June 17, 2002
National Portfolio, a series of Merrill Lynch Municipal Bond Fund,
Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Connecticut Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Maryland Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Minnesota Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Texas Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
each a series of Merrill Lynch Multi-State Municipal Series Trust
Re: Reorganization of the National Portfolio, a series of
Merrill Lynch Municipal Bond Fund, Inc., and Merrill Lynch
Connecticut Municipal Bond Fund, Merrill Lynch Maryland
Municipal Bond Fund, Merrill Lynch Minnesota Municipal Bond
Fund and Merrill Lynch Texas Municipal Bond Fund, each a
series of Merrill Lynch Multi-State Municipal Series Trust
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Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of the acquisition by the National Portfolio (the "National
Portfolio"), a series of Merrill Lynch Municipal Bond Fund, Inc. ("Municipal
Bond Fund"), of substantially all of the assets of, and the assumption by the
National Portfolio of substantially all of the liabilities of, Merrill Lynch
Connecticut Municipal Bond Fund, Merrill Lynch Maryland Municipal Bond Fund,
Merrill Lynch Minnesota Municipal Bond Fund and Merrill Lynch Texas Municipal
Bond Fund (each, a "State Fund" and collectively, the "State Funds"), each a
series of Merrill Lynch Multi-State Municipal Series Trust ("Municipal Series
Trust"), and the simultaneous distribution of newly-issued shares of common
stock, par value $.10 per share, of the National Portfolio (the
"Reorganization"), to the shareholders of each State Fund. After the
Reorganization, each State Fund will cease to operate as a separate series of
Municipal Series Trust, will have no assets remaining, will have final Federal
and state (if any) tax returns filed on its behalf and will have all of its
shares cancelled under the Declaration of Trust of Municipal Series Trust, as
amended, and Massachusetts law.
This opinion letter is furnished pursuant to (i) the sections entitled,
"The Reorganization--Terms of the Agreement and Plan of
Reorganization--Required Approvals" and "The Reorganization--Terms of the
Agreement
and Plan of Reorganization--Amendments and Conditions" in the Proxy Statement
and Prospectus, which is a part of the Registration Statement on Form N-14
(File No. 333-76504) of Municipal Bond Fund, as amended and supplemented to
date (the "N-14 Registration Statement"), which became effective on February
9, 2002 and (ii) Sections 8(g) and 9(h) of the Agreement and Plan of
Reorganization, dated as of February 8, 2002, by and between Municipal Series
Trust and Municipal Bond Fund (the "Plan"). All terms used herein, unless
otherwise defined, are used as defined in the Plan.
In rendering our opinion, we have reviewed and relied upon (a) the Plan,
(b) the N-14 Registration Statement, and (c) certain representations
concerning the Reorganization made by (i) the National Portfolio dated June
17, 2002, (ii) the Connecticut Fund dated June 17, 2002, (iii) the Maryland
Fund dated June 17, 2002, (iv) the Minnesota Fund dated June 17, 2002, and (v)
the Texas Fund dated June 17, 2002 (collectively, the "Representations").
Based upon current law, including cases and administrative
interpretations thereof and on the reviewed materials listed above, it is our
opinion that:
1. The acquisition by the National Portfolio of substantially all of the
assets of each State Fund, as described in the Plan, 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 National Portfolio and
each State Fund will each be a "party" to a reorganization within the meaning
of section 368(b) of the Code.
2. In accordance with section 361(a) of the Code, each State Fund will
not recognize any gain or loss either on the transfer of substantially all of
its assets to the National Portfolio in exchange solely for shares of common
stock of the National Portfolio or on the simultaneous distribution of the
shares of common stock of the National Portfolio to such State Fund's
shareholders.
3. Under section 1032 of the Code, the National Portfolio will recognize
no gain or loss as a result of the Reorganization.
4. In accordance with section 354(a)(1) of the Code, shareholders of each
State Fund will recognize no gain or loss on the exchange of their respective
shares of beneficial interest for shares of common stock of the National
Portfolio.
5. The basis of the assets of each State Fund received by the National
Portfolio in the Reorganization will be the same as the basis of such assets
to each State Fund immediately before the Reorganization under section 362(b)
of the Code.
6. Under section 358 of the Code, the basis of the shares of common stock
of the National Portfolio received by shareholders of each State Fund will be
the same as the basis of their respective shares of beneficial interest in a
State Fund exchanged pursuant to the Reorganization.
7. Under section 1223 of the Code, the holding period of the shares of
common stock of the National Portfolio received in the Reorganization will
include the holding period of the shares of beneficial interest of each State
Fund exchanged pursuant to the Reorganization, provided that such shares were
held as a capital asset on the date of the Reorganization.
8. The holding period of the assets acquired by the National Portfolio
from each State Fund will include the period during which such assets were
held by such State Fund under section 1223 of the Code.
9. Pursuant to section 381(a) of the Code and section 1.381(a)-1 of the
Income Tax Regulations, the National Portfolio will succeed to and take into
account the items of each State Fund described in section 381(c) of the Code,
subject to the provisions and limitations specified in sections 381, 382, 383
and 384 of the Code and the regulations thereunder. Under section 381(b) of
the Code, the taxable year of each State Fund will end on the date of the
Reorganization.
Our opinion represents our best legal judgment with respect to the proper
Federal income tax treatment of the Reorganization, based on the facts
contained in the Plan, the N-14 Registration Statement and the
Representations. Our opinion assumes the accuracy of the facts as described in
the Plan, the N-14 Registration Statement and the Representations and could be
affected if any of the facts as so described are inaccurate.
We are furnishing this opinion letter to the addressees hereof, solely
for the benefit of such addressees in connection with the Reorganization. This
opinion letter is not to be used, circulated, quoted or otherwise referred to
for any other purpose.
Very truly yours,
/s/ Sidley Austin Brown & Wood LLP