EXHIBIT 12
Sutherland Draft
(11/30/01)
________________, 2002
Board of Trustees and Officers
IDEX Mutual Funds
570 Carillon Parkway
St. Petersburg, Florida 33716
Ladies and Gentlemen:
This letter responds to your request for our opinion concerning the
federal income tax consequences of (i) a transfer of all the assets of the IDEX
American Century International portfolio (the "Target Portfolio") of IDEX Mutual
Funds (the "Fund") to the IDEX International Equity portfolio (the "Acquiring
Portfolio") of the Fund in exchange for shares of the Acquiring Portfolio and
the assumption by the Acquiring Portfolio of certain specified liabilities of
the Target Portfolio and (ii) the liquidation of the Target Portfolio. In
rendering our opinion, we have relied solely on the representations set forth
below and on the facts, summarized below, contained in the following documents:
(a) the Agreement and Plan of Reorganization dated as of ______________ by the
Fund on behalf of the Target Portfolio and the Acquiring Portfolio (the "Plan of
Reorganization") and (b) the Form N-14 Registration Statement of the Fund.
Summary of Relevant Facts
-------------------------
The Fund is a Massachusetts business trust registered as a diversified
open-end management investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"). The Fund comprises several separate investment
portfolios and issues separate classes of shares of beneficial interests
representing ownership interests in each of those portfolios. Among the
portfolios of the Fund are the Acquiring Portfolio and the Target Portfolio. As
of ____________, the Target Portfolio had $____________ of net assets and the
Acquiring Portfolio had $______________ of net assets. Shares of each of the
Acquiring Portfolio and the Target Portfolio are available for purchase by
members of the general public and are widely held.
The Acquiring Portfolio and the Target Portfolio have similar
investment objectives. The Target Portfolio has been managed by American Century
Investment Management, Inc. ("American Century") since the Target Portfolio's
inception on April 2, 2001. From the inception of the Acquiring Portfolio on
February 1, 1997, through October 4, 2001, the sub-adviser for the Acquiring
Portfolio was GE Asset Management Incorporated ("GEAM"). Effective October 5,
2001, after the resignation of GEAM as sub-adviser, American Century became the
sub-adviser for the Acquiring Portfolio as well. The Acquiring Portfolio then
adopted similar investment policies and strategies to those of the Target
Portfolio to fulfill its investment objectives. To pursue their goals, each of
the Acquiring Portfolio and the Target
Board of Trustees and Officers
______________, 2002
Page 2
Portfolio invests in stocks of growing foreign companies pursuant to a growth
investment strategy developed by American Century. Prior to American Century
becoming the sub-adviser to the Acquiring Portfolio, the Acquiring Portfolio
invested in stocks of foreign companies selected by GEAM.
For valid business reasons, the board of trustees and officers of the
Fund has determined to recommend to shareholders that the Acquiring Portfolio
and the Target Portfolio be combined and operated as a single portfolio. The
board of trustees believes that such a combination has the potential of
improving the performance and reducing the overall operating expenses of the two
portfolios. Accordingly, the following Plan of Reorganization has been approved
by the board of trustees of the Fund:
(i) immediately prior to the close of business on the closing date
for the Reorganization (the "Closing Date"), the Target Portfolio will, if
applicable, declare and pay to its shareholders one or more dividends or
distributions, which together with all previous dividends will have the effect
of distributing to Target Portfolio shareholders all the Target Portfolio's
previously undistributed investment company taxable income, if any, for the
fiscal period ending on or prior to the Closing Date (computed without regard to
any deduction for dividends paid), its net exempt interest income for the fiscal
period ending on or prior to the Closing Date, and all its previously
undistributed net capital gain realized in the fiscal period ending on or prior
to the Closing Date (after reduction for any capital loss carried forward);
(ii) on the Closing Date, all the assets of the Target Portfolio will
be transferred to the Acquiring Portfolio in exchange for shares of the
Acquiring Portfolio and the assumption by the Acquiring Portfolio of certain
specified liabilities of the Target Portfolio. The aggregate value of the
Acquiring Portfolio shares to be issued in this exchange will be equal to the
value of the net assets transferred (computed using the valuation procedures set
forth in the Fund's then-current prospectus and statement of additional
information);
(iii) as soon as conveniently practicable after the Closing Date, the
Target Portfolio will distribute the Acquiring Portfolio shares received by it
pursuant to the Plan of Reorganization to its shareholders pro rata in
proportion to their respective interests;/1/ and
(iv) the Target Portfolio will be completely liquidated.
__________
/1/ The distribution will be accomplished by establishing new accounts on the
shareholder records of the Acquiring Portfolio in the name of each Target
Portfolio shareholder, with each new account being credited with the respective
pro rata number of Acquiring Portfolio shares due the shareholder based upon the
relative net assets values per share as of the Closing Date. All shares of
Target Portfolio stock will be redeemed/canceled.
Board of Trustees and Officers
______________, 2002
Page 3
(The steps discussed in paragraphs (ii), (iii), and (iv) above are
referred to herein collectively as the "Reorganization.")
Representations
---------------
Our opinion is conditioned upon the accuracy of the following
representations as of the Closing Date, which representations will be certified
to us by an authorized officer of the Fund:
(a) The Fund is registered with the Securities and Exchange
Commission under the 1940 Act as an open-end management investment company, and
each of the Target Portfolio and the Acquiring Portfolio (1) operates as a
separate open-end management investment company and (2) is taxable as a separate
corporation for federal income tax purposes by reason of section 851(h)./2/
(b) Each of the Target Portfolio and the Acquiring Portfolio
qualified for treatment as a regulated investment company under section 851 (a
"RIC") for its most recent taxable year and intends to qualify as such for its
current taxable year (including the Target Portfolio's last short taxable period
ending on the date of the Reorganization). Following completion of the
Reorganization, the Acquiring Portfolio intends to continue to qualify as a RIC
within the meaning of section 851 for all subsequent taxable years.
(c) The fair market value of the shares of the Acquiring Portfolio
stock to be received by each shareholder of the Target Portfolio will be
approximately equal to the fair market value of the shares of the Target
Portfolio surrendered in exchange therefor.
(d) The Acquiring Portfolio will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair market
value of the gross assets held by the Target Portfolio immediately prior to the
Reorganization. For purposes of this representation, amounts used by the Target
Portfolio to pay its reorganization expenses and all redemptions and
distributions (except for (1) redemptions in the ordinary course of the Target
Portfolio's business as an open-end investment company as required by section
22(e) of the 1940 Act pursuant to a demand of a shareholder and (2) regular,
normal dividends) made by the Target Portfolio immediately prior to the transfer
will be included as assets of the Target Portfolio held immediately prior to the
Reorganization.
(e) There will be no Target Portfolio shareholders entitled to
appraisal rights as a result of the Reorganization, no cash will be paid to the
shareholders of the Target Portfolio in lieu of fractional shares, and no cash
or property other than the Acquiring Portfolio shares will be received by or
distributed to the shareholders of the Target Portfolio in the Reorganization.
___________
/2/ Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended (the "Code").
Board of Trustees and Officers
______________, 2002
Page 4
(f) Neither the Acquiring Portfolio nor any person related to the
Acquiring Portfolio has any plan or intention to redeem (or acquire) any of the
Acquiring Portfolio stock issued in the Reorganization except under its legal
obligations under section 22(e) of the 1940 Act.
(g) The Acquiring Portfolio has no plan or intention to sell or
otherwise dispose of any of the assets of the Target Portfolio acquired in the
Reorganization, except for dispositions made in the ordinary course of its
business as an open-end investment company.
(h) The Target Portfolio's liabilities to be assumed by the Acquiring
Portfolio (if any) were incurred by the Target Portfolio in the ordinary course
of its business and are associated with the assets to be transferred.
(i) The Acquiring Portfolio, the Target Portfolio, and the
shareholders of the Target Portfolio will pay their respective transaction
expenses.
(j) There is no intercorporate indebtedness between the Acquiring
Portfolio and the Target Portfolio.
(k) The fair market value of the assets of the Target Portfolio to be
transferred in the Reorganization to the Acquiring Portfolio will exceed the sum
of the liabilities to be assumed by the Acquiring Portfolio (if any).
(l) The total adjusted basis of the Target Portfolio assets
transferred to the Acquiring Portfolio will equal or exceed the sum of the
liabilities (if any) to be assumed by the Acquiring Portfolio pursuant to the
Reorganization.
(m) The Target Portfolio will distribute to its shareholders the
shares of the Acquiring Portfolio it receives pursuant to the Reorganization.
(n) As of the Closing Date of the Reorganization, the Target
Portfolio will cease to be a going concern except for completion of the
transactions contemplated pursuant to the Plan of Reorganization. Following the
final liquidating distribution, the Target Portfolio will not retain any assets
and will be dissolved.
(o) In contemplation of the Reorganization, the Target Portfolio has
not disposed, and will not dispose, of any assets other than (1) pursuant to
sales occurring in the ordinary course of its business as a regulated investment
company and (2) the transfer of its assets to the Acquiring Portfolio pursuant
to the Reorganization.
(p) Prior to the adoption of the Plan of Reorganization for the
Reorganization, neither the Target Portfolio nor any person related to the
Target Portfolio has redeemed (or acquired)
Board of Trustees and Officers
______________, 2002
Page 5
any shares of Target Portfolio stock except under its legal obligations under
section 22(e) of the 1940 Act.
(q) The Acquiring Portfolio and the Target Portfolio each meets the
requirements of a regulated investment company as defined in section
368(a)(2)(F).
(r) The Acquiring Portfolio does not own, directly or indirectly, nor
has it owned during the past five years, directly or indirectly, any shares of
the Target Portfolio.
(s) All shares issued by the Acquiring Portfolio in the
Reorganization, regardless of class designation, will be voting shares.
(t) During the five-year period ending on the date of the
Reorganization, the Target Portfolio has not made (and will not have made) any
distributions with respect to the Target Portfolio shares (other than regular
and normal dividend distributions made pursuant to the Target Portfolio's
historic dividend paying practice), either directly or through any transaction,
agreement, or arrangement with any other person, except for distributions
described in sections 852 and 4982.
(u) The Acquiring Portfolio and the Target Portfolio are each
engaging in the Reorganization for valid business reasons.
Opinion
-------
Based on our analysis of the Code, the Income Tax Regulations
promulgated under the Code, case law, published and private rulings of the
Internal Revenue Service, and other relevant legal authority, and in view of the
facts summarized above and the representations set forth above, it is our
opinion that the following federal income tax consequences will result from the
Reorganization:
1. The Reorganization will constitute a "reorganization" within the
meaning of section 368(a), and the Target Portfolio and the Acquiring Portfolio
each will be a "party to a reorganization" within the meaning of section 368(b).
2. No gain or loss will be recognized by the Target Portfolio (i) on
the transfer of its assets to the Acquiring Portfolio in exchange solely for
shares of the Acquiring Portfolio and the Acquiring Portfolio's assumption of
the specified liabilities of the Target Portfolio and (ii) the subsequent
distribution by the Target Portfolio of those shares to the shareholders of the
Target Portfolio. Section 361.
Board of Trustees and Officers
______________, 2002
Page 6
3. No gain or loss will be recognized by the Acquiring Portfolio on
receipt of the assets transferred to it by the Target Portfolio in exchange for
shares of the Acquiring Portfolio and the assumption of the specified
liabilities of the Target Portfolio. Section 1032.
4. The Acquiring Portfolio's basis in the assets received from the
Target Portfolio will be the same as the Target Portfolio's basis in those
assets immediately prior to the Reorganization. Section 362(b).
5. The Acquiring Portfolio's holding period for the transferred
assets will include the Target Portfolio's holding period therefor. Section
1223(2).
6. No gain or loss will be recognized by the shareholders of the
Target Portfolio on the exchange of their shares of the Target Portfolio solely
for shares of the Acquiring Portfolio. Section 354.
7. A Target Portfolio shareholder's basis in the shares of the
Acquiring Portfolio received in the Reorganization will be the same as the
adjusted basis of the shares of the Target Portfolio surrendered in exchange
therefor. Section 358.
8. A Target Portfolio shareholder's holding period in the shares of
the Acquiring Portfolio received in the Reorganization will include the
shareholder's holding period for the shares of the Target Portfolio surrendered
in exchange therefor, provided such Target Portfolio shares were held as capital
assets on the Closing Date. Section 1223(l).
9. The Acquiring Portfolio will succeed to and take into account the
items of the Target Portfolio described in section 381(c), including any
earnings and profits, or deficit therein, of the Target Portfolio as of the date
of the Closing Date, subject to the conditions and limitations specified in
sections 381, 382, 383, and 384.
* * *
Board of Trustees and Officers
______________, 2002
Page 7
We are furnishing this opinion letter solely for the benefit of the
Fund, including the Target Portfolio and the Acquiring Portfolio thereof, the
board of trustees and officers of the Fund, and the shareholders of each of
those two Portfolios, and this letter is not to be used, circulated, or quoted
for any other purpose without our written consent. Our opinion reflects our
interpretation of the provisions of the Code as in effect as of the date hereof.
Our opinion is limited to the federal income tax consequences of the
Reorganization, and we express no opinion regarding any state, local, foreign or
other tax or nontax consequences. Absent your written request, we will revise or
update this letter to reflect subsequent changes in law only through the Closing
Date.
Sincerely yours,
SUTHERLAND ASBILL & BRENNAN LLP