IMG MUTUAL FUNDS, INC.
EXHIBIT # 12 (b)
TO
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM N-14 REGISTRATION STATEMENT
CLINE, WILLIAMS, WRIGHT, JOHNSON & OLDFATHER
1900 First Bank Building
233 South 13th Street
Lincoln, NE 68508
(402) 474-6900
Fax: (402) 474-5393
January 12, 1998
IMG Mutual Funds, Inc.
2203 Grand Ave.
Des Moines, IA 50312-5338
RE: Plan of Reorganization and Reclassification for combining the
IMG Mutual Funds, Inc. ("IMG") Select Shares, Adviser Shares and
Institutional Shares of the IMG Bond Fund into a new, untitled
single class of shares of the IMG Bond Fund.
Dear Sirs:
We have been asked to give our opinion relating to the above-described
transaction (the "Reorganization"), as to certain Federal income tax
consequences of consummating the transactions contemplated in the Plan of
Reorganization and Reclassification (the "Plan").
BACKGROUND
IMG Mutual Funds, Inc. ("IMG") is a Maryland corporation consisting of
multiple investment portfolios, including its Bond Fund ("Bond Fund"). The Bond
Fund is registered under the Investment Company Act of 1940, as amended, as an
open-end investment company of the management type.
It is proposed that all of the Select Shares, Adviser Shares and
Institutional Shares ("outstanding shares") of the Bond Fund be exchanged for a
new single class of shares of the Bond Fund that will not have a title. A number
of full and fractional new untitled Bond Fund shares equal to the net asset
value of the outstanding shares will be issued at the Effective Time of
Reorganization.
ASSUMPTIONS
For purposes of this opinion, we have made several assumptions:
First, that the Bond Fund is qualified as a "regulated investment
company" under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal
Revenue Code of 1986, as amended (the "Code") and also meet the diversification
requirements of Code ss.368(a)(2)(E)(ii), for its most recently ended fiscal
year and will continue to so qualify for its current fiscal year;
Second, that the shareholders of the Bond Fund have no plan or
intention to dispose of a number of shares of the Bond Fund received by them as
a result of the transaction which would result in their owning in the aggregate
shares of the Bond Fund having a fair market value that is less than 50% of the
fair market value of the Bond Fund's shares outstanding immediately before the
transaction (including any Bond Fund's shares redeemed in anticipation of the
transaction);
Third, that the Bond Fund has no plan or intention to reacquire any of
their shares issued in the transaction, except for redemptions in the ordinary
course of business as a regulated investment company;
Fourth, that the Bond Fund has no plan or intention to sell or
otherwise to dispose of any of its assets except for dispositions made in the
ordinary course of business;
Fifth, that the transaction serves a business purpose or purposes of
the Funds and that following the transaction the Bond Fund will continue the
historic business of the Bond Fund or use a significant portion of the Bond
Fund's historic business assets in a business;
Sixth, that the Bond Fund is not under the jurisdiction of a court in a
case under Title 11 of the United States Code or a receivership, foreclosure or
similar proceeding in any Federal or State court; and
Seventh, that the Plan substantially in the form included as an exhibit
to the registration statement of the Bond Fund, on Form N-14 under the
Securities Act of 1933 (the "Registration Statement") has been or will be duly
authorized by the Bond Fund.
The opinions set forth below are subject to the approval of the Plan by
the shareholders of the Bond Fund, to the proper submission and filing of
appropriate documents with the appropriate government agencies and to the
satisfaction of the terms and conditions set forth in the Plan.
CONCLUSIONS
Based upon the Code, applicable Treasury Department regulations in
effect as of the date hereof, current published administrative positions of the
Internal Revenue Service contained in revenue rulings and procedures, and
judicial decisions, and upon the information, representations and assumptions
contained herein and in the documents provided to us by you, it is our opinion
for Federal income tax purposes that:
(i) the exchange of outstanding shares by Shareholders of
the Bond Fund for a single class of new untitled shares, as described
in the Plan will constitute a reorganization within the meaning of Code
Section 368(a)(1)(E).
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Bond Fund as a
result of such transactions;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by the Bond Fund as a result of such
transactions;
(iv) in accordance with section 354(a)(1) of the Code, no
gain or loss will be recognized by the shareholders of the Bond Fund on
the distribution to them by a Bond Fund of new shares of the Bond Fund
in exchange for their shares of such Bond Fund (but shareholders of the
Bond Fund subject to taxation will recognize income upon receipt of any
net investment income or net capital gains of such Bond Fund which are
distributed to them by the Bond Fund prior to the closing date of its
Reorganization);
(v) in accordance with section 358(a)(1) of the Code, the
basis of the Bond Fund shares received by a shareholder of a Bond Fund
will be the same as the basis of the shareholder's Bond Fund shares
immediately before the transactions; and
(vi) in accordance with section 1223(1) of the Code, a
shareholder's holding period for Bond Fund shares will be determined by
including the period for which the shareholder held Bond Fund shares
exchanged therefor, provided that the shareholder held such Bond Fund
shares as a capital asset.
We express no opinion relating to any Federal income tax matter except
on the basis of the documents and assumptions described above. In issuing our
opinion, we have relied solely upon existing provisions of the Code, existing
and proposed regulations thereunder, and current administrative rulings and
court decisions. Such laws, regulations, administrative rulings and court
decisions are subject to change at any time. Any such change could affect the
validity of the opinion set forth above.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the caption
"Federal Income Tax Consequences" in the Combined Proxy Statement/Prospectus
constituting a part of the Registration Statement.
Very truly yours,
/s/ Cline, Williams, Wright,
Johnson & Oldfather
CLINE, WILLIAMS, WRIGHT,
JOHNSON & OLDFATHER