October 26, 1995
Xxxxxx New York Tax Exempt Income Fund
c/o The Xxxxxx Funds
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Putnam New York Intermediate Tax Exempt Fund
c/o The Xxxxxx Funds
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and
Plan of Reorganization (the "Agreement") dated as of November ,
1995, between Xxxxxx New York Tax Exempt Income Fund, a
Massachusetts business trust ("Acquiring Fund") and Xxxxxx New York
Intermediate Tax Exempt Fund, a Massachusetts business trust
("Target Fund"). The Agreement describes a proposed transaction
(the "Transaction") to occur on a date to be agreed upon by
Acquiring Fund and Target Fund (the "Exchange Date"), pursuant to
which Acquiring Fund will acquire substantially all of the assets
of Target Fund in exchange for shares of beneficial interest in
Acquiring Fund (the "Acquiring Fund Shares") and the assumption by
Acquiring Fund of all of the liabilities of Target Fund following
which the Acquiring Fund Shares received by Target Fund will be
distributed by Target Fund to its shareholders in liquidation and
termination of Target Fund. This opinion as to certain federal
income tax consequences of the Transaction is furnished to you
pursuant to Sections 8(h) and 9(g) of the Agreement. Capitalized
terms not defined herein are defined in the Agreement.
Target Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management
investment company. Shares of Target Fund are redeemable at net
asset value at each shareholder's option. Target Fund has elected
to be a regulated investment company for federal income tax
purposes under Section 851 of the Internal Revenue Code of 1986, as
amended (the "Code").
Acquiring Fund is registered under the 1940 Act as an open-end
management investment company. Shares of Acquiring Fund are
redeemable at net asset value at each shareholder's option.
Acquiring Fund has elected to be a regulated investment company for
federal income tax purposes under Section 851 of the Code.
For purposes of this opinion, we have considered the
Agreement, the Registration Statement filed with the Securities and
Exchange Commission on October 27, 1995 (including the items
incorporated by reference therein), and such other items as we have
deemed necessary to render this opinion. In addition, you have
represented to us the following facts, occurrences and information
upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items
referred to above):
1. Target Fund will transfer to Acquiring Fund all of its assets,
and Acquiring Fund will assume all of the liabilities of Target
Fund as of the Exchange Date.
2. The fair market value of the Acquiring Fund Shares
received by each Target Fund shareholder will be approximately
equal to the fair market value of the Target Fund shares
surrendered in exchange therefor. The Target Fund shareholders
will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares
of beneficial interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-
employees of Target Fund, if any, will be separate consideration
for, or allocable to, any of their Target Fund Shares; none of the
Acquiring Fund Shares received by any Target Fund shareholder-
employees will be separate consideration for, or allocable to, any
employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services
actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
4. There is no plan or intention by any Target Fund
shareholder who owns 5% or more of the total outstanding Target
Fund Shares, and to the best of the knowledge of the management of
Target Fund, there is no plan or intention on the part of the
remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership
of Acquiring Fund Shares to a number of Acquiring Fund Shares
having a value, as of the date of the Transaction, of less than 50
percent of the value of all of the formerly outstanding Target Fund
Shares as of the same date. For purposes of this representation,
Acquiring Fund Shares or Target Fund Shares surrendered by Target
Fund shareholders in redemption or otherwise disposed of,
where such dispositions, if any, appear to be initiated by Target
Fund shareholders in connection with or as a result of the
Agreement or the Transaction, will be treated as outstanding Target
Fund shares on the date of the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any
of the Acquiring Fund Shares issued in the Transaction, except for
Acquiring Fund Shares reacquired in the ordinary course of its
business as an open-end investment company.
6. Acquiring Fund will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the
fair market value of the gross assets held by Target Fund
immediately prior to the Transaction. For purposes of this
representation, (a) amounts paid by Target Fund, out of the assets
of Target Fund, to Target Fund shareholders in redemption of Target
Fund Shares, where such redemptions, if any, appear to be initiated
by Target Fund shareholders in connection with or as a result of
the Agreement or the Transaction, (b) amounts used by Target Fund
to pay expenses of the Transaction, and (c) amounts used to effect
all redemptions and distributions (except for regular, normal
dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to
avoid fund-level tax) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately
prior to the Transaction. Further, for purposes of this
representation, the amounts, if any, that Acquiring Fund pays after
the Transaction to Acquiring Fund shareholders who are former
Target Fund shareholders in redemption of Acquiring Fund Shares
received in exchange for Target Fund Shares, where such
redemptions, if any, appear to be initiated by such shareholders in
connection with or as a result of the Agreement or the Transaction,
will be considered to be assets of Target Fund that were not
transferred to Acquiring Fund.
7. The fair market value of the assets transferred to
Acquiring Fund by Target Fund will equal or exceed the sum of the
liabilities to be assumed by Acquiring Fund.
8. Following the Transaction, Acquiring Fund will continue to
use a substantial portion (in this case, at least 50%) of the
historic business assets of Target Fund. Specifically, Acquiring
Fund will use such significant portion of Target Fund's historic
business assets in its business by continuing to hold at least such
portion of the total assets transferred to it by Target Fund. In
making this determination, dispositions made in the ordinary course
of Acquiring Fund's business as an open-end investment company
(i.e., dispositions resulting from investment decisions made after
the Transaction on the basis of investment considerations
independent of the Transaction) shall not be taken into account.
9. Acquiring Fund has no plan or intention to sell or
otherwise dispose of any of the assets received from Target Fund
except for dispositions made in the ordinary course of Acquiring
Fund's business as an open-end investment company (i.e.,
dispositions resulting from investment decisions made after the
Transaction on the basis of investment considerations independent
of the Transaction).
10. The liabilities of Target Fund to be assumed by Acquiring
Fund were incurred by Target Fund in the ordinary course of its
business and are associated with the assets transferred to
Acquiring Fund. For purposes of this paragraph, expenses of the
Transaction are not treated as liabilities.
11. All fees and expenses incurred by Target Fund and/or
Acquiring Fund as a direct result of the Agreement or the
Transaction will be allocated ratably between the two funds in
proportion to their net assets as of the Valuation Time, except
that (a) the costs of proxy materials and proxy solicitation will
be borne by Target Fund, and (b) such fees and expenses will be
paid by the party directly incurring such expenses if and to the
extent that payment by the other party would result in the
disqualification of Acquiring Fund or Target Fund, as the case may
be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and
borne by either of Acquiring Fund and Target Fund shall be solely
and directly related to the Transaction and shall be paid directly
by Acquiring Fund or Target Fund, as the case may be, to the
relevant providers of services or other payees, in accordance with
the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses,
if any, incurred in connection with the Transaction.
12. For federal income tax purposes, Target Fund qualifies as
a regulated investment company, and the provisions of Sections 851
through 855 of the Code apply to Target Fund for its current
taxable year beginning December 1, 1994 and will continue to apply
to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund
shareholders of record on or prior to the Exchange Date a dividend
or dividends which together with all previous such dividends shall
have the effect of distributing all of Target Fund's investment
company taxable income (see Code Section 852) for both the taxable
year ending November 30, 1994 and the short taxable year of Target
Fund beginning on December 1, 1994 and ending on the Exchange Date
(computed in each case without regard to any deduction for
dividends paid) and all of the net capital gain realized in Target
Fund's taxable year ending November 30, 1994 and in its short
taxable year beginning on December 1, 1994 and ending on the
Exchange Date (after reduction for any capital loss carryover).
Such dividends will be made to ensure continued qualification of
Target Fund as a regulated investment company for tax purposes and
to eliminate fund-level tax.
13. Not more than 25% of the value of Target Fund's total
assets is invested in the stock and securities of any one issuer
and not more than 50% of the value of Target Fund's total assets is
invested in the stock and securities of five or fewer issuers.
14. For federal income tax purposes, Acquiring Fund qualifies
as a regulated investment company, and the provisions of Sections
851 through 855 of the Code apply to Acquiring Fund for its current
taxable year beginning December 1, 1994 and will continue to apply
to it through the Exchange Date.
15. Not more than 25% of the value of Acquiring Fund's total
assets is invested in the stock and securities of any one issuer
and not more than 50% of the value of Acquiring Fund's total assets
is invested in the stock and securities of five or fewer issuers.
16. Acquiring Fund does not own, directly or indirectly, nor
has it owned during the past five years, directly or indirectly,
any Target Fund Shares.
17. There is no intercorporate indebtedness existing between
Target Fund and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it
receives in the Transaction to its shareholders as provided in the
Agreement.
19. Target Fund 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.
Based on the foregoing representations and our review of the
documents and items referred to above, we are of the opinion that
for federal income tax purposes:
(i) No gain or loss will be recognized by Acquiring Fund upon
the receipt of the assets of Target Fund in exchange for
Acquiring Fund Shares and the assumption by Acquiring
Fund of the liabilities of Target Fund;
(ii) The basis in the hands of Acquiring Fund of the assets of
Target Fund transferred to Acquiring Fund in the
Transaction will be the same as the basis of such assets
in the hands of Target Fund immediately prior to the
transfer;
(iii) The holding periods of the assets of Target Fund in the
hands of Acquiring Fund will include the periods during
which such assets were held by Target Fund;
(iv) No gain or loss will be recognized by Target Fund upon
the transfer of Target Fund's assets to Acquiring Fund in
exchange for Acquiring Fund Shares and the assumption by
Acquiring Fund of the liabilities of Target Fund, or upon
the distribution of Acquiring Fund Shares by Target Fund
to its shareholders in liquidation;
(v) No gain or loss will be recognized by the Target Fund
shareholders upon the exchange of their Target Fund
Shares for Acquiring Fund Shares;
(vi) The basis of Acquiring Fund Shares a Target Fund
shareholder receives in connection with the Transaction
will be the same as the basis of his or her Target Fund
Shares exchanged therefor; and
(vii) A Target Fund shareholder's holding period for his or her
Acquiring Fund Shares will be determined by including the
period for which he or she held the Target Fund Shares
exchanged therefor, provided that he or she held such
Target Fund shares as capital assets.
Very truly yours,
Ropes & Gray
