Boston Pizza International’s royalty income fund updated

Jan. 8, 2013, Vancouver – Effective Jan. 1, 2013, the Boston Pizza
Royalties Income Fund's royalty pool has been adjusted to include the
royalties from seven new restaurants
opened across Canada between Jan. 1, 2012 and Dec. 31, 2012,  the company said in a press release.

Jan. 8, 2013, Vancouver – Effective Jan. 1, 2013, the Boston Pizza Royalties Income Fund's royalty pool has been adjusted to include the royalties from seven new restaurants
opened across Canada between Jan. 1, 2012 and Dec. 31, 2012 (six of which are full-service restaurants and one of which is a fast-casual location), the company said in a press release. Two full-service restaurants were permanently closed
during the period. This is the 11th consecutive annual increase of
royalties payable to the fund and, with the adjustment for these
openings and closures during 2012, the royalty pool now includes 348
Boston Pizza restaurants.

On January 1 of each year,
an adjustment is made to add new Boston Pizza
restaurants that opened to the royalty pool, and to remove any Boston Pizza restaurants that
permanently closed since the last adjustment date. In return for adding
net additional royalty revenue, BPI receives the right to indirectly
acquire additional units of the fund (additional entitlements).
The adjustment for net additional royalty revenue added to the royalty pool is designed to be accretive to unitholders. For each adjustment date occurring after Jan. 2, 2011, the additional entitlements are
calculated at 92.5 per cent of the estimated net royalty revenue added to the royalty pool, multiplied by one minus the estimated effective average
tax rate (expressed as a decimal) that the fund will pay during that
year, divided by the yield of the fund, divided by the weighted average
unit price. BPI receives 80 per cent of the additional entitlements initially,
with the balance received when both the actual full year performance of
the new restaurants and the effective average tax rate paid by the fund
are known with certainty. BPI receives 100 per cent of distributions from the additional entitlements throughout the year. Once these new restaurants
have been part of the royalty pool for a full year, an audit of each of
the royalty revenues of these restaurants received from BPI and the
effective average tax rate paid by the Fund is performed. At such time
an adjustment is made to reconcile distributions paid to BPI and the additional entitlements received by BPI.

In return for adding the royalty revenue from the seven new
restaurants to the royalty pool, less revenue from the two permanent
closures, BPI has received 155,559 additional entitlements. The 155,559
represents 80 per cent (194,449 represents 100 per cent) of the additional entitlements
with the balance to be received (as adjusted) by BPI when both the
actual full year performance of the new restaurants and the effective
average tax rate paid by the fund are known with certainty. The 155,559 additional entitlements represents 0.9 per cent of the fund units on a fully
diluted basis. The full 194,449 additional entitlements would represent
1.1 per cent of the fund on a fully diluted basis. Including the 194,449 additional entitlements described above, BPI has the right to acquire
2,197,957 fund units, representing 12.4 per cent of the fund units on a fully
diluted basis. The issuance of the additional entitlements to BPI is
subject to approval by the Toronto Stock Exchange.

The estimated annual gross franchise revenue for the seven
new restaurants in 2013 is $11.6 million. Pursuant to the Amended and
Restated Limited Partnership Agreement governing Boston Pizza Royalties
Limited Partnership, BPI is required to deduct from this amount the
actual gross franchise revenue received from the two permanently closed
restaurants during the first 12-month period immediately following their
addition to the Royalty Pool, which is $3.4 million. Consequently, the
estimated annual net franchise revenue for the new restaurants in 2012
is $8.2 million. The estimated four per cent royalty revenue the fund will receive
in 2013 from these additional new restaurants is $0.3 million. The
pre-tax royalty revenue for the purposes of calculating the additional entitlements, therefore, is approximately $0.3 million or 92.5 per cent. The
estimated effective average tax rate that the fund will pay in the
calendar year 2013 is 25 per cent. Accordingly, the after-tax royalty revenue
for the purposes of calculating the additional entitlements is
approximately $0.2 million ($0.3 million x (1 – 0.25)). Once both the
actual performance of these new restaurants for 2013 and the actual
effective average tax rate paid by the fund for 2013 are known, the
number of additional entitlements will be adjusted in 2014 to reflect
the actual royalty revenue received by the fund in 2013 and the actual
effective average tax rate paid by the fund in 2013. As of Jan. 1,
2013, there are 348 restaurants in the royalty pool.