Exhibit 12
SIDLEY AUSTIN LLP BEIJING GENEVA SAN FRANCISCO
787 SEVENTH AVENUE BRUSSELS HONG KONG SHANGHAI
SIDLEY AUSTIN LLP NEW YORK, NY 10019 CHICAGO LONDON SINGAPORE
- ----------------- (212) 839 5300 DALLAS LOS ANGELES TOKYO
SIDLEY (212) 839 5599 FAX FRANKFURT NEW YORK WASHINGTON, DC
FOUNDED 1866
August 28, 2006
Merrill Lynch Global Allocation Fund, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Strategy Series, Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Re: Reorganization of Merrill Lynch Global Allocation Fund, Merrill
Lynch Strategy Growth and Income Fund and Merrill Lynch Strategy
Long-Term Growth Fund
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Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of (i) the acquisition by Merrill Lynch Global Allocation Fund,
Inc. ("Global Allocation"), an open-end, registered management investment
company organized as a Maryland corporation, of substantially all of the
assets of Merrill Lynch Strategy Growth and Income Fund ("Growth & Income")
and Merrill Lynch Strategy Long-Term Growth Fund ("Long-Term Growth"), each an
open-end, registered management investment company organized as a separate
series of Merrill Lynch Strategy Series, Inc. ("Strategy Series"), a Maryland
corporation, and the assumption by Global Allocation of the Stated Liabilities
of Growth & Income and Long-Term Growth and (ii) the simultaneous distribution
of newly issued Class A, Class B, Class C, Class I and Class R shares of
Global Allocation, each with a par value of $0.10 per share (collectively, the
"Global Allocation Shares") to stockholders of Growth & Income and Long-Term
Growth (collectively and with respect to each of Growth & Income and Long-Term
Growth, the "Reorganization"). After the Reorganization, each of Growth &
Income and Long-Term Growth will cease to operate, will have no assets
remaining, will have final Federal and state (if any) tax returns filed on its
behalf and will have all of its shares cancelled under Maryland law.
This opinion letter is furnished pursuant to Section 8.6 of the
Agreement and Plan of Reorganization, dated as of June 14, 2006, by and
between Global Allocation and Strategy Series (the "Plan"). 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 Registration Statement on Form N-14 (File No. 333-133929) of Merrill
Lynch Global Allocation Fund, Inc., as amended to date (the "N-14 Registration
Statement"), and (c) certain representations concerning the Reorganization
made by Global Allocation and Strategy Series in letters dated August 28, 2006
(the "Representations").
SIDLEY AUSTIN LLP
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SIDLEY
* * * *
To comply with certain Treasury regulations, we state that (i) this
opinion is written to support the promotion and marketing by others of the
transactions or matters addressed herein, (ii) this opinion is not intended or
written to be used, and cannot be used, by any person for the purpose of
avoiding U.S. federal tax penalties that may be imposed on such person and
(iii) each taxpayer should seek advice based on the taxpayer's particular
circumstances from an independent tax advisor.
* * * *
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 Global Allocation of substantially all of the
assets of Growth & Income, 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 Global Allocation and
Growth & Income will each be a "party to a reorganization" within the meaning
of section 368(b) of the Code.
2. The acquisition by Global Allocation of substantially all of the
assets of Long-Term Growth, as described in the Plan, will constitute a
reorganization within the meaning of section 368(a)(1)(C) of the Code, and
Global Allocation and Long-Term Growth will each be a "party to a
reorganization" within the meaning of section 368(b) of the Code.
3. In accordance with section 361(a) of the Code, Growth & Income will
not recognize any gain or loss either on the transfer of substantially all of
its assets to Global Allocation in exchange solely for shares of its common
stock or on the simultaneous distribution of such common stock to Growth &
Income stockholders, and Long-Term Growth will not recognize any gain or loss
either on the transfer of substantially all of its assets to Global Allocation
in exchange solely for shares of its common stock or on the simultaneous
distribution of such common stock to Long-Term Growth stockholders.
4. Under section 1032 of the Code, Global Allocation will not recognize
any gain or loss as a result of the acquisition by Global Allocation of
substantially all of the assets of Growth & Income and Long-Term Growth in the
Reorganization.
5. In accordance with section 354(a)(1) of the Code, stockholders of
Growth & Income will recognize no gain or loss on the exchange of their shares
of Growth & Income common stock solely for corresponding shares of Global
Allocation common stock and stockholders of Long-Term Growth will recognize no
gain or loss on the exchange of their shares of Long-Term Growth common stock
solely for corresponding shares of Global Allocation common stock.
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6. Under section 362(b) of the Code, the basis of the assets of Growth &
Income received by Global Allocation will be the same as the basis of such
assets to Growth & Income immediately before the Reorganization, and the basis
of the assets of Long-Term Growth received by Global Allocation will be the
same as the basis of such assets to Long-Term Growth immediately before the
Reorganization.
7. Under section 358 of the Code, the basis of the shares of Global
Allocation common stock, including fractional shares, received by each
stockholder of Growth & Income will be the same as the basis of the shares of
common stock of Growth & Income exchanged pursuant to the Reorganization, and
the basis of the shares of Global Allocation common stock, including
fractional shares, received by each stockholder of Long-Term Growth will be
the same as the basis of the shares of common stock of Long-Term Growth
exchanged pursuant to the Reorganization.
8. Under section 1223 of the Code, the holding period of the shares of
Global Allocation common stock, including fractional shares, received in the
Reorganization will include the holding period of the shares of Growth &
Income common stock or Long-Term Growth common stock exchanged pursuant to the
Reorganization, provided that such shares of common stock were held as capital
assets on the date of the Reorganization.
9. Under section 1223 of the Code, the holding period of the assets
acquired by Global Allocation from Growth & Income will include the period
during which such assets were held by Growth & Income and the holding period
of the assets acquired by Global Allocation from Long-Term Growth will include
the period during which such assets were held by Long-Term Growth.
10. Pursuant to section 381(a) of the Code and section 1.381(a)-1 of the
Income Tax Regulations, Global Allocation will succeed to and take into
account the items of Growth & Income and Long-Term Growth 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) of the Code, the tax years of Growth & Income and
Long-Term Growth will end on the date of the Reorganization.
Our opinion represents our best legal judgment with respect 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.
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SIDLEY AUSTIN LLP
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SIDLEY
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 LLP
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