Welcome to Gunns Ethical Shareholders(GES). Although GES was only established in late 2000, the group is moving along and we already have much to report. The initial concerns of GES have been magnified since our company bought North Forest Products. This has elevated Gunns to the number one export woodchipper in Australia. This year our company will export over 5 million tonnes of woodchip – double the rest of Australia combined.

What will be the ramifications for our company in terms of reputation, resource security and long term viability? What percentage of the company’s profit is now derived from this controversial industry? Clearly Gunns can no longer claim to be a proud value adding Tasmanian Timber Company. We are now without a doubt an export woodchip driven company which is shipping Tasmania’s forests overseas to be made into paper.

THE WOODCHIP DEBACLE

As community pressure on companies and governments to stop logging and woodchipping native forests escalates, the financial stability of the native forest product market is being undermined by competition from plantations: both in Australia and overseas.

Judy Clarke, in her 1995 report on Australia’s plantations, states;

     "…the crucial features of structural changes overtaking the (forestry) industry (are):

• The plantation processing industry together with recycled paper already dominates Australia's markets for wood products for shelter and paper;
• The plantation processing industry is poised for major expansion over the next five years as large areas of plantations mature;
• Growing wood as an agricultural crop in plantations has an array of cost and quality advantages which are driving native forest wood products out of commodity markets;
• Companies manufacturing plantation wood products are working to secure the domestic market, placing themselves in a more secure position to expand into export markets.

It is clear that there is a limited future for export woodchipping and logging in old growth forests - the current industry is neither ecologically, economically or socially viable.

Shareholders need to be informed of the extent of our company's involvement in the destruction of these world heritage value forests.

TASMANIAN FORESTS

Despite these figures the Tasmanian forest industry uses jargon such as "world class reserve systems" to sell their unsustainable operations.

While much of Tasmania's natural heritage is protected, most reserved areas are alpine ecosystems; tall forest are inadequately represented.

In fact independent statistics indicate that Tasmania has some of Australia's worst forestry practices including:

• 50,800 ha of forest cleared since 1996 (Forest Practices Board Annual Report 99/00);
• Only 13% of the original Eucalyptus Regnans remain standing;
• Of the 12,060 ha of native public forest logged in 2000 76% was Old Growth;
• Tasmania is the only place in Australia that legally logs rainforest.

THE STYX VALLEY

World Heritage-listed National Parks surround the Styx Valley's 20,000 hectares of substantially undisturbed Eucalyptus Regnans Forest. The Styx was denied protected under the Tasmanian RFA despite being one of the world's last remaining strongholds of old growth E. regnans forest.

Over the next three years, the Tasmanian forest industry plans to log 800 hectares, as well as building 17 km of logging roads into the area. This will decimate the natural qualities of the forest. Gunns has been identified as the receivers of logs coming out of coupe number SX-12-C. This coupe is located in the Styx Valley. It is also the coupe that was featured in the 60 Minutes report that aired in November 2000, "The Valley of the Giants".

There can be no doubt that our company is directly involved in the destruction of this area. In light of national media and public attention on the Valley, GES is calling on Gunns to withdraw all logging operations from the Styx.

SHAREHOLDER CONCERN AT TAKEOVER

Following the take over the North Forest Products, several letters of concern were written to Gunns' Board of directors by shareholders. The Board did not reply.

GES considered ways in which they may become more actively involved with the company, and make their concerns heard.

GES' first initiative was to produce a leaflet inviting others to join the group. The leaflet is still being distributed to the Gunn's shareholders.

In their first acknowledgement of GES, the Board sent an open letter of response to all shareholders. Although members of GES contest many of the claims in the letter, it is at least an indication that the group has been noticed, and have made some impact in the Boardroom. GES considers the letter an opportunity to initiate discussion between the Board and shareholders.

PLEASE SUPPORT THE RESOLUTIONS ATTACHED

GES asks you to consider supporting these two resolutions. Representatives from GES will be contacting you over the coming week. However, if you wish to contact Erika Ford directly you can do so by phoning her on 0412 070 960. GES has nominated Erika Ford to be on the Board of Gunns Ltd. We need your support for this nomination. This will not mean that you are voting for Erika, just that you would like her to have the opportunity to run for a place on the Board. GES look forward to working with you to find a path forward which delivers good economic returns, but not at the expense of our natural heritage.