EXHIBIT 12
FORM OF TAX OPINION TO BE DELIVERED AT CLOSING
May 2, 1997
Board of Trustees
Leahi Investment Trust
Board of Directors
First Pacific Mutual Fund, Inc.
Re: Agreement and Plan of Reorganization, Dated as of the
th Day of , 1997, By and Between Leahi Investment
Trust (the "Trust") on behalf of Leahi Tax-Free Income
Trust ("Acquired Fund") and First Pacific Mutual Fund, Inc.
("First Pacific") on behalf of First Hawaii Municipal Bond
Fund ("Acquiring Fund")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of Acquired Fund whereby, Acquired Fund
will transfer substantially all of its property, assets, and goodwill to
Acquiring Fund in exchange solely for shares of voting common stock of
Acquiring Fund ("Acquiring Fund Shares"), followed by the distribution
by Acquired Fund of the Acquiring Fund Shares to the shareholders of
Acquired Fund, the cancellation of all of the outstanding shares of
Acquired Fund ("Acquired Fund Shares") and the liquidation of Acquired
Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied upon
(a) the Amended and Restated Agreement, dated as of the th day of
, 1997, by and between First Pacific and the Trust ("Agreement"),
(b) the proxy materials provided to stockholders of Acquired Fund in
connection with the Special Meeting of Stockholders of Acquired Fund
held , 1997, (c) certain representations concerning the
Reorganization made to us by First Pacific and the Trust in a letter
dated , 1997 (the "Representation Letter"), (d) all
other documents, financial and other reports and corporate minutes
which we deemed relevant or appropriate, and (e) such statutes,
regulations, rulings and decisions as we deemed material to the
rendition of this opinion. All terms used herein, unless otherwise
defined, are used as defined in the Agreement.
For purposes of this opinion, we have assumed that Acquired Fund
on the effective date of the Reorganization satisfies, and following the
Reorganization, Acquiring Fund will continue to satisfy, the requirements
of subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury
under Section 1276(d) of the Code, certain transfers of market discount
bonds will be excepted from the requirement that accrued market discount
be recognized on disposition of a market discount bond under Section 1276(a)
of the Code. Such regulations are to provide, in part, that accrued market
discount will not be included in income if no gain is recognized under
Section 361(a) of the Code where a bond is transferred in an exchange
qualifying as a tax-free reorganization. As of the date hereof,
the Secretary has not issued any regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried
out in accordance with the applicable laws of the State of Maryland and the
Commonwealth of Massachusetts, the Agreement and the Representation Letter,
it is our opinion that:
1. The Reorganization will constitute a tax-free reorganization
within the meaning of Section 368(a)(1) of the Code and Acquired Fund and
Acquiring Fund will each be a party to the reorganization within the meaning
of Section 368(b) of the Code.
2. No gain or loss will be recognized by Acquired Fund upon the
transfer of all of its assets to Acquiring Fund in exchange solely for
Acquiring Fund Shares pursuant to Section 361(a) and Section 357(a) of the
Code. We express no opinion as to whether any accrued market discount will
be required to be recognized as ordinary income pursuant to Section 1276 of
the Code.
3. No gain or loss will be recognized by Acquiring Fund upon the
receipt by it of all of the assets of Acquired Fund in exchange solely for
Acquiring Fund Shares pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received by Acquiring
Fund will be the same as the basis of such assets to Acquired Fund immediately
prior to the exchange pursuant to Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund received by
Acquiring Fund will include the period during which such assets were held by
Acquired Fund pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of
Acquired Fund upon the exchange of their Acquired Fund Shares for Acquiring
Fund Shares (including fractional shares to which they may be entitled),
pursuant to Section 354(a) of the Code.
7. The basis of the Acquiring Fund Shares received by the
stockholders of Acquired Fund (including fractional shares to which they
may be entitled) will be the same as the basis of the Acquired Fund Shares
exchanged therefor pursuant to Section 358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares received
by the stockholders of Acquired Fund (including fractional shares to which
they may be entitled) will include the holding period of the Acquired Fund
Shares surrendered in exchange therefor, provided that the Acquired Fund
Shares were held as a capital asset on the effective date of the
Reorganization, pursuant to Section 1223(1) of the Code.
9. Acquiring Fund will succeed to and take into account as of
the date of the proposed transfer (as defined in Section 1.381(b)-1(b) of
the Income Tax Regulations) the items of Acquired 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.
Our opinion is based upon the Code, the applicable Treasury
Regulations promulgated thereunder, the present position of the Internal
Revenue Service as set forth in published revenue rulings and revenue
procedures, present administrative positions of the Internal Revenue
Service, and existing judicial decisions, all of which are subject to
change either prospectively or retroactively.
Our opinion is conditioned upon the performance by Acquiring Fund
and Acquired Fund of their undertakings in the Representation Letter.
This opinion is being rendered to Acquiring Fund and Acquired Fund
and may be relied upon only by such funds and the stockholders of each.
Very truly yours,
XXXXXXXX, XXXXX, XXXXXXX & XXXXX, LLP
By: \s\ Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X.Xxxxxxx, III, a Partner
