Exhibit 99.12(b)
KRAMER LEVIN NAFTALIS & FRANKEL LLP
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
47, Avenue Hoche
75008 Paris
France
May 5, 2000
The Victory Portfolios
on behalf of Government Mortgage Fund
3435 Stelzer Road
Columbus, OH 43219
and
The Victory Portfolios
on behalf of Fund for Income
3435 Stelzer Road
Columbus, OH 43219
Ladies and Gentlemen:
This opinion is being furnished to you in connection with
the reorganization (the "Reorganization") of Government Mortgage Fund
("Transferor") into Fund for Income ("Transferee") pursuant to the Agreement and
Plan of Reorganization and Liquidation (the "Reorganization Plan") dated as of
May 5, 2000, between The Victory Portfolios, a Delaware business trust
("Victory"), on behalf of Transferor and Victory on behalf of Transferee. Both
Transferor and Transferee are segregated portfolios of assets Victory.
In the Reorganization, Transferor will transfer all of its
assets to Transferee solely in exchange for voting stock of Transferee and the
assumption by Transferee of the liabilities of Transferor.(1) Transferor will
distribute the stock of Transferee received in the Reorganization pro rata to
its shareholders in exchange for their Transferor stock in complete liquidation
of Transferor.
All capitalized terms used in this opinion and not defined
herein have the respective meanings assigned to them
in the Reorganization Plan and the Combined Proxy Statement and Prospectus
included in the registration statement on Form N-14, Registration No.
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(1) Pursuant to section 851(g)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), Transferor and Transferee are treated as separate
corporations. Under Delaware law, ownership interests in Transferor and
Transferee constitute shares of beneficial interest. Such interests are
considered stock for federal income tax purposes and are referred to as "stock"
or "shares" in this letter.
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333-93959, as amended, filed by Transferee with The Securities and Exchange
Commission on December 30, 1999 ("Proxy Statement").
For purposes of the opinion set forth below, we have
reviewed and relied upon (i) the Reorganization Plan, (ii) the Proxy Statement,
and (iii) such other documents, records, and instruments as we have deemed
necessary or appropriate as a basis for our opinion. In addition, in rendering
our opinion we have relied upon certain statements and representations, which we
have neither investigated nor verified, made by Transferor, Transferee, and Key
Asset Management, Inc., the investment adviser to Transferor and Transferee (the
"Certified Representations"), including, inter alia, that:
(a) there is no plan or intention by Transferee or any person
related to Transferee (as defined in Treasury Regulations ss.
1.368-1(e)(3)) to acquire or redeem any of the stock of
Transferee issued in the Reorganization either directly or
through any transaction, agreement, or arrangement with any
other person, other than redemptions in the ordinary course of
Transferee's business as an open-end investment company, as
required by section 22(e) of the Investment Company Act of
1940;
(b) the fair market value of the Transferee stock received by each
shareholder of Transferor will be approximately equal to the
fair market value of the Transferor stock surrendered in the
Reorganization;
(c) each of Transferor and Transferee is qualified as a regulated
investment company, as defined in section 851 of the Internal
Revenue Code of 1986, as amended (the "Code"); and
(d) Transferee 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 Transferor
immediately prior to the Reorganization, calculated in
accordance with the relevant provisions of Rev. Proc. 77-37,
1977-2 C.B. 568, as amended.
We also have obtained such additional information and
representations as we have deemed relevant and necessary through consultation
with the officers and directors of Transferor and Transferee, as well as with
other professionals engaged by them. We have assumed, with your consent, that
all documents reviewed by us are originals or photocopies that faithfully
reproduce the originals thereof, that all such documents have been or will be
duly executed to the extent required, that all representations and statements
set forth in such documents are true, correct, complete, and not breached, that
no actions that are inconsistent with such representations and statements will
be taken, and that all obligations imposed by any such documents on the parties
thereto have been or will be performed or satisfied in accordance with their
terms. We have further assumed that all representations made in the Certified
Representations "to the best knowledge of" any person will be true, correct, and
complete as if made without such qualification.
Based upon the foregoing, and subject to the qualifications
set forth below, it is our opinion that, for federal income tax purposes:
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(a) the transfer by Transferor of all of its assets to Transferee
in exchange for shares of Transferee and the assumption by
Transferee of the liabilities of Transferor, and the
subsequent liquidation of Transferor, pursuant to the Plan,
will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and Transferor and Transferee will
each be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(b) Transferor will not recognize any gain or loss as a result of
the Reorganization;
(c) Transferee will not recognize any gain or loss on the receipt
of the assets of Transferor in exchange for shares of
Transferee and the assumption of the liabilities of Transferor
in the Reorganization;
(d) the shareholders of Transferor will not recognize any gain or
loss on the exchange of their shares of Transferor for shares
of Transferee in the Reorganization;
(e) the aggregate tax basis of the shares of Transferee received
by each shareholder of Transferor in the Reorganization will
be the same as the aggregate tax basis of the shares of
Transferor exchanged therefor by such shareholder;
(f) Transferee's adjusted tax bases in the assets received from
Transferor in the Reorganization will be the same as the
adjusted tax bases of such assets in the hands of Transferor
immediately prior to the Reorganization;
(g) the holding period of each former shareholder of Transferor in
the shares of Transferee received in the Reorganization will
include the period during which such shareholder held the
Transferor shares exchanged therefor, if such shares were held
as a capital asset at the time of the Reorganization; and
(h) Transferee's holding periods in the assets received from
Transferor in the Reorganization will include the holding
periods of such assets in the hands of Transferor immediately
prior to the Reorganization.
Our opinion, which is not binding on the Internal Revenue
Service or the courts, is based upon existing statutory, regulatory, and
administrative and judicial authority, any of which may be changed at any time
with retroactive effect to the detriment of Transferee, Transferor, and/or their
shareholders. We do not undertake to advise you as to any changes after the date
of this opinion in the above-referenced authorities that may affect our opinion
unless we are specifically requested to do so. As noted above, our opinion is
based solely on the documents that we have examined, the assumptions we have
made, the additional information that we have obtained, and the representations
that have been made to us. Our opinion cannot be relied upon if any of the facts
contained in such documents, such additional information, or any of our
assumptions or the representations made to us is, or later becomes, inaccurate.
Finally, our opinion is limited to the tax matters specifically stated above,
and we have not been asked to address, nor have we addressed, any other matters
relating to the Reorganization, Transferee, Transferor, or any investment in or
by Transferee or Transferor.
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This opinion is intended for the exclusive use of
Transferor and Transferee. This opinion may not be circulated or relied upon by
any other person or entity or for any other purpose without our prior consent.
We hereby authorize you to attach this opinion as an exhibit to the Registration
Statement on Form N-14.
Very truly yours,
Kramer Levin Naftalis & Frankel LLP
