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MG CAPITAL PLC

RESULTS FOR THE YEAR ENDED 30 JUNE 2008

CHAIRMAN'S STATEMENT 

Against an increasingly gloomy global financial background there have been few areas of relative brightness over the past year. One of these brighter areas has been agricultural sector where we have been active on behalf of our client Family Investments Limited. Prices of agricultural land performed strongly over the period driven up by a sharp rise in the prices of most soft commodities. This greatly benefited the valuations of the fund's farming holdings in South America and Australia. We believe that this upturn represents the first stage of a long term bull market in soft commodities, but even so we felt that prices and values had risen too far too fast and that it would be sensible for the fund to take advantage of some very strong buyer demand for its particular assets and use this as a selling opportunity. As a result the fund made some well timed sales, completed after the June year end, at excellent prices which have significantly advanced the fund towards its aim of liquidating all its assets over a two year time frame.  

Since the timing of those sales there has been a material pull back in soft commodity prices and in some farm valuations. We see this very much as a buying opportunity and are therefore moving ahead with plans to establish an investment vehicle specializing in this sector. While current conditions in financial markets are not favourable for new funds of any sort, we think that as investors become more familiar with this asset class they will realise that it has many qualities that make it attractive in the current climate of financial uncertainty. We are also continuing to work on a new fund for private equity investment in China, which in our view will be one of the few countries in the world where growth prospects will remain relatively robust over the next few years and where opportunities to invest at reasonable valuations are likely to increase.

Turning to our corporate advisory and consultancy activities, we have continued to work on transactions in Russia and China in various sectors. The most notable of these, a US$20 million capital raising for Sinotel Limited, an Australian Company involved in fibre optic telecommunications in China, was in fact not completed until after the year end and is still subject to shareholders' approval, which is expected later this month. Provided that this approval is received, MG Global Investments Limited (our FSA authorised and regulated subsidiary) will receive a fee of 5% of the amount raised for its services. It is already entitled to a warrant over 1% of the enlarged share capital of the Company. However, no fees from this work or any other of our main projects were accrued in the year under review and as a consequence there was a loss attributable to the equity holders of the Company of £576,057 compared to a loss of £667,606 on the same basis for the previous year. 

As you will recall, we have a stake of around 4% in Sky Express, Russia's only low cost airline. Sky Express is still growing fast with ten Boeing 737s now in operation. It has reported that it is on track to achieve an 85% year on year growth in passenger numbers in 2008 with growth in passenger numbers of over 40% on routes that were in operation for the second year. However due to the rise in fuel prices, conditions in this market are tough and the airline has announced that it is the process of raising necessary additional capital. 

This year's Annual General Meeting will be held at 10.30am on 11th December 2008. From 1 October 2008, under the Companies Act 2006, a director has a statutory duty to avoid a situation where there is or may be a conflict of interest with their Company. However in the event that a conflict does arise there needs to be a practical way of dealing with it. The Act provides for this by allowing directors of public companies to authorise conflicts or potential conflicts where the articles of association contain a provision allowing this authorisation, and a resolution will be proposed that the Company's Articles of Association be amended to include such a provision. For details of the meeting and resolutions please refer to the Notice at the end of this Report. 

Peter Hannen  14 October 2008  

Chairman  

 REPORT OF THE DIRECTORS

The Directors present their Report, together with the Group Financial Statements and Auditors' Report, for the year ended 30 June 2008.

Principal Activities and Business Review

The principal activity of the Group continued to be the provision of fund management and advisory services, corporate advisory, research and consultancy services, and other investment and financial services.

The Parent Company is a limited liability company, incorporated and domiciled in the UK.

The results for the Group show a pre-tax loss on continuing operations of £781,888 (2007: £982,377) for the year and sales on the continuing trade of £186,667 (2007: £741,456). There is also a profit within the Group on discontinued trade of £214,329 (2007: £260,643) for the year with related sales of £417,346 (2007: £785,576).

Business Environment

The business environment has been a challenging one throughout the year, particularly as the effects of the credit crunch emanating from the United States began to be felt around the world. 

Strategy

The principal objective is for the Group to become a strong and independent investment house offering a number of distinctive specialisations. 

There are several key elements to the Group's strategy for achieving this objective:

• Growth of existing funds under management/advice by continued active marketing;

• Development of new funds and other products and services in the Group's specialist areas;

• Continued development of the Group's ability to identify, assess and process individual investment opportunities in the Group's specialist areas;

• Continued development of the Group's ability to distribute its products and services by extending the breadth and depth of its institutional relationships in the UK, the rest of Europe and in Asia;

• Continuing to build up the Group's interests in emerging companies with high growth potential by way of equity fees paid by client companies, warrants and earned interests;

• Targeted investment in the resources required to support these strategies.

Business Review

The Group has made progress during the year on some but not all of these key elements to its strategy. Following the decision taken in the previous year to wind down Jade Absolute Fund Managers and to terminate the advisory agreement with the Close Far East Equity fund, the agreement with the Jade Asia Pacific Fund was terminated at the end of July 2007, which further reduced the funds under management or advice over the period to $23 million. Performance fees amounting to £401,125 which related to calendar year 2007 were received by Jade Absolute during the year. Much of the Group's efforts during the year have been devoted to marketing new products, principally a global farming product and a China private equity product, that it is hoped will more than replace the Jade funds as core assets under management/advice for the Group. Corporate advisory, research and consultancy work continued, but as the main project in this category did not come to fruition until after the year end, no such fees were earned during the year. During the year the Group continued to invest in the resources required to support its strategies, including a continuing albeit reduced investment in the Beijing operations of its subsidiary MG Maple Capital Limited. 

Future Outlook and Future Developments

It is anticipated that the corporate advisory and consultancy business will continue to produce significant but sporadic fee revenues derived mainly from transactions in China and other emerging economies. However the main focus will continue to be on efforts to redeploy the Group's resources towards securing a higher proportion of recurrent income from asset management and advisory activities.

Key Performance Indicators ('KPIs')

Progress on the key elements of its strategy is also monitored by the Directors by reference to the following key performance indicators (KPIs) applied on a group wide basis. Performance for the year to 30 June 2008 is set out in the table below together with prior year comparison.  

	2008	2007
Assets under management or advice	$23m	$25m
Corporate advisory, research and consultancy fees	$Nil	$611,706

Principal Risks and Uncertainties

The Group's principal financial assets are cash, receivables and an investment in the shares of Fin-First Limited (the parent company of Sky Express). A major part of its revenues are currently derived from fund management/advisory fees. The key risks to which the Group is exposed are credit risks, currency risks, and operational risks. The Group's investment in Fin-First Limited should be regarded as relatively high risk in that Sky Express is a recently launched low cost airline operation in Russia which has yet to achieve positive cash flow and has been adversely affected during the year by a sharp rise in fuel costs which means it has a requirement for new capital which there is no certainty that it will secure.

Credit Risk

The Group's credit risk is mainly attributable to its debtors including trade and other debtors; this is the risk that a client or other debtor will fail to pay amounts when they fall due. The credit risk on liquid funds is limited as any cash is deposited with banks with high credit-ratings assigned by international credit-rating agencies. Exposure to credit risk is spread over a number of clients.  

Currency Risk

The Group's currency exposure is mainly to the US Dollar in which its revenues at present are principally denominated. The Group is aware of this currency exposure and would be prepared to take steps to hedge that exposure if considered appropriate and practical.  

Market Risk

Following the winding down of Jade Absolute Fund Managers and the sale of its holding in Celtic Resources, the Group is no longer directly exposed to any material stock market risk, nor is it indirectly exposed to stock market risk through funds under advice as these are not currently invested in listed or quoted securities.

Operational Risk 

Operational, reputational and legal risks are actively monitored by the Managing Director and the other executive directors. Wherever practical, measures are taken to control or mitigate risks. 

Results and Dividends

The Company's loss for the year is £5,055,323 (2007: £1,122,162). No dividends were paid by the company during the year. Included in the above loss is an impairment provision of £2,804,063 against investment in subsidiary companies and £2,070,527 against group debtors.

Directors

Mr C A Fowler and Mr P F Curtin retire in accordance with the Articles of Association and, being eligible, offer themselves for re-election.  

Mr P D N Robertson regrettably passed away during the year.

Post Balance Sheet Events

Since the end of the period under review a client of the Group, Sinotel Limited, an Australian domiciled company engaged in activities in the telecommunications field in the Peoples Republic of China, has completed a US$20 million capital raising. As the adviser to Sinotel on this transaction and as the introducer of the global telecommunications company which is making the investment, the Group is due to receive a fee of $1 million. It is also entitled to a warrant over 1% of Sinotel's enlarged share capital.

The Environment

The Group is committed to a policy which recognises environmental issues in all aspects of its business. Responsibility for compliance with environmental best practice is vested in the Directors, and environmentally sound options are integrated into the Group's business at all levels of operation, wherever practicable.

Corporate Social Responsibility

All Directors, management and staff are expected to consistently apply the highest ethical standards to their conduct to ensure that the Company's affairs and reputation are at all times maintained at the uppermost level.

Substantial Shareholdings

At 24 September 2008, the Directors were aware of the following shareholdings in excess of 3% of the company's issued share capital.

	Number of  Ordinary shares	Percent of issued ordinary share capital
Peter Hannen	1,621,096	33.7 %
Chase Nominees Limited	420,000	8.7 %
Ferlim Nominees Limited	350,000	7.3 %
Hero Nominees Limited	300,000	6.2 %
Giltspur Nominees Limited	250,000	5.2 %
Global Fiduciary (Canada) Inc	217,500	4.5 %
Prism Nominees Limited	184,500	3.8 %
W B Nominees Limited	155,032	3.2 %
Apple Tree Nominees Limited	145,000	3.0 %

Policy and Practice on Payment of Creditors

The Company and its subsidiary undertakings agree terms and conditions for their business transactions with suppliers. Payment is then made in accordance with these terms, subject to the terms and conditions being met by the supplier. The creditor payment days outstanding for the Group at 30 June 2008 was 33 days (2007: 26 days).

International Financial Reporting Standards

The Directors have implemented International Financial Reporting Standards for the first time this year, as required by the Alternative Investment Market. The 2007 accounts have been restated to comply with these new standards.

The impact of the transition on the group's results is set out in note 24.

Proposed change to Articles of Association

From 1 October 2008, under the Companies Act 2006, a director has a statutory duty to avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the Company's interests. The Act allows directors of public companies to authorise conflicts or potential conflicts where the articles of association contain a provision allowing this authorisation. A resolution is to be proposed at the forthcoming Annual General Meeting that the Company's Articles of Association be amended to include such a provision.

Provision of Information to Auditors

So far as each of the Directors is aware at the time this report is approved:

• there is no relevant audit information of which the company's auditors are unaware; and

• the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Auditors

Since the previous Annual General Meeting our auditors, CLB Littlejohn Frazer, have changed their name to Littlejohn. A resolution to reappoint Littlejohn will be proposed at the next Annual General Meeting.

This report was approved by the board on 13 October 2008 and signed on its behalf.

R Chudasama

Company Secretary

GROUP BALANCE SHEET

    At 30 June 

			Note	2008	2007
Non-Current Assets					restated
Property, Plant and equipment			5	9,130	15,077
Goodwill			7	115,585	115,585
Investments			8	195,918	195,918
				_______	_______
				320,633	326,580
Current Assets
Trade receivables and other receivables			9	219,959	274,685
Other current assets			8	-	188,578
Cash and cash equivalents			10	84,008	5,194
				_______	_______
				303,967	468,457
				_______	_______
Disposal Group Held for Sale			11	2,050	352,825
				_______	_______
Total Assets				£626,650	£1,147,862
				_______	_______
Current Liabilities
Trade and other payables			13	351,459	299,155
				_______	_______
				351,459	299,155
Non-Current Liabilities
Long-term borrowings			14	120,000	-
Disposal Group Held for Sale			11	-	43,582
				_______	_______
Total Liabilities				£471,459	£342,737
				_______	_______
Net Assets				£155,191	£805,125
				_______	_______
Equity
Called-up share capital			12	2,402,255	2,402,255
Retained earnings				(2,247,064)	(1,671,007)
				_______	_______
Equity attributable to the shareholders
of the parent Company				155,191	731,248
Minority Interests				-	73,877
				_______	_______
Total Equity				£155,191	£805,125
				_______	_______

The Financial Statements were approved and authorised for issue by the Board of Directors on 14 October 2008.

PARENT COMPANY BALANCE SHEET

    At 30 June 

			Note	2008	2007
Non-Current Assets
Investments in group companies			6	2,790,508	5,489,312
				_______	_______
				2,790,508	5,489,312
Current Assets
Trade and other receivables			9	888,209	2,751,323
Other current assets			8	-	188,578
Cash and cash equivalents			10	1,019	389
				________	_______
				889,228	2,940,290
				_______	_______
Total Assets				£3,679,736	£8,429,602
				_______	_______
Current Liabilities
Trade and other payables			13	1,435,449	1,260,616
Short-term borrowings			13	204,484	193,860
				______	______
				1,639,933	1,454,476
Non-Current Liabilities
Long-term borrowings			14	120,000	-
				_______	_______
Total Liabilities				£1,759,933	£1,454,476
				________	_______
Net Assets				£1,919,803	£6,975,126
				________	_______
Equity
Called up share capital			12	2,402,255	2,402,255
Retained earnings				(482,452)	4,572,871
				_______	_______
Total Equity				£1,919,803	£6,975,126
				________	_______

The Financial Statements were approved and authorised for issue by the board of Directors on 14 October 2008.

 

GROUP INCOME STATEMENT

    Year Ended 30 June 

			Note	2008	2007
Continuing Operations:
Revenue				186,667	705,731
Administrative expenses			16	(1,053,905)	(1,459,464)
Other net gains / (losses)			15	91,627	(346,692)
				_______	_______
Operating Loss				(775,611)	(1,100,425)
Finance income			19	4,901	2,063
Finance costs			19	(11,178)	(8,068)
				_______	_______
Loss before taxation				(781,888)	(1,106,430)
Corporation tax expense			20	(8,498)	(5,124)
				_______	_______
Loss for the Financial Year on Continuing Operations				£(790,386)	£(1,111,554)
Profit for the Financial Year on Discontinued Operations			11	£214,329	£325,444
				_______	_______
Loss for the Financial Year				£(576,057)	£(786,110)
				_______	_______
Attributable to:
Equity holders of the Company				(576,057)	(726,858)
Minority interests				-	(59,252)
				_______	_______
				£(576,057)	£ (786,110)
				_______	_______
Loss per Share for Profit from Continuing Operations
Attributable to the Equity Holders of the Company
during the Year
Basic and diluted			21	(16.45p)	(1.64p)
				_______	_______
Earnings per Share for Profit from Discontinuing Operations
Attributable to the Equity Holders of the Company
during the Year
Basic and diluted			21	4.46p	0.48p
				_______	_______

The Company has elected to take the exemption under Section 230 of the Companies Act 1985 from presenting the Parent Company Income Statement.

STATEMENTS OF CHANGES IN EQUITY

    Year Ended 30 June 

GROUP                Attributable to equity holders of     the Company

	Minority	Share	Share	Retained
	Interest	Premium	Capital	Earnings	Total
At 1 July 2006	101,363	5,101,552	4,637,458	(8,221,652)	1,618,721
Consolidated loss for the year	-	-	-	(786,110)	(786,110)
Cancellation of share premium	-	(5,101,552)	-	5,101,552	-
Cancellation of 223,520,300 deferred
ordinary shares of 1p	-	-	(2,235,203)	2,235,203	-
Minority share for the year	(27,486)	-	-	-	(27,486)
	_______	_______	_______	_______	_______
At 30 June 2007	£73,877	£ -	£2,402,255	£(1,671,007)	£805,125
	_______	_______	_______	_______	_______
At 1 July 2007	73,877	-	2,402,255	(1,671,007)	805,125
Consolidated loss for the year	-	-	-	(576,057)	(576,057)
Minority interest paid	(73,877)	-	-	(73,877)
	_______	_______	_______	_______	_______
At 30 June 2008	£ -	£ -	£2,402,255	£(2,247,064)	£155,191
	_______	_______	_______	_______	_______

PARENT COMPANY            Attributable to equity holders of the Company

                        

	Share	Share	Retained
	Premium	Capital	Earnings	Total
At 1 July 2006	5,085,311	4,637,458	(1,625,481)	8,097,288
Loss for the year	-	-	(1,122,162)	(1,122,162)
Cancellation of share premium	(5,085,311)	-	5,085,311	-
Cancellation of 223,520,300 deferred
ordinary shares of 1p	-	(2,235,203)	2,235,203	-
	_______	_______	_______	_______
At 30 June 2007	£ -	£2,402,255	£4,572,871	£6,975,126
	_______	_______	_______	_______
At 1 July 2007	-	2,402,255	4,572,871	6,975,126
Loss for the year	-	-	(5,055,323)	(5,055,323)
	_______	_______	_______	_______
At 30 June 2008	£ -	£2,402,255	£ (482,452) £	1,919,803
	_______	_______	_______	_______

GROUP CASH FLOW STATEMENT

    Year Ended 30 June

				2008	2007
Cash generated from Operations
Profit before taxation on discontinued operations				210,618	313,944
(Loss) before taxation on continuing operations				(775,611)	(720,612)
Depreciation				7,446	7,713
Goodwill impairment charge				32,382	93,336
Write off of fixed asset investments				-	4,650
Movement on minority interest				(73,877)	(86,738)
Non cash fixed asset investment addition		8		-	(195,918)
				________	________
				(599,042)	(583,625)
Decrease in trade and other receivables				277,146	7,566
Increase in trade and other payables				10,128	146,959
				________	________
Cash used in Operations				(311,768)	(429,100)
Interest paid				(11,178)	(9,525)
Foreign corporation tax paid				(8,498)	(5,124)
				________	________
Net Cash used in Operating Activities				(331,444)	(443,749)
				________	________
Cash Flows from Investing Activities
Purchase of property, plant and equipment				(1,499)	(2,083)
Proceeds from sale of investments				-	565,510
Purchase of intangible assets				(32,382)	-
Interest received				8,612	15,020
				________	________
Net Cash from Investing Activities				(25,269)	578,447
				________	________
Cash Flows from Financing Activities
Proceeds from long-term borrowings				120,000	-
				________	________
Net Cash from Financing Activities				120,000	-
				________	________
Net (Decrease) / Increase in Cash and Cash Equivalents				(236,713)	134,698
Cash and Cash Equivalents at Beginning of Year				322,771	188,073
				_______	________
Cash and Cash Equivalents at End of Year				£86,058	£322,771
				________	________

PARENT COMPANY CASH FLOW STATEMENT

    Year Ended 30 June 

				2008	2007
Cash generated from Operations
(Loss) before taxation				(5,044,240)	(1,065,962)
Adjustments for:
(Profit) / Loss on disposal of investments				(92,627)	196,019
Impairment of investments				2,805,063	874,043
				________	________
				(2,331,804)	4,100
Decrease / (Increase) in trade and other receivables				1,863,114	(231,947)
Increase / (decrease) in trade payables				185,457	(39,136)
				________	________
Cash used in Operations				(283,233)	(266,983)
Interest paid				(11,178)	(8,082)
				________	________
Net Cash used in Operating Activities				(294,411)	(275,065)
				________	________
Cash Flows from Investing Activities
Proceeds from sale of investments				281,205	221,798
Purchase of investments				-	(45,850)
Purchase of minority interest in subsidiary undertakings				(106,259)	(50,688)
Interest received				95	126
Dividends received				-	147,775
				________	________
Net Cash from Investing Activities				175,041	273,161
				________	________
Cash Flows from Financing Activities
Proceeds from long-term borrowings				120,000	-
				________	________
Net Cash from Financing Activities				120,000	-
				________	________
Net Increase/ (Decrease) in Cash and Cash Equivalents				630	(1,904)
Cash and Cash Equivalents at Beginning of Year				389	2,293
				________	________
Cash and Cash Equivalents at End of Year				1,019	389
				________	________

ACCOUNTING POLICIES

Year Ended 30 June 2008

Summary of Significant Accounting Policies

The principal Accounting Policies applied in the preparation of these Financial Statements are set out below. These Policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of Preparation of Financial Statements

The Financial Statements have been prepared in accordance with EU-endorsed International Financial Reporting Standards (IFRS), IFRIC interpretations and the parts of the Companies Act 1985 applicable to companies reporting under IFRS. The Financial Statements have also been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in Note 2.

First-Time Adoption of International Financial Reporting Standards (IFRS)

The Company and Group have adopted IFRS for the first time in their respective Financial Statements.

The Company and Group have applied IFRS 1 'First-time Adoption of International Financial Reporting Standards' to provide a starting point for reporting under IFRS. The date of transition to IFRS was 1 July 2006, and all comparative information in these Financial Statements has been restated to reflect the Company's and Group's adoption of IFRS.

The transition to IFRS reporting has resulted in a number of changes to the Financial Statements, the Notes thereto and the Accounting Policies, compared with previous annual reports. These changes are set out in Note 24. The Accounting Policies that have been applied in the opening Balance Sheet have also been applied throughout all periods presented in these Financial Statements.

Standards and Interpretations in Issue but not yet Effective or not yet Relevant

At the date of approval of these consolidated Financial Statements the following standards and interpretations were in issue but not yet effective:

IFRS 8 Operating Segments 

IAS 1 Presentation of Financial Statements (revised version) 

IAS 23 Borrowing Costs (revised version) 

IFRS 2 Share-based Payment (amended) 

IFRS 1 First-time Adoption of International Financial Reporting Standards (amended) 

IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (amended) 

IFRIC 12 Service Concession Arrangements 

IFRIC 13 Customer Loyalty Programmes 

Standards and Interpretations in Issue but not yet Effective or not yet Relevant (continued)

IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction 

IFRIC 15 Agreements for the Construction of Real Estate 

IFRIC 16 Hedges of a Net Investment in a Foreign Operation

The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group and have no impact on the current or previous reporting periods.

Basis of Consolidation

The Group Financial Statements consolidate the Financial Statements of MG Capital Plc and all its subsidiary undertakings made up to 30 June 2008.

Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the Financial Statements of subsidiaries have been adjusted where necessary to ensure consistency with the Accounting Policies adopted by the Group.

The Group treats transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the Income Statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets in the subsidiary.

Goodwill arises on acquisitions including the acquisitions of minority interests in subsidiaries. Goodwill is the difference between the fair value of consideration and the fair value of the separable assets, liabilities and contingent liabilities acquired.

Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns different from those of other geographical segments.

Foreign Currencies

Items included in the Financial Statements are measured using the currency of the primary economic environment in which the entity operates (its 'functional currency'). The Financial Statements are presented in Pounds Sterling (£), which is the Company's functional and presentation currency.

Transactions in foreign currencies are translated into the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are retranslated at the rates of exchange ruling at the Balance Sheet date. Foreign exchange differences on retranslation and settlement are recognised in the Income Statement.

Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.  

Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Income Statement in the period in which they are incurred.

Depreciation is provided on all property, plant and equipment, at rates calculated to write off the cost, less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows:

Short leasehold property        over term of lease

Computer equipment            3 - 5 years straight line    

Fixtures and fittings            5 years straight line

Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued.

An asset is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount, and are recognised in the Income Statement.

Leasing Commitments

An operating lease is one in which a significant portion of the risks and rewards of ownership are retained by the lessor. Rentals payable under operating leases are charged to the Income Statement on a straight-line basis over the term of the lease.

Impairment of Non Current Assets

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from the business combination on which the goodwill arose, and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill is tested for impairment at least annually.  All other non current assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal discounted cash flow evaluation. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Impairment losses are charged to administrative expenses.

Financial Assets

Investments in unquoted subsidiaries are held at cost. Other financial assets are divided into the following categories: financial assets at fair value through profit or loss, and loans and receivables. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available.

All financial assets are recognised when the group becomes a party to the contractual provisions of the instrument.

Financial assets other than those categorised as at fair value through profit or loss are recognised initially at fair value. Financial assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs expensed through the Income Statement.

Financial assets at fair value through profit or loss are held for trading, i.e., acquired principally to be sold in the short term. Financial assets at fair value through profit or loss are measured after initial recognition at fair value, with changes in fair value being taken to the Income Statement in the period in which they occur.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured after initial recognition at amortised cost, using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the Income Statement.

Provision for impairment of trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is the difference between the receivable's carrying amount and the present value of the estimated future cash flows.

An assessment for impairment is undertaken at least annually.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, demand deposits, bank overdrafts, and short-term, highly liquid investments that are readily convertible into known amounts of cash, and are subject to an insignificant risk of changes in value.

Disposal Group Held for Sale

A disposal group is a group of assets and liabilities whose carrying amount will be recovered principally through a sale transaction, not through continuing use. A disposal group held-for-sale is measured at the lower of its carrying amount immediately prior to its classification as held-for-sale and its fair value less costs to sell.

Discontinued Operations

A discontinued operation is a group of cash-generating units, that is classified as held for sale, and represents a separate major line of business;

The disclosures for prior periods have been re-presented to show the results of discontinued operations separately from continuing operations.

Financial Liabilities

Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities are measured initially at fair value, net of direct issue costs.

All financial liabilities are recorded at amortised cost, using the effective interest method, with interest-related charges being recognised as an expense under finance costs in the Income Statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the Income Statement on an accruals basis, using the effective interest method, and are added to the carrying amount of the instrument, to the extent that they are not settled in the period in which they arise.

A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, is cancelled, or expires.

Taxation

Current tax is the tax currently payable based on the taxable profit for the year.

Tax losses available to be carried forward, and other tax credits to the group, are recognised as deferred tax assets, to the extent that it is probable that there will be future taxable profits against which the temporary differences can be utilised.

Share Capital

Ordinary shares are classified as equity.

Employee Benefits

The Group supports various personal pension arrangements. The Group also operates a defined contribution stakeholder pension scheme. This is a scheme under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to service in current and prior years. Agreed contributions are charged to the Income Statement as they become payable.

Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable by the Group for services provided in the ordinary course of the Group's activities, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or the transfer of risk to the customer.

Financial Risk Management - fair value estimation

The book values of financial assets and liabilities are not materially different to their fair values in the opinion of the Directors.

2.    Critical Accounting Estimates and Judgments

    Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

    Critical Accounting Estimates and Assumptions

    The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.  

    Estimated impairment of goodwill: the Group conducts annual impairment tests of goodwill. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates.

    Estimated impairment of investments in subsidiaries: the Company reviews the values of such investments on a regular basis. Any impairments in value require the use of estimates.

3.    Segmental Information

The group operates in a single business segment. The group operates in the UK and Hong Kong. However, in the Directors' opinion, both segments have the same risks and returns, and therefore no segmental information is presented.

4.    Auditors' Remuneration             

	2008	2007
	£	£
Fees payable to the Company's auditor for the audit of the annual Parent Company and consolidated accounts	12,150	9,900
	_______	_______
Fees payable to the Company's auditor and its associates for other services provided to the Company and its subsidiaries:
The audit of the Company's subsidiaries under legislative requirements	12,476	12,494
Tax services	4,750	5,000
All other services	1,675	2,450
	_______	_______

5.    Property, Plant and Equipment

	Short
	leasehold	Fixtures	Computer
GROUP	property	and fittings	equipment	Total
Cost
At 1 July 2006	51,380	45,945	302,746	400,071
Additions	-	144	1,939	2,083
Write off	-	(11,002)	6,106	(4,896)
	_______	________	________	________
At 30 June 2007	51,380	35,087	310,791	397,258
Additions	-	-	1,499	1,499
	_______	________	________	________
At 30 June 2008	-	35,087	312,290	398,757
	_______	________	________	________
Depreciation
At 1 July 2006	51,380	33,860	289,474	374,714
Charge for the year	-	333	7,380	7,713
Write off	-	(77)	(169)	(246)
	_______	________	________	________
At 30 June 2007	51,380	34,116	296,685	382,181
Charge for the year	-	329	7,117	7,446
	_______	________	________	________
At 30 June 2008	51,380	34,445	303,802	389,627
	_______	________	________	________
Net Book Value
At 30 June 2008	£-	£642	£8,488	£9,130
	_______	_______	_______	_______
At 30 June 2007	£-	£971	£14,106	£15,077
	_______	_______	_______	_______
At 1 July 2006	£-	£12,085	£13,272	£25,357
	_______	_______	_______	_______

    

    Depreciation expenses of £7,446 (2007: £7,713) are included in administrative expenses in the Income Statement.

6.    Investments in Subsidiary Undertakings            

	2008	2007
Company
Shares in group undertakings
At 1 July	5,489,312	6,882,050
Additions	106,259	50,688
Disposals	(1,000)	(561)
Impairment	(2,804,063)	(1,442,865)
	______	______
At 30 June	£2,790,508	£5,489,312
	______	______

    Investments in group undertakings are stated at cost less any impairment losses. Impairment losses have been included within administration expenses within the Company Income Statement. All investments detailed below are consolidated into these financial statements.

	Country of incorporation	Class of share	% interest held
Name
2007
MG Global Investments Ltd	UK	Ordinary	100
MG Research Ltd	UK	Ordinary	100
MG Maple Capital Ltd	Hong Kong	Ordinary	100
Hannen & Company Ltd	UK	Ordinary	100
Jade Absolute Fund Managers Ltd	UK	Ordinary	75.5
AIM pre-IPO Company Ltd	Isle of Man	Ordinary	100
2008
MG Global Investments Ltd	UK	Ordinary	100
MG Research Ltd	UK	Ordinary	100
MG Maple Capital Ltd	Hong Kong	Ordinary	100
Hannen & Company Ltd	UK	Ordinary	100
Jade Absolute Fund Managers Ltd	UK	Ordinary	100

    An impairment provision has been made against the investment in the wholly owned subsidiary MG Global Investment Limited as the cost of the investment was considered significantly above a reasonable fair value in the current economic conditions. The value of the investment has been impaired to a level representing its value in use based on the current estimated value of the company, taking into account the present value of future economic inflows and subsequent growth.

 

7. Goodwill                

Group	£
Cost
At 1 July 2006	208,921
Impairment	(93,336)
	______
At 30 June 2007	115,585
	______
Addition	32,382
Impairment	(32,382)
	______
At 30 June 2008	115,585
	______

    The impairment losses have been included within administration expenses in the Group Income Statement. The impairment provision in 2008 relates to an impairment in the level of goodwill relating to Jade Absolute Fund Managers Limited. The impairment has reduced the value of goodwill to that of fair value less costs to sell as the trade for the company is discontinued and it is intended that the company will be struck off following the period end.

 

8. Non Current Investments                

	2008
	£
Group
Cost
At 1 July 2006	99,566
Additions	195,918
Disposals	(99,566)
	______
At 30 June 2007 and 2008	195,918
	______

All investments noted above as carried forward at 30 June 2007 and 30 June 2008 relate to unlisted investments. The addition noted above as having been acquired during the year to 30 June 2007 was acquired for non-cash consideration.

Listed investments totalling £188,578 were included within current asset investments at 30 June 2007 and were all disposed of during the year to 30 June 2008. The market value of the listed investments at 30 June 2008 was therefore £Nil (2007: £158,362).

9.    Trade and Other Receivables    

	Group		Company
	2008	2007	2008	2007
Trade receivables	6,931	11,174	-	-
Prepayments	56,731	48,393	3,564	3,401
Loans to related parties	-	-	884,645	2,677,173
Other receivables	156,297	215,118	-	70,749
	______	______	______	______
Current portion	£219,959	£274,685	£888,209	£2,751,323
	______	______	______	______

    All debts shown above are considered to be recoverable within twelve months. Debts which are past     due have not been impaired as they are all deemed fully recoverable by the Directors.

    The intra group balance with a wholly owned subsidiary which has built up over a number of years,     was     considered to be impaired, as it was unlikely that the subsidiary would generate sufficient cash     in the immediate future to settle the amounts due.

    Included within other receivables, a loan balance has been prudently provided      against due to the time     it has remained outstanding, whilst every effort is being expended to recover the amount due.

10.    Cash and Cash Equivalents

    Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:

	Group		Company
	2008	2007	2008	2007
Cash	40	-	-	-
Bank	86,018	324,177	1,019	389
	______	______	______	______
Total net cash	£86,058	£324,177	£1,019	£389
	______	______	______	______

    

Included in the above total is an amount of £2,050 (2007: £318,983) relating to the disposal group (see note 11). These amounts are shown within the disposal group held for sale figure on the face of the     group balance sheet.

11.    Disposal Group Held for Sale

The following assets and liabilities relating to the Group have been presented as held for sale following the approval of the Group's management and shareholders during 2007. The disposal group consists of the trade within Jade Absolute Fund Managers Limited and Hannen & Company Limited. Hannen & Company is to be sold as it is a redundant shell and no longer of use to the group. Jade Absolute Fund Managers Limited is to be struck off following the cessation of its trade.

	2008	2007
Operating cash flows	197,854	218,557
Investing cash flows	3,711	39,088
Financing cash flows	-	-
	______	______
Total cash flows	£201,565	£257,645
	______	______
Assets Classified as Held for Sale	2008	2007
Disposal group held for sale:
- cash	2,050	318,983
- debtors	-	33,842
	_______	_______
	£2,050	£352,825
	_______	_______
Liabilities Directly Associated with Assets Classified as Held for Sale
	2008	2007
Trade and other payables	-	43,582
	_______	_______
	£-	£43,582
	_______	_______
Analysis of the Result of Discontinued Operations
	2008	2007
Revenue	417,346	821,301
Administrative expenses	(206,728)	(533,488)
Other net gains / (losses)	-	26,131
Finance income	3,711	12,957
Finance costs	-	(1,457)
	_______	________
Profit before tax of discontinued operations	214,329	325,444
Tax		-
	_______	_______
Profit after tax of discontinued operations	£214,329	£325,444
	_______	_______

12.    Called-Up Share Capital

    

Authorised		2008	2007
10,000,000 Ordinary shares of 50p each		£5,000,000	£5,000,000
		________	________
Group and Company	Number of shares	Ordinary shares	Total
At 30 June 2007 and 30 June 2008 ordinary shares of 50p	4,804,510	£2,402,255	£2,402,255
	_______	_______	_______

13.    Trade and Other Payables    

                

	Group		Company
	2008	2007		2008	2007
Trade payables	75,311	43,489		-	-
Bank overdraft	-	1,406		-	-
Loans and other payables	207,984	201,741		204,484	193,860
Amounts due to related parties	-	-		1,415,699	1,249,766
Social security and other taxes	8,400	(7,321)		-	-
Accrued expenses	59,764	59,840		19,750	10,850
	______	______		______	______
Total	£351,459	£299,155		£1,639,933	£1,454,476
	______	______		______	______

14.    Long term borrowings     

	Group		Company
	2008	2007	2008	2007
Loans and other payables	120,000	-	120,000	-
	______	______	______	______
Total	£120,000	£-	£120,000	£-
	______	______	______	______

The loan noted above relates to £120,000 of convertible loan notes. Interest is payable quarterly in arrears on these notes at a rate of 6.5% and the notes mature in 2011. The loan note has been classified wholly as a liability as the equity element is insignificant.

15.    Other Net (Losses)/Gains            

	2008	2007
Other financial assets at fair value through profit or loss:
- fair value losses	(1,000)	(346,692)
- fair value gains	92,627	-
	_______	_______
	£91,627	£(346,692)
	_______	_______

    These gains and losses relate to current asset investments disposed of during the year.

16.    Expenses by Nature            

	2008	2007
Staff costs	311,848	444,690
Depreciation, amortisation and impairment charges	37,998	98,413
Office costs	114,552	283,586
Operating lease payments	171,826	188,628
Financial costs	417,681	444,147
	_______	_______
Total Administrative Expenses (continuing operations)	£1,053,905	£1,459,464
	_______	______

_

17.    Employees

	2008	2007
Staff Costs - continuing operations (including executive Directors)
Wages and salaries	267,438	388,466
Social security costs	31,913	34,519
Pension costs	12,497	21,705
	_______	_______
	£311,848	£444,690
	_______	_______
Average Number of Employees (including executive Directors)	No.	No.
Accounts and administration	2	4
Technical and support	4	8
Sales staff	3	4
	__	__
	9	16
	__	__

18.    Directors' Remuneration

	2008	2007
Emoluments	120,600	155,814
Company pension contributions to defined contribution schemes	1,610	-
	_____	______
	£122,210	£155,814
	_____	______

    Retirement benefits are accruing to 1 (2007: Nil) Director under a defined contribution pension scheme.

19.    Finance Income and Costs            

	2008	2007
Interest expense:
- bank and other borrowings	11,178	8,068
	_______	_______
	11,178	8,068
Finance income - interest income on short-term bank deposits	(4,901)	(2,063)
	_______	_______
Net Finance Costs (continuing operations)	£6,277	£ 6,005
	_______	_______

20.    Taxation

Analysis of Charge in Year			2008	2007
Current tax:
Foreign tax			8,498	5,124
			_______	_______
Total current tax			£8,498	£5,124
			_______	_______
Factors affecting tax charge for period
The tax assessed for the year is at the standard rate of corporation tax in the UK of 30% (2007: 30%). The differences are explained below:
			2008	2007
Loss on ordinary activities before tax			£(567,559)	£(721,734)
			______	______
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2007: 30% )			(170,268)	(216,520)
Effects of:
Capital allowances for period in excess of depreciation			(2,424)	(235)
Expenses not deductible for tax			1,103	1,349
Tax losses to carry forward			143,801	298,231
Profit/ (Loss) on sale of fixed asset			27,788	(82,825)
Foreign tax			8,498	5,124
			_______	_______
Total tax charge for period			£8,498	£5,124
			_______	_______

The Group has tax losses of approximately £6.5 million carried forward at 30 June 2008. A deferred     tax asset has not been recognised in respect of these tax losses carried forward.

21.    (Loss) / earnings per Share

    Basic and diluted (continuing operations)

    Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

	2008	2007
Loss attributable to equity holders of the Company	(790,386)	(1,111,554)
	_______	_______
Weighted average number of ordinary shares in issue	4,804,510	67,880,102
	_______	_______
Basic loss per share (pence per share) on continuing operations	(16.45)	(1.64)
	_______	_______

    

    Diluted LPS is the same as basic LPS as there are no dilutive potential ordinary shares. 

    Basic and diluted (discontinued operations)

    

	2008	2007
Profit attributable to equity holders of the Company	214,329	325,444
	_______	_______
Weighted average number of ordinary shares in issue	4,804,510	67,880,102
	_______	_______
Basic earnings per share (pence per share) on discontinued operations	4.46	0.48
	_______	_______

    

    Diluted LPS is the same as basic LPS as there are no dilutive potential ordinary shares. 

22.    Commitments            

    Operating lease commitments

    The total minimum lease payments to which the Company is committed under non-cancellable operating leases in relation to land and buildings are:

	2008	2007
On leases expiring:
Within one year	26,655	-
Between one and two years	-	133,275
	_______	_______
	£26,655	£133,275
	_______	_______

    There are no other commitments at the Balance Sheet date.

23.    Parent Company loss

    For the year ended 30 June 2008, the Parent Company suffered a loss after taxation of £5,055,323 (2007: £1,122,162).  

24.    Reconciliation of previous GAAP to IFRS

    The only difference between the financial statements of the Group under UK GAAP and IFRS at the date of transition, 1 July 2006, the end of the latest period presented under previous GAAP, 30 June 2007, and the end of the current period, 30 June 2008, is amortisation of goodwill.

    Under UK GAAP, goodwill was being amortised over 10 years on a straight line basis. Under IFRS goodwill is not amortised, but is subject to annual impairment reviews.

    It is the opinion of the Directors that the carrying value of previously amortised goodwill at 30 June 2007 is equal to its impaired cost at 30 June 2008. 

    There are no differences between the financial statements of the Company under UK GAAP and IFRS at the date of transition, 1 July 2006, the end of the latest period presented under previous GAAP, 30 June 2007, or the end of the current period, 30 June 2008. 

25.    Related party transactions

    The Company had the following transactions with related parties:

    MG Capital Plc purchased 24.5% of the Ordinary shares in Jade Absolute Fund Managers Ltd, a company in which MG Capital held a majority shareholding at 30 June 2007 and has shared Directors.

    The total consideration paid was £106,259.

    Included within trade and other receivables are the following amounts due to MG Capital Plc from wholly owned subsidiaries; £Nil (2007: £2,081,581) MG Research Ltd and £764,645 (2007: £577,031) MG Maple Capital Ltd.

    Also included within trade and other receivables is a loan to MG Global Investments Ltd for £120,000. The loan was signed on 30 June 2008 and is repayable on delivery of 60 days' notice. Interest is being charged at 6.5% and is payable on repayment of the principal.

    Included within other payables are the following amounts due from MG Capital Plc to wholly owned subsidiaries; £448,539 (2007: £787,321) MG Global Investments Ltd, £519,539 (2007: £Nil) Jade Absolute Fund Managers Ltd and £447,321 (2007: £462,445) Hannen & Company Ltd.

    

    P M L Hannen, a director and shareholder, lent the Company £186,000 (2007: £186,000) which is included within other payables. The loan is unsecured and carries an interest rate of 6%, and is repayable on receipt of one month's notice from the lender.

    On 26 June 2008 P M L Hannen purchased convertible loan notes at par for £120,000.  Interest is payable at a rate of 6.5%.  The loan notes are included within long term borrowings.

    Details of the remuneration of key management personnel are shown within note 18.

MG CAPITAL PLC    NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the annual general meeting of the Company will be held at the offices of MG Capital Plc, Ocean House, 10/12 Little Trinity Lane, London EC4V 2DH, at 10.30am on 11 December 2008.

Ordinary Business

1.    To receive and adopt the Report of the Directors and the Financial Statements for the year ended 30 June 2008, together with the Report of the Independent Auditors.

2.    To re-elect the following Directors retiring by rotation who, being eligible, offer themselves for re-election.

    C A Fowler

    P F Curtin

3.    To reappoint the auditors, Littlejohn, and to authorise the Directors to determine their remuneration.

The biographies of the Directors being elected in resolution 2 above will be distributed at the Annual General Meeting and will be available on request beforehand.

Special Business

As special business, to consider and, if thought fit, to pass the following resolutions, of which resolution no. 4 will be proposed as an ordinary resolution and resolution no. 5 will be proposed as a special resolution:

Ordinary Resolution

4.    THAT the Directors be and are hereby generally and unconditionally authorised for the purposes of section 80 of the Companies Act 1985 (and in substitution for any existing authority to allot relevant securities) to exercise all the powers of the Company to allot relevant securities (within the meaning of section 80(2) of that Act) up to an aggregate nominal amount of £2,597,745 provided that this authority shall expire on the conclusion of the next annual general meeting of the Company save that the Company may before such expiry make offers, agreements or other arrangements which would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of such offers, agreements or other arrangements as if the authority conferred hereby had not expired.

Special Resolutions

5.    THAT, subject to and conditionally upon the passing of resolution no. 4 above, the directors be and are hereby empowered pursuant to section 95 of the Companies Act 1985 to allot equity securities (within the meaning of section 94 of that Act) pursuant to the authority conferred by resolution no. 4 as if sub-section (1) of section 89 of that Act did not apply to any such allotment provided that this power shall be limited to:

• the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities respectively attributable to the interests of all such holders are proportionate (as nearly as may be) to the respective number of ordinary shares held by them (but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or legal or practical problems arising under the laws of, or the requirements of any regulatory body or any stock exchange in, any territory or otherwise howsoever); and

      b.  the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate
           nominal amount £2,597,745, and shall expire at the conclusion of the next annual general meeting of the 
           Company save that the Company may before such expiry make offers, agreements or arrangements which 
           would or might require equity securities to be allotted after such expiry and the Directors may allot equity 
           securities in pursuance of such offers, agreements or other arrangements as if the power conferred hereby 
           had not expired.

6. THAT the Articles of Association of the Company be amended by the inclusion of the following articles: 

'Directors' Interests

24    PERMITTED INTERESTS AND VOTING

(a)    Subject to the provisions of the Companies Acts and of paragraph (j) of this article, no director or proposed or intending director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatever, nor shall any contract in which any director is in any way interested be liable to be avoided, nor shall any director who is so interested be liable to account to the Company or the members for any remuneration, profit or other benefit realised by the contract by reason of the director holding that office or of the fiduciary relationship thereby established.

(b)    A director may hold any other office or place of profit with the Company (except that of auditor or auditor of any subsidiary of the Company) in conjunction with his office of director for such period (subject to the provisions of the Companies Acts) and upon such other terms as the board may decide, and may be paid such extra remuneration for so doing (whether by way of salary, commission, participation in profits or otherwise) as the board or any committee authorised by the board may decide, and either in addition to or in lieu of any remuneration provided for by or pursuant to any other article.

(c)    A director of the Company may be or become a director or other officer of, or otherwise interested in, any company promoted by the Company or in which the Company may be interested or as regards which it has any power of appointment, and shall not be liable to account to the Company or the members for any remuneration, profit or other benefit received by him as a director or officer of or from his interest in the other company. The board may also cause any voting power conferred by the shares in any other company held or owned by the Company or any power of appointment to be exercised in such manner in all respects as it thinks fit, including the exercise of the voting power or power of appointment in favour of the appointment of the directors or any of them as directors or officers of the other company, or in favour of the payment of remuneration to the directors or officers of the other company.

(d)    A director may act by himself or his firm in a professional capacity for the Company (otherwise than as an auditor or auditor of any subsidiary of the Company) and he or his firm shall be entitled to remuneration for professional services as if he were not a director.

(e)    A director shall not vote on or be counted in the quorum in relation to any resolution of the board concerning his own appointment, or the settlement or variation of the terms or the termination of his own appointment, as the holder of any office or place of profit with the Company or any other company in which the Company is interested but, where proposals are under consideration concerning the appointment, or the settlement or variation of the terms or the termination of the appointment, of two or more directors to offices or places of profit with the Company or any other company in which the Company is interested, a separate resolution may be put in relation to each director and in that case each of the directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution unless it concerns his own appointment or the settlement or variation of the terms or the termination of his own appointment or the appointment of another director to an office or place of profit with a company in which the Company is interested and the director seeking to vote or be counted in the quorum owns one per cent. or more of it

(f)    Save as otherwise provided by these articles, a director shall not vote on, or be counted in the quorum in relation to, any resolution of the board or any committee thereof in respect of any contract arrangement, transaction or proposal in which he has an interest which (taken together with any interest of any person connected with him within the meaning of section 839 Income and Corporation Taxes Act 1988 (ICTA)) is to his knowledge a material interest and, if he shall do so, his vote shall not be counted, but this prohibition shall not apply to any resolution where that material interest arises only from one or more of the following matters:

(i)    the giving to him of any guarantee, indemnity or security in respect of money lent or obligations undertaken by him or by any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings;

(ii)    the giving to a third party of any guarantee, indemnity or security in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security;

(iii)    where the Company or any of its subsidiary undertakings is offering securities in which offer the director is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which the director is to participate;

(iv)    any contract, arrangement, transaction or proposal in which he is interested by virtue of his interest in shares or debentures or other securities of the Company or by reason of any other interest in or through the Company;

(v)    any contract concerning any other company (not being a company in which the director owns one per cent. or more) in which he is interested directly or indirectly whether as an officer, shareholder, creditor or otherwise howsoever;

(vi)    any contract concerning the adoption, modification or operation of a pension fund or retirement, death or disability benefits scheme which relates both to directors and employees of the Company or of any of its subsidiary undertakings and does not provide in respect of any director as such any privilege or advantage not accorded to the employees to which the fund or scheme relates;

(vii)     any contract for the benefit of employees of the Company or any of its subsidiary undertakings under which he benefits in a similar manner to the employees and which does not accord to any director as such any privilege or advantage not accorded to the employees to whom the contract relates,

(viii)    any contract for the purchase or maintenance for any director or directors of insurance against any liability; and

(ix)    the grant to any director or directors of an indemnity from the Company against any liability.

(g)    A company shall be deemed to be one in which a director owns one per cent. or more if and so long as (but only if and so long as) he, taken together with any person connected with him within the meaning of section 839 ICTA is, to his knowledge, (either directly or indirectly) the holder of or beneficially interested in one per cent. or more of any class of the equity share capital of that company or of the voting rights available to members of that company. For the purpose of this paragraph of this article there shall be disregarded any shares held by the director or any such person as bare or custodian trustee and in which he has no beneficial interest, any shares comprised in a trust in which his or any such person's interest is in reversion or remainder if and so long as some other person is entitled to receive the income of the trust and any shares comprised in an authorised unit trust scheme in which he or any such person is interested only as a unit holder.

(h)    Where a company in which a director owns one per cent. or more is materially interested in a contract, he also shall be deemed materially interested in that contract.

(i)    If any question shall arise at any meeting of the board as to the materiality of the interest of a director (other than the chairman of the meeting) or as to the entitlement of any director (other than the chairman of the meeting) to vote or be counted in the quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or not to be counted in the quorum, the question shall be referred to the chairman of the meeting and his ruling in relation to the director concerned shall be conclusive except in a case where the nature or extent of his interest (so far as it is known to him) has not been fairly disclosed to the board. If any question shall arise in respect of the chairman of the meeting, the question shall be decided by a resolution of the board (for which purpose the chairman shall be counted in the quorum but shall not vote on the matter) and the resolution shall be conclusive except in a case where the nature or extent of the interest of the chairman (so far as is known to him) has not been fairly disclosed to the board.

(j)    A director who to his knowledge is in any way, whether directly or indirectly, interested in a contract with the Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract is first taken into consideration, if he knows his interest then exists, or in any other case at the first meeting of the board after he knows that he is or has become so interested. For the purposes of this article, a general notice to the board by a director to the effect that (a) he is a member of a specified company or firm and is to be regarded as interested in any contract which may after the date of the notice be made with that company or firm or (b) he is to be regarded as interested in any contract which may after the date of the notice be made with a specified person who is connected with him, shall be deemed to be a sufficient declaration of interest under this article in relation to any such contract, provided that no such notice shall be effective unless either it is given at a meeting of the board or the director takes reasonable steps to secure that it is brought up and read at the next board meeting after it is given.

(k)     References in this article to a contract include references to any proposed contract and to any transaction or arrangement whether or not constituting a contract.

(l)     A director shall not, by reason of permitted interest, office or employment as set out in this article, be in breach of his duty to the Company to avoid a situation in which he has or can have a direct or indirect interest that conflicts, or may be possible to be conflicted with the interests of the Company.

Authorisation of Conflicts

25    The directors may (subject to such terms and conditions, if any, as they may think fit to impose from time to time, and subject always to their right to vary or terminate such authorisation) authorise, to the fullest extent permitted by law:

• any matter which would otherwise result in a director infringing his duty to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company and which may reasonably be regarded as likely to give rise to a conflict of interest (including a conflict of interest and duty or conflict of duties); and

• a director to accept or continue in any office, employment or position in addition to his office as a director of the Company and without prejudice to the generality of paragraph (a) of this article may authorise the manner in which a conflict of interest arising out of such office, employment or position may be dealt with, either before or at the time that such a conflict of interest arises,

provided that for this purpose the authorisation is only effective if the director in question and any other interested director is not counted in the quorum at any board meeting at which such matter, or such office, employment or position, is approved and it is agreed to without their voting or would have been agreed to if their votes had not been counted.

                        c.    If a matter, or office, employment or position, has been authorised by the directors in accordance
                               with this article then (subject to such terms and conditions, if any, as the directors may think fit to 
                               impose from time to time, and subject always to their right to vary or terminate such authorisation 
                               or the permissions set out below):

• the director shall not be required to disclose any confidential information relating to such matter, or such office, employment or position, to the Company if to make such a disclosure would result in a breach of a duty or obligation of confidence owed by him in relation to or in connection with that matter, or that office, employment or position; and

• the director may absent himself from discussions, whether in meetings of the directors or otherwise, and exclude himself from information which will or may relate to that matter, or that office, employment or position; and

• a director shall not, by reason of his office as a director of the Company, be accountable to the Company for any benefit which he derives from any such matter, or from such office, employment or position.'

such amendment to take effect from the conclusion of this Annual General Meeting.

By order of the Board

R Chudasama                                      Ocean House

                                                            10-12 Little Trinity Lane

Company Secretary                              London EC4V 2DH

Date 13 October 2008

Notes:

• A member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and (on a poll) vote instead of him. A proxy need not also be a member.

• To be valid, a form of proxy and the power of attorney (if any) under which it is signed, or a notarially certified copy of such power of attorney, must be deposited at the Company's registrars, Capita IRG Plc, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU not less than 48 hours before the time appointed for holding the meeting or, in the case of a poll taken otherwise than at or on the same day as the meeting, not less than 24 hours before the time appointed for the taking of a poll.

• The return of a form of proxy will not prevent a member from attending the meeting and voting in person.

Enquiries

MG Capital Plc Charles Fowler	Tel: 020 7332 2040
Nabarro Wells & Co. Limited Hugh Oram	Tel: 020 7634 4860

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