Mr. Jeff Good reports

SIR ROYALTY INCOME FUND RESPONDS TO LEMBIT JANES PRESS RELEASE

SIR Royalty Income Fund has responded to the press release disseminated on April 12, 2021, by Lembit Janes that proposed to nominate three new trustees for election at the annual general meeting of unitholders of the fund to be held on June 29, 2021.

The fund's trustees continue to closely review the matters raised in Mr. Janes's release and will respond to such matters as appropriate. The fund's trustees would be pleased to engage, in a constructive manner, with Mr. Janes or any other unitholder on any of the matters described in Mr. Janes's release.

The impact of the COVID-19 pandemic has been particularly challenging for the hospitality industry, including the fund and SIR Corp. While restaurants in Ontario, where the majority of SIR's restaurants is located, remain closed for in-restaurant dining, the expenses for operating the restaurants subject to the royalty pool, many of which are fixed, are borne by SIR. Notwithstanding this structure, which results in the fund benefiting from minimal operating expenses other than taxes and public company costs, revenues generated by the royalty pooled restaurants have declined substantially and are not forecast to fully recover until the pandemic subsides, government-regulated operating restrictions are lifted and in-restaurant dining returns to prepandemic levels.

In the interim, SIR continues to work with its lenders to secure renewed credit arrangements and with suppliers to extend credit terms. As previously announced, as a result of successful negotiations with its lenders, SIR recently remitted a $1-million payment to the fund toward previously deferred royalty payments. The fund's trustees are committed to full transparency and will continue to update fund unitholders of material developments.

The fund notes that a number of statements made in Mr. Janes's release were inaccurate, including, among others:

• That the new debt secured by SIR has resulted in the fund moving from being the "most secured party to now being subordinated." In fact, the fund has always been subordinated to SIR's bank lenders.
• That any revenues derived from the Renegade Chicken ghost kitchen operations are solely for SIR's benefit. Renegade Chicken is in a test mode and is not using any of the fund's trademarks or being supported in any way by the fund. Revenues generated by Renegade Chicken contribute to assisting SIR in maintaining liquidity, which will put SIR in a better position to catch up on deferred royalties and pay future royalties to the fund. The test phase is expected to conclude by the end of May. At that time, SIR is expected to advise the fund how it intends to move forward with these ghost kitchen operations.
• That the unitholders received nothing for the closure of the three restaurants at Yonge and Gerrard. In fact, on Jan. 1, 2022, SIR will, as required by its agreements with the fund and the SIR Royalty Limited Partnership, return the same number of Class A general partnership units that it received for the vend-in of two of these restaurants (a Scaddabush location and Reds Midtown Tavern) to the fund's royalty pool. The third closed restaurant at Yonge and Gerrard, a Duke's Refresher, was not part of the royalty pool. This return of Class A GP units will reduce SIR's future share of the partnership's earnings and correspondingly increase the unitholders' share of the partnership's earnings.

The fund also notes that Mr. Janes seems to want to be reimbursed by the fund for his personal expenses, including proxy solicitation expenses and legal fees. This is not contemplated by the fund's declaration of trust and would inappropriately reduce amounts that would otherwise be available for legitimate fund expenses and distributions. Under the fund's declaration of trust, the fund's trustees are only entitled to be reimbursed for reasonable travel and other out-of-pocket expenses properly incurred by them in attending meetings of the trustees, or any committee thereof, or in connection with their services as trustees. Distributions have been made by the fund consistently for more than 15 years until the onset of the COVID-19 pandemic, and SIR and the fund have every intention to re-establish distributions at an appropriate level as soon as it is reasonable and feasible to do so. The fund paying for the personal expenses of one unitholder would not be consistent with that goal.

About SIR Royalty Income Fund

The fund is a trust governed by the laws of the Province of Ontario that indirectly has interests in the trademarks used by SIR.

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