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					Priszm Income Fund
Interim Consolidated Financial Statements
(Unaudited)
Third Quarter Period from
June 16, 2008 to September 7, 2008
Priszm Income Fund
Interim Consolidated Balance Sheets
(Unaudited)

(in thousands of dollars)

                                                                                                  September 7,   December 30,
                                                                                                         2008           2007
                                                                                                             $              $
Assets
Current assets
Cash and cash equivalents (note 15)                                                                     7,718         19,449
Short-term investments                                                                                      -          5,002
Trade and other accounts receivable                                                                     3,214          2,436
Inventories                                                                                             3,461          3,618
Prepaid expenses                                                                                        3,861          1,578
Other assets                                                                                              170            169

                                                                                                       18,424         32,252

Property and equipment (note 3)                                                                        70,756         70,860

Future income taxes (note 4)                                                                            4,300          4,225

Franchise rights (note 5)                                                                              37,362         39,294

Goodwill                                                                                              120,357        120,357

Assets of discontinued operations (note 18)                                                            16,369         16,471

                                                                                                      267,568        283,459

Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 6)                                                      37,118         45,027
Distributions payable to Unitholders (note 14)                                                          1,163            697

                                                                                                       38,281         45,724

Long-term loan (note 7)                                                                                74,826         74,224

Convertible debentures (note 8)                                                                        28,308         28,008

Future income taxes (note 4)                                                                            4,555          4,455

Deferred contract amounts (note 5)                                                                      5,556          5,072

Liabilities of discontinued operations (note 18)                                                        3,901          5,600

                                                                                                      155,427        163,083

Non-controlling interest (note 9)                                                                      47,360         49,804

Unitholders’ Equity
Equity (note 10)                                                                                      143,845        143,198

Deficit                                                                                               (79,064)       (72,626)
                                                                                                       64,781         70,572

                                                                                                      267,568        283,459

The accompanying notes are an integral part of these interim consolidated financial statements.
Priszm Income Fund
Interim Consolidated Statements of Operations
(Unaudited)

(in thousands of dollars, except per Unit amounts)

                                                                   Period from         Period from         Period from      Period from
                                                                      June 16,            June 18,        December 31,       January 1,
                                                                        2008 to             2007 to             2007 to          2007 to
                                                                  September 7,        September 9,        September 7,     September 9,
                                                                          2008                2007                2008             2007
                                                                              $                   $                   $                $

Restaurant sales                                                         95,857              97,711            264,938         268,251

Restaurant cost and expenses
     Cost of restaurant sales (note 12)                                  55,798              57,592            155,111         159,055
     Restaurant operating expenses (note 12)                             13,521              12,812             39,092          38,502
     Rent                                                                 6,598               6,415             19,934          19,231
     Franchise royalty expense                                            5,753               5,869             15,902          16,107
     Amortization                                                         2,531               2,455              7,439           7,143

                                                                         84,201              85,143            237,478         240,038

Income from restaurant operations                                        11,656              12,568             27,460          28,213

General and administrative expenses - including                           4,552               4,287             14,053          13,927
    amortization of $766 (December 31, 2007 to
    September 7, 2008 - $2,302)

Interest income                                                             (22)                  (194)           (136)           (259)

Interest expense (note 7)                                                 2,036               1,949              6,118           4,862

Income before income taxes and non-controlling interest                   5,090               6,526              7,425           9,683

Income taxes (note 4)                                                          -             (1,000)                25           4,700

Income from continuing operations before non-                             5,090               7,526              7,400           4,983
     controlling interest

Non-controlling interest (note 9)                                        (2,023)             (2,993)             (2,940)        (1,982)

Income from continuing operations                                         3,067               4,533              4,460           3,001

Income (loss) from discontinued operations - net of income
   taxes and non-controlling interest (note 18)                             450                    97                (2)        (1,753)

Net income for the period                                                 3,517               4,630              4,458           1,248




The accompanying notes are an integral part of these interim consolidated financial statements.
Priszm Income Fund
Interim Consolidated Statements of Operations …continued
(Unaudited)

(in thousands of dollars, except per Unit amounts)


                                                               Period from          Period from      Period from     Period from
                                                                  June 16,             June 18,     December 31,      January 1,
                                                                    2008 to              2007 to          2007 to         2007 to
                                                              September 7,         September 9,     September 7,    September 9,
                                                                      2008                 2007             2008            2007
                                                                          $                    $                $               $

Basic earnings (loss) per Unit (note 13)
Continuing operations                                                  0.197                0.291           0.286           0.193
Discontinued operations                                                0.029                0.006           0.000         (0.113)

                                                                       0.226                0.297           0.286          0.080

Diluted earnings (loss) per Unit (note 13)
Continuing operations                                                  0.168                0.275           0.285           0.193
Discontinued operations                                                0.022                0.006           0.000         (0.113)

                                                                       0.190                0.281           0.285          0.080




The accompanying notes are an integral part of these interim consolidated financial statements.
Priszm Income Fund
Interim Consolidated Statements of Deficit
(Unaudited)

(in thousands of dollars)

                                                     Period from               Period from             Period from         Period from
                                                        June 16,                  June 18,            December 31,          January 1,
                                                          2008 to                   2007 to                 2007 to             2007 to
                                                September 7, 2008         September 9, 2007       September 7, 2008   September 9, 2007
                                                                $                         $                       $                   $

Deficit - Beginning of period                              (81,024)                (36,582)               (72,626)            (24,904)

Net income for the period                                     3,517                   4,630                  4,458               1,248
Distributions (note 14)                                     (1,557)                 (4,978)               (10,896)            (13,274)

Deficit - End of period                                    (79,064)                (36,930)               (79,064)            (36,930)




Interim Consolidated Statements of Comprehensive Income
(Unaudited)

(in thousands of dollars)

                                                      Period from              Period from             Period from         Period from
                                                         June 16,                 June 18,            December 31,          January 1,
                                                           2008 to                  2007 to                 2007 to             2007 to
                                                 September 7, 2008        September 9, 2007       September 7, 2008   September 9, 2007
                                                                 $                        $                       $                   $

Net income for the period                                      3,517                   4,630                 4,458               1,248

Other comprehensive income                                            -                     -                     -                   -

Comprehensive income                                           3,517                   4,630                 4,458               1,248




The accompanying notes are an integral part of these interim consolidated financial statements.
Priszm Income Fund
Interim Consolidated Statements of Cash Flows
(Unaudited)

(in thousands of dollars)
                                                                        Period from            Period from            Period from          Period from
                                                                     June 16, 2008 to       June 18, 2007 to   December 31, 2007 to   January 1, 2007 to
                                                                   September 7, 2008      September 9, 2007      September 7, 2008    September 9, 2007
                                                                                    $                      $                      $                   $
Cash provided by (used in)

Operating activities
Income from continuing operations                                              3,067                  4,533                  4,460                3,001
Add: Non-cash items
   Income taxes                                                                    -                 (1,000)                    25                4,700
   Non-controlling interest                                                    2,023                  2,993                  2,940                1,982
   Amortization of property and equipment                                      2,545                  2,410                  7,526                7,046
   Amortization of franchise rights                                              682                    684                  2,051                2,052
   Amortization of deferred financing charges                                      -                    132                      -                  369
   Interest accretion                                                            207                    155                    643                  260
   Amortization of deferred contract amount (note 5)                             (27)                   (26)                  (116)                  48
   Loss (gain) on disposal of property and equipment                               -                     (1)                    19                  106
   Unit-based compensation                                                        89                     14                    492                   43
   Long-term incentive plan accrual                                               20                   (270)                   (24)                (675)

Cash provided by continuing operations                                         8,606                  9,624                18,016                18,932
Net change in continuing non-cash working capital (note 15)                    1,252                  1,958                (9,897)              (13,550)
Tenant inducement and supply contract prepayment                                   -                  1,235                   600                 1,235

Cash provided by continuing operations                                         9,858                12,817                   8,719                6,617
Income (loss) from discontinued operations (note 18)                             450                    97                      (2)              (1,753)
Change in discontinued operations - non-cash items (note 18)                     306                   952                      26                1,477
Net change in discontinued non-cash working capital (note 18)                   (244)                  236                  (1,846)              (1,186)

Cash provided by operating activities                                         10,370                14,102                  6,897                 5,155

Investing activities
Purchase of property and equipment                                             (3,326)               (2,698)                (7,958)              (8,865)
Purchase of franchise rights                                                      (92)                  (22)                  (119)                (256)
Net proceeds on disposal of property and equipment                                  -                    10                      -                   58
Proceeds on sale of short-term investments                                          -                     -                  5,002                    -

Cash used in investing activities                                              (3,418)               (2,710)                (3,075)              (9,063)

Financing activities
Deferred financing charges                                                          -               (1,689)                    (45)              (1,689)
Distributions to Unitholders                                                   (5,815)              (5,786)                (15,812)             (24,407)
Repayments of revolving credit facilities                                           -               (7,300)                      -                    -
Proceeds from convertible debentures                                                -               30,000                       -               30,000
Proceeds from long-term loan                                                       82                    -                     304                    -

Cash provided by (used in) financing activities                                (5,733)              15,225                 (15,553)               3,904

Change in cash and cash equivalents during the period                          1,219                26,617                 (11,731)                  (4)

Cash and cash equivalents - Beginning of period                                6,499                 2,585                 19,449                29,206

Cash and cash equivalents - End of period                                      7,718                29,202                  7,718                29,202

Supplemental disclosure of cash flow information (note 15)

The accompanying notes are an integral part of these interim consolidated financial statements.
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

1   Summary of significant accounting policies

    Basis of preparation

    The interim consolidated financial statements of Priszm Income Fund (“the Fund”) have been prepared in
    accordance with Canadian generally accepted accounting principles. The note disclosure in these interim
    consolidated financial statements includes only material changes from the disclosure found in the Fund’s
    annual consolidated financial statements for the year ended December 30, 2007. Therefore these interim
    consolidated financial statements should be read in conjunction with those statements. Except as discussed
    below, these interim consolidated financial statements follow the same accounting policies as the Fund’s
    audited annual consolidated financial statements.

    Changes in accounting policies

    Effective December 31, 2007, the Fund adopted the following sections of The Canadian Institute of Chartered
    Accountants (“CICA”) Handbook:

    •    Section 1535, Capital Disclosure

         The section requires that an entity disclose information that enables users of its financial statements to
         evaluate an entity’s objectives, policies and processes for managing capital, including disclosures of any
         externally imposed capital requirements and the consequences of non-compliance. The new disclosures are
         included in note 16.

         This section relates to disclosure and presentation only and did not have any impact on the Fund’s results
         or consolidated financial position.

    •    Section 3031, Inventories

         The section relates to accounting for inventories and revises and enhances the requirements for assigning
         costs to inventories. It requires inventory to be measured at the lower of cost and net realizable value, and
         also provides guidance on the costs that can be capitalized.

         The adoption of this standard did not have any impact on the Fund’s results or consolidated financial
         position.

    •    Sections 3862 and 3863, Financial Instruments - Disclosure and Presentation

         The new Sections 3862 and 3863 replace existing Section 3861, revising and enhancing its disclosure
         requirements, and carrying forward unchanged its presentation requirements. These new sections place
         increased emphasis on disclosures about the nature and extent of risks arising from financial instruments
         and how the entity manages those risks. The new disclosures are included in note 17.




                                                                                                                    (1)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

         These sections relate to disclosure and presentation only and did not have any impact on the Fund’s results
         or consolidated financial position.

2   Seasonality

    The Fund operates on a 13-period accounting basis, with the first three quarters consisting of 12 weeks and the
    fourth quarter consisting of 16 weeks. The business is seasonal. The following table shows the percentage of
    annual sales achieved in each fiscal reporting quarter, on average, over the last three years.

         First Quarter (12 weeks)                            20%
         Second Quarter (12 weeks)                           24%
         Third Quarter (12 weeks)                            25%
         Fourth Quarter (16 weeks)                           31%

                                                            100%

3   Property and equipment

                                                                                                    September 7,
                                                                                                           2008
                                                                            Accumulated
                                                           Cost             amortization                      Net
                                                              $                        $                        $

    Land                                                    215                         -                     215
    Building                                                929                       240                     689
    Leasehold improvements                               52,985                    15,213                  37,772
    Furnishings and equipment                            59,793                    30,132                  29,661
    Restaurants under development                         2,419                         -                   2,419

                                                       116,341                     45,585                  70,756

                                                                                                   December 30,
                                                                                                          2007
                                                                            Accumulated
                                                           Cost             amortization                      Net
                                                              $                        $                        $

    Land                                                    215                         -                     215
    Building                                                923                       203                     720
    Leasehold improvements                               49,575                    12,597                  36,978
    Furnishings and equipment                            56,195                    25,323                  30,872
    Restaurants under development                         2,075                         -                   2,075

                                                       108,983                     38,123                  70,860




                                                                                                                 (2)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

4   Future income taxes

    Prior to June 12, 2007, the Fund was not a taxable entity and, accordingly, its consolidated financial statements
    did not include a provision for Canadian income taxes related to the Fund’s income.

    On October 31, 2006, the Minister of Finance (Canada) announced proposed tax legislation (“trust legislation”)
    that will change the income tax rules applicable to publicly traded trusts rendering income trusts taxable in
    2011. In 2011, when the Fund becomes a taxable entity, income taxes payable will reduce net earnings and will
    affect distributable cash by an equal amount.

    The October 31, 2006 trust legislation was substantively enacted into law on June 12, 2007, at which time the
    Fund gave accounting recognition to these new tax rules.

    While the Fund will not be liable for current taxes until January 1, 2011, it gave recognition to future income
    taxes arising from those temporary tax differences expected to reverse between January 1, 2011 and
    December 31, 2011 at the 29-1/2% tax rate, and after January 1, 2012 at the 28% tax rate applicable to the
    Fund.

    Future income tax assets and liabilities are recognized on temporary differences between the accounting and tax
    bases of existing assets and liabilities as follows:
                                                                   September 7, 2008           December 30, 2007
                                                                                   $                           $

         Franchise rights                                                        3,118                        3,118
         Deferred contract amounts                                               1,182                        1,107
         Future income taxes - assets                                            4,300                        4,225


         Property and equipment                                                  2,664                        2,423
         Goodwill                                                                1,817                        1,761
         Other                                                                      74                          271
         Future income taxes - liabilities                                       4,555                        4,455


         Net future income tax liabilities                                         255                          230

5   Franchise rights and deferred contract amounts

    Franchise rights are net of accumulated amortization of $16,232 (December 30, 2007 - $14,181).

    With respect to the Fund’s operating leases, step lease amortization is included in the determination of net
    income over the term of the lease on a straight-line basis resulting in an accrued expense for the quarter of $70
    (June 18, 2007 to September 9, 2007 - $126) and year to date accrued expense amounted to $164 (January 1,
    2007 to September 7, 2007 - $344). The cumulative amount as at September 7, 2008 was $3,325 (December 30,
    2007 - $3,161).



                                                                                                                      (3)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    Deferred contract amounts in respect of certain supply contract prepayments were $1,648 (December 30, 2007 -
    $1,911), net of $88 amortized to income for the quarter (June 18, 2007 to September 9, 2007 - $152) and $263
    amortized to income for year to date (January 1, 2007 to September 9, 2007 - $296).

    There was a $583 (December 30, 2007 - $nil) of tenant inducement amount included in the deferred contract
    amounts, net of $9 amortized to income for the quarter (June 18, 2007 to September 9, 2007 - $nil) and $17
    amortized to income for the year to date (January 1, 2007 to September 9, 2007 - $nil). The tenant inducement
    is amortized to income over the term of the lease on a straight-line basis.

6   Accounts payable and accrued liabilities
    Accounts payable and accrued liabilities are comprised of the following:
                                                                  September 7, 2008            December 30, 2007
                                                                                  $                            $
         Trade accounts payable                                                 15,341                       20,624
         Royalties payable                                                       1,959                        1,742
         Advertising payable                                                     1,122                        1,004
         Payroll payable                                                         8,664                        8,995
         Sales taxes payable                                                     3,508                        3,475
         Other accrued liabilities (a)                                           6,524                        9,187

                                                                                37,118                       45,027

    a)   As a result of the restructuring plan, the Fund recorded total restructuring costs of $5,771 in the fourth
         quarter of 2007, including $2,012 of severance costs, $398 of other exit costs and other restructuring
         included in discontinued operations (note 18). In the quarter ended September 7, 2008, the Fund paid out
         $280 and $nil (year to date September 7, 2008 - $1,517 and $205) to reduce the severance and other exit
         cost obligations included in the other accrued liabilities. As of September 7, 2008, the balance owing and
         outstanding is $328 in severance and $nil in other exit cost obligations (December 30, 2007 - $1,845 and
         $205).

7   Long-term loan

    With the adoption of CICA Handbook Section 3855, Financial Instruments – Recognition and Measurement,
    the Fund elected to present the long-term loan net of transaction costs. Transaction costs are amortized to the
    interim consolidated statements of operations through accretion resulting in increasing values recorded on the
    interim consolidated balance sheets as time progresses. At maturity, the balance sheet value of the long-term
    loan will be equal to the face value. At September 7, 2008, the net long-term loan is $74,826 (face value is
    $75,937 net of $1,111 in transaction costs).




                                                                                                                  (4)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    Interest expense comprises the following:

                                              Period from       Period from        Period from         Period from
                                            June 16, 2008,     June 18, 2007      December 31,          January 1,
                                                   2008 to           2007 to            2008 to             2007 to
                                             September 7,      September 9,       September 7,        September 9,
                                                     2008               2007              2008                2007
                                                         $                 $                  $                   $

     Interest expense on long-term loan              1,359              1,184               4,071             3,552
     Interest expense on debentures                    446                427               1,341               427
     Interest expense on revolver and                   24                 51                  63               254
          other
     Accretion and amortization of                     207                287                 643               629
          deferred financing charges

                                                     2,036              1,949               6,118             4,862

    The long-term loan included two advances: $73,892 and $2,045 (the facility). The $73,892 advance has a fixed
    interest rate of 7.8% and the principal is due in full on January 13, 2011 with payments of interest due on a
    monthly basis. The $2,045 advance has a fixed interest rate of 8.09% and the principal is due in full on
    November 11, 2011 with payments of interest due on a monthly basis. The long-term loan is secured by
    substantially all of the assets of the Fund.

    The fair value of the long-term loan as at September 7, 2008 is approximately $64,236 (December 30, 2007 -
    $73,602) based on the valuation using the current market rate that closely matches with the remaining term of
    the loan.

    The Fund amended the facility on February 29, 2008 with an effective date of December 30, 2007. The facility
    amendments included a change to many of the financial covenants and an increase in the interest rate by 1% for
    both the $73,596 and $2,037 advanced. The interest rate increase may be reduced provided the Fund achieves
    certain financial covenants. For the period from December 31, 2007 to September 7, 2008, the Fund increased
    the advances by $304 to pay a portion of the 1% increase in interest expenses.

    Subsequent to the end of the third quarter 2008, the Fund amended certain of the financial covenants of the
    facility with an effective date of September 7, 2008. There is no change to the interest rate of the facility.

    The Fund also maintains an operating line of credit and an acquisition line of credit. The Fund amended the
    agreements for these revolving lines of credit on February 29, 2008 with an effective date of December 30,
    2007. The amendments included a change to many of the financial covenants and a reduction of the
    development and acquisition facility from $10,000 to $5,000. As of September 7, 2008, the Fund had revolving
    lines of credit in the amount of $15,000. The terms of the lines of credit included a renewable annual term and
    bearing interest at either, banker’s acceptance plus 150 to 200 basis points or Canadian prime rate plus 50 to
    100 basis points. Other than certain letters of credit totalling $70 (December 30, 2007 - $65), no amounts have
    been drawn down under the line of credit as of September 7, 2008.




                                                                                                                      (5)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)



    Subsequent to the end of the third quarter the Fund renewed the $10,000 revolving operating line of credit and
    amended certain of the financial covenants with an effective date of September 7, 2008. In addition, the
    interest rate on the revolving lines increased to either, banker’s acceptance plus 400 basis points or Canadian
    prime rate plus 300 basis points. The Fund did not renew the $5,000 development and acquisition line of
    credit.

8   Convertible debentures

    On June 22, 2007, the Fund completed the issuance of $30,000 convertible, unsecured, subordinated debentures
    (“Debentures”) due June 30, 2012. The Debentures bear interest at an annual rate of 6.5% payable
    semi-annually in arrears on June 30 and December 31 in each year commencing December 31, 2007. The
    Debentures are convertible at a conversion price of $12.28 per Unit at the holders’ option into fully paid Units
    of the Fund at any time prior to the close of business on the earlier of June 30, 2012 and the business day
    immediately preceding the date fixed for redemption. The Debentures are redeemable by the Fund at any time
    after June 30, 2010 and prior to June 30, 2011, at a price equal to their principal amount plus accrued and
    unpaid interest provided certain criteria are met, including the fact that the current market price per Unit must
    be at least 125% of the conversion price on the date the redemption notice is given. The Debentures are
    redeemable by the Fund at any time on and after June 30, 2011 and on or prior to the maturity date at a price
    equal to their principal amount plus accrued and unpaid interest. On redemption, or on the maturity date, the
    Debentures may, at the option of the Fund, be repaid in cash or Units of the Fund.

    Upon the occurrence of a change of control involving the acquisition of voting control or direction over
    66-2/3% or more of the Units of the Fund, the Fund will be required to make an offer to purchase, within 30
    days following the consummation of the change of control, all of the Debentures at a price equal to 101% of the
    principal amount thereof plus accrued and unpaid interest.

    The Debentures are treated as compound instruments for financial reporting purposes. Accordingly, the
    conversion feature has been separately valued and presented as a component of equity in the amount of $747
    (note 10). In accordance with the adoption of CICA Handbook Section 3855, the Fund has elected to present
    the Debentures net of transaction costs. Transaction costs of $1,477 are amortized to the interim consolidated
    statements of operations using the effective interest rate method. At maturity, the balance sheet value of the
    Debentures will be equal to the face value of $30,000. As at September 7, 2008, the net convertible debenture
    balance is $28,308 (December 30, 2007 - $28,008), and the fair value is approximately $21,150 (December 30,
    2007 - $24,600) based on the closing market value of the last trading day of the period ended September 7,
    2008.




                                                                                                                  (6)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

9   Non-controlling interest
                                                                                  September 7,        December 30,
                                                                                         2008                2007
                                                                                             $                  $

    Balance - Beginning of period                                                           49,804          81,089
    Share of net income (loss) from continuing operations for the period                     2,940          (7,231)
    Share of net loss from discontinued operations for the period (note 18)                     (2)        (13,500)
    Distributions for the period                                                            (5,382)        (10,554)

    Balance - End of period                                                                 47,360          49,804

    Subordinated Units - number of Units                                              2,582,000          2,582,000
    Exchangeable Units - number of Units                                              7,688,000          7,688,000

                                                                                     10,270,000         10,270,000
10 Equity
    The Fund Trust Indenture provides that an unlimited number of Fund Units may be issued.
    Equity comprises the following balances:
                                                                                  September 7,        December 30,
                                                                                         2008                2007
                                                                                             $                  $

         Capital contributions                                                             142,445         142,290
         Contributed surplus (a)                                                               653             161
         Convertible debentures (note 8)                                                       747             747

                                                                                           143,845         143,198

    a) On February 13, 2008, the Fund granted 134,000 Units (valued at $6.20 per Unit) to certain employees
       under the 2008 management retention bonus plan. On July 21, 2008, the Fund granted 30,000 Units (valued
       at $3.48 per Unit) to an employee. These expenses are amortized over the vesting periods (12 or 18
       months).
    As at September 7, 2008, Units outstanding and capital contributions are as follows:
                                                                                       Number             Amount
                                                                                       of Units                $

         Fund Units
             Issued under IPO                                                        15,000,000            150,000
             Issued upon the exercise of the over-allotment option                      550,000              5,500
             Issued upon the 2005 management retention bonus plan                        22,569                155
             Issuance costs                                                                   -            (13,210)

                                                                                     15,572,569            142,445



                                                                                                                 (7)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    On March 7, 2008, the Fund issued 22,569 Units at $6.8679 per Unit totalling $155,000 to certain employees
    under the 2005 management retention bonus plan.

    The year to date weighted average number of Units outstanding was 15,566,569 (2007 - 15,550,000).

11 Related party accounts and transactions

    The Fund entered into the following transactions during the period. These transactions were in the normal
    course of operations and were measured at the exchange amount, which is the amount of consideration
    established and agreed to by the related parties. The terms of trade with related parties are similar to those with
    other third parties.

    a)   Obelysk Inc. (“Obelysk”) is controlled by the Executive Chairman of the Fund. The Fund pays Obelysk
         rents for certain leased properties, including office space.

                                                                       Amount of Transactions

                                                      Period from Period from         Period from       Period from
                                                         June 16,     June 18,       December 31,        January 1,
                                                           2008 to     2007 to             2007 to           2007 to
                                                     September 7, September 9,       September 7,      September 9,
                                                             2008        2007                2008              2007
                                                                 $           $                   $                 $

              Rent paid to Obelysk for leased
                  properties                                  136             120                367              339
              Rent paid to Obelysk for leased
                  office space                                105             111                314              322
              Reimbursement of costs incurred
                  by the Fund                                    6               5                20               28
              Purchases of services and
                  reimbursements of costs
                  incurred by Obelysk                          28               32               120               99

                                                                            Balance Owing

                                                                     September 7,                      December 30,
                                                                            2008                              2007
                                                                                $                                $

              Balance owing from Obelysk                                         5                                  1
              Balance owing to Obelysk                                           -                                 18




                                                                                                                     (8)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    b) Scott’s Real Estate Investment Trust (“Scott’s REIT”) has 34.8% of interest owned by Obelysk. The Fund
       pays Scott’s REIT rents for certain leased properties.

                                                                      Amount of Transactions

                                                      Period from Period from       Period from      Period from
                                                         June 16,     June 18,     December 31,       January 1,
                                                           2008 to     2007 to           2007 to          2007 to
                                                     September 7, September 9,     September 7,     September 9,
                                                             2008        2007              2008             2007
                                                                 $           $                 $                $

              Rent paid to Scott’s REIT                     2,747          2,685          8,222            8,079
              Tennant Inducement received from
                  Scott’s REIT                                 -               -            100                 -
              Reimbursement of costs incurred
                  by the Fund                                  2             12                3              36
              Purchases of services and
                  reimbursements of costs
                  incurred by Scott’s REIT                     1               -               1                -

                                                                          Balance Owing

                                                                    September 7,                    December 30,
                                                                           2008                            2007
                                                                               $                              $
              Balance owing from Scott’s REIT                                 1                                -
              Balance owing to Scott’s REIT                                   -                                1


    c) Artistic Minds LP (“AM”) is owned by a purchasing cooperative with a debt obligation to Obelysk. The
       Fund has entered into contractual arrangement with AM for the provision of certain marketing and graphic
       design services, for which rebates are earned.

                                                                      Amount of Transactions

                                                      Period from Period from       Period from      Period from
                                                         June 16,     June 18,     December 31,       January 1,
                                                           2008 to     2007 to           2007 to          2007 to
                                                     September 7, September 9,     September 7,     September 9,
                                                             2008        2007              2008             2007
                                                                 $           $                 $                $

              Reimbursement of rent and costs
                  incurred by the Fund                        14             13                42             46
              Purchases of services and
                  reimbursements of costs
                  incurred by AM                             919           1,422           3,691           4,229



                                                                                                               (9)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

                                                                         Balance Owing

                                                                   September 7,                    December 30,
                                                                          2008                            2007
                                                                              $                              $

              Balance owing from AM                                          5                                1
              Balance owing to AM                                          255                              836


            In addition the Company has a $606 rebate receivable (2007 $456).




    d) Canadian Satellite Radio Holding Inc.’s (“CSR”) Chief Executive Office and controlling shareholder is
       also the Executive Chairman of the Fund. The Fund provided certain general and administrative services to
       CSR. In addition, the Fund subscribed to satellite radio services, advertised on programs and reimbursed
       costs incurred by CSR on behalf of the Fund.


                                                                     Amount of Transactions

                                                      Period from Period from      Period from      Period from
                                                         June 16,     June 18,    December 31,       January 1,
                                                           2008 to     2007 to          2007 to          2007 to
                                                     September 7, September 9,    September 7,     September 9,
                                                             2008        2007             2008             2007
                                                                 $           $                $                $

              Fees received by the Fund for
                   general and administrative
                   services                                    7             7                25             25
              Reimbursement of costs incurred
                   by the Fund                                 8             8                33             45
              Purchases of services and
                   reimbursements of costs
                   incurred by CSR                             5           168                31            357

                                                                         Balance Owing

                                                                   September 7,                    December 30,
                                                                          2008                            2007
                                                                              $                              $

              Balance owing from CSR                                         4                               45
              Balance owing to CSR                                           -                               83



                                                                                                             (10)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)


12 Costs and expenses

    Cost of restaurant sales and restaurant operating expenses consisted of the following:

                                                Period from       Period from       Period from         Period from
                                                   June 16,          June 18,      December 31,          January 1,
                                                     2008 to           2007 to           2007 to             2007 to
                                               September 7,      September 9,      September 7,        September 9,
                                                       2008              2007              2008                2007
                                                           $                 $                 $                   $

    Cost of restaurant sales
         Food and supplies                             34,213           36,321               93,589          98,786
         Amortization of supply contract                  (88)            (152)                (263)           (296)
             prepayments (note 5)
         Labour                                        21,673           21,423               61,785          60,565

                                                       55,798           57,592           155,111            159,055

    Restaurant operating expenses
        Utilities and maintenance                       4,514             4,426              14,303          13,910
        Advertising                                     5,148             4,597              13,415          13,699
        Other                                           3,859             3,789              11,374          10,893

                                                       13,521           12,812               39,092          38,502




                                                                                                                 (11)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

13 Earnings (loss) per Unit

    The computation for basic and diluted earnings (loss) per Unit is as follows:

                                                 Period from      Period from        Period from     Period from
                                                    June 16,         June 18,       December 31,      January 1,
                                                      2008 to          2007 to            2007 to         2007 to
                                                September 7,     September 9,       September 7,    September 9,
                                                        2008             2007               2008            2007
                                                            $                $                  $               $

    Income from continuing operations
      available to Unitholders                         3,067              4,533            4,460           3,001
    Dilutive effect of
      Non-controlling interest                         2,023              2,993            2,940           1,982
      Convertible debentures                             547                527            1,641               -

    Diluted income from continuing
      operations available to Unitholders              5,637              8,053            9,041           4,983

    Income (loss) from discontinued
      operations available to Unitholders               450                  97               (2)        (1,753)
    Dilutive effect of
      Non-controlling interest                          297                  65               (2)        (1,157)

    Diluted income (loss) from discontinued
      operations available to Unitholders               747                 162               (4)        (2,910)

    Basic weighted average number of Units
      (in thousands)                                 15,573              15,550           15,567          15,550
    Dilutive effect of
      Non-controlling interest                       10,270              10,270           10,270          10,270
      Convertible debentures                          7,593               3,365            5,799               -
      Unit-based compensation                           151                   -              116               -
      Stock option                                        -                   -                -               7

    Diluted weighted average number of
      Units                                          33,587              29,185           31,752          25,827

    Basic earnings (loss) per Unit
      Continuing operations                            0.197              0.291            0.286           0.193
      Discontinued operations                          0.029              0.006            0.000         (0.113)
                                                       0.226              0.297            0.286           0.080

    Diluted earnings (loss) per Unit
      Continuing operations                            0.168              0.275            0.285           0.193
      Discontinued operations                          0.022              0.006            0.000         (0.113)
                                                       0.190              0.281            0.285           0.080



                                                                                                              (12)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

14 Distributions to Unitholders

    Distributions announced during the period from June 16, 2008 to September 7, 2008 were as follows:

                                                            Total       Per Unit         Paid or payable
         Unitholder record date                                 $             $

         Trust Units
         July 31, 2008                                        778          0.050           August 15, 2008
         August 29, 2008                                      779          0.050        September 15, 2008

                                                            1,557          0.100

         Exchangeable Units
         July 31, 2008                                        385          0.050           August 15, 2008
         August 29, 2008                                      384          0.050        September 15, 2008

                                                              769          0.100

         All Units                                          2,326

    No distribution was declared to Subordinated Units during the period from June 16, 2008 to September 7, 2008.

15 Supplemental disclosure of cash flow information

    Cash and cash equivalents consist of the following:

                                                                                September 7,     December 30,
                                                                                       2008             2007
                                                                                           $               $

         Cash                                                                           2,518             5,699
         GIC/term deposits                                                              5,200            13,750

                                                                                        7,718            19,449




                                                                                                             (13)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    Net change in non-cash working capital is comprised of the following:
                                                Period from        Period from       Period from        Period from
                                                   June 16,           June 18,      December 31,         January 1,
                                                     2008 to            2007 to           2007 to            2007 to
                                               September 7,       September 9,      September 7,       September 9,
                                                       2008               2007              2008               2007
                                                           $                  $                 $                  $

       Trade accounts receivable                           18              (930)              (22)             (841)
       Inventories                                      (101)               (80)               157               330
       Prepaid expenses and other assets                (665)              (583)           (2,284)           (2,269)
       Accounts payable and accrued                     2,000              3,551           (7,748)          (10,770)
           liabilities

                                                        1,252              1,958           (9,897)          (13,550)

       Interest paid                                    1,904                933             4,640             3,673
       Interest received                                   21                186               194               259

16 Management of capital

    The Fund views its capital as the combination of its long-term loan, convertible debentures, Unitholders’ equity
    and non-controlling interest. The Fund’s objectives when managing capital are to safeguard the Fund’s ability
    to continue as a going concern while maintaining the growth of its business and the distributable cash to its
    Unitholders. In general, the overall capital of the Fund is evaluated and determined in the context of its
    financial objectives and its strategic plan.

    The Fund determines the appropriate level of long-term loan and convertible debentures in the context of its
    cash flow and overall business risks. The Fund has historically generated sufficient cash flow to pay monthly
    distributions to its Unitholders and maintenance expenditures. The funds from long-term loan and convertible
    debentures were mainly used to finance growth initiatives such as acquisition and development projects.

    The current level of capital is considered adequate in the context of current operations. The strategic plan of the
    Fund may necessitate additions to the capital of the Fund. The decrease of the equity component of capital is
    mainly based on the income or loss of the business less the distributions paid. The Fund will also review its
    level of equity in the context of the change in taxation impacting the Fund commencing in 2011.

    Although there are no externally imposed capital requirements, the Fund is subject to a number of covenants
    and restrictions under the loan agreements, including the requirements to meet certain financial ratios such as
    leverage ratio and interest and rent coverage ratio. Management also uses these ratios as key indicators in
    managing the Fund’s capital.




                                                                                                                   (14)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

17 Financial instruments and financial risk management

    The Fund is exposed to credit risk, liquidity risk and interest rate risk. The Fund’s Trustees have overall
    responsibility for the establishment and oversight of the Fund’s risk management framework and reviews the
    Fund’s policies on an ongoing basis.

    Credit risk

    The Fund’s financial instruments that are exposed to credit risk consist primarily of cash and cash equivalents
    and accounts receivable. Cash and cash equivalents are maintained at major financial institutions that have high
    credit ratings assigned by international credit-rating agencies, and therefore the exposure to credit risk is
    minimal. Credit risk from accounts receivable is minimized as a result of the review and evaluation of customer
    account balances beyond a particular age and credit limit. The Fund accounts for a specific bad debt provision
    when management considers that the expected recovery is less than the actual accounts receivable. The credit
    risk of accounts receivable is limited because the majority of the Fund’s revenue is cash or debit/credit card
    transactions and the balance of accounts receivable is not significant.

    Liquidity risk

    Liquidity risk is the risk that the Fund will not be able to meet its financial obligations as they come due. The
    Fund manages liquidity risk through regular monitoring of forecast and actual cash flows, and also the
    management of its capital structure and financial leverage as outlined in note 16. Given the Fund’s available
    liquid resources as compared to the timing of the payment of liabilities, management assesses the Fund’s
    liquidity risk to be low.

    Interest rate risk

    The Fund’s interest rate risk is low due to the fixed rate nature of the long-term loan and convertible
    debentures. The Fund may be subject to interest rate risks as its revolving line of credit facility bears interest at
    varying rates in accordance with borrowing rates in Canada. Management assesses that the interest rate risk
    exposure is not significant based on the level of the revolving line of credit.

    Financial instruments

    The carrying amounts of cash and cash equivalents, trade and other accounts receivable and accounts payable
    and accrued liabilities approximate their fair value because of the near-term maturity of these instruments. The
    fair value of the long-term loan and convertible debentures are disclosed in notes 7 and 8, respectively.

18 Discontinued operations

    Disposition

    On October 17, 2007, the Board of Trustees of the Fund approved a restructuring plan to sell approximately
    128 restaurants and close up to 20 unprofitable restaurants. Additionally, consistent with this plan, the Fund has
    realigned the structure of its business, which resulted in restructuring costs, including lease termination,
    severance, and other exit costs.


                                                                                                                     (15)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    As at September 7, 2008, 19 restaurants were closed and eight of the 128 restaurants were sold. The Fund
    intends to sell the remaining 120 restaurants.

    On August 3, 2008, the Fund sold three restaurants and the aggregate proceeds on the disposition were $386.
    On September 7, 2008, the Fund sold five restaurants and the aggregate proceeds on the disposition were $370.
    There were no gains or losses on these two dispositions. The total proceeds of $756 remained in accounts
    receivable as at September 7, 2008.

    Discontinued operations consist of the operations comprising the 128 restaurants, which were sold or are to be
    sold, and 19 closed restaurants, including restaurant operating results, general and administrative expenses such
    as salary, benefit and severance costs for management and support staff of these restaurants and closed
    restaurant expenses.
    The operating results and cash flow information for the discontinued operations are as follows:

                                                  Period from      Period from      Period from        Period from
                                                     June 16,         June 18,     December 31,         January 1,
                                                       2008 to          2007 to          2007 to            2007 to
                                                 September 7,     September 9,     September 7,       September 9,
                                                         2008             2007             2008               2007
                                                             $                $                $                  $

    Revenues                                           20,437            24,660           57,130            68,231

    Income (loss) from discontinued                        747              162               (4)           (2,910)
        operations before non-controlling
        interest
    Non-controlling interest                             (297)              (65)                2            1,157

    Income (loss) from discontinued
        operations                                         450                97              (2)           (1,753)


    As a result of the restructuring plan, the Fund recorded restructuring costs of $3,361 in the fourth quarter of
    2007. These costs included employee severance of $918 and costs of restaurant closures of $2,443. In the
    quarter ended September 7, 2008, the Fund paid out $38 and $333 (year to date September 7, 2008 - $727 and
    $887), respectively, to reduce these obligations. As of September 7, 2008, the balances owing and outstanding
    are $106 and $1,240 (December 30, 2007 - $833 and $2,127), which are included in accounts payable and
    accrued liabilities.




                                                                                                                 (16)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    The assets and liabilities of the discontinued operations are:
                                                                       September 7, 2008     December 30, 2007
                                                                                       $                     $
         Assets
             Inventories                                                             807                     910
             Prepaid expenses                                                        226                       -
             Other assets                                                             60                      64
             Property and equipment                                               15,276                  15,497

                                                                                  16,369                  16,471

         Liabilities
             Accounts payable and accrued liabilities                               3,123                  4,850
             Step lease amortization                                                  778                    750

                                                                                    3,901                  5,600


    The following table provides additional information with respect to amounts included in the interim
    consolidated statements of cash flows related to discontinued operations:

                                               Period from        Period from     Period from       Period from
                                                  June 16,           June 18,    December 31,        January 1,
                                                    2008 to            2007 to         2007 to           2007 to
                                              September 7,       September 9,    September 7,      September 9,
                                                      2008               2007            2008              2007
                                                          $                  $               $                 $
         Income (loss) from discontinued
             operations                                  450               97               (2)           (1,753)

         Items not affecting cash
             Amortization                                  -              853                -             2,539
             Amortization of deferred                      9               34               28                95
                   contract amounts
             Non-controlling interest                    297               65               (2)           (1,157)

                                                         306              952               26             1,477

         Cash provided by (used in)
             discontinued operations                     756            1,049               24             (276)




                                                                                                              (17)
Priszm Income Fund
Notes to Interim Consolidated Financial Statements
(Unaudited)
September 7, 2008 and September 9, 2007

(in thousands of dollars, except per Unit amounts)

    Components of changes in non-cash working capital balances of discontinued operations:

                                              Period from        Period from       Period from        Period from
                                                 June 16,           June 18,      December 31,         January 1,
                                                   2008 to            2007 to           2007 to            2007 to
                                             September 7,       September 9,      September 7,       September 9,
                                                     2008               2007              2008               2007
                                                         $                  $                 $                  $
         Inventories                                    20                (30)              103                 76
         Prepaid expenses and other
             assets                                     81                141             (222)              (337)
         Accounts payable and accrued
             liabilities                              (345)               125           (1,727)              (925)

                                                      (244)               236           (1,846)            (1,186)

19 Subsequent events

    On August 14, 2008, the Fund announced a normal course issuer bid for its Units. Under the terms of the
    normal course issuer bid the Fund may purchase its Units during the period from August 18, 2008 to August
    17, 2009. Subsequent to the end of the third quarter 2008, the Fund purchased 143,400 Units for cancellation at
    an average price of $2.22 per Unit, in a total amount of $319.

    The Fund amended the credit agreements for the long term debt and operating facility effective September 7,
    2008. Further detail is provided in note 7.

20 Comparative figures

    Certain prior period comparative figures, including the disclosure of the discontinued operations separately on
    the interim consolidated balance sheets, interim consolidated statements of operations and the interim
    consolidated statements of cash flows, have been reclassified to conform to the presentation adopted for the
    current interim reporting period ended September 7, 2008.




                                                                                                                (18)

				
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