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 sole general partner in A&W Trade Marks Limited Partnership (the Partnership). The Partnership owns the A&W trademarks and licences these trademarks 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 trademarks 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 by issuance of additional limited partnership units (LP Units) in the Partnership. The additional LP Units are, at the option of A&W Food Services, exchangeable for common shares of Trade Marks.

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.

A&W Food Services currently owns 21.9% of Trade Marks and 9.4% of the Fund. A&W Food Services has the option to convert its ownership in Trade Marks into Units of the Fund. Taken together, A&W Food Services' ownership of exchangeable common shares of Trade Marks and Limited Voting Units equates to Food Services owning 29.2% of the total equivalent units of the Fund on a fully diluted basis.

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 trademarks and licences them to A&W Food Services.

Fund Structure

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