Streaky Bay Aquaculture Newsletter:

Directors Report – January 2008

Our last report was written in July 2007 which was posted on our website. Since that report, we are happy to advise:

1. Further funds have been raised allowing us to complete all the items listed in that report including:
    a) Construction of grow outs “C” and “D”.
    b) Mains power connection including relevant poles (approx 6 kms) to a transformer completed by ETSA.
    c) Third pump purchased, placed and now in full time operation.
    d) All pipe welding (630mm, 450mm and 250mm) completed, placed and operating effectively.
    e) A new Main Switch Board has been purchased and placed. It is now in operation, with the connection

        to the ETSA transformer and upgrade of all major wiring being completed by Tri Star Electrical

        from Adelaide.

With the above works completed, it is envisaged the facility could produce 30T/annum by 2009 and quickly expand to 100T/annum (with relevant funding for additional grow out either being borrowed or sourced from operating profits) without having to do any major additional electrical or bunker/pump/pipe upgrades. This gives a very solid base for future expansion.

2. The 2007 spawning has been completed. Whilst this spawning does not appear to have given the results of past years, we are hopeful that through careful management and a provision to purchase additional spat if required, adequate spat will be available to ensure the facilities current capacity of 30 tonne/annum will not be jeopardised by the time this year class of spat is ready for harvest.

3. Our anticipated harvest between July and November of 07 was down on expectations. However, we have held some stock over for early sale in 2008 and further, we anticipate being able to harvest in excess of the previously stated 5 tonne prior to 30th June 2008 from the next year class. As such, cash flow from operations should be very close to even for the first time since the project’s commencement.

The predictions for 2008/09 being the first full year of availability of A, B, C and D for harvest remains as previously stated, and should enable the first opportunity for a dividend payment.

4. We advise that this coming year being the first year without major capital works being undertaken, will allow us to concentrate entirely on our stock and allow us to gauge a clearer picture of the total capacity possible to be produced from the existing facility. We are looking forward to improving yields per tank by optimising timing of stock movement and stocking densities. We also acknowledge that further refinement could be achieved in this area if funds were available for an appropriate grading device to ensure harvest of whole tanks could occur as opposed to selective harvesting of sizeable animals.

This would be achieved by stocking animals of a particular size more uniformly in periods immediately prior to periods of prime growth conditions and eventual harvest.

5. It is with disappointment that we advise Roger Goodfellow is no longer employed within our organisation. Roger and family lived onsite for 3.5 years before relocating to town 1.5 years ago.

Five years involvement in an emerging business that commands your attention and thoughts 24 hour a day is a big ask, particularly when funding is tight and expansion needs to occur quickly to survive. We thank Roger and his family for their past dedication to this project and wish them well in their future endeavours. As Roger had performed our last two spawning, we anticipate tendering this function out in 2008. Roger has been encouraged to offer a tender when advertised.

6. The $AUD’s strength continues to reduce our income and hinder our cash flow position, but also ensures we are vigilant in trying to streamline procedures and operations as quickly as possible to ensure profits and eventual dividends to shareholders become an expected normality in the shortest time possible. The effects of current streamling measures will only serve to amplify profits/dividends in future years.

7. We advise we are currently a HACCP audited and approved facility, and additionally, are currently undertaking training to obtain ISO 14001 qualification. This will increase our opportunities for future marketing of product, as world regulations and codes of conduct, for business procedures and processed product become more stringent to allow for top quality assurance.

8. We advise that we have withdrawn from the Seafood and Aquaculture Trail and no longer conduct tours of our operation. Obviously shareholders and their friends are still welcome to visit for an update, and probably should call first to ensure someone is available to take them through. The tours have ceased in line with tightening of controls regarding our qualifications above.

9. We attach the 2007 financial statements for SBA and advise that after the 2008 financial statements have been prepared, we will give a detailed financial summary of our position for all shareholders information.

10. Once again we thank shareholders for their patience and employees for their support commitment and understanding as the project moves towards its goals.

The Directors
STREAKY BAY AQUACULTURE PTY LTD