Benvest New Look Income Fund announces proposed conversion to a corporation

MONTREAL, Jan. 21 /CNW Telbec/ - Benvest New Look Income Fund (TSX: BCI.UN) (the "Fund") announced today it will convert from an income trust structure to a corporation (the "Conversion") and commence an initiative to distribute hearing healthcare products through its retail network.

Pursuant to an arrangement agreement (the "Arrangement Agreement") with Sonomax Hearing Healthcare Inc. ("Sonomax") entered into today setting out the proposed Conversion:

    
    i)   unitholders of the Fund will receive on a one-for-one basis common
         shares of the new Benvest New Look operating entity to be named New
         Look Eyewear Inc. ("Newco");

    ii)  exchangeable shareholders of the Fund's current subsidiary New Look
         Eyewear Inc. ("New Look") will receive on a one-for-one basis common
         shares of Newco;

    iii) Newco will hold the assets and business of New Look and will
         continue its operations. The existing trustees and management of the
         Fund and New Look will become the directors and management of Newco;

    iv)  application will be made to list the common shares of Newco on the
         Toronto Stock Exchange. Following the Conversion, there will be no
         dilution in the number of shares from the number of Fund units and
         exchangeable shares outstanding immediately prior to the Conversion;
         and

    v)   Newco intends to make distributions to its shareholders in the form
         of dividends. The initial quarterly rate is expected to be $0.15
         ($0.60 per annum) subject to Newco's ongoing operating results,
         optical market conditions in which it is operating and other factors
         normally associated with the declaration of dividends by a
         corporation. These dividends will be eligible for dividend tax
         credits for individuals residing in Canada. Currently, only
         approximately 32% of the Fund's distributions qualify for dividend
         tax treatment.
    

John Bennett, Chairman of the Fund stated that: "Our business remains focused on delivering significant value to its equity holders through its growth strategy and through the return of substantial cash flow. We believe that in the current environment, the Conversion will provide greater flexibility to continue successfully growing the business of New Look and achieving these objectives".

Pursuant to the Arrangement Agreement, Newco will retain certain assets of Sonomax and enter into a distribution and licensing agreement with Sonomax Technologies Inc., a new corporation to be owned by the shareholders of Sonomax. The Fund will pay Sonomax a consideration of approximately $1.7 million (such consideration to be transferred to Sonomax Technologies Inc.).

Martial Gagné, President of New Look, stated that: "We look forward to an association with Sonomax and the development of additional products and services through our retail network. Others in our industry are undertaking similar initiatives."

From 2005 to 2008, New Look has grown its revenue and EBITDA(1) from respectively $43.4 million to $62.9 million and from $5.4 million to $10.5 million, through organic growth. New Look has become an eye care leader in both the Province of Québec and the Ottawa region. The acquisition of the hearing healthcare distribution assets of Sonomax will allow New Look to add a complementary line of products into its stores and leverage its current assets.

Rationale and Benefits of the Conversion

Amendments to the federal income tax rules relating to specified investment flow-through trusts ("SIFTs") allow for the conversion of a trust to a corporation to be effected on a tax deferred basis if completed prior to 2013.

Key benefits of the Conversion include:

    
    -   Greater access to equity capital markets and widening of potential
        investor base in light of the decreasing importance of the public
        business income trust market;
    -   Sonomax hearing healthcare assets and products are a complement to
        the current eyewear products sold through the New Look store network;
    -   The Arrangement Agreement provides for an effective and efficient
        method to convert from an income trust to a corporation under
        existing legislation; and
    -   The Conversion will lead to a simplified capital structure, as a
        result of the elimination of the exchangeable shares, and more
        efficient corporate structure.
    

The Conversion is expected to be completed in early March 2010 and is subject to the approval of the unitholders of the Fund as well as the holders of exchangeable shares of New Look and the securityholders of Sonomax, to be obtained at special meetings to be held on or about February 26, 2010 and will be completed pursuant to a statutory plan of arrangement of Sonomax (the "Plan of Arrangement") under Section 192 of the Canada Business Corporations Act (the "CBCA"). The Conversion is also subject to other customary closing conditions for transactions of this nature, including Court and TSX approvals.

At the special meetings of the Fund and of New Look, unitholders and exchangeable shareholders will be asked also to consider a resolution to implement a Stock Option Plan for Newco, which plan will be further described in the information circular in respect of the meetings. Pursuant to the Plan of Arrangement, the existing options to purchase Fund units will be exchanged for options to purchase common shares of Newco.

Distributions by the Fund for the period starting on March 1, 2010 and ending on the closing date of the Conversion will be paid, on or around April 15, 2010, and calculated on a pro rata basis using the current monthly distribution of $0.0542. It is expected that Newco will make its first quarterly dividend payment to its shareholders in May 2010 for the stub period from the completion of the arrangement to March 27, 2010.

Complete details of the terms of the Plan of Arrangement are set out in the Arrangement Agreement that will be filed by the Fund on SEDAR (www.sedar.com) and will be contained in an information circular to be sent out to unitholders and exchangeable shareholders in anticipation of the special meetings.

On May 1, 2005, Benvest Capital Inc. was converted into an income trust named the Benvest New Look Income Fund, the purpose of which is to hold securities of New Look Eyewear Inc. This subsidiary is a leading enterprise in the eye care industry in Eastern Canada, with growth opportunities based on demographic trends and the consolidation of the industry in Canada. As of December 31st, 2009, 6,118,328 units of the Fund were issued and outstanding. In addition, 3,870,404 exchangeable shares (on a consolidated basis) of the subsidiary were also issued and outstanding.

This press release may contain certain forward-looking statements that reflect the current views and/or expectations of Benvest New Look Income Fund with respect to its performance, business, and future events. Such statements are subject to a number of risks, uncertainties, and assumptions. Actual results and events may vary. The statements contained in this release are not to be construed as tax advice and holders of units and exchangeable shares should seek their own independent tax advice.

    
    -------------------
    (1) EBITDA refers to consolidated earnings before interest income and
        expenses, income taxes, and amortization. It excludes any gain or
        loss on foreign currency translation (except if related to cost of
        goods sold), expenses related to former portfolio investments,
        equity-based compensation, and non-controlling interest. EBITDA is
        not a recognized measure under Canadian generally accepted accounting
        principles (GAAP) and may not be comparable to similar measures used
        by other entities. The Fund believes that EBITDA is a useful
        financial metric as it assists in determining the ability to generate
        cash from operations. Investors should be cautioned that EBITDA
        should not be construed as an alternative to net earnings or cash
        flows as determined under GAAP.
    

SOURCE BENVEST NEW LOOK INCOME FUND

For further information: For further information: Lise Melanson, (514) 877-4299, ext. 2234

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BENVEST NEW LOOK INCOME FUND

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