Re: Agreement and Plan of Reorganization, dated June 16, 2009 (the “Plan”), adopted by the Board of Trustees of the Schwab Capital Trust (the “Trust”) for the reorganization of the Trust’s Schwab Retirement Income Fund (the “Acquired Fund”) into the...
June 16, 2009
| Re: | Agreement and Plan of Reorganization, dated June 16, 2009 (the “Plan”), adopted by the Board of Trustees of the Xxxxxx Capital Trust (the “Trust”) for the reorganization of the Trust’s Schwab Retirement Income Fund (the “Acquired Fund”) into the Trust’s Xxxxxx Monthly Income Fund — Enhanced Payout (the “Surviving Fund”) |
Ladies and Gentlemen:
You have requested our opinions as to certain U.S. federal income tax consequences of the
reorganization of the Acquired Fund and the Surviving Fund that will consist of: (i) the transfer
of all of the assets of the Acquired Fund to the Surviving Fund in exchange solely for shares of
the Surviving Fund (“Surviving Fund Shares”), (ii) the assumption by the Surviving Fund of all of
the liabilities of the Acquired Fund, and (iii) the distribution of the Surviving Fund Shares to
the shareholders of the Acquired Fund in complete liquidation of the Acquired Fund, all upon the
terms and conditions set forth in the Plan (the “Reorganization”).
In rendering our opinions, we have reviewed and relied upon (a) the Plan, (b) certain
representations concerning the Reorganization made to us by the Trust, on behalf of the funds, in a
letter dated June 16, 2009 (the “Representation Letter”), (c) all other documents, financial and
other reports and corporate minutes that we deemed relevant or appropriate, and (d) such statutes,
regulations, rulings and decisions as we deemed material with respect to this opinion. All terms
used herein, unless otherwise defined, are used as defined in the Plan.
For purposes of our opinions, we have assumed that the Acquired Fund and the Surviving Fund,
as of the Closing Date of the Reorganization, each satisfy and, following the Reorganization, the
Surviving 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”).
Based on the foregoing, and provided the Reorganization is carried out in accordance with the
laws of the Commonwealth of Massachusetts, the Plan 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 the Acquired Fund and the Surviving 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 Surviving Fund upon the receipt of the
assets of the Acquired Fund solely in exchange for Surviving Fund Shares and the assumption
by the Surviving Fund of all of the liabilities of the Acquired Fund, pursuant to Section
1032(a) of the Code.
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Board of Trustees
Xxxxxx Capital Trust
June 16, 2009
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Xxxxxx Capital Trust
June 16, 2009
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3. No gain or loss will be recognized by the Acquired Fund upon the transfer of all of
its assets to the Surviving Fund solely in exchange for Surviving Fund Shares and the
assumption by the Surviving Fund of all of the liabilities of the Acquired Fund or upon the
distribution of Surviving Fund Shares to shareholders of the Acquired Fund, pursuant to
Sections 361(a) and (c) and 357(a) of the Code.
4. No gain or loss will be recognized by the shareholders of the Acquired Fund upon the
exchange of their shares of the Acquired Fund for Surviving 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 Surviving Fund Shares received by each shareholder of the
Acquired Fund (including fractional shares to which they may be entitled) will be the same
as the aggregate tax basis of the Acquired Fund shares exchanged therefor, pursuant to
Section 358(a)(1) of the Code.
6. The holding period of the Surviving Fund Shares received by the shareholders of the
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 as of the Closing Date of the
Reorganization, pursuant to Section 1223(1) of the Code.
7. The tax basis of the assets of the Acquired Fund received by the Surviving Fund will
be the same as the tax basis of such assets to the Acquired Fund immediately prior to the
exchange, pursuant to Section 362(b) of the Code.
8. The holding period of the assets of the Acquired Fund received by the Surviving Fund
will include the period during which such assets were held by the Acquired Fund, pursuant to
Section 1223(2) of the Code.
9. The Surviving 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 Treasury Regulations), the items of the
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.
Notwithstanding the foregoing opinions, no opinion is expressed as to the effect of the
Reorganization on (i) the Acquired Fund or the Surviving Fund with respect to any asset as to which
any unrealized gain or loss is required to be recognized for U.S. federal income tax purposes at
the end of a taxable year (or on the termination or transfer thereof) under a xxxx-to-market system
of accounting and (ii) any shareholder of the Acquired Fund that is required to recognize
unrealized gains and losses for U.S. federal income tax purposes under a xxxx-to-market system of
accounting.
Our opinions are limited solely to the Reorganization. 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
Board of Trustees
Xxxxxx Capital Trust
June 16, 2009
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Xxxxxx Capital Trust
June 16, 2009
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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 opinions are conditioned upon the performance by the Trust, on behalf of the Surviving
Fund and the Acquired Fund, of its undertakings in the Plan and the Representation Letter.
Our opinions are being rendered to the Trust on behalf of the Surviving Fund and the Acquired
Fund, and may be relied upon only by the Trust, its Board of Trustees, the Acquired Fund, the
Surviving Fund and the shareholders of the Acquired Fund and the Surviving Fund.
| Very truly yours, |
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| /s/ Xxxxxx, Xxxxx & Xxxxxxx LLP | ||||
| Xxxxxx, Xxxxx & Bockius LLP | ||||
