Manx Financial Regulatory News (MFX)

FOR IMMEDIATE RELEASE

14 May 2010

Manx Financial Group PLC (the 'Company')

Open Offer of up to 21,138,817 New Ordinary Shares at 9p per share on the basis of 1 New Ordinary Share for every 3 Existing Ordinary Shares

The Company announces the Open Offer to Eligible Shareholders to subscribe for New Ordinary Shares on the terms and subject to the conditions set out in a document published today. Extracts from this document to include the expected timetable and Offer statistics are set out below, and the document is available on the Company's website at www.mtg.im, free of charge and in accordance with the requirements of the AIM Rules. A table of definitions used in the document are attached to this announcement as an appendix.

1. Introduction

In a recent letter to Shareholders it was indicated that the Company would consider providing existing Shareholders as a whole the opportunity to subscribe for New Ordinary Shares. The Board is pleased to confirm that the Company has today announced that it is proposing to issue up to 21,138,817 New Ordinary Shares on the basis of 1 New Ordinary Share for every 3 Existing Ordinary Shares held on the Record Date by means of an Open Offer to existing Shareholders. The Company is hoping to raise up to approximately £1.9 million (before Offer Costs) through the Offer. 

This Open Offer is made in accordance with the Company's articles of association and is in accordance with applicable laws. Although the Company's articles of association impose restrictions on the issuing of 20% or more shares in issue at any calendar year, as this Open Offer is made available to all Shareholders on a pre-emptive basis, such restrictions do not apply. If Shareholders wish to increase their investment in the Company, they can do so by applying for New Ordinary Shares under the Offer.

2. Background to, Reasons for and Use of Proceeds of the Offer

Whilst Conister Bank has performed credibly in the recent difficult markets and, as a consequence, has no shortage of liquidity, the Group now finds itself in the position of having insufficient regulatory capital to maximise the utilisation of that liquidity to fund the Group's current business plan, centred on augmenting the traditional lending business of the Bank.

Following the Company's successful extraordinary general meeting on 14 January 2010, the Directors, in recognising the need to raise additional regulatory capital to meet the requirements of the Group's business plan, considered which option would be the most expeditious, especially in considering the best interests of the Group and all its Shareholders. It was recognised that whilst the Bank was adequately capitalised for its current business, additional regulatory capital would be required to support incremental lending and other opportunities which in turn would generate sufficient revenues to turn the Group back into profit.

The Group's business plan details the path back to profitability by the end of 2010 requiring the injection of up to £2.5 million of new regulatory capital within the year. Profitability is sensitive to the timing of the introduction of the new regulatory capital and with various lending opportunities being developed it was soon evident that the regulatory capital would need to be raised in two tranches. 

In considering that a market placing or a rights issue/open offer to Shareholders would not be possible until the audited accounts for 2009 were available, both of these options suffered in that they could not be completed within the timeframe necessary to allow the Bank to take advantage of a number of initiatives including the Marsh Lending Opportunity.

With the two major Shareholders, both Directors of the Company, willing to commit to an unsecured convertible loan agreement, it allowed the Group to raise £1.71 million. In turn, this allowed the Bank to commence with the Marsh Lending Opportunity, net of the repayment of £0.5 million of subordinated debt by the Bank.

Taking into consideration the comments from Shareholders at the recent extraordinary general meeting, the Directors, who have been advised by Beaumont Cornish, are recommending that the second tranche of capital is to be financed through an Open Offer to all Shareholders. 

Accordingly, the Open Offer is being made to Eligible Shareholders to provide them with the opportunity to subscribe for New Ordinary Shares at 9p per share, being the same price at which the unsecured loan agreement is convertible.

3. Details of the Offer

The Company is seeking to raise up to approximately £1.9 million (before Offer Costs) through an issue of up to 21,138,817 New Ordinary Shares pursuant to the Offer. The net proceeds, assuming full take-up of entitlements under the Offer (after deducting the Offer Costs) are estimated to be up to £1.8 million. The Offer is not being underwritten and Shareholders should note that there is no minimum amount to be raised. The Offer, being a pre-emptive issue available to all Shareholders, is being made pursuant to the authority to issue shares as contained in the articles of association of the Company. Accordingly, the Offer is conditional solely upon Admission.

Application has been made for up to 21,138,817 New Ordinary Shares issued pursuant to the Offer to be admitted to trading on AIM. It is expected that Admission will become effective and dealings for normal settlement in the New Ordinary Shares will commence on 8 June 2010. The New Ordinary Shares will, following allotment, rank pari passu in all respects with the existing issued Ordinary Shares and have the right to receive all dividends and other distributions declared, made or paid in respect of the issued Ordinary Share capital of the Company. 

The Offer Price has been fixed at 9p per Offer Share.

Shareholders may apply for New Ordinary Shares at the Offer Price on the following basis and subject to the terms and conditions of the Offer which are set out in Part III of the document and in the accompanying Application Form. The Offer has been structured so as to allow Eligible Shareholders to subscribe for Offer Shares at the Offer Price pro rata to their existing shareholdings on the basis of 1 Offer Share for every 3 Existing Ordinary Shares held on the Record Date. Shareholders may subscribe for any number of New Ordinary Shares (up to a maximum of 21,138,817), and applications by Shareholders will be satisfied in full up to their pro rata Open Offer Entitlement. Pro rata entitlements will be rounded down to the nearest whole number. Fractional entitlements which would have otherwise arisen will not be issued to Shareholders. The Offer Costs to be incurred by the Company are estimated to amount to approximately £90,000. In the event of an over subscription, the Board has the sole discretion to scale back or otherwise allocation subscriptions in any manner it deems appropriate. It should be noted that it is the intention of the Board to prioritise subscriptions from existing smaller Shareholders.

Expected Timetable

The dates set out in the timetable of principal events above and mentioned throughout the document and in the Application Form may be adjusted by the Company, in which event the details will be notified to a regulatory information service operated by the London Stock Exchange, posted on the Company's website at www.mfg.im and, where appropriate, to Shareholders.

Offer Statistics

* Assuming full take-up of entitlements under the Offer

Contacts

Manx Financial Group PLC

Denham Eke, Chief Executive

Tel: 01624 694694

Beaumont Cornish Limited

Roland Cornish

Tel: 0207 628 3396

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