MANAGER'S DISCUSSION OF FUND PERFORMANCE
Dear Shareholder:
The FMC Select Fund (the "Fund") had a total return of 18.2% for the year ended
October 31, 1999. The Fund outperformed the 13.5% average total return of its
peer group, the Lipper Flexible Fund Universe, and trailed the 20.44% total
return of its benchmark, which is an 80% weighting of the S&P 500 Index and a
20% weighting of the Merrill Lynch Corporate & Government Index of one to ten
year maturities. As of October 31, 1999, 76.6% of the Fund's assets were
invested in equities, within the targeted equity allocation of 75-85%. The
remaining assets were in investment grade, medium term, fixed income instruments
and cash equivalents.
As value investors, we examine many measurements to determine the value of the
businesses that we analyze and own. "Earnings yield", which measures how much
net income a business generates relative to its price, is one of our preferred
measurements. We like to compare this measurement to both the earnings yield
available on the S&P Industrials Index and the yield available from the 30 year
U.S. Treasury. As of October 31, 1999, the equity portion of the portfolio had
an earnings yield of 5.6%, significantly above the S&P Industrials' 3.6%
earnings yield. The portfolio's earnings yield was slightly below the 6.2% yield
available on the 30 year U.S. Treasury. While the interest coupon paid on the 30
year U.S. Treasury will not grow, the portfolio's earnings are estimated to
increase by 70% over the next five years, which would increase the earnings
yield to 10.3% based on current prices.
The table below compares a weighted average of key measures of the equity
portion of the Fund with the S&P Industrials Index. It shows that the Fund is
invested in profitable businesses selling at attractive valuations compared to
the S&P Industrials Index.
- --------------------------------------------------------------------------------
FMC Select Fund S&P Industrials Index
--------------- ---------------------
Quality
- -------
Return-on-Equity (ROE) [1] 19% 19%
Period Needed to Retire
Debt from Free Cash Flow [2] 2 Years 9 Years
Estimated Annual EPS Growth
for 1999-2004 13% 7%
Valuation
- ---------
2000 Estimated Price/Earnings 17.8X 27.7X
- --------------------------------------------------------------------------------
[1] The ROE is based on net income for the trailing four quarters ended 9/30/99
and the average equity over that period. ROE provides insight into both the
quality of the business and the quality of management in its use of the
shareholders' resources. Given the portfolio's heavy skewing towards
businesses with franchises we feel are significantly less dependent on the
business cycle than those in the S&P, it is anticipated that the
portfolio's "ROE advantage" relative to the S&P would expand in a
recession.
[2] Free cash flow is defined for this purpose as net income plus depreciation
and amortization minus capital expenditures. We have intentionally omitted
dividends from this calculation to separate dividend policy, a financial
decision, from the enterprises' underlying economics, i.e., the cash
generated from operations. We believe that careful analysis of both working
capital and free cash flow is often more valuable than reported net income
in evaluating the fundamentals of a business.
1
<PAGE>
Since we last reported to you, the Fund established a position in Robert Half
International (RHI), the largest provider of accounting, finance and information
technology temporary staffing to mid-sized companies. RHI has an ROE of over 20%
and its balance sheet reflects almost $200 MM or $2/share of net cash. In
addition, RHI has a strong portfolio of brands, including Accountemps,
Management Resources, OfficeTeam and The Leading Resource. These solid brands
are the outgrowth of several decades of RHI's allocating a greater proportion of
its resources to branding, quality control, marketing and, more recently,
internet-based recruitment than its major competitors. One result of this
approach is that RHI's typical transaction is non-competitive and is for less
than two temps, while the other major staffing firms' average transaction is for
50+ temps and is generally hotly contested. This emphasis on branding and
non-competitive placements provides RHI with a gross profit margin in the low
40s versus the mid 20s to low 30s for other major staffers. We were able to
purchase RHI at 15X 2000 estimated EPS of $1.70 or about one-half of the current
estimated P/E ratio of the S&P Industrials Index.
Our investment process remains focused on owning good business, selling at what
we believe are attractive valuations. This discipline keeps us centered on
fundamentals such as return on equity, free cash flow and a valuation that we
believe provides a margin of safety. The equity portion of the portfolio
continues to be invested in businesses with strong balance sheets and
historically less cyclical exposure than the overall economy. While these
qualities may be less appreciated after eight consecutive years of economic
growth, we perceive the businesses in the portfolio to be well positioned to
deal with adversity when the economy inevitably slows and/or interest rates rise
materially.
We continue to work hard analyzing the Fund's existing and prospective
investments. Thank you for your continued confidence.
Sincerely yours,
/s/ Signature omitted /s/ Signature omitted /s/ Signature omitted
- -------------------- ------------------- --------------------
Bernard Groveman William McElroy A. Byron Nimocks
Equity Manager Fixed Income Manager Equity Manager
2
<PAGE>
- --------------------------------------------------------------------------------
TOTAL RETURN(1)
- --------------------------------------------------------------------------------
Annualized Annualized
One Year 3 Year Inception(3)
Return(2) Return to Date
- --------------------------------------------------------------------------------
18.18% 19.20% 20.73%
- --------------------------------------------------------------------------------
Comparison of Change in the Value of a $10,000 Investment in the
FMC Select Fund, versus the S&P 500 Composite Index, the Merrill
Lynch 1-10 Year Corporate/Government Bond Index, and an 80/20
Blend of the Referenced S&P and Merrill Indices.
[TWO GRAPHS OMITTED]
In the printed version of the document, 2 line graphs appear
which depicts the following plot points:
FMC S&P MERRIll
5/31/95 10000 10000 10000
10/31/95 10844 11005 10353
10/31/96 13445 13654 10948
10/31/97 17547 18038 11781
10/31/98 19268 22006 12864
10/31/99 22771 27655 12971
FMC 80/20 S&P, MERRILL
5/31/95 10000 10000
10/31/95 10844 10874
10/31/96 13445 13076
10/31/97 17547 16612
10/31/98 19268 19899
10/31/99 22771 23968
- ----------
(1) These figures represent past performance. Past performance is no guarantee
of future results. The investment return and principal value of an
investment will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than their original cost.
(2) One year return is for the period beginning 11/01/98 and ending 10/31/99.
(3) The FMC Select Fund commenced operations on May 8, 1995. The performance
reflected in the graph begins May 31, 1995.
Portfolio Composition
[GRAPHIC OMITTED]
In the printed version of the document, a pie graph appears
which depicts the following percentages:
Auto & Truck Related 1% U.S. Treasury Obligations 12%
Healthcare 1% Financial Services 11%
Miscellaneous Business Services 1% Retail 11%
Special Chemicals 1% Banks 8%
Consumer Products 1% Medical Products & Services 8%
Miscellaneous Industries 2% Media 7%
Packaging 2% Corporate Obligations 7%
Computers & Services 3%
Drugs 3%
Household Products 3%
Technology 3%
Diversified Operations 4%
Professional Services 5%
U.S. Gov't. Agency
Obligations 5%
% of Total Fund Investments
3
<PAGE>
Statement of Net Assets FMC Select Fund
October 31, 1999
Market
Value
FMC SELECT FUND Shares (000)
- -------------------------------------------------------------------------------
Common Stock (76.6%)
Auto & Truck Related (0.6%)
Snap-On Tools ........................... 23,200 $ 705
-------
Banks (8.0%)
Bank of America ......................... 71,045 4,574
Charter One Financial ................... 17,745 436
Compass Bancshares ...................... 34,650 925
Dime Bancorp ............................ 52,100 931
North Fork Bancorp ...................... 94,500 1,955
TF Financial ............................ 32,000 470
-------
9,291
-------
Computers & Services (1.1%)
Acxiom* ................................. 79,616 1,314
-------
1,314
-------
Consumer Products (1.5%)
Kimberly-Clark .......................... 28,600 1,805
-------
Diversified Operations (4.4%)
Berkshire Hathaway, Cl A* ............... 41 2,620
Berkshire Hathaway Cl B* ................ 1,169 2,443
-------
5,063
-------
Drugs (3.4%)
Amgen* .................................. 49,200 3,924
-------
Financial Services (11.2%)
Fannie Mae .............................. 23,000 1,627
Freddie Mac ............................. 72,000 3,893
Household International ................. 112,545 5,022
Newcourt Credit Group ................... 145,300 2,388
-------
12,930
-------
Healthcare (1.4%)
Johnson & Johnson ....................... 15,000 1,572
-------
Household Products (2.5%)
Benckiser N.V., Cl B* ................... 49,900 2,932
-------
Insurance (0.2%)
Mony Group* ............................. 5,800 183
-------
Media (7.0%)
E.W. Scripps ............................ 13,000 600
Gannett ................................. 45,900 3,540
Harte-Hanks Communications .............. 197,700 3,917
-------
8,057
-------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Statement of Net Assets FMC Select Fund
October 31, 1999
Market
Value
FMC SELECT FUND (continued) Shares (000)
- -------------------------------------------------------------------------------
Medical Products & Services (7.8%)
IMS Health .................................. 194,800 $ 5,649
Stryker ..................................... 54,100 3,341
-------
8,990
-------
Miscellaneous Business Services (4.5%)
Olsten ...................................... 88,500 891
Personnel Group of America* ................. 86,000 575
Robert Half International* .................. 129,300 3,499
York Group .................................. 56,100 210
-------
5,175
-------
Miscellaneous Industries (1.9%)
IDEX ........................................ 89,385 2,201
-------
Packaging (1.6%)
Sealed Air* ................................. 32,547 1,802
-------
Professional Services (3.4%)
Gartner Group, Cl A* ........................ 164,600 1,605
Gartner Group, Cl B* ........................ 25,362 238
ITT Educational Services* ................... 77,000 1,521
Omnicare .................................... 67,200 622
-------
3,986
-------
Retail (11.5%)
Autozone* ................................... 119,100 3,164
CVS ......................................... 82,500 3,584
Dollar General .............................. 146,395 3,861
InterTAN* ................................... 118,000 2,655
-------
13,264
-------
Specialty Chemicals (1.3%)
Great Lakes Chemical ........................ 35,000 1,243
McWhorter Technologies* ..................... 15,000 205
-------
1,448
-------
Technology (3.3%)
First Data .................................. 82,725 3,779
-------
Total Common Stock
(Cost $64,932) .............................. 88,421
-------
Preferred Stock (0.0%)
Fresenius National Medical Care* ............ 20,400 --
-------
Total Preferred Stock
(Cost $0) ................................... --
-------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Statement of Net Assets FMC Select Fund
October 31, 1999
Face Market
Amount Value
FMC SELECT FUND (continued) (000) (000)
- -------------------------------------------------------------------------------
Corporate Obligations (6.7%)
Aon
7.400%, 10/01/02 ......................... $ 150 $ 152
BellSouth Trust
9.190%, 07/01/03 ......................... 139 144
Block Financial
6.750%, 11/01/04 ......................... 615 606
Bond Backed Certificate IBM
7.350%, 06/01/17 ......................... 495 499
Citibank Credit Card Master Trust
6.050%, 01/15/10 ......................... 480 452
Commercial Credit
7.750%, 03/01/05 ......................... 150 153
Dow Chemical
8.040%, 07/02/05 ......................... 500 516
Eastman Kodak
9.750%, 10/01/04 ......................... 300 336
Geico
7.500%, 04/15/05 ......................... 200 206
General Electric Capital
8.850%, 04/01/05 ......................... 250 272
General Motors
8.950%, 07/02/09 ......................... 700 718
Gerber Products
9.000%, 10/15/06 ......................... 694 771
Manufacturers & Trader Trust
8.125%, 12/01/02 ......................... 250 258
May Department Stores
9.750%, 02/15/21 ......................... 415 503
McCormick & Company
6.240%, 02/01/06 ......................... 250 237
Monsanto
8.130%, 12/15/06 ......................... 555 581
Norwest
6.375%, 09/15/02 ......................... 350 347
Philip Morris
7.250%, 01/15/03 ......................... 200 199
Private Export Funding
6.670%, 09/15/09 ......................... 225 222
Simon Property Group
6.875%, 11/15/06 ......................... 400 373
Union Pacific
7.600%, 05/01/05 ......................... 250 251
-----
Total Corporate Obligations
(Cost $7,989) ................................. 7,796
-----
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Net Assets FMC Select Fund
October 31, 1999
Face Market
Amount Value
FMC SELECT FUND (continued) (000) (000)
- -------------------------------------------------------------------------------
U.S. Government Agency Obligations (5.0%)
Export Funding Trust Series 1994-A
7.890%, 02/15/05 ................................ $ 275 $ 283
Fannie Mae
6.375%, 06/15/09 ................................ 507 495
6.595%, 12/01/03 ................................ 486 482
6.800%, 08/27/12 ................................ 400 393
Financial Assistance Corporation
9.375%, 07/21/03 ................................ 200 219
Government Trade Trust, Ser 1995
8.010%, 03/01/07 ................................ 204 215
Guaranteed Export Certificates, Ser 1994-B
7.460%, 12/15/05 ................................ 282 290
Guaranteed Export Certificates, Ser 1995-A, Cl A
6.280%, 06/15/04 ................................ 352 351
Guaranteed Trade Trust, Ser A
7.020%, 09/01/04 ................................ 125 127
Overseas Private Investment
6.080%, 08/15/04 ................................ 477 476
6.930%, 12/15/08 ................................ 800 813
Small Business Administration, Ser 1996
6.500%, 11/01/06 ................................ 266 267
Small Business Administration, Ser 1997
6.550%, 12/01/17 ................................ 463 450
Small Business Administration, Ser 1998
6.150%, 04/01/18 ................................ 375 359
Union Finl Svcs Taxable Student 1998
5.500%, 09/01/05 ................................ 380 361
U.S. Department of Housing & Urban Development, Ser 99
5.750%, 08/01/06 ................................ 265 253
-------
Total U.S. Government Agency Obligations
(Cost $5,929) ........................................ 5,834
-------
U.S. Treasury Obligations (12.4%)
United States Treasury Bills
4.631%, 11/04/99 ................................ 4 4
4.963%, 03/02/00 ................................ 854 840
5.328%, 04/20/00 ................................ 12,914 12,605
U.S. Treasury Notes
8.000%, 05/15/01 ................................ 250 258
7.500%, 11/15/01 ................................ 250 258
6.625%, 03/31/02 ................................ 250 254
6.250%, 02/15/07 ................................ 93 93
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Net Assets FMC Select Fund
October 31, 1999
Market
Value
FMC SELECT FUND (continued) (000)
- -------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $14,312) ................................................. $ 14,312
--------
Total Investments (100.7% )
(Cost $93,162) ................................................. 116,363
--------
Other Assets and Liabilities, Net (-0.7%) ......................... (794)
--------
Net Assets:
Portfolio Shares (unlimited authorization -- no par value)
based on 5,976,116 outstanding shares of beneficial interest.. 78,023
Undistributed Net Investment Income ............................ 237
Accumulated Net Realized Gain on Investments ................... 14,108
Net Unrealized Appreciation on Investments ..................... 23,201
--------
Total Net Assets (100.0%) ......................................... $115,569
========
Net Asset Value, Offering and Redemption Price Per Share ....... $ 19.34
========
- ----------
* Non-income producing security
Cl -- Class
Ser -- Series
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Operations FMC Select Fund
For the year ended October 31, 1999
FMC
Select
Fund
(000)
- --------------------------------------------------------------------------------
Investment Income:
Dividend Income..................................................... $ 984
Interest Income .................................................... 1,060
- --------------------------------------------------------------------------------
Total Investment Income........................................... 2,044
- --------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................................... 906
Administrative Fees ................................................ 170
Transfer Agent Fees ................................................ 33
Professional Fees .................................................. 35
Printing Fees ...................................................... 26
Registration and Filing Fees ....................................... 14
Organization Costs.................................................. 10
Custodian Fees ..................................................... 10
Insurance and Other Fees ........................................... 6
Trustee Fees ....................................................... 7
- --------------------------------------------------------------------------------
Total Expenses, Net .............................................. 1,217
- --------------------------------------------------------------------------------
Net Investment Income .......................................... 827
- --------------------------------------------------------------------------------
Net Realized Gain from Securities Sold ............................. 14,108
Net Change in Unrealized Appreciation of Investment Securities ..... 3,272
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments .................. 17,380
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations................ $18,207
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Changes in Net Assets FMC Select Fund
<TABLE>
<CAPTION>
FMC
Select Fund
--------------------------
11/01/98 11/01/97
to 10/31/99 to 10/31/98
(000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Activities:
Net Investment Income ........................................... $ 827 $ 990
Net Realized Gain from Securities Sold .......................... 14,108 4,769
Net Change in Unrealized Appreciation of Investment Securities... 3,272 1,077
- -------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations........... 18,207 6,836
- -------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ........................................... (681) (955)
Realized Capital Gains........................................... (4,769) (4,503)
- -------------------------------------------------------------------------------------------------
Total Distributions ........................................... (5,450) (5,458)
- -------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ..................................... 13,047 27,196
Reinvestment of Cash Distributions .............................. 5,232 5,295
Cost of Shares Redeemed ......................................... (15,428) (9,599)
- -------------------------------------------------------------------------------------------------
Increase in Net Assets Derived from Capital Share Transactions... 2,851 22,892
- -------------------------------------------------------------------------------------------------
Total Increase in Net Assets .................................. 15,608 24,270
- -------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ............................................. 99,961 75,691
- -------------------------------------------------------------------------------------------------
End of Period ................................................... $115,569 $99,961
=================================================================================================
Shares Issued and Redeemed:
Shares Issued .................................................. 704 1,536
Shares Issued in Lieu of Cash Distributions .................... 303 317
Shares Redeemed ................................................ (823) (561)
- -------------------------------------------------------------------------------------------------
Net Increase in Share Transactions ............................ 184 1,292
=================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Financial Highlights FMC Select Fund
For a Share Outstanding Throughout Each Period
For the periods ended October 31,
<TABLE>
<CAPTION>
Net Realized Net Net
Asset and Distributions Distributions Asset Assets Ratio of
Value Net Unrealized from Net from Value End of Expenses
Beginning Investment Gains on Investment Capital End of Total Period to Average
of Period Income Securities Income Gains Period Return (000) Net Assets
--------- ---------- ---------- ------------- ------------- ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------
FMC Select Fund
- ---------------
1999 $17.26 0.14 2.88 (0.11) (0.83) $19.34 18.18% $115,569 1.08%
1998 $16.82 0.17 1.43 (0.17) (0.99) $17.26 9.81% $ 99,961 1.09%
1997 $13.42 0.16 3.81 (0.16) (0.41) $16.82 30.51% $ 75,691 1.10%
1996 $10.97 0.14 2.48 (0.14) (0.03) $13.42 23.99% $ 47,909 1.10%
1995(1) $10.00 0.10 0.96 (0.09) -- $10.97 10.60%+ $ 27,202 1.10%*
<CAPTION>
Ratio
of Net
Ratio Ratio of Investment
of Net Expenses Income
Investment to Average to Average
Income Net Assets Net Assets Portfolio
to Average (Excluding (Excluding Turnover
Net Assets Waivers) Waivers) Rate
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
- ---------------
FMC Select Fund
- ---------------
1999 0.73% 1.08% 0.73% 26.23%
1998 1.01% 1.11% 0.99% 29.72%
1997 1.08% 1.17% 1.01% 21.71%
1996 1.10% 1.20% 1.00% 24.39%
1995(1) 1.96%* 1.57%* 1.49%* 1.87%
</TABLE>
- ----------
* Annualized
(1) The FMC Select Fund commenced operations on May 8, 1995.
+ Total Return is for the period indicated and has not been annualized.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Notes to Financial Statements FMC Select Fund
October 31, 1999
1. Organization:
The Advisors' Inner Circle Fund (the "Trust") is organized as a Massachusetts
business trust under an Amended and Restated Agreement and Declaration of Trust
dated February 18, 1997. The Trust is registered under the Investment Company
Act of 1940, as amended, as a diversified open-end management investment company
with ten portfolios. The financial statements herein are those of the FMC Select
Fund (the "Fund"). The financial statements of the remaining portfolios are not
presented herein. The assets of each portfolio are segregated, and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund's prospectus provides a description of the Fund's investment objectives,
policies and strategies.
2. Significant Accounting Policies:
The following is a summary of the significant accounting policies followed by
the Fund.
Security Valuation -- Investments in equity securities which are traded on
a national exchange (or reported on the NASDAQ national market system) are
stated at the last quoted sales price if readily available for such equity
securities on each business day; other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt
obligations exceeding sixty days to maturity for which market quotations
are readily available are valued at the most recent quoted bid price. Debt
obligations with sixty days or less remaining until maturity may be valued
at their amortized cost, which approximates market value.
Federal Income Taxes -- It is the Fund's intention to qualify as a
regulated investment company by complying with the appropriate provisions
of the Internal Revenue Code of 1986, as amended. Accordingly, no provision
for Federal income taxes is required.
Security Transactions and Investment Income -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Costs used in determining realized gains and losses on the sales of
investment securities are those of the specific securities sold, adjusted
for the accretion and amortization of purchase discounts or premiums during
the respective holding period which is calculated using the effective
interest method. Interest income is recognized on the accrual basis.
Dividend income is recorded on the ex-date.
Net Asset Value Per Share -- The net asset value per share of the Fund is
calculated on each business day by dividing the total value of assets, less
liabilities, by the number of shares outstanding.
Expenses -- Expenses that are directly related to the Fund are charged to
the Fund. Other operating expenses of the Trust are prorated to the Fund on
the basis of relative daily net assets compared to the aggregate daily net
assets of the Trust.
Distributions to Shareholders -- Distributions from net investment income
are declared and paid to shareholders 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.
3. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months commencing with the start-up. In the event the initial shares
of the Trust are redeemed by any holder thereof during the period that the Trust
is amortizing its organizational costs, the redemption proceeds payable to the
holder
12
<PAGE>
Notes to Financial Statements (concluded) FMC Select Fund
October 31, 1999
thereof by the Portfolio will be reduced by the unamortized organizational costs
in the same ratio as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of redemption. These costs
include legal fees of approximately $10,000 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.
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 .15% of the Funds' average daily
net assets.
DST Systems Inc. (the "Transfer Agent") serves as the transfer agent and
dividend disbursing agent for the Fund under a transfer agency agreement with
the Fund.
The Trust and Distributor are parties to a Distribution Agreement. The
Distributor receives no fees for its distribution services under this agreement.
5. Investment Advisory and Custodian Agreements:
The Fund and First Manhattan Co. (the "Adviser") are parties to an Investment
Advisory Agreement under which the Adviser receives an annual fee equal to .80%
of the average daily net assets. The Adviser has, on a voluntary basis, agreed
to waive its fee in order to limit the Fund's total operating expenses to a
maximum of 1.10% of the average daily net assets. The Adviser reserves the right
to terminate this arrangement at any time in its sole discretion.
First Union National Bank acts as custodian (the "Custodian") for the Fund. The
Custodian plays no role in determining the investment policies of the Fund or
which securities are to be purchased and sold by the Fund.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the period ended October 31, 1999 are as follows:
FMC
Select Fund
(000)
-----------
Purchases
U.S. Government ..................... $ 1,163
Other ............................... 27,462
Sales
U.S. Government ..................... $ 1,514
Other ............................... 36,845
At October 31, 1999, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes were not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held by the Fund
at October 31, 1999, is as follows:
FMC
Select Fund
(000)
-----------
Aggregate gross unrealized
appreciation ........................ $29,411
Aggregate gross unrealized
depreciation ........................ (6,210)
-------
Net unrealized appreciation ........... $23,201
=======
13
<PAGE>
Report of Independent Public Accountants
To the Shareholders and Trustees of
FMC Select Fund of
The Advisors' Inner Circle Fund:
We have audited the accompanying statement of net assets of the FMC Select Fund
(the "Fund"), one of the funds constituting The Advisors' Inner Circle Fund, as
of October 31, 1999, and the related statement of operations, the statements of
changes in net assets, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
FMC Select Fund of The Advisors' Inner Circle Fund as of October 31, 1999, and
the results of its operations, the changes in its net assets, and the financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 17, 1999
14
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ADVISORS' INNER CIRCLE FUND
(unaudited)
For shareholders that do not have an October 31, 1999 taxable year end, this
notice is for informational purposes only. For shareholders with an October 31,
1999 taxable year end, please consult your tax adviser as to the pertinence of
this notice.
For the fiscal year ended October 31, 1999, the portfolio is designating long
term capital gains, qualifying dividends and exempt interest income with regard
to distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
Long Term Ordinary (C)
Capital Gain Income Total (D) (E) (F)
Distributions Distributions Distributions Qualifying Tax Exempt Foreign
Portfolio (Tax Basis) (Tax Basis) (Tax Basis) Dividends(1) Interest Tax Credit
--------- ------------- ------------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FMC Select Fund ........ 88% 12% 100% 98% 0% 0%
</TABLE>
- ----------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A)and (B) are based on a percentage of the portfolio's total
distributions.
** Items (D) and (E) are based on a percentage of ordinary income
distributions of the portfolio.
15
<PAGE>
======================================= ====================================
FMC SELECT FUND
P.O. Box 219009
Kansas City, MO 64121-6009
Adviser:
FIRST MANHATTAN CO. FMC SELECT FUND
437 Madison Avenue
New York, NY 10022
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 Annual Report
October 31, 1999
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.
Advised By:
FIRST MANHATTAN CO.
FMC-F-003-06
======================================= ====================================
