EXHIBIT D
Board of Trustees Board of Directors
Declaration Funds ATC Funds, Inc.
000 Xxxxx Xxxx, Xxxxx 0000 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000 Xxxxx Xx, Xxx Xxxxxx 00000-2052
Re: AGREEMENT AND PLAN OF REORGANIZATION DATED May 22, 2001, (THE "PLAN")
BETWEEN DECLARATION FUND, A PENNSYLVANIA BUSINESS TRUST
("DECLARATION") AND ATC FUNDS, INC., A MARYLAND CORPORATION ("ATC")
Gentlemen:
You have requested my opinion concerning certain federal income tax
consequences of the reorganization of Declaration and ATC (the
"Reorganization"). The Reorganization will involve the transfer of all of the
assets of The Water Fund, a separate series of shares of Declaration (the
"Declaration Portfolio") to a recently created, corresponding series of shares
of ATC (the "ATC Portfolio") and the assumption of the liabilities of the
Declaration Portfolio by the ATC Portfolio. On the date of the Reorganization,
shares of the ATC Portfolio will be credited to shareholders of the Declaration
Portfolio, following which the Declaration Portfolio will be dissolved.
In rendering this opinion, I have reviewed and relied upon: (a) the
Agreement and Plan of Reorganization dated May 22, 2001 (the "Plan"), made by
Declaration and ATC; (b) the proxy materials provided to shareholders of the
Declaration Portfolio in connection with the Special Meeting of Shareholders, to
be held on July 30, 2001; (c) certain representations concerning the
Reorganization made to us by Declaration and ATC ; (d) all other documents,
financial and other reports and corporate minutes that we deemed relevant or
appropriate; and (e) 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.
For purposes of this opinion, I have assumed that the Declaration Portfolio
on the date of the Reorganization, satisfies, and immediately following the
Reorganization, the ATC Portfolio will 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 the Treasury (the
"Secretary") 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 such regulations under Section 1276(d) 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, Pennsylvania, the
Plan, and the Representations of ATC and Declaration, it is my opinion that:
1. The transfer by the Declaration Portfolio of all of its assets subject
to its liabilities in exchange for shares of the ATC Portfolio will
qualify as a reorganization within the meaning of Section 368(a)(1)(F)
of the Code, and the Declaration Portfolio and the ATC Portfolio 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 the Declaration Portfolio upon
the transfer of all of its assets subject to its liabilities to the
ATC Portfolio exchange solely for shares of the ATC Portfolio pursuant
to Section 361(a) and Section 357(a) of the Code.
3. No gain or loss will be recognized by the ATC Portfolio upon the
receipt by it of all of the assets of the Declaration Portfolio
subject to its liabilities in exchange solely for shares of the ATC
Portfolio pursuant to Section 1032(a) of the Code.
4. The basis of the assets of the Declaration Portfolio received by the
ATC Portfolio will be the same as the basis of such assets to the
Declaration Portfolio immediately prior to the exchange pursuant to
Section 362(b) of the Code.
5. The holding period of the assets of the Declaration Portfolio received
by the ATC Portfolio will include the period during which such assets
were held by the Declaration Portfolio pursuant to Section 1223(2) of
the Code.
6. No gain or loss will be recognized by the shareholders of the
Declaration Portfolio upon the exchange of their shares in such
Portfolio for shares of beneficial interest in the ATC Portfolio
(including fractional shares to which they may be entitled), pursuant
to Section 354(a) of the Code.
7. The basis of the shares of beneficial interest in the ATC Portfolio
received by the shareholders of the Declaration Portfolio (including
fractional shares to which they may be entitled) will be the same as
the basis of the shares of the Declaration Portfolio exchanged
therefor pursuant to Section 358(a)(1) of the Code.
8. The holding period of the shares of beneficial interest in the ATC
Portfolio received by the shareholders of the Declaration Portfolio
(including fractional shares to which they may be entitled) will
include the holding period of the shares of such Portfolio surrendered
in exchange therefor, provided that the shares of such Portfolio were
held as a capital asset on the date of the Reorganization, pursuant to
Section 1223(1) of the Code.
9. The ATC Portfolio 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 regulations
issued by the Secretary (regulations issued by the Secretary are
hereafter referred to as "Treasury Regulations"), the items of the
Declaration Portfolio described in Section 381(c) of the Code, as
provided in Section 1.381(b)-1(a)(2) of the Treasury Regulations.
This 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. I do not undertake to make any continuing analysis of the facts
or relevant law following the date of this opinion.
This opinion is further conditioned upon the performance by Declaration and
ATC of their undertakings in the Plan.
This opinion is being rendered to Declaration and ATC and may be relied
upon only by Declaration and ATC and the shareholders, respectively, of each,
and we consent to its inclusion in Form N-14, Post Effective Amendment No. 37 to
the Registration Statement under the Securities Act of 1933 solely for such
purposes.
Very truly yours,
XXXXX XXXXX & XXXXX., P.C.
/s/ Xxxxx X. Xxxxx
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By: Xxxxx X. Xxxxx, Esq
