Return of Capital

nanoUniverse PLC
4 May 2001



                               NANOUNIVERSE PLC

                      ('nanoUniverse' or 'the company')

PROPOSED RETURN OF £18 MILLION VIA A REDUCTION IN SHARE CAPITAL AND CHANGE OF
                                   BUSINESS

nanoUniverse, which floated on the Alternative Investment Market in March
2000, announced on 13 March 2001, that it was exploring ways of returning
capital to shareholders, together with a strategic review of the Company's
business going forward. Details of the Capital Reduction and Consolidation and
a full description of the Company's new strategy are contained in a circular
being posted to shareholders today.



Highlights


  * Immediate return of £18 million of the Company's cash to shareholders by
    way of a reduction of the Company's share capital.

  * Capital Reduction is being effected at 65p which is a premium of 48% to
    the closing mid-market price of nanoUniverse's ordinary shares of 44p per
    share on 12 March 2001, the day before the original announcement.

  * Change of business to become a media, entertainment and leisure company.

Alan Buggy, Chairman, commented:

'Today's announcement is the culmination of several months work towards a
revised strategy for nanoUniverse. This revised strategy has been developed by
the Board in order to both provide a new focus on the media, entertainment and
leisure industries in order to enhance shareholder value, whilst at the same
time recognizing the requests of shareholders for a significant return of
capital.

'Fortunately our Board recognized early on that numerous adverse market and
business conditions in the Internet industry made the Company's initial
strategy too risky to pursue. We therefore made the decision to focus on what
we have identified as significant opportunities in the more traditional areas
of media, entertainment and leisure, where the Board believes the company can
develop a substantial and profitable business. At the same time, we recognize
that shareholders have expressed a desire for a significant return of capital
in addition to this change of strategy. As a result, the Board has decided to
retain only a small portion of its initial capital in order to fully develop
its new strategy, and intends to seek additional new capital for such strategy
at the appropriate time. Upon receiving all necessary approvals for this
proposal the Board intends to fully review its operating costs in light of
both the requirements of the new strategy and the Company's reduced capital
base.'

                                                                    4 May 2001
Enquiries:
College Hill                            Tel:      [phone]
Nicola Weiner                           Email: [e-mail]
Clare Warren                            Email: [e-mail]

nanoUniverse plc                        Tel:      [phone]
Alan Buggy, Executive Chairman          Email: [e-mail]
Kiran Sidhu, Chief Financial Officer    Email: [e-mail]





                               NANOUNIVERSE PLC

                      ('nanoUniverse' or 'the company')

PROPOSED RETURN OF £18 MILLION VIA A REDUCTION IN SHARE CAPITAL AND CHANGE OF
                                   BUSINESS



Introduction

On 13 March 2001 the Company announced that the Board had conducted a detailed
review of its investment opportunities, set against the background of greatly
altered market conditions since the date of the Company's flotation and, as a
result, was close to finalising a proposal to put to shareholders for a
strategic repositioning of the Company.

The Board has now finalised this proposal and the background to, reasons for
and details of the proposal are set out in detail in the re-admission document
being posted to shareholders to day ('the Circular').

The Board no longer believes it to be in the best interests of the Company for
it to continue to follow its original strategy. The Board is therefore
recommending a new Proposal with two principal elements. Firstly, the Board is
recommending an immediate return to shareholders of the majority of the
Company's capital. The Board's prudent investment approach, together with a
focus on overhead control, has preserved the Company's valuable capital. The
Company's financial position therefore remains strong with net current assets
at the date of this announcement of approximately £24.3 million, comprised
principally of cash and liquid short term deposits. The Board is recommending
a return of capital of in aggregate £18 million to be effected by way of a
reduction of nanoUniverse's share capital.

Secondly, as part of the proposal, the Board is also recommending to
shareholders that the Company adopt the Change of Business. The Board's
proposal is that nanoUniverse becomes a media, entertainment and leisure
company and invests in, produces and distributes film and television content,
together with other new forms of entertainment content that will have added
value as broadband technologies are deployed worldwide. Initially the Board
intends the Company to focus on content that fulfils the current and near term
needs of established media companies. The Board believes that this strategy
will offer significant potential for growth in shareholder value.



Reduction of Share Capital

As the first part of the Proposal the Board is recommending a reduction of
nanoUniverse's share capital in order to return £18 million in aggregate to
shareholders.

The Capital Reduction and Consolidation in the form being proposed will
effectively enable shareholders to realise the majority of their investment at
a premium to the current market price.

Given that the Company has no distributable profits and is not currently
intending to raise further equity capital other than for nU Entertainment, it
is precluded by the Companies Act 1985 from returning cash to its shareholders
by way of dividend or buyback. The Board therefore believes that the proposed
Capital Reduction and Consolidation represents the most appropriate way of
returning cash to shareholders. An illustrative pro-forma balance sheet of the
Company following the Capital Reduction and Consolidation is set out at the
end of this announcement.

Under the proposed Capital Reduction, the nominal value of each issued 1p
share will be reduced to 0.2p by cancelling paid-up capital of 0.8p on each
share. Upon the proposed Consolidation, every five ordinary Shares of 0.2p
each will then be consolidated into a single ordinary Share of 1p each.
Accordingly, following the implementation of the Capital Reduction and
Consolidation:
  for every 5 Ordinary Shares       a member will hold 1 New Ordinary Share
    held on the Record Date                and receive £2.60 in cash

and so in proportion for any other number of Ordinary Shares then held.

The effect of the Capital Reduction and Consolidation for each shareholder
will be equivalent to the cancellation of four out of every five of his
Ordinary Shares held on the Record Date at a price of 65p per share. This
represents a premium of 48 per cent. over the closing mid-market price for
Ordinary Shares being 44p per share on 12 March 2001, which was the last
trading day prior to the announcement made by the Company which indicated that
the Board was close to finalising the Proposal.

Under the Act the Capital Reduction requires the approval of a special
resolution of shareholders and, following such approval, a Court order
confirming the Capital Reduction. Accordingly, after the Capital Reduction and
Consolidation have been effected, although each shareholder will hold fewer
ordinary shares than before, the proportion of the share capital held by each
shareholder will not be affected.

The rights and conditions and nominal value attaching to the New Ordinary
Shares will be identical in all respects to the Ordinary Shares.

Application has been made for the New Ordinary Shares to be re-admitted to
AIM. It is expected that dealings in the New Ordinary Shares will commence at
opening of business on 21 June 2001.



The Change of Business

nanoUniverse is proposing as the part of the Proposal to change the Company's
business so that nanoUniverse becomes a media, entertainment and leisure
company. Specifically, nanoUniverse initially intends to launch a new
operating business, to be known initially as nU Entertainment, which will
focus primarily on 'A' movie and television content production, acquisition,
and distribution, along with other new forms of entertainment content, for
both traditional and, when appropriate, emerging content delivery companies.
At the same time, nanoUniverse also intends to pursue investments in other
types of entertainment, media and leisure related ventures as opportunities
arise. These may involve investments in such areas as film, television, sport,
location based entertainment and casino gaming (internet and/or location
based).

The Board has developed a business plan and financial model for nU
Entertainment over the past several months, and has reviewed these with a
number of investment banks with a view to targeting as potential strategic and
financial investors a number of the clients of these banks. nanoUniverse
intends potentially to invest all of its capital remaining after the Capital
Reduction and Consolidation in nU Entertainment. It may, however, invest a
lesser amount depending upon the circumstances at the time of launch, which is
intended to be within approximately 12 months of the Capital Reduction and
Consolidation becoming effective. In view of nanoUniverse's intention to raise
significant additional capital for nU Entertainment from significant strategic
or financial partners either the investment criteria of these partners, or
alternatively market conditions, may result in nanoUniverse ending up with
significant, but not a controlling interest in all nU Entertainment.

In addition to its own investment, nanoUniverse is seeking to raise in the
region of £50 to £150 million of further capital for nU Entertainment through
the following potential sources:


  * Equity and production pre-payments from strategic investors, including
    TV delivery companies, traditional investors in entertainment content and
    the potential new entrants to the home entertainment delivery industry
    outlined above, such as Telecommunications Companies, Internet Service
    Providers and Internet Portals;

  * Equity from financial investors;

  * Debt raised publicly or privately from financial institutions.

The Company is ready to commence this fund raising process, upon receiving
Shareholder approval for the Change of Business.

While the Board's principal focus after the Capital Reduction and
Consolidation becomes effective will be on raising the capital for and
developing nU Entertainment, the Board will continue to be open to other
investment opportunities in the media, entertainment and leisure sectors and
will pursue those opportunities if it believes that they can deliver
significant growth in shareholder value.

Given the reduced capital base of the Company after the Capital Reduction and
Consolidation becomes effective, the Board will seek to further reduce its
overheads. As a result of these potential changes the Company may incur
restructuring charges. The Board will also seek more actively to manage its
treasury operations to enhance the return on its capital in whatever manner
the Board consider appropriate and prudent including (but not limited to), if
appropriate, by way of investing in equity securities, corporate bonds,
derivatives, or other investments.



Extraordinary General Meeting

A notice convening an EGM to be held at 9.30am on Tuesday, 29 May 2001 is set
out in the Circular. Copies of the Circular are available from the Company and
from Peel Hunt plc.



Recommendation

The Directors, who have been advised by Peel Hunt, consider the Proposal to be
in the best interests of the Company and its Shareholders as a whole. In
advising the Directors, Peel Hunt have taken account of the Directors'
commercial assessment of the Proposal.

Accordingly the Directors unanimously recommend shareholders to vote in favour
of the resolution to be proposed at the Extraordinary General Meeting, as they
intend to do in respect of their own beneficial holdings amounting in
aggregate to 4,505,000 Ordinary Shares (representing approximately 13 per cent
of the Company's issued share capital).

                                                                  Alan R Buggy

                                                            Executive Chairman

                                                                    4 May 2001