Dear Shareholder

As promised at the Annual General Meeting I am now providing a further report to shareholders regarding the current position relating to London Asia Capital plc and its subsidiary companies.

As a result of the resignations of Toby Parker and Francesco Gardin, I have now taken executive responsibility for trying to resolve a number of matters that have caused considerable concern to me over the last couple of months, particularly matters over which Toby Parker had primary control. I have put a small team together to deal with these matters and help me as follows:

• David Fordham and Ben Hart in dealing with and reviewing all matters relating to shareholders, bringing the share register up-to-date, other legal corporate matters and the administration of the company secretariat.
• Paul Bobroff in relation to realisation of assets & Section 110 proposals.
• Fenton Higgins in relation to finance matters.

In relation to shareholder matters, we will be looking to try and find a solution for shareholders to realise value and more on this will follow in due course.

There have been a number of matters of concern to deal with, namely as follows:

1. Myeg Services Berhad
LAC would like to realise its MyEg shares, the market value of which is around £2m. The current custodians in Malaysia have so far refused to transfer the shares to our appointed custodians and major legal proceedings are likely to follow in relation to this very shortly.  This is of considerable concern as I have now been brought up-to-date with the facts in this matter and there is frankly no good reason for the shares not to be under our control.

2. Bank Mayapada
For some time LAC has been seeking to dispose of its shareholding in Bank Mayapada. Until very recently there has been no liquid market in the shares but we have now implemented a different strategy and are beginning to realise our shareholding. We are continuing to actively manage this position and I hope that this new approach will result in a more successful outcome.

3. Former Directors conduct
As a result of the former directors failed action in improperly seeking to remove Sir Jeremy Hanley and myself in the summer, legal costs and expenses approaching £200,000 have been incurred.  We are reviewing a considerable element of these costs and intend to dispute some of these vigorously.

4. Hong Kong subsidiaries
We have been faced with tax bills in our Hong Kong subsidiary companies totalling HKD 760,000 and whilst we have been advised that there is no alternative other than to pay this sum, there are grounds for appeal which may ultimately reduce this considerably. We are attempting to discover how these tax liabilities arose and who was responsible for incurring them.

5. Croatia Investment
In looking at the $5m apparently invested in a Croatian corporation, which has not been   returned, I have recently had a meeting with a substantial investor in that Company who has been concerned at press comment made by Toby Parker during the summer.  I am carrying out  more research into this matter to see whether any recovery is possible.

Your Board has now agreed that it will pursue the Section 110 proposals and the lawyers have been instructed to start this process and prepare documentation for shareholders to consider in due course.  This will hopefully enable the Company to find a methodology which will give value back to shareholders and resolve the differences that exist between the two sets of shareholders in Europe and the Far East.  More on this will follow shortly.

There is much work being undertaken and hopefully the next 3-6 months will see some progress, which I hope will be beneficial to all shareholders.  I shall keep you informed of developments.

David Buchler
Chairman
London Asia Capital plc