Contents :

1) The reason(s) why Harpers Trading (M) Sdn. Bhd. did not proceed with the signing ceremony or any reason(s) made known to your Company.

To the best of our knowledge, we believe that Harpers Trading (M) Sdn. Bhd. repudiated the distributorship agreement before the signing ceremony fixed on 26/1/2000 because inter alia, they wished to vary the agreed terms of the distributorship agreement of which we disagreed.

Harpers Trading (M) Sdn. Bhd. through their Solicitors had informed Zaitun's Solicitors that their reasons for not proceeding with the signing ceremony was because it was alleged that they Zaitun could not give an exclusive distributorship to Harper's of which Zaitun denied.

2) Details of the impact of the Termination on the Group's operations

Owing to the unlawful Termination, the Group would be deprived of its income from the sales of the Group's product and that it would be difficult for the Group to appoint a similar established exclusive distributor who is willing to distribute the Group's products on terms agreeable to the Group.

The Group has begun negotiating with several agency houses for the exclusive distributorship of the Group's products for terms acceptable to the Group. Todate, the Group has not been able to secure any satisfactory distributor.

The Termination had also caused severe cash flows problems to the Group as Zaitun Marketing Sdn Bhd had not and would not be receiving the balance of the guaranteed monthly payment of RM2,000,000.00 each from January 2000 to March 2000 as stipulated in the Distributorship Agreement. Consequently, the manufacturing operations of the Group was also affected because of the fact that many suppliers had refused to deliver raw materials to the Group due to the Group's inability to honour the payments as promised.


3) Basis of arriving at the estimated sum of RM211,385,995 being amount

suffered for losses and damages to the Group

In furtherance to the announcement made by the Company on 1st February, 2000, the Company's wholly owned subsidiary, Zaitun Marketing Sdn. Bhd. (“the Plaintiff”) is now claiming in a lawsuit in the Kuala Lumpur High Court for the sum of RM263,225,995.08 against Harpers Trading (M) Sdn. Bhd. (“the Defendant”) a wholly owned subsidiary of Diethelm Holdings (Malaysia) Berhad, for inter alia breach of contract, goods sold and delivered and damages for loss of reputation and goodwill of the Plaintiff arising from the repudiation of the Distributorship Agreement between the Plaintiff and the Defendant.

Zaitun's claims, inter alia from the Harper's are as follows:-


RM


a) The loss of sales for the duration of the Distributorship Agreement
(4 years)
i) Year 2000 RM 30,000,000.00
ii) Year 2001 RM 36,000,000.00
iii) Year 2002 RM 43,200,000.00
iv) Year 2003 RM 51,840,000.00
________________
161,040,000.00

b) The expenses incurred for the aborted formal signing ceremony 17,665.00


c) The goods sold and delivered 2,168,330.08


d) Damages for loss of reputation and goodwill of the Plaintiff's 100,000,000.00

Company

------------------------
263,225,995.08
=============




4) The steps that your Company has taken or will take to address the distributorship issue

In the meantime, the Group has resumed the selling and distribution of the Group's products on its own. The Group has started taking sales orders from both the wholesalers and retailers previously serviced by the former distributors and new customers, at the high traffic outlets. To further strengthen the efficiency of Group's distribution network, the Group is in the process of appointing jobbers in strategic locations to distribute its products.

Query Letter Contents :

We refer to your Company's announcement on the aforesaid matter.
In this connection, kindly furnish the Exchange with the following additional
information for public release:-
(1) The reason(s) why Harpers Trading (M) Sdn Bhd did not proceed with the
signing ceremony or any reason(s) made known to your Company.
(2) Details of the impact of the Termination on the Group's operations.
(3) Basis of arriving at the estimated sum of RM211,385,995 being amount
suffered for losses and damages to the Group.
(4) The steps that your Company has taken or will take to address the
distributorship issue.
Kindly furnish the Exchange with your reply within two (2) market days from the
date hereof.

Yours faithfully
KUALA LUMPUR STOCK EXCHANGE

Lisa Lam
Senior Manager, Listing Operations
SA/LPY/ne
c.c Securities Commission