Nortel Networks UK Limited (In Administration) (the Company )

Transcription

1 Ernst & Young LLP 1 More London Place London SE1 2AF Tel: Fax: TO ALL KNOWN CREDITORS 11 August 2015 Dear Sirs Ref: MLP/7E/AB/DM/ST/LO3538/PCF16 Saskia Lawrence Direct line: +44 (0) NortelEMEA@uk.ey.com Nortel Networks UK Limited (In Administration) (the Company ) High Court of Justice of England and Wales, Chancery Division, Companies Court Case number 536 of 2009 We write, in accordance with Rule 2.47 of The Insolvency Rules 1986, to provide creditors with a thirteenth report on the progress of the Administration (the Report ). This Report covers the period from 14 January 2015 to 13 July 2015 and should be read in conjunction with the Joint Administrators previous reports dated 13 August 2009, 13 February 2010, 12 August 2010, 11 February 2011, 12 August 2011, 9 February 2012, 6 August 2012, 6 February 2013, 6 August 2013, 6 February 2014, 6 August 2014 and 9 February 2015 as well as the Joint Administrators Statement of Proposals dated 23 February Additional copies of this Report, and the previous reports referred to, can be made available on request or can be obtained at the following address: The Company entered administration (the Administration ) on 14 January 2009 when A R Bloom, A M Hudson, S J Harris and C J W Hill of Ernst & Young LLP, 1 More London Place, London SE1 2AF, were appointed to act as joint administrators (the Joint Administrators ) by an order (the Order ) of the High Court of Justice of England and Wales (the Court ), following an application made by the Company s directors. This was part of a wider restructuring of the Nortel group of companies. Nortel Networks Corporation ( NNC ), the ultimate parent company of the Nortel group, Nortel Networks Limited ( NNL ) and certain of its other Canadian subsidiaries filed an application for creditor protection under the Companies Creditors Arrangement Act ( CCAA ) in Canada to facilitate a comprehensive business and financial restructuring. Nortel Networks Inc ( NNI ), Nortel Networks Capital Corporation and a number of other US Nortel group companies filed petitions in the United States under Chapter 11 of the US Bankruptcy Code.

2 2 At the same time as the appointment of the Joint Administrators, the Court, following applications made by the directors of each company, made administration orders in respect of 18 other Nortel group companies based in the Europe, Middle East and Africa region ( EMEA ). Article 3 of the EC Regulation on Insolvency Proceedings 1346/2000 (the EC Regulation ), states that the relevant court of the EU Member State in which the centre of main interests ( COMI ) of a company is situated had jurisdiction to open main insolvency proceedings in respect of that company. In the case of the 19 EMEA group companies (the EMEA Companies ), the Court was satisfied that each had its centre of main interests in England and, as such, the Court had jurisdiction to open main insolvency proceedings, namely administration, in respect of each company. Details of all 19 companies that entered administration are provided at Appendix 1. The Nortel group of companies (the Group ) reports in US dollars ( US$ ), and accordingly all amounts referred to in this report are in US$ unless otherwise stated. Please refer to the disclaimer at the end of the principal section of this report.

3 3 1. Executive Summary of Progress of the Administration Purpose of the Administration The Joint Administrators continued to trade the Company's businesses with a view to achieving either a rescue of the Company as a going concern or a better result for the Company s creditors as a whole than would be likely if the Company were wound up. In 2009, it became clear that, owing to the financial and market pressures facing the Nortel businesses, the sale of all businesses would be necessary and a rescue of the Company as a going concern would not be possible. Sale of Businesses and Assets The disposals of the Group s global businesses and principal assets were completed in The headline aggregate gross sale proceeds of the global disposals, including the gross sale proceeds from the sale of the residual Intellectual Property, totals approximately $7.5 billion (before transaction costs, adjustments and escrow balances) and in accordance with the agreed basis for the global disposals, the sale proceeds remain in escrow pending allocation within the Group. Next Steps The key remaining issues for the Company are to deal with the allocation of the sale proceeds within the Group (Purchase Price Allocation, or PPA ), the winding-up of the affairs of the Company s subsidiary companies in EMEA, including the return of surplus assets to the Company and the development of an appropriate process to agree creditors claims and distribute available funds to them. A further and important remaining issue for certain of the Company s subsidiary companies in EMEA is the resolution of the Financial Support Direction ( FSD ) claims asserted by the UK Pensions Regulator ( TPR ), the hearing of which is currently stayed. The Company has an economic interest in certain of these subsidiaries and the robust defence of these claims is an important matter. Further information is contained in the sections that follow. Real Estate The Company continues to occupy offices at Maidenhead on a short term lease due to expire on 24 March 2016 (with a rolling option to determine the lease from December 2015).

4 4 Employees Through the various business sales, the Joint Administrators have succeeded in transferring 1180 employment contracts to the purchasers of the businesses. Employee numbers as at 13 July 2015 Employees at appointment 1,915 Transferred with business sales (1,180) Resignations and other leavers (242) Redundancies (473) Employees continuing as at 13 July The remaining employees are retained by the Joint Administrators to assist with the remaining tasks in the administration of the Company and the other EMEA Companies. 2. Receipts and Payments Account Attached at Appendix 2 is the Joint Administrators receipts and payments ( R & P ) account for the period from 14 January 2015 to 13 July 2015 in respect of the Company. The R & P shows total receipts of US$5.2 million excluding FX translation movements and payments of US$7.6 million. The Company in the UK and the Saudi Arabia branch together held cash in various currencies equivalent to US$ million at 13 July The majority of the Company s cash is held in GBP. The R & P account is a statement of cash received and cash paid out, and does not reflect estimated future receipts or payments, including proceeds from the sales of businesses held in escrow pending allocation amongst the Group Companies. Further detailed notes are provided in Appendix 2.

5 5 3. Joint Administrators Remuneration and Disbursements It is the responsibility of the Committee to approve the Joint Administrators fees. During the period from 29 November 2014 to 29 May 2015 the Joint Administrators incurred time costs of GB 2,247, as well as transaction time costs of GB in respect of the same period. The Joint Administrators are continuing to ensure that only costs relating directly to the Company are billed to the Company. In respect of workstreams that are undertaken for the benefit of all the EMEA entities, we continue to ensure that a proportionate and reasonable allocation of time billed for this type of work is apportioned and absorbed by the other filed EMEA entities. As a result, the Company will receive recharges from the EMEA Companies amounting to GB 1,205, for work carried out in the period from 29 November 2014 to 29 May An analysis of the time spent is at Appendix 3. Payments to Other Professionals The Joint Administrators continue to engage the following professional advisors to assist them in the Administration. These professionals work on a time cost basis and internal review processes are undertaken to assess their invoices. During the period from 14 January 2015 to 13 July 2015 the following has been paid: Herbert Smith Freehills LLP GB 398, (Legal Advisors) Local Counsel (Engaged by Herbert Smith Freehills LLP) US$670, (Legal Advisors) Please note the above legal fees figures have been converted using monthly spot rates. As such, there may be a minimal difference between these figures and the figure reported in our R&Ps in Appendix 2 (which uses an average spot rate over the period 14 January 2015 to 13 July 2015). Since the Joint Administrators appointment, various professional costs (and in particular legal costs) have been incurred for the benefit of EMEA as a whole in respect of the various business sales and the PPA process. These costs have been paid by the Company and have not yet been charged to the individual entities. At the conclusion of the PPA process, it is intended that these costs will be apportioned between the EMEA entities in proportion to each company s benefit arising from the global sale proceeds and realisations from North American claims settlements. The costs of professional advisors who assist the Company with discrete matters in the usual course of business (for instance, debt collection proceedings) are not included above.

6 6 4. Future Conduct of the Administration Purchase Price Allocation On 12 May 2015, the judgments of the US and Canadian courts in relation to the allocation dispute were issued. Both judgments provide for the allocation of the c.us$7.5 billion lockbox proceeds amongst the various Nortel selling entities based on the ratio of each entity s pre-filing liabilities to the total level of such liabilities in the Nortel group (the pro-rata outcome ). The judgments can be found at and Subsequently, certain of the US parties, including the Nortel US Debtor, filed motions in both the US court and the Canadian court for reconsideration of the judgments issued by each of the Judges. The motions for reconsideration constitute steps taken before formal appeals, and ask the Judges to reconsider their own judgments. The time for filing appeals against the judgments was suspended whilst the motions for reconsideration were dealt with. The motions for reconsideration were heard on the 25 June 2015 and a memorandum order was issued by the Judges on 6 July 2015 which granted certain of the US parties requests for clarification and denied others. With the Courts recognising that the US parties are unhappy with the allocation opinions and order, they urged the parties to discuss how to refine the issues in order to avoid any appeals and the expenditure of time and money that may result. Since then, certain of the US parties, including the Nortel US Debtor, have filed notices to the Courts appealing the allocation opinions and order dated 12 May 2015 and the memorandum order dated 6 July The Joint Administrators continue to consider carefully what steps should be taken in the light of the judgments issued and subsequent notices of appeal. The Pensions Regulator in the UK TPR, a UK statutory body, has made claims against several Nortel group companies in EMEA (not including the Company, but including several of the Company s direct and indirect subsidiaries) ( Target Companies ) and North America. Its Determinations Panel issued a decision in June 2010 that FSDs should be issued, which would require the Target Companies to provide financial support to the Nortel Networks UK Limited pension scheme (the UK Pension Scheme ). The UK Pension Scheme is estimated to have a deficit of c. GB 2.1 billion. The Joint Administrators of the Target Companies have referred the decision of the Determinations Panel to the Upper Tribunal (the Reference ). The Reference challenges this decision on behalf of the Target Companies over which the Joint Administrators are appointed. Pending a determination of the Reference by the Upper Tribunal, no FSD may be issued to the Target Companies. The Reference proceedings are currently stayed. Any liability in respect of a FSD or Contribution Notice issued against a Target Company would rank as a provable debt alongside those of unsecured creditors. It has not been determined that any Nortel entity in EMEA is under any obligation to make a contribution to the UK Pension Scheme.

7 7 The Joint Administrators will continue to vigorously defend the Target Companies positions in the Reference and it is not at all certain that any FSDs or Contribution Notices will ultimately be imposed. The Joint Administrators of the Target Companies have engaged with TPR to ascertain the possibility of resolving certain of the FSD claims on a consensual basis. These discussions are ongoing and the Joint Administrators will update creditors as appropriate. Distributions to Creditors In light of the judgments handed down by the US and Canadian courts, the Joint Administrators consider that it is now the time to commence a formal process for the calling for and adjudication of claims. On 24 July 2015, the Joint Administrators received the permission of the English High Court of Justice to commence a distribution process in accordance with the Insolvency Act This process commenced on 7 August 2015 and creditors should have received notice as to how to lodge their claim. It is the Joint Administrators intention to make a distribution to creditors by 30 November Further information is provided separately with this progress report and creditors can visit for tools to assist with the lodging of claims. Before PPA receipts from the business disposal escrow accounts and the receipt of future intra-group dividends, the Joint Administrators anticipate that there will be, absent any unforeseen liabilities arising, in the region of US$411 million available to distribute to the creditors of the Company. This distribution includes the assumption that the Company is able to recover costs paid on behalf of other Nortel entities from PPA proceeds. The Joint Administrators currently estimate that the Company will be able to at least recover these costs from the PPA proceeds in a worst case scenario, based on the arguments put before the courts by the other parties. The Joint Administrators are, however, still neither able to confirm the quantum of the preappointment creditor claims nor the likely return for individual creditors or classes of creditor. These will be determined for the most part by the following key factors: a. Outcome of the formal proof of debt procedure; b. The impact of any FSD on any subsidiary company of the Company; c. Finalisation of quantum of certain complex liabilities and claims; d. Finalisation of ranking of creditor claims which will be determined as part of the distribution process; and e. The outcome of the PPA process. The Company also has a branch in Saudi Arabia which has ceased trading and has entered a local liquidation process. For further information, please refer to the Joint Administrators previous progress reports.

8 8 5. Other Matters The Committee The committee of creditors was formed at the creditors meeting held on 11 March 2009 (the Creditors Committee ). The Joint Administrators continue to provide detailed information to the members of the Creditors Committee as the Administration progresses and matters evolve (including an analysis of their time costs for approval). The Joint Administrators will continue to keep the Creditors Committee apprised of developments. The Prescribed Part Section 176A of the Insolvency Act 1986 does not apply to this Administration as there is no qualifying floating charge security, and as such there is no Prescribed Part to be set aside for nonpreferential creditors. Extensions of the Administration In November 2013, the administration order in respect of the Company was extended to 13 January 2016 to allow the Joint Administrators to continue to administer the estate and achieve the purpose of the administration. French Employee Claims A number of former employees of Nortel Networks S.A. ( NNSA ) have filed claims against the Company before the Industrial Tribunal of Versailles (the Tribunal ). The claims have been raised against a number of Nortel entities including the Company on the basis of tortious liability. The issue of co-employment has also been raised by the Employee Guarantee Fund (the AGS ). The Joint Administrators have challenged in particular the jurisdiction of the Tribunal. In the case of certain employees, the Tribunal ruled that it did not have jurisdiction with respect to claims against the Company. These decisions have been appealed. For certain other employees, hearings before the Tribunal are pending. The next hearing is scheduled for 24 September In one instance, the claim of a former employee of NNSA has been heard before the Versailles Court of Appeal. This court has determined that the French courts have jurisdiction to hear the claim. The Joint Administrators have appealed the decision before the French Supreme Court (Cours de Cassation) and the matter on the merits is stayed at the level of the Court of Appeal until the French Supreme Court has handed down its decision. In all of these matters, the Joint Administrators will continue to defend the Company where it remains in the interests of creditors as a whole to do so.

9 9 The Joint Administrators will report to creditors again in six months time or at the conclusion of the Administration, whichever is sooner. Yours faithfully for Nortel Networks UK Limited (In Administration) A Bloom Joint Administrator Enc: Company information Joint Administrators Receipts and Payments Account Summary of Joint Administrators Time Costs Joint Administrators Policy on Fees and Disbursements Form 2.24B Administrators Progress Report For the Companies listed below, The Institute of Chartered Accountants in England and Wales in the UK authorises A R Bloom, S J Harris, C J W Hill and S J Taylor to act as Insolvency Practitioners under section 390(2)(a) of the Insolvency Act 1986 and the Association of Chartered Certified Accountants in the UK authorises A M Hudson and D M Hughes to act as Insolvency Practitioners under section 390(2)(a) of the Insolvency Act The affairs, business and property of the Companies are being managed by the Joint Administrators, A R Bloom, S J Harris, A M Hudson and C J W Hill who act as agents of the Companies only and without personal liability. The Companies are Nortel Networks UK Limited; Nortel GmbH; Nortel Networks France S.A.S.; Nortel Networks N.V.; Nortel Networks S.p.A.; Nortel Networks B.V.; Nortel Networks Polska Sp. z o.o.; Nortel Networks Hispania, S.A.; Nortel Networks (Austria) GmbH; Nortel Networks s.r.o.; Nortel Networks Engineering Service Kft.; Nortel Networks Portugal, S.A.; Nortel Networks Slovensko s.r.o.; Nortel Networks Oy; Nortel Networks Romania SRL; Nortel Networks AB; Nortel Networks International Finance & Holding B.V.. The affairs, business and property of Nortel Networks (Ireland) Limited are being managed by the Joint Administrators, A R Bloom and D M Hughes, who act as agents of Nortel Networks (Ireland) Limited only and without personal liability. The affairs, business and property of Nortel Networks S.A. are being managed by the Joint Administrators, A R Bloom, S J Harris, A M Hudson, C J W Hill and S J Taylor who act as agents of Nortel Networks S.A. only and without personal liability. Nortel Networks S.A. was placed into French liquidation judiciaire on 28 May The business and assets of the company that are situated in France are now under the control of la liquidateur judiciaire. We advise that this report is provided pursuant to our appointments as Joint Administrators of the Company. It is provided solely for the purpose of informing creditors of certain aspects of the current status of the Administration. As this report is only an interim indication of the overall position of the Company, and not a valuation of the current or future value of any particular item of debt, and is liable to change, it should not be relied upon as an indication of the final return to creditors and, in particular, neither we nor the Company shall have any responsibility to any person who relies on our report for the purpose of trading in debt of the Company. The Joint Administrators may collect, use, transfer, store or otherwise process (collectively, Process ) information that can be linked to specific individuals ( Personal Data ). They may Process Personal Data in various jurisdictions in accordance with applicable law and professional regulations including (without limitation) the Data Protection Act 1998.

10 Appendix 1 Appendix 1 Nortel Networks UK Limited (In Administration) Company Information Registered number: Company name: Registered office address Previous names: Nortel Networks UK Limited Fleming House, 71 King Street, Maidenhead, Berks SL6 1DU Nortel Networks Holdings Limited Nortel Networks Holdings plc Details of the Administrators and of their appointment Administrators: A R Bloom, A M Hudson, S J Harris and C J W Hill of Ernst & Young LLP, 1 More London Place, London, SE1 2AF Date of appointment: 14 January 2009 By whom appointed: Court reference: Division of the Administrators responsibility: The appointment was made by the High Court of Justice, Chancery Division, Companies Court on the application of the Company's directors. High Court of Justice, Chancery Division, Companies Court - case 536 of 2009 Any of the functions to be performed or powers exercisable by the administrators may be carried out/exercised by any one of them acting alone or by any or all of them acting jointly. Statement Concerning the EC Regulation on Insolvency Proceedings 2000 The EC Council Regulation on Insolvency Proceedings 2000 applies to this administration and the proceedings are main proceedings. This means that this administration is conducted according to English insolvency legislation and is not governed by the insolvency law of any other European Union Member State.

11 Appendix 1 Share Capital Class Authorised Issued & Fully paid Number Number Ordinary 1,468,100,001 1,468,100,001 1,468,100,001 1,468,100,001 Shareholders Nortel Networks Limited % Directors (current and for the last three years) and company secretary (current) Name Director or secretary Date appointed Date resigned Current shareholding Simon Freemantle David Quane Brenda Dandridge Director 31/03/ Director 30/09/ Secretary 01/12/

12 Summary of Nortel Group Structure Appendix 1

13 Appendix 1 The EMEA Companies in English administration proceedings Legal Entity Nortel Networks UK Limited Nortel Networks S.A. Nortel Networks France S.A.S. Nortel Networks (Ireland) Limited Nortel GmbH Nortel Networks Oy Nortel Networks Romania SRL Nortel Networks AB Nortel Networks N.V. Nortel Networks S.p.A. Nortel Networks B.V. Nortel Networks International Finance & Holding B.V. Nortel Networks Polska Sp. z o.o. Nortel Networks (Austria) GmbH Nortel Networks s.r.o. Nortel Networks Engineering Service Kft Nortel Networks Portugal, S.A. Nortel Networks Hispania, S.A. Nortel Networks Slovensko s.r.o. Country of Incorporation England France France Ireland Germany Finland Romania Sweden Belgium Italy Netherlands Netherlands Poland Austria Czech Republic Hungary Portugal Spain Slovakia

14 Appendix 2 Appendix 2 Nortel Networks UK Limited (In Administration) Joint Administrators Abstract of Receipts and Payments from 14 January 2009 to 13 July 2015 Nortel Networks UK Limited (in Administration) Administrators' receipts and payments account for the period: 14 January 2009 to 13 July 2015 Currency: USD Period 14 January 2009 to 13 January 2015 Period 14 January 2015 to 13 July 2015 Total to 13 July 2015 Opening balance 338,622, ,622,958 Receipts Trading: - Post-appointment intercompany 428,908, ,908,178 - Post-appointment sales 393,444, ,444,258 - Realisations from subsidiaries 5,710,478-5,710,478 - TSA receipts 66,449,334-66,449,334 - Asset sales 19,672,103-19,672,103 - Other receipts 8,759, ,759,689 - Other taxes 6,854, ,184 7,285,210 - Property income 3,763,805-3,763,805 - Pre-liquidation distribution from NN Saudi 2,900,000-2,900,000 - Overpayment refunds 1,470,845-1,470,845 Other: - Pre-appointment sales 101,595, ,595,114 - FX translation movement 46,737,876 1,277,372 48,015,247 - US settlement Allocation on Claims 17,927,587-17,927,587 - Pre-appointment intercompany - Asia Pacific entities 14,307,188 4,537,158 18,844,346 - Bank interest 9,880, ,241 10,173,382 - Pre-appointment intercompany - Nortel Networks Israel 308, ,492 Payments 1,128,688,886 6,539,181 1,135,228,067 Trading: - Accounts payable - inventory related (451,510,922) - (451,510,922) - Payroll, employee benefits, and payroll taxes (250,865,618) (3,020,391) (253,886,009) - Property costs (53,310,758) (153,737) (53,464,496) - Other payments (41,666,614) (892,446) (42,559,059) - Utilities (13,789,271) (16,391) (13,805,662) - Pension contributions (13,393,597) (217,566) (13,611,162) - Trade payables (10,532,622) - (10,532,622) - Contractors (4,627,372) - (4,627,372) Other: - Legal fees (280,792,707) (1,273,280) (282,065,987) - Joint Administrators' fees and disbursements (116,428,158) (1,566,335) (117,994,493) - Other professional services costs (19,897,303) (476,808) (20,374,111) - Liquidators fees for winding up of subsidiaries (41,358) (41,061) (82,419) - Restructuring costs (3,442,817) - (3,442,817) - FX translation movement on FX transactions within the entity (20,561,299) - (20,561,299) - Bank charges and interest (1,473,069) (26,210) (1,499,280) - Capital expenditure (180,407) - (180,407) (1,282,513,893) (7,684,225) (1,290,198,118) Closing balance 184,797, ,652,907 Account reconciliations: Local Accounts 3,580,691 3,312,352 Administration Accounts 181,217, ,340, ,797, ,652,907

15 Appendix 2 Nortel Networks UK Limited (In Administration) Joint Administrators Abstract of Receipts and Payments from 14 January 2009 to 13 July 2015 Nortel Networks UK Limited (in Administration) Administrators' receipts and payments account for the period: 14 January 2009 to 13 July 2015 Currency: GBP Period 14 January 2009 to 13 January 2015 Period 14 January 2015 to 13 July 2015 Total to 13 July 2015 Opening balance 236,900, ,900,621 Receipts Trading: - Post-appointment intercompany 277,767,108 2,897, ,665,016 - Post-appointment sales 251,539, ,539,923 - Realisations from subsidiaries 3,502,720-3,502,720 - TSA receipts 43,322,739-43,322,739 - Asset sales 12,756,209-12,756,209 - Other receipts 5,576, ,576,332 - Property income 2,420,194-2,420,194 - Pre-liquidation distribution from NN Saudi 1,908,194-1,908,194 - Overpayment refunds 939, ,650 Other: Pre-appointment sales 64,978,537-64,978,537 - Pre-appointment intercompany - Asia Pacific entities 9,217,676-9,217,676 - US Settlement Allocation on Claims 10,699,825-10,699,825 - Other taxes 3,649, ,394 3,924,798 - Bank interest 6,301, ,291 6,488,635 - Cash-in-transit 319, ,582 - Pre-appointment intercompany - Nortel Networks Israel 203, , ,102,305 3,360, ,463,042 Payments Trading: - Accounts payable - inventory related (290,691,120) - (290,691,120) - Payroll, employee benefits, and payroll taxes (160,790,164) (1,929,099) (162,719,263) - Property costs (34,388,770) (98,191) (34,486,960) - Other payments (26,762,875) (569,998) (27,332,873) - Utilities (8,904,204) (10,469) (8,914,672) - Pension contributions (8,564,505) (138,957) (8,703,463) - Trade payables (6,726,163) - (6,726,163) - Contractors (2,971,076) - (2,971,076) Other: - Legal fees (176,190,661) (813,247) (177,003,908) - Joint Administrators' fees and disbursements (74,410,128) (1,000,406) (75,410,534) - Other professional services costs (12,745,796) (304,534) (13,050,330) - FX translation movement (5,095,779) - (5,095,779) - Liquidators fees for winding up of subsidiaries (25,371) (26,225) (51,596) - Restructuring costs (2,236,840) - (2,236,840) - FX translation movement on FX transactions within the entity (1,871,767) (251,378) (2,123,145) - Bank charges and interest (945,794) (16,740) (962,535) - Capital expenditure (115,282) - (115,282) (813,436,295) (5,159,244) (818,595,539) Closing balance 118,566, ,768,125 Account reconciliations: Local Accounts 2,297,376 2,106,022 Administration Accounts 116,269, ,662, ,566, ,768,125

16 Appendix 2 Nortel Networks UK Limited (In Administration) Receipts and payments comments There has been a significant reduction in the receipts and payments activity during the interim period against prior periods. This is representative of the wind down position of the business. Notes to R & P Note 1 Account balances have all been reported in a local currency, GBP, in addition to a common currency across all entities, USD. Opening balances have been converted using January 2009 month end spot rates and closing balances converted using June 2015 month end spot rates which have been provided by the Company. This approach is in line with the Company s internal reporting procedures. Transactions that have taken place through the accounts over the course of the reporting period (14 January 2015 to 13 July 2015) have been converted at average spot rates over this period, which have been sourced from Reuters. Consequently, foreign exchange movements have occurred in the period as a result of fluctuations in currency conversion rates. These are translation movements only and do not reflect an actual receipt or payment. Note 2 The numbers used to prepare the receipts and payments summary have been provided by the Company and are unaudited. Material items have been reviewed for accuracy and reasonableness. Note 3 The amounts reported are inclusive of sales tax where applicable. Foreign exchange translation movement The total FX translation movement to 13 July 2015 is a result of the fluctuations in exchange rates against the USD. As such the interim FX translation movement does not represent a true monetary gain or loss.

17 Appendix 2 Nortel Networks UK Limited (In Administration) Saudi Arabia Branch Joint Administrators Abstract of Receipts and Payments from 14 January 2009 to 13 July 2015 Nortel Networks UK Limited - Saudi Arabia Branch (in Administration) Administrators' receipts and payments account for the period: 14 January 2009 to 13 July 2015 Currency: USD Period 14 January 2009 to 13 January 2015 Period 14 January 2015 to 13 July 2015 Total to 13 July 2015 Opening balance 2,554,345 2,554,345 Receipts Trading: - Other receipts 16,915-16,915 Other: - - Pre-appointment sales 1,884,240-1,884,240 - Intercompany 393, ,119 - Bank interest 34,176-34,176 - FX Translation movement 1, ,938 Payments 2,330, ,330,388 Trading: - Other payments (755,311) - (755,311) - Trade payables (402,325) - (402,325) - Other taxes (259,905) - (259,905) - Payroll, employee benefits, and payroll taxes (199,476) - (199,476) - Other professional services costs (164,878) - (164,878) - Property costs (92,478) - (92,478) - Utilities (71,790) - (71,790) - Contractors (29,343) - (29,343) Other: - Pre-liquidation distribution - NN UK (2,900,000) - (2,900,000) - Bank charges and interest (950) - (950) - FX translation movement on FX transactions within the entity (507) - (507) (4,876,963) - (4,876,963) Closing balance 7,765 7,770 Account reconciliations: Local Accounts 7,588 7,593 Administration Accounts ,765 7,770

18 Appendix 2 Nortel Networks UK Limited (In Administration) Saudi Arabia Branch Joint Administrators Abstract of Receipts and Payments from 14 January 2009 to 13 July 2015 Nortel Networks UK Limited - Saudi Arabia Branch (in Administration) Administrators' receipts and payments account for the period: 14 January 2009 to 13 July 2015 Currency: SAR Period 14 January 2009 to 13 January 2015 Period 14 January 2015 to 13 July 2015 Total to 13 July 2015 Opening balance 9,585,178 9,585,178 Receipts Trading: - Other receipts 63,431-63,431 Other: - Pre-appointment sales 7,065,584-7,065,584 - Intercompany 1,484,482-1,484,482 - Bank interest 128, ,127 - FX translation movement 275 (1) 275 Payments 8,741,899 (1) 8,741,899 Trading: - Other payments (2,831,972) - (2,831,972) - Trade payables (1,507,187) - (1,507,187) - Other taxes (974,296) - (974,296) - Payroll, employee benefits, and payroll taxes (747,342) - (747,342) - Other professional services costs (617,615) - (617,615) - Property costs (346,380) - (346,380) - Utilities (268,911) - (268,911) - Contractors (109,931) - (109,931) Other: - - Pre-liquidation distribution - NN UK (10,857,763) - (10,857,763) - FX Translation movement on FX transactions within the entity (32,978) - (32,978) - Bank charges and interest (3,563) - (3,563) (18,297,938) - (18,297,938) Closing balance 29,140 29,139 Account reconciliations: Local Accounts 28,476 28,476 Administration Accounts ,139 29,139

19 Appendix 2 Nortel Networks UK Limited (In Administration) Saudi Arabia Branch Receipts and payments comments There has been a significant reduction in the receipts and payments activity during the interim period against prior periods. This is representative of the wind down position of the business. Notes to R & P Note 1 Account balances have all been reported in a local currency, SAR, in addition to a common currency across all entities, USD. Opening balances have been converted using January 2009 month end spot rates and closing balances converted using June 2015 month end spot rates which have been provided by the Company. This approach is in line with the Company s internal reporting procedures. Transactions that have taken place through the accounts over the course of the reporting period (14 January 2015 to 13 July 2015) have been converted at average spot rates over this period, which have been sourced from Reuters. Consequently, foreign exchange movements have occurred in the period as a result of fluctuations in currency conversion rates. These are translation movements only and do not reflect an actual receipt or payment. Note 2 The numbers used to prepare the receipts and payments summary have been provided by the Company and are unaudited. Material items have been reviewed for accuracy and reasonableness. Note 3 The amounts reported are inclusive of sales tax where applicable. Foreign exchange translation movement The total FX translation movement to 13 July 2015 is a result of the fluctuations in exchange rates against the USD. As such the interim FX translation movement does not represent a true monetary gain or loss.

20 Appendix 3 Appendix 3 Nortel Networks UK Limited (In Administration) The Joint Administrators fees comprise the following three elements: Administration time costs Administration time costs are those fees incurred by the Joint Administrators in respect of the overall management of the Administration of the Company. They do not include core fees in relation to the sales of the businesses nor any reallocation of centrally incurred costs. These time costs are categorised into various workstreams and detailed in a table in accordance with the Statement of Insolvency Practice 9, an English regulatory requirement. These workstreams include, amongst others, creditors, employees, property, pensions and statutory. Reallocated time costs Throughout the Administration process, certain fees of the Joint Administrators have been charged centrally, for activities relating to all EMEA filed entities. Appropriate apportionment rates have been applied to these fees and the costs are apportioned accordingly between the various EMEA entities, including the Company. Please note, not all workstreams are apportioned to all EMEA entities. Total reallocated time costs across all EMEA entities for the period were GB 1,712, Transaction time costs The Joint Administrators have incurred fees in respect of the global business and asset sales. Apportionment rates have been applied to these fees, based on a provisional purchase price allocation ( PPA ) scenario, and the respective portions have been charged to each entity in EMEA, including the Company. In the fullness of time, there will be a true up of transaction time costs in accordance with actual PPA to each EMEA entity. Total transaction time costs across all EMEA entities for the period were GB 1, Total time costs for the Administration in respect of the period from 29 November 2014 to 29 May 2015 Time costs for the Administration for the period 29/11/2014 to 29/05/2015 Administration time costs 2,247, Reallocation of time costs (1,205,062.95) Transaction time costs Total time costs 1,043,257.73

21 Nortel Networks UK Limited (In Administration) Appendix 3 Summary of Joint Administrators time costs in respect of the period from 29 November 2014 to 29 May 2015 (GBP) Excluding core M&A transaction time Activity Partner Director / Executive Director Assistant Director Hours Manager Executive / Assistant Executive Analyst Total sum of hours Average hourly rate Time costs for the Time costs for Period Adminstration to date PPA, Claims & Strategy , ,807, IT , , ,059, Finance, Accounting & Administration , , ,155, EMEA tax & VAT advisory , ,705, UK Tax / VAT Advisory & Compliance , ,203, Creditors , ,843, Employees , ,804, Trading ,794, Suppliers ,690, PPF reporting , ,077, Transfer Pricing ,745, Exit Strategy , ,674, Statutory , ,568, Case Management , ,492, Customers ,446, Property , ,339, Debtors ,077, Canada / USA ,005, Legal , , Creditors Committee , , NNUK Branches & Equity Interests , , Intellectual Property Portfolio , Estimated Outcome Statement , Liaising Directors , Team meetings , Progress Reports , , Investigations , Branches & equity interests , , Treasury / Banks , PPF EY fees reporting , , Pensions , Briefing EMEA , Loan to NNSA , Administration application and planning , Stablisation , France settlement , Intra Group & Netting , EMEA billing , , CVA Planning , , Strategy ,120.00

22 Appendix 3 Nortel Networks UK Limited (In Administration) Summary of Joint Administrators time costs in respect of the period from 29 November 2014 to 29 May 2015 (GBP) Excluding core M&A transaction time (continued) Activity Partner Director / Executive Director Assistant Director Hours Manager Executive / Assistant Executive Analyst Total sum of hours Average hourly rate Time costs for the Time costs for Period Adminstration to date PPF HS fees reporting , Pension Defence , Purchase Price Allocation , PR / Media , M&A , NNUK creditors , , Communications , Tax , Cash forecasting , Finance, accounting and administration , Directors , Fees , Retention of title , Creditors , Non COMI countries , Pensions , Suppliers ARB SJH DM Legal Grand Total , , , ,247, ,228, Average hourly rate ( ) Time costs for the Period ( ) 404, , , , , , Time costs for the Administration to date ( ) 6,966, ,498, ,799, ,222, ,822, ,919, Time costs for the Administration to date may show minor variances from one progress report to the next, owing to timing differences and adjustments being made to prior period time reports. This information should not be considered definitive and is provided to creditors only for guidance.

23 Appendix 3 Administration fee analysis (GBP) Summary of total reallocated time costs for all EMEA filed entities in respect of the period from 29 November 2014 to 29 May 2015 Hours Activity Partner Director / Executive Director Assistant Director Manager Executive / Assistant Executive Analyst Total sum of hours Average hourly rate ( ) Total reallocated time costs for the Period ( ) Total reallocated time costs to 29 May 2015 ( ) PPA, Claims & Strategy , ,807, IT , , ,059, Finance, Accounting & Administration , , ,155, EMEA tax & VAT advisory , ,705, Creditors , ,843, Trading ,794, Transfer Pricing ,745, Exit Strategy , ,674, Customers ,446, Debtors ,077, Canada / USA ,005, Intellectual Property Portfolio , Estimated Outcome Statement , Progress Reports , , Branches & equity interests , , France settlement , EMEA billing , , CVA Planning , , Grand Total , , , ,712, ,446, Average hourly rate ( ) Total reallocated time costs for the Period ( ) 388, , , , , , Total reallocated time costs to 29 May 2015 ( ) 5,666, ,589, ,701, ,072, ,825, ,590,646.24

24 Appendix 3 Administration fee analysis (GBP) Summary of total core M&A transactions time costs for all EMEA filed entities in respect of the period from 29 November 2014 to 29 May 2015 Activity Partner Director / Executive Director Hours Assistant Director Manager Executive Analyst Total sum of hours Average hourly rate ( ) Total transaction time costs for the Period ( ) Total transaction time costs to 29 May 2015 ( ) M&A / Transitional Services ,054, Purchase Price Allocation ,328, M&A / Equinox ,525, M&A / Netas ,197, M&A Snow , ,796, M&A / GSM ,584, M&A / Carrier ,326, M&A / Passport ,120, Other Assets , M&A , M&A Iceberg , M&A / Velocity , Grand Total , ,775, Average hourly rate ( ) Total transaction time costs for the Period ( ) - 1, Total transaction time costs to 29 May 2015 ( ) 2,559, ,174, ,962, ,874, ,639, , Note Time costs in respect of transactions for the period from 29 November 2014 to 29 May 2015 have been apportioned on a provisional basis, having regard to the nature of the work done and the extent of progress made in respect of some, but not all, core M&A transactions. The allocation is provisional and will change as the transactions progress and the outcome of the PPA is clear. Please note the Joint Administrators have only apportioned core M&A transaction time costs in respect of those transactions that have made sufficient progress. Therefore further core M&A transaction time costs will be apportioned in due course to the Company, and reapportioned as the outcome of the PPA process becomes clear.

25 Appendix 4 Appendix 4 Nortel Networks UK Limited (In Administration) Office Holders Charging Policy for Fees The statutory provisions relating to remuneration are set out in Rule of the Rules. Further information is given in the Association of Business Recovery Professionals publication A Creditors Guide to Administrators Fees, a copy of which may be accessed from the web site of the Insolvency Practitioners Association at (follow Regulation and Guidance then Creditors Guides to Fees ), or is available in hard copy upon written request to the Administrators. The creditors have determined that the Administrators remuneration should be fixed on the basis of time properly spent by the Administrators and their staff in attending to matters arising in the Administration. The Administrators have engaged managers and other staff to work on the cases. The work required is delegated to the most appropriate level of staff taking account of the nature of the work and the individual s experience. Additional assistance is provided by accounting and treasury executives dealing with the Company s bank accounts and statutory compliance diaries, secretaries providing typing and other support services and filing clerks. Work carried out by all staff is subject to the overall supervision of the Administrators. All time spent by staff working directly on case-related matters is charged to a separate time code established for each case. Each member of staff has a specific hourly rate, which is subject to change over time. The average hourly rate for each category of staff over the period is shown in Appendix 3, as are the current hourly rates used. The current hourly rates may be higher than the average rates, if hourly rates have increased over the period covered by this report. Office Holders Charging Policy for Disbursements Statement of Insolvency Practice No. 9 ( SIP 9 ) published by R3 (The Association of Business Recovery Professionals) divides disbursements into two categories. Category 1 disbursements comprise payments made by the office holders firm, which comprise specific expenditure relating to the administration of the insolvent s affairs and referable to payment to an independent third party. These disbursements can be paid from the insolvent s assets without approval from the Committee. In line with SIP 9, it is our policy to disclose such disbursements drawn but not to seek approval for their payment. Category 2 disbursements comprise payments made by the office holders firm which include elements of shared or overhead costs. Such disbursements are subject to approval from Creditors Committee as if they were remuneration. It is our policy, in line with SIP 9, to seek approval for this category of disbursement before they are drawn.

26 Rule 2.47 Form 2.24B The Insolvency Act 1986 Administrator s progress report 2.24B Name of Company Company number Nortel Networks UK Limited In the High Court of Justice of England and Wales, Chancery Division, Companies Court Court case number 536 of 2009 We A R Bloom, A M Hudson, S J Harris and C J W Hill Ernst & Young LLP, 1 More London Place, London, SE1 2AF administrators of the above company attach a progress report for the period From to 14 January July 2015 Signed Joint Administrator Dated 11 August 2015 Contact Details: You do not have to give any contact information in the box opposite but if you do, it will help Companies House to contact you if there is a query on the form. The contact information that you give will be visible to searchers of the public record Saskia Lawrence Ernst & Young LLP, 1 More London Place, London, SE1 2AF Tel: +44 (0) DX Number: DX Exchange: Companies House receipt date barcode When you have completed and signed this form please send it to the Registrar of Companies at: Companies House, Crown Way, Cardiff, CF14 3UZ DX Cardiff