SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
THE CHRYSLER BUILDING WASHINGTON, DC OFFICE
405 LEXINGTON AVENUE THE WASHINGTON HARBOUR
NEW YORK, NY 10174 3000 K STREET, NW, SUITE 300
TELEPHONE (212) 973-0111 WASHINGTON, DC 20007
FAX (212) 758-9526 (202) 424-7500 FAX (202) 424-7647
WWW.SWIDLAW.COM
November 1, 2000
Prudential National Municipals Fund, Inc.
Gateway Center Three
Newark, New Jersey 07102
Prudential Municipal Series Fund
(Massachusetts Series)
Gateway Center Three
Newark, New Jersey 07102
Dear Sirs:
We are acting as counsel to Prudential National Municipals Fund,
Inc., a Maryland corporation ("National Municipals Fund") and Prudential
Municipal Series Fund, a Massachusetts business trust ("Series Fund") in
connection with the proposed transfer of the assets of the Massachusetts
Series ("Massachusetts Series") of Series Fund to the National Municipals
Fund in exchange solely for Class A and Class Z shares of the National
Municipals Fund (the "Shares"), and the assumption by National Municipals
Fund of Massachusetts Series' liabilities, if any, pursuant to an Agreement
and Plan of Reorganizations (the "Agreement"). The transactions contemplated
by the Agreement are collectively referred to herein as the "Reorganization."
We have participated in the preparation of the National Municipals
Fund's Registration Statement on Form N-14 (the "Registration Statement")
relating, among other things, to the Shares of National Municipals Fund to be
offered in exchange for the assets and the assumption of the liabilities of
Massachusetts Series, and containing the Prospectus and Proxy Statement relating
to the Reorganization (collectively, the "Prospectus"), filed with the
Securities and Exchange Commission (the "Commission") pursuant to the provisions
of the Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations of the Commission thereunder. In addition, in connection with
rendering the opinions expressed herein, we have
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Massachusetts Series)
Page 2
examined originals or copies, certified or otherwise identified to our
satisfaction, of such other documents, records and instruments as we have deemed
necessary or appropriate for the purpose of rendering this opinion, including
the form of the Agreement included as Attachment A to the Prospectus.
In our examination of the foregoing documents we have assumed the
genuineness of all signatures, the authority of each signatory, the due
execution and delivery of all documents by all parties, the authenticity of all
agreements, documents, certificates and instruments submitted to us as
originals, the conformity of the Agreement as executed and delivered by the
parties with the form of the Agreement contained in the Prospectus, and the
conformity with originals of all agreements, documents, certificates and
instruments submitted to us as copies.
In rendering the opinions expressed herein, we have assumed that the
transactions contemplated by the Agreement will be consummated in accordance
therewith and as described in the Prospectus. As to other questions of fact
material to this opinion, we have assumed, with your approval and without
independent investigation or verification, that the following facts will be
accurate and complete as of the consummation of the Reorganization (the "Closing
Date").
1. The fair market value of the Shares to be received by each
Massachusetts Series shareholder will be equal to the fair market value
of the shares of beneficial interest of Massachusetts Series
surrendered in exchange therefor upon the liquidation of Massachusetts
Series.
2. There will be no plan or intention by Massachusetts Series to redeem
its shares prior or incident to and as part of the Reorganization. For
purposes of this assumption, shares of Massachusetts Series required to
be redeemed by Massachusetts Series prior to the Reorganization and not
as part of the Reorganization but in the ordinary course of its
business as an open-end investment company pursuant to Section 22(e) of
the Investment Company Act of 1940, as amended (the "ICA"), shall not
be taken into account.
3. Pursuant to the Agreement, Series Fund will distribute in complete
liquidation of Massachusetts Series, the Shares of National Municipals
Fund received by Massachusetts Series in the Reorganization.
4. The liabilities of Massachusetts Series assumed by National Municipals
Fund pursuant to the Reorganization, plus the liabilities, if any, to
which assets transferred pursuant to the Reorganization will be
subject, constitute less than 20% of the total consideration for the
Reorganization, all such liabilities will have been incurred by
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Massachusetts Series)
Page 3
Massachusetts Series in the ordinary course of its business, and
National Municipals Fund will pay no other consideration, except for
the Shares, in connection with the Reorganization.
5. All expenses incurred by Massachusetts Series with respect to the
Reorganization will be borne by Massachusetts Series. Each shareholder
of Massachusetts Series will pay its respective share of the expenses,
if any, incurred in connection with the Reorganization. National
Municipals Fund will pay the expenses, if any, incurred by it in
connection with the Reorganization.
6. No intercorporate indebtedness will exist between National Municipals
Fund and Massachusetts Series that was issued, acquired, or will be
settled at a discount.
7. Massachusetts Series will not own, directly or indirectly, nor will it
have owned during the five years preceding the Closing Date, directly
or indirectly, any stock of National Municipals Fund.
8. The assets of Massachusetts Series transferred to National Municipals
Fund will include all assets owned by Massachusetts Series at fair
market value on the Closing Date subject to all known liabilities of
Massachusetts Series at such time.
9. In accordance with the terms of the Agreement, Massachusetts Series
will transfer all of its business and will transfer assets to National
Municipals Fund representing at least 90% of the fair market value of
the net assets, and at least 70% of the fair market value of the gross
assets, held by Massachusetts Series immediately prior to the
Reorganization. For purposes of this assumption, amounts paid by
Massachusetts Series to shareholders who receive cash or other
property, amounts paid to dissenters, amounts used by Massachusetts
Series to pay its reorganization expenses and all redemptions and
distributions (other than regular, normal redemptions and dividends)
made by Massachusetts Series immediately preceding the Reorganization
will be included as assets of Massachusetts Series held immediately
prior to the Reorganization.
10. The fair market value of the assets of Massachusetts Series transferred
to National Municipals Fund will equal or exceed the sum of liabilities
assumed by National Municipals Fund, plus the amount of liabilities, if
any, to which the transferred assets will be subject.
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Massachusetts Series)
Page 4
11. Massachusetts Series will not be under the jurisdiction of a court in
a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Internal Revenue Code of 1986, as amended (the "Code").
12. No cash will be paid to the shareholders of Massachusetts Series in
lieu of fractional Shares.
13. For federal income tax purposes, Massachusetts Series will qualify as a
"regulated investment company" (as defined in Code Section 851) and
will have so qualified since its formation. The provisions of Code
Sections 851 through 855 apply to Massachusetts Series and will
continue to apply through the Closing Date.
14. As of the Closing Date, Massachusetts Series will have declared to its
shareholders of record a dividend or dividends payable prior to
closing, which together with all previous such dividends will have the
effect of distributing all of Massachusetts Series' investment company
taxable income plus the excess of its interest income, if any,
excludable from gross income under Code Section 103(a) (including by
virtue of prior Code Section 853(b)(5)(C)) over its deductions
disallowed under Code Sections 265 and 171(a)(2) for the taxable year
of Massachusetts Series ending on the Closing Date and all its net
capital gain realized in such taxable year.
15. Neither National Municipals Fund nor any person related thereto within
the meaning of Treasury Regulation Section 1.368-1(e) will have any
plan or intention to reacquire any of the Shares of National Municipals
Fund issued in the Reorganization. For purposes of this assumption,
Shares of National Municipals Fund required to be redeemed by National
Municipals Fund not as part of the Reorganization but in the ordinary
course of its business as an open-end investment company pursuant to
Section 22(e) of the ICA shall not be taken into account.
16. Following the Reorganization, National Municipals Fund will continue
the historic business of Massachusetts Series or use a significant
portion of Massachusetts Series' historic business assets in its
business.
17. National Municipals Fund will not own, directly or indirectly, nor will
it have owned during the five years preceding the Closing Date,
directly or indirectly, any shares of beneficial interest of
Massachusetts Series.
18. National Municipals Fund will not be under the jurisdiction of a court
in a Title 11 or similar case within the meaning of Code Section
368(a)(3)(A).
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Massachusetts Series)
Page 5
19. For federal income tax purposes, National Municipals Fund will qualify
as a "regulated investment company" (as defined in Code Section 851)
and will have so qualified since its formation. The provisions of Code
Sections 851 through 855 apply to National Municipals Fund prior to the
Reorganization and will continue to apply after the Closing Date.
20. No compensation received by any shareholder-employee of Massachusetts
Series will be separate consideration for the Reorganization; none of
the Shares of National Municipals Fund received by any
shareholder-employee will be separate consideration for, or allocable
to, any employment agreement; and any compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to other parties bargaining at arm's
length for similar services.
We note that our opinion is expressly limited to the federal laws of
the United States.
Based on the foregoing and subject to the assumptions and limitations
set forth above and such examination of law as we have deemed necessary, we are
of the opinion that:
1. The acquisition by National Municipals Fund of the assets of
Massachusetts Series in exchange solely for voting shares of
National Municipals Fund and the assumption by National
Municipals Fund of such Series' liabilities, if any,
followed by the distribution of National Municipals Fund's
voting shares received by Massachusetts Series pro rata to
such Series' shareholders, pursuant to its termination and
constructively in exchange for such Series' shares, will
constitute a "reorganization" within the meaning of Code
Section 368(a)(1)(C), and each of National Municipals Fund
and Massachusetts Series will be "a party to a reorganization"
within the meaning of Code Section 368(b);
2. Massachusetts Series' shareholders will not recognize gain or
loss upon the constructive exchange of all of their shares of
Massachusetts Series solely for shares of National Municipals
Fund in complete termination of Massachusetts Series, as
described above and in the Agreement;
3. No gain or loss will be recognized by Massachusetts Series
upon the transfer of its assets to National Municipals Fund in
exchange solely for the Shares and the assumption by National
Municipals Fund of Massachusetts Series' liabilities, if any,
and the subsequent distribution of the Shares to Massachusetts
Series' shareholders in complete termination of Massachusetts
Series;
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Massachusetts Series)
Page 6
4. No gain or loss will be recognized by National Municipals Fund
upon the acquisition of Massachusetts Series' assets in
exchange solely for the Shares and the assumption of
Massachusetts Series' liabilities, if any;
5. National Municipals Fund's basis for the assets of
Massachusetts Series acquired in the Reorganization will be
the same as the basis of these assets when held by
Massachusetts Series immediately before the transfer, and the
holding period of such assets acquired by National Municipals
Fund will include the holding period of these assets when held
by Massachusetts Series;
6. The Massachusetts Series shareholders' basis for the Shares to
be received by them pursuant to the Reorganization will be the
same as their basis for the shares of Massachusetts Series to
be constructively surrendered in exchange therefor; and
7. The holding period of the Shares to be received by
Massachusetts Series' shareholders will include the period
during which the shares of Massachusetts Series to be
constructively surrendered in exchange therefor were held;
provided that Massachusetts Series' shares surrendered were
held as capital assets by those shareholders as defined in
Code Section 1221, on the date of the exchange.
The opinions expressed herein are based upon currently applicable
statutes and regulations and existing judicial and administrative
interpretations. We can provide no assurance that such statutes or regulations,
or existing judicial or administrative interpretations thereof, will not be
amended, revoked or modified (possibly prior to the Closing Date) in a manner
which would affect any of our conclusions. Finally, we note that this opinion is
solely for the benefit of the addressees hereof in connection with the
transaction described herein and, except as otherwise provided herein, should
not be referred to, used, relied upon or quoted (with or without specific
reference to our firm) in any documents, reports, financial statements or
otherwise, without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our firm in
the Registration Statement or in the Prospectus constituting part thereof. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Swidler Berlin Shereff Friedman, LLP
Swidler Berlin Shereff Friedman, LLP
SBSF:JHN:MKN:RDB:CSB
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
THE CHRYSLER BUILDING WASHINGTON, DC OFFICE
405 LEXINGTON AVENUE THE WASHINGTON HARBOUR
NEW YORK, NY 10174 3000 K STREET, NW, SUITE 300
TELEPHONE (212) 973-0111 WASHINGTON, DC 20007
FAX (212) 758-9526 (202) 424-7500 FAX (202) 424-7647
WWW.SWIDLAW.COM
November 1, 2000
Prudential National Municipals Fund, Inc.
Gateway Center Three
Newark, New Jersey 07102
Prudential Municipal Series Fund
(North Carolina Series)
Gateway Center Three
Newark, New Jersey 07102
Dear Sirs:
We are acting as counsel to Prudential National Municipals Fund, Inc.,
a Maryland corporation ("National Municipals Fund") and Prudential Municipal
Series Fund, a Massachusetts business trust ("Series Fund") in connection with
the proposed transfer of the assets of the North Carolina Series ("North
Carolina Series") of Series Fund to the National Municipals Fund solely in
exchange for Class A shares of the National Municipals Fund (the "Shares"), and
the assumption by National Municipals Fund of North Carolina Series'
liabilities, if any, pursuant to an Agreement and Plan of Reorganizations (the
"Agreement"). The transactions contemplated by the Agreement are collectively
referred to herein as the "Reorganization."
We have participated in the preparation of the National Municipals
Fund's Registration Statement on Form N-14 (the "Registration Statement")
relating, among other things, to the Shares of National Municipals Fund to be
offered in exchange for the assets and the assumption of the liabilities of
North Carolina Series, and containing the Prospectus and Proxy Statement
relating to the Reorganization (collectively, the "Prospectus"), to be filed
with the Securities and Exchange Commission (the "Commission") pursuant to the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), and
the rules and regulations of the Commission thereunder. In addition, in
connection with rendering the opinions expressed herein, we have examined
originals or copies, certified or otherwise identified to our satisfaction, of
such other
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(North Carolina Series)
Page 2
documents, records and instruments as we have deemed necessary or appropriate
for the purpose of rendering this opinion, including the form of the Agreement
included as Attachment A to the Prospectus.
In our examination of the foregoing documents we have assumed the
genuineness of all signatures, the authority of each signatory, the due
execution and delivery of all documents by all parties, the authenticity of all
agreements, documents, certificates and instruments submitted to us as
originals, the conformity of the Agreement as executed and delivered by the
parties with the form of the Agreement contained in the Prospectus, and the
conformity with originals of all agreements, documents, certificates and
instruments submitted to us as copies.
In rendering the opinions expressed herein, we have assumed that the
transactions contemplated by the Agreement will be consummated in accordance
therewith and as described in the Prospectus. As to other questions of fact
material to this opinion, we have assumed, with your approval and without
independent investigation or verification, that the following facts will be
accurate and complete as of the consummation of the Reorganization (the "Closing
Date").
1. The fair market value of the Shares to be received by each North
Carolina Series shareholder will be equal to the fair market value of
the shares of beneficial interest of North Carolina Series surrendered
in exchange therefor upon the liquidation of North Carolina Series.
2. There will be no plan or intention by North Carolina Series to redeem
its shares prior or incident to and as part of the Reorganization. For
purposes of this assumption, shares of North Carolina Series required
to be redeemed by North Carolina Series prior to the Reorganization and
not as part of the Reorganization but in the ordinary course of its
business as an open-end investment company pursuant to Section 22(e) of
the Investment Company Act of 1940, as amended (the "ICA"), shall not
be taken into account.
3. Pursuant to the Agreement, Series Fund will distribute in complete
liquidation of North Carolina Series, the Shares of National Municipals
Fund received by North Carolina Series in the Reorganization.
4. The liabilities of North Carolina Series assumed by National Municipals
Fund pursuant to the Reorganization, plus the liabilities, if any, to
which assets transferred pursuant to the Reorganization will be
subject, constitute less than 20% of the total consideration for the
Reorganization, all such liabilities will have been incurred by North
Carolina Series in the ordinary course of its business, and National
Municipals Fund will
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(North Carolina Series)
Page 3
pay no other consideration, except for the Shares, in connection with
the Reorganization.
5. All expenses incurred by North Carolina Series with respect to the
Reorganization will be borne by North Carolina Series. Each shareholder
of North Carolina Series will pay its respective share of the expenses,
if any, incurred in connection with the Reorganization. National
Municipals Fund will pay the expenses, if any, incurred by it in
connection with the Reorganization.
6. No intercorporate indebtedness will exist between National Municipals
Fund and North Carolina Series that was issued, acquired, or will be
settled at a discount.
7. North Carolina Series will not own, directly or indirectly, nor will it
have owned during the five years preceding the Closing Date, directly
or indirectly, any stock of National Municipals Fund.
8. The assets of North Carolina Series transferred to National Municipals
Fund will include all assets owned by North Carolina Series at fair
market value on the Closing Date subject to all known liabilities of
North Carolina Series at such time.
9. In accordance with the terms of the Agreement, North Carolina Series
will transfer all of its business and will transfer assets to National
Municipals Fund representing at least 90% of the fair market value of
the net assets, and at least 70% of the fair market value of the gross
assets, held by North Carolina Series immediately prior to the
Reorganization. For purposes of this assumption, amounts paid by North
Carolina Series to shareholders who receive cash or other property,
amounts paid to dissenters, amounts used by North Carolina Series to
pay its reorganization expenses and all redemptions and distributions
(other than regular, normal redemptions and dividends) made by North
Carolina Series immediately preceding the Reorganization will be
included as assets of North Carolina Series held immediately prior to
the Reorganization.
10. The fair market value of the assets of North Carolina Series
transferred to National Municipals Fund will equal or exceed the sum of
liabilities assumed by National Municipals Fund, plus the amount of
liabilities, if any, to which the transferred assets will be subject.
11. North Carolina Series will not be under the jurisdiction of a court in
a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Internal Revenue Code of 1986, as amended (the "Code").
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(North Carolina Series)
Page 4
12. No cash will be paid to the shareholders of North Carolina Series in
lieu of fractional Shares.
13. For federal income tax purposes, North Carolina Series will qualify as
a "regulated investment company" (as defined in Code Section 851) and
will have so qualified since its formation. The provisions of Code
Sections 851 through 855 apply to North Carolina Series and will
continue to apply through the Closing Date.
14. As of the Closing Date, North Carolina Series will have declared to
its shareholders of record a dividend or dividends payable prior to
closing, which together with all previous such dividends will have
the effect of distributing all of North Carolina Series' investment
company taxable income plus the excess of its interest income, if any,
excludable from gross income under Code Section 103(a) (including by
virtue of prior Code Section 853(b)(5)(C)) over its deductions
disallowed under Code Sections 265 and 171(a)(2) for the taxable year
of North Carolina Series ending on the Closing Date and all its net
capital gain realized in such taxable year.
15. Neither National Municipals Fund nor any person related thereto within
the meaning of Treasury Regulation Section 1.368-1(e) will have any
plan or intention to reacquire any of the Shares of National Municipals
Fund issued in the Reorganization. For purposes of this assumption,
Shares of National Municipals Fund required to be redeemed by National
Municipals Fund not as part of the Reorganization but in the ordinary
course of its business as an open-end investment company pursuant to
Section 22(e) of the ICA shall not be taken into account.
16. Following the Reorganization, National Municipals Fund will continue
the historic business of North Carolina Series or use a significant
portion of North Carolina Series' historic business assets in its
business.
17. National Municipals Fund will not own, directly or indirectly, nor will
it have owned during the five years preceding the Closing Date,
directly or indirectly, any shares of beneficial interest of North
Carolina Series.
18. National Municipals Fund will not be under the jurisdiction of a court
in a Title 11 or similar case within the meaning of Code Section
368(a)(3)(A).
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(North Carolina Series)
Page 5
19. For federal income tax purposes, National Municipals Fund will qualify
as a regulated investment company (as defined in Code Section 851) and
will have so qualified since its formation. The provisions of Code
Sections 851 through 855 apply to National Municipals Fund prior to the
Reorganization and will continue to apply after the Closing Date.
20. No compensation received by any shareholder-employee of North Carolina
Series will be separate consideration for the Reorganization; none of
the Shares of National Municipals Fund received by any
shareholder-employee will be separate consideration for, or allocable
to, any employment agreement; and any compensation paid to any
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to other parties bargaining at arm's
length for similar services.
We note that our opinion is expressly limited to the federal laws of
the United States.
Based on the foregoing and subject to the assumptions and limitations
set forth above and such examination of law as we have deemed necessary, we are
of the opinion that:
1. The acquisition by National Municipals Fund of the assets of
North Carolina Series in exchange solely for voting shares of
National Municipals Fund and the assumption by National
Municipals Fund of such Series' liabilities, if any, followed
by the distribution of National Municipals Fund's voting
shares received by North Carolina Series pro rata to such
Series' shareholders, pursuant to its termination and
constructively in exchange for such Series' shares, will
constitute a "reorganization" within the meaning of Code
Section 368(a)(1)(C), and each of National Municipals Fund
and North Carolina Series will be "a party to a
reorganization" within the meaning of Code Section 368(b);
2. North Carolina Series' shareholders will not recognize gain or
loss upon the constructive exchange of all of their shares of
North Carolina Series solely for shares of National Municipals
Fund in complete termination of North Carolina Series, as
described above and in the Agreement;
3. No gain or loss will be recognized by North Carolina Series
upon the transfer of its assets to National Municipals Fund in
exchange solely for the Shares and the assumption by National
Municipals Fund of North Carolina Series' liabilities, if any,
and the subsequent distribution of the Shares to North
Carolina Series' shareholders in complete termination of North
Carolina Series;
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(North Carolina Series)
Page 6
4. No gain or loss will be recognized by National Municipals Fund
upon the acquisition of North Carolina Series' assets in
exchange solely for the Shares and the assumption of North
Carolina Series' liabilities, if any;
5. National Municipals Fund's basis for the assets of North
Carolina Series acquired in the Reorganization will be the
same as the basis of these assets when held by North Carolina
Series immediately before the transfer, and the holding period
of such assets acquired by National Municipals Fund will
include the holding period of these assets when held by North
Carolina Series;
6. The North Carolina Series shareholders' basis for the Shares
to be received by them pursuant to the Reorganization will be
the same as their basis for the shares of North Carolina
Series to be constructively surrendered in exchange therefor;
and
7. The holding period of the Shares to be received by North
Carolina Series' shareholders will include the period during
which the shares of North Carolina Series to be constructively
surrendered in exchange therefor were held; provided that
North Carolina Series' shares surrendered were held as capital
assets by those shareholders as defined in Code Section 1221,
on the date of the exchange.
The opinions expressed herein are based upon currently applicable
statutes and regulations and existing judicial and administrative
interpretations. We can provide no assurance that such statutes or regulations,
or existing judicial or administrative interpretations thereof, will not be
amended, revoked or modified (possibly prior to the Closing Date) in a manner
which would affect any of our conclusions. Finally, we note that this opinion is
solely for the benefit of the addressees hereof in connection with the
transaction described herein and, except as otherwise provided herein, should
not be referred to, used, relied upon or quoted (with or without specific
reference to our firm) in any documents, reports, financial statements or
otherwise, without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our firm in
the Registration Statement or in the Prospectus constituting part thereof. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Swidler Berlin Shereff Friedman, LLP
Swidler Berlin Shereff Friedman, LLP
SBSF:JHN:MKN:RDB:CSB
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
THE CHRYSLER BUILDING WASHINGTON, DC OFFICE
405 LEXINGTON AVENUE THE WASHINGTON HARBOUR
NEW YORK, NY 10174 3000 K STREET, NW, SUITE 300
TELEPHONE (212) 973-0111 WASHINGTON, DC 20007
FAX (212) 758-9526 (202) 424-7500 FAX (202) 424-7647
WWW.SWIDLAW.COM
November 1, 2000
Prudential National Municipals Fund, Inc.
Gateway Center Three
Newark, New Jersey 07102
Prudential Municipal Series Fund
(Ohio Series)
Gateway Center Three
Newark, New Jersey 07102
Dear Sirs:
We are acting as counsel to Prudential National Municipals Fund, Inc.,
a Maryland corporation ("National Municipals Fund") and Prudential Municipal
Series Fund, a Massachusetts business trust ("Series Fund") in connection with
the proposed transfer of the assets of the Ohio Series ("Ohio Series") of Series
Fund to the National Municipals Fund in exchange solely for Class A shares of
the National Municipals Fund (the "Shares"), and the assumption by National
Municipals Fund of Ohio Series' liabilities, if any, pursuant to an Agreement
and Plan of Reorganizations (the "Agreement"). The transactions contemplated by
the Agreement are collectively referred to herein as the "Reorganization."
We have participated in the preparation of the National Municipals
Fund's Registration Statement on Form N-14 (the "Registration Statement")
relating, among other things, to the Shares of National Municipals Fund to be
offered in exchange for the assets and the assumption of the liabilities of Ohio
Series, and containing the Prospectus and Proxy Statement relating to the
Reorganization (collectively, the "Prospectus"), to be filed with the Securities
and Exchange Commission (the "Commission") pursuant to the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the Commission thereunder. In addition, in connection with
rendering the opinions expressed herein, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of such other documents,
records and instruments as we have deemed necessary or appropriate for the
purpose of rendering
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Ohio Series)
Page 2
this opinion, including the form of the Agreement included as Attachment A to
the Prospectus.
In our examination of the foregoing documents we have assumed the
genuineness of all signatures, the authority of each signatory, the due
execution and delivery of all documents by all parties, the authenticity of all
agreements, documents, certificates and instruments submitted to us as
originals, the conformity of the Agreement as executed and delivered by the
parties with the form of the Agreement contained in the Prospectus, and the
conformity with originals of all agreements, documents, certificates and
instruments submitted to us as copies.
In rendering the opinions expressed herein, we have assumed that the
transactions contemplated by the Agreement will be consummated in accordance
therewith and as described in the Prospectus. As to other questions of fact
material to this opinion, we have assumed, with your approval and without
independent investigation or verification, that the following facts will be
accurate and complete as of the consummation of the Reorganization (the "Closing
Date").
1. The fair market value of the Shares to be received by each Ohio Series
shareholder will be equal to the fair market value of the shares of
beneficial interest of Ohio Series surrendered in exchange therefor
upon the liquidation of Ohio Series.
2. There will be no plan or intention by Ohio Series to redeem its shares
prior or incident to and as part of the Reorganization. For purposes of
this assumption, shares of Ohio Series required to be redeemed by Ohio
Series prior to the Reorganization and not as part of the
Reorganization but in the ordinary course of its business as an
open-end investment company pursuant to Section 22(e) of the Investment
Company Act of 1940, as amended (the "ICA"), shall not be taken into
account.
3. Pursuant to the Agreement, Series Fund will distribute in complete
liquidation of Ohio Series, the Shares of National Municipals Fund
received by Ohio Series in the Reorganization.
4. The liabilities of Ohio Series assumed by National Municipals Fund
pursuant to the Reorganization, plus the liabilities, if any, to which
assets transferred pursuant to the Reorganization will be subject,
constitute less than 20% of the total consideration for the
Reorganization, all such liabilities will have been incurred by Ohio
Series in the ordinary course of its business, and National Municipals
Fund will pay no other consideration, except for the Shares, in
connection with the Reorganization.
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Ohio Series)
Page 3
5. All expenses incurred by Ohio Series with respect to the Reorganization
will be borne by Ohio Series. Each shareholder of Ohio Series will pay
its respective share of the expenses, if any, incurred in connection
with the Reorganization. National Municipals Fund will pay the
expenses, if any, incurred by it in connection with the Reorganization.
6. No intercorporate indebtedness will exist between National Municipals
Fund and Ohio Series that was issued, acquired, or will be settled at a
discount.
7. Ohio Series will not own, directly or indirectly, nor will it have
owned during the five years preceding the Closing Date, directly or
indirectly, any stock of National Municipals Fund.
8. The assets of Ohio Series transferred to National Municipals Fund will
include all assets owned by Ohio Series at fair market value on the
Closing Date subject to all known liabilities of Ohio Series at such
time.
9. In accordance with the terms of the Agreement, Ohio Series will
transfer all of its business and will transfer assets to National
Municipals Fund representing at least 90% of the fair market value of
the net assets, and at least 70% of the fair market value of the gross
assets, held by Ohio Series immediately prior to the Reorganization.
For purposes of this assumption, amounts paid by Ohio Series to
shareholders who receive cash or other property, amounts paid to
dissenters, amounts used by Ohio Series to pay its reorganization
expenses and all redemptions and distributions (other than regular,
normal redemptions and dividends) made by Ohio Series immediately
preceding the Reorganization will be included as assets of Ohio Series
held immediately prior to the Reorganization.
10. The fair market value of the assets of Ohio Series transferred to
National Municipals Fund will equal or exceed the sum of liabilities
assumed by National Municipals Fund, plus the amount of liabilities, if
any, to which the transferred assets will be subject.
11. Ohio Series will not be under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the
Internal Revenue Code of 1986, as amended (the "Code").
12. No cash will be paid to the shareholders of Ohio Series in lieu of
fractional Shares.
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Ohio Series)
Page 4
13. For federal income tax purposes, Ohio Series will qualify as a
regulated investment company (as defined in Code Section 851) and will
have so qualified since its formation. The provisions of Code Sections
851 through 855 apply to Ohio Series and will continue to apply through
the Closing Date.
14. As of the Closing Date, Ohio Series will have declared to its
shareholders of record a dividend or dividends payable prior to
closing, which together with all previous such dividends will have
the effect of distributing all of Ohio Series' investment company
taxable income plus the excess of its interest income, if any,
excludable from gross income under Code Section 103(a) (including by
virtue of prior Code Section 853(b)(5)(C)) over its deductions
disallowed under Code Sections 265 and 171(a)(2) for the taxable year
of Ohio Series ending on the Closing Date and all its net capital gain
realized in such taxable year.
15. Neither National Municipals Fund nor any person related thereto within
the meaning of Treasury Regulation Section 1.368-1(e) will have any
plan or intention to reacquire any of the Shares of National Municipals
Fund issued in the Reorganization. For purposes of this assumption,
Shares of National Municipals Fund required to be redeemed by National
Municipals Fund not as part of the Reorganization but in the ordinary
course of its business as an open-end investment company pursuant to
Section 22(e) of the ICA shall not be taken into account.
16. Following the Reorganization, National Municipals Fund will continue
the historic business of Ohio Series or use a significant portion of
Ohio Series' historic business assets in its business.
17. National Municipals Fund will not own, directly or indirectly, nor will
it have owned during the five years preceding the Closing Date,
directly or indirectly, any shares of beneficial interest of Ohio
Series.
18. National Municipals Fund will not be under the jurisdiction of a court
in a Title 11 or similar case within the meaning of Code Section
368(a)(3)(A).
19. For federal income tax purposes, National Municipals Fund will qualify
as a "regulated investment company" (as defined in Code Section 851)
and will have so qualified since its formation. The provisions of Code
Sections 851 through 855 apply to National Municipals Fund prior to
the Reorganization and will continue to apply after the Closing Date.
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Ohio Series)
Page 5
20. No compensation received by any shareholder-employee of Ohio Series
will be separate consideration for the Reorganization; none of the
Shares of National Municipals Fund received by any shareholder-employee
will be separate consideration for, or allocable to, any employment
agreement; and any compensation paid to any shareholder- employee will
be for services actually rendered and will be commensurate with amounts
paid to other parties bargaining at arm's length for similar services.
We note that our opinion is expressly limited to the federal laws of
the United States.
Based on the foregoing and subject to the assumptions and limitations
set forth above and such examination of law as we have deemed necessary, we are
of the opinion that:
1. The acquisition by National Municipals Fund of the assets of
Ohio Series in exchange solely for voting shares of National
Municipals Fund and the assumption by National Municipals Fund
of such Series' liabilities, if any, followed by the
distribution of National Municipals Fund's voting shares
received by Ohio Series pro rata to such Series' shareholders,
pursuant to its termination and constructively in exchange for
such Series' shares, will constitute a "reorganization" within
the meaning of Code Section 368(a)(1)(C), and each of National
Municipals Fund and Ohio Series will be "a party to a
reorganization" within the meaning of Code Section 368(b);
2. Ohio Series' shareholders will not recognize gain or loss upon
the constructive exchange of all of their shares of Ohio
Series solely for shares of National Municipals Fund in
complete termination of Ohio Series, as described above and in
the Agreement;
3. No gain or loss will be recognized by Ohio Series upon the
transfer of its assets to National Municipals Fund in exchange
solely for the Shares and the assumption by National
Municipals Fund of Ohio Series' liabilities, if any, and the
subsequent distribution of the Shares to Ohio Series'
shareholders in complete termination of Ohio Series;
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund
(Ohio Series)
Page 6
4. No gain or loss will be recognized by National Municipals Fund
upon the acquisition of Ohio Series' assets in exchange solely
for the Shares and the assumption of Ohio Series' liabilities,
if any;
5. National Municipals Fund's basis for the assets of Ohio Series
acquired in the Reorganization will be the same as the basis
of these assets when held by Ohio Series immediately before
the transfer, and the holding period of such assets acquired
by National Municipals Fund will include the holding period of
these assets when held by Ohio Series;
6. The Ohio Series shareholders' basis for the Shares to be
received by them pursuant to the Reorganization will be the
same as their basis for the shares of Ohio Series to be
constructively surrendered in exchange therefor; and
7. The holding period of the Shares to be received by Ohio
Series' shareholders will include the period during which the
shares of Ohio Series to be constructively surrendered in
exchange therefor were held; provided that Ohio Series' shares
surrendered were held as capital assets by those shareholders
as defined in Code Section 1221, on the date of the exchange.
The opinions expressed herein are based upon currently applicable
statutes and regulations and existing judicial and administrative
interpretations. We can provide no assurance that such statutes or regulations,
or existing judicial or administrative interpretations thereof, will not be
amended, revoked or modified (possibly prior to the Closing Date) in a manner
which would affect any of our conclusions. Finally, we note that this opinion is
solely for the benefit of the addressees hereof in connection with the
transaction described herein and, except as otherwise provided herein, should
not be referred to, used, relied upon or quoted (with or without specific
reference to our firm) in any documents, reports, financial statements or
otherwise, without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and reference to our firm in
the Registration Statement or in the Prospectus constituting part thereof. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Swidler Berlin Shereff Friedman, LLP
Swidler Berlin Shereff Friedman, LLP
SBSF:JHN:MKN:RDB:CSB