Phoenix Capital Income Trust

Phoenix Capital Income Trust

July 22, 2005 08:30 ET

Phoenix Capital Income Trust: Press Release

TORONTO, ONTARIO--(CCNMatthews - July 22, 2005) - Phoenix Capital Income Trust ("Phoenix" "Trust") (TSX VENTURE:PNX.UN), advises that the implementation of the Plan of Arrangement, approved by shareholders on June 10, 2005, should be completed by July 25, 2005, and Trust Units and cash, for those electing to receive cash, will be distributed to shareholders who have submitted valid Letters of Transmittal and Election.

The Depositary for the elections made by shareholders of Phoenix Capital Inc. confirmed on July 13, 2005, that shareholders representing 3,290,039 shares had elected to receive cash and Trust Units and shareholders representing 1,524,545 had elected to receive solely Trust Units, or had made no election. No notices of dissent were received. As a result of the elections, shareholders electing to receive cash and Trust Units will receive $0.76 and 0.098 Trust Units per share of Phoenix Capital Inc.

Distributions on the Trust Units from interest income derived from Notes issued by Phoenix Capital Inc. were projected to commence in July 2005. As a result of the delays in completing the transaction distributions will not commence until August 2005.

The elections to receive cash and Trust Units exceeded management's expectations and, as a result of the higher level of elections for Cash and Trust Units, the number of public holders of Trust Units and the number of Trust Units held by them, is significantly below the distribution requirements of the TSX Venture Exchange.

The Plan of Arrangement is one of the steps in an extensive re-organization detailed in the Annual Report of Phoenix Capital Inc. released in May 2004, which included (i) the sale of several properties owned by Phoenix Capital Inc. to crystallize substantial unrealized gains; (ii) a reorganization of the capital structure of Phoenix Capital Inc.; (iii) the offer of a distribution of cash to shareholders who, by virtue of the lack of liquidity in the shares of Phoenix Capital Inc., had not benefited from the appreciation in the underlying value of Phoenix Capital Inc., and (iv) raising alternative or additional capital.

Subsequently, Phoenix Capital Inc. sold several properties, which resulted in earnings of $1,861,000 ($0.387 per share) for the year ended December 31, 2004 and a consolidated cash position at year end of $4,268,000 ($0.89 per share).

On January 14, 2005 Phoenix Capital Inc. announced that the Directors had approved a planned reorganization of the capital structure into an income trust pursuant to a Plan of Arrangement that included a significant distribution of cash to shareholders. The announcement also detailed a number of additional benefits of the reorganization.

On March 17, 2005 Phoenix Capital Inc. announced that it had entered into agreement with First Associates Investments Inc. for a proposed offering of Units in the capital of the Trust. Since March 17, 2005, the parties, and respective legal counsel, have been involved in the extensive due diligence procedures required for a substantial public offering. The Trust expects to be in a position to file a prospectus by July 23, 2005.

The prospectus will contain extensive disclosure not presently available to holders of Trust Units. After giving consideration to the potential lack of public distribution of Trust Units, and the imminent filing of a prospectus that contains extensive disclosure, the Trustees have requested that the TSX Venture halt trading in the Trust Units until the Plan of Arrangement has been completed and sufficient Units have been distributed pursuant to the offering to meet the distribution requirements of the TSX Venture Exchange.

This release contains forward-looking statements, including statements about projected future financial items or performance and other statements about the company's plans, objectives, intentions and expectations. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to risks and uncertainties that could cause actual actions and results to differ materially from those anticipated in the forward-looking statements. The words "anticipate", "believe", "estimate", "expect", "intend", "project", and variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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