AEROPLAN CANADA INC.

AEROPLAN CANADA INC.

May 09, 2008 03:01 ET

Aeroplan Income Fund to Convert to a Corporation

    MONTREAL, May 9  - Aeroplan Income Fund (the "Fund") today
announced that it has received board approval to reorganize its income trust
structure into a growth oriented, dividend paying, global loyalty management
public corporation. The proposed reorganization is subject to unitholder and
other approvals and will be undertaken pursuant to a statutory plan of
arrangement under the Canada Business Corporations Act (the "Arrangement").
    Upon completion of the reorganization, it is anticipated that the
dividend policy will initially be set at $0.125 per common share per quarter,
with the first dividend to be declared payable in respect of the quarter ended
September 30, 2008. The dividend policy has been established with a view to
maximizing the return to the shareholders while allowing the company to pursue
its growth objectives through the maintenance of an appropriate capital
structure.
    "The reorganization will be a major milestone in our evolution as the
global leader in loyalty management," said Rupert Duchesne, President and
Chief Executive Officer, Aeroplan. "This change in structure will be
fundamental in helping us achieve our strategic objectives over the coming
years, mainly through increased flexibility to pursue attractive growth and
acquisition opportunities as well as through unrestricted access to capital
markets and foreign investors."
    Following the reorganization, the composition of the Board of Directors
of the resulting public corporation will be the same as that of Aeroplan
Holding GP Inc. and Rupert Duchesne will serve as President and Chief
Executive Officer. David L. Adams will serve as Executive Vice President and
Chief Financial Officer, Alex Moorhead will take on the position of Executive
Vice President and Chief Commercial Officer and Liz Graham of Executive Vice
President and Chief Operating Officer.

    Background and Reasons for the Arrangement

    Since its initial public offering in June 2005, the Fund has operated
under a trust structure which allowed it to continue to execute against its
stated business strategy. Subsequent to the October 31, 2006 Federal
government's announcement on tax policy relating to income trusts, the Fund
has continuously reviewed its strategic objectives and all options available
to it in respect thereof to ensure that its capital structure remains
efficient and that unitholder value is being maximized.
    Due in part to the current foreign ownership limitations applicable to
the Fund and the increasing level of non-resident ownership in the Fund, the
new tax treatment of publicly traded mutual fund trusts, including limitations
regarding normal growth and undue expansion, as well as the evolution of the
Fund's growth strategy, on March 4, 2008, the Board of Trustees and the Board
of Directors requested that management formally retain financial advisors to
conduct and in-depth analysis of the Fund's capital structure and its
viability moving forward in the context of the Fund's strategy to become the
global leader in loyalty management.As a result of this analysis, it was determined that the arguments in
favour of moving to a corporate structure were very compelling as the
reorganization:

    - Resolves issues relating to the potential non-compliance with foreign
      ownership limitations should additional units of the Fund be purchased
      on the public market or otherwise by non-residents;

    - Provides better access to global capital markets to finance the Fund's
      growth strategy on a timely and cost efficient basis;

    - Optimizes leverage in order to maximize returns to shareholders and
      enhances the Fund's ability to maintain an adequate investment-grade
      capital structure; and

    - Expands the Fund's flexibility and ability to pursue attractive growth
      and acquisition opportunities.Fairness Opinions

    RBC Dominion Securities Inc. and TD Securities Inc. are acting as
financial advisors with respect to the Arrangement. They have each provided an
opinion that the consideration to be received by unitholders pursuant to the
Arrangement is fair, from a financial point of view, to such unitholders.
    The Aeroplan directors and trustees, based upon their own investigations,
including the consideration of the fairness opinions provided by RBC and TD,
have unanimously determined that the Arrangement is fair to unitholders, that
it is in the best interest of the Fund and the unitholders and recommend that
unitholders vote in favour of the Arrangement.

    Mechanics of the Arrangement

    If approved, the Arrangement will result in the reorganization of the
Fund's income trust structure into a growth oriented, dividend paying, global
loyalty management public corporation and the units of the Fund held by
unitholders will be transferred to the corporation in consideration for common
shares on the basis of one common share for each unit transferred. It is
expected that the reorganization will be completed on a tax-free rollover
basis, subject to the filing of any required tax elections.
    The Arrangement is subject to approval by not less than two-thirds of the
votes cast by the unitholders voting in person or by proxy at an annual and
special meeting of the unitholders scheduled to be held on June 19, 2008, not
on June 2, 2008 as noted in the annual report. The Arrangement is also subject
to the approval of the Superior Court of Québec and all necessary regulatory
approvals. The company will apply to the Toronto Stock Exchange for the
listing of its common shares and the Fund will seek the delisting of its units
from the Toronto Stock Exchange following completion of the Arrangement.
    It is anticipated that a management information circular will be mailed
to unitholders at the end of May 2008 in connection with the Arrangement and
other matters to be considered at the annual and special meeting. Although it
is not possible to state with certainty, the Fund expects, subject to receipt
of required approvals, that the reorganization will be effective on or about
June 25, 2008.

    May and June 2008 Distributions

    It is expected that distributions to be paid to unitholders for the
months of May and June 2008 will not be affected by the Arrangement.
Accordingly, unitholders of record on May 30, 2008 and on the day preceding
the closing of the reorganization will receive their regular monthly cash
distribution of $0.07 per unit.

    Caution Concerning Forward-Looking Statements

    Certain statements in this news release may contain forward-looking
statements. Forward-looking statements, by their nature, are based on
assumptions and are subject to important risks and uncertainties. Any
forecasts or forward-looking predictions or statements cannot be relied upon
due to, amongst other things, changing external events and general
uncertainties of the business and its corporate structure. Results indicated
in forward-looking statements may differ materially from actual results for a
number of reasons, including without limitation, dependency on top
accumulation partners, Air Canada or travel industry disruptions, reduction in
activity, usage and accumulation of Aeroplan Miles, retail market or economic
downturn, greater than expected redemptions for rewards, industry competition,
supply and capacity costs, unfunded future redemption costs, changes to the
Aeroplan and Nectar Programs, seasonal nature of the business, regulatory
matters, VAT appeal, appointment rights of ACE Aviation Holdings Inc. ("ACE"),
foreign ownership limitations and impact on mutual fund trust status and value
and liquidity of units, future sales or distributions of units by ACE, income
tax matters, SIFT Rules, conversion to corporate structure, as well as the
other factors identified throughout the MD&A. The forward-looking statements
contained in this discussion represent the Fund's expectations as of May 8,
2008, and are subject to change after such date. However, 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, except as
required under applicable securities regulations.

    About Aeroplan Income Fund

    Aeroplan Income Fund is an unincorporated, open-ended trust established
under the laws of the Province of Ontario. Aeroplan Income Fund is the owner
of Aeroplan Limited Partnership, Canada's premier loyalty marketing company
and operator of the Aeroplan loyalty program and Loyalty Management Group
Limited, operator of Nectar, the United Kingdom's leading coalition loyalty
program.

    For more information about Aeroplan, please visit www.aeroplan.com.



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