FEDERAL INTERNATIONAL (2000) LTD

LOWER PROFITS FOR FINANCIAL YEAR 2000


We refer to your letter of 21 February 2001.

Further to the announcement made on 13 February 2001, the Board of Directors of the Company would like to provide additional information for the lower profit for the group.

Turnover was lower than forecast due to changes in the factors taken into consideration in preparing the forecast presented in the prospectus. The projects in the Company's flowline control products and services activities that the Board expected to commence in year 2000 were delayed. A few of the Company's China and Singapore customers have postponed the commencement date of their projects. In addition, the Company held back shipment of US$2 million worth of goods to its Indonesian customer that the Board included in its forecast pending for the approval of their bank financing. The approval was subsequently granted to the Company's Indonesian customer in December 2000.

The recovery of the oilfield drilling equipment activities in view of the improvement in the economy and increase in the price of crude oil is below the Company's management expectation. The orders expected to derive from one of the Company's contracts to supply some of its exclusive products to one of the largest offshore drilling contractors were lower. In addition, the Company has lost a few orders due to stiff competition in the oilfield equipment industry.

The Company's profit before tax and profit after tax are lower than forecast in view of the lower turnover and lower than anticipated sales margin. Lower sales margin was due to stiff competition in the last quarter of the year in the Company's oilfield drilling equipment activities and fire protection activities.


Yours faithfully

Chng Geok
Company Secretary