Redgroup NZ-Report to Creditors

26 July 2011

TO THE CREDITOR AS ADDRESSED

Dear Sir / Madam

WGL Retail Holdings Ltd WGL Realisations Ltd (Administrators Appointed) (Administrators Appointed) Company No. 120265 (formerly known as Whitcoulls Group Limited) Calendar Club New Zealand Ltd Company No. 131870 (Administrators Appointed) Company No. 826130 B Realisations (NZ) Ltd (Administrators Appointed) REDgroup Online Ltd (formerly known as Borders New (Administrators Appointed) Zealand Limited) Company No. 2223528 Company No. 944114

(Collectively “the Group” or “the Companies”)

I refer to the appointment of Steve Sherman, John Melluish and I as Administrators of the Group on 17 February 2011.

Section 239AU(3) Report

Please find enclosed our report to creditors pursuant to section 239AU(3) of the Companies Act 1993 (“the Act”).

Joint Watershed Meeting

The Administrators are required to call a joint watershed meeting of creditors (“the Watershed Meeting”) pursuant to section 239AT(1) of the Act, and do so in this case by way of a joint meeting of the creditors of each company in the Group under section 239AL. The purpose of the Watershed Meeting is to provide creditors with an opportunity to resolve:

1. That the Companies execute a Deed of Company Arrangement; or 2. That the administrations should end; or 3. That the Companies be wound up.

I have enclosed the following documents:

(a) Notice of a Joint Watershed Meeting. Please note that the meeting commences at 10:30am Thursday, 4 August 2011. You should arrive for registration at least 30 minutes prior to the meeting.

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Letter to Creditor 26 July 2011

(b) Formal Proof of Debt Form.

A person is not entitled to vote at the meeting unless they have provided particulars of the debt or claim to the Administrators before the meeting. All creditors must furnish full details of their claims, indicating whether they rank as a secured, preferential or unsecured creditor.

If you have already submitted a proof of debt form for the first meeting of creditors please email Liana Fasanella at [email protected] who will confirm the amount that the proof previously lodged by you is claiming for.

Please note that you must submit a separate proof of debt form for each company your debt relates to.

(d) Postal Vote Form. The form allows you to vote on the resolutions of the meeting without attendance.

In accordance with s239AL, any creditor may object to the joint meeting by sending a written objection to the Administrators to the below address by 5pm on Monday, 1 August 2011, otherwise the creditors will be taken to have agreed to the joint meeting.

The formal proof of debt, proxy and postal vote forms should be lodged with the Administrators before the meeting and, in any event, no later than 5pm on Monday, 1 August 2011. All forms and particulars should be scanned and emailed to [email protected], sent by facsimile on +61 2 9286 9888 marked to the attention of Liana Fasanella or mailed to the following postal address:

Ferrier Hodgson Attention: Matt Linehan C/- PO Box 8 AUCKLAND 1140

Should you have any queries regarding the contents of this letter or require assistance in the completion of the enclosed forms, please do not hesitate to contact Liana Fasanella by email at [email protected] or on +61 2 9286 9853.

Yours faithfully

Ryan Eagle Administrator

bp110725 Letter to Creditor C:68580

COMPANIES ACT 1993 Section 239AL WGL Retail Holdings Ltd WGL Realisations Ltd (Administrators Appointed) (Administrators Appointed) Company No. 120265 (formerly known as Whitcoulls Group Limited) Calendar Club New Zealand Ltd Company No. 131870 (Administrators Appointed) Company No. 826130 B Realisations (NZ) Ltd (Administrators Appointed) REDgroup Online Ltd (formerly known as Borders New (Administrators Appointed) Zealand Limited) Company No. 2223528 Company No. 944114

(Collectively “the Group” or “the Companies”)

NOTICE OF A JOINT WATERSHED MEETING OF CREDITORS OF GROUP UNDER ADMINISTRATION

Notice is now given that a joint watershed meeting of the creditors of each of the companies in the Group will be held at 10:30am, on Thursday, 4 August 2011 at the Mercure Auckland, 8 Customs Street, Auckland.

AGENDA

1. To consider the directors’ Statement of Company Position of each of the Companies. 2. To consider the circumstances leading up to the administration and the various options available to creditors. 3. For creditors to resolve upon one of the following:  That the Companies execute a Deed of Company Arrangement; or  That the administrations should end; or  That the Companies be wound up.

4. If the Companies are wound up, to consider the appointment of a Liquidation Committee. 5. Any other business that may be lawfully brought forward.

A form of proxy is available from me to enable you to appoint another person to act on your behalf at the meeting (see note below). Proxies must be returned by no later than 5pm on Monday, 1 August 2011. A corporate creditor can only be represented by proxy or by a representative appointed under clauses 6 and 9 of schedule 5 of the Companies Act 1993.

Dated 26 July 2011

Ryan Eagle Administrator

Note: Under the Companies Act 1993 a creditor is not entitled to vote at a meeting by proxy unless they have delivered to the administrators a copy of the proxy not less than 2 working days before the start of the meeting (Fifth Schedule, clause 6(4)).

FORMAL PROOF OF DEBT OR CLAIM (GENERAL FORM) COMPANIES ACT 1993

There must be one Formal Proof of Debt Form for each entity your debt relates to. Please indicate (cross) the relevant entity below.

(Collectively “the Group” or, individually, “the Company”)

To the Administrators of the Group

1. This is to state that the Company was on 17 February 2011, and still is, justly and truly indebted to:

______(full name and address of the creditor and, if applicable, the creditor's partners. If prepared by an employee or agent of the creditor, also insert a description of the occupation of the creditor)

for $______and______cents.

All creditors must furnish full details of their claims, indicating whether they rank as a secured, preferential or unsecured creditor.

Date Consideration (state how the Amount Describe the documentation Debt arose) NZ$ to support the claim (e.g. invoice/statement)

2. To my knowledge or belief the creditor has not, nor has any person by the creditor's order, had or received any satisfaction or security for the sum or any part of it except for the following: (insert particulars of all securities held. If the securities are on the property of the company, assess the value of those securities. If any bills or other negotiable securities are held, show them in a schedule in the following form).

Date Drawer Acceptor Amount Due Date NZ$

*3. I am employed by the creditor and authorised in writing by the creditor to make this statement. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.

*4. I am the creditor's agent authorised in writing to make this statement in writing. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, remains unpaid and unsatisfied.

...... Dated Signature Occupation: Address

*Do not complete if this proof is made by the creditor personally.

APPOINTMENT OF PROXY COMPANIES ACT 1993 Schedule 5, clause 6

There must be one Appointment of Proxy Form for each entity your debt relates to. Please indicate (cross) the relevant entity below.

(Collectively “the Group” or, individually, “the Company”)

I/We (1) ______of (insert name of individual)

______a creditor/member of the Company appoint (insert name of creditor)

(2)______or in his/her absence (insert name of proxy)

(3) ______as my/our general/special proxy to vote at the (insert name of second proxy, if any) joint watershed meeting of creditors to be held on 4 August 2011 at 10:30 AM or at any adjournment of that meeting, to vote on each of the of the following kinds of resolution:

For Against Abstain a. the company execute a Deed of Company    Arrangement; b. the administration should end; or    c. the Company be wound up   

DATED this ______day of ______2011

(4) Signature ______

Notes: (1) If a firm strike out "I" and set out the full name of the firm. (2) Insert the name of the person appointed. (3) If a special proxy, “add the words „to vote for‟ or the words „to vote against‟ and specify the particular resolution”. (4) If the creditor is a sole trader, sign in accordance with the following example: “A.B., proprietor”. If the creditor is a partnership, sign in accordance with the following example: “A.B., a partner of the said firm.” If the creditor is a company, then the form of proxy must be under its Common Seal or under the hand of some officer duly authorised in that capacity, and the fact that the officer is so authorised must be stated in accordance with the following example: “for the company, A.B.” (duly authorised under the Seal of the Company).

CERTIFICATE OF WITNESS - only complete if the person given the proxy is blind or incapable of writing.

I, ______of______certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him before he attached his signature or mark to the instrument.

DATED this ______day of ______2011

Signature of witness ______Description ______Place of residence ______

POSTAL VOTE FORM COMPANIES ACT 1993

There must be one Postal Vote Form for each entity your debt relates to. Please indicate (cross) the relevant entity below.

(Collectively “the Group” or, individually, “the Company”)

I/We ______of (insert name of individual)

______(insert name of creditor) being a creditor of the Company direct that at a joint watershed meeting of the creditors of each of the Companies being held at 10:30am on Thursday, 4 August 2011 at the Mercure Auckland, 8 Customs Street, Auckland and at any adjournment my vote be recorded as follows: For Against Abstain a. The Company execute a Deed of Company    Arrangement; b. The Administration should end; or    c. The Company be wound up   

DATED this ______day of ______2011

Signature/s ______

Notes:

1) You may cast a postal vote on all or any of the above resolutions by completing and sending in this form to the attention of Liana Fasanella at [email protected], fax to +61 2 9286 9888 or, alternatively, post to Ferrier Hodgson c/- Attn: Matt Linehan, PO Box 8, AUCKLAND 1140. 2) This form must be signed by the creditor or his/her/their attorney duly authorised in writing or if the creditor is a corporation, by a signatory/signatories or attorney duly authorised. Joint holders should all sign this form. 3) This form and the power of attorney (or other authority, if any, under which it is signed) or a materially certified copy of the power or authority and a certificate of non-revocation of the power of attorney must be received by the Administrators no less than 2 working days before the start of the meeting.

WGL Retail Holdings Limited And Associated Companies (Administrators Appointed)

Report by Administrators Pursuant to Section 239AU(3) of the Companies Act 1993

S Sherman, J Melluish & R Eagle

26 July 2011

FERRIER HODGSON LEVEL 13, GROSVENOR PLACE, 225 GEORGE STREET SYDNEY NSW 2000 AUSTRALIA

GPO BOX 4114 SYDNEY NSW 2001 TELEPHONE 02 9286 9999 FACSIMILE 02 9286 9888

Table of Contents

Glossary of terms 2

1. Executive summary 4 1.1 Appointment of voluntary administrators...... 4 1.2 First meeting of creditors ...... 5 1.3 Achievements of the administration to date ...... 5 1.4 Watershed meetings of creditors ...... 5 1.5 Proposed Deed of Company Arrangement ...... 5 1.6 Comparison of liquidation and DOCA scenarios ...... 6

2. Introduction 7 2.1 Purpose of appointment and this report ...... 7 2.2 First meetings of creditors and committees of creditors ...... 7 2.3 Watershed meetings of creditors ...... 8 2.4 Declaration of independence, relevant relationships and indemnities ...... 8

3. Company information 10 3.1 Statutory information ...... 10 3.2 Company history ...... 11 3.3 Decision to appoint Administrators ...... 13

4. Historical financial information 15 4.1 Group profit and loss statements ...... 15 4.2 RGR consolidated profit and loss statements ...... 16 4.3 Group balance sheets ...... 17 4.4 RGR consolidated balance sheets ...... 17

5. Statement by directors 19 5.1 Summary ...... 19 5.2 Administrators’ assessment ...... 20 5.3 Directors’ explanation for current financial position ...... 23

6. Trading by Administrators 24 6.1 Overview ...... 24 6.2 Trading issues ...... 24

7. Summary of receipts and payments 25

Section 239AU(3) Report by Administrators 26 July 2011

8. Sale of business 26 8.1 Sale program ...... 26 8.2 Advertisements ...... 26 8.3 Preliminary information ...... 26 8.4 Information memorandum ...... 26 8.5 Outcome of the sales process ...... 27 8.6 Summary of asset realisations ...... 29

9. Statutory investigations 30 9.1 Nature and scope of review ...... 30 9.2 The Company‟s solvency ...... 31 9.3 Potential liquidator recoveries - voidable transactions ...... 35 9.4 Potential liquidator recoveries - insolvent trading ...... 38 9.5 Other potential liquidator recoveries ...... 39 9.6 Possible offences ...... 39 9.7 Summary of potential liquidators’ recoveries ...... 39 9.8 Report to Companies Office ...... 39

10. Proposal for DOCA 40 10.1 Statement of proposed DOCA ...... 40 10.2 Key commercial features ...... 40

11. Creditors’ options, dividend estimates and cost estimates 42 11.1 Administration to end ...... 42 11.2 Winding up of Company ...... 42 11.3 Execution of proposed DOCA ...... 43 11.4 Comparison of proposed DOCA to liquidation ...... 43

12. Administrators’ opinion 44

13. Administrators’ remuneration report 44

14. Further queries 44

Section 239AU(3) Report by Administrators 26 July 2011

Glossary of terms

Abbreviation Description $ or NZ$ All dollars are New Zealand dollars unless otherwise stated Australian Dollars have been converted to New Zealand Dollars at the rate of $A1.00 = $NZ1.29 A$ Australian dollars ABN Australian Business Number ACN Australian Company Number Act Companies Act 1993 ASIC Australian Securities and Investments Commission Australian Group The ten companies set out in Appendix A section 2 Bonds REDGroup Retail Pty Limited bonds that were listed on the NZ Stock Exchange Borders NZ B Realisations (NZ) Limited (formerly known as Borders New Zealand Limited) (Administrators Appointed) BOSI BOS International (Australia) Limited Calendar Club NZ Calendar Club New Zealand Limited (Administrators Appointed) CN New Zealand Company Number Companies The five companies set out in Appendix A section 1 Companies Office NZ Companies Office Corporations Act Corporations Act 2001 (Cth) CSFB Credit Suisse First Boston DIRRI Declaration of Independence, Relevant Relationships and Indemnities DOCA Deed of Company Arrangement Eagle Co-Investment Pacific Equity Partners Fund IV Co-Investment Trust A ERV Estimated Realisable Value Fund IV LP Pacific Equity Partners Fund IV GP (Jersey) Limited Fund IV Trust Pacific Equity Partners Fund IV (Australasia) Unit Trust Group The five NZ companies set out in Appendix A section 1 GSD General Security Deed between the Group and PEP Advisory IV Pty Limited dated 15 December 2010 IPA Insolvency Practitioners Association of Australia IRD Inland Revenue Department LTM Last twelve months PEP PEP Advisory IV Pty Limited PEP Investment PEP Investment Pty Limited REDgroup Online REDgroup Online Limited (Administrators Appointed) (NZ entity) REDgroup Online REDgroup Online Pty Limited (Administrators Appointed) (Australian entity) Australia RGR REDgroup Retail Pty Limited (Administrators Appointed) (the holding company of the RGR Group) RGR Group The Group and Australian Group collectively SFA Senior Facilities Agreement dated 2 December 2010 Singapore Borders Pte Limited (Singaporean entity)

Section 239AU(3) Report by Administrators 26 July 2011 Page 2

Abbreviation Description SOP Directors‟ Statement of Position about the Company‟s Business, Property, Affairs and Financial Circumstances in accordance with section 239AF of the Act the Administrators With respect to the Group, Steven Sherman, John Melluish and Ryan Eagle of Ferrier Hodgson With respect to the Australian Group, Steven Sherman, John Melluish and John Lindholm of Ferrier Hodgson WGL Retail WGL Retail Holdings Limited Whitcoulls WGL Realisations Limited (formerly known as Whitcoulls Group Limited)

Listing of annexures

Annexure 1 Notice of Meeting of Creditors

Annexure 2 Appointment of Proxy and Proof of Debt form

Annexure 3 Administrators‟ Receipts & Payments to 30 June 2011

Annexure 4 Administrators‟ Remuneration Report

Annexure 5 Proposed terms of DOCA

Listing of appendices

Appendix A RGR Group – Functions and Activities

Appendix B RGR Group – Statutory Information

Appendix C RGR Group – Ownership Structure

Appendix D Group Profit & Loss Statements

Appendix E Group Balance Sheets

Appendix F RGR Group – Summary of directors‟ Statements of Affairs

Section 239AU(3) Report by Administrators 26 July 2011 Page 3

1. Executive summary

1.1 Appointment of voluntary administrators

On 17 February 2011 Steven Sherman, John Melluish and Ryan Eagle were appointed as Administrators of the following Companies that comprise the REDgroup Retail Pty Limited operations in New Zealand (the Group):

. WGL Retail Holdings Limited CN 120265 . WGL Realisations Limited (formerly Whitcoulls Group Limited) CN 131870 . B Realisations (NZ) Limited (formerly Borders New Zealand Limited) CN 944114 . Calendar Club New Zealand Limited CN 826130 . REDgroup Online Limited CN 2223528

The Companies that are subject to the Administrators‟ appointment are listed in Appendix A.

On the same day, Steven Sherman, John Melluish and John Lindholm were appointed Administrators of ten companies that comprise the REDgroup Retail operations in Australia (the Australian Group). REDgroup Retail Pty Limited (RGR), an Australian incorporated company, is the parent entity of the Group and the Australian Group (collectively referred to as the RGR Group). These companies are listed in Appendix A.

The following diagram shows the relationship between the Group and the Australian Group:

REDgroup Retail Pty Limited

51%

Supanews REDgroup Retail Angus & Robertson Holdings Spine Holdco REDgroup Online A & R Australia Whitcoulls Group Administrative Bookworld Calendar Pty Limited Pty Limited Pty Limited Holdings Pty Limited Holdings Pty Limited Services Pty Ltd Club Pty Ltd

Supanews Retail Spine Newco Angus & Robertson Pty Limited Pty Limited Pty Limited

WGL Retail Holdings Limited

Borders Australia Borders Pte Limited Pty Limited

Borders New Whitcoulls Group REDgroup Online Calendar Club Zealand Limited Limited Limited New Zealand Limited

Australian Company New Zealand Member of Deed of Cross Guarantee effective 29/08/2009 In Voluntary Administration (Australia) Singapore Company Australian Member of Deed of Cross Guarantee effective 29/08/2009 Trading Entity In Voluntary Administration (New Zealand) Note: Unless otherwise noted, structure indicates 100% ordinary share ownership

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1.2 First meeting of creditors

Creditors ratified our appointment as Administrators at the first joint meeting of creditors held on 1 March 2011.

Two Committees of Creditors were appointed at the first meeting of creditors in relation to:

. Whitcoulls; and . Borders NZ.

1.3 Achievements of the administration to date

Following our appointment on 17 February 2011, we continued to trade the Group‟s businesses and prepare for sales of the businesses.

A sales process was commenced with the following sales having been completed to date:

. Whitcoulls Travel: 1. Auckland Airport – 19 April 2011 2. Rotorua Airport – 27 April 2011 3. Christchurch Airport – 28 April 2011 4. Wellington Airport – completion has not occurred as yet . Bennetts – 5 May 2011 . Whitcoulls Retail / Borders NZ – 20 June 2011

The outcome of these sales processes are discussed in further detail at section 8 of this report.

1.4 Joint watershed meeting of creditors

On 16 March 2011, the High Court made Orders that the period within which the Administrators must convene the watershed meetings of creditors for the Group under Section 239AU of the Act be extended up to and including 17 September 2011 with provision that the Administrators may convene a meeting of creditors at any time during the convening period. An extension in relation to the 14 day period for employment agreements was also provided for the same period. As such, the watershed meetings are required to be held by 23 September 2011.

The extension to the convening period allowed the Administrators more time to investigate the Group‟s affairs, and explore options for the sale of businesses operated by the Group.

The joint watershed meeting of creditors will now be held at the Mercure Auckland, 8 Customs Street, Auckland on Thursday 4 August 2011 at 10:30am.

1.5 Proposed Deed of Company Arrangement

The directors of RGR Group proposed a Deed of Company Arrangement (DOCA) which has been submitted for the consideration by creditors.

The proposed DOCA provides for the contribution of $3.14 million for the benefit of the Group‟s creditors. The details of the proposed DOCA are discussed further at section 10 of this report.

Section 239AU(3) Report by Administrators 26 July 2011 Page 5

1.6 Comparison of liquidation and DOCA scenarios

We have carried out investigations into the affairs of the Group to assist in formulating our opinion as to what is in the creditors‟ best interests. The main points to note from investigations into the Group‟s affairs are:

. The Group had available cash resources in the order of $3 million at the date of the Administrators‟ appointment; . The Group had debt facilities that were not fully drawn and were not due for repayment at the date of the Administrators‟ appointment; . The Group‟s trade payables were generally within normal terms; . The Group has been operating up to the date of the Administrators‟ appointment with the support of the secured creditor and RGR, the ultimate holding company; . It is our preliminary view that it is difficult to maintain an argument that the Group was insolvent for any material period prior to 17 February 2011.

Under the proposed DOCA, we estimate a dividend payable to ordinary unsecured creditors of up to three cents in the dollar subject to the final proving of claims.

In the event the Group is wound up, we estimate that unsecured creditors will receive no dividend.

We are of the opinion that, for the reasons set out in this report, creditors should accept the proposed DOCA.

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2. Introduction

2.1 Purpose of appointment and this report

The Administrators were appointed to the entities within the Group on 17 February 2011, pursuant to Section 239I of the Act by resolutions passed at meetings of the directors of each of the entities within the Group convened on the same date. Immediately following our appointment, we took control of the Group‟s assets and continued to carry on its businesses.

The purpose underlying an Administrator‟s appointment is to allow for independent control and investigation of an insolvent company‟s affairs. During the administration period, creditors‟ claims are put on hold. The Administrators are required to investigate the affairs of the company and to provide creditors with information and recommendations to assist creditors to decide upon the company‟s future.

Section 239AU(3) of the Act outlines the purpose of an Administrator‟s report in providing that the notice (of the watershed meeting of creditors) must be accompanied by a copy of:

(a) A report by the Administrator about the company’s business, property, affairs and financial circumstances; and

(b) A statement setting out the Administrator’s opinion about each of the following matters:

. Whether it would be in the creditors’ interests for the company to execute a DOCA; . Whether it would be in the creditors’ interest for the administration to end; . Whether it would be in the creditors’ interest for the company to be wound up; . His or her reasons for those opinions and provide such other information known to the Administrator as will enable the creditors to make an informed decision about each of the above matters; and

In the time available, we have undertaken the investigation detailed in section 9 of this report. These investigations have enabled us to form an opinion about the Group‟s future. Our opinion is set out in section 12 of this report.

2.2 First meetings of creditors and committees of creditors

Creditors attended the first joint meeting of creditors held on 1 March 2011. At those meetings, creditors ratified our appointment as Administrators of the Group. Creditors also resolved to appoint a Committee of Creditors for each of Whitcoulls and Borders NZ.

The Committees of Creditors comprises of the IRD, New Zealand Customs, key suppliers, employees and union representatives. Three meetings of the Committees of Creditors have been held since 1 March 2011.

Section 239AU(3) Report by Administrators 26 July 2011 Page 7

2.3 Joint watershed meeting of creditors

Pursuant to Section 239AT of the Act, the joint watershed meeting of creditors of the Group is convened for Thursday 4 August 2011 at the Mercure Auckland, 8 Customs Street, Auckland at 10:30am.

Annexure 1 contains the Notice of Meeting of Creditors.

At the watershed meeting, creditors will decide the Group‟s future by voting on one of the following options:

. That the administration should end and control of all or any of the Companies in the Group should revert to its directors; or, . That all or any of the Companies in the Group should enter into a DOCA; or, . That all or any of the Companies in the Group should be wound up.

For the purposes of voting at the watershed meeting, attached as Annexure 2 are the following forms:

. Appointment of Proxy; . Proof of Debt; and . Postal Vote.

Creditors should ensure that the Appointment of Proxy or Postal Vote, and Proof of Debt forms are lodged with the Administrators prior to 5.00pm on Monday, 1 August 2011.

2.4 Declaration of independence, relevant relationships and indemnities

The Administrators provided a Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) to creditors with their first circular to creditors and also tabled the declaration at the first joint meeting of creditors.

The Administrators disclosed the following prior relationships in the DIRRI:

(i) Circumstances of appointment

On 15 February 2011, Steven Sherman met with the officers and advisers of the RGR Group in Sydney, Australia. The people in attendance at that meeting were Joseph Browne, Steven Cain and Simon Pillar, Nicolas Laurent (PEP), David Cowling (Clayton Utz), Niro Ananda (Clayton Utz), Philip Kapp (Clayton Utz) and Orla McCoy (Clayton Utz). The meeting was held at 4pm AEST to approximately 6.30pm AEST. The purpose of the meeting was to discuss issues relevant to the Group and its current financial position and to explain the basic issues regarding the voluntary administration process.

We received no remuneration for this advice. This meeting does not affect our independence for the following reasons:

Ferrier Hodgson‟s advice was limited to assessing RGR Group‟s financial position, the consequences of insolvency and restructuring options. Advice was given to the RGR Group only. We did not advise the directors personally or others. The Courts and the IPA‟s Code of Professional Practice specifically recognise the need for practitioners to provide advice on the insolvency process and the options available and do not consider that such advice results in a conflict or an impediment to Section 239AU(3) Report by Administrators 26 July 2011 Page 8

accepting the appointment. The nature of the advice is such that it would not be subject to review and challenge during the voluntary administration. The pre-appointment advice has not influenced our ability to fully comply with the statutory and fiduciary obligations associated with the voluntary administration in an objective and impartial manner.

(ii) Relevant relationships (excluding professional services to the Insolvent)

Neither of us, nor our firm, have, or have had within the preceding 24 months, any relationships with the Group, an associate of the Group, a former insolvency practitioner appointed to the Group or any other person or entity that has a charge on the whole or substantially the whole of the Group‟s property.

(iii) Prior professional services to the Insolvent

Neither us, nor our firm, have provided any professional services to the Group in the previous 24 months.

(iv) No other relevant relationships to disclose

There are no other known relevant relationships, including personal, business and professional relationships, within the previous 24 months with the Group, an associate of RGR Group, a former insolvency practitioner appointed to the Group or any person or entity that has a charge on the whole or substantially the whole of the Group‟s property that should be disclosed.

(v) Indemnities and upfront payments

We have not been indemnified in relation to this administration, other than any indemnities that we may be entitled to under statute and we have not received any upfront payments in respect of our remuneration or disbursements.

There has been no other change in the declaration since that time.

The Administrators are partners of Ferrier Hodgson. Ferrier Hodgson is Australia‟s and the Asia- Pacific‟s largest independent corporate restructuring practice. Ferrier Hodgson does not provide accounting, audit, legal or taxation services. The Administrators are Chartered Accountants, and John Melluish and Ryan Eagle are members of the IPA.

Further information regarding Ferrier Hodgson and the Administrators can be obtained from the firm‟s website at www.ferrierhodgson.com.

Section 239AU(3) Report by Administrators 26 July 2011 Page 9

3. Company information

3.1 Statutory information

According to searches of the Companies Office database, the following information in respect of the Group is contained in Appendix B. Appendix B also contains statutory information with respect to the Australian Group.

. Incorporation Date; . Registered Office; . Directors; and . Shareholders.

3.1.1 Registered securities and banking facilities

Pursuant to the Senior Facilities Agreement (SFA) dated 2 December 2010 between RGR (the borrower) and Pacific Equity Partners Fund IV LP and Pacific Equity Partners Fund IV (Australasia) Pty Limited (the financiers), the Group entered into a General Security Deed (GSD) with PEP Advisory IV Pty Limited (PEP) dated 15 December 2010. PEP also holds registered fixed and floating charges over the Australian Group dated 15 December 2010 and registered on 16 December 2010.

The background to the granting of the securities is set out below:

. In May 2004, RGR was capitalised with shareholder funding of A$45 million (NZ$58 million) and draw downs on debt funding to complete the 2004 Acquisition (refer explanation at section 3.2.1). . The debt facility entered into by RGR was with BOSI as Initial Financier, Working Capital Financier, Arranger, Facility Agent and Nominated Hedge Counterparty and BOSI Security Services Pty Limited as Security Trustee for an amount of A$76 million (NZ$98 million) being a A$25 million (NZ$32 million) Amortising Term Commitment, a A$26 million (NZ$35 million) Bullet Term Commitment and a A$25 million (NZ$32 million) Working Capital Commitment. . WestLB AG subsequently acceded as a lender to this facility. In May 2004 RGR was also the borrower under a NZ$30.8 million subordinated bridge facility agreement with Credit Suisse First Boston (CSFB). . In October 2004, RGR issued bonds that were listed on the NZ Stock Exchange (Bonds) which had an aggregate face value of NZ$31 million. The proceeds of the Bonds were used to repay the CSFB subordinated bridge facility. . From time to time since 2004, various members of management have also been given the opportunity to subscribe for shares in RGR by invitation from the board of directors of RGR. . In 2008, RGR entered into a loan with Pacific Equity Partners Fund IV, L.P. acting through its general partner Pacific Equity Partners Fund IV GP (Jersey) Limited (Fund IV LP), Pacific Equity Partners Fund IV (Australasia) Pty Ltd in its capacity as trustee of the Pacific Equity Partners Fund IV (Australasia) Unit Trust (Fund IV Trust), Eagle Co-Investment Pty Limited as trustee for the Pacific Equity Partners Fund IV Co-Investment Trust A (Eagle Co-Investment) and PEP Investment Pty Limited (PEP Investment) for an amount of up to A$138 million (NZ$178 million) (Loan Amount). This was for the funding required to complete the Borders Acquisition (refer explanation at section 3.2.1). . The outstanding loan balance in November 2008 was A$108 million (NZ$139 million) (Loan Balance). At that time, the Loan Balance was set off against the issue price of convertible notes and ordinary shares as follows: Section 239AU(3) Report by Administrators 26 July 2011 Page 10

1. 40,645,334 convertible notes and 13,548,445 ordinary shares were issued for an aggregate amount of A$92 million (NZ$119 million) to Fund IV LP; 2. 6,281,715 convertible notes and 2,093,905 ordinary shares were issued for an amount of A$14 million (NZ$18 million) to Fund IV Trust; 3. 269,820 convertible notes and 89,940 ordinary shares were issued for an amount of A$612k (NZ$789k) to PEP Investment; and 4. 450,190 convertible notes and 150,063 ordinary shares were issued for an amount of A$1 million (NZ$1.3 million) to Eagle Co-Investment. . On 15 December 2010, the RGR entered into a senior secured loan facility with Fund IV LP and Fund IV Trust for a loan of up to A$126 million (NZ$163 million), composed of a A$46 million (NZ$59 million) term debt facility and a working capital facility of up to A$80 million. . The proceeds from the debt facility were used to repay bank debt due to BOSI of A$33 million (NZ$43 million) and NZ$14 million, to West LB of A$25 million (NZ$32 million) and NZ$7 million and to Bank of Western Australia of A$3 million (NZ$4 million) on 15 December 2010 and also to redeem the Bonds in the amount of NZ$37 million on their maturity date which was 15 December 2010. . As at 17 February 2011, the working capital facility was drawn to A$70 million (NZ$90 million).

The debt due to PEP is cross collateralised across the Australian Group and the Group. PEP has lodged a Proof of Debt in the Administration of each company for A$118.5 million (NZ$153 million).

We have reviewed the PEP security and obtained independent legal advice, which is further discussed at section 9.3.1.

3.1.2 Winding up applications

As at the date of our appointment there were no outstanding winding up applications against any entity in the Group.

3.2 Company history

3.2.1 Group Overview

RGR was incorporated on 21 April 2004 for the purpose of acquiring (through subsidiaries) W H Smith Aspac Pty Ltd (later renamed A & R Australia Holdings Pty Limited), W H Smith Aspac Limited (later renamed Whitcoulls Limited) and W H Smith Hong Kong Limited from WH Smith plc. This was the acquisition of Whitcoulls in New Zealand, the Angus & Robertson business in Australia, the WH Smith stores in the Hong Kong Airport as well as 75% of the Calendar Club business (2004 Acquisition). The purchase price was $115 million.

In October 2006, RGR acquired 51% of Supanews Holdings Pty Limited for approximately $12 million. This is the Supanews newsagency business.

In June 2008, RGR, through newly incorporated subsidiaries, acquired the Borders business in New Zealand, Australia and Singapore from Borders Group Inc (Borders Acquisition). The purchase price was approximately $105 million.

In May 2009, RGR, through itself and its subsidiaries, acquired the remaining 25% shareholding in the Calendar Club companies for approximately $2.4 million.

Section 239AU(3) Report by Administrators 26 July 2011 Page 11

The Group consisted of four businesses:

12 months # to Group Brand Comments Stores 31-Dec-10 Sales Sales Iconic brand in New Zealand. c. 140 years of history. Market leader in books, cards, personal stationery, magazines, DVDs and e-books. Whitcoulls Retail 64 c. NZ$140m 70% Online transactional business (whitcoulls.co.nz), selling physical books and e-books. Identified as the favourite bookseller nearly twice as often as other retailers. New Zealand's largest travel book store retailer. 10 (+ 1 Whitcoulls Travel c. NZ$25m 12% Stores located in all major airports - Auckland opening) (5); Wellington (2); Christchurch (2+ 1 opening); and Rotorua (1). New Zealand‟s leading operator of stores located on tertiary campuses, selling Bennetts 9 c. NZ$9m 4% textbooks, course materials and campus essentials. Includes the Bennetts Online transaction business. Stores offering an extensive range of books, Borders NZ 5 c. NZ$27m 14% magazines, music and DVDs, along with an in-store cafe for casual dining. Source: The Group

The Australian Group consists of the following businesses:

. Angus & Robertson (A&R): smaller corporate stores and franchised stores; . Borders Australia: larger corporate stores; . Readers Feast: bookstore located in Melbourne which is independently operated; . Online: comprising separate transactional websites; . Calendar Club: pop up calendar retailer operating in shopping mall walkway spaces in both Australia and NZ.

3.2.2 Structure and functions

A diagram summarising the relationships / ownership interests between the Group and Australian Group is contained in Appendix C.

A summary of the functions of the Group and Australian Group is contained in Appendix A.

Section 239AU(3) Report by Administrators 26 July 2011 Page 12

3.3 Decision to appoint Administrators

By the time the businesses were fully acquired in June 2008, the Global Financial Crisis had begun which had a significant impact on global markets, and specifically, on discretionary spending. The Group experienced declining sales and, coupled with significant repayments was, until the appointment of Administrators, struggling to meet its financial obligations.

The management of the RGR Group had initiated cost cutting initiatives and explored other avenues to increase sales prior to the appointment of the Administrators.

The following provides a brief summary of the events leading up to the Administrators‟ appointment:

. On 21 June 2010, a cash flow forecast of the RGR Group generated by management indicated a potential shortfall in September 2010. Management subsequently produced a revised cash flow forecast on 22 June 2010 (Revised Cash Flow Forecast) which took into account the following short-term actions to deal with the potential cash shortfall: 1. Ceasing discretionary capital expenditure through June and July 2010; 2. Postponing entry into an agreement with Adrian Gaskin of Supanews for a payment of $1 million from July 2010 until August 2010; 3. In accordance with its contractual arrangements, increasing returns of obsolete stock to some of its suppliers (in particular Penguin) for a 100% refund which was to be set-off against payments to that supplier which had the net effect of reducing the overall payments to suppliers; and 4. Delaying payments to its suppliers and landlords by up to 30 days with the agreement of the suppliers and landlords. . On 22 June 2010, the directors sought legal advice regarding the risk of insolvent trading based on the Revised Cash Flow Forecast. Following the consideration of that legal advice in a Board meeting held on 24 June 2010, the directors asked management to provide cash flow forecasts twice a week as well as daily sales and gross profit updates. Also discussed in the meeting was the concept of equity funding support via funds managed and advised by PEP should the cash flow position deviate from the Revised Cash Flow Forecast position. The directors also asked management to keep them updated if suppliers and landlords were not agreeable to an extension in payment terms. The short-term actions noted above were implemented by management. . Based on the financial information presented to the board meeting on 28 July 2010, the directors formed the view that RGR Group was likely to breach two out of three of its banking covenants at the next covenant test date on 28 August 2010, being the interest cover ratio and the leverage or gearing ratio. This was disclosed to the NZ Stock Exchange on 29 July 2010. The two covenants which were likely to be breached did not relate to cash flow issues. . RGR Group sought and received from its banks a waiver from compliance with the relevant covenants on 29 August 2010. . On 2 September 2010, the directors sought and received legal advice in respect of RGR's contractual obligations with its key suppliers and the basis for paying those suppliers on extended terms. . The directors also commissioned a series of initiatives to look at cost savings and restructuring of the business over the medium to longer term. This included engaging Deloitte to prepare a report on potential cost savings for the business which resulted in recommended savings of up to A$19 million (NZ$25 million). . The directors also engaged Deloitte to review the Revised Cash flow Forecast which was completed on 16 September 2010.

Section 239AU(3) Report by Administrators 26 July 2011 Page 13

. RGR Group's debt to its banks was due to be repaid on 31 December 2010 and Bonds were due to be redeemed on their maturity date of 15 December 2010. RGR Group had obtained a financing commitment on 27 October 2010 from BOSI and Fortress for a $47 million senior debt facility and from Fortress for a $33 million subordinated debt facility to refinance this debt. However, based on reforecast financial information for the 2011 financial year presented to the Board in November 2010, which showed that trading had declined, the directors formed the view that RGR Group was likely to require increased debt funding for its ongoing operations, and that funding was unlikely to be forthcoming from Fortress and BOSI. . RGR‟s majority shareholder, Fund IV LP in its capacity as trustee of the Fund IV Trust agreed to provide a A$126 million (NZ$163 million) debt facility to RGR, composed of a A$46 million (NZ$59 million) term facility and a A$80 million (NZ$103 million) working capital facility. That funding would be sufficient to repay the bank debt and the Bonds and also provided a working capital facility sufficient for the ongoing operation of RGR Group. The directors who were not employees of Pacific Equity Partners Pty Limited voted on the debt facility and resolved that RGR Group enter into that debt facility. Those directors also sought and received legal advice in relation to the terms of the debt facility. . Following this, RGR Group repaid its bank debt and redeemed the Bonds. The details of the new debt facility (including the signed documentation) from PEP was provided to Deloitte as part of their audit in signing off on the going concern statement that they provided as part of their audit of the RGR's full financial year statements as at 28 August 2010. . During the week commencing 7 February 2011, management had compiled sales data from the end of January and start of February. Sales data indicated that sales had fallen significantly compared to the same period in the immediately preceding year post the Christmas sale period. The CFO formed the view that if the sales position reflected a structural decline in sales and was indicative of the level of sales going forward (ie normalised weekly level post the Christmas sale period through January), there was likely to be a cash shortfall at the start of April 2011. . Further work was commissioned to enable the directors to consider the financial forecast for RGR Group as soon as possible. While this work was being undertaken, the directors were considering alternatives. . As part of that consideration, Simon Pillar, Joseph Browne and Steven Cain met with Steven Sherman of Ferrier Hodgson on 15 February 2011 to understand what the voluntary administration process would entail. . A board meeting was scheduled for 17 February 2011 for the directors to consider the reforecast financial information. That information indicated that there was likely to be a cash flow shortfall during the first week of April 2011. The directors resolved to appoint voluntary administrators at that point in time after seeking legal advice.

Section 239AU(3) Report by Administrators 26 July 2011 Page 14

4. Historical financial information

4.1 Group profit and loss statements

The Administrators have been provided with unconsolidated management accounts for the businesses in the Group for the years ended 28 August 2009 and 28 August 2010, and the last twelve months (LTM) to 31 December 2010. The unconsolidated management accounts have not been audited.

Appendix D contains a summary of the profit and loss statements for the businesses in the Group to 31 December 2011.

4.1.1 Analysis

Our comments in relation to the historical trading results for the Group are set out below:

. Group EBITDA (excluding unallocated head office, distribution and marketing costs) decreased from $39.2 million for FY08 to $26.3 million for LTM to December 2010, which was largely attributable to the 55% decrease in Borders NZ‟s EBITDA. . Fixed expenses increased in proportion of sales revenue throughout the businesses. For LTM to December 2010, Whitcoulls‟ rent and occupancy costs represented 30% of sales (up from 23% in FY08) and Borders NZ‟s rent and occupancy costs represented 35% of sales (up from 26% in FY08). Similar trends were evident for employment costs. . Bennetts EBITDA for LTM to December 2010 was $403k, which was 76% lower than FY09. The gross margin for the same period was 26.5%. . Whitcoulls Travel‟s gross margin improved from 41.1% to 42.4% during the period FY08 to 31 December 2010, with a 16% decrease in EBITDA for the same period. . Head office costs, such as management and marketing, have remained fairly consistent over the period FY08 to 31 December 2010 at approximately 11% of the Group‟s sales.

In addition to the above, there were a number of events that had an impact on normal trading during the first half of the 2011 financial year, which impact the result for the LTM to December 2010. Below is a summary of the events and the adjustments to the LTM to December 2010 results:

LTM Dec-10 Abnormal Period EBITDA Impact Description of Impact Event $’000 All stores in Christchurch closed in September for varying Christchurch periods due to the first Christchurch earthquake. The Sep-10 (91) Earthquake adjustment represents management‟s estimate of the impact of store closures. Impact on sales as a result of increase in GST from 12.5% to 15%. This has resulted in a decreased market share of GST Increase Oct-10 (112) between 4% and 9% in the two weeks post the GST increase. A decision at the Australian parent level was made to reduce shifts at the Mangere (Auckland) distribution centre. Distribution Oct-10 to The decision was made with limited consultation with local Centre (“DC”) (755) Nov-10 New Zealand management. This resulted in a significant Backlog sustained backlog in the DC during stock build for Christmas, which was not resolved until mid-November.

Section 239AU(3) Report by Administrators 26 July 2011 Page 15

LTM Dec-10 Abnormal Period EBITDA Impact Description of Impact Event $’000 Pick Your Due to capital constraints, local New Zealand management Price Nov-10 (319) reduced the duration of this key promotion. Promotion

New Zealand management made the strategic decision to reduce the CD range at Borders NZ, given its return Borders NZ Nov-10 N/A characteristics. The CD stock was cleared at below cost CD Clearance onwards and resulted in a negative sold margin. This negative margin was funded out of provision for obsolescence. Commencing in December 2010, purchasing was curtailed from the Australian parent level in part due to refinancing constraints. The New Zealand business purchased $5M less stock at cost than in December 2009. This impacted trading in weeks 3 and 4 of December 2010 and sales of December Dec-10 (729) the most popular fast selling Christmas lines. Management Availability estimated the impact of availability on sales of the book category, assuming the market share achieved YTD was achieved in the last 2 weeks of December. This result was then extrapolated to other General Merchandise, assuming the same proportional impact. Total EBITDA Impact (2,006) Unadjusted EBITDA 19,983 Adjusted EBITDA 21,989 Source: The Group

4.2 RGR consolidated profit and loss statements

The Administrators have also been provided with the RGR consolidated profit and loss statements for the past two financial years ending 28 August 2010. A summary of RGR‟s consolidated profit and loss statements are set out below. Deloitte have audited the consolidated financial statements of RGR up to the year ended 28 August 2010.

Please note that the consolidated statement reflects the operations of all controlled entities including not only the Group but also the operations conducted in Australia, Singapore and the Supanews newsagency business.

Consolidated A$’000 NZ$’000 (AUS, NZ & SNG) FY09 FY10 FY09 FY10

Total Revenue 648,730 580,951 836,862 749,427 Gross Margin 295,561 234,197 389,727 302,114 EBITDA (Note 1) 42,400 27,045 54,696 34,888 EBIT 6,540 (19,533) 8,437 (25,198)

Note 1 - Before one off items including stock impairment charge and one off Borders NZ integration costs

4.2.1 Analysis

Our comments in relation to the historical trading results for RGR are set out below:

. EBITDA for FY09 was before one off costs of A$22.8 million (NZ$29 million) including A$12.6 million (NZ$16 million) associated with the Borders Acquisition.

Section 239AU(3) Report by Administrators 26 July 2011 Page 16

. FY09 results reflected the full year contribution from the 32 Borders Australia and Borders NZ stores that had been acquired in June 2008. . FY09 revenues were reported to be up 52% on FY08. FY10 revenues declined by 10% . FY10 results also reflect a one off stock impairment charge of A$30.3 million (NZ$39 million) principally attributable to the integration of the Borders Acquisition and a general range reduction. . The directors have generally attributed the FY10 results to the challenging retail environment post the GFC.

4.3 Group balance sheets

Appendix E contains a summary of the balance sheets for the Group as at 28 August 2009, 28 August 2010 and 31 December 2010.

4.3.1 Analysis

Our comments in relation to the historical financial position of the Group are set out below:

. The increase in current assets for Whitcoulls in December 2010 is largely attributable to the accumulation of cash and inventories. This is consistent with the timing of the year (Christmas), the delay in paying trade creditors (see below point) and the building up of inventory due to the backlog in the Distribution Centre before Christmas. . The Group‟s current liabilities increased in December 2010 due to the increase in trade creditors for both Whitcoulls and Borders NZ by 104% and 185% respectively when compared to FY10. We understand that the Group was directed by RGR management to obtain extended credit terms with suppliers at this time.

4.4 RGR consolidated balance sheets

A summary of RGR‟s consolidated balance sheets as at 28 August 2009, 28 August 2010 and 31 December 2010 is set out below.

Consolidated A$’000 NZ$’000 (AUS, NZ & SNG) FY09 FY10 FY09 FY09 Current Assets 170,628 134,308 220,110 173,257 Current Liabilities 164,300 207,497 211,947 267,671 Working Capital 6,328 (73,189) 8,163 (94,414) Non-Current Assets 232,771 235,586 300,275 303,906 Non-Current Liabilities 159,596 125,473 205,879 161,860 Net Assets 79,503 36,924 102,559 47,632 Source: RGR Group

Section 239AU(3) Report by Administrators 26 July 2011 Page 17

4.4.1 Analysis

Our comments in relation to the historical balance sheets are set out below:

. The reduction in current assets principally reflects the inventory adjustment of A$30.3 million (NZ$39 million) generally resulting from the range reduction across the Borders Australia, Angus & Robertson, Whitcoulls and Border NZ stock holdings. . The increase in current liabilities reflects the reallocation of secured borrowings from non-current to current liabilities on the basis that A$28.6 million (NZ$37 million) of the debt maturing on 15 December 2010 and A$77.3 million (NZ$100 million) maturing on 31 December 2010. . The RGR Group was likely to breach the financial covenants imposed by its secured lenders in August 2010 and subsequently in November 2010. Refer to section 9.2.2.1 for further discussion. . The reduction in non-current liabilities reflects the reallocation of secured debts to current liabilities as a result of the pending maturity of those facilities and an increase in the order of A$13.5 million (NZ$17 million) in convertible notes which do not mature until 28 November 2017.

Section 239AU(3) Report by Administrators 26 July 2011 Page 18

5. Statement by directors

5.1 Summary

Section 239AF of the Act requires the directors to give the Administrators a statement about the business, property, affairs and financial circumstances of the Companies as at the date of administration. We received the directors‟ Statements of Position (SOP) on 4 April 2011.

In the SOPs, the directors detail the Companies‟ assets and liabilities at book value and ERV.

Appendix F contains a summary of the SOPs for the Group. In addition, Appendix F contains a summary of the SOPs for the Australian Group.

Below is a summary of the Group position as at 17 February 2011 (excluding intercompany loans), along with the Administrators‟ assessment:

Administrators’ $’000 SOP ERV ERV Assets Cash 8,205 3,579 Trade Debtors 1,642 618 Inventories2 51,959 Not disclosed Property, Plant & Equipment2 14,221 Not disclosed Total Assets 76,026 Not disclosed Liabilities Priority IRD Claim3 - (364) Preferential Employee Entitlements4 (2,167) (492) Secured Creditor5 (117,208) (153,320) Unsecured Employee Entitlements4 - (174) Unsecured Trade Creditors (16,684) (19,980) Unsecured IRD and Customs Claims6 - (1,487) Total Liabilities (136,059) (175,817)

Net Deficiency1 (60,032) Not disclosed

Notes:

1. Net Deficiency for third party assets and liabilities only: Intercompany Loan amounts disclosed in the directors’ SOPs have been excluded from the above table and are discussed in Section 5.3 below.

2. Administrators’ ERVs for Inventories and Property, Plant & Equipment are not disclosed separately due to commercial sensitivity. Refer to section 8.6 for further discussion of the Administrators’ asset realisations.

3. The IRD had a lien over cash on appointment in respect of unpaid pre-appointment PAYE and associated deductions (e.g. Kiwi Saver). This amount was paid by the Administrators before 30 June 2011.

4. Employee Entitlements: The Administrators’ assessment includes preferential claims of $492k and unsecured claims of $174k.

5. Secured Creditor: The amount owing to PEP is secured against the Group and the Australian Group and has been converted to NZ Dollars in the Administrators’ ERV column.

6. Unsecured IRD and Customs Claims: Relates to pre-appointment GST ($1,437k) and Customs Duty ($49k).

Section 239AU(3) Report by Administrators 26 July 2011 Page 19

5.2 Administrators’ assessment

Following are the Administrators‟ comments in relation to the key assets and liabilities contained in the directors‟ SOPs for Whitcoulls and Borders NZ (being the trading entities).

5.2.1 Assets

5.2.1.1 Cash at bank

SOP ERV Administrators’ ERV Entity $’000 $’000 Whitcoulls 7,652 3,185 Borders NZ 458 295 Total 8,110 3,493

On the date of administration, the Administrators took control of all of the NZ based bank accounts of the Group. The total amount of cash at the date of appointment for Whitcoulls and Borders NZ was $3.5 million, which included $0.4 million of cash floats at the stores. In addition, the Administrators took control of the bank accounts for REDgroup Online ($13k) and Calendar Club NZ ($93k).

5.2.1.2 Trade debtors

SOP ERV Administrators’ ERV Entity $’000 $’000 Whitcoulls 1,542 539 Borders NZ 114 79 Total 1,656 618

Pre-appointment trade debtors consisted of accounts relating to:

. Business/corporate customers: $539k for Whitcoulls and $79k for Borders NZ; . Supplier rebates: $579k for Whitcoulls and $26k for Borders NZ; . Other debtors (property, landlords, head office): $424k for Whitcoulls and $7k for Borders NZ.

The Administrators have realised most of the pre-appointment business/corporate customer debtors to date. Due to the occurrence of the administration, the majority of supplier rebates and other debtors were not recoverable and have been largely offset against creditor claims.

5.2.1.3 Inventories

SOP ERV Administrators’ ERV Entity $’000 $’000 Whitcoulls 44,407 Not disclosed Borders NZ 7,376 Not disclosed Total 51,783 Not disclosed

Stock on hand for the Group at the date of appointment was $51.8 million. During the course of the administration, the Administrators undertook significant stock clearance programs to reduce the build- up of old stock, achieving sales of approximately $52 million during the administration period.

The Administrators‟ ERVs for inventories are not disclosed separately due to commercial sensitivity relating to the sales of businesses of the Group. Refer to section 8.6 for further discussion of the Administrators‟ asset realisations. Section 239AU(3) Report by Administrators 26 July 2011 Page 20

5.2.1.4 Property, plant & equipment

SOP ERV Administrators’ ERV Entity $’000 $’000 Whitcoulls 13,905 Not disclosed Borders NZ 255 Not disclosed Total 14,160 Not disclosed

As part of the sales of Whitcoulls Travel, Bennetts and Whitcoulls/Borders NZ, all property, plant & equipment at the stores, head office and distribution centre was sold. Property, plant & equipment at stores that were closed (Whitcoulls K Road, Albany Mega Centre and Papamoa) are in the process of being auctioned, and it is expected that the proceeds will not exceed more than $50k.

The Administrators‟ ERVs for property, plant & equipment are not disclosed separately due to commercial sensitivity relating to the sales of businesses of the Group. Refer to section 8.6 for further discussion of the Administrators‟ asset realisations.

5.2.2 Liabilities

5.2.2.1 Employee entitlements

SOP ERV Administrators’ ERV Entity $’000 $’000 Whitcoulls 1,939 649 Borders NZ 227 16 Total 2,166 665

As a result of the sales of Whitcoulls Travel, Bennetts and Whitcoulls/Borders NZ, the majority of employees transferred to the purchasers along with their accrued entitlements. In addition, the Administrators paid entitlements that accrued during the administration period.

Due to the limited number of redundancies required during the administration period, the total estimated priority employee claims are $491k ($475k for Whitcoulls and $16k for Borders NZ).

In accordance with Clause 1(2) of Schedule 7 of the Act, priority employee claims include:

a) Wages and salaries; b) Holiday pay (including annual leave); and c) Redundancy.

It is estimated that there are a further $174k of unsecured employee claims for Whitcoulls. Unsecured employee claims include amounts in excess of the statutory priority limit of $18,700, and other claims which fall outside the terms of Schedule 7 of the Act.

5.2.2.2 Secured creditor

The debt due to PEP is cross collateralised across the Group and Australian Group. PEP has lodged a Proof of Debt in the Administration of each company for A$118.5 million (NZ$153.3 million). Refer to section 3.1.1 for further discussion.

Section 239AU(3) Report by Administrators 26 July 2011 Page 21

5.2.2.3 Unsecured creditors

SOP ERV Administrators’ ERV Entity $’000 $’000 WGL Retail - 1,334 Whitcoulls 15,261 18,518 Borders NZ 1,346 1,510 Calendar Club NZ - 104 Total 16,607 21,466

Note: This table excludes unsecured employee claims of $174k for Whitcoulls

We have reviewed the Group‟s books and records along with correspondence received from creditors to undertake an initial assessment of unsecured creditor claims. The estimated unsecured creditors can be divided into the following categories:

WGL Borders Calender Whitcoulls Total $’000 Retail NZ Club NZ Number of $’000 creditors IRD 1,334 - - 104 1,438 1 Customs - 28 21 - 49 1 Trade Creditors - 18,489 1,490 - 19,979 1,016 Total 1,334 18,517 1,511 104 21,466 1,018

The above claims are after allowing for payment of the settlement of retention of title claims in the amount of $3.6 million. Refer to section 6.2.1 for further discussion.

5.2.3 Intercompany loans

According to the SOPs in summarised in Appendix F, the intercompany loan position as at 17 February 2011 was as follows:

Total WGL Borders Calendar Australian $’000 Whitcoulls Singapore Loans Retail NZ Club NZ Group Receivable WGL Retail 20,042 20,042 Whitcoulls 14,283 1,069 15,352 Borders NZ 4,554 3 4,557 Calendar Club NZ 2,122 2,122 Australian Group 76,876 2,591 719 636 80,822 Singapore - Total Loans Payable 91,159 9,267 20,761 636 1,069 3 122,894

The most significant loan from the Australian Group to WGL Retail (being the holding company for the Group) is in relation to funding of the Group‟s working capital by way of the facilities provided by PEP to RGR. The majority of intercompany loans within the Group are to/from Borders NZ and Whitcoulls, being the trading entities.

Section 239AU(3) Report by Administrators 26 July 2011 Page 22

5.3 Directors’ explanation for current financial position

The directors‟ explanation for the current financial position of the Group and the RGR Group generally is as follows:

. Subdued discretionary consumer spending; . The legislative framework in relation to the sale of books in Australia which limit the ability of Australian booksellers to compete with overseas retailers due to: 1. No GST of 10% being added for Australian online consumers on overseas book purchases - whilst stores operating in Australia must add GST; 2. Parallel importation restrictions which allow Australian consumers to buy books directly from overseas whilst Australian retailers have to purchase their books from generally more expensive Australian based publishers; 3. The strong Australian dollar which had appreciated against the US dollar and the pound sterling by 20% since September 2009, and further fuelled the growth in Australian consumers purchasing books online from overseas retailers; and 4. Deep discounting and increased advertising of front list books by discount department stores. . Together, these factors created significant pricing pressure on front list titles (local competition) and backlist titles (offshore competition). In the context of a weak consumer environment, this led to an erosion of like for like sales. Coupled with rental inflation, the economics of the business weakened significantly. . Whilst restructuring to address the above issues commenced in mid-2010, it was the fall-off in top line performance through January and February 2011 that led to the recognition in mid-February that operating cash flows would not be sufficient to complete the planned restructuring program.

We generally concur with the directors‟ reasons for the failure of the Group and the RGR Group generally. In addition, we consider that the following factors also contributed to the failure of the Group:

. Management buying decisions did not meet market demands. There was more emphasis on „buying‟ rather than „selecting‟ stock resulting in overstocking with aged, poor stock. . Decisions were made by the Australian management team with respect to the NZ businesses, with limited consultation from local NZ management. This created issues such as the back log in the distribution centre, reduced stock availability during the busy 2010 Christmas period, and reduced periods for promotional campaigns. . Failure to recognise and promptly address loss making stores. . Under-utilisation of space in stores and poor organisation with no logical grouping. . General lack of consistent business processes with little use and reference to signed off critical paths and event management cycles.

Section 239AU(3) Report by Administrators 26 July 2011 Page 23

6. Trading by Administrators

6.1 Overview

The Administrators assumed control of the Group‟s businesses upon appointment. Appropriate controls and systems were put in place with respect to cash / banking, purchase orders, stock control and reporting.

From the commencement of our appointment we have attempted to implement procedures which would allow the business to trade in the “ordinary course”. These procedures have included:

. Communication with senior management team and employees; . Establishing new banking facilities; . Opening of new accounts with service providers, utilities and other non-stock suppliers; . Negotiation of terms of trade with various suppliers of books and general merchandise; . Continued employment of store and head office staff; . Negotiation of certain payments of necessity to ensure continued supply of business critical services; . Liaison with landlords and negotiations with various landlords to determine their willingness to grant rental discounts for the term of the voluntary administration to facilitate the continued operation of some stores; . Liaison with lessors and other stakeholders; . Determination of a gift card policy and communication and implementation of that policy; . Negotiation of retention of title settlements.

6.2 Trading issues

6.2.1 Retention of title claims

A large number of suppliers to the business held terms of trade which require that title in goods supplied does not pass to the purchaser until such time as those goods have been paid for.

Generally these “Retention of Title” clauses can include the following types:

. All monies clause – where title to all of the goods supplied by the supplier remains the property of that supplier until all of those goods have been paid for; or . Specific clause – where title in specific items remains the property of the supplier until such times as those specific goods have been paid for.

In the case of an “all monies clause” it is necessary for the supplier to prove that the goods on hand are in fact their goods. For a “specific clause” to be effective it is necessary for a supplier not only to be able to identify their goods, but also be able to distinguish between those goods that have been paid for, and those that have not. Accordingly the enforcement of a “specific clause” becomes problematic as, depending on the sophistication of the buyer‟s accounting system, the identification of a book which has been paid for and one that has not been paid for can be difficult to clearly distinguish.

Section 239AU(3) Report by Administrators 26 July 2011 Page 24

Accordingly, the fact that a particular supplier had a retention of title clause on their invoice did not necessarily mean that the clause is valid, or capable of being enforced. In addition, retention of title claims are security interests which must be registered under the Personal Property Securities Act 1999, which can also affect validity and priority as against other claims.

The quantum of claims against the Group included:

Value of Claims Number of Claims $’000 Whitcoulls 94 10,718 Borders NZ 42 1,638 Total 136 12,356

As at the date of this report, we have reached agreement with the majority of suppliers resulting in the payment of $3.6m by the Administrators against the above value of claims.

6.2.2 Store performance

Since our appointment, we have undertaken investigations into the performance of the businesses within the Group to identify areas of improvement. Through the implementation of improved inventory management practises, cash flow management and positive negotiations with landlords and suppliers, the Administrators ensured that no store closures were undertaken during the administration period, with the exception of the K Road Whitcoulls store (Auckland), which was scheduled for closure prior to the commencement of the voluntary administration.

7. Summary of receipts and payments

A summary of the Administrators‟ receipts and payments for the period 17 February 2011 to 30 June 2011 is attached as Annexure 3.

Section 239AU(3) Report by Administrators 26 July 2011 Page 25

8. Sale of business

8.1 Sale program

Given the tight timeframe imposed by the Act and the Group‟s critical cash position, we commenced a sale program on 11 March 2011 seeking expressions of interest from parties wishing to acquire all or part of the business operated by Group including:

. Whitcoulls Retail; . Whitcoulls Travel; . Borders NZ; and . Bennetts.

The sale process required the submission of expressions of interest by 14 March 2011. The information memorandum was available for interested parties from 16 March 2011 with indicative offers closing on 23 March 2011. The data room opened for due diligence on 25 March 2011 with final offers due on 15 April 2011.

At the same time, sale program was commenced for the businesses of the Australian Group including:

. Borders Australia; . Angus & Robertson; . Casual Leasing; . Calendar Club (Australia and NZ); . Readers Feast.

8.2 Advertisements

Advertisements for the Group businesses were placed in the following publications:

. Asian Wall Street Journal – 11 March 2011 . NZ Herald – 12 March 2011 and 16 March 2011 . Weekend Australia – 12 March 2011 . Australian Financial Review – 15 March 2011

8.3 Preliminary information

A preliminary information brochure was made publicly available on 11 March 2011.

8.4 Information memorandum

We prepared an Information Memorandum in conjunction with the Group‟s directors and senior management. The Information Memorandum was made available on 16 March 2011 to 20 interested parties who had executed and returned a Confidentiality Agreement.

Section 239AU(3) Report by Administrators 26 July 2011 Page 26

8.5 Outcome of the sales process

Indicative offers were reviewed by the Administrators and investigations were conducted to ensure that interested parties had, or could source, adequate funding in the event that a final offer was accepted. After finalising negotiations with the preferred parties, the following contracts of sale were executed:

Date of Date(s) of Business Description of Sale Exchange Completion 19 April 2011 Auckland Airport – 5 stores Whitcoulls Travel 1 April 2011 27 April 2011 Rotorua Airport – 1 store 28 April 2011 Christchurch Airport – 3 stores University sites – 7 stores Bennetts 29 April 2011 5 May 2011 High street – 1 store Whitcoulls – 57 stores Borders NZ – 5 stores Whitcoulls & Borders NZ 25 May 2011 20 June 2011 Distribution Centre Head Office

Further details in relation to the sale of each business are below.

8.5.1 Whitcoulls Travel

We exchanged contracts with LS Travel Retail Pacific on 1 April 2011 for the sale of the Group‟s 10 Travel stores. The purchaser has significant experience in the travel retail industry, and was considered a suitable buyer for this part of the Group.

Completion of the sale was staggered from 19 April 2011 onwards as the various airport leases were assigned. Employees at each store were transferred to the purchaser on completion, which has resulted in the preservation of over 100 jobs.

The Wellington airport stores will be the last to complete due to ongoing negotiations with the purchaser and the landlord.

8.5.2 Bennetts

The Bennetts business comprised of eight academic books stores and one site within the Borders NZ store on Queen Street, Auckland. The greatest challenge faced by the Administrators in respect of the Bennetts business was to maintain the cooperation of the university landlords, who were in the process of putting the majority of sites to tender and in one case required the tenant to make significant capital expenditure. Due to lack of interest by the parties interested in acquiring the Whitcoulls and Borders NZ businesses, the Administrators separately negotiated with interested parties in respect of the sale of the Bennetts stores as a matter of urgency in order to preserve the business as a going concern.

We exchanged contracts with Bennetts Bookstores Limited on 29 April 2011, a newly incorporated entity owned by Mr Geoffrey Spong, who has had extensive experience in the university bookstore industry. Completion of the sale took place on 5 May 2011, after the purchaser had secured ongoing tenure with the university landlords. The sale resulted in the transfer of eight stores (all Bennetts stores with the exception of the site in the Borders NZ store), with all employees at those stores (approximately 30 staff) retaining their jobs with the purchaser or being transferred to the wider Whitcoulls network.

Section 239AU(3) Report by Administrators 26 July 2011 Page 27

A portion of the purchase price has been deferred until the purchaser is able to secure tenure at one Manukau Institute of Technology site (to be confirmed by August 2011) and three Massey University sites (to be confirmed by May 2012) for more than 12 months.

8.5.3 Whitcoulls & Borders NZ

On 26 May 2011 the Administrators agreed the sale of the Whitcoulls and Borders NZ businesses to Whitcoulls 2011 Limited (formerly Project Mark Limited), a company in the James Pascoe Group. James Pascoe Group is a NZ privately owned business which operates the brands Pascoes, Farmers, Stewart Dawsons, Goldmark, Stevens, Prouds and Angus & Coote and employs over 9,000 people in NZ and Australia.

The sale to Whitcoulls 2011 Limited formally completed on 20 June 2011, which included 57 Whitcoulls stores, five Borders NZ stores, the Distribution Centre (Mangere) and head office (Auckland). The sale did not include the following six Whitcoulls stores:

. Three stores in Christchurch which had not opened since the February 2011 earthquake – Cashel Street, Colombo and Eastgate; . A further three stores – Albany Mega Centre, Papamoa and Bishopdale (the purchaser was unable to secure tenure with the landlord of the Bishopdale store). The majority of the staff at these stores were relocated within the Whitcoulls store network where possible. The Administrators then commenced an orderly close down of these stores by 15 June 2011.

The sale to Whitcoulls 2011 Limited resulted in the preservation of more than 900 jobs, with the majority of head office staff being offered full time jobs with the purchaser. Due to the sale of the Travel stores and Bennetts stores, as well as the separation from the Australian Group, unfortunately the purchaser was unable to offer positions to some members of senior management, and the shared services and IT teams, however a number of staff in those teams were offered fixed term contracts in order to support the wind down of the Australian Group.

8.5.4 Calendar Club – Australia and NZ

A separate Information Memorandum was prepared for the businesses of the Australian Group. An offer for the Calendar Club business in Australia and NZ was accepted from one party just prior to Easter. An offer was accepted prior to Easter however that offer has now been subject to further negotiation. We are currently waiting on comments on the draft contracts provided to purchaser with a view to having all parties execute the contracts in the next 7-10 days. Settlement is scheduled for August 2011.

8.5.5 Australian Group businesses

8.5.5.1 Borders Australia

Offers were received for the Borders Australia stores and the Online Borders business, however these offers were rejected on the basis that a greater return could be realised from the liquidation of the stock. As a result, all Borders Australia stores, and all but two Angus & Robertson stores entered a close down procedure in order to realise all remaining stock.

8.5.5.2 Angus & Robertson stores and franchise network

An offer was accepted from Collins Booksellers for a certain number of the franchised stores that were agreeable to transferring to Collins. The exact number of stores, and therefore the amount realised for the sales is yet to be determined.

Section 239AU(3) Report by Administrators 26 July 2011 Page 28

8.5.5.3 REDgroup Online Australia

The Administrators accepted an offer for the REDgroup Online business and settlement is anticipated to occur on 27 July 2011. Financial details of the sale will be made available following completion.

8.5.5.4 Casual Leasing

The Australian Group conducted a pop-up retail business across Australia whereby operators set up small retail sites in the shopping centres and sold discount books. An offer was subsequently accepted for the stock and a small amount of plant and equipment.

8.6 Summary of asset realisations

The following summarises the total estimated asset realisations for the Group:

Actual Estimated Future Estimated Total $'000 to 30- Jun-11 High Low High Low Asset Realisations Cash on Hand at Appointment 3,579 - - 3,579 3,579 Pre-appointment Trade Debtors 598 370 - 968 598 Sale of Businesses 47,053 2,017 - 49,070 47,053 Insurance Claim - Christchurch Earthquake - 1,500 - 1,500 - Total 51,231 3,887 - 55,118 51,231 Administration Activities - - Net Trading Position 7,956 (12,480) (14,480) (4,524) (6,524) Administrators' Costs (2,238) (1,500) (1,500) (3,738) (3,738) Professional Costs (including Legal Costs) (774) (1,000) (1,000) (1,774) (1,774) Non-Trading Net Receipts 290 - - 290 290 Total 5,235 (14,980) (16,980) (9,746) (11,746)

Net Realisations before further costs 56,465 (11,093) (16,980) 45,372 39,485

Section 239AU(3) Report by Administrators 26 July 2011 Page 29

9. Statutory investigations

9.1 Nature and scope of review

The Act requires an administrator to carry out preliminary investigations into a company‟s business, property, affairs and financial circumstances.

Investigations centre on transactions entered into by the company that a liquidator might seek to void or otherwise challenge where the company is wound up. Investigations allow an administrator to advise creditors what funds might become available to a liquidator in order that creditors can properly assess whether to accept a DOCA proposal or resolve to wind up the company.

Funds recovered would be available to the general body of unsecured creditors including secured creditors but only to the extent of any shortfall incurred after realising their security.

A liquidator may recover funds from voidable transactions. A deed administrator does not have recourse to these voidable transactions. A liquidator may also recover funds through other avenues; for example, through action seeking compensation for insolvent trading or breach of director duties.

An administrator is not obliged to carry out investigations to the same extent as a liquidator. A liquidator may require many months of investigation and conduct public examinations before forming a concluded view on recovery action. We investigated matters to the extent possible in the time available. The dividend estimate in a liquidation scenario set out in section 11.2 of this report reflects the outcome of our investigations.

The Administrators‟ knowledge of the Group‟s affairs comes principally from the following sources:

. Communications with the Group‟s major unsecured creditors regarding the nature and amount of the debts owed. Those creditors confirmed that the details disclosed by the Group are substantially correct. . Communications with the secured creditor of the RGR Group (PEP) regarding the nature and amount of the debt owed. The secured creditor confirmed the information supplied by the Group. . The directors‟ SOPs and detailed questionnaires concerning RGR Group's affairs. . Discussions with the RGR Group directors and their advisors. . Discussions with senior management. . A search of the Companies Office and ASIC records relating to RGR Group. . An examination of the Group‟s books and records including its financial statements, management accounts, board reports and minutes.

Section 239AU(3) Report by Administrators 26 July 2011 Page 30

9.2 The Company’s solvency

9.2.1 Overview

A precursor to the recovery of funds by a liquidator through the voiding of certain transactions or through other legal action, such as seeking compensation from directors for breach of directors' duties, is establishing the company‟s insolvency at the relevant time.

Establishing insolvency is a complex matter due in part to the complexity of corporate financial transactions and the lack of clear prescriptive legal authority on proof of insolvency. Notwithstanding, there are two primary tests used in determining a company‟s solvency, at a particular date; namely:

. Balance sheet test; and . Cash flow or commercial test.

The Courts have widely used the cash flow or commercial test in determining a company‟s solvency at a particular date. For the purposes of most of the voidable transactions provisions, a claim may be available if “the company is unable to pay its due debts”, which has been interpreted principally as relating to cash flow insolvency (see further discussion in section 9.3.1.1 below).

However, the commercial test is not the sole determinant of solvency. Determining solvency derives from a proper consideration of a company‟s financial position in its entirety and in the context of commercial reality. Relevant issues include, but are not limited to the following:

. The degree of illiquidity. A temporary lack of liquidity is not conclusive; . Regard should be had to:  Cash resources  Monies available through asset realisations, borrowings against the security of assets or equity/capital raising;

. All a company‟s assets might not be relevant when considering solvency. For example, where a company proposes selling assets which are essential to its business operations, the proceeds of those assets should not be taken into account; . The voluntary and temporary forbearance by creditors not to enforce payment terms; and . It is not appropriate to base an assessment of whether a company can meet its liabilities as and when they fall due on the prospect that a company might trade profitably in the future.

In summary, it is a company‟s inability using such resources as are available to it through the use of its assets, or otherwise, to meet its debts as they fall due, which indicates insolvency.

Section 239AU(3) Report by Administrators 26 July 2011 Page 31

9.2.2 Preliminary determination

9.2.2.1 Review of banking facilities

We have undertaken a review of the Group‟s bank facilities for the 6 months prior to our appointment and have not identified any transactions which would appear to vary from the ordinary course of business conducted by the Group. The Group conducted its operations within its facility limits and we having sighted nothing unusual in the conduct of the Group banking arrangements.

The most significant liability of the Group was the guarantee under the SFA in connection with RGR and the Australian Group. Therefore the status of the banking facilities of RGR and the Australian Group directly impact on the Group‟s financial position.

With respect to the RGR and Australian Group banking facilities, the only issue identified was at a RGR Board meeting on 28 July 2010, where the directors formed the view that RGR was likely to breach two out of three of its banking covenants at the next covenant test date on 28 August 2010, being the interest cover ratio and the leverage or gearing ratio. On 27 August 2010 RGR announced that it had secured from its banks a waiver of compliance with respect to the relevant covenants.

9.2.2.2 Aged payables review

The table below sets out an analysis of the aged trade payables profile for the main trading businesses of Whitcoulls and Borders NZ for the 9 months to 17 February 2011:

Whitcoulls

Month Total Current 30 days 60 days 90 days 120+ days $'000 Feb-11 11,884 2,002 3,711 4,589 1,496 85 Total (%) 100% 17% 31% 39% 13% 1% Jan-11 24,213 2,961 7,588 10,960 2,595 110 Total (%) 100% 12% 31% 45% 11% 0% Dec-10 30,853 4,880 14,862 9,899 1,298 86 Total (%) 100% 16% 48% 32% 4% 0% Nov-10 32,977 8,882 12,810 9,255 1,917 113 Total (%) 100% 27% 39% 28% 6% 0% Oct-10 18,542 4,115 10,030 2,358 1,758 282 Total (%) 100% 22% 54% 13% 9% 2% Sep-10 17,242 5,290 6,801 3,894 1,172 86 Total (%) 100% 31% 39% 23% 7% 0% Aug-10 15,484 3,062 5,404 5,862 895 261 Total (%) 100% 20% 35% 38% 6% 2% Jul-10 11,682 3,447 6,630 1,495 (44) 153 Total (%) 100% 30% 57% 13% (0%) 1% Jun-10 18,630 3,380 6,471 5,807 2,093 880 Total (%) 100% 18% 35% 31% 11% 5% Source: The Group

Section 239AU(3) Report by Administrators 26 July 2011 Page 32

Borders NZ

Month Total Current 30 days 60 days 90 days 120+ days $'000 Feb-11 1,346 30 253 672 227 164 Total (%) 100% 2% 19% 50% 17% 12% Jan-11 3,089 343 542 1,581 493 130 Total (%) 100% 11% 18% 51% 16% 4% Dec-10 4,363 622 2,083 1,608 103 19 Total (%) 100% 14% 48% 37% 2% 0% Nov-10 3,966 1,316 1,512 1,010 (181) 308 Total (%) 100% 33% 38% 25% (5%) 8% Oct-10 2,221 808 1,143 (74) (96) 441 Total (%) 100% 36% 51% (3%) (4%) 20% Sep-10 1,694 741 133 469 338 13 Total (%) 100% 44% 8% 28% 20% 1% Aug-10 1,481 (285) 835 800 145 (14) Total (%) 100% (19%) 56% 54% 10% (1%) Jul-10 1,073 (13) 767 334 48 (63) Total (%) 100% (1%) 71% 31% 4% (6%) Jun-10 1,856 111 814 722 152 56 Total (%) 100% 6% 44% 39% 8% 3% Source: The Group

There is a clear build up in total payables from November 2010 for both Whitcoulls and Borders NZ. This reflects two issues:

. Stock purchasing for the Christmas period; and . The outcome of negotiations with suppliers on the extension of terms from 30 to 60 days (and longer is some cases).

The decision to approach suppliers to negotiate extensions on payment terms was made in July 2010 after the directors confirmed that the RGR Group was likely to breach two of its banking covenants in August 2010 and November 2010.

By January 2011, after the RGR Group banking facilities had been refinanced by PEP, payables clearly started to reduce to the levels ordinarily experienced by the Group.

9.2.2.3 Finance Commitments Review

Please refer to comments at section 3.3 regarding finance commitments.

9.2.2.4 Net Assets / Working Capital Analysis

Appendix E provides a summary of the balance sheets for the Group for the past two financial years. A summary of RGR‟s consolidated balance sheets for the past two financial years is also set out at section 4.3 of this report.

The Administrators note the following in relation to the Group:

. Whitcoulls maintained positive working capital (a company‟s ability to meet its current liabilities from its current assets) to December 2010. Negative working capital for Borders NZ in December 2010 was primarily caused by the build-up in trade payables.

Section 239AU(3) Report by Administrators 26 July 2011 Page 33

. The working capital position of Whitcoulls improves in December 2010 after the refinance of the Australian Group and Group banking facilities earlier that month. . By the end of January 2011, the working capital position has worsened again and at about this point, it appears that the directors took advice and sought the appointment of the Administrators. . Net assets have remained positive for the total Group and for Whitcoulls throughout the past two years. There was a net deficiency for Borders NZ during the same period as a result of the intercompany loans.

9.2.2.5 Profitability / Trading Results

Appendix D provides a summary of the profit and loss statements for the Group for the past two financial years. A summary of RGR‟s consolidated profit and loss statement for the past two financial years is also set out at section 4.2 of this report.

The Administrators note the following in relation to the Group:

. Sales for the month of December 2010 were not a high as expected as a result of the decision at the Australian Group level to reduce shifts at the Auckland distribution centre. This resulted in a significant sustained backlog in the distribution centre during stock build for Christmas. . In addition to the above, from December 2010 onwards purchasing was curtailed due to financing constraints. The Group purchased $5 million less stock at cost than in December 2009. This impacted trading in weeks 3 and 4 of December 2010 and sales of the most popular fast selling Christmas lines. Management estimated the impact of availability on sales of the book category, assuming the market share achieved YTD was achieved in the last 2 weeks of December 2010. . In January 2011 sales improved significantly after the distribution centre backlog was resolved and the Group adjusted to the reduced purchasing volumes.

9.2.2.6 External Creditors and Statutory Commitments

. From the information available, it would appear that superannuation and statutory liabilities were current at the date of our appointment. . Whilst there was a build-up of trade payables from November 2010 to December 2010 as a result of the negotiated extended payment terms with suppliers, payables had generally returned to ordinary terms by January 2011.

9.2.2.7 Availability of Debt Facilities

Details of the Group‟s banking facilities are set out at section 3.1.1. On 15 December 2010, RGR entered into a senior secured loan facility with Fund IV LP and Fund IV Trust for a loan of up to A$126 million (NZ$163 million), composed of a A$46 million term (NZ$59 million) debt facility and a working capital facility of up to A$80 million (NZ$103.2 million).

The proceeds from the debt facility were used to repay bank debt due to BOSI of A$33 million (NZ$43 million) and NZ$14 million, to West LB of A$25 million (NZ$32 million) and NZ$7 million and to Bank of Western Australia of A$3 million (NZ$4 million) on 15 December 2010 and also to redeem the Bonds in the amount of NZ$37 million on their maturity date which was 15 December 2010. As at 17 February 2011, the working capital facility was drawn to $70 million (NZ$90 million).

Section 239AU(3) Report by Administrators 26 July 2011 Page 34

9.2.2.8 Returned cheques

RGR Group had adequate overdraft facilities to ensure that amounts paid to creditors were honoured. The Administrators have not sighted any evidence of dishonoured cheques/EFTs in their review of the Group‟s banking facilities.

9.2.2.9 Creditor correspondence and legal action

From the records available, there is no evidence that creditors were demanding repayment of overdue accounts.

All creditor claims and legal actions in respect of unpaid debts appear to be contractual disputes rather than a failure to pay trade debts as and when they fall due.

9.2.2.10 Conclusion as to solvency

Having regard to the above analysis, it is our preliminary view that it is difficult to maintain an argument that the Group was insolvent for any material period prior to 17 February 2011 principally as a result of the support available from PEP.

A Liquidator would need to conduct further investigations, and possibly conduct public examinations of relevant parties, to ultimately determine whether or not the Companies became insolvent at an earlier date. However the prospect seems unlikely.

9.3 Potential liquidator recoveries - voidable transactions

9.3.1 Voidable charges – PEP security

We have considered whether the PEP security would constitute a voidable charge under Section 293 of the Act or would be voidable on other grounds in a liquidation of the Group.

Under Section 293, charges over any property of a company are voidable against the liquidator if they are executed:

. Within two years prior to the commencement of liquidation; and . At a time when the company is unable to pay its due debts immediately after the execution of the charge.

There are a number of exceptions to this rule. In particular, a charge will not be voidable if the charge secures money actually advanced or paid, or the actual price or value of property sold or supplied to the company, or any other valuable consideration given in good faith by the grantee of the charge at the time of, or at any time after, the giving of the charge (Section 293(1A)).

The key considerations as to whether the PEP security might be voidable by a liquidator pursuant to Section 293 are:

. Whether the PEP security was given at a time when the Group, or any of the individual companies, were unable to pay their due debts; and . If so, whether the PEP security secures money advanced or paid "at the same time or after" the PEP security was executed.

Section 239AU(3) Report by Administrators 26 July 2011 Page 35

9.3.1.1 Were the NZ Companies unable to pay their due debts on 15 December 2010?

A charge can only be set aside for the purposes of Section 293 if it was made at a time when the company was unable to pay its due debts. Where a charge is executed within 6 months prior to the commencement of liquidation, it is presumed that the company was unable to pay its due debts at the time the security was granted. The PEP security was not executed within six months of the commencement of liquidation and therefore a liquidator would need to prove insolvency.

Determining the solvency and ability of a company to pay its due debts is a factual enquiry and principally focuses on cash flow. The following matters are often considered relevant:

. Consideration of ability to pay debts is concerned with the debtor‟s present position. However, in considering that position, regard may be had to the recent past, that is, whether the debtor has, in the recently preceding period, been able to pay its debts as they have become due; . Outstanding debts must be taken into account in determining a company‟s ability to meet its debts as they become due. In this context "due debts" means debts that are legally due; . The Courts consider the financial viability of the company in the near future as being determinative of whether the company was insolvent. In Re Seafresh New Zealand Ltd (in liq) (2004) 9 NZCLC 263, 629, the Court found that the company was unable to pay its due debts based on evidence that it was unable to pay its monthly trade creditors, that its current assets could not have met its current liabilities, and that the company had no success in refinancing its liabilities, despite the fact that the company was balance sheet solvent at the time. . Conversely, an excess of liabilities over assets does not of itself establish insolvency, and much will depend on the nature of current trading and immediate prospects. For example, the ability to procure sufficient money to pay debts by realisation by sale or mortgaging or pledging assets within a relatively short period of time will satisfy the test. . The test of solvency is an objective one. The views of the debtor itself as to its financial position (current or future) are irrelevant.

We understand that on and around 15 December 2010:

. The Group was able to and generally paid their trade creditors (including tax debts) when they became due. . The Group guaranteed and therefore had a contingent liability owing in connection with the SFA. . There were funds available from the working capital facility under the SFA to fund trading for the near future, although it is not clear on the basis of our preliminary investigations how much was available and for how long funding was anticipated.

Given that the most significant liability of the Group at the time was in relation to the guarantee under the SFA, considerations about the position of RGR and the Australian Group in determining solvency of the Group are unavoidable. The more likely it was for RGR to default under the SFA, the higher the prospects that the guarantee would be called upon by PEP.

In our view, it is not likely that a Court would find that the Group was insolvent on 15 December 2010.

Section 239AU(3) Report by Administrators 26 July 2011 Page 36

9.3.1.2 Does the PEP security secure money actually advanced at the same time or after the giving of the charge?

Even if the Group was unable to pay their due debts on the date that the PEP security was given, the PEP security will not be voidable under Section 293 if it secures money advanced or paid at the same time as or after the giving of the charge.

Based on our investigations and advice, the PEP security was given "at the time of" the original advances of A$112 million ($NZ144 million) on 10 December 2010. The initial advances made by PEP on 10 December 2010 and the release of the executed GSD from escrow on 15 December 2010 were part of one continuous transaction. Our reasons for that view are as follows:

. The SFA anticipated that the PEP security would be granted as a condition precedent for the advances under the SFA, and the PEP security had been signed by the parties prior to the making of the advance (and held in escrow). . The delay was due to constraints on the part of the Group. RGR and the Group required the initial advance to be made so that existing secured facilities could be discharged and to allow the PEP security taking effect without breaching negative pledge obligations. There was an escrow agreement in place in relation to the executed GSD. . Registration of the relevant financing statements occurred on 9 December 2010, which predates the advance, indicating that PEP intended for the advances to be secured at all times. . The advances under the SFA were intended to be used to repay the bank debt and to redeem Retail Bonds, both of which were secured by, amongst others, the Group.

9.3.2 Insolvent transactions

9.3.2.1 PEP security

Section 292 of the Act enables a liquidator to avoid certain transactions entered into by the company within a pre-liquidation period.

A transaction will be an insolvent transaction which is voidable by a liquidator if it:

. Is a transaction, which includes the giving of security; . Is entered into a time when the company is unable to pay its due debts; . Is entered into within the two year period prior to the commencement of liquidation; and . Enables another person to receive more towards the satisfaction of debt owed by the company than the person would receive, or would be likely to receive, in the event of the company's liquidation.

In our view, on the information available at this preliminary stage, as the PEP security is not a voidable charge, PEP should be treated as being secured in a liquidation of the Group. Section 292 would not be available to a liquidator.

9.3.2.2 Other transactions

As we have concluded that each of the companies in the Group would not have been unable to pay their due debts at a date materially earlier than the appointment date of the Administrators, we consider it unlikely that any other creditors could be pursued for receiving insolvent transactions. Our preliminary investigation into the Group‟s affairs has not identified any insolvent transactions.

Section 239AU(3) Report by Administrators 26 July 2011 Page 37

9.3.3 Transactions at an undervalue

As we have concluded that each of the companies in the Group would not have been unable to pay their due debts at a date materially earlier than the appointment date of the Administrators, we consider it unlikely that any transactions could be attacked on the basis of being transactions at an undervalue. Our preliminary investigations do not disclose any transactions at an undervalue which may lead to recoveries by a liquidator in the event that the Group is wound up.

9.3.4 Obstruction of creditors’ rights

Our investigations have not identified any transactions intended to prejudice creditors for the purposes of the Property Law Act 2007.

9.4 Potential liquidator recoveries - insolvent trading

9.4.1 Directors’ liability for insolvent trading

Our preliminary investigations do not show that the Group traded whilst it was insolvent.

Based on our analysis at section 9.2 of this report, we consider that it is difficult (without further investigation and enquiry) to determine a date of insolvency materially earlier than 17 February 2011 having regard to the ongoing support by PEP. That would be particularly relevant for an analysis of whether the directors could be liable under Section 136 of the Act.

Section 136 of the Act provides that a director of a company must not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.

The directors, in their defence could argue:

. That at all times, there was sufficient working capital available to meet the debts which were being incurred; . They had sought ongoing professional advice which ultimately led to the appointment of Administrators; . A reasonably held expectation that PEP would continue to support the RGR Group.

Again, a liquidator would likely seek legal advice on these issues and conduct more investigations, possibly including an examination of directors and employees.

The costs of proceeding with actions against directors must be considered as would the personal financial capacity of the directors to pay a judgment obtained against them. At this stage, I have not ascertained the financial position of the directors of the Group.

Presently, on the available information, it is the Administrators‟ view that there is no clear basis for an action under Section 136 against the current directors.

Section 239AU(3) Report by Administrators 26 July 2011 Page 38

9.5 Other potential liquidator recoveries

9.5.1 Compensation for breach of director duties

Based on our preliminary investigations, it would not appear that the directors have breached their duties in relation to the Company.

9.6 Possible offences

Based on preliminary investigations, we have not identified any offences the directors may have committed under the Act.

9.7 Summary of potential liquidators’ recoveries

At this stage, the Administrators do not consider that there will be any potential recoveries by a liquidator in the event the Companies are wound up.

9.8 Report to Companies Office

We have not identified any offences that require reporting to the Companies Office pursuant to Section 239AI of the Act.

Section 239AU(3) Report by Administrators 26 July 2011 Page 39

10. Proposal for DOCA

10.1 Statement of proposed DOCA

We have received a proposed DOCA put forward by the directors of the RGR Group. The proposal provides for a contribution of $3.142 million for the benefit of the creditors of the entire Group.

A summary of the major terms of the proposed DOCA are set out in the attached Annexure 5, however a simplified analysis of those terms appears below.

10.2 Key commercial features

10.2.1 Creditor Fund

Creditor claims for each of the companies in the Group will be pooled and creditors will claim against the Group DOCA fund. Resolutions of creditors for each of the companies will need to be passed in order for the Group DOCA to be approved.

The proposal is for a combined Group DOCA, with the directors of the Group companies causing $3,142,000 to be contributed to the Group DOCA.

These deed funds shall be distributed in the following order:

a) First, in payment of the Deed Administrators‟ remuneration and expenses (estimated amount of $390,000). b) Next, in payment of the priority employee claims (estimated amount of $491,635 – refer to section 5.2.2.1 of this report for further information). c) Next, in payment of the IRD priority claims (estimated amount of $1,437,946). d) Next, in payment of Customs priority claim (estimated amount of $49,247). e) Next, in payment of any other unpaid employee claims which arise in respect of wages and salary (including bonuses and commissions), payments in lieu of notice, redundancy and leave entitlements (estimated amount of $173,859 – refer to section 5.2.2.1 of this report). f) The remaining balance to meet the claims of other unsecured creditors (estimated amount available for distribution of $599,313).

10.2.2 Related Parties

All RGR Group companies will not be entitled to prove or participate in respect of intercompany loans.

10.2.3 Realisation Fund

A second realisation fund will also be created, from the balance of funds on hand after the $3,142,000 contribution to the deed fund. Further Group asset realisations will be collected in this fund.

Funds in the realisation fund shall be distributed in the following order:

. First, in payment of any unpaid Administrators‟ costs, expenses and remuneration. . Next, in payment of the Deed Administrators‟ costs, expenses and remuneration. . The remaining balance to PEP.

Section 239AU(3) Report by Administrators 26 July 2011 Page 40

10.2.4 Estimated return to creditors

Based on our analysis of creditors we believe that these contributions will result in a dividend of approximately three cents to unsecured creditors. Creditors should be aware however that these estimates are entirely dependent on the value of claims ultimately received.

10.2.5 Process for the adjudication and payment of creditor claims

The general process for the adjudication and payment of claims, in simplified form, following the joint watershed meeting on 4 August 2911 will be as follows:

. The Deed Administrators will write to creditors and give public notice calling for formal proofs of debt to be submitted within a 21 day period; . Creditors wishing to make a claim must provide their proof of debt and any documents that evidence of substantiate their claim within that period; . The Deed Administrators will then either admit or reject a claim in whole or in part, and give notice to the creditor if their claim is rejected; . Anyone who fails to submit their claim to the Deed Administrators before the date set in the notice will be excluded from the benefit of any distribution; . If a creditor wishes to appeal the decision of the Deed Administrators they may, within 20 working days of the decision, apply to Court to appeal the Deed Administrators‟ decision; and . Following finalisation of the adjudication process, the Deed Administrators will declare dividends to creditors from the Creditor Fund in the order as outlined in section 10.2.1 above. This is likely to result in a dividend to unsecured creditors in October 2011.

10.2.6 Other details

. The Voluntary Administrators are proposed to be the Deed Administrators. . A similar proposal (based on a three cent dividend to unsecured creditors) is being made to the creditors of the Australian Group companies. . At the expiry of the DOCA the Companies will be de-registered.

Section 239AU(3) Report by Administrators 26 July 2011 Page 41

11. Creditors’ options, dividend estimates and cost estimates

Pursuant to Section 239AU(3)(b) of the Act, we are required to provide creditors with a statement setting out our opinion on whether it is in the creditors‟ interests for the:

. Administration to end; . Companies to be wound up; . Companies to execute a DOCA.

In forming our opinion, it is necessary to consider an estimate of the dividend creditors might expect, and the likely costs, under each option.

11.1 Administration to end

Creditors may resolve that the administration should end if it appears the Companies are solvent or, for some other reason, control of the Companies should revert to their directors.

Based on the assets realised to date and our preliminary investigations and analysis of the Group‟s financial information, the Companies are now insolvent. There appears to be no valid commercial reason why control of the Companies should revert to its directors. Therefore, our opinion is that it is not in the creditors‟ interest for the administration to end.

11.2 Winding up of Company

11.2.1 Estimated position

We have set out below the estimated financial position for the Group in the event that the Companies are to be wound up:

Estimated Future Total Estimated Actual to $’000 Realisations Realisations 30-Jun-11 High Low High Low Estimated Group Realisations 56,465 (11,093) (16,980) 45,372 39,485 Estimated Australian Group Realisations1 18,920 11,180 Amount Owing to Secured Creditor (153,320) (153,320) Estimated Shortfall to Secured Creditor 56,465 (11,093) (16,980) (89,028) (102,655) Note 1: Estimated Australian Group realisations have been converted to NZ$.

The estimated return to the secured creditor from the Group realisations to date is approximately $35 million, of which $29.9 million has been distributed to the secured creditor prior to 30 June 2011. A further $5.1 million will be distributed to the secured creditor prior to the joint watershed meeting.

11.2.2 Return to unsecured creditors

The above analysis provides a high and low estimate of the realisable value of the assets for the Companies in the event that they are wound up. The high estimate reflects circumstances where there is greater certainty as to realisations. The low estimate reflects the opposite.

Under either scenario, there would be no return to unsecured creditors due to:

. Insufficient assets have been realised to discharge the amount owed to the secured creditor; . The extent of employee priority claims.

Section 239AU(3) Report by Administrators 26 July 2011 Page 42

11.3 Execution of proposed DOCA

We have set out in section 11.4 the estimated financial position of the Companies in the Group in the event that the Companies execute the proposed DOCA.

The dividend calculations are an estimate only and may change due to the following: . Total final amount claimed by creditors once proofs of debt are received and adjudicated upon; . Changes in the estimated costs of the DOCA resulting from issues not presently known; and . Compliance with all provisions of the DOCA.

11.4 Comparison of proposed DOCA to liquidation

Below is a comparison of the estimated returns under the proposed DOCA and liquidation for the Group:

DOCA Liquidation $'000 High Low High Low Net Realisations 45,372 39,485 45,372 39,485 Less: Preferential & Secured Claims Preferential IRD Claim for PAYE (lien over cash) (371) (371) (371) (371) Secured Creditor (converted to NZ$) (153,320) (153,320) (153,320) (153,320) Net Realisations Available for Creditors - - - - Add: DOCA Fund 3,142 3,142 - - Add: Amount available for Priority Creditors in Liquidation - - 1,979 - Less: Deed Administrators' Costs & Expenses (390) (390) - - Amount Available for Priority & Unsecured Creditors 2,752 2,752 1,979 - Payments to Creditors: Priority Employee Claims (492) (492) (492) - Priority IRD & Customs Claims (1,487) (1,487) (1,487) - Unsecured Employee Claims (174) (174) - - Unsecured Creditor Claims (599) (599) - - Total Payment to Creditors (2,752) (2,752) (1,979) -

In the event of liquidation, on a high case recoveries may be available to meet priority creditors.

DOCA Liquidation $’000 High Low High Low Est. funds available before costs 3,142 3,142 1,979 - Deed Administration Costs & Expenses (390) (390) - - Est. amount available for Priority & Unsecured creditors 2,752 2,752 1,979 Nil Est. return to priority employees (cents in the $) 100c 100c 100c Nil Est. return to priority IRD / Customs (cents in the $) 100c 100c 100c Nil Est. return to unsecured employees (cents in the $) 100c 100c Nil Nil Est. return to unsecured creditors (cents in the $) 3c 3c Nil Nil

The estimated return to unsecured creditors of three cents is based on the Administrators‟ current estimate of the value of unsecured claims.

In the event of liquidation, the liquidators‟ costs and expenses are likely to be payable from recoveries available to the secured creditor. Section 239AU(3) Report by Administrators 26 July 2011 Page 43

12. Administrators’ opinion

As stated in section 11.1 above, the option of the administrations ending is clearly not viable. The only remaining options available to creditors are to wind up the Companies or accept the proposed DOCA.

From the calculations set out in section 11.2 and 11.3 of this report, we estimate that the return to creditors under the proposed DOCA exceeds the estimated return under a winding up of the Companies. The proposed DOCA is likely to provide a better return to creditors because:

. Funds of $3.14 million to be provided by PEP under the proposed DOCA would not otherwise be available to creditors in a winding up of the Companies; . In a liquidation intercompany claims will rank for dividend purposes; . If the Companies were placed into liquidation, there are currently no identifiable recoveries from voidable or other antecedent transactions referred to in section 9 of this report. Based on the above, it is our opinion that it is in the creditors‟ interests to resolve that the Companies enter into the proposed DOCA.

13. Administrators’ remuneration report

I enclose as Annexure 4 the Administrators‟ Remuneration Report for period 17 February 2011 to 30 June 2011.

14. Further queries

The Administrators will advise creditors in writing, if practicable, of any additional matter that comes to their attention after the dispatch of this report that, in the Administrators‟ view, is material to creditors‟ deliberations.

In the meantime, should creditors have any queries, please do not hesitate to contact Liana Fasanella by email at [email protected] or by telephone on +61 2 9286 9853.

DATED this 26th day of July 2011

S Sherman, J Melluish and R Eagle Administrators

Section 239AU(3) Report by Administrators 26 July 2011 Page 44

Annexure 1

Notice of Meeting

[Please see notice behind cover letter]

Annexure 2

Appointment of Proxy, Postal Vote & Proof of Debt Forms

[Please see forms behind cover letter]

Annexure 3

Administrators’ Receipts & Payments to 30 June 2011

Annexure 3 - Administrators' Receipts and Payments to 30 June 2011

NZ$ Whitcoulls Borders NZ REDgroup Online Calendar Club NZ WGL Retail Group Total

TRADING RECEIPTS

Book Token Redemptions 259,760.00 71,768.00 - - - 331,528.00 Reimbursement of Expenses 1,787,503.00 976,314.00 - - - 2,763,817.00 Rent Refunds 153,625.69 - - - - 153,625.69 Rental Income - 38,078.62 - - - 38,078.62 Sales - Bennetts 3,237,654.62 - - - - 3,237,654.62 Sales - Borders - 6,291,938.39 - - - 6,291,938.39 Sales - New Zealand Lotto 4,483,066.57 - - - - 4,483,066.57 Sales - REDgroup Online Ltd - - 705,650.75 - - 705,650.75 Sales - Whitcoulls 43,078,304.35 - - - - 43,078,304.35 Sundry Income - 12,824.58 - - - 12,824.58 Sundry Refunds 31,622.52 - - - - 31,622.52

TOTAL TRADING RECEIPTS 53,031,536.75 7,390,923.59 705,650.75 - - 61,128,111.09

TRADING PAYMENTS

3rd Party Gift Card Redemptions (8,898.93) - - - - (8,898.93) Customer Refunds (16,963.24) - - - - (16,963.24) EPAY (phone cards) (1,083,231.25) - - - - (1,083,231.25) Group GST - Post-Appointment (1,420,388.44) - - - - (1,420,388.44) Insurance (131,902.48) - - - - (131,902.48) Merchant Services Fees (134,976.81) (17,256.39) - - - (152,233.20) New Zealand Lotto (4,001,262.31) - - - - (4,001,262.31) Other Store Costs (444,775.00) (1,500.00) - - - (446,275.00) PAYE and other associated deductions - Post-Appointment (1,550,109.83) (43,333.28) - - - (1,593,443.11) Payments of Commercial Necessity (691,876.47) - - - - (691,876.47) Refund of Sales to Bennetts Purchaser (27,774.57) - - - - (27,774.57) Rent and other Property Related Costs (8,665,770.56) (1,681,787.58) - (29,976.68) - (10,377,534.82) Retention of Title Payments (3,266,884.79) (319,304.58) - - - (3,586,189.37) Trade and Expense Creditors (17,393,944.88) (1,469,239.70) - (55,172.77) - (18,918,357.35) Trade and Expenses Creditors - REDgroup Online Pty Limited - - (73,083.46) - - (73,083.46) Transfer to REDgroup Online Pty Limited - - (615,038.41) - - (615,038.41) Wages and Salaries (6,986,786.54) (671,990.52) - (34,352.36) - (7,693,129.42)

TOTAL TRADING PAYMENTS (45,825,546.10) (4,204,412.05) (688,121.87) (119,501.81) - (50,837,581.83)

NET TRADING RECEIPTS AND 7,205,990.65 3,186,511.54 17,528.88 (119,501.81) - 10,290,529.26 PAYMENTS

NON-TRADING RECEIPTS

Asset Realisations 44,896,557.93 2,156,679.00 - - - 47,053,236.93 Bank Interest Received 309,607.69 28,852.58 760.09 248.25 - 339,468.61 Cash at Bank - 17 February 2011 3,185,023.02 287,540.91 13,076.48 93,690.62 - 3,579,331.03 FX Gains 159.09 - - - - 159.09

Intercompany Loan - RED Group NZ entities 3,199,978.00 311,113.45 11,182.82 30,813.96 14,370.31 3,567,458.53 Intercompany Loan - RED Group Australian entities - - - 44,354.77 - 44,354.77 Pre-Appointment Debtor Recoveries 525,830.00 71,712.00 - - - 597,542.00

TOTAL NON-TRADING RECEIPTS 52,117,155.73 2,855,897.94 25,019.39 169,107.60 14,370.31 55,181,550.96

NON-TRADING PAYMENTS

Administrators' Disbursements (52.63) (3,674.96) (802.30) (358.64) (568.76) (5,457.29) Administrators' Remuneration (1,870,188.13) (307,438.48) (10,380.52) (30,455.32) (13,801.55) (2,232,264.00) Bank Charges (44,765.84) (5.00) - (4,388.88) - (49,159.72) Distributions to Secured Creditor (29,876,680.00) - - - - (29,876,680.00)

Intercompany Loan - RED Group NZ entities (367,480.53) (3,199,978.00) - - - (3,567,458.53) Other Professional Costs (774,040.03) - - - - (774,040.03) PAYE and other associated deductions - Pre-Appointment (364,051.27) - - (6,661.71) - (370,712.98)

TOTAL NON-TRADING PAYMENTS (33,297,258.43) (3,511,096.45) (11,182.82) (41,864.55) (14,370.31) (36,875,772.55)

NET NON-TRADING RECEIPTS AND 18,819,897.30 (655,198.51) 13,836.57 127,243.05 - 18,305,778.41 PAYMENTS

CASH AT BANK - 30 JUNE 2011 26,025,887.95 2,531,313.03 31,365.45 7,741.24 - 28,596,307.67

Annexure 4

Administrators’ Remuneration Report

WGL RETAIL HOLDINGS LIMITED CN 120265 WGL REALISATIONS LIMITED (FORMERLY WHITCOULLS GROUP LIMITED) CN 131870 B REALISATIONS (NZ) LIMITED (FORMERLY BORDERS NEW ZEALAND LIMITED) CN 944114 CALENDAR CLUB NEW ZEALAND LIMITED CN 944144 REDGROUP ONLINE LIMITED CN 2223528

(ALL ADMINISTRATORS APPOINTED) (“THE COMPANIES”)

REMUNERATION REPORT

I, Ryan Reginald EAGLE, have undertaken a proper assessment of this remuneration claim for our appointment as Voluntary Administrators of the Companies in accordance with the law and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed in the conduct of the administration.

Our Remuneration Report takes the following format.

Part A

A1 Schedule of hourly rates (in Australian dollars) and general guide to staff experience

A2 Tasks undertaken by the Administrators and remuneration calculation for the period 17 February 2011 to 30 June 2011

A3 Remuneration drawn to date

Part B

B1 Administrators‟ disbursements

B2 Summary of Receipts and Payments for the period 17 February 2011 to 30 June 2011

B3 Other creditor information on remuneration

The Remuneration Report must be read in conjunction with the report to creditors dated 26 July 2011.

PART A

A1 SCHEDULE OF HOURLY RATES & GENERAL GUIDE TO STAFF EXPERIENCE

Rate Title Experience (A$)

Partner 625 The Partner/Appointee is a registered liquidator and member of the ICAA and, Principal 570 generally, the IPA, bringing specialist skills to the administration or insolvency task. For specific experience and other details of the appointee/s, please visit our website at www.ferrierhodgson.com Director 520 Generally, minimum of 12 years experience at least 2 years of which is to be at Manager level. University degree; member of the ICAA and, generally, the IPA, with deep knowledge and lengthy experience in relevant insolvency legislation and issues. Senior Manager 470 Generally, more than 7 years experience with at least 2 years as a Manager. University degree; member of the ICAA and, generally, the IPA; very strong knowledge of relevant insolvency legislation and issues. Manager 390 Generally, 5-7 years chartered accounting or insolvency management experience. University degree; member of the ICAA and generally, the IPA; sound knowledge of relevant insolvency legislation and issues. Supervisor 330 Generally, 4-6 years chartered accounting or insolvency management experience. University degree; member of the ICAA; completing IPAA Insolvency Education Program. Good knowledge of relevant insolvency legislation and issues. Senior 1 295 Generally, 2-4 years chartered accounting or insolvency management experience. University degree; completing the ICAA‟s Chartered Accountants‟ program. Good knowledge of basic insolvency legislation and issues. Senior 2 260 Generally, 2-3 years chartered accounting or insolvency management experience. University degree, ICAA‟s Chartered Accountants‟ program commenced. Intermediate 1 235 0 to 2 years experience. Has completed or substantially completed a degree in finance/accounting. Under supervision, takes direction from senior staff in completing administrative tasks. Intermediate 2 195 0 – 1 year‟s experience. Undertaking a degree part-time in finance/accounting. Under supervision, takes direction from senior staff in completing more complex administrative tasks. Junior 155 0 – 1 year‟s experience. Undertaking a degree part-time in finance/accounting. Under supervision, takes directions from senior staff in completing administrative tasks. Senior Secretary 190 Appropriate skills including machine usage. Computer 125 Appropriate skills including machine usage. Operator Typist 100 Appropriate skills including machine usage. Notes: 1. The hourly rates are in Australian dollars and are exclusive of GST. 2. ICAA – Institute of Chartered Accountants in Australia 3. IPA – Insolvency Practitioners Association of Australia 4. The guide to staff experience is intended only as a general guide to the qualifications and experience of our staff engaged in the administration. Staff may be engaged under a classification that we consider appropriate for their experience. 5. Time is recorded and charged in six-minute increments. 6. Rates are subject to change from time to time. The hourly rates reflect the total cost of providing professional services and should not be compared to an hourly rate. See Part B1 for details of disbursements.

A2. Tasks undertaken by the Administrators and remuneration calculation for the period 17 February 2011 to 30 June 2011 with respect to the Companies

General Includes: Task Area Description . Review due diligence information on Whitcoulls‟ and Borders NZ sale program. . Preparation of sale information/strategy, discussions with potential sale agents on engagement letters. . Discussions with sale advisors. . Undertake tasks relevant to the Travel sale including the negotiation of sale, settlement of the stores at Auckland, Christchurch and Rotorua Airports, correspondence with lawyers and the purchaser. Sale of business Assets . Continuing to progress the Wellington Airport Travel sale, including as a going negotiations with the purchaser and landlords. concern A$690,206.50 . Undertake tasks relevant to the Bennett‟s sale including negotiation [NZ$892,662.01] of sale, settlement, correspondence with lawyers and the purchaser and transition tasks. . Progressing Whitcoulls and Borders sale including communications with the purchaser, analysis of stock and executing sales agreement. . Undertake tasks relevant to the Whitcoulls‟s sale including negotiation of sale, settlement, correspondence with lawyers and the purchaser and transition tasks. . Review of stock on hand records. Stock . Review of stock position across all entities. . Summarise and assess retention of title claims. Leasing . Correspondence and meetings with landlords regarding the administration period. . Review capital expenditure requirements for premises requiring building works.

. Correspondence and meetings with landlords, particularly regarding the sales of Whitcoulls, Travel and Bennetts. . Execute documentation required by landlords to facilitate transfers/assignments/surrenders of leases in relation to the sales. . Ongoing discussions with numerous creditors and suppliers to ensure continued supply. . Collate proxy and proof of debt forms. Enquiries . Correspondence with unsecured creditors. . Correspondence with committee of creditors. . Hold meetings with committee of creditors. . Preparation of meeting notices, proxies and advertisements for the first meeting of creditors. . Forward notice of meeting to all known creditors . Preparation of meeting file, including agenda, certificate of postage, Creditors attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting for the first Meeting of A$306,263.50 meeting of creditors. Creditors [NZ$396,098.55] . Preparation of minutes of meetings for the first meeting of creditors. . Preparation of meeting notices, proxies and advertisements for the watershed meeting of creditors . Preparation of report to creditors pursuant to section 239AU(3), including summarising results of investigations into the affairs of the Companies and analysis of DOCA versus Liquidation sceanarios. . Calculate exposure to ROT claims. . Review and respond to creditor and supplier emails regarding ROT Retention of Title and PPSR. Claims . Discuss claims with legal advisors. . Analysis of ROT claims against stock listing and accounts payable. . Review and respond to ROT questionnaires received.

General Includes: Task Area Description . Various circular to employees. Employee . Preparation and distribution of employee FAQ documents. enquiries . Holding staff meetings. . Reviewing employee files and companies‟ books and records. . Liaising with payroll staff to obtain details of employees for the Calculation of purposes of calculating their entitlements. Employees entitlements . Calculating pre-appointment employee entitlements.

. Preparing correspondence to employees regarding their entitlements. A$117,489.50 . Liaising with solicitors regarding entitlements. [NZ$151,952.23] Other employee . Preparation for meeting with National Distribution Union and Unite issues Union. . Meetings with National Distribution Union and Unite union. . Preparation of application to extend 14 day period in respect of employment agreements. . Collating information and calculation of employee entitlements. . Discuss employee issues with legal advisors. . Implementing trade on processes, including correspondence with employees, landlords and suppliers. . Continued correspondence with employees, landlords and suppliers. . Meetings with management to discuss strategy and position of the business. . Review of store performance, capital expenditure requirements and trading results. . Dealing with insurance matters. . Review SAP purchase order processes. Trade On . Review store operating issues. Define new systems and processes Management for purchasing, petty cash and customer orders. . Review OH&S policies and procedures. . Dealing with media enquiries. Trade On . Dealing with Christchurch earthquake store and employee issues. . Liaising with VMI suppliers. A$1,152,082.50 . Dealing with ROT claims. [NZ$1,490,018.25] . Implementation of gift card policy. . Correspondence with Inland Revenue and Customs. . Various discussions and correspondence with key suppliers. . Tasks associated with transitioning businesses to new purchasers. . Meetings with Accounts Payable and Payroll regarding timing of payments going forward. Processing . Review of administrator‟s banking processes. receipts and . Review of cash receipts. payments . Preparation of Adminimistrators‟ account of receipts and payments summaries for the Companies in relation tot he administration period. . Meeting with financial controller and senior management team to Budgeting & discuss operating performance of business brands. financial . Preparing short term profit and loss and cash flow forecasts. reporting . Meetings with senior management team to review and update budgets and cash flow forecasts.

General Includes: Task Area Description . Investigation of the secured creditor security position and history of involvement with the Companies. . Analysis of the Statements of Company‟s Position submitted to the Administrators by the directors of the Companies, including Conducting comparison to Administrators‟ estimated realisable values for the investigation assets and liabilities contained in those statements. . Investigation of the directors‟ statements in relation to the events (please note that leading up to the appointment of the Administrators and prepare some of the commentary for inclusion in the report to creditors. Investigation investigation . Review of Companies‟ bank accounts and financial statements to

work undertaken prepare an analysis of the trading history and financial position of the A$70,987.50 has been Companies. [NZ$91,809.98] included in the . Analysis of Companies‟ solvency for the purposes of identifying any

creditors section voidable transactions, if any. above under . Investigation of potential voidable transactions. preparation of . Investigation of creditor balances and creditor claims against the report to Companies. creditors) . Analysis of the current and future asset realisations of the Administrators for the purposes of comparing the DOCA and Liquidation scenarios. Prepare recommendations to creditors for the purposes of voting at the watershed meeting. . Forensic imaging of IT systems. Dividend . Tasks to be commenced in August 2011 when proofs of debt are Processing called for and received for the purposes of paying dividends to A$0.00 proofs of debt creditors. [NZ$0.00] . Creditor notifications – circulars to creditors, suppliers and other Correspondence correspondences. . Regular bank account reconciliations. Administration Bank account . Preparation of receipts and payments summaries for the Companies. administration . Discussions and correspondences with Westpac in relation to the A$155,492.00 Corporate Online banking facility. [NZ$201,101.85] Companies . Attend to statutory lodgements relating to the appointment of the House reporting Administrators to the Companies. IRD & other . Meetings with the IRD. statutory . Obtain legal advice on IRD and Customs‟ position. reporting . Preparation for creditors‟ meeting. Total Remuneration for the Companies A$2,492,521.50 [NZ$3,223,642.86]

A summary of the above remuneration attributed to the individual Companies is as follows:

Company $A $NZ1 WGL Retail Holdings Limited 10,227.00 13,226.85 WGL Realisations Limited (formerly Whitcoulls Group Limited) 2,130,129.00 2,754,951.22 B Realisations (NZ) Limited (formerly Borders New Zeland Limited) 321,906.00 416,329.40 Calendar Club New Zealand Limited 22,567.50 29,187.13 REDgroup Online Limited 7,692.00 9,948.26 Total 2,492,521.50 3,223,642.86

Note 1: Converted at $A1.00 = NZ$1.29

Details of the remuneration attributed to the individual Companies are contained in the following pages.

WGL Realisations Limited (formerly Whitcoulls Group Limited) (Administrators Appointed) Remuneration Report for the period 17 February 2011 to 30 June 2011

Employee Position Rate Total Task Area (ex GST) Assets Creditors Employees Trade On Investigation Dividend Administration $/Hour Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $

Sherman, Steven, J. Partner 625.00 31.5 19,687.50 1.5 937.50 0.0 0.00 0.0 0.00 30.0 18,750.00 0.0 0.00 0.0 0.00 0.0 0.00 Melluish, John Partner 625.00 31.3 19,562.50 3.3 2,062.50 2.5 1,562.50 1.2 750.00 18.3 11,437.50 1.0 625.00 0.0 0.00 5.0 3,125.00 Eagle, Ryan Partner 625.00 712.1 445,062.50 368.6 230,375.00 55.5 34,687.50 10.0 6,250.00 264.4 165,250.00 11.6 7,250.00 0.0 0.00 2.0 1,250.00 Duggan, Robyn Principal 570.00 6.9 3,933.00 0.0 0.00 0.5 285.00 0.0 0.00 0.8 456.00 0.4 228.00 0.0 0.00 5.2 2,964.00 Carruthers, Denis Director 520.00 64.0 33,280.00 54.5 28,340.00 0.0 0.00 0.0 0.00 7.5 3,900.00 0.0 0.00 0.0 0.00 2.0 1,040.00 Cave, Michael Director 520.00 44.0 22,880.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 44.0 22,880.00 Gill, Colin, A. Director 520.00 21.5 11,180.00 0.0 0.00 1.1 572.00 0.0 0.00 18.4 9,568.00 2.0 1,040.00 0.0 0.00 0.0 0.00 Vassiliou , Peter Director 520.00 426.4 221,728.00 150.8 78,416.00 0.0 0.00 0.0 0.00 275.6 143,312.00 0.0 0.00 0.0 0.00 0.0 0.00 Grimshaw, Bradley Manager 1 470.00 6.8 3,196.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 6.8 3,196.00 Psomas, Maria Manager 1 470.00 60.5 28,435.00 1.8 846.00 55.1 25,897.00 0.0 0.00 2.6 1,222.00 0.0 0.00 0.0 0.00 1.0 470.00 Quinlan, Phil Manager 1 470.00 311.0 146,170.00 5.0 2,350.00 55.1 25,897.00 33.3 15,651.00 148.3 69,701.00 0.0 0.00 0.0 0.00 69.3 32,571.00 Dampney, James Manager 1 470.00 583.1 274,057.00 93.4 43,898.00 141.9 66,693.00 8.3 3,901.00 310.1 145,747.00 0.0 0.00 0.0 0.00 29.4 13,818.00 Khoury, Michael Manager 1 470.00 2.3 1,081.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 2.3 1,081.00 0.0 0.00 0.0 0.00 Haig, Fiona Manager 2 390.00 7.0 2,730.00 0.3 117.00 0.7 273.00 0.0 0.00 5.6 2,184.00 0.0 0.00 0.0 0.00 0.4 156.00 Phillips, Amanda Manager 2 390.00 538.2 209,898.00 506.5 197,535.00 12.1 4,719.00 0.0 0.00 2.2 858.00 0.8 312.00 0.0 0.00 16.6 6,474.00 Yu, Stephen Manager 2 390.00 73.5 28,665.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 73.5 28,665.00 0.0 0.00 0.0 0.00 Saini, Anmol Supervisor 330.00 3.7 1,221.00 0.0 0.00 0.1 33.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 3.6 1,188.00 Fernandez, Fred Supervisor 330.00 26.0 8,580.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 26.0 8,580.00 0.0 0.00 0.0 0.00 Yang, David Supervisor 330.00 399.6 131,868.00 73.3 24,189.00 28.0 9,240.00 161.2 53,196.00 86.5 28,545.00 35.3 11,649.00 0.0 0.00 15.3 5,049.00 Hosking, Mathew Senior 1 295.00 555.0 163,725.00 13.4 3,953.00 161.1 47,524.50 0.0 0.00 339.1 100,034.50 0.0 0.00 0.0 0.00 41.4 12,213.00 Piastra, Nicolas Senior 1 295.00 58.7 17,316.50 0.0 0.00 0.0 0.00 0.0 0.00 58.7 17,316.50 0.0 0.00 0.0 0.00 0.0 0.00 Rogers, Rhys Senior 1 295.00 686.6 202,547.00 39.0 11,505.00 0.0 0.00 63.3 18,673.50 584.3 172,368.50 0.0 0.00 0.0 0.00 0.0 0.00 McNeill, Chris Senior 2 260.00 369.7 96,122.00 29.1 7,566.00 24.1 6,266.00 7.8 2,028.00 266.3 69,238.00 0.0 0.00 0.0 0.00 42.4 11,024.00 Zemancheff , Amy Senior 2 260.00 55.4 14,404.00 6.6 1,716.00 45.3 11,778.00 0.0 0.00 2.8 728.00 0.0 0.00 0.0 0.00 0.7 182.00 Corcoran, Sean Intermediate 1 235.00 3.0 705.00 0.0 0.00 3.0 705.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 Davies, Courtney Intermediate 1 235.00 8.1 1,903.50 6.6 1,551.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 1.5 352.50 Wong, Gregory Intermediate 1 235.00 21.3 5,005.50 0.0 0.00 0.0 0.00 14.1 3,313.50 0.0 0.00 0.0 0.00 0.0 0.00 7.2 1,692.00 Fasanella, Liana Intermediate 2 195.00 2.5 487.50 0.0 0.00 2.1 409.50 0.0 0.00 0.0 0.00 0.1 19.50 0.0 0.00 0.3 58.50 Priest, Billy Intermediate 2 195.00 37.2 7,254.00 9.2 1,794.00 5.7 1,111.50 6.2 1,209.00 4.1 799.50 0.0 0.00 0.0 0.00 12.0 2,340.00 McCreesh, Brendan Intermediate 2 195.00 2.8 546.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 2.8 546.00 0.0 0.00 0.0 0.00 Holland, Rachael Intermediate 2 195.00 18.8 3,666.00 0.0 0.00 18.7 3,646.50 0.1 19.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 Lewis, Amanda Senior Secretary 190.00 12.2 2,318.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 12.2 2,318.00 Crewe-Brown, Ryan Junior 155.00 2.9 449.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 2.9 449.50 Snowden, Nicholas Junior 155.00 3.0 465.00 0.0 0.00 3.0 465.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 Total 5,186.6 2,130,129.00 1,362.9 637,151.00 615.6 241,765.00 305.5 104,991.50 2,425.6 961,415.50 155.8 59,995.50 0.0 0.00 321.2 124,810.50

Note: A$2,130,120.00 equates to NZ$2,754,951.20 when converted at $A1.00 = NZ$1.29

B Realisations (NZ) Limited (formerly Borders New Zealand Limited) (Administrators Appointed) Remuneration Report for the period 17 February 2011 to 30 June 2011

Employee Position Rate Total Task Area (ex GST) Assets Creditors Employees Trade On Investigation Dividend Administration $/Hour Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $

Sherman, Steven, J. Partner 625.00 2.5 1,562.50 2.0 1,250.00 0.0 0.00 0.0 0.00 0.5 312.50 0.0 0.00 0.0 0.00 0.0 0.00 Melluish, John Partner 625.00 13.2 8,250.00 0.0 0.00 0.0 0.00 0.0 0.00 13.2 8,250.00 0.0 0.00 0.0 0.00 0.0 0.00 Eagle, Ryan Partner 625.00 109.9 68,687.50 41.8 26,125.00 5.0 3,125.00 8.0 5,000.00 49.1 30,687.50 6.0 3,750.00 0.0 0.00 0.0 0.00 Duggan, Robyn Principal 570.00 5.7 3,249.00 0.0 0.00 0.3 171.00 0.0 0.00 0.8 456.00 0.4 228.00 0.0 0.00 4.2 2,394.00 Carruthers, Denis Director 520.00 6.5 3,380.00 6.5 3,380.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 Vassiliou , Peter Director 520.00 39.4 20,488.00 0.0 0.00 0.0 0.00 0.0 0.00 39.4 20,488.00 0.0 0.00 0.0 0.00 0.0 0.00 Dampney, James Manager 1 470.00 148.7 69,889.00 2.7 1,269.00 35.5 16,685.00 0.0 0.00 104.2 48,974.00 0.0 0.00 0.0 0.00 6.3 2,961.00 Grimshaw, Bradley Manager 1 470.00 1.5 705.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 1.5 705.00 Psomas, Maria Manager 1 470.00 27.3 12,831.00 1.0 470.00 23.7 11,139.00 0.0 0.00 2.0 940.00 0.0 0.00 0.0 0.00 0.6 282.00 Quinlan, Phil Manager 1 470.00 61.2 28,764.00 2.3 1,081.00 12.0 5,640.00 7.6 3,572.00 32.0 15,040.00 0.0 0.00 0.0 0.00 7.3 3,431.00 Haig, Fiona Manager 2 390.00 10.1 3,939.00 0.8 312.00 1.3 507.00 0.0 0.00 6.2 2,418.00 0.0 0.00 0.0 0.00 1.8 702.00 Phillips, Amanda Manager 2 390.00 34.1 13,299.00 28.5 11,115.00 0.2 78.00 3.0 1,170.00 2.0 780.00 0.0 0.00 0.0 0.00 0.4 156.00 Saini, Anmol Supervisor 330.00 3.9 1,287.00 0.0 0.00 0.1 33.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 3.8 1,254.00 Yang, David Supervisor 330.00 15.5 5,115.00 6.2 2,046.00 0.0 0.00 4.0 1,320.00 0.0 0.00 4.5 1,485.00 0.0 0.00 0.8 264.00 Waller, Mark Supervisor 330.00 1.4 462.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 1.4 462.00 Hosking, Mathew Senior 1 295.00 156.7 46,226.50 2.6 767.00 35.7 10,531.50 1.0 295.00 110.8 32,686.00 0.0 0.00 0.0 0.00 6.6 1,947.00 Rogers, Rhys Senior 1 295.00 54.9 16,195.50 0.0 0.00 0.0 0.00 1.4 413.00 53.5 15,782.50 0.0 0.00 0.0 0.00 0.0 0.00 Kyriakides, Christos Senior 1 295.00 2.0 590.00 0.0 0.00 2.0 590.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 Piastra, Nicolas Senior 1 295.00 4.3 1,268.50 0.0 0.00 0.0 0.00 0.0 0.00 4.3 1,268.50 0.0 0.00 0.0 0.00 0.0 0.00 Zemancheff , Amy Senior 2 260.00 32.2 8,372.00 5.3 1,378.00 26.2 6,812.00 0.0 0.00 0.7 182.00 0.0 0.00 0.0 0.00 0.0 0.00 McNeill, Chris Senior 2 260.00 15.0 3,900.00 0.5 130.00 0.8 208.00 2.8 728.00 8.3 2,158.00 0.0 0.00 0.0 0.00 2.6 676.00 Bachir, Jennifer Intermediate 1 235.00 1.3 305.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 1.3 305.50 Corcoran, Sean Intermediate 1 235.00 4.4 1,034.00 0.0 0.00 3.9 916.50 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.5 117.50 Polochacz, Nicholas Intermediate 2 195.00 1.2 234.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 1.2 234.00 Holland, Rachael Intermediate 2 195.00 9.6 1,872.00 0.0 0.00 9.6 1,872.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 Total 762.5 321,906.00 100.2 49,323.00 156.3 58,308.00 27.8 12,498.00 427.0 180,423.00 10.9 5,463.00 0.0 0.00 40.3 15,891.00

Note: A$321,906.00 equates to NZ$416,329.40 when converted at $A1.00 = NZ$1.29

WGL Retail Holdings Limited (Administrators Appointed) Remuneration Report for the period 17 February 2011 to 30 June 2011

Employee Position Rate Total Task Area (ex GST) Assets Creditors Employees Trade On Investigation Dividend Administration $/Hour Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $

Duggan, Robyn Principal 570.00 5.3 3,021.00 0.3 171.00 0.8 456.00 0.4 228.00 3.8 2,166.00 Phillips, Amanda Manager 2 390.00 6.0 2,340.00 6.0 2,340.00 Saini, Anmol Supervisor 330.00 3.8 1,254.00 0.1 33.00 3.7 1,221.00 Yang, David Supervisor 330.00 7.3 2,409.00 2.0 660.00 4.5 1,485.00 0.8 264.00 Waller, Mark Supervisor 330.00 1.4 462.00 1.4 462.00 Polochacz, Nicholas Intermediate 2 195.00 1.2 234.00 1.2 234.00 McCreesh, Brendan Intermediate 2 195.00 2.6 507.00 2.0 390.00 0.6 117.00 Total 27.6 10,227.00 2.0 660.00 6.4 2,544.00 - - 0.8 456.00 6.9 2,103.00 - - 11.5 4,464.00

Note: A$10,227.00 equates to NZ$13,226.85 when converted at $A1.00 = NZ$1.29

REDgroup Online Limited (Administrators Appointed) Remuneration Report for the period 17 February 2011 to 30 June 2011

Employee Position Rate Total Task Area (ex GST) Assets Creditors Employees Trade On Investigation Dividend Administration $/Hour Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $

Duggan, Robyn Principal 570.00 5.3 3,021.00 0.3 171.00 0.8 456.00 0.4 228.00 3.8 2,166.00 Saini, Anmol Supervisor 330.00 3.8 1,254.00 0.1 33.00 3.7 1,221.00 Yang, David Supervisor 330.00 7.3 2,409.00 2.0 660.00 4.5 1,485.00 0.8 264.00 Waller, Mark Supervisor 330.00 1.4 462.00 1.4 462.00 Polochacz, Nicholas Intermediate 2 195.00 2.8 546.00 1.0 195.00 1.8 351.00 Total 20.6 7,692.00 2.0 660.00 1.4 399.00 - - 0.8 456.00 4.9 1,713.00 - - 11.5 4,464.00

Note: A$7,692.00 equates to NZ$9,948.30 when converted at $A1.00 = NZ$1.29

Calendar Club New Zealand Limited (Administrators Appointed) Remuneration Report for the period 17 February 2011 to 30 June 2011

Employee Position Rate Total Task Area (ex GST) Assets Creditors Employees Trade On Investigation Dividend Administration $/Hour Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $ Hours $

Melluish, John Partner 625.00 2.0 1,250.00 1.5 937.50 0.5 312.50 Shady, James Partner 625.00 2.7 1,539.00 2.5 1,425.00 0.2 114.00 Duggan, Robyn Principal 570.00 5.3 3,021.00 0.3 171.00 0.8 456.00 0.4 228.00 3.8 2,166.00 Dang, Yvan Manager 1 470.00 4.1 1,927.00 0.4 188.00 0.3 141.00 3.4 1,598.00 Haig, Fiona Manager 2 390.00 9.9 3,861.00 1.8 702.00 0.3 117.00 6.6 2,574.00 1.2 468.00 Saini, Anmol Supervisor 330.00 3.7 1,221.00 0.1 33.00 3.6 1,188.00 Yang, David Supervisor 330.00 5.3 1,749.00 4.5 1,485.00 0.8 264.00 Waller, Mark Supervisor 330.00 1.4 462.00 1.4 462.00 Cheng, Siobhan Supervisor 330.00 3.2 1,056.00 2.0 660.00 0.4 132.00 0.8 264.00 Mazzone, David Intermediate 1 235.00 7.5 1,762.50 7.5 1,762.50 Lee, Gladys Intermediate 2 195.00 6.0 1,170.00 0.5 97.50 2.7 526.50 1.2 234.00 1.6 312.00 Lieu, Henry Intermediate 2 195.00 11.6 2,262.00 3.0 585.00 8.4 1,638.00 0.2 39.00 Polochacz, Nicholas Intermediate 2 195.00 6.6 1,287.00 5.2 1,014.00 1.4 273.00 Total 69.3 22,567.50 5.2 2,412.50 13.9 3,247.50 - - 29.8 9,332.00 4.9 1,713.00 - - 15.5 5,862.50 Note: A$22,567.50 equates to NZ$29,187.13 when converted at $A1.00 = NZ$1.29

A3 Remuneration drawn to 30 June 2011

The Administrators have drawn fees relating to the period 17 February 2011 to 30 April 2011 as follows:

Company $A $NZ1 WGL Retail Holdings Limited 10,227.00 13,226.85 WGL Realisations Limited (formerly Whitcoulls Group Limited) 1,385,816.00 1,792,311.86 B Realisations (NZ) Limited (formerly Borders New Zeland Limited) 227,813.00 294,636.48 Calendar Club New Zealand Limited 22,567.50 29,187.13 REDgroup Online Limited 7,629.00 9,866.78 Total 1,654,052.50 2,139,229.10

Note 1: Converted at $A1.00 = NZ$1.29

PART B

B1 Administrators’ Disbursements

Disbursements are divided into three types D1, D2 and D3.

D1 Disbursements are all externally provided professional services and are recovered at cost. An example of a D1 disbursement is legal fees.

D2 Disbursements are externally provided non professional costs such as travel, accommodation and search fees. D2 disbursements are recovered at cost.

D3 Disbursements are internally provided non professional costs such as photocopying and document storage. D3 disbursements are charged at cost except for photocopying, printing and telephone calls which are charged at a rate which is intended to recoup both variable and fixed costs. The relevant rates are set out below.

Disbursements Charges (Excluding GST) AUD Advertising At cost Couriers At cost DX (Document Exchange) Postage equivalent or less Mileage Reimbursement $0.67 per kilometre Photocopying (colour) $0.50 per page Photocopying (mono) $0.20 per page Photocopying (outsourced) At cost Printing (colour) $0.50 per page Printing (mono) $0.20 per page Printing (outsourced) At cost Postage At cost Searches At cost Storage and Storage Transit At cost Telephone Calls At cost

Disbursements incurred to date are shown in the Summary of Receipts and Payments. Creditor approval for the payment of disbursements is not required. However, the Administrators must account to creditors. Creditors have the right to question the incurring of disbursements and can challenge disbursements in court.

B2 Summary of Receipts and Payments

Please refer to Annexure 4 of the Report to Creditors for the summary of Receipts and Payments for the period 17 February 2011 to 30 June 2011.

B3 Other creditor information on remuneration

The partners of Ferrier Hodgson are, generally, members of the Insolvency Practitioners Association of Australia. Ferrier Hodgson follows the IPA Code of Professional Practice. A copy of the Code of Professional Practice may be found on the IPA website at www.ipaa.com.au

Dated 26th July 2011

Ryan Eagle Administrator

Annexure 5

Proposed Terms of DOCA

WGL Retail Holdings Limited (Company No. 120265) and four other companies (Administrators Appointed) (“WGL”)

Deed of Company Arrangement Proposal

POOLED DOCA PROPOSAL

SUMMARY OF PROPOSAL

1. Pooling

The proposal is for a combined WGL deed of company arrangement (“DOCA”) that has the effect of pooling certain funds for Creditors of WGL, and pooling and extinguishing the Claims of creditors of WGL (subject to the terms of the DOCA).

2. Asset Realisations

The Deed Administrators shall, with the consent of the Secured Creditors, proceed with recovery of all Asset Realisations. It is acknowledged that but for the DOCA the Secured Creditors would be entitled to payment of their full entitlements from the Asset Realisations, to the extent of Charged Assets.

3. Deed Funds

The DOCA shall create two Deed Funds, namely the:

(a) Creditor Fund – being the fund for Preferential Creditors and Admitted General Creditors; and

(b) Realisation Fund – being the proceeds of Asset Realisations.

4. Creation of Deed Funds

PEP Fund IV shall contribute to the Deed Administrators the Creditor Contribution to create the Creditor Fund.

The Realisation Fund shall consist of the Asset Realisations, from time to time.

5. Distribution of the Deed Funds

The Deed Administrators shall make distributions from the Creditor Fund in the following order:

(a) first, in payment of the Deed Administrators' Remuneration (up to an amount in total which does not exceed NZ$390,000 (including GST)) and associated costs and expenses;

(b) next, in payment of the Eligible Employee Creditors, up to an amount which does not exceed the statutory cap of NZ$18,700 per Eligible Employee Creditor;

(c) next, in payment of claims under the Layby Sales Act 1971 which fall within the scope of clause 1(3) of Schedule 7 to the Act;

(d) next, in payment of the IRD and Collector of Customs (who shall each be paid in full for any claims which fall within the scope of clause 1(2) and (5) of Schedule 7 to the Act);

(e) next, in payment of any Creditors who are employees in payment of Admitted Claims which arise in respect of wages and salary (including bonuses and commissions), payments in lieu of notice, redundancy and leave entitlements, but which remain unpaid under (b) or which do not fall within the scope of clause 1(2) of Schedule 7 to the Act; and

(f) next, in payment of Admitted General Creditors, in proportion to their Admitted Claims.

6. The Deed Administrators shall make distributions from the Realisation Fund in the following order:

(a) first, in payment of any unpaid Voluntary Administrators' costs, expenses, liabilities (including contractual obligations arising from sales of WGL assets) and remuneration;

(b) next, in payment of the Realisation Remuneration; and

The Deed Administrators may make more than one distribution or payment to PEP Fund IV or in respect of the Realisation Remuneration.

7. Related Parties

The Claims of the Related Parties are extinguished by the DOCA and they are not entitled to participate in the Deed Funds. Related Parties shall not be entitled to prove or participate in respect of Intercompany Loans and Accounts.

8. Secured Creditors

Except for the Realisation Fund payable to PEP Fund IV under the DOCA, the Secured Creditors are not entitled to participate in the Deed Funds.

PEP Fund IV will release its security to the extent necessary to allow the sale of the assets of WGL and the distribution of the Deed Funds as set out above.

9. Control and effectuation

The Deed Administrators shall maintain the control and stewardship of all WGL companies during the DOCA.

Upon effectuation of the DOCA, the Deed Administrators shall seek the deregistration of each WGL company and the directors of each WGL company must provide all reasonable assistance to the Deed Administrators in doing so.

DEED OF COMPANY ARRANGEMENT – PRINCIPAL TERMS

1. The Arrangement

1.1 Deed Administrators

The administrators of the DOCA will be Steven Sherman, John Melluish and Ryan Eagle of Ferrier Hodgson.

1.2 Parties

The DOCA will be entered into by the following parties:

(a) WGL (that is all of the entities defined as WGL); and

(b) the Deed Administrators.

1.3 Admissible Claims date

The day on or before which Claims must have arisen if they are to be admissible to participate in the DOCA is the Appointment Date (17 February 2011).

1.4 Asset Realisations

The Deed Administrators shall, with the consent of the Secured Creditors, proceed with recovery of all Asset Realisations. It is acknowledged that but for the DOCA, the Secured Creditors would be entitled to payment of their full entitlements from the Asset Realisations, to the extent of Charged Assets.

1.5 Deed Funds

The DOCA shall create two Deed Funds, namely the:

(a) Creditor Fund - being the fund for Preferential Creditors and Admitted General Creditors; and

(b) Realisation Fund – being the proceeds of Asset Realisations.

1.6 Creation of Deed Funds

Creditor Fund

PEP Fund IV shall contribute to the Deed Administrators the Creditor Contribution to create the Creditor Fund.

The Realisation Fund shall consist of the Asset Realisations, from time to time.

1.7 Distribution of Deed Funds

The Deed Administrators shall make distributions from the Creditor Fund in the following order:

(a) first, in payment of the Deed Administrators' Remuneration (up to an amount in total which does not exceed NZ$390,000 (including GST)) and associated costs and expenses;

(b) next, in payment of the Eligible Employee Creditors, up to an amount which does not exceed the statutory cap of NZ$18,700 per Eligible Employee Creditor;

(c) next, in payment of claims under the Layby Sales Act 1971 which fall within the scope of clause 1(3) of Schedule 7 to the Act;

(d) next, in payment of the IRD and Collector of Customs (who shall each be paid in full for any claims which fall within the scope of clause 1(2) and (5) of Schedule 7 to the Act) ;

(f) next, in payment of Admitted General Creditors, in proportion to their Admitted Claims.

The Deed Administrators shall make distributions from the Realisation Fund in the following order:

(a) first, in payment of any unpaid Voluntary Administrators' costs, expenses, liabilities (including contractual obligations arising from sales of WGL assets) and remuneration;

(b) next, in payment of the Realisation Remuneration; and

The Deed Administrators may make more than one distribution or payment to PEP Fund IV or in respect of the Realisation Remuneration.

1.8 Excluded Creditors

The Related Parties are excluded from having an Admitted Claim but their Claims against any WGL entity are released, discharged and extinguished.

1.9 Indemnities

The Voluntary Administrators shall have the benefit of the Administrators' Indemnity.

The Deed Administrators shall have the benefit of a lien over the Realisation Fund, and over the Asset Realisations, in respect of Realisation Remuneration.

1.10 Secured Creditors

The Secured Creditors shall not be entitled to participate in the distribution of the Creditor Fund but PEP Fund IV shall, subject to the Voluntary Administrators' costs, expenses and remuneration and the Realisation Remuneration, be entitled to the net proceeds of the Realisation Fund. After distribution of the Realisation Fund their claims will then, and only then, be extinguished by the DOCA.

1.11 Control and effectuation

The Deed Administrators:

 shall maintain control and stewardship of each WGL company during the DOCA; and

 shall seek the deregistration of each WGL company upon effectuation of the DOCA, and the directors of each WGL company must provide all reasonable assistance to the Deed Administrators in doing so.

2. Release of Creditor Claims

2.1. All Unsecured Claims Extinguished

Upon the Final Creditor Dividend, all Claims of Creditors (other than Secured Creditors), but including the Related Parties against WGL, will be released, discharged and extinguished, notwithstanding that the DOCA may not then have been effectuated, or all Asset Realisations effected.

3. Prescribed Provisions: the prescribed provisions in the Companies (Voluntary Administration) Regulations 2007 shall be excluded, unless expressly incorporated into the DOCA.

4. Key Definitions

Act means the Companies Act 1993 (NZ).

Administrators’ Indemnity means the statutory and contractual indemnity to be granted in favour of the Voluntary Administrators over the Realisation Fund in respect of any unpaid Voluntary Administrators' costs, expenses, liabilities and remuneration.

Admitted Claim means a Claim that is admitted in accordance with the terms of the DOCA.

Admitted General Creditor means any person, other than a Preferential Creditor, who has an Admitted Claim against WGL.

Appointment Date means 17 February 2011.

Asset Realisations means the realisation and reduction to money or moneys worth of all assets of any nature of WGL (including Charged Assets), including Current Realisations but excluding Intercompany Loans and Accounts and the Creditor Contribution.

Charged Assets means any assets of WGL of any nature over which the Secured Creditors have any security.

Claim means any debt, claim or liability, present or future, certain or contingent, ascertained or sounding in damages, being a debt, claim or liability against or of WGL, the circumstances giving rise to which occurred on or before the Appointment Date.

Creditor means a person who has a Claim against WGL excluding the Secured Creditors and any of the Related Parties.

Creditor Contribution means the sum of $3,142,000.

Current Realisations means all cash under the control of the Voluntary Administrators (including held in blocked accounts under undertakings to the Secured Creditors) as at the date of the execution of the DOCA.

Deed Administrators mean:

(a) Steven Sherman, John Melluish and Ryan Eagle of Ferrier Hodgson as administrators of the DOCA; and

(b) any replacement administrator(s) of the DOCA.

Deed Administrators’ Remuneration means such remuneration as is approved in accordance with the Act for the Deed Administrators creating and administering the DOCA, and administering and distributing the Creditor Fund.

Deed Funds means the funds created in accordance with the terms of the DOCA, being the Creditor Fund and the Realisation Fund.

DOCA means the pooling deed of company arrangement executed in accordance with this proposal, binding each WGL company.

Eligible Employee Creditors means an employee who is entitled to have a claim paid in accordance with clause 1(2) of Schedule 7 of the Act.

Final Creditor Dividend means the final payment or distribution from the Creditor Fund.

Intercompany Loans and Accounts means the debits and credits or other dealings, whether or not by way of loan or journal entry, as between or amongst the Related Parties or any of them.

IRD means the Inland Revenue Department, and is a reference to the New Zealand Government Department referred to in section 5 of the Tax Administration Act 1994 (NZ).

PEP Fund IV means PEP Advisory IV Pty Limited.

Preferential Creditors means any person entitled to be paid in priority to all other unsecured creditors in accordance with Schedule 7 of the Act, with such modifications as are necessary, as if the references to "winding up" are replaced with "deed of company arrangement".

Realisation Remuneration means the costs, expenses, liabilities and remuneration of the Deed Administrators in carrying out Realisation Tasks as may be agreed by the Deed Administrators and PEP Fund IV, which is in addition to the Deed Administrators' Remuneration.

Realisation Tasks means the duties and obligations of the Deed Administrators in acting as Deed Administrators other than creating and administering the DOCA and administering and distributing Creditor Fund, including recovering and attending to the Asset Realisations, any consequential post completion and administrative tasks, and winding down and deregistering the WGL companies.

Related Parties means each of:

(a) WGL

(b) REDgroup Retail Pty Limited ACN 108 801 127

(d) Spine Newco Pty Limited ACN 127 667 314

(e) Borders Australia Pty Limited ACN 082 194 287

(f) REDgroup Online Pty Limited ACN 136 187 972

(g) A & R Australia Holdings Pty Limited ACN 098 003 984

(h) Angus & Robertson Pty Limited ACN 060 424 124

(i) REDgroup Retail Administrative Services Pty Limited ACN 138 956 377

(j) Angus & Robertson Bookworld Calendar Club Pty Limited ACN 074 372 277

(k) Whitcoulls Group Holdings Pty Limited ACN 108 801 994.

Secured Creditors means the Senior Financiers and PEP Fund IV.

Senior Financiers means:

(a) Pacific Equity Partners Fund IV, LP of which the general partner is Pacific Equity Partners IV GP (Jersey) Limited, Registered No. 96268; and

(b) Pacific Equity Partners Fund (IV) (Australasia) Pty Ltd ACN 124 839 989 in its capacity as trustee of the Pacific Equity Partners Fund (IV) (Australasia) Unit Trust.

Voluntary Administrators means Steven Sherman, John Melluish and Ryan Eagle in their capacities as voluntary administrators of WGL.

WGL means each of and collectively:

(a) WGL Retail Holdings Limited (Company No. 120265);

(b) Calendar Club New Zealand Limited (Company No. 826130);

(d) WGL Realisations Limited (Company No. 131870) (formerly Whitcoulls Group Limited);

(e) B Realisations (NZ) Limited (Company No. 944114) (formerly Borders New Zealand Limited).

Appendix A - RGR Group Company Functions & Activities

(1) The Group

Company CN Functions 1 WGL Retail Holdings Limited 120265 Holding company of the Group 2 REDgroup Online Limited 2223528 Non-operating entity; receives payments on behalf of REDGroup online Pty Limited 3 B Realisations (NZ) Ltd (Formerly Borders New Zealand Ltd) 944114 Retailer of books, stationery, general merchandise, DVDs, CDs, games, toys and gifts across New Zealand 4 WGL Realisations Ltd (Formerly Whitcoulls Group Ltd) 131870 Retailer of books, stationery, general merchandise, DVDs, CDs, games, toys and gifts across New Zealand 5 Calendar Club New Zealand 826130 Specialty retailer of calendars and gifts

(2) The Australian Group

Company ACN Functions 1 REDgroup Retail Pty Limited 108 801 127 Holding company of the Group 2 REDgroup Online Pty Limited 136 187 972 The sale of books, DVDs, CDs, E-content and E-readers online via the Borders, Angus & Robertson and Whitcoulls websites 3 A & R Australia Holdings Pty Limited 098 003 984 Holding company of Angus & Robertson Pty Limited 4 REDgroup Retail Administrative Services Pty Limited 138 956 377 Provides corporate management services supporting the Group's business divisions 5 Angus & Robertson Bookworld Calendar Club Pty Limited 074 372 277 Specialty seasonal retailer of calendars and gifts 6 Whitcoulls Group Holdings Pty Limited 108 801 994 Holding company of the New Zealand subsidiaries 7 Spine Holdco Pty Limited 128 016 991 Holding company of Spine Newco Pty Limited, Borders Australia Pty limited and Borders Singapore 8 Spine Newco Pty Limited 127 667 314 Holding company of Borders Australia Pty Limited and Borders Singapore 9 Borders Australia Pty Limited 082 194 287 Retailer of books, stationery, general merchandise, DVDs, CDs, games, toys and gifts across Australia 10 Angus & Robertson Pty Limited 060 424 124 Retailer of books, stationery, general merchandise, DVDs, CDs, games, toys and gifts across Australia 2

Appendix B - RGR Group Statutory Information

(1) The Group

Incorporation Company Name Registered Office Directors Shareholder Name Type Shares Number Shares Date WGL Retail Holdings Limited 30/10/1883 Level 5, 131 Queen Street, Tony Ristevski Whitcoulls Group Holdings Pty Limited N/A 17,371,997 AUCKLAND Peter Thomas Kalan Samual Olukayode Shosanya REDgroup Online Limited 27/03/2009 Level 5, 131 Queen Street, Tony Ristevski WGL Retail Holdings Limited N/A 1 AUCKLAND James Peter Webber Peter Thomas Kalan Samual Olukayode Shosanya B Realisations (NZ) Limited 16/02/1999 Level 5, 131 Queen Street, Tony Ristevski WGL Retail Holdings Limited N/A 14,765,100 (formerly Borders New Zealand Limited) AUCKLAND Peter Thomas Kalan Samual Olukayode Shosanya WGL Realisations Limited 8/04/1936 C/- Deloitte Touche Tomatsu Tony Ristevski WGL Retail Holdings Limited N/A 3,000 (formerly Whitcoulls Group Limited) Level 8, Deloitte House, Peter Thomas Kalan 8 Nelson Street Samual Olukayode Shosanya AUCKLAND Calendar Club New Zealand 6/09/1996 Level 5, 131 Queen Street, Tony Ristevski WGL Retail Holdings Limited N/A 100 AUCKLAND James Peter Webber Peter Thomas Kalan Samual Olukayode Shosanya

(2) The Australian Group

Incorporation Company Name Registered Office Directors Shareholder Name Type Shares Number Shares Date REDgroup Retail Pty Limited 21/04/2004 Level 19, 8 Exhibition Street, Tony Ristevski Mypersuall Pty Limited, Paul Donovan, Tony Ristevski, Dianne Laws, David MPSA 7,022,715 MELBOURNE Rickard Jan Rolf Gardell Fenlon, Peter Kalan, Ian Gauder, Jacinta Caithness, Craig Hemer, Sam MPSB 7,022,715 Steven Anthony Cain Shosanya, Paul Lennen, Paul Brabin, Francesco Lorfino, Sugar Joy Investments MPSC 4,012,366 Simon David Pillar Pty Limited, Timothy Murphy, Paul O'Sullivan, Patrick Gaskin, Andrew Howard, MPSD 1,069,965 Joseph Anthony Brown ACA 5 Investments Pty Limited, Gillian Kingston, Briony Lewis MPSE 1,069,965 David Bolitho, James Cody, Stana Pezic, Star Holdings Limited, James Webber, ORD 61,645,616 David Fenlon, Paul Donovan, Tony Ristevski, Dianne Laws Pacific Equity Partners Fund II (NQP) L.P, Pacific Equity Partners Fund IV L.P, Pacific Equity Partners Fund IV (Australasia) Pty Limited, Eagle Coinvestment Pty Limited, PEP Co-Investment Pty Limited, Pacific Equity Partners Supplementary Fund II L.P, Pacific Equity Partners Fund II L.P, PEP Investment Pty Limited, Pacific Equity Partners Fund II (Australasia) Pty Limited, Mypersuall Pty Limited REDgroup Online Pty Limited 26/03/2009 Tony Ristevski REDgroup Retail Pty Limited ORD 1 James Peter Webber A & R Australia Holdings Pty Limited 30/08/2001 Tony Ristevski REDgroup Retail Pty Limited ORD 16,382,353 REDgroup Retail Administrative Services 19/08/2009 Tony Ristevski REDgroup Retail Pty Limited ORD 108,801,127 Pty Limited Angus & Robertson Bookworld Calendar 9/08/1996 Tony Ristevski REDgroup Retail Pty Limited A 25 Club Pty Limited James Peter Webber B 25 C 50 Whitcoulls Group Holdings Pty Limited 21/04/2004 Tony Ristevski REDgroup Retail Pty Limited ORD 1 Spine Holdco Pty Limited 16/10/2007 Tony Ristevski REDgroup Retail Pty Limited ORD 1,000 Spine Newco Pty Limited 21/09/2007 Tony Ristevski Spine Holdco Pty Limited ORD 1 Borders Australia Pty Limited 17/04/1998 Tony Ristevski Spine Newco Pty Limited ORD 62,752,957 Angus & Robertson Pty Limited 10/06/1993 Tony Ristevski A & R Australia Holdings Pty Limited ORD 42,150,002 3

Appendix C - RGR Group Structure

REDgroup Retail Pty Limited

51%

Supanews Retail Spine Newco Angus & Robertson Pty Limited Pty Limited Pty Limited

WGL Retail Holdings Limited

Borders Australia Borders Pte Limited Pty Limited

Borders New Whitcoulls Group REDgroup Online Calendar Club Zealand Limited Limited Limited New Zealand Limited

Appendix D – Group Historical Profit & Loss

Below is an analysis of the historical trading performance of the Group and individual businesses, exclusive of costs relating to head office/ shared services. Please note that the Financial Year is from 1 September to 28 August.

(1) Total Group

Group FY08 FY09 FY10 LTM Dec-10 $'000 Sales 243,329 228,559 208,524 201,187 Cost of Sales (146,203) (132,013) (122,870) (120,615) Sold Margin 97,125 96,546 85,654 80,573 Sold Margin % 39.9% 42.2% 41.1% 40.0% Supplier Income 4,128 4,113 4,052 4,181 Supplier Co-op 944 1,207 1,402 1,077 Net Sold Contribution 102,198 101,866 91,108 85,830 Net Sold Contribution % 42.0% 44.6% 43.7% 42.7% Shrinkage (1,385) (1,352) (2,071) (1,994) Writeoffs (761) (872) (844) (764) Loyalty (1,973) (1,649) (832) (523) Gift Card Breakage (346) (752) 512 677 Other Income 2,559 (60) 3,325 3,823 Gross Margin 100,292 97,182 91,199 87,050 Gross Margin % 41.2% 42.5% 43.7% 43.3% Salaries (25,910) (24,589) (23,843) (23,654) Bonus 1 (2) (138) (41) Superannuation (5) (51) (191) (197) Other Salary Costs (352) (335) (312) (318) Staff Costs (26,266) (24,977) (24,484) (24,210) Rent (22,753) (24,548) (24,130) (24,149) Straight Line Rent Adjustment (837) (705) (501) (472) Landlord Contributions 1,047 286 241 237 Rates (633) (674) (918) (930) Repairs (387) (447) (545) (612) Utilities (1,595) (1,546) (1,587) (1,575) Cleaning (330) (326) (474) (499) Other Occupation Costs (4,367) (4,497) (3,707) (3,640) Occupation Costs (29,855) (32,458) (31,621) (31,639) Indirect Costs (5,012) (4,826) (4,265) (4,403) Other Expenses 0 0 (613) (708) Profit/(Loss) on Disposal of Businesses/ 0 0 (66) (55) Assets EBITDA from Trading Activities 39,159 34,922 30,457 26,388

Notes:

1. Group performance includes Casual Leasing Business; however there was no trading activity in FY10.

2. Group performance excludes the Online Business, which is reported separately below.

(2) Group Unallocated Head Office, Distribution and Marketing Costs

Following is a breakdown of the unallocated head office, distribution and marketing costs incurred in New Zealand, which are not included in the individual business profit and loss statements. Please note that some of these costs relate to the Australian businesses, and an independent third party has estimated that these costs could be reduced by at least $1.8m for FY10 if the Australian and New Zealand head offices were completely separated.

Group FY08 FY09 FY10 LTM Dec-10 $'000 Salaries (6,084) (5,905) (6,846) (7,182) Bonus 255 (15) (20) 0 Superannuation (7) (22) (82) (83) Other Salary Costs (804) (967) (372) (398) Staff Costs (6,640) (6,909) (7,320) (7,664) Rent (169) (204) (214) (214) Landlord Contributions 98 0 0 0 Repairs (21) (30) (22) (17) Utilities (28) (30) (35) (35) Cleaning (45) (52) (50) (56) Other Occupation Costs (41) (100) (137) (138) Occupation Costs (206) (416) (458) (459) Bank Charges (10) (9) (3) (2) Professional Fees (344) (446) (260) (237) Meetings & Conferences (136) (39) (17) (23) Travel & Entertainment (397) (248) (437) (456) Recruitment (320) (178) (238) (190) Motor Vehicles (141) (95) (97) (104) Insurance (50) (127) 0 0 Postage, Printing & Stationery (120) (165) (102) (106) Telecommunications (76) (74) (196) (117) Training (97) (50) (38) (60) IT Expenses (2,963) (3,535) (3,181) (3,356) Other Indirect Costs (1,960) (612) (815) (993) Indirect Costs (6,615) (5,576) (5,383) (5,646) Marketing (Advertising) Costs (6,736) (6,882) (4,811) (5,559) Distribution Centre Costs (2,964) (3,081) (3,319) (3,278) EBITDA from Trading Activities (23,160) (22,865) (21,291) (22,607)

Notes:

1. Other Indirect Costs – FY08 includes a restructuring cost of $1.2m

(3) Whitcoulls Retail

Whitcoulls Retail FY08 FY09 FY10 LTM Dec-10 NZD $'000 Sales 167,105 154,708 145,425 139,794 Cost of Sales (98,574) (87,245) (85,391) (83,307) Sold Margin 68,532 67,463 60,033 56,487 Sold Margin % 41.0% 43.6% 41.3% 40.4% Supplier Income 3,706 3,667 3,621 3,779 Supplier Co-op 688 795 1,223 968 Net Sold Contribution 72,926 71,925 64,878 61,234 Net Sold Contribution % 43.6% 46.6% 44.6% 43.8% Shrinkage (984) (1,153) (1,134) (1,075) Writeoffs (350) (331) (173) (170) Loyalty (1,973) (1,649) (1,025) (716) Gift Card Breakage (346) (752) 474 554 Other Income 1,459 288 2,166 2,293 Gross Margin 70,732 68,328 65,185 62,119 Gross Margin % 42.2% 44.1% 44.8% 44.4% Salaries (18,565) (17,382) (16,992) (16,781) Bonus 18 (2) (129) (29) Superannuation (4) (44) (129) (135) Other Salary Costs (278) (268) (235) (243) Staff Costs (18,829) (17,697) (17,486) (17,187) Rent (15,045) (16,128) (16,004) (16,021) Straight Line Rent Adjustment 0 (130) (106) (123) Landlord Contributions 926 145 101 104 Rates (604) (647) (634) (633) Repairs (291) (317) (330) (392) Utilities (1,054) (1,036) (1,039) (1,038) Cleaning (306) (305) (277) (280) Other Occupation Costs (3,770) (3,758) (3,605) (3,558) Occupation Costs (20,145) (22,176) (21,894) (21,941) Indirect Costs (3,131) (3,381) (2,899) (2,953) Profit/(Loss) on Disposal of Businesses/ 0 0 (55) (55) Assets EBITDA from Trading Activities 28,627 25,074 22,851 19,983

Notes:

1. Other Income – FY08 includes a one off release in the provision for obsolescence ($705k); FY09 includes a $548k expense relating to an additional provision for trade creditors; FY10 includes a release of provision for trade creditors of $1.6m and a Vendor Managed Inventory (“VMI”) magazine margin adjustment of $398k. Similarly LTM Dec-10 had the same one off adjustments.

A summary of the Other Income one-off items are as follows: LTM FY08 FY09 FY10 Dec-10 Other Income 1,459 288 2,166 2,293 One-off Adjustment Obsolescence - re-classification to integration costs (702) Inc/(Dec) in provision for Trade Creditors 548 (1,650) (1,650) VMI magazine margin error 398 398 Normalised Other Income 757 836 914 1,041

2. Gift card breakage – includes one off cost adjustments in FY08 ($560k) and FY09 ($1.341m)

3. Loyalty – treatment of reward vouchers was changed from end of Nov-09. This has resulted in a sold margin impact of $992k in FY10 and $1,339k in LTM Dec-10. 7

4. Straight Line Rent Adjustment – this represents an adjustment for the fixed % increase of rent over the term of the lease.

5. Indirect Costs – includes bank charges; professional fees; travel & entertainment; recruitment; insurance; postage, printing & stationery; freight costs; security and credit card commission.

(4) Whitcoulls Travel

Whitcoulls Travel FY08 FY09 FY10 LTM Dec-10 NZD $'000 Sales 26,437 25,802 25,390 24,974 Cost of Sales (15,919) (15,128) (14,667) (14,486) Sold Margin 10,518 10,674 10,723 10,488 Sold Margin % 39.8% 41.4% 42.2% 42.0% Supplier Income 72 123 126 178 Net Sold Contribution 10,590 10,796 10,849 10,666 Net Sold Contribution % 40.1% 41.8% 42.7% 42.7% Shrinkage (2) (202) (72) (68) Writeoffs (14) (10) (5) (4) Loyalty 0 0 0 0 Gift Card Breakage 0 0 0 0 Other Income 295 244 184 205 Gross Margin 10,869 10,828 10,956 10,798 Gross Margin % 41.1% 42.0% 43.2% 43.2% Salaries (2,172) (2,097) (2,412) (2,522) Bonus (6) (0) (6) (6) Superannuation (0) (3) (19) (21) Other Salary Costs (45) (45) (34) (31) Staff Costs (2,223) (2,145) (2,471) (2,580) Rent (3,305) (3,689) (3,615) (3,431) Landlord Contributions 15 24 22 15 Rates (25) (23) (71) (66) Repairs (20) (22) (34) (45) Utilities (63) (76) (82) (84) Cleaning (13) (14) (11) (14) Other Occupation Costs (73) (91) (80) (79) Occupation Costs (3,483) (3,890) (3,872) (3,704) Indirect Costs (277) (275) (344) (403) EBITDA from Trading Activities 4,886 4,519 4,269 4,111

Notes:

1. Other Income – FY09 includes $95k VMI magazine margin adjustments; FY10 and LTM Dec10 include $119k VMI Mag margin adjustment.

A summary of the Other Income one-off items are as follows: LTM FY08 FY09 FY10 Dec-10 Other Income 295 244 184 205 One-off Adjustment VMI magazine margin error 96 119 119 Normalised Other Income 295 340 303 324

2. Rent – LTM Dec10 includes a one off release of $111k relating to FY10 % rent wash-up.

3. Salaries – FY10 and LTM Dec10 includes one RSM’s salary. 8

4. Indirect costs – includes bank charges; professional fees; travel & entertainment; recruitment; insurance; postage, printing & stationery; freight costs; security and credit card commission. FY10 & LTM Dec10 include one off $100k security costs.

(5) Bennetts

Bennetts FY08 FY09 FY10 LTM Dec-10 NZD $'000 Sales 11,334 12,378 9,336 8,934 Cost of Sales (7,650) (8,049) (6,406) (6,067) Sold Margin 3,685 4,329 2,931 2,867 Sold Margin % 32.5% 35.0% 31.4% 32.1% Supplier Income 0 0 0 0 Supplier Co-op 0 0 0 0 Net Sold Contribution 3,685 4,329 2,931 2,867 Net Sold Contribution % 32.5% 35.0% 31.4% 32.1% Shrinkage (157) (159) (94) (91) Writeoffs (26) (257) (346) (349) Other Income (14) (20) (20) (21) Gross Margin 3,487 3,893 2,470 2,407 Gross Margin % 31.6% 31.5% 26.5% 26.9% Salaries (1,173) (1,201) (1,142) (1,101) Bonus (11) (0) (2) (7) Superannuation (0) (3) (10) (9) Other Salary Costs (29) (21) (23) (31) Staff Costs (1,213) (1,226) (1,176) (1,148) Rent (485) (648) (533) (521) Rates (4) (4) (4) (4) Repairs (5) (4) (9) (17) Utilities (31) (30) (29) (27) Cleaning (11) (7) (7) (6) Other Occupation Costs 0 (1) (2) (3) Occupation Costs (535) (696) (584) (577) Indirect Costs (318) (297) (291) (278) Profit/(Loss) on Disposal of Businesses/ 0 0 (11) 0 Assets EBITDA from Trading Activities 1,420 1,675 409 403

Notes:

1. Indirect Costs – includes bank charges; professional fees; travel & entertainment; recruitment; insurance; postage, printing & stationery; freight costs; security and credit card commission.

2. Sales – lower sales in FY10 & LTM Dec10 were the result of two store closures due to losing the tender at one campus site.

(6) Borders NZ

Borders FY08 FY09 FY10 LTM Dec-10 NZD $'000 Sales 38,452 35,672 28,373 27,486 Cost of Sales (24,061) (21,591) (16,406) (16,754) Sold Margin 14,391 14,081 11,967 10,731 Sold Margin % 37.4% 39.5% 43.2% 39.0% Supplier Income 350 323 305 224 Supplier Co-op 256 412 179 108 Net Sold Contribution 14,997 14,816 12,451 11,063 Net Sold Contribution % 39.0% 41.5% 43.9% 40.3% Shrinkage (242) 161 (770) (760) Writeoffs (371) (274) (320) (241) Gift Card Breakage 0 0 231 317 Other Income 820 (571) 995 1,347 Gross Margin 15,204 14,132 12,587 11,726 Gross Margin % 39.5% 39.6% 44.4% 42.7% Salaries (4,001) (3,909) (3,297) (3,250) Bonus 0 0 (2) 0 Superannuation 0 0 (33) (32) Other Salary Costs 0 0 (19) (13) Staff Costs (4,001) (3,909) (3,351) (3,295) Rent (3,919) (4,084) (3,978) (4,177) Straight Line Rent Adjustment (837) (575) (395) (349) Landlord Contributions 107 118 118 118 Rates 0 0 (208) (226) Repairs (71) (104) (172) (158) Utilities (448) (404) (437) (426) Cleaning 0 0 (179) (199) Other Occupation Costs (524) (646) (20) (0) Occupation Costs (5,692) (5,696) (5,271) (5,417) Indirect Costs (1,286) (873) (730) (769) Other Expenses 0 0 (613) (708) EBITDA from Trading Activities 4,226 3,654 2,928 1,891

Notes:

1. Shrinkage – FY09 includes a one off release of a $564k shrinkage accrual. FY10 and LTM Dec-10 include one off stock write off in the Distribution Centre of $330k.

2. Other Income – FY09 includes an increase of $759k in the provision for trade creditors, while FY10 and LTM Dec-10 include a release of $671k of the provision for trade creditors. LTM Dec-10 also includes a release of the provision in relation to the CD clearance of $473k. Detailed information is not available for FY08 (Borders was integrated into SAP in Apr-09).

A summary of the Other Income one-off items are as follows: LTM FY08 FY09 FY10 Dec-10 Other Income 820 (571) 995 1,347 One-off Adjustment Inc/(Dec) in provision for Trade Creditors 759 (671) (671) Release of provision for obsolescence - CD clearance negative margin) (473) Normalised Other Income 820 188 324 203

3. Rent – FY10 includes a $145k rent refund resulting from one of the stores not meeting the FY09 sales threshold. 10

4. Straight Line Rent Adjustment – this represents an adjustment for the fixed % increase of rent over the term of the lease.

5. Other Occupation Costs – FY08 and FY09 include utilities, rates and repair costs.

6. Indirect Costs – includes bank charges; professional fees; travel & entertainment; recruitment; insurance; postage, printing & stationery; freight costs; security and credit card commission.

(7) REDgroup Online Business

The Online Business is reported separately to the Group performance as follows:

Online Business FY09 FY10 LTM Dec-10 NZD $'000 Sales 40 1,217 1,591 Cost of Sales (16) (656) (871) Sold Margin 24 560 720 Sold Margin % 60.4% 46.1% 45.2% Supplier Income - - - Supplier Co-op - - - Net Sold Contribution 24 560 720 Net Sold Contribution % 60.4% 46.1% 45.2% Shrinkage 0 (1) Gross Margin 24 560 719 Gross Margin % 60.4% 46.1% 45.2% Staff Costs 0 (37) (70) Indirect Costs (19) (341) (404) Marketing Costs 0 (260) (298) EBITDA from Trading Activities 5 (77) (53)

Notes:

1. FY09 includes trading for Jul-08 and Aug-08 only.

Appendix E - Group Balance Sheets

Note: Financial Year is from 1 September to 28 August.

Whitcoulls Group Limited Borders New Zealand Limited $'000 FY09 FY10 Dec 10 $'000 FY09 FY10 Dec 10

Current Assets Current Assets Cash and Cash Equivilants 1,979 4,282 19,610 Cash and Cash Equivilants 762 835 1,187 Inventories 35,459 38,932 48,496 Inventories 13,641 12,054 10,860 Provision for Obsolescence (2,606) (6,092) (6,132) Provision for Obsolescence (783) (4,527) (3,167) Trade Debtors 2,207 2,016 2,962 Trade Debtors 172 124 164 Provision for Doubtful Debts (93) (85) (85) Provision for Doubtful Debts (50) (24) (26) Other Receivables 1,358 985 1,797 Other Receivables 55 95 105 Total Current Assets 38,303 40,038 66,648 Total Current Assets 13,796 8,558 9,123

Current Liabilities Current Liabilities Trade Creditors (22,345) (19,460) (39,628) Trade Creditors (3,566) (1,906) (5,424) Other Accrued Liabilities (10,540) (11,812) (15,269) Other Accrued Liabilities (4,861) (4,815) (5,383) Total Current Liabilities (32,885) (31,271) (54,897) Total Current Liabilities (8,427) (6,721) (10,807)

Working Capital 5,418 8,767 11,751 Working Capital 5,369 1,838 (1,684)

Non-Current Assets Non-Current Assets Plant and Equipment 9,762 14,004 14,738 Plant and Equipment 73 127 262 Deferred Tax Assets 3,008 3,008 3,684 Deferred Tax Assets 2,046 2,046 4,432 Total Non-current Assets 12,770 17,012 18,422 Total Non-current Assets 2,119 2,172 4,693

Non-Current Liabilities Non-Current Liabilities Provision for Tax 94 (22) (2,193) Provision for Tax 411 992 325 Intercompany Loans 16,104 8,942 8,562 Intercompany Loans (21,113) (18,707) (15,709) Total Non-current Liabilities 16,197 8,921 6,369 Total Non-current Liabilities (20,702) (17,715) (15,384)

Net Assets 34,386 34,699 36,543 Net Assets (13,214) (13,705) (12,375)

Appendix F - RGR Group Directors' Statements of Positions

(1) The Group

$'000 WGL Retail Whitcoulls Borders NZ

Book Value ERV Book Value ERV Book Value ERV Assets Cash 0 0 7,653 7,653 458 458 Trade Debtors 0 0 1,543 1,543 114 99 Intercompany Loans (Receivable) 20,042 20,042 15,352 0 4,557 0 Inventories 0 0 44,407 44,407 7,376 7,376 Plant, Property & Equipment 0 0 13,905 13,905 255 255 Other Assets 0 0 5,586 4,290 4,963 4,891 Intangible Assets 0 0 0 0 0 0 Investments in Subsidiaries 79,820 79,820 0 0 0 0

Total Assets 99,861 99,861 88,445 71,798 17,722 13,079

Liabilities Preferential Employee Entitlements 0 0 (1,939) (1,939) (228) (228) Secured Creditor (117,208) (117,208) (117,208) (117,208) (117,208) (117,208) Surplus/(Deficiency) after preferential and secured claims (17,346) (17,346) (30,702) (47,349) (99,713) (104,357)

Unsecured Trade Creditors (15,261) (15,261) (1,346) (1,346) Unsecured Intercompany Loans (Payable) (91,159) (91,159) (9,268) (9,268) (20,761) (20,761)

Net Deficiency (108,505) (108,505) (55,231) (71,878) (121,820) (126,464)

$'000 REDgroup Online Calendar Club NZ Group

Book Value ERV Book Value ERV Book Value ERV Assets Cash 0 0 94 94 8,205 8,205 Trade Debtors 0 0 0 0 1,656 1,642 Intercompany Loans (Receivable) 0 0 2,122 2,122 42,072 22,164 Inventories 0 0 176 176 51,959 51,959 Plant, Property & Equipment 0 0 61 61 14,221 14,221 Other Assets 0 0 24 24 10,573 9,205 Intangible Assets 0 0 0 0 0 0 Investments in Subsidiaries 0 0 0 0 0 0

Total Assets 0 0 2,477 2,477 128,686 107,395

Liabilities Preferential Employee Entitlements 0 0 0 0 (2,167) (2,167) Secured Creditor (117,208) (117,208) (117,208) (117,208) (117,208) (117,208) Surplus/(Deficiency) after preferential and secured claims (117,208) (117,208) (114,731) (114,731) 9,311 (11,979)

Unsecured Trade Creditors 0 0 (77) (77) (16,684) (16,684) Unsecured Intercompany Loans (Payable) 0 0 (636) (636) (121,824) (121,824)

Total Liabilities (117,208) (117,208) (117,921) (117,921) (257,883) (257,883)

Net Deficiency (117,208) (117,208) (115,444) (115,444) (129,197) (150,488)

Appendix F - RGR Group Directors' Statements of Positions

(2) The Australian Group

RedGroup Retail Angus & Robertson RedGroup Retail Pty RedGroup Online Pty A & R Australia Holdings A$'000 Administrative Srevices Pty Bookworld Calendar Club Limited Limited Pty Limited Limited Pty Limited Book Value ERV Book Value ERV Book Value ERV Book Value ERV Book Value ERV Assets Cash 9 9 308 308 0 0 1 1 85 85 Receivables (sundry debtors) 198,016 0 1,111 272 0 0 11,048 0 4,484 788 Inventories 0 0 810 810 0 0 0 0 373 373 Other Assets 76,095 1,041 (32) 0 48,606 0 50 0 141 9 Intangible Assets 0 0 1,545 1,545 0 0 0 0 0 0 Plant, Property & Equipment 223 0 0 0 0 0 3,322 3,322 1,160 1,160

Total Assets 274,343 1,049 3,742 2,935 48,606 0 14,420 3,322 6,244 2,415

Liabilities Preferential Employee Entitlements 550 550 366 366 0 0 3,488 3,488 0 0 Secured Creditor 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 Surplus/(Deficiency) after preferential and secured claims 156,585 (116,709) (113,832) (114,639) (68,602) (117,208) (106,277) (117,374) (110,964) (114,793)

Unsecured creditors (including intercompany loans) 128,285 128,285 5,496 5,496 9,080 221 13,725 13,725 2,366 2,366

Net Deficiency 28,300 (244,994) (119,328) (120,134) (77,681) (117,429) (120,002) (131,099) (113,330) (117,159)

Whitcoulls Group Holdings Borders Australia Pty Angus & Robertson Pty A$'000 Spine Holdco Pty Limited Spin Newco Pty Limited Australian Group Pty Limited Limited Limited

Book Value ERV Book Value ERV Book Value ERV Book Value ERV Book Value ERV Book Value ERV Assets Cash 0 0 0 0 1 1 3,049 3,049 3,879 3,879 7,331 7,331 Receivables (sundry debtors) 3,191 0 1 0 7,967 0 9,937 1,653 31,512 1,156 267,267 3,870 Inventories 0 0 0 0 0 0 45,617 45,617 34,105 34,105 80,904 80,904 Other Assets 0 0 1 0 84,902 0 5,551 1,056 5,139 1,208 220,454 3,314 Intangible Assets 0 0 0 0 0 0 0 0 0 0 1,545 1,545 Plant, Property, & Equipment 0 0 0 0 0 0 28,020 28,020 12,792 12,792 45,517 45,294

Total Assets 3,192 0 2 0 92,870 1 92,175 79,396 87,426 53,140 623,019 142,258

Liabilities Preferential Employee Entitlements 0 0 0 0 0 0 5,981 5,981 5,136 5,136 11,117 11,117 Secured Creditor 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 117,208 Surplus/(Deficiency) after preferential and secured claims (114,016) (117,208) (117,206) (117,208) (24,338) (117,207) (31,014) (43,793) (34,918) (69,204) 494,693 13,933

Unsecured creditors (including intercompany loans) 0 0 0 0 96,489 96,489 32,238 32,238 29,907 29,907 317,585 308,726

Net Deficiency (114,016) (117,208) (117,206) (117,208) (120,827) (213,696) (63,252) (76,031) (64,825) (99,112) 177,109 (294,794)