GODFREY & KAHN, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
TEL: (414) 273-3500 FAX: (414)273-5198
June 7, 2000
Board of Directors
Strong Income Funds, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Board of Directors
Strong International Income Funds, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Gentlemen:
We have been requested to render this opinion concerning certain matters of
federal income tax law in connection with the proposed acquisition of all or
substantially all of the assets (the "Global Bond Fund Assets") of Strong
Global High-Yield Bond Fund (the "Global Bond Fund"), a series of Strong
International Income Funds, Inc. ("SIIF"), a corporation organized and existing
under the laws of the State of Wisconsin, by Strong High-Yield Bond Fund (the
"Bond Fund"), a series of Strong Income Funds, Inc. ("SIF"), a corporation
organized and existing under the laws of the State of Wisconsin, in exchange
for Investor Class shares of the Bond Fund ("Bond Fund Shares") equal in value
to the Global Bond Fund Assets pursuant to the applicable corporate laws of the
State of Wisconsin (the "Asset Acquisition"), and in accordance with that
certain Agreement and Plan of Reorganization between the Global Bond Fund and
the Bond Fund for the Asset Acquisition dated as of June 7, 2000 (the
"Agreement").
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as counsel to both SIIF and SIF in connection with the Asset
Acquisition. As such, and for the purpose of rendering this opinion, we have
examined and are relying upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times including on the
anticipated Closing Date, of the statements, covenants, conditions,
representations and warranties contained in the following documents (including
all schedules and exhibits thereto):
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1. The Agreement;
2. The Registration Statement of the Bond Fund on Form N-14 as filed with
the Securities and Exchange Commission on June 7, 2000 (the "Registration
Statement");
3. Certificates of certain officers of SIF and SIIF as to the satisfaction
of various conditions for the Asset Acquisition under the Agreement; and
4. Such other instruments and documents related to the formation,
organization and operation of the Bond Fund and the Global Bond Fund or the
consummation of the Asset Acquisition and the transactions contemplated thereby
as we have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed (and are relying
thereon, without any independent investigation or review thereof) that:
1. Original documents (including signatures) are authentic; documents
submitted to us as copies conform to the original documents or the forms
thereof included in the Registration Statement, and there has been due
execution and delivery of all documents where due execution and delivery are
prerequisites to the effectiveness thereof; and
2. The Asset Acquisition will be consummated pursuant to the Agreement and
as described in the Registration Statement.
Based on our examination of the foregoing items and subject to the assumptions,
exceptions, limitations and qualifications set forth herein, we are of the
opinion that for federal income tax purposes:
(a) The transfer to the Bond Fund of all or substantially all of the assets
of the Global Bond Fund in exchange solely for Bond Fund Shares and the
assumption by the Bond Fund of all of the liabilities of the Global Bond Fund,
followed by the distribution of Bond Fund Shares to Global Bond Fund
shareholders in exchange for their shares of the Global Bond Fund in complete
liquidation of the Global Bond Fund, will constitute a "reorganization" within
the meaning of Section 368(a)(1) of the Code, and the Bond Fund and the Global
Bond Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(b) In accordance with Section 361(a) of the Code, no gain or loss
will be recognized by the Global Bond Fund upon the transfer of the Global Bond
Fund Assets to the Bond Fund in exchange for Bond Fund Shares and the
assumption by the Bond Fund of liabilities of the Global Bond Fund or upon the
distribution (whether actual or constructive) of the Bond Fund Shares to the
Global Bond Fund's shareholders in exchange for their shares of the Global Bond
Fund under Section 361(c) of the Code.
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(c) In accordance with Section 362(b) of the Code, the basis of the
assets of the Global Bond Fund in the hands of the Bond Fund will be the same
as the basis of such assets of the Global Bond Fund immediately prior to the
transfer.
(d) The holding period of the assets of the Global Bond Fund in the
hands of the Bond Fund will include the period during which such assets were
held by the Global Bond Fund.
(e) Under Section 1032 of the Code, no gain or loss will be recognized
by the Bond Fund upon the receipt of the assets of the Global Bond Fund in
exchange for Bond Fund Shares and the assumption by the Bond Fund of the
liabilities of the Global Bond Fund.
(f) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by the Global Bond Fund shareholders upon the receipt of
Bond Fund Shares solely in exchange for their shares of the Global Bond Fund as
part of the transaction.
(g) In accordance with Section 358 of the Code, the basis of the Bond
Fund Shares received by the Global Bond Fund shareholders will be the same as
the basis of the shares of the Global Bond Fund exchanged therefor.
(h) In accordance with Section 1223 of the Code, the holding period of
Bond Fund Shares received by the Global Bond Fund shareholders will include the
holding period during which the shares of the Global Bond Fund exchanged
therefor were held, provided that at the time of the exchange the shares of the
Global Bond Fund were held as capital assets in the hands of the Global Bond
Fund shareholders.
In addition to the assumptions set forth above, this opinion is subject to the
exceptions, limitations and qualifications set forth below:
1. Our opinion is not binding upon the Internal Revenue Service or the
courts, and the Internal Revenue Service is not precluded from asserting a
contrary position. No ruling has been or will be requested from the Internal
Revenue Service concerning the federal income tax consequences of the Asset
Acquisition. Future legislative, judicial or administrative changes, on either
a prospective or retroactive basis, may adversely affect the accuracy of the
opinion expressed herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
2. Our opinion concerning certain of the federal tax consequences of the
Asset Acquisition is limited to the specific federal tax consequences presented
above. No opinion is expressed as to any transaction other than the Asset
Acquisition, including any transaction undertaken in connection with the Asset
Acquisition. In addition, this opinion does not address any other federal,
estate, gift, state, local or foreign tax consequences that may result from the
Asset Acquisition.
3. No opinion is expressed if all the transactions described in the
Agreement are not consummated in accordance with the terms of such Agreement
and without
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waiver or breach of any material provision thereof or if all of the
representations, warranties, covenants, conditions, statements and assumptions
upon which we relied are not true and accurate at all relevant times. In the
event any one of the statements, representations, warranties, covenants,
conditions or assumptions upon which we have relied to issue this opinion is
incorrect, our opinion might be adversely affected and may not be relied upon.
4. This opinion is being delivered solely for the purpose of satisfying the
requirements set forth in Section 8.6 of the Agreement. This opinion may not
be relied upon or utilized for any other purpose or by any other person or
entity, and may not be made available to any other person or entity, without
our prior written consent. We do, however, consent to the filing of this
opinion as an exhibit to the Registration Statement or any amendment thereto
and further consent to the use of our name in the Registration Statement or any
amendment thereto wherever it appears.
Very truly yours,
/s/ Godfrey & Kahn, S.C.
GODFREY & KAHN, S.C.
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