As Of                Filer                Filing    For·On·As Docs:Size

 7/16/14  Calvert Variable Products, Inc.   N-14¶                  8:1.1M
          → Calvert VP Inflation Protected Plus Portfolio
          → CVT Investment Grade Bond Index Portfolio

Document/Exhibit                   Description                      Pages   Size 

 1: N-14        Registration Statement by an Open-End Investment    HTML    440K 
                Company (Business Combination)                                   
 8: COVER     ¶ Comment-Response or Cover Letter to the SEC         HTML      6K 
 2: EX-99.11 OPIN COUNSL  Miscellaneous Exhibit                     HTML     13K 
 3: EX-99.12 TAX OPINION  Miscellaneous Exhibit                     HTML     27K 
 4: EX-99.14 OTH CONSENT  Miscellaneous Exhibit                     HTML      7K 
 5: EX-99.16 PWR OF ATTY  Miscellaneous Exhibit                     HTML     43K 
 6: EX-99.17 PROXY CARD  Miscellaneous Exhibit                      HTML      4K 
 7: EX-99.17 VOTER INST  Miscellaneous Exhibit                      HTML      4K 

________ , 2014

Calvert Variable Products, Inc. behalf of

Calvert VP Inflation Protected Plus Portfolio

4550 Montgomery Avenue

Bethesda, Maryland 20814

 

Calvert Variable Products, Inc. on behalf of

Calvert VP Investment Grade Bond Index Portfolio

4550 Montgomery Avenue

Bethesda, Maryland 20814

 

Re:       Acquisition of Assets of Calvert VP Inflation Protected Plus Portfolio

 

 

Ladies and Gentlemen:

You have asked for our opinion as to certain Federal income tax consequences of the transaction described below.

Parties to the Transaction

Calvert VP Inflation Protected Plus Portfolio (“Target Fund”) is a series of Calvert Variable Products, Inc., a Maryland corporation (the “Corporation”).

 

Calvert VP Investment Grade Bond Index Portfolio (“Acquiring Fund”) is also a series of the Corporation.

Description of Proposed Transaction

In the proposed transaction (the “Reorganization”), Acquiring Fund will acquire all of the assets of Target Fund in exchange for shares of Acquiring Fund of equivalent value and the assumption of the liabilities of Target Fund.  Target Fund will then liquidate and distribute all of the Acquiring Fund shares which it holds to its shareholders pro rata in proportion to their shareholdings in Target Fund, in complete redemption of all outstanding shares of Target Fund, and promptly thereafter will proceed to dissolve.

Scope of Review and Assumptions

In rendering our opinion, we have reviewed and relied upon the Agreement and Plan of Reorganization between the Corporation with respect to Target Fund and the Corporation with respect to Acquiring Fund dated ______________, 2014 (the “Reorganization Agreement”) and on the prospectus/proxy statement dated ___________, 2014, which describes the proposed transaction, and on the information provided in such prospectus/proxy statement.  We have relied, without independent verification, upon the factual statements made therein, and assume that there will be no change in material facts disclosed therein between the date of  the prospectus/proxy statement and the date of this letter.  We further assume that the transaction will be carried out in accordance with the Reorganization Agreement.

Representations

Written representations, copies of which are attached hereto, have been made to us by the appropriate officers of Target Fund and Acquiring Fund, and we have without independent verification relied upon such representations in rendering our opinions.

Discussion

One of the prerequisites for a tax-free reorganization under the Internal Revenue Code is that the transaction represent a continuity of the business enterprise of the acquired entity.  As interpreted by the Treasury in regulations, and in accordance with court decisions, continuity of business enterprise is present if the acquiring entity either continues the business of the acquired entity or uses a substantial portion of the acquired entity’s historic assets in its own business.  The regulations, and private letter rulings in the area issued by the Internal Revenue Service, suggest that the latter test is met if the acquiring fund uses at least one third of the historic assets of the target fund in the business of the acquiring fund.  Target Fund invests primarily in inflation adjusted fixed income securities.  Up to twenty percent of Target Fund’s assets may be invested in fixed income securities that are not inflation indexed.  Acquiring Fund invests in fixed income securities that comprise the Barclays U.S. Aggregate Bond Index.  Acquiring Fund has represented that it will use no more than twenty percent of the assets of Target Fund in the business of Acquiring Fund, since Acquiring Fund does not hold and will not hold inflation protected fixed income securities.  Therefore, continuity of business enterprise may be present only if Acquiring Fund continues the historic business of Target Fund. 

There is very little official guidance as to the meaning of continuation of the historic business.  In Revenue Ruling 87-76, a municipal bond fund acquired all of the assets of a fund which had historically invested in corporate debt and equity instruments.  The transaction was held to lack continuity of business enterprise, even though both funds were in the business of investing.  In the current situation, as noted above, Acquiring Fund has historically invested in fixed income securities that comprise the Barclays U.S. Aggregate Bond Index, but not to any material extent in corporate stocks, and Target Fund invests primarily in inflation protected fixed income securities, not tax-exempt securities.  Therefore the Revenue Ruling is not squarely on point.  However, the fact that Acquiring Fund does not invest in inflation protected fixed income securities, the primary investment of Target Fund, and that Acquiring Fund will not use more than twenty percent of the historic assets of Target Fund in Acquiring Fund’s business, is strong evidence that Acquiring Fund and Target Fund are not in the same business.  Therefore we conclude that the Reorganization will be a taxable event.  However, because of the lack of definitive guidance, our opinions cannot be entirely free from doubt.

The legal owners of shares of the Target Fund are separate accounts of insurance companies which support variable life insurance and/or variable annuity contracts (each a “Contract”) issued by the insurance companies.  The Contracts are intended to be, and have been represented to us to be, life insurance contracts and variable annuity contracts for purposes of the Internal Revenue Code (the “Code”).  Owners of such contracts are not taxable on income earned by the separate accounts in which the Contracts invest unless and until amounts are withdrawn from the Contracts, or unless the owner of a Contract has an impermissible level of control over the investments of the Contract.  We have no reason to believe that the owner of any Contract has such an impermissible level of control, but we have not independently verified that fact.  For purposes of this opinion, we assume that the Contracts are life insurance contracts and variable annuity contracts for purposes of the Code and that owners of the Contracts do not have impermissible levels of investor control over the investments of the Contracts.

Opinions

Based on and subject to the foregoing, and on our examination of the legal authority we have deemed to be relevant, we have the following opinions, which are not free from doubt because they are based on the stated assumptions:

1.         The transfer of all of the assets of Target Fund in exchange for shares of Acquiring Fund will be a taxable sale of all of the assets of Target Fund for their fair market value.

2.         None of the owners of Contracts for which either the Target Fund or the Acquiring Fund serves as an investment option will recognize taxable income, gains or losses for federal income tax purposes upon closing of the Reorganization.

The foregoing opinions are based on the Code as in effect on the date hereof and administrative and judicial interpretations of it.  No assurance can be given that the Code will not change or that such interpretations will not be revised or amended adversely, possibly with retroactive effect.  This opinion letter is delivered to you in satisfaction of the requirements of Section _ of the Reorganization Agreement.  We hereby consent to the filing of this opinion as an exhibit to the Registration Statement on Form N-14 relating to the Reorganization and to the use of our name and any reference to our firm in such Registration Statement or in the prospectus/proxy statement constituting a part thereof.  In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.

 

Very truly yours,