0000 X Xxxxxx, XX
Xxxxxxxxxx, XX 00000 XXXXXX, XXXXX
000-000-0000 & BOCKIUS LLP
Fax: 000-000-0000 COUNSELORS AT LAW
November 9, 2001
Board of Trustees
Xxxxxx Funds
0000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Board of Trustees
Professionally Managed Portfolios
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Re: Agreement and Plan of Reorganization, Dated as of the 15th
Day of June, 2001 (the "Agreement"), By and Between Xxxxxx
Funds, a Massachusetts business trust (the "Trust"), on behalf
of its Xxxxxx Future Financial Services Fund (the "Acquiring
Fund") and Professionally Managed Portfolios, a Massachusetts
business trust (the "PMP Trust"), on behalf of its Titan
Financial Services Fund (the "Transferring Fund")
Ladies and Gentlemen:
You have requested our opinion as to certain federal income
tax consequences of the reorganization of the Transferring Fund which will
consist of (i) the transfer of all of the assets of the Transferring Fund to the
Acquiring Fund, in exchange solely for shares of the Acquiring Fund (the
"Acquiring Fund Shares"), (ii) the assumption by the Acquiring Fund of the
liabilities of the Transferring Fund, and (iii) the distribution of the
Acquiring Fund Shares to the shareholders of the Transferring Fund in complete
liquidation of the Transferring Fund, all upon the terms and conditions 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 the
Transferring Fund in connection with the Special Meeting of Shareholders of the
Transferring Fund held on Friday, September 21, 2001, (c) certain
representations concerning the Reorganization made to us by the Acquiring Fund
and the Transferring Fund in letters dated November 9, 2001(collectively, the
"Representation Letters"), (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
Transferring Fund and the Acquiring Fund on the Closing 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 Letters, it is our opinion that:
1. The Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(D) of the Code, and the
Transferring Fund and the 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 the Acquiring Fund
upon the receipt of the assets of the Transferring Fund solely in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Transferring Fund pursuant to Section 1032(a) of the Code.
3. No gain or loss will be recognized by the Transferring Fund
upon the transfer of all of its assets to the Acquiring Fund solely in exchange
for Acquiring Fund Shares and the assumption by the Acquiring Fund of the
liabilities of the Transferring Fund or upon the distribution of the Acquiring
Fund Shares to the shareholders of the Transferring Fund in exchange for such
shareholders' shares of the Transferring 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
the Transferring Fund upon the exchange of their shares of the Transferring Fund
for the 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 Transferring Fund (including fractional
shares to which they may be entitled) will be the same as the aggregate tax
basis of the Transferring 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 Transferring Fund (including fractional shares to which they
may be entitled) will include the holding period of the Transferring Fund Shares
surrendered in exchange therefor, provided that the Transferring Fund Shares
were held as a capital asset on the Closing Date of the Reorganization, pursuant
to Section 1223(1) of the Code.
7. The tax basis of the assets of the Transferring Fund
received by the Acquiring Fund will be the same as the tax basis of such assets
to the Transferring Fund immediately prior to the exchange pursuant to Section
362(b) of the Code.
8. The holding period of the assets of the Transferring Fund
received by the Acquiring Fund will include the period during which such assets
were held by the Transferring 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 the Transferring 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 Trust,
on behalf of the Acquiring Fund, and the PMP Trust, on behalf of the
Transferring Fund, of their undertakings in the Agreement and the Representation
Letters.
This opinion is being rendered to the Trust on behalf of the
Acquiring Fund and the PMP Trust on behalf of the Transferring Fund and the
shareholders of such funds.
Very truly yours,
/s/ Xxxxxx, Xxxxx & Xxxxxxx LLP
