KFC (Bermuda) Releases Chairman's Report

Net income for the year ended 31st January 2004 amounted to $256,880 compared with $160,174 in the year ended 31st January 2003. Sales in the year ended 31st January 2004 were higher than those for year ended 31st January 2003 by $188,181. Due to small price increases on certain food items and control over the cost of the menu items, gross profit increased by $208,283 over the previous year. Operating expenses increased by $111,467 from the previous year, largely due to a $82,064 increase in salary and wage costs (our largest expense) in 2003/04 to $1,356,949. Franchise fees increased by $48,510 over the previous year due to an increase in the rate payable for franchise fees from 5% to 6% on higher sales.

On 15th May 2003 we paid a dividend of $0.10 per share to shareholders of record 30th April 2002. Another dividend of $0.10 per share was paid on 15th October 2003 to shareholders of record 30th September 2002. The Company did not repurchase any of its own shares during the fiscal year; however, as it is still our intention to repurchase shares from time to time to reduce the shares outstanding to a more acceptable level and on 16th February 2004 the Company purchased 1,800 shares at $3.58.

During the year, repairs and maintenance amounted to $102,229 compared to $156,252 in the previous year. The Company had capital expenditures in the amount of $57,352 and has commitments to purchase an air conditioning unit to replace the existing unit in the office and to completely refurbish the dining room at an anticipated cost of just under $310,000. The store will be closed for two weeks in late April and early May for these renovations and this closure will also negatively impact earnings by as much as $50,000.

On behalf of the Board I would like to pay tribute to all our staff for their hard work. I would particularly like to thank Frank Seuss who joined as General Manager in June 2002, Iris Kehler who started with the Company in March 2003 and Tracy Robinson who have worked hard to improve sales and earnings. I would also like to express our appreciation to Graham Redford (our marketing consultant) for his help and advice.

We look forward to the 2005 fiscal year with optimism and hope that the steps we are taking will improve our facilities and generate increased sales and profits in the future.

I wish to acknowledge the contribution of Mr. James A. Pearman, who retired from the Board in May 2003 and thank him for his many years of involvement and as one of the founders of the Company. I also wish to thank Llewellyn Petty and my fellow Executive Directors, Crayton Greene, Susan Wilson, Bill Thomson and Kevin

Signed By:

Donald P. Lines, OBE, FCA, JP

Chairman