General Announcement
Reference No O&-060419-59326

Submitting Merchant Bank	:	K & N KENANGA BHD
Company Name	:	REXIT BERHAD (MESDAQ Market)
Stock Name	:	REXIT
Date Announced	:	19/04/2006


Type	:	Announcement
Subject	:	REXIT BERHAD ("REXIT" OR "COMPANY") (A) PROPOSED JOINT VENTURE BETWEEN REXIT AND PT SWADAYANUSA KENCANA RAHARJA ("PT SWADAYANUSA") TO FORM A JOINT VENTURE COMPANY, PT REXIT INDONESIA ("PT REXIT") TO UNDERTAKE THE BUSINESS OF FINANCIAL AND INSURANCE RELATED INFORMATION TECHNOLOGY SERVICES IN THE REPUBLIC OF INDONESIA ("PROPOSED JOINT VENTURE"); AND (B) LETTER OF UNDERTAKING FROM PT ASURANSI SINAR MAS ("ASM") FOR THE OUTSOURCING OF ITS INFORMATION TECHNOLOGY ("IT") OPERATIONS TO PT REXIT INDONESIA

Contents :

1. INTRODUCTION

On behalf of the Board of Directors of Rexit, K & N Kenanga Bhd ("Kenanga") is pleased to announce that Rexit had on 19 April 2006 entered into a Joint Venture Agreement ("JV Agreement") with PT Swadayanusa, to form a joint venture company, PT Rexit Indonesia (PT Rexit") to undertake the business of providing information technology ("IT") services to the financial and insurance industry in the Republic of Indonesia ("Indonesia").

In conjunction with the setting up of PT Rexit, Rexit has, on 19 April 2006, received a letter of undertaking from PT Asuransi Sinar Mas ("ASM") to outsource its IT operations to PT Rexit, at terms and conditions to be mutually agreed upon.

2. DETAILS OF THE PROPOSED JOINT VENTURE

2.1. Information on ASM

ASM, one of the biggest insurance companies in Indonesia in terms of gross written premium in the insurance industry in 2005, is an insurance arm of Sinar Mas Group which is one of the largest conglomerates in Indonesia. ASM will outsource its IT operations to PT Rexit to enable its insurance transactions to be processed through the Internet and to improve efficiency of the insurance processing operations.

2.2. Information on PT Swadayanusa

PT Swadayanusa was incorporated on 27 March 1997 in Jakarta, Indonesia. PT Swadayanusa is principally involved in general trading and services. The shareholders of PT Swadayanusa are PT Duta Jakarta Sejahtera and Bpk Arthur Tahya.

As at the date of this announcement, PT Swadayanusa does not have any subsidiary and associated company.

2.3. Salient Terms of the JV Agreement

The salient terms of the JV Agreement are as follows:-

2.3.1 Information on PT Rexit Shareholding

PT Rexit will be incorporated in Indonesia under the name of "PT Rexit Indonesia". The authorized share capital of PT Rexit is USD4,000,000 (equivalent to approximately RM14,720,000 at an exchange rate of USD1.00 : RM3.68) comprising 4,000,000 ordinary shares of USD1.00 each. The issued and paid-up capital of PT Rexit is USD1,000,000 (equivalent to approximately RM3,680,000 at an exchange rate of USD1.00 : RM3.68) comprising 1,000,000 ordinary shares of USD1.00 each.

The shareholdings of Rexit and PT Swadayanusa in PT Rexit will be 51% and 49% respectively.

2.3.2 The responsibilities of Rexit

The responsibilities of Rexit in relation to the JV Agreement are as follows:-

(a) Providing expertise for technical assistance in developing and maintaining the financial and insurance software systems;

(b) Licensing to PT Rexit the use of the software systems owned by Rexit and to market the software systems in Indonesia;

(c) Licensing to PT Rexit all the basic software required to support the business, new development financial and insurance software systems and all future upgrades, product development, marketing research and training materials;

(d) Providing necessary management assistance and training in standard business process, marketing, software and systems usage to operate the Business; and

(e) Preparing all agreements which Rexit and PT Swadayanusa ("Party(ies)" or "Shareholder(s)") consider necessary to be entered into.

2.3.3 The responsibilities of PT Swadayanusa

The responsibilities of PT Swadayanusa in relation to the JV Agreement are as follows:-

(a) Procuring approvals from Indonesian Investment Coordinating Board, Department of Justice and Human Rights of Indonesia and all other approvals and licenses from any other relevant statutory or regulatory body, authority or government ministry as may be necessary to incorporate and operate PT Rexit and conduct the Business; and

(b) Business prospecting including sourcing and identification of customers for PT Rexit.

2.3.4 Board of Directors of PT Rexit

PT Rexit shall consist of three (3) Directors, of which Rexit may appoint up to two (2) Directors, including the President Director, and PT Swadayanusa may appoint one (1) Director.

The Board of Directors shall manage the operations, business and affairs of PT Rexit, subject to the provision of the JV Agreement. The term of office for each member of the Board of Directors of PT Rexit shall be three (3) years.

2.3.5 Board of Commissioners of PT Rexit

In addition, a Board of Commissioners of PT Rexit consisting of two (2) Commissioners will be formed. The Board of Commissioners shall supervise the Board of Directors of PT Rexit. Under the JV Agreement, PT Swadayanusa may nominate the President Commissioner and Rexit may nominate one (1) Commissioner.

The term of office for each member of the Board of Commissioners of PT Rexit shall be three (3) years.

2.3.6 Dividend policy

Dividends shall be made as agreed to by the Shareholders of PT Rexit.

2.3.7 Non-competition

(a) With the exception of any activities carried out by Rexit and PT Swadayanusa as at the date of the JV Agreement, the Parties shall hereby undertake in favour of each other that they shall, and that they shall procure that their respective shareholders and affiliates shall, while they are shareholders in PT Rexit refrain from, directly or indirectly, through their present or future affiliates, engaging in, entering into, assisting with or holding a financial interest in any business competitive with the business of PT Rexit in Indonesia;

(b) The Parties shall also refrain from, directly or indirectly, offering any employment or any position in management other than in PT Rexit whether full time, part time or on a consultancy basis to any employee, director or other personnel of PT Rexit;

(c) The Parties undertake that PT Rexit is the sole and exclusive entity through which the Parties or any of their affiliated companies or entities shall carry on, directly or indirectly, the Business in Indonesia; and

(d) PT Swadayanusa shall not carry on the Business or similar activity outside of Indonesia without the written consent of Rexit.

3. RATIONALE FOR THE PROPOSED JOINT VENTURE

To expand the revenue base of Rexit and its subsidiaries ("Group" or "Rexit Group"), the Group intends to deliver its proprietary solutions regionally. The Proposed Joint Venture will provide an opportunity for Rexit Group to tap into the Indonesian market as part of its regional expansion plan.

4. RISK FACTORS

4.1 Business Risks

The business of PT Rexit is exposed to the general business risks as well as certain risks inherent in the broad sector of IT. These may include, amongst others, general economic conditions, increase in interest rates, timing and market acceptance of the software, constraints in labour supply, inability to control unforeseen costs, rapid technological change in the software and IT market and other business risks common to going-concerns.

In mitigating such risks, PT Rexit will constantly keep abreast with new technologies and market trends and also keep close eye on customers' requirements.

4.2 Industry Risks

Other than the business risks from IT sector as mentioned in Section 4.1 above, the business of PT Rexit will also depend and rely on the performance of the financial and insurance industries. Any loss or deterioration in relationship and/or termination of contracts by the financial and insurance companies any result in severe disruptions to PT Rexit's business operations.

4.3 Investment Risks

Notwithstanding the terms and conditions stated in the JV Agreement, there is no assurance that the anticipated benefits from the investment by Rexit in PT Rexit will be realized. Risk associated with Rexit's investment in PT Rexit include but is not limited to the uncertainty of acceptance of PT Rexit's software and services in the Indonesia market, and the inability of Rexit to protect its IP. Any of these risks could result in delay or loss of customer or revenue and cause additional expenditure to rectify the problems.

4.4 Political and Regulatory Risks

Development in political, economic and regulatory factors in Indonesia and/or other countries where PT Rexit operates and/or plan to operate in the future could materially affect the financial and business prospects of PT Rexit and the industry in which it operates. The political and regulatory uncertainties include, amongst others, the risks of war, riots, changes in political leadership, expropriation, nationalism, renegotiations or nullification of existing sales orders and contracts, and changes in methods of taxation. This may result in a need for PT Rexit to incur additional expenses to meet the changes or new requirements.

As such, there is no guarantee that there will not be any changes in government policies or regulations that may be unfavourable to PT Rexit.

4.5 Foreign Exchange Risks

PT Rexit will be potentially exposed to foreign exchange risk, in particular the volatility of the Rupiah against other major currencies such as the United States dollar, as its operations are principally in Indonesia.

In this respect, PT Rexit may use various hedging techniques to mitigate this risk. However, there is no assurance that any future significant fluctuation in the exchange rates and financial crisis will not materially and adversely affect its financial condition.

5. POLICIES ON FOREIGN INVESTMENTS AND REPATRIATION OF PROFITS FROM INDONESIA AND ENFORCEABILITY OF THE JV AGREEMENT

5.1

Policies on foreign investment and repatriation of profits from Indonesia

There is no restriction or prohibition under Indonesia laws relating to the ownership of PT Rexit by Rexit.

Subject to applicable withholding taxes, profits from investments in Indonesia companies can be repatriated without any restrictions. The Proposed Joint Venture represent a long term investment, and profits, as they arise and are available for distribution shall be repatriated accordingly.

5.2

Enforceability of JV Agreement

The Directors of Rexit have been advised that the JV Agreement constitute valid, legally binding and enforceable obligations of PT Swadayanusa under Indonesian law.

6. FINANCIAL EFFECTS

6.1 Share Capital

There will be no effect on the issued and paid-up share capital of Rexit arising from the Proposed Joint Venture as the Proposed Joint Venture does not involve the issuance of new shares in Rexit.

6.2 Substantial Shareholders' Shareholdings

There will be no effect on the shareholdings of the substantial shareholders of Rexit arising from the Proposed Joint Venture as the Proposed Joint Venture does not involve the issuance of new shares in Rexit.

6.3 Earnings

The Proposed Joint Venture is not expected to have a material impact on the earnings of Rexit for the financial year ending 30 June 2006.

The Proposed Joint Venture is expected to enhance the future earnings of Rexit.

6.4 Net Assets

The Proposed Joint Venture is not expected to have any material impact on the net assets of Rexit Group for the financial year ending 30 June 2006.

7. SOURCE OF FUNDS

Rexit will finance the Proposed Joint Venture via internally generated funds.

8. APPROVALS REQUIRED

The Proposed Joint Venture is subject to the approvals being obtained from the following:-

(a) the Bank Negara Malaysia; and

(b) the relevant government authorities and/or regulators in Indonesia.

The Proposed Joint Venture does not require the approvals from shareholders of Rexit.

9. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTERESTS

None of the directors and/or major shareholders and/or persons connected to the directors and/or major shareholders of Rexit have any interest, direct or indirect, in the Proposed Joint Venture and the said letter of undertaking.

10. ESTIMATED TIME FRAME FOR COMPLETION

The establishment of the Proposed Joint Venture is expected to be completed in the fourth quarter of financial year ending 30 June 2006.

11. SPONSOR

K&N Kenanga Bhd is currently the sponsor for Rexit.

12. DOCUMENTS FOR INSPECTION

The JV Agreement relating to the Proposed Joint Venture will be made available for inspection at the registered office of Rexit at 42, Jalan BM 1/2, Taman Bukit Mayang Emas, 47301 Petaling Jaya, Selangor Darul Ehsan, during normal office hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this

announcement.

This announcement is dated 19 April 2006.