lletter to shareholders

SOLCO Letter to Shareholders and Option for 2008 Annual Report

Dear Shareholders,

Reflections on a Solid 2007/2008 and Contemplating a Stellar Future

My purpose in writing to you is threefold:
• to share with you information concerning Solco’s performance over 2007/2008;
• to outline Solco’s strategic direction going forward;
• to give you an opportunity to elect to receive your Solco 2008 Annual Report in hard copy form,
should you not wish to access the Solco website to receive that Report online.

Firstly, concerning Solco’s performance over 2007/2008

Obviously this will be covered more in the Company’s formal 2008 Annual Report but I would like to
summarise two financial highlights:
• Group revenue for 2007/2008 was up 63% to $16.8 million (compared to $10.3 million for
2006/2007) primarily reflecting business growth in its wholesale distribution business of PV and
related products;
• Group net profit for 2007/2008 was slightly over $0.1 million (compared to a loss of $2.25 million
for 2006/2007 and a loss of $5.89 million for 2005/2006) reflecting a positive growth curve
forward.
Over 2007/2008 the focus of the Company’s attention was primarily:
• to rationalize areas of operation which were considered not to part of the Group’s continuing
business plans;
• to improve the efficiency of business operations;
• to identify and analyse business growth opportunities (both organic and acquisitive);
• to improve product quality and address residual product warranty issues;
• to recapitalize the Company;
• to restructure the Board and the executive team;
• to address the Group’s underperforming and neglected international SMS investments;
• to enhance the corporate and commercial capability of the Group;
• to bring quality practices and sound corporate governance to bear;
• to strategically position the Group for the future as a platform base from which enduring value
may be able to be delivered for the benefit of the Company’s shareholders and its broader
stakeholders.
Some industry issues which impacted (some favourably, some negatively) the Group’s operations over
this period included:
• positive demand for solar PV products arising from greater social awareness of climate change
impacts and the benefit of clean energy;
• international supply shortages of source material and PV solar panels due to intense large scale
PV installation activity internationally;
• rural Australia drought;
• political policy vagaries concerning the Federal Government Rebate Program for domestic grid
connect systems as evidenced in the May 2008 budget;
• strong price competition in a maturing market sector for domestic solar grid connections, putting
downward pressure on operating margins.

Secondly, concerning Solco’s strategic direction going forward

With the re-establishment of its core profitability, Solco can now engage in, and respond to, the
significant commercial growth opportunities emerging in the enviro-renewable energy and water sectors.
Its strategic direction is to focus on:
• Products:
- aggressively building upon and expanding its existing wholesale distribution business of
solar pv, water pumping and associated products through geographic expansion within
Australia; regional expansion in select offshore markets; expansion of product range;
enhancing its dealer support network; strengthening its supply chain assurance; and
innovation in product and customer offerings;
- identifying, assessing and acting on investment and strategic alliance opportunities for
quality assured production of proprietary products in low cost manufacturing locations.
• Projects:
- delivery of commercial scale renewable energy and water pumping solutions to
commercial, corporate, government and NGO customers for industrial, civic, rural, mining
and select offshore regional applications;
- continuing capability growth and development, including through joint venture opportunities,
to meet emerging market demands and opportunities for larger scale applications and
installation.
• Power utility:
- strategically developing Solco’s capability and capacity to position it to initiate and respond
to emerging opportunities as a niche renewable energy power utility participant.
The Company is refining its business plans to verify and assure the outcome of its strategic direction. At
the same time, the Company is alert to any “left field” opportunities that may arise in this
enviro-renewable energy and water market sector, that can deliver solid shareholder value.

Thirdly, Annual Report Distribution

We would like to present an opportunity for you to help “save our planet”, and considerable
printing/distribution expense for your Company, by accessing the Solco 2008 Annual Report (upon its
issue next month) via the Company’s website (www.solco.com.au) rather than in hard copy print, posted
to you. In this context, please refer to the attached “Important Notice” and the instructions and
explanations given on that form.

In Conclusion

With the continuing support of all its stakeholders, on behalf of the Board of Solco, Mark Norman
(Executive Director and Acting CEO), David Richardson (Non-Executive Director), Ian Campbell
(Non-Executive Director) and myself (Chairman), we look forward to applying our capabilities towards
ensuring that Solco’s future is a prosperous one.

Steven Cole
Chairman

http://www.solco.com.au/pdf/solco_asx_18_09_2008_A.pdf