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REALTY
SHARES
PORTFOLIO
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1999
ADVISED BY:
CRA REAL ESTATE
SECURITIES, L.P.
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REALTY
--------------------------------
SHARES
--------------------------------
PORTFOLIO
MANAGER'S DISCUSSION OF FUND PERFORMANCE
To Our Shareholders:
We are pleased to present the semi-annual report for the CRA Realty Shares
Portfolio managed on your behalf by CRA Real Estate Securities. The performance
for the portfolio and several indices are summarized in the table below.
[BOUNDING BOX]
<TABLE>
<CAPTION>
Since
April Trailing Trailing Trailing Inception
1999 3 mo. 6 mo. 12 mo. (annualized)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CRA Realty Shares Portfolio 11.28% 9.52% 7.48% -10.17% 3.78%
Wilshire R.E. Securities 10.66 9.19 7.28 -8.23 2.39
NAREIT - Equity REITs 9.23 6.03 2.01 -11.65 0.99
S & P 500 (Large Co. Stocks) 3.87 4.67 22.31 21.82 30.76
Russell 2000 (Small Co. Stocks) 8.96 1.70 15.16 -9.26 9.23
Lehman Gov't/Corp Bonds 0.25 -1.65 -0.11 6.28 7.74
*Inception Date: 1/1/97
</TABLE>
[END BOUNDING BOX]
IS THIS THE DAWN? We closed our last report to you with the observation that it
is sometimes darkest before the dawn, and that market awareness of the inherent
value in real estate securities was building. We are gratified to report that in
April, real estate securities advanced approximately 10%. The breadth and extent
of the positive performance are very encouraging. Only five times in the last 20
years have real estate securities delivered 10% or more in a month. Usually,
such strong positive performance has been followed by continued gains,
especially when preceded by periods of poor performance such as 1998's 17.5%
decline.
THE CONTEXT IS ENCOURAGING. April's performance is attributed to several real
estate factors and a positive broader context. All property type sectors showed
strong positive performance (see table below). Increased awareness of stock
buyback programs, some management-led buyout offers, and increased investment in
REITs by value investors (including Warren Buffett) helped spur interest in real
estate stocks. At the same time, government data indicated strong continued
growth in the U.S. economy. As a result, cyclical stocks performed very well in
April. Small company stocks also did well, gaining almost 9%. The improved
breadth of the stock market gains and improving sentiment about the strength of
the U.S. economy (a positive for prospective real estate demand) encourage us to
expect more positive performance ahead.
WILSHIRE REAL ESTATE SECURITIES INDEX
PERFORMANCE BY PROPERTY TYPE AS OF 4/30/99
<TABLE>
<CAPTION>
Weight 1999 1998 Trailing
Property Type in Index April YTD Rank 1998 Rank 1 year
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hotels 14.7% 18.2% 20.2% 1 -45.6% 10 -31.1%
Outlet Centers 1.0 12.9 -2.6 9 -10.3 6 -17.4
Diversified 20.6 11.2 5.0 5 -15.2 8 -5.8
Storage 4.2 10.8 3.7 6 -7.2 4 -4.5
Apartments 18.6 10.4 9.3 3 -8.1 5 2.7
Office 16.2 10.2 9.4 2 -18.0 9 -3.4
Industrial 4.9 6.9 6.0 4 -10.5 7 -1.5
Mfr. Homes 1.6 6.9 1.8 7 0.2 1 5.7
Shopping Centers 8.2 6.9 -3.5 10 0.0 2 -1.9
Malls 10.0 6.2 -1.1 8 -3.5 3 -5.2
Total 100.0% 10.7% 6.8% -17.4% -8.2%
</TABLE>
CRA REAL ESTATE SECURITIES, L.P.
- --------------------------------------------------------------------------------
AN AFFILIATE OF CLARION PARTNERS
<PAGE>
REAL ESTATE SECURITIES STILL OFFER VALUE. Though not as depressed as a month
ago, real estate stocks still trade at a discount (approximately 5%) to the
estimated private market value of their assets. The average dividend yield is
still over 7%, and the average price represents only nine times the company's
cash flow earnings.
MANAGEMENT TRANSITIONS CONTINUE. In our annual outlook, we predicted that
management response to a more competitive environment with less emphasis on
acquisitions would be an important determinant of company performance.
Management changes have accelerated with mixed reviews. Several companies have
reduced management ranks as a necessary response to reduced acquisition and
development activity (e.g. AvalonBay Communities and BRE Properties). These
changes reduce overhead and management ranks to match a more operations-focused
strategy. Some changes, however, have not been so positive. In the wake of some
recent merger activity, some management team "marriages" have proved unstable
with some unexpected and expensive (in terms of severance package payments)
departures. Examples of these less than positive management changes include
Mack-Cali Realty Corporation's expensive severance payments to departing Co-CEO
Thomas Rizk, and the surprise resignation of Gary Sabin and six other managers
from New Plan Excel Realty. We continue to monitor management response and
strategy closely in this time of change.
We thank you for your continued faith and confidence and believe that the
performance outlook for an actively managed portfolio of real estate company
stocks remains positive.
Sincerely,
CRA REAL ESTATE SECURITIES, L.P.
/s/signature omitted /s/signature omitted
T. Ritson Ferguson Kenneth D. Campbell
Co-Portfolio Manager Co-Portfolio Manager
*The performance data quoted herein represents past performance and the return
and value of an investment in the Fund will fluctuate so that shares, when
redeemed, may be worth less than their original cost. This information must be
preceded or accompanied by a current prospectus. Investors should read the
prospectus carefully before investing or sending money. The CRA Realty Shares
Portfolio, a portfolio of the Advisors' Inner Circle Fund, is distributed by
SEI Investments Distributions Co., Oaks, PA 19456.
CRA REAL ESTATE SECURITIES, L.P.
- --------------------------------------------------------------------------------
AN AFFILIATE OF CLARION PARTNERS
<PAGE>
STATEMENT OF NET ASSETS
April 30, 1999 (Unaudited)
Market
Value
CRA REALTY SHARES PORTFOLIO Shares (000)
- --------------------------------------------------------------------------------
EQUITIES (98.6%)
DIVERSIFIED PROPERTY HOLDINGS (5.0%)
Northstar Capital Investment Corp.* ...... 20,000 $ 318
Trizec Hahn Corp.* ....................... 62,700 1,332
Vornado Realty Trust ..................... 35,200 1,373
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3,023
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INDUSTRIAL (1.4%)
AMB Property Corp. ....................... 39,600 871
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INDUSTRIAL/OFFICE MIX (15.7%)
American Real Estate Investment Corp. .... 92,000 1,369
Duke Realty Investments .................. 103,600 2,435
Prentiss Properties Trust ................ 122,000 2,638
Spieker Properties ....................... 45,000 1,766
TriNet Corporate Realty Trust ............ 45,400 1,246
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9,454
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OFFICE (18.0%)
Arden Realty Inc. ........................ 41,800 1,045
CarrAmerica Realty Trust ................. 108,700 2,690
Equity Office Properties Trust ........... 110,657 3,050
Highwoods Properties Inc. ................ 92,400 2,379
Kilroy Realty Corp. ...................... 71,400 1,682
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10,846
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RESIDENTIAL: APARTMENTS (23.7%)
Apartment Investment & Management Co. .... 68,100 2,728
AvalonBay Communities Inc. ............... 92,268 3,229
BRE Properties ........................... 62,400 1,552
Camden Property Trust .................... 72,800 1,966
Equity Residential Properties Trust ...... 66,800 3,090
Post Properties Inc. ..................... 43,400 1,720
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14,285
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RESIDENTIAL: HOTELS (12.3%)
Felcor Lodging Trust Inc. ................ 42,200 1,010
Host Marriott Corp. ...................... 229,595 3,056
Starwood Hotels & Resorts Worldwide* ..... 91,857 3,370
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7,436
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RETAIL: MALLS (10.4%)
General Growth Properties Inc. ........... 62,500 2,301
Simon Property Group Inc. ................ 93,028 2,669
Urban Shopping Centers ................... 39,900 1,277
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6,247
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Market
Value
CRA REALTY SHARES PORTFOLIO Shares (000)
- ---------------------------------------------------------------
RETAIL: SHOPPING CENTERS (10.0%)
Bradley Real Estate Inc. ................. 60,600 $ 1,208
Developers Diversified Realty Corp. ...... 112,800 1,784
JDN Realty Corp. ......................... 56,450 1,249
Kimco Realty Corp. ....................... 45,000 1,766
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6,007
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SELF STORAGE (2.1%)
Public Storage Inc. ...................... 45,600 1,271
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TOTAL EQUITIES
(Cost $58,717) ......................... 59,440
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REPURCHASE AGREEMENT (1.6%)
Morgan Stanley Tri-Party Repo
4.50%, dated 04/30/99, matures
05/03/99,repurchase price
$963,388 (collateralized by
a U.S. Treasury Instrument,
par value $998,806, matures
07/29/99, market value $987,858) ....... $963 963
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TOTAL REPURCHASE AGREEMENT
(Cost $963) ............................ 963
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TOTAL INVESTMENTS (100.2%)
(Cost $59,680) ......................... 60,403
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OTHER ASSETS AND LIABILITIES, NET (0.2%) (133)
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NET ASSETS:
Portfolio Capital (unlimited authorization --
no par value) based on 6,361,057
outstanding shares of beneficial interest 63,846
Distributions in excess of net investment income (248)
Accumulated net realized loss on investments (4,051)
Net unrealized appreciation on investments 723
--------
TOTAL NET ASSETS (100.0%) ................ $ 60,270
========
Net Asset Value, Offering and Redemption
Price Per Share ........................ $9.47
========
*NON-INCOME PRODUCING SECURITY
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS (000)
For the six-month period ended April 30, 1999 (Unaudited)
CRA REALTY SHARES PORTFOLIO
- --------------------------------------------------------------------------------
Investment Income:
Dividend Income..................................................... $ 1,844
Interest Income .................................................... 24
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Total Investment Income........................................... 1,868
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Expenses:
Investment Advisory Fees ........................................... 194
Investment Advisory Fee Waiver ..................................... (34)
Administrative Fees ................................................ 42
Custodian Fees ..................................................... 6
Professional Fees .................................................. 25
Transfer Agent Fees ................................................ 16
Printing Fees ...................................................... 9
Trustee Fees ....................................................... 4
Registration and Filing Fees ....................................... 12
Amortization of Deferred Organization Costs ........................ 3
Other Fees.......................................................... --
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Total Expenses ................................................... 277
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Net Investment Income .......................................... 1,591
Net Realized Loss from Securities Sold ............................. (1,748)
Net Unrealized Appreciation of Investment Securities ............... 4,296
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Net Realized and Unrealized Gain on Investments .................. 2,548
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Net Increase in Net Assets Resulting from Operations................ $ 4,139
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Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
(Unaudited)
<TABLE>
<CAPTION>
11/1/98 11/1/97
CRA REALTY SHARES PORTFOLIO THRU 4/30/99 THRU 10/31/98
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Activities:
Net Investment Income...................................................................... $ 1,591 $ 1,457
Net Realized Loss on Securities Sold ...................................................... (1,748) (2,038)
Net Change in Unrealized Appreciation (Depreciation) of Investment Securities ............. 4,296 (6,937)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations.......................... 4,139 (7,518)
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Distributions to Shareholders:
Net Investment Income ..................................................................... (1,803) (1,784)
Realized Capital Gain ..................................................................... -- (1,540)
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Total Distributions ..................................................................... (1,803) (3,324)
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Capital Share Transactions:
Shares Issued ............................................................................. 5,685 30,081
Shares Issued in Lieu of Cash Distributions ............................................... 1,469 2,788
Shares Redeemed ........................................................................... (4,837) (1,207)
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Increase in Net Assets Derived from Capital Share Transactions............................. 2,317 31,662
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Total Increase in Net Assets ............................................................ 4,653 20,820
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Net Assets:
Beginning of Period ....................................................................... 55,617 34,797
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End of Period ............................................................................. $60,270 $55,617
==============================================================================================================================
Shares Issued and Redeemed:
Shares Issued ............................................................................ 626 2,939
Shares Issued in Lieu of Cash Distributions .............................................. 166 259
Shares Redeemed .......................................................................... (540) (118)
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Net Increase in Share Transactions ...................................................... 252 3,080
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</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period (Unaudited)
<TABLE>
<CAPTION>
Ratio
Net Net Net of Net
Asset Realized and Distributions Distributions Asset Assets Ratio Investment
Value Net Unrealized from Net from Value End of Expenses Income
Beginning Investment Gain (Loss)on Investment Capital End Total of Period to Average to Average
of Period Income Securities Income Gains of Period Return (1) (000) Net Assets Net Assets
--------- ---------- ------------ ------------- ------------- --------- ---------- --------- ----------- ----------
- ---------------------------
CRA REALTY SHARES PORTFOLIO
- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 (1) $ 9.10 0.26 0.40 (0.29) -- $ 9.47 7.48% $60,270 1.00%* 5.71%*
1998 $11.49 0.35 (1.85) (0.40) (0.49) $ 9.10 (14.16)% $55,617 1.00% 3.29%
1997 (2) $10.00 0.26 1.53 (0.30) -- $11.49 18.17% $34,797 1.00%* 2.91%*
</TABLE>
Ratio
of Net
Ratio Investment
of Expenses Income
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
--------- ---------- ---------
- ---------------------------
CRA REALTY SHARES PORTFOLIO
- ---------------------------
1.12%* 5.59%* 24.82%
1.17% 3.12% 73.54%
1.63%* 2.28%* 102.74%
* Annualized
+ Total returns are for the period indicated and have not been annualized.
(1) For the six-month period ended April 30, 1999.
(2) The CRA Realty Shares Portfolio commenced operations on January 1, 1997.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS CRA REALTY SHARES PORTFOLIO
April 30, 1999 (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 a diversified open-end management investment company
with nine portfolios. The financial statements herein are those of the CRA
Realty Shares Portfolio (the "Fund"). The financial statements of the remaining
portfolios are not presented herein. The assets of each portfolio are
segregated, and a Shareholder's interest is limited to the portfolio in which
shares are held. The Fund's prospectus provides a description of the Fund's
investment objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Fund.
SECURITY VALUATION -- Investments in equity securities which are traded on
a national exchange (or reported on the NASDAQ national market system) are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations
are readily available are valued at the most recently quoted bid price.
Debt obligations with sixty days or less remaining until maturity may be
valued at their amortized cost, which approximates market value.
FEDERAL INCOME TAXES -- It is the Fund's intention to qualify as a
regulated investment company by complying with the appropriate provisions
of the Internal Revenue Code of 1986, as amended. Accordingly, no provision
for Federal income taxes is required.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Costs used in determining realized gains and losses on the sales of
investment securities are those of the specific securities sold, adjusted
for the accretion and amortization of purchase discounts or premiums during
the respective holding period which is calculated using the effective
interest method. Interest income is recognized on the accrual basis.
Dividend income is recorded on the ex-date.
NET ASSET VALUE PER SHARE -- The net asset value per share of the Fund is
calculated on each business day by dividing the total value of assets, less
liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements ensure that the market
value of the collateral, including accrued interest thereon, is sufficient
in the event of default by the counterparty. If the counterparty defaults
and the value of the collateral declines or if the counterparty enters into
an insolvency proceeding, realization of the collateral by the Fund may be
delayed or limited.
EXPENSES -- Expenses that are directly related to the Fund are charged to
the Fund. Other operating expenses of the Trust are prorated to the Fund on
the basis of relative daily net assets compared to the aggregate daily net
assets of the Trust.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared and paid to Shareholders quarterly. Any net realized capital
gains are distributed to Shareholders at least annually.
Distributions from net investment income and net realized capital gains are
determined in accordance with the U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they
are charged or credited to paid-in-capital in the period that the
differences arise. These reclassifications have no effect on net assets or
net asset value.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
The majority of the dividend income recorded by the Fund is from Real
Estate Investment Trusts ("REITs"). For tax purposes, a portion of these
dividends consists of capital gains and returns of capital. The Fund's
Administrator estimates the return of capital based upon historical returns
of capital paid by each REIT in prior periods. These estimates are then
reconciled to the actual returns of capital reported by the REITs shortly
after calendar year end, and an adjustment, if any is required, is then
recorded by the Fund.
3. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
The Fund incurred organization costs of approximately $32,000. These costs have
been capitalized by the Fund and are being amortized over sixty months
commencing with the start-up. In the event the initial shares of the Fund are
redeemed by any holder thereof during the period that the Fund is amortizing its
organizational costs, the redemption proceeds payable to the holder thereof by
the Fund will be reduced by the unamortized organizational costs in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption. These costs include legal
fees of approximately $13,000 for organizational work performed by a law firm of
which a trustee of the Trust is a partner and two officers of the Trust are
partners.
Certain officers of the Trust are also officers of SEI Investments Mutual Funds
Services (the "Administrator") and/or SEI Investments Distribution Co. (the
"Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) CRA REALTY SHARES PORTFOLIO
April 30, 1999 (Unaudited)
4. ADMINISTRATION, SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an Administration Agreement under
which the Administrator provides management and administrative services for an
annual fee equal to the higher of $75,000 or 0.15% of the first $100 million of
the Portfolio's average daily net assets; 0.125% of the next $100 million of the
Portfolio's average daily net assets; 0.10% of the next $100 million of the
Portfolio's average daily net assets; and 0.08% of the Portfolio's average daily
net assets over $300 million.
DST Systems Inc. (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Fund under a transfer agency agreement
with the Trust.
The Trust and Distributor are parties to a Distribution Agreement. The
Distributor receives no fees for its distribution services under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Trust and CRA Real Estate Securities, L.P. (the "Adviser") are parties to an
Investment Advisory Agreement under which the Adviser receives an annual fee
equal to .70% of the Fund's average daily net assets. The Adviser has, on a
voluntary basis, agreed to waive its fee and reimburse Fund expenses
as applicable in order to limit the Fund's total operating expenses to a maximum
of 1.00% of the average daily net assets for Institutional shares. The Adviser
reserves the right to terminate this arrangement at any time in its sole
discretion.
First Union National Bank acts as custodian (the "Custodian") for the Fund. Fees
of the Custodian are paid on the basis of the net assets of the Fund. The
Custodian plays no role in determining the investment policies of the Fund or
which securities are to be purchased and sold by the Fund.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the year ended April 30, 1999, are as follows (000):
Purchases............................... $16,419
Sales .................................. $13,676
At April 30, 1999, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Fund
at April 30, 1999, is as follows (000):
Aggregate gross unrealized
appreciation ................................. $ 3,858
Aggregate gross unrealized
depreciation ................................. (3,135)
-------
Net unrealized appreciation .................... $ 723
=======
<PAGE>
[BLANK PAGE]
<PAGE>
FUND:
CRA REALTY SHARES PORTFOLIO
P.O. Box 419009
Kansas City, MO 64141-6009
ADVISER:
CRA REAL ESTATE SECURITIES, L.P.
Suite 205, 259 N. Radnor-Chester Road
Radnor, PA 19087
DISTRIBUTOR:
SEI INVESTMENTS DISTRIBUTION CO.
Oaks, PA 19456
ADMINISTRATOR:
SEI INVESTMENTS MUTUAL FUNDS SERVICES
Oaks, PA 19456
LEGAL COUNSEL:
MORGAN, LEWIS & BOCKIUS LLP
1800 M Street N.W.
Washington, DC 20036
INDEPENDENT PUBLIC ACCOUNTANTS:
ARTHUR ANDERSEN LLP
1601 Market Street
Philadelphia, PA 19103
This information must be preceded or accompanied by a current prospectus for
the Fund described.
CRA-F-003-03
