AGREEMENT AND PLAN OF REORGANIZATION
THIS
AGREEMENT AND PLAN OF REORGANIZATION (“Agreement”) is made as of October 1,
2008, among U.S. Global Investors Funds, a Delaware statutory trust (the
“Trust”), on behalf of the China Region Fund, All American Equity Fund, Gold and
Precious Metals Fund, World Precious Minerals Fund, Global Resources Fund,
Eastern European Fund, Global Emerging Markets Fund, Xxxxxx Growth Fund, Global
MegaTrends Fund, Tax Free Fund, Near-Term Tax Free Fund, U.S. Government
Securities Savings Fund, and U.S. Treasury Securities Cash Fund, each a
segregated portfolio of assets (“series”) thereof (each a “New Fund” and
collectively, the “New Funds”); U.S. Global Investors Funds, a Massachusetts
business trust (the “Investors Funds Trust”), on behalf of the China Region
Fund, All American Equity Fund, Gold and Precious Metals Fund, World Precious
Minerals Fund, Global Resources Fund, Tax Free Fund, Near-Term Tax Free Fund,
U.S. Government Securities Savings Fund, and U.S. Treasury Securities Cash Fund,
each a series thereof (each a “Predecessor Fund” and collectively, the
“Investors Funds”); U.S. Global Accolade Funds, a Massachusetts business trust
(the “Accolade Funds Trust”), on behalf of the Eastern European Fund, Global
Emerging Markets Fund, Xxxxxx Growth Fund, and Global MegaTrends Fund (each a
“Predecessor Fund” and collectively, the “Accolade Funds” and, together with the
Investors Funds, the “Predecessor Funds”); and U.S. Global Investors, Inc.
(“USGI”), investment adviser to the Funds (for purposes of Sections 6 and 8
only). Each New Fund and Predecessor Fund is sometimes referred to
herein as a “Fund,” and each trust is sometimes referred to herein as an
“Investment Company.” All agreements, covenants, representations,
actions, and obligations described herein made or to be taken or undertaken by
the New Funds are made and shall be taken or undertaken by the Trust on its
behalf, and all rights and benefits created hereunder in favor of the New Funds
shall inure to, and shall be enforceable by, the Trust on its
behalf.
Each
Investment Company desires to effect a reorganization described in section
368(a) of the Internal Revenue Code of 1986, as amended (“Code”), and intends
this Agreement to be, and adopts it as, a “plan of reorganization” within the
meaning of the regulations under the Code (“Regulations”). The
reorganization will involve the change of each Predecessor Fund’s identity, form
and place of organization -- by converting from a Predecessor Fund to a series
of the Trust -- by (1) transferring all of its assets to its corresponding
New Fund (each of which is being established solely for the purpose of acquiring
such assets and continuing the Predecessor Fund’s business) in exchange solely
for voting shares of beneficial interest in the New Fund and the New Fund’s
assumption of all of the Predecessor Fund’s liabilities, (2) distributing
such shares of the New Fund pro rata to the Predecessor
Fund’s shareholders in exchange for their shares of beneficial interest in the
Predecessor Fund and in complete liquidation thereof, and (3) terminating
the Predecessor Fund (all the foregoing transactions being referred to herein
collectively as the “Reorganization”), all on the terms and conditions set forth
herein.
Each
Investment Company’s Board of Trustees (each, a “Board”), including a majority
of its members who are not “interested persons” (as that term is defined in the
Investment Company Act of 1940, as amended (“1940 Act”)) thereof, (1) has
duly adopted and approved this Agreement and the transactions contemplated
hereby and (2) has determined that participation in the Reorganization is
in the best interests of the respective Funds and that the interests of the
existing shareholders of the respective Funds will not be diluted as a result of
the Reorganization.
The
Predecessor Funds offer a single class of voting shares of beneficial interest
(“Predecessor Fund Shares”). The New Funds will also offer a single
class of voting shares of beneficial interest (“New Fund Shares”). The rights,
powers, privileges, and obligations of the New Fund Shares will be substantially
identical to those of the Predecessor Fund Shares.
In
consideration of the mutual promises contained herein, each Investment Company
agrees, on behalf of its respective Funds, as follows:
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1.
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PLAN OF
REORGANIZATION
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1.1 Subject
to the requisite approval of each of the Predecessor Fund’s shareholders and the
terms and conditions set forth herein, each Predecessor Fund shall assign, sell,
convey, transfer, and deliver all of its assets described in paragraph 1.2
(“Assets”) to the corresponding New Fund. In exchange therefore, each
New Fund shall --
(a) issue and
deliver to the Predecessor Fund the number of full and fractional New Fund
Shares equal to the number of full and fractional Predecessor Fund Shares then
outstanding (all references herein to “fractional” shares meaning fractions
rounded to the third decimal place), and
(b) assume
all of the Predecessor Fund’s liabilities described in paragraph 1.3
(“Liabilities”).
Such
transactions shall take place at the Closing (as defined in paragraph
2.1).
1.2 The
Assets shall consist of all assets and property -- including all cash, cash
equivalents, securities, commodities, futures interests, receivables (including
interest and dividends receivable), claims and rights of action, rights to
register shares under applicable securities laws, books and records, and
deferred and prepaid expenses shown as assets on each Predecessor Fund’s books –
a Predecessor Fund owns at the Effective Time (as defined in paragraph
2.1).
1.3 The
Liabilities shall consist of all of a Predecessor Fund’s liabilities, debts,
obligations, and duties of whatever kind or nature existing at the Effective
Time, whether absolute, accrued, contingent or otherwise, whether or not arising
in the ordinary course of business, whether or not determinable at that time,
and whether or not specifically referred to in this
Agreement. Without limiting the generality of the foregoing, the
Liabilities shall include a Predecessor Fund’s obligations to USGI pursuant to
an expense limitation agreement under which USGI is entitled to the
reimbursement of certain fees waived or expenses reimbursed by USGI to a
Predecessor Fund during the five (5) years prior to the Effective Time and shall
include the Investors Funds Trust’s or the Accolade Funds Trust’s obligation to
any independent trustee pursuant to a retirement agreement under which the
independent trustee is entitled to a one-time cash payment.
1.4 At or
immediately before the Closing, each New Fund shall redeem the Initial Share (as
defined in paragraph 5.6) for $10.00. At the Effective Time (or as
soon thereafter as is reasonably practicable), each Predecessor Fund shall
distribute the corresponding New Fund Shares it receives pursuant to paragraph
1.1(a) to its shareholders of record determined as of the Effective Time (each,
a “Shareholder”), in proportion to their Predecessor Fund Shares then held of
record and in exchange for their Predecessor Fund Shares, and will completely
liquidate. That distribution shall be accomplished by Trust’s
transfer agent’s opening accounts on each New Fund’s shareholder records in the
Shareholders’ names and transferring those New Fund Shares
thereto. Pursuant to such transfer, each Shareholder’s account shall
be credited with the number of full and fractional New Fund Shares equal to the
number of full and fractional Predecessor Fund Shares that Shareholder holds at
the Effective Time. All issued and outstanding Predecessor Fund
Shares, including any represented by certificates, shall simultaneously be
canceled on each Predecessor Fund’s shareholder records. The New
Funds shall not issue certificates representing the New Fund Shares issued in
connection with the Reorganization.
1.5 As soon
as reasonably practicable after distribution of the New Fund Shares pursuant to
paragraph 1.4, but in all events within six months after the Effective Time,
each Predecessor Fund shall be dissolved, liquidated, and terminated, and any
further actions shall be taken in connection therewith as required by applicable
law.
1.6 Any
reporting responsibility of a Predecessor Fund to a public authority, including
the responsibility for filing regulatory reports, tax returns, and other
documents with the U.S. Securities and Exchange Commission (the “Commission”),
any state securities commission, any federal, state, and local tax authorities,
and any other relevant regulatory authority, is and shall remain its
responsibility up to and including the date on which it is
terminated.
1.7 Any
transfer taxes payable on issuance of New Fund Shares in a name other than that
of the registered holder on a Predecessor Fund’s shareholder records of the
Predecessor Fund Shares actually or constructively exchanged therefore shall be
paid by the person to whom those New Fund Shares are to be issued, as a
condition of that transfer.
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2.
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CLOSING AND EFFECTIVE
TIME
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2.1 The
Reorganization, together with related acts necessary to consummate the same
(“Closing”), shall occur at the Investment Companies’ offices on October 1,
2008, or at such other place and/or on such other date as to which the
Investment Companies may agree. All acts taking place at the Closing
shall be deemed to take place simultaneously immediately after the close of
business (i.e., 4:00
p.m., Eastern time) on the date thereof (“Effective Time”).
2.2 Each
Predecessor Fund shall direct the custodian for its assets (“Custodian”) to
deliver at the Closing a certificate of an authorized officer stating that
(a) the Assets have been delivered in proper form to each corresponding New
Fund within two business days before or at the Effective Time and (b) 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. Each of a Predecessor Fund’s
portfolio securities represented by a certificate or other written instrument
shall be transferred and delivered by the Predecessor Fund as of the Effective
Time for each corresponding New Fund’s account duly endorsed in proper form for
transfer in such condition as to constitute good delivery
thereof. The Custodian shall deliver as of the Effective Time by book
entry, in accordance with the customary practices of the Custodian and any
securities depository (as defined in Rule 17f-4 under the 0000 Xxx) in which any
Assets are deposited, the Assets that are deposited with such
depositories. The cash to be transferred by each Predecessor Fund
shall be delivered by wire transfer of federal funds at the Effective
Time.
2.3 Each of
the Investors Funds Trust and Accolade Funds Trust shall deliver to the Trust at
the Closing a certificate of an authorized officer setting forth information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, on each Predecessor Fund’s books immediately
before the Effective Time.
2.4 Each
Investment Company shall deliver to the other at the Closing a certificate
executed in its name by its President or a Vice President in form and substance
reasonably satisfactory to the recipient and dated the date of the Closing, to
the effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
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3.
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REPRESENTATIONS AND
WARRANTIES
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3.1 Each of
the Investors Funds Trust and Accolade Funds Trust, on each respective
Predecessor Fund’s behalf, represents and warrants to the Trust, on each New
Fund’s behalf, as follows:
(a) The
Investors Funds Trust and the Accolade Funds Trust are each business trusts that
are duly organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts; and their Second Amended and Restated Master
Agreements (“Master Agreements”) are on file with the Commonwealth’s
Corporations Division;
(b) The
Investors Funds Trust and the Accolade Funds Trust are each duly registered as
open-end management investment companies under the 1940 Act, and such
registration will be in full force and effect at the Effective
Time;
(c) At the
Effective Time, the Investors Funds Trust and the Accolade Funds Trust, on each
respective Predecessor Fund’s behalf, will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets hereunder free of any liens or other encumbrances (except
securities that are subject to “securities loans” as referred to in section
851(b)(2) of the Code or that are restricted to resale by their terms); and on
delivery and payment for the Assets, the Trust, on each New Fund’s behalf, will
acquire good and marketable title thereto;
(d) Each
Predecessor Fund is not engaged currently, and the Investors Funds Trust’s and
the Accolade Funds Trust’s execution, delivery, and performance of this
Agreement will not result, in (1) a material violation of the respective
Master Agreements or their By-Laws (collectively, “Company Governing Documents”)
or of any agreement, indenture, instrument, contract, lease, or other
undertaking to which the Investors Funds Trust or the Accolade Funds Trust, on
the respective Predecessor Funds’ behalf, are a party or by which they are bound
or (2) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment,
or decree to which the Investors Funds Trust or the Accolade Funds Trust, on the
respective Predecessor Funds’ behalf, is a party or by which it is
bound;
(e) All
material contracts and other commitments of each Predecessor Fund (other than
this Agreement and certain investment contracts, including options, futures, and
forward contracts) will terminate, or provision for discharge of any liabilities
of the Predecessor Fund thereunder will be made, at or before the Effective
Time, without either the Predecessor Funds or the corresponding New Funds
incurring any liability or penalty with respect thereto and without diminishing
or releasing any rights the Predecessor Fund may have had with respect to
actions taken or omitted or to be taken by any other party thereto before the
Closing;
(f) No
litigation, administrative proceeding, or investigation of or before any court
or governmental body is presently pending or, to its knowledge, threatened
against the Investors Funds Trust or the Accolade Funds Trust with respect to a
respective Predecessor Fund or any of a Predecessor Fund’s properties or Assets
that, if adversely determined, would materially and adversely affect a
Predecessor Fund’s financial condition or the conduct of a Predecessor Fund’s
business; and the Investors Funds Trust and the Accolade Funds Trust, on the
respective Predecessor Funds’ behalf, know of no facts that might form the basis
for the institution of such proceedings and 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;
(g) Each
Investors Fund’s Statement of Assets and Liabilities, Statements of Operations
and Changes in Net Assets, and Portfolio of Investments at and for the year
ended on June 30, 2007, and each Accolade Fund’s Statement of Assets and
Liabilities, Statements of Operations and Changes in Net Assets, and Portfolio
of Investments at and for the year ended on October 31, 2007 have been audited
by KPMG LLP (the “Auditor”), an independent registered public accounting firm,
and present fairly, in all material respects, each Predecessor Fund’s financial
condition as of such respective dates in accordance with generally accepted
accounting principles consistently applied (“GAAP”); and to the Predecessor
Funds’ management’s best knowledge and belief, there are no known contingent
liabilities, debts, obligations, or duties of a Predecessor Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date that are not disclosed therein;
(h) Since
June 30, 2007 and October 31, 2007 with respect to the Investors Funds and
Accolade Funds, respectively, there has not been any material adverse change in
a Predecessor Fund’s financial condition, assets, liabilities, or business,
other than changes occurring in the ordinary course of business, or any
incurrence by a Predecessor Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred; for purposes of this subparagraph,
a decline in net asset value per Predecessor Fund Share due to declines in
market values of securities a Predecessor Fund holds, the discharge of
Predecessor Fund liabilities, or the redemption of Predecessor Fund Shares by
its shareholders shall not constitute a material adverse change;
(i) At the
Effective Time, all federal and other tax returns, dividend reporting forms, and
other tax-related reports of each Predecessor Fund required by law to have been
filed by such date (including any extensions) shall have been filed and are or
will be correct in all material respects, and all federal and other taxes shown
as due or required to be shown as due on such returns and reports shall have
been paid or provision shall have been made for the payment thereof, and to the
best of each Predecessor Fund’s knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such
returns;
(j) For each
taxable year of its operation, each Predecessor Fund has met (or, for its
current taxable year, will meet) the requirements of Subchapter M of
Chapter 1 of the Code for qualification as a regulated investment company
(“RIC”) and has been (or will be) eligible to and has computed (or will compute)
its federal income tax under section 852 of the Code; from the time each of
Investors Funds Trust’s or Accolade Funds Trust’s Board, as applicable, approved
the transactions contemplated by this Agreement through the Effective Time, each
Predecessor Fund has invested and will invest its assets in a manner that
ensures its compliance with the foregoing; and each Predecessor Fund has no
earnings and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it;
(k) All
issued and outstanding Predecessor Fund Shares are, and at the Effective Time
will be, duly and validly issued and outstanding, fully paid, and non-assessable
by a Predecessor Fund and have been offered and sold in every state and the
District of Columbia in compliance in all material respects with applicable
registration requirements of the Securities Act of 1933, as amended (“1933
Act”), and state securities laws; all issued and outstanding Predecessor Fund
Shares will, at the Effective Time, be held by the persons and in the amounts
set forth in each Predecessor Fund’s transfer agent’s records, as provided in
paragraph 2.3; and each Predecessor Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any Predecessor Fund
Shares, nor is there outstanding any security convertible into any Predecessor
Fund Shares;
(l) Each
Predecessor Fund’s current prospectus and statement of additional information,
and each prospectus and statement of additional information including the
Predecessor Fund used at all times prior to the date hereof (1) conform 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
(2) as of the date on which they were issued did not contain, and as
supplemented by any supplement thereto dated before or at the Effective Time do
not contain, 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
misleading;
(m) The Proxy
Statement (as defined in paragraph 4.5) (other than written information Trust
provided for inclusion therein) will, on its effective date, at the Effective
Time, and at the time of the Shareholders Meeting (as defined in paragraph 4.1),
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
misleading; and
(n) The New
Fund Shares are not being acquired for the purpose of any distribution thereof,
other than in accordance with the terms hereof.
3.2 The
Trust, on the New Funds’ behalf, represents and warrants to the Investors Funds
Trust and the Accolade Funds Trust, on the respective Predecessor Funds’ behalf,
as follows:
(a) The Trust
is a statutory trust that is duly organized, validly existing, and in good
standing under the laws of the State of Delaware; and its Certificate of Trust
has been duly filed in the office of the Secretary of State
thereof;
(b) The Trust
is duly registered as an open-end management investment company under the 1940
Act, and such registration will be in full force and effect at the Effective
Time;
(c) Before
the Effective Time, each New Fund will be a duly established and designated
series of Trust;
(d) The New
Funds have were formed for the purpose of effecting the Reorganization, have not
commenced operations or engaged in any business prior to Closing and will not
commence operation or engage in any business until after the
Closing;
(e) Before
the Closing, there will be no (1) issued and outstanding New Fund Shares,
(2) options, warrants, or other rights to subscribe for or purchase any New
Fund Shares, (3) securities convertible into any New Fund Shares, or
(4) any other securities issued by a New Fund, except the Initial
Share;
(f) No
consideration other than New Fund Shares (and each New Fund’s assumption of the
Liabilities) will be issued in exchange for the Assets in the
Reorganization;
(g) Each New
Fund is not engaged currently, and the Trust’s execution, delivery, and
performance of this Agreement will not result, in (1) a material violation
of the Trust’s Trust Instrument or By-Laws (collectively, “Trust Governing
Documents”) or of any agreement, indenture, instrument, contract, lease, or
other undertaking to which the Trust, on the New Funds’ behalf, is a party or by
which it is bound or (2) the acceleration of any obligation, or the
imposition of any penalty, under any agreement, indenture, instrument, contract,
lease, judgment, or decree to which the Trust, on the New Funds’ behalf, is a
party or by which it is bound;
(h) No
litigation, administrative proceeding, or investigation of or before any court
or governmental body is presently pending or, to its knowledge, threatened
against the Trust with respect to a New Fund or any of its properties or assets
that, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business; and the Trust, on the New
Funds’ behalf, knows of no facts that might form the basis for the institution
of such proceedings and 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) Each New
Fund will be a “fund” as defined in section 851(g)(2) of the Code; it will meet
the requirements of Subchapter M of Chapter 1 of the Code for qualification
as a RIC for its taxable year in which the Reorganization occurs; and it intends
to continue to meet all such requirements for the next taxable
year;
(j) The New
Fund Shares to be issued and delivered to each Predecessor Fund, for the
Shareholders’ accounts, pursuant to the terms hereof, (1) will at the
Effective Time have been duly authorized and duly registered under the federal
securities laws (and appropriate notices respecting them will have been duly
filed under applicable state securities laws) and (2) when so issued and
delivered, will be duly and validly issued and outstanding New Fund Shares and
will be fully paid and non-assessable by the Trust;
(k) The Proxy
Statement (only with respect to written information the Trust provided for
inclusion therein) will, on its effective date, at the Effective Time, and at
the time of the Shareholders Meeting, 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 misleading; and
(l) The
Trust’s Trust Instrument permits the Trust to vary its shareholders’ investment;
and the Trust does not have a fixed pool of assets -- each series thereof
(including the New Funds after they commence operations) is (will be) a managed
portfolio of securities, and its investment advisers (including USGI) have the
authority to buy and sell securities for it.
3.3 The
Trust, on the New Funds’ behalf, and the Investors Funds Trust and the Accolade
Funds Trust, on the respective Predecessor Funds’ behalf, each represents and
warrants to the other Investment Company, as follows:
(a) No
governmental consents, approvals, authorizations, or filings are required under
the 1933 Act, the Securities Exchange Act of 1934, as amended (“1934 Act”), the
1940 Act, or state securities laws for its execution or performance of this
Agreement, except for such consents, approvals, authorizations, and filings as
have been made or received or as may be required subsequent to the Effective
Time; and
(b) The net
asset value of the New Fund Shares each Shareholder receives will be equal to
the net asset value of its Predecessor Fund Shares it actually or constructively
surrenders in exchange therefore.
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4.
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COVENANTS
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4.1 The
Investors Funds Trust and the Accolade Funds Trust covenant to call a meeting of
each respective Predecessor Fund’s shareholders to consider and act on this
Agreement and to take all other action necessary to obtain approval of the
transactions contemplated herein (“Shareholders Meeting”).
4.2 The
Investors Funds Trust and the Accolade Funds Trust, on the respective
Predecessor Funds’ behalf, covenant that the New Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
4.3 The
Investors Funds Trust and the Accolade Funds Trust covenant that each will
assist the Trust in obtaining information the Trust reasonably requests
concerning the beneficial ownership of Predecessor Fund Shares.
4.4 The
Investors Funds Trust and the Accolade Funds Trust covenant that each will turn
over each respective Predecessor Fund’s books and records (including all books
and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) to the Trust at the Closing.
4.5 Each
Investment Company covenants to cooperate in preparing, in compliance with
applicable federal securities laws, a proxy statement relating to the
Reorganization to be furnished in connection with the Investors Funds Trust’s
and the Accolade Funds Trust’s Boards’ solicitation of proxies for use at the
Shareholders Meeting (collectively, “Proxy Statement”).
4.6 Each
Investment Company covenants that it will, from time to time, as and when
requested by an other Investment Company, execute and deliver or cause to be
executed and delivered all assignments and other instruments, and will take or
cause to be taken further action, the other Investment Company deems necessary
or desirable in order to vest in, and confirm to, as applicable (a) each
New Fund, title to and possession of all the Assets, and (b) each
Predecessor Fund, title to and possession of the New Fund Shares to be delivered
hereunder, and otherwise to carry out the intent and purpose
hereof.
4.7 The Trust
covenants to use all reasonable efforts to obtain the approvals and
authorizations required by the 1933 Act, the 1940 Act, and state securities laws
it deems appropriate to continue its operations after the Effective
Time.
4.8 Subject
to this Agreement, each Investment Company covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
4.9 On or
before the Effective Time, each Predecessor Fund shall have declared and paid a
dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to its shareholders all of the Predecessor
Fund’s investment company taxable income (computed without regard to any
deduction for dividends paid), if any, plus the excess, if any, of its interest
income excludible from gross income under Section 103(a) of the Code over its
deductions disallowed under Sections 265 and 171(a)(2) of the Code for all
taxable periods or years ending on or before the Effective Time, and all of its
net capital gains realized (after reduction for any capital loss carry forward),
if any, in all taxable periods or years ending on or before the Effective
Time.
4.10 It is the
intention of the parties that the transaction will qualify as a reorganization
within the meaning of Section 368(a) of the Code. Neither the Trust,
the Investors Funds Trust, the Accolade Funds Trust, the Predecessor Funds nor
the New Funds 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 within the meaning of Section 368(a) of the Code. At
or prior to the Effective Time, the parties to this Agreement will take such
reasonable action, or cause such action to be taken, as is reasonably necessary
to enable Xxxxxx, Xxxxx & Xxxxxxx LLP (“Xxxxxx Xxxxx”) to render the tax
opinion contemplated in the Agreement.
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5.
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CONDITIONS
PRECEDENT
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Each
Investment Company’s obligations hereunder shall be subject to
(a) performance by the other Investment Companies of all their obligations
to be performed hereunder at or before the Closing, (b) all representations
and warranties of the other Investment Companies contained herein being true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated hereby, as of the Effective Time,
with the same force and effect as if made at and as of such time, and
(c) the following further conditions that, at or before such
time:
5.1 All
necessary filings shall have been made with the Commission and state securities
authorities, and no order or directive shall have been received that any other
or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Commission shall not have
issued an unfavorable report with respect to the Reorganization under section
25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin
consummation of the transactions contemplated hereby under section 25(c) of the
1940 Act. All consents, orders, and permits of federal, state, and
local regulatory authorities (including the Commission and state securities
authorities) either Investment Company deems necessary to permit consummation,
in all material respects, of the transactions contemplated hereby shall have
been obtained, except where failure to obtain same would not involve a risk of a
material adverse effect on either the Predecessor Funds’ or the New Funds’
assets or properties;
5.2 At the
Effective Time, no action, suit, or other proceeding shall be pending before any
court or governmental agency in which it is sought to restrain or prohibit, or
to obtain damages or other relief in connection with, the transactions
contemplated hereby;
5.3 The
Investors Funds Trust and the Accolade Funds Trust shall have received an
opinion of Xxxxxx Price P.C. (“Xxxxxx Price”) substantially to the effect
that:
(a) Each New
Fund is a duly established series of the Trust, a trust that is validly existing
as a statutory trust under the laws of the State of Delaware;
(b) This
Agreement has been duly authorized, executed and delivered by the
Trust;
(c) The New
Fund Shares to be issued and distributed to the Shareholders under this
Agreement have been duly authorized and, on their issuance and delivery in
accordance with this Agreement, will be validly issued, fully paid, and
non-assessable;
(d) The
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, materially violate any provision of
the Trust Governing Documents;
(e) To Xxxxxx
Price’s knowledge (without any independent inquiry or investigation), no
consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by the Trust, on the New Funds’
behalf, of the transactions contemplated herein, except any that have been
obtained and are in effect and exclusive of any required under state securities
laws;
(f) The Trust
is registered with the Commission as an investment company, and to Xxxxxx
Price’s knowledge, is not subject to any stop order; and
(g) To Xxxxxx
Price’s knowledge (without any independent inquiry or investigation), as of the
date of the opinion, there is no action or proceeding pending before any court
or governmental agency, or overtly threatened in writing against the Trust (with
respect to the New Funds) or any of its properties or assets attributable or
allocable to a New Fund that seeks to enjoin the performance or affect the
enforceability of this Agreement, except as set forth in such
opinion.
In
rendering such opinion, Xxxxxx Price need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to the Trust or a New Fund, and may (1) rely, as
to matters governed by the laws of the State of Delaware, on an opinion of
competent Delaware counsel, (2) make assumptions that the execution,
delivery, and performance of any agreement, instrument, or document by any
person or entity other than the Trust have been duly authorized, (3) make
assumptions regarding the authenticity, genuineness, and/or conformity of
documents and copies thereof without independent verification thereof and other
assumptions customary for opinions of this type, (4) limit such opinion to
applicable federal and state law, (5) define the word “knowledge” and
related terms to mean the actual knowledge of attorneys then with Xxxxxx Price
who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization and not to include matters as to which such
attorneys could be deemed to have constructive knowledge, and (6) rely as
to matters of fact on certificates of public officials and statements contained
in officers’ certificates;
5.4 The Trust
shall have received an opinion of Xxxxxx Price substantially to the effect
that:
(a) Each
Investors Fund is a duly established series of the Investors Funds Trust, a
business trust that is validly existing and in good standing under the laws of
the Commonwealth of Massachusetts;
(b) This
Agreement has been duly authorized executed and delivered by the Investors Funds
Trust;
(c) The
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, materially violate any provision of
the Investors Funds Trust’s Governing Documents;
(d) To Xxxxxx
Price’s knowledge (without any independent inquiry or investigation), no
consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by the Investors Funds Trust, on the
Investors Funds’ behalf, of the transactions contemplated herein, except any
that have been obtained and are in effect and exclusive of any required under
state securities laws;
(e) The
Investors Funds Trust is registered with the Commission as an investment
company, and to Xxxxxx Price’s knowledge, is not subject to any stop order;
and
(f) To Xxxxxx
Price’s knowledge (without any independent inquiry or investigation), as of the
date of the opinion, there is no action or proceeding pending before any court
or governmental agency, or overtly threatened in writing against the Investors
Funds Trust (with respect to the Investors Funds) or any of its properties or
assets attributable or allocable to the Investors Funds that seeks to enjoin the
performance or affect the enforceability of this Agreement, except as set forth
in such opinion.
In
rendering such opinion, Xxxxxx Price need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to the Investors Funds, and may (1) rely, as to
matters governed by the laws of the Commonwealth of Massachusetts, on an opinion
of competent Massachusetts counsel, (2) make assumptions that the
execution, delivery, and performance of any agreement, instrument, or document
by any person or entity other than the Investors Funds Trust have been duly
authorized, (3) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof and other assumptions customary for opinions of this type,
(4) limit such opinion to applicable federal and state law, (5) define
the word “knowledge” and related terms to mean the actual knowledge of attorneys
then with Xxxxxx Price who have devoted substantive attention to matters
directly related to this Agreement and the Reorganization and not to include
matters as to which such attorneys could be deemed to have constructive
knowledge, and (6) rely as to matters of fact on certificates of public
officials and statements contained in officers’ certificates;
5.5 The Trust
shall have received an opinion of Xxxxxx Price substantially to the effect
that:
(a) Each
Accolade Fund is a duly established series of the Accolade Funds Trust, a
business trust that is validly existing and in good standing under the laws of
the Commonwealth of Massachusetts;
(b) This
Agreement has been authorized, executed and delivered by the Accolade Funds
Trust;
(c) The
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, materially violate any provision of
the Accolade Funds Trust’s Governing Documents;
(d) To Xxxxxx
Price’s knowledge (without any independent inquiry or investigation), no
consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by the Accolade Funds Trust, on the
Accolade Funds’ behalf, of the transactions contemplated herein, except any that
have been obtained and are in effect and exclusive of any required under state
securities laws;
(e) The
Accolade Funds Trust is registered with the Commission as an investment company,
and to Xxxxxx Price’s knowledge, is not subject to any stop order;
and
(f) To Xxxxxx
Price’s knowledge (without any independent inquiry or investigation), as of the
date of the opinion, there is no action or proceeding pending before any court
or governmental agency, or overtly threatened in writing against the Accolade
Funds Trust (with respect to the Accolade Funds) or any of its properties or
assets attributable or allocable to the Accolade Funds that seeks to enjoin the
performance or affect the enforceability of this Agreement, except as set forth
in such opinion.
In
rendering such opinion, Xxxxxx Price need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to the Accolade Funds, and may (1) rely, as to
matters governed by the laws of the Commonwealth of Massachusetts, on an opinion
of competent Massachusetts counsel, (2) make assumptions that the
execution, delivery, and performance of any agreement, instrument, or document
by any person or entity other than the Accolade Funds Trust have been duly
authorized, (3) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof and other assumptions customary for opinions of this type,
(4) limit such opinion to applicable federal and state law, (5) define
the word “knowledge” and related terms to mean the actual knowledge of attorneys
then with Xxxxxx Price who have devoted substantive attention to matters
directly related to this Agreement and the Reorganization and not to include
matters as to which such attorneys could be deemed to have constructive
knowledge, and (6) rely as to matters of fact on certificates of public
officials and statements contained in officers’ certificates;
5.6 The
Investment Companies shall have received an opinion of Xxxxxx Xxxxx as to the
federal income tax consequences mentioned below (“Tax Opinion”). In
rendering the Tax Opinion, Xxxxxx Xxxxx may rely as to factual matters,
exclusively and without independent verification, on the representations and
warranties made in this Agreement, which Xxxxxx Xxxxx may treat as
representations and warranties made to it, and in separate letters addressed to
it. The Tax Opinion shall be substantially to the effect that, based
on the facts and assumptions stated therein and conditioned on consummation of
the Reorganization in accordance with this Agreement, for federal income tax
purposes:
(a) The
Reorganization will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Code, and the Predecessor Funds and the New Funds will
each be a party to a reorganization within the meaning of Section 368(b) of the
Code;
(b) No gain
or loss will be recognized by a Predecessor Fund upon the transfer of all of its
assets to the corresponding New Fund in exchange solely for the New Fund Shares
and the assumption by the New Fund of the Predecessor Fund’s liabilities or upon
the distribution of New Fund Shares to the Predecessor Fund’s shareholders in
exchange for their shares of the Predecessor Fund;
(c) No gain
or loss will be recognized by a New Fund upon its receipt of all of the assets
of the corresponding Predecessor Fund in exchange solely for New Fund Shares and
the assumption by the New Fund of the liabilities of the Predecessor
Fund;
(d) The
adjusted tax basis of the assets of a Predecessor Fund received by the
corresponding New Fund will be the same as the adjusted tax basis of such assets
to the Predecessor Fund immediately prior to the Reorganization;
(e) The
holding period of the assets of a Predecessor Funds received by the
corresponding New Fund will include the holding period of those assets in the
hands of the Predecessor Fund immediately prior to the
Reorganization;
(f) No gain
or loss will be recognized by the shareholders of a Predecessor Fund upon the
exchange of its Predecessor Fund Shares for New Fund Shares (including
fractional shares to which they may be entitled) and the assumption by the
corresponding New Fund of the liabilities of the Predecessor Fund;
(g) The
aggregate adjusted tax basis of New Fund Shares received by the shareholders of
a corresponding Predecessor Fund (including fractional shares to which they may
be entitled) pursuant to the Reorganization will be the same as the aggregate
adjusted tax basis of Predecessor Fund Shares held by the Predecessor Fund’s
shareholders immediately prior to the Reorganization;
(h) The
holding period of New Fund Shares received by the shareholders of the
corresponding Predecessor Fund (including fractional shares to which they may be
entitled) will include the holding period of Predecessor Fund Shares surrendered
in exchange therefore, provided that Predecessor Fund Shares were held as a
capital asset as of the Closing Date; and
(i) For
purposes of section 381 of the Code, each New Fund will succeed to and take into
account as of the date of the transfer (as defined in Section 1.381(b)-1(b) of
the Treasury Regulations) the items of the corresponding Predecessor Fund
described in Section 381(c) of the Code, subject to the conditions and
limitations specified in Sections 381(b) and (c), 382, 383 and 384 of the
Code.
No
opinion will be expressed as to the effect of the Reorganization on (i) the
Predecessor Funds or the New Funds with respect to any Asset as to which any
unrealized gain or loss is required to be recognized for U.S. federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a xxxx-to-market system of accounting and (ii) any Predecessor
Fund or New Fund shareholder that is required to recognize unrealized gains and
losses for U.S. federal income tax purposes under a xxxx-to-market system of
accounting.
Such
opinion shall be based on customary assumptions, limitations and such
representations as Xxxxxx Xxxxx may reasonably request, and each Predecessor
Fund and New Fund will cooperate to make and certify the accuracy of such
representations. Such opinion may contain such assumptions and
limitations as shall be in the opinion of such counsel appropriate to render the
opinions expressed therein;
5.7 Before
the Closing, Trust’s Board shall have authorized the issuance of, and each New
Fund shall have issued, one New Fund Share (“Initial Share”) to U.S. Global
Brokerage, Inc., the Trust’s distributor (“Distributor”), or an affiliate
thereof (“sole shareholder”) in consideration of the payment of $10.00 to take
whatever action it may be required to take as each New Fund’s sole shareholder
pursuant to paragraph 5.8;
5.8 The Trust
(on behalf of and with respect to each New Fund) shall have entered into, or
adopted, as appropriate, an investment advisory contract and other agreements
and plans necessary for each New Fund’s operation as a series of an open-end
investment company. Each such contract and agreement shall have been
approved by the Trust’s Board and, to the extent required by law (as interpreted
by Commission staff positions), by its trustees who are not “interested persons”
(as defined in the 0000 Xxx) thereof and by each New Fund’s sole
shareholder;
5.9 At any
time before the Closing, any Investment Company may waive any of the foregoing
conditions (except those set forth in paragraphs 5.1, 5.6, 5.7, and 5.8) if, in
the judgment of its Board, such waiver will not have a material adverse effect
on its Fund’s shareholders’ interests.
5.10 The
Trust, on behalf of the New Funds, shall have entered into an expense cap
agreement with the Adviser limiting the expenses of each New Fund, excluding
extraordinary expenses, taxes, brokerage and interest, for a one-year period
ending September 30, 2009, as follows:
|
Fund
|
Expense Cap
|
|
China
Region Fund
|
2.00%
|
|
All
American Equity Fund
|
1.75%
|
|
Gold
and Precious Metals Fund
|
1.50%
|
|
World
Precious Minerals Fund
|
1.50%
|
|
Global
Resources Fund
|
1.50%
|
|
Eastern
European Fund
|
2.25%
|
|
Global
Emerging Markets Fund
|
2.50%
|
|
Xxxxxx
Growth Fund
|
1.75%
|
|
Global
MegaTrends Fund
|
1.85%
|
|
Tax
Free Fund
|
0.70%
|
|
Near-Term
Tax Free Fund
|
0.45%
|
|
U.S.
Government Securities Savings Fund
|
0.45%
|
|
U.S.
Treasury Securities Cash Fund
|
1.00%
|
5.11 The
insurance carriers for the Investors Funds Trust and the Accolade Funds Trust
agree to provide continued coverage for the Trust in amounts providing the same
aggregate coverage as in effect on the date of this Agreement.
5.12 This
Agreement and the transactions contemplated herein, with respect to the
Predecessor Funds, shall have been approved by the requisite vote of the
Shareholders in accordance with the provisions of the Governing Documents of the
Investors Funds Trust and the Accolade Funds Trust, as applicable, Massachusetts
law and the 1940 Act.
|
6.
|
EXPENSES
|
All fees and expenses incurred
directly in connection with the Reorganization and the transactions contemplated
by this Agreement will be borne by USGI, including proxy
preparation, printing, mailing and solicitation expenses; counsel fees; any
incremental Board Meeting fees and retirement payments pursuant to a retirement
agreement.
|
7.
|
ENTIRE AGREEMENT; NO
SURVIVAL
|
No
Investment Company has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement among the
Investment Companies and USGI. The representations, warranties, and
covenants contained herein or in any document delivered pursuant hereto or in
connection herewith shall not survive the Closing.
|
8.
|
TERMINATION
|
This
Agreement may be terminated at any time at or before the Closing:
8.1 By any
Investment Company (a) in the event of any other Investment Company’s
material breach of any representation, warranty, or covenant contained herein to
be performed at or before the Closing, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, (c) if a governmental body issues an order, decree, or
ruling having the effect of permanently enjoining, restraining, or otherwise
prohibiting consummation of the Reorganization, or (d) if the Closing has not
occurred on or before December 31, 2008, or such other date as to which the
Investment Companies agree; or
8.2 By the
Investment Companies’ mutual agreement; or
8.3 By
either Investment Company by written notice to the other parties following a
determination by the terminating party’s Board of Trustees that the consummation
of the Reorganization is not in the best interest of its Funds.
8.4 By
USGI by written notice to the other parties following a determination by it that
the consummation of the Reorganization is not in its best
interests.
In the
event of a termination under paragraphs 8.1(c), 8.2, 8.3 or 8.4, this Agreement
shall become void and there shall be no liability hereunder on the part of any
party (except for USGI as provided in Section 6), or their respective Directors
or Trustees, 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.
|
9.
|
AMENDMENTS
|
The
Investment Companies may amend, modify, or supplement this Agreement at any time
in any manner they mutually agree on in writing, notwithstanding a Predecessor
Fund’s shareholders’ approval thereof; provided that, following such approval no
such amendment, modification, or supplement shall have a material adverse effect
on the Shareholders’ interests.
|
10.
|
SEVERABILITY
|
Any term
or provision of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms and provisions of this Agreement in any
other jurisdiction.
|
11.
|
MISCELLANEOUS
|
11.1 This
Agreement shall be construed and interpreted in accordance with the internal
laws of the State of Delaware; provided that, in the case of any conflict
between those laws and the federal securities laws, the latter shall
govern.
11.2 Nothing
expressed or implied herein is intended or shall be construed to confer on or
give any person, firm, trust, or corporation other than each Investment Company
and its respective successors and assigns any rights or remedies under or by
reason of this Agreement.
11.3 Notice is
hereby given that this instrument is executed and delivered on behalf of the
Trust’s trustees and the Investors Funds Trust’s and the Accolade Funds Trust’s
trustees, solely in their capacities as trustees and not
individually. Each Investment Company’s obligations under this
instrument are not binding on or enforceable against any of its trustees,
officers, or shareholders or any series thereof other than the respective
Predecessor Funds and the New Funds, but are only binding on and enforceable
against each Predecessor Fund’s or each New Fund’s property,
respectively. Each Investment Company, in asserting any rights or
claims under this Agreement shall look only to its own property in settlement of
such rights or claims and not to the property of any other series thereof other
than its Predecessor Fund or New Fund, as applicable, or to such trustees,
officers, or shareholders.
11.4 This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been executed by each party and delivered to the other
parties. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
IN
WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officer as of the day and year first written
above.
U.S.
GLOBAL INVESTORS FUNDS, on behalf of each of its series
By: /s/ Xxxxx X.
Xxxxxx
Xxxxx X.
Xxxxxx
President
and Chief Executive Officer
U.S.
GLOBAL ACCOLADE FUNDS, on behalf of each of its series
By: /s/ Xxxxx X.
Xxxxxx
Xxxxx X.
Xxxxxx
President
and Chief Executive Officer
U.S.
GLOBAL INVESTORS FUNDS (NEW TRUST), on behalf of each of its series
By: /s/ Xxxxx X.
Xxxxxx
Xxxxx X.
Xxxxxx
President
and Chief Executive Officer
U.S.
GLOBAL INVESTORS, INC.
(For
Purposes of Sections 6 and 8 Only)
By: /s/ Xxxxx X.
XxXxx
Xxxxx X.
XxXxx
President
and General Counsel
