Richly Field China Development Limited — Share Issue/Capital Change 2000

May 5, 2000

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

CAPITAL REDUCTION

and

PROPOSED SPECIAL CASH DIVIDEND

Financial adviser

CENTURION CORPORATE FINANCE LIMITED

SUMMARY

Reference is made to the announcements dated 3 March 2000 and 3 May 2000 respectively, the Board intends to put forward a Capital Reduction proposal to its shareholders for the reduction of the Company's share premium account amounting to HK$368.9 million. The credit arising from such reduction will be applied towards the elimination of the accumulated losses of the Company as at 29 February 2000 of approximately HK$368.9 million by the Board on the same date the Capital Reduction exercise becoming effective. For the avoidance of doubt, the nominal value per Share will not be affected by such capital reduction exercise and will remain unchanged at HK$0.10.

Implementation of the Capital Reduction exercise will not, in itself, alter the net asset value, the underlying assets, business operations, management or financial position of the Company or the proportional interests of the Shareholders in the Company, other than the resulting expenses incurred for the Capital Reduction. The Capital Reduction is subject to the conditions contained in the section headed “Conditions of the Capital Reduction” below.

As a result of the proceeds received from the disposal of the Company's controlling interest in Hong Kong Toy Centre International Limited, the Capital Reduction is proposed so that the Board can recommend a special cash dividend/distribution of HK$0.10 per Share from the Company's contributed surplus account. A circular containing details of the Capital Reduction (together with the other related matters) and a notice convening a Special General Meeting to approve the Capital Reduction will be posted to the Shareholders as soon as practicable.

CAPITAL REDUCTION

Following the announcements dated 3 March 2000 and 3 May 2000 respectively made by the board of directors (the “Board”) of United Pacific Industries Limited (the “Company”), the Board intends to put forward a proposal to its shareholders (the “Shareholders”) for the reduction of the Company's share premium account amounting to HK$368.9 million and at the same time, crediting the same amount to the contributed surplus account of the Company (“Capital Reduction”). Following the completion of the Capital Reduction and on the basis of the Company's audited balance sheet as at 31 March 1999, share premium and contributed surplus accounts will be adjusted from, respectively, HK$382.7 million and HK$70.9 million to HK$13.8 million and HK$439.8 million respectively. The Board intends to apply the same amount of HK$368.9 million arising from the Capital Reduction as credited to the contributed surplus account towards the elimination of the accumulated losses of approximately HK$368.9 million of the Company as at 29 February 2000.

The Capital Reduction is proposed in order to enable the Board to recommend a special dividend/distribution to the Shareholders and as announced on 3 March 2000, such special dividend/distribution, if distributed, may consist of part of the proceeds received from the disposal of the controlling equity interest in the share capital of Hong Kong Toy Centre International Limited (“HK Toy”). The Board today resolved that upon completion of the Capital Reduction and on its effective date, a special cash dividend/distribution of HK$0.10 per issued share in the Company (“Share”) will be declared out of the Company's contributed surplus account.

Without implementing the Capital Reduction, the Company has an audited deficit of HK$132.7 million in its deficit account as at 31 March 1999. After taking into account of the operating expenses of the Company and the loss on disposal of the interest in HK Toy, an aggregate loss of approximately HK$236.2 million was incurred for the 11-month period ended 29 February 2000. Consequently, the accumulated losses of the Company as at 29 February 2000 amounted to a total of HK$368.9 million.

In light of the deficit position of the Company's deficit account as at 29 February 2000, the Company will not be in a position to pay any dividend to the Shareholders without the Capital Reduction. On the premise that all the credit arising from the reduction of the share premium account is applied towards the elimination of the aforesaid deficit on the date the Capital Reduction exercise becoming effective, the accumulated losses of the Company would be reduced to zero. The Board also intends to procure subsidiaries of the Company to effect dividend payments to the Company so that the Company's accumulated profits account could be restored to a surplus for the purpose of the proposed cash dividend/distribution.

Implementation of the Capital Reduction will not in itself, alter the net asset value, the underlying assets, business operations, management or financial position of the Company or the proportional interests of the Shareholders in the Company, other than the resulting expenses incurred for the Capital Reduction. Accordingly, the audited net asset value of the Company will remain unchanged before and after the Capital Reduction.

CONDITIONS OF THE CAPITAL REDUCTION

The Capital Reduction will be conditional on, inter alia:--

1. the passing of a special resolution by Shareholders at the forthcoming special general meeting of the Company (“Special General Meeting”), which is to be held on or about 19 June 2000 (or such other date as the Board may determine at the time of despatch of the circular as referred to below) to approve the Capital Reduction;
2. the publication of a notice in an appointed newspaper in Bermuda in respect of the Capital Reduction as required by section 46 of the Companies Act 1981 of Bermuda (“Companies Act”); and
3. the swearing of an affirmation/affidavit by at least two directors of the Company declaring that the Company is solvent on the date as from which the Capital Reduction is to have effect as required by section 46 of the Companies Act.

Assuming that the above conditions are fulfilled, it is expected that the Capital Reduction will become effective on the date of the Special General Meeting.

A further announcement will be made to inform Shareholders of the effective date of the Capital Reduction which is expected to be completed on or about 19 June 2000 and details of the aforesaid special cash dividend/distribution.

GENERAL

A circular setting out details of the Capital Reduction, a detailed timetable of events together with a notice convening the Special General Meeting to consider, and if thought fit, approve the Capital Reduction, will be despatched to the Shareholders as soon as practicable.

The Board would like to advise Shareholders that the proposed payment of the aforesaid special cash dividend/distribution of HK$0.10 per Share will in no way, adversely affect the financial position of the Company and its subsidiaries (the “UPI Group”), as the UPI Group is currently debt-free (in so far as bank borrowings are concerned) and also has sufficient cash reserve to cater for its working capital requirements, should such HK$0.10 special cash dividend/distribution be paid as proposed.

By Order of the Board of
UNITED PACIFIC INDUSTRIES LIMITED
HO Che Kong Chairman Hong Kong SAR, 4 May 2000