Employment tax relief to the tune of $50,000 helped Masters Ltd. avoid laying off any staff during the slow retail period and also contributed to a 37 percent increase in profits.

Masters president and CEO Susan Wilson released the company's results to the Bermuda Stock Exchange for the six months ended July 31st, 2002.

Net income for the period amounted to $685,321 compared with $1,410,958 for the same six months for the previous financial period although it was noted that last year's earnings encompassed a one-time gain on the sale of investments in the amount of $906,347 and net income of $5,036 for discontinued operations.

Comparable net income for the first six months of this financial period increased by $185,746 to $685,321 compared to $499,575 or 37.2 percent over the same period last year. Increased income was attributed to increased activity in the retail division.

However, around $50,000 of this increase was directly attributable to employment tax relief and the company managed to keep their entire staff employed over the slow retail period without any layoffs, while at the same time promoting heavily in order to increase sales as well as out customer base.

Sales to July 31, 2002 amounted to $4,938,532 compared with $4,419,326 (adjusted for discontinued operations) for the same period last year, an increase of $519,206, or 11.7 percent. Gross Margin on sales for the same period amounted to $2,058,226 in 2002 compared with $1,895,249 (adjusted for discontinued operations) in 2002, an increase of $162,977, or 8.6 percent.

The directors said the negative 3 percent difference between sales growth and gross margin growth exhibited the heavy emphasis the company had to place on special promotions and thinner margins in order to be successful in an increasingly difficult retail environment.

Expenses in the first half of the current financial period amounted to $1,949,152 compared with $1,974,462 (adjusted for discontinued operations) for the same period last year.

Personnel costs decreased by the sum saved through the employment tax relief as previously mentioned.

Salary increases were held for the first six months of this financial year as the company's directors decided it was better to keep all staff employed on a full-time basis rather than increase salaries and then have layoffs during the slow season.

Although this decision was more costly to the company, the directors said: "We feel that our staff make a major contribution to the success of this Company and any reduction in their income during the tough, slow season would be detrimental to their well-being and not in the best long-term interests of the Company."

In view of the Employment Tax relief afforded the company for the first two quarters, the directors said they also felt this decision was well justified.

The increase of $91,000 in general and administrative expenses was due to three significant components, namely building maintenance costs, advertising and decreases in investment income (due to the sale of significant investments during the previous year).

The directors also said they were expecting significant increases in property insurance costs for the second half of the current financial year and also had some one-time maintenance costs that were expected to impact this line item even further during the second half of the current financial year.

The directors said the company continues to have a strong balance sheet, with an enviable ratio of current assets to current liabilities.

The directors also said in their opinion, the company was in a very strong position to sustain itself through what they see as very difficult economic times ahead.

During 2002, both Masters Limited and its affiliated company retired their property mortgages.

As a result, the directors said there was sufficient cash flow to issue a special one-time dividend in the amount of $0.20 to shareholders of record on November 15, 2002, payable on November 30, 2002.

This special dividend will be added to the regular dividend of $0.15 and therefore shareholders can expect a total dividend of $0.35 per share.

The directors also said: "The Company is totally committed to doing everything possible to support "Buy Bermuda" programmes.

"We have made every attempt to lower prices, contain costs and negotiate the best possible deals with our vendors.

"Expansion of the Bermuda retail market is limited and the Company will continue to strive to find vertical markets in which to promote.

"As mentioned in previous reports, the major portion of our earnings from the retail operations are earned in the final few months of the year, i.e. the Christmas retail season.

"During the last financial year, we fully participated in the "Buy Bermuda" programme and we have adopted that same approach in our forward planning for the same period this year.

Therefore, as we near this critical selling period, we issue the same caution as in previous years, i.e. that our final results are very much dependent on the second six months of the financial year."