Income & Equity Index Participation Fund
TSX : IEP.UN

Income & Equity Index Participation Fund
CGF Mutual Funds Corporation

March 02, 2009 12:36 ET

Income & Equity Index Participation Fund, CGF Mutual Funds Corporation Announce Completion of Arrangement

CALGARY, ALBERTA--(Marketwire - March 2, 2009) -

Completion of Plan of Arrangement

CGF Mutual Funds Corporation ("CGF MFC") and Income & Equity Index Participation Fund (the "Fund") (TSX:IEP.UN) announce the completion of the Plan of Arrangement approved by unitholders of the Fund on February 12, 2009.

In accordance with the Plan of Arrangement, those unitholders of the Fund who elected to receive cash will be paid their pro rata share of the net asset value of the Fund determined as of 12:01 am on February 27, 2009. All other unitholders of the Fund received one CGF Income & Equity Class share of CGF MFC ("I&E Share"), a separate mutual fund investment portfolio of CGF Mutual Fund Corporation (the "I&E Fund"), for each unit of the Fund held.

Net Asset Value

The net asset value per unit of the Fund and therefore the initial net asset value of the I&E Fund as of 12:01 am on February 27, 2009 was $3.75. The net asset value of the Fund declined from $5.22 per unit on February 12, 2009 as a result of a combination of the following:

1. the decline in the value of the S&P/TSX Capped Call Options held by the Fund on the S&P/TSX 60 Index from $13.0 million at February 12, 2009 to $0.76 million on February 18, 2009, the maturity date of the options, as a result of the fall of the S&P/TSX 60 Index from 528.12 on February 12, 2009 to 489.49 on February 18, 2009. The Fund's S&P/TSX Capped Call Options had strike prices of 486.20 and 489.73 respectively. The sharp decline in the S&P/TSX 60 Index resulted in one of the options expiring out of the money and the other being exercised 3.29 points in the money;

2. the decline in the value of the Fund's income trust portfolio from $52 million, net of debt, on February 12, 2009 to $47 million on February 27, 2009; and

3. the accrual of the expenses of the Plan of Arrangement, including the $0.095 per unit solicitation fee payable to the dealers, in the aggregate amount of $0.98 million.

Distribution Level

In accordance with the information provided to unitholders of the Fund in the Information Circular mailed to all unitholders of the Fund in December 2008, the initial monthly dividend on the I&E Shares had been anticipated to be consistent with the Fund's monthly distribution of $0.075 per security. However, it is important for holders of the I&E Shares to realize that since the mailing of the Fund's Information Circular most of the highest yielding income trusts in the I&E Fund's portfolio have announced distribution cuts. As a result, the Independent Board of Directors of CGF MFC will meet in late March 2009 to consider the monthly dividend rate to be paid on the I&E Shares and determine whether a change to the initial dividend level is necessary or advisable.

Management Fee Waiver

Management of CGF MFC recognize that the net asset value of the I&E Shares is less than what management was expecting, primarily as a result of the dramatic decline in the S&P/TSX 60 Index during the last week of the term of the S&P/TSX Capped Call Options acquired by the Fund with the proceeds of its initial public offering in 2004. In order to contribute towards an improved performance of the I&E Shares going forward, CGF MFC has elected to rebate its management fee on the I&E Shares back to the holders of such shares for the period commencing March 1, 2009 through to June 30, 2009.

Investment Strategy Amendment

Management of CGF MFC also advises that it is considering making an amendment to the Simplified Prospectus of the I&E Fund in order to permit the I&E Fund to enter into one or more forward agreements with one or more qualified counterparties in order to increase the after-tax return to the I&E Fund on distributions received from income trusts until their qualification as dividends on January 1, 2011 pursuant to the Tax Fairness Plan.

Certain statements included in this news release constitute forward-looking statements. The forward-looking statements are not historical facts but reflect management's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Although management believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. Management undertakes no obligation to update publicly or otherwise revise any forward-looking statement or information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

Contact Information

  • Income & Equity Index Participation Fund
    Joe MacDonald
    Executive Vice President, Sales and Marketing
    1-877-261-9674
    or
    Income & Equity Index Participation Fund
    Andrea Kladar
    Vice President, Sales and Marketing Western Region
    1-866-936-7880
    Website: www.citadelfunds.com