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 Ohio Regional Stock Fund
3435 Stelzer Road
Columbus, OH 43219
and
The Victory Portfolios
on behalf of Established Value Fund
3435 Stelzer Road
Columbus, OH 43219
Ladies and Gentlemen:
This opinion is being furnished to you in connection with the
reorganization (the "Reorganization") of Ohio Regional Stock Fund ("Transferor")
into Established Value Fund ("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 ("series") of 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 Regulationsss.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
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