about 40 percent for the year ended March 31, 1997. The decline was attributed to reorganisation costs and increased expenses.

The closely-held company posted net earnings for the past financial year of $630,424 compared with $1,042,829 in the previous year. The company had earnings per share of three cents compared with 48 cents per share in the previous financial year.

Staples had revenues of $6.29 million, an increase of about six percent over the $5.95 million in the previous financial year. Sales and revenues amounted to $13.32 million, about the same as the previous financial year, while the cost of sales and rentals amounted to $7.04 million, a decline of about $300,000 over the previous year.

However the company's sales, general and administrative expenses increased by 14 percent to $5.08 million from $4.46 million in the previous year. The company attributed the increased expenses to a move into new warehouse space.

The company also spent money moving to a new retail store at the corner of Burnaby Hill and Reid St. from its previous location in Washington Mall.

More money was spent on completing the merger of Staples with Chips Ltd., which the company bought at the end of 1995. During the year the company bought a new computer system which is scheduled to come on line next year. It also launched a new medical sales subsidiary, Atlantic Medical International Ltd. (AMI). The company sells medical supplies and equipment to the healthcare sector, including the King Edward VII Memorial Hospital.

According to Staples annual report AMI eventually plans on expanding its operations outside of Bermuda.

To help bring down expenses Staples has hired Millennium International Ltd., another publicly traded company on the Bermuda Stock Exchange. Millennium will help Staples implement its computer system.

Staples chairman William Midon is also the chairman of Millennium. He is a substantial shareholder in both companies. Mr. Midon received a $60,000 fee from Staples during the previous financial year for "strategic planning and development'' of the company, according to the annual report.

Staples two subsidiaries Staples Ltd. and AMI employ 66 people, including part time and temporary workers. Staples Ltd. supplies office equipment to the local Bermuda market.

During the financial year Staples hired Joseph Viggiano for the new post of vice president of sales. Mr. Viggiano is involved in training all staff according to the concept of Total Quality Management, a concept he brought with him from Xerox Corp. where he worked for 20 years.

In May this year Mark White resigned from the company as president. The position has been filled by Joan Hug.

"Our management team is ideally positioned to lead (Staples) to realise significant growth in both revenue and profitability this year,'' the annual report states. "Neither this past year's revenue or income performance met our expectations. However, we are confident that we have identified and corrected key problem areas.'' Staples has 300 preferred shareholders and 25 common shareholders. Company directors and officers hold 99 percent of the common shares. The local stock exchange requires companies to make their shares more widely held by the end of this year. The smaller capitalised companies like Staples are required to have a minimum of 15 percent of their shares held outside the holdings of directors and controlling shareholders.

Last year Staples began a share option incentive plan for its board of directors and senior management. Up to 92,890 common shares have been reserved for the plan. The exercise price will be fixed at a 12 percent premium to the market price of the common shares. No options had been granted as of March 31.

An employee share purchase plan has also been put in place for the preferred shares. Preferred shares offered under the plan may not exceed 15 percent on an employee's total compensation. They will pay 80 percent of the average trading price during the 30 days prior to the date of the offering.

Staples common shares have never traded since the company went public two years ago. The preferred shares last traded at $8.75 on September 12.