Northwater Five-Year Market-Neutral Trust - Final Net Asset Value - December 31, 2008



    TORONTO, Jan. 22 /CNW/ - The Northwater Five-Year Market-Neutral Trust
(the "Trust") announced today that the net asset value of the Trust per unit
as at December 31, 2008 is $12.06. This net asset value reflects the
distribution of $0.4375 per Unit previously declared to unitholders of record
on December 31, 2008. The return of the Trust for the month of December is
-5.02%. The rolling 12-month return for the Trust is -36.80%.
    In addition, the Trust has concluded that no special distribution of the
Trust's net income and realized capital gains will be required to ensure that
the Trust will not be liable to pay income tax under Part I of the Income Tax
Act.
    The Trust, through a forward purchase and sale agreement, has exposure to
approximately 150% of a portfolio of market-neutral hedge funds held by
Northwater Five-Year Market-Neutral Fund Limited (the "Fund"). For the month
of December, 8 of the Fund's 28 managers posted positive returns and 4 out of
the 10 market-neutral strategies included within the Fund's portfolio
contributed positively to the bottom line. Specifically, the Fund's structured
finance strategy was the largest negative contributor to the estimated return
of the Trust for the month.
    The hedge fund industry, like other market participants, has been subject
to the exceptional and unprecedented turmoil in the markets due to the ongoing
credit crisis that has resulted in losses in the Fund's hedge fund portfolio,
particularly for the last four months in 2008.
    Based on the redemptions that have been submitted, the Manager
anticipates that, as of December 31, 2008, approximately 51% of the hedge fund
portfolio will no longer have exposure to underlying hedge fund market
movements.
    Based on the information that the Manager has available to it as of the
date hereof, the Manager anticipates that approximately 43% of the hedge fund
portfolio may be subject to restrictions on liquidity that could extend beyond
June 30, 2009 (the "Termination Date"). The Manager will be actively seeking
an orderly liquidation of the underlying funds prior to the Termination Date.
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 has been paid. The Manager will periodically
update investors as to its progress in liquidating the Fund's portfolio in
subsequent press releases as additional information becomes available.
    The Fund relies on estimates provided by administrators or managers of
each of the Fund's underlying hedge funds. These estimates may be revised and
the Fund will be required to capture these revisions in subsequent net asset
value calculations. The net asset value of the Fund is also affected by the
finalization of the net asset value by the administrators of the underlying
hedge funds. Ultimately, the net asset value of the Fund impacts the reported
net asset value of the Trust and, accordingly, the Trust indirectly relies on
the estimates provided by administrators or managers of each of the Fund's
underlying hedge funds.
    The Fund's exposure to a fixed interest rate swap increased the Trust's
return as the interest rate environment was favourable to the Trust over the
period.
    Subject to limits set out in the Trust's prospectus, the Trust is
required to purchase its units in the market in the event that the market
price of a unit of the Trust falls below 95% of the net asset value of the
Trust per unit. For the month of December, the Trust did not purchase any
units under this program.

    The Northwater Five-Year Market-Neutral Trust is a well-diversified fund
of market-neutral hedge funds. Units are listed on The Toronto Stock Exchange
under the symbol NYF.UN.





For further information:

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

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NORTHWATER FIVE-YEAR MARKET-NEUTRAL TRUST

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