Exhibit 13
SIDLEY AUSTIN BROWN & WOOD LLP
CHICAGO 787 SEVENTH AVE. BEIJING
---- NEW YORK, NEW YORK 10019 ----
DALLAS TELEPHONE 212 839 5300 GENEVA
---- FACSIMILE 212 839 5599 ----
LOS ANGELES www.sidley.com HONG KONG
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SAN FRANCISCO FOUNDED 1866 LONDON
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WASHINGTON, D.C. SHANGHAI
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SINGAPORE
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TOKYO
June 16, 2003
Merrill Lynch Investment Managers Funds, Inc., on behalf of
Merrill Lynch Low Duration Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Mercury Funds II, on behalf of
Mercury Low Duration Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Re: Reorganization of Merrill Lynch Low Duration Fund and Mercury
Low Duration Fund
Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of the acquisition by Merrill Lynch Low Duration Fund
("Acquiror"), a series of Merrill Lynch Investment Managers Funds, Inc.
("Acquiror Series"), of substantially all of the assets of Mercury Low
Duration Fund ("Target"), a series of Mercury Funds II ("Target Series"), and
the assumption by Acquiror of substantially all of the liabilities of Target
and the simultaneous distribution of newly-issued shares of Acquiror common
stock to Target stockholders (the "Reorganization"). After the Reorganization,
Target will cease operations, will have no assets remaining and will have
final Federal and state (if any) tax returns filed on its behalf. Target
Series Funds will terminate Target as a series of Target Series Funds under
the laws of the Commonwealth of Massachusetts and Target Series will be
dissolved under Massachusetts law.
This opinion letter is furnished pursuant to (i) the section entitled
"The Reorganization--Terms of the Agreement and Plan--Amendments and
Conditions" in the Proxy Statement and Prospectus, dated February 10, 2003,
contained in the Registration Statement on Form N-14
SIDLEY AUSTIN BROWN & WOOD LLP NEW YORK
Merrill Lynch Investment Managers Funds, Inc., on behalf of
Merrill Lynch Low Duration Fund
Mercury Funds II, on behalf of
Mercury Low Duration Fund
June 16, 2003
Page 2
(File No. 333-102447) of Acquiror Series, as amended and supplemented to date
(the "N-14 Registration Statement"), and (ii) Sections 8(e) and 9(e) of the
Agreement and Plan of Reorganization dated February 7, 2003, by and among
Acquiror Series, on behalf of Acquiror, Target Series, on behalf of Target,
and FAM Trust, on behalf of the Low Duration Portfolio, (the "Plan") as a
condition of closing. All terms used herein, unless otherwise defined, are
used as defined in the Plan.
In rendering our opinion, we have reviewed and relied upon (a) the Plan,
(b) the N-14 Registration Statement and (c) certain representations concerning
the Reorganization made by (i) Acquiror in a letter dated June 16, 2003 and
(ii) Target in a letter dated June 16, 2003 (together, the "Representations").
Based upon current law, including cases and administrative
interpretations thereof, and on the reviewed materials listed above, it is our
opinion that:
1. The acquisition by Acquiror of substantially all of the assets of
Target (consisting primarily of all of Target's beneficial interests in the
Low Duration Portfolio of FAM Trust), as described in the Plan, will
constitute a reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Acquiror and
Target each will be a "party" to a reorganization within the meaning of
Section 368(b) of the Code.
2. In accordance with Section 361(a) of the Code, Target will not
recognize any gain or loss either on the transfer of substantially all of its
assets to Acquiror in exchange solely for voting shares of Acquiror common
stock or on the distribution of shares of Acquiror common stock to its
stockholders.
3. Under Section 1032 of the Code, Acquiror will recognize no gain or
loss as a result of the Reorganization.
4. In accordance with Section 354(a)(1) of the Code, stockholders of
Target will not recognize any gain or loss on the exchange of their shares for
shares of Acquiror common stock.
5. The basis of the assets of Target received by Acquiror will be the
same as the basis of such assets to Target immediately before the
Reorganization under Section 362(b) of the Code.
6. Under Section 358 of the Code, immediately after the Reorganization,
the basis of shares of Acquiror common stock received by Target stockholders
(including fractional shares to which they may be entitled) will be the same
as the basis of their Target shares exchanged pursuant to the Reorganization.
SIDLEY AUSTIN BROWN & WOOD LLP NEW YORK
Merrill Lynch Investment Managers Funds, Inc., on behalf of
Merrill Lynch Low Duration Fund
Mercury Funds II, on behalf of
Mercury Low Duration Fund
June 16, 2003
Page 3
7. Under Section 1223 of the Code, the holding period of shares of
Acquiror common stock received by Target stockholders in the Reorganization
(including fractional shares to which they may be entitled) will include the
holding period of the Target shares exchanged pursuant to the Reorganization,
provided that such shares were held as a capital asset on the date of the
Reorganization.
8. The holding period of the assets acquired by Acquiror from Target will
include the period during which such assets were held by Target under Section
1223 of the Code.
9. Pursuant to Section 381(a) of the Code and Section 1.381(a)-1 of the
Income Tax Regulations, Acquiror will succeed to and take into account the
items of Target 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. Under Section 381(b), the tax year of
Target will end on the date of the Reorganization.
Our opinion represents our best legal judgment as to the proper Federal
income tax treatment of the Reorganization, based on the facts contained in
the Plan, the N-14 Registration Statement and the Representations. Our opinion
assumes the accuracy of the facts as described in the Plan, the N-14
Registration Statement and the Representations and could be affected if any of
the facts as so described are inaccurate.
We are furnishing this opinion letter to the addressees hereof, solely
for the benefit of such addressees in connection with the Reorganization. This
opinion letter is not to be used, circulated, quoted or otherwise referred to
for any other purpose.
Very truly yours,
/s/ Sidley Austin Brown & Wood LLP