Exhibit 12
SIDLEY AUSTIN BROWN & WOOD LLP
BEIJING 787 SEVENTH AVENUE LOS ANGELES
---- NEW YORK, NEW YORK 10019 ----
BRUSSELS TELEPHONE 212 839 5300 NEW YORK
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CHICAGO www.sidley.com SAN FRANCISCO
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DALLAS FOUNDED 1866 SHANGHAI
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GENEVA SINGAPORE
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HONG KONG TOKYO
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LONDON WASHINGTON, D.C.
January 20, 2004
Merrill Lynch Fundamental Growth Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
The Asset Program, Inc., on behalf of
Mercury Growth Opportunity Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Re: Reorganization of Merrill Lynch Fundamental Growth Fund, Inc.
and Mercury Growth Opportunity Fund, a Series of The Asset
Program, Inc.
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Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of the acquisition by Merrill Lynch Fundamental Growth Fund, Inc.
("Acquiror") of substantially all of the assets of Mercury Growth Opportunity
Fund ("Target"), a series of The Asset Program, Inc. ("Target Series"), and
the assumption by Acquiror of substantially all of the liabilities of Target
and the simultaneous distribution of newly-issued shares of Acquiror common
stock to Target stockholders (the "Reorganization"). After the Reorganization,
Target will cease operations, will have no assets remaining, will have final
Federal and state (if any) tax returns filed on its behalf and will be
terminated as a series of Target Series under Maryland law.
This opinion letter is furnished pursuant to (i) the section entitled
"The Reorganization--Terms of the Agreement and Plan--Amendments and
Conditions" in the Proxy Statement and Prospectus, dated November 3, 2003,
contained in the Registration Statement on Form N-14 (File No. 333-109472) of
Acquiror, as amended and supplemented to date (the "N-14 Registration
Statement"), and (ii) Sections 8(g) and 9(g) of the Agreement and Plan of
Reorganization, dated November 3, 2003, by and between Target Series, on
behalf of Target, and Acquiror (the "Plan") as a condition of closing. All
terms used herein, unless otherwise defined, are used as defined in the Plan.
In rendering our opinion, we have reviewed and relied upon (a) the Plan,
(b) the N-14 Registration Statement and (c) certain representations concerning
the Reorganization made by (i) Acquiror in a letter dated January 20, 2004 and
(ii) Target in a letter dated January 20, 2004 (together, the
"Representations").
Based upon current law, including cases and administrative
interpretations thereof and on the reviewed materials listed above, it is our
opinion that:
1. The acquisition by Acquiror of substantially all of the assets of
Target, as described in the Plan, will constitute a reorganization within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), and Acquiror and Target each will be a "party" to a
reorganization within the meaning of Section 368(b) of the Code.
2. In accordance with Section 361(a) of the Code, Target will not
recognize any gain or loss either on the transfer of substantially all of its
assets to Acquiror in exchange solely for voting shares of Acquiror common
stock or on the distribution of shares of Acquiror common stock to its
stockholders.
3. Under Section 1032 of the Code, Acquiror will recognize no gain or
loss as a result of the Reorganization.
4. In accordance with Section 354(a)(1) of the Code, stockholders of
Target will not recognize any gain or loss on the exchange of their shares for
shares of Acquiror common stock.
5. The basis of the assets of Target received by Acquiror will be the
same as the basis of such assets to Target immediately before the
Reorganization under Section 362(b) of the Code.
6. Under Section 358 of the Code, immediately after the Reorganization,
the basis of shares of Acquiror common stock received by Target stockholders
(including fractional shares to which they may be entitled) will be the same
as the basis of their Target shares exchanged pursuant to the Reorganization.
7. Under Section 1223 of the Code, the holding period of shares of
Acquiror common stock received by Target stockholders in the Reorganization
(including fractional shares to which they may be entitled) will include the
holding period of the Target shares exchanged pursuant to the Reorganization,
provided that such shares were held as a capital asset on the date of the
Reorganization.
8. The holding period of the assets acquired by Acquiror from Target
will include the period during which such assets were held by Target under
Section 1223 of the Code.
9. Pursuant to Section 381(a) of the Code and Section 1.381(a)-1 of the
Income Tax Regulations, Acquiror will succeed to and take into account the
items of Target described in Section 381(c) of the Code, subject to the
provisions and limitations specified in Sections 381, 382, 383 and 384 of the
Code and the regulations thereunder. Under Section 381(b), the tax year of
Target will end on the date of the Reorganization.
Our opinion represents our best legal judgment as to the proper Federal
income tax treatment of the Reorganization, based on the facts contained in
the Plan, the N-14 Registration Statement and the Representations. Our opinion
assumes the accuracy of the facts as described in the Plan, the N-14
Registration Statement and the Representations and could be affected if any of
the facts as so described are inaccurate.
We are furnishing this opinion letter to the addressees hereof, solely
for the benefit of such addressees in connection with the Reorganization. This
opinion letter is not to be used, circulated, quoted or otherwise referred to
for any other purpose.
Very truly yours,
/s/ Sidley Austin Brown & Wood LLP