________________, 2000
Board of Trustees TIP Funds___________________.
___________________________
___________________________
___________________________
Board of Trustees
Vanguard Fenway Funds
___________________________
___________________________
___________________________
Re: Agreement and Plan of Reorganization as of
_____________,2000 between Vanguard Fenway Funds, a
_________ Delaware business trust (the "Delaware
Trust"), on behalf of its series, Vanguard Growth
Equity fund (the "Vanguard Fund"), and
__________________TIP Funds, a Massachusetts business
trust (the "Massachusetts Trust"), on behalf of its
series, Turner Growth Equity Fund (the"Turner Fund").
Ladies and Gentlemen:
You have requested our opinion as to certain federal income tax
consequences of the reorganization of the Turner Fund (the "Reorganization").
The Reorganization will involve (i) the transfer of all the assets of the Turner
Fund to the Vanguard Fund, and (ii) the assumption of the liabilities of the
Turner Fund by the Vanguard Fund. In exchange for the foregoing, shares of the
Vanguard Fund will be distributed to shareholders of the Turner Fund. ,
following which the Turner Fund will be dissolved. In rendering our opinion, we
have reviewed and relied upon (a) the Agreement and Plan of Reorganization, made
as of _______________, 2000, by and between the Massachusetts Trust and the
Delaware Trust (the
"Agreement"), (b) the proxy materials provided to stockholders of the Turner
Fund in connection with the Special Meeting of Stockholders of the Turner Fund
held on ______________, 2000 and, (c) certain representations concerning the
Reorganization made to us by the Massachusetts Trust and the Delaware Trust in a
letter dated ______________, 2000 (the "Representation Letter"), (d) all other
documents, financial and other reports and corporate minutes which we deemed
relevant or appropriate, and (e) such statutes, regulations, rulings and
decisions as we deemed material to the rendition of this opinion. All terms used
herein, unless otherwise defined, are used as defined in the Agreement.
For purposes of this opinion, we have assumed that the Turner Fund on the
effective date of the Reorganization satisfies, and following the
Reorganization, the Vanguard Fund will continue to satisfy, the requirements of
subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company.
Under regulations to be prescribed by the Secretary of Treasury under
Section 1276(d) of the Code, certain transfers of market discount bonds will be
excepted from the requirement that accrued market discount be recognized on
disposition of a market discount bond under Section 1276(a) of the Code. Such
regulations are to provide, in part, that accrued market discount will not be
included in income if no gain is recognized under Section 361(a) of the Code
where a bond is transferred in an exchange qualifying as a tax-free
reorganization. As of the date hereof, the Secretary has not issued any
regulations under Section 1276 of the Code.
Based on the foregoing and provided the Reorganization is carried out in
accordance with the applicable laws of the Commonwealth of Massachusetts and the
State of Delaware, the Agreement and the Representation Letter, it is our
opinion that:
1. The Reorganization will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(F) of the Code and the Turner Fund and the Vanguard
Fund will each be a party to the reorganization within the meaning of Section
368(b) of the Code.
2. No gain or loss will be recognized by the Turner Fund upon the transfer
of all of its assets to, and assumption of the liabilities by, the Vanguard Fund
in exchange solely for shares of the Vanguard Fund pursuant to Section 361(a)
and Section 357(a) of the Code. We express no opinion as to whether any accrued
market discount will be required to be recognized as ordinary income pursuant to
Section 1276 of the Code.
3. No gain or loss will be recognized by the Vanguard Fund upon the receipt
by it of all of the assets of the Turner Fund in exchange solely for shares of
the Vanguard Fund pursuant to Section 1032(a) of the Code.
4. The basis of the assets of the Turner Fund received by the Vanguard Fund
will be the same as the basis of such assets to the Turner Fund immediately
prior to the exchange pursuant to Section 362(b) of the Code.
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5. The holding period of the assets of the Turner Fund received by the
corresponding Vanguard Fund will include the period during which such assets
were held by the Turner Fund pursuant to Section 1223(2) of the Code.
6. No gain or loss will be recognized by the stockholders of the Turner
Fund upon the exchange of their shares in the Turner Fund for shares in the
Vanguard Fund (including fractional shares to which they may be entitled),
pursuant to Section 354(a) of the Code.
7. The basis of the shares in the Vanguard Fund received by the
stockholders of the Turner Fund (including fractional shares to which they may
be entitled) will be the same as the basis of the shares of the Turner Fund
exchanged therefor pursuant to Section 358(a)(1) of the Code.
8. The holding period of the shares in the Vanguard Fund received by the
stockholders of the Turner Fund (including fractional shares to which they may
be entitled) will include the holding period of the shares of the Turner Fund
surrendered in exchange therefor, provided that the shares of the Turner Fund
were held as a capital asset on the effective date of the Reorganization,
pursuant to Section 1223(1) of the Code.
9. The Vanguard Fund will succeed to and take into account as of the date
of the proposed transfer the items of the Turner Fund described in Section
381(c) of the Code as provided in Section 1.381(b)-1(a)(2) of the Income Tax
Regulations.
Our opinion is based upon the Code, the applicable Treasury Regulations
promulgated thereunder, the present position of the Internal Revenue Service as
set forth in published revenue rulings and revenue procedures, present
administrative positions of the Internal Revenue Service, and existing judicial
decisions, all of which are subject to change either prospectively or
retroactively. We do not undertake to make any continuing analysis of the facts
or relevant law following the date of this letter.
Our opinion is conditioned upon the performance by the Corporation and the
Fund of their undertakings in the Representation Letters. This opinion is being
rendered to the Massachusetts Trust and the Vanguard Trust and may be relied
upon only by these parties and the stockholders of the Turner Fund and the
Vanguard Fund.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:
, a Partner
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