[Dechert Logo] Dechert LLP
October 3, 2003
Board of Directors
Security Equity Fund
One Security Benefit Place
Topeka, KS 66636-0001
Board of Directors
Security Mid Cap Growth Fund
One Security Benefit Place
Topeka, KS 66636-0001
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences to the Security Technology Fund and the Security International Fund
(each, a "Target"), each a separate series of the Security Equity Fund (the
"Company), to the holders of the shares of each Target (the "Target
Shareholders"), and to the Security Global Fund, a separate series of the
Company, and the Security Mid Cap Growth Fund, a separate corporation (each, an
"Acquiring Fund"), in connection with the proposed transfer of substantially all
of the properties of each Target to the corresponding Acquiring Fund in exchange
solely for voting shares of such Acquiring Fund ("Acquiring Fund Shares"),
followed by the distribution of such Acquiring Fund Shares received by such
Target in complete liquidation and termination of Target (the "Reorganization"),
all pursuant to the Agreement and Plan of Reorganization (the "Plan") dated as
of May 2, 2003, entered into by the Security Mid Cap Growth Fund and by the
Company on behalf of each Target and Security Global Fund.
For purposes of this opinion, we have examined and rely upon (1) the Plan,
(2) the Form N-14s filed by the Company on July 23, 2003 and July 28, 2003, (3)
the Form 497s filed by the Company on September 4, 2003 and September 3, 2003
with the Securities and Exchange Commission, (4) the related Proxy Statements
dated September 1, 2003, (5) the facts and representations contained in the
letter dated on or about the date hereof addressed to us from the Security Mid
Cap Growth Fund and from the Company on behalf of Security Global Fund, (6) the
facts and representations contained in the letter dated on or about the date
hereof addressed to us from the Company on behalf of each Target, and (7) 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 Forms
N-14 and 497 referred to above.
Based upon the foregoing, it is our opinion that:
1. The acquisition by each Acquiring Fund of substantially all of the
properties of the corresponding Target in exchange solely for Acquiring Fund
Shares and assumption of all of such Target's liabilities followed by the
distribution of Acquiring Fund Shares to the Target Shareholders in exchange
for their Target shares in complete liquidation and termination of such
Target will constitute a reorganization within the meaning of section 368(a)
of the Code. Each Target and the corresponding Acquiring Fund will 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 the corresponding Acquiring Fund in exchange solely for
Acquiring Fund Shares and assumption of all of Target's liabilities 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 the corresponding Target in exchange solely for Acquiring Fund Shares and
assumption of all of Target's liabilities.
4. The aggregated adjusted basis to Acquiring Fund of the properties of the
corresponding 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 the
corresponding 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 a 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.
Our opinion as expressed herein, is solely for the benefit of each Target,
the Target Shareholders, and each Acquiring Fund, and unless we give our prior
written consent, neither our opinion nor this opinion letter may be quoted in
whole or in part or relied upon by any other person.
Very truly yours,
DECHERT LLP
Law Offices of Dechert LLP
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4000 Bell Atlantic Tower * 1717 Arch Street * Philadelphia, PA 19103-2793
Tel: 215.994.4000 * Fax: 215.994.2222
Guggenheim Alpha Opportunity Fund (SAOAX)
Filed: 14 Oct 03, 12:00am