Why No?, page-2

Hi Williak

I do think there is a chance of Couran Cove succeeding but I believe the reason the ordinary shares have fallen down is that we take all the risk for this new business. The directors and outsiders who took all the preference shares are getting 8% dividends per year and then in five years they can convert to ordinary shares and take control if things are going well but otherwise they can apply to get their cash back and we ordinary shareholders will be in great trouble then. They also have the right to extend the 5 year period for holding their preference shares if they want to. I think it is disgusting that the ordinary shareholders of this company were not offered the preference shares and now we are just offered more ordinary shares at 38c which looks like failing.

I live in WA and I recently visited the McGrath site and they are only building about 7 houses which is the lowest I have seen in recent years. I also went down to Boyanup to check out the Meadowbrooke site which is McGrath's biggest contract. Not a single house has been put into that site other than the McGrath demonstration houses. However a lot of work has been done recently on the Meadowbrooke site which made me think they are feeling confident of it working. I was told that six houses have been paid for and others have been ordered by people subject to the selling of their own houses.

I also heard recently from an experienced outsider that Bloomer is continuing to go badly and likely to be losing more money. That business has been surprisingly disappointing.

So lets hope that Couran Cove goes well. If things do work over the next 5 years then the preference shareholders convert their 55c purchase cost into ordinary shares so the ordinary shares will have to be over 55c at that point. Lets hope it works if we are still in there.

GPASAS