Bermuda Bakery Issues Chairman's Report

Consolidated results for the year 2003 for the Bermuda Bakery Ltd. and its subsidiary show an operating loss of ($261,708), and after a charge for redundancy payouts, redundant assets and inventory write-offs, a net loss of ($1,547,607). The operating loss is due to decline in the sales of bakery products and increase in cost of sales and expenses.

Earnings per share dropped correspondingly to ($5.40) from $1.59 in 2002.

Net capital assets remained almost unchanged and reflect the replacement of the Belvedere Building air conditioning system and the write-off of redundant Bakery process equipment.

The Belvedere office building continues at full occupancy with excellent long-term tenants. Continuing leasehold improvements coupled with a substantial upgrade in the building infrastructure makes the Belvedere one of the prime office locations in the city. Construction on the complete replacement and upgrading of the air conditioning system to improve both the comfort control and environmental quality in the building was completed by the year-end.

The Bakery division continued to face serious competition from a growing number of small, bread baking operations, which resulted in declined sales and market share of bakery products.

In September 2003 the Company discontinued the baking of breads and rolls as part of the planned restructuring of the Bakery Operations. The Company continued to distribute imported breads, and to bake cake and snack products from its present location

The suspension of baking bread and rolls resulted in the redundancy of one-third of current Bakery Operations employees. Restructuring was expected to reduce the losses by lowering operating costs and provide the flexibility needed to evaluate the long-term requirements of the Bakery Operations, and the opportunities for the future utilization of the Pitts Bay Road property.

I am pleased to report that the capital expenditures and expenses have been funded from current earnings and the Bakery continues to operate without debt. Dividends paid

last year amounted to $143,459 or $0.50 per share. Trading in Bermuda Bakery shares on the Bermuda Stock exchange was modest and in the range of $23.50 to $40.00

As we begin our 81st year of operation our focus is to build on our strengths, which have sustained us over the years while changing to meet the needs of our stakeholders and the community we serve. I wish to thank the Directors, management and staff for their dedication and support throughout the challenging past year.

David A. White

Vice-Chairman of the Board