AIG
MONEY MARKET FUND
ANNUAL REPORT
OCTOBER 31, 1998
[logo omitted]
ADVISED BY
AIG CAPITAL MANAGEMENT CORP.
<PAGE>
THE AIG MONEY MARKET FUND
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LETTER TO SHAREHOLDERS, OCTOBER 31, 1998
Dear Shareholder:
We are pleased to provide you with the Annual Report for the AIG Money Market
Fund (the "Fund") for the Fund's fiscal year ending October 31, 1998.
The twelve-month period ended October 31, 1998 was plagued by extreme
volatility in the global financial markets. Such volatility highlighted the
relative safety of money market funds compared to both equity and bond funds, as
money market funds continued to offer investors protection of principal, daily
liquidity and current income against the backdrop of market turmoil.
During the reporting period, the U.S. economy continued to be characterized by
moderate growth, low inflation and a declining interest rate environment. In the
fall of 1998, the Federal Reserve Board reduced in two successive moves the Fed
Funds rate by a total of 50 basis points in order to maintain liquidity and
prevent a slowdown in the U.S. economy. Accordingly, the yields on money market
instruments ended the twelve-month reporting period lower than at the beginning
of the period. For the fiscal year overall, the Fund's total return for each of
its classes of shares was higher than the related figure for the prior year by
eight basis points, as shown in the Financial Highlights section of the Annual
Report.
As always, we will continue to monitor prevailing market conditions in order to
manage the Fund in a manner that will provide competitive returns commensurate
with the Fund's objectives of preservation of capital and liquidity.
Thank you for your continued investment in the Fund.
Sincerely,
/s/signature omitted
Helen Stefanis
President
AIG Capital Management Corp.
<PAGE>
STATEMENT OF NET ASSETS AIG MONEY MARKET FUND
OCTOBER 31, 1998
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AIG MONEY MARKET FUND
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FACE
AMOUNT VALUE
(000) (000)
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COMMERCIAL PAPER* (60.6%)
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BANK HOLDING COMPANIES (10.1%)
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Abbey National North America
$15,000 5.130, 01/27/99 $14,816
Commerzbank U.S. Finance
11,500 5.604, 01/11/99 11,376
Societe Generale North America
15,000 5.595, 01/19/99 14,820
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41,012
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INDUSTRIAL (6.1%)
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General Electric
25,000 5.572, 11/13/98 24,954
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CHEMICALS (8.6%)
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Du Pont
4,900 5.508, 11/09/98 4,894
Great Lakes Chemical (A)
10,000 5.653, 11/02/98 9,998
Lubrizol Corporation
10,000 5.470, 11/16/98 9,977
10,000 5.125, 11/10/98 9,987
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34,856
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FINANCIAL SERVICES (19.2%)
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BIL North America
15,000 5.325, 11/03/98 14,996
General Electric Capital Services
15,000 5.598, 11/10/98 14,979
Goldman Sachs Group
18,000 5.703, 11/02/98 17,997
USAA Capital
15,000 5.442, 11/19/98 14,960
Vattenfall Treasury
15,000 5.268, 01/05/99 14,859
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77,791
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FACE
AMOUNT VALUE
(000) (000)
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FOOD, BEVERAGE & TOBACCO (4.4%)
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Coca Cola
$12,000 5.037, 11/24/98 $ 11,962
6,000 5.356, 11/06/98 5,995
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17,957
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HOUSEHOLD PRODUCTS (4.7%)
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Gillette
19,000 5.653, 11/02/98 18,997
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PETROLEUM & FUEL PRODUCTS (0.7%)
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Shell Oil
2,900 5.265, 11/18/98 2,893
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PHOTOGRAPHIC EQUIPMENT & SUPPLIES (3.7%)
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Xerox
15,200 5.703, 11/02/98 15,198
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RETAIL (1.9%)
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Wal-Mart Stores
7,500 5.255, 11/05/98 7,496
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SEMI-CONDUCTORS/INSTRUMENTS (1.2%)
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Intel
5,000 5.653, 11/02/98 4,999
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TOTAL COMMERCIAL PAPER
(Cost $246,153) 246,153
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CERTIFICATES OF DEPOSIT (35.2%)
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Australia & New Zealand Banking Group Limited
20,000 5.600, 11/04/98 20,000
Banco Bilbao Vizcaya
10,000 5.600, 02/22/99 10,000
Bank of Montreal
20,000 5.160, 01/25/99 20,000
BankBoston North America
15,000 5.594, 01/19/99 15,000
Bayerische Landesbank Girozentrale
20,000 5.570, 11/30/98 20,001
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF NET ASSETS AIG MONEY MARKET FUND
OCTOBER 31, 1998
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AIG MONEY MARKET FUND (concluded)
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FACE
AMOUNT VALUE
(000) (000)
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CERTIFICATES OF DEPOSIT (CONTINUED)
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Canadian Imperial Bank of Commerce
$10,000 5.100, 12/22/98 $ 10,000
Credit Agricole Indosuez
10,000 5.660, 02/26/99 9,999
Landesbank Hessen-Thueringen
Girozentrale
13,000 5.520, 11/03/98 13,000
National Westminster Bank PLC
20,000 5.150, 11/23/98 20,000
Societe Generale
5,000 5.550, 02/09/99 4,998
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TOTAL CERTIFICATES OF DEPOSIT
(Cost $142,998) 142,998
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TIME DEPOSITS (4.4%)
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Svenska Handelsbanken Euro
17,650 5.625, 11/02/98 17,650
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TOTAL TIME DEPOSITS
(Cost $17,650) 17,650
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TOTAL INVESTMENTS (100.2% )
(Cost $406,801) 406,801
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OTHER ASSETS AND LIABILITIES, NET (-0.2%) (633)
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TOTAL NET ASSETS (100.0%) 406,168
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VALUE
(000)
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NET ASSETS:
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Portfolio Shares of Class A (unlimited
authorization -- no par value) based
on 251,086,582 outstanding shares
of beneficial interest $251,087
Portfolio Shares of Class B (unlimited
authorization -- no par value) based
on 155,077,871 outstanding shares
of beneficial interest 155,078
Undistributed Net Investment Income 3
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TOTAL NET ASSETS (100.0%) $406,168
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Net Asset Value, Offering and Redemption
Price Per Share -- Class A $1.00
Net Asset Value and Redemption Price
Per Share -- Class B $1.00
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(A) Security sold within terms of a private placement
memorandum, exempt from registration under Section 4(2)
or 144A of the Securities Act of 1933, as amended, and may
be sold only to dealers in that program or other "accredited
investors." These securities have been determined to be
liquid under guidelines established by the Board of Trustees.
* Disclosure presents annualized yield at date of purchase for
discount securities, and coupon for coupon-bearing securities.
PLC -- PUBLIC LIMITED CORPORATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS AIG MONEY MARKET FUND
FOR THE YEAR ENDED OCTOBER 31, 1998
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AIG MONEY MARKET FUND (000)
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INVESTMENT INCOME:
Interest $32,347
-------
Total Investment Income 32,347
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EXPENSES:
Investment Advisory Fees 1,437
Waiver of Investment Advisory Fees (505)
Administrative Fees 392
Waiver of Administrative Fees (48)
Custodian Fees 63
Professional Fees 28
Distribution Fees (1) 482
Transfer Agent Fees 77
Printing Fees 23
Trustee Fees 6
Registration and Filing Fees 21
Insurance and Other Fees 26
Organizational Fees 6
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Total Expenses, Net 2,008
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Net Investment Income 30,339
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,339
=======
(1) Distribution fees are incurred by Class B shares only.
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS AIG MONEY MARKET FUND
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11/1/97 TO 11/1/96 TO
10/31/98 10/31/97
AIG MONEY MARKET FUND (000) (000)
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<S> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 30,339 $ 23,905
Net Realized Gain on Securities -- 2
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Increase in Net Assets Resulting from Operations 30,339 23,907
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DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A (23,453) (17,990)
Class B (6,886) (5,915)
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Total Distributions (30,339) (23,905)
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SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Class A
Shares Issued 26,714,818 24,277,294
Shares Issued in Lieu of Cash Distributions 23,085 17,863
Shares Redeemed (26,815,939) (24,219,898)
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Net Class A Share Transactions (78,036) 75,259
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Class B
Shares Issued 451,047 398,868
Shares Issued in Lieu of Cash Distributions 6,793 5,874
Shares Redeemed (411,515) (431,373)
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Net Class B Share Transactions 46,325 (26,631)
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Increase (Decrease) in Net Assets From Share Transactions (31,711) 48,628
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Total Increase (Decrease) in Net Assets (31,711) 48,630
NET ASSETS:
Beginning of Period 437,879 389,249
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End of Period $ 406,168 $ 437,879
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</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS AIG MONEY MARKET FUND
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FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIODS ENDED OCTOBER 31,
RATIO
RATIO OF NET
NET NET NET RATIO OF EXPENSES INCOME
ASSET DISTRIBUTIONS ASSET ASSETS RATIO OF NET TO AVERAGE TO AVERAGE
VALUE NET FROM NET VALUE END OF EXPENSES INCOME NET ASSETS NET ASSETS
BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING
OF PERIOD INCOME INCOME OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS)
--------- ---------- ------------- --------- ------ -------- ---------- ---------- --------- ----------
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AIG MONEY MARKET FUND
- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
1998 $1.00 0.05 (0.05) $1.00 5.49% $251,090 0.26% 5.37% 0.36% 5.27%
1997 $1.00 0.05 (0.05) $1.00 5.41% $329,125 0.27% 5.30% 0.39% 5.18%
1996 $1.00 0.05 (0.05) $1.00 5.26% $253,865 0.39% 5.15% 0.41% 5.13%
1995(1) $1.00 0.05 (0.05) $1.00 5.75%* $313,657 0.40%* 5.60%* 0.47%* 5.53%*
CLASS B
1998 $1.00 0.05 (0.05) $1.00 5.12% $155,078 0.62% 5.00% 0.72% 4.90%
1997 $1.00 0.05 (0.05) $1.00 5.04% $108,754 0.63% 4.93% 0.74% 4.82%
1996 $1.00 0.05 (0.05) $1.00 4.89% $135,384 0.74% 4.79% 0.77% 4.76%
1995(1) $1.00 0.04 (0.04) $1.00 5.43%* $120,482 0.75%* 5.18%* 0.85%* 5.08%*
</TABLE>
* Annualized
(1) The AIG Money Market Fund Class A and Class B shares commenced
operations on December 1, 1994 and February 16, 1995, respectively.
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS AIG MONEY MARKET FUND
OCTOBER 31, 1998
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1. ORGANIZATION:
THE ADVISORS' INNER CIRCLE FUND (the "Trust") is organized as a
Massachusetts business trust under an Amended and Restated Agreement and
Declaration of Trust dated February 18, 1997. The Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified
open-end management investment company with eight portfolios. The financial
statements herein are those of one such portfolio, the AIG Money Market Fund
(the "Fund"), which offers two classes of shares: Class A and Class B. The
financial statements of the remaining portfolios are presented separately. The
assets of each portfolio are segregated, and a shareholders' interest is
limited to the portfolio in which shares are held. The Funds' prospectus
provide a description of the Funds' investment objectives, policies and
strategies.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed
by the Fund.
SECURITY VALUATION -- Investment securities are stated at amortized cost,
which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity
and are included in interest income.
FEDERAL INCOME TAXES -- It is the Fund's intention to qualify as a
regulated investment company by complying with the appropriate provisions
of the Internal Revenue Code of 1986, as amended. Accordingly, no
provision for Federal income taxes is required.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis. Costs used in
determining realized gains and losses on the sales of investment
securities are those of the specific securities sold during the respective
holding period.
NET ASSET VALUE PER SHARE -- The net asset value per share of the Fund is
calculated on each business day by dividing the total value of assets,
less liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements and provisions adopted by
the Adviser ensure that the market value of the collateral, including
accrued interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters into an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
EXPENSES -- Expenses that are directly related to the Fund are charged
directly to the Fund. Other operating expenses of the Trust are prorated
to the portfolios on the basis of relative net asset value. Class specific
expenses, such as the 12b-1 fees, are borne by that class. Income, other
expenses and realized gains and losses of the Fund are allocated to the
respective classes on the basis of the relative net asset value each day.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) AIG MONEY MARKET FUND
OCTOBER 31, 1998
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DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment
income are declared daily and paid to Shareholders monthly. Any net
realized capital gains are distributed to Shareholders at least
annually.
Distributions from net investment income and net realized capital gains
are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they
are charged or credited to paid-in capital in the period that the
differences arise. These reclassifications have no effect on net assets or
net asset value.
USE OF ESTIMATES --The preparation of financial statements in conformity
with 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 revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being
amortized over sixty months commencing with operations. In the event any of the
initial shares of the Trust are redeemed by any holder thereof during the period
that the Trust is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof by the Portfolio will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption. Organizational costs include legal fees of approximately
$21,000 for organizational work performed by a law firm of which a trustee of
the Trust is a partner and two officers of the Trust are partners.
Certain officers of the Trust are also officers of SEI Investments Mutual
Funds Services (the "Administrator") and/or SEI Investments Distribution Co.
(the "Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
4. ADMINISTRATION, SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an Administration Agreement
under which the Administrator provided administrative services at an annual rate
of .10% of the Fund's average daily net assets up to $50 million;.08% of the
average daily net assets from $50 million up to and including $250 million;.06%
of the average daily net assets from $250 million up to and including $450
million; and .05% of the average daily net assets in excess of $450 million.
There is a minimum annual fee of $75,000 per portfolio plus $15,000 for each
additional class.
The Trust and the Distributor entered into a Distribution Agreement dated
November 14, 1991 as Amended and Restated August 8, 1994. The Distributor
receives no fees for its distribution services under this agreement.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AIG MONEY MARKET FUND
OCTOBER 31, 1998
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AIG Equity Sales Corp. serves as the Sub-Distributor and Shareholder
Servicing Agent to the Fund. The Fund has adopted a Distribution Plan ("the
Plan") relating to the Class B shares pursuant to the Investment Company Act of
1940, Rule 12b-1. The Plan provides for payment of fees to the Distributor at an
annual rate of .35% of the average daily net assets of the Class B shares. Such
fees are then paid to the Sub-Distributor for services provided.
DST Systems, Inc. (the "Transfer Agent") serves as the transfer agent
and dividend disbursing agent for the Fund under a transfer agency agreement
with the Trust.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Fund and AIG Capital Management Corp. (the "Advisor") are parties to an
Investment Advisory Agreement (the "Advisory Agreement"). Under the terms of the
Advisory Agreement, the Advisor receives an annual fee equal to .25% of the
Fund's average daily net assets. The Advisor has voluntarily agreed to waive
.10% of its fee, and to waive additional fees and/or reimburse certain expenses
of the Portfolio in order to limit operating expenses to not more than .40% of
the average daily net assets of Class A and not more than .75% of the average
daily net assets of Class B. Fee waivers are voluntary and may be terminated at
any time upon sixty days' written notice to the Fund.
First Union National Bank acts as custodian (the "Custodian") for the Fund.
The Custodian plays no role in determining the investment policies of the Fund
or which securities are to be purchased and sold by the Fund.
6. CONCENTRATION OF CREDIT RISK:
The Fund invests primarily in high quality money market instruments. The
Fund maintains a diversified portfolio which currently has a concentration of
assets in the banking industry. The ability of the issuers of the securities
held by the Fund to meet their obligations may be affected by economic
developments in the banking industry. The summary of credit quality rating for
securities held by the Fund at October 31, 1998 is as follows:
S & P MOODY'S
---------------- ----------------
A1 + 83.3% P1 100%
A1 16.7% NR 0%
----- ---
100.0% 100%
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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To the Shareholders and Board of
Trustees of AIG Money Market Fund of
The Advisors' Inner Circle Fund:
We have audited the accompanying statement of net assets of the AIG Money Market
Fund (the "Fund"), one of the funds constituting The Advisors' Inner Circle
Fund, as of October 31, 1998, and the related statements of operations, changes
in net assets, and financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund'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 generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1998, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. 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 AIG
Money Market Fund of The Advisors' Inner Circle Fund as of October 31, 1998, and
the results of its operations, changes in its net assets, and financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, PA
December 18, 1998
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ADVISORS' INNER CIRCLE FUND
(UNAUDITED)
For the shareholders that do not have a October 31, 1998 taxable year end, this
notice is for informational purposes only. For shareholders with a October 31,
1998 taxable year end, please consult your tax adviser as to the pertinence of
this notice.
For the fiscal year ended October 31, 1998, the portfolio is designating long
term capital gains, qualifying dividends and exempt interest income with regard
to distributions paid during the year as follows:
(A) (B)
LONG TERM ORDINARY (C)
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS)
--------- ------------- ------------- -------------
AIG Money Market Fund 0% 100% 100%
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
PORTFOLIO DIVIDENDS (1) INTEREST TAX CREDIT
--------- ------------- ------------- -----------
AIG Money Market Fund 0% 0% 0%
- --------------------
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION. * ITEMS (A) AND (B) ARE BASED ON A PERCENTAGE OF
THE PORTFOLIO'S TOTAL DISTRIBUTIONS. ** ITEMS (D) AND (E) ARE BASED ON A
PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS OF THE PORTFOLIO.
<PAGE>
INVESTMENT ADVISOR:
AIG CAPITAL MANAGEMENT CORP.
70 PINE STREET
NEW YORK, NY 10270
DISTRIBUTOR:
SEI INVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
SUB-DISTRIBUTOR:
AIG EQUITY SALES CORP.
NEW YORK, NY 10270
For information call: 1-800-845-3885
This information must be preceded or accompanied by
a current prospectus.
AIG-F-005-05000
