Exhibit 12
____, 2001
Citi National Tax Free Income Fund, a series
of CitiFunds Tax Free Income Trust
Seven World Trade Center
New York, NY 10048
Salomon Brothers National Intermediate
Municipal Fund, a series of Salomon
Brothers Series Funds Inc
Seven World Trade Center
New York, NY 10048
Re: Agreement and Plan of Reorganization dated as of
[_______], 2001 between Salomon Brothers Series
Funds Inc and CitiFunds Tax Free Income Trust
Ladies and Gentlemen:
We have acted as legal counsel for Salomon Brothers Series Funds
Inc, a Maryland corporation (the "Acquired Company"), and its series, Salomon
Brothers National Intermediate Municipal Fund (the "Acquired Fund"), in
connection with the proposed transfer of the assets and liabilities of the
Acquired Fund to CitiFunds Tax Free Income Trust (to be renamed the "Salomon
Funds Trust"), a Massachusetts business trust (the "Acquiring Trust"), on behalf
of its series, Citi National Tax Free Income Fund (to be renamed the "Salomon
Brothers National Tax Free Income Fund") (the "Acquiring Fund"), pursuant to the
Agreement and Plan of Reorganization between the Acquired Company and the
Acquiring Trust, dated as of [_______], 2001 (the "Plan"). Except as otherwise
provided, any capitalized term not defined herein shall have the meaning given
to such term in the Plan.
In that connection, you have requested our opinion regarding the
material United States federal income tax consequences of the Reorganization. In
providing our opinion, we have examined the Plan, the Registration Statement
under the Securities Act of 1933 on form N-14, dated as of [_______] , 2001,
related to the Plan (the "Registration Statement"), the Representation Letters
(as hereinafter defined), and such other documents and corporate records as we
have deemed necessary or appropriate for purposes of our opinion. In our
examination of such documents and in our reliance upon them in issuing this
opinion, we have assumed, with your consent, that all the documents submitted to
us as photocopies or by telecopy faithfully reproduce the originals thereof;
that the originals are authentic; that all such documents submitted to us have
been or will be duly executed and validly signed (or filed, where applicable) to
the extent required in substantially the same form as they have been provided to
us; and that each executed document will constitute the legal, valid, binding,
and enforceable agreement of the signatory parties.
In rendering our opinion, we have also assumed that (i) the
Reorganization will be consummated in accordance with the provisions set forth
in the Plan, (ii) the statements concerning the Reorganization set forth in the
Plan and the Registration Statement are and will remain true, correct and
complete in all material respects, (iii) the factual representations made to us
by the Acquiring Trust and the Acquired Company in their respective letters to
us each dated the date hereof, and delivered to us for purposes of this opinion
are and will remain true, correct and complete (such letters, collectively, the
"Representation Letters"), and (iv) all obligations imposed on, or covenants
agreed to by, the parties pursuant to any of the documents have been or will be
performed or satisfied in accordance with their terms in all material respects.
Based upon the foregoing, in our opinion, for United States federal
income tax purposes:
(i) the transfer to the Acquiring Fund of all or substantially all
of the assets of the Acquired Fund in exchange solely for Acquiring Fund Shares
and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund, followed by the distribution of the Acquiring Fund Shares to the
Acquired Fund Shareholders in exchange for their shares of the Acquired Fund in
complete liquidation of the Acquired Fund, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Acquiring Fund and the
Acquired Fund will each 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 the Acquired Fund upon
the transfer of all or substantially all of the Acquired Fund's assets to the
Acquiring Fund solely in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
or upon the distribution (whether actual or constructive) of the Acquiring Fund
Shares to the Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund;
(iii) the basis of the assets of the Acquired Fund in the hands of
the Acquiring Fund will be the same as the basis of such assets in the hands of
the Acquired Fund immediately prior to the Reorganization;
(iv) the holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will include the period during which such assets
were held by the Acquired Fund;
(v) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of all or substantially all of the assets of the Acquired Fund
solely in exchange for Acquiring Fund Shares and the assumption by the Acquiring
Fund of all of the liabilities of the Acquired Fund;
(vi) no gain or loss will be recognized by the Acquired Fund
Shareholders upon the exchange of their shares of the Acquired Fund solely for
Acquiring Fund Shares pursuant to the Reorganization;
(vii) the basis of Acquiring Fund Shares received by each
shareholder of the Acquired Fund pursuant to the Reorganization will be, in the
aggregate, the same as the basis, in the aggregate, of the shares of the
Acquired Fund exchanged therefor; and
(viii) the holding period of Acquiring Fund Shares received by each
shareholder of the Acquired Fund pursuant to the Reorganization will include the
period during which the shares of the Acquired Fund exchanged therefor were
held, provided that on the Closing Date such shares of the Acquired Fund were
held as capital assets in the hands of the such shareholder.
The payment by Salomon Brothers Asset Management Inc. and Citi
Fund Management Inc. of the expenses of the Reorganization (referred to in
Section 10.2 of the Plan) will not affect the opinions set forth above
regarding the United States federal income tax consequences of the
Reorganization. However, no opinion is expressed as to any other United
States federal income tax consequences to any of the parties of the payment
of such expenses by Salomon Brothers Asset Management Inc. and Citi Fund
Management Inc.
The opinions expressed herein are based upon existing statutory,
regulatory and judicial authority, any of which may be changed at any time with
retroactive effect. Nevertheless, we undertake no responsibility to advise you
of any new developments in the application or interpretation of the United
States federal income tax laws. Our opinions are not binding upon the Internal
Revenue Service or the courts, and there is no assurance that the Internal
Revenue Service will not successfully assert a contrary position. In addition,
our opinions are based solely on the documents that we have examined, the
additional information that we have obtained, and the assumptions referred to
above, all of which we have assumed (without independent verification) are and
will be true, correct and complete as of the Closing Date. Our opinions may be
adversely affected and cannot be relied upon if any facts pertinent to the
United States federal income tax treatment of the Reorganization stated in such
documents or in such additional information is, or later becomes, inaccurate.
Finally, our opinions are limited to the tax matters specifically covered
hereby, and we have not been asked to address, nor have we addressed, any other
tax consequences of the Reorganization or any other transactions.
This opinion is given for the purpose of satisfying the condition
precedent set forth in Section 8.5 of the Plan and is intended solely for the
benefit of the parties thereto; it may not be relied upon for any other purpose
or by any other person or entity (other than shareholders of the Acquired Fund
who are receiving shares of the Acquiring Fund pursuant to the terms of the
Plan), and may not be made available to any other person or entity without our
prior written consent.
We consent to the filing of this opinion as Exhibit 12 to the
Registration Statement and to the reference to our firm name in the sections of
the combined Proxy Statement/Prospectus contained in the Registration Statement
under the headings "Synopsis - Tax Consequences" and "The Proposed Transaction -
Federal Income Tax Consequences." In giving such consent, we do not admit that
we are an "expert" within the meaning of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Sincerely,
Simpson Thacher & Bartlett