IBI Income Fund (TSX: IBG-U, OTC: IBIBF) announced today it will convert to a corporation “on or about Jan. 1, 2011.” Income fund holders will at that time swap their units for common shares of IBI Group Inc on a one-for-one basis.

The big question with every conversion is what will happen to the distribution. IBI plans to continue paying at the current rate until conversion and to remain “a relatively high distributor of cash earned” thereafter. Quoting from today’s press release, “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.”

That’s positive for IBI unitholders, who have seen the value of their investment drop 17 percent in 2010 on relatively weak earnings and uncertainty about the payout. The bad news is management has declined to set a post-conversion dividend amount, stating it “will be determined by the directors of IBI Group Inc, based on earnings and cash generated.”

In my view, post-conversion IBI’s post-tax earnings will support a substantial dividend, in part because the growing portion of profits generated in the US won’t be subject to new taxation. Perhaps more important, however, the current yield of well over 12 percent is arguably already pricing in a sizeable reduction, setting a low bar for expectations that won’t be hard to beat. Units also sell for just 1.2 times book value and 60 percent of sales.

As a contract planner and designer of infrastructure projects, IBI has been able to successfully transition its business from heavy reliance on the slumping private sector to greater balance with the public sector. Earlier this month management announced the acquisition of Nightingale Architects, a leading architectural practice specializing in facilities used for health care, education and science. The business’ base of operations is the UK, but its range extends to Eastern Europe, the Middle East, Australia and South Africa, strengthening IBI’s existing presence there in the type of project that tends to produce very reliable cash flow in good times and bad.

As recent results have shown, IBI’s business is somewhat cyclical, despite management’s success in diversifying its client list, expertise and geographic reach. And the volatile Canadian dollar has also impacted profits, though the fund has moved aggressively to curtail it. But at its current price and with management affirming its big dividend focus will extend well past 2011, IBI Income Fund is a solid buy as long as it remains below my value-based target of USD17.

Note my advice on two trusts going through transformational moves remains the same. First, continue to hold Provident Energy Trust (TSX: PVE-U, NYSE: PVX) through the planned spinoff of the company’s oil and gas operations.

To review, at that time, investors will hold shares in an intermediate oil and gas producer, via a combination with Midnight Oil and Gas (TSX: MOX, OTC: MDOEF). You’ll also own shares in Provident Midstream, a pure midstream asset play on natural gas liquids. Provident Midstream will remain a trust and will pay out at its current dividend rate until conversion, at which time management will set a new rate based on profitability.

My guess is that will be close to the current rate, though the share price is reflecting somewhat lower expectations.

Provident Energy Trust remains a buy up to USD8 for those yet to have a position. I also recommend holding the oil and gas producer, Midnight Oil and Gas, which is likely to be a takeover bet.

I also continue to advise US investors try to unload Boralex Power Income Fund (TSX: BPT-U, OTC: BLXJF) as close as possible to the CAD5 per share value of parent Boralex Inc’s (TSX: BLX, OTC: BRLXF) buyout offer–which currently has an expiration date of June 28.

Boralex Inc has received approvals of Canada’s Commissioner of Competition and the US Federal Trade Commission to proceed with its offer, which is basically a CAD100 face value convertible bond (20 income fund units per bond) paying 6.25 percent annually, supplemented by cash for odd lots. It also hasn’t to date attracted major opposition, meaning the company should have close to 100 percent control of the income fund by the time its offer officially closes on June 28.

My opinion is the new convertible will be extremely safe and that Boralex Inc will eventually reach the CAD18 per share price to give them some exchange value above the CAD100 face value. The potential problem is broker execution in the US. And if your broker can’t handle foreign bonds in your account, you run the risk of problems ranging from getting the full value of your exchange and collecting the proper amount of interest to being able to sell.

Canadians, in contrast, will have no such problems. They can continue to hold the income fund through the transition and the convertible bonds thereafter. You can track the fate of Boralex Inc in How They Rate, as it will replace Boralex Power Income Fund after the deal is closed.