American Century Capital Value Fund Investor Class (ACTIX)
Filed: 16 Jun 06, 12:00am
EXHIBIT 99.12c
INTERNAL REVENUE SERVICE Department of Treasury
Washington, DC 20224
Index Number: 368.03-00, 368.03-01, Third Party Communication: None
368.13-00 Date of Communication: Not Applicable
Person To Contact:
Mr. Jon Zindel Peter C. Meisel, ID No. 50-28834
Tax Director
American Century Investments Telephone Number:
4500 Main Street (202) 622-7750
Suite 400
Kansas City, MO 64111 Refer Reply To:
CC:CORP:1
PLR-152157-05
Date: February 10, 2006
LEGEND:
Acquiring Fund = American Century Mutual Funds, Inc. - Select Fund,
a Maryland corporation
EIN 43-1607636
Acquiring Series = American Century Mutual Funds, Inc.
Target Fund = Mason Street Funds, Inc. - Growth Stock Fund,
a Maryland corporation
EIN 39-1861707
Target Series = Mason Street Funds, Inc.
State A = Maryland
X = 30
Y = 84.29
Shareholder C = The Northwestern Mutual Life Insurance Company and
Maroon, Inc.
Dear Mr. Zindel:
This letter responds to your request dated October 11, 2005, for rulings as to
the federal income tax consequences of a proposed transaction. Additional
information was submitted in letters dated November 14, 2005, December 21, 2005,
January 6, 2006,
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January 27, 2006, February 6, 2006, and February 9, 2006. The information
submitted is summarized below.
Acquiring Fund is a State A corporation registered under the Investment Company
Act of 1940 (the "1940 Act") as a diversified, open-end management investment
company. Acquiring Fund is a series of Acquiring Series. As a series fund,
Acquiring Fund is treated as a separate corporation and separate taxpayer for
federal income tax purposes pursuant to § 851 of the Internal Revenue Code
(the "Code"), and has elected to be treated as a regulated investment company (a
"RIC") under §§ 851 through 855.
Target Fund is a State A corporation registered under the 1940 Act as a
diversified, open-end management investment company. Target Fund is a series of
Target Series. As a series fund, Target Fund is treated as a separate
corporation and separate taxpayer for federal income tax purposes pursuant to
§ 851, and has elected to be treated as a RIC under §§ 851 through 855.
Pursuant to a plan of reorganization, it is proposed that Acquiring Fund and
Target Fund will undertake the following transaction (the "Reorganization"):
(i) Target Fund will transfer substantially all of its assets and
liabilities to Acquiring Fund in exchange for shares of Acquiring Fund
having equivalent value to the net assets transferred;
(ii) Target Fund will distribute pro rata the shares of Acquiring Fund
received in step (i) to the shareholders of record of Target Fund in
redemption of all shares of Target Fund; and
(iii) Target Fund will liquidate and dissolve in accordance with the laws of
State A, and terminate its registration under the 1940 Act.
Within X days before the Reorganization, pursuant to § 22(e) of the 1940 Act,
it is proposed that a shareholder and its affiliate (together, "Shareholder C")
holding Y% (which is an amount greater than 50%) of the stock of Target Fund
will present for redemption, solely for cash, shares representing up to 10% of
the net asset value of the Target Fund as of that date (the "Redemption"). Other
than the Redemption, Shareholder C has no plan or intention to present any other
shares for redemption in connection with the Reorganization. Shareholder C is an
affiliate of the investment advisor of Target Fund. Under § 22(e) of the 1940
Act, each shareholder of an open-end management investment company has the right
to redeem any or all of its interest in the investment company on any business
day of the year.
The following representations have been made in connection with the
Reorganization:
(a) The fair market value of the shares of Acquiring Fund that will be
received by each Target Fund shareholder will be approximately equal
to the fair market
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value of the shares of Target Fund that will be surrendered in
exchange therefor. In the Reorganization, the Acquiring Fund will
issue no consideration to the Target Fund shareholders other than
Acquiring Fund shares (including fractional shares, if any) in
exchange for their Target Fund shares.
(b) On the date of Reorganization and at all times after, there will be no
plan or intention by Acquiring Fund or any person related to Acquiring
Fund (as defined in Treas. Reg. § 1.368-1(e)(3)) to acquire or redeem
any of the Acquiring Fund shares issued in the Reorganization either
directly or through any transaction, agreement, or other arrangement
with any other person, other than redemptions that Acquiring Fund will
make as an open-end investment company pursuant to § 22(e) of the
1940 Act.
(c) During the five year period ending on the date of the Reorganization,
neither Target Fund nor any person related to Target Fund (as defined
in § 1.368-1(e)(3) without regard to § 1.368-1(e)(3)(i)(A)) will
have (i) acquired Target Fund shares with consideration other than
shares of Acquiring Fund or Target Fund, except for shares redeemed
pursuant to the Redemption or in the ordinary course of Target Fund's
business as an open-end investment company pursuant to § 22(e) of
the 1940 Act, or (ii) made distributions with respect to the Target
Fund shares except for (a) normal, regular, dividend distributions
made pursuant to the historic dividend paying practice of Target Fund,
and (b) distributions and dividends declared and paid in order to
ensure Target Fund's continuing qualification as a RIC and to avoid
the imposition of fund-level tax.
(d) Prior to or in the Reorganization, neither Acquiring Fund nor any
person related to Acquiring Fund (as defined in § 1.368-1(e)(3)) will
have acquired, directly or through any transaction, agreement or
arrangement with any other person, Target Fund shares with
consideration other than Acquiring Fund shares.
(e) Acquiring Fund 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 Target Fund immediately prior to the
Reorganization. For purposes of this representation, amounts used by
Target Fund to pay its reorganization expenses and all redemptions and
distributions made by Target Fund immediately preceding the transfer
(except for (i) redemptions of shares pursuant to § 22(e) of the
1940 Act (other than the Redemption) and (ii) distributions and
dividends declared and paid in order to ensure Target Fund's
continuing qualification as a RIC and to avoid the imposition of
fund-level tax) will be included as assets of Target Fund held
immediately prior to the Reorganization.
In making this representation, the Redemption shall be taken into
account by treating the Target Fund as if it distributed, immediately
prior to the
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Reorganization, a percentage of its net and gross assets,
respectively, equal to the actual percentage of the Target Fund's net
and gross assets distributed to Shareholder C on the date of the
Redemption. For purposes of the preceding sentence, the Target Fund
shall be treated, immediately prior to the deemed distribution above,
as if it held an amount of net and gross assets that bears the same
proportion to its actual net and gross assets (at that time) as the
amount of the Target Fund's net and gross assets immediately before
the Redemption bore to its net and gross assets immediately after the
Redemption.
(f) The liabilities of Target Fund that will be assumed by Acquiring Fund
(within the meaning of § 357(d)) were incurred by Target Fund in the
ordinary course of business and are associated with the assets
transferred to Acquiring Fund.
(g) Acquiring Fund is in the same line of business that Target Fund was in
preceding the Reorganization for purposes of § 1.368-1(d)(2).
Following the Reorganization, Acquiring Fund will continue such line
of business and has no plan or intention to change such line of
business. Neither Acquiring Fund nor Target Fund entered into such
line of business as part of the plan of reorganization. On the date of
Reorganization, at least 33 1/3% of Target's portfolio assets will
meet the investment objectives, strategies, policies, risks and
restrictions of Acquiring Fund. Target Fund did not alter its
portfolio in connection with the Reorganization to meet the 33 1/3%
threshold. On the date of Reorganization, Acquiring Fund will have no
plan or intention to change any of its investment objectives,
strategies, policies, risks and restrictions after the Reorganization.
To the best of the knowledge of the Acquiring Fund's management, as of
the record date for Target Fund shareholders entitled to vote on the
Reorganization, there was no plan or intention by the Target Fund
shareholders to sell, exchange, or otherwise dispose of a number of
Target Fund shares (or Acquiring Fund shares received in the
Reorganization), in connection with the Reorganization, that would
reduce the Target Fund shareholders' ownership of Target Fund shares
(or equivalent Acquiring Fund shares) to a number of shares that was
less than 50% of the number of Target Fund shares as of the record
date.
(h) Target Fund will distribute all of the Acquiring Fund shares received
by it in the Reorganization to its respective shareholders in complete
liquidation in proportion to the number of Target Fund shares owned by
each shareholder.
(i) Acquiring Fund, Target Fund, and the shareholders of Target Fund will
pay their respective expenses, if any, incurred in connection with the
Reorganization. If Acquiring Fund or the investment advisor to Target
Fund pays or assumes expenses of Target
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Fund, they will pay or assume only those expenses of Target Fund that
are solely and directly related to the Reorganization in accordance
with the guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
(j) At the time of the Reorganization, there will be no intercorporate
indebtedness existing between Acquiring Fund and Target Fund that was
issued, acquired, or settled at a discount.
(k) Acquiring Fund and Target Fund have elected to be taxed as RICs under
§ 851, and for all of their taxable periods (including the last
short taxable period ending on the date of Reorganization for Target
Fund), have qualified or intend to qualify for the special tax
treatment afforded to RICs under the Code. After the Reorganization,
Acquiring Fund intends to continue to so qualify.
(l) Acquiring Fund will not own, directly or indirectly; nor will it have
owned during the five years preceding the date of Reorganization,
directly or indirectly, any Target Fund shares.
(m) On the date of Reorganization, Target Fund will not be under the
jurisdiction of a court in a Title 11 or similar case within the
meaning of § 368(a)(3)(A).
Based solely on the information submitted and the representations set forth
above, we hold as follows:
(1) The Reorganization will qualify as a "reorganization" within the
meaning of § 368(a)(1)(C). Acquiring Fund and Target Fund are each
"a party to a reorganization" within the meaning of § 368(b).
(2) No gain or loss will be recognized by Target Fund upon the transfer of
all of its assets to Acquiring Fund in exchange for Acquiring Fund
stock and the assumption by Acquiring Fund of Target Fund liabilities
(§§ 361 (a) and 357(a)).
(3) No gain or loss will be recognized by Target Fund on the distribution
of Acquiring Fund stock to its shareholders (§ 361(c)).
(4) No gain or loss will be recognized by Acquiring Fund upon the receipt
of the assets of Target Fund in exchange for Acquiring Fund stock (§
1032(a)).
(5) The basis of the assets of Target Fund in the hands of Acquiring Fund
will be the same as the basis of those assets in the hands of Target
Fund immediately prior to the transfer (§ 362(b)).
(6) The holding period of the assets of Target Fund in the hands of
Acquiring Fund will include the period during which those assets were
held by Target Fund (§ 1223(2)).
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(7) The basis of the shares of Acquiring Fund received by Target Fund
shareholders other than Shareholder C will be the same as the basis of
the Target Fund stock surrendered in exchange therefor (§
358(a)(1)). The basis of the shares of Acquiring Fund received by
Shareholder C will be the same as the basis of the Target Fund stock
surrendered in exchange therefor, decreased by the amount of money and
other property received by Shareholder C and increased by the amount,
if any, which is treated as a dividend, and the amount of gain (not
including any portion of such gain which is treated as a dividend, if
any) Shareholder C may recognize on such exchange (§ 358(a)(1)).
(8) The holding period of Acquiring Fund stock received by the Target Fund
shareholders will include the period during which the Target Fund
shareholders held the Target Fund stock surrendered in exchange
therefor, provided the Target Fund stock was held as a capital asset
on the date of the exchange (§ 1223(1)).
(9) No gain or loss will be recognized by the Target Fund shareholders
other than Shareholder C on the receipt of Acquiring Fund stock solely
in exchange for their Target Fund stock (§ 354(a)). Shareholder C
will recognize gain upon the receipt of Acquiring Fund stock and cash
or other property in exchange for Target stock, but in an amount not
in excess of the cash and other property received (§ 356(a)(1)). If
the exchange has the effect of a distribution of a dividend
(determined with the application of § 318(a)), then the amount of
the gain recognized that is not in excess of Shareholder C's ratable
share of the undistributed earnings and profits will be treated as a
dividend (§ 356(a)(2)). The determination of whether the exchange
has the effect of a distribution of a dividend will be made in
accordance with the principles set forth in Commissioner v. Clark, 489
U.S. 726 (1989). No loss will be recognized by Shareholder C pursuant
to § 356(c).
(10) Pursuant to § 381 (a) and § 1.381(a)-1, Acquiring Fund will
succeed to and take into account the items of Target Fund described in
§ 381(c), subject to the provisions and limitations specified in
§§ 381, 382, 383, and 384, and the regulations thereunder.
Pursuant to § 1.381(b)-1, the tax year of Target Fund will end on
the effective date of the Reorganization.
Except as expressly provided herein, no opinion is expressed or implied
concerning the tax consequences of any aspect of any transaction or item
discussed or referenced in this letter.
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3)
of the Code provides that it may not be used or cited as precedent.
PLR-152157-05
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In accordance with the Power of Attorney on file with this office, a copy of
this letter is being sent to your authorized representatives.
A copy of this letter must be attached to any income tax return to which it is
relevant. Alternatively, taxpayers filing their returns electronically may
satisfy this requirement by attaching a statement to their return that provides
the date and control number of the letter ruling.
The rulings contained in this letter are based upon information and
representations submitted by the taxpayer and accompanied by a penalty of
perjury statement executed by an appropriate party. While this office has not
verified any of the material submitted in support of the request for rulings, it
is subject to verification on examination.
Sincerely,
/s/ Michael J. Wilder
------------------------------------
Michael J. Wilder
Senior Technician Reviewer, Branch 1
Office of Associate Chief Counsel (Corporate)
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cc: Karen Gilbreath Sowell
Ernst & Young LLP
1225 Connecticut Avenue, NW
Washington, D.C. 20036
Ronald S. Cohn
Ernst & Young LLP
560 Mission Street
San Francisco, CA 94105
Internal Revenue Service
Attention: Industry Director, Financial Services (LM:F)
290 Broadway, 12th Floor
New York, NY 10007