December 21, 1998
Board of Directors
UBS Private Investor Funds, Inc. - UBS Small Cap Fund
000 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Board of Trustees
The Xxxxxxx Funds - U.S. Small Capitalization Growth Fund
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Re: Agreement and Plan of Reorganization, Dated as of the 20th day of
October, 1998, By and Between UBS Private Investor Funds, Inc.
(the "Corporation") on behalf of the UBS Small Cap Fund
("Acquired Fund") and The Xxxxxxx Funds (the "Trust") on behalf
of U.S. Small
Capitalization Fund, now known as the U.S. Small Capitalization
Growth 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 and liabilities to
Acquiring Fund in exchange solely for Xxxxxxx U.S. Small Capitalization Growth
Fund Class I shares of Acquiring Fund (the "Acquiring Fund Shares"), followed by
the distribution by Acquired Fund of Acquiring Fund Shares to the stockholders
of Acquired Fund, the cancellation of all of the outstanding shares of common
stock of Acquired Fund (the "Acquired Fund Shares") and the liquidation of
Acquired Fund (the "Reorganization").
In rendering our opinion, we have reviewed and relied upon (a) the Agreement and
Plan of Reorganization, dated as of the 20th day of October, 1998, by and
between the Corporation and the Trust ("Agreement"), (b) the proxy materials
provided to stockholders of Acquired Fund in connection with the Special Meeting
of Shareholders of Acquired Fund held on December 11, 1998, (c) certain
representations concerning the Reorganization made to us by the Corporation and
the Trust in a letter dated December 21, 1998 (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 State of
Delaware, 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 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. 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 Corporation and the Trust
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 such funds and the stockholders of each.
Very truly yours,
XXXXXXXX, XXXXX, XXXXXXX & XXXXX, LLP
By: /S/ XXXXXXX X. XXXXXXXXX
Xxxxxxx X. Xxxxxxxxx, a Partner
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