The Keg Royalties Income Fund Posts Strong Year-End Financial Results And Announces Fourth Increase in Distributions.

Vancouver, February 6, 2007 – The Keg Royalties Income Fund (the “Fund”) has reported its financial results for the three months and year ended December 31, 2006. Gross sales and same stores sales reported by Keg Restaurants Ltd. (“KRL”), royalty income, earnings, and distributable cash all increased from the comparable periods of the prior year. 

Gross sales reported by Keg restaurants in the Royalty Pool increased by $13,467,000 or 15.8% to $98,684,000 during the quarter and by $46,755,000 or 14.4% to $372,472,000 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 10.5% in Canada and by 7.9% in the United States for the 13-week period ended December 31, 2006, and by 8.3% in Canada and by 7.2% in the U.S. for the 52-week period ended December 31, 2006. After translating the sales of the U.S. restaurants into their Canadian dollar equivalent, consolidated same store sales increased by 9.6% for the comparable 13-week period, and by 6.9% for the comparable 52-week period, despite the continuing negative effect of the exchange rate between Canadian and US dollars. 

Royalty income increased by $589,000 or 17.1% to $4,038,000 for the quarter, and by $1,959,000 or 14.9% to $15,097,000 for the year, as a result of the increase in gross sales. 

Earnings increased by 8.4% to 32.1 cents/Fund unit from 29.6 cents/Fund unit during the quarter and by 6.8% to $1.20/Fund unit from $1.12/Fund unit during the year. Distributable cash available to pay distributions to Fund unitholders increased by 8.4% to 32.2 cents/Fund unit from 29.7 cents/Fund unit for the quarter, and by 6.7% to $1.20/Fund unit from $1.13/Fund unit for the year. The Fund declared distributions of 38.2 cents/Fund unit during the quarter and $1.14/Fund unit for 2006. 

As a result of this strong performance, the Fund is pleased to announce that it is once again increasing its monthly cash distributions. The monthly distributions will increase 2.5% from $0.0956 per unit to $0.0980 per unit beginning with the March 2007 distribution. This equates to an annualized distribution of $1.176 per unit. The distribution of $0.0980 per unit for the period from February 1, 2007 to February 28, 2006 will be payable to Unitholders of record at the close of business on March 21, 2007 and will be paid on March 30, 2007. The Fund periodically reviews distribution levels with the objective of providing a consistent monthly distribution flow to Unitholders at the highest sustainable level. 

“We have once again delivered record sales and strong same store sales growth, which have led to continued growth in both earnings and distributable cash for the Fund,” said David Aisenstat, President and CEO of Keg Restaurants Ltd. “We are pleased that this growth enables the Fund to increase distributions for the third time within the past year and the fourth time since the inception of the Fund.” 

The Fund also announced that 84.92% of distributions made in 2006 are considered taxable to unitholders, with the remaining 15.08% of distributions considered a return of capital. 

A copy of the complete financial results will be available at www.sedar.com or on the Fund’s website at www.kegincomefund.com. 

The Keg Royalties Income Fund (TSX – KEG.UN) is a limited purpose, open-ended trust established under the laws of the Province of Ontario that, through The Keg Rights Limited Partnership, owns certain trademarks and other related intellectual property used by Keg Restaurants Ltd. (“KRL”). In exchange for use of those trademarks, KRL pays the Fund a royalty of 4% of gross sales of Keg restaurants included in the royalty pool. Vancouver-based Keg Restaurants Ltd. is the leading operator and franchisor of the steakhouse restaurants in Canada and has a substantial presence in select regional markets in the United States. 

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 five years by the Globe and Mail’s Report on Business Magazine. For more information on our brand, visit www.kegsteakhouse.com 

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