Northwater Market-Neutral Trust - Update on status of wind-up and potential tax implications

    TORONTO, May 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

    Market conditions have 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 business.
    As of March 31, 2009, approximately 52% 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 40% 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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