IBI Income Fund announces planned conversion to corporate structure

TORONTO, June 21 /CNW/ - IBI Income Fund (the "Fund") (TSX: IBG.UN) today announced details of its intention to convert from an income trust structure to a corporation. The conversion is expected to be effective on or about January 1, 2011. The conversion will be completed pursuant to a plan of arrangement under the Canada Business Corporations Act and must be approved by not less than 66(2/3) of votes cast at a special meeting of unitholders to be held on August 5, 2010, and is also subject to court and other approvals. This proposed reorganization is being contemplated as a result of legislative changes to the tax treatment of business income trusts that will eliminate, commencing in 2011, the tax savings to income funds from distributions to unitholders, thereby removing the primary benefit of the income trust structure.

Details of the conversion

Pursuant to the conversion, unitholders of the Fund will exchange their units of the Fund for common shares of IBI Group Inc., a newly incorporated wholly-owned subsidiary of the Fund, on the basis of one common share for each unit of the Fund. The basic structure of IBI Group, which carries on the business of IBI, as a partnership with two partners will continue. Following conversion, IBI Group Inc., rather than the Fund, will hold all of the Class A partnership units of IBI Group and IBI Group Management Partnership will continue to hold all of the Class B partnership units of IBI Group.

IBI Group Inc. will assume the obligation of the Fund to exchange the Class B units of IBI Group, which will become exchangeable for common shares of IBI Group Inc. upon the exercise by the Management Partnership of its exchange rights. IBI Group Inc. will also assume all obligations of the Fund with respect to the Fund's outstanding convertible debentures, and holders who wish to convert their convertible debentures will be entitled to receive common shares on the same conversion basis that currently applies in respect of Fund units.

Following the conversion, the board of directors of IBI Group Inc. will be comprised of the existing members of the Fund's board of trustees.

Benefits of conversion

The board of trustees and management believe the proposed conversion is in the best interest of unitholders and the business, and can be expected to produce the following benefits:

    
    -   Improved access to capital markets to assist the business as it
        continues to expand through acquisitions;

    -   A corporate structure that may widen the potential investor base; and

    -   A simplified tax and legal structure which will lower internal and
        external administrative costs.
    

"The Fund's proposed conversion to a corporation is the best approach for us to take in the context of the new taxation environment and to support the future growth of the business," said Philip Beinhaker, Chief Executive Officer. "Since going public in 2004, IBI's business has grown significantly while consistently meeting its financial objective of delivering stable and growing distributions to unitholders. Moving forward, IBI Group Inc. will be well positioned for continued growth that will support dividend appreciation over the long term."

Dividend Policy

The Fund plans to maintain its current level of distributions of $0.1333 per unit per month, or $1.60 per unit on an annual basis, until conversion. As a corporation, IBI will continue to be a relatively high distributor of cash earned, as this is an important component of the structure of the firm, whereby the Management Partnership is motivated by the achievement of this income based on performance, which will ensure that the interests of management are aligned with the interests of shareholders, and which is attractive to investors looking for steady income as well as growth in the value of the shares over time. Payment of dividends will provide the benefit of dividend tax credits for qualifying holders and reduce the after-tax impact on distributions. The actual amount of dividends will be determined by the directors of IBI Group Inc., based on earnings and cash generated.

Forward-Looking Statements

Certain statements in this news release, including statements regarding the conversion and its effective date, the level of distributions and the benefits of the conversion, constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained in this news release reflect management's current expectations regarding future events and speak only as of the date of this news release. Forward-looking statements involve a number of risks and uncertainties, including those related to: (i) IBI's ability to maintain profitability and manage its growth; (ii) IBI's reliance on its key professionals; (iii) competition in the industry in which IBI operates; (iv) timely completion by IBI of projects and performance by IBI of its obligations; (v) reliance on fixed-price contracts; (vi) the general state of the economy; (vii) acquisitions by IBI; (viii) risk of future legal proceedings against IBI; (ix) the international operations of IBI; * reduction in IBI's backlog; (xi) fluctuations in interest rates; (xii) fluctuations in currency exchange rates; (xiii) potential undisclosed liabilities associated with acquisitions; (xiv) increased assumption by risk by IBI; (xv) limits under IBI's insurance policies; and (xvi) the degree to which IBI is leveraged. See "Risk Factors" in the Fund's Annual Information Form dated March 31, 2010. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, the Fund cannot assure investors that actual results will be consistent with these forward-looking statements.

About IBI Income Fund

The Fund is a TSX listed income trust, which pays monthly distributions and trades under the symbol "IBG.UN". The Fund holds an indirect 71.7% in IBI Group, a partnership which, directly and through its subsidiary entities, provides professional services, including planning, design, implementation, analysis of operations and other consulting services in relation to four main areas of development, being urban land, building facilities, transportation networks and systems technology. The remaining 28.3% of IBI Group is owned by IBI Group Management Partnership. On a partially diluted basis, assuming the exchange of its units of IBI Group for units of the Fund, IBI Group Management Partnership together with IBI Group Investment Partnership holds a 46.3% interest in the Fund.

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For further information: Philip H. Beinhaker, IBI Income Fund, 230 Richmond Street West, Toronto, Ontario, M5V 1V6, Telephone: [phone]