Acquisition

Lupus Capital PLC
03 March 2006

  Not for release, publication or distribution into the United States, Canada,
                               Japan or Australia



                  Lupus Capital plc ('Lupus' or 'the Company')



                        Proposed acquisition of Schlegel

    Placing of 299,339,334 New Ordinary Shares at 14 pence per New Ordinary

                                     Share

Open Offer of up to 79,232,095 New Ordinary Shares at 14 pence per New Ordinary
                                     Share

           Admission of the Enlarged Share Capital to trading on AIM



Summary

  • Lupus announces it has conditionally agreed to acquire the Schlegel
    building products business from UniPoly Holdings Limited and its subsidiary
    for approximately £84 million in cash payable on completion.
  • Schlegel is a leader in the manufacturing and marketing of door seals,
    selling its products worldwide. For the year ended 31 December 2005,
    Schlegel had sales of £69.3 million and generated profit before interest and
    tax of £10.0 million, after management services fees of £0.7 million.
  • The consideration will be funded partly through a Placing and Open Offer
    of 378,571,429 New Ordinary Shares at a price of 14 pence per share and
    partly through a new debt facility of up to £45 million to be provided by
    HSBC and HBOS.
  • Of the Ordinary New Shares being issued, 299,339,334 shares have been
    placed firm with institutional and certain other investors under the Placing
    and 79,232,095 shares will be offered to existing shareholders under the
    terms of the Open Offer on the basis of one share for every three held as at
    1 March 2006.
  • The Acquisition is categorised as a reverse takeover for Lupus under the
    Listing Rules and as such requires the consent of Lupus shareholders to be
    sought at the EGM expected to be held on 29 March 2006 at 11:00 a.m..
  • Lupus is applying for the cancellation of the listing of its Existing
    Ordinary Shares from the Official List on completion of the Acquisition and
    will simultaneously apply for the Enlarged Share Capital to be admitted to
    trading on AIM.
  • Lupus has today announced its preliminary results for the year ended 31
    December 2005.
  • HSBC is acting as nominated adviser and broker to Lupus and is sole
    underwriter to the Placing and Open Offer.



Commenting on the Acquisition, Greg Hutchings, Executive Chairman of Lupus,
said:

'We are very excited about the progress that we are making with the Company.
Our results are good, backed up by strong cash generation and a progressive
dividend policy.  The acquisition of Schlegel, an international building
products manufacturer, is yet another step in creating a successful growing
international business in line with our strategy of developing Lupus Capital
plc.'


This summary should be read in conjunction with the full text of the following
announcement and the prospectus and circular to Shareholders relating to the
Acquisition, Placing and Open Offer and Admission to AIM, which will be posted
to Shareholders shortly.


Enquiries:

Alan Frame
Equity Development
0207 405 7777
07850 944187

HSBC Bank plc:
Rupert Faure Walker                Nick Donald
Managing Director                  Head of UK Equity Capital Markets
0207 992 2101                      0207 992 2151


Further information on Lupus Capital plc is available on the company's website
(www.lupuscapital.co.uk)


  Not for release, publication or distribution into the United States, Canada,
                               Japan or Australia


HSBC is acting exclusively for Lupus Capital plc and no one else in relation to
the Acquisition, Placing and Open Offer referred to in this announcement and
will not be responsible to anyone other than Lupus for providing the protections
afforded to their clients or for providing advice in relation to the
Acquisition, the Placing, the Open Offer or any other matter referred to in this
announcement.

No offer or invitation to acquire shares in Lupus Capital plc is being made by
or in connection with this announcement. Any such offer will be made solely by
means of the prospectus to be published by Lupus Capital plc in due course and
any acquisition of ordinary shares should be made on the basis of the
information contained in such prospectus.

The Prospectus containing details of, inter alia, the Acquisition, the Placing
and Open Offer and a notice of an Extraordinary General Meeting of the Company,
to be held at the offices of Slaughter and May, One Bunhill Row, London EC1Y
8YY, is expected to be posted to Qualifying Shareholders shortly, together with
the application forms and separate form of proxy for use at the Extraordinary
General Meeting. Copies of the Prospectus will also be available to the public,
free of charge, from the offices of Slaughter and May, One Bunhill Row, London
EC1Y 8YY and the registered office of the Company up until Admission.

This announcement and the information contained herein are not an offer for sale
of securities in or into the United States, Australia, Canada or Japan or in any
other jurisdiction. The ordinary shares, nor any rights to subscribe for such
ordinary shares, have not been and are not being registered under the United
State Securities Act of 1933, as amended (the Securities Act) and may not be
offered or sold in the United States or to or for the account or benefit of US
persons (as such terms are defined in Regulation S under such Act) absent
registration under, or an exemption from registration under, or in a transaction
not subject to the requirements of, the Securities Act. There will be no public
offer of securities in the United States.

This announcement and the information contained herein does not constitute an
offer to sell, exchange or transfer any securities of Lupus Capital plc and is
not soliciting an offer to purchase, exchange or transfer such securities in any
jurisdiction where the offer, sale, exchange or transfer is not permitted or to
any person or entity to whom it is unlawful to make that offer, sale, exchange
or transfer.

This announcement contains 'forward-looking statements' which include all
statements other than statements of historical facts, including, without
limitation, those regarding Lupus's financial position, business strategy, plans
and objectives of management for future operations and any statements preceded
by, followed by or that include forward-looking terminology such as the words '
targets', 'believes', 'estimates', 'expects', 'aims', 'intends', 'can', 'may', '
anticipates', 'would', 'should', 'could' or similar expressions or the negative
thereof. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors beyond Lupus's control that could
cause the actual results, performance or achievements of Lupus to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding Lupus's present and future business strategies
and the environment in which Lupus will operate in the future. These
forward-looking statements speak only as at the date of this announcement. Lupus
expressly disclaims any obligation or undertaking to disseminate any updates or
revisions in relation to any forward-looking statements contained herein to
reflect any change in Lupus's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statements are based save
as required by FSMA, the Prospectus Rules, Disclosure Rules and the Listing
Rules. As a result of these factors, the events described in the forward-looking
statements in this announcement may not occur.




  Not for release, publication or distribution into the United States, Canada,

                               Japan or Australia


                  Lupus Capital plc ('Lupus' or 'the Company')


                        Proposed acquisition of Schlegel

 Placing of 299,339,334 New Ordinary Shares at 14 pence per New Ordinary Share

Open Offer of up to 79,232,095 New Ordinary Shares at 14 pence per New Ordinary
                                     Share

           Admission of the Enlarged Share Capital to trading on AIM


1.      Background and introduction:

Lupus announces it has conditionally agreed to acquire, through its wholly owned
subsidiaries Schlegel Acquisition Holdings Limited, Schlegel Acquisition
Holdings USA, Inc., Schlegel UK (2006) Limited and Schlegel Australia (2006) Pty
Limited, the shares, assets and liabilities comprising the building products
business of Schlegel from UniPoly Holdings Limited and Schlegel Limited (a
wholly owned subsidiary of UniPoly Holdings Limited) for approximately £84
million in cash.

The cash consideration payable in relation to the Acquisition will be funded
through a firm Placing of 299,339,334 New Ordinary Shares at a price of 14 pence
per share, an Open Offer of 79,232,095 New Ordinary Shares at a price of 14
pence per share and a New Debt Facility. 54,373,895 of the Open Offer Shares
will also be conditionally placed with institutional and other certain
investors, subject to recall in respect of any of those Open Offer Shares being
acquired pursuant to the Open Offer.

The Placing and the Open Offer will raise gross proceeds of approximately £53
million and the Company will use the New Debt Facility and the proceeds of the
Placing and Open Offer (net of all expenses in relation to the transaction) to
finance the Acquisition.

The Acquisition is categorised as a reverse takeover for Lupus under the Listing
Rules and as such requires the consent of the Existing Shareholders to be sought
at the EGM proposed to be held on 29 March 2006 at 11:00 a.m.. Lupus is applying
for the cancellation of the listing of its Existing Ordinary Shares from the
Official List on completion of the Acquisition and will simultaneously apply for
the Enlarged Share Capital to be listed on AIM.

The Board believes that the listing of the Enlarged Group on AIM is in the best
interests of Shareholders as a whole and allows Lupus to complete the
acquisition of Schlegel. It will also enable Lupus to agree and execute
transactions more quickly, should acquisition and development opportunities
arise in the future. The Board remains committed to the highest standards of
corporate governance.

The Acquisition is conditional, inter alia, on the Resolutions being passed by
Lupus Shareholders at the EGM and Admission taking place.

HSBC is acting as nominated adviser and broker to Lupus and is sole underwriter
to the Placing and Open Offer.

The Directors of Lupus believe that Schlegel is a profitable and cash generative
business with an international manufacturing capability that makes good margins
and operates in a sector that the Lupus management team know well. The Schlegel
brand is recognised throughout the industry and the business has substantial
market shares in its key markets.

Schlegel represents a very strong fit with Lupus's strategy of acquiring asset
based, positive cash flow companies operating in industrial manufacturing,
processes or services. Lupus will look to use Schlegel as a platform for growth
and will work with the Schlegel management to drive operational improvements
through the business, to pursue organic growth opportunities and to make add-on
acquisitions where they will add value. Lupus expects that Schlegel will form
the foundations of a more substantial building products group.


2.      Principal terms of the Acquisition

On 3 March 2006, Schlegel Acquisition Holdings Limited, Schlegel Acquisition
Holdings USA, Inc., Schlegel UK (2006) Limited and Schlegel Australia (2006) Pty
Limited (all wholly owned subsidiaries of Lupus) entered into the Acquisition
Agreement with UniPoly and Schlegel UK for the purchase of Schlegel.

The consideration payable under the terms of the Acquisition is £84 million on a
debt free/cash free basis. All existing third party debt is being repaid on
acquisition and cash balances held in Schlegel as at 28 February 2006 will be
paid over to UniPoly at Completion. The amount of £84 million will be (i)
increased by any net cash in the bank accounts of Schlegel as at 28 February
2006; (ii) increased by interest for the period between 28 February 2006 and
Completion at 5 per cent. per annum; and (iii) decreased to the extent that the
net trading working capital of Schlegel as at 28 February 2006 is less than
£14.8 million. The total consideration is not expected to exceed £86 million.

The Acquisition Agreement is conditional upon (inter alia) the satisfaction of
the following conditions:

-        the waiting period under any applicable antitrust regulations having
terminated or expired;

-        certain of the conditions relating to obtaining the financing to
complete the Acquisition being satisfied (these include some of the conditions
relating to the Placing, Open Offer and New Debt Facility); and

-        the release by the Vendors of their letters of credit specified in the
Acquisition Agreement.

The Acquisition is expected to complete at the same time as Admission, subject
to all the relevant conditions being satisfied.

Further information on the terms and conditions of the Acquisition will be
contained in the Prospectus and circular to be published and sent to
shareholders shortly.


3.      Information on Schlegel

Schlegel is a leader in the manufacturing and marketing of door seals and sold
over 500 million metres of window seals in the year ended 31 December 2005.
Schlegel's core manufacturing competencies are continuously moulded urethane
foam, narrow fabric textiles, and extruded plastics. Schlegel is a leading
producer of urethane foam (compression seals) and woven pile (sliding seals) for
the window and door market and sells its products in more than 75 countries from
seven manufacturing plants located around the world.

Schlegel also manufactures related products such as cleaning brushes and static
control devices for copiers and printers, specialty automotive products such as
sunroof seals and truck spray suppressants, tractor seat trim and sway bar
bushes. Schlegel currently has over 5,000 customers.

For the year ended 31 December 2005, Schlegel had sales of £69.3 million and
generated profit before tax of £3.8 million. Operating profit for the year ended
31 December 2005 was £10.0 million and operating profit before management
services fees of £0.7 million was £10.7 million. The value of the gross assets
of Schlegel as at 31 December 2005 was £39.9 million.


4.      Information on Lupus

Lupus is a holding company with a declared strategy:

  • to build shareholder value through the acquisition of industrial assets
    with the potential for development;
  • to apply the executive team's management skills and systems to improve
    profitability; and
  • to use a variety of funding mechanics and exit strategies to enhance
    shareholder value.

Lupus owns one operating subsidiary, Gall Thomson, a supplier of marine
breakaway couplings.

For the year ended 31 December 2005, Lupus had sales in the year of £7.479
million (2004: £6.607 million) an increase of 13.2 per cent. Pre tax profits
before goodwill, the LESOT charge and exceptional items were up 6.8 per cent. at
£3.176 million (2004: £2.974 million). Lupus also intends to declare an
increased final dividend of 0.278p per share (2004: 0.264p), an increase of 5.3
per cent.

Lupus has today announced its preliminary results for the year ended 31 December
2005.



5.      Historic financial information on Schlegel

Financial information for Schlegel will be included in the Prospectus. As
Schlegel has only traded as a separate entity since 1 January 2005, it is only
possible to produce historical financial information for Schlegel for the year
ended 31 December 2005.

Schlegel is the larger of the two divisions within the Schlegel Group, the other
being Schlegel EMI. The Schlegel Group has operations in various countries
around the world. In most of these countries, only Schlegel or the Schlegel EMI
business operates. However, in the USA, the largest single country of operation,
which accounts for approximately 45 per cent. of Schlegel sales, and in Belgium,
which accounts for approximately 11 per cent. of Schlegel sales, the two
divisions have historically been operated as one combined unit with no
separation of manufacturing operations or financial reporting.

Prior to 31 December 2004, Schlegel EMI and Schlegel operated as one combined
unit with each business sharing operating resources, premises, support services,
staff and management. There was no separation of financial results beyond sales,
and in particular the net assets and cashflows of the separate businesses were
not tracked, neither was there any allocation of the pool of overhead costs. The
businesses were, in effect, so closely entwined that their results are not
reasonably separable to provide a true picture of the separate businesses prior
to 31 December 2004.

During 2004, work commenced to separate the two divisions operationally in the
USA and Belgium. From 31 December 2004, the two divisions were operated as stand
alone units with separate accounting records capable of independent audit.
Following separation, the primary manufacturing process was retained by
Schlegel, which now supplies Schlegel EMI on an arm's length basis. Both
businesses conduct secondary manufacturing and finishing processes, but they
have distinct product lines and very little customer overlap.

The manufacturing process is largely the same for both businesses and the raw
materials employed are also largely the same. As outlined above, prior to 31
December 2004, operations in the USA and Belgium were run as a single entity
with no differentiation in manufacturing process. Furthermore, in the USA and
Belgium the workforce and management of the Schlegel Group operated as a single
pool with very few employees specific to one division or the other.

As a result of the above, it is not possible to recreate separate historical
financial information for the separate businesses for any historic period prior
to 31 December 2004. For this reason, the only financial information available
for Schlegel as a separate entity is for the financial year ended 31 December
2005.

The Directors believe that, in spite of the limited financial information
available for Schlegel, the Transaction is in the best interests of Shareholders
as a whole.



6.      Suspension in trading of Lupus's shares

Further to the announcement made by Lupus on 3 February 2006, Lupus's shares
were suspended from trading with effect from 7.30 a.m. on 3 February 2006. Lupus
believes that the Ordinary Shares will remain suspended until the cancellation
of the listing of the Existing Ordinary Shares from the Official List on
completion of the Acquisition, which is currently expected to occur on or about
4 April 2006.


7.      Details of the Placing and Open Offer

Lupus is proposing to raise up to approximately £53 million in total pursuant to
the Placing and Open Offer. The Issue Price of 14 pence per New Ordinary Share
is equal to the closing middle market price for an Existing Ordinary Share of 14
pence on 2 February 2006, the day prior to the suspension of trading of Lupus's
shares on 3 February 2006.

Pursuant to the Placing Agreement, HSBC has conditionally placed the Placing
Shares with institutional and certain other investors. The Placing and the Open
Offer have been underwritten by HSBC.

The Open Offer provides Qualifying Holders with the opportunity to apply to
acquire any number of Open Offer Shares at the Issue Price. Qualifying Holders
will be offered a minimum entitlement on the following basis:

            1 Open Offer Share for every 3 Existing Ordinary Shares

registered in their names at the close of business on the Record Date and so in
proportion for any greater or lesser number of Existing Ordinary Shares then
held. Entitlements to apply to acquire Open Offer Shares will be rounded down to
the nearest whole number. Fractions of New Ordinary Shares will be disregarded
in the calculation of the Qualifying Holder's Basic Entitlement.

The Excess Application Facility enables Qualifying Holders to apply to acquire
any whole number of Open Offer Shares in excess of their Basic Entitlement
which, in the case of Qualifying Non-CREST Holders, will be the number of Open
Offer Entitlements as shown on their Non-CREST Application Form or, in the case
of Qualifying CREST Holders, will be the number of Open Offer Entitlements
standing to the credit of their stock account in CREST. Qualifying Holders with
holdings of Existing Ordinary Shares in both certificated and uncertificated
form will be treated as having separate holdings for the purpose of calculating
their Basic Entitlements under the Open Offer.

Excess applications may be scaled down in such manner as the Directors
determine, in their absolute discretion. It is intended that excess applications
will be satisfied pro rata (or as nearly as practicable) to the relevant
holder's Basic Entitlement. The aggregate number of New Ordinary Shares
available for acquisition under the Open Offer will not exceed 79,232,095.

Application has been made for the Open Offer Entitlements for Qualifying CREST
Holders to be admitted to CREST. It is expected that the Open Offer Entitlements
will be admitted to CREST on 7 March 2006.

Shareholders should note that the Open Offer is not a rights issue. Qualifying
CREST Holders should note that, although the Open Offer Entitlements will be
admitted to CREST and be enabled for settlement, applications in respect of
entitlements under the Open Offer may only be made by the Qualifying Holder
originally entitled or by a person entitled by virtue of a bona fide market
claim raised by CRESTCo's Claims Processing Unit. Qualifying Non-CREST Holders
should note that the Non-CREST Application Form is not a negotiable document and
cannot be traded. Qualifying Holders should be aware that in the Open Offer,
unlike in a rights issue, any Open Offer Shares not applied for will not be sold
in the market or placed for the benefit of Qualifying Holders who do not apply
under the Open Offer.

If the Resolutions are not passed, or the Acquisition is not completed, the
Existing Ordinary Shares will remain listed on the Official List, the New
Ordinary Shares will not be issued under the Placing or the Open Offer and all
monies received by the receiving agent, Capita Registrars, will be returned to
the applicants (at the applicants' risk and without interest) as soon as
possible thereafter. Any Open Offer Entitlements admitted to CREST will
thereafter be disabled.

The New Ordinary Shares will, following allotment and issue, rank pari passu in
all respects with Existing Ordinary Shares and will rank in full for all
dividends and other distributions declared in respect of the ordinary share
capital of Lupus.

Further details on the Placing and Open Offer are provided in the Prospectus and
circular to be published and sent to shareholders shortly.



8.      Expected timetable
       2006
     1 March               Record Date for the Open Offer
     6 March         7am   Announcement of the Acquisition, Placing and Open Offer and Lincoln preliminary
                           results

                           Prospectus Published
     7 March               Open Offer Entitlements credited to stock accounts in CREST of Qualifying CREST
                           Holders
     20 March        3pm   Recommended latest time for requesting withdrawal of Open Offer Entitlements
                           from CREST
     22 March        3pm   Latest time for depositing Open Offer Entitlements into CREST
     23 March        3pm   Latest time and date for splitting of Non-CREST Application Forms (to satisfy
                           bona fide market claims only)
     27 March       11am   Latest time and date for acceptance of the Open Offer and receipt of completed
                           Non-CREST Application Forms and CREST Excess Application Forms and payment in
                           full under the Open Offer or settlement of relevant CREST instruction
     27 March       11am   Latest time and date for receipt of Forms of Proxy
     29 March       11am   Extraordinary General Meeting
     29 March              Ex-dividend date for the special interim dividend and Lincoln final dividend
     31 March              Record date for the special interim dividend and Lincoln final dividend
     4 April         8am   Completion of the Acquisition
                     8am   Cancellation of the listing of the Existing Ordinary Shares from trading on the
                           Official List
                     8am   Date of Admission and commencement of dealings on AIM
                     8am   New Ordinary Shares credited to CREST stock accounts
week commencing 10         Despatch of definitive share certificates for New Ordinary Shares
      April

Notes:

(1) References to times in the above timetable are to London time (unless
otherwise stated).

(2) The timing of the events in the above timetable following the Extraordinary
General Meeting and in the rest of this announcement is indicative only and
conditional upon the approval of the Resolutions by Shareholders at the
Extraordinary General Meeting.



9.      Proposed Admission of the Enlarged Share Capital to AIM

Lupus is currently listed on the Official List. The Acquisition is classified by
the Listing Rules as a reverse takeover and, accordingly, Lupus is applying for
the cancellation of the listing of its Existing Ordinary Shares from the
Official List on completion of the Acquisition. As a condition to granting Lupus
exclusivity, the Vendors required Lupus to commit to an announcement of the
Acquisition immediately following completion of the 2005 year-end audit process,
and to completion of the Acquisition as soon as possible thereafter.

The Directors believe that it would not be possible to complete the Acquisition
and list the Enlarged Group on the Official List for the following reasons:

  • Admission to the Official List requires the compilation of a three year
    track record and, while Schlegel has existed and traded for a number of
    years, for the reasons set out in paragraph 5 of this announcement, it has
    not proved possible to recreate separate historical financial information
    for Schlegel for any historic period prior to 1 January 2005.
  • An application for admission to the Official List would require Schlegel
    and Lupus to prepare financial statements under IFRS. As a business owned by
    a private company, Schlegel currently prepares accounts under UK GAAP and no
    work has been undertaken by the Vendors or Schlegel to prepare Schlegel
    accounts under IFRS.

For these reasons, the Directors consider that the Acquisition can only be
completed by re-listing the Enlarged Group on AIM following completion of the
Acquisition.

The London Stock Exchange has indicated to Lupus' advisers that the Enlarged
Group, which will prepare its consolidated financial statements for the year
ending 31 December 2006 under UK GAAP, will be eligible for listing on AIM.

The Board believes that the listing of the Enlarged Group on AIM is in the best
interests of Shareholders as a whole and allows Lupus to complete the
acquisition of Schlegel. It will also enable Lupus to agree and execute
transactions more quickly, should acquisition and development opportunities
arise in the future. The Board remains committed to the highest standards of
corporate governance.

Shareholders should note that, while an AIM listing is appropriate for the
Enlarged Group at present, should the Enlarged Group's circumstances change in
the future and the Enlarged Group become eligible for listing on the Official
List, Lupus may decide to apply for admission to the Official List.

If the Resolutions are not passed, or the Acquisition is not completed, the
Existing Ordinary Shares will remain on the Official List.

Application will be made to the London Stock Exchange for the Enlarged Share
Capital to be admitted to trading on AIM. It is expected that Admission will
become effective and dealings for normal settlement in the Enlarged Share
Capital will commence on 4 April 2006.



10.  Financial effects of the transaction on Lupus

The Acquisition will have a transforming impact on the financial position of
Lupus. The Directors believe that, taking into account the impact of the Placing
and Open Offer, the Acquisition will be earnings enhancing to the Enlarged Group
in 2006. This statement should not be interpreted to mean that future earnings
of the Enlarged Group will necessarily match or exceed the Group's historical
published earnings.

In addition to funding the Acquisition, the Placing and Open Offer has been
structured in a way that is expected to have the effect of creating
distributable reserves equal to the net proceeds of the Placing and Open Offer
less the par value of the New Ordinary Shares issued by Lupus. This structure is
described in the following paragraph.

Lupus and HSBC have agreed to subscribe for ordinary shares in Newco. HSBC will
then apply monies that they receive from Qualifying Shareholders applying to
acquire New Ordinary Shares under the Placing and Open Offer, after deducting
commissions, to subscribe for redeemable preference shares in Newco. Lupus will
allot and issue the New Ordinary Shares to those persons entitled thereto in
consideration of HSBC transferring its holding of redeemable preference shares
in Newco and its holding of ordinary shares in Newco to Lupus. Accordingly,
instead of receiving cash as consideration for the issue of the New Ordinary
Shares, at the conclusion of the Placing and Open Offer, Lupus will own the
entire issued share capital of Newco whose only asset will be its cash reserves,
which will represent an amount equivalent to the net proceeds of the Placing and
Open Offer. Lupus will be able to utilise this amount by redeeming the
redeemable preference shares it holds in Newco and, during any interim period
prior to redemption, by procuring that Newco lends the amount to Lupus. The
structure of the Placing and Open Offer is expected to have the effect of
creating distributable reserves equal to the proceeds of the Placing and Open
Offer less the par value of the New Ordinary Shares issued by Lupus. It should
be possible for Lupus to declare dividends from the distributable reserves
created in the future, provided that Lupus has sufficient cash resources to fund
such dividends, the distributable reserves have not otherwise been reduced, and
the Directors consider it appropriate to declare such dividends.

An unaudited UK GAAP pro forma net assets statement showing the financial
effects of the Transaction on Lupus will be set out in the Prospectus and
circular to be published and sent to shareholders shortly.



11.  Trends in current trading and prospects

Schlegel

In mainland Europe the new year has started promisingly. In the UK, there was a
slight slowdown in the first months of 2006 for foam orders in the vinyl sector,
which is expected to continue in the second quarter. North America opened with
strong copier shipments but urethane foam and woven pile have been slightly
slower to recover after Christmas and New Year.

Schlegel expects the market for door and window seals to continue to expand in
2006 and Schlegel's management believes that the business is well placed to take
advantage of opportunities as they arise.

Lupus

Gall Thomson's trading in 2006 to date has been good and the business has a
healthy order book. Gall Thomson expects that there will be good prospects for
the offshore oil and gas market over the coming year. This is being driven by
the continuing expansion in the use of sub-sea production technologies, the move
into deep water areas and the exploitation of marginal fields.

KLAW has continued to extend its product range and has increased its marketing
efforts to penetrate the industrial couplings market.



12.  Directors, Employees and Key Personnel of the Enlarged Group

Following completion of the Transaction, the senior management of Schlegel,
under the leadership of the current CEO, Ian Pawson, will remain with Schlegel.

The existing employment rights, including pension rights, of employees of both
Lupus and Schlegel will be fully safeguarded.



13.  Share Incentive Arrangements

Lupus operates Share Incentive Arrangements through an employee benefit trust,
the LESOT, and an enterprise management incentive scheme, the EMI Scheme. These
arrangements are designed to provide incentives for eligible participants to
achieve value for Shareholders. All full time employees of Lupus (including
executive Directors) are eligible to participate in the Share Incentive
Arrangements.

No further awards can currently be made under the Share Incentive Arrangements
until at least 30 days following the preliminary announcement of the results of
Lupus for the year ending 31 December 2007.

In light of the Acquisition and its timing, the Remuneration Committee wishes to
include the Schlegel management team in the Group's existing Share Incentive
Arrangements. The Remuneration Committee has recommended that, conditional on
the Acquisition being completed, the dates of the Third Period in the
subscription agreement between Lupus and LESOT and in the option agreement
between Lupus and Greg Hutchings (subject to the written consent of Greg
Hutchings) be amended to the period of the three financial years ending on 31
December 2008, with the Trustees of the LESOT being permitted to subscribe for
Ordinary Shares until 31 August 2009. All other aspects of the Share Incentive
Arrangements will remain unchanged. These amendments to the Share Incentive
Arrangements will be subject to approval by Shareholders and it is proposed that
a resolution will be put forward accordingly at the AGM of Lupus, which is
expected to be held in May 2006.



14.  Dividend policy

Lupus intends to pay a special interim dividend of 0.114 pence per Ordinary
Share in respect of the quarter ending 31 March 2006 to Shareholders on the
register on 31 March 2006. This special interim dividend will be paid to
Shareholders on 21 April 2006.

Lupus also announced today its intention to pay a final dividend for the year
ended 31 December 2005 of 0.278p per Ordinary Share to Shareholders on the
register on 31 March 2006. This final dividend will be paid to Shareholders
following the AGM of Lupus which is expected to be held in May 2006.

Lupus expects, in the absence of unforeseen circumstances, to declare dividends
(including the special interim dividend) for the financial year ending 31
December 2006 totalling 0.455 pence. This is equivalent to a dividend yield of
3.25 per cent. at the Issue Price. It is the intention of the Board to maintain
a progressive dividend policy in the future.



15.  Extraordinary General Meeting

An Extraordinary General Meeting of the Company will be convened for 11:00 a.m.
on 29 March 2006 at the offices of Slaughter and May, One Bunhill Row, London
EC1Y 8YY for the purpose of considering and, if thought fit, passing the
Resolutions.



16.  Directors intentions in respect of Open Offer

Greg Hutchings owns 23,750,000 Existing Ordinary Shares in Lupus, representing
approximately 10.0 per cent. of Existing Ordinary Shares, and intends to apply
to acquire his entire Open Offer Entitlement amounting to 7,916,666 Open Offer
Shares and costing £1,108,333 at the Issue Price.

In order to increase his net shareholding in Lupus he intends to borrow the
money to purchase his Open Offer Entitlement with an expectation of repaying the
loan on the disposal of some Ordinary Shares at a later date.

The LESOT owns 47,539,257 Existing Ordinary Shares in Lupus and intends to apply
to acquire its entire Open Offer Entitlement amounting to 15,846,419 Open Offer
Shares and costing £2,218,499 at the Issue Price.

In order to increase its net shareholding in Lupus, the LESOT intends to borrow
the money to purchase its Open Offer Entitlement with an expectation of repaying
the loan on the disposal of some Ordinary Shares at a later date.

Denis Mulhall owns 2,800,000 Existing Ordinary Shares in Lupus and intends to
apply to acquire his entire Open Offer Entitlement of 933,333 New Ordinary
Shares, as well as 866,667 Firm Placing Shares. In total, under that Placing and
Open Offer, he is subscribing for £252,000 at the Issue Price.

Frederic Hoad owns 325,000 Existing Ordinary Shares in Lupus and intends to
apply to acquire his entire Open Offer Entitlement of 108,333 New Ordinary
Shares, as well as 100,000 Firm Placing Shares. In total, under that Placing and
Open Offer, he is subscribing for £29,167 at the Issue Price.

Roland Tate owns 160,348 Existing Ordinary Shares in Lupus and intends to apply
to acquire his entire Open Offer Entitlement of 53,449 New Ordinary Shares, as
well as 53,571 Firm Placing Shares. In total, under that Placing and Open Offer,
he is subscribing for £14,983 at the Issue Price.



17.  Recommendation

The Board, which has been so advised by HSBC, consider that the Transaction is
in the best interests of Lupus' Shareholders as a whole. In providing this
advice, HSBC has taken into account the Directors' commercial assessment of the
Transaction. Accordingly, the Board recommends that you vote in favour of the
Resolutions to be proposed at the EGM as the Directors intend to do in respect
of their own beneficial shareholdings, amounting to 27,035,348 Ordinary Shares
representing approximately 11.4 per cent. of the issued share capital of Lupus.
In addition, the trustees of the LESOT have indicated that they intend to vote
in favour of the Resolutions in respect of their holding of 47,539,257 Ordinary
Shares representing approximately 20.0 per cent. of the issued share capital of
Lupus.



18.  Documentation

A Prospectus and circular to shareholders containing the full terms and
conditions of the Acquisition and the Placing and Open Offer, together with the
relevant Application Forms is expected to be published and despatched to Lupus
shareholders shortly.

The Prospectus and circular to shareholders will also contain notice of the
Extraordinary General Meeting of Lupus convened for 29 March 2006 for the
purposes of considering the necessary resolutions to implement the Acquisition,
Placing and Open Offer.

Copies of the Prospectus will also be available to the public, free of charge,
from the offices of Slaughter and May, at One Bunhill Row, London EC1Y 8YY, and
the registered office of the Company until Admission.


Appendix 1: Definitions



The following definitions are used throughout this announcement except where the
context requires otherwise:
'Acquisition'                     the acquisition by Lupus, through the Purchasing Subsidiaries, from the
                                  Vendors of the Transferred Assets and entire issued share capital of
                                  the Transferred Subsidiaries

'Acquisition Agreement'           the conditional agreement for the Acquisition dated 3 March 2006
                                  between the Vendors and the Purchasing Subsidiaries

'Admission'                       the admission of the Existing Ordinary Shares and the New Ordinary
                                  Shares to be issued on Completion to listing on AIM and to trading on
                                  the London Stock Exchange

'AGM'                             annual general meeting

'AIM'                             the Alternative Investment Market

'Application Forms'               the CREST Excess Application Form and the Non-CREST Application Form
'Basic Entitlement'               the basic pro rata entitlement of Qualifying Holders to acquire 1 Open
                                  Offer Share for every 3 Existing Ordinary Shares held on the Record
                                  Date

'Business'                        the worldwide business conducted by Schlegel UK and the Transferred
                                  Subsidiaries, consisting of the research, development, manufacturing,
                                  marketing, assembly and sale of weatherstripping products, including
                                  foam-based compression seals and pile-based sliding seals for the
                                  global window and door market, and other engineered products based on
                                  continuously molded urethane foam, narrow fabric textiles and extruded
                                  plastics, including cleaning brushes, static control devices for
                                  copiers and printers, specialty automotive products (e.g. sunroof
                                  seals, truck spray suppressants and tractor seat trim), sandwich bag
                                  seals and aircraft components, hardware products including hinge
                                  mechanisms, window and door locking mechanisms and associated fittings
                                  and the furnishing of advisory and consulting services in connection
                                  therewith

'Capita Registrars'               a trading division of Capita IRG Plc

'Companies Act' or 'Act'          the Companies Act 1985, as amended by the Companies Act 1989

'Completion'                      completion of the Acquisition and the Placing and Open Offer in
                                  accordance with the terms of the Placing Agreement and Acquisition
                                  Agreement

'Conditional Placing Shares'      the 54,373,895 New Ordinary Shares being placed subject to clawback in
                                  respect of any Open Offer Shares applied for pursuant to the Placing
                                  Agreement

'CREST'                           the system for the paperless settlement of trades and the holding of
                                  uncertificated securities operated electronically by CRESTCo in
                                  accordance with the Uncertificated Securities Regulations 2001 (SI No.
                                  2001/3755)

'CRESTCo'                         CRESTCo Limited, the operator of CREST

'CREST Excess Application Form'   the excess CREST application form relating to excess applications for
                                  Open Offer Shares issued to Qualifying CREST Holders

'EMI Scheme'                      the Lupus Capital PLC 2004 enterprise management incentive scheme

'Enlarged Group'                  the Lupus Group as enlarged by Schlegel

'Enlarged Share Capital'          the issued ordinary share capital of Lupus immediately following
                                  completion of the Placing and the Open Offer including the Existing
                                  Ordinary Shares and the New Ordinary Shares
'Excess Application Facility'     the arrangement pursuant to which Qualifying Holders may apply for
                                  additional Open Offer Shares in excess of their Basic Entitlement in
                                  accordance with the terms and conditions of the Open Offer

'Existing Ordinary Shares'        the Ordinary Shares in issue as at the date of this announcement

'Existing Shareholders'           the holders of the Existing Ordinary Shares

'Extraordinary General Meeting'   the extraordinary general meeting expected to be held at 11:00 a.m. on
or 'EGM'                          29 March 2006, notice of which is set out in the Prospectus

'Firm Placing Shares'             the 299,339,334 New Ordinary Shares being placed firm pursuant to the
                                  Placing Agreement

'FSA'                             Financial Services Authority

'FSMA'                            the Financial Services and Markets Act 2000

'Gall Thomson'                    Gall Thomson Environmental Limited, incorporated in England and Wales
                                  under the Act with registered number 2852924

'HSBC'                            HSBC Bank plc, a company incorporated in England and Wales under the
                                  Act with registered number 14259

'IFRS'                            International Financial Reporting Standards

'Issue Price'                     14 pence per New Ordinary Share

'KLAW'                            KLAW Products Limited, a company incorporated in England and Wales
                                  under the Act with registered number 316007

'LESOT'                           the Lupus Employee Share Ownership Trust

'Listing Rules'                   the Listing Rules of the FSA

'London Stock Exchange'           London Stock Exchange plc

'Lupus'                           Lupus Capital plc, a company incorporated in England and Wales under
                                  the Act and domiciled in the UK with registered number 2806007

'Lupus Group' or 'the Group'      Lupus and its subsidiaries, or any one or more of them as the context
                                  requires

'Newco'                           Lupus Capital (Jersey) Limited, a company incorporated under the laws
                                  of Jersey

'New Debt Facility'               an agreement dated 3 March 2006 for a term loan facility of £35,000,000
                                  and a multicurrency revolving loan facility of £10,000,000

'New Ordinary Shares'             the new ordinary shares of 0.5p each to be issued by Lupus pursuant to
                                  the Placing and Open Offer

'Non-CREST Application Form'      the application form relating to applications for Open Offer Shares
                                  issued to Qualifying Non-CREST Holders

'Notice'                          the notice of the Extraordinary General Meeting of Lupus to be held for
                                  the purpose of considering and, if thought fit, passing the Resolutions

'Official List'                   the Official List of the UK Listing Authority

'Open Offer'                      the conditional invitation made to Qualifying Shareholders to apply to
                                  acquire the Open Offer Shares, as described in the Prospectus and in
                                  the Application Forms

'Open Offer Entitlements'         an entitlement to apply to acquire Open Offer Shares, allocated to a
                                  Qualifying Holder pursuant to the Open Offer

'Open Offer Shares'               up to 79,232,095 New Ordinary Shares being made available to Qualifying
                                  Shareholders under the Open Offer

'Ordinary Shares'                 ordinary shares of 0.5p each in the capital of Lupus

'Placing'                         the proposed placing of shares in Lupus described in further detail in
                                  the Prospectus

'Placing Agreement'               the conditional agreement between Lupus and HSBC dated 3 March 2006 in
                                  connection with the Placing and Open Offer, further details of which
                                  will be set out in the Prospectus

'Placing Shares'                  the Firm Placing Shares and the Conditional Placing Shares

'Prospectus'                      the prospectus, prepared in accordance with the Listing Rules and the
                                  Prospectus Rules, to be published and despatched to Shareholders
                                  shortly

'Prospectus Rules'                the Prospectus Rules of the Financial Services Authority

'Purchasing Subsidiaries'         Schlegel UK (2006) Limited, Schlegel Acquisition Holdings USA, Inc.,
                                  Schlegel Australia (2006) Pty Limited and Schlegel Acquisition Holdings
                                  Limited, all wholly owned subsidiaries of Lupus

'Qualifying Holders' or '         Shareholders whose names appear on the register of members of Lupus on
Qualifying Shareholders' or '     the Record Date
Qualifying CREST Holders' or '
Qualifying Non-CREST Holders'

'Record Date'                     1 March 2006

'Registrars'                      Capita Registrars, the registrars of Lupus

'Regulations'                     the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)

'Resolutions'                     the ordinary resolutions and special resolutions to be proposed at the
                                  EGM

'Resolution 1'                    the ordinary resolution to be proposed at the EGM to approve the
                                  implementation by Lupus of the Acquisition as set out in the Notice

'RNS'                             the Regulatory News Service of the London Stock Exchange

'Schlegel'                        the Transferred Assets and entire issued share capital of the
                                  Transferred Subsidiaries

'Schlegel Acquisition Holdings    Schlegel Acquisition Holdings USA, Inc., a company incorporated under
USA, Inc.'                        the laws of Delaware and a wholly owned subsidiary of Lupus

'Schlegel Acquisition Holdings    Schlegel Acquisition Holdings Limited a company incorporated in England
Limited'                          and Wales with registered number 5686572

'Schlegel Australia'              Schlegel Pty, a company incorporated under the laws of Australia

'Schlegel Australia (2006) Pty    Schlegel Australia (2006) Pty Limited, a company incorporated under the
Limited'                          laws of Australia

'Schlegel Belgium'                Schlegel BVBA, a company incorporated under the laws of Belgium

'Schlegel EMI'                    the electromagnetic interferences business which is owned by UniPoly
                                  and which presently forms the Schlegel Group together with Schlegel

'Schlegel Engineering'            Schlegel UK Engineering Limited, a company incorporated in England and
                                  Wales

'Schlegel Germany'                Schlegel GmbH, a company incorporated under the laws of Germany

'Schlegel Italy'                  Schlegel SRL, a company incorporated under the laws of Italy

'Schlegel Spain'                  Schlegel Taliana SL, a company incorporated under the laws of Spain

'Schlegel UK'                     Schlegel Limited, a company incorporated in England and Wales

'Schlegel UK (2006) Limited'      Schlegel UK (2006) Limited, a company incorporated in England and Wales
                                  with registered number 5686601

'Schlegel UK Subsidiaries'        Schlegel Italy, Schlegel Spain, Schlegel (UK) Engineering Limited and
                                  Schlegel (UK) Limited, or any one or more of them as the context
                                  requires

'Schlegel US'                     UniPoly Schlegel Holdings, Inc, a company incorporated under the laws
                                  of Delaware

'Securities Act'                  the US Securities Act of 1933, as amended

'Shareholders'                    the holders of Ordinary Shares in Lupus

'Share Incentive Arrangements'    the LESOT and the EMI Scheme (including the option agreement between
                                  Lupus and Greg Hutchings granted under the EMI Scheme) and the
                                  subscription agreement between the Trustees and Lupus

'Shares'                          shares in the capital of Lupus

'Suspension'                      the suspension of trading of the Ordinary Shares on the London Stock
                                  Exchange which took effect from 7.30 a.m. on 3 February 2006
'Transaction'                     the Acquisition, Placing and Open Offer and the Resolutions

'Transferred Assets'              all of Schlegel UK's property and assets related to, or used, or held
                                  in connection with the Business as conducted by Schlegel UK on the date
                                  of completion of the Acquisition Agreement, real, personal or mixed,
                                  tangible and intangible, of every kind and description, wherever
                                  located

'Transferred Subsidiaries'        the UniPoly Subsidiaries and Schlegel UK Subsidiaries, or any one or
                                  more of them as the context requires

'Trustee'                         Walbrook Trustees (Guernsey) Limited

'UK' or 'United Kingdom'          the United Kingdom of Great Britain and Northern Ireland

'UK GAAP'                         generally accepted accounting principles in the UK

'UK Listing Authority' or 'UKLA'  the Financial Services Authority acting in its capacity as the
                                  competent authority for the purpose of Part VI of the Financial
                                  Services and Markets Act 2000

'Uncertified Share' or '          a share or other security which is in an uncertificated form
uncertificated share'

'UniPoly'                         UniPoly Holdings Limited, a company incorporated in England and Wales

'UniPoly Subsidiaries'            Schlegel US, Schlegel Germany, Schlegel Belgium and Schlegel Australia,
                                  or any one or more of them as the context requires

'US', 'USA' or 'United States'    the United States of America, its territories and possessions, any
                                  state of the United States and the District of Columbia and all other
                                  areas subject to its jurisdiction

'Vendors'                         UniPoly and Schlegel UK




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