|
|
|
|
|
NOTES TO FINANCIAL STATEMENTS
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|
|
1. Organization:
The Advisors’ Inner Circle Fund (the “Trust”) is organized as a Massachusetts business trust under an Amended and Restated
Agreement and Declaration of Trust dated February 18, 1997. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company with 45 funds. The AlphaOne Micro
Cap Equity Fund and the AlphaOne U.S. Equity Long Short Fund (the “AlphaOne Funds”) are each series of the Trust. The financial statements herein are those of the AlphaOne U.S. Long Short Equity Fund (the “Fund”). The Fund, which
commenced operations on March 31, 2011, is diversified and seeks long-term capital appreciation. The financial statements of the remaining funds of the Trust 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 fair value 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.
Values of debt securities are generally reported at the last sales price if the security is actively traded. If a debt security is not actively traded it is valued 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. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates.
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 October 31, 2012, there were no securities valued in
accordance with the Fair Value Procedures.
Options for which the primary market is a national securities exchange are valued
at the last sale price on the exchange on which they are traded, or, in the absence of any sale, at the closing bid price for long options and the closing offer price for written options. Options not traded on a national securities exchange are
valued at the last quoted bid price.
In accordance with the authoritative guidance on fair value measurements and disclosure
under GAAP, the Fund discloses the 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 abilities (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, adjusted quoted prices on foreign equity securities that were adjusted in accordance with
pricing procedures approved by the Board, etc.); and
Level 3 — Prices, inputs or proprietary modeling techniques which
are both significant to the fair value measurement and unobservable (supported by little or no market activity).
11
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THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
|
|
|
|
|
Effective May 1, 2012, the Fund adopted Accounting
Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”)”. ASU 2011-04 includes
common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 requires reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value
hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity, and a narrative description of the sensitivity of the fair value measurement to changes in
unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 requires reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value
measurements. The adoption of ASU 2011-04 had no impact on the Fund’s net assets.
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.
For the year ended October 31, 2012, there have been no significant changes to the Fund’s fair
valuation methodology.
Securities Sold Short
— The Fund engages in short sales (selling securities that it does not own). To complete a short sale transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing the security at the market price at the time of replacement. Short sale transactions result in off-balance sheet risk because the ultimate obligation may exceed the amount shown in the
Statement of Assets and Liabilities. Short positions may be used either to hedge long positions or may be used speculatively to seek positive returns in instances where the Adviser believes a security price will decline. The price at such time may
be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay to the lender amounts equal to any dividends or interest, which accrue during the period of the loan. This amount
is reflected as dividend expense on securities sold short in the Statement of Operations. To borrow the security, the Fund also may be required to pay a premium, which would decrease the proceeds of the security sold. The Fund pays interest to the
lender for borrowing the security. This amount is reflected as prime broker fees on securities sold short in the Statement of Operations. Upon entering into a short position, the Fund records the proceeds as a receivable from the prime broker in its
Statement of Assets and Liabilities and establishes an offsetting liability for the securities sold under the short sale agreement. The liability is subsequently marked to market to reflect changes in the value of securities sold short.
Short sales are collateralized by cash deposits with the counterparty broker, Goldman, Sachs & Co. The collateral required is
determined daily by reference to the market value of the short positions.
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 its 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 (i.e., the last three open tax year ends, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.
As of and during the year ended October 31, 2012, the Fund did not have any unrecognized tax benefits. The Fund recognizes interest
and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year ended October 31, 2012, the Fund did not incur any interest or penalties.
Security Transactions and Investment Income
— Security transactions are accounted for on trade date for financial reporting purposes. Costs used in determining realized gains or losses on the sale of investment securities are based on the
specific identification method. Dividend income and expenses are recorded on the ex-dividend date. Interest income and expense are recognized on the accrual basis from settlement date.
Classes
—
Class specific expenses, such as distribution fees and shareholder servicing fees, are borne by that class of shares. Income, realized and unrealized gains/losses and non-class specific expenses are allocated to the respective class on the basis
of relative daily net assets.
12
|
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|
|
THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
|
|
|
|
|
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 net assets.
Dividends and Distributions to Shareholders
— The Fund distributes substantially all of its net investment income, if any, at least annually. Any net realized capital gains are distributed at least annually. All dividends and distributions
are recorded on ex-dividend date.
Organization and Offering
Costs
— Organization costs of the Fund, which commenced operations on March 31, 2011, have been expensed as incurred. Offering costs, including costs of printing initial
prospectuses and registration fees, were amortized to expense over twelve months. As of October 31, 2012, the Fund had no offering fees remaining to be amortized.
Redemption Fees
— The Fund retains a redemption fee of 2.00% on redemptions of capital
shares held for less than 90 days. The redemption fee is recorded as an increase paid-in capital. For the year ended October 31, 2012, there were $3,473 in redemption fees retained by the Fund.
Foreign Currency
Translation
— The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are
translated into U.S. dollars on the date of valuation. The Fund does not isolate that portion of realized or unrealized gains and losses resulting from changes in the foreign exchange rate from fluctuations arising from changes in the market prices
of the securities. These gains and losses are included in net realized and unrealized gains and losses on investments on the Statement of Operations. Net realized and unrealized gains and losses on foreign currency transactions represent net foreign
exchange gains or losses from foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between trade and settlement dates on securities transactions and the difference between the amount of the
investment income and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid.
Options Written/Purchased
— The Fund invests in financial options contracts to add
return or to economically hedge its existing portfolio securities, or securities that the Fund intends to purchase, against fluctuations in fair value caused by changes in prevailing market interest rates. The option techniques utilized by the Fund
for the year ended October 31, 2012 were to hedge against changes in equity securities prices in order to establish more definitely the effective return on securities held or intended to be acquired by the Fund. When the Fund writes or purchases an
option, an amount equal to the premium received or paid by the Fund is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Fund on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Fund has realized a gain or a loss.
The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases
and the option is exercised. The risk in purchasing an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction at an acceptable price if
a liquid secondary market does not exist. Option contracts also involve the risk that they may not work as intended due to unanticipated developments in market conditions or other causes.
Finally, for written options, the risk exists that losses could exceed amounts disclosed on the Statement of Assets and Liabilities.
Written options transactions entered into during the year ended October 31, 2012 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Contracts
|
|
|
Premium
Received
|
|
|
Balance at the beginning of the year
|
|
|
40
|
|
|
$
|
2,880
|
|
|
Written
|
|
|
962
|
|
|
|
100,345
|
|
|
Expired
|
|
|
(450
|
)
|
|
|
(32,224
|
)
|
|
Exercised
|
|
|
(70
|
)
|
|
|
(37,243
|
)
|
|
Closing buys
|
|
|
(162
|
)
|
|
|
(15,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the year
|
|
|
320
|
|
|
$
|
17,970
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
|
|
|
|
|
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, other than the Chief Compliance Officer (“CCO”) as described below, for serving as officers of the
Trust.
A portion of the services provided by the 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 and fees have been approved by and are reviewed by the Board.
4. Administration, Distribution, Shareholder Servicing, Transfer Agent and Custodian Agreements:
The AlphaOne Funds and the Administrator are parties to an Administration Agreement under which the Administrator provides management and administrative
services for an annual fee equal to 0.11% of the first $750 million and 0.09% of average daily net assets over $750 million of the AlphaOne Funds’ average daily net assets, subject to a minimum fee of $255,000 for the two initial AlphaOne
Funds, each with three classes of shares. Due to these minimums, the annual administration fee the AlphaOne Funds pay will exceed the above percentages at low asset levels.
The Trust and Distributor are parties to a Distribution Plan dated November 14, 2001, amended and restated on November 12, 2002. The Fund has adopted the Distribution Plan (the “Plan”)
for the Investor Class Shares and R Class Shares. Under the Plan, the Distributor, or third parties that enter into agreements with the Distributor, may receive up to 0.25% of the Fund’s average daily net assets attributable to the Investor
Class Shares and R Class Shares as compensation for distribution services. The Distributor will not receive any compensation for the distribution of I Class Shares of the Fund.
The Fund has entered into shareholder servicing agreements with third-party service providers pursuant to which the service providers provide certain shareholder services to Fund shareholders (the
“Service Plan”). Under the Service Plan, the Fund’s R Class Shares may pay service providers a fee at a rate of up to 0.25% annually of the average daily net assets attributable to R Class Shares, subject to the arrangement for
provision of shareholder and administrative services. For the year ended October 31, 2012, the Fund’s R Class Shares incurred $274 of shareholder servicing fees, an effective rate of 0.25%.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent for the Fund under a transfer agency agreement with the Trust. The Fund may
earn cash management credits which can be used to offset transfer agent expenses. During the year ended October 31, 2012, the Fund earned $28 of cash management credits. This amount is listed as “Fees Paid Indirectly” on the Statement
of Operations.
Union Bank, N.A. 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 Fund.
5. Investment Advisory Agreement:
AlphaOne Investment Services, LLC serves as the Adviser (the “Adviser”) to the Fund. For its services under the Advisory
Agreement, the Adviser is entitled to a fee, which is calculated daily and paid monthly, at an annual rate of 1.25% of the average daily net assets of the Fund. The Adviser may, from its own resources, compensate broker dealers whose clients
purchase shares of the Fund. The Adviser has contractually agreed to reduce fees and reimburse expenses to the extent necessary to keep the Fund’s net operating expenses (excluding 12b-1 Fees, Shareholder Servicing Fees, dividend expense and
prime broker fees on securities sold short, taxes, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses (collectively, “excluded expenses”)) from exceeding 2.00% of the Fund’s average daily net assets
until March 1, 2013.
If at any point it becomes unnecessary for the Adviser to reduce fees or make expense reimbursements, the Adviser
may retain the difference between the Fund’s total annual fund operating expenses (not including excluded expenses) and the amounts listed above to recapture all or a portion of its prior fee reductions or expense reimbursements made during the
preceding three-year period during which this agreement was in place. As of October 31, 2012, pursuant to the above, fees which were previously waived and reimbursed by the Adviser which may be subject to possible future reimbursement to the
Adviser were $249,393, expiring in 2014, and $330,297, expiring in 2015.
14
|
|
|
|
|
THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
|
|
|
|
|
6. Investment Transactions:
The cost of security purchases and proceeds from security sales, other than short-term securities and securities sold short, for the year ended
October 31, 2012, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
Sales
|
|
|
AlphaOne U.S. Equity Long Short Fund
|
|
$
|
60,305,868
|
|
|
$
|
55,427,504
|
|
There were no purchases or sales of long-term U.S. Government securities for the Fund.
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. GAAP. 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 paid-in capital, as appropriate, in the period that the differences arise.
Accordingly, the following permanent differences that are primarily attributable to differing book and tax treatments for foreign currency transactions and capitalized dividends related to short selling
have been reclassified to (from) the following accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed Net
Investment
Income
|
|
|
Accumulated Net
Realized Loss
|
|
|
AlphaOne U.S. Equity Long Short Fund
|
|
$
|
25,498
|
|
|
$
|
(25,498
|
)
|
These reclassifications had no impact on the net assets or net values of the Fund.
The tax character of dividends and distributions declared during the fiscal year ended October 31, 2012 was as follows:
|
|
|
|
|
|
|
|
|
Ordinary Income
|
|
|
AlphaOne U.S. Equity Long Short Fund
|
|
$
|
88,900
|
|
For tax purposes, short-term gains are considered ordinary income.
As of October 31, 2012, the components of Accumulated Losses on a tax basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Loss
Carryforward
|
|
|
Late-Year
Loss Deferral
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
|
Other
Temporary
Differences
|
|
|
Total
Accumulated
Losses
|
|
|
AlphaOne U.S. Equity Long Short Fund
|
|
$
|
(1,674,646
|
)
|
|
$
|
(274,028
|
)
|
|
$
|
(209,880
|
)
|
|
$
|
(18,198
|
)
|
|
$
|
(2,176,752
|
)
|
For Federal income tax purposes, capital losses incurred in taxable years beginning before December 22, 2010 may be
carried forward for a maximum period of eight years and applied against future net capital gains.
Under the recently enacted Regulated
Investment Company Modernization Act of 2010, a fund will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. 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. As of October 31, 2012, the Fund had $1,672,443 of short-term losses and $2,203 of
long-term losses carried forward under these new provisions.
Deferred late-year losses represent ordinary losses realized on investment
transactions from January 1, 2012 through October 31, 2012 and specified losses realized on investment transactions from November 1, 2011 through October 31, 2012, that, in accordance with Federal income tax regulations, the Fund
defers and treats as having arisen in the following fiscal year.
The Federal tax cost and aggregate gross unrealized appreciation and
depreciation for the investments and purchased options held (excluding securities sold short, written options and foreign currency) by the Fund at October 31, 2012, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
Tax
Cost
|
|
|
Aggregate
Gross
Unrealized
Appreciation
|
|
|
Aggregate
Gross
Unrealized
Depreciation
|
|
|
Net
Unrealized
Depreciation
|
|
|
AlphaOne U.S. Equity Long Short Fund
|
|
$
|
8,768,934
|
|
|
$
|
117,045
|
|
|
$
|
(452,991
|
)
|
|
$
|
(335,946
|
)
|
15
|
|
|
|
|
THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
|
|
|
|
|
8. Indemnifications:
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 established; however, based on experience, the risk of loss from such claims is considered remote.
9. Other:
At October 31,
2012, 99% of I Class Shares outstanding were held by two shareholders on record and 49% of Investor Class Shares outstanding were held by one shareholder on record owning 10% or greater of the aggregate total shares outstanding. These shareholders
are comprised of omnibus accounts that were held on behalf of multiple underlying shareholders. 76% of I Class Shares outstanding and 100% of R Class Shares outstanding were held by an affiliate of the Investment Adviser.
10. Recent Accounting Pronouncement:
In December 2011, the Financial Accounting Standards Board issued a further update to the guidance
“Balance Sheet – Disclosures about
Offsetting Assets and Liabilities”
. The amendments to this standard require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those
arrangements on its financial position. The amended guidance is effective for interim and annual reporting periods beginning after January 1, 2013. At this time, management is evaluating the implications of this update and its impact on
the financial statements has not been determined.
11. Subsequent Event:
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
additional disclosures or adjustments were required to the financial statements.
16
|
|
|
|
|
THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
|
|
|
|
|
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
|
To the Board of Trustees of The
Advisors’ Inner Circle Fund and Shareholders of
AlphaOne U.S. Equity Long Short Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the AlphaOne U.S. Equity Long Short Fund
(one of the series constituting The Advisors’ Inner Circle Fund (the “Trust”)) as of October 31, 2012, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial
highlights for the year then ended and for the period from March 31, 2011 (commencement of operations) to October 31, 2011. These financial statements and financial highlights are the responsibility of the Trust’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 the standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Trust’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2012, by correspondence with the custodian and brokers or by other appropriate auditing procedures when replies from brokers
were not received. 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 AlphaOne U.S. Equity Long Short Fund of The Advisors’ Inner Circle Fund at October 31, 2012, the results of its operations for
the year then ended and the changes in its net assets and its financial highlights for the year then ended and for the period from March 31, 2011 (commencement of operations) to October 31, 2011, in conformity with U.S. generally accepted
accounting principles.
Philadelphia, Pennsylvania
December 27, 2012
17
|
|
|
|
|
THE ADVISORS’ INNER CIRCLE FUND
|
|
A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
|
|
|
|
O
CTOBER
31, 2012
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DISCLOSURE OF FUND EXPENSES
(Unaudited)
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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 a mutual fund’s gross
income and directly reduce its final investment return. These expenses are expressed as a percentage of a mutual fund’s average net assets; this percentage is known as a mutual fund’s expense ratio.
The following examples are intended to help you understand the ongoing fees (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 on the following page 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 incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense 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 actual 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 year, but that
the expense ratio (Column 3) for the period 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 “Expenses 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 may
not apply to your specific investment.
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Beginning
Account
Value
5/1/12
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Ending
Account
Value
10/31/12
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Annualized
Expense
Ratios
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Expenses
Paid
During
Period*
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Actual Fund Return
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AlphaOne U.S. Equity Long Short Fund, I Class Shares
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$1,000.00
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$ 943.80
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2.66%
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$13.01
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AlphaOne U.S. Equity Long Short Fund, Investor Class Shares
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1,000.00
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942.50
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2.91%
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14.24
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AlphaOne U.S. Equity Long Short Fund, R Class Shares
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1,000.00
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941.20
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3.15%
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15.43
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Hypothetical 5% Return
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AlphaOne U.S. Equity Long Short Fund, I Class Shares
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$1,000.00
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$1,011.82
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2.66%
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$13.46
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AlphaOne U.S. Equity Long Short Fund, Investor Class Shares
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1,000.00
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1,010.55
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2.91%
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14.74
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AlphaOne U.S. Equity Long Short Fund, R Class Shares
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1,000.00
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1,009.31
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3.15%
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15.97
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*
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Expenses are equal to the Fund’s annualized expense ratio (including dividend expense and prime broker fees on securities sold short) multiplied by the average
account value over the period, multiplied by 184/365 (to reflect the one-half year period).
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18
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THE ADVISORS’ INNER CIRCLE FUND
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A
LPHA
O
NE
U.S. E
QUITY
L
ONG
S
HORT
F
UND
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O
CTOBER
31, 2012
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