The Keg Royalties Income Fund Announces Strong Year End Results and Seventh Distribution Increase

Not for distribution to U.S. news wire services or dissemination in the U.S.

Vancouver, February 6, 2008 – The Keg Royalties Income Fund (the “Fund”) has reported its financial results for the three months and year ended December 31, 2007.  Gross sales and same stores sales reported by Keg Restaurants Ltd. (“KRL”), royalty income, earnings before income taxes, and distributable cash all increased from the prior year.

Total system sales reported by Keg Restaurants Ltd. increased by $2.5 million or 2.4% to $108.9 million for the quarter, and by $35.1 million or 8.9% to $428.2 million for the year. Royalty Pool sales increased by 4.9% to $103.5 million for the quarter and by 10.8% to $412.8 million for the year. The increase in gross sales reflects the net impact of the addition of net new sales to the Royalty Pool at the beginning of the year and an increase in same store sales. 

KRL’s same store sales (sales of restaurants that operated during the entire period of both the current and prior years) increased by 2.8% in Canada and decreased by 2.2% in the United States for the 13-week period ended December 30, 2007, and increased by 7.3% in Canada and by 2.1% in the United States for the 52-week period ended December 30, 2007.  After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales decreased by 0.4% for the 13-week period and increased by 5.5% for the 52-week period, despite the dramatically negative effect of the exchange rate between Canadian and U.S. dollars. It is important to note that the fourth quarter of each year has historically included The Keg’s annual price increases but for strategic and competitive reasons, price increases were postponed until the first quarter of 2008.

Royalty income increased by $208,000 or 5.2% to $4,246,000 for the quarter and by $1,730,000 or 11.5% to $16,827,000 for the year, as a result of the increase in gross sales. 

Earnings before income taxes decreased slightly by 0.6% to 31.9 cents/Fund unit from 32.1 cents/Fund unit during the quarter, and increased by 5.3% to $1.263/Fund unit from $1.200/Fund unit for the year.  Distributable cash available to pay distributions to Fund unitholders increased by 4.1% to 30.3 cents/Fund unit from 29.1 cents/Fund unit for the quarter, and by 7.9% to $1.269/Fund unit from $1.176/Fund unit for the year. 

The Fund paid distributions of 30.5 cents/Fund unit during the quarter and $1.193/Fund unit for the year. 

The Fund is pleased to announce that it is again increasing its monthly cash distributions to Unitholders, marking the seventh distribution increase since the Fund’s inception. The monthly distributions will increase 2.9% from $0.1035 per unit to $0.1065 per unit beginning with the March 2008 distribution.  This equates to an annualized distribution of $1.278 per Fund unit, an increase of 18.3% since the Funds inception.  The distribution of $0.1065 per unit for the period from February 1, 2008 to February 29, 2008 will be payable on March 31, 2008.  

The Fund regularly reviews distribution levels with the objective of providing consistent monthly distribution flow to Unitholders at the highest sustainable level. This distribution increase is primarily attributable to continued same store sales growth at KRL of 5.5% for the year.

“The Keg continues to outpace the casual dining industry in Canada with 7.3% same store sales growth in 2007 over 2006. We are particularly pleased with our results in the United States conidering the comparative results of other restaurants in the casual dining sector. With continued focus on running great steakhouses, The Keg has continued to grow market share, and we are delighted to be able to translate these successes into higher distributions to the Fund’s unitholders,” said David Aisenstat, President and CEO of KRL.

Financial Highlights

$000's except per unit amounts	Oct 1  to Dec 31 2007	Oct 1  to Dec 31  2006	Jan 1  to Dec 31  2007	Jan 1  to Dec 31  2006
Restaurants in the Royalty Pool	95	91	95	91
Gross Sales Reported by Restaurants in the Royalty Pool .....	$103, 541	$96,684	$412,759	$372,472
Royalty Income	$4,246	$4,038	$16,827	$15,097
Partnership Expenses	(77)	(105)	(369)	(456)
Partnership Earnings	4,169	3,933	16,458	14,641
KRL's Interest	(1,919)	(1,876)	(7,696)	(7,306)
Equity Income	2,250	2,057	8,762	7,335
Interest Income	1,090	1,083	4,318	4,289
Total Income	3,340	3,140	13,080	11,624
Interest and Financing Expense	(240)	(234)	(943)	(900)
Earnings Before Income Taxes	$3,100	$2,906	$12,137	$10,724
Net Earnings	$3,200	$2,906	$10,387	$10,724
Distributable Cash	$2,940	$2,636	$12,199	$10,510
Distributions Paid	$2,962	$2,597	$11,463	$10,078
Earnings before Income taxes per Fund Unit (1)	$.319	$.321	$1.263	$1.200
Earnings per Fund Unit(2)	$.330	$.321	$1.081	$1.200
Distributable Cash Per Fund Unit (1)	$.303	$.291	$1.269	$1.176
Distributions Paid Per Fund Unit	$.305	$.287	$1.193	$1.128
Payout Ratio	$100.8%	$98.5%	$94.0%	$95.9%
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(1) All per unit amounts are calculated based on the weighted average number of Fund units outstanding, which are those units held by public unitholders during the respective period. (2) Net earnings for the three and year ended December 31, 2007 reflect the non-cash future tax expense of $100,000 and the non-cash future income tax expense of $1,750,000 respectively, realted to the new tax legislation.
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A copy of the complete financial results will be available at www.sedar.com and the Fund’s website at www.kegincomefund.com.

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 six 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 changes in market and competition, 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