After hours and hours and hours of searching for the answer to this very problem I’ve found a solution so here is what you do guys!!
First of all this is dead simple! Don’t bother with any of those media player iPhone or iPad apps the are a waste of money and are totally useless! So you need a program called handbrake you can get this from http://handbrake.fr/downloads.php
Secondly you will need a program called isquint available at http://www.macupdate.com/app/mac/19769/isquint . Once you have these then begin by opening handbrake.
Once opened click the source button and load the MKV file of your choice, next click the output file type bar and select mp4 leave encoding as h.264 and click the subtitle bar, here choose the MKV subtitle type SSA and click the burn tab, after doing all this hit start!
Once handbrake has finished start iSquint and drag your newly created m4v file into the box, check optimise for iPod and add to iTunes then begin the conversion…. Once converted you will have a fully iPod, iPad & iPhone compatible MP4 video file with subtitles… Enjoy guys 🙂