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Richina Plans To Remove Director Thwarting Rights

Richina Plans To Remove Director Thwarting Rights Issue

Richina Pacific is to call a special meeting of shareholders to seek approval to remove Mr Ming Lu, an employee of and board representative of 9.6% shareholder JP Morgan Partners (BHCA) LP, as a director for thwarting attempts by the company to proceed with its proposed one-for-one rights issue.

Mr Lu has declined to sign the prospectus covering the rights issue, nor will he resign.

As under New Zealand law all directors must sign a prospectus before it can be issued, Mr Lu and JP Morgan Partners are preventing the issue proceeding even though it has received all necessary regulatory consents, was endorsed at a special meeting of shareholders in December 2002, and has the support of all other directors. At no stage has Mr Lu or his alterate raised issues that the prospectus does not meet with all relevant legal requirements.

At the special meeting, directors will seek the removal of Mr Lu as a director, clearing the way for the rights issue to proceed.

Mr Lu and JP Morgan Partners have expressed their opposition to the rights issue in the past, and their representative spoke against the capital raising proceeding at December’s special meeting. Overwhelmingly, they failed to gain shareholder support for their position.

While Mr Lu and JP Morgan Partners are entitled to their views on the capital raising, it is not in the interests of all shareholders or the company for the majority position to be thwarted.

The US$10.4 million to be raised by the rights issue will be used to purchase skins and hides to meet upcoming peak seasonal sales demand. Failure of the rights issue to proceed will create difficulties with cash flow in the near term, and may impact future profitability.

Mr Lu has been kept aware of the timetable, due diligence and legal process relating to the rights issue, and directors had assurances from Mr Lu that he would sign the prospectus, provided that it met all legal and regulatory requirements.

It is disappointing that a director representing a minority shareholder is holding out against the position of the majority, and will involve the company in unnecessary delay and expense.

If shareholders approve the removal of Mr Lu as a director at the special meeting, the rights issue will proceed as soon as possible.

Mr Jonathon Kotler, an employee of JP Morgan Partners, has had his status as Mr Lu’s alternate revoked.

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