GALE PACIFIC LIMITED — Capital/Financing Update 2002

Nov 26, 2002

Facsimile

To: Australian Stock Exchange

Company Announcements Office

FACSIMILE NO:

1300 300 021

Rod House FROM:

SUBJECT: Overseas Acquisition Completed . AUSTRALIAN STOCK EXCHANGE GAP000031

DATE:

27 November 2002

TOTAL NO. OF PAGES: 4

Dear Sir,

Please find enclosed an acquisition announcement.

Yours Faithfully

Rod House COMPANY SECRETARY

1

IF THIS MESSAGE IS NOT FULLY RECEIVED OR UNCLEAR, PLEASE CALL 61 3 9518 3333 The Information contained in this facsimile transmission is privileged and confidential and intended only for the use of the individual(s) and/or entity(les) named above. If you have received this transmission in error, please immediately notify us by telephone (collect) to arrange for return of the materials. Thank you. Gale Pacific Ltd 145 Woodlands Drive, Braeside, Victoria 3195, Australia. P O Box 892, Braeside, Victoria 3195, Australia Ph: (03) 9516 3333 Fax: (03) 9516 3398 Toll Free: 1800 331 521 ABN 80 082 283 778 ACN 082 263 778 coularoo

GALE PACIFIC LTD OVERSEAS ACQUISITION COMPLETED

Gale Pacific Ltd ("Gale") wishes to announce that it has acquired the business and customer base of California Sun Shades Inc. ("CalShades") located in the USA for US\$2.272 million, equating to A\$4,057 million.

In conjunction with this transaction, Gale is taking a majority position in a Chinese Joint Venture which will continue to manufacture substantially all the product for CalShades' USA distribution. Further investment will be made by Gale and its Chinese partner to expand the Joint Venture operations to absorb a portion of the Company's current third party sourcing operation in China.

Gale is very experienced in operating in both the USA and China, having a long established USA marketing and distribution subsidiary and a successful record in sourcing certain value added manufacturing and assembly operations in China.

A\$2.807 million of the purchase price was funded by Gale's debt facilities with the remainder through the issue of 974,811 ordinary shares to California Sun Shades Inc. The issue price of these shares was A\$1.2823, representing A\$1.25 million of the consideration.

Post acquisition, the vendor holds approximately 2.3% of Gale. All of these shares are subject to a 12 month escrow.

Further, on achieving certain annual performance milestones, additional payments totalling US\$1.3 million (A\$2.32 million) including US\$0.3 million in shares, will be made to the vendor. The net incremental earnings to Gale would be significant under this scenario.

The addition of CalShades sales and marketing resources to Gale's expanding commitment to the USA, including the recent appointment by Gale of a high calibre Vice President to the USA operation, is expected to greatly enhance our ability to service this important market. The acquisition will also add a west coast office to our operations, which is currently the most important market in the USA for Gale Pacific and CalShades.

The CalShades product range has broadened in recent years and competed with Gale in a number of segments of the USA market. CalShades also offered a range of exterior window furnishings and sun shades in addition to bulk fabric, which appealed to some market segments not previously available to Gale. They also have a number of product development plans which will benefit Gale as a result of the acquisition.

In addition, it is expected that there will be opportunities for CalShades products to be introduced to some of Gale's existing customers both in the USA and Australia.

Significantly, CalShades has enjoyed a growing relationship with one major USA retailing group which had not yet taken on Gale's product offerings. Therefore we see a number of sales and marketing synergies as a result of the acquisition, with the product ranges of both Gale and CalShades expected to enjoy further USA market penetration.

The acquisition is expected to deliver an annual increase to the Group's USA revenue of approximately 70% over the 2001/02 level of US\$8.2 million (A\$15.6) million). A large proportion of this amount will be derived prior to 30 June 2003 given that the bulk of the selling period into the major USA retailers is in our second half. Further revenue growth is expected in the following year as the Group realises the full benefit of synergistic and expansion opportunities available through the acquisition.

The CalShades acquisition further reduces operational risk with a significant boost to second half earnings. This together with the recent Industrial Fabrics acquisition is expected to provide a more even earnings profile through the financial vear.

The Board is comfortable with the small amount of additional gearing arising as a consequence of the acquisition. The Company recently announced a substantial improvement year on year in operational cash flow. These improvements have continued into the first quarter of 2002/03 and we expect this to rapidly reduce our increased gearing.

CalShades' Chinese manufacturing operation will benefit from the Joint Venture partners' further commitment to facility development and expansion plans. Further, it is expected that these developments will serve as a launching pad for sales into the European market where significant potential exists for Gale's products.

This acquisition represents the third leg of our immediate strategy, ie the strengthening of our established and growing USA operation. The first leg, the supply of advanced polymer products to the Australian market has been in place for many years. The second leg, our presence in the commercial arena was substantially strengthened by the Industrial Fabrics acquisition,

Following the very successful acquisition and integration of the Industrial Fabrics business, and the new product development success enjoyed by the Company over the last year, the Board is pleased with the implementation of these growth strategies. Most importantly, Gale has enhanced its management resources in respect of these initiatives and looks forward to the future with confidence.

Gale is now a major player in both retail and industrial fabric markets in Australia. has successful and expanding overseas operations, and is maintaining its focus on new product initiatives.

Over the remainder of the financial year, we will continue to benefit from the most pleasing success of the Industrial Fabrics business, including the provision of paper coating services to the Visy group at above forecast levels.

We are currently enjoying strong trading conditions, particularly in our retail business and are on target to meet our retail performance targets which are well ahead of the prior year.

For further information contact the Managing Director, Mr Gary Gale on (03) 9518 3312.

Gary S Gale Managing Director 27 November, 2002