FULL ANNOUNCEMENT TO BURSA MALAYSIA SECURITIES BERHAD DATED 19 MAY 2006

RCE CAPITAL BERHAD (“RCE” OR “COMPANY”)

(A) PROPOSED SPECIAL ISSUE OF UP TO 21,100,000 NEW ORDINARY SHARES OF RM0.10 EACH IN RCE TO BUMIPUTERA INVESTOR(S) (“PROPOSED SPECIAL ISSUE”);

(B) PROPOSED BONUS ISSUE OF UP TO 161,576,076 NEW ORDINARY SHARES OF RM0.10 EACH IN RCE (“BONUS SHARES”) TO BE CREDITED AS FULLY PAID-UP, ON THE BASIS OF ONE (1) BONUS SHARE FOR EVERY THREE (3) EXISTING ORDINARY SHARES HELD IN RCE ON AN ENTITLEMENT DATE TO BE DETERMINED LATER (“PROPOSED BONUS ISSUE”);

(C) PROPOSED TRANSFER OF THE LISTING OF AND QUOTATION FOR THE ENTIRE ENLARGED ISSUED AND PAID-UP SHARE CAPITAL OF RCE AFTER THE PROPOSED BONUS ISSUE FROM THE SECOND BOARD TO THE MAIN BOARD OF BURSA MALAYSIA SECURITIES BERHAD (“PROPOSED TRANSFER OF LISTING”); AND

(D) PROPOSED INCREASE IN THE AUTHORISED SHARE CAPITAL OF RCE FROM RM50,000,000 DIVIDED INTO 500,000,000 ORDINARY SHARES OF RM0.10 EACH TO RM200,000,000 DIVIDED INTO 2,000,000,000 ORDINARY SHARES OF RM0.10 EACH BY THE CREATION OF AN ADDITIONAL 1,500,000,000 ORDINARY SHARES OF RM0.10 EACH (“PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL”).

(COLLECTIVELY REFERRED AS THE “PROPOSALS”)

1.0 INTRODUCTION

On behalf of the Board of Directors of RCE (“Board”), Malaysian International Merchant Bankers Berhad (“MIMB”) wishes to announce that the Company is proposing to undertake the following corporate exercises:-

(a) proposed special issue of up to 21,100,000 new ordinary shares of RM0.10 each in RCE (“Placement Shares”) to Bumiputera investor(s) to be identified by the Board;

(b) proposed bonus issue of up to 161,576,076 Bonus Shares on the basis of one (1) Bonus Share for every three (3) existing ordinary shares of RM0.10 each held in RCE (“RCE Shares”) on an entitlement date to be determined later by the Board;

(c) proposed transfer of the listing of and quotation for the entire enlarged issued and paid-up share capital of RCE after the Proposed Bonus Issue from the Second Board to the Main Board of Bursa Malaysia Securities Berhad ("Bursa Securities"); and

(d) proposed increase in the authorised share capital of RCE from RM50,000,000 divided into 500,000,000 ordinary shares of RM0.10 each to RM200,000,000 divided into 2,000,000,000 ordinary shares of RM0.10 each by the creation of an additional 1,500,000,000 ordinary shares of RM0.10 each.

2.0 PROPOSED SPECIAL ISSUE

2.1 Details of the Proposed Special Issue

The Proposed Special Issue entails the issuance of up to 21,100,000 new Placement Shares, representing approximately 3.26% of the enlarged issued and paid-up share capital of the Company after the Proposed Special Issue and Proposed Bonus Issue of RM64,633,764 comprising 646,337,640 RCE Shares, assuming that the Proposed Special Issue is implemented after the entitlement date of the Proposed Bonus Issue (“Scenario 1”).

In the event that the Proposed Special Issue is implemented prior to the entitlement date of the Proposed Bonus Issue, the Proposed Special Issue would only entail the issuance of up to 15,800,000 new Placement Shares representing approximately 3.26% of the enlarged issued and paid-up share capital of the Company after the Proposed Special Issue but before the Proposed Bonus Issue of RM48,472,823 comprising 484,728,230 RCE Shares (“Scenario 2”).

The Placement Shares shall be placed to Bumiputera investor(s) (“Placee(s)”) to be determined later by the Board. Such Placee(s) shall be person(s) who qualify under Schedules 2 and 3 of the Securities Commission Act, 1993.

2.2 Pricing of Placement Shares

The final issue price in respect of the Placement Shares to be issued pursuant to the Proposed Special Issue shall be determined at a later date which shall be after the approval of the Securities Commission ("SC") (“Price Fixing Date”), at a discount from weighted average market price ("WAMP") of RCE Shares for the five (5) market days ending on the Price Fixing Date, but not lower than the par value of the RCE Shares of RM0.10 each.

Should the discount attached to the final issue price for the Placement Shares exceed 10% from the aforementioned WAMP, the said issue price shall be subject to the approval of the shareholders at the extraordinary general meeting (“EGM”) of RCE to be convened to approve the Proposed Special Issue.

In the event that the Proposed Special Issue is implemented after the entitlement date of the Proposed Bonus Issue, the issue price of the Placement Shares shall take into consideration the theoretical ex-bonus price of RCE Shares computed based on WAMP of RCE Shares immediately prior to the Price Fixing Date.

For illustrative purposes, assuming the WAMP of RCE Shares for the five (5) days immediately prior to the Price Fixing Date is RM0.355 and a 10% discount thereof, the issue price would have been fixed at RM0.32 per share in the event that the Proposed Special Issue is implemented prior to the Proposed Bonus Issue.

In the event that the Proposed Special Issue is implemented after the entitlement date of the Proposed Bonus Issue, the issue price would be fixed at RM0.24 per share, being 10% from the theoretical ex-bonus price of RCE Shares of RM0.266 after incorporating the dilution effects of the Proposed Bonus Issue.

2.3 Ranking of the Placement Shares

The Placement Shares to be issued pursuant to the Proposed Special Issue shall, upon allotment, issuance and full payment, rank pari passu in all respects with the existing ordinary shares of the Company except they shall not be entitled to any dividends, rights, allotments and/or other distributions declared, the entitlement date of which is prior to the date of allotment of the Placement Shares.

2.4 Rationale for the Proposed Special Issue

The rationale for the implementation of the Proposed Special Issue is to facilitate the compliance with the Bumiputera equity condition imposed by the SC vide its letter dated 8 March 2006, as mentioned in the announcement dated 10 March 2006

2.5 Utilisation of Proceeds from the Proposed Special Issue

The Proposed Special Issue is expected to raise gross proceeds of up to RM5.06 million, proposed to be utilized as follows:-

Scenario 1
Amount
RM / Scenario 2
Amount
RM
No. of Placement Shares / 21,100,000 / 15,800,000
Indicative issue price / * 0.24 / * 0.32
5,064,000 / 5,056,000
Proposed Utilisation
Working capital of RCE Group / 4,814,000 / 4,806,000
Expenses related to the Proposals / 250,000 / 250,000
Total / 5,064,000 / 5,056,000

* For illustrative purposes only. Please refer to Section 2.2 above for basis of arriving at the figures.

Any difference between the indicative proceeds above and the actual proceeds raised from the Proposed Special Issue (dependent on the final issue price of the Placement Shares and the final number of Placement Shares issued) as well as any differences in the actual expenses relating to the Proposals shall be adjusted to the allocation for working capital of the RCE Group.

3.0 PROPOSED BONUS ISSUE

3.1 Details of the Proposed Bonus Issue

The Proposed Bonus Issue entails the issuance of up to 161,576,076 new Bonus Shares credited as fully paid-up on the basis of one (1) Bonus Share for every three (3) existing RCE Shares held by the existing shareholders of RCE whose names appear in the Record of Depositors of the Company at the close of business on an entitlement date to be determined later by the Board of RCE, assuming that the Proposed Special Issue is fully implemented prior to the entitlement date of the Proposed Bonus Issue (“Scenario 2”).

In event that the Proposed Special Issue is implemented after the entitlement date of the Proposed Bonus Issue, the Proposed Bonus Issue would only entail the issuance of 156,309,410 Bonus Shares on the basis of one (1) Bonus Shares for every three (3) existing RCE Shares held by the existing shareholders of RCE whose names appear in the Record of Depositors of the Company at the close of business on an entitlement date to be determined later (“Scenario 1”).

In determining the shareholders’ entitlements to the Bonus Shares pursuant to the Proposed Bonus Issue, fractions of entitlements of Bonus Shares will be disregarded and shall be dealt with in such manner as the Board shall in their absolute discretion deems appropriate in the interest of the Company.

The Proposed Bonus Issue shall be effected by way of capitalisation from the share premium and retained profits accounts of the Company as at 31 March 2006 (subject to finalisation of the audit for the financial statements of RCE for the financial year ended 31 March 2006) as illustrated below:-

Scenario 1

Share Premium / Retained Profits / Total
Company Level / RM’000 / RM’000 / RM’000
Unaudited balances as at 31 March 2006 / 8,042 / 9,899 / 17,941
Less: Amount to be capitalised for the Proposed Bonus Issue / (7,792) / (7,839) / (15,631)
Less: Estimated expenses for the Proposals / (250) / - / (250)
Balance after the Proposed Bonus Issue / - / 2,060 / 2,060

Scenario 2

Share Premium / Retained Profits / Total
Company Level / RM’000 / RM’000 / RM’000
Unaudited balances as at 31 March 2006 / 8,042 / 9,899 / 17,941
Less: Amount to be capitalised for the Proposed Bonus Issue / (7,792) / (8,366) / (16,158)
Less: Estimated expenses for the Proposals / (250) / - / (250)
Balance after the Proposed Bonus Issue / - / 1,533 / 1,533

3.2 Ranking of Bonus Shares

The Bonus Shares shall, upon allotment and issuance, rank pari passu in all respects with the existing issued and paid-up share capital of the Company and shall not be entitled to any dividends, rights, allotments and/or other distributions declared, the entitlement date of which is prior to the date of allotment of the Bonus Shares.

3.3 Rationale for the Proposed Bonus Issue

The Proposed Bonus Issue is undertaken to reward the shareholders of RCE for their continued support by giving them a greater participation in the equity of the Company in terms of the number of Shares held, without depleting the cash resources of the Company as well as to facilitate the Proposed Transfer of Listing.

4.0 PROPOSED TRANSFER OF LISTING

4.1 Details of the Proposed Transfer of Listing

With the implementation of the Proposed Special Issue and Proposed Bonus Issue, the issued and paid-up share capital of RCE would be increased to RM64,633,764 comprising 646,337,640 RCE Shares. Accordingly, the Company would have met the requirement of having a minimum issued and paid up share capital of RM60 million, in compliance with the Policies and Guidelines on Issue/Offer of Securities, issued by the SC (“SC Guidelines”) pertaining to transfer of listing status to the Main Board of Bursa Securities.

In the event that the Proposed Special Issue is implemented after the Proposed Bonus Issue and Proposed Transfer of Listing, the enlarged issued and paid-up share capital after the Proposed Bonus would still be sufficient to meet the minimum issued and paid-up share capital requirement of RM60.0 million.

Based on the unaudited consolidated financial statements of the RCE and its subsidiaries ("RCE Group"), (which are subject to the finalisation of audit), the Group have achieved a consolidated profit after tax (“PAT”) of RM19.8 million for the financial year ended 31 March 2006, with an aggregate consolidated PAT for the past three (3) financial years ended 31 March 2004 to 31 March 2006 exceeding RM30 million, after excluding certain non-recurring and/or non-operating items. Accordingly, the RCE Group would meet the profit track record requirements under the SC Guidelines pertaining to the transfer of listing status to the Main Board of Bursa Securities, subject to finalisation of audit for the financial statements of the RCE Group.

In this respect, the Board has proposed to transfer the listing of and quotation for the entire enlarged issued and paid-up share capital of RCE after the Proposed Bonus Issue from the Second Board to the Main Board of Bursa Securities.

4.2 Rationale for the Proposed Transfer of Listing

The Proposed Transfer of Listing will better reflect the current size of operations of RCE Group and is expected to enhance the Group’s standing and attractiveness amongst investors, in particular, institutional investors. A Main Board listing is also expected to enhance the Group’s prestige and reputation, and the confidence of the Group’s customers, suppliers and employees as well as further strengthen the Group’s profile among its bankers.

5.0 PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

The Proposed Increase in the Authorised Share Capital entails the proposed increase in the authorised share capital of RCE from RM50,000,000 divided into 500,000,000 ordinary shares of RM0.10 each to RM200,000,000 divided into 2,000,000,000 ordinary shares of RM0.10 each by the creation of an additional 1,500,000,000 ordinary shares of RM0.10 each.

Accordingly, the capital clause and Article 5 of the Memorandum and Articles of Association of the Company would be amended to reflect the Proposed Increase in Authorised Share Capital.

The purpose of the Proposed Increase in the Authorised Share Capital is to facilitate the Proposed Special Issue and Proposed Bonus Issue.

6.0 FINANCIAL EFFECTS OF THE PROPOSALS

The Proposed Transfer of Listing and Proposed Increase in Authorised Share Capital are not expected to have any effects on the share capital, net assets, earnings, dividend and shareholdings of the substantial shareholders of the Company.