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FMC STRATEGIC
VALUE FUND
SEMI-ANNUAL REPORT
APRIL 30, 2000
ADVISED BY:
FIRST MANHATTAN CO.
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<PAGE>
MANAGER'S DISCUSSION OF FUND PERFORMANCE
Dear Shareholder:
The FMC Strategic Value Fund (the "Fund") had a total return of 11.4% for the
six months ended April 30, 2000 and 16.4% from inception on August 17, 1998.
This compares with a total return of 8.2% and 3.0% for the Fund's benchmark, the
Russell 2000 Value Index, for the same periods.
Whereas the 1999 stock market was notable for its near singular focus on
technology stocks, the past six months reflect a playing field that has started
to level off. Even though it might not be fully gleaned from the 7.2% gain for
the S&P 500 (which is heavily weighted by technology) for the same six month
period, the fact that the performance differential between the indexes has
narrowed represents a notable shift from recent history. To be sure, the value
sector has continued to face tough headwinds given the outflow of funds away
from value to growth. The chart below reflects this outflow.
Net Flows of Growth and Value Equity Funds
($ in billions, excludes Blend and Index Funds)
Many of the stocks in our portfolio have been subject to consistent selling
pressure over the past year. Nevertheless, while there are still many
crosscurrents in fundamentals, high multiple stocks are now having a harder time
maintaining their valuations while depressed valuations in certain "old economy"
sectors have triggered merger and acquisition activity.
In this regard, our performance in the recent period was aided by the
acquisition of Cordant Technologies by Alcoa. We discussed Cordant in our last
letter as a recent addition where we were able to acquire our position for seven
times free cash flow and four times EBDITA for a company with a 14% return on
invested capital. Alcoa paid a cash price nearly twice our acquisition cost. We
note that subsequent to this April 30, 2000 report, two other portfolio
holdings, McWhorter Technologies and Hussman, entered into agreements to be
acquired in cash transactions at attractive premiums to our cost.
[Bar Chart Graph Omitted]
No Plot Points Available
Source: Strategic Insight Simfund and Salomon Smith Barney
1
<PAGE>
Another important factor that has aided our performance over the recent six
months has been the continued increase in oil prices to $30 per barrel and along
with it the strengthening in natural gas prices. In addition to the oilfield
sector where stocks have continued to appreciate, our holdings of independent
oil and gas producers, namely EOG Resources and HS Resources, have enjoyed
attractive appreciation along with prospects for increasing cash flow.
Included in our recent portfolio additions are two companies in the
furniture industry, Ethan Allen and Furniture Brands. Notwithstanding the fact
that the rise in interest rates is likely to cause some slowdown in consumer
buying, the demographic trends suggest that the longer-term outlook will not be
as cyclical as current market valuations seem to be suggesting. We paid about
eleven times current year earnings for our position in Ethan Allen, which we
think is a very low valuation for a well known and growing franchise with an
excellent track record. Furniture Brands' name may not be as well known but its
key product lines, Thomasville, Broyhill and Lane, enjoy a solid market
position; in fact the company is the largest domestic furniture manufacturer.
The market is capitalizing this stock at only 7.5 times 2000 earnings estimates,
and the multiple is even lower based on cash earnings. Both companies have used
free cash flow to repurchase their shares in the open market.
In summary, while the value sector of the market is no longer catching the
slurs like it did over the past year, it still has a long way to go before
regaining its luster. Our portfolio sells at a significant discount to the
average P/E for the S&P 500 of 24 times 2000 estimates, which we think bodes
well for future appreciation.
Sincerely,
/s/signature omitted
Edward I. Lefferman
Portfolio Manager
2
<PAGE>
TOTAL RETURN (1)
Annualized Cumulative
One Year Inception Inception(2)
Return(4) to Date to Date
(1.43%) 9.32% 19.11%
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&P 400/BARRA Value Index.
[Graphic Omitted] Plot points are as follows:
FMC Russell 2000
8/31/98 10,000 10,000
10/31/98 11,114 10,879
10/31/99 11,143 10,957
4/30/00 12,410 11,856
(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)The FMC Strategic Value Fund commenced operations on August 17, 1998.
(3)The performance reflected in the graph begins at the end of the month
operations commenced.
(4)One year return is for the period beginning 5/1/99 and ending 4/30/00.
[Pie Chart Graph Omitted] Plot Points are as follows:
Portfolio Composition
Aerospace & Defense 2%
Building & Construction 2%
Household Furniture & Fixtures 2%
Food, Beverages & Tobacco 2%
Banks 2%
Printing & Publishing 2%
Rubber & Plastic 3%
Apparel/Textiles 3%
Insurance 4%
Chemicals 5%
Miscellaneous Manufacturing 5%
U.S. Treasury Obligations 7%
Machinery 8%
Specialty Machinery 10%
Miscellaneous Business Services 12%
Petroleum & Fuel Products 12%
Manufacturing 18%
% of Total Fund Investments
3
<PAGE>
STATEMENT OF NET ASSETS FMC STRATEGIC VALUE FUND
<TABLE>
<CAPTION>
April 30, 2000 (Unaudited)
Market
Value
FMC STRATEGIC VALUE FUND Shares (000)
------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (92.9%)
AEROSPACE & DEFENSE (2.0%)
<S> <C> <C>
B.F. Goodrich .............................................................. 6,440 $ 205
------
APPAREL/TEXTILES (3.1%)
U.S. Industries ............................................................ 26,000 317
------
BANKS (2.4%)
North Fork Bancorp ......................................................... 15,000 243
------
BUILDING & CONSTRUCTION (2.1%)
Fluor ...................................................................... 6,300 211
------
CHEMICALS (4.6%)
Ck Witco ................................................................... 13,863 163
McWhorter Technologies* .................................................... 20,100 304
------
467
------
FOOD, BEVERAGE & TOBACCO (2.3%)
Corn Products International ................................................ 10,000 240
------
HOUSEHOLD FURNITURE & FIXTURES (2.2%)
Ethan Allen Interiors ...................................................... 4,600 123
Furniture Brands International* ............................................ 5,300 99
------
222
------
INSURANCE (3.6%)
Commerce Group ............................................................. 12,300 363
Homefed* ................................................................... 7,923 5
------
368
------
MACHINERY (8.4%)
Denison International ADR* ................................................. 38,000 494
Gardner Denver* ............................................................ 21,000 366
------
860
------
MANUFACTURING (18.2%)
Agrium ..................................................................... 45,000 422
Aztec ...................................................................... 29,800 406
Justin Industries .......................................................... 22,000 401
Trinity Industries ......................................................... 14,000 311
Westinghouse Air Brake ..................................................... 28,600 324
------
1,864
------
MISCELLANEOUS BUSINESS SERVICES (11.8%)
Advo* ...................................................................... 20,000 600
Burns International Services* .............................................. 40,000 435
Moore ...................................................................... 50,000 178
-------
1,213
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF NET ASSETS FMC STRATEGIC VALUE FUND
<TABLE>
<CAPTION>
April 30, 2000 (Unaudited)
Shares/ Market
Face Amount Value
FMC STRATEGIC VALUE FUND (CONCLUDED) (000) (000)
----------------------------------------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING (4.8%)
<S> <C> <C>
Mueller Industries* ........................................................ 15,000 $ 494
-------
PETROLEUM & FUEL PRODUCTS (11.9%)
EOG Resourses .............................................................. 5,700 142
HS Resources* .............................................................. 25,000 605
Rowan* ..................................................................... 17,000 475
-------
1,222
-------
PRINTING & PUBLISHING (2.4%)
New England Business Service ............................................... 15,000 248
-------
RUBBER & PLASTIC (2.8%)
Hanna ...................................................................... 25,000 288
-------
SPECIALTY MACHINERY (10.3%)
Cooper Cameron* ............................................................ 4,200 315
Hussman International ...................................................... 20,000 278
Tecumseh Products .......................................................... 10,000 464
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1,057
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TOTAL COMMON STOCKS
(Cost $9,148) .............................................................. 9,519
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U.S. TREASURY OBLIGATIONS (7.4%)
United States Treasury Bills
5.871%, 06/08/00 ......................................................... $ 586 582
4.910%, 07/06/00 ......................................................... 184 182
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TOTAL U.S. TREASURY OBLIGATIONS
(Cost $765) ................................................................ 764
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TOTAL INVESTMENTS (100.3%)
(Cost $9,913) .............................................................. 10,283
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OTHER ASSETS AND LIABILITIES, NET (-0.3%) ..................................... (36)
-------
NET ASSETS:
Portfolio Shares (unlimited authorization -- no par value)
based on 926,335 outstanding shares of beneficial interest ............... 9,484
Undistributed Net Investment Income ........................................ 1
Accumulated Net Realized Gain on Investments ............................... 392
Net Unrealized Appreciation on Investments ................................. 370
-------
TOTAL NET ASSETS (100.0%) ..................................................... $10,247
=======
Net Asset Value, Offering and Redemption Price Per Share ................... $11.06
=======
*NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF OPERATIONS FMC STRATEGIC VALUE FUND
<TABLE>
<CAPTION>
For the six-month period ended April 30, 2000 (Unaudited)
FMC STRATEGIC VALUE FUND (000)
----------------------------------------------------------------------------------------------------------------
Investment Income:
<S> <C>
Dividend Income............................................................................ $ 80
Interest Income ........................................................................... 16
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Total Investment Income.................................................................. 96
----------------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees .................................................................. 49
Investment Advisory Fee Waiver ............................................................ (49)
Reimbursements by Advisor.................................................................. (28)
Administrative Fees ....................................................................... 37
Administrative Fee Waiver ................................................................. (24)
Professional Fees ......................................................................... 28
Printing Fees ............................................................................. 23
Transfer Agent Fees ....................................................................... 20
Trustee Fees .............................................................................. 4
Registration and Filing Fees .............................................................. 1
Insurance and Other Fees .................................................................. 1
Custodian Fees ............................................................................ 1
----------------------------------------------------------------------------------------------------------------
Total Expenses, Net ..................................................................... 63
----------------------------------------------------------------------------------------------------------------
Net Investment Income ................................................................. 33
----------------------------------------------------------------------------------------------------------------
Net Realized Gain from Securities Sold .................................................... 392
Net Change in Unrealized Appreciation of Investment Securities ............................ 643
----------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments ......................................... 1,035
----------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations....................................... $1,068
================================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS FMC STRATEGIC VALUE FUND
For the six-month period ended April 30, 2000 (Unaudited) and for the year ended
October 31, 1999.
<TABLE>
<CAPTION>
11/01/99 11/01/98
TO 04/30/00 TO 10/31/99
(000) (000)
----------------------------------------------------------------------------------------------------------------
Investment Activities:
<S> <C> <C>
Net Investment Income............................................... $ 33 $ 55
Net Realized Gain from Securities Sold ............................. 392 325
Net Change in Unrealized Appreciation (Depreciation) of
Investment Securities ............................................. 643 (469)
----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations... 1,068 (89)
----------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .............................................. (30) (63)
Realized Capital Gains.............................................. (322) (31)
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Total Distributions .............................................. (352) (94)
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Capital Share Transactions:
Proceeds from Shares Issued ........................................ 667 4,598
Reinvestment of Cash Distributions ................................. 352 94
Cost of Shares Redeemed ............................................ (1,040) (648)
----------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Net Assets from
Capital Share Transactions...................................... (21) 4,044
----------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets ..................................... 695 3,861
----------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ................................................ 9,552 5,691
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End of Period ...................................................... $10,247 $9,552
================================================================================================================
Shares Issued and Redeemed:
Shares Issued ..................................................... 65 429
Shares Issued in Lieu of Cash Distributions ....................... 35 9
Shares Redeemed ................................................... (100) (59)
----------------------------------------------------------------------------------------------------------------
Net Increase in Share Transactions ............................... -- 379
================================================================================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS FMC STRATEGIC VALUE FUND
For a share outstanding for each period.
For the six-month period ended April 30, 2000 (Unaudited) and for the periods
ended October 31.
<TABLE>
<CAPTION>
Ratio Ratio
Net Net Net of Net of Expenses
Asset Realized and Distributions Distributions Asset Assets Ratio Investment to Average
Value Net Unrealized from Net from Value End of Expenses Income Net Assets
Beginning Investment Gains on Investment Capital End Total of Period to Average to Average (Excluding
of Period Income Securities Income Gains of Period Return (000) Net Assets Net Assets Waivers)
--------- ---------- ----------- ------------- ------------- --------- ------ --------- ----------- ---------- -----------
-------------------------
FMC STRATEGIC VALUE FUND
-------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $10.31 0.03 1.09 (0.03) (0.34) $11.06 11.37%+ $10,247 1.30%* 0.68%* 3.37%*
1999 $10.40 0.07 (0.05) (0.07) (0.04) $10.31 0.26% $ 9,552 1.30% 0.59% 3.10%
1998(1) $10.00 0.03 0.39 (0.02) -- $10.40 4.25%+ $ 5,691 1.30%* 1.45%* 5.07%*
</TABLE>
Ratio
of Expenses
to Average
Net Assets
(Excluding Portfolio
Waivers and) Turnover
Reimbursements) Rate
-------------- ----------
-------------------------
FMC STRATEGIC VALUE FUND
-------------------------
2000 (1.39)%* 10.71%
1999 (1.21)% 11.85%
1998(1) (2.32)%* 6.86%
* Annualized
+ Total return is for the period indicated and has not been annualized.
(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.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS....... FMC STRATEGIC VALUE FUND
April 30, 2000 (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. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by, or in accordance with
procedures approved by, the Board of Trustees.
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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) FMC STRATEGIC VALUE FUND
April 30, 2000 Unaudited)
3. TRANSACTIONS WITH AFFILIATES:
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 contractually agreed to limit its annual
fee to no higher than $27,500 for the Fund through October 31st, 2000, $50,000
for the period November 1st, 2000 to October 31st, 2001, and $75,000 thereafter.
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, 2000 are as follows:
(000)
---------
Purchases
U.S. Government ..................... $ --
Other ............................... 999
Sales
U.S. Government ..................... --
Other ............................... 1,663
At April 30, 2000, 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, 2000, is as follows:
(000)
---------
Aggregate gross unrealized
appreciation ........................ $ 1,765
Aggregate gross unrealized
depreciation ........................ (1,395)
-------
Net unrealized appreciation ........... $ 370
=======
10
<PAGE>
NOTES
<PAGE>
FMC STRATEGIC VALUE FUND
P.O. Box 219009
Kansas City, MO 64121
ADVISOR
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-008-02
