[Form of Opinion]
[_____] [__], 2001
Board of Trustees
STI Classic Funds
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Re: Agreement and Plan of Reorganization, Dated as of the ___ Day of _________,
2001 (the "Agreement"), By and Between STI Classic Funds, a Massachusetts
business trust (the "Trust"), on behalf of its series, Capital Appreciation
Fund (the "Acquiring Fund") and the Core Equity Fund (the "Acquired Fund")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of the Acquired Fund which will consist of
(i) the transfer of all or substantially all of the assets of the Acquired Fund
to the Acquiring Fund, in exchange solely for, as applicable, Trust Shares and
Flex Shares of beneficial interest of the Acquiring Fund (collectively, the
"Acquiring Fund Shares"); (ii) the assumption by the Acquiring Fund of certain
liabilities of the Acquired Fund, and (iii) the distribution of the Acquiring
Fund Shares to the shareholders of the Acquired Fund in complete liquidation of
the Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in the Agreement (the "Reorganization").
In rendering our opinion, we have reviewed and relied upon (a) the
Agreement, (b) the proxy materials provided to shareholders of each class of the
Acquired Fund in connection with the Special Meeting of Shareholders of the
Acquired Fund to be held on May 18, 2001, (c) certain representations concerning
the Reorganization made to us by the Acquiring Fund and the Acquired Fund in a
letter dated _________ ___, 2001(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 the Acquired Fund
and the Acquiring Fund on the effective date of the Reorganization each satisfy,
and following the Reorganization, the 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
("RIC").
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 laws of 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) 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 Acquiring Fund upon the
receipt of the assets of Acquired Fund solely in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the identified liabilities of
Acquired Fund pursuant to Section 1032(a) of the Code.
3. No gain or loss will be recognized by Acquired Fund upon the
transfer of all of its assets to Acquiring Fund solely in exchange for Acquiring
Fund Shares and the assumption by Acquiring Fund of the identified liabilities
of Acquired Fund or upon the distribution of the Acquiring Fund Shares to the
shareholders of Acquired Fund pursuant to Sections 361(a) and (c) and 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.
4. No gain or loss will be recognized by the shareholders of
Acquired Fund upon the exchange of their shares of Acquired Fund for Acquiring
Fund Shares (including fractional shares to which they may be entitled)
pursuant to Section 354(a) of the Code.
5. The aggregate tax basis of the Acquiring Fund Shares received by
each shareholder of the Acquired Fund (including fractional shares to which they
may be entitled) will be the same as the aggregate tax basis of the Acquired
Fund shares exchanged therefor pursuant to Section 358(a)(1) of the Code.
6. The holding period of the Acquiring Fund Shares received by the
shareholders 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.
7. The tax basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the tax basis of such assets to Acquired Fund
immediately prior to the exchange pursuant to Section 362(b) of the Code.
8. 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.
9. 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 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.
This opinion letter expresses our views only as to U.S. federal income
tax laws in effect as of the date hereof. It represents our best legal judgment
as to the matters addressed herein, but is not binding on the Internal Revenue
Service or the courts. Accordingly, no assurance can be given that the opinions
and analysis expressed herein, if contested, would be sustained by a court. 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. We do not
undertake to make any continuing analysis of the facts or relevant law following
the date of this letter.
Our opinion is conditioned upon the performance by the Acquiring Fund
and the Acquired Fund of their undertakings in the Agreement and the
Representation Letter.
This opinion is being rendered to Acquiring Fund and Acquired Fund and
may be relied upon only by the funds and their shareholders.
Very truly yours,
