=========================
FMC SELECT FUND
ANNUAL REPORT
OCTOBER 31, 2000
ADVISED BY:
FIRST MANHATTAN CO.
=========================
<PAGE>
MANAGER'S DISCUSSION OF FUND PERFORMANCE
Dear Shareholder:
The FMC Select Fund (the "Fund") had a total return of 11.9% for the year ended
October 31, 2000. The Fund outperformed both the 9.3% average total return of
its peer group, the Lipper Flexible Portfolio Funds Objective, and the 4.3%
total return of its benchmark, which is an 80% weighting of the S&P 500
Composite Index and a 20% weighting of the Merrill Lynch 1-10 Year
Corporate/Government Bond Index. As of October 31, 2000, 81.3% of the Fund's
assets were invested in equities, within the targeted equity allocation of
75-85%. The remaining assets were in 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
US Treasury. As of October 31, 2000, the equity portion of the portfolio had an
earnings yield of 5.7%, significantly above the 3.6% earnings yield of the S&P
Industrials Index. The portfolio's earnings yield almost matched the 5.8% yield
available on the 30 year US Treasury. While the interest coupon paid on the
30-year US Treasury will not grow, the portfolio's earnings are estimated to
increase by 84% over the next five years, which would increase the earnings
yield to 10.4% 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 that are selling at attractive valuations
compared to the S&P Industrials Index.
--------------------------------------------------------------------------------
FMC SELECT FUND S&P INDUSTRIALS INDEX
------------------ ---------------------
QUALITY
-------
Return-on-Equity (ROE) [1] 23% 20%
Period Needed to Retire
Debt from Free Cash Flow [2] 2 Years 8 Years
Estimated Annual EPS Growth
for 2000-2005 13% 8%
VALUATION
---------
2001 Estimated Price/Earnings 17.7X 27.5X
--------------------------------------------------------------------------------
[1] ROE is based on net income for the trailing four quarters ended 9/30/00 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 believe 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 Sabre
Holdings, the leading global provider of computerized reservation systems and of
information technology solutions to the travel industry. Sabre earns a 20% ROE,
a 10%+ net margin, has a balance sheet with minimal net debt and, at purchase,
generated free cash flow equal to about 10% of its market capitalization. Sabre
has a 39% and rising global share of airline reservations with a 70% share in
Asia and 50%+ share in Latin America. Sabre is gaining share against all three
of its major competitors: Amadeus, which is linked to several major European
flag carriers; Galileo, which is linked to United; and Worldspan, which is
linked to Northwest. Sabre is the market leader in all geographic areas except
Europe. Sabre's recent purchase of Dillon of Germany should increase its
European share from the low teens to almost 30%, making it a strong number two
in Europe to leader Amadeus, and significantly increasing Sabre's margins as it
increases processing volumes in a scale-intensive business. Our research
indicated that Sabre's rising market share is the result of its investing more
in product development than its three competitors, and providing the most
user-friendly and reliable reservation system, as well as the industry's best
training and support.
When we purchased Sabre, the stock was down almost 70% from the prior year,
selling at about 10X 2001E cash EPS of $2.35. The decline in the stock price was
attributable largely to three factors:
(1) the overhang from the distribution of over 80% of Sabre's shares by
American Airlines (We viewed this as providing the short term opportunity
to buy shares from those selling for reasons unrelated to fundamentals.);
(2) concern over how the Internet was going to affect Sabre (In reality, Sabre
is a major beneficiary of the Internet, owning 70% of Travelocity, the
leading Internet travel site, and serving as the reservation engine for
over 80% of the virtual travel agents on the Internet, the fastest growing
distribution channel in the travel industry.); and
(3) concern over Orbitz, an Internet travel reservation site operated by five
US-based carriers and, at that time, expected to launch in September, 2000.
At the outset of our research, we considered the competitive threat from Orbitz
the most serious concern. Interestingly, our research showed that Orbitz was
unlikely to meet its ambitious September, 2000 launch date. Orbitz subsequently
delayed its launch date twice, with a scaled-back version now scheduled for
launch in mid-2001. Also, Orbitz is currently under investigation by the US
Department of Justice for possible antitrust violations including price fixing;
for antitrust reasons Orbitz may be unable to develop any sustainable
competitive advantage and will probably be precluded from offering any fares not
offered to other parties; and, in fact, consumers may avoid Orbitz once they
learn that, unlike Internet sites operating on the Sabre platform, Orbitz will
not offer fares from Southwest Airlines, the leading US budget carrier.
2
<PAGE>
Our investment process remains focused on owning good businesses, 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 nine 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
3
<PAGE>
--------------------------------------------------------------------------------
TOTAL RETURN(1)
--------------------------------------------------------------------------------
Annualized Annualized Annualized
One Year 3 Year 5 Year Inception(2)
Return Return Return to Date
--------------------------------------------------------------------------------
11.89% 13.24% 18.63% 19.06%
--------------------------------------------------------------------------------
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.
80/20 BLEND OF THE
FMC SELECT FUND S&P AND MERRILL INDEX
5/31/95 $10,000 $10,000
10/31/95 10,844 10,875
10/31/96 13,445 13,077
10/31/97 17,547 16,613
10/31/98 19,268 19,900
10/31/99 22,771 23,970
10/31/00 25,479 25,494
<TABLE>
<CAPTION>
S&P 500 MERRILL LYNCH 1-10 YEAR
FMC SELECT FUND COMPOSITE INDEX CORP./GOV'T. BOND INDEX
<S> <C> <C> <C>
5/31/95 $10,000 $10,000 $10,000
10/31/95 10,844 11,005 10,353
10/31/96 13,445 13,654 10,948
10/31/97 17,547 18,038 11,781
10/30/98 19,268 22,006 12,864
10/31/99 22,771 27,655 12,971
10/31/00 25,479 29,339 13,816
<FN>
(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 Select Fund commenced operations on May 8, 1995. The performance
reflected in the graph begins at the end of the month operations commenced.
</FN>
</TABLE>
PORTFOLIO COMPOSITION
% of Portfolio
Miscellaneous Industrial 1%
Convertible Bond 2%
U.S. Government Agency Obligations 4%
Automotive & Truck Related 4%
Diversified Operations 6%
Banks 2%
Corporate Obligations 6%
Consumer Products 6%
U.S. Treasury Obligations 7%
Financial Services 7%
Specialty Chemicals 1%
Telecommunications 1%
Retail 12%
Professional Services 11%
Information Services 11%
Media 8%
Health Care 8%
As of October 31, 2000, 81.3% 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
4
<PAGE>
STATEMENT OF NET ASSETS FMC SELECT FUND
October 31, 2000
Market
Value
FMC SELECT FUND Shares (000)
--------------------------------------------------------------------------------
COMMON STOCKS (81.3%)
AUTOMOTIVE & TRUCK RELATED (4.4%)
AutoZone* ...................................... 119,100 $ 3,193
Snap-On ........................................ 61,500 1,572
-------
4,765
-------
BANKS (6.2%)
Bank of America ................................ 47,045 2,261
Compass Bancshares ............................. 19,050 346
Dime Bancorp ................................... 70,900 1,733
North Fork Bancorporation ...................... 94,500 1,908
TF Financial ................................... 32,000 434
-------
6,682
-------
CONSUMER PRODUCTS (6.1%)
Kimberly-Clark ................................. 28,600 1,888
Reckitt Benckiser .............................. 364,400 4,803
-------
6,691
-------
DIVERSIFIED OPERATIONS (5.6%)
Berkshire Hathaway, Cl A* ...................... 41 2,612
Berkshire Hathaway, Cl B* ...................... 1,631 3,430
-------
6,042
-------
FINANCIAL SERVICES (6.9%)
CIT Group, Cl A ................................ 101,710 1,774
Household International ........................ 112,545 5,662
-------
7,436
-------
HEALTH CARE (7.8%)
Abbott Laboratories ............................ 73,000 3,855
IMS Health ..................................... 194,800 4,602
-------
8,457
-------
INFORMATION SERVICES (10.2%)
Acxiom* ........................................ 79,616 3,205
First Data ..................................... 82,725 4,147
Sabre Holdings* ................................ 109,900 3,675
Synavant* ...................................... 9,740 44
-------
11,071
-------
MEDIA (7.3%)
E.W. Scripps, Cl A ............................. 13,000 760
Gannett ........................................ 48,300 2,801
Harte-Hanks Communications ..................... 197,700 4,374
-------
7,935
-------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF NET ASSETS FMC SELECT FUND
October 31, 2000
Shares/ Market
Face Amount Value
FMC SELECT FUND (continued) (000) (000)
--------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES (0.2%)
York Group ..................................... 39,100 $ 188
-------
MISCELLANEOUS INDUSTRIAL (1.5%)
IDEX ........................................... 49,385 1,593
-------
PROFESSIONAL SERVICES (10.9%)
Gartner Group, Cl B* ........................... 255,862 2,239
ITT Educational Services* ...................... 200,600 3,159
Personnel Group of America* .................... 76,000 233
Robert Half International* ..................... 202,300 6,170
-------
11,801
-------
RETAIL (11.5%)
CVS ............................................ 144,000 7,623
Dollar General ................................. 182,993 2,836
Intertan* ...................................... 177,000 1,958
-------
12,417
-------
SPECIALTY CHEMICALS (1.1%)
Great Lakes Chemical ........................... 35,000 1,168
-------
TELECOMMUNICATIONS (1.2%)
Sprint (FON Group) ............................. 49,400 1,260
-------
UTILITIES (0.4%)
Florida Public Utilities ....................... 30,400 467
-------
TOTAL COMMON STOCKS
(Cost $65,067) ................................. 87,973
-------
PREFERRED STOCK (0.0%)
Fresenius Medical Care Holdings ................ 20,400 1
-------
TOTAL PREFERRED STOCK
(Cost $0) ...................................... 1
-------
CORPORATE OBLIGATIONS (6.2%)
BellSouth Savings & Employee Stock
Ownership Trust, MTN, Ser A
9.190%, 07/01/03 .......................... $ 112 116
Block Financial
6.750%, 11/01/04 .......................... 615 599
Bond-Backed Certificate IBM
7.350%, 06/01/17 .......................... 481 463
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF NET ASSETS FMC SELECT FUND
October 31, 2000
Face Market
Amount Value
FMC SELECT FUND (continued) (000) (000)
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS (CONTINUED)
Citibank Credit Card Master Trust I, Cl A, Ser 2
6.050%, 01/15/10 .......................... $ 480 $ 455
Continental Airlines, Ser 98-3
6.320%, 11/01/08 .......................... 100 93
Dow Chemical, Ser 92-A2
8.040%, 07/02/05 .......................... 500 514
Eastman Kodak
9.750%, 10/01/04 .......................... 300 322
Geico
7.500%, 04/15/05 .......................... 200 203
General Electric Capital
8.850%, 04/01/05 .......................... 250 270
General Motors, Ser 91-A2
8.950%, 07/02/09 .......................... 650 677
Manufacturers & Traders Trust
8.125%, 12/01/02 .......................... 250 255
May Department Stores
9.750%, 02/15/21 .......................... 415 476
McCormick, MTN, Ser A
6.240%, 02/01/06 .......................... 250 240
Pharmacia
8.130%, 12/15/06 .......................... 555 573
Ryder System
6.500%, 05/15/05 .......................... 250 236
Simon Property Group
6.875%, 11/15/06 .......................... 400 377
Stanley Works
5.750%, 03/01/04 .......................... 330 318
Union Pacific
7.600%, 05/01/05 .......................... 250 252
Wilmington Trust
6.625%, 05/01/08 .......................... 270 249
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $6,885) 6,688
-------
CONVERTIBLE BOND (1.8%)
Center Trust, CV to 55.5556 Shares
7.500%, 01/15/01 .......................... 2,044 1,993
-------
TOTAL CONVERTIBLE BOND
(Cost $2,003) 1,993
-------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF NET ASSETS FMC SELECT FUND
October 31, 2000
Face Market
Amount Value
FMC SELECT FUND (continued) (000) (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (6.8%)
U.S. Treasury Bills (A)
6.258%, 04/19/01 .......................... $3,802 $ 3,693
6.123%, 01/25/01 .......................... 1,384 1,364
6.110%, 02/08/01 .......................... 143 141
5.995%, 01/04/01 .......................... 21 21
5.970%, 11/09/00 .......................... 5 5
5.949%, 12/07/00 .......................... 9 9
5.920%, 03/15/01 .......................... 1,643 1,606
U.S. Treasury Note
5.875%, 11/30/01 .......................... 500 498
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $7,340) 7,337
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (3.7%)
Export Funding Trust, Cl A, Ser A
7.890%, 02/15/05 .......................... 225 224
Financial Assistance, Ser A-03
9.375%, 07/21/03 .......................... 200 214
FNMA
6.595%, 12/01/03 .......................... 481 476
Government Trust Certificate, Ser 95-A
8.010%, 03/01/07 .......................... 183 190
Guaranteed Export Trust, Cl A, Ser A
6.280%, 06/15/04 .......................... 282 278
Guaranteed Export Trust, Cl A, Ser B
7.460%, 12/15/05 .......................... 239 241
Guaranteed Trade Trust, Cl A, Ser A
7.020%, 09/01/04 .......................... 100 101
HUD, Ser 99-A
5.750%, 08/01/06 .......................... 265 254
Overseas Private Investment
6.080%, 08/15/04 .......................... 402 395
Private Export Funding
6.670%, 09/15/09 .......................... 225 224
Small Business Administration, Ser 10F
6.500%, 11/01/06 .......................... 215 213
Small Business Administration, Ser 20D
6.150%, 04/01/18 .......................... 352 334
Small Business Administration, Ser 20L
6.550%, 12/01/17 .......................... 436 424
Union Financial Services Taxable Student Loan,
Cl A8, Ser A
5.500%, 09/01/05 .......................... 380 365
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $4,012) .................................. 3,933
--------
TOTAL INVESTMENTS (99.8%)
(Cost $85,307) ................................. 107,925
--------
OTHER ASSETS AND LIABILITIES, NET (0.2%) .......... 221
--------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENT OF NET ASSETS FMC SELECT FUND
October 31, 2000
Market
Value
FMC SELECT FUND (concluded) (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited authorization -- no par value)
based on 5,786,867 outstanding shares of beneficial interest ... $ 74,430
Undistributed net investment income .............................. 61
Accumulated net realized gain on investments ..................... 11,037
Net unrealized appreciation on investments ....................... 22,618
--------
TOTAL NET ASSETS (100.0%) ........................................... $108,146
========
Net Asset Value, Offering and Redemption Price Per Share ......... $18.69
========
*NON-INCOME PRODUCING SECURITY
(A) -- RATE SHOWN IS THE EFFECTIVE YIELD OF THE SECURITY AT TIME OF PURCHASE
CL -- CLASS
CV -- CONVERTIBLE SECURITY
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
HUD -- HOUSING AND URBAN DEVELOPMENT
MTN -- MEDIUM TERM NOTE
SER -- SERIES
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENT OF OPERATIONS (000) FMC SELECT FUND
For the Year Ended October 31, 2000
FMC SELECT FUND
--------------------------------------------------------------------------------
Investment Income:
Dividend Income ....................................................$ 888
Interest Income .................................................... 1,125
--------------------------------------------------------------------------------
Total Investment Income........................................... 2,013
--------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................................... 844
Administrative Fees ................................................ 158
Professional Fees .................................................. 38
Transfer Agent Fees ................................................ 28
Printing Fees ...................................................... 25
Custodian Fees ..................................................... 6
Trustee Fees ....................................................... 6
Registration and Filing Fees ....................................... 3
Insurance and Other Fees ........................................... 7
--------------------------------------------------------------------------------
Total Expenses, Net .............................................. 1,115
--------------------------------------------------------------------------------
Net Investment Income .......................................... 898
--------------------------------------------------------------------------------
Net Realized Gain from Securities Sold ............................. 11,038
Net Change in Unrealized Depreciation on Investment Securities ..... (583)
--------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments .................. 10,455
--------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations................$11,353
================================================================================
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) FMC SELECT FUND
<TABLE>
<CAPTION>
For the Years Ended October 31,
FMC SELECT FUND
-----------------------
11/01/99 11/01/98
TO 10/31/00 TO 10/31/99
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Activities:
Net Investment Income........................................................ $ 898 $ 827
Net Realized Gain from Securities Sold ...................................... 11,038 14,108
Net Change in Unrealized Appreciation (Depreciation) on Investment Securities (583) 3,272
--------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations....................... 11,353 18,207
--------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ....................................................... (1,074) (681)
Realized Capital Gains....................................................... (14,109) (4,769)
--------------------------------------------------------------------------------------------------------------
Total Distributions ....................................................... (15,183) (5,450)
--------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ................................................. 4,201 13,047
Reinvestment of Cash Distributions .......................................... 15,177 5,232
Cost of Shares Redeemed ..................................................... (22,971) (15,428)
--------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Derived from Capital Share Transactions.... (3,593) 2,851
--------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets ................................... (7,423) 15,608
--------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ......................................................... 115,569 99,961
--------------------------------------------------------------------------------------------------------------
End of Period ............................................................... $108,146 $115,569
==============================================================================================================
Shares Issued and Redeemed:
Shares Issued .............................................................. 247 704
Shares Issued in Lieu of Cash Distributions ................................ 920 303
Shares Redeemed ............................................................ (1,356) (823)
--------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares ......................................... (189) 184
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
FINANCIAL HIGHLIGHTS FMC SELECT FUND
For a Share Outstanding Throughout Each Period
For the Years Ended October 31,
<TABLE>
<CAPTION>
Net Net
Asset Realized and Distributions Distributions Asset
Value, Net Unrealized from Net from Value,
Beginning Investment Gain on Investment Capital End Total
of Period Income Securities Income Gains of Period Return
--------- ---------- ------------ ------------- ------------- --------- --------
---------------
FMC SELECT FUND
---------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 $19.34 $0.15 $1.78 $(0.18) $(2.40) $18.69 11.89%
1999 17.26 0.14 2.88 (0.11) (0.83) 19.34 18.18
1998 16.82 0.17 1.43 (0.17) (0.99) 17.26 9.81
1997 13.42 0.16 3.81 (0.16) (0.41) 16.82 30.51
1996 10.97 0.14 2.48 (0.14) (0.03) 13.42 23.99
</TABLE>
<TABLE>
<CAPTION>
Ratio
of Net
Ratio Ratio Investment
Net of Net of Expenses Income
Assets, Ratio Investment to Average to Average
End of Expenses Income Net Assets Net Assets Portfolio
of Period to Average to Average (Excluding (Excluding Turnover
(000) Net Assets Net Assets Waivers) Waivers) Rate
-------- ---------- ---------- ---------- ----------- ---------
---------------
FMC SELECT FUND
---------------
<S> <C> <C> <C> <C> <C> <C>
2000 $108,146 1.06% 0.85% 1.06% 0.85% 24.81%
1999 115,569 1.08 0.73 1.08 0.73 26.23
1998 99,961 1.09 1.01 1.11 0.99 29.72
1997 75,691 1.10 1.08 1.17 1.01 21.71
1996 47,909 1.10 1.10 1.20 1.00 24.39
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS FMC SELECT FUND
October 31, 2000
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 Funds are not
presented herein. The assets of each Fund are segregated, and a shareholder's
interest is limited to the Fund 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 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.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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. 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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) FMC SELECT FUND
October 31, 2000
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 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 0.80%
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 1.10% 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 year ended October 31, 2000 are as follows:
(000)
-----------
Purchases
U.S. Government ..................... $ 998
Other ............................... 24,162
Sales
U.S. Government ..................... 3,226
Other ............................... 36,157
At October 31, 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 October 31, 2000, is as follows:
(000)
-----------
Aggregate gross unrealized
appreciation ........................ $29,666
Aggregate gross unrealized
depreciation ........................ (7,048)
-------
Net unrealized appreciation ........... $22,618
=======
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of FMC Select Fund of The Advisors'
Inner Circle Fund:
We have audited the accompanying statement of net assets of FMC Select Fund (the
"Fund"), one of the funds constituting The Advisors' Inner Circle Fund, as of
October 31, 2000, 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. 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, 2000, by correspondence with
the custodian and broker. 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 FMC
Select Fund of The Advisors' Inner Circle Fund as of October 31, 2000, and the
results of its operations, the changes in its net assets, and the financial
highlights for the periods presented, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
December 15, 2000
15
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ADVISORS' INNER CIRCLE FUND
(UNAUDITED)
For shareholders that do not have an October 31, 2000 tax year end, this notice
is for informational purposes only. For shareholders with an October 31, 2000
tax year end, please consult your tax advisor as to the pertinence of this
notice. For the fiscal year ended October 31, 2000, each portfolio is
designating the following items with regard to distributions paid during the
year.
<TABLE>
<CAPTION>
LONG TERM
(20% RATE) ORDINARY
CAPITAL GAIN INCOME TAX-EXEMPT TOTAL QUALIFYING
FUND DISTRIBUTION DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1)
------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
FMC Select Fund 92.93% 7.07% 0.00% 100.00% 75.72%
</TABLE>
---------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected as a percentage of "Ordinary
Income Distributions".
16
<PAGE>
NOTES
<PAGE>
NOTES
<PAGE>
<PAGE>
=====================================================
FMC SELECT FUND
P.O. Box 219009
Kansas City, MO 64121-9009
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-003-07
=====================================================
