Island Press Releases Director's Letter To Shareholders

"We are pleased to report a profit of $562,758 or $1.05 per common share for the year ended September 30, 2002. In general, these results reflect an improvement over the prior year. However, there are a number of factors contributing to this performance, which must be considered. the most significant factor affecting the current year financial statements is the inclusion of the results of both Caribbean Publishing Company Ltd. ("CPC"), a directory publishing company acquired in May of 2002, and Bermuda Cruise Ltd for the twelve months ended September 30,2002. These balances have been included as a result of the acquisition of CPC and the consolidation of Bermuda Cruise Ltd. which in prior years was carried as an investment at cost. The prior year balances as presented in the financial statements do not reflect the results of both CPC and Bermuda Cruise Ltd.

Operating revenues have increased by 22% and cost of sales have decreased by 3% as compared to the 2001 fiscal year. This has resulted in an increase in the Company's gross profit margin from 41% in 2001 to 53% in 2002. Rental, interest and income have increased by 60%. In addition, we have recognized a gain of $328,146 relating to the forgiveness of debt as a result of the purchase of the CPC. General and administrative costs increased by 104% and will be described further below.

If we "normalize" our financial results for the year, thus excluding the operating results of both CPC and Bermuda Cruise Ltd. for the purpose of our comparative analysis, we will have a basis for assessing our performance in relation to our historical operating activities. On this basis, normalized operating revenues have in fact decreased by 5% as compared to the prior year. Cost of sales however decreased by approximately 11%, which reflects the benefits arising from our continuing efforts towards cost control. Normalized rental, interest and other income increased by 96% as compared to the prior year. This increase was primarily the result of interest earned on comparatively larger cash reserves. Normalized general and administrative costs have increased by 9%. This increase was primarily the result of charges incurred during the acquisition of CPC as well as expenses relating to the pursuit of further overseas directory publishing opportunities. The normalized gross profit margin percentage increased to 44% from 41% in the prior year. Normalized net income for the year under review was $870,458, representing a 16% increase over the prior year.

Cash flow increased by $1,610,331 or 79% as compared to the prior year. At September 30, 2002 approximately $1,242,000 of total cash on hand was restricted under the terms of various credit facilities, however on October 9, 2002, $1,000,386 of these restrictions was removed. Accounts receivable, net of an allowance for doubtful accounts, increased by $5,404,460. This increase was primarily the result of receivables held by CPC. Inventories increased by $99,732 as did prepaid charges by $503,170. Once again, the increase in prepaid charges was the result of balances reflected in CPC's year end balance sheet. Accounts payable increased by $3,229,344 as a result of payables held by CPC at year end. Payables excluding those held by CPC and Bermuda Cruise Ltd in fact decreased by 20% as compared to the prior year. Finally, bank financing increased by $1,642,551. $1,569,871 of this increase related to a bank overdraft facility held by CPC. By year end, the net book value per common share had increased by $1.05 to $10.11 share.

These results are encouraging. However, as stated in previous Director's Reports, commercial printing in Bermuda is a mature industry. As such, we have aggressively pursued and successfully secured, through acquisition and development, additional publishing opportunities in both the United States and the Caribbean. Furthermore, we are developing a venture involving the replacement, repair and maintenance of electrical control systems in Bermuda. This venture began operations in February 2003. It is expected that these and other opportunities will enable the development of future growth and increased profitability.

As a publish company listed on the Bermuda Stock Exchange, it should be noted that the directors and officers of the Company hold 321,525 of the outstanding common shares and 51,934 preference shares. No rights to subscribe for shares in the Company have been granted to any director or officer and there are no service contracts with any director or officer. No dividend has been declared for the year under review.

Finally, the Board would like to thank all of our Company members for their continued hard work and enthusiasm and for making the Company more efficient and customer driven."

Signed by:

Randy French, Chairman

Island Press (Holdings) Limited