May 20, 2005

On May 11th, Royal Host held its Annual General Meeting (AGM) for investors and analysts. Annual meetings are usually platitudinous events; senior executives, after reviewing the prior year’s happenings, give a vague, optimistic forecast for the current calendar year. Subsequent to this overview is the election of the Board. The list of nominees presented on the Corporation’s proxy is usually elected without discussion. Indeed, in today’s world of email, real-time news, and increased corporate disclosure, AGMs are increasingly becoming mere formalities.

Royal Host’s AGM proceeded along this agenda as planned – until the election of the Board was tabled. In a dramatic turn of events, three long-serving Royal Host Board members were unexpectedly replaced with three representatives of George Armoyan’s Geosam Investments. Before the meeting, George Armoyan was Geosam’s sole representative on Royal Host’s Board of Directors. With three new representatives, Geosam now effectively controls half of Royal Host’s Board, giving it significant influence with respect to the future direction of the Trust. During Royal Host’s first quarter conference call on May 12th, Greg Royer, President & CEO, welcomed the new Directors enthusiastically, saying their presence gives the Trust a more “focused” direction.

We purchased Royal Host units because we feel that the current unit price does not reflect the fundamental value of the Trust’s nation-wide Travelodge franchise, premier resorts & hotels, and expanding hotel management business. As outlined in our first Royal Host commentary, we feel Royal Host’s true net asset value (NAV) is approximately $6.50. Furthermore, Geosam’s 19.8% interest was a clear sign that a catalyst had arrived and that the Trust’s underlying value would be unlocked sooner rather than later. With these latest developments, we expect Royal Host’s repositioning will only be accelerated.

August 19, 2005

On August 15th, Royal Host announced its operating performance for the first six months of the 2005 fiscal year. The Trust’s core businesses performed well amidst a rebounding hospitality industry. During the second quarter, revenue per available room (RevPAR) improved by $2.30 to $65.12, with the year-to-date figure coming in at $58.51. The REIT continues to focus on bottom line improvements; gross margin improved by 14% when compared to the same period in 2004. With these improved results, and a positive outlook, Royal Host increased its monthly distribution by 17% to $0.035 from $0.03 per unit. We would not be surprised to see another distribution increase in the first quarter of 2006.

Royal Host’s franchise operations and hotel management business, classified as “other hospitality revenue” grew by 15% year-over-year. This line item is often overlooked as it only accounts for approximately 10%-15% of the Trust’s revenue. However, franchise operations and hotel management revenues flow directly to the Trust’s bottom line. The Trust’s management contract with US-based Supertel Hospitality is a key driver of net income. Due to the fixed-cost nature of its management business, incremental fees generated from its Supertel contract provide powerful leverage to Royal Host’s bottom line.

While Royal Host’s operations exceeded expectations, the Trust’s corporate finance decisions tell a much more compelling story. Armed with its growing cash position (as of June 30th the Trust had $8,000,000 on its balance sheet), Royal Host continues to execute its two outstanding Normal Course Issuer Bids. The first Issuer Bid, announced December 2004, allows the Trust to purchase 1,200,000 units. Between January 1st and June 30th, Royal Host purchased 100,000 units at an average cost of $5.41. During the Q2 conference call, Greg Royer, the Trust’s CEO, stated that at this time purchasing units is the most accretive option facing Royal Host. In other words, Mr. Royer feels that current unit prices do not reflect the Trust’s true net asset value (NAV), and continues to buy back stock at these levels. The second Issuer Bid, announced in July 2005, allows the Trust to purchase $2,000,000 of its 9.25% convertible debentures. To date, Royal Host has not purchased any convertible debentures, citing that buying units is more accretive.

We continue to believe that Royal Host’s true NAV is north of $6.50. While most investors and analysts focus on Royal Host’s Travelodge hotel operation, and value the Trust using cap rates between 9.50% and 10.50%, it is important to note that 70% of the Trust’s income is derived from just 14 hotel properties. These 14 properties, like the Grand Okanagan in Kelowna and the Toronto Travelodge, are typically discounted using cap rates between 8.00% and 9.00% (based on recent private market transactions). In addition, we believe the Trust has excess land that could be sold, used for hotel expansion, or condo development. We believe these hidden assets will be surfaced within the next twelve months.

April 7, 2006

For the 2005 fiscal year, Royal Host recorded improved results in all areas of its business. Revenue of $144.3 million, the highest in the Trust’s history, represents an increase of 4% over last year. Looking at the Trust’s key hotel operating numbers, RevPAR and ADR increased by 3.6% and 3.9%, respectively. Royal Host’s dual focus on core operations and cost control has translated into strong gains in income and cash flow. The 2005 gross margin of 29%, a 9% increase over 2004, approached the historical high of 32% reached in 2002. Cash available from operations rose 43% to $0.70 per unit. As a result of these impressive numbers, the Trust’s annual distribution has been raised by 14% to $0.48 per unit. Assuming continued strong performance in 2006, distributions could easily rise to $0.55 - $0.60 per unit.

Looking at 2006, the Trust could pursue opportunities to take advantage of record hotel valuations. During the Trust’s year-end conference call, Greg Royer, the Trust’s CEO, commented that capitalization rates are the lowest he’s seen in quite some time – especially for limited service hotels (e.g. Travelodge and Thriftlodge). It is interesting that Royal Host is the only TSX listed REIT with an implied capitalization rate north of 10%, despite the fact that Mr. Royer sees several limited service properties selling below this number. Indeed, Mr. Royer could look to sell these properties at record prices to narrow the gap between the Trust’s current market value and what he sees to be the Trust’s true intrinsic value. When these potential asset sales are coupled with the expected windfall from the completion of the Royal Private Residence Club, development projects, and a generally improving hotel industry, we see many catalysts that will drive the units to what we believe is a net asset value of approximately $7.00.

June 23, 2006

On June 19th, Royal Host’s CEO, Greg Royer, announced his intention to resign from the Trust effective August 31st. In addition, Terry Royer announced that he will resign as Trustee effective immediately. With these two surprising resignations, the three founding members of Royal Host are no longer involved in day-to-day operations.

Naturally, the sudden departure of the two remaining Royer brothers leads to speculation regarding the future direction of Royal Host. It is no secret that George Armoyan has been shopping the REIT and, as a self-described activist investor, is keen on finding a suitable exit strategy. Backed by Mr. Armoyan’s financial expertise and access to capital markets, Greg Royer and his team have done much to turn around the REIT since 2003. We believe that there are three tasks remaining for Mr. Armoyan before another REIT or private entity purchases Royal Host: the completion of the Royal Private Residence Club, the redemption of outstanding convertible debentures, and the sale of non-performing assets. Given that all three of these tasks are scheduled to be completed by the end of the year, Royal Host is well positioned as a consolidation candidate.

November 10, 2006