N-CSRS 1 w82008nvcsrs.htm FORM N-CSRS nvcsrs
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-CSRS
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-06400
The Advisors’ Inner Circle Fund
(Exact name of Registrant as specified in charter)
 
101 Federal Street
Boston, MA 02110
(Address of principal executive offices) (Zip code)
SEI Corporation
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
Registrant’s telephone number, including area code: (877) 446-3863
Date of fiscal year end: October 31, 2011
Date of reporting period: April 30, 2011
 
 

 

 

Item 1.  Reports To Stockholders.
THE ADVISORS’ INNER CIRCLE FUND
(LSV LOGO)
Conservative Core Equity Fund
SEMI-ANNUAL REPORT TO SHAREHOLDERS
April 30, 2011
This information must be preceded or
accompanied by a current prospectus.
Investors should read the prospectus carefully
before investing.

 

(LSV LOGO)
MANAGER’S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
(Unaudited)
The total net of fee return of the LSV Conservative Core Equity Fund, (the “Fund”) and the benchmark S&P 500 Index for trailing periods ended April 30, 2011, were as follows:
                                 
                            Since
    6 Months   1 Year*   3 Year*   Inception*
LSV Conservative Core Equity Fund
     16.27 %     16.43 %     1.59 %     -1.95 %
S&P 500 Index
     16.36       17.22       1.73       -0.67  
 
*   As of April 30, 2011; periods longer than one year are annualized; inception date is May 22, 2007; net of fees. The investment return and principal value of an investment will fluctuate so that an investor’s shares when redeemed may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month end, please call 1-888-FUND-LSV.
As of April 30, 2011 the Russell 1000 Value Index total return has lagged the Russell 1000 Growth Index by 5.6% for the trailing year, and 4.7% annualized for 3-years. Not surprisingly, this has been a challenging environment for our value approach. However, recently we have begun to see a reversal as value stocks have performed better which has benefitted the portfolio somewhat year-to-date.
Despite the more favorable recent environment for value stocks, attribution suggests that the Portfolio’s stronger emphasis on valuation than the S&P 500 Index detracted from relative returns in the trailing six months. Overall stock selection had a slightly positive effect on relative returns as portfolio holdings outperformed benchmark constituents in the Health Care sector but lagged in other sectors, most notably in the Industrials and Consumer Discretionary sectors. As an enhanced indexed portfolio, sector bets are tightly constrained and therefore do not usually have a significant impact on relative returns. The positive benefit of underweight exposure to the Consumer Staples sector was more than offset by the negative impact of an overweight to the Health Care sector and an underweight to the Industrials sector. The Fund’s most significant sector exposures on a relative basis are to the Health Care and Technology sectors. The Fund is underweight to Industrials stocks. From an industry perspective, the biggest overweights are to Oil, Gas and Consumable Fuels and Insurance and the biggest underweights are Energy Equipment Services and REITs.
Even with the strong market returns since March 2009, the portfolio remains attractive from a valuation perspective as corporate earnings have also risen sharply since the recovery began. Currently the portfolio is trading at 11.7x forward earnings, compared to 14.1x for the S&P 500 benchmark, 1.9x book compared to 2.3x and 7.9x cash flow compared to 10.3x. While we never know exactly what the catalyst/s will be for a more favorable environment for value stocks, we are beginning to see positive signs that the market is recognizing that it has underestimated the prospects of the stocks we own in the Fund. Companies are starting to increase dividends, to look for acquisitions and to buy back stock. Corporate balance sheets have built up substantial cash since the market and economic recovery began in 2009 and merger and acquisition activity is also picking up among financial buyers creating another potential source of demand for healthy businesses that are out of favor.
Our assets under management, ownership structure and team remain stable. As always, we are committed to a consistent application of our investment process and research agenda as part of an ongoing effort to enhance our quantitative models and add value for our clients.
The information provided herein represents the opinion of the manager and is not intended to be a forecast of future events, a guarantee of future results or investment advice.
The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index (stock price times number of shares outstanding), with each stock’s weight in the Index proportionate to its market value. The S&P 500 Index is one of the most widely used benchmarks of U.S. equity performance. It is not possible to invest directly in an index.

1

 

   
April 30, 2011 (Unaudited)
()
 
† Percentages are based on total investments.
                 
Schedule of Investments              
LSV Conservative Core           Value  
Equity Fund   Shares     (000)  
 
Common Stock (99.7%)
                
Aerospace & Defense (3.2%)
                
General Dynamics
     5,000     $ 364  
Huntington Ingalls Industries*
     816       32  
ITT
     4,600       266  
L-3 Communications Holdings, Cl 3
     2,900       232  
Northrop Grumman
     6,000       382  
Raytheon
     7,000       340  
Tyco International
     4,900       239  
 
              
 
             1,855  
 
              
 
                
Agricultural Operations (0.6%)
                
Archer-Daniels-Midland
     9,600       355  
 
              
 
                
Agricultural Products (0.1%)
                
Fresh Del Monte Produce
     2,000       54  
 
              
 
                
Aircraft (1.1%)
                
Lockheed Martin
     4,600       365  
United Continental Holdings*
     6,000       137  
US Airways Group*
     12,800       116  
 
              
 
             618  
 
              
 
                
Apparel Retail (0.9%)
                
Gap
     11,100       258  
Ross Stores
     3,400       251  
 
              
 
             509  
 
              
 
                
Asset Management & Custody Banks (1.5%)
                
Ameriprise Financial
     5,500       341  
Bank of New York Mellon
     12,500       362  
Legg Mason
     5,200       193  
 
              
 
             896  
 
              
 
                
Automotive (1.6%)
                
Autoliv
     2,800       225  
Ford Motor*
     34,800       538  
TRW Automotive Holdings*
     3,400       194  
 
              
 
             957  
 
              
 
                
Banks (5.4%)
                
Bank of America
     47,300       581  
Huntington Bancshares
     29,800       202  
JPMorgan Chase
     21,500       981  
PNC Financial Services Group
     5,200       324  
Regions Financial
     9,900       73  
SunTrust Banks
     2,800       79  
US Bancorp
     6,000       155  
Wells Fargo
     27,500       800  
 
              
 
             3,195  
 
              
 
                
Biotechnology (1.9%)
                
Amgen*
     7,200       409  
Biogen Idec*
     4,700       458  
Gilead Sciences*
     5,700       221  
 
              
 
             1,088  
 
              
 
                
Cable & Satellite (1.0%)
                
Comcast, Cl A
     16,500       433  
Time Warner Cable, Cl A
     1,900       148  
 
              
 
             581  
 
              
 
                
Chemicals (1.7%)
                
Cytec Industries
     2,400       141  
Dow Chemical
     13,500       553  
Eastman Chemical
     2,900       311  
 
              
 
             1,005  
 
              
 
                
Commercial Printing (0.3%)
                
RR Donnelley & Sons
     9,200       174  
 
              
 
                
Commercial Services (0.2%)
                
Convergys*
     6,400       93  
 
              
 
                
Computer & Electronics Retail (0.9%)
          
Best Buy
     6,900       215  
GameStop, Cl A*
     7,700       198  
RadioShack
     6,600       104  
 
              
 
             517  
 
              
 
                
Computers & Services (10.1%)
                
Apple*
     3,200       1,114  
Applied Materials
     24,200       380  
CA
     9,200       226  
Computer Sciences
     5,800       296  
Dell*
     26,100       405  
Google, Cl A*
     600       326  
Hewlett-Packard
     18,800       759  
Microsoft
     48,400       1,259  
The accompanying notes are an integral part of the financial statements.

2

 

     
Schedule of Investments
    
April 30, 2011
  (Unaudited)
                 
LSV Conservative Core         Value  
Equity Fund   Shares     (000)  
 
Computers & Services (continued)
                
NCR*
     6,600     $ 131  
Oracle
     8,800       317  
SanDisk*
     5,700       280  
Seagate Technology
     10,100       178  
Western Digital*
     6,700       267  
 
              
 
             5,938  
 
              
 
                
Construction & Engineering (0.2%)
                
KBR
     3,700       142  
 
              
 
                
Consumer Discretionary (1.2%)
                
Kimberly-Clark
     1,900       126  
Procter & Gamble
     8,800       571  
 
              
 
             697  
 
              
 
                
Diversified Metals & Mining (0.9%)
                
Freeport-McMoRan Copper & Gold
     9,600       528  
 
              
 
                
Drug Retail (1.7%)
                
CVS Caremark
     13,100       475  
Walgreen
     12,500       534  
 
              
 
             1,009  
 
              
 
                
Electrical Services (4.2%)
                
Ameren
     7,100       208  
American Electric Power
     9,700       354  
DTE Energy
     4,100       207  
Edison International
     7,500       295  
Entergy
     5,400       376  
Exelon
     4,400       185  
General Electric
     32,200       658  
Public Service Enterprise Group
     6,400       206  
 
              
 
             2,489  
 
              
 
                
Financial Services (3.1%)
                
American Express
     4,600       226  
Capital One Financial
     5,900       323  
Citigroup*
     131,100       602  
Goldman Sachs Group
     2,700       407  
Morgan Stanley
     8,900       233  
 
              
 
             1,791  
 
              
 
                
Food, Beverage & Tobacco (3.5%)
                
Altria Group
     3,700       99  
Coca-Cola
     6,200       418  
Coca-Cola Enterprises
     8,700       247  
ConAgra Foods
     8,900       218  
Hormel Foods
     6,600       194  
Kraft Foods, Cl A
     4,100       138  
PepsiCo
     3,200       220  
Philip Morris International
     4,200       292  
Supervalu
     3,200       36  
Tyson Foods, Cl A
     10,900       217  
 
              
 
             2,079  
 
              
 
                
General Merchandise Stores (1.4%)
                
Big Lots*
     4,800       197  
Family Dollar Stores
     3,000       163  
Target
     9,800       481  
 
              
 
             841  
 
              
 
                
Health Care Distributors (0.4%)
                
McKesson
     2,800       233  
 
              
 
                
Health Care Equipment (1.4%)
                
Baxter International
     2,700       154  
Medtronic
     12,700       530  
Zimmer Holdings*
     2,200       144  
 
              
 
             828  
 
              
 
                
Household Products, Furniture & Fixtures (0.3%)
                
Whirlpool
     2,100       181  
 
              
 
                
Insurance (8.1%)
                
ACE
     5,300       356  
Aetna
     9,800       406  
Allstate
     9,900       335  
Assurant
     4,400       175  
Berkshire Hathaway, Cl B*
     4,300       358  
Chubb
     5,300       346  
CIGNA
     4,000       187  
Hartford Financial Services Group
     3,100       90  
Lincoln National
     2,800       88  
MetLife
     10,300       482  
Prudential Financial
     6,400       406  
Travelers
     6,200       392  
UnitedHealth Group
     11,500       566  
Unum Group
     5,300       140  
WellPoint
     5,800       445  
 
              
 
             4,772  
 
              
 
                
IT Consulting & Other Services (1.6%)
                
International Business Machines
     4,500       767  
SAIC*
     10,800       188  
 
              
 
             955  
 
              
 
                
Machinery (0.6%)
                
Oshkosh*
     5,500       174  
Timken
     3,500       197  
 
              
 
             371  
 
              
 
                
Metal & Glass Containers (0.4%)
                
Ball
     3,800       142  
Owens-Illinois*
     2,700       80  
 
              
 
             222  
 
              
 
                
Multimedia (0.8%)
                
DISH Network, Cl A*
     5,600       140  
News, Cl A
     9,400       168  
Walt Disney
     3,700       159  
 
              
 
             467  
 
              
The accompanying notes are an integral part of the financial statements.

3

 

     
Schedule of Investments
    
April 30, 2011
  (Unaudited)
                 
LSV Conservative Core         Value  
Equity Fund   Shares     (000)  
 
Office Electronics (0.4%)
                
Xerox
     21,800     $ 220  
 
              
 
                
Office Equipment (0.9%)
                
3M
     1,800       175  
Avery Dennison
     6,000       250  
Pitney Bowes
     5,000       123  
 
              
 
             548  
 
              
 
                
Oil & Gas Equipment & Services (0.4%)
          
Schlumberger
     2,700       242  
 
              
 
                
Paper & Paper Products (0.6%)
                
International Paper
     10,900       337  
 
              
 
                
Paper Packaging (0.2%)
                
Rock-Tenn, Cl A
     2,000       138  
 
              
 
                
Petroleum & Fuel Products (12.2%)
                
Apache
     4,300       574  
Chesapeake Energy
     7,600       256  
Chevron
     12,600       1,379  
ConocoPhillips
     11,500       908  
Exxon Mobil
     23,500       2,068  
Marathon Oil
     9,500       513  
Murphy Oil
     4,300       333  
Noble
     3,000       129  
Occidental Petroleum
     3,800       434  
Tesoro*
     7,100       193  
Valero Energy
     12,300       348  
 
              
 
             7,135  
 
              
 
                
Petroleum Refining (1.3%)
                
Devon Energy
     4,100       373  
Hess
     4,700       404  
 
              
 
             777  
 
              
 
                
Pharmaceuticals (6.8%)
                
Abbott Laboratories
     9,800       510  
Bristol-Myers Squibb
     8,200       230  
Eli Lilly
     12,100       448  
Forest Laboratories*
     3,700       123  
Johnson & Johnson
     8,400       552  
Merck
     21,700       780  
Mylan Laboratories*
     6,600       164  
Pfizer
     52,100       1,092  
Watson Pharmaceuticals*
     1,300       81  
 
              
 
             3,980  
 
              
 
                
Printing & Publishing (0.3%)
                
Lexmark International, Cl A*
     1,800       58  
McGraw-Hill
     3,600       146  
 
              
 
             204  
 
              
 
                
Railroads (0.4%)
                
Union Pacific
     2,200       228  
 
              
 
                
Reinsurance (0.8%)
                
Everest Re Group
     1,800       164  
PartnerRe
     1,900       153  
Validus Holdings
     5,200       169  
 
              
 
             486  
 
              
 
                
Retail (4.2%)
                
Brinker International
     5,600       135  
Darden Restaurants
     4,400       207  
Kroger
     8,600       209  
Lowe’s
     19,000       499  
Macy’s
     9,500       227  
McDonald’s
     1,400       109  
Safeway
     12,300       299  
Wal-Mart Stores
     14,000       770  
 
              
 
             2,455  
 
              
 
                
Semi-Conductors/Instruments (4.3%)
                
Intel
     38,900       902  
Jabil Circuit
     6,400       127  
KLA-Tencor
     5,600       246  
Lam Research*
     3,300       159  
Micron Technology*
     14,600       165  
TE Connectivity
     7,800       280  
Texas Instruments
     14,700       522  
Vishay Intertechnology*
     6,900       132  
 
              
 
             2,533  
 
              
 
                
Specialized REIT’s (0.3%)
                
Hospitality Properties Trust
     6,400       155  
 
              
 
                
Steel & Steel Works (0.7%)
                
Alcoa
     7,800       133  
Cliffs Natural Resources
     3,200       300  
 
              
 
             433  
 
              
 
                
Technology Distributors (0.6%)
                
Avnet*
     2,600       94  
Ingram Micro, Cl A*
     5,900       111  
Tech Data*
     2,600       138  
 
              
 
             343  
 
              
 
                
Telephones &Telecommunications (5.0%)
                
AT&T
     36,700       1,142  
Cisco Systems
     33,300       585  
Corning
     21,900       458  
Harris
     5,700       303  
QUALCOMM
     3,500       199  
Verizon Communications
     6,500       246  
 
              
 
             2,933  
 
              
 
                
Total Common Stock
(Cost $54,793)
             58,587  
 
              
The accompanying notes are an integral part of the financial statements.

4

 

     
Schedule of Investments
April 30, 2011 		  (Unaudited)
                 
    Face        
LSV Conservative Core   Amount     Value  
Equity Fund   (000)     (000)  
 
Repurchase Agreement (0.2%)
                
Morgan Stanley 0.020%, dated 04/29/11, to be repurchased on 05/02/11, repurchase price $132,532 (collateralized by a U.S. Treasury Inflationary Index Note, par value $134,347, 2.500%, 07/15/16; with total market value $135,183)
   $ 133     $ 133  
 
              
Total Repurchase Agreement
(Cost $133)
             133  
 
              
Total Investments — 99.9%
(Cost $54,926)
           $ 58,720  
 
              
Percentages are based on Net Assets of $58,792 (000).
 
*   Non-income producing security.
 
Cl   Class
 
REIT   Real Estate Investment Trust
The following is a summary of the inputs used as of April 30, 2011 in valuing the Fund’s investments carried at value (000):
                                 
Investments in                        
Securities   Level 1     Level 2     Level 3     Total  
Common Stock
   $ 58,587     $ —     $ —     $ 58,587  
Repurchase Agreement
     —       133       —       133  
 
                        
Total Investments in Securities
   $ 58,587     $ 133     $ —     $ 58,720  
 
                        
For the six-month period ended April 30, 2011, there were no significant transfers between Level 1 and Level 2 assets and liabilities. For the six-month period ended April 30, 2011, there were no Level 3 securities.
For more information on valuation inputs, see Note 2 — Significant Accounting Policies in the Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.

5

 

     
Statement of Assets and Liabilities (000)
April 30, 2011 		  (Unaudited)
         
    LSV Conservative
    Core Equity Fund
 
Assets:
        
Investments at Value (Cost $54,926)
   $ 58,720  
Cash
     8  
Dividend and Interest Receivable
     63  
Receivable from Investment Adviser
     10  
Prepaid Expenses
     15  
 
Total Assets
     58,816  
 
Liabilities:
        
Payable due to Investment Adviser
     18  
Payable due to Administrator
     3  
Other Accrued Expenses
     3  
 
Total Liabilities
     24  
 
Net Assets
   $ 58,792  
 
Net Assets Consist of:
        
Paid-in Capital
   $ 63,503  
Undistributed Net Investment Income
     275  
Accumulated Net Realized Loss on Investments
     (8,780 )
Net Unrealized Appreciation on Investments
     3,794  
 
Net Assets
   $ 58,792  
 
Institutional Shares:
        
Outstanding Shares of Beneficial Interest (unlimited authorization — no par value)
     6,862,682 (1)
 
Net Asset Value, Offering and Redemption Price Per Share
   $ 8.57  
 
 
(1)   Shares have not been rounded.
The accompanying notes are an integral part of the financial statements.

6

 

     
Statement of Operations (000)
For the six months ended April 30, 2011 		  (Unaudited)
         
    LSV Conservative
    Core Equity Fund
 
Investment Income:
        
Dividend Income
   $ 544  
Interest Income
     —  
 
Total Investment Income
     544  
 
Expenses:
        
Investment Advisory Fees
     102  
Administration Fees
     16  
Transfer Agent Fees
     14  
Registration and Filing Fees
     9  
Custodian Fees
     3  
Printing Fees
     2  
Professional Fees
     2  
Insurance and Other Fees
     2  
 
Total Expenses
     150  
Less: Waiver of Investment Advisory Fees
     (56 )
Fees Paid Indirectly — (see Note 4)
     —  
 
Net Expenses
     94  
 
Net Investment Income
     450  
 
Net Realized Gain on Investments
     468  
Net Change in Unrealized Appreciation (Depreciation) on Investments
     7,010  
 
Net Realized and Unrealized Gain on Investments
     7,478  
 
Net Increase in Net Assets Resulting from Operations
   $ 7,928  
 
Amounts designated as “—” are $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.

7

 

Statement of Changes in Net Assets (000)
For the six months ended April 30, 2011 (Unaudited)
and for the year ended October 31, 2010
                 
    LSV Conservative
    Core Equity Fund
    11/01/10   11/01/09
    to 4/30/11   to 10/31/10
 
Operations:
                
Net Investment Income
   $ 450     $ 585  
Net Realized Gain on Investments
     468       210  
Net Change in Unrealized Appreciation (Depreciation) on Investments
     7,010       3,326  
 
Net Increase in Net Assets Resulting from Operations
     7,928       4,121  
 
Dividends and Distributions:
                
Net Investment Income
     (642 )     (571 )
 
Total Dividends and Distributions
     (642 )     (571 )
 
Capital Share Transactions:
                
Issued
     21,590       —  
In Lieu of Dividends and Distributions
     339       483  
Redeemed
     (636 )     (1,274 )
 
Net Increase (Decrease) in Net Assets Derived from Capital Share Transactions
     21,293       (791 )
 
Total Increase in Net Assets
     28,579       2,759  
 
Net Assets:
                
Beginning of Period
     30,213       27,454  
 
End of Period (including undistributed net investment income of $275 and $467, respectively)
   $ 58,792     $ 30,213  
 
Shares Transactions:
                
Issued
     2,850       —  
In Lieu of Dividends and Distributions
     43       69  
Redeemed
     (79 )     (176 )
 
Net Increase (Decrease) in Shares Outstanding from Share Transactions
     2,814       (107 )
 
Amounts designated as “—” are $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.

8

 

Financial Highlights
For a share outstanding throughout each period
For the six months ended April 30, 2011 (unaudited) and the years and period ended October 31,
                                                                                                         
                    Realized                                                           Ratio of   Ratio    
    Net           and           Dividends           Net           Net           Expenses   of Net    
    Asset           Unrealized           from   Total   Asset           Assets   Ratio of   to Average   Investment    
    Value   Net   Gains   Total   Net   Dividends   Value           End of   Expenses   Net Assets   Income   Portfolio
    Beginning   Investment   (Losses) on   from   Investment   and   End of   Total   Period   to Average   (Excluding   to Average   Turnover
    of Period   Income(1)   Investments   Operations   Income   Distributions   Period   Return†   (000)   Net Assets   Waivers)   Net Assets   Rate
LSV Conservative Core Equity Fund                                                                                        
2011*
   $ 7.46     $ 0.07     $ 1.14     $ 1.21     $ (0.10 )   $ (0.10 )   $ 8.57       16.27 %   $ 58,792       0.35 %     0.56 %     1.68 %     11 %
2010
     6.61       0.14       0.85       0.99       (0.14 )     (0.14 )     7.46       15.06       30,213       0.35       0.68       1.98       29  
2009
     6.09       0.15       0.58       0.73       (0.21 )     (0.21 )     6.61       12.58       27,454       0.35       0.73       2.53       44  
2008
     9.84       0.20       (3.87 )     (3.67 )     (0.08 )     (0.08 )     6.09       (37.56 )     28,568       0.35       0.64       2.31       35  
2007**
     10.00       0.08       (0.24 )     (0.16 )     —       —       9.84       (1.60 )     29,691       0.35       0.73       1.92       5  
 
*   For the six-month period ended April 30, 2011. All ratios for the period have been annualized. Portfolio turnover rate is for the period indicated and has not been annualized.
 
**   Commencement of operations for the LSV Conservative Core Equity Fund was May 22, 2007. All ratios for the period have been annualized. Portfolio turnover rate is for the period indicated and has not been annualized.
 
†   Return is for the period indicated and has not been annualized. Total returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Total return would have been lower had the advisor not waived a portion of its fee.
 
(1)   Per share calculations were performed using average shares for the period.
 
Amounts designated as “—” are $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.

9

 

     
Notes to Financial Statements
April 30, 2011 		  (Unaudited)
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 an open-end management investment company with 39 funds. The financial statements herein are those of the LSV Conservative Core Equity Fund (the “Fund”). The Fund seeks long-term growth of capital by investing in undervalued stocks which are out of favor in the market. The financial statements of the remaining funds of the Trust are not presented herein, but are presented separately. The assets of each fund are segregated, and a shareholder’s interest is limited to the fund in which shares are held.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by the Fund.
Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Security Valuation — Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded, or, if there is no such reported sale, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. If available, debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. Debt obligations with remaining maturities of sixty days or less may be valued at their amortized cost, which approximates market value.
Securities for which market prices are not “readily available” are valued in accordance with Fair Value Procedures established by the Fund’s Board of Trustees (the “Board”). The Fund’s Fair Value Procedures are implemented through a Fair Value Committee (the “Committee”) designated by the Board. Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; the security has not been traded for an extended period of time; the security’s primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government-imposed restrictions. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee. As of April 30, 2011, there were no fair valued securities.
In accordance with the authoritative guidance on fair value measurements and disclosure under GAAP, the Fund discloses fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1 — Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Fund has the ability to access at the measurement date;
Level 2 — Other significant observable inputs (includes quoted prices for similar securities, interest rates, prepayment speeds, credit risk, referenced indices, quoted prices in inactive markets, adjusted quoted prices in active markets, etc.); and
Level 3 — Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity).
Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement.

10

 

     
Notes to Financial Statements
April 30, 2011 		  (Unaudited)
For the six month period April 30, 2011, there have been no significant changes to the Fund’s fair valuation methodologies.
Federal Income Taxes — It is the Fund’s intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of Subchapter M of the Internal Revenue Code of 1986, as amended and to distribute substantially all of its income to shareholders. Accordingly, no provision for Federal income taxes has been made in the financial statements.
The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether it is “more-likely-than-not” (i.e., greater than 50-percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Fund did not record any tax provision in the current period. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities on open tax years 2007, 2008 and 2009, on-going analysis of and changes to tax laws, regulations and interpretations thereof.
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. Dividend income is recorded on the ex-date. Interest income is recognized on an accrual basis.
Repurchase Agreements — In connection with transactions involving repurchase agreements, a third party custodian bank takes possession of the underlying securities (“collateral”), the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. Such collateral will be cash, debt securities issued or guaranteed by the U.S. Government, securities that at the time the repurchase agreement is entered into are rated in the highest category by a nationally recognized statistical rating organization (“NRSRO”) or unrated category by an NRSRO, as determined by the Adviser. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings.
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 based on the number of funds and/or relative daily net assets.
Dividends and Distributions to Shareholders — Dividends from net investment income, if any, are declared and paid to shareholders annually. Any net realized capital gains are distributed to shareholders at least annually.
3. Transactions with Affiliates:
Certain officers of the Trust are also officers of SEI Investments Global Funds Services (the “Administrator”), a wholly owned subsidiary of SEI Investments Company and/or SEI Investments Distribution Co. (the “Distributor”). Such officers are paid no fees by the Trust for serving as officers of the Trust.
A portion of the services provided by the Chief Compliance Officer (“CCO”) and his staff, whom are employees of the Administrator, are paid for by the Trust as incurred. The services include regulatory oversight of the Trust’s Advisors and service providers as required by SEC regulations. The CCO’s services have been approved by and reviewed by the Board.
4. Administration, Distribution, Transfer Agency and Custodian Agreements:
The LSV Funds (the “Funds”) and the Administrator are parties to an Administration Agreement under which the Administrator provides administrative services at an annual rate of 0.07% of the Funds’ first $1 billion of average daily net assets; 0.06% of the Funds’ average daily net assets between $1 billion and $1.5 billion; 0.04% of the Funds’ average daily net assets between $1.5 billion and $3 billion; and 0.035% of the Funds’ average daily net assets over $3 billion. There is a minimum annual fee of $150,000 per Fund and $25,000 for each additional share class.
The Trust and Distributor are parties to a Distribution Agreement dated November 14, 1991, as Amended and Restated November 14, 2005. The Distributor receives no fees for its distribution services under this agreement.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent for the Fund under a transfer agency agreement with the Trust. During the six month period ended April 30, 2011, the Fund earned $4 in cash management credits which were used to offset transfer agent expenses. This amount is labeled as “Fees Paid Indirectly” on the Statement of Operations.
U.S. Bank, N.A. 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.

11

 

     
Notes to Financial Statements
April 30, 2011 		  (Unaudited)
5. Investment Advisory Agreement:
The Trust and LSV Asset Management (the “Adviser”) are parties to an Investment Advisory Agreement, under which the Adviser receives an annual fee equal to 0.38% of the Fund’s average daily net assets. The Adviser has contractually agreed through February 29, 2012 to waive its fee in order to limit the Fund’s total operating expenses to a maximum of 0.35% of the Fund’s average daily net assets. The Adviser reserves the right to terminate this arrangement at any time at its discretion.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales, other than short-term investments, for the six-month period ended April 30, 2011, were as follows (000):
         
Purchases
        
Other
   $ 26,370  
Sales
        
Other
   $ 5,472  
7. Federal Tax Information:
The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with Federal income tax regulations, which may differ from U.S. generally accepted accounting principles. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent. To the extent these differences are permanent in nature, they are charged or credited to undistributed net investment income (loss), accumulated net realized gain (loss) or to paid-in-capital, as appropriate, in the period that the differences arise.
Accordingly, the following permanent differences, primarily attributable to investments in REITS, have been reclassified to (from) the following accounts (000):
         
Undistributed Net   Accumulated Net
Investment Income   Realized Loss
$1
   $ (1 )
The tax character of dividends and distributions declared during the years ended October 31, 2010 and 2009 was as follows (000):
         
    Ordinary
    Income
2010
   $ 571  
2009
     915  
As of October 31, 2010, the components of accumulated losses on a tax basis were as follows (000):
         
Undistributed Ordinary Income
   $ 466  
Capital Loss Carryforward
     (9,122 )
Unrealized Depreciation
     (3,341 )
 
      
Total Accumulated Losses
   $ (11,997 )
 
      
For Federal income tax purposes, capital loss carryforwards represent realized losses of the Fund that may be carried forward a maximum of eight years and applied against future capital gains as follows (000):
                 
            Total Capital Loss
Expires   Expires   Carryforwards
10/31/16   10/31/17   2010
$1,198
   $ 7,924     $ 9,122  
Under the recently enacted Regulated Investment Company Modernization Act of 2010, Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
During the year ended October 31, 2010, the Fund had utilized capital loss carryforwards in the amount of $265 (000) to offset capital gains.
The total cost of securities for Federal income tax purposes and the aggregate gross unrealized appreciation and depreciation on investments held by the Fund at April 30, 2011, were as follows (000):
                         
    Aggregated   Aggregated    
    Gross   Gross   Net
Federal   Unrealized   Unrealized   Unrealized
Tax Cost   Appreciation   Depreciation   Depreciation
$55,040
   $ 8,372     $ (4,692 )   $ 3,680  
8. Other:
At April 30, 2011, 86% of total shares outstanding were held by three record shareholders each owning 10% or greater of the aggregate total shares outstanding. These shareholders were comprised of omnibus accounts that were held on behalf of various individual shareholders.

12

 

     
Notes to Financial Statements
April 30, 2011 		  (Unaudited)
In the normal course of business, the Fund enters into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
9. Subsequent Events:
The Fund has evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no adjustments were required to the financial statements.

13

 

Disclosure of Fund Expenses (Unaudited)
All mutual funds have operating expenses. As a shareholder of a mutual fund, your investment is affected by these ongoing costs, which include (among others) costs for portfolio management, administrative services, and shareholder reports like this one. It is important for you to understand the impact of these costs on your investment returns.
Operating expenses such as these are deducted from the mutual fund’s gross income and directly reduce your final investment return. These expenses are expressed as a percentage of the mutual fund’s average net assets; this percentage is known as the mutual fund’s expense ratio.
The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The table below illustrates your Fund’s costs in two ways:
• Actual fund return. This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The “Expenses Paid During Period” column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense cost from the Fund’s gross investment return.
You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = $8.6), then multiply that ratio by the number shown for your Fund under “Expenses Paid During Period.”
• Hypothetical 5% return. This section helps you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had an annual 5% return before expenses during the period, but that the expense ratio (Column 3) is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to make this 5% calculation. You can assess your Fund’s comparative cost by comparing the hypothetical result for your Fund in the “Expense Paid During Period” column with those that appear in the same charts in the shareholder reports for other mutual funds.
NOTE: Because the hypothetical return is set at 5% for comparison purposes — NOT your Fund’s actual return —the account values shown do not apply to your specific investment.
                                 
    Beginning   Ending           Expenses
    Account   Account   Annualized   Paid
    Value   Value   Expense   During
    11/01/10   04/30/11   Ratios   Period*
 
LSV Conservative Core Equity Fund
                                
 
Actual Fund Return
                                
Institutional Shares
   $ 1,000.00     $ 1,162.70       0.35 %   $ 1.88  
 
                                
Hypothetical 5% Return
                                
Institutional Shares
   $ 1,000.00     $ 1,023.06       0.35 %   $ 1.76  
 
 
*   Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

14

 

Board Considerations in Re-Approving the Advisory Agreement
(Unaudited)
Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), the Board of Trustees (the “Board”) of The Advisors’ Inner Circle Fund (the “Trust”) must consider and approve an Advisory Agreement for an initial two year term and must annually review and re-approve the existing Advisory Agreement after its initial two-year term: (i) by the vote of the Trustees or by a vote of the shareholders of the Funds; and (ii) by the vote of a majority of the Trustees who are not parties to the Advisory Agreement or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. Each year, the Board calls and holds a meeting to decide whether to renew the Advisory Agreement for an additional one-year term. In preparation for the meeting, the Board requests and reviews a wide variety of information from the Adviser. The Trustees use this information, as well as other information that the Adviser and other service providers of the Funds may submit to the Board, to help them decide whether to renew the Advisory Agreement for an additional year.
Prior to this year’s meeting held on February 15-16, 2011, the Board, including the Independent Trustees advised by their independent legal counsel, reviewed written materials from the Adviser regarding, among other things: (i) the nature, extent and quality of the services to be provided by the Adviser; (ii) the investment performance of the Funds and the Adviser; (iii) the costs of the services to be provided and profits to be realized by the Adviser and its affiliates from the relationship with the Funds; (iv) the extent to which economies of scale would be realized as the Funds grow; and (v) whether fee levels reflect these economies of scale for the benefit of Funds’ investors, as discussed in further detail below.
At the meeting, a representative from the Adviser, along with other Fund service providers, presented additional oral and written information to help the Board evaluate the Adviser’s fee and other aspects of the Advisory Agreement. Among other things, the representative from the Adviser provided an overview of the Adviser, including its history, assets under management, ownership structure, investment personnel, sell discipline and risk management. The Adviser’s representative also reviewed each Fund’s portfolio characteristics, including sector weightings and top ten holdings. The Trustees then discussed the written materials that the Board received before the meeting and the Adviser’s oral presentation and any other information that the Board received at the meeting, and deliberated on the renewal of the Advisory Agreement in light of this information. In its deliberations, the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and the re-approval of the Advisory Agreement, and did not identify any single piece of information discussed below that was all-important, controlling or determinative of its decision.
Nature, Extent, and Quality of Services Provided by the Adviser
In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed the portfolio management services provided by the Adviser to the Funds, including the quality and continuity of the Adviser’s portfolio management personnel. The most recent investment adviser registration form (“Form ADV”) for the Adviser was provided to the Board, as was the response of the Adviser to a detailed series of questions which included, among other things, information about the background and experience of the portfolio managers primarily responsible for the day-to-day management of the Funds.
The Trustees also considered other services to be provided to the Funds by the Adviser, such as selecting broker-dealers for executing portfolio transactions, monitoring adherence to the Funds’ investment restrictions, and monitoring compliance with various Fund policies and procedures and with applicable securities regulations. Based on the factors above, as well as those discussed below, the Board concluded that it was satisfied with the nature, extent and quality of the services provided to the Funds by the Adviser.
Investment Performance of the Funds and the Adviser
The Board was provided with information regarding each Fund’s performance since the Advisory Agreement was last renewed, as well as information regarding each Fund’s performance since its inception. The Board also compared each Fund’s performance to a benchmark index and other similar mutual funds over various periods of time. At the meeting, the representative of the Adviser provided information regarding and led a discussion of factors impacting the performance of the Funds over the past year, outlining current market conditions and explaining the Adviser’s expectations and strategies for the future. In particular, the representative discussed each Fund’s investments in securities of small capitalization companies and the effect such investments had on each Fund’s performance. The representative

15

 

Board Considerations in Re-Approving the Advisory Agreement
(Unaudited)
noted that “value” securities had outperformed “growth” securities during the prior periods, but that the Funds had made a good recovery in recent time. With respect to each LSV Fund, the Board noted that although each Fund underperformed its benchmark over various periods of time, each Fund’s performance was not substantially below that of its respective benchmark and did not necessitate any significant additional review. Based on this information, the Board concluded that it was satisfied with the investment results the Adviser had been able to achieve for each Fund.
Costs of Advisory Services, Profitability and Economies of Scale
In concluding that the advisory fees payable by each Fund were reasonable, the Trustees reviewed a report of the advisory fees paid by the Funds to the Adviser, the fee waivers that the Adviser had made over the period, as well as the costs of services provided by and the profits realized by the Adviser from its relationship with the Funds, and concluded that such profits were not excessive. The Trustees also reviewed reports comparing the expense ratio and advisory fee paid by each Fund to those paid by other comparable mutual funds and noted that each Fund’s total fees and expenses were within the range of the average fees and expenses incurred by other peer funds. The Board concluded that the advisory fees were the result of arm’s length negotiations and appeared reasonable in light of the services rendered. The Board also considered the Adviser’s commitment to managing the Funds and its willingness to continue its expense limitation and fee waiver arrangement with the Funds. In addition, the Board considered whether economies of scale were realized during the current contract period for the Funds, but did not conclude that such economies of scale had been achieved.
Based on the Board’s deliberations and its evaluation of the information described above, the Board, including all of the Independent Trustees, unanimously: (a) concluded that terms of the Agreement are fair and reasonable; (b) concluded that the Adviser’s fees are reasonable in light of the services that the Adviser provides to the Funds; and (c) agreed to renew the Agreement for the Funds for another year.

16

 

Trust:
The Advisors’ Inner Circle Fund
Fund:
LSV Conservative Core Equity Fund
Adviser:
LSV Asset Management
Distributor:
SEI Investments Distribution Co.
Administrator:
SEI Investments Global Fund Services
Legal Counsel:
Morgan, Lewis & Bockius LLP
Independent Registered Public Accounting Firm:
Ernst & Young LLP
The Fund files its complete schedule of Portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Fund’s Forms N-Q are available on the Commission’s website at http://www.sec.gov, and may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that The Advisors’ Inner Circle Fund uses to determine how to vote proxies (if any) relating to portfolio securities, as well as information relating to how a Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available without charge (i) upon request, by calling 888-Fund-LSV and (ii) on the Commission’s website at http://www.sec.gov.
LSV-SA-005-0400

 

 

Item 2. Code of Ethics.
Not applicable for semi-annual report.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual report.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable to open-end management investment companies.
Item 6. Schedule of Investments
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end management investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable. Effective for closed-end management investment companies for fiscal years ending on or after December 31, 2005.
Item 9. Purchases of Equity Securities by Closed-End Management Company and Affiliated Purchasers.
Not applicable to open-end management investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees during the period covered by this report.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report, are effective based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

 

(b) There has been no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Items 12. Exhibits.
(a)(1) Not applicable for semi-annual report.
(a)(2) A separate certification for the principal executive officer and the principal financial officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing as an Exhibit.

 

 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
(Registrant)  The Advisors’ Inner Circle Fund
 		  
By (Signature and Title)*  /s/ Philip T. Masterson    
  Philip T. Masterson, President   
Date: 07/08/11     
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
         
     
By (Signature and Title)*  /s/ Philip T. Masterson    
  Philip T. Masterson, President   
Date: 07/08/11     
 
     
By (Signature and Title)*  /s/ Michael Lawson    
  Michael Lawson, Treasurer, Controller & CFO   
Date: 07/08/11     
 
 
*   Print the name and title of each signing officer under his or her signature.