Cargojet Income Fund Announces Intention to Convert to a Corporation

TORONTO, Feb. 26 /CNW/ - Cargojet Income Fund (the "Fund") (TSX: CJT.UN) announced today its intention to proceed with a conversion of the Fund from an income trust to a growth-oriented, dividend paying corporation ("New Cargojet"), which will continue the business of the Fund and its subsidiaries and affiliates as a leading Canadian provider of time sensitive overnight air cargo services. It is contemplated that the proposed conversion be completed by way of a statutory plan of arrangement (the "Arrangement") under Section 182 of the Business Corporations Act (Ontario). It is anticipated that a management information circular will be mailed to voting unitholders in mid-April 2010, in connection with the conversion and other matters to be considered at the annual and special meeting (the "Meeting") of holders of trust units and special voting units of the Fund ("Voting Unitholders") to be held on May 18, 2010. The conversion is currently expected to be completed on or about December 31, 2010.

Background to and Reasons for the Arrangement

On October 31, 2006, the Minister of Finance (Canada) (the "Minister") announced the federal government's proposal to apply a tax at the trust level on distributions of certain income from, among other entities, certain publicly traded mutual fund trusts at a rate of tax comparable to the combined federal and provincial corporate tax rate and to treat such distributions as dividends to unitholders. The Minister announced that existing trusts would have a four-year transition period and generally would not be subject to the new rules until 2011, provided such trusts experienced only "normal growth" and no "undue expansion" before then. The announcement had an immediate impact on the Canadian capital markets and resulted in a significant decline in trading prices for publicly traded income trusts.

On December 15, 2006, the Minister released further guidance concerning the proposed tax changes, including guidance respecting "normal growth" for the purposes of this proposal, as well as the Finance Department's confirmation that it would not recommend any extension of the four year transition period. Bill C-52, the Budget Implementation Act, 2007, which received royal assent on June 22, 2007, contained rules relating to the tax treatment of specified investment flow-through trusts or partnerships, which are designed, among other things, to implement the proposal.

Following the October 31, 2006 announcement, management considered the potential impact and significance of the proposed tax changes to the Fund, and conducted a series of detailed analysis concerning the strategic direction of the Fund. In connection with this process, management considered a broad range of strategic alternatives, including without limitation, new corporate structures and acquisition opportunities.

The Trustees of the Fund formally discussed a potential conversion of the Fund from an income trust structure to a corporate structure, at which time management reviewed with the Trustees the proposed conversion and dividend policy for New Cargojet, and ultimately approved a proposal to convert the Fund from an income trust to a growth-oriented, dividend paying corporation.

The Arrangement

Pursuant to the Arrangement, it is anticipated that the holders of units of the Fund and Class B limited partnership units of Cargojet Holdings Limited Partnership will become the holders of common voting shares of New Cargojet on the basis of one common voting share for each Fund unit or Class B limited partnership unit so transferred. In order to comply with the Canadian ownership restrictions under the Canada Transportation Act, immediately upon the issuance of common voting shares to Voting Unitholders that are non-Canadian (as defined therein), it is anticipated that the common voting shares of non-Canadians will be converted into variable voting shares in accordance with the proposed Articles of New Cargojet. The restrictions on voting are expected to be similar to the current restrictions on voting set out in the Fund's declaration of trust.

New Cargojet will assume all of the covenants and obligations of the Fund in respect of the outstanding convertible debentures of the Fund.

It is anticipated that the board of directors of New Cargojet will initially be comprised of the current Trustees and directors of Cargojet GP Inc., being Terence Francis, Paul Godfrey, John Webster, Ajay Virmani and Dan Mills. The senior management of New Cargojet will be comprised of the current members of senior management of Cargojet GP Inc.

The conversion is subject to approval of more than two-thirds (66 2/3%) of the votes cast by Voting Unitholders, either in person or by proxy, at the Meeting. The conversion is also subject to the approval of the Ontario Superior Court of Justice and receipt of all necessary regulatory approvals. The Fund will apply to the Toronto Stock Exchange for the substitutional listing of the securities of New Cargojet, subject to New Cargojet satisfying the requirements of the Toronto Stock Exchange.

Effect on Distributions

The Fund is currently paying a monthly distribution at the rate of $0.042 per Fund unit. If the conversion is approved and becomes effective, the Fund expects to continue to pay a monthly distribution of $0.042 per Fund unit to holders of record on the last business day of each month up to but excluding the month in which the conversion becomes effective. However, any future distribution payments will be determined by the Board of Trustees in light of financial performance and anticipated business needs at the time a distribution is declared. If the Arrangement is not approved at the Meeting, the Board of Trustees will assess matters at that time to determine the Fund's course of action regarding any future distributions on the Fund units.

The board of directors of New Cargojet is expected to adopt a dividend policy upon completion of the conversion. However, any dividend payments will be determined by the board of directors of New Cargojet in light of New Cargojet's financial performance and its current and anticipated business needs at that time.

Annual General Meeting

The Annual and Special meeting of Unitholders of Cargojet Income Fund will be held at the TSX Gallery, the Exchange Tower, 130 King Street West, Toronto, Ontario on Tuesday, May 18, 2010. Registration will begin at 3:00p.m. followed by the meeting at 3:30p.m. EST.

Cargojet is Canada's leading provider of time sensitive overnight air cargo services. Cargojet operates its network across North America, transporting approximately 750,000 pounds of time sensitive air cargo each business night, utilizing a fleet of forty-one all cargo aircraft.

Notice on Forward Looking Statements:

This news release contains certain forward-looking information within the meaning of applicable Canadian securities laws. All information other than statements of present or historical fact is forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "forecast", "may", "will", "achieve", "project", "schedule", "should", or similar words suggesting future outcomes. In particular, this news release contains forward-looking statements relating to:

    -   the benefits of the Arrangement;
    -   the treatment of Voting Unitholders under tax laws;
    -   the business strategy of New Cargojet;
    -   the business to be carried on by New Cargojet following completion of
        the Arrangement;
    -   the potential distributions to be paid by the Fund; and
    -   the potential for dividend payments to be made by New Cargojet.

Forward-looking information regarding the perceived benefits of the Arrangement are based upon the financial and operating attributes of the Fund as at the date hereof, anticipated operating and financial results from the date hereof to the effective date of the conversion, the views of management and the Board of Trustees respecting the benefits associated with the Arrangement and current and anticipated market conditions.

By its very nature, forward-looking information involves inherent risks and uncertainties (both general and specific) and risks that the anticipated results will not be achieved. Undue reliance should not be placed on forward looking information, as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in the forward-looking information, including those set out below and those detailed elsewhere in this news release:

    -   inability to meet TSX listing requirements;
    -   inability to obtain required consents, permits or approvals,
        including the approval of the court of the Arrangement and Voting
        Unitholders' approval of the Arrangement;
    -   failure to realize anticipated benefits of the Arrangement, including
        anticipated cost savings; and
    -   liabilities inherent in the air cargo industry.

Readers are cautioned that the foregoing list is not exhaustive.

The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information contained herein is made as of the date of this news release and the Fund undertakes no obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so required by applicable securities laws.

%SEDAR: 00022068E

SOURCE Cargojet Inc.

For further information: For further information: P. Dhillon, Vice President Marketing, Public & Government Relations, Tel: (905) 501-7373,

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