Bermuda Bakery Releases President's Report

"The audited financial statement presented to shareholders represents the first consolidated report including the new wholly owned subsidiary Bermuda Bakery Operations Limited. As planned, the separation of the bakery operation allowed for a clearer understanding of the complete costs of this manufacturing business separate from the property division. This has provided the ability to start to put in place new strategies for each and planning for sustained development and growth of our assets.

The year 2000 was more significant on many other fronts beyond the actual financial separation of the two business units. The closure of the retail ButterCrust operation on Pitts Bay Road, severe competition in an otherwise poor consumer retail market, the introduction of a completely new sales /accounting system and the introduction of a new senior management team resulted in a period of tremendous change and accommodation.

Financial Overview

At year-end 2000, total assets had grown modestly over the previous year reflecting a slight improvement in the cash position, capital investment in the bakery operation and growth in the investment portfolio. Retained earnings increased by 2% from $4.34 million to $4.43 million while total shareholder equity increased by 1.6% to $5.85 million.

Net income for the year was severely affected by a loss of sales in the Bakery operation compared to 1999. The resultant year end Net Income of $341,497 or $1.20 per share is half that of the year prior. While these results are unsatisfactory by comparison, the compounding impact of the changes noted earlier was not unexpected and strategic steps are now in place to reverse this position.

The rental division also recorded a decrease in Net Income as a result of a two-fold increase in the maintenance costs associated with the continuing upgrade of the Belvedere Building. Most significant was the work undertaken during the complete renovation and remodeling of two complete floors by our major tenants.

Shareholder Activity

We are pleased to report that dividends paid in the past year of $251,010

remain at the same level as in previous years, i.e. $0.88 per share per annum. Trading in Bermuda Bakery shares was modest and in the range of $19.00 to $22.00.

Management

It is with the deepest regrets that we advise of the death during the year of our Financial Controller, Mr. Peter Hollis Grayston. Peter served the Board and the Bakery with dedication and focus for the past six years through a difficult period of financial uncertainty and management change. We mourn his passing and extend our deepest sympathy to his family, friends and associates.

The board of directors is pleased to have appointed Mr. John Hirschi to the Board during the past year. John retired from the bakery as General Manager early in the year and brings to the Board many years experience in the commercial bakery business.

Following an extensive search both in Bermuda and overseas, the Board was successful in finding a new Financial Controller, Mr. Eric O. Vauhkonen, MBSc, CMA at year end. Eric comes to the Bakery after some six years with a major bakery in Nova Scotia, Canada, and other businesses in his native Finland.

Our new General Manager, John H. Massa MBA, P.Eng, has successfully completed his first year with the Bakery and we extend our congratulations and support in his success during this year of transition.

The challenge for the Bakery in the coming years is to develop the strategies that will maximize earnings of its two key assets, namely the prime real estate holdings and the experience of its people as leaders in the production of the highest quality breads and pastry products. In this respect, a Finance Committee has been formed to assist management in the development of a strategic plan for the near future and beyond.

I wish to thank the directors and the management and all the staff for their contribution and commitment during the past year. "

James A. Pearman,

President

Bermuda Bakery Limited