Potential £5million subscription and acquisition

For immediate release: 0700hrs, 10 April 2012

Specialist Energy Group plc

("Specialist Energy Group", "SEG" or the "Company")

Proposed Subscription to raise £5 million, proposed new borrowing facilities and potential MBE Cologne Acquisition & Notice of Results

Specialist Energy Group plc (AIM: SEGR), the specialist engineering group, is pleased to announce that on Thursday 5 April 2012 a Circular and Notice of General Meeting were posted to Shareholders regarding:

·; A Subscription by MBE Mineral Technologies Pte Ltd ("MBE") for 10,000,000 New Ordinary Shares at 50 pence representing a 108 per cent premium to the closing share mid-price on 4 April;

·; Proposed new borrowing facilities of £12 million from Standard Chartered and MBE;

·; Authority to issue of 4,000,000 Additional New Ordinary Shares to acquire 20 to 24 per cent of MBE Cologne Engineering GmbH, a wholly owned subsidiary of MBE;

·; Approval for waiver of obligations under Rule 9 of the Takeover Code.

Copies of the Circular, Notice of General Meeting and Proxy Forms are also available for download from the Company's website, www.segroupplc.com/shareholderinformation.htm. A copy of the text from the Circular appears below. Defined terms used in this announcement have the same meaning as those in the Circular.

Financial Highlights of the Transaction

·; MBE has agreed to subscribe to 10,000,000 New Ordinary Shares at 50 pence representing a 108 per cent premium to the closing share mid-price on 4 April of 24 pence, raising £5 million before expenses;

·; The Company to seek authority to issue 4,000,000 Additional New Ordinary Shares to acquire a 20 to 24 per cent of MBE Cologne Engineering GmbH, a wholly owned subsidiary of MBE which specialises in the manufacture of specialist machinery and components for the material handling and power generation sectors;

·; MBE's holding in SEG to increase from 25.27 per cent to 41.69 per cent following the Subscription;

·; Funds raised to be used to settle existing derivative instruments with the Company's existing bank enabling it to re-bank with Standard Chartered;

·; Anticipated net debt within SEG after the repayment of the derivative instruments to be reduced from £9.4 million to £8.4 million before costs on a pro-forma basis;

·; Loan facilities available to the Company to increase by 26 per cent to £12 million via proposed borrowing facilities from Standard Chartered and MBE; and

·; £2.8 million of Bonds and Guarantees to be additionally provided by Standard Chartered which combined with the loans will significantly improve working capital for the Company.

Operational Highlights of the Transaction

·; MBE is the wholly owned investment subsidiary of McNally Bharat Engineering Company Limited, one of India's leading Engineering, Procurement and Construction groups and an existing shareholder in SEG;

·; Through McNally Bharat, the Company will have increased access to key growth markets - in particular India, Africa and South America;

·; Through SEG's Hayward Tyler subsidiary, McNally Bharat will have improved access to North American and Chinese markets and a broader portfolio of products and services to market;

·; MBE Cologne to deliver operational benefits to assist in enhancing Hayward Tyler's procurement and supply chain management;

·; Hayward Tyler's Luton facility to be developed further as a centre of engineering excellence;

·; Three new directors proposed by MBE to join the Board replacing Christopher Every and Ronald Emerson who are due to step down on completion of the Transaction.

Notice of Results

The Company also draws Shareholders attention to comments made in the Current Trading and Prospects section of the Circular and confirms it expects to release its preliminary results for the year ended 31 December 2011 on or around 16 April 2012. As highlighted in the Circular and the pre-close statement of 1 February 2012, trading levels experienced in the second half significantly exceeded those achieved in the first six months of the year. However, as previously indicated, performance in the manufacturing division was poor. As a result, overall revenues for the year are expected to be in the region of £32.1 million with trading operating profit of £2.5 million and trading profit after tax of £1.5 million (before any non-cash non-trading items). Furthermore, as highlighted in the Circular, the Board is currently reviewing the specific uncertainty surrounding the collectability of various receivables which may require a provision of up to £1 million.

John May, Chairman of Specialist Energy Group, commented:

"We are delighted to have reached these agreements with MBE which we believe will be transformational for the Group and in the long term interest of all our customers, staff and shareholders. MBE is fully supportive of our Company's senior management team, its strategic plan for Hayward Tyler and supporting the development of the Group. It is likewise committed to maintaining the Company's listing on AIM for a minimum of two years. Subject to the proposed resolutions being passed at the General Meeting, the Board believes that the significant premium to the pre-announcement share price will be appreciated by shareholders as will the proposed benefit of a supportive banking relationship."

The General Meeting of the Company will be held at Irwin Mitchell LLP, 40 Holborn Viaduct, London EC1N 2PZ at 9 a.m. on 30 April 2012.

Enquiries:

Part I

LETTER FROM THE CHAIRMAN

Dear Shareholders

(1) Subscription for 10,000,000 New Ordinary Shares to raise £5 million

(2) Authority to issue of 4,000,000 Additional New Ordinary Shares

to acquire between 20 and 24 per cent of MBE Cologne

(3) Approval for waiver of obligations under Rule 9 of the Takeover Code

and

(4) Notice of General Meeting

1. Introduction

As Shareholders are aware the Board's focus during 2011 was to explore paths that potentially allowed Hayward Tyler, our main trading entity, to accelerate its position in the international market place, strengthen the Company's balance sheet and deliver value to Shareholders. To that end, the Board is pleased to announce that MBE Mineral Technologies Pte Ltd, a wholly owned subsidiary of McNally Bharat Engineering Company Limited:

§ will subscribe £5 million for 10 million New Ordinary Shares; and

§ may, conditional upon receipt by SEG of satisfactory supporting due diligence, valuation reports, agreement of definitive sale and purchase agreements, Board approval and a supporting opinion from the Company's nominated adviser, undertake the Share Exchange for 4 million Additional New Ordinary Shares in the capital of the Company,

in each case at a price of 50 pence per New Ordinary Share and Additional New Ordinary Share and subject to certain shareholder consents more fully described in this circular. The Subscription Price represents a premium of 108 per cent to the closing mid-market price of 24p on the disclosure date. 

The Transaction will facilitate the Re-bank that will provide new funding arrangements that comprise banking facilities with Standard Chartered together with a loan facility from MBE and encourage closer operational, commercial and market led benefits and opportunities with MBE, a wholly owned subsidiary of one of India's leading engineering, procurement and construction companies. Furthermore the Re-bank is conditional upon the Transaction being completed.

The Transaction is conditional upon, amongst other things, the Directors obtaining appropriate Shareholder authorities at the General Meeting to, inter alia, dis-apply pre-emption rights which would otherwise apply to the allotment of the New Ordinary Shares and the Additional New Ordinary Shares and the Independent Shareholders waiving the Subscriber's obligation which would otherwise arise under Rule 9 as a result of its subscription for New Ordinary Shares and Additional New Ordinary Shares pursuant to the Transaction.

The purpose of this document is to provide you with information about the background to and the reasons for the Transaction, to explain why the Board considers the Transaction to be in the best interests of the Company and its Independent Shareholders as a whole, why the Directors recommend that you vote in favour of the Resolutions and to seek the approval of the Independent Shareholders, on a poll, of a waiver, which the Panel has agreed to give (subject to such approval being given), of the obligation that might otherwise arise under Rule 9 of the Takeover Code for MBE to make a mandatory offer for the Company as a result of their shareholding in the Company representing approximately:

§ 41.69 per cent following the Transaction, assuming MBE subscribes for the New Ordinary Shares only; and

§ 46.40 per cent following the Transaction, assuming MBE subscribes for the New Ordinary Shares and the Additional New Ordinary Shares.

In addition it is proposed that following the issue of the New Ordinary Shares the Board will be augmented by the appointment of Mr Deepak Khaitan, Mr Subir Dasgupta and Mr Prabir Ghosh, the Proposed Directors, who will represent MBE. Following the issue of the New Ordinary Shares Mr Christopher Every and Mr Ronald Emerson will resign from the Board whilst the Non-Executive Chairman, Chief Executive Officer and Finance Director will remain.

2. Information on SEG

The Company was admitted to trading on AIM in January 2010 following the reverse takeover of Southbank UK plc by Nviro Cleantech plc. The Company is, through its operating subsidiary Hayward Tyler, focused on providing mission critical equipment and aftermarket services to end markets that have significant growth potential. In particular these include the power generation sectors in India and China and offshore oil and gas sectors worldwide. Whilst the Company has made significant headway in China with a wholly owned service facility built to provide aftermarket services for Hayward Tyler's installed base of c.450 units, India remains a nascent part of the business with an installed base of less than 150 units and no permanent aftermarket facility. MBE likewise has recently established a facility in Brazil to provide access to the South America market.

The Company's unaudited interim results for the six months ended 30 June 2011 showed revenues of £14.4 million and an operating profit of £0.5 million with an increase in gross margins to 34.1 per cent. Net debt at 30 June 2011 stood at £9.3 million compared to £6.7 million at 31 December 2010. As at 31 December 2011 the Company's order intake for the year was £31.6 million (£16.5 million as at 30 June 2011) with a confirmed order book of £20.4 million (£22.6 million as at 30 June 2011). 

Further background on the Company can be found on the Company's website (www.segroupplc.com).

3. Information on MBE

MBE is a wholly owned subsidiary of McNally Bharat, a company listed on the Bombay Stock Exchange under the ticker: MCNA.IN (Bloomberg) and MCNL.BO (Reuters). McNally Bharat is one of India's leading EPC contractors with a strong manufacturing base in bulk material handling equipment. In addition to its core product offering in coal handling systems for power plants, its offerings span ash/material handling systems, mining equipment, grinding mills and cranes.

According to analysts' estimates MBE is expecting an order inflow of approximately £400 million for 2012 with revenues of £350 million and EBITDA of £25 million. Net assets as at 31 March 2011 were £120 million with a dividend yield forecast for 2012 at 2.1 per cent.

Further information on MBE is set out in Part IV of this document. Further information on McNally Bharat can be found in Part IV of this document and on its website (www.mcnallybharat.com).

4. Information on MBE Cologne

MBE Cologne is a wholly owned subsidiary of MBE, having been acquired by MBE in 2009. MBE Cologne specialises in the manufacture of machines and components for the specialist engineering industry. Sectors served include power generation and ash and material handling. MBE Cologne is able to provide a full range of engineering competencies including, specialist welding, milling and boring capacity up to 70 tons, large lathe capacity and supply and quality management systems. MBE Cologne reported revenues of €14.9 million and a loss before interest and tax of €798,000 in the year ending 31 March 2011. MBE estimates that MBE Cologne achieved revenues of €17.5 million and earnings before interest and tax ("EBIT") of approximately zero in the year to 31 March 2012. MBE forecasts that MBE Cologne will report revenues of €22.0 million, order intake of €22.0 million and EBIT of €1.2 million in the year ending 31 March 2013. 

Further background on the company can be found on the company's website (www.mbe-cologne.com).

5. Background to and reasons for the Transaction

The Directors, who have been so advised by Akur Partners LLP and FinnCap Ltd, consider that the Transaction is in the best interests of the Company and the Independent Shareholders overall. The Directors believe that the Transaction will provide the opportunity to enhance the operational and commercial performance of the Company through the relationship with MBE as follows:

§ Operational - operational benefits are likely to be achieved through closer co-operation with MBE's existing manufacturing operations in Germany and India. In particular the sourcing of quality castings and forgings, sharing in the increased buying power of the MBE group and increasing the element of locally sourced and produced equipment is likely to have significant cost, efficiency and delivery benefits. 

§ Considerable development work has already been undertaken between MBE Cologne and the Company and the Board believes that significant benefits will be achieved that will deliver a more robust manufacturing operation and reliable supply chain through closer co-operation between MBE Cologne and Hayward Tyler. The prospect of the Share Exchange will only encourage this co-operation further. In addition, the programme is expected to provide a more flexible cost base and an operation that will be closer to the needs of the Company's customers. In turn this will allow the business to focus on two of its core strengths; technical and engineering expertise building on Hayward Tyler's brand and reputation for reliability.

§ Market led - MBE and Hayward Tyler already share some of India's largest power related customers and the proposed relationship has the potential to strengthen these customer ties further. Access to MBE's support network is likely to enhance Hayward Tyler's aftermarket offering. In addition MBE has a presence in the growing economies of Brazil and Russia, markets in which Hayward Tyler currently has a limited presence.

§ Staffing - the Transaction will allow the Company to develop its plans to create a centre of engineering excellence in Luton and adjust its staffing to reflect the Company's broader global reach.

In addition, the Transaction will strengthen the balance sheet through providing a significant amount of new financing for the Company, facilitating the Re-bank and ultimately allowing the Company to consider the commencement of dividend payments.

6. Specifics of Funding

As part of the on-going balance sheet strengthening activity, Shareholders will be aware that the Company has been seeking to establish new banking facilities for some time: particularly in the light of the fact that the Company's principal existing facilities with Lloyds TSB Bank plc having been placed on an on demand basis are due to expire on 30 April 2012. As a result of this, approval of the transaction is required in order to allow the Company to enter into the facilities described below.

The proposed new borrowing facilities comprise a 6 year term loan from MBE and a one year revolving credit facility, renewable annually, from Standard Chartered Bank. In addition, the latter will provide a £2.8 million bonds and guarantees facility and a foreign exchange hedging facility. Further details of the Re-bank are set out in paragraph 5 of Part II of this document.

To facilitate the Re-bank the Company will buy-out an inflation swap that has proved an impediment to new banking facilities being established. Having explored various options to address this financial instrument, which have included novation, restructuring and alternative sources of credit, it has become clear that this would not be possible. Accordingly, the Company has been in discussions with certain of its Shareholders to find the best funding solution for all Shareholders. The Company intends to buy-out an interest rate swap as well, which will further mitigate the dilution impact on earnings per share. Further details of the Re-bank are set out in paragraph 5 of Part II of this document.

The Subscription Price represents a premium of 108 per cent to the closing middle market price of 24 pence per Ordinary Share on the disclosure date. The Board believes this premium is very attractive to Shareholders as it reduces the dilution being suffered. The Board considered the possibility of conducting a rights issue but concluded that the lack of certainty and the significant time required in order to prepare a prospectus made that option unattractive. Any non pre-emptive Transaction requires approval of a special resolution at general meeting and therefore it was essential that the Board could be confident that any proposals put to Shareholders would be successful. The Transaction is the result of extensive discussions with MBE and consultation with certain other major Shareholders. 

It is the view of the Board that without the consent of Shareholders to the Transaction the Re-bank would not be achieved and the Company would thereafter cease to have stable bank facilities. Such a potential outcome would be seriously detrimental to the ability of the Company to develop its business and could endanger the ability of the Company to continue to trade. Therefore shareholders are asked to consider this carefully when determining whether to approve the Transaction.

7. Current trading and Prospects

The underlying trading performance of the Company in the second half of 2011 was much stronger than that for the first six months to 30 June 2011. However, prior to finalising the audited result for the year ended 31 December 2011 the Company is currently, as is usual, undertaking a review of receivables. With respect to certain balances that remain outstanding as at 31 December 2011, the Board is considering whether there is specific uncertainty surrounding the collectability of part or all of these balances. Depending upon the outcome of this process, the Board may determine it appropriate to make a provision that would in those circumstances impact on reported profit for the year ended 31 December 2011. As at the disclosure date the Board is unable to quantify the potential impact however the Board estimates that it could be up to £1.0 million.

The preliminary results for the Group for the year ended 31 December 2011 will be issued on or around 16 April 2012 and will be posted on the Company's website at www.segroupplc.com.

Trading in the year to date has been mixed with the aftermarket business in the US having a strong start to the year whilst the UK business has been held back by a lack of credit facilities. The Board expects this situation to improve in the remainder of the yearfollowing the successful completion of the proposed Transaction. Improvements to the main manufacturing operations resulting from the reorganisation and restructuring are beginning to show encouraging signs, although further work and additional non-recurring costs are required before the positive impact is reflected in the bottom line.

As previously announced in February following a significant strengthening of the operational management team particularly focused on driving the improvements required in the manufacturing operations and supply chain Ewan Lloyd-Baker has since taken over direct day to day responsibility of Hayward Tyler and as a consequence of these positive changes the Commercial Director and Managing Director of Hayward Tyler have by mutual agreement left the business.

The Board considers that the positive effects of the Re-bank and the broader opportunities presented through a closer relationship with MBE will increase the opportunity for growth in revenue and profit in the medium term through rationalisation of the Hayward Tyler operations to better focus on the long-term opportunities in the Indian and Chinese power markets. 

The Directors and the Proposed Directors may if and when appropriate and at some point in the future consider commencing the payment of dividends to Shareholders at a level and amount to be determined in due course. This potential intention is regarded as an important step in broadening the appeal of the Company's shares to new secondary investors and therefore providing the opportunity for greater liquidity.

The Company has had discussions with a number of parties about potential joint venture or partnership opportunities to enhance the prospects created by this planned rationalisation and growth. Throughout this process discussions have continued with MBE and the Board is therefore pleased to be able to announce MBE's support not just in the current Transaction but also in the longer term strategic positioning and growth plans of the Hayward Tyler business. 

MBE, as one of India's leading EPC businesses, has significant operations in the sub-continent with a strong manufacturing base throughout India focused on providing material handling equipment, particularly for power plants. The Board believes that access to these manufacturing operations and those which MBE also owns in Germany will potentially provide a significantly more flexible and competitive manufacturing base for the Group by improving supply chain reliability (a key challenge for Hayward Tyler), lowering product cost (to increase market competitiveness) and improving the reliability of delivery times (providing both customer and working capital benefits) for the production of new units. Hayward Tyler and MBE Cologne have been working together to assess these benefits and the initial results of this work is encouraging and the Board believe there is a good potential fit with MBE Cologne's sourcing and machining capability. As part of the Transaction the Company is seeking approval to be able to issue shares to MBE to acquire between 20 and 24 per cent of the issued share capital of MBE Cologne. 

With approximately 100,000 megawatts of power sector capacity proposed in India's Draft Twelfth Five Year Plan and an increasing interest in super-critical boiler designs the Indian market is anticipated by management to show rapid growth over the period of three to five years starting in 2013. In addition to the operational benefits of working alongside MBE, the Board also considers there to be considerable market-led and commercial benefits available. MBE shares common customers with Hayward Tyler in India and, with an India-wide network, MBE also has the infrastructure in place to allow Hayward Tyler to develop its core aftermarket offering. Commercially, MBE already has interests in and access to large power and oil and gas customers both in India and in the emerging markets of South Africa (where Hayward Tyler has a small aftermarket presence), Brazil and Russia (where Hayward Tyler has very limited exposure). The Board therefore believe that the prospects for the Company will be enhanced by the opportunities presented by working with MBE and the proposed significant investment in the business and operations of Hayward Tyler. Following the Transaction, Hayward Tyler will be able to move forward with its plans to create a new centre of engineering excellence in Luton and move its non-core activities to a more flexible supply chain.

8. Working Capital

The Re-bank is conditional upon the Transaction being completed. The Directors believe that, based on current forecasts, following receipt of the net proceeds of the Transaction and the Re-bank the Group will have sufficient cash to fund its current working capital requirements and growth plans. 

The proposed borrowing facilities of £12.0 million offered under the Re-bank represent an increase in facilities of approximately 26 per cent over the current principal facilities with Lloyds TSB Bank plc and Nationwide Building Society. With terms ranging from one to six years these proposed new facilities provide a stronger platform from which the Group can operate. In addition, the proposed new facilities enable the Company to develop a relationship with a bank which clearly has a global presence and is actively looking to support export-led businesses.

As at the disclosure date, the Company had net debt of £9.4 million. Following completion of the Transaction and after the repayment of the two derivatives described in the first bullet point below it is anticipated that net debt would reduce to £8.4 million before costs on a pro-forma basis.

The proceeds of the Transaction of £5 million before costs will be employed as follows:

§ approximately £4.0 million will be used to buy-out two derivative instruments, which are an interest rate swap and an inflation swap. In addition, in the case of the inflation swap, this action facilitates the Re-bank and removes the risk from high inflation that would further erode the value of the Group and generate substantial cash outflows. These derivative instruments are reflected in the Group balance sheet and, accordingly, there is no impact on net assets from buying-out the swaps; and

§ the balance of approximately £1.0 million before costs will augment the working capital of Hayward Tyler.

9. The Transaction

The Company proposes to raise approximately £5 million (before expenses) and, subject to certain conditions, potentially acquire between 20 and 24 per cent of the issued share capital of MBE Cologne through the issue of the New Ordinary Shares at the Subscription Price. The Subscription Price represents a premium of 108 per cent to the closing middle market price of 24 pence per Ordinary Share on the disclosure date. The New Ordinary Shares will represent approximately 21.97 per cent of the Company's issued ordinary share capital immediately following Admission.

Subscription by MBE

MBE, an existing Shareholder with an interest in 8,971,166 Ordinary Shares, representing approximately 25.27 percent of the Company's issued share capital as at the date of this document, has conditionally agreed to subscribe for the New Ordinary Shares. Following Admission of the New Ordinary Shares, MBE will have an interest in 18,971,166 Ordinary Shares representing approximately 41.69 per cent of the Enlarged Share Capital.

MBE may augment its shareholding in the Company by subscribing for the Additional New Ordinary Shares. MBE's consideration for the Additional New Ordinary Shares will be ordinary shares, representing between 20 and 24 per cent of the issued share capital of MBE Cologne. The subscription by MBE for the Additional New Ordinary Shares is conditional on the Board having received satisfactory due diligence reports and valuation reports verifying the value of the consideration shares in MBE Cologne and the agreement of definitive sale and purchase agreements.

Under Rule 9, MBE would normally, as a result of its proposed shareholding following its subscription for the New Ordinary Shares and Additional New Ordinary Shares, be obliged to make a general offer to all Shareholders to acquire the Ordinary Shares held by them in the Company. However, in this instance, the Panel has agreed to waive the obligation to make a general offer that would otherwise arise subject to the approval of the Independent Shareholders on a poll at the General Meeting which will be sought pursuant to the Whitewash Resolution. Further information relating to the Waiver is set out in paragraph 11 of Part I of this document.

Relationship Agreement and Letter of Confirmation

In connection with the Transaction, MBE has entered into the following agreements, further details of which are set out in Part II of this document:

Relationship Agreement

Pursuant to the Relationship Agreement, MBE has agreed to regulate its conduct in respect of the Company following completion of the Transaction. In particular and amongst other things, MBE has agreed to certain restrictions on its ability to purchase further Ordinary Shares, not to de-list the Company and to ensure that its dealings with the Company are on commercial terms and at arm's length.

Letter of Confirmation

Under the terms of the Letter of Confirmation, Mr Ewan Lloyd-Baker has confirmed that all information and documents provided to MBE in the course of its due diligence relating to the Transaction were true in all material respects and that no material fact, information or document has been withheld.

10. The Takeover Code

The terms of the Transaction give rise to certain considerations under the Takeover Code. Brief details of the Panel, the Takeover Code and the protection they afford are given below.

The Takeover Code is issued and administered by the Panel. The Company is a company to which the Takeover Code applies and as such, its Shareholders are entitled to the protections afforded by the Takeover Code. The Takeover Code and the Panel operate principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover. The Takeover Code also provides an orderly framework in which takeovers are conducted.

Under Rule 9 where any person acquires an interest in shares which (taken together with shares in which he is already interested and in which persons acting in concert with him are interested) carry 30 per cent or more of the voting rights of a company which is subject to the Takeover Code, that person, and any person acting in concert with him, is normally required by the Panel to make a general offer in cash to the shareholders for the remaining shares in that company not held by him and his concert party.

Rule 9 further provides that where any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent of the voting rights of a company but does not hold shares carrying more than 50 per cent of such voting rights, a general offer would normally be required if any further interests in shares are acquired by any such person. 

An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make an offer or any person acting in concert with him for any interest in shares of the company within the 12 months preceding the date of the announcement of such offer.

Under the Takeover Code, a concert party arises when persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate, to obtain or consolidate control of a company subject to the Takeover Code.

11. Whitewash

The Panel has agreed, subject to Resolution 1 and Resolution 2 (as set out in the General Meeting Notice) being passed on a poll by the Independent Shareholders, to waive MBE's obligation to make a general offer for the Ordinary Shares which would arise as a result of the proposed subscription by MBE of the New Ordinary Shares and Additional New Ordinary Shares. To be passed, Resolution 1 and Resolution 2 will require a simple majority of the votes cast on a poll vote. As the Waiver must be approved by the Independent Shareholders, MBE will not be able to vote on Resolution 1 or Resolution 2.

The Directors who own existing Ordinary Shares, have confirmed that, having considered the Transaction, they will each vote in favour of the Resolutions.

If the Resolutions are passed at the General Meeting, the voting rights attributable to MBE following Admission of the New Ordinary Shares and Additional New Ordinary Shares would be approximately 46.40 per cent of the Enlarged Share Capital, without incurring any obligation under Rule 9 to make a general offer. Any further increase in the Ordinary Shares held by MBE will be subject to the provisions of Rule 9.

MBE has not taken part in any decision of the Board relating to the Waiver.

The Waiver will be invalidated if any purchases of Ordinary Shares are made by MBE in the period between the date of this document and the General Meeting.

12. Related Party Transaction

MBE, which currently holds approximately 25.27 per cent of the issued share capital of the Company, is a related party for the purposes of the AIM Rules. The issue of the New Ordinary Shares under the Subscription Agreement and the proposed six year term loan facility of £4.0m being provided by MBE both constitute related party transactions for the purpose of the AIM Rules.

The Company's directors consider, having explored alternative financing options and having consulted with FinnCap Ltd, the Company's nominated adviser, that the terms of the issue of New Ordinary Shares under the Subscription Agreement and the proposed banking facilities are fair and reasonable insofar as its Shareholders are concerned.

The proposed issue of the Additional New Ordinary Shares will also, if issued, constitute a related party transaction under the AIM Rules. As this transaction will not be entered into until receipt by SEG of satisfactory supporting due diligence, valuation reports, agreement of definitive sale and purchase agreements, Board approval and a supporting opinion for the related party transaction from the Company's nominated adviser. This will be opined upon at a later date if required.

13. Irrevocable Undertakings to Vote in Favour of the Resolutions

The Company has received irrevocable undertakings to vote in favour of the Resolutions from each of the current Directors (who are Independent Shareholders), who in aggregate have a beneficial interest in respect of 3,699,825 Ordinary Shares, representing approximately 10.42 per cent of the existing issued share capital of the Company.

14. The General Meeting

Set out at the end of this document is a notice convening the General Meeting to be held at 9 am on 30 April 2012 at Irwin Mitchell LLP, 40 Holborn Viaduct, London EC1N 2PZ at which the following Resolutions will be proposed for the purposes of implementing the Transaction:

·; Ordinary Resolution 1 and Ordinary Resolution 2: to approve the Waiver (these resolutions will be taken on a poll of the Independent Shareholders voting in person and by proxy);

·; Ordinary Resolution 3: to authorise the Directors to allot the New Ordinary Shares and Additional New Ordinary Shares to the Subscriber in connection with the Transaction; and

·; Special Resolution 4: to authorise the Directors, in addition and separate to the authority set out in Resolution 3, to allot the New Ordinary Shares and Additional New Ordinary Shares as if Article 5.2 of the Company's Articles of Association (pre-emption rights) does not apply to such allotment.

Shareholders should note that the Resolutions are inter-conditional and, if any one of them is not passed, the Transaction will not proceed. Without the Transaction, the Board will need to consider alternative sources of funding, which may or may not be forthcoming.

15. Action to be taken

A Form of Proxy for use at the General Meeting accompanies this document. Whether or not you intend to be present at the meeting, you are asked to complete the Form of Proxy in accordance with the instructions thereon and to return it by post to the Company's registrars, Share Registrars Limited, Suite E, First Floor, 9 Lion & Lamb Yard, West Street, Farnham, Surrey GU9 7LL, so as to be received as soon as possible, but in any event no later than 9 am on 28 April 2012. The completion and return of a Form of Proxy will not preclude Shareholders from attending the General Meeting and voting in person should they so wish.

16. Recommendation

It is the view of the Board that without the consent of Shareholders to the Transaction the Re-bank would not be achieved and the Company would thereafter cease to have stable bank facilities.

The Directors, who have been so advised by Akur Partners LLP in relation to the Waiver, consider the Waiver and the Transaction to be fair and reasonable and in the best interests of the Company and the Independent Shareholders as a whole. In providing advice to the Directors, Akur Partners LLP has taken into account the Directors' commercial assessments. Accordingly, the Directors unanimously recommend that:

(a) Independent Shareholders vote in favour of the Whitewash Resolutions (Resolution 1 and Resolution 2) to be proposed at the General Meeting; and

(b) all Shareholders vote in favour of Resolutions 3 and 4 to be proposed at the General Meeting,

as they intend to do in respect of their own beneficial holdings of Ordinary Shares amounting, in aggregate, to 3,699,825 Ordinary Shares, representing approximately 10.42 per cent of the existing issued ordinary share capital of the Company.

Yours faithfully

Mr John J. May

Non-Executive Chairman

PART II

DETAILS OF THE TRANSACTION

1. The Transaction

The Subscriber has agreed, subject, inter alia, to Shareholders' approval to subscribe for the New Ordinary Shares at the Subscription Price. The issue of the New Ordinary Shares will raise £5 million before expenses for the Company. The issue of the Additional New Ordinary Shares will allow the Company to acquire between 20 and 24 per cent of MBE Cologne.

Terms of the Subscription Agreement

Under the terms of the Subscription Agreement:

1.1 The Transaction is conditional upon the passing of the Resolutions. If the Resolutions are not passed at the General Meeting or otherwise by 30 April 2012 the Subscriber shall not be bound to complete the Transaction.

1.2 The proceeds of the Transaction are required to be utilised by the Company as follows:

1.2.1 the settlement with Lloyds TSB Bank plc of existing derivatives being approximately £4.0 million as at 31 December 2011; and

1.2.2 the balance of approximately £1.0 million before costs shall be utilised for working capital purposes.

1.3 The Proposed Directors shall be appointed to the Board as soon as practicable following the issue of the New Ordinary Shares, at which time Mr Christopher Every and Mr Ronald Emerson shall resign from the Board.

1.4 The Board shall use its reasonable endeavours to ensure that Admission of the New Ordinary Shares takes place not later than 5 p.m. on 7 May 2012.

1.5 The Subscription Agreement shall terminate and be of no further force and effect if:

1.5.1 there is (i) a general moratorium on commercial banking activities in the United Kingdom, India and Singapore declared by the relevant authorities or (ii) there is a material disruption in commercial banking or securities settlement or clearance services in the United Kingdom, India and Singapore, in each case where such moratorium or disruption (as the case may be) lasts for a period of not less than two weeks and during which time prevents MBE from completing the Transaction; or

1.5.2 there is a change in any currency exchange controls in the United Kingdom, India and Singapore which prevents MBE from completing the Transaction,

in each case on the terms set out in the Subscription Agreement.

2. Dealings and Settlement

2.1 The New Ordinary Shares and the Additional New Ordinary Shares to be allotted and issued pursuant to the Transaction will be allotted and issued fully paid and will, on issue, rank pari passu with the existing Ordinary Shares, including the right to receive, in full, all dividends and other distributions thereafter declared, made or paid after the date of issue together with all rights attaching to them and free from all liens, charges and encumbrances of any kind. Application will be made to the London Stock Exchange for the New Ordinary Shares and the Additional New Ordinary Shares to be admitted to trading on AIM.

2.2 It is expected that, subject to the Subscription Agreement becoming unconditional in all respects, the New Ordinary Shares to be issued will be registered in the name of the Subscriber and issued in CREST and is expected to take place on 7 May 2012, unless the Company exercises its right to issue such New Ordinary Shares in certificated form.

2.3 No temporary documents of title will be issued pending the despatch of definitive share certificates.

3. Relationship Agreement

3.1 In connection with the Transaction, MBE has entered into an agreement dated 5 April 2012 (the Relationship Agreement) with the Company which seeks to regulate MBE's conduct in respect of the Company following completion of the Transaction. Under the terms of the Relationship Agreement, MBE has agreed:

3.1.1 not to and to procure that no member of its group shall, either alone or with other persons, directly or indirectly and whether acting in concert with other parties or otherwise, prior to the Transaction and for a period of two years thereafter without the consent of a majority of the independent members of the Board acquire or permit any member of its group to acquire any interest in Ordinary Shares or enter into any agreement, arrangement or understanding (whether legally binding or not) for the acquisition of such an interest;

3.1.2 for a period of two years following completion of the Transaction, to exercise its voting rights so as to ensure that:

(a) as far as it is within its power to do so, the independent members of the Board are free to exercise their independent judgement in matters of decision making affecting the Company;

(b) it complies at all times with its obligations and assists the Company to comply with its obligations pursuant to Rule 13 of the AIM Rules (Related Party Transactions);

(c) the Company does not de-list from AIM;

(d) the Board will be comprised so as to maintain the split between those directors appointed by MBE and those who are independent of MBE; and

(e) the Company's central management and control remains in the United Kingdom or Isle of Man;

3.1.3 to undertake, for a period of two years following completion of the Transaction, to and to procure that each member of its group ensures that every agreement or arrangement (whether legally binding or not) entered into between MBE or any member of its group and the Company is:

(a) on entirely arm's length terms;

(b) on normal commercial terms; and

(c) approved by a majority of the Board.

3.2 The standstill arrangement set out in paragraph 3.1.1 above is subject to the following provisos:

3.2.1 MBE shall be entitled to participate in any offer to subscribe for shares that is made to all Shareholders or any body of Shareholders of which MBE forms part;

3.2.2 MBE shall be entitled to acquire shares pursuant to any option or other agreements entered into between MBE and an existing shareholder of the Company which were in existence at the date of the Subscription Agreement;

3.3.3 MBE shall be entitled to acquire shares where Shareholders have specifically waived their pre-emption rights in respect of an issue of shares to MBE; and

3.3.4 MBE shall be entitled to participate in any offer to subscribe for shares in excess of its entitlement under a pre-emptive offer where such offer is not fully subscribed, the Company has a working capital requirement and the independent members of the Board resolve that MBE may do so.

4. Confirmation Letter

4.1 As part of the arrangements for the Transaction, Mr Ewan Lloyd-Baker has signed a letter of confirmation in favour of the Subscriber. Under the terms of the confirmation, Mr Ewan Lloyd-Baker has confirmed that all information and documents furnished by the Group to MBE in the course of its due diligence relating to the Transaction are true in all material respects and that no material fact, information or document has been withheld.

4.2 For the purposes of the statement described in paragraph 4.1 above, material has been defined as a liability of SEG of in excess of £1 million. Mr Ewan Lloyd-Baker's aggregate liability in respect of any claim under the confirmation letter shall not exceed £90,000.

5. Re-bank

5.1 Under the terms of an offer letter dated 15 March 2012 from Standard Chartered to McNally Bharat, Standard Chartered has conditionally agreed to provide the Company access to new bank borrowing facilities subject to completion of the Transaction.

5.2 Under the terms of Standard Chartered's offer, Standard Chartered will provide the Company with a revolving credit facility and related ancillary facilities on the following terms:

5.3 In addition, under the terms of two term sheets, MBE has also agreed to conditionally provide term facilities as follows:

5.4 As part of the proposed loan arrangements with Standard Chartered and MBE, the Company will be required to enter into security arrangements in favour of Standard Chartered and MBE as follows:

5.5 Standard Chartered's banking offer and MBE's loan offer (as described in this paragraph 5) are conditional only upon the completion of the Transaction. The Company will however be required to fulfil a number of conditions precedent to the Re-bank inter alia as follows:

§ completion of facility documentation reflecting current Loan Market Association standards, which is likely to contain representations, covenants and information undertakings;

§ release of security by Lloyds TSB Bank plc and Nationwide Building Society;

§ buy-out of the inflation and interest rate swaps currently in place with Lloyds TSB Bank plc; and

§ approval and perfection of the security suite described in paragraph 5.4 above.

Part III

Financial Information on Specialist Energy Group plc

The preliminary results for the Group for the year ended 31 December 2011 will be issued on or around 16 April 2012 and will be posted on the Company's website at:

www.segroupplc.com

The audited consolidated accounts for the Group for the year ended 31 December 2010 can be found on the Company's website at:

http://www.segroupplc.com/downloads/SEGAnnualReport2010.pdf

The audited consolidated accounts for the Group for the three month period ended 31 December 2009 can be found on the Company's website at:

http://segroupplc.com/downloads/InterimResultsfor3monthsto31December2009300410.pdf

The audited consolidated accounts for the Group for the year ended 30 September 2009 can be found on the Company's website at:

http://www.segroupplc.com/downloads/GroupFinancialstatementsYearended30September2009.pdf

The unaudited interim results for the Group for the six months ended 30 June 2011 can be found on the Company's website at:

http://www.segroupplc.com/downloads/InterimStatement30thJune2011.pdf

The information set out above is hereby incorporated by reference into this document.

A Shareholder may request a copy of the above information in hard copy (but such information will not be sent unless requested). A hard copy may be obtained by contacting Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, West Street, Farnham, Surrey GU9 7LL or by telephoning +44 (0)1252 821390. 

PART IV

INFORMATION ON MBE AND MCNALLY BHARAT

The information set out in this Part IV which relates to MBE, McNally Bharat and MBE Cologne has been accurately reproduced from information provided by MBE. As far as SEG is aware and is able to ascertain from information provided by MBE, no facts have been omitted which would render the information in this Part IV inaccurate or misleading.

1. Information on MBE

MBE is an investment company and is a wholly owned subsidiary of McNally Bharat, a company listed on the Bombay Stock Exchange under the ticker: MCNA.IN (Bloomberg) and MCNL.BO (Reuters). McNally Bharat is one of India's leading EPC contractors with a strong manufacturing base in bulk material handling equipment. In addition to its core product offering in coal handling systems for power plants, its offerings span ash/material handling systems, mining equipment, grinding mills and cranes.

1.1 Directors.

The directors of MBE are as follows:

Mr Deepak Khaitan

Mr Subir Dasgupta

Mr Prabir Ghosh

1.2 Incorporation and registered office

MBE Mineral Technologies Pte Ltd, a company incorporated in the Republic of Singapore under company number 200908836C and whose registered office is at 220 Orchard Road, 05-01 Midpoint Orchard, Singapore 238852. 

1.3 Financial Trading and Prospects

MBE is currently trading in line with its board's expectations for the current financial year and has experienced no significant change in its financial or trading position since the publication of its financial statements for the year ended 31 March 2011.

1.4 Financial Information on MBE

The audited consolidated accounts for MBE for the years ended 31 March 2011 and 31 March 2010 can be found on McNally Bharat's website at:

http://mcnallybharat.com/financials/annual-reports.asp

The information set out above is hereby incorporated by reference into this document.

A Shareholder may request a copy of the above information in hard copy (but such information will not be sent unless requested). A hard copy may be obtained by contacting Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, West Street, Farnham, Surrey GU9 7LL or by telephoning +44 (0)1252 821390. 

2. Information on McNally Bharat

McNally Bharat, a company listed on the Bombay Stock Exchange under the ticker: MCNA.IN (Bloomberg) and MCNL.BO (Reuters). McNally Bharat is one of India's leading EPC contractors with a strong manufacturing base in bulk material handling equipment. In addition to its core product offering in coal handling systems for power plants, its offerings span ash/material handling systems, mining equipment, grinding mills and cranes.

2.1 The directors of McNally Bharat are as follows:

Mr Deepak Khaitan

Mr Aditya Khaitan

Mr Amritanshu Khaitan

Mr Subir Dasgupta

Mr Virendra Kumar Verma

Mr PH Ravi Ravikumar

Mr Sudipta Sarkur

Mr Utsav Parekh

Mr Prabir Ghosh

Mr Prashanta Kumar Chandra

2.2 Incorporation and registered office

McNally Bharat Engineering Company Limited, a company registered in India and whose registered office is at 4 Mangoe Lane, 4th Floor, Kolkata - 700001

2.3 Financial Trading and Prospects

McNally Bharat is currently trading in line with its board's expectations for the current financial year and has experienced no significant change in its financial or trading position since the publication of its financial statements for the year ended 31 March 2011.

2.4 Financial Information on McNally Bharat

The audited consolidated accounts for McNally Bharat for the year ended 31 March 2011 can be found on McNally Bharat's website at:

http://mcnallybharat.com/financials/pdf/annualreports10-11.pdf

The audited consolidated accounts for McNally Bharat for the year ended 31 March 2010 can be found on McNally Bharat's website at:

http://mcnallybharat.com/financials/pdf/annualreports09-10.pdf

The unaudited interim results for McNally Bharat for the quarter ended 30 June 2011 can be found on the company's website at:

http://mcnallybharat.com/financials/pdf/financialsjune-11.pdf

The unaudited interim results for McNally Bharat for the quarter ended 30 September 2011 can be found on the company's website at:

http://mcnallybharat.com/financials/pdf/financialssep-11.pdf

The information set out above is hereby incorporated by reference into this document.

A Shareholder may request a copy of the above information in hard copy (but such information will not be sent unless requested). A hard copy may be obtained by contacting Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, West Street, Farnham, Surrey GU9 7LL or by telephoning +44 (0)1252 821390. 

3. Information on MBE Cologne

MBE Cologne was created in 2009, after the manufacturing business was separated from KHD Humboldt Wedag's Cement Business and MBE's acquisition of Coal & Mineral Technology business from KHD Humboldt Wedag. MBE Cologne manufactures a range of engineering equipment for the cement, coal, iron ore and other engineering sectors.

3.1 Directors.

The directors of MBE Cologne are as follows:

Mr Harald Schutz (Chief Executive Officer)

Mr Wilfried Kuppers, (Chief Operating Officer)

Mr Subir Dasgupta,

Mr Prabir Ghosh,

Mr Olaf Zimmlinghaus,

3.2 Incorporation and registered office

MBE Cologne is a company incorporated in Germany under company number HRB 68071 and whose registered office is at 51105 Cologne, Gottfried Hagen Strasse 20, Germany. 

3.3 Financial Trading and Prospects

MBE Cologne is currently trading in line with its board's expectations for the current financial year and has experienced no significant change in its financial or trading position since the publication of its financial statements for the year ended 31 March 2011.

Financial Information on MBE Cologne

The audited accounts for MBE Cologne for the years ended 31 March 2010 and 31 March 2011 can be found at:

www.segroupplc.com/shareholderinformation.htm

The information set out above is hereby incorporated by reference into this document.

A Shareholder may request a copy of the above information in hard copy (but such information will not be sent unless requested). A hard copy may be obtained by contacting Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, West Street, Farnham, Surrey GU9 7LL or by telephoning +44 (0)1252 821390. 

4. Disclosure of interests and dealings in shares

4.1 Definitions

For the purposes of paragraphs 4 of Part IV and paragraph 6 of Part V:

(a) "acting in concert" has the meaning attributable to it in the Takeover Code;

(b) "arrangement" includes any indemnity or option arrangements and any agreement or understanding, formal or informal, of whatever nature, relating to the equity securities which may be an inducement to deal or refrain from dealing;

(c) "connected adviser" has the meaning attributed to it in the Takeover Code;

(d) "control" means a holding, or aggregate holdings, of shares carrying 30 per cent or more of the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting, irrespective of whether the holding or aggregate holding gives de facto control;

(e) "dealing" or "dealt" includes the following:

(i) the acquisition or disposal of equity securities, of the right (whether conditional or absolute) to exercise or direct the exercise of voting rights attached to equity securities, or of general control of equity securities;

(ii) the taking, granting, acquisition, disposal, entering into, closing out, termination, exercise (by either party) or variation of an option (including a trade option contract) in respect of any equity securities;

(iii) subscribing or agreeing to subscribe for equity securities;

(iv) the exercise or conversion of any equity securities carrying conversion or subscription rights (whether in respect of new or existing securities);

(v) entering into, terminating or varying the terms of any agreement to purchase or sell equity securities; and

(vi) any other action resulting, or which may result, in an increase or decrease in the number of equity securities in which a person is interested or in respect of which he has a short position;

(f) "derivative" includes any financial product whose value in whole or in part is determined directly or indirectly by reference to the price of an underlying security;

(g) "disclosure period" means the period commencing on 4 April 2011 being the date twelve months prior to the date of the posting of this document and ending on the disclosure date;

(h) "equity securities" has the meaning given in section 560 of the Act in relation to MBE or SEG securities;

(i) "exempt principal trader" or "exempt fund manager" has the meaning attributed to it in the Takeover Code;

(j) being "interested" in equity securities includes where a person:

(i) owns equity securities;

(ii) has a right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to equity securities or has general control of them;

(iii) by virtue of any agreement to purchase, option or derivative, has the right or option to acquire equity securities or call for their delivery or is under an obligation to take delivery of them, whether the right, option or obligation is conditional or absolute and whether it is in the money or otherwise; or

(iv) is party to any derivative whose value is determined by reference to their price and which results, or many result, in his having a long position in them;

(k) "relevant MBE securities" means ordinary shares in MBE (or derivatives referenced thereto) or, rights to subscribe for or to convert securities into, ordinary shares and options (including trading options) in respect thereof;

(l) "relevant SEG securities" means ordinary shares in SEG (or derivatives referenced thereto) or, rights to subscribe for or to convert securities into, ordinary shares and options (including traded options) in respect thereof; and

(m) "short position" means any short position (whether conditional or absolute and whether in the money or otherwise) including any short position under a derivative, agreement to sell or any delivery obligation or right to require any other person to purchase or take delivery.

4.2 MBE interests in SEG

MBE is currently interested in 8,971,166 Ordinary Shares representing 25.27 per cent of the voting rights of the Company. MBE has agreed to subscribe for 10,000,000 new Ordinary Shares under the Subscription Agreement, pursuant to which its interest will increase to 41.69 per cent of the Enlarged Share Capital after the Transaction. If MBE subscribes for the Additional New Ordinary Shares pursuant to the Share Exchange its interest will increase to 46.40 per cent of the Enlarged Share Capital after the Transaction.

The relevant interests in SEG and its maximum potential controlling position, now and following completion of the Transaction, will be as follows: 

The subscription for the New Ordinary Shares by MBE will be its largest investment to date but still only a relatively small proportion of the total asset value of the McNally Bharat group, which has net assets of approximately US$180 million. The other investments made by MBE total just under US$10 million and include complete ownership of MBE Coal & Minerals Technology GmbH in Germany, MBE Minerals S.A. (PTY) Ltd in South Africa, Humboldt Wedag Minerals India Private Ltd in India, MBE Cologne Engineering GmbH in Germany and smaller operations in China and Brazil (where MBE owns 99 per cent of the issued share capital). MBE does not consider, given the size of the Transaction in relation to other assets owned by the McNally Bharat group, that the subscription for New Ordinary Shares will have any material effect on its earnings in the short term.

MBE believes that the proposed investment will not just complement MBE's existing investments but also those of the wider McNally Bharat group.

From an operational perspective MBE believes that it will be able to assist the Hayward Tyler business in improving its procurement and supply chain management and provide a more reliable means of subcontracting machining and other tasks 'in-house'. This has the potential to increase the utilisation of MBE's current operations thereby making them more efficient and improving their marginal rates of return.

From a commercial perspective the McNally Bharat group currently has a strong presence in the Balance of Plant part of EPC. Through a closer relationship with Hayward Tyler, MBE believes that there is potential to increase McNally Bharat's presence in the boiler turbine generator part of EPC. This potentially increases the breadth and depth of the product offering which McNally Bharat can sell to its current customers (with BHEL and NTPC already being common to Hayward Tyler).

From a market perspective access to Hayward Tyler's installed base provides greater opportunities for McNally Bharat to develop its aftermarket operations particularly in the Indian sub-continent where McNally Bharat already has a wide geographical coverage. Overseas, Hayward Tyler's current North American operations provide access to a geographical market in which McNally Bharat currently has very little exposure. This provides opportunities not just in the power generation market but also in oil and gas. Hayward Tyler has an extensive product range and installed base in the onshore and offshore oil and gas sector which in addition to its recently developed subsea motors could provide opportunities for McNally Bharat's operations in its home market as well as Brazil.

The planned investment seems to fit with an on-going strategy to develop McNally Bharat's proprietary product and service offering in markets outside of India. In addition, it is well placed to accelerate the organic growth plans of Hayward Tyler through access to the local Indian market. With some of Hayward Tyler's customers requesting a greater degree of local supply McNally Bharat has the existing infrastructure from a land, building, manpower and investment perspective to help Hayward Tyler achieve its growth strategy.

4.3 Market dealings in relevant SEG securities by MBE

Save as disclosed below, no dealings have taken place during the twelve months prior to the date of this document in relevant SEG securities by MBE or any other person acting in concert with MBE:

4.4 As at the close of business on the disclosure date, save as disclosed in this paragraph 4:

(a) MBE had no interest in or right to subscribe for, nor had any short position in relation to, any relevant SEG securities, nor had it dealt in any relevant SEG securities during the disclosure period;

(b) none of the directors of MBE (including any members of such directors' respective immediate families) had an interest in or a right to subscribe for, or had any short position in relation to, any relevant SEG securities, nor had any such person dealt in any relevant SEG securities during the disclosure period;

(c) no person acting in concert with MBE had an interest in or a right to subscribe for, or had any short position in relation to, any relevant SEG securities, nor had any such person dealt in any relevant SEG securities during the disclosure period;

(d) there were no arrangements which existed between MBE, or any person acting in concert with MBE, and any other person in connection with or dependent upon the outcome of the Transaction;

(e) neither MBE nor any person acting in concert with MBE had borrowed or lent any relevant SEG securities, save for any borrowed shares which have either been on-lent or sold;

(f) no repayment of or security for any MBE liability depends to a significant extent on the business of SEG.

4.5 Neither MBE or any persons acting in concert with it have entered into agreements, arrangements or understandings (including any compensation arrangement) with any of the Company's Directors, recent directors, Shareholders, recent Shareholders, concert party or any person interested or recently interested in existing Ordinary Shares which are connected with or dependent upon the outcome of the Transaction. MBE has not entered into any agreement, arrangement or understanding to transfer any interest acquired in SEG, as a result of the Transaction. 

5. Irrevocable undertaking

MBE has entered into an irrevocable undertaking (subject to the exceptions referred to in paragraph 1 of Part II of this document) as part of the arrangements set out in the Subscription Agreement, pursuant to which MBE has agreed, inter alia, to subscribe for the New Ordinary Shares under the Transaction and vote in favour of the Resolutions. 

6. MBE's intentions regarding SEG's business

6.1 MBE is fully supportive of the Company's senior management team and its strategic plan for Hayward Tyler and is looking forward to working with them following completion of the Transaction to develop Hayward Tyler's operations in the Indian market and elsewhere. MBE is not looking to change the Company's strategy and intends to support the Company, in particular in its proposed development of a centre of engineering excellence, the restructuring of its procurement and supply chain operations and its expansion into the Indian market as the anticipated demand for the Company's products increases in line with the current Draft Twelfth Five Year Plan. MBE appreciates the reputation, brand and proprietary product range which the Company has and is keen to help continue to develop this. 

6.2 MBE does not currently have any intentions regarding the Group's business that would affect:

6.2.1 the employment of the Group's personnel, including the continued employment of and conditions of employment of any of the Group's management; or

6.2.2 the locations of the Group's business.

6.3 MBE does not have any intentions to dispose or otherwise change the use of any of the fixed assets of the Group.

6.4 Under the terms of the Relationship Agreement, MBE has agreed not to de-list the Company from AIM for a period of two years following completion of the Transaction.

7 Long-term justification for proposed transaction and source of funds

7.1 MBE is one of the largest EPC contractors in India, which is one of the Company's largest emerging geographical markets. MBE has extensive access to power plants and shares common customers with Hayward Tyler including BHEL and NTPC. MBE has been in discussions with the Company's management for some time about developing a closer working relationship and has built up a current stake of over 25 per cent during the last 18 months.

7.2 MBE intends to fund the Transaction through a term loan facility of $15 million with Axis Bank Limited, Singapore. The principal terms of this term loan facility, which have been outlined by Axis Bank to MBE in letters of 14 October 2011 and 22 March 2012, but are subject to formal agreements being prepared, are as follows:

(a) repayable in 20 equal quarterly instalments commencing one year after utilisation;

(b) the loan will carry an interest rate of six month LIBOR plus 5 per cent, payable on a quarterly basis;

(c) financial covenants will be required McNally Bharat as follows:

i. ratio of long-term debt to EBITDA of not greater than 3 times;

ii. ratio of long-term debt to tangible net worth of not greater than 2.5 times;

iii. the ratio of total net assets to total borrowings of net less than 1.15 times; and

iv. the ration of EBITDA less Tax to debt repayment of not less than 1.25 times.

(d) security for the loan will include (i) a charge over all of the assets of MBE (ii) a pledge over MBE's entire shareholding (including the New Ordinary Shares) in the Company and (iii) a guarantee from McNally Bharat.

7.3 In the event that MBE defaults on its term loan facility as described in this paragraph 7, Axis Bank Limited may exercise its security. One of the consequences of this is that Axis Bank could replace MBE as the Company's majority shareholder.

8 MBE's Material Contracts

Save for the Subscription Agreement, as described in Part II of this document, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by MBE within the period of two years preceding the date of this document and are or may be material:

(a) the Relationship Agreement, further details of which are set out in paragraph 3 of Part II of this document;

(b) the Confirmation Letter, further details of which are set out in paragraph 4 of Part II of this document;

(c) the letter dated 22 March 2012 from Axis Bank Limited to MBE setting out the principal terms of the term loan facility, further details of which are set out in paragraph 5.2 of this Part II of this document.

PART V

Additional Information

1. Responsibility Statement

1.1 The Directors whose names and positions appear in paragraph 2.1 below, and the Company, accept responsibility for the information contained in this document (other than information relating to MBE, McNally Bharat and MBE Cologne). To the best of the knowledge of the Directors and the Company (who have taken all reasonable care to ensure that such is the case), the information contained in this document (other than information relating to MBE, McNally Bharat and MBE Cologne) is in accordance with the facts and does not omit anything like to affect the import of such information. 

1.2 The Proposed Directors accept responsibility for the information contained in this document relating to MBE, McNally Bharat and MBE Cologne. To the best of their knowledge (having taken all reasonable care to ensure that such is the case), the information contained in this document for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. 

2. Directors of the Company

2.1 Each of the Directors has entered into an agreement with the Company providing for them to act as a director. Their annual fees, excluding all reasonable expenses and discretionary bonus arrangements incurred in the course of their duties which will be reimbursed by the Company and other principal terms of such agreements, are as follows:

None of the above contracts have been amended or replaced within the six months prior to the date of this document.

2.2 Each of the Proposed Directors has entered into an agreement with the Company, each of which is conditional upon the completion of the Transaction, providing for them to act as a director. Their annual fees, excluding all reasonable expenses and discretionary bonus arrangements incurred in the course of their duties which will be reimbursed by the Company and other principal terms of such agreements, are as follows:

3. Market quotations

The following table shows the closing middle market quotations of existing Ordinary Shares, as derived from the Daily Official List of the London Stock Exchange on the first business day of each of the six months immediately before the date of this document and on the disclosure date.

4. The Company's Material Contracts

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company within the period of two years preceding the date of this document and are or may be material:

(a) the Subscription Agreement, further details of which are set out in paragraph 1 of Part II of this document;

(b) the Relationship Agreement, further details of which are set out in paragraph 3 of Part II of this document;

(c) the agreement with Standard Chartered relating to the Re-bank, further details of which are set out in paragraph 6 of Part II of this document; and

(d) the loan agreement with MBE, further details of which are set out in paragraph 6 of Part II of this document; and

(e) the agreement entered into with FinnCap Ltd Limited on 29 November 2010 relating to the placing of up to 10,416,667 Ordinary Shares at price of 48 pence per Ordinary Share.

5. Directors' interests in shares

As at the date of this document, the interests of the Directors and their immediate families (all of which are beneficial) in the issued share capital of the Company and, so far as is known to the Directors or could with reasonable diligence be ascertained by them or any person acting in concert with them, which if the connected person were a Director, would otherwise be disclosed pursuant to this paragraph are, or are expected to be, as follows:

[1] 1,271,195 of these shares are held in the name 'Ewan Lloyd-Baker and Denton & Co Trustees Limited'. A further 1,698,827 are held in the name Ewan Lloyd-Baker. The remaining 87,424 shares owned by Ewan Lloyd-Baker, are charged as security in favour of Lloyds TSB Group plc pursuant to an agreement dated 25 May 2007. Ewan Lloyd-Baker retains the beneficial interest and voting rights associated with these shares

6. Additional disclosure required by the Takeover Code

As at the close of business on the disclosure date:

(a) SEG had no interest in or right to subscribe for, nor had any short position in relation to, any relevant MBE securities, nor had it dealt in any relevant MBE securities during the disclosure period;

(b) none of the Directors (including any members of such Directors' respective immediate families, related trusts or any person acting in concert with them) had any interest in or right to subscribe for, or had any short position in relation to, any relevant MBE securities;

(c) except as disclosed in paragraph 5 above, none of the Directors (including any members of such Directors' respective immediate families, related trusts or any person acting in concert with them) nor concert parties to SEG had an interest in or a right to subscribe for, or had any short position in relation to, any relevant SEG securities;

(d) no pension fund of SEG had any interest in or right to subscribe for, or had any short position in relation to, any relevant SEG securities;

(e) other than Hayward Tyler Pension Plan Trustees Limited, which beneficially holds 419,639 Ordinary Shares, no connected adviser to SEG or to a paragraph 1 associate of SEG or to a person acting in concert with SEG, nor any person controlling, controlled by or under the same control as any such connected adviser (except for an exempt principal trader or exempt fund manager) had any interest in or right to subscribe for, or had any short position in relation to, any relevant SEG securities;

(f) SEG has not redeemed or purchased any relevant SEG securities during the disclosure period;

(g) neither SEG nor any person acting in concert with SEG had borrowed or lent any relevant SEG securities;

(h) there were no arrangements which existed between SEG or any associate of SEG and any other person to transfer any relevant SEG securities;

(i) other than the Re-bank, there were no arrangements which existed between SEG, or any person acting in concert with SEG, and any other person in connection with or dependent upon the outcome of the Transaction.

7. General

7.1 The estimated costs and expenses relating to the Transaction payable by the Company are estimated to amount to approximately £400,000 (excluding VAT), which amount excludes the costs of the Re-bank.

7.2 FinnCap Ltd and Akur Partners LLP have given and not withdrawn their respective written consents to the issue of this document with the inclusion of each of their names and references to them in the form and context in which they appear.

8. Documents Available for Inspection

8.1 Copies of the following documents will be available for inspection during normal business hours on any weekday (public holidays excepted) at the registered office of the Company from the date of this document until the date of the General Meeting:

(a) the memorandum and articles of association of the Company;

(b) the memorandum and articles of association of MBE;

(c) the audited consolidated accounts of the Group for the financial years ended 31 December 2010 and 30 September 2009 and the three month period ended 31 December 2009;

(d) unaudited interim results for the Group for the six months ended 30 June 2011;

(e) the audited accounts of MBE for the financial years ending 31 March 2010 and 31 March 2011;

(f) the audited accounts of McNally Bharat for the financial years ending 31 March 2010 and 31 March 2011;

(g) the unaudited interim results for McNally Bharat for the quarters ended 30 June 2011 and 30 September 2011;

(h) the audited accounts for MBE Cologne for the years ended 31 March 2010 and 31 March 2011;

(i) the term sheets for MBE's £9 million term loan facility agreement with Axis Bank Limited, Singapore;

(j) the term sheet for the Company's £8 million facility agreement with Standard Chartered, Singapore;

(k) the term sheets for the Company's loan agreement with MBE;

(l) the Subscription Agreement;

(m) the Relationship Agreement;

(n) the letters of consent referred to in paragraph 7 of this Part V;

(o) the irrevocable undertakings referred to in paragraph 13 of Part I of this document;

(p) the Confirmation Letter;

(q) the placing agreement entered into between the Company and FinnCap Ltd, details of which are set out in paragraph 4(e) of Part V of this document; and

(r) this document.

Documents (a), (c), (d), (e), (h), (i), (j), (k), (l), (m), (n), (o), (p), (q) and (r) are on display at www.segroupplc.com/shareholderinformation.htm.

Document (b) is on display at www.mcnallybharat.com/financials/shareholding-pattern.asp

Documents (f) is on display at www.mcnallybharat.com/financials/annual-results.asp.

Document (g), is on display at www.mcnallybharat.com/financials/quarterly-results.asp.

A Shareholder may request a copy of the above information in hard copy (but such information will not be sent unless requested). A hard copy may be obtained by contacting Share Registrars Limited at Suite E, First Floor, 9 Lion & Lamb Yard, West Street, Farnham, Surrey GU9 7LL or by telephoning +44 (0)1252 821390.