PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
Telephone (415) 498-5000
Facsimile (415) 498-7100
DRAFT OF OPINION ANTICIPATED
TO BE RENDERED AT CLOSING
______________, 2001
Board of Directors
American Century Mutual Funds, Inc.
4500 Main Street
Kansas City, Missouri 64141-6200
Board of Directors
American Century Premium Reserves, Inc.
4500 Main Street
Kansas City, Missouri 64141-6200
Board of Trustees
American Century Investment Trust
4500 Main Street
Kansas City, Missouri 64141-6200
Gentlemen:
You have requested our opinion regarding certain Federal income tax
consequences to Intermediate-Term Bond Fund and Bond Fund, each a series of
American Century Mutual Funds, Inc. ("ACMF"), and to Premium Bond Fund, a series
of American Century Premium Reserves, Inc. ("ACPR") (each a "Fund" and
collectively the "Funds"), to Diversified Bond Fund ("Acquiring"), a series of
American Century Investment Trust, and to the holders of the shares of the
Funds, in connection with the proposed transfer of substantially all of the
properties of each Fund to Acquiring in exchange solely for voting shares of
Acquiring ("Acquiring Shares"), followed by the distribution of such Acquiring
Shares received by each Fund in complete liquidation and termination of that
Fund (the "Reorganization"), all pursuant to the Agreement and Plan of
Reorganization included as an exhibit to Form N-14 filed by ACMF and ACPR on
___________, 2001 (the "Form N-14") with the Securities and Exchange Commission
(the "Agreement").
For purposes of this opinion, we have examined and rely upon the
following: (1) the Agreement; (2) the Form N-14; and (3) such other documents
and instruments as we have deemed necessary or appropriate. We assume that the
Reorganization will be carried out in accordance with the terms of the Agreement
and as described in the documents and instruments we have examined.
This opinion is based upon the assumption by us that each Fund and
Acquiring have and will each separately qualify and be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") for its taxable year that includes the closing date of the
Reorganization. If this assumption is not correct, the Reorganization may not
qualify as a tax-free reorganization and, therefore, our opinion could be
altered. For purposes of rendering this opinion, we have not been requested to
undertake, nor have we undertaken, any investigation or inquiry as to whether
this assumption is and will be correct.
This opinion is conditioned among other things upon the Reorganization
taking place in the manner described in the Agreement and the Form N-14 to which
reference is made above.
Based upon and subject to the foregoing and the conditions below, it is
our opinion that, for Federal income tax purposes:
(1) The transfer to Acquiring of substantially all of a Fund's
properties in exchange solely for Acquiring Shares, followed by the distribution
of Acquiring Shares received by that Fund in the Reorganization and of any money
and other property of that Fund to the shareholders of that Fund in complete
liquidation and termination of that Fund, will constitute a reorganization
within the meaning of section 368(a)(1) of the Code. Each Fund and Acquiring
will each be "a party to a reorganization" within the meaning of Section 368(b)
of the Code.
(2) No gain or loss will be recognized by a Fund upon the transfer to
Acquiring of substantially all of that Fund's properties in exchange solely for
Acquiring Shares or upon the distribution of the Acquiring Shares received by
that Fund in the Reorganization to that Fund's shareholders in complete
liquidation and termination of that Fund.
(3) Acquiring will recognize no gain or loss upon receiving properties
of a Fund in exchange for Acquiring Shares.
(4) No gain or loss will be recognized by a shareholder of a Fund on
the distribution to such shareholder by that Fund of Acquiring Shares received
in the Reorganization in exchange for shares of that Fund.
(5) The basis to Acquiring of the properties of the Funds transferred
to Acquiring in the Reorganization will be the same as the basis of those
properties in the hands of the Funds immediately before the exchange.
(6) The basis of Acquiring Shares received by a shareholder of a Fund
in the Reorganization will in the aggregate be the same as the basis of that
Fund's shares surrendered by the shareholder in exchange therefor.
(7) A Fund shareholder's holding period for the Acquiring Shares
received by the shareholder in the Reorganization will include the holding
period during which the shareholder held the Fund shares surrendered in exchange
therefor, provided that the shareholder held such Fund shares as a capital asset
on the date of the Reorganization.
(8) Acquiring's holding periods with respect to the Funds' properties
that Acquiring acquires in the Reorganization will include the corresponding
periods for which those properties were held by the Funds (except to the extent
that an activity or investment of Acquiring has the effect of diminishing or
eliminating a holding period with respect to an asset).
The conclusions reached in this opinion represent and are based upon
our best judgment regarding the application of Federal income tax laws arising
under the Code, judicial decisions, administrative regulations, published
rulings and other tax authorities existing as of the date of this opinion. This
opinion is not binding upon the Internal Revenue Service or the courts and there
is no guarantee that the Internal Revenue Service will not successfully assert a
contrary position. Furthermore, no assurance can be given that future
legislative or administrative changes, on either a prospective or retroactive
basis, would not adversely affect the accuracy of the conclusions stated herein.
PricewaterhouseCoopers LLP undertakes no responsibility to advise any party or
shareholder of any new developments in the application or interpretation of the
Federal income tax laws.
This opinion does not address any Federal tax consequences of the
transactions set forth herein, or transactions related or proximate to such
transactions, except as specifically set forth herein. This opinion does not
address any state, local, foreign, or other tax consequences that may result
from any of the transactions set forth herein, or transactions related to such
transactions. This opinion may not be relied upon by any other party to this
transaction or in any other transaction without our prior written consent.
This opinion is based upon the representations made to us and upon the
documents, facts, and assumptions that have been included or referenced herein.
In rendering our opinion, we have relied upon such representations, documents
and facts as being true, accurate and authentic without independent verification
on our part. Our opinion may be altered if all the transactions described herein
are not consummated as described herein without waiver or breach of any material
provision thereof or if the facts and assumptions set forth herein or the
representations made to us are not true and accurate at all relevant times. In
the event any one of the facts or assumptions is incorrect, in whole or in part,
the conclusions reached in this opinion might be adversely affected.
We express no opinion as to the tax consequences of the Reorganization
except as expressly set forth above, or as to any transaction except the
Reorganization.
Very truly yours,
