-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AtVPR/megEH0W+BunrJhoia+iV88IMf1VZAVbS/Q+KjaVAEU4iH60aw3a+y1Irtp SFu2Nc4t6MY3nkgc/ljDSA== 0000935069-08-000888.txt : 20080410 0000935069-08-000888.hdr.sgml : 20080410 20080410113203 ACCESSION NUMBER: 0000935069-08-000888 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080131 FILED AS OF DATE: 20080410 DATE AS OF CHANGE: 20080410 EFFECTIVENESS DATE: 20080410 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Advisors Inner Circle Fund II CENTRAL INDEX KEY: 0000890540 IRS NUMBER: 233040006 STATE OF INCORPORATION: MA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07102 FILM NUMBER: 08749226 BUSINESS ADDRESS: STREET 1: ONE FREEDOM VALLEY DRIVE CITY: OAKS STATE: PA ZIP: 19456 BUSINESS PHONE: 6106761000 MAIL ADDRESS: STREET 1: ONE FREEDOM VALLEY DRIVE CITY: OAKS STATE: PA ZIP: 19456 FORMER COMPANY: FORMER CONFORMED NAME: ARBOR FUND DATE OF NAME CHANGE: 19920929 0000890540 S000017483 SMARTGROWTH ETF LIPPER(R) OPTIMAL CONSERVATIVE INDEX FUND C000048337 CLASS A SHARES 0000890540 S000017484 SMARTGROWTH ETF LIPPER(R) OPTIMAL MODERATE INDEX FUND C000048339 CLASS A SHARES 0000890540 S000017485 SMARTGROWTH ETF LIPPER(R) OPTIMAL GROWTH INDEX FUND C000048341 CLASS A SHARES N-CSR 1 aiciismtgrowthcombar3_08.txt AIC II SMARTGROWTH AR 1_08 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________ FORM N-CSR ________ CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES INVESTMENT COMPANY ACT FILE NUMBER 811-07102 THE ADVISORS' INNER CIRCLE FUND II (Exact name of registrant as specified in charter) ________ c/o CT Corporation 101 Federal Street Boston, MA 02110 (Address of principal executive offices) (Zip code) SEI Investments One Freedom Valley Drive Oaks, PA 19456 (Name and address of agent for service) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-877-446-3863 DATE OF FISCAL YEAR END: JANUARY 31, 2008 DATE OF REPORTING PERIOD: JANUARY 31, 2008 ITEM 1. REPORTS TO STOCKHOLDERS. THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH FUNDS SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND ANNUAL REPORT JANUARY 31, 2008 - -------------------------------------------------------------------------------- [LOGO OMITTED] SMART|GROWTH[R] MUTUAL FUNDS INVESTMENT ADVISER: HENNION & WALSH ASSET MANAGEMENT, INC. - -------------------------------------------------------------------------------- THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Shareholders' Letter ..................................................... 1 Schedules of Investments.................................................. 7 Statements of Assets and Liabilities...................................... 12 Statements of Operations.................................................. 13 Statements of Changes in Net Assets....................................... 14 Financial Highlights...................................................... 17 Notes to Financial Statements............................................. 20 Report of Independent Registered Public Accounting Firm .................. 29 Trustees and Officers of The Advisors' Inner Circle Fund II............... 30 Disclosure of Fund Expenses............................................... 38 Notice to Shareholders.................................................... 40 - -------------------------------------------------------------------------------- The Funds will file their complete schedule of fund holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of each period. The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov, and may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities, as well as information relating to how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available (i) without charge, upon request, by calling 1-888-465-5722; and (ii) on the Commission's website at http://www.sec.gov. THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHAREHOLDERS' LETTER - -------------------------------------------------------------------------------- Dear Shareholders: The inception date for the SmartGrowth(R) family of Mutual Funds (each, a "Fund," and collectively, the "Funds") was June 1, 2007, so the annual report covers the eight-month period ending January 31, 2008. As a reminder, there are three Funds within the SmartGrowth(R) family of mutual funds: SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND (LPCAX) The Fund's investment objective is to track the performance of the Lipper(TM) Optimal Conservative Index which is a target risk benchmark consisting of a select group of ETFs, rebalanced quarterly, designed to maximize returns given a low degree of volatility. SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND (LPMAX) The Fund's investment objective is to track the performance of the Lipper(TM) Optimal Moderate Index which is a target risk benchmark consisting of a select group of ETFs, rebalanced quarterly, designed to maximize returns given a moderate degree of volatility. SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND (LPGAX) The Fund's investment objective is to track the performance of the Lipper(TM) Optimal Growth Index which is a target risk benchmark consisting of a select group of ETFs, rebalanced quarterly, designed to maximize returns given a high degree of volatility. Each of the three Funds is categorized in the Lipper(TM) Multi-Cap Core Funds classification. Performance comparisons against this Index are as follows: CUMULATIVE PERFORMANCE FUND/BENCHMARK INCEPTION TO JANUARY 31, 2008 - -------------------------------------------------------------------------------- LPCAX Without Load 4.20% With Load -0.76% LIPPER(TM) MULTI-CAP CORE FUNDS INDEX -8.93% - -------------------------------------------------------------------------------- LPMAX Without Load 5.22% With Load 0.21% LIPPER(TM) MULTI-CAP CORE FUNDS INDEX -8.93% - -------------------------------------------------------------------------------- LPGAX Without Load 10.33% With Load 5.08% LIPPER(TM) MULTI-CAP CORE FUNDS INDEX -8.93% - -------------------------------------------------------------------------------- 1 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- The Funds achieved this level of performance throughout a period of great, yet not unprecedented, volatility -- as of mid-December 2007, the Dow Jones Industrial Average ("DJIA") experienced daily moves of more than 2%, up or down, 20 times in 2007 alone -- and constant uncertainty with respect to the general direction of the markets. The sub-prime mortgage meltdown essentially commenced shortly after the inception of the Funds. Home values fell on a national basis throughout the year; international equity markets outperformed U.S. equity markets and commodity prices (Ex. Wheat, Milk, Oil, Steel, Gold, etc...) soared to heights that many believed were not possible. The Funds capitalized on these themes, albeit to different degrees, based on the risk profile of each Fund. The premise of the underlying Lipper(TM) Optimal Target Risk Indices that the Funds track is to help represent the best risk-return tradeoff for a given level of risk. To validate this objective, the Funds benefited from allocations to a currency ETF that takes advantage of decreases in the value of the U.S. Dollar and an ETF whose performance is roughly 2x the inverse of the S&P 500 Index in the 3rd quarter of 2007. The indices then took on a very bearish/protective stance in the 4th quarter of 2007 with allocations to ETFs focusing on short-intermediate-term bonds and a Gold ETF while also leveraging the rapid growth of certain emerging markets by having an allocation to an ETF focused on India. As we opened 2008, the Funds took on an even more cautious stance regarding equities than they exhibited during the 4th quarter of 2007. Further, the equities exposure we see now in the Funds is generally international (EXS. INDIA AND CHINA) or specialized (EXS. CLEAN ENERGY, HEALTHCARE AND TECHNOLOGY) in nature. Broader domestic equities categories, such as the S&P 500 Index and the Russell 2000 Index, are notably absent. Fixed income is traditionally seen as an antidote to equity risk. Interestingly, though, allocations to fixed income oriented ETFs for the Funds, which rose in the 4th quarter of 2007, have now been trimmed in the 1st quarter of 2008 -- even as equity exposure has dropped as well. These shifts reflect the unique nature of the Funds, which track the revolutionary Lipper(R) Optimal Indices which analyze risk objectively -- through volatility and correlation -- rather than through longstanding investing stereotypes. While fixed income usually seems conservative, we find now that alternative assets can also provide diversification within a portfolio. Leading the way in the 1st quarter of 2008 is a currency-oriented ETF that benefits from gains in the Japanese Yen at the expense of the U.S. Dollar. Each Fund has a relatively high allocation to this ETF with LPGAX having the most 2 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- significant exposure. The Greenback seems vulnerable due to continuing fallout from sub-prime mortgage woes, weaker forecasted U.S. economic activity and potentially lower interest rates. Elsewhere, all three Funds have slightly increased their stakes in an ETF that focuses on agricultural commodities. Higher oil prices, increased demand for ethanol, which lists corn as a main ingredient, as an alternative fuel source and worldwide demand for wheat will likely continue to help drive this ETF higher in 2008. Finally, LPMAX and LPCAX have both retained significant allocations to Bond oriented ETFs which not only help to reduce volatility but also expect to gain from anticipated interest rate reductions which could increase the total return potential of these products. Despite the challenging market environment that we anticipate throughout 2008, we are confident that the SmartGrowth(R) Mutual Funds will continue to provide attractive risk-adjusted returns through what is expected to be a volatile year. Sincerely, /s/Kevin D. Mahn Kevin D. Mahn CHIEF INVESTMENT OFFICER & PORTFOLIO MANAGER THIS REPRESENTS THE MANAGER'S ASSESSMENT OF THE PORTFOLIOS AND THE MARKET ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE READER AS RESEARCH OR INVESTMENT ADVICE. DEFINITION OF THE COMPARATIVE INDICES ------------------------------------- S&P 500 INDEX is an unmanaged index containing common stocks of 500 industrial, transportation, utility and financial companies, regarded as generally representative of the U.S. stock market. The return per the total return index reflects the reinvestment of income dividends and capital gain distributions, if any, but does not reflect fees, brokerage commissions, or other expenses of investing. The LIPPER(TM) MULTI-CAP CORE FUNDS INDEX is an equally weighted representation of the largest funds in the Lipper(TM) Multi-Cap Core Classification. These funds, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one capitalization range over an extended period of time. An investment cannot be made directly in an index. 3 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND - -------------------------------------------------------------------------------- Growth of a $10,000 Investment - ------------------------------------------------ TOTAL RETURN FOR PERIOD ENDED JANUARY 31, 2008 - ------------------------------------------------ Cumulative Inception | Cumulative Inception to Date, without load | to Date, with load(1) - ------------------------------------------------ 4.20% | (0.76)% - ------------------------------------------------ [LINE GRAPH OMITTED] EDGAR REPRESENTATION OF PLOTS POINTS TO FOLLOW:
SmartGrowth(R) EFT Lipper(TM) Lipper(TM) Multi-Cap Lipper(TM) Multi-Cap Optimal Conservative Index Fund S&P 500 Index Core Funds Classification Core Funds Index 6/01/07 $9,525 $10,000 $10,000 $10,000 6/31/07 9,268 9,797 9,882 9,913 7/31/07 9,392 9,494 9,579 9,596 8/31/07 9,344 9,636 9,650 9,658 9/30/07 9,401 9,996 10,018 9,995 10/31/07 9,563 10,155 10,258 10,197 11/30/07 9,754 9,731 9,794 9,739 12/31/07 9,877 9,663 9,728 9,651 1/31/08 9,925 9,084 9,098 9,107
Period Ended on January 31st THE FUND COMMENCED OPERATIONS ON JUNE 1, 2007. LIPPER(TM) RETURNS ARE FROM MAY 31, 2007. (1) REFLECTS MAXIMUM SALES CHARGE OF 4.75%. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE BECAUSE IT IS ACTIVELY MANAGED AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. IF THE ADVISER HAD NOT LIMITED CERTAIN EXPENSES, THE FUND'S TOTAL RETURN WOULD HAVE BEEN LOWER. SEE DEFINITION OF COMPARATIVE INDICES ON PAGE 3. 4 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND - -------------------------------------------------------------------------------- Growth of a $10,000 Investment - ------------------------------------------------ TOTAL RETURN FOR PERIOD ENDED JANUARY 31, 2008 - ------------------------------------------------ Cumulative Inception | Cumulative Inception to Date, without load | to Date, with load(1) - ------------------------------------------------ 5.22% | 0.21% - ------------------------------------------------ [LINE GRAPH OMITTED] EDGAR REPRESENTATION OF PLOTS POINTS TO FOLLOW:
SmartGrowth(R) EFT Lipper(TM) Lipper(TM) Multi-Cap Lipper(TM) Multi-Cap Optimal Moderate Index Fund S&P 500 Index Core Funds Classification Core Funds Index 6/01/07 $ 9,525 $10,000 $10,000 $10,000 6/31/07 9,297 9,797 9,882 9,913 7/31/07 9,411 9,494 9,579 9,596 8/31/07 9,354 9,636 9,650 9,658 9/30/07 9,420 9,996 10,018 9,995 10/31/07 9,630 10,155 10,258 10,197 11/30/07 9,839 9,731 9,794 9,739 12/31/07 9,974 9,663 9,728 9,651 1/31/08 10,022 9,084 9,098 9,107
Period Ended on January 31st THE FUND COMMENCED OPERATIONS ON JUNE 1, 2007. LIPPER(TM) RETURNS ARE FROM MAY 31, 2007. (1) REFLECTS MAXIMUM SALES CHARGE OF 4.75%. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE BECAUSE IT IS ACTIVELY MANAGED AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. IF THE ADVISER HAD NOT LIMITED CERTAIN EXPENSES, THE FUND'S TOTAL RETURN WOULD HAVE BEEN LOWER. SEE DEFINITION OF COMPARATIVE INDICES ON PAGE 3. 5 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND - -------------------------------------------------------------------------------- Growth of a $10,000 Investment [LINE GRAPH OMITTED] EDGAR REPRESENTATION OF PLOTS POINTS TO FOLLOW: - ------------------------------------------------ TOTAL RETURN FOR PERIOD ENDED JANUARY 31, 2008 - ------------------------------------------------ Cumulative Inception | Cumulative Inception to Date, without load | to Date, with load(1) - ------------------------------------------------ 10.33% | 5.08% - ------------------------------------------------
SmartGrowth(R) EFT Lipper(TM) Lipper(TM) Multi-Cap Lipper(TM) Multi-Cap Optimal Growth Index Fund S&P 500 Index Core Funds Classification Core Funds Index 6/01/07 $ 9,525 $10,000 $10,000 $10,000 6/31/07 9,354 9,797 9,882 9,913 7/31/07 9,468 9,494 9,579 9,596 8/31/07 9,335 9,636 9,650 9,658 9/30/07 9,639 9,996 10,018 9,995 10/31/07 10,135 10,155 10,258 10,197 11/30/07 10,344 9,731 9,794 9,739 12/31/07 10,547 9,663 9,728 9,651 1/31/08 10,509 9,084 9,098 9,107
Period Ended on January 31st THE FUND COMMENCED OPERATIONS ON JUNE 1, 2007. LIPPER(TM) RETURNS ARE FROM MAY 31, 2007. (1) REFLECTS MAXIMUM SALES CHARGE OF 4.75%. THE PERFORMANCE DATA QUOTED HEREIN REPRESENTS PAST PERFORMANCE AND THE RETURN AND VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT, WHEN REDEEMED, MAY BE WORTH LESS THAN ITS ORIGINAL COST. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE AND SHOULD NOT BE CONSIDERED AS A REPRESENTATIONOF THE FUTURE RESULTS OF THE FUND. THE FUND'S PERFORMANCE ASSUMES THE REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. INDEX RETURNS ASSUME REINVESTMENT OF DIVIDENDS AND, UNLIKE A FUND'S RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IF SUCH FEES AND EXPENSES WERE INCLUDED IN THE INDEX RETURNS, THE PERFORMANCE WOULD HAVE BEEN LOWER. PLEASE NOTE THAT ONE CANNOT INVEST DIRECTLY IN AN UNMANAGED INDEX. THERE ARE NO ASSURANCES THAT THE FUND WILL MEET ITS STATED OBJECTIVES. THE FUND'S HOLDINGS AND ALLOCATIONS ARE SUBJECT TO CHANGE BECAUSE IT IS ACTIVELY MANAGED AND SHOULD NOT BE CONSIDERED RECOMMENDATIONS TO BUY INDIVIDUAL SECURITIES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. IF THE ADVISER HAD NOT LIMITED CERTAIN EXPENSES, THE FUND'S TOTAL RETURN WOULD HAVE BEEN LOWER. SEE DEFINITION OF COMPARATIVE INDICES ON PAGE 3. 6 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECTOR WEIGHTINGS (UNAUDITED)+: - -------------------------------------------------------------------------------- [BAR CHART OMITTED] EDGAR REPRESENTATION OF PLOTS POINTS TO FOLLOW: 40.2% Short Government 20.8% World Bond 19.7% Long Government 8.7% Specialty Natural Resources 6.0% Specialty Health 3.5% Pacific/Asia ex-Japan Stock 0.6% Specialty Technology 0.5% Short-Term Investment + PERCENTAGES ARE BASED ON TOTAL INVESTMENTS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS EXCHANGE TRADED FUNDS -- 93.6% - -------------------------------------------------------------------------------- SHARES VALUE ------ --------- LONG GOVERNMENT -- 18.5% iShares Lehman 7-10 Year Treasury Bond Fund........... 804 $ 72,215 -------- PACIFIC/ASIA EX-JAPAN STOCK -- 3.3% iPath MSCI India Index ETN* .......................... 108 9,035 Powershares Golden Dragon Halter USX China Portfolio.. 133 3,668 -------- 12,703 -------- SHORT GOVERNMENT -- 37.8% iShares Lehman Short Treasury Bond Fund............... 1,334 147,153 -------- SPECIALTY HEALTH -- 5.6% iShares Dow Jones US Health Care Providers Index Fund. 124 7,346 iShares Dow Jones US Medical Devices Index Fund*...... 255 14,520 -------- 21,866 -------- SPECIALTY NATURAL RESOURCES -- 8.2% PowerShares DB Agriculture Fund*...................... 638 23,600 Powershares WilderHill Clean Energy Portfolio*........ 375 8,175 -------- 31,775 -------- SPECIALTY TECHNOLOGY -- 0.6% iShares S&P GSTI Software Index Fund*................. 51 2,385 -------- WORLD BOND -- 19.6% CurrencyShares Japanese Yen Trust*.................... 814 76,386 -------- TOTAL EXCHANGE TRADED FUNDS (Cost $358,690) .................................... 364,483 -------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 7 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 0.5% - -------------------------------------------------------------------------------- SHARES VALUE ------ --------- Fidelity Money Management Fund, Institutional Class, 4.610% (A) (Cost $1,860) ........................................ 1,860 $ 1,860 -------- TOTAL INVESTMENTS -- 94.1% (Cost $360,550) .................................... $366,343 ======== PERCENTAGES ARE BASED ON NET ASSETS OF $389,221. * NON-INCOME PRODUCING SECURITY. (A) THE RATE SHOWN IS THE 7 DAY EFFECTIVE YIELD AS OF JANUARY 31, 2008. ETN -- EXCHANGE TRADED NOTE THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 8 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECTOR WEIGHTINGS (UNAUDITED)+: - -------------------------------------------------------------------------------- [BAR CHART OMITTED] EDGAR REPRESENTATION OF PLOTS POINTS TO FOLLOW: 32.8% Long Government 32.0% World Bond 14.2% Specialty Natural Resources 7.7% Specialty Health 5.7% Pacific/Asia ex-Japan Stock 4.5% Short Government 2.2% Short-Term Investment 0.9% Specialty Technology + PERCENTAGES ARE BASED ON TOTAL INVESTMENTS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS EXCHANGE TRADED FUNDS -- 99.7% - -------------------------------------------------------------------------------- SHARES VALUE ------ --------- LONG GOVERNMENT -- 33.4% iShares Lehman 7-10 Year Treasury Bond Fund........... 9,779 $ 878,350 ---------- PACIFIC/ASIA EX-JAPAN STOCK -- 5.8% iPath MSCI India Index ETN*........................... 1,300 108,758 Powershares Golden Dragon Halter USX China Portfolio.. 1,578 43,521 ---------- 152,279 ---------- SHORT GOVERNMENT -- 4.6% iShares Lehman Short Treasury Bond Fund............... 1,098 121,120 ---------- SPECIALTY HEALTH -- 7.9% iShares Dow Jones US Health Care Providers Index Fund. 1,290 76,420 iShares Dow Jones US Medical Devices Index Fund*...... 2,305 131,247 ---------- 207,667 ---------- SPECIALTY NATURAL RESOURCES -- 14.5% PowerShares DB Agriculture Fund*...................... 7,702 284,897 Powershares WilderHill Clean Energy Portfolio*........ 4,401 95,942 ---------- 380,839 ---------- SPECIALTY TECHNOLOGY -- 0.9% iShares S&P GSTI Software Index Fund*................. 517 24,175 ---------- WORLD BOND -- 32.6% CurrencyShares Japanese Yen Trust*.................... 9,159 859,480 ---------- TOTAL EXCHANGE TRADED FUNDS (Cost $2,572,735).................................. 2,623,910 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 2.2% - -------------------------------------------------------------------------------- SHARES VALUE ------ --------- Fidelity Money Management Fund, Institutional Class, 4.610% (A) (Cost $58,394)...................................... 58,394 $ 58,394 ---------- TOTAL INVESTMENTS -- 101.9% (Cost $2,631,129).................................. $2,682,304 ========== PERCENTAGES ARE BASED ON NET ASSETS OF $2,632,798. * NON-INCOME PRODUCING SECURITY. (A) THE RATE SHOWN IS THE 7 DAY EFFECTIVE YIELD AS OF JANUARY 31, 2008. ETN -- EXCHANGE TRADED NOTE THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 10 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECTOR WEIGHTINGS (UNAUDITED)+: - -------------------------------------------------------------------------------- [BAR CHART OMITTED] EDGAR REPRESENTATION OF PLOTS POINTS TO FOLLOW: 48.6% World Bond 24.2% Specialty Natural Resources 12.8% Short-Term Investment 12.1% Pacific/Asia ex-Japan Stock 2.3% Long Government + PERCENTAGES ARE BASED ON TOTAL INVESTMENTS - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS EXCHANGE TRADED FUNDS -- 98.8% - -------------------------------------------------------------------------------- SHARES VALUE ------ --------- LONG GOVERNMENT -- 2.6% iShares Lehman 20+ Year Treasury Bond Fund ......... 1,879 $ 178,448 ---------- PACIFIC/ASIA EX-JAPAN STOCK -- 13.8% iPath MSCI India Index ETN* ........................ 7,909 661,667 Powershares Golden Dragon Halter USX China Portfolio* 10,402 286,887 ---------- 948,554 ---------- SPECIALTY NATURAL RESOURCES -- 27.4% PowerShares DB Agriculture Fund*.................... 39,183 1,449,379 Powershares WilderHill Clean Energy Portfolio* ..... 20,281 442,126 ---------- 1,891,505 ---------- WORLD BOND -- 55.0% CurrencyShares Japanese Yen Trust* ................. 40,402 3,791,324 ---------- TOTAL EXCHANGE TRADED FUNDS (Cost $6,694,264) ................................ 6,809,831 ---------- - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 14.5% - -------------------------------------------------------------------------------- Fidelity Money Management Fund, Institutional Class, 4.610% (A) (Cost $998,579)..................................... 998,579 998,579 ---------- TOTAL INVESTMENTS -- 113.3% (Cost $7,692,843)................................. $7,808,410 ========== PERCENTAGES ARE BASED ON NET ASSETS OF $6,891,783. * NON-INCOME PRODUCING SECURITY. (A) THE RATE SHOWN IS THE 7 DAY EFFECTIVE YIELD AS OF JANUARY 31, 2008. ETN -- EXCHANGE TRADED NOTE THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES - --------------------------------------------------------------------------------
SMARTGROWTH(R) SMARTGROWTH(R) SMARTGROWTH(R) ETF LIPPER(TM) ETF LIPPER(TM) ETF LIPPER(TM) OPTIMAL OPTIMAL OPTIMAL CONSERVATIVE MODERATE GROWTH INDEX FUND INDEX FUND INDEX FUND -------------- -------------- -------------- ASSETS: Investments at Value (Cost $360,550, $2,631,129, and $7,692,843, respectively) ... $366,343 $2,682,304 $7,808,410 Receivable for Capital Shares Sold ............. 75,005 -- 59,123 Investment Advisory Reimbursement to the Fund .. -- 15,031 25,425 Deferred Offering Costs ........................ 7,123 23,840 27,671 Prepaid Expenses ............................... 919 2,596 2,646 Dividends Receivable ........................... 20 217 1,119 -------- ---------- ---------- Total Assets ............................ 449,410 2,723,988 7,924,394 -------- ---------- ---------- LIABILITIES: Payable for Investment Securities Purchased .... -- 45,161 965,100 Payable due to Investment Adviser .............. 29,997 -- -- Payable due to Administrator ................... 623 5,007 10,887 Chief Compliance Officer Fees Payable .......... 163 1,214 3,152 Payable due to Trustees ........................ 107 796 2,061 Payable due to Distributor ..................... 61 483 1,054 Other Accrued Expenses ......................... 29,238 38,529 50,357 -------- ---------- ---------- Total Liabilities ....................... 60,189 91,190 1,032,611 -------- ---------- ---------- NET ASSETS ...................................... $389,221 $2,632,798 $6,891,783 ======== ========== ========== NET ASSETS CONSIST OF: Paid-in-Capital ................................ $376,337 $2,506,753 $6,680,842 Distributions in Excess of Net Investment Income/ Accumulated Net Investment Loss ............. (312) (2,909) (5,318) Accumulated Net Realized Gain on Investments ... 7,403 77,779 100,692 Net Unrealized Appreciation on Investments ..... 5,793 51,175 115,567 -------- ---------- ---------- NET ASSETS ...................................... $389,221 $2,632,798 $6,891,783 ======== ========== ========== CLASS A SHARES: Outstanding Shares of Beneficial Interest (unlimited authorization--no par value) ..... 37,591 252,351 631,554 ======== ========== ========== Net Asset Value and Redemption Price per Share ............................. $ 10.35 $ 10.43 $ 10.91 ======== ========== ========== Maximum Offering Price per Share (net asset value / 95.25%)................... $ 10.87 $ 10.95 $ 11.45 ======== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 12 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS FOR THE PERIOD ENDED JANUARY 31, 2008* - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - --------------------------------------------------------------------------------
SMARTGROWTH(R) SMARTGROWTH(R) SMARTGROWTH(R) ETF LIPPER(TM) ETF LIPPER(TM) ETF LIPPER(TM) OPTIMAL OPTIMAL OPTIMAL CONSERVATIVE MODERATE GROWTH INDEX FUND INDEX FUND INDEX FUND -------------- -------------- -------------- INVESTMENT INCOME: Dividend Income ........................... $ 3,255 $ 23,947 $ 16,642 -------- --------- --------- EXPENSES Administration Fees ....................... 8,532 79,213 78,485 Investment Advisory Fees .................. 625 5,770 7,313 Trustees' Fees ............................ 674 5,532 5,843 Chief Compliance Officer Fees ............. 382 2,884 5,435 Distribution Fees(1) ...................... 313 2,885 3,657 Audit Fees ................................ 20,112 20,356 20,349 Transfer Agent Fees ....................... 20,100 27,370 28,040 Legal Fees ................................ 6,760 11,876 18,215 Offering Costs ............................ 5,936 19,866 23,060 Printing Fees ............................. 813 7,390 9,797 Custodian Fees ............................ 290 3,709 3,827 Registration Fees ......................... 263 464 547 Insurance and Other Expenses .............. 895 3,505 3,933 -------- --------- --------- TOTAL EXPENSES ............................ 65,695 190,820 208,501 Less: Reimbursement by Investment Adviser ....... (63,192) (167,733) (179,228) Waiver of Investment Advisory Fees ........ (625) (5,770) (7,313) -------- --------- --------- NET EXPENSES .............................. 1,878 17,317 21,960 -------- --------- --------- NET INVESTMENT INCOME (LOSS) .............. 1,377 6,630 (5,318) -------- --------- --------- NET REALIZED GAIN ON INVESTMENTS .......... 7,711 87,742 141,771 NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS .......... 5,793 51,175 115,567 -------- --------- --------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .................... 13,504 138,917 257,338 -------- --------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $ 14,881 $ 145,547 $252,020 ======== ========= ======== * COMMENCED OPERATIONS ON JUNE 1, 2007. (1) ATTRIBUTABLE TO CLASS A SHARES.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 13 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2008* ----------- OPERATIONS: Net Investment Income................................................ $ 1,377 Net Realized Gain on Investments..................................... 7,711 Net Change in Unrealized Appreciation (Depreciation) on Investments . 5,793 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. 14,881 -------- DIVIDENDS AND DISTRIBUTIONS: Dividends from Net Investment Income................................. (1,691) Distributions from Net Realized Gains................................ (310) -------- TOTAL DIVIDENDS AND DISTRIBUTIONS................................ (2,001) -------- CAPITAL SHARE TRANSACTIONS: Issued............................................................... 374,439 Reinvestment of Distributions........................................ 2,001 Redeemed............................................................. (99) -------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS..................... 376,341 -------- TOTAL INCREASE IN NET ASSETS..................................... 389,221 -------- NET ASSETS: Beginning of Period.................................................. -- -------- End of Period (including distributions in excess of net investment income of $312)..................................... $389,221 ======== SHARE TRANSACTIONS: Issued............................................................... 37,407 Reinvestment of Distributions........................................ 194 Redeemed............................................................. (10) -------- NET INCREASE IN SHARES OUTSTANDING FROM SHARE TRANSACTIONS.............................................. 37,591 ======== * COMMENCED OPERATIONS ON JUNE 1, 2007.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 14 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2008* ----------- OPERATIONS: Net Investment Income................................................ $ 6,630 Net Realized Gain on Investments..................................... 87,742 Net Change in Unrealized Appreciation (Depreciation) on Investments . 51,175 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. 145,547 ---------- DIVIDENDS AND DISTRIBUTIONS: Dividends from Net Investment Income................................. (9,564) Distributions from Net Realized Gains................................ (10,099) ---------- TOTAL DIVIDENDS AND DISTRIBUTIONS................................. (19,663) ---------- CAPITAL SHARE TRANSACTIONS: Issued............................................................... 2,535,147 Reinvestment of Distributions........................................ 19,027 Redeemed............................................................. (47,260) ---------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS ........................ 2,506,914 ---------- TOTAL INCREASE IN NET ASSETS...................................... 2,632,798 ---------- NET ASSETS: Beginning of Period.................................................. -- ---------- End of Period (including distributions in excess of net investment income of $2,909).................................. $2,632,798 ========== SHARE TRANSACTIONS: Issued............................................................... 255,103 Reinvestment of Distributions........................................ 1,829 Redeemed............................................................. (4,581) ---------- NET INCREASE IN SHARES OUTSTANDING FROM SHARE TRANSACTIONS.............................................. 252,351 ========== * COMMENCED OPERATIONS ON JUNE 1, 2007.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 15 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
PERIOD ENDED JANUARY 31, 2008* ----------- OPERATIONS: Net Investment Loss................................................. $ (5,318) Net Realized Gain on Investments.................................... 141,771 Net Change in Unrealized Appreciation (Depreciation) on Investments 115,567 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ 252,020 ---------- DIVIDENDS AND DISTRIBUTIONS: Distributions from Net Realized Gains............................... (41,079) ---------- CAPITAL SHARE TRANSACTIONS: Issued.............................................................. 6,695,253 Reinvestment of Distributions....................................... 37,094 Redeemed............................................................ (51,505) ---------- NET INCREASE FROM CAPITAL SHARE TRANSACTIONS ....................... 6,680,842 ---------- TOTAL INCREASE IN NET ASSETS..................................... 6,891,783 ---------- NET ASSETS: Beginning of Period................................................. -- ---------- End of Period (including accumulated net investment loss of $5,318) $6,891,783 ========== SHARE TRANSACTIONS: Issued.............................................................. 633,448 Reinvestment of Distributions....................................... 3,354 Redeemed............................................................ (5,248) ---------- NET INCREASE IN SHARES OUTSTANDING FROM SHARE TRANSACTIONS............................................. 631,554 ========== * COMMENCED OPERATIONS ON JUNE 1, 2007.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 16 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- SELECTED PER SHARE DATA & RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD CLASS A SHARES -------------- PERIOD ENDED JANUARY 31, 2008(1) ----------- Net Asset Value, Beginning of Period........................................... $10.00 ------ Income from Operations: Net Investment Income(2)...................................... 0.07 Net Realized and Unrealized Gain on Investments............................................. 0.35 ------ Total from Operations............................................ 0.42 ------ Dividends and Distributions: Net Investment Income......................................... (0.06) Net Realized Gains............................................ (0.01) ------ Total Dividends and Distributions................................ (0.07) ------ Net Asset Value, End of Period................................... $10.35 ====== TOTAL RETURN+.................................................... 4.20% ====== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (Thousands)............................ $ 389 Ratio of Expenses to Average Net Assets.......................... 1.50%* Ratio of Expenses to Average Net Assets (excluding waivers and reimbursements) ........................ 52.47%* Ratio of Net Investment Income to Average Net Assets.......................................... 1.10%* Portfolio Turnover Rate.......................................... 260%** + TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES NOT BEEN WAIVED AND EXPENSES ASSUMED BY THE ADVISER DURING THE PERIOD. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. TOTAL RETURN EXCLUDES APPLICABLE SALES CHARGES. * ANNUALIZED ** NOT ANNUALIZED (1) COMMENCED OPERATIONS ON JUNE 1, 2007. (2) PER SHARE DATA CALCULATED USING AVERAGE SHARES METHOD. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 17 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- SELECTED PER SHARE DATA & RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD CLASS A SHARES -------------- PERIOD ENDED JANUARY 31, 2008(1) ----------- Net Asset Value, Beginning of Period........................................... $10.00 ------ Income from Operations: Net Investment Income(2)...................................... 0.04 Net Realized and Unrealized Gain on Investments............................................. 0.48 ------ Total from Operations............................................ 0.52 ------ Dividends and Distributions: Net Investment Income......................................... (0.04) Net Realized Gains............................................ (0.05) ------ Total Dividends and Distributions................................ (0.09) ------ Net Asset Value, End of Period................................... $10.43 ====== TOTAL RETURN+.................................................... 5.22% ====== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (Thousands)............................ $2,633 Ratio of Expenses to Average Net Assets.......................... 1.50%* Ratio of Expenses to Average Net Assets (excluding waivers and reimbursements) ....................... 16.52%* Ratio of Net Investment Income to Average Net Assets......................................... 0.57%* Portfolio Turnover Rate.......................................... 256%** + TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES NOT BEEN WAIVED AND EXPENSES ASSUMED BY THE ADVISER DURING THE PERIOD. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. TOTAL RETURN EXCLUDES APPLICABLE SALES CHARGES. * ANNUALIZED ** NOT ANNUALIZED (1) COMMENCED OPERATIONS ON JUNE 1, 2007. (2) PER SHARE DATA CALCULATED USING AVERAGE SHARES METHOD. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 18 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- SELECTED PER SHARE DATA & RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD CLASS A SHARES -------------- PERIOD ENDED JANUARY 31, 2008(1) ----------- Net Asset Value, Beginning of Period........................................... $10.00 ------ Income from Operations: Net Investment Loss(2)...................................... (0.03) Net Realized and Unrealized Gain on Investments............... ............................ 1.06 ------ Total from Operations............................................ 1.03 ------ Dividends and Distributions: Net Realized Gains............................................ (0.12) ------ Net Asset Value, End of Period................................... $10.91 ====== TOTAL RETURN+.................................................... 10.33% ====== RATIOS AND SUPPLEMENTAL DATA Net Assets, End of Period (Thousands)............................ $6,892 Ratio of Expenses to Average Net Assets.......................... 1.50%* Ratio of Expenses to Average Net Assets (excluding waivers and reimbursements) 14.23%* Ratio of Net Investment Loss to Average Net Assets......................................... (0.36)%* Portfolio Turnover Rate.......................................... 225%** + TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN FEES NOT BEEN WAIVED AND EXPENSES ASSUMED BY THE ADVISER DURING THE PERIOD. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. TOTAL RETURN EXCLUDES APPLICABLE SALES CHARGES. * ANNUALIZED ** NOT ANNUALIZED (1) COMMENCED OPERATIONS ON JUNE 1, 2007. (2) PER SHARE DATA CALCULATED USING AVERAGE SHARES METHOD. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 19 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION: THE ADVISORS' INNER CIRCLE FUND II (the "Trust") is organized as a Massachusetts business trust under an Amended and Restated Agreement and Declaration of Trust dated July 24, 1992. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with fourteen funds. The financial statements herein are those of the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund, the SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index FunD and the SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund (each, a "Fund," and collectively, the "Funds"). The financial statementS of the remaining funds are presented separately. The investment objective of the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative INDex Fund is to track the performance of the Lipper(TM) Optimal Conservative Index. The investment objective of the SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund is to track the performance of the Lipper(TM) Optimal Moderate Index. The investment objectiVE of the SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund is to track the performance of the Lipper(TM) Optimal Growth Index. ThE Trust is registered to offer Class A Shares and Institutional Class Shares of all Funds. As of January 31, 2008, the Institutional Class Shares had not yet commenced operations. The assets of each fund of the Trust are segregated, and a shareholder's interest is limited to the fund of the Trust in which shares are held. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Funds: USE OF ESTIMATES -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 20 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- SECURITY VALUATION -- Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded, or, if there is no such reported sale, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Prices for most securities held in the Funds are provided daily by recognized independent pricing agents. If a security price cannot be obtained from an independent, third-party pricing agent, the Funds seek to obtain a bid price from at least one independent broker. Securities for which market prices are not "readily available" are valued in accordance with Fair Value Procedures established by the Funds' Board of Trustees (the "Board"). The Funds' Fair Value Procedures are implemented through a Fair Value Committee (the "Committee") designated by the Board. Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security's trading has been halted or suspended; the security has been de-listed from a national exchange; the security's primary trading market is temporarily closed at a time when under normal conditions it would be open; the security has not been traded for an extended period of time; the security's primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government-imposed restrictions. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee. As of January 31, 2008, there were no fair valued securities. FEDERAL INCOME TAXES -- It is each Fund's intention to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and to distribute all of its taxable income. Accordingly, no provision for Federal income taxes has been made in the financial statements. 21 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on trade date. Costs used in determining realized gains and losses on the sales of investment securities are based on specific identifications. Dividend income is recognized on the ex-dividend date. EXPENSES -- Most expenses of the Trust can be directly attributed to a particular fund. Expenses that cannot be directly attributed to a fund are apportioned among the funds of the Trust based on the number of funds and/or relative net assets. In addition to the expenses reflected on the statements of operations, the Funds indirectly bear the investment advisory fees and other expenses of the exchange traded funds (ETFs) in which they invest. Because each of the ETFs has varied expense and fee levels, and the Funds may own different amounts of shares of these funds at different times, the amount of fees and expenses incurred indirectly will vary. CLASSES -- Class specific expenses are borne by that class of shares. Income, realized and unrealized gains/losses, and non-class specific expenses are allocated to the respective class on the basis of relative daily net assets. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income, if any, are declared and paid annually by the Funds. Any net realized capital gains are distributed to shareholders at least annually. All distributions are recorded on ex-dividend date. REDEMPTION FEES -- The Funds retain a redemption fee of 2.00% on redemptions of capital shares held for less than 7 days. For the period ended January 31, 2008, there were no redemption fees retained. OFFERING COSTS -- Offering costs, including costs of printing initial prospectuses, legal and registration fees, are being amortized over twelve months from the inception date of the Funds. As of January 31, 2008, $7,123 of offering costs remained to be amortized for the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund, $23,840 remained for the SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund, and $27,671 remained for the SmartGrowth(R) ETF Lipper(TM) Growth Index Fund. 22 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- 3. TRANSACTIONS WITH AFFILIATES: Certain officers and a trustee of the Trust are also officers of SEI Investments Global Funds Services (the "Administrator"), a wholly owned subsidiary of SEI Investments Company, and/or SEI Investments Distribution Co. (the "Distributor"). Such officers are paid no fees by the Trust for serving as officers of the Trust. A portion of the services provided by the Chief Compliance Officer ("CCO") and his staff, whom are employees of the Administrator, are paid for by the Trust as incurred. The services include regulatory oversight of the Trust's advisers and service providers as required by SEC regulations. The CCO's services have been approved by and are reviewed by the Board. 4. ADMINISTRATION, DISTRIBUTION, TRANSFER AGENT AND CUSTODIAN AGREEMENTS: The Funds and the Administrator are parties to an Administration Agreement under which the Administrator provides management and administrativeservices to the Funds at an annual rate of: 0.10% on the first $500 million of the Funds' average daily net assets; 0.08% between $500 million and $2 billion of the Funds' average daily net assets; and 0.06% on the Fund's average daily net assets over $2 billion. Effective December 1, 2007, the Funds are subject to a minimum annual administration fee of $65,000 per fund. Prior to December 1, 2007, the Funds were subject to a minimum annual administration fee of $90,000 per fund. There is also a minimum annual administration fee of $15,000 per additional class. The Trust and Distributor are parties to a Distribution Plan dated May 31, 2000, amended and restated on November 16, 2004. The Funds have adopted the Distribution Plan (the "Plan") for Class A Shares. Under the Plan, the Distributor, or third parties that enter into agreements with the Distributor, may receive up to 0.25% of the Funds' average net assets attributable to Class A Shares as compensation for distribution services. 23 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- UMB Fund Services, Inc. serves as the transfer agent and dividend disbursing agent for the Funds under a transfer agency agreement with the Trust. U.S. Bank, N.A. acts as custodian (the "Custodian") for the Funds. The Custodian plays no role in determining the investment policies of the Funds or which securities are to be purchased or sold by the Funds. 5. INVESTMENT ADVISORY AGREEMENT: Under the terms of an investment advisory agreement, Hennion & Walsh Asset Management, Inc. (the "Adviser"), provides investment advisory services tothe Funds at a fee, which is calculated daily and paid monthly at an annual rate of 0.50% of each Fund's average daily net assets. The Adviser has voluntarily agreed to waive a portion of its advisory fees and to assume expenses, if necessary, in order to keep the Funds' total annual operating expenses from exceeding 1.50% of the Class A shares average daily net assets. The Adviser may discontinue the expense limitation at any time. In addition, if at any pointduring the first three years of Fund operations it becomes unnecessary for the Adviser to waive fees or make reimbursements, the Adviser may retain thedifference between the "Total Annual Fund Operating Expenses" and 1.50% to recapture any of its prior waivers or reimbursements. At January 31, 2008, the amount the Adviser may seek reimbursement of previously waived fees and reimbursed expenses for the Funds was $63,817, $173,503, and $186,541 for the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund, the SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund and the SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund, respectively. The Adviser has entered into a licensing agreement with Lipper(TM) to obtain the right to offer shares of a registered investment company that pursues an investment program that seeks to track certain Lipper(TM) Indices and to obtain information and assistance from Lipper(TM) to facilitate the operations of the Funds. Fees payable to Lipper(TM) under this agreement are paid by the Adviser and not by the Funds. 24 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- 6. INVESTMENT TRANSACTIONS: For the period ended January 31, 2008, the purchases and sales of investment securities other than long-term U.S. Government and short-term investments were:
PURCHASES SALES ----------- ---------- SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund $ 933,661 $ 582,683 SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund 7,194,954 4,709,961 SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund 12,292,846 5,740,353
There were no purchases or sales of long-term U.S. Government securities. 7. FEDERAL TAX INFORMATION: The amount and character of income and capital gain distributions, if any, to be paid are determined in accordance with Federal income tax regulations, which may differ from U.S. generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary orpermanent. To the extent these differences are permanent in nature, they are charged or credited to undistributed net investment income (loss), accumulated net realized gain (loss) or paid-in capital, as appropriate, in the period that the differences arise. Each of the Funds has a tax year that ends on December 31. The following tax disclosure is representative as of December 31, 2007, for net investment taxable income and capital gains/losses, respectively. Permanent book and tax differences resulted in the following reclassifications. These differences are due to return of capital from underlying funds and return of capital paid. These reclassifications had no impact on the net assets or net asset value of the Funds. UNDISTRIBUTED PAID-IN NET INVESTMENT ACCUMULATED NET CAPITAL INCOME REALIZED GAIN ------- ------------- --------------- SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund $ (4) $ 2 $ 2 SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund (161) 25 136 25 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- The tax character of dividends and distributions paid during the last fiscal period was as follows: ORDINARY INCOME TOTAL -------- ------- SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund $ 2,001 $ 2,001 SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund 19,663 19,663 SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund 41,079 41,079 As of January 31, 2008, the components of distributable earnings on a tax basis were as follows:
SMARTGROWTH(R) ETF SMARTGROWTH(R) ETF SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL LIPPER(TM) OPTIMAL LIPPER(TM) OPTIMAL CONSERVATIVE MODERATE GROWTH INDEX FUND INDEX FUND INDEX FUND ------------------ ------------------ ------------------ Undistributed Ordinary Income $ -- $ -- $ 1,636 Post October Losses -- (4) -- Net Unrealized Appreciation 5,795 51,189 115,567 Other Temporary Differences 7,089 74,860 93,738 ------- -------- -------- Total Distributable Earnings $12,884 $126,045 $210,941
Other temporary differences reflect income, capital gains/(losses) and distributions from the most recent tax measurement period through January 31, 2008. Amounts designated as "--" are either $0 or have been rounded to $0. For Federal income tax purposes, capital loss carryforwards represent realized losses of the Portfolio that may be carried forward for a maximum period of eight years and applied against future capital gains. As of December 31, 2007, there were no capital loss carryforwards. 26 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- The Federal tax cost and aggregate gross unrealized appreciation and depreciation on investments held by the Funds at January 31, 2008 were as follows:
AGGREGATE GROSS AGGREGATE GROSS SMARTGROWTH(R) FEDERAL UNREALIZED UNREALIZED NET UNREALIZED FUNDS TAX COST APPRECIATION DEPRECIATION APPRECIATION -------------- ----------- --------------- --------------- -------------- SmartGrowth(R) ETF Lipper(TM) OptimaL Conservative Index Fund $ 360,548 $ 9,517 $ (3,722) $ 5,795 SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund 2,631,115 93,502 (42,313) 51,189 SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund 7,692,843 236,946 (121,379) 115,567
8. OTHER: At January 31, 2008, the percentage of total shares outstanding held by shareholders for the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund and the SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund, which were comprised of omnibus accounts that were held on behalf of several individual shareholders, was as follows:
NO. OF % SHAREHOLDERS OWNERSHIP ------------ --------- SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund 1 33% SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund 1 24%
In the normal course of business, the Funds enter into contracts that provide general indemnifications. The Funds' maximum exposure under these arrangements is dependent on future claims that may be made against the Funds and, therefore, cannot be established; however, based on the Trust's experience, the risk of loss from such claim is considered remote. 27 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- 9. NEW ACCOUNTING PRONOUNCEMENTS: In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of January 31, 2008, the Funds do not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain measurements reported on the statement of changes in net assets for a fiscal period. 28 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS JANUARY 31, 2008 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of SmartGrowth Funds of the Advisors' Inner Circle Fund II: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund, SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund, and SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund (three of the portfolios constituting The Advisors' Inner Circle Fund II (the "Trust")), as of January 31, 2008, and the related statements of operations, statements of changes in net assets, and financial highlights for the period from June 1, 2007 (commencement of operations) through January 31, 2008. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Trust's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of January 31, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the SmartGrowth(R) ETF Lipper(TM) Optimal Conservative Index Fund, SmartGrowth(R) ETF Lipper(TM) Optimal Moderate Index Fund, and SmartGrowth(R) ETF Lipper(TM) Optimal Growth Index Fund at January 31, 2008, and the results of their operations, the changes in their net assets, and their financial highlights for the period from June 1, 2007 (commencement of operations) through January 31, 2008, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Philadelphia, Pennsylvania March 27, 2008 29 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS OF THE ADVISORS' INNER CIRCLE FUND II (UNAUDITED) - -------------------------------------------------------------------------------- Set forth below are the names, age, position with the Trust, length of term of office, and the principal occupations for the last five years of each of the persons currently serving as Trustees and Officers ofthe Trust. Trustees who are deemed not to be "interested persons" of the Trust are referred to as "Independent Board Members." Messrs. Nesher and Doran are Trustees who may be deemed to be TERM OF POSITION(S) OFFICE AND NAME, ADDRESS, HELD WITH LENGTH OF AGE 1 THE TRUST TIME SERVED 2 - -------------------------------------------------------------------------------- INTERESTED BOARD MEMBERS - ------------- ROBERT A. NESHER Chairman (Since 1991) 61 yrs. old of the Board of Trustees - -------------------------------------------------------------------------------- WILLIAM M. DORAN Trustee (Since 1992) 1701 Market Street, Philadelphia, PA 19103 67 yrs. old - -------------------------------------------------------------------------------- 1 Unless otherwise noted, the business address of each trustee is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. 2 Each trustee shall hold office during the lifetime of this Trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns or is removed in accordance with the Trust's Declaration of Trust. 3 Directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., "public companies") or other investment companies registered under the Investment Company Act of 1940. 30 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- "interested" persons of the Trust as that term is defined in the 1940 Act by virtue of their affiliation with the Trust's Distributor. The Trust's Statement of Additional Information ("SAI") includes additional information about the Trustees and Officers. The SAI may be obtained without charge by calling 1-888-465-5722. The following chart lists Trustees and Officers as of January 31, 2008.
NUMBER OF FUNDS IN THE ADVISORS' INNER CIRCLE FUND II PRINCIPAL OCCUPATION(S) OVERSEEN BY BOARD OTHER DIRECTORSHIPS DURING PAST 5 YEARS MEMBER HELD BY BOARD MEMBER 3 - ------------------------------------------------------------------------------------------------------------------------------ Currently performs various services on behalf 14 Trustee of The Advisors' Inner Circle of SEI Investments for which Mr. Nesher is Fund, Bishop Street Funds, SEI Asset compensated. Executive Vice President of SEI Allocation Trust, SEI Daily Income Investments, 1986-1994. Director and Trust, SEI Index Funds, SEI Executive Vice President of the Administrator Institutional International Trust, SEI and the Distributor, 1981-1994. Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Opportunity Master Fund, L.P., SEI Opportunity Fund, L.P., SEI Global Master Fund, PLC, SEI Global Assets Fund, PLC, SEI Global Investments Fund, PLC, SEI Investments Global, Limited, SEI Investments Global Fund Services, Limited, SEI Investments (Europe) Ltd., SEI Investments Unit Trust Management (UK) Limited and SEI Global Nominee Ltd. - ------------------------------------------------------------------------------------------------------------------------------ Self-employed Consultant since 2003. Partner, 14 Director of SEI Investments Company Morgan, Lewis & Bockius LLP (law firm) and SEI Investments Distribution Co., from 1976-2003, counsel to the Trust, SEI SEI Investments Global Fund Services Investments, the Administrator and the Global Limited, Trustee of The Distributor. Director of SEI Investments since Advisors' Inner Circle Fund, Bishop 1974; Secretary of SEI Investments since 1978. Street Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Investments Global Fund Services Limited, SEI Investments Global, Limited, SEI Investments (Europe), Limited SEI Investments (Asia) Limited and SEI Asset Korea Co., Ltd. - ------------------------------------------------------------------------------------------------------------------------------
31 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS OF THE ADVISORS' INNER CIRCLE FUND II (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF POSITION(S) OFFICE AND NAME, ADDRESS, HELD WITH LENGTH OF AGE 1 THE TRUST TIME SERVED 2 - -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS - ------------- JAMES M. STOREY Trustee (Since 1994) 76 yrs. old - -------------------------------------------------------------------------------- GEORGE J. SULLIVAN, JR. Trustee (Since 1999) 65 yrs. old - -------------------------------------------------------------------------------- BETTY L. KRIKONIAN Trustee (Since 2005) 64 yrs. old - -------------------------------------------------------------------------------- 1 Unless otherwise noted, the business address of each trustee is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. 2 Each trustee shall hold office during the lifetime of this Trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns or is removed in accordance with the Trust's Declaration of Trust. 3 Directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., "public companies") or other investment companies registered under the Investment Company Act of 1940. 4 Served as a trustee until August 26, 2007. 32 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - --------------------------------------------------------------------------------
NUMBER OF FUNDS IN THE ADVISORS' INNER CIRCLE FUND II PRINCIPAL OCCUPATION(S) OVERSEEN BY BOARD OTHER DIRECTORSHIPS DURING PAST 5 YEARS MEMBER HELD BY BOARD MEMBER 3 - ------------------------------------------------------------------------------------------------------------------- Attorney, Solo Practitioner since 1994. 14 Trustee of The Advisors' Inner Circle Partner, Dechert, September 1987- Fund, Bishop Street Funds, SEI Asset December 1993. Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust and U.S. Charitable Gift Trust. - ------------------------------------------------------------------------------------------------------------------- Chief Executive Officer, Newfound 14 Trustee, State Street Navigator Consultants, Inc. since April 1997. General Securities Lending Trust, since 1995. Partner, Teton Partners, L.P., June 1991- Trustee of The Advisors' Inner Circle December 1996; Chief Financial Officer, Fund, Bishop Street Funds, SEI Asset Nobel Partners, L.P., March 1991-December Allocation Trust, SEI Daily Income 1996; Treasurer and Clerk, Peak Asset Trust, SEI Index Funds, SEI Management, Inc., since 1991. Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, SEI Opportunity Master Fund, L.P., and SEI Opportunity Fund, L.P. - ------------------------------------------------------------------------------------------------------------------- Self-employed Legal and Financial Services 14 Trustee of The Advisors' Inner Circle Consultant since 2003. Counsel to State Street Fund and Bishop Street Funds. Bank Global Securities and Cash Operations from 1995 to 2003. - -------------------------------------------------------------------------------------------------------------------
33 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS OF THE ADVISORS' INNER CIRCLE FUND II (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF POSITION(S) OFFICE AND NAME, ADDRESS, HELD WITH LENGTH OF AGE 1 THE TRUST TIME SERVED 2 - -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED) - ------------------------- CHARLES E. CARLBOM Trustee (Since 2005) 73 yrs. old - -------------------------------------------------------------------------------- MITCHELL A. JOHNSON Trustee (Since 2005) 65 yrs. old - -------------------------------------------------------------------------------- OFFICERS - -------- JAMES F. VOLK, CPA President (Since 2003) 45 yrs. old - -------------------------------------------------------------------------------- MICHAEL LAWSON Controller and Chief (Since 2005) 47 yrs. old Financial Officer - -------------------------------------------------------------------------------- JAMES NDIAYE Vice President and (Since 2004) 38 yrs. old Secretary - -------------------------------------------------------------------------------- CAROLYN F. MEAD Vice President and (Since 2007) 50 yrs. old Secretary - -------------------------------------------------------------------------------- 1 Unless otherwise noted, the business address of each trustee/officer is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. 2 Each trustee shall hold office during the lifetime of this Trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns or is removed in accordance with the Trust's Declaration of Trust. 3 Directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., "public companies") or other investment companies registered under the Investment Company Act of 1940. 34 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - --------------------------------------------------------------------------------
NUMBER OF FUNDS IN THE ADVISORS' INNER CIRCLE FUND II PRINCIPAL OCCUPATION(S) OVERSEEN BY BOARD OTHER DIRECTORSHIPS DURING PAST 5 YEARS MEMBER HELD BY BOARD MEMBER/OFFICER 3 - --------------------------------------------------------------------------------------------------------------------------- Self-employed Business Consultant, Business 14 Trustee of The Advisors' Inner Circle Project Inc. since 1997. CEO and President, Fund, Bishop Street Funds. Oregon United Grocers Inc. from 1997 to 2000. Trust Co. and O.T. Logistics, Inc. - --------------------------------------------------------------------------------------------------------------------------- Retired. 14 Director, Federal Agricultural Mortgage Corporation. Trustee of The Advisors' Inner Circle Fund and Bishop Street Funds. - --------------------------------------------------------------------------------------------------------------------------- Senior Operations Officer, SEI Investments, N/A N/A Fund Accounting and Administration (1996- present); Assistant Chief Accountant of the U.S. Securities and Exchange Commission's Division of Investment Management (1993-1996). - --------------------------------------------------------------------------------------------------------------------------- Director, SEI Investments, Fund Accounting N/A N/A since July 2005. Manager, SEI Investments AVP from April 1995 to February 1998 and November 1998 to July 2005. - --------------------------------------------------------------------------------------------------------------------------- Employed by SEI Investments Company since N/A N/A 2004. Vice President, Deusche Asset Management from 2003-2004. Associate, Morgan, Lewis & Bockius LLP from 2000-2003. Counsel, Assistant Vice President, ING Variable Annuities Group from 1999-2000. - --------------------------------------------------------------------------------------------------------------------------- Corporate Counsel of SEI since 2007; Associate, N/A N/A Stradley, Ronan, Steven & Young 2004-2007; Counsel, ING Variable Annuities, 1999-2002. - ---------------------------------------------------------------------------------------------------------------------------
35 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TRUSTEES AND OFFICERS OF THE ADVISORS' INNER CIRCLE FUND II (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF POSITION(S) OFFICE AND NAME, ADDRESS, HELD WITH LENGTH OF AGE 1 THE TRUST TIME SERVED 2 - -------------------------------------------------------------------------------- OFFICERS (CONTINUED) - -------------------- TIMOTHY D. BARTO Assistant Vice President (Since 2000) 39 yrs. old and Assistant Secretary - -------------------------------------------------------------------------------- RUSSELL EMERY Chief Compliance (Since 2006) 44 yrs. old Officer - -------------------------------------------------------------------------------- SOFIA ROSALA Assistant Vice President (Since 2004) 33 yrs. old and Assistant Secretary - -------------------------------------------------------------------------------- NICOLE WELCH AML Officer (Since 2006) 29 yrs. old - -------------------------------------------------------------------------------- 1 The business address of each officer is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. 36 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - --------------------------------------------------------------------------------
NUMBER OF FUNDS IN THE ADVISORS' INNER CIRCLE FUND II PRINCIPAL OCCUPATION(S) OVERSEEN BY BOARD OTHER DIRECTORSHIPS DURING PAST 5 YEARS MEMBER HELD BY OFFICER 3 - ------------------------------------------------------------------------------------------------------------- General Counsel, Vice President and Assistant N/A N/A Secretary of SEI Investments Global Funds Services since 1999; Associate, Dechert (law firm) from 1997-1999; Associate, Richter, Miller & Finn (law firm) from 1994-1997. - ------------------------------------------------------------------------------------------------------------- Director of Investment Product Management N/A N/A and Development at SEI Investments since February 2003. Senior Investment Analyst, Equity team at SEI Investments from March 2000 to February 2003. - ------------------------------------------------------------------------------------------------------------- Vice President and Assistant Secretary of SEI N/A N/A Investments Management Corp. and SEI Global Funds Services since 2005. Compliance Officer of SEI Investments from 2001-2004. Account and Product Consultant SEI Private Trust Company, 1998-2001. - ------------------------------------------------------------------------------------------------------------- Assistant Vice President and AML Compliance N/A N/A Officer of SEI Investments since January 2005. Compliance Analyst at TD Waterhouse from January 2004 to November 2004. Senior Compliance Analyst at UBS Financial Services from October 2002 to January 2004. Knowledge Management Analyst at PricewaterhouseCoopers Consulting from September 2000 to October 2002. - -------------------------------------------------------------------------------------------------------------
37 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES (UNAUDITED) - -------------------------------------------------------------------------------- We believe it is important for you to understand the impact of fees regarding your investment. All mutual funds have operating expenses. As a shareholder of a mutual fund, you incur ongoing costs, which include costs for fund management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a mutual fund's gross income, directly reduce the investment return of a mutual fund. A mutual fund's expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing fees (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The table on the next page illustrates your Fund's costs in two ways. oACTUAL PORTFOLIO RETURN. This section helps you to estimate the actual expenses after fee waivers that you paid over the period. The "Ending Account Value" shown is derived from the Fund's actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading "Expenses Paid During Period." oHYPOTHETICAL 5% RETURN. This section is intended to help you compare your Fund's costs with those of other mutual funds. It assumes that the Fund had a return of 5% before expenses during the period, but that the expense ratio is unchanged. In this case, because the return used is not the Fund's actual return, the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your Fund's costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other mutual funds. 38 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES (UNAUDITED) - -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect any transactional costs such as sales charges (loads) and redemption fees, which are described in the Prospectus. If this fee were applied to your account, your costs would be higher. Note: Because the hypothetical return is set at 5% for comparison purposes -- NOT your Fund's actual return -- the account values shown may not apply to your specific investment. - -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSE ACCOUNT ACCOUNT ANNUALIZED PAID VALUE VALUE EXPENSE DURING 08/01/07 01/31/08 RATIOS PERIOD(1) - -------------------------------------------------------------------------------- SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL CONSERVATIVE INDEX FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A Shares $1,000.00 $1,056.80 1.50% $7.78 HYPOTHETICAL 5% RETURN Class A Shares 1,000.00 1,017.64 1.50 7.63 - -------------------------------------------------------------------------------- SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL MODERATE INDEX FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A Shares $1,000.00 $1,065.00 1.50% $7.81 HYPOTHETICAL 5% RETURN Class A Shares 1,000.00 1,017.64 1.50 7.63 - -------------------------------------------------------------------------------- SMARTGROWTH(R) ETF LIPPER(TM) OPTIMAL GROWTH INDEX FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A Shares $1,000.00 $1,110.00 1.50% $7.98 HYPOTHETICAL 5% RETURN Class A Shares 1,000.00 1,017.64 1.50 7.63 - -------------------------------------------------------------------------------- (1) Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). 39 THE ADVISORS' INNER CIRCLE FUND II SMARTGROWTH(R) FUNDS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTICE TO SHAREHOLDERS (UNAUDITED) - -------------------------------------------------------------------------------- For the fiscal year ended January 31, 2008, the Funds are designating the following items with regard to distributions paid during the year. For shareholders that do not have a January 31, 2008 tax year end, this notice is for informational use only.
FOREIGN QUALIFYING FOR INVESTORS CORPORATE ------------ ORDINARY DIVIDENDS QUALIFYING INTEREST SHORT-TERM INCOME TOTAL RECEIVED DIVIDEND RELATED CAPITAL GAIN DISTRIBUTIONS DISTRIBUTIONS DEDUCTION (1) INCOME (2) DIVIDENDS (3) DIVIDEND (4) ------------- ------------- -------------- ---------- ------------- -------------- SMARTGROWTH(R) OPTIMAL CONSERVATIVE INDEX FUND 100.00% 100.00% 10.64% 8.05% 0.00% 100.00% SMARTGROWTH(R) OPTIMAL MODERATE INDEX FUND 100.00% 100.00% 7.86% 7.74% 0.00% 100.00% SMARTGROWTH(R) OPTIMAL GROWTH INDEX FUND 100.00% 100.00% 3.26% 2.84% 0.00% 100.00%
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE DIVIDENDS RECEIVED DEDUCTION AND IS REFLECTED AS A PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS (THE TOTAL OF SHORT-TERM CAPITAL GAIN AND NET INVESTMENT INCOME DISTRIBUTIONS). (2) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING DIVIDEND INCOME" AS CREATED BY THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003 AND IS REFLECTED AS A PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS (THE TOTAL OF SHORT-TERM CAPITAL GAIN AND NET INVESTMENT INCOME DISTRIBUTIONS). IT IS THE INTENTION OF THE FUND TO DESIGNATE THE MAXIMUM AMOUNT PERMITTED BY LAW. (3) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING INTEREST INCOME" AS CREATED BY THE AMERICAN JOBS CREATION ACT OF 2004 AND IS REFLECTED AS A PERCENTAGE OF NET INVESTMENT INCOME DISTRIBUTIONS THAT IS EXEMPT FROM U.S. WITHHOLDING TAX WHEN PAID TO FOREIGN INVESTORS. THIS PROVISION OF THE IRC WILL BE EXPIRING FOR YEARS BEGINNING AFTER JANUARY 1, 2008. (4) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING SHORT-TERM CAPITAL GAIN" AS CREATED BY THE AMERICAN JOBS CREATION ACT OF 2004 AND IS REFLECTED AS A PERCENTAGE OF SHORT-TERM CAPITAL GAIN DISTRIBUTIONS THAT IS EXEMPT FROM U.S. WITHHOLDING TAX WHEN PAID TO FOREIGN INVESTORS. THIS PROVISION OF THE IRC WILL BE EXPIRING FOR YEARS BEGINNING AFTER JANUARY 1, 2008. 40 SMARTGROWTH(R) FUNDS P.O. Box 2085 Milwaukee, WI 53201-2085 1-888-465-5722 INVESTMENT ADVISER: Hennion & Walsh Asset Management, Inc. 2001 Route 46, Waterview Plaza Parsippany, NJ 07054 DISTRIBUTOR: SEI Investments Distribution Co. One Freedom Valley Drive Oaks, PA 19456 ADMINISTRATOR: SEI Investments Global Funds Services One Freedom Valley Drive Oaks, PA 19456 LEGAL COUNSEL: Morgan, Lewis & Bockius LLP 1111 Pennsylvania Ave., N.W. Washington, DC 20004 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: Ernst & Young, LLP Two Commerce Square 2001 Market Street, Suite 4000 Philadelphia, PA 19103 This information must be preceded or accompanied by a current prospectus for the Funds described. HWM-AR-001-0100 ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the registrant's Principal Executive Officer, Principal Financial Officer, and any person who performs a similar function. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The registrant's board of trustees has determined that the registrant has at least one audit committee financial expert serving on the audit committee. (a)(2) The audit committee financial expert is George Sullivan and is independent as defined in Form N-CSR Item 3(a)(2). ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fees billed by Ernst & Young LLP ("E&Y") related to the Hancock Horizon Family of Funds and the SmartGrowth Family of Funds (the "Funds") for fiscal year 2008 and the Hancock Horizon Family of Funds for fiscal 2007. E&Y billed the Funds aggregate fees for services rendered to the Funds for the last two fiscal years was as follows:
- ------------------ ----------------------------------------------------- ----------------------------------------------------- 2008 2007 - ------------------ ----------------------------------------------------- ----------------------------------------------------- All fees and All fees and All other fees All fees and All fees and All other fees services to the services to and services to services to the services to and services to Trust that were service service Trust that were service service pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that were pre- did not require were pre- did not require approved pre-approval approved pre-approval - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (a) Audit $197,760 N/A N/A $130,900 N/A N/A Fees - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (b) Audit- Related N/A N/A N/A N/A N/A N/A Fees - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (c) Tax N/A N/A N/A N/A N/A N/A Fees - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (d) All N/A N/A N/A N/A N/A N/A Other Fees - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Notes: (1) Audit fees include amounts related to the audit of the Funds' annual financial statements, performance of security counts in compliance with rule 17f-2 of the Investment Company Act of 1940, and services normally provided by the accountant in connection with statutory and regulatory filings. (e)(1) Audit Committee's Pre-Approval Policies and Procedures. The Trust's Audit Committee has adopted and the Board of Trustees has ratified an Audit and Non-Audit Services Pre-Approval Policy (the "Policy"), which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor of the Funds may be pre-approved. The Policy provides that all requests or applications for proposed services to be provided by the independent auditor must be submitted to the Registrant's Chief Financial Officer ("CFO") and must include a detailed description of the services proposed to be rendered. The CFO will determine whether such services: (1) require specific pre-approval; (2) are included within the list of services that have received the general pre-approval of the Audit Committee pursuant to the Policy; or (3) have been previously pre-approved in connection with the independent auditor's annual engagement letter for the applicable year or otherwise. In any instance where services require pre-approval, the Audit Committee will consider whether such services are consistent with SEC's rules and whether the provision of such services would impair the auditor's independence. Requests or applications to provide services that require specific pre-approval by the Audit Committee will be submitted to the Audit Committee by the CFO. The Audit Committee will be informed by the CFO on a quarterly basis of all services rendered by the independent auditor. The Audit Committee has delegated specific pre-approval authority to either the Audit Committee Chair or financial expert, provided that the estimated fee for any such proposed pre-approved service does not exceed $100,000 and any pre-approval decisions are reported to the Audit Committee at its next regularly scheduled meeting. Services that have received the general pre-approval of the Audit Committee are identified and described in the Policy. In addition, the Policy sets forth a maximum fee per engagement with respect to each identified service that has received general pre-approval. All services to be provided by the independent auditor shall be provided pursuant to a signed written engagement letter with the Registrant, the investment advisor or applicable control affiliate (except that matters as to which an engagement letter would be impractical because of timing issues or because the matter is small may not be the subject of an engagement letter) that sets forth both the services to be provided by the independent auditor and the total fees to be paid to the independent auditor for those services. In addition, the Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the independent auditor and to assure the auditor's independence from the Registrant, such as reviewing a formal written statement from the independent auditor delineating all relationships between the independent auditor and the Registrant, and discussing with the independent auditor its methods and procedures for ensuring independence. (e)(2) Percentage of fees billed by E&Y to non-audit services pursuant to waiver of pre-approval requirement were as follows: -------------------------- ---------------- --------------- 2008 2007 -------------------------- ---------------- --------------- Audit-Related Fees N/A N/A -------------------------- ---------------- --------------- Tax Fees N/A N/A -------------------------- ---------------- --------------- All Other Fees N/A N/A -------------------------- ---------------- --------------- (f) Not applicable. (g)(1) The aggregate non-audit fees and services billed by E&Y for last two fiscal years were $0 and $0 for 2008 and 2007, respectively. (h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to open-end management investment companies. ITEM 6. SCHEDULE OF INVESTMENTS Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to open-end management investment companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not applicable. Effective for closed-end management investment companies for fiscal years ending on or after December 31, 2005. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to open-end management investment companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The trust, effective February 18, 2005, adopted procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees. ITEM 11. CONTROLS AND PROCEDURES. (a) The certifying officers, whose certifications are included herewith, have evaluated the registrant's disclosure controls and procedures within 90 days of the filing date of this report. In their opinion, based on their evaluation, the registrant's disclosure controls and procedures are adequately designed, and are operating effectively to ensure, that information required to be disclosed by the registrant in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEMS 12. EXHIBITS. (a)(1) Code of Ethics attached hereto. (a)(2) A separate certification for the principal executive officer and the principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed herewith. (b) Officer certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing as an Exhibit. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) The Advisors' Inner Circle Fund II By (Signature and Title)* /s/ James F. Volk ---------------------------- James F. Volk President Date: April 7, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ James F. Volk ---------------------------- James F. Volk President Date: April 7, 2008 By (Signature and Title)* /s/ Michael Lawson ---------------------------- Michael Lawson Controller and Chief Financial Officer Date: April 7, 2008 * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 aiciicoe.txt AIC II SMARTGROWTH AR COE THE ADVISORS' INNER CIRCLE FUND THE ADVISORS' INNER CIRCLE FUND II FINANCIAL OFFICER CODE OF ETHICS I. INTRODUCTION The reputation and integrity of The Advisors' Inner Circle Fund and The Advisors' Inner Circle Fund II, (each a "Trust" and, collectively, the "Trusts") are valuable assets that are vital to the each Trust's success. The Trusts' senior financial officers ("SFOs") are responsible for conducting the Trusts' business in a manner that demonstrates a commitment to the highest standards of integrity. The Trusts' SFOs include the principal executive officer, the principal financial officer, comptroller or principal accounting officer, and any person who performs a similar function. The Sarbanes-Oxley Act of 2002 (the "Act") effected sweeping corporate disclosure and financial reporting reform on public companies, including mutual funds, to address corporate malfeasance and assure investors that the companies in which they invest are accurately and completely disclosing financial information. Under the Act, all public companies (including the Trusts) must either have a code of ethics for their SFOs, or disclose why they do not. The Act was intended to foster corporate environments which encourage employees to question and report unethical and potentially illegal business practices. Each Trust has chosen to adopt this Financial Officer Code of Ethics (the "Code") to encourage its SFOs to act in a manner consistent with the highest principles of ethical conduct. II. PURPOSES OF THE CODE The purposes of this Code are: o To promote honest and ethical conduct by each Trust's SFOs, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o To assist each Trust's SFOs in recognizing and avoiding conflicts of interest, including disclosing to an appropriate person any material transaction or relationship that reasonably could be expected to give rise to such a conflict; o To promote full, fair, accurate, timely, and understandable disclosure in reports and documents that the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; o To promote compliance with applicable laws, rules and regulations; o To encourage the prompt internal reporting to an appropriate person of violations of this Code; and o To establish accountability for adherence to this Code. III. QUESTIONS ABOUT THIS CODE Each Trust's compliance officer designated to oversee compliance with the Trust's Code of Ethics adopted pursuant to Rule 17j-1 shall serve as Compliance Officer for the implementation and administration of this Code. You should direct your questions about this Code to the Compliance Officer. IV. CONDUCT GUIDELINES Each Trust has adopted the following guidelines under which the Trust's SFOs must perform their official duties and conduct the business affairs of the Trust. 1. ETHICAL AND HONEST CONDUCT IS OF PARAMOUNT IMPORTANCE. Each Trust's SFOs must act with honesty and integrity and avoid violations of this Code, including the avoidance of actual or apparent conflicts of interest with the Trust in personal and professional relationships. 2. SFOS MUST DISCLOSE MATERIAL TRANSACTIONS OR RELATIONSHIPS. Each Trust's SFOs must disclose to the Compliance Officer any actual or apparent conflicts of interest the SFO may have with the Trust that reasonably could be expected to give rise to any violations of this Code. Such conflicts of interest may arise as a result of material transactions or business or personal relationships to which the SFO may be a party. If it is not possible to disclose the matter to the Compliance Officer, it should be disclosed to the Trust's Chief Financial Officer, Chief Executive Officer or another appropriate person. In addition to disclosing any actual or apparent conflicts of interest in which an SFO is personally involved, the Trusts' SFOs have an obligation to report any other actual or apparent conflicts which they discover or of which they otherwise become aware. If you are unsure whether a particular fact pattern gives rise to a conflict of interest, or whether a particular transaction or relationship is "material," you should bring the matter to the attention of the Compliance Officer. 3. STANDARDS FOR QUALITY OF INFORMATION SHARED WITH SERVICE PROVIDERS OF THE TRUSTS. Each Trust's SFOs must at all times seek to provide information to the Trust's service providers (adviser, administrator, outside auditor, outside counsel, custodian, ETC.) that is accurate, complete, objective, relevant, timely, and understandable. 4. STANDARDS FOR QUALITY OF INFORMATION INCLUDED IN PERIODIC REPORTS. Each Trust's SFOs must at all times endeavor to ensure full, fair, timely, accurate, and understandable disclosure in the Trust's periodic reports. 5. COMPLIANCE WITH LAWS. Each Trust's SFOs must comply with the federal securities laws and other laws and rules applicable to the Trusts, such as the Internal Revenue Code. 6. STANDARD OF CARE. Each Trust's SFOs must at all times act in good faith and with due care, competence and diligence, without misrepresenting material facts or allowing your independent judgment to be subordinated. Each Trust's SFOs must conduct the affairs of the Trust in a responsible manner, consistent with this Code. 7. CONFIDENTIALITY OF INFORMATION. Each Trust's SFOs must respect and protect the confidentiality of information acquired in the course of their professional duties, except when authorized by the Trust to disclose it or where disclosure is otherwise legally mandated. You may not use confidential information acquired in the course of your work for personal advantage. 8. SHARING OF INFORMATION AND EDUCATIONAL STANDARDS. Each Trust's SFOs should share information with relevant parties to keep them informed of the business affairs of the Trust, as appropriate, and maintain skills important and relevant to the Trust's needs. 9. PROMOTE ETHICAL CONDUCT. Each Trust's SFOs should at all times proactively promote ethical behavior among peers in your work environment. 10. STANDARDS FOR RECORDKEEPING. Each Trust's SFOs must at all times endeavor to ensure that the Trust's financial books and records are thoroughly and accurately maintained to the best of their knowledge in a manner consistent with applicable laws and this Code. V. WAIVERS OF THIS CODE You may request a waiver of a provision of this Code by submitting your request in writing to the Compliance Officer for appropriate review. For example, if a family member works for a service provider that prepares a Trust's financial statements, you may have a potential conflict of interest in reviewing those statements and should seek a waiver of this Code to review the work. An executive officer of each Trust, or another appropriate person (such as a designated Board or Audit Committee member), will decide whether to grant a waiver. All waivers of this code must be disclosed to the applicable Trust's shareholders to the extent required by SEC rules. VI. AFFIRMATION OF THE CODE Upon adoption of the Code, each Trust's SFOs must affirm in writing that they have received, read and understand the Code, and annually thereafter must affirm that they have complied with the requirements of the Code. To the extent necessary, each Trust's Compliance Officer will provide guidance on the conduct required by this Code and the manner in which violations or suspected violations must be reported and waivers must be requested. VII. REPORTING VIOLATIONS In the event that an SFO discovers or, in good faith, suspects a violation of this Code, the SFO MUST immediately report the violation or suspected violation to the Compliance Officer. The Compliance Officer may, in his or her discretion, consult with another member of the Trust's senior management or the Board in determining how to address the suspected violation. For example, a Code violation may occur when a periodic report or financial statement of a Trust omits a material fact, or is technically accurate but, in the view of the SFO, is written in a way that obscures its meaning. SFOs who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be investigated and addressed promptly and will be treated as confidential to the extent possible. VIII. VIOLATIONS OF THE CODE Dishonest or unethical conduct or conduct that is illegal will constitute a violation of this Code, regardless of whether this Code specifically refers to such particular conduct. A violation of this Code may result in disciplinary action, up to and including removal as an SFO of the Trust. A variety of laws apply to the Trusts and their operations, including the Securities Act of 1933, the Investment Company Act of 1940, state laws relating to duties owed by Trust officers, and criminal laws. The Trusts will report any suspected criminal violations to the appropriate authorities, and will investigate, address and report, as appropriate, non-criminal violations. EX-99.CERT 3 aiciicert302_jv.txt AIC II SMARTGROWTH AR CERT 302_JV CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, James F. Volk, certify that: 1. I have reviewed this report on Form N-CSR of The Advisors' Inner Circle Fund II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 7, 2008 /s/ James F. Volk - --------------------- James F. Volk President EX-99.CERT 4 aiciicert302_ml.txt AIC II SMARTGROWTH AR CERT 302_ML CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Michael Lawson, certify that: 1. I have reviewed this report on Form N-CSR of The Advisors' Inner Circle Fund II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 7, 2008 /s/ Michael Lawson - ---------------------- Michael Lawson Controller and Chief Financial Officer EX-99.906CERT 5 aiciicert906_jv.txt AIC II SMARTGROWTH AR CERT 906_JV CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the President of The Advisors' Inner Circle Fund II (the "Fund"), with respect to the Fund's Form N-CSR for the period ended January 31, 2008 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: April 7, 2008 /s/ James F. Volk ------------------------ James F. Volk, President EX-99.906CERT 6 aiciicert906_ml.txt AIC II SMARTGROWTH AR CERT 906_ML CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the Controller and CFO of The Advisors' Inner Circle Fund II (the "Fund"), with respect to the Fund's Form N-CSR for the period ended January 31, 2008 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. Date: April 7, 2008 /s/ Michael Lawson ---------------------------------- Michael Lawson, Controller and CFO -----END PRIVACY-ENHANCED MESSAGE-----