LAW OFFICES OF
PAUL, HASTINGS, JANOFSKY & WALKER LLP
A LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
345 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104-2635
TELEPHONE (415) 835-1600
FACSIMILE (415) 217-5333
INTERNET www.phjw.com
June 30, 2000
Allegiance Investment Trust
800 North Brand Boulevard, Suite 300
Glendale, California 91203
Re: Reorganization of Allegiance American Value Fund
into Van Deventer & Hoch American Value Fund
Ladies and Gentlemen:
You have requested our opinion as counsel for Allegiance Investment
Trust, a Delaware business trust ("AIT"), with respect to certain federal income
tax matters in connection with the reorganization by and between the Van
Deventer & Hoch American Value Fund (the "Acquiring Fund"), a series of Advisors
Series Trust, a Delaware business trust ("AST"), and the Allegiance American
Value Fund (the "Target Fund"), a series of A This opinion is rendered in
connection with the transaction described in the Agreement and Plan of
Reorganization dated as of May 31, 2000 (the "Reorganization Agreement"), by AST
for itself and on behalf of the Acquiring Fund and by AIT for itself and on
behalf of the Target Fund, and adopts the applicable defined terms therein.
This letter and the opinion expressed herein are for delivery to AIT
and may be relied upon only by AIT, the Target Fund and its shareholders. This
opinion also may be disclosed by AIT, and Target Fund or any of its shareholders
in connection with an audit or other administrative proceeding before the
Internal Revenue Service (the "Service") affecting AIT, and Target Fund or any
of its shareholders or in connection with any judicial proceeding relating to
the federal, state or local tax liability of AIT, and Target Fund or any of its
shareholders.
<PAGE>
For purposes of this opinion we have assumed the truth and accuracy of
the following facts:
AST was duly created pursuant to its Agreement and Declaration of Trust
by the Trustees for the purpose of acting as a management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and is
validly existing under the laws of Delaware. AST is registered as an investment
company classified as a diversified, open-end management company, under the 1940
Act.
The Acquiring Fund is a series of AST duly established under the laws
of Delaware, and is validly existing under the laws of that state. The Acquiring
Fund has an authorized capital of an unlimited number of shares and each
outstanding share of the Acquiring Fund is fully transferable and has full
voting rights.
AIT was duly created pursuant to its Agreement and Declaration of Trust
by the Trustees for the purpose of acting as a management investment company
under the 1940 Act, and is validly existing under the laws of Delaware. AIT is
registered as an investment company classified as a diversified, open-end
management company, under the 1940 Act.
The Target Fund is a series of AIT duly established under the laws of
Delaware, and is validly existing under the laws of that state. The shares of
the Target Fund are widely held. The Target Fund has an authorized capital of an
unlimited number of shares and each outstanding share of the Target Fund is
fully transferable and has full voting rights.
For valid business purposes, the following transaction (the
"Transaction") will take place in accordance with the laws of the State of
Delaware and pursuant to the Reorganization Agreement:
(a) On the date of the closing (the "Closing Date"), AIT will cause the
Target Fund to transfer substantially all of its assets to the Acquiring Fund.
Solely in exchange therefor, AST will cause the Acquiring Fund to assume all of
the liabilities of the Target Fund and to deliver to the Target Fund a number of
shares of voting common stock of the Acquiring Fund which represents 50 percent
or more of the aggregate voting shares of the Acquiring Fund.
(b) AIT will then cause the Target Fund to liquidate and distribute all
of the shares of the Acquiring Fund to the shareholders of the Target Fund in
proportion to their respective interests in the Target Fund in exchange for
their shares in the Target Fund.
(c) AIT will then cause the Target Fund to wind up and dissolve as soon
as practicable thereafter.
<PAGE>
In rendering the opinions stated below, we have examined and relied
uthe following, assuming the truth and accuracy of any statements contained
therein:
(1) The Reorganization Agreement; and
(2) Such other documents, records and instruments as we have deemed
necessary in order to enable us to render the opinions referred
to in this letter.
For purposes of rendering the opinions stated below, we have in
addition relied upon the following representations by AST on behalf of Acquiring
Fund and AIT on behalf of Target Fund, as applicable:
(A) The fair market value of the shares of the Acquiring Fund received
by each shareholder of the Target Fund will be approximately equal to the fair
market value of the shares of the Target Fund surrendered in the exchange.
(B) There is no plan or intention by the Acquiring Fund or any person
related to the Acquiring Fund, as defined in section 1.368-1(e)(3) of the
Treasury Regulations, to acquire or redeem any of the stock of the Acquiring
Fund issued in the transaction either directly or through any transaction,
agreement, or arrangement with any other person, other than redemptions in the
ordinary course of the Acquiring Fund's business as an open-end investment
company, as required by section 22(e) of the 1940 Act. For this purpose, section
1.368-1(e)(3) of the Treasury Regulations generally provides that two
corporations are related if they are members of the same affiliated group (i.e.,
one or more chains of corporations connected through stock ownership with a
common parent corporation where: (i) stock with at least 80% of the total voting
power and value of each corporation in the chain is owned directly by one or
more of the other corporations in the chain; and (ii) the common parent owns
directly stock with at least 80% of the voting power and value of at least one
of the corporations in the chain for consolidated return purposes ("Affiliated
Group Relationship") or if one corporation owns stock possessing at least 50% or
more of the voting power or value of the other corporation (the
"Parent-Subsidiary Relationship").
(C) During the five-year period ending on the date of the Transaction,
neither the Target Fund nor any person related to the Target Fund by having a
Parent- Subsidiary Relationship will have directly or through any transaction,
agreement, or arrangement with any other person, (i) acquired stock of the
Target Fund with consideration other than shares of the Acquiring Fund or the
Target Fund (except for shares of the Target Fund stock acquired from dissenters
in the transaction), (ii) redeemed or made distributions with respect to the
Target Fund shares, except for redemptions in the ordinary course of the Target
Fund's business as an open-end investment company as required by section 22(e)
of the 1940 Act and distributions necessary to qualify for the special tax
treatment afforded regulated investment companies under Section 852 of the
<PAGE>
Internal Revenue Code of 1986, as amended (the "Code"), and made in the ordinary
course of the Target Fund's business as a qualified regulated investment
company.
(D) Prior to or in the Transaction, neither the Acquiring Fund nor any
person related to the Acquiring Fund (having either an Affiliated Group
Relationship or a Parent-Subsidiary Relationship) will have acquired directly or
through any transaction, agreement or arrangement with any other person, stock
of the Target Fund with consideration other than shares of the Acquiring Fund.
(E) The aggregate value of the acquisitions, redemptions, and
distributions discussed in paragraphs (B), (C) and (D) above will not exceed 50
percent of the value (without giving effect to the acquisitions, redemptions and
distributions) of the proprietary interest in Target Fund on the effective date
of the proposed transaction.
(F) The Acquiring Fund will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market value
of the gross assets held by the Target Fund immediately prior to the
Transaction. For purposes of this representation, amounts used by the Target
Fund to pay its reorganization expenses, amounts paid by the Target Fund to
shareholders who receive cash or other property, and all redemptions and
distributions (except for distributions and redemptions occurring in the
ordinary course of the Target Fund's business as an investment company) made by
the Target Fund immediately preceding the transfer have been included as assets
of the Target Fund held immediately prior to the Transaction.
(G) After the Transaction, the shareholders of the Target Fund will be
in control of the Acquiring Fund within the meaning of Section 368(a)(2)(H) of
the Code, which provides that control means the ownership of shares possessing
at least 50 percent of the total combined voting power of all classes of shares
entitled to vote, or at least 50 percent of the total value of all classes of
shares.
(H) The Acquiring Fund has no plan or intention to reacquire any of its
shares issued in the Transaction, except for acquisitions made in the ordinary
course of its business as a series of an investment company.
(I) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Target Fund acquired in the Transaction,
except for dispositions made in the ordinary course of its business as a series
of an investment company.
(J) In pursuance of the plan of reorganization, the Target Fund will
distribute as soon as practicable the shares of the Acquiring Fund it receives
in the Transaction.
<PAGE>
(K) The liabilities of the Target Fund assumed by the Acquiring Fund
plus the liabilities to which the assets are subject were incurred by the Target
Fund in the ordinary course of its business and are associated with the assets
transferred.
(L) The fair market value of the assets of the Target Fund transferred
to the Acquiring Fund will equal or exceed the sum of the liabilities assumed by
the Acquiring Fund, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(M) The total adjusted basis of the assets of the Target Fund tto the
Acquiring Fund will equal or exceed the sum of the liabilities to be assumed by
the Acquiring Fund, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(N) Following the Transaction, the Acquiring Fund will continue the
historic business of the Target Fund or use a significant portion of the Target
Fund's historic business assets in a business.
(O) At the time of the Transaction, the Acquiring Fund will not have
any outstanding warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire shares in the Acquiring Fund
that, if exercised or converted, would affect the Target Fund's shareholders'
acquisition or retention of control of the Acquiring Fund, as defined in Section
368(a)(2)(H) of the Code, which provides that control means the ownership of
shares possessing at least 50 percent of the total combined voting power of all
classes of shares entitled to vote, or at least 50 percent of the total value of
all classes of shares.
(P) There is no intercorporate indebtedness existing between the Target
Fund and the Acquiring Fund that was issued, acquired, or will be settled at a
discount.
(Q) The Target Fund and the Acquiring Fund meet the requirements of a
regulated investment company as defined in Sections 368(a)(2)(F)(ii) and (iii)
of the Code. Section 368(a)(2)(F)(ii) of the Code requires that not more than
25% of the value of investment company's total assets is invested in the stock
and securities of any one issuer and not more than 50% of the value of its total
assets is invested in the stock and securities of five or fewer issuers. Section
368(a)(2)(F)(iii) of the Code requires that 50% or more of the value of the
investment company's total assets are stock and securities and 80% or more of
the value of its total assets are assets held for investment.
(R) The Target Fund is not under the jurisdiction of a court in a case
under Title 11 of the United States Code or a receivership, foreclosure, or
similar proceeding in a Federal or state court.
<PAGE>
(R) The investment advisor to both the Acquiring Fund and the Target
Fund will pay or assume only those expenses of the Target Fund and the Target
Fund's shareholders that are solely and directly related to the transaction in
accordance with the guidelines established in Revenue Ruling 73-54, 1973-1 C.B.
187 (such as legal and accounting expenses, appraisal fees, administrative
costs, security underwriting and registration fees and expenses, and transfer
agents' fees and expenses). Otherwise, the Acquiring Fund, the Target Fund, and
the shareholders of the Target Fund will pay their respective expenses, if any,
incurred in connection with the transaction.
(S) Each of the Target Fund and the Acquiring Fund has elected to be
taxed as a "regulated investment company" under Section 851 of the Code and, for
all of its taxable periods, (including the last short taxable period ending on
the date of the transaction for the Target Fund) has qualified for the special
tax treatment afforded regulated investment companies under the Code, and after
the transaction, the Acquiring Fund intends to continue to so qualify.
Our opinions set forth in this letter are based upon the Code,
regulations othe Treasury Department, published administrative announcements and
rulings of the Service and court decisions, all as of the date of this letter.
Based on the foregoing facts and representations, and provided that the
transaction will take place in accordance with the terms of the Reorganization
Agreement, and further provided that the Target Fund distributes the shares of
the Acquiring Fund received in the transaction as soon as practicable, we are of
the opinion that:
(a) The transfer of substantially all of the Target Fund's assets to
the Acquiring Fund in exchange for shares of the Acquiring Fund ("Shares") and
the assumption of the Target Fund's liabilities, and the distribution of the
Shares to the Target Fund shareholders in liquidation of the Target Fund, will
constitute a "reorganization" (the "Reorganization") within the meaning of
Section 368(a) of the Code, and the Acquiring Fund and the Target Fund each are
a "party to a reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Target Fund solely in exchange for Shares and the
assumption by the Acquiring Fund of the Target Fund's liabilities;
(c) No gain or loss will be recognized by the Target Fund upon the
transfer of its assets to the Acquiring Fund in exchange for Shares and the
assumption by the Acquiring Fund of the Target Fund's liabilities, or upon the
distribution (whether actual or constructive) of the Shares to the Target Fund
shareholders in exchange for their shares of the Target Fund; <PAGE>
(d) No gain or loss will be recognized by the Target Fund's
shareholders upon exchange of their shares of the Target Fund for Shares;
(e) The tax basis of Shares received by each Target Fund shareholder
pursuant to the Reorganization will be the same as the tax basis of the Target
Fund shares held by that shareholder immediately before the Reorganization, and
the holding period of Shares to be received by each Target Fund shareholder will
include the period during which the Target Fund shares exchanged therefor were
held by such shareholder;
(f) The tax basis of the assets of the Target Fund acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Target
Fund immediately prior to the Reorganization, and the holding period of the
assets of the Target Fund acquired by the Acquiring Fund will include the period
during which those assets were held by the Acquiring Fund;
The opinions set forth above represent our conclusions as to the
application of Federal income tax law existing as of the date of this letter to
the transaction described above, and we can give no assurance that legislative
enactments, administrative changes or court decisions may not be forthcoming
which would require modifications or revocations of our opinions expressed
herein. Moreover, there can be no assurance that positions contrary to our
opinions will not be taken by the Service, or that a court considering the
issues would not hold contrary to such opinions. Further, all the opinions set
forth above represent our conclusions based upon the documents and facts
referred to above. Any material amendments to such documents or changes in any
significant facts would affect the opinions referred to herein. Although we have
made such inquiries and performed such investigation as we have deemed necessary
to fulfill our professional responsibilities, we have not undertaken an
independent investigation of the facts referred to in this letter.
We express no opinion as to any Federal income tax issue or other
matter except those set forth above.
Very truly yours,
/s/ PAUL, HASTINGS, JANOFSKY & WALKER LLP
