Silk Energy Ltd SLKEF

RE: The Annual Reports

[victor2009]

As pitiful as the effort at providing annual information may be, I wouldn't want to discourage readers from trying to wade through the mishmash. If nothing else, some of the boiler plate commentary that is included, might give someone a chuckle. Its an example of some of the drivel that results when agencies that purport to represent the public interest, attempt to justify their existence. We get pages of cautions, disclaimers and obvious observations that are repeated annually by hundreds of public companies. Eventually, readers quit reading the gibberish, and companies can include incorrect information, or exclude required information, and no one is any the wiser.

I find the following comments in the recent annual information provided by ISM to be examples of inane filler.

No History of Mining Operations

The Company does not have a history of mining operations and there is no assurance that it will produce

revenue, operate profitably or provide a return on investment in the future.

Need for Additional Mineral Reserves

As mines have limited lives defined by their proven and probable mineral reserves, the Company will be

required to continually replace and expand its mineral reserves as its mines produce nickel.

Now, isn't this information quite a revelation for those looking for information on ISM. ISM has never mined or produced nickel, and there is no assurance it ever will. The company has not now, or in the past, had an ounce of reserves. Given these facts, it sure is helpful to know that ISM will be required to continually replace and expand mineral reserves it has never had, as its mines produce nickel that doesn't exist.

Another favourite is the disclosure in the May 3, 2010 Management Information Circular:

Compensation Process

In April 2007, the Corporation formed the Compensation Committee to meet as required and review senior

management compensation and the overall compensation policies and practises of the Corporation. The members of

the Compensation Committee are Messrs. Brugh, Stewart and Davis, all of whom are independent directors.

The Compensation Committee is responsible for determining the compensation of the Corporation's executive

officers. The Compensation Committee is also responsible for determining all forms of compensation, including

long-term incentive in the form of stock options, to be granted to the Named Executive Officers of the Corporation

and to the directors, and for reviewing the recommendations respecting compensation for any other officers of the

Corporation from time to time, to ensure such arrangements reflect the responsibilities and risks associated with

each position. When determining the compensation of its officers, the Compensation Committee considers: (i)

recruiting and retaining executives critical to the success of the Corporation and the enhancement of shareholder

value; (ii) providing fair and competitive compensation; (iii) balancing the interests of management and the

Corporation's shareholders; and (iv) rewarding performance, both on an individual basis and with respect to

operations in general.

This is from the same Circular that advised, for the first public disclosure, of the rather generous Employment Agreement:

F. Employment Agreements

As of the date of this Information Circular, the Corporation has entered into a consulting agreement with Adrea

Capital Corp., a private British Columbia company owned and / or controlled by Mr. Miller. In the event that the

consulting agreement is terminated due to the death, retirement of disability of Mr. Miller, the agreement provides

for the lump sum payment of an amount equal to two (2) times the annual salary and two (2) times the average

annual bonus paid to Adrea Capital Corp. In the event that the agreement is terminated for any other reason or not

for just cause or in the event Mr. Miller resigns for "Good Reason", as such term is defined therein, Mr. Miller will

be entitled to a payment that, in the aggregate, equals the annual salary at time of termination and an amount equal

to the greater of: (i) six (6) times the annual salary; and (ii) an amount equal to the result obtained when the annual

salary is multiplied by a fraction, the numerator of which is the number of days between the date of termination and

Mr. Miller's retirement date and the denominator of which is 365. In addition, the Corporation is required to

purchase from Mr. Miller, at the fair market value, all shares, rights, options or warrants to acquire shares of the

Corporation owned by Mr. Miller and shall pay him three (3) times the difference between the exercise price and the

fair market value of all rights, options or warrants to acquire shares subject to issuance pursuant to any options or

warrants held by Mr. Miller.

I should point out that the "F" is an indexing reference in the Circular, not a failing grade for the Compensation Committee, as many might conclude. I have some doubts that shareholders that watched their shares decline from a high of 87 cents on Jan 5, 2010 to a close of 26 cents on Dec 31, 2010, will be impressed by the decision of the Compensation Committee to increase monthly compensation to the extent they did, or to initiate the Employment Agreement. In particular "balancing the interests of management and the Corporation's shareholders; and rewarding performance, both on an individual basis and with respect to operations in general" might be hard to swallow.