Exhibit EX-99.(12)(A)
[FORM OF OPINION]
[ ], 2000
Board of Directors
D. L. Babson Tax-Free Income Fund, Inc.
700 Karnes Boulevard
Kansas City, MO 64108-3306
Re: Plan of Reorganization, dated as of the [___] day
of [ ], 2000 (the "Plan"), made by D. L. Babson Tax-
Free Income Fund, Inc. (the "Fund") on behalf of two of
its series, Portfolio S ("Acquired Fund") and Portfolio
L ("Acquiring Fund")
Ladies and Gentlemen:
You have requested our opinion as to certain federal
income tax consequences of the reorganization of Acquired Fund
which will consist of: (i) the acquisition by the Acquiring
Fund, of substantially all of the property, assets and goodwill
of the Acquired Fund in exchange solely for shares of common
stock, par value $0.10 per share, of the Acquiring Fund
("Acquiring Fund Shares"); (ii) the distribution by the Acquired
Fund of the Acquiring Fund Shares to the shareholders of the
Acquired Fund; and (iii) the subsequent dissolution of Acquired
Fund as soon as practicable after the closing (the
"Reorganization"), all upon and subject to the terms and
conditions of the Plan.
In rendering our opinion, we have reviewed and relied
upon: (a) the Plan of Reorganization, dated as of the [___] day
of [ ], 2000, made by the Fund on behalf of the Acquiring
Fund and the Acquired Fund; (b) the proxy materials provided to
stockholders of the Acquired Fund in connection with the Special
Meeting of Stockholders of the Acquired Fund held on the 1st day
of September, 2000; (c) certain representations concerning the
Reorganization made to us by the Fund on behalf of Acquiring Fund
and the Acquired Fund in a letter dated [___________], 2000 (the
"Representation Letter"); (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 Plan.
For purposes of this opinion, we have assumed that the
Acquired Fund on the effective date of the Reorganization
satisfies, 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.
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 applicable laws of the
State of Maryland, the Plan and the Representation Letter, it is
our opinion that:
1. The acquisition by Acquiring Fund of substantially
all of the assets of Acquired Fund as provided for herein in
exchange for Acquiring Fund Shares will qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the
Code, and Acquired Fund and 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 Acquired
Fund upon the transfer of substantially all of its assets to
Acquiring Fund in exchange solely for Acquiring Fund Shares
pursuant to Section 361(a) and Section 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.
3. No gain or loss will be recognized by Acquiring
Fund upon the receipt by it of substantially all of the assets of
Acquired Fund in exchange solely for Acquiring Fund Shares
pursuant to Section 1032(a) of the Code.
4. The basis of the assets of Acquired Fund received
by Acquiring Fund will be the same as the basis of such assets to
Acquired Fund immediately prior to the exchange pursuant to
Section 362(b) of the Code.
5. The holding period of the assets of Acquired Fund
received by Acquiring Fund will include the period during which
such assets were held by Acquired Fund pursuant to Section
1223(2) of the Code.
6. No gain or loss will be recognized by the
stockholders of Acquired Fund upon the exchange of their Acquired
Fund Shares for Acquiring Fund Shares (including fractional
shares to which they may be entitled), pursuant to Section 354(a)
of the Code.
7. The basis of the Acquiring Fund Shares received by
the stockholders of Acquired Fund (including fractional shares to
which they may be entitled) will be the same as the basis of the
Acquired Fund Shares exchanged therefor pursuant to Section
358(a)(1) of the Code.
8. The holding period of the Acquiring Fund Shares
received by the stockholders of 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 on the effective date of the
Reorganization, pursuant to Section 1223(1) of the Code.
9. Acquiring Fund will succeed to and take into
account as of the date of the proposed transfer (as defined in
Section 1.381(b)-1(b) of the Income Tax Regulations) the items of
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 and the Income Tax Regulations
thereunder.
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
Acquiring Fund and Acquired Fund of their undertakings in the
Plan and the Representation Letter.
This opinion is being rendered to the Fund, on behalf
of both the Acquiring Fund and the Acquired Fund, and may be
relied upon only by such funds and the stockholders of each.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:
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