TORONTO, June 1 /CNW/ - The Northwater Five-Year Market-Neutral Trust
(the "Trust") today is providing investors with an update on the status of
actions taken within the Trust to effect the orderly liquidation of the
Trust's assets as previously announced.
The Trust, through a forward purchase and sale agreement, has exposure to
a portfolio of market-neutral hedge funds held by Northwater Five-Year
Market-Neutral Fund Limited (the "Fund").
Status of Wind-Up
As announced previously, market conditions have caused many underlying
hedge funds held by the Fund to invoke various restrictions on redemptions
including, without limitation, restricting redemptions to a limited percentage
of the aggregate net asset value of such underlying hedge funds, the temporary
suspension of redemptions altogether, or the commencement of a controlled
liquidation and wind-up of the underlying hedge fund's business.
As of April 30, 2009, approximately 83% of the Fund (68% of the Trust)
continued to have exposure to underlying hedge fund market movements. Based on
the information that Northwater Capital Management Inc. (the "Manager") had
available to it as of April 30, 2009, the Manager anticipates that
approximately 66% of the Fund (54% of the Trust) may be subject to
restrictions on liquidity that could extend beyond June 30, 2009 (the
"Termination Date"). The Manager is working to affect the monetization of the
hedge fund portfolio on or prior to the Termination Date against a backdrop of
liquidity constraints. In some instances, the Fund (and by extension the
Trust) will have exposure to the particular investment strategy engaged in by
a hedge fund until the Fund's redemption in the hedge fund is effective.
Potential Tax Implications of Wind-Up
As announced previously, the Manager currently anticipates commencing
cash distributions ("Termination Distributions") to investors on or about June
30, 2009. Upon the commencement of the payment of Termination Distributions
from the Trust, the percentage of a particular illiquid holding in relation to
the Trust's assets is likely to exceed the 10% concentration limits required
in order for the Trust to continue to qualify as a unit trust for Canadian
income tax purposes.
If and when the Trust fails to qualify as a unit trust it will no longer
qualify as a mutual fund trust for Canadian income tax purposes and the Trust
will no longer be a "qualified investment" for registered accounts, including
without limitation, RRIF's, RRSP's and RESP's. The Manager anticipates that
the Trust will lose its "qualified investment" status for Canadian income tax
purposes on or about June 30, 2009. Investors are advised to speak with their
advisors as soon as possible to obtain tax advice regarding the anticipated
failure of the Trust to maintain its "qualified investment" status.
Units of the Northwater Five-Year Market-Neutral Trust are listed on The
Toronto Stock Exchange under the symbol NYF.UN.
For further information:
For further information: Mohamed Khaki at Northwater Capital Management
Inc. at (416) 360-5435