operating and financial review of - domestic & general

OPERATING AND FINANCIAL REVIEW OF THE PRO FORMA CONSOLIDATED FINANCIAL

STATEMENTS (UNAUDITED) OF GALAXY FINCO LIMITED

(Registered in Jersey No. 113706) FOR THE YEAR ENDED 31 MARCH 2015

TABLE OF CONTENTS

PAGE PRESENTATION OF FINANCIAL INFORMATION 1

RISK FACTORS 3 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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BUSINESS 35 MANAGEMENT 53 PRINCIPAL SHAREHOLDERS 55 NON-GAAP FINANCIAL MEASURES 56 FORWARD-LOOKING STATEMENTS 60 CERTAIN DEFINITIONS 62 PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE YEAR ENDED 31 MARCH 2015

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CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015

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PRESENTATION OF FINANCIAL INFORMATION

Financial Information The Issuers are holding companies formed for the purpose of facilitating Galaxy Bidco Limited’s

acquisition of Domestic & General Group Holdings Limited (the “Acquisition”) as described in the offering memorandum of Galaxy Bidco Limited and Galaxy Finco Limited dated October 24, 2013.

On December 19, 2013, the Acquisition of Domestic & General Group Holdings Limited by Galaxy Bidco Limited, the Senior Secured Notes Issuer, was completed.

Galaxy Finco Limited is required to prepare consolidated financial statements. The actual results of Galaxy Finco Limited prepared in accordance with IAS 1 Presentation of Financial Statements do not give meaningful operational information due to the timing of the Acquisition. On a voluntary basis, pro forma financial information has been prepared to assist in understanding the underlying trading performance of the business.

The pro forma consolidated financial statements of Galaxy Finco Limited for the year ended March 31, 2015 included in this financial report have not been prepared in accordance with IAS 34 but in accordance with the basis of preparation described therein, utilising accounting policies consistent with those applied in the consolidated financial statements of Galaxy Finco Limited for the year ended March 31, 2015.

The financial information discussed within this operating and financial review has been prepared on a pro forma basis in accordance with the basis of preparation as described in the pro forma condensed consolidated interim financial statements of Galaxy Finco Limited for the year ended March 31, 2015 included herein.

The pro forma condensed consolidated interim financial statements of Galaxy Finco Limited for the year ended March 31, 2015 should be read in conjunction with the consolidated financial statements of Galaxy Finco Limited for the year ended March 31, 2015.

Refer to the section entitled “Certain Definitions” herein for a list of terms and abbreviations used throughout this operating and financial review.

Non-GAAP Financial Measures In this operating and financial review we present certain financial measures that are not required

by or presented in accordance with IFRS, including “Adjusted EBITDA”, “Underlying Revenue”, “Underlying Operating Profit”, “Net Working Capital”, “Free Cash Flow” and “Adjusted Cash Flow Available for Debt Service”, because we believe they provide investors with useful additional information to measure our performance (in the case of Adjusted EBITDA, Underlying Revenue and Underlying Operating Profit) or liquidity (in the case of Net Working Capital, Free Cash Flow and Adjusted Cash Flow Available for Debt Service).

Refer to the section entitled “Non-GAAP Financial Measures” herein for a description of these items.

Information Regarding Forward-Looking Statements

This operating and financial review includes “forward-looking statements”, within the meaning of the U.S. securities laws and certain other jurisdictions, based on our current expectations and projections about future events.

All statements other than statements of historical facts included in this operating and financial review, including, without limitation, statements regarding our future financial position, risks and uncertainties related to our business, strategy, capital expenditures and our plans and objectives for future operations, may be deemed to be forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to in the sections entitled “Forward-looking statements” of this operating and financial review or in the Operating and Financial Review of the Pro Forma Consolidated

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Financial Statements (Unaudited) of Galaxy Finco Limited for the year ended 31 March 2015, or in the offering memorandum, including those set forth under the sections thereof entitled “Risk Factors”.

Presentation Rounding adjustments have been made in calculating some of the financial information included in

this operating and financial review. Figures shown as totals in some tables and elsewhere may not be exact arithmetic aggregations of the figures that precede them.

Cross reference In certain areas reference has been made to the “offering memorandum”. In all cases, this refers

to the offering memorandum of Galaxy Bidco Limited and Galaxy Finco Limited dated October 24, 2013.

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RISK FACTORS

An investment in the Senior Secured Notes or the Senior Notes involves a high degree of risk. Before purchasing the Senior Secured Notes or the Senior Notes, you should carefully consider the risk factors described below, as well as the other information contained in this operating and financial review and the offering memorandum dated October 24, 2013. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are not aware or that we currently believe are immaterial may also adversely affect our business, financial condition, results of operations and prospects. If any of the possible events described below were to occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. If that happens, this could have a negative effect on the trading price of the Senior Secured Notes and the Senior Notes, and we may not be able to pay interest or principal on the Senior Secured Notes or the Senior Notes, respectively, when due, and you could lose all or part of your investment.

This operating and financial review and the offering memorandum also contain forward-looking

statements that involve risks and uncertainties. See “Forward-Looking Statements”. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks described below and elsewhere in this operating and financial review and in the offering memorandum.

Risks Relating to Our Business and Industry

We derive the majority of our revenue through arrangements with Original Equipment Manufacturers (“OEMs”) and retailers. As a result, our operations, revenues and profitability would be adversely affected if we failed to maintain our existing relationships including financial terms, if our OEM or retailer partners moved to manage appliance care in-house or if we failed to win contracts with partners.

We derive the majority of our business through arrangements with OEMs and retailers. Our business model in particular focuses on developing and maintaining strong relationships with our OEM partners, which provide the core channel for our sales in the United Kingdom. For example, in fiscal year 2015, Post Point of Sale (“PPoS”) sales, which are primarily OEM-sourced sales, accounted for 75% of our total sales, as compared to 25% for retailer-sourced sales. There can however be no assurance that our OEM and retailer partners will not at some point in the future move to manage appliance care in-house or with competitors or that OEMs will not alter the terms of their manufacturer guarantee or the provision of equipment or services to their customers, for example by extending the period during which customers may claim a free repair or replacement or providing free equipment or services, each of which may deprive us of our core marketing channels, result in significant sales declines, and substantially affect our business, financial condition, results of operations and cash flows.

Our ability to gain and maintain relationships with OEMs and retailers depends on a variety of

factors, including, among other things, the commission and marketing fees we are willing to pay them, the quality of our services, our reputation and the quality of services and reputation of specialist appliance care providers generally. Although our OEM and retailer partners typically source extended appliance care schemes from a sole provider, they usually apply a competitive process in their selection and review their existing arrangements from time to time, usually annually, and sometimes by means of a tender process. While most new business customer sales are based on long-term partner contracts, we have agreed with some of our business partners to contractual arrangements which could be terminated on relatively short notice. If we are not able to agree with our partners commission and marketing fees, or if they determine that we do not meet their needs or those of their customers, including as a result of customer dissatisfaction or negative press coverage relating to us or appliance care providers generally, our relationships with our partners could be impaired or jeopardized, resulting in our inability to maintain or renew our existing contracts and distribution channels on substantially equivalent financial terms. These or other circumstances resulting in the loss of contracts with partners, or the renegotiation of contracts with partners on less favourable financial terms, would significantly impact our business and adversely affect our financial condition, results of operations and cash flows.

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Direct debit form of payment, a key driver of our renewal rates, may be subject to regulatory or public scrutiny.

Renewal rates are driven by the increasing percentage of customer payments by direct debit on plans which renew automatically. There has been increasing scrutiny of direct debit programs of service providers generally, including our programs, by consumer advocates and consumer protection regulators, which may result in regulatory restrictions or adverse publicity, each of which may impair our ability to maintain our direct debit auto-renewals and lead to a reduction in our renewal rates. Our Plan Renewal Rates, which drive a significant portion of our sales, are significantly higher for our UK OEM plans (approximately 77.7% in fiscal year 2015) than for our UK retailer appliance care plans (approximately 11.9% in fiscal year 2015). Margins for renewals are higher than margins for new products, because of the significant upfront investment and acquisition costs generally involved in the sales of new products, which makes renewals particularly important to our profit generation. In the event that renewal rates decline or we are not able to continue to automatically renew customers who pay by direct debit, our revenues, financial condition, results of operations and cash flows may be adversely affected.

A limited number of partners account for a significant proportion of our sales volumes, and our revenue and profits could decrease significantly if we lost one or more of these partners.

We derive a substantial portion of our revenue from appliance care programs run in conjunction with a limited number of business partners. For example, our five largest partners during fiscal year 2015 accounted for approximately 46% of our revenue, with Indesit and Sky accounting for 19% and 16%, respectively. As a result, it is critical for our business that we maintain close relationships with our core partners. Deterioration in these relationships or the termination of contractual arrangements with our principal business partners (for example our contract with Media Saturn Holdings Germany was terminated on February 26, 2014 with effect from August 2014) could lead to a material decline in sales, revenues, profitability and cash flows and impair our business and reputation. Furthermore, a financial failure or insolvency of one of our business partners (such as Comet and Jessops in Q3 of fiscal year 2013) could result in a loss of future business, as well as the loss of the related repair network and source of parts for future repairs, which may increase our repair and replacement costs. In addition, certain agreements with our partners contain limited change of control provisions that could have been triggered by the Acquisition or further changes of control, which could have a material adverse effect on our business, financial condition and results of operations.

Our international expansion depends on our ability to successfully replicate our UK business model and adapt to different regulatory landscapes, customers’ propensity to buy extended appliance care products and responsiveness to various marketing strategies.

Our strategy in our non-UK markets is to further develop our relationships with retailers and export our OEM model to drive PPoS sales in selected foreign markets. Most of our international operations are still developing and, therefore, it may take a substantial amount of time before (i) we establish strong relationships with channel partners, (ii) our products start generating revenue, (iii) renewals, a key driver of our total sales and profit, increase and (iv), as a result of these and other circumstances, we expand our revenue base and are consistently profitable in the selected foreign markets in which we choose to operate. In order to establish ourselves in a new market, we are required to engage in significant upfront and ongoing investments, which may not ultimately lead to a stable and mature business platform if our expansion strategy is unsuccessful. Additionally, our international expansion strategy is enhanced by building and maintaining critical mass through relationships with retailers, which are more price sensitive and with whom our relationships are less entrenched than with OEMs. For example, as previously disclosed, our contract with Media Saturn Holdings Germany was terminated on February 26, 2014 with effect from August 2014. If we are unable to transition to an OEM-based business in a market, our earnings in that market may be exposed to the higher volatility of the retail sector. There can be no assurance that we will succeed in expanding internationally. As we establish our footprint in new markets, we may face significant local competition, differences in the regulatory landscape, including, for example, in the characterization of our products or the application of privacy law, or experience low propensity of customers to buy extended appliance care products or low responsiveness to various marketing strategies or delays in strengthening our sales channels and launching locally tailored appliance care products. As a result, there can be no assurance that we will succeed in establishing our business in a given market, or that our business model will translate across geographical markets. Failure to drive expansion in our non-UK markets may impair our growth, resulting in misallocation of

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resources and time of our management, and could have a material adverse impact on our business, financial condition, results of operations and cash flows.

In identifying international markets to replicate our OEM-focused model, we screen potential

countries based on a number of key criteria, including, among other things, the geographic focus of our OEM business partners, the local legal and regulatory environment and banking system, the development of customer direct marketing techniques and the potential for our operations to develop in a similar way to the United Kingdom. However, there is no guarantee that we will be able to establish a successful business in our international markets as extended appliance care product penetration may not reach UK levels, the PPoS sales channel may remain underdeveloped or retailers’ Point of Sale (“PoS”) channels, which traditionally have been the prevailing channel for extended appliance care product sales in a number of international markets may grow their dominance. In addition, in the majority of the international markets in which we have selected to expand, including Germany, France, Spain, Austria, Belgium, Ireland, Poland and Portugal, our appliance care products are characterized as insurance products. We are also in the process of setting up insurance business in Italy. As a result, as we expand internationally, our insurance business may account for a gradually bigger proportion of our overall business, sales, revenues and Adjusted EBITDA, increasing the proportion of our business that is subject to insurance regulations over conduct and capital requirements, including the application of the Insurance Groups Directive, and impacting cash available to service debt (see “—The minimum capital requirements of our insurance business may change or become more onerous”), which may limit operational flexibility or increase costs.

Our Regulated Business is subject to extensive regulation. In addition, legal and regulatory changes or actions could impose more onerous controls on our business or subject our Non- Regulated Business to new regulations.

Our Regulated Business is subject to a variety of regulatory capital and conduct regulations in the jurisdictions in which we operate. The regulations issued by UK, EU, Australian and local regulatory agencies can be complex and subject to potentially differing or conflicting interpretations or changes or may not have yet been fully developed or clarified through implementing regulations or guidance. For example, in the United Kingdom DGI is authorised and prudentially regulated and supervised by the Prudential Regulatory Authority (“PRA”) and regulated for conduct purposes by the Financial Conduct Authority (“FCA”). See “Business—Regulation”. There can be no assurance that regulators, such as the FCA and PRA, will interpret applicable law and regulations in the same way we do in relation to past, current or future regulatory matters which affect our business. If a UK, EU, Australian or local regulatory agency were to determine that one of our insurance branches did not comply with applicable regulations, we could be subject to various potential administrative measures and remedies, including, among other things, monetary penalties, restrictions on our ability to operate in the jurisdiction in question or the enforcement of other sanctions, such as the return of a portion or all relevant customer fees and redress. Any such measures and remedies would require the commitment of significant management time and resource and could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.

We are also subject to regulatory review from time to time, including in connection with market

surveys, information gathering, thematic reviews and regulatory visits and as such are exposed to the risk that as a result of market developments generally, trends in the industry in which we operate or our business and operations specifically or the views of relevant regulators on our systems and controls and the level of compliance with regulatory requirements, we may become subject to more frequent and aggressive regulatory investigations and proceedings or regulatory actions, changes to assert supervision or control over our business and other sanctions which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Regulatory changes could impose higher or more complex rules, increase operating costs or make products uneconomical. Regulators’ decisions to impose penalties or sanctions generally take into account any past history of regulatory issues, such as complaint handling breaches or failures to treat customers fairly.

In addition, we do not categorize our service plans as contracts of insurance. In our core UK

market, there is no statutory definition of what constitutes a “contract of insurance”. Although the FSA (previously) and the FCA issued guidance designed to help identify “contracts of insurance”, there is no assurance that the law will not change or that the regulatory interpretation or environment will not change in the future with the effect that our service plans may be deemed to be insurance products or be otherwise subject to additional regulation. In such an event, our Non-Regulated Business may

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become partially or totally regulated as an insurance business or we may have to alter our operations or sales processes, which would further restrict our operational flexibility by increasing costs (including in certain circumstances a net increase in indirect tax costs), expanding our reporting requirements, and subjecting us to incremental regulatory capital, thereby reducing Adjusted Cash Flow Available for Debt Service. Additionally, if our Non-Regulated Businesses were to become part of our Regulated Business, the Guarantees and Collateral in respect of these entities would be released, which would substantially decrease the credit support for the Notes. All our businesses are required to comply with laws, regulations and codes of practice covering various aspects of our activities. Applicable laws, regulations and codes of practice may change or be enhanced from time to time and future developments may impose additional constraints or controls on our business, operations and activities. For example, statutory consumer rights in respect to new appliances vary from country to country depending on local laws and regulations and may offer consumers varying rights and remedies against retailers or manufacturers in the event that an appliance does not meet the required quality standards. Similarly, the interpretation and implementation of consumer protection laws might shift over time and our business conduct, selling practices, customer documentation or operations might become subject to greater regulation or restrictions. The UK government is implementing the European Consumer Rights Directive and introducing legislation to harmonize existing EU and UK laws and introduce additional consumer rights. It has also introduced changes to the consumer protection regime including the establishment of a new Competition and Markets Authority which will inherit the OFT’s consumer enforcement powers. If the relevant laws, regulations, codes of practice or regulators’ practice were to change to offer consumers greater rights and remedies, or place new or enhanced obligations or restrictions on us or our product offering, our business, financial condition, results of operations and cash flows could be adversely affected. Additionally, in the United Kingdom, the regulation of consumer credit (including licensing and reporting) moved from the UK Office of Fair Trading (“OFT”) to the FCA on April 1, 2014. Both DGI and DGS hold interim Consumer Credit licences and, as such, from 1st April 2014, DGS would be regulated by the FCA in respect of any consumer credit activity it may choose to undertake (although we consider that DGS is not currently undertaking such activity). If we were required to offer consumer credit terms as a result of changes to consumer credit laws and regulations or their interpretation and implementation, this may subject us to incremental regulation and impact our business, financial condition, results of operations and cash flows.

In our international markets, increased focus or activity by local regulators may also affect our

business, financial condition and reputation. For example, in Australia, the Australian Competition and Consumer Commission (“ACCC”) raised an issue concerning extended warranty marketing materials provided to customers of one of our OEM business partners and subsequently commenced legal action against our business partner and our Australian subsidiary in respect of such materials. Those proceedings were settled, with agreed orders being made on 27 January 2015, resulting in the payment by both our business partner and our Australian subsidiary of penalties and contribution towards the ACCC’s legal costs.

The compliance of our retail partners’ staff with the relevant legal and regulatory rules when

selling appliance care products on our behalf is more difficult for us to monitor at PoS than it is at our internal call centres. Similarly, sales of our appliance care products made by our business partners through their own or outsourced call centres and staff (e.g., repair engineers) are also more difficult to control or monitor and may lead to breaches of rules and regulations for which we are held liable. Regulatory actions or investigations based on breaches by our business partners’ staff when selling appliance care products on our behalf could cause us to suffer significant reputational harm, which could have a material adverse effect on our business, financial condition and results of operations.

Additionally, our business partners may elect to transfer to insurance products instead of service

plans due to their preferences. For example, in 2011, Sky elected to transfer its appliance care program to insurance (and consequently the Sky business moved from our Non-Regulated Business to DGI). We have successfully migrated the business to DGI, which has led to an increase in our capital requirements. Additionally, the revenue, earnings and cash flow attributable to the Sky relationship (representing 15% of our revenue in fiscal year 2014) is now recognised in the Regulated Business and subject to the regulatory controls and restrictions on distributions discussed below in “—The minimum capital requirements of our insurance business may change or become more onerous.”.

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The minimum capital requirements of our insurance business may change or become more onerous.

Minimum capital requirements are designed to ensure the adequacy of statutory capital reserves in relation to investment and insurance risks. These requirements are also used as an early warning tool to identify companies that may be weakly-capitalized for the purpose of initiating regulatory action. As of March 31, 2015, DGI’s minimum capital requirement for regulatory purposes was £47.8 million and the total capital actually held was £72.4 million. If the qualifying regulatory capital of DGI falls below the required levels or if the required capital levels are increased, we may become subject to different degrees of regulatory actions, be required to contribute additional capital to our Regulated Business and, if we fail to do so, we may become insolvent or our assets may be subject to seizure by regulators. Additionally, we might be unable to make distributions from our Regulated Business and, consequently, our cash available for debt service might become insufficient to allow us to service our indebtedness.

The Solvency II European Directive (2009/138/EEC) adopted on November 25, 2009

(“Solvency II”) is the new prudential regime for insurance and reinsurance undertakings in the European Union which will replace the current UK regulatory regime on 1st January 2016. UK businesses are expected to implement some aspects of Solvency II before this date. The aim of Solvency II is the harmonization of prudential requirements for insurers and reinsurers across Europe, eliminating the most serious differences between the laws of the various member states. Solvency II sets out a new framework for calculating the solvency capital requirements applicable to insurance companies. Assessing the potential impact of Solvency II on our insurance business’s capital requirements involves the application of expert judgment, the projection of future business results and the use of estimates and alternative scenarios. As related requirements are finalized by regulators we may need to adjust our implementation program and reassess the level of capital that DGI is required to hold in order to comply with the new framework. The efforts required to comply with the new Solvency II regulations may increase our operating costs. Any resulting increase in our minimum capital requirements could reduce our profitability and future cash flows available to service our indebtedness.

Additionally, if due to changes to laws and regulations or their interpretation and implementation,

partner demand or other regulatory action, we were required to reclassify our Non-Regulated Business, in whole or in part, as insurance business then our regulatory capital requirements could increase significantly, which could in turn negatively affect our solvency position, results of operations and ability to service indebtedness.

We operate in a competitive industry, and there can be no assurance that we can continue to maintain or grow our market share successfully.

We face strong competition in the markets in which we operate. Our UK competitors include The Warranty Group, Dixons Carphone, British Gas, SquareTrade, Warranty Direct, Assurant and others. Although we are a leading provider of appliance care services in the United Kingdom for large appliances, our competitors compete with us to varying degrees in the channels we use (PoS, PPoS and Point of Need (“PoN”)), in the products that we sell (Single Appliance Plan, Multiplan and Repair & Protect) and the goods that we service (white, brown and grey goods and heating). Some of our competitors may have a large customer base and the ability to engage more resources, including a significant advertising budget, than we do. For example, British Gas has a boiler and home emergency focus and has offered white goods multi-appliance cover as part of its broad range of products for many years. In addition, in the United Kingdom, PoS retailers not using our products, who account for the majority of extended appliance care sales, enjoy a persisting competitive advantage. This retailer advantage is even more pronounced in our international markets. PoS retailers can leverage their direct contacts with customers to market extended appliance care products more effectively than specialist appliance care providers. Additionally, if our OEMs elect to provide extended appliance care services internally, our business would be substantially damaged. Our ability to compete effectively depends on a number of factors, including, among other things, our access to data acquisition and capture techniques, our sales processes and product design to support our business model, our marketing capability and our customer service. There can be no assurance that we can continue to maintain or grow our market share successfully in the future.

From time to time, the UK appliance care industry has been the subject of anti-trust enquiries or

investigations by the Competition Commission or the OFT, particularly in respect of PoS retail sales of

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warranties. There is little official statistical information on the size of the UK appliance care market and there is no assurance that anti-trust regulators, in the context of an enquiry or otherwise, would take the same view as we do on the definition and size of the appliance care market and our market share.

In addition, price transparency initiatives may increase competitive pressure. For example, a

new UK price comparison website for extended warranties in domestic electrical goods was set up in July 2013 following a 2012 OFT market study. The OFT market study concluded that while there had been some market improvements in recent years, several competition concerns remained, in particular a persisting retailer PoS advantage and limited ability of the consumer to select among a range of appliance care products. This led to the commitment to establish an independently operated, non-transactional price comparison website by the three largest UK retailers of electrical appliances Dixons (now Dixons Carphone), Argos and Comet (prior to its administration). The website went live in May 2013 and we, along with other appliance care providers, volunteered to provide pricing information to the website. In addition, the FCA is currently considering proposals requiring insurers to report and publish product value data. Our participation in these and other price transparency initiatives may however increase competitive pressure among extended appliance care providers and adversely affect our pricing, results of operations and cash flows. If regulators sought to impose additional anti-trust measures or regulations on the UK appliance care market in the future, which may affect our exclusive arrangements with our business partners, our collection and use of customer data and the information we must provide to customers, this could have an adverse effect on our business, financial condition and results of operations.

Our industry depends in part on consumer demand and availability of credit, and may be affected by recession, unfavorable economic cycles, or changes in taxation.

Sales are partly related to consumer demand for domestic electrical goods, which is subject to fluctuations in the availability of credit, changes in tax and interest rates, strength of the housing market, and the degree of stability in the political and economic environment in our geographical markets, among other factors. In particular, a worsening economic climate can affect consumer confidence and result in decreased demand for domestic electrical goods and, by extension, our appliance care service products. In addition, appliance care demand is sensitive to so-called “headline” prices: consumers weigh the cost of appliance care services against the purchase price of the purchased appliance. Any decrease in appliance prices could, therefore, lead to price pressure on our products and significantly impair our profitability and cash flow. Further, negative publicity about appliance care providers or extended warranties in general, including by regulators or consumer groups, can affect consumer demand for our appliance care service products.

Should indirect taxation increase, demand for our product may reduce if prices were to increase. For any incremental indirect taxation cost that the business absorbed would have a negative effect on profit and cash flow. Similarly, incremental business taxation would have a negative effect on profit after tax and cash flow.

Disruptions in information technology or a failure to maintain the security, confidentiality or privacy of sensitive data residing on our systems could harm our business.

Compliance with privacy laws and proprietary protection of our customer data are critical to our ability to analyse data and behavior and to market our appliance care products effectively. Privacy of customer data is a key focus of regulators and other interested persons. Regulatory scrutiny or actions involving our practices with regard to, the collection, storage, use, disclosure, or security of personal information or other privacy related matters, even if unfounded, could damage our reputation and adversely affect operating results. Our business partners are also increasingly seeking to impose their own information security standards and policies in respect of customer data held and processed by us, which may lead to increased costs. In addition, the application of consumer and data protection laws in Europe, Australia and elsewhere may develop or change. The application of these laws differs from country to country and it is possible that these laws may be applied in a manner that is inconsistent with our data practices. Data protection laws are also subject to change. For example, the European Commission’s proposed reform of the EU’s 1995 data protection rules, announced in 2012, are still subject to debate and revision and there is uncertainty as to the final rules which will be adopted, the effect on businesses and the costs of implementation. If the reforms were to be adopted in their current draft form, they would have a material impact on our operations and our marketing activities. While we strive to comply with all applicable data protection laws and regulations, as well as our own privacy policies, the failure or perceived failure to comply may result in inquiries and other proceedings

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or actions against us by government agencies, or could result in the loss of customers and key partners.

The continuous and accurate operation of our IT systems is also critical to the operation of our

business. Failure or poor performance of IT systems would create a rapid backlog in operational processes and potential major customer and business partner disruption which may be difficult to recover without adverse reputational, regulatory or financial impacts. In addition, our IT systems may not be developed, expanded, updated, redesigned, replaced or enhanced fast enough or flexibly enough to meet the demands of the business, our business partners or customers, which could have a material adverse effect on our business, financial condition, results of operations and reputation.

In addition, cyber-attacks may result in unauthorised parties obtaining access to our or our

customers’ data. Outside parties may attempt to fraudulently induce employees, users, or business partners to disclose sensitive information in order to gain access to our or our customers’ data. Our security measures may also be breached due to employee error, malfeasance, or otherwise. Any such breach or unauthorised access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in our services that could potentially have an adverse effect on our business. Because the techniques used to obtain unauthorised access, disable or degrade service, or sabotage systems change frequently and often are not recognised until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, operational capability and regulators’, partners’ and customers’ perception of the effectiveness of our security measures could be harmed and we could lose customers and our main channels of distribution, as well as become subject to fines or remedial actions.

If actual repair claims exceed our repair costs provision or if changes in the estimated level of future claims are necessary, our results of operation and financial condition can be materially and adversely affected.

We incur repair or replacement costs to settle claims made by our customers under our appliance care plans and our results of operations are exposed to the risk that the frequency and severity of claims and repairs could be greater than expected and reflected in our pricing. While we have extensive experience of breakdown rates and repair or replacement costs, there is always a risk that a failure of a product, model or component in a number of different products or customer behaviors may expose the business to significantly higher costs.

We account for the costs of paying all claims and repairs incurred up to but not paid at the

balance sheet date, whether reported or not, together with related claims and repair handling expenses, and estimate our liability as the expected undiscounted ultimate cost of settling all repair costs incurred at the balance sheet date. The provision is based on estimation techniques and assumptions which we periodically review, with any changes in estimates reflected in our income statement as they occur. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Judgments—Claims and Repairs Costs Provision”.

Although our estimates of future claims and repair costs are intended to cover the most likely

expected future expense of repairs and replacement, the actual future claims and repair and replacement costs are inherently uncertain (especially in respect of changing technology, such as mobile phones) and our plans may experience higher claims or more adverse repairs than covered by the deferred income on the related policies, which would render these contracts onerous and adversely affect our results of operations and financial condition. As a result, it may become necessary to seek to adjust customer pricing or plan coverage, renegotiate repair costs or commission & marketing fees with partners, or cease to offer appliance care for certain products, clients or territories, each of which may have a material adverse effect on our business, financial condition, results of operations and reputation. Additionally, we may experience higher than expected repair and replacement costs due to unexpected issues with a particular type or model of appliance, for example as a result of widespread manufacturing defects or design deficiencies. While we would seek to obtain from the manufacturer the additional costs arising from such defects or deficiencies, we may not be able to recover all or any part of the incremental repair and replacement costs associated with manufacturing failures.

In addition, we may be subject to fraud, misappropriation or collusion by customers, employees or

repair agents, which may cause us to incur unjustified payments or costs and may result in actual claims costs exceeding our repair cost provision or payments.

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Our investment portfolio constitutes a significant proportion of our assets.

Our investment portfolio accounted for approximately 15% of our total assets as of March 31, 2015. We have a conservative investment policy, with limited product or counterparty risk, our portfolio consisting of money market investments and deposits with financial institutions as well as investment-grade corporate & government bonds. Following a review of our investment policies, risks and returns, we decided to widen the universe of permitted investments to include investment grade debt securities and we also hold debt securities issued by entities from several European Union countries. We have appointed an external investment manager to run the debt security investments: an independent custodian holds all assets in safe keeping. This may result in us incurring additional risk on our investments. In addition, the performance of our investment portfolio depends in part upon the level of and changes in interest rates, exchange rates, risk spreads, fees paid, market volatility, the performance of the economy in general, the performance of the specific obligors included in our portfolio and other factors that are beyond our control. Changes in these factors can affect our net investment income in any period, and such changes can be substantial. We are exposed to risks related to conducting operations in several different countries.

In addition to our core UK market, we currently operate in Australia, Austria, Belgium, France,

Germany, Ireland, Italy, the Netherlands, New Zealand, Poland, Portugal, Spain and Sweden. As a result, our business is subject to risks related to the differing legal, political, social and regulatory requirements and economic conditions of many jurisdictions. Risks inherent in international operations include the following:

• general economic, social or political conditions in the countries in which we operate could have an adverse effect on our earnings from operations in those countries;

• compliance with a variety of laws and regulations in various jurisdictions may be burdensome and expensive and subject to differing or conflicting interpretation and uncertainty;

• unexpected or adverse changes in laws or regulatory requirements in various jurisdictions may occur;

• withholding taxes or other taxes or royalties on our income, or other restrictions on foreign trade or investment, including currency exchange controls, may be imposed or adopted;

• intellectual property rights may be more difficult to enforce;

• price controls may come into force; and

• difficulties in enforcing agreements and collecting receivables.

Our businesses rely on being able to easily and effectively collect payment from customers, in particular continuous forms of electronic payment such as direct debit entered into by telephone or online. This is dependent on the local banking systems in the various countries in which we operate, customer preference and relevant local laws and regulations.

In addition, since we conduct business in currencies other than pounds sterling but report our

financial results in pounds sterling, we face exposure to fluctuations in currency exchange rates and the global economic environment. A proportion of our operations are in other European countries and Australia. This results in potential exposure to Euro and Australian dollar foreign exchange translation risk. Significant currency or economic fluctuations could expose us to additional risks that could adversely affect our financial condition and results of operations. See also “—Our international expansion depends on our ability to successfully replicate our UK business model and adapt to different regulatory landscapes and customers’ propensity to buy extended appliance care products and sensitivity to various marketing strategies.” If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

We have designed and continue to design our internal controls with the objective of providing

reasonable assurance that (1) our transactions are properly authorised; (2) our assets are safeguarded against unauthorised or improper use; and (3) our transactions are properly recorded and reported, all

10

to permit the preparation of our consolidated financial information in conformity with applicable accounting principles. Any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. Any failure to maintain adequate internal controls or to be able to produce accurate consolidated financial information on a timely basis could increase our operating costs and have a material adverse effect on our business, financial condition and results of operations.

Our success depends on the continued service of certain key personnel and good relations with our workforce.

As at March 31, 2015, we employed over 2,750 people in our operations in the United Kingdom

and abroad. Our employees are not covered by collective bargaining agreements, but many reside in countries in which employment laws provide greater bargaining or other rights to employees than the laws of the United Kingdom. These employment rights may require us to expend greater time and expenses in altering or amending employees’ terms of employment or making staff reductions, which could have a material adverse effect on our business, financial condition and results of operations. Our success also depends in significant part upon the continued service of our directors and senior management. Over the past 18 months a number of new senior management hires have been made, including a new Chief Executive Officer and Chief Financial Officer. The loss of one or more of our key management or operating personnel or the failure to attract and retain additional key personnel, could have a material adverse impact on our business, financial condition and results of operations.

Risks Relating to Our Financial Profile Our substantial leverage and debt service obligations could adversely affect our business and prevent us from fulfilling our obligations with respect to the Notes and the Notes Guarantees.

We cannot guarantee that we will be able to generate enough cash flow from operations to

service our debt obligations. We are a highly leveraged business. As of March 31, 2015, we have total financial indebtedness of £500 million under the Senior Secured Notes and Senior Notes, plus accrued interest of £9.8 million.

The degree to which we are leveraged could have important consequences to Holders of the

Notes offered hereby, including, but not limited to:

• making it difficult for us to satisfy our obligations with respect to the Notes;

• making us vulnerable to, and reducing our flexibility to respond to, general adverse economic and industry conditions;

• requiring the dedication of a substantial portion of our cash flow from operations to the payment

of principal of, and interest on, indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures, or other general corporate purposes;

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

environment and the industry in which we operate;

• placing us at a competitive disadvantage as compared to our competitors, to the extent that they are not as highly leveraged; and

• limiting our ability to borrow additional funds and increasing the cost of any such borrowing.

Any of these or other consequences or events could have a material adverse effect on our ability

to satisfy our debt obligations, including the Notes. Despite our substantial leverage, we may still be able to incur more debt under the Indentures governing the Notes, which could further exacerbate the risk described above.

The terms of each of the Senior Secured Notes Indenture and the Senior Notes Indenture will

permit us to incur substantial additional indebtedness, including increased commitments under the New Revolving Credit Facility Agreement or borrowings under any credit facility that replaces or refinances the New Revolving Credit Facility (a “Credit Facility”) in a maximum aggregate principal

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amount of up to £130 million and certain other secured debt that shares in the Collateral securing the Senior Secured Notes on a pari passu or super priority basis. In addition, the Indentures will allow our non-guarantor subsidiaries to incur additional debt that would be structurally senior to the Notes and will not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined thereunder. If we are able to designate some of our Restricted Subsidiaries (as defined under “Description of Senior Secured Notes—Certain Definitions” or “Description of Senior Notes—Certain Definitions” in the offering memorandum) under the Indentures as Unrestricted Subsidiaries (as defined under “Description of Senior Secured Notes—Certain Definitions” or “Description of Senior Notes—Certain Definitions” in the offering memorandum), those Unrestricted Subsidiaries would be permitted to borrow beyond the limitations specified in the Indentures and engage in other activities in which Restricted Subsidiaries may not engage.

We are subject to restrictive debt covenants that may limit our ability to finance future operations and capital needs and to pursue business opportunities and activities.

Each of the Senior Secured Notes Indenture and the Senior Notes Indenture will restrict, among

other things, our ability to:

• incur or guarantee additional indebtedness and issue certain preferred stock;

• enter into certain sale and leaseback transactions;

• create or incur certain liens;

• make certain payments, including dividends or other distributions, with respect to the shares of such entity;

• prepay or redeem subordinated debt or equity;

• make certain investments;

• create encumbrances or restrictions on the payment of dividends or other distributions, loans or

advances to, and on the transfer of, assets to such entity;

• sell, lease or transfer certain assets, including stock of restricted subsidiaries;

• engage in certain transactions with affiliates;

• consolidate or merge with other entities; and

• impair the security interest for the benefit of the holders of the relevant Notes.

All of these limitations will be subject to significant exceptions and qualifications. See “Description of Senior Secured Notes—Certain Covenants” and “Description of Senior Notes—Certain Covenants” in the offering memorandum. Despite these exceptions and qualifications, the covenants to which we are subject could limit our ability to finance our future operations and capital needs and our ability to pursue business opportunities and activities that may be in our interest.

In addition, we will be subject to the affirmative and negative covenants contained in the New

Revolving Credit Facility Agreement. A breach of any of those covenants or the occurrence of certain specified events will, subject to applicable cure periods and other limitations, result in an event of default under the New Revolving Credit Facility Agreement. Upon the occurrence of any event of default under the New Revolving Credit Facility Agreement, the Majority Lenders (being, subject to certain limitations, lenders under the New Revolving Credit Facility Agreement whose commitments thereunder aggregate at least 50.1% of the total commitments thereunder) could cancel the availability of the New Revolving Credit Facility Agreement and elect to declare all amounts outstanding under the New Revolving Credit Facility, together with accrued interest, immediately due and payable. In addition, a default or event of default under the New Revolving Credit Facility Agreement could lead to an event of default and acceleration under other debt instruments that contain cross-default or cross-acceleration provisions, including the Senior Secured Notes Indenture and the Senior Notes Indenture. If our creditors, including the creditors under the New Revolving Credit Facility, accelerate the payment of amounts owing to them under such other debt instruments, we cannot assure you that our assets and the assets of our subsidiaries would be sufficient to repay in full those amounts, to satisfy all other liabilities of our subsidiaries which would be due and payable and to make payments to enable us to repay the Senior Secured Notes or the Senior Notes, in full or in part. In addition, if we are unable to

12

repay those amounts, our creditors could proceed against any Collateral granted to them to secure repayment of those amounts.

We will require a significant amount of cash to service our debt and sustain our operations. Our ability to generate or raise sufficient cash depends on many factors beyond our control.

Our ability to make principal or interest payments when due on our indebtedness, including the New Revolving Credit Facility Agreement and our obligations under the Senior Secured Notes and the Senior Notes, and to fund our ongoing operations, will depend on our future performance and ability to generate cash, which is subject to general economic, financial, competitive, legislative, legal, regulatory and other factors, as well as other factors discussed in these “Risk Factors”, many of which are beyond our control.

In addition, the subsidiaries in our Regulated Business are not Guarantors and are subject to

significant restrictions on their ability to pay dividends or return capital to entities that are obligors under the Notes in order to make interest and principal payments in respect of our indebtedness. Cash and cash equivalents held by DGI can only be extracted and upstreamed to its direct or indirect parent entities, including for purposes of debt service, to the extent that DGI has sufficient cumulative distributable reserves and the minimum capital requirements continue to be met and our prudential buffer continues to be maintained. The Regulated Business declared and paid dividends to the Non- Regulated Business of £36.5 million in fiscal year 2015 and £46.1 million in fiscal year 2014. Substantially all of the cash and cash equivalents and investments shown on the Group’s balance sheet as of March 31, 2015 are held by the Regulated Business and are subject to these restrictions on distributions.

The New Revolving Credit Facility Agreement provides for a revolving credit facility with

commitments of £80.0 million, which matures on September 18, 2019. At the maturity of these loans, the Senior Secured Notes, the Senior Notes or any other debt which we may incur, if we do not have sufficient cash flows from operations and other capital resources to pay our debt obligations, or to fund our other liquidity needs, we may be required to refinance or restructure our indebtedness. If we are unable to refinance or restructure all or a portion of our indebtedness or obtain such refinancing or restructuring on terms acceptable to us, we may be forced to sell assets, or raise additional debt or equity financing in amounts that could be substantial or the holders of our debt may accelerate our debt and, to the extent such debt is secured, foreclose on our assets. The type, timing and terms of any future financing, restructuring, asset sales or other capital raising transactions will depend on our cash needs and the prevailing conditions in the financial markets. We cannot assure you that we will be able to accomplish any of these measures in a timely manner or on commercially reasonable terms, if at all. In such an event, we may not have sufficient cash or sources of cash to repay all of our debt. In addition, the terms of the New Revolving Credit Facility Agreement, the Senior Secured Notes Indenture, the Senior Notes Indenture and the Intercreditor Agreement may limit our ability to pursue any of these measures.

The Floating Rate Notes and drawings under the New Revolving Credit Facility Agreement will bear interest at floating rates that could rise significantly, increasing our costs and reducing our cash flow.

The Floating Rate Notes and drawings under the New Revolving Credit Facility Agreement will bear interest at floating rates of interest per annum equal to LIBOR, as adjusted periodically, plus a spread. These interest rates could rise significantly in the future. Although we have entered into a swap arrangement relating to the Floating Rate Notes, and we may enter into certain other hedging arrangements designed to fix a portion of these rates, there can be no assurance that hedging will be available or continue to be available on commercially reasonable terms. To the extent that interest rates or any drawings were to increase significantly, our interest expense would correspondingly increase, reducing our cash flow.

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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is based upon the pro forma consolidated financial information of Galaxy Finco Limited and its subsidiaries. It has been extracted from, and should be read in conjunction with, the pro forma consolidated financial statements of Galaxy Finco Limited for the year ended March 31, 2015 included in this financial report. Overview

We are the leading specialist provider of appliance care services for domestic appliances and

consumer electronic products in our home UK market and a leading specialist provider in several of our international markets, with international operations in Germany, Spain, Portugal, France, Italy and Australia. In fiscal year 2015 we generated 79% of our revenues from our UK Division and 21% from our International Division, which includes operations at various stages of development throughout the European Union and Australia.

Appliances covered by our products include white goods (such as washing machines and

refrigerators), brown and grey goods (such as TVs, laptops, satellite systems and mobile phones), as well as heating appliances (such as boilers) and small domestic appliances. These products allow consumers to protect their domestic electrical goods against the cost of repair or replacement in the event of breakdown (including parts, labor and call-out costs) or accidental damage, theft and other associated risks. New appliances are protected by a manufacturer’s guarantee, typically for a period of one year in the United Kingdom or two years in our international markets, as well as statutory remedies against retailers and manufacturers for faulty or sub-standard goods. Our products offer extended cover of repairs or replacement after the manufacturer’s guarantee has expired to ensure that consumers are still protected against breakdowns and to provide benefits in addition to consumers’ statutory rights. Our products can be typically purchased for up to five years initial cover (including the manufacturer’s guarantee period), in the case of new appliances, or for an annual period of cover, in the case of appliances outside the manufacturer’s guarantee period. In both cases, these products can generally be renewed for subsequent annual periods over the life of the appliance. When we sell products with extended periods of cover (i.e., more than a year) we do not book the entire amount of the sales made in the fiscal year as revenue earned in that year. Instead, revenue is recognised over the life of the policy in accordance with our revenue recognition policy.

Our products are sold through several sales channels including through retailers at point-of-sale

(“PoS”), through OEMs post-point-of-sale (“PPoS”) and at point-of-need (“PoN”) following an appliance breakdown after the manufacturer’s guarantee has expired. Customers can purchase our products for single or multiple appliances either during or after the manufacturer’s guarantee period, and they can purchase a single appliance plan when the appliance has broken down with our Repair & Protect product, which offers a repair plus a period of appliance care cover.

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Key Factors Affecting Our Results of Operations

Our results of operations are driven by a combination of factors, which are discussed in more detail below.

Relationships with OEMs

Our business model is centered on our cooperative relationships with our business partners, in particular, OEMs. We are the chosen extended appliance care services partner of major OEMs operating in the United Kingdom and the largest European economies. By collaborating with OEMs, we are able to include in-the-box literature and stickers on their products and thus encourage end customers to register their manufacturer’s warranty over the phone, online or by post. When customers register with us, we capture valuable information about their appliances, establish whether they have or want to purchase an extended appliance care product, gain insight into their purchasing behavior for OEMs and establish a direct relationship with them. We also make use of OEM delivery and repair information to market our products to consumers. We then store this customer data in our database of households and appliances, which allows us to contact the customer at various stages of an appliance’s life cycle to market our protection plans and generate PPoS sales. As at March 31, 2015, our UK database included information on 131 million appliances in 26 million households, approximately half of which are contactable. Our PPoS business is the most profitable for us due to its high retention rates, with 77.7% of our UK PPoS sourced plans renewing in fiscal year 2015. Renewal sales generally have higher margins than new business due to lower customer acquisition costs.

Our OEM relationships are long-lasting as they are underpinned by mutual benefits. Partnering

with us to run an extended appliance care scheme allows OEMs to receive an additional income stream based on appliance care sales we make on their appliances or fees for using their customer data. In addition, OEMs may reduce or avoid the need for in-house expertise and support functions that are non-core aspects of their business. OEMs also receive a stable stream of additional work from the repair volumes we refer to their in-house networks. These elements of income and repair work may, in many cases, represent an important source of their profitability.

Sales

Sales represent amounts invoiced to customers in respect of sales of our appliance care plans

and policies and related support services, net of cancellations and exclusive of value added tax and insurance premium tax (and parafiscal taxes in Spain, Portugal and France). We recognize sales for the full amount of the contract when a customer buys a plan. We do not book the entire amount of sales made during an accounting period as revenue earned in that period. Instead, warranty revenue recognition commences when the plan goes “on risk”. See “—Critical Accounting Estimates and Judgments—Revenue Recognition and Deferred Income”.

Sales to new customers tend to be less profitable than renewals due to the higher acquisition and

administrative costs associated with acquiring new customers, together with the attractive pricing we offer to new customers. In addition, since new business often has a period of manufacturer product

Galaxy Finco Limited

For the year ended March 31,

For the three months ended March 31,

2015 2014 2015 2014

Unaudited (£ millions)


UK Sales 528.8 492.4 140.0 129.1 New Business 159.1 150.8 42.0 38.9 Renewals 369.7 341.6 98.0 90.2 International Sales 122.8 155.5 25.0 37.5 New Business 98.1 130.6 19.0 31.5 Renewals 24.7 24.9 6.0 6.0 Total Sales 651.6 647.9 165.0 166.6

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cover (typically one year in our UK market and two years in our international markets) before revenue is earned on a contract; growth in new appliance sales translates into revenue and Adjusted EBITDA growth with a lag of one to two years. In fiscal year 2015 we recorded sales of £651.6 million, a 0.6% increase from sales of £647.9 million in fiscal year 2014. In the three months ending March 31, 2015 we recorded sales of £165.0 million, a 1.0% decrease from sales of £166.6 million for the three months ending March 31, 2014.

A large majority of sales in our UK Division are generated through 12-month contracts: either

renewals of existing contracts or new annual policies taken out once the manufacturer’s warranty period has terminated. Our UK sales were £528.8 million in fiscal year 2015, a 7.4% increase from UK sales of £492.4 million in fiscal year 2014. Our UK sales growth was attributable to growth in both new business and renewals. In fiscal year 2015 renewals sales were equal to £369.7 million, up from £341.6 million in fiscal year 2014 as a result of stable retention ratios on a growing book of business. Direct debit penetration of UK households, rose from 87% of total UK plan sales in fiscal year 2014 to 89% in fiscal year 2015. New business sales in our UK Division increased to £159.1 million in fiscal year 2015 from £150.8 million in fiscal year 2014 as management strengthened relationships with key clients and continued to pursue Best Practice initiatives.

UK sales for the three months ending March 31, 2015 were £140.0 million, an 8.4% increase on

the three months ending March 31, 2014. New Business increased to £42.0 million in the three months ending March 31, 2015, representing a 7.9% increase on the three months ending March 31, 2014. Renewals were equal to £98.0 million in the three months ending March 31, 2015, representing an increase of 8.6% on the three months ending March 31, 2014, continuing the trends described above.

Our international sales were £122.8m million in fiscal year 2015, a decrease of 21.0% from

international sales of £155.5 million in 2014. The decline is as a result of the cessation of our relationship with German retailer Media Saturn (“MSH Germany”) in August 2014, which contributed sales of £21.1 million in fiscal year 2015, a decrease of 64.5% on sales of £60.2 million in 2014. International sales through OEMs increased from £18.8 million in fiscal year 2014 to £24.8 million in fiscal year 2015. We expect that new business will continue to represent the large majority of sales in our International Division in the foreseeable future, as our international operations are less mature than in the United Kingdom. We anticipate an increase in OEM-sourced new business as we roll out our OEM business model in our international markets by seeking to acquire new partners, increasing registration rates, improving conversion rates of registrations, increasing direct marketing activities, intensifying the marketing of Repair & Protect plans and increasing direct debit penetration rates.

Number of Appliances Protected

We monitor the number of appliances protected under our plans as a key indicator of our performance and the size of our operations as well as to gauge our potential ability to generate future renewals business. The total number of appliances protected at year-end decreased from 22.8 million in fiscal year 2014 to 22.7 million in fiscal year 2015. The number of UK appliances covered at year-end in fiscal year 2015 and fiscal year 2014 is 13.5 million. The number of international appliances protected at year-end decreased from 9.3 million in fiscal year 2014 to 9.2 million in fiscal year 2015, following the cessation of the MSH Germany contract.

Number of Households Served

We monitor the number of households we serve to keep track of customers who have purchased a product from us, organize customer data, develop customer segmentation as part of our marketing processes and tailor our marketing activities accordingly. The total number of households served at year-end in fiscal year 2015 and fiscal year 2014 is 14.8 million. The number of UK households at year-end in fiscal year 2015 and fiscal year 2014 is 7.9 million. The number of international households served at year-end end in fiscal year 2015 and fiscal year 2014 is 6.9 million.

Number of Appliances Protected per Customer

A key aspect of our strategy is to intensify market penetration of our UK Division by increasing the number of appliances we cover for each of our customers. Our multi-plan products are specifically designed to expand the reach of our products across the full range of domestic electrical goods per UK customer. We monitor the average number of appliances protected by our products for each of our UK customers to measure our progress against this strategic objective. The average number of appliances protected by our products per UK customer at the end of the year was 1.53 for fiscal year 2014

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increasing to 1.54 for fiscal year 2015, driven by the implementation of best practices across our OEM partners to maximize receipt of customer data and the step-up in our tailored marketing efforts and cross selling and use of data analytics to acquire new customers. We also monitor the average number of appliances protected by our products for each of our international customers to gauge their propensity to purchase appliance protection and better tailor our marketing initiatives.

International Expansion

International expansion is central to our future growth. We have selected the non-UK markets in which we have decided to strengthen our presence or access for the first time based on a combination of potential OEM demand for our appliance care services and specific characteristics, including applicable legal and regulatory regimes. We have initially built local scale in our new markets through the domestic electrical goods retailer channel to create volume and help establish a repair network. We have then followed up on initial entry with significant investment in our employee base and the development of market intelligence underpinned by the development of strong central management and support as well as continued infrastructure investment in our IT platform. Our top UK OEM partners sell approximately four to five times as many large appliances in our international markets combined than in the United Kingdom and are increasingly recognizing the value of our appliance care proposition. Our International Division has contracts to run appliance care programs in 13 countries for 44 OEMs contracted on an individual or pan-European basis.

Number of Claims Handled / Provisioning for Claims and Repair Costs

The frequency of appliance care product usage generally increases over the life of the appliance

to approximately 50%. Our profitability is affected by the cost of claims made on our products in a given fiscal year. We seek to ensure that our pricing is set to maintain stable repair cost ratios across the life of our plans, to offset the increasing cost of repairs as appliances age. We monitor the number of claims handled each year as a factor driving our historical and potential exposure to customer claims and to estimate our future claims ratios. The number of claims handled increased from 2.8 million in fiscal year 2014 to 3.0 million in fiscal year 2015 in line with business growth.

We make provisions for the expected ultimate cost of settlement of claims incurred in respect of

events that have occurred up to the latest balance sheet date, together with related claims handling expenses. As of March 31, 2015, our claims and repair costs provision amounted to £17.5 million. See “—Critical Accounting Estimates and Judgments—Claims and Repairs Costs Provision”.

Underwriting and Pricing

Our results of operations are exposed to the risk that the frequency and severity of claims and

repairs could be greater than expected and reflected in our pricing. We manage our trading liability risk through the following measures: underwriting controls, approval procedures for new products, control over the prices at which products may be sold, control over repair costs, regular review of partners, products and performance and monitoring of emerging issues.

We aim for a targeted return on each type of service we offer. Our appliance care portfolio

combines a large number of small value contracts which generally span one to five years and predominantly have short tail risks of less than six months. We build and set our pricing on a rigorous and prudent “ground up” approach developed and tested during many years as a specialist provider. In particular, our pricing is built up from several parts, including claims and repair costs, administrative costs, acquisition costs, tax and profit margin. Statistical expectancy is applied to pricing and provisioning for our portfolio of appliance care contracts. We use several methods to assess and monitor our trading liability risk exposure for both individual types of risks covered and overall risks, including internal risk measurement and sensitivity analysis. Factors considered in our pricing also include historical and projected failure incidences, current average repair cost and types of repair, forecast levels of inflation, product sales volumes and predicted and historical take-up levels for our plans.

Results of Operations (Pro forma)

Basis of preparation of pro forma consolidated financial information

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The consolidated financial information included herein is prepared on a pro forma basis combining the results of the successor group for the twelve month period to 31 March 2015 and successor and predecessor groups for the twelve month period to 31 March 2014.

"Successor" refers to Galaxy Finco Limited and its subsidiaries after the Acquisition and

"Predecessor" refers to Domestic & General Group Holdings Limited and its subsidiaries prior to the Acquisition.

For the year ended 31 March 2015, the pro forma financial information includes: • The consolidated income statement of Galaxy Finco Limited Group only

• The consolidated balance sheet of Galaxy Finco Limited Group only

• The consolidated cashflow statement of Galaxy Finco Limited Group only

All other financial information is derived from the above combined sources unless otherwise stated.

For the year ended 31 March 2014 (the comparative period) the pro forma financial information

includes:

• The consolidated income statement of Domestic & General Group Holdings Limited for the nine month period to 31 December 2013, plus the income statement of Galaxy Bidco Limited since its inception to 31 December 2013 plus the income statement of Galaxy Finco Limited since its inception to 31 December 2013 eliminating any transactions between those companies plus the consolidated income statement of Galaxy Finco Limited for the three month period to 31 March 2014.

• The consolidated balance sheet of Galaxy Finco Limited as at 31 March 2014 reflecting the acquisition of Domestic & General Group Holdings Limited by Galaxy Bidco Limited (but ignoring the fair value adjustment required to be made to deferred acquisition costs and deferred income to reflect the fact that deferred acquisition costs have a fair value of £nil in a business combination).

• The consolidated cashflow statement of Domestic & General Group Holdings Limited for the nine month period to 31 December 2013, plus the cashflow statement of Galaxy Bidco Limited since its inception to 31 December 2013 plus the cashflow statement of Galaxy Finco Limited since its inception to 31 December 2013 eliminating any transactions between those companies plus the consolidated cashflow statement of Galaxy Finco Limited for the three month period to 31 March 2014.

All other comparative financial information is derived from the above combined sources unless otherwise stated.

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Consolidated Results

The following table sets forth our consolidated income statement data for the periods indicated:




2015 2014 2015 2014



Underlying Revenue 668.7 632.9 170.2 158.0 Operating costs

Repair Costs (301.6) (284.6) (78.9) (76.3)

Commission & Marketing Fees (156.0) (154.3) (37.7) (37.7)

Operating Expenses (129.7) (115.5) (34.7) (26.6)

Depreciation (6.6) (4.9) (1.8) (1.4) Underlying operating profit 74.8 73.6 17.1 16.0

Amortization of intangible assets (103.3) (43.5) (25.8) (28.6)

Significant items (2.2) - (1.8) - Operating (Loss)/profit (30.7) 30.1 (10.5) (12.6) Other (Expenses)/Income - (5.4) - (3.7)

Investment Income 2.9 3.5 0.6 0.7

Finance Costs (50.0) (43.0) (12.7) (11.7)

Income Tax (Charge)/Credit 16.3 0.1 5.9 4.9 (Loss)/Profit for the Year (61.5) (14.7) (16.7) (22.4)

Sales, Change in Deferred Income, Revenue




2015 2014 2015 2014



Sales 651.6 647.9 165.0 166.6 Change in Unearned Premium 17.1 (15.0) 5.2 (8.6) Underlying Revenue 668.7 632.9 170.2 158.0

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(1) The following table provides a breakdown of sales between sales from new business and sales from renewals for the periods presented:

Sales. Sales for the year ending March 31, 2015 was £651.6 million, a 0.6% increase on the year

ending March 31, 2014. Sales in the UK division for the year ending March 31, 2015 was £528.8 million, a 7.4% increase

on the year ending March 31, 2014. Performance was driven by increases in new business and renewal sales. Renewal sales which was £369.7 million for the year ending March 31, 2015, an 8.2% increase on the year ending March 31, 2014. New business sales for the year ending March 31, 2015 were £159.1 million, a 5.5% increase on the year ending March 31, 2014 as management strengthened relationships with key clients and continued to pursue Best Practice initiatives.

Sales in the International division for the year ending March 31, 2015 were £122.8 million. This

represented a 21.0% decrease on the year ending March 31, 2014 The decline is as a result of the cessation of our relationship with German retailer Media Saturn in August 2014, which contributed sales of £21.1 million in fiscal year 2015, compared with £60.2 million in 2014.




2015 2014 2015 2014



UK Sales 528.8 492.4 140.0 129.1 New Business 159.1 150.8 42.0 38.9 Renewals 369.7 341.6 98.0 90.2 International Sales 122.8 155.5 25.0 37.5 New Business 98.1 130.6 19.0 31.5 Renewals 24.7 24.9 6.0 6.0 Total Sales 651.6 647.9 165.0 166.6

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(2) The following table provides a breakdown of revenue between revenue from new business sales and revenue from renewals for the periods presented:

(3) The following table provides a reconciliation of Adjusted EBITDA to profit/(loss) for the

periods indicated:




2015 2014 2015 2014



(Loss)/Profit for the Year (61.5) (14.7) (16.7) (22.4) Income tax (credit)/charge (16.3) (0.1) (5.9) (4.9) Financial instruments - (0.1) (0.1) 0.1 Finance costs 50.0 43.1 12.8 11.6 Amortization of intangible assets 103.3 43.5 25.8 28.6 Depreciation 6.6 4.9 1.8 1.4 Significant items 2.2 5.4 1.8 3.7 Adjusted EBITDA 84.3 82.0 19.5 18.1

Year Ended March 31, 2015, Compared with Year Ended March 31, 2014

Revenue. Underlying revenue increased by £35.8 million, or 5.7%, to £668.7 million for the year ended March 31, 2015, as compared with £632.9 million for the year ended March 31, 2014. The increase in revenue was due to a 7.2% increase in UK underlying revenue (from £491.8 million for the year ending March 31, 2014 to £527.0 million for the year ending March 31, 2015) and to a 0.4% increase in International underlying revenue from £141.1 million for the year ending March 31, 2014 to £141.7 million for the year ending March 31, 2015).

Repair Costs. Repair costs increased by £17.0 million, or 6.0%, to £301.6 million for the year ended March 31, 2015, as compared with £284.6 million for the year ended March 31, 2014. Expressed as a proportion of underlying revenue of £668.7 million and £632.9 million, respectively, repair costs have increased by 0.1 percentage points to 45.1%.

Customer Acquisition Costs. Customer acquisition costs, comprising commission and marketing fees (“C&M fees”), increased by £1.7 million, or 1.1%, to £156.0 million for the year ended March 31, 2015, as compared with £154.3 million for the year ended March 31, 2014. C&M fees increased at a slower rate than revenue due principally to lower marketing fees.

Operating Expenses. Operating expenses increased by £14.2 million, or 12.3%, to £129.7 million for the year ended March 31, 2015, as compared with £115.5 million for the year ended March 31,




2015 2014 2015 2014



UK Revenue 527.0 491.8 137.1 122.3 New Business 172.4 168.4 43.4 39.4 Renewals 354.6 323.4 93.7 82.9 International Revenue 141.7 141.1 33.1 35.7 New Business 117.7 117.4 27.3 29.6 Renewals 24.0 23.7 5.8 6.1 Underlying Revenue 668.7 632.9 170.2 158.0

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2014. The increase in operating expenses was primarily the result of operational investment, with higher staff and related costs to support revenue growth and international expansion as well as one-off costs.

Depreciation. Depreciation increased by £1.7 million, or 34.7%, to £6.6 million for the year ended March 31, 2015, as compared with £4.9 million for the year ended March 31, 2014. The increase in depreciation reflects the increased capital expenditure, predominantly in IT assets, in Fiscal Year 2015.

Significant items and amortisation. Amortisation increased by £59.8 million, or 137.5%, to £103.3 million for the year ended March 31, 2015, as compared with £43.5 million for the year ended March 31, 2014. The amortisation in the current period was solely attributable to intangible assets recognised in the Acquisition. Significant items of £2.2 million for the year ended March 31, 2015, as were attributable to one-off expenditure as a result of organisational changes.

Operating (loss)/profit. As a result of the factors described above, the operating result decreased by £60.8 million, or 202.0%, to a loss of £30.7 million for the year ended March 31, 2015, as compared with a profit of £30.1 million for the year ended March 31, 2014.

Investment Income. Investment income decreased by £0.6 million, or 17.1%, to £2.9 million for the year ended March 31, 2015, as compared with £3.5 million for the year ended March 31, 2014. The decrease in investment income was due to lower overall investment balances and lower yields reflecting the interest rate environment during the period.

Finance Costs. Finance costs increased by £7.0 million, or 16.3%, to £50.0 million for the year ended March 31, 2015, as compared with £43.0 million for the year ended March 31, 2014. This increase was attributable to the higher interest charges on the Senior Secured Notes and Senior Notes compared to the interest expense of the predecessor Group under its legacy financing arrangements. Interest on shareholder loans amounted to £13.0 million for the year ended March 31 2015.

Income tax credit/(charge). The income tax credit increased by £16.2 million to a credit of £16.3 million for the year ended March 31, 2015, as compared to a credit of £0.1 million for the year ended March 31, 2014. The tax credit is as a result of the release of deferred tax on intangible assets. Our effective tax rate on profits before significant items and amortization in the year ended March 31, 2015 and 2014 was approximately 20.2% and 25.8% respectively driven by the UK tax rate with adjustments for overseas tax rate differences.

(Loss)/ Profit for the year. As a result of the factors described above, our loss for the year increased by £46.8 million, to a loss of £61.5 million for the year ended March 31, 2015, as compared with a loss of £14.7 million for the year ended March 31, 2014.

Adjusted EBITDA

Adjusted EBITDA was £84.3 million for the year ended March 31, 2015, £2.3m higher than the year ended March 31, 2014. Investment income decreased by £0.6 million with underlying operating profit increasing by £1.2 million (from £73.6 million for the year ended March 31, 2014 to £74.8 million profit for the year ended March 31, 2015).

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Operating data Galaxy Finco Limited

For the year ended

March 31,

2015 2014

Number of appliances protected (in millions) 22.7 22.8 UK Division 13.5 13.5 International Division 9.2 9.3 Number of households served (in millions) 14.8 14.8 UK Division 7.9 7.9 International Division 6.9 6.9 Number of appliances protected per customer 1.39 1.38 UK Division 1.54 1.53 International Division 1.21 1.22 Number of claims handled (in millions) 3.0 2.8 UK Division 2.2 2.2 International Division 0.8 0.6 Renewal rate UK Division* 71.7% 72.4%

* Represents the proportion of renewable plans that are renewed and still in force one month after the renewal date. The reduction in renewals rate reflects the increasing proportion of retail plans in force which renew at a lower rate. Liquidity and Capital Resources

Liquidity

Liquidity describes the ability of a company to generate sufficient cash flows to meet the short-term cash requirements of its business operations, including working capital needs, capital expenditures, debt service obligations and other commitments and contractual obligations. We rely primarily on cash generated from operations to fund our liquidity requirements. Our operating cash flows are derived from our sales and we are a highly cash-generative business, as our customers generally pay for plans in advance of or alongside revenues being recognized, which together with our low capital expenditure and historically negative working capital requirements drives significant cash flow generation. To the extent necessary to fund future liquidity requirements of the Non-Regulated Business we have £45 million undrawn under our New Revolving Credit Facility. See “—Adjusted Cash Flow Available for Debt Service” below.

Regulated Business

The Regulated Business includes our UK insurance arm DGI and its international branches as well as the Italian and Australian service companies. The Regulated Business has a significantly higher mix of cash upfront PoS extended warranty business than the Non-Regulated Business and is characterized by large inflows of working capital that, together with continuing profitability and the lack of any debt service requirements, allow it to independently fund its liquidity needs.

Non-Regulated Business

The Non-Regulated Business is comprised principally of our UK service-plan operations, held by DGS, which consist primarily of new annual business and renewals business and tend to be working capital neutral. Unlike the Regulated Business, the Non-Regulated Business holds relatively small cash reserves. Accordingly, the liquidity of the Non-Regulated Business depends on its continued ability to generate sufficient cash flows from sales as well as its ability to borrow under the New Revolving Credit Facility.

Although we believe that the expected cash flows from operating activities of the Non-Regulated

Business, together with available borrowings, will be adequate to meet its anticipated general liquidity needs for the next 12 months, we cannot assure you that the Non-Regulated Business will generate sufficient cash flows from operations to meet these needs or that future debt or equity financing will be available to us in an amount sufficient to enable us to fund these liquidity needs, including making payments on the Notes or other debt when due. If the Non-Regulated Business’s cash flows from

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operating activities are lower than expected or its cash requirements exceed our projections and dividend capacity from the Regulated Business is insufficient, we may be required to seek additional financing, which may not be available on commercially reasonable terms, if at all, and may depend on numerous factors, including general economic conditions, the availability of credit from banks, other financial institutions, and capital markets, restrictions in instruments governing our debt, and our general financial performance.

Capital Management

Capital refers to the long-term financial resources available to support the operation of our business, fund business growth and cover financial and operational needs that arise from adverse circumstances. Our primary source of ongoing capital generation is the profitability of our insurance and service plan operations. We believe we have a strong capital position thanks to our £258.4 million balance of cash and cash equivalents, term deposits and available for sale financial assets (classified as investments on the balance sheet) as of March 31, 2015. We hold the majority of our cash and cash equivalents, term deposits and available for sale financial assets in the Regulated Business: as of March 31, 2015, the Regulated Business held £212.6 million, or 98.7%, of our cash and cash equivalents and investments, while the Non-Regulated Business held the remaining £2.8 million.

Regulated Business

In order to ensure that the assets held by an insurer are appropriate for backing the risk profile of the insurer’s insurance liability, our insurance companies (principally DGI) within the Regulated Business are required to maintain minimum levels of regulatory capital. The high levels of cash held in the Regulated Business reflect these regulatory capital requirements as well as the higher balances of deferred income associated with our insurance operations.

As of March 31, 2015 the qualifying capital resources of £72.4 million held by DGI comfortably

exceeded its minimum capital requirements of £47.8 million, resulting in an additional buffer of £24.6 million, or 51.4% of the minimum capital requirements. Our Board of Directors regularly reviews actual and projected capital levels of DGI under a variety of scenarios that include stress scenarios and is directly involved in the development and maintenance of our capital policy. We have also established internal processes and controls designed to mitigate potential risks and uncertainties relating to our capital position and project that our future minimum capital will grow in line with DGI’s sales growth. Therefore, not all of the projected profits generated by DGI will be available for dividend distributions to the Non-Regulated Business. In particular, cash and cash equivalents held by DGI can only be extracted and upstreamed to its direct or indirect parent entities, including for purposes of debt service, to the extent that DGI has sufficient cumulative distributable reserves and that the minimum capital requirements continue to be met.

Our management had historically adhered to a voluntary policy of paying dividends out of DGI’s

distributable reserves only to the extent that a prudential buffer of approximately 70% of the minimum capital requirements continues to be maintained after giving effect to the proposed distribution. In its application for approval of the Acquisition filed with the PRA, the Senior Secured Notes Issuer advised the PRA of its intention to lower the level of this voluntary prudential constraint on dividend payments from 70% to 30% of the minimum capital requirements applicable to DGI from time to time. On December 16, 2013, the level of additional prudential buffer was reduced to approximately 30% of the minimum capital requirements applicable to DGI from time to time improving surplus capital by £19.3 million. Approximately £19 million of this was used to finance the Transaction.

The Regulated Business declared and paid dividends to the Non-Regulated Business of £36.5

million in fiscal year 2015. This approach indicates that the risk-based capital requirements of our insurance companies (principally DGI) within the Regulated Business have been broadly equivalent to 17.7% (excluding our prudential buffer) or 23.0% (including our prudential buffer) of our sales of insurance-backed warranties.

Non-Regulated Business

As of March 31, 2015 all of our external and shareholder debt was owed by entities in our Non-Regulated Business, since direct borrowings by our Regulated Business would negatively affect its compliance with capital requirements. We believe that the ongoing profitability of the Non-Regulated Business is sufficient to fund its estimated liquidity requirements. In addition, although not a member

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itself, we comply with the recommendations of the BRC, requiring its members to ring-fence assets to secure potential future claims made under appliance care plans sold at PoS, we have established a trust fund (“PoS Trust”) to secure expected future claims in respect of service plans sold by our retail partners at PoS (principally Argos). As of March 31, 2015, the PoS Trust held a £35.0 million on-demand letter of credit issued under our £80.0 million New Revolving Credit Facility as security for such future claims which would only be drawn by the trustees if DGS were unable to pay for customer claims, which we do not consider a likely event. We have accounted for the letter of credit as an off-balance sheet item. Source and Uses of Liquidity and Capital Cash Flows

The following table presents our cash flows for the periods indicated:




2015 2014 2015 2014



Net cash from operating activities 2.1 50.8 5.6 20.0 Net cash used in investing activities (91.6) (322.8) (32.3) 76.9 Net cash used in financing activities (12.3) 378.5 (12.3) (0.5) Net (decrease)/increase in cash and cash equivalents (101.8) 106.5 (39.0) 96.4 Cash and cash equivalents at the beginning of the period 140.9 38.8 75.5 46.1 Effects of exchange rates (3.6) (4.4) (0.9) (1.6) Cash and cash equivalents at the end of the year 35.5 140.9 35.5 140.9

Net cash from operating activities. Net cash from operating activities was £2.1 million for the

year ended March 31, 2015, as compared with £50.8 million for the year ended March 31, 2014, a decrease of £48.7 million, or 95.9%. The decrease in net cash from operating activities was due to the higher interest paid in the year ended March 31, 2015 of £35.7 million compared with £13.2 million the year ended March 31, 2014 as a result of the new financing arrangements, and the negative working capital impact from the run off of retail policies in Germany following the cessation of the MSH Germany contract.

Net cash used in investing activities. There was a net cash outflow from investing activities of £91.6 million for the year ended March 31, 2015, as compared with £322.8 million in the year ended March 31, 2014, a decrease of £231.2 million. Fiscal year 2015 includes outflows relating to the purchases of trading investments in the form of Available for Sale financial assets. Fiscal year 2014 outflows primarily as a result of net cash used to finance the acquisition.

Net cash used in financing activities. There was a net cash outflow in financing activities of £12.3 million for the year ended March 31, 2015, as compared with an inflow of £378.5 million in the year ended March 31, 2014, a decrease of £390.8 million. Fiscal year 2014 flows were as a result of the raising of the £488.2 million of Senior Secured and Senior Notes on acquisition in March 2014 (being £500.0 million of bonds less issue costs), new intercompany financing of £124.9 million and new equity of £89.9 million, offset by the repayment of £318.2 million of existing third party debt and the payment of £6.3 million of financing costs that could not be capitalized. Fiscal year 2015 flows relate to repayments made to the parent entity, £7.5m of which was subsequently returned to the shareholders of the ultimate controlling party of the company in the form of a repurchase of preference shares and associated accrued interest.

The total of Cash and Cash Equivalents as at March 31, 2015 was £35.5 million, as compared with £140.9 million as at March 31, 2014. This figure excludes available for sale investments purchased during the year.

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At March 31, 2015, we estimate that the Group had unrestricted cash reserves of approximately £13.8 million.

Net Working Capital

The following table presents Net Working Capital as of the dates indicated:


As at March 31,

2015 2014

Unaudited (£ millions) Deferred income (594.0) (637.8) Deferred acquisition costs 199.7 208.8 Net deferred income (394.3) (429.0) Trade debtors 316.7 289.8 Other working capital balances (130.0) (123.6) Accrued income 18.6 9.6 Repairs cost provision and others (17.5) (16.6) Third party creditors (59.3) (55.6) Accruals (29.5) (23.2) Other tax, VAT, PAYE, NI payable (42.3) (37.8) Net Working Capital (207.6) (262.8)

As of March 31, 2015 our Net Working Capital was £ (207.6) million, £ (136.3) million of which was the Regulated Business’s Net Working Capital and £ (71.3) million of which was the Non-Regulated Business’s Net Working Capital

The net working capital profile is affected by a variety of factors, including, among other things:

• the mix of annual plans (including renewals and Repair & Protect) and extended plans in any given period;

• how appliance care plans are paid for by customers (i.e. fee or premium paid upfront or periodic payments, generally by direct debit);

• customer acquisition costs (i.e. marketing fees and commissions paid to the OEM and retail partners, and direct acquisition costs);

• the value of claims being paid on prior period sales; and

• the growth rate of sales of the Group’s various appliance care plans. These factors affect the timing of cash we receive on plans and cash we pay as acquisition costs

and in settlement of claims. From a net working capital perspective, these factors affect principally our deferred income, trade debtors and deferred acquisition costs balances. Our UK and International Divisions have different net working capital profiles due to the different stages of maturity of the respective businesses and the different mix of products that are sold.

The reduction in negative working capital reflects the impact the negative working capital impact

from the run off of retail policies in Germany as well as an increasing number of customers settling by Direct Debit across periods of 12 months or more rather than an upfront annual fee.

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Capital Expenditures

Capital expenditure for the year ended March 31, 2015 and 2014 is as follows:



2015 2014


IT Hardware and Software 12.2 5.8 UK, Other 1.6 1.3 International, Other 0.1 0.3 Total 13.9 7.4

Free Cash Flow



2015 2014


Adjusted EBITDA 84.3 82.0 Changes in Net Working Capital Movement in deferred acquisition costs (1.9) (5.2) Movement in deferred income (14.4) 11.4 Movement in trade and other receivables (40.6) (19.1) Movement in claims and repair costs provision 1.8 3.3 Movement in trade and other payables 19.5 7.0 Outflow in Net Working Capital (35.6) (2.6) Operating cash flow 48.7 79.4 Capital expenditure (13.9) (7.4) Free Cash Flow 34.8 72.0

The Group relies primarily on cash generated from operations to fund its liquidity requirements.

Operating cash flows are derived from sales as customers generally pay for plans in advance of or alongside revenues being recognised, which together with the Group’s historically low capital expenditure and negative working capital requirements drives significant cash flow generation. The decline in free cash flow is temporary in nature and as a result of increased capital investment coupled with the shortening periods of cover on UK sales with lower initial payments from customers.

Free Cash Flow conversion in the year ended March 31, 2015 was 41% of adjusted EBITDA and

lower than the year ended March 31, 2014 (88%) as a result of the impact of negative working capital following the run off of retail policies in Germany, incremental capital expenditure and a temporary increase in working capital outflow, as a result of an increasing number of customers settling by Direct Debit across periods of 12 months or more rather than an upfront annual fee.

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Adjusted Cash Flow Available for Debt Service The Group’s ability to service debt depends primarily on two separate streams of cash flow: (a)

free cash flow from the Non-Regulated Business and (b) distributable earnings of the Regulated Business, representing after-tax earnings that can be distributed following any capital retention necessary to ensure continued compliance with the applicable capital requirements and the Group’s policy of retaining an additional prudential solvency buffer within DGI.

Adjusted Cash Flow Available for Debt Service is defined as the sum of (i) Free Cash Flow of the Non-Regulated Business, plus (ii) dividends that can be distributed by the Regulated Business over the amount of capital to be held for regulatory purposes, plus (iii) certain payments from the Regulated Business to the Non-Regulated Business not included in (i) and (ii) above.

The following table presents Adjusted Cash Flow Available for Debt Service for the periods

indicated:



2015 2014


Free cashflow from non-regulated business 2.4 9.5 Distributable earnings from Regulated business 41.6 54.2 Service charge paid from DGI to DGS 0.6 3.6 Tax charge paid from DGI to DGS (Current only) 9.9 12.1 Cash flow available to service debt 54.5 79.4 Proforma adjustment for change in prudential buffer - (19.3) Adjusted cash flow available to service debt 54.5 60.1 Cash Flow Available For Debt Service conversion (% of Adj. EBITDA) 64.7% 73.3%

Cash Flow Available for Debt Service conversion in the year ended March 31, 2015 was 64.7%

of adjusted EBITDA and lower than the year ended March 31, 2014 (73.3%) as a result of incremental capital expenditure and a temporary increase in working capital outflow, reflecting the impact the negative working capital impact from the run off of retail policies in Germany as well as an increasing number of customers settling by Direct Debit across periods of 12 months or more rather than an upfront annual fee.

(1) The following table presents Free Cash Flow from the Non-Regulated business for the

periods indicated:

Free Cash Flow from the Non-Regulated business



2015 2014


Adjusted EBITDA 32.5 24.3 Increase in working capital (16.5) (7.8) Capex (13.6) (7.0)

Free cash flow from Non-Regulated Business 2.4 9.5

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(2) The following table presents Distributable earnings from the Regulated business for the periods indicated:

Distributable earnings from the Regulated business


For the year ended March 31

2015 2014


Adjusted EBITDA 51.8 57.7 Depreciation (0.4) (0.4) Swap valuation - (0.2) Transfer pricing charge (reg to unreg) (0.6) (3.6) Tax DGI

Current tax (9.9) (12.1) Deferred tax 0.3 (0.7)

DGSP Current tax (0.9) (1.7) Deferred tax - 0.1

Regulated Business profit after tax 40.3 39.1 Increase in capital requirement 1.3 15.1 Distributable earnings from Regulated business 41.6 54.2

Off-Balance Sheet Arrangements The Group has an undrawn £35.0 million letter of credit under the revolving credit facility,

pledged as an asset to the Point of Sale trust maintained for UK retail service plan customers in line with British Retail Consortium guidelines. This would only be drawn by the trustees if DGS were unable to pay for customer claims, which the Group does not consider to be a likely event. None of these arrangements has or is likely to have a material effect on our results of operations, financial condition or liquidity. In addition, we lease various office facilities under non-cancellable operating leases. Contractual Commitments

The following table summarizes information relating to our contractual and other cash obligations as at March 31, 2015, as adjusted to give pro forma effect to this offering of the Notes and the other Transactions:

Quantitative and Qualitative Disclosures about Market Risk

In the ordinary course of our business, we are exposed to a variety of market risks arising relating to our financial assets and liabilities and to a limited extent our insurance contracts, including interest rate risk, liquidity risk and foreign exchange risk. We have a risk management program in place through which we seek to mitigate the adverse effects of these market risks.

£ million Total Less than 1 year

1-5 years More than 5 years

Senior Secured Notes 375.0 — 175 200.0 Senior Notes 125.0 — — 125.0 Capital Commitments 2.3 2.3 — — Non-cancellable Operating Leases 14.9 2.7 9.3 2.9 Total 517.2 5.0 184.3 327.9

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Interest Rate Risk Our greatest risk to changes in interest rates arises from our investment portfolio and from our

external indebtedness. Interest rate risk within our investment portfolio and external indebtedness is actively managed by our treasury function. In particular, we analyze interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivatives. These projections involve evaluating the potential gain or loss on most of our investments and borrowings under various increasing and decreasing interest rate environments. We measure relative sensitivities of the value of our assets and liabilities to changes in key assumptions utilizing internal models.

To manage our exposure to changes in interest rates and to lower the overall costs of the

Financing, we have used interest rate swaps to exchange the interest rate exposure on £100.0 million of the Floating Rate Senior Secured Notes from a floating interest rate to a fixed interest rate. This swap expires in May 2018.

Credit Risk

Our greatest credit risk relates to deposits with credit institutions, money market funds, available for sale financial assets and warranty and insurance debtors. We structure the levels of credit risk we accept by placing limits on our exposure to any single counterparty or groups of counterparties.

In fiscal year 2015, we only placed deposits with banks or building societies having credit limits

approved by the Board. Counterparty exposure is subject to constant review. Available for sale investments are managed by an external fund manager within investment management terms that specify, amongst other things, minimum credit ratings and maximum duration.

Internationally we have a number of contracts with major partners, with exposure on the monies

owed to us at any one time. However, we closely monitor outstanding debt and are in constant dialogue with the partners and are therefore in a position to act swiftly to mitigate any loss in the event of a major partner running into financial difficulties.

Warranty and insurance debtors are amounts receivable from policyholders and service plan

customers and are by their nature high volume but low value. As our customers pay for their appliance care plans either upfront or via direct debit, we do not have any material credit exposure to our customers. Additionally, if the installment debtor lapses we cancel the cover provided, which further mitigates customer credit risk.

Liquidity Risk

An important part of our risk management is ensuring that cash is available to settle liabilities as they fall due. The most significant payments are claims and repair costs, staff costs and interest payments on borrowings. The profile of claims and repair costs, staff costs and interest payments is highly predictable. We maintain cash and liquid deposits to meet demands on a daily basis. We also have £45.0 million of the £80.0 million New Revolving Credit Facility which we will be able to use to meet short-term liquidity requirements of the Non- Regulated Business.

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Foreign Currency Exchange Risk

Foreign exchange transactional risk arises when financial and insurance assets and liabilities are denominated in a currency other than the respective functional currencies of the Galaxy Finco Limited Group entities. Most transactions are undertaken in functional currency, and asset and liability matching within the Galaxy Finco Limited Group is such that foreign exchange transaction risk is not expected to be material.

The majority of our business is based in the United Kingdom and we prepare our consolidated

financial statements in pounds sterling; however, a proportion of our operations are in other European countries and Australia and New Zealand. This results in potential exposure to Euro and Australian or New Zealand dollar foreign exchange translation risk. Given our increasing focus on non-UK markets, the effect of exchange rate fluctuations on our reported results of operations is expected to increase over time, although we believe these impacts will continue to be relatively limited. We manage this risk through asset and liability matching and expect to continue doing so in the foreseeable future.

Critical Accounting Estimates and Judgments

We have reviewed our selection and application of principal accounting policies and related financial disclosures. The preceding discussion of past performance is based upon our consolidated financial statements, which have been prepared in accordance with IFRS, or upon financial information extracted from our accounting records. Our significant accounting policies are described in our audited consolidated financial statements, included elsewhere in this offering memorandum. The application of these accounting policies requires that management make estimates and judgments. On an ongoing basis, we evaluate our estimates, which are based on historical experience and market and other conditions, and on assumptions that we believe to be reasonable. Actual results may differ from these estimates due to actual market and other conditions, and assumptions being significantly different than was anticipated at the time of the preparation of these estimates. Such differences may affect our financial results. We have chosen to highlight certain policies that we consider critical to the operations of our business and understanding our consolidated financial information. We believe the following estimates affect the application of our most critical accounting policies and require our most significant judgments.

Revenue Recognition and Deferred Income

Our revenue is derived primarily from appliance care insurance plans and appliance care service plans. Revenue from appliance care insurance plans and appliance care service plans is recognized based on the gross written premiums/sales on plans. The portion of deferred income/revenue relating to the unexpired part of the plan is deferred to future years as a liability on the balance sheet as the deferred income reserve. Revenue is recognized through the amortization of the deferred income reserve over the “on risk” period of the plan. Since the majority of our plans sold are for one year’s cover, we will recognize the substantial majority of deferred income within one year. The deferred income reserve is amortized to our income statement over the period in which we are “on risk” based on the timing of the consumption of risk under the policy using “earnings profiles”. For some warranties (i.e., annual business or 1+1 warranties), the earnings profile will be a straight line using the 24ths method, while for others (i.e., Repair & Protect and extended warranties) the earnings profile will be weighted to the incidence of risk. The 24ths method is a basis for estimating deferred income reserve, based on the assumption that annual policies are written evenly over each month and risk is spread evenly over the year. For example, in the month in which an annual policy is written, 1/24th of the premium is amortized and 23/24ths is reflected in deferred income. In month two, a further 2/24ths is amortized and this continues until month 13 when the final 1/24th is amortised and the deferred income balance is nil.

Deferred Acquisition Costs (“DAC”)

We incur significant costs in connection with acquiring new and renewal service plan and insurance business. Costs that relate directly to the successful acquisition or renewal of warranties are deferred as DAC. In addition to commissions, certain advertising expenses and other direct costs, deferrable costs include the portion of an employee’s total compensation and benefits related to time spent selling, underwriting or processing the issuance of new and renewal insurance business. We utilize various techniques to estimate the portion of an employee’s time spent on qualifying acquisition

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activities that result in actual sales. These estimates include assumptions that are reviewed and updated on a periodic basis or more frequently to reflect significant changes in processes or distribution methods.

We do not recognize all C&M fees paid in a fiscal period as expenses incurred over that period.

We charge to the income statement a proportion of acquisition costs corresponding to the proportion of appliance care sales that we have recognized as revenue for that period and capitalize as an asset on our balance sheet the DAC relating to the portion of appliance care sales that we record as deferred income. Our accounting system is based on a net deferred income accounting (net of DAC) and requires month-end grossing adjustments.

Measurement of Recoverable Amount of Goodwill

Any excess of the cost of acquisition over the fair value of net identifiable assets acquired as of the date of the acquisition is recognized as goodwill. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment even if no indication of impairment exists. An impairment loss on goodwill is not reversed.

For purposes of goodwill impairment testing, if the carrying value of a goodwill asset exceeds its

estimated fair value, the implied fair value of the goodwill asset is compared to the carrying value of that asset to measure the amount of impairment loss, if any. In such instances, the implied fair value of the goodwill is determined in the same manner as the amount of goodwill that would be determined in a business acquisition. The key inputs, judgments and assumptions necessary in determining estimated fair value of the goodwill asset include projected operating earnings, current book value, the level of capital required to support the mix of business, long-term growth rates, projections of new and Renewals business, as well as margins on such business, the level of interest rates, equity market levels, and the discount rate that we believe is appropriate for the asset.

Claims and Repairs Cost Provision

The claims and repairs cost provision comprises provisions for the estimated costs of paying all claims and repairs incurred up to but not paid at the balance sheet date, whether reported or not, together with related claims and repair handling expenses. Estimation techniques and assumptions are periodically reviewed with any changes in estimates reflected in the income statement as they occur.

Provision is also made, where necessary, when the expected value of claims, repairs and

administrative expenses attributable to the unexpired periods of service plans and policies in force at the balance sheet date exceeds the provision for deferred income in relation to such service plans and policies after deduction of deferred acquisition costs. Any provision is calculated separately for each category of business but surpluses and deficits between categories that are managed together are offset.

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BUSINESS Overview

We are the leading specialist provider of warranties and appliance care services for domestic appliances and consumer electronic products in our home UK market and a leading specialist provider in several of our international markets, with international operations in Germany, Spain, Portugal, France, Italy and Australia. In fiscal year 2015 we generated 79% of our revenues from our UK Division and 21% from our International Division, which includes operations at various stages of development throughout the European Union and Australia.

Appliances covered by our products include white goods (such as washing machines and

refrigerators), brown and grey goods (such as TVs, laptops, satellite systems and mobile phones), as well as heating appliances (such as boilers) and small domestic appliances. Appliance care products allow consumers to protect their domestic electrical goods against the cost of repair or replacement in the event of breakdown (including parts, labor and call-out costs) or accidental damage, theft and other associated risks. New appliances are protected by a manufacturer’s guarantee, typically for a period of one year in the United Kingdom or two years in our international markets, as well as statutory remedies against retailers and manufacturers for faulty or sub-standard goods. Our products offer extended cover of repairs or replacement after the manufacturer’s guarantee has expired to ensure that consumers are still protected against breakdowns and to provide benefits in addition to consumers’ statutory rights. Appliance care products can be typically purchased for up to five years initial cover, in the case of new appliances, or for an annual period of cover, in the case of appliances outside the manufacturer’s guarantee period. In both cases, these products can generally be renewed for subsequent annual periods over the life of the appliance. When we sell products with extended periods of cover (i.e., more than a year) we do not book the entire amount of the sales made in the fiscal year as revenue earned in that year. Instead, revenue is recognised over the life of the policy in accordance with our revenue recognition policy. Our products are sold through several sales channels including through retailers at point-of-sale (“PoS”), through OEMs post-point-of-sale (“PPoS”) and at point-of-need (“PoN”) following an appliance breakdown after the manufacturer’s guarantee has expired. Customers can purchase our products for single or multiple appliances either during or after the manufacturer’s guarantee period, and they can purchase a single appliance plan when the appliance has broken down with our Repair & Protect product, which offers a repair plus a period of appliance cover.

In our home UK market, our business model is centred on establishing and maintaining

cooperative relationships with OEMs, which allows us to market our products directly to consumers who purchase their domestic electrical goods. By collaborating with leading OEMs and brands such as AEG, Bauknecht, Baxi, Bosch, Sky, Candy, Electrolux, Hoover, Hotpoint, Indesit, LG, Samsung, Whirlpool and Zanussi, we are typically able to collect customer data primarily through placing stickers on their products and including in-the-box literature with their appliances encouraging end customers to register the manufacturer’s warranty over the phone, online or by post. When end customers register with us, we capture valuable information about their appliances, establish whether they have or want to purchase an appliance care plan, gain insight into their purchasing behavior for OEMs and establish a direct relationship with them. We also make use of OEM delivery and repair information to market our products to consumers. Analysing data of households and appliances allows us to contact customers at various stages of an appliance’s life cycle to market our protection plans and generate PPoS sales. Our UK Division also has relationships with leading electrical retailers, which we provide with a diverse array of appliance care products offered at PoS. However, our OEM-sourced business is the most profitable for us due to its high retention or renewal rates and lower customer acquisition costs on renewals. In the United Kingdom we achieved a Plan Renewal Rate of 71.7% of our total renewable expiring appliance care plans in fiscal year 2015.

Expansion of our International Division supports our future growth. We select the non-UK

markets in which to establish or strengthen our presence based on potential OEM demand for our appliance care services and specific local market characteristics, including consumer acceptance of direct marketing techniques, the legal and regulatory regimes and the sophistication of the banking system. Historically, we have built local scale in our international markets by running the PoS appliance care programs of electrical retailers (such as Media Saturn in Germany and Spain), which has allowed us to build our infrastructure, develop critical know-how, create sufficient volume and cashflows and develop a local repair network. We have then made further investments in our

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employee base and systems to support direct marketing techniques required for OEM business and claims handling. As we become more established in our international markets, we move to capitalise on relationships with our top UK OEM partners, which sell approximately four to five times as many large appliances in our international markets combined than in the United Kingdom and are increasingly recognising the value of our appliance care proposition. As of March 2015, our International Division had contracts to run appliance care programs in 13 countries for 44 OEM entities contracted on an individual or pan-European basis, compared to two countries for three OEMs in 2007, and we believe we are well-positioned to capture the substantial opportunity for growth presented by our international markets, which we expect will represent an increasing share of our total sales in the future.

Both our UK and International Divisions feature attractive industry dynamics and strong growth

characteristics. In fiscal year 2013 we undertook a market sizing exercise which indicated that in the UK there were approximately 370 million warrantable appliances (excluding mobile phones and small domestic appliances), based on an average of 14 such appliances per household, and an addressable market of approximately 221 million appliances which our products could cover (excluding mobile phones and small domestic appliances), which excludes appliances owned by households that we believe do not have a propensity to purchase appliance care products. Within this market segment, we estimate that as at March 31, 2013 we protected approximately 8.5 million appliances, while our combined competition protected another 51.9 million appliances, leaving approximately 73% of the addressable market open to further penetration. Given the substantial untapped potential of the addressable market, we believe that our UK Division has significant potential for further expansion within this market, by increasing sales to households that we do not currently protect and that show a propensity to purchase appliance care products as well as by cross-selling our appliance care products to existing customers on a larger number of their domestic appliances.

We estimate that in the United Kingdom:

• as at March 31, 2015, we protected approximately 13.5 million appliances, comprising approximately 4.7 million small appliances and approximately 8.8 million other appliances (as described in further detail below); and

• as at March 31, 2015, we protected 1.54 appliances per household on average (out of an average of 14 warrantable appliances owned by each such household).

In our international territories as at March 31, 2015, we protected approximately 9.2 million

appliances. General warranty penetration and our own products’ penetration are lower than in our UK market, particularly in our core PPoS and PoN areas.

We believe that, as we continue to develop our international businesses in cooperation with our

manufacturer partners and expand our market positions in each of our target markets, we will benefit from the robust growth opportunities they present.

We offer one of the widest arrays of products available in the markets we serve across white

goods, brown and grey goods, heating appliances and small domestic appliances. Typically, our products cover single appliances where the plan is sold during the manufacturer’s guarantee period (extended plan), single appliances where the plan is sold outside of the manufacturer’s guarantee (annual plan), multiple appliances where the plan can be sold during or outside of the manufacturer’s guarantee (Multiplan) or out-of-guarantee broken appliances where the plan is sold at the point of breakdown or need (Repair & Protect). Extended plans are typically sold at or close to the purchase of the appliance while the remainder of our products are sold PPoS or PoN. Our products are supported by dedicated customer service agents, OEM or third party countrywide repair networks and engineers, allowing us to deliver a high standard of care and support to our customers.

Thanks to our long-standing reputation for excellent customer service and product innovation as

well as the flexible nature of our offering, today we work with over 160 leading manufacturer and retail brands in the United Kingdom and internationally, offering them a full range of appliance care services, including product development, customer marketing, administration, pricing, account management, customer care, support and training, allowing them to obtain value from their appliance care sales and generate revenue for their own repair networks.

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We sell our appliance care plans through multiple channels at PoS and PPoS using customer data acquired from appliance registration and other customer contact. We also offer a PoN product, Repair & Protect, which covers the cost of a repair on an out-of-guarantee appliance which has broken down, and protects against further breakdowns for an additional period, typically one year. Independent of the sales channel, customers can continue their initial plan through annual renewals, which provides us with a relatively stable stream of income. Through these multiple routes to market, we seek to continually develop and refine our marketing activities, launch new products and maximize household penetration. We believe we have created a sustainable, customer-oriented business model that translates into predictable, recurring revenues and is generally resilient to the swings in sales of electrical appliances.

Our Competitive Strengths

We believe our key competitive strengths are:

Leading position as an appliance care specialist in the United Kingdom with strategic positions in selected markets, underpinned by a differentiated business model. We are the leading specialist provider of appliance care products & services for domestic appliances and consumer electronic products in the United Kingdom, protecting 13.5 million appliances for nearly nine million customers in our domestic UK market in fiscal year 2015. As at March 31, 2014, we estimate that we had an overall market share of 21% in our core UK market sector of large appliances. In the United Kingdom we compete with electrical retailers that sell extended warranties at PoS as well as with other specialist providers of cover, including insurance companies, utility companies, on-line providers, retail banks and credit card providers. Our combination of data usage and services to OEM partners underpins our franchise and creates a differentiated business model that we believe sets us apart. Since commencing the current phase of our international expansion in 2008, we have also gained significant experience in entering into international appliance care markets, which requires meaningful investment of capital, time and resources. We have capitalised on our robust partnerships with leading global OEMs in our domestic market to develop and bring to market appliance care programs tailored to the multi-country distribution of their appliances across Europe. We have hired and trained local personnel, opened new offices, launched multi-language front end systems, developed pan-European registration techniques for our OEM partners, built data protection and compliance procedures and accumulated local know-how, including familiarity with the applicable regulatory frameworks. In fiscal year 2015 our International Division accounted for 21% of our revenue, down from 22% in fiscal year 2014 and currently provides coverage to nearly eight million customers across 13 countries. We believe our strong positioning in Germany, Spain and other major economic regions of Europe where we have already established a foothold, as well as our presence in Australia represent a competitive platform to capture the substantial growth opportunity presented by these and other markets without further significant investment.

Attractive industry growth profile. We estimate that at March 31, 2013, there were approximately 370 million warrantable appliances in the United Kingdom, approximately 60% of which (or 221 million) belonged to households which our market research shows have a propensity to buy warranty coverage. The UK market has significant untapped potential for future growth, since in our estimates only 27% of the addressable appliance segment is currently protected by us or our competitors, and as at 31 March 2015 we cover 1.54 of on average 14 appliances which could be covered typically owned by the households we serve. In particular, although market penetration for appliance care plans in the United Kingdom is relatively high, with approximately 58% of households having purchased coverage for at least one of their appliances at March 31, 2013, penetration across the full range of domestic electrical goods that could be covered owned by each household is still low. We are well placed to harvest the growth prospects of the UK market thanks to our database of over 12 million UK contactable households and our marketing agreements with OEMs, which we believe give us a significant data and marketing ability to continue expanding our customer base and increasing penetration rates. General appliance care penetration and our own products’ penetration in our international territories are considerably lower than in the United Kingdom, while our OEM partners sell approximately four to five times as many large appliances in our international markets combined than in the United Kingdom and are increasingly recognising the value of our international appliance care proposition. We believe that the sales per capita potential in our international markets is similar to the United Kingdom, but that our penetration levels are significantly lower. As a result, we believe we are strongly positioned to capitalise on this opportunity, especially as our OEM partners encourage us to

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expand more broadly and we are able to leverage our first mover advantage in new territories as well as our established international platform.

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Long-standing, cooperative relationships with OEM partners, driving track record of contract extensions. Thanks to our long-standing reputation for excellent customer service and product innovation we have developed strong relationships with numerous major manufacturers and other business partners. We are the chosen extended appliance care services partner of major OEMs operating in the United Kingdom and the largest European economies, including ten of the twelve largest white goods OEMs operating in the UK market. The strength of our relationships with our OEM partners is underpinned by the mutual benefits generated for both parties and the ability to provide long term customer care. OEMs receive commissions and marketing fees from us based on the volume of data we obtain from them and our sales conversion. These payments can represent an important source of OEMs’ profitability. We also provide significant repair volumes to OEMs’ own repair networks (in some cases 50%) and cover a significant proportion of their repair network costs. Appliance care services are a non-core function for many OEMs and having us as a partner helps reduce the need for in-house expertise and support functions. Our products are also critical to assisting OEMs’ customer satisfaction levels, defending the value of their brands and enhancing customer loyalty to sustain their future sales of new appliances. Many of our OEM relationships span over ten years thanks to our high quality service offering. OEMs are our primary avenue to obtaining customer data and generating sales. We acquire data from customers through OEM- branded appliance care stickers or in-the-box cards, included in the packaging of new appliances, and through the manufacturer’s interactions with the customer such as repairs carried out during the manufacturer’s guarantee. These stickers and cards give customers contact telephone numbers or websites to register their appliances and allow us to capture valuable customer data upon registration. We subsequently market our products and make sales at the opportune time over the appliance’s life cycle to registered customers. As at March 31, 2015, our UK database included information on 131.0 million appliances in 26.0 million households, approximately half of which are contactable. After a sale to a new customer, we aim to generate cross-sales from that new customer relationship and drive customer retention through renewals. In addition, since our OEM-sourced business has high retention rates, it is highly profitable and greatly contributes to our operating margins and financial profile.

Diverse and flexible product offering with a highly valued customer proposition, generating

a high level of renewals and a large share of recurring revenue. We offer a wide array of appliance care plans in the markets in which we operate, which allows us to adapt to a broad spectrum of market conditions and consumer choices. We strive to deepen our understanding of customers’ needs. In the United Kingdom we have invested in identifying distinct customer segments and buying propensities and have assembled a large database of 131.0 million appliances in 26.0 million households and gained significant insight into the factors influencing consumer preferences. We use our data management systems to tailor our marketing message and product offering to specific customer segments across the full range of our sales channels. We perform bi-annual reviews of our customers’ experience to monitor our performance and identify areas where we can refine and improve our service offerings. We aim to communicate the terms of our plans clearly, respond actively to customer complaints and support our plans with dedicated customer agents, countrywide repair networks and expert claims teams, focusing on delivering a high quality of service. We had a 72% UK Plan Renewal Rate in fiscal year 2015. Our strong renewals book (primarily sourced through OEM- business), which is underpinned by a high proportion of direct debit payment plans for renewals, drives our profitability and funds investment in new business. Given the strength of our renewals, we can invest in new business in the first plan period to drive long-term value.

Attractive financial model with consistent sales growth, predictable revenue profile and

strong cash flow generation. Our sales have grown at a compound annual growth rate of 9.6% over the last six years despite weak economic conditions. Increasing product penetration in the United Kingdom combined with international expansion and the commercial success of our customer oriented products has contributed to a robust and growing renewal book. In addition, based on high plan retention rates and significant deferred income, we generally have good visibility on our forward revenue streams. We recognise revenue over time in line with plan cover periods. Combined with our high and stable renewal rates, our extended sales give us the ability to lock in and accurately forecast a large majority of our revenues over subsequent fiscal periods. In fiscal year 2015, for example, a significant proportion of our Underlying Revenue consisted of either deferred income released into our income statement from prior years’ sales of extended products or of renewal income written and earned in the year. In addition, we seek to maintain the total amount of repair costs and customer acquisition costs (our largest expenses) relatively stable as a percentage of revenue by adjusting the C&M fees payable to an OEM in a way that compensates for changes in repair frequency or cost or customer acquisition cost, so that our margins remain broadly consistent over time on any individual OEM

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account. Over time, we have delivered consistently strong cash flows and achieved high cash conversion rates. Usually, our business requires limited capital expenditure (principally for maintenance and development of our IT systems and office space) and has negative working capital, as we receive plan payments ahead of or in line with the associated repair costs, both of which factors drive high cash flow conversion. We recorded Adjusted EBITDA of £84.3 million in fiscal year 2015 and £82.0 million in fiscal year 2014. Our deferred income balance as of the end of the fiscal year was £594.0million in 2015 and £637.8 million in 2014. We attained a cash flow conversion rate (Free Cash Flow divided by Adjusted EBITDA) of 41% in fiscal year 2015 and 88% in fiscal year 2014, as a result of investment in available for sale financial investments during the fiscal year 2015, reducing cash and cash equivalent balances to £35.5 million.

Strong conduct culture supported by operating discipline. We have a strong conduct culture

throughout our organisation. We have been running regulated activities for a long period of time and the processes and culture to support treating customers fairly are therefore well established. We maintain significant board level focus on the conduct of our business, with both executive and non-executive directors closely overseeing our affairs. We have an outsourced Internal Audit function, while our Conduct Standards Committee and Audit Committee aim to ensure that a strong governance culture, procedures and policies are routinely implemented within our operations. We have a long track record of working collaboratively with regulatory bodies and adapting our business model to changing legal requirements without significant negative impact on our performance.

Our Business Strategy

Our mission is to be the leading appliance care specialist in all of our markets and to continue growing our business, and, over time, to increase the proportion of our sales coming from outside the United Kingdom. Following our acquisition by CVC we have reaffirmed our strategy and underlined our commitment to both our business partners and customers by augmenting our brand values under the “Expect More” banner and vision that “D&G takes the worry out of breakdowns”. We believe we can accomplish this mission through the effective execution of the following strategies:

Increase our customer base and plan penetration in the United Kingdom. We intend to drive growth in our UK market largely by continuing the actions that have historically delivered positive results as well as by rolling out new initiatives. In particular, we plan to expand our UK business by:

• Implementing best marketing practices and registration techniques across our entire OEM

portfolio. We intend to step up our efforts to measure the effectiveness of the various techniques we deploy in acquiring data via customers registering their initial appliance purchases and replicate the most successful techniques throughout our OEM partnerships and the territories in which we operate. We believe there is still significant potential for us to extend existing best practices adopted with some OEMs to all of our business partners, which we expect will drive additional sales.

• Increasing conversion rates by reducing the initial period of cover and extending payment terms. Our management has taken the strategic decision to sell extended plans on some products with shorter period of cover and extended payment terms with a view to improving conversion rates. Whilst initially this is detrimental to working capital, this will have the added benefit of shortening the time before customers are offered more profitable renewal contracts. We have also introduced other initiatives that increase the rate of renewals, such as promoting the use of direct debit for payment.

• Further penetrating our current customer base and improve conversion as a result of

identifying actionable segments and through cross-selling. We are optimising our customer database to develop new pricing strategies that aim to improve customer acquisition, customer retention and our appliances per customer ratio. By moving from “one size fits all” to actionable needs/wants based segment. For example, within the segment of customers who display a propensity to obtain comprehensive coverage for several electrical goods to protect against the hassle of breakdowns or repair bills, we have identified a technology- focused group concerned only with protecting digital appliances and a more family-oriented group primarily concerned with protecting white goods. This allows us to tailor our product offerings to various customer segments.

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• Further marketing to our proprietary database of “prospects” (i.e., potential new customers) to drive new sales. We have a prospects database of over 26.0 million households, approximately half of which are contactable. By improving our marketing techniques and tailoring product offerings, we expect to be able to increase both the number of households which we cover and the number of appliances covered in each household.

• Strengthening Repair & Protect focus transforming it into a key driver for growth. We expect

that our Repair & Protect product will continue to be well-received in the market, allowing us to service customers’ needs with simple and reliable solutions at PoN, when customers are inconvenienced by a breakdown of a major household appliance. Our UK Repair & Protect sales volumes have grown by approximately 9.5% per annum over the past five years but still accounted for only £86.4 million sales in fiscal year 2015, or 16.3% of our sales.

• Improve the customer journey. Ensure customers’ prospects of worry-free breakdowns and

facilitate pain free customer journeys (including improving digital experience and e-commerce) with ongoing advice and expertise on appliance and customer engagement improvements.

Expand presence and deliver profitable growth in our international markets. We believe that sales to European and other markets outside the United Kingdom represent a significant business opportunity and we intend to continue strengthening our presence in select overseas markets with the goal of growing our International Division to a larger percentage of our total business. We now protect appliances for nearly eight million customers across 12 countries in our International Division and are developing new relationships with manufacturers across multiple territories at a strong rate. In collaboration with our partners we are rolling out our successful and proven product-registration and data collection initiatives, including in-the-box cards, on-product stickers, telephone registrations and on-line registration sites across our international markets, supporting our partners in their customer relationship strategies. We believe that our products have become much more widely understood by our OEM partners internationally in recent years and, given the very low penetration of appliance protection in our non-UK markets, we will target meaningful increases in sales in these markets for the foreseeable future.

Continue to establish and develop long term relationships with business partners. Over the last two decades we have achieved strong sales growth and have expanded effectively in the UK market primarily by winning an increasing number of contracts to provide appliance care services for major manufacturers of domestic appliances and establishing long-lasting relationships with those manufacturers. Today a substantial majority of UK manufacturers of white goods that run an appliance protection scheme choose to partner with us. More recently, we have developed a strategic relationship with leading UK retailer Argos, providing it with a range of appliance care products offered at PoS and signed a new six year contract with Sky. We aim to continue nurturing our existing partner relationships and to extend our long track record of maintaining relationships and acquiring new partners. Our strategy is to achieve superior results for our business partners by leveraging our focused industry sector expertise, customer service, responsive engagement model and breadth of offerings. We believe we are well positioned to address our partners’ needs through specialised account managers who have responsibility for increasing the size and scope of the business with our partners, the dedicated support of our UK-based call centers and our experience in developing tailored marketing initiatives and appliance care products. Continue to focus on highly predictable lower risk products known to us. We have a diversified product portfolio and a large base of business partners. We expect to continue to run operations in line with our business model to focus on extended appliance care products with measurable and consistent repair cost profiles and short-term claims exposure. We seek to set our pricing to maintain stable repair cost ratios across the life of our plans and to offset the increasing cost of repairs as appliances age, based on a rigorous and prudent “ground up” approach developed and tested over many years as a specialist provider. Additionally, we enter into annual negotiations with the majority of our OEM partners and independent repair networks to pre-determine and fix repair costs associated with repair visits to mitigate the risk associated

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with repair cost movement within any given period. We use several methods to assess and monitor our liability risk exposure, including internal risk measurement and sensitivity analysis, and have an active policy seeking to re-price our risks based on the latest account experience and external conditions. We have purposefully avoided products like creditor insurance, home emergency type products and credit card or identity theft cover that we believe would expose us to risks that are not commensurate with the associated profits or that have been recently challenged in the market. We plan to continue marketing products that are straightforward and meet the needs of customers and fit our business partners’ objectives and core competencies.

Continue to strengthen our management team, attract and retain top talent and energize and incentivize employees. Over the past 18 months we have recruited a number of senior members of our management team including the Chief Executive Officer and Chief Financial Officer. These high quality additions have provided fresh impetus and strengthened the existing management team, many of whom have been promoted from our own employee base. We intend to continue to invest in human capital and leadership development to promote excellence in customer and client service and preserve the firm culture that underpins our position as the leading warranty specialist in the United Kingdom focused on performance and growth. To that end, we have implemented comprehensive leadership, training, development and career management programs that help us retain top talent and reduce attrition. We maintain open channels for feedback and dialogue with our employee base, survey our employees’ views at least annually and report the results to our Chief Executive Officer and our senior management team.

Use IT as an enabler of product and service innovation and excellence. We look to develop our IT platform as an enabler of future growth, upgrading both client and customer portals allowing for greater collaboration with our partners, enhancing the digital customer journey and improving contact center technology across the business. Continuing development of UK Call Centres. Much of the IT infrastructure upgrade is being invested in our call centres, in which we continue to invest to ensure that they continue to provide the service levels required in an efficient and sustainable way.

Our Products

We provide appliance care products & services on domestic electrical goods in the United Kingdom through two companies: DGS, which provides services-based appliance care plans, and DGI, which is a UK- regulated insurance company. Internationally, we provide products either through local service companies or through branches of DGI. We typically offer the following appliance care products across our markets:

• Single appliance plan protects one specific domestic appliance and can be purchased at the same time as the appliance through a retailer or during the manufacturer’s guarantee period usually for a maximum coverage period of up to five years. For appliances outside the manufacturer’s guarantee, protection is offered for one-year periods. Customers can either pay upfront or by direct debit (generally over 12 months) and in most cases can renew their plan for further annual periods over the lifetime of the covered appliance. Single appliance sales accounted for 73% of UK sales in fiscal year 2015.

• Multiplans offer a similar level of protection as single appliance plans but usually for three or more appliances. Customers generally pay monthly by direct debit, which can be renewed annually. They may retain protection on the original appliance or on other appliances at their election. Multiplan sales accounted for 11% of UK sales in fiscal year 2015.

• Repair & Protect is designed for appliances that break down outside of a manufacturer’s guarantee and are not covered for repair. The plan covers the cost of the repair and offers up to 18 months’ breakdown protection, typically a “no fix, no fee” guarantee on the initial repair and the option to pay monthly by direct debit. Similar to single appliance plans and Multiplans, plans are generally renewed annually over the lifetime of the appliance. Repair & Protect sales accounted for 16% of UK sales in fiscal year 2015.

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Our products are further distinguished by type of contract. Our insured products are regulated insurance contracts where the consumer is directly insured against the cost of repair or replacement, while our service plans are contracts where the consumer is provided with a repair or replacement service, without the product being structured as an insurance product. The main distinction between these types of service products is that insurance contracts are subject to defined regulatory standards for product design, sales and post-sales activities and require that we set aside prescribed regulatory capital. The treatment of one of our products as an insurance product or a service plan depends on applicable laws in each of the territories in which we operate. For consumers, the difference between insured products and service plans lies, in practice, in the types of protections they can expect if an insurance or service provider goes out of business and regulations governing the sales process and the handling of complaints. In the United Kingdom, for example, insured products are protected by the Financial Services Compensation Scheme and offer greater security than service plans in the event of a business failure. It is usually the decision of our business partners as to whether our products are to be sold as on an insured or service-backed basis. When we tender to provide our products to manufacturers or retailers, we generally offer the ability to design the product either as an insurance product or as a service plan, depending on the partner’s requirements and market factors such as taxation, regulation and the competitive environment.

Appliances Covered Under Our Products

We cover a broad range of appliances including white goods (e.g. washing machines and other large appliances), brown goods (e.g. televisions, audiovisual devices and satellite equipment), grey goods (e.g. personal computers and laptops), heating appliances and a number of small domestic appliances for some of our retail partners. Within our customer base products on white goods are the most common and our business model and marketing strategy account for the differences in each type of covered appliance.

In fiscal year 2015, we managed 2.0 million repairs in the United Kingdom through 24 major OEM

repair networks (including Sky) and 224 contracted independent network companies and 0.6 million repairs internationally, where our central operations team works closely with local staff. Many international appliances are currently under the manufacturers’ initial guarantee and therefore our international repair volumes are relatively small as we are not yet required to undertake associated repairs.

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Our Sales Channels

We receive the majority of our business through our arrangements with partners (i.e., OEMs and retailers). Under these partner arrangements, we agree to run appliance care programs in conjunction with the relevant OEM or retailer. The structure of the arrangements differs depending on whether the partner is an OEM or retailer. In some cases, the partner promotes and sells appliance care plans, either our plans branded by them, or (as in Australia) their plans backed by an insurance arrangement provided by us. In other cases, we use customer sales data of appliance manufacturers and we market directly to customers under arrangements whereby the appliance care plan is branded under the name of our partner. Typically:

• OEMs will promote the appliance care plan by attaching stickers to the relevant product, by

inserting materials into the packaging of products, over the telephone, on-line and by promoting the appliance care plan when a customer contacts them requesting repairs and by providing customer data to use on in-guarantee repairs; and

• Retailers will typically promote the appliance care plans at PoS and some will also provide customer data to us for use in marketing directly to customers PPoS.

Our sales strategy in our UK Division is centered on our cooperative relationships with OEMs.

Although we do not interact with customers at PoS, i.e., when they buy a new domestic appliance, our well-established relationships with manufacturers provide us with an effective alternative route to access consumers who purchase domestic electrical goods manufactured by them. By collaborating with OEMs, we are able to place stickers on their products or include in-the-box literature with their appliances and thus encourage end customers to register their manufacturer’s guarantee over the phone, online or by post. When customers register their products by telephone or online we try to sell appliance care plans while collecting the registration details, which delivers valuable information about their appliances and purchasing behavior and allows us to establish a direct relationship with them. We store the customer data in our database of customers and appliances, which allows us to contact the customer at various stages of an appliance’s life cycle to market our protection plans and generate PPoS sales. We have built up a substantial prospects database of consumers who have not purchased an extended appliance care product for their appliance based on OEM registration data, appliance delivery date, in-guarantee repair data provided by OEMs and some retailers’ customer data. We typically target these customers between 30 days and up to five years after the appliance was purchased through a combination of PPoS channels, including outbound calls and mail. Finally, we sell products (primarily Repair & Protect products) at PoN, when consumers contact OEMs to arrange repair for out-of-guarantee appliances. We also sell Repair & Protect products through a number of independent repair networks and online.

Our Business Partners

We enjoy long term partnerships with leading manufacturers and retailers of domestic appliances

and consumer electronics in the United Kingdom and internationally. These strong and trusted relationships enable us to continually develop and refine our marketing activities, launch new products to meet customer needs and maximize conversion rates. Many of our partners are themselves international businesses and they are helping us to support our strategy to expand internationally. We have signed agreements with several of our existing UK OEM partners to provide appliance care services in a number of other European countries, creating a solid platform to enable us to realise the potential for PPoS business across the Eurozone, and we have also enjoyed success with some key retail partners.

Our top two partners Indesit and Sky are market leaders in their respective white goods and

brown goods markets, and we pride ourselves on the stability of these relationships. We have partnered with Electrolux for over thirty years and many of our partnerships are ten years older or more.

Our Customers

We are a customer-centric business with more than 16 million customers in the United Kingdom

and internationally seeking to deliver consistently high standards of customer satisfaction.

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We have built our business model around acquiring valuable customer data from our OEM and retailer partners. We convert this data into sales through sophisticated data analytics and targeted marketing. Retailer-sourced sales (though smaller on average at less than a quarter of our sales as compared to OEM-sourced sales) help fund infrastructure investment and cover local fixed costs particularly when entering new countries, contribute to creating critical mass for product repair networks, and are generally cash flow positive.

We aim to communicate the terms of our products clearly, respond actively to customer

complaints and back our products with well trained, skilled employees, countrywide repair networks and expert claims processes, focusing on delivering high quality customer services. We achieved a 71.7% UK Plan Renewal Rate in fiscal year 2015 because treating customers fairly is an integral part of our everyday activities regardless of whether a customer purchases an insurance contract or service plan. We have established a Conduct Standards Committee chaired by the Chief Financial Officer that sets standards and policies in relation to customers: agreeing principles, promoting our conduct standards culture throughout our organization, ensuring processes and controls are in place and properly monitored, recommending actions and improvements and reporting to our Board of Directors. The Conduct Standards Committee meets on a monthly basis at a minimum and on an ad hoc basis as required to ensure that we are delivering good outcomes for our customers and following regulatory standards and best practices.

Organisational and Management Structure

Our Group Structure

We are an internationally integrated organisation with an operational framework that allows us to share knowledge, capture operating synergies and employ the most efficient use of our resources. Through our cohesive operating structure we continue to build on our leadership position in the United Kingdom and leverage our expertise and partner relationships internationally.

Our reporting functions are divided into UK, International, Finance, Legal & Compliance, IT,

Contact Centres and HR. These functions report into our UK and International Managing Directors, Chief Financial Officer or directly to the Chief Executive Officer. Local service, sales and marketing teams along with country managers support the functional reporting lines. We have six offices controlling operations across twelve countries and are headquartered in Wimbledon, London. In addition we have three additional UK offices in Bedworth, Brighton and Nottingham where administrative and customer service functions are based. Overall strategic responsibilities as well as the corporate functions reside in London. Through the Head Office, we provide various support functions to the other offices domestically and internationally.

Our ultimate group holding company Galaxy Topco Limited, which was formed in 2013 to

acquire Domestic & General Group Holdings Limited and its subsidiary companies, is not classified as an insurance group for purposes of the European Insurance Groups Directive and Jersey legislation given the significant service plan contribution from Domestic & General Services Ltd. All insurance activities are undertaken by DGI.

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Galaxy Finco Limited Group Structure Overview

We have offices in Germany, Spain, Australia, France and Italy as well as the United Kingdom. Each office is run by a country manager who is responsible for local partner relationships, retail and OEM, as well as local operations, and is accountable for the sales and costs of the unit. We manage a substantial amount of our core international functions centrally with a view to achieving significant economies of scale leveraging our expertise and efficiency. A centralised multi-functional international operations team provides expertise to the international offices across a number of areas. Central international marketing and sales teams coordinate developing international OEM relationships and managing OEM partner acquisition.

The level of local responsibilities and infrastructure within a country office is dependent on the

size and years of operations of an office. Germany and Spain have locally established call centres, financial operations and claims departments which are staffed and managed locally whereas France, due to the nature of its operations, only has a local sales team. Italy has its own call centre as volumes from OEM partners provide sufficient scale for a local office. In addition, Australia, due to its geographic distance has a greater degree of self-sufficiency with local sales and marketing, operations and an outsourced call center and finance functions. For new territories and new international OEM partners, the level of central operations involvement is high.

In addition to utilising a centralised operations team, we also use outsourcing arrangements to

provide certain functions for areas that are run distantly and selectively increase capacity as required. For example, our Polish business, which is managed from the German office, uses outsourced call handlers in-country to achieve a flexible and low cost local presence.

Our UK Division

As at March 31, 2015, approximately 2,119 people (measured as full-time equivalents (“FTEs”)) worked in our UK Division between our head office, operations center and two contact centers. Approximately 82% of our UK revenue in fiscal year 2015 was generated through 12-month contracts, either renewals of existing contracts or new annual policies taken out once the manufacturer’s period of cover expires. Total UK revenues in fiscal year 2015 were £527.0 million.

We have contact center sites in Nottingham and Brighton and a back-office function in Bedworth

in the United Kingdom. The contact centers represent key hubs for the UK business handling inbound and outbound sales as well as customer service, repair related, soft service and technical help calls. We also use specialist UK outsource telephony service providers in particular for outbound sales.

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Our International Division

In contrast to our UK revenue, the majority of international revenue (70%) was generated through extended contracts due to the less mature nature of the OEM international market. Total International revenues in fiscal year 2015 were £141.7 million with the following breakdown in selected markets:

• Germany, Poland and Austria. As at March 31, 2015, there were 79 FTEs and revenue in fiscal year 2015 was £75.7 million.

• Spain and Portugal. As at March 31, 2015, there were 193 FTEs (including call center and back office support for certain of our other International countries) and revenue in fiscal year 2015 was £38.2 million.

• Italy. As at March 31, 2014, there were 54 FTEs and revenue in fiscal year 2015 was £5.3 million.

• Australia. As at March 31, 2015, there were 27 FTEs and revenue in fiscal year 2015 was £15.7 million.

• France and Belgium. As at March 31, 2015, there were 13 FTEs and revenue in fiscal year 2015 was £3.7 million.

• Ireland. As at March 31, 2014, there were no FTEs since operations are managed from the UK offices and revenue in fiscal year 2015 was £3.1 million.

In addition, the OEM channel presents a significant untapped opportunity for us to grow if we

are able to successfully replicate our OEM model in these markets, as the number of appliances sold by our OEM partners in our international markets exceeds the number of appliances sold in the United Kingdom.

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Risk Management & Governance

We have established a risk management and control framework to protect our business from events that hinder achievement of our objectives and financial performance, including failure to exploit opportunities. Our Board of Directors identifies potential risks and uncertainties that could have a material impact on our performance and puts in place internal processes and controls designed to mitigate each risk. The major risks and uncertainties we face include:

• underwriting and pricing risk relating to the frequency and severity of claims and repair costs being greater than expected and reflected in our pricing. We manage our warranty liability risk through the following measures: underwriting controls, approval procedures for new products, control over the prices at which warranties may be sold, regular review of partners, products and performance and monitoring of emerging issues. In particular, our pricing is intended to maintain stable repair cost ratios across the life of our plans through a rigorous and prudent “ground up” approach developed and tested during many years as a specialist provider;

• liquidity risk relating to our ability to access cash to settle liabilities as they fall due. We maintain cash and liquid deposits to meet demands on a daily basis. We also have an £80.0 million Revolving Credit Facility, of which £45.0 million is available to us to meet short-term liquidity requirements of the Non-Regulated Business. As of March 31, 2015, there is an on-demand £35.0 million letter of credit under the New Revolving Credit Facility in favor of the PoS Trust. This letter of credit will remain undrawn until the trustees of the PoS Trust demand payment to cover customer claims that we have not settled in a timely fashion. Otherwise, the New Revolving Credit Facility remains undrawn.

• exposure to changes in interest rates arises from our investment portfolio and borrowings. Interest rate risk within our investment portfolio and external borrowings is actively managed by our Board of Directors and treasury function; and

• credit risk associated with our deposits with credit institutions, money market funds and warranty and insurance debtors. We structure the levels of credit risk we accept by placing limits on our exposure to any single counterparty or groups of counterparties and constantly review counterparty exposure in accordance with our conservative investment policy.

Proper and ethical business conduct is embedded into our day-to-day business. We have a strict

business framework which senior management and the Board ensure pervades all activities. We have established appropriate controls and monitoring over product design, selling processes, customer service and complaints which underpins our low complaints rates and high customer satisfaction.

We have a both a UK and International Conduct Standards Committee, chaired by our Chief

Financial Officer, which meets monthly and has a specific mandate to set the Group’s conduct standards and policies in relation to customers and promote our conduct standards culture throughout the organisation. Our Board of Directors is focused on corporate conduct related matters including comprehensive management information and reporting in board packs that are considered in board meetings to ensure the highest standards are maintained and the agenda is set at the very top of the organisation.

Regulation

Product Offerings

We seek to offer our UK business partners a full range of appliance care products covering both insured products and service plans depending on partner requirements and market factors such as taxation, regulation and the competitive environment. Insured products directly insure a consumer against repair or replacement of a domestic or electrical appliance, while service plans provide the consumer with similar protection but under a plan that is not structured as a “contract of insurance”. Although there is no statutory definition of what constitutes a “contract of insurance” under English law, certain legal principles have been established at common law. In addition, the Perimeter Guidance Manual published by the FCA (and its predecessor, the Financial Services Authority (FSA)) has helped us categorize whether our products are contracts of insurance or service contracts, in keeping with the applicable legal and regulatory requirements.

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Depending on their characterisation, our products are provided either by our regulated insurance company, DGI, or our service subsidiaries. Our ability to offer both insurance products and service plans allows us to meet our business partners’ requirements, compete with other appliance care providers in the market and offer flexible solutions within the same group. It also allows us the ability to switch programs should the business partner or circumstances so require. For example, in late 2011 dialogue with Sky led to the decision to transition all of its service plan customers to insurance contracts. We agreed the approach with the then FSA and substantially completed the migration of Sky customers within 12 months.

We are also able to provide variants to the basic product structure, to meet local legal and

regulatory rules. For example, in respect of certain types of retailer-sourced PoS appliance care programs in the United Kingdom, the Supply of Extended Warranties on Domestic Electrical Goods Order 2005 requires appropriate disclosures to be included in all PoS literature in respect of the nature of the financial protection provided to the consumer in the event of the warranty provider going out of business. The BRC requires its members (i.e. British retailers who join the BRC) to ring-fence assets to secure potential future claims made under certain appliance care plans sold at PoS. Although not a member of the BRC ourselves, we have established the PoS Trust to secure expected future claims in respect of our retailer appliance care PoS programs. As of March 31, 2015, the PoS Trust held a £35.0 million on-demand letter of credit issued under our £80.0 million New Revolving Credit Facility as security for such future claims and £0.4 million of cash.

UK Regulatory Landscape

On April 1, 2013, the FSA, which was previously responsible for regulation of financial firms from both a ‘prudential’ and ‘conduct’ perspective, ceased to exist, with most aspects of its role split between two new authorities: the PRA, responsible for prudential regulation, and the FCA, responsible for conduct of business matters and the prudential regulation of firms not regulated by the PRA. DGI, our UK-based insurer, is subject to dual regulation by the FCA and the PRA under the new regime and our other UK-regulated entities, Domestic & General Insurance Services Limited (“DGIS”) and Inkfish Financial Services Limited (“Inkfish”), are authorized and regulated by the FCA alone. DGIS and Inkfish are both non-investment insurance intermediaries that are not currently transacting business. DGS, our UK-based service company, operates as an appointed representative of DGI for insurance business and also sells service plans in its own right.

Under the new regulatory framework, DGI is subject to revised threshold requirements that firms

must meet in order to remain authorised. The PRA’s objectives are to promote the safety and soundness of firms and secure appropriate

protection for customers of insurance firms (in particular through the implementation of the Solvency II directive on the 1st January 2016) as well as a secondary objective to promote effective competition.

The FCA has also been granted wider powers compared to those of the previous FSA, including:

• intervening quickly to ban products for up to a year in order to prevent or minimize harm to consumers;

• banning or restricting sales of products that pose an unacceptable risk to consumers; and

• immediately banning financial advertising and promotions considered to be misleading.

In addition, the FCA has powers to ensure that the financial services industry in the United Kingdom remains stable and to promote healthy competition between financial services providers (with certain anti-trust powers transferred from the OFT as well as regulatory consumer credit). Both the FCA and PRA are expected to focus on firms’ business models and anticipate the potential risks their activities pose to financial stability and consumers.

While the Non-Regulated Business is not subject to FCA regulation in respect of its non-

insurance warranty services, it is subject to other laws and regulations, such as consumer regulations enforced by the OFT, including:

• the Unfair Terms in Consumer Contracts Regulations, which protect consumers against unfair standard terms in contracts; and

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• the Consumer Protection (Distance Selling) Regulations 2000 (DSRs), which apply to the selling of products and services where there is no face-to-face contact.

These regulations apply equally to DGI, but are enforced by the FCA. Since one aim of the

DSRs is to ensure a minimum level of consumer protection across the European Union, the DSRs also apply to warranty services marketed in the EEA, subject to the varying implementation in each applicable EEA country.

We believe that our relationship with the UK regulators is based on proactive engagement of our

senior management. We maintain open lines of communication with the PRA and FCA with a view to responding promptly to their requests for information and addressing their recommendations regarding compliance matters. DGI has a strong regulatory record in that it has never been fined or subject to enforcement action.

The UK government recently introduced changes to the consumer protection regime. Local

Authority Trading Standards Services will now have a greater role in the enforcement of consumer protection law at the national level. In addition a new Competition and Markets Authority will inherit the OFT’s consumer enforcement powers and will become the principal competition law regulator. The UK government is also implementing the European Consumer Rights Directive and introducing legislation to harmonize existing EU and UK laws and introduce additional consumer rights.

International Regulatory Landscape

DGI provides insured warranties in Germany, Spain, France, Austria, Belgium, Ireland, the Netherlands, Poland, Sweden and Portugal via “passporting” of our UK insurance regulatory status either through our branches in Germany, Spain and France or on a cross-border services basis. Our branch conduct requirements are regulated by the Autorité de Contrôle Prudentiel, the Bundesanstalt für Finanzdienstleistungsaufsicht and the Dirección General de Seguros y Fondos de Pensiones in France, Germany and Spain, respectively. DGI and DGIS are currently in the process of setting up branches in Italy in order to permit the carrying out of insurance activity in that country.

The activities of our business partners in selling or promoting insurance in our European markets

(including the United Kingdom) is currently governed by the 2005 Insurance Mediation Directive (and local implementing legislation), and regulated by various local regulators (such as the FCA in the United Kingdom). The European Commission has published legislative proposals for a revised directive – renamed the Insurance Distribution Directive (expected to be adopted by the EU Parliament and Council during 2015 and enter into force about two years later). The collection, storage and use of personal data is currently governed by the EU’s 1995 Data Protection Directive (and local implementing legislation, regulations and guidelines), and regulated by national regulators or authorities (such as the Information Commissioner’s Office in the United Kingdom). In 2012, the European Commission proposed the reform of the EU’s 1995 data protection rules (expected to come into force in or after 2016). In addition, in February 2014, a new system for credit transfer and direct debit transactions denominated in euro within the EU (known as “SEPA”) began operating.

DGI is also authorized to offer insured warranties in Australia, regulated by APRA, which

oversees the Australian financial services industry, and ASIC, which regulates Australia’s corporate and financial services. The Australian business is subject to the ASIC Act and the Australian Consumer Law, introduced as part of the Competition and Consumer Act 2010, which is enforced by the ACCC, an independent statutory authority which has oversight of consumer protection. Due to recent developments in Australia, there is heightened scrutiny of the extended warranty market, which may lead to increased regulatory action. For further detail on these developments, see “Risk Factors—Risks Relating to Our Business and Industry— Our Regulated Business is subject to extensive regulation. In addition, legal and regulatory changes or actions could impose more onerous controls on our business or subject our Non- Regulated Business to new regulations.”

We also offer service plans in Italy and Australia through our Italian and Australian service

companies. DGSP, the Australian service company, holds a financial services license from ASIC and is subject to the Australian Consumer Law enforced by the ACCC. Our other European service companies are not actively selling warranty services.

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Our Risk & Compliance Activities

Our Risk & Compliance team consists of ten FTEs supervised by our Group Head of Legal and Company Secretary: a Group Head of Risk & Compliance, a UK Group Compliance Manager, two Monitoring Officers and a Contact Centre Compliance Officer, an International Compliance Manager and Compliance Officer, a Compliance Manager- Australia and a Group Risk Manager and Risk Analyst. We prepare an annual compliance plan that sets out the activity of the Compliance function for both insurance and non-insurance subsidiaries in our UK and International Divisions for the year and a Risk Development Plan to further develop our risk management structure and processes. As well as providing advice, guidance and training to the business, our Compliance team operates two risk-based Annual Compliance Monitoring plans: one for the United Kingdom and the Republic of Ireland and the other for our International Division (excluding Australia, which is supported by external consultants locally). The planned monitoring activity takes place on a rolling monthly basis and is designed to ensure that the relevant companies, including outsourced arrangements, are complying with regulatory requirements (as appropriate) and to promote business practice improvements. The Risk & Compliance team reports to the DGI Board and DGI Audit & Risk Committee and to the Group Audit & Risk Committee and is a member of the Conduct Standards Committee.

Regulatory Capital Requirements

Insurance groups are required to comply with certain European and local regulatory capital and conduct regulations for their activities in the European Economic Area (“EEA”). The PRA capital rules are relevant to all EEA insurance groups that include UK insurers and stipulate a requirement to hold capital above certain minimum levels defined as follows:

• Minimum Capital Requirement (“MCR”): The MCR is a formula based calculation that determines the EU minimum capital requirement at a specific individual insurance entity level. This is a ‘hard test’, meaning there exists an obligation to comply, and if capital resources fall below this level a restoration plan needs to be agreed with the PRA.

• Individual Capital Assessment (“ICA”): The ICA is a company’s own assessment of the regulatory capital it needs to maintain at a specific individual insurance entity level, based on its own view of its risks and level of diversification. The PRA has set out a number of sub- principles and associated guidance to articulate minimum standards for firms in undertaking their ICA’s.

• Insurance Groups Directive (“IGD”): The IGD applies to the consolidated position of an insurance group, not specific insurance entities. IGD is a hard test within the EEA, but also includes a soft test (i.e., no obligation to comply but only to report) for non-EEA based parent undertakings of insurance groups.

The minimum capital requirements computed above are then compared to a company’s actual

capital position and the surplus / deficit capital position is presented as a ratio, often called a solvency ratio. These regulatory capital requirements impact our companies as follows:

• Domestic & General Acquisitions Limited (“DGA”) is currently regarded as our ‘Ultimate Insurance Parent Undertaking’ but is not an insurer itself. Since it is incorporated in Jersey (outside of the EEA) it is not currently required to comply with any ‘hard’ IGD capital requirements, but has a ‘soft’ obligation to report its IGD capital position to the PRA. As it is not an insurer, DGA does not have to comply with MCR or ICA;

• Domestic & General Group Limited (“DGG”) is currently regarded as our EEA Insurance Parent Undertaking but is not an insurer itself. It is subject to the hard IGD test. As it is not an insurer it does not have to comply with MCR, or ICA; and

• DGI is the only insurer in the Domestic & General Group. DGI has to comply with MCR and ICA and is included within DGG’s IGD’s assessment. As of March 31, 2015 the qualifying capital resources of £72.4 million held by DGI exceeded the minimum capital requirements of £47.8 million, resulting in an additional buffer of £24.6 million (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Management—Regulated Business”).

The Solvency II European Directive (2009/138/EEC) adopted on November 25, 2009 (“Solvency

II”) is the new prudential regime for insurance and reinsurance undertakings in the European Union

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which will replace the current UK regulatory regime in 2016. The aim of Solvency II is the harmonization of prudential requirements for insurers and reinsurers across Europe, eliminating the most serious differences between the laws of the various member states. Solvency II consists of three core areas described as “three pillars”. Pillar 1 relates to the quantification of solvency capital requirements. Pillar 2 relates to how management assesses the potential impact on capital arising from its day-to-day business decisions, including overall regulatory governance. Pillar 3 relates to reporting regulatory information. A general principle in Solvency II states that its application should be proportionate to the risks and size of the relevant insurance business. Our management has reviewed the new rules of Solvency II and prepared an implementation program to ensure that all the related regulatory requirements will be met by January 1, 2016. Assessing the potential impact of Solvency II on our insurance business’s capital requirements involves the application of expert judgment, the projection of future business results and the use of estimates and alternative scenarios. In addition, there remains significant uncertainty around the final detailed rules and how they will be applied. Within these limitations and based on a set of assumptions that we believe to be reasonable, our management has estimated a range of potential outcomes from the application of Solvency II and concluded that Solvency II is not expected to materially impact our current solvency ratios and that its additional reporting requirements should be met with minor enhancements to our current reporting system. See “Risk Factors—Risks Relating to our Business and Industry—The minimum capital requirements of our insurance business may change or become more onerous.”

Intellectual Property

We own the intellectual property rights to all software which has been customised or configured for our bespoke IT systems and processes. The Group’s registered intellectual property consists of various UK and international trade marks and domain names.

Employees

As of March 31, 2015, we had 2,533 FTEs located in Germany, Spain, Australia, France and Italy as well as the United Kingdom. None of our employees are covered by collective bargaining agreements. We consider our relations with our employees to be good.

Certain Contracts Relating to the Operation of Our Business

UK Partner Contracts

We have a standard form of contract that we endeavor to use as the basis of negotiations with our UK partners; although each contract is negotiated separately and incorporates specific requests of the relevant partner. Our UK contracts have initial terms of one to eight years, and if not terminated prior to the expiry of the initial term, they either automatically renew, subject to the exercise of any termination rights prior to such automatic renewal, for successive one-year periods or continue indefinitely until the contract is terminated.

The right to use customer data to renew appliance care plans that are expiring or to cross-sell

other appliance care plans, once the contract itself has expired, gives us the potential to sell renewed appliance care plans for the lifecycle of a product and to offer customers new appliance care plans, notwithstanding the termination of the arrangements with a particular UK business partner. The ability to renew expiring appliance care plans is typically expressed as our right to use, on an exclusive basis, the data provided under the contract following termination of the contract. The ability to cross-sell appliance care plans is typically expressed as our right to share customers’ data within our group of companies to promote other appliance care plans.

International Partner Contracts

Our International Division is split between retail partners, who have entered into country-specific contracts, and OEM partners who either have country-specific agreements or have entered into Pan- European contracts which cover more than one country and which contain schedules setting out country-specific information. The latter form has been used as the base document for the Whirlpool and Candy Hoover Pan-European agreements, with a variant used for the Indesit Framework Agreement. However, each contract is negotiated separately and incorporates specific requests of the relevant partner. With certain exceptions, our international OEM contracts have initial terms of three to eight

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years and, if not terminated prior to the expiry of the initial term, they generally automatically renew, subject to the exercise of any termination rights prior to such automatic renewal, for successive one or two-year periods. Some business partners have contractual arrangements of shorter duration or which may be terminated on relatively short notice.

Both during the term and following termination of the contract, we may only use customer data

originally obtained from an international partner for the sole purpose of promoting and selling appliance care plans and renewing existing appliance care plans with respect to the particular product manufactured, distributed or sold by the particular partner to that customer. However, we may use customer data received from customers generally for marketing purposes, as permitted by the terms and conditions of the underlying appliance care plans. Following termination of our international contracts, with certain limitations, we are generally allowed to renew expiring appliance care plans sold to customers of our international partners.

Legal Proceedings

We are not currently subject to any pending or threatened material litigation proceedings. In the ordinary course of business we are and may become subject to litigation proceedings, but we do not believe that any such claims individually or in the aggregate would have a material impact on our financial condition.

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MANAGEMENT

Board of Directors

The current Board of Directors of Galaxy Finco Limited consists of the following members: Andrew Crossley (Chief Financial Officer), Robin (Pev) Hooper (CVC), Peter Rutland (CVC) and David Wells (CVC).

Galaxy Midco 1 Limited is the parent company of the Group, and this is where the executive

management team sits from a corporate governance perspective. The Board of Galaxy Midco 1 Limited (the “Board”) consists of the following members: Dr

Alexander Labak (Chief Executive Officer), Andrew Crossley (Chief Financial Officer), Kevin Beeston (Chairman), Debbie Hewitt MBE (Non-Executive Director), Robin (Pev) Hooper (CVC) and Peter Rutland (CVC).

The following description refers to the governance structures of Galaxy Midco 1 Limited. Board Practices

Our Board meets on a regular basis to review performance and our business plans. In addition, the Board has established policies for the conduct of our business, including delegations of Board authority to directors and members of senior management. The Board has appointed committees to ensure appropriate oversight of our companies’ operations (see “Business–Organisation and Management Structure—Risk Management and Governance”).

Board Committees

Our Board has an Audit & Risk Committee and a Remuneration Committee.

The Audit Committee meets at least three times a year to review the annual and quarterly financial statements, the appropriateness of our accounting principles and procedures, the effectiveness of the audit process and our relationship with our external auditors and the effectiveness of our internal controls, risk management and compliance processes.

The Remuneration Committee meets at least once a year to determine the overall framework and

policy for remuneration of the Chairman, the independent non-executive directors, the executive directors and senior executives of the Domestic & General Group.

Senior Management Senior management at the time of this report was as follows:

Dr Alex Labak was appointed Chief Executive designate on 10 March 2014 and became Chief Executive and a member of the Board on 30 April 2014. Most recently he was Chairman and Chief Executive of Home Credit BV, a market leading consumer finance and retail banking organisation in emerging markets in both Europe and Asia. Prior to that he held senior positions at a number of companies including Henkel, Johnson and Johnson Consumer Products, Deutsche Bank and MasterCard. He holds an MBA from the Wharton School at the University of Pennsylvania and a Doctorate in Managerial Economics from Vienna University.

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Andrew Crossley FCA was appointed a director of the Company on 4 September 2014 when he joined the Group as Chief Financial Officer. Andrew was previously Chief Financial Officer and Deputy Chief Executive Officer at Prudential UK & Europe and Group Chief Risk Officer for Prudential Plc, having formerly held senior finance positions with other listed companies including Lloyds Bank and Legal & General. He holds a BSc from the University College London and an M.Phil from University of Cambridge.

Dean Keeling joined D&G on 9 September 2013 and as Managing Director is responsible for the UK business. Previously, Dean developed both Grocery and Health and Beauty retail sectors across the UK and Western Europe for Proctor & Gamble. Dean has held senior positions at British Gas, Centrica, Procter & Gamble and led the startup of British Gas Smart Homes to drive market leadership in Smart Meters, Electric Vehicles and innovation launches such as the award winning Remote Boiler Controls proposition.

Mark Berryman joined D&G in January 1999 as a key account handler. In November 2006 he

was promoted to Commercial Director and in December 2010 he became Group Marketing Director. He holds a BSc from Leeds University, is a Chartered Insurer and Associate of the Chartered Insurance Institute. Mark is responsible for the International business, having become Managing Director - International in February 2014.

Compensation of Senior Management

The aggregate compensation paid to our Senior Management in fiscal year 2015, including benefits in kind and pension contributions, was £1.5 million. Our aggregate expense for service fees paid to the non-executive directors was £0.2 million.

We currently have a customary directors and officers insurance policy.

Bonus Incentive Plans

Our bonus plans form part of our total compensation strategy. The Management Bonus Plan is designed to ensure that the compensation for management is in line with market rates and reflects their contribution to the long-term success of the Group. Management bonuses are calculated as a percentage of salary, and an individual’s bonus payment is determined by combining this calculation with percentage multipliers which are based on personal and Group financial performance. We have established a long-term incentive plan for management in connection with the Transactions, and we also operate the following bonus schemes for those who are not in the Management Bonus Plan:

• Contact Centre Bonus Scheme—payable on a monthly or quarterly basis and subject to locally agreed key performance indicators;

• Group Bonus Scheme—payable on an annual basis and subject to a Group EBITDA target. Available to all employees who are not in the Management Bonus Plan or a Contact Centre Bonus Scheme.

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PRINCIPAL SHAREHOLDERS As at March 31, 2015 funds advised by CVC Capital Partners directly or indirectly through

intermediate holding companies owned approximately 85% of the share capital of Galaxy Topco Limited and approximately 93% of the shareholder debt issued by Galaxy Midco 1, while the Management Participants had beneficial ownership of approximately 15% of the share capital of Galaxy Topco Limited and approximately 7% of the shareholder debt issued by Galaxy Midco 1 Limited.

CVC Funds are our equity sponsors. CVC is a leading international private equity and advisory

firm. Founded in 1981, CVC today has a network of 20 offices throughout Europe, Asia and the United States. To date, CVC has secured commitments of over US$66 billion in funds across European and Asia Pacific private equity funds and credit funds, and CVC Funds have completed over 300 investments in a wide range of industries and countries across the world, with an aggregate enterprise purchase value of approximately US$120 billion. CVC Funds currently own more than 55 companies worldwide, which generate approximately US$120 billion in revenues and employ approximately 400,000 people.

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NON-GAAP FINANCIAL MEASURES In this operating and financial review we present certain financial measures that are not required

by or presented in accordance with IFRS, including “Adjusted EBITDA”, “Underlying Revenue”, “Underlying Operating Profit”, “Net Working Capital”, “Free Cash Flow” and “Adjusted Cash Flow Available for Debt Service”, because we believe they provide investors with useful additional information to measure our performance (in the case of Adjusted EBITDA, Underlying Revenue and Underlying Operating Profit) or liquidity (in the case of Net Working Capital, Free Cash Flow and Adjusted Cash Flow Available for Debt Service).

Adjusted EBITDA Adjusted EBITDA represents profit/(loss) before (i) finance costs and interest expenses, (ii) income

tax (charge)/credit, (iii) depreciation and (iv) amortization and after investment income, as further adjusted to exclude the impact on our profit/(loss) of certain items that management considers exceptional or non-trade related and to exclude the results of discontinued operations. Adjusted EBITDA provides useful information to investors about results of the Group’s operations for the following reasons: (a) it is among the measures used by the Board of Directors and management to evaluate underlying operating performance, review business trends, identify strategies to improve results and make day-to-day operating decisions, and (b) it allows a comparison of the Group’s results across periods and results across companies in the industry on a consistent basis, by removing the effects on operating performance of the Group’s capital structure (such as the varying levels of interest expense), asset base and capital investment cycle (such as depreciation and amortization) and items largely outside the control of management (such as income taxes).

Adjusted EBITDA should not be considered in isolation or as a substitute for measures of operating performance reported in accordance with IFRS. Adjusted EBITDA has limitations as an analytical tool, some of which are as follows:

Adjusted EBITDA does not reflect the significant interest expense on debt or the cash requirements necessary to service interest or principal payments on debt;

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

Adjusted EBITDA excludes certain tax payments that may represent a reduction in cash available to us;

other companies in the industry in which we operate may calculate Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures;

Adjusted EBITDA includes investment income, which is affected by fluctuations in interest rates, changes in market sentiment, economic downturns and any deterioration in the financial condition of one or more issuers of the debt securities held in our investment portfolio. Since the Group’s investment income does not directly result from our core warranty business, including it in Adjusted EBITDA may limit or distort the usefulness of these measure in presenting the profitability of our recurring operations; and

the calculation and presentation of Adjusted EBITDA in this operating and financial review is similar to, but different from, the calculation of Consolidated EBITDA under the Indentures governing the Notes or the agreement governing the Galaxy Finco Revolving Credit Facility. Accordingly Adjusted EBITDA does not provide precise indications as to the level of Galaxy Finco’s adherence to the terms of the Indentures and Revolving Credit Facility Agreement.

Because of these limitations, the Group relies primarily on its IFRS results and uses Adjusted EBITDA only supplementally. Investors are encouraged to evaluate each of the adjustments reflected in the presentation of Adjusted EBITDA and consider whether each is appropriate. The information presented by Adjusted EBITDA is unaudited and is not intended to and does not comply with the reporting requirements of the U.S. Securities and Exchange Commission.

Underlying Revenue and Underlying Operating Profit Following the acquisition of the Domestic & General Group, part of the purchase price paid by

Galaxy Bidco Limited was allocated to the fair value of our identifiable assets and identifiable liabilities as of the Completion Date and the excess was recorded as goodwill. In connection with the purchase price allocation, the Group concluded that £208.8 million of our Deferred Acquisition Costs had a fair value of £nil and therefore, in the condensed consolidated interim financial statements of Galaxy Finco Limited included within this financial information, we have reduced both our Deferred Acquisition Costs asset and

55

our Deferred Income liability by a corresponding amount. This adjustment will reverse over time impacting revenue and customer acquisition costs without having an overall impact on operating profit.

This adjustment has not been made in the pro forma condensed consolidated interim financial statements or in this operating and financial review in order to assist the understanding of the Group’s balance sheet and working capital.

The Group’s management measures and reports, and intends to continue measuring and reporting, revenue and operating profit on a basis that (i) reverses the accounting impact of business combinations, (ii) excludes non-warranty sources of revenue and (iii) does not include investment income, in order to keep track of and evaluate the underlying operating performance of our core warranty business. In particular:

“Underlying Revenue” represents revenue after the reversal of any fair value adjustments to Deferred Acquisition Costs and Deferred Income associated with the acquisition method of accounting for business combinations. Underlying Revenue does not include investment income, which is affected by fluctuations in interest rates, changes in market sentiment, economic downturns and any deterioration in the financial condition of one or more issuers of the debt securities held in our investment portfolio and which does not directly result from the core warranty business;

“Underlying Operating Profit” represents Underlying Revenue minus operating costs.

The Groups believes that Underlying Revenue and Underlying Operating Profit provide useful information to investors about our results of operations for the following reasons: (a) they are among the measures used by the Board of Directors and management to evaluate our underlying operating performance, review business trends, identify strategies to improve results and make day-to-day operating decisions, and (b) they allow a comparison of results across periods on a consistent basis, by removing the effects on operating performance of the acquisition method of accounting for business combinations and excluding investment income.

Underlying Revenue and Underlying Operating Profit should not be considered in isolation or as substitutes for measures of our operating performance reported in accordance with IFRS. Underlying Revenue and Underlying Operating Profit have limitations as analytical tools, including that they do not give effect to our revised estimates regarding the recoverability of Deferred Acquisition Costs through Deferred Income as of a date that is subsequent to the date on which such customer acquisition costs were incurred. Because of these limitations, the Group relies primarily on its IFRS results and uses Underlying Revenue and Underlying Operating Profit only supplementally. You are encouraged to evaluate the adjustments reflected in our presentation of Underlying Revenue and Underlying Operating Profit and whether you consider each to be appropriate. The information presented by Underlying Revenue and Underlying Operating Profit is unaudited and is not intended to and does not comply with the reporting requirements of the U.S. Securities and Exchange Commission.

Net Working Capital Net Working Capital, as of any given balance sheet date, is defined as the sum of the following

assets and liabilities: (i) deferred acquisition costs, minus (ii) deferred income, plus (iii) trade debtors, plus (iv) prepayments, minus (v) repairs cost provision, minus (vi) other tax, VAT, PAYE, NI payable, minus (vii) third party creditors, minus (viii) accrued expenses. Management believe that Net Working Capital provides useful information to investors about our operating liquidity for the following reasons: (a) it is among the measures used by the Board of Directors or management to evaluate our ability to fund short-term liquidity needs, and (b) it allows investors, among other things, to assess the extent to which sales carried on our balance sheet are sufficient to cover deferred acquisition costs and receivables from direct debit customers. Net Working Capital should not be considered in isolation or as a substitute for measures of liquidity or cash flows reported in accordance with IFRS.

Free Cash Flow Free Cash Flow represents Adjusted EBITDA plus/(minus) the decrease/(increase) in Net Working

Capital minus capital expenditures. Management believes that free cash flow provides useful information to investors about our liquidity and cash flows for the following reasons: (a) management uses this measure to evaluate our ability to generate long-term value and (b) Free Cash Flow is frequently used by securities analysts, investors and other interested parties for valuation purposes or as a common measure to compare financial condition across periods and financial condition across companies in the appliance care industry.

56

Free Cash Flow is not a measure of liquidity under IFRS and has limitations as an analytical tool, some of which are as follows:

Free Cash Flow does not represent a reliable measure of cash flow available to service our debt, since a substantial majority of our Free Cash Flow is generated by and held in our Regulated Business, from which it can be extracted and upstreamed to the Issuers only in compliance with the regulatory capital requirements applicable to our insurance companies (principally DGI) within the Regulated Business and our dividend policy relating to DGI;

Free Cash Flow does not represent the residual cash flow available for discretionary expenditures by us, since we have debt payment obligations and tax payment obligations that are not deducted from the measure;

Free Cash Flow does not deduct cash flows used by the Group in other financing activities; Free Cash Flow does not deduct certain other items settled in cash; and other companies in the industries in which the Group operates may calculate Free Cash Flow

differently, limiting its usefulness as a comparative measure.

Because of these limitations, the Group relies primarily on measures of liquidity and cash flows presented in accordance with IFRS and uses Free Cash Flow only supplementally. You are encouraged to evaluate our methodology for calculating Free Cash Flow and whether you consider it to be appropriate. In addition, in evaluating this non-GAAP financial measure, you should consider the types of events and transactions that are not reflected in Free Cash Flow and should not consider Free Cash Flow in isolation or as an alternative to net cash flows from operating activities or other measures of liquidity prepared in accordance with IFRS or as a reliable measure of our ability to service our debt.

Adjusted Cash Flow Available for Debt Service

The Group’s ability to service debt depends primarily on two separate streams of cash flow: (a) free cash flow from the Non-Regulated Business and (b) distributable earnings of the Regulated Business (representing after-tax earnings that can be distributed following any capital retention necessary to ensure continued compliance with the applicable capital requirements and our policy of only paying dividends out of DGI’s distributable reserves to the extent that an additional prudential buffer continues to be retained within DGI after giving effect to the proposed distribution).

Prior to the Acquisition a prudential buffer of approximately 70% was maintained. On March 16, 2014, the level of additional prudential buffer was reduced to approximately 30% of the minimum capital requirements applicable to DGI from time to time.

The financial information provided in this financial review for the current fiscal period is calculated using the 30% prudential buffer that was being applied at March 31, 2015, and for the comparative fiscal period, the 70% prudential buffer that was being applied at March 31, 2014.

Adjusted Cash Flow Available for Debt Service is defined as the sum of (i) Free Cash Flow of the Non-Regulated Business, plus (ii) dividends that can be distributed by DGI over the amount of capital to be held for regulatory purposes plus the prudential buffer and by other members of the Regulated Business, plus (iii) certain payments from the Regulated Business to the Non-Regulated Business not included in (i) and (ii) above.

Adjusted Cash Flow Available for Debt Service is presented because in management’s view it provides investors with useful information about our underlying ability to generate and extract cash flows from our various subsidiaries in order to make interest and principal payments on our debt, including the Notes offered hereby. Adjusted Cash Flow Available for Debt Service is not a measure of liquidity under IFRS and has limitations as an analytical tool, some of which are as follows:

Adjusted Cash Flow Available for Debt Service does not represent the residual cash flow available for discretionary expenditures, particularly because it is a pre-tax measure and our various tax payment obligations are not deducted from such measure;

Adjusted Cash Flow Available for Debt Service does not deduct cash flows used in financing activities;

Adjusted Cash Flow Available for Debt Service is not a direct measurement of cash flows and attempts to derive and measure our ability to service debt from income statement data of the Regulated Business and Non-Regulated Businesses. Accordingly, Adjusted Cash Flow Available for Debt Service does not directly correlate to the actual collection of cash. In addition, the calculation of the measure does not take into account changes in working capital of the

57

Regulated Business that are otherwise factored in when calculating its net cash from operating activities;

Adjusted Cash Flow Available for Debt Service does not deduct certain other items settled in cash; and

other companies in the industries in which we operate may calculate Adjusted Cash Flow Available for Debt Service differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, the Group relies primarily on measures of liquidity and cash flows presented in accordance with IFRS and use Adjusted Cash Flow Available for Debt Service only supplementally. You are encouraged to evaluate our methodology for calculating Adjusted Cash Flow Available for Debt Service and whether you consider it to be appropriate. In addition, in evaluating this non-GAAP financial measure, you should consider the types of events and transactions that are not reflected in Adjusted Cash Flow Available for Debt Service and should not consider Adjusted Cash Flow Available for Debt Service in isolation or as an alternative to net cash flows from operating activities or other measures of liquidity prepared in accordance with IFRS.

Unrestricted Cash Defined as the Cash and Cash equivalents balance of the Unregulated Business and the Excess

Distributable Reserves of the Regulated Business over and above regulatory capital requirements.

58

FORWARD-LOOKING STATEMENTS

This operating and financial review includes “forward-looking statements”, within the meaning of the U.S. securities laws and certain other jurisdictions, based on our current expectations and projections about future events, including:

our ability to maintain our relationships with existing OEM and retailer partners and win contracts with new business partners;

our ability to continue to renew automatically plans with customers who pay by direct debit; our reliance on a limited number of major business partners; our ability to expand in international markets; the impact of regulations on us and our operations and the possibility of future regulatory

changes; the competitive environment in which we operate; general economic trends and trends in the appliance care services industry; our strategy, outlook and growth prospects; changes to our repair cost ratios and expectations of future repair costs; the management and performance of our investment portfolio; risks related to conducting operations in several different countries; our ability to maintain an effective system of internal controls over financial reporting; our operational and financial targets; our liquidity, capital resources and capital expenditure; our ability to maintain data security and comply with data protection laws; exchange rate fluctuations; our ability to attract and retain key personnel; risks related to our structure; our high degree of leverage and significant debt service obligations, as well as our ability to

generate and upstream sufficient cash flow to service our debt; the effect of operating and financial restrictions in our debt instruments; other risks associated with our structure, our financial profile, the Notes and our other

indebtedness factors discussed or referred to in the offering memorandum of Galaxy Bidco Limited (the “Senior Secured Notes Issuer”) and Galaxy Finco Limited (the “Senior Notes Issuer” and, together with the Senior Secured Notes Issuer, the “Issuers”) dated October 24, 2014 (the “offering memorandum”), including those set forth under the section thereof entitled “Risk Factors”;

risks associated with the Transactions in connection with the Acquisition; other factors discussed or referred to in the offering memorandum of Galaxy Bidco Limited (the

“Senior Secured Notes Issuer”) and Galaxy Finco Limited (the “Senior Notes Issuer” and, together with the Senior Secured Notes Issuer, the “Issuers”) dated October 24, 2014 (the “offering memorandum”), including those set forth under the section thereof entitled “Risk Factors”; and

other factors discussed or referred to in the Operating and Financial Review of the Pro Forma Consolidated Financial Statements (Unaudited) of Galaxy Finco Limited for the year ended 31 March 2015 dated July 8, 2015, including those set forth under the section thereof entitled “Risk Factors”.

All statements other than statements of historical facts included in this operating and financial review, including, without limitation, statements regarding our future financial position, risks and uncertainties related to our business, strategy, capital expenditures and our plans and objectives for future operations, may be deemed to be forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, including those identified under the “Risk Factors” section in the offering memorandum. Words such as “believe”, “expect”, “anticipate”, “may”, “assume”, “plan”, “intend”, “will”, “should”, “estimate”, “risk” and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. In addition, from time to time we or our representatives, acting in respect of information provided by us, have made or may make forward-looking

59

statements orally or in writing and these forward-looking statements may be included in but are not limited to press releases (including on our website), reports to our security holders and other communications. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Any forward-looking statement speaks only as of the date on which it is made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this operating and financial review or in the Operating and Financial Review of the Pro Forma Consolidated Financial Statements (Unaudited) of Galaxy Finco Limited for the year ended 31 March 2015, or in the offering memorandum, including those set forth under the section thereof entitled “Risk Factors”.

The risks described in the “Risk Factors” section in the offering memorandum and in the Operating and Financial Review of the Pro Forma Consolidated Financial Statements (Unaudited) of Galaxy Finco Limited for the year ended 31 March 2015 are not exhaustive. Other sections of this operating and financial review describe additional factors that could adversely affect our business, financial condition or results of operations. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.

60

CERTAIN DEFINITIONS

Unless indicated otherwise in this operating and financial review or the context requires otherwise: all references to the “Completion Date” are to the date on which the Acquisition was

consummated, being December 19, 2014; all references to “DGI” are to Domestic & General Insurance Plc, a limited liability company

incorporated under the laws of England and Wales; all references to “DGS” are to Domestic & General Services Limited, a limited liability company

incorporated under the laws of England and Wales; all references to the “Domestic & General Group” are to Galaxy Finco Limited (a limited

company incorporated under the laws of Jersey) and its consolidated subsidiaries; all references to “Group”, “we”, “us” or “our” are to the Senior Notes Issuer and its consolidated

subsidiaries from time to time, including the Domestic & General Group from the Completion Date;

all references to the “Guarantors” are to the Senior Secured Notes Guarantors and the Senior Notes Guarantors, collectively;

all references to “IFRS” are to the International Financial Reporting Standard as adopted by the European Union;

all references to the “Indentures” are to the Senior Secured Notes Indenture and the Senior Notes Indenture;

all references to the “Issuers” are to the Senior Secured Notes Issuer and the Senior Notes Issuer, collectively;

all references to the “Revolving Credit Facility” are to the £80.0 million revolving facility made available under the Revolving Credit Facility Agreement;

all references to the “Revolving Credit Facility Agreement” are to the revolving credit facility agreement dated August 13, 2014 (as amended and restated prior to the Issue Date) between (among others) the Senior Secured Notes Issuer (as original borrower), the Senior Notes Issuer, Goldman Sachs Lending Partners LLC, Barclays Bank PLC, Credit Suisse AG, London Branch, BNP Paribas Fortis SA/NV, Morgan Stanley Senior Funding Inc., Société Générale, London Branch, UBS AG, London Branch, Mizuho Bank, Ltd., National Westminster Bank plc (as lenders) and The Royal Bank of Scotland plc (as facility agent and security agent) as the same may be further amended from time to time;

all references to the “Non-Regulated Business” are to the entities comprising the Domestic & General Group other than those comprising the Regulated Business;

all references to the “Offering Memorandum” are to the offering memorandum of Galaxy Bidco Limited and Galaxy Finco Limited dated October 24, 2013;

all references to the “PoS Trust” are to the English law trust fund (as the same be amended from time to time) established by Domestic & General Services Limited on June 17, 2010 to secure expected future claims in respect of its warranty plans sold through retailers, other third parties or sold directly, and/or any other similar trusts or arrangements established from time to time and/or any successors thereof;

all references to the “predecessor Group” are to Domestic & General Group Holdings Limited and its consolidated subsidiaries prior to the Completion Date;

all references to the “successor Group” are to Galaxy Finco Limited and its consolidated subsidiaries subsequent to the Completion Date;

all references to the “Regulated Business” are to Domestic & General Acquisitions Limited and the entities owned, directly or indirectly, by Domestic & General Acquisitions Limited including Domestic & General Group Limited (our EEA insurance parent undertaking), Domestic & General Insurance Services Limited (a UK regulated non-investment insurance intermediary), Inkfish Financial Services Limited (a UK regulated non-investment insurance intermediary), DGI (our UK regulated insurance company) and DGI’s international insurance branches in Germany, Spain, France and Australia, together with the Italian, Australian (DGSP), Spanish and German service companies (which are not insurance companies and are not subject to regulatory capital requirements).

61

GALAXY FINCO LIMITED

(Registered in Jersey No. 113706)

PRO FORMA CONSOLIDATED

FINANCIAL STATEMENTS (UNAUDITED)

FOR THE YEAR AND QUARTER ENDED

31 MARCH 2015

FP-1


BASIS OF PREPARATION

Basis of preparation

●

●

●

●

●

●

The valuation exercise undertaken to allocate the purchase price to identifiable net assets is now final.

There have been no changes since the prior period.

For further details, refer to Note 4 to these interim financial statements which represents the allocation

of the purchase price to the acquired net assets of Domestic & General Group Holdings Limited and

its subsidiaries.

The consolidated cashflow statement of Domestic & General Group Holdings Limited for the nine

month period to 31 December 2013, plus the cashflow statement of Galaxy Bidco Limited since its

inception to 31 December 2013 plus the cashflow statement of Galaxy Finco Limited since its

inception to 31 December 2013 eliminating any transactions between those companies plus the

consolidated cashflow statement of Galaxy Finco Limited for the three month period to 31 March

2014.

Galaxy Finco Limited was incorporated on 9 August 2013. The company was formed by funds advised

by CVC Capital Partners in order to enable a subsidiary company, Galaxy Bidco Limited, to acquire

Domestic & General Group Holdings Limited and its subsidiary companies, and to continue the

business of this Group, which is the comprehensive provision of appliance care for products in the

UK, Europe and Australia.

The consolidated balance sheet of Galaxy Finco Limited as at 31 March 2014 reflecting the

acquisition of Domestic & General Group Holdings Limited by Galaxy Bidco Limited (but ignoring

the fair value adjustment required to be made to deferred acquisition costs and deferred income to

reflect the fact that deferred acquisition costs have a fair value of £nil in a business combination).

These financial statements are prepared on a pro forma basis combining the results of the successor

group for the twelve month period to 31 March 2015 and successor and predecessor groups for the

twelve month period to 31 March 2014.

"Successor" refers to Galaxy Finco Limited and its subsidiaries after the business combination and

"Predecessor" refers to Domestic & General Group Holdings Limited and its subsidiaries prior to the

business combination.

For the year ended 31 March 2015 the pro forma financial statements include:

The consolidated income statement of Galaxy Finco Limited Group only

The consolidated balance sheet of Galaxy Finco Limited Group only

The consolidated cashflow statement of Galaxy Finco Limited Group only

For the year ended 31 March 2014 (the comparative period) the pro forma financial information

The consolidated income statement of Domestic & General Group Holdings Limited for the nine

month period to 31 December 2013, plus the income statement of Galaxy Bidco Limited since its

inception to 31 December 2013 plus the income statement of Galaxy Finco Limited since its

inception to 31 December 2013 eliminating any transactions between those companies plus the

consolidated income statement of Galaxy Finco Limited for the three month period to 31 March

2014.

In accordance with IFRS 3 Business Combinations, the acquisition of Domestic & General Group

Holdings Limited by Galaxy Bidco Limited is accounted for using the purchase method. The cost of

acquisition is measured at the fair value of assets transferred, liabilities assumed and equity interests

issued by the acquirer. Acquisition-related costs are expensed as incurred. The consideration

transferred is offset against the re-valued identifiable net assets attributable to the acquirer at the

acquisition date. Any resulting positive difference is capitalized in the balance sheet as goodwill.

FP-2


PRO FORMA CONSOLIDATED INCOME STATEMENT

FOR THE YEAR AND QUARTER ENDED 31 MARCH 2015

Before After Before After

significant Significant significant significant Significant significant

items items items items items items

and and and and and and

amortisation amortisation amortisation amortisation amortisation amortisation

Note £m £m £m £m £m £m

Revenue 1 170.2 - 170.2 158.0 - 158.0

- Amortisation 2 - (25.8) (25.8) - (28.6) (28.6)

- Other operating costs 2 (153.1) (1.8) (154.9) (142.0) - (142.0)

17.1 (27.6) (10.5) 16.0 (28.6) (12.6)

0.6 - 0.6 0.7 - 0.7

Finance costs (12.7) - (12.7) (11.7) - (11.7)

- - - - (3.7) (3.7)

5.0 (27.6) (22.6) 5.0 (32.3) (27.3)

(0.5) 6.4 5.9 (0.5) 5.4 4.9

-

(16.7) (22.4)

Before After Before After

significant Significant significant significant Significant significant

items items items items items items

and and and and and and

amortisation amortisation amortisation amortisation amortisation amortisation

Note £m £m £m £m £m £m

Revenue 1 668.7 - 668.7 632.9 632.9

- Amortisation 2 - (103.3) (103.3) - (43.5) (43.5)

- Other operating costs 2 (593.9) (2.2) (596.1) (559.3) - (559.3)

74.8 (105.5) (30.7) 73.6 (43.5) 30.1

2.9 - 2.9 3.5 - 3.5

Finance costs (50.0) - (50.0) (34.8) (8.2) (43.0)

- - - - (5.4) (5.4)

27.7 (105.5) (77.8) 42.3 (57.1) (14.8)

4 (5.6) 21.9 16.3 (10.9) 11.0 0.1

(61.5) (14.7)(Loss) for the period

The total loss for the year and quarter is attributable to the equity shareholders of the Company.

Operating profit/(loss)

Investment income

Other expenses

Profit/(loss) before

taxation

Income tax (charge)/credit

Operating costs

Quarter ended 31 March 2015 (Unaudited) Quarter ended 31 March 2014 (Unaudited)

Operating costs

Operating profit/(loss)

Investment income

Other expenses

Profit/(loss) before

taxation

Income tax (charge)/credit

Loss for the period

Year ended 31 March 2015 (Unaudited) Year ended 31 March 2014 (Unaudited)

FP-3


PRO FORMA CONSOLIDATED BALANCE SHEET

AS AT 31 MARCH 2015

31 March 31 March

2015 2014

(Unaudited) (Unaudited)

Note £m £m

Assets

Property, plant and equipment 14.6 12.6

Goodwill and intangible assets 665.6 762.9

Deferred acquisition costs 5 199.7 208.8

Investments 6 179.9 117.5

Derivative asset - 0.2

Trade and other receivables 335.7 299.4

Cash and cash equivalents 35.5 140.9

Total assets 1,431.0 1,542.3

Liabilities

Loans and borrowings 10 619.6 617.0

Deferred tax liabilities 76.3 98.2

Deferred income 8 594.0 637.8

Claims and repair costs provision 9 17.5 16.6

Derivative financial instruments 1.5 -

Current tax liability 1.2 4.3

Trade and other payables 12 131.1 116.6

Total liabilities 1,441.2 1,490.5

Shareholders' equity

Share capital 0.9 0.9

Share premium 89.0 89.0

Other reserves (0.3) 0.2

Retained earnings (99.8) (38.3)

Total shareholders' equity (10.2) 51.8

Total shareholders' equity and liabilities 1,431.0 1,542.3

FP-4


PRO FORMA CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2015

Note £m £m

(Loss)/Profit before tax (77.8) (14.8)

Adjustments for:

Depreciation of property, plant and equipment 4.0 3.2

Amortisation of software 2.6 1.7

Amortisation of acquired intangible assets 2 103.3 43.5

Interest expense 50.0 34.8

Interest income (2.9) (3.5)

Significant items 2 2.2 13.6

81.4 78.5

Changes in working capital

Increase in deferred acquisition costs (1.9) (5.2)

Increase in trade and other receivables (40.6) (19.1)

(Decrease)/Increase in deferred income (14.4) 11.4

Increase in claims and repair costs provision 1.8 3.3

Increase in trade and other payables 19.5 7.0

Cash flows from operating activities 45.8 75.9

Interest received from cash and cash equivalents 0.7 1.6

Interest paid (35.7) (13.2)

Income taxes paid (8.7) (13.5)

Net cash from operating activities 2.1 50.8

Cash flows from investing activities

Interest received on investments 2.4 3.1

Acquisition of property, plant and equipment (5.3) (4.9)

Acquisition of software (8.6) (2.5)(Deposits with)/Withdrawal from credit institutions (20.7) 116.1

Withdrawal from /(deposits with) money market funds 43.4 (48.9)

Acquisition of subsidiaries, net of cash acquired 4 - (378.4)

Deferred financing fees - (2.4)

Significant item - acquisition expenses (4.9)

Financial instrument investments (102.8) -

Net cash used in investing activities (91.6) (322.8)

Cash flows from financing activities

Repayment of third party debt - (318.2)

Amounts (paid to)/received from group undertakings 11 (12.3) 124.9

Net proceeds from issue of ordinary share capital - 89.9

Net proceeds from issue of bonds - 488.2

Significant item - financing fees - (6.3)

Net cash from / (used in) financing activities (12.3) 378.5

Net (decrease) / increase in cash and cash equivalents (101.8) 106.5

Effects of exchange rates (3.6) (4.4)

Cash and cash equivalents at the beginning of the year 140.9 38.8

Cash and cash equivalents at the end of the year 35.5 140.9

Year ended 31

March 2015

(Unaudited)

Year ended

31 March

2014

(Unaudited)

FP-5


SIGNIFICANT ACCOUNTING POLICIES

The Company

Accounting principles

NOTES TO THE PRO FORMA CONDENSED FINANCIAL STATEMENTS

1 Revenue

Service plans Insurance Total

£m £m £m

Sales 381.7 269.9 651.6

Deferred income movement (5.8) 22.9 17.1

Revenue 375.9 292.8 668.7


£m £m £m

Sales 349.5 298.4 647.9

Deferred income movement (10.9) (4.1) (15.0)

Revenue 338.6 294.3 632.9


2015 2015 2015

£m £m £m

Sales 103.0 62.0 165.0

Deferred income movement (4.3) 9.5 5.2

Revenue 98.7 71.5 170.2


2014 2014 2014

£m £m £m

Sales 94.2 72.4 166.6

Deferred income movement (7.3) (1.3) (8.6)

Revenue 86.9 71.1 158.0

Revenue is derived from service plans and insurance policies sold for breakdown protection on household

appliances, and administration services.

Galaxy Finco Limited is a Company incorporated in Jersey. These consolidated financial statements of the

Company are for the year to 31 March 2015 and comprise the Company and its subsidiaries (together referred

to as the 'Group').

The actual results of Galaxy Finco Limited prepared in accordance with IAS 1 Presentation of Financial

Statements do not give meaningful operational information due to the timing of the Acquisition. As such, on a

voluntary basis, these consolidated financial statements have been prepared on a pro forma basis to assist in

understanding the underlying trading performance of the business.

The pro forma condensed consolidated financial statements for the year ended 31 March 2015 have not been

prepared in accordance with IAS 1 Presentation of Financial Statements but in accordance with the basis for

preparation on page FP-2, utilising accounting policies consistent with those applied in the consolidated

financial statements of Galaxy Finco Limited for the year ended 31 March 2015.

Sales consists of amounts invoiced in respect of appliance care service plans, gross premium income in

respect of insurance business, commissions receivable and sales invoiced in respect of other support services,

net of cancellations and exclusive of VAT and IPT (insurance premium tax).

Sales are recognised as revenue in the income statement in accordance with the earnings patterns that reflect

the expected timing of claims. Sales not yet recognised in the income statement are deferred and recorded in

the balance sheet as deferred income.

Year ended 31 March 2015

Year ended 31 March 2014

Quarter ended 31 March 2015

Quarter ended 31 March 2014

FP-6



2 Significant items and amortisation

£m £m £m £m

Operating Costs

Amortisation of intangible assets

acquired in a business combination (103.3) (43.5) (25.8) (28.6)

Restructuring costs (2.2) - (1.8) -

Reallocation - - - -

(105.5) (43.5) (27.6) (28.6)

Other expenses

Strategic review costs - (1.7) - (1.2)

Professional fees - (3.7) - (2.5)

- (5.4) - (3.7)

Financing costs

Deferred loan fees - (1.9) - -

Facility fees - (6.3) - -

- (8.2) - -

3 Taxation

31 March 31 March

2015 2014

£m £mIncome tax credit/(charge)

Current tax on profit for the year (5.6) (10.9)

Deferred tax 21.9 11.0

Total income tax credit/(charge) 16.3 0.1

The major components of income tax credit/(charge) in

the pro forma consolidated income statement are:

The amortisation charge relates to intangible assets recognised on the acquiring Domestic & General Group

Holdings Limited.

In the year ended 31 March 2015, the Group incurred significant one-off expenditure totalling £2.2m as a result

of restructuring following the cessation of the MSH Germany contract and organisational changes.

In the period ended 31 March 2014, the Group incurred expenses associated with the acquisition of Domestic

& General Group Holdings Limited namely: £1.9m of capitalised fees relating to the existing third party debt

facilities which were repaid upon the Acquisition; professional fees incurred of £5.4m; and fees related to

bridge financing facilities of £6.3m.

Year ended 31

March 2015

Year ended 31

March 2014

Quarter ended

31 March 2014

Quarter ended

31 March 2015

FP-7



4 Acquisition of subsidiaries

Fair Value

19 December 2013

£mProperty, plant and equipment 12.1

Intangible assets 512.2

Software 3.6

Deferred acquisition costs 208.8

Investments 245.9

Cash and cash equivalents 41.9

Trade and other receivables 298.3Total Assets 1,322.8

Deferred income (633.8)

Claims and repair costs provision (14.4)

Deferred tax liabilities (105.1)

Tax liabilities (6.6)

Loans and borrowings (316.2)

Trade and other payables (104.9)

Total Liabilities (1,181.0)

Total identifiable net assets 141.8

Goodwill 278.5

Total consideration 420.3

Satisfied by:

Cash 420.3

420.3

Net cash outflow arising on acquisition

Cash consideration (420.3)

Less: cash and cash equivalents acquired 41.9

(378.4)

On 9 August 2013 funds managed by CVC Capital Partners SICAV-FIS S.A formed a number of companies

to create a new Group. On 19 December 2013 one of the newly formed companies, Galaxy Bidco Limited, a

wholly owned subsidiary of Galaxy Finco Limited, acquired the entire share capital of Domestic & General

Group Holdings Limited (the “Acquisition”) and obtained control.

The amounts recognised at the acquisition date for each class of Domestic & General Group Holdings

Limited assets and liabilities, together with the fair value of the consideration paid and the resulting balance

of goodwill is as follows:

Total consideration transferred

The valuation exercise undertaken to allocate the purchase price to identifiable net assets is now final. There

have been no changes since the prior reporting period.

The fair value of the acquired identifiable intangible assets of £512.2m are represented by the Group's

customer and client relationships including an element of margin inherent in those contracts already written,

using estimated post-tax cash flows and discount rates. The relationship assets have been assessed as

having a life between one and fifteen years and their value is being amortised over that period.

The fair value of trade and other receivables is £298.3m. The gross contractual amount for trade receivables

due is £298.7m of which £0.4m is expected to be uncollectible.

FP-8



5 31 March 31 March

2015 2014

£m £m

Balance at the start of the period 208.8 205.6

Arising in the period 162.0 169.9

Amortisation for the period (182.1) (168.7)

Foreign exchange 11.0 2.0

Balance at the end of the period 199.7 208.8

Split between:

Amounts expected to be amortised within 12 months 143.0 137.0

Amounts expected to be amortised after 12 months 56.7 71.8

199.7 208.8

6 Investments

AFS** FVTPL*

Loans and

receivables Total

31 March 31 March 31 March 31 March

2015 2015 2015 2015£m £m £m £m

Money market funds - 29.7 - 29.7

98.0 - - 98.0

Deposits with credit institutions - - 52.2 52.2

98.0 29.7 52.2 179.9

AFS** FVTPL*

Loans and

receivables Total


2014 2014 2014 2014

£m £m £m £m

Money market funds - 76.6 - 76.6

Deposits with credit institutions - - 40.9 40.9

- 76.6 40.9 117.5

Available for sale investments carried at

fair value

**Available for sale financial assets

The value of financial assets which are expected to be recovered in less than one year is £97.7m (2014:

£117.5m) and those greater than one year is £82.2m (2014: £nil).

Available for sale investments relate to fixed income related securities which are managed by an external fund

manager within investment management terms that specify, amongst other things, minimum credit ratings and

maximum duration. The fair values of which are based on quoted market prices.

Deferred acquisition costs represent the proportion of acquisition costs incurred which corresponds to the

proportion of sales that have not been recognised in revenue at the balance sheet date.

The Group's maximum exposure to credit risk for loans and receivables and other assets designated as fair

value through profit or loss at the reporting date was equal to the carrying value of the asset.

The carrying value of loans and receivables closely approximates fair value.

Deferred acquisition costs

*FVTPL - fair value through profit or loss

FP-9



7 Categories of financial instruments

AFS** -

designated

on initial

recognition

FVTPL* -

designated

on initial

recognition

Loans and

receivables

Financial

liabilities held

at amortised

cost Total

31 March 31 March 31 March 31 March 31 March

2015 2015 2015 2015 2015£m £m £m £m £m

Investments 98.0 29.7 52.2 - 179.9

Trade and other receivables - - 335.7 - 335.7

Cash and cash equivalents - - 35.5 - 35.5

Derivative assets/(liabilities) - (1.5) - - (1.5)

Loans and borrowings - - - (619.6) (619.6)

Trade and other payables - - - (131.1) (131.1)

98.0 28.2 423.4 (750.7) (201.1)

AFS** -

designated on

initial

recognition

FVTPL* -

designated

on initial

recognition

Loans and

receivables

Financial

liabilities held

at amortised

cost Total


2014 2014 2014 2014 2014

£m £m £m £m £m

Investments - 76.6 40.9 - 117.5

Trade and other receivables - - 299.4 - 299.4

Cash and cash equivalents - - 140.9 - 140.9

Loans and borrowings - - - (617.0) (617.0)

Derivative assets - 0.2 - - 0.2

Trade and other payables - - - (116.6) (116.6)

- 76.8 481.2 (733.6) (175.6)

Valuation techniques and assumptions applied for the purpose of measuring fair value

- The fair values of derivative instruments are calculated using quoted prices. Where such prices are not

available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the

instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency

forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted

interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of

future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest

rates.

**Available for sale financial assets

*FVTPL - fair value through profit or loss

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at

amortised cost in the financial statements approximate their fair values.

The fair values of financial assets and financial liabilities are determined as follows:

- The fair values of financial assets and financial liabilities with standard terms and conditions and traded on an

active liquid market are determined with reference to quoted market prices.

FP-10



7 Categories of financial instruments (continued)


2015 2015 2015 2015

Level 1 Level 2 Level 3 Total

£m £m £m £m

- 29.7 - 29.7

- (1.5) - (1.5)

98.0 - - 98.0


2014 2014 2014 2014

Level 1 Level 2 Level 3 Total

£m £m £m £m

- 76.6 - 76.6

- 0.2 - 0.2

- - - -


fair value

Non-derivative financial assets held for

trading

Available for sale investments carried at fair

The following table provides an analysis of financial instruments that are measured subsequent to initial

recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for

identical assets or liabilities;

- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level

1 that are observable from the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from

prices); and

- Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset

or liability that are not based on observable market data (unobservable inputs).

Non-derivative financial assets held for

Derivative financial assets

Derivative financial liabilities

FP-11



8

31 March 31 March

2015 2014

£m £m


Amounts deferred during the period 649.3 645.5

Amounts recognised as revenue during the period (663.7) (634.1)

Foreign exchange (29.4) (14.8)


Split between:

Amounts expected to be recognised within 12 months 425.3 418.4

Amounts expected to be recognised after 12 months 168.7 219.4

594.0 637.8

9

31 March 31 March

2015 2014

£m £m


Amounts incurred during the period 301.6 284.6

Amounts paid during the period (300.7) (281.6)


10

31 March 31 March

2015 2014

£m £m

6.375% Senior Secured notes due 2020 200.0 200.0

Senior Secured Floating Rate Notes due 2019 175.0 175.0

7.875% Senior Notes due 2021 125.0 125.0

Due to shareholders 129.6 128.5

Financing costs (10.0) (11.5)

619.6 617.0

Deferred income represents that part of sales which it is estimated will be recognised as revenue in the

following or subsequent financial periods. For contracts in excess of one year, the time apportionment basis is

suitably modified so that the earnings patterns reflect management's expectations of expected timings of

claims.

All claims and repair cost provisions are expected to be settled within the next 12 months.

Loans and borrowings

Deferred income

Claims and repair costs provision

The Group's interest-bearing loans and borrowings, which are measured at amortised cost, are the following:

FP-12



10

Terms and debt repayment schedule of third party loans and borrowings

Nominal

interest rate

Year of

maturity Principal

Carrying

amount

£m £m

6.375% Senior Secured notes due 2020 LIBOR + 5.0% 2019 200.0 196.2

Senior Secured Floating Rate Notes due 2019 6.375% 2020 175.0 171.2

7.875% Senior Notes due 2021 7.875% 2021 125.0 122.6

10% Due to parent company 10% 2033 129.6 129.6

629.6 619.6

11 Related parties

The entire balance of loans and borrowings is considered to be non-current, on the basis that repayment is not

required until periods greater than 12 months from the balance sheet date. The principal component of the

Group's loans and borrowings is repayable entirely on maturity date.

Certain Group companies have pledged collateral as security in respect of the loan notes in the form of a

general charge over their assets. The book value of collateral as at 31 March 2014 is £592.0m (2014:

£545.5m).

The Group has a revolving bank facility of £80.0m (2014: £80m) with a final maturity date of 18 September

2019, of which £35.0m (2014: £35.0m) is allocated to a letter of credit pledged as an asset to a trust for UK

service plan customers in line with British Retail Consortium guidelines. £45.0m (2014: £45.0m) was undrawn

at year end, and of this £3.0m (2014: £3.0m) is currently available as a same day drawdown money market

facility.

Loans and borrowings (continued)

The nature of the related party transactions of the Group are consistent in nature and scope with those

disclosed in note 27 of the Group's consolidated financial statements for the year ended 31 March 2015.

During the year the Company repaid £12.3m (2014: received £124.9m) to the parent company, of which £7.5m

was subsequently returned to the shareholders of the ultimate controlling party of the company in the form of a

repurchase of preference shares and associated accrued interest.

FP-13



12 Financial risk management

A rated (or

above)

BBB rated

(or below)

Institutions Institutions Unrated Total


2015 2015 2015 2015£m £m £m £m

Cash and cash equivalents 35.5 - - 35.5

Money market funds 29.7 - - 29.7

70.1 27.9 - 98.0

Deposits with credit institutions 52.2 - - 52.2

Trade and other receivables - - 335.7 335.7

187.5 27.9 335.7 551.1

A rated (or

above)

BBB rated (or

below)

Institutions Institutions Unrated Total


2014 2014 2014 2014

£m £m £m £m

Cash and cash equivalents 140.9 - - 140.9

Money market funds 76.6 - - 76.6

Deposits with credit institutions 40.9 - - 40.9

Trade and other receivables - - 299.4 299.4

258.4 - 299.4 557.8

Total Trade

and other

receivables

Total Trade

and other

receivables

31 March 31 March

2015 2014

£m £m

Not past due 335.2 299.5

0 - 30 0.3 -

31 - 60 - 0.1

61 - 90 - -

Greater than 90 0.4 0.2

Provision (0.2) (0.4)

Carrying amount 335.7 299.4

Credit ratings of significant classes of financial assets


fair value

The table below sets out an analysis of the Group's assets, showing those which are past due, or impaired.

Categories of financial assets for which there are neither past due or impaired balances have not been

included below.

Past due or impaired financial assets

Past due (days)

FP-14



12 Financial risk management (continued)

Claims &

Repair costs

Loans and

borrowings

Trade and

other

payables

Interest

payable Total


2015 2015 2015 2015 2015£m £m £m £m £m

0 - 90 days 17.5 - 126.5 10.3 154.3

91 days - 1 year - - 3.8 31.6 35.4

1 - 3 years - - 0.7 83.9 84.6

3 - 5 years - - - 81.6 81.6

Greater than 5 years - 629.6 0.1 204.3 834.0

Total 17.5 629.6 131.1 411.7 1,189.9

Claims &

Repair costs

Loans and

borrowings

Trade and

other

payables

Interest

payable Total


2014 2014 2014 2014 2014

£m £m £m £m £m

0 - 90 days 16.6 - 115.1 11.8 143.5

91 days - 1 year - - 1.5 36.2 37.7

1 - 3 years - - - 96.0 96.0

3 - 5 years - - - 96.0 96.0

Greater than 5 years - 628.5 - 243.8 872.3

Total 16.6 628.5 116.6 483.8 1,245.5

Interest payable is calculated using yield curves appropriate to the maturities of the Group's borrowings and

assumes all borrowings are held to term.

The table below summarises the maturity profile of the Group's financial liabilities based on remaining

undiscounted contractual obligations where the maturity profile is an analysis by estimated timing of the

amounts recognised in the balance sheet.

Contractual maturity analysis:

FP-15

operating and financial review of - domestic & general

Documents