SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-9998
(212) 758-9500
September 18, 1998
Prudential National Municipals Fund, Inc.
Gateway Center Three
Newark, New Jersey 07102
Prudential Municipal Bond Fund
(Intermediate 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
Bond Fund, a Massachusetts business trust ("Bond Fund") in connection with
the proposed transfer of the assets of the Intermediate Series ("Intermediate
Series") of Bond Fund to the National Municipals Fund and the assumption by
National Municipals Fund of Intermediate Series' liabilities, if any, in
exchange for shares of the National Municipals Fund (the "Shares") pursuant
to an Agreement and Plan of Reorganization (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
Intermediate 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 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 Appendix B 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
Prudential National Municipals Fund, Inc. Prudential Municipal Bond Fund
(Intermediate Series) September 18, 1998 Page 2
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
Intermediate Series shareholder will be equal to the fair market value of the
shares of beneficial interest of Intermediate Series surrendered in exchange
therefor upon the liquidation of Intermediate Series.
2. There will be no plan or intention by any shareholder of
Intermediate Series who owns 5 percent or more of Intermediate Series shares
of beneficial interest, and to the best of the knowledge of management of
Intermediate Series, there will be no plan or intention on the part of the
remaining shareholders of Intermediate Series, to sell, exchange, or
otherwise dispose of a number of Shares received in the Reorganization that
would reduce Intermediate Series shareholders' ownership of Shares of
National Municipals Fund to a number of Shares having a value, as of the
Closing Date, of less than 50 percent of the value of all formerly
outstanding shares of beneficial interest of Intermediate Series as of the
same date. For purposes hereof, shares of beneficial interest of
Intermediate Series exchanged for cash or other property, surrendered by
dissenters, or exchanged for cash in lieu of fractional Shares of National
Municipals Fund will be treated as outstanding shares of beneficial interest
of Intermediate Series at the Closing Date of the Reorganization. Moreover,
shares of beneficial interest of Intermediate Series and Shares of National
Municipals Fund held by Intermediate Series shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Reorganization and as
part of the Reorganization will be considered in making this assumption.
3. Pursuant to the Agreement, Intermediate Series will distribute in
complete liquidation of Intermediate Series, the Shares of National
Municipals Fund received by Intermediate Series in the Reorganization.
4. The liabilities of Intermediate 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 Intermediate Series in the
ordinary
Prudential National Municipals Fund, Inc. Prudential Municipal Bond Fund
(Intermediate Series) September 18, 1998 Page 3
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 Intermediate Series with respect to the
Reorganization will be borne by Intermediate Series. Each shareholder of
Intermediate 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 Intermediate Series that was issued, acquired, or will be
settled at a discount.
7. Intermediate 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 Intermediate Series transferred to National
Municipals Fund will include all assets owned by Intermediate Series at fair
market value on the Closing Date subject to all known liabilities of
Intermediate Series at such time.
9. In accordance with the terms of the Agreement, Intermediate 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 Intermediate Series immediately prior to the Reorganization. For purposes
of this assumption, amounts paid by Intermediate Series to shareholders who
receive cash or other property, amounts paid to dissenters, amounts used by
Intermediate Series to pay its reorganization expenses and all redemptions
and distributions (other than regular, normal redemptions and dividends) made
by Intermediate Series immediately preceding the Reorganization will be
included as assets of Intermediate Series held immediately prior to the
Reorganization.
10. The fair market value of the assets of Intermediate 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. Intermediate 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 Bond Fund (Intermediate Series)
September 18, 1998
Page 4
12. No cash will be paid to the shareholders of Intermediate Series in
lieu of fractional Shares.
13. For federal income tax purposes, Intermediate 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 Intermediate Series and will continue to apply through
the Closing Date.
14. As of the Closing Date, Intermediate 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 Intermediate 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 Section 853(b)(5)(C)
of the Code) over its deductions disallowed under Sections 265 and 171(a)(2)
for the taxable year of Intermediate Series ending on the Closing Date and
all its net capital gain realized in such taxable year.
15. Except to the extent necessary to comply with its legal obligation
to redeem its own shares, National Municipals Fund will have no plan or
intention to reacquire any of the Shares issued in the Reorganization.
16. Aside from an initial realignment of the portfolio of Intermediate
Series in which National Municipals Fund will dispose of no more than 66 2/3%
of Intermediate Series' assets acquired in the Reorganization, National
Municipals Fund will have no plan or intention to sell or otherwise dispose
of any of the assets of the Intermediate Series acquired in the
Reorganization, other than dispositions made in the ordinary course of
business.
17. Following the Reorganization, National Municipals Fund will
continue the historic business of Intermediate Series or use a significant
portion of Intermediate Series' historic business assets in its business.
18. 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 Intermediate Series.
19. 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).
20. 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
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Intermediate Series)
September 18, 1998
Page 5
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.
21. No compensation received by any shareholder-employee of
Intermediate 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 we are members of the Bar of the State of New York and 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 Reorganization will constitute a reorganization within the meaning
of Section 368(a)(1)(C) of the Code;
2. Intermediate Series and National Municipals Fund will each be a "party
to a reorganization" within the meaning of Section 368(b) of the Code;
3. Pursuant to Sections 361(a) and 357(a) of the Code, no gain or loss
will be recognized by Intermediate Series upon the transfer of its
assets to National Municipals Fund in exchange solely for Shares of
National Municipals Fund as a result of the Reorganization and the
assumption by National Municipals Fund of Intermediate Series'
liabilities, if any, or upon the distribution (whether actual or
constructive) of the Shares of National Municipals Fund in complete
liquidation of Intermediate Series;
4. Pursuant to Section 1032(a) of the Code, no gain or loss will be
recognized by National Municipals Fund upon its acquisition of
Intermediate Series' assets solely in exchange for Shares of National
Municipals Fund and the assumption by National Municipals Fund of the
liabilities of Intermediate Series;
5. Pursuant to Section 362(b) of the Code, the basis of the assets of
Intermediate Series acquired by National Municipals Fund will be the
same as the basis of such assets when held by Intermediate Series
immediately prior to the Reorganization;
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Intermediate Series)
September 18, 1998
Page 6
6. Pursuant to Section 1223(2) of the Code, the holding period of the
assets of Intermediate Series acquired by National Municipals Fund
will include the period during which such assets were held by
Intermediate Series;
7. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by a shareholder of Intermediate Series upon the exchange
of his or her shares of beneficial interest solely for Shares of
National Municipals Fund, including fractional Shares, in liquidation
of Intermediate Series;
8. Pursuant to Section 358(a)(1) of the Code, the basis of the Shares of
National Municipals Fund received by former Intermediate Series
shareholders will be the same as the basis of Intermediate Series
shares of beneficial interest surrendered in exchange therefor; and
9. Pursuant to Section 1223(1) of the Code, the holding period for Shares
of National Municipals Fund received by each shareholder of
Intermediate Series in exchange for his or her shares of beneficial
interest of Intermediate Series will include the period during which
such shareholder held shares of beneficial interest of Intermediate
Series (provided Intermediate Series shares of beneficial interest
were held as capital assets 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 to any reference to our
firm in the Registration Statement or in the Prospectus constituting part
thereof.
Very truly yours,
/s/ Swidler Berlin Shereff Friedman, LLP
Swidler Berlin Shereff Friedman, LLP
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Intermediate Series)
September 18, 1998
Page 7
SBSF:JHN:MKN:RDB:SDB:GNB
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-9998
(212) 758-9500
September 18, 1998
Prudential National Municipals Fund, Inc.
Gateway Center Three
Newark, New Jersey 07102
Prudential Municipal Series Fund
(Michigan 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 Michigan Series ("Michigan
Series") of Series Fund to the National Municipals Fund and the assumption by
National Municipals Fund of Michigan Series' liabilities, if any, in exchange
for Class A shares of the National Municipals Fund (the "Shares") pursuant to
an Agreement and Plan of Reorganization (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
Michigan 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 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 Appendix B 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
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Michigan Series)
September 18, 1998
Page 2
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 Michigan
Series shareholder will be equal to the fair market value of the shares of
beneficial interest of Michigan Series surrendered in exchange therefor upon
the liquidation of Michigan Series.
2. There will be no plan or intention by any shareholder of Michigan
Series who owns 5 percent or more of Michigan Series shares of beneficial
interest, and to the best of the knowledge of management of Michigan Series,
there will be no plan or intention on the part of the remaining shareholders
of Michigan Series, to sell, exchange, or otherwise dispose of a number of
Shares received in the Reorganization that would reduce Michigan Series
shareholders' ownership of Shares of National Municipals Fund to a number of
Shares having a value, as of the Closing Date, of less than 50 percent of the
value of all formerly outstanding shares of beneficial interest of Michigan
Series as of the same date. For purposes hereof, shares of beneficial
interest of Michigan Series exchanged for cash or other property, surrendered
by dissenters, or exchanged for cash in lieu of fractional Shares of National
Municipals Fund will be treated as outstanding shares of beneficial interest
of Michigan Series at the Closing Date of the Reorganization. Moreover,
shares of beneficial interest of Michigan Series and Shares of National
Municipals Fund held by Michigan Series shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Reorganization and as
part of the Reorganization will be considered in making this assumption.
3. Pursuant to the Agreement, Michigan Series will distribute in
complete liquidation of Michigan Series, the Shares of National Municipals
Fund received by Michigan Series in the Reorganization.
4. The liabilities of Michigan 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 Michigan Series in the ordinary course
of its business, and National Municipals Fund will pay no other
consideration, except for
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Michigan Series)
September 18, 1998
Page 3
the Shares, in connection with the Reorganization.
5. All expenses incurred by Michigan Series with respect to the
Reorganization will be borne by Michigan Series. Each shareholder of
Michigan 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 Michigan Series that was issued, acquired, or will be
settled at a discount.
7. Michigan 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 Michigan Series transferred to National Municipals
Fund will include all assets owned by Michigan Series at fair market value on
the Closing Date subject to all known liabilities of Michigan Series at such
time.
9. In accordance with the terms of the Agreement, Michigan 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
Michigan Series immediately prior to the Reorganization. For purposes of
this assumption, amounts paid by Michigan Series to shareholders who receive
cash or other property, amounts paid to dissenters, amounts used by Michigan
Series to pay its reorganization expenses and all redemptions and
distributions (other than regular, normal redemptions and dividends) made by
Michigan Series immediately preceding the Reorganization will be included as
assets of Michigan Series held immediately prior to the Reorganization.
10. The fair market value of the assets of Michigan 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. Michigan 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 Michigan Series in lieu of
fractional Shares.
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Michigan Series)
September 18, 1998
Page 4
13. For federal income tax purposes, Michigan 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 Michigan Series and will continue to apply through the
Closing Date.
14. As of the Closing Date, Michigan 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 Michigan 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 Section 853(b)(5)(C) of the
Code) over its deductions disallowed under Sections 265 and 171(a)(2) for the
taxable year of Michigan Series ending on the Closing Date and all its net
capital gain realized in such taxable year.
15. Except to the extent necessary to comply with its legal obligation
to redeem its own shares, National Municipals Fund will have no plan or
intention to reacquire any of the Shares issued in the Reorganization.
16. Aside from an initial realignment of the portfolio of Michigan
Series in which National Municipals Fund will dispose of no more than 66 2/3%
of Michigan Series' assets acquired in the Reorganization, National
Municipals Fund will have no plan or intention to sell or otherwise dispose
of any of the assets of the Michigan Series acquired in the Reorganization,
other than dispositions made in the ordinary course of business.
17. Following the Reorganization, National Municipals Fund will
continue the historic business of Michigan Series or use a significant
portion of Michigan Series' historic business assets in its business.
18. 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 Michigan Series.
19. 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).
20. 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 Bond Fund (Michigan Series)
September 18, 1998
Page 5
21. No compensation received by any shareholder-employee of Michigan
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 we are members of the Bar of the State of New York and 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 Reorganization will constitute a reorganization within the meaning
of Section 368(a)(1)(C) of the Code;
2. Michigan Series and National Municipals Fund will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Code;
3. Pursuant to Sections 361(a) and 357(a) of the Code, no gain or loss
will be recognized by Michigan Series upon the transfer of its assets
to National Municipals Fund in exchange solely for Shares of National
Municipals Fund as a result of the Reorganization and the assumption
by National Municipals Fund of Michigan Series' liabilities, if any,
or upon the distribution (whether actual or constructive) of the
Shares of National Municipals Fund in complete liquidation of Michigan
Series;
4. Pursuant to Section 1032(a) of the Code, no gain or loss will be
recognized by National Municipals Fund upon its acquisition of
Michigan Series' assets solely in exchange for Shares of National
Municipals Fund and the assumption by National Municipals Fund of the
liabilities of Michigan Series;
5. Pursuant to Section 362(b) of the Code, the basis of the assets of
Michigan Series acquired by National Municipals Fund will be the same
as the basis of such assets when held by Michigan Series immediately
prior to the Reorganization;
6. Pursuant to Section 1223(2) of the Code, the holding period of the
assets of Michigan Series acquired by National Municipals Fund will
include the period during which such assets were held by Michigan
Series;
Prudential National Municipals Fund, Inc.
Prudential Municipal Bond Fund (Michigan Series)
September 18, 1998
Page 6
7. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by a shareholder of Michigan Series upon the exchange of
his or her shares of beneficial interest solely for Shares of National
Municipals Fund, including fractional Shares, in liquidation of
Michigan Series;
8. Pursuant to Section 358(a)(1) of the Code, the basis of the Shares of
National Municipals Fund received by former Michigan Series
shareholders will be the same as the basis of Michigan Series shares
of beneficial interest surrendered in exchange therefor; and
9. Pursuant to Section 1223(1) of the Code, the holding period for Shares
of National Municipals Fund received by each shareholder of Michigan
Series in exchange for his or her shares of beneficial interest of
Michigan Series will include the period during which such shareholder
held shares of beneficial interest of Michigan Series (provided
Michigan Series shares of beneficial interest were held as capital
assets 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 to any reference to our
firm in the Registration Statement or in the Prospectus constituting part
thereof.
Very truly yours,
/s/ Swidler Berlin Shereff Friedman, LLP
Swidler Berlin Shereff Friedman, LLP
SBSF:JHN:MKN:RDB:SDB:GNB
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022-9998
(212) 758-9500
September 18, 1998
Prudential National Municipals Fund, Inc.
Gateway Center Three
Newark, New Jersey 07102
Prudential Municipal Series Fund
(Maryland 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 Maryland Series ("Maryland
Series") of Series Fund to the National Municipals Fund and the assumption by
National Municipals Fund of Maryland Series' liabilities, if any, in exchange
for Class A shares of the National Municipals Fund (the "Shares") pursuant to
an Agreement and Plan of Reorganization (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
Maryland 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 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 Appendix B 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
Prudential National Municipals Fund, Inc.
Prudential Municipal Series Fund (Maryland Series)
September 18, 1998
Page 2
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 Maryland
Series shareholder will be equal to the fair market value of the shares of
beneficial interest of Maryland Series surrendered in exchange therefor upon
the liquidation of Maryland Series.
2. There will be no plan or intention by any shareholder of Maryland
Series who owns 5 percent or more of Maryland Series shares of beneficial
interest, and to the best of the knowledge of management of Maryland Series,
there will be no plan or intention on the part of the remaining shareholders
of Maryland Series, to sell, exchange, or otherwise dispose of a number of
Shares received in the Reorganization that would reduce Maryland Series
shareholders' ownership of Shares of National Municipals Fund to a number of
Shares having a value, as of the Closing Date, of less than 50 percent of the
value of all formerly outstanding shares of beneficial interest of Maryland
Series as of the same date. For purposes hereof, shares of beneficial
interest of Maryland Series exchanged for cash or other property, surrendered
by dissenters, or exchanged for cash in lieu of fractional Shares of National
Municipals Fund will be treated as outstanding shares of beneficial interest
of Maryland Series at the Closing Date of the Reorganization. Moreover,
shares of beneficial interest of Maryland Series and Shares of National
Municipals Fund held by Maryland Series shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the Reorganization and as
part of the Reorganization will be considered in making this assumption.
3. Pursuant to the Agreement, Maryland Series will distribute in
complete liquidation of Maryland Series, the Shares of National Municipals
Fund received by Maryland Series in the Reorganization.
4. The liabilities of Maryland 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 Maryland Series in the ordinary course
of its business, and National Municipals Fund will pay no other
consideration, except for
Prudential National Municipals Fund, Inc.
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September 18, 1998
Page 3
the Shares, in connection with the Reorganization.
5. All expenses incurred by Maryland Series with respect to the
Reorganization will be borne by Maryland Series. Each shareholder of
Maryland 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 Maryland Series that was issued, acquired, or will be
settled at a discount.
7. Maryland 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 Maryland Series transferred to National Municipals
Fund will include all assets owned by Maryland Series at fair market value on
the Closing Date subject to all known liabilities of Maryland Series at such
time.
9. In accordance with the terms of the Agreement, Maryland 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
Maryland Series immediately prior to the Reorganization. For purposes of
this assumption, amounts paid by Maryland Series to shareholders who receive
cash or other property, amounts paid to dissenters, amounts used by Maryland
Series to pay its reorganization expenses and all redemptions and
distributions (other than regular, normal redemptions and dividends) made by
Maryland Series immediately preceding the Reorganization will be included as
assets of Maryland Series held immediately prior to the Reorganization.
10. The fair market value of the assets of Maryland 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. Maryland 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 Maryland Series in lieu
of fractional Shares.
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September 18, 1998
Page 4
13. For federal income tax purposes, Maryland 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 Maryland Series and will continue to apply through the
Closing Date.
14. As of the Closing Date, Maryland 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 Maryland 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 Section 853(b)(5)(C) of the
Code) over its deductions disallowed under Sections 265 and 171(a)(2) for the
taxable year of Maryland Series ending on the Closing Date and all its net
capital gain realized in such taxable year.
15. Except to the extent necessary to comply with its legal obligation
to redeem its own shares, National Municipals Fund will have no plan or
intention to reacquire any of the Shares issued in the Reorganization.
16. Aside from an initial realignment of the portfolio of Maryland
Series in which National Municipals Fund will dispose of no more than 66 2/3%
of Maryland Series' assets acquired in the Reorganization, National
Municipals Fund will have no plan or intention to sell or otherwise dispose
of any of the assets of the Maryland Series acquired in the Reorganization,
other than dispositions made in the ordinary course of business.
17. Following the Reorganization, National Municipals Fund will
continue the historic business of Maryland Series or use a significant
portion of Maryland Series' historic business assets in its business.
18. 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 Maryland Series.
19. 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).
20. 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.
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September 18, 1998
Page 5
21. No compensation received by any shareholder-employee of Maryland
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 we are members of the Bar of the State of New York and 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 Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(C) of the Code;
2. Maryland Series and National Municipals Fund will each be a "party to
a reorganization" within the meaning of Section 368(b) of the Code;
3. Pursuant to Sections 361(a) and 357(a) of the Code, no gain or loss
will be recognized by Maryland Series upon the transfer of its assets
to National Municipals Fund in exchange solely for Shares of National
Municipals Fund as a result of the Reorganization and the assumption
by National Municipals Fund of Maryland Series' liabilities, if any,
or upon the distribution (whether actual or constructive) of the
Shares of National Municipals Fund in complete liquidation of Maryland
Series;
4. Pursuant to Section 1032(a) of the Code, no gain or loss will be
recognized by National Municipals Fund upon its acquisition of
Maryland Series' assets solely in exchange for Shares of National
Municipals Fund and the assumption by National Municipals Fund of the
liabilities of Maryland Series;
5. Pursuant to Section 362(b) of the Code, the basis of the assets of
Maryland Series acquired by National Municipals Fund will be the same
as the basis of such assets when held by Maryland Series immediately
prior to the Reorganization;
6. Pursuant to Section 1223(2) of the Code, the holding period of the
assets of Maryland Series acquired by National Municipals Fund will
include the period during which such assets were held by Maryland
Series;
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September 18, 1998
Page 6
7. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by a shareholder of Maryland Series upon the exchange of
his or her shares of beneficial interest solely for Shares of National
Municipals Fund, including fractional Shares, in liquidation of
Maryland Series;
8. Pursuant to Section 358(a)(1) of the Code, the basis of the Shares of
National Municipals Fund received by former Maryland Series
shareholders will be the same as the basis of Maryland Series shares
of beneficial interest surrendered in exchange therefor; and
9. Pursuant to Section 1223(1) of the Code, the holding period for Shares
of National Municipals Fund received by each shareholder of Maryland
Series in exchange for his or her shares of beneficial interest of
Maryland Series will include the period during which such shareholder
held shares of beneficial interest of Maryland Series (provided
Maryland Series shares of beneficial interest were held as capital
assets 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 to any reference to our
firm in the Registration Statement or in the Prospectus constituting part
thereof.
Very truly yours,
/s/ Swidler Berlin Shereff Friedman, LLP
Swidler Berlin Shereff Friedman, LLP
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