TORONTO, May 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
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 March 31, 2009, approximately 87% of the Fund (76% 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 March 31, 2009, the Manager anticipates that
approximately 68% of the Fund (59% 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