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Press release from Marketwire

Canexus Income Fund Announces Intention to Convert to a Corporation and Maintain Distributions

Wednesday, May 05, 2010

Canexus Income Fund Announces Intention to Convert to a Corporation and Maintain Distributions21:10 EDT Wednesday, May 05, 2010CALGARY, ALBERTA--(Marketwire - May 5, 2010) - Canexus Income Fund (TSX:CUS.UN) (the "Fund") today announced its intention to seek unitholder approval not later than the Fund's May 2011 Annual General Meeting to convert from an income trust into a corporation in 2011.This reorganization is being initiated as a result of the federal government's announcement in October 2006 that changed the way income trusts are to be taxed effective January 1, 2011.The Fund expects to maintain its current distributions at $0.5472 per unit annualized (currently $0.0456 per unit monthly) until and after conversion. Any distributions made as an income trust in 2011 are expected to be a return of capital to unitholders. The post-conversion timing of payment of distributions is anticipated to change from monthly to quarterly."As a corporation, we believe the competitive strengths of each of our strategic business units can support current distributions in 2011 and beyond at an after-tax payout ratio of between 55 and 65 percent," said Gary Kubera, President and CEO. "During the past few years we have grown our business and expect significant increases in our operating cash flow commencing in the second half of 2010. This incremental operating cash flow is not expected to result in higher cash income taxes in Canada in the next several years as a result of the capital investments made."Benefits of ConversionThe Fund believes the proposed conversion can be expected to provide a number of benefits to its business and its current unitholders, including:- Enhanced access to capital markets that will facilitate continued expansion through growth projects and potential acquisitions;- A corporate structure could attract new investors and provide a more liquid trading market for our securities; and- A simplified tax and legal structure, more comparable to the majority of public companies operating in Canada, could reduce internal and external administrative costs.Conversion ProcessIt is currently anticipated that unitholders will be asked to approve a proposed conversion plan at a special meeting of the Fund expected to be held not later than our May 2011 Annual General Meeting. While details have yet to be finalized, implementation of the conversion is expected to occur by way of plan of arrangement and subject to approval by not less than 66 2/3 percent of the votes cast at the unitholders' meeting as well as customary conditions, including the receipt of applicable regulatory, court and TSX approvals. Upon completion of the conversion, unitholders are expected to receive on a tax-deferred rollover basis one share of the resulting public corporation for each unit held. An information circular in respect of the unitholders' meeting, which will provide a detailed outline of the proposed conversion, will be distributed prior to the meeting.In its current structure, Canexus Limited is a wholly-owned subsidiary of Canexus Income Fund and is responsible to administer the Fund and its subsidiaries. Following the conversion, it is expected the Board of Directors of the resulting public corporation will be comprised of the current Board and that the Executive Officers will remain the same.Forward-Looking StatementsThis news release contains forward-looking statements and information relating to expected future events and results of the Fund, Canexus LP and its subsidiaries. Information about the anticipated conversion process and plan of Arrangement is subject to change, including benefits of the Arrangement, the occurrence of the effective date of the Arrangement, the treatment of Unitholders under tax laws, the business strategy of Canexus post-conversion, the business to be carried on by Canexus following the Arrangement and the potential for a payment of a dividend by Canexus post conversion. Investors should be cautioned that any decision to pay dividends following the conversion will be made by the board of directors of Canexus on the basis of Canexus' earnings, financial requirements and other conditions existing at such future time. The use of the words "expects", "anticipates", "continue", "estimates", "projects", "should", "believe", "plans", "intends", "may", "will" or similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements for a variety of reasons, including market and general economic conditions, future costs, treatment under governmental regulatory, tax and environmental regimes and the other risks and uncertainties detailed under "Risk Factors" in the Fund's Annual Information Form filed on the Fund's SEDAR profile at www.sedar.com. Management believes the expectations reflected in these forward-looking statements are currently reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Due to the potential impact of these factors, the Fund and Canexus LP disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.About CanexusCanexus produces sodium chlorate and chlor-alkali products largely for the pulp and paper and water treatment industries. Our four plants in Canada and one in Brazil are reliable, low-cost, strategically-located facilities that capitalize on competitive electricity costs and transportation infrastructure to minimize production and delivery costs. Canexus also provides fee-for-service hydrocarbon transloading services to the oil and gas industry from its terminal at Bruderheim, Alberta. Canexus targets opportunities to maximize unitholder returns and delivers high-quality products and services to its customers. Canexus units and convertible debentures trade on the Toronto Stock Exchange under the symbol CUS. More information about Canexus is available at www.canexus.ca.FOR FURTHER INFORMATION PLEASE CONTACT: Canexus Limited Gary Kubera President and CEO (403) 571-7300 or Canexus Limited Richard McLellan CFO (403) 571-7300 www.canexus.ca