February 23, 2000
Xxxxx, Brown & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
To the Persons Listed on
Schedule I Attached hereto
Re: Agreement and Plan of Reorganization for the Exchange
of Stock of Xxxxxx Xxxxxxx Xxxx Xxxxxx California
Tax-Free Income Fund for Substantially All of the
Assets of California Series, a portfolio of Xxxxxx
Xxxxxxx Xxxx Xxxxxx Multi-State Municipal Series
Trust, dated as of January 26, 2000 (the
"Reorganization Agreement").
Ladies and Gentlemen:
We have acted as counsel to California Series ("California Series"), a
portfolio of Xxxxxx Xxxxxxx Xxxx Xxxxxx Multi-State Municipal Series Trust
("Multi-State"), and Xxxxxx Xxxxxxx Xxxx Xxxxxx California Tax-Free Income Fund
("California Tax-Free") in connection with the proposed transfer of
substantially all of the assets of California Series to California Tax- Free and
certain other transactions related thereto pursuant to and in accordance with
the terms of the Reorganization Agreement (the "Reorganization"). You have
requested that we provide an opinion regarding the treatment of the
Reorganization under the Internal Revenue Code of 1986, as amended (the "Code"),
and the accuracy of the tax disclosures in the proxy statement/prospectus (the
"Proxy Statement/Prospectus") on Exhibit 12 to the Form N-14 Registration
Statement.
In connection with rendering this opinion, we have examined originals
or copies, certified or otherwise identified to our satisfaction, of (i) the
Reorganization Agreement, (ii) the Registration Statement on Form N-14 for the
Reorganization, and the Proxy Statement/Prospectus and other documents,
exhibits, attachments and schedules contained therein, (iii) written
representations of Xxxxxx Xxxxxxx Xxxx Xxxxxx Advisors Inc. (the "Advisor")
concerning certain facts underlying and relating to the Reorganization set forth
in a letter dated February 23, 2000, and (iv) such other documents and materials
as we have deemed necessary or appropriate for purposes of the opinions set
forth below. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the
February 23, 2000
Page 2
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. We have not made
an independent investigation of the facts set forth either in the Registration
Statement, the Reorganization Agreement or such other documents that we have
examined. We have consequently assumed in rendering this opinion that the
information presented in such documents or otherwise furnished to us accurately
and completely describes in all material respects all facts relevant to the
Reorganization.
We have also assumed for purposes of rendering our opinion (i) the
accuracy of, and material compliance with, the representations of the Advisor
set forth in the letter referred to above, (ii) the accuracy of, and material
compliance with, the representations, warranties, covenants and agreements of
California Tax-Free and Multi-State, on behalf of California Series, made in the
Reorganization Agreement, and (iii) that there are no agreements or
understandings other than those of which we have been informed that would affect
our conclusions set forth below.
The opinion set forth below is based on the Code, the legislative
history with respect thereto, rules and regulations promulgated thereunder, and
published rulings, court decisions and administrative authorities issued with
respect to all of the foregoing, all as in effect and existing on the date
hereof, and all of which are subject to change at any time, possibly on a
retroactive basis. In addition, there can be no assurance that positions
contrary to those stated in our opinion may not be asserted by the Internal
Revenue Service.
Any change occurring after the date hereof in, or a variation from, any
of the foregoing factual or legal bases for our opinion could affect the
conclusions set forth below.
In addition, the opinion expressed herein is given as of the date
hereof and we express no obligation to advise you of any changes in the law or
events that may hereafter come to our attention that could affect our opinion
set forth below.
Based on the foregoing, we are of the opinion that, for federal income
tax purposes:
1. The summaries of United States federal income tax consequences set
forth in the Proxy Statement/Prospectus under the headings "Synopsis -- Tax
Consequences of the Reorganization", "The Reorganization -- The Board's
Consideration" and "The Reorganization -- Tax Aspects of the Reorganization" are
accurate in all material respects as to matters of law and legal conclusions.
February 23, 2000
Page 3
2. The transfer of California Series' assets in exchange for California
Tax-Free Shares1/ and the assumption by California Tax-Free of certain stated
liabilities of California Series followed by the distribution by California
Series of California Tax-Free Shares to the California Series Shareholders in
exchange for their California Series shares pursuant to and in accordance with
the terms of the Reorganization Agreement will constitute a "reorganization"
within the meaning of section 368(a)(1)(C) of the Code, and California Series
and California Tax-Free will each be a "party to a reorganization" within the
meaning of section 368(b) of the Code.
3. No gain or loss will be recognized by California Tax-Free upon
receipt of the assets of California Series solely in exchange for California
Tax-Free Shares and the assumption by California Tax-Free of the stated
liabilities of California Series.
4. No gain or loss will be recognized by California Series upon the
transfer of the assets of California Series to California Tax-Free in exchange
for California Tax-Free Shares and the assumption by California Tax-Free of the
stated liabilities or upon the distribution of California Tax-Free Shares to the
California Series Shareholders in exchange for their California Series shares.
5. No gain or loss will be recognized by the California Series
Shareholders upon the exchange of the California Series shares for California
Tax-Free Shares.
6. The aggregate tax basis for the California Tax-Free Shares received
by each California Series Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the California Series shares held by each
such California Series Shareholder immediately prior to the Reorganization.
7. The holding period of the California Tax-Free Shares to be received
by each California Series Shareholder will include the period during which the
California Series shares surrendered in exchange therefor were held (provided
such California Series shares are held as capital assets on the date of the
Reorganization).
8. The tax basis of the assets of California Series acquired by
California Tax-Free will be the same as the tax basis of such assets to
California Series immediately prior to the Reorganization.
--------
1/ Capitalized terms used herein without definition have the meanings
ascribed to them in the Reorganization Agreement.
February 23, 2000
Page 4
9. The holding period of the assets of California Series in the hands
of California Tax- Free will include the period during which those assets were
held by California Series.
This opinion is being provided to you solely in connection with the
filing of the Registration Statement for the Reorganization. This opinion may
not be relied upon by you for any other purpose or relied upon by or furnished
to any other person without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Proxy Statement/Prospectus and to all references to this firm under the headings
"Synopsis -- Tax Consequences of the Reorganization" and "The Reorganization --
Tax Aspects of the Reorganization" in the Proxy Statement/Prospectus.
Very truly yours,
/s/ Xxxxx, Xxxxx & Xxxxx
XXXXX, BROWN & XXXXX
February 23, 2000
Page 5
SCHEDULE I
Xxxxxx Xxxxxxx Xxxx Xxxxxx
Multi-State Municipal Series Trust, on behalf of California Series
Xxxxxx Xxxxxxx Xxxx Xxxxxx
California Tax-Free Income Fund
