EXHIBIT 1.
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ROPES & GRAY LLP
ONE INTERNATIONAL PLACE BOSTON, MA 02110-2624 617-951-7000 F 617-951-7050
BOSTON NEW YORK PALO ALTO SAN FRANCISCO WASHINGTON, DC www.ropesgray.com
March 21, 2005
Putnam Municipal Income Fund
One Post Office Square
Boston, MA 02109
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Income Trust
One Post Office Square
Boston, MA 02109
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated December 1, 2004, between Putnam
Municipal Income Fund ("Target Fund") and Putnam Tax-Free Income Trust,
a Massachusetts Business Trust (the "Acquiring Trust") on behalf of
Putnam Tax-Free High Yield Fund ("Acquiring Fund"). The Agreement
describes a proposed transaction (the "Transaction") to occur on March
21, 2005, or such other date as may be decided by the parties (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(g) 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 a series of the Acquiring Trust, which 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
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
Combined Prospectus/Proxy Statement dated December 10, 2004 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).
Based on the foregoing representations and our review of the documents
and items referred to above, we are of the opinion that generally for
federal income tax purposes, except as noted below:
(i) The Transaction will constitute a reorganization within the meaning
of Section 368(a) of the Code, and Acquiring Fund and Target Fund each
will 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 aggregate basis of Acquiring Fund Shares a Target Fund
shareholder receives in connection with the Transaction will be the same
as the aggregate basis of his or her Target Fund shares exchanged
therefor;
(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.
We express no view with respect to the effect of the reorganization on
any transferred asset as to which any unrealized gain or loss is
required to be recognized at the end of a taxable year (or on the
termination or transfer thereof) under federal income tax principles.
Our opinion is based on the Internal Revenue Code of 1986, as amended,
Treasury Regulations, Internal Revenue Service rulings, judicial
decisions, and other applicable authority, all as in effect on the date
of this opinion. The legal authorities on which this opinion is based
may be changed at any time. Any such changes may be retroactively
applied and could modify the opinions expressed above.
Very truly yours,
/s/ Ropes & Gray LLP
Ropes & Gray LLP