THE ADVISORS' INNER CIRCLE FUND
[LOGO OMITTED]
ANNUAL REPORT TO SHAREHOLDERS
AS OF OCTOBER 31, 1999
THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED
BY A CURRENT PROSPECTUS FOR THE FUND DESCRIBED.
<PAGE>
VALUE EQUITY FUND
<PAGE>
MANAGER'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
The total return of the Fund and the benchmark Russell 1000 Value Index for the
seven month period from inception (March 31, 1999) to October 31, 1999 were as
follows.
- ------------------------------------------------------------------------------
Total Return
- ------------------------------------------------------------------------------
Fund 3.30%
- ------------------------------------------------------------------------------
Russell 1000 Value Index 6.15%
- ------------------------------------------------------------------------------
During the same period, within the universe of value stocks, mid cap stocks
underperformed large cap stocks.
- ------------------------------------------------------------------------------
Index Style Total Return
- ------------------------------------------------------------------------------
Russell Top 200 Value Large Cap Value 7.84%
- ------------------------------------------------------------------------------
Russell Mid Cap Value Mid Cap Value 2.29%
- ------------------------------------------------------------------------------
The portfolio characteristics of the Fund, the benchmark Russell 1000 Value
Index (representing large cap and mid cap value stocks) and the S&P 500 Index
(representing the broad market) as of October 31, 1999 were as follows.
- ------------------------------------------------------------------------------
Russell 1000 S&P 500
Characteristic Fund Value Index Index
- ------------------------------------------------------------------------------
Price-to-Earnings Ratio 13.0 19.6 27.5
- ------------------------------------------------------------------------------
Price-to-Book Ratio 2.2 3.0 4.8
- ------------------------------------------------------------------------------
Weighted Average
Market Capitalization $27 billion $56 billion $116 billion
As shown above, the Fund's portfolio was deeper on value (as measured by
price-to-book and price-to-earnings) and had a smaller average market
capitalization than both indexes. LSV has always been a deep value manager with
deeper value characteristics than the large-cap value indexes and with an
emphasis on more mid cap stocks; we will continue to manage the Fund in this
style.
1
<PAGE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE LSV VALUE
EQUITY FUND, VERSUS THE RUSSELL 1000 VALUE INDEX
[Line Graph Omitted]
Plot Points are as follows:
LSV Russell
3/31/99 10,000 10,000
10/31/95 10,329 10,615
(1) These figures represent past performance. Past performance is no guarantee
of future results. The investment return and principal value of an
investment will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than their original cost.
2
<PAGE>
STATEMENT OF NET ASSETS LSV VALUE EQUITY FUND
October 31, 1999
Market
Value
LSV VALUE EQUITY FUND Shares (000)
- ------------------------------------------------------------------------------
COMMON STOCK (98.2%)
AEROSPACE & DEFENSE (3.5%)
Alliant Techsystems* 700 $ 43
Cordant Technologies 2,700 84
Litton Industries* 2,600 122
United Technologies 3,500 212
--------
461
--------
AIR TRANSPORTATION (2.7%)
Alaska Airgroup* 1,300 52
America West Holdings, Cl B* 3,400 70
Delta Air Lines 4,300 234
--------
356
--------
AUTOMOTIVE (6.1%)
Arvin Industries 1,700 48
Delphi Automotive Systems 2,096 34
Ford Motor 5,400 296
General Motors 3,300 232
Navistar International* 4,100 171
Ryder Systems 1,800 39
--------
820
--------
BANKS (13.9%)
Amsouth Bancorp 6,450 166
Bancwest 1,180 49
Bank of America 3,600 232
Chase Manhattan 3,700 323
Dime Bancorp 2,900 52
Fleet Boston 2,700 118
Golden West Financial 2,000 224
Greenpoint Financial 3,900 111
J.P. Morgan 1,800 236
Pacific Century Financial 5,000 114
PNC 3,900 233
--------
1,858
--------
BUILDING & CONSTRUCTION (1.8%)
Centex 1,800 48
Lafarge 1,840 55
Owens Corning 2,300 47
Pulte 4,720 95
--------
245
--------
BUSINESS SERVICES (0.3%)
Harris 1,700 38
--------
CHEMICALS (2.1%)
Dow Chemicals 1,800 213
W.R. Grace & Company* 4,070 61
--------
274
--------
Market
Value
Share (000)
-------- --------
COMPUTERS & SERVICES (5.4%)
Apple Computer* 4,300 $ 345
IBM 2,200 216
NCR* 1,800 60
Unisys* 4,300 104
--------
725
--------
CONTAINERS & PACKAGING (0.6%)
Ball 2,100 85
--------
ELECTRICAL SERVICES (9.5%)
DTE Energy 2,820 94
Eastern Utilities Association 1,600 48
Edison International 2,800 83
Energy East 4,700 118
FPL Group 1,300 65
OGE Energy 2,300 52
PECO Energy 2,700 103
PG&E 8,000 184
PP&L Resources 7,700 208
Public Service Company of
New Mexico 2,910 52
Public Service Enterprise Group 5,400 214
Reliant Energy 1,900 52
--------
1,273
--------
FINANCIAL SERVICES (4.6%)
Bear Stearns 4,400 188
Countrywide Credit Industries 5,400 183
Financial Security Assurance
Holdings 1,510 85
Lehman Brothers Holdings 900 66
Painewebber Group 2,400 98
--------
620
--------
FOOD, BEVERAGE & TOBACCO (2.7%)
Earthgrains 2,430 55
IBP 8,500 203
Ralcorp Holdings* 2,800 55
Universal 1,900 45
--------
358
--------
HOUSEHOLD FURNITURE & FIXTURES (0.4%)
Furniture Brands International* 2,800 54
--------
HOUSEHOLD PRODUCTS (3.2%)
Maytag 2,380 95
Premark International 1,960 107
Whirlpool 3,200 223
--------
425
--------
INDUSTRIAL (1.4%)
Rockwell International 3,900 189
--------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
LSV VALUE EQUITY FUND
October 31, 1999
Market
Value
LSV VALUE EQUITY FUND (concluded) Shares (000)
- -------------------------------------------------------
INSURANCE (6.4%)
Aetna 700 $ 35
Allstate 3,130 90
Cigna 1,800 135
Hartford Financial Services
Group 2,850 148
Lincoln National 3,560 164
Old Republic International 2,600 36
Travelers Property Casualty 6,900 248
--------
856
--------
LEASING & RENTING (0.8%)
Xtra 2,640 110
--------
LUMBER & WOOD PRODUCTS (1.5%)
Georgia Pacific 5,100 202
--------
MACHINERY (2.1%)
Briggs & Stratton 1,940 113
Cummins Engine 2,600 132
NACCO Industries, Cl A 700 32
--------
277
--------
MEDICAL (2.4%)
Mallinckrodt 5,900 200
Pharmacia & Upjohn 2,300 124
--------
324
--------
OPTICAL SUPPLIES (1.3%)
Bausch & Lomb 3,200 173
--------
PETROLEUM & FUEL PRODUCTS (1.4%)
Amerada Hess 3,300 189
--------
PETROLEUM REFINING (3.5%)
Ashland 1,610 53
Exxon 2,680 199
Phillips Petroleum 4,200 195
Sunoco 780 19
--------
466
--------
PRINTING & PUBLISHING (1.5%)
Knight-Ridder 1,400 89
Lexmark International Group, Cl A* 1,400 109
--------
198
--------
RETAIL (4.4%)
Darden Restaurants 6,440 123
Dayton Hudson 3,500 226
Kmart* 7,500 75
Longs Drug Stores 1,700 46
Ruddick 2,500 43
Sears Robuck 1,070 30
Shopko Stores 1,900 48
--------
591
--------
SPECIALTY MACHINERY (0.7%)
Tecumseh Products 1,800 86
--------
Market
Value
Share (000)
-------- --------
STEEL & STEEL WORKS (1.1%)
AK Steel Holding 4,380 $ 76
Alcoa 1,180 72
-------
148
-------
TELEPHONES & TELECOMMUNICATION (11.6%)
AT&T 4,200 196
Bell Atlantic 6,500 293
SBC Communications 4,842 247
Sprint 3,880 288
United States Cellular* 4,000 354
US WEST 2,860 175
-------
1,553
-------
WHOLESALE (1.3%)
BJ's Wholesale Club* 1,900 59
Supervalu 5,060 106
-------
165
-------
TOTAL COMMON STOCK
(Cost $12,402) 13,119
-------
REPURCHASE AGREEMENT (1.6%)
Morgan Stanley 5.00%, dated
10/29/99, matures 11/01/99,
repurchase price $216,223
(collateralized by U.S. Treasury
Note, 06/30/2000, market value
$228,634) $ 216 216
-------
TOTAL REPURCHASE AGREEMENT
(Cost $216) 216
-------
TOTAL INVESTMENTS (99.8%)
(Cost $12,618) 13,335
-------
OTHER ASSETS AND LIABILITIES, NET (0.2%) 30
-------
NET ASSETS:
Portfolio Shares (unlimited authorization
-- no par value) based on 1,293,785
outstanding shares of beneficial
interest 12,596
Undistributed Net Investment Income 66
Accumulated Net Realized Loss on
Investments (14)
Net Unrealized Apreciation
on Investments 717
-------
TOTAL NET ASSETS (100.0%) $13,365
=======
Net Asset Value, Offering and Redemption
Price Per Share $10.33
=======
*NON-INCOME PRODUCING SECURITY
CL--CLASS
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF OPERATIONS LSV VALUE EQUITY FUND For the period ended October 31,
1999.
LSV
VALUE EQUITY
FUND(1)
------------
3/31/99
TO 10/31/99
(000)
- -------------------------------------------------------------------------------
Investment Income:
Dividend Income............................. $122
Interest Income............................. 7
- -------------------------------------------------------------------------------
Total Investment Income................... 129
- -------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ................... 39
Investment Advisory Fee Waiver ............. (39)
Reimbursements by Advisor................... (36)
Administrative Fees ........................ 44
Transfer Agent Fees ........................ 24
Printing Fees .............................. 14
Professional Fees .......................... 8
Registration Fees .......................... 3
Trustee Fees ............................... 3
Custodian Fees ............................. 3
- -------------------------------------------------------------------------------
Total Expenses, Net ........................ 63
- -------------------------------------------------------------------------------
Net Investment Income .................. 66
- -------------------------------------------------------------------------------
Net Realized Loss from Securities Sold ..... (14)
Net Change in Unrealized Appreciation of
Investment Securities ..................... 717
- -------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments .............................. 703
- ------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
From Operations ........................... $769
==============================================================================
(1) LSV Value Equity Fund commenced operations on March 31, 1999.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS LSV VALUE EQUITY FUND
For the period ended October 31, 1999
LSV
VALUE EQUITY
FUND(1)
-------------------------
3/31/99
TO 10/31/99
(000)
- -------------------------------------------------------------------------------
Investment Activities:
Net Investment Income ......................... $ 66
Net Realized Loss from Securities Sold ........ (14)
Net Change in Unrealized Appreciation of
Investment Securities ...................... 717
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations............................ 769
- -------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ......................... --
Realized Capital Gains ........................ --
- -------------------------------------------------------------------------------
Total Distributions.......................... --
- -------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ................... 12,634
Reinvestment of Cash Distributions ............ --
Cost of Shares Redeemed ....................... (38)
- -------------------------------------------------------------------------------
Increase in Net Assets Derived from Capital
Share Transactions ....................... 12,596
- -------------------------------------------------------------------------------
Total Increase in Net Assets .............. 13,365
- -------------------------------------------------------------------------------
Net Assets:
Beginning of Period ........................... --
- -------------------------------------------------------------------------------
End of Period ................................. $13,365
- -------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ........................................ 1,298
Issued in Lieu of Cash Distributions .......... --
Redeemed ...................................... (4)
- -------------------------------------------------------------------------------
Net Increase in Share Transactions............. 1,294
===============================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) LSV Value Equity Fund commenced operations on March 31, 1999.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
FINANCIAL HIGHLIGHTS LSV VALUE EQUITY FUND
For a Share Outstanding Throughout Each Period
For the period ended October 31, 1999
<TABLE>
Ratio
of Net
Ratio of Investment
Expenses (loss)
Ratio Ratio to Average to Average
Realized Net Net of of Net Net Assets Net Assets
Net and Asset Assets Expenses Investment (Excluding (Excluding
Asset Unrealized Value End to Income to Waivers Waivers
Value Net Gains End of Average Average and and Portfolio
Beginning Investment on of Total Period Net Net Reimburse- Reimburse- Turnover
of Period Income Securities Period Return (000) Assets Assets ments) ments) Rate
--------- ---------- ---------- ------ ------ ------ -------- ---------- ---------- ---------- ---------
- ----------------
LSV VALUE EQUITY
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999(1) $10.00 0.05 0.28 $10.33 3.30% $13,365 0.90% 0.95% 1.97% (0.12)% 10.70%
</TABLE>
(1) The LSV Value Equity Fund commenced operations on March 31,1999.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS LSV VALUE EQUITY FUND
October 31, 1999
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, as a diversified open-end management investment company
with ten portfolios. The financial statements herein are those of the LSV Value
Equity Fund (the "Fund"). The financial statements of the remaining portfolios
are not presented herein. The assets of each portfolio are segregated, and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund's prospectus provides a description of the Fund's 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 -- Investments in equity securities which are traded on a
national exchange (or reported on the NASDAQ national market system) are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations are
readily available are valued at the most recent quoted bid price. Debt
obligations with sixty days or less remaining until maturity may be valued at
their amortized cost, which approximates market value.
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 INVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Costs used in determining realized gains and losses on the sales of
investment securities are those of the specific securities sold, adjusted for
the accretion and amortization of purchase discounts or premiums during the
respective holding period which is calculated using the effective interest
method. Interest income is recognized on the accrual basis. Dividend income
is recorded on the ex-date.
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.
EXPENSES -- Expenses that are directly related to the Fund are charged to the
Fund. Other operating expenses of the Trust are prorated to the Fund on the
basis of relative daily net assets compared to the aggregate daily net assets
of the Trust.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared and paid to shareholders annually. 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 the 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. ORGANIZATIONAL COSTS AND TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being amortized
over twelve months commencing with the start-up. In the event 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.
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.
The Fund has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Fund. For its services, SEI
Investments received $60 for the period ended October 31, 1999.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) LSV VALUE EQUITY FUND
October 31, 1999
4. ADMINISTRATION, SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an Administration Agreement dated
March 15, 1999 under which the Administrator provides management and
administrative services at an annual rate of .10% of the Funds first $100
million of average daily net assets; .08% of the next $100 million of average
daily net assets; and .07% of the Fund's average daily net assets over $200
million. there is a minimum annual fee of $75,000 per fund and $15,000 per
additional class.
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 Fund. The Trust and Distributor are parties to a Distribution Agreement
dated August 8, 1994. The Distributor receives no fees for its distribution
services under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Fund and LSV Asset Management Co. (the "Adviser") are parties to an
Investment Advisory Agreement dated March 15, 1999 under which the Adviser
receives an annual fee equal to .55% of the average daily net assets. The
Adviser has, on a voluntary basis, agreed to waive its fee in order to limit the
Fund's total operating expenses to a maximum of .90% of the average daily net
assets. The Adviser reserves the right to terminate this arrangement at any time
in its sole discretion.
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. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the period ended October 31, 1999 are as follows:
LSV VALUE EQUITY
FUND (000)
----------------
Purchases
U.S. Government ..................... $ --
Other ............................... 13,698
Sales
U.S. Government ..................... $ --
Other ............................... 1,282
At October 31, 1999, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Fund
at October 31, 1999, is as follows:
LSV VALUE EQUITY
FUND (000)
----------------
Aggregate gross unrealized
appreciation ........................ $1,664
Aggregate gross unrealized
depreciation ........................ (947)
------
Net unrealized appreciation ........... $ 717
======
9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
LSV Value Equity Fund of
The Advisors' Inner Circle Fund:
We have audited the accompanying statement of net assets of the LSV Value Equity
Fund (the "Fund"), one of the funds constituting The Advisors' Inner Circle
Fund, as of October 31, 1999, and the related statement of operations, the
statement of changes in net assets, and the financial highlights for the period
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
audit.
We conducted our audit 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, 1999, by correspondence with the custodian and the application
of alternative auditing procedures with respect to unsettled securities
transactions. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
LSV Value Equity Fund of The Advisors' Inner Circle Fund as of October 31, 1999,
and the results of its operations, the changes in its net assets, and financial
highlights for the period presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 17, 1999
10
<PAGE>
TRUST:
The Advisors' Inner Circle Fund
FUND:
LSV Value Equity Fund
ADVISER:
LSV Asset Management
DISTRIBUTOR:
SEI Investments Distribution Co.
ADMINISTRATOR:
SEI Investments Mutual Funds Services
LEGAL COUNSEL:
Morgan, Lewis & Bockius LLP
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
LSV-F-004-01
