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EXHIBIT 12
______________________, 2001
Board of Directors Board of Trustees
Principal Preservation Portfolios, Inc. Nationwide Mutual Funds
215 North Main Street Three Nationwide Plaza
West Bend, WI 53095 Columbus OH 43215-2220
Re: TAX OPINION FOR REGISTRATION STATEMENT ON FORM N-14
Ladies and Gentlemen:
We are acting as counsel to Principal Preservation Portfolios, Inc., a
Maryland corporation ("Principal Preservation"), in connection with the proposed
transfer of the assets of the Select Value Portfolio (the "Select Value
Portfolio"), a series of Principal Preservation, to the Nationwide Value
Opportunities Fund (the "Value Opportunities Fund"), a series of Nationwide
Mutual Funds ("Nationwide"), solely in exchange for Value Opportunities Fund
shares to be distributed to the Select Value Portfolio shareholders in
liquidation of the Select Value Portfolio. The transactions will occur pursuant
to the Agreement and Plan of Reorganization (the "Agreement"), dated as of
December 15, 2000, executed by Nationwide and Principal Preservation. The
Agreement is attached as Appendix A to the Registration Statement under the
Securities Act of 1933 on Form N-14 (the "Registration Statement"), filed by
Nationwide on the date hereof with the Securities and Exchange Commission. This
opinion is rendered pursuant to Section 7.6 of the Agreement. Capitalized terms
not otherwise defined herein have the meanings assigned to them in the
Agreement.
In rendering our opinion, we have examined the Registration Statement
and the Agreement and have, with your permission, relied upon, and assumed as
correct now and as of the effective time of the Reorganization, (i) the factual
information contained in the Registration Statement, (ii) the representations
and covenants contained in the Agreement, (iii) certain factual representations
made by Principal Preservation on behalf of the Select Value Portfolio and by
Nationwide on behalf of the Value Opportunities Fund, and (iv) such other
materials as we have deemed necessary or appropriate as a basis for our opinion.
On the basis of the information, representations and covenants
contained in the foregoing materials and assuming the Reorganization is
consummated in the manner described
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Principal Preservation Portfolios, Inc.
Nationwide Mutual Funds
____________________, 2001
Page 2
in the Agreement and the Proxy Statement/ Prospectus included in the
Registration Statement, we are of the opinion that:
(i) The Reorganization 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 the Select Value Portfolio and the Value Opportunities
Fund will each be a "party to" the Reorganization within the meaning of Section
368(b) of the Code;
(ii) No gain or loss will be recognized by the Select Value
Portfolio upon the transfer of substantially all of its assets to the Value
Opportunities Fund in exchange solely for the Value Opportunities Fund Shares;
(iii) No gain or loss will be recognized by the Value
Opportunities Fund upon the receipt by it of substantially all of the assets of
the Select Value Portfolio in exchange solely for the Value Opportunities Fund
Shares.
(iv) No gain or loss will be recognized by the Select Value
Portfolio Shareholders upon the liquidation of the Select Value Portfolio and
the related surrender of their shares of the Select Value Portfolio in exchange
for the Value Opportunities Fund Shares;
(v) The Value Opportunities Fund's basis in the assets
acquired from the Select Value Portfolio will be the same as the basis of those
assets in the hands of the Select Value Portfolio immediately prior to the
exchange;
(vi) The holding period of the assets of the Select Value
Portfolio received by the Value Opportunities Fund will include the period
during which such assets were held by the Select Value Portfolio;
(vii) The basis of the Value Opportunities Fund Shares
received by each Select Value Portfolio Shareholder in connection with the
reorganization will be the same as the Select Value Portfolio Shareholder's
basis in his or her Select Value Portfolio Shares immediately prior to the
Reorganization;
(viii) The holding period of the Value Opportunities Fund
Shares received by each Select Value Portfolio Shareholder in connection with
the Reorganization will include such Select Value Portfolio Shareholder's
holding period of his or her Select Value Portfolio Shares held immediately
prior to the Reorganization, provided that such Select Value Portfolio Shares
were held by such Select Value Portfolio Shareholder as a capital asset as of
the Effective Time;
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Principal Preservation Portfolios, Inc.
Nationwide Mutual Funds
____________________, 2001
Page 3
(ix) The Value Opportunities Fund will succeed to and take
into account as of the Effective Time the items of the Select Value Portfolio
described in Section 381(c) of the Code, subject to the conditions and
limitation specified in Sections 381(b) and (c), 382, 383 and 384 of the Code,
and the applicable Treasury Regulations thereunder.
(x) The discussion in the Proxy Statement/Prospectus under the
captions "Synopsis - Federal Tax Consequences and "The Proposed Reorganization -
Federal Tax Considerations," to the extent it constitutes summaries of legal
matters or legal conclusions, is accurate in all material respects.
This opinion expresses our views only as to federal income tax laws in
effect as of the date hereof, including the Code, applicable Treasury
Regulations, published rulings and administrative practices of the Internal
Revenue Service (the "Service") and court decisions. This opinion represents our
best legal judgment as to the matters addressed herein, but is not binding on
the Service or the courts. Furthermore, the legal authorities upon which we rely
are subject to change either prospectively or retroactively. Any change in such
authorities or any change in the facts or representations, or any past or future
actions by Principal Preservation, the Select Value Portfolio, Nationwide or the
Value Opportunities Fund contrary to such representations might adversely affect
the conclusions stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name under the
captions "Synopsis - Federal Tax Consequences" and "The Proposed Reorganization
- Federal Tax Considerations" in the Proxy Statement/Prospectus included in the
Registration Statement.
Very truly yours,
DRAFT
