The Keg Royalties Income Fund To Modify Roll-In Formula

December 5, 2005 – The Keg Royalties Income Fund (the “Fund”) announced today that, with agreement from Keg Restaurants Ltd. (“KRL”), it will amend the Fund’s formula used for adding new restaurant sales to the Royalty Pool. As a result of this amendment, KRL has waived its rightful entitlement to 43,718 Fund units pursuant to the January 1, 2005 roll-in. 

Annually on January 1st, the Fund’s Royalty Pool is adjusted to include the gross sales from new Keg restaurants that have opened on or before October 2nd of the prior year, after deducting the gross sales from any Keg restaurants that were permanently closed during the preceding calendar year. In return for adding these net sales to the Royalty Pool, KRL receives the right to indirectly acquire additional Fund units (the "Additional Entitlement"). This Additional Entitlement is determined based on 92.5% of the royalty revenue added to the Royalty Pool divided by the annual yield of the Fund units. KRL receives 80% of the estimated Additional Entitlement initially, with the balance determined and awarded when the actual full-year performance of the new restaurants is known with certainty with effect from January 1st of that year. 

It has recently come to the Fund’s attention that the roll-in formula used to calculate the Additional Entitlement is inconsistent with other restaurant royalty funds in the Fund’s peer group such that the accretion that was intended to result from the addition of new sales to the Royalty Pool is affected by the Fund’s unit price at the time of the roll-in. If the unit price was above $10, the addition of new restaurant sales to the Royalty Pool would be less accretive to unitholders than intended and conversely, if the unit price was below $10, the addition of new restaurant sales would be more accretive than intended. 

As a result, the Fund’s Trustees and KRL’s management have agreed to amend the arrangements between KRL and the Fund (with effect as if the amendments had been made on May 31, 2002, the date of the Fund’s initial public offering) to ensure that the intended accretion to unitholders continues regardless of the Fund’s unit price. As part of these new arrangements, KRL has agreed to waive its entitlement to receive approximately 43,718 units in connection with the Additional Entitlement for the January 1, 2005 pursuant to the existing formula. KRL and the Fund will prepare the necessary documentation to amend the calculation of the Additional Entitlement and take other actions that may be necessary to effect the agreement between the Fund and KRL. 

“This agreement with Keg Restaurants Ltd. clearly demonstrates The Keg’s ongoing commitment to adding value for Fund unitholders,” said C.C. Woodward, Chairman of the Fund. “The Keg was under no obligation to alter the formula nor waive its entitlement to units, but did so in the best interest of 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” by the Globe and Mail's Report on Business Magazine for the past four years. 

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

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. 

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