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EXHIBIT 12
(Xxxxxxx Xxxxxxx & Xxxxxxxx)
___________, 1996
Re: Agreement and Plan of Reorganization
and Liquidation dated as of December
__, 1995 between The Hanover
Investment Funds, Inc. and Mutual
Fund Group
The Hanover Investment Funds, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Mutual Fund Group
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
You have requested our opinion with respect to the federal income tax
consequences of certain aspects of the proposed transfer by each Hanover
Portfolio(1) of all of its assets to its Corresponding MFG Portfolio solely in
exchange for MFG Portfolio Shares of the Corresponding MFG Portfolio and the
assumption of all its obligations and liabilities by the Corresponding MFG
Portfolio (as described in Section
--------
(1) Where relevant, capitalized terms not otherwise defined herein have the
meanings they have for the purposes of the Agreement and Plan of
Reorganization and Liquidation, dated as of December __, 1995, between
Hanover and MFG (the "Agreement").
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2(a)(1) of the Agreement) followed by the liquidation of the Hanover Portfolio
and the distribution pro rata of such MFG Portfolio Shares to the shareholders
of the Corresponding Hanover Portfolio. The series of steps that will occur to
effect such transaction are hereinafter referred to as the "Reorganization".
This opinion is being delivered pursuant to Sections 7(d) and 8(e) of the
Agreement.
Hanover is a Maryland corporation registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end investment company
of the management type and is comprised of separate investment portfolios which
include The Hanover Short Term U.S. Government Fund, The Hanover U.S. Government
Securities Fund, The Hanover Blue Chip Growth Fund, The Hanover Small
Capitalization Growth Fund and The Hanover American Value Fund (each, a "Hanover
Portfolio"). Hanover's investment portfolios other than the Hanover Portfolios
(consisting of The Tax Free Income Fund, The New York Tax Free Income Fund, The
New Jersey Tax Free Income Fund, The International Equity Fund and The
International Bond Fund, each of which has not to date commenced investment
operations) are not parties to the Reorganization.
The authorized capital stock of Hanover consists of 200,000,000 shares
of Common Stock, each having a par value $.001 per share. As of ________, 1995,
there were outstanding _______ shares of The Hanover Short Term U.S.
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Government Fund (consisting of ______ "Investor Shares" and ____ "Advisor
Shares"), _______ shares of The Hanover U.S. Government Securities Fund
(consisting of ______ "Investor Shares" and ___ "Advisor Shares"), ________
shares of The Hanover Blue Chip Growth Fund (consisting of ______ "Investor
Shares" and ___ "Advisor Shares"), ________ shares of The Hanover Small
Capitalization Growth Fund (consisting of ______ "Investor Shares", ___ "Advisor
Shares" and ______ "CBC Benefit" Shares) and ______ shares of The Hanover
American Value Fund (consisting of ______ "Investor Shares" and ___ "Advisor
Shares"), and no shares were held in the treasury of Hanover.
MFG is registered under the Act as an open-end diversified investment
company of the management type and is organized as a Massachusetts business
trust comprised of separate investment portfolios, which include Vista Short
Term Bond Fund, Vista Equity Fund and Vista Small Cap Equity Fund, and which is
expected to include, at the Effective Time of the Reorganization, Vista U.S.
Government Securities Fund and Vista American Value Fund (each, an "MFG
Portfolio"). MFG's investment portfolios other than the MFG Portfolios
(consisting of Vista U.S. Government Income Fund, Vista Balanced Fund, Vista
Bond Fund, Vista Equity Income Fund, Vista IEEE Balanced Fund, Vista Growth and
Income Fund, Vista Capital Growth Fund, Vista International Equity Fund, Vista
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Global Fixed Income Fund, Vista Southeast Asian Fund, Vista European Fund and
Vista Japan Fund) are not parties to the Reorganization.
MFG has an unlimited number of authorized shares of beneficial
interest, currently without par value, of which as of ________, 1995 there were
outstanding the following numbers of shares of the MFG Portfolios: ________
shares of Vista Short Term Bond Fund (consisting of a single class of shares),
________ shares of Vista Equity Fund (consisting of a single class of shares)
and _______ shares of Vista Small Cap Equity Fund (consisting of __________
"Class A" shares, __________ "Class B" Shares and ______ "Institutional" Shares)
and no shares were held in the treasury of MFG. There are no outstanding shares
of Vista U.S. Government Securities Fund and Vista American Value Fund.
The Agreement was approved by the Board of Trustees of MFG on December
14, 1995 and by the Board of Directors of Hanover on December 13, 1995.
Upon satisfaction of all conditions precedent set forth in the
Agreement, the Reorganization will be effected as set forth in the following
summary:
1. Pursuant to the Agreement, Hanover will cause each Hanover Portfolio
to convey, transfer and deliver at the Closing to the MFG Portfolio set
forth opposite its name in the table attached to the Agreement as Schedule I
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(each such MFG Portfolio being the "Corresponding MFG Portfolio" of the
Hanover Portfolio set forth opposite its name, and each such Hanover
Portfolio being the "Corresponding Hanover Portfolio" of the MFG Portfolio
set forth opposite its name) all of the then existing assets of such Hanover
Portfolio. In consideration thereof, MFG agrees at the Closing to cause each
MFG Portfolio (i) to assume and pay, to the extent that they exist on or
after the Effective Time of the Reorganization, all of the obligations and
liabilities of its Corresponding Hanover Portfolio and (ii) to issue and
deliver to the Corresponding Hanover Portfolio full and fractional shares of
beneficial interest of the Corresponding MFG Portfolio as follows: (1) to
The Hanover Short Term U.S. Government Fund, Class A shares of Vista Short
Term Bond Fund; (2) to The Hanover U.S. Government Fund, Institutional Class
shares of Vista U.S. Government Fund; (3) to the Hanover Blue Chip Growth
Fund, Institutional Class shares of Vista Equity Fund (to be renamed Vista
Large Cap Equity Fund in connection with the Reorganization); (4) to The
Hanover Small Capitalization Growth Fund, Class A Shares and Institutional
Class shares, as described in paragraph (2) below, of Vista Small Cap Equity
Fund; and (5) to the Hanover American Value Fund, shares of Vista American
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Value Fund (the shares of the MFG Portfolios to be received by the Hanover
Portfolios in connection with the Reorganization are referred to
collectively as the "MFG Portfolio Shares"), with respect to each class of
each MFG Portfolio equal to that number of full and fractional MFG Portfolio
Shares as determined in Section 2(c) of the Agreement. Any shares of capital
stock, par value $.001 per share, of the Hanover Portfolios ("Hanover
Portfolio Shares") held in the treasury of Hanover on the Effective Time of
the Reorganization shall thereupon be retired.
2. At the Effective Time of the Reorganization, each Hanover Portfolio
will liquidate and distribute pro rata to its holders of Hanover Portfolio
Shares as of the Effective Time of the Reorganization the MFG Portfolio
Shares of the Corresponding MFG Portfolio received by such Hanover Portfolio
pursuant to Section 2(a) of the Agreement. In the case of each Hanover
Portfolio other than The Hanover Small Capitalization Growth Fund, all
shareholders of such Hanover Portfolios will receive the MFG Portfolio
Shares of the Corresponding MFG Portfolio identified in Section 2(a)(1)
above. In the case of the Hanover Small Capitalization Growth Fund,
shareholders of both the "Investor Shares" and the "Advisor Shares" thereof
will receive Class A shares of the Vista Small Cap Equity Fund and
shareholders of "CBC Benefit Shares"
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thereof will receive Institutional Class shares of the Vista Small Cap
Equity Fund. Such liquidation and distribution will be accompanied by the
establishment of an account on the respective share records of each MFG
Portfolio in the name of each record holder of Hanover Portfolio Shares of
the Corresponding Hanover Portfolio and representing the respective pro rata
number of MFG Portfolio Shares of the Corresponding MFG Portfolio due such
shareholder. Fractional Corresponding MFG Portfolio Shares will be carried
to the third decimal place. Simultaneously with such crediting of MFG
Portfolio Shares to the shareholders, the Hanover Portfolio Shares held by
such shareholders shall be cancelled.
3. As soon as practicable after the Effective Time of the
Reorganization, Hanover shall take all the necessary steps under Maryland
law and Hanover's Articles of Incorporation, as amended and supplemented, to
effect a complete dissolution of Hanover and to deregister Hanover under the
Act.
In acting as special counsel to MFG and Hanover with respect to the
Reorganization, we have, among other things, reviewed the following documents:
1. The Agreement;
2. The proxy statement of MFG dated __________, 1996; and
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3. MFG's Registration Statement on Form N-14 under the Securities Act
of 1933, as amended and declared effective by the Securities and
Exchange Commission.
In preparing our opinion, as hereinafter set forth, we have reviewed
such other documents relating to the Reorganization and such federal income tax
authorities as we deemed relevant under the circumstances. Further, for purposes
of this opinion, we have assumed, with your permission and without independent
investigation, the following:
1. Each of the Hanover Portfolios and the Corresponding MFG Portfolios
is treated as a separate corporation in accordance with section 851(h) of
the Internal Revenue Code of 1986, as amended (the "Code"), and each
qualifies as a "regulated investment company" for federal income tax
purposes pursuant to section 851 of the Code.
2. The fair market value of the MFG Portfolio Shares received by the
shareholders of each Hanover Portfolio will be approximately equal to the
fair market value of the Hanover Portfolio Shares of such Hanover Portfolio
surrendered by the shareholders of such Hanover Portfolio in the
Reorganization.
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3. There is no plan or intention by the shareholders of the Hanover
Portfolios who own 5 percent or more of the shares of any Hanover Portfolio,
and to the best of the knowledge of management of the Hanover Portfolios,
there is no plan or intention on the part of the remaining shareholders of
each Hanover Portfolio as a group, to sell, exchange, or otherwise dispose
of a number of MFG Portfolio Shares that would reduce the Hanover
shareholders' ownership of such MFG Portfolio Shares to a number of shares
having a value, as of the date of the Reorganization, of less than 50% of
the value of all of the formerly outstanding Hanover Portfolio Shares of
such Hanover Portfolio. In this connection, Hanover Portfolio Shares or MFG
Portfolio Shares held by Hanover shareholders and otherwise sold, redeemed
or disposed of prior or subsequent to the Reorganization will be considered,
except for shares which are required to be redeemed at the demand of
shareholders by a Hanover Portfolio or MFG Portfolio in the ordinary course
of its business as required by Section 22(e) of the Act ("Section 22(e)
Redemptions").
4. No cash or consideration other than MFG Portfolio Shares will be
received by the Hanover Portfolios from the MFG Portfolios or distributed to
any shareholders of
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the Hanover Portfolios in liquidation of the Corresponding Hanover
Portfolios.
5. Each MFG Portfolio will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by the Corresponding Hanover Portfolios
immediately prior to the Reorganization. In this connection, amounts used by
any Hanover Portfolio to pay its reorganization expenses, amounts paid by
the Hanover Portfolios to shareholders who receive cash or other property,
and all redemptions and distributions (except for Section 22(e) Redemptions
and regular, normal dividends) made by the Hanover Portfolios immediately
preceding the transfer will be included as assets of the Hanover Portfolios
held immediately prior to the Reorganization. The Hanover Portfolios will
pay no amounts to dissenters.
6. None of the MFG Portfolios has any plan or intention to reacquire
any of its shares issued in the Reorganization, subject to the right of MFG
Portfolios' shareholders to receive Section 22(e) Redemptions.
7. Neither Chemical Banking Corporation, The Chase Manhattan
Corporation nor any of their affiliates has any plan or intention to sell,
redeem or otherwise dispose of
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any Hanover Portfolio Shares or MFG Portfolio Shares in connection with the
Reorganization.
8. None of the MFG Portfolios has any plan or intention to sell or
otherwise dispose of any of the assets of the Corresponding Hanover
Portfolios acquired in the Reorganization, except for dispositions made in
the ordinary course of business.
9. The obligations and liabilities of the Hanover Portfolios, if any,
to be assumed by the Corresponding MFG Portfolios pursuant to the
Reorganization and the liabilities, if any, to which the transferred assets
of the Hanover Portfolios are subject were incurred by the Hanover
Portfolios in the ordinary course of their businesses.
10. Following the consummation of the Reorganization, each of the MFG
Portfolios will continue the historic business of the Corresponding Hanover
Portfolio or use a significant portion of the Corresponding Portfolio's
historic business assets in a business.
11. The shareholders of the Hanover Portfolios will pay their
respective expenses, if any, incurred in connection with the Reorganization.
12. Only certain expenses of Hanover and MFG which are directly related
to the Reorganization will be paid
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by Chemical Banking Corporation and/or The Chase Manhattan Corporation
pursuant to section 10 of the Agreement.
13. There is no intercorporate indebtedness existing between any
Hanover Portfolio and the Corresponding MFG Portfolio that was issued,
acquired, or will be settled at a discount.
14. None of the MFG Portfolios owns, directly or indirectly, nor has
owned during the past five years, directly or indirectly, any shares of the
Corresponding Hanover Portfolios.
15. The fair market value of the assets of each of the Hanover
Portfolios to be transferred to the Corresponding MFG Portfolios will equal
or exceed the sum of the liabilities assumed by the Corresponding MFG
Portfolios, plus the amount of liabilities, if any, to which the transferred
assets are subject.
Based on the foregoing, and assuming that the Reorganization is
effected in accordance with the terms of the Agreement (and exhibits thereto)
and that the representations made pursuant thereto by the parties are true at
the Effective Time, it is our opinion that for federal income tax purposes:
(i) the Reorganization will constitute a reorganization within the
meaning of section 368(a)(1) of
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the Code with respect to each Hanover Portfolio and its Corresponding MFG
Portfolio;
(ii) no gain or loss will be recognized by any of the Hanover
Portfolios or the Corresponding MFG Portfolios upon the transfer of all the
assets and liabilities, if any, of each Hanover Portfolio to its
Corresponding MFG Portfolio solely in exchange for MFG Portfolio Shares or
upon the distribution of the MFG Portfolio Shares to the holders of Hanover
Portfolio Shares solely in exchange for all of their Hanover Portfolio
Shares;
(iii) no gain or loss will be recognized by shareholders of any of the
Hanover Portfolios upon the exchange of such Hanover Portfolio Shares solely
for MFG Portfolio Shares;
(iv) the holding period and tax basis of the MFG Portfolio Shares
received by each holder of Hanover Portfolio Shares pursuant to the
Reorganization will be the same as the holding period (provided the Hanover
Portfolio Shares were held as a capital asset on the date of the
Reorganization) and tax basis of the Hanover Portfolio Shares held by the
shareholder immediately prior to the Reorganization; and
(v) the holding period and tax basis of the assets of each of the
Hanover Portfolios acquired by its
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Corresponding MFG Portfolio will be the same as the holding period and tax
basis of those assets to each of the Hanover Portfolios immediately prior to
the Reorganization.
The payment by Chemical Banking Corporation and/or The Chase Manhattan
Corporation of certain expenses of Hanover and MFG which are directly related to
the Reorganization (referred to in section 10 of the Agreement) will not affect
the opinions set forth above regarding the federal income tax consequences of
the exchanges by Hanover and the shareholders of Hanover. However, no opinion is
expressed as to any other federal income tax consequences to any of the parties
of the payment of such expenses by Chemical Banking Corporation and/or The Chase
Manhattan Corporation.
We express our opinion herein only as to those matters specifically set
forth above and such opinion may be relied upon solely by you for the exclusive
purpose of ascertaining the federal income tax consequences of the
Reorganization contemplated in the Agreement to the Hanover
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Portfolios, the MFG Portfolios and the shareholders of the Corresponding Hanover
Portfolios on their receipt of the MFG Portfolio Shares pursuant to the
Agreement.
Very truly yours,
