Northwater Top 75 Income Trusts PLUS - Update on status of wind-up and potential tax implications

    TORONTO, Feb. 6 /CNW/ - The Northwater Top 75 Income Trusts PLUS (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 generally holds an income trust portfolio comprised of an
equally weighted portfolio of the largest 75 income trusts by market
capitalization listed on the Toronto Stock Exchange. The Trust also has
exposure to a portfolio of market-neutral hedge funds held by Enhancement Fund
Limited (the "Fund") through a forward purchase and sale agreement. The Trust
previously targeted an exposure to the Fund of approximately 100% of the value
of the Trust. The process of reducing the leverage and redeeming from the
underlying hedge funds is well under way and will continue. However, events in
the capital markets generally and the hedge fund industry specifically have
delayed this process. Specifically, the dramatic fall in the value of the
income trust portfolio along with the significant cash distributions already
paid to unitholders of the Trust combined with restrictions placed on the
liquidity of certain of the underlying hedge funds in the Fund's portfolio has
led to an increase in the exposure of the Trust to the Fund that exceeds
targeted levels. The Trust's exposure to the Fund will fall as redemption
payments are received from the underlying hedge funds.

    Status of Wind-Up
    The hedge fund industry, like other market participants, has been subject
to unprecedented turmoil in the markets due to the ongoing credit crisis. Many
of the trading strategies employed by hedge funds depend on functional
financial markets, including the ability of managers to enter into short
positions. Hedge funds have not only suffered losses as a result of the stress
felt in the markets, including the difficulty encountered in maintaining short
positions, but because of the drying up of liquidity in many markets. Certain
of the managers have been unable to sell assets to prevent additional losses
or fund investor redemptions. Continuing illiquidity has caused numerous
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
    As of December 31, 2008, approximately 51% of the Fund (103% of the
Trust) will continue 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 December 31, 2008, the Manager
anticipates that approximately 29% of the Fund (58% 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

    Potential Tax Implications of Wind-Up
    The Manager currently anticipates commencing special cash distributions
("Termination Distributions") to investors effective as of December 31, 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 December 31, 2009. However, it is
possible that the Trust could lose its "qualified investment" status prior to
December 31, 2009. The Manager will endeavor to provide investors with as much
advance notice as reasonably possible if the Trust's loss of its "qualified
investment" status will occur prior to December 31, 2009. Investors are
advised to speak with their advisors to obtain tax advice with respect to
appropriate actions to take in respect of the failure of the Trust to qualify
as a mutual fund trust.

    Units of the Northwater Top 75 Income Trusts PLUS are listed on The
Toronto Stock Exchange under the symbol NTP.UN.

For further information:

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

Organization Profile


More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890