General Donlee Income Fund Reports Fourth Quarter and Year Ended December 31
2009 Results and Intention to Convert to a Dividend Paying Corporation

TORONTO, March 5 /CNW/ - General Donlee Income Fund (the "Fund" or "General Donlee") (TSX: GDI.UN) today announced its results for the fourth quarter and year ended December 31, 2009, as well as its intention to become a share capital corporation before January 1, 2011.

The operating company's Management made strategic decisions during the quarter which somewhat mitigated the effects of the wide-reaching economic pressures that continue to affect its industry. General Donlee's fourth quarter 2009 results included:

    -   Sales of $8.8 million, compared to the Q4 2008 sales level of
        $14.6 million
    -   Sales order backlog of $44.9 million at December 31, 2009
    -   Net income at $1.0 million, compared to the $1.7 million earned in Q4
    -   Basic income of $0.192 per Unit, as compared to $0.304 per Unit in
        the same period last year
    -   $0.270 in distributions paid to Unitholders for the quarter
    -   The Trustees' affirmation of the current distribution level

The reduced production and sales due to the industry slowdown caused the Fund's net income to drop to $1.0 million in the fourth quarter of 2009, compared to $1.7 million in the same period of 2008; however, when compared to the third quarter of 2009, sales and net income were up $0.3 million and $0.8 million respectively. The Fund posted gains on the valuation of foreign exchange forward contracts and marketable securities, which helped mitigate some of the negative impact on earnings in the fourth quarter. Cash flow generated from operating activities of $0.9 million remained positive for the fourth quarter, and consisted of cash from operating activities of $0.6 million and a net change in non-cash working capital items of $0.3 million.

General Donlee's experienced management team has seen the company through times of vigorous market activity as well as leaner times like those experienced in recent quarters, and understands that the best way to position the Company well for the future is to be flexible. In keeping with that experience, Management has introduced changes to its operations in recent quarters to ensure they are in lockstep with the realities of the market; these include reducing the number of labour hours scheduled, to ensure maximum efficiencies in the face of reduced production demands. Management believes that moves like these, together with the continuing healthy production backlog of $44.9 million, will help mitigate the impact of the economic slowdown on General Donlee's overall performance, both now and as market conditions improve.

The Fund maintained its regular monthly distributions to Unitholders at the rate of $0.090 per Unit in the fourth quarter of 2009, despite the pressure on sales. As a result, given the negative effects continued economic pressures have had on General Donlee's financial results, the Fund's payout ratio in the last three quarters has been significantly higher than target. A strong long-term commitment to Unitholder value has historically underpinned the Fund's performance - illustrated, among other things, by the conservative payout ratio the Fund has traditionally maintained - and has not wavered, despite the challenges of a difficult market. Accordingly, Management and the Trustees, barring any unforeseen circumstances, have affirmed the current distribution level, but will continue on an ongoing basis to monitor the Fund's results and their potential impact on future distributions to Unitholders.

Financial Highlights

The following summary of financial data presents the consolidated results of operations of the Fund for the three-month and twelve-month periods ended December 31, 2009, including comparative results for the same periods in 2008.


    ($ millions, except Unit       Three Months Ended    Twelve Months Ended
     and per Unit amounts,         ------------------    -------------------
     unaudited)                   Dec 31/09  Dec 31/08  Dec 31/09  Dec 31/08
                                  ---------  ---------  ---------  ---------
    Sales                               8.8       14.6       41.7       53.7
    Gross profit                        1.7        5.6        9.9       16.5
    Net income                          1.0        1.7        6.1        6.8
    Basic income per Unit          $0.192(a)  $0.304(b)  $1.124(c)  $1.041(d)

    Distributable cash(1)               0.1        3.4        2.8       10.1
    Distributable cash
     per Unit(1)                   $0.011(a)  $0.615(b)  $0.526(c)  $1.559(d)
    Distributions paid                  1.4        1.9        5.8        7.4
    Distributions paid per Unit      $0.270     $0.350     $1.080     $1.160

    (1) Distributable cash is not a defined term under Canadian generally
        accepted accounting principles ("GAAP"), but is determined by the
        Fund as cash flow provided by operating activities (adjusted to
        remove changes in non-cash working capital items), less repayment of
        long-term bank debt and less the pro-rated reserve for maintenance
        capital expenditures, for which Management estimates $1.25 million
        for 2009. See reconciliation of distributable cash below. Management
        believes that this liquidity measure is a useful supplemental measure
        of performance, as it provides investors with an indication of the
        amount of cash available for distribution to Unitholders. Investors
        are cautioned, however, that distributable cash should not be
        construed as an alternative to using net earnings as a measure of
        profitability, or to using the statements of cash flows. Further, the
        Fund's method of calculating distributable cash may not be comparable
        to measures used by other companies or trusts. For details of
        distributable cash, see the table below.

        (a) Based on weighted average of 5,332,317 Units outstanding for the
            fourth quarter of 2009.
        (b) Based on weighted average of 5,606,957 Units outstanding for the
            fourth quarter of 2008.
        (c) Based on weighted average of 5,392,335 Units outstanding for the
            twelve months 2009.
        (d) Based on weighted average of 6,507,840 Units outstanding for the
            twelve months 2008.

    Overall Financial Performance for 2009

    -   Net income for the year was $6.1 million, compared to $6.8 million in
    -   Basic income per Unit for the year was $1.124, up from $1.041 in 2008

Despite the economic downturn in the markets General Donlee serves, in 2009 the Company delivered sales of $41.7 million - a reduction of $12.0 million or 22% from its sales a year earlier. Sales in the Company's aerospace and power generation products division were $28.0 million, a decrease of $4.5 million, or 14%, over 2008, mostly due to a decrease in commercial aerospace sales, offset by higher military aerospace sales net of the increased (on average) U.S. dollar ("USD"). Its industrial products division's sales in 2009 were $13.7 million, a decrease of $7.5 million or 35% over the same period last year, due to the continued slowdown in the capital goods market and client changes to delivery schedules for commercial aerospace landing gear components.

The $6.1 million in net income the Fund achieved for the twelve months ended December 31, 2009 was only $0.7 million less than the same period in the previous year; this result incorporated both the negative impact of the economic slowdown and a gain on its USD foreign exchange forward contracts.

The basic income per Unit of $1.124 for 2009 was up from $1.041 per Unit in 2008 as a result of the repurchase of Trust Units under its Issuer Bids, thereby leaving a lesser number of Trust Units outstanding.

Distributable cash(1) for the twelve months ended December 31, 2009 was $2.8 million, or $0.526 per Unit, as compared to $10.1 million or $1.559 per Unit in the comparable period in 2008; the Fund maintained its monthly distribution level at $0.090 throughout 2009. In the twelve months ended December 31, 2009, distributions paid were $5.8 million or $1.080 per Unit, compared to $7.4 million or $1.160 per Unit in 2008; the Fund was able to reduce the total amount of distributions paid by reducing the number of Units outstanding at the end of 2009.

General Donlee continues to maintain adequate working capital to support its operations, as well as additional credit facilities to support any growth. At December 31, 2009, General Donlee had working capital of $17.9 million, compared to the $19.9 million reported at December 31, 2008, and a current ratio of 4.5:1.

Distributable Cash(1)

Distributable cash(1) for the twelve months ended December 31, 2009 was $2.8 million, or $0.526 per Unit, as compared to the $10.1 million or $1.559 per Unit posted in the twelve months ended December 31, 2008. This was due to the reduction in cash provided by operating activities which resulted from the ongoing economic slowdown in the industries General Donlee serves.

Regular distributions paid to Unitholders were $1.080 per Unit for the twelve months ended December 31, 2009, unchanged from the same period in 2008.

The following table shows the calculation of distributable cash(1).

                                   Three Months Ended    Twelve Months Ended
    ($000, except per               Dec 31     Dec 31     Dec 31     Dec 31
     Unit amounts)                   2009       2008       2009       2008
                                   ---------  ---------  ---------  ---------
    Cash provided by
     operating activities              $893       $487     $9,757     $8,538
    Adjust for net changes in
     non-cash working capital
     balances related to operations    (275)     3,508     (4,696)     3,425
    Cash provided by operating
     activities before changes in
     non-cash working
     capital balances                   618      3,995      5,061     11,963
    Repayment of long-term bank debt   (247)      (235)      (972)      (566)
    Reserve for maintenance
     capital expenditures              (312)      (312)    (1,250)    (1,250)
    Distributable cash(1)               $59     $3,448     $2,839    $10,147

    Distributions paid
     to Unitholders                  $1,440     $1,950     $5,819     $7,398

    Basic income per Unit            $0.192     $0.304     $1.124     $1.041

    Distributable cash(1)
     per Unit                        $0.011     $0.615     $0.526     $1.559

    Distributions paid per Unit      $0.270     $0.350     $1.080     $1.160
    Payout ratio(2)                     n/a        69%       205%        74%

    (2) Payout ratio is not a defined term under Canadian GAAP, but is
        determined as actual distributions divided by distributable cash. The
        Fund's method of calculating its payout ratio may not be comparable
        to measures used by other companies or trusts.

Intention to Convert to a Dividend Paying Corporation

The Fund announced today its intention to convert the Fund from an income trust to a publicly listed dividend paying corporation. The Board of Trustees of the Fund has approved a process for the conversion by way of a statutory plan of arrangement under the Canada Business Corporations Act. The conversion is subject to completion of the detailed conversion plan and related agreements as well as various conditions, including the receipt of required consents and approvals, including approval from the Exchange and Unitholders of the Fund. It is anticipated that Unitholders will be asked to consider and approve the conversion and other related matters at the annual and special meeting of the Unitholders of the Fund which is expected to be held in June 2010. The conversion is currently expected to be completed on or about December 31, 2010.

The proposed conversion relates to the federal government's plan to impose a tax at the trust level on distributions of certain income from publicly traded mutual fund trusts, such as the General Donlee Income Fund, at rates of tax comparable to the combined federal and provincial corporate tax rate - and to treat such distributions as dividends to Unitholders. Following the announcement of this plan by the Minister of Finance on October 31, 2006, Management of the Fund reviewed with legal and accounting experts the potential impact of the proposed tax changes, and concluded that it is in the best interests of the Fund and its Unitholders to convert the Fund to a dividend paying corporation.

Further information on the conversion will be made available once the detailed plan has been completed and approved by the Board of Trustees of the Fund.


Despite the economic realities that played out in 2009, General Donlee's outlook for the year ahead remains, on the whole, positive. The Company's operational efficiency and its production volume, although down somewhat from 2008, remain steady - and its production backlog, a direct indicator of the ongoing demand for its products, remains strong. The Company's diverse platform of products and customer base continue to help mitigate decreases in the aerospace industry, which is expected to again decline slightly in the coming year.

The strategies that have consistently underpinned General Donlee's business - through markets both vigorous and lean - remain solid, and Management is committed to upholding them in the year ahead. At their foundation is the flexibility to respond to changing market conditions, and, as it did in 2009, General Donlee will make any ongoing adjustments required in 2010 to ensure its operations continue to be appropriate for demand. The Fund has undertaken a search for a new President and Chief Executive Officer to replace Thomas Faucette, who retired January 29, 2010.

General Donlee has built a solid reputation in its industry for excellence and performance - and has done so on the strength of its commitment to delivering value for its customers and its Unitholders, in both the near and long terms. It looks forward to maintaining that standard of excellence in the year ahead.

Company Profile

The Fund is a trust established to hold the securities of General Donlee Limited, a leading diversified manufacturer of precision-machined products for the military, commercial and general aerospace industries, and a specialist in the manufacture of precision-machined products for the industrial products and power generation industries. General Donlee's operating strategy focuses on targeting niche markets for products that are aligned with its sophisticated manufacturing capabilities and skilled workforce.

SEDAR Filings

The Fund will file on March 8, 2010 its annual Consolidated Financial Statements (including the notes thereto) and Management's Discussion and Analysis for the year ended December 31, 2009 with SEDAR at These documents will also be available on the Fund's website at on the Financial Reports page.

In addition to these documents, the Fund also files its Annual Report, Annual Information Form, its Notice of Annual Meeting and Management Information Circular, and its interim financial statements with SEDAR.

Forward-Looking Information

As with all forward-looking statements, caution must be exercised to ensure that appropriate interpretation is made. Certain forward-looking statements are based on information currently available to Management, but are subject to a number of uncertainties and risks that could cause actual results to differ materially from the results discussed in the forward-looking statements. These uncertainties and risks include, but are not limited to: dependence on commercial aircraft sales and defence procurement; dependence on power generation sales and sales to the industrial sector; production rates; shipping schedules and timing of deliveries; dependence on key customers; dependence on third party suppliers and manufacturers; raw material costs; competition; satisfying product specifications; product liability and warranty claims; environmental and other government regulation; quality certification requirements; hedging effects; ability to fund pension deficits, interest and foreign exchange rates; leverage and restrictive debt covenants; continued availability of credit facilities; regulatory requirements; reliance on key personnel and the Company's skilled workforce; changes in accounting policies; the ability to obtain orders; contract awards and terminations; input costs; possible changes to the tax laws affecting income trusts; economic growth and fluctuations (including the global credit crisis, and pension performance, funding and expenses); and domestic and international economic conditions. In addition, these forward-looking statements relate to the date on which they are made. Although the forward-looking statements contained herein are based upon what Management believes to be reasonable assumptions, the Fund cannot assure Unitholders that actual results will be consistent with these forward-looking statements, and the Fund disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In formulating the forward-looking statements herein, Management has assumed that business and economic conditions affecting it will continue substantially in the ordinary course, including without limitation with respect to industry conditions, general levels of economic activity, regulation, taxes, foreign exchange rates and interest rates, that there will be no material changes in its facilities, equipment, customer and employee relations, credit arrangements or credit and collections experience, and that the integration of new equipment will proceed relatively smoothly.

Further information can be found in the disclosure documents filed by General Donlee Income Fund with the securities regulatory authorities, available at or through the Fund's website at

%SEDAR: 00017571E


For further information: For further information: Gerald Thain, Chief Financial Officer, Telephone: (416) 743-4417, E-mail:, Web site:

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