EX-12 2 efc7-0414_5962296ex12.txt Exhibit 12 SIDLEY AUSTIN LLP BEIJING GENEVA SAN FRANCISCO 787 SEVENTH AVENUE BRUSSELS HONG KONG SHANGHAI SIDLEY AUSTIN LLP NEW YORK, NY 10019 CHICAGO LONDON SINGAPORE ----------------- (212) 839 5300 DALLAS LOS ANGELES TOKYO SIDLEY (212) 839 5599 FAX FRANKFURT NEW YORK WASHINGTON, DC FOUNDED 1866 October 16, 2006 BlackRock Short-Term Municipal Fund 800 Scudders Mill Road Plainsboro, New Jersey 08536 BlackRock UltraShort Portfolio 100 Bellevue Parkway Wilmington, Delaware 19809 Re: Reorganization of BlackRock Short-Term Municipal Fund and BlackRock UltraShort Municipal Portfolio ------------------------------------------------------------------- Ladies and Gentlemen: You have requested our opinion as to certain Federal income tax consequences of (i) the acquisition by BlackRock Short-Term Municipal Fund (formerly Short-Term Portfolio) ("Acquiring Fund"), an open-end, registered management investment company organized as a separate series of the BlackRock Municipal Bond Fund, Inc. (formerly Merrill Lynch Municipal Bond Fund, Inc. ) (the "Corporation"), a Maryland corporation, of substantially all of the assets of BlackRock UltraShort Municipal Portfolio ("Target Fund"), an open-end, registered management investment company organized as a separate series of the BlackRock Funds ("BlackRock Funds"), a Massachusetts business trust, and the assumption by Acquiring Fund of the Stated Liabilities of Target Fund, and (ii) the simultaneous distribution of newly issued Investor A, Institutional, Service and BlackRock shares of Acquiring Fund, each with a par value of $0.10 per share (collectively, the "Acquiring Fund Shares") to stockholders of Target Fund (the steps in (i) and (ii) collectively, the "Reorganization"). After the Reorganization, Target Fund will cease to operate, will have no assets remaining, will have final federal and state (if any) tax returns filed on its behalf and will have all of its shares cancelled under Massachusetts law. This opinion letter is furnished pursuant to Section 8.6 of the Agreement and Plan of Reorganization, dated as of June 19, 2006, by and between the Corporation and BlackRock Funds (the "Plan"). All terms used herein, unless otherwise defined, are used as defined in the Plan. In rendering our opinion, we have reviewed and relied upon (a) the Plan, (b) the Registration Statement on Form N-14 (File No. 333-133875) of Merrill Lynch Multi-State Municipal Series Trust, as amended to date (the "N-14 Registration Statement"), and (c) certain representations concerning the Reorganization made by Acquiring Fund and Target Fund in letters dated October 16, 2006 (the "Representations"). SIDLEY AUSTIN LLP ----------------- SIDLEY Based upon current law, including cases and administrative interpretations thereof and on the reviewed materials listed above, it is our opinion that: 1. The acquisition by Acquiring Fund of substantially all of the assets of Target Fund and the assumption by Acquiring Fund of the Stated Liabilities, as described in the Plan, will constitute a reorganization within the meaning of section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), and Acquiring Fund and Target Fund will each be a "party to a reorganization" within the meaning of section 368(b) of the Code. 2. In accordance with section 361(a) of the Code, Target Fund will not recognize any gain or loss either on the transfer of substantially all of its assets to Acquiring Fund in exchange solely for shares of its common stock and the assumption by Acquiring Fund of the Stated Liabilities or on the simultaneous distribution of such common stock to Target Fund stockholders. 3. Under section 1032 of the Code, Acquiring Fund will not recognize any gain or loss as a result of the acquisition by Acquiring Fund of substantially all of the assets of Target Fund in the Reorganization. 4. In accordance with section 354(a)(1) of the Code, stockholders of Target Fund will recognize no gain or loss on the exchange of their shares of Target Fund common stock solely for corresponding shares of Acquiring Fund common stock. 5. Under section 362(b) of the Code, the basis of the assets of Target Fund received by Acquiring Fund will be the same as the basis of such assets to Target Fund immediately before the Reorganization. 6. Under section 358 of the Code, the aggregate basis of the shares of Acquiring Fund common stock, including fractional shares, received by each stockholder of Target Fund will be the same as the aggregate basis of the shares of common stock of Target Fund exchanged pursuant to the Reorganization. 7. Under section 1223 of the Code, the holding period of the shares of Acquiring Fund common stock, including fractional shares, received in the Reorganization will include the holding period of the shares of Target Fund common stock exchanged pursuant to the Reorganization, provided that such shares of common stock were held as a capital asset on the date of the Reorganization. 8. Under section 1223 of the Code, the holding period of the assets acquired by Acquiring Fund from Target Fund will include the period during which such assets were held by Target Fund. Our opinion represents our best legal judgment with respect to the proper federal income tax treatment of the Reorganization, based on the facts contained in the Plan, the N-14 SIDLEY AUSTIN LLP ----------------- SIDLEY Registration Statement and the Representations. Our opinion assumes the accuracy of the facts as described in the Plan, the N-14 Registration Statement and the Representations and could be affected if any of the facts as so described are inaccurate. We are furnishing this opinion letter to the addressees hereof, solely for the benefit of such addressees in connection with the Reorganization. This opinion letter is not to be used, circulated, quoted or otherwise referred to for any other purpose. Very truly yours, /s/ SIDLEY AUSTIN LLP