Structure of the Fund
The source of income for the A&W Revenue Royalties Income Fund (the Fund) is through its ownership in A&W Trade Marks Inc. (Trade Marks)
which is the general partner with a 99.9% interest in A&W Trade Marks Limited Partnership (the Partnership). The Partnership owns the A&W trade-marks and licences these trade-marks to A&W Food Services of Canada Inc. (A&W Food Services) for use in operating
and franchising A&W restaurants. In return, A&W Food Services pays the Partnership a top-line royalty of 3% of sales from A&W restaurants
in the Royalty Pool.
A&W Food Services continues to build and develop the A&W trade-marks and open new restaurants. Each year, the Royalty Pool is adjusted to
include the future royalty streams from new restaurants, net of the sales of any A&W restaurants that have permanently closed.
The Partnership pays A&W Food Services for the additional royalty stream from the net new restaurants in the form of an increase in Food Services limited partnership in the Partnership.
In the event that a restaurant in the Royalty Pool closes, A&W Food Services pays the royalties that would have been paid to the Partnership
if the restaurant had not closed, until the next adjustment to the Royalty Pool.
After the January 5, 2010 adjustment to the Royalty Pool, A&W Food Services owns 43% of Trade Marks and has the option to convert its ownership
in Trade Marks into Units by exchanging the securities it holds for Units.
Click
here to view a diagram of the structure of the Fund.
As long as Food Services holds an indirect interest in the Fund, distributions to unitholders are made in priority to distributions to A&W Food Services.
The Fund is a top-line fund. The Fund does not operate A&W restaurants. It simply owns an investment in Trade Marks which indirectly owns
the A&W trade-marks and licences them to A&W Food Services.
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