Business Appraisal & Valuation Report

The Pagnell Hotel

High Street Newport Pagnell Buckinghamshire MK16 7XX

Client: INDEPENDENT BANK, LONDON Proposed Borrowers: Mr & Mrs B Brown Date of Valuation: 10 September 2008 Reference: Specimen

CONTENTS

Instructions Seal of authenticity Synopsis Executive Summary Location Site & Aspects of Title External Property Condition & Reinstatement Internal Description Statutory Authorities Local Market Business History Current Operating Format Current Trade Assessment Future Proposals Projection Valuations Valuation Comments National Sector Profile Conditions of Engagement Client Instructions

- purpose of report - confirmation of authorised report

- map, description and environmental commentary - site plan and comments on tenure - description of site and buildings - property condition and reinstatement cost estimate - assessment of accommodation - planning, rating, fire and environmental health - demographic summary and competition commentary - accounts summary; VAT returns summary - licences, trading hours, sources of income, operating expenses - assessment of any proposed changes to property or business - requested opinions of valuation - explanation of valuation terminology - commentary on national trends

Reference

Page 2 of 36

INSTRUCTIONS

CLIENT PROPOSED BORROWER(S) PURPOSE OF REPORT BUSINESS OWNER(S) PERSON(S) INTERVIEWED DATE OF INSPECTION UNDERTAKEN BY DATE OF VALUATION SIGNATORIES
For and on behalf of Pinders Professional & Consultancy Services Limited

Independent Bank plc, 255 High Street, London, WC10 3AD Mr & Mrs B Brown Proposed Acquisition of Freehold Property and Business Mr & Mrs B Oliver Mr B Oliver 3 September 2008 Mr K Royle 10 September 2008 Mr M Kidby
Director of Licensed Trade

K Royle M Kidby
Justin Cain

Mr J Cain MRICS
Managing Director

CONDITIONS OF ENGAGEMENT We can confirm that neither the valuer nor Pinders has any known conflict of interest in accepting your instructions, nor any previous knowledge of the business or the potential borrower other than as specifically stated within the report. According to our records, we last visited this business in 1997. Unless specified elsewhere, this report has been prepared in accordance with our Standard Conditions of Engagement, as appended to this report, and in accordance with The Royal Institution of Chartered Surveyors Appraisal & Valuation Standards, for the sole purpose of assisting the Client and Proposed Borrower indicated above, in consideration of the subject business. Whilst the valuations contained within this report are expressed in a way which is suitable for lending purposes, any party, other than the Client shown above, wishing to rely upon the contents of the report for such purposes, will need to instruct Pinders to prepare and provide a further report, which addresses the partys specific requirements. We can confirm that Pinders has in place appropriate Professional Indemnity Insurance in respect of this valuation. A copy certificate to this effect can be provided to the Client upon request. We appreciate that there may be many parties involved in consideration of this proposal and this report (inclusive of photographs, maps and site plans) will be provided by electronic mail in pdf file format (requires Acrobat Reader software) to facilitate easy transfer of information. However, we recommend that our lending clients rely only upon an authenticated hard copy of the report, which has the Pinders security seal attached below.

If you wish to discuss any aspect of this report, please contact our Operations team at:-

Pinder House Central Milton Keynes MK9 1DS Telephone: 01908 350500 Email: info@pinders.co.uk

Reference

Page 3 of 36

SYNOPSIS

PROPERTY SUMMARY
Hotel Freehold Town centre; town located to the periphery of Milton Keynes Modern brick built; with separate annexe Extensive car parking and some lawned gardens 70 bedrooms, 180 cover restaurant, conference rooms and leisure facilities 12 roomed separate staff annexe Requires general refurbishment

BUSINESS SUMMARY
Commercial and business travellers, plus local functions trade 50% letting sales; 15% wet sales; 25% food sales; plus sundry leisure income Average achieved room rate 48 Run under management Purchasers propose active promotion and phased refurbishment Accounts y/e 31/3/06 Accounts y/e 31/3/07 Accounts y/e 31/3/08 Current Trade Assessment Projection

Turnover () Gross Profit () Gross Profit Margin Net Profit () Net Profit Margin

1,397,093 1,205,422 86.3% 260,356 18.6%

1,450,271 1,247,005 86.0% 342,521 23.6%

1,511,861 1,319,295 87.3% 395,344 26.1%

1,550,000 1,350,000 87.1% 400,000 25.8%

1,650,000 1,440,000 87.2% 500,000 30.3%

VALUATIONS SUMMARY
Market Value Market Value with specified assumptions Market Value - business closed

Present 4,000,000 3,000,000 2,400,000

Proposed n/a n/a n/a

PLEASE SEE FULL DEFINITIONS OF VALUATIONS AND SPECIFIED ASSUMPTIONS APPENDED TO THIS REPORT

Reference

Page 4 of 36

EXECUTIVE SUMMARY
Pagnell Hotel is currently operated as part of a small group and is being disposed of due to the overall future strategy of the group in seeking to focus on its 4 star outlets. The business is well established and has a reputation as a focal point as the towns primary hotel and functions venue, although there is relevant competition and it will be important that standards do not slip. The selling agents advise that this business has not been openly marketed and that no sales details have been prepared. At the request of the owners, they have discreetly offered the business over the summer, mainly to operators known to be seeking this style of hotel. They advise that they have had good interest and that there are three parties who have offered the asking price, and Mr Browns offer has been accepted as he is in a position move quickest. This is a style of business that would be of primary interest to experienced individual operators, or small to medium corporate bodies and notwithstanding the current economic climate, we would expect reasonable interest being shown, as indicated by the selling agents advice. This business offers a prospective purchaser the opportunity to capture additional dining and conference trade, whilst also offering some scope for increasing occupancy levels within the accommodation. Its weaknesses are the need for some redecorative works and the competition for corporate trade emanating from the Milton Keynes area.
Current Market Value

Proposed n/a n/a n/a 500,000 500,000 n/a n/a

4,000,000 100,000 4,100,000 400,000 455,000 x 10.2yp x 9yp

Other Adjustments Base value of trading business equating to: Current Trade Assessment/Projection Profit equating to: Assessed Fair Maintainable Trade Net Profit

Other Adjustments
We have made an adjustment to reflect that the business is not achieving its Fair Maintainable Net Profit due to excessive staffing costs.

Base Value of Trading Business

From our database of recent valuations, together with evidence of recent sales obtained from several agents, similar businesses are attracting investment at between 8-10 times sustainable annual profits on a fully managed basis. Reflecting the circumstances of the sale we have adopted a mid range multiplier and consider that the agreed sale price is fairly reflective of the current value of the business.

Reference

Page 5 of 36

COMPETITION MAP

The circle above is of 10km (6 mile) radius centred on the subject business.

Digital Map Data Bartholomew (2007)

Reference

Page 6 of 36

LOCATION
Newport Pagnell is a pleasant, expanded residential community, located on the eastern fringes of the town of Milton Keynes and close to Junction 14 of the M1 motorway, giving the area good road communications. Newport Pagnell is some 12 miles south of Northampton, 13 miles south of Wellingborough and 20 miles north of Luton. Newport Pagnell is renowned as the home of Aston Martin motors, but it has also seen residential development, with large estates of owner-occupied housing being developed in the last 30 years. Although the town has quite good shopping facilities of its own, there are superb facilities in Milton Keynes where all of the main retail chains, banks and building societies are represented. The Pagnell Hotel is located at the junction of High Street and Marsh End Road, the latter leading south towards Milton Keynes. It has as neighbours mainly residential properties, with the towns retained fire station located opposite. The business has its own large car park and there is also ample public car parking located nearby.

Environmental Matters
From our limited inspection of the property, we detected no evidence to suggest the existence of any current or past contamination and Mr Oliver, confirmed that to his knowledge the property did not currently or historically, suffer from any form of contamination. From information available within the public domain, we understand that there are sites producing pollution to the north/north-east and south/south-west of Newport Pagnell, and that the town may be at risk of being affected by flooding. With regard to the latter, we would note that the town is located at the junction of two rivers, the Lovat and the Great Ouse, and we are aware that flooding has taken place in various parts of the town and its surrounds over the years. However, we understand that additional flood defences have been installed in recent years, which should assist in reducing the risk of damage to properties. From our inspection of the property and enquiries made, there is no indication that the property or its immediate locality:

is on or near to landfills; is located within a mining area; is in an area that has been identified as having a risk of subsidence or landslip; is affected by naturally occurring gases; is subject to water or land pollution; has been used for the manufacture, storage or sale of hazardous/toxic materials such as chemicals, petroleum products, pesticides, fertilisers, acids, asbestos, explosives, paint or radioactive materials; is the site of below-ground storage tanks; is close to incinerators or chimneys giving off heavy emissions. We have detected no evidence to suggest that deleterious or hazardous materials or techniques have been used in the construction or subsequent modification of the building.

We would also refer you to the paragraph headed Environmental Matters within the appended Conditions of Engagement.

Reference

Page 7 of 36

SITE & ASPECTS OF TITLE Site Plan

The plan shown opposite has been obtained directly from the Land Registry Online facility and shows the boundaries of the site as recorded at the Land Registry. We can confirm that the area outlined in red corresponds with our understanding of the site boundary of the property as visually inspected and confirmed by the owner of the property.
It should be noted that this plan and the markings thereon indicate the approximate extent of the site inspected and no guarantee can be given as to whether this corresponds to that over which title is held. It remains the responsibility of the Client to investigate and confirm the legal boundaries and title applying to the property.

Restrictive Covenants, Rights of Way and Easements

We were advised by Mr Oliver that there are no rights of way, easements or restrictive covenants affecting the property.

Tenure and Title

We are advised that the property is freehold.
Our valuations assume that any prospective purchaser would be granted full possession of the property, free of any restrictions on title and that all fixtures, fittings and items of equipment remaining would be provided on a fully unencumbered basis. Unless stated, we have not been provided with a report on title, but we would be pleased to cooperate with solicitors acting for the Client in respect of such a report should this be required.

Reference

Page 9 of 36

EXTERNAL PROPERTY

Reference

Page 10 of 36

EXTERNAL PROPERTY Site Description/Potential

The property comprises a large detached building with various two-storey extensions to the rear and side of the main building. The hotel is set back from the High Street, with the main entrance facing the larger car parking area. Externally there are two large car parking areas within the demise and some 100 cars can be parked. The site is a sloping one, leading from the road boundary down to the southern boundary, where there is a small stream. The car parking area is landscaped with various trees and bushes, with additional external areas being laid to lawn. We do not consider that there is any economic scope to extend the property, as the external areas are in use for the car parking.

Buildings Description
The building is of modern development, completed we are advised some twenty years ago. To the rear of the main entrance building, which houses the public areas, is a large mainly two-storey section housing the letting bedrooms over ground and first floors and the leisure facility at lower ground floor level. To the left-hand side of the leisure facilities is a further building, which houses the staff accommodation. The following table summarises the apparent construction of the major building elements. It should be noted that we have not undertaken any form of survey, structural or otherwise and the following comments are based purely on visual observations from ground level, unless otherwise stated. ELEMENT Walls Pitched Roofs Flat Roofs Window Frames Rainwater Goods DESCRIPTION Brick-faced elevations Interlocking concrete tiles None Modern PVC-u double-glazed units Black sectional plastic

Reference

Page 11 of 36

EXTERNAL PROPERTY

Reference

Page 12 of 36

CONDITION & REINSTATEMENT Condition

Externally the property appears to be in relatively good order, with no serious defects noted, although overall the property is fast approaching the need for a programme of refurbishment. Mr Oliver advised us that no formal inspection for asbestos has been carried out. We have had sight of an Energy Performance Certificate (EPC) dated 6 June 2008 which indicates a rating of G for this property.
Asbestos As from May 2004, all owners/occupiers of non-domestic properties have been required, under the Control of Asbestos at Work Regulations (2002), to provide a record of an inspection to verify whether any form of asbestos is present. If asbestos is detected, then an appropriate management plan must be implemented. We have not inspected for asbestos and, unless otherwise stated, our valuations exclude any costs relating to this management plan. Energy Performance Certificate From October 2008 all non-domestic properties over 50m2 in size require an EPC when constructed, sold or let.. The certificate will include an energy efficiency rating between A (most efficient) and G. Please contact us for further information about arranging an asbestos survey or EPC

Reinstatement Assessment
It should be appreciated that an assessment of the likely costs of fully reinstating a property is a complex and detailed exercise usually undertaken by a building or quantity surveyor. The following estimate is provided purely for guidance purposes to assist the named client in their consideration of the stated business proposal. It should not be relied upon by either the named client, or any other party, as a basis for assessing levels of insurance cover and Pinders accept no liability in this regard. Whilst the estimate provided allows for the approximate costs of demolition, debris removal and professional fees, and assumes the use of modern materials, construction techniques and compliance with all current building regulations, it makes no allowance for any alterations to the layout or configuration of the property which may be required for the ongoing operation of the business. On these specified assumptions, we would suggest that the reinstatement figure for the existing structure (exclusive of VAT) should not be less than 6,000,000 (six million pounds).

Reference

Page 13 of 36

INTERNAL PROPERTY

Reference

Page 14 of 36

SUMMARY OF ACCOMMODATION

PUBLIC AREAS Reception/Lounge Restaurant Conference Suite Conference Suite Leisure Suite Customer Toilets Bar Servery

Size (approx) 160m2 220m2 170m2 55m2 -

Description Well presented; seating for 40 Seating for 180 Seating 120 banquet style Seating for 40 theatre style Gym, CV Room, Pool, changing rooms Well presented; accessed from the reception with additional facilities within the restaurant and leisure suite Accessible from both lounge and bar areas

SERVICE AREAS

Kitchen Cellar Boiler Room Other Staff Accommodation

Good size, commercially equipped; has a food store with walk-in coldroom and an external store room A large temperature-controlled cellar situated at ground floor level Basement level within the maintenance area, to include workshop, housekeeping store and linen store Managers office, sales office, conference offices, staff rooms, staff offices 12 bedrooms, lounge; kitchen in separate annexe building

LETTING ROOMS Ground First First Reception Block Total

Single 0 0 0 0

Twin 12 13 0 25

Double 19 18 8 45

Family 0 0 0 0

Total Rooms 31 31 8 70

Total Beds 62 62 16 140

MEASUREMENT OF ACCOMMODATION
We endeavour to measure the accommodation at the time of our inspection but, where this is not possible, we will either rely upon measurements taken from plans provided, schedules of measurements or other information advised to us by the owner of the business.

Disability Discrimination Act 2005

The regulations of this Act, as they apply to existing buildings to which the public has access, require reasonable steps to be taken to ensure that disabled persons are not treated less favourably. Whilst the Act will be enforced by service-user complaint, rather than proactive inspection, practices, procedures and policies should be reviewed and amended where appropriate.

Reference

Page 15 of 36

INTERNAL DESCRIPTION Decoration and Furnishing

The reception/bar areas are well presented for their use and the restaurant is arranged in a flexible style, permitting large groups and more intimate dining to co-exist. The conference and leisure facilities are adequately presented, although they are becoming tired and would benefit from refurbishment in the medium term. The letting accommodation, situated over both floors of the main block and also on the first floor above the reception lounge, comprises 70 bedrooms. All of the bedrooms have en suite facilities, comprising shower, WC and wash-hand basin. All bedrooms have tea and coffee making facilities and colour television. These rooms are adequately furnished, but would benefit from redecoration in the short to medium term.

Owners/Staff Accommodation
There is no dedicated owners' accommodation, but there is a separate annexe containing the staff accommodation on the first floor over covered car parking and additional store rooms. This accommodation is basically presented and obviously well used. From measurements taken, it is our opinion that less than 40% of the total of the land and buildings within the curtilage of this business is currently being utilised as private living accommodation.
Regulated Mortgages From 31 October 2004, mortgage applications relating to commercial property, where more than 40% of the property is used for residential purposes, are to be treated as Regulated Mortgage Contracts by the Financial Services Authority.

Services
We understand that the property is connected to mains electricity, gas and water. The property also has the benefit of a full central heating to the letting rooms, with the public areas having air conditioning. A separate air conditioning system services the leisure club. Whilst it is beyond the scope of our instructions to undertake tests of services, equipment, fixtures and fittings, etc, we assume that all such items are operating safely and efficiently and are appropriate for the purposes to which they are put.

Reference

Page 16 of 36

STATUTORY AUTHORITIES Planning and Highways

We are advised by Mr Oliver that the property is not Listed, although it does lie within the Newport Pagnell Town Centre Conservation Area. Furthermore, we were advised that there are no Tree Preservation Orders. Following our visit we visited the Planning Department of Milton Keynes Council, who were able to confirm that the most recent planning applications were from January 2003, relating to the granting of consent for external illuminated signage. High Street is an adopted highway.

Rates, Water and Environmental Charges

The rateable value of the subject property is 145,000. Within our calculations we have made an allowance of 90,000 for rates, water rates and environmental charges.

Fire Authority
We were advised that the Authority did visit some six months ago and other than some procedural changes in the Risk Assessment and an increase in staff training, there were no matters outstanding.
Regulatory Reform (Fire Safety) Order 2005 We would recommend that business proprietors fully acquaint themselves with the requirements of the Regulatory Reform (Fire Safety) Order 2005, which cover statutory fire prevention in almost every commercial property.

Environmental Health Authority

Mr Oliver confirmed that the subject concern is registered under the provisions of the Food Safety Act 1990 and it is assumed that the business meets fully with the requirements of this legislation. We were also advised that the Environmental Health Officer last visited some three months ago and required some replacement fridge seals, updated manuals and replacement signage within the food prep areas. We are advised that all these matters have been attended to.
Food Safety Act 1990 We would recommend that business proprietors fully acquaint themselves with the terms and conditions of the Food Safety Act 1990 and its various subordinate regulations. These have included the introduction of a scheme for compulsory registration of all food premises under The Food Premises (Registration) Regulations 1991, the latter relating to England, Scotland and Wales, and applying to most types of businesses, with few exemptions.

Reference

Page 17 of 36

DEMOGRAPHIC PROFILE

Census 2001 Overall Population Percentage change on 2008 age between 18 and 24 yrs age between 25 and 44 yrs age between 45 and 64 yrs of pensionable age 188,996 -

(Sub National Population Projections) 2008 209,840 18,979 65,896 52,810 22,380 2018 237,399 +13.1% 18,459 69,688 61,440 33,360 2028 235,889 -0.6% 20,333 73,395 63,997 42,446

The following graphs show comparisons between the population of 188,996 within 10km of the subject business shown on the map overleaf, and the UK as a whole.

Comparison of Population by Age

35.00% 32.84%

30.00%

29.15%

25.00%
% of Total Population

23.07%

23.81%

20.00% 15.89% 15.00%

10.00%

10.00% 8.56% 8.45%

5.00%

0.00% age between 18 and 24 yrs age between 25 and 44 yrs Within 10km age between 45 and 64 yrs Whole UK of pensionable age

Comparison of Population by Socio-economic Classification

40.00% 36.28% 35.00% 31.29% 30.00% 25.93%
% of Total Population

30.06%

29.88%

25.00% 20.26% 20.00%

15.00%

12.90%

13.40%

10.00%

5.00%

0.00% Class A/B Class C1 Within 10km Whole UK Class C2 Class D/E

AB-Professional and managerial, C1-Intermediate and junior non-manual, C2-Skilled manual, DE-Semi-skilled and unskilled manual. Census output is Crown copyright and reproduced with permission of the Controller of HMSO Source: 2001 Census Statistics

Reference

Page 18 of 36

LOCAL MARKET FACTORS

The population at the time of the last census, within a 10-km radius of the subject concern, was around 190,000. The age distribution statistics reveal that the proportion of those aged between 25 and 44 is higher, and for those of pensionable age is lower than the UK averages. The other age groups are broadly in line with the UK figures. The above statistics, together with the proposed number of new homes that are planned to be built in and around Milton Keynes and the general expansion of the town, suggest that demand for leisure pursuits should remain high. Whilst the town of Newport Pagnell itself has only limited direct competition for the hotel trade, with the Swan Revived, an historic 40 bedroom coaching inn at the eastern end of the town being the most relevant, there are significant levels of competition within Milton Keynes, reflective of the strong demand. Located just to the north of Junction 14 of the M1 is the Courtyard by Marriott, with other chain hotels in the town including the Hilton Hotel at Kents Hill, Jurys Inn in Central Milton Keynes and the Novotel by Linford Wood. There are also a number of the budget hotel operators, to include Travelodge, Premier Inn, Campanile and Express by Holiday Inn located within Milton Keynes. Most of the larger units offer extensive conferencing facilities, and whilst the Swan Revived can only cater for 75 delegates, also located within Newport Pagnell is Harben House, a dedicated conference and training venue operated by the DeVere Group. The subject business appears to have established a good reputation and has built up a good level of repeat trade. Therefore, provided that it continues to be operated in a friendly, efficient and professional manner, and is marketed and upgraded to retain this trade, then we consider that the business should continue to trade successfully.

Reference

Page 19 of 36

THE BUSINESS Business History

This is a purpose built hotel, having traded as such since 1990, having formerly been part of the Forte group. Oliver Hotels have owned the subject property for five years. It is now being disposed of as they are trying to take their hotels into the 4 star plus category and this unit falls outside of these plans, as well as being some distance from the groups other units, making hands on management difficult. We are advised that it has not been actively marketed, with the selling agents, Christie & Co, offering it on a discreet basis to interested parties, and we understand that a good level of interest has been shown.

Historic Accounts
We have been provided with financial statements for the three-year period ending 31 May 2008, which are summarised below. The accounts are internal figures provided by Oliver Hotels, and have travel agency commissions and flowers shown as costs within the sales figures, whereas, to show consistency, we have adjusted these figures and treated them as business expenses, rather than costs of sales. Within the expenses we have also added back the sums allocated for depreciation, bad debts and banking discrepancies. We are advised by Mr Oliver, the Financial Director of Oliver Hotels, that the Head Office Allocations relates to group recharges and costs and these costs would not continue with the hotel in individual ownership. Within our adjustments we have added back the entirety of the Head Office Allocations, as these do not appear to have any direct relationship to this specific business. These figures show that the business has maintained a steady level of turnover, with a gross profit margin that is to be commended, bearing in mind the multi-faceted nature of the business, with the income from the Vitality Health Club assisting in this. It is noted that the net profitability of the business has shown growth over the three year period from a level lower than our expectations, which is primarily due to closer control of items of expenditure.

VAT Returns
We have not been provided with any VAT Returns.

Reference

Page 20 of 36

ACCOUNTS SUMMARY

Accounts Year End 31/05/06 Turnover () Gross Profit () Gross Profit Margin Profit/(Loss) as per accounts () Adjustments to Expenses () 1,397,903 1,205,422 86.2% 92,813

Accounts Year End 31/05/07 1,450,217 1,247,054 85.9% 139,019

Accounts Year End 31/05/08 1,511,531 1,319,957 87.3% 184,999

Bank charges Depreciation Loan servicing costs Directors Travel costs Head Office Allocation
Reconstituted Net Profit () Net Profit Margin

2,256 35,532 75,257 6,234 48,264 260,356 18.6%

3,215 45,143 84,361 7,896 62,887 342,521 23.6%

2,663 48,219 82,492 8,230 68,741 395,344 26.1%

Reference

Page 21 of 36

CURRENT OPERATING FORMAT Licences

The Licensing Act 2003 The provisions of the Licensing Act 2003 came into effect on 24th November 2005, and all premises where a licensable activity takes place require a Premises Licence. This will incorporate an operating schedule to outline the basis of trading of the business, such as trading hours, whether and when entertainment is provided and the capacity of the premises, etc. In addition, there will need to be a named Designated Premises Supervisor who will need to hold a Personal Licence. For the purpose of this report and our valuations, we have assumed that the business will have the necessary licences in place to continue to trade as existing and/or proposed.

We have had sight of the Premises Licence, Ref 06/01628/PREM, issued by Milton Keynes Council, which specifies the registered owner of the premises as Oliver Hotels, with the Designated Premises Supervisor being named as Mr David Oliver. The licence permits sales by retail of alcohol, late night refreshment, performance of live music, recorded music, dancing etc, over various hours, the main summary of which is noted below:
Day Monday Tuesday Wednesday Thursday Friday Saturday Sunday Sales 10.00am Midnight 10.00am 11.00pm 10.00am 11.00pm 10.00am Midnight 10.00am 1.00am 10.00am 1.00am Noon Midnight Regulated Entertainment Midday - Midnight Midday - Midnight Midday - Midnight Midday - Midnight Midday - Midnight Midday - Midnight Midday - Midnight

Trading Hours and Seasonality

The business opens all year round and it is said that apart from the expected Christmas boost, little seasonality is shown.

Sources of Income
Accommodation sales are driven by business travellers, supplemented by overnight conference and function guests, together with tourists on leisure breaks. The restaurant trade is focused on conference trade, together with diners from the surrounding area being attracted by the various events hosted by the business.

- Wet Sales
The bar prices are as follows:
Product Bitters Lagers Cider Guinness Spirits House wine Price 3.20/pint 3.30 to 3.65/pint 3.25/pint 3.55/pint From 3.20/single measure 4.75/ 175ml glass

Reference

Page 22 of 36

CURRENT OPERATING FORMAT

As would be expected for a business of this nature, these prices are above those seen at local public houses. Purchases are made through Coors, who supply on competitive terms, and we are advised that the costs of wet stocks are included within the accounting information includes the benefit of any discounted purchases.

- Dry Sales
The business offers a range of menus, dependent upon location and occasion, with Chardonnays Restaurant offering five pre-starters priced from 3.95 for marinated Mediterranean olives, to 4.95 for tortilla chips with tomato salsa, jalapeno peppers and sour cream and chive dressing. There are 10 starters priced from 4.95 for grilled goats cheese with chilli jam and mixed leaves, to 9.95 for mussels with garlic bread. Main dishes range from 12.95 for trio of sausages with creamy mash to 18.95 for 8oz sirloin steak. There are also seven main desserts priced at 5.25, or a dessert platter at 7.50. The lounge and room service menu offers a range of sandwiches priced between 5.95 and 6.50, salads at 9.95 to 10.95, hot food between 4.95 and 15.95 and desserts again priced at 5.25. The conferencing facilities offer a wide range of menus, from a six item finger buffet priced at 9.95 per head to an individually priced banqueting menu including options such as Thai fishcakes at 4.75, cod with prawn and herb mousse at 3.75 and lime chiffon pie at 4.75. Some centralised purchasing is undertaken, but the majority of fresh food purchased is procured from local suppliers where possible.

- Accommodation Income
The published tariffs for the business are 90 for a midweek room, and 35 per person at weekends, although these prices are not published on the hotels website and booking staff do have considerable discretion to negotiate discounted tariffs. For the year to March 2006, average room rates were 44.24, with an occupancy level of 58.6%; for the following year room rates slipped slightly to 43.02, although the occupancy levels were substantially higher at 68.6%. In the year to March 2008, occupancy levels steadied at 65%, with an increased room rate of 48 being achieved. For the three months to June 2008 an average occupancy level of 63.5% is indicated, and an average rate of 54.42.

- Functions
The hotel offers a range of conferencing options, from room hire only to full residential rates, up to a platinum package at 154 per person per day. Basic room hire charges are from 500 for the Tickford Suite for day hire, or 250 for an evening hire. Refreshments, meals, and equipment hire can also be arranged and are individually priced, or one of the day or 24hr delegate packages can be selected. The business also offers wedding packages, with the Tickford Suite being licensed for civil ceremonies. The price of the packages for 2008 ranges from 45 to 55 per person, and discounted rooms can also be booked. A charge of 250 is made for the ceremony in the Tickford Suite. - Membership Fees The Vitality Health and Leisure Club is open for hotel guests and members, from 7am to 10pm from Monday to Friday, and 8am to 8pm on Saturday and Sundays. There are a range of membership packages, with peak single being priced at 36 a month, off peak single at 26, family at 64 a month and guest passes available at 5. There are said to be 460 full members, and whilst in the publicity material there are joining fees indicated, in line with many health clubs in present times, these are frequently waived.

Reference

Page 23 of 36

CURRENT OPERATING FORMAT Entertainment

The business offers themed/special dinners in the restaurant on a regular basis, but other than this, and any entertainment specifically hired for functions, there is no programme of regular entertainment.

Advertising and Promotion

The hotel has an AA 3 star rating and is advertised in Yellow Pages, together with local press. Additionally, it is a member of the Best Western consortium, benefiting from advertising and referrals through the Best Western websites. The business also has its own website and obtains referrals from Active Hotels and other travel agencies. It also produces its own literature promoting the wedding and conference opportunities, and also a brochure publicising the special events and weekend breaks.

Staffing
The business is operated on a fully managed basis, with a general manager, operations manager, events manager, and conference/banqueting sales manager, assisted by a range of full and part time staff. We have been provided with a copy of the current staffing list, with the key staff being paid as follows:
Job Title General Manager Head Chef Relief Chef Conference/Banqueting Sales Manager Maintenance Manager Head Housekeeper Events Manager Operations Manager Business Co-ordinator Chef de Partie Food and Beverage Assistant Assistant Manager/Barman Receptionist Annual Salary 35,000 26,000 21,000 18,250 16,000 16,000 14,000 14,000 12,500 12,000 11,925 11,000 11,000

All staff are paid at least in accordance with National Minimum Wage requirements and get at least the statutory holiday pay. Some staff live in the staff annexe. After allowing for the extensive pool of part time and casual staff. the total wage cost indicated amounts to 489,917, although this is noted as being below the level of staffing within the 2008 accounts, when staff costs were recorded as 525,873. The figures for the quarter to June 2008 indicate staff costs of 125,217, which equates to 34% of the recorded sales figures, which whilst a lower percentage than the preceding year (39%) is still higher than we would normally expect to see. We have based our assessment upon the moist recent figures, representing approximately 34% of net turnover.

Reference

Page 24 of 36

CURRENT OPERATING FORMAT Credit Card Charges

All major credit and debit cards are accepted and whilst the precise rates of charges are not known, Mr Oliver advised that they obtain more competitive rates than the standard Best Western terms.

Hire Purchase, Leasing and Rental Agreements

Only a small amount of equipment is held on such terms, namely two treadmills and some ovens, and the costs of these are said to be fairly modest, although precise sums were not known. Our valuations have been prepared on the basis that all items of equipment are unencumbered.

Reference

Page 25 of 36

BASIS FOR CURRENT TRADE ASSESSMENT

In addition to the accounts for the three years ended 31 May 2008, we have also been provided with a summary of management accounts for the year to August 2008, these indicates total sales of 1,514,011, generating a gross profit of 1,321,903, a margin of 87.3%, and a reconstituted net profit of 247,928, with a net profit margin of 16.4%. The wet sales indicated for the year were recorded at 205,883, a weekly average of 3,959, generating a wet gross profit margin of 74.1%; food sales were recorded as 374,972, generating a gross profit of 246,126, a margin of 65.3%; accommodation takings were recorded as 771,164, room hire as 60,901 and income from leisure in the figures was recorded at 101,091. In addition we were able to have sight of stocktaking information for the 35 days to 3 July 2008 and the 35 day period 1 August 2008 to 5 September 2008. These indicated net weekly averages of 5,315 and 4,236 and gross profit margins of 74.9 and 73.8% respectively. For the three months to August 2008, internal figures provided show bar sales of 51,372, broadly similar to those seen for the prior year, food sales of 93,191, an approximate 10% increase on the preceding year, accommodation sales showing 217,233, a rise of 9.3%, with room hire at 12,018, virtually the same as for the preceding year and leisure income showing 94,215, a small drop when compared to the preceding year. These figures show that the business has continued to maintain its turnover and gross profit margins since the most recent accounts, although the operating costs do appear to be increasing. Whilst we were not provided with a full breakdown of these, it is apparent that staff costs have increased, as have heat and light costs in the most recent year. The latter are to be expected in line with nationwide energy price increases and the former may be explained by the difficulties experienced in retaining a good head chef. We have based our Assessment of Current Trade on the information provided and detailed within this report and would remind you that we have shown travel agency costs as an expense and not as costs of sales.

SUSTAINABILITY OF TRADE
The Current Trade Assessment seeks to reflect the operating format of the business as at the date of our inspection on an annualised basis. For the purposes of making meaningful valuation comparisons with other similar businesses, we have given consideration as to whether this Assessment is a fair reflection of the maintainable trade which might be expected by a typical, competent operator. In this case, we feel the income reflected in our Current Trade Assessment can be expected to be sustained, and the profitability, if run by an experienced management teams, should be capable of increasing, due to the very high levels of staffing currently employed. We consider that a managed net profit of some 455,000 should be sustainable at this business.

Reference

Page 26 of 36

CURRENT TRADE ASSESSMENT

Total Turnover (Net of VAT) Gross Profit Gross Profit Margin Other Income Total Income Less Expenses Rates, Water, Environmental Charges Heat and Light Wages (excluding family payments) Printing, Postage, Stationery, Telephone Advertising Insurance Accountancy and Stocktaking Laundry and Cleaning Repairs and Maintenance Transport Hire Purchasing, Leasing and Rentals Credit Card Commission Payments Agency Commissions Entertainment Sundries Total Expenses Net Profit ()

1,550,000 1,350,000 87.1% 0 1,350,000

100%

75,000 60,000 525,000 20,000 40,000 20,000 10,000 50,000 50,000 5,000 0 10,000 40,000 25,000 20,000 950,000 400,000

4.8% 3.8% 33.8% 1.3% 2.6% 1.3% 0.6% 3.2% 3.2% 0.3% 0.0% 0.6% 2.6% 1.6% 1.2% 61.1% 25.8%

Net Profit is the owners earnings before interest, taxation, depreciation and amortisation.

Reference

Page 27 of 36

FUTURE PROPOSALS
Whilst on site we had the pleasure of meeting Mr Brown in order to discuss their plans and proposals for the business. A formal business plan has not been produced at this time. He advised that he and his family have experience in the hotel business, formerly operating a hotel in St Alban since 1981. This was sold off recently to enable Mr Brown and his brother to follow their individual business ideas. Property Initially there will be no major changes to the property, although Mr Brown is keen to undertake a refurbishment of the public areas in particular, as he considers the dcor to be in need of upgrading. Some improvements to the circulation flow from the entrance are also to be considered, as will trying to create a separate identity for the restaurant. Business Mr Brown is to operate the business on a full time basis, whilst retaining much of the current management. The high levels of staffing are to be rationalised, as Mr Brown considers that the levels of staffing are sufficient for a 4 star hotel at present and, therefore that savings can be made. The restaurant side of the business is to be more actively promoted, as is the wedding and conference trade. It is hoped to improve the occupancy levels to 70% in line with national averages. The Best Western links are to be maintained, although in due course Mr Brown will consider linking with the Holiday Inn network. Our Projection assumes that the refurbishment of all public areas will be undertaken, together with some improvements to the bedroom stock. We assume that Mr Brown will be successful in improving both occupancy levels and dining take-up.

Reference

Page 28 of 36

PROJECTION

Total Turnover (Net of VAT) Gross Profit Gross Profit Margin Other Income Total Income Less Expenses Rates, Water, Environmental Charges Heat and Light Wages (excluding family payments) Printing, Postage, Stationery, Telephone Advertising Insurance Accountancy and Stocktaking Laundry and Cleaning Repairs and Maintenance Transport Hire Purchasing, Leasing and Rentals Credit Card Commission Payments Licences Entertainment Sundries Total Expenses Net Profit ()

1,650,000 1,440,000 87.2% 0 1,440,000

100%

75,000 65,000 500,000 20,000 45,000 20,000 5,000 50,000 50,000 5,000 000 0 11,000 45,000 25,000 24,000 940,000 500,000

4.5% 3.9% 30.3% 1.2% 2.7% 1.2% 0.3% 3.0% 3.0% 0.3% 0.0% 0.6% 2.7% 1.5% 1.4% 56.9% 30.3%

Net Profit is the owners earnings before interest, taxation, depreciation and amortisation.

Reference

Page 29 of 36

VALUATIONS MARKET VALUE (a)

The business as a fully operational going concern, to include the freehold property in its present condition, has a Market Value of four million pounds ......................................................................................4,000,000

MARKET VALUE subject to :[i] [ii] [iii] a sale of the concern has been required within a 6 month period; accounts or records of trade would not be available to a prospective purchaser; the business is open for trade.

(b)

The business as a fully operational going concern, to include the freehold property in its present condition, and subject to the assumptions specified above, has a Market Value of three million pounds ..................................................................................................................................................................................................3,000,000

MARKET VALUE subject to :[i] [ii] [iii] [iv] a sale of the concern has been required within a 6 month period; accounts or records of trade would not be available to a prospective purchaser the business has been closed; the licences have been lost or been breached.

( c)

The former operational going concern, to include the freehold property in its present condition, and subject to the assumptions specified above, has a Market Value of two million, four hundred thousand pounds ...................................................................................................................................................................................2,400,000

Sale Price
We are advised that a sale price of four million pounds 4,000,000 has provisionally been negotiated between the parties, which figure we consider to be appropriate in current market conditions.

Reference

Page 30 of 36

VALUATION COMMENTS
Basis of Valuation The bases of valuation above are as defined within The Royal Institution of Chartered Surveyors' Appraisal and Valuation Standards, and are subject to the qualifications and limitations referred to within this report. Please refer to our Valuation Comments opposite for further clarification of valuation terminology. Full definitions of the valuations are also given within the Conditions of Engagement appended to this report. Methodology When preparing our valuations, we have had principal regard to the profits method of valuation, together with an analysis of comparable market information, our own extensive database and having regard also to other investigations. Where appropriate, we will also consider the build-up approach to valuation, taking account of the current goodwill and the underlying value of the property. Due to the confidential basis on which much of our comparable information is obtained and held, it is not generally possible to include this data within our report. Loan Security Clearly, the value of a trading business is subject to fluctuation over time, resulting from the trading performance of the business, changes in local market forces, legislation and national economic conditions. Whilst it is for the lender to assess the risk attached to such fluctuations over the period of any loan, and to determine an appropriate level of security, we are unaware of any foreseeable events or circumstances, other than those detailed within this report, which would suggest that the subject property is unsuitable security for loan purposes, over the normal period of a commercial mortgage for this type of business. This assumes that the necessary maintenance and upgrades are made to the property to ensure that it continues to meet legislative and market requirements. Market Value Special Assumptions Unless otherwise specified, this valuation assumes that the business is to be offered for sale free of any perceived blight resulting from factors such as the threat of action by statutory authorities or the appointment of Receivers. It should be appreciated that the impact of the specified restricted sale period will be more significant during periods where transactions are prolonged due to uncertain market conditions. Market Value Business Closed In accordance with the mandatory requirement of the RICS Appraisal and Valuation Manual, we have provided our opinion of the value of the subject concern should it cease to trade and be offered for sale as a closed unit. Unless otherwise specified, this valuation assumes that the vacant property is to be offered for sale free of any perceived blight resulting from factors such as the threat of action by statutory authorities or the appointment of Receivers, but it should be appreciated that the value of empty business premises may vary considerably depending on the circumstances of the business closure. It is also important to recognise that this valuation assumes continuation of the existing use and excludes the possibility of any change of use being permitted (see Alternative Use below). It should be noted that, if a care home is to be reopened after a period of closure, it should be treated as a new registration and would, therefore, be subject to the full scope of the National Care Standards. This may involve significant remodelling of the accommodation to ensure that all bedrooms are for single occupancy, exceed 12m2 and have en suite facilities, that there is sufficient communal space and that a passenger lift is installed. Bricks and Mortar Value This phrase is still widely referred to and confusion often exists as to its meaning. As this is no longer a valuation term recognised by the RICS for business premises, being replaced by a Market Value with client-specified assumptions, we would encourage clients to discuss their requirements with us, to ensure that they receive the valuations required. Alternative Use Whilst the valuations provided are for the business/property with its existing use, a higher value might be attributed to an alternative use. In such cases, we will indicate, for guidance purposes, the most likely alternative use for the property, but it should be noted that this assumes that all of the necessary consents will be obtainable for the type and scale of use anticipated. Should a redevelopment project be possible which results in an end value higher, or lower, than estimated, this could have a bearing on the value of the present property/site.

Reference

Page 31 of 36

NATIONAL SECTOR PROFILE

The UK hotel market is fragmented and diverse and as a result its scope is very hard to define. About 22,000 hotels and guest houses are registered with the tourist boards, plus a further 16,000 bed and breakfast establishments according to the British Hospitality Association. Adding in unregistered establishments, the total would come to 50,000 to 60,000. There are numerous external factors, which can cause the market to hesitate or be in flux including the worldwide action on terrorism and closer to home, instances such as the London bombings. These can cause great variance in the willingness of foreign tourists to visit the UK which can impact upon trading performance and ultimately value. Independently owned non-branded hotels are becoming increasingly rare, with the market dominated by either the big players such as Travelodge or Premier Travel Inn, or the branded outlets, such as Best Western, Holiday Inn, Marriott and Days. Many of these are independently owned and tied to the various consortia either by formal franchise or by management agreements. The style and quality of accommodation, however, is a factor, with some lower tier corporate and smaller group operators shying away from acquiring listed buildings or certain other buildings as in some cases there can be excessively high costs in respect of regular maintenance and/or running costs etc. Many buyers of smaller and middle sized leisure businesses fund their deposit through the sale or re-mortgaging of their own residential properties, and this market is currently in decline, limiting the available purchasers for these businesses. Stagnation at the smaller end of the leisure market can lead to increased difficulties in selling small and medium-sized businesses. Eventually this can also have an effect on larger businesses. Additionally, there is a lack of confidence in the wider economy, both in the UK and globally with the worldwide banking sectors undergoing significant turmoil and many of the traditional lenders to the hotel market have also tightened their criteria making funding purchases more difficult. Additionally a number of larger pub and hotel companies are reporting difficult trading conditions and depressed profitability. All of these factors have led to a weakening in the market for hotels. Consequently buyers who are in a position to proceed are being more cautious in their approach to transactions, and agents are reporting longer marketing periods and less competitive bidding. Future market conditions are of course very difficult to predict, but it is unlikely that the markets will bounce back in the short term, with the future fluctuations in the wider economy, particularly in respect of consumer and business expenditure, being key factors in the hotel market. We would also comment that due to the banks being cautious about lending money in the commercial sectors, sales can take a long time to achieve. Should a quick sale therefore be required, this could have a significant impact on the price achievable.

Reference

Page 32 of 36

APPENDIX CONDITIONS OF ENGAGEMENT

(Effective from 1 July 2008)
This Appendix forms part of the Valuation and/or Appraisal Report, and it is assumed that the Client is fully conversant with its contents. (a) Definitions Unless the context otherwise requires, the following terms have the meanings ascribed (where appropriate, references in the singular will also apply in the plural):"the Client" "Proposed Borrowers" "the Property" "the Business" "Pinders" "the Report" means the person(s) or body from whom the instructions to prepare the Report have been received. Reference to the Client, who shall be identified on the front page of the Report, shall in all cases be interpreted to mean only this person(s) or body. means the individual(s) or company whose proposal is the subject of the Report. Any reference to Proposed Borrowers within these Conditions of Engagement also applies to alternative forms such as "Proposed Purchasers", "Proposed Vendors", etc. means all those freehold/leasehold premises from which the Business is operated and which have been inspected by Pinders Professional & Consultancy Services Limited and reported upon. means the business trade or profession carried on or to be carried on by the Proposed Borrower in respect of which Pinders Professional & Consultancy Services Limited has been requested to prepare the Report. means Pinders Professional & Consultancy Services Limited whose registered office is at Pinder House, Central Milton Keynes, MK9 1DS. means a Report on the Property/Business prepared by Pinders. It means the written provision of a Valuation, combined with professional opinion and/or analysis relating to the suitability or profitability or otherwise of the subject property for defined purposes or to the effects of specified circumstances thereon, as judged by Pinders following relevant investigation. the date on which Pinders representative carried out the inspection of the business premises. the date as of which the Valuation and/or Appraisal is stated to be expressed.

"date of Inspection" "date of Valuation"

(b) Purpose of Report Pinders Professional & Consultancy Services Limited has prepared this Report for use only by the Client to assist them in the consideration of the proposal stated within the Introduction to the Report, in respect of the subject business and/or premises, and for no other purpose whatever. It is confidential to the Client and other than for information purposes it is not for use by the Proposed Borrowers in any way. Pinders can accept no responsibility if the Report is divulged to any other persons or bodies, any of whom relies upon it entirely at their own risk. Pinders accepts responsibility to the Client alone that the Report will be prepared with the skill, care and diligence to be expected of a competent business valuer and appraiser, but accepts no responsibility whatsoever to any person other than the Client. No person or body other than the Client may rely on the Report and neither the whole, nor any part of the Report, nor any reference thereto, is to be included in any published document, circular or statement, nor published in any way without the written approval of Pinders as to the form and context in which it may appear. The Report comprises a valuation and appraisal together with comments and projections as to the potential of the business concerned. The projection of trading potential of the business concerned over the next twelve months or other specified period stated in the Report is based upon our own investigations and such other sources as detailed in the Report, and makes the following assumptions:(i) That the business would at all times be managed and operated by a competent and diligent owner devoting all due time and care to the affairs of the business. (ii) That the business would at all times be properly capitalised, stocked and staffed. (iii) That the financial and market situation prevailing at the date of the Report does not vary during the period of assessment. (iv) That the nature, character, extent and pricing structure of the business will not materially alter. (v) That all proper and prudent insurance cover for the business of the type examined will be taken out and maintained. (vi) That there has been no suppression, deception or falsification of material facts by the Vendor, Proprietor, and/or Proposed Borrowers. (vii) That there are no known onerous features of the business against which the Proposed Borrowers should make specific provision. We do not accept responsibility for loss of whatever nature which may result directly or indirectly from mismanagement, underfunding or understaffing of the business, market trends or fluctuations or any other factors whatever which are outside our influence or control or material changes in the nature, character, extent or pricing structure of the business, or the absence of adequate insurance cover for the business or for the suppression of material facts from us. Whether or not in the Report there is any qualification as to the source of any particular information, it remains the responsibility of the Client to ensure that all the usual prudent and appropriate enquiries are made. Such enquiries include, but are not limited to, the taking of independent professional advice from solicitors and accountants, the entering into of a professionally drawn acquisition agreement with the appropriate warranties being taken from the Vendor or Proprietor, the taking up of all necessary trade and bank references, the inspection of the Vendors or Proprietors or Proposed Borrowers' accounts, examinations of all necessary consents, regulations, permissions, licences and bylaws, and all the usual searches and other precautions taken by a solicitor, accountant or other professional adviser in connection with the purchase or mortgage of a property/business. This Report is not intended to replace any of the investigations or enquiries referred to above and we do not accept responsibility for loss of whatever nature directly or indirectly arising out of failure to make such enquiries. The Report may, indeed, point to further enquiries being necessitated. Furthermore it is the Clients responsibility to ensure that all trading information provided to Pinders is substantiated by audited/certified accounts and, where appropriate, an Accountants Certificate. Any discrepancy which results from such documentation should be reported to Pinders as soon as practicable in order that any necessary adjustments may be made to the Report. It must be remembered that the Report does not contain a decision as to whether the stated proposal should proceed. It should also be noted that we do not supply "investment advice" either for the purposes of the Financial Services Act 1986 or at all. We do not offer advice as to whether shareholdings or debentures should be taken in the case of an incorporated business or equity acquired in the case of an unincorporated business or partnership. Should the Client and/or the Proposed Borrowers require such advice, they should seek assistance from their independent financial adviser. The estimate provided for Reinstatement Cost Assessment is provided strictly for guidance purposes only, and Pinders accept no liability whatsoever to any party in this regard. A detailed reinstatement assessment has not been undertaken and it is for the Client and the Proposed Borrowers to decide, in consultation with insurers, brokers and, where appropriate, other parties having an interest in the building, what level of insurance cover should be maintained and whether or not this should any allowance for VAT. (c) The Property The Report is a business appraisal/valuation only and is not a Report of a survey, whether "Building Survey", "Structural Survey" or otherwise and no such building or structural survey has been carried out. In making the Report regard will be had to the apparent state of repair, construction and condition of the Property, taking into consideration major defects which are obvious in the course of a visual inspection of so much of the exterior and interior of the Property as is accessible at the time of inspection with safety, and without undue difficulty. The inspection will view those parts of the Property as can be seen whilst standing at ground level within the boundaries of the site and adjacent public/communal areas and whilst standing at the various floor levels, which Pinders considers reasonably necessary to provide the service, having regard to its purpose. Pinders shall be under no duty to examine those parts of the Property which are covered, unexposed or inaccessible, or to raise boards, inspect woodwork, move anything, or use a moisture detecting meter. Neither shall Pinders have a duty to arrange for the testing of electrical, heating or other services which, unless indicated to the contrary, shall be assumed to be in a working and serviceable condition. If Pinders inspection suggests that there may be material hidden defects Pinders will so advise and may exceptionally defer submitting a final Report until the results of further investigations are available. It is assumed that those parts of any building erected on the Property which have not been inspected or made available for inspection would not reveal material defects of such a nature as to cause Pinders to alter the Report and Valuation.

Reference

Page 33 of 36

In making the Report Pinders has made the following assumptions: (i) We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous material has been used in the construction of this property, or has since been incorporated, and we are therefore unable to report that the property is free from risk in this respect. For the purpose of this Report we have assumed that such investigation would not disclose the presence of any such material to any significant extent. (ii) Pinders cannot give any opinion whatsoever regarding the structural design of any construction upon the property nor as to the suitability of any foundations to such constructions. (iii) That the Property is not subject to any unusual or especially onerous covenants, restrictions, encumbrances or outgoings which might affect Pinders valuation or which might prevent all or part of the Property from being properly used in connection with the Business. (iv) That the Title is as described to Pinders and as referred to in this Report and that there is good and marketable Title to the Estate or Interest which Pinders has valued. Unless indicated to the contrary, title deeds and/or lease documents have not been inspected. Any interpretation of leases and other legal documents and legal assumptions given in our capacity as Business Valuers and Appraisers must be verified by a suitably qualified lawyer if it is to be relied upon. (v) That the valuation of the Property/Business is unaffected by any matters which would be revealed by any searches and replies to such enquiries as are raised or should properly be raised by the Client/Proposed Borrower and/or by Solicitors acting on his/their behalf or by any statutory notice, restriction or liability; Pinders must be advised of any variations as to this assumption. (vi) That the Property and/or Business, its use or intended use, or its condition is not in any way unlawful or in breach of any provisions of the Town and Country Planning Acts, Building Control, Licensing Acts, Registered Homes Act, Environmental Health Acts, or other statutory requirements, and that the Property has direct access from a publicly maintained highway. (vii) That the plant, machinery, equipment, fixtures and fittings are in serviceable order, adequate for the effective trading of the business, and will remain so for the foreseeable future. Pinders shall be under no obligation to verify any of these assumptions. It remains the responsibility of the Client to ensure that all appropriate enquiries and investigations are made and the report is not intended to replace any of those enquiries/investigations. (d) Boundaries and Measurements Pinders understanding of the boundaries is noted, but Pinders has no knowledge (expressed or implied) of the responsibilities for fencing and legal advice should be sought in this respect, if required. Pinders assumes that such boundaries show the true extent of the property and that there are no potential or existing boundaries or other disputes or claims outstanding. Site areas are not measured and are as advised to Pinders. They are not derived from a physical site survey and are approximate unless otherwise indicated. Unless otherwise stated, any measurements noted are carried out in accordance with the Joint Code of Measuring Practice issued by the Royal Institution of Chartered Surveyors and the Incorporated Society of Valuers and Auctioneers. (e) Environmental Matters Pinders has not carried out, nor has it commissioned, a site investigation, geographical or geophysical survey and therefore can give no opinion or assurance or guarantee that the ground has sufficient load bearing strength to support the existing constructions or any other construction that may be erected upon it in the future. Pinders cannot give any opinion or assurance or guarantee that there are no underground mineral or other workings beneath the site or in the vicinity nor that there is any fault or disability underground. It is not possible for Pinders, therefore, to certify that any land is capable of further development or redevelopment at a reasonable cost for the use for which there is permission. Unless otherwise stated, we are not aware of the content of any environmental audit or any other environmental investigation or soil survey which may have been carried out on the property and which may draw any attention to contamination or the possibility of any subsequent contamination. In our undertaking we will assume that no contaminative or potentially contaminative uses have ever been carried out in the property. We have not carried out an investigation into past or present uses, either of the property or of any neighbouring land, to establish whether there is any potential for contamination to the subject property from these uses or sites, and have therefore assumed that none exist. Should it be established subsequently that any contamination exists at the property or on any neighbouring land, or that the premises have been or are being put to a contaminated use, this might reduce the values now reported. (f) Defamation This Report has been prepared in good faith on the basis of enquiries made and information supplied to us. We reserve the right to claim qualified privilege in respect of any part of this Report should the contents be subsequently challenged by a party claiming to be aggrieved at anything stated herein. (g) Generally Sections 12 to 16 of the Supply of Goods and Services Act 1982 (or any statutory enactment thereof for the time being in force) are hereby excluded. Notwithstanding what we have said above, this Report must be treated at all times as confidential to the body or person to whom it is addressed. Neither Pinders Professional & Consultancy Services Limited nor its servants or agents can accept any responsibility whatever for loss and damage of whatsoever nature and howsoever arising in the event of the contents of this Report being copied, disclosed, distributed or published in any manner to any other person, without prior reference to us. Valuations may be relied upon for the stated purpose as at the date specified. In normal market conditions the value may not change materially in the short term (approximately 3-6 months). However, the property market is constantly changing and is susceptible to many external factors which can affect business confidence. If any reliance is to be placed upon the valuation following any changes which could affect business confidence, then further consultation is strongly recommended. In the case of properties normally sold and valued as operational entities, all items of equipment normally associated with such a property are assumed to be owned outright and are included within the valuation unless otherwise specified. Value added tax, taxation, grants and allowances are not included in capital and rental values as, unless otherwise specified in the report, these are always stated on a basis exclusive of any VAT liability even though VAT will in certain circumstances be payable. It is assumed for the purposes of valuation that any potential purchaser is able to reclaim VAT, unless otherwise stated. Unless otherwise specified no account is taken of any existing or potential liabilities arising for Capital Gains or other taxation or as a result of grants or capital allowances. In the event of a dispute arising in connection with a valuation or the contents of the Report, unless expressly agreed otherwise in writing, Pinders Professional & Consultancy Services Limited and the Client will submit to the jurisdiction of the British Courts only. This will apply wherever the property or Client is located, or the advice provided. Pinders shall be treated as "Independent Valuers" and unless stated to the contrary are deemed to be "External Valuers" with no other current or presently foreseeable fee earning relationship concerning the subject property and/or business apart from the valuation fee. Pinders will disclose to the best of its knowledge previous inspections undertaken. Pinders is not however able to disclose any present or previous relationship with any of the interested parties, contrary to the requirements of the Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors. (h) Valuations The valuations provided will be made on the assumptions stated within the Report and/or this Appendix in respect of the individual subject business/property, unless otherwise agreed, on whichever of the following or other bases as have been agreed between Pinders and the Client, such bases where applicable to be as defined or referred to in the Appraisal and Valuation Standards of The Royal Institution of Chartered Surveyors. The valuations provided are for the value of the business/property as described. No account has been taken of any special tax or other inducement or liability which may arise as a result of any transaction in contemplation nor of normal costs involved in the execution of such a transaction. The full definitions of the valuations provided in the Report are set out overleaf: If the Report contains other valuation bases, these are as specifically requested by the Client with our advice identified within the Report to be on a basis not recommended by the Royal Institution of Chartered Surveyors, and provided for guidance purposes only.

Reference

Page 34 of 36

DEFINITIONS OF VALUATIONS Market Value (MV) The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Opinions of Market Valuation can be provided in accordance with special assumptions which are indicated by the client. These assumptions will be clearly stated within the body of the report.

Market Value with special assumptions

Interpretive Commentary, as published in International Valuation Standard 1. 3.2 3.2.1 The term property is used because the focus of these Standards is the valuation of property. Because these standards encompass financial reporting, the term asset may be substituted for general application of the definition. Each element of the definition has its own conceptual framework. 'The estimated amount ...' Refers to a price expressed in terms of money (normally in the local currency) payable for the asset in an arm's-length market transaction. Market Value is measured as the most probable price reasonably obtainable in the market at the date of valuation in keeping with the Market Value definition. It is the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of Special Value '... a property should exchange ...' Refers to the fact that the value of an asset is an estimated amount rather than a predetermined or actual sale price. It is the price at which the market expects a transaction that meets all other elements of the Market Value definition should be completed on the date of valuation. '... on the date of valuation ...' Requires that the estimated Market Value is time-specific as of a given date. Because markets and market conditions may change, the estimated value may be incorrect or inappropriate at another time. The valuation amount will reflect the actual market state and circumstances as of the effective valuation date, not as of either a past or future date. The definition also assumes simultaneous exchange and completion of the contract for sale without any variation in price that might otherwise be made. '... between a willing buyer ...' Refers to one who is motivated, but not compelled to buy. This buyer is neither over-eager nor determined to buy at any price. This buyer is also one who purchases in accordance with the realities of the current market and with current market expectations, rather than on an imaginary or hypothetical market which cannot be demonstrated or anticipated to exist. The assumed buyer would not pay a higher price than the market requires. The present asset owner is included among those who constitute 'the market'. A Valuer must not make unrealistic assumptions about market conditions or assume a level of Market Value above that which is reasonably obtainable. '... a willing seller ...' Is neither an over-eager nor a forced seller prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in the current market. The willing seller is motivated to sell the property at market terms for the best price attainable in the (open) market after proper marketing, whatever that price may be. The factual circumstances of the actual asset owner are not a part of this consideration because the 'willing seller' is a hypothetical owner. '... in an arm's-length transaction ...' Is one between parties who do not have a particular or special relationship (for example, parent and subsidiary companies or landlord and tenant) which may make the price level uncharacteristic of the market or inflated because of an element of S pecial Value.(see para 3.1. above) The Market Value transaction is presumed to be between unrelated parties each acting independently. '... after proper marketing ...' Means that the asset would be exposed to the market in the most appropriate manner to effect its disposal at the best price reasonably obtainable in accordance with the Market Value definition. The length of exposure time may vary with market conditions, but must be sufficient to allow the asset to be brought to the attention of an adequate number of potential purchasers. The exposure period occurs prior to the valuation date. '... wherein the parties had each acted knowledgeably and prudently ...' Presumes that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of the asset, its actual and potential uses and the state of the market as of the date of valuation. Each is further presumed to act for self-interest with that knowledge and prudently to seek the best price for their respective positions in the transaction. Prudence is assessed by referring to the state of the market at the date of valuation, not with benefit of hindsight at some later date. It is not necessarily imprudent for a seller to sell property in a market with falling prices at a price which is lower than previous market levels. In such cases, as is true for other purchase and sale situations in markets with changing prices, the prudent buyer or seller will act in accordance with the best market information available at the time. '... and without compulsion' Establishes that each party is motivated to undertake the transaction, but neither is forced or unduly coerced to complete it. Market Value is understood as the value of an asset estimated without regard to costs of sale or purchase, and without offset for any associated Taxes.

3.2.2

3.2.3

3.2.4

3.2.5

3.2.6

3.2.7

3.2.8

3.2.9 3.3

Reference

Page 35 of 36

APPENDIX COPY OF CLIENT INSTRUCTION

Reference

Page 36 of 36