ANNUAL REPORT
MDL
BROAD MARKET FIXED
INCOME FUND
MDL
LARGE CAP GROWTH
EQUITY FUND
MDL
[LOGO OMITTED]
OCTOBER 31, 1999
<PAGE>
LETTER TO SHAREHOLDERS OCTOBER 31, 1999
Dear Shareholders:
Thank you again for investing in the MDL Funds as a part of your investment
portfolio. We will continually strive to provide you the investment performance
and service you command and deserve. We are committed to the principles that led
to the development of the MDL Funds in 1997 and we thank you for your support
that will allow for a prosperous new millennium.
Our investment process remains focused on the principles we believe are
essential to excellent returns. Our Large Cap Growth Fund maintains a
philosophy, which has enabled us to outperform the S&P 500 index for the year
and places MDL in the top half of all Equity Mutual Funds in the country. The
sectors we are currently emphasizing in the economy are Technology, Retail, and
Financials. As the stock market continues to skyrocket, we are well aware that
there is no market that moves in one direction, but as long term investors we
believe the trend in equities continues to be very positive.
As Fixed Income investors we believe that the current trend in interest rates is
justified based on the strength of the U.S. economy and the historically low
unemployment rate we have witnessed. The Federal Reserve has raised fed funds
rates three times in 1999 and continues to have a bias towards tightening. With
this in mind our emphasis for the MDL Broad Market Fixed Income Fund is capital
preservation. In a higher interest rate environment shorter bonds tend to
outperform longer-term bonds so we have taken a more conservative posture for
the near term until the threat of higher inflation has passed.
AN INSIDE VIEW OF MDL'S APPROACH TO MANAGING STOCKS AND BONDS
Like all successful money managers, our investment philosophy and methodology
remain the same during all phases of an economic cycle. Yet, our portfolio
strategies remain flexible to take advantage of the benefits of an ever-evolving
global economy.
The hallmark of our investment process begins with our Investment Policy
Committee. The Committee meets bi-monthly to review developments in the economy
and securities markets. The Committee then develops the strategic direction for
each of the mutual funds.
The Committee is composed of six investment professionals with over 60 years of
combined investment experience using the economic analysis supplied by these
professionals and the parameters determined by the Committee, each Fund's
portfolio manager then uses additional variables to implement a strategy to
manage each Fund.
Thank you for your continued confidence and best wishes to you and your loved
ones in the coming year.
Thank You,
[Signature Omitted] [Signature Omitted]
Mark D. Lay Steven L. Sanders
Chairman & CEO President
1
<PAGE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE MDL BROAD
MARKET FIXED INCOME FUND, VERSUS THE LEHMAN AGGREGATE BOND INDEX
Total Return1
Annualized
One-Year Inception
Return to Date
-2.80% 2.98%
[Line Graph Omitted]
Plot Points are as follows:
MDL Fixed Lehman
Income Fund Aggregate Index
10/31/97 10,000 10,000
10/98 10,910 10,932
10/99 10,605 10,990
(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.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE MDL LARGE
CAP GROWTH FUND, VERSUS THE S&P 500 COMPOSITE INDEX
Total Return 1
Annualized
One-Year Inception
Return to Date
26.40% 22.50%
[Line Graph Omitted]
Plot Points are as follows:
MDL Large Cap S&P 500
Growth Fund Composite Index
10/31/97 10,000 10,000
10/31/98 11,872 12,200
10/31/99 15,006 15,332
(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 THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
Face Market
MDL BROAD MARKET Amount Value
FIXED INCOME FUND (000) (000)
- --------------------------------------------------------------------------------
CORPORATE BOND (1.1%)
Pacific Bell
6.875%, 08/15/06 $ 235 $ 233
--------
TOTAL CORPORATE BOND
(Cost $251) 233
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.3%)
Fannie Mae
6.500%, 11/01/28 935 898
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $943) 898
--------
U.S. TREASURY OBLIGATIONS (75.5%)
U.S. Treasury Notes
5.500%, 12/31/00 6,270 6,258
5.625%, 05/15/01 1,800 1,796
5.500%, 07/31/01 650 647
6.375%, 08/15/02 725 734
6.250%, 02/15/03 1,540 1,553
4.250%, 11/15/03 1,050 986
6.500%, 05/15/05 985 1,003
7.000%, 07/15/06 1,320 1,378
6.625%, 05/15/07 1,045 1,071
6.000%, 08/15/09 275 275
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $15,994) 15,701
--------
ASSET-BACKED SECURITIES (4.4%)
American Express Credit Account
Master Trust Series 1999-1
5.600%, 11/15/06 950 911
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $948) 911
--------
MORTGAGE RELATED (12.8%)
FHLMC CMO, Ser 1410, Cl C
6.000%, 09/15/22 85 82
GNMA
6.500%, 01/15/26 188 180
6.500%, 04/15/26 140 134
6.500%, 12/15/27 38 37
6.500%, 06/15/28 243 232
7.500%, 06/15/28 100 100
6.500%, 10/15/28 264 252
6.500%, 04/15/29 255 244
7.500%, 09/15/29 1,399 1,402
--------
TOTAL MORTGAGE RELATED
(Cost $2,708) 2,663
--------
Face Market
Amount Value
(000) (000)
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.3%)
Morgan Stanley 5.00%, dated
10/29/99, matures 11/01/99,
repurchase price$51,484
(collateralized by U.S.
Treasury Note, 03/31/2001,
market value $54,439) $ 51 $ 51
-------
TOTAL REPURCHASE AGREEMENT
(Cost $52) 51
-------
TOTAL INVESTMENTS (98.4%)
(Cost $20,896) 20,457
-------
OTHER ASSETS AND LIABILITIES, NET (1.6%) 335
-------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 2,130,624 outstanding
shares of beneficial interest 21,977
Undistributed Net Investment Income 17
Accumulated Net Realized Loss on
Investments (763)
Net Unrealized Depreciation on
Investments (439)
-------
TOTAL NET ASSETS (100.0%) $20,792
=======
Net Asset Value and Redemption
Price Per Share $9.76
=======
CL -- CLASS
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SER -- SERIES
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
COMMON STOCK (98.3%)
AIRCRAFT (1.9%)
Allied Signal 8,475 $ 483
--------
BANKS (10.1%)
Bank of America 5,795 373
Bank of New York 14,504 607
Bank One 6,585 247
Chase Manhattan 3,000 262
First Union 3,900 166
Fleet Boston 8,344 364
Mellon Financial 16,490 609
--------
2,628
--------
BEAUTY PRODUCTS (2.3%)
Gillette 5,550 201
Procter & Gamble 3,650 383
--------
584
--------
BROADCASTING, NEWSPAPERS & ADVERTISING (2.9%)
AMFM* 5,530 387
Omnicom Group 4,160 366
--------
753
--------
BUILDING & CONSTRUCTION (0.6%)
Centex 5,325 143
--------
COMMUNICATIONS EQUIPMENT (3.4%)
Lucent Technologies 8,981 577
Tellabs* 4,850 307
--------
884
--------
COMPUTERS & SERVICES (12.9%)
Cisco Systems* 11,570 856
Compaq Computer 9,265 176
Hewlett Packard 2,347 174
IBM 6,560 645
Microsoft* 12,993 1,203
Oracle Systems* 6,264 298
--------
3,352
--------
ELECTRICAL SERVICES (6.1%)
FPL Group 7,144 359
General Electric 9,090 1,232
--------
1,591
--------
FINANCIAL SERVICES (5.1%)
American Express 2,650 408
Citigroup 10,575 572
Fannie Mae 5,025 356
--------
1,336
--------
FOOD, BEVERAGE & TOBACCO (1.2%)
Coca-Cola 5,445 321
--------
Market
Value
Shares (000)
- -------------------------------------------------------------------------------
INSURANCE (1.4%)
American International Group 3,468 $ 357
--------
MACHINERY (4.0%)
Applied Materials* 5,000 449
Baker Hughes 9,423 263
United Technologies 5,250 318
--------
1,030
--------
MANUFACTURING (1.7%)
Tyco International 11,098 443
--------
MARINE TRANSPORTATION (1.0%)
Carnival 5,970 266
--------
MEDICAL/HEALTH CARE (10.0%)
Johnson & Johnson 4,835 506
McKesson HBOC 3,550 71
Merck & Company 8,460 673
Pfizer 13,775 544
Schering-Plough 7,266 360
Warner Lambert 5,580 445
--------
2,599
--------
PAPER & PAPER PRODUCTS (1.6%)
International Paper 7,925 417
--------
PETROLEUM REFINING (4.6%)
Exxon 7,820 579
Royal Dutch Petroleum ADR 6,340 380
Sunoco 10,055 243
--------
1,202
--------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES (0.4%)
Xerox 3,700 104
--------
PRINTING & PUBLISHING (1.2%)
Time Warner 4,500 314
--------
RAILROADS (0.8%)
CSX 5,350 219
--------
RETAIL (8.8%)
Costco Wholesale* 4,473 359
Dayton Hudson 3,196 207
Home Depot 6,075 459
McDonald's 7,800 322
Wal-Mart Stores 16,220 919
--------
2,266
--------
SEMI-CONDUCTORS/INSTRUMENTS (5.6%)
Intel 9,907 767
LSI Logic* 6,550 348
Micron Technology 4,696 335
--------
1,450
--------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
Shares/Face Market
MDL LARGE CAP Amount Value
GROWTH FUND (concluded) (000) (000)
- -------------------------------------------------------------------------------
STEEL & STEEL WORKS (1.2%)
Alcoa 5,000 $ 304
-------
TELEPHONES & TELECOMMUNICATION (9.5%)
AirTouch Communications* 3,850 499
AT&T 6,562 307
Bell Atlantic 5,640 366
BellSouth 7,300 329
MCI WorldCom* 5,800 498
SBC Communications 8,915 454
-------
2,453
-------
TOTAL COMMON STOCK
(Cost $22,527) 25,499
-------
REPURCHASE AGREEMENT (1.7%)
Morgan Stanley 5.00%, dated 10/29/99,
matures 11/01/99, repurchase price
$439,565 (collateralizes by U.S.
Treasury Note, 06/30/2000,market
value $464,796) $440 440
-------
TOTAL REPURCHASE AGREEMENT
(Cost $440) 440
-------
TOTAL INVESTMENTS (100.0%)
(Cost $22,967) 25,939
-------
OTHER ASSETS AND LIABILITIES, NET (0.0%) 8
-------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 1,734,143 outstanding
shares of beneficial interest 21,126
Distributions in Excess of Net
Investment Income (6)
Accumulated Net Realized Gain
on Investments 1,855
Net Unrealized Appreciation on
Investments 2,972
-------
TOTAL NET ASSETS (100.0%) $25,947
=======
Net Asset Value, Offering and Redemption
Price Per Share $14.96
=======
*NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF OPERATIONS THE ADVISORS' INNER CIRCLE FUND
For the year ended October 31, 1999
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND FUND
11/01/98 TO 11/01/98 TO
10/31/99 10/31/99
(000) (000)
- -------------------------------------------------------------------------------
Investment Income:
Dividend Income.............................. $ -- $ 219
Interest Income ............................. 935 14
- -------------------------------------------------------------------------------
Total Investment Income.................... 935 233
- -------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees .................... 80 161
Investment Advisory Fee Waiver .............. (80) (67)
Reimbursements by Advisor ................... (26) --
Administrative Fees ......................... 80 80
Professional Fees ........................... 34 34
Transfer Agent Fees ......................... 28 26
Printing Fees ............................... 13 14
Registration Fees ........................... 13 10
Trustee Fees ................................ 6 5
Custodian Fees .............................. 4 6
Organizational Costs ........................ 5 3
Insurance and other fees .................... 2 2
- -------------------------------------------------------------------------------
Total Expenses, Net ......................... 159 274
- -------------------------------------------------------------------------------
Net Investment Income (Loss) ............ 776 (41)
- -------------------------------------------------------------------------------
Net Realized Gain (Loss)
from Securities Sold ..................... (763) 1,905
Net Unrealized Appreciation (Depreciation) of
Investment Securities ........... (576) 2,416
- -------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments ...................... (1,339) 4,321
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
From Operations ............... $ (563) $4,280
===============================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS THE ADVISORS' INNER CIRCLE FUND
For the Years Ended October 31,
<TABLE>
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND FUND
-------------------------------------------------------------------
11/01/98 11/01/97 11/01/98 11/01/97
10/31/99 10/31/98 10/31/99 10/31/98
(000) (000) (000) (000)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income .......................................... $ 776 $ 69 $ (41) $ 5
Net Realized Gain (Loss) from Securities Sold .................. (763) 12 1,905 (8)
Net Unrealized Appreciation (Depreciation) of Investment
Securities .................................................. (576) 137 2,416 556
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations (563) 218 4,280 553
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .......................................... (771) (69) (9) (2)
Realized Capital Gains ......................................... -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions............................................. (771) (69) (9) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued .................................... 4,029 5,383 2,325 5,464
Reinvestment of Cash Distributions ............................. 788 50 9 2
Subscription In-Kind Transaction................................ 13,003 -- 14,708 --
Cost of Shares Redeemed ........................................ (1,105) (171) (1,355) (28)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Derived From Capital Share Transactions.. 16,715 5,262 15,687 5,438
- -----------------------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets ................................... 15,381 5,411 19,958 5,989
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ............................................ 5,411 -- 5,989 --
- -----------------------------------------------------------------------------------------------------------------------------------
End of Period .................................................. $20,792 $5,411 $25,947 $5,989
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ......................................................... 401 528 165 508
Issued in Lieu of Cash Distributions ........................... 79 5 1 --
Subscription In-Kind Transaction................................ 1,243 -- 1,160 --
Redeemed ....................................................... (109) (17) (97) (2)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Share Transactions ............................. 1,614 516 1,229 506
===================================================================================================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS THE ADVISORS' INNER CIRCLE FUND
For a Share Outstanding Throughout Each Period
For the Year Ended October 31,
<TABLE>
Ratio
of Net
Ratio Investment
Realized Distribu- Ratio Ratio of Income(Loss)
and tions Net of of Net Expenses to Average
Net Unralized from Asset Net Expenses Investment to Average Net Assets
Asset Net Gain or Net Value Assets to Income(Loss) Net Assets (Excluding
Value Investment (Losses) Invest- End End Average to Average (Excluding Waivers and Portfolio
Beginning Income on ment of Total of Net Net Waivers)and Reimburse- Turnover
of Period (Loss) Securities Income Period Return Period Assets Assets Reimbursements ments) Rate
- ----------------------------------
MDL BROAD MARKET FIXED INCOME FUND
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $10.48 0.44 (0.73) (0.43) $ 9.76 (2.80)% $20,792 0.90% 4.40% 1.50% 3.80% 198.83%
1998(1) $10.00 0.41 0.48 (0.41) $10.48 9.10% $ 5,411 0.90% 4.38% 11.24% (5.96)% 72.82%
- -------------------------
MDL LARGE CAP GROWTH FUND
- -------------------------
1999 $11.84 (0.01) 3.13 -- $14.96 26.40% $25,947 1.26% (0.19)% 1.57% (0.50)% 75.29%
1998(1) $10.00 0.04 1.83 (0.03) $11.84 18.72% $ 5,989 1.26% 0.41% 12.88% (11.21)% 127.68%
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The Funds commenced operations on October 31, 1997.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ADVISORS' INNER CIRCLE 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 a 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
MDL Broad Market Fixed Income Fund and the MDLLarge Cap Growth Equity Fund (the
"Funds"). The financial statements of the remaining portfolios are presented
separately. The assets of each portfolio are segregated, and a shareholder's
interest is limited to the portfolio in which shares are held. The Funds'
prospectus provides 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 Funds.
SECURITY VALUATION -- Investments in equity securities which are listed on a
securities exchange for which market quotations are available are valued at
the last quoted sales price for such securities on each business day, or, if
there is no such reported sales price on the valuation date, at the most
recently quoted bid price. Debt obligations exceeding sixty days to maturity
for which market quotations are readily available are valued at the most
recently quoted bid price. Debt obligations with sixty days or less remaining
until maturity may be valued at their amortized cost. Under this valuation
method, purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income. Securities for which quotations
are not readily available are valued at fair value using methods determined
in good faith by the Board of Trustees.
FEDERAL INCOME TAXES -- It is each Portfolio'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).
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. Purchase
discounts and premiums on securities held by the Funds are accreted and
amortized to maturity using the scientific interest method, which
approximates the effective interest method.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Portfolio
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 Portfolios may be delayed or limited.
EXPENSES -- Expenses that are directly related to one of the Portfolios are
charged to the Portfolio. Other operating expenses of the Trust are prorated
to the Portfolios on the basis of relative daily net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared monthly for the MDL Broad Market Fixed Income Fund and are paid
monthly. The MDL Large Cap Growth Fund declares dividends from net investment
income quarterly and are paid quarterly. Any net realized capital gains are
distributed to shareholders at least annually.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
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. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized and are being amortized on a straight
line basis over a period of 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.
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 Funds have entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Funds. For its services, the
Liquidity Desk received $7,670 for the period ended October 31, 1999.
4. ADMINISTRATION, SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an Administration Agreement dated
November 14, 1991, as amended and restated on November 3, 1997, under which the
Administrator provides management and administrative services for an annual fee
equal to the higher of $80,000, or of .15% on the first $50 million of average
daily net assets; .125% on the next $50 million of average net assets; and .10%
on average net assets over $100 million of the Fund's average daily net assets.
DST Systems Inc. (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Funds under a transfer agency agreement with
the Trust.
The Trust and Distributor are parties to a Distribution Agreement dated November
14, 1991 as amended and restated on August 8, 1994. The Distributor receives no
fees for its distribution services under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Funds and MDL Capital Management, Inc. (the "Adviser") are parties to an
Investment Advisory Agreement dated October 31, 1997 under which the Adviser
receives an annual fee equal to .45% and .74% of the Fund's average daily net
assets of the MDL Broad Market Fixed Income and MDL Large Cap Growth Equity
Funds, respectively. The Adviser has voluntarily agreed to waive all or a
portion of its fees and to reimburse expenses in order to limit operating
expenses for the MDL Broad Market Fixed Income and MDL Large Cap Growth Equity
Funds to an annual rate of not more than .90% and 1.26% of the average daily net
assets, respectively. Fee waivers and expense reimbursements are voluntary and
may be terminated at any time.
First Union National Bank acts as custodian (the "Custodian") for the Funds. The
Custodian plays no role in determining the investment policies of the Funds or
which securities are to be purchased or sold by the Funds.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
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:
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND FUND
---------------- ------------
Purchases
Government ...... $45,189 $ --
Other ........... 3,830 30,921
Sales
Government ...... $29,624 $ --
Other ........... 2,692 15,508
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, are as follows:
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND FUND
-------------- ------------
Aggregate gross
unrealized
appreciation .... $ 9 $ 4,315
Aggregate gross
unrealized
depreciation .... (448) (1,343)
------- -------
Net unrealized
appreciation/
(depreciation) .. $ (439) $ 2,972
======= =======
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MDL Broad Market Fixed Income and
MDL Large Cap Growth Equity Funds of The Advisors' Inner Circle Fund:
We have audited the accompanying statements of net assets of the MDL Broad
Market Fixed Income Fund and the MDL Large Cap Growth Equity Fund (the "Funds"),
two of the funds constituting The Advisors' Inner Circle Fund, as of October 31,
1999, and the related statements of operations, the statements of changes in net
assets, and the 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, 1999, 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 the
MDL Broad Market Fixed Income Fund and the MDL Large Cap Growth Equity Fund of
The Advisors' Inner Circle Fund as of October 31, 1999, and the results of their
operations, the changes in their net assets, and the financial highlights for
the periods presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 17, 1999
12
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ADVISORS' INNER CIRCLE FUND
(UNAUDITED)
For shareholders that do not have an October 31, 1999 tax year end, this notice
is for informational purposes only. For shareholders with an October 31, 1999,
please consult your tax advisor as to the pertinence of this notice.
For the fiscal year ended October 31, 1999, each portfolio is designating the
following items with regard to distributions paid during the year.
<TABLE>
LONG TERM ORDINARY
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1)
---------- ---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
MDL Large Cap Growth Fund .................. 0% 100% 100% 75.5%
MDL Broad Market Fixed Income Fund ......... 0% 100% 100% 0%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION AND IS REFLECTED AS A PERCENTAGE OF "ORDINARY
INCOME DISTRIBUTIONS".
13
<PAGE>
TRUST:
The Advisor's Inner Circle Fund
MDL FUNDS:
MDL Broad Market Fixed Income Fund
MDL Large Cap Growth Equity Fund
ADVISER:
MDL Capital Management, Inc.
DISTRIBUTOR:
SEI Investments Distribution Co.
ADMINISTRATOR:
SEI Investments Mutual Funds Services
LEGAL COUNSEL:
Morgan, Lewis & Bockius LLP
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
For information call: 1-800-932-7781
MDL-F-004-02
