Bermuda Bakery - Chairman's Report to Shareholders

Hamilton, Bermuda: May 29, 2006 - The Bermuda Bakery (BAKE.BH) stated in the Chairman's' Report that the operating income for the Company in 2005 increased by $752,630 to $887,743 if compared to the consolidated results for the year 2004 of $135,114.   The Rental Division operating income without the now closed Bakery Division increased by $149,468 or 20%.  The net income for Bermuda Bakery Limited for the year 2005 show a net income of $1,016,530 compared to previous year's net income of $1,028,649. 

Last year's (2004) net income of $1,028,641 reflects the net effect of redundancy pay of $570,786, gain on sale of assets of $217,660, write-off of redundant assets and inventories of $211,014, a one-time gain of the sale of the Bank of Bermuda shares of $1,089,904, and the special dividend of $225,282 received from the Bank of Bermuda.

Earnings were $3.52 per share for the year 2005, a minor decrease of $0.05 or 1.2% compared to

$3.57 per share in 2004.  Dividends paid last year amounted to $288,606 or $1.00 per share, an increase of $144,390 or $0.50 cents per share. Trading in Bermuda Bakery shares on the Bermuda Stock exchange was modest with 2% of outstanding shares trading in the range of $55.00 to $65.00.  The weighted average trade price increased to $60.31 from $35.08 in 2004, an increase of 71.9 %.

Net Capital Assets increased by $76,821 or 2.8%, and Investments by $2,272,640 or 279.2%. Total Assets increased by 707,757 or 12.4% and Shareholder's Equity by $744,667 or 13.3%.

During the year 2005 the Bakery's old equipment was disposed, the Building partitioned, renovated and fitted with a new fire alarm system.  The Building was rented on short-term leases (two years), while the Company is evaluating its options for the future utilization and development of the Pitts Bay Road property, which is the largest undeveloped commercial property west of Hamilton.

The Belvedere Building, and other investments of the Company, continued to perform well as a result of the significant improvement in the control of costs, cash flow and the capital investments made to improve energy efficiency over the past years. 

In 2006 the Company will make further improvements to its existing facilities and parking lots.  The Bakery Building and Belvedere Building land (lots # 71 and 69 Pitts Bay Road) were recently surveyed and the Company has commenced an invitation only design competition for a concept and a site plan for the Pitts Bay Road properties future development.

I wish to thank the Directors, management and staff for their dedication and support throughout the successful year.

David A.J.G. White