GALE PACIFIC LIMITED — AGM Information 2003

Nov 12, 2003

ANNUAL GENERAL MEETING 13 NOVEMBER 2003

CHAIRMAN'S ADDRESS

It is my pleasure to welcome you all today to this the third Annual General Meeting of Gale Pacific Limited.

The past financial year saw Gale generate record earnings with after tax profits attributable to shareholders 50% above the previous year. Factors contributing to this substantial increase included:

• A record Australian retail season reflecting a long, hot summer;
• The full integration of the industrial fabrics business acquired from the $\bullet$ . Visy Group:
• The acquisition of California Sun Shades Inc. in the USA; and $\bullet$
• Establishment of a manufacturing Joint Venture in China to initially $\bullet$ produce the California Sun Shades products.

In my address to shareholders last year I stated the Board's commitment to develop three strong legs to the business. These were:

• The supply of advanced polymer products to the Australian market;
• A strong presence in the industrial/commercial sector; and
• Strengthening the USA operation.

In the past year considerable progress has been made in all three areas. We continue to produce a wide range of innovative advanced polymer fabrics from our plant here in Braeside. Many consumer fabricated products that used to be sourced from third party converters in China are now being produced in our own facility in Ningbo, China. The manufacturing Joint Venture in China has been expanded considerably and this year will supply at least 80% of products to our Australian and USA businesses. Earlier this year we acquired full ownership of the China Joint Venture and have a competent and skilled local management team. The China operation is particularly important as it enables Gale to control its total cost structure and we are able to deal direct with the large retail buyers in the USA and Europe.

The industrial and commercial sector has increased in size following the successful integration of the Visy acquisition. Sales growth was impacted last year by the drought but with more normal weather patterns returning, an improved performance is expected. The commercialization of a fire retardant commercial fabric will open up new sales opportunities both here and in the USA.

The California Sun Shades acquisition strengthened our USA operation but significant further investment will be made to grow our presence in the retail sector and to enter the commercial market.

Our Middle East operation performed strongly and further growth is being actively pursued.

With the low cost operations successfully established in China, entry into the European market is now underway.

Your Board's objective is to establish Gale as a participant in all major world markets with success being dependent upon ongoing product innovation, low cost primary and secondary manufacturing and efficient distribution

HUW DAVIES CHAIRMAN

13 November 2003

ANNUAL GENERAL MEETING 13 NOVEMBER 2003

MANAGING DIRECTOR'S ADDRESS

RESULTS

The Company earned a net profit of \$5.45 million attributable to members, an increase of just over 50% on the prior year. During the year, the Company incurred one time net costs of some \$1.2 million after tax, predominantly relating to the Company's acquisitions.

Revenue for the year was \$84.6 million, an increase of 51% on last year with a particularly strong Australian retail season and Middle East industrial volumes.

The Company benefited from the contributions of the Industrial Fabric business purchased in June 2002 from Visy Industries, the November 2002 acquisition of the California Sun Shades ("CalShades") business together with the associated Chinese Joint Venture. The strong Australian retail performance more than offset the droughtaffected industrial fabric range. This demonstrates the success of the Company's strategy of mitigating the impact of weather on our operations.

Significantly, the Company's revenues and earnings for the year have been generated fairly equally between the first and second halves, also demonstrating the success of the Company's strategy in developing a more balanced earnings stream through the year from the northern and southern hemisphere operations. This will be more evident in the forthcoming year.

The Company has previously stated a goal of continuous improvement in working capital management and is well satisfied with this year's result. The Company consciously built inventory prior to year end to accommodate the relocation of several of the value adding operations in China from external contractors to our own in-house manufacturing facility in Ningbo. These moves are expected to translate into improved cash flows in 2003/04.

Current year trading has seen a substantially later start to the retail season in Australia in comparison to last year's very early summer conditions. While this has translated into below budgeted sales, we are still up on last year. We are now experiencing more favourable weather conditions throughout Australia that are now improving sales at retail level. Year to date we have also received most satisfying improvements in gross margins. This progress has been partially offset by costs associated with the China operations and increased costs in marketing, the benefits from which will flow progressively through the year.

The inclement weather experienced through early Spring, while adverse for our retail sector, has represented a considerable improvement against the drought conditions experienced last year in our industrial sector. This will improve the Company's opportunities throughout the year in the agricultural and water management markets.

INDUSTRIAL FABRICS ACQUISITION

The Company has completed the assimilation of the business into our group:

• Sourcing of the scrim from Asia is complete and well integrated into our $\bullet$ operations;
• The expected margin improvement has been achieved;
• The coating line upgrades are complete; and
• We have rationalised our sales and sales channel structure for improved efficiency.

The business is now ready for the steady growth in volume from new product development that can further lower our costs as we increase the utilisation of our coating line.

CALSHADES ACOUISTION

The business has delivered a very solid contribution to the year's results and is also totally assimilated into our group.

It has:

• Substantially increased the company's market presence; $\bullet$
• Balanced our overall Window Furnishings product range to Good, Better and $\bullet$ Best: and
• Reduced costs well below plan with efficient component outsourcing.

CHINA SUBSIDIARY

From our start up we have been very pleased with the China operation's achievements:

• Satisfaction of CalShades' product requirements from a "greenfields" start up; $\bullet$
• Transfer of outsourced value adding activities to our operations; $\bullet$
• Reduction in packaging and fabrication costs; $\bullet$
• Construction of a new manufacturing facility scheduled for completion in the $\bullet$ first half of 2004:
• Improvement in the integration of China into the consolidated business; and
• Over-achievement in target margins and quality. $\bullet$

The further growth of activities in China will be supported by Phases 2 and 3 in the expansion of our new facility which will eventually add some $16,000m^2$ to the Phase 1 facility of $15,000$ m².

SHORT TERM OUTLOOK

The Company's short term outlook will benefit from:

• The synergies from our recent acquisitions; $\bullet$
• Enhanced plant performance in Melbourne and China; $\bullet$
• Improved procurement and supply chain operations in China: $\bullet$
• Improved inventory management; and
• Growth in recently commercialised products:
• Fire Retardant Fabrics $\mathbb{Z}^2$
  • Bioclip Sheep Coats $\overline{a}$
  • Water Flumes

MID TERM OUTLOOK

The Company's mid-term outlook is expected to benefit from:

• Establishment of a production capability for product components in China; $\bullet$
• New product development; $\bullet$
• European expansion: $\bullet$
• Ongoing focus on research and development;
• Export opportunities for the coated industrial product range; $\bullet$
• Further productivity improvements: and $\bullet$
• Middle East market expansion.

NEW BUSINESS DEVELOPMENT

The Company recognises that the development of advanced and innovative protectable products are the key to our sustained growth. We have allocated the Company's resources accordingly by establishing a Business Development Group with a dedicated Senior Manager in place who is currently expanding the team substantially over the balance of this financial year.

Continued and consistent results are being achieved.

Innovative projects include:

• Bioclip Sheep Nets; $\mathbb{Z}^{\mathbb{Z}}$
• Pratt Water;
• PVC Replacement Fabrics: $\overline{a}$
• Aquaspan; and $\overline{a}$
• Domestic Water Storage Product.

New retail products include:

• Water Proof Shadecloth: and
• Pet Beds $\mathbf{r}$

BioClip

• Over 550,000 sheep nets have been ordered and produced;
• New product enhancements have been added; and $\bullet$
• Significant expansion in the market has been identified.

Pratt Water

• Initial cost feasibility established; $\bullet$
• Field testing commenced; and $\bullet$
• $\bullet$ Substantial potential markets.

Ouest for PVC Replacement Fabrics

• "Anti-wicking" (the prevention of water absorbency) scrim innovation achieved; $\bullet$
• Market review in process; and $\bullet$
• Range to be established. $\bullet$

LONG TERM TRENDS DRIVING THE BUSINESS

• Organic Agricultural Products $\bullet$
• Passive barriers to birds, insects and severe weather. $\overline{a}$
• "Cocooning" $\bullet$
• The backyard is a major area of home improvement spend.
• Global Warming $\bullet$
• UV damage to people and plants.
• Water Conservation $\bullet$
• Evaporation and water quality.

GARY S GALE MANAGING DIRECTOR

13 November 2003