EXHIBIT 12(b)
[ROPES & GRAY HEADER]
September 26, 2005
Nations Intermediate Municipal Bond Fund
Nations Funds Trust
One Bank of America Plaza, 33rd Floor
Charlotte, North Carolina 28255-0001
Columbia Intermediate Tax-Exempt Bond Fund
Columbia Funds Trust V
One Financial Center
Boston, Massachusetts 02111-2621
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan of
Reorganization (the "Agreement") dated June 1, 2005 between Nations Funds Trust,
a Delaware statutory trust (the "Target Trust"), on behalf of Nations
Intermediate Municipal Bond Fund ("Target Fund") and Columbia Funds Trust V, a
Massachusetts business trust (the "Acquiring Trust"), on behalf of Columbia
Intermediate Tax-Exempt Bond Fund ("Acquiring Fund"). The Agreement describes a
transaction (the "Transaction") to occur as of the date of this letter (the
"Closing 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 U.S. federal income tax consequences of the Transaction is furnished to
you pursuant to Section 8.5 of the Agreement. Capitalized terms not defined
herein are used herein as defined in the Agreement.
Target Fund is a series of the Target Trust, which 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, plus any applicable sales charge, 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
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net asset value, plus any applicable sales charge, 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 July 1, 2005 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).
The facts you have represented as to in paragraph 5 of the letter from
Acquiring Fund and paragraph 6 of the letter from Target Fund, each dated as of
the date hereof, support the conclusion that, following the Transaction,
Acquiring Fund will continue its business as an open-end investment company
that, like Target Fund, seeks high current income exempt from federal income
tax, consistent with moderate fluctuation of principal, generally by investing
at least 80% of its assets in securities that pay interest exempt from federal
income tax.
Various factors demonstrate the similarity between Target Fund's
historic investments and Acquiring Fund's historic investments. First, Target
and Acquiring Funds have similar investment objectives: the achievement of high
current income exempt from federal income tax, consistent with moderate
fluctuation of principal, and the achievement of current income, exempt from
federal income tax, consistent with preservation of capital, respectively. Under
normal circumstances, both funds invest at least 80% of their assets in
securities that pay interest exempt from federal income tax. As of December 31,
2004 ("the comparison date"), a randomly selected date that reflects the funds'
portfolios without reference to the Transaction, both funds were categorized by
Morningstar as "Municipal National Intermediate-Term" bond funds. (1) Target and
Acquiring Funds invested 95.3% and 99.9%, respectively, of their net assets in
bonds. Neither fund invested in stocks.
Consistent with the funds' shared goals and strategies, an analysis of
the funds' portfolios indicates that the funds hold securities with similar
characteristics. First, as of the comparison date, the average coupons of the
funds' portfolios nearly identical: 5.19% for Target Fund and 5.18% for
Acquiring Fund, a difference of only .2%. The funds differed, however, with
respect to their correlation to the Lehman Brothers Municipal Bond Index. (2) As
of the comparison date, Target Fund and Acquiring Fund had betas of 0.84 and
1.06, respectively, a difference of 26.2%. (3)
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(1) As defined by Morningstar, a "Municipal National Intermediate-Term" fund is
a national municipal bond fund with an average duration of more than 4.5 years
but less than seven years, or average maturity of more than five years but less
than 12 years.
(2) The Lehman Brothers Municipal Bond Index is a benchmark index that includes
investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities
(greater than two years) selected from issues larger than $50 million.
(3) Beta is the statistical measure of the degree of variance between a
security or fund and a specifically defined market, in this case, the Lehman
Brothers Municipal Bond Index.
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The funds are very similar in terms of credit quality. As of the
comparison date, the average credit ratings of Target and Acquiring Funds were
close at AA and AAA, respectively. (4) The funds' individual investments
overlapped in terms of credit quality by a total of 80%. Specifically, there was
an overlap of 54.51% in AAA rated investments, 18.6% in AA rated investments,
4.69% in A rated investments, and 2.20% in BBB rated investments. (5) This
similarity in credit quality is reflected in the fact that the funds have
similar yields. (6) As of the comparison date, the funds' 30-day SEC yields (7)
were similar (2.90% for Target Fund and 2.24% for Acquiring Fund), as were their
12-month yields (8) (3.71% for Target Fund and 3.60% for Acquiring Fund).
The funds' portfolios differ somewhat in terms of average duration. As
of the comparison date, there was a 24% difference between the average duration
of Target Fund, 4.54 years, and that of Acquiring Fund, 5.58 years. Morningstar
accordingly placed Target and Acquiring Fund in different Style Boxes: "High-
Short" and "High-Intermediate," respectively. (9) The funds were more similar in
terms of maturity. The average maturity of Target Fund, 8.51 years, only
differed from the average maturity of Acquiring Fund, 8.48 years, by 0.4%. (10)
The specific characteristics described above (the relative figures and
percentages in terms of asset allocation, yield, duration, maturity, risk
profile and yield) do not constitute fixed aspects of Target Fund and Acquiring
Fund's investment strategies. Rather, they reflect the fact that the Funds'
similar investment strategies have led them to react similarly (by choosing
similar portfolios) to the market conditions in place up until the comparison
date.
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(4) Portfolio Audit and Review ("PAR") Report. Unless otherwise noted,
all data is obtained from Morningstar. Morningstar defines funds with an average
credit rating of either AAA or AA as "high quality."
(5) PAR Report.
(6) Yield is influenced by and hence correlated with credit quality.
(7) A bond fund's 30-day SEC yield is calculated by dividing the net
investment income (less expense) per share over a 30-day period by the current
maximum offering price. The formula is designated by the Securities and Exchange
Commission (SEC).
(8) Yield, expressed as a percentage, represents a fund's income return
on capital investment for the past 12 months. This figure refers only to
interest distributions from fixed-income securities, dividends from stocks, and
realized gains from currency transactions. Monies generated from the sale of
securities or from options and futures transactions are considered capital
gains, not income. Return of capital is also not considered income. Morningstar
computes yield by dividing the sum of the fund's income distributions for the
past 12 months by the previous month's net asset value (adjusted upward for any
capital gains distributed over the same time period).
(9) As defined by Morningstar, a municipal bond has a "High-Short" investment
style if its average credit rating is AAA or AA and its average effective
duration is less than 4.5 years. A "High-Intermediate" investment style
corresponds to the same average credit rating (AAA or AA) but an average
effective duration range of 4.5 to seven years.
(10) PAR Report.
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Given the similarity of the funds, on the date of the Transaction, at
least 33 1/3% of Target Fund's portfolio assets will not be required to be sold
by virtue of the investment objectives, strategies, policies, risks or
restrictions of Acquiring Fund. Acquiring Fund has no plan or intention to
change any of its investment objectives, strategies, policies, risks or
restrictions after the transaction. After the Transaction, Acquiring Fund will
invest all assets acquired from Target Fund in a manner consistent with the
funds' shared investment strategies, as described above and reflected by the
aforementioned portfolio data.
Based on the foregoing representations and assumption and our review of
the documents and items referred to above, we are of the opinion that generally
for U.S. federal income tax purposes:
(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) Under section 1032 of the Code, 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) Under section 362(b) of the Code, 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) Under section 1223(2) of the Code, 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) Under section 361 of the Code, 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) Under section 354 of the Code, no gain or loss will be
recognized by Target Fund shareholders upon the exchange of
their Target Fund shares for Acquiring Fund Shares;
(vii) Under section 358 of the Code, 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;
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(viii) Under section 1223(1) of the Code, 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,
subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and the Regulations
thereunder.
Notwithstanding the foregoing, the Code requires that certain contracts
or securities (including, in particular, futures contracts, certain foreign
currency contracts, "non-equity" options and investments in "passive foreign
investment companies") be marked to market (treated as sold for their fair
market value) at the end of a taxable year (or upon their termination or
transfer), and Target Fund's taxable year will end as a result of the
Reorganization.
In connection with this opinion, we call your attention to Revenue
Ruling 87-76, 1987-2 C.B. 84, published by the Internal Revenue Service ("IRS").
In that ruling, the IRS held that the so-called "continuity of business
enterprise" requirement necessary to tax-free reorganization treatment was not
met in the case of an acquisition of an investment company which invested in
corporate stocks and bonds by an investment company which invested in municipal
bonds. Specifically, the IRS based its ruling on its conclusion that the
business of investing in corporate stocks and bonds is not the same line of
business as investing in municipal bonds. We believe that the IRS's conclusion
in this ruling is questionable, and that, even if the IRS's conclusion is
correct, the facts of this Transaction are distinguishable from those in the
published ruling.
We believe that Acquiring Fund and Target Fund are both engaged in the
same line of business: each is an intermediate municipal bond fund that seeks
high current income exempt from federal income tax, consistent with moderate
fluctuation of principal, generally by investing at least 80% of its assets in
securities that pay interest exempt from federal income tax. Notwithstanding
that Target and Acquiring Funds differ with respect to average effective
duration (4.54 years versus 5.58 years, respectively) and correlation to the
Lehman Brothers Municipal Bond Index (with betas of 0.84 versus 1.06,
respectively), their portfolio holdings are substantially similar in terms of
average credit quality (AA versus AAA, respectively), yield (2.90% versus 2.24%,
respectively, for 30-day SEC yield and 3.71% versus 3.60%, respectively, for
12-month yield), and average maturity (8.51 years versus 8.48 years,
respectively). After the Transaction, Acquiring Fund will continue that line of
business for the benefit of the stockholders of both Target and Acquiring Funds.
While Acquiring Fund will dispose of securities formerly held by Target Fund,
these dispositions will be fully consistent with the shared historic investment
policies of both Funds and all proceeds generated by such dispositions will be
reinvested in a manner fully consistent with such policies. In these
circumstances, we are of the opinion that Acquiring Fund will have continued the
historic business of Target Fund for the benefit of, among others, the historic
stockholders of Target Fund, and that the continuity of business enterprise
doctrine should, as a result, be fulfilled. Revenue Ruling 87-76 is the only
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published ruling dealing specifically with the application of the "continuity of
business enterprise" requirement to a reorganization involving investment
companies. No ruling has been or will be obtained from the IRS as to the subject
matter of this opinion and there can be no assurance that the IRS or a court of
law would concur with the opinion set forth above.
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
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