The Keg Royalties Income Fund Announces Strong Quarterly Sales Results

Vancouver, October 16, 2006 - The Keg Royalties Income Fund (KEG.UN:TSX, the “Fund”) and Keg Restaurants Ltd. today announced sales results for the 13 and 39-week periods ended October 1, 2006. 

Keg Restaurants Ltd.’s total system sales for the 13 weeks ended October 1, 2006 were $98.0 million compared to $87.6 million for the 13 weeks ended October 2, 2005, an increase of $10.4 million or 11.9%. For the 39-week period ended October 1, 2006, The Keg’s total system sales were $286.8 million compared to $260.3 million for the 39-week period ended October 2, 2005, an increase of $26.5 million or 10.2%. Royalty Pool Sales increased by 14.6% to $91.6 million for the quarter, and by 13.8% to $273.8 million for the nine-month period. 

The Keg’s same store sales (sales of restaurants that operated during the entire period of both the current and prior years) increased by 8.9% in Canada and by 7.1% in the United States for the 13-week period ended October 1, 2006, and by 8.1% in Canada and by 7.0% in the U.S. for the 39-week period ended October 1, 2006. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales increased by 7.3% for the 13-week period and by 6.4% for the 39-week period, in spite of the continuing negative effect of the exchange rate between Canadian and U.S. dollars. 

“We are pleased to once again deliver strong quarterly sales results, which we believe demonstrate The Keg’s continued ability to deliver growth that outpaces the industry,” said David Aisenstat, Keg President & CEO. “As the administrative and interest costs for the Fund are relatively fixed, growth in sales directly results in increased royalties and therefore provides the Fund with an increased level of distributable cash. This, in turn, assists the Fund in realizing its strategic objective of achieving not only consistent, but growing distributions to the Fund’s unitholders.” 

Vancouver-based Keg Restaurants Ltd. is the leading operator and franchisor of steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. KRL continues to operate The Keg restaurant system and expand that system through the addition of both corporate and franchised Keg steakhouses. Keg Restaurants Ltd. has been named one of the “50 Best Employers in Canada” for the past four years by the Globe and Mail’s Report on Business Magazine. 

This press release may contain certain "forward looking" statements reflecting The Keg Royalties Income Fund's current expectations in the casual dining segment of the restaurant food industry. Investors are cautioned that all forward looking statements involve risks and uncertainties, including those relating to the Keg’s ability to continue to realize historical same store sales growth, changes in market and existing competition, new competitive developments, and potential downturns in economic conditions generally. Additional information on these and other potential factors that could affect the Fund's financial results are detailed in documents filed from time to time with the provincial securities commissions in Canada. 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of the prospectus, nor shall there be any sale of the Fund units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state, province or jurisdiction. The Keg Royalties Income Fund units have not been, and will not be registered under the U.S. Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an application for exemption from the registration requirement under U.S. securities laws. 

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

For further information: 
Karyn Byrne, Investor Relations Manager 
Tel: (416) 646-4960, karynb@kegrestaurants.com 
www.kegincomefund.com 

For more information on our brand, visit www.kegsteakhouse.com