[ROPES & GRAY LETTERHEAD APPEARS HERE]
October 5, 2000
Liberty Contrarian Balanced Fund
Liberty Contrarian Equity Fund
Liberty Funds Trust III
One Financial Center
Boston, MA 02111
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement"), in the form attached as Appendix A to the
Combined Prospectus and Proxy Statement filed October 5, 2000 (the
"Prospectus/Proxy"), by and among Liberty Funds Trust III (the "Trust"), a
Massachusetts business trust, on behalf of two of its series, Liberty Contrarian
Balanced Fund ("Target Fund") and Liberty Contrarian Equity Fund ("Acquiring
Fund") and Liberty Financial Companies, Inc. The Agreement describes a proposed
transaction (the "Transaction") to occur on a date to be determined, in a manner
consistent with the Prospectus/Proxy, in early 2001 (the "Exchange Date"),
pursuant to which Acquiring Fund will acquire substantially all of the assets of
Target Fund in exchange for shares of beneficial interest in Acquiring Fund (the
"Merger Shares") and the assumption by Acquiring Fund of all of the liabilities
of Target Fund, following which the Merger Shares received by Target Fund will
be distributed by Target Fund to its shareholders in liquidation and termination
of Target Fund. This opinion as to certain federal income tax consequences of
the Transaction is furnished to you pursuant to Section 8.5 of the Agreement.
Capitalized terms not defined herein are used herein as defined in the
Agreement.
Target Fund and Acquiring Fund are separate series of the Trust, which
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end diversified management investment company. Shares of
Target Fund are redeemable at net asset value at each shareholder's option, as
are shares of Acquiring Fund. Each of Target Fund and Acquiring Fund has elected
to be a regulated investment company for federal income tax purposes under
Section 851 of the Internal Revenue Code of 1986, as amended (the "Code").
For purposes of this opinion, we have considered the Agreement, the
Prospectus/Proxy relating to the Transaction, which will be furnished to each
Fund's shareholders in connection with the Transaction (including any items
incorporated by reference therein), and such other
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Liberty Contrarian Balanced Fund
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items as we have deemed necessary to render this opinion. In addition, you have
provided us with letters dated as of the date hereof from Acquiring Fund and
Target Fund, representing as to certain facts, occurrences and information upon
which you have indicated that we may rely in rendering this opinion (whether or
not contained or reflected in the documents and items referred to above).
Based on our review of the documents and items referred to above, we
are of the opinion that for federal income tax purposes:
(i) The Transaction will constitute a reorganization within the
meaning of Section 368(a) of the Code, and Acquiring Fund and
Target Fund will each be a "party to a reorganization" within
the meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Target Fund in exchange for Merger
Shares and the assumption by Acquiring Fund of the liabilities
of Target Fund;
(iii) The basis in the hands of Acquiring Fund of the assets of Target
Fund transferred to Acquiring Fund in the Transaction will be
the same as the basis of such assets in the hands of Target Fund
immediately prior to the transfer;
(iv) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets
were held by Target Fund;
(v) No gain or loss will be recognized by Target Fund upon the
transfer of Target Fund's assets to Acquiring Fund in exchange
for Merger Shares and the assumption by Acquiring Fund of the
liabilities of Target Fund, or upon the distribution of Merger
Shares by Target Fund to its shareholders in liquidation;
(vi) No gain or loss will be recognized by Target Fund shareholders
upon the exchange of their Target Fund Shares for Merger Shares;
(vii) The basis of Merger Shares that a Target Fund shareholder
receives in connection with the Transaction will be the same, in
the aggregate, as the aggregate basis of his or her Target Fund
Shares exchanged therefor;
(viii) A Target Fund shareholder's holding period for his or her Merger
Shares will be determined by including the period for which he
or she held the Target Fund Shares exchanged therefor, provided
that he or she held such Target Fund Shares as capital assets;
and
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Liberty Contrarian Balanced Fund
-3- October 5, 2000
(ix) Acquiring Fund will succeed to and take into account the items
of Target Fund described in Section 381(c) of the Code, subject
to the conditions and limitations specified in Sections 381,
382, 383, and 384 of the Code and the Regulations thereunder.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
