[LOGO] Dechert
August 26, 2002
Board of Directors
Total Return Series
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636
Equity Series
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636
Dear Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences to the Total Return Series ("Target"), a separate series of
Separate Equity Fund, a Kansas corporation ("Company"), to the holders of the
shares of beneficial interest (the "shares") of Target (the "Target
Shareholders"), and to the Equity Series ("Acquiring Fund"), a separate series
of Company, in connection with the proposed transfer of substantially all of the
properties of Target to Acquiring Fund in exchange solely for voting shares of
beneficial interest of Acquiring Fund ("Acquiring Fund Shares"), followed by the
distribution of such Acquiring Fund Shares received by Target in complete
liquidation and termination of Target (the "Reorganization"), all pursuant to
the Plan of Reorganization (the "Plan") dated as of May 3, 2002, executed by
Company on behalf of Target and on behalf of Acquiring Fund.
For purposes of this opinion, we have examined and rely upon (1) the Plan,
(2) the Form N-14 filed by Acquiring Fund on May 30, 2002 with the Securities
and Exchange Commission, (3) the related Proxy Statement dated July 20, 2002,
(4) the facts and representations contained in the letter dated on or about the
date hereof addressed to us from Company on behalf of Acquiring Fund, (5) the
facts and representations contained in the letter dated on or about the date
hereof addressed to us from Company on behalf of Target, and (6) such other
documents and instruments as we have deemed necessary or appropriate for
purposes of rendering this opinion.
This opinion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), United States Treasury regulations, judicial decisions, and
administrative rulings and pronouncements of the Internal Revenue Service, all
as in effect on the date hereof. This opinion is conditioned upon the
Reorganization taking place in the manner described in the Plan and the Form
N-14 referred to above.
Based upon the foregoing, it is our opinion that:
1. The acquisition by Acquiring Fund of substantially all of the properties of
Target in exchange solely for Acquiring Fund Shares followed by the
distribution of Acquiring Fund Shares to the Target Shareholders in exchange
for their Target shares in complete liquidation and termination of Target
will constitute a reorganization within the meaning of section 368(a) of the
Code. Target and Acquiring Fund will each be "a party to a reorganization"
within the meaning of section 368(b) of the Code.
2. Target will not recognize gain or loss upon the transfer of substantially
all of its assets to Acquiring Fund in exchange solely for Acquiring Fund
Shares except to the extent that Target's assets consist of contracts
described in section 1256(b) of the Code ("Section 1256 Contracts"); Target
will be required to recognize gain or loss on the transfer of any such
Section 1256 contracts to Acquiring Fund pursuant to the Reorganization as
if such Section 1256 contracts were sold to Acquiring Fund on the effective
date of the Reorganization at their fair market value. Target will not
recognize gain or loss upon the distribution to its shareholders of the
Acquiring Fund Shares received by Target in the Reorganization. We do not
express any opinion as to whether any accrued market discount will be
required to be recognized as ordinary income.
3. Acquiring Fund will recognize no gain or loss upon receiving the properties
of Target in exchange solely for Acquiring Fund Shares.
4. The aggregated adjusted basis to Acquiring Fund of the properties of Target
received by Acquiring Fund in the reorganization will be the same as the
aggregate adjusted basis of those properties in the hands of Target
immediately before the exchange.
5. Acquiring Fund's holding periods with respect to the properties of Target
that Acquiring Fund acquires in the transaction will include the respective
periods for which those properties were held by Target (except where
investment activities of Acquiring Fund have the effect of reducing or
eliminating a holding period with respect to an asset).
6. The Target Shareholders will recognize no gain or loss upon receiving
Acquiring Fund Shares solely in exchange for Target shares.
7. The aggregate basis of the Acquiring Fund Shares received by a Target
Shareholder in the transaction will be the same as the aggregate basis of
Target shares surrendered by the Target Shareholder in exchange therefor.
8. A Target Shareholder's holding period for the Acquiring Fund Shares received
by the Target Shareholder in the transaction will include the holding period
during which the Target Shareholder held Target shares surrendered in
exchange therefor, provided that the Target Shareholder held such shares as
a capital asset on the date of Reorganization.
We express no opinion as to the federal income tax consequences of the
Reorganization except as expressly set forth above, or as to any transaction
except those consummated in accordance with the Plan.
Very truly yours,
DECHERT
Law Offices of Dechert Price & Rhoads
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4000 Bell Atlantic Tower * 1717 Arch Street * Philadelphia, PA 19103-2793
Tel: 215.994.4000 * Fax: 215.994.2222 * www.dechert.com
Guggenheim Alpha Opportunity Fund (SAOAX)
Filed: 19 Sep 02, 12:00am