The Vancouver-based A&W Revenue Royalties Income Fund, which owns some of the strongest brand names in the Canadian food service industry, has reported for its fiscal results for the Q2 ended 16 June.

The A&W Fund was launched on 15 February 2002. In return for royalties of 3% of gross sales from 585 of A&W's restaurants across the country, the Fund licenses A&W Food Services of Canada to use these trade-marks.

For year-to-date period, the Fund generated basic earnings of 31.5 cents per unit on royalty income of C$4.2m (US$) from Food Services. Cash available for distribution to unitholders totalled C$2.99m (35.9 cents per unit), and the distribution declared was 30.8 cents, in line with the anticipated annual distribution rate of C$1.08 per unit.

During the Q2, the Fund generated basic earnings of 21.6 cents per unit on royalty income of C$2.95m from Food Services. Cash available for distribution to unitholders totalled C$2.06m (24.7 cents per unit), and distributions of 27 cents per unit were declared. The difference between Fund income and distributions reflects differences in the timing of receipt of royalties and the timing of distributions.

The company stressed that these results were achieved against a backdrop of continuing weakness in Canada's food service industry. Although reports suggest the Canadian economy has entered a period of recovery, this has not yet translated to the food service sector. Industry sales were also affected by unseasonable weather, which continued through much of the Q2. From January to April 2002, the most recent period for which industry data is available, total Canadian restaurant revenues grew by just 1.6%, compared to a 2001 growth rate of 6.6%.

Sales in the quick service restaurants (QSR) category, were slower still, declining by -0.3%. By comparison, A&W's sales (including sales from new restaurants) grew by 2.7% during the January to April period.

A&W's total Q2 sales grew by 1.2%. However, same store sales were down 2.8% from the comparable period in 2001, reflecting the industry and weather challenges experienced during the quarter.

"A&W Food Services has responded very effectively to difficult conditions," said Jefferson J. Mooney, chairman and CEO. "A&W's sales continue to outperform the industry, and the Fund is on track to deliver the anticipated annual distribution of C$1.08."

Operating Results Summary

     (C$000's except earnings per unit)
                                  12 weeks - 25 March  15 February (inception)
                                  to 16 June 2002      to 16 June 2002
     Gross Sales reported by the
      585 A&W Restaurants in the
      Royalty Pool                         $98,236             $140,526
     Royalty Income                          2,947                4,216
     Taxes and Expenses                        539                  712
     Non-controlling interest (1)              607                  881
     Earnings for the period                 1,801                2,623
     Basic earnings per trust unit.        $ 0.216             $  0.315
     Distributions declared                $ 0.27              $  0.308

     (1) Represents the interest of Food Services in the earnings of the Fund

Outlook

While the overall Canadian economy is improving, both the retail sector and the food services sector are expected to continue experiencing difficult conditions through the balance of 2002.

In response, A&W Food Services is implementing key strategic initiatives focused on its strategy "to become the number one choice of the baby boomer generation." Continued progress is being made with Chubby Chicken through the focus on take-home meals, and new advertising and promotional activities are getting customers to try this new product line. Food Services is also continuing the roll out of its re-image programme for freestanding restaurants.

This programme is designed to strengthen A&W's overall brand positioning, as well as its street impact and appeal. Over 100 restaurants have now committed to this programme and implementation and execution will continue over the next six months. The re-imaging of 50 restaurants is expected to be completed during the summer months. Moving forward, Food Services will continue to develop new initiatives and promotions that increase A&W's competitiveness in the current market, while building on the overall strategy.