AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") is adopted as of
this 19th day of June, 2009 by and among (i) HSBC Investor Funds, a
Massachusetts business trust ("TRUST"), with its principal place of business
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on behalf of its series, HSBC
Investor Core Plus Fixed Income Fund ("CPFI FUND"), HSBC Investor
Intermediate Duration Fixed Income Fund ("IDFI FUND") and HSBC Investor New
York Tax-Free Bond Fund ("NYTFB FUND"); (ii) HSBC Advisor Funds Trust, a
Massachusetts business trust ("ADVISOR TRUST"), with its principal place of
business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on behalf of its series,
HSBC Investor Core Plus Fixed Income Fund ("CPFI ADVISOR FUND"); (iii) HSBC
Investor Portfolios, a New York trust ("MASTER TRUST"), with its principal
place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, on behalf of its
series, HSBC Investor Core Plus Fixed Income Portfolio ("CPFI PORTFOLIO") and
HSBC Investor Intermediate Duration Fixed Income Portfolio ("IDFI
Portfolio"); (iv) HSBC Global Asset Management (USA) Inc., a registered
investment adviser ("HGAM"), with its principal place of business at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; (v) Franklin Investors Securities Trust, a
Delaware statutory trust ("FRANKLIN TRUST"), with its principal place of
business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, on behalf of its
series, Franklin Total Return Fund ("▇▇▇▇▇▇▇▇ ▇▇ FUND"); (vi) Franklin New
York Tax Free Trust, a Delaware statutory trust ("FRANKLIN NY TRUST"), with
its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
on behalf of its series, Franklin New York Intermediate-Term Tax-Free Income
Fund ("FRANKLIN NY FUND"); and (vii) Franklin Advisers, Inc, ("FRANKLIN
ADVISERS"), with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
WHEREAS, each of the Trust, Advisor Trust, Master Trust, Franklin
Trust and Franklin NY Trust is an open-end, registered investment company of
the management type;
WHEREAS, each of CPFI Fund, CPFI Advisor Fund, IDFI Fund and NYTFB Fund
may hereinafter be referred to herein as a "TARGET FUND," and each of
▇▇▇▇▇▇▇▇ ▇▇ Fund and Franklin NY Fund may hereinafter be referred to herein
as an "ACQUIRING FUND";
WHEREAS, the parties hereto intend for each Acquiring Fund and its
corresponding Target Fund (as set forth in Exhibit A hereto) to enter into a
transaction pursuant to which: (i) the Acquiring Fund will acquire the assets
of the corresponding Target Fund (subject to the retention by the Target Fund
of certain assets to discharge liabilities) in exchange for A, C and Advisor
Class shares (as applicable) of the Acquiring Fund of equal value to the net
assets of the Target Fund, and (ii) the Target Fund will distribute such
shares of each class of the corresponding Acquiring Fund to shareholders of
the corresponding class of the Target Fund (as set forth in Exhibit A), in
connection with the liquidation of the Target Fund, all upon the terms and
conditions hereinafter set forth in this Agreement (each such transaction, a
"REORGANIZATION").
WHEREAS, this Agreement is intended to be and is adopted as a plan of
reorganization and liquidation with respect to each Reorganization within the
meaning of Section 368(a)(1) of the United States Internal Revenue Code of
1986, as amended ("CODE");
WHEREAS, the CPFI Fund, CPFI Advisor Fund and IDFI Fund each own
securities, directly or indirectly through investment in CPFI Portfolio and
IDFI Portfolio, respectively, and NYTFB Fund owns securities directly, that
generally are assets of the character in which its corresponding Acquiring
Fund is permitted to invest;
WHEREAS, each of CPFI Fund and CPFI Advisor Fund invests all of its
investable assets in CPFI Portfolio, and IDFI Fund invests all of its
investable assets in IDFI Portfolio, in master-feeder structures;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree
as follows:
1. DESCRIPTION OF THE REORGANIZATIONS
1.1. It is the intention of the parties hereto that each Reorganization
described herein shall be conducted separately of the others, and a party
hereto which is not a party to a Reorganization shall incur no obligations,
duties or liabilities with respect to such Reorganization by reason of being
a party to this Agreement. If any one or more Reorganizations should fail to
be consummated hereunder, such failure shall not affect the other
Reorganizations in any way. The parties shall cooperate in preparing, and
each of Franklin Trust and Franklin NY Trust each shall file, a Registration
Statement on Form N-14 under the Securities Act of 1933, as amended, which
collectively shall properly register the Acquiring Fund shares to be issued
in connection with the Reorganizations with the Securities and Exchange
Commission ("COMMISSION") and include a proxy statement with respect to the
votes of the shareholders of each Target Fund to approve its Reorganization
(collectively, the "REGISTRATION STATEMENT").
1.2. With respect to the Reorganizations of the CPFI Fund, CPFI Advisor Fund
and IDFI Fund, prior to or as of the close of each of the Target Funds'
business on the Closing Date (as defined in Paragraph 3.1 hereof) of the
Reorganization for that Target Fund, CPFI Portfolio or IDFI Portfolio, as
appropriate, shall conduct an in-kind liquidating distribution, and shall
deliver to CPFI Fund and CPFI Advisor Fund or IDFI Fund, as appropriate, all
of its assets or such pro rata share of its assets as is appropriate given
CPFI Fund's and CPFI Advisor Fund's or IDFI Fund's relative ownership of its
beneficial interests.
1.3. On or as soon as practicable prior to the Closing Date for a
Reorganization, the Target Fund (with the assistance of CPFI Portfolio or
IDFI Portfolio, to the extent appropriate), will declare and pay to its
shareholders of record one or more dividends and/or other distributions so
that it will have distributed substantially all (and in no event less than
98%) of its investment company taxable income (computed without regard to any
deduction for dividends paid) and realized net capital gain, if any, for the
current taxable year through the Closing Date.
1.4. Provided that all conditions precedent to a Reorganization have been
satisfied as of the Closing Date and based on the representations and
warranties each party herein provides to the others, the Trust or Advisor
Trust and Franklin Trust or Franklin NY Trust, as appropriate, agree to take
the following steps with respect to that Reorganization, the parties to which
and classes of shares to be issued in connection with which as set forth in
Exhibit A:
(a) The Target Fund shall transfer all of its Assets, as defined and set
forth in Paragraph 1.4(b), to the corresponding Acquiring Fund, and the
Acquiring Fund in exchange therefore shall deliver to the Target Fund
the number of full and fractional Acquiring Fund shares, determined in
the manner and as of the time on the Closing Date set forth in Paragraph
2.
(b) The assets of the Target Fund to be acquired by the Acquiring Fund shall
consist of all assets and property, including, without limitation, all
cash, securities, commodities and futures interests, claims (whether
absolute or contingent, known or unknown, accrued or unaccrued and
including, without limitation, any interest in pending or future legal
claims in connection with past or present portfolio holdings, whether in
the form of class action claims, opt-out or other direct litigation
claims, or regulator or government-established investor recovery fund
claims, and any and all resulting recoveries) and dividends or interest
receivable that are owned by the Target Fund and any deferred or prepaid
expenses shown as an asset on the books of the Target Fund on the
Closing Date, except for cash, bank deposits or cash equivalent
securities in an estimated amount necessary to (i) discharge the Target
Fund's unpaid liabilities on the Target Fund's books at the Closing Date
and (ii) pay such contingent liabilities, if any, as the Board of
Trustees of the Trust or Advisor Trust, as applicable, shall reasonably
deem to exist against the Target Fund at the Closing Date, for which
contingent and other appropriate liability reserves shall be established
on the Target Fund's books (collectively, "ASSETS").
(c) The Target Fund will use commercially reasonable efforts to discharge
all of its known liabilities and obligations prior to the Closing Date.
Neither the Acquiring Fund nor the Franklin Trust or Franklin NY Trust,
as applicable, shall assume any of the liabilities of the Target Fund,
whether accrued or contingent, known or unknown, existing at the Closing
Date (collectively, "LIABILITIES") and the Acquiring Fund and the
Franklin Trust or the Franklin NY Trust, as appropriate, specifically
disclaim the assumption of any such Liabilities.
(d) Immediately after the transfer of Assets provided for in this Paragraph,
the Target Fund will distribute to its shareholders of record ("TARGET
FUND SHAREHOLDERS") with respect to each class of shares, as set forth
in Exhibit A, the shares of the Acquiring Fund of the corresponding
class received by the Target Fund pursuant to Paragraph 1.4(a),
determined as of immediately after the close of business on the Closing
Date, on a pro rata basis within that class, and will completely
liquidate (except as to the contingent liability reserve provided for in
Paragraph 1.4(b) herein). Such distribution and liquidation will be
accomplished, with respect to each class of the Target Fund's shares, by
the transfer of the Acquiring Fund shares of the corresponding class
then credited to the account of the Target Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring
Fund in the names of the Target Fund Shareholders of the class. The
aggregate net asset value of each class of shares of the Acquiring Fund
to be so credited to the corresponding class or classes of Target Fund
Shareholders shall be equal to the aggregate net asset value of the
Target Fund's shares of the corresponding class or classes owned by the
Target Fund Shareholders on the Closing Date (as set forth in Exhibit
A). All issued and outstanding shares of the Target Fund will
simultaneously be canceled on the books of the Target Fund. The
Acquiring Fund shall not issue certificates representing shares in
connection with such exchange.
(e) Ownership of Acquiring Fund shares will be shown on its books, as such
are maintained by the Acquiring Fund's Transfer Agent, as defined in
Paragraph 3.2.
(f) Any reporting responsibility of the Target Fund, including, but not
limited to, the responsibility for filing regulatory reports, tax
returns, or other documents with the Commission, any state securities
commission, and any Federal, state or local tax authorities or any other
relevant regulatory authority, is and shall remain the responsibility of
the Target Fund.
2. VALUATION
2.1. With respect to each Reorganization:
(a) The value of the Target Fund's Assets shall be the value of such Assets
computed as of immediately after the close of business of the New York
Stock Exchange and after the declaration of any dividends on the Closing
Date, using the valuation procedures set forth in then-current
prospectus and statement of additional information with respect to the
Acquiring Fund, and valuation procedures established by the Acquiring
Fund's Board of Trustees and provided to the Target Fund prior to the
Closing Date.
(b) The net asset value of each class of Acquiring Fund shares issued in
connection with the Reorganization shall be the net asset value per
share computed with respect to that class as of the Closing Date, using
the valuation procedures set forth in the Acquiring Fund's then-current
prospectus and statement of additional information, and valuation
procedures established by the Acquiring Fund's Board of Trustees.
(c) The number of each class of Acquiring Fund shares issued (including
fractional shares, if any) in exchange for the Target Fund's Assets
shall be determined by dividing the value of the net assets with respect
to each class of shares of the Target Fund determined using the same
valuation procedures referred to in Paragraph 2.1(a), by the net asset
value of an Acquiring Fund share of the corresponding class, as set
forth in Exhibit A, determined in accordance with Paragraph 2.1(b).
(d) All computations of value shall be made by the Target Fund's designated
recordkeeping agent and shall be subject to review by the Acquiring
Fund's recordkeeping agent and by each of the Target Fund's and
Acquiring Fund's respective independent registered public accountants.
3. CLOSING AND CLOSING DATE
3.1. Each Reorganization shall close on August 28, 2009 or such other date as
the parties may agree with respect to any or all Reorganizations (the
"CLOSING DATE"). All acts taking place at the closing of the Reorganizations
("CLOSING") shall be deemed to take place simultaneously as of immediately
after the close of business on the Closing Date unless otherwise agreed to by
the parties. The close of business on the Closing Date shall be as of 4:00
p.m., Eastern Time. The Closing shall be held by facsimile, email or such
other communication means as the parties may reasonably agree.
3.2. With respect to each Reorganization:
(a) The Trust or Advisor Trust, as appropriate, shall direct the custodian
for the Target Fund ("CUSTODIAN"), to deliver, at the Closing, a
certificate of an authorized officer stating that (i) except as
permitted by Paragraphs 1.4(b) and 3.2(b) hereunder, the Assets shall
have been delivered in proper form to the corresponding Acquiring Fund
no later than as of the close of business on the Closing Date, and (ii)
all necessary taxes in connection with the delivery of the Assets,
including all applicable Federal and state stock transfer stamps, if
any, have been paid or provision for payment has been made.
(b) The Target Fund's portfolio securities represented by a certificate or
other written instrument shall be transferred and delivered by the
Target Fund as of the Closing Date for the account of the corresponding
Acquiring Fund duly endorsed in proper form for transfer and in such
condition as to constitute good delivery thereof. The Target Fund shall
direct the Custodian to deliver as of the Closing Date by book entry, in
accordance with the customary practices of the Custodian and any
securities depository, as defined in Rule 17f-4 under the Investment
Company Act of 1940, as amended (the "1940 ACT"), in which the Assets
are deposited, the Target Fund's portfolio securities and instruments so
held. The cash to be transferred by a Target Fund shall be delivered by
wire transfer of federal funds on the Closing Date. If, on the Closing
Date, the Target Fund is unable to make delivery in the manner
contemplated by this Paragraph of securities held by the Target Fund for
the reason that any of such securities purchased prior to the Closing
Date have not yet been delivered to the Target Fund or its broker, then
the corresponding Acquiring Fund may, in its sole discretion, waive the
delivery requirements of this Paragraph with respect to said undelivered
securities if the Target Fund has delivered to the Acquiring Fund or its
custodian by or on the Closing Date, and with respect to said
undelivered securities, executed copies of an agreement of assignment
and escrow and due bills executed on behalf of said broker or brokers,
together with such other documents as may be required by the Acquiring
Fund or its custodian, including brokers' confirmation slips.
(c) At such time prior to the Closing Date as the parties mutually agree,
the Target Fund shall provide (i) instructions and related information
to the Acquiring Fund or its transfer agent with respect to the shares
of each class of the Acquiring Fund to be issued to the Target Fund
Shareholders, including names, addresses and tax withholding status of
the Target Fund Shareholders as of the date agreed upon (such
information to be updated as of the Closing Date, as necessary) and (ii)
the information and documentation maintained by the Target Fund or its
agents relating to the identification and verification of the Target
Fund Shareholders under the USA PATRIOT ACT and other applicable
anti-money laundering laws, rules and regulations (the "AML
Documentation") and such other information as the Acquiring Fund may
reasonably request. The Acquiring Fund and its transfer agent shall
have no obligation to inquire as to the validity, propriety or
correctness of any such instruction, information or documentation, but
shall, in each case, assume that such instruction, information or
documentation is valid, proper, correct and complete.
(d) The Trust or Advisor Trust, as appropriate, shall direct Citi Fund
Services Ohio, Inc., in its capacity as transfer agent for the Target
Fund ("TRANSFER AGENT"), to deliver to Franklin Trust or Franklin NY
Trust, as appropriate, at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the
Target Fund Shareholders and the number and percentage ownership of
outstanding shares of each class owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and
deliver a confirmation evidencing the Acquiring Fund shares to be
credited on the Closing Date to the Secretary of the Target Fund, or
provide other evidence satisfactory to the Trust that such Acquiring
Fund shares have been credited to the Target Fund Shareholders' accounts
on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments,
certificates, if any, receipts or other documents as such other party or
its counsel may reasonably request.
(e) In the event that on the Closing Date (a) the New York Stock Exchange or
another primary trading market for portfolio securities of the Acquiring
Fund or the Target Fund (each, an "EXCHANGE") shall be closed to trading
or trading thereupon shall be restricted, or (b) trading or the
reporting of trading on such Exchange or elsewhere shall be disrupted so
that, in the judgment of the Board of Trustees of the Trust or Advisor
Trust or, as applicable, Franklin Trust or Franklin NY Trust, accurate
appraisal of the value of the net assets of the Acquiring Fund or the
Target Fund, respectively, is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall
have been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. With respect to each Reorganization, the Trust or Advisor Trust, as
applicable, on behalf of the Target Fund, represents and warrants to the
corresponding Acquiring Fund, as follows:
(a) The Target Fund is duly organized as a series of the Trust or Advisor
Trust, as appropriate, which is a business trust validly existing and in
good standing under the laws of the Commonwealth of Massachusetts, with
power under the Trust's or Advisor Trust's Declaration of Trust, as
amended from time to time, to own all of its Assets, to carry on its
business as it is now being conducted and to enter into this Agreement
and perform its obligations hereunder;
(b) The Trust or Advisor Trust, as appropriate, is a registered investment
company classified as a management company of the open-end type, and its
registration with the Commission as an investment company under the 1940
Act, and the registration of the shares of the Target Fund under the
Securities Act of 1933, as amended ("1933 ACT"), is in full force and
effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority or the Financial Industry Regulatory Authority
("FINRA") is required for the consummation by the Target Fund of the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the Securities Exchange Act of 1934, as amended
("1934 ACT"), the 1940 Act and state securities laws;
(d) The current prospectus and statement of additional information of the
Target Fund and each prospectus and statement of additional information
of the Target Fund used at all times prior to the date of this Agreement
conforms or conformed at the time of its use in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder and does not or did
not at the time of its use include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not materially misleading;
(e) Except as otherwise disclosed in writing to and accepted by or on behalf
of the Acquiring Fund, on the Closing Date, the Target Fund will have
good and marketable title to the Assets and full right, power, and
authority to sell, assign, transfer and deliver such Assets hereunder
free of any liens or other encumbrances, and upon delivery and payment
for such Assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act;
(f) The Target Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material
violation of the Trust's or Advisor Trust's, as appropriate, or the
Master Trust's, Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Target Fund is a party or by which it is bound, or (ii) the acceleration
of any obligation, or the imposition of any lien, encumbrance, penalty
or additional fee under any agreement, indenture, instrument, contract,
lease, judgment or decree to which the Target Fund, the Trust, the
Advisor Trust or the Master Trust, is a party or by which it is bound;
(g) All material contracts or other commitments of the Target Fund (other
than this Agreement and certain investment contracts, including options,
futures, and forward contracts) will terminate with respect to the
Target Fund without liability to the Target Fund on or prior to the
Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by or on behalf
of the Acquiring Fund, (i) no litigation or administrative proceeding or
investigation of or before any court, tribunal, arbitrator, governmental
body or FINRA is presently pending or, to the Target Fund's knowledge,
threatened against the Target Fund that, if adversely determined, would
materially and adversely affect the Target Fund's financial condition or
the conduct of its business, and (ii) without any special investigation
or inquiry, to the knowledge of the portfolio managers of the Target
Fund as identified in the Target Fund's prospectus (the "Target Fund
Portfolio Managers"), no litigation or administrative proceeding or
investigation of or before any court, tribunal, arbitrator, governmental
body or FINRA is presently pending or threatened against any of the
Target Fund's properties or assets, that, if adversely determined, would
materially and adversely affect the Target Fund's financial condition or
the conduct of its business. The Target Fund and, with respect to the
Target Fund's properties or assets, the Target Fund Portfolio Managers,
without any special investigation or inquiry, know of no facts that
might form the basis for the institution of such proceedings and the
Target Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the
transactions herein contemplated;
(i) The financial statements of the Target Fund as of and for the year ended
October 31, 2008 have been audited by KPMG LLP, independent registered
public accounting firm. Such statements, as well as the unaudited,
semi-annual financial statements for the semi-annual period ended April
30, 2009, are in accordance with accounting principles generally
accepted in the United States of America ("GAAP") consistently applied,
----
and such statements (copies of which have been furnished to the
Acquiring Fund) present fairly, in all material respects, the financial
condition of the Target Fund as of such date in accordance with GAAP,
and there are no known contingent liabilities of the Target Fund
required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(j) Since October 31, 2008, there has not been any material adverse change
in the Target Fund's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of
business, except as otherwise disclosed to and accepted by the Acquiring
Fund in writing. For the purposes of this subparagraph (j), a decline
in net asset value per share of Target Fund shares due to declines in
market values of securities held by the Target Fund, the discharge of
the Target Fund's ordinary course liabilities, or the redemption of the
Target Fund's shares by shareholders of the Target Fund shall not
constitute a material adverse change;
(k) On the Closing Date, Trust or Advisor Trust, as appropriate, has duly
and timely filed, on behalf of Target Fund, all Tax (as defined below)
returns and reports (including information returns), which are required
to be filed by such Target Fund, and all such returns and reports
accurately state the amount of Tax owed for the periods covered by the
returns, or, in the case of information returns, the amount and
character of income required to be reported by such Target Fund. On
behalf of Target Fund, Trust or Advisor Trust, as appropriate, has paid
or made provision and properly accounted for all Taxes (as defined
below) due or properly shown to be due on such returns and reports. The
amounts set up as provisions for Taxes in the books and records of
Target Fund as of the close of business on the Closing Date will, to the
extent required by GAAP, be sufficient for the payment of all Taxes of
any kind, whether accrued, due, absolute, contingent or otherwise, which
were or which may be payable by Target Fund for any periods or fiscal
years prior to and including the close of business on the Closing Date,
including all Taxes imposed before or after the close of business on the
Closing Date that are attributable to any such period or fiscal year.
No return filed by Target Fund is currently being audited by the
Internal Revenue Service or by any state or local taxing authority. As
used in this Agreement, "TAX" or "TAXES" means all federal, state, local
and foreign (whether imposed by a country or political subdivision or
authority thereunder) income, gross receipts, excise, sales, use, value
added, employment, franchise, profits, property, ad valorem or other
taxes, stamp taxes and duties, fees, assessments or charges, whether
payable directly or by withholding, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority (foreign or domestic) with respect thereto. To its knowledge,
there are no levies, liens or encumbrances relating to Taxes existing,
threatened or pending with respect to the assets of Target Fund. There
are no known actual or proposed deficiency assessments with respect to
any Taxes payable by it;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Target Fund has met (or will meet) the
requirements of Subchapter M of the Code for qualification as a
regulated investment company ("RIC"), has been (or will be) eligible to
and has computed (or will compute) its Federal income tax under Section
852 of the Code, and will have distributed all of its investment company
taxable income and net capital gain (as defined in the Code) that has
accrued through the Closing Date, and before the Closing Date will have
declared dividends sufficient to distribute all of its investment
company taxable income and net capital gain for the period ending on the
Closing Date. Consummation of the transactions contemplated by this
Agreement will not cause the Target Fund to fail to be qualified as a
RIC as of the Closing Date;
(m) All issued and outstanding shares of the Target Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Trust or the Advisor Trust, as
appropriate, and, in every state where offered or sold, such offers and
sales have been in compliance in all material respects with applicable
registration requirements of the 1933 Act and state and District of
Columbia securities laws. All of the issued and outstanding shares of
the Target Fund will, at the time of Closing, be held by the persons and
in the amounts set forth in the records of the Transfer Agent, on behalf
of the Target Fund, as provided in Paragraph 3.2(d). The Target Fund
does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the shares of the Target Fund, nor is
there outstanding any security convertible into any of the Target Fund's
shares, except for the automatic conversion right of Class B
shareholders of the Target Fund to convert to Class A shares in
accordance with the terms set forth in the Target Fund's prospectus and
statement of additional information;
(n) The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary action, if
any, on the part of the Trustees of the Trust or Advisor Trust, as
appropriate, and subject to the approval of the shareholders of the
Target Fund, this Agreement will constitute a valid and binding
obligation of the Target Fund, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and
to general equity principles;
(o) The information to be furnished by the Target Fund for use in the
Registration Statement and other documents filed or to be filed with any
Federal, state or local regulatory authority (including the Financial
Industry Regulatory Authority), which may be necessary in connection
with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations
thereunder applicable thereto;
(p) The books and records of Target Fund, including, without limitation, FIN
48 work papers and supporting statements, made available to Acquiring
Fund and/or its counsel and authorized agents are true and correct in
all material respects and contain no material omissions with respect to
the business and operations of Target Fund;
(q) The Trust or Advisor Trust, as appropriate, is not under the
jurisdiction of a court in a Title 11 or similar case within the meaning
of Section 368(a)(3)(A) of the Code;
(r) The Target Fund has no unamortized or unpaid organizational fees or
expenses; and
(s) The Target Fund shall waive any contingent deferred sales charge to
which Target Fund Shareholders holding Class B shares may be subject as
a result of the Reorganization.
4.2. With respect to each Reorganization, the Franklin Trust or Franklin NY
Trust, as appropriate, on behalf of the Acquiring Fund, represents and
warrants to the corresponding Target Fund as follows:
(a) The Acquiring Fund is duly organized as a series of the Franklin Trust
or Franklin NY Trust, as appropriate, which is a statutory trust duly
organized, validly existing, and in good standing under the laws of the
State of Delaware, with power under its Agreement and Declaration of
Trust, as amended from time to time, to own all of its properties and
assets and to carry on its business as it is now being conducted;
(b) The Franklin Trust or the Franklin NY Trust, as appropriate, is a
registered investment company classified as a management company of the
open-end type, and its registration with the Commission as an investment
company under the 1940 Act and the registration of shares of the
Acquiring Fund under the 1933 Act, is in full force and effect;
(c) No consent, approval, authorization, or order of any court, governmental
authority or FINRA is required for the consummation by the Acquiring
Fund of the transactions contemplated herein, except such as have been
or will be (at or prior to the Closing Date) obtained under the 1933
Act, the 1934 Act, the 1940 Act and state securities laws;
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional
information of the Acquiring Fund used at all times prior to the date of
this Agreement conforms or conformed at the time of its use in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission thereunder and
does not or did not at the time of its use include any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;
(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances that have been incurred
in the ordinary course of business of the Acquiring Fund, including
without limitation, those that have arisen under (i) the Term
Asset-Backed Securities Loan Facility operated by the Federal Reserve
Bank of New York or (ii) International Swaps and Derivatives
Association, Inc. (ISDA) agreements, or as to which the Target Fund has
received notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material
violation of, as appropriate, the Franklin Trust's or Franklin NY
Trust's Agreement and Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking
to which the Acquiring Fund is a party or by which it is bound, or (ii)
the acceleration of any obligation, or the imposition of any lien,
encumbrance, penalty, or additional fee under any agreement, indenture,
instrument, contract, lease, judgment or decree to which the Acquiring
Fund, the Franklin Trust or the Franklin NY Trust is a party or by which
it is bound;
(g) Except as otherwise disclosed in writing to and accepted by or on behalf
of the Target Fund, (i) no litigation or administrative proceeding or
investigation of or before any court, tribunal, arbitrator, governmental
body or FINRA is presently pending or, to the Acquiring Fund's
knowledge, threatened against the Acquiring Fund that, if adversely
determined, would materially and adversely affect the Acquiring Fund's
financial condition or the conduct of its business, and (ii) without any
special investigation or inquiry, to the knowledge of the portfolio
managers of the Acquiring Fund as identified in the Acquiring Fund's
prospectus (the "Acquiring Fund Portfolio Managers"), no litigation or
administrative proceeding or investigation of or before any court,
tribunal, arbitrator, governmental body or FINRA is presently pending or
threatened against any of the Acquiring Fund's properties or assets,
that, if adversely determined, would materially and adversely affect the
Acquiring Fund's financial condition or the conduct of its business. The
Acquiring Fund and, with respect to the Acquiring Fund's properties or
assets, the Acquiring Fund Portfolio Managers, without any special
investigation or inquiry, know of no facts that might form the basis for
the institution of such proceedings and the Acquiring Fund is not a
party to or subject to the provisions of any order, decree or judgment
of any court or governmental body that materially and adversely affects
its business or its ability to consummate the transactions herein
contemplated;
(h) The financial statements of the Acquiring Fund as of and for the year
ended October 31, 2008 (if a series of Franklin Trust) or September 30,
2008 (if a series of Franklin NY Trust) have been audited by
PricewaterhouseCoopers LLP, independent registered public accounting
firm. Such statements, as well as the unaudited, semi-annual financial
statements of the Acquiring Fund for the semi-annual period ended April
30, 2009 (if a series of Franklin Trust) or ▇▇▇▇▇ ▇▇, ▇▇▇▇ (▇▇ a series
of Franklin NY Trust), are in accordance with GAAP consistently applied,
and such statements (copies of which have been furnished to the Target
Fund) present fairly, in all material respects, the financial condition
of the Acquiring Fund as of such date in accordance with GAAP, and there
are no known contingent liabilities of the Acquiring Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance
with GAAP as of such date not disclosed therein;
(i) Since October 31, 2008 (if the Acquiring Fund is a series of Franklin
Trust) or September 30, 2008 (if the Acquiring Fund is a series of
Franklin NY Trust), there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of
business, except as otherwise disclosed to and accepted by the Target
Fund in writing. For purposes of this subparagraph (i), a decline in
net asset value per share of the Acquiring Fund's shares due to declines
in market values of securities held by the Acquiring Fund, the discharge
of the Acquiring Fund's ordinary course liabilities, or the redemption
of the Acquiring Fund's shares by shareholders of the Acquiring Fund,
shall not constitute a material adverse change;
(j) On the Closing Date, it has duly and timely filed, on behalf of the
Acquiring Fund, all Tax (as defined below) returns and reports
(including information returns), which are required to be filed by such
Acquiring Fund, and all such returns and reports accurately state the
amount of Tax owed for the periods covered by the returns, or, in the
case of information returns, the amount and character of income required
to be reported by such Acquiring Fund. On behalf of Acquiring Fund,
Franklin Trust or Franklin NY Trust, as appropriate, has paid or made
provision and properly accounted for all Taxes due or properly shown to
be due on such returns and reports. The amounts set up as provisions
for Taxes in the books and records of Acquiring Fund as of the close of
business on the Closing Date will, to the extent required by generally
accepted accounting principles, be sufficient for the payment of all
Taxes of any kind, whether accrued, due, absolute, contingent or
otherwise, which were or which may be payable by Acquiring Fund for any
periods or fiscal years prior to and including the close of business on
the Closing Date, including all Taxes imposed before or after the close
of business on the Closing Date that are attributable to any such period
or fiscal year. No return filed by Acquiring Fund is currently being
audited by the Internal Revenue Service or by any state or local taxing
authority. To its knowledge, there are no levies, liens or encumbrances
relating to Taxes existing, threatened or pending with respect to the
assets of Acquiring Fund. There are no known actual or proposed
deficiency assessments with respect to any Taxes payable by it;
(k) For each taxable year of its operation (including the taxable year that
includes the Closing Date), the Acquiring Fund has met (or will meet)
the requirements of Subchapter M of the Code for qualification as a RIC,
has been eligible to (or will be eligible to) and has computed (or will
compute) its Federal income tax under Section 852 of the Code, and has
distributed all of its investment company taxable income and net capital
gain (as defined in the Code) for periods ending prior to the Closing
Date. Consummation of the transactions contemplated by this Agreement
will not cause the Acquiring Fund to fail to be qualified as a RIC as of
the Closing;
(l) All issued and outstanding Acquiring Fund shares are, and on the Closing
Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Franklin Trust and Franklin NY Trust, as
appropriate, and, in every state where offered or sold, all offers and
sales have been in compliance in all material respects with applicable
registration requirements of the 1933 Act and state and District of
Columbia securities laws. The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any
Acquiring Fund shares, nor is there outstanding any security convertible
into any Acquiring Fund shares, except for the automatic conversion
right of Class B shareholders of the Acquiring Fund to convert to Class
A shares in accordance with the terms set forth in the Acquiring Fund's
prospectus and statement of additional information;
(m) The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary action, if
any, on the part of the Trustees of the Franklin Trust or Franklin NY
Trust, as appropriate, on behalf of the Acquiring Fund, and this
Agreement will constitute a valid and binding obligation of the
Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general
equity principles;
(n) The shares of the Acquiring Fund to be issued and delivered to the
Target Fund, for the account of the Target Fund Shareholders, pursuant
to the terms of this Agreement, as set forth in Exhibit A, will on the
Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund shares, and
will be fully paid and non-assessable by the Acquiring Fund; and
(o) The information to be furnished by the Acquiring Fund for use in the
Registration Statement and other documents that may be necessary in
connection with the transactions contemplated hereby shall be accurate
and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations
applicable thereto, and, insofar as it relates to the Franklin Trust or
Franklin NY Trust (as applicable) and the Acquiring Fund, the
Registration Statement, and any amendment or supplement to the foregoing
will, from the effective date of the Registration Statement through the
date of the meeting of shareholders of the Target Fund contemplated
therein and on the Closing Date (i) not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially
misleading, provided, however, that the representations and warranties
of this subparagraph (o) shall not apply to statements in or omissions
from the Registration Statement made in reliance upon and in conformity
with information that was furnished by the Target Fund for use therein,
and (ii) comply in all material respects with the provisions of the 1933
Act, the 1934 Act, and the 1940 Act and the rules and regulations
thereunder.
(p) The Franklin Trust or Franklin NY Trust, as appropriate, is not under
the jurisdiction of a court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code;
(q) The Acquiring Fund has no unamortized or unpaid organizational fees or
expenses.
5. COVENANTS OF THE ACQUIRING FUND AND THE TARGET FUND
5.1. With respect to each Reorganization:
(a) The Acquiring Fund and the Target Fund each: (i) will operate its
business in the ordinary course and substantially in accordance with
past practices between the date hereof and the Closing Date for the
Reorganization, it being understood that such ordinary course of
business will include changes to the composition of the portfolio of the
Target Fund in anticipation of the Reorganization and the declaration
and payment of customary dividends and distributions, and any other
distribution that may be advisable, and (ii) shall use its reasonable
best efforts to preserve intact its business organization and material
assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business operations of the Acquiring
Fund or the Target Fund, as appropriate, in the ordinary course in all
material respects.
(b) The Trust or Advisor Trust, as appropriate, will call a meeting of the
shareholders of the Target Fund to consider and act upon this Agreement
and to take all other action necessary to obtain approval of the
transactions contemplated herein. Trust and Advisor Trust, as
appropriate, shall, through its Board of Trustees, recommend to the
shareholders of Target Fund approval of this Agreement.
(c) The Target Fund covenants that the Class A, C and Advisor Acquiring Fund
shares to be issued hereunder (as set forth in Exhibit A) are not being
acquired for the purpose of making any distribution thereof, other than
in accordance with the terms of this Agreement.
(d) The Target Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of the Target Fund's shares.
(e) The Trust or Advisor Trust, as appropriate, will at the Closing (or,
with respect to delivery of the tax basis of a Target Fund's investments
to be transferred as provided in clause (1) below, will within five
business days after the Closing Date in the case of CPFI Fund and IDFI
Fund and within one business day after the Closing Date in the case of
NYTFB Fund) provide the Acquiring Fund with (1) a statement of the
respective tax basis of all investments to be transferred by the Target
Fund to the Acquiring Fund, (2) a copy (which may be in electronic form)
of the shareholder ledger accounts including, without limitation, the
name, address and taxpayer identification number of each shareholder of
record, the number of shares of beneficial interest held by each
shareholder, the dividend reinvestment elections applicable to each
shareholder, and the backup withholding and nonresident alien
withholding certifications, notices or records on file with the Target
Fund with respect to each shareholder, for all of the shareholders of
record of the Target Fund as of the close of business on the Closing
Date, who are to become holders of the Acquiring Fund as a result of the
transfer of assets that is the subject of this Agreement (the "TARGET
-------
FUND SHAREHOLDER DOCUMENTATION"), certified by its transfer agent or its
President or its Vice-President to the best of their knowledge and
belief, and (3) all FIN 48 work papers and supporting statements
pertaining to the Target Fund (the "FIN 48 WORKPAPERS").
(f) Subject to the provisions of this Agreement, the Acquiring Fund and the
Target Fund will each take, or cause to be taken, all action, and do or
cause to be done all things, reasonably necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
(g) As soon as is reasonably practicable after the Closing, the Target Fund
will make a liquidating distribution to its shareholders consisting of
the Class A, C and Advisor Acquiring Fund shares received at the
Closing, as set forth in Paragraph 1.4(d) hereof.
(h) The Acquiring Fund and the Target Fund shall each use their reasonable
best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as
promptly as practicable.
(i) The Target Fund shall, from time to time, as and when reasonably
requested by the Acquiring Fund, execute and deliver or cause to be
executed and delivered all such assignments and other instruments, and
will take or cause to be taken such further action as the Acquiring Fund
may reasonably deem necessary or desirable in order to vest in and
confirm the Acquiring Fund's title to and possession of all the Assets
and otherwise to carry out the intent and purpose of this Agreement.
(j) The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state blue sky or securities laws as may be necessary in
order to continue its operations after the Closing Date.
(k) As promptly as practicable, but in any case within sixty days after the
Closing Date, each Target Fund shall furnish the corresponding Acquiring
Fund, in such form as is reasonably satisfactory to such Acquiring Fund, a
statement of the earnings and profits of such Target Fund for federal
income tax purposes that will be carried over by such Acquiring Fund as a
result of Section 381 of the Code, which will be reviewed by KPMG, LLP and
certified by such Target Fund's President and Treasurer or Chief Financial
Officer.
(l) It is the intention of the parties that the transaction will
qualify as a reorganization with the meaning of Section 368(a) of the
Code. None of the parties to this Agreement shall take any action or
cause any action to be taken (including, without limitation the filing
of any tax return) that is inconsistent with such treatment or results
in the failure of the transaction to qualify as a reorganization with
the meaning of Section 368(a) of the Code.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET FUND
6.1. With respect to each Reorganization, the obligations of the Target Fund
to consummate the transactions provided for herein shall be subject, at the
Target Fund's election, to the performance by the Acquiring Fund of all the
obligations to be performed by it hereunder on or before the Closing Date,
and, in addition thereto, the following further conditions:
(a) All representations and warranties of the Acquiring Fund and the
Franklin Trust or Franklin NY Trust, as appropriate, contained in this
Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date;
(b) The Franklin Trust or Franklin NY Trust, as appropriate, shall have
delivered to the Trust or Advisor Trust, as appropriate, on the Closing
Date a certificate executed in its name by its Chief Executive Officer
and Treasurer, in form and substance reasonably satisfactory to Target
Fund and dated as of the Closing Date, to the effect that the
representations and warranties of or with respect to the Acquiring Fund
made in this Agreement are true and correct at and as of the Closing
Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as the Target Fund shall
reasonably request;
(c) The Franklin Trust or Franklin NY Trust, as appropriate, and the
Acquiring Fund shall have performed all of the covenants and complied
with all of the provisions required by this Agreement to be performed or
complied with by the Franklin Trust or Franklin NY Trust and the
Acquiring Fund, on or before the Closing Date;
(d) The Target Fund and the Acquiring Fund shall have agreed on the number
of full and fractional Class A, C and Advisor shares of the Acquiring
Fund to be issued in connection with the Reorganization after such
number has been calculated in accordance with Paragraph 1.4 hereto;
(e) The Trust or Advisor Trust, as appropriate, shall have received on the
Closing Date the opinion of ▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP, counsel
to the Franklin Trust or Franklin NY Trust, as appropriate, (which may
rely as to matters governed by the laws of the State of Delaware on an
opinion of Delaware counsel and/or certificates of officers or Trustees
of the Franklin Trust or Franklin NY Trust), dated as of the Closing
Date, covering the following points:
(i) The Franklin Trust or Franklin NY Trust, as appropriate,
is a statutory trust duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the trust power
to own all of the Acquiring Funds' properties and assets and to carry on
its business, including that of the Acquiring Fund, as a registered
investment company;
(ii) The Agreement has been duly authorized by the Franklin
Trust or Franklin NY Trust, as appropriate, on behalf of the Acquiring
Fund and, assuming due authorization, execution and delivery of the
Agreement by the Trust, Advisor Trust, as appropriate, Master Trust and
HGAM, is a valid and binding obligation of the Franklin Trust or
Franklin NY Trust, as appropriate, on behalf of the Acquiring Fund
enforceable against it in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and to
general equity principles;
(iii)The Acquiring Fund shares to be issued to the Target Fund
Shareholders as provided by this Agreement are duly authorized, upon
such delivery will be validly issued and outstanding, and will be fully
paid and non-assessable by the Franklin Trust or Franklin NY Trust, as
appropriate, and no shareholder of an Acquiring Fund has any preemptive
rights to subscription or purchase in respect thereof;
(iv) The execution and delivery of the Agreement did not, and
the consummation of the transactions contemplated hereby will not,
result in a material violation of, as appropriate, the Franklin Trust's
or Franklin NY Trust's Agreement and Declaration of Trust or By-Laws or
any provision of any agreement (known to such counsel) to which the
Franklin Trust or Franklin NY Trust is a party or by which it is bound
or, to the knowledge of such counsel, result in the acceleration of any
obligation or the imposition of any penalty under any agreement,
judgment or decree to which the Franklin Trust or Franklin NY Trust is a
party or by which it is bound;
(v) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the
United States or the State of Delaware is required to be obtained by the
Franklin Trust or Franklin NY Trust in order to consummate the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be
required under state securities laws;
(vi) The Franklin Trust or Franklin NY Trust, as appropriate,
is a registered investment company classified as a management company of
the open-end type with respect to each series of shares it offers,
including those of the Acquiring Fund, under the 1940 Act, and its
registration with the Commission as an investment company under the 1940
Act is in full force and effect; and
(vii)To the knowledge of such counsel, and except as otherwise
disclosed to the Trust or Advisor Trust pursuant to Paragraph 4.2(g)
hereunder, no litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or
threatened as to the Franklin Trust or Franklin NY Trust or the
Acquiring Fund and neither the Franklin Trust or Franklin NY Trust, as
appropriate, nor the Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
7.1. With respect to each Reorganization, the obligations of the Acquiring
Fund to complete the transactions provided for herein shall be subject, at
the Acquiring Fund's election, to the performance by the Target Fund of all
of the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
(a) All representations and warranties of the Trust or Advisor Trust, as
appropriate, and the Target Fund, contained in this Agreement shall be
true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date;
(b) The Trust or Advisor Trust, as appropriate, on behalf of the Target
Fund, shall have delivered to the Franklin Trust or Franklin NY Trust,
as appropriate, on the Closing Date (i) a statement of the Target Fund's
assets, together with a list of portfolio securities of the Target Fund
showing the tax costs of such securities by lot and the holding periods
of such securities, as of the Closing Date, certified by the Treasurer
of the Trust or Advisor Trust, as appropriate, (ii) the Target Fund
Shareholder Documentation, (iii) the AML Documentation and (iv) the FIN
48 Workpapers;
(c) The Trust or Advisor Trust, as appropriate, shall have delivered to the
Franklin Trust or Franklin NY Trust, as appropriate, on the Closing Date
a certificate executed in its name by its President and Treasurer, in
form and substance satisfactory to the Acquiring Fund and dated as of
the Closing Date, to the effect that the representations and warranties
of or with respect to the Target Fund made in this Agreement are true
and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement, and as to
such other matters as the Acquiring Fund shall reasonably request;
(d) The Trust or Advisor Trust, as appropriate, and the Target Fund shall
have performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied with
by the Trust or Advisor Trust, as appropriate, and the Target Fund, on
or before the Closing Date;
(e) The Target Fund and the Acquiring Fund shall have agreed on the number
of full and fractional Class A, C and Advisor shares of the Acquiring
Fund to be issued in connection with the Reorganization after such
number has been calculated in accordance with Paragraph 1.4 hereto;
(f) The Target Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its shareholders
(i) all of its investment company taxable income and all of its net
realized capital gains, if any, for the period from the close of its
last fiscal year to 4:00 p.m. Eastern time on the Closing Date; and (ii)
any undistributed investment company taxable income and net realized
capital gains from any period to the extent not otherwise already
distributed;
(g) The Franklin Trust or Franklin NY Trust, as appropriate, shall have
received on the Closing Date the opinion of Dechert LLP, counsel to the
Trust or Advisor Trust, as appropriate, (which may rely on certificates
of officers or Trustees of the Trust or Advisor Trust), covering the
following points:
(i) The Trust or Advisor Trust, as appropriate, is a business
trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has the trust power to own
all of Target Fund's properties and assets, and to carry on its
business, including that of the Target Fund, as presently conducted;
(ii) The Agreement has been duly authorized by the Trust or
Advisor Trust, as appropriate, on behalf of the Target Fund, and,
assuming due authorization, execution and delivery of the Agreement by
the Franklin Trust or Franklin NY Trust, as applicable, is a valid and
binding obligation of the Trust or Advisor Trust, on behalf of the
Target Fund, enforceable against the Trust or Advisor Trust in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles;
(iii) The execution and delivery of the Agreement did not, and
the consummation of the transactions contemplated hereby will not,
result in a material violation of, as appropriate, the Trust's or
Advisor Trust's Declaration of Trust or By-Laws or any provision of any
agreement (known to such counsel) to which the Trust or Advisor Trust is
a party or by which it is bound or, to the knowledge of such counsel,
result in the acceleration of any obligation or the imposition of any
penalty under any agreement, judgment or decree to which the Trust or
Advisor Trust is a party or by which it is bound;
(iv) To the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the
United States or the Commonwealth of Massachusetts is required to be
obtained by the Trust or Advisor Trust in order to consummate the
transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be
required under state securities laws;
(v) The Trust or Advisor Trust, as appropriate, is a
registered investment company classified as a management company of the
open-end type with respect to each series of shares it offers, including
those of the Target Fund, under the 1940 Act and its registration with
the Commission as an investment company under the 1940 Act is in full
force and effect;
(vi) The outstanding shares of the Target Fund are registered
under the 1933 Act, and such registration is in full force and effect;
and
(vii) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Trust or
Advisor Trust or Target Fund and neither the Trust or Advisor Trust nor
the Target Fund is a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially
and adversely affects its business.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND
THE TARGET FUND
With respect to each Reorganization, if any of the conditions set forth
below have not been satisfied on or before the Closing Date with respect to
the Target Fund or the Acquiring Fund, the other party to this Agreement
shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1. The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
the Target Fund in accordance with the provisions of the Trust's or Advisor
Trust's, as appropriate, Declaration of Trust and By-Laws, applicable
Massachusetts law and the 1940 Act, and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the Target Fund nor
the Acquiring Fund may waive the conditions set forth in this Paragraph 8.1;
8.2. The Agreement and transactions contemplated herein shall have been
approved by the Board of Trustees of the Trust and Advisor Trust, as
appropriate, and Franklin Trust or Franklin NY Trust, as appropriate, and
each party shall have delivered a copy to the other of the resolutions
approving this Agreement and the transactions contemplated in connection
herewith adopted by the other party's Board of Trustees, certified by the
Secretary or equivalent officer. Notwithstanding anything herein to the
contrary, neither the Target Fund nor the Acquiring Fund may waive the
conditions set forth in this Paragraph 8.2;
8.3. On the Closing Date no action, suit or other proceeding shall be pending
or, to, as applicable, the Trust's or Advisor Trust's and, as applicable,
Franklin Trust or Franklin NY Trust's knowledge, threatened before any court
or governmental agency in which it is sought to restrain or prohibit, or
obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein;
8.4. All consents of other parties and all other consents, orders and permits
of Federal, state and local regulatory authorities deemed necessary by the
Acquiring Fund or Target Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of
the Acquiring Fund or the Target Fund, provided that either party hereto may
for itself waive any of such conditions;
8.5. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act; and
8.6. Dechert LLP shall deliver an opinion addressed to the Trust or Advisor
Trust, as applicable, and Franklin Trust or Franklin NY Trust, as applicable,
substantially to the effect that, based upon certain facts, assumptions, and
representations, the transaction contemplated by this Agreement shall
constitute a tax-free reorganization for Federal income tax purposes, unless,
based on circumstances existing at the time of Closing, Dechert LLP
determines that the transaction contemplated by this Agreement does not
qualify as such. The delivery of such opinion is conditioned upon receipt by
Dechert LLP of representations it shall request of the parties.
Notwithstanding anything herein to the contrary, no party may waive the
condition set forth in this Paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1. The parties hereto represent and warrant to each other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2. Each of Franklin Advisers and HSBC agrees to bear or arrange for an
entity under common ownership to bear the expenses relating to the
Reorganizations, allocated among Franklin Advisers and HSBC as set forth in a
Letter Agreement dated as of the date hereof. The costs of the
Reorganizations shall include, but not be limited to, costs associated with
obtaining any necessary order of exemption from the 1940 Act, if any,
preparation, printing and distribution of the Registration Statement, legal
fees, accounting fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by
the party directly incurring such expenses if and to the extent that the
payment by another person of such expenses would result in the
disqualification of such party as a "regulated investment company" within the
meaning of Section 851 of the Code.
10. FINAL TAX RETURNS AND FORMS 1099 OF TARGET FUND
10.1.After the Closing of a Reorganization, Trust or Advisor Trust, as
appropriate, shall or shall cause its agents to prepare any federal, state or
local Tax returns, including any Forms 1099, required to be filed by Trust or
Advisor Trust, as appropriate, with respect to the Target Fund's final
taxable year ending with its complete liquidation and for any prior periods
or taxable years and shall further cause such Tax returns and Forms 1099 to
be duly filed with the appropriate taxing authorities.
10.2.Notwithstanding the provisions of Paragraph 9 hereof, any expenses
incurred by Trust, Advisor Trust or Target Fund (other than for payment of
Taxes) in connection with the preparation and filing of said Tax returns and
Forms 1099 after the Closing, shall be borne by Target Fund.
11. COOPERATION AND EXCHANGE OF INFORMATION
Trust, Advisor Trust, Franklin Trust, and Franklin NY Trust will provide
each other and their respective representatives with such cooperation,
assistance and information as any of them reasonably may request of the
others in filing any Tax returns, amended returns or claims for refunds,
determining a liability for Taxes, or in determining the financial reporting
of any tax position, or a right to a refund of Taxes or participating in or
conducting any audit or other proceeding in respect of Taxes. Each party or
their respective agents will retain for a period of six (6) years following
the Closing all returns, schedules and work papers and all material records
or other documents relating to Tax matters and financial reporting of tax
positions of the Target Fund and the Acquiring Fund for its taxable period
first ending after the Closing of the applicable Reorganization and for all
prior taxable periods.
12. INDEMNIFICATION
12.1. With respect to each Reorganization, the Franklin Trust or Franklin NY
Trust, as appropriate, agrees to indemnify out of the assets of the Acquiring
Fund and hold harmless the Trust or Advisor Trust, as appropriate, and, as
appropriate, each of the Trust's or Advisor Trust's officers and Trustees
from and against any and all losses, claims, damages, liabilities or expenses
(including, without limitation, the payment of reasonable legal fees and
reasonable costs of investigation) to which jointly and severally, the Trust
or Advisor Trust, as appropriate, or any of its Trustees or officers may
become subject, insofar as such loss, claim, damage, liability or expense (or
actions with respect thereto) arises out of or is based on any breach by the
Franklin Trust or Franklin NY Trust, as appropriate, of any of its
representations, warranties, covenants or agreements set forth in this
Agreement. This indemnification obligation shall survive the termination of
this Agreement and the closing of the Reorganizations.
12.2. With respect to each Reorganization, the Trust or Adviser Trust, as
appropriate, agrees to indemnify and hold harmless the Franklin Trust or
Franklin NY Trust, as appropriate, and, as appropriate, each of the Franklin
Trust's or Franklin NY Trust's officers and Trustees from and against any and
all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Franklin Trust or Franklin
NY Trust, as appropriate, or any of its Trustees or officers may become
subject, insofar as such loss, claim, damage, liability or expense (or
actions with respect thereto) arises out of or is based on any breach by the
Trust or Advisor Trust, as appropriate, of any of its representations,
warranties, covenants or agreements set forth in this Agreement and provided
that the obligation to so indemnify is limited as set forth in Paragraph 17.5
hereof. This indemnification obligation shall survive the termination of
this Agreement and the closing of the Reorganizations.
12.3. With respect to each Reorganization, HGAM agrees to indemnify and hold
harmless the Franklin Trust or Franklin NY Trust, as appropriate, and, as
appropriate, each of the Franklin Trust's or Franklin NY Trust's officers and
Trustees from and against any and all losses, claims, damages, liabilities or
expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which jointly and severally, the
Franklin Trust or Franklin NY Trust or any of its Trustees or officers may
become subject, insofar as (and only to the extent that) such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of
the negligence or intentional misconduct by HGAM in performing its
obligations as investment adviser or administrator, or by Halbis Capital
Management (USA) Inc. in performing its obligations as sub-adviser, of the
Target Funds. This indemnification obligation shall survive the termination
of this Agreement and the closing of the Reorganizations.
13. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
13.1. Each party agrees that no party has made any representation, warranty or
covenant not set forth herein and that this Agreement constitutes the entire
agreement between the parties.
13.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder. The covenants to be performed after the Closing shall survive the
Closing.
14. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned with respect to one or more (or all) Reorganizations
by (i) mutual agreement of the parties; (ii) by either party to a
Reorganization, if the Board of Trustees of the terminating party determines
that it cannot permit the party to consummate the Reorganization in light of
the Board of Trustees' fiduciary obligations to the party's shareholders;
(iii) by either party with respect to a Reorganization if the Closing of the
Reorganization shall not have occurred on or before December 31, 2009, unless
such date is extended by mutual agreement of the parties; or (iv) by either
party with respect to a Reorganization if the other party shall have
materially breached its obligations under this Agreement or made a material
and intentional misrepresentation herein or in connection herewith. In the
event of any such termination, this Agreement shall become void with respect
to the Reorganization or Reorganizations terminated and there shall be no
liability hereunder on the part of any party or their respective Trustees or
Trustees or officers, except for any such material breach or intentional
misrepresentation, as to each of which all remedies at law or in equity of
the party adversely affected shall survive. This Agreement shall be
terminated in its entirety if it is terminated with respect to all of the
Reorganizations.
15. AMENDMENTS
This Agreement may be amended, modified or supplemented in a writing
signed by the parties hereto to be bound by such Amendment; provided,
however, that with respect to each Reorganization, following the meeting of
the shareholders of the Target Fund called by the Trust, pursuant to
Paragraph 5.1(b) of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Class A, C and Advisor
Acquiring Fund shares to be issued to the Target Fund under this Agreement to
the detriment of any or all Target Fund shareholders, without their further
approval.
16. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, personal service or prepaid or certified mail addressed to:
For the Trust, Advisor Trust, Master Trust and HGAM:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
HSBC Global Asset Management (USA) Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Dechert LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
For Franklin Trust, Franklin NY Trust and Franklin Advisers:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Investments
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
17. HEADINGS; GOVERNING LAW; COUNTERPARTS; ASSIGNMENT; LIMITATION OF
LIABILITY
17.1. The Article and Paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17.2. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware and applicable Federal law, without regard to
its principles of conflicts of laws.
17.3. This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the written consent of the other parties. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
17.4. This agreement may be executed in any number of counterparts, each of
which shall be considered an original.
17.5. It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of their respective Trustees, shareholders,
nominees, officers, agents, or employees personally, but, except as provided
in Sections 12.3 and 9.2 hereof, shall bind only the property of the Target
Funds or the Acquiring Funds as provided in the Declaration of Trust of the
Trust or Advisor Trust or the Agreement and Declaration of Trust of the
Franklin Trust or Franklin NY Trust, respectively. The execution and
delivery by such officers shall not be deemed to have been made by any of
them individually or to impose any liability on any of them personally, but
shall bind only the property of such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
approved on behalf of each of the Acquiring Funds and Target Funds.
FRANKLIN INVESTOR SECURITIES TRUST HSBC INVESTOR FUNDS
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President & Secretary Title: President
FRANKLIN NEW YORK TAX-FREE TRUST HSBC ADVISOR FUNDS TRUST
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_________________________________ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ _________________________________
Title: Vice President & Secretary Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
FRANKLIN ADVISERS, INC.
HSBC INVESTOR PORTFOLIOS
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_________________________________ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ _________________________________
Title: Executive Vice President Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
HSBC GLOBAL ASSET MANAGEMENT
(USA) INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Chief Operating Officer
EXHIBIT A
CHART OF REORGANIZATIONS
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ACQUIRING FUND CORRESPONDING TARGET FUND
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Franklin Total Return Fund HSBC Investor Core Plus Fixed
Income Fund (HSBC Investor Funds)
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Class A Class A
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Class A Class B
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Class C Class C
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Franklin Total Return Fund HSBC Investor Core Plus Fixed
Income Fund (HSBC Advisor Funds
Trust)
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Advisor Class Class I
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Franklin Total Return Fund HSBC Investor Intermediate
Duration Fixed Income Fund
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Class A Class A
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Class A Class B
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Class C Class C
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Advisor Class Class I
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Franklin New York HSBC Investor New York Tax-Free
Intermediate-Term Bond Fund
Tax-Free Income Fund
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Class A Class A
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Class A Class B
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Class C Class C
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Advisor Class Class I
----------------------------------------------------------------------