The introduction of the Master Distributor program will have a huge and positive impact on existing Distributors because we are now able to remove all minimums on drop shipping and ordering. Details of these changes are highlighted in section 4, Policy Changes Effective April 1, 2004.

As of April 15th, 2004 all membership prices and our current e-commerce solution will be changing as well. Details of these price changes are outlined at Distributor Membership Changes Effective April 15, 2004 and E-Commerce Solution Changes Effective April 15, 2004.

There are several other important sections to this newsletter as well, pertaining to new product and marketing tool development. In addition, we have extended the Ad Co-Op deadline in light of the many new changes we are implementing.

As a final note, I will be attending the Take Me 2 Tea conference in Las Vegas and will be arriving on March 26th and staying at the Las Vegas Hilton. In attendance will also be our two Master Distributors and other Distributors. I look forward to meeting existing and prospective Distributors at the show.

Looking ahead, I am extremely excited about the future. What started out as a dream in a 200 square foot office, has quickly turned into a reality. Tea Connexions is my passion and will always be. I am constantly striving to make the company better, stronger, and of more value to our members. Our goal is to always focus on serving our Distributors, and with this in mind, we will constantly strive to have a point of difference from other tea companies. This will ensure that our Distributors are in the best position to grow and profit from the ever-expanding multi-billion dollar tea industry.

To all of our Distributors, I extend a heartfelt thank you for your belief and faith in Tea Connexions. To new and prospective members, I look forward to welcoming you to our ever-expanding family.

Drink Tea and Prosper!

Yours sincerely,

Sanjay Gupta
President/CEO
Tea Connexions
Shangers Teaopolis Ltd.

Inside:

1. Look Back at 2003
2. Master Distributors
3. Become a Master Distributor
4. Policy Changes Effective April 1, 2004
5. Distributor Membership Changes Effective April 15, 2004
6. E-Commerce Solution Changes Effective April 15, 2004
7. New Catalog
8. New Products
9. Take Me 2 Tea
10. Ad Co-Op Deadline Extended
11. Final Thoughts: Looking Ahead to 2004 and Beyond

1. A Look Back at 2003
Looking back at 2003, I think as the years move forward, this year will be viewed as one of the most historic years for Tea Connexions. In business, there are certain events that mark the ultimate destiny of a company. The year, 2003, was a pivotal year for Tea Connexions because it established us as a tea company with a clear point of difference from our competition.

It is this point of difference that gives Tea Connexions and all Distributors a clear advantage over our competitors. Our alliance with Shangers, Ltd. and the subsequent formation of Shangers Teaopolis Ltd. is a tremendous partnership that will create long-lasting benefits for our existing and future members. Mike Prince's vision for a mother brand that encompasses tea and other products, along with the distribution model developed by Tea Connexions will give our Distributors the opportunity to not only distribute tea, but exclusive accessories, food products, childrens products, and other entertainment products, all tied to together under one clear theme: tea and the celebration of tea.

My decision to take Mike's call, one historic May afternoon in 2003 changed the destiny and future of Tea Connexions. Interestingly, the only reason I could contemplate taking the call, was because it was near the end of the first key period of Tea Connexions, meaning I had the opportunity to think proactively.

There were three key periods in 2003:

• Growth Management (January to June)
• Building Core TEAm (June to September)
• Proactive Business Development (September to December)

Growth Management (January to June)
In 2002 Tea Connexions experienced triple digit sales growth. This sales growth was very exciting, but also created two critical issues for Tea Connexions.

1. Staffing
Tea Connexions was under-staffed. This was a period of high stress, high adrenaline, little sleep, and constant work. It was a reactive period in Tea Connexions history.

2. Lack of Space
In order to hire more staff, space became a critical issue. Tea Connexions started in a 200 square foot office, then grew to 1,000 square feet. In order to accommodate more staff, we had to move.

First Major Event of 2003: Moving to 3,000 Square Feet Facility
In June we move to our present 3,000 square feet facility 12 full months ahead of schedule. Planning for this move began in March, we signed the lease in April, and began packing up in May. It was in May, that we made our first major hiring decision. At this time, we hired Brian Mang. Brian came to Tea Connexions with more than 13 years of experience in owning and operating his own business, experience teaching at University, and many years of sales. Brian's expertise in business and skill at sales has been a tremendous asset to Tea Connexions.

Building Core TEAm (June to September)
During this period, Tea Connexions sought to fill certain key positions: marketing, administration/finance, and graphic design. Investment in staffing became a critical focus of Tea Connexions so that we could begin building a core TEAm that could grow with the company as we expand our worldwide operations. Our core TEAm is highly motivated, not only by the mission and philosophy of Tea Connexions, but also through our unique compensation structure that is based upon corporate growth.

In June, Clayton MacDonald took on the permanent role of managing all the logistics and warehousing of the company. Clayton has been with Tea Connexions since mid-2002 and has witnessed the tremendous growth of the company first hand. In this month we hired Daisy Lieu as our Marketing Director; July, Jenny Truong joined us and took on the administration and membership services role; finally, in September, Lihui Tang joined Tea Connexions and became our full time Graphics Designer, working full time with Suruchi. Tea Connexions' core team consists of.

Suruchi Gupta: Creative Director
Clayton MacDonald: Director, Logistics and Warehousing
Brian Mang: Director, New Business Development
Daisy Lieu: Director, Marketing and Public Relations
Jenny Truong: Director, Membership Services
Lihui Tang: Director, Graphic Design Services

In December, Michele Germain joined Tea Connexions as our Financial Director. Michele has played a key role in the creation of our Master Distributor program which is discussed later on.

To read full profiles of our core team and their responsibilities, click here.

Having these key positions filled, enabled Tea Connexions to become very proactive and focus on business growth, bringing us to the next key event of 2003

Second Major Event of 2003: Face to Face Meeting With Mike Prince of Shangers, Ltd.
In early May, I received a call from a gentleman in England, Mike Prince, who had an idea about tea, and creating a brand that brings together tea and entertainment. I immediately saw the opportunity. Many calls later, near the end of May, Mike told me that he wants to come to Saskatoon to see me. We met on June 15th, just 3 days after we moved to our new facility. This was the first meeting between us, and a historic one as we finalized a Memorandum of Understanding to continue further discussions. To learn more about this meeting, click here.

Investment in our core TEAm was one of the best decisions that Tea Connexions made in 2003. This investment enabled me to take myself out of many day to day operations, so that I could actually think about growing the business. As stated by Peter Daniels, "I schedule time to think . . . All of my greatest ideas, opportunities and money making ventures started with the days I took off to think." The time and freedom created for me because of the fine job our core TEAm does, resulted in the four most productive months in Tea Connexions history. This proactive period will have a huge and positive impact on Tea Connexions and its Distributors.

Proactive Business Development (September to December)
September onward, was a tremendous period for Tea Connexions, full of major events.

Third Major Event of 2003: Launch of Tea Biz In A Box
Our members had been asking for a marketing program that they could use to build their businesses. Tea Biz In A Box was the answer. It is a program developed to help our Distributors market the products. To learn more about this program, click here. Members can view details of this plan inside the online training.

Fourth Major Event of 2003: October Conference
In October, Tea Connexions held the first Master Distributor conference. Four Distributors attended, of which eventually one became our first Master Distributor. Further details of this conference are posted at Shangers News 3 and Shangers News 5.

Fifth Major Event of 2003: Shangers Teaopolis Ltd. formed
November, 2003, Mike Prince came to Saskatoon once again. At this time, we signed the documents to incorporate our company, Shangers Teaopolis Ltd. Details of this signing were released earlier this year.

MOST IMPORTANT Event of 2003:
First Master Distributor In December, 2003, Mike Prince and I traveled to Dallas for a follow up conference to the October meeting. December, 2003 marked the signing of the first Master Distributor for Tea Connexions and Shangers Teaopolis, Ltd. in the state of Florida. This is very significant as the launch of our Master Distributor program occurred more than two full years ahead of schedule. The signing of our first Master Distributor set in motion several changes, changes which we will begin implementing in April of this year.
top

So, what impact will Master Distributors have?

Positive Change
First and foremost, the implementation of Master Distributors will have only a positive impact on our existing and future members. When this business model was conceived in 1998, I built in Master Distributors. At the launch of the program in 2001, I anticipated that this program would be introduced in 2006. The new alliance with Shangers accelerated the introduction of this program by more than two years.

It is important to understand that the implementation of Master Distributors further enhances our business model of "localized distribution". Distributors provide local service and shipping to their end customers. Now, "localized distribution" can be offered to Distributors through our Master Distributors. Big box retail expands through the setting up of new stores. Tea Connexions expands with each and every new Distributor that joins our buying group. The end result is better, faster, and more efficient service to the end consumer. This whole model of localized distribution is tied together by the Internet, meaning consumers can visit LeafTea.Com and choose their nearest distributor to purchase product. This makes our business model unique and is a key differentiating factor with other tea companies in operation today. Couple this distribution model with our recent alliance with Shangers, and I am certain that no other tea company in this world will be able to offer the same level of service and unique products that we will be offering.

As stated by George Wilson of Jacksonville Tea Company, "I became a Master Distributor because I realize that this is the one tea company in the world today that has a key point of difference from others. There are many tea companies, thousands, if not hundreds of thousands in operation today. Tea Connexions and Shangers offer a unique concept that will be hard to duplicate by others. This competitive advantage made my decision easy. If I want to grow and incubate my tea business, it made the most sense to join Tea Connexions. I see huge growth opportunities with Tea Connexions and Shangers. With most business opportunities, getting involved early is the key."

Reduced Lead and Shipping Times
Prior to the introduction of this program, all product shipped to our Distributors in the United States came from one distribution point, our warehouse in Saskatoon, Saskatchewan, Canada. This proved to be very expensive because of the extra costs associated with clearing US customs on behalf of our Distributors. Since 9/11, brokerage and duty costs increased three-fold. Tea Connexions subsidized these costs heavily to ensure that product could be delivered to our members. With the introduction of the new bio-terrorism laws and a tripling of FDA related fees and the addition of new fees, it became clear in 2003 that Tea Connexions would have to seek an alternative shipping solution. Master Distributors provided this. Beginning in February, we began testing the shipping of product from Florida, and now in March product is being shipped from California. From now on, all shipping costs will be calculated using Florida and California as the point of origin. This is important and should reduce shipping times, as UPS, our preferred shipper offers 1 to 3 day service to most regions serviced out of Florida and California.

Reduced Shipping Costs
Now that all fulfillment to Distributors will be done through our Master Distributors, Tea Connexions no longer has to charge the following fees: Duty, Brokerage, Entrance, FDA. This will create significant savings. At the same time, we have set up a national account with UPS in the United States as well, meaning our Master Distributors ship all goods on our account.

No Minimums on Ordering
Master Distributors in the United States now make it possible for small orders of less than a case to be shipped. What this means is that existing and future members can order one (1) piece, five (5), any combination of pieces. There will no longer be any minimums on ordering period.

This policy change will go into effect on April 1, 2004.

No Minimums on Drop Shipping
Up until recently, shipping small quantities on behalf of our Distributors simply was not feasible. Since we now have Master Distributors in the United States, Tea Connexions can now remove all minimums associated with Drop Shipping.

What does this mean? Essentially, the size of the order no longer matters. Whether a Distributor gets an order for one piece or a dozen pieces, all they have to do is place the order in the members section, and specify a different ship to address, if they want it drop shipped by a Master Distributor. This is very important for members that do not want to carry any inventory. This new reality now enables existing and prospective members to focus on the marketing of the products exclusively, without any involvement in the fulfillment of orders.

This policy change will go into effect on April 1, 2004.

It is interesting to note, that most, if not all tea wholesaling companies in North America today would never offer their customers drop shipping on only one piece. In most cases, there is always a minimum dollar or case quantity that must be ordered before drop shipping will be considered. This policy change by Tea Connexions, just gave our Distributors another competitive advantage. Now, our members can focus their resources on marketing, and pre-sell products which are then drop shipped. This is another competitive advantage we offer to our Distributors.
top

3. Become a Master Distributor
Tea Connexions and Shangers Teaopolis Ltd. are actively seeking out Master Distributors in the following states: Washington, Texas, Colorado, Minnesota, Wisconsin, Louisiana, Illinois, Tennessee, Michigan, Ohio, Georgia, South Carolina, New York, New Jersey, Pennsylvania, Virginia, and Conneticut. If you live in one of these states or a neighboring state, and would like to be considered for this program, click here for further details.
top

4. Policy Changes Effective April 1, 2004
No Minimums for Drop Shipping
As mentioned earlier, the implementation of the Master Distributor program means that no minimum dollar values will be required for drop shipping.

No Minimums for Ordering
As mentioned earlier, the implementation of the Master Distributor program means that no minimum product quantities will be required for ordering.

Private Labeling
Effective April 1, 2004 Tea Connexions will no longer be offering air freight service on private label orders, meaning all orders must be brought in by sea.

Re-Seller Program Discontinued
As of March 1, 2004 all existing Re-Sellers have been converted to Drop Ship Distributors. The new logistics realities created through the Master Distributor program means we can upgrade all Re-Sellers to Drop Ship Distributors, who now have the opportunity to benefit from the e-commerce services Tea Connexions offers. New Re-Sellers that join during the month of March will automatically be converted to Drop Ship Distributors as well.

Drop Ship Distributor Program
As of April 1, 2004 the Drop Ship Distributor program will be replacing the Re-Seller program. The new Drop Ship Distributor program will include two new marketing services in the membership package:

i) PDF Catalog that can be customized to the needs of the Drop Ship Distributor.
ii) HTML Catalog that can be customized to the needs of the Drop Ship Distributor.

These new products are included in this package to facilitate the e-commerce capabilities of Drop Ship Distributors. The total value of the Drop Ship Distributor program is $794.97 and includes $187.15 worth of product, 50 Gourmet teas…beautifully packaged catalogs valued at $32.50, 50 Tea…the beverage of choice brochures valued at $20.32, the two new customizable electronic marketing tools-PDF and HTML catalogs-valued at $255, plus access to the online training valued at $300. This package will be offered at the discounted rate of $744.27, including shipping and handling.
top

5. Distributor Membership Changes Effective April 15, 2004
Effective April 15, 2004, the cost of a Distributor membership and all package deals presently offered will change for the following reasons:

i) More Product: Product in the basic Distributor package will increase from 104 pieces valued at $1268.15 to 165 pieces valued at $1767.65. In total, new Distributors will receive five each of the following: B1001, W4005, W4001, B1004, PM3001, PM3002, W4004, DT201, DT203, DT205, DT207, AT101, HT401, HT403, NT601, AT04, FF02, FT01, FT04, FT05, FT06, FT07A, FT07B, FT07J, GT01, GT02, MU02, SF02, and ST04 PLUS 20 each of TBIW026. To learn more about these products and other products we offer, click here.

ii) New Marketing Tools: Electronic marketing tools will now become standard components of the membership kit and will now include a PDF and HTML catalog that can be customized to the new members needs. These new additions we believe are essential to increase the Distributors ability to market the products, and have a combined value of $255.

The present Distributorship is valued at $2179.41 and sells for $2024, including shipping and handling.

The new Distributor program, effective April 15, 2004 is valued at $2933.91 and will be sold for $2589.91, including shipping and handling.
top

6. E-Commerce Solution Changes Effective April 15, 2004
The present E-Commerce Solution that we offer valued at $2540, but sold for $995, will be replaced with three distinct web solutions to suit different customer needs:

i) Junior Web Solution: Unique Domain Hosted Website with 18 HTML pages with full text, Home Page Design, Teazine and product inquiry forms, One Year Domain Reservation, and 4 Months of html page hosting. This web solution is a brochure style website that is ideally suited for individuals that presently have their own e-commerce and payment acceptance arrangements in place. The suggested retail of this package is $1275 and will be offered for only $637.50

ii) Senior Web Solution: Unique Domain Hosted Website with 18 HTML pages with full text, Home Page Design, Wholesale request, teazine, and re-seller recruitment forms. One Year Domain Reservation, Shopping Cart To Accept Online Orders, All Products Added to Store, FAQ page to help customers order, Shared SSL Security and Encryption, 4 Months of html page hosting, 4 Months shopping cart hosting, Link on Tea4Free.com and Leaftea.com. The suggested retail of this package is $3259 and will be offered for only $1629.50.

iii) Premium Web Solution: Unique Domain Hosted Website with 18 HTML pages with full text, Home Page Design, FAQ page to help customers order, Wholesale request, teazine, and re-seller recruitment forms, Two Extra Forms (Corporate Gifts and/or Fundraising and/or Contest), Two Year Domain Reservation, Shopping Cart To Accept Online Orders, All Products Added to Store, Shared SSL Security and Encryption, 12 Months of html page hosting, 12 Months shopping cart hosting, 4 Months of Internet Promotion, PayPal Implementation, Logo Design, Link on Tea4Free.com and Leaftea.com. The suggested retail of this package is $4189 and will be offered for only $2094.50.

Because of these new Web Solution changes, the present Distributor package deals will change as well.

• The Silver Package will increase from $3473.63 to $4201.60
• The Gold Package will increase from $3939.65 to $4736.92
• The Platinum Package will increase from $5268.42 to $6417.83
• The Titanium Package will increase from $7405.72 to $9073.33
• The Ultimate Package will increase from $26316.26 to $27170.09

7. New Catalog
Creation of new print tools has been an issue for Tea Connexions. In the past when it made logistical sense to have minimums for drop shipping and ordering, our biggest concern was that we did not want to force Distributors to carry product they did not want to market. For this reason, we developed a catalog solution that essentially enabled members to custom make a catalog through a brochure and insert system. All the design was completed, but the printing just proved unfeasible. For this reason we introduced PDF catalogs that could be customized to the Distributors' selling needs. However, because of the no minimum drop shipping and ordering policy, which has been made possible through Master Distributors, Tea Connexions will be replacing our existing catalog with a brand new one. This new catalog will be available on April 15, 2004 and will include all the products presently offered.
top

8. New Products
In 2004 we intend to add more than 100 new products, including 18 new loose tea varieties from India, 5 gram servings of about 40 loose teas, 50 gram servings of loose teas each in a unique and decorative cloth pouch, bulk teas, and 6 new tea bag varieties from China. The teas from India are scheduled to arrive in three separate shipments, plus we have a shipment coming from China.

In addition, at the request of some of our Distributors, we have asked our Indian supplier to put the imported label on all products on the outside cellophane of the products from India. This will be applicable to all loose carton teas and the gourmet teas beautifully packaged.

Finally, UPC codes. Due to increased demand, we will be implementing these sometime this year.

More details of our product initiatives will be released as the products are launched.
top

9. Take Me 2 Tea
I will be attending the Take Me 2 Tea conference scheduled for Las Vegas from March 28 to March 30. I will be arriving on March 26th and staying at the Las Vegas Hilton, the venue for the conference. Also attending will be our two Master Distributors, and from what I understand several Distributors will be attending as well. One of our Distributors, George Sibert of Royal Gourmet Teas will be displaying at the show. Existing and prospective Distributors can meet our Master Distributors and I at the show. We look forward to meeting with you.
top

10. Ad Co-Op Deadline Extended
The Ad Co-Op is a Member-driven advertising campaign managed by Tea Connexions to build the buying group. Originally proposed in 2002 by an existing Distributor, this Advertising program is designed as a 24-month campaign and is based upon the lessons learned from the first Ad Co-Op.

The decision to proceed with this program is exclusively dependent on Member participation. This program will only proceed provided that 90% of the units are sold by Friday, July 30, 2004.

Distributor members that participate in the Ad Co-Op can profit from Tea Connexions' growth.

The Ad Co-Op has five main objectives

1. To empower Distributor members with small advertising budgets to get involved in a costly and extensive advertising campaign.
2. To reduce the risk by sharing it with other partipants.
3. To create a residual, passive revenue stream for participants.
4. To ensure the continued growth of the buying group.
5. To increase the profile and exposure of this program and the unique products being offered.

In light of the recent policy changes, specifically conversion of Re-Sellers to Drop Ship Distributors and the new no minimum policies on drop shipping and ordering, we have decided to extend the Ad Co-Op deadline from March 19, 2004 to July 30, 2004.

The Ad Co-Op is open to Drop Ship Distributors and Distributors. Information will be posted in the online training.
top

11. Final Thoughts: Looking Ahead to 2004 and Beyond
Looking ahead to 2004 and beyond, I am very excited. Already, the first quarter of 2004 has been tremendous. Tea Connexions signed on Kenneth Kinnan of Mule Mountain Tea as our second Master Distributor, meaning we are now able to better serve Western United States customers. From a revenue perspective, I think 2004 will be a tremendous year and anticipate triple digit growth over 2003 sales.

Plans for the future include the following:

• Introduction of more teas from India, China, and other countries. We have already issued purchase orders for more teas from India and China, and are in negotiations with suppliers from Sri Lanka and South Africa.
• Introduction of Shangers products, including accessories, food products and other products offered exclusively to our members. The first introduction is scheduled for third quarter.
• Launch of the Teaopolis Tea Party Program. The materials have been created and are undergoing a final review before we get all the printing done for this program. We anticipate that the materials will be printed before the end of April.
• The holding of six to eight more Master Distributor conferences, to present the Master Distributor opportunity. We anticipate that more Master Distributors will be in place in the key states identified earlier. The next conference is scheduled for late April or early May. Details will be released once this is confirmed.
• The launch of the Teaopolis concept. Our goal is to have the first ones set up in Florida and California in the third or fourth quarter of this year.
• More corporate alliances, to increase the value of membership in the buying group. The Shangers alliance and our recent alliance with a reputable Chinese supplier are complete. We are now seeking other corporate alliances with other companies.
• The introduction of a financing program for new members. We are hoping to offer financing packages that will involve a deposit and monthly payment spread out over 12 to 24 months. Increased financing options and flexibility will have a positive impact.
• Continued revenue growth and investment in growing the company. The bottom line, the stronger Tea Connexions becomes the stronger the whole buying group will be.