ERROR RG P4 31.7.1999 The Bank of Bermuda's Far East offices did not suffer a 75 percent decline in fee revenue as stated in an article in the Business section of July 27.

Corporate trust fees fell $11.6 million during the financial year to June 30, 1999. Of that fall, 75 percent of the decline was attributed to Far East offices.

The Bank of Bermuda Ltd. yesterday reported net income of $76.3 million for the fiscal year to June 30, 1999, an increase of 25 percent from a year ago.

Earnings per share increased 23 percent to $3.52 on a diluted basis compared to $2.87 a year ago. On top of the record earnings the company has declared a 50 cents per share special cash dividend for the year amounting to a total $10 million payout to shareholders. The bank will also issue a special 10 percent stock dividend to shareholders of record on August 31, 1999. For every 10 shares a shareholder will receive one share. Those entitled to a fraction of a share will receive cash in lieu of the fraction.

Bank of Bermuda chief financial officer Edward Gomez said the results marked the company's seventh consecutive year of record earnings.

"It also marked a second straight year of more than 20 percent growth in earnings per share,'' he said. "These results are especially pleasing in a fiscal year that presented our fee-based businesses with significant challenges. Higher interest earnings made an important contribution to our record performance and were the result of improved productivity on both sides of our balance sheet.'' Mr. Gomez said fourth quarter results continued the trend of growth in the company's core revenues. Fee revenues increased eight percent over the third quarter, including an 11 percent growth in corporate trust fees.

Fourth quarter net income was $20.9 million, an increase of 18 percent. In the financial year to June 30 total revenues increased 14 percent to $353.9 million. The bank attributed the gain to strong interest earnings and one-time investment gains which offset declines in corporate trust fee revenues. Fee revenues declined three percent to $197.8. Corporate trust fees fell 12 percent. Meanwhile banking service fees increased 23 percent over last year.

Corporate trust fees, the largest component of fee revenue, was $83.8 million compared to $95.4 million in `99.

The bank stated that Far East offices suffered a 75 percent decline over the year in fees as the regional financial crisis cut client asset values.

Most of the decline occurred in the first half of the financial year. Client asset values improved in the latter part of the year.

Private trust fees were $28.1 million compared to last year's $27.7 million in revenues. Investment services fees increased to $30.2 million from $29.6 million. Banking services fees increased 23 percent to $21.5 million.

Bermuda Home, which the bank bought this year, accounted for 25 percent of the increase in banking service fees. The retail clients division accounted for most of the rest of the increase, the bank stated.

The bank had foreign exchange earnings of $33.1 million, matching the record performance of last year.

Net interest income increased 46 percent to $146.2 million.

"The improved interest earnings were mostly generated by a more active approach to pricing our deposits as well as from improved asset yields,'' the bank said. "In addition, Bermuda Home contributed $5.3 million to current year interest earnings.'' The bank also changed its treasury asset portfolio by reducing inter-bank deposits for high quality floating rate securities.

Investment and other income was $9.9 million for the year, an increase of $3.3 million.

Meanwhile operating expenses were up 12.9 percent to $272.7 million. About 60 percent of the increase was due to higher salaries and related expenses from annual pay raises. The company also hired more staff.

"Additional expense growth reflects systems upgrade costs, higher corporate and marketing expenses, and the impact of Bermuda Home costs, included in group results for the first time this year,'' the bank said.

At June 30 the company had total balance sheet assets of $9.5 billion compared to $10.1 billion a year ago. Cash and deposits with banks declined to $4.4 billion from $6.5 billion as funds were directed into "high quality'' marketable securities, the bank said.

Marketable securities totaled $3.4 billion, up $1 billion from a year ago.

Loans, less allowance for losses, rose to $1.4 billion from $950 million, reflecting consolidation of Bermuda Home assets during the third quarter.

Upbeat: Bank of Bermuda CFO Edward Gomez CHART