Mr. Michael Harbinson reports

BOSTON PIZZA INTERNATIONAL ANNOUNCES NO CHANGES TO THE ROYALTY POOL OF BOSTON PIZZA ROYALTIES INCOME FUND

Boston Pizza Royalties income Fund and Boston Pizza International Inc. have been no changes to the fund's royalty pool for the adjustment date (defined below) of Jan. 1, 2026, as there were no new Boston Pizza restaurants that opened between Jan. 1, 2025, and Dec. 31, 2025, and no Boston Pizza restaurants that permanently closed during the period. Accordingly, the royalty pool remains unchanged with 372 Boston Pizza restaurants.

The fund effectively receives 5.5 per cent of franchise revenues of Boston Pizza restaurants in the royalty pool less the pro rata portion payable to BPI in respect of its retained interest in the fund. On Jan. 1 of each year, an adjustment is made to add to the royalty pool new Boston Pizza restaurants that opened and to remove any Boston Pizza restaurants that permanently closed since the last adjustment date. In return for adding new royalty income and distribution income from the new restaurants after subtracting the royalty income and distribution income that is lost from the closed restaurants, BPI receives the right to indirectly acquire additional units of the fund. The calculation of additional entitlements is designed to be accretive to unitholders of the fund as the expected increase in franchise sales from the new restaurants added to the royalty pool less the decrease in franchise sales from the closed restaurants is valued at a 7.5-per-cent discount. The additional entitlements are calculated at 92.5 per cent of the estimated royalty income and distribution income expected to be generated by the new restaurants less the actual royalty income and distribution income lost from the closed restaurants, multiplied by one minus the effective tax rate estimated to be paid by the fund, divided by the yield of the fund, divided by the weighted average unit price over a specified period. BPI indirectly receives 80 per cent of the additional entitlements initially, with the balance received when the actual full year performance of the new restaurants and the actual effective tax rate paid by the fund are known with certainty (the holdback). BPI receives 100 per cent of the distributions on the additional entitlements throughout the year. After the new restaurants have been part of the royalty pool for a full year, an audit of the franchise sales of these restaurants is performed, and the actual effective tax rate paid by the fund is determined. At such time, an adjustment is made to reconcile distributions paid to BPI and the additional Entitlements received by BPI.

While no adjustments to the royalty pool occurred for the adjustment date of Jan. 1, 2026, due to there being no new restaurants or closed restaurants, a deficiency (being 5.5 per cent of any negative net franchise sales for any given adjustment date) from prior adjustment dates remain outstanding. Since there was a deficiency in respect of each adjustment date from Jan. 1, 2021, to Jan. 1, 2025, there is currently a cumulative deficiency of $2.2-million. A summary of the cumulative deficiency is as shown in the attached table.

Due to no adjustments being made to the royalty pool, BPI did not receive any additional entitlements on Jan. 1, 2026. Though there is an outstanding deficiency, BPI does not lose any of the additional entitlements it received in respect of previous years. Instead, BPI will be required to make-up the cumulative deficiency of $2.2-million in future years by first adding net royalty and distribution income in an amount equal to the cumulative deficiency before receiving any further additional entitlements. BPI continues to hold a 13.3-per-cent interest in the fund.

See the fund's annual information form dated March 28, 2025, for a detailed description of the annual adjustment that is made to the royalty pool.