EXHIBIT 2
_________, 1999
Xxxxxx High Quality Bond Fund
Putnam American Government Income Fund
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization dated as of ______, 1999 (the "Agreement"), between Putnam
American Government Income Fund ("Acquiring Fund"), a Massachusetts business
trust, and Xxxxxx High Quality Bond Fund ("Target Fund"), a Massachusetts
business trust. The Agreement describes a proposed transaction (the
"Transaction") to occur on ______, 1999, or such other date as may be decided by
the Trust (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(g) and 9(g) of the Agreement.
Capitalized terms not defined herein are defined in the Agreement.
Target Fund is a series of the Trust which 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 a series of the Trust which 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.
Xxxxxx High Quality Bond Fund _________, 1999
Putnam American Government Income Fund
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For purposes of this opinion, we have considered the Agreement, the Proxy
Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you provided us with a letter dated as of the date
hereof, representing as to certain facts, occurrences and information upon which
you have indicated that we may rely in rendering this opinion (whether or not
contained or reflected in the documents and items referred to above).
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) The Transaction will constitute a reorganization within the meaning
of Section 368(a) of the Code. The Target Fund and the Acquiring
Fund will each be a "party to a reorganization" within the meaning
of Section 368(b) of the Code;
(ii) 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;
(iii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iv) 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;
(v) 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;
(vi) 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;
(vii) 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; and
Xxxxxx High Quality Bond Fund _________, 1999
Putnam American Government Income Fund
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(viii) 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.
Very truly yours,
Ropes & Gray
