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Exhibit 99.12a
July 7, 2000
North American Tax-Sensitive Equity Fund
North American Funds
286 Congress Street
Boston, MA 02210
North American Growth & Income Fund
North American Funds
286 Congress Street
Boston, MA 02210
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated as of April 6, 2000, between North
American Funds (the "Trust"), a Massachusetts business trust, on behalf of North
American Tax-Sensitive Equity Fund ("Target Fund"), and the Trust, on behalf of
North American Growth & Income Fund ("Acquiring Fund"). The Agreement describes
a proposed transaction (the "Transaction") to occur today (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(g) and 9(f) 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").
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
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North American Tax-Sensitive Equity Fund July 7, 2000
North American Growth & Income Fund
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
Acquired Fund 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 provided us with
letters dated as of the date hereof, representing as to certain facts,
occurrences and information upon which you have indicated that we may rely in
rendering this opinion (whether or not contained or reflected in the documents
and items referred to above) (the "Acquiring Fund Rep Letter" and "Target Fund
Rep Letter").
Based on the foregoing representations and assumptions and our review of
the documents and items referred to above, we are of the opinion that, subject
to the final two paragraphs hereof, for federal income tax purposes:
(i) The Transaction will constitute a reorganization within the meaning of
Section 368(a) of the Code. Acquiring Fund and Target Fund will each
be a "party to a reorganization" within the meaning of Section 368(b)
of the Code;
(ii) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund Shares and
the assumption by Acquiring Fund of the liabilities of Target Fund;
(iii) The basis in the hands of Acquiring Fund of the assets of Target Fund
transferred to Acquiring Fund in the Transaction will be the same as
the basis of such assets in the hands of Target Fund immediately prior
to the transfer;
(iv) The holding periods of the assets of Target Fund in the hands of
Acquiring Fund will include the periods during which such assets were
held by Target Fund;
(v) No gain or loss will be recognized by Target Fund upon the transfer of
Target Fund's assets to Acquiring Fund in exchange for 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;
(vi) No gain or loss will be recognized by Target Fund shareholders upon
the exchange of their Target Fund Shares for Acquiring Fund Shares;
(vii) 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
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North American Tax-Sensitive Equity Fund July 7, 2000
North American Growth & Income Fund
(viii) 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; and
(ix) Acquiring Fund will succeed to and take into account the items of
Target Fund described in Section 381(c) of the Code. Acquiring Fund
will take these items into account subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the Code
and the Regulations thereunder.
In connection with this opinion we call your attention to Revenue
Ruling 87-76, 1987-2 C.B. 84, published by the Internal Revenue Service
("IRS"). In that ruling, the IRS held that the so-called "continuity of
business enterprise" requirement necessary to tax-free reorganization
treatment was not met in the case of an acquisition of an investment company
which invested in corporate stocks and bonds by an investment company which
invested in municipal bonds. Specifically, the IRS based its ruling on its
conclusion that the business of investing in corporate stocks and bonds is not
the same line of business as investing in municipal bonds. We believe that the
IRS's conclusion in this ruling is questionable, and that, even if the IRS's
conclusion is correct, the facts of this Transaction are distinguishable from
those in the published ruling.
We believe that Acquiring Fund and Target Fund are both engaged in the
same line of business, investing for the benefit of their respective
stockholders primarily in equity securities of large capitalization U.S.
issuers with a view toward providing capital growth. After the Transaction,
Acquiring Fund will continue that business for the benefit of the stockholders
of both Target and Acquiring Funds. While Acquiring Fund will dispose of
securities formerly held by Target Fund in order to conform with its criteria
for the selection of equity securities of large capitalization U.S. issuers,
it will apply the same criteria to its own historic investments. All proceeds
generated by all such dispositions will be reinvested in a manner fully
consistent with the shared historic investment policies of both Funds. In
these circumstances, we are of the opinion that Acquiring Fund will have
continued the historic business of Target Fund --investing in equity
securities of large capitalization U.S. issuers with a view toward providing
capital growth for the benefit of, among others, the historic stockholders of
Target Fund -- and that the continuity of business enterprise doctrine should,
as a result, be satisfied. Because Revenue Ruling 87-76 is the only published
ruling dealing specifically with the application of the "continuity of
business enterprise" requirement to a reorganization involving investment
companies, however, our opinion cannot be free from doubt. No ruling has been
or will be obtained from the IRS as to the subject matter of this opinion and
there can be no assurance that the IRS or a court of law will concur with the
opinion set forth above.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
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