takeover, page-9

ZhiZhai,

Apologies for taking time to respond.

I note you do not own CPI and I assume from the line and tone of your questions that you are considering making an investment in the company.

To that end I am conscious of the potential for me providing "financial advice" to you.

So my answers to your questions will be somewhat indirect, if you don't mind. I will provide you with information that is on the public record which should make it easy for you to answer your own questions:

1) Scope for 20c special dividend to be fully franked.
As noted in this thread, as at 30 June 2010, the franking credit balance was over $13m. The arithmetic in terms of the ability to fully frank the 20c special dividend is therefore quite rudimentary. The other thing that needs to be considered when assesssing the scope for dividend payouts is the extent of retained earnings, which is minus $29m, which previosuly would have been a problem for payout ratios >100%, but new legislation provides for >100% payout ratios providing the enterprise is trading solvently and will continue to do so after any dividends are paid. To conclude whther or not CPI will remain solvent after the payment of a 20c dividend is a little bit more challenging but a simple Excel spreadsheet exercise looking at how solvency metrics such as EBITDA-to-Net Debt or EBITDA-Net Interest change assuming the 20cps dividend (about $12m in nominal cash terms) is paid.

2) Will distribution be incorprated in FY11 tax returns?
Page 2 of the Scheme of Arrangment Announcement made on 17 January has a paragraph dedicated exclusively to the issue of timing under the heading TIMING.

3) What is the likelihood of the takeover being completed wihtout any issues?
I haven't given this much thought at all, as I am ambivalent whether or not the Scheme is implemented. But it should be reasonably easy for you to come to some sort of conlusion given the recommendations of the directors, the shareholding structure of the company, the intrinsic valuation of the business compared to the offer price, the historical financial performance of the company, the industry structure in which CPI operates and the history of the option agreement between Trojan and Octavium. I really don't want to express a direct opinion on this which could influence your investment decision, but I think that I have drawn your attention to enough publicly-available information for you to quite easily come to your own conclusion.

4) When will shareholders receive the final settlement amounts?
I have no way of knowing the exact date (no one does really); as for the approximate date, refer to question 2 herein.

I'm not intentionally trying to be obtuse here, but it is clear that you want to do something in the stock based on the answers to the questions you have posed, and I am unwilling to advise you either way (I am merely an enthusiastic investor, and not a licenced financial advisor), so what I have tried to do is to point you in the direction of the relevant public information of which you should probably have studied anyway before posing some of the questions you did.

Hope this helps

Good Luck!

Cameron