Second Cup Royalty Income Fund Proposes Modification to Fund Structure, Announces March distribution


Apr 13, 2006

MISSISSAUGA, ON, April 13 /CNW/ - Second Cup Royalty Income Fund today announced that at its Annual and Special Meeting of Unitholders, being held on May 10th, unitholders will be asked to approve a reorganization of the Fund and its subsidiaries. Since its creation in 2004, the Fund has owned the Second Cup trade-marks through intermediary corporate subsidiaries. This structure subjects these subsidiaries to income tax which, in turn, reduces the cash available for distribution to the Fund'''''s unitholders. The Fund proposes to modify the current structure of the Fund by replacing the intermediary corporations with a newly formed trust and limited partnership. The proposed reorganization, which has been adopted by a number of other income trusts, will provide the Fund with a "flow through" structure that will maximize the cash available for distribution by eliminating the income taxes paid by the Fund. The reorganization would be conditional on obtaining a number of regulatory and third party approvals, including a favourable income tax ruling from Canada Revenue Agency. From a unitholder's perspective, the reorganization will not result in a change to the number, type and ownership of outstanding units of the Fund. In addition, there will be no impact on the daily operations of the Fund. A detailed description of the reorganization is contained in the Notice of Meeting and Management Information Circular that will be mailed to unitholders in connection with the Annual and Special Meeting. The Annual and Special Meeting will be held at 2 pm on May 10, 2006 at the offices of Osler, Hoskin & Harcourt, 63rd floor, First Canadian Place, Toronto, Ontario. The Notice of Meeting and Management Information Circular are expected to be available electronically at on April 18, 2006. March Distribution Announcement and First Quarter Same Café Sales Growth Second Cup Royalty Income Fund has also announced that its Board of Trustees has approved a cash distribution of $0.0834 per unit for the month of March, 2006 to be paid on April 28, 2006 to unitholders of record at the close of business on April 26, 2006. In addition, the Fund is pleased to announce that same café sales growth for cafés in the Royalty Pool was 6.4% for the period January 1, 2006 through March 31, 2006. Sales were favourably impacted by the mild winter in Ontario together with the change in the timing of Easter. "We are pleased with the continued momentum of our same café sales growth, especially in the absence of any significant price increases during the quarter" said Bruce Elliot, President of The Second Cup Ltd. "Second Cup has achieved positive same café sales growth in each quarter since the Fund's inception, and we remain confident that we will be able to achieve our target of 3% to 5% for 2006. I wish to take this opportunity to thank our franchise partners, sales associates, and the Second Cup team for their continued efforts and, most importantly, thank our guests for their ongoing patronage and support." The Fund is an open-ended trust established under the laws of the Province of Ontario. It holds, through an indirect wholly-owned subsidiary, the Canadian trade-marks and other intellectual property and associated rights used by The Second Cup Ltd. ("Second Cup") in connection with the operation of Second Cup cafés in Canada. For more information on the Second Cup Royalty Income Fund please visit Second Cup is Canada's largest specialty coffee café franchisor and second largest retailer of specialty coffee, as measured by number of cafés. Second Cup is a wholly owned subsidiary of Cara Operations Limited, Canada's leading integrated restaurant company. %SEDAR: 00021352E For further information: please contact: Rachel Douglas, Manager, Communications at (905) 405-6904,