Recommended Offer for Trace

25th May 2007 16:42

Microgen PLC25 May 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTOTHE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR ANY JURISDICTIONWHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCHJURISDICTION FOR IMMEDIATE RELEASE25 May 2007 Recommended Cash Offer for Trace Group plc ("Trace") by Microgen plc ("Microgen") Summary The Microgen Board and the Trace Independent Directors are pleased to announcethat they have agreed the terms of a recommended cash offer to be made byMicrogen for the entire issued and to be issued ordinary share capital of Trace. • The Offer will be 155 pence in cash for each Trace Share. • The Offer will value the existing issued ordinary share capital of Trace at approximately £22.1 million. • The Offer represents: (i) a premium of approximately 73.2 per cent. to the Closing Price of 89.5 pence per Trace Share on 19 April 2007, the date immediately preceding the date of the Tulip Announcement; (ii) a premium of approximately 62.3 per cent. to the average daily Closing Price of 95.5 pence per Trace Share during the six months prior to 19 April 2007, the date immediately preceding the date of the Tulip Announcement; (iii)a premium of approximately 47.6 per cent to the highest Closing Price of 105 pence per Trace Share over the five years prior to 19 April 2007, the date immediately preceding the date of the Tulip Announcement; (iv)a premium of approximately 14.8 per cent. to the Tulip Proposal of 135 pence per Trace Share in cash; (v) a premium of approximately 8.8 per cent. to the Closing Price of 142.5 pence per Trace Share on 24 May 2007, the last business day prior to this Announcement; and (vi)approximately 18.8 times reported earnings per Trace Share from continuing operations of 8.23 pence for the year ended 31 May 2006, and on a fully diluted basis represents approximately 18.9 times reported earnings per Trace Share from continuing operations of 8.19 pence for the year ended 31 May 2006. • The Independent Directors, who have been so advised by Shore Capital,consider the terms of the Offer to be fair and reasonable. In providing adviceto the Independent Directors, Shore Capital has taken into account theIndependent Directors' commercial assessments. • The Trace Independent Directors have unanimously recommended that all TraceShareholders accept the Offer. • The Directors of Microgen believe that the acquisition of Trace willstrengthen Microgen's position as an IT services and solutions provider.Benefits are also anticipated to be derived from the efficiencies and synergiesas a result of the combination. Commenting on the Offer, Daniel Chapchal, Chairman of Trace, said: "The Independent Directors believe that the Offer from Microgen represents asignificant increase over the previous offer from Tulip. As a result, theIndependent Directors have given their unanimous recommendation to the Offerfrom Microgen which they believe to be in the best interests of all TraceShareholders." Martyn Ratcliffe, Chairman of Microgen, said: "The combination of Trace and Microgen should be attractive to all stakeholders,including customers, employees and shareholders in both organisations. The Tracebusinesses will fit well within the Microgen Group, providing customers with astronger supplier, employees with expanded career opportunities, shareholders ofTrace with an attractive cash exit and shareholders in Microgen with greaterpotential in the future, derived from the Enlarged Group." This summary should be read in conjunction with the full text of thisAnnouncement and its appendices. Enquiries: Microgen plc Tel: +44 (0) 1252 772 300Martyn RatcliffePhilip Wood Arbuthnot Securities Limited Tel: +44 (0) 20 7012 2000 (Financial adviser and broker to Microgen in relation to the Offer)Ian WilliamsRichard DunnRichard Tulloch Financial Dynamics Tel: +44 (0) 20 7831 3113 (Public relations adviser to Microgen)Giles Sanderson Trace Group plc Tel: +44 (0) 20 7825 1000Daniel Chapchal Tel: +44 (0) 7836 512 549David Begg Tel: +44 (0) 20 7825 1000Robin Woodall Tel: +44 (0) 7740 928 399 Shore Capital and Corporate Limited Tel: +44 (0) 20 7408 4090 (Financial adviser to Trace)Alex BorrelliPascal Keane The terms used in this summary shall have the same meaning given to them in thefull Announcement. Arbuthnot Securities, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Microgen and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Microgen for providing the protections afforded to clients of ArbuthnotSecurities nor for providing advice in relation to the Offer, or the contents ofthis Announcement or any matter referred to herein. Arbuthnot Securities Limited has approved this Announcement for the purposes ofsection 21 of the Financial Services and Markets Act 2000. The principal placeof business of Arbuthnot Securities Limited is Arbuthnot House, 20 RopemakerStreet, London EC2Y 9AR. Shore Capital, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Trace and no one else inconnection with the Offer and will not be responsible to anyone other than Tracefor providing the protections afforded to clients of Shore Capital nor forproviding advice in relation to the Offer, the content of this Announcement orany matter referred to herein. This Announcement is not intended to and does not constitute, or form any partof, an offer or an invitation to purchase or sell any securities or thesolicitation of any vote or approval in any jurisdiction pursuant to the Offeror otherwise. The Offer will be made solely through the Offer Document, and, inrelation to certificated Trace Shares, the Form of Acceptance. Microgen intendsto dispatch such documents to Trace Shareholders (and, for information only, toTrace Optionholders) and place such advertisement shortly. The Offer Documentand the Form of Acceptance will together contain the full terms and conditionsof the Offer, including details of how to accept the Offer. Any acceptance orother response to the Offer should be made only on the basis of the informationcontained in the Offer Document and the Form of Acceptance. The Offer will besubject to English Law. The laws of relevant jurisdictions may affect theavailability of the Offer to overseas persons. Overseas persons, or persons whoare subject to the laws of any jurisdiction other than the United Kingdom,should inform themselves about and observe any applicable legal and regulatoryrequirements. The Offer Document will be available for public inspection in theUnited Kingdom. Unless otherwise determined by Microgen, the Offer will not be made, directly orindirectly, in or into the United States or by use of the mails of, or by anymeans or instrumentality (including, without limitation, facsimile, internet,email or other electronic transmission, telex or telephone) of inter-state orforeign commerce of, or any facility of a national, state or other securitiesexchange of, the United States, nor will it be made directly or indirectly in orinto Canada, Australia, Japan or any Restricted Jurisdiction, and the Offer willnot be capable of acceptance by any such use, means, instrumentality or facilityor from within the United States, Canada, Australia, Japan or any RestrictedJurisdiction. Accordingly, copies of this Announcement are not being, will notbe and must not be, directly or indirectly, mailed or otherwise forwarded,transmitted, distributed or sent in, into or from the United States, Canada,Australia, Japan or any Restricted Jurisdiction, and persons receiving thisAnnouncement (including, without limitation, custodians, nominees and trustees)must not mail, forward, distribute or send it in, into or from the UnitedStates, Canada, Australia, Japan or any Restricted Jurisdiction. Doing so mayrender invalid any purported acceptance of the Offer. Any persons (includingcustodians, nominees and trustees) who are overseas persons or who would, orotherwise intend to, mail or otherwise forward, transmit, distribute or sendthis Announcement, the Offer Document, the Form of Acceptance or any relateddocument outside the United Kingdom or to any overseas person should seekappropriate advice before doing so. Further details in relation to OverseasTrace Shareholders will be contained in the Offer Document. Cautionary statement regarding forward-looking statements This Announcement contains statements about Microgen and Trace (and theirrespective groups and/or subsidiary undertakings) that are or may beforward-looking statements. All statements other than statements of historicalfacts included in this Announcement may be forward-looking statements. Withoutlimitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance orthe negative thereof are forward-looking statements. Forward-looking statementsinclude statements relating to the following (i) future capital expenditures,expenses, revenues, earnings, synergies, economic performance, indebtedness,financial condition, dividend policy, losses and future prospects; (ii) businessand management strategies and the expansion and growth of Microgen's or Trace'soperations and potential synergies resulting from the Offer; and (iii) theeffects of government regulation on Microgen's or Trace's business. Theseforward-looking statements are not guarantees of future performance. They havenot been reviewed by the auditors of Microgen or of Trace. These forward-lookingstatements involve known and unknown risks, uncertainties and other factorswhich may cause the actual results, performance or achievements of any suchperson, or industry results, to be materially different from any results,performance or achievements expressed or implied by such forward-lookingstatements. These forward-looking statements are based on numerous assumptionsregarding the present and future business strategies of such persons and theenvironment in which each will operate in the future. You are cautioned not toplace undue reliance on any forward-looking statement, which speak only as ofthe date they were made. All subsequent oral or written forward-lookingstatements attributable to Microgen, Trace or any members of their respectivegroups or any persons acting on their behalf are expressly qualified in theirentirety by the Cautionary Statement above. All forward-looking statementsincluded in this document are based on information available to us on the datehereof. Investors should not place undue reliance on such forward-lookingstatements, and we undertake no obligation to publicly update or revise anyforward-looking statements. Dealing disclosure requirements Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if anyperson is, or becomes, "interested" (directly or indirectly) in 1% or more ofany class of "relevant securities" of Trace, all "dealings" in any "relevantsecurities" of that company (including by means of an option in respect of, or aderivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 pm (London time) on the London business dayfollowing the date of the relevant transaction. This requirement will continueuntil the date on which the Offer becomes, or is declared, unconditional as toacceptance, lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of Trace they will be deemed to be a single person for the purposeof Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Trace by Microgen or Trace or by any of their respective "associates" must be disclosed by no later than 12.00 noon (London time) on theLondon business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative reference to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTOTHE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR ANY JURISDICTIONWHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCHJURISDICTION FOR IMMEDIATE RELEASE 25 May 2007 Recommended Cash Offer for Trace Group plc ("Trace") by Microgen plc ("Microgen") 1. Introduction The Microgen Board and the Trace Independent Directors are pleased to announcethat they have agreed the terms of a recommended cash offer to be made byMicrogen for the entire issued and to be issued ordinary share capital of Trace. The Offer will be 155 pence in cash for each Trace Share which values theexisting issued ordinary share capital of Trace at approximately £22.1 million. The Offer is conditional, inter alia, on the passing of the Resolutions at anEGM of Microgen, details of which are set out in paragraph 13 below. Background On 20 April 2007, the Board of Tulip, a management buy-out vehicle formed forthe purposes of acquiring Trace, and the Trace Independent Directors announcedthat they had reached agreement on the terms of a recommended proposal for theacquisition of Trace by Tulip at a price of 135 pence per Trace Share in cash tobe effected by means of a scheme of arrangement between Trace and TraceShareholders pursuant to section 425 of the Companies Act 1985 ("Tulip Proposal"). During the period from 14 May 2007 to 24 May 2007, Tulip announced a number ofupdates regarding the level and terms of irrevocable undertakings it hadreceived in respect of the Tulip Proposal. In the most recent update provided byTulip on 24 May 2007, Tulip confirmed that it had received the followingirrevocable undertakings in favour of the Tulip Proposal: (i) irrevocable undertakings that do not fall away in the event of ahigher offer and are for a period of 12 months from 14 May 2007 (the "HardIrrevocables with Standstill") in respect of 5,485,773 Trace Shares in aggregaterepresenting approximately 38.50 per cent. of the Trace Shares; (ii) irrevocable undertakings that do not fall away in the event of ahigher offer, effective for 12 months but which will lapse if (i) the TulipProposal lapses or is withdrawn and within 21 days thereafter Tulip has not madeor announced it will make an offer to acquire the share capital of Trace for acash price of not less than 135 pence per share; or (ii) the Tulip Proposal isnot approved at the Trace Court Meeting (scheduled for 4 June 2007); or (iii)the Scheme is not sanctioned by the Court by 19 April 2008 (the "HardIrrevocables without Standstill") in respect of 1,493,939 Trace Shares inaggregate representing approximately 10.48 per cent. of the Trace Shares; and (iii) irrevocable undertakings that lapse in the event of a higheroffer being made at a price of not less than 150 pence (the "Soft Irrevocables")in respect of 3,440,000 Trace Shares in aggregate representing approximately24.14 per cent. of the Trace Shares. As set out in paragraph 2 below, the Offer has been recommended by the TraceIndependent Directors. The Trace Independent Directors have today obtained anOrder of the Chancery Division of the High Court in relation to Trace and theScheme which contains the following direction: "THE COURT DIRECTS that in the event an offer is received to acquire the entireissued share capital of the Company for a price of 155 pence or higher and whichthe said Independent Directors propose to recommend the Chairman of the CourtMeeting is directed to adjourn the Court Meeting sine diem with the consequencethat the proposals for the Scheme will automatically lapse upon the saidIndependent Directors recommending an offer for each Trace Share at 155 pence ormore." (Order No. 2850 of 2007 25 May 2007) Therefore, in relation to those parties who have entered into Hard Irrevocableswithout Standstill, the lapsing of the Scheme will trigger the lapsing of suchundertakings in the event that within 21 days of the lapsing of the Scheme,Tulip has not made or announced it will make an offer to acquire the sharecapital of Trace for a cash price of not less than 135 pence per Trace Share. Further details of the irrevocable undertakings provided in relation to theTulip Proposal are set out in Appendix III of this Announcement. Following the announcement of the Tulip Proposal on 20 April 2007, the MicrogenBoard and the Trace Independent Directors entered into negotiations regarding apotential offer for Trace by Microgen. On 11 May 2007, Microgen announced thatit was in preliminary discussions with the Independent Directors of Trace andwas considering a possible competing offer in cash for the share capital ofTrace at a price of not less than 150 pence per Trace Share. The IndependentDirectors subsequently announced on 11 May 2007 that Trace Shareholders shouldtake no action in relation to the Tulip Proposal, pending further clarificationfrom Microgen. A further announcement was made by Microgen on 22 May 2007, whichstated that on 21 May 2007 the Board of Microgen had approached the IndependentDirectors of Trace with a possible revised proposal of a competing offer at 155pence in cash per Trace Share. Since 22 May 2007, Microgen has concluded its due diligence, finalised itsfinancing arrangements and secured the recommendation of the IndependentDirectors of Trace and, consequently, today announces its intention to acquirethe entire issued and to be issued share capital of Trace at 155 pence per TraceShare. 2. Recommendation of the Offer The Trace Independent Directors, who have been so advised by Shore Capital,consider the terms of the Offer to be fair and reasonable. In providing adviceto the Trace Independent Directors, Shore Capital has taken into account theTrace Independent Directors' commercial assessments. Accordingly the TraceIndependent Directors unanimously recommend that all Trace Shareholders acceptthe Offer. The Independent Directors, on behalf of themselves and their connected parties,holding in aggregate 1,436,453 Trace Shares representing 10.08 per cent. of theTrace Shares, have undertaken to accept the Offer upon the lapsing of theirirrevocable commitments to the Tulip Proposal which are described above and inAppendix III of this Announcement. Such lapsing will occur in respect of 10,000of these Trace Shares (representing 0.07 per cent. of the Trace Shares) in theevent of a higher offer being made at a price of not less than 150 pence and inrespect of 1,426,453 of these Trace Shares (representing 10.01 per cent. of theTrace Shares) in the event that within 21 days of the Tulip scheme ofarrangement being withdrawn, Tulip has not made or announced it will make anoffer to acquire the share capital of Trace for a cash price of not less than135p per share. As a result of the giving of the recommendation of the Offer by the TraceIndependent Directors, the Trace Independent Directors have today sought andobtained the Order which concerns the lapsing of the Scheme (details of whichare provided above). 3. Summary of the Offer The Offer, which will be subject to the conditions set out in Appendix I of thisAnnouncement and to the full terms and conditions set out in the Offer Documentand the Form of Acceptance, will be made on the following basis: for each Trace Share 155 pence in cash The Offer values the whole of Trace's existing issued share capital atapproximately £22.1 million. The Offer represents: (i) a premium of approximately 73.2 per cent. to the Closing Priceof 89.5 pence per Trace Share on 19 April 2007, the date immediately precedingthe date of the Tulip Announcement; (ii) a premium of approximately 62.3 per cent. to the average dailyClosing Price of 95.5 pence per Trace Share during the six months prior to 19April 2007, the date immediately preceding the date of the Tulip Announcement; (iii) a premium of approximately 47.6 per cent to the highest ClosingPrice of 105 pence per Trace Share over the five years prior to 19 April 2007,the date immediately preceding the date of the Tulip Announcement; (iv) a premium of approximately 14.8 per cent. to the Tulip Proposal of135 pence per Trace Share in cash; (v) a premium of approximately 8.8 per cent. to the Closing Price of142.5 pence per Trace Share on 24 May 2007, the last business day prior to thisAnnouncement; and (vi) approximately 18.8 times reported earnings per Trace Share fromcontinuing operations of 8.23 pence for the year ended 31 May 2006, and on afully diluted basis represents approximately 18.9 times reported earnings perTrace Share from continuing operations of 8.19 pence for the year ended 31 May2006. The Offer will extend to all Trace Shares unconditionally allotted or issued(including pursuant to the exercise of options granted under the Trace GroupShare Schemes) after the date of this Announcement and before the time at whichthe Offer ceases to be open for acceptance (or before such earlier time asMicrogen may, in accordance with the terms and conditions of the Offer andsubject to the rules of the Code, decide). Further details in relation to theeffect of the Offer on options under the Trace Group Share Schemes is set out inparagraph 12 of this Announcement. All Trace Shares to which the Offer relates will be acquired by Microgen fullypaid and with full title guarantee free from all liens, equitable interests,charges, encumbrances, pre-emption rights and other interests and together withall rights now and hereafter attaching thereto, including the right to receiveall dividends and other distributions (if any) declared, made or paidthereafter. The Offer is conditional inter alia, on the passing of theResolutions at an EGM of Microgen. 4. Information on Trace Trace was established in 1974 and is a UK provider of IT solutions. Tracefloated on the Official List of the London Stock Exchange in May 1989 and sincethen, Trace has increased turnover from £9.8 million for the year ended 31 May1989, to £14.3 million for the year ended 31 May 2006. Trace focuses on business software solutions for three principal markets:financial (Trace Financial), insurance and reinsurance broking (Trace Isys) andproperty (Trace Solutions). In conjunction with its software-based activities,Trace also offers imaging and workflow solutions and additionally it offers arange of payroll and HR services including a managed payroll service to smalland medium sized enterprises (Trace Employment Services). Trace services a broad range of clients from FTSE 100 companies to smallerprivate companies and currently employs approximately 190 people. Trace'sheadquarters and principal place of business is in London and Trace's growthplans are presently to focus on broadening and improving its portfolio ofproducts by way of internal development. For the year ended 31 May 2006, Trace reported turnover of £14.3 million (2005:£14.7 million) from continuing operations on which it generated profit beforetax of £1.6 million (2005: £1.4 million). As at 31 May 2006, Trace had grossassets of £17.1 million and net assets of £11.6 million, including cash and cashequivalents of £2.4 million. Intangible assets (comprising capitalisedexpenditure on software development) were £2.3 million as at 31 May 2006. The interim unaudited results for the six months to 30 November 2006 wereannounced on 27 February 2007. As at 30 November 2006, Trace had gross assets of£17.0 million and net assets of £12.0 million including cash and cashequivalents of £3.4 million. Intangible assets (comprising capitalisedexpenditures on software development) were £2.5 million as at 30 November 2006. 5. Background to and reasons for the Independent Directors of Tracerecommending the Offer to Trace Shareholders The turnover of the Trace Group has remained relatively static except for theyear ended 31 May 2002 where the turnover benefited from an acquisition. Theacquisition proved unsuccessful with the result that in the year ended 31 May2003 the Trace Group recorded a loss of £2.5 million before tax, most of whichwas attributed to the write-off of goodwill relating to the acquisition. Sincethat time the Trace Group's profitability has been restored and the Trace Grouprecorded a profit before tax from continuing operations of £1.6 million for theyear ended 31 May 2006 with basic earnings per share from continuing operationsof 8.23 pence. On 20 April 2007, the Board of Tulip and the Trace Independent Directorsannounced that they had reached agreement on the terms of a recommended proposalfor the acquisition of Trace by Tulip at a price of 135 pence per Trace Share incash to be effected by means of a scheme of arrangement between Trace and TraceShareholders pursuant to section 425 of the Companies Act 1985. Following the announcement of the Tulip Proposal, the Microgen Board and theIndependent Directors of Trace entered into negotiations regarding a potentialoffer for Trace by Microgen. On 11 May 2007, Microgen announced that it was inpreliminary discussions with the Independent Directors of Trace and wasconsidering a possible competing offer in cash for the share capital of Trace ata price of not less than 150 pence per Trace Share. The Independent Directorssubsequently announced on 11 May 2007 that Trace Shareholders should take noaction in relation to the Tulip Proposal, pending further clarification fromMicrogen. A further announcement was made by Microgen on 22 May 2007, whichstated that on 21 May 2007 the Board of Microgen had approached the IndependentDirectors of Trace with a possible revised proposal of a competing offer at 155pence in cash per Trace Share. Since 22 May 2007, Microgen has concluded its duediligence, finalised its financing arrangements and secured the recommendationof the Trace Independent Directors. The Trace Independent Directors note that the Offer by Microgen represents: (i) a premium of approximately 73.2 per cent. to the Closing Priceof 89.5 pence per Trace Share on 19 April 2007, the date immediately precedingthe date of the Tulip Announcement; (ii) a premium of approximately 62.3 per cent. to the average dailyClosing Price of 95.5 pence per Trace Share during the six months prior to 19April 2007, the date immediately preceding the date of the Tulip Announcement; (iii) a premium of approximately 47.6 per cent to the highest ClosingPrice of 105 pence per Trace Share over the five years prior to 19 April 2007,the date immediately preceding the date of the Tulip Announcement; (iv) a premium of approximately 14.8 per cent. to the Tulip Proposal of135 pence per Trace Share in cash; (v) a premium of approximately 8.8 per cent. to the Closing Price of142.5 pence per Trace Share on 24 May 2007, the last business day prior to thisAnnouncement; and (vi) approximately 18.8 times reported earnings per Trace Share fromcontinuing operations of 8.23 pence for the year ended 31 May 2006, and on afully diluted basis represents approximately 18.9 times reported earnings perTrace Share from continuing operations of 8.19 pence for the year ended 31 May2006. The Trace Independent Directors believe that there can be no certainty thatTrace Shares will trade at a price equivalent to the price under the Offer inthe foreseeable future. Accordingly, the Trace Independent Directors believethat, the Offer provides the best available opportunity for all TraceShareholders to realise their investments at a premium of 73.2 per cent. to theClosing Price of 89.5 pence per share on 19 April 2007, being the last businessday prior to the Tulip Announcement, and a premium of 14.8 per cent. to theTulip Proposal. As a result, the Trace Independent Directors believe that theOffer is in the best interests of the Trace Shareholders and are unanimouslyrecommending it to all Trace Shareholders as set out in paragraph 2 of thisAnnouncement. 6. Information on Microgen (a) General Microgen has been publicly listed since 1983. Over the past eight years,Microgen has established a track record of successful acquisitions in ITsoftware and services, with consistent profitability and cash flow. At theannouncement of the Microgen preliminary results for the year ended 31 December2006 in February 2007, the priorities of the Board in 2007 were defined as: (i) focus on profitability, both short and long term, withcorresponding cash conversion; (ii) increase the proportion of business derived from Microgensoftware products; (iii) increase recurring revenue, with an emphasis on annual licensingof software products; (iv) balance investment in product development and marketing withshort-term profitability, to maximise medium term shareholder value; and (v) explore mergers and acquisitions which may enhance shareholdervalue through the addition of products, services or customer base. (b) Operations Microgen is organised into five operating businesses, with the benefits of scalebeing achieved through shared central services, (including product development,which are fully expensed and charged into each business). The businesses are: • Asset & Wealth Management : providing trust, fund and bankingsystems into the wealth management sector and within the asset management sectorproviding both back office systems and performance measurement solutions. • Banking : providing software solutions, consultancy and servicesrelated to transaction processing, treasury, derivatives and payments. • Energy : providing solutions for pricing and margin managementin the Energy sector. • Consultancy & Applications Management : providing IT consultancyservices and applications management. • Billing & Database Management : providing multi-channel billingand hosted document management services. In addition, the Microgen Group expends considerable resources on productdevelopment and support activities. These activities are mostly managed within asingle function in order to maximise efficiency and the benefits of scale,unless there are greater operational benefits from alternative organisationalstructures. The Microgen central development operations are based in threecentres in Fleet, Hampshire; the Channel Islands and Wroclaw, Poland. (c) Financial information and current trading In the year ended 31 December 2006, Microgen reported under InternationalFinancial Reporting Standards ("IFRS") revenues of £37.6 million (2005: £40.8million) and a loss before taxation of £8.8 million (2005: profit beforetaxation of £5.5 million). The loss before taxation for the year ended 31December 2006 included a goodwill and intangibles impairment charge of £14.5million. Microgen had net assets of £59.6 million and £70.4 million as of 31December 2006 and 31 December 2005 respectively. The market capitalisation ofMicrogen based on the Closing Price of 51.5 pence per Microgen Share on 24 May2007 (the last business day prior to the publication of this Announcement) was£52.9 million. Microgen's trading performance in the first part of the 2007 financial year isin line with the Board's expectations and the organic development of theMicrogen Group as outlined in Microgen's Financial Statements for the year ended31 December 2006 has continued to make good progress. Microgen Aptitude hascontinued to gain market recognition for its transaction performance capabilityand event driven architecture and a number of new customer wins have beenachieved. 7. Background to and reasons for Microgen making the Offer Microgen has undertaken a series of successful acquisitions in the UK ITsoftware and solutions sector. Over the past five years, the Microgenacquisitions have had an increasing emphasis on the financial services sector,where the Board of Microgen considers that the regulatory environment provides amarket for potential investment in IT services and solutions. The proposed transaction will provide Microgen with an increased presence andexpanded client base with a broader range of software and service offerings.Certain of Trace's businesses will expand Microgen's presence in the financialservices sector, while others would open up opportunities for the EnlargedGroup. In addition, the acquisition of Trace pursuant to the Offer will providean opportunity to market Microgen's complementary software and servicesofferings to the Trace customer base and certain of Trace's products to theMicrogen customer base. In addition to the potential medium term revenue benefits from the combinationthrough an expanded product range and customer base, Microgen anticipates beingable to produce cost and efficiency synergies for the Enlarged Group as a resultof the combination, including: (i) the elimination of duplicated head office and centraladministration costs; (ii) increased efficiency in business operations; and (iii) increased scale of software development and supportinfrastructure. 8. Finance and bank facilities Full acceptance of the Offer would require a maximum cash payment ofapproximately £22.6 million by Microgen, which will be funded out of Microgen'sexisting cash reserves and from committed bank facilities from Lloyds TSB Bankplc that have been put in place for the purposes of the transaction. The bankfacilities provide Microgen with a facility of up to £20 million in the form ofa 364 day revolving credit loan facility together with additional term loanfacilities upon which Microgen may draw as necessary. Utilising these cashreserves and bank facilities, Microgen will be in a position to declare theOffer unconditional as to acceptances when it has received valid acceptances ofthe Offer or has acquired voting rights representing not less than 51.5 percent. of the voting share capital of Trace or such lesser percentage as Microgenmay decide provided that such amount is more than 50 per cent. of the votingshare capital of Trace. Further details of the bank facilities entered into byMicrogen will be set out in the Offer Document. Arbuthnot is satisfied that sufficient financial resources are available forMicrogen to satisfy the consideration payable as a result of full acceptance ofthe Offer. 9. Prospects for the Enlarged Group The Directors of Microgen believe that the acquisition of Trace will strengthenMicrogen's position as an IT services and solutions provider. The Enlarged Groupis expected to benefit from having an increased presence and expanded clientbase, with a broader range of software and service offerings which it will beable to market to Trace's and Microgen's customer base. Benefits are alsoanticipated to be derived from the efficiencies and synergies as a result of thecombination. The benefits of the transaction are likely to be reflected in the EnlargedGroup's financial year ending 31 December 2008 and subsequent periods, with thecosts of the transaction and associated integration being reported in the secondhalf of 2007. Any statement or inference that the transaction is expected to be earningsenhancing for the Enlarged Group should not be interpreted to mean that theearnings per share in the financial year following the transaction, or in anysubsequent period, will necessarily be greater than those for the relevantpreceding financial period. The financial effect of the Trace acquisition on Microgen's earnings per shareis expected to be positive in 2008. This statement should not be taken to meanthat Microgen's earnings per share for 2007 or subsequent periods will be higherthan that of prior periods. 10. Microgen's future intentions regarding Trace The proposed acquisition of Trace will provide an opportunity to marketMicrogen's software and services to the Trace customer base and certain ofTrace's products to Microgen's customer base. There will be cost and efficiencysynergies on the combination of Microgen and Trace's businesses. However, theprecise future strategy for creating such efficiencies and synergies will differdepending on the level of Microgen's shareholding in Trace and will be subjectto certain conditions. This can be explained as follows: (a) Shareholding levels: general Whilst Microgen will seek to acquire 100 per cent. of the issued Trace Shares,due to the irrevocable commitments provided to Tulip as described in AppendixIII of this Announcement, Microgen cannot predict with certainty its futurelevel of shareholding in Trace. However, it is a condition of the Offer thatMicrogen will only declare the Offer unconditional as to acceptances to theextent it has received valid acceptances of the Offer or has acquired votingshares representing not less than 51.5 per cent. of the voting share capital ofTrace or such lesser percentage as Microgen may decide provided that such amountis more than 50 per cent. of the voting share capital of Trace. Further detailsof this acceptance condition and the conditions of the Offer are set out inAppendix I of this Announcement. In the event that the acceptance condition under the Offer described above issatisfied and upon the Offer becoming or being declared unconditional in allrespects ("Offer Completion"), Trace will become a subsidiary undertaking ofMicrogen and will carry on business as determined by the then Board of Trace.However, Trace Shares will continue to be listed on the Official List whilstMicrogen owns less than 75 per cent. of the voting share capital of Trace. It isthe intention of Microgen to hold the Offer open for acceptances from TraceShareholders (subject to any notice to the contrary permitted under the Code,see below) once Offer Completion has occurred and therefore enable TraceShareholders to continue to accept the Offer following Offer Completion, shouldthey choose to do so. Under the Code, Microgen will be entitled, and may elect,to close the Offer at any time following Offer Completion by giving not lessthan 14 days' notice to this effect. Upon Microgen acquiring 75 per cent. of the voting share capital of Trace, andas part of the existing terms and conditions of the Offer, Microgen will makeapplication to the UK Listing Authority for the de-listing of Trace Shares.However, there may be a period of time that (whilst a subsidiary undertaking ofMicrogen) Trace's Shares are listed on the Official List. The Trace Independent Directors have stated in the Scheme Document as follows: "The Independent Directors believe that Trace Shares have traded at a lowerrating relative to companies in the 'Software and Computer Services' sector onthe Official List over the previous three years as a result of a number offactors. These factors include: • the relatively small market capitalisation of Trace; • the significant size of the shareholding of the Directors, amounting to33.06 per cent. of Trace Shares, and the limited volume of trading in TraceShares; • the relatively flat financial performance of Trace Group; and • Trace Group's recent unsuccessful acquisition." (Scheme Document: Part 1, paragraph 3) In the circumstances that Trace Shares continue to be listed on the OfficialList following the Offer Completion, and with Microgen's resulting substantialshareholding in Trace, the liquidity in Trace Shares would be anticipated toreduce further. Various parties (as identified in Part A of Appendix III of this Announcement)have entered into irrevocable undertakings with Tulip in respect of the TulipProposal that do not fall away in the event of a higher offer and are for aperiod of 12 months from 14 May 2007 ("Hard Irrevocables with Standstill") inrespect of 5,485,773 Trace Shares in aggregate representing approximately 38.50per cent. of the Trace Shares. It should be noted that these arrangements willremain in place even if the Offer becomes or is declared unconditional in allrespects. In this circumstance, the parties who entered into Hard Irrevocableswith Standstill would become minority shareholders in Trace (which would then bea subsidiary of Microgen) until such time as Tulip (should Tulip choose to doso) releases such individuals from the undertakings. In the best interests ofTrace's employees and shareholders, in due course Microgen will be requestingTulip to release these parties from the terms of such undertakings. The intentions of Microgen during such period that Microgen holds, first, alevel of 51.5 per cent. to 75 per cent. of the voting share capital of Trace,and second, a level above 75 per cent. are as follows: (b) Trace being a subsidiary undertaking of Microgen with ashareholding of between 51.5 per cent. and 75 per cent. Upon Offer Completion, a new Board of Trace will be appointed and announced byMicrogen irrespective of the size of Microgen's shareholding in Trace. It iscurrently anticipated that the proposed appointees to the Trace Board will beMartyn Ratcliffe, David Sherriff, Philip Wood and up to three non-executivedirectors who may or may not be current Directors of Microgen or Trace. Trace'sShares will continue to be listed on the Official List and Trace will be subjectto the Listing Rules. However it is the intention of Microgen for Trace toimplement the following proposed strategy promptly after Offer Completion: (i) Rationalisation of property The Trace properties at 224-232 St John's Street, London EC1 and 55 FarringdonRoad, London EC1 will be marketed and sold to appropriate third party purchasersselected by the then Trace Board on arm's length terms for cash. The operationspreviously at each site will be moved to a new facility in London (the "NewFacility"), although no precise location has been identified. Microgen willconsider the possibility of using the St John's Street property as the NewFacility. At 31 May 2006, Trace's premises at St John's Street and FarringdonRoad were held on the balance sheet at a value of approximately £7.0 million asindicated in the financial information on Trace in the Scheme Document. Inrelation to the St. John's Street property the following statement has been madeby the Trace Independent Directors in the Scheme Document: "Under the terms of the Sale and Leaseback Agreement and following completion ofthe Acquisition, Trace's freehold interest in the St John Street Property willbe sold to the Property Purchaser for £9.1 million in cash and the property willthen be leased back to Trace for a term of 15 years under a standard commerciallease at an initial rent of £500,000 per annum with an option for Trace toterminate at 10 years". (Scheme Document; Part 1 paragraph 8). The contents of this paragraph 10 and the statement above are not intended, norshould be construed as a valuation of the St John's Street property. Details ofthe Sale and Leaseback Agreement are disclosed and set out in the SchemeDocument. The proceeds of the proposed sales at such market prices as can be attained (andto the extent they realise distributable profits for Trace) will be distributedto the then Trace Shareholders by way of a dividend as at a record date to beannounced but being after completion of the property disposals and after theOffer has closed. The distributable profits available following any suchdisposals will also take into account the revaluation reserve of £1.8 million inthe financial statements of Trace as at 30 November 2006 and provision will bemade for taxation of Trace together with other relevant provisions. (ii) Dividend policy The proposed Trace Directors will adopt a dividend policy that will distributeapproximately 90 per cent. of distributable reserves. At 31 May 2006, Trace haddistributable reserves of £3.3 million as indicated in the financial informationin the Scheme Document. Dividend distributions may result in some TraceShareholders being subject to taxation on such dividend distributions inaccordance with applicable income tax legislation (at such time). Dividenddistributions to Microgen, or any other corporate entity, are not anticipated tobe subject to taxation under current UK legislation. Dividend distributions, tothe extent they are made, will only be made after the Offer has closed. (iii) Marketing arrangements for software products Microgen anticipates that Trace would be appointed a distributor of Microgensoftware and Microgen would be appointed a distributor of Trace software, sucharrangements to be established on an arm's length basis and subject to theListing Rules. (iv) Technology arrangements Microgen anticipates that, wherever possible, arrangements would be put in placefor sharing of technology between Trace and Microgen, such arrangements to beestablished on an arm's length basis and subject to the Listing Rules. (v) Other synergies Microgen anticipates that, wherever possible, the Boards of Trace and Microgenwould endeavour to establish operational relationships which would provide costand revenue benefits to the Microgen Group and the Trace Group subject to theListing Rules. The following conditions apply to the intentions expressed or described byMicrogen in this paragraph 10: (i) the policy and strategy of Trace (in the light of Microgen beinga controlling shareholder in Trace) being set out in a relationship agreementbetween Microgen and Trace ("Relationship Agreement") and these intentionscomplying with such agreement; (ii) the proposed Trace directors named above will only implement theproposals regarding properties in Trace pursuant to the Relationship Agreementwhich will include requirements for transactions by Trace to be in the interestsof Trace and its shareholders; (iii) the market conditions to be favourable for property disposals andsuitable relocation facilities available; (iv) the disposals of the Trace premises need to coincide with thedisposal by Microgen of its City Road premises and its operations there beingmoved to the New Facility; and (v) the Offer must have been closed and not be available for futureacceptance by Trace Shareholders. (c) Trace being a subsidiary undertaking of Microgen with ashareholding of over 75 per cent. Trace's Shares will be de-listed following Microgen achieving 75 per cent. ofthe voting share capital of Trace as disclosed in paragraph 14 of thisAnnouncement. Rule 11 of The Listing Rules (Related party transactions) will notapply to transactions between Microgen and Trace following the completion of thede-listing. Accordingly there will be greater scope for intra-group arrangementsbetween Microgen and Trace. It is Microgen's intention that in addition to theproperty disposals described above, the Trace Board will consider appropriateproposals for the integration of the Microgen and Trace operations. 11. Directors, management and employees of Trace The Trace Independent Directors have undertaken to resign from the Board ofTrace upon the Offer becoming or being declared wholly unconditional.Appropriate representatives of Microgen (as identified in paragraph 10, above)will be appointed to the Board of Trace upon the Offer becoming or beingdeclared wholly unconditional at which point Trace will become a subsidiaryundertaking of Microgen. As an integral part of a larger UK-based, fully-listed company, Microgenbelieves that opportunities for Trace employees and management will be enhancedby the combination with Microgen. Furthermore, the Microgen Board believes inaligning management compensation with shareholder objectives and is to requestapproval from the Microgen Shareholders to allocate new share options overshares in Microgen specifically for Trace employees upon them becoming part ofthe Enlarged Group. Subject to the approval of the Resolutions by MicrogenShareholders at the EGM to provide capacity for such options, these optionswould be in addition to any proposals made by Microgen which are related toexisting Trace Group Share Schemes (including in relation to options that aredue to be granted by Trace in respect of 379,770 Trace Shares) but could only beissued in the event that Microgen acquires in excess of 75 per cent. of TraceShares and cancels Trace's listing on the Official List. The Trace Independent Directors have consented to Microgen undertaking a limitednumber of meetings with Trace employees in order for such employees to betterunderstand the Microgen business and its ambitions for the proposed EnlargedGroup. The Board of Microgen has given assurances to the Trace Independent Directorsthat, following the Offer becoming or being declared unconditional in allrespects, the existing contractual and statutory employment rights, includingpension rights, of the directors, management and employees of Trace will befully safeguarded. In the event that Microgen acquires sufficient shares in Trace to cancel Trace'slisting on the Official List (that is to say greater than 75 per cent. of thevoting share capital of Trace), Trace employees will be given the opportunity,should they so wish, to transfer onto Microgen's standard terms and conditionsof employment which will provide employees with salaries, profit share, bonusschemes, share option plans and other benefits in line with existing Microgenstaff. There will be no change to the emoluments of the Microgen directors as a resultof the Offer becoming or being declared unconditional in all respects. In recommending the Offer, the Independent Directors have taken into accountMicrogen's integration plans for the combined businesses, and Microgen's statedintention of minimising disruption for both clients and employees of Trace.Following consideration of the information referred to above, the IndependentDirectors note and welcome the assurances given by Microgen to the IndependentDirectors. 12. Trace Group Share Schemes The Offer will extend to all Trace Shares unconditionally allotted or issuedpursuant to the exercise of options granted under the Trace Group Share Schemesafter the date of this announcement and before the time at which the Offerceases to be open for acceptance (or before such earlier time as Microgen may,in accordance with the terms and conditions of the Offer and subject to therules of the Code, decide). If the Offer becomes or is declared unconditional in all respects, then Microgenintends to make proposals in due course to holders of options under the TraceGroup Share Schemes (to the extent that such holders' options have not beenexercised or lapsed) as are appropriate in the circumstances having regard tothe terms of the Trace Group Share Schemes and the level of Microgen'sshareholding in Trace. Under the terms of the Trace Group Share Schemes, a further 379,770 options aredue to be granted under the Trace Group Share Schemes. Following the Offerbecoming or being declared unconditional in all respects, Microgen intends tomake appropriate proposals to relevant employees of Trace in recognition of thefact that such options have not been granted, which may include replacementoptions over shares in Microgen. 13. Microgen Shareholder approval In view of the relative sizes of Microgen and Trace, the Offer is conditional,inter alia, upon the approval of Microgen Shareholders at the EGM to be convenedat Fleet House, 3 Fleetwood Park, Barley Way, Fleet, Hampshire GU51 2QJ at adate to be confirmed. At the EGM, two resolutions will be proposed that can be summarised as follows: 1. a resolution to approve the Offer (or any other offer for the Traceshares) and to grant the Microgen Directors authority to proceed, includingamending or varying the terms of the same, provided that in all cases suchmatters do not amount to a material change in the terms or conditions of theOffer and, further, to approve any purchase of Trace Shares that may be acquiredby Microgen; and 2. a resolution to approve the grant of options over up to1,500,000 Microgen Shares as regards options to be available for use asroll-over or replacement options or to satisfy obligations to existing Traceemployees or to issue new options (as the case may be) pursuant to Microgen'sShare Option Schemes to employees of Trace (yet to be identified) at thediscretion of the Microgen Directors and on the basis that such options shallnot be taken into account in determining the total number of Microgen Sharesthat may be allocated under such Scheme at any relevant time period. A circular convening the EGM will be posted to Microgen Shareholders in duecourse. The Microgen Board will vote in favour of the Resolutions relating to the Offerto be proposed at the EGM in respect of their own beneficial holdings of5,292,911 Microgen Shares representing approximately 5.2 per cent. of theexisting issued share capital of Microgen. Furthermore, Microgen intends to seekto procure letters of intent to support the Resolutions from MicrogenShareholders in advance of the posting of the circular to Microgen Shareholders. 14. Compulsory acquisition and cancellation of listing of Trace Shares Following the Offer becoming or being declared unconditional in all respects,provided that Microgen receives acceptances under the Offer of at least 90 percent., Microgen intends to use the procedures set out in Part 28 of theCompanies Act 2006 to acquire compulsorily any outstanding Trace Shares to whichthe Offer relates. Microgen will also procure the making of an application byTrace for the cancellation of the listing of Trace Shares on the Official Listupon acquiring 75 per cent. of the voting share capital of Trace and in theevent that there is less than 25 per cent. of the voting share capital of Tracein public hands. An announcement will be made following either (i) the Offer becoming or beingdeclared unconditional in all respects and the necessary percentage beingreached under the Listing Rules or (ii) the commencement of the compulsoryacquisition procedures under Part 28 of the Companies Act 2006 in respect of theTrace Shares, stating the anticipated time and date when the listing and tradingin shares will be cancelled being not less than 20 business days following suchevent. The cancellation of the listing of Trace Shares will significantly reduce theliquidity and marketability of any Trace Shares not assented to under the Offerand their value may be affected as a consequence. 15. Disclosure of interests in Trace Neither Microgen nor any Microgen Director nor his family has an interest in, orhas any right to subscribe for, any relevant securities of Trace, nor are theyparty to any short positions (whether conditional or absolute and whether in themoney or otherwise) relating to relevant securities of Trace, including shortpositions under derivatives, agreements to sell or any delivery obligations orrights to require another person to take delivery. Neither Microgen nor any Microgen Director has borrowed or lent any relevantsecurities of Trace. Nor does any such person have any arrangement in relationto relevant securities of Trace. For these purposes, "arrangement" includes anyindemnity or option arrangement and any agreement or understanding, formal orinformal, of whatever nature, relating to relevant securities of Trace which maybe an inducement to deal or refrain from dealing in such securities. 16. Overseas Shareholders Overseas Shareholders should inform themselves about and observe any applicablelegal or regulatory requirements. If you are in any doubt about your position,you should consult your professional advisor in the relevant territory. The implications of the Offer for persons not resident in the UK may be affectedby the laws of the relevant jurisdiction. Any persons who are subject to thelaws of any jurisdiction other than the UK should inform themselves about andobserve any applicable requirements. 17. General Trace Shares will be acquired pursuant to the Offer fully paid and free from allliens, charges, equitable interests, third party rights and interests andencumbrances and together with all rights now and hereafter attaching thereto,including the right to receive all dividends and other distributions (if any)declared, made or paid after the date of the announcement of the Offer. The formal Offer Document and the Form of Acceptance setting out the full termsand conditions of the Offer is expected to be posted to Trace Shareholders on orbefore 4 June 2007. In deciding whether or not to accept the Offer, TraceShareholders should rely on the information contained in, and proceduresdescribed in, the Offer Document and the Form of Acceptance. The Offer will be governed by English law and be subject to the applicablerequirements of the Code, the Panel, the London Stock Exchange and the FinancialServices Authority. Appendix I to this Announcement contains the conditions to and a summary ofcertain further terms of the Offer, Appendix II contains further details of thesources of information and bases of calculations set out in this Announcement,Appendix III contains details of the irrevocable undertakings provided inrelation to the Tulip Proposal and Appendix IV contains definitions of certainexpressions used in this Announcement. All times referred to are London timesunless otherwise stated. Enquiries: Microgen plc Tel: +44 (0) 1252 772 300Martyn RatcliffePhilip Wood Arbuthnot Securities Limited Tel: +44 (0) 20 7012 2000 (Financial adviser and broker to Microgen in relation to the Offer)Ian WilliamsRichard DunnRichard Tulloch Financial Dynamics Tel: +44 (0) 20 7831 3113 (Public relations adviser to Microgen)Giles Sanderson Trace Group plc Tel: +44 (0) 20 7825 1000Daniel Chapchal Tel: +44 (0) 7836 512 549David Begg Tel: +44 (0) 20 7825 1000Robin Woodall Tel: +44 (0) 7740 928 399 Shore Capital and Corporate Limited Tel: +44 (0) 20 7408 4090 (Financial adviser to Trace)Alex BorrelliPascal Keane Arbuthnot Securities Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Microgenand no one else in connection with the Offer and will not be responsible toanyone other than Microgen for providing the protections afforded to clients ofArbuthnot Securities nor for providing advice in relation to the Offer, or thecontents of this Announcement or any matter referred to herein. Arbuthnot Securities Limited has approved this Announcement for the purposes ofsection 21 of the Financial Services and Markets Act 2000. The principal placeof business of Arbuthnot Securities Limited is Arbuthnot House, 20 RopemakerStreet, London EC2Y 9AR. Shore Capital, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Trace and no one else inconnection with the Offer and will not be responsible to anyone other than Tracefor providing the protections afforded to clients of Shore Capital nor forproviding advice in relation to the Offer, the content of this Announcement orany matter referred to herein. This Announcement is not intended to and does not constitute, or form any partof, an offer or an invitation to purchase or sell any securities or thesolicitation of any vote or approval in any jurisdiction pursuant to the Offeror otherwise. The Offer will be made solely through the Offer Document, and, inrelation to certificated Trace Shares, the Form of Acceptance. Microgen intendsto dispatch such documents to Trace Shareholders (and, for information only, toTrace Optionholders) and place such advertisement shortly. The Offer Documentand the Form of Acceptance will together contain the full terms and conditionsof the Offer, including details of how to accept the Offer. Any acceptance orother response to the Offer should be made only on the basis of the informationcontained in the Offer Document and the Form of Acceptance. The Offer will besubject to English law. The laws of relevant jurisdictions may affect theavailability of the Offer to overseas persons. Overseas persons, or persons whoare subject to the laws of any jurisdiction other than the United Kingdom,should inform themselves about and observe any applicable legal and regulatoryrequirements. The Offer Document will be available for public inspection in theUnited Kingdom. Unless otherwise determined by Microgen, the Offer will not be made, directly orindirectly, in or into the United States or by use of the mails of, or by anymeans or instrumentality (including, without limitation, facsimile, internet,email or other electronic transmission, telex or telephone) of inter-state orforeign commerce of, or any facility of a national, state or other securitiesexchange of, the United States, nor will it be made directly or indirectly in orinto Canada, Australia, Japan or any Restricted Jurisdiction, and the Offer willnot be capable of acceptance by any such use, means, instrumentality or facilityor from within the United States, Canada, Australia, Japan or any RestrictedJurisdiction. Accordingly, copies of this Announcement are not being, will notbe and must not be, directly or indirectly, mailed or otherwise forwarded,transmitted, distributed or sent in, into or from the United States, Canada,Australia, Japan or any Restricted Jurisdiction, and persons receiving thisAnnouncement (including, without limitation, custodians, nominees and trustees)must not mail, forward, distribute or send it in, into or from the UnitedStates, Canada, Australia, Japan or any Restricted Jurisdiction. Doing so mayrender invalid any purported acceptance of the Offer. Any persons (includingcustodians, nominees and trustees) who are overseas persons or who would, orotherwise intend to, mail or otherwise forward, transmit, distribute or sendthis Announcement, the Offer Document, the Form of Acceptance or any relateddocument outside the United Kingdom or to any overseas person should seekappropriate advice before doing so. Further details in relation to OverseasTrace Shareholders will be contained in the Offer Document. Cautionary statement regarding forward-looking statements This Announcement contains statements about Microgen and Trace (and theirrespective groups and/or subsidiary undertakings) that are or may beforward-looking statements. All statements other than statements of historicalfacts included in this Announcement may be forward-looking statements. Withoutlimitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects" or words or terms of similar substance orthe negative thereof are forward-looking statements. Forward-looking statementsinclude statements relating to the following (i) future capital expenditures,expenses, revenues, earnings, synergies, economic performance, indebtedness,financial condition, dividend policy, losses and future prospects; (ii) businessand management strategies and the expansion and growth of Microgen's or Trace'soperations and potential synergies resulting from the Offer; and (iii) theeffects of government regulation on Microgen's or Trace's business. Theseforward-looking statements are not guarantees of future performance. They havenot been reviewed by the auditors of Microgen or of Trace. These forward-lookingstatements involve known and unknown risks, uncertainties and other factorswhich may cause the actual results, performance or achievements of any suchperson, or industry results, to be materially different from any results,performance or achievements expressed or implied by such forward-lookingstatements. These forward-looking statements are based on numerous assumptionsregarding the present and future business strategies of such persons and theenvironment in which each will operate in the future. You are cautioned not toplace undue reliance on any forward-looking statement, which speak only as ofthe date they were made. All subsequent oral or written forward-lookingstatements attributable to Microgen, Trace or any members of their respectivegroups or any persons acting on their behalf are expressly qualified in theirentirety by the Cautionary Statement above. All forward-looking statementsincluded in this document are based on information available to us on the datehereof. Investors should not place undue reliance on such forward-lookingstatements, and we undertake no obligation to publicly update or revise anyforward-looking statements. Dealing disclosure requirements Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if anyperson is, or becomes, "interested" (directly or indirectly) in 1% or more ofany class of "relevant securities" of Trace, all "dealings" in any "relevantsecurities" of that company (including by means of an option in respect of, or aderivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 pm (London time) on the London business dayfollowing the date of the relevant transaction. This requirement will continueuntil the date on which the Offer becomes, or is declared, unconditional as toacceptance, lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of Trace they will be deemed to be a single person for the purposeof Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Trace by Microgen or Trace or by any of their respective "associates" must be disclosed by no later than 12.00 noon (London time) on theLondon business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative reference to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. Appendix I Conditions and certain further terms of the Offer Part A: CONDITIONS OF THE OFFER The Offer will be subject to the following conditions: (a) valid acceptances of the Offer being received (and not, wherepermitted, withdrawn) by not later than 1:00 p.m. (London time) on the FirstClosing Date of the Offer (or such later time(s) and/or date(s) as Microgen may,subject to the rules of the Code or with the consent of the Panel, decide) inrespect of not less than 51.5 per cent. (or such lesser percentage as Microgenmay decide) of the Trace Shares to which the Offer relates, provided that,unless agreed by the Panel, this condition will not be satisfied unless Microgenand/or any of its wholly-owned subsidiaries shall have acquired or agreed toacquire (whether pursuant to the Offer or otherwise) directly or indirectlyTrace Shares carrying in aggregate more than 50 per cent. of the voting rightsthen normally exercisable at a general meeting of Trace, including for thispurpose (except to the extent, if any, required by the Panel) any such votingrights attaching to any Trace Shares that are unconditionally allotted or issuedbefore the Offer becomes or is declared unconditional as to acceptances, whetherpursuant to the exercise of any outstanding subscription or conversion rights orotherwise and, for this purpose: (i) the expression "Trace Shares to which the Offer relates"shall be construed in accordance with sections 974 to 991 of the Companies Act2006; and (ii) Trace Shares which have been unconditionally allotted but notissued shall be deemed to carry the voting rights which they will carry uponissue; (b) the passing at an extraordinary general meeting of MicrogenShareholders (or any adjournment thereof) of a resolution or resolutions whichare necessary or in the opinion of Microgen desirable to approve, effect andimplement the Offer and the acquisition of Trace and of any Trace Shares for theapproval and implementation of the Offer; (c) insofar as the merger provisions of the Enterprise Act 2002may be applicable to any aspect of the proposed acquisition of Trace byMicrogen, the Office of Fair Trading not indicating that it intends to refer theproposed acquisition of Trace by Microgen (its implementation or any matter ormatters arising therefrom) to the Competition Commission; (d) no Relevant Authority having intervened in any way and therenot continuing to be outstanding any statute, regulation or order of anyRelevant Authority in each case which would or might reasonably be expected (inany case to an extent which is material in the context of the Wider MicrogenGroup or to the Wider Trace Group, as the case may be, in each case, taken as awhole) to: (i) make the Offer or the acquisition or proposed acquisitionby Microgen or any other member of the Wider Microgen Group of any shares orcontrol of Trace or any other member of the Wider Trace Group, void,unenforceable and/or illegal in any relevant jurisdiction or otherwise directlyor indirectly restrain, restrict, prohibit, prevent, delay or otherwiseinterfere with the implementation thereof, or impose material additionalconditions or obligations with respect to the Offer or such acquisition, orotherwise challenge, or prevent the Offer or its implementation, or requirematerial amendment to the terms of the Offer or the acquisition or proposedacquisition of any Trace Shares, or the acquisition of control of Trace byMicrogen; (ii) require, prevent or delay the divestiture or alter theterms of any proposed divestiture by Microgen or any other member of the WiderMicrogen Group or by Trace or any other member of the Wider Trace Group of allor any material part of their respective businesses, assets or properties orimpose any limitation on the ability of any of them to conduct any of theirrespective businesses or to own or control any of their respective assets orproperties or any material part thereof; (iii) limit or delay the ability of any member of the WiderMicrogen Group to acquire or to hold or to exercise effectively, directly orindirectly, all or any rights of ownership in respect of the Trace Shares; or (iv) except pursuant to Part 28 of the Companies Act 2006,require any member of the Wider Microgen Group or of the Wider Trace Group toacquire, or to offer to acquire, any shares or other securities (or theequivalent) in any member of the Wider Trace Group owned by any RelevantAuthority; and all applicable waiting and other time periods during which any RelevantAuthority could intervene in such a way under the laws of any relevantjurisdiction having expired, lapsed or been terminated; (e) all necessary notifications and filings having been made,all regulatory and statutory obligations in any relevant jurisdiction havingbeen complied with, all appropriate waiting and other time periods (includingany extensions of such waiting and other time periods) under any applicablelegislation or regulations of any relevant jurisdiction having expired, lapsedor been terminated, in each case in respect of the Offer or the acquisition orproposed acquisition of any Trace Shares or control of Trace or any other memberof the Wider Trace Group by any member of the Wider Microgen Group except wherethe failure to make any such notification or filing, or comply with any suchobligation, or the fact that any such period has not expired, lapsed or beenterminated, individually or in the aggregate, is not likely to have a materiallyadverse effect on the Wider Microgen Group taken as a whole; (f) all authorisations and determinations necessary orappropriate in any relevant jurisdiction for or in respect of the Offer or theacquisition or proposed acquisition of any Trace Shares or control of Trace orany other member of the Wider Trace Group by any member of the Wider MicrogenGroup having been obtained from all and any Relevant Authority or (withoutprejudice to the generality of the foregoing) from any person or bodies withwhom any member of the Wider Trace Group has entered into contractualarrangements that are material in the context of the Wider Trace Group taken asa whole and such authorisations and determinations remaining in full force andeffect and there being no notice of any intention to revoke or not renew ormaterially suspend, restrict or modify any of the same in any such case insofaras is material in the context of the Wider Microgen Group or Wider Trace Group,as the case may be, in each case, taken as a whole; (g) except as publicly announced by Trace, or as disclosed toMicrogen or its advisers by or on behalf of Trace in connection with the Offerprior to the date of this Announcement, there being no provision of anyagreement, arrangement, license or other instrument to which any member of theWider Trace Group is a party, or by or to which any such member or any of itsassets is or are or may be bound, entitled or subject or any circumstance which,in each case as a consequence of the Offer or the acquisition or proposedacquisition of any Trace Shares or control of Trace or any other member of theWider Trace Group by any member of the Wider Microgen Group or otherwise, wouldor might reasonably be expected to result in (in any case to an extent that isor would be material in the context of the Wider Trace Group taken as a whole): (i) any monies borrowed by or any other indebtedness orliabilities (actual or contingent) of, or any grant available to, any suchmember being or becoming repayable or being capable of being declared repayableimmediately or prior to its stated maturity, or the ability of any such memberto borrow moneys or incur any indebtedness being withdrawn or inhibited; or (ii) the creation or enforcement of any mortgage, charge orother security interest over the whole or any material part of the business,property or assets of any such member of the Wider Trace Group or any suchmortgage, charge or other security interest (whenever created arising or havingarisen), becoming enforceable; (h) since 30 November 2006, save as publicly announced or asdisclosed to Microgen or its advisers by or on behalf of Trace in connectionwith the Offer prior to the date of this Announcement no member of the WiderTrace Group having: (i) (save as between Trace and, on a pre-emptive basis, anymember of the Wider Trace Group or upon the exercise of rights to subscribe forTrace Shares pursuant to the exercise of options granted under any of the TraceShare Option Schemes on or prior to 30 November 2006 or details of which havebeen disclosed to Microgen or its advisers in connection with the Offer prior tothe date of this announcement) issued or agreed to issue or authorised the issueof additional shares of any class, or of securities convertible into, or rights,warrants or options to subscribe for or acquire, any such shares or convertiblesecurities or redeemed, purchased or repaid any of its own shares or othersecurities or reduced or made any other change to any part of its share capital; (ii) save for transactions between members of the Trace Group,acquired or disposed of or transferred, mortgaged or charged or created anysecurity interest over (in each case other than in the ordinary course ofbusiness) any assets or any rights, title or interest in any asset (includingshares and trade investments), which, in each case, is material in the contextof the Wider Trace Group taken as a whole, or merged with or demerged any bodycorporate or authorised or announced any intention to propose any such merger,demerger, acquisition, disposal, transfer, mortgage, charge or security interest(other than in the ordinary course of business); (iii) made or authorised or announced an intention to propose anymaterial change in its loan capital or issued, authorised or proposed the issueof any material debentures; (iv) (save in the ordinary course of business and/or fortransactions between members of the Trace Group) incurred or increased anyindebtedness or liability (actual or contingent) which is material in thecontext of the Wider Trace Group taken as a whole; or (v) taken any corporate action or had any legal proceedingsinstituted or threatened against it, or petition presented or order made, ineach case for its winding-up (voluntarily or otherwise), dissolution orreorganisation or for the appointment of a receiver, administrator,administrative receiver, trustee or similar officer of all or any material partof its assets or revenues which in any case is material in the context of theWider Trace Group taken as a whole; and for the purpose of this condition 'material' shall mean material in thecontext of the Wider Trace Group taken as a whole; (i) since 30 November 2006, save as publicly announced or asdisclosed to Microgen or its advisers by or on behalf of Trace in connectionwith the Offer prior to the date of this Announcement: (i) no adverse change or deterioration having occurred in the business,assets, financial or trading position or profits or prospects of Trace or anyother member of the Wider Trace Group that is material in the context of theWider Trace Group taken as a whole; and (ii) no litigation or arbitration proceedings, prosecution or otherlegal proceedings having been instituted, announced, implemented or threatenedin writing by or against or remaining outstanding against or in respect of anymember of the Wider Trace Group or to which any member of the Wider Trace Groupis a party (whether as claimant, defendant or otherwise) the effect of which isadverse to any member of the Wider Trace Group to an extent that in any case ismaterial in the context of the Wider Trace Group taken as a whole; (j) save as disclosed to Microgen or its advisers by or onbehalf of Trace in connection with the Offer prior to the date of thisAnnouncement, Microgen not having discovered: (i) that any financial, business or other information concerning Traceor the Wider Trace Group that has been disclosed at any time by or on behalf ofany member of the Wider Trace Group whether publicly, or to any member of theWider Microgen Group, is misleading, contains any misrepresentation of fact oromits to state a fact necessary to make the information contained therein notmisleading and which was not subsequently corrected before the date of thisAnnouncement by disclosure either publicly or otherwise to Microgen, which inany case itself or together with other factors is material and adverse to thefinancial or trading position of the Wider Trace Group taken as a whole; or (ii) that any member of the Wider Trace Group is subject to anyliability (actual or contingent) that has not been disclosed to any member ofthe Wider Microgen Group or publicly announced prior to the date of thisannouncement, and which in any case is material in the context of the WiderTrace Group taken as a whole. For the purposes of these conditions: (a) "Relevant Authority" means any government, government department orgovernmental, quasi-governmental, supranational, statutory, regulatory orinvestigative body, authority (including any national anti-trust or mergercontrol authority), court, trade agency, association; institution orprofessional or environmental body or any other person or body whatsoever in anyrelevant jurisdiction (including the London Stock Exchange, the Panel and theInland Revenue; (b) a Relevant Authority shall be regarded as having "intervened" if ithas publicly decided to take, institute, implement, or threaten any action,proceeding, suit, investigation or enquiry or reference, or made, enacted orproposed any statute, regulation, decision or order, and 'intervene' shall beconstrued accordingly; (c) "authorisations" means authorisations, orders, grants, recognitions,confirmations, consents, licences, clearances, permissions, exemptions andapprovals; (d) "publicly announced" means disclosed in the interim results of Tracefor the six month period ended 30 November 2006 (issued on 27 February 2007) orotherwise announced on or before the date of this Announcement by or on behalfof Trace by the delivery of an announcement to a Regulatory Information Servicein accordance with the Listing Rules; and (e) "the Wider Trace Group" means Trace and its subsidiary undertakings,associated undertakings and any other undertakings in which Trace and suchundertakings (aggregating their interests) have a substantial interest and "theWider Microgen Group" means Microgen and its subsidiary undertakings, associatedundertakings and any other undertaking in which Microgen and such undertakings(aggregating their interests) have a substantial interest. Subject to the requirements of the Panel, Microgen reserves the right to waiveall or any of the above conditions, in whole or in part, except conditions (a)and (b). The Offer will lapse if it does not become or is not declaredunconditional as to acceptances. Further, the Offer will lapse unless conditions(c) to (j) have been fulfilled or (if capable of waiver) waived, or, whereappropriate, have been determined by Microgen to be or remain satisfied, bymidnight on the later of (i) the day which is 21 days after the First ClosingDate of the Offer; and (ii) the date which is 21 days after the date on whichcondition (a) is fulfilled (the acceptance condition) or in each case such laterdate as Microgen may, with the consent of the Panel, decide, provided thatMicrogen shall be under no obligation to waive or treat as fulfilled orsatisfied any of conditions (c) to (j) inclusive by a date earlier than thelatest date specified above for the fulfillment thereof notwithstanding that anysuch condition or the other conditions of the Offer may at such earlier datehave been fulfilled or satisfied and that there are at such earlier date nocircumstances indicating that any of such conditions may not be capable offulfilment or satisfaction. The Offer will lapse if in relation to the acquisition of Trace by Microgen orany matters arising therefrom there is a referral to the Competition Commissionbefore the later of (i) 1.00 p.m. (London time) on the First Closing Date of theOffer and (ii) the date on which the Offer becomes or is declared unconditionalas to acceptances. If the Offer lapses it will cease to be capable of further acceptance andMicrogen and accepting Trace Shareholders shall thereupon cease to be bound byForms of Acceptance submitted at or before the time when the Offer so lapses. If Microgen is required by the Panel to make an offer for Trace Shares under theprovisions of Rule 9 of the Code, Microgen may make such alterations to theterms and conditions of the Offer (including condition (a) above) as arenecessary to comply with the provisions of that Rule. PART B: CERTAIN FURTHER TERMS OF THE OFFER (a) If sufficient acceptances are received and/or sufficient Trace Sharesare otherwise acquired, Microgen intends to apply the provisions of sections 974to 991 of the Companies Act 2006 ("2006 Act") to acquire compulsorily anyoutstanding Trace Shares to which the Offer relates. Microgen also intendseither, on the date that acceptances under the Offer attain the requiredpercentage for the purposes of Rule 5.2.10R(1) of the Listing Rules or on thefirst date of issue of compulsory acquisition notices under section 979 of the2006 Act ("Cancellation Commencement Date") to procure the making of anapplication by Trace to the UK Listing Authority for the cancellation of thelisting of Trace Shares on the Official List and for the cancellation of tradingof the Trace Shares on the market for listed securities of the London StockExchange, in respect of a date not less than 20 business days after theCancellation Commencement Date which shall constitute the notice period for suchpurposes under Rule 5.2.10R(2) of the Listing Rules. (b) If the Panel requires Microgen to make an offer for Trace Sharesunder the provisions of Rule 9 of the Code, Microgen may make such alterationsto the conditions of the Offer, including condition (a) (set out in Part Aabove), as are necessary to comply with the provisions of that Rule. (c) The Trace Shares which are the subject of the Offer will be acquiredby Microgen fully paid and free from all liens, charges, equitable interests,encumbrances and other interests of any nature whatsoever and together with allrights now or hereafter attaching thereto, including the right to receive andretain all dividends, interest and other distributions declared, made or payableafter the date of this document. (d) Overseas Shareholders should inform themselves about and observe anyapplicable legal or regulatory requirements. If you are in any doubt about yourposition, you should consult your professional advisor in the relevantterritory. Appendix II Sources of information and bases of calculation (a) The value of the Offer by reference to the existing issuedand voting ordinary share capital of Trace is based on the 14,248,815 TraceShares in issue on 24 May 2007 (the last business day prior to the date of thisAnnouncement). (b) The market capitalisation of Microgen is based on the102,651,776 Microgen Shares in issue on 24 May 2007 (the last business day priorto the date of this Announcement). There are no Microgen Shares held intreasury. (c) Unless otherwise stated, financial information concerningTrace has been extracted from the Financial Statements of Trace for the yearended 31 May 2006. (d) Unless otherwise stated, financial information concerningMicrogen has been extracted from the Financial Statements of Microgen for theyear ended 31 December 2006. (e) The Closing Prices of Trace Shares and Microgen Shares arederived from the Daily Official List. Appendix III Details of Irrevocable Undertakings in relation to the Tulip Proposal Part A: Hard Irrevocables with Standstill Shareholder Position Number of Trace Percentage of Trace Shares Shares Richard Wolfe Trace Non- 3,265,771* 22.92% Independent Director Chief Executive Officer of Trace (Director and shareholder of Tulip)Peter Stolerman Trace Non- 8,000 0.06% Independent Director Finance Director of Trace (Director of Tulip)John Murphy Managing Director of a 134,562 0.94% Trace Subsidiary (Director of Tulip) Michael Flynn Managing Director of 115,614 0.81% a Trace SubsidiaryConnel Torley Managing Director of 81,956 0.58% a Trace SubsidiaryZigmond Levy Director of a Trace 590,187 4.14% SubsidiaryDoug Eastabrook - 330,469 2.32%Ann Claxton - 223,141 1.57%Roger Claxton - 180,788 1.27%Ian Winchester - 100,000 0.70%Carole Moore - 54,647 0.38%Peter Carabott - 52,438 0.37%Julian Mancell-Smith - 33,303 0.23%Nick Tonge - 30,169 0.21%Patricia Matheson - 24,131 0.17%Tony Davis - 21,634 0.15%Julia Mancell-Smith - 17,890 0.13%James Ebel - 17,043 0.12%Marilyn Lawless - 15,891 0.11%Adam Levy - 15,175 0.11%David Bacon - 14,907 0.10%Paul Mortimer - 13,637 0.10%Richard Fok-Seang - 12,478 0.09%Bianca Levy - 12,000 0.08%Chrispin Levy - 12,000 0.08%Ruth Wolfe - Charitable Trust 10,000 0.07%Paul Donnelly - 9,456 0.07%Julian Penfold - 8,573 0.06%John Davis - 8,498 0.06%Kathy Donnelly - 6,513 0.05%Phil Pearson - 6,397 0.04%Trudy Pearson - 6,250 0.04%Garreth O'Neill - 6,112 0.04%Xenia McGrane - 5,172 0.04%Aisha Hussain - 4,838 0.03%Ian Treadgold - 4,475 0.03%Sheila Bow - 4,000 0.03%Hermine King - 3,648 0.03%Kathy Tong - 3,131 0.02%Andrew Booth - 3,000 0.02%Linda Letch - 2,738 0.02%Eamonn Brown - 2,375 0.02%Mary Davis - 2,237 0.02%Terry Hooper - 2,198 0.02%Pete Geraghty - 2,029 0.01%Graham Pointer - 1,748 0.01%Tony Abbott - 1,536 0.01%Sid Chekhar - 1,107 0.01%Dave Marchant - 1,000 0.01%Jerry Baker - 900 0.01%Kevin Grice - 11 0.00%Total 5,485,773 38.50% * Note: of these Shares, 369,264 are held in Richard Wolfe's SIPP. Part B: Hard Irrevocables without Standstill Shareholder Position Number of Trace Percentage of Shares Trace SharesColin Clarke Trace Independent 1,426,453 10.01% DirectorDebbie Able - 28,266 0.20%Clare Garretty - 15,757 0.11%Mark Holden - 3,160 0.02%Gladys Flynn - 2,724 0.02%Emmy Golding - 2,614 0.02%William Muir - 2,540 0.02%Alan Beck - 2,297 0.02%Sharon Thompson - 2,294 0.02%Anne Marie Taylor - 1,936 0.01%Robert Wolf - 1,918 0.01%Elizabeth Kaufmann - 938 0.01%Elizabeth Higgins - 768 0.01%Charlotte Burr - 664 0.00%Katrina Hopkins - 573 0.00%Nick Kaufmann - 476 0.00%Phillippa Kaufmann - 461 0.00%Mike Taylor - 100 0.00%Total 1,493,939 10.48% Part C: Soft Irrevocables Shareholder Position Number of Trace Percentage of Shares Trace SharesDaniel Chapchal Trace Independent 10,000* 0.07% Director and Chairman of TraceMark Dixon - 3,430,000 24.07%Total 3,440,000 24.14% * Note: the shares are held in Daniel Chapchal's SIPP. Appendix IV Definitions The following definitions apply throughout this Announcement, unless the contextrequires otherwise: Act means the Companies Act 1985 as amended by the Companies Act 2006;Announcement this announcement by Microgen;Arbuthnot Arbuthnot Securities Limited;Australia the Commonwealth of Australia, its states and its dependent territories;Board as the context requires, the board of directors of Microgen or the board of directors of Trace;business day a day (excluding Saturdays, Sundays and public holidays) on which banks are generally open for business in the City of London;Canada Canada, its provinces and territories and all areas subject to its jurisdiction and any political subdivision thereof;certificated or in certificated form a share or other security which is not in uncertificated form (that is, not in CREST);Closing Price the middle market price of the relevant share at the close of business on the day to which such price relates, derived from the Daily Official List for that day;Code The City Code on Takeovers and Mergers;CREST the relevant system (as defined in the CREST Regulations) for the paperless settlement of trades and holding of securities in respect of which CRESTCo is the Operator (as defined in the CREST Regulations);CRESTCo CRESTCo Limited;CREST Regulations the Uncertificated Securities Regulations 2001 (SI 2001 No.3755);Daily Official List the Daily Official List of the London Stock Exchange;EGM the extraordinary general meeting of Microgen Shareholders to be convened at Fleet House, 3 Fleetwood Park, Barley Way, Fleet, Hampshire GU51 2QJ at a date to be confirmed;Enlarged Group the Microgen Group as enlarged by the acquisition of the Trace Group pursuant to the Offer;First Closing Date of the Offer means the date set as the first closing date of the Offer in the Offer Document;Form of Acceptance the form of acceptance and authority for use by Trace Shareholders in connection with the Offer;Japan Japan, its cities and prefectures, territories and possessions;Listing Rules the listing rules published by the UK Listing Authority;London Stock Exchange London Stock Exchange plc;Microgen Microgen plc a company incorporated in England and Wales with number 1602662;Microgen Group Microgen and its subsidiaries;Microgen Aptitude the product owned by Microgen supplying technical architecture for full transaction process management to customers;Microgen Shareholder holders of Microgen SharesMicrogen Shares ordinary shares of 5 pence in MicrogenOffer the recommended offer to be made by Microgen to acquire all of the Trace Shares (other than Trace Shares which at the date of such offer are already held by Microgen within the meaning of Part 28 of the Companies Act 2006) on the terms and subject to the conditions described in this Announcement and to be set out in the Offer Document and the Form of Acceptance (including, where the context requires, any subsequent revision, variation, extension or renewal of such offer);Offer Document the formal offer document setting out the terms and conditions of the Offer which is expected to be posted to Trace Shareholders (other than those in a Restricted Jurisdiction) on or before 4 June 2007;Offer Period the period commencing on 20 April 2007 and ending on whichever of the following dates shall be the latest: (i) at 1.00 p.m. on the First Closing Date of the Offer; (ii) the date on which the Offer lapses; and (iii) the date on which the Offer becomes or is declared unconditional as to acceptances;Official List the Official List of the UK Listing Authority;Order the order of the Chancery Division of the High Court of Justice by Mr Registrar Rawson dated 25 May 2007 (no. 2850 of 2007)Overseas Shareholders Trace Shareholders resident in, or nationals or citizens of, or who are subject to jurisdictions outside, the UK or who are nominees of, or custodians, trustees or guardians for, citizens or nationals of or persons subject to such jurisdictions;Panel the Panel on Takeovers and Mergers;Regulatory Information Service a regulatory information service for the purposes of and as defined in the Listing Rules;Resolutions means the resolutions of Microgen in respect of the Offer to be proposed at the EGM;Restricted Jurisdiction any jurisdiction where local laws or regulations may result in a significant risk of civil, regulatory or criminal exposure or prosecution if information concerning the Offer is sent or made available to Trace Shareholders in that jurisdiction;Scheme the scheme of arrangement in relation to the Tulip ProposalScheme Document the document dated 26 April 2007 containing recommended proposals for the acquisition of the ordinary share capital of Trace by Tulip to be effected by way of a scheme of arrangement pursuant to the Act;Share Option Schemes the share option schemes of Microgen;Shore Capital Shore Capital and Corporate Limited;subsidiary a subsidiary as defined in section 736 of the Act;Trace Trace Group plc;Trace Group Trace and its subsidiaries;Trace Independent Directors or Independent Directors means Mr Daniel Chapchal, Prof David Begg, Mr Colin Clarke and Mr Robin Woodall;Trace Group Share Schemes means the share option and other share schemes of Trace;Trace Shareholders holders of Trace Shares;Trace Shares the existing unconditionally allotted or issued and fully paid ordinary shares of 5 pence each in the capital of Trace and any further such shares which are unconditionally allotted or issued prior to the time at which the Offer ceases to be open for acceptance (or prior to such earlier time as Microgen may, in accordance with the terms and conditions of the Offer, and subject to the Code, decide), as Microgen may determine, but excluding in both cases any such shares held or which become held as Treasury Shares;Treasury Shares the ordinary shares of 5 pence each in the capital of Trace which are held by Trace as treasury shares (within the meaning of section 162A of the Act);Tulip Tulip Holdings Limited a company incorporated in England and Wales with number 06046342;Tulip Announcement the announcement of the Tulip Proposal by Tulip on 20 April 2007;Tulip Proposal the offer of 135 pence for each Trace Share to be effected by way of a scheme of arrangement pursuant to section 425 of the Act, the terms of which are set out in the Scheme Document;UK or United Kingdom the United Kingdom of Great Britain and Northern Ireland;UK Listing Authority the Financial Services Authority acting in its capacity as the competent authority for listing purposes under Part VI of the Financial Services and Markets Act 2000;uncertificated or in uncertificated form recorded on the relevant register of Trace as being held in uncertificated form in CREST, and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST;United States or US the United States of America, its territories and possessions, any State of the United States and the District of Colombia, and all other areas subject to its jurisdiction; and This information is provided by RNS The company news service from the London Stock Exchange

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