EXHIBIT 12(b)
SIDLEY AUSTIN BROWN & WOOD LLP
CHICAGO 787 SEVENTH AVENUE BEIJING
NEW YORK, NEW YORK 10019
DALLAS TELEPHONE 212 839 5300 GENEVA
FACSIMILE 212 839 5599
LOS ANGELES www.sidley.com HONG KONG
SAN FRANCISCO FOUNDED 1866 LONDON
WASHINGTON, D.C. SHANGHAI
SINGAPORE
TOKYO
July 29, 2002
National Portfolio, a series of Merrill Lynch Municipal Bond Fund,
Inc.
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Arizona Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Massachusetts Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Michigan Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch North Carolina Municipal Bond Fund
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Merrill Lynch Ohio 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 Arizona
Municipal Bond Fund, Merrill Lynch
Massachusetts Municipal Bond Fund, Merrill
Lynch Michigan Municipal Bond Fund, Merrill
Lynch North Carolina Municipal Bond Fund
and Merrill Lynch Ohio 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
Arizona Municipal Bond Fund, Merrill Lynch Massachusetts Municipal Bond Fund,
Merrill Lynch Michigan Municipal Bond Fund, Merrill Lynch North Carolina
Municipal Bond Fund and Merrill Lynch Ohio 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, to the shareholders of each State Fund
(the "Reorganization"). 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 of beneficial interest 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
(collectively 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, and amended as of July 16, 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 July 29, 2002, (ii)
the Arizona Fund dated July 29, 2002, (iii) the Massachusetts Fund dated July
29, 2002, (iv) the Michigan Fund dated July 29, 2002, (v) the North Carolina
Fund dated July 29, 2002, and (vi) the Ohio Fund dated July 29, 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