Offer by OM Group-Pt.5

London Stock Exchange 29 August 2000 PART 5 OF 5 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES OM GROUP -------- OFFER FOR LONDON STOCK EXCHANGE PLC ----------------------------------- APPENDIX VI ----------- ESTIMATED COST SAVINGS ---------------------- Statement of estimated cost savings prepared by OM -------------------------------------------------- 1. OM expects significant synergies and operating efficiencies to be achieved from the integration of the two businesses. Major synergies are expected to arise from the implementation of OM's trading platform on LSE and the integration of the associated IT operations. Further benefits are expected from implementation of OM's business model and the elimination of overlapping functions. Based on a preliminary assessment and on the information outlined below, OM believes that the New Group could achieve yearly pre-tax cost savings rising to more than GBP30 million within four years. The aggregate cash cost of achieving these synergies is expected to be approximately GBP58 million. OM will create a restructuring provision upon acquisition and this amount will therefore be included in the goodwill arising from the transaction. OM further believes there will be significant potential for enhancement of income from trading service-related activities. 2. In arriving at this estimate in respect of cost savings, the Directors have assumed that: * the implementation of the OM trading platform occurs by the middle of the second year following completion of the Offer and that the relevant LSE systems can be decommissioned during the third year; * the existing systems outsourcing arrangements expire in 2002 without any financial penalty for termination; and * no benefits have been assumed from potential cost savings arising from vertical integration within clearing and settlement systems All amounts are given in current day prices. 3. The sources of information which the Directors have used to arrive at this estimate include LSE's annual reports and accounts, the LSE demutualisation circular, the iX merger offer document, as well as limited information made available by LSE, together with the Directors' knowledge of the industry. 4. The Directors have not been able to discuss with LSE's management the reasonableness of the bases of their belief, as it relates to LSE, supporting the Statement. As a result, the inherent risks in relation to this forward looking statement are greater. Because of this, and the fact that the changes relate to the future, the actual cost savings could be materially different from those estimated. Letter from Ernst & Young relating to OM's statement of ------------------------------------------------------- estimated costs savings ----------------------- Ernst & Young AB Adolf Fredriks Kyrkogata 2 SE-103 62 Stockholm Sweden The Directors OM Gruppen AB Norrlandsgatan 31 SE-105 78 Stockholm Sweden The Directors Lazard Brothers & Co., Limited 21 Moorfields London EC2P 2HT United Kingdom 28 August 2000 Offer for London Stock Exchange plc ('LSE') We refer to the statement regarding the estimate of cost savings ('the Statement') made by OM Responsibility -------------- The Statement is the responsibility solely of the Directors of OM ('the Directors'). It is our responsibility and that of Lazard Brothers & Co., Limited ('Lazard') to form respective opinions, as required by Note 8(b) to Rule 19.1 of the City code on Takeovers and Mergers ('the Code'), as to whether the Statement has been made by the Directors of OM with due care and consideration. Basis of opinion ---------------- We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued by the Auditing Practices Board. We have reviewed the relevant bases of belief (including sources of information) and calculations underlying the Statement. We have discussed the Statement together with the relevant bases of belief (including sources of information) with the Directors and those officers and employees of OM who developed the underlying plans and with Lazard. Our work did not involve any independent examinations of any of the financial or other information underlying the Statement. We have also considered the letter dated 28 August 2000 from Lazard to the Directors on the same matter. We do not express any opinion as to the achievability of the cost savings identified by the Directors. Opinion ------- In our opinion, based on the foregoing, the Statement by the Directors of OM has been made with due care and consideration, in the context in which it was made. Our work in connection with the Statement has been undertaken solely for the purposes of reporting under Note 8(b) to Rule 19.1 of the Code to the Directors and to Lazard. We accept no responsibility to LSE or its shareholders or any other person (other than the Directors and Lazard) in respect of, arising out of or in connection with that work. Yours faithfully Ernst & Young Letter from Lazard relating to OM's statement of estimated cost savings ----------------------------------------------------------------------- Lazard Brothers & Co., Limited 21 Moorfields London EC2P 2HT United Kingdom The Directors OM Gruppen AB Norrlandsgatan 31 SE-105 78 Stockholm Sweden 28 August 2000 Dear Sirs, Offer for London Stock Exchange plc ('LSE') We refer to the statement of estimated cost savings (the 'Statement') made by OM Gruppen AB ('OM') set out in Appendix VI to the offer announcement to be published on 29 August 2000, for which the Directors of OM are solely responsible. We have discussed the Statement (including the bases and assumptions on which it was made) with the Directors of OM and those officers and employees of OM responsible for its compilation. We have also reviewed the work carried out by Ernst & Young and have discussed with them the conclusions stated in their letter of 28 August 2000 addressed to yourselves and ourselves on this matter. We have relied upon the accuracy and completeness of all the financial and other information reviewed by us and have assumed such accuracy and completeness for the purposes of rendering this letter. We do not express any opinion as to the achievability of the cost savings identified by the Directors of OM. This letter is provided solely to the Directors of OM in connection with Note 8(b) of Rule 19.1 of the City Code on Takeovers and Mergers and for no other purpose. We accept no responsibility to LSE or its shareholders or any other person other than the Directors of OM in respect of this letter. On the basis of the foregoing, we consider that the Statement by OM, for which the Directors of OM are solely responsible, has been made with due care and consideration in the context in which it was made. Yours faithfully Jonathan Dawson for and on behalf of Lazard Brothers & Co., Limited APPENDIX VII ------------ DEFINITIONS ----------- The following definitions apply throughout the document, unless the context otherwise requires: AIM means the Alternative Investment Market of LSE; American Stock Exchange means The American Stock Exchange LLC; Australian Stock Exchange means Australian Stock Exchange Limited; Board or Directors means the directors of either OM, LSE or the New Group as the context demands; Canada means Canada, its provinces and territories and all areas subject to its jurisdiction or any political subdivision of these; CRESTCo means CRESTCo Limited; CSDs means central securities depositories; EGM means the Extraordinary General Meeting of LSE to be held on 14 September 2000 (or any date to which such meeting is adjourned) Ernst & Young means Ernst & Young AB of Adolf Fredriks Kyrkogata 2, SE-103 62 Stockholm, Sweden; E*TRADE means E*TRADE Nordic AB; Extranet means a system of computers that enables particular organisations to communicate with each other and share information; Financial Times means the daily newspaper printed by The Financial Times Limited; FSA means Financial Services Authority; GBP means pounds sterling; ISE means the International Securities Exchange in New York; iX iX - international exchanges plc Jiway means the EURO100 million joint venture between OM and Morgan Stanley Dean Witter to create a screen-based electronic market; Lazard means Lazard Brothers & Co., Limited; LCH means The London Clearing House Limited; LIFFE means London International Financial Futures and Options Exchange plc; LMIL means London Market Information Link; Loan Note means the loan notes of OM Group to be issued pursuant to the Loan Note Alternative, the principal terms of which are set out in Appendix III of this document; Loan Note Alternatives means the entitlement of LSE Shareholders to elect to receive Loan Notes in lieu of some or all of the cash to which they would be entitled to under the Offer LSE means London Stock Exchange plc; LSE Group means LSE and its subsidiary undertakings; LSE Group Associate means any partnership, joint venture, firm or body corporate in which any member of LSE Group may be interested; LSE Shareholders means holders of LSE Shares; LSE Shares means ordinary shares of 5p each in the capital of LSE; Morgan Stanley Dean Witter means Morgan Stanley Dean Witter & Co.; Nasdaq means The Nasdaq Stock Market Inc.; National Discount Brokers means National Discount Brokers Group Inc.; New Group means the new group formed following the implementation of the Offer in the manner set out in this document; new OM Shares means the new OM Shares which may be issued by OM Group in connection with the Offer to be made by Lazard on behalf of OM Group; NOREX means the combined markets of Scandinavian countries; Offer means the offer for LSE Shares to be made by Lazard on behalf of OM Group as described in Appendix I of this document; Official List means the Official List maintained by the UK Listing Authority, pursuant to Part IV of the Financial Services Act 1986; OM or OM Group means OM Gruppen AB (publ); OM Group Associate means any partnership, joint venture, firm or body corporate in which any member of the OM Group may be interested; OM London Exchange means OM London Exchange Ltd., a subsidiary of OM; OM Shares means the shares of SEK2 each in the capital stock of OM; OM Shareholders means the holders of OM Shares; OM Stockholm Exchange means OM Stockholmsborsen AB; Panel means The Panel on Takeovers and Mergers; Primary Markets means the markets on which shares are initially admitted to listing and trading; RIE means Recognised Investment Exchange as defined in section 207(1) of the Financial Services Act 1986; SEAQ means Stock Exchange Automated Quotation System; SEAQ Auctions means the auction market mechanism for SEAQ stocks operated by the London Stock Exchange; SEATS PLUS means the trading service used for AIM securities and some other securities; Secondary Markets means the trading in shares after their initial issue; SEK means Swedish Krona; SETS means the order book trade execution systems of the London Stock Exchange; Stockholm Stock Exchange means OM Stockholm Stock Exchange; Tandem means a brand of computers manufactured by Compaq Computer Corporation Inc.; the Deutsche Borse means the Deutsche Borse AG; the iX transaction or the iX merger means the proposed merger announced on 3 May 2000 between LSE and the Deutsche Borse; the OM Group means OM and its subsidiary undertakings; the wider LSE Group means LSE Group and LSE Group Associates; the wider OM Group means the OM Group and the OM Group Associates; United Kingdom or UK means the United Kingdom of Great Britain and Northern Ireland; UNIX means the UNIX operating system; UK Power Exchange means the spot and futures market in UK electricity which is being operated by OM London Exchange; United States or US means the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia; VPC means VPC AB, the Swedish Central securities despository; and XML means Extended Mark-up Language.

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