THE ADVISORS' INNER CIRCLE FUND
[HGK Logo Omitted]
FIXED INCOME FUND
EQUITY VALUE FUND
SEMI-ANNUAL REPORT TO SHAREHOLDERS
AS OF APRIL 30, 2000
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 6 months
ending April 30, 2000 of 0.31% versus a negative total return of 1.49% for the
Lehman Brothers Government/Corporate Bond Index.
REVIEW
A flight to quality resulting from volatility in the equity market and an
aversion to spread risk by fixed income investors led Treasury securities to
their best relative performance since 1998. This came even as the Fed continued
to raise interest rates in their battle against inflation. Additional support
for Treasuries came from the positive supply technicals as the Treasury
Department stepped up its buyback program. Unfortunately, this did little to
help the diversified fixed income portfolio as investors and issuers of spread
product (Agencies and Corporates) remained on the sidelines. The resulting lack
of liquidity caused spread product to move to historically wide levels.
Additionally, U.S. Agency securities widened substantially as a result of
uncertainty regarding the future of the implicit guarantee by the Government for
these bonds (i.e. FNMA and FHLB).
The Fund's portfolio is naturally overweighted to Agencies and Corporate bonds.
This exposure to spread product, combined with the impact of a position in
Service Corp (which was downgraded by Moody's and Standard & Poors), resulted in
the Fund's underperformance relative to index during the period.
OUTLOOK
We expect the Fed to continue their hawkish stance on interest rates, continuing
to raise rates unless the economy shows strong signs of a slowdown and inflation
pressures appear to be easing. This will have little impact on the overall level
of interest rates, but will keep the yield curve inverted. We do not foresee any
significant near-term recovery in Corporate bonds, but we do believe that Agency
bonds should rebound as the threat of government legislation fades.
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 Target Large Value Index over
shorter periods. A secondary objective is lower-than-market volatility, which
may be achieved through broad sector diversification.
PERFORMANCE SUMMARY
For the six-month period ending April 30, the Fund returned 0.56%. This compares
favorably to the Fund's performance benchmark, the Wilshire Target Large Value
Index, which posted a return of -4.69% over the same period.
REVIEW
The big story in the stock market since November has been the huge rise in the
NASDAQ stocks, which are predominately Technology-related stocks. While the Fund
does have a 15% allocation in Technology, it is underweighted relative to the
overall market in this sector. As a result the Equity Value Fund's returns, like
many diversified funds, failed match the headline-grabbing returns of those
funds with large exposure to Technology. But that sword cuts both ways, as seen
in the big sell-off in the NASDAQ since its March high. In fact, the Fund from
January 1st was up 1.16% while the S&P 500 was down -0.78% and the NASDAQ fell
-5.08%.
Two sectors positively impacting the Fund's performance were Energy and Basic
Materials. All Energy stocks have done well with oil near $30/barrel. In Basic
Materials, we took profits in Alcoa after its strong showing in 1999. One new
name in the portfolio in 2000 is Lincoln National, a financial services company
specializing in life insurance. Financial stocks sold off as the Federal Reserve
raised interest rates three times, but they have rebounded recently as investors
anticipate the end of the rate increases.
OUTLOOK
Although inflation pressures have been building, the unemployment rate may have
finally bottomed. The interest rate hikes by the Fed seem to be working, with
most economists now predicting slower GDP growth in the second half of 2000. The
portfolio is positioned to participate should the Fed achieve another "soft
landing" (slowing the economy without pushing it into recession). As such, we
remain overweighted in sectors such as Consumer Cyclicals and Capital Goods.
Given the high level of volatility in the market, we expect to add
opportunistically to the Fund's Technology holdings. As always, our focus
remains on managing a diversified portfolio of good quality companies that meet
the standards of our disciplined approach to cash flow analysis and fundamental
research.
2
<PAGE>
SCHEDULE OF INVESTMENTS HGK FIXED INCOME FUND
April 30, 2000 (Unaudited)
Face Market
Amount Value
HGK FIXED INCOME FUND (000) (000)
-------------------------------------------------------
[Pie Chart Omitted]
Plot points as follows:
% of Total Investments
Mortgage-Backed Floating Rate Bonds 4%
Asset-Backed Securities 4%
U.S. Gov't. Mortgage-Backed Securities 12%
U.S. Gov't. Agency Obligations 15%
U.S. Treasury Obligations 16%
Repurchase Agreement 3%
Corporate Obligations 46%
CORPORATE OBLIGATIONS (45.6%)
AEROSPACE & DEFENSE (1.8%)
Lockheed Martin
8.200%, 12/01/09 $ 250 $ 242
------
AIR TRANSPORTATION (3.6%)
US Airways
8.360%, 07/20/20 500 492
------
BROADCASTING, NEWSPAPERS & ADVERTISING (4.2%)
British Sky Broadcasting
6.875%, 02/23/09 650 569
------
ELECTRICAL SERVICES (1.7%)
Empresa Nacional Electric
7.750%, 07/15/08 250 230
------
FINANCIAL SERVICES (11.3%)
Block Financial
8.500%, 04/15/07 250 249
Finova Capital
7.250%, 11/08/04 275 252
General Elec. Cap
7.375%, 01/19/10 350 350
General Motors Acceptance
6.625%, 10/15/05 150 141
IMC Home Equity Series 1998-A5
6.360%, 08/20/22 225 220
Lehman Brothers Holdings
7.500%, 09/01/06 350 338
------
1,550
------
INSURANCE (4.0%)
Conseco
9.000%, 10/15/06 250 145
PXRE Capital Trust 1
8.850%, 02/01/27 150 123
Trenwick Cap Trust I
8.820%, 02/01/37 325 282
------
550
------
Face Market
Amount Value
(000) (000)
-------------------------------------------------------
MACHINERY (5.3%)
Deere & Co.
7.850%, 05/15/10 $ 725 $ 725
------
RETAIL (2.9%)
Service International
6.000%, 12/15/05 680 401
------
PAPER & PAPER PRODUCTS (1.7%)
Champion International
7.350%, 11/01/25 125 111
Westvaco
8.200%, 01/15/30 125 124
------
235
------
PRINTING & PUBLISHING (3.2%)
News America Holdings
9.250%, 02/01/13 425 443
------
TELEPHONES & TELECOMMUNICATION (5.9%)
BellSouth Cap Funding
7.875%, 02/15/30 675 678
MCI Worldcom
6.950%, 08/15/28 150 133
------
811
------
TOTAL CORPORATE OBLIGATIONS
(Cost $6,450) 6,248
------
ASSET-BACKED SECURITIES (4.1%)
Countrywide Asset-Backed
Certificates Ser 1999-1
5.995%, 03/25/13 76 76
Peco Energy Transition Trust
Ser 1999-A Cl A-6
6.050%, 03/01/09 525 483
------
TOTAL ASSET-BACKED SECURITIES
(Cost $600) 559
------
U.S. GOVERNMENT AGENCY OBLIGATIONS (14.4%)
Fannie Mae MTN
6.400%, 11/04/02 350 343
Federal Home Loan Bank
6.750%, 02/01/02 350 348
Fannie Mae
6.400%, 05/14/09 250 231
Freddie Mac
5.250%, 02/16/01 810 802
Freddie Mac
7.000%, 03/15/10 250 245
------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,993) 1,969
------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
SCHEDULE OF INVESTMENTS HGK FIXED INCOME FUND
April 30, 2000 (Unaudited)
Face Market
HGK FIXED INCOME FUND Amount Value
(concluded) (000) (000)
-------------------------------------------------------
MORTGAGE-BACKED FLOATING RATE BOND (3.7%)
Gracechurch Card Funding PLC
6.310%, 11/15/04 $ 500 $ 500
------
TOTAL MORTGAGE-BACKED FLOATING RATE BOND
(Cost $500) 500
------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (12.1%)
Federal National Mortgage
Association
5.650%, 06/01/01 1,000 987
Federal National Mortgage
Association Ser MTN
6.270%, 02/05/08 175 162
Freddie Mac
7.500%, 12/01/29 246 241
Government National Mortgage
Association
7.000%, 09/20/29 272 260
------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $1,682) 1,650
------
U.S. TREASURY OBLIGATIONS (15.9%)
U.S. Treasury Bonds
8.125%, 05/15/21 650 789
5.250%, 02/15/29 800 704
U.S. Treasury Notes
5.875%, 11/15/05 200 194
6.875%, 05/15/06 475 483
------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $2,093) 2,170
------
Face Market
Amount Value
(000) (000)
-------------------------------------------------------
REPURCHASE AGREEMENT (2.7%)
Morgan Stanley, 5.80%, dated
04/28/00, matures 05/01/00,
repurchase price $375,116
(collateralized by U.S. Treasury
Note, 03/31/01, market value
$535,021) (A) $ 375 $ 375
------
TOTAL REPURCHASE AGREEMENT
(Cost $375) 375
------
TOTAL INVESTMENTS (98.5%)
(Cost $13,693) $13,471
=======
(A) THE RATE REPORTED ON THE SCHEDULE OF INVESTMENTS IS THE EFFECTIVE YIELD AS
OF APRIL 30, 2000.
CL -- CLASS
MTN -- MEDIUM TERM NOTE
PLC -- PUBLIC LIMITED COMPANY
SER -- SERIES
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES HGK FIXED INCOME FUND
April 30, 2000 (Unaudited)
HGK
FIXED INCOME
FUND
(000)
------------
Assets:
Investments at value (cost $13,693)............................... $13,471
Cash ............................................................. 76
Accrued Income.................................................... 263
Receivable for investment securities sold ........................ 700
Other assets ..................................................... 22
--------------------------------------------------------------------------------
Total Assets ................................................... 14,532
--------------------------------------------------------------------------------
Liabilities:
Payable for investment securities purchased ...................... 725
Accrued expenses payable ......................................... 37
Distribution payable ............................................. 74
Other liabilities ................................................ 22
--------------------------------------------------------------------------------
Total Liabilities .............................................. 858
--------------------------------------------------------------------------------
Total Net Assets ............................................. 13,674
================================================================================
Net Assets:
Portfolio Shares
(unlimited authorization -- no par value) based on 1,423,570
outstanding shares of beneficial interest ...................... 14,840
Distributions in Excess of Net Investment Income.................. (1)
Accumulated Net Realized Loss on Investments ..................... (943)
Net Unrealized Depreciation on Investments ....................... (222)
--------------------------------------------------------------------------------
Total Net Assets (100.0%) ........................................... $13,674
================================================================================
Net Asset Value, Offering and Redemption Price Per Share ......... $9.61
================================================================================
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF NET ASSETS HGK EQUITY VALUE FUND
April 30, 2000 (Unaudited)
Market
Value
HGK EQUITY VALUE FUND Shares (000)
-------------------------------------------------------
[Pie Chart Omitted]
Plot points as follows:
% of Total Fund Investments
Repurchase Agreement 1%
Other 0%
Common Stock 99%
COMMON STOCKS (98.5%)
AIR TRANSPORTATION (1.2%)
AMR* 2,200 $ 75
-----
AUTOMOTIVE (4.7%)
Dana 4,064 123
General Motors 1,800 168
-----
291
-----
BANKS (11.4%)
Bank of America 3,500 171
Chase Manhattan 2,400 173
Golden West Financial 5,400 184
Mellon Financial 600 19
National City 800 14
PNC 3,500 153
-----
714
-----
BUILDING CONSTRUCTION (2.7%)
Martin Marietta Materials 3,200 170
-----
CHEMICALS (1.5%)
E.I. du Pont de Nemours 2,000 95
-----
COMPUTERS & SERVICES (6.4%)
Compaq Computer 4,500 132
Computer Associates International 2,000 112
First Data 1,500 73
Hewlett Packard 600 81
-----
398
-----
CONTAINERS & PACKAGING (2.1%)
Newell Rubbermaid 5,200 131
-----
DIVERSIFIED OPERATIONS (2.1%)
Honeywell International 2,300 129
-----
Market
Value
Shares (000)
-------------------------------------------------------
DRUGS (5.9%)
Abbott Laboratories 5,000 $ 192
Bristol-Myers Squibb 1,000 52
Merck & Company 1,800 125
-----
369
-----
ELECTRICAL SERVICES (4.4%)
Emerson Electric 2,000 110
Texas Utilities 5,000 168
-----
278
-----
ENTERTAINMENT (2.8%)
Walt Disney 4,000 173
-----
FOOD, BEVERAGE & TOBACCO (2.2%)
H.J. Heinz 4,000 136
-----
GAS/NATURAL GAS (8.4%)
Baker Hughes 3,200 102
Keyspan 5,500 162
USX-Marathon Group 4,800 112
Williams Companies 4,000 149
-----
525
-----
INSURANCE (3.4%)
Lincoln National 1,500 52
Torchmark 6,500 163
-----
215
-----
LEISURE PRODUCTS (1.4%)
Hasbro 5,500 88
-----
MACHINERY (8.3%)
Deere 3,800 153
Dover 1,200 61
Ingersoll-Rand 3,500 164
Parker-Hannifin 3,000 139
-----
517
-----
MEDICAL PRODUCTS & SERVICES (3.3%)
Tenet Healthcare* 8,000 204
-----
PAPER & PAPER PRODUCTS (2.5%)
Mead 4,500 157
-----
PETROLEUM REFINING (4.2%)
Chevron 1,600 136
Texaco 2,600 129
-----
265
-----
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF NET ASSETS HGK EQUITY VALUE FUND
April 30, 2000 (Unaudited)
Shares/ Market
HGK EQUITY VALUE FUND Face Amount Value
(CONCLUDED) (000) (000)
-------------------------------------------------------
PROFESSIONAL SERVICES (1.1%)
Ogden 7,000 $ 69
-----
RAILROADS (1.2%)
Burlington Northern Santa Fe 1,500 36
Norfolk Southern 2,200 39
-----
75
-----
RETAIL (3.3%)
Harcourt General 2,000 75
McDonald's 3,400 130
-----
205
-----
SEMI-CONDUCTORS/INSTRUMENTS (3.2%)
Intel 1,600 203
-----
STEEL & STEEL WORKS (2.1%)
Alcoa 2,000 130
-----
TELEPHONES & TELECOMMUNICATION (1.3%)
GTE 1,200 81
-----
TRAVEL SERVICES (0.9%)
Sabre Holdings* 1,589 55
-----
WHOLESALE (6.5%)
Avnet 3,000 236
Supervalu 8,100 168
-----
404
-----
TOTAL COMMON STOCKS
(Cost $6,329) 6,152
-----
REPURCHASE AGREEMENT (1.1%)
Morgan Stanley, 5.80%, dated
04/28/00, matures 05/01/00,
repurchase price $71,705
(collateralized by U.S.
Treasury Note, 03/31/01,
market value $110,017) (A) $ 72 72
-----
TOTAL REPURCHASE AGREEMENT
(Cost $72) 72
-----
TOTAL INVESTMENTS (99.6%)
(Cost $6,401) 6,224
-----
OTHER ASSETS AND LIABILITIES, NET (0.4%) 22
-----
Market
Value
(000)
-------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A (unlimited
authorization -- no par value)
based on 679,468 outstanding
shares of beneficial interest $6,398
Distributions in Excess of
Net Investment Income (1)
Accumulated Net Realized Gain
on Investments 26
Net Unrealized Depreciation
on Investments (177)
-----
TOTAL NET ASSETS (100.0%) $6,246
======
Net Asset Value, Offering and Redemption
Price Per Share $9.19
=====
*NON-INCOME PRODUCING SECURITY
(A) THE RATE REPORTED ON THE STATEMENT OF NET ASSETS IS THE EFFECTIVE YIELD AS
OF APRIL 30, 2000.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENTS OF OPERATIONS HGK FUNDS
For the six-month period ended April 30, 2000. (Unaudited)
<TABLE>
<CAPTION>
HGK HGK
FIXED INCOME EQUITY VALUE
FUND FUND
----------- -----------
11/01/99 11/01/99
TO 4/30/00 TO 04/30/00
(000) (000)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividend Income.................................................. $ -- $ 64
Interest Income ................................................. 549 3
------------------------------------------------------------------------------------------------------
Total Investment Income........................................ 549 67
------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................................ 38 28
Investment Advisory Fee Waiver .................................. (38) (28)
Reimbursements by Advisor........................................ (20) (59)
Administrative Fees ............................................. 37 37
Professional Fees ............................................... 22 18
Transfer Agent Fees ............................................. 17 18
Printing Fees ................................................... 10 5
Trustee Fees .................................................... 3 3
Registration Fees ............................................... 3 4
Insurance and Other Fees ........................................ 2 --
Organizational Fees ............................................. -- 6
Custodian Fees .................................................. 3 6
Distribution Fees................................................ -- 8
------------------------------------------------------------------------------------------------------
Total Expenses, Net ............................................. 77 46
------------------------------------------------------------------------------------------------------
Net Investment Income ....................................... 472 21
------------------------------------------------------------------------------------------------------
Net Realized (Loss) Gain from Securities Sold ................... (396) 26
Net Change in Unrealized Depreciation of Investment Securities .. (44) (30)
------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Loss on Investments ............... (440) (4)
------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations ............ $ 32 $ 17
======================================================================================================
</TABLE>
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>
STATEMENTS OF CHANGES IN NET ASSETS HGK FUNDS
For the six-month period ended April 30, 2000 (Unaudited)
and the period ended October 31, 1999.
<TABLE>
<CAPTION>
HGK HGK
FIXED INCOME EQUITY VALUE
FUND FUND
------------------------- ------------------------
11/01/99 11/01/98 11/01/99 06/09/99(1)
TO 4/30/00 TO 10/31/99 TO 4/30/00 TO 10/31/99
(000) (000) (000) (000)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income ............................. $ 472 $ 887 $ 21 $ 10
Net Realized (Loss) Gain from Securities Sold ..... (396) (545) 26 113
Net Change in Unrealized Depreciation of
Investment Securities ........................... (44) (290) (30) (147)
---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. 32 52 17 (24)
---------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ............................. (472) (888) (17) (15)
Realized Capital Gains ............................ -- (208) (113) --
---------------------------------------------------------------------------------------------------------------------
Total Distributions................................ (472) (1,096) (130) (15)
---------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ....................... 223 4,936 341 6,633
Reinvestment of Cash Distributions ................ 463 1,153 130 15
Cost of Shares Redeemed ........................... (2,814) (3,748) (532) (189)
---------------------------------------------------------------------------------------------------------------------
(Decrease) Increase in Net Assets from Capital Share
Transactions .................................... (2,128) 2,341 (61) 6,459
---------------------------------------------------------------------------------------------------------------------
Total (Decrease) Increase in Net Assets ........... (2,568) 1,297 (174) 6,420
---------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ............................... 16,242 14,945 6,420 --
---------------------------------------------------------------------------------------------------------------------
End of Period ..................................... $13,674 $16,242 $6,246 $6,420
---------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ............................................ 23 484 38 707
Issued in Lieu of Cash Distributions .............. 48 113 15 2
Redeemed .......................................... (291) (375) (62) (20)
---------------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Share Transactions...... (220) 222 (9) 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.
9
<PAGE>
FINANCIAL HIGHLIGHTS HGK FUNDS
For a Share Outstanding Throughout Each Period
For the six-month period ended April 30, 2000 (Unaudited) and the periods ended
October 31, 1999.
<TABLE>
<CAPTION>
Net Realized and Net Net
Asset Unrealized Distributions Distributions Asset Assets
Value Net Gains or from Net From Value End
Beginning Investment (Losses) on Investment Capital End Total of Period
of Period Income Securities Income Gains of Period Return (000)
--------- -------- ---------- -------- ------- ----------- --------- --------
----------------
HGK FIXED INCOME
----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 $ 9.88 0.30 (0.27) (0.30) -- $ 9.61 0.31% $13,674
1999 $10.51 0.54 (0.49) (0.54) (0.14) $ 9.88 0.48% $16,242
1998 $10.53 0.60 0.02 (0.60) (0.04) $10.51 6.00% $14,945
1997 $10.29 0.60 0.24 (0.60) -- $10.53 8.47% $13,371
1996 $10.88 0.61 (0.17) (0.61) (0.42) $10.29 4.29% $12,515
1995(1) $10.00 0.67 0.88 (0.67) -- $10.88 16.07%* $10,420
----------------
HGK EQUITY VALUE
----------------
2000 $ 9.32 0.01 0.04 (0.02) (0.16) $ 9.19 (4.94)% $ 6,246
1999(2) $10.00 0.02 (0.68) (0.02) -- $ 9.32 (6.46)% $ 6,420
Ratio
Ratio of Net
Ratio of Expenses Investment
of Net to Average Income (Loss) to
Ratio Investment Net Assets Average Net
of Expenses Income (Excluding Assets (Excluding Portfolio
to Average to Average Waivers and Waivers and Turnover
Net Assets Net Assets Reimbursements) Reimbursements) Rate
---------- ---------- --------------- --------------- --------
----------------
HGK FIXED INCOME
----------------
<S> <C> <C> <C> <C> <C>
2000 1.00%* 6.18%* 1.77%* 5.41%* 100.79%
1999 1.00% 5.33% 1.71% 4.62% 322.36%
1998 1.00% 5.62% 1.70% 4.92% 173.93%
1997 1.00% 5.85% 1.64% 5.21% 256.52%
1996 1.00% 5.92% 1.51% 5.41% 264.02%
1995(1) 1.00%* 6.38%* 2.37%* 5.01%* 300.48%
----------------
HGK EQUITY VALUE
----------------
2000 1.50%* 0.70%* 4.21%* (2.01)%* 8.83%
1999(2) 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.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS HGK FUNDS
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 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 nine 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 AND INVESTMENT 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 Fund 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.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) HGK FUNDS
April 30, 2000 (Unaudited)
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 $114 for the period ended April 30, 2000.
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 .20% of the first $250 million, .15% of the
next $250 million, and .12% of any amount above $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.
HGK Equity Value Fund has adopted a distribution plan that allows the Fund to
pay distribution and service fees for the sale and distribution of its shares
and for services provided to shareholders. Because these fees are paid out of a
Fund's assets continuously, overtime these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. The
Plan provides for payment of fees to the Distribution at an annual rate of .25%
of the average daily net assets.
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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) HGK FUNDS
April 30, 2000 (Unaudited)
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.
6. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the period ended April 30, 2000 are as follows:
HGK FIXED HGK EQUITY
INCOME FUND VALUE FUND
(000) (000)
----------- ----------
Purchases
Government ......... $4,774 $ --
Other .............. 8,455 536
Sales
Government ......... 7,962 --
Other .............. 7,738 674
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 Funds
at April 30, 2000, are as follows:
HGK FIXED HGK EQUITY
INCOME FUND VALUE FUND
(000) (000)
------------ ----------
Aggregate gross
unrealized
appreciation ....... $ 108 $ 610
Aggregate gross
unrealized
depreciation ....... (330) (787)
------- ------
Net unrealized
depreciation ....... $ (222) $(177)
======= ======
13
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HGK-F-005-04
