Blue Ribbon Fund Management Ltd.

Blue Ribbon Fund Management Ltd.
Citadel HYTES Fund

Citadel HYTES Fund
Series S-1 Income Fund

Series S-1 Income Fund
Citadel Premium Income Fund

Citadel Premium Income Fund
Citadel S-1 Income Trust Fund

Citadel S-1 Income Trust Fund
Citadel Diversified Investment Trust

Citadel Diversified Investment Trust

September 17, 2009 11:01 ET

Brompton/Bloom Sets the Record Straight on Citadel/Crown Hill Inaccuracies

TORONTO, ONTARIO--(Marketwire - Sept. 17, 2009) -

Blue Ribbon Fund Management will hold a conference call with a live audio webcast on Thursday, September 17 at 10:30 a.m. (EST). To participate, dial 1-866-250-4877 or 416-644-3416 and quote identification number 4162080. To access the simultaneous webcast, log on to Please note the webcast allows participants to listen only. A recording of the session will be archived until midnight on September 24, 2009. To access it, dial 416-640-1917 or 1-877-289-8525 and enter passcode 4162080#.

Blue Ribbon, an associated company of Brompton Funds Management Limited ("Brompton") and Bloom Investment Counsel, Inc. ("Bloom") would like to respond to several inaccurate representations that have been made by Citadel/Crown Hill on a conference call that was held on Monday September 14, in a letter to unitholders dated September 14 and on their website.

Citadel HYTES Fund (TSX:CHF.UN)

Series S-1 Income Fund (TSX:SRC.UN)

Citadel Premium Income Fund (TSX:CPF.UN)

Citadel S-1 Income Trust Fund (TSX:SDL.UN)

Citadel Diversified Investment Trust (TSX:CTD.UN)

Completion of Transaction

Contrary to the claims made by Crown Hill, Brompton and Bloom have been advised by counsel that the transaction as proposed can be completed without additional meetings or regulatory approval.

Bloom's Performance

Crown Hill has criticized Bloom's investment management of the Citadel funds citing performance numbers that do not include distributions in accordance with National Instrument 81-106 which dictates performance be calculated including reinvestment of distributions. Bloom's performance numbers compare favourably against his peer group including those of Jarislowsky Fraser. Citadel unitholders are reminded that Crown Hill had originally asked Bloom to continue as the portfolio manager as noted in the Citadel Proxy Circular.

Redemption Procedure

Crown Hill has proposed an onerous and complicated redemption procedure that requires signed forms from each unitholder in a very tight timeframe and is subject to fees and charges. In addition, redemptions in 2010 are subject to undisclosed contractual obligation charges and there is a limited redemption privilege thereafter. In contrast Blue Ribbon proposes an annual redemption process that uses the well-established procedures within each dealer at 100% of net asset value per unit less direct costs of funding the redemption. Crown Hill has also reserved the right in their sole discretion to cancel the mergers, including the redemption privilege for any reason.

Crown Hill All-Encompassing Power

Crown Hill Capital as trustee and administrator of the Crown Hill Fund, the continuing fund under the Crown Hill proposal retains the right to make fundamental changes, such as fees and redemption rights, to the fund without unitholder approval at any time.

Crown Hill Spending Unitholder Capital

As outlined in their proxy circular Crown Hill has been spending significant unitholder capital such as $755,000 for a fairness opinion to Scotia Capital and a $400,000 fee for proxy solicitation services to Kingsdale Shareholder Services Inc. plus disbursements and call centre fees which will increase the cost significantly. Crown Hill has also been spending significant unitholder resources on legal fees to contest the validity of the unitholder requests for meetings. Blue Ribbon is paying all of its own legal, marketing and printing fees and expenses.

Support from Noted Financial Author

Blue Ribbon is very pleased with the statement made yesterday by Gordon Pape in support of our proposal. Mr. Pape is a noted author and editor of the Internet Wealth Builder, Income Investor, and Mutual Funds Update newsletters. His website is at

"What will I do? As a unitholder, I have a say and I intend to exercise my voting right by casting my ballot for Bloom/Brompton (the "Hostile Resolution")." - Gordon Pape(i), Wednesday, September 16, 2009

(i)permission to quote Mr. Pape was neither obtained nor sought

One-Sided Comments on Transaction Fees

During the Crown Hill conference call, management continued to present a one-sided discussion of the termination fee payable to Crown Hill if the Blue Ribbon proposal is successful by not commenting on the costs incurred by unitholders if the Crown Hill reorganization proposal is approved. If Crown Hill is successful, the funds will be required to pay termination fees to Bloom Investment Counsel of approximately $3.7 million. These fees range between 0.33% to 1.16% of net asset value depending on the particular fund. Bloom has confirmed that if the Blue Ribbon Proposal is successful, they will waive any such fees. When combined with the solicitation fee and advisory fee that Crown Hill has committed to pay out of unitholder capital, the costs incurred under the Crown Hill proposal for those unitholders wishing to remain in the funds or wishing to redeem could cost unitholders more. The following chart shows for each fund the respective costs as a percentage of net asset value that an investor may incur under each proposal, pursuant to costs and assumptions outlined on pages 8-9 of the Blue Ribbon Proxy Circular "The Right Way Forward".

Blue Ribbon
Proposal Crown Hill Proposal
------------- -----------------------------
Non-Redeeming Redeeming
% NAV Unitholder Unitholder
------ -------------- -----------

Diversified 3.00% 2.59% 3.33%
HYTES 1.42% 3.47% 2.56%
PREMIUM 2.20% 2.35% 3.00%
S-1 1.37% 3.46% 2.13%
Series S-1 1.10% 3.19% 1.30%
Weighted Average 2.00% 2.88% 2.50%

Blue Ribbon Recommendation

In order to make an informed decision regarding your investment in the Citadel funds, Blue Ribbon recommends investors contact their investment advisor and consider the recommendations of the various analysts at the large investment dealers. Unitholders may also attend the conference call noted earlier, listen to the replay at or contact the senior executives of Brompton named below to make an informed decision.

Blue Ribbon recommends that the Right Way Forward for Citadel Funds is that unitholders vote their blue proxy/ voting instruction forms both AGAINST the reorganization resolution and FOR the hostile resolution (Blue Ribbon Proposal).

Contact Information

  • Mark Caranci
    Lorne Zeiler
    David Roode
    Chris Cullen
    Toll-free: 1-866-642-6001
    News media contact:
    Emily Dontsos
    (416) 367-5000 ext. 252