As filed with the Securities and Exchange Commission on January 30, 1997
Registration No. 333-12871
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 1 [ X ]
PIMCO FUNDS
(Exact name of Registrant as Specified in Charter)
840 Newport Center Drive, Newport Beach, California 92660
(Address of Principal Executive Offices)
(714) 640-3031
(Area Code and Telephone Number)
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R. Wesley Burns
Pacific Investment Management Company
840 Newport Center Drive
Newport Beach, California 92660
(Name and Address of Agent for Service)
Copies to:
Newton B. Schott, Jr., Esq. Robert W. Helm, Esq. Douglass N. Ellis, Jr., Esq.
c/o PIMCO Advisors L.P. Dechert Price & Rhoads Ropes & Gray
2187 Atlantic Street 1500 K Street, N.W. One International Place
Stamford, CT 06902 Suite 500 Boston, MA 02110
Washington, D.C. 20005
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It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b).
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An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2. In reliance upon such
Rule, no filing fee is being paid at this time. A Rule 24f-2 notice for the
Registrant for the fiscal year ended March 31, 1996 was filed on May 30, 1996.
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<PAGE>
File No. 333-12871
PIMCO FUNDS
HIGH YIELD FUND, TOTAL RETURN FUND,
LOW DURATION FUND AND MONEY MARKET FUND
Form N-14
PART C
OTHER INFORMATION
Item 16. Exhibits
(12) The following opinions of counsel as to tax matters and
consent of counsel are filed herewith:
(a) Opinion of counsel as to certain tax matters related
to the merger of the High Yield Fund.
(b) Opinion of counsel as to certain tax matters related
to the merger of the Total Return Fund with the PIMCO
Advisors Total Return Income Fund.
(c) Opinion of counsel as to certain tax matters related
to the merger of the Total Return Fund with the PIMCO
Advisors U.S. Government Fund.
(d) Opinion of counsel as to certain tax matters related
to the merger of the Low Duration Fund.
(e) Opinion of counsel as to certain tax matters related
to the merger of the Money Market Fund.
(f) Consent of counsel.
(16) Powers of attorney for Messrs. Burns, Hardaway, Babcock, Kemp,
Harris, Popejoy and Curtis were previously filed.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it meets all the requirements for effectiveness of
this Post-Effective Amendment No. 1 to its Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 1 to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Washington in the District of Columbia on the 28th day of January, 1997.
PIMCO Funds
By: R. WESLEY BURNS*
__________________________
R. Wesley Burns, President
*By: /s/ Robert W. Helm
Robert W. Helm, as Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
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<S> <C> <C>
Signature Title Date
R. WESLEY BURNS* President January 28, 1997
- ----------------------- (Principal Executive Officer)
R. Wesley Burns
JOHN P. HARDAWAY* Treasurer (Principal January 28, 1997
- ---------------------- Financial and Accounting Officer)
John P. Hardaway
GUILFORD C. BABCOCK* Trustee January 28, 1997
______________________
Guilford C. Babcock
THOMAS P. KEMP* Trustee January 28, 1997
______________________
Thomas P. Kemp
BRENT R. HARRIS* Trustee January 28, 1997
______________________
Brent R. Harris
WILLIAM J. POPEJOY* Trustee January 28, 1997
______________________
William J. Popejoy
VERN O. CURTIS* Trustee January 28, 1997
______________________
Vern O. Curtis
*By: /s/ Robert W. Helm
___________________________________
Robert W. Helm, as Attorney-in-Fact
</TABLE>
<TABLE>
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<S> <C>
EXHIBIT LIST
Exhibit No. Exhibit Name
12(a) Opinion of counsel as to certain tax matters related to the merger of the
High Yield Fund.
12(b) Opinion of counsel as to certain tax matters related to the merger of the
Total Return Fund with the PIMCO Advisors Total Return Income
Fund.
12(c) Opinion of counsel as to certain tax matters related to the merger of the
Total Return Fund with the PIMCO Advisors U.S. Government Fund.
12(d) Opinion of counsel as to certain tax matters related to the merger of the
Low Duration Fund.
12(e) Opinion of counsel as to certain tax matters related to the merger of the
Money Market Fund.
12(f) Consent of counsel.
</TABLE>
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
FAX: (617) 951-7050
January 17, 1997
High Yield Fund
PIMCO Funds
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
High Income Fund
PIMCO Advisors Funds
2187 Atlantic Avenue
Stamford, Connecticut 06902
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated as of November 1, 1996, between High
Yield Fund ("Acquiring Fund"), a series of PIMCO Funds (the "PIMS Trust"), a
Massachusetts business trust, and High Income Fund ("Target Fund"), a series of
PIMCO Advisors Funds (the "PAF Trust"), a Massachusetts business trust. The
Agreement describes a proposed transaction (the "Transaction") to occur on
January 17, 1997 (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 "Acquiring Fund Shares") and the
assumption by Acquiring Fund of all of the liabilities of Target Fund following
which the Acquiring Fund 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 Sections 8(h) and 9(g) of the Agreement.
Capitalized terms not defined herein are used herein as defined in the
Agreement.
Target Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company. Shares
of Target Fund are redeemable at net asset value at each shareholder's option.
Target 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").
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Acquiring Fund is registered under the 1940 Act as an open-end
management investment company. Shares of Acquiring Fund are redeemable at net
asset value at each shareholder's option. Acquiring Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Code.
For purposes of this opinion, we have considered the Agreement, the
Proxy Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you have represented to us the following facts,
occurrences and information upon which you have indicated we may rely in
rendering this opinion (whether or not contained or reflected in the documents
and items referred to above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund, as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who
owns 5% or more of the total outstanding Target Fund Shares, and to the best of
the knowledge of the management of Target Fund, there is no plan or intention on
the part of the remaining Target Fund shareholders to sell, exchange, or
otherwise dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership of Acquiring
Fund Shares to a number of Acquiring Fund Shares having a value, as of the date
of the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund shareholders in
connection with or as a result of the Agreement or the Transaction, will be
treated as outstanding Target Fund Shares on the date of the Transaction.
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5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. 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 Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid
fund-level tax (including for this purpose any dividends referred to in
representation 14 herein)) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately prior to the
Transaction. Further, for purposes of this representation, the amounts, if any,
that Acquiring Fund pays after the Transaction to Acquiring Fund shareholders
who are former Target Fund shareholders in redemption of Acquiring Fund Shares
received in exchange for Target Fund Shares, where such redemptions, if any,
appear to be initiated by such shareholders in connection with or as a result of
the Agreement or the Transaction, will be considered to be assets of Target Fund
that were not transferred to Acquiring Fund.
7. In the Transaction Target Fund will transfer to Acquiring Fund at
least 50% of its historic business assets (see definition below).
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. Following the Transaction, Acquiring Fund will continue to use a
substantial portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. That
is, Acquiring Fund will continue to hold historic business assets of Target
Fund, defined for purposes of this opinion as those assets transferred to it on
the Exchange Date which were either (i) acquired by Target Fund prior to its
management's decision to propose to its Trustees that it transfer any or all of
its assets to Acquiring Fund, or (ii) acquired subsequent to such decision but
not with a view to the Agreement or the Transaction, in an amount equal to at
least 50% of the assets in Target Fund's portfolio held on the Exchange Date, as
increased by the amounts, if any, that Target Fund paid to its shareholders in
redemption of its shares, where such redemptions, if any, appear to have been
initiated by such shareholders in connection with or as a result of the
Agreement or Transaction. In making this determination, dispositions made in the
ordinary course
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of Acquiring Fund's business as an open-end investment company (i.e.,
dispositions made in the ordinary course of business and independent of the
Transaction) shall not be taken into account. In addition, following the
Transaction Acquiring Fund will continue the historic business of Target Fund as
an open-end investment company that seeks maximum total return, consistent with
preservation of capital and prudent investment management.
10. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction, except
for (i) dispositions made in the ordinary course of its business as a series of
an open-end investment company (i.e., dispositions made in the ordinary course
of business and independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualification as a "regulated investment company" for federal income tax
purposes under section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continued use by Acquiring Fund of the historic
business assets of Target Fund. For purposes of this representation, Realignment
Dispositions made by Target Fund, if any, will be considered to have been made
by Acquiring Fund.
11. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
12. The Transaction will offer shareholders of the Target Fund an
opportunity to pursue a substantially similar investment program in a larger
fund and fund complex, which should offer opportunities for economies of scale,
greater diversification of risk and broader exchange privileges. Moreover, the
Acquiring Fund offers the benefit of fixed, predictable expense ratios under
which expenses of the Target Fund will be set at an initial rate lower than the
Target Fund's current and historical operating expense ratios.
13. All fees and expenses incurred by Target Fund and/or Acquiring Fund
as a direct result of the Agreement or the Transaction will be preliminarily
allocated on a basis approved, inter alia, by the Trustees of both the PAF Trust
and the PIMS Trust. PIMCO Advisors L.P. will bear any and all expenses
preliminarily allocated to the Target Fund and the Acquiring Fund to the extent
they would otherwise exceed $239,260 and $20,000, respectively (the "Relevant
Expense Caps"), and the Target Fund and Acquiring Fund agree to pay the expenses
preliminarily allocated to them but not, however, in an amount exceeding the
Relevant Expense Caps. The Relevant Expense Caps will be reduced pursuant to the
conditions of the Trustee approval referred to above, to the extent that
expenses borne by all the PAF Trust's funds would otherwise exceed $500,000. All
such fees and expenses incurred by any of Acquiring Fund, Target Fund and PIMCO
Advisors L.P. shall be solely and directly related to the Transaction and shall
be paid
<PAGE>
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directly by Acquiring Fund, Target Fund or PIMCO Advisors L.P. as the case may
be, to the relevant providers of services or other payees, in accordance with
the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
14. For federal income tax purposes, Target Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Target Fund for its current taxable year beginning October 1,
1996 and will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
the excess of (i) Target Fund's investment income excludable from gross income
under Section 103(a) of the Code over (ii) Target Fund's deductions disallowed
under Sections 265 and 171(a)(2) of the Code, all of Target Fund's investment
company taxable income (see Code Section 852) (computed in each case without
regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending September 30, 1996 and the short taxable
year beginning on October 1, 1996 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
15. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning April 1,
1996 and will continue to apply to it through the Exchange Date.
16. Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any Target Fund
Shares.
17. There is no intercorporate indebtedness existing between Target
Fund and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives
in the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
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Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(ii) 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;
(iii) 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;
(iv) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(v) No gain or loss will be recognized by the Target Fund shareholders upon
the exchange of their Target Fund Shares for Acquiring Fund Shares;
(vi) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of his
or her Target Fund Shares exchanged therefor; and
(vii) A Target Fund shareholder's holding period for his or her Acquiring
Fund 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.
Very truly yours,
/s/Ropes & Gray
Ropes & Gray
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
FAX: (617) 951-7050
January 17, 1997
Total Return Fund
PIMCO Funds
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Total Return Income Fund
PIMCO Advisors Funds
2187 Atlantic Avenue
Stamford, Connecticut 06902
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated as of November 1, 1996, between Total
Return Fund ("Acquiring Fund"), a series of PIMCO Funds (the "PIMS Trust"), a
Massachusetts business trust, and Total Return Income Fund ("Target Fund"), a
series of PIMCO Advisors Funds (the "PAF Trust"), a Massachusetts business
trust. The Agreement describes a proposed transaction (the "Transaction") to
occur on January 17, 1997 (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 "Acquiring Fund Shares")
and the assumption by Acquiring Fund of all of the liabilities of Target Fund
following which the Acquiring Fund 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 Sections 8(h) and 9(g) of the
Agreement. Capitalized terms not defined herein are used herein as defined in
the Agreement.
Target Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company. Shares
of Target Fund are redeemable at net asset value at each shareholder's option.
Target Fund has elected to be a
<PAGE>
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regulated investment company for federal income tax purposes under Section 851
of the Internal Revenue Code of 1986, as amended (the "Code").
Acquiring Fund is registered under the 1940 Act as an open-end
management investment company. Shares of Acquiring Fund are redeemable at net
asset value at each shareholder's option. Acquiring Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Code.
For purposes of this opinion, we have considered the Agreement, the
Proxy Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you have represented to us the following facts,
occurrences and information upon which you have indicated we may rely in
rendering this opinion (whether or not contained or reflected in the documents
and items referred to above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund, as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who
owns 5% or more of the total outstanding Target Fund Shares, and to the best of
the knowledge of the management of Target Fund, there is no plan or intention on
the part of the remaining Target Fund shareholders to sell, exchange, or
otherwise dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership of Acquiring
Fund Shares to a number of Acquiring Fund Shares having a value, as of the date
of the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise
<PAGE>
-3-
disposed of, where such dispositions, if any, appear to be initiated by Target
Fund shareholders in connection with or as a result of the Agreement or the
Transaction, will be treated as outstanding Target Fund Shares on the date of
the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. 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 Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid
fund-level tax (including for this purpose any dividends referred to in
representation 14 herein)) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately prior to the
Transaction. Further, for purposes of this representation, the amounts, if any,
that Acquiring Fund pays after the Transaction to Acquiring Fund shareholders
who are former Target Fund shareholders in redemption of Acquiring Fund Shares
received in exchange for Target Fund Shares, where such redemptions, if any,
appear to be initiated by such shareholders in connection with or as a result of
the Agreement or the Transaction, will be considered to be assets of Target Fund
that were not transferred to Acquiring Fund.
7. In the Transaction Target Fund will transfer to Acquiring Fund at
least 50% of its historic business assets (see definition below).
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. Following the Transaction, Acquiring Fund will continue to use a
substantial portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. That
is, Acquiring Fund will continue to hold historic business assets of Target
Fund, defined for purposes of this opinion as those assets transferred to it on
the Exchange Date which were either (i) acquired by Target Fund prior to its
management's decision to propose to its Trustees that it transfer any or all of
its assets to Acquiring Fund, or (ii)
<PAGE>
-4-
acquired subsequent to such decision but not with a view to the Agreement or the
Transaction, in an amount equal to at least 50% of the assets in Target Fund's
portfolio held on the Exchange Date, as increased by the amounts, if any, that
Target Fund paid to its shareholders in redemption of its shares, where such
redemptions, if any, appear to have been initiated by such shareholders in
connection with or as a result of the Agreement or Transaction. In making this
determination, dispositions made in the ordinary course of Acquiring Fund's
business as an open-end investment company (i.e., dispositions made in the
ordinary course of business and independent of the Transaction) shall not be
taken into account. In addition, following the Transaction Acquiring Fund will
continue the historic business of Target Fund as an open-end investment company
that seeks maximum total return, consistent with preservation of capital and
prudent investment management.
10. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction, except
for (i) dispositions made in the ordinary course of its business as a series of
an open-end investment company (i.e., dispositions made in the ordinary course
of business and independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualification as a "regulated investment company" for federal income tax
purposes under section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continued use by Acquiring Fund of the historic
business assets of Target Fund. For purposes of this representation, Realignment
Dispositions made by Target Fund, if any, will be considered to have been made
by Acquiring Fund.
11. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
12. The Transaction will offer shareholders of the Target Fund an
opportunity to pursue a substantially similar investment program in a larger
fund and fund complex, which should offer opportunities for economies of scale,
greater diversification of risk and broader exchange privileges. Moreover, the
Acquiring Fund offers the benefit of fixed, predictable expense ratios under
which expenses of the Target Fund will be set at an initial rate lower than the
Target Fund's current and historical operating expense ratios.
13. All fees and expenses incurred by Target Fund and/or Acquiring
Fund as a direct result of the Agreement or the Transaction will be
preliminarily allocated on a basis approved, inter alia, by the Trustees of
both the PAF Trust and the PIMS Trust. PIMCO Advisors L.P. will bear any and
all expenses preliminarily allocated to the Target Fund and the Acquiring
<PAGE>
-5-
Fund to the extent they would otherwise exceed $180,938 and $20,000,
respectively (the "Relevant Expense Caps"), and the Target Fund and Acquiring
Fund agree to pay the expenses preliminarily allocated to them but not, however,
in an amount exceeding the Relevant Expense Caps. The Relevant Expense Caps will
be reduced pursuant to the conditions of the Trustee approval referred to above,
to the extent that expenses borne by all the PAF Trust's funds would otherwise
exceed $500,000. All such fees and expenses incurred by any of Acquiring Fund,
Target Fund and PIMCO Advisors L.P. shall be solely and directly related to the
Transaction and shall be paid directly by Acquiring Fund, Target Fund or PIMCO
Advisors L.P. as the case may be, to the relevant providers of services or other
payees, in accordance with the principles set forth in Rev. Rul. 73-54, 1973-1
C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
14. For federal income tax purposes, Target Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Target Fund for its current taxable year beginning October 1,
1996 and will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
the excess of (i) Target Fund's investment income excludable from gross income
under Section 103(a) of the Code over (ii) Target Fund's deductions disallowed
under Sections 265 and 171(a)(2) of the Code, all of Target Fund's investment
company taxable income (see Code Section 852) (computed in each case without
regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending September 30, 1996 and the short taxable
year beginning on October 1, 1996 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
15. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning April 1,
1996 and will continue to apply to it through the Exchange Date.
16. Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any Target Fund
Shares.
<PAGE>
-6-
17. There is no intercorporate indebtedness existing between Target
Fund and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives
in the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(ii) 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;
(iii) 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;
(iv) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(v) No gain or loss will be recognized by the Target Fund shareholders upon
the exchange of their Target Fund Shares for Acquiring Fund Shares;
(vi) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of his
or her Target Fund Shares exchanged therefor; and
<PAGE>
-7-
(vii) A Target Fund shareholder's holding period for his or her Acquiring
Fund 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.
Very truly yours,
/s/Ropes & Gray
Ropes & Gray
<PAGE>
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
FAX: (617) 951-7050
January 17, 1997
Total Return Fund
PIMCO Funds
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
U.S. Government Fund
PIMCO Advisors Funds
2187 Atlantic Avenue
Stamford, Connecticut 06902
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated as of November 1, 1996, between Total
Return Fund ("Acquiring Fund"), a series of PIMCO Funds (the "PIMS Trust"), a
Massachusetts business trust, and U.S. Government Fund ("Target Fund"), a series
of PIMCO Advisors Funds (the "PAF Trust"), a Massachusetts business trust. The
Agreement describes a proposed transaction (the "Transaction") to occur on
January 17, 1997 (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 "Acquiring Fund Shares") and the
assumption by Acquiring Fund of all of the liabilities of Target Fund following
which the Acquiring Fund 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 Sections 8(h) and 9(g) of the Agreement.
Capitalized terms not defined herein are used herein as defined in the
Agreement.
Target Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company. Shares
of Target Fund are redeemable at net asset value at each shareholder's option.
Target 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").
<PAGE>
-2-
Acquiring Fund is registered under the 1940 Act as an open-end
management investment company. Shares of Acquiring Fund are redeemable at net
asset value at each shareholder's option. Acquiring Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Code.
For purposes of this opinion, we have considered the Agreement, the
Proxy Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you have represented to us the following facts,
occurrences and information upon which you have indicated we may rely in
rendering this opinion (whether or not contained or reflected in the documents
and items referred to above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund, as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who
owns 5% or more of the total outstanding Target Fund Shares, and to the best of
the knowledge of the management of Target Fund, there is no plan or intention on
the part of the remaining Target Fund shareholders to sell, exchange, or
otherwise dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership of Acquiring
Fund Shares to a number of Acquiring Fund Shares having a value, as of the date
of the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund shareholders in
connection with or as a result of the Agreement or the Transaction, will be
treated as outstanding Target Fund Shares on the date of the Transaction.
<PAGE>
-3-
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. 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 Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid
fund-level tax (including for this purpose any dividends referred to in
representation 14 herein)) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately prior to the
Transaction. Further, for purposes of this representation, the amounts, if any,
that Acquiring Fund pays after the Transaction to Acquiring Fund shareholders
who are former Target Fund shareholders in redemption of Acquiring Fund Shares
received in exchange for Target Fund Shares, where such redemptions, if any,
appear to be initiated by such shareholders in connection with or as a result of
the Agreement or the Transaction, will be considered to be assets of Target Fund
that were not transferred to Acquiring Fund.
7. In the Transaction Target Fund will transfer to Acquiring Fund at
least 50% of its historic business assets (see definition below).
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. Following the Transaction, Acquiring Fund will continue to use a
substantial portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. That
is, Acquiring Fund will continue to hold historic business assets of Target
Fund, defined for purposes of this opinion as those assets transferred to it on
the Exchange Date which were either (i) acquired by Target Fund prior to its
management's decision to propose to its Trustees that it transfer any or all of
its assets to Acquiring Fund, or (ii) acquired subsequent to such decision but
not with a view to the Agreement or the Transaction, in an amount equal to at
least 50% of the assets in Target Fund's portfolio held on the Exchange Date, as
increased by the amounts, if any, that Target Fund paid to its shareholders in
redemption of its shares, where such redemptions, if any, appear to have been
initiated by such shareholders in connection with or as a result of the
Agreement or Transaction. In making this determination, dispositions made in the
ordinary
<PAGE>
-4-
course of Acquiring Fund's business as an open-end investment company (i.e.,
dispositions made in the ordinary course of business and independent of the
Transaction) shall not be taken into account. In addition, following the
Transaction Acquiring Fund will continue the historic business of Target Fund as
an open-end investment company that seeks maximum total return, consistent with
preservation of capital and prudent investment management.
10. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction, except
for (i) dispositions made in the ordinary course of its business as a series of
an open-end investment company (i.e., dispositions made in the ordinary course
of business and independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualification as a "regulated investment company" for federal income tax
purposes under section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continued use by Acquiring Fund of the historic
business assets of Target Fund. For purposes of this representation, Realignment
Dispositions made by Target Fund, if any, will be considered to have been made
by Acquiring Fund.
11. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
12. The Transaction will offer shareholders of the Target Fund an
opportunity to pursue a substantially similar investment program in a larger
fund and fund complex, which should offer opportunities for economies of scale,
greater diversification of risk and broader exchange privileges. Moreover, the
Acquiring Fund offers the benefit of fixed, predictable expense ratios under
which expenses of the Target Fund will be set at an initial rate lower than the
Target Fund's current and historical operating expense ratios.
13. All fees and expenses incurred by Target Fund and/or Acquiring Fund
as a direct result of the Agreement or the Transaction will be preliminarily
allocated on a basis approved, inter alia, by the Trustees of both the PAF Trust
and the PIMS Trust. PIMCO Advisors L.P. will bear any and all expenses
preliminarily allocated to the Target Fund and the Acquiring Fund to the extent
they would otherwise exceed $226,711 and $20,000, respectively (the "Relevant
Expense Caps"), and the Target Fund and Acquiring Fund agree to pay the expenses
preliminarily allocated to them but not, however, in an amount exceeding the
Relevant Expense Caps. The Relevant Expense Caps will be reduced pursuant to the
conditions of the Trustee approval referred to above, to the extent that
expenses borne by all the PAF Trust's funds would otherwise exceed $500,000. All
such fees and expenses incurred by any of Acquiring Fund, Target Fund and PIMCO
Advisors L.P. shall be solely and directly related to the Transaction and shall
be paid
<PAGE>
-5-
directly by Acquiring Fund, Target Fund or PIMCO Advisors L.P. as the case may
be, to the relevant providers of services or other payees, in accordance with
the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
14. For federal income tax purposes, Target Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Target Fund for its current taxable year beginning October 1,
1996 and will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
the excess of (i) Target Fund's investment income excludable from gross income
under Section 103(a) of the Code over (ii) Target Fund's deductions disallowed
under Sections 265 and 171(a)(2) of the Code, all of Target Fund's investment
company taxable income (see Code Section 852) (computed in each case without
regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending September 30, 1996 and the short taxable
year beginning on October 1, 1996 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
15. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning April 1,
1996 and will continue to apply to it through the Exchange Date.
16. Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any Target Fund
Shares.
17. There is no intercorporate indebtedness existing between Target
Fund and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives
in the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
<PAGE>
-6-
Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(ii) 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;
(iii) 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;
(iv) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(v) No gain or loss will be recognized by the Target Fund shareholders upon
the exchange of their Target Fund Shares for Acquiring Fund Shares;
(vi) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of his
or her Target Fund Shares exchanged therefor; and
(vii) A Target Fund shareholder's holding period for his or her Acquiring
Fund 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.
Very truly yours,
/s/Ropes & Gray
Ropes & Gray
<PAGE>
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
FAX: (617) 951-7050
January 17, 1997
Low Duration Fund
PIMCO Funds
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Short-Intermediate Fund
PIMCO Advisors Funds
2187 Atlantic Avenue
Stamford, Connecticut 06902
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated as of November 1, 1996, between Low
Duration Fund ("Acquiring Fund"), a series of PIMCO Funds (the "PIMS Trust"), a
Massachusetts business trust, and Short-Intermediate Fund ("Target Fund"), a
series of PIMCO Advisors Funds (the "PAF Trust"), a Massachusetts business
trust. The Agreement describes a proposed transaction (the "Transaction") to
occur on January 17, 1997 (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 "Acquiring Fund Shares")
and the assumption by Acquiring Fund of all of the liabilities of Target Fund
following which the Acquiring Fund 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 Sections 8(h) and 9(g) of the
Agreement. Capitalized terms not defined herein are used herein as defined in
the Agreement.
Target Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company. Shares
of Target Fund are redeemable at net asset value at each shareholder's option.
Target 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").
<PAGE>
-2-
Acquiring Fund is registered under the 1940 Act as an open-end
management investment company. Shares of Acquiring Fund are redeemable at net
asset value at each shareholder's option. Acquiring Fund has elected to be a
regulated investment company for federal income tax purposes under Section 851
of the Code.
For purposes of this opinion, we have considered the Agreement, the
Proxy Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you have represented to us the following facts,
occurrences and information upon which you have indicated we may rely in
rendering this opinion (whether or not contained or reflected in the documents
and items referred to above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund, as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who
owns 5% or more of the total outstanding Target Fund Shares, and to the best of
the knowledge of the management of Target Fund, there is no plan or intention on
the part of the remaining Target Fund shareholders to sell, exchange, or
otherwise dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership of Acquiring
Fund Shares to a number of Acquiring Fund Shares having a value, as of the date
of the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund shareholders in
connection with or as a result of the Agreement or the Transaction, will be
treated as outstanding Target Fund Shares on the date of the Transaction.
<PAGE>
-3-
5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. 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 Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid
fund-level tax (including for this purpose any dividends referred to in
representation 14 herein)) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately prior to the
Transaction. Further, for purposes of this representation, the amounts, if any,
that Acquiring Fund pays after the Transaction to Acquiring Fund shareholders
who are former Target Fund shareholders in redemption of Acquiring Fund Shares
received in exchange for Target Fund Shares, where such redemptions, if any,
appear to be initiated by such shareholders in connection with or as a result of
the Agreement or the Transaction, will be considered to be assets of Target Fund
that were not transferred to Acquiring Fund.
7. In the Transaction Target Fund will transfer to Acquiring Fund at
least 50% of its historic business assets (see definition below).
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. Following the Transaction, Acquiring Fund will continue to use a
substantial portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. That
is, Acquiring Fund will continue to hold historic business assets of Target
Fund, defined for purposes of this opinion as those assets transferred to it on
the Exchange Date which were either (i) acquired by Target Fund prior to its
management's decision to propose to its Trustees that it transfer any or all of
its assets to Acquiring Fund, or (ii) acquired subsequent to such decision but
not with a view to the Agreement or the Transaction, in an amount equal to at
least 50% of the assets in Target Fund's portfolio held on the Exchange Date, as
increased by the amounts, if any, that Target Fund paid to its shareholders in
redemption of its shares, where such redemptions, if any, appear to have been
initiated by such shareholders in connection with or as a result of the
Agreement or Transaction. In making this determination, dispositions made in the
ordinary
<PAGE>
-4-
course of Acquiring Fund's business as an open-end investment company (i.e.,
dispositions made in the ordinary course of business and independent of the
Transaction) shall not be taken into account. In addition, following the
Transaction Acquiring Fund will continue the historic business of Target Fund as
an open-end investment company that seeks maximum total return, consistent with
preservation of capital and prudent investment management.
10. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction, except
for (i) dispositions made in the ordinary course of its business as a series of
an open-end investment company (i.e., dispositions made in the ordinary course
of business and independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualification as a "regulated investment company" for federal income tax
purposes under section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continued use by Acquiring Fund of the historic
business assets of Target Fund. For purposes of this representation, Realignment
Dispositions made by Target Fund, if any, will be considered to have been made
by Acquiring Fund.
11. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
12. The Transaction will offer shareholders of the Target Fund an
opportunity to pursue a substantially similar investment program in a larger
fund and fund complex, which should offer opportunities for economies of scale,
greater diversification of risk and broader exchange privileges. Moreover, the
Acquiring Fund offers the benefit of fixed, predictable expense ratios under
which expenses of the Target Fund will be set at an initial rate lower than the
Target Fund's current and historical operating expense ratios.
13. All fees and expenses incurred by Target Fund and/or Acquiring Fund
as a direct result of the Agreement or the Transaction will be preliminarily
allocated on a basis approved, inter alia, by the Trustees of both the PAF Trust
and the PIMS Trust. PIMCO Advisors L.P. will bear any and all expenses
preliminarily allocated to the Target Fund and the Acquiring Fund to the extent
they would otherwise exceed $46,322 and $20,000, respectively (the "Relevant
Expense Caps"), and the Target Fund and Acquiring Fund agree to pay the expenses
preliminarily allocated to them but not, however, in an amount exceeding the
Relevant Expense Caps. The Relevant Expense Caps will be reduced pursuant to the
conditions of the Trustee approval referred to above, to the extent that
expenses borne by all the PAF Trust's funds would otherwise exceed $500,000. All
such fees and expenses incurred by any of Acquiring Fund, Target Fund and PIMCO
Advisors L.P. shall be solely and directly related to the Transaction and shall
be paid
<PAGE>
-5-
directly by Acquiring Fund, Target Fund or PIMCO Advisors L.P. as the case may
be, to the relevant providers of services or other payees, in accordance with
the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
14. For federal income tax purposes, Target Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Target Fund for its current taxable year beginning October 1,
1996 and will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
the excess of (i) Target Fund's investment income excludable from gross income
under Section 103(a) of the Code over (ii) Target Fund's deductions disallowed
under Sections 265 and 171(a)(2) of the Code, all of Target Fund's investment
company taxable income (see Code Section 852) (computed in each case without
regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending September 30, 1996 and the short taxable
year beginning on October 1, 1996 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
15. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning April 1,
1996 and will continue to apply to it through the Exchange Date.
16. Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any Target Fund
Shares.
17. There is no intercorporate indebtedness existing between Target
Fund and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it receives
in the Transaction to its shareholders as provided in the Agreement.
19. Target Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
<PAGE>
-6-
Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(ii) 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;
(iii) 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;
(iv) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund, or upon the distribution of Acquiring Fund Shares by
Target Fund to its shareholders in liquidation;
(v) No gain or loss will be recognized by the Target Fund shareholders upon
the exchange of their Target Fund Shares for Acquiring Fund Shares;
(vi) The basis of Acquiring Fund Shares a Target Fund shareholder receives
in connection with the Transaction will be the same as the basis of his
or her Target Fund Shares exchanged therefor; and
(vii) A Target Fund shareholder's holding period for his or her Acquiring
Fund 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.
Very truly yours,
/s/Ropes & Gray
Ropes & Gray
<PAGE>
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
FAX: (617) 951-7050
January 17, 1997
Money Market Fund
PIMCO Funds
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Money Market Fund
PIMCO Advisors Funds
2187 Atlantic Avenue
Stamford, Connecticut 06902
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization dated as of November 1, 1996, (the "Agreement"), between Money
Market Fund ("Acquiring Fund"), a series of PIMCO Funds (the "PIMS Trust"), a
Massachusetts business trust, and Money Market Fund ("Target Fund"), a series of
PIMCO Advisors Funds (the "PAF Trust"), a Massachusetts business trust. The
Agreement describes a proposed transaction (the "Transaction") to occur on
January 17, 1997 (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 "Acquiring Fund Shares") and the
assumption by Acquiring Fund of all of the liabilities of Target Fund following
which the Acquiring Fund 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 Sections 8(h) and 9(g) of the Agreement.
Capitalized terms not defined herein are defined in the Agreement.
Target Fund is a series of the PAF Trust which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. Shares of Target Fund are redeemable at net asset
value at each shareholder's option. Target 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").
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Acquiring Fund is a series of the PIMS Trust which is registered under
the 1940 Act as an open-end management investment company. Shares of Acquiring
Fund are redeemable at net asset value at each shareholder's option.
For purposes of this opinion, we have considered the Agreement, the
Proxy Statement, the Registration Statement (including the items incorporated by
reference therein), and such other items as we have deemed necessary to render
this opinion. In addition, you have represented to us the following facts,
occurrences and information upon which you have indicated we may rely in
rendering this opinion (whether or not contained or reflected in the documents
and items referred to above):
1. Target Fund will transfer to Acquiring Fund all of its assets, and
Acquiring Fund will assume all of the liabilities of Target Fund, as of the
Exchange Date.
2. The fair market value of the Acquiring Fund Shares received by each
Target Fund shareholder will be approximately equal to the fair market value of
the Target Fund shares surrendered in exchange therefor. The Target Fund
shareholders will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares of beneficial
interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-employees of
Target Fund, if any, will be separate consideration for, or allocable to, any of
their Target Fund Shares; none of the Acquiring Fund Shares received by any
Target Fund shareholder-employees will be separate consideration for, or
allocable to, any employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services actually
rendered and will be commensurate with amounts paid to third parties bargaining
at arm's length for similar services.
4. There is no plan or intention by any Target Fund shareholder who
owns 5% or more of the total outstanding Target Fund Shares, and to the best of
the knowledge of the management of Target Fund, there is no plan or intention on
the part of the remaining Target Fund shareholders to sell, exchange, or
otherwise dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership of Acquiring
Fund Shares to a number of Acquiring Fund Shares having a value, as of the date
of the Transaction, of less than 50 percent of the value of all of the formerly
outstanding Target Fund Shares as of the same date. For purposes of this
representation, Acquiring Fund Shares or Target Fund Shares surrendered by
Target Fund shareholders in redemption or otherwise disposed of, where such
dispositions, if any, appear to be initiated by Target Fund shareholders in
connection with or as a result of the Agreement or the Transaction, will be
treated as outstanding Target Fund Shares on the date of the Transaction.
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5. Acquiring Fund has no plan or intention to reacquire any of the
Acquiring Fund Shares issued in the Transaction, except for Acquiring Fund
Shares reacquired in the ordinary course of its business as an open-end
investment company.
6. 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 Target Fund immediately prior to the Transaction. For
purposes of this representation, (a) amounts paid by Target Fund, out of the
assets of Target Fund, to Target Fund shareholders in redemption of Target Fund
Shares, where such redemptions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or the
Transaction, (b) amounts used by Target Fund to pay expenses of the Transaction,
and (c) amounts used to effect all redemptions and distributions (except for
regular, normal dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to avoid
fund-level tax (including for this purpose any dividends referred to in
representation 17 herein)) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately prior to the
Transaction. Further, to the best of the knowledge of the managements of each of
Acquiring Fund and Target Fund, this representation will remain true even if the
amounts, if any, that Acquiring Fund pays after the Transaction to Acquiring
Fund shareholders who are former Target Fund shareholders in redemption of
Acquiring Fund Shares received in exchange for Target Fund Shares, where such
redemptions, if any, appear to be initiated by such shareholders in connection
with or as a result of the Agreement or the Transaction, are considered to be
assets of Target Fund that were not transferred to Acquiring Fund.
7. Immediately after the Transaction, the shareholders of Target Fund
will be in control of Acquiring Fund within the meaning of Section 304(c) of the
Code.
8. The fair market value of the assets transferred to Acquiring Fund by
Target Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
9. The total adjusted basis of the assets of Target Fund transferred to
Acquiring Fund will equal or exceed the sum of the liabilities to be assumed by
Acquiring Fund.
10. In the Transaction Target Fund will transfer to Acquiring Fund at
least 50% of its historic business assets (see definition below).
11. Following the Transaction, Acquiring Fund will continue to use a
significant portion (in this case, at least 50%) of the historic business assets
of Target Fund. Specifically, Acquiring Fund will use such significant portion
of Target Fund's historic business assets in its business by continuing to hold
at least such portion of the total assets transferred to it by Target Fund. That
is, Acquiring Fund will continue to hold historic business assets of Target
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Fund, defined for purposes of this opinion as those assets transferred to it on
the Exchange Date which were either (i) acquired by Target Fund prior to its
management's decision to propose to its Trustees that it transfer any or all of
its assets to Acquiring Fund, or (ii) acquired subsequent to such decision but
not with a view to the Agreement or the Transaction, in an amount equal to at
least 50% of the assets in Target Fund's portfolio held on the Exchange Date, as
increased by the amounts, if any, that Target Fund paid to its shareholders in
redemption of its shares, where such redemptions, if any, appear to have been
initiated by such shareholders in connection with or as a result of the
Agreement or Transaction. In making this determination, dispositions made in the
ordinary course of Acquiring Fund's business as an open-end investment company
(i.e., dispositions made in the ordinary course of business and independent of
the Transaction) shall not be taken into account. In addition, following the
Transaction, Acquiring Fund will continue the historic business of Target Fund
as an open-end investment company that seeks maximum current income, consistent
with preservation of capital and daily liquidity.
12. At the time of the Transaction, Acquiring Fund will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock in Acquiring Fund that,
if exercised or converted, would affect the Target Fund shareholders'
acquisition or retention of control of Acquiring Fund as defined in Section
304(c) of the Code.
13. Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Target Fund acquired in the Transaction, except
for (i) dispositions made in the ordinary course of its business as a series of
an open-end investment company (i.e., dispositions made in the ordinary course
of business and independent of the Transaction) and (ii) dispositions made by
Acquiring Fund to realign its portfolio in order to reflect its investment
objective and conform to its investment restrictions and/or to maintain its
qualification as a "regulated investment company" for federal income tax
purposes under section 851 of the Code ("Realignment Dispositions"), which
Realignment Dispositions shall be limited to the extent required by the above
representation relating to the continued use by Acquiring Fund of the historic
business assets of Target Fund. For purposes of this representation, Realignment
Dispositions made by Target Fund, if any, will be considered to have been made
by Acquiring Fund.
14. The liabilities of Target Fund to be assumed by Acquiring Fund were
incurred by Target Fund in the ordinary course of its business and are
associated with the assets transferred to Acquiring Fund. For purposes of this
paragraph, expenses of the Transaction are not treated as liabilities.
15. The Transaction will offer shareholders of the Target Fund an
opportunity to pursue a substantially similar investment program in a larger
fund and fund complex, which
<PAGE>
-5-
should offer opportunities for economies of scale, greater diversification of
risk and broader exchange privileges.
16. All fees and expenses incurred by Target Fund and/or Acquiring Fund
in connection with the consummation of the Transaction will be allocated on a
basis approved, inter alia, by the Trustees of both the PAF Trust and the PIMS
Trust. The Target Fund and the Acquiring Fund agree to pay the expenses
preliminarily allocated on a basis approved, inter alia, by the Trustees of both
the PAF Trust and the PIMS Trust. PIMCO Advisors L.P. will bear any and all
expenses preliminarily allocated to the Target Fund and the Acquiring Fund to
the extent they would otherwise exceed $0 and $20,000, respectively (the
"Relevant Expense Caps"), and the Target Fund and Acquiring Fund agree to pay
the expenses preliminarily allocated to them but not, however, in an amount
exceeding the Relevant Expense Caps. The Relevant Expense Caps will be reduced,
pursuant to the conditions of the Trustee approval referred to above, to the
extent that the expenses borne by all the PAF Trust's funds would otherwise
exceed $500,000. All such fees and expenses incurred and borne by either of
Acquiring Fund, Target Fund and PIMCO Advisors L.P. shall be solely and directly
related to the Transaction and shall be paid directly by Target Fund, Acquiring
Fund and PIMCO Advisors L.P., as the case may be, to the relevant providers of
services or other payees, in accordance with the principles set forth in Rev.
Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses, if any,
incurred in connection with the Transaction.
17. For federal income tax purposes, Target Fund qualifies as a
regulated investment company, and the provisions of Sections 851 through 855 of
the Code apply to Target Fund for its current taxable year beginning October 1,
1996 and will continue to apply to it through the Exchange Date.
In that regard, Target Fund will declare to Target Fund shareholders of
record on or prior to the Exchange Date a dividend or dividends which together
with all previous such dividends shall have the effect of distributing all of
Target Fund's investment company taxable income (see Code Section 852) (computed
without regard to any deduction for dividends paid) and all of Target Fund's net
realized capital gain (after reduction for any capital loss carryover) in each
case for both the taxable year ending September 30, 1996 and the short taxable
period beginning on October 1, 1996 and ending on the Exchange Date. Such
dividends will be made to ensure continued qualification of Target Fund as a
regulated investment company for tax purposes and to eliminate fund-level tax.
18. For federal income tax purposes, Acquiring Fund qualifies as a
regulated investment company, and the provisions of Section 851 through 855 of
the Code apply to Acquiring Fund for its current taxable year beginning April 1,
1996 and will continue to apply
<PAGE>
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to it through the Exchange Date.
19. Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any Target Fund
Shares.
20. There is no intercorporate indebtedness existing between Target
Fund and Acquiring Fund.
21. Target Fund will distribute the Acquiring Fund Shares it receives
in the Transaction to its shareholders as provided in the Agreement.
22. Target Fund is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that for federal income tax
purposes:
(i) No gain or loss will be recognized by Target Fund upon the transfer
of Target Fund's assets to Acquiring Fund in exchange for Acquiring
Fund Shares and the assumption by Acquiring Fund of the liabilities
of Target Fund, or upon the distribution of Acquiring Fund Shares
by Target Fund to its shareholders in liquidation;
(ii) No gain or loss will be recognized by the Target Fund shareholders
upon the exchange of their Target Fund Shares for Acquiring Fund
Shares;
(iii) The basis of Acquiring Fund Shares a Target Fund shareholder
receives in connection with the Transaction will be the same as the
basis of his or her Target Fund Shares exchanged therefor;
(iv) A Target Fund shareholder's holding period for his or her Acquiring
Fund 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;
(v) No gain or loss will be recognized by Acquiring Fund upon the
receipt of the assets of Target Fund in exchange for Acquiring Fund
Shares and the assumption by Acquiring Fund of the liabilities of
Target Fund;
<PAGE>
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(vi) 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; and
(vii) 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.
Very truly yours,
/s/Ropes & Gray
Ropes & Gray
<PAGE>
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
FAX: (617) 951-7050
January 29, 1997
PIMCO Funds
840 Newport Center Drive
Suite 360
Newport Beach, CA 92660
Ladies and Gentlemen:
We hereby consent to the filing as exhibits to your Registration
Statement on Form N-14 (File No. 333-12871) of our five opinions, each dated
January 17, 1997 and each addressed to you, as to certain tax matters related to
the transactions carried out pursuant to such Registration Statement.
Very truly yours,
/s/Ropes & Gray
Ropes & Gray
<PAGE>
