investing in healthcare

MDY Healthcare plcAnnual Report 2007

Investing in healthcare

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Contents

OverviewIFC Who is MDY Healthcare?IFC Why invest in healthcare?01 Highlights02 At a glance

Business review04 Chairman’s and Chief Executive’s review07 Financial review08 Review of strategic investments

Management and governance14 Directors and advisers16 Directors’ report19 Corporate Governance21 Remuneration report24 Directors’ responsibilities

Main header ifc2MDY Healthcare plc Annual Report 2007

$5,000 billion spentannually on globalhealthcare budgets:

8.7%Global spend represents8.7% of global GDP in 2004or $777 per person annually

16%US spends approximately 16% ofUS GDP (c. $2,000 billion) annually

Who is MDY Healthcare? Why invest in healthcare?

Financial statements and notes25 Independent auditors’ report26 Consolidated income statement27 Consolidated statement of recognised

income and expense28 Consolidated balance sheet29 Company balance sheet30 Consolidated cash flow statement31 Company cash flow statement32 Statement of accounting policies37 Notes to the accounts

Additional information53 Notice of Annual General Meeting56 Shareholder information

MDY Healthcare is a strategicinvestment company, investingglobally in both public andprivate companies across thehealthcare sector.

We have a highly specialisedteam that shares extensive globalexperience of the sector. We seekout a small number of uniqueopportunities to invest in attractiveniches with good growth potential.

We aim to identify opportunitieswith attractive risk/reward profilesand clear routes to enhancedinvestor returns. MDY Healthcareoffers strategic support to addfurther value to our investments.

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Highlights in strategic portfolio

● Sale of Cozart to Concateno represented highlyprofitable cash exit from first investment

● AOI Medical successfully completed IPO andsubsequently submitted 510(k) to US FDA andinitiated clinical study

● Medivance completed $23.0 million financingin the US and the business continues toexceed expectations

● Minster Pharma initiated 500 patient Phase IIb trialfor migraine prevention following investmentby MDY Healthcare

● Lombard Medical completed successful 21-patientFDA review of its Aorfix™ endovascular stent graftfollowing investment by MDY Healthcare

● Joint venture established with William Ransom tosell natural healthcare products direct to consumerwith commercial launch on track for 2008

Financial highlights

● Cash exit from Cozart investment represented87% gain and £1.3 million cash returned toMDY Healthcare

● Total investments valued at £9.4 million, cashdeposits of £5.1 million and a cash receivableof £1.3 million from investment sales

● Following AOI Medical’s successful IPO, initialinvestment revalued upwards by £0.6 millionon MDY Healthcare’s balance sheet

● Net asset value per share as at 30 September 2007of £1.06 (2006: £1.20)

● Loss after tax for continuing operations of£1.9 million (2006: £1.4 million), which includes£877,000 of exchange rate loss due todollar weakness

17%More senior citizens…Number of over-60s predictedto grow from 10% to 17%of the world population by 2030

4½ & 3yearsPeople living longer…In the UK, life expectancy at age 50 hasincreased by 41⁄2 years for men and 3 yearsfor women between 1981 and 2002

18.7%Spending more on health…US spending forecast to reach 18.7%of US GDP by 2014

01MDY Healthcare plc Annual Report 2007

Strong demographictrends underpinfuture growth:

Healthcareis a highlyinnovative sector:

Sources: World Health Organisation, World Health Statistics 2007, Department of Economic and Social Affairs of the United Nations, UK Office for National Statistics

● Ideal sector for valuecreation with strong growthand barriers to entry fornon-specialists…

● with large number ofgenuinely novel technologiesand products…

● addressing unmet clinicalneeds to improve patientoutcomes cost-effectively…

● thereby creating a widerange of dynamicinvestment opportunities.

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At a glance 02MDY Healthcare plc Annual Report 2007

Current strategic investments

As at 30 September 2007, MDY Healthcareheld approximately 8.6% of AOI’s issuedshare capital which was valued atapproximately £2.4 million.

In July 2007, AOI Medical submittedthe 510(k) submission for its BAMF Spineproduct to the US FDA.

Based in Florida, USA, AOI Medical isan AIM-quoted company developing, andintending to commercialise, innovativeorthopaedic medical devices for thespine and trauma markets.

AOI Medical, Inc.

As at 30 September 2007, MDY Healthcareheld approximately 9.8% of the fully dilutedequity of Medivance which was valued atapproximately £2.7 million.

Medivance has continued to exceed its2007 annual plan expectations on severalfronts including revenues, gross marginand expenses.

A global medical device company basedin Colorado, USA. Medivance develops,manufactures and markets proprietarytherapeutic temperature managementsolutions.

Medivance, Inc.

As at 30 September 2007, MDY Healthcareheld just over 3% of Lombard’s issuedshare capital valued at approximately£0.5 million.

Lombard announced in December 2007an equity fundraising to raise approximately£7.6 million to fund the company through2008 and complete recruitment of theAorfix™ trials.

A specialist cardiovascular device andpolymer coatings company. Lombard’sflagship product, the Aorfix™ endovascularstent graph is CE Mark approved in theEU and under pivotal US clinical trials.

Lombard Medical Technologies PLC

Cozart is a medical diagnostics company which develops, manufactures and sellsimmunodiagnostic tests, predominantly those used for the detection of drugs of abuse.Cozart’s products include laboratory based testing kits for the detection of drugs in avariety of biological samples and the Cozart® RapiScan and Cozart® Drug Detectionsystems, portable devices used for the onsite testing of drugs of abuse in oral fluid(saliva) samples. Cozart supplies point of contact testing products, laboratory servicesand forensic testing kits to the criminal justice (e.g. police forces, probation services andprisons), medical (e.g. hospitals and drug dependency clinics) and workplace markets(e.g. pre-employment, random and “for cause” testing) both in the UK and internationally.

At the time of MDY Healthcare’s investments, Cozart was quoted on AIM.

Investment case study

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Joint venture

As at 30 September 2007, MDY Healthcareheld just over 2% of Minster’s issued sharecapital valued at approximately £0.6 million.

The results of the clinical trial of tonabersatfor the prophylactic treatment for migraineare scheduled to be published in late 2008.

Minster Pharmaceuticals is a drugdevelopment company specialisingin compounds for the treatment ofneurological and psychiatric conditions.

Minster Pharmaceuticals plc

As at 30 September 2007, MDY Healthcareheld just over 0.7% of Allergy Therapeutics,issued share capital which was valued atapproximately £0.4 million.

Allergy Therapeutics’ Pollinex Quattroclinical studies were placed on hold bythe FDA in July 2007. Following this thecompany is working with the FDA to havethe hold removed.

A speciality pharmaceutical companyfocused upon the treatment andprevention of allergy.

Allergy Therapeutics plc

The JV is initially majority owed by MDYHealthcare which will provide up to£3 million in loan capital.

Commercial launch expected in 2008.

MDY Healthcare and Ransom haveestablished a multi-channel retail JVto sell natural healthcare productsdirect to consumers.

William Ransom & Son plc

Dr Chris Hand, Chief Executiveof Cozart plc:

“We have been delighted withMDY’s commitment to Cozart,both through its participationin recent fundraisings and itspro-active approach in providingbroader strategic support andaccess to a significant contact basewithin the investment community.”

● MDY Healthcare’s first investment in July 2006 in a placing to assistCozart in financing an acquisition in Sweden

● MDY Healthcare supported Cozart in March 2007 in its financingfor UK acquisition and acquired shares in market during 2007

● Cozart acquired for cash by Concateno plc in September 2007for £64.4 million

● First investment exit for MDY Healthcare

● Acquisition of Cozart for cash represented an 87% premium to MDYHealthcare’s cost of investment and returned c. £1.3 million in cash

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“We intend to focus increasingly on larger strategictransactions in both the public and private arenawhere we can leverage the team’s specialised sectorand transactional expertise to add value to investeecompanies.”

David WongChairman

OverviewThe year ended 30 September 2007 was MDY Healthcare’s firstfull year as a strategic investor focused on the healthcare sector,following the sale of its operating businesses in the previousfinancial year.

During the year we have built a promising portfolio of investmentsand achieved a highly profitable cash exit from our first publicinvestment, as well as the IPO of our first private investment.During the period we invested approximately £10.1 million in fivenew strategic investments as well as follow-on investments inCozart and AOI (in which we originally invested last financial year)and in our trading portfolio. In total, we had investments valued,as at 30 September 2007, at £9.4 million (2006: £1.3 million) andcash reserves of £5.1 million (2006: £17.2 million).

We were particularly pleased to achieve our first exit from astrategic investment when Concateno plc announced its cash offerfor Cozart plc in September 2007. The offer valued Cozart’s equityat an 87% premium to our cost of investment, resulting in a profitof £0.6 million and returned approximately £1.3 million to our cashreserves in October 2007. This represents a significant profit overa relatively short period thereby demonstrating the potential gainsavailable despite the challenging markets.

Investment strategyDuring the course of the year, we have increased our focus on thosetransactions where we could leverage the team’s specialised sectorand transactional expertise to add value to investee companies as a

strategic shareholder. For example, we helped Cozart to implementits buy-and-build growth strategy over the past year culminating in thesale of the business for a substantial premium. Similarly, both of ourUS investments (AOI Medical and Medivance) have benefited fromhaving a sector-focused strategic investor based in Europe to helpthem develop their financing strategies. The joint venture with WilliamRansom & Son plc is an example where we developed an innovativedeal structure to support Ransom’s strategic business objectives,while preserving significant investment upside for our shareholders.

We intend to continue to focus increasingly on such transactionsin both the private and public arena, working with other providersof capital where required.

Strategic portfolio reviewFollowing the successful sale of our first strategic investment(Cozart), six core strategic investments remain in the portfolio.Four of these are companies quoted on AIM, one is a private USmedtech business and one is an investment in a joint venture withanother AIM-quoted company. Each of these strategic investmentshas made good progress since we invested.

As at 30 September 2007, three of our investments (AOI,Medivance and Lombard) had increased in value, while two(Allergy Therapeutics and Minster Pharma) were showing losses.AOI Medical successfully floated on AIM in June – one of the fewsuch transactions achieved in the sector. Medivance successfullyraised significant further equity finance and our investment inMedivance is showing an increase in book value of approximately

Chairman’s andChief Executive’s review


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“During our first full year as a strategic investor inhealthcare companies we have made solid progressdespite very challenging global market conditions.We remain encouraged by the quality of the assetsin our core portfolio and see the substantial profitrealised by Cozart as a validation of our businessmodel. Although we continue to operate in uncertainand difficult markets, we are well placed to makefurther strategic investments and structure innovativedeals to realise future value for shareholders.”

Charles SpicerChief Executive

10%, based on the valuation achieved at the recent financing.Lombard has recently announced the successful completion ofthe 21-patient review on its lead product by the US Food and DrugAdministration (“FDA”). Allergy Therapeutics’ share price hassuffered since the summer following the unexpected clinical holdimposed by the FDA on its key clinical trial following a singleadverse event. Minster’s share price has suffered in line with thedepressed share prices across drug development companies.

Since our financial year end, 30 September 2007, stock marketconditions have continued to be extremely challenging with the shareprices for each of our quoted strategic investments falling further.

AOI Medical, Inc.Based in Florida, USA, AOI Medical is developing, and intends tocommercialise, innovative orthopaedic medical devices for the spineand trauma markets. In September 2006, we subscribed $1.5 million(£0.8 million) for ordinary shares in a private placing. In June 2007,AOI Medical completed its IPO on AIM and we invested a further£1 million, raising our stake in the business to approximately 8.6%of the issued share capital which was valued at approximately£2.4 million as at 30 September 2007.

In July 2007, AOI Medical announced the £510k submission forAscendX™ (Fracture Reduction System), to the FDA. AOI recentlyannounced that the FDA has asked AOI to conduct a clinical studyof its AscendX™ technology and that the product is on track forlaunch in H2 2008.

Medivance, Inc.Based in Colorado, USA, Medivance is a leading company in theemerging field of therapeutic temperature management. Medivance’snon-invasive technology, Arctic Sun® is patented and FDA approvedto rapidly cool patients (“therapeutic hypothermia”) and preciselycontrol their temperatures as a therapeutic tool.

In July 2007 we subscribed a further $2.5 million (£1.2 million) innewly issued ordinary shares in Medivance following our subscriptionfor $2.5 million (£1.3 million) in convertible loan notes announcedin December 2006. The July financing of $23.0 million was ledby Quellos Group, LLC, a US investment management company.As a consequence of the more recent financing, conversion of ouroriginal convertible loan notes into ordinary shares was triggered ata discount of 15% to the price paid by new equity investors at thatfinancing. Consequently we now own approximately 9.8% of thefully-diluted equity of Medivance which was valued at £2.7 millionas at 30 September 2007.

Medivance has continued to roll out the Arctic Sun® productinternationally. In the year to date, Medivance has continued toexceed its annual plan expectations on several fronts includingrevenues, gross margin and expenses. The Arctic Sun® productis now available in Europe and Asia as well as in the US. In the UK,units have been installed in a number of leading hospitals.

Minster Pharmaceuticals plcMinster is a drug development company that acquired fromGlaxoSmithKline (“GSK”) the worldwide development rights of two


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Chairman’s andChief Executive’s reviewcontinued


compounds, tonabersat and sabcomeline, which have already benefitedfrom substantial investment by GSK. Minster’s lead product, tonabersat,belongs to an exciting new class of drugs called “gap junction blockers”,and is being developed as a prophylactic treatment for migraine.

In March 2007, we invested in Minster’s fundraising, which raiseda total of £17.0 million. Minster’s share price has performed poorlyduring the year reflecting the difficult markets for small cap companiesgenerally and drug development businesses in particular. Followingthe original investment we have acquired further shares at significantlylower prices in the market and now hold just over 2% of Minster’sissued share capital valued at approximately £0.6 million as at30 September 2007.

In October 2007, Minster announced that it had started enrolmentfor its 500-patient Phase IIb trial of tonaberstat in the US where itsees migraine prevention as one of the fastest growing segmentsof the pharmaceutical market. The clinical results of this trial arescheduled to be published in late 2008.

Allergy Therapeutics plcAllergy Therapeutics is a speciality pharmaceutical company focusedupon the treatment and prevention of allergy. It has an existing Europeansales base, an MHRA-approved manufacturing capability and a numberof novel vaccines which have already undergone initial clinical evaluationand, once registered, could potentially revolutionise the treatment of allergy.

In March 2007, we acquired shares in Allergy Therapeutics andhave subsequently bought further shares in the market. MDYHealthcare now holds just over 0.7% of Allergy Therapeutics’ issuedshare capital which was valued at approximately £0.4 million as at30 September 2007.

Allergy Therapeutics has announced conclusive results of its oralallergy vaccine study and the commencement of dosing in itsPollinex® phase III ragweed trial. It also announced that it hasentered into a €40 million debt facility with RBS. In July 2007, AllergyTherapeutics announced that its Pollinex Quattro clinical studies hadbeen placed on clinical hold by the FDA whilst the agency fullyassesses the report of a rare adverse event classified by the physicianinvolved as “possibly related” to the study drug. Allergy Therapeuticscontinues to grow its core business but the future direction of thecompany is dependent on the timing of the decision on the clinicalhold. It intends to make further submissions and will continue to workwith the FDA to have the clinical hold removed.

Lombard Medical Technologies PLCLombard Medical is a specialist cardiovascular device and polymercoatings company. Its flagship product, the Aorfix™ endovascularstent graft for Abdominal Aortic Aneurysm (AAA), is CE Mark approvedin the EU. With no device currently approved for the treatment of AAAswith neck angulations greater than 60 degrees, Aorfix™ has apotentially unique product profile targeting an unmet clinical need.

In August 2007 we announced that we had acquired shares inLombard Medical following participation in both the June 2007equity fundraising and, subsequently, acquisition of shares atsignificantly lower levels in the market. We now hold just over 3%of Lombard’s issued share capital valued at approximately£0.5 million as at 30 September 2007.

In November 2007, Lombard Medical announced that it hadsuccessfully passed an FDA review of the first 21 patients in thepivotal US clinical trial for Aorfix™.

Joint Venture with William Ransom & Son plcRansom is the UK’s oldest independent pharmaceutical companyand one of the UK’s leading natural healthcare companies. It is themarket leading supplier of glucosamine supplements and one ofEurope’s leading suppliers of retailed aloe vera products.

In August 2007, Ransom and MDY Healthcare announced theestablishment of a multi-channel retail joint venture selling naturalhealthcare products direct to consumers via the internet, mail orderand telesales. The aim of the joint venture is to capitalise on therapid growth of e-commerce in the UK. The products will beprimarily sourced and/or manufactured by Ransom, which willalso provide management support and fulfilment from its newlyestablished distribution centre in Bradford, UK. MDY Healthcarewill provide up to £3 million in loan capital to finance the jointventure which is expected to launch commercial activities in 2008.

The newly created joint venture company will initially be majorityowned by MDY Healthcare and the Board of the joint ventureincludes representatives of both Ransom and MDY Healthcare.Ransom has the option to acquire 100% ownership of the jointventure company in accordance with an agreed timetable andvaluation process. Given the initial stage of the project there iscurrently no material value to MDY Healthcare’s equity interestincluded on the balance sheet.

We are now in the detailed planning and setup stage for the jointventure and have engaged specialised consultants to assist in thedevelopment of the retail offering, design of the customer interfaceand develop the fulfilment and logistical capabilities ahead ofcommercial launch in 2008.

Trading portfolioSeparately from the strategic investments, we have a portfolio ofinvestments in healthcare companies traded on the Main Marketof the London Stock Exchange or quoted on AIM, which werevalued at £2.9 million as at 30 September 2007. The disruptionin global equity markets since the summer has hit smallercapitalisation companies relatively hard and particularly thehealthcare sector. This trend has continued since the financial yearend. Whilst we realised some cash gains in early summer frombetter performing stocks (including Optos, Corin and Renovo),the trading portfolio was showing a net loss at the period end.

Conclusion and outlookDuring our first full year as a strategic investor in healthcarecompanies we have made solid progress despite very challengingmarket conditions. We remain encouraged by the quality of theassets in our core portfolio and see the substantial profit realisedby Cozart as a validation of our business model. Although wecontinue to operate in uncertain and difficult markets, we arewell placed to make further strategic investments and structureinnovative deals to realise future value for shareholders.

David Wong Charles SpicerChairman Chief Executive

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At 30 September 2007, MDY Healthcare’s total investments werevalued at £9.4 million (2006: £1.3 million) and we had cash and cashequivalents of £5.1 million (2006: £17.2 million), most of which areheld in US dollars following the receipt of US dollar cash proceedsfrom the disposal of our operating business in 2006. In addition, wehad a £1.3 million trade receivable relating to the sale of our Cozartinvestment which was paid in October 2007. Net asset value pershare as at 30 September 2007 was £1.06 (2006: £1.20).

In the year ended 30 September 2007, our loss after tax forcontinuing operations was £1.9 million (2006: £1.4 million). Of this,£877,000 was an exchange rate loss related mainly to cash balancesheld in US dollars resulting from the significant weakening of thedollar over the period. £421,000 of our total operating expensesrelated to costs resulting from matters relating to the sale and/orclosure of our previous operating businesses.

Revenue for the period was £28,000 and interest income was£628,000. During the year the realised gains on investments were£731,000 which includes our gain on the sale of Cozart and cashgains within our trading portfolio. A fair value loss on investmentsof £907,000 reflects the mark to market revaluation of our listed andquoted investments following the difficult stock market conditionsduring the summer.

Our initial private investment of $1.5 million in AOI Medical wasmade in August 2006 (i.e. in the previous financial year) whenMDY Healthcare had an operating business which we sold duringthat year. Consequently the initial AOI Medical investmentwas categorised as an “available-for-sale financial asset” inaccordance with the accounting policy that applied in the yearended 30 September 2006. Immediately following AOI Medical’ssuccessful IPO in June 2007, this initial investment was revaluedupwards by £626,000. However, under IFRS this revaluation hasto be booked directly in equity and does not appear on theconsolidated income statement until the investment is sold.

Following the conclusion of MDY Healthcare’s change in strategicdirection and operations, the Company now operates as a strategicinvestor in financial investments. Following this change, we nowclassify equity investments as financial assets at fair value throughprofit or loss. Realised and unrealised gains and losses on financialassets at fair value through profit or loss are included in the incomestatement in the period in which they arise. Therefore, with theexception of the initial investment in AOI Medical, for the yearended 30 September 2007 realised and unrealised gains andlosses on all other of our investments at fair value through profitor loss are included in the income statement.

Losses per share for the period were 16.02 pence as against12.80 pence for the corresponding period in 2006.

Share capital reorganisationOn 29 March 2007, we posted a circular to shareholders settingout various resolutions which were subsequently passed at ourAnnual General Meeting held on 4 May 2007. The resolutionsincluded, inter alia, a share capital reorganisation, leading to theconsolidation of our shares equating to one new ordinary share forevery 50 existing shares held. The 13,984,223 new ordinary sharesof 1 pence each were admitted to trading on AIM on 8 May 2007under ISIN code GB00B1VJNC59. The per share calculationsincluded in the financial review above are all based on the numberof new ordinary shares outstanding (i.e. on a post-consolidationbasis). As at 30 September 2007, the Company’s capital consistedof 14,623,111 ordinary shares. (The Company’s share capital alsoconsists of 13,984,223 deferred shares, which were created aspart of the share capital reorganisation. The rights attaching tothe deferred shares, which are not admitted to trading, are minimalthereby rendering them effectively valueless.)

Financial review

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Review of strategic investments

AOI Medical, Inc.


● Successful IPO on AIM in June 2007 raising£8 million

● 510(k) submitted for Ascendx™ in July 2007

● US Food and Drug Administration (“FDA”)granted conditional approval for AOI to begina 60-subject, single arm study on Ascendx™in December 2007

● Clinical trial expected to commence in Q1 2008

● Commercial launch of Ascendx™ targeted forH2 2008

Bill Christy, Chief Executive Officer, AOI Medical, Inc.:“MDY Healthcare provided AOI Medical with valuablestrategic guidiance throughout our IPO process inLondon. They have a deep understanding of theopportunities and challenges for smaller companiesin the sector.”

MDY Healthcare’s investment

• Subscribed $1.5 million for ordinary shares in a private placingin September 2006

• Invested a further £1 million in IPO in June 2007

• As at 30 September 2007 MDY Healthcare held approximately8.6% of the issued share capital which was valued atapproximately £2.4 million

AOI Medical (AIM: AOI) is a medical device company focusingon the development and commercialisation of innovativeorthopaedic medical devices for the spine and trauma markets.Since incorporation in November 2004, the company hasprogressed the development of three separate key technologyplatforms:

• Ascendx™ Fracture Reduction System (formerly known as“BAMF Spine’’): a set of tools for use in restoring the anatomyof fractured bone. It is intended for vertebral use to addresscompression fractures of the spine caused by osteoporosisor trauma.

• Balloon Assisted Management of Trauma Fractures(“BAMF Trauma’’): a removable, inflatable nail for the stabilisationof fractures of the long bones of the arms and legs.

• Motion Preserving Cervical Dynamic Stabilization Plate(“Cervical Plate’’): an anterior, semi-constrained artificial ligamentproviding limited translational and rotational stabilisation forcesat the site of an intervertebral graft, implant or prosthesissubsequent to a cervical spine disc replacement surgery.

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Medivance, Inc.

● Continued to roll out the Arctic Sun®

product internationally

● Continued to exceed its 2007 annual planexpectations on several fronts including revenues,gross margin and expenses

● The Arctic Sun® product is now available in Europeand Asia as well as in the US

● Units have been installed in a number of leadinghospitals in the UK

Robert Kline, President and CEO of Medivance, Inc.:“MDY Healthcare provided valuable input toMedivance on the UK and European captial markets.In addition, they have useful knowledge of theEuropean healthcare industry and a network ofexperienced advisors.”

Medivance (private) is a global medical device company basedin Colorado. The company develops, manufactures and marketsproprietary therapeutic temperature management solutions.

Founded in 1998, Medivance provides clinicians with safe, easyand precise methods for regulating body temperature. Establishedin Critical Care Units and Emergency Departments in hospitalsworldwide, Medivance’s advanced devices potentially improveoutcomes in patients who have suffered cardiac arrest, heart attack,stroke, brain injury, neurogenic fever, trauma or other critical illness.Medivance’s award-winning Arctic Sun® Therapeutic TemperatureManagement System has received FDA 510(k) clearance, the CEMark, and marketing approvals and registrations from the JapaneseMinistry of Health, Labour and Welfare (MHLW), CanadianTherapeutic Products Directorate, and the Australian TherapeuticGoods Administration.

Medivance manufactures its products in a 15,000 sq.ft. facility inLouisville, Colorado and supports a direct sales organisation inNorth America as well as distribution partners in Canada, Europe,Asia and Australia.


• Initial subscription for $2.5 million (£1.3 million) in convertibleloan notes in December 2006

• Subscribed a further $2.5 million (£1.2 million) in newlyissued ordinary shares in financing of $23.0 million led byQuellos Group, LLC, a US investment management companyin July 2007

• As at 30 September 2007, MDY Healthcare held 9.8% ofthe fully-diluted equity of Medivance which was valued at£2.7 million

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Review of strategic investmentscontinued


Lombard Medical Technologies PLC

● Announced successful FDA review of the first 21patients in the pivotal US clinical trial for Aorfix™in November 2007

● Announced an equity fundraising to raiseapproximately £7.6 million in December 2007 tofund the company through 2008 and completerecruitment of the Aorfix™ trials

● Announced that in 2008 it will pursue a numberof strategies which will include the disposal ofnon-core assets, further financing from strategicinvestors and discussions with potential partners orpotential acquirers of the company or the business


• Announced acquisition of shares in August 2007 followingparticipation in both the equity fundraising and acquisitionof shares at significantly lower levels in the market

• Acquired further shares in December 2007 fundraising(post period end)

• As at 30 September 2007, MDY Healthcare held just over 3%of Lombard’s issued share capital valued at £0.5 million

Lombard Medical (AIM: LMT) is a specialist cardiovasculardevice and polymer coatings company. Its flagship product,the Aorfix™ endovascular stent graft for Abdominal AorticAneurysm (AAA), is CE Mark approved in the EU. With no devicecurrently approved for the treatment of AAAs with neckangulations greater than 60 degrees, Aorfix™ has a potentiallyunique product profile targeting an unmet clinical need.

The company, headquartered in Oxfordshire, with operations inYorkshire, Ayrshire and Boston, USA, employs over 100 people.Lombard Medical’s Polymer Coatings Division primarily developspolymer coatings for use in drug-eluting stents and has a numberof research collaborations developing novel products.

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Minster Pharmaceuticals plc

● Professor Peter Goadsby, the lead investigator intonabersat’s Phase IIa trial and a world authorityon headache, was invited to present the trial resultsto both the American Headache Society and theCongress of the International Headache Societyin June 2007

● Announced that it started enrolment for theTEMPUS study, its 500-patient Phase IIb trial oftonaberstat in the US and Canada in October 2007

● Announced in February 2008 that 125 patientshave now been enrolled in the company’sTEMPUS study, representing 25% of the patientsplanned to take part in the trial

● The primary endpoint of the study is on trackto report in late 2008

Minster Pharmaceuticals (AIM: MPM) is a drug developmentcompany specialising in compounds for the treatment ofneurological and psychiatric conditions. It acquired fromGlaxoSmithKline the worldwide development rights of twocompounds, tonabersat and sabcomeline, which have alreadybenefited from substantial investment by GSK. Minster’s leadproduct, tonabersat, belongs to an exciting new class of drugscalled “gap junction blockers”, and is being developed as aprophylactic treatment for migraine. Minster believes migraineprevention will be one of the fastest growing segments of theUS pharmaceutical market.

Minster’s strategy is to acquire clinical-stage products and thento maximise their value through the company’s core competencein drug development. Minster’s commercialisation strategy is toout-license its compounds to marketing partners on a global orregional basis at an appropriate point in the products’ developmentbut ahead of regulatory submission for marketing authorisation.Minster has adopted an outsourced business model for functionssuch as clinical trial management enabling resources to be focusedon its development assets.


• Invested in Minster’s fundraising in March 2007, which raiseda total of £17.0 million

• Acquired further shares at significantly lower prices in the market

• As at 30 September 2007, MDY Healthcare held just over 2%of Minster’s issued share capital valued at £0.6 million

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12MDY Healthcare plc Annual Report 2007Review of strategic investments

continued

Allergy Therapeutics plc

● Announced conclusive results of oral allergyvaccine study and the commencement of dosing inits Pollinex® Phase III ragweed trial in April 2007

● Announced 140 million debt facility with RoyalBank of Scotland in May 2007

● Announced that its Pollinex Quattro clinical studieshad been placed on clinical hold by the FDA inJuly 2007

● Announced in November 2007 that the companyhad held a constructive Type A meeting withthe FDA

● Has made further submissions and will continue towork with the FDA to have the clinical hold removed

Allergy Therapeutics (AIM: AGY) is a speciality pharmaceuticalcompany focused upon the treatment and prevention of allergy.It has an existing European sales base, an MHRA-approvedmanufacturing capability and a number of novel vaccineswhich have already undergone initial clinical evaluation andonce registered, could potentially revolutionise the treatmentof allergy.

The company’s current portfolio of marketed products is based onallergoid tyrosine depot and MPL® adjuvant. Allergy Therapeutics’R&D programmes aim to maximise safe and effective productsfor the treatment of allergy with a range of clinical studiescurrently in progress.


• Acquired shares in Allergy Therapeutics in March 2007 andsubsequently bought further shares in the market

• As at 30 September 2007, MDY Healthcare held just over0.7% of Allergy Therapeutics’ issued share capital whichwas valued at £0.4 million

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• The JV company will initially be majority-owned byMDY Healthcare. As such, the company is treated as asubsidiary undertaking for the purposes of these accounts.

• Ransom has the option to acquire 100% ownership inaccordance with an agreed timetable and valuation process

• MDY Healthcare will provide up to £3 million in loan capital


Joint Venture with William Ransom & Son plc

● JV announced in August 2007

● Now in the detailed planning and set-up stage

● Has engaged specialist consultants to assist inthe development of the retail offering, design ofthe customer interface and develop the fulfilmentand logistical capabilities

● Commercial launch expected in 2008

Ian Miscampbell, Group Finance Director ofWilliam Ransom & Son plc:“The JV offers the opportunity to create significantvalue for both companies’ shareholders.MDY Healthcare devised an innovative financingstructure which provides the springboard to sell ourmarket-leading product range directly to consumers.We are working closely with the MDY Healthcareteam to achieve the commerical launch laterthis year.”

Ransom (AIM: RNSM) is the UK’s oldest independentpharmaceutical company and one of the UK’s leading naturalhealthcare companies. It is the market-leading supplier ofglucosamine supplements and one of Europe’s leadingsuppliers of retailed aloe vera products.

The multi-channel retail joint venture will sell natural healthcareproducts direct to consumers via the internet, mail order andtelesales. The aim of the joint venture is to capitalise on the rapidgrowth of e-commerce in the UK. The products will be primarilysourced and/or manufactured by Ransom, which will also providemanagement support and fulfilment from its newly establisheddistribution centre in Bradford, UK.

The Board of the newly created joint venture company includesrepresentatives of both Ransom and MDY Healthcare.

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Directors and advisers

The Board


Executives

Senior advisers

1 32 4

5 76

8 10 119

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The Board

1. Dr David Wong, ChairmanDavid has been Executive Chairman of MDY Healthcare since April2003 and a director since 1998. In 1992 he founded MedicalConsultants and Management Limited, an investment companyspecialising in medical and bioscience companies. He received adegree in dentistry from Guy’s Hospital Medical School in 1976 andwent on to found a group of dental surgery clinics, which were soldin 1988. He also built up and sold a food business to Slater FoodsPLC where he became a director.

2. Charles Spicer, Chief ExecutiveCharles was appointed as Chief Executive of MDY Healthcare in July2006. Charles was previously Head of Healthcare Corporate Financeat Numis Securities and prior to that Head of Healthcare CorporateFinance at Nomura International, which he joined in 1998. In bothroles, he advised a wide range of companies in the healthcare sectoron corporate finance, mergers, acquisitions and corporate broking.He started his career in New York in 1987 working for Bear StearnsInternational having graduated from Cambridge University. He isa director of Gresham’s Schools Limited and a member of thetechMark Advisory Group at the London Stock Exchange.

3. Derek Ablett, Non-executive DirectorDerek has been a director of MDY Healthcare since 1997. He gained18 years of experience in banking with a major UK clearing bank beforejoining a merchant bank for 11 years, where he was appointed directorresponsible for corporate finance in the Midlands. He is an experiencednon-executive director and has been involved in companies operatingin several sectors. He is currently a director of K.P. Holdings Limitedand Kandaprint Limited, and a trustee for several pension funds.

4. Alan MacKay, Non-executive DirectorAlan is a Global Lead Partner, Healthcare at 3i Investments plc.He is a member of the 3i leadership team and heads its healthcaregroup of 20 investment professionals based throughout Europe,US and Asia, actively investing in the pharmaceuticals, medicaldevice and care services sub-sectors. He joined 3i in 1987, workingin Scotland, Ireland and London. In 1994 he was appointed to theBoard of 3i plc. From 2000 he was Chief Executive of 3i Nordic plc,investing in a diverse range of healthcare companies across Finland,Denmark and Sweden. He has an LLB in law from Glasgow University,an MSc in Commerce from Sterling University and an AMP inBusiness from Insead.

Executives

5. Louisa Hellier, General Counsel and Company SecretaryLouisa was appointed General Counsel and Company Secretary inSeptember 2006. Prior to that she worked in the Healthcare CorporateFinance Group at Nomura International which she joined in 1998. Prior tothat she was a solicitor in the corporate department at Allen & Overywhere she qualified in 1996 having graduated from Oxford University.

6. Dr Robert Watson, Associate DirectorRob joined MDY Healthcare in December 2006. He was previouslyat Sofinnova Partners in Paris where he had been an investmentanalyst since January 2005. At Sofinnova he worked in a team

investing in private biopharmaceutical and medical technologycompanies. Robert has a DPhil in neurology from the Departmentof Clinical Medicine, University of Oxford, as well as an MBiochemand a BA (Hons) in Biochemistry also from Oxford.

7. Marina Nones, Operations Manager and PA to the directorsMarina joined MDY Healthcare in September 2006 and is responsiblefor the firm’s operations, systems, IT and general administration.Prior to that she worked for Terra Firma Capital Partners, NomuraInternational plc and Bank Hapoalim. She graduated fromWestminster University and is fluent in Spanish and Italian.

Senior advisers

8. Lawrence Kinet, Senior adviserLawrence Kinet is non-executive Chairman of Oxford ImmunotecLtd and Endosense SA in Geneva. He is also a Board director ofM2 in Sunneyvale, California. Lawrence was previously an executivedirector of Smiths Group plc, a FTSE 100 company, where heheaded up Smiths Medical. Prior to that, he was Chairman andChief Executive Officer of Aksys Limited and of Oculon Corp.He has also spent a significant amount of time in various seniormanagement roles at Baxter International Inc, culminating in hisappointment as Corporate VP and President, World Trade Group.Lawrence is a US citizen based in London.

9. Jonathan Milner, Senior adviserJonathan Milner is Group Chief Executive of Abcam plc, anAIM-quoted producer and distributor of research grade antibodiesand associated products headquartered in Cambridge. From 1992to 1995, he was a research fellow for Pfizer Pharmaceuticals at theUniversity of Bath. From 1995 until 1998, Jonathan was a researchfellow at Cambridge University. He has a degree in Applied Biologyfrom Bath University and a PhD in Molecular Genetics fromLeicester University.

10. June Scott, Senior adviserJune was most recently Senior Portfolio Manager and Head ofHealthcare at Close Investments (formerly Reabourne Technology)where she was responsible for healthcare investments in thetechnology funds. Prior to that she was a director and Board memberof Sagitta Asset Management. From 1995 to 2000, June was a directorat Foreign & Colonial Investment Management. She startedher career as an investor at JPMorgan Investment Management.She holds an MBA from the London Business School and a BScin Biological Sciences from the London Guildhall University.

11. Brian Steer, Senior adviserBrian Steer is Executive Chairman of Gyrus Group PLC which hejoined in 1997. His experience spans 40 years of managementwithin the healthcare industry including 20 years with BaxterHealthcare, which he joined in 1963, holding several positionsincluding President of Europe. He spent a further ten years asPresident of Zimmer International, a Bristol Myers Squibb company.In 1993 he formed Steer Associates, consulting for Orthofix, Gyrus,Genetics Institute and others. He later became Director and ChiefOperating Officer of Orthofix.

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Directors’ report 16MDY Healthcare plc Annual Report 2007

The directors present their report and the audited financialstatements of the Group for the year ended 30 September 2007.

Principal activities and business reviewThe Company is an investment holding company. A business reviewis given within the Chairman and Chief Executive’s review on pages4 to 6.

Key performance indicatorsThe directors consider that the Group’s key performanceindicators are:

• Whether the Group is successfully implementing its investmentstrategy. During the period, the Group invested in five newstrategic investments as well as follow-on investmentsin Cozart and AOI (in which the Group originally invested lastfinancial year) and in the trading portfolio. During the periodthe Group further strengthened the executive team and alsoestablished an advisory panel of senior executives from thehealthcare sector.

• Creating value by building assets and realising investments byrevaluations and/or divestments of its investments. The Groupachieved its first cash exit from a strategic investment whenConcateno plc announced its cash offer for Cozart plc inSeptember 2007. The offer valued Cozart’s equity at an 87%premium to the Group’s cost of investment. As at 30 September2007, three of the Group’s investments (AOI, Medivance andLombard) had increased in value, while two (Allergy Therapeuticsand Minster Pharma) were showing losses. AOI Medicalsuccessfully floated on AIM in June.

• Controlling operating costs.

• Receiving third-party investment in the Company. During theyear, a placing of new ordinary shares to new institutionalinvestors raised £575,000 for the Company.

Results and dividendsThe trading results for the year and the financial position at theend of the year are shown in the attached financial statements.The directors have not recommended a dividend (2006: £Nil).

The directors and their interestsThe directors who served the Company during the year together withtheir beneficial interests in the shares of the Company were as follows:

At 30 At 30September September

Class of share 2007 2006*

D N Ablett Ordinary sharesof 1 pence each 5,267 2,002

D Wong Ordinary sharesof 1 pence each 768,285 733,333

A B MacKay Ordinary sharesof 1 pence each – –

C A E Spicer Ordinary sharesof 1 pence each 163,333 143,333

* The share numbers as at 30 September 2006 have been adjusted to take into account theshare capital reorganisation effected in May 2007, further details of which are set out atNote 18 to the financial statements. No director disposed of shares during the period. Asummary of the directors’ acquisitions and subscriptions of shares throughout the year isset out below.

Details of how the directors hold these interests are set out onpage 22.

D Ablett acquired 163,265 ordinary shares (equating to 3,265ordinary shares post consolidation) on 3 January 2007.

D Wong acquired 408,347 ordinary shares (equating to 8,167ordinary shares post consolidation) on 3 January 2007, 14,285ordinary shares on 30 August 2007 and 12,500 ordinary shareson 31 August 2007.

C Spicer acquired 1,000,000 ordinary shares (equating to 20,000ordinary shares post consolidation) on 3 January 2007 andsubscribed for 23 ordinary shares (equating to nil ordinary sharespost consolidation) on 29 March 2007.

D Ablett held 7,200 (2006: 7,200) share options (adjusted followingthe share capital reorganisation in May 2007) at a weighted averageexercise price of £5.25 which were exercisable until 23 January2008. No options were granted to, or exercised by, directors duringthe year.

In accordance with the Company’s articles, Derek Ablett, will retireby rotation; being eligible he offers himself for re-election at theforthcoming Annual General Meeting.

Other shareholdingsAt the date of this report, the Company had not been notified thatany shareholders, with the exception of 3i Group PLC (which holds22.0%), Carnegie Global Healthcare Fund (which holds 5.98%),Barclays plc (Barclays Private Bank and Trust Ltd, BarclaysStockbrokers Ltd and Gerrard Ltd) (which holds 6.84%) and DavidWong (who holds 5.3%), held 3% or more of the issued ordinaryshare capital of the Company.

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Research and developmentExpenditure on research and development during the yearamounted to £Nil (2006: £870,000).

Charitable and political donationsThe Group made no charitable contributions or political donationsduring the year (2006: £Nil).

Creditor payment policyIt is the Group’s policy to abide by the payment terms agreed withsuppliers whenever it is satisfied that the supplier has provided thegoods and services in accordance with agreed terms and conditions.

Group undertakingsDetails of the Company’s subsidiary undertakings are set out in note9 to the financial statements.

Financial risk managementThe Group’s financial instruments, excluding short-term debtorsand creditors, comprise cash and liquid resources, current andlong-term investments and available-for-sale financial assets.The main risks arising from the Group’s financial instruments areprice risk, liquidity risk and foreign exchange risk. The Group’spolicies for managing each of these risks are summarised below.

Price riskThe Group holds equity investments to achieve capital growthin their value with the intention of subsequent disposal at a profit.The main risks arising from these equity investments aretechnological and market price risks. The overall value of theinvestment portfolio will fluctuate with the valuations of investeecompanies, based on share prices, where publicly quoted, and onthe terms of fundraisings and other valuation defining events forprivate companies. The Group seeks to manage investment risk byusing investment appraisal processes and monitoring procedureswith regular reports made to the Board on the statusof investments.

Liquidity riskThe Group seeks to manage financial risk by ensuring sufficientliquidity is available to meet foreseeable needs and to invest cashassets profitably across a range of different investments.

Foreign exchange riskThe Group is exposed to foreign exchange risk as the Groupcurrently holds its cash and cash equivalents predominantly in USdollars. Some of the Company’s investments are made in companiesthat have an exposure to US dollars. The directors review and agreepolicies for managing this risk. Currently, the Board has not soughtto put in place financial instruments to hedge the dollar exchangerisk as the directors may make investments and incur expenditurein US dollars.

Remuneration CommitteeMr Ablett, an independent Non-executive director, acted asChairman of the Committee during the year. The Executive Chairmanis also a member. The Remuneration Committee met once duringthe year; when necessary non-Committee members were invitedto attend. The Committee’s principal responsibilities are:

• setting, reviewing and recommending to the Board for approvalthe Group’s overall remuneration policy and strategy;

• setting, reviewing and approving individual remunerationpackages for executive directors (including the Chairman)relating to terms and conditions of employment and anychanges to the packages;

• reviewing the salary structure and terms, conditions and benefitsof employment of the other executives; and

• approving the rules, and launch, of any Company share, shareoption or cash based incentive scheme and the grant, award,allocation or issue of shares, share options or payments undersuch scheme.

In addition the Committee regularly reviews the Group’sremuneration policy in relation to:

• its competitors and industry norms;

• compensation commitment; and

• contract periods.

The report of the Remuneration Committee is set out on pages 21to 23.

Audit CommitteeMr Ablett was the sole member of the Committee during the year.

Mr Ablett, who sat as a member of the Committee during theaccounting period, brought to it a wide range of experience fromsenior positions in business, however he has not had recentexecutive experience in senior finance positions.

Under its terms of reference, the Audit Committee monitors theintegrity of the Group’s financial statements and any formalannouncements relating to the Group’s performance. The Committeeis responsible for monitoring the effectiveness of the external auditprocess and making recommendations to the Board in relation tothe appointment, re-appointment and remuneration of the externalauditor. It is responsible for ensuring that an appropriate relationshipbetween the Group and the external auditors is maintained,including reviewing non-audit services and fees. It also reviewsannually the Group’s systems of internal control and the processesfor monitoring and evaluating the risks facing the Group.

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Directors’ reportcontinued


The Committee meets with executive directors and management,as well as privately with the external auditors. In 2007, the AuditCommittee discharged its responsibilities by:

• reviewing the Group’s draft financial statements and interimresults statement prior to Board approval and reviewing theexternal auditor’s reports thereon;

• reviewing the Group’s preliminary announcement prior to release;

• reviewing the appropriateness of the Group’s accounting policies;

• reviewing regularly the potential impact in the Group’s financialstatements of certain matters such as potential impairmentsof financial investments;

• reviewing and approving the audit fee and reviewing non-auditfees payable to the Group’s external auditors;

• reviewing the external auditor’s plan for the audit of the Group’saccounts, key risks to the business, confirmations of auditorindependence and the proposed audit fee, and approving theterms of engagement for the audit; and

• reviewing an Annual Report on the Group’s systems of internalcontrol and its effectiveness, reporting to the Board on theresults of the review and receiving regular updates on key riskareas of financial control.

The Group does not currently have an internal audit function orFinance Director. The Board has reviewed the need for an internalaudit function and is satisfied, having regard to the size of theGroup and the level of overview by senior management, that aninternal audit function is not currently needed. This matter ishowever reviewed on an ongoing basis. It is the Group’s intentionto introduce whistle blowing procedures to ensure that appropriatearrangements are in place for employees to be able to raise mattersof possible impropriety in confidence, with suitable subsequentfollow up action.

The Audit Committee monitors the non-audit services beingprovided to the Group by its external auditors. The Audit Committeereviews all services being provided by the external auditors toreview the independence and objectivity of the external auditors,taking into consideration relevant professional and regulatoryrequirements, so that these are not impaired by the provision ofpermissible non-audit services. Activities that may be perceived tobe in conflict with the role of the external auditor must be submittedto the Committee for approval prior to engagement, regardless ofthe amounts involved.

Details of the amounts paid to the external auditors during the yearfor audit and other services are set out in the notes to the financialstatements (note 2).

The environment and health and safetyThe Group is committed to complying with environmental legislationand minimising the environmental impact of its activities. The Groupconsiders that its activities have a low environmental impact. TheGroup also promotes high standards of health and safety at work.

EmployeesThe Group is committed to employment, practices, policies andprocedures which follow best practice, based on equal opportunitiesfor all employees irrespective of gender, race, national origin,religion, colour, disability, sexual orientation, age or marital status.

Employees are kept closely involved and consulted in majorchanges affecting them through such measures as formal andinformal team meetings.

Going concernThe directors are satisfied that the preparation of the financialstatements on a going concern basis is appropriate.

On behalf of the Board

D WongDirector

19 December 2007

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Corporate Governance 19MDY Healthcare plc Annual Report 2007

Companies that have securities that trade on AIM are not requiredto comply with the disclosure requirements of the Combined Codeon Corporate Governance. However, the Board is committed topractising good Corporate Governance as part of its aim to delivershareholder value. The Company has regard to these principles andits activities in the area of Corporate Governance are discussedbelow. In assessing the appropriate standards of CorporateGovernance the Board takes into account the nature and size of theoperation, which as at 30 September 2007 comprised four directorsand three staff operating at one site in the UK.

The BoardThe Group is controlled through its Board of Directors. The Board’smain roles include providing entrepreneurial leadership within aframework of prudent and effective controls that allow for risk to bemanaged and assessed, setting the Group’s strategic objectives andvalues and ensuring that the necessary financial and other resourcesare made available to enable those to be met. The Non-executivedirectors recognise that they have a particular role in overseeingthe development of strategy, scrutinising management performanceand ensuring integrity of financial information and risk management.

The Board, which meets approximately six times per year,in addition to making and reviewing major business decisions andmonitoring current investment portfolio performance, has a scheduleof matters reserved for its approval. All material investment anddivestment decisions require appraisal, review and Board approval.The specific responsibilities reserved to the Board include: settingGroup strategy, reviewing operational and financial performance;approving specific strategic investments and other investment andcash management strategies; reviewing the Group’s systems offinancial control and risk management; ensuring that appropriatemanagement development plans are in place; approvingappointments to the Board and as Company Secretary; approvingpolicies relating to directors’ remuneration and the severance ofdirectors’ contracts; and ensuring that a satisfactory dialogue takesplace with shareholders.

The Board has delegated the following responsibilities tomanagement: the development and recommendation of strategicplans for consideration by the Board that reflect the longer termobjectives and priorities established by the Board; implementationof the investment strategies and policies of the Group asdetermined by the Board; monitoring the quality of the investmentprocess against objectives; prioritising the allocation of capital,technical and human resources; communicating with investorsand developing and implementing risk management systems.

The Executive Chairman on a periodic basis holds meetingswith the Non-executive directors.

The Executive Chairman leads the Board in the determinationof its strategy and in the achievement of its objectives. He is alsoresponsible for organising the business of the Board, ensuring itseffectiveness and setting its agenda. The Executive Chairmanfacilitates the effective contribution of non-executive directorsand constructive relations between executive and Non-executivedirectors. The Chief Executive has direct charge of the Group ona day-to-day basis and is accountable to the Board for the financialand operational performance of the Group.

The directors are given access to independent professional adviceat the Company’s expense, when the directors deem it is necessaryin order for them to carry out their responsibilities.

Board balance and independenceThe Board currently comprises the Executive Chairman, the ChiefExecutive and two Non-executive directors. The size of the Boardand balance of skills is considered appropriate for the requirementsof the business.

The Board considers that A B MacKay and D N Ablett areindependent. The Group has not appointed a senior independentdirector. Mr Ablett has been a director of the Company for over tenyears. The Board considers that Mr Ablett is of sufficient calibre thathis views carry significant weight in the Board’s decision making.Mr MacKay is an employee of 3i Group PLC, a significantshareholder of the Company, but was appointed to the Board inhis personal capacity and not as a representative of 3i Group PLC.The Board has reviewed the independence of each of Mr Ablettand Mr MacKay in the context of the matters referred to above,including an assessment of their overall character and approachand concluded that they are independent.

Save as referred to above, the Non-executive directors: have notbeen employees of the Group within the last five years; have not,or had not within the last three years, a material businessrelationship with the Group; will not receive remuneration(other than through Director’s fees); have no close family ties withany of the Group’s advisers, directors or senior employees; hold nocross-directorships or have significant links with other directorsthrough involvement in other companies or bodies; do not representa significant shareholder; and have not served on the Board formore than nine years.

Appointments to the BoardThe Board as a whole deals with the appointment of directors.Directors are appointed on the basis of merit and to ensure asufficiently wide and relevant mix of background, skills andexperience to provide strong and effective leadership to the Group.

The Board has considered whether or not it is appropriate forthe Board to constitute a Nomination Committee to deal withappointments to the Board and believe, having regard to thesize of the Board, that it is not necessary to constitute sucha Committee at this time.

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Corporate Governancecontinued


Information and professional developmentInformationRegular reports and papers are circulated to the directors in atimely manner in preparation for Board and Committee meetings.These papers are supplemented by information specificallyrequested by the directors from time to time.

The Non-executive directors receive monthly management accountsand regular management reports and information which enable themto scrutinise the Group’s and management’s performance againstagreed objectives.

The Board is committed to putting a process in place for trainingnew directors in their legal and fiduciary duties if and when itis required.

The Company Secretary is a part time employee of the Group.The Company Secretary is responsible for advising the Boardthrough the Chairman on all governance matters. All directorshave access to the advice and services of the Company Secretary.The Company’s Articles of Association and the schedule of mattersreserved to the Board for decision provide that the appointment andremoval of the Company Secretary is a matter for the full Board.

Performance evaluationThe performance of each director and of each committee of theBoard is formally evaluated annually. The non-executive directorsmeet to consider the performance of the executive directors, andthe non-executive directors’ performance is considered by theexecutive directors.

Re-electionAll directors are subject to election at the first AGM followingappointment and to re-election every three years.

RemunerationInformation regarding the Remuneration Committee is set outin this report and in the directors’ remuneration report.

Accountability and auditFinancial reportingThe Board seeks to present a balanced and understandableassessment of the Group’s position and prospects not only in theAnnual Report but also in the interim and other public records.The Board believes it has met this obligation. A summary of thedirectors’ responsibilities for the financial statements is set out inthis report.

The going concern statement is set out on page 18.

Internal controlThe Board is responsible for the Group’s system of internal control;should set appropriate policies on internal control; seek regularassurance that will enable it to satisfy it that the system is functioningeffectively; and must ensure that the system of internal control iseffective in managing risks in the manner which it has approved.

The directors have continued to review the effectiveness of theGroup’s system of financial and non-financial controls, includingoperational and compliance controls, risk management and theGroup’s high level internal control arrangements. These reviewshave included an assessment of internal controls, and in particularinternal financial controls, by management, management assuranceof the maintenance of control and reports from the external auditoron matters identified in the course of its statutory audit work.

The Group views the careful management of risk as a keymanagement activity. Managing business risk to deliver opportunitiesis a key element of all activities. This is done using a simple andflexible framework which provides a consistent and sustained way ofimplementing the Group’s values. These business risks, which maybe strategic, operational, reputational, financial or environmental,should be understood and visible. The business context determinesin each situation the level of acceptable risk and controls.

Relations with shareholdersThe Company has discussions with institutional shareholders ona range of issues affecting its performance. The Executive Chairmangives feedback to the Board on issues raised with him by majorshareholders. This is supplemented by regular feedback tothe Board on meetings between management and investors.All directors normally attend the Annual General Meeting.The Annual General Meeting is one of the main opportunities forthe Board to communicate with the Company’s non-institutionalshareholders and the Board welcomes all shareholder participationat the meeting.

The Company maintains a corporate website(www.mdyhealthcare.com) containing a wide range of informationof interest to institutional and private investors including all theinformation neccessary to comply with the AIM rules regardinginvestor relations. The Annual Report is available on theCompany’s website.

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Remuneration report 21MDY Healthcare plc Annual Report 2007

IntroductionCompanies that have securities that trade on AIM are not requiredto comply with the disclosure requirements of the Directors’Remuneration Report Regulations 2002 (the “Regulations”) or tocomply with the relevant requirements of the Listing Rules of theFinancial Services Authority. However, the Remuneration Committeeis committed to following best practice and therefore set out beloware disclosures relating to the remuneration of directors and aresolution to approve the report will be proposed at the AnnualGeneral Meeting of the Company.

Composition and terms of reference of theRemuneration CommitteeThe Remuneration Committee consists of an independentNon-executive director (D Ablett) and the Executive Chairman(D Wong). The Committee, in accordance with its agreed terms ofreference, is responsible for the formulation of the Group’s policy onsenior executive remuneration. It also considers and determines thesalaries and other terms of remuneration of the executive directorsand all other executives, including pension rights.

The Remuneration Committee has access to independent advicewhere it considers appropriate. No such advice was received duringthe year.

Remuneration policyThe Group’s policy on senior executive remuneration aims to ensurethat remuneration packages are competitive so that individuals areappropriately rewarded relative to their responsibility, experienceand value to the Group. Performance related remuneration basedon measured targets is a key component of executive directors’remuneration. The policy in respect of directors’ remunerationin the current and forthcoming years is set out below.

Non-executive directorsNon-executive directors are remunerated by way of directors’ fees,details of which are disclosed below. Non-executive directorsare not eligible for performance related bonuses and no pensioncontributions are made on their behalf. Non-executiveremuneration is set by the Board following recommendationsof the Remuneration Committee.

Executive directors’ remunerationThe elements of the remuneration package for executive directorsare basic salary, benefits and annual bonuses, where deemedappropriate. The basic salaries of executive directors are reviewedannually. No fees are paid to executive directors. Bonuses,where paid, are determined based on the achievement ofperformance objectives.

Annual bonus schemeThe executive directors and other executives participate in bonusschemes that reward those individuals if targets, agreed by theCommittee, for investment portfolio development and certainnon-financial targets are met.

Directors’ service contractsIt is the Company’s policy that the contracts of employment forthe service of executive directors provide for periods of noticeof termination of 12 months. Service contracts have no fixed termand contain no provision for compensation. All executive directors’contracts conform to this policy.

All Non-executive directors have letters of appointment with theCompany. These contracts have no fixed term, provide for aperiod of notice of three months and contain no provisionfor compensation.

Share price performanceThe mid market price of the Company’s shares on 28 September2007 (the last business day prior to 30 September 2007) was73.5 pence. During the year to 30 September 2007, the mid marketprice of the Company’s shares ranged from 140 pence to 73.5pence. The average share price for the period was 112.2 pence.

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Remuneration reportcontinued


Directors’ and Company Secretary’s interests in shares and share optionsThe directors who held office at the end of the financial year had the following beneficial interests in the ordinary shares of the Companyas recorded in the register of directors’ shares and debenture interests; no director has non-beneficial interests.

Ordinary shares of 1 pence each

Interest at Interest at end Interest at beginning19 December 2007 of the year of the year1

D N Ablett 5,267 5,267 2,002C A E Spicer 163,333 163,333 143,333D Wong2 768,285 768,285 733,333A B MacKay – – –L Hellier – – –

1 The share numbers for the directors’ interests at the beginning of the year have been adjusted to take into account the share capital reorganisation effected in May 2007, further detailsof which are set out at note 18 to the financial statements. No director disposed of shares during the period. A summary of the directors’ acquisitions and subscriptions for sharesthroughout the year is set out on page 16.

2 The 768,285 ordinary shares in which D Wong is interested in are held by Medical Consultants and Management Ltd (“MCM”), an investment holding company registered in Jerseywhich is wholly owned by a trust settled by Dr Wong, the beneficiaries of which are Dr Wong’s wife and children.

The interests of directors in office at the year end in options over ordinary shares are set out below.At

1 October 2006 Weighted(or date of At average

appointment Forfeited/ 30 September exercise Exerciseif later) expired 2007 price period

D Wong – – – – –C A E Spicer – – – – –D N Ablett1 7,200 – 7,200 525 pence To 23 January 2008A B MacKay – – – – –L Hellier – – – – –

1 D Ablett held 7,200 (2006: 7,200) share options (adjusted following the share capital reorganisation in May 2007) at a weighted average exercise price of £5.25 which were exercisableuntil 23 January 2008. Mr Ablett, as sole remaining option holder, agreed to surrender these options for no consideration by an agreement with the Company dated 22 November 2007.

No options were granted to, or exercised by, directors during the year. On 22 November 2007, the Board resolved to terminate all theGroup’s share option schemes.

According to the register of directors’ interests, no other rights to subscribe for shares in or debentures of the Company or any other Groupcompany were granted to any of the directors or their immediate families, or exercised by them during the financial year nor in the periodup to the date of this report.

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Details of individual emoluments and compensationThe remuneration payable to directors of the Company who held office for any part of the current or previous financial year, includingamounts paid to them as directors of subsidiary companies was:

2007 2006Salary Pension Other Salary Pension Other

and fees Bonus contributions benefits Total and fees Bonus contributions benefits Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

ExecutiveD Wong1 – – – – – – – – – –C A E Spicer 175 88 – – 263 39 – – – 39Non-executiveD N Ablett 25 – – – 25 25 10 – – 35A B MacKay 25 – – – 25 1 – – – 1

225 88 313 65 10 – – 75

1 During the year ended 30 September 2007, £300,000 (2006: £300,000) was paid to Pacific Corporate Consultants Limited of which D Wong is a retained consultant.

On behalf of the Remuneration Committee

D N AblettNon-executive Director

19 December 2007

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Directors’ responsibilities 24MDY Healthcare plc Annual Report 2007

The directors are responsible for preparing the Annual Report andthe Group and parent company financial statements in accordancewith applicable law and regulations.

Company law requires the directors to prepare Group and parentcompany financial statements for each financial year. Under thatlaw they have elected to prepare both the Group and the parentcompany financial statements in accordance with IFRS as adoptedby the EU and applicable laws.

The Group and parent company financial statements are requiredby law and IFRS as adopted by the EU to present fairly the financialposition of the Group and the parent company and the performancefor that period; the Companies Act 1985 provides in relation to suchfinancial statements that references in the relevant part of that Actto financial statements giving a true and fair view are referencesto their achieving a fair presentation.

In preparing each of the Group and parent company financialstatements, the directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSas adopted by the EU; and

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Group and theparent company will continue in business.

The directors are responsible for keeping proper accountingrecords that disclose with reasonable accuracy at any time thefinancial position of the parent company and enable them to ensurethat its financial statements comply with the Companies Act 1985.They have a general responsibility for taking such steps as arereasonably open to them to safeguard the assets of the Groupand to prevent and detect fraud and other irregularities. Underapplicable law and regulations, the directors are also responsiblefor preparing a directors’ report, directors’ remuneration reportand Corporate Governance statement that comply with that lawand those regulations.

The directors’ are responsible for the maintenance and integrity ofthe corporate and financial information included on the Company’swebsite. Legislation in the UK governing the preparation anddissemination of financial statements may differ from legislationin other jurisdictions.

Disclosure of information to auditorsIn the case of each director, so far as each is aware, there is norelevant audit information of which the Company’s auditors areunaware. Each director has taken all the steps he needs to havetaken as a director in order to make himself aware of any relevantaudit information and to establish that the Company’s auditors areaware of that information.

AuditorsKPMG are the Company’s auditors. A resolution to appointKPMG LLP as auditors and authorise the directors to set theirremuneration will be proposed at the Annual General Meeting.

On behalf of the Board

D WongDirector

19 December 2007

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Independent auditor’s report 25MDY Healthcare plc Annual Report 2007

We have audited the Group and parent company financialstatements (the ’’financial statements’’) of MDY Healthcare plcfor the year ended 30 September 2007 which comprise theconsolidated income statement, the consolidated and parentcompany balance sheets, the consolidated and parent companycash flow statement, the consolidated and parent companystatements of recognised income and expense and the relatednotes. These financial statements have been prepared under theaccounting policies set out therein.

This report is made solely to the Company’s members, as a body,in accordance with section 235 of the Companies Act 1985.Our audit work has been undertaken so that we might state tothe Company’s members those matters we are required to state tothem in an auditor’s report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibilityto anyone other than the Company and the Company’s members asa body, for our audit work, for this report, or for the opinions wehave formed.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the Annual Report,the directors’ remuneration report and the financial statements inaccordance with applicable law and International Financial ReportingStandards (IFRS) as adopted by the EU are set out in the statementof directors’ responsibilities on page 24.

Our responsibility is to audit the financial statements and the partof the directors’ remuneration report to be audited in accordancewith relevant legal and regulatory requirements and InternationalStandards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statementsgive a true and fair view and whether the financial statements andthe part of the directors’ remuneration report to be audited havebeen properly prepared in accordance with the Companies Act1985 and, as regards the Group financial statements, Article 4of the IAS Regulation. We also report to you whether in our opinionthe information given in the directors’ report is consistent with thefinancial statements.

In addition we report to you if, in our opinion, the Company hasnot kept proper accounting records, if we have not received allthe information and explanations we require for our audit, or ifinformation specified by law regarding directors’ remunerationand other transactions is not disclosed.

We read the Annual Report and consider whether it is consistentwith the audited financial statements. We consider the implicationsfor our report if we become aware of any apparent misstatementswithin it. Our responsibilities do not extend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standardson Auditing (UK and Ireland) issued by the Auditing Practices Board.

An audit includes examination, on a test basis, of evidence relevantto the amounts and disclosures in the financial statements. It alsoincludes an assessment of the significant estimates and judgementsmade by the directors in the preparation of the financial statements,and of whether the accounting policies are appropriate to theGroup’s and Company’s circumstances, consistently applied andadequately disclosed.

We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessaryin order to provide us with sufficient evidence to give reasonableassurance that the financial statements are free from materialmisstatement, whether caused by fraud or other irregularity or error.In forming our opinion we also evaluated the overall adequacy ofthe presentation of information in the financial statements.

OpinionIn our opinion:

• the Group financial statements give a true and fair view, inaccordance with IFRS as adopted by the EU, of the state of theGroup’s affairs as at 30 September 2007 and of its loss for theyear then ended;

• the parent company financial statements give a true and fair view,in accordance with IFRS as adopted by the EU as applied inaccordance with the provisions of the Companies Act 1985, of thestate of the parent company’s affairs as at 30 September 2007;

• the financial statements have been properly preparedin accordance with the Companies Act 1985; and

• the information given in the directors’ report is consistentwith the financial statements.

KPMGChartered AccountantsRegistered Auditor

19 December 2007

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Consolidated income statementFor the year ended 30 September 2007


2007 2007 2007 2006 2006 2006Continuing Discontinued Continuing Discontinuedoperations operations Total operations operations Total

Notes £’000 £’000 £’000 £’000 £’000 £’000

Revenue 1 28 – 28 41 18,720 18,761Cost of sales – – – – (13,196) (13,196)

Gross profit 28 – 28 41 5,524 5,565Selling and distribution costs – – (2,092) (2,092)Administrative expenses 5 (1,628) (421) (2,049) (1,521) (4,225) (5,746)Research and development expenditure in the year – – – – (870) (870)

Results from operating activities (1,600) (421) (2,021) (1,480) (1,663) (3,143)Net change in fair value of financial assets at fair valuethrough profit or loss 9 (543) – (543) – – –Net gains on disposal of available for sale financial assetstransferred from equity 367 – 367 – – –Foreign exchange loss (877) – (877) – – –Financing income 6 628 – 628 268 14 282Financing costs 6 – – – (175) (395) (570)

Net finance (expense)/income (425) – (425) 93 (381) (288)

Loss before tax (2,025) (421) (2,446) (1,387) (2,044) (3,431)Income tax credit/(expense) 15 175 – 175 – (92) (92)

Loss after tax but before gain on discontinued operations (1,850) (421) (2,271) (1,387) (2,136) (3,523)Gain on sale of discontinued operations, net of tax 3 – – – – 2,121 2,121

Loss for the period (1,850) (421) (2,271) (1,387) (15) (1,402)

Attributable to:– Equity holders of the parent (2,271) (1,402)

Loss for the period (2,271) (1,402)

Basic and diluted loss per share 4 (13.05)p (2.97)p (16.02)p (12.66)p (0.14)p (12.80)p

The notes on pages 32 to 52 are an integral part of these consolidated financial statements.

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Consolidated statement ofrecognised income and expenseFor the year ended 30 September 2007


2007 2006Notes £’000 £’000

Gain on foreign currency translation – 126Defined benefit plan actuarial gains/(losses) – 156Net change in fair value of available for sale financial assets 9 896 97Deferred tax liability arising on net change in fair value of available for sale financial assets 15 (146) (29)Net change in fair value of available for sale financial assets transferred to profit and loss (367) –

Income and expenses recognised directly in equity in the year 383 350Loss for the financial year (2,271) (1,402)

Total recognised income and expense for the year (1,888) (1,052)Attributable to– Equity holders of the Company (1,888) (1,052)

Total recognised income and expenses for the period (1,888) (1,052)


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Consolidated balance sheetAs at 30 September 2007


2007 2006Notes £’000 £’000

AssetsNon-current assetsProperty, plant and equipment 8 105 68Investments 9 6,454 1,274

Total non-current assets 6,559 1,342

Current assetsInvestments 9 2,904 –Trade and other receivables 10 1,470 545Cash and cash equivalents 11 5,090 17,159

Total current assets 9,464 17,704

Total assets 16,023 19,046

LiabilitiesNon-current liabilitiesDeferred tax liabilities 15 – 29

Total non-current liabilities – 29Current liabilitiesTrade and other payables 12 493 2,174

Total current liabilities 493 2,174

Total liabilities 493 2,203

Net assets 15,530 16,843

EquityIssued capital 18 7,020 7,013Share premium account 17 101,419 100,851Other reserves 17 22,993 22,993Shares issuable 17 – 63Retained earnings 17 (115,902) (114,077)

Total equity 15,530 16,843


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Company balance sheetAs at 30 September 2007


2007 2006Notes £’000 £’000

AssetsNon-current assetsProperty, plant and equipment 8 105 68Investments 9 6,455 1,274

Total non-current assets 6,560 1,342

Current assetsInvestments 9 2,904 –Trade and other receivables 10 1,560 541Cash and cash equivalents 11 5,090 17,159

Total current assets 9,554 17,700

Total assets 16,114 19,042

LiabilitiesNon-current liabilitiesDeferred tax liabilities 15 – 29

Total non-current liabilities – 29Current liabilitiesTrade and other payables 12 455 2,137

Total current liabilities 455 2,137

Total liabilities 455 2,166

Net assets 15,659 16,876

EquityIssued capital 18 7,020 7,013Share premium account 17 101,419 100,851Other reserves 17 3,132 3,132Shares issuable 17 – 63Retained earnings 17 (95,912) (94,183)

Total equity 17 15,659 16,876


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Consolidated cash flow statementFor the year ended 30 September 2007


2007 2006£’000 £’000

Cash flows from operating activitiesLoss for the year (2,271) (3,523)Adjustments for:Depreciation and amortisation 17 509Income tax (credit)/expense (175) 92Net change in fair value of financial assets at fair value through profit or loss 543 –Net gains on disposal of available for sale financial assets transferred from equity (367) –Foreign exchange losses on cash held 910 –Impairment of property, plant and equipment – 1,001Impairment of intangibles – 219Share based payments – (9)Interest receivable (628) (282)Financing costs – 570

Operating loss before changes in working capital and provisions (1,971) (1,423)Increase in inventory – (28)Increase in trade and other receivables (925) (70)(Decrease)/increase in trade and other payables (1,681) 1,472Increase in pension – 5

Cash used by operations (4,577) (44)Current tax paid – –Interest paid – (567)

Net cash outflow from operating activities (4,577) (611)

Cash flows from investing activitiesInterest received 628 282Purchase of financial asset at fair value through the profit and loss (10,150) (1,177)Purchase of intangibles – (6)Purchase of property, plant and equipment (54) (324)Proceeds from the sale of discontinued activities (net of costs of sale and cash held by discontinued activities (note 3)) – 21,808Proceeds from the sale of financial assets at fair value through the profit and loss 1,666 –Proceeds from the sale of available for sale financial assets 753 –

Net cash (outflow)/inflow from investing activities (7,157) 20,583

Cash flows from financing activitiesProceeds from issue of share capital 575 4,825Bank loan repayment – (6,237)

Net cash inflow/(outflow) from financing activities 575 (1,412)

(Decrease)/increase in cash and cash equivalents (11,159) 18,560Cash and cash equivalents at 1 October 17,159 (1,401)Effect of exchange rate fluctuations on cash held (910) –

Cash and cash equivalents at end of year 5,090 17,159


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Company cash flow statementFor the year ended 30 September 2007


2007 2006£’000 £’000

Cash flows from operating activitiesLoss for the year (2,175) (10,373)Adjustments for:Depreciation and amortisation 17 –Income tax expense (175) –Net change in fair value of financial assets at fair value through profit or loss 543 –Net gains on disposal of available for sale financial assets transferred from equity (367) –Foreign exchange losses on cash held 910 –Loss on sale of subsidiaries – 5,393Impairment of investments in subsidiary undertakings – 4,264Impairment of amounts owed by subsidiary undertakings – 846Share based payments – (9)Interest receivable (628) (619)Financing costs – 645

Operating loss before changes in working capital and provisions (1,875) (357)(Increase)/decrease in trade and other receivables (1,019) 14,663(Decrease)/increase in trade and other payables (1,682) 1,340

Cash (used by)/generated from operations (4,576) 15,646Interest paid – (645)

Net cash inflow/(outflow) from operating activities (4,576) 15,001

Cash flows from investing activitiesInterest received 628 619Purchase of financial assets at fair value through the profit and loss (10,151) (1,177)Purchase of property, plant and equipment (54) (68)Proceeds from the sale of subsidiaries (net) – 49Proceeds from the sale of financial assets at fair value through the profit and loss 1,666 –Proceeds from the sale of available for sale financial assets 753 –

Net cash outflow from investing activities (7,158) (577)

Cash flows from financing activitiesProceeds from issue of share capital 575 4,825

Net cash inflow from financing activities 575 4,825

(Decrease)/increase in cash and cash equivalents (11,159) 19,249Cash and cash equivalents at 1 October 17,159 (2,090)Effect of exchange rate fluctuations on cash held (910) –

Cash and cash equivalents at end of year 5,090 17,159


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Statement of accounting policies 32MDY Healthcare plc Annual Report 2007

Reporting entityMDY Healthcare plc (“the Company”) is a Public Limited Company (traded on AIM) incorporated in and domiciled in the United Kingdom.The address of the Company’s registered office is 23 Bridge Street, Ellon, Aberdeenshire, Scotland. The consolidated financial statementsof the Company as at and for the year ended 30 September 2007 comprise the Company and its subsidiaries (together referred to as “theGroup”). The Group is a healthcare sector specialised investment company.

Basis of preparationa) Statement of complianceThe Group and parent company financial statements have been prepared and approved by the directors in accordance with InternationalFinancial Reporting Standards (“IFRS”) as adopted by the EU. On publishing the parent company financial statements here together withthe Group financial statements, the Company is taking advantage of the exemption in section 230 of the Companies Act 1985 not topresent its individual income statement and related notes that form a part of these approved financial statements.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in theseconsolidated financial statements.

The financial statements were approved by the Board of directors on 19 December 2007.

The financial statements have been prepared on the going concern basis.

b) Basis of measurementThe consolidated financial statements have been prepared on the historical cost basis except for the following:

• Financial investments at fair value through profit or loss account are measured at fair value;

• Available for sale financial assets are measured at fair value; and

• Share based payments under the Group’s scheme are measured as fair value at grant date.

c) Functional and presentation currencyThe financial statements are presented in pounds sterling, rounded to the nearest thousand, which is the Company’s functional currency.Functional currencies within the Group consist primarily of pounds sterling.

d) Use of estimates and judgementsThe preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions thataffect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differfrom these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the periodin which the estimates are revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that havethe most significant effect on the amounts recognised in the financial statements is included in note 9 – investments.

Significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in these accounting policies, and have beenapplied consistently by Group entities.

Basis of consolidationThe consolidated financial statements include the financial statements of MDY Healthcare plc and its subsidiary undertakings prepared upto 30 September 2007. Subsidiaries are those entities over which the Group has the power to control the operating and financial policy soas to obtain economic benefit from its activities. Subsidiaries are consolidated from the date on which control is transferred to the Groupand are no longer consolidated from the date that control ceases. The acquisition method of accounting is applied for acquisitions with fairvalues being attributed to the identifiable net assets acquired. Goodwill arising on acquisition is dealt with as set out below.

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing theconsolidated financial statements.

Revenue and revenue recognitionRevenue represents the fair value amounts (excluding value added tax) derived from the provision of goods and services to third partycustomers during the year together with royalties.

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Revenue and revenue recognition (continued)Non-refundable royalty income and licence fees are credited to the income statement when earned, in accordance with the termsprescribed in each respective licence agreement, and when the Group has no future obligations pursuant to that royalty or licence fee.Refundable royalties and licence fees are treated as deferred income until such time as they are no longer refundable and not subjectto future obligations. Revenue from the sale of medical equipment and supplies is recognised upon shipment.

Employee benefitsa) Pensions – defined contribution schemesA defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity andwill have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans arerecognised as an employee benefit expense in profit or loss when they are due. Prepaid contributions are recognised as an asset to theextent that a cash refund or a reduction in future payments is available.

b) Share based payment transactionsThe share option programme allows Group employees to acquire shares of the Company. The fair value of options granted under theprogramme is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread overthe period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measuredat grant date using the Black-Scholes formula, taking into account the terms and conditions upon which the options were granted.

Upon transition to IFRS, and in accordance with the exemption allowed on transition to IFRS, the fair value calculations in respect of sharebased payments under IFRS 2, Share Based Payments, have only been applied in respect of share options granted after 7 November 2002that have not vested by 1 January 2005. The Group currently has no such share options outstanding. A number of share options areoutstanding which were granted after 7 November 2002 which had vested by 1 January 2005.

TaxIncome tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that itrelates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reportingdate, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assetsand liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the followingtemporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affectsneither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent thatit is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differencesarising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporarydifferences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred taxassets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxeslevied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities andassets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporarydifference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longerprobable that the related tax benefit will be realised.

Foreign currenciesTransactions in foreign currencies are translated to the respective functional currencies of Group entities at the rate of exchange at the dateof the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functionalcurrencies at the rates of exchange prevailing at that date. The foreign currency gain or loss taken to the income statement on monetaryitems is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interestand payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period.Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functionalcurrency at the exchange rate that the fair value was determined. Foreign currency differences arising on retranslation are recognisedin the income statement, except for differences arising on the retranslation of available for sale equity instruments.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translatedto pounds sterling at the foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations aretranslated at the average rates of exchange during the year where the rates are a reasonable approximation of the actual rates that applied.Exchange differences arising on translation of opening net assets and results of foreign operations are recognised directly to equity,in a translation reserve. Those arising after the transition date to IFRS are released to the income statement upon disposal of the relatedforeign operation.

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Statement of accounting policiescontinuedFor the year ended 30 September 2007


Property, plant and equipmentItems of property, plant and equipment are measured at cost, net of accumulated depreciation and any provision for impairment.

Depreciation is provided by the Group to write off the cost less the estimated residual value of property, plant and equipment on a straightline basis over their estimated useful economic lives as follows:

• Leasehold improvements: over the shorter of their useful lives and the term of the relevant lease

• Plant, equipment, fixtures and fittings: three to seven years

Depreciation methods, useful lived and residual values are reassessed at the reporting date.

Leased assetsLeases where the lessor retains substantially all the risks and benefits of ownership of the assets are classified by the Group, as lessee,as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight line basis over thelease term.

GoodwillAll business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisitionof subsidiaries, joint ventures and associates. In respect of business acquisitions that have occurred since 1 October 2004, goodwillrepresents the difference between the cost of acquisition and the fair value of the net identifiable assets acquired. In respect of acquisitionsprior to this date, goodwill is included on the basis of its deemed cost, i.e. original cost less accumulated amortisation since acquisitionup to 30 September 2004, which represents the amount recorded under UK GAAP. Goodwill is allocated to cash generating units andis now no longer amortised but is tested annually for impairment at a consistent time each year.

Business combinationsThe purchase method of accounting is employed in accounting for the acquisition of subsidiaries by the Group. The Group has availedof the exemption under IFRS 1, whereby business combinations prior to the IFRS transition date of 1 October 2004 are not restated.IFRS 3, Business Combinations has been applied with effect from the transition date of 1 October 2004 and goodwill amortisation ceasedfrom that date.

Research and developmentExpenditure on research activities, with the prospect of gaining new scientific or technical knowledge and understanding, was recognisedas an expense in the income statement.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantiallyimproved products, is expensed as incurred unless the criteria for recognition of an internally generated intangible are met.

The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads.Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Other developmentexpenditure is recognised in the income statement as an expense as incurred.

Financial instrumentsFinancial assets within the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans or receivables,held to maturity investments or available for sale financial assets. When financial assets are recognised initially they are measured at fairvalue, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction cost.

Financial assets at fair value through profit or lossFollowing the conclusion of the Group’s change in strategic direction and operations, the Group now operates as a strategic investor infinancial investments. Following this change from 1 October 2006, the Group now classifies equity investments, purchased subsequentto the introduction of this policy, as financial assets at fair value through profit or loss. An instrument is classified at fair value through profitor loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition attributable transaction costs arerecognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changestherein are recognised in profit or loss.

Available-for-sale financial assetsThe Group’s investments in equity securities held prior to the change in strategic direction are classified as available-for-sale financialassets. On initial recognition they were measured at fair value plus incremental direct costs. Subsequently they are measured at fair valueand changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items, arerecognised directly in equity. When the investments are derecognised or sold, the cumulative gain or loss previously recognised directlyin equity is recognised in the income statement.

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Valuation of investmentsThe fair values of quoted investments are based on quoted bid prices at the balance sheet date. The fair value of unlisted investments isestablished using International Private Equity and Venture Capital Guidelines (“IPEVCG”). The valuation methodology used most commonlyby the Group is the “price of recent investment” contained in the IPEVCG valuation guidelines.

Recognition of financial assetsThe purchase or sale of financial assets is recognised using trade date accounting for all financial assets at fair value through profit or loss.

Impairmenti) Financial assetsA financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financialasset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimatedfuture cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount,and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respectof an available-for-sale financial asset is calculated by reference to its fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessedcollectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available for sale financial asset recognisedpreviously in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.For financial assets measured at amortised cost the reversal is recognised in profit or loss. For available-for-sale financial assets that areequity securities, the reversal is recognised directly in equity.

ii) Non-financial assetsThe carrying amounts of the Group’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date todetermine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated ateach reporting date.

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are groupedtogether into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflowsof other assets or groups of assets (the “cash generating unit”). The goodwill acquired in a business combination, for the purpose ofimpairment testing, is allocated to cash generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount.Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash generating units are allocated first toreduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit(group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods areassessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if therehas been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent thatthe asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,if no impairment loss had been recognised.

Discontinued operationsA discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical areaof operations that has been disposed of or is held for sale, or is subsidiary acquired exclusively with a view for resale. Classification of adiscontinued operation occurs upon disposal or, if earlier, when the operation meets the criteria to be classified as held for sale. When anoperation is classified as a discontinued operation the comparative income statement is restated as if the operation has been discontinuedfrom the start of that comparative period.

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Statement of accounting policiescontinuedFor the year ended 30 September 2007


Cash and cash equivalentsCash and cash equivalents, comprise cash balances and call deposits, including bank deposits of less than three months maturity.Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a componentof cash and cash equivalents for the purpose of the cash flows statement.

Interest-bearing borrowingsInterest-bearing borrowings are recognised initially at fair value less attributable transactions costs. Subsequent to initial recognition,interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in theincome statement over the period of the borrowings on an effective interest rate basis.

Segment reportingA segment is a distinguishable component of the Group that is engaged either in providing products or services (class of businesssegment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risksand rewards that are different from those other segments. The Group has identified the geographical segment as the primary segment andthe business segment as the secondary segment.

Earnings per shareThe Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profitor loss attributable to ordinary Shareholders of the Company by the weighted average number of ordinary shares outstanding during theperiod. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary Shareholders and the weighted average numberof ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

New standards and interpretations not yet adoptedA number of new standards, amendments to standards and interpretations are not yet effective for the year ended 30 September 2007,and have not been applied in preparing these consolidated financial statements:

• Amendments to IAS 1, Capital Disclosures: This amendment will require additional disclosures regarding the capital structure of theCompany and Group.

• IFRS 7, Financial Instruments: Disclosures: This standard updates and extends the existing disclosure requirements if IAS 32 and willrequire significant additional disclosures relating to risk management and processes.

• IFRS 8, Operating Segments introduces the “management approach” to segment reporting. IFRS 8, which becomes mandatory for theGroup’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewedby the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them.Currently the Group presents segment information in respect of its business and geographical segments (see note 1).

• IFRIC 11, IFRS 2, Group and Treasury Share Transactions requires a share based payment arrangement in which an entity receivesgoods or services as consideration for its own equity instruments to be accounted for as an equity settled share based paymenttransaction, regardless of how the equity instruments are obtained. IFRIC 11 will become mandatory for the Group’s 2008 financialstatements, with retrospective application required. It is not expected to have any impact on the consolidated financial statements.

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37MDY Healthcare plc Annual Report 2007Notes to the accounts

For the year ended 30 September 2007

1 Revenue and segment information

On 11 May 2006, the Group sold its trading subsidiaries (namely Hypoguard Limited and Hypoguard USA Inc) and ceased to trade in theDiagnostics and Healthcare worker safety product business. The Group now has surplus cash which it is investing in healthcare relatedinvestments. As a result, all of the Group’s healthcare services are classed as discontinuing and investment activities classed as continuing.In the year ended 30 September 2006 an amount of £21,808,000 was received in connection with the sale of discontinued activities.

Prior to the 2006 disposal, the Group’s income was primarily sourced from the United States, and operating in two business segments:

• Diagnostics

• Healthcare worker safety products

The Group’s operations and income are now predominately UK based.

Primary reporting format – geographical segmentsGeographically

2007 2007Continuing Discontinued 2007 2006operations operations Total Total

£’000 £’000 £’000 £’000

RevenueUnited Kingdom 28 – 28 117Rest of Europe – – – 1,157United States – – – 16,754Rest of World – – – 733

28 – 28 18,761

Loss on ordinary activities before taxationUnited Kingdom (2,653) (275) (2,928) (2,061)United States – (145) (145) 1,714Rest of World – (1) (1) (19)Central costs – – – (2,777)

(2,653) (421) (3,074) (3,143)Financing costs (net) 628 – 628 (288)

(2,025) (421) (2,446) (3,431)

Assets by location of undertakingUnited Kingdom 16,023 – 16,023 18,152United States – – – 894

16,023 – 16,023 19,046

Liabilities by location of undertakingUnited Kingdom (493) – (493) (2,100)United States – – – (103)

(493) – (493) (2,203)

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Notes to the accountscontinuedFor the year ended 30 September 2007


1 Revenue and segment information continued2007 2006£’000 £’000

Capital expenditure by location of undertakingUnited Kingdom 54 259United States – 71

54 330Depreciation and amortisation by location of undertakingUnited Kingdom 17 213United States – 296

17 509

Geographical revenue is shown by location of customers. Geographic revenue by location from which products and services are suppliedis not materially different other than for the rest of Europe and rest of world customers which were primarily supplied from the United States.

Secondary reporting format – business segmentsClass of business

2007 2006£’000 £’000

RevenueInvesting activities 28 –Diagnostics – 17,781Healthcare worker safety products – 928Other – 52

28 18,761

Loss on ordinary activities before taxationInvesting activities (2,563) –Diagnostics (421) (339)Healthcare worker safety products – (27)Central costs – (2,777)

(3,074) (3,143)Financing costs (net) 628 (288)

(2,446) (3,431)

Assets by class of businessInvesting activities 16,023 19,046Diagnostics – –Healthcare worker safety products – –

16,023 19,046

Liabilities by class of businessInvesting activities (493) (2,203)Diagnostics – –Healthcare worker safety products – –

(493) (2,203)

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2 Loss before taxation

The following items have been included in arriving at loss before taxation:

Group2007 2006£’000 £’000

Inventories:– Cost of inventories recognised as an expense (included in cost of sales) – 11,929– Impairment – 152Depreciation of property, plant and equipment 17 494Impairment of property, plant and equipment – 1,001Amortisation of intangible assets – 8Impairment of intangible assets – 219Other operating lease rentals payable:– Plant and machinery – 34– Property 156 78Research and development expenditure – 870Trade receivables impairment – 38

Services provided by the Group’s auditor and network firmsDuring the year the Group (including its overseas subsidiaries) obtained the following services from the Group’s auditor at costsdetailed below:

Group2007 2006£’000 £’000

Audit services:– Statutory audit 35 45Further assurance services – 75Tax services:– Compliance services 44 33– Advisory services – 57

79 210

3 Gain on sale of discontinued operations

a) Sale of diagnostic operationsOn 7 March 2006, the Boards of the Company and Medisys USA, Inc signed a term sheet with ARKRAY, Inc of Kyoto, Japan under theterms of which ARKRAY was to purchase the entire issued share capital of Hypoguard Limited and Hypoguard USA Inc (together with itswholly owned subsidiary Hypoguard Medical Products, Inc) for a cash consideration of $21.7 million (£11.9 million) and the repayment ofintra group loans of $21.1 million (£11.5 million). The total consideration received was $42.8 million (£23.4 million). The transaction closedon 11 May 2006. No tax liability arose on this transaction given the availability of group relief. In the year ended 30 September 2006 a gainon sale of £1,553,000 was recorded.

On 11 May 2006, the Group ceased to trade in the diagnostics business. The Group now has surplus cash which it plans to invest inhealthcare related investments. Thus all of the Group’s previous trade associated with healthcare services is classed as discontinued, andtrade associated with investment activities classed as continuing.

b) Sale of healthcare worker safety products businessOn 10 April 2006, the Group sold its Futura Safety businesses, together with certain assets used by Hypoguard USA, Inc in carrying outthat business, to Merit Medical Systems Inc (“Merit”). The consideration payable was $750,000 (£429,000) on closing and an additional$500,000 (£267,000) payable upon Merit achieving sales of at least 600,000 units of safety scalpels in any six month period from the dateof the closing of the agreement until 18 months from the date of closing. At 30 September 2006, Merit informed the Group that thisthreshold had been achieved and that the additional $500,000 consideration was payable. In the year ended 30 September 2006 a gainon sale of £568,000 was recorded.

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4 Loss per share

2007 2006

BasicNet loss for the financial period (£’000) (2,271) (1,402)Weighted average number of shares outstanding (’000) 14,179,049 10,951,260Basic loss per share (pence) (16.02) (12.80)

The basic net loss per ordinary share is calculated using a numerator of the net loss for the financial year and a denominator of theweighted average number of ordinary shares in issue for the financial year. The diluted net loss per ordinary share is calculated using anumerator of the net loss for the financial year and a denominator of the weighted average number of ordinary shares and adjusting for theeffect of all potentially dilutive shares, including share options and warrants, assuming they are converted. There is no difference for 2007and 2006 between the basic net loss per share and the diluted net loss per share as ordinary share equivalents from share options havebeen excluded from the computation as their effects are anti-dilutive. Earnings per share for 2006 have been adjusted to reflect the shareconsolidation referred to in Note 18.

Weighted average number of ordinary shares2007 2006’000 ’000

Issued ordinary shares at 1 October 13,984,223 10,735,100Effect of shares issued in the financial period 194,826 216,160

Weighted average number of ordinary shares at 30 September 14,179,049 10,951,260

5 Administration expenses

2007Included in administration costs for the year ended 30 September 2007 are costs related to operations discontinued in 2006 related to thewrite down of a receivable, arising on the disposal of operations in prior year, of £89,000 and legal and accounting costs of £332,000.

2006Included in administration expenses for the year ended 30 September 2006 is an impairment loss of £1,331,000 with respect to assets andliabilities sold in relation to Hypoguard Limited (discontinued operation). This consisted of write downs to property, plant and equipment(£977,000), intangible assets (£202,000) and inventory (£152,000) to their recoverable amount.

6 Finance costs – net2007 2006£’000 £’000

Financing costs:Interest payable on bank loans – (312)Arrangement fees payable on bank loans – (102)Interest payable on amount payable on redemption of preference shares – (52)Cost of committed share finance facility – (101)Net finance costs on employee benefit liabilities – (3)

Finance expense – (570)

Interest income on bank deposits 628 282

Finance costs – net 628 (288)

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7 Analysis of changes in net funds

Group and CompanyExchange rate

2006 Cash flow movements 2007£’000 £’000 £’000 £’000

Cash and cash equivalents 17,159 (11,159) (910) 5,090Bank overdraft – – – –

Total 17,159 (11,159) (910) 5,090

8 Property, plant and equipment

Group and Company – 2007 Plant,equipment

Leasehold fixtures andproperty fittings Total

£’000 £’000 £’000

CostAt 1 October 2005 1,474 5,576 7,050Additions 79 245 324Disposals (1,442) (4,661) (6,103)Assets written down – (1,001) (1,001)Translation adjustments (52) (150) (202)

At 30 September 2006 59 9 68

Additions 6 48 54

At 30 September 2007 65 57 122

DepreciationAt 1 October 2005 1,054 2,620 3,674Charge for the period 92 409 501Disposals (1,106) (2,908) (4,014)Translation adjustments (40) (121) (161)

As at 30 September 2006 – – –Charge for period 6 11 17

At 30 September 2007 6 11 17

Net book valueAt 30 September 2007 59 46 105

At 30 September 2006 59 9 68

At 30 September 2005 420 2,956 3,376

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8 Property, plant and equipment continued

Company – 2006 Plant,equipment

Leasehold fixtures andproperty fittings Total

£’000 £’000 £’000

CostAt 1 October 2005 – – –Additions 59 9 68

At 30 September 2006 59 9 68

DepreciationAt 1 October 2005 – – –Charge for period – – –

At 30 September 2006 – – –

Net book valueAt 30 September 2006 59 9 68

At 30 September 2005 – – –

9 InvestmentsGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

Subsidiary undertakings (i) – – 1 –Available for sale financial assets (ii) 1,417 1,274 1,417 1,274Financial assets designated at fair value through profit or loss (iii) 5,037 – 5,037 –Financial assets held for trading at fair value through profit or loss (iv) 2,904 – 2,904 –

9,358 1,274 9,359 1,274

i) Subsidiary undertakingsGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

At 1 October 2006 – – – 9,706Additions – – 1 –Assets written down – – – (4,264)Disposal – – – (5,142)

At 30 September 2007 – – 1 –

During the year the Company purchased 80.1% of the share capital of Project Acorn Limited for £801.

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9 Investments continued

Details of subsidiary undertakings are as follows:Country of

registration or Principal Class of %Subsidiary incorporation activity shares held Holding

Biocure Limited Scotland Dormant Ordinary shares 100.0Medisys America Limited (formerly Hypoguard America Limited) England & Wales Holding company Ordinary shares 100.0Medisys Safety Products Limited England & Wales Holding company Ordinary shares 100.0Medisys Asia Pacific (Pte) Limited Singapore In liquidation Ordinary shares 100.0Medisys USA Inc. United States of America Holding company Ordinary shares 100.0Project Acorn Limited England & Wales Dormant Ordinary shares 80.1

ii) Available for sale financial assetsGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

At 1 October 2006 1,274 – 1,274 –Additions at fair value:– Cozart plc (1,350,000 shares) – 386 – 386– AOI Medical Inc. (432,865 shares) – 791 – 791Revaluation 896 97 896 97Disposals (753) – (753) –

At 30 September 2007 1,417 1,274 1,417 1,274

In line with the Group’s accounting policy, the gain on revaluation of available for sale financial assets is recognised in the consolidatedstatement of recognised income and expense until that financial asset is disposed of.

£’000

Fair value as at 19 December 2007 967

iii) Financial assets designated at fair value through profit or lossGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

At 1 October 2006 – – – –Additions at cost: 5,696 – 5,696 –Revaluation 75 – 75 –Disposals (734) – (734) –

At 30 September 2007 5,037 – 5,037 –

£’000

Fair value as at 19 December 2007 4,481

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9 Investments continued

iv) Financial assets held for trading at fair value through profit or lossGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

At 1 October 2006 – – – –Additions at cost: 4,454 4,454Revaluation (618) – (618) –Disposals (932) – (932) –

At 30 September 2007 2,904 – 2,904 –

£’000

Fair value as at 19 December 2007 2,223In addition, investments with a value of £24,000 were sold during the period from 1 October 2007 to 19 December 2007.

10 Trade and other receivables

Group Company2007 2006 2007 2006£’000 £’000 £’000 £’000

Amounts falling due within one year:Trade receivables 1,321 105 1,321 105Amounts owed by group companies – – 90 –Other trade receivables 121 116 121 112Prepayments 28 324 28 324

1,470 545 1,560 541

Included in trade receivables at 30 September 2007 was £1.3 million in relation to the sale of financial instruments disposed of (2006: £Nil)which has been received since the year end.

11 Cash and cash equivalentsGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

Cash and cash equivalentsCash at bank and in hand 459 381 459 381Short term bank deposits 4,631 16,778 4,631 16,778

5,090 17,159 5,090 17,159

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12 Trade and other payablesGroup Company

2007 2006 2007 2006£’000 £’000 £’000 £’000

Trade payables 120 175 82 162Other tax and social security payable 14 9 14 9Other creditors 9 235 9 235Accruals 350 1,755 350 1,731

493 2,174 455 2,137

13 Employees and directors

Staff costs for the Group during the year:2007 2006£’000 £’000

Wages and salaries 342 2,955Social security costs 41 192Other pension costs 11 143

394 3,290

The average monthly number of people (including directors) employed:Number of employees2007 2006

Management and administration 5 46Research – 8Production and sales – 40

5 94

Directors2007 2006£’000 £’000

Aggregate emoluments 175 75Company contributions to money purchase pension schemes – –

175 75

During the year ended 30 September 2007, £300,000 (2006: £300,000) was paid to Pacific Corporate Consultants Limited of which DWong, a director, is a retained consultant.

The aggregate of emoluments and amounts receivable under long term incentive schemes of the highest paid director was £263,000(2006: £39,000).

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14 Related party transactions

Transactions with key management personnel2007During the year ended 30 September 2007, £300,000 (2006: £300,000) was paid to Pacific Corporate Consultants Limited of which D Wongis a retained consultant. A bonus of £88,000 was paid to Charles Spicer during the year. No bonus payments were made to any otherdirector. Total director remuneration for the year ended 30 September 2007 is set out on page 23.

2006Bonuses of £252,000 were paid to certain members of management upon the successful sale of subsidiaries disposed of during the yearended 30 September 2006. In addition, £10,000 was paid to D N Ablett, a Non-executive director, as remuneration for additional work thathe undertook in relation to the sale of the operating businesses. These costs are included in costs of disposal in note 3. With the exceptionof D N Ablett, all such management remained with the subsidiaries disposed of.

Transactions with group companiesThe Company entered into the following transactions with its subsidiary companies:

Transactions during the year2007 2006£’000 £’000

Interest receivable – 148Balances owed by subsidiary undertakings 90 –Balances owed to subsidiary undertakings – –

15 Taxation

Group and Companyi) Income tax expenseThe components of the income tax expense for the years ended 30 September 2007 and 2006 were as follows:

2007 2006£’000 £’000

Current tax expenseUK Corporation tax – –US State taxes – 92Deferred tax expenseArising on the revaluation of available-for-sale financial assets (see below) (29) 29

Total income tax (credit)/expense for the Group (29) 121

- Recognised in the income statement (175) 92

- Recognised directly in equity 146 29

(29) 121

No charge to UK corporation arises due to losses in the current year and losses carried forward from previous periods. The charge in thecurrent year is £Nil (2006: credit of £92,000) relates solely to US state taxes.

The Group has an unrecognised deferred tax asset at 30 September 2007 of £4,853,000 (2006: £4,804,000). The majority of the deferred taxasset relates to tax losses carried forward at 30 September 2007 which have not been recognised in line with the Group’s accounting policy.

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15 Taxation continued

ii) Deferred tax liabilityIn 2007 a deferred tax liability was recognised following the revaluation of available for sale financial assets held.

Movement in temporary differences during the yearBalance at Recognised Balance at1 October in profit Recognised 30 September

2006 and loss in equity 2007

Financial instruments 29 (175) 146 –

16 Loss attributable to MDY Healthcare plc

The loss for the period dealt with in the accounts of the parent company, MDY Healthcare plc was £2,175,000 (2006: £10,373,000 loss).

17 Reconciliation of movements in equity2007 2006£’000 £’000

Total recognised income and expense for the period (1,888) (1,121)Share based payments – (9)Issued and issuable share capital including premium, less expenses 575 4,978

Net (decrease)/increase in equity (1,313) 3,848Opening equity 16,843 12,995

Closing equity 15,530 16,843

i) Equity – GroupIssued Share Profitshare premium Shares and loss Other

capital account issuable account reserves Total£’000 £’000 £’000 £’000 £’000 £’000

Equity at 1 October 2005 5,368 97,581 – (112,994) 23,040 12,995Adjustment for impact of first time adoption of IAS 32 and IAS 39 – – – (69) – (69)Loss for the year – – – (1,402) – (1,402)Foreign exchange – – – – 126 126Actuarial gains – – – 156 – 156Revaluation gain – – – 97 – 97Deferred tax on revaluation gains – – – (29) – (29)Transfer of share option reserve upon cancellation of options – – – 164 (164) –Share based payments – – 63 – (9) 54Share issues 1,624 3,270 – – – 4,894IAS 39 adjustment 21 – – – – 21

Equity at 30 September 2006 7,013 100,851 63 (114,077) 22,993 16,843Loss for the year – – – (2,271) – (2,271)Revaluation gain – – – 529 – 529Deferred tax on revaluation gains – – – (146) – (146)Transfer of shares issuable reserve on cancellation of finance facility – – (63) 63 – –Share issues 7 568 – – – 575

Equity at 30 September 2007 7,020 101,419 – (115,902) 22,993 15,530

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17 Reconciliation of movements in equity continued

ii) Equity – CompanyIssued Share Profitshare premium Shares and loss Other

capital account issuable account reserves Total£’000 £’000 £’000 £’000 £’000 £’000

Equity at 1 October 2005 5,368 97,581 – (83,538) 3,305 22,716Loss for the year – – – (10,373) – (10,373)Foreign exchange – – – (504) – (504)Revaluation gain – – – 97 – 97Deferred tax on revaluation gains – – – (29) – (29)Transfer of share option reserve upon cancellation of options – – – 164 (164) –Share based payments – – 63 – (9) 54Share issues 1,624 3,270 – – – 4,894IAS 39 adjustment 21 – – – – 21

Equity at 30 September 2006 7,013 100,851 63 (94,183) 3,132 16,876Loss for the year – – – (2,175) – (2,175)Revaluation gain – – – 529 – 529Deferred tax on revaluation gains – – – (146) – (146)Transfer of shares issuable reserve on cancellation of finance facility – – (63) 63 – –Share issues 7 568 – – – 575

Equity at 30 September 2007 7,020 101,419 – (95,912) 3,132 15,659

iii) Other reserves – GroupCapital Share Currency

redemption Merger option translation Otherreserve reserve reserve reserve reserves Total

£’000 £’000 £’000 £’000 £’000 £’000

Other reserves at 1 October 2005 20 19,606 173 (7) 3,248 23,040Exchange – – – 126 – 126Share based payments – – (9) – – (9)Transfer of share option reserve upon cancellation of options – – (164) – – (164)

Other reserves at 30 September 2006 20 19,606 – 119 3,248 22,993Exchange – – – – – –

Reserves at 30 September 2007 20 19,606 – 119 3,248 22,993

Other reserves relate to the cancellation of the Company’s share premium account in November 1995.

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17 Reconciliation of movements in equity continued

iv) Reserves – CompanyCapital Share

redemption option Specialreserve reserve reserve Total

£’000 £’000 £’000 £’000

Other reserves at 1 October 2005 20 173 3,112 3,305Share based payments – (9) – (9)Transfer of share option reserve upon cancellation of options – (164) – (164)

Other reserves at 30 September 2006 20 – 3,112 3,132

Reserves at 30 September 2007 20 – 3,112 3,132

18 Called up share capital

Group and CompanyAllotted, called up

Authorised and fully paid

2007 2006 2007 2006Number Number £’000 £’000

Ordinary shares of 1 pence each (pre share reorganisation) – 1,000,000,000 – 7,013Ordinary shares of 1 pence each (post share reorganisation) 314,773,073 – 146 –Deferred shares of 49 pence each (post share reorganisation) 13,984,223 – 6,852 –

6,999 7,013

Number of ordinary shares in issue2007’000

Ordinary shares of 1 pence each issued (pre share reorganisation) 701,355

Ordinary shares of 1 pence each (post share reorganisation) 13,984Ordinary shares of 1 pence issued during the year (post share reorganisation) 639

Total ordinary shares of 1 pence each (post share reorganisation) 14,623

On 29 March 2007, MDY Healthcare posted a circular to shareholders setting out various resolutions, which were subsequently passedat the Annual General Meeting held on 4 May 2007. The resolutions included, inter alia, a share capital reorganisation, leading to theconsolidation of the Company’s shares equating to one new ordinary share for every 50 existing shares held. In order to facilitate the sharecapital reorganisation, 23 (pre share reorganisation) ordinary shares were issued at par on 29 March 2007. The 13,984,223 new ordinaryshares of 1 pence each were admitted to trading on AIM on 8 May 2007.

At the same time, the deferred shares were created as part of the share capital reorganisation. Each ordinary shareholder at the time ofthe share capital reorganisation received one deferred share of 49 pence for every 50 existing ordinary shares held. This resulted in thecreation of 13,984,223 new deferred shares. The rights attaching to the deferred shares, which are not admitted to trading on any market orexchange, are minimal. The deferred shares are incapable of transfer. The deferred shares do not confer on their holders any right to receivenotice of any general meeting of the Company nor any right to attend, speak or vote at any such meeting. The deferred shares will notentitle their holders to receive any dividend or other distribution and shall on a return of assets on a winding up of the Company entitle theholders only to a repayment of the amounts paid up on such shares after the amount paid to holders of ordinary shares exceeds £1 millionper ordinary share.

On 11 June 2007, a total of 638,888 new ordinary shares of 1 pence each were allotted via a placing to several new institutional investorsat a price of 90 pence per share.

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19 Operating lease commitments – minimum lease payments

Group and Company2007 2006

Property Other Property Other£’000 £’000 £’000 £’000

Commitments under non-cancellable operating leases expiring:Within one year – – – –Later than one year and less than five years 450 – – –After five years – – 1,105 –

450 – 1,105 –

20 Contingent liability

On 31 January 2005 M Miller and W C Cole on behalf of themselves and all others similarly situated filed a complaint in the Circuit Courtof Madison County State of Illinois against, inter alia, Hypoguard USA, Inc. and Medisys USA, Inc., a subsidiary of MDY Healthcare plc.The original complaint cited several claims against Hypoguard and Medisys the majority of these claims had been dismissed and the onlyclaims that were still active were a claim for common law fraud and a purported violation of the Illinois consumer fraud and deceptivebusiness practices act. In November 2006, Hypoguard and Medisys received summary judgements in their favour. Under the terms of theHypoguard business sale and purchase agreement dated 14 April 2006 pursuant to which Hypoguard USA, Inc was sold, the Companyagreed to indemnify the purchaser and Hypoguard USA, Inc in respect of the complaint. The plaintiffs did not appeal the summaryjudgement granted in favour of Hypoguard and Medisys.

Separately, Hypoguard USA, Inc. and Medisys USA filed a complaint against their insurer St Paul Fire and Marine Insurance Company fortheir failure to defend or meet the costs that were incurred in defending the Miller/Cole action. Hypoguard and Medisys received summaryjudgement in their favour that St Paul was obligated to defend the Miller/Cole action. St Paul appealed the judgement. The Appellate Courtreversed the summary judgement on 4 December 2007 holding that St. Paul had no duty to defend. No specific provision has beenincluded in the financial statements in respect of these matters as the directors consider that no material liability is likely to arise.

21 Pensions

GroupUp to 11 May 2006 and the disposal of Hypoguard Limited, the Group operated a defined benefit pension scheme in the UK being theHypoguard Limited Pension Scheme. The assets of the scheme were held separately from those of the Group.

The Group also operated pension schemes providing benefits on a defined contributions basis in the UK, US and Singapore.

Pension commitmentsPension costs for defined contributions schemes are as follows:

Group2007 2006£’000 £’000

Defined contribution schemes 9 92

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22 Share based payments

The following expenses have been recognised in the income statement arising on share based payments and included withinadministrative expenses:

2007 2006£’000 £’000

Share based payment charge on vesting of share options – (9)

No share options were exercised in the current or previous financial year. No share options were granted during the financial year.

Upon transition to IFRS, and in accordance with the exemption allowed on transition to IFRS, the fair value calculations in respect of sharebased payments under IFRS 2, Share Based Payments, have only been applied in respect of share options granted after 7 November 2002that have not vested by 1 January 2005. The Group currently has no such share options outstanding. A number of share options areoutstanding which were granted after 7 November 2002 which had vested by 1 January 2005.

The Group operated the Medisys PLC Employee Share Option Plan, which was approved by shareholders in March 2000, under whichoptions could be granted to employees and directors of, or to other persons providing services to the Company or any of its subsidiariesor affiliates at the absolute discretion of the Board. The exercise price of any shares granted under option would not be less than theaverage middle market quotation of the Company’s shares on the dealing day immediately preceding the date of the grant. In any ten yearperiod, no more than 10% of the issued ordinary share capital from time to time could be put under option under the Plan or any otheremployee share option arrangements established by the Company or any of its subsidiaries.

In general, an option would never be exercisable as to more than one third of the option shares after six months from the date of grant.The remaining two thirds were exercisable on the second anniversary of the date of grant. The exercise of an option would be madeconditional upon the achievement of targets notified to the holder at the date of grant. Notwithstanding that targets were met, options wouldonly be exercisable to the extent that they had vested.

Under the Medisys PLC Employee Share Option Plan a total of 7,200 (2006: 7,200) options over ordinary shares were outstanding at aweighted average price of 525 pence (2006: 525 pence) per share as at 30 September 2007. There were no shares issues during the yearunder this scheme. On 22 November 2007, the Board resolved to terminate all of the Group’s share option schemes. The sole option holderagreed to surrender these options for no consideration by an agreement with the Company dated 22 November 2007.

The fair values of options granted in 2006 were calculated using the following inputs into the Black Scholes formula:

1 January 23 January 7 April 12 May 6 January 6 JanuaryDate of grant 2003 2003 2003 2003 2004 2004

Life 5 years 5 years 5 years 5 years 5 years 5 yearsExercise price 10.5p 10.5p 11.75p 17.75p 11.5p 6.75pNumber of options granted 40,000 720,000 40,000 30,000 2,995,000 710,000Expected volatility 54% 54% 55% 55% 55% 53%Fair value of options 2.89p 4.96p 6.06p 8.75p 5.98p 3.44pRisk free rate 4% 4% 4% 4% 5% 4%Vesting conditions Service Service Service Service Service Service

The exercise price is based upon the closing share price on the day before the date of grant.

The Company recognised total expenses of £Nil and £9,000 related to equity settled share based payment transactions during 2007 and2006, respectively, calculated in accordance with the transition rules of IFRS 2, Share Based Payments. IFRS requires that the fair valueof share based payments is expensed over the period that the related services are received, together with the corresponding increase inequity. In accordance with the exemption allowed on transition to IFRS, the fair value calculations have only been applied to share optionsgranted after 7 November 2002 that had not vested by 1 January 2005.

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23 Financial assets and financial liabilities

An outline of the Group’s financial risk management policies and objectives are dealt with in the report on page 17.

a) Maturity profile of financial assets and financial liabilities of the Group and CompanyThe Group had no financial assets, other than available for sale equity financial assets (see note 9), trade and other receivables (see note 10)and cash and cash equivalents (see note 11) as at 30 September 2007.

The Group and Company had no financial liabilities at 30 September 2007 (2006: £8,409,000).

b) Borrowing facilitiesThe Group had no borrowing facilities at 30 September 2007.

c) Fair values of financial assets and financial liabilitiesThe fair value of the Group’s and Company’s short term and long term financial assets and financial liabilities approximates to their carryingvalues at 30 September 2007 and 2006.

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Notice of Annual General Meeting 53MDY Healthcare plc Annual Report 2007

NOTICE IS HEREBY GIVEN that an Annual General Meeting of MDY Healthcare plc (the “Company”) will be held at 11am on 29 April 2008at the offices of FD, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB for the purpose of considering and, if thought fit,passing resolutions 1 to 5 and 7 as ordinary resolutions and resolutions 6 and 8 as special resolutions.

1 That the report of the directors and the financial statements for the year ended 30 September 2007 be received.

2 That Derek Ablett be re-elected as a director of the Company.

3 That KPMG LLP be appointed auditors of the Company, to hold office until the conclusion of the next general meeting at whichaccounts are laid before the Company.

4 That the directors be authorised to determine the auditors’ remuneration.

5 That the Directors’ Remuneration Report for the year ended 30 September 2007 be approved.

6 That, subject to and with effect on and from 1 October 2008 or such later date as section 175 for the Companies Act 2006 shall bebrought into force, articles 94 and 113 of the current articles of association of the Company be deleted in their entirety and articles 94,94A and 113 as set out in the document produced to the meeting (and signed by the Chairman for the purposes of identification) besubstituted therefore.

7 That the directors of the Company (the “Directors”) be and are hereby generally and unconditionally authorised for the purposesof section 80 of the Companies Act 1985 (the “Act”), to allot relevant securities (within the meaning of section 80(2) of the Act) of theCompany up to a maximum aggregate nominal amount of £48,743, such authority to expire on 28 April 2013 (unless and to the extentthat such authority is revoked, varied, renewed or extended prior to such date), but so that the Company may, before the expiry of suchperiod, make an offer or agreement which would or might require relevant securities to be allotted after the expiry of such period andthe Directors may allot relevant securities pursuant to such an offer or agreement as if the authority conferred hereby had not expired.

8 That, subject to and conditional upon the passing of resolution 7, the Directors be and are hereby empowered pursuant to section 95of the Act to allot equity securities (as defined in section 94(2) to section 94(3A) of the Act) for cash pursuant to the authority conferredupon them pursuant to paragraph 7 above as if section 89(1) of the Act did not apply to such allotment, provided that such power shallbe limited to the allotment of equity securities:

(a) in connection with an offer of such securities by way of rights issue; and

(b) otherwise than pursuant to sub-paragraph 8(a) above, up to a maximum aggregate nominal amount of £48,743,

such power to expire on 28 April 2013, (unless and to the extent that such power is revoked, varied, renewed or extended prior tosuch date), but so that the Company may, before the expiry of such period, make an offer or agreement which would or might requireequity securities to be allotted after the expiry of such period and the Directors may allot equity securities pursuant to such an offeror agreement as if the power conferred hereby had not expired.

For the purposes of this resolution, “rights issue” means an offer of equity securities (as defined in section 94(2) of the Act) open foracceptance for a period fixed by the Directors to holders on the register on a fixed record date in proportion as nearly as may be totheir respective holdings, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient todeal with any fractional entitlements or with any legal or practical difficulties under the laws of, or the requirements of any recognisedregulatory body or any stock exchange in, any territory.

This power applies in relation to a sale of shares which is an allotment of equity securities by virtue of section 94(3A) of the Act asif in the first paragraph the words “pursuant to the authority conferred upon them pursuant to paragraph 7 above” were omitted.

Dated: 28 March 2008

Registered office: By order of the Board23 Bridge StreetEllon Louisa HellierAberdeenshire SecretaryAB41 9AA

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Notice of Annual General Meetingcontinued


Explanatory notes:

1 A member entitled to attend and vote at the meeting of which the foregoing gives notice is entitled to appoint proxy(ies) who need notbe (a) member(s) of the Company to attend and vote in his or her place. The appointment of (a) proxy(ies) will not preclude a memberfrom attending and voting at the meeting.

2 To be valid, a proxy appointment must be completed and deposited (together with any power of attorney or other written authority underwhich it is executed or a copy of such authority certified notarially or in some other way approved by the Directors) at the Company’sRegistrars (Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6BH) not less than 48 hours before the time appointedfor the meeting.

3 The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), specifies that only thosemembers entered on the register of members of the Company as at 6pm on 27 April 2008 shall be entitled to attend or vote atthe meeting in respect of the number of shares registered in their name at that time. Changes to entries on the register after 6pmon 27 April 2008 shall be disregarded in determining the rights of any person to attend or vote at the meeting.

4 The register of Directors’ share interests, the existing Articles and Memorandum of Association of the Company and the revised Articlesof Association of the Company and copies of the Directors’ service contracts will be available for inspection at the Annual GeneralMeeting from 10.45am until the meeting’s conclusion.

5 A copy of the Articles of Association marked to show the changes being proposed by resolution 6 will be available for inspectionat the Company’s registered office and at the Annual General Meeting from 10.45am until the meeting’s conclusion.

6 Resolution 6 – Amendment of the articles of association

It is proposed to make revisions to the articles of association of the Company (the “Articles”) with effect on and from 1 October 2008to cater for changes being introduced by the Companies Act 2006 relating to directors’ conflicts of interest. The principal changesintroduced to the Articles are set out below. A copy of the revised Articles marked to show changes being proposed by this resolutionare available for inspection as noted above.

The Companies Act 2006 sets out directors’ general duties which largely codify the existing law but with some changes. Under theCompanies Act 2006, from 1 October 2008, a director must avoid a situation where he has, or can have, a direct or indirect interestthat conflicts, or possibly may conflict, with the Company’s interests. The requirement is very broad and could apply, for example,if a director becomes a director of another company or a trustee of another organisation. The Companies Act 2006 allows directorsof public companies to authorise conflicts and potential conflicts where appropriate, where the articles of association contain aprovision to this effect. The Companies Act 2006 also allows the articles of association to contain other provisions for dealing withdirectors’ conflicts of interest to avoid a breach of duty. The changes to the Articles are proposed to be revised with effect on andfrom 1 October 2008 (or a later date as referred to above) and give the directors authority to approve such situations and to includeother provisions to allow conflicts of interest to be dealt with in a similar way to the current position.

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There are safeguards that will apply when directors decide whether to authorise a conflict or potential conflict. First, only directors whohave no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the directorsmust act in a way they consider, in good faith, will be most likely to promote the company’s success. The directors will be able to imposelimits or conditions when giving authorisation if they think that this is appropriate.

It is proposed to include provisions relating to confidential information, attendance at board meetings and availability of board papers toprotect a director being in breach of duty if a conflict of interest or potential conflict of interest arises. These provisions will only apply wherethe position giving rise to the potential conflict has previously been authorised by the directors.

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Shareholder information 56MDY Healthcare plc Annual Report 2007

The Board of DirectorsD Wong (Executive Chairman)D N AblettA B MacKayC A E Spicer (Chief Executive)

Company secretaryL Hellier

Registered office23 Bridge StreetEllonAberdeenshireAB41 9AA

Head office11 Stanhope GateLondonW1K 1AN

AuditorKPMGChartered Accountants1 Stokes PlaceSt Stephen’s GreenDublin 2Ireland

BankersBank of ScotlandBishopsgate Exchange155 BishopsgateLondonEC2M 3YB

SolicitorsBerwin Leighton Paisner LLPAdelaide HouseLondon BridgeLondonEC4R 9HA

Registrars and transfer officeEquinitiAspect HouseSpencer RoadLancingWest SussexBN99 6DA

Nominated adviser and brokerBrewin Dolphin LimitedNational House36 St Ann’s StreetManchesterM2 7LE

Financial calendar

Year end 30 September 2007

Preliminary results(to the year ended 30 September 2007) 19 December 2007

Annual General Meeting(for the year ended 30 September 2007) 29 April 2008

Half year end 31 March 2008

Interim results(six months ending 31 March 2008) June 2008

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Designed and produced by 85fourThe report was printed in England without the use of harmful, VOC emitting, isopropyl alcohol using pureprint® environmental printtechnology by pureprint®, a CarbonNeutral® printer registered to environmental management system ISO 14001.

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MDY Healthcare plc11 Stanhope GateLondonW1K 1AN

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investing in healthcare

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