Northwater Market-Neutral Trust - Update on Status of Wind-Up and Potential Tax Implications

    TORONTO, April 1 /CNW/ - The Northwater 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 holds a portfolio of market-neutral hedge
funds and utilizes a loan facility to apply a moderate degree of leverage to
the portfolio.

    Status of Wind-Up

    As mentioned previously, continuing illiquidity has caused many
underlying hedge funds held by the Trust 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
    As of February 28, 2009, approximately 53% 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 February 28, 2009, the Manager anticipates that approximately 39% of the
Trust may be subject to restrictions on liquidity that could extend beyond
December 31, 2009 (the "Termination Date"). The Manager of the Trust 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 Trust will have exposure to the particular investment strategy
engaged in by a hedge fund until the Trust's redemption in the hedge fund is

    Potential Tax Implications of Wind-Up

    As announced previously, the Manager anticipates commencing special 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 Market-Neutral Trust are listed on The Toronto
Stock Exchange under the symbol NMN.UN.

For further information:

For further information: Mohamed Khaki at Northwater Capital Management
Inc. at (416) 360-5435

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Northwater Market-Neutral Trust

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