are "Year 2000 Compliant'' by the end of the next calendar year.

The bank said in a letter to shareholders that an analysis of all bank software had already been completed and a preliminary plan established to deal with the issues relating to the "Millennium Bug''.

Meanwhile, executives at the bank have no fear of the likely passage in the US legislature of the latest tax simplification measures.

Bank chairman, Eldon H. Trimingham and president and CEO, Henry B. Smith, conceded in the shareholders' letter that enactment could negatively impact offshore fund administrators located in jurisdictions such as Bermuda, Cayman and Dublin.

One proposal in the US tax package eliminates the principal office requirement for US-managed offshore investment funds. At present, the location of a fund's principal office depends on where the various administrative tasks, such as accounting and valuation, shareholder accounting and corporate secretarial services are performed.

The letter said, "Should this proposal be enacted, a transfer of fund administration activity from offshore centres to the US could take place for cost efficiency reasons, but our view at this time is that the enactment of such a proposal should not have a material effect on the bank's business.

"We believe it is unlikely that non-US investors in US managed funds would welcome a move to establish fund records on-shore.'' The bank has just concluded its financial year to the end of June, and should soon have a complete picture of the institution's performance for the fiscal year.

Bank of Bermuda prepares for the Millenium Bug Mr. Trimingham and Mr. Smith said the bank's core business continue to produce strong results.

The letter said, "Growth in fee income and improved control of operating costs have combined to help compensate for disappointing net interest margins on treasury assets. Moreover, our overseas operation in Europe and the Far East are generating record earnings, which we expect to continue into the new financial year.'' The bank has made significant progress in recent months with its reorganisation, aimed at improving client focus, risk management and cost controls. A number of initiatives have been launched to enhance shareholder value.

Expansion of the bank's global network was more recently evidenced by their licence granted to open a representative office in Bahrain, from which to market a full range of services to potential clients in the region.

The new office, officially to be opened in September, is expected to quickly become an important source of new business.

Mr. Clement E.F. Talbot, JP, has been promoted vice president, director of corporate clients, with corporate level responsibility for the development and maintenance of corporate relations, with particular emphasis on major individual clients, corporate entities and local governmental agencies.

Having been with the bank for 31 years, Mr. Talbot will also contribute to the development of strategies to ensure the continued expansion of the bank's corporate and private client business.

Eldon Trimingham