CTI LOGISTICS LIMITED — Capital/Financing Update 2005

Oct 19, 2005

("15% buy-back"). This buy-back was completed on 17 October 2005 and a total of 3,419,540 shares were acquired for a total outlay of \$3,040,135 representing an average price per share of 89 cents.

Although the Company continues to pursue suitable growth strategies, in the current market environment
sensibly priced acquisitions are not readily identifiable. This proposed buy-back presents an opportunity to grow net tangible asset backing and earnings per share as illustrated below in the paragraph headed "Financial" $\mathbf{E}$ Effect of the Buy-Back on the Company."

The board of directors believes that there may be shareholders who would be sellers at the current historical high prices but who could not find a ready market for their shares in the absence of a share buy-back. Such a market overhang could lead to a softening of the market price of the shares over time. In the past, the lack of substantial buying support for the Company's shares has meant that quite small parcels of shares offered for sale have led to a decline in the market price. It therefore seems appropriate to extend the Company's buy-back offer to the extent that it is financially prudent to do so, to enable other willing sellers to sell their shares in an orderly manner. Hence the board has decided to ask shareholders for permission to buy-back, on market, up to a further 33.33% of issued shares in the Company.

Source of Funds for the Buy-Back

The Company's operations continue to generate cash at a faster rate than current capital expenditure rate company of operations commate to generate can at a nation may have made carrent expirities. The Company has undrawn bank facilities at the date of this Explanatory Memorandum of \$8.35 million. Based on the last sale price of the Company's shares prior to the date of this Explanatory Memorandum, of 95 cents, the Compa of share purchases it is not possible to predict whether purchases will be made from cash resources or from bank facilities.

Financial Effect of the Buy-Back on the Company

There will be a "funding cost" relating to the acquisition of shares under the buy-back. This will be a combination of interest on bank facilities and interest income foregone. Assuming a worst case scenario of full debt funding, at an average share price of 95 cents each, and using a funding cost of 8 percent, the notional funding cost after tax would be \$343,626 annually. For every 1 cent variation in the average price paid, the funding cost after tax varies by \$3,617. These figures also assume that the full 33.33 percent is bought back. There is a compensating cash flow benefit to the Company in respect of any future dividends that may be paid. Assuming the full 33.33 percent is bought-back, the saving in dividend cash outflow would be \$64,591 for every one cent dividend paid. In respect of the year ended 30 June 2005, the Company declared dividends aggregating 3 cents per share.

The amount spent on the buy-back will also reduce the Company's total equity and thereby have the effect of increasing balance sheet gearing. In addition, the amount of the buy-back which is funded out of borrowings will increase debt levels accordingly. The directors believe that debt to finance the buy-back should not exceed \$5.7 million. This additional amount would not be drawn for the full year as normal operating cash inflows as well as \$717,642 in receipts due during the period to 30 June 2006 for the prior sale of businesses will be applied to reduce debt levels.

Based on the consolidated statement of financial position at 30 June 2005 which showed total equity of \$22,534,171 and total liabilities of \$16,970,573, it is estimated that, as a consequence of this proposed transaction, total equity would reduce to \$13,925,351 and total liabilities would increase to \$22,695,386. These figures do not take into account the results for the consolidated entity in the period after 30 June 2005. Any profits earned subsequent to 30 June 2005 will increase total equity and further improve gearing.

The Directors do not believe that there will be any material adverse effect on the prospects of the Company arising out of the proposed increase in gearing.

All other factors being constant, the effect of a reduction in the number of shares on issue will tend to increase both the net tangible asset value of the remaining shares and increase the Company's earnings per share because the weighted average number of shares used in the calculation is reduced by the number bought back. It is not possible to calculate the future effect of these factors as the number of shares bought back and the total amount likely to be outlaid is not known. However, based on a 95 cent average share buy-back price, if the proposed share-buy back effects are applied to the results for the 2005 financial year ended on 30 June 2005, earnings per share increases from $7.77$ cents to 10.53 cents and net tangible asset backing per share increases from 100.95 cents to 105.28 cents. Current trading conditions and prospects suggest that results for the 2005-06 financial year will be comparable with the 2004-05 result.

Interests of Directors

At the date of this Explanatory Memorandum none of the directors intends to participate in the buy-back.

Information Regarding Current Share Market Price

During the period of the initial 10 per cent buy-back (20 September 2004 to 8 December 2004), the Company purchased 2,532,993 shares the lowest price paid being 58 cents and the highest being 61 cents. During that period another 269,820 shares were purchased by other parties at prices ranging from 58 cents to 63 cents.

In the period between the initial buy-back and the 15% buy back, 173,891 shares were traded on market at prices ranging from 61 cents to 70 cents.

The details of the 3.419.540 shares acquired over the course of the 15% buy-back are as follows

Month	Number of Shares	High-Low Price
	Acquired	(cents)
January 2005	28,019	$65 - 68$
February 2005	2,223	69-71
March 2005	228,311	70-74
April 2005	216,254	70-76
May 2005	16,512	$72 - 73.5$
June 2005	264,036	$72 - 80$
July 2005	145,217	80-80
August 2005	-
September 2005	109,260	78-81.5
October 2005(part)	2,409,708	83-95

During the period of the 15% buy-back another 306,036 shares were purchased by other parties at prices ranging from 66 cents to 95.5 cents.

20 October 2005

CTI LOGISTICS LIMITED ABN 69 008 778 925

Registered Office: 1 Drummond Place West Perth, Western Australia 6005 Facsimile: (08) 9227 8000

The Secretary CTI Logistics Limited 1 Drummond Place WEST PERTH WA 6005

I/We
0f
being a member/members of CTI Logistics Limited
hereby appoint
of
or failing him/her
of

or failing him/her, the Chairman of the Meeting as my/our Proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at 1 Drummond Place, West Perth, Western Australia on Thursday 17 November 2005 at 5.00pm and at any adjournment thereof.

If two Proxies are being appointed the proportion of my/our voting rights that each Proxy is appointed to represent is as set out above.

Note: If you wish to direct your Proxy how to vote in respect of the proposed resolution, you should tick the appropriate box below. Otherwise your Proxy may vote as he/she thinks fit or abstain from voting.

ORDINARY RESOLUTIONS	FOR	AGAINST	ABSTAIN
1. To re-elect Mr Bruce Saxild as a director of the Company.		$\Box$ $\Box$ $\Box$
2. To re-elect Mr David Mellor as a director of the Company.		1 1 1 1 1 1 1
3. To adopt the remuneration report		$\begin{array}{ c c c c c c c c c c c c c c c c c c c$
4. To authorise the share buy-back		$\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2}$ $\sqrt{2$

Signed this ....................................

Signature of member(s)....................................

• NOTE: * A member of the Company entitled to attend and vote is entitled to appoint not more than two Proxies to attend the Annual General Meeting and vote on his/her behalf. Where more than one Proxy is appointed, each Proxy must be appointed to represent a specified proportion of the member's voting rights. A Proxy need not be a member of the Company.
• * To be effective, the Proxy Form must be properly completed and signed by the member or his Attorney duly authorised in writing or, if the member is a body corporate, either in any manner permitted by the Corporations Law or under the hand of an officer or attorney duly authorised in writing by the member.
• * The Proxy Form and any Power of Attorney under which it is signed or a notarially certified copy thereof, or a facsimile transmission copy thereof must be received by the Company at its registered office not less than 48 hours before the time of the Annual General Meeting.
• Proxies lodged in favour of the Chairman which do not contain a direction on how to vote will be exercised by the Chairman in favour of the resolutions.
• * The directors have determined in accordance with Regulation 7.11.37 of the Corporation Regulations 2001 that, for the purposes of attending and voting at the meeting, shares will be taken to be held by the registered holders at 5pm on Tuesday 15 November 2005