Boston Pizza Franchise Royalties Income Fund Announces Plan To Maintain Current Income Trust Structure

Boston Pizza
Published: August 12th, 2010

VANCOUVER, BRITISH COLUMBIA - (Marketwire) - The Trustees of Boston Pizza Royalties Income Fund (the "Fund") (TSX:BPF.UN) announced their intention for the Fund to maintain its current income trust structure beyond January 1, 2011 when legislative changes to the tax treatment of income trusts, commonly referred to as Specified Investment Flow Through tax (the "SIFT Tax"), become effective.

The Trustees of the Fund have examined all alternatives available to the Fund to maximize unitholder value in the face of the implementation of the SIFT Tax and believe that the Fund remaining a trust is in the best interest of unitholdes and the business for the following reasons:

• The Fund will avoid incurring significant administrative and legal costs associated with converting to a corporation, which conversion would not provide any material tax benefit to unitholders as the amount of SIFT Tax the Fund will pay in the current trust structure beginning on January 1, 2011 is approximately the same as the amount of corporate tax that would be payable if the Fund were to convert to a corporation;
• While there have been concerns over the future of investor interest in the income trust sector following January 1, 2011, the Trustees believe that there will be continued investor interest and access to capital based on Boston Pizza's proven track record of stable and growing distributions over the past eight years in the current trust structure; and
• The Trustees will continue to examine all available alternatives for the structure of the Fund and, under the federal SIFT Tax guidelines, can choose to convert to a new structure on a tax-deferred basis until December 31, 2012.

"The Fund's announcement concerning its plan to maintain the current income trust structure beyond 2010 is the best approach for us to take in the context of the new taxation environment," said John Cowperthwaite, Chairman of the Board of Trustees. "Since going public in 2002, the Fund has performed well as a top line income trust increasing annualized distributions from $1.00 to $1.38 per unit over that time while consistently meeting its financial objective of delivering stable and growing distributions to unitholders."

Under the SIFT Tax legislation, which was substantively enacted into law on June 12, 2007, the Fund will be subject to a tax at the prevailing corporate rate beginning on January 1, 2011. The SIFT Tax rate is 26.5% for 2011 and 25% for 2012 and later taxation years. Monthly cash distributions to unitholders will be reclassified for tax purposes as eligible dividends and Canadian residents who hold their units in a non-tax deferred account may claim the dividend tax credit for eligible dividends, thereby reducing the after-tax impact of this legislative change.

Forward-looking information in this press release includes, but is not limited to, such things as:

• The Fund retaining its current income trust structure beyond January 1, 2011;
• The rate of SIFT applicable to the Fund in 2011, 2012 and beyond; and
• The characterization of the Fund's distributions as eligible dividends commencing January 1, 2011, and the ability of qualifying unitholders to claim dividend tax credits in respect of such distributions.

The forward-looking information disclosed herein is based on a number of assumptions including, among other things:

• the absence of changes in law;
• the protection of the Boston Pizza trade-marks and trade-names;
• franchisees' access to financing;
• franchisees' duly paying franchise fees and other amounts;
• there will be no closures of Boston Pizza restaurants that materially affect the amount of royalty paid by Boston Pizza International Inc. ("BPI") to the Fund;
• future results being similar to historical results; and
• expectations related to future general economic conditions.

This forward-looking information involves a number of risks, uncertainties and future expectations including, but not limited to:

• competition;
• changes in demographic trends;
• changes in consumer preferences and discretionary spending patterns;
• changes in national and local business and economic conditions;
• legislation and government regulation;
• cash distributions are not guaranteed;
• accounting policies and practices;
• the impact of new or increased or harmonization of sales taxes upon gross sales; and the results of operations and financial conditions of BPI and the Fund.

The foregoing list of factors is not exhaustive and should be considered in conjunction with the risks and uncertainties set out in "Risks & Uncertainties" section of the Fund's management's discussion and analysis for the three month and six month periods ended June 30, 2010. This press release discusses some of the factors that could cause actual results to differ materially from those expressed in or underlying such forward-looking information.

Forward-looking information is provided as of the date hereof and, except as required by law, we assume no obligation to update or revise forward-looking information to reflect new events or circumstances.

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