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MESSAGE TO SHAREHOLDERS

The management of Perlite Canada inc. is pleased to present shareholders with the annual report for the fiscal period ended October 31, 2000, and the major developments for the year 2001.

In the last fiscal year sales reached $3,066,379, a 44% increase over the same period last year. Thanks to their efforts to market our products and our quality service, our sales team can be credited with this increase. However, the year ended with an $87,702 loss. This loss can be attributed to the significant increase in the price of petroleum products and to the fact that our main perlite supplier changed his extraction site and modified his operating equipments.

These important changes forced Perlite Canada inc. to modify its own treatment processes. Modifications were completed last fall, and we could already feel their positive impact in the first quarter ended January 31, 2001. By that date sales had grown by 29% compared to the same period in the year 2000 with a net income of $129,436, a six-fold increase over the previous quarter. Given these results, we expect the current fiscal year to yield record sales and earnings since the creation of Perlite Canada inc.

Along with these modifications, the company expects the new production facilities in Lamèque, New Brunswick to be ready for opening in June 2001. This new unit will allow us to supply peat moss producers in Eastern Canada with exfoliated perlite and vermiculite. With this new plant, the company is anticipating a 20% increase in sales in the year to come.

As concerns development projects, we are still working with various other companies on the development of new perlite-based industrial products. Trials are in the final phase, and firm orders could follow in the next few months.

With an increase in turnover and earnings, on top of our expansion plans, management considers that the current price of its shares does not reflect the real value of the company. This is the reason why we have announced our intention to redeem as many of the 528,329 shares of capital stock as possible, representing 5% of the outstanding stock, by February 26, 2002. The company believes that this share redemption will be in the best interest of its shareholders.

The directors and management thank each and every one of its employees for their great work, and all shareholders for their continued confidence in Perlite Canada inc.

Richard Barabé, P.Eng.
President and Chief Executive Officer

Berthe A. Lambert
Chairwoman of the Board