EXHIBIT 12
August 25, 2003
Vontobel Funds, Inc.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
Janus Adviser
100 Fillmore Street
Denver, Colorado 80206
Re: Acquisition by Janus Adviser -- U.S. Value Fund and Janus
Adviser -- International Equity Fund, each a series of Janus
Adviser, of assets of Vontobel U.S. Value Fund and Vontobel
International Equity Fund, respectively, each a series of
Vontobel Funds, Inc.
Ladies and Gentlemen:
We have acted as counsel to Vontobel Funds, Inc., a Maryland
corporation ("Vontobel Funds"), and Janus Adviser, a Delaware statutory trust
("Janus Adviser"), in connection with the Agreement and Plan of Reorganization
(the "Plan")1 by and between Vontobel Funds, on behalf of its portfolio series
Vontobel U.S. Value Fund ("Acquired Fund I") and Vontobel International Equity
Fund ("Acquired Fund II" and, together with Acquired Fund I, the "Acquired
Funds"), and Janus Adviser, on behalf of its portfolio series Janus Adviser --
U.S. Value Fund ("Acquiring Fund I") and Janus Adviser -- International Equity
Fund ("Acquiring Fund II" and, together with Acquiring Fund I, the "Acquiring
Funds"), described in the prospectus/proxy statement relating to the Plan
included as part of the Registration Statement on Form N-14 of Vontobel Funds
(the "Registration Statement") filed on July 14, 2003 with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, as amended by Pre-Effective Amendment No. 1 filed August 25, 2003 (the
"Registration Statement"). You have requested our opinion as to certain federal
income tax consequences of the transactions contemplated by the Plan.
In rendering this opinion, we have reviewed such documents and
materials as we have considered necessary for the purpose of rendering this
opinion. We have made inquiry as to the underlying facts that we considered to
be relevant to the conclusions set forth in this letter. The opinions expressed
in this letter are based upon certain factual statements relating to Vontobel
Funds and Janus Adviser set forth in the Registration Statement and certain
representations set forth below that have been confirmed to us in representation
letters from Vontobel Funds and Janus Adviser dated as of the date hereof for
our use in rendering the opinions set forth herein.
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1 Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Plan.
Vontobel Funds, Inc.
Janus Adviser
August __, 2003
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We have assumed that such statements, representations, and warranties are true,
correct, complete, and not breached and will continue to be so through the
Closing Date, that no actions that are inconsistent with such statements,
representations, and warranties will be taken, and that all representations,
statements, and warranties made to "the best knowledge of" any person or with
similar qualification are and will be true, correct and complete as if made
without such qualification. We have also assumed (i) the genuineness of all
signatures, (ii) the authenticity of all documents submitted to us as originals,
(iii) the conformity to the original documents of all documents submitted to us
as copies, (iv) the authority and capacity of the individual or individuals who
executed any such documents on behalf of any person, (v) the conformity to the
final documents of all documents submitted to us as drafts, and (vi) the
accuracy and completeness of all records made available to us. In addition, we
have assumed that (i) the Reorganizations will be consummated in accordance with
the Plan, (ii) each of Vontobel Funds and Janus Adviser will comply with all
reporting obligations with respect to the Reorganizations required under the
Internal Revenue Code of 1986, as amended (the "Code"),2 and the Treasury
Regulations promulgated thereunder, and (iii) the Plan is valid and binding in
accordance with its terms.
The discussion and conclusions set forth below are based upon the Code,
the Treasury Regulations and existing administrative and judicial
interpretations thereof, all of which are subject to change. Therefore, no
assurance can be given that the federal income tax consequences described below
will not be altered in the future, including on or before the date of the
Closing, and we do not assume responsibility to provide notice or advice to any
person or entity regarding any such changes or altered tax consequences.
I. Background.
Janus Adviser is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). Vontobel
Funds is an open-end management investment company registered under the 1940
Act. Each of Acquiring Fund I and Acquiring Fund II intends to acquire the
assets of Acquired Fund I and Acquired Fund II, respectively.
The investment objectives of Acquiring Fund I and Acquired Fund I are
substantially identical. Both funds seek to achieve long-term capital
appreciation and have substantially similar investment policies, strategies and
restrictions. Both Acquiring Fund I and Acquired Fund I seek to achieve their
investment objective by investing in a non-diversified portfolio consisting
primarily of equity securities. Acquiring Fund I will invest, under normal
circumstances, at least 80% of its net assets in equity securities of companies
that are traded on U.S. exchanges or quoted on an established over-the-counter
market. This restriction may be
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2 Unless otherwise indicated, all section references contained herein are
to the Code.
Vontobel Funds, Inc.
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August __, 2003
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changed on 60 days advance notice to shareholders of Acquiring Fund I. Under
normal market conditions, Acquired Fund I will invest at least 65% of its net
assets in equity securities of companies that are traded on U.S. exchanges.
Equity securities consist of common stocks and securities convertible into
common stocks, such as warrants, rights, convertible bonds, debentures and
convertible preferred stock. Each of Acquiring Fund I and Acquired Fund I may
also invest in debt securities and cash equivalents, such as overnight
repurchase agreement, and short-term U.S. Government securities. Debt securities
include obligations of governments, instrumentalities and corporations.
Similarly, the investment objectives of Acquiring Fund II and Acquired
Fund II are substantially identical. Both funds seek capital appreciation and
have substantially similar investment policies, strategies and restrictions.
Both Acquiring Fund II and Acquired Fund II seek to achieve their investment
objective by investing in a diversified portfolio consisting primarily of equity
securities. Under normal circumstances, each fund will invest at least 80% of
its net assets in equity securities of issuers that are located outside of the
United States, or that derive a significant portion of their business or profits
outside of the United States. This restriction may be changed on 60 days advance
notice to shareholders of Acquiring Fund II. Each fund intends to diversify its
investments among countries. Each fund will generally invest most of its assets
in equity securities of countries that are generally considered to have
developed markets, such as, but not limited to, the United Kingdom, the eleven
euro-zone countries (France, Germany, Italy, Spain, Portugal, Finland, Ireland,
Belgium, the Netherlands, Luxembourg and Austria), Switzerland, Norway, Japan,
Hong Kong, Australia, and Singapore. The portfolio manager of each fund will
decide when and how much to invest in each of these markets. Each fund may also
invest in equity securities issued by companies in "developing countries" or
"emerging markets," such as, but not limited to, Taiwan, Malaysia, Indonesia,
and Brazil, that are included in Morgan Stanley Capital International's Emerging
Markets Free Index.
Acquiring Fund II and Acquired Fund II will primarily hold securities
listed on a security exchange or quoted on an established over-the-the counter
market. Each fund may make limited investments in "thinly traded" securities.
The securities each fund purchases may not always be purchased on the principal
market for the issuer's securities. For example, Depositary Receipts may be
purchased if trading conditions make them more attractive than the underlying
security. In addition to common stocks and securities that are convertible into
common stocks, each fund may invest in shares of closed-end investment companies
that invest in securities that are consistent with each fund's objective and
strategies. Each fund also has the authority to enter into forward contracts to
purchase or sell foreign currencies, purchase and write covered call options on
foreign currencies and enter into contracts for the purchase or sale for future
delivery of foreign currencies.
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II. The Plan of Reorganization.
Subject to the terms and conditions set forth in the Plan, Vontobel
Funds on behalf of Acquired Fund I and Acquired Fund II shall transfer all of
the assets of such Acquired Funds, and assign all Assumed Liabilities (as
hereinafter defined) of such Acquired Funds, to Acquiring Fund I and Acquiring
Fund II respectively. Janus Adviser on behalf of Acquiring Fund I and Acquiring
Fund II shall acquire all such assets, and shall assume all such Assumed
Liabilities, upon delivery to Vontobel Funds on behalf of Acquired Fund I and
Acquired Fund II of Acquiring Fund I shares and Acquiring Fund II shares,
respectively, each having a net asset value equal to the value of the net assets
of the corresponding Acquired Fund transferred (the "Acquiring Fund Shares").
"Assumed Liabilities" means all known liabilities, expenses, costs, charges and
reserves, reflected on an unaudited statement of assets and liabilities of an
Acquired Fund prepared as of the close of regular trading on the Valuation Date
(as hereinafter defined), determined in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
net asset value of the Acquiring Fund Shares and the value of the net assets of
each Acquired Fund to be transferred shall be determined as of immediately after
the close of business on the New York Stock Exchange on the Closing Date (the
"Valuation Date") using the valuation procedures set forth in the then-current
prospectus and statement of additional information of the Acquiring Funds. All
Assumed Liabilities of Acquired Fund I and Acquired Fund II, to the extent that
they exist at or after the Closing, shall after the Closing attach to Acquiring
Fund I and Acquiring Fund II, respectively, and may be enforced against such
Acquiring Fund to the same extent as if the same had been incurred by the
relevant Acquiring Fund. In addition, at or immediately prior to the Closing,
each Acquired Fund shall declare and pay a dividend or dividends which, together
with all previous such dividends, shall have the effect of distributing to the
Acquired Fund's shareholders all of the Acquired Fund's investment company
taxable income for all taxable years ending at or prior to the Closing (computed
without regard to any deduction for dividends paid under section 852(b)(2)(D))
and all of its net capital gains (after reduction for any capital loss
carry-forward) for all taxable years ending at or prior to the Closing.
Immediately after the Closing, each Acquired Fund will be liquidated
and the Acquiring Fund Shares that have been delivered to Vontobel Funds on
behalf of Acquired Fund I and Acquired Fund II will be distributed to the
shareholders of Acquired Fund I and Acquired Fund II, respectively, each
shareholder to receive Acquiring Fund Shares equal to the pro rata portion of
shares of beneficial interest of the relevant Acquired Fund held by such
shareholder as of the close of business on the Valuation Date. Such liquidation
and distribution will be accompanied by the establishment of an open account on
the share records of each Acquiring Fund in the name of each shareholder of the
Acquired Fund and representing the respective pro rata number of Acquiring Fund
Shares due such shareholder. As of the Closing, each outstanding certificate
which, prior to the Closing, represented shares of an Acquired Fund will be
deemed for all purposes to evidence ownership of the number of Acquiring Fund
Shares issuable with respect thereto pursuant to the Reorganizations. The
Acquiring Funds will not issue certificates
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Janus Adviser
August __, 2003
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representing Acquiring Fund Shares issued in connection with the
Reorganizations. Ownership of Acquiring Fund Shares will be shown on the books
of the Acquiring Funds' transfer agent.
The Board of Trustees of each of the Acquired Funds, including those
Trustees who are not "interested persons" of Vontobel Funds as defined in the
1940 Act, has determined that the interests of existing shareholders of each
Acquired Fund will not be diluted as a result of the transactions contemplated
by the Reorganizations and that the Reorganizations would be in the best
interests of the shareholders of the Acquired Funds. The Board of Directors of
Janus Adviser has reached similar conclusions with respect to each of the
Acquiring Funds and has also approved the Reorganizations with respect to the
Acquiring Funds.
III. Representations.
The following representations have been made by Janus Adviser, on
behalf itself and each Acquiring Fund, and/or by Vontobel Funds, on behalf of
itself and each Acquired Fund, with respect to each Reorganization:
(a) As of the Closing, the fair market value of the Acquiring Fund
Shares to which each shareholder of the Acquired Fund is entitled will
approximately equal the fair market value of the shares of the Acquired Fund
such shareholder will surrender.
(b) There are no dissenters' or appraisal rights, and the consideration
paid by the Acquiring Fund in connection with the Reorganization will consist
solely of Acquiring Fund Shares.
(c) There is no plan or intention by the Acquiring Fund or any person
related (as defined in Treasury Regulations Section 1.368-1(e)(3)) to the
Acquiring Fund to acquire or redeem, during the five-year period beginning on
the date of the Closing, with consideration other than Acquiring Fund Shares,
any of the Acquiring Fund Shares issued in the Reorganization either directly or
through any transaction, agreement, or arrangement with any other person, other
than redemptions in the ordinary course of the Acquiring Fund's business as an
open-end investment company as required by section 22(e) of the 1940 Act.
(d) During the five-year period ending on the date of the Closing,
neither the Acquired Fund nor any person related (as defined in Treasury
Regulations Section 1.368-1(e)(3) determined without regard to Treasury
Regulations Section 1.368-1(e)(3)(i)(A)) to the Acquired Fund will have directly
or through any transaction, agreement, or arrangement with any other person, (i)
acquired shares of the Acquired Fund with consideration other than Acquiring
Fund Shares or shares of the Acquired Fund, except for redemptions in the
ordinary course of the Acquired Fund's business as an open-end investment
company as required by section 22(e) of the 1940 Act, or (ii) made distributions
with respect to shares of the Acquired Fund, except for (a) distributions
described in sections 852 and 4982 and (b) additional distributions, to the
extent
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such distributions do not exceed fifty percent (50%) of the value (without
giving effect to such distributions) of the proprietary interests in the
Acquired Fund as of the date of the Closing.
(e) During the five-year period ending on the date of the Closing,
neither the Acquiring Fund nor any person related (as defined in Treasury
Regulations Section 1.368-1(e)(3)) to the Acquiring Fund will have acquired
directly or through any transaction, agreement or arrangement with any other
person, shares of the Acquired Fund with consideration other than Acquiring Fund
Shares.
(f) The Acquiring Fund will acquire at least ninety percent (90%) of
the fair market value of the net assets and at least seventy percent (70%) of
the fair market value of the gross assets held by the Acquired Fund immediately
prior to the Reorganization. For purposes of this representation, amounts, if
any, paid by or on behalf of the Acquired Fund for reorganization expenses,
amounts, if any, paid by the Acquired Fund to shareholders who receive cash or
other property and all redemptions and distributions made by the Acquired Fund
immediately preceding or in contemplation of the transfer will be included as
assets of the Acquired Fund immediately prior to the Reorganization. However,
(i) regular distributions and redemptions occurring in the ordinary course of
the Acquired Fund's business as an open-end management investment company and
(ii) distributions made to shareholders of the Acquired Fund prior to the
Reorganization in order to pay out all of the Acquired Fund's (a) investment
company taxable income (before the deduction for dividends paid under section
852(b)(2)(D)) and (b) net capital gain (after reduction for any capital loss
carryover) will be excluded.
(g) Immediately after the Closing, the Acquired Fund will, in pursuance
of the Plan, distribute the Acquiring Fund Shares it receives in the
Reorganization and its other assets, if any, and thereupon will cancel all of
its issued and outstanding shares.
(h) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Acquired Fund acquired in the
Reorganization, except for dispositions made in the ordinary course of business.
(i) The Acquiring Fund will continue to use in its business at least
fifty percent (50%) of the historic portfolio securities of the Acquired Fund.
When such securities mature, are redeemed or are otherwise disposed of by the
Acquiring Fund, they will be replaced with similar securities (i.e., securities
that would have been permissible investments of the Acquired Fund under the
applicable investment objectives, policies, and restrictions of the Acquired
Fund in effect immediately before the Closing). For purposes of this
representation, portfolio securities disposed of by the Acquired Fund prior to
and in anticipation of the Reorganization will be treated as part of the
historic portfolio securities of the Acquired Fund.
(j) As of the Closing, there is no intercorporate indebtedness existing
between the Acquiring Fund and the Acquired Fund.
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(k) The Acquired Fund has qualified as a separate association taxable
as a corporation for federal income tax purposes under section 851(g) in each
taxable year and will qualify as such as of the Closing. The Acquiring Fund was
newly formed in connection with the Reorganization and will qualify as a
separate association taxable as a corporation for federal income tax purposes
under section 851(g) in each taxable year as of and following the Closing. Janus
Adviser has elected to be classified as an association taxable as a corporation,
effective on or before the Closing Date, pursuant to Treasury Regulations
Section 301.7701-3.
(l) The Acquiring Fund will elect to be treated as a regulated
investment company under Section 851 and will qualify as such as of and
following the Closing. The Acquired Fund has elected to be treated as a
regulated investment company under section 851, has qualified as such for each
taxable year and will qualify as such as of the Closing. In order (i) to ensure
continued qualification of the Acquired Fund as a regulated investment company
for federal income tax purposes and (ii) to eliminate any tax liability of the
Acquired Fund arising by reason of undistributed investment company taxable
income or net capital gain, the Acquired Fund has declared or will declare and
will pay to its shareholders of record on or prior to the Closing a dividend or
dividends that, together with all previous such dividends, shall have the effect
of distributing (1) all of its investment company taxable income for the last
full taxable year of the Acquired Fund and any subsequent short taxable year
ending on the Closing (computed without regard to any deduction for dividends
paid under section 852(b)(2)(D)) and (2) all of its net capital gain realized in
the final full taxable year of the Acquired Fund and any subsequent short
taxable year ending on the Closing (after reduction for any capital loss
carryover).
(m) The expenses incurred in connection with entering into and carrying
out the provisions of the Plan will be borne by Janus Capital Management LLC,
the investment adviser of the Acquiring Fund. All such expenses will be solely
and directly related to the Reorganization. No cash will be transferred from the
Acquiring Fund to the Acquired Fund for the purpose of paying any reorganization
expenses of the Acquired Fund. The shareholders of the Acquired Fund and the
Acquiring Fund will pay their own expenses, if any, incurred in connection with
the Reorganization.
(n) As of the Closing, the Acquiring Fund does not own, directly or
indirectly, nor has it owned during the past five years, directly or indirectly,
any shares of the Acquired Fund.
(o) The liabilities of the Acquired Fund to be assumed by the Acquiring
Fund and the liabilities to which the transferred assets of the Acquired Fund
will be subject, if any, have been incurred by the Acquired Fund in the ordinary
course of its business.
(p) The fair market value of the assets of the Acquired Fund to be
transferred to the Acquiring Fund equals or exceeds the sum of the liabilities
to be assumed by the Acquiring Fund plus the amount of liabilities, if any, to
which the transferred assets will be subject.
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(q) The total adjusted basis of the assets of the Acquired Fund to be
transferred to the Acquiring Fund equals or exceeds the sum of the liabilities
to be assumed by the Acquiring Fund plus the amount of liabilities, if any, to
which the transferred assets will be subject.
(r) As of the Closing, neither the Acquiring Fund nor the Acquired Fund
is under the jurisdiction of a court in a Title 11 or a similar case within the
meaning of section 368(a)(3)(A).
(s) The Acquired Fund has not distributed and will not distribute to
its shareholders in pursuance of the Plan any "appreciated property" within the
meaning of section 361(c)(2).
(t) At the time of the Closing, the Acquired Fund will not have
outstanding any warrants, options, convertible securities, or any other type of
right pursuant to which any person could acquire stock of the Acquiring Fund.
Any inaccuracy in, or breach of, any of the aforementioned statements,
representations, warranties and assumptions or any change after the date hereof
in applicable law could adversely affect our opinion. No ruling has been (or
will be) sought from the Internal Revenue Service (the "Service") as to the
federal income tax consequences of any aspect of the Reorganization.
IV. Opinions.
Based upon and subject to the foregoing, as well as the limitations set
forth below, it is our opinion with respect to each Reorganization that, under
presently applicable federal income tax law:
(i) The transfer of all or substantially all of the assets of each
Acquired Fund solely in exchange for shares of the corresponding Acquiring Fund
and the assumption by each Acquiring Fund of all known liabilities of the
corresponding Acquired Fund, and the distribution of such shares to the
shareholders of the Acquired Funds, will constitute a "reorganization" within
the meaning of Section 368(a) of the Code. The Acquiring Funds and the Acquired
Funds 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 either Acquired Fund on
the transfer of the assets of each Acquired Fund to the corresponding Acquiring
Fund in exchange for the Acquiring Fund Shares and the assumption by the
applicable Acquiring Fund of all known liabilities of the Acquired Fund or upon
the distribution of the Acquiring Fund Shares to the applicable Acquired Fund
shareholders in exchange for their shares of the Acquired Fund.
(iii) The tax basis of the Acquired Fund's assets acquired by the
applicable Acquiring Fund will be the same to the Acquiring Fund as the tax
basis of such assets to the Acquired Fund immediately prior to the
Reorganization, and the holding period of the assets of the Acquired Fund in the
hands of the applicable Acquiring Fund will include the period during which
those assets were held by the Acquired Fund.
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(iv) No gain or loss will be recognized by each Acquiring Fund upon
the receipt of the assets of the corresponding Acquired Fund solely in exchange
for the Acquiring Fund Shares and the assumption by each Acquiring Fund of all
known liabilities of the corresponding Acquired Fund.
(v) No gain or loss will be recognized by shareholders of each
Acquired Fund upon the receipt of the corresponding Acquiring Fund Shares by
such shareholders, provided such shareholders receive solely the Acquiring Fund
Shares (including fractional shares) in exchange for their Acquired Fund shares.
(vi) The aggregate tax basis of the Acquiring Fund Shares, including
any fractional shares, received by each shareholder of the applicable Acquired
Fund pursuant to the Reorganization will be the same as the aggregate tax basis
of the Acquired Fund shares held by such shareholder immediately prior to the
Reorganization, and the holding period of the Acquiring Fund Shares, including
fractional shares, to be received by each shareholder of the applicable Acquired
Fund will include the period during which the Acquired Fund shares exchanged
therefor were held by such shareholder (provided that the Acquired Fund shares
were held as a capital asset on the date of the Reorganization).
* * *
No opinion is expressed as to any matter not specifically addressed
above. Also, no opinion is expressed as to the tax consequences of any of the
transactions contemplated in the Plan under any foreign, state, or local tax
law. Moreover, you should recognize that our opinions are not binding on the
Service, that the Service may disagree with the opinions expressed herein, and
that, although we believe that the opinions expressed herein would be sustained
if challenged, there can be no assurances to that effect.
This opinion has been issued to and may be relied upon solely by the
addressees hereof in connection with the consummation of the transactions
contemplated in the Plan and may not be relied upon by any other person or used
for any other purpose without our prior written consent.
Very truly yours,
/s/ GOODWIN PROCTER LLP
GOODWIN PROCTER LLP