================================================================================
FMC STRATEGIC
VALUE FUND
SEMI-ANNUAL REPORT
APRIL 30, 1999
ADVISED BY:
FIRST MANHATTAN CO.
================================================================================
<PAGE>
MANAGER'S DISCUSSION OF FUND PERFORMANCE
Dear Shareholder:
The FMC Strategic Value Fund (the "Fund") had a total return of 13.27% for the
six months ended April 30, 1999 and had a total return of 18.09% from inception
on August 17, 1998. This compares with returns of 4.39% and -1.38%, respectively
for the Fund's benchmark, the Russell 2000 Value Index.
In light of the performances of the broader-based market indices, we are pleased
with the results in the period measured. It has just been in the last couple of
months that stocks in the value sectors where we are focused have responded
favorably. For many months appreciation had been narrowly focused on a select
number of high multiple growth stocks. Our performance was also favorably
affected by the acquisition of Pinkerton's, Inc., a Fund portfolio company, by
Securitas NV, a Swedish guard company, for $29 per share in cash. The Fund
acquired its position at a cost of $17. We are gratified that our estimate of
Pinkerton's intrinsic business value was realized.
Many observers describe the market as fully valued selling at 26 times earnings.
However, the average multiple for many of our key holdings is in a modest range
of 10-12 times earnings. Even in those cases where the multiple might be high
because current earnings are depressed for one reason or another, these stocks
sell in a range of 1.0 to 1.5 times book value, another financial ratio which is
at a sharp discount to the market averages. Consequently, we continue to feel
very positive about the longer term outlook for our portfolio.
Following is a brief description of two recent additions to our Fund, which
reflect the investment strategy we are employing.
MUELLER INDUSTRIES (MLI) is a leading manufacturer of copper fabricated products
such as rod, tubing and various fixtures. Current management took control of MLI
in the early 1990s and has steadily and successfully improved profitability from
a marginal level through 1998 when return on invested capital was 15% and
pre-tax margins were at 12%. While on the surface MLI is not in a very exciting
business, the company has been at the forefront of industry consolidation so
that currently there are only three or four competitors, depending on markets,
and barriers to entry are very high because of the large capital investment
required. Even after investing heavily in its plants in order to lower
manufacturing costs as well as concluding selected strategic acquisitions, MLI's
balance sheet remains strong with a net debt/capital ratio of only 16%. As a
further indication of the strong free cash flow generated by the business, MLI
could be nearly debt free by the end of this year with the aid of a net
operating loss carryforward tax benefit. We paid 10 times 1998 reported EPS of
$1.90 for our position; this also equates to 1.5 times book value. We estimate
that MLI will earn around $2.25 this year and prospectively $2.76 to $3.00 if
recent acquisitions perform as currently envisioned.
HUSSMAN INTERNATIONAL (HSM) manufactures, installs and services refrigerator
systems and display cases on a worldwide basis. The company has the leading
market share position in United States supermarkets and superstores and, with a
recent acquisition now has a strong presence in Europe. HSM was spun out of
Whitman Corporation in January 1998 and has generated record profits during its
short public ownership with 1998 EPS of $1.20. The trend toward fresh take-out
products has stimulated strong topline growth for Hussman, which is expected to
continue for the foreseeable future. Also, the company has a growing
international presence with its refrigeration cases and reach-in beverage
coolers, which serve the major international soft drink bottlers. As a
subsidiary of a large company, Hussman did not focus on cash flow, but now has
heavy incentives to do so. We purchased the shares at less than 11 times our
1999 EPS estimate of $1.40, which we consider an excellent entry point for this
brand name manufacturer whose name is in every supermarket.
I trust that this report helps keep you informed on how your investment is being
managed. I appreciate your confidence.
Sincerely,
/s/ signature omitted
Edward I. Lefferman
Portfolio Manager
<PAGE>
TOTAL RETURN(1)
Annualized Comulative
Inception Inception(2)
to Date to Date
25.79% 18.09%
Comparison of Change in the Value of a $10,000 Investment in the
FMC Strategic Value Fund, versus the Russell 2000 Value Index, and the
S&P400/BARRA Value Index.
[LINE GRAPH OMITTED]
PLOT POINTS ARE AS FOLLOWS:
8/31/98 10/98 4/99
FMC Strategic Value Fund $10,000 $11,114 $12,589
Russell 2000 Value Index $10,000 $10,879 $11,356
S&P 400/BARRA Value Index $10,000 $11,628 $12,535
1These 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.
2The FMC Strategic Value Fund commenced operations on August 17, 1998.
3The performance reflected in the graph begins at the end of the month
operations commenced.
[GRAPH OMITTED]
PORTFOLIO COMPOSITION
Manufacturing 13%
Petroleum & Fuel Products 11%
Miscellaneous Business Services 9%
Chemicals 8%
Specialty Machinery 7%
Machinery 7%
Miscellaneous Manufacturing 5%
Rubber & Plastic 4%
Food, Beverage & Tobacco 4%
Printing & Publishing 4%
Housing/Construction 3%
Aircraft 2%
Insurance 3%
U.S. Treasury Obligations 20%
% of Total Fund Investments
<PAGE>
STATEMENT OF NET ASSETS FMC STRATEGIC VALUE FUND
April 30, 1999 (Unaudited)
Market
Value
FMC STRATEGIC VALUE FUND Shares (000)
- ----------------------------------------------------------------
COMMON STOCK (80.6%)
AIRCRAFT (2.4%)
Coltec Industries* ...................... 11,500 $ 249
------
CHEMICALS (8.5%)
Agrium .................................. 40,000 362
McWhorter Technologies* ................. 15,000 222
Witco Chemical .......................... 15,000 286
------
870
------
FOOD, BEVERAGE & TOBACCO (4.2%)
Corn Products International ............. 15,000 433
------
HOUSING/CONSTRUCTION (3.4%)
U.S. Industries ......................... 19,000 353
------
INSURANCE (3.0%)
Leucadia National ....................... 10,000 307
------
MACHINERY (6.8%)
Denison International ADR* .............. 24,100 322
Gardner Denver Inc* ..................... 21,000 374
------
696
------
MANUFACTURING (12.7%)
Aztec ................................... 35,000 359
Trinity Industries ...................... 13,000 453
Westinghouse Air Brake .................. 22,000 491
------
1,303
------
MISCELLANEOUS BUSINESS SERVICES (8.7%)
Borg Warner Security* ................... 25,000 441
Moore ................................... 45,000 450
------
891
------
MISCELLANEOUS MANUFACTURING (4.6%)
Mueller Industries* ..................... 15,000 472
------
PETROLEUM & FUEL PRODUCTS (11.4%)
Cooper Cameron* ......................... 11,000 425
HS Resources* ........................... 25,000 266
Rowan* .................................. 30,000 480
------
1,171
------
PRINTING & PUBLISHING (4.0%)
New England Business Service ............ 15,000 410
------
RUBBER & PLASTIC (3.9%)
Hanna ................................... 25,000 405
------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF NET ASSETS FMC STRATEGIC VALUE FUND
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Shares/ Market
Face Amount Value
FMC STRATEGIC VALUE FUND (concluded) (000) (000)
- --------------------------------------------------------------------------------
SPECIALTY MACHINERY (7.0%)
<S> <C> <C>
Hussman International .................................... 20,000 $ 317
Tecumseh Products ........................................ 6,500 397
-------
714
-------
TOTAL COMMON STOCK
(Cost $7,193) ............................................. 8,274
-------
U.S. TREASURY OBLIGATIONS (20.1%)
4.420%, 05/27/99 ...................................... $ 30 30
5.485%, 08/19/99 ...................................... 2,059 2,031
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,061) .............................................. 2,061
-------
TOTAL INVESTMENTS (100.7%)
(Cost $9,254) .............................................. 10,335
-------
OTHER ASSETS AND LIABILITIES, NET (-0.7%) ..................... (68)
-------
NET ASSETS:
Portfolio Shares (unlimited authorization -- no par value)
based on 879,738 outstanding shares of beneficial interest 8,944
Accumulated Net Realized Gain on Investments ............... 242
Net Unrealized Appreciation on Investments ................. 1,081
-------
TOTAL NET ASSETS (100.0%) ..................................... $10,267
=======
Net Asset Value, Offering and Redemption Price Per Share ... $11.67
=======
</TABLE>
*NON-INCOME PRODUCING SECURITY.
ADR -- AMERICAN DEPOSITORY RECEIPT
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF OPERATIONS FMC STRATEGIC VALUE FUND
For the six-month period ended April 30, 1999 (Unaudited)
FMC
STRATEGIC
VALUE FUND(1)
(000)
- --------------------------------------------------------------------------------
Investment Income:
Dividend Income................................................... $ 29
Interest Income .................................................. 65
- --------------------------------------------------------------------------------
Total Investment Income......................................... 94
- --------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ......................................... 41
Investment Advisory Fee Waiver ................................... (41)
Reimbursements by Advisor......................................... (5)
Administrative Fees .............................................. 38
Administrative Fee Waiver ........................................ (24)
Professional Fees ................................................ 12
Transfer Agent Fees .............................................. 10
Printing Fees .................................................... 9
Trustee Fees ..................................................... 3
Registration and Filing Fees ..................................... 6
Insurance and Other Fees ......................................... 2
Organization Costs................................................ 2
Custodian Fees ................................................... 1
- --------------------------------------------------------------------------------
Total Expenses, Net ............................................ 54
- --------------------------------------------------------------------------------
Net Investment Income ........................................ 40
- --------------------------------------------------------------------------------
Net Realized Gain from Securities Sold ........................... 242
Net Change in Unrealized Appreciation of Investment Securities ... 886
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments ................ 1,128
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.............. $1,168
================================================================================
(1) The FMC Strategic Value Fund commenced operations on August 17, 1998.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS FMC STRATEGIC VALUE FUND
For the six-month period ended April 30, 1999 (Unaudited) and for the period
ended October 31, 1998.
<TABLE>
<CAPTION>
11/01/98 8/17/98
TO 04/30/99 TO 10/31/98(1)
(000) (000)
- -------------------------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C> <C>
Net Investment Income............................................... $ 40 $ 15
Net Realized Gain from Securities Sold ............................. 242 31
Net Change in Unrealized Appreciation of Investment Securities ..... 886 195
- -------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations.............. 1,168 241
- -------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .............................................. (44) (11)
Realized Capital Gains.............................................. (31) --
- -------------------------------------------------------------------------------------------------------------------
Total Distributions .............................................. (75) (11)
- -------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ........................................ 3,663 5,449
Reinvestment of Cash Distributions ................................. 74 12
Cost of Shares Redeemed ............................................ (254) --
- -------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Derived from Capital Share Transactions.... 3,483 5,461
- -------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets ..................................... 4,576 5,691
- -------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................ 5,691 --
- -------------------------------------------------------------------------------------------------------------------
End of Period ...................................................... $10,267 $ 5,691
===================================================================================================================
Shares Issued and Redeemed:
Shares Issued ..................................................... 350 546
Shares Issued in Lieu of Cash Distributions ....................... 7 1
Shares Redeemed ................................................... (24) --
- -------------------------------------------------------------------------------------------------------------------
Net Increase in Share Transactions ............................... 333 547
===================================================================================================================
</TABLE>
(1) The FMC Strategic Value Fund commenced operations on August 17, 1998.
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 FMC STRATEGIC VALUE FUND
For the six-month period ended April 30, 1999 (Unaudited) and for the period
ended October 31, 1998.
For a share outstanding for each period.
<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 Gains on Investment Capital End Total of Period to Average to Average
of Period Income Securities Income Gains of Period Return (000) Net Assets Net Assets
--------- ---------- ----------- ------------- ------------- --------- ------ --------- ----------- ----------
- ------------------------
FMC STRATEGIC VALUE FUND
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $10.40 0.05 1.31 (0.05) (0.04) $11.67 13.27%+ $10,267 1.30%* 0.97%*
1998(1) $10.00 0.03 0.39 (0.02) -- $10.40 4.25%+ $ 5,691 1.30%* 1.45%*
<C> <C> <C>
Ratio
of Net
Ratio Investment
of Expenses Income
to Average to Average
Net Assets Net Assets
(Excluding (Excluding
Waivers Waivers Portfolio
and and Turnover
Reimbursements) Reimbursements) Rate
- --------------- --------------- ---------
3.04%* (0.77)% 10.12%
5.07%* (2.32)% 6.86%
</TABLE>
* Annualized
+ Total return is for the period indicated and has not been annualized.
(1) The FMC Select Fund commenced operations on August 17, 1998.
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 FMC STRATEGIC VALUE FUND
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 FMC
Strategic Value 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 Funds 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 twelve 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 organi-
<PAGE>.
NOTES TO FINANCIAL STATEMENTS (concluded) FMC STRATEGIC VALUE FUND
April 30, 1999 (Unaudited)
zational costs, the redemption proceeds payable to the holder thereof by the
Portfolio will be reduced by the unamortized organizational costs in the same
ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
Certain officers of the Trust are also officers of SEI Investments Mutual Funds
Services (the "Administrator") and/or SEI Investments Distribution Co. (the
"Distributor"). Such officers are paid no fees by the Trust for serving as
officers of the Trust.
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 Fund's average daily
net assets.The Administrator has voluntarily agreed to limit its fee to no
higher than $27,500 for the Fund's initial fiscal year.
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 1.00%
of the Fund's 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 1.30%. 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 six months ended April 30, 1999 are as follows:
(000)
---------
Purchases
U.S. Government ..................... $ --
Other ............................... 3,844
Sales
U.S. Government ..................... $ --
Other ............................... 580
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 ........................ $1,234
Aggregate gross unrealized
depreciation ........................ (153)
-------
Net unrealized appreciation ........... $1,081
======
<PAGE>
NOTES
<PAGE>
<PAGE>
FMC STRATEGIC VALUE FUND
P.O. Box 219009
Kansas City, MO 64121-6009
ADVISER:
FIRST MANHATTAN CO.
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
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.
FMC-F-008-01.
<PAGE>
