EXCELSIOR CAPITAL LTD - Proxy Solicitation & Information Statement 2008

CMI LIMITED

ACN 050 542 553

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Notices of Meetings of: Ordinary and Class A Shareholders

These meetings of the Ordinary Shareholders and the Class A Shareholders are being held to modify and streamline the capital structure of CMI Limited by way of a selective capital reduction of Class A Shares. You are invited to attend in person the relevant meetings of the Company. There are two meetings.

The first meeting will involve voting by both the Ordinary and Class A Shareholders.
The second meeting of the Class A Shareholders will involve voting by Class A Shareholders only.

Summary of Important Information

Date of Meetings	7th November 2008 at 10.00am
Venue of Meetings	Brisbane Riverview Hotel, Charter Room,
	Corner Kingsford Smith Drive and Hunt Street
	Hamilton, BrisbaneQueensland 4007
Time of Meetings	10am for the combined Ordinary and Class A Shareholders’
	meeting followed immediately by the Class A Shareholders’
	meeting(expectedly10.30am).
Last time by which proxy forms for the Meetings
can be lodged	10.00am 5th November 2008
Voting Record Date	10.00am 5th November 2008
Payment Record Date	12th December 2008

This Document is important:

If you do not understand it or are in any doubt about the action which you are required to take, you should consult your legal or financial or other professional adviser immediately.

CHAIRMAN’S LETTER	1
DEfINITIONS	2
NOTICE Of MEETINg Of
COMBINED ORDINARY AND CLASS A
SHAREHOLDERS	3
NOTICE Of MEETINg Of CLASS A
SHAREHOLDERS	4
ExpLANATORY MEMORANDuM	5
ANNExuRE A – ExpERT’S REpORT	9

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CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Chairman’s Letter

CMI Limited ACN 050 542 553

Dear Shareholder

These meetings should not be confused with the Annual general Meeting which is normally held in November each year. These meetings of the Ordinary Shareholders and the Class A Shareholders are being held to modify and streamline the capital structure of CMI Limited.

The Directors are aware of the concerns of Class A Shareholders about the declining Class A Share price, which has been as low as $0.39 for Class A Shares. Your Directors have been working diligently to resolve this issue and find a way to achieve a fair and equitable result for both Ordinary and Class A Shareholders.

Several alternatives have been considered by the Directors including a partial share swap of Ordinary Shares for Class A Shares or a partial share and cash offer or a full cash offer. In coming to a conclusion as to which is the best alternative, the Directors have taken into consideration the current state of the financial markets and the lack of liquidity in the market of both the Company’s Ordinary and Class A stock and have decided that it is in the best interests of the Class A Shareholders and the Company to provide the Class A Shareholders with the full cash offer option. The Class A Shareholders can then have the flexibility to determine for themselves how they will utilise the cash proceeds.

The consideration proposed to be paid by the Company to each Class A Shareholder under the selective share capital reduction is $1.00 per share and will be paid to Class A Shareholders registered on the payment Record Date.

for the capital reduction to proceed, we need to achieve the following vote at the meetings of Ordinary and Class A Shareholders:

75% {For} vote of all entitled Ordinary and Class A Shareholders voting in person or by proxy at the combined Ordinary and Class A Shareholders meeting.

Important notes on voting at the combined meeting of Ordinary and Class A Shareholders

the votes of the Class A Shareholders voting in favour of the resolution at this meeting will not be counted as they stand to receive consideration as part of the selective capital reduction; only votes against will be counted; and
Ordinary Shareholders that are also holders of Class A Shares on the Voting Record Date will not be entitled to vote in favour of the resolution as they stand to receive consideration as part of the selective capital reduction.

Note: The Company requests that, in order to provide the Company with information on the views on this issue of all the Shareholders, Shareholders in favour of the Resolution should still vote {FOR} the Resolution even though in accordance with section 256C(2)(a) of the Act the votes may be disregarded.

75% {For} vote of the Class A Shareholders voting in person or by proxy at the Class A Shareholders’ meeting.

As this level of acceptance is normally difficult to achieve, if you are in favour of the proposal, you will need to ensure that you vote either in person or by proxy to achieve an affirmative result.

The Directors believe that Class A Shareholders should consider the likely trading price for the Class A Shares if this proposal is not approved and should consider the possibility that in the short term the price may fall back to levels that existed prior to the announcement of this proposed selective share capital reduction.

The Directors have engaged Tolhurst Interfinancial Limited to prepare an expert’s report to assess whether the proposed selective share capital reduction is fair and reasonable. The conclusion of the Expert is that the proposed capital reduction is fair and reasonable and their reasons for forming that opinion are detailed in their report, a copy of which is contained in Annexure A for your consideration.

further information in relation to the proposed selective share capital reduction is set out in the attached Explanatory Memorandum.

please read this information carefully. If you have any queries you should consult your legal, financial or other professional adviser immediately.

Yours faithfully

Colin Ryan

Chairman CMI Limited

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Definitions

A number of capitalised terms are used throughout the Notices of Meetings and Explanatory Memorandum. Except to the extent the context otherwise requires:

Term	Defnition
Act	the_Corporations Act 2001_(Cth).
Associates	has the meaning given to it in the act.
Capital Reduction	the selective reduction of Class a shares in the Company which is the subject of the resolutions.
Chairman’s Letter	the letter to shareholders signed by Mr Colin ryan which is contained in this booklet.
Class A Share	means a Class a share in the Company formerly known as a CPs or convertible preference share.
Class A Shareholder	means a holder of Class a shares in the Company.
Company	CMI Limited aCN 050 542 553.
Directors	the directors of the Company.
Expert	means Tolhurst Interfinancial Limited aCN 010 740 342.
Expert’s Report	the report prepared by Tolhurst Interfinancial Limited on the fairness and reasonableness of the Capital reduction which is attached as annexure a.
Explanatory Memorandum	the explanatory memorandum accompanying the Notices of Meetings.
Listing Rules	means the Listing rules of australian securities Exchange.
Meetings	the meetings of the combined ordinary and Class a shareholders of the Company and the meeting of Class a shareholders of the Company to be held on 7th November 2008.
Member	means a shareholder.
Notices of Meetings	the notices of meetings contained in this booklet dated 1st october 2008.
Ordinary Shares	means fully paid ordinary shares in the Company.
Ordinary Shareholder	means a holder of ordinary shares in the Company.
Payment Record Date	7.00pm on 12th December 2008 subject to the passing of the resolutions as special resolutions (on the basis that the sum of $1 per share will be paid by the Company on cancellation to the holder or holders of Class a shares registered in the Company’s register of members), on which a Class a shareholder needs to be registered as the owner of Class a shares in the Company to be eligible for payment arising from the Transaction.
Resolutions	the resolutions to approve the Capital reduction to be considered at the Meetings.
Share	an ordinary share in the Company and a Class a share in the Company.
Shareholder	a holder of shares.
Special Resolutions	a resolution that has been passed by at least 75% of the votes cast by shareholders entitled to vote on the resolution.
Transaction	the Capital reduction involving the cancellation of all Class a shares on issue for a consideration of $1 per Class a share.
Voting Power	has the meaning given to it in the act.
Voting Record Date	In accordance with regulation 7.11.37 of the Corporations regulations 2001, all securities of the Company that are quoted securities at 10.00am (Brisbane time) on the 5th November 2008 are taken, for the purposes of the above Meetings, to be held by the persons who held them at that time. only those persons will be entitled to vote at the Meetings on the 7th November 2008.

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Notice of meeting of combined Ordinary and Class A Shareholders

CMI Limited ACN 050 542 553

Notice is given that a meeting of all Shareholders of CMI Limited (Company) will be held at Riverview Hotel, Charter Room, Corner Kingsford Smith Drive and Hunt Street, Hamilton, Brisbane Queensland 4007 on 7th November 2008 at 10am (Brisbane time).

AgENDA – SPECIAL BuSINESS

Resolution – Capital Reduction

To consider and, if thought fit, pass the following Resolution as a Special Resolution:

‘That, subject to the Class A Shareholders and the combined Ordinary Shareholders and Class A Shareholders of the Company separately approving the cancellation of Class A Shares (and having regard to the other information provided in the Notices of Meetings of Ordinary and Class A Shareholders), IT IS RESOLVED that the Company’s share capital be reduced by the cancellation of all Class A Shares on issue on the Payment Record Date for the consideration of $1.00 per Class A Share.’

NOTES

(a) A Member who is entitled to attend and cast a vote at the meeting is entitled to appoint a proxy.
(b) The proxy need not be a Member of the Company. A Member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise.
(c) If you wish to appoint a proxy and are entitled to do so, then complete and return the enclosed proxy form.
(d) A corporation may elect to appoint a representative in accordance with the Act in which case the Company will require written proof of the representative’s appointment which must be lodged with or presented to the Company before the meeting.
(e) If you have any queries on how to cast your votes then call Sharyn Williams on 07 3865 9865 during business hours.

VOTINg ExCLuSION

At this combined Ordinary and Class A Shareholders meeting, in accordance with section 256C(2)(a) of the Act, any votes cast by Ordinary Shareholders that are also holders of Class A Shares on the Voting Record Date (or their Associates) in favour of the Resolution will be disregarded and only votes cast {Against} the Resolution by Class A Shareholders will be counted.

However, the Company need not disregard any such vote in favour of the Resolution if:

(a) it is cast by any person referred to above as a proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or
(b) it is cast by the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Dated: 1st October 2008

By Order of the Board

Sharyn Williams

Sharyn Williams Company Secretary

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Notice of meeting of Class A Shareholders

CMI Limited ACN 050 542 553

Notice is given that a meeting of the Class A Shareholders of CMI Limited (Company) will be held at Riverview Hotel, Charter Room, Corner Kingsford Smith Drive and Hunt Street, Hamilton, Brisbane Queensland 4007 on 7th November 2008 immediately after the meeting of the combined Ordinary and Class A Shareholders (expectedly 10.30am).

AgENDA – SPECIAL BuSINESS

Resolution – Capital Reduction

To consider and, if thought fit, pass the following Resolution as a Special Resolution:

NOTES

(a) A Member who is entitled to attend and cast a vote at the meeting is entitled to appoint a proxy.
(b) The proxy need not be a Member of the Company. A Member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise.
(c) If you wish to appoint a proxy and are entitled to do so, then complete and return the enclosed proxy form.
(d) A corporation may elect to appoint a representative in accordance with the Act in which case the Company will require written proof of the representative’s appointment which must be lodged with or presented to the Company before the meeting.
(e) If you have any queries on how to cast your votes then call Sharyn Williams on 07 3865 9865 during business hours.

VOTINg ExCLuSION

Ordinary Shareholders are not eligible to vote at the Class A Shareholders’ Meeting.

Dated: 1st October 2008 By Order of the Board

Sharyn Williams

Sharyn Williams Company Secretary

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Explanatory Memorandum

CMI Limited ACN 050 542 553

The information in this Explanatory Memorandum is provided to Members in compliance with the Act and the Listing Rules.

1 Purpose of the Resolutions

1.1 The information in this Explanatory Memorandum is provided to Shareholders in compliance with the regulatory requirements of Chapter 2J Division 1 of the Act and the Listing Rules which relate to capital reductions.

2 Investment advice

2.1 This Explanatory Memorandum does not take into account individual investment objectives, financial situations or particular needs. Shareholders are advised to obtain independent financial, investment, legal and taxation advice before deciding whether or not to attend a relevant meeting or to vote in favour of, or against the Resolutions.

3 Capital Reduction

Background

3.1 under section 256B of the Act, a company is able to return capital to its shareholders if:
(a) the proposal is fair and reasonable to the shareholders as a whole;
(b) the proposal does not materially prejudice the company’s abilities to pay its creditors; and
(c) the proposal is approved by the company’s shareholders under section 256C of the Act.
3.2 The Expert has concluded that the Transaction is fair and reasonable to the Shareholders by:
(a) comparing the value of consideration offered to the Class A Shareholders with the fair value of Class A Shares;
(b) determining the remaining net asset value of the Company (following the proposed Transaction) available for the remaining Ordinary Shareholders; and
(c) assessing the reasonableness of the proposed Transaction in terms of the advantages and disadvantages to all Shareholders of accepting the Capital Reduction and the advantages and disadvantages to all Shareholders if the Capital Reduction is not accepted.
3.3 In the opinion of the Directors, the Transaction will not materially prejudice the ability of the Company to pay its creditors.
3.4 Similarly, the Directors do not consider the solvency of the Company will be in any way materially prejudiced by the Transaction.
3.5 Section 256C(2) of the Act requires that the terms of the Transaction be approved by:
(a) a Special Resolution passed at the combined meeting of all entitled Ordinary and Class A Shareholders (Resolution of Combined Ordinary and Class A Shareholders)

Important notes on voting at the combined meeting of Ordinary and Class A Shareholders

the votes of the Class A Shareholders voting in favour of the resolution at this meeting will not be counted as they stand to receive consideration as part of the selective capital reduction; only votes against will be counted.
Ordinary Shareholders that are also holders of Class A Shares on the Record Date will not be entitled to vote as they stand to receive consideration as part of the selective capital reduction.

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Explanatory Memorandum

(b) a Special Resolution passed at the Class A Shareholders’ Meeting (Resolution of Class A Shareholders).
3.6 The Transaction will proceed only if both the Resolution of the combined Ordinary and Class A Shareholders and the Resolution of the Class A Shareholders are passed. If only one of the Resolutions is passed, or if neither are passed, then:
(a) Class A Shareholders will not receive any consideration for their Class A Shares and will remain Class A Shareholders, and
(b) the Transaction will not proceed.

Consideration

3.7 The consideration for the Transaction payable to the Class A Shareholders will be $1 per Share, which will be paid to them in cash. The total amount which will be paid to Class A Shareholders will be $28,005,311 if the Transaction proceeds.

Effect on the Company

3.8 The Company currently has 33,752,634 Ordinary Shares on issue and 28,005,311 Class A Shares on issue.
3.9 If Shareholders approve the Transaction, then upon completion all 28,005,311 Class A Shares will be cancelled and 33,752,634 Ordinary Shares will remain on issue.
3.10 Accordingly, the remaining Shareholders will then hold 100% of the issued capital of the Company.
3.11 The Capital Reduction will not occur until at least one month after lodgement with ASIC of the notice of passing of the Special Resolutions. In accordance with section 246D of the Act, the Company will ensure that there are no court proceedings taken to prevent the Transaction proceeding before any payment to Class A Shareholders is made.

Directors interests

3.12 As at the date of the Meetings (7th November 2008), the Directors expect to have a relevant interest in the following numbers and percentages of Shares immediately before and immediately after the Capital Reduction:

Name	Before Capital Reduction	After Capital Reduction
Colin ryan	ordinary – 0 (0%)	ordinary – 0 (0%)
	Class a – 0 (0%)
raymond Catelan	ordinary – 11,284,066 (33%)	ordinary – 11,284,066 (33%)
	Class a – 0 (0%)
Danny herceg	ordinary – 0 (0%)	ordinary – 0 (0%)
	Class a – 0 (0%)
richard Catelan	ordinary – 351,632 (1%)	ordinary – 351,632 (1%)
	Class a – 0 (0%)

Disclosure of relevant information

3.13 This Explanatory Memorandum has been issued to satisfy the requirements of section 256C(4) of the Act and contains all information known to the Company that is material to the decision whether to approve the Transaction.

4 Funding the Transaction

4.1 The Company intends to fund the Transaction by way of a loan. The Directors have decided to raise the necessary funds by taking a loan rather than by conducting a capital raising exercise as it is their view, given the Company’s recent losses (in particular the loss on the sale of the Company’s engineering division and the impairment loss from the write down of the finance division’s non-current assets), and the subsequent fall in value of the Company’s shares over the past six months, that investors would be reluctant to subscribe for further shares in the Company, especially in the current challenging economic climate. The loan is made on normal commercial bill facility terms reviewable in October 2011.
4.2 In addition, it is likely that if the Company opted to conduct a capital raising to raise the necessary funds, only the Company’s major Shareholders would subscribe for Shares, which would have the effect of further diluting the shareholdings of the minority shareholders.
4.3 Based on the lender’s current interest rates (and facility fee expenses), the annual interest payable on the amount which the Company will borrow to fund the Transaction, is likely to be approximately $2,520,000.

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Explanatory Memorandum

4.4 The costs to the Company, because of the need to pay interest on the loan, will increase. By way of illustration as to the likely impact that the interest payments may have on the Company’s future earnings, paragraph 4.5 summarises what the likely impact of the interest payments would have been if the Company had entered into the loan in October 2007, based on the earnings of the Company’s continuing operations (which comprise the electrical division and the TJM products division) for the financial year ending 30 June 2008 ( Financial Year ).
4.5 During the financial Year, the Company’s continuing operations produced a profit of $13,903,000 before tax. However, the Company made a total loss of $22,475,000 before tax. The Company’s continuing operations paid approximately $984,000 of interest on $12,500,000 of borrowings. If the Company had borrowed an amount in November 2007 equal to that necessary to fund the Transaction, approximately $1,680,000 extra would have been added to its interest bill for the remainder of the financial Year, which would have reduced the Company’s profit before tax produced by its continuing operations to $12,223,000.
4.6 The information provided in paragraph 4.5 is provided for illustrative purposes only and is not intended to provide an indication as to the precise impact that repayment of the interest on the loan would have on the Company’s earnings for the financial year ending June 2009 and future financial years, or in any way serve as a forecast as to what those earnings are likely to be.

5 Effect on the Company and Shareholders if the Transaction proceeds

5.1 If the Transaction is approved by Shareholders and proceeds, the Directors are of the view that the main effects will be:
(a) a simplified share capital structure, which will make it easier for Shareholders to understand their investment in the Company;
(b) the loan will increase the Company’s debt to equity ratio and increase costs to the Company because of the need to service and repay the loan;
(c) based on the current interest rates, the expected interest (and bank fee expenses) for the loan, borrowed to pay the Class A Shareholders, is considered to be more cost effective for the Company over the long term; and
(d) the possibility of an improvement in the ASx Share price for Ordinary Shares in the medium to long term.

6 Effect on the Company and Shareholders if the Transaction does not proceed

6.1 If the Transaction is not approved and the Company continues existence in its current form, the Directors consider that it is likely that:
(a) the Class A Shares will continue to trade at similar prices to which they traded in the period prior to the proposed Transaction;
(b) it is highly unlikely that Class A Shareholders will be able to realise a more favourable price for their shares in the short to medium term than the price offered under the Transaction; and
(c) due to the illiquidity of the Class A Shares and price sensitivity when trying to sell reasonable volumes, the ability of a Class A Shareholder to dispose of all of their Class A Shares at a known price may not present itself again in the short to medium term.
6.2 The Directors have not declared a dividend to the Class A Shareholders for the past 3 quarters. If the Transaction does not proceed, it is uncertain at present as to when future dividends on the Class A Shares will be declared, and it is likely that this will compound the current lack of liquidity in the market for Class A Shareholders.

7 Tax consequences

7.1 The following tax discussion is a simplified outline of the income tax position for those Australian resident Class A Shareholders discussed below, based on current tax law. The information set out hereunder reflects the Australian income tax law as at 9th September 2008.

The discussion is general in nature only and should not be regarded as tax advice as to a particular Class A Shareholders position. Accordingly, it is recommended that all Class A Shareholders seek professional advice from a qualified taxation advisor specific to their own circumstances.

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Explanatory Memorandum

7.2 Class A Shareholders may make a gain or loss as a result of the selective capital reduction and subsequent cancellation of their shares by the Company. Any gain made in respect of the cancellation of the Class A Shares, which were acquired by Class A Shareholders for long-term investment and held on capital account, should not be assessed as income according to ordinary concepts, but rather as a capital gain. The capital gain should be calculated as the difference between the capital proceeds received and the cost base of the Shares.
7.3 Alternatively, a capital loss may arise where the reduced cost base of a Class A Share exceeds the proceeds received by the Shareholder for the cancellation of the Shares. A capital loss cannot be offset against other income, but can be carried forward indefinitely to be offset against future capital gains.
7.4 The cost base of the Shares should generally be equal to the amount paid for the Shares.
7.5 If a Class A Shareholder makes a capital gain as a result of the cancellation of their Class A Shares, the Class A Shareholder may be eligible to claim the CgT discount. generally, an individual Class A Shareholder or a Class A Shareholder who is the trustee of a trust (that is treated as a flow-through entity for tax purposes) may be entitled to a 50% CGT discount if the Class A Shares have been held for greater than 12 months at the time of the CgT event (being the cancellation of the Shares). A superannuation fund may be entitled to a one-third discount in the same circumstances.
7.6 for a Class A Shareholder who had a cost base of more than $1.00 per Class A Share, they will incur a loss to the extent that their cost base exceeds $1.00 per Class A Share. In this situation, the loss can be offset against other capital gains realised in a financial year or carried forward and offset against future capital gains.
7.7 for Class A Shareholders who hold their Class A Shares as trading stock or on revenue account, different tax consideration will apply and separate advice should be sought.
7.8 The Income Tax Assessment Act 1936 (Cth) (the 1936 Act) contains various integrity measures (in particular section 45B) which can operate to deem a capital payment (such as a return of capital paid by a company) to be a dividend for tax purposes. The Directors of the Company have considered the risks of section 45B applying and are of the opinion that section 45B of the 1936 Act should not apply given all of the circumstances of the selective capital reduction.
7.9 There should be no taxation consequences for the Company from the share capital reduction. This assumes that Section 45B will not apply (refer to 7.8 above).

8 Recommendation of the Directors

8.1 The Directors recommend that;
(a) eligible Shareholders vote in favour of the Resolution in the Notice of Meeting of combined Ordinary and Class A Shareholders; and
(b) Class A Shareholders vote in favour of the Resolution in the Notice of Meeting of all Class A Shareholders.
8.2 To the extent that they are eligible to do so, each of the Directors intends to vote in favour of the Resolutions in respect of the Shares that they control.
8.3 Shareholders who are unable to attend are urged to complete the proxy form and return it as soon as possible, and in any event, not later than 48 hours before the time appointed for the meeting.

9 Date

This Explanatory Memorandum is dated 1st October 2008.

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

ExPERT’S REPORT

Annexure A

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Tolhurst InterFinancial Limited

Financial Services Guide

About us

Tolhurst InterFinancial Limited ( TIFL or we or us or our ) has been engaged by CMI Limited ( CMI or Company ) to provide general financial product advice in the form of an Independent Expert’s Report ( Report ) in connection with the proposed selective capital reduction relating to the Company’s Class A shares.

The Corporations Act 2001 (Cth) requires us to provide this Financial Services Guide ( FSG ) in connection with the attached Report prepared for the benefit of CMI. You are not the party who engaged us to prepare this Report and we are not acting for any person other than CMI. This FSG provides important information designed to assist retail clients in their views of any general financial product advice provided by TIFL in this Report. It is not intended to comprise personal retail financial product advice to retail investors or market-related advice to retail investors. This FSG contains information about our engagement by the directors of CMI to prepare this Report in connection with the proposed capital reduction ( Engagement ), the financial services we are authorised to provide, the remuneration we (and any other relevant parties) may receive in connection with the Engagement, and details of our internal and external dispute resolution systems and how these may be accessed.

Financial services we are licensed to provide

Our Australian Financial Services Licence authorises us to provide the following services to both retail and wholesale clients:

financial product advice in relation to deposit products, securities, derivatives, managed investment schemes (excluding investor directed portfolio services), superannuation and government debentures, stocks and bonds; and
deal in a financial product by arranging for another person to apply for, acquire, vary or dispose of the abovementioned financial products.

General financial product advice

This Report contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. Where the advice relates to the application for or acquisition of a financial product, you should also obtain and read carefully the relevant offer document or explanatory memorandum provided by the issuer or seller of the financial product before making a decision regarding the application for or acquisition of the financial product.

Remuneration, commissions and other benefits

TIFL charges fees for its services, and will receive a fee for its work on this Report. These fees have been agreed on, and will be paid solely by CMI, which has engaged our services for the purpose of providing this Report. TIFL may seek reimbursement of any out of pocket expenses incurred in providing these services. Further details on our fees are set out in Section 12.3 of this Report.

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CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Annexure A

ExPERT’S REPORT

Associations and relationships

Other than as set out in this FSG or this Report, TIFL has no associations or relationships with any person who might reasonably be expected to be capable of influencing it in providing advice under the Engagement. TIFL, its officers and employees and other related parties have not and will not receive, whether directly or indirectly, any commission, fees, or benefits, except for the fees for services rendered in producing this Report. Neither TIFL nor its directors or executives has an interest in securities, directly or indirectly, which are the subject of this Report. TIFL may perform paid services in the ordinary course of business for entities which are the subject of this Report.

Complaints

Our Australian Financial Services Licence requires us to have an internal complaints-handling mechanism. All complaints must be addressed to us in writing. If we are not able to resolve your complaint to your satisfaction, you are entitled to have your matter referred to the Ombudsman Service ( FOS ). You will not be charged for using the FOS service.

To contact TIFL:

Level 3, Emirates House 167 Eagle Street GPO Box 975 Brisbane, Qld 4000 Tel: 07 3218 9100 Fax: 07 3218 9199

To contact the FOS:

GPO Box 3, MELBOURNE, VIC 3001 Tel: 1800 78 08 08 Fax: (03) 9613 6399

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CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

ExPERT’S REPORT

Annexure A

17th September 2008

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The Directors CMI Limited 150 Robinson Road Geebung, Brisbane QLD 4000

Dear Directors

INDEPENDENT EXPERT’S REPORT TO CMI SHAREHOLDERS – PROPOSED SELECTIVE CAPITAL REDUCTION

1. Introduction

This Report is both an Independent Expert’s Report and Financial Services Guide ( FSG ).

On 4 September 2008, CMI Limited ( CMI or the Company ) announced a proposal to reduce the share capital of the Company through a selective capital reduction and cancellation of all of its Class A shares ( Proposed Capital Reduction ).

CMI is an Australian public company listed on the Australian Securities Exchange ( ASX ), with a market capitalisation for its ordinary shares of approximately $35.1 million as at 16 September 2008. CMI’s business operations were consolidated in April 2008 when the Company divested its engineering division (excluding TJM Products). Today, CMI’s remaining business units comprise:

the Electrical Division;
TJM; and
CapitalCorp Finance.

Under the terms of the Proposed Capital Reduction, CMI’s 1,702 Class A shareholders ( Class A Shareholders ) holding 28,005,311 shares will receive $1.00 per Class A share. The terms and conditions of the Proposed Capital Reduction are discussed in the Notices of Meeting and Explanatory Memorandum to which this Report is attached.

There is no statutory requirement for CMI to commission an independent expert’s report in the present circumstances but ASIC Regulatory Guide 111 indicates that an expert’s report should usually accompany the explanatory memorandum for a selective capital reduction to satisfy the information requirements under section 256C(4) of the Corporations Act 2001 (Cth) ( Act ). For this reason, and in order to ensure that all CMI shareholders are fully informed in making any decision as to whether or not to support the Proposed Capital Reduction, CMI’s Directors have requested Tolhurst InterFinancial Limited ( TIFL ) to prepare an independent expert’s report as to whether the Proposed Capital Reduction is fair and reasonable to all CMI shareholders, that is, to both the Class A Shareholders and the remaining ordinary shareholders ( Continuing Shareholders ).

CMI is now seeking the approval of its shareholders for the Proposed Capital Reduction to proceed. The specific terms of the resolutions to be approved are set out in the Notices of Meeting and Explanatory Memorandum to which this Report is attached.

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CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

Annexure A

ExPERT’S REPORT

This Report has been prepared exclusively for the purpose of assisting CMI shareholders entitled to vote on the resolutions in their consideration of those resolutions. This IER must not be used for any other purpose. This Report should be read in full, including all of the assumptions upon which our work is based, together with the Notices of Meeting and the Explanatory Memorandum and any other information provided to CMI shareholders in connection with the Proposed Capital Reduction.

2. Summary of Opinion

TIFL has concluded that the Proposed Capital Reduction is fair and reasonable to both Class A Shareholders and Continuing Shareholders.

The consideration of $1.00 per share being offered by the Company for the Class A shares is marginally above the range of market value for Class A shares assessed by TIFL, that range being between $0.85 and $0.97.

For the holders of the Class A shares, the cash consideration of $1.00 per share is above our assessed valuation range. When potential costs of transacting in the shares on-market are considered, the difference between the consideration offered to Class A Shareholders and the higher end of our valuation range increases. Recent trading in the Class A shares would suggest that Class A Shareholders would not be able to achieve a value close to the consideration offered if they were to reject the Proposed Capital Reduction, without the Board clearly stating its intention to resume the payment of dividends on Class A Shares.

Implementation of the Proposed Capital Reduction will give Continuing Shareholders ownership of a Company with a greatly simplified capital structure. They will have priority for the distribution of future potential profits, and will obtain the benefit of future franking credits. TIFL considers that these and other advantages of the Proposed Capital Reduction outweigh the disadvantages of the Proposed Capital Reduction from the perspective of the Continuing Shareholders.

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1.	Introduction.......................................................................................................................................1	Introduction.......................................................................................................................................1
2.	Summary of Opinion.........................................................................................................................2
3.	This Report.......................................................................................................................................3
	3.1	Scope of the Report...............................................................................................................3
	3.2	Purpose of the Report............................................................................................................3
	3.3	Basis of Evaluation ................................................................................................................3
	3.4	Methodology for assessing the value of Class A Shares ......................................................4
	3.5	Source of Information.............................................................................................................5
	3.6	Conclusion5
4.	Background Information ...................................................................................................................6
	4.1	Company Information.............................................................................................................6
	4.2	Historical Financial Statements .............................................................................................6
	4.3	Capital Structure ....................................................................................................................8
	4.4	Brief History of the Class A Shares .......................................................................................8
	4.5	Financial Structure following the Proposed Capital Reduction..............................................9
	4.6	Comparative Trading Activity.................................................................................................9
5.	Valuation of Class A Shares ..........................................................................................................10
	5.1	Future Dividends..................................................................................................................10
	5.2	Discount Rate ......................................................................................................................11
	5.3	Calculating the Value Range ...............................................................................................11
	5.4	Valuation Summary..............................................................................................................12
6.	Valuation Cross Check...................................................................................................................12
7.	Assessment of the fairness and reasonableness of the Proposed Capital Reduction ..................13
	7.1	General ...........................................................................................................................13
	7.2	Class A Shareholders’ Perspective .....................................................................................13
	7.3	Continuing Shareholders’ Perspective.................................................................................13
8.	Consequences if Proposed Capital Reduction is not approved.....................................................14
9.	Assessment of Fairness and Reasonableness..............................................................................14
10.	Director’s Position ..........................................................................................................................15
11.	Limitations, Representations and Reliance on Information............................................................15
	11.1	Sources of Information.........................................................................................................15
	11.2	Assumptions ........................................................................................................................15
12.	Qualifications, Declarations and Consents ....................................................................................16
	12.1	Qualifications .......................................................................................................................16
	12.2	Declarations .........................................................................................................................17
	12.3	Independence ......................................................................................................................17
	12.4	Indemnity ...........................................................................................................................17
	12.5	Consents ...........................................................................................................................18
	12.6	Other ...........................................................................................................................18
Appendix A: Summary terms of Class A Shares 19
Appendix B: Calculation of Discount Rates 23

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3. This Report 3.1 Scope of the Report

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Section 256B(1) of the Act permits a reduction in share capital in a company, in a way that is not otherwise authorised by law, if the reduction:

is fair and reasonable to the company’s shareholders as a whole;
does not materially prejudice the company’s ability to pay its creditors; and
is approved by shareholders.

Under section 256C of the Act, a selective capital reduction must be approved by either:

a special resolution of shareholders at a general meeting of the company, with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or by their associates; or
a resolution agreed to, at a general meeting, by all ordinary shareholders.

Further, where the selective capital reduction involves the cancellation of shares, the reduction must also be approved by a special resolution at a separate meeting of shareholders whose shares are to be cancelled.

This Report has been prepared to assist CMI shareholders (both Class A Shareholders and Continuing Shareholders) in voting on the resolutions required by section 256(C) of the Act. While there is no statutory requirement for CMI to commission this Report in relation to the Proposed Capital Reduction, ASIC Regulatory Guide 111 recommends that an expert’s report should be provided in relation to a selective capital reduction. For this reason, and to ensure that CMI’s shareholders are fully informed, the CMI Board has elected to provide this Report. 3.2 Purpose of the Report

The directors of CMI have engaged TIFL to prepare an independent expert’s report setting out whether, in its opinion, the Proposed Capital Reduction is fair and reasonable to both the Class A Shareholders and the Continuing Shareholders. This Report will accompany Notices of Meeting and an Explanatory Memorandum which will be sent to all CMI shareholders.

TIFL's opinion should not be construed as a recommendation as to whether or not to approve the Proposed Capital Reduction. Approval or rejection of the Proposed Capital Reduction is a matter for individual shareholders based on their own circumstances, including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Shareholders who are in any doubt as to the action they should take in relation to the Proposed Capital Reduction should consult their own independent professional adviser.

3.3 Basis of Evaluation

There is no statutory definition of the expressions “fair and reasonable”, and the expression has different meanings for different regulatory purposes.

However, according to ASIC Practice Note 29 “Selective capital reductions” (this Practice Note has now been withdrawn by ASIC), an independent expert reporting on a selective capital reduction should (making appropriate adjustments) prepare a report as if it were a report for shareholders voting on a resolution under section 623 of the Act (now section 611 of the Act). While Practice Note 29 has now been withdrawn by ASIC, we believe that this approach remains relevant and provides the best guide of the basis upon which a selective capital reduction should be evaluated.

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Regulatory Guide 74 “Acquisitions Agreed to by Shareholders” deals with independent expert reports prepared for the purpose of section 611 of the Act. The Regulatory Guide provides that:

what is considered fair and reasonable for non-associated shareholders should be judged in all circumstances of the proposal;
the report must compare the likely advantages and disadvantages for the non-associated shareholders if the proposal is agreed to, with the advantages and disadvantages if it is not; and
comparing the value of the shares to be acquired under the proposal and the value of the consideration to be paid is only one element of this assessment.

A selective capital reduction must not only be assessed in light of non-associated shareholders. According to ASIC Practice Note 29, an independent expert’s report prepared in respect of a selective capital reduction should state whether a proposed capital reduction is fair and reasonable to:

the holders of the shares to be cancelled (that is, the Class A Shareholders); and
those that remain shareholders in the company (that is, the Continuing Shareholders),

in that it strikes a fair balance between the interests of the persons whose shares are to be cancelled and those who will remain in the company.

According to the Explanatory Memorandum to the Company Law Review Bill 1997, the term “fair and reasonable” in the context of 256B(1) of the Act is intended to be a composite requirement (paragraph 10.24). That is, a capital reduction will either be fair and reasonable, or not fair and reasonable.

In assessing whether the Proposed Capital Reduction is fair and reasonable to CMI shareholders, we have evaluated the Proposed Capital Reduction from the perspective of both the Class A Shareholders and the Continuing Shareholders. In doing so, we have assessed:

the advantages and disadvantages of the Proposed Capital Reduction to Class A Shareholders; and
the advantages and disadvantages of the Proposed Capital Reduction to the Continuing Shareholders.

As part of making the assessments outlined above, we have assessed the consideration to be paid by CMI for the cancellation of the Class A Shares in comparison with the value of those shares as determined by TIFL.

In the process of making an assessment of the Proposed Capital Reduction, TIFL has made certain assumptions. Where these assumptions are material to our work, we have set them out in this Report.

3.4 Methodology for assessing the value of Class A Shares

TIFL has adopted a discounted future dividend methodology to assess the value of the shares given the nature of the Class A shares (see a summary of the terms in Appendix A ). The decision as to which of a range of methodologies to apply generally depends on the nature of the security being valued, the most common method adopted and the availability of appropriate information.

The key terms of the Class A shares are:

Holders have a preferential right to dividends ahead of other classes of shares;
Holders have preference to the holders of ordinary shares if there is a return of capital;
Holders have restricted voting rights;

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Holders are entitled to a quarterly dividend at a rate determined by the directors but not less than 14 cents each year;
If dividends are not fully franked they must be ‘grossed up’ by a cash payment to give the effect to 100% franking; however
The payment of a dividend to the Class A holders is subject to the discretion of the Directors and there being funds available for the payment of dividends.

The latter requirement is an important matter in considering the value of a security of this nature. The Class A Shareholder has to accept the dividend policy set by the Directors. While this may have suited the Class A Shareholder at the time of investment or purchase, a change in the Company’s circumstances and a change in the dividend policy may make the dividend policy either unattractive in itself or unattractive relative to other investment alternatives. There is evidence that this has happened in the case of CMI.

The question of whether recent trading in CMI Class A shares represents fair market value for a CMI Class A share has also been considered by TIFL. There are limitations to this basis of valuation when the market for a company or securities is not active or liquid and in the case of extreme volatility in markets, as is being experienced at the present time. Given that CMI Class A shares are thinly traded compared to other securities on the ASX, we have not used recent trading as a primary methodology.

3.5 Source of Information

This Report is based upon financial and other information provided by or on behalf of CMI. We have considered and relied upon this information and believe the information provided is reliable, complete and not misleading and have no reason to believe that material facts have been withheld. The information provided to TIFL has been evaluated through analysis, inquiry and review for the purposes of forming an opinion as to whether the Proposed Capital Reduction is fair and reasonable to CMI shareholders. However, TIFL does not warrant that its inquiries have identified or verified all of the matters that an audit, extensive examination or due diligence investigation might disclose.

An important part of the information used in forming an opinion as to fairness and reasonableness is comprised of the opinions and judgment of CMI management and directors. This type of information was evaluated through analysis, inquiry and review. However, such information is often not capable of external verification or validation and has not been independently verified.

The financial estimates used in the preparation of this report reflect the judgment of directors and management of CMI based on present circumstances, as to both the most likely set of conditions and the course of action CMI is most likely to take. It is sometimes the case that events and circumstances do not occur as expected or are not anticipated. Accordingly, actual results during the forecast period can differ from the forecast and such differences may be material. To the extent that our conclusions are based on forecasts, we express no opinion on the achievability of those forecasts.

3.6 Conclusion

We have considered the Proposed Capital Reduction and, taking account of the matters outlined in this Report, we believe that the Proposed Capital Reduction is fair and reasonable to Class A Shareholders and Continuing Shareholders.

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4. Background Information

4.1 Company Information

CMI is an Australian public company listed on the ASX. Its current operations are conducted through three business units, namely:

Electrical – the manufacture, distribution and marketing of specialist cabling and electrical products for a range of industry sectors ( Electrical Business ).
TJM Products – manufactures an extensive range of vehicle bull bars, side and rear protection bars, sports bars, roof racks, side steps, tyre carriers, and canopies. The accessory range includes recovery equipment, winches, suspension, wheel arch flares, snorkels and air operated differential locks. TJM Canopies, TJM XGS Suspension, TJM Pro Locker, TJM OX Recovery Equipment and TJM Airtec Snorkels are among the range of branded products. ( TJM )
Financial Services – The provision of consumer and commercial finance services through the finance brokerage company, Capitalcorp Finance and Leasing Pty Ltd ( CFLPL ), a wholly owned subsidiary of CMI. The company operates from 40 branches nationally ( Finance Business )

On 28[th] August 2008 the directors of CMI announced a loss of $22.9 million after tax. The result included a pre-tax impairment of $17.6 million from the write down of the Finance Business's noncurrent assets and $16.5m from the write down of the Engineering Division's non-current assets.

The group produced a profit before tax from continuing operations of $13.9 million (TJM and Electrical Division, excluding the Finance Business).

Due to recent renewed interest in the Finance Business, CMI continues to hold the Finance Business for sale and the company is continuing with its restructure program.

The Electrical Division produced a pre-tax profit of $14.86m which was $102k less than FY2007. Revenue increased to $51.9m, 5.3% (or $2.6m) up on the result for the financial year ending 30 June FY2007 ( FY2007 ). The directors reported that certain branches and new product lines performed well and helped to make up for significant drop-offs in customer orders in the mining sector due to flooding and delays in port infrastructure construction.

The TJM Products Division produced a pre-tax profit of $1.45m, which is $178k less than for FY2007. Revenue increased to $44.81 m, 8.5% (or $3.5m) up on the previous year. The directors reported that the reduction in margin can in large part be attributed to increased costs in updating accessories designs, inventory management and raw materials.

The Board advised that due to the impairment write down in the Finance Business and the sale of the Engineering Division the Company's combined result for the year is an overall loss of $22.9 million after tax. The directors therefore resolved not to pay a final dividend to ordinary shareholders .

4.2 Historical Financial Statements

Table 4.1 below shows the full year financial results for the continuing operations of CMI, that is, TJM, Electrical Division and Capital Corp for FY2007 and the financial year ending 30 June 2008 ( FY2008 ). These results do not include CMI’s engineering division, which was divested during FY2008.

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Table 4.1 – Historical Financial Performance
$000	2008	2007
Revenue from Continuing Operations	97,518	90,815
Cost of Goods Sold	(56,288)	(51,161)
Gross Profit	41,230	39,654
Other Expenses	(24,461)	(22,798)
EBITDA	16,769	16,856
Depreciation & Amortisation	(1,882)	(1,728)
EBIT	14,887	15,128
Interest Expense	(984)	(1,170)
Income Tax	(3,931)	(3,849)
Profit/(Loss) from Continuing Operations	9,972	10,109
Profit/(Loss)from Discontinued operations	(32,869)	(13,949)
Profit/(Loss) for theperiod	(22,897)	(3,840)

Source: ASX, CMI Company Reports

The following table shows the reported financial position of the Company as at 30[th] June 2008.

Table 4.2 – Balance Sheet – FY2008

Table 4.2 – Balance Sheet – FY2008
$000
Current Assets
Cash and cash equivalents	2,920
Trade Receivables & Inventories	54,731
Total Current Assets	57,651
Non Current Assets
Property,Plant & Equipment	6,063
Goodwill & Other Intangibles	15,259
Total Non-current Assets	21,322
Current Liabilities
Trade & Other Payables	11,558
Borrowings	625
Provisions	497
Total Current Liabilities	12,680
Non Current Liabilities
Borrowings	9,634
Deferred Tax Liabilities & Other	1,930
Total Non-current Liabilities	11,564
Total Equity	54,729

Source: ASX, CMI Company Reports

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4.3 Capital Structure

Table 4.3 – CMI Capital Structure

Type	Amount	Rights	Rights	ASX Code	Last Price
OrdinaryFullyPaid	33,752,634	Ordinaryshares		CMI	$1.04
Class A	28,005,311	�	Carry an entitlement to a quarterly	CMIPC	$0.91
			dividend at such rate determined by the
			directors but in any event not less than 14
			cents each year;
		�	Rank ahead of ordinary shares for
			repayment of capital but there is no
			entitlement to share in any surplus on
			winding up;
		�	Have restricted voting rights (can only
			vote on issues affecting their share
			capital);
		�	Do not confer on their holders any other
			rights to participate in profits or property of
			the company except as set out in rule 30 *
			of the Company’s constitution.
		Directors options exercisable at $2.22 and		CMIAO	Unlisted
Employee Options	10,000	expire at 27 April 2009. Convert into ordinary
		shares.
		Directors options exercisable at $1.20 and		CMIAM	Unlisted
Employee Options	600,000	expire at 15 April 2013. Convert into ordinary
		shares.

Refer to Appendix A for an excerpt of Rule 30 from the CMI Limited Company Constitution. Source: IRESS; Last Prices: 16[th] September 2008

4.4 Brief History of the Class A Shares

In July 2001, the Company issued a prospectus for 13.2 million high yielding Convertible Preference Shares ( CP Shares ). The issue price was $1.20 and dividends were projected to be 12 cents in the first year, 12.5 cents in the second, 13.25 cents in the third and 14 cents from the fourth year forward. Existing shareholders had the opportunity to convert up to 25% of their existing shareholding into CP Shares to take advantage of these high yielding securities. The issue of CP Shares raised up to $15.84 million, which was to be used to assist in funding an onmarket buy-back of up to 20% of CMI's ordinary shares, to retire debt, and to raise additional working capital to build on past growth in both domestic and overseas markets.

In March 2003 there was a further $11m issue entitling shareholders to 1 CP Share for every 6 Ordinary or CP Shares held.

In August 2005, changes in Australian Accounting Standards occurred such that the Company believed the issued CP Shares would be reclassified from equity to debt and result in future dividend payments made to holders of the CP Shares being classified as interest. Such a move would reduce the profit of the Company and the dividend payments would no longer be taxdeductible for CMI.

The Company proposed to change its Constitution to vary the rights of all existing CP Shares, such that they become Class A Shares on a simple one-for-one basis. These Class A Shares would have essentially the same preferred dividend and return of capital rights and restricted voting rights as the CP Shares. However, the balance of the rights associated with those Class A Shares would be the same as for the ordinary shares of CMI.

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4.5 Financial Structure following the Proposed Capital Reduction

The following table compares the financial structure of CMI before and after the Proposed Capital Reduction. Enterprise values are expected to remain largely unchanged, although CMI net debt is expected to increase by $28 million.

Table 4.4 – Financial Structure

Table 4.4 – Financial Structure
$ mills	Pre-Capital Reduction	Post-Capital Reduction
Market Capitalisation(OrdinaryShares)	35.1	35.1
Market Capitalisation(Class A Shares)	25.6	0.0
Net Debt	7.3	35.3
Enterprise Value	68.0	70.4 *

The $2.4 million difference represents the premium to be paid to the A Class shareholders over the closing price as at 16[th] September 2008

Source: TIFL Analysis, Security prices – IRESS on 16[th] September 2008

The Company has been offered a new debt facility agreement with NAB Limited ( Facility Agreement ) to finance the Proposed Capital Reduction.

TIFL has examined the financial covenants contained in the Facility Agreement to be entered into between CMI and NAB to fund the Proposed Capital Reduction. After discussions with CMI management and directors, TIFL believes that CMI should be able to meet these financial covenants throughout the financial year ending 30 June 2009 ( FY2009 ). This judgment is made based on information available to TIFL and existing as at the date of this Report as well as a number of economic and other assumptions (including the assumptions set out in this Report). These economic and other assumptions may prove to be incorrect and, accordingly, CMI’s future results and operations may vary materially from those on which TIFL has based its judgement, which could in turn lead to CMI breaching its financial covenants.

4.6 Comparative Trading Activity

Both CMI’s ordinary shares and the Class A Shares trade on the ASX but can be considered illiquid securities, with relatively infrequent trading and relatively larger bid-ask spreads. Both the CMI ordinary shares and the Class A Shares have declined in value over the previous year.

In particular, the Class A Shares have suffered significant declines as a result of the uncertainty surrounding CMI’s dividend policy when the Company announced the suspension of dividends in February 2008.

Fig 4.1 – Class A Shares – Prices and Volumes

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A Class Shares - Prices and Volumes
CumVolume 30-day VWAP Price
Daily Volume Price (cents)
250,000 140.0
120.0
200,000
Offer of $1.00 for A Class Shares 100.0
150,000 80.0
60.0
100,000
40.0
50,000
20.0
0 0.0
Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08
Source: IRESS, 16 [th] September 2008
----- End of picture text -----

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5. Valuation of Class A Shares

The Class A shares pay a fixed, although discretionary, dividend.

As TIFL has indicated in Section 3.4 we have adopted a discounted future dividend methodology for valuing the Class A shares. Applying the discounted future dividend methodology involves the following procedures:

estimating the future dividends of the Company;
assessing the appropriate discount rate which reflects the risks associated with the dividend flows; and
calculating the present value of the future cash flows.

5.1 Future Dividends

To establish the future dividends it is necessary to establish the level of future profits and consequently the likely future dividend policy of the Company. The future dividend policy of the Company can either be ascertained by direct enquiry and/or by considering the recent historic policy. One also needs to take account of the level of retained profits, the existence of franking credits and the level of realised and unrealised capital profits and losses.

As part of its investigations, TIFL has had discussions with the management of the various divisions of CMI in regard to the outlook for FY2009.

As a result of those discussions we have formed the view that the results for FY2008 provide a good indication of the likely outcome of results for FY2009. It is our view that it is reasonable to assume that:

the Electrical Business will grow at between 5% to 7% as compared to FY2008;
TJM will grow at between 5% and 7% as compared to FY2008; and
the Finance Business could be expected to deliver a loss of $0.6m for the year.

The following table shows the divisional results for a high and low range of outcomes, which is then consolidated and provides TIFL’s view as to the likely profit outcomes for FY2009. The Low Case is the same as the results for FY2008, the High Case is the low case adjusted for TIFL’s views as expressed above.

Table 5.1 – High Case & Low Case EBITDA

Table 5.1 – High Case &	Low Case EBITDA
Divisional EBITDA	Low Case	High Case
($000)	(as for FY2008)
Electrical	15,095	16,200
TJM	3,020	3,100
Capital Corp	(1,700)	(600)
Corporate	(2,100)	(2,100)
Total	14,315	16,600

Source: CMI Management Discussions, TIFL Analysis

The Company has confirmed that negotiations are progressing to undertake a sale of CFLPL, which owns and operates CMI’s Finance Business. TIFL has assumed, for the purposes of this Report, that CFLPL will remain a wholly owned subsidiary of CMI until such time as that sale is finalised. Following discussions with CMI management, TIFL believes that CFLPL’s losses will be limited to $0.6m for FY2009. It is worth noting that, Capital Corp has been written down to zero by the Company.,

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Following our analysis of divisional profitability, we considered the likely cash flow impact over the period. The outcome of this analysis suggests that profits and cash would be available from which dividends could be declared, however, following discussions with CMI management and directors we concluded that the current strategy of the Board is to reinvest profits for the future growth of the Company.

We therefore consider that it is highly unlikely that dividends will be paid on the Class A shares over the next 4 quarters and we have used this as the low point for our valuation. On the other hand, conditions may change and a dividend may be paid in all the quarters commencing December 2008, we have used this as the high point of our valuation.

We have also assumed that the directors of CMI would not resolve to pay Class A Shareholders a dividend greater than the base sum of 14 cents per annum specified by the Constitution. We believe that this assumption is reasonable based on discussions with the directors of CMI and historical dividend payments for Class A shares.

Table 5.2 – Expected Dividend Stream

Period Ending	Sep-08	Dec-08	Mar-09	Jun-09	Sep-09	From Dec-09 Qtr onwards
High($)	-	0.035	0.035	0.035	0.035	0.035
Low($)	-	-	-	-	0.035	0.035
Source: TIFL Analysis

5.2 Discount Rate

The appropriate rate at which to discount the future dividends is the after tax cost of equity. For a detailed discussion in relation to the calculation of discount rates, see Appendix B . The following table shows the assumptions used in generating the appropriate discount rate.

Table 5.3 - Cost of Equity Assumptions

Table 5.3 - Cost of Equity Assumptions
Assumptions
Risk free rate(= 10yeargovt bond rate)	6.45%
Risk Premium	6.00%
Beta	1.44
Gamma	-
Cost of Equity (after-tax)	15.10%

Source: TIFL Analysis

5.3 Calculating the Value Range

For the high value we consider the most appropriate valuation technique is to use a perpetuity formula. The formula for present value of a perpetual cashflow is:

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where:

PVCF is the present value of the regular dividend payments; CF is the regularly recurring cashflow; and ke is the cost of equity (discount rate).

Where the dividend is paid quarterly, as in the case here, then a quarterly discount rate should be

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Annexure A

used. The factor having the greatest effect upon the chosen cost of equity is the equity beta. IFL has considered both CMI’s ‘observed’ equity beta and compared that to the sector equity beta.

For the low case, TIFL then used a discounted dividend model with the following assumptions:

DCF window of 9 quarters to 30[th] September 2010;
terminal dividend growth rate was set at 0%, giving no real growth as Class A shares are entitled to a maximum of 14 cents per annum;
terminal dividend of $0.14 applied in September 2010;
dividend profile for low case as set out in Table 5.2; and
cost of equity of 15.1%, this was converted into a quarterly rate of 3.58%.
5.4 Valuation Summary

It must be noted that the value of a Class A share as stated in this Report is a matter of opinion, and a definitive or certain value cannot be provided. The ultimate price of any asset is largely a question of market demand, market sentiment and competing investment classes at the time of investment, all features which cannot be readily assessed by an expert.

The following table summarises the application of the DCF calculation.

Table 5.4 – Valuation of ‘A’ Class Shares

	Low	High
Discount Rate	3.58%	3.58%
Present Value of Dividend Stream	$0.14	$0.97
Present Value of Terminal Value	$0.71	n/a
Value of Class A Shares	$0.85	$0.97

Source: Tolhurst InterFinancial Analysis

This valuation would be a ‘gross’ value, that is, it does not consider the cost of someone transacting in the shares on-market.

6. Valuation Cross Check

As discussed in section 3.4, we considered the question of whether recent trading in CMI Class A shares represents fair market value for a CMI share and concluded that it did not.

In section 4.6, we have presented charts of the trading in CMI Class A shares. That chart showed the trading in Class A shares, for the past twelve months, as compared to the current buy-back price of $1.00.

CMI Class A shares prices have generally been falling from a high of $1.29 in October FY2007 to a low of $0.39 prior to announcement of the Proposed Capital Reduction. This fall preceded an announcement by CMI in February that no quarterly dividend would be paid to shareholders. Further, CMI commented that it would undertake a strategic review of the Company’s direction which culminated in the sale of its engineering business to a third party. Subsequently, the engineering business was sold and both CMI’s Class A shares and ordinary shares have continued to fall.

CMI Class A shares have not traded above the offer price of $1.00 since February 2008. It should also be noted that the face value of the Class A share is $1.20 per share.

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7. Assessment of the fairness and reasonableness of the Proposed
Capital Reduction
7.1 General
In the course of our analysis we have identified the advantages and disadvantages to CMI
shareholders of approving the Proposed Capital Reduction.
We have assessed that in all cases the advantages and disadvantages of rejecting the Proposed
Capital Reduction are the inverse of approving the Proposed Capital Reduction. Accordingly, for
simplicity and ease of evaluation of the Proposed Capital Reduction, we have set out the significant
factors only in the context of approving the Proposed Capital Reduction. However, we have
summarised the consequences of the Proposed Capital Reduction not proceeding in section 8
below.
7.2 Advantages and Disadvantages from a Class A Shareholder’s perspective
� The Proposed Capital Reduction cash consideration of $1.00 per share is marginally above our
assessed valuation range of $0.85 to $0.97 per share. In addition, when potential costs of
transacting in the shares are considered, the difference between the consideration offered and
the higher end of our valuation range becomes greater. The Proposed Capital Reduction
provides an opportunity for Class A Shareholders to immediately realise their interest in the
Class A shares without incurring transaction costs, as the Proposed Capital Reduction involves
the return and cancellation of the Class A shares rather than the on market sale of the shares
and, accordingly, no brokerage fees will be incurred by the Class A Shareholders.
� It is important for Class A Shareholders to understand that the terms of the Class A shares mean
that while Class A Shareholders have priority to dividends over Continuing Shareholders, the
payment of dividends is subject to the approval of the Board and is therefore discretionary.
Accordingly, the Proposed Capital Reduction allows the Class A Shareholders to realise an
amount in respect of future dividends even though there is no guarantee that those dividends
would be paid to the Class A Shareholders in the future.
� The Proposed Capital Reduction cash consideration of $1.00 per share is at a significant
premium to the 3-month VWAP for the Class A shares prior to the Proposed Capital Reduction
being announced. In fact, the share price has not reached these levels since February 2008.
� The Proposed Capital Reduction consideration is higher than our estimate of the likely stock
market price of Class A shares in the absence of the Proposed Capital Reduction. Since the
announcement, and in TIFL’s opinion because of the announcement, the share price has
increased to $0.93 per share enabling the Class A Shareholders to exit their investment by
selling their investment on-market at a price that was not previously available to them.
� Class A Shareholders will no longer be exposed to the risk of further falls in sentiment towards
the overall share market. Although Class A Shareholders forgo the longer term upside potential
where interest rates fall and Class A share prices increase, they have the opportunity to reinvest
the cash they receive for their Class A shares in alternative investments at a more opportune
time or alternatively in cash.
� The Proposed Capital Reduction provides an opportunity for Class A Shareholders to exit from a
relatively illiquid investment.
7.3 Advantages and Disadvantages from a Continuing Shareholder’s perspective
� The Proposed Capital Reduction cash consideration of $1.00 per Class A share is marginally
above our assessed valuation range of $0.85 to $0.97 per Class A share.
� The Proposed Capital Reduction may increase future dividends per share ( DPS ) of Continuing
Shareholders, because distributions out of profits will not first need to be made to the Class A
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Shareholders. The Continuing Shareholders will now have first call on the future profits to be distributed by the Company by way of dividends.

While the directors have made a judgment about the value of the Class A shares, that value exceeds the TIFL valuation range and it is possible, given the trading VWAP for the Class A shares, that the Company may have been able to buy-back the shares at a lower price. However, a lower price may have caused Class A Shareholders to vote against the Proposed Capital Reduction and prevented its implementation.
Based on our analysis, interest paid on the loan facility to fund the Proposed Capital Reduction is less than would have been paid out as dividends to the Class A Shareholders going forward. TIFL estimates the cash available to be distributed as dividends to Continuing Shareholders (if the Board resolves to do so) will be increased by the Proposed Capital Reduction by some $2.3 million in the first year following the Proposed Capital Reduction, after taking into consideration the additional interest payable to finance the Proposed Capital Reduction and the potential ‘savings’ by not paying dividends to Class A Shareholders.
Following the Proposed Capital Reduction, the Continuing Shareholders will obtain the benefit of future franking credits that would otherwise have been attached to the dividend component of any distributions on the Class A shares.
The capital structure of the Company will be considerably simplified by the Proposed Capital Reduction. The market generally accords greater value to simplicity in capital structures, which is reflected in share price. This is true in small-cap companies and especially in times of volatile investment markets. A simplified structure may also make the Company more attractive to potential acquirers and is likely to make it easier for the Company to raise capital, in the future.
There will be a significant increase in the level of debt due to the nature of funding of the Proposed Capital Reduction and therefore an increase in the gearing ratio of the Company which will (in turn) increase the risk associated with the business. TIFL’s analysis of the Company’s ability to service this increased level of debt suggests that its banking covenants will be met during FY2009 and there will be sufficient cash flow to meet working capital requirements during that period. Moreover, the Continuing Shareholders have knowledge of the financial performance of the Company and factors impacting the market in which it operates.

8. Consequences if Proposed Capital Reduction is not approved

It is difficult to be certain of the impact on CMI if the Proposed Capital Reduction is not approved by shareholders, however there are some key considerations that need to be addressed by shareholders in their deliberations. In TIFL’s view, if the transaction is not approved, then:

it is likely that the market value of the Class A shares will retreat from their current trading value in excess of $0.90. The 52 week low of $0.39 is unlikely to be tested in the short term but the value of these shares is heavily contingent upon the discretion of the directors and their willingness to declare dividends;
as the Class A shares currently have limited voting rights, there will be no change to the voting power attributable to each class of share;
the capital structure of the Company would not be altered. While the level of gearing in the Company would not increase, the complexity inherent in the existing equity structure would remain as a hindrance to the Company raising future equity capital, and continue to limit the attractiveness of the Company as a potential takeover target.

9. Assessment of Fairness and Reasonableness

After due consideration of the advantages and the disadvantages of the Proposed Capital Reduction as detailed in Section 7 of this Report, it is TIFL’s opinion that the Proposed Capital Reduction is fair and reasonable to both Class A Shareholders and Continuing Shareholders.

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10. Director’s Position

The Directors have indicated that they intend to recommend the approval of the Proposed Capital Reduction.

11. Limitations, Representations and Reliance on Information

11.1 Sources of Information

TIFL has relied on the following information in the preparation of this Report:

NAB Banking Facilities Agreement;
CMI FY2009 internal budgets;
CMI FY2008 management accounts;
CMI FY2008 Preliminary Final Report as provided to the ASX;
CMI Limited franking credits register;
CMIPC shareholding register;
CMI shareholding register;
CMI Class A Shares Prospectus;
CMI Company Constitution;
CMI press and ASX releases; and
Other confidential correspondence, project presentations, material contracts, taxation advice, financial model, and working papers.

TIFL has also held discussions with, and obtained information from, senior management and the directors of CMI.

In forming our opinions of the value of the Class A shares, we have reviewed and relied upon the following discussions and documents:

publicly available information;
discussions with management regarding general corporate strategy and dividend policy;
preliminary financial statements for the year ended 30 June 2008;
internal budgets for FY2009; and
estimates by the Company of head office costs in future years.
11.2 Assumptions

TIFL's opinion is based on economic, share market, business trading, financial and other conditions and expectations prevailing at the date of this Report. These conditions can change significantly over relatively short periods of time. If they did change materially subsequent to the date of this Report, our opinion could be different in these changed circumstances. However, TIFL has no obligation, and gives no undertaking, to advise any person of any change in circumstances which comes to its attention after the date of this Report or to review, revise or update its Report or opinion.

This Report is also based on publicly available information and on financial and other information provided by CMI (either directly or through its advisers). TIFL has considered and relied upon this information and its completeness, accuracy and fair presentation. CMI has represented in writing to TIFL that, to its knowledge, the information provided by it was complete, accurate and not misleading in any material respect. The information provided to TIFL has been evaluated through analysis, enquiry and review for the purposes of forming an opinion as to whether the Proposed

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Capital Reduction is fair and reasonable. However, in preparing reports such as this, time is limited and TIFL does not warrant that its enquiries have identified or verified all of the matters that an audit, extensive examination or "due diligence" investigation might disclose. Except as expressly set out in this Report, TIFL has not attempted to independently verify the completeness, accuracy or fair presentation of any of the information provided by CMI. In any event, an opinion as to whether a proposal is fair and reasonable is more in the nature of an overall review rather than a detailed audit or investigation. TIFL confirms that its procedures and enquiries do not constitute an audit in accordance with Australian Accounting Standards ( AAS ), and do not constitute a review in accordance with AAS 902 applicable to review engagements.

TIFL has no reason to believe that any material facts have been withheld and CMI has confirmed in writing that it believes it has provided all relevant information of which it is aware but TIFL does not represent that it has received all relevant information.

TIFL believes that its opinion must be considered as a whole as the various elements of its analysis are often interdependent. TIFL cautions against examination of individual elements of its analysis as this may create a misleading impression of the overall opinion.

An important part of the information used in forming an opinion of the kind expressed in this Report is comprised of the opinions and judgments of management. This type of information was also evaluated through analysis, enquiry and review to the extent practical. However, such information is often not capable of external verification or validation.

Preparation of this Report does not imply that TIFL has audited in any way the management accounts or other records of CMI. It is understood that the accounting information that was provided was prepared in accordance with generally accepted accounting principles and in a manner consistent with the methods of accounting in previous financial years of CMI (except where noted or where required due to a change in accounting standards).

In forming its opinion, TIFL has also assumed that:

matters such as title, compliance with laws and regulations and contracts are in good standing and will remain so;
the information set out in the accompanying Notices of Meeting and Explanatory Memorandum is complete, accurate and fairly presented in all material respects; and
the public and confidential information relied on by TIFL in its analysis was accurate and not misleading.

In this Report we have limited the disclosure of information to that which is regularly placed into the public domain by CMI, which we consider to be quite extensive. This approach has been adopted following a request by CMI and recognises the commercially sensitive and confidential nature of certain operational and financial information that has been supplied to us. Nevertheless, we believe that our opinion is adequately supported by the information disclosed in the Report and, accordingly, we were able to accommodate CMI’s request in preparing this Report.

12. Qualifications, Declarations and Consents

12.1 Qualifications

TIFL provides corporate advisory services in relation to mergers and acquisitions, capital raisings, corporate restructuring and financial matters generally. One of its activities is the preparation of company and business valuations and the provision of independent advice and expert's reports in connection with mergers and acquisitions, takeovers and schemes of arrangements. TIFL directors have prepared a number of public expert's reports since its formation in 1987.

The principal person responsible for preparing this Report on behalf of TIFL is Mr Paul Keehan

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who has over 20 years of experience in relevant corporate advisory matters. Mr Keehan is an authorised representative of TIFL pursuant to its Australian Financial Services Licence under Part 7.6 of the Corporations Act. 12.2 Declarations

It is not intended that this Report should be used or relied upon for any purpose other than as an expression of TIFL’s opinion as to whether the Proposed Capital Reduction is fair and reasonable. TIFL expressly disclaims any liability to any CMI shareholder who relies or purports to rely on this Report for any other purpose and to any other party who relies or purports to rely on this Report for any purpose.

This Report has been prepared by TIFL with care and diligence and the statements and opinions given by TIFL in this Report are given in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading. However, no responsibility is accepted by TIFL or any of its directors, officers or employees for errors or omissions however arising in the preparation of this Report, provided that this shall not absolve TIFL from liability arising from an opinion expressed recklessly or in bad faith (unless the law otherwise requires).

TIFL has had no involvement in the preparation of the Notices of Meeting and Explanatory Memorandum and has not verified or approved any of the contents of the Notices of Meeting and Explanatory Memorandum. TIFL does not accept any responsibility for the contents of the Notices of Meeting and Explanatory Memorandum or any other documents provided to CMI shareholders (except for this Report). 12.3 Independence

TIFL is entitled to receive a fee of $25,000 (exclusive of GST) for the preparation of this Report. TIFL is also entitled to be reimbursed for any out-of-pocket expenses incurred in the preparation of this Report. Except for this fee and the reimbursement of these expenses, TIFL has not received and will not receive any pecuniary or other benefit, whether direct or indirect, in connection with the preparation of this Report.

Neither the signatories to this Report nor TIFL holds securities in CMI. No such securities have been held at any time over the last two years.

Neither the signatories to this Report nor TIFL have had within the past two years any business relationship material to an assessment of TIFL’s impartiality with CMI, or its associates, other than in connection with the preparation of this Report. TIFL has been engaged to provide an Independent Expert Report for CMI in the preceding 12 months.

Prior to accepting this engagement, TIFL considered its independence with respect to CMI and any of their respective associates with reference to ASIC Regulatory Guide 112 entitled “Independence of Experts". In TIFL’s opinion it is independent of CMI and its associates.

A draft of this Report was provided to CMI and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this Report as a result of this review and there was no alteration to the methodology, evaluation or opinions set out in this Report as a result of issuing the draft.

12.4 Indemnity

Under the terms of our engagement, CMI has agreed that no claim shall be made by CMI or any of its subsidiaries against TIFL, any of their directors, officers, partners, employees or agents ( Indemnified Persons ) to recover any loss or damage which CMI or any of its subsidiaries may suffer by reason of or arising out of anything done or omitted in relation to the provision of the services by TIFL, provided that such loss or damage does not arise from the negligence or wilful

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default of any of the Indemnified Persons. CMI has unconditionally indemnified TIFL and its related bodies corporate and their respective officers, employees and agents against any losses, claims, damages, liabilities, costs, expenses and outgoings whatsoever ( Losses ) which they may suffer or incur directly or indirectly arising out of:

TIFL relying on information provided by CMI or any of its employees, agents or advisers; or
CMI failing to provide TIFL with material information in relation to the Proposed Capital Reduction or CMI.

Further, CMI must pay and must indemnify TIFL against any Losses in relation to any investigations, enquiries or legal proceedings by ASIC, ASX or any other competent regulatory body arising out of, or in connection with, the Proposed Capital Reduction, including reasonable legal expenses and disbursements incurred by TIFL and fees payable to TIFL attributable to time reasonably spent by its staff assessed at its hourly rates to the extent that investigation, enquiry or legal proceeding is not caused by an act or omission of the Indemnified Persons.

12.5 Consents

TIFL consents to the issuing of this Report in the form and context in which it is to be included in the Notices of Meeting and Explanatory Memorandum to be sent to CMI shareholders. Neither the whole nor any part of this Report nor any reference thereto may be included in, or attached to, any other document without the prior written consent of TIFL as to the form and context in which it appears.

TIFL takes no responsibility for the content of the Notices of Meeting and Explanatory Memorandum or any other documents provided to CMI shareholders, other than this Report.

12.6 Other

The opinion of TIFL is made at the date of this Report and reflects circumstances and conditions as at that date. In particular, TIFL provides no representations or warranties in relation to the future value of shares of CMI.

CMI shareholders who are in any doubt as to the action they should take should consult their own independent professional adviser.

TIFL has prepared a Financial Services Guide as required by the Corporations Act. The Financial Services Guide is set out at the beginning of this Report.

Yours sincerely Tolhurst InterFinancial Limited

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Paul Keehan Head of Corporate Finance

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Appendix A – Summary terms of Class A Shares

The following is an excerpt from Rule 30 of the CMI Constitution.

Dividends

A quarterly dividend ( Dividend ) is paid in respect of each Class A Share calculated in accordance with the following formula:

Quarterly Dividend =[Annual Dividend] 4

Dividend Rate is for each year, ending on the anniversary of the Allotment Date, at such rate as determined by the Directors, but in any event, not less than 14¢ each year.

Franking of Dividends

If any Dividend is not franked to 100% under Part IIIAA of the Tax Act (or any provisions that revise or replace that Part) ( Applicable Franking Rate ), the Dividend will be calculated in accordance with the following formula:

D Dividend = 1 - [ Ti × (1 - f )]

where:

D is the Dividend calculated under rule 30.2 in the CMI Constitution;

Ti is the Australian corporate tax rate applicable to the franking account of the Company from which the Dividend will be franked, expressed as a decimal; and

f is the Applicable Franking Rate, expressed as a decimal to four decimal places.

Payment of Dividend

The payment of a Dividend is subject to:

(a) the Directors, at their discretion, declaring the Dividend to be payable; and

(b) there being funds legally available for the payment of dividends.

Non-Cumulative Dividends

If and to the extent that all or any part of a Dividend is not paid because of the provisions of rule 30.4 in the CMI Constitution, the holder has no claim in respect of such non-payment.

Dividend Payment Dates

Subject to rule 30.6 in the CMI Constitution, Dividends will be payable on the Class A share in arrears on that day being 3 months after the Allotment Date and thereafter quarterly.

Record Dates

A Dividend is only payable to those persons registered as holders of Class A shares at the date on which the books of the Company close for Class A share holders in respect of each relevant Dividend.

No Entitlement to Other Dividends

Class A shares shall have a preferential right to a Dividend determined in accordance with rules 30.2 and 30.3 in the CMI Constitution in priority to holders of Ordinary Shares as to the payment of dividends but shall, subject to payment of such Dividend under rules 30.2 and 30.3, have no other

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entitlement to any dividend which may be determined to be paid to holders of Ordinary Shares.

Ranking

Class A shares shall rank equally amongst shares in that class in all respects.

Return of capital

If there is to be a return of capital on a winding up of the Company, holders of Class A shares will be entitled to receive, out of the assets of the Company available for distribution to holders of shares, in respect of each Class A share held, a cash payment equal to the sum of:

(a) the amount of any Dividend (whether declared or not) calculated on a daily basis (assuming a 365 day year) throughout the period from and including the date of the preceding Dividend Payment Date to the date of commencement of the winding-up; and

(b) the Face Value,

before any return of capital is made to holders of Ordinary Shares or any other class of shares ranking behind the Class A shares.

Class A shares do not confer on their holders any right to participate in profits or property except as set out in the provisions of Rule 30.

Shortfall on Winding Up

If, upon a return of capital, there are insufficient funds to pay in full the amounts referred to in rule 30.10 in the CMI Constitution and the amounts payable in respect of any other shares in the Company ranking as to such distribution equally with the Class A shares on a winding-up of the Company, the holders of the Class A shares and the holders of any such other shares will share in any distribution of assets of the Company in proportion to the amounts to which they respectively are entitled.

Participation in Surplus Assets

The Class A shares do not confer on their holders any further right to participate in the surplus assets of the Company on a winding-up.

Restrictions on Dividends and Other Issues

The Company must not, without approval of a special resolution passed at a separate meeting of holders of the Class A shares:

(a) declare or pay a cash dividend or make any distribution on any share capital over which the Class A shares rank in priority for participation in profits if the Dividend payable in either of the four quarterly periods immediately preceding the cash dividend or distribution has not been paid or otherwise satisfied in full; or

(b) issue shares ranking in priority to the Class A shares but the Directors are at all times authorised to issue such further Class A shares ranking equally with any existing Class A shares and, subject to required shareholder approvals, to give effect to the conversion or variation of rights to other classes of Company shares on issue which may convert into Class A shares or which may have rights (as varied) identical or similar to Class A shares.

Takeovers and Schemes of Arrangement

If a takeover bid is made for Ordinary Shares, acceptance of which is recommended by the Directors, or the Directors recommend a member's scheme of arrangement, the Directors will use reasonable endeavours to procure that equivalent takeover offers are made to Class A shares holders or that they participate in the scheme of arrangement.

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Participation in New Issues

Class A shares will confer rights to subscribe for new securities in the Company or to participate in any bonus issues, to the same extent as Ordinary Shares.

Voting rights for Class A shares

The holder of Class A Share is not entitled to vote at any general meeting of the Company except in the following circumstances:

(a) on a proposal:
(i) to reduce the share capital of the Company;
(ii) that affects rights attached to the Class A shares;
(iii) to wind up the Company; or

(iv) for the disposal of the whole of the property, business and undertaking of the Company;

(b) on a resolution to approve the terms of a buy-back agreement;

(d) during the winding up of the Company.

In any circumstance where the holder of Class A shares may vote at a general meeting of the Company, each Class A Share shall entitle the holder to one vote.

Listing

The Company must use all reasonable endeavours and furnish all such documents, information and undertakings as may be reasonably necessary in order to procure, at its own expense, listing of the Class A shares on the ASX and/or on each of the stock exchanges on which the other Ordinary Shares of the Company are listed, following the Effective Date.

Amendments to the terms of issue

Subject to complying with all applicable laws, the Company may without the authority, assent or approval of Class A shareholders amend or add to these terms of issue if such amendment or addition is, in the opinion of the Company:

(a) of a formal, minor or technical nature;

(b) made to correct a manifest error; or

(c) not likely (taken as a whole and in conjunction with all other modifications, if any, to be made contemporaneously with that modification) to be materially prejudicial to the interests of the holders of the Class A shares.

Interpretation

The following expressions shall have the following meanings:

`Allotment Date' means the date in respect of which a CPS shall have been allotted or have deemed to have been allotted by the Company. In any other instance, 21 August shall be deemed the relevant date and month on which Class A Share is allotted (notwithstanding the date of actual allotment) for the purposes of determining the yearly Dividend Rate applicable at the time of allotment;

`Dividend Payment Date' means each date on which a Dividend is payable in accordance with rule 30.6 in the CMI Constitution whether or not a Dividend is paid on that date;

**Face Value'** means $1.20 per Class A share in respect of a CPS which shall have been converted into Class A share. In any other instance, where the termFace Value' is relevant, then, in the absence of any other definition or meaning, it shall mean the issue price paid or payable on the

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issue of such share;

'Franking Rate' in relation to a Dividend, means the franking percentage (within the meaning of Part IIIAA of the Tax Act or any part that replaces or revises that part) of the Dividend, expressed as a decimal;

`Ordinary Share' means an ordinary share in the capital of the Company;

`Tax Act' means:

(a) the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 as the case may be as amended and a reference to any section of the Income Tax Assessment Act 1936 includes a reference to that section as rewritten in the Income Tax Assessment Act 1997;

(b) any other Act setting the rate of income tax payable; and

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Appendix B - Calculation of Discount Rates

Overview

Selection of an appropriate discount rate to apply to the forecast dividend flows of a company fundamentally is a matter of judgment. There is a formulaic approach that can and is derived by theory; however, a mechanistic application of financial theory can result in a discount rate that is not applicable in reality. Hence, it should be stressed that there is no "correct" discount rate. Despite the growing acceptance and application of various theoretical models, many companies may rely on less sophisticated approaches and use relatively arbitrary "hurdle rates" which do not vary significantly over time despite interest rate movements.

The discount rate that TIFL has adopted is reasonable relative to the rates derived from theoretical models is the cost of equity derived from the Capital Asset Pricing Model ( CAPM ) methodology. The CAPM is probably the most widely accepted and used methodology for determining the cost of equity capital. However, while the theory underlying the CAPM is rigorous, the practical application is subject to shortcomings and limitations and the results of applying the CAPM model should only be regarded as providing a general guide.

Overview of the CAPM Framework

The CAPM provides a theoretical basis for determining a discount rate that reflects the returns required by diversified investors in equities. CAPM is based on the assumption that investors require a premium for investing in equities above risk free investments (such as Australian government bonds). The premium is commonly known as the market risk premium and notionally represents the premium required to compensate for investment in the equity market in general.

The risks associated with an investment in a company can be classed as either specific risks or systematic risks. Specific risks are risks that are specific to a particular company or business and are unrelated to movements in equity markets. Systematic risk is the risk that returns from an investment or business will vary with market returns in general. If returns on an investment are expected to be perfectly correlated with returns on the market, then the return required on the investment would be equal to the return required from the market (ie. the risk free rate plus the market risk premium).

CAPM postulates that the return required on investment or assets can be estimated by applying to the market risk premium a measure of systematic risk described as the equity beta factor. The equity beta for an investment reflects the covariance of the return from that investment with the return from the market as a whole. Covariance is a measure of relative volatility and correlation. The equity beta of an investment represents its systematic risk only. It is not a measure of the total risk of a particular investment. In general, an investment with an equity beta greater than 1 is riskier than the market and an investment with a beta of less than 1 is less risky.

The formula for deriving the cost of equity using CAPM is as follows:

Re = Rf + Beta (Rm - Rf)

Where Re is the expected return on equity; Rf is the risk free rate; Beta is the equity beta factor; Rm is the expected market return; and Rm – Rf is the market risk premium.

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The equity beta for a company is normally estimated by observing the historical relationship between returns from the company or comparable companies and returns from the market in general.

Risk-Free Rate

The risk-free rate can be defined as a theoretical return on risk-free assets. Although a truly riskfree asset exists only in theory, in practice most professionals and academics use government bonds of the currency in question to estimate the risk-free rate – in this case Commonwealth Government bonds.

While it is theoretically correct to apply a series of spot rates for each cash flow for the duration of the forecast period, TIFL recognizes that valuation methodology typically applies a single risk-free rate estimated by the yield-to-maturity of 10-year Commonwealth Government bonds. Similarly it is common industry practice to ‘match’ the maturity profile of the proxy for the risk-free rate to the maturity of the cash flows over the forecast period. Where the forecast period exceeds ten years, a practical estimation issue arises as to the bond maturity to use as an appropriate proxy. While longer-maturity bonds exist, TIFL views that 10-year Commonwealth Government bond as a widely used and accepted benchmark for the risk-free rate.

For the purpose of this report, TIFL has adopted a risk free rate of 6.45%. The risk free rate approximates the yield to maturity on 10 year Australian Government bonds in the week ending 10[th] September 2008.

Market Risk Premium

The market risk premium (Rm - Rf) represents the additional return that investors require to invest in equity securities as a whole over a risk free investment which is not observable and therefore a historical premium is used as a proxy. Australian studies have been limited but indicate that the long run average premium has been in the order of 6% measured over more than 100 years of data.

The market risk premium is not constant and may change over time as investors perceive that equities are more risky than at other times and will increase or decrease their expected premium.

A market risk premium of 6% has been assumed which TIFL believes is within the range of generally accepted figures of long term market risk premiums in the Australian capital market.

Equity Beta

Beta is a measure of the expected covariance (ie. volatility and correlation of returns) between returns on an investment and returns on the market as a whole. The conventional practice for estimating beta is to calculate a historical beta using past share price and market returns data and use it as a proxy for the future.

Equity Beta estimate

To obtain an equity beta, TIFL has considered Ordinary Least Squares ( OLS ) betas of CMI and other comparable companies listed on Australian Securities Exchange ( ASX ).

TIFL considers that an appropriate equity beta of 1.44 would be acceptable for investors considering an investment in this sector.

Imputation Credits (Gamma)

The WACC set out above assumes a "classical" tax system. The CAPM model is constructed to derive returns to investors after corporate taxes but before personal taxes. Under the US classical tax system, interest expense is deductible to a company but dividends are not. Investors are also

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ExPERT’S REPORT

double-taxed on dividends received.

Under Australia's dividend imputation system, domestic equity investors now receive a taxation credit (franking credit) for any tax paid by a company, hence eliminating the double taxation associated with US dividends. There are schools of economic thought that argue that the taxation benefits of dividend imputation should be incorporated into any analysis of value. However, Australian studies of the relative value of dividend imputation are controversial and have produced mixed results.

It is worth noting that franking credits can only be utilised in the hands of domestic Australian investors and to a lesser extent, superannuation funds who are eligible for a refund of unused imputation credits (provided that franking credit trading rules are met). Foreign investors are unable to access attached franking credits and hence attribute no additional value to franking credits.

While a number of studies point towards the proposition that some value should be attributed to dividend imputation, TIFL considers that the evidence provided by the different schools of thought as to the value that investors attributes to dividend imputation is unclear.

TIFL considers that any adjustment to CAPM methodology to factor in an estimate of dividend imputation is unnecessary.

In TIFL's opinion it is not appropriate to make any such adjustments in the valuation methodology and therefore assigned a value of zero.

Summary of WACC Parameters

Parameter/Estimate	Value
Equitybeta	1.44
Gamma(�)	0
Market riskpremium	6.00%
Risk-free rate	6.45%
Corporate tax rate	30%
Cost of equity	15.10%

Page 25

CMI LIMITED NoTICEs of MEETINgs of orDINary aND CLass a sharEhoLDErs

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ACN 050 542 553

Please return your Proxy forms to: Link Market Services Limited Level 12, 680 George Street, Sydney NSW 2000 Locked Bag A14, Sydney South NSW 1235 Australia Telephone: (02) 8280 7454 Facsimile: (02) 9287 0309 ASX Code: CMI Website: www.linkmarketservices.com.au

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APPOINTMENT OF PROXY

Combined Ordinary and Class A Shareholders Meeting

If you would like to attend and vote at the General Meeting, please bring this form with you. This will assist in registering your attendance.

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X99999999999
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X99999999999

I/We being a member(s) of CMI Limited and entitled to attend and vote hereby appoint

the Chairman OR if you are NOT appointing the Chairman of the A of the Meeting Meeting as your proxy, please write the name of the (mark box) person or body corporate (excluding the registered securityholder) you are appointing as your proxy

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or failing the person/body corporate named, or if no person/body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following instructions (or if no directions have been given, as the proxy sees fit) at the Combined Ordinary and Class A Shareholders Meeting of the Company to be held at 10:00am on Friday, 7 November 2008, at Brisbane Riverview Hotel, Charter Room, Corner Kingsford Smith Drive and Hunt Street, Hamilton, Queensland and at any adjournment of that meeting.

Where more than one proxy is to be appointed or where voting intentions cannot be adequately expressed using this form an additional form of proxy is available on request from the share registry. Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the meeting. The Chairman of the Meeting intends to vote undirected proxies in favour of all items of business.

B To direct your proxy how to vote on any resolution please insert in the appropriate box below.X

For Against Abstain*

Resolution

That, subject to the Class A Shareholders and the combined Ordinary Shareholders and Class A Shareholders of the Company separately approving the cancellation of Class A Shares (and having regard to the other information provided in the Notices of Meetings of Ordinary and Class A Shareholders), IT IS RESOLVED that the Company’s share capital be reduced by the cancellation of all Class A Shares on issue on the Payment Record Date for the consideration of $1.00 per Class A Share.

If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

C	SIGNATURE OF SECURITYHOLDERS – THIS MUST BE COMPLETED
Securityholder 1 (Individual) Joint Securityholder 2 (Individual) Joint Securityholder 3 (Individual) Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director

This form should be signed by the securityholder. If a joint holding, either securityholder may sign. If signed by the securityholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the securityholder’s constitution and the Corporations Act 2001 (Cwlth).

CMI PRX841

How to complete this Proxy Form

1 Your Name and Address

This is your name and address as it appears on the company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

2 Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in section A. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person in section A. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the company. A proxy may be an individual or a body corporate.

3 Votes on Items of Business

You should direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

4 Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s share registry or you may copy this form.

To appoint a second proxy you must:

(a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together.

5 Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign.

Joint Holding: where the holding is in more than one name, either securityholder may sign.

Power of Attorney: to sign under Power of Attorney, you must have already lodged the Power of Attorney with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it. Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission. A form of the certificate may be obtained from the company’s share registry.

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 10:30am on Wednesday, 5 November 2008, being not later than 48 hours before the commencement of the meeting. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy forms may be lodged using the reply paid envelope or:

– by posting or facsimile to CMI Limited’s share registry as follows:

CMI Limited C/- Link Market Services Limited

Locked Bag A14 Sydney South NSW 1235 Facsimile: (02) 9287 0309

delivering it to Level 12, 680 George Street, Sydney NSW 2000.

Link Market Services Limited advises that Chapter 2C of the Corporations Act 2001 requires information about you as a securityholder (including your name, address and details of the securities you hold) to be included in the public register of the entity in which you hold securities. Information is collected to administer your securityholding and if some or all of the information is not collected then it might not be possible to administer your securityholding. Your personal information may be disclosed to the entity in which you hold securities. You can obtain access to your personal information by contacting us at the address or telephone number shown on this form. Our privacy policy is available on our website (www.linkmarketservices.com.au).

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APPOINTMENT OF PROXY

Class A Shareholders Meeting

If you would like to attend and vote at the General Meeting, please bring this form with you. This will assist in registering your attendance.

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X99999999999
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X99999999999

I/We being a member(s) of CMI Limited and entitled to attend and vote hereby appoint

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A
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the Chairman OR if you are NOT appointing the Chairman of the of the Meeting Meeting as your proxy, please write the name of the (mark box) person or body corporate (excluding the registered securityholder) you are appointing as your proxy

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or failing the person/body corporate named, or if no person/body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following instructions (or if no directions have been given, as the proxy sees fit) at the Class A Shareholders Meeting of the Company to be held at (expectedly) 10:30am on Friday, 7 November 2008, at Brisbane Riverview Hotel, Charter Room, Corner Kingsford Smith Drive and Hunt Street, Hamilton, Queensland and at any adjournment of that meeting.

B To direct your proxy how to vote on any resolution please insert in the appropriate box below.X

Resolution

For Against Abstain*

If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

C	SIGNATURE OF SECURITYHOLDERS – THIS MUST BE COMPLETED
Securityholder 1 (Individual) Joint Securityholder 2 (Individual) Joint Securityholder 3 (Individual) Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director

CMI PRX841

How to complete this Proxy Form

1 Your Name and Address

2 Appointment of a Proxy

3 Votes on Items of Business

4 Appointment of a Second Proxy

To appoint a second proxy you must:

(b) return both forms together.

5 Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign.

Joint Holding: where the holding is in more than one name, either securityholder may sign.

Lodgement of a Proxy

Proxy forms may be lodged using the reply paid envelope or:

– by posting or facsimile to CMI Limited’s share registry as follows:

CMI Limited C/- Link Market Services Limited

Locked Bag A14 Sydney South NSW 1235 Facsimile: (02) 9287 0309

delivering it to Level 12, 680 George Street, Sydney NSW 2000.

AI assistant

EXCELSIOR CAPITAL LTD — Proxy Solicitation & Information Statement 2008

64816_rns_2008-10-07_7a1b2e5e-84f9-4697-a314-2447e85e8356.pdf

Notices of Meetings of: Ordinary and Class A Shareholders

Summary of Important Information

This Document is important:

Table of Contents

Chairman’s Letter

CMI Limited ACN 050 542 553

Dear Shareholder

Important notes on voting at the combined meeting of Ordinary and Class A Shareholders

Definitions

Notice of meeting of combined Ordinary and Class A Shareholders

AgENDA – SPECIAL BuSINESS

NOTES

VOTINg ExCLuSION

Sharyn Williams

Notice of meeting of Class A Shareholders

CMI Limited ACN 050 542 553

AgENDA – SPECIAL BuSINESS

NOTES

VOTINg ExCLuSION

Sharyn Williams

Explanatory Memorandum

CMI Limited ACN 050 542 553

1 Purpose of the Resolutions

2 Investment advice

3 Capital Reduction

Background

Explanatory Memorandum

Consideration

Effect on the Company

Directors interests

Disclosure of relevant information

4 Funding the Transaction

Explanatory Memorandum

5 Effect on the Company and Shareholders if the Transaction proceeds

6 Effect on the Company and Shareholders if the Transaction does not proceed

7 Tax consequences

Explanatory Memorandum

8 Recommendation of the Directors

9 Date

Annexure A

Tolhurst InterFinancial Limited

Financial Services Guide

About us

Financial services we are licensed to provide

General financial product advice

Remuneration, commissions and other benefits

Annexure A

ExPERT’S REPORT

Associations and relationships

Complaints

To contact TIFL:

To contact the FOS:

Annexure A

INDEPENDENT EXPERT’S REPORT TO CMI SHAREHOLDERS – PROPOSED SELECTIVE CAPITAL REDUCTION

1. Introduction

Annexure A

ExPERT’S REPORT

2. Summary of Opinion

Annexure A

ExPERT’S REPORT

Table of Contents

Annexure A

ExPERT’S REPORT

3. This Report 3.1 Scope of the Report

3.3 Basis of Evaluation

Annexure A

ExPERT’S REPORT

3.4 Methodology for assessing the value of Class A Shares

Annexure A

ExPERT’S REPORT

3.5 Source of Information

3.6 Conclusion

Annexure A

ExPERT’S REPORT

4. Background Information

4.1 Company Information

4.2 Historical Financial Statements

EXCELSIOR CAPITAL LTD Proxy Solicitation & Information Statement 2008