GARDNER, CARTON & DOUGLAS
321 North Clark Street
Chicago, Illinois 60610-4795
March 14, 2001
Prudential Global Total Return Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102-4077
Prudential International Bond Fund, Inc.
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102-4077
RE: REORGANIZATION OF PRUDENTIAL GLOBAL TOTAL RETURN FUND, INC. AND
PRUDENTIAL INTERNATIONAL BOND FUND, INC.
Ladies and Gentlemen:
We are outside counsel to Prudential International Bond Fund, Inc.
("International Bond Fund"), a Maryland corporation, and Prudential Global Total
Return Fund, Inc. ("Global Total Return Fund"), a Maryland corporation (each of
International Bond Fund and Global Total Return Fund, a "Fund"). An Agreement
and Plan of Reorganization and Liquidation (the "Agreement") has been approved
by the Boards of each Fund pursuant to which International Bond Fund will
transfer to Global Total Return Fund substantially all of the assets of
International Bond Fund in exchange solely for Class A, Class B, Class C, and
Class Z shares of Global Total Return Fund and the assumption by Global Total
Return Fund of the liabilities, if any, of International Bond Fund whether or
not incurred in the ordinary course of business. International Bond Fund will
then distribute the Class A, Class B, Class C, and Class Z shares of Global
Total Return Fund acquired in the exchange to the respective International Bond
Fund Class A, Class B, Class C, and Class Z shareholders, and International Bond
Fund will file Articles of Dissolution with the state of Maryland and liquidate
pursuant to the Agreement (the "Reorganization").
You have requested our opinion as to certain federal income tax
consequences of the Reorganization. The opinion that follows is based on the
Internal Revenue Code of 1986, as amended through the date hereof (the "Code"),
judicial decisions, administrative rulings and regulations, and such other
sources of legal authority as we deemed necessary to consult in rendering this
opinion. The opinion is also based on (i) factual representations, including
those set forth on Exhibits A and B hereto, (ii) the representations made by the
parties in the Agreement, and (iii) our understanding that the Reorganization
will take place substantially as set out in the Agreement and as described in
the Prospectus/Proxy Statement (the "Proxy Statement") included in Pre-Effective
Amendment No. 1 to Registration Statement on Form N-14 filed by Global Total
Return Fund with the Securities and Exchange Commission on March 14, 2001 in
connection with the meeting of shareholders of International Bond Fund currently
scheduled to be held on April 19, 2001.
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
March 14, 2001
Page 2
SUMMARY OF THE TRANSACTION
In the Reorganization, International Bond Fund will transfer substantially
all of its assets and liabilities to Global Total Return Fund in exchange for an
equal value of Class A, Class B, Class C, and Class Z voting shares of Global
Total Return Fund. International Bond Fund will then distribute as a liquidating
distribution to its shareholders all of such Class A, Class B, Class C, and
Class Z shares of Global Total Return Fund in exchange for and in cancellation
of each respective outstanding Class A, Class B, Class C, and Class Z share of
International Bond Fund, and International Bond Fund will dissolve and liquidate
pursuant to the Agreement.
BUSINESS PURPOSE
Our opinion is based in part upon our understanding that the primary
business purpose of this transaction is to achieve certain cost savings by
combining the assets of International Bond Fund and Global Total Return Fund as
is represented on Exhibits A and B hereto. A description of the business
purposes of the Reorganization is set out in the Proxy Statement.
REPRESENTATIONS
In rendering our opinion, we are, with your permission, assuming that the
transaction will occur substantially as described in the Agreement and the Proxy
Statement. We are also relying upon the additional representations which have
been certified to us by International Bond Fund and Global Total Return Fund, as
set forth on Exhibits A and B hereto.
OPINION
Based upon the foregoing, the representations contained in Exhibits A and B
hereto, and our review of the relevant legal authorities, it is our opinion
that:
1. The acquisition by Global Total Return Fund of substantially all of
the assets of International Bond Fund in exchange solely for voting shares of
Global Total Return Fund and the assumption by Global Total Return Fund of
International Bond Fund's liabilities, if any, followed by the distribution of
Global Total Return Fund's voting shares by International Bond Fund pro rata to
its shareholders, as a liquidating distribution, and the liquidation of
International Bond Fund pursuant to the Agreement and constructively in exchange
for the shareholders' International Bond Fund shares, will constitute a
reorganization within the meaning of Section 368(a) of the Code, and
International Bond Fund and Global Total Return Fund each will be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
2. International Bond Fund's shareholders will recognize no gain or loss
upon the receipt of Class A, Class B, Class C, and Class Z shares of Global
Total Return Fund solely in exchange for and in cancellation of International
Bond Fund shares of common stock, as described above and in the Agreement. Code
Section 354(a)(1).
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
March 14, 2001
Page 3
3. No gain or loss will be recognized by International Bond Fund upon
the transfer of substantially all of its assets to Global Total Return Fund
in exchange solely for Class A, Class B, Class C, and Class Z shares of
Global Total Return Fund and the assumption by Global Total Return Fund of
International Bond Fund's liabilities, if any. IRC Sections 361(a) and
357(a). In addition, no gain or loss will be recognized by International Bond
Fund on the distribution of such shares to the International Bond Fund
shareholders in liquidation of International Bond Fund. Code Section
361(c)(1).
4. No gain or loss will be recognized by Global Total Return Fund upon
the acquisition of International Bond Fund's assets in exchange solely for
Class A, Class B, Class C, and Class Z shares of Global Total Return Fund and
the assumption of International Bond Fund's liabilities, if any. Code
Section 1032(a).
5. Global Total Return Fund's basis in the assets acquired from
International Bond Fund will be the same as the basis of such assets in the
hands of International Bond Fund immediately before the Reorganization, and the
holding period of such assets acquired by Global Total Return Fund will include
the holding period thereof when held by International Bond Fund immediately
before the Reorganization. Code Sections 362(b) and 1223(2).
6. International Bond Fund shareholders' basis in the Class A, Class B,
Class C, and Class Z shares of Global Total Return Fund to be received by them
pursuant to the Reorganization will be the same as their respective basis in the
Class A, Class B, Class C, and Class Z shares of International Bond Fund to be
constructively surrendered in exchange therefor. Code Section 358(a)(1).
7. The holding period of Global Total Return Fund shares to be received
by International Bond Fund shareholders will include the period during which
International Bond Fund shares to be constructively surrendered in exchange
therefor were held, provided such International Bond Fund shares were held as
capital assets by those shareholders on the date of the Reorganization.
Code Section 1223(1).
You should be aware that this opinion is not binding on the Internal
Revenue Service or the courts and that no ruling of the Internal Revenue Service
has been requested. No opinion is expressed concerning the state, local or
foreign tax consequences of the Reorganization.
This opinion is being delivered to you pursuant to paragraph 8.6 of the
Agreement.
Prudential Global Total Return Fund, Inc.
Prudential International Bond Fund, Inc.
March 14, 2001
Page 4
We hereby give you our consent to your inclusion of this opinion as an
exhibit to Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-14 filed by Global Total Return Fund with the Securities and Exchange
Commission and to the references to our firm contained in the Proxy Statement.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Gardner, Carton & Douglas