Citadel Group of Funds and Crown Hill Fund have mailed to unitholders management information circulars that outline the proposed mergers of several funds, the companies said Thursday.

The proposed reorganization includes the merger of the Crown Hill Fund with eight of the recently acquired Citadel funds into a continuing fund. The continuing fund will be renamed the Citadel Income Fund.

The reorganization proposal will be considered at special meetings of unitholders to be held on September 30.

These eight Citadel funds are: Citadel Premium Income Fund; Citadel S-1 Income Trust Fund; Citadel Stable S-1 Income Fund; Citadel Diversified Investment Trust; Series S-1 Income Fund; Equal Weight Plus Fund; Citadel SMaRT Fund; and Citadel HYTES Fund.

“We strongly urge that unitholders support the reorganization proposal, which has been unanimously approved by the board as well as recommended by the Independent Review Committee,” said Wayne Pushka, president of Citadel Fund Administrator and president of Crown Hill Capital Corp., in a release. “We believe the Reorganization Proposal will significantly increase long-term value creation for unitholders.”

“Beyond the reduction of some expenses, there are several other important benefits, including greater liquidity and a broadened investment mandate,” Pushka added.

“The Citadel Independent Review Committee concluded that the reorganization proposal, if approved, would achieve a fair and reasonable result for the unitholder of each of the Citadel funds. Scotia Capital Inc., the financial advisor who provided its fairness opinion to the IRC, has also provided an opinion that the reorganization [roposal is fair, from a financial point of view,” Citadel said.

According to the two companies, the continuing fund will offer investment management by Independent money manager Jarislowsky, Fraser, which has over over $40 billion in assets under management.

The fund’s new investment strategy will include a broad range of income producing securities and reduce reliance on the shrinking universe of income trust investments.

The continuing fund intends to pay a high level of monthly distributions. The annual distribution is currently set at approximately 8.5% of NAV per year and this is not expected to change for the remainder of 2009.

Following the merger, the continuing fund is expected to have a significantly larger market capitalization. This should result in improved trading and liquidity for the units of the continuing fund, which will continue to be listed on the Toronto Stock Exchange.

A number of the Citadel funds do not currently permit unitholders to redeem their units. Nonetheless, the companies say if the reorganization proposal is approved at the meetings, unitholders who do not wish to hold units in the continuing fund will be able to redeem their units following the meeting. In addition, unitholders will have a redemption right in 2010 and a limited annual redemption right in subsequent years.

Citadel board recommends rejection of hostile proposal


A hostile proposal from Brompton Administration Ltd. and Bloom Investment Counsel, Inc. is also being considered at the special meetings of the Citadel funds, seeking unitholder support for a new
administrator and investment manager.

“The IRB of the Citadel Fund Administrator unanimously recommends unitholders of the affected funds vote AGAINST the Hostile Proposal,” Citadel said.

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