Exhibit 12
August 1, 2003
First Focus Funds, Inc.
1620 Dodge Street
Omaha, NE 68197
Re: Plan of Reorganization for the First Focus Funds, Inc. First
Focus Income Fund and First Focus Bond Fund
Dear Sirs:
We have been asked to give our opinion, in accordance with Section
11(d) of the Agreement and Plan of Reorganization between First Focus Income
Fund and First Focus Bond Fund, dated as of May 6, 2003 (the "Plan"), as to
certain federal income tax consequences of consummating the transactions
contemplated in the Plan.
Background
First Focus Funds, Inc. (the "Company") is a Nebraska corporation
operating as an open-end management investment company consisting of multiple
investment portfolios, two of which are First Focus Bond Fund (the "Acquired
Fund") and First Focus Income Fund (the "Acquiring Fund"). The Acquired Fund and
the Acquiring Fund are sometimes referred to herein collectively as "Funds." The
Company, as well as each of the Funds, is registered under the Investment
Company Act of 1940, as amended, as an open-end investment company of the
management type.
It is proposed that all the assets and liabilities of the Acquired Fund
be transferred to the Acquiring Fund. As consideration for such transfer, the
Acquiring Fund shall issue to the Acquired Fund a number of full and
fractional shares of common stock in the Acquiring Fund equal to the net asset
value of the Acquired Fund determined immediately prior to the transfer.
First Focus Funds, Inc.
August 1, 2003
Page 2
Immediately after the transfer, the Acquiring Fund shares issued to the
Acquired Fund shall be distributed to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund, and the Acquired Fund shall cease operations.
Each shareholder of the Acquired Fund shall receive shares of the Acquiring Fund
equal in value to his or her shares held in the Acquired Fund immediately before
the transfer. The outstanding shares of the Acquired Fund shall be cancelled,
and the Acquired Fund shall be terminated.
Assumptions
For purposes of this opinion, we have made several assumptions, as
follows:
1. Each of the Funds qualified as a "regulated investment company"
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue
Code of 1986, as amended (the "Code"), for its most recently ended fiscal year
and will continue to so qualify for its current fiscal year;
2. The Acquiring Fund is acquiring at least 90% of the fair market
value of the net assets and at least 70% of the fair market value of the gross
assets held by the Acquired Fund immediately prior to the transaction, treating
any assets used to pay dissenting shareholders or to make other than regular and
normal distributions or redemptions as unacquired assets;
3. The shareholders of the Acquired Fund have no plan or intention to
dispose of a number of shares of the Acquiring Fund received by them as a result
of the transaction which would result in their owning in the aggregate shares of
the Acquiring Fund Fund having a fair market value that is less than 50% of the
fair market value of the Acquired Fund shares outstanding immediately before the
transaction (including any Acquired Fund shares redeemed in anticipation of the
transaction);
4. The Acquiring Fund has no plan or intention to reacquire any of its
shares issued in the transaction, except for redemptions in the ordinary course
of business as a regulated investment company;
5. The Acquiring Fund has no plan or intention to sell or otherwise to
dispose of any of the assets of the Acquired Fund acquired in the transaction,
except for dispositions made in the ordinary course of business;
6. The liabilities of the Acquired Fund assumed by the Acquiring Fund
and the liabilities to which the transferred assets of the Acquired Fund are
subject were incurred by the Acquired Fund in the ordinary course of business;
First Focus Funds, Inc.
August 1, 2003
Page 3
7. The transaction serves a business purpose or purposes of the Funds
and that following the transaction, the Acquiring Fund will continue the
historic business of the Acquired Fund or use a significant portion of the
Acquired Fund's historic business assets in a business;
8. There is no intercorporate indebtedness existing between the
Acquiring Fund and the Acquired Fund that was issued, acquired or will be
settled at a discount;
9. The Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any stock of the
Acquired Fund;
10. The Acquired Fund is not under the jurisdiction of a court in a
case under Title 11 of the Untied States Code or a receivership, foreclosure or
similar proceeding in any Federal or State court; and
11. The Plan, substantially in the form included as an exhibit to the
Registration Statement of the Company, on Form N-14 under the Securities Act of
1933 (the "Registration Statement"), has been or will be duly authorized by the
Company.
The opinions set forth below are subject to: the approval of the Plan
by the respective shareholders of the Funds; the proper submission and filing of
appropriate documents with the appropriate government agencies; and the
satisfaction of the terms and conditions set forth in the Plan.
Conclusions
Based upon the Code and applicable existing and proposed Treasury
Regulations promulgated thereunder as in effect as of the date hereof, current
published administrative positions of the Internal Revenue Service contained in
Revenue Rulings and Revenue Procedures, applicable judicial decisions, and upon
the information, representations and assumptions contained herein and in the
documents provided to us by you, it is our opinion for federal income tax
purposes that:
First Focus Funds, Inc.
August 1, 2003
Page 4
(i) the transfer of all of the assets and liabilities of the
Acquired Fund to the Acquiring Fund in exchange for shares of the
Acquiring Fund and distribution to shareholders of the Acquired Fund of
the shares the shares of the Acquiring Fund so received, as described
in the Plan, will constitute a reorganization within the meaning of
Code section 368(a)(1)(C) or 368(a)(1)(D);
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Acquired Fund as
a result of such transactions;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by the Acquiring Fund as a result of such
transactions;
(iv) in accordance with section 354(a)(1) of the Code, no
gain or loss will be recognized by the shareholders of either of the
Funds on the distribution to the Acquired Fund shareholders by the
Acquired Fund of shares of the Acquiring Fund in exchange for their
shares of the Acquired Fund, as described in the Plan;
(v) in accordance with section 362(b) of the Code, the basis
to the Acquiring Fund of the assets of the Acquired Fund received
pursuant to the transactions will be the same as the basis of those
assets in the hands of the Acquired Fund immediately before the
transactions;
(vi) in accordance with section 358(a)(1) of the Code, the
basis of the Acquiring Fund shares received by a shareholder of a
Acquired Fund will be the same as the basis of the shareholder's
Acquired Fund shares immediately before the transactions;
(vii) in accordance with section 1223(2) of the Code, the
Acquiring Fund's holding period with respect to any asset acquired from
the Acquired Fund will include the period for which such asset was held
by the Acquired Fund; and
(viii) in accordance with section 1223(1) of the Code, an
Acquired Fund shareholder's holding period for Acquiring Fund shares
will be determined by including the period for which the shareholder
held the Acquired Fund shares exchanged therefor, provided that the
shareholder held the Acquired Fund shares as a capital asset.
First Focus Funds, Inc.
August 1, 2003
Page 5
We express no opinion relating to any federal income tax matter except
on the basis of the documents and assumptions described above. In issuing our
opinion, we have relied solely upon existing provisions of the Code, existing
and proposed Regulations promulgated thereunder and current administrative
rulings and court decisions. Such laws, regulations, administrative rulings and
court decisions are subject to change at any time. Any such change could affect
the validity of the opinion set forth above.
We hereby consent to the filing of this opinion as an exhibit to the
Form N-14 Registration Statement filed by First Focus Funds, Inc. in connection
with the proposed reorganization.
Very truly yours,
/s/ SCOTT D. KELLY
For the Firm