<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST- +
+EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT RELATING TO THESE SECURITIES+
+HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES +
+MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE POST- +
+EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS +
+PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN +
+OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN +
+WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION+
+OR QUALIFICATION UNDER THE SECURITIES LAW OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS DATED NOVEMBER 22, 1996
SUBJECT TO COMPLETION
THE ADVISORS' INNER CIRCLE FUND
Investment Adviser:
CRA Real Estate Securities L.P.
The Advisors' Inner Circle Fund (the "Fund") provides a convenient and
economical means of investing in professionally managed portfolios of
securities. This Prospectus offers shares of the following mutual fund (the
"Portfolio"), which is a separate series of the Fund.
CRA REALTY SHARES PORTFOLIO
Class A Shares
and
Institutional Shares
This Prospectus sets forth concisely the information about the Fund and the
Portfolio that a prospective investor should know before investing. Investors
are advised to read this Prospectus and retain it for future reference. A
Statement of Additional Information relating to the Portfolio dated the same
date as this Prospectus has been filed with the Securities and Exchange
Commission and is available without charge by calling 1-800-932-7781. The
Statement of Additional Information is incorporated into this Prospectus by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
___________, 1996
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
- -------------------------------------------------------------------------------
<PAGE>
SUMMARY
The following summary provides basic information about Class A shares and
Institutional shares of the CRA Realty Shares Portfolio (the "Portfolio"). The
Portfolio is one of the mutual funds comprising The Advisors' Inner Circle Fund
(the "Fund"). This summary is qualified in its entirety by reference to the more
detailed information provided elsewhere in this Prospectus and in the Statement
of Additional Information.
WHAT IS THE INVESTMENT OBJECTIVE AND POLICIES? The Portfolio seeks total return
through an investment in real estate securities. The Portfolio seeks to achieve
its objective through a combination of above-average income and long-term growth
of capital by investing primarily in income-producing equity securities of
publicly traded companies primarily engaged in the U.S. real estate industry,
including Real Estate Investment Trusts ("REITs"). Under normal circumstances,
at least 65% of the Portfolio's total assets will be invested in income
producing equity securities of real estate companies. The Portfolio seeks to
invest in equity securities of companies that provide a dividend yield that
generally exceeds the composite dividend yield of securities comprising the S&P
500 Index. There is no assurance that the Portfolio will achieve its investment
objective.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE PORTFOLIO? The investment
policies of the Portfolio entail certain risks and considerations of which an
investor should be aware. The Portfolio invests in securities that fluctuate in
value, and investors should expect the Portfolio's net asset value per share to
fluctuate. Because the Portfolio invests primarily in the securities of
companies principally engaged in the real estate industry, its investments may
be subject to the risks associated with the direct ownership of real estate.
Further, because it is expected that the Portfolio will invest a substantial
portion of its assets in REITs, the Portfolio may also be subject to certain
risks associated with REITs. Finally, because the Portfolio concentrates its
investments in companies primarily engaged in the real estate industry and is a
non-diversified portfolio, the Portfolio may invest a greater proportion of its
assets in the securities of a smaller number of issuers and, as a result, may be
subject to a greater risk with respect to its portfolio securities.
For more information about the Portfolio, see "Investment Objective and
Policies," and "Description of Permitted Investments and Risk Factors."
WHO IS THE ADVISER? CRA Real Estate Securities L.P. serves as the investment
adviser of the Portfolio (the "Adviser" or "CRA"). In addition to advising the
Portfolio, the Adviser, through its predecessors, has managed investments in
real estate equity securities in a manner consistent with that used by the
Portfolio on behalf of pension funds, insurance companies and wealthy
individuals since 1984. See "Expense Summary" and "The Adviser."
<PAGE>
WHO IS THE ADMINISTRATOR? SEI Fund Resources serves as the administrator and
shareholder servicing agent of the Portfolio. See "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as the transfer agent and
dividend disbursing agent for the Portfolio. See "The Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company acts as the distributor
of the Portfolio's shares. See "The Distributor."
IS THERE A SALES LOAD? No, shares of each class of the Portfolio are offered on
a no-load basis.
IS THERE A MINIMUM INVESTMENT? The minimum initial investment is $100,000 for
Institutional shares and $5,000 for Class A shares of the Portfolio. Subsequent
investments may be made in any amount.
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Transfer Agent on a day when the New York Stock Exchange is open for
business (a "Business Day"). A purchase order will be effective as of the
Business Day received by the Transfer Agent if the Transfer Agent receives an
order and payment by check or with readily available funds prior to 4:00 p.m.,
Eastern time. Redemption orders placed with the Transfer Agent prior to 4:00
p.m., Eastern time on any Business Day will be effective that day. The Portfolio
also offers both a Systematic Investment Plan and a Systematic Withdrawal Plan.
The purchase and redemption price for shares is the net asset value per share
determined as of the end of the day the order is effective. See "Purchase and
Redemption of Shares."
HOW ARE DISTRIBUTIONS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Portfolio is distributed in the form of
quarterly dividends. Any capital gain is distributed at least annually.
Distributions are paid in additional shares unless the shareholder elects to
take the payment in cash. See "Dividends and Distributions."
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Institutional
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees (1)(2) None None
Exchange Fees None None
- -------------------------------------------------------------------------------------------------------
(1) A wire redemption charge of $10.00 is deducted from the amount of a
Federal Reserve wire redemption payment made at the request of a
shareholder.
(2) A fee of 0.75% of the amount redeemed is imposed on redemptions made
within six months of the date of the initial investment.
<CAPTION>
ANNUAL OPERATING EXPENSES (as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------
Class A Institutional
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advisory Fees (after fee waiver)(1) 0.00% 0.00%
Shareholder Service Fees 0.25% None
Other Expenses (after
reimbursements)(1)(2) 1.00% 1.00%
- ------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee 1.25% 1.00%
waiver)(1)(2)
======================================================================================================
</TABLE>
(1) The Adviser has agreed, on a voluntary basis, to waive "Advisory Fees" and
reimburse "Other Expenses" for the Portfolio to the extent necessary to keep the
Portfolio's "Total Operating Expenses" during the current fiscal year from
exceeding 1.25% and 1.00% for Class A shares and Institutional shares,
respectively. The Adviser reserves the right to terminate such waivers and
reimbursements at any time in its sole discretion. Absent such waivers and
reimbursements, Advisory Fees, Other Expense and Total Operating Expenses for
the Class A shares of the Portfolio would be .70%, 1.68% and 2.38%,
respectively, and such fees and expenses for Institutional Shares of the
Portfolio would be .70%, 1.43% and 2.13%, respectively.
(2) "Other Expenses" for the Portfolio are estimated for the current fiscal
year.
<TABLE>
<CAPTION>
Example
- -------------------------------------------------------------------------------------------------------
1 year 3 years
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
An investor in the Portfolio would pay the following expenses
on a $1,000 investment assuming (1) a 5% annual return and (2)
redemption at the end of each time period:
Class A shares .......................................... $13 $40
Institutional shares .................................... $10 $32
=======================================================================================================
=======================================================================================================
</TABLE>
The example should not be considered a representation of past or future
expenses. The Portfolio is new and actual expenses may be greater or less than
those shown. Information about the actual performance of the Portfolio will be
contained in the Trust's future Annual Reports to Shareholders, which may be
obtained without charge when they become available.
<PAGE>
The purpose of the expense table and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in each class of the Portfolio. A person who purchases shares
through a financial institution may be charged separate fees by that
institution. Additional information may be found under "The Adviser," "The
Administrator" and "Shareholder Services."
<PAGE>
THE FUND AND THE PORTFOLIOS
The Advisors' Inner Circle Fund (the "Fund") offers shares of a number of
diversified and non-diversified mutual funds, each of which is a separate series
("portfolio") of the Fund. Each share of each mutual fund represents an
undivided, proportionate interest in that mutual fund. This Prospectus offers
Class A shares and Institutional shares of the Fund's CRA Realty Shares
Portfolio (the "Portfolio"). Information regarding the other mutual funds in the
Fund is contained in separate prospectuses that may be obtained by calling
1-800-932-7781.
INVESTMENT OBJECTIVE AND POLICIES
================================================================================
The investment objective of the Portfolio is total return through investment in
real estate securities. The Portfolio seeks to achieve its investment through a
combination of above-average income and long-term growth of capital by investing
primarily in income-producing equity securities of companies principally engaged
in the U.S. real estate industry, including Real Estate Investment Trusts
("REITs"). There is no assurance that the Portfolio will achieve its investment
objective.
The Portfolio invests primarily in income producing equity securities of
publicly traded companies principally engaged in the real estate industry ("real
estate companies"). Under normal circumstances, at least 65% of the Portfolio's
total assets will be invested in income producing equity securities of real
estate companies. Such equity securities are common stocks (including shares or
units of beneficial interest of REITs), rights or warrants to purchase common
stocks and preferred stock. For purposes of the Portfolio's investment policies,
a company is "principally engaged" in the real estate industry if (i) it derives
at least 50% of its revenues or profits from the ownership, construction,
management, financing or sale of residential, commercial or industrial real
estate, or (ii) it has at least 50% of the fair market value of its assets
invested in residential, commercial or industrial real estate. Companies
principally engaged in the real estate industry include REITs, master limited
partnerships ("MLPs"), and real estate owners, real estate managers, real estate
brokers and real estate dealers. The Portfolio generally seeks to invest in
equity securities of real estate companies that provide a dividend yield that
generally exceeds the composite dividend yield of securities comprising the
S&P 500 Index.
Real Estate Investment Trusts. It is expected that the majority of the
- -----------------------------
Portfolio's total assets will be invested in securities issued by REITs. REITs
pool investors' funds for investment primarily in income producing real estate
or real estate related loans or interests. A REIT is not taxed at the federal
level on income distributed to its shareholders or unitholders if it complies
with regulatory requirements relating to its organization, ownership, assets and
income, and with a regulatory requirement that it distribute to its shareholders
or unitholders at least 95% of its taxable income for each taxable year.
Generally, REITs can be classified as Equity REITs or Mortgage REITs. Equity
REITs invest the majority of their assets directly in ownership of real property
and derive their income primarily from rental
<PAGE>
income. Equity REITs are further categorized according to the types of real
estate properties they own, e.g., apartment properties, retail shopping centers,
office and industrial properties, hotels, health-care facilities, manufactured
housing and mixed- property types. Mortgage REITs invest the majority of their
assets in real estate mortgages and derive their income primarily from interest
payments on the credit they have extended. The Portfolio will invest primarily
in Equity REITs. Shareholders in the Portfolio should realize that by investing
in REITs indirectly through the Portfolio, they will bear not only their
proportionate share of the expenses of the Portfolio but also, indirectly, the
management expenses of underlying REITs.
The Portfolio may invest any remaining assets in debt securities issued or
guaranteed by real estate companies or secured by real estate assets and rated,
at time of purchase, in one of the four highest rating categories by a
nationally recognized statistical rating organization (an "NRSRO") or determined
by the Adviser to be of comparable quality at the time of purchase. Investment
grade securities are securities that are rated in one of the four highest rating
categories by an NRSRO. Securities rated in the lowest category of investment
grade securities have speculative characteristics. The Portfolio may also invest
in debt securities rated below investment grade (commonly known as "junk bonds")
although the Portfolio will not purchase such bonds if such investment would
cause more than 5% of its net assets to be so invested. In the event that a
security held by the Portfolio is downgraded below the stated rating categories,
the Adviser will review and take appropriate action with regard to the security.
The Portfolio anticipates that its annual portfolio turnover rate will not
exceed 100%, but the turnover rate will not be a limiting factor when the
Adviser deems portfolio changes appropriate. The turnover rate may vary greatly
from year to year. A high portfolio turnover rate may result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate was lower.
GENERAL INVESTMENT POLICIES
================================================================================
BORROWING
The Portfolio's fundamental investment limitations set forth the extent to which
the Portfolio may borrow money. However, the Portfolio's investment policy
further limits its borrowings as follows: (i) the Portfolio will not borrow
money except from banks for temporary or emergency purposes (e.g. to facilitate
orderly redemption of its shares while avoiding untimely disposition of
portfolio holdings); (ii) the Portfolio will not borrow money in excess of 10%
of the value of its total assets (excluding the amount borrowed), at the time of
the borrowing or (iii) mortgage, pledge or hypothecate any assets except to
secure permitted borrowings and then only in an amount not in excess of 15% of
the value of its total assets (excluding the amount borrowed) at the time of
such borrowings. The Portfolio will not borrow for the purpose of leveraging its
investment portfolio. The Portfolio may
<PAGE>
not purchase additional securities while its outstanding borrowings exceed 5% of
its assets. The Portfolio's investment policy with respect to borrowing may be
changed by vote of the Board of Trustees without a shareholder vote.
MONEY MARKET INSTRUMENTS; TEMPORARY DEFENSIVE INVESTMENTS
In order to meet liquidity needs, the Portfolio may hold cash reserves and
invest in money market instruments (including securities issued or guaranteed by
the United States Government, its agencies or instrumentalities, repurchase
agreements, certificates of deposit and bankers' acceptances issued by banks or
savings and loan associations having net assets of at least $500 million as of
the end of their most recent fiscal year and commercial paper) rated at time of
purchase in the top two categories by an NRSRO or determined to be of comparable
quality by the Adviser at the time of purchase.
For temporary defensive purposes when the Adviser determines that market
conditions warrant, the Portfolio may invest up to 100% of its assets in the
money market instruments described above and other long and short-term debt
instruments which are rated at time of purchase in the top two categories by an
NRSRO or determined to be of comparable quality by the Adviser at the time of
purchase, and may hold a portion of its assets in cash. To the extent the
Portfolio is engaged in temporary defensive investments, the Portfolio will not
be pursuing its investment objective.
NON-PUBLICLY TRADED SECURITIES AND RESTRICTED SECURITIES; RULE 144A SECURITIES
The Portfolio may invest in securities that are neither listed on a stock
exchange nor traded over-the-counter, including privately placed securities.
Such unlisted equity securities may involve a higher degree of business and
financial risk that can result in substantial losses. As a result of the absence
of a public trading market for these securities, they may be less liquid than
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the prices realized from these sales could be less than
those originally paid by the Portfolio or less than what may be considered the
fair value of such securities. Furthermore, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements which might be applicable if their securities were
publicly traded. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Portfolio
may be required to bear the expenses of registration. The Portfolio may not
invest more than 15% of its net assets in illiquid securities, including
securities for which there is not a readily available secondary market.
The Portfolio may invest in Restricted Securities that can be offered and sold
to qualified institutional buyers under Rule 144A under that Act ("144A
Securities"). The Board of Trustees has adopted guidelines and delegated to the
Adviser, subject to the supervision of the Board of Trustees, the daily function
of determining and monitoring the liquidity of 144A Securities. 144A Securities
may become illiquid if qualified institutional buyers are not interested in
acquiring the securities.
<PAGE>
SECURITIES LENDING
The Portfolio may lend up to 33-1/3% of its total assets to qualified investors
for the purpose of realizing additional income; however, the Portfolio has no
present intention to lend its securities.
OPTIONS AND FUTURES
The Portfolio may purchase or write options, futures and options on futures for
the purpose of managing or hedging portfolio risks, to remain fully invested and
to reduce transaction costs. The Portfolio will not enter into futures
transactions for speculation or achieving leverage. Risks associated with
investing in options and futures may include lack of a liquid secondary market,
trading restrictions which may be imposed by an exchange, government regulations
which may restrict trading, an imperfect correlation between the prices of
securities held by the Portfolio and the price of an option or future.
For additional information regarding the Portfolio's permitted investments, see
"Description of Permitted Investments and Risk Factors" in this Prospectus and
"Description of Permitted Investments" in the Statement of Additional
Information.
INVESTMENT LIMITATIONS
================================================================================
The investment objective and investment limitations are fundamental policies of
the Portfolio. Fundamental policies cannot be changed with respect to the Fund
or the Portfolio without the consent of the holders of a majority of the Fund's
or the Portfolio's outstanding shares. The Portfolio is classified as a
"non-diversified" investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"), which means that the Portfolio is not limited by
the 1940 Act in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Portfolio intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), which will relieve
the Portfolio of any liability for federal income tax to the extent its earnings
are distributed to shareholders. See "Taxes."
The Portfolio may not:
1. Purchase or sell real estate, except that the Portfolio may purchase
securities issued by companies primarily engaged in the real estate industry and
will, as a matter of fundamental policy, concentrate its investments in such
securities of companies principally engaged in the real estate business.
2. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Portfolio may obtain short-term credits as
necessary for the clearance of security transactions.
<PAGE>
3. Acquire more than 10% of the voting securities of any one issuer.
Additional investment limitations are set forth in the Statement of Additional
Information.
THE ADVISER
The Adviser, CRA Real Estate Securities L.P., is a registered investment advisor
and through its predecessors has been managing investments in real estate
securities on behalf of institutional investors since 1984. CRA Real Estate
Securities L.P. is owned by its principals Messrs. Kenneth D. Campbell, T.
Ritson Ferguson and Jarrett B. Kling and the principals of Jones Lang Wootton
Realty Advisors, an affiliate of the Adviser and a registered investment
adviser. As of October 1, 1996, the Adviser had approximately $410 million in
assets under management. The principal business address of the Adviser is Suite
205, 259 Radnor-Chester Road, Radnor, Pennsylvania 19087.
The Adviser uses a two part investment approach comprised of securities analysis
and portfolio allocation. For securities analysis, the Adviser employs
proprietary analytical techniques and databases to identify companies offering,
in the Adviser's view, above-average investment value. For portfolio allocation
purposes, CRA draws upon the proprietary private real estate market knowledge of
its affiliate Jones Lang Wootton Realty Advisors, which manages approximately
$4.0 billion of real estate on behalf of its pension clients. The Adviser uses
systematic, top-down research to evaluate property market conditions and trends
and to make judgements regarding which market sectors offer potentially
attractive returns.
CRA has not previously served as an investment adviser to a registered
investment company, and, as such, does not have extensive experience advising a
highly regulated entity such as an investment company. This may present
additional risks for the Portfolio. However, CRA's predecessor, Audit
Investments, Inc., served as sub-adviser to a registered closed end investment
company, REIT Income Fund (subsequently RET Income Fund) from 1972 to 1978.
The Adviser serves as the investment adviser for the Portfolio under an
investment advisory agreement (the "Advisory Agreement") with the Fund. Under
the Advisory Agreement, the Adviser makes the investment decisions for the
assets of the Portfolio and continuously reviews, supervises and administers the
investment program of the Portfolio, subject to the supervision of, and policies
established by, the Trustees of the Fund.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of 0.70% of the average daily net assets of
the Portfolio. The Adviser has voluntarily agreed to waive all or a portion of
its fee for the Portfolio and to reimburse expenses of the Portfolio in order to
limit total operating expenses to an annual rate of not more than 1.25% of
average daily net assets for Class A shares and 1.00% of average
<PAGE>
daily net assets for Institutional shares. The Adviser reserves the right, in
its sole discretion, to terminate its voluntary fee waivers and reimbursements
at any time.
PORTFOLIO MANAGERS
Kenneth D. Campbell and T. Ritson Ferguson, CFA have shared primary
responsibility for managing the assets of the Portfolio since commencement of
operations.
KENNETH D. CAMPBELL Is The Chairman, Co-chief Investment Officer And
Co-Portfolio Manager of the Adviser. Mr. Campbell has been with the Adviser and
its predecessors since 1969, and has managed real estate securities portfolios
since 1989 for a select number of institutional and individual accounts. An MBA
graduate with distinction from New York University and a BA from Capital
University, Mr. Campbell founded and published Realty Stock Review, an industry
-------------------
advisory service, from 1970 until its sale in 1990. He is the editor and
principal author of several book-length investment studies of REITs, including
Real Estate Investment Trusts: America's Newest Billionaires (1971). He received
- ------------------------------------------------------------
the REIT Industry Leadership Award from the National Association of Real Estate
Investment Trust (NAREIT) in 1996. He is a member of the New York and
Philadelphia Societies of Security Analysts, the Real Estate Analyst's Group and
an associate member of NAREIT.
T. RITSON FERGUSON, CFA is President, Co-Chief Investment Officer and
Co-Portfolio Manager of the Adviser. Mr. Ferguson provides oversight of CRA's
operations and is a member of the firm's Investment Policy Committee and
Investment Committee. Mr. Ferguson has been a portfolio manager with the Adviser
and it predecessors since 1993. Before joining CRA, Mr. Ferguson gained
extensive direct real estate investment experience at Radnor Advisors and
Trammell Crow Company where he was involved in all facets of the acquisition,
development and management of commercial real estate since 1986. Mr. Ferguson
also served as a Captain in the U.S. Air Force. He received his MBA with
distinction from Wharton (University of Pennsylvania) and holds a B.S. from Duke
University (summa cum laude, Phi Beta Kappa). Mr. Ferguson studied at Oxford
University as an A.B. Duke Scholar. He is a member of the Financial Analysts of
Philadelphia and an associate member of NAREIT. He is a Chartered Financial
Analyst (CFA).
The following graph presents the composite compounded annual rates of total
return attained by the accounts managed by CRA Real Estate Securities L.P. and
its predecessors with investment policies substantially similar to those of the
Portfolio for the time periods indicated, compared to the NAREIT - All REITs
Index and the Wilshire Real Estate Securities Index.
Past Performance of CRA and its Predecessors
Since
Inception
Total Return 1 Year 3 Years 5 Years (October, 1984)
CRA 21.5% 9.9% 17.3% 10.3%
NAREIT-All REITs 19.7% 8.7% 13.6% 8.5%
Index
Wilshire Real Estate 19.8% 7.4% 11.0% 7.4%
Securities Index
[In the printed prospectus, the foregoing information will be in a bar graph
format.]
* The performance results described above are based on a composite of all
discretionary real estate securities portfolios that were advised by CRA and its
predecessors with investment policies substantially similar to those of the
Portfolio through September 30, 1996. Audit Investments, Inc. was formed on
January 29, 1969 and reorganized into Campbell Radnor Advisors on January 1,
1994. Campbell Radnor Advisors was subsequently reorganized into CRA Real
Estate Securities L.P. on January 31, 1995. The same advisory personnel who
have previously managed the discretionary portfolio accounts at each of the
predecessors serve as portfolio managers for the Portfolio. These accounts were
managed by Mr. Campbell through 1992; Mr. Ferguson became a co-portfolio manager
with Mr. Campbell in January, 1993; and Messrs. Campbell and Ferguson
co-managed the accounts for all subsequent periods shown. The results are net
of the private account advisory fees and assume the reinvestment of dividends.
As of October 1, 1996, CRA had $410 million in real estate assets under
management with $410 million in this style, all of which is represented in these
results.
The Wilshire and NAREIT indices are unmanaged indices without transaction costs
and are widely recognized as indicators of the performance of the real estate
securities market. The Wilshire Real Estate Securities Index is a
market-weighted index comprised of equity REITs and Real Estate Operating
Companies. The NAREIT index is a market-weighed index comprised of all of the
tax-qualified REITs listed on the New York Stock Exchange, American Stock
Exchange and the NASDAQ National Market System.
Registered investment companies managed by the Advisor, including the Portfolio,
are subject to certain regulatory and tax restrictions on investment that are
not applicable to the Advisor's private accounts. Additionally, the operating
expenses of the Portfolio will be different from, and may be higher than, the
operating expenses of the individual accounts. The performances of CRA and its
predecessors is provided merely to indicate their experience in managing similar
investment portfolios.
<PAGE>
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator"), serves as the administrator of the
Fund. The Administrator, provides the Fund with administrative services,
including regulatory reporting and all necessary office space, equipment,
personnel and facilities. The Administrator is a Delaware business trust and SEI
Financial Management Corporation, a wholly owned subsidiary of SEI Corporation
("SEI"), is the owner of all beneficial interests in the Administrator.
For these administrative services, the Administrator is entitled to a fee from
the Portfolio, which fee is calculated daily and paid monthly, at an annual rate
of 0.15% of the first $100 million of the Portfolio's average daily net assets;
0.125% of the next $100 million of the Portfolio's average daily net assets;
0.10% of the next $100 million of the Portfolio's average daily net assets; and
0.08% of the Portfolio's average daily net assets over $300 million. However,
the Portfolio pays the Administrator a minimum annual fee of $75,000, which will
be waived during the first four months of operations.
The Administrator also serves as the shareholder servicing agent for the
Portfolio under a shareholder servicing agreement with the Fund.
THE TRANSFER AGENT
DST Systems, Inc., 210 W. 10th Street, Kansas City, Missouri 64105 (the
"Transfer Agent") serves as the transfer agent and dividend disbursing agent for
the Fund under a transfer agency agreement with the Fund.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as the Fund's distributor pursuant to a distribution agreement (the
"Distribution Agreement"). No compensation is paid to the Distributor for
distribution services for the shares of the Portfolio.
Shareholder Services
The Fund has adopted a shareholder servicing plan for Class A shares (the
"Service Plan") under which a shareholder servicing fee of up to .25% of average
daily net assets
<PAGE>
attributable to Class A shares will be paid to the Distributor. Under the
Service Plan, the Distributor may perform, or may compensate other service
providers for performing, the following shareholder services: sub-accounting;
providing information on share positions to clients; forwarding shareholder
communications to clients; processing purchase, redemption orders; and
processing dividend payments. Under the Service Plan, the Distributor may retain
as a profit any difference between the fee it receives and the amount it pays to
third parties.
PORTFOLIO TRANSACTIONS
The Advisory Agreement authorizes the Adviser to select broker-dealers that will
execute the purchase or sale of investment securities for the Portfolio and
directs the Adviser to seek to obtain the best net results.
The Portfolio may execute brokerage or other agency transactions through the
Distributor for which the Distributor may receive usual and customary
compensation. Because shares of the Portfolio are not marketed through
intermediary broker-dealers, it is not the Portfolio's practice to allocate
brokerage or effect principal transactions with broker-dealers on the basis of
sales of shares that may be made through such firms. However, the Adviser may
place orders for the Portfolio with qualified broker-dealers who refer clients
to the Portfolio.
PURCHASE AND REDEMPTION OF SHARES
Investors may purchase and redeem shares of the Portfolio directly through the
Transfer Agent, P.O. Box 419009, Kansas City, Missouri 64141-6009 by mail or
wire transfer. All shareholders may place wire transfer orders and redemption
orders by telephone; when market conditions are extremely busy, it is possible
that investors may experience difficulties placing orders by telephone and may
wish to place orders by mail. Purchases and redemptions of shares of the
Portfolio may be made on any Business Day. Shares of the Portfolio are offered
only to residents of states in which such shares are eligible for purchase.
Certain broker-dealers assist their clients in the purchase or redemptions of
shares from the Distributor and charge a fee for this service in addition to the
Portfolio's public offering price.
MINIMUM INVESTMENT AND ACCOUNT SIZES; CONVERSION FROM CLASS A TO INSTITUTIONAL
SHARES
For a Portfolio account, the minimum initial investment and minimum account size
are $5,000 for Class A shares and $100,000 for Institutional shares. If the
value of a Portfolio account containing Institutional shares falls below
$100,000 (but remains at or above $5,000) because of shareholder redemption(s),
the Fund will notify the shareholder, and if the account value remains below
$100,000 (but remains at or above $5,000) for a continuous 60-day period, the
Institutional shares in such account will convert to Class A
<PAGE>
shares and will be subject to the shareholder servicing fee and other features
applicable to the Class A shares. The Fund, however, will not convert
Institutional shares to Class A shares based solely upon changes in the market
that reduce the net asset value of shares. Under current tax law, conversions
between share classes are not a table event to the shareholder.
Investors may also invest in the Fund by purchasing shares through a trust
department, broker, dealer, agent, financial planner, financial services firm or
investment adviser. An investor may be charged an additional service or
transaction fee by that institution.
The Adviser will waive the initial minimum investment levels for the officers
and employees, and the immediate family members of the officers and employees,
of the Adviser and its affiliates. The minimum investment levels may also be
waived at the discretion of the Adviser for (i) certain trust departments,
brokers, dealers, agents, financial planners, financial services firms, or
investment advisers that have entered into an agreement with the Administrator
or its affiliates; and (ii) retirement and deferred compensation plans and
trusts used to fund such plans, including, but not limited to, those defined in
Section 401(a), 403(b) or 457 of the Code, and "rabbi trusts."
The Fund reserves the right to modify or terminate the conversion features of
the shares as stated above at any time upon 60 days' notice to shareholders.
MINIMUM ACCOUNT SIZES AND INVOLUNTARY REDEMPTION OF SHARES
If the value of a Portfolio account falls below $5,000 because of shareholder
redemption(s), the Fund will notify the shareholder, and if the account value
remains below $5,000 for a continuous 60-day period, the shares in such account
are subject to redemption by the Fund and, if redeemed, the net asset value of
such shares will be promptly paid to the shareholder. The Fund, however, will
not redeem shares based solely upon changes in the market that reduce the net
asset value of shares.
The Fund reserves the right to modify or terminate the involuntary redemption
features of the shares as stated above at any time upon 60 days' notice to
shareholders.
CONVERSION FROM CLASS A TO INSTITUTIONAL SHARES
If the value of Class A shares in a Portfolio account increases, whether due to
shareholder share purchases or market activity, to $100,000 or more, the Class A
shares will convert to Institutional shares. Under current tax law, such
conversion is not a taxable event to the shareholder. Institutional shares
converted from Class A shares are subject to the same minimum account size
requirements that are applicable to Portfolio accounts containing Institutional
shares, as stated above. The Fund reserves the right to modify or terminate this
conversion feature at any time upon 60 days' notice to shareholders.
<PAGE>
INITIAL PURCHASES DIRECTLY FROM THE FUND
The Fund's determination of an investor's eligibility to purchase shares of a
given class will take precedence over the investor's selection of a class.
Assuming the investor is eligible for the class, the Fund will select the most
favorable class for the investor, if the investor has not done so.
PURCHASES BY MAIL
An account may be opened by mailing a check or other negotiable bank draft
(payable to the name of the Portfolio) for $5,000 or more for Class A shares and
$100,000 or more for Institutional shares, together with a completed Account
Application to the Transfer Agent, P.O. Box 419009, Kansas City, Missouri
64141-6009. Subsequent investments may also be mailed directly to the Transfer
Agent. All purchases made by check should be in U.S. dollars and made payable to
CRA Realty Shares Portfolio. Third party checks, credit cards, credit card
checks and cash will not be accepted. When purchases are made by check,
redemptions will not be allowed until the investment being redeemed has been in
the account for 15 business days.
PURCHASES BY WIRE TRANSFER
Shareholders having an account with a commercial bank that is a member of the
Federal Reserve System may purchase shares of the Portfolio by requesting their
bank to transmit funds by wire to: United Missouri Bank of Kansas, N.A.; ABA
#10-10-00695; for Account Number _____________; Further Credit: CRA Realty
Shares Portfolio. The shareholder's name and account number must be specified in
the wire.
Initial Purchases: Before making an initial investment by wire, an investor must
first telephone 1-800-________ to be assigned an account number. The investor's
name, account number, taxpayer identification number or Social Security number,
and address must be specified in the wire. In addition, an Account Application
should be promptly forwarded to: DST Systems, Inc., P.O. Box 419009, Kansas
City, Missouri 64141-6009.
Subsequent Purchases: Additional investments may be made at any time through the
wire procedures described above, which must include a shareholder's name and
account number. The investor's bank may impose a fee for investments by wire.
General Information Regarding Purchases
A purchase order will be effective as of the day received by the Transfer Agent
if the Transfer Agent receives the order and payment before 4:00 p.m., Eastern
time. Payment may be made by check or readily available funds. The purchase
price of shares of the Portfolio is the net asset value per share next
determined after a purchase order is
<PAGE>
effective. Purchases will be made in full and fractional shares of a Portfolio
calculated to three decimal places. The Fund will not issue certificates
representing shares of the Portfolio.
If a check received for the purchase of shares does not clear, the purchase will
be canceled, and the investor could be liable for any losses or fees incurred.
The Fund reserves the right to reject a purchase order when the Fund determines
that it is not in the best interest of the Fund or its shareholders to accept
such order.
SYSTEMATIC INVESTMENT PLAN -- A shareholder may also arrange for periodic
additional investments in the Portfolio through automatic deductions by
Automated Clearing House ("ACH") transfers from a checking or savings account by
completing the appropriate section of the Account Application form. This
Systematic Investment Plan is subject to the account minimum initial purchase
amounts and a minimum pre-authorized investment amount of $50 per month. An
Account Application form may be obtained by calling 1-800-________.
REDEMPTIONS
Redemption orders received by the Transfer Agent prior to 4:00 p.m., Eastern
time on any Business Day will be effective that day. The redemption price of
shares is the net asset value per share of the Portfolio next determined after
the redemption order is effective. Payment on redemption will be made as
promptly as possible and, in any event, within seven days after the redemption
order is received, provided, however, that redemption proceeds for shares
purchased by check (including certified or cashier's checks) will be forwarded
only upon collection of payment for such shares; collection of payment may take
15 or more days. Shareholders may not close their accounts by telephone.
Shareholders may receive redemption payments in the form of a check or by
Federal Reserve wire transfer or ACH wire transfer. There is no charge for
having a check for redemption proceeds mailed. The custodian will deduct a wire
charge, currently $10.00, from the amount of a Federal Reserve wire redemption
payment made at the request of a shareholder. Shareholders cannot redeem shares
of a Portfolio by Federal Reserve wire on federal holidays restricting wire
transfers. The Fund does not charge for ACH wire transfers; however, such
transactions will not be posted to a shareholder's bank account until the second
Business Day following the transaction.
Redemption requests made within six months of the initial investment will be
subject to a redemption fee of 0.75% of the amount redeemed. The redemption fee
is designed to discourage short-term trading and any proceeds of such fee will
be credited to the net assets of the Portfolio.
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN -- The Portfolio offers a Systematic Withdrawal Plan
(the "SWP") for shareholders who wish to receive regular distributions from
their account. Upon commencement of the SWP, the account must have a current
value of $25,000 or more. Shareholders may elect to receive automatic payments
via ACH wire transfers of $100 or more on a monthly, quarterly, semi-annual or
annual basis. An application form for SWP may be obtained by calling
1-800-________.
Shareholders should realize that if withdrawals exceed income dividends, their
invested principal in the account will be depleted. Thus, depending on the
frequency and amounts of the withdrawal payments and/or any fluctuations in the
net asset value per share, their original investment could be exhausted
entirely. To participate in the SWP, shareholders must have their dividends
automatically reinvested. Shareholders may change or cancel the SWP at any time,
upon written notice to the Transfer Agent.
Neither the Fund nor the Transfer Agent will be responsible for the authenticity
of instructions received by telephone if they reasonably believe those
instructions to be genuine. The Fund and the Transfer Agent will each employ
reasonable procedures to confirm that telephone instructions are genuine. Such
procedures may include taping of telephone conversations.
The right of redemption may be suspended or the date of payment of redemption
proceeds postponed during certain periods as set forth more fully in the
Statement of Additional Information.
NET ASSET VALUE
The net asset value per share of a class of the Portfolio is determined by
dividing the total market value of the Portfolio's investments and other assets
attributable to the class, less any liabilities attributable to the class, by
the total number of shares of that class in the Portfolio that are outstanding.
Net asset value per share is determined daily as of the close of business of the
New York Stock Exchange (normally, 4:00 p.m., Eastern time) on any Business Day.
PERFORMANCE
From time to time, the Portfolio may advertise its yield and total return. These
figures will be based on historical earnings and are not intended to indicate
future performance. No representation can be made regarding actual future yields
or returns. The yield of the Portfolio refers to the annualized income generated
by an investment in the Portfolio over a specified 30-day period. The yield is
calculated by assuming that the same amount of income generated by the
investment during that period is generated in each 30-day period over one year
and is shown as a percentage of the investment.
<PAGE>
The total return of the Portfolio refers to the average compounded rate of
return on a hypothetical investment, for designated time periods (including but
not limited to the period from which the Portfolio commenced operations through
the specified date), assuming that the entire investment is redeemed at the end
of each period and assuming the reinvestment of all dividend and capital gain
distributions.
The performance figures for Class A shares will generally be lower than those
for Institutional shares because of the shareholder servicing fees charged to
Class A shares.
The Portfolio may periodically compare its performance to that of other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical
Services, Inc.), or by financial and business publications and periodicals, of
broad groups of comparable mutual funds, unmanaged indices, which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs, or other investment alternatives. The
Portfolio may quote Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. The Portfolio may quote Ibbotson Associates
of Chicago, Illinois, which provides historical returns of the capital markets
in the U.S. The Portfolio may use long term performance of these capital markets
to demonstrate general long-term risk versus reward scenarios and could include
the value of a hypothetical investment in any of the capital markets. The
Portfolio may also quote financial and business publications and periodicals as
they relate to fund management, investment philosophy, and investment
techniques. The Portfolio may also quote indices relating to real estate
securities published by the National Association of Real Estate Investment
Trusts (NAREIT) and Wilshire Associates Incorporated ("Wilshire").
The Portfolio may quote various measures of volatility and benchmark correlation
in advertising and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
Additional performance information regarding the Portfolio will be set forth in
the Fund's Annual Report to Shareholders, which, when available, may be obtained
on request and without charge by calling 1-800-________.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action.
No attempt has been made to present a detailed explanation of the federal,
state, or local income tax treatment of the Portfolio or its shareholders.
Accordingly, shareholders are
<PAGE>
urged to consult their tax advisors regarding specific questions as to federal,
state and local income taxes.
TAX STATUS OF THE PORTFOLIO:
The Portfolio is treated as a separate entity for federal income tax purposes
and is not combined with the Fund's other portfolios. The Portfolio intends to
qualify for the special tax treatment afforded regulated investment companies as
defined under Subchapter M of the Code. So long as the Portfolio qualifies for
this special tax treatment, it will be relieved of federal income tax on that
part of its net investment income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss) which it distributes to
shareholders.
TAX STATUS OF DISTRIBUTIONS:
The Portfolio will distribute all of its net investment income (including, for
this purpose, net short-term capital gain) to shareholders. Dividends from net
investment income will be taxable to shareholders as ordinary income whether
received in cash or in additional shares. It can be expected that only certain
dividends of the Portfolio will qualify for that deduction. Any net capital
gains will be distributed annually and will be taxed to shareholders as long-
term capital gains, regardless of how long the shareholder has held shares. The
Portfolio will make annual reports to shareholders of the federal income tax
status of all distributions, including the amount of dividends eligible for the
dividends-received deduction.
Certain securities purchased by the Portfolio (such as STRIPS) are sold with
original issue discount and thus do not make periodic cash interest payments.
For a further description of such securities, see "Description of Permitted
Investments and Risk Factors" below. The Portfolio will be required to include
as part of its current income the accrued discount on such obligations even
though the Portfolio has not received any interest payments on such obligations
during that period. Because the Portfolio distributes all of its net investment
income to its shareholders, the Portfolio may have to sell portfolio securities
to distribute such accrued income, which may occur at a time when the Adviser
would not have chosen to sell such securities and which may result in a taxable
gain or loss.
Dividends declared by the Portfolio in October, November or December of any year
and payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Portfolio and received by the shareholders on
December 31 of that year, if paid by the Portfolio at any time during the
following January.
The Portfolio intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.
<PAGE>
Sale or redemption of the Portfolio's shares is a taxable event to the
shareholder.
GENERAL INFORMATION
THE FUND
The Fund, an open-end investment management company that offers shares of
diversified and non-diversified portfolios, was organized under Massachusetts
law as a business trust under a Declaration of Trust dated July 18, 1991. The
Declaration of Trust permits the Fund to offer separate series ("portfolios") of
shares. All consideration received by the Fund for shares of any portfolio and
all assets of such portfolio belong to that portfolio and would be subject to
liabilities related thereto. The Fund reserves the right to create and issue
shares of additional portfolios.
The Fund pays its (i) operating expenses, including fees of its service
providers, expenses of preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and registering its shares
under federal and state securities laws, pricing and insurance expenses,
brokerage costs, interest charges, taxes and organization expenses and (ii) pro
rata share of the Fund's other expenses, including audit and legal expenses. The
Portfolio's expense ratios are disclosed under "Financial Highlights."
TRUSTEES OF THE FUND
The management and affairs of the Fund are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Fund.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Each of the
Fund's portfolios (or classes of such portfolios) will vote separately on
matters relating solely to the particular portfolio or class thereof. As a
Massachusetts business trust, the Fund is not required to hold annual meetings
of shareholders but shareholders' approval will be sought for certain changes in
the operation of the Fund and for the election of Trustees under certain
circumstances. In addition, a Trustee may be removed by the remaining Trustees
or by shareholders at a special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares of the Fund. In the
event that such a meeting is requested, the Fund will provide appropriate
assistance and information to the shareholders requesting the meeting.
<PAGE>
REPORTING
The Fund issues unaudited financial information semi-annually and audited
financial statements annually for the Portfolio. The Fund also furnishes
periodic reports and, as necessary, proxy statements to shareholders of record.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to The Advisors' Inner Circle Fund,
P.O. Box 419009, Kansas City, Missouri 64141-6009 or by calling 1-800-932-7781.
Purchases and redemptions of shares should be made through the Transfer Agent by
calling 1-800-808-4921.
DIVIDENDS AND DISTRIBUTIONS
Substantially all of the net investment income (exclusive of capital gains) of
the Portfolio is distributed in the form of quarterly dividends. Shareholders of
record on the next to last Business Day of each quarter will be entitled to
receive the quarterly dividend distribution, which is generally paid within 10
Business Days after the end of the quarter. If any capital gains are realized,
substantially all of it will be distributed at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares, unless the shareholder has elected to take
such payment in cash. Shareholders may change their election by providing
written notice to the Transfer Agent at least 15 days prior to the distribution.
Shareholders may receive payments for cash distributions in the form of a check
or by Federal Reserve wire transfer or ACH wire transfers.
Dividends and other distributions of the Portfolio are paid on a per share
basis. The value of each share will be reduced by the amount of the payment. If
shares are purchased shortly before the record date for a distribution of
ordinary income or capital gains, a shareholder will pay the full price for the
shares and receive some portion of the price back as a taxable dividend or
distribution.
COUNSEL AND INDEPENDENT PUBLIC ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Fund. Arthur Andersen LLP
serves as the independent public accountants of the Fund.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101 acts as the custodian (the "Custodian") of the Fund. The
Custodian holds cash, securities and other assets of the Fund as required by the
1940 Act.
<PAGE>
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
================================================================================
The following is a description of the permitted investment practices for the
Portfolio, and the associated risk factors:
CONVERTIBLE SECURITIES -- Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both
fixed-income and equity securities. Because of the conversion feature, the
market value of a convertible security tends to move with the market value of
the underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
EQUITY SECURITIES -- Equity securities represent ownership interests in a
company or corporation and include common stock, preferred stock, and warrants
and other rights to acquire such instruments. Investments in common stocks are
subject to market risks which may cause their prices to fluctuate over time. The
value of convertible securities is also affected by prevailing interest rates,
the credit quality of the issuer and any call provisions. Changes in the value
of portfolio securities will not necessarily affect cash income derived from
these securities but will affect the Portfolio's net asset value.
FIXED INCOME SECURITIES -- Fixed income securities are debt obligations issued
by corporations, municipalities and other borrowers. The market value of fixed
income investments will generally change in response to interest rate changes
and other factors. During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities generally decline.
Moreover, while securities with longer maturities tend to produce higher yields,
the prices of longer maturity securities are also subject to greater market
fluctuations as a result of changes in interest rates. Changes by recognized
agencies in the rating of any fixed income security and in the ability of an
issuer to make payments of interest and principal will also affect the value of
these investments. Changes in the value of portfolio securities will not affect
cash income derived from these securities but will affect a Portfolio's net
asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS -- Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. The Portfolio may use
futures contracts and related options for bona fide hedging purposes, to offset
changes in the value of securities held or expected to be acquired or be
disposed of, or to gain exposure to a particular market or instrument. A
<PAGE>
Fund will minimize the risk that it will be unable to close out a futures
contract by only entering into futures contracts which are traded on national
futures exchanges. In addition, a Fund will sell only covered futures contracts
and options on futures contracts. In order to avoid leveraging and related
risks, when the Portfolio purchases futures contracts, it will collateralize
its position by depositing an amount of cash or liquid securities, equal to
the market value of the futures positions held, less margin deposits, in a
segregated account with a third party custodian. Collateral equal to the current
market value of the futures position will be marked to market on a daily basis.
There are risks associated with these activities, including the following:
(1) the success of a hedging strategy may depend on an ability to predict
movements in the prices of individual securities, fluctuations in markets
and movements in interest rates, (2) there may be an imperfect or no
correlation between the changes in market value of the securities held by
the Portfolio and the prices of futures and options on futures, (3) there
may not be a liquid secondary market for a futures contract or option,
(4) trading restrictions or limitations may be imposed by an exchange,
and (5) government regulations may restrict trading in futures contracts
and futures options.
ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be
disposed of within seven business days at approximately the price at which
they are being carried on the Fund's books. Illiquid securities include
demand instruments with a demand notice period exceeding seven days,
securities for which there is no secondary market, and repurchase agree-
ments with durations over 7 days in length.
LOWER RATED SECURITIES -- The Portfolio may invest in lower rated securities.
Fixed income securities are subject to the risk of an issuer's ability to meet
principal and interest payments on the obligation (credit risk), and may also be
subject to price volatility due to such factors as interest rate sensitivity,
market perception of the creditworthiness of the issuer and general market
liquidity (market risk). Lower rated or unrated (i.e., high yield) securities
are more likely to react to developments affecting market and credit risk than
are more highly rated securities, which primarily react to movements in the
general level of interest rates. The market values of fixed income securities
tend to vary inversely with the level of interest rates. Yields and market
values of high yield securities will fluctuate over time, reflecting not only
changing interest rates but the market's perception of credit quality and the
outlook for economic growth. When economic conditions appear to be deteriora-
ting, medium to lower rated securities may decline in value due to heightened
concern over credit quality, regardless of prevailing interest rates. Investors
should carefully consider the relative risks of investing in high yield
securities and understand that such securities generally are not meant for
short-term investing.
MONEY MARKET INSTRUMENTS -- Money market securities are high-quality, U.S.
dollar-denominated, short-term debt instruments. They consist of: (i) bankers'
acceptances, certificates of deposits, notes and time deposits of highly-rated
U.S. banks and U.S. branches of foreign banks; (ii) U.S. Treasury obligations
and obligations issued or
<PAGE>
guaranteed by the agencies and instrumentalities of the U.S. Government;
(iii) high-quality commercial paper issued by U.S. and foreign corporations;
(iv) debt obligations with a maturity of one year or less issued by corporations
with outstanding high-quality commercial papers; and (v) repurchase agreements
involving any of the foregoing obligations entered into with highly-rated banks
and broker-dealers.
NON-DIVERSIFICATION -- Investment in the Portfolio, a non-diversified mutual
fund, may entail greater risk than would investment in a diversified investment
company because the concentration in securities of relatively few issuers could
result in greater fluctuation in the total market value of the Portfolio's
holdings. Any economic, political, or regulatory developments affecting the
value of the securities the Portfolio holds could have a greater impact on the
total value of the Portfolio's holdings than would be the case if the portfolio
securities were diversified among more issuers. The Portfolio intends to comply
with the diversification requirements of Subchapter M of the Code. In accordance
with these requirements, the Portfolio will not invest more than 5% of its total
assets in any one issuer; this limitation applies to 50% of the Portfolio's
total assets.
OPTIONS -- A put option gives the purchaser of the option the right to sell, and
the writer of the option the obligation to buy, the underlying commodity or
index at any time during the option period. A call option gives the purchaser of
the option the right to buy, and the writer of the option the obligation to
sell, the underlying security at any time during the option period. The initial
purchase (sale) of an option contract is an "opening transaction." In order to
close out an option position, the Portfolio may enter into a "closing
transaction," which is simply the sale (purchase) of an option contract on the
same security with the same exercise price and expiration date as the option
contract originally opened. If the Portfolio is unable to effect a closing
purchase transaction with respect to an option it has written, it will not be
able to sell the underlying security until the option expires or the Portfolio
delivers the security upon exercise.
Risk Factors. Risks associated with options transactions include: (1) the
- ------------
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; (3) there may not be a
liquid secondary market for options; and (4) while the Portfolio will receive a
premium when it writes covered call options, it may not participate fully in a
rise in the market value of the underlying security.
REAL ESTATE SECURITIES -- The Portfolio may be subject to the risks associated
with the direct ownership of real estate because of its policy of concentration
in the securities of companies principally engaged in the real estate industry.
For example, real estate values may fluctuate as a result of general and local
economic conditions, overbuilding and increased competition, increases in
property taxes and operating expenses, demographic trends and variations in
rental income, changes in zoning laws, casualty or condemnation losses,
regulatory limitations on rents, changes in neighborhood values,
<PAGE>
related party risks, changes in how appealing properties are to tenants, changes
in interest rates and other real estate capital market influences. The value of
securities of companies which service the real estate business sector may also
be affected by such risks.
Because the Portfolio may invest a substantial portion of its assets in REITs,
the Portfolio may also be subject to certain risks associated with the direct
investments of the REITs. REITs may be affected by changes in the value of their
underlying properties and by defaults by borrowers or tenants. Mortgage REITs
may be affected by the quality of the credit extended. Furthermore, REITs are
dependent on specialized management skills. Some REITs may have limited
diversification and may be subject to risks inherent in financing a limited
number of properties. REITs depend generally on their ability to generate cash
flow to make distributions to shareholders or unitholders, and may be subject to
defaults by borrowers and to self-liquidations. In addition, the performance of
a REIT may be affected by its failure to qualify for tax-free pass-through of
income under the Code or its failure to maintain exemption from registration
under the 1940 Act. Changes in prevailing interest rates may inversely affect
the value of the debt securities in which the Portfolio will invest. Changes in
the value of portfolio securities will not necessarily affect cash income
derived from these securities but will affect the Portfolio's net asset value.
Generally, increases in interest rates will increase the costs of obtaining
financing which could directly and indirectly decrease the value of the
Portfolio's investments.
U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Federal Farm Credit Bank, the
Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association), others are supported by the right of the issuer to borrow
from the Treasury (e.g., Federal Farm Credit Bank), while still others are
supported only by the credit of the instrumentality (e.g., Federal National
Mortgage Association). Guarantees of principal by agencies or instrumentalities
of the U.S. Government may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to maturity there might not
be a market and thus no means of realizing on the obligation prior to maturity.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of the Portfolio's
shares.
U.S. TREASURY OBLIGATIONS -- U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry Principal Securities ("STRIPS").
<PAGE>
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
Additional information on permitted investments and risk factors can be found in
the Statement of Additional Information.
<PAGE>
Fund:
THE ADVISORS' INNER CIRCLE FUND
Portfolio:
CRA REALTY SHARES PORTFOLIO
Adviser:
CRA REAL ESTATE SECURITIES L.P.
Distributor:
SEI FINANCIAL SERVICES COMPANY
Administrator:
SEI FUND RESOURCES
Legal Counsel:
MORGAN, LEWIS & BOCKIUS LLP
Independent Public Accountants:
ARTHUR ANDERSEN LLP
___________, 1996
