Kentucky Fried Chicken (Bermuda) Limited Interim Report To Shareholders

Hamilton, Bermuda: 30th August 2005 - Net income for the six months ended 31st July 2005 amounted to $267,962 compared with $160,989 in the six months ended 31st July 2004.

Sales in the six months ended 31st July 2005 were higher than those for six months ended 31st July 2004 by $300,640. Due to modest price increases on certain food items and control over the cost of the menu items, gross profit increased by $205,582 over the same period in 2004. Payroll costs have increased by $88,675 over the same period in the prior year. Advertising expenses have also increased over the prior year by $18,450.

Due to the blackout on 14th July 2005 the Company suffered the following losses: staff wages paid for the days which the store was closed - $14,924, loss on spoiled stock - $5,784 as well as estimated loss of profits on sales of approximately $64,000 for the days during which we were closed. The company reopened for business on 18th July 2005 with all electrical equipment functioning properly. Additionally, due to damage from the power outage, relay switches were replaced on the air conditioner.

On 15th April 2005 we paid a dividend of $0.10 per share to shareholders of record 31st March 2005. Another dividend of $0.10 per share was paid on 15th July 2005 to shareholders of record 30th June 2005.

The Company repurchased 4,000 of its own shares at $5. It is still our intention to repurchase shares from time to time to reduce the shares outstanding to a more acceptable level.

At 31st July 2005 cash resources amounted to $1,499,449 compared with $1,266,521 at 31st January 2005. Total liabilities amounted to $298,522 compared with liabilities of $292,098 at 31st January 2005. Shareholders' equity at 31st July 2005 amounted to $2,265,830 or $3.83 per share compared with shareholders' equity of $2,136,648 or $3.58 per share at 31st January 2005.

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, General Manager, Tracy Robinson, Assistant General Manager, Iris Kehler, Operations Manager, and Jerome Talbot, Operations Manager - Trainee, who have worked hard to improve sales and earnings. I would also like to express our appreciation to Graham Redford, Marketing Consultant, for his help and advice.

We look forward to the second half of the 2006 fiscal year with optimism and hope that the steps we are taking to improve our facilities will continue to generate increased sales and profits in the future.

My thanks to Llewellyn Petty and my fellow Executive Directors, Crayton Greene, Susan Wilson, Bill Thomson and Kevin Gunther for their contribution and assistance during the past six months.

Signed by:

Donald P. Lines, OBE, FCA, JP

Chairman