ken's response and my follow up response

Before we discuss the issue at hand, I must state that I am very impressed with the level of feedback that I have received to date and I am thankful that Ken has taken the time to address the issue within the constraints that he has.

I am sure that there will be some very positive and not so positive speculation surrounding this. I personally am sitting on the positive side of the fence but as usual I welcome contrarian views.

Nice deep breath everyone and happy reading!

Kens response ...................

XXXXX

Thank you for your email and I do welcome feedback from shareholders.

Key does endeavour to maintain open lines of communication with shareholders, although as a listed Company we must always be mindful of the constraints of the ASX Listing Rules and confidentiality requirements arising from contractual arrangements.

You have raised some concern in relation to the proposed Resolution 4 to be put to the AGM on 23 November 2009 which seeks approval for a share placement of up to 70 million ordinary shares in the Company in order to raise additional working capital.

Key’s management and Board consider that in the current environment it would be prudent to have shareholder approval to issue up to this number of new shares should an appropriate acquisition or other business opportunity become available. In the absence of having this facility available, there would be delays of approximately 35 days (minimum) in order to convene a shareholders’ meeting and such delays could adversely impact upon Key’s ability to transact. This is especially so with Christmas fast approaching and the following holiday period. We at Key are very cognizant of the need to preserve our cash balance as far as possible and therefore the issue of new Key scrip is considered to be a more viable alternative when considering the elements of a possible transaction.

As you would appreciate, Key has numerous proposals presented to it from time to time – these are evaluated and if we have any interest in pursuing them we engage with the proponent and establish whether there is the basis for a transaction which would add value to the Key portfolio. Typically, most of these proposals are not pursued for one reason or another. It is an advantage however to have the immediate capacity to issue new shares as consideration for a transaction, should a decision be made to proceed.

Achieving a balance between current shareholders and new sophisticated/professional investors when issuing fresh equity capital is always a challenge. Certainly, we consider a share purchase plan for current shareholders if there is a need to raise a modest amount of new equity capital. When larger amounts of capital are required then the limitations of SPPs inevitably lead to institutional or sophisticated investors being approached for funds.

None of this is startling or new – it happens frequently in the life of many growing companies. Resolution 4 is essentially a pre-approval which, if passed, will be utilized by the Board if, and only if, Key has a need to raise new equity capital within 3 months following the AGM. It is a pro-active step by your Board rather than being reactive and waiting for an appropriate opportunity to present itself before approaching Key shareholders for approval for the issue of new shares. What we do not have at present is a transaction for which additional working capital is specifically required – hence we are unable to provide any further details beyond what appears in the Notice of Meeting. Shareholders will be advised at the time of the AGM if this position has changed.

The Board recognizes that the issue of up to 70 million new shares to new investors would significantly dilute the shareholdings of current shareholders – current Board members would be similarly diluted in their own shareholdings. You may be assured that the issue of such new shares would only be undertaken if the Board considered it was in the best interests of shareholders as a whole.

I understand the frustration that some shareholders have expressed in relation to Resolution 4 – in the absence of specific details of the purpose to which any funds raised may be put can lead to some shareholders adopting a ‘conspiracy theory’ – I regret that prospect but may I suggest that shareholders need to place some faith in the Board and its ability to guide the Company in a direction which will be beneficial for shareholder value.

I hope I have managed to answer you concerns.

Best Regards
Ken R.

My follow up reply ..............

Hi Ken,

Thank you for taking the time to respond in such a detailed manner and specifically clarifying the need to be able to utilise funds quickly as opportunities arise.

With regard to the institutional/sophisticated placement versus SPP issue, I understand your perspective here and do not require further clarification.

With regard to the actual need for a placement, I think much of the confusion stems from the three month window of opportunity as stated in resolution 4.

This brings me to the question that I previously raised but may not have articulated very well .........

If the placement is for unspecified, potential opportunities that *may* arise within the medium term than wouldn't it be more prudent to ask for a 12 month window so as KEY are covered for the full year period?

I take on board your aforementioned point regarding "confidentiality requirements arising from contractual arrangements" however, it seems to the layman that you have at the least, a level of confidence that some form of opportunity will arise within this three month window.

With regard to having faith in the board, I am a strong believer in KEY and KEY's board, however the clarification that I and fellow shareholders have sort over the recent past in simply good investment practice which I know you would appreciate as well.

I should also take this opportunity to congratulate you on the UK acquisition. I was very impressed with how the acquisition was managed to fruition. It highlighted managements ability to identify undervalued opportunities. More importantly, I was impressed with the level of Due Diligence and the resolve of management to be able to walk away from the deal if all boxes were not ticked.

As mentioned in my earlier email, I will post our correspondence publicly so that other interested shareholders may also benefit from the communication that you have kindly offered.

Thank you again.

Best regards
XXXX