Boston Pizza Royalties Income Fund and Boston Pizza International Inc. Announce July Distribution and Record Second Quarter Sales Results

Boston Pizza
Published: August 8th, 2007

Royalty income increased 22% driven by 6.7% same store sales growth and 40 net new restaurants in the royalty pool

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 8, 2007) - Boston Pizza Royalties Income Fund (TSX:BPF.UN) (the "Fund") and Boston Pizza International Inc. ("BPI") each reported today financial results for the period of April 1, 2007 to June 30, 2007 (the "Period") and the year-to-date results from January 1, 2007 to June 30, 2007 ("Year-to-date"). A copy of the combined second quarter report is available at www.sedar.com and www.bpincomefund.com. The Fund will host a conference call to discuss second quarter results on August 8, 2007 at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time). The call can be accessed by dialling 1-800-319-4610 or 604-638-5340. A replay will be available until August 15, 2007 by dialling 1-800-319-6413 or 604-638-9010 and enter the pin code: 5962 followed by # sign.

Same Store Sales Growth ("SSSG"), the key metric for revenue growth of the Fund, was 6.7% for the Period and 6.6% Year-to-date. Overall growth in franchise sales of royalty pooled restaurants, which is a combination of new restaurants added to the royalty pool and SSSG, was 21.8%. During the Period, BPI opened six new Boston Pizza restaurants bringing the current total number of Boston Pizza restaurants open in Canada to 275, of which 266 are included in the royalty pool. Also during the Period, three restaurants were renovated to the latest design standards. Year-to-date, seven new Boston Pizza restaurants have opened and twelve have completed major renovations.

"We're very pleased with Boston Pizza's performance through the second quarter of 2007," said Mike Cordoba, Chief Executive Officer of Boston Pizza. "We continue to drive very strong SSSG results with the help of effective promotional activities, an updated menu launched in May and our unique store renovation program. As a result of the continued strong operating performance, the Trustees announced the Fund's twelfth increase to monthly distributions in June".

Earnings before income taxes per unit increased by 6.3% during the Period compared to the same period in 2006. Earnings before income taxes of the Fund for the Period were $4.3 million or $0.34 per unit compared to the second quarter of 2006 in which Net Earnings were $3.5 million or $0.32 per unit. Distributions declared for the Period were $0.34 per unit compared to the second quarter of 2006 in which distributions declared were $0.31 per unit. Distributions for the Period were funded entirely by cash flow from operations. No debt was incurred at any point during the Period to fund distributions.

Based on the continued positive results, the Trustees of the Fund are pleased to announce a monthly cash distribution of $0.113 per unit for July 2007. The distribution will be paid to Unitholders of record at the close of business on August 21, 2007 and will be payable on August 31, 2007. The Fund periodically reviews distribution levels based on its policy of stable and sustainable distribution flow to Unitholders. Monthly distributions have been increased a total of twelve times since the Fund's initial public offering in July 2002. The current distribution translates to an annualized rate per unit of $1.36, an increase of 35.6% since the Fund's inception.

The Fund is a limited purpose, open-ended trust established under the laws of British Columbia to acquire indirectly certain trade-marks and trade names used by BPI in its Boston Pizza restaurants in Canada. The trade-marks are licensed to BPI for 99 years for which BPI pays the Fund 4% of franchise revenues of royalty pooled restaurants. Effective January 1, 2007, there are 266 restaurants in the royalty pool.

HIGHLIGHTS

The following table sets out selected historical information and other data from the financial statements of the Fund and the Boston Pizza Royalties Limited Partnership (the "Partnership"), which should be read in conjunction with the attached consolidated financial statements of the Fund.

                                Apr. 1,     Apr. 1,     Jan. 1,     Jan. 1,

                               2007 to     2006 to     2007 to     2006 to

                               Jun. 30,    Jun. 30,    Jun. 30,    Jun. 30,

                                  2007        2006        2007        2006

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          (in thousands of dollars - except restaurants and per unit items)

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Number of restaurants in

 Royalty Pool                      266         226         266         226

Franchise Sales reported by

 restaurants in Royalty

 Pool                       $  146,277  $  120,115  $  283,869  $  233,854

Royalty Income - 4% of

 Franchise Sales of Royalty

 Pool Restaurants           $    5,851  $    4,805  $   11,355  $    9,354

Partnership administrative

 and interest expenses      $      312  $      279  $      644  $      510

Partnership earnings for

 the period before

 undernoted                 $    5,539  $    4,526  $   10,711  $    8,844

BPI's interest              $    1,675  $    1,453  $    3,567  $    3,095

Equity income related to

 BPI royalties

 earned by the Fund         $    3,864  $    3,073  $    7,144  $    5,749

Interest income             $      450  $      450  $      900  $      900

Earnings before income

 taxes                      $    4,314  $    3,523  $    8,044  $    6,649

Future income taxes         $    2,823  $        0  $    2,823  $        0

Net earnings                $    1,491  $    3,523  $    5,221  $    6,649

Basic Earnings per Fund

 unit                       $     0.12  $     0.32  $     0.43  $     0.63

Diluted earnings per Fund

 unit                       $     0.12  $     0.32  $     0.43  $     0.63

Distributions declared per

 Fund unit                  $     0.34  $     0.31  $     0.56  $     0.52

Same store sales growth            6.7%        7.8%        6.6%       10.1%

Number of restaurants

 opened during period                6          11           7          17

Number of restaurants

 closed during period                0           0           0           0

OUTLOOK

Boston Pizza is well positioned for continued success in 2007. With expansion across Canada, particularly in Ontario and Quebec, BPI estimates that it will open approximately 40 new restaurants in 2007. BPI management believes that the organization can continue to deliver on the most important metric to Unitholders, namely SSSG. Through strong television and radio advertising, and national and local promotions, BPI management believes that the organization can achieve industry-leading SSSG. As part of the SSSG initiative, Boston Pizza will continue its unique renovation program that requires each location to renovate every seven years. For 2007, approximately 24 renovations will be completed. Historically SSSG for renovated locations has been between 10-15% in the year following the renovation.

We remain confident that Boston Pizza will continue to enhance its position as Canada's number one casual dining brand.

Certain statements in this press release may constitute "forward-looking" statements that involve known and unknown risks, uncertainties, future expectations and other factors which may cause the actual results, performance or achievements of the Fund, the Boston Pizza Holdings Trust, the Partnership, BPI, Boston Pizza restaurants, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this press release, such statements use such words as "anticipate", "estimate", "may", "will", "expect", "believe", "plan" and other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this press release. These forward-looking statements involve a number of risks, uncertainties and future expectations including, but not limited to the risks and uncertainties set out in the Fund's Annual Information Form under "Risks Related to the Structure of the Fund". Forward-looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

The trustees of the Fund have approved the contents of this press release.

BOSTON PIZZA ROYALTIES INCOME FUND

Consolidated Balance Sheets

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                                                   June 30,    December 31,

                                                      2007            2006

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                                                (Unaudited)

Assets





Current assets:

 Cash                                        $         305  $          275

 Interest receivable on note receivable from

  Boston Pizza International Inc.                  150,000         150,000

 Distributions receivable from Boston Pizza

  Royalties Limited Partnership                          -       1,048,645

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                                                   150,305       1,198,920

Note receivable from Boston Pizza

 International Inc.                             24,000,000      24,000,000





Investment in Boston Pizza Royalties

 Limited Partnership (note 4)                  126,222,978      98,854,840





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                                             $ 150,373,283  $  124,053,760

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Liabilities and Unitholders' Equity





Current liabilities:

 Distributions payable to Fund unitholders   $           -  $    1,198,640

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Future income taxes (note 6)                     2,823,000               -





Unitholders' equity:

 Fund units                                    149,182,701     122,606,237

 Retained earnings (deficit)                    (1,632,418)        248,883

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                                               147,550,283     122,855,120

Contingency (note 5)

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                                             $ 150,373,283  $  124,053,760

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See accompanying notes to consolidated financial statements.







BOSTON PIZZA ROYALTIES INCOME FUND

Consolidated Statements of Earnings and Comprehensive Income

(Unaudited)





Three and six months ended June 30, 2007, with comparative figures for 2006





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                               Three months ended        Six months ended

                                     June 30,                June 30,

                          ----------------------- -----------------------

                                 2007        2006        2007        2006

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Revenue (note 3(a)):

 Equity income related to

  BPI royalties           $ 3,863,994 $ 3,072,521 $ 7,143,944 $ 5,749,301

 Interest income              450,015     450,015     900,025     900,025

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Earnings before income

 taxes                      4,314,009   3,522,536   8,043,969   6,649,326





Future income taxes

 (note 6)                   2,823,000           -   2,823,000           -

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Net earnings for the

 period                     1,491,009   3,522,536   5,220,969   6,649,326





Other comprehensive

 income                             -           -           -           -





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Comprehensive income      $ 1,491,009 $ 3,522,536 $ 5,220,969 $ 6,649,326

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Weighted average units

 outstanding               12,750,922  10,996,700  12,276,022  10,619,812

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Basic and diluted

 earnings per Fund unit   $      0.12 $      0.32 $      0.43 $      0.63

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Consolidated Statements of Retained Earnings (Deficit)

(Unaudited)





Three and six months ended June 30, 2007, with comparative figures for 2006





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                           Three months ended            Six months ended

                                June 30,                    June 30,

                   --------------------------  --------------------------

                           2007          2006          2007          2006

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Retained earnings,

 beginning of

 period            $  1,148,133  $  1,134,019  $    248,883  $    272,549





Net earnings for

 the period           1,491,009     3,522,536     5,220,969     6,649,326





Distributions

 declared to Fund

 unitholders         (4,271,560)   (3,441,967)   (7,102,270)   (5,707,287)

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Retained earnings

 (deficit), end of

 period            $ (1,632,418) $  1,214,588  $ (1,632,418) $  1,214,588

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See accompanying notes to consolidated financial statements.







BOSTON PIZZA ROYALTIES INCOME FUND

Consolidated Statements of Cash Flows

(Unaudited)





Three and six months ended June 30, 2007, with comparative figures for 2006





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                           Three months ended             Six months ended

                                 June 30,                    June 30,

                     ------------------------  ---------------------------

                            2007         2006          2007           2006

--------------------------------------------------------------------------

Cash provided by

 (used in):





Operations:

 Net earnings        $ 1,491,009  $ 3,522,536  $  5,220,969   $  6,649,326

 Items not

  affecting cash:

  Equity income       (3,863,994)  (3,072,521)   (7,143,944)    (5,749,301)

  Future income

   taxes               2,823,000            -     2,823,000              -

 Distributions

  received from

  Boston Pizza

  Royalties Limited

  Partnership          3,821,554    2,991,967     7,400,909      5,785,461

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                       4,271,569    3,441,982     8,300,934      6,685,486





Financing:

 Distributions paid

  to Fund

  unitholders         (4,271,554)  (3,441,967)   (8,300,904)    (6,685,456)

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Increase in cash              15           15            30             30





Cash, beginning of

 period                      290        1,430           275          1,415

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Cash, end of period  $       305  $     1,445  $        305   $      1,445

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Supplementary

 information:

 Non-cash financing 

  and investing

  activities:

  Issuance of Fund

   units to acquire

   additional

   interest in Boston

   Pizza Royalties 

   Limited

   Partnership       $         -  $         -  $ 26,576,464   $ 21,776,860

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See accompanying notes to consolidated financial statements.

1. Basis of presentation:

These consolidated financial statements include the accounts of the Boston Pizza Royalties Income Fund, its wholly-owned subsidiary Boston Pizza Holdings Trust (the "Trust"), and its 80% owned subsidiary Boston Pizza GP Inc. ("BPGP") (collectively the "Companies" or "Fund"). BPGP is the managing general partner and Boston Pizza International Inc. ("BPI") is a general partner of the Partnership. All residual ownership of BPGP is either directly or indirectly controlled by BPI.

Boston Pizza Royalties Limited Partnership (the "Partnership") is considered to be a Variable Interest Entity. BPI is a primary beneficiary of the Partnership and accordingly is required to consolidate the Partnership.

These interim consolidated financial statements have been prepared using Canadian generally accepted accounting principles.

The disclosures in these statements do not include all the disclosures required by Canadian generally accepted accounting principles for annual financial statements. These statements should be read in conjunction with the significant accounting policies and other information in the Fund's most recent annual financial statements. These statements follow the same accounting policies and methods of their application as the most recent annual financial statements, except for the changes outlined in note 2.

2. Changes in Accounting Policies:

(a) Financial Instruments:

Effective January 1, 2007, the Fund adopted the recommendations of Canadian Institute of Chartered Accountants ("CICA") Handbook Section 1530 Comprehensive Income, Section 3251 Equity, Section 3855 Financial Instruments - Recognition and Measurement, and Section 3861 Financial Instruments - Disclosure and Presentation. These new sections provide standards for recognition, measurement, disclosure and presentation of financial assets, financial liabilities and non-financial derivatives. Handbook section 1530 also establishes standards for reporting and displaying comprehensive income. Comprehensive income includes unrealized gains and losses on financial assets classified as available for sale, unrealized foreign exchange gains and losses arising from translation of self sustaining foreign operations, and changes in unrealized gains and losses on cash flow hedges.

The Fund has reviewed the impact of these new standards and determined that they do not have an impact on the consolidated financial statements in the current period.

The requirement of the Fund to settle its note receivable from BPI in exchange for Class C Partnership units is considered a derivative instrument. The Fund has reviewed the net impact of this potential exchange requirement on its cash flows and has determined there is no significant value applicable to this feature.

(b) Accounting Changes:

CICA Handbook Section 1506, Accounting Changes, revised the standards on changes in accounting policy, estimates or errors to require a change in accounting policy to be applied retrospectively, unless doing so is impracticable, changes in estimates to be recorded prospectively, and prior period errors to be corrected retrospectively. Voluntary changes in accounting policy are allowed only when they result in financial statements that provide reliable and more relevant information. In addition, these revised standards call for enhanced disclosures about the effects of changes in accounting policies, estimates and errors on the financial statements. These revised standards became effective for interim and annual financial statements relating to fiscal periods ending on or after January 1, 2007.

(c) Cash Flows:

Amendments to CICA Handbook Section 1540, Cash Flow Statements, require entities to disclose total cash distributions on financial instruments classified as equity in accordance with a contractual agreement and the extent to which total cash distributions are non-discretionary. This disclosure requirement became effective for interim and annual financial statements relating to fiscal periods ending on or after March 31, 2007. The declaration of distributions from the Fund are at the discretion of the Trustees of the Fund. During the three and six months ended June 30, 2007, $4.3 million and $8.3 million respectively (2006 - $3.4 million and $6.7 million) in discretionary cash distributions were paid to Unitholders.

3. Operations:

(a) Franchise sales reported by Boston Pizza Restaurants in the Royalty Pool during the three and six months ended June 30, 2007 is $146,276,825 and $283,868,932 respectively (2006 - $120,115,468 and $233,853,765).

Equity and interest income earned by the Fund has been derived as follows:

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                               Three months ended         Six months ended

                                      June 30,                June 30,

                           ----------------------  -----------------------

                                 2007        2006        2007         2006

--------------------------------------------------------------------------

(in thousands of dollars, except number of restaurants in the Royalty Pool

 and earnings per Fund unit)





Restaurants in the

 Royalty Pool                     266         226         266          226

--------------------------------------------------------------------------

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Franchise sales reported

 by restaurants in the

 Royalty Pool              $  146,277  $  120,115  $  283,869  $   233,854

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Royalty income - 4% of

 Franchise sales           $    5,851  $    4,805  $   11,355  $     9,354

Administrative and

 interest expenses               (312)       (279)       (644)        (510)

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Partnership earnings for

 the period before

 undernoted                     5,539       4,526      10,711        8,844

BPI's interest                 (1,675)     (1,453)     (3,567)      (3,095)

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Equity income related to

 BPI royalties earned

 by Fund                        3,864       3,073       7,144        5,749

Interest income                   450         450         900          900

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Net earnings before

 income taxes              $    4,314  $    3,523  $    8,044  $     6,649

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(b) On January 1, 2007, adjustments to royalty payments and Additional Entitlement were made based on the actual performance of 31 restaurants added to the Royalty Pool on January 1, 2006. Based on these adjustments, BPI received its pro rata portion of the remaining Additional Entitlement, 465,995 Fund units.

(c) On January 1, 2007, 41 (2006 - 31) new Boston Pizza restaurants that opened during the period from January 1, 2006 to December 31, 2006 were added to the Royalty Pool. One restaurant that closed during the period was removed from the Royalty Pool. The Franchise sales of these 40 net new restaurants has been estimated at $74.6 million. The total number of restaurants in the Royalty Pool has increased to 266. The yield of the Fund units was determined to be 8.64% calculated using a weighted average unit price of $14.79. Weighted average unit price is calculated based on the market price of the units traded on the TSX Stock Exchange during the period of twenty consecutive days ending on the fifth trading day before January 1, 2007. As a result of the contribution of the additional net sales to the Royalty Pool, and assuming 100% of the Additional Entitlement, BPI's Additional Entitlement is equivalent to 2,158,478 (2006 - 1,904,808) Fund units. BPI will also receive a proportionate increase in monthly distributions from the Partnership. Of the Additional Entitlement, 20% (2007 - 431,696 units; 2006 - 380,962 units), remain unissued and are not eligible for conversion to Fund units until January 1, 2008 (2006 units - January 1, 2007) based on the actual performance of the new stores.

(d) On February 19, 2007, BPI exchanged Class B Partnership units for 1,754,222 Fund units. BPI then sold these Fund units to the public. As of June 30, 2007, BPI holds exchangeable Partnership units equivalent to 3,187,730 Fund units, or 20% of the issued and outstanding units on a fully diluted basis.

BPI has committed to maintain a minimum of 20% indirect interest in the Fund until there are 275 restaurants in the Royalty Pool.

4. Investment in Boston Pizza Royalties Limited Partnership:

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Balance as at December 31, 2005                              $  77,100,557





Acquisition of additional Partnership units by issuing

 Fund units                                                     21,776,860

Equity income                                                   12,230,056

Distributions from the Partnership                             (12,252,633)

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Balance as at December 31, 2006                                 98,854,840





Acquisition of additional Partnership units by issuing

 Fund units                                                     26,576,464

Equity income                                                    7,143,944

Distributions from the Partnership                              (6,352,270)





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Balance as at June 30, 2007                                  $ 126,222,978

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Summarized balance sheet of the Partnership is as follows:









--------------------------------------------------------------------------

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                                                    June 30,   December 31,

                                                       2007           2006

--------------------------------------------------------------------------





Current assets                                $   5,533,970 $    8,175,440

Long-term assets, consisting of the BP Rights   191,195,466    160,047,787

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Total assets                                  $ 196,729,436 $  168,223,227

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Current liabilities                           $   2,930,151 $    7,155,972

Long term liabilities                             5,000,000      5,000,000





Partners' surplus                               188,799,285    156,067,255

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Total liabilities and surplus                 $ 196,729,436 $  168,223,227

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5. Contingency:

BPI and the Fund are involved in trademark litigation with entities affiliated with McDonald's Restaurants of Canada (the "McDonald's Group"), opposing the registration by the McDonald's Group in Canada of the Boston Market trademark. Additionally, BPI and the Fund have commenced an action against the McDonald's Group to prevent them from infringing BPI's and the Fund's respective interests in the Boston Pizza trademarks by operating Boston Market in Canada. The McDonald's Group has filed a counterclaim and a separate action challenging the validity of the registered trademark "Boston Pizza" and related trademarks under the Trade-Marks Act (Canada). Management does not believe that this action will succeed. However, in the event that the challenge to the Boston Pizza trademarks is successful, the Fund would lose the benefits of registration of its trademarks under the Trade-Marks Act (Canada), which may mean losing the ability to prevent others from using the registered trademarks for the goods and services for which they are registered and to prevent others from using similar or confusing trademarks or names. However, the loss of the registration under the Trade-Marks Act (Canada), would not prevent the Fund from continuing to license and use the "Boston Pizza" and related trademarks in the existing operations and geographic territories where they are presently used and from taking other measures to protect their rights in respect of, and their ability to use, the "Boston Pizza" and related trademarks, in new areas where BPI and its sub-licensees do not presently operate Boston Pizza restaurants.

6. Income Taxes:

On October 31, 2006, the Canadian federal government announced proposed tax legislation that would change the income tax rules applicable to publicly traded trusts rendering income trusts taxable starting in 2011. On June 12, 2007, the proposed tax legislation passed third reading in the House of Commons. As a result, the associated income tax became substantively enacted for accounting purposes. The legislation imposes a tax of 31.5% on Canadian public income trusts. As a transition period applies to publicly traded trusts that existed prior to November 1, 2006, the new tax is not expected to apply to the Fund until January 1, 2011.

Future income taxes are recorded on the temporary differences arising between the accounting and tax bases of balance sheet assets and liabilities. Historically the Fund had been exempt from recognizing future income taxes associated with temporary differences.

The impact on the Fund's consolidated financial statements for the quarter ended June 30, 2007 was to record a future income tax liability, and a corresponding future income tax expense, of $2,823,000. The future income tax liability arises mainly as a result of the Fund recording, in the current quarter, its cumulative share of the temporary differences between the accounting and tax bases of the BP Rights owned by the Partnership generated since the inception of the Fund. This additional expense had no impact on the Fund's cash flow for the period.