RNS announcement

Palace Capital plc ( "Palace Capital" or "Company")

 Potential reverse takeover transaction

and

related party transactions

In line with its stated strategy, and as referred to in the preliminary announcement dated 5 July 2013, the Board of Palace Capital can now confirm that it is at an advanced stage of negotiations to acquire a property company owned by Quintain Estates & Development PLC at an agreed purchase price of approximately £40 million. To finance the acquisition, Palace Capital intends to raise approximately £23.5 million of new equity and it has also received credit committee approval from a UK lender for a facility of £20 million.

Due to the size of the proposed transaction relative to the Company, it will be treated as a reverse takeover and, in order for the proposed transaction to proceed, it will require shareholder consent and for the enlarged issued ordinary share capital of the Company to be admitted to AIM. The Company's ordinary shares have been suspended from trading on AIM pending the publication of an admission document.

In order to help fund the costs of the proposed transaction, on 27 June 2013 and 2 August 2013, Stanley Davis, Non-Executive Chairman of Palace Capital, loaned the Company £25,000 and £100,000 respectively (the "Loans"). The Loans were made on the same basis as previous loans made by him to the Company in that they are non-interest bearing and they have no defined term for repayment. The Loans do however constitute related party transactions under the AIM Rules for Companies and the directors of the Company consider, having consulted Allenby Capital, the Company's Nominated Adviser, that the Loans are fair and reasonable insofar as the Company's shareholders are concerned.

Shareholders will be kept informed of developments in due course.

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