Mr. Jeff Good reports

SIR ROYALTY INCOME FUND ANNOUNCES ADDITIONS TO ROYALTY POOL

As of Jan. 1, 2015, one new Jack Astor's restaurant and one new Scaddabush Italian Kitchen & Bar have been added to the royalty pooled restaurants, from which SIR Royalty Income Fund earns distribution income. The fund's royalty pool now consists of 55 restaurants. This represents the ninth year since the fund's inception in 2004 and the fifth consecutive year that new restaurants have been added to the fund's royalty pool.

"These new additions to the royalty pool demonstrate our commitment to continuing to expand our restaurant network and growing cash available for distribution to our unitholders," said Peter Fowler, chief executive officer of SIR Corp. "The two new royalty pool restaurants include our Jack Astor's in St. John's, Nfld., SIR's first restaurant in the province, and a new Scaddabush location in downtown Toronto, our second location for this popular new Italian concept brand."

The royalty pool is adjusted in January of each year to include sales from any new SIR Corp. restaurants that opened on or before Nov. 2 of the prior year, net of sales of any royalty pooled restaurants that were closed.

The fund, through the SIR Royalty Limited Partnership, pays SIR for the additional royalty stream from net new restaurants, based upon a formula set out in the licence and royalty agreement between SIR and the partnership. The payment formula, which is designed to be accretive to fund unitholders, is based on the 6-per-cent royalty from the estimated annualized revenue from the new restaurants divided by the tax-adjusted current yield on the units of the fund. The accretion to fund unitholders is achieved by discounting the payment to SIR by 7.5 per cent. The payment to SIR is in the form of additional Class A GP units of the partnership. These units are the economic equivalent of fund units.

Initial adjustment for 2015

The estimated annualized net revenue of the two new restaurants of $12.2-million is expected to result in a $700,000 increase to the royalty stream on the basis of the 6-per-cent royalty. The fund, through the partnership, will pay SIR for the additional royalty stream through the conversion of 350,543 Class B GP units, currently held by SIR, into Class A GP units on a one-for-one basis. The Class A units received by SIR are valued at $4.5-million, or $12.85 per unit, representing the volume-weighted average price of the fund units for the 20 trading days ended Dec. 22, 2014. The 350,543 Class A GP units represent 80 per cent of the estimated Class A GP units that SIR is expected to receive. The remaining amount, if any, will be issued in the second incremental adjustment, which will be based on the actual annual revenue for the new restaurants in 2015, as opposed to the current annualized estimate. The date of the second incremental adjustment is Jan. 1, 2016. The actual payment from the partnership to SIR for the additional royalty stream is calculated as summarized in the attached calculation of royalty stream table.

             CALCULATION OF ROYALTY STREAM, SUBJECT TO 2015 INITIAL ADJUSTMENT 

Estimated annual net revenue from new restaurants added to the royalty pool           $12,188,000
Royalty rate on net revenue paid to the fund                                          6%        
Estimated net increase in royalty stream                                              $731,280   
Less                                                                   
A 7.5% accretion adjustment                                                           $54,846    
Estimated additions to royalty pool before 80% initial adjustment                     $676,434   
Estimated additions to royalty pool after 80% initial adjustment                      $541,147   
Calculation of 2015 initial adjustment                                                
Estimated additions to royalty pool after 80% initial adjustment                      $541,147   
Current yield on fund units                                                           12.01%    
Capitalized value of estimated additions to royalty stream                            $4,504,483 
Volume-weighted average price of fund units at Dec. 22, 2014                          $12.85     
Number of units to be exchanged by the partnership for additions to the royalty pool  350,543   

Second incremental adjustment for 2014

The second incremental adjustment for the Jan. 1, 2014, addition of new restaurants to the royalty pool is negative. The actual revenue for the 52 weeks ended Dec. 31, 2014, of the four new restaurants added to the royalty pool, effective Jan. 1, 2014, totalled $18.6-million, which was approximately 20.4 per cent less than the amount originally estimated. This resulted in SIR effectively returning 3,466 Class A GP units to the partnership. While the sales of all four of the restaurants added to the royalty pool, effective Jan. 1, 2014, were negatively affected by unfavourable weather conditions during the winter and spring of 2014, the most significant factor resulting in the actual revenue of the four restaurants being below the estimate used in the 2014 incremental adjustment was that sales at one of the new restaurants were significantly below expectations. SIR believes the primary reason for the underperformance of this restaurant is that it is located within a large new condominium and retail development that has not reached its full potential. The 2014 second incremental adjustment is calculated as summarized in the attached calculation of amount subject to the 2014 second incremental adjustment table.

                             
             CALCULATION OF AMOUNT SUBJECT TO 2014 SECOND INCREMENTAL ADJUSTMENT     

Actual annual net revenue from new restaurants added to the royalty pool                 $18,587,092
Royalty rate on net revenue paid to the fund                                             6%        
Net increase in restaurant royalties                                                     $1,115,226 
Less           
A 7.5% accretion adjustment                                                              $83,642    
Actual additional royalty stream subject to the 2014 second incremental adjustment       $1,031,584 
Calculation of 2014 second incremental adjustment                                     
Actual additional royalty stream subject to the 2014 second incremental adjustment       $1,031,584 
Current yield on fund units                                                              10.32%    
Capitalized value of actual additions to royalty stream                                  $9,995,227 
Volume-weighted average price of fund units at Dec. 20, 2013                             $14.54     
Number of units to be exchanged by the partnership for additions to the royalty pool     687,429   
Number of units exchanged in the 2014 initial adjustment                                (690,895) 
Second incremental adjustment in 2014                                                   (3,466)   

Special conversion distribution/refund

As the 2014 second incremental adjustment resulted in SIR effectively returning 3,466 Class A GP units to the partnership, the special conversion refund payable by SIR to the partnership for Dec. 31, 2014, has been finalized. The amount of the conversion refund is $5,378. The annual special conversion distribution/refund can only be calculated once the actual revenue for the 52 weeks ended Dec. 31, 2014, for the new restaurants added to the royalty pool, effective Jan. 1, 2014, and the number of additional Class B GP units that will be converted to Class A GP units for the second incremental adjustment related to the Jan. 1, 2014, new additional restaurants are known with certainty. The amount of the conversion refund is equal to the aggregate distributions declared per fund unit, adjusted for the impact of the specified investment flow-through tax paid or payable, for the preceding calendar year of $1.5516 multiplied by 3,466, which is the number of Class A GP units that are effectively converted back into Class B GP units as a result of the 2014 second incremental adjustment. The conversion refund has been declared effective Dec. 31, 2014, and will be paid on Jan. 30, 2015.

Capital structure

Following the 2015 initial adjustment and 2014 second incremental adjustment, all effective Jan. 1, 2015, SIR will own, control and hold 2,488,421 Class A GP units, representing the equivalent of 24.60 per cent of the units of the fund on a fully diluted basis. This 24.60 per cent consists of: 2,141,344 Class A GP units held by SIR as at Dec. 31, 2014, and 347,077 in additional Class A GP units received for the adjustments described herein (350,543 for the 2014 initial adjustment minus 3,466 for the 2014 second incremental adjustment).

                                                                                                                                           
  CALCULATION OF SIR'S SHARE OF THE FUND, ON A FULLY DILUTED BASIS, 
             ISSUED AND OUTSTANDING UNITS, AND ADDITIONAL UNITS 
               RESULTING FROM 2015 ADJUSTMENTS TO ROYALTY POOL
                   
Public float at Dec. 31, 2014                                    7,625,567  
Class A GP units held by SIR as at Dec. 31, 2014 (convertible           
to units on a one-for-one basis)                                 2,141,344  
Add                                                                        
Class A GP units per the 2015 initial adjustment                 350,543    
Class A GP units per the 2014 second incremental adjustment     (3,466)    
Number of fully diluted units                                    10,113,988 
Number of fully diluted units available for exchange by                     
SIR, effective Jan. 1, 2015                                      2,488,421  
Percentage of fully diluted units available for exchange                    
by SIR, effective Jan. 1, 2015                                   24.60%     

SIR's Class A GP units currently represent 100 per cent of the issued and outstanding Class A GP units.

Subsequent to the aforementioned exchanges, SIR owns, controls and holds 95,381,548 Class B GP units, which are convertible in certain circumstances (based on the addition of further new restaurants to royalty pooled restaurants) into Class A GP units on a one-for-one basis. Other than as described herein, none are currently convertible. If converted, the resulting Class A GP units would, subject to the partnership's right to reconvert them back into Class B GP units in certain circumstances (based on the new restaurants' performance being below 80 per cent of the original expectations), also be exchangeable on a one-for-one basis into units of the fund. The 95,381,548 Class B GP units currently represent 100 per cent of the issued and outstanding Class B GP units.

The fund expects there to be a 2015 second incremental adjustment, effective Jan. 1, 2015, and an associated special conversion distribution declared, effective Dec. 31, 2015, both related to the two new restaurants that were just added to the royalty pool. The amount of such adjustment and distribution cannot be determined at this time. The offeror and Peter Fowler (who beneficially owns 31,500 units of the fund apart from the offeror's holdings), who are affiliated, may be considered under applicable securities laws to be acting jointly or in concert. This news release is not an admission of same, and the 24.6-per-cent equivalent fund unit holding, represented by SIR's Class A GP units noted herein, would increase to 24.9 per cent, taking into account such additional units of the fund. Except for the foregoing, SIR is not acting in concert with any other person, including any of its shareholders, directors or officers, in connection with its holdings of the fund or the partnership, and thus any holdings that they may have in the fund are not included in this report.

The transactions noted herein took place privately.

SIR holds its interests in the partnership for investment purposes and in connection with its operation of its restaurant business, which produces the revenues from which the partnership and the fund derive their income through a trademark licence and royalty agreement entered into in connection with the fund's initial public offering.

SIR may, depending on market and other conditions, increase or decrease its beneficial ownership, control or direction over units of the fund, or securities of the partnership, through market transactions, private agreements, treasury issuances, exercise of options, convertible or exchangeable securities, or otherwise. SIR has entered into a number of material agreements with the fund and/or the partnership, which are described in the final prospectus of the fund dated Oct. 1, 2004. In addition to the royalty generated by any new SIR restaurants added to royalty pooled restaurants, the consideration paid by SIR for its Class A GP units and Class B GP units was the transfer of certain trademarks, as described in the final prospectus of the fund. Certain amendments to the declaration of trust and other material agreements were approved at a special meeting of unitholders held on Dec. 20, 2010. They are filed on SEDAR.

About SIR Corp.

SIR is a privately held Canadian corporation that owns and operates a portfolio of 58 restaurants in Canada. SIR's Concept brands include: Jack Astor's Bar and Grill, with 38 locations; Alice Fazooli's, together with Scaddabush Italian Kitchen & Bar, for a total of five locations; and Canyon Creek Chop House, with eight locations. SIR also operates one-of-a-kind Signature brands in downtown Toronto, including Reds Wine Tavern, Reds Midtown Tavern, Far Niente/Four/Petit Four and the Loose Moose. All trademarks related to the Concept and Signature brands noted herein are used by SIR under a licence and royalty agreement with SIR Royalty Limited Partnership in consideration for a royalty, payable by SIR to the partnership, equal to 6 per cent of the revenue of the 55 restaurants currently included in the royalty pool. SIR also owns and operates Dukes Refresher & Bar in downtown Toronto and two seasonal Signature restaurants: Abbey's Bake House and Duke's Refresher, which are not currently part of the royalty pool. For more information on SIR Corp. or the SIR Royalty Income Fund, please visit the SIR Corp. website.

We seek Safe Harbor.