L.E.K. Consulting LLP 40 Grosvenor Place London, SW1X 7JL United Kingdom

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22 June 2016

Mr Martin Adams Clerk Business, Innovation and Skills Committee Business, Innovation and Skills Committee House of Commons Beijing London ­ Boston SW1A 0AA ­

Chennai Chicago Dear Mr Adams

London The Sale and Acquisition of BHS Los Angeles Thank you for your letter dated 17th June 2016. We have provided an overview Melbourne of our involvement in this matter, and then address your specific questions in turn. Milan Overview Mumbai Three Partners of L.E.K. – Iain Evans, Jonathan Simmons and myself, were Munich involved in BHS deal discussions with Paul Sutton and Dominic Chappell over a 20 month period from June 2013 to February 2015. Our interactions took place New Delhi through a series of meetings held at L.E.K’s London office, attended by one or New York both of these individuals. A meeting log is set out in an annex to this letter. We have no written notes or records from these meeting, as they were informal in Paris nature, with no documentation exchanged. They consisted mainly of verbal San Francisco ­ updates from Mr. Sutton and/or Mr. Chappell, but at least two of the three Partners referred to above were in attendance at each meeting. In particular, São Paulo responses to questions 1d), 1e), 1f) and 2c) are based on our joint recollection of Seoul discussions with Messrs Sutton or Chappell in relation to those subjects. We wish to emphasise that at no stage were we formally appointed to act as advisors Shanghai to Mr. Sutton, Mr. Chappell or Retail Acquisitions, nor did we receive any Singapore remuneration in connection with this deal.

Sydney 1. With regards to your relationship with Paul Sutton: Tokyo Wroclaw a. � How you first came in to contact with Mr Sutton.

Mr. Richard Briance of Edmund de Rothschild Ltd. in London telephoned Iain Evans (whom he knew previously) to say that we might receive a call from a party

L.E.K. Consulting LLP Registered in England No. OC300277

who wished to engage L.E.K. to assist with a business plan for a UK retail business. We understand that Mr. Sutton had approached Rothschild for assistance with a plan to acquire BHS. They suggested that he needed expert external help around the commercial viability of the proposal and recommended that he speak to L.E.K. b. � When you first came in to contact with Mr Sutton. Mr. Sutton attended a meeting at our offices on 28 June 2013. c. � Whether any third party was involved in that introduction, if so, who. See above. d. � How Mr Sutton explained his connection with the Green family. He claimed to have known the Green family for many years, having initially been involved in helping facilitate their move to Monaco. He said he knew Lady Tina Green well and that the Green and Sutton children “went to the same schools.” He did not imply he had a close relationship with Philip Green. He claimed he was viewed as a safe party for Sir Philip to do business with in the context of this sensitive proposal, based on his long relationship with Lady Green and the family. e. � The reasons given by Mr Sutton for Sir Philip Green’s interest in selling BHS. Mr. Sutton said that Sir Philip wanted to exit BHS primarily to focus his attention and resources on Topshop/Topman, which would represent the future of Sir Philips’s international retail ambitions. According to Mr. Sutton, Sir Philip’s American backers had supported him on the condition that he exit his other retail activities, to focus on driving international expansion of the core Topshop brands. He also said that BHS was losing money due to the highly competitive nature of the high street and Sir Philip wanted to offload the business to stem the drain on resources. He said that the Greens believed that if the business could be separated, put under new management and trade “for a few years” that would absolve them of responsibility for any future failure, and associated reputational damage. He also said Sir Philip was unwilling to sell out to any of his retail rivals, as this would also have personal reputational consequences if a turnaround succeeded under their direction. There was also the potential, Mr. Sutton claimed, for the Arcadia brands (other than Topshop/Topman) to be sold to him along with BHS or in a subsequent transaction. f. � The nature of the deal that Mr Sutton indicated he had negotiated with Sir Philip, including any discussions on the pension liability. The outline terms of the deal were never made clear to us and, in any case, changed at each update meeting we held with Mr. Sutton over the following weeks. At this

initial stage, it was made clear that the pension deficit liabilities would not attach to the new owner. They would either be retained by the Green companies, or would be settled through a deal with the Pension Trustees. Sutton told us that parallel discussions were taking place between Green, the Trustees and advisors, with the intention that the pension issue would be resolved to allow the BHS deal to proceed. He said that the BHS Trustees did not know a sale was contemplated, and emphasised that this must not leak to them. Aside from the pension issue, the deal involved various proposals around debt forgiveness, cash injection and development property assets that would support a turnaround plan. Our understanding was that the BHS business would be passed to the buyer with a modest “dowry” of assets, no debt and settled pension arrangements. g. � What was the nature and extent of any work you did for Mr Sutton, including details of any initial observations on the viability of the BHS turnaround plan. At Mr. Sutton’s request, we agreed to undertake a quick review of a BHS turnaround plan document, prepared by the incumbent management, for no fee. We quickly concluded that the plan presented to us was not viable. The scale of the required turnaround would require resources well in excess of those likely to be available to the separated BHS business and the ability to re-position the business and brand was highly risky. We made these views clear to Mr. Sutton. We believed that without a substantial net positive cash position (perhaps several hundred million pounds), an acceptable pension settlement, and a clear path for separation from the Arcadia Group, the business would have a high chance of failing in the short term. We made clear that extensive due diligence and further business planning would be required to establish if there was a viable plan, and without such a plan, L.E.K. would not be prepared to provide ongoing assistance. This initial review consisted of a few man-hours of effort by the L.E.K. Partners involved. We undertook this work, and attended a number of subsequent “update” meetings detailed in the annex for no fees, with the expectation that we would play a role in due diligence, business planning and the eventual turnaround, should the deal progress. h. � When did you last have any contact with Mr Sutton. Our last meeting with Mr. Sutton was 27th August 2014. i. � What due diligence you did on Mr Sutton, when, and what you found out. We relied to a large extent on the referral from Rothschilds, who informed us that they had made enquiries about Mr. Sutton in Monaco and that he was “ok to do business with.” He also appeared to have credibility as a suitable buyer with Sir Philip and BHS management, given his access to their plans and regular meetings that took place between them. We did some informal checks ourselves and were aware of the out-of-court settlement of a fraud claim with Lord and Lady

Fairhaven, but not of his bankruptcy history nor fraud conviction in the French courts. 2. With regards to Dominic Chappell: a. � When did you first meet Mr Chappell. Mr. Chappell accompanied Mr. Sutton at a meeting held at L.E.K. on 10th February 2014. b. In what circumstances did you meet Mr Chappell. Mr. Sutton described Mr. Chappell as a business associate who would be helping him with the deal. Mr. Chappell would be co-ordinating the activities of various advisors and was presented as someone who had some experience in putting deals together. There was no detail provided on whether the two had actually worked together before, but we assumed they had. c. � What explanation was given for Mr Chappell taking over the deal from Mr Sutton. Mr. Chappell attended a meeting on his own at L.E.K. on 16th October 2014, and explained that Sir Philip had become aware of certain aspects of Mr. Sutton’s past and was no longer willing to entertain him as a buyer of BHS. Mr. Sutton was to have no further involvement in the deal in any form. Mr. Chappell indicated that he was intending to take things forward, and informally sought our continued support in that effort, should things proceed. d. What was the nature and extent of the work, if any, you did for Mr Chappell. We carried out no work for Mr. Chappell, nor received any remuneration at any stage of the process. We believe Mr. Chappell continued to refer to us as advisors to the acquiring group, but we were not consulted about this, and had no contact with Chappell or Retail Acquisitions / Swiss Rock after 11th February 2015. We had no involvement in the activities running up to the actual sale and learned about the deal in the press in mid-March. e. What contact did you have with Retail Acquisitions / Swiss Rock following the sale of BHS, with whom, and the nature of this. We had a meeting with Mr. Chappell on 3rd February 2016 to discuss how things were progressing with BHS post-acquisition and whether there might be any role for L.E.K. to help with the turnaround. He referred us to Mr. Paul Wareham at BHS who was running various aspects of the turnaround programme and was responsible for hiring external consulting advisors. We met with Mr. Wareham on 24th February 2016 to discuss possible project work, but nothing came of these discussions before the business went into administration.

f. When you last had contact with Mr Chappell. Our last contact was the meeting of 3rd February 2016 referred to above. g. What due diligence you did on Mr Chappell, when, and what you found out. After our first meeting with Mr. Chappell, we carried a similar desk-top review of his background as we had done for Mr. Sutton and discovered information on his previous bankruptcy at Island Harbour Marina.

3. Whether you had any contact with any representatives of Sir Philip Green as the seller of BHS. We had no contact with representatives of Sir Philip Green, BHS or their advisors.

4. It would be extremely helpful if you could provide a log setting out details of any contact or communication with Mr Sutton, Swiss Rock / Retail Acquisitions, and any representatives of Sir Philip Green, including dates, attendees, and a summary of any content.

A list of meetings, based on our internal records, is attached. We have noted the attendance where it was recorded, although on a few occasions other advisors to Messrs Sutton or Chappell were present as observers. At no time were any representatives of Sir Philip Green present. Other than one or two early meetings where L.E.K. fed back views on the business plan (as described above) the content of all of the meetings focused on feedback from meetings with the sellers and updates on the latest deal terms or proposals. Although numerous, in our view the meetings were a mechanism for Messrs Sutton and Chappell to keep us “onside” by providing regular updates to prove that the deal was still progressing, rather than to seek any advisory input.

If you have any further queries, please do not hesitate to contact me.

Yours sincerely,

Larry Verge Partner L.E.K. Consulting LLP

Annex: Record of Meetings on BHS deal

Date Attendees Company Location 02/07/2013 Paul Sutton L.E.K. office 15/07/2013 Paul Sutton L.E.K. office John Forsyth n/a 20/08/2013 Paul Sutton L.E.K. office 28/08/2013 Paul Sutton L.E.K. office 03/02/2014 Paul Sutton L.E.K. office 04/02/2014 Paul Sutton L.E.K. office 10/02/2014 Paul Sutton L.E.K. office Dominic Chappell Edward Parladorio PSB Law LLP Jasal Patel Cornhill Capital Ltd Andrew Frangos Cornhill Capital Ltd Panicos Euripides Al Jaber Group Lee Isaacs Cedar Dean David Abramson Cedar Dean 11/03/2014 Paul Sutton L.E.K. office 02/04/2014 Paul Sutton L.E.K. office 10/04/2014 Paul Sutton L.E.K. office Dominic Chappell 20/05/2014 Paul Sutton L.E.K. office 27/08/2014 Paul Sutton L.E.K. office 16/10/2014 Dominic Chappell L.E.K. office 30/01/2015 Dominic Chappell L.E.K. office 05/02/2015 Dominic Chappell L.E.K. office 11/02/2015 Dominic Chappell L.E.K. office 03/02/2016 Dominic Chappell BHS HQ 24/02/2016 Paul Wareham BHS BHS HQ