Exhibit (12)
[ ], 2009 42264.00004
Daily Income Fund
600 Fifth Avenue, 8th Floor
New York, New York 10020
Sentinel Group Funds, Inc.
National Life Drive
Montpelier, Vermont 05604
Re: Reorganization of the Sentinel Government Money Market Fund into the U.S.
Government Portfolio
Ladies and Gentlemen:
We have acted as counsel to the Daily Income Fund in connection with the
reorganization of the Sentinel Government Money Market Fund (the "Acquired
Fund"), a series of Sentinel Group Funds, Inc. ("Sentinel"), into the U.S.
Government Portfolio (the "Acquiring Fund", and together with the Acquired Fund,
the "Funds"), a series of the Daily Income Fund, in accordance with an Agreement
and Plan of Reorganization (the "Plan") dated [September 17], 2009, and the Form
N-14 Registration Statement of the Daily Income Fund (Registration No.
333-[ ]) (the "Registration Statement") as filed with the Securities and
Exchange Commission on [September 9, 2009]. Pursuant to the Plan and in
accordance with the Registration Statement, (i) all of the then-existing assets
of the Acquired Fund will be transferred to the Acquiring Fund in exchange for a
number of Institutional Service Class Shares (the "Shares") of the Acquiring
Fund equivalent in aggregate net asset value to the aggregate net asset value of
the Class A and Class B Shares of the Acquired Fund outstanding immediately
prior to the Closing Date (as defined in the Registration Statement); (ii) the
Acquiring Fund will assume all known and disclosed liabilities of the Acquired
Fund; and (iii) the Shares of the Acquiring Fund will be distributed to the
shareholders of the Acquired Fund and the Acquired Fund will be terminated (the
"Reorganization"). This opinion is furnished to you pursuant to section 8.6 of
the Plan.
Except as otherwise provided, capitalized terms not defined herein have the
meanings set forth in the Plan. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as counsel to the Daily Income Fund in connection with the
Reorganization. For the purpose of rendering this opinion, we have examined
originals, certified copies or copies otherwise identified to our satisfaction
as being true copies of the original of the following documents (including all
exhibits and schedules attached thereto):
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(a) the Plan;
(b) the Registration Statement;
(c) such other instruments and documents related to the formation, organization
and operation of the Acquired Fund and the Acquiring Fund and related to
the consummation of the Reorganization and the transactions contemplated
thereby as we have deemed necessary or appropriate; and
(d) the certificates attached to this opinion as Exhibit A.
In connection with rendering this opinion, we have with your permission assumed,
without any independent investigation or review thereof, the following:
1. That original documents (including signatures) are authentic; that
documents submitted to us as copies conform to the original documents; and
that there is (or will be on or prior to the Closing Date) due execution
and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof;
2. That all representations, warranties and statements made or agreed to by
the Daily Income Fund or Sentinel on behalf of the Funds, and their
management, employees, officers, directors and shareholders thereof in
connection with the Reorganization, including but not limited to those set
forth in the Plan (including the exhibits) are true and accurate at all
relevant times; and that all covenants contained in such documents are
performed without waiver or breach of any material provision thereof.
Based on our examination of the foregoing items and subject to the limitations,
qualifications, assumptions and caveats set forth herein, we are of the opinion
that for federal income tax purposes:
The transfer of all of the assets and liabilities of the Acquired Fund
to the Acquiring Fund in exchange for the Shares of the Acquiring Fund
and the distribution to shareholders of the Acquired Fund of the Shares
of the Acquiring Fund, as described in the Plan, will constitute a
tax-free "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code, and the Acquired Fund and the Acquiring Fund each will be
considered "a party to a reorganization" within the meaning of Section
368(b) of the Code;
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No gain or loss will be recognized by the Acquired Fund upon (a) the
transfer of its assets and liabilities to the Acquiring Fund in
exchange for the issuance of the Shares of the Acquiring Fund to the
Acquired Fund and the assumption by the Acquiring Fund of the Acquired
Fund's liabilities, if any, and (b) the distribution by the Acquired
Fund to its shareholders of the Shares of the Acquiring Fund received
as a result of the Reorganization (Sections 361(a), 354(a) and 357(a)
of the Code);
No gain or loss will be recognized by the Acquiring Fund upon its
receipt of the assets and liabilities of the Acquired Fund in exchange
for the issuance of the Shares of the Acquiring Fund to the Acquired
Fund and the assumption by the Acquiring Fund of the Acquired Fund's
liabilities, if any (Section 1032(a) of the Code);
The tax basis of the Shares of the Acquiring Fund received by a
shareholder of the Acquired Fund in the aggregate will be the same as
the aggregate tax basis of the shareholders' Acquired Fund shares
immediately prior to the Reorganization (Section 358(a)(i) of the
Code);
The tax basis of the Acquiring Fund in the assets and liabilities of
the Acquired Fund received pursuant to the Reorganization will be the
same as the tax basis of the assets and liabilities in the hands of the
Acquired Fund immediately before the Reorganization (Section 362(b) of
the Code);
The tax holding period for the Shares of the Acquiring Fund issued in
connection with the Reorganization will be determined by including the
period for which the shareholder held shares of the Acquired Fund
exchanged therefor, provided that the shareholder held such shares of
the Acquired Fund as capital assets;
The tax holding period for the Acquiring Fund with respect to the
assets and liabilities of the Acquired Fund received in the
Reorganization will include the period for which such assets and
liabilities were held by the Acquired Fund (Section 1223(2) of the
Code);
The Acquired Fund's shareholders will not recognize gain or loss upon
the exchange of their shares of the Acquired Fund for Shares of the
Acquiring Fund as part of the Reorganization;
The Acquiring Fund will succeed to and take into account the items of
the Acquired Fund described in Section 381(c) of the Code, subject to
the provisions and limitations specified in Sections 381, 382, 383 and
384 of the Code and the regulations thereunder (Section 381(a) of the
Code); and
The tax year of the Acquired Fund will end on the date of the
Reorganization (Section 381(b) of the Code).
This opinion does not address the various state, local or foreign tax
consequences that may result from the Reorganization. In addition, no opinion is
expressed as to any federal income tax consequence of the Reorganization except
as specifically set forth herein, and this opinion may not be relied upon except
by the Acquiring Fund and the Acquired Fund and their shareholders with respect
to the consequences specifically discussed herein.
This opinion addresses only the general tax consequences of the Reorganization
expressly described above and does not address any tax consequence that might
result to a shareholder
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in light of its particular circumstances, such as shareholders who are dealers
in securities, who are subject to the alternative minimum tax provisions of the
Code, who are foreign persons or who acquired their shares in connection with
stock options or stock purchase plans or in other compensatory transactions.
No opinion is expressed as to any transaction other than the Reorganization as
described in the Plan or to any other transaction whatsoever including the
Reorganization if all the transactions described in the Plan are not consummated
in accordance with the terms of the Plan and without waiver of any material
provision thereof. To the extent any of the representations, warranties,
statements and assumptions material to our opinion and upon which we have relied
are not complete, correct, true and accurate in all material respects at all
relevant times, our opinion would be adversely affected and should not be relied
upon.
This opinion represents only our best judgment as to the federal income tax
consequences of the Reorganization and is not binding on the Internal Revenue
Service or the courts. The conclusions are based on the Code, existing judicial
decisions, administrative regulations and published rulings in effect as of the
date that this opinion is dated. No assurance can be given that future
legislative, judicial or administrative changes would not adversely affect the
accuracy of the conclusions stated herein. Furthermore, by rendering this
opinion, we undertake no responsibility to advise you of any new developments in
the application or interpretation of the federal income tax laws.
This opinion has been delivered to you for the purposes set forth in section
8.6 of the Plan and is solely for your benefit. We consent to the filing of this
opinion with and as part of the Registration Statement. This opinion may not be
relied upon by you for any other purpose or relied upon by any other person,
firm, corporation or other entity for any purpose, without our prior written
consent. We disclaim any obligation to advise you of any developments in areas
covered by this opinion that occur after the date of this opinion.
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As required by U.S. Treasury Regulations governing tax practice, you are hereby
advised that any written tax advice contained herein was not written or intended
to be used (and cannot be used) by any taxpayer for the purpose of avoiding
penalties that may be imposed under the Internal Revenue Code.
Very truly yours,
PAUL, HASTINGS, JANOFSKY & WALKER LLP