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Front Street hedge fund closes $178 million offering

Date: Monday, May 16, 2005
Author: Investment Executive

Long/Short Income Fund begins trading on TSX

Monday, May 16, 2005

By† IE Staff

Front Street Long/Short Income Fund today announced the closing of its initial public offering for gross proceeds of $178 million. The offering price was $10 per unit.

The fund is a hedge fund managed by Front Street Capital 2004 and advised by Front Street Investment Management Inc. The units of the fund are listed on the Toronto Stock Exchange under the symbol FLS.UN.

Front Street says the fundís investment objectives are:
  • to provide holders of units with a stable stream of monthly cash distributions, initially targeted to be $5Ę per unit (or 60Ę per year), representing a yield of 6% per year on the original price of the units; and
  • to provide holders of units with the opportunity for enhanced capital growth through the selection, management and strategic trading of long and short positions primarily in securities of income trusts.

The fund's portfolio will consist primarily of securities of income trusts. Front Street says the fundís investment advisor may also invest in or use derivatives and employ a variety of hedging strategies.

As well, the portfolio will include securities which the Investment Advisor believes are undervalued and may include short positions in securities which the Investment Advisor believes are overvalued.

The offering was led by National Bank Financial Inc. The other members of the agents' syndicate are BMO Nesbitt Burns Inc., TD Securities Inc., Canaccord Capital Corp., Dundee Securities Corp., HSBC Securities (Canada) Inc., Raymond James Ltd., First Associates Investments Inc., Haywood Securities Inc., Tuscarora Capital Inc., Richardson Partners Financial Ltd. and Wellington West Capital Inc.

The fund has granted the agents an over-allotment option to acquire additional units which is exercisable at any time during the next 60 days.