Guidance Notes to Paragraph 3

If the independent adviser is unable to advise the board of the Target whether the financial terms of an offer (or any alternative offers) are, or are not, fair and reasonable, this must be made known to Target shareholders and an explanation given in the Target board circular. The Panel should be consulted in advance about the explanation which is to be given.

Directors of a Bidder and the Target must, in advising their shareholders, act only in their capacity as Directors and not have regard to their personal or family shareholdings or to their personal relationships with the Bidder or Target. Directors of the Target must give careful consideration before they enter into any commitment with a Bidder (or anyone else) which would restrict their freedom to advise their shareholders in the future.

In certain circumstances it may not be appropriate for a Person who has had a recent advisory relationship with a Bidder to give advice to a Target. Additionally, the Panel would consider a Person who has a significant interest in or financial connection with either a Bidder or the Target of such a kind as to create a conflict of interest. The requirement for competent independent advice is of particular importance where the offer is a management buyout or similar transaction or is being made by the existing controlling shareholder or group of shareholders. In any such cases, the independence of the adviser must be beyond question.

The Panel should be consulted if there is any potential of a contravention of Paragraph 3. The Panel may waive or modify the application of Paragraph 3 if it is satisfied that it is appropriate to do so in the circumstances.

Where required to do so, a Bidder should obtain independent advice before announcing its offer or any revised offer. Such advice should be as to whether or not the making of the offer is in the interests of the Bidder's shareholders. Shareholders should have sufficient time to consider advice given to them prior to any general meeting held to implement the proposed offer.

In obtaining advice as to how an offer affects all shareholders, consideration should specifically be given by the Target board to the effect on minority shareholders or classes of shareholders, where applicable. It is expected that the substance of any such advice will be summarised in the Target circular.