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Control of Richina challenged

Tuesday 15th April 2003

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Richina Pacific has been advised that papers have been filed in the High Court of Justice, Virgin Island, on April 11, 2003 by Richard Rainwater, a 5.12% shareholder in Richina Pacific, and J P Morgan Partners, a 9.61% shareholder, both of whom also hold an interest in Richina Enterprise Holdings Limited (REHL).

The statement of claim states that Trident Trust Company (BVI) Limited is the trustee of Richina Equity Trust 1 and that Rainwater and J P Morgan Partners are the lead investors in the Trust. The Trust is managed by Richina Capital Partners Limited, a company controlled by Richard Yan.

In the proceedings, Rainwater and J P Morgan Partners have sought, amongst other things, an injunction to compel the trust company, as trustee of the trust, to take under its control all of the Richina Pacific Limited shares currently held by REHL (being 25.5% of the shares in Richina Pacific Limited).

If the claim is successful, there could be a change in the effective control of REHL. If this occurs prior to the date of the allotment of shares under the proposed rights issue, REHL would be prevented from performing its obligations as underwriter of the offer.

In that event, Richina Pacific would not be able to allot those shares and subscription moneys paid would have to be repaid to subscribers. Investors holding rights at that time would not be able to exercise those rights.

Richina Pacific also advises that a statement as to its trading position after the first quarter ending 31 March, 2003, needs to be updated.

Since making its statement to shareholders at the April 2 special meeting, directors have received further information on events which have affected current trading.

The SARs virus has severely curbed tourist numbers visiting China and curtailed local leisure activities. This has had an immediate impact on the number of tour group visitors to the Blue Zoo Beijing aquarium attraction.

In moving from toll manufacturing to manufacturing upholstery leather for sale under its own brand, Shanghai Richina Leather has encountered delays in re-establishing the business with new customers, and there have also been some quality issues. This resulted in some credits being issued to customers and a slow down in activities while remedial action was initiated.

The ovine garment leather sector is not currently strong, and key customers are delaying confirmation and delivery of orders.

While these events are not major in terms of annual expectations they will impact on the first quarter's performance.

March results, which will assist the company to regain from a somewhat slow start to the year, will not be sufficient to put the company above last year to date as was stated at the meeting.

Expectations are however little changed for the half and full year and the company is anticipating a solid half and full-year result ahead of last year's profits of $4.2 million and $8.2 million respectively.

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