THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice as soon as possible from your stockbroker, bank, solicitor, accountant, fund manager or other appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

The distribution of this document and the accompanying documents and the allotment and issue of New Melrose Ordinary Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by New Melrose to obtain any approval, authorisation or exemption to permit the allotment or issue of New Melrose Ordinary Shares or the possessing or distribution of this document and the accompanying documents in any jurisdiction, other than the United Kingdom. Persons outside the United Kingdom into whose possession this document comes should inform themselves about, and observe, any applicable restrictions and legal, exchange control or regulatory requirements in relation to the distribution of this document and the Proposals. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted in or into any Scheme Restricted Jurisdiction.

No New Melrose Ordinary Shares have been marketed to, or are available for purchase in whole or in part by, the public in the United Kingdom or elsewhere in connection with the Admission. This document does not constitute or form part of any offer or invitation to purchase, subscribe for, sell or issue, or any solicitation of any offer to purchase, subscribe for, sell or issue, New Melrose Ordinary Shares or any other securities of New Melrose.

A copy of this document, which comprises a prospectus relating to the New Melrose Ordinary Shares prepared in accordance with the Prospectus Rules made under section 73A of the Financial Services and Markets Act 2000, has been filed with the FSA and has been approved by the FSA in accordance with section 87A of the Financial Services and Markets Act 2000 and made available to the public as required by section 3.2 of the Prospectus Rules.

Shareholders should read the whole of this document and any documents incorporated herein by reference. In particular, your attention is drawn to the factors described in the ''Risk Factors'' section of this document.

NEW MELROSE PLC

(to be renamed as Melrose PLC)

(Incorporated and registered in England and Wales with registered number 8243706)

Introduction to the Official List and admission to trading on the London Stock Exchange of 1,266,627,036 New Melrose Ordinary Shares

Rothschild

Sponsor and Financial Adviser

Investec

Broker

Applications will be made to the UKLA for the New Melrose Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for the New Melrose Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective, and that dealings in the New Melrose Ordinary Shares will commence, at 8.00 a.m. on the Effective Date which, subject to the satisfaction of certain conditions, is expected to occur on 27 November 2012. No application has been or is currently intended to be made for any other class of shares issued by New Melrose to be admitted to the Official List or to trading on the London Stock Exchange or to be admitted to listing or dealing on any other exchange.

The New Melrose Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with each other and will rank in full for all dividends and other distributions thereafter declared, made or paid in respect of the New Melrose Ordinary Shares.

Shareholders should only rely on the information contained in this document and any documents incorporated herein by reference. No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representation must not be relied upon as having been so authorised. New Melrose will comply with its obligations to publish a supplementary prospectus pursuant to section 87G FSMA and Rule 3.4 of the Prospectus Rules containing further updated information required by law or by any regulatory authority but, except as required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules or any other applicable law, assumes no further obligation to publish additional information. Without prejudice to New Melrose's legal or regulatory obligations to publish a supplementary prospectus, neither the delivery of this document nor Admission shall, under any circumstances, create any implication that there has been no change in the affairs of the Melrose Group since the date of this document or that the information is correct as of any time subsequent to the date of this document.

Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for New Melrose in relation to the Admission and for New Melrose and Old Melrose in relation to the Proposals and is not advising any other person and accordingly will not be responsible to any person other than New Melrose for providing the protections afforded to the clients of Rothschild or for providing advice in relation to the matters described in this document.

Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for New Melrose in relation to Admission and Old Melrose in relation to the Proposals and is not advising any other person and accordingly will not be responsible to any person other than New Melrose for providing the protections afforded to the clients of Investec or for providing advice in relation to the matters described in this document.

Apart from the responsibilities and liabilities, if any, which may be imposed on Rothschild or Investec under FSMA or the regulatory regime established thereunder, neither Rothschild or Investec accepts any responsibility whatsoever and makes no warranty, express or implied, in relation to the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Melrose Group, the New Melrose Ordinary Shares or the Proposals. Each of Rothschild and Investec accordingly disclaims, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement.

The contents of this document are not to be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.

This document is not an offer of securities for sale in the United States or in any other country or jurisdiction. New Melrose Ordinary Shares to be issued to Shareholders in connection with the Scheme have not been, and will not be, registered with the SEC under the US Securities Act, and will be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act. For the purpose of qualifying for the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act with respect to the New Melrose Ordinary Shares issued pursuant to the Scheme, Old Melrose will advise the Court that it will rely on the Section 3(a)(10) exemption based on the Court's sanctioning of the Scheme, which will be relied upon by Old Melrose as an approval of the Scheme. The Court will hold a hearing on the Scheme's fairness to Old Melrose Shareholders, at which hearing all such Shareholders will be entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme.

The New Melrose Ordinary Shares have not been and will not be registered on a United States securities exchange or quoted on any inter-dealer quotation system in the United States. New Melrose does not intend to take any action to facilitate a market in New Melrose Ordinary Shares in the United States. Consequently, New Melrose believes that it is unlikely that an active trading market in the United States will develop for the New Melrose Ordinary Shares.

Neither the SEC nor any other US federal or state securities commission or regulatory authority has approved or disapproved the New Melrose Ordinary Shares or passed an opinion on the adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

Old Melrose and New Melrose are public limited companies incorporated under the laws of England and Wales. All of the Directors of Old Melrose and New Melrose are citizens or residents of countries other than the United States. Substantially all of the assets of such persons and a significant proportion of the assets of Old Melrose and New Melrose are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon such persons, Old Melrose or New Melrose, or to enforce against them judgments of US courts, including judgments predicated upon civil liabilities under the securities laws of the United States or any state or territory within the United States. The United States and the United Kingdom do not have a treaty providing for the reciprocal recognition of judgements (other than arbitral awards) in civil and commercial matters. Consequently, a final and conclusive judgement by any federal or state court of the United States based on civil liability, whether or not predicated solely upon US federal securities laws, would not automatically be enforceable in England and Wales. In addition, it is doubtful whether the courts of England and Wales would accept jurisdiction and impose civil liability if proceedings were commenced in England or Wales in an original action predicated solely upon US federal securities laws.

Some financial and other numerical information in this document has been rounded and, as a result, the numerical figures shown as totals in this document may vary slightly from the exact arithmetic aggregation of the figures that precede them.

The New Melrose Ordinary Shares have not been, and will not be, registered under the securities laws of any state or jurisdiction of the United States and, accordingly, will only be issued to the extent that exemptions from the registration or qualification requirements of state ''blue sky'' securities laws are available or such registration or qualification requirements have been complied with.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

	Page
SUMMARY	1
RISK FACTORS	13
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS .	35
EXPECTED TIMETABLE OF PRINCIPAL EVENTS	36
DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS	37
PART I INFORMATION ON THE PROPOSALS .	38
PART II INFORMATION ON OLD MELROSE AND NEW MELROSE	44
PART III OPERATING AND FINANCIAL REVIEW RELATING TO THE MELROSE GROUP .	52
PART IV CAPITAL RESOURCES .	54
PART V HISTORICAL FINANCIAL INFORMATION RELATING TO OLD MELROSE	58
PART VI UNAUDITED PRO FORMA INFORMATION ON THE MELROSE GROUP	61
PART VII UNITED KINGDOM TAXATION CONSIDERATIONS .	67
PART VIII DIRECTORS, CORPORATE GOVERNANCE AND EMPLOYEES	69
PART IX ADDITIONAL INFORMATION	81
DEFINITIONS	116
DOCUMENTS INCORPORATED BY REFERENCE	125

(This page has been left blank intentionally.)

SUMMARY

Summaries are made up of disclosure requirements known as 'Elements'. The elements are numbered in Sections A–E (A.1–E.7).

This summary contains all the Elements required to be included in a summary for this type of securities and Issuer. Because some of the Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted because of the type of securities and Issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of 'not applicable'.

	Section A—INTRODUCTION AND WARNINGS
Element	Disclosure Requirement	Disclosure
A.1	Warning	THE FOLLOWING SUMMARY SHOULD BE READ AS AN INTRODUCTION TO THIS PROSPECTUS ONLY. ANY DECISION TO INVEST IN NEW MELROSE ORDINARY SHARES SHOULD BE BASED ON A CONSIDERATION OF THIS PROSPECTUS AS A WHOLE INCLUDING THE INFORMATION INCORPORATED BY REFERENCE INTO THIS PROSPECTUS
		Where a claim relating to information contained in this prospectus is brought before a court, a plaintiff investor might, under the national legislation of the EEA States, have to bear the costs of translating this prospectus before legal proceedings are initiated. Civil liability attaches only to those persons who have tabled this summary, including any translation of this summary but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this prospectus or it does not provide, when read together with the other parts of this prospectus, key information in order to aid investors when considering whether to invest in New Melrose Ordinary Shares.
A.2	Subsequent resale of securities or final placement of securities through financial intermediaries	Not applicable. New Melrose is not engaging any financial intermediaries for any resale of securities or final placement of securities after publication of this document.

	Section B—ISSUER
Element	Disclosure Requirement	Disclosure
B.1	Legal and commercial name	New Melrose PLC (to be renamed as Melrose PLC) (''New Melrose'' or ''the Company'')
B.2	Domicile and legal form, applicable legislation and jurisdiction of incorporation	New Melrose was incorporated in England and Wales on 8 October 2012 under the 2006 Act as a public company limited by shares with registration number 8243706 and was incorporated for the purpose of implementing the Scheme. New Melrose is domiciled in the United Kingdom and the principal legislation under which it operates is the 2006 Act.
B.3	Current operations and principal activities	As part of the Proposals, New Melrose will become the holding company of the Melrose Group on the Scheme becoming effective. New Melrose has no current operations or activities and had not traded since incorporation.
		The principal businesses operated by Old Melrose's trading subsidiaries are discussed below:

Energy

The Melrose Group's Energy businesses are market leading manufacturers of electricity generating equipment, switchgear and transformers. Energy services the power generation, oil and gas, utilities, industrial, marine, rail, telecommunications, construction, commercial, military, hydropower, cogeneration, and uninterrupted power supply and aftermarket sectors.

Lifting

The Melrose Group's Lifting businesses are world leading suppliers of wire, wire rope products, lifting fittings and blocks. Lifting services the onshore and offshore oil and gas, deep shaft and surface mining, petrochemical, alternative energy, general industrial and construction markets, fishing and marine, infrastructure (for example, bridges and sports stadia) and material handling industries.

Other Industrials

The Melrose Group's Other Industrials businesses are market leading manufacturers across the housing, construction, scrap processing and other industrial sectors. Other Industrials businesses serve a diverse range of sectors, including housing, construction, retail, scrap processing, fibre recycling, industrial and general engineering.

Elster

The Melrose Group's Elster Business is one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions. Elster's products and solutions are used to measure gas, electricity and water consumption as well as enable energy efficiency and conservation.

B.4a Significant recent trends On 30 August 2012, Old Melrose published its unaudited results affecting the Melrose for the six month period to 30 June 2012. The following text has Group and the industries been extracted from that statement:

The recovery from the slump of 2008/09 has been slow and patchy nearly everywhere in the world and this seems set to continue. However, our businesses trade in sound end markets with good prospects such as the energy, oil & gas and mining sectors. Order books remain strong and our major investment programme is yet to fully reap its benefits. The addition of Elster will give us the opportunity, over several years, of enhancing existing growth prospects.

Energy

Within the Brush Turbogenerators' business new build sales increased by 24% compared to the same period last year. In this period Brush Turbogenerators has, as a result of the well-publicised switch to more gas fired power generation, seen a trend towards smaller turbogenerators on shorter order cycles which, combined with delays due to the economic climate in orders for some larger generators, has meant the order book has reduced from last year. The order book, however, is improving in the second half of 2012 and, as stated later, the outlook for this business remains promising.

in which it operates	Outlook

Trading in the aftermarket business has started the year strongly with orders up 16% over 2011.

The restructuring of the generator manufacturing plant in the Netherlands, which was detailed in the 2011 Annual Report, was largely completed in the first half. ... Demand for this product, which has been low this year due to market conditions, is expected to improve considerably in 2013 and this, when combined with its lower cost base, is expected to improve the performance of this business next year.

Sales of Brush Transformers started to recover in the second half of 2011 and this has continued into 2012 ... Operating margins continue to improve following the implementation of a revised manufacturing strategy and the introduction of a redesigned ''value engineered'' product line.

With a high proportion of orders already received for the second half and further operational improvements to come, we are confident that HSS will continue to build on the strong second quarter performance and further improve operating margins.

The current record order book gives Marelli confidence in meeting its forecasts for the full year.

Lifting

On the back of a healthy order intake in the first half of the year and a strong order book, Bridon expects that its performance for the full year will exceed that of 2011. The company has leading positions in sectors with favourable market prospects, such as oil & gas and mining, which together with the capital investment being made and associated operating improvements provides confidence that Bridon can continue to progress even in the light of the current economic uncertainty.

Crosby enjoyed an excellent start to the year in terms of both revenue and profits. First half revenues and operating profits were up 21% and 30% respectively.

Whilst there has been a slight softening of US order rates in the last few weeks this has been compensated by higher demand than forecast elsewhere in the world. We expect Crosby to show further progress this year.

Acco performed extremely well during the first half, with operating profits up by 76% when compared with the same period last year.... The outlook for Acco in the second half remains positive.

Other Industrial

Sales within Truth during the first half were above management expectations ... There are signs of gentle recovery in the US housing market but whether this is a continuing trend is likely to be clearer over the next few months.

Harris is currently experiencing a slow down in its market place and is not expected to perform better than last year. As a result close attention is being paid by its management to its cost structure.

		Elster
		On 23 August 2012 Melrose completed the acquisition of Elster for a total cash consideration of approximately £1.5 billion.
		We believe there exists a significant opportunity to improve the performance of Elster over the next few years for the benefit of shareholders. It is obviously very early in this process but some initial steps have already been taken and we will report further on our progress at the time of our year end results.
B.5	Description of the Melrose Group and New Melrose's position therein	Old Melrose is the holding company of various principal subsidiaries. On the Scheme becoming effective, New Melrose will become the holding company of all of these subsidiaries.
B.6	Interests in the Company and voting rights	So far as the Company is aware, as at the Latest Practicable Date, the following persons (other than the Directors) hold voting rights, whether direct or indirect, of (and/or holdings, whether direct or indirect, of certain financial instruments which give the holder an unconditional right or a right exerciseable in his sole discretion to acquire) three per cent. or more of the ordinary issued share capital of Old Melrose:
		Shareholder	Number of Old Melrose Ordinary Shares	Approximate percentage of Old Melrose issued share capital
		BlackRock, Inc. Ameriprise Financial, Inc. . Lloyds Banking Group plc Artemis Investment	143,471,514 93,195,516 67,884,094	11.33% 7.36% 5.36%
		Management LLP Aviva Plc and its subsidiaries . Standard Life	63,280,471 59,988,528	5.00% 4.74%
		Investments Ltd. Legal and General Investment	56,188,393	4.44%
		Management Ltd. F&C Asset Management Plc	50,997,778 44,186,490	4.03% 3.49%
		As at the Latest Practicable Date, the interests (all of which are beneficial) of the Directors, their immediate families and (so far as is known to them or could with reasonable diligence be ascertained by them) persons connected (within the meaning of section 96B of FSMA) with the Directors in the issued share capital of Old Melrose, including: (i) those arising pursuant to transactions notified to Old Melrose pursuant to Disclosure and

with such interests as are expected to subsist immediately following Admission, are set out in the following table:

	Interests as at the Latest Practicable Date
	Number of Old Melrose Ordinary Shares	Percentage of Old Melrose issued ordinary share capital
Executive Chairman
Christopher Miller(1)	14,175,344	1.12
Executive Vice-Chairman
David Roper	9,584,633	0.76
Executive Directors:
Simon Peckham	9,664,068	0.76
Geoffrey Martin	4,758,797	0.38
Non-Executive Directors:
Miles Templeman	632,343	0.05
Perry Crosthwaite	222,377	0.02
John Grant	295,817	0.02
Justin Dowley	414,000	0.03

	Number of options over Old Melrose 2012 Incentive Shares held at the Latest Practicable Date
Christopher Miller	8,500
David Roper	8,500
Simon Peckham	8,500
Geoffrey Martin	8,500
None of the Old Melrose Ordinary Shareholders referred to above has now, or will following the Proposals, have different voting rights from any other holder of Old Melrose Ordinary Shares or New Melrose Ordinary Shares in respect of any Old Melrose Ordinary Shares or New Melrose Ordinary Shares held by them.

As at the Latest Practicable Date, the Company is not aware of any person or persons who directly or indirectly, acting jointly with others or acting alone, exercised or could exercise control over the Company.

B.7 Select historical financial The summary financial information set out below has been information extracted without material adjustment from the Audited Financial Statements for the three years ended 31 December 2011, 31 December 2010 and 31 December 2009. Since 30 June 2012, being the date to which the last interim unaudited results of the Melrose Group were prepared the Melrose Group has completed the 2012 Rights Issue, raising approximately £1.2 billion, and completed the Tender Offer. The Facilities Agreement, which was used to partly finance the Tender Offer for Elster, became unconditional on 23 August 2012. The illustrative financial impact of these actions is set out further under element B.8 below.

					Year ended 31 December
			2011(1)	2010(1)	2010	2009
			£m	£m	£m	£m
		Condensed consolidated
		income statement
		Revenue	1,153.9	1,035.4	1,379.5	1,298.5
		Gross profit	341.0	304.4	391.0	328.2
		Operating profit Headline operating	117.0	134.0	181.4	113.1
		profit(2)	180.8	147.0	196.9	149.7
		Profit before tax	97.4	108.7	155.3	82.0
		Profit for the year from
		continuing operations	114.8	103.7	141.3	54.7
		Profit for the year from
		discontinued operations	171.7	37.6	—	24.6
		Profit for the year	286.5	141.3	141.3	79.3
		Earnings per share From continuing
		operations:
		Basic	25.2p	20.8p	28.4p	11.0p
		Diluted	23.7p	19.8p	27.0p	10.8p
		From continuing and discontinued operations:			As at 31 December
				2011	2010	2009
				£m	£m	£m
		Summary condensed consolidated balance sheet Non-current assets Current assets		1,162.1 619.4	1,470.2 673.6	1,459.6 585.1
		Total assets		1,781.5	2,143.8	2,044.7
		Current liabilities		394.0	452.2	417.5
		Non-current liabilities		739.1	808.7	863.9
		Total liabilities		1,133.1	1,260.9	1,281.4
		Net assets		648.4	882.9	763.3
		(1) Excludes the results of discontinued operations (Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp).
		(2) Before exceptional costs, exceptional income and intangible asset amortisation.
B.8	Select unaudited pro forma financial information	The following unaudited pro forma statement of net assets of the Melrose Group has been based on the net assets of the Old Melrose Group as at 30 June 2012 and the net assets of Elster Business as at 30 June 2012 and has been prepared in accordance with Annex II of the Prospectus Directive Regulation and on the basis of the notes set out below. The unaudited pro forma statement of net assets has been prepared to illustrate the effect on the consolidated net assets of the Old Melrose Group of the Acquisition as if Melrose Acquisitionco had acquired 99.62 per cent of Elster Shares and/or Elster ADSs on 30 June 2012. As indicated above, the unaudited pro forma statement of the net assets has been prepared for illustrative purposes only and,

because of its nature, the pro forma statement addresses a hypothetical situation and does not, therefore, represent the Old Melrose Group's actual financial position or results following the Acquisition.

		Adjustments
	Historical As reported	Historical			Acquisition of a
	Old Melrose Group Consolidated Net Assets as at	Elster Business Net Assets as at	Rights	Acquisition of 99.35% of Elster Shares/ Elster	further 0.27% of Elster Shares/ Elster	Elster Debt	Acquisition finance	Pro
	30/06/2012	30/06/2012	Issue	ADSs	ADSs	repayment	facilities	forma
	(notes 1 and 9) £ millions	(notes 2 and 9)	(note 3) £ millions £ millions £ millions	(notes 4, 5 (notes 5, 6 and 10)	and 10)	(note 7)	(note 8) £ millions £ millions £ millions £ millions
Non-current assets
Goodwill and other intangible assets .	879.0	674.6		983.5				2,537.1
Property, plant and equipment	208.3	125.7						334.0
Trade and other
receivables Deferred tax assets	0.6 49.2	44.8 18.7						45.4 67.9

Current assets	1,137.1	863.8	0.0	983.5	0.0	0.0	0.0	2,984.4
Inventories Trade and other	218.0	107.5						325.5
receivables Derivative financial	215.2	229.7						444.9
assets	1.6	0.6						2.2
Current tax asset Cash and cash	0.0	6.4						6.4
equivalents	116.7			71.1 1,170.5 (1,484.8)	(4.0)	(349.5)	667.8	187.8
	551.5			415.3 1,170.5 (1,484.8)	(4.0)	(349.5)	667.8	966.8
Total assets 1,688.6			1,279.1 1,170.5	(501.3)	(4.0)	(349.5)	667.8	3,951.2
Current liabilities Trade and other payables	273.8	262.0						535.8
Interest-bearing loans and
borrowings Current tax	0.0	3.2				(3.2)		0.0
liabilities Derivative financial	27.1	14.5						41.6
liabilities	8.4	0.1						8.5
Provisions	45.7	13.3						59.0
	355.0	293.1	0.0	0.0	0.0	(3.2)	0.0	644.9
Net current assets .	196.5			122.2 1,170.5 (1,484.8)	(4.0)	(346.3)	667.8	321.9
Non-current liabilities
Interest-bearing loans and borrowings	423.2	346.3				(346.3)	667.8	1,091.0
Trade and other payables	1.6	4.6						6.2
Non-current tax liabilities	0.0	9.7						9.7
Deferred tax liabilities	95.6	39.5						135.1
Retirement benefit obligations	131.4	101.3						232.7
Derivative financial liabilities. .	2.5	—						2.5
Provisions	63.3	0.6						63.9
	717.6	502.0	0.0	0.0	0.0	(346.3)	667.8	1,541.1
Total liabilities 1,072.6		795.1	0.0	0.0	0.0	(349.5)	667.8	2,186.0
Net assets	616.0		484.0 1,170.5	(501.3)	(4.0)	0.0	0.0	1,765.2

(1) The consolidated net assets of the Old Melrose Group have been extracted without material adjustment, from the published consolidated unaudited financial statements of the Old Melrose Group for the six months ended 30 June 2012 which were prepared in accordance with IFRS.

(2) The net assets of Elster are extracted from Elster's 2012 unaudited second quarter results ended 30 June 2012 and restated under the Old Melrose Group's accounting policies and are set out in the following table.

(3) Adjustments reflect funds raised from the Rights Issue of £1,170.5 million (gross proceeds of £1,199.1 million less expenses of £28.6 million).

(4) The adjustment of £1,484.8 million to cash represents gross cash consideration of £1,464.4 million (\$2,299.1 million based on the exchange rate of 1.57 USD/1GBP at 30 June 2012) based on consideration per Elster ADS of \$20.50 (\$82 per Elster Share) for 99.35 per cent. of the Elster ADSs and Elster Shares, plus estimated acquisition expenses of £20.4 million. IFRS 3 (revised) requires that acquisition expenses are written off and therefore the amount of goodwill recognised has been calculated as the difference between gross cash consideration of £1,464.4 million plus the 0.65 per cent. non-controlling interest of £3.1 million and the net assets acquired of £484.0 million.

The acquisition accounting adjustments do not reflect any fair value adjustments which may ultimately be required since these remain unknown as at the date of this document. In addition, the excess of consideration over the net book value of the Elster Business's net assets has not yet been allocated between goodwill and other identifiable intangible assets.

(5) The Old Melrose Prospectus reflected an assumption of 100 per cent. acquisition of Elster ADSs and Elster Shares. This pro forma financial information has been updated to reflect the actual Elster Shares acquired on 23 August 2012 (99.35 per cent) and 28 August 2012 (a further 0.27 per cent).
(6) The adjustment of £4.0 million to cash represents cash consideration of £4.0 million (\$6.2 million based on the exchange rate of 1.57 USD/1GBP at 30 June 2012) based on consideration per ADS of \$20.50 (\$82 per Elster Share), for 0.27 per cent. of the Elster ADSs and Elster Shares. In accordance with IFRS, no goodwill is recognised on subsequent purchase of non-controlling interests with the balance taken to reserves.
(7) Adjustments reflect repayment of existing Elster bank facilities as drawn down on 30 June 2012.
(8) Adjustments reflect the drawdown of a portion of the facilities available under the Facilities Agreement inclusive of banking fees.
(9) No adjustment has been made to reflect the trading results of the Old Melrose Group or the Elster Business since 30 June 2012.
(10) Adjustments do not reflect any acquisitions of Elster Shares and/or Elster ADSs outside of the Tender Offer.

	Historical	IFRS accounting policy adjustments
	As reported Elster Business Consolidated Net Assets as at 30/06/2012	Research and develop- ment	Balance sheet reclassi- fications	Elster IFRS	Elster Business Business IFRS	The Old Melrose Group's IFRS classification
	(note 1) \$ millions— US GAAP	(note 2) \$ millions	(note 3) \$ millions		(note 4) \$ millions £ millions
Non-current assets Goodwill	904.3			904.3		576.0 Goodwill and other intangible assets
Other intangible assets	154.8			154.8		98.6 Goodwill and other intangible assets
Property, plant and equipment.	197.3			197.3		125.7 Property, plant and equipment
Other assets	54.2	32.4	(16.3)	70.3		44.8 Trade and other receivables—non current
Deferred tax assets	12.4		16.9	29.3		18.7 Deferred tax assets
Current assets	1,323.0	32.4	0.6	1,356.0	863.8
Inventories	168.8			168.8		107.5 Inventories
Accounts receivable	289.7			289.7		184.5 Trade and other receivables—current
Receivable from related parties .	7.6			7.6		4.8 Trade and other
Prepaid expenses	11.7			11.7		receivables—current 7.5 Trade and other receivables—current
Other current assets	52.6		(0.9)	51.7		32.9 Trade and other receivables—current
Derivative financial assets .			0.9	0.9		0.6 Derivative financial assets
Income tax refunds	10.0			10.0		6.4 Current tax assets
Deferred tax assets	16.9		(16.9)	0.0	0.0
Cash and cash equivalents	111.7			111.7		71.1 Cash and cash equivalents
	669.0	0.0	(16.9)	652.1	415.3
Total assets 1,992.0		32.4	(16.3)		2,008.1 1,279.1

	IFRS accounting policy Historical adjustments
	As reported Elster Business Consolidated Net Assets as at 30/06/2012	Research and develop- ment	Balance sheet reclassi- fications	Elster Business Business IFRS	Elster IFRS	The Old Melrose Group's IFRS classification
	(note 1) \$ millions— US GAAP	(note 2) \$ millions	(note 3) \$ millions	\$ millions £ millions	(note 4)
Current liabilities Accounts payable	207.3			207.3		132.0 Trade and other
Warranties	30.2			30.2		payables 19.2 Trade and other payables
Payroll, bonuses and related accruals	57.8			57.8		36.8 Trade and other payables
Other current liabilities	130.8		(21.0)	109.8		69.9 Trade and other
Deferred revenue	6.5			6.5		payables 4.1 Trade and other
Short term debt	5.0			5.0		payables 3.2 Interest bearing loans and
Income tax payable	22.8			22.8		borrowings 14.5 Current tax liabilities
Pension and other employee benefits Deferred tax liabilities	13.0 6.4		(13.0) (6.4)	0.0 0.0	0.0 0.0
Derivative financial liabilities			0.1	0.1		0.1 Derivative financial
Provisions			20.9	20.9		liabilities 13.3 Provisions
	479.8	0.0	(19.4)	460.4	293.1
Net current assets . .	189.2	0.0	2.5	191.7	122.2
Non-current liabilities Long term debt	560.0		(16.3)	543.7		346.3 Interest bearing loans and borrowings
Payroll, bonuses and related accruals	1.4			1.4		0.9 Trade and other
Warranties	4.9			4.9		payables 3.1 Trade and other payables
Other non current liabilities	1.9		(1.0)	0.9		0.6 Trade and other
Income taxes payable .	15.3			15.3		payables 9.7 Non current tax
Deferred tax liabilities	46.3	9.3	6.4	62.0		liabilities 39.5 Deferred tax liabilities
Pension and other employee benefits	146.0		13.0	159.0		101.3 Retirement benefit obligations
Provisions			1.0	1.0		0.6 Provisions
	775.8	9.3	3.1	788.2	502.0
Total liabilities	1,255.6	9.3	(16.3)	1,248.6	795.1
Net assets	736.4	23.1	0.0	759.5	484.0

(1) The balance sheet of Elster as at 30 June 2012 has been extracted, without material adjustment, from Elster's 2012 unaudited second quarter results Form 6-K prepared in accordance with US GAAP included in its Form 6-K furnished with the United States Securities and Exchange Commission.

(2) The US GAAP to IFRS adjustment in respect of the treatment of research and development expenditure and taxation are explained in Part VII (Historical Financial Information Relating to Elster) of the Old Melrose Prospectus.

		Under US GAAP these are recognised by Elster as an asset whereas under IFRS these deferred fees are offset against loans and other borrowings. In addition, certain balances classified by Elster as ''other current liabilities'', ''other non current liabilities'' and ''other current assets'' would be classified as ''provisions'' or ''derivative financial instruments'' under the Old Melrose Group's accounting policies. \$20.9 million of current liabilities and \$1.0 million of non-current liabilities balances have therefore been reclassified to provisions and \$0.1 million of current liabilities and \$0.9 million of current assets have been reclassified as derivative financial instruments. (4) Converted at exchange rate on 30 June 2012 of 1.57 USD/1GBP.
B.9	Profit forecast or estimate	Not applicable. No profit forecast or estimate is included in this Prospectus.
B.10	Nature of any qualifications in audit report on the historical financial information	Not applicable. No qualifications are included in any audit report on the historical financial information included in this Prospectus.
B.11	Explanation in respect of insufficient working capital	Not applicable. The Company is of the opinion that, taking into account the bank facilities available to it, the Melrose Group has sufficient working capital for its present requirements, that is, for at least the 12 months following the date of publication of this Prospectus.

Section C—SECURITIES
Element	Disclosure Requirement	Disclosure
C.1	Type and class of securities being admitted to trading, including the security identification number	New Melrose Ordinary Shares. The ISIN number of the New Melrose Ordinary Shares will be GB00B8L59D51. There will be no such application for any other class of shares of New Melrose to be admitted to listing or trading on any exchange.
C.2	Currency of the securities in issue	The New Melrose Ordinary Shares will be in pound sterling.
C.3	Number of shares in issue and par value	The following table sets out the issued share capital of New Melrose as at the date of this document:
		Class	£	Number	Nominal Value
		Subscriber Shares	2	2	£1
		Redeemable Preference Shares	50,000	50,000	£1
		No ordinary shares are issued and not fully paid.
C.4	Rights of securities	The New Melrose Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with each other and will rank in full for all dividends and other distributions thereafter declared, made or paid in respect of the New Melrose Ordinary Shares.
C.5	Restrictions on free transferability of the securities	There are no restrictions on the free transferability of the New Melrose Ordinary Shares set out in the constitutional
		documents of the Company. However, the Proposals relating New Melrose Ordinary Shares to persons located or resident in, or who are citizens of, or who have a registered address in countries other than the United Kingdom, may be affected by the law or regulatory requirements of the relevant jurisdiction, which may include restrictions on the free transferability of such New Ordinary Shares.

C.6	Admission to trading on regulated market	Application will be made to the UKLA for all of the New Melrose Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for all of the New Melrose Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.
C.7	Dividend policy	Old Melrose paid a final dividend of 4.8 pence(1) per Old Melrose Ordinary Share for the financial year ended 31 December 2011 (2010: 4.0 pence(1)). Old Melrose will pay an interim dividend of 2.6 pence per Old Melrose Ordinary Share (2011: 2.6 pence(1)) for the financial year ended 31 December 2012. The interim dividend will be payable on the enlarged share capital of Old Melrose following the 2012 Rights Issue completed on 1 August 2012.
		Ordinary Share for	The table below shows the amount of dividend per Old Melrose each of the financial years ended 31 December 2011, 2010 and 2009.
			2011	2010	2009
		Dividend per Old Melrose Ordinary
		Share	7.4 pence(1)	6.3 pence(1)	4.4 pence(1)
		(1) Adjusted for Old Melrose's ordinary share capital to include the effects of the 2012 Rights Issue.

Section D—RISKS
Element	Disclosure Requirement	Disclosure
D.1	Key risks that are specific and individual to the	• The Melrose Group is dependent on its directors and on a responsive workforce
	Melrose Group and the industries in which it operates	• The Melrose Group will be subject to the risk of major operational problems and its future operating results will depend on its ability to develop and manufacture products in a cost effective manner
		• Potential liability for defective products may affect the financial condition and business of the Melrose Group
		• The continued weakness of new construction markets poses a substantial risk to the business of the Melrose Group and if the Melrose Group is not successful in adapting to conditions in the markets in which it operates, it may suffer adverse effects
		• The utility industry worldwide is often subject to long budgeting, purchasing and regulatory review processes that can take several years to complete and can result in unpredictable capital investment cycles
		• The Melrose Group's success will be dependent upon its ability to integrate the Elster businesses; there will be numerous challenges associated with the integration
D.3	Key risks related to the ordinary shares	• Confirmation of the Scheme and the New Melrose Reduction of Capital is in each case within the discretion of the Court
		• The value of an investment in New Melrose may go down as well as up
		• Holders of New Melrose Ordinary Shares outside the United Kingdom may not be able to participate in future equity offerings by New Melrose

Section E—OFFER
Element	Disclosure Requirement	Disclosure
E.1	Total net proceeds and estimate of total expenses of the issue/offer, including estimated expenses charged to investors	Not applicable. This document does not constitute an offer or invitation to any person to subscribe for or purchase any shares in New Melrose. It has been prepared in connection with the application to listing on the premium listing segment of the Official List and trading on the London Stock Exchange of up to 1,266,627,036 New Melrose Ordinary Shares to be issued in connection with the Proposals. New Melrose will not receive any proceeds as a result of the Proposals.
E.2a	Reasons for the offer, use of proceeds and estimated net amount of proceeds	Not applicable. This document does not constitute an offer or invitation to any person to subscribe for or purchase any shares in New Melrose. New Melrose will not receive any proceeds as a result of the Proposals.
		Old Melrose intends to implement a corporate reorganisation in order to provide greater flexibility within its capital structure and to enable it to continue to efficiently return the proceeds of future disposals to Shareholders. It is proposed that a new holding company should be introduced for the Melrose Group. It is intended that this new corporate structure will be implemented by means of a scheme of arrangement under Part 26 of the Companies Act 2006 and that a subsequent reduction of capital of New Melrose will be used to create distributable reserves. The Proposals will not affect the commercial operations of the Melrose Group.
E.3	Terms and conditions of the offer	Not applicable. This document does not constitute an offer or invitation to any person to subscribe for or purchase any shares in New Melrose.
		Shareholders will not have to pay anything for the New Melrose Ordinary Shares allotted to them.
E.4	Interests material to the issue/offer, including	Not applicable. There is no interest, including any conflicting interest, that is material to the issue/offer.
E.5	conflicting interests Name of person offering to sell the securities	Not applicable. There is no security being sold and no lock up arrangements in place in respect of the Proposals.
	Lock-up agreement details including the parties involved and indication of the period of the lock-up
E.6	Amount and percentage of immediate dilution resulting from the offer	Not applicable. There will be no dilution resulting from the Proposals.
E.7	Estimated expenses charged to the investor by the company	Not applicable. No expenses will be charged to the investor by the Company in respect of the Proposals.

RISK FACTORS

A number of factors affect the operating results, financial condition and prospects of New Melrose and the Melrose Group. This section describes the risk factors which are considered by the Directors to be material in relation to New Melrose and the Melrose Group. However, these should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. Additional risks and uncertainties that are not presently known to the Directors, or which they currently deem immaterial, may also have an adverse effect on New Melrose or the Melrose Group's operating results, financial condition and prospects. Because the Elster Business represents a significant proportion of the Melrose Group (44 per cent. of the pro forma net assets preadjustment as set out in Part VI (Unaudited Pro Forma Information on the Melrose Group)), certain risks relating to the Elster Business are material to the Melrose Group. The information given is as of the date of this document and, except as required by the FSA, the London Stock Exchange, the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules or any other applicable law, will not be updated. Any forwardlooking statements are made subject to the reservations specified under ''Forward-Looking Statements'' in the preamble to this document.

An investment in New Melrose Ordinary Shares is subject to a number of risks. Shareholders should carefully consider all the information set out in this document, in particular the risks set out below. You should consider carefully the risks and uncertainties described below, together with all other information contained in this document and the information incorporated by reference herein.

PART A: Risks relating to the Melrose Group

1. A significant slow down in certain industries could have a material adverse effect on the Melrose Group's business or financial condition

The Melrose Group operates across a number of industries. A significant slow down in the metering, energy, mining, oil and gas, exploration, US retail and housing, material handling, industrial and/or consumer markets could lead to a decline in the volume or demand for the Melrose Group's products and services and could have a material adverse effect on the Melrose Group's business, financial condition or results of operation. In addition, the cyclical nature of those industries could affect the financial performance of the Melrose Group from time to time.

The Melrose Group sells and distributes a significant portion of its manual-read meters and Smart Offerings for use in new construction markets and to utilities and utility contractors, and its level of sales activity in these markets depends to a significant extent on general economic conditions. The Melrose Group defines its Smart Offerings as automated meter reading, or AMR, meters, advanced metering infrastructure, or AMI, meters, and other meters that are equipped with communications capabilities, communications networks and related software solutions, or Smart Grid Solutions, together with individual products, components and services for use in the Smart Grid. The Melrose Group defines smart meters as meters, which are AMR or AMI enabled, are equipped with communication capabilities and may be used as components in the Smart Grid. The Smart Grid is commonly used to refer to any gas, electricity or water network that allows utilities to measure and control production, transmission and distribution more efficiently through the use of communications technology.

Many utilities have announced plans or intentions to replace older meters with smart meters enabled for AMR or with meters enabled for AMI on a standalone basis or as components of Smart Grid solutions. However, some utilities have delayed their investments due to economic uncertainty, a reduction in the consumption of energy resources as a result of the economic downturn, difficulty in obtaining financing, limitations on their own or public financial resources or for other reasons. Utilities that are owned by municipalities or other public authorities may also face budgetary restrictions and funding constraints. Such uncertainties and funding constraints may lead some utilities to alter their budgeting and procurement priorities to focus on capital expenditures in areas other than metering, which may result in delays in the installation of meters and Smart Grid solutions.

2. Owing to the geographical diversity of its operations, the Melrose Group is subject to the risk of exchange rate fluctuations

The Melrose Group's financial condition and results of operations are reported in pound sterling but a large proportion of its revenues are denominated in currencies other than pound sterling, including the Euro and the US dollar. In particular, movements between the US dollar and pound sterling and the Euro and pound sterling could have a material adverse effect on the Melrose Group's results on a translational basis.

The most significant exchange risk that the Melrose Group takes arises when a division that is predominantly based in a foreign currency is sold. The proceeds for those divisions may be received in a foreign currency and therefore an exchange rate risk arises if these proceeds are converted back to pound sterling, for instance to pay a dividend to shareholders. This can lead to fluctuations in the Melrose Group's consolidated financial statements upon translation of into pound sterling. There are currently no advanced plans to make any material disposals.

Adverse currency exchange rate movements may hinder the Melrose Group's ability to procure important materials and services from vendors and suppliers, may affect the value of its level of indebtedness, and may have a significant adverse effect on its revenues and overall financial results.

In the past, the Melrose Group has experienced gains and losses from exchange rate fluctuations, including foreign exchange gains and losses from transaction risks associated with assets and liabilities denominated in foreign currencies, including inter-company financings. Although it has introduced measures to improve its ability to respond to currency exchange rate risks, these measures may prove ineffective, and recent exchange rate volatility, particularly between currency pairs that have traditionally been rather stable, may continue at high levels. As a result, the Melrose Group may continue to suffer exchange rate losses, which could cause operating results to fluctuate significantly and could have a material adverse effect on the Melrose Group's business and financial condition.

3. The Melrose Group is dependent on its directors and on certain of its businesses' management and on a responsive workforce

The stated strategy of the Melrose Group of ''buy, improve, sell'' depends on the expertise of the executive directors, each of whom significantly contributes to the Melrose Group's ability to identify, execute and manage acquisition and disposal opportunities. The retention of their services cannot be guaranteed. The loss of them could have an adverse effect on the ability Melrose Group to implement its strategy. In addition, illness affecting them at critical stages in development may have a detrimental effect on the strategy and growth of the Melrose Group.

The Melrose Group is also dependent on the remainder of its workforce to respond effectively to customer requests. Industrial actions, which may arise as the Board progresses with the implementation of the Elster Business's reinvestment programme (discussed in more detail at Risk Factor 38 of Part A of this section), could negatively impact its ability to respond effectively, especially for larger, more complex rollouts that encompass a broad range of its products and services. Any such industrial actions, along with any inability to attract and retain key personnel could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

4. The Melrose Group is exposed to risks in relation to compliance with anti-corruption laws and regulations

Doing business on a worldwide basis requires the Melrose Group to comply with the laws and regulations of various jurisdictions. In particular, the Melrose Group's international operations are subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977 (the ''FCPA'') and the United Kingdom Bribery Act of 2010 (the ''Bribery Act'') (the FCPA and the Bribery Act together, the ''Anti-Corruption Laws''). The FCPA prohibits providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. The Melrose Group may, as part of its business, deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA. The provisions of the Bribery Act extend beyond bribery of foreign public officials and are more onerous than the FCPA in a number of other respects, including jurisdiction, non-exemption of facilitation payments and penalties.

As a result of doing business in foreign countries, the Melrose Group is exposed to a risk of violating anti-corruption laws and sanctions regulations applicable in those countries where it, its partners or agents operate. Some of the international locations in which the Melrose Group operates lack a developed legal system and have high levels of corruption. Continued expansion and worldwide operations by the Melrose Group, including in developing countries, development of joint venture relationships worldwide and the employment by it of local agents in the countries in which it operates increases the risk of violations of Anti-Corruption Laws, OFAC, or similar laws. Violations of anti-corruption laws and sanctions regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts) and revocations or restrictions of licenses, as well as criminal fines and imprisonment. In addition, any such violations could have a significant impact on the Melrose Group's reputation and consequently on its ability to win future business and could have material adverse consequences on its reputation, business, financial condition or results of operations.

While the Melrose Group has a strong culture of compliance and has adequate systems of control, it seeks to continuously improve its systems of internal controls, to remedy any weaknesses that are identified through appropriate corrective action depending on the circumstances, including additional training, improvement of internal controls and oversight, and deployment of additional resources and to take appropriate action in case of any breach of the Melrose Group's rules and procedures which might include disciplinary measures, suspensions of employees and ultimately termination of such employees. There can be no assurance, however, that policies and procedures of the Melrose Group will be followed at all times or will effectively detect and prevent violations of the applicable laws by one or more of its employees, consultants, agents or partners and, as a result, it could be subject to penalties and material adverse consequences on its business, financial condition or results of operations if it failed to prevent any such violations.

5. The Melrose Group is exposed to risks in relation to compliance with economic sanction programmes

The Melrose Group's businesses are subject to economic sanction programmes, including those administered by the UN, EU and OFAC and regulations set forth under the Comprehensive Iran Accountability Divestment Act (collectively, ''Sanctions''). The Council of the EU has adopted restrictions on trade with entities associated with certain jurisdictions, including Council Regulation (EU) No. 961/2010 of October 25, 2010 on restrictive measures against Iran, most recently updated on January 23, 2012, and Council Decision 2010/413/CFSP concerning restrictive measures against Iran, most recently amended by Council Decision 2012/35/CFSP of January 23, 2012. These sanctions regulations, which vary depending on the jurisdiction in question, apply to EU nationals worldwide, including all EU companies. While these sanctions regulations do not apply to subsidiaries of EU companies that are organised under the laws of countries outside the EU, EU parent companies are nonetheless expected to encourage their subsidiaries to follow these regulations. Sanctions programmes restrict the Melrose Group's business dealings with certain sanctioned countries. The Melrose Group has conducted, and continues to conduct, business with entities located in jurisdictions subject to EU sanctions regulations. If the Melrose Group is found to have violated any of these restrictions, it could be subject to fines, which could have a material adverse effect on the Melrose Group's business and reputation.

The U.S. Department of the Treasury's Office of Foreign Assets Control, or OFAC, and the Office of Export Enforcement of the U.S. Department of Commerce, or OEE, administer certain laws and regulations, or U.S. Economic Sanctions Laws, that impose restrictions upon U.S. companies and persons, or U.S. persons, and, in some contexts, foreign entities and persons, with respect to activities or transactions with certain countries, governments, entities and individuals that are the subject of U.S. Economic Sanctions Laws, or Sanctions targets. U.S. persons are also generally prohibited from facilitating such activities or transactions. Most recently the President of the United States signed Executive Order 13590 (effective November 21, 2011). This order further expands the range of conduct that may be sanctioned by U.S. authorities and, among other things, targets exports that directly contribute to Iran's ability to develop domestic petroleum resources.

The Melrose Group has policies and procedures designed to assist its compliance with applicable economic sanction programmes including training of its employees to comply with such programmes. In October 2007, the Elster Business implemented enhancements to its compliance and training programmes and procedures designed to ensure that, across all its operations globally, no sales to Sanctions targets would occur of products containing more than a de minimis level of U.S. content (or any level of U.S. content in circumstances where no U.S. content is permissible) and that U.S. persons among its employees would have no involvement in business with Sanctions targets. Despite the compliance procedures in place, the enhancements and Melrose Group's other efforts designed to ensure compliance with applicable sanctions laws and embargoes, it remains possible that its products could be sold or transferred to countries, governments, entities or persons targeted by EU or U.S. sanctions in a manner that violates such sanctions. For example, despite the procedures in place, one of the Melrose Group's businesses may miscalculate the level of U.S.-origin content in a product or transfer a U.S.-origin product to a customer that it should have known was subject to U.S. or EU sanctions. Should such sales or transfers occur, the Melrose Group would bear the costs of any necessary investigative and remedial measures that may be necessary, and could be subject to fines or criminal penalties in respect of such sales or transfers. If any such violations were to occur this may have adverse consequences for the reputation, business and financial condition of the Melrose Group.

In addition to the sanctions administered by OFAC and OEE described above, the U.S. government may impose (and has in the past imposed from time to time) restrictions and sanctions against other countries, including ones in which the Melrose Group does business. In addition, the U.S. government may impose new or expanded restrictions and sanctions against existing Sanctions targets. Any such measures targeting countries in which the Melrose Group undertakes business could have a material adverse effect on business and reputation.

6. The Melrose Group is subject to pricing pressures from customers

The Melrose Group faces pricing pressures in certain business segments from its respective larger customers. Because of their purchasing size, the Melrose Group's larger customers can influence market participants to compete on price terms. If the Melrose Group is not able to offset pricing reductions resulting from these pressures by improved operating efficiencies and reduced expenditures, those price reductions may have an adverse impact on their respective financial results or results of operations.

In an attempt to increase efficiency, some of its utility customers have informed the Melrose Group that they are seeking to reduce the number of vendors from whom they purchase products and services, particularly as vendors, including the Melrose Group, increase the breadth of the products and solutions they offer. If the Melrose Group is not selected as a preferred provider in a significant number of cases, it may lose access to certain sections of the markets in which it competes or wishes to compete. Failure to maintain access to important sections of the market could have a material adverse effect on results of operations, business and financial condition. Even if the Melrose Group is selected as a preferred provider, the possibility exists that increased competition will have an impact on the agreements customers are willing to enter into. As a result, the terms and conditions of agreements regarding testing, contractual penalties, bonding, warranties, performance and indemnities may be substantially more restrictive, or carry a greater risk of liability, than the terms and conditions associated with the Melrose Group's standard products and services.

7. The industries in which the Melrose Group's businesses operate are highly competitive

The industries in which the Melrose Group's businesses operate are highly competitive. Certain of the Melrose Group's businesses make products that are subject to changing technologies. The costs related to the research and development necessary to develop new technologies are significant and any reduction of the Melrose Group's research and development budget could adversely impact its competitiveness. Further, the Melrose Group may face significant competition from companies entering these industries that have greater capital resources or from companies that may develop a technological advantage over the Melrose Group either through superior production processes and/or a superior end product.

The Melrose Group's ability to compete effectively will require continuous efforts in sales and marketing, new product development and innovation, close customer relationships, understanding of customer needs and rigorous focus on cost and accountability. To ensure the products and services of the Melrose Group remain competitive, it may be required to reduce its prices for a temporary or long term period as a result of price reductions or promotional activities undertaken by its competitors. If the Melrose Group fails to make these changes its results may be adversely affected.

The Melrose Group faces varying levels of price erosion in the metering markets that it serves due to a variety of factors, including existing competitors lowering their prices, competition from manufacturers in low-cost countries and new entrants using off-the-shelf products or other low-priced strategies to gain market share. In addition, the Melrose Group may have a competitive cost disadvantage with its competitors who are not subject to the same legal and compliance framework as Old Melrose, the parent company of the Elster Business, which is a listed public company. During 2011 (prior to its acquisition by the Melrose Group), the Elster Business saw intense price competition, in the water segment in the Americas and some European markets, leading to price erosion for many of its products. In addition, there is a risk that low-cost providers will enter, or form alliances or cooperative relationships with the Melrose Group's competitors, thereby contributing to further price erosion in the market for manual-read meter and Smart Grid solutions. The Melrose Group may be unable to reorganise its operations to make them more efficient or reduce the costs of its supplies sufficiently to maintain margins on its sales in the face of intense competition. Some of the Melrose Group's products and services may become commoditised and the Melrose Group may have to adjust the prices of some of its products to stay competitive.

8. The Melrose Group may be unable to develop or commercialise technological advances and introduce new products in a manner and to an extent sufficient for it to remain competitive within the metering industry

In addition to enhancing its current metering product and solutions portfolio, the Melrose Group continually strives to offer new products and design new technologies and software solutions. This requires continued investment in product and technology development to help it maintain or increase its current market position and to allow it to respond to changing customer needs. However, the Melrose Group may be unable to develop or commercialise technological advances and introduce new products in a manner and to an extent sufficient for it to remain competitive within its industry. For example, the Melrose Group may, among other things, lack capacity to invest the required level of human and financial resources necessary to develop these products, commit errors or misjudgments in its planning in these areas or experience difficulties in implementing rollouts. In addition, the Melrose Group may not be able to meet its product development and delivery schedules as a consequence of unforeseen problems during the design or development phases of new product and technology introductions. Some of the Melrose Group's new products also require certification or regulatory approval and may not be approved in a timely manner or at all. Delays of this type, or failures to obtain regulatory approval, could negatively affect the Melrose Group's reputation and relationship with its customers and lead to delayed or reduced revenues for its products.

If the Melrose Group fails to enhance existing products, develop new products or keep pace with developing technology, growth opportunities could be lost or it may lose existing metering customers. This is especially the case for its Smart Offerings, which have experienced a rapid pace of development. In addition, the Melrose Group has made commitments within some existing contracts with customers, to develop and deliver new products. If the Melrose Group is unable to meet these commitments, it could be subject to contractual penalties or lose the orders altogether. Delays in product development may also lead to a need for greater investments in research, design and development. If the Melrose Group encounters increased costs associated with new product development and product enhancements for which it is unable to realise sufficient revenues, the costs of the related new product development may not be recoverable. Either increased costs of or decreased revenues from newly developed products, or both, could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

9. Behaviour of the competitors of the Melrose Group may adversely affect its business

Any consolidation among the competitors of the Melrose Group's businesses could enhance their product offerings and financial resources, further strengthening their competitive position and potentially reducing market share of the relevant Melrose Group business. As a result, the Melrose Group may face declining sales volumes and prices for its products and/or may be compelled to extend warranty periods or provide other gestures of goodwill to its customers.

Some of the Melrose Group's current or future metering competitors have or may have substantially greater financial, marketing, technical or manufacturing resources, and, in some cases, greater name recognition, market penetration and experience than the Melrose Group does which may also be the case with respect to Smart Grid solutions. These competitors may also be able to devote greater resources to the development, promotion and sale of their products and services.

10. The Melrose Group will be subject to the risk of major operational problems

The Melrose Group's sales will be dependent on the continued operation of its various manufacturing facilities and those of third parties that supply it, its warehousing and logistics infrastructure and its information technology systems. In particular, because the Brush sites at Loughborough, UK and Plzen, Czech Republic and the Elster sites in Raleigh, U.S., Mainz, Germany and Osnabruck, Germany represent ¨ a material proportion of the Melrose Group's turnover, an operational failure at any of these sites may adversely affect the Melrose Group's business or financial condition. Operational risks include equipment failure, failure to comply with applicable regulations and standards, raw material supply disruptions, labour force shortages or work stoppages, events impeding or increasing the cost of transporting the Melrose Group's products, fires and natural disasters. There is no guarantee that the Melrose Group's insurance policies and disaster recovery plans will be sufficiently adequate to protect the Melrose Group against loss

if any of the aforementioned occurs and the occurrence of major operational problems resulting from these or other events may have an adverse effect on the results and financial condition of the Melrose Group. Operational risks will be present in the Melrose Group's business. These risks include the risk of failed internal and external processes and systems (including information technology systems), human error and external events such as changes in credit terms offered by suppliers. Such events could have an impact on the results of operations of the Melrose Group during the affected period. The Melrose Group will actively assess these risks through ongoing processes embedded in its business which identify, evaluate and manage the risks faced by it.

11. Future capital requirements

The Melrose Group's stated strategy is to buy, improve and sell companies and the Directors expect that the Melrose Group will make further acquisitions which may be material in the context of the Melrose Group. While there are currently no plans to make any material acquisitions, any such acquisitions in the future may require funding by debt and equity finance. Any future equity financing may dilute Shareholders' shareholdings in the Melrose Group.

12. Any shortfall in the Melrose Group's pension schemes may require additional funding

The Melrose Group operates various pension schemes around the world with a net pension liability at 30 June 2012 of £131.4 million. The main pension scheme in the UK is the FKI UK Pension Plan, which is a defined benefit pension scheme. The FKI UK Pension Plan was closed to new members and on 28 February 2011 it closed to current members' future service. In addition to the FKI UK Pension Plan, other pension schemes of significant size that the Melrose Group operates are the McKechnie UK Pension Plan and a US defined benefit plan for FKI. The Melrose Group monitors its pension strategy on an ongoing basis. A decline in pension asset values, different actuarial assumptions or the application of purchase accounting may result in an increase in pension liability. Decline in interest rates or the market value of the securities held by the plans, or certain other changes, could adversely affect the status of the Melrose Group's plans and affect the level and timing of required contributions. Any permanent shortfall in the Melrose Group retirement pension benefit scheme funding obligations would require additional cash funding. However, it is expected that any additional cash contributions required would be structured over a sensible period of time, such that there is no material impact on cash contributions in the next twelve months.

13. The Melrose Group is subject to risks from legal proceedings and arbitrations

Companies in the Melrose Group are involved in legal and arbitration proceedings including regulatory action and employee litigation. Such proceedings could involve substantial claims for damages relating to, for example, product liability, breach of warranty obligations, contractual penalties for late delivery or disputes over termination of contracts or could involve the payment of fines or other payments. For example, the Bridon litigation (set out in more detail at paragraph 10 of Part IX (Additional Information) of this document) which recently settled. Certain Melrose Group companies are subject to anti-trust and competition laws in some of the markets in which they operate and may be subject to regulatory scrutiny and/or legal proceedings in these jurisdictions. The outcomes of legal proceedings, including regulatory actions, intellectual property disputes and employee lawsuits, are inherently unpredictable, and the Company cannot guarantee that Melrose Group companies will succeed in defending any current or future claims, that judgments will not be rendered against them with respect to any or all current or future proceedings or that reserves set aside or to be set aside and cover taken out or to be taken out under insurance policies will be adequate to cover any such judgments. The Melrose Group could be required to pay substantial damages, fines and related costs, or could incur a charge to its earnings if its reserves prove to be inadequate in respect of any adverse judgment. The realisation of any of these risks could have a material adverse effect on the business, financial condition and results of operations of the Melrose Group.

The nature of the metering industry, which includes large contracts entered into with public or publiclyregulated utilities in many jurisdictions, presents greater risks of non-compliance with some forms of regulation than is the case in many other industries. These risks are accentuated by the global nature of the Melrose Group's operations. The Melrose Group is exposed to the risk that its employees or agents could engage in anti-competitive behaviour or seek to influence the awarding of contracts in other impermissible ways. The Melrose Group maintains a compliance infrastructure including ''whistleblower'' hotlines, employee education and training programmes, and due diligence on agents. Under this compliance infrastructure, the Melrose Group investigates cases of potentially non-compliant behaviour and, if necessary, takes specific steps to prevent such non-compliant conduct in the future. However, the Melrose Group's compliance infrastructure may be insufficient to deter all misconduct. Moreover, if it becomes aware of allegations of non-compliant conduct, the Melrose Group may have difficulty investigating such conduct and gathering evidence. If such cases were to arise, and misconduct was determined to have occurred, the Melrose Group could be subject to fines, blacklisting and to litigation, which could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

14. The Melrose Group's operations are subject to environmental, health and safety laws and regulations and non-compliance with such laws and regulations could result in substantial costs, fines, sanctions and claims

The Melrose Group operates global manufacturing, product handling and distribution facilities that are subject to a broad array of environmental laws and regulations relating to pollution, the health and safety of employees, protection of the public, protection of the environment and the storage and handling of hazardous substances and waste materials. These laws and regulations are becoming increasingly stringent. It is the policy of the Melrose Group to comply with all relevant laws and regulations. The Melrose Group actively manages these risks through regular compliance and performance improvement assessments and key performance indicators and the engagement of competent health, safety and environmental coordinators at each of its sites. However, violations of applicable laws and regulations, in particular provisions of environmental and health and safety laws, or changes in such laws and regulations (such as the imposition of more stringent standards for discharges into the environment), could result in temporary or permanent restrictions on the operations of the facilities of the Melrose Group, damages, fines, clean up costs, or other civil or criminal sanctions and/or increased costs of compliance (including capital expenditures), as well as damage to reputation. The realisation of any of these risks could have a material adverse effect on the business, financial condition and results of operations of the Melrose Group.

The Melrose Group faces inherent risks of environmental liability in its manufacturing activities. For example, the Ipsen Group furnace business which was formerly owned by the Elster Business (prior to the acquisition by the Melrose Group) has been subject to a number of claims relating to alleged asbestos exposure. Pursuant to the agreement under which it sold the Ipsen Group furnace business, the Elster Business is required to indemnify the purchaser against present or future asbestos claims notified to it by 15 August 2015, up to a maximum out-of-pocket amount for it of EUR 15 million. The agreement under which the Elster Business sold the Ipsen Group furnace business further provides that the amount of the indemnity be reduced by payments made to the purchaser under the Ipsen Group's current or pre-existing insurance policies. Claims exceeding the amount of EUR 15 million are only the subject of the indemnity if they are covered by an indemnity from the Elster Business's former owner, E.ON Ruhrgas AG. In addition, according to the due diligence conducted at the time of the disposition, Ipsen's current and pre-existing insurance coverage is in excess of the EUR 15 million amount. At the time of the disposition, 14 cases were open, and 188 new claims have been subsequently notified up to 28 September 2012. Of the total claims notified, 93 have been dismissed. Additionally, there are currently three asbestos cases (filed in 1999, 2002 and 2003 by individual plaintiffs) in which Elster American Meter Company has been named as an additional defendant. All three cases have been included in the New York County Asbestos Litigation, or NYCAL, programme and are currently classified as inactive. While on the inactive docket, all discovery in these matters has been stayed until further notice.

Furthermore, the Melrose Group's operations and properties are subject to U.S., European and other foreign, state and local environmental laws and regulations governing, among other things, the generation, storage, emission, discharge, transportation, treatment and disposal of hazardous materials and the clean-up of contaminated properties. Many of these environmental laws and regulations impose a form of strict joint and several liability on the current and former owners and operators of land for the presence of any hazardous waste materials on the land and require generators of waste to take remedial actions at off-site disposal locations when necessary. As such, certain parties, including the Melrose Group, may be found liable for such cleanup costs regardless of fault. For example, the U.S. Environmental Protection Agency (''EPA''), issued to one of the Melrose Group's subsidiaries in the US, Hauck Manufacturing Company, (''Hauck''), among many other parties, a notice of potential liability under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, (''CERCLA''), in respect of hazardous substance contamination at the Gowanus Canal Superfund Site in Brooklyn, New York. A Superfund site under CERCLA is a contaminated site targeted for high priority environmental cleanup by EPA. EPA alleges that one or two former Hauck manufacturing sites near the Gowanus Canal may have discharged hazardous substances into the local sewer system that may have led

into the canal. Although the EPA has yet to issue a final remedy and such remedy is not anticipated to be issued until the end of 2012, the total cost to remediate the Gowanus Canal is anticipated to be material. In addition to investigation and remediation costs, certain parties may be found liable for costs associated with assessing and restoring any natural resources damaged in connection with the release of hazardous materials, though due to the early stage of this investigation the quantum of the cost of such remedy, assessment and restoration (if applicable) is unquantifiable. In the ordinary course of its business, the Melrose Group has used and may continue to use metals such as mercury and cadmium, solvents and other materials on-site that create waste, which may expose it to liability under these regulations. Any failure to comply could result in the imposition of significant fines, suspension of production, alteration of product processes, cessation of operations or other actions detrimental to the Melrose Group's business.

The Melrose Group's European operations may become regulated under the EU Emissions Trading System, or ETS, which aims to reduce greenhouse gas emissions through the issuance to industrial installations of ''allowances'' to emit. The allowances may be traded among installations or in the open market, thereby creating an incentive for installations to reduce their emissions below their allowances inventory and sell the excess allowances. The ETS is anticipated to become progressively more stringent over time, including by reducing the number of allowances that will be allocated by regulatory authorities to industrial installations free of cost. A number of additional international and national measures to limit industrial greenhouse gas emissions, including the Kyoto Protocol and legislation in Australia and California, are in various phases of discussion or implementation, and legislation in other countries or regions is expected to follow. These measures may result in additional requirements for the Melrose Group to reduce its direct and indirect greenhouse gas emissions and/or additional costs for it to upgrade facilities or invest in emissions allowances.

These laws and regulations have complicated requirements, which are often changed or modified and could become stricter in the future. As such, the Melrose Group may incur increased costs associated with future environmental or climate change compliance, with remediation obligations or with litigation if claims are made with respect to damages resulting from its operations (including those arising under the indemnity agreement relating to the Elster Business's former Ipsen Group furnace business). These and any future costs associated with environmental or climate change issues currently unknown to the Melrose Group could have a material adverse effect on its results of operations, business and financial condition.

15. The Melrose Group is subject to a number of tax regimes

The Melrose Group operates in many countries and therefore is subject to different tax regulations. Changes in tax law could result in higher tax expense and payments. Furthermore, legislative changes could materially impact tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities. In addition, the uncertain tax environment in some regions could limit the Melrose Group's ability to enforce its rights. As a globally operating organisation, the Melrose Group conducts business in countries subject to complex tax rules, which may be interpreted in different ways. Future interpretations or developments of tax regimes may affect its tax liability, return on investments and business operations. In particular, the Elster Business is regularly examined by tax authorities in various jurisdictions and the tax treatment of certain of its transactions is complex and in some cases may be subject to uncertainties and differing interpretations. If the relevant tax authorities disagree with the positions the Elster Business takes on these tax matters, it could be required to pay additional taxes in connection with these transactions, the quantum of which cannot be predicted at present.

Some of the Melrose Group's subsidiaries obtained inter-company financing and record interest expense on such financing. While interest expense is generally deductible for tax purposes, the tax laws of Germany and several other countries in which the Melrose Group has operations disallow the deduction of interest expenses for tax purposes either in full or in part.

Of particular relevance for the Elster Business, and consequently the Melrose Group, in Germany, for fiscal years up to and including 2007, interest expenses on loans granted, secured or guaranteed by affiliated companies may not be deductible for tax purposes due to the application of the German thin capitalisation rules. Furthermore, in 2008 Germany adopted a limitation on the deductibility of interest expenses in excess of interest income, referred to as the ''interest barrier rules''. Subject to qualifications and exceptions contained in the interest barrier rules, German law limits the deductibility of interest expenses in excess of interest income to an amount equal to 30 per cent. of the taxpayer's tax basis EBITDA. Non-deductible interest expenses under the interest barrier rules may, subject to conditions, be carried forward to future tax years (at which time their deductibility continues to be limited by the interest barrier rules). Subsequent to the merger of its German subsidiary Elster Holdings GmbH, interest carry forwards of approximately \$27.7 million were forfeited. This did not impact its net income, as a valuation allowance was recorded against these carry forwards in the year 2009. Since 2010 the interest barrier rules apply at the level of Elster Group SE as it is the parent company of the Elster Business's fiscal unity in Germany. The interest carryforward of Elster Group SE amounted to approximately \$16.4 million as of 31 December 2011. Ordinarily, this would be just a deferral of tax deductions. However the interest carry forward, and certain other losses, may be forfeited on either the change of control arising on the Acquisition and/or the change of control resulting from the Scheme. To the extent the Melrose Group's interest expenses are forfeited, it will incur a reduction of its existing loss carryforwards and may pay higher taxes. This could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

16. The Melrose Group could be negatively impacted if it fails to adequately protect its intellectual property rights or if third parties claim it is in violation of their intellectual property rights

The success of the Melrose Group depends, in part, on its ability to protect current and future branded products and processes through securing, enforcing and defending its intellectual property rights for example within the FKI and Elster brands. The Melrose Group relies on a combination of trademarks, copyright, patents, utility models, designs, know-how, trade secrets and contractual restrictions to establish and protect proprietary rights in its products, processes and technical data. The Melrose Group's intellectual property is a valuable asset that helps to protect its investment in technology and software, and to supports its licensing efforts with third parties. There can be no assurance that these proprietary rights, rights in know-how and contractual provisions will be adequate to prevent the misappropriation, infringement or other unauthorised use of the intellectual property rights of the Melrose Group by third parties which could harm it. There can be no guarantees that patents will be granted with respect to patent applications for new products or processes. The Melrose Group depends in part on its ability to obtain and maintain ownership of and rights of use in the intellectual property related to its product and solution portfolio. Further, there is no guarantee that any patents, issued or pending, will provide the Melrose Group with any competitive advantage or will not be challenged by third parties.

Competitors or others may infringe the Melrose Group's intellectual property rights or successfully avoid them through alternative innovation. Moreover, patents covering technology substantially identical to that covered by intellectual property rights the Melrose Group owns have in the past been, and may in the future be, granted in various jurisdictions around the world, and the Melrose Group may not become immediately aware of them, which in turn, could inhibit its ability to challenge them.

To combat infringement or unauthorised use, as well as to protect existing patents from the effects of intervening ones, the Melrose Group may need to litigate, which can be expensive and time-consuming. The mere existence of patent disputes can cause us reputational harm among customers and market observers and participants, in particular due to a perception that the Melrose Group's ownership of its intellectual property may not be sufficiently secure. In addition, a court may decide in an infringement proceeding that an intellectual property right of the Melrose Group's is not valid or is unenforceable, or may refuse to enjoin the other party from using the technology or other intellectual property right at issue on the grounds that it is non-infringing or the legal requirements for an injunction have not been met.

Some of the countries in which the Melrose Group operates, such as China, offer less effective intellectual property protection than is available in Europe or the United States. In jurisdictions where effective intellectual property protection is unavailable or limited, the Melrose Group's intellectual property may be vulnerable to disclosure or misappropriation by employees, strategic partners, suppliers, customers and other persons. Patents may not be granted on the Melrose Group's currently pending or future applications or may not be of sufficient scope or strength to provide it with meaningful protection or commercial advantage. Policing unauthorised use of its intellectual property is difficult and expensive, and the Melrose Group may not be able, or may lack the resources, to prevent infringement of the Melrose Group's intellectual property, particularly in countries where the laws may not protect such rights as fully as do the laws of the United States.

There is no certainty that the Melrose Group does not and will not infringe third parties' intellectual property rights. The Melrose Group may be required to defend claims of patent infringement, infringement of third party proprietary rights or breach of confidence or to take action to protect its own proprietary rights. Such proceedings could be burdensome and costly and the Melrose Group may not prevail. Any claim against the Melrose Group, even if it is without merit, may be expensive and time consuming to defend, subject the Melrose Group to damages, cause it to cease making, using or selling certain products that incorporate the disputed intellectual property, require it to redesign its products, divert management time and attention and/or require it to enter into costly licensing royalty or licensing agreements, in each case which may have an adverse effect on its business, financial condition and results of operations. Any adverse or uncertain outcome of any dispute with respect to material patents or other material proprietary rights may adversely affect the competitive position of the Melrose Group or interrupt or adversely affect the ability of the Melrose Group to carry on its business.

The loss or unavailability, or threat of loss, of its intellectual property or the economic exploitation of it could have a material adverse effect on results of operations, business and financial condition. The cost of defending against or settling intellectual property claims can be material and the existence or threat of such claims can damage the Melrose Group's reputation and business.

17. The Melrose Group relies on its own IT systems and on IT systems provided by third parties

The Melrose Group relies on its own information technology, or IT, systems to manage its business data, communications, computing needs, production and supply chain effectively and efficiently. The Melrose Group's IT systems are used to conduct, among other things, order entry, order fulfilment, inventory replenishment, e-commerce and other business processes in the Elster Business. The Melrose Group also relies on the IT systems provided by third parties, including, in particular, for much of the Elster Business's Wide Area Network and other IT infrastructure.

The Melrose Group currently outsources, and in the future plans to continue to outsource, certain aspects of its technical and communication infrastructure to third parties. Should these systems not operate as intended or any third parties to whom the Melrose Group outsources some of its IT services fail to deliver as expected, its ability to transact business across its international company would be significantly impaired. In addition, the Melrose Group's IT systems and those it outsources are vulnerable to damage or interruption from circumstances beyond the Melrose Group's control, including fire, natural disasters, power loss, hacker attacks, computer systems failure and viruses. The failure of the Melrose Group's IT systems to perform as anticipated, could disrupt the Melrose Group's business and could result in decreased sales, increased overhead costs, excess inventory and product shortages, causing the Melrose Group's business and results of operations to suffer. In addition, unforeseen vulnerabilities in the Melrose Group's security systems and policies could result in potential data misuse, resulting in damage to the Melrose Group's reputation and an adverse effect on its business.

18. The Melrose Group businesses' success and sales are dependent on the strength of their brands and reputation and are subject to customers' perceptions of those businesses and their products

Products sold by the Melrose Group may have faults or defects or may not meet a customer's quality specification. Such faults, defects or failures to meet specification may negatively affect the market acceptance of the Melrose Group's products and their reputation and could subsequently lead to a loss of customers.

The Melrose Group's customers increasingly demand access to a broad range of products and technologies and evaluate their suppliers on the basis of a number of factors, including product quality, reliability and timeliness of delivery, accuracy, new product innovation, price competitiveness, technical expertise and development capability, product design capability, manufacturing expertise, operational flexibility, customer service and overall management and so the Melrose Group must continue to develop its expertise to design, manufacture and market its products successfully. The Melrose Group's success therefore depends, to a significant extent, on its development of new products and technologies and its ability to continue to meet its customers' changing requirements.

If the Melrose Group's businesses are unable to respond to changing consumer demand, those businesses' names and reputations may be impaired and customer demand for a particular category of product offering may decrease. In addition, the public image of the Melrose Group's businesses' existing and future product offering may become tarnished and create negative publicity for that business group and damage that business's brands.

Each of these factors could have a material adverse effect on the results of operations, business and financial condition of the Melrose Group.

19. Potential liability for defective products may affect the financial condition and business of the Melrose Group

Due to the nature of its operations, claims against the Melrose Group could arise from defects in material or products manufactured and/or supplied by the Melrose Group. Purchasers and third parties could make claims against Melrose Group companies, based on their delivery of defective materials or products, or for damage or loss arising from the use of these defective materials or products.

Product quality and performance are a priority for the Melrose Group since its products are used in various industries where precise control and measurement of gas, electricity and water are essential. The Melrose Group is focused on technological platforms and systems to facilitate the proper functioning of many of the Elster Business's Smart Offerings as well as more advanced manual-read meters and services it sells. The Melrose Group's products and solutions will not meet performance standards if it fails to produce high-quality products that perform as their specifications demand or if the technology on which the Melrose Group depends for accurate metering, data storage and secure data transmission is defective. Any delivery of substandard products, or any failure of the Melrose Group's meters to record accurate data or transmit recorded data in an accurate and secure manner, even if this failure results from a failure to use its meters according to their specifications, may seriously harm the Melrose Group's reputation and lead to claims, resulting both in a loss of current customers to competitors and damage to its ability to attract new customers.

As is customary in the Elster Business's industry, the Elster Business's sales agreements typically contain product warranties that generally allow post-shipment obligations and returns over a period of one year or longer, depending on the particular product and market, and may provide for liquidated damages. Some warranties provide that if certain failure rates are exceeded among a production lot of meters, all the meters in the production lot may be returned. In some cases, the length of the Elster Business's warranties and guarantees may even exceed ten years. The Elster Business has recently encountered that customers are requesting longer warranty periods, and it often needs to grant longer warranty periods in order to win business. The Melrose Group may be exposed to substantial warranty claims as a result of these warranty undertakings and may be unable to obtain proper back-to-back coverage from its sub-suppliers. The Elster Business has experienced warranty claims in the recent past relating to some of its meters and other products. The Elster Business's accruals for warranty provisions totalled \$29.7 million as of 31 December 2011. Widespread product failures, or perceptions of such failures, may damage the Elster Business's, and as a result the Melrose Group's, market reputation, reduce its market share and cause its sales to decline. The Melrose Group's reputation and that of the metering industry may also suffer if a large or high-profile rollout, whether involving its products and solutions or those of a competitor, is impacted by serious technical or other failures.

If any of the Melrose Group's products proves to be defective, it may be required to effect or participate in a recall involving those products. The Melrose Group may also be the subject of lawsuits seeking damages for products alleged to be defective, including in particular product liability claims in the event that the use of its products is alleged to have resulted in injury, a risk of injury or other adverse effects. Litigation, including litigation resulting from product liability claims, can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless of the ultimate outcome of the litigation with respect to those claims. While the Melrose Group currently maintains product liability insurance coverage, such insurance may not provide adequate coverage against potential claims. A successful claim brought against the Melrose Group with respect to a defective product or batches of products in excess of available insurance coverage, if the Melrose Group's coverage is applicable, or a requirement to participate in a major product recall, could have a material adverse effect on the Melrose Group's reputation, results of operations, business and financial condition.

20. The continued weakness of new construction markets poses a substantial risk to the business of the Melrose Group

The new construction market in the United States has in particular been in an extended period of contraction, and the Melrose Group is unable to predict when this market will return to levels approaching those seen before that weakness began. Similar contractions have occurred in the new construction markets in other countries, including in the United Kingdom and Spain. If countries where the Melrose Group has significant operations continue to experience an overall contraction in new construction markets, or if these markets fail to grow, existing orders for its metering products and services may be

delayed or cancelled, and new orders may not materialise. This could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

21. Economic weakness and uncertainty may slow the rate of ''gasification''

Economic weakness and uncertainty may slow the rate of ''gasification'' which the Melrose Group defines as the expansion of natural gas infrastructure and distribution to include regions and customers, particularly in the Middle East, North Africa and Asia, not previously connected to the gas grid. Similarly, economic weakness has led to and may in the future lead to a decrease in demand for meters and other products that the Melrose Group sells for transmission and distribution applications, as well as for gas utilisation products, which consists of process-heating equipment, such as burner-control systems for gas-fired industrial heat treatment processes, and heat-control systems for residential and commercial boilers. As a result of these developments, existing orders for products and services may be delayed or cancelled and new orders may not materialise, which could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

22. Recent uncertainty in worldwide financial markets may lead customers to demand guarantees or bonds covering a larger portion of contracts with the Melrose Group or require the Melrose Group to maintain larger amounts of inventory

Some of the Melrose Group's customers and potential customers ask it for credit and/or performance guarantees, including payment and advance payment guarantees and performance guarantees, or credit and/or performance bonds, in each case to cover portions of their potential contract volumes. They may also or alternatively ask the Melrose Group to maintain a certain level of inventory. The experience of the recent uncertainty in worldwide financial markets may lead customers to demand guarantees or bonds covering a larger portion of these contracts or for the Melrose Group to maintain larger amounts of inventory, while at the same time making it more difficult for the Melrose Group to obtain favourable terms on the credit necessary to fulfil these demands. If it is unable to obtain the necessary guarantees or bonds, or maintain or finance the necessary level of inventory, the Melrose Group may fail to win these contracts, which could have a material adverse effect on the Melrose Group's business and financial condition.

23. The manufacturing processes for all of the Melrose Group's products, especially in the gas and water metering segments, require a wide variety of components, raw materials and energy, including gas and electricity. The prices of components, raw materials and energy fluctuate and could negatively impact profitability

As an industrial business, the Melrose Group is exposed to fluctuations in the price of utilised components such as brass castings, aluminium housings, sheet metal, plastics and printed circuit board assemblies and other electronics. Important raw materials include steel, resins, aluminium, brass and bronze. Prices of these components, raw materials or energy may increase or become more volatile. In particular, within the Melrose Group, the Elster Business recently experienced difficulties in passing on to its customers the full amount of increases in the prices of components, raw materials and energy, which has had an adverse effect on its profit margins, in particular in its water segment, and to a lesser extent, its gas segment. In many cases, especially for brass, steel and aluminium, the Melrose Group seeks to manage its exposure to changing prices by executing procurement contracts for periods of up to one year with its suppliers of these materials or of components that include them. The Melrose Group may pay higher prices with this approach than it otherwise would have, should market prices decline during the life of the contracts.

24. Any inability to obtain adequate supplies at favourable prices could decrease the Melrose Group's profit margins and negatively impact timely deliveries to its customers

The loss of, or a substantial decrease in the availability at favourable prices of, products, component parts, raw materials and energy from some of the Melrose Group's suppliers, or the loss of key supplier relationships for products including precision and engineered plastics and sealants and the need to find alternative sources on potentially disadvantageous terms, could lead to a reduction in its production and sales volumes and in its profit margins. Any of these events could have a material adverse effect on the Melrose Group's business and financial condition.

25. The metering industry depends substantially on governmental regulation

Historically, a key driver in the industry in which the Melrose Group's Elster Business operates has been the replacement cycle of existing meters, especially the length of that cycle. Local or national regulations often determine when meters are to be replaced, and manual-read meter replacement cycles have been between five and 30 years, depending on the specific geographic market and the type and usage of the meter. Likewise, much of the impetus for the growth expected in the industry arises from regulatory initiatives. Today, governments around the world are considering and, in some cases, have already begun to implement new laws and regulations to promote increased energy efficiency, slow or reverse growth in the consumption of scarce resources, reduce carbon dioxide emissions and protect the environment more generally. In particular, intensified regulatory pressure relating to energy and natural resource consumption is being driven by these and a range of additional imperatives in the United States and the EU and in other countries, including Australia, Brazil, Canada, China and Russia. The EU, for example, has provided a mandatory framework for the upgrade of all gas and electricity meters to smart meters by 2022. Many of the legislative and regulatory initiatives encourage utilities to develop Smart Grid infrastructure, and some of these initiatives provide for government subsidies, grants or other incentives to utilities and other participants in their industry to promote transition to Smart Grid technologies.

If government regulations regarding the introduction of Smart Grid technologies and the related shortening of the replacement cycles for meters are delayed, revised to permit lower or different investments in metering infrastructure or terminated altogether, this could have a material adverse effect on its results of operations, business and financial condition.

In many regions, Smart Grid-related legislation or regulation is being considered, drafted or negotiated, or general legislation is in place, but awaiting implementing rules or guidance. Legislatures and governmental agencies may prolong the law- and rule-making process, subject new technology to extensive reviews or fail to implement Smart Grid-related legislation or regulation on a timely basis, if at all. For example, some of the current legislative and regulatory initiatives in the EU have clauses that may lead to deferral or dilution to the extent the Smart Grid initiatives are deemed economically non-viable. Some of the Melrose Group's utility customers have been awaiting greater clarity on the scope and implementation of these laws and regulations and the timing of, and conditions related to, the receipt of related government grants, subsidies and other incentives. This effect has caused the revenues of the Melrose Group's electricity metering segment to decline as utilities in the United States have been deferring their upgrades of installed meter bases and infrastructure expansions. They have accordingly been deferring their commitments for the substantial upgrades of installed meter bases and infrastructure expansions that will be part of their response to Smart Grid related regulation. While awaiting the upgrades on Smart Grids, some customers have also been deferring investments in the existing meter base. These deferrals continued throughout 2011. If a significant number of utilities continue to delay their investments or opt not to participate altogether, this could lead to shortfalls in the Melrose Group's sales and results of operations in the short to medium term.

The Melrose Group is subject to a range of laws, regulations and ordinances in all of the jurisdictions in which it conducts business, and the Melrose Group and its customers are regulated by various bodies at the supranational, national, state and local level. For example, in many U.S. states, public utility commissions regulate utilities in their states separately from other state regulators and federal agencies. The laws, regulations and ordinances to which the Melrose Group is subject, and the actions and attitudes of regulators, can change from time to time. Compliance with current or future laws and regulations may increase the Melrose Group's expenses if their complexity or inconsistency increases, while failure to comply could result in the imposition of significant fines, suspension of production, alteration of production processes, cessation of operations or other actions in the jurisdictions concerned, all of which could have a material adverse effect on its results of operations, business and financial condition.

The nature, scope or effect of future regulatory requirements to which the Melrose Group's operations might be subject or the manner in which existing or future laws will be administered or interpreted cannot be predicted. In particular, governmental agencies and state public utility commissions may promulgate regulations that mandate or encourage the use of a particular type of technology that is not readily compatible with the technology employed in its products or may otherwise establish standards that are more favourable to its competitors. For example, in the United States, the National Institute of Standards and Technology is statutorily required to define uniform interoperability standards for the implementation of Smart Grid solutions, and the U.S. Federal Energy Regulatory Commission is required to engage in a rulemaking process to consider making these interoperability standards mandatory for interstate electricity

transmission and wholesale power markets. This process may favour one company's technology over another's. If this were to happen, particularly in the larger markets in which the Melrose Group sells its products, it could be forced to withdraw some of its products from the market, make substantial investments in a new technology or lose market share to competitors, all of which could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

26. The Melrose Group is subject to various governmental certification requirements and similar regulations

Many of the Melrose Group's new products and much of its equipment require certifications, calibrations or regulatory approvals before they may be sold or used. In some areas, each item produced by the Melrose Group must be separately calibrated or certified by a governmental agency prior to deployment. There is no certainty that any of the Melrose Group's new products and equipment requiring approval will be approved in a timely manner, if at all. If certification, calibration or approval requirements become more stringent or cumbersome in the future, or differ materially on a regional or national level, the Melrose Group's ability to market its products may be impaired.

In some cases, existing calibration requirements currently work to the Melrose Group's benefit by driving service opportunities and meter replacement. The Melrose Group's water meter products in particular are subject to ongoing calibration requirements in a number of European countries and its gas meters are generally subject to exacting safety tests. In Germany, for example, federal regulations require cold water meters to be recalibrated and repaired every six years, while hot water meters must be recalibrated and repaired every five years. German and certain U.S. state regulations also require that gas meters be tested periodically and serviced when needed. Because of the relative expense involved in repairing water and gas meters, many customers install new meters at the time national regulations call for recalibration and repair. If these national regulations were changed to extend the time for recalibration and repair, the Melrose Group's sales of water and gas meters could decrease, which could have a material adverse effect on its results of operations, business and financial condition.

27. The Melrose Group's communications technologies use particular radio frequencies and thus are subject to the regulation of various governmental bodies

The Melrose Group's communications technologies use particular radio frequencies and thus are subject to the regulation of various governmental bodies, such as the U.S. Federal Communications Commission and corresponding regulatory institutions of various U.S. states and European countries. With respect to the United States in particular, currently very few of the Melrose Group's products operate using licensed radio frequencies, but additional AMI and AMR products may operate in the United States using licensed radio frequencies in the future. To the extent that the Melrose Group's products and solutions use licensed frequencies, there is a risk that there may be insufficient available licensed frequencies in some markets, that neither the Melrose Group nor its customers will be able to obtain licenses where required, even if sufficient frequencies are available, and that licenses that are granted to the Melrose Group or its customers may not be renewed on acceptable terms, if at all. Also, while unlicensed frequencies may currently be available for a wide variety of uses, including the Melrose Group's RF mesh communications technology, the Melrose Group and its customers may not be entitled to protection from interference by others who operate on frequencies close to or the same as those on which its products operate. If currently unlicensed frequencies become unacceptably crowded, or subject to restrictive rules governing their use, the Melrose Group's business could suffer a material adverse effect.

28. In Europe the Melrose Group is subject to data protection regulation that imposes a general regulatory framework for the collection, processing and use of personal data

Many of the Melrose Group's Smart Grid and other technologies rely on the transfer of data relating to individuals and are accordingly affected by these regulations. Although the European Data Protection Directive (95/46/EC) has been implemented across the EU, data protection laws across member states vary to a large degree, and authorities do not always apply existing laws in a consistent manner. If the Melrose Group fails to comply with such regulations it may incur costs which could have a material adverse effect on its business. While privacy issues in connection with AMR, AMI and Smart Grid solutions have been discussed within the EU, it is unclear how regulation in connection with privacy requirements will further develop and how and to what extent it may affect technology in its industry relating to Smart Grid solutions. It may also lead to delay in other regulatory initiatives supporting the implementation of Smart Grid solutions. The Melrose Group may incur additional expenditure in order to comply with such future regulations.

Some of the Melrose Group's business structures, processes or actions may infringe applicable data protection standards and as a consequence it may have to take costly and burdensome measures to change these business structures, processes or actions, and may face administrative fines or other sanctions for such infringement. The Melrose Group's business and/or its reputation could suffer a material adverse effect as a result.

29. The loss of customers could have an adverse effect on the operations, business and financial condition of the Melrose Group

A significant number of the Melrose Group's metering customers purchase products under master agreements with terms ranging from one year in many cases to two to five years for larger projects. As the market moves towards conforming technology and large contracts in connection with Smart Grid solutions, the proportion of such contracts in the Melrose Group's business is likely to increase further. Individual orders of products under these master agreements are subject to cancellation or rescheduling due to many factors that may lead the Melrose Group's customers to redeploy resources. They may also cease placing orders or cancel these agreements in their entirety, in which case the Melrose Group's remedies may be limited. In addition to potential changes in their views regarding the Melrose Group's products, they may also take such steps in response to changes in economic conditions generally or in the public procurement or regulatory environments. Cancellation or postponement of a number of these significant contracts, or parts thereof, could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

30. The Melrose Group is reliant on the effectiveness and acceptance of its technologies

The Melrose Group is exposed to the risk that new technologies, features and functionalities that it and other industry participants develop and market may not be accepted by the industry, regulators or end-users or may not meet applicable standards. This may occur as a result of technological developments or competing features or functionalities proving superior to the Melrose Group's existing products, changes occurring in the regulatory landscape, including with respect to interoperability standards, perceptions that the new technologies are error-prone or present cyber-security risks or otherwise. There is a risk that competing technologies, features or functionalities will be favoured by the industry, regulators or end-users if there is not sufficient awareness of, or interest in, its innovations. For example, the advantages that Smart Grid-enabled products can provide may fail to be effective if utility customers choose not to implement corresponding technology throughout their distribution and transmission networks, or if regulators mandate or encourage the deployment of another technology. Generally, if utilities in the United States or some European countries plan to invest additional amounts for capital improvements, including meters and AMI/AMR upgrades, the utility must present the proposed capital improvement to the relevant utility regulatory commission for approval. Many of the Melrose Group's utility customers are required to obtain regulatory approval to pass through the costs of products and services to their customers because of the effect it may have on utility rates for consumers. Utility regulatory commissions have decided in the past, and may decide in the future, not to permit the pass-through of such costs onto consumers and this in turn could affect the products and services that its utility customers ultimately purchase. Any delay or failure to receive this approval, due to regulatory preference for another technology or otherwise, could reduce demand for the products the Melrose Group sells to its utility customers, which could adversely affect the Melrose Group's business. Market and regulatory acceptance of Smart Grid technologies varies by country and industry based on factors, such as the regulatory and business environment, environmental concerns, labour costs and other economic conditions.

The Melrose Group also is exposed to the risk that consumers or other end-users will not welcome these new technologies, or view technologically advanced systems as responsible for higher utility bills, uncertainty in their relationships with their utilities, incursions on privacy or other real or perceived shortcomings. Some utilities and regulators are expressing concerns about the potential for near-term costs to customers of the installation of these new technologies. If the Melrose Group's products or those of a competitor fall subject to perceptions of this nature, the resulting negative publicity for the Melrose Group or for the industry generally could adversely affect the Melrose Group's business.

31. Some public concern exists over the potential health risks associated with the use of radio frequency, or RF, communications in smart meters used in neighbourhoods

The Federal Communications Commission, or FCC, establishes guidelines for RF emissions for equipment used in a residence or residential setting and the Melrose Group's devices meet the guidelines. However, these guidelines may prove to be inadequate and may change, or even if the guidelines are appropriate, public concern could impact the acceptance of its products. In such a case, the Melrose Group's projects may be delayed, interrupted or terminated as a result which may have a material adverse effect on its results of operations, business or financial condition.

32. The metering industry in which the Melrose Group operates is exposed to the risk of, and to public concern about, an increased threat of ''cyber attacks'' on the power grid as Smart Grid infrastructure becomes more prevalent

Smart Grid privacy and security risks have attracted attention recently, as media reports have highlighted the dangers of potential instability, blackouts and economic disruption that could result from a Smart Grid cyber attack by hackers. Any cyber attack or other security breach on any component the Melrose Group or a competitor have provided, or on other similar technologies, could lead to a reduction in public acceptance of Smart Grid technologies and have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

33. The competitive environment in which the Melrose Group's Elster Business operates has been strongly impacted by the movement towards Smart Grid solutions

While the Melrose Group is increasingly focusing its metering business plan on the development of Smart Grid product offerings and solutions in an attempt to maintain and expand its activities and market share in this area, current or future competitors may be able to respond more quickly to new or emerging technologies and changes in customer or regulatory requirements. They may also be able to drive technological innovation and develop products that are equal in quality and performance or superior to the Melrose Group's products, which could reduce the Melrose Group's overall sales, require the Melrose Group to invest additional funds in new technology development and put pressure on the Melrose Group's market position. The Melrose Group's competitors also have made or may make strategic acquisitions or establish alliances or cooperative relationships among themselves or with third parties that enhance their ability to address the needs of customers, potentially giving them a significant increase in market share at the Melrose Group's expense. New entrants could include competitors from industries the Melrose Group previously viewed as distinct from its own, such as the networking, telecommunications and systems integration industries. Should the Melrose Group fail to compete successfully with current or future competitors, the Melrose Group could experience a material adverse effect on the results of the Melrose Group's operations, business and financial condition.

34. The Melrose Group's future operating results will depend on its ability to develop and manufacture products in a cost-effective manner

The Melrose Group outsources the manufacturing of some of its metering products and their sub-assemblies and components such as brass castings, aluminium housings, sheet metal, plastics and printed circuit board assemblies and other electronics, especially for solid state meters used by gas, electricity and water utilities to maintain focus on its core competencies and streamline its operations, as well as to minimise its manufacturing costs. Solid state meters measure gas, electricity or water using electronic devices instead of mechanical components.

The outsourcing of manufacturing capabilities reduces the day-to-day control that the Melrose Group is able to exercise over the production process and could result in quality problems and increased product warranty costs. In addition, as it outsources additional production capacity, the Melrose Group will retain limited internal production capacity and will rely more on third-party manufacturers to fill orders on a timely basis. While the Melrose Group's strategy calls for having more than one supplier for each important product and component, it relies on a single source for some key product lines, products and components that it purchases from third-party manufacturers, such as for diaphragms for its North American residential gas meters manufactured at one of its facilities. In some cases, the Melrose Group's purchases account for a material portion of some of its suppliers' respective businesses.

35. The third-party manufacturers with whom the Melrose Group works often require it to provide accurate forecasts, sometimes months in advance

If the Melrose Group overestimates its requirements, it may be obligated to purchase quantities of products that exceed customer demand. If the Melrose Group underestimates its requirements, particularly in connection with large meter rollouts, it may have inadequate inventory from which to meet customer demand. From time to time, some of its suppliers may have difficulties keeping pace with the Melrose Group's requirements if it increases its orders with little advance notice in response to demand for its products. While the Melrose Group is seeking to give its suppliers more advance notice of its peak requirements and holding more of the affected components in inventory where possible, it may fail to do so, or may, for reasons outside its control, not have access to sufficient supplies, which may cause even longer lead times. In any case where the Melrose Group must forecast its supply needs, its inability to forecast demand accurately may have a material adverse effect on its results of operations, business and financial condition.

Lead times for the components purchased from third-party manufacturers depend on a variety of factors, including the demand for each component and supplier capacity. If the Melrose Group's third-party manufacturers or any of their sub-suppliers fail to deliver quality products and services in a timely manner, or if the Melrose Group's ability to source from alternative suppliers cannot be maintained or if a supplier that is dependent on the Melrose Group is unable to cope with variations in the Melrose Group's ordering patterns, the ensuing disruptions in its chain of supply could negatively affect its product portfolio, reputation, sales and ability to meet large orders, especially in the context of large rollouts. In the past, the Melrose Group has experienced significantly extended lead times at its suppliers that provide components used in some of its products, in particular for electronic components.

36. The natural disasters and nuclear power plant emergencies in Japan in 2011, as well as the flooding in Thailand in autumn 2011, may result in additional interruptions or long-term delays in the worldwide supply of components that manufacturers, potentially including the Elster Business's suppliers and their sub-suppliers, use in electronic components for use in many industries, including metering

As a result of the Thailand flooding (which occurred prior to the Elster Business's acquisition by the Melrose Group), the Elster Business has been forced to find alternative sources for certain of its components, particularly for its North American production of water and electricity meters. The process of finding alternative sources has now been completed but the transition may be subject to delays and may result in interruptions in the production of some of its products if it is not able to successfully finalise testing of the alternative components in time and/or is not able to find suitable alternative sources of supply. While the Melrose Group is not able to predict the effects, if any, on it of a longer term disruption in Japanese industry, these delays could continue well into the future and have a material adverse effect on the ability of its company and others to manufacture and ship their electronic products.

Shortages or interruptions in the supply of components or communications modules could delay shipments of the Melrose Group's products or increase its production costs. This in turn could have a material adverse effect on its results of operations, business and financial condition. Any contractual penalties the Melrose Group negotiates for the event that a supplier does not meet its obligations with respect to timeliness and quality may fail to mitigate the harm to the Melrose Group's business caused by any such contractual breaches.

37. The utility industry worldwide is often subject to long budgeting, purchasing and regulatory review processes that can take several years to complete and can result in unpredictable capital investment cycles

The Melrose Group, in particular its Elster Business, derives much of its revenues from customers in the utility industry, either directly or through distributors and the utility industry worldwide is often subject to long budgeting, purchasing and regulatory review processes that can take several years to complete and can result in unpredictable capital investment cycles. Generally, larger contracts with utilities are granted through competitive tender processes that involve large volumes, require lengthy and complex competitive procurement processes and lead to long and unpredictable sales cycles. Utilities are under increasing economic, political and regulatory pressure to seek bids for their higher-volume purchases in as competitive a process as possible, which can further delay the time necessary to complete the tender process. In addition, in the face of increasing economic pressure, the Melrose Group's customers in the utility industry may establish alliances or enter into mergers which may enhance their purchasing power and their ability to command lower prices. In some markets, utilities' ability to recover the costs of purchasing the Melrose Group's products and services is also subject to lengthy and uncertain regulatory proceedings. In addition, utilities' purchasing decisions are sometimes delayed if they are considering or negotiating major transactions or changes in their businesses or operations that are unrelated to the Melrose Group's products. The Melrose Group's revenue development may be materially and adversely affected if these sales cycles lead to delays that it did not anticipate, for which it was unable to plan adequately or that are otherwise disadvantageous to it. This could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

38. The Melrose Group's future financial performance and success largely depend on its ability to implement its business strategies successfully

The Melrose Group's ability to implement its business strategies depends on, among other things, its ability to divest businesses or discontinue product lines on favourable terms and with minimal disruptions, finance its operations and product development activities, maintain high quality and efficient manufacturing operations, relocate and close certain manufacturing facilities with minimal disruption to its operations, respond to competitive and regulatory changes, access quality raw materials in a cost-effective and timely manner, and retain and attract highly-skilled technical, managerial, marketing and finance personnel. The details of the actions to be taken and the timing of the reinvestment programme have not yet been finalised and may differ in material ways from the strategy and plans the Melrose Group (or, prior to its acquisition by the Melrose Group, the Elster Business) has announced. In addition, the reinvestment programme or the Melrose Group's other business strategies could have adverse tax implications. Any failure to develop, revise or implement its business strategies, including its reinvestment programme, in a timely and effective manner could have a material adverse effect on the Melrose Group's results of operations, business and financial condition.

For example, in the first quarter of 2012, the Elster Business commenced a reinvestment programme which is expected to continue through to 2014, now under the Melrose Group's ownership. The reinvestment programme is intended to position it to take advantage of growth opportunities associated with global gasification trends and Smart Grid deployments in Europe, as well as further optimise operational efficiencies. The Elster Business has initiated measures that began in the first quarter of 2012 to pursue this strategy, which are expected to include adapting its manufacturing footprint to create scalable regional core production centres and driving further efficiency across its segments. Key elements include consolidating operations and sites mainly in the United States and in Europe, relocating product-lines and increasing its mix of production in low-cost countries, which are intended to result in an optimisation of its cost structure. Planned actions include the closure of four major facilities and the reduction of the number of its small- and mid-sized facilities.

The expenses and capital expenditures of implementing the Elster Business's reinvestment programme may be greater than it anticipates and the implementation of its reinvestment programme may be delayed as a result of, among other things, consultations with works councils and relations with its employees generally, as well as regulatory requirements.

The Board has significant experience of successfully executing restructuring and reinvestment programmes. However, it may not be able to successfully implement the reinvestment programme or other business strategies or those to be developed by management, and implementing these strategies may not sustain or improve, and could even harm, its results of operations in targeted sectors. The Melrose Group may be unable to realise the anticipated benefits and cost reductions of its reinvestment programme or its other business strategies. The Melrose Group's business strategies are based on assumptions about future demand for its current products and the new products and applications it is developing, as well as on its continuing ability to produce its products profitably.

39. The Melrose Group's business would be affected by the uncertainties of economic conditions

As a result of the credit crisis in Europe, in particular in Greece, Italy, Ireland, Portugal and Spain, the European Commission created the European Financial Stability Facility (the ''EFSF'') and the European Financial Stability Mechanism (the ''EFSM'') to provide funding to Eurozone countries in financial difficulties that seek such support. In March 2011, the European Council agreed on the need for Eurozone countries to establish a permanent stability mechanism, the European Stability Mechanism (the ''ESM''), which will be activated by mutual agreement, to assume the role of the EFSF and the EFSM in providing external financial assistance to Eurozone countries after June 2013. Although the macroeconomic environment showed further overall improvement in the first half of 2011, the development of certain economic indicators as well as the recent turbulence in the financial markets in the second half of 2011, primarily as a result of the ongoing sovereign debt crisis in the euro-zone, still indicate a highly volatile macroeconomic environment. Future macroeconomic development is dependent upon the evolution of a number of global and local factors, such as the crisis in the credit markets, economic crises arising from sovereign debt overruns, government budget consolidation measures related thereto, reduced levels of capital expenditures, declining consumer and business confidence, increasing unemployment in certain countries, fluctuating commodity prices, bankruptcies, natural disasters, political crises and other challenges affecting the speed of sustainable macroeconomic growth. Despite these measures, concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations, the overall stability of the Euro and the suitability of the Euro as a single currency given the diverse economic and political circumstances in individual member states. These and other concerns could lead to the re-introduction of individual currencies in one or more member states, or, in more extreme circumstances, the possible dissolution of the Euro entirely. Should the Euro dissolve entirely, the legal and contractual consequences for Euro-denominated obligations would be determined by laws in effect at such time. These potential developments, or market perceptions concerning these and related issues, could adversely affect the results of operations, business and financial condition of the Melrose Group. The Melrose Group is exposed to European markets (Europe represented 24.9 per cent. of 2011 Melrose Group continuing revenues (which did not include the Elster Business) and approximately 49.3 per cent. of 2011 revenues of the standalone Elster Business). A continued European credit crisis, unresolved concerns over the debt burden of certain Eurozone countries and any adverse developments in relation to the Euro might therefore have a negative impact on the Melrose Group.

Numerous other factors, such as fluctuations of energy and raw material prices, as well as global political conflicts, including those in the Middle East, North Africa and other regions, continue to impact macroeconomic parameters and the international capital and credit markets. The uncertainty of economic and political conditions could have a material adverse impact on the Melrose Group's business and financial condition.

40. If the Melrose Group is not successful in adapting to conditions in the markets in which it operates, it may suffer adverse effects

In light of the latest economic developments, the level of public debt in the United States, as well as in Greece, Italy and other European countries, uncertainties with respect to the stability of the Chinese economy, and the potential impact of budget consolidation measures by governments around the world, the bases for the expectations relating to the overall economic situation and specific conditions in markets relevant to the Melrose Group are subject to considerable uncertainties. If the macroeconomic environment deteriorates and the Melrose Group is not successful in adapting its production and cost structure to subsequent changes to conditions in the markets in which it operates, it may experience adverse effects that may be material to its business, financial condition, results of operations.

41. An impairment of goodwill or other intangible assets would adversely affect the Melrose Group's financial condition and results of operation

Upon completion of the Acquisition, a significant portion of the difference between the purchase price, Elster's net assets at that date and the allocation of costs of the combination to the assets acquired and the liabilities assumed, will be recorded as goodwill. In addition, other intangible assets will be recorded as a result of the purchase price allocation. Under IFRS, goodwill and intangible assets with indefinite lives are not amortised but are tested for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets with a finite life are amortised on a straight-line basis over their estimated useful lives and reviewed for impairment whenever there is an indication of impairment. In particular if the combination of the businesses meets with unexpected difficulties, or if the business of the Melrose Group does not develop as expected, impairment charges may be incurred in the future which could be significant and which could have an adverse effect on the Melrose Group's financial condition.

The Proposals will create significant reserves within New Melrose. The Melrose Group has significant intangible assets, long-lived assets, goodwill and deferred tax assets that are susceptible to valuation adjustments as a result of changes in various factors or conditions. The Melrose Group assesses impairment of amortisable intangible and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In addition, many asset classes are subject to impairment consideration on a periodic basis under applicable accounting rules. Factors that could trigger an impairment of such assets include the following:

a significant underperformance relative to historical or projected future operating results;
significant changes in the nature of or use of the acquired assets or the strategy for its overall business;
significant negative industry or general economic trends;
changes in the Melrose Group's organisation or management reporting structure could result in additional reporting units, which may require;
alternative methods of estimating fair values or greater aggregation or disaggregation in the Melrose Group's analysis by reporting unit;
a sustained decline in its market capitalisation below net book value; and
the harmonisation of company trademarks throughout the Melrose Group.

The Melrose Group assesses the potential impairment of goodwill as of 31 December of each year. It also assesses the potential impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Adverse changes in operations or other unforeseeable factors could result in an impairment charge in future periods that would impact results of operations in that period.

The realisation of the Melrose Group's deferred tax assets related to net operating loss carry-forwards is supported by projections of future profitability. The Melrose Group provides a valuation allowance based on estimates of future taxable income in the respective taxing jurisdiction and the amount of deferred taxes that are expected to be realisable. If future taxable income is different from what is expected, the Melrose Group may not be able to realise some or all of the tax benefit, which may, in turn, have a material and adverse effect on the Melrose Group's results of operations, business and financial condition.

PART B: Risks relating to the recent Acquisition

1. The Melrose Group's success will be dependent upon its ability to integrate the Elster Business; there will be numerous challenges associated with the integration

The success of the Melrose Group is expected in part to be dependent upon its ability to integrate the Elster Business without any significant disruption to the businesses of Old Melrose or the Elster Business. The Melrose Group may encounter numerous integration challenges in connection with the Acquisition, including loss of customers, suppliers and/or employees and other challenges which are not currently foreseeable. In addition, the Melrose Group's management and resources may be diverted away from its core business activities due to personnel being required to assist in the integration process. This integration process may take longer or prove more costly than expected, or difficulties relating to the integration, of which the Board is not yet aware, may arise. This could adversely affect the implementation of the Melrose Group's plans, and the Melrose Group may not be successful in addressing risks or problems encountered in connection with the integration and failure to do so may adversely affect its business or financial condition.

2. The Melrose Group may not realise the desired operational improvements from the Acquisition

The Melrose Group is targeting operational improvements from the Acquisition. Achieving the advantages of the Acquisition will depend partly on the rapid and efficient management and co-ordination of the activities of Old Melrose and Elster, two businesses of considerable size that function independently and are located in different countries, with geographically dispersed operations and with different business cultures and compensation structures. There is a risk that operational improvements from the Acquisition may fail to materialise, or they may be materially lower than have been estimated. In addition, the cost of funding these operational improvements may exceed expectations. Such eventualities may have a material adverse effect on the financial condition of the Melrose Group.

3. The Elster Business may not perform in line with expectations

If the results and cash flows generated by the combination of the operations of Elster with those of the Melrose Group are not in line with the Directors' expectations, a write-down may be required against the carrying value of the Melrose Group's investment in the Elster Business.

4. The financial results of the Melrose Group will, as a result of the Acquisition and the resulting increased portion of assets, liabilities and earnings denominated in Euros and US dollars, be more exposed to fluctuations in the exchange rate between the pound sterling and the Euro and/or the US dollar

The Melrose Group will present its financial statements in pound sterling and will have a significant portion of Euro and US dollar denominated assets, liabilities and earnings as a result of the significant assets and revenues of Elster across the Eurozone and in the United States. The operational and financial results as well as the equity of the Melrose Group will therefore be more sensitive to fluctuations in the exchange rate of the pound sterling against the Euro and against the US dollar than they are currently. There has been a high degree of volatility in exchange rates since the onset of the global financial crisis and this volatility has continued with the recent EU sovereign debt crisis. A depreciation of the Euro and/or the US dollar relative to the pound sterling could have an adverse impact on the consolidated financial condition and results of operation of the Melrose Group.

PART C: Risks relating to an investment in New Melrose Ordinary Shares

1. Confirmation of the Scheme and the New Melrose Reduction of Capital is in each case within the discretion of the Court

Implementation of the New Melrose Reduction of Capital is conditional upon, among other things, confirmation of the Scheme and the New Melrose Reduction of Capital by the Court. There are risks that this will not be given and that the New Melrose Reduction of Capital will not occur on a timely basis or at all. If this does not happen, the New Melrose Reduction of Capital will not be implemented and the benefits expected to result from the New Melrose Reduction of Capital will not be achieved.

2. The value of an investment in New Melrose may go down as well as up

The market price of New Melrose Ordinary Shares could be volatile and subject to significant fluctuations due to a variety of factors outside the control of the Melrose Group including changes in sentiment in the market regarding the New Melrose Ordinary Shares (or securities similar to them), any regulatory changes affecting the Melrose Group's operations, variations in the Melrose Group's operating results, business developments of the Melrose Group or its competitors, the operating and share price performance of other companies in the industries and markets in which the Melrose Group operates, speculation about the Melrose Group's business in the press, media or the investment community, changes to the Melrose Group's profit estimates or the publication of reports by analysts and general market conditions. Stock markets have from time to time experienced significant price and volume fluctuations that have affected the market prices for securities and which may be unrelated to the Melrose Group's operating performance, underlying asset value or prospects. The market price of the New Melrose Ordinary Shares may be adversely affected by any of the preceding or other factors regardless of the Melrose Group's actual results of operations and financial condition. Furthermore, the Melrose Group's operating results and prospects from time to time may be below the expectations of market analysts and investors.

3. Any future New Melrose Ordinary Shares issues and sales of New Melrose Ordinary Shares by major Shareholders may have an adverse effect on the market price of the New Melrose Ordinary Shares

The Melrose Group has no current plans for a subsequent offering of New Melrose Ordinary Shares. However, it is possible that the Melrose Group may decide to offer additional New Melrose Ordinary Shares in the future. An additional offering or a significant sale of New Melrose Ordinary Shares by any major Shareholder could have an adverse effect on the market price of the outstanding New Melrose Ordinary Shares.

4. New Melrose's ability to continue to pay dividends on the New Melrose Ordinary Shares will depend on the availability of distributable reserves

New Melrose's ability to pay dividends is limited under English company law, which limits a company to only paying dividends to the extent that it has distributable reserves available for this purpose. As a holding company, New Melrose's ability to pay dividends in the future is affected by a number of factors, principally its ability to receive sufficient dividends from subsidiaries and, until the EGSE Guarantee Date, restrictions in the Facilities Agreement. The payment of dividends to New Melrose by its subsidiaries is, in turn, subject to restrictions, including certain regulatory requirements and the existence of sufficient distributable reserves in such subsidiaries. The ability of these subsidiaries to pay dividends and the Melrose Group's ability to receive distributions from its investments in other entities is subject to applicable local laws and regulatory requirements and other restrictions, including, but not limited to, applicable tax laws and restrictions in some of the Melrose Group's debt facilities. These laws and restrictions could limit the payment of future dividends and distributions to the Melrose Group by its subsidiaries, which could restrict the Melrose Group's ability to pay a dividend to holders of the New Melrose Ordinary Shares.

5. Exchange rate fluctuations may impact the price of New Melrose Ordinary Shares or the value of any dividends paid

The New Melrose Ordinary Shares, and any dividends to be announced in respect of such shares, will be quoted in pound sterling. An investment in New Melrose Ordinary Shares by an investor in a jurisdiction whose principal currency is not pound sterling exposes the investor to foreign currency rate risk. Any depreciation of the pound sterling in relation to such foreign currency will reduce the value of the investment in the New Melrose Ordinary Shares in foreign currency terms and may adversely impact the value of any dividends.

6. Holders of New Melrose Ordinary Shares outside the United Kingdom may not be able to participate in future equity offerings

English law provides for pre-emptive rights generally to be granted to the Shareholders, unless such rights are disapplied by shareholder resolution. However, Shareholders outside the United Kingdom may not be entitled to exercise these rights. US holders of shares are customarily excluded from exercising any such pre-emption rights they may have unless a registration statement under the US Securities Act is effective with respect to those rights, or an exemption from the registration requirements or an exemption from similar requirements in other relevant jurisdictions thereunder is available. The Melrose Group has no current intention to file any such registration statement, and cannot assure prospective investors that any exemption from the registration requirements would be available to enable US or other overseas holders to exercise such pre-emption rights or, if available, that it will utilise any such exemption.

CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS

Certain statements contained in this document, including those in the parts headed ''Summary'', ''Risk Factors'', ''Information on the Proposals'' and ''Information on Old Melrose and New Melrose'', constitute ''forward-looking statements''. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''continues'', ''estimates'', ''plans'', ''prepares'', ''anticipates'', ''expects'', ''intends'', ''aims'', ''may'', ''will'' or ''should'' or, in each case, their negative or other variations or comparable terminology. Shareholders should specifically consider the factors identified in this document which could cause actual results to differ before making an investment decision. Undue reliance should not be placed on any forward-looking statements as such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Old Melrose, New Melrose and/or the Melrose Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Undue reliance should not be placed on any forward-looking statements as such forward-looking statements are based on numerous assumptions regarding Old Melrose's, New Melrose's and/or the Melrose Group's present and future business strategies and the environment in which Old Melrose, New Melrose and/or the Melrose Group will operate in the future. Among the factors that could cause actual results to differ materially from those described in the forwardlooking statements are changes in the global political, economic and/or business sphere, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. Such risks, uncertainties and other factors are set out more fully in the section of this document headed ''Risk Factors'' and include, among others: risks relating to commodity prices, risks relating to the economic conditions of the markets in which New Melrose and the Melrose Group operates and risks relating to the possible volatility of the price of New Melrose Ordinary Shares. These forward-looking statements speak only as at the date of this document. Except as required by the FSA, the London Stock Exchange or applicable law (including as may be required by the Prospectus Rules, Listing Rules and the Disclosure and Transparency Rules), New Melrose expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this document to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Forward-looking statements contained in this document do not in any way seek to qualify the working capital statement contained in paragraph 8 of Part IX (Additional Information) of this document.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the table below is indicative only and may be subject to change.

	2012(5)
Record date for Old Melrose interim dividend	21 September
Posting of the Old Melrose Circular to Shareholders	12 October
Payment of Old Melrose interim dividend	19 October
Latest time and date for receipt of blue Form of Proxy for the Court Meeting	9:00 a.m. on 1 November(1)
Latest time and date for receipt of white Form of Proxy for the Old Melrose General Meeting	9:15 a.m. on 1 November(2)
Scheme Voting Record Time (in respect of the Old Melrose General Meeting and the Court Meeting)	6.00 p.m. on 1 November(3)
Court Meeting	9:00 a.m. on 5 November
Old Melrose General Meeting	9:15 a.m. on 5 November(4)
Court Hearing	26 November
Last day for dealings in Old Melrose Ordinary Shares	26 November
Scheme Record Date	26 November
Scheme Record Time	6:00 p.m. on 26 November
Effective Date of the Scheme	27 November
Delisting of Old Melrose Ordinary Shares, Admission of New Melrose Ordinary Shares, crediting of New Melrose Ordinary Shares to CREST accounts and dealings in New Melrose Ordinary Shares commence on the London Stock Exchange's main market for listed securities	8.00 a.m. on 27 November
Name changes expected to become effective	27 November
Court hearing of the claim form to confirm the New Melrose Reduction of Capital	28 November
New Melrose Reduction of Capital becomes effective	29 November
Despatch of the New Melrose Ordinary Share certificates	4 December

(1) Blue Forms of Proxy for the Court Meeting not returned by this time may be handed to the Chairman or the Registrars at the Court Meeting prior to the vote being taken.

(2) To be valid the white Forms of Proxy for the Old Melrose General Meeting must be lodged at least 48 hours (excluding any part of a day that is not a working day) before the time appointed.

(3) If either the Court Meeting or the Old Melrose General Meeting is adjourned, the Scheme Voting Record Time for the adjourned meeting will be 6:00 p.m. on the day which is two days (excluding any part of a day that is not a working day) before the date of the adjourned meeting.

(4) To commence at the time fixed or, if later, immediately following the conclusion or adjournment of the Court Meeting.

(5) These dates are indicative only and will depend, among other things, on the date upon which the Court sanctions the Scheme and confirms the New Melrose Reduction of Capital.

All references in this document to times are to London time unless otherwise stated.

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

Christopher Miller Garry Barnes David Roper Simon Peckham Miles Templeman Precision House Perry Crosthwaite Arden Road John Grant Alcester B49 6HN Justin Dowley

SPONSOR AND FINANCIAL ADVISER BROKER

Rothschild Investec London EC4N 8AL

AUDITORS AND LEGAL ADVISERS REPORTING ACCOUNTANTS

DIRECTORS COMPANY SECRETARY

Geoffrey Martin REGISTERED OFFICE

New Court 2 Gresham Street St. Swithin's Lane London EC2V 7QP

Deloitte LLP Simpson Thacher & Bartlett LLP 2 New Street Square CityPoint London EC4A 3BZ One Ropemaker Street London EC2Y 9HU

REGISTRARS

Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA

PART I

INFORMATION ON THE PROPOSALS

1. Description of the Scheme and the New Melrose Reduction of Capital

Today the Board of Old Melrose announced its intention to implement a corporate reorganisation in order to provide greater flexibility within the Melrose Group's capital structure and to enable the Melrose Group to continue to efficiently return the proceeds of future disposals to Shareholders. It is proposed that a new holding company be introduced for the Melrose Group. The implementation of the Scheme will have no impact on the reported historical financial statements of the Melrose Group or the way in which the Melrose Group will report its financial results on an on-going basis.

The establishment of a new holding company for the Melrose Group and the New Melrose Reduction of Capital entails a number of steps and is a common method of creating distributable reserves.

1.1 Effects of the Scheme

1.1.1 The effects of the implementation of the Scheme on Old Melrose and holders of Old Melrose Ordinary Shares will be as follows:
(a) instead of having its issued share capital owned by Old Melrose Ordinary Shareholders, Old Melrose will become a wholly-owned subsidiary of New Melrose with its entire issued share capital owned by New Melrose;
(b) instead of owning a given number of Old Melrose Ordinary Shares, each Old Melrose Ordinary Shareholder will become a New Melrose Ordinary Shareholder and will own the same number of New Melrose Ordinary Shares; and
(c) New Melrose will be the new holding company of the Melrose Group.
1.1.2 The effect of the implementation of the Scheme on Old Melrose 2012 Incentive Optionholders is that instead of owning a given number of options over Old Melrose 2012 Incentive Shares, they will own an equivalent number of options over New Melrose 2012 Incentive Shares on substantially the same terms and economic basis as their existing options.
1.1.3 Immediately following the Scheme becoming effective, New Melrose will own no assets other than the £1 cash, the Capitalisation Shares, the Deferred A Share and a receivable of £50,000 in respect of the Redeemable Preference Shares.

1.2 The Scheme

The insertion of New Melrose will be effected through a Court-approved scheme of arrangement under section 899 of the 2006 Act.

Under the Scheme, all Old Melrose Ordinary Shares will be cancelled on the Effective Date. In consideration for the cancellation, Old Melrose Ordinary Shareholders on the register of members of Old Melrose at the Scheme Record Time, expected to be 6:00 p.m. on 26 November 2012, will receive 1 New Melrose Ordinary Share for every 1 Old Melrose Ordinary Share held.

The rights attaching to the New Melrose Ordinary Shares will be substantially the same as those attaching to the Old Melrose Ordinary Shares. Upon implementation of the Scheme, a holder of New Melrose Ordinary Shares will have the same interest in the profits, net assets and dividends of New Melrose as he or she had as a holder of Old Melrose Ordinary Shares in the profits, net assets and dividends of Old Melrose before the Scheme became effective. A summary of the rights attaching to the New Melrose Ordinary Shares and the New Melrose 2012 Incentive Shares is set out at paragraph 4 of Part IX (Additional Information) of this Prospectus and a summary of the terms of the options over New Melrose 2012 Incentive Shares is set out at paragraph 13 of Part IX (Additional Information) of this Prospectus.

The nominal value of each New Melrose Ordinary Share has been set at 120 pence such that the aggregate nominal value of New Melrose Ordinary Shares will be approximately £1.5 billion. This should enable distributable reserves of approximately £1.5 billion to be created pursuant to the New Melrose Reduction of Capital. The difference between the aggregate nominal value of the New Melrose Ordinary Shares and the market capitalisation of Old Melrose at the Scheme Record Time will be credited to a merger reserve of New Melrose which will be available to New Melrose to issue bonus shares to New Melrose Ordinary Shareholders credited as fully paid up to facilitate any future return of capital.

Pursuant to the Scheme, the issued share capital of Old Melrose will be reduced by cancelling and extinguishing the Old Melrose Ordinary Shares and the credit arising in the books of Old Melrose as a result of the cancellation will be applied in paying up in full the Capitalisation Shares such that the aggregate nominal value of such Capitalisation Shares equals the aggregate nominal value of the Old Melrose Ordinary Shares cancelled. The Capitalisation Shares will be issued to New Melrose which will, as a result, become the holding company of Old Melrose and the Melrose Group.

1.3 The New Melrose Reduction of Capital

The New Melrose Reduction of Capital which will occur following, and subject to, the Scheme becoming effective will involve the reduction of New Melrose's ordinary share capital by approximately £1.5 billion by reducing the nominal amount of each New Melrose Ordinary Share issued pursuant to the Scheme from 120 pence to 0.1 penny. This reduction will create distributable reserves for future dividends and/or returns of capital to Shareholders. This is a legal and accounting adjustment and should not have any impact on the market value of the New Melrose Ordinary Shares.

2. Conditions to and implementation of the Scheme and the New Melrose Reduction of Capital

2.1 The Scheme

The implementation of the Scheme is conditional upon:

(A) approval of the Scheme at the Court Meeting by a majority in number, representing not less than 75 per cent. in value, of those Shareholders present and voting, either in person or by proxy;
(B) the passing of the special resolution set out in the notice of Old Melrose General Meeting to approve, amongst other things, the cancellation of the Old Melrose Ordinary Shares and the allotment of the Capitalisation Shares by the Directors of Old Melrose (pursuant to the Scheme);
(C) sanction by the Court of the Scheme and confirmation by the Court of the reduction of capital of Old Melrose as part of the Scheme; and
(D) the delivery of a copy of the order of the Court sanctioning the Scheme and confirming the reduction of capital of Old Melrose in relation to the Scheme to the Registrar of Companies.

The Court Hearing (at which it is proposed that the Court sanction the Scheme) is expected to be held on or around 26 November 2012. Any creditors or shareholders who wish to oppose the Scheme will be informed by advertisement in a newspaper with national distribution of their right to appear in person, or be represented by Counsel, at the Court Hearing.

All holders of options over Old Melrose 2012 Incentive Shares have undertaken not to exercise their options between the Latest Practicable Date and 31 December 2012 (or the Effective Date, if earlier) (inclusive) and, pursuant to the terms of the options, following the Scheme becoming effective, will receive options over New Melrose 2012 Incentive Shares in exchange for their existing options over Old Melrose 2012 Incentive Shares on a one-for-one basis on substantially the same terms and economic basis as their existing options. The terms of the options over the New Melrose 2012 Incentive Shares are set out in paragraph 13 of Part IX (Additional Information) of this document.

In addition, the Directors of Old Melrose will not take the necessary steps to enable the Scheme to become effective unless, at the relevant time, the conditions below have been satisfied and, at the relevant time, they consider that it continues to be in the best interests of Old Melrose and Old Melrose Ordinary Shareholders that the Scheme should be implemented:

(E) the agreement of the UKLA to admit the New Melrose Ordinary Shares to be issued in connection with the Scheme to the Official List and its agreement not being withdrawn prior to the Effective Date; and
(F) the agreement of the London Stock Exchange to admit the New Melrose Ordinary Shares to be issued in connection with the Scheme to trading on its main market for listed securities and its agreement not being withdrawn prior to the Effective Date.

If the Scheme is sanctioned by the Court and the conditions described at (E) and (F) above are satisfied, the Scheme is expected to become effective and dealings in the New Melrose Ordinary Shares to be issued pursuant to the Scheme are expected to commence at 8:00 a.m. on 27 November 2012.

If the Scheme has not become effective by 31 December 2012 (or such later date as the Court may allow), it will lapse, in which event neither the Scheme nor the New Melrose Reduction of Capital will proceed and Old Melrose Ordinary Shareholders will remain holders of Old Melrose Ordinary Shares and holders of options over Old Melrose 2012 Incentive Shares will remain holders of options over Old Melrose 2012 Incentive Shares, and Old Melrose Ordinary Shares will continue to be listed on the Official List.

The Scheme contains a provision for Old Melrose and New Melrose jointly to consent, on behalf of all persons concerned, to any modification of, or addition to, the Scheme or to any condition that the Court may think fit to approve or impose. The Court would be unlikely to approve or impose any modification of, or addition or condition to, the Scheme which might be material to the interests of Shareholders unless such persons were informed of any such modification, addition or condition. It will be a matter for the Court to decide, in its discretion, whether or not the consent of Shareholders should be sought at a further meeting. If the Court approves or imposes a modification of, or addition or condition to, the Scheme which, in the opinion of the Directors, is of such a nature or importance as to require the approval of Shareholders, at a further meeting (or meetings), the Directors of Old Melrose will not take the necessary steps to enable the Scheme to become effective unless and until such approval is obtained.

Shortly after Admission, pursuant to resolutions of the Boards of New Melrose and Old Melrose, respectively, New Melrose will be renamed Melrose PLC and Old Melrose will be renamed and will be re-registered as a private limited company.

2.2 The New Melrose Reduction of Capital

The New Melrose Reduction of Capital involves the following:

(A) the Scheme becoming effective and being fully implemented;
(B) the confirmation of the New Melrose Reduction of Capital by the Court; and
(C) the delivery of a copy of the order of the Court confirming the New Melrose Reduction of Capital to the Registrar of Companies for registration.

The Court hearing to confirm the New Melrose Reduction of Capital is expected to be held on or around 28 November 2012. Shareholders will have the right to attend the Court hearing to support or oppose the New Melrose Reduction of Capital and to appear in person or be represented by Counsel.

The New Melrose Reduction of Capital is expected to become effective on 29 November 2012.

3. Admission, dealings, share certificates and settlement

Application will be made to the UKLA for 1,266,627,036 New Melrose Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for such shares to be admitted to trading on the London Stock Exchange's main market for listed securities. The ISIN number of the New Melrose Ordinary Shares will be GB00B8L59D51. There will be no such application for any other class of shares of New Melrose to be admitted to listing or trading on any exchange.

The last day of dealings in Old Melrose Ordinary Shares is expected to be 26 November 2012. The last time for registration of transfers of Old Melrose Ordinary Shares is expected to be 6:00 p.m. on 26 November 2012.

New Melrose Ordinary Shares can be held in certificated form or uncertificated form. With effect from and including the Effective Date, share certificates for the Old Melrose Ordinary Shares will cease to be valid and should be destroyed. With respect to the Old Melrose Ordinary Shares held in uncertificated form, Euroclear will be instructed to cancel the entitlements of the relevant Shareholders with respect to those Old Melrose Ordinary Shares.

Admission of the New Melrose Ordinary Shares to the Official List will become effective and dealings in the New Melrose Ordinary Shares are expected to commence at 8:00 a.m. on 27 November 2012.

These dates may be deferred if it is necessary to adjourn any meetings required to approve the Scheme or if there is any delay in obtaining the Court's sanction of the Scheme. In the event of a delay, the application for Old Melrose Ordinary Shares to be delisted will be deferred, so that listing will not be cancelled until immediately before the Scheme takes effect.

No New Melrose Ordinary Shares have been marketed to, or are available for purchase in whole or in part by the public in the United Kingdom or elsewhere in connection with Admission.

It is expected that New Melrose Ordinary Shares will be credited to CREST accounts on 27 November 2012.

It is expected that certificates for New Melrose Ordinary Shares will be posted by 4 December 2012.

Pending the despatch of certificates for New Melrose Ordinary Shares, transfers of New Melrose Ordinary Shares in certificated form will be certified against the share register of New Melrose. Temporary documents of title have not been, and will not be, issued in respect of the New Melrose Ordinary Shares.

All documents, certificates, cheques or other communications sent by or to Shareholders will be sent at their own risk and may be sent by post.

All mandates relating to payment of dividends on Old Melrose Ordinary Shares and all instructions given to Old Melrose in relation to notices and other communications in force immediately prior to the Effective Date will, unless and until revoked or varied, be deemed, as from the Effective Date, to be valid and effective mandates or instructions to New Melrose in relation to the corresponding holdings of New Melrose Ordinary Shares.

4. Shareholder Payment Policy

Old Melrose will pay an interim dividend of 2.6 pence per Old Melrose Ordinary Share (2011: 2.6 pence(1)) for the financial year ending 31 December 2012. The interim dividend will be payable on the enlarged share capital of Old Melrose following the 2012 Rights Issue completed on 1 August 2012. The interim dividend is expected to be paid on Friday 19 October 2012 to Shareholders on the register at close of business on Friday 21 September 2012.

The table below shows the amount of dividend per Old Melrose Ordinary Share for each of the financial years ended 31 December 2011, 2010 and 2009.

	2011	2010	2009
Dividend per Old Melrose Ordinary Share	7.4 pence(1)	6.3 pence(1)	4.4 pence(1)

(1) Adjusted for Old Melrose's ordinary share capital to include the effects of the 2012 Rights Issue

It is the intention of the Board of New Melrose to maintain a progressive dividend policy going forward.

The Melrose Group's policy is also to return surplus cash and business disposal proceeds to Shareholders.

5. Overseas Shareholders

5.1 General

No New Melrose Ordinary Shares or any other securities in New Melrose have been marketed to, or are available for purchase, in whole or in part, by, the public in the United Kingdom or elsewhere in connection with Admission or the Proposals. This document does not constitute or form part of any offer or invitation to purchase, subscribe for, sell or issue, or any solicitation of any offer to purchase, subscribe for, sell or issue, New Melrose Ordinary Shares or any other securities of New Melrose.

It is the responsibility of any Shareholder not resident in the United Kingdom or a citizen, resident or national of another country wishing to participate in the allotment and issue of New Melrose Ordinary Shares and/or into whose possession this document comes to satisfy himself as to full observance of the laws of each relevant jurisdiction in connection with the distribution of this document and/or the allotment and issue of New Melrose Ordinary Shares pursuant to the Scheme, including the obtaining of any government, exchange control or other consents which may be required, and/or the compliance with other necessary formalities needing to be observed and the payment of any issue, transfer or other taxes or duties in such jurisdiction as may be required in the context of the allotment and issue of New Melrose Ordinary Shares.

The distribution of this document in certain jurisdictions other than the United Kingdom may be restricted by law. Persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this document nor any other document issued or to be issued by or on behalf of the Company in connection with the allotment and issue of New Melrose Ordinary Shares constitutes an invitation, offer or other action on the part of the Company in any jurisdiction in which such invitation, offer or other action is unlawful.

The above provisions of this paragraph relating to Overseas Shareholders may be waived, varied or modified as regards specific Shareholders or on a general basis by the Company in its absolute discretion.

If, in respect of any Overseas Shareholders, Old Melrose or New Melrose is advised that the allotment and issue of New Melrose Ordinary Shares would or might infringe the laws of any jurisdiction outside the United Kingdom or would or might require New Melrose to obtain any governmental or other consent or effect any registration, filing or other formality with which, in the opinion of New Melrose, it would be unable to comply or which it regards as unduly onerous, the Scheme provides that:

(A) in the case of such New Melrose Ordinary Shares, New Melrose may in its sole discretion determine that they shall be allotted and issued to such persons as New Melrose may procure, as nominee for such Overseas Shareholder, on terms that they shall, as soon as practicable following the Effective Date, be sold on behalf of such Overseas Shareholder at the best price which can reasonably be obtained at the time of sale and the net proceeds of such sale (after the deduction of all expenses and commissions) shall be paid to such Overseas Shareholder; or
(B) where such New Melrose Ordinary Shares have already been allotted and issued (in circumstances where paragraph (A) does not apply), New Melrose may in its sole discretion determine that such New Melrose Ordinary Shares shall be sold, and New Melrose shall appoint a person who shall be authorised on behalf of such Overseas Shareholder to procure that any shares in respect of which New Melrose has made such determination shall, as soon as practicable following the Effective Date, be sold at the best price which can reasonably be obtained at the time of sale and the net proceeds of such sale (after the deduction of all expenses and commissions).

Any remittance of the net proceeds of sale or redemption referred to in this section shall be at the risk of the relevant Overseas Shareholder.

Overseas Shareholders should consult their own legal and tax advisers with respect to the legal and tax consequences of the Proposals in their particular circumstances.

5.2 United States

The New Melrose Ordinary Shares have not been and will not be registered with the SEC under the US Securities Act and will be issued pursuant to the Scheme in reliance on the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act. For the purpose of qualifying for the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act with respect to the New Melrose Ordinary Shares issued pursuant to the Scheme, Old Melrose will advise the Court that it will rely on the Section 3(a)(10) exemption based on the Court's sanctioning of the Scheme, which will be relied upon by Old Melrose as an approval of the Scheme. The Court will, hold a hearing on the Scheme's fairness to Old Melrose Shareholders, at which hearing all such Shareholders will be entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme.

The New Melrose Ordinary Shares have not been and will not be listed on a United States securities exchange or quoted on any inter-dealer quotation system in the United States. New Melrose does not intend to take any action to facilitate a market in New Melrose Ordinary Shares in the United States. Consequently, New Melrose believes that it is unlikely that an active trading market in the United States will develop for the New Melrose Ordinary Shares.

The New Melrose Ordinary Shares have not been, and will not be, registered under the securities laws of any state or jurisdiction in the United States and, accordingly, will only be issued to the extent that exemptions from the registration or qualification requirements of state ''blue sky'' securities laws are available or such registration or qualification requirements have been complied with.

A person who is entitled to receive New Melrose Ordinary Shares and who is an affiliate of New Melrose following the Effective Date may not resell such securities without registration under the US Securities Act or pursuant to the applicable resale provisions of Rule 144 of the US Securities Act or another applicable exemption from registration or in a transaction not subject to registration (including a transaction that

satisfies the applicable requirements of Regulation S under the US Securities Act). Whether a person is an affiliate of a company for the purposes of the US Securities Act depends on the circumstances but affiliates can include certain officers, directors and significant shareholders. Persons who believe that they may be affiliates of New Melrose should consult their own legal advisers prior to any sale of securities received pursuant to the Scheme.

Shareholders who are citizens or residents of the United States are advised that any securities issued pursuant to the Scheme have not been and will not be registered under the US Exchange Act. New Melrose intends, if necessary, to rely on an exemption from the reporting requirements of Section 12(g) of the US Exchange Act pursuant to Rule 12g3-2(b) thereunder.

Shareholders who are citizens or residents of the United States should consult their own legal and tax advisers with respect to the legal and tax consequences of the Scheme.

5.3 Canada

This Prospectus is not, and under no circumstances is to be construed as, an offer to any person in Canada and an advertisement or a public offering of the securities described herein. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this Prospectus or the merits of the securities described herein and any representation to the contrary is an offence in Canada.

Old Melrose prepares its financial statements in UK pound sterling, the official currency of the United Kingdom.

The New Melrose Ordinary Shares will be issued in Canada pursuant to the Scheme and the issuance of the New Melrose Ordinary Shares will be exempt from the requirement that New Melrose prepare and file a prospectus with the relevant Canadian regulatory authorities pursuant to section 2.11 of National Instrument 45-106—Prospectus and Registration Exemptions. Accordingly, any resale of the New Melrose Ordinary Shares must be made in accordance with applicable securities laws which may require resales to be made pursuant to exemptions from prospectus requirements. These resale restrictions may in some circumstances apply to resales of the New Melrose Ordinary Shares outside of Canada. Canadian investors are advised to seek legal advice prior to any resale of the New Melrose Ordinary Shares.

New Melrose is not, and does not intend to become, a ''reporting issuer'', as such term is defined under applicable Canadian securities legislation, in any province or territory of Canada in which the New Melrose Ordinary Shares will be offered and there is currently no public market for the New Melrose Ordinary Shares in Canada and no such market may ever develop. Under no circumstances will New Melrose be required to file a prospectus or similar document with any securities regulatory authority in Canada qualifying the resale of the New Melrose Ordinary Shares to the public in any province or territory of Canada. Canadian investors are advised that New Melrose currently does not intend to file a prospectus or similar document with any securities regulatory authority in Canada qualifying the resale of the New Melrose Ordinary Shares to the public in any province or territory of Canada.

Any discussion of taxation and related matters contained in this Prospectus does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to acquire the New Melrose Ordinary Shares and, in particular, does not address Canadian tax considerations. Shareholders who are Canadian residents should consult their own legal, financial and tax advisers with respect to the tax consequences of the Scheme in their particular circumstances.

New Melrose is incorporated under the laws of England and Wales. All or substantially all of New Melrose's Directors and officers may be located outside of Canada and, as a result, it may not be possible for Canadian investors to effect service of process within Canada upon New Melrose or such persons. All or a substantial portion of the assets of New Melrose and such other persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against New Melrose or such persons in Canada or to enforce a judgment in Canadian courts against New Melrose or persons outside of Canada.

Upon receipt of this document, each Canadian investor confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. French translation: Par la r´eception de ce document, chaque investisseur canadien confirme par les pr´esentes qu'il a express´ement exig´e que tous les documents faisant foi ou se rapportant de quelque maniere que ce soit a la vente des valeurs mobili`eres d´ecrites aux pr´esentes (incluant, pour plus de certitude, toute confirmation d'achat ou tout avis) soient r´edig´es en anglais seulement.

PART II

INFORMATION ON OLD MELROSE AND NEW MELROSE

The selected historical financial information and other historical financial information in relation to Old Melrose in this Part II (Information on Old Melrose and New Melrose) has, unless otherwise stated, been extracted without material adjustment from the audited consolidated IFRS financial statements of the Melrose Group in the annual report and accounts of the Melrose Group for the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 as referred to in Part V (Historical Financial Information Relating to Old Melrose) of this document.

The historical financial information in relation to Elster in this Part II (Information on Old Melrose and New Melrose) has been extracted without material adjustment from the unaudited Elster quarterly report for the three months ended 30 June 2012 published on 3 August 2012 (which has been reviewed), and has been prepared in accordance with US GAAP.

Shareholders should read the whole of this document and the documents incorporated herein by reference and should not just rely on the financial information set out in this Part II (Information on Old Melrose and New Melrose).

1. Introduction and Business Overview

1.1 Old Melrose

Old Melrose is a public limited company registered in England and Wales and was floated on AIM on 28 October 2003 with the strategy of acquiring businesses whose operational performance, in the opinion of the Old Melrose Directors, could be improved to create greater shareholder value. The Old Melrose Directors have extensive experience of identifying and evaluating acquisition opportunities, quoted and unquoted, both in the UK and overseas. During December 2005 Old Melrose moved onto the London Stock Exchange's main market for listed securities.

Old Melrose is an acquisitive company which has a track record of acquiring businesses and making the necessary changes to maximise the value inherent in those businesses to the benefit of shareholders. In May 2005 Old Melrose acquired two specialist engineering businesses, Dynacast and McKechnie, for an enterprise value of £429 million and in July 2008 Old Melrose acquired FKI plc for a total consideration of £970.4 million (including debt). During the period of its ownership, Old Melrose significantly improved the operational performance of these businesses. In May 2007 it completed the sale of a large part of McKechnie for £428 million (with the buyer also assuming £2.8 million of indebtedness) and in July 2011 it completed the sale of Dynacast for an enterprise value of £377 million (including £11 million of pension liabilities assumed by the buyer). In August 2007 shareholders approved a return of capital of £220 million following the McKechnie disposal (which, together with dividends already paid, equalled approximately 95 per cent. of the original capital raised from shareholders and the further capital raised to buy Dynacast and McKechnie). In August 2011 Old Melrose returned approximately £373 million to shareholders following the disposal of Dynacast. In August 2012, Old Melrose acquired Elster for a total consideration of approximately £1.5 billion.

1.2 New Melrose

New Melrose is a public limited company registered in England and Wales and was incorporated for the purpose of implementing the Scheme. It has not traded since its incorporation. As part of the Proposals, New Melrose will become the holding company of the Melrose Group on the Scheme becoming effective.

2. The Melrose Group's Strategy

The Melrose Group's strategy is to acquire good industrial businesses underperforming their potential, improve them by a mixture of investment, operational improvements and changed management focus, then commercially choose the right time to sell, often within a 3 to 5 year time frame (but this is flexible). The value from significant disposals is then returned to shareholders. Further details of each part of the strategy are shown below.

The Melrose Group is not a passive investor and its senior executives work closely with business managers to support the development of its subsidiaries. This includes long term strategic planning.

The Melrose Group looks for the following characteristics in an investment:

a manufacturing company with a strong market position and high quality products; and
a business that needs change to improve its performance through investment, refocusing or other company-specific issues.

The Melrose Group expects to challenge and be challenged as it works in tandem with management teams to improve the growth prospects of its businesses. Management teams are given incentive arrangements that align their interests with shareholders so that they will benefit on the post acquisition value creation process.

The Melrose Group finances its acquisitions in such a way as to give it flexibility to improve its businesses. It does not saddle its businesses with high levels of debt.

The Melrose Group will seek to invest in new product developments, make bolt-on acquisitions and strengthen the senior management team to ensure the success of its businesses.

The expected result is an improvement in operational and financial performance, which generates an excellent return for investors. This is well illustrated by the sale of Dynacast referred to at paragraph 1 above.

3. Organisational structure and businesses

Old Melrose is the holding company of various principal subsidiaries listed in paragraph 7 of Part IX (Additional Information) of this document and its business is conducted at the locations set out at Paragraph 6 of Part IX (Additional Information) of this document. The principal businesses operated by those trading subsidiaries are discussed below. On the Scheme becoming effective, New Melrose will become the holding company of all of these subsidiaries.

3.1 Energy

The Melrose Group's energy businesses are market leading manufacturers of electricity generating equipment, switchgear and transformers. Energy has five business units comprising:

Brush Turbogenerators;
Brush Transformers;
Marelli;
Hawker Siddeley Switchgear; and
Harrington Generators.

Energy services the power generation, oil and gas, utilities, industrial, marine, rail, telecommunications, construction, commercial, military, hydropower, cogeneration, and uninterrupted power supply and aftermarket sectors.

3.2 Lifting

The Melrose Group's lifting businesses are world leading suppliers of wire, wire rope products, lifting fittings and blocks. Lifting has three business units comprising:

Bridon;
Crosby; and
Acco.

Lifting services the onshore and offshore oil and gas, deep shaft and surface mining, petrochemical, alternative energy, general industrial and construction markets, fishing and marine, infrastructure (for example, bridges and sports stadia) and material handling industries.

3.3 Other Industrials

Melrose's Other Industrials businesses are market leading manufacturers across the housing, construction, scrap processing and other industrial sectors. Other Industrials has three business units comprising:

Truth;
Harris; and
Prelok.

Other Industrials businesses serve a diverse range of sectors, including housing, construction, retail, scrap processing, fibre recycling, consumer packaging, industrial and general engineering.

3.4 Elster

Melrose's Elster Business is one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions. Elster's products and solutions are used to measure gas, electricity and water consumption as well as enable energy efficiency and conservation. Elster has three business segments comprising:

Gas;
Electricity; and
Water.

The Melrose Group's Elster Business's customers include gas exploration and production, gas transmission, gas distribution and general industrial companies, integrators, end-users, power plants, grid operators, multi-utilities, commercial boiler manufacturers, furnace builders and end-users from the metal and ceramics, incineration industries, providers of security functions, plug & play capabilities and IP-based protocols, municipal, privately owned water-only utilities and other systems providers.

4. Selected financial information

The Old Melrose summary financial information set out below has been extracted without material adjustment from the Audited Financial Statements for the year ended 31 December 2011 (under IFRS), as set out in Old Melrose's annual reports and accounts for 2011, the Audited Financial Statements for the year ended 31 December 2010 (under IFRS), as set out in Old Melrose's annual report and accounts for 2010 and the Audited Financial Statements for the year ended 31 December 2009 (under IFRS), as set out in Old Melrose's annual reports and accounts for 2009. Shareholders should read the whole of this document and the documents incorporated herein by reference and should not just rely on the financial information set out in this paragraph 4 of this Part II (Information on Old Melrose and New Melrose).

The auditors of Old Melrose, Deloitte LLP, issued unqualified audit opinions on Old Melrose's consolidated financial statements for each of the three years ended 31 December 2011, 31 December 2010 and 31 December 2009.

Financial information for Elster has not yet been consolidated into the Melrose Group financial information and so is shown separately below.

CONDENSED CONSOLIDATED INCOME STATEMENT UNDER IFRS (AS REPORTED)

	Year ended 31 December 2011(1)	Year ended 31 December 2010(1)	Year ended 31 December 2010	Year ended 31 December 2009
	£m	£m	£m	£m
Continuing operations
Revenue	1,153.9	1,035.4	1,379.5	1,298.5
Cost of sales	(812.9)	(731.0)	(988.5)	(970.3)
Gross profit	341.0	304.4	391.0	328.2
Headline operating expenses(2)	(160.2)	(157.0)	(193.7)	(178.9)
Share of results of joint ventures	—	(0.4)	(0.4)	0.4
Intangible asset amortisation	(23.7)	(24.1)	(26.6)	(26.7)
Exceptional costs	(40.1)	(10.3)	(10.3)	(23.9)
Exceptional income	—	21.4	21.4	14.0
Total net operating expenses	(224.0)	(170.4)	(209.6)	(215.1)
Operating profit	117.0	134.0	181.4	113.1
Headline operating profit(2)	180.8	147.0	196.9	149.7
Finance costs	(29.6)	(34.6)	(35.4)	(36.2)
Finance income	10.0	9.3	9.3	5.1
Profit before tax	97.4	108.7	155.3	82.0
Total Tax	17.4	(5.0)	(14.0)	(27.3)
Profit for the year from continuing operations	114.8	103.7	141.3	54.7
Profit for the year from discontinued operations	171.7	37.6	—	24.6
Profit for the year	286.5	141.3	141.3	79.3
Attributable to:
Owners of the parent	286.4	141.1	141.1	79.5
Non-controlling interests	0.1	0.2	0.2	(0.2)
Earnings per share
From continuing operations
—Basic	25.2p	20.8p	28.4p	11.0p
—Diluted	23.7p	19.8p	27.0p	10.8p
From continuing and discontinued operations
—Basic	62.9p	28.4p	28.4p	16.0p
—Diluted	59.0p	27.0p	27.0p	15.6p
—Headline diluted(2)	28.8p	24.1p	24.1p	16.3p

(1) Excludes the results of discontinued operations (Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp).

(2) Before exceptional costs, exceptional income and intangible asset amortisation.

SUMMARY CONDENSED CONSOLIDATED BALANCE SHEET UNDER IFRS (AS REPORTED)

	31 December 2011	31 December 2010	31 December 2009
	£m	£m	£m
Non-current assets	1,162.1	1,470.2	1,459.6
Current assets	619.4	673.6	585.1
Total assets	1,781.5	2,143.8	2,044.7
Current liabilities	394.0	452.2	417.5
Non-current liabilities	739.1	808.7	863.9
Total liabilities	1,133.1	1,260.9	1,281.4
Net assets	648.4	882.9	763.3
Equity attributable to owners of the parent	648.3	881.5	761.6
Non-controlling interests	0.1	1.4	1.7
Total equity	648.4	882.9	763.3

SUMMARY CONDENSED CONSOLIDATED CASH FLOW STATEMENT UNDER IFRS (AS REPORTED)

	Year ended 31 December 2011	Year ended 31 December 2010(1)	Year ended 31 December 2010	Year ended 31 December 2009
	£m	£m	£m	£m
Net cash from operating activities	91.2	117.9	117.9	174.8
Net cash (used in)/from investing activities	337.2	(30.2)	(30.2)	28.3
Net cash used in financing activities	(425.2)	(45.4)	(45.4)	(221.5)
Net increase/(decrease) in cash and cash
equivalents	3.2	42.3	42.3	(18.4)

(1) Excludes the results of discontinued operations (Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp).

The Elster financial information set out below has been has been extracted without material adjustment from the unaudited Elster report for the three months ended 30 June 2012 published on 3 August 2012 (which has been reviewed), prepared in accordance with US GAAP. It therefore does not reflect any transactions and events that may have occurred after that date.

The financial information set out below does not constitute statutory accounts for any company within the meaning of section 434 of the 2006 Act.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)

	Three Months Ended 30 June		Six Months Ended 30 June
	2012	2011	2012	2011
	\$	\$	\$	\$
Revenues	463.4	486.7	910.1	930.6
Cost of sales	(320.5)	(328.1)	(636.2)	(625.6)
Gross profit	142.9	158.5	273.9	305.0
Operating income	36.1	46.6	57.3	87.3
Total non-operating expenses	(6.4)	(24.6)	(14.0)	(30.4)
Income before income tax	29.7	22.0	43.4	56.8
Income tax expense	(9.1)	(6.9)	(13.4)	(17.0)
Net income	20.6	15.0	30.0	39.9
Net income attributable to non controlling interests	1.4	0.7	2.5	1.6
Net income attributable to Elster Group SE	19.2	14.4	27.5	38.3

CONSOLIDATED BALANCE SHEETS (IN MILLIONS)

(UNAUDITED)

	30 June 2012
	\$
Total current assets	669.0
Total noncurrent assets	1,323.0
Total assets	1,992.0
Total current liabilities	479.8
Total noncurrent liabilities	775.8
Total liabilities	1,255.6
Total equity attributable to Elster Group SE	721.9
Total equity	736.4
Total liabilities and equity	1,992.0

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED)

	Six Months ended 30 June
	2012	2011
	\$	\$
Cash flows from operating activities	59.0	75.1
Net cash flow used in investing activities	(24.7)	(21.4)
Net cash flow from (used in) financing activities	(4.1)	(151.2)
Net increase (decrease) in cash and cash equivalents	30.2	(97.5)
Cash and cash equivalents at 30 June	111.7	129.9

5. Recent developments

The initial offering period of the Tender Offer ended at midnight (EST) on 22 August 2012 and the subsequent offering period of the Tender Offer ended at 5.00 p.m. (EST) on 28 August 2012. At the end of the subsequent offering period, 99.62 per cent of the total issued share capital of Elster had been validly tendered (and not validly withdrawn) including 17,412,069 Elster Shares and 42,804,332 Elster ADSs, all of which Melrose Acquisitionco accepted for payment. Elster ADSs were suspended from trading on NYSE on 29 August 2012 and Elster was delisted from NYSE with effect from 11 September 2012. Melrose Acquisitionco is currently considering implementing a squeeze-out of other Elster Shareholders. Melrose Acquisitionco will appoint a valuer to produce a valuation report, which a separate valuer, appointed by the court of Landgericht Dortmund, will review. Once the valuation report is agreed, it will be used to determine the price to be offered to other Elster Shareholders for their Elster Shares under the squeeze-out process. The squeeze-out process, if implemented, is subject to German law and is expected to be completed in 2013. Following the squeeze-out becoming effective, New Melrose intends to procure entry by Melrose Acquisitionco into a domination agreement with Melrose Acquisitionco as the ''controlling company'' and Elster as the ''controlled company'' so that Melrose Acquisitionco would control the management of Elster's business affairs.

6. Current trading, trends and prospects

On 30 August 2012, Old Melrose published its unaudited results for the six month period to 30 June 2012. The following text has been extracted from that statement:

Outlook

Revenue in the period, up 9%, is most encouraging with all divisions contributing to the rise. At the same time Group order intake remains higher than revenue giving us confidence for the second half of the year. Headline operating margins have continued to improve and are now at 16.1% leading to a highly satisfactory increase in headline operating profit, up 11%.

Energy

Brush enjoyed a good first half of the year. Management focus in this business has continued to be on operational efficiency, investment to drive future performance and increasing market share in the aftermarket sector. Good progress has been made on all these objectives in this period.

Trading in the aftermarket business has started the year strongly with orders up 16% over 2011.

The restructuring of the generator manufacturing plant in the Netherlands, which was detailed in the 2011 Annual Report, was largely completed in the first half. . . . Demand for this product, which has been low this year due to market conditions, is expected to improve considerably in 2013 and this, when combined with its lower cost base, is expected to improve the performance of this business next year

With all of its new build orders in place for the second half and a large part of its aftermarket projected sales already ordered, Brush Turbogenerators is expected to have another good year and at this stage looks well positioned for 2013.

Sales of Brush Transformers started to recover in the second half of 2011 and this has continued into 2012. . . . Operating margins continue to improve following the implementation of a revised manufacturing strategy and the introduction of a redesigned ''value engineered'' product line.

The current record order book gives Marelli confidence in meeting its forecasts for the full year.

Lifting

Trading performance in the first half of the year continued to improve. Sales were ahead of both the comparable prior year period and the second half of 2011. Bridon's major end-user markets in oil & gas and mining remain strong, with projects continuing despite the well-publicised concern over economic conditions.

Crosby enjoyed an excellent start to the year in terms of both revenue and profits. Order intake was particularly pleasing in all geographic regions driven primarily by Crosby's key markets of oil & gas and mining. First half revenues and operating profits were up 21% and 30% respectively.

Acco performed extremely well during the first half, with operating profits up by 76% when compared with the same period last year. . . . The outlook for Acco in the second half remains positive.

Other Industrial

Sales within Truth during the first half were above management expectations. . . . There are signs of gentle recovery in the US housing market but whether this is a continuing trend is likely to be clearer over the next few months.

Elster

On 23 August 2012 Melrose completed the acquisition of Elster for a total cash consideration of approximately £1.5 billion. The costs of acquiring Elster are expected to be between £70 million and £75 million of which approximately £30 million relate to the raising of equity and approximately £25 million relate to bank facility arrangement fees.

We believe there exists a significant opportunity to improve the performance of Elster over the next few years for the benefit of shareholders. It is obviously very early in this process but some initial steps have already been taken and we will report further on our progress at the time of our year end results.

7. Old Melrose breakdown of revenue

The summary financial information set out below has been extracted without material adjustment from the Audited Financial Statements for the year ended 31 December 2011, as set out in Old Melrose's annual reports and accounts for 2011, the Audited Financial Statements for the year ended 31 December 2010, as set out in Old Melrose's annual report and accounts for 2010, and the Audited Financial Statements for the year ended 31 December 2009, as set out in Old Melrose's annual report and accounts for 2009, except for the split of Old Melrose's revenue by geographical area, which is taken from Old Melrose's annual report and accounts for 2010.

A split of Old Melrose's revenue by geographical area is set out below.

	Year ended 31 December 2011(1)	Year ended 31 December 2010(1)	Year ended 31 December 2010	Year ended 31 December 2009
	£m	£m	£m	£m
UK	195.2	156.5	199.8	201.8
Europe	287.6	294.1	416.4	364.3
North America	463.5	419.8	525.4	500.3
Other	207.6	165.0	237.9	232.1
Total	1,153.9	1,035.4	1,379.5	1,298.5

(1) Excludes the results of discontinued operations (Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp).

A split of the revenue for the continuing operations by division is set out below.

	Year ended 31 December 2011(1)	Year ended 31 December 2010(1)	Year ended 31 December 2010	Year ended 31 December 2009
	£m	£m	£m	£m
Energy	461.6	427.5	427.5	418.3
Lifting	484.4	422.7	422.7	419.0
Dynacast(2)	—	—	275.7	208.7
Other Industrial	207.9	185.2	253.6	252.5
Total	1,153.9	1,035.4	1,379.5	1,298.5

(1) Excludes the results of discontinued operations (Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp).

(2) Dynacast sale completed on 19 July 2011.

8. Pensions

Certain of the Elster Business's subsidiaries sponsor defined benefit pension plans. In addition, the Elster Business's subsidiaries in the US and Canada provide other postretirement benefits consisting of healthcare and life insurance benefits. The cost of providing these benefits is determined for each plan using the projected unit credit actuarial valuation method.

PART III

OPERATING AND FINANCIAL REVIEW RELATING TO THE MELROSE GROUP

The operating and financial review for each of the three years ended 31 December 2011, 31 December 2010, 31 December 2009 and the period ended 30 June 2012 as set out in the annual report and accounts and the half yearly results of Old Melrose for each of the relevant periods are incorporated by reference into this document. The audit reports for each of the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 were unqualified. Reference should also be made to the 30 June 2012, 31 December 2011, 31 December 2010, and 31 December 2009 financial information incorporated by reference into this document: see Part V (Historical Financial Information Relating to Old Melrose) of this document, the Risk Factors on pages 13 to 34 of this document and the strategy section in paragraph 2 of Part II (Information on Old Melrose and New Melrose) of this document.

1. Cross reference list

The following list is intended to enable Shareholders to identify easily specific items of information which have been incorporated by reference into this document.

1.1 Operating and Financial Review for the year ended 31 December 2009

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2009:

pages 1 to 25;
page 28;
pages 31 to 33;
pages 42 to 43;
pages 47 to 51;
pages 58 to 59; and
page 62.

1.2 Operating and Financial Review for the year ended 31 December 2010

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2010:

pages 1 to 25;
pages 28 to 29;
pages 31 to 34;
pages 42 to 43;
pages 47 to 51;
pages 58 to 59; and
page 62.

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2011:

page 3;
page 8;
page 10;
page 12;
page 14;
page 17;
page 20;
page 23;
page 24;
pages 26 to 30;
pages 34 to 35;
pages 58 to 59;
pages 63 to 67;
page 77; and
pages 80 to 81.

1.3 Operating and Financial Review for the year ended 31 December 2011

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2011:

pages 3 to 30;
pages 34 to 35;
page 39;
pages 43 to 48;
pages 58 to 59;
pages 63 to 67;
page 77; and
pages 80 to 81.

1.4 Operating and Financial Review for the half year ended 30 June 2012

The sections below refer to the relevant sections of the half yearly results of Old Melrose for the financial half year ended 30 June 2012:

Chief Executive's Review; and
Finance Director's Review.

PART IV

CAPITAL RESOURCES

1. Capitalisation and indebtedness

1.1 Capitalisation and indebtedness of Old Melrose

The following tables show (i) the capitalisation of the Melrose Group as at 30 June 2012 and (ii) the total indebtedness and net debt of the Melrose Group as at 26 August 2012. Save for the 2012 Rights Issue, the Tender Offer and the Facilities Agreement, there have been no material changes to the capitalisation figures since 30 June 2012. The figures for capitalisation have been extracted without material adjustment from Old Melrose's consolidated unaudited interim financial statements for the period ended 30 June 2012.

	£m
Total capitalisation and indebtedness
Total Current debt	3.8
—secured —unsecured	— 3.8
Total non-current debt (excluding current portion of long-term debt)	1,333.7
—secured —unsecured	— 1,333.7
Shareholders' equity
Share capital(1) .	1.1
Share premium(1)	126.0
Other reserves	649.0
Total capitalisation (as at 30 June 2012)	776.1

Note

(1) On 1 August 2012, the 2012 Rights Issue was completed for the purposes of part-funding the Tender Offer. The 2012 Rights Issue raised approximately £1,170.5 million after costs. As a consequence of this, the share capital of Old Melrose has increased since 30 June 2012 to £3.2 million and share premium has increased since 30 June 2012 to £1,294.4 million.

The following table details the net debt of the Melrose Group as at 26 August 2012:

	£m
Cash	407.8
Cash equivalents (bank deposits)	—
Liquidity	407.8
Current financial receivable	—
Current bank debt (secured and unsecured)(1)	3.8
Other current financial debt (unsecured)	—
Current financial debt	3.8
Net current cash	404.0
Non-current bank loans (secured and unsecured)(1)	1,134.5
Other non-current financial indebtedness(2)	199.3
Non-current financial indebtedness	1,333.7
Net debt	929.8

Notes

⁽¹⁾ Bank facilities at 31 August 2012 include amounts of £194.4 million in respect of Elster revolving credit facilities. On 28 September 2012, these revolving credit facilities were repaid and replaced through an additional drawdown under the Facilities Agreement.

⁽²⁾ Non-current financial indebtedness relates to the Senior Notes. As required following the change of control of Elster, Elster made an offer on 17 September 2012 to repurchase the Senior Notes at a price of 101%. This offer will expire on 18 October 2012. Any repurchase of the Senior Notes will be funded through an additional drawdown under the Facilities Agreement. Shortly following the expiration date and settlement date of the Senior Notes Change of Control Offer, it is intended to give notice of the intention to redeem the outstanding principal amount of the Senior Notes shortly after the Effective Date at the applicable makewhole price pursuant to the indenture which will be higher than the price for the current Senior Notes Change of Control Offer. The makewhole redemption price is currently estimated to be approximately EUR 31 million as calculated on the Latest Practicable Date, plus accrued and unpaid interest. Any such redemption notice may be subject to conditions

precedent and the calculation of the applicable redemption premium (as that term is defined in the indenture referred to above) is subject to change based on the actual redemption date and movements in the bund rate (as that term is defined in the indenture referred to above). Any repurchase or redemption of the Senior Notes will be funded through an additional drawdown under the Facilities Agreement.

1.2 Capitalisation and indebtedness of New Melrose

As at the Latest Practicable Date, New Melrose has two subscriber shares, each fully paid and with £1 nominal value, and 50,000 Redeemable Preference Shares, one-quarter paid up, in issue. Accordingly New Melrose's capitalisation as the Latest Practicable Date was £50,002 and its cash was £2. As at 10 October 2012, New Melrose had indebtedness of £50,000. This £50,000 comprises the Redeemable Preference Shares which carry a right to receive, out of the profits of New Melrose available for distribution and resolved to be distributed, a fixed non-cumulative preferential dividend of 2 per cent. per annum, accruing with effect from 1 January 2013 and are accounted for in accordance with IAS 32 ''Financial Instruments: Disclosure and Presentation'' and IAS 39 ''Financial Instruments: Recognition and Measurement'' and are presented as a financial liability. As at 10 October 2012, New Melrose had no banking facilities in place nor did it have any indirect indebtedness or contingent liabilities or guarantees. New Melrose has not traded since it was incorporated.

2. Funding—Old Melrose and the Melrose Group

Old Melrose is, and (on the Scheme becoming effective) New Melrose will be, a holding company whose principal assets are its investments in the shares of its subsidiaries. The liquidity and capital resource requirements of each subsidiary vary in the light of their own financial position and activity.

The Melrose Group's principal source of funds is funds raised from time to time from the issue of ordinary shares and bank and other borrowings, as well as cash dividends received, and money borrowed, from its subsidiaries.

On 29 June 2012 (the ''Signing Date''), Old Melrose entered into a multi-currency term and revolving credit facilities agreement (the ''Facilities Agreement'') pursuant to which a USD 500 million term facility and a £180 million multi-currency term facility and a EUR 300 million revolving credit facility, a £70 million multi-currency revolving credit facility and a £690 million multi-currency revolving credit facility were provided to the Melrose Group by a group of lenders. On 21 September 2012, Elster and certain of its subsidiaries acceded as borrowers under the Facilities Agreement and on 28 September 2012, Elster and certain of its subsidiaries acceded as guarantors under the Facilities Agreement.

The term facilities are fully utilised. The aggregate outstanding amount under the term facilities are required to be reduced to (i) on the third anniversary of the Signing Date, 95 per cent. of the total term loans drawn as of 23 December 2012; (ii) on the fourth anniversary of the Signing Date, 90 per cent. of the total term loans drawn as of 23 December 2012; and (iii) on the date falling six months after the fourth anniversary of the Signing Date, 85 per cent. of the total term loans drawn as of 23 December 2012. The balance of the aggregate outstanding amounts under the term facilities are required to be repaid on the date that is five years after the Signing Date.

The revolving credit facilities under the Facilities Agreement are available until the date that is one month before the date that is five years after the Signing Date. The revolving credit facilities will be used by (i) Old Melrose and any other borrowers that are members of the Melrose Group to finance the Melrose Group's (and following the EGSE Guarantee Date (as defined below), the Melrose Group's) working capital requirements and for general corporate purposes (including refinancing existing indebtedness and for financing acquisitions); (ii) Elster and any other borrowers that are members of the Elster Business (other than Elster Holdings US Inc.) to finance the Elster Business' working capital requirements and for general corporate purposes (including refinancing existing indebtedness and for financing acquisitions). Elster Holdings US Inc. has a separate revolving multi-currency credit facility of £70 million available to it for its working capital needs after it accedes to the Facilities Agreement as a borrower.

Prior to the EGSE Guarantee Date (as defined below), Old Melrose is required to ensure that the aggregate of any outstanding loans under the euro denominated tranche of the revolving credit facilities do not exceed an agreed threshold (the ''RCF Drawing Limit'') provided that the RCF Drawing Limit may be exceeded prior to the EGSE Guarantee Date as a result of the euro denominated tranche of the revolving credit facility being utilised to fund, directly or indirectly, any change of control offer, full redemption, repurchase, retirement or other acquisition of the Senior Notes or to pay associated costs and expenses or any costs and expenses incurred in connection with a waiver request or consent solicitation approved by the lenders under the Facilities Agreement in relation to the Senior Notes.

The Facilities Agreement contains representations and warranties, financial covenants, undertakings and events of default customary for a facilities agreement of this nature. The undertakings include (i) an undertaking to not acquire interests in companies, businesses or undertakings if (A) the aggregate consideration for all such acquisitions during the life of the Facilities Agreement would exceed £300 million (this limit will not apply if the leverage ratio at the time of a proposed acquisition (pro forma for such acquisition) is 1.50:1 or less); or (B) such acquisition is a Class 1 Transaction under the Listing Rules; (ii) an undertaking to ensure that financial indebtedness of members of the Melrose Group who are not obligors under the Facilities Agreement, subject to certain exceptions, does not exceed £75 million at any time; and (iii) a requirement to ensure that refinancing of the Senior Notes will be with either (A) the proceeds of loans under the Facilities Agreement or (B) pari passu debt borrowed by Old Melrose.

The financial covenants require that interest cover for the Melrose Group remains equal to or greater than 4.0:1 and the net debt:EBITDA ratio for the Melrose Group remains equal to or less than (depending on the testing period) 3.50:1 to 3.0:1. Prior to the EGSE Guarantee Date, certain further restrictions apply to incurrence of financial indebtedness by the Elster Business outside of the Facilities Agreement and the Senior Notes. New Melrose will become a guarantor in relation to the Facilities Agreement shortly after the Scheme becomes effective.

Old Melrose and various other entities in the Melrose Group will, subject to applicable local law limitations, guarantee all amounts due under the Facilities Agreement. Elster and various other entities in the Elster Business will, after their accession to the Facilities Agreement, initially (and subject to the limitations under the Senior Notes covenants and applicable local law limitations) guarantee only their own borrowings. When permitted to do so under German law, these members of the Elster Business will, subject to limitations under the Senior Notes covenants that are applicable at such time and applicable local law limitations, guarantee the liabilities of the Melrose Group (the date on which such guarantees are granted being the ''EGSE Guarantee Date'').

3. Borrowing requirements and funding structure

The revolving credit facilities under the Facilities Agreement are used (when required) to finance short-term working capital requirements. The Melrose Group's businesses display no significant seasonality in their borrowing requirements. Old Melrose draws down under these revolving credit facilities and on-lends to subsidiaries as required. Old Melrose can request that the commitments of lenders under the £690 million revolving credit facility (up to an aggregate limit of £250 million) be made available as bilateral ancillary facilities. Overseas subsidiaries can directly avail of overdraft facilities in their jurisdictions as required.

4. Restrictions on use of capital resources

There are no notable restrictions on the use of the Melrose Group's capital resources.

5. Treasury policies

The Melrose Group has a centralised treasury function whose primary role is to manage funding, liquidity and financial risks. Treasury is not a profit centre and does not enter into speculative transactions. The treasury policies of the Melrose Group are controlled by the Old Melrose Board (prior to the Scheme becoming effective) and the New Melrose Board (on the Scheme becoming effective) and are subject to discussion on a regular basis, on the recommendation of the Finance Director. Whenever appropriate, the Melrose Group's treasury policy is to remit surplus cash resources to the UK companies in the Melrose Group. For further information please refer to Old Melrose's annual report and accounts for the financial year ended 31 December 2011 which is incorporated by reference into this document.

6. Cash flow Analysis

The selected cash flow information presented for the years ended 31 December 2011, 31 December 2010 and 31 December 2009 has been prepared in accordance with IFRS and has been extracted from the Melrose Group's audited financial statements for the years ended 31 December 2011, 31 December 2010 and 31 December 2009 respectively.

	Year ended 31 December
	2011	2010(1)	2010	2009
	£m	£m	£m	£m
Net cash from operating activities from continuing operations Net cash from/(used in) operating activities from discontinued	74.6	72.7	117.9	176.8
operations	16.6	45.2	—	(2.0)
Net cash from operating activities	91.2	117.9	117.9	174.8
Investing activities
Disposal of businesses	374.4	(0.1)	(0.1)	49.2
Net cash disposed	(0.5)	—	—	(0.6)
Acquisition and disposal costs	(3.2)	—	—	—
Purchase of properties, plant and equipment	(37.6)	(22.9)	(29.5)	(22.9)
Proceeds on disposal of properties, plant and equipment	0.3	0.2	0.3	1.0
Purchase of computer software	(1.6)	(1.2)	(1.2)	(0.9)
Dividends received from joint ventures	—	0.3	0.3	0.2
Dividends paid to non-controlling interests	—	—	(0.2)	(0.2)
Interest received	10.0	9.3	9.3	3.8
Acquisition of subsidiary undertakings	—	(9.1)	(9.1)	—
Net cash from/(used in) in investing activities operations from continuing operations	341.8	(23.5)	(30.2)	29.6
Net cash from/(used in) investing activities operations from
discontinued operations	(4.6)	(6.7)	—	(1.3)
Net cash from/(used in) investing activities	337.2	(30.2)	(30.2)	28.3
Financing activities
Dividends paid	(52.8)	(43.8)	(43.8)	(35.6)
Return of capital	(372.1)	—	—	—
Net movement on borrowings	—	—	(0.5)	(185.8)
Repayment of obligations under finance leases	—	(1.1)	(1.1)	(0.1)
Net cash used in financing activities from continuing operations	(424.9)	(44.9)	(45.4)	(221.5)
Net cash used in financing activities from discontinued operations	(0.3)	(0.5)	—	—
Net cash used in financing activities	(425.2)	(45.4)	(45.4)	(221.5)
Net increase in cash and cash equivalents	3.2	42.3	42.3	(18.4)
Cash and cash equivalents at beginning of year	195.7	147.5	147.5	167.7
Effect of foreign exchange rate changes	(3.3)	5.9	5.9	(1.8)
Cash and cash equivalents at end of year	195.6	195.7	195.7	147.5

(1) Restated to include the cash flows of Dynacast, Brush Traction, Logistex UK, Madico and Weber Knapp within discontinued operations.

7. Principal investments and acquisitions

Save with respect to the acquisition of Elster as set out in paragraph 1.1 and paragraph 5 of Part II (Information on Old Melrose and New Melrose) of this document, in the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 the Melrose Group did not, and as at the Latest Practicable Date the Melrose Group does not, have any principal investments in progress.

8. Plant, property and equipment

A description of the Melrose Group's investments in property, plant and equipment is given on pages 18 and 107 of the annual report and accounts of Old Melrose for the financial year ended 31 December 2011, which is incorporated into this document by reference. In addition, the Melrose Group has planned material capital expenditure of £5.4 million in relation to upgrades to certain Bridon manufacturing sites.

PART V

HISTORICAL FINANCIAL INFORMATION RELATING TO OLD MELROSE

1. Background

The financial statements of Old Melrose for the period ended 30 June 2012, as set out in the half yearly results, financial year ended 31 December 2011, as set out in the annual report and accounts of Old Melrose for 2011, the financial statements of Old Melrose for the year ended 31 December 2010, as set out in the annual report and accounts of Old Melrose for 2010, and the financial statements of Old Melrose for the financial year ended 31 December 2009, as set out in the annual report and accounts of Old Melrose for 2009, are incorporated by reference into this document. The audit reports for each of the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 were unqualified.

The financial statements of Old Melrose for the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 were prepared in accordance with IFRS.

The financial statements of the Elster Business for the three month period ended 31 March 2012 (which have been extracted without material adjustment from Elster's report on Form 6-K which contains the unaudited quarterly report for the first quarter ended 31 March 2012 which was filed on 4 May 2012), as set out in section A.1 of Part VII (Historical Financial Information Relating to Elster) of the Old Melrose Prospectus, the financial statements of the Elster Business for the three financial years ended 31 December 2009, 31 December 2010 and 31 December 2011 (which have been extracted without material adjustment from Form 20-Fs filed with the SEC by Elster), as set out in section A.2 of Part VII (Historical Financial Information Relating to Elster) of the Old Melrose Prospectus, and the unaudited reconciliation of the Elster Business's financial statements for the years ended 31 December 2009, 31 December 2010 and 31 December 2011, and for the period ended 31 March 2012, to IFRS, as applied by Old Melrose as set out in section B of Part VII (Historical Financial Information Relating to Elster) of the Old Melrose Prospectus, are incorporated by reference into this document.

The financial statements of the Elster Business for the period ended 31 March 2012 and for the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 were prepared in accordance with US GAAP.

2. Cross reference list

The following list is intended to enable Shareholders to identify easily specific items of information which have been incorporated by reference into this document.

2.1 IFRS financial statements for the year ended 31 December 2009 and the audit report thereon for Old Melrose

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2009:

consolidated income statement—page 47;
consolidated statement of comprehensive income—page 48;
consolidated statement of cash flows—page 49;
consolidated balance sheet—page 50;
consolidated statement of changes in equity—page 51;
notes to the consolidated financial statements—pages 52 to 89;
independent auditors' report—page 46; and
accounting policies—pages 53 to 58.

2.2 IFRS financial statements for the year ended 31 December 2010 and the audit report thereon for Old Melrose

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2010:

consolidated income statement—page 47;
consolidated statement of comprehensive income—page 48;
consolidated statement of cash flows—page 49;
consolidated balance sheet—page 50;
consolidated statement of changes in equity—page 51;
notes to the consolidated financial statements—pages 52 to 87;
independent auditors' report—page 46; and
accounting policies—pages 52 to 57.

2.3 IFRS financial statements for the year ended 31 December 2011 and the audit report thereon for Old Melrose

The page numbers below refer to the relevant pages of the annual report and accounts of Old Melrose for the financial year ended 31 December 2011:

consolidated income statement—page 63;
consolidated statement of comprehensive income—page 64;
consolidated statement of cash flows—page 65;
consolidated balance sheet—page 66;
consolidated statement of changes in equity—page 67;
notes to the consolidated financial statements—pages 68 to 108;
independent auditors' report—page 62; and
accounting policies—pages 69 to 76.

2.4 Half yearly results for the period ended 30 June 2012 and 30 June 2011 for Old Melrose

The half yearly results as published by Old Melrose on 30 August 2012 (which have been reviewed) are incorporated by reference into this document in their entirety.

2.5 US GAAP financial statements for the years ended 31 December 2009, 31 December 2010 and 31 December 2011 and the audit reports thereon for the Elster Business

The page numbers below refer to the relevant pages of the Old Melrose Prospectus:

independent auditors reports—pages 101 and 138;
consolidated statements of operations—pages 102 and 139;
consolidated balance sheets—pages 103 and 140;
consolidated statements of changes in equity—pages 104 and 141;
consolidated statements of cash flows—pages 105 and 142; and
notes to the consolidated financial statements—pages 106 to 137 and pages 143 to 173.

2.6 Quarterly results for the period ended 31 March 2012 for the Elster Business

The page numbers below refer to the relevant pages of the Old Melrose Prospectus:

consolidated statements of operations—page 85;
consolidated balance sheets—page 86;
consolidated statements of cash flows—page 87; and
notes to the consolidated interim financial statements—pages 88 to 99.

2.7 Unaudited reconciliation of the Elster Business's financial statements for the years ended 31 December 2009, 31 December 2010 and 31 December 2011, and for the period ended 31 March 2012, to IFRS, as applied by Old Melrose

The unaudited reconciliation of the Elster Business's financial statements for the years ended 31 December 2009, 31 December 2010 and 31 December 2011, and for the period ended 31 March 2012, to IFRS, as applied by Old Melrose is set out on pages 174 and 175 of the Old Melrose Prospectus.

PART VI

UNAUDITED PRO FORMA INFORMATION ON THE MELROSE GROUP

This unaudited pro forma statement of net assets of the Melrose Group in this Part VI has been based on the net assets of Old Melrose Group as at 30 June 2012 and the net assets of Elster Business as at 30 June 2012 and has been prepared in accordance with Annex II of the Prospective Directive Regulation and on the basis of the notes set out below. The unaudited pro forma statement of net assets has been prepared to illustrate the effect on the consolidated net assets of the Old Melrose Group of the Acquisition as if Melrose Acquisitionco had acquired 99.62 per cent. of Elster Shares and/or Elster ADSs on 30 June 2012. As indicated above, the unaudited pro forma statement of the net assets has been prepared for illustrative purposes only and, because of its nature, the pro forma statement addresses a hypothetical situation and does not, therefore, represent the Old Melrose Group's actual financial position or results following the Tender Offer becoming effective or the Acquisition being completed.

				Adjustments
	Historical	Historical
	As reported Old Melrose Group Consolidated Net Assets as at 30/06/2012	Elster Business Net Assets as at 30/06/2012	Rights Issue	Acquisition of 99.35% of Elster Shares/ Elster ADSs	Acquisition of a further 0.27% of Elster Shares/ Elster ADSs	Elster Debt repayment	Acquisition finance facilities	Pro forma
	(notes 1 and 9)	(notes 2 and 9)	(note 3)	(notes 4, 5 and 10)	(notes 5, 6 and 10)	(note 7)	(note 8)
	£ millions	£ millions	£ millions	£ millions	£ millions	£ millions	£ millions	£ millions
Non-current assets
Goodwill and other
intangible assets	879.0	674.6		983.5				2,537.1
Property, plant and
equipment.	208.3	125.7						334.0
Trade and other
receivables	0.6	44.8						45.4
Deferred tax assets	49.2	18.7						67.9
	1,137.1	863.8	0.0	983.5	0.0	0.0	0.0	2,984.4
Current assets
Inventories Trade and other	218.0	107.5						325.5
receivables	215.2	229.7						444.9
Derivative financial assets .	1.6	0.6						2.2
Current tax asset	0.0	6.4						6.4
Cash and cash equivalents .	116.7	71.1	1,170.5	(1,484.8)	(4.0)	(349.5)	667.8	187.8
	551.5	415.3	1,170.5	(1,484.8)	(4.0)	(349.5)	667.8	966.8
Total assets	1,688.6	1,279.1	1,170.5	(501.3)	(4.0)	(349.5)	667.8	3,951.2
Current liabilities
Trade and other payables Interest-bearing loans and	273.8	262.0						535.8
borrowings	0.0	3.2				(3.2)		0.0
Current tax liabilities Derivative financial	27.1	14.5						41.6
liabilities	8.4	0.1						8.5
Provisions	45.7	13.3						59.0
	355.0	293.1	0.0	0.0	0.0	(3.2)	0.0	644.9
Net current assets	196.5	122.2	1,170.5	(1,484.8)	(4.0)	(346.3)	667.8	321.9

	Adjustments
	Historical	Historical
	As reported Old Melrose Group Consolidated Net Assets as at 30/06/2012		Elster Business Net Assets as at 30/06/2012	Rights Issue	Acquisition of 99.35% of Elster Shares/ Elster ADSs	Acquisition of a further 0.27% of Elster Shares/ Elster ADSs	Elster Debt repayment	Acquisition finance facilities	Pro forma
	(notes 1 and 9)	(notes 2 and 9)	(note 3) (notes 4, 5	and 10)	(notes 5, 6 and 10) £ millions	(note 7)	(note 8)	£ millions
	£ millions	£ millions	£ millions	£ millions		£ millions	£ millions
Non-current liabilities
Interest-bearing loans and
borrowings	423.2	346.3				(346.3)	667.8	1,091.0
Trade and other payables	1.6	4.6						6.2
Non-current tax liabilities .	0.0	9.7						9.7
Deferred tax liabilities .	95.6	39.5						135.1
Retirement benefit
obligations	131.4	101.3						232.7
Derivative financial
liabilities	2.5	—						2.5
Provisions	63.3	0.6						63.9
	717.6	502.0	0.0	0.0	0.0	(346.3)	667.8	1,541.1
Total liabilities	1,072.6	795.1	0.0	0.0	0.0	(349.5)	667.8	2,186.0
Net assets	616.0	484.0	1,170.5	(501.3)	(4.0)	0.0	0.0	1,765.2

(3) Adjustments reflect funds raised from the Rights Issue of £1,170.5 million (gross proceeds of £1,199.1 million less expenses of £28.6 million).

(5) The Old Melrose Prospectus reflected an assumption of 100 per cent. acquisition of Elster ADSs and Elster Shares. This pro forma financial information has been updated to reflect the actual Elster Shares acquired on 23 August 2012 (99.35 per cent) and 28 August 2012 (a further 0.27 per cent).
(6) The adjustment of £4.0 million to cash represents cash consideration of £4.0 million (\$6.2 million based on the exchange rate of 1.57 USD/1GBP at 30 June 2012) based on consideration per ADS of \$20.50 (\$82 per Elster Share), for 0.27 per cent. of the Elster ADSs and Elster Shares. In accordance with IFRS, no goodwill is recognised on subsequent purchase of non-controlling interests with the balance taken to reserves.
(7) Adjustments reflect repayment of existing Elster bank facilities as drawn down on 30 June 2012.
(8) Adjustments reflect the drawdown of a portion of the facilities available under the Facilities Agreement inclusive of banking fees.
(9) No adjustment has been made to reflect the trading results of the Old Melrose Group or the Elster Business since 30 June 2012.
(10) Adjustments do not reflect any acquisitions of Elster Shares and/or Elster ADSs outside of the Tender Offer.

	Historical		IFRS accounting policy adjustments
	As reported Elster Business Consolidated Net Assets as at 30/06/2012	Research and development	Balance sheet reclassifications	Elster Business IFRS	Elster Business IFRS	The Old Melrose Group's IFRS classification
	(note 1) \$ millions— US GAAP	(note 2) \$ millions	(note 3) \$ millions	\$ millions	(note 4) £ millions
Non-current assets
Goodwill Other intangible assets Property, plant and	904.3 154.8			904.3 154.8	576.0 98.6	Goodwill and other intangible assets Goodwill and other intangible assets
equipment. Other assets	197.3 54.2	32.4	(16.3)	197.3 70.3	125.7 44.8	Property, plant and equipment Trade and other receivables—
Deferred tax assets	12.4		16.9	29.3	18.7	non current Deferred tax assets
	1,323.0	32.4	0.6	1,356.0	863.8
Current assets
Inventories Accounts receivable Receivable from related	168.8 289.7			168.8 289.7	107.5 184.5	Inventories Trade and other receivables—current
parties	7.6			7.6	4.8	Trade and other receivables—current
Prepaid expenses	11.7			11.7	7.5	Trade and other receivables—current
Other current assets Derivative financial assets	52.6		(0.9) 0.9	51.7 0.9	32.9 0.6	Trade and other receivables—current Derivative financial assets
Income tax refunds	10.0			10.0	6.4	Current tax assets
Deferred tax assets	16.9		(16.9)	0.0	0.0
Cash and cash equivalents	111.7			111.7	71.1	Cash and cash equivalents
	669.0	0.0	(16.9)	652.1	415.3
Total assets	1,992.0	32.4	(16.3)	2,008.1	1,279.1
Current liabilities
Accounts payable Warranties Payroll, bonuses and related	207.3 30.2			207.3 30.2	132.0 19.2	Trade and other payables Trade and other payables
accruals	57.8			57.8	36.8	Trade and other payables
Other current liabilities	130.8		(21.0)	109.8	69.9	Trade and other payables
Deferred revenue .	6.5			6.5	4.1	Trade and other payables
Short term debt Income tax payable	5.0 22.8			5.0 22.8	3.2 14.5	Interest bearing loans and borrowings Current tax liabilities
Pension and other employee
benefits	13.0		(13.0)	0.0	0.0
Deferred tax liabilities .	6.4		(6.4)	0.0	0.0
Derivative financial liabilities . Provisions			0.1 20.9	0.1 20.9	0.1 13.3	Derivative financial liabilities Provisions

	479.8	0.0	(19.4)	460.4	293.1
Net current assets	189.2	0.0	2.5	191.7	122.2
Non-current liabilities Long term debt	560.0		(16.3)	543.7	346.3	Interest bearing loans and borrowings
Payroll, bonuses and related
accruals	1.4			1.4	0.9	Trade and other payables
Warranties Other non current liabilities	4.9 1.9		(1.0)	4.9 0.9	3.1 0.6	Trade and other payables Trade and other payables
Income taxes payable	15.3			15.3	9.7	Non current tax liabilities
Deferred tax liabilities Pension and other employee	46.3	9.3	6.4	62.0	39.5	Deferred tax liabilities
benefits	146.0		13.0	159.0	101.3	Retirement benefit obligations
Provisions .			1.0	1.0	0.6	Provisions
	775.8	9.3	3.1	788.2	502.0
Total liabilities	1,255.6	9.3	(16.3)	1,248.6	795.1
Net assets	736.4	23.1	0.0	759.5	484.0

(3) A number of balance sheet reclassification adjustments have been made in order to align the balance sheet presentation of Elster under US GAAP to the balance sheet presentation of the Old Melrose Group under IFRS. Specifically, the Old Melrose Group does not classify any component of 'deferred taxation' or 'pension and other employee benefits' as current. Accordingly, an adjustment has been made to reclassify all current assets and current liabilities associated with these balance sheet items as non-current. Also, a \$16.3 million reclassification has been made in respect of deferred banking facility fees. Under US GAAP these are recognised by Elster as an asset whereas under IFRS these deferred fees are offset against loans and other borrowings. In addition, certain balances classified by Elster as ''other current liabilities'', ''other non current liabilities'' and ''other current assets'' would be classified as ''provisions'' or ''derivative financial instruments'' under the Old Melrose Group's accounting policies. \$20.9 million of current liabilities and \$1.0 million of non-current liabilities balances have therefore been reclassified to provisions and \$0.1 million of current liabilities and \$0.9 million of current assets have been reclassified as derivative financial instruments.

(4) Converted at exchange rate on 30 June 2012 of 1.57 USD/1GBP.

2 New Street Square London EC4A 3BZ

The Board of Directors on behalf of New Melrose PLC Leconfield House Curzon Street London W1J 5JA

N M Rothschild & Sons Limited New Court St Swithin's Lane London EC4N 8AL

12 October 2012

Dear Sirs,

New Melrose PLC (the ''Company'')

We report on the unaudited pro forma financial information (the ''Pro forma financial information'') set out in Part VI of the prospectus dated 12 October (the ''Prospectus'', which has been prepared on the basis described in that Part VI, for illustrative purposes only, to provide information about how the acquisition of the Elster Business might have affected the financial information presented on the basis of the accounting policies adopted by the Old Melrose Group in preparing the financial statements for the period ended 30 June 2012. This report is required by Annex I item 20.2 of Commission Regulation (EC) No 809/2004 (the ''Prospectus Directive Regulation'') and is given for the purpose of complying with that requirement and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company (the ''Directors'') to prepare the Pro forma financial information in accordance with Annex I item 20.2 and Annex II items 1 to 6 of the Prospectus Directive Regulation.

It is our responsibility to form an opinion; in accordance with Annex I item 20.2 of the Prospectus Directive Regulation, as to the proper compilation of the Pro forma financial information and to report that opinion to you in accordance with Annex II item 7 of the Prospectus Directive Regulation.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Annex I item 23.1 of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the Directors.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Old Melrose Group.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards or practices.

Opinion

In our opinion:

(a) the Pro forma financial information has been properly compiled on the basis stated; and
(b) such basis is consistent with the accounting policies of the Old Melrose Group.

Declaration

For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with Annex I item 1.2 of the Prospectus Directive Regulation.

Yours faithfully

Deloitte LLP Chartered Accountants

PART VII

UNITED KINGDOM TAXATION CONSIDERATIONS

1. General

The following summary is intended as a general guide only and relates only to certain UK tax consequences of receiving the New Melrose Ordinary Shares under the Scheme. It is based on current UK tax law and the current practice of HM Revenue & Customs, both of which are subject to change, possibly with retrospective effect. The summary is intended to apply only to Shareholders who are resident in the UK for UK tax purposes, who hold the New Melrose Ordinary Shares as investments and not on trading account and who are the beneficial owners of the New Melrose Ordinary Shares. The summary is not intended to apply to certain classes of shareholders such as dealers in securities, insurance companies, those holding shares by reason of their employment or collective investment schemes.

Any Shareholders or prospective shareholders who are in any doubt as to their tax position regarding the acquisition, ownership and/or disposal of the New Melrose Ordinary Shares and/or who are subject to tax in a jurisdiction other than the UK should consult their tax advisers.

2. The Scheme and the New Melrose Reduction of Capital

For the purposes of the UK taxation of chargeable gains, the cancellation of the Old Melrose Ordinary Shares and the issue of New Melrose Ordinary Shares should be treated as a reorganisation of share capital. Accordingly, Shareholders will not be treated as making a disposal in respect of the cancellation of Old Melrose Ordinary Shares or an acquisition in respect of the issue to them of the New Melrose Ordinary Shares. The New Melrose Ordinary Shares will be treated as having been acquired at the same time and for the same consideration as the Old Melrose Ordinary Shares for the purposes of UK taxation of chargeable gains. Shareholders who alone, or together with connected persons, hold more than five per cent. of the Old Melrose Ordinary Shares are advised that Old Melrose has obtained a clearance under section 138 of the Taxation of Chargeable Gains Act 1992 that the Board of HM Revenue & Customs are satisfied that the scheme of reconstruction will be effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of a liability to capital gains tax or corporation tax.

A Shareholder's original base cost in his Old Melrose Ordinary Shares will be attributed to the New Melrose Ordinary Shares.

For the purposes of the UK taxation of chargeable gains, the New Melrose Reduction of Capital, which will be effected by decreasing the nominal value of each New Melrose Ordinary Share should be treated as another reorganisation of share capital. Accordingly, Shareholders should not be treated as making a disposal of the New Melrose Ordinary Shares for the purposes of the UK taxation of chargeable gains as a result of that reduction of capital.

3. Dividends

Under current tax law, New Melrose will not be required to withhold tax at source from dividend payments it makes.

3.1 Individuals

An individual who receives a dividend from New Melrose will generally be entitled to a tax credit which may be set against that individual's total income tax liability on the dividend. Such a liability to income tax is calculated on the aggregate of the net dividend and the related tax credit (the ''gross dividend''). The tax credit will be equal to one-ninth of the cash dividend paid, or ten per cent. of the gross dividend.

An individual who is liable to income tax at the basic rate will be subject to income tax on dividends paid by New Melrose at the rate of ten per cent. of the gross dividend. As such, the tax credit will satisfy in full the individual's liability to income tax on the dividend.

An individual who is liable to income tax at the higher rate will be subject to income tax on the gross dividend at 32.5 per cent. After taking into account the tax credit, the individual will have to account for tax at an effective rate of 25 per cent. of the net cash dividend received.

An individual who is liable to income tax at the additional rate of tax of 50 per cent., reducing to 45 per cent. from 6 April 2013 (i.e. those with taxable income in excess of £150,000) will be subject to income tax on the gross dividend at 42.5 per cent (37.5 per cent. from 6 April 2013). After taking into account the tax credit, the individual will have to account for tax at an effective rate of 36.1 per cent. (30.6 per cent. from 6 April 2013) of the net cash dividend received.

An individual who is not liable to income tax in respect of the gross dividend will not be entitled to any payment in respect of any part of the tax credit associated with the dividend.

In all circumstances, the dividend tax credit is notional only and non-refundable.

3.2 Companies

Subject to certain exceptions for traders in securities and insurance companies, a corporate shareholder resident in the U.K. for tax purposes will normally be exempt from corporation tax on any dividend received from New Melrose (unless certain conditions are not met) and will not be able to claim a tax credit in respect of any such dividend. If the conditions for exemption are not or cease to be satisfied, or if a shareholder elects for an otherwise exempt dividend to be taxable, the shareholder will be subject to U.K. corporation tax on dividends received from New Melrose. U.K. corporation tax would be charged on such dividends at the rate applicable to that corporate shareholder.

4. Stamp Duty and Stamp Duty Reserve Tax

Except in relation to arrangements for depositary receipts or clearance services to which special rules apply:

(i) No stamp duty or stamp duty reserve tax (''SDRT'') should be payable on the issue of the New Melrose Ordinary Shares.
(ii) An unconditional agreement to sell New Melrose Ordinary Shares would normally give rise to liability on the purchaser to SDRT at the rate of 0.5 per cent. of the amount or actual value of the actual consideration paid or provided. If an instrument of transfer of the New Melrose Ordinary Shares were subsequently produced it would generally be subject to stamp duty at the rate of 0.5 per cent. of the amount or actual value of the actual consideration paid or provided (rounded up to the nearest £5), subject to an exemption for low-value transactions (£1,000 or less). When such stamp duty is paid, provided it is paid within six years of the agreement the SDRT charge will be cancelled and any SDRT already paid will be refunded. Stamp duty and SDRT are generally the liability of the purchaser.

The above statements are intended as a general guide to the current position. Certain categories of person, including market makers, brokers, dealers and persons connected with depositary arrangements and clearance services are not liable to stamp duty or SDRT and others may be liable at a higher rate or may, although not primarily liable for tax, be required to notify and account for it.

5. ISAs

If existing Shareholders of Old Melrose currently hold their Old Melrose Ordinary Shares in the stocks and shares component of an ISA, the New Melrose Ordinary Shares should qualify for inclusion in the same way.

PART VIII

DIRECTORS, CORPORATE GOVERNANCE AND EMPLOYEES

1. Directors

The following table sets out information relating to the New Directors, each of whom is also currently a Director of Old Melrose:

Name	Function
Christopher Miller	Executive Chairman
David Roper	Executive Vice-Chairman
Simon Peckham	Chief Executive
Geoffrey Martin	Group Finance Director
Miles Templeman	Senior Non-Executive Director
Perry Crosthwaite	Non-Executive Director
John Grant	Non-Executive Director
Justin Dowley	Non-Executive Director

The business address of each of the Directors is Leconfield House, Curzon Street, London W1J 5JA.

1.1 Profiles of the Directors

The names, business experience and principal business activities outside the Melrose Group of the Directors, as well as the dates of their initial appointment as Directors, are set out below.

Christopher Miller

Executive Chairman

Age 61; Mr. Miller qualified as a chartered accountant with Coopers & Lybrand, following which he was an associate director of Hanson plc. In September 1988 he joined the board of Wassall PLC as its chief executive. Between October 2000 and May 2003 he was involved in private investment activities. Mr. Miller was appointed as an Executive Director of Old Melrose on 29 May 2003. He is currently non-executive director of TMO Renewables Limited.

David Roper

Executive Vice-Chairman

Age 61; Mr. Roper qualified as a chartered accountant with Peat Marwick Mitchell, following which he worked in the corporate finance divisions of S.G. Warburg & Co. Limited, BZW and Dillon Read. In September 1988 he was appointed to the board of Wassall PLC and became its deputy chief executive in 1993. Between October 2000 and May 2003 he was involved in private investment activities and served as a non-executive director on the boards of two companies. Mr. Roper was appointed as an Executive Director of Old Melrose on 29 May 2003 and became Executive Vice-Chairman at the conclusion of the 2012 AGM.

Simon Peckham

Chief Executive

Age 50; Mr. Peckham qualified as a solicitor in 1986. In 1990 he joined Wassall PLC and became an executive director of Wassall PLC in 1999. From October 2000 until May 2003 he worked for the equity finance division of The Royal Bank of Scotland and was involved in several high profile transactions. Mr Peckham was appointed as an Executive Director of Old Melrose on 29 May 2003 and became Chief Executive at the conclusion of the 2012 AGM.

Geoffrey Martin

Group Finance Director

Age 44; Mr. Martin qualified as a chartered accountant with Coopers & Lybrand, where he worked within the corporate finance and audit departments. In 1996 he joined Royal Doulton PLC and was group finance director from October 2000 until June 2005. During this time, he was involved in projects including raising public equity, debt refinancings and the restructuring and outsourcing of the manufacturing and supply chain. Mr Martin was appointed as an Executive Director of Old Melrose on 7 July 2005.

Miles Templeman

Senior Non-Executive Director

Age 65; Mr. Templeman has been a director of several consumer goods and retailing companies. He was managing director of Threshers Off-Licences between 1985 and 1988 and managing director of Whitbread Beer Company between 1990 and 2001. Mr Templeman was chief executive officer of HP Bulmer Holdings PLC from January 2003 to July 2003 and non-executive chairman of restaurant chain YO! Sushi between 2003 and 2008. He has also held a number of other non-executive directorships and was appointed as a non-executive Director of Old Melrose on 8 October 2003. Between October 2004 and October 2011 Mr Templeman also occupied the position of director general of the Institute of Directors. He is currently non-executive chairman of Shepherd Neame, the Kentish family brewer.

Perry Crosthwaite

Non-Executive Director

Age 63; Mr. Crosthwaite has over 30 years' experience as a director in the City of London. He was a founding director of Henderson Crosthwaite Institutional Brokers Limited, serving on the board until its acquisition by Investec Bank in 1998. He became a director of Investec Bank (UK) Limited and chairman of the Investment Banking division until his retirement in 2004. Mr. Crosthwaite was appointed as a non-executive Director of Old Melrose on 26 July 2005. He is currently chairman of Jupiter Green Investment Trust Plc and a non-executive director of Investec Limited and Investec Plc.

John Grant

Non-Executive Director

Age 66; Mr. Grant spent his executive career in a variety of senior international roles within the automotive industry and other engineering businesses. He was chief executive of Ascot Plc between 1997 and 2000. Prior to that, Mr. Grant was group finance director of Lucas Industries Plc (subsequently LucasVarity Plc) between 1992 and 1996. He previously held several senior strategy and finance positions with Ford Motor Company in Europe and the USA. Mr. Grant was appointed as a non-executive Director of Old Melrose on 1 August 2006. He is currently a non-executive director of MHP S.A., Pace Plc and Wolfson Microelectronics Plc.

Justin Dowley

Non-Executive Director

Age 57; Mr. Dowley has extensive experience within the banking, investment and asset management sector and was latterly vice chairman of EMEA Investment Banking, a division of Nomura International plc; he was also a founder partner of Tricorn Partners, Head of Investment Banking at Merrill Lynch Europe and a director at Morgan Grenfell. Mr. Dowley was appointed as a non-executive Director of Old Melrose on 1 September 2011. He is also currently chairman of Intermediate Capital Group plc, a specialist investment and asset management company and is also a director of a number of private companies including Ascot Authority (Holdings) Limited.

1.2 Interests of the Directors

As at the Latest Practicable Date, the interests (all of which are beneficial) of the Directors, their immediate families and (so far as is known to them or could with reasonable diligence be ascertained by them) persons connected (within the meaning of section 96B of FSMA) with the Directors in the issued share capital of Old Melrose, including: (i) those arising pursuant to transactions notified to Old Melrose pursuant to Disclosure and Transparency Rule 3.1.2R; or (ii) those of the connected persons of the Directors, which would, if such connected person were a Director, be required to be disclosed under (i) above, together with such interests in New Melrose as are expected to subsist immediately following Admission, are set out in the following table:

	Number of Old Melrose Ordinary Shares	Number of New Melrose Ordinary Shares	Percentage of issued ordinary share capital
Executive Chairman
Christopher Miller(1)	14,175,344	14,175,344	1.12
Executive Vice-Chairman
David Roper	9,584,633	9,584,633	0.76
Executive Directors:
Simon Peckham	9,664,068	9,664,068	0.76
Geoffrey Martin	4,758,797	4,758,797	0.38
Non-Executive Directors:
Miles Templeman	632,343	632,343	0.05
Perry Crosthwaite	222,377	222,377	0.02
John Grant	295,817	295,817	0.02
Justin Dowley	414,000	414,000	0.03

(1) The interest of Christopher Miller includes 4,000,000 Old Melrose Ordinary Shares held by Harris & Sheldon Investments Limited, a company which is connected with Christopher Miller within the meaning of section 252 of the 2006 Act. On the Scheme becoming effective, Harris & Sheldon Investments Limited will own 4,000,000 New Melrose Ordinary Shares.

Taken together, the combined percentage interest of the Directors in the issued ordinary share capital of Old Melrose as at the Latest Practicable Date was approximately 3.14 per cent. The percentage holding of New Melrose Ordinary Shares is expected to be the same as the percentage of Old Melrose Ordinary Shares.

Details of rights over Old Melrose 2012 Incentive Shares held by the Directors as at the Latest Practicable Date are set out below. Those rights are not included in the interests of the Directors shown in the table above.

Directors' interests in share-based long-term incentive plans

On 11 April 2012, Shareholders approved amendments to Old Melrose's existing incentive share scheme which had the effect of, inter alia, bringing forward the crystallisation date of that incentive scheme and adopting a new incentive scheme, having a similar economic basis (the ''Old Melrose 2012 Incentive Scheme''). Participants in the Old Melrose 2012 Incentive Scheme have been granted options over a new class of incentive shares in Old Melrose (''Old Melrose 2012 Incentive Shares''). Details of the number of options held by Directors under the Old Melrose 2012 Incentive Scheme are set out below. The rights and restrictions attaching to the options are set out at paragraph 2 of Part II of the shareholder circular sent to Shareholders on 23 March 2012 which is incorporated in to this document by reference. The rights attaching to the Old Melrose 2012 Incentive Shares (including a description of the conversion rights) are set out at paragraph 4 of Part XIII (Additional Information) of the Old Melrose Prospectus.

Options over Old Melrose 2012 Incentive Shares will, pursuant to their terms, be exchanged for options over New Melrose 2012 Incentive Shares on a one-for-one basis upon the Scheme becoming effective on substantially the same terms and economic basis as their existing options. The terms of the options over the New Melrose 2012 Incentive Shares are set out in paragraph 13 of Part IX (Additional Information) of this document.

	Number of options over Old Melrose 2012 Incentive Shares held at the Latest Practicable Date
Christopher Miller	8,500
David Roper	8,500
Simon Peckham	8,500
Geoffrey Martin	8,500
Miles Templeman	Nil
Perry Crosthwaite	Nil
John Grant .	Nil
Justin Dowley .	Nil

General

Save as set out above, no Director, nor any member of their respective immediate families, nor any person connected with any Director within the meaning of section 252 of the 2006 Act, has any interests (beneficial or non-beneficial) in the share capital of New Melrose or Old Melrose or any member of the Melrose Group.

Except as set out in paragraph 12.1.2 of Part IX (Additional Information) of this document, no Director has, or has had, any interest in any transaction which is or was unusual in its nature or conditions or which is or was significant to the business of New Melrose or Old Melrose and which was effected by New Melrose or Old Melrose during the current or immediately preceding financial year or which remains in any respect outstanding or unperformed.

There are no outstanding loans granted by New Melrose, Old Melrose or any member of the Melrose Group to any of the Directors, nor has any guarantee been provided by Melrose or any of its subsidiaries for their benefit save that qualifying third party indemnity provisions are in place for the benefit of Directors in relation to certain losses and liabilities which they may potentially incur to third parties in the course of their duties.

2. Remuneration of the Directors

Set out below is information on the current employment and remuneration arrangements for the Directors of Old Melrose and the arrangements in place during the year ended 31 December 2011.

2.1 Directors' Service Agreements and Letters of Appointment

Details of the terms of each of the Old Melrose Executive Directors' service agreement are set out below. Upon the Scheme becoming effective, the existing Executive Director service agreements will be novated from Old Melrose to New Melrose and all the Executive Directors except Simon Peckham and Geoffrey Martin will resign as Executive Directors of Old Melrose.

Name	Date of Initial Appointment	Date of Expiry of Current Office	Salary per annum (£)	Leave (days)(1)	Benefits on Termination	Notice Period	Confidentiality Obligations
Christopher Miller .	29 May 2003	end of 2013 AGM	409,800	25	None other than payment in lieu of untaken holiday entitlement	12 months	During and after employment
David Roper	29 May 2003	end of 2013 AGM	409,800	25	None other than payment in lieu of untaken holiday entitlement	12 months	During and after employment
Simon Peckham	29 May 2003	end of 2013 AGM	409,800	25	None other than payment in lieu of untaken holiday entitlement	12 months	During and after employment
Geoffrey Martin	7 July 2005	end of 2013 AGM	327,900	25	None other than payment in lieu of untaken holiday entitlement	12 months	During and after employment

(1) In addition to bank and public holidays.

Details of the terms of each non-executive Director's appointment with Old Melrose are set out below. The non-executive Directors of Old Melrose have been appointed as Directors of New Melrose and will enter into new letters of appointment with New Melrose on similar terms to their existing letters of appointment with Old Melrose on or before the Scheme becoming effective. Such new letters of appointment will take effect upon the Scheme becoming effective, and all the non-executive Directors will resign as Directors of Old Melrose.

Name	Date of initial appointment	Date of Expiry of Current Office	Date of Expiry of New Melrose Office(1)	Non-executive fee per annum (£)	Expenses	Confidentiality Obligations	Termination Provisions(2)
Miles Templeman .	8 October 2003	26 October 2015	End 2015 annual general meeting	58,350 (to be reviewed annually)	Reimbursement of travel, hotel and other incidental expenses incurred in the course of duties	Confidentiality undertaking without limitation in time	Without notice and/or compensation if removed from office by shareholders in general meeting
Perry Crosthwaite .	26 July 2005	24 July 2014	End 2015 annual general meeting	63,350 (to be reviewed annually)	Reimbursement of travel, hotel and other incidental expenses incurred in the course of duties	Confidentiality undertaking without limitation in time	Without notice and/or compensation if removed from office by shareholders in general meeting
John Grant	1 August 2006	31 July 2015	End 2015 annual general meeting	63,350 (to be reviewed annually)	Reimbursement of travel, hotel and other incidental expenses incurred in the course of duties	Confidentiality undertaking without limitation in time	Without notice and/or compensation if removed from office by shareholders in general meeting
Justin Dowley	1 September 2011	31 August 2014	End 2015 annual general meeting	58,350 (to be reviewed annually)	Reimbursement of travel, hotel and other incidental expenses incurred in the course of duties	Confidentiality undertaking without limitation in time	Without notice and/or compensation if removed from office by shareholders in general meeting

(1) Subject to re-appointment at the annual general meeting in each relevant year.

(2) In addition, for New Melrose, at the end of any annual general meeting if not re-elected.

Save as set out above, there are no existing or proposed service agreements between any Director and any member of the Melrose Group providing for benefits upon termination of employment.

In the financial year ended 31 December 2011, the amount of remuneration paid (including any contingent or deferred compensation) and benefits in kind granted to each of the Directors by the Melrose Group for services in all capacities to the Melrose Group were as follows:

	Basic salary and fees	Bonus	Taxable benefits	In lieu of pension contributions	Pension contributions(1)	Total
	(£)	(£)	(£)	(£)	(£)	(£)
Christopher Miller(2)	397,850	—	20,121	59,678	—	477,649
David Roper	397,850	334,194	19,430	59,678	—	811,152
Simon Peckham	397,850	334,194	19,891	16,176	43,500	811,611
Geoffrey Martin	318,300	267,372	53,217	9,941	37,800	686,630
Miles Templeman(3)	61,650	—	—	—	—	61,650
Perry Crosthwaite(4)	61,650	—	—	—	—	61,650
John Grant	56,650	—	—	—	—	56,650
Justin Dowley(5)	18,883	—	—	—	—	18,883

(1) Of the £226,773 attributable to pension contributions, £145,473 was paid as a supplement to basic salary in lieu of pension arrangements. The balance of £81,300 was paid into the individual Director's nominated private pension schemes. No other amount is set aside to provide pension, retirement or similar benefits to Directors.

(2) Christopher Miller is a non-executive director of TMO Renewables Limited. His fees for the year were £27,472. This amount is retained by Christopher Miller and therefore excluded from the table above.
(3) Includes £5,000 per annum in recognition of chairmanship of the Audit and Nomination Committees.
(4) Includes £5,000 per annum in recognition of chairmanship of the Remuneration Committee.
(5) Justin Dowley was appointed as a non-executive Director of Old Melrose on 1 September 2011.

2.2 Pension arrangements of the Executive Directors of Old Melrose

No Director is a member of any Melrose Group pension arrangement. The Old Melrose Executive Directors may elect to receive a contribution by Old Melrose to their individual pension arrangements, or a supplement to basic salary in lieu of a pension arrangement. Contributions by Old Melrose are calculated on base salary only.

3. Corporate governance

The Old Melrose Board is accountable to the Company's shareholders for good governance. With the exception set out immediately below, Old Melrose complies with all the provisions of the UK Corporate Governance Code and with all the requirements of the Disclosure and Transparency Rules on audit committees and corporate governance statements. On the Scheme becoming effective, it is intended that New Melrose will comply with the provisions of the UK Corporate Governance Code and with the requirements of the Disclosure and Transparency Rules.

Schedule A of the UK Corporate Governance Code recommends that grants under executive share option and the long term incentive schemes should normally be phased rather than awarded in one block. Under the Old Melrose 2012 Incentive Scheme, further details of which are set out in paragraph 1.2 of this Part VIII, entitlements to be paid are to be awarded in one block. The proposals relating to the Old Melrose 2012 Incentive Scheme were approved by Shareholders and an explanation of the proposed payment is included in the circular to shareholders dated 23 March 2012 which is incorporated in to this document by reference.

The statements below describe how Old Melrose has applied the principles identified in the UK Corporate Governance Code and Disclosure and Transparency Rules. It is intended that, on the Scheme becoming effective, the corporate governance structure of New Melrose will be substantially the same as that of Old Melrose.

3.1 The Old Melrose Board

The Old Melrose Board meets regularly during the year as well as on an ad-hoc basis as required by time critical business needs. The Old Melrose Board is responsible to shareholders for the effective and proper management and control of Old Melrose and has a formal schedule of matters reserved for its decisions. Its primary roles are to determine and review Old Melrose's strategy and policy, consider acquisitions and disposals, assess requests for major capital expenditure, review trading performance, ensure that adequate funding and personnel are in place, maintain sound internal control systems and to report to shareholders and give consideration to all other significant financial matters. Board responsibilities are undertaken in conjunction with senior management, who in turn are responsible for the day-to-day conduct of the Melrose Group's operations and for reporting to the Old Melrose Board on items of significance and progress against objectives. There were four scheduled Board meetings held during 2011.

As at 31 December 2011, the Old Melrose Board comprised eight members being the Executive Chairman, Mr. Christopher Miller, three other Executive Directors and four non-executive Directors. The four Executive Directors, Mr. Christopher Miller, Chairman, Mr. David Roper, Chief Executive Officer, Mr. Simon Peckham, Chief Operating Officer and Mr. Geoffrey Martin, Group Finance Director, and three of the four non-executive Directors, Mr. Miles Templeman, Mr. Perry Crosthwaite and Mr. John Grant, served throughout the year. Mr. Justin Dowley was appointed as a non-executive Director of the Company on 1 September 2011. On 9 May 2012, Simon Peckham, took over as Chief Executive of the Company. David Roper, whom he succeeded as Chief Executive, became Executive Vice-Chairman with effect from the same date. The terms and conditions of the non-executive Directors' appointments and the Executive Directors' service contracts are set out in paragraph 2.1 of this Part VIII.

The Old Melrose Board believes that the Directors possess diverse business experience in areas complementary to the activities of the Company. Biographies of the Directors are set out in paragraph 1.1 of this Part VIII. These biographies identify any other appointments held by the Directors. The only Executive Director to hold non-executive director appointments elsewhere is Mr. Christopher Miller, who is a non-executive director of TMO Renewables Limited and is allowed to retain the remuneration he receives from that appointment.

In accordance with the provisions of the UK Corporate Governance Code, consideration has been given to the independence of all the non-executive Directors and the Old Melrose Board considers all the non-executive Directors to be independent. The non-executive Directors are not entitled to any bonus or shares under the Old Melrose 2012 Incentive Scheme. Performance of the Old Melrose Board and each committee is evaluated annually.

With effect from 31 December 2011 and notwithstanding the Old Melrose Articles, the Old Melrose Board determined that all Directors would stand for election or re-election at the 2012 AGM and annually thereafter, in compliance with the provisions of the UK Corporate Governance Code. Prior to this, one third of Old Melrose's Directors were subject to retirement by rotation with a requirement to then offer themselves for re-election. It is the policy of the Old Melrose Board that non-executive Directors are appointed for an initial term of three years, following which their appointment will be reviewed. In respect of non-executive Directors appointments of New Melrose, the term will expire at the conclusion of the annual general meeting in the relevant year.

The Old Melrose Board and Nomination Committee have carefully considered the time commitments required and the contribution made by each Director and both the Nomination Committee and the Old Melrose Board are of the belief that the performance of each executive and non-executive Director continues to be effective and that each Director demonstrates commitment to their role.

Performance of the Old Melrose Board and each Committee is evaluated annually. The Chairman has held meetings with the Directors, including the senior independent non-executive Director, Mr. Miles Templeman, to discuss the performance of individual Executive Directors and the Old Melrose Board as a whole. It was considered that the individual Directors and the Old Melrose Board as a whole were operating effectively. The non-executive Directors, led by Miles Templeman, the Senior non-executive Director, are responsible for the performance evaluation of the Chairman and as part of this process also take into account the views of the Executive Directors. Directors determine whether there are any training requirements, by completing an evaluation questionnaire during the year that is designed to identify any failures in the performance of the Old Melrose Board and each of its Committees. The findings of the 2011 evaluations were reviewed by the Company Secretary and feedback was provided to the Old Melrose Board.

The Old Melrose Board is currently considering the impact on the performance evaluation process with respect to the new requirement under the UK Corporate Governance Code to carry out externally facilitated performance evaluations at least every three years. As at the date of this document, the Company has not yet carried out an external evaluation of its Directors' performance.

The Nominations Committee currently takes into account a variety of factors before recommending any new appointments to the Old Melrose Board, including relevant skills to perform in the role, experience, knowledge, ethnicity and gender. The most important priority of the Nominations Committee has been, and will continue to be, ensuring that the best candidate is selected to join the Old Melrose Board and this approach will remain in place going forward.

All Directors receive a formal and tailored induction shortly after their appointment. Directors are advised that they have access to the advice and services of the Company Secretary, Garry Barnes, who is responsible for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Old Melrose Board may seek independent legal and financial advice in the furtherance of their duties, at the Company's expense. A pack of briefing papers and an agenda are provided to each Director in advance of each scheduled Board or standing Committee meeting. The Directors are able to seek further clarification and information on any matter from any other Director or employee of the Group whenever necessary. Decisions are taken by the Old Melrose Board in conjunction with the recommendations of its Committees and advice from external consultants, advisors and senior management.

3.2 Chairman and Chief Executive

The roles of the Chairman and Chief Executive of the Company are, and will remain, separate and distinct from one another in accordance with best practice and Old Melrose Board policy.

The Chairman alone is responsible for the leadership of the Old Melrose Board and for ensuring effective communication with shareholders together with the other Executive Directors. The Chief Executive is responsible for strategic direction and decisions involving the day-to-day management of the Company. These respective responsibilities are set out in writing and have been approved by the Old Melrose Board, who consider that the respective roles and responsibilities are clearly understood by both individuals and by the Old Melrose Board as a whole.

3.3 Committees of the Old Melrose Board

In accordance with the provisions of the UK Corporate Governance Code, the Old Melrose Board has three standing committees: the Audit, Nomination and Remuneration Committees (the ''Committees''), each of which include the four independent non-executive Directors. The duties of the Committees are set out in formal terms of reference. These are available from the Company Secretary and on the Melrose Group's website: (www.melroseplc.net). Membership of the Committees is shown below. The Company Secretary acts as Secretary to each of the Committees. Prior to the Effective Date New Melrose will establish audit, nomination and remuneration committees, each of which will be operated with terms of reference that have been approved by the New Melrose Board and which are substantially in the form of the equivalent terms of reference in place for Old Melrose.

3.4 Audit Committee

The Audit Committee currently comprises the four independent non-executive Directors, Mr. Miles Templeman, Mr. Perry Crosthwaite, Mr. John Grant and Mr. Justin Dowley. Mr. John Grant is the Chairman of the Audit Committee, replacing Mr Miles Templeman with effect from 6 March 2012.

Each member of the Audit Committee brings relevant financial experience from senior executive and non-executive positions as described in their biographies at paragraph 1.1 of this Part VIII.

The Audit Committee reviews and monitors the integrity of the financial statements of the Melrose Group, including its interim accounts, the annual report, interim management and preliminary statements and any other formal announcements relating to the financial performance of the Melrose Group; keeps under review the effectiveness of the Melrose Group's financial reporting, internal controls, risk management systems and compliance controls; focuses and challenges the consistency of accounting policies, methods used to account for significant or unusual transactions and compliance with accounting standards; reviews the Melrose Group's arrangements for its employees to raise concerns in confidence about possible wrongdoing in financial reporting, in accordance with the Melrose Group's whistleblowing policy; and develops, implements and monitors the Melrose Group's policy on external audit and for overseeing the objectivity and effectiveness of the auditor.

The Audit Committee invites the Melrose Group Finance Director, the Head of Financial Reporting and senior representatives of the external and internal auditors to attend meetings as appropriate to the business being considered. The Audit Committee has the right to invite any other employees to attend meetings where this is considered appropriate. In addition, the Audit Committee meets at least once per year with both the external and internal auditors, without management present. The Audit Committee is expected to meet not less than three times a year and the Audit Committee met three times during 2011.

External Auditor

The Melrose Group's external auditor is recommended for reappointment by the Audit Committee who also assess the appropriateness of the scope of audit work performed and provides recommendations in respect of their remuneration and terms of engagement. The Audit Committee receives regular reports from the Melrose Group's external auditor. The Audit Committee has a policy on the engagement of the external auditor for the supply of non-audit services. In accordance with best practice FRC guidelines, which apply from 30 April 2011 onwards, the Melrose Group's policy in relation to non-audit services is kept under regular review; the policy outlines which non-audit services are pre-approved, which services require the prior approval of the Audit Committee and which services the auditor is excluded from providing.

During 2011, the main non-audit services provided by Deloitte were in relation to taxation compliance, tax planning, corporate finance (which included work carried out around the sale of Dynacast and the aborted purchase of Charter International plc) and UK pensions.

The Audit Committee carries out regular reviews to ensure that auditor objectivity and independence is maintained at all times. A different senior partner carries out the taxation audit of the Melrose Group compared to those partners working on the non-audit taxation services. A separate team, which was independent from the audit team, was used within Deloitte to carry out work in relation to corporate finance services. The non-audit work provided on pensions was performed either by a different senior partner to those involved in audit work, or by independent actuaries who have no links with Deloitte. Based on these strict procedures the Audit Committee remains confident that auditor objectivity and independence has been maintained but accepts that non-audit work should be controlled to ensure that it does not compromise the auditor's position.

Deloitte was appointed in 2003. At each year end Deloitte submits a letter setting out how it believes its independence and objectivity have been maintained. Deloitte is also required to rotate the audit partner responsible for the Melrose Group and subsidiary audits every five years. The Melrose Group's audit signing partner changed as part of that rotation process in 2010. There are no contractual obligations that restrict the Melrose Group's capacity to recommend a particular firm for appointment as auditor.

Internal Audit

Due to the size and complexity of the Melrose Group, it is appropriate for an internal audit programme to be used within the business. BM Howarth, an external firm, provides internal audit services to the Melrose Group. A rotation programme is in place, such that every business unit will have an internal audit at least once every three years, with the largest sites reviewed at least once every two years. The rotation programme allows divisional management's actions and responses to be followed up on a timely basis. During the year ended 31 December 2011, BM Howarth also carried out an Audit of the Group's central head office functions.

The internal auditors' remit includes assessment of the effectiveness of internal control systems, compliance with the Melrose Group's Policies and Procedures Manual and a review of the businesses' balance sheets. A report of key findings and recommendations is presented to the Melrose Group Finance Director, Head of Financial Reporting and Melrose Group Operations Controller, followed by a meeting to discuss key findings and resulting action points. Review of the internal audit process and scope of work covered by the internal auditor is the responsibility of the Audit Committee, to ensure their objectives, level of authority and resources are appropriate for the nature of the businesses under review. A report of significant findings is presented by the internal auditor to the Audit Committee at each meeting and implementation of recommendations by the Old Melrose Board is followed up at the subsequent Audit Committee meeting.

3.5 Remuneration Committee

The Remuneration Committee currently comprises the four independent non-executive Directors, Mr. Miles Templeman, Mr. Perry Crosthwaite, Mr. John Grant and Mr. Justin Dowley. Mr. Perry Crosthwaite chairs the Committee.

The function of the Remuneration Committee is to annually review remuneration trends across the Melrose Group and obtain reliable and up to date information about the remuneration of directors and senior employees in other companies; consider and make recommendations to the Old Melrose Board on the framework for the remuneration of the Company's Old Melrose Executive Directors, Company Secretary and other senior employees; ensure that remuneration of the Executive Directors and senior employees are provided with appropriate annual incentives to encourage enhanced performance and that they are rewarded for their individual contributions to the success of Old Melrose; and approve the structure of, and determine targets for any long term incentive plans operated by Old Melrose.

In developing its recommendations, the Remuneration Committee gives due consideration to Schedule 8 of Part 15 of the 2006 Act. The Remuneration Committee is expected to meet not less than twice a year and during 2011 the Remuneration Committee met twice.

3.6 Nomination Committee

The Nomination Committee currently comprises Mr. Christopher Miller and the four independent non-executive Directors, Mr. Miles Templeman, Mr. Perry Crosthwaite, Mr. John Grant and Mr. Justin Dowley. Mr. Miles Templeman is the Chairman of the Nomination Committee.

The Nomination Committee keeps the size, structure and composition of the Old Melrose Board under regular review and recommends to the Old Melrose Board any adjustments as may be necessary from time to time; gives full consideration to succession planning to ensure an optimum balance of executive and non-executive Directors in terms of skills, experience and diversity; keeps under review the leadership needs of the business; and keeps up-to-date and fully informed about strategic issues and commercial changes affecting the Melrose Group and the market in which it operates. The Nomination Committee uses external search consultants as appropriate.

The Nomination Committee is expected to meet not less than twice a year and during 2011 the Nomination Committee met three times.

4. Employees

The average number of persons employed by the Melrose Group for the year ended 31 December 2011 was 10,007 across its four divisions. The average number of persons employed by the Melrose Group for the years ended 31 December 2011, 31 December 2010 and 31 December 2009 is set out below:

	Average number of employees
Number of employees (including Directors)	Year ended 31 December 2011	Year ended 31 December 2010(1)	Year ended 31 December 2009(1)
Continuing Operations
Energy	3,341	3,277	3,558
Lifting	3,079	2,917	2,886
Other Industrial	1,670	1,650	1,638
Elster	6,985	6,959	6,853
Corporate	33	33	29
Continuing operations total	15,108	14,836	14,964
Discontinued operations
Dynacast(2)	1,743(2)	2,647	2,141
Other(2)	141(2)	650	2,250
Total	16,992	18,133	19,355

(1) Restated to show Dynacast and other disposed businesses within discontinued operations.

(2) Represented to separate the employee numbers for discontinued operations between the Dynacast business and other disposed businesses.

As at the Latest Practicable Date, the Melrose Group employed 14,587 persons (excluding the Directors).

In addition to the employee totals above, the Melrose Group's Elster Business uses a number of temporary external employees in the United States and, in previous years, in South America, in connection with manufacturing activities and also occasionally uses temporary employees to assist it in ordinary course office functions. The Melrose Group's Elster Business had 515, 395 and 367 temporary external employees as of December 31, 2011, 2010 and 2009, respectively.

In a number of the Melrose Group's facilities, its employees are represented in works councils or labour unions. In 2011 (prior to its acquisition by the Melrose Group), the Elster Business experienced one work stoppage in one of its facilities in Brazil which produces products for its water segment, affecting approximately 260 employees. The stoppage lasted four days. In 2009 (also prior to its acquisition by the Melrose Group), the Elster Business experienced one work stoppage in one of its facilities in France which produces products for its gas segment, affecting approximately 80 employees.

5. Directors' confirmations

5.1 During the last five years, and save as expressly set out in paragraph 5.2 below, no Director has:
(a) been convicted in relation to a fraudulent offence;
(b) been associated with any bankruptcy, receivership or liquidation while acting in the capacity of a member of the administrative, management or supervisory body or senior management of any company;
(c) been subject to any official public incrimination and/or sanction by statutory or regulatory authorities (including designated professional bodies);
(d) been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of any issuer or from acting in the management or conduct of the affairs of any issuer;
(e) been a partner in a partnership which, while he was a partner or within 12 months of his ceasing to be a partner, was put into compulsory liquidation or administration or which entered into any partnership or voluntary arrangement, or had a receiver appointed over any partnership asset;
(f) had a receiver appointed with respect to any assets belonging to him; or
(g) has been a director of a company which has been placed in receivership, compulsory liquidation, creditors' voluntary liquidation or administration or which entered into any company voluntary

arrangement or any composition or arrangement with its creditors generally or any class of creditors, at any time during which he was a director of that company or within 12 months after his ceasing to be a director.

5.2 As set out in paragraph 7 of this Part VIII, John Grant previously held the office of Director of (i) Hasgo Group Limited (''Hasgo''); (ii) MCT Mitchell Cotts Limited (a wholly-owned subsidiary of Hasgo) (''MCT''); and (iii) WDS Components Limited (a wholly-owned subsidiary of Hasgo) (''WDS''). MCT and WDS were put into administration on 11 May 2009 whilst John Grant held the office of Director. Hasgo was put into creditors' voluntary liquidation on 5 October 2009 whilst John Grant held the office of Director.

6. Conflicts of interest

In respect of any Director, there are no actual or potential conflicts of interests between any duties he has to the Company or the Melrose Group, either in respect of the Proposals or otherwise, and the private interests and/or other duties they may also have.

No Director has or has had any interest in the Proposal which is or was unusual in its nature or conditions or which is or was significant to the business of the Melrose Group and which was effected by the Melrose Group during the current or immediately preceding financial year or during an earlier financial year and which remains in any respect outstanding or unperformed.

No Director has, or had during the year ended 31 December 2011, a material interest in any significant contract with New Melrose, Old Melrose or any member of the Melrose Group.

None of the Directors was selected to be a Director pursuant to any arrangement or understanding with any major customer, supplier or other person having a business connection with the Melrose Group.

There are no family relationships between any of the Directors.

7. Directorships and partnerships

Save as set out below, no Director has held any directorships of any company, other than in relation to companies in the Melrose Group, or been a partner in a partnership at any time in the five years prior to the date of this document.

Director	Current appointments	Former appointments
Christopher Miller	TMO Renewables Limited Gordon House Investor LLP	—
David Roper	—	Alkaline S.A.
Simon Peckham	—	—
Geoffrey Martin .	—	—
Miles Templeman	Shepherd Neame Limited Cell Drinks Limited The Institute for the Management of Sport and Physical Activity Rugby Football Union	Miles Templeman Consultancy Limited Start Talking Ideas Limited Young Enterprise YO! Sushi Group Limited The Director Publications Limited Enterprise United Kingdom Enterprise Insight Trading Limited
Perry Crosthwaite . .	Jupiter Green Investment Trust PLC Investec Plc Investec Limited Investec Bank Plc Nordoff-Robbins Music Therapy 606 Club LLP NCB Group Limited	CIDA Foundation Toluna Group Limited

۰, ۰. M. × ۰, × ۰.

Pace Plc Floform USA Inc. Surion Energy Limited Floform Pension Trust Limited Wolfson Microelectronics Plc Gas Turbine Efficiency Limited Eclipse Film Partnership No. 5 LLP Hasgo Group Limited Second Northern Film Partnership International Motor Sports Limited The Magenta Film Partnership MCT Mitchell Cotts Limited

John Grant . . . . . . . MHP S.A Floform Limited MCT Pension Trust Limited The Royal Automobile Club Limited The Royal Automobile Club Motor Sports Association Limited Torotrak Plc Torotrak (Property) Limited WDS Components Limited WDS Pension Trust Limited

Justin Dowley ..... Intermediate Capital Group plc Tricorn Partners LLP Ascot Authority (Holdings) Limited Bridgewell Group Limited Tillmouth & Tweed Salmon Tricorn Corporate Member Limited Fishings LLP Burnham Overy Boathouse Limited Independent Port Handling Limited MCC Overseas Limited Callerheugh Limited L.J and E.L Dowley Farming Partnership New Schools Network Old Bailey 2005 LLP Claridge Partners Limited

PART IX

ADDITIONAL INFORMATION

1. RESPONSIBILITY

1.1 The Company and the Directors, whose names appear at paragraph 1 of Part VIII (Directors, Corporate Governance and Employees) of this document, accept responsibility for the information contained in this document. To the best of the knowledge of the Company and the Directors (having taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and contains no omission that is likely to affect its import.
1.2 Deloitte, whose registered address is at 2 New Street Square, London EC4A 3BZ, accepts responsibility for (i) its report on pro forma financial information set out in Part VI (Unaudited Pro Forma Information on the Melrose Group) of this document. To the best of the knowledge of Deloitte (having taken all reasonable care to ensure that such is the case) the information contained in that report is in accordance with the facts and contains no omissions likely to affect its import.

2. CORPORATE HISTORY

2.1 New Melrose was incorporated in England and Wales on 8 October 2012 under the 2006 Act as a public company limited by shares with registration number 8243706 and with the name New Melrose PLC.
2.2 The liability of the members of the Company is limited.
2.3 The Company is domiciled in the United Kingdom and its registered office is at Precision House, Arden Road, Alcester, Warwickshire B49 6HN. The Company's principal place of business is at Leconfield House, Curzon Street, London W1J 5JA (tel. no. +44 (0)20 7647 4500).
2.4 On 10 October 2012, the Company was granted a certificate under section 761 of the 2006 Act entitling it to commence business. The Company has not traded since incorporation.
2.5 The principal legislation under which New Melrose operates, and pursuant to which the share capital of New Melrose has been created, is the 2006 Act and regulations made thereunder.

3. SHARE CAPITAL

3.1 The share capital history of New Melrose is as follows:
3.1.1 on incorporation the share capital of the Company was £2 divided into 2 Subscriber Shares of £1 each, one held by each of the Initial Subscribers and with the following rights:
- (a) the Subscriber Shares are a separate and distinct class of shares in the capital of the Company to any other shares subsequently issued and allotted by the Company (including, for the avoidance of doubt, any other ordinary shares and/or any preference shares);
- (b) the Subscriber Shares have a nominal value of £1 per Subscriber Share;
- (c) the holders of Subscriber Shares are entitled to receive notice of and to attend and vote at any general meeting of the Company; and
- (d) for as long as the Subscriber Shares are the only ordinary shares of the Company in issue, the Subscriber Shares shall carry a right to (i) participate in a return of capital on a liquidation or otherwise of the assets of the Company available for distribution among the Company's members; and (ii) receive, out of the profits of the Company available for distribution and resolved to be distributed, a dividend, apportioned and paid proportionately to the amounts paid up on the Subscriber Shares. If there are any other ordinary shares of the company in issue, the Subscriber Shares shall not carry a right to be paid a dividend and, on a winding up, after the distribution of the first £10,000,000,000 of the assets of the Company to the holders of the other ordinary shares, the Subscriber Shares shall carry a right to receive an amount equal to the nominal value of the Subscriber Shares held by the relevant holder;

and

3.1.2 on 9 October 2012 the Company issued 50,000 Redeemable Preference Shares of £1 each paid up as to one quarter of their nominal value to Shield Trust Limited with the following rights:
(a) the Redeemable Preference Shares have a nominal value of £1 per Redeemable Preference Share;
(b) on a return of capital on a liquidation or otherwise, the assets of the Company available for distribution among the members will be applied first in repaying to the holders of Redeemable Preference Shares the amounts paid up on such Redeemable Preference Shares together with all accrued but unpaid dividends. Save as aforesaid, the Redeemable Preference Shares do not carry any other right to participate in profits or assets of the Company;
(c) the holders of Redeemable Preference Shares are not entitled to receive notice of or to attend or vote at any general meeting of the Company unless a resolution to wind up the Company to vary, modify or abrogate the rights attaching to the Redeemable Preference Shares proposed;
(d) the Redeemable Preference Shares carry a right to receive, out of the profits of the Company available for distribution and resolved to be distributed, a fixed non-cumulative preferential (that is, in priority to the other shares of the Company in issue from time to time) dividend per cent. per annum on the amounts paid up, accruing with effect from 1 January 2013;
(e) the Company may redeem the Redeemable Preference Shares at any time at the discretion of the Directors or, at the request of the holders of the Redeemable Preference Shares, following any reduction of capital of the Company becoming effective. Upon any such redemption, Company shall pay to the holder the nominal amount paid up on such shares together with accrued but unpaid dividends; and
(f) the Redeemable Preference Shares may only be transferred with the consent of the Board.
3.2 As at the date of this document, the Initial Subscribers each hold 1 Subscriber Share of £1 each. It is expected that these shares will be cancelled as part of the New Melrose Reduction of Capital.
3.3 As at the date of this document, Shield Trust Limited holds 50,000 Redeemable Preference Shares of £1 each. It is expected that the Redeemable Preference Shares will be paid up in full and redeemed for the amount paid up shortly after the Effective Date.
3.4 As at the Latest Practicable Date, the issued share capital of New Melrose is, and immediately prior to the implementation of the Scheme will be, as follows:

Class	£	Number	Nominal Value per share
Subscriber Shares Redeemable Preference Shares	2 50,000	2 50,000	£1 £1

3.5 The Old Melrose Board has granted 47,875 options in respect of Old Melrose 2012 Incentive Shares (including 34,000 to Directors as set out at paragraph 1.2 to Part VIII (Directors, Corporate Governance and Employees) of this document). The terms of such options are set out at paragraph 2.2 (Details of options to subscribe for 2012 Incentive Shares) of Part II (Details of the Proposals) of the shareholder circular sent to Shareholders on 23 March 2012 which is incorporated into this document by reference. Options over Old Melrose 2012 Incentive Shares will, pursuant to their terms, be exchanged for options over New Melrose 2012 Incentive Shares on a one-for-one basis upon the Scheme becoming effective on substantially the same terms and economic basis as the existing options. The terms of the options over the New Melrose 2012 Incentive Shares are set out in paragraph 13 of this Part IX.

3.6 On 11 October 2012, resolutions were passed at a general meeting of New Melrose to the effect that:
3.6.1 the Directors of New Melrose be and are generally and unconditionally authorised to exercise all the powers of New Melrose to allot shares in New Melrose or grant rights to subscribe for, or to convert any security into, shares in New Melrose:
- (a) up to an aggregate nominal amount of £1,519,952,443.20 provided that this authority is limited to the allotment of shares in New Melrose in connection with the Scheme (and is in addition to the authorities granted by (b) and (c) below);
- (b) up to an aggregate nominal amount of £422,209.01 (such amount representing approximately one-third of the total issued ordinary share capital of New Melrose immediately after the New Melrose Reduction of Capital); and
- (c) comprising equity securities (as defined in section 560(1) of the 2006 Act) up to an aggregate nominal amount of £844,418.02 (such amount representing approximately two thirds of the total issued ordinary share capital of New Melrose immediately after the New Melrose Reduction of Capital, provided that such amount shall be reduced by the aggregate nominal amount of any allotments or grants made under sub-paragraph (b) of this paragraph 3.6.1) in connection with an offer by way of a rights issue:
- (i) to holders of New Melrose Ordinary Shares in proportion (as nearly as may be practicable) to their existing holdings; and
- (ii) to holders of other equity securities as required by the rights of those securities or, subject to such rights, as the Directors of New Melrose otherwise consider necessary, and so that the Directors of New Melrose may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter,

such authorities to apply until (the end of the Company's annual general meeting after this resolution is passed (or, if earlier until the close of business on 30 June 2013) but, in each case, so that New Melrose may make offers and enter into agreements before the authority expires which would, or might, require shares to be allotted or rights to subscribe for or convert securities into shares to be granted after the authority expires and the Directors of New Melrose may allot shares or grant rights under any such offer or agreement as if the authority had not expired;

3.6.2 the Directors of New Melrose:
(a) be and are generally and unconditionally authorised in accordance with section 551 of the 2006 Act to exercise all the powers of the Company to allot shares in the Company or grant rights to subscribe for, or to convert any security into, shares in the Company up to an aggregate nominal amount of £50,000, provided that the authority conferred is limited to the allotment of or grant of rights to subscribe for, or convert into, New Melrose 2012 Incentive Shares and shall apply until the end of the Company's annual general meeting after this resolution is passed (or, if earlier until the close of business on 30 June 2013), but, so that New Melrose may make offers and enter into agreements before the authority expires which would, or might, require New Melrose 2012 Incentive Shares to be allotted or rights to subscribe for, or convert into, New Melrose 2012 Incentive Shares to be granted after the authority expires and the Directors of New Melrose may allot New Melrose 2012 Incentive Shares or grant rights under any such offer or agreement as if the authority had not expired; and
(b) be and are empowered pursuant to section 571 of the 2006 Act to allot equity securities (as defined in the 2006 Act) for cash pursuant to the authority described in

sub-paragraph (a) of this paragraph 3.6.2 as if section 561(1) of the 2006 Act did not apply to the allotment, provided that this power:

(i) shall apply until the end of the Company's annual general meeting after this resolution is passed (or, if earlier, until the close of business on 30 June 2013); and
(ii) is limited to allotments of equity securities in connection with the New Melrose 2012 Incentive Shares up to an aggregate amount of £50,000;
3.6.3 subject to and conditional upon: (i) the resolution in paragraph 3.6.1 having been passed; (ii) the New Melrose Ordinary Shares required to be allotted and issued by New Melrose pursuant to the Scheme having been allotted and issued and registered in the names of the persons entitled to such New Melrose Ordinary Shares in New Melrose's register of members; and (iii) the Scheme becoming effective:
(a) the capital paid up on each New Melrose Ordinary Share be and is reduced from 120 pence to 0.1 penny and the nominal value thereof be and is reduced to 0.1 penny; and
(b) each Subscriber Share be and is cancelled and extinguished;
3.6.4 subject to and conditional upon the resolution described in paragraph 3.6.1 having been passed the Directors of New Melrose be and are generally empowered to allot equity securities (as defined in the 2006 Act) for cash pursuant to the authority granted by the resolution described in paragraph 3.6.1 above and/or to sell New Melrose Ordinary Shares held by the Company as treasury shares for cash in each case free of the restriction in section 561(1) of the 2006 Act, such power to be limited:
(a) to the allotment of equity securities and sale of treasury shares for cash in connection with an offer of equity securities (but in the case of an allotment pursuant to the authority granted by sub-paragraph (c) of the resolution described in paragraph 3.6.1 above, such power shall be limited to the allotment of equity securities in connection with an offer by way of a rights issue only):
- (i) to New Melrose Ordinary Shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
- (ii) to holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the Directors of New Melrose otherwise consider necessary,

and so that the Directors of New Melrose may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the laws of, any territory or any other matter; and

(b) to the allotment (otherwise than in the circumstances set out in paragraph (a) above) of equity securities pursuant to the authority granted by paragraph (b) of the resolution described in paragraph 3.6.1 above and/or the sale of treasury shares for cash up to a nominal amount of £63,331.35,

such power to apply until the end of the Company's annual general meeting after this resolution is passed (or, if earlier, until the close of business on 30 June 2013), but, in each case, so that New Melrose may make offers and enter into agreements before the power expires which would, or might, require equity securities to be allotted (and treasury shares to be sold) after the power expires and the Directors of New Melrose may allot equity securities (and sell treasury shares) under any such offer or agreement as if the power had not expired; and

3.6.5 New Melrose be and is generally and unconditionally authorised to make one or more market purchases (within the meaning of section 693 of the 2006 Act) of New Melrose Ordinary Shares provided that:
(a) the maximum aggregate number of New Melrose Ordinary Shares authorised to be purchased is 126,662,703 (representing approximately 10 per cent. of the expected

issued ordinary share capital of New Melrose immediately following the delivery to the Registrar of Companies of the Order of the Court confirming the New Melrose Reduction of Capital);

(b) the minimum price which may be paid for a New Melrose Ordinary Share shall not be less than the nominal value of a New Melrose Ordinary Share at the time of such purchase;
(c) the maximum price which may be paid for a New Melrose Ordinary Share is not more than the higher of:
(i) 105 per cent of the average of the middle market quotation for a New Melrose Ordinary Share as derived from the London Stock Exchange plc's Daily Official List for the five Business Days immediately preceding the day on which the New Melrose Ordinary Share is purchased; and
(ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out,

in each case, exclusive of expenses;

(d) this authority shall apply until the end of the Company's annual general meeting after this resolution is passed (or, if earlier, until the close of business on 30 June 2013);
(e) New Melrose may make a contract to purchase New Melrose Ordinary Shares under this authority before expiry of the authority which will or may be executed wholly or partly after the expiry of that authority, and may make a purchase of New Melrose Ordinary Shares in pursuance of any such contract; and
(f) any New Melrose Ordinary Shares purchased pursuant to this authority may either be held as treasury shares or cancelled by New Melrose, depending on which course of action is considered by the New Directors to be in the best interests of Shareholders at the time.
3.7 Save as disclosed in this paragraph 3, as at the date of this Prospectus:
3.7.1 there has been no issue of shares or loan capital of New Melrose since its incorporation; and
3.7.2 no share or loan capital of New Melrose is under option or agreed to be put under option.
3.8 As at the date of this Prospectus, New Melrose has no subsidiaries and, accordingly, there has been no material issue of share or loan capital by any subsidiary undertaking of New Melrose for cash or other consideration.
3.9 As at the date of this Prospectus, New Melrose does not hold any New Melrose Ordinary Shares in treasury.
3.10 The Directors of New Melrose have no present intention to make any allotments pursuant to the authority contemplated in the resolutions described in paragraph 3.6.1(b) or (c) above.
3.11 The New Melrose Ordinary Shares will, when issued, be in registered form and will be capable of being held in uncertificated form and title to such shares may be transferred by means of a relevant system (as defined in the Regulations). No temporary documents of title have been or will be issued in respect of the New Melrose Ordinary Shares.
3.12 The New Melrose Ordinary Shares have not been marketed and are not available in whole or in part to the public otherwise than pursuant to the Scheme.
3.13 No commissions, discounts, brokerages or other special terms have been granted in respect of the issue of any share capital of New Melrose.
3.14 The Redeemable Preference Shares and the Subscriber Shares are in registered form but are not and will not be listed or traded. The Redeemable Preference Shares contain limited rights to vote.
3.15 Under the Scheme, New Melrose will issue New Melrose Ordinary Shares, credited as fully paid, to persons who are, at the Scheme Record Time, Old Melrose Ordinary Shareholders on the basis of 1 New Melrose Ordinary Share for every 1 Old Melrose Ordinary Share held at the Scheme Record Time. It is also intended to cancel the Subscriber Shares pursuant to the New Melrose Reduction of Capital. It is also intended that immediately following the New Melrose Reduction of Capital the

Redeemable Preference Shares will be paid up in full and redeemed at par. Accordingly, the proposed authorised issued and fully paid share capital of New Melrose as it will be following the New Melrose Reduction of Capital and the redemption of the Redeemable Preference Shares is expected to be as follows:

Class	Aggregate nominal value	Number	Nominal value per share
New Melrose Ordinary Shares	£1,266,627.04	1,266,627,036	0.1 penny

3.16 Application will be made for the New Melrose Ordinary Shares to be admitted to the Official List and to trading on the London Stock Exchange's market for listed securities, with dealings expected to commence on 27 November 2012. New Melrose will apply for the New Melrose Ordinary Shares to be admitted to CREST with effect from Admission so that general market transactions in the New Melrose Ordinary Shares may be settled within the CREST system.
3.17 The legislation under which the New Melrose Ordinary Shares and the New Melrose 2012 Incentive Shares will be created is the 2006 Act and regulations made under the 2006 Act. When issued, the New Melrose Ordinary Shares and the New Melrose 2012 Incentive Shares will be denominated in sterling. The ISIN of the New Melrose Ordinary Shares is GB00B8L59D51.

4. ARTICLES OF ASSOCIATION

The rights attaching to the New Melrose 2012 Ordinary Shares will be substantially the same as those attaching to the Old Melrose Ordinary Shares. The rights relating to the New Melrose 2012 Incentive Shares have been amended to ensure that such shares are on the same economic basis as the Old Melrose 2012 Incentive Shares and therefore apply to Old Melrose up to the Effective Date. The New Melrose Articles have also been amended to: (a) require that every Director retire from office at each annual general meeting and shall be eligible for re-appointment at that meeting; (b) clarify that the issue of a separate class of shares is not a variation of class rights unless stated in the class rights; and (c) provide that notices sent to a shareholder with a registered address not in the United Kingdom and who has not provided an address for service in the United Kingdom shall be deemed to have been sent for information purposes only.

The following is a summary of the rights and restrictions attaching to the New Melrose Ordinary Shares, and the New Melrose 2012 Incentive Shares, which are more fully set out in the New Melrose Articles.

4.1 Voting rights

4.1.1 Subject to any special rights or restrictions as to voting attached to any class of shares by or in accordance with the Articles, at a general meeting every New Melrose Shareholder present in person or by proxy has on a show of hands one vote and every New Melrose Shareholder present in person or by proxy has on a poll one vote for every share of which he is the holder. In the case of joint holders, the vote of the person whose name stands first in the register of members and who tenders a vote is accepted to the exclusion of any votes tendered by any other joint holders.
4.1.2 The holders of New Melrose 2012 Incentive Shares have the right to receive notice of and to attend general meetings of New Melrose, but do not have the right to vote thereat.

4.2 Dividends

4.2.1 Subject to the New Melrose Articles and the 2006 Act, New Melrose may by ordinary resolution declare a dividend to be paid to the New Melrose Shareholders according to their respective rights and interests, but no dividend may exceed the amount recommended by the New Melrose Board. The New Melrose Board may declare and pay such interim dividends as appear to it to be justified by the profits of New Melrose available for distribution.
4.2.2 The New Melrose 2012 Incentive Shares do not confer a right to be paid a dividend save as set out in paragraph 4.4 below.
4.2.3 Except as otherwise provided by the rights attached to shares, a dividend shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is declared and paid, but no amount paid up on a share in advance of a call may be treated for these purposes as paid up on the share. Dividends shall be apportioned and paid proportionately to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid.
4.2.4 Except as otherwise provided by the rights attached to shares, dividends may be declared or paid in any currency and, with the prior authority of an ordinary resolution of the Company, payment of a dividend may be satisfied wholly or in part by the distribution of assets in specie.
4.2.5 A dividend unclaimed for a period of 12 years from the date it was declared or became due for payment is forfeited and ceases to remain owing by the Company.

4.3 Return of Capital

4.3.1 On a voluntary winding up of New Melrose the liquidator may, on obtaining any sanction required by law, divide among the members in kind the whole or any part of the assets of New Melrose, whether or not the assets consist of property of one kind or of different kinds and vest the whole or any part of the assets in trustees upon such trusts for the benefit of the members. For such purpose the liquidator may set the value he deems fair on a class or classes of property, and may determine on the basis of that valuation and in accordance with the then existing rights of members how the division is to be carried out between members or classes of members. The liquidator may not, however, distribute to a member without his consent an asset to which there is attached a liability or potential liability for the owner.
4.3.2 On a return of capital on winding up (but not otherwise), the holders of New Melrose 2012 Incentive Shares shall be entitled to participate in New Melrose's assets available for distribution in accordance with paragraph 4.4.14 below.

4.4 Further rights attaching to New Melrose 2012 Incentive Shares

4.4.1 (a) The holders of the New Melrose 2012 Incentive Shares shall, not later than 20 business days after the trigger date, be paid a dividend which shall be equal to such amount per New Melrose 2012 Incentive Share (the ''Dividend Amount'') as equals the Conversion Number (as determined in accordance with paragraph 4.4.3 for the trigger date, except that if the Conversion Number is a fraction it shall not be rounded up) multiplied by SP (as determined in accordance with paragraph 4.4.3). To the extent that a dividend is paid in respect of New Melrose 2012 Incentive Shares in accordance with this paragraph 4.4.1(a), those shares shall, with effect from the payment date, be re-designated (and in any event shall have the same rights (and no other rights)) as non-voting deferred shares, having the rights set out in paragraph 4.4.11.
(b) Prior to the trigger date, the Remuneration Committee of the New Melrose Board may in its absolute discretion determine that the Dividend Amount to be paid on the New Melrose 2012 Incentive Shares should be reduced in whole or in part. If the Dividend Amount is reduced in whole, the New Melrose 2012 Incentive Shares shall be converted in accordance with the remaining provisions of this paragraph 4.4. If the Dividend Amount is reduced in part the New Melrose 2012 Incentive Shares shall be converted in accordance with the remaining provisions of this paragraph 4.4 save that the Conversion Number shall be reduced to reflect the amount of the dividend per share to be paid. The Company shall serve a notice on the holders of such New Melrose 2012 Incentive Shares (a ''conversion notice'') informing such holders of the determination by the remuneration committee of the New Melrose Board and such notice shall be served within five business days of such determination.
(c) If New Melrose is unable (for whatever reason) to pay the full amount of the dividend which is due as provided for in paragraph 4.4.1(a) or paragraph 4.4.1(b) or if New Melrose decides not to pay such a dividend or if the remuneration committee of the New Melrose Board determines in accordance with paragraph 4.4.1(b) that the New Melrose 2012 Incentive Shares should be converted but New Melrose fails to convert the New Melrose 2012 Incentive Shares in accordance with paragraph 4.4.1(b) and the remaining provisions of this paragraph 4.4, then the Company shall procure that such New Melrose 2012 Incentive Shares shall be purchased, not later than 25 business days after the trigger date, by an employee benefit trust nominated by New Melrose for a consideration per New Melrose 2012 Incentive Share equal to the Dividend Amount (as defined in paragraph 4.4.1(a)),

failing which New Melrose shall redeem such New Melrose 2012 Incentive Shares, not later than 25 business days after the trigger date, for a redemption payment per New Melrose 2012 Incentive Share equal to the Dividend Amount (the Dividend Amount, in each case, to be reduced by the amount of any dividend actually paid on the New Melrose 2012 Incentive Shares in accordance with paragraph 4.4.1(b)).

4.4.2 If a conversion notice is served in accordance with paragraph 4.4.1(b), or pursuant to paragraph 4.4.13 or paragraph 4.4.14, on conversion each New Melrose 2012 Incentive Share shall convert into such number of fully paid ordinary shares as equals the Conversion Number (save where a dividend has been paid on the New Melrose 2012 Incentive Shares in accordance with paragraph 4.4.1(b) in which case the Conversion Number shall be reduced to reflect the amount of any dividend per share actually paid).
4.4.3 Subject to paragraph 4.4.7 and paragraph 4.4.13 and subject always to adjustment in accordance with paragraph 4.4.15 and/or paragraph 4.4.16, the ''Conversion Number'' equals:

$$
\frac{7.5}{100} \times [(SP \times N) - IC] \times \frac{1}{SP}
$$

NBS

Where:

N = the number of ordinary shares in issue on the relevant trigger date.
NBS = 50,000.
SP = the price certified by Investec Investment Banking (or other brokers for the time being of New Melrose) to be the average closing middle market quotation (in pounds sterling) of an ordinary share in the capital of New Melrose as derived from the Daily Official List for the 40 business days prior to the trigger date.
IC = the invested capital (in pounds sterling), relating to the ordinary shares of Old Melrose or New Melrose, as the case may be, being the sum of the Indexed Capital for each month in which there is either an Ordinary Share Cost or a Return from (and including) March 2012 (and for these purposes the Ordinary Share Cost for March 2012 shall be £1,518,492,691, being the deemed market capitalisation of Old Melrose as at 21 March 2012 based on the average closing middle market quotation (in pounds sterling) of an ordinary share in the capital of Old Melrose as derived from the Daily Official List for the 40 business days up to an including 21 March 2012).

and where:

(i) the ''Indexed Capital'' for a month means the Net Capital for that month multiplied by the relevant Index Adjustment for the period from the commencement of that month until the commencement of the month in which the trigger date falls.
(ii) the ''Net Capital'' for a month means the Ordinary Share Cost in that month or the Returns in that month or, in the event that there is both, the net amount of Ordinary Share Cost minus Returns, and which for the avoidance of doubt may be zero or a negative number.
(iii) ''Ordinary Share Cost'' means the total amount (in pounds sterling) paid up (as to nominal value and any premium) on any allotment of ordinary shares of Old Melrose (prior to the Effective Date) or of the Company (after the Effective Date) in the period (excluding the ordinary shares of Old Melrose or of the Company to be issued pursuant to the Scheme), provided that (I) if any part of such amount paid up on any ordinary share in Old Melrose or the Company, as the case may be, is paid up otherwise than in cash the amount paid up on that share shall be deemed to be the price certified by Investec Investment Banking (or other broker for the time being of New Melrose) to be the average closing middle market quotation (in pounds sterling) of an ordinary share in Old Melrose or the Company, as the case may be, as derived from the Daily Official List for the 10 business days from and including the date on

which the new ordinary shares are admitted to trading, and (II) if any ordinary shares in Old Melrose or the Company, as the case may be, shall be allotted credited as fully paid by way of capitalisation of profits or reserves the amount paid up on such shares shall be excluded from the calculation of Ordinary Share Cost.

(iv) ''Returns'' means the sum of any dividends or distributions of any kind paid or made on or in respect of the ordinary shares of Old Melrose (prior to the Effective Date) or of the Company (after the Effective Date), including (I) a purchase of any of Old Melrose's (prior to the Effective Date) or of the Company's (after the Effective Date) own shares (whether or not out of the proceeds of any fresh issue of shares or out of unrealised profits), (II) a reduction of share capital by repaying paid up share capital, and (III) any other returns of capital in the period, whether in cash or otherwise and however described, excluding:
(a) any issue of shares credited as fully paid to shareholders by way of capitalisation of profits or reserves which is to be, or may at the election of the shareholders be, issued instead of the whole or any part of a cash dividend which the shareholders concerned would or could otherwise have received; and
(b) any issue of shares credited as fully paid to the shareholders (or as they may direct) by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve).
(v) ''Index Adjustment'' =

Where:

RPI1 is the RPI for the month immediately preceding the start of the period referred to in (i) above (rounded to one decimal place).

RPI2 is the RPI for the month immediately preceding the end of the period referred to in (i) above (or, if that has not been published by the close of business on the trigger date, then the RPI for the latest month for which the RPI has been published) (rounded to one decimal place).

''t'' is the number of months between the two months used to determine RPI1 and RPI2 (and for the avoidance of doubt, there are 12 months between the same months in consecutive years).

''RPI'' means the UK Retail Prices Index (all items) published by the Office for National Statistics (or any successor Government department) (January 1987 = 100) or any index which may replace the RPI, as selected by the remuneration committee of the Board.

References to a month are to a calendar month.

For the avoidance of doubt, where ''IC'' is a negative number the formula in this paragraph 4.4.3 shall continue to be applicable.

In the event that the calculation in this paragraph 4.4.3 results in a Conversion Number being less than one, the Conversion Number for the purposes of these paragraphs shall be one.

The Conversion Number multiplied by NBS shall not exceed the sum of (i) 5 per cent. of the aggregate number of ordinary shares in Old Melrose in issue on 22 March 2012, being 390,961,043, plus (ii) 5 per cent. of any additional ordinary shares issued or created by Old Melrose after 22 March 2012 and prior to the Effective Date or by the Company after the Effective Date (but in each case excluding the ordinary shares in Old Melrose or the Company to be issued pursuant to the Scheme) (the ''Cap'').

4.4.4 In this paragraph 4.4, the ''trigger date'' is (except where paragraph 4.4.13 or paragraph 4.4.14 applies) 31 May 2017. If, however, New Melrose's annual accounts for its preceding financial period (or where applicable a summary financial statement derived from the annual accounts) have (or has) not been published by 31 March 2017, the trigger date is 2 months after the date on which the annual accounts (or where applicable the summary financial statement) are (or is) so published. If New Melrose shall change its accounting reference date from 31 December, there shall be substituted for the said 31 May 2017 the date which is five months after the new accounting date. Other than pursuant to paragraph 4.4.13 and paragraph 4.4.14 the trigger date as calculated in accordance with this paragraph 4.4.4 shall not be prior to 31 May 2017.
4.4.5 The ordinary shares to which a holder is entitled on conversion shall not rank for any dividends or other distributions paid or made on ordinary shares prior to the relevant trigger date but shall rank for any paid or made thereafter, and subject thereto they shall rank pari passu in all respects and form one class with the ordinary shares then in issue.
4.4.6 If a conversion notice is served in accordance with paragraph 4.4.1(b), within 20 business days after the trigger date (the ''conversion date''), the New Melrose Board shall convert the New Melrose 2012 Incentive Shares into the ordinary shares and deferred shares (if any) arising on conversion and, as soon as reasonably practicable thereafter, shall issue to the holders of such ordinary shares without charge certificates for the ordinary shares and deferred shares (if any). In the meantime, transfers of ordinary shares shall be certified against the register.
4.4.7 Except for the purposes of paragraph 4.4.1(a), where the Conversion Number is a fraction, the Conversion Number shall be rounded up to the nearest whole number provided that where a holder of New Melrose 2012 Incentive Shares converts more than one New Melrose 2012 Incentive Share at the same time, then for the purposes of determining the number of ordinary shares to which a holder is entitled and whether (and if so what) fraction of an ordinary share arises, the number of ordinary shares arising on the conversion of New Melrose 2012 Incentive Shares by any one holder shall first be aggregated.
4.4.8 Where a block admission arrangement is in place with a relevant investment exchange, New Melrose will use its best endeavours to procure that the aggregate Conversion Number of ordinary shares shall, upon conversion, be admitted to the relevant investment exchange. Where a block admission arrangement is not in place or is insufficient to deal with the aggregate Conversion Number, New Melrose will apply for admission to the relevant investment exchange for that number of ordinary shares for which there are insufficient ordinary shares available under a block admission arrangement to satisfy the aggregate Conversion Number. New Melrose shall prepare and use its best endeavours to issue any listing particulars and other documents that may be required to be issued in respect of any ordinary shares arising on conversion pursuant to the rules of any relevant investment exchange.
4.4.9 The New Melrose Board may in its absolute discretion from time to time decide the manner in which New Melrose 2012 Incentive Shares are to be converted, subject to the provisions of the New Melrose Articles and the 2006 Act, and for the avoidance of doubt may decide to effect conversion of New Melrose 2012 Incentive Shares partly in one manner and partly in another.
4.4.10 Without prejudice to paragraph 4.4.9, the New Melrose Board may, pursuant to the authority given by the adoption of the New Melrose Articles and without the requirement for any further resolution of New Melrose or of the holders of any class of shares, elect to effect conversion, in whole or in part, by sub-division, in which case each New Melrose 2012 Incentive Share to be converted shall, pursuant to the authority granted by the adoption of the New Melrose Articles, be sub-divided and re-designated into:
(i) such number of ordinary shares of the same nominal amount as the ordinary shares of New Melrose at such time as the New Melrose Board determines, equal to (or no greater than) the Conversion Number; and
(ii) a non-voting deferred share with a nominal value equal to the balance of such share, having the rights set out in paragraph 4.4.11 (a ''deferred share'' and, together, the ''deferred shares'').
4.4.11 The deferred shares shall not confer the right to be paid a dividend or to receive notice of or to attend or vote at a general meeting. On a winding-up, after the distribution of the first £10 billion of the assets in accordance with paragraph 4.3.2, the holders of the deferred shares (if any) shall be entitled to receive an amount equal to the nominal value of such deferred shares pro rata to their respective holdings. The deferred shares shall not, save as referred to in this paragraph 4.4.11, be transferable. Conversion of a New Melrose 2012 Incentive Share is deemed to confer irrevocable authority on the New Melrose Board at any time to do all or any of the following without obtaining the sanction of the holder of any or all of the deferred shares:
(i) to appoint a person to execute on behalf of each holder of deferred shares an instrument of transfer for or an agreement to transfer (or both) all or some of the deferred shares, without making a payment to the holder, to such person as the New Melrose Board may decide, as custodian;
(ii) to purchase all or some of the deferred shares (subject to the provisions of the 2006 Act) for a price of 1 pence for all the deferred shares purchased, without obtaining the sanction of the holder;
(iii) for the purposes of any such purchase, to appoint any person to execute on behalf of the holder of deferred shares a contract for the sale to New Melrose of any such deferred shares by him or her; and
(iv) to cancel all or any of the same so purchased in accordance with the Act.

Pending the transfer or purchase New Melrose may retain the certificates for the deferred shares.

4.4.12 Without prejudice to paragraph 4.4.9, and notwithstanding the provisions of the New Melrose Articles, the New Melrose Board may without the requirement for any further resolution of New Melrose or of the holders of any class of shares, (I) elect to effect conversion, in whole or in part, by way of the capitalisation of profits or reserves (including a share premium account, capital redemption reserve and profit and loss account), whether or not available for distribution, (II) appropriate the sum to be capitalised to any one or more holders of New Melrose 2012 Incentive Shares and whether or not in proportion to the nominal amounts of shares held by them, and apply that sum on such holders' behalf in or towards paying up in full unissued ordinary shares of a nominal amount equal to that sum, and to allot the shares to such holders or as they may direct. Immediately upon such allotment, the New Melrose 2012 Incentive Shares to be converted at any one time and held by such holder shall, if conversion is effected in whole pursuant to this paragraph 4.4.12, pursuant to the authority given by the adoption of the New Melrose Articles and without the requirement for any further resolution of New Melrose, be re-designated as non-voting deferred shares having the rights set out in paragraph 4.4.11.
4.4.13 If, prior to the payment of the dividend provided for in paragraph 4.4.1(a) and paragraph 4.4.1(b), the conversion of the New Melrose 2012 Incentive Shares into ordinary shares pursuant to paragraph 4.4.1(b) or the purchase or redemption of the New Melrose 2012 Incentive Shares pursuant to paragraph 4.4.1(c), as the case may be, New Melrose becomes aware that, as a result of an offer made to all holders of ordinary shares (or all holders of ordinary shares other than the offeror and any associates of the offeror, as defined in section 988 of the 2006 Act) to acquire all or some of the ordinary shares (including any such offer implemented by way of a court approved scheme of arrangement under Part 26 of the Act) the right to cast more than 50 per cent. of the votes that may ordinarily be cast on a poll at a general meeting has or will become vested in the offeror and those associates, New Melrose shall give notice to all holders of New Melrose 2012 Incentive Shares forthwith upon it becoming so aware. Subject to paragraph 4.6.3, the New Melrose 2012 Incentive Shares shall convert on the third day following the date of the notice in accordance with this paragraph 4.4 except that for such purposes the ''trigger date'' shall be the date of, but immediately prior to, the change of control of New Melrose (the ''Change of Control'') and

''SP'' shall be the offer price as calculated on the date of the Change of Control. In the event that part or all of the offer price is not in cash, the remuneration committee shall determine the value of the non-cash element, having been advised by an investment bank of repute that such valuation is fair and reasonable. For the avoidance of doubt, any offer so made (including any offer implemented by way of a court approved scheme of arrangement under Part 26 of the Act) which results in New Melrose being controlled by a new company (''New Company'') in which at least 90 per cent. of the shares in the New Company are held by substantially the same persons who immediately before the offer was made were shareholders in New Melrose shall not constitute a Change of Control of New Melrose and no ''trigger date'' shall be deemed to have occurred provided that the New Melrose 2012 Incentive Shares have been exchanged or are exchangeable for new incentive shares in the New Company on substantially the same terms as the New Melrose 2012 Incentive Shares.

4.4.14 If, prior to the payment of the dividend provided for in paragraph 4.4.1(a) and paragraph 4.4.1(b), the conversion of the New Melrose 2012 Incentive Shares into ordinary shares pursuant to paragraph 4.4.1(b) or the purchase or redemption of the New Melrose 2012 Incentive Shares pursuant to paragraph 4.4.1(c), as the case may be, either (I) a resolution for voluntary winding-up of New Melrose is passed or (II) a winding-up order is made by the court in relation to New Melrose, subject to paragraph 4.6.3, the New Melrose 2012 Incentive Shares shall be treated as if they had converted in accordance with this paragraph 4.4 on the date of, and with effect immediately prior to, the resolution for the voluntary winding-up of New Melrose being passed or the date of the winding-up order being made, as the case may be (in either case, the ''operative date'') except that for such purposes the ''trigger date'' shall be the operative date. In that event, the holder thereof shall be entitled to be paid, in satisfaction of the amount due in respect of his New Melrose 2012 Incentive Shares, a sum equal to the amount to which he would have been entitled on a return of capital on a winding-up if he had been the holder of the ordinary shares to which he would have become entitled on such conversion.
4.4.15 If a doubt or dispute arises concerning the calculation of the Conversion Number or any component part of the formulae for calculating the Conversion Number, the New Melrose Board shall refer the matter to the auditors and their certificate as to such calculation shall be conclusive and binding on all concerned.
4.4.16 In the event that any provision (or combination of provisions) in this paragraph 4.4 or any future change to the capital structure of New Melrose produces, or is likely to produce, a Conversion Number which appears to the remuneration committee to be an anomalous result or there shall be quantified material information known to the remuneration committee in relation to the current financial position of New Melrose that is not in the public domain that would, in the reasonable opinion of the remuneration committee, produce an anomalous result if such information were in the public domain, the remuneration committee may make such adjustments to the method of calculating the Conversion Number as it considers appropriate to ensure that conversion is fair and reasonable, and as an investment bank of repute shall have confirmed in writing to be fair and reasonable so far as the ordinary shareholders are concerned.

4.5 Permitted Transfer of New Melrose 2012 Incentive Shares

4.5.1 Subject to paragraph 4.5.2, the holders of the New Melrose 2012 Incentive Shares may not transfer, charge, encumber, grant any option over or otherwise dispose of any New Melrose 2012 Incentive Share or any interest therein.
4.5.2 A holder of a New Melrose 2012 Incentive Share may at any time transfer a New Melrose 2012 Incentive Share:
(a) with the prior written consent of the New Melrose Board (and where such consent is given in relation to a transfer to the trustees of a trust of which the only beneficiaries (and the only people capable of being beneficiaries) are the holder of the New Melrose 2012 Incentive Shares who established the trust and who is transferring the relevant shares; and/or his spouse; and/or his lineal descendants by blood or adoption, such transferees being ''permitted transferees''); or
(b) when required by paragraph 4.5.3 or paragraph 4.6.2.
4.5.3 If a transferee of any shares under paragraph 4.5.2 shall at any time cease to be a permitted transferee in relation to the original holder of the relevant New Melrose 2012 Incentive Shares (the ''relevant shares''), it shall be the duty of the trustees and/or the person holding the relevant shares to notify the New Melrose Board in writing that such event has occurred and the trustees and/or the person shall be bound to execute a stock transfer form and to do such other things as may be necessary to transfer the relevant shares at the price per relevant share (if any) for which they were acquired, to the original holder (who shall be bound to acquire the relevant shares) and, if they or he fails to do so, the Directors may authorise any Director to execute any stock transfer form and to do such other things as may be necessary or desirable to transfer the relevant shares on behalf of the trustees and/or the person holding the relevant shares pursuant to this paragraph 4.5.3.
4.5.4 The New Melrose Board may require from any person lodging a share transfer such information and evidence as the New Melrose Board thinks fit regarding any matter which they may reasonably deem relevant for the purposes of paragraph 4.5.2 and may refuse to register the relevant transfer until they have received information and evidence satisfactory to them.

4.6 Compulsory transfer or conversion

If the holder of any New Melrose 2012 Incentive Shares or the original holder of any New Melrose 2012 Incentive Shares transferred pursuant to paragraph 4.5, if an employee of New Melrose or any of its subsidiary undertakings, ceases to be an employee, if a Director of New Melrose, ceases to be a Director, and if an employee and Director, ceases to be both, in each case other than by reason of death, permanent ill health, permanent disability, his resignation in connection with a Change of Control, or the termination of his employment or directorship without cause, he shall be deemed to be a ''bad leaver''.

If the holder of any New Melrose 2012 Incentive Shares or the original holder of any New Melrose 2012 Incentive Shares transferred pursuant to paragraph 4.5, if an employee of New Melrose or any of its subsidiary undertakings, ceases to be an employee, if a Director of New Melrose, ceases to be a Director, and if an employee and Director, ceases to be both, and such person is not a bad leaver, he shall be deemed to be a ''good leaver''.

4.6.1 Unless the Remuneration Committee of the New Melrose Board shall in its absolute discretion determine otherwise, if the holder of any New Melrose 2012 Incentive Shares or the original holder of any New Melrose 2012 Incentive Shares transferred pursuant to paragraph 4.5 becomes a bad leaver then the provisions of paragraph 4.6.1 to paragraph 4.6.3 shall apply in respect of:
(a) the bad leaver; and
(b) any permitted transferee of such bad leaver and any subsequent transferee of such shares

(together the ''compulsory transferors'').

4.6.2 Each New Melrose 2012 Incentive Share held by the compulsory transferors shall within the period of 20 Business Days following the bad leaver ceasing to be an employee or Director, be transferred to the trustees of an employee share ownership plan trust, or such person as the New Melrose Board may direct, at a price per share equal to the lower of the nominal value per New Melrose 2012 Incentive Share and the closing middle market quotation of an ordinary share in the capital of New Melrose as derived from the Daily Official List on the Business Day prior to the transfer, and the compulsory transferors shall be bound to execute a stock transfer form and to do such other things as may be necessary to transfer the relevant shares and if they fail to do so, the Directors may authorise any director to execute any stock transfer form and to do such other things as may be necessary or desirable to transfer the relevant shares on behalf of the compulsory transferors.
4.6.3 Following a cessation of employment or Directorship causing this paragraph 4.6 to apply to particular New Melrose 2012 Incentive Shares, those New Melrose 2012 Incentive Shares may not be transferred pursuant to paragraph 4.5.2(a). In the event of a Change of Control

between the date of cessation of employment or Directorship and the relevant transfer date in paragraph 4.6.2, those New Melrose 2012 Incentive Shares shall convert in accordance with paragraph 4.4.13 except that each such New Melrose 2012 Incentive Share shall convert into one fully paid ordinary share and one fully paid deferred share with a nominal value equal to the balance of the nominal value of the New Melrose 2012 Incentive Share (the ''bad leaver conversion rate''). In the event of either (I) a resolution for a voluntary winding-up of New Melrose being passed or (II) a winding-up order being made by the court in relation to New Melrose, in either case between the date of cessation of employment or Directorship and the relevant transfer date in paragraph 4.6.2, those New Melrose 2012 Incentive Shares shall convert in accordance with paragraph 4.4.14 except that each such New Melrose 2012 Incentive Share will convert in accordance with the bad leaver conversion rate.

4.6.4 Save in circumstances where a holder of New Melrose 2012 Incentive Shares becomes a good leaver as a result of his resignation in connection with a Change of Control, the Remuneration Committee of the New Melrose Board may, in its absolute discretion, require that a good leaver and any person to whom such good leaver has transferred New Melrose 2012 Incentive Shares pursuant to paragraph 4.5 and any subsequent transferee of such shares shall be deemed to be a compulsory transferor and that the provisions of paragraph 4.6.2 shall apply to such good leaver or transferee as the case may be, in respect of some or all of the Unvested Portion of the New Melrose 2012 Incentive Shares held by such good leaver, as they apply to a bad leaver.

Any determination by the Remuneration Committee of the New Melrose Board in accordance with paragraph 4.6.4 shall be notified to such good leaver within three months of such person becoming a good leaver.

For the purposes of this paragraph 4.6.4, ''Unvested Portion'' shall mean the product of (i) the number of full calendar months remaining from the date on which a holder of New Melrose 2012 Incentive Shares becomes a good leaver up to 31 May 2017 divided by 62 and (ii) the total number of New Melrose 2012 Incentive Shares held by such good leaver; rounded up to the nearest whole number of New Melrose 2012 Incentive Shares; save that, in the case of a good leaver who first became, or becomes, entitled to become a holder of Old Melrose 2012 Incentive Shares or New Melrose 2012 Incentive Shares more than six weeks after 11 April 2012 (other than pursuant to the exchange of options over Old Melrose 2012 Incentive Shares for options over New Melrose 2012 Incentive Shares as a result of the Scheme) the Unvested Portion shall be the total number of New Melrose 2012 Incentive Shares held by such good leaver.

4.7 Restrictions

If New Melrose 2012 Incentive Shares remain capable of being converted into ordinary shares, New Melrose shall not, except with the consent in writing of the holders of at least three-fourths of the nominal amount of the New Melrose 2012 Incentive Shares then in issue or with the sanction of a special resolution passed at a separate meeting of the holders of the New Melrose 2012 Incentive Shares then in issue validly held in accordance with the provisions of the New Melrose Articles (I) create, allot or issue any further New Melrose 2012 Incentive Shares in the capital of New Melrose; or (II) pass a resolution varying any of the special rights attached to the New Melrose 2012 Incentive Shares.

4.8 Transfer of Shares

4.8.1 Shares issued by New Melrose in certificated form may be transferred by an instrument of transfer in writing in any usual form, or in such other form as the New Melrose Board may approve. The instrument of transfer shall be executed by or on behalf of the transferor and, in the case of a transfer of a share that is not fully paid, by or on behalf of the transferee.
4.8.2 In exceptional circumstances, approved by any relevant investment exchange, the New Melrose Board may refuse to register the transfer of certificated shares provided that such refusal would not disturb the market in those shares. Subject to the requirements of any relevant investment exchange, the New Melrose Board may, in its absolute discretion refuse to register any transfer of a certificated share which is not fully paid or the transfer of a

certificated share on which New Melrose has a lien. Subject to the requirements of any relevant investment exchange, the New Melrose Board may also, in its absolute discretion, refuse to register the transfer of a certificated share or a renunciation of a renounceable letter of allotment unless:

(a) it is only in respect of one class of shares;
(b) it is in favour of a single transferee or renouncee or not more than four joint transferees or renouncees;
(c) it is duly stamped (if required); and
(d) it is delivered for registration to the registered office or such other place as the New Melrose Board may decide, accompanied by the certificate for the shares to which it relates (except where the shares are transferred by a recognised financial institution and no certificates have been issued for them or in the case of a renunciation) and such other evidence as the New Melrose Board may reasonably require to prove title of the transferor or the person renouncing and due execution by him of the transfer or renunciation.

If the New Melrose Board refuses to register the transfer of a certificated share it shall, as soon as reasonably practicable, send notice of such refusal to the transferee together with its reasons for the refusal.

4.8.3 Shares issued by New Melrose in uncertificated form may be transferred in accordance with the CREST Regulations. The Directors may refuse to register a transfer of a share in uncertificated form in any case where New Melrose is entitled to refuse (or is expected from the requirement) under the CREST Regulations to register the transfer.

4.9 Changes in Capital and Purchase of Own Shares

4.9.1 New Melrose may at any time by way of ordinary resolution:
(a) consolidate and divide all or any of its share capital into shares of a larger amount;
(b) subject to the 2006 Act, subdivide all or part of its share capital into shares of a smaller amount and may determine that the shares resulting from the sub-division have amongst themselves such preferred, deferred or other special rights or advantages or be subject to any such restrictions as New Melrose has power to attach to unissued or new shares;
(c) cancel any shares which, at the date of the ordinary resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled; and
(d) increase its share capital.
4.9.2 Subject to the 2006 Act and to the rights attached to existing shares, New Melrose may:
(a) subject to the requirements of any relevant investment exchange, purchase, or agree to purchase in the future, its own shares; and
(b) by special resolution, reduce its share capital, capital redemption reserve, share premium account or other undistributable reserve in any way.

4.10 Variation of Rights

Subject to the 2006 Act, all or any of the rights for the time being attached to any class of shares may be varied or abrogated either with the consent in writing of the holders of at least three-fourths in nominal amount of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class validly held in accordance with the New Melrose Articles. The rights attached to a class of shares are not, unless otherwise expressly provided for in the rights attaching to those shares, deemed to be varied by the creation, allotment or issue of further shares ranking in priority to, pari passu with or subsequent to them or by the purchase or redemption by New Melrose of its own shares in accordance with the 2006 Act and the New Melrose Articles.

4.11 Constitution of the New Melrose Board

There is no age limit for Directors of New Melrose. The Directors of New Melrose must not, unless otherwise determined by an ordinary resolution of New Melrose, be less than two. A Director of New Melrose need not be a member of New Melrose.

4.12 Directors' remuneration, pensions and benefits

4.12.1 The Directors of New Melrose shall be paid such aggregate amount of fees for their services as Directors as the New Melrose Board decides (or such other aggregate amount as New Melrose may by ordinary resolution decide). The aggregate fees shall be divided among the Directors in such proportions as the New Melrose Board decides or, if no decision is made, equally. Subject to the 2006 Act, the requirements of any relevant investment exchange and the New Melrose Articles, the New Melrose Board may arrange for part of a fee payable to a director to be provided in the form of fully-paid shares in the capital of New Melrose.
4.12.2 The Directors are entitled to be repaid all reasonable travelling, hotel and other expenses properly incurred by them in the performance of their duties as directors including expenses incurred in attending meetings of the New Melrose Board or of Committees of the New Melrose Board or general meetings or separate meetings of the holders of a class of shares of New Melrose.
4.12.3 In addition, the New Melrose Board may decide to pay a Director who, at the request of the New Melrose Board, goes or resides abroad, makes a special journey or performs a special service on behalf of New Melrose, such reasonable additional remuneration (whether by way of salary or otherwise) and expenses as the New Melrose Board may decide.
4.12.4 The salary or other remuneration of a Director appointed to hold employment or executive office in accordance with the New Melrose Articles may be a fixed sum of money, or wholly or in part governed by business done or profits made, or as otherwise decided by the New Melrose Board, and may be in addition to or instead of a fee payable to him for his services as director pursuant to the New Melrose Articles.
4.12.5 The New Melrose Board may exercise all the powers of New Melrose to provide pensions or other retirement or superannuation benefits and to provide death or disability benefits or other allowances or gratuities to a person who is or has at any time been a director of:
(a) New Melrose or any company which is or was a subsidiary undertaking of New Melrose;
(b) any company allied to or associated with New Melrose or a subsidiary undertaking of New Melrose; or
(c) a predecessor in business of New Melrose or of a subsidiary undertaking of New Melrose, or any member of his family or his dependants. For this purpose the New Melrose Board may establish, maintain, subscribe and contribute to any scheme, trust or fund and pay premiums.

4.13 Directors' retirement

At each annual general meeting of New Melrose each director then in office shall retire from office with effect from the conclusion of the meeting. A retiring director shall be eligible for re-election, and a director who is re-elected will be treated as continuing in office without a break. A retiring director who is not re-elected shall retain office until the close of the meeting at which he retires.

4.14 Directors' interests in contracts

Subject to the 2006 Act and provided he has disclosed to the New Melrose Board the nature and extent of any direct or indirect interest of his, a Director of New Melrose, notwithstanding his office:

4.14.1 may enter into or otherwise be interested in a contract, arrangement, transaction or proposal with New Melrose or in which New Melrose is otherwise interested either in connection with his tenure of an office or place of profit or as seller, buyer or otherwise;

4.14.2 may hold another office with New Melrose (except that of auditor or auditor of a subsidiary of New Melrose) in conjunction with the office of Director and may act by himself or through his firm in a professional capacity to New Melrose, and in that case on such terms as to remuneration and otherwise as the New Melrose Board may decide either in addition to or instead of the remuneration described in paragraph 4.8 above;
4.14.3 may be a Director or other officer of, or employed by, or a party to a contract, transaction, arrangement or proposal with or otherwise interested in, a company promoted by New Melrose or in which New Melrose is otherwise interested or as regards which New Melrose has a power of appointment; and
4.14.4 is not liable to account to New Melrose for a profit, remuneration or other benefit realised by such contract, arrangement, transaction, proposal, office or employment and no such contract, arrangement, transaction or proposal is avoided on the grounds of any such interest or benefit.

4.15 Restrictions on voting by directors

4.15.1 A Director of New Melrose may not vote or be counted in the quorum in respect of any contract, arrangement, transaction or proposal to which New Melrose is or is to be a party and in which he has an interest which is, to his knowledge, a material interest (otherwise than by virtue of his interest in shares or debentures or other securities of or otherwise in or through New Melrose). Notwithstanding the above, a Director shall be entitled to vote on:
(a) the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of, or for the benefit of, New Melrose or any of its subsidiary undertakings;
(b) the giving of a guarantee, security or indemnity in respect of a debt or obligation of New Melrose or any of its subsidiary undertakings for which he himself has assumed responsibility under a guarantee or indemnity or by the giving of security;
(c) any contract, arrangement, transaction or proposal concerning an offer of shares, debentures or other securities of New Melrose or any of its subsidiary undertakings for subscription or purchase in respect of which he is or may be entitled to participate as a holder of any such securities or in the underwriting or sub-underwriting of which he is to participate;
(d) any contract, an arrangement, transaction or proposal to which New Melrose is or is to be a party concerning another company (including a subsidiary undertaking of New Melrose) in which he is interested (directly or indirectly) if he does not to his knowledge hold an interest in shares (within the meaning of sections 820 to 825 of the 2006 Act) representing one per cent. or more of any class of the equity share capital of such company or of the voting rights of that company;
(e) any contract, arrangement, transaction or proposal for the benefit of employees of New Melrose or any of its subsidiary undertakings which does not award him a privilege or benefit not generally awarded to the employees to whom it relates; and
(f) any contract, arrangement, transaction or proposal concerning the purchase or maintenance of an insurance policy under which he may benefit.
4.15.2 A Director shall not vote or be counted in the quorum at a meeting of the Directors or Committee meeting in respect of any resolution concerning his own appointment (including fixing and varying the terms of his appointment or its termination), as the holder of any office or place of profit with New Melrose or any other company in which New Melrose is interested.

4.16 Borrowing powers

The New Melrose Board may exercise all the powers of New Melrose to borrow money and to mortgage or charge all or part of the undertaking, property and assets (present or future) and uncalled capital of New Melrose and, subject to the 2006 Act and all other relevant legislation, to issue debentures and other securities whether outright or as collateral security for a debt, liability or obligation of New Melrose or a third party. There is no limit on the amount of borrowings.

4.17 Disclosure

Where there is a default in supplying information required by a notice served under section 793 of the 2006 Act, the New Melrose Articles provide for voting and related rights to be restricted in relation to the relevant shares and, where the relevant shares represent 0.25 per cent. or more in nominal value of the issued shares of the relevant class, the right to receive dividends to be withheld.

4.18 General Meetings

The New Melrose Board may call general meetings whenever it thinks fit and immediately on receipt of a requisition of members pursuant to the 2006 Act.

Unless consent to short notice is obtained in accordance with the provisions of the 2006 Act, an annual general meeting shall be called by at least 21 clear days' notice. All other general meetings shall be called by at least 14 clear days' notice. A notice of meeting shall be given to each member of New Melrose (other than any who, under the New Melrose Articles or the terms of an allotment or issue of shares, is not entitled to receive notice), to the Directors and to New Melrose's auditors.

No business shall be transacted at any general meeting unless a quorum is present. Two ''qualifying persons'' present and entitled to vote shall be a quorum, where ''qualifying persons'' includes proxies and corporate representatives. The absence of a quorum does not prevent appointment of a chairman in accordance with the New Melrose Articles, which shall not be treated as part of the business of the meeting.

The New Melrose Board may make any arrangement and impose any restriction it considers appropriate to ensure the security of a meeting of New Melrose including, without limitation, the searching of a person attending the meeting and the restriction of the items of personal property that may be taken into a meeting. A Director or the secretary of New Melrose may refuse entry to a meeting to any person who refuses to comply with any such arrangements and eject from a meeting any person who causes the proceedings to become disorderly.

Each Director shall be entitled to attend and speak at a general meeting and at a separate meeting of the holders of a class of shares or debentures in New Melrose, whether or not he is a member. The chairman may invite any person to attend and speak at any general meeting of New Melrose where he considers that this will assist in the deliberations of the meeting.

The Directors may decide in advance of any general meeting that some or all of the resolutions to be put to the vote at a general meeting will be decided on a poll.

At a general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands), a poll is demanded by the chairman of the meeting; or not less than five members present in person or by proxy and entitled to vote at the meeting; or a member or members present in person or by proxy and representing in aggregate not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or a member or members present in person or by proxy holding shares conferring a right to vote at the meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. Members present by proxy shall have the right to speak and to vote on a show of hands.

On a poll votes may be given in person or by proxy and a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way. A person appointed to act as a proxy need not be a member of New Melrose. Members may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to different shares.

A company which is a member of New Melrose may, by resolution of its directors or other governing body, authorise one or more persons to act as its representative at a meeting of New Melrose or at a separate meeting of the holders of a class of shares. The person so authorised is entitled to exercise on behalf of the company which he represents (in respect of that part of the company's holding of shares to which the authorisation relates) those powers that the company could exercise if it were an individual member. The company is for the purposes of the New Melrose Articles deemed to be present in person at a meeting if a representative is present. Such representative may be required to produce a certified copy of the resolution of authorisation before permitting him to exercise his powers.

The above is a summary only of certain provisions of the New Melrose Articles. Copies of the New Melrose Articles are available for inspection in the manner specified in paragraph 17 below.

5. MAJOR INTERESTS IN SHARES

5.1 So far as New Melrose is aware, as at the Latest Practicable Date, the following persons (other than the Directors) hold voting rights, whether direct or indirect of (and/or holdings, whether direct or indirect, of certain financial instruments which give the holder an unconditional right or a right exerciseable in his sole discretion to acquire), three per cent. or more of the ordinary issued share capital of Old Melrose:

Shareholder	Number of Old Melrose Ordinary Shares	Approximate percentage of Old Melrose issued share capital
BlackRock, Inc.	143,471,514	11.33%
Ameriprise Financial, Inc.	93,195,516	7.36%
Lloyds Banking Group plc	67,884,094	5.36%
Artemis Investment Management LLP	63,280,471	5.00%
Aviva Plc and its subsidiaries	59,988,528	4.74%
Standard Life Investments Ltd.	56,188,393	4.44%
Legal and General Investment Management Ltd.	50,997,778	4.03%
F&C Asset Management Plc	44,186,490	3.49%

5.2 Save as set out in paragraph 5.1, above, New Melrose is not aware of any person who holds, voting rights, whether direct or indirect (and/or holdings, whether direct or indirect, of certain financial instruments which give the holder an unconditional right or a right exerciseable in his sole discretion to acquire), three per cent. or more of the ordinary issued share capital of Old Melrose.
5.3 None of the persons referred to in paragraphs 5.1 or 5.2 above has or will have different voting rights from any other holder of Old Melrose Ordinary Shares or New Melrose Ordinary Shares.
5.4 As at the Latest Practicable Date, New Melrose is not aware of any person who, directly or indirectly could exercise control over Old Melrose (prior to the Scheme becoming effective) or, immediately following Admission, over New Melrose.

6. PROPERTY

The following properties are the principal properties occupied by the Melrose Group:

UK Location	Division	Tenure	Use
Leconfield House, Curzon Street, London W1J 5JA	Group	Leasehold	Offices
Precision House, Arden Road, Alcester, Warwickshire B49 6HN	Group	Leasehold	Offices
Greenhill Industrial Estate, Coltswood Road, Coatbridge, North Lanarkshire ML5 2AG	Bridon Group	Freehold	Manufacturing
Carr Hill, Doncaster, South Yorkshire DN4 8DG	Bridon Group	Freehold	Manufacturing
ICON Building Firstpoint Balby Carr Bank, Doncaster, South Yorkshire DN4 5JQ	Bridon Group	Leasehold	Offices
Willington Quay, Wallsend, Tyne and Wear NE28 6TT	Bridon Group	Part Freehold/ Part Leasehold	Manufacturing
Neptune Quay, Neptune Yard, Fisher Street, Walkerdene, Newcastle Upon Tyne, NE6 4LT	Bridon Group	Leasehold	Manufacturing
Falcon Works, Nottingham Road, Loughbrough, Leicestershire LE11 1EX	Brush Turbogenerators	Freehold	Manufacturing
Newport Road, Blackwood, Gwent NP12 2XH	Switchgear	Leasehold	Manufacturing
Station Street, Cradley Heath, West Midlands B64 6AJ	Crosby	Freehold	Manufacturing
121 and 130 Camford Way, Luton, Bedfordshire, LU3 3AN	Elster Business	Leasehold	Research, Design & Development, Production, Administration
Tolgate Business Park, Beacon Side, Stafford, Staffordshire, ST16 3HS	Elster Business	Leasehold	Research, Design & Development, Product & Distribution

Europe Location	Division	Tenure	Use
Leuvensebaan 51, Putte, B-2580, Belgium	Crosby	Freehold	Manufacturing
Edvarda Beneˇse 39/564, Plzen, Czech Republic, 301 00.	Brush Turbogenerators	Freehold	Manufacturing
27 rue des 3 Obus, Nouzonville, 08700, France	Crosby	Freehold	Manufacturing
Mageburger street 14a, Gelsenkirchen, Germany 45881	Bridon Group	Freehold	Manufacturing
Heliswannenweg 50, Elze, Germany, 31008	Marelli	Freehold	Warehouse
Via Sabbionara 1, Arzignano, Italy, 36071	Marelli	Freehold	Manufacturing
Ringdijk, 390B, Ridderkerk, Netherland, 2983GS, The Netherlands	Brush Turbogenerators	Freehold	Manufacturing
Celsiusstraat 51, Ede, Netherland, 67163Z, The Netherlands	Crosby	Freehold	Manufacturing
Rijkmakerlaan, 2910, Essen, Belgium	Elster Business	Owned	Production, Office Space
194 Nam. Dr. A. Schweitzera, Star ´ a Tur ´ a, ´ 91601, Slovakia	Elster Business	Freehold	Production, Storage, Office Space, Research, Design & Development
Strotheweg 1, Lotte-Buren, 49504, Germany ¨	Elster Business	Freehold	Research, Design & Development, Production, Distribution, Administration
Steinern Strasse 19-21, Mainz-Kastel, 55252, Germany	Elster Business	Freehold	Research, Design & Development, Production, Distribution, Administration
Asia Location	Division	Tenure	Use
Loyang Offshore Supply Base (SOPS Way), Box No: 5064, 25 Loyang Crescent, Singapore 508988	Bridon Group	Leasehold	Warehouse
Jl. Raya Bekasi Km.43 Cibitung, Bekasi, Indonesia, 17520	Bridon Group	Freehold	Manufacturing
Lot PT Nos 5038 and 5941, Jalan Teluk Datuk 28/40, Off Persiaran Sepang, Seksyen 28, 40400 Alam, Selangor Darul Ehsan, Malaysia	Marelli	Leasehold	Manufacturing
57 Yonghau Street, Xiachebg District, Hangzhou City, ZheJiang Province, 310022,	Bridon Group	Leasehold	Manufacturing

China

North America Location	Division	Tenure	Use
76 ACCO Drive, PO Box 792, York, PA, 17405, USA	Acco	Leasehold	Manufacturing
280 New Commerce Blvd. Wilkes-Barre, PA, 18706 (corporate and wiremill)	Bridon Group	Freehold	Manufacturing
101 Stevens Lane, Exeter, PA, 18643, USA	Bridon Group	Freehold	Manufacturing
340 Jekyll Road, Baxley, GA, 31513, USA	Harris	Freehold	Manufacturing
315 West 12th Ave. Cordele, GA, 31010, USA	Harris	Freehold	Manufacturing
2801 Dawson Rd., Tulsa, Oklahoma, 74110 (Main Address), USA	Crosby	Freehold	Manufacturing
900 Fisher Rd. Longview, Texas, 75606, USA	Crosby	Freehold	Manufacturing
700 West Bridge Street, Owatonna, MN, 55060, USA	Truth	Freehold	Manufacturing
601 Braddock Ave, Turtle Creek, PA 15145, USA	Brush Turbogenerators	Leasehold	Manufacturing
145 Heart Lake Road, Brampton, Ontario, L6W 3K3 BLDG 1, Canada	Crosby	Freehold	Manufacturing
201, 208 & 409 South Rogers Lane, Raleigh, North Carolina, 27610, USA	Elster Business	Leasehold	Research, Design & Development, Production, Administration
203 Wiles Road, Plattsmouth, Nebraska, NE 68048, USA	Elster Business	Leasehold	Parts Warehouse
2221 Industrial Road, Nebraska City, Nebraska, 68410, USA	Elster Business	Freehold and Leasehold	Production, Meter Services, Research, Design & Development, Warehouse, Office Space
436 North Eagle Street, Geneva, Ohio, 44041, USA	Elster Business	Freehold	Production, Warehouse
South America Location	Division	Tenure	Use
944 Av. Lincoln dos Santos, Distrito Industrial, Montes Claros, 39.404-005, Brazil	Elster Business	Freehold	Production & Foundry, Administration
477 Rua Marcos Wainstein, Cachoerinha RS, 94.930-360, Brazil	Elster Business	Leasehold	Production & Administration
45 Parque Industrial Tres Naciones Zona Industrial Del Potosi, Circuito Mexico, San Luis Potosi, Mexico, 78395	Elster Business	Leasehold	Production, Gas & Electricity
Australasia Location	Division	Tenure	Use
Cookes: 6-10 Greenmount Drive, East Tamaki, Auckland, New Zealand	Bridon Group	Leasehold	Manufacturing
South Africa Location	Division	Tenure	Use
56-64 Commando Road, Industria ext. 2, Johannesburg, 2093, South Africa	Elster Business	Freehold	Production & Administration

7. SUBSIDIARIES

7.1 Old Melrose currently acts as the holding company of the Melrose Group. Upon the Scheme becoming effective, New Melrose will become the holding company of the Melrose Group (including Old Melrose). The Melrose Group's stated strategy is to acquire companies and businesses whose operational performance the Directors believe can be improved to create shareholder value. Further details are set out in paragraph 2 of Part II (Information on Old Melrose and New Melrose) of this document.

7.2 The significant subsidiary undertakings of the Melrose Group following the implementation of the Scheme (other than Old Melrose) are set out in the table below. The proportion of share capital indicated in each of these companies is directly or indirectly owned by Old Melrose (and will on the Scheme becoming effective be directly or indirectly owned by New Melrose). The issued share capital of each company is fully paid.

Name of subsidiary	Incorporated and registered in	Proportion of share capital owned by Old Melrose (per cent.)
Energy
Brush Electrical Machines Limited	Great Britain	100
Brush HMA B.V.	Netherlands	100
Brush SEM s.r.o.	Czech Republic	100
Brush Transformers Limited	Great Britain	100
Harrington Generators International Limited	Great Britain	100
Hawker Siddeley Switchgear Limited	Great Britain	100
Marelli Motori SpA	Italy	100
Generator & Motor Services of Pennsylvania LLC	USA	100
Lifting
Bridon-American Corporation	USA	100
Bridon International GmbH	Germany	100
Bridon International Limited	Great Britain	100
Bridon New Zealand Limited	New Zealand	100
Crosby Europe N.V.	Belgium	100
The Crosby Group LLC	USA	100
Crosby Canada Inc (formerly FKI Industries Canada Limited)	Canada	100
Other Industrial
Prelok Specialist Products Limited	Great Britain	100
The Harris Waste Management Group Inc .	USA	100
Truth Hardware Corporation .	USA	100

Group FKI Engineering Limited	Great Britain	100
FKI Industries Inc	USA	100
Precision House Management Services Limited	Great Britain	100
FKI Limited (formerly FKI plc)	Great Britain	100
Melrose Overseas Holdings Limited	Great Britain	100
Melrose UK Holdings Limited	Great Britain	100
Alcester Plastics Company Limited	Great Britain	100
Eachairn Aerospace Holdings Limited	Great Britain	100
Alcester EP 1 Limited	Great Britain	100
Melrose North America Inc .	USA	100
Melrose PFG Company Number 1 Limited	Great Britain	100
Sageford UK Limited	Great Britain	100
Mintford AG	Germany	100
Teaford GmbH	Germany	100

Name of subsidiary	Incorporated and registered in	Proportion of share capital owned by Old Melrose (per cent.)
Elster(1)
Elster Group SE	Germany	99.62
Elster American Meter Company, LLC	USA	99.62
Elster Finance B.V.	Netherlands	99.62
Elster GmbH	Germany	99.62
Elster Holdings Netherlands B.V.	Netherlands	99.62
Elster Holdings US, Inc. .	USA	99.62
Elster s.r.o.	Slovakia	99.62

⁽¹⁾ Old Melrose's interest in Elster Group SE was 99.62 per cent. as at the completion of the Tender Offer and will be 100% following the squeeze-out which is expected to be completed in 2013.

7.3 Set out below are details of undertakings in which Old Melrose has a direct or indirect participating interest and where that participating interest generates at least 10 per cent. of the consolidated net profit of the Melrose Group:

Name of subsidiary	Incorporated and registered in	Principal activity	Proportion of share capital owned by Melrose (per cent.)
Brush Electrical Machines
Limited	Great Britain	Engineering Company	100
The Crosby Group LLC	USA	Engineering Company	100
Elster GmbH	Germany	Gas measurement and control/	99.62
		Electricity company

There are no undertakings in the Melrose Group that individually own net assets that exceed 10 per cent. of the net assets of the Melrose Group.

8. WORKING CAPITAL

The Company is of the opinion that, taking into account the bank facilities available to it, the Melrose Group has sufficient working capital for its present requirements, that is, for at least the 12 months following the date of publication of this document.

9. SIGNIFICANT CHANGE

Save for the 2012 Rights Issue, the Tender Offer and the Facilities Agreement (each described below), there has been no significant change in the financial or trading position of the Melrose Group since 30 June 2012, being the date to which the last unaudited interim results of the Melrose Group were prepared.

On 1 August 2012, Old Melrose completed its two-for-one fully underwritten approximately £1.2 billion rights issue of 844,418,024 Old Melrose Ordinary Shares at a price of 142 pence per Old Melrose Ordinary Share (the ''2012 Rights Issue''). The proceeds were used, in part, to fund the Tender Offer.

On 28 August 2012, Old Melrose completed its approximately £1.5 billion Tender Offer for Elster pursuant to which it acquired 99.62 per cent. of Elster. The Tender Offer was financed by the proceeds of the 2012 Rights Issue and the drawings under the Facilities Agreement.

The Facilities Agreement, pursuant to which a USD 500 million term facility and a £180 million multicurrency term facility and a EUR 300 million revolving credit facility, a £70 million multi-currency revolving credit facility and a £690 million multi-currency revolving credit facility were provided to the Melrose Group by a group of lenders, became unconditional on 23 August 2012.

10. LITIGATION

Old Melrose's Report and Accounts for the year ended 31 December 2011 contained details of product liability litigation against two Bridon companies, inherited, in part, from the FKI acquisition. On 23 May 2012, Bridon, Noble and Certex reached a consensual resolution and confidential settlement of the litigation and all claims have been dismissed with prejudice. The settlement sum has been paid by Bridon since the half year end. Including legal costs and taking account of current contributions from insurers, the settlement was in line with the £25.8 million provision made at the year end.

Elster's former Ipsen furnace business has been subject to a number of claims relating to alleged asbestos exposure. Pursuant to the agreement under which Elster sold its Ipsen furnace business, Elster is required to indemnify the purchaser against present or future asbestos claims notified to Elster by 15 August 2015, up to a maximum out-of-pocket amount for Elster of EUR 15 million. The agreement under which Elster sold its Ipsen furnace business further provides that the amount of the indemnity be reduced by payments made to the purchaser under Ipsen's current or pre-existing insurance policies.

Claims exceeding the amount of EUR 15 million are only subject of the indemnity if they are covered by an indemnity from Elster's former owner, E.ON Ruhrgas AG. In addition, Ipsen's current and pre-existing insurance coverage is in excess of the EUR 15 million amount. As a consequence, Elster does not believe that these cases will have a material adverse effect on its financial condition. At the time of the disposition, 14 cases were open, and 188 new claims have been subsequently notified up to 28 September 2012. Of the total claims notified, 93 have been dismissed.

In addition, there are currently three asbestos cases (filed in 1999, 2002 and 2003 by individual plaintiffs) in which Elster American Meter Company has been named as an additional defendant. As is common in asbestos related cases, the plaintiffs have not quantified their respective claims and, as such, the value of these claims is not quantifiable. All three cases have been included in the New York County Asbestos Litigation, or NYCAL, programme and are currently classified as inactive. While on the inactive docket, all discovery in these matters has been stayed until further notice.

The U.S. Environmental Protection Agency, or EPA, issued to one of Elster's subsidiaries in the U.S., Hauck, among many other parties, a notice of potential liability under CERCLA, in respect of hazardous substance contamination at the Gowanus Canal Superfund Site in Brooklyn, New York. EPA invited potentially responsible parties (''PRPs''), including Hauck, to a briefing in March 2012 to hear EPA's technical findings, potential remediation plan and legal enforcement approach.

Previously, in March 2010, EPA added the 1.8 mile Gowanus Canal to its National Priorities List of Superfund sites under CERCLA, which are contaminated sites targeted for high priority environmental cleanup by EPA. In December 2011, EPA issued a draft remedial investigation/feasibility study that reviewed various approaches to conduct a cleanup of the contaminated canal sediments. EPA plans to propose a cleanup remedy for the site during 2012 and to select the final remedy by the end of 2012. Although the EPA has yet to issue a final remedy, and such remedy is not anticipated to be issued until the end of 2012, the total cost to remediate the Gowanus Canal is anticipated to be material. In addition to investigation and remediation costs, certain parties may be found liable for costs associated with assessing and restoring any natural resources damaged in connection with the release of hazardous materials, though due to the early stage of this investigation, the quantum of the cost of such remedy, assessment and restoration (if applicable) is unquantifiable.

CERCLA and similar state statutes could impose strict, joint and several liability for investigation and remediation costs upon owners and operators of contaminated property and generators of hazardous substances that were sent to a contaminated property. EPA alleges that one or two former Hauck manufacturing sites near the Gowanus Canal may have discharged hazardous substances into the local sewer system that may have led into the canal before they ceased operations in 1964. However, the notice of potential liability is not a formal legal determination of liability and does not mean that EPA expects Hauck to perform or fund any work related to the site at this time. Hauck denies it discharged hazardous substances into the canal and intends to avail itself of all appropriate legal defenses. At this early stage of the proceedings, we are unable to predict whether or not Hauck could be exposed to liability. We understand that EPA has entered into a consent order with City of New York and National Grid as PRPs to conduct certain investigation work at the canal, has issued notices of potential liability to many other PRPs, and is engaged in an ongoing search for additional PRPs.

Save as stated above, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which New Melrose is aware) during the 12 months immediately preceding the date of this document), which may have, or have had, in the recent past a significant effect on the Company and/or any member of the Melrose Group's financial position or profitability.

11. MATERIAL CONTRACTS

The following are all of the contracts, not being contracts entered into in the ordinary course of business, which: (i) are or may be material to New Melrose and/or the Melrose Group, and have been entered into by New Melrose and/or a member of the Melrose Group within the two years immediately preceding the date of this document; or (ii) (regardless of when entered into) contain provisions under which New Melrose or/or any member of the Melrose Group has an obligation or entitlement which is or may be material to New Melrose and/or the Melrose Group, as at the date of this document:

11.1.1 Underwriting Agreement

In relation to its acquisition of Elster, on 29 June 2012 Old Melrose entered into the Underwriting Agreement with the Underwriters pursuant to which the Underwriters agreed to fully underwrite the Rights Issue. Pursuant to the Underwriting Agreement, the Underwriters agreed (severally) to use all reasonable endeavours to procure subscribers in the market for any New Melrose Ordinary Shares not validly accepted (or not treated as validly accepted) under the Rights Issue and, failing this, to subscribe themselves (or procure subscribers) for any outstanding New Melrose Ordinary Shares.

Old Melrose gave representations, warranties and undertakings to the Underwriters customary for such agreements. Old Melrose also provided an indemnity to the Underwriters and each person acting for or on behalf of them in connection with the services rendered or duties performed by any such indemnified person in connection with the 2012 Rights Issue and the Tender Offer. In addition, Old Melrose agreed to perform certain obligations relating to the implementation of the Rights Issue which have now been satisfied.

11.1.2 Facilities Agreement

On the Signing Date, Old Melrose entered into the Facilities Agreement pursuant to which a USD 500 million term facility, a £180 million multi-currency term facility, a EUR 300 million revolving credit facility, a £70 million multi-currency revolving credit facility and a £690 million multi-currency revolving credit facility were provided to the Melrose Group by a group of lenders. On 21 September 2012, Elster and certain of its subsidiaries acceded as borrowers under the Facilities Agreement and on 28 September 2012, Elster and certain of its subsidiaries acceded as guarantors under the Facilities Agreement.

The revolving credit facilities under the Facilities Agreement are available until the date that is one month before the date that is five years after the Signing Date. The revolving credit facilities will be used by (i) Old Melrose and any other borrowers that are members of the Melrose Group to finance the Melrose Group's (and following the EGSE Guarantee Date (as defined below), the Melrose Group's) working capital requirements and for general corporate purposes (including refinancing existing indebtedness and for financing acquisitions); (ii) Elster and any other borrowers that are members of the Elster Business (other than Elster Holdings US Inc.) to finance the Elster Business' working capital requirements and for general corporate purposes (including refinancing existing indebtedness and for financing acquisitions). Elster Holdings US Inc. has a separate multi-currency revolving credit facility of £70 million available to it for its working capital needs after it accedes to the Facilities Agreement as a borrower.

Prior to the EGSE Guarantee Date, Old Melrose is required to ensure that the aggregate of any outstanding loans under the euro denominated tranche of the revolving credit facilities do not exceed the RCF Drawing Limit provided that the RCF Drawing Limit may be exceeded prior to the EGSE Guarantee Date as a result of the euro denominated tranche of the revolving credit facility being utilised to fund, directly or indirectly, any change of control offer, full redemption, repurchase, retirement or other acquisition of the Senior Notes or to pay associated costs and expenses or any costs and expenses incurred in connection with a waiver request or consent solicitation approved by the lenders under the Facilities Agreement in relation to the Senior Notes.

The financial covenants require that interest cover for the Melrose Group remains equal to or greater than 4.0:1 and the net debt:EBITDA for the Melrose Group remains equal to or less than (depending on the testing period) 3.50:1 to 3.0:1. Prior to the EGSE Guarantee Date, certain further restrictions apply to incurrence of financial indebtedness by the Elster Business outside of the Facilities Agreement and the Senior Notes. New Melrose will become a guarantor in relation to the Facilities Agreement shortly after the Scheme becomes effective.

Old Melrose and various other entities in the Melrose Group will, subject to applicable local law limitations, guarantee all amounts due under the Facilities Agreement. Elster and various other entities in the Elster Business will after their accession to the Facilities Agreement initially (and subject to the limitations under the Senior Notes covenants and applicable local law limitations) guarantee only their own borrowings. When permitted to do so under German law, these members of the Elster Business will, subject to limitations under the Senior Notes covenants that are applicable at such time and applicable local law limitations, guarantee the liabilities of the Melrose Group.

11.1.3 Investment Agreement

On 29 June 2012 Old Melrose, Melrose Acquisitionco and Elster entered into the Investment Agreement pursuant to which Elster gave certain undertakings to cooperate with the Company to implement the Tender Offer and Old Melrose and Melrose Acquisitionco gave certain undertakings to Elster concerning, among other things, their conduct in connection with the Tender Offer and their commitments and intentions in connection with the continuation of the business of the Elster Business after the Effective Date.

It was confirmed in the Investment Agreement that Elster would be required to accede as a borrower to the Facilities Agreement as soon as reasonably practicable after the Tender Offer Expiration Date. Old Melrose would ensure that funds up to a maximum of EUR 350 million were made available on a certain funds basis to Elster when Elster acceded as a borrower to the Facilities Agreement and that Elster would have access to a EUR 350 million revolving credit facility. Old Melrose represented in the Investment Agreement that Elster would not be liable for the payment of any arrangement fees under or in connection with the Facilities Agreement. It was further confirmed in the Investment Agreement that the Facilities Agreement would not provide for any guarantees, grant of security, indemnities or other credit support from Elster and/or any other member of the Elster Business for any borrowings of Old Melrose or any other member of the Melrose Group which would result in a breach of the obligation of Elster to fully comply with Sections 57, 71a of the Stock Corporation Act.

The parties agreed that as long as a domination agreement was not in place the Elster Board (the majority of which would be made up of Old Melrose appointees following the Tender Offer becoming effective) would continue independently to conduct the business operations of Elster and Old Melrose will not instruct the Elster Board to take any actions which would not be in the best interests of the Elster Business. Old Melrose confirmed its intention to work with the Elster Board to implement the restructuring and reinvestment program previously authorised by the Elster Board. Pursuant to the Investment Agreement, other than those changes already planned by the Elster Board, Old Melrose and Melrose Acquisitionco would not cause Elster, for a period of two years from the Tender Offer Expiration Date, to change the location of the corporate seat and head office of Elster in Essen; change the corporate seats or locations of Elster's significant subsidiaries; change the use of the assets and future obligations; sell or otherwise dispose of substantial assets of the Elster Business, including the research and development facilities; break-up the Elster Business by selling or otherwise disposing of Elster's core segments (i.e. gas, electricity, water and Smart grid); or merge or otherwise combine businesses of the Elster Business with businesses of the Melrose Group.

Old Melrose and Elster agreed that, following the delisting of Elster, to the extent that certain central service functions of the Elster Business related to its listing were discontinued, if any employees were affected by any discontinuation of central service functions, such employees would be offered an equivalent position in the Elster Business, to the extent such position was available and the employee was suited for the position; up to EUR 2,000,000 would be paid in aggregate to then employees who had a base salary of up to EUR 100,000 per annum and who become unemployed as a result of the discontinuation of central service functions (but had not accepted an equivalent position within the Elster Business), each being entitled to their annual gross basic salary plus any statutory entitlements until such monies were exhausted; and Old Melrose would compensate the Elster Business for any such payments made to employees who became unemployed as a result of the discontinuation of central service functions.

Old Melrose confirmed its intention to support Elster to capitalise on its brand and further enhance brand awareness and had no intention to change the brand strategy of Elster or its corporate name.

The Investment Agreement has a fixed term of two years but may be terminated in certain circumstances.

11.1.4 Indemnity Agreement

On 29 June 2012, Old Melrose entered into an indemnity agreement (the ''Indemnity Agreement'') with Elster, pursuant to which Old Melrose agreed to indemnify and hold harmless, subject to certain exceptions, Elster and any of its directors, officers and employees from any and all damages and reasonable expenses arising from: (i) confidential information disclosed by Elster to Old Melrose; and (ii) any other assistance provided by Elster to Old Melrose, in each case in connection with the Rights Issue and the Tender Offer. The aggregate liability of Old Melrose under the Indemnity Agreement was limited to £24 million less any liability under the Cost Cover Agreement.

11.1.5 Rembrandt Lock-out Agreement

On 14 June 2012, Old Melrose entered into a lock-out agreement (the ''Rembrandt Lock-Out Agreement'') with Rembrandt and Nachtwache (Nachtwache and Rembrandt, together, the ''Sellers''), pursuant to which each Seller represented that no member of its group, nor any of their respective directors, officers, duly authorised representatives, advisers, agents or employees was directly or indirectly in discussion or negotiation with any person in connection with a Competing Elster Transaction nor was any such person under any obligation to enter into or implement a Competing Elster Transaction. This representation was deemed to be repeated on each day from the date of the Rembrandt Lock-Out Agreement until 6 July 2012 (the ''Lock-Out Period'').

Lock-Out

During the Lock-Out Period, the Sellers could not and had to ensure that no member of its group nor any of its or their directors, officers, employees, representatives, members, partners or advisers would directly or indirectly:

(i) support (in its capacity as an Elster Shareholder) a sale of all or a material portion of Elster's assets;
(ii) support (in its capacity as an Elster Shareholder) any increase in the share capital of Elster or the issuance of Elster Shares to third parties;
(iii) solicit, encourage, initiate, facilitate, enter into or be involved in any discussion or negotiation with any person in connection with any Competing Elster Transaction or otherwise seek to procure any Competing Elster Transaction;
(iv) enter into an agreement or arrangement with any person in connection with a Competing Elster Transaction; or

(v) make available to any person any non-publicly available information relating to or in connection with a Competing Elster Transaction.

Break Fee

Under the Rembrandt Lock-Out Agreement, the Sellers agreed to pay a break fee (the ''Break Fee'') to Old Melrose in the event that Old Melrose launched the Tender Offer for all outstanding Elster ADSs and Elster Shares at a price not less than \$20.50 per Elster ADS (\$82 per Elster Share), but before the expiration date of the Tender Offer, a public tender offer in respect of a Competing Elster Transaction was announced (the ''Competing Offer'') and the Tender Offer subsequently expired or was terminated without Old Melrose having accepted for payment validly tendered and not properly withdrawn Elster ADSs and Elster Shares and the Competing Offer or any subsequent public tender offer in respect of a Competing Elster Transaction was announced before the expiration or termination of a previously announced Competing Elster Transaction (and within 12 months of the commencement of the Tender Offer) which was accepted by the Sellers.

The Break Fee covered all external fees, costs and expenses actually incurred by Old Melrose after 5 April 2012 and payable in connection with the Tender Offer and the associated debt and equity fund raising, notwithstanding the Tender Offer expiring, being terminated or being withdrawn, including all costs and expenses that Old Melrose had agreed to pay or reimburse to Elster, subject to the Break Fee in no event exceeding a maximum amount of £50,000,000.

11.1.6 Irrevocable Undertakings to Tender

On 29 June 2012, Old Melrose entered into a tender agreement (the ''Shareholders Tender Agreement'') with Rembrandt and Nachtwache , pursuant to which Nachtwache and Rembrandt agreed to validly tender (and not withdraw) all of their Elster Shares and/or Elster ADSs at least ten trading days prior to the Tender Offer Expiration Date, unless the Tender Offer lapsed or was withdrawn.

Under the Shareholders Tender Agreement, Old Melrose gave certain limited representations and warranties to Nachtwache and Rembrandt and Nachtwache and Rembrandt each gave certain limited representations and warranties to Old Melrose, including that Nachtwache and Rembrandt each owned the number of Elster Shares and/or Elster ADSs set out in the Shareholders Tender Agreement. During the term of the Shareholders Tender Agreement, each of Nachtwache and Rembrandt could not: (i) sell or offer to sell any of its Elster Shares and/or Elster ADSs, save as pursuant to the Tender Offer; or (ii) grant any proxy, power of attorney or authority that could have been reasonably expected to prevent or impede the Tender Offer.

11.1.7 Agreement for the disposal of Dynacast

On 5 June 2011, Old Melrose and its subsidiaries, Melrose Overseas Holdings Limited and Melrose UK 4 Limited (formerly known as Dynacast Investments Limited) (Old Melrose, Melrose Overseas Holdings Limited and Melrose UK 4 Limited, collectively being the ''Dynacast Sellers'') entered into a share purchase agreement with Dynacast International Inc. (formerly known as KDI Holdings Inc.) (the ''Dynacast Buyer''), a company formed by a consortium of financial investors and managed by Kenner & Company, Inc. Under the terms of this agreement the Dynacast Sellers agreed to dispose of Dynacast by way of the sale of the entire issued share capitals of the Dynacast Companies for a cash consideration of US\$590 million. In addition, the Dynacast Buyer indirectly assumed approximately US\$17 million of pension liabilities accruing to certain entities within Dynacast.

The Dynacast Sellers and the Dynacast Buyer each gave certain representations and warranties customary for this type of transaction. The Dynacast Sellers also gave the Dynacast Purchaser an indemnity in respect of certain tax liabilities relating to Dynacast.

11.1.8 Senior Notes

In April 2011, Elster placed EUR 250 million of senior unsecured notes due 2018 with a coupon of 6.25 per cent. per annum (the ''Senior Notes'') with institutional investors. The Senior Notes were issued by Elster Finance B.V., a wholly owned finance subsidiary of Elster, and guaranteed by Elster and certain of its subsidiaries.

Old Melrose has arranged sufficient facilities under the Facilities Agreement to enable Elster, if required, to prepay amounts outstanding under the Senior Notes.

On 17 September 2012, Old Melrose announced that one of its subsidiaries, Elster, had announced that, effective 17 September 2012, Elster had commenced an offer (the ''Senior Notes Change of Control Offer'') to purchase the Senior Notes upon the terms and conditions set forth in the offer dated 17 September 2012 at a price in cash equal to 101 per cent. of the aggregate principal amount of the notes, plus accrued and unpaid interest up to, but not including, the date of purchase. The Senior Notes Change of Control Offer was made pursuant to the change of control provisions in the related indenture dated 21 April 2011 (as amended and supplemented) pursuant to which the Senior Notes were issued and will expire on 18 October 2012. Any repurchase of the Senior Notes will be funded through an additional drawdown under the Facilities Agreement. Shortly following the expiration date and the settlement date of the Senior Notes Change of Control Offer, it is intended to give notice of the intention to redeem the outstanding principal amount of the Senior Notes shortly after the Effective Date at the applicable makewhole price pursuant to the indenture which will be higher than the price for the current Senior Notes Change of Control Offer. The makewhole redemption price is currently estimated to be approximately EUR 31 million as calculated on the Latest Practicable Date, plus accrued and unpaid interest. Any such redemption notice may be subject to conditions precedent and the calculation of the applicable redemption premium (as that term is defined in the indenture referred to above) is subject to change based on the actual redemption date and movements in the bund rate (as that term is defined in the indenture referred to above). Any repurchase or redemption of the Senior Notes will be funded through an additional drawdown under the Facilities Agreement.

11.1.9 Elster Shareholder Indemnification Agreement

In May 2011, the German Federal Court of Justice ruled that the assumption of prospectus liability by a German stock corporation in a secondary offering of its securities constitutes an unlawful repayment of capital to the extent that the economic benefit received by the selling shareholder is not offset by the granting of adequate compensation by the selling shareholder. Under the court's decision, an unlawful repayment of capital may only be avoided by the selling shareholder agreeing to reimburse the issuer for all costs incurred by it, and to indemnify the issuer for any liabilities assumed by it, in connection with the secondary offering.

On 1 April 2011, Elster entered into an intercompany agreement with Rembrandt (the ''Intercompany Agreement'') in connection with the April 2011 secondary public offering of Elster ADSs by Rembrandt (the ''April 2011 Offering''). Under the Intercompany Agreement, in consideration for Elster's undertaking to comply with its obligations under the underwriting agreement relating to the April 2011 Offering, Rembrandt agreed to reimburse Elster for all costs incurred by Elster in connection with the April 2011 Offering (including legal fees and accountants' fees) and to indemnify Elster for all liabilities assumed by it in connection with the April 2011 Offering, including liability under U.S. federal securities laws.

On 20 March 2012, Elster entered into an indemnification and cost reimbursement agreement with Rembrandt (the ''Indemnification and Reimbursement Agreement'') in connection with the initial public offering of Elster ADSs in October 2010 (the ''IPO''), the April 2011 Offering, and any additional offerings from time to time under a shelf registration statement (together with the April 2011 Offering and the IPO, the ''Offerings''). The Indemnification and Reimbursement Agreement superseded and replaced the Intercompany Agreement. Under the Indemnification and Reimbursement Agreement, Rembrandt agreed to reimburse Elster for all costs incurred or to be incurred by Elster in connection with the Offerings (including legal fees and accountants' fees) and to indemnify Elster for all liabilities assumed by it in connection with the Offerings. The indemnity and cost reimbursement obligations in relation to each of the Offerings terminates on the third anniversary of the relevant Offering (save to the extent claims have been raised by a third party in relation to the relevant Offering prior to such date).

12. RELATED PARTY TRANSACTIONS

12.1 Melrose Group

12.1.1 Save as disclosed below and in the financial information set out in the related party transactions note 28 to the financial statements of Old Melrose for the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009, which are incorporated by reference into this document, neither Old Melrose nor the Melrose Group entered into any related party transactions (which for these purposes are those set out in the standards adopted according to the Regulation (EC) No 1606/2002) during the period covered by the historical financial information and up to the date of this document.

12.1.2 On 12 April 2012, Old Melrose sub-divided and re-designated each of the 50,000 2009 Incentive Shares (held by certain directors and other key managers of Old Melrose) into 392 Old Melrose Ordinary Shares and simultaneously capitalised £29,649.38 standing to the credit of its capital redemption reserve and applied such sum to paying up in full 11,647,969 Old Melrose Ordinary Shares which were allotted and issued to those persons who had been holders of 2009 Incentive Shares, pro rata to their holding of such shares (the ''Incentive Share Reset''). Certain amendments to the Old Melrose Articles were implemented to give effect to the Incentive Share Reset and to set out the rights of the Old Melrose 2012 Incentive Shares. On 22 March 2012, the Old Melrose Board conditionally granted 47,500 options in respect of the Old Melrose 2012 Incentive Shares to certain Directors and other key personnel, and on 12 April 2012 this grant became unconditional in all respects. At a general meeting of Old Melrose dated 11 April 2012, Shareholders approved by way of special resolution the Incentive Share Reset (including, inter alia, the amendments to the Old Melrose Articles referred to above). As at the Latest Practicable Date the Board has granted 47,875 options in respect of Old Melrose 2012 Incentive Shares.
12.1.3 The Elster Business has business relationships with subsidiaries outside the scope of consolidation and other associates that are deemed related parties.

The Elster Business generated revenues with related parties of USD 30,659,000 in 2011, USD 24,970,000 in 2010 and USD 26,681,000 in 2009 as follows:

	2011	2010	2009
Revenues from equity method investments	\$25,725,000	\$19,955,000	\$21,226,000
Revenues from unconsolidated subsidiaries	4,934,000	5,015,000	5,455,000
	\$30,659,000	\$24,970,000	\$26,681,000

As at 30 September 2012, the Elster Business had receivables due from related parties of USD 5,322,000 and payables of USD 6,685,000 to related parties. During the three months ended June 30, 2012 and 2011, the Elster Business generated revenues with related parties of USD 6,313,000 and USD 8,258,000. During six months ended June 30, 2012 and 2011 revenues with related parties amounted to USD 13,542,000 and USD 17,435,000, respectively. As of June 30, 2012 and December 31, 2011, Elster had receivables due from related parties of USD 7,589,000 and USD 5,900,000 and payables due to related parties of USD 8,396,000 and USD 3,619,000. As of December 31, 2010, Elster had receivables due from related parties of USD 14,197,000 and payables due to related parties of USD 4,794,000.

In 2007 the Elster Business entered into agreements with the then Chairman of the administrative board of Elster and Minit Operational Board Ltd., a company the then Chairman controlled, to lease office space in London and provide various office services. These agreements were terminated in the second quarter of 2010. Expenses incurred for the agreement were USD 133,000 in 2010 and USD 1,081,000 in 2009.

In 2006, Elster entered into a loan agreement with Rembrandt, to fund the legal and administrative expenses Rembrandt incurred as a holding company. The loan was repaid in the fourth quarter of 2010.

13. OPTIONS OVER NEW MELROSE 2012 INCENTIVE SHARES

13.1 Terms of options over New Melrose 2012 Incentive Shares

13.1.1 Each option over a New Melrose 2012 Incentive Share entitles its holder to subscribe for one 2012 Incentive Share at a nominal value of £1 per share;

13.1.2 the Board may, from time to time at the recommendation of the Remuneration Committee, grant options to subscribe for an aggregate of up to 50,000 New Melrose 2012 Incentive Shares. If an option over a New Melrose 2012 Incentive Share lapses the Board may, on the recommendation of the Remuneration Committee, grant further options over New Melrose 2012 Incentive Shares provided that the aggregate number of options over New Melrose 2012 Incentive Shares when added to the number of New Melrose 2012 Incentive Shares in issue does not exceed 50,000. If, immediately prior to the ''trigger date'' (as defined in article 6(D) of the New Melrose Articles), the full exercise of options over New Melrose 2012 Incentive Shares would result in there being fewer than 50,000 New Melrose 2012 Incentive Shares in issue, the Board shall grant (prior to any automatic exercise of options over New Melrose 2012 Incentive Shares pursuant to paragraph 13.1.3) additional options over New Melrose 2012 Incentive Shares to the employee benefit trust such that the full exercise of options over New Melrose 2012 Incentive Shares will result in 50,000 New Melrose 2012 Incentive Shares being in issue immediately prior to the ''trigger date'';
13.1.3 Options over New Melrose 2012 Incentive Shares may be exercised at any time up to and including the ''trigger date'' and, if not exercised within such time, will be automatically exercised immediately prior to the ''trigger date''. On exercise, a New Melrose 2012 Incentive Share certificate will be issued to the holder of the New Melrose 2012 Incentive Shares;
13.1.4 an option over a New Melrose 2012 Incentive Share may be exercised by notification in writing (which may include email) to the secretary to the Remuneration Committee by the holder of such option over a New Melrose 2012 Incentive Share of such holder's exercise of the option over a New Melrose 2012 Incentive Share and delivery by such holder of payment in full for the share to be subscribed and, if available, the holder's Option certificate in respect of such option over a New Melrose 2012 Incentive Share. If any such exercise is for less than such holder's total holding of options over New Melrose 2012 Incentive Shares, the Remuneration Committee will determine which options over New Melrose 2012 Incentive Shares have been exercised and a new certificate will be issued to reflect the balance of any remaining options over New Melrose 2012 Incentive Shares held by such holder;
13.1.5 if any option over a New Melrose 2012 Incentive Share is automatically exercised pursuant to paragraphs 13.1.3, 13.1.6 or 13.1.7, to the extent that the consideration payable on such exercise is not immediately paid and in order to enable the New Melrose 2012 Incentive Share to be issued fully paid, an amount of £1 will become due to the Company by the holder of such option over a New Melrose 2012 Incentive Share and it is a term of the grant of each option over a New Melrose 2012 Incentive Share that each holder undertakes to pay, cash to the Company, in satisfaction of such amount, on demand and in any event within one month of the automatic exercise of the option of a New Melrose 2012 Incentive Share;
13.1.6 if the Company becomes aware, in accordance with article 6(M) of the rights to be attached to the New Melrose 2012 Incentive Shares, of a potential Change of Control and notwithstanding the requirements in paragraph 13.1.4 above, it will:
(a) as soon as possible on becoming so aware, provide notice thereof to holders of options over New Melrose 2012 Incentive Shares; and
(b) at the same time as such notice is required to be given to holders of New Melrose 2012 Incentive Shares, provide to all holders of options over New Melrose 2012 Incentive Shares a copy of the notice required to be given to holders of 2012 Incentive Shareholders in accordance with such article 6(M), whether or not any New Melrose 2012 Incentive Shares are in issue at that time;

If, for any reason, the Company is not able to or does not comply with sub-paragraphs (a) and (b) of this paragraph, the options over New Melrose 2012 Incentive Shares will be automatically exercised immediately prior to the ''trigger date'' in accordance with paragraph 13.1.3;

13.1.7 if, in accordance with article 6(N) of the rights to be attached to the New Melrose 2012 Incentive Shares, a resolution for voluntary winding up of the Company is passed or a winding up order is made by the Court, notwithstanding the requirements in paragraph 13.1.4 above, the options over New Melrose 2012 Incentive Shares then outstanding will be deemed to have been exercised immediately prior to the conversion of the New Melrose 2012 Incentive Shares in accordance with such article 6(N);

13.1.8 except as set out in paragraph 13.1.9, holders of options over New Melrose 2012 Incentive Shares may not transfer, charge, encumber or grant any option over a New Melrose 2012 Incentive Share over or otherwise dispose of any option over a New Melrose 2012 Incentive Share or interest therein;
13.1.9 a holder of an option over a New Melrose 2012 Incentive Share may at any time transfer an option:
(a) with the prior written consent of the Board (and where such consent is given in relation to a transfer to the trustees of a trust of which the only beneficiaries (and the only people capable of being beneficiaries) are the holder of the Option over a New Melrose 2012 Incentive Share who established the trust and who is transferring the relevant Options over New Melrose 2012 Incentive Shares; and/or his spouse; and/or his lineal descendants by blood or adoption, such transferees being ''permitted option over a New Melrose 2012 Incentive Share transferees''); and
(b) if a transferee ceases to be a permitted option over a New Melrose 2012 Incentive Share transferee in relation to the original holder of the option, to such original holder of the option;
13.1.10 unless the Remuneration Committee determines otherwise, if a holder of options over New Melrose 2012 Incentive Shares or an original holder of options over New Melrose 2012 Incentive Shares transferred pursuant to paragraph 13.1.9 becomes a ''bad leaver'' (as defined in article 8 of the New Melrose Articles), any unexercised Options over New Melrose 2012 Incentive Shares shall lapse;
13.1.11 if a holder of options over New Melrose 2012 Incentive Shares or an original holder of options over New Melrose 2012 Incentive Shares transferred pursuant to paragraph 13.1.9 becomes a ''good leaver'' (as defined in article 8 of the New Melrose Articles), at the Remuneration Committee's discretion, some or all of such good leaver's unexercised options over New Melrose 2012 Incentive Shares shall lapse, such number to be no more than that number of options over New Melrose 2012 Incentive Shares as would be equal to the Unvested Portion of New Melrose 2012 Incentive Shares had such holder's options over New Melrose 2012 Incentive Shares been exercised in full prior to the holder becoming a ''good leaver'' and a new certificate will be issued to reflect the balance of options over New Melrose 2012 Incentive Shares held by such good leaver (if any) following such lapse;
13.1.12 New Melrose 2012 Incentive Shares allotted on exercise of options over New Melrose 2012 Incentive Shares will have the rights set out in the Company's Articles;
13.1.13 if any offer is made and is implemented (including any offer implemented by way of a court approved scheme of arrangement under Part 26 of the 2006 Act) which results in the Company being controlled by a New Company in which at least 90 per cent. of the shares in the New Company are held by substantially the same persons who immediately before the offer was made were shareholders in the Company, the options over Old Melrose 2012 Incentive Shares will, at the direction of the Remuneration Committee, be automatically exchanged for like options over New Melrose 2012 Incentive Shares in the New Company on substantially the same terms as the Old Melrose 2012 Incentive Shares and upon such exchange taking effect the existing options over Old Melrose 2012 Incentive Shares will lapse;
13.1.14 the Remuneration Committee may amend the terms of the options over New Melrose 2012 Incentive Shares at any time with the consent of the holders of options over New Melrose 2012 Incentive Shares holding not less than three-quarters of the options over New Melrose 2012 Incentive Shares then in issue. Prior approval will not be required for any minor alteration made to benefit the administration of the options over New Melrose 2012 Incentive Shares, to take account of a change in legislation or to obtain or maintain favourable tax, exchange or regulatory treatment for holders of options over New Melrose

2012 Incentive Shares or for any company in the Melrose Group provided that an investment bank of repute shall have confirmed in writing that such alterations are fair and reasonable so far as holders of Melrose Shares are concerned; and

13.1.15 if any amendment is made to the terms of the New Melrose 2012 Incentive Shares the terms of the options over New Melrose 2012 Incentive Shares will be amended in such manner as the Remuneration Committee determines to be fair and reasonable to reflect such amendments.

13.2 Grant of options over New Melrose 2012 Incentive Shares

Conditional on the Scheme becoming effective, options over New Melrose 2012 Incentive Shares have been granted to holders of 47,875 options over Old Melrose 2012 Incentive Shares in exchange for such holders' options over Old Melrose 2012 Incentive Shares which will lapse upon such exchange.

14. CONSENTS

14.1 Deloitte, whose registered office is at 2 New Street Square, London EC4A 3BZ, is a member of the Institute of Chartered Accountants in England and Wales and has given and has not withdrawn its written consent to the inclusion of its report on pro forma financial information set out in Part VI (Unaudited Pro Forma Information on the Melrose Group) of this document and the references to its reports in the form and context in which it is included and has authorised the contents of the part of this document which comprises its reports for the purposes of Prospectus Rule 5.5.3(2)(f).
14.2 Investec has given and has not withdrawn its written consent to the inclusion in this document of its name and the references thereto in the form and context in which it appears.
14.3 Rothschild has given and has not withdrawn its written consent to the inclusion in this document of its name and the references thereto in the form and context in which it appears.

15. SOURCES AND BASES OF SELECTED FINANCIAL INFORMATION

15.1 Unless otherwise stated below:
(a) financial information relating to Old Melrose has been extracted (without material adjustment) from the audited annual report and accounts for Old Melrose for the years ended 31 December 2011, 31 December 2010 and 31 December 2009 and the six month period ended 30 June 2012;
(b) financial information relating to Elster has been extracted (without material adjustment) from the Elster unaudited results announcement for the six month period ended 30 June 2012, published on 3 August 2012.
15.2 As at the close of business on the Latest Practicable Date, Old Melrose had in issue 1,266,627,036 ordinary shares of 14⁄55 pence each. The ISIN for Old Melrose Ordinary Shares is GB00B464F978.

16. GENERAL

16.1 The financial information concerning New Melrose and the Melrose Group contained in this document does not constitute statutory accounts within the meaning of section 434 of the 2006 Act. Full individual accounts of Old Melrose and each of its subsidiary undertakings for each financial year to which the financial information relates and on which the auditors gave unqualified reports have been delivered to the Registrar of Companies. The consolidated financial statements of Old Melrose in respect of the three years ended 31 December 2011, 31 December 2010 and 31 December 2009 were reported on by Deloitte, a member of the Institute of Chartered Accountants for England and Wales, the auditors of the Company within the meaning of section 434 of the 2006 Act. No statutory accounts have been prepared for New Melrose.
16.2 The total costs, charges and expenses payable by the Company in connection with the Proposals are estimated to be approximately £1.3 million (exclusive of VAT).

17. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (Saturday, Sundays and public holidays excepted) at (i) the registered office of Old Melrose and New Melrose (being Precision House, Arden Road, Alcester, Warwickshire B49 6HN) and (ii) the offices of Simpson Thacher & Bartlett LLP (being CityPoint, One Ropemaker Street, London EC2Y 9HU) up to and including the date of Admission:

(a) the Old Melrose Articles;
(b) the New Melrose Articles;
(c) the audited consolidated accounts of the Melrose Group for the three financial years ended 31 December 2011, 31 December 2010 and 31 December 2009;
(d) the Old Melrose Circular;
(e) the consent letters referred to at paragraph 14 above; and
(f) this Prospectus.

The Old Melrose Circular and this document and the information incorporated by reference into this document (as set out on page 125 under the heading ''Information incorporated by reference'') may also be viewed via the National Storage Mechanism.

Dated: 12 October 2012

DEFINITIONS

The following definitions apply throughout this document unless the context otherwise requires:

1985 Act	the Companies Act 1985, as amended
2006 Act	the Companies Act 2006, as amended and for the time being in force
2009 Incentive Shares	has the meaning given to such term at paragraph 3.3.1(b) of Part XIII (Additional Information) of the Old Melrose Prospectus
2012 AGM	the annual general meeting of Old Melrose held on 9 May 2012
2012 Rights Issue	has the meaning given to such term at paragraph 9 of Part IX (Additional Information) of this document
2013 AGM	the annual general meeting of Old Melrose to be held in 2013
Acquisition	the acquisition of the Elster pursuant to the Tender Offer
Admission	admission of the New Melrose Ordinary Shares by the FSA (in its capacity as the UKLA) to listing on the premium segment of the Official List and by the London Stock Exchange to trading on the main market of the London Stock Exchange
ADS	an American Depository Share
AIM	AIM, a market operated by the London Stock Exchange
Anti-Corruption Laws	has the meaning given to such term at paragraph 4 of Part A of the section of this document headed ''Risk Factors''
April 2011 Offering	has the meaning given to such term at paragraph 11.1.9 of Part IX (Additional Information) of this document
Audit Committee	the audit committee of the Board
Audited Financial Statements	the audited financial statements for the year ended 31 December 2011 (under IFRS), as set out in Old Melrose's annual report and accounts for 2011, the audited financial statements for the year ended 31 December 2010 (under IFRS), as set out in Old Melrose's annual report and accounts for 2010 and the audited financial statements for the year ended 31 December 2009 (under IFRS), as set out in Old Melrose's annual report and accounts for 2009
Australia	the Commonwealth of Australia and its dependent territories
Barclays	Barclays Bank PLC
Board(s)	the board of Directors of Old Melrose and/or the board of Directors of New Melrose (as the context shall indicate)
Break Fee	has the meaning given to such term at paragraph 11.1.5 of Part IX (Additional Information) of this document
Bribery Act	has the meaning given to such term at paragraph 4 of Part A of the section of this document headed ''Risk Factors''
Business Day	a day (other than a Saturday or Sunday or public holiday) on which banks are open for business in London, other than solely for trading and settlement in Euro
Canada	Canada, its provinces and territories and all areas subject to its jurisdiction or any political subdivision thereof
Capitalisation Shares	the ordinary shares of 14⁄55 pence nominal value each in the capital of Old Melrose to be allotted and issued to New Melrose

	following the cancellation of the Old Melrose Ordinary Shares pursuant to the operation of the Scheme
CERCLA	has the meaning given to such term at paragraph 14 of Part A of the section of this document headed ''Risk Factors''
certificated or in certificated form	in relation to a share or other security, a share or other security title to which is recorded in the relevant register of the share or other security as being held in certificated form (that is, not in CREST)
Committees	the Audit, Nomination and Remuneration Committees of the Board as described at paragraph 3.3 of Part VIII (Directors, Corporate Governance and Employees) of this document
Companies Acts	the 1985 Act and the 2006 Act
Company or New Melrose	New Melrose PLC, a public limited company incorporated in England and Wales with registered number 8243706, to be renamed Melrose PLC shortly after the Scheme becomes effective
Competing Elster Proposal	means any inquiry, proposal or offer relating to, or that could reasonably be expected to lead to, a merger or business combination, liquidation or other transaction involving any third party: (i) in respect of or for all or a significant proportion (being 30 per cent. or more when aggregated with shares already held by such third party and any person acting in concert with that third party) of the share capital or voting rights of Elster; or (ii) in respect of or for all or a significant proportion (being 25 per cent. or more) of the Elster Business's undertaking, business, revenues, profits; or (iii) the consideration for which exceeds 25 per cent. of Elster's market capitalisation, in each case howsoever it is proposed that such transaction be implemented (and whether or not subject to any (pre-) conditions)
Competing Elster Transaction	any enquiry, proposal or offer relating to, or that could reasonably be expected to lead to, a sale, transfer, assignment, pledge, mortgage, hypothecation, grant of options over, or other disposition of the Elster Shares and/or Elster ADSs or any of them held directly or indirectly by Rembrandt and Nachtwache or any other transaction in relation to any such Elster Shares and/or Elster ADSs involving any third party
Competing Offer	has the meaning given to such term at paragraph 11.1.5 of Part IX (Additional Information) of this document
conversion notice	has the meaning given to such term at paragraph 4.4.1(b) of Part IX (Additional Information) of this document
Cost Cover Agreement	means the cost cover agreement dated 31 May 2012 and entered into between Old Melrose and Elster, pursuant to which Old Melrose agreed to reimburse Elster: (i) a lump sum amount of EUR 55,000 for internal costs; and (ii) up to EUR 145,000 for reasonable external costs and expenses (in particular costs of professional advisors) incurred in connection with the general due diligence process in relation to the Acquisition and the preparation of the Old Melrose Prospectus
Court	the High Court of Justice of England and Wales
Court Hearing	the hearing of the claim form to sanction the Scheme and confirm the reduction of capital of Old Melrose involved in the Scheme

Court Meeting	the meeting of holders of Old Melrose Ordinary Shares convened for 9:00 a.m. on 5 November 2012 at the Serpentine Suite of the London Hilton, 22 Park Lane, London, W1K 1BE by order of the Court pursuant to section 896 of the 2006 Act to consider and, if thought fit, approve the Scheme, and any adjournment of that meeting
CREST	the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator (as defined in the CREST Regulations)
CREST Regulations	the Uncertificated Securities Regulations 2001 (SI 2001 No. 01/378), as amended
Deferred A Share	the deferred share intended to be issued by Old Melrose to New Melrose in the period after the Old Melrose General Meeting and before the Court Hearing (being a separate class from the Old Melrose Ordinary Shares and, therefore, not forming part of the shares in the capital of Old Melrose that are subject to the effects of the Scheme)
deferred share	has the meaning given to such term at paragraph 4.4.10(ii) of Part IX (Additional Information) of this document
Deloitte	Deloitte LLP, auditors to Old Melrose and reporting accountants
Director(s)	the directors of Old Melrose, or the directors of New Melrose, as the context may require, and whose names are set out on page 69 of this document
Disclosure and Transparency Rules	the Disclosure and Transparency Rules as published by the FSA
Dividend Amount	has the meaning given to such term at paragraph 4.4.1(a) of Part IX (Additional Information) of this document
Dynacast	the Dynacast business comprising the Dynacast Companies and their respective subsidiaries and subsidiary undertakings
Dynacast Buyer	has the meaning given to such term at paragraph 11.1.7 of Part IX (Additional Information) of this document
Dynacast Companies	Dynacast (UK) Limited; Dynacast Beteiligungs und Verwaltungs GmbH (formerly known as Melrose Beteiligungs und Verwaltungs GmbH); Dynacast Parent Spanish Holding Company S.L. (formerly known as Melrose Spain S.L.); US 1 LLC (formerly known as Melrose US 1 LLC); and Dynacast Singapore Holdings Pte Ltd (formerly known as Melrose Singapore Holdings Pte Ltd)
Dynacast Sellers	has the meaning given to such term at paragraph 11.1.7 of Part IX (Additional Information) of this document
EBITDA	earnings before interest, tax, depreciation and amortisation
EEA	the European Economic Area
EEA States	the member states of the EEA
Effective Date	the date on which the Scheme becomes effective in accordance with its terms, expected to be 27 November 2012
EST	US Eastern standard time
EFSF	has the meaning given to such term at paragraph 39 of Part A of the section of this document headed ''Risk Factors''

EFSM	has the meaning given to such term at paragraph 39 of Part A of the section of this document headed ''Risk Factors''
EGSE Guarantee Date	has the meaning given to such term at paragraph 2 of Part IV (Capital Resources) of this document
Elster	Elster Group SE, a German Societas Europaea registered in the commercial register of the local court of Essen, Germany, under HRB number 22030
Elster ADS	an ADS representing one fourth of one Elster Share
Elster ADS Holder	a holder of Elster ADSs
Elster Board	the administrative board of Elster
Elster Directors	the members of the Elster Board
Elster Business	Elster, its subsidiaries and subsidiary undertakings
Elster Shareholders	holders of Elster Shares
Elster Share(s)	the ordinary registered shares with a nominal value of EUR 1 each in the share capital of Elster
EPA	has the meaning given to such term at paragraph 14 of Part A of the section of this document headed ''Risk Factors''
ESM	has the meaning given to such term at paragraph 39 of Part A of the section of this document headed ''Risk Factors''
EU	the member states of the European Union
Euroclear	Euroclear UK & Ireland Limited, the operator of CREST
Exchange Act	the United States Securities Exchange Act of 1934, as amended
Executive Director(s)	the executive directors of Old Melrose or New Melrose as the context shall indicate
Facilities Agreement	has the meaning given to such term at paragraph 2 of Part V (Capital Resources) of the Old Melrose Prospectus
FCPA	has the meaning given to such term at paragraph 4 of Part A of the section of this document headed ''Risk Factors''
Form(s) of Proxy	the blue form of proxy for use at the Court Meeting and the white form of proxy for use at the Old Melrose General Meeting
FSA	the United Kingdom Financial Services Authority
FSMA	the Financial Services and Markets Act 2000, as amended from time to time
gross dividend	has the meaning so given in paragraph 3 of Part VII (United Kingdom Taxation Considerations) of this document
Hauck	has the meaning given to such term at paragraph 14 of Part A of the section of this document headed ''Risk Factors''
HM Revenue & Customs or HMRC	HM Revenue & Customs, the UK tax authority
HSBC	HSBC Bank PLC
IFRS	International Financial Reporting Standards as adopted for use in the EU
Incentive Share Reset	has the meaning given to such term at paragraph 12.1.2 of Part IX (Additional Information) of this document
Indemnification and Reimbursement Agreement	has the meaning given to such term at paragraph 11.1.9 of Part IX (Additional Information) of this document

Indemnity Agreement	has the meaning given to such term at paragraph 11.1.4 of Part IX (Additional Information) of this document
Initial Subscribers	Garry Barnes and Nick Heard
Intercompany Agreement	has the meaning given to such term at paragraph 11.1.9 of Part IX (Additional Information) of this document
International Securities Identification Number or ISIN	the international code for a listed security
Investec	Investec Investment Banking, a division of Investec Bank plc, broker to Old Melrose and New Melrose
Investment Agreement	the investment agreement between Old Melrose, Melrose Acquisitionco and Elster dated 29 June 2012, as more fully described at paragraph 11.1.3 of Part IX (Additional Information) of this document
IPO	has the meaning given to such term at paragraph 11.1.9 of Part IX (Additional Information) of this document
Japan	Japan, its cities, prefectures, territories and possessions
JPMSL	J.P. Morgan Securities Ltd.
Latest Practicable Date	10 October 2012 (being the latest practicable date prior to the publication of this document)
Listing Rules	the listing rules made by the FSA under section 73A of FSMA
Lock-out Period	has the meaning given to such term at paragraph 11.1.5 of Part IX (Additional Information) of this document
London Stock Exchange	the London Stock Exchange plc or its successor
McKechnie	the group of businesses acquired by Old Melrose in May 2005 which, at that time, included the MPC, MVC, Aerospace Aftermarket, Aerospace OEM and PSM businesses (some of which have now been sold)
Melrose Acquisitionco	Mintford AG, an indirectly wholly owned Old Melrose subsidiary
Melrose Group or Group	before the Effective Date, Old Melrose, its subsidiaries and subsidiary undertakings including the Elster Business (which for the avoidance of doubt, does not include New Melrose) and, from the Effective Date, New Melrose, its subsidiaries and subsidiary undertakings including the Elster Business (which will include Old Melrose, its subsidiaries and subsidiary undertakings)
MPC	McKechnie Plastic Components
MTM	a many-to-many instruction in CREST
Nachtwache	Nachtwache Reserve GmbH
National Storage Mechanism	the document publication facility made available by the FSA at www.Morningstar.co.uk/uk/nsm
New Melrose or the Company	New Melrose PLC, a public limited company incorporated in England and Wales with registered number 8243706, to be renamed Melrose PLC shortly after the Scheme becomes effective
New Melrose 2012 Incentive Shareholders	holders of New Melrose 2012 Incentive Shares

New Melrose 2012 Incentive Shares	the 2012 Incentive Shares of £1 each of New Melrose having the rights and restrictions attaching to them as more specifically set out in paragraph 4 of Part IX (Additional Information) of this document
New Melrose Articles	the articles of association of New Melrose summarised at paragraph 4 of Part IX (Additional Information), as amended from time to time
New Melrose Ordinary Shareholders	holders of New Melrose Ordinary Shares;
New Melrose Ordinary Shares	(A) prior to the New Melrose Reduction of Capital, the ordinary shares in the capital of New Melrose to be allotted and issued pursuant to the Scheme, with a nominal value of 120 pence; and
	(B) subsequent to the New Melrose Reduction of Capital, the ordinary shares with a nominal value of 0.1 penny each in the capital of New Melrose
New Melrose Reduction of Capital	the proposed reduction of capital of New Melrose under Part 17 Chapter 10 of the 2006 Act to reduce the nominal value of each New Melrose Ordinary Share from 120 pence to 0.1 penny
New Melrose Reduction of Capital Record Time	6:00 p.m. on the Business Day immediately preceding the date of the Court Hearing of the claim form to confirm the New Melrose Reduction of Capital
Noble	Noble Drilling Services Inc.
Nomination Committee	the nomination committee of the Board
NYSE	The New York Stock Exchange
Offerings	has the meaning given to such term at paragraph 11.1.9 of Part IX (Additional Information) of this document
Official List	the official list maintained by the UKLA for the purposes of Part V of FSMA
Old Melrose	Melrose PLC, a public limited company incorporated in England and Wales with registered number 4763064, to be renamed shortly after the Scheme becomes effective
Old Melrose 2012 Incentive Optionholders	holders of options over Old Melrose 2012 Incentive Shares
Old Melrose 2012 Incentive Scheme	has the meaning given to such term at paragraph 1.2 of Part VIII (Directors, Corporate Governance and Employees) of this document
Old Melrose 2012 Incentive Shares	has the meaning given to such term at paragraph 1.2 of Part VIII (Directors, Corporate Governance and Employees) of this document
Old Melrose Articles	the articles of association of Old Melrose as adopted or amended from time to time
Old Melrose Circular	the circular to be sent to Old Melrose Ordinary Shareholders on or about the date hereof containing details of the Proposals (and of which the Scheme forms a part)
Old Melrose General Meeting	the general meeting of Old Melrose to be held at 9:15 a.m. on 5 November 2012 at the Serpentine Suite of the London Hilton, 22 Park Lane, London, W1K 1BE to vote on the resolutions set out in the Notice of General Meeting contained in the Old Melrose Circular

Old Melrose Group	Old Melrose, its subsidiaries and subsidiary undertakings but excluding the Elster Business (and which for the avoidance of doubt, does not include New Melrose)
Old Melrose Ordinary Shareholders	holders of Old Melrose Ordinary Shares
Old Melrose Ordinary Shares	ordinary shares with a nominal value of 14⁄55 pence each in the capital of Old Melrose
Old Melrose Prospectus	the Old Melrose Prospectus dated 29 June 2012
Overseas Shareholders	Shareholders who are resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom
pence, £, GBP and pound sterling	the lawful currency of the United Kingdom
Proposals	the proposed reorganisation of the Melrose Group involving the Scheme and the subsequent New Melrose Reduction of Capital
Prospectus or this document	this document dated 12 October 2012, comprising a prospectus relating to New Melrose and the listing of the New Melrose Ordinary Shares on the Official List (together with any supplements or amendments thereto)
Prospectus Directive Regulation	Directive 2003/71/EC (as amended from time to time, including by Directive 2010/73/EC (the ''PD Amending Directive'') to the extent implemented in the relevant EEA State) and includes any relevant implementing measures in each EEA State that has implemented Directive 2003/71/EC
Prospectus Rules	the rules for the purposes of Part VI of FSMA in relation to offers of securities to the public and the admission of securities to trading on a regulated market
RBC	RBC Europe Limited (operating under the name RBC Capital Markets)
RCF Drawing Limit	has the meaning given to such term at paragraph 2 of Part IV (Capital Resources) of this document
Receiving Agent or Equiniti	Equiniti Limited, or any other registrar appointed by the Company from time to time;
Redeemable Preference Shares	the redeemable non-voting preference shares of £1 each in the capital of New Melrose which will be redeemed by New Melrose shortly after the Effective Date
Registrar of Companies	the Registrar of Companies in England and Wales
Rembrandt	Rembrandt Holdings S.A
Rembrandt Lock-Out Agreement	the agreement between Old Melrose and Rembrandt dated 14 June 2012 as described at paragraph 11.1.5 of Part IX (Additional Information) of this document
Remuneration Committee	the remuneration committee of the Board
Rothschild	N M Rothschild & Sons Limited, sponsor and financial adviser to New Melrose and financial adviser to Old Melrose
Sanctions	has the meaning given to such term at paragraph 5 of Part A of the section of this document headed ''Risk Factors''
Scheme	the proposed scheme of arrangement under section 899 of the 2006 Act between Old Melrose, New Melrose, Old Melrose Ordinary Shareholders and Old Melrose 2012 Incentive Shareholders including any modification, addition or condition approved or imposed by the Court, details of which are set out in Part IV (Scheme of Arrangement) of the Old Melrose Circular

Scheme Document	the document in relation to the implementation of the Scheme, which is set out in Part IV (Scheme of Arrangement) of the Old Melrose Circular
Scheme Record Date	the Business Day immediately preceding the Effective Date
Scheme Record Time	the time and date specified as such in the Scheme Document, expected to be 6.00 p.m. on the Scheme Record Date
Scheme Restricted Jurisdiction	any jurisdiction where sending in the Scheme Document would breach any applicable law
Scheme Voting Record Time	6.00 p.m. on 1 November 2012 or, if either the Court Meeting or the Old Melrose General Meeting is adjourned, 6.00 p.m. on the second day before the date of such adjourned meeting
SDRT	stamp duty reserve tax
SEC	the US Securities and Exchange Commission
Senior Notes	has the meaning given to such term at paragraph 11.1.8 of Part IX (Additional Information) of this document
Senior Notes Change of Control Offer	has the meaning given to such term at paragraph 11.1.8 of Part IX (Additional Information) of this document
Settlement Date	is the date for settlement of the Underwriters' payment obligations to Old Melrose pursuant to the Underwriting Agreement
Shareholder(s)	registered holder(s) of Old Melrose Ordinary Shares and/or of New Melrose Ordinary Shares, as the context may require
Shareholders Tender Agreement	has the meaning given to such term at paragraph 11.1.6 of Part IX (Additional Information) of this document
Signing Date	has the meaning given to such term at paragraph 2 of Part IV (Capital Resources) of this document
Sponsor	Rothschild
Subscriber Shares	The two ordinary shares of £1 each in the capital of New Melrose which will be cancelled pursuant to the New Melrose Reduction of Capital
subsidiary and subsidiary undertaking	have the meaning given to them in sections 1159 and 1162 of the 2006 Act respectively
Tender Offer	the offer by Melrose Acquisitionco to purchase all of the issued and outstanding Elster ADSs (and the underlying Elster Shares to which they relate), at a purchase price of \$20.50 per Elster ADS (\$82 per Elster Share) in cash on the terms and subject to the conditions to be set out in the Tender Offer Document
Tender Offer Commencement Date	9 July 2012
Tender Offer Document	a Tender Offer Statement on Schedule TO (including the Offer to Purchase contained therein) and the related Letter of Transmittal, filed with the SEC and mailed to Elster ADS Holders and Elster Shareholders on the Tender Offer Commencement Date containing and setting out the terms and conditions of the Tender Offer
Tender Offer Expiration Date	midnight on 22 August 2012
UK or United Kingdom	the United Kingdom of Great Britain and Northern Ireland

UK Corporate Governance Code	the combined code on corporate governance issued by the Financial Reporting Council in the United Kingdom from time to time
UKLA	the FSA acting in its capacity as the competent authority for the purposes of Part VI of FSMA and in the exercise of its functions in respect of admission to the Official List
uncertificated or in uncertificated form	a share or other security title to which is recorded in the relevant register of the share or security 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
Underwriters	JPMSL, Investec, Barclays, HSBC and RBC
Underwriting Agreement	the agreement dated 29 June 2012 between Old Melrose and the Underwriters pursuant to which the Underwriters conditionally agreed to underwrite the rights issue
US or United States or United States of America	the United States of America (including the states of the United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction
US Exchange Act	the US Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder
US GAAP	generally accepted accounting principles in the United States
US Securities Act	the US Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder
US\$, US dollars, USD or \$	the lawful currency of the United States
VAT	(i) within the EU, any tax imposed by any member state in conformity with the directive of the council of the EU on the common system of value added tax (2006/112/EC), and (ii) outside the EU, any tax corresponding to, or substantially similar to, the common system of value added tax referred to in paragraph (i) of this definition

All references to legislation in this document are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

For the purpose of this document, ''subsidiary'' and ''subsidiary undertaking'' have the meanings given by the 2006 Act.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

DOCUMENTS INCORPORATED BY REFERENCE

The following documentation, which was sent to Shareholders at the relevant time and/or is available for inspection in accordance with paragraph 17 of Part IX (Additional Information) of this document, contains information which is relevant to the Acquisition:

1. Old Melrose's Annual Report and Accounts for the financial years ended 31 December 2011, 2010 and 2009

These reports and accounts contain the audited consolidated historical financial statements of Old Melrose for the financial years ended 31 December 2011, 31 December 2010 and 31 December 2009 and the audit Annex I, reports in respect of each year.

2. Information incorporated by reference

The table below sets out the documents which are incorporated by reference into this document, to ensure that Shareholders and others are aware of all information which, according to the particular nature of the Company and of the New Melrose Ordinary Shares, is necessary to enable Shareholders and others to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Company and of the rights attaching to the New Melrose Ordinary Shares:

Information incorporated by reference into this document	Location of incorporation in this document	Page number(s) in this document
Old Melrose's Half yearly results published 30 August 2012.	Part V (Historical Financial Information Relating to Old Melrose)	58-60
Old Melrose's Annual Report and Accounts 2011 including the Melrose Group's financial statements for the year ended 31 December 2011, the notes and the auditors' report thereon and the Finance Director's review (pages 23-30 and 62-108)	Part V (Historical Financial Information Relating to Old Melrose)	58-60
Old Melrose's Annual Report and Accounts 2010 including the Melrose Group's financial statements for the year ended 31 December 2010, the notes and the auditors' report thereon (pages 46-87).	Part V (Historical Financial Information Relating to Old Melrose)	58-60
Old Melrose's Annual Report and Accounts 2009 including the Melrose Group's financial statements for the year ended 31 December 2009, the notes and the auditors' report thereon (pages 46-89).	Part V (Historical Financial Information Relating to Old Melrose)	58-60
Old Melrose's operating and financial review for the period ended 30 June 2012	Part III (Operating and Financial Review Relating to the Melrose Group)	52-53
Old Melrose's operating and financial review for the year ended 31 December 2011	Part III (Operating and Financial Review Relating to the Melrose Group)	52-53
Old Melrose's operating and financial review for the year ended 31 December 2010	Part III (Operating and Financial Review Relating to the Melrose Group)	52-53
Old Melrose's operating and financial review for the year ended 31 December 2009	Part III (Operating and Financial Review Relating to the Melrose Group)	52-53

Information incorporated by reference into this document	Location of incorporation in this document	Page number(s) in this document
Part VII (Historical Financial Information relating to Elster) of the Old Melrose Prospectus dated 29 June 2012	Part V (Historical Financial Information Relating to Old Melrose)	58-60
Part XIII (Additional Information) of the Old Melrose Prospectus dated 29 June 2012	Part VI (Unaudited Pro Forma Information on the Melrose Group)	61-66
Divisional review for the year ended 2011 (page 18)	Part IV (Capital Resources)	54-57
Paragraph 2.2 (Details of options to subscribe for 2012 Incentive Shares) of Part II (Details of the Proposals) from the shareholder circular sent by Old Melrose to Shareholders on 23 March	Part VIII (Directors, Corporate Governance and Employees)	69-80

To the extent that any document or information incorporated by reference or attached to this document itself incorporates any information by reference, either expressly or impliedly, such information will not form part of this document for the purposes of the Prospectus Rules, except where such information or documents are stated within this document as specifically being incorporated by reference or where this document is specifically defined as including such information.

2012

Any statement contained in a document which is deemed to be incorporated by reference into this document shall be deemed to be modified or superseded for the purpose of this document to the extent that a statement contained in this document (or in a later document which is incorporated by reference into this document) modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this document.

Where certain parts only of a document have been incorporated by reference into this document, the other parts of those documents which have not been expressly stated to be incorporated are either not relevant to Shareholders or are covered elsewhere in this document.

The information incorporated by reference is available for inspection (in respect of (i) and (ii) during normal business hours on any weekday (Saturday, Sundays and public holidays excepted)) up to and including the date of Admission (i) at the registered offices of Old Melrose and New Melrose (being Precision House, Arden Road, Alcester, B49 6HN), (ii) at the offices of Simpson Thacher LLP (being CityPoint, One Ropemaker Street, London EC2Y 9HU), (iii) at the Melrose Group's website (www.melroseplc.net) and (iv) via the National Storage Mechanism.

Merrill Corporation Ltd, London 12ZCP11701

AI assistant

Melrose Industries PLC — Capital/Financing Update 2012

5335_prs_2012-10-12_cec51432-a322-4567-9744-c5711d07cf7b.pdf

NEW MELROSE PLC

Rothschild

Investec

NOTICE TO NEW HAMPSHIRE RESIDENTS

CONTENTS

SUMMARY

Energy

Lifting

Other Industrials

Elster

Energy

Lifting

Other Industrial

RISK FACTORS

PART A: Risks relating to the Melrose Group

1. A significant slow down in certain industries could have a material adverse effect on the Melrose Group's business or financial condition

2. Owing to the geographical diversity of its operations, the Melrose Group is subject to the risk of exchange rate fluctuations

3. The Melrose Group is dependent on its directors and on certain of its businesses' management and on a responsive workforce

4. The Melrose Group is exposed to risks in relation to compliance with anti-corruption laws and regulations

5. The Melrose Group is exposed to risks in relation to compliance with economic sanction programmes

6. The Melrose Group is subject to pricing pressures from customers

7. The industries in which the Melrose Group's businesses operate are highly competitive

8. The Melrose Group may be unable to develop or commercialise technological advances and introduce new products in a manner and to an extent sufficient for it to remain competitive within the metering industry

9. Behaviour of the competitors of the Melrose Group may adversely affect its business

10. The Melrose Group will be subject to the risk of major operational problems

11. Future capital requirements

12. Any shortfall in the Melrose Group's pension schemes may require additional funding

13. The Melrose Group is subject to risks from legal proceedings and arbitrations

14. The Melrose Group's operations are subject to environmental, health and safety laws and regulations and non-compliance with such laws and regulations could result in substantial costs, fines, sanctions and claims

15. The Melrose Group is subject to a number of tax regimes

16. The Melrose Group could be negatively impacted if it fails to adequately protect its intellectual property rights or if third parties claim it is in violation of their intellectual property rights

17. The Melrose Group relies on its own IT systems and on IT systems provided by third parties

18. The Melrose Group businesses' success and sales are dependent on the strength of their brands and reputation and are subject to customers' perceptions of those businesses and their products

19. Potential liability for defective products may affect the financial condition and business of the Melrose Group

20. The continued weakness of new construction markets poses a substantial risk to the business of the Melrose Group

21. Economic weakness and uncertainty may slow the rate of ''gasification''

22. Recent uncertainty in worldwide financial markets may lead customers to demand guarantees or bonds covering a larger portion of contracts with the Melrose Group or require the Melrose Group to maintain larger amounts of inventory

24. Any inability to obtain adequate supplies at favourable prices could decrease the Melrose Group's profit margins and negatively impact timely deliveries to its customers

25. The metering industry depends substantially on governmental regulation

26. The Melrose Group is subject to various governmental certification requirements and similar regulations

27. The Melrose Group's communications technologies use particular radio frequencies and thus are subject to the regulation of various governmental bodies

28. In Europe the Melrose Group is subject to data protection regulation that imposes a general regulatory framework for the collection, processing and use of personal data

29. The loss of customers could have an adverse effect on the operations, business and financial condition of the Melrose Group

30. The Melrose Group is reliant on the effectiveness and acceptance of its technologies

31. Some public concern exists over the potential health risks associated with the use of radio frequency, or RF, communications in smart meters used in neighbourhoods

32. The metering industry in which the Melrose Group operates is exposed to the risk of, and to public concern about, an increased threat of ''cyber attacks'' on the power grid as Smart Grid infrastructure becomes more prevalent

33. The competitive environment in which the Melrose Group's Elster Business operates has been strongly impacted by the movement towards Smart Grid solutions

34. The Melrose Group's future operating results will depend on its ability to develop and manufacture products in a cost-effective manner

35. The third-party manufacturers with whom the Melrose Group works often require it to provide accurate forecasts, sometimes months in advance

37. The utility industry worldwide is often subject to long budgeting, purchasing and regulatory review processes that can take several years to complete and can result in unpredictable capital investment cycles

38. The Melrose Group's future financial performance and success largely depend on its ability to implement its business strategies successfully

39. The Melrose Group's business would be affected by the uncertainties of economic conditions

40. If the Melrose Group is not successful in adapting to conditions in the markets in which it operates, it may suffer adverse effects

41. An impairment of goodwill or other intangible assets would adversely affect the Melrose Group's financial condition and results of operation

PART B: Risks relating to the recent Acquisition

1. The Melrose Group's success will be dependent upon its ability to integrate the Elster Business; there will be numerous challenges associated with the integration

2. The Melrose Group may not realise the desired operational improvements from the Acquisition

3. The Elster Business may not perform in line with expectations

PART C: Risks relating to an investment in New Melrose Ordinary Shares

1. Confirmation of the Scheme and the New Melrose Reduction of Capital is in each case within the discretion of the Court

2. The value of an investment in New Melrose may go down as well as up

3. Any future New Melrose Ordinary Shares issues and sales of New Melrose Ordinary Shares by major Shareholders may have an adverse effect on the market price of the New Melrose Ordinary Shares

4. New Melrose's ability to continue to pay dividends on the New Melrose Ordinary Shares will depend on the availability of distributable reserves

5. Exchange rate fluctuations may impact the price of New Melrose Ordinary Shares or the value of any dividends paid

6. Holders of New Melrose Ordinary Shares outside the United Kingdom may not be able to participate in future equity offerings

CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

SPONSOR AND FINANCIAL ADVISER BROKER

AUDITORS AND LEGAL ADVISERS REPORTING ACCOUNTANTS

DIRECTORS COMPANY SECRETARY

Geoffrey Martin REGISTERED OFFICE

REGISTRARS

PART I

INFORMATION ON THE PROPOSALS

1. Description of the Scheme and the New Melrose Reduction of Capital

1.1 Effects of the Scheme

Melrose Industries PLC Capital/Financing Update 2012