EX-99.12 2 b60379cfexv99w12.txt OPINION OF ROPES AND GRAY EXHIBIT 12 (ROPES & GRAY LOGO) 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 September 26, 2005 Nations Strategic Income Fund Nations Funds Trust One Bank of America Plaza, 33rd Floor Charlotte, North Carolina 28255-0001 Columbia Strategic Income Fund Columbia Funds Trust I 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 Strategic Income Fund ("Target Fund") and Columbia Funds Trust I, a Massachusetts business trust (the "Acquiring Trust"), on behalf of Columbia California Strategic Income 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 net asset value, plus any applicable sales charge, at each shareholder's option. Acquiring Fund ROPES & GRAY LLP 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 13, 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 the historic business of Target Fund as an open-end investment company that seeks total return and current income, generally by investing in debt securities, including U.S. government obligations, foreign debt securities, corporate debt securities, and lower-quality debt securities. Various factors demonstrate the similarity between Target Fund and Acquiring Fund.(1) The investment objectives and strategies of the funds are very similar due to the fact that they are run by the same manager, Laura Ostrander. This similarity is reflected in the fact that, as of December 31, 2004 ("the comparison date"), a randomly selected date that reflects the funds' portfolios without reference to the Transaction, Morningstar categorized both funds as "Multisector Bond" funds(2) and described both funds' investment styles as "Intermediate-Medium." A comparison of the funds' portfolios indicates that, consistent with the funds' shared goals and strategies, the funds hold assets with similar characteristics. First, the funds' portfolios are substantially similar in terms of duration and maturity. As of the comparison date, the average duration of Target Fund, 4.03 years, was close to that of Acquiring Fund, 4.47 years. With respect to maturity, the average maturities of Target Fund and Acquiring Fund were 10.32 years and 9.09 years, respectively. Moreover, when compared in terms of the percentage of net assets each fund invested in securities of varying maturities, there was a total overlap of 82.69%, consisting of 0.07% in securities with maturities of 0-1 years, 5.88% in securities with maturities of 1-3 years, 31.10% in securities with maturities of 3-7 years, 24.50% in securities with maturities of 7-10 years, and 21.21% in securities with maturities of 10 years or more. Next, the funds are very similar in terms of credit quality. As of the comparison date, the average credit ratings of the funds were very close but not exactly the same: A for Target Fund ---------- (1) Unless otherwise noted, the following information is based on Portfolio Audit and Review (PAR) reports. (2) While the investment objective stated in a fund's prospectus may or may not reflect how the fund actually invests, Morningstar categories are assigned based on the underlying securities in each portfolio. Funds are placed in a given category based on their portfolio statistics and compositions over the past three years. When necessary, category assignments may be modified to reflect recent portfolio changes. As defined by Morningstar, the "Multisector Bond" category includes funds that seek income by diversifying their assets among several fixed-income sectors, usually U.S. government obligations, foreign bonds, and high-yield domestic debt securities. -2- ROPES & GRAY LLP and BBB+ for Acquiring Fund. However, despite this difference in average credit ratings, the credit ratings of the funds' individual investments overlapped by a total of approximately 82.25%. Specifically, there was an overlap of approximately 40.96% in AAA-rated investments, 0.60% in AA-rated investments, 2.28% in A-rated investments, 3.91% in BBB-rated investments, 9.00% in BB-rated investments, 19.30% in B-rated investments, 5.10% in CCC-rated investments, 0.90% in CC-rated investments, and 0.20% in non-rated investments.(3) The funds are also somewhat similar in terms of overall diversification. As of the comparison date, the funds both invested in a large number of issuers: 258 for Target Fund and 394 for Acquiring Fund. Finally, the funds have similar 30-day SEC yields, which is calculated by dividing the net investment income (less expenses) per share over a 30-day period by the current maximum offering price.(4) As of the comparison, the 30-day SEC was 4.05% for Target Fund and 5.02% for Acquiring Fund. 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. 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; ---------- (3) The only data available to calculate these overlap figures were actually derived using different denominators, specifically, "total investments" for Target Fund and "net assets" for Acquiring Fund. However, as of the comparison date, virtually all of Acquiring Fund's net assets consisted of investments, as only a very minimal percentage (2.32%) was invested in cash and equivalents. Hence, these overlap figures provide a relatively good approximation of the true overlap figures that would have resulted if data derived using the same denominator had been available. (4) The formula is designated by the Securities and Exchange Commission (SEC). -3- ROPES & GRAY LLP (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; (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. -4- ROPES & GRAY LLP 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 open-end investment company that seeks total return and current income, generally by investing in debt securities, including U.S. government obligations, foreign debt securities, corporate debt securities, and lower-quality debt securities. The funds are run by the same manager, categorized as "Multisector Bond" funds by Morningstar, and their portfolios are substantially similar with respect to average duration (4.03 years for Target Fund and 4.47 years for Acquiring Fund), maturity (82.69% overlap), credit quality (82.25% overlap), overall diversification, and yield. 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 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 -5-