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Balsam Hedge Funds today announced the launch of its first product, the Balsam Canadian Hedge Fund


Date: Thursday, June 6, 2002

Toronto, Canada (June 6, 2002) – Balsam Hedge Funds today announced the launch of its first product, the Balsam Canadian Hedge Fund Limited Partnership, one of the few Canadian-managed, single manager/single strategy absolute return funds available to Canadian investors. Balsam Capital Management Limited is the general partner of the fund. The fund, which is available to accredited investors, both institutional and retail, is designed to generate absolute returns – a positive return each year, regardless of the direction of the broader markets and the performance of underlying market indices. “We strongly believe this product fills a void in the Canadian hedge fund market for a risk-controlled alternative investment that is non-leveraged, redeemable daily like a mutual fund, highly transparent and adheres to a single strategy,” said John O’Donohue, President and Chief Executive Officer of Balsam Hedge Funds. “The cornerstone of Balsam is risk control and our management team and advisors have designed a company and product centred on best practices for risk management. We have implemented strict guidelines developed by Deloitte & Touche, which include a prohibition on the use of leverage, increased disclosure to investors, and the use of a primary broker to consolidate the investment activity of the fund.” The Balsam Canadian Hedge Fund is managed using a long/short equity strategy. The portfolio manager holds long equity positions in companies whose financial prospects are good and short equity positions in companies whose financial outlook is judged to be negative. These two positions are held in one portfolio simultaneously and the manager buys and sells positions with the objective of capturing real rates of return. Unlike many hedge funds, the Balsam Canadian Hedge Fund does not use leverage. Specifically, the fund will not borrow money to invest. The fund’s investment manager is Leon Frazer & Associates Inc., one of Canada’s oldest and most respected investment management organizations. Based in Toronto, Leon Frazer & Associates Inc. currently has 15 senior portfolio managers on its investment team, including senior investment managers who have successfully managed private investment portfolios with a “short bias” for the past several years. BMO Nesbitt Burns Inc. is acting as custodian of the assets of the fund and as primary broker. “We are confident in the ability of our investment team to outperform generally accepted measurement standards in the industry,” said William (Bill) Tynkaluk, President of Leon Frazer & Associates Inc. “For many years our disciplined investment approach has enabled us to capitalize on either rising or falling markets and deliver consistent, strong results to our private clients and institutional accounts. The Balsam Canadian Hedge Fund is the ideal vehicle through which we can offer our services to a broader investment audience.” "We believe our team has developed an investment and risk management strategy which is highly desirable for the Canadian market and which will accomplish the fund’s principal objectives – preserving capital and generating positive, absolute returns for investors each year,” said O’Donohue. “Leon Frazer’s experience as a value-based manager is virtually unmatched in the Canadian market and, as one of the few Canadian firms with a competency in short selling, we believe they are uniquely positioned to successfully execute our strategy and build wealth for our investors through up or down markets.” Balsam Hedge Funds is a strong advocate of risk management best practices. The company has incorporated absolute return fund investment guidelines and reporting processes – designed to provide transparency into the performance, liquidity and investment activities – into the fund. The guidelines and processes were developed by Deloitte & Touche LLP and independently validated by Mercer Investment Consulting. Relevant examples of these guidelines include limiting the portfolio’s exposure to concentration risks, in either sectors or individual securities, and stop loss limits on all individual positions. Balsam management will ensure that the investment advisors maintain their compliance with specific guidelines that ensure consistency between the investment mandate and the actual investment activities. In addition, the Balsam Canadian Hedge Fund will employ robust processes designed to provide the fund and its investors with up-to-date information on the investment activities of the independent investment advisors. Balsam Canadian Hedge Fund The Balsam Canadian Hedge Fund Limited Partnership is an open-ended pooled fund established under the laws of the Province of Ontario. Balsam Capital Management Limited is the general partner of the Fund. Balsam Hedge Funds Established in July 2001, Balsam Hedge Funds specializes in creating absolute return investment products for Canadian accredited retail and institutional investors. Balsam’s management team and its strategic partners have extensive experience in alternative investment strategies and related regulatory and policy matters. The company was founded by John O’Donohue, who oversees the strategic direction of the company and its investment products in his role as President & CEO. Mr. O’Donohue has extensive experience in using a wide variety of investment strategies, and has provided investment services to high net worth individual investors throughout Canada. While with investment dealer Burns Fry Limited (now BMO Nesbitt Burns Inc.), he was one of the most successful retail representatives in Canada, specializing in convertible hedging. Lloyd Komori, who recently joined Balsam’s Board of Directors, is the founder of a private consulting company that provides in-depth advice and counsel on matters relating to risk management and strategy to investment organizations and multinational corporations. From 1995 – 2002, Mr. Komori served as head of Deloitte & Touche LLP’s Capital Markets Group, a consulting group he founded to provide clients with specialized advice in the field of financial risk management.