Exhibit 12
___________ __, 2008
CGM Trust
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
CGM Capital Development Fund
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Ladies and Gentlemen:
This opinion is furnished to you pursuant to paragraph 8.5 of the Agreement and
Plan of Reorganization (the "Agreement"), dated as of _________ __, 2008, by
and among CGM Trust, a Massachusetts business trust (the "Successor Entity"),
on behalf of CGM Focus Fund, a series thereof (the "Successor Fund"), CGM
Capital Development Fund, a Massachusetts business trust (the "Predecessor
Entity"), and Capital Growth Management L.P. All capitalized terms not
otherwise defined herein have the meanings ascribed to them in the Agreement.
The Agreement contemplates the acquisition of all of the assets of the
Predecessor Entity by the Successor Fund in exchange for (a) the assumption by
the Successor Entity, on behalf of the Successor Fund, of the liabilities of
the Predecessor Entity and (b) the issuance and delivery by the Successor
Entity, on behalf of the Successor Fund, to the Predecessor Entity, for
distribution, in accordance with paragraph 1.3 of the Agreement, pro rata to
the Predecessor Entity Shareholders in exchange for their Predecessor Entity
Shares and in complete liquidation of the Predecessor Entity, of a number of
Successor Fund Shares having an aggregate net asset value equal to the value of
such assets, less the amount of such liabilities, of the Predecessor Entity so
transferred to the Successor Fund (the "Transaction").
In connection with this opinion we have examined and relied upon the originals
or copies, certified or otherwise identified to us to our satisfaction, of the
Agreement, the Proxy Statement on Schedule 14A filed with the Securities and
Exchange Commission on or about ___________ __, 2008 with respect to the
Transaction, and related documents (collectively, the "Transaction Documents").
In that examination, we have assumed the genuineness of all signatures, the
capacity and authority of each party executing a document to so execute the
document, the authenticity and completeness of all documents purporting to be
originals (whether reviewed by us in original or copy form) and the conformity
to the originals of all documents purporting to be copies (including electronic
copies). We have also assumed that each agreement and other instrument reviewed
by us is valid and binding on the party or parties thereto and is enforceable
in accordance with its terms, and that there are no contracts, agreements,
arrangements, or understandings, either written or oral, that are inconsistent
with or that would materially alter the terms of the Agreement or the other
Transaction Documents.
As to certain factual matters, we have relied with your consent upon, and our
opinion is limited by, the representations of the various parties set forth in
the Transaction Documents and in certificates of the Predecessor Entity and the
Successor Entity dated as of the date hereof (the "Certificates"). Our opinion
assumes (i) that all representations set forth in the Transaction Documents and
in the Certificates will be true and correct in all material respects as of the
date of the Transaction, and (ii) that the Agreement is implemented in
accordance with its terms and consistent with the representations set forth in
the Transaction Documents and Certificates. Our opinion is limited solely to
the provisions of the Internal Revenue Code of 1986, as amended and as
presently in effect (the "Code"), existing case law, existing permanent and
temporary treasury regulations promulgated under the Code ("Treasury
Regulations"), and existing published revenue rulings and procedures of the
Internal Revenue Service that are in effect as of the date hereof, all of which
are subject to change and new interpretation, both prospectively and
retroactively. We assume no obligation to update our opinion to reflect any
changes in law or in the interpretation thereof that may hereafter occur.
On the basis of and subject to the foregoing, we are of the opinion that, for
United States federal income tax purposes:
1. The transfer to the Successor Fund of all of the assets of the
Predecessor Entity in exchange solely for Successor Fund Shares and
the assumption by the Successor Entity, on behalf of the Successor
Fund, of all of the liabilities of the Predecessor Entity, followed
by the distribution of such Successor Fund Shares to the
Predecessor Entity Shareholders in complete liquidation of the
Predecessor Entity will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Successor Fund and
the Predecessor Entity will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by the Predecessor Entity upon
the transfer of its Assets to the Successor Fund solely in exchange
for the Successor Fund Shares and the assumption by the Successor
Entity, on behalf of the Successor Fund, of all of the Liabilities,
or upon the distribution of the Successor Fund Shares by the
Predecessor Entity to its shareholders in liquidation, except for
(i) any gain or loss that may be recognized on the transfer of
"section 1256 contracts" as defined in Section 1256(b) of the Code,
(ii) any gain that may be recognized on the transfer of stock in a
"passive foreign investment company" as defined in Section 1297(a)
of the Code, and (iii) any other gain that may be required to be
recognized as a result of the closing of the Predecessor Entity's
taxable year.
3. The basis in the hands of the Successor Fund of the Assets
transferred by the Predecessor Entity in the Transaction will be
the same as the basis of such Assets in the hands of the
Predecessor Entity immediately prior to the transfer thereof,
increased by the amount of gain (or decreased by the amount of
loss), if any, recognized by the Predecessor Entity upon the
transfer.
4. The holding periods of the Assets in the hands of the Successor
Fund, other than Assets with respect to which gain or loss is
required to be recognized, will include in each instance the period
during which the Assets were held by the Predecessor Entity (except
where investment activities of the Successor Fund have the effect
of reducing or eliminating the holding period with respect to an
Asset).
5. No gain or loss will be recognized by the Successor Fund upon
receipt of the Assets solely in exchange for the Successor Fund
Shares and the assumption by the Successor Entity, on behalf of the
Successor Fund, of the Liabilities of the Predecessor Entity.
6. No gain or loss will be recognized by the Predecessor Entity
Shareholders upon the exchange of all of their Predecessor Entity
Shares solely for Successor Fund Shares as part of the Transaction.
7. The aggregate basis of the Successor Fund Shares that each
Predecessor Entity Shareholder receives in the Transaction will be
the same as the aggregate basis of the Predecessor Entity Shares
exchanged therefor.
8. Each Predecessor Entity Shareholder's holding period for his or her
Successor Fund Shares received in the Transaction will be
determined by including the period for which he or she held the
Predecessor Entity Shares exchanged therefor, provided that he or
she held such Predecessor Entity Shares as capital assets on the
date of the exchange.
This opinion is being delivered solely to you for your use in connection with
the referenced transaction, and may not be relied upon by any other person or
used for any other purpose.
Very truly yours,
XXXXXXX XxXXXXXXX LLP
