SECOND CUP INCOME FUND Annual Information Form For the year ended December 31, 2009 March 30, 2010 TABLE OF CONTENTS GLOSSARY OF TERMS .......................................................................................................................... 1 FORWARD-LOOKING STATEMENTS ............................................................................................... 4 GENERAL .................................................................................................................................................. 5 FUND STRUCTURE ................................................................................................................................. 5 Name, Address and Jurisdiction of Formation ......................................................................................... 5 Intercorporate Relationships .................................................................................................................... 6 GENERAL DEVELOPMENT OF THE BUSINESS ............................................................................. 7 Establishment of the Fund........................................................................................................................ 7 Acquisition of Second Cup ...................................................................................................................... 7 Fund Term Loan and Fund Operating Loan............................................................................................. 7 Business of the Fund ................................................................................................................................ 8 Business of GP Inc. .................................................................................................................................. 8 Business of GP Trust ............................................................................................................................... 8 Business of MarksLP ............................................................................................................................... 8 BUSINESS OF SECOND CUP ................................................................................................................. 9 General ..................................................................................................................................................... 9 What is Specialty Coffee? ........................................................................................................................ 9 History ..................................................................................................................................................... 9 Competitive Conditions ......................................................................................................................... 10 The Second Cup Café System ................................................................................................................ 10 Products ................................................................................................................................................. 14 Sales ....................................................................................................................................................... 15 Advertising and Marketing .................................................................................................................... 17 Purchasing and Distribution ................................................................................................................... 17 Franchise Operations ............................................................................................................................. 19 The Second Cup Marks .......................................................................................................................... 23 Employees .............................................................................................................................................. 24 Government Regulation ......................................................................................................................... 24 RISK FACTORS ...................................................................................................................................... 24 Risks Related to the Business of Second Cup ........................................................................................ 24 Risk Related to the Structure of the Fund .............................................................................................. 28 DESCRIPTION OF THE FUND ............................................................................................................ 29 Declaration of Trust ............................................................................................................................... 29 Activities of the Fund ............................................................................................................................. 30 Description of Units ............................................................................................................................... 31 Issuance of Units .................................................................................................................................... 31 Trustees .................................................................................................................................................. 31 Audit Committee .................................................................................................................................... 33 Cash Distributions .................................................................................................................................. 34 Redemption Right .................................................................................................................................. 36 Meetings of Unitholders ........................................................................................................................ 38 Limitation on Non-Resident Ownership ................................................................................................ 39 Amendments to the Declaration of Trust ............................................................................................... 40 Term of the Fund ................................................................................................................................... 40 Take-over Bids ....................................................................................................................................... 40 Exercise of Certain Voting Rights Attached to Certain Securities ......................................................... 41 Information and Reports ........................................................................................................................ 41 Book-Entry Only System ....................................................................................................................... 41 Fund Administration .............................................................................................................................. 42 GOVERNANCE OF MARKSLP ........................................................................................................... 42 Capital of MarksLP ................................................................................................................................ 42 Distribution Policy ................................................................................................................................. 42 i TRUSTEES, DIRECTORS AND MANAGEMENT ............................................................................ 43 Trustees and Directors of the Fund, Second Cup and GP Inc. ............................................................... 43 Management ........................................................................................................................................... 45 Insider Reporting ................................................................................................................................... 47 MARKET FOR SECURITIES ............................................................................................................... 47 Trading Price and Volume ..................................................................................................................... 47 LEGAL PROCEEDINGS ....................................................................................................................... 47 TRANSFER AGENT AND REGISTRAR............................................................................................. 48 MATERIAL CONTRACTS ................................................................................................................... 48 EXPERTS ................................................................................................................................................. 48 ADDITIONAL INFORMATION ........................................................................................................... 48 Schedule A – Charter of the Audit Committee...................................................................................... 49 ii GLOSSARY OF TERMS In addition to the other terms defined in this Annual Information Form, the following terms are used frequently and are defined below. Unless the context otherwise