Sun Gro Horticulture Income Fund Announces Details of Proposed Conversion to
a Corporation

TRADING SYMBOL: Toronto Stock Exchange - GRO.UN

VANCOUVER, March 17 /CNW/ - Sun Gro Horticulture Income Fund (the Fund) today announced the details of the proposed conversion plan of the Fund from an income trust to a corporation. The new entity (New Sun Gro) will continue the business of the Fund's wholly owned subsidiary, Sun Go Horticulture Canada Ltd. (Sun Gro or the company). The proposed conversion is expected to be completed by way of a statutory plan of arrangement (the Arrangement) under Section 192 of the Canada Business Corporations Act. The Fund anticipates that a management information circular will be mailed to voting unitholders at the end of April 2010, in connection with the conversion and other matters to be considered at the annual and special meeting (the Meeting) of unitholders to be held on May 27, 2010.

Background to and Reasons for the Arrangement

On October 31, 2006, Canada's Minister of Finance (the Minister) announced the federal government's proposal to apply a tax at the trust level on distributions of certain income from, among other entities, certain publicly traded mutual fund trusts at a rate of tax comparable to the combined federal and provincial corporate tax rate and to treat such distributions as dividends to unitholders. The Minister announced that existing trusts would have a four-year transition period and generally would not be subject to the new rules until 2011, provided such trusts experienced only "normal growth" and no "undue expansion" before then. The announcement had an immediate impact on the Canadian capital markets and resulted in a significant decline in trading prices for publicly traded income trusts.

On December 15, 2006, the Minister released further guidance concerning the proposed tax changes, including guidance respecting "normal growth" for the purposes of this proposal, as well as the Finance Department's confirmation that it would not recommend any extension of the four-year transition period. Bill C-52, the Budget Implementation Act, 2007, which received royal assent on June 22, 2007, contained rules relating to the tax treatment of specified investment flow-through (SIFT) trusts or partnerships, which are designed, among other things, to implement the proposal.

Following a thorough analysis of the various strategic alternatives with respect to Sun Gro's structure going forward, as well as Sun Gro's current unitholder base, the Fund's trustees have concluded that the proposed conversion will provide broadened access to capital markets by putting the constraints of the SIFT structure imposed by the new tax legislation behind the Fund. In addition, Canadian taxable Sun Gro unitholders will benefit from a more tax-effective treatment of future cash dividends following the conversion to a corporate structure. Sun Gro's unitholders will also benefit from a simplified and more efficient corporate structure. Under the current legislation, the conversion can be structured on a tax-deferred basis for Canadian income tax purposes.

The Fund's trustees formally discussed a potential conversion of the Fund from an income trust structure to a corporate structure, at which time management reviewed with the trustees the proposed conversion plan, and ultimately approved a proposal to convert the Fund from an income trust to a corporation.

The Arrangement

Pursuant to the Arrangement, it is anticipated that unitholders of the Fund will become the holders of common voting shares of New Sun Gro on the basis of one common voting share for each Fund unit so transferred.

It is anticipated that the board of directors of New Sun Gro will initially be comprised of the current trustees and directors of Sun Gro: Jack Edwards, Craig Graham, John McLaughlin, David Sutin, Mitchell J. Weaver and John Zaplatynsky. The senior management of New Sun Gro will be comprised of the current members of senior management of Sun Gro.

The conversion is subject to the approval of more than two-thirds (66 2/3%) of the votes cast by unitholders, either in person or by proxy, at the Meeting. The conversion is also subject to the approval of the Supreme Court of British Columbia and receipt of all necessary regulatory approvals. The Fund will apply to the Toronto Stock Exchange for the substitutional listing of the securities of New Sun Gro, subject to New Sun Gro satisfying the requirements of the Toronto Stock Exchange. Subject to receipt of all necessary approvals, the conversion would be effective prior to December 31, 2010.

Future Dividend Policy

The board of directors of New Sun Gro is expected to adopt a dividend policy upon completion of the conversion. However, any dividend payments will be determined by the board of directors of New Sun Gro in light of New Sun Gro's financial performance, and its current and anticipated business needs at that time.

Annual General Meeting

The annual and special meeting of unitholders of Sun Gro Horticulture Income Fund will be held at the Terminal City Club, 837 West Hastings Street, Vancouver, BC on Thursday, May 27, 2010 at 1:30 p.m. PST. Registration will begin at 1:00 p.m.

Forward Looking Information

This news release contains certain forward-looking statements within the meaning of applicable Canadian provincial securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. When used in this news release, the words "anticipate", "will", "believe", "estimate", "expect", "intend", "target", "plan", "goals", "objectives", "pro forma", "forecast", "schedule", "may" and other similar words and expressions, identify forward-looking statements or information. The forward-looking statements or information relates to, among other things: details of the Meeting; the structure of the Arrangement; the composition of the board of directors of New Sun Gro; the proposed senior management of New Sun Gro; the presentation of the proposed Arrangement to unitholders at the Meeting; the approval of the Arrangement by unitholders at the Meeting; regulatory and court approvals required in order to complete the Arrangement; the dividend policy of New Sun Gro; and the completion of the Arrangement.

These statements reflect the current views of the Fund with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Fund, are inherently subject to significant business, economic, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this news release and the Fund has made assumptions based on or related to many of these factors. Such factors include, without limitation, risks relating to: currency fluctuations; interest rate fluctuations; Sun Gro's ability to meet its financial obligations as they fall due; financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations; Sun Gro's resource supply; competition in the growing media industry; the effect of seasonality, weather and other related factors on Sun Gro's production and sales; environmental regulations and related requirements; climate and its ability to affect the cost and quality of Sun Gro's harvest; potential product liabilities, regulatory requirements and labour relations connected with Sun Gro's operations; Sun Gro's ability to retain key personnel; potential litigation; unitholder distributions; the Fund's reliance on Sun Gro's operations; unitholder limited liability; income tax matters; the eligibility of the Fund's units under registered retirement savings plans, deferred profit sharing plans, registered retirement income funds and registered education savings plans; the nature of and statutory rights associated with units; distributions to unitholders upon redemption of units or termination of the Fund; dilution of existing unitholder interests on the issuance of additional units; restrictions on Sun Gro's potential growth under its current income trust structure, and those factors that have been identified under the caption "Risk Factors" in the Fund's Annual Information Form filed on SEDAR at www.sedar.com. Although the Fund has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. The Fund does not intend and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances where any other events affecting such statements or information, other than as required by applicable securities laws. Unitholders are cautioned against attributing undue reliance on forward-looking statements or information.

Income Fund Profile

Sun Gro Horticulture Income Fund was launched with the completion of an Initial Public Offering on March 27, 2002. Units of the Fund are listed for trading on the Toronto Stock Exchange. At March 17, 2010, there were 22,284,681 units of the Fund issued and outstanding.

Company Profile

Sun Gro is the largest producer and distributor of peat and bark-based growing mixes to professional plant growers in the US and Canada. It is also North America's largest producer and distributor of sphagnum peat moss, with approximately 65,000 acres of peat bogs under lease. Sun Gro sells its professional products primarily to greenhouse, nursery and specialty crop growers. The company also sells peat moss and potting mixes to retail customers, either by way of private label partnerships or under its own brand names. In addition, Sun Gro sells sand-based mixes to golf course developers and landscapers. The company's North America-wide production network now comprises 12 Canadian operating plants and 13 US operating plants.

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For further information: Bradley A. Wiens, Vice-President, Finance and CFO, Sun Gro Horticulture Income Fund, Tel: [phone], Email: [email protected], Website: www.sungro.com