Proposed capitalisation issue

R.E.A.Hldgs PLC
05 September 2007


R.E.A. Holdings plc - Proposed capitalisation issue
===================================================

Summary
-------
The company announced earlier today as part of the announcement of its interim
report for the six months ended 30 June 2007 that it proposed to make a
capitalisation issue to ordinary shareholders. The company now further announces
that it is today despatching a circular (the 'circular') to shareholders
providing information regarding the proposed issue.

Pursuant to the issue, it is proposed that ordinary shareholders will be
allotted new preference shares on the basis of one new preference share for
every 30 ordinary shares held at the close of business on 1 October 2007. The
new preferences shares will be issued credited as fully paid by way of
capitalisation of share premium account.

To avoid an allottee of 1,000 or fewer new preference shares being forced either
to retain what that allottee may regard as a relatively small allotment or to
incur disproportionately high selling costs in realising the allotment, it is
further proposed that the company will (except to the extent that allottees
otherwise elect) aggregate all new preference shares comprised in allotments of
1,000 or fewer new preference shares and sell the resultant aggregated holding
on behalf of the relative allottees (subject to achievement of a minimum gross
price of 100p per share as specified below).

Since implementation of the proposals will require certain shareholder
approvals, a notice is set out at the end of the circular convening an
extraordinary general meeting of the company, to be held on 2 October 2007, for
the purposes of considering and, if thought fit, passing the resolutions
necessary to implement the proposals.

Background
----------
As shareholders will be aware, the group's business consists of oil palm
operations in East Kalimantan, a province of Indonesia. The operations have been
developed entirely since the early 1990's and their development has involved
major investment by the group. Financing this investment has posed significant
challenges for the group and, for several years, the directors felt constrained
to recommend that no dividends be paid on the ordinary shares.

In 2006, with the 13,000 hectares of oil palms planted over the period 1994 to
2000 approaching full maturity, the directors decided that the group's cash flow
could support the resumption of ordinary dividends at a modest level and an
interim dividend in lieu of final of 1p per ordinary share was paid in respect
of 2006.

With the expectation of increasing crops from the group's expanding oil palm
hectarage, the directors believe that it will be appropriate over time
progressively to increase the aggregate annual rate of dividend paid. However,
the group remains committed to an ambitious development programme and
implementation of that programme will entail major capital expenditure. The
directors are anxious to ensure that ordinary dividend payments remain
compatible with financing such expenditure.

Balancing the twin objects of increasing the rate of annual ordinary dividends
and conserving cash to finance expansion, the directors have indicated in the
interim report in respect of 2007 that they anticipate declaring dividends in
respect of 2007 totalling 2p per ordinary share (of which a first interim
dividend of 1p per ordinary share has been declared for payment on 5 October
2007 and the directors intend that a second interim dividend in lieu of final of
1p per ordinary share should be declared for payment in early 2008).

The directors recognise that dividends totalling 2p per ordinary share may not
fully reflect recent improvements in the group's financial position and
prospects, particularly in a year in which the group is benefiting from CPO
prices that are relatively high when compared with average CPO price levels of
recent years (albeit that there can be no certainty that current CPO prices will
be maintained). The capitalisation issue is proposed with the aim of providing
some additional return to ordinary shareholders in what should prove a good year
for the group while facilitating the preservation of the company's liquid
resources.

Capitalisation Issue
--------------------
Upon and subject to the terms and conditions described below, it is proposed
that holders of ordinary shares on the register of members at the close of
business on 1 October 2007 be allotted 1,085,795 new preference shares credited
as fully paid at par by way of capitalisation of £1,085,795 standing to the
credit of the company's share premium account, on the following basis:

1 new preference share for every 30 ordinary shares

held at the close of business on 1 October 2007 (and so in proportion for any
greater or lesser number of ordinary shares held) provided that fractional
entitlements to new preference shares will be aggregated and sold on terms that
the company will be entitled to retain the proceeds of sale.

The 1,085,795 new preference shares proposed to be issued pursuant to the
capitalisation issue would represent 9.5 per cent of the 11,449,624 existing
preference shares currently in issue (not including the 1,064,581 new preference
shares that it was announced, as part of the announcement of the company's
interim report for the six months ended 30 June 2007, that the company is
proposing to issue for cash at a price of 105p per share by way of a placing
with institutional investors).

Sale arrangement
----------------
The directors have been concerned that an ordinary shareholder receiving a small
allotment of new preference shares pursuant to the capitalisation issue might
find it unsatisfactory to be faced with a choice between retaining what he may
regard as a relatively small investment or incurring disproportionately high
selling costs in realising his allotment. Equally, the company would prefer not
to add a large number of small holdings of preference shares to the company's
register of members as the future costs to the company of doing so would, in the
opinion of the directors, be disproportionate to the benefits to the company and
the members concerned.

Accordingly, under the sale arrangement, it is proposed that where an ordinary
shareholder is allotted 1,000 or fewer new preference shares pursuant to the
capitalisation issue and such shareholder does not elect to retain the new
preference shares in question, the company will, subject as provided below,
arrange for those preference shares to be aggregated with preference shares
allotted to other ordinary shareholders with similar allotments and placed by
Guy Butler Limited with one or a small number of professional investors. The
proceeds of sale (net of dealing costs of 1/2 per cent as referred to below)
will then be distributed to the original allottees of the shares so sold pro
rata to the numbers of shares sold on their behalf.

Whilst it is impossible to predict the price at which the holdings of
participants in the sale arrangement will be sold, the company will endeavour to
obtain the highest price reasonably realisable at the time of sale. As an
indication to prospective participants, the average of the closing mid market
quotations for an existing preference share as derived from the Daily Official
List of the London Stock Exchange on and for the four dealings day immediately
prior to 4 September 2007 (the latest practicable date before the publication of
the circular) was 111.5p.

The company will not sell new preference shares the subject of the sale
arrangement at a price of less than 100p per share. If, as a result, no sale of
such new preference shares has been made on or before the close of business on
10 October 2007, the sale arrangement will be abandoned and prospective
participants in the sale arrangement will retain the new preference shares
allotted to them.

The company has agreed with Guy Butler Limited a dealing commission of 1/2 per
cent of the gross proceeds of shares sold pursuant to the sale arrangement for
the services of Guy Butler Limited in connection with the sale arrangement, such
commission to be borne by the participants in the arrangement.

On the basis of the composition of the company's register of ordinary
shareholders as at 4 September 2007 (the latest practicable date before the
publication of the circular), 898 ordinary shareholders would be allotted 1,000
or fewer new preference shares pursuant to the capitalisation issue representing
in aggregate 50,917 new preference shares (being some 4.7 per cent of the new
preference shares proposed to be issued pursuant to the capitalisation issue).

The directors recognise that the restriction of the sale arrangement to ordinary
shareholders who are allottees of 1,000 or fewer new preference shares pursuant
to the capitalisation issue will mean that the treatment of those shareholders
pursuant to the capitalisation issue will differ from that of other ordinary
shareholders. The directors consider that allottees of 1,000 or fewer new
preference shares are in a different position from other ordinary shareholders
due to the cost implications for the company of adding a large number of small
holdings to its register of members.

Elections to retain new preference shares that would otherwise be subject to the
sale arrangement will be irrevocable and may only be made pursuant to the
election forms that are enclosed with the circular. Further forms of election,
if required as a result of any as yet unregistered sale or other transfer of
ordinary shares or any sale or other transfer following the date of the
circular, will be available on request from the company's registrars, Capita
Registrars, of The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
(telephone: [phone]).

Ordinary shareholders holding ordinary shares for a number of beneficial owners,
one or more of whom will be beneficially entitled to 1,000 or fewer new
preference shares pursuant to the capitalisation issue and who wish to avail
themselves of the sale arrangement, should act immediately to transfer the
relevant number of ordinary shares into a separate account.

Further terms
-------------
The new preference shares to be issued pursuant to the capitalisation issue will
upon issue rank pari passu in all respects with the existing preference shares
and, in particular, will rank for dividend on 31 December 2007 as if their
dividend entitlement on that date had accrued (at the rate of 9 per cent per
annum) with effect from and including 1 July 2007. The existing preference
shares are already admitted to trading on the London Stock Exchange's market for
listed securities.

No expenses of or incidental to the capitalisation issue will be charged to
allottees of new preference shares and the new preference shares will be
registered by the company in the names of the allottees thereof free of stamp
duty and stamp duty reserve tax. New preference shares the subject of the sale
arrangement will be sold on terms that stamp duty or stamp duty reserve tax
payable on transfer of those shares will be borne by the purchaser(s) of the
shares and not the participants in the sale arrangement. However, the dealing c
ommission of 1/2 per cent referred to above, payable in connection with the sale
arrangement, will be deducted in calculating the net proceeds of sale of new
preference shares sold pursuant to the arrangement.

No premium will be payable upon issue of any of the new preference shares.

Conditions
----------
The proposals are conditional upon:

• the passing of the first resolution set out in the notice of
the extraordinary general meeting of the company convened for 2 October 2007

• admission of the new preference shares to the Official List and
to trading on the London Stock Exchange's market for listed securities and such
admissions becoming effective on or before 5.00 pm on 31 October 2007.

The sale arrangement is further conditional upon the passing of the second
resolution set out in the notice of the extraordinary general meeting of the
company convened for 2 October 2007.

Risk factors
------------
The capitalisation issue will result in holders of ordinary shares receiving new
preference shares. The risks attaching to an investment in the preference shares
differ in some respects from those attached to an investment in the ordinary
shares.

The existing market capitalisation of the preference share capital of the
company is substantially less than that of the ordinary share capital and this
may be expected to remain the case for the foreseeable future. An investment in
the preference shares may therefore be more illiquid than an investment in the
ordinary shares.

The value of an investment in any shares of the company may be affected by many
factors including general economic conditions, levels of interest rates,
political events and trends, tax laws, rates of inflation and changes or
perceived changes in the group's performance and prospects. Because the
preference shares are fixed income securities, the impact of such factors on the
value of the preference shares may differ from its impact on the ordinary
shares.

Meetings
--------
As already noted, an extraordinary general meeting of the company has been
convened for 12.00 noon on 2 October 2007, to be held at the London office of
the company's solicitors, Ashurst, at Broadwalk House, 5 Appold Street, London
EC2A 2HA.

Two resolutions are set out in the notice of the meeting. Of these, the first
resolution will be proposed as an ordinary resolution and the second resolution
as a special resolution. The first resolution provides authority pursuant to
article 154 of the company's articles of association for the directors to
implement the capitalisation issue (including, subject to the passing of the
second resolution, the sale arrangement). The second resolution amends article
156 of the articles of association of the company by adding a specific authority
in relation to the capitalisation issue to empower the directors to implement
the sale arrangement.

The full text of the proposed new article 156 is set out in the second
resolution.

Recommendation
--------------
The board considers that the proposed capitalisation issue is in the best
interests of the company and its shareholders as a whole. The board also
considers that the proposed sale arrangement and amendment of the articles of
association of the company are in the best interests of the company and its
shareholders as a whole.

Accordingly, the board recommends all ordinary shareholders to vote in favour of
both resolutions set out in the notice of extraordinary general meeting of the
company convened for 2 October 2007 as the directors (and persons connected with
them within the meaning of section 346 of the Act) intend to do in respect of
their own beneficial holdings.

The beneficial holdings of the directors (and persons connected with them within
the meaning of section 346 of the Act) comprise 997,394 ordinary shares
(representing 3.1 per cent of the ordinary shares in issue).

Further information
-------------------
Copies of the circular will be available for inspection at the Document Viewing
Facility of the UK Listing Authority up to and including the date of the
extraordinary general meeting convened for 2 October 2007 and may be obtained
free of charge from the company at its registered office, First Floor, 32-36
Great Portland Street, London W1W 8QX. A copy of the circular is also being
placed on the company's website at www.rea.co.uk.

Expected Timetable
------------------
Latest time and date for receipt of 
proxies for use in connection with 
the extraordinary general meeting                12.00 noon on 30 September 2007

Latest time and date for receipt of 
election forms                                         3.00 pm on 1 October 2007

Record date for the capitalisation issue                          1 October 2007

Extraordinary general meeting                       12.00 noon on 2 October 2007

Admission of new preference shares to the 
Official List and to trading on the London Stock 
Exchange effective and proposals unconditional         8.00 am on 3 October 2007

CREST accounts credited in respect of new 
preference shares                                                 3 October 2007

Definitive share certificates despatched in 
respect of new preference shares                                 17 October 2007

Cheques despatched (representing net proceeds of 
sale of new preference shares sold pursuant to 
the sale arrangement despatched)                                 17 October 2007

Definitions
-----------
Unless the context otherwise requires, the following definitions apply
throughout this announcement:

'Act' the Companies Act 1985 (as amended)

'board' the board of directors of the company

'Capita Registrars' a trading division of Capita IRG Plc

'capitalisation issue' the proposed capitalisation issue of 1,085,795 new
preference shares to be allotted to holders of ordinary shares, credited as
fully paid by way of capitalisation of share premium account, on the basis of
one new preference share for every 30 ordinary shares held at the close of
business on 1 October 2007

'company' or 'REA' R.E.A. Holdings plc

'CPO' crude palm oil

'CREST' the relevant system (as defined in the Uncertificated Securities
Regulations 2001) in respect of which CRESTCo Limited is the operator

'directors' directors of the company

'election form' the form upon which a holder (or joint holders) of ordinary
shares who is/are (a) prospective allottee(s) of 1,000 or fewer new preference
shares pursuant to the capitalisation issue may elect (in whole or in part) not
to participate in the sale arrangement

'existing preference shares' the existing issued preference shares

'group' the company and its subsidiaries

'London Stock Exchange' London Stock Exchange plc

'new preference shares' the new preference shares proposed to be issued pursuant
to the capitalisation issue

'Official List' the list maintained by the Financial Services Authority in
accordance with section 74(1) of the Financial Services and Markets Act 2000

'ordinary shares' ordinary shares of 25p each in the capital of the company

'preference shares' 9 per cent cumulative preference shares of £1 each in the
capital of the company

'proposals' the proposals, details of which are set out in this document, for
the capitalisation issue and the sale arrangement

'sale arrangement' the arrangement whereby the company will (except to the
extent that allottees otherwise elect) aggregate all new preference shares
comprised in allotments of 1,000 or fewer new preference shares pursuant to the
capitalisation issue and arrange for the resultant aggregated holding to be
placed by Guy Butler Limited with one or a small number of professional
investors (subject to achievement of the minimum price referred to under 'Sale
arrangement' above)

'shareholders' holders of ordinary shares and/or preference shares


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