Xxxxxxxx Xxxxx Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Philadelphia, PA 19103-7098
Telephone (000) 000-0000
Fax (000) 000-0000
May 1, 2003
Board of Trustees
X. X. Xxxxxx Bond Trust, a Missouri common law trust
BMA Tower
000 Xxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Board of Trustees
X. X. Xxxxxx Bond Trust, a Delaware statutory trust
BMA Tower
000 Xxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Re: Agreement and Plan of Reorganization (the "Plan") made as of the 28th day of
March, 2003 by and between X. X. Xxxxxx Bond Trust, a Delaware statutory trust
(the "Delaware Trust") on behalf of its series, Portfolios S and L (the
"Acquiring Funds" and, singly, an "Acquiring Fund"), and X. X. Xxxxxx Bond
Trust, a Missouri common law trust (the "Missouri Trust") on behalf of its
series, Portfolios S and L (the "Acquired Funds" and, singly, an "Acquired
Fund")
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Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
consequences of the reorganizations of the Acquired Funds (singly or together,
as the context requires, the "Reorganization"), which will consist of: (i) the
acquisition by each Acquiring Fund on the Closing Date of the Reorganization of
all of the corresponding Acquired Fund's then-existing assets; (ii) the
assumption or payment by each Acquiring Fund, to the extent that they exist on
or after the Closing Date of the Reorganization, of all of the corresponding
Acquired Fund's obligations and liabilities, whether absolute, accrued,
contingent or otherwise, including all fees and expenses in connection with the
Plan; (iii) the delivery to each Acquired Fund of full and fractional shares of
beneficial interest, without par value, of the corresponding Acquiring Fund (the
"Acquiring Fund Shares") equal in number to the number of full and fractional
shares of beneficial interest, par value $0.25 per share with respect to
Portfolio L and par value $1.00 with respect to Portfolio S, of the Acquired
Fund outstanding immediately prior to the Closing Date of the Reorganization;
and (iv) the distribution on the Closing Date of the Reorganization of the
corresponding series of Acquiring Fund Shares to the shareholders of each
Acquired Fund according to their respective interests in the Acquired Fund,
following which the Acquired Funds and the Missouri Trust will be dissolved as
soon as practicable after the Closing Date of the Reorganization.
In rendering our opinion, we have reviewed and relied upon: (a) the Plan,
made as of the 28th day of March, 2003, by and between the Missouri Trust and
the Delaware Trust; (b) the proxy materials provided to shareholders of the
Acquired Funds in connection with the adjourned Special Meeting of Shareholders
of the Acquired Funds held on March 28, 2003; (c) all other documents, financial
and other reports and corporate minutes we deemed relevant or appropriate; and
(d) such statutes, regulations, rulings and decisions as we deemed material in
rendering this opinion. All terms used herein, unless otherwise defined, are
used as defined in the Plan.
You have authorized and directed us to assume, and we hereby do assume, in
issuing our opinion, the following facts with respect to each Acquiring Fund and
corresponding Acquired Fund, which are true and correct as of the date hereof:
1. The fair market value of the Acquiring Fund Shares (including fractional
shares) distributed to each Acquired Fund shareholder will be approximately
equal to the fair market value of the shares (including fractional shares) of
the Acquired Fund ("Acquired Fund Shares") surrendered by the shareholder in the
exchange. The Acquired Fund will not receive any consideration other than the
shares of the Acquiring Fund for the assets of the Acquired Fund being acquired
in the Reorganization.
2. Immediately following consummation of the Reorganization, the Acquiring
Fund will possess the same assets and liabilities, except for assets used to pay
expenses incurred in connection with the Reorganization, as those possessed by
the Acquired Fund immediately prior to the Reorganization. Assets used to pay
expenses, and all repurchases and distributions (except for regular, normal
dividends) made by the Acquired Fund immediately preceding the Reorganization
will, in the aggregate, constitute less than one percent of the net assets of
the Acquired Fund.
3. Immediately following the consummation of the Reorganization, the
current shareholders of the Acquired Fund will own all of the outstanding shares
of the Acquiring Fund in the same proportions as the shares they owned in the
Acquired Fund and will own these shares solely by reason of their ownership of
the shares of the Acquired Fund immediately before the Reorganization.
4. Following the Closing Date of the Reorganization, the Acquiring Fund
will continue the business of the Acquired Fund and use a significant portion of
the Acquired Fund's business assets in a continuing business. Before the Closing
Date, neither the Acquired Fund nor the Acquiring Fund will dispose of and/or
acquire any assets in order to satisfy the investment objectives of the
Acquiring Fund or for any other reason, or otherwise change its historic
investment policies, except for acquisitions and dispositions made in the
ordinary course of its business as a regulated investment company ("RIC").
Following the Closing Date, the Acquiring Fund will not dispose of assets
acquired from the Acquired Fund in order to satisfy the investment objective of
the Acquiring Fund, or for any other reason, except for dispositions made in the
ordinary course of its business as a RIC, and any proceeds from the disposition
of securities will be invested in accordance with the Acquiring Fund's
investment objectives.
5. The fair market value of the assets of the Acquired Fund that will be
transferred to the Acquiring Fund will equal or exceed the sum of the
liabilities, if any, assumed by the Acquiring Fund, plus the amount of
liabilities, if any, to which the transferred assets were subject. Any
liabilities of the Acquired Fund assumed by the Acquiring Fund and any
liabilities to which the assets transferred by the Acquired Fund are subject
will have been incurred by the Acquired Fund in the ordinary course of its
business as a RIC.
6. The Acquiring Fund and the Acquired Fund each satisfies the requirements
applicable to RICs under Section 851 of the Internal Revenue Code of 1986, as
amended (the "Code") and, therefore, the two funds satisfy the requirements of
Sections 368(a)(2)(F)(i) and (ii) of the Code.
7. The Acquiring Fund intends to elect, and the Acquired Fund has elected,
to be taxed as a RIC under Section 851 of the Code and, for all required taxable
periods, the Acquired Fund has qualified for the special tax treatment afforded
RICs under the Code, and after the Reorganization, the Acquiring Fund intends to
qualify as a RIC. At the time the Acquired Fund was organized, there was no plan
or intention to dispose of the Acquired Fund's assets except in the ordinary
course of its business as a RIC.
8. There is no plan or intention for the Acquiring Fund (the issuing
corporation as defined in ss.1.368-1(b) of the income tax regulations issued by
the United States Department of the Treasury (the "Income Tax Regulations")) or
any person related (as defined in ss.1.368-1(e)(3) of the Income Tax
Regulations, without regard to ss.1.368-1(e)(3)(i)(A)) to the Acquiring Fund to
acquire during the five-year period beginning on the date of the Reorganization,
with consideration other than Acquiring Fund Shares, Acquiring Fund Shares
furnished in exchange for a proprietary interest in the Acquired Fund, either
directly or through any transaction, agreement, or arrangement with any other
person, other than redemptions in the ordinary course of the Acquiring Fund's
business as an open-end investment company, as required by Section 22(e) of the
1940 Act.
Based on the foregoing, and provided the Reorganization is carried out in
accordance with the applicable laws of the State of Missouri and State of
Delaware and the terms of the Plan, for each Acquired Fund and corresponding
Acquiring Fund, it is our opinion that:
1. The acquisition by the Acquiring Fund of all of the assets of the
Acquired Fund, as provided for in the Plan, in exchange for the Acquiring Fund
Shares and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund, followed by the distribution by the Acquired Fund to its
shareholders of the Acquiring Fund Shares in complete liquidation of the
Acquired Fund, will qualify as a reorganization within the meaning of Section
368(a)(1)(F) of the Code, and the Acquired Fund and the Acquiring Fund each will
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 the Acquired Fund upon the
transfer of all of its assets to, and assumption of its liabilities by, the
Acquiring Fund in exchange for the Acquiring Fund Shares pursuant to Section
361(a) and Section 357(a) of the Code.
3. No gain or loss will be recognized by the Acquiring Fund upon the
receipt by it of all of the assets, and assumption by it of all of the
liabilities, of the Acquired Fund in exchange for the Acquiring Fund Shares
pursuant to Section 1032(a) of the Code.
4. No gain or loss will be recognized by the Acquired Fund upon the
distribution of the Acquiring Fund Shares to its shareholders in complete
liquidation of the Acquired Fund (in pursuance of the Plan) pursuant to Section
361(c)(1) of the Code.
5. The basis of the assets of the Acquired Fund received by the Acquiring
Fund will be the same as the basis of these assets to the Acquired Fund
immediately prior to the exchange pursuant to Section 362(b) of the Code.
6. The holding period of the assets of the Acquired Fund received by the
Acquiring Fund will include the period during which such assets were held by the
Acquired Fund pursuant to Section 1223(2) of the Code.
7. No gain or loss will be recognized by the shareholders of the Acquired
Fund upon the exchange of the Acquired Fund Shares for the Acquiring Fund Shares
(including fractional shares to which they may be entitled), pursuant to Section
354(a) of the Code.
8. The basis of the Acquiring Fund Shares received by the shareholders of
the 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.
9. The holding period of the Acquiring Fund Shares received by the
shareholders of the 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 Closing Date of the Reorganization pursuant to
Section 1223(1) of the Code.
10. The Acquiring 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 Income Tax
Regulations, the items of the Acquired Fund described in Section 381(c) of the
Code.
Our opinion is based upon the Code, the applicable Income Tax Regulations,
the present positions of the Internal Revenue Service (the "Service") as are set
forth in published revenue rulings and revenue procedures, present
administrative positions of the Service, and existing judicial decisions, all of
which are subject to change either prospectively or retroactively. We do not
undertake to make any continuing analysis of the facts or relevant law following
the Closing Date of the Reorganization.
Our opinion is conditioned upon the performance by the Delaware Trust, on
behalf of the Acquiring Funds, and the Missouri Trust, on behalf of the Acquired
Funds, of their undertakings in the Plan. Our opinion is limited to the
transactions incident to the Reorganization described herein, and no opinion is
rendered with respect to (i) any other transaction or (ii) the effect, if any,
of the Reorganization (and/or the transactions incident thereto) on any other
transaction and/or the effect, if any, of any such other transaction on the
Reorganization.
This opinion is being rendered to each Acquiring Fund and corresponding
Acquired Fund, and may be relied upon only by such funds and the shareholders of
each. We hereby consent to the use of this opinion as an exhibit to any
Registration Statement of the Delaware Trust, or amendments thereto, covering
the registration of the shares of the Delaware Trust under the Securities Act of
1933, as amended, to be issued in the Reorganization.
Very truly yours,
XXXXXXXX, XXXXX, XXXXXXX & XXXXX, LLP
By: /s/Xxxxxxx X. Xxxxxxx, III
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Xxxxxxx X. Xxxxxxx, III, a partner
Malvern, PA o Wilmington, DE o Cherry Hill, NJ o Washington, DC
A Pennsylvania Limited Liability Partnership
