January [ ], 2017
Hancock Horizon Value Fund
The Advisors’ Inner Circle Fund II
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Federated MDT Stock Trust
4000 Ericsson Drive
Warrendale, PA 15086-7561
| Re: | Reorganization to Combine a Series of a Massachusetts Business Trust with a Series of a Massachusetts Business Trust |
Ladies and Gentlemen:
Federated MDT Stock Trust, a Massachusetts business trust (“Federated Fund”), and The Advisors’ Inner Circle Fund II, a Massachusetts business trust (“Hancock Trust”), on behalf of its series, Hancock Horizon Value Fund (the “Hancock Fund”), have requested our opinion as to certain federal income tax consequences of transactions (the “Reorganization”) in which the Federated Fund will acquire all or substantially all of the assets of the Hancock Fund in exchange solely for shares of beneficial interest in the Federated Fund (“Federated Fund Shares”) pursuant to an Agreement and Plan of Reorganization (“Agreement”) entered into among the Federated Fund, and Hancock Trust, on behalf of the Hancock Fund[1] on [ ]. Specifically, the Funds have requested our opinion that the consummation of the Reorganization will qualify as a “reorganization” (as defined in section 368(a)).[2]
In rendering this opinion, we have examined (1) the Agreement, (2) the Proxy Statement/Prospectus dated November 18, 2016, regarding the Reorganization (“Proxy Statement”) that was furnished in connection with the solicitation, by the members of the Hancock Trust’s Board of Trustees ( “Board”), of proxies for use at a special meeting of the Hancock Fund’s shareholders that was held on January 26, 2017, and (3) other documents we have deemed necessary or appropriate for the purposes hereof (collectively, “Documents”). We have assumed, for purposes hereof, the accuracy and completeness of the information contained in all the Documents. As to various matters of fact material to this opinion, we have relied, exclusively and without independent verification (with your permission), on the representations and warranties set forth in the Agreement and on the written statements and representations of officers and other representatives of the Federated Fund and the Hancock Fund (collectively, “Representations”). We have assumed that any Representation made “to the knowledge and belief” (or similar qualification) of any person or party is, and at the Closing Date (as defined in the Agreement) will be, correct without such qualification. We have also assumed that as to all matters for which a person or entity has represented that such person or entity is not a party to, does not have, or is not aware of any plan, intention, understanding, or agreement, there is no such plan, intention, understanding, or agreement. Finally, we have assumed that the Documents and the Representations present all the material and relevant facts relating to the Reorganization.
Based solely on the facts and representations set forth in the Documents and Representations, and conditioned on (i) those Representations’ being true on the closing date of the Reorganization and (ii) the Reorganization’s being consummated in accordance with the Agreement (without the waiver or modification of any terms or conditions thereof), our opinion with respect to the federal income tax consequences of the Reorganization is as follows.
1. The transfer of all or substantially all of the Hancock Fund’s assets to the Federated Fund solely in exchange for Federated Fund Shares (followed by the distribution of Federated Fund Shares to the Hancock Fund shareholders in termination and liquidation of the Hancock Fund) will constitute a “reorganization” within the meaning of section 368(a) of the Code, and the Federated Fund and the Hancock Fund will each be a “party to a reorganization” within the meaning of section 368(b) of the Code.
2. No gain or loss will be recognized by the Federated Fund upon the receipt of the assets of the Hancock Fund solely in exchange for Federated Fund Shares.
3. No gain or loss will be recognized by the Hancock Fund upon the transfer of the Hancock Fund’s assets to the Federated Fund solely in exchange for Federated Fund Shares or upon the distribution (whether actual or constructive) of Federated Fund Shares to Hancock Fund shareholders in exchange for their Hancock Fund shares.
4. No gain or loss will be recognized by any Hancock Fund shareholder upon the exchange of its Hancock Fund shares for Federated Fund Shares.
5. The aggregate tax basis of the Federated Fund Shares received by each Hancock Fund shareholder pursuant to the Reorganization will be the same as the aggregate tax basis of the Hancock Fund shares held by such Hancock Fund shareholder immediately prior to the Reorganization. The holding period of the Federated Fund Shares received by each Hancock Fund shareholder will include the holding period during which the Hancock Fund shares exchanged therefor were held by such shareholder, provided the Hancock Fund shares were held as capital assets at the time of the Reorganization.
6. The tax basis of the Hancock Fund's assets acquired by the Federated Fund will be the same as the tax basis of such assets to the Hancock Fund immediately prior to the Reorganization. The holding period of the assets of the Hancock Fund in the hands of the Federated Fund will include the period during which those assets were held by the Hancock Fund.
No opinion is expressed as to the effect of the Reorganization on the Federated Fund, the Hancock Fund or any Hancock Fund shareholder with respect to any asset as to which unrealized gain or loss is required to be recognized for federal income tax purposes at the end of a taxable year (or on the termination or transfer thereof) under a mark-to-market system of accounting.
Our opinion is based on, and is conditioned on the continued applicability of, the provisions of the Code and the Regulations, judicial decisions, and rulings and other pronouncements of the Internal Revenue Service (“Service”) in existence on the date hereof. All the foregoing authorities are subject to change or modification that can be applied retroactively and thus also could affect the conclusions expressed herein; we assume no responsibility to update our opinion after the date hereof with respect to any such change or modification. Our opinion represents our best judgment regarding how a court would decide the issues addressed herein and is not binding on the Service or any court. Moreover, our opinion does not provide any assurance that a position taken in reliance thereon will not be challenged by the Service, and although we believe that our opinion would be sustained by a court if challenged, there can be no assurances to that effect.
Our opinion addresses only the specific federal income tax consequences of the Reorganization set forth above and does not address any other federal, or any state, local, or foreign tax consequences of the Reorganization or any other action (including any taken in connection therewith). Our opinion also applies only if each Fund is solvent, and we express no opinion about the tax treatment of the transactions described herein if any Fund is insolvent. Finally, our opinion is solely for the information of the addressees and their shareholders, and may not be relied on for any purpose by any other person without our express written consent.
Very truly yours,
[1] Each of the Hancock Fund and Federated Fund is sometimes referred to herein as a “Fund.”
[2] All “section” references are to the Internal Revenue Code of 1986, as amended (“Code”), unless otherwise noted, and all “Treas. Reg. §” references are to the regulations under the Code (“Regulations”).
