THE ADVISORS' INNER CIRCLE FUND
[LOGO OMITTED]
FIXED INCOME FUND
EQUITY VALUE FUND
ANNUAL REPORT TO SHAREHOLDERS
AS OF OCTOBER 31, 1999
THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED
BY A CURRENT PROSPECTUS FOR THE FUND DESCRIBED.
<PAGE>
MANAGER'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
INVESTMENT OBJECTIVES
The HGK Fixed Income Fund seeks total return through current income and capital
appreciation consistent with the preservation of capital. The Fund's goal is to
outperform the Lehman Brothers Government/ Corporate Bond Index while taking
less risk. HGK controls risk by maintaining a relatively duration-neutral
posture versus the Index, while adding value through over-weighting particular
sectors or areas of the yield curve. The Fund invests primarily in U.S.
Government securities, investment-grade corporate bonds, and asset-backed
securities.
PERFORMANCE SUMMARY
The HGK Fixed Income Fund produced a positive total return for the 12 months
ending October 31, 1999 of 0.48% versus a negative total return of -0.66% for
the Lehman Brothers Government/Corporate Bond Index.
PERFORMANCE RATIONALE
The fixed income markets are in the midst of their second worst year of
performance on record. The calendar year performance (-1.49%) of the Lehman
Government/Corporate Index is second only to the -3.51% recorded in 1994. The
combination of higher treasury yields, brought about by three 25 basis point
increases in interest rates by the Federal Reserve, a rebound from the "flight
to quality" in the third quarter of 1998, and widening spreads versus treasuries
on all high grade fixed income products, has made for a very challenging year
managing fixed income portfolios. In addition, the continuing fear of Y2K
calamities exaggerated the widening of corporate spreads during the first ten
months of 1999 as investors were aggressively adding liquidity to their
portfolios.
Additionally, even considering the approximately 100+ basis point rise over the
past 10 months, interest rates are still at historically low levels (the average
A rated security with a 10 year maturity would yield 7.25%). This historically
low level has been perceived as an attractive funding opportunity by issuers of
corporate and agency debt. The level of rates, combined with Y2K concerns and
the prospect of the Fed continuing to raise interest rates, had many issuers of
debt accelerating their funding schedules hoping to avoid a potential retreat to
the sidelines by investors who may not want to actively participate in spread
product as we approach year-end. This produced an avalanche of corporate and
government agency supply in the first ten months of 1999 that overwhelmed fixed
income investors and put significant widening pressure on spreads versus
treasury bonds. Corporate spreads did stage a modest recovery in September and
October as investors were forced to put cash to work when the corporate calendar
did not meet expectations.
STRATEGY FOR THE COMING PERIOD
Our outlook for 2000 is for continued uncertainty regarding the direction of
interest rates with a slight bias toward higher rates. The Federal Reserves'
inability to believe the combination of an expanding economy with little or no
inflation is feasible will prevent interest rates from staging any significant
recovery in 2000. We believe fixed income returns will be generated from a
recovery in spread product with an increasing importance being placed upon
individual security selection.
As such, we continue to overweight spread product, specifically corporate and
agency securities, and have biased portfolio holdings towards large liquid
benchmark issues. We believe the portfolio is positioned to take full advantage
of the anticipated recovery in spreads while mitigating exposure to further
rate increases.
1
<PAGE>
MANAGER'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
INVESTMENT OBJECTIVES
The HGK Equity Value Fund seeks to achieve long-term capital appreciation by
investing primarily in large capitalization U.S. stocks that exhibit value
characteristics. The Fund's goal is to outperform the overall market over an
entire market cycle and outperform the Wilshire Large Value Index over shorter
periods. A secondary objective is lower-than-market volatility, which may be
achieved through broad sector diversification.
PERFORMANCE SUMMARY
From the Fund's inception on June 9, 1999, through October 31, the Fund returned
- -6.46%. For comparison purposes, the Fund's four-month return (July 1 - October
31) was -6.66%, as compared to the Wilshire Large Value Index return of -10.94%.
REVIEW
After big gains in April and May, value-oriented stocks retreated significantly
in the face of two interest rate hikes by the Federal Reserve. Based on this
reaction, the market seems to be anticipating a recession that would negatively
impact the earnings of cyclical companies in sectors such as Capital Goods,
Basic Materials, Transportation, and Energy. Our assessment is the opposite: the
U.S. economy's continued strength plus the ongoing recovery in Asia and Europe
will continue to propel cyclical stocks' earnings higher. We view the Fed's
action as merely taking back the liquidity-driven rate cuts of last autumn.
However, the negative effects of higher rates are being felt in the Financial
sector, in which the Fund is under-weighted relative to its value benchmark.
OUTLOOK
Given the market's rebound at the start of the fourth quarter, investors appear
to have concluded that Y2K will be a non-event. While HGK is not so sanguine,
especially given the interconnectedness of the global economy, we are staying
fully invested while keeping a close eye on the situation. Productivity gains
continue to allow the domestic economy to grow steadily with both low inflation
and low unemployment. While this scenario is unlikely to continue indefinitely,
it isn't clear yet what will trigger the end. We feel confident that the
continued strength in the global economy will cushion any slowdown here at home.
We have positioned the portfolio to benefit from this by over-weighting cyclical
sectors such as Capital Goods, Basic Materials, Energy, and Transportation. Even
if there is a recession, we feel that the downside is limited given the large
valuation gap that exists between growth and value stocks.
2
<PAGE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 NVESTMENT IN THE HGK FIXED
INCOME FUND, VERSUS THE LEHMAN GOVERNMENT/CORPORATE BOND INDEX
[line graph omitted]
Plot points are as follows:
HGK Fixed Income Fund Lehman Government/Corporate Index
11/30/94 10000 10000
10/31/95 11500 11637
10/31/96 11991 12264
10/31/97 13006 13344
10/31/98 13787 14715
10/31/99 13853 14618
(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.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE HGK EQUITY
VALUE FUND, VERSUS THE WILSHIRE TARGET LARGE VALUE INDEX
[Line Graph omitted]
Plot Points are as follows:
HGK Fixed Income Fund Wilshire
6/30/99 10000 10000
10/31/95 9334 8904
(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.
3
<PAGE>
SCHEDULE OF INVESTMENTS THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
Face Market
Amount Value
HGK FIXED INCOME FUND (000) (000)
- ---------------------------------------------------------
% of Total Fund Investments
[Pie Graph Omitted]
Percentage points are as follows:
U.S.Treasury Oblligations 36%
Asset-Backed Securities 4%
U.S. Gov't Agency Obligations 9%
U.S. Gov't Mortgage-Backed Securities 15%
Corporate Obligations 36%
Repurchase Agreement 0%
CORPORATE OBLIGATIONS (36.2%)
AIR TRANSPORTATION (3.1%)
US Airways
8.360%, 07/20/20 $ 500 $ 496
--------
BROADCASTING, NEWSPAPERS & ADVERTISING (5.6%)
British Sky Broadcasting
6.875%, 02/23/09 600 542
News America
7.250%, 05/18/18 400 365
--------
907
--------
COMPUTERS & SERVICES (3.7%)
Electronic Data Systems
7.450%, 10/15/29 600 601
--------
FINANCIAL SERVICES (4.4%)
IMC Home Equity Series 1998-A5
6.360%, 08/20/22 225 222
Lehman Brothers Holdings
6.625%, 02/05/06 150 144
7.500%, 09/01/06 350 344
--------
710
--------
INSURANCE (5.3%)
Conseco
9.000%, 10/15/06 450 452
Delphi Funding LLC
9.310%, 03/25/27 150 141
Trenwick Cap Trust I
8.820%, 02/01/37 325 274
--------
867
--------
PETROLEUM & FUEL PRODUCTS (1.1%)
Conoco
6.950%, 04/15/29 200 186
--------
Face Market
Amount Value
HGK FIXED INCOME FUND (000) (000)
- ---------------------------------------------------------
PRINTING & PUBLISHING (1.4%)
News America Holdings
7.750%, 12/01/45 $ 250 $ 228
--------
RETAIL (5.1%)
DaimlerChrysler NA Holdings
7.200%, 09/01/09 500 501
Kroger
7.625%, 09/15/06 325 324
--------
825
--------
TELEPHONES & TELECOMMUNICATION (5.2%)
AT&T
6.500%, 03/15/29 675 598
China Telecom Hk
7.875%, 11/02/04 250 249
--------
847
--------
WHOLESALE (1.3%)
PanAmerican Beverages
7.250%, 07/01/09 250 213
--------
TOTAL CORPORATE OBLIGATIONS
(Cost $5,970) 5,880
--------
ASSET-BACKED SECURITIES (3.7%)
Countrywide Asset-Backed
Certificates Ser 1999-1
5.995%, 03/25/13 114 113
Peco Energy Transition Trust
Ser 1999-A Cl A-6
6.050%, 03/01/09 525 497
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $638) 610
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS (8.6%)
Fannie Mae MTN
6.400%, 11/04/02 350 350
Federal Home Loan Bank
6.375%, 08/15/06 250 247
FHLMC
5.250%, 02/16/01 810 801
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,404) 1,398
--------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (14.5%)
Federal National Mortgage
Association
5.650%, 06/01/01 1,000 991
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
SCHEDULE OF INVESTMENTS THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
Face Market
HGK FIXED INCOME FUND Amount Value
(concluded) (000) (000)
- -------------------------------------------------------------------------------
FHLMC
5.110%, 01/19/01 $ 500 $ 494
FNMA Series MTN
6.270%, 02/05/08 175 167
GNMA
6.500%, 03/15/29 196 188
7.000%, 09/20/29 524 512
--------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $2,378) 2,352
--------
U.S. TREASURY OBLIGATIONS (35.4%)
U.S. Treasury Bond
5.250%, 02/15/29 350 303
U.S. Treasury Notes
5.625%, 11/30/00 750 750
6.625%, 06/30/01 650 658
6.625%, 04/30/02 600 610
6.875%, 05/15/06 925 960
7.000%, 07/15/06 750 783
5.500%, 05/15/09 325 312
6.000%, 08/15/09 300 300
6.125%, 08/15/29 1,075 1,071
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,774) 5,747
--------
REPURCHASE AGREEMENT (0.2%)
Morgan Stanley 5.00%, dated 10/29/99,
matures 11/01/99, repurchase price
$29,424 (collateralized by U.S.
Treasury Note, 03/31/2001, market
value $31,113) (A) $ 29 $ 29
--------
TOTAL REPURCHASE AGREEMENT
(Cost $29) 29
--------
TOTAL INVESTMENTS (98.6%)
(Cost $16,194) $ 16,016
--------
(A) THE RATE REPORTED ON THE SCHEDULE OF INVESTMENTS IS THE EFFECTIVE YIELD AS
OF OCTOBER 31, 1999.
CL -- CLASS
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
LLC -- LIMITED LIABILITY COMPANY
MTN -- MEDIUM TERM NOTE
SER -- SERIES
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
--------------
HGK
FIXED INCOME
FUND
(000)
--------------
ASSETS:
Investments at value (cost $16,194) $16,016
Cash 103
Accrued income 247
Receivable for investment securities sold 881
Other assets 29
--------
Total assets 17,276
--------
LIABILITIES:
Accrued expenses payable 29
Payable for investment securities
purchased 898
Distribution payable 78
Other liabilities 29
--------
Total liabilities 1,034
--------
Total net assets $16,242
========
NET ASSETS:
Portfolio Shares
(unlimited authorization -- no par
value) based on 1,643,659
outstanding shares of beneficial
interest 16,968
Distributions in Excess of Net
Investment Income (1)
Accumulated Net Realized Loss on
Investments (547)
Net Unrealized Depreciation on
Investments (178)
--------
TOTAL NET ASSETS (100.0%) $16,242
========
Net Asset Value, Offering and Redemption
Price Per Share $9.88
========
Amounts designated as "--" are either $0 or have been rounded to 0.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
Market
Value
HGK EQUITY VALUE FUND Shares (000)
- -------------------------------------------------------------------------------
% of Total Fund Investments
[pie graph omitted]
percentages as follows:
Common Stock 98%
Repurchase Agreement 1%
Other 1%
COMMON STOCK (98.1%)
AEROSPACE & DEFENSE (1.5%)
Allied-Signal 1,700 $ 97
--------
AIR TRANSPORTATION (2.2%)
AMR* 2,200 140
--------
AUTOMOTIVE (4.1%)
Dana 3,564 105
Delphi 209 3
General Motors 2,200 155
--------
263
--------
BANKS (13.0%)
Bank of America 3,000 193
Chase Manhattan 2,400 210
Golden West Financial 1,800 201
Mellon Financial 600 22
National City 800 24
PNC 3,100 185
--------
835
--------
BUILDING CONSTRUCTION (1.9%)
Martin Marietta Materials 3,200 125
--------
CHEMICALS (3.9%)
Dow Chemicals 1,300 154
E.I. du Pont de Nemours 1,500 97
--------
251
--------
COMPUTERS & SERVICES (4.9%)
Automatic Data Processing 400 19
Compaq Computer 4,500 85
Computer Associates International 3,000 170
Hewlett Packard 600 44
--------
318
--------
CONTAINERS & PACKAGING (2.8%)
Newell Rubbermaid 5,200 180
--------
Market
Value
Shares (000)
- -----------------------------------------------------------
DRUGS (5.3%)
Abbott Laboratories 4,500 $ 182
Merck & Company 2,000 159
--------
341
--------
ELECTRICAL SERVICES (4.3%)
Emerson Electric 2,000 120
Texas Utilities 4,000 155
--------
275
--------
ENTERTAINMENT (1.6%)
Walt Disney 4,000 106
--------
FOOD, BEVERAGE & TOBACCO (3.0%)
H.J. Heinz 4,000 191
--------
GAS/NATURAL GAS (8.6%)
Baker Hughes 3,200 89
Keyspan 5,500 155
USX-Marathon Group 4,800 140
Williams Companies 4,500 169
--------
553
--------
INSURANCE (3.2%)
Torchmark 6,500 203
--------
LEISURE PRODUCTS (1.8%)
Hasbro 5,500 113
--------
MACHINERY (6.9%)
Deere 3,000 109
Dover Corp 1,700 72
Gerber Scientific 800 15
Ingersoll-Rand 2,500 131
Parker-Hannifin 2,500 115
--------
442
--------
MEDICAL PRODUCTS & SERVICES (3.0%)
Tenet Healthcare* 10,000 194
--------
PAPER & PAPER PRODUCTS (2.4%)
International Paper 594 31
Mead 3,500 126
--------
157
--------
PETROLEUM REFINING (4.9%)
Chevron 1,700 155
Sunoco 100 2
Texaco 2,600 160
--------
317
--------
PROFESSIONAL SERVICES (1.0%)
Ogden 7,000 63
--------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
Shares/ Market
Face Amount Value
HGK EQUITY VALUE FUND (000) (000)
- ----------------------------------------------------------
RAILROADS (1.6%)
Burlington Northern Santa Fe 1,500 $ 48
Norfolk Southern 2,200 54
--------
102
--------
RETAIL (3.6%)
Harcourt General 2,000 77
McDonald's 3,400 140
Neiman-Marcus Group Cl B* 602 13
--------
230
--------
SEMI-CONDUCTORS/INSTRUMENTS (1.9%)
Intel 1,600 124
--------
STEEL & STEEL WORKS (2.1%)
Alcoa 2,200 134
--------
TELEPHONES & TELECOMMUNICATION (1.6%)
AT&T 300 14
GTE 1,200 90
--------
104
--------
WHOLESALE (7.0%)
Avnet 3,800 206
Bergen Brunswig, Cl A 10,000 71
Supervalu 8,100 170
--------
447
--------
TOTAL COMMON STOCK
(Cost $6,452) 6,305
--------
REPURCHASE AGREEMENT (1.3%)
Morgan Stanley, 5.00%, dated
10/29/99, matures 11/01/99,
repurchase price $83,484
(collateralized by U.S.
Treasury Note, 03/31/2001,
market value $88,276) (A) $ 83 83
--------
TOTAL REPURCHASE AGREEMENT
(Cost $83) 83
--------
TOTAL INVESTMENTS (99.4%)
(Cost $6,535) 6,388
--------
OTHER ASSETS AND LIABILITIES, NET (0.6%) 32
--------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 688,558 outstanding
shares of beneficial interest $ 6,459
Distributions in Excess of Net
Investment Income (5)
Accumulated Net Realized Gain
on Investments 113
Net Unrealized Depreciation on
Investments (147)
--------
TOTAL NET ASSETS (100.0%) $ 6,420
========
Net Asset Value, Offering and
Redemption Price Per Share $9.32
========
*NON-INCOME PRODUCING SECURITY
CL -- CLASS
(A) THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE EFFECTIVE YIELD AS OF OCTOBER 31, 1999.
The accompanying notes are an integral part of
the financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS THE ADVISORS' INNER CIRCLE FUND
HGK HGK
FIXED INCOME EQUITY VALUE
FUND FUND
----------- ----------
11/01/98 06/09/99(1)
TO 10/31/99 TO 10/31/99
(000) (000)
- -------------------------------------------------------------------------------
Investment Income:
Dividend Income........................ $ -- $ 32
Interest Income ...................... 1,054 6
- -------------------------------------------------------------------------------
Total Investment Income............. 1,054 38
- -------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ............. 83 17
Investment Advisory Fee Waiver ....... (83) (17)
Reimbursements by Advisor............. (35) (59)
Administrative Fees .................. 75 30
Professional Fees .................... 46 14
Transfer Agent Fees .................. 39 12
Printing Fees ........................ 21 6
Trustee Fees ......................... 6 2
Registration Fees .................... 6 13
Insurance and Other Fees ............. 2 1
Organizational Fees ................... 4 --
Custodian Fees ....................... 3 4
Distribution Fees...................... -- 5
- -------------------------------------------------------------------------------
Total Expenses, Net .................. 167 28
- -------------------------------------------------------------------------------
Net Investment Income ............ 887 10
- -------------------------------------------------------------------------------
Net Realized Gain (Loss) from
Securities Sold ...................... (545) 113
Net Change in Unrealized Depreciation
of Investment Securities ............. (290) (147)
- -------------------------------------------------------------------------------
Net Realized and Unrealized Loss on
Investments .......................... (835) (34)
- -------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations ............ $ 52 $(24)
================================================================================
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The HGK Equity Value Fund commenced operations on June 9, 1999.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS THE ADVISORS' INNER CIRCLE FUND
<TABLE>
HGK HGK
FIXED INCOME EQUITY VALUE
FUND FUND
------------------------- -------------
11/01/98 11/01/97 06/09/99(1)
TO 10/31/99 TO 10/31/98 TO 10/31/99
(000) (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Activities:
Net Investment Income .................................. $ 887 $ 791 $ 10
Net Realized Gain (Loss) from
Securities Sold .......... .......................... (545) 207 113
Net Change in Unrealized Depreciation
of Investment Securities ............................ (290) (190) (147)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from
Operations............................................ 52 808 (24)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .................................. (888) (791) (15)
Realized Capital Gains ................................. (208) (53) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions..................................... (1,096) (844) (15)
Capital Share Transactions:
Proceeds from Shares Issued ............................ 4,936 2,598 6,633
Reinvestment of Cash Distributions ..................... 1,153 770 15
Cost of Shares Redeemed ................................ (3,748) (1,758) (189)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Derived from Capital Share
Transactions ......................................... 2,341 1,610 6,459
---------------------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets ........................... 1,297 1,574 6,420
--------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period .................................... 14,945 13,371 --
- ---------------------------------------------------------------------------------------------------------------------------------
End of Period .......................................... $16,242 $14,945 $6,420
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ................................................. 484 246 707
Issued in Lieu of Cash Distributions ................... 113 73 2
Redeemed ............................................... (375) (167) (20)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Share Transactions...................... 222 152 689
==================================================================================================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The HGK Equity Value Fund commenced operations on June 9, 1999.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
FINANCIAL HIGHLIGHTS THE ADVISORS' INNER CIRCLE FUND
For a Share Outstanding Throughout Each Period
For the Periods Ended October 31,
<TABLE>
Ratio
of Net
Ratio of Investment
Expenses Income(Loss)
Realized Distribu- Ratio Ratio to Average to Average
and tions Net Net of of Net Net Assets Net Assets
Net Unrealized from Distri- Asset Assets Expenses Investment (Excluding (Excluding
Asset Gain Net butions Value End to Income to Waivers Waivers
Value Net (Loss) Invest- from End of Average Average and and Portfolio
Beginning Investment on ment Capital of Total Period Net Net Reimburse- Reimburse- Turnover
of Period Income Securities Income Gains Period Return (000) Assets Assets ments) ments) Rate
----------- -------- ---------- ------ ------ ------ ------ ------ ------ --------- ------------ ---------- ---------
- -------------------
HGK FIXED INCOME
- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $10.51 0.54 (0.49) (0.54) (0.14) $ 9.88 0.48 $16,242 1.00% 5.33% 1.71% 4.62% 322.36%
1998 $10.53 0.60 0.02 (0.60) (0.04) $10.51 6.00 $14,945 1.00% 5.62% 1.70% 4.92% 173.93%
1997 $10.29 0.60 0.24 (0.60) -- $10.53 8.47% $13,371 1.00% 5.85% 1.64% 5.21% 256.52%
1996 $10.88 0.61 (0.17) (0.61) (0.42) $10.29 4.29% $12,515 1.00% 5.92% 1.51% 5.41% 264.02%
1995(1) $10.00 0.67 0.88 (0.67) -- $10.88 16.07%* $10,420 1.00%* 6.38%* 2.37%* 5.01%* 300.48%
- -------------------
HGK EQUITY VALUE
- -------------------
1999(2) $10.00 0.02 (0.68) (0.02) -- $ 9.32 (6.46)% $ 6,420 1.50% 0.52% 5.76% (3.74)% 5.01%
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
** Annualized
(1) The HGK Fixed Income Fund commenced operations on November 3, 1994.
(2) The HGK Equity Value Fund commenced operations on June 9, 1999.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ADVISORS' INNER CIRCLE 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 a 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
HGK Fixed Income Fund and HGK Equity Value Fund (the "Funds"). The financial
statements of the remaining portfolios are presented separately. 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 Funds.
SECURITY VALUATION -- Investment securities of the Funds which are listed on
a securities exchange for which market quotations are available are valued at
the last quoted sales price for such securities on each business day, or, if
there is no such reported sales price on the valuation date, at the most
recently quoted bid price. Unlisted securities for which market quotations
are readily available are valued at the most recently quoted price. Debt
obligations with sixty days or less remaining until maturity may be valued at
their amortized cost. Under this valuation method, purchase discounts and
premiums are accreted and amortized ratably to maturity and are included in
interest income. Securities for which quotations are not readily available
are valued at fair value using methods determined in good faith by the Board
of Trustees.
FEDERAL INCOME TAXES -- It is each 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 ANDINVESTMENT INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis. Costs used in determining
realized gains and losses on the sales of investment securities are those of
the specific securities sold during the respective holding period. Purchase
discounts and premiums on securities held by the Funds are accreted and
amortized to maturity using the scientific interest method, which
approximates the effective interest method.
NET ASSET VALUE PER SHARE -- The net asset value per share of each Portfolio
is calculated on each business day by dividing the total value of assets,
less liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements and provisions adopted by the
Adviser ensure that the market value of the collateral, including accrued
interest thereon, is sufficient in the event of default by the counterparty.
If the counterparty defaults and the value of the collateral declines or if
the counterparty enters into an insolvency proceeding, realization of the
collateral by the Portfolios may be delayed or limited.
EXPENSES -- Expenses that are directly related to one of the Portfolios are
charged to the Portfolio. Other operating expenses of the Trust are prorated
to the Portfolios on the basis of relative daily net assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared daily for the HGK Fixed Income Fund and monthly for the HGK Equity
Value Fund and paid to Shareholders monthly for each of the Funds. Any net
realized capital gains are distributed to Shareholders at least annually.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
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. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being amortized
on a straight line basis over a period of sixty months commencing with
operations. In the event any of 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 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.
The Funds have entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Funds. For its services, SEI
Investments received $258 for the period ended October 31, 1999.
4. ADMINISTRATION, SHAREHOLDER SERVICING AND DISTRIBUTION AGREEMENTS:
The Trust and the Administrator are parties to an Administration Agreement
dated November 14, 1991, as amended and restated on August 15, 1999, under
which the Administrator provides management and administrative services for an
annual fee equal to the higher of $75,000 or .18%of the first $250 million,
.14% of the next $250 million, and .10% of any amountabove $500 million of the
Fund's 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 Trust.
The Trust and Distributor are parties to a Distribution Agreement dated November
14, 1991 as amended and restated on August 8, 1994. The Distributor receives no
fees for its distribution services under this agreement.
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Funds and HGK Asset Management, Inc. (the "Adviser") are parties to an
Investment Advisory Agreement dated August 15, 1994 under which the Adviser
receives an annual fee equal to .50% and .90% of the average daily net assets of
the HGK Fixed Income and HGK Equity Value Funds, respectively. The Adviser has
voluntarily agreed to waive all or a portion of its fees and to reimburse
expenses in order to limit operating expenses for the HGK Fixed Income Fund to
an annual rate of not more than 1.00% of the average daily net assets and has
contractually agreed to waive fees and reimburse expenses in order to keep total
operating expense from exceeding 1.50% for a period of one year for the HGK
Equity Value Fund. Fee waivers and expense reimbursements are voluntary for the
HGK Fixed Income Fund and may be terminated at any time.
First Union National Bank acts as custodian (the "Custodian") for the Funds. The
Custodian plays no role in determining the investment policies of the Funds or
which securities are to be purchased or sold by the Fund.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ADVISORS' INNER CIRCLE FUND
October 31, 1999
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:
HGK EQUITY
HGK FIXED INCOME VALUE FUND
FUND (000) (000)
---------------- ----------
Purchases
Government ....... $18,584 $ 451
Other ............ 25,933 6,133
Sales
Government ....... $14,828 $ --
Other ............ 27,471 246
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 Funds
at October 31, 1999, are as follows:
HGK FIXED HGK EQUITY
INCOME FUND VALUE FUND
(000) (000)
---------- ----------
Aggregate gross
unrealized
appreciation ....... $ 20 $ 442
Aggregate gross
unrealized
depreciation ....... (198) (589)
------ ------
Net unrealized
depreciation ....... $(178) $(147)
====== ======
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
HGK Fixed Income and HGK Equity
Value Funds of
The Advisors' Inner Circle Fund:
We have audited the accompanying statement of net assets of the HGK Equity Value
Fund and the statement of assets and liabilities, including the schedule of
investments, of the HGK Fixed Income Fund (the "Funds"), two of the funds
constituting The Advisors' Inner Circle Fund, as of October 31, 1999, and the
related statements 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
HGK Fixed Income Fund and the HGK Equity Value Fund of The Advisors' Inner
Circle Fund as of October 31, 1999, and the results of their operations, the
changes in their 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
15
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ADVISORS' INNER CIRCLE FUND
(UNAUDITED)
or the 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>
LONG TERM ORDINARY
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1)
---------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
HGK Fixed Income Fund .... 11% 89% 100% 0%
LONG TERM ORDINARY
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING
PORTFOLIO (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS (1)
---------- ---------------- --------------- ---------------- ----------------
HGK Equity Value Fund ... 0% 100% 100% 0%
</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>
HGK-F-004-06
