ANNUAL REPORT
MDL
BROAD MARKET FIXED
INCOME FUND
MDL
LARGE CAP GROWTH
EQUITY FUND
MDL
OCTOBER 31, 2000
<PAGE>
LETTER TO SHAREHOLDERS OCTOBER 31, 2000
Dear Shareholders:
We at MDL Capital Management, Inc. would like to thank you for your continued
support of our efforts to create wealth for you through our mutual funds. We
continue to focus on performance and service to our shareholders. In the very
volatile markets we are faced with, it has never been more important to remain
true to one's discipline. At MDL, we have done just that with our fixed income
and equity products. Once again, we are committed to staying true to our
trademark, "Investing with Distinction".
BOND MARKET OVERVIEW
Given the slowdown that we have seen in the U.S. economy and the turbulence we
have witnessed in the equity markets, fixed income has become the asset class
of choice. Our analysis at MDL indicated that high quality; highly liquid
securities with maturities over five years would perform extremely well. As this
strategy has played out in 2000 our investors have reaped the rewards. We
continue to remain positive on the Bond market although we view several future
events with guarded optimism (Federal Reserve Policy, Presidential Election, and
Commodity Prices). But based on our current fundamental analysis we feel that
bond investors with the MDL Broad Market Fixed Income Fund can look forward to
another positive year.
EQUITY MARKET OVERVIEW
This year's stock market difficulties are the direct result of a
much-anticipated negative reaction to overzealous valuations of many so called
new economy stocks, combined with the Federal Reserve's attempts to fight off
inflation by slowing the economy. As the six interest rate increases took hold,
the economy began to decelerate. Corporate revenue projections declined and a
parade of negative earnings warnings largely from technology companies led to
dismal returns for the S&P 500 Composite Index, heavy losses on the NASDAQ, and
more specifically, a bear market in technology and Internet related stocks.
However, as the year draws to a close, we remain optimistic about the long-term
positive effects of these events on the economy and the stock market going
forward. Valuations have moderated as price to earning ratios have fallen.
Investors' overall confidence has been put in check. The great economic
expansion should continue, albeit, at a slower pace. Thus, 2001 should prove
joyous for stock market investors in the MDL Large Cap Growth Fund.
Thank You,
/S/ SIGNATURE OMITTED /S/ SIGNATURE OMITTED
MARK D. LAY STEVEN L. SANDERS
Mark D. Lay Steven L. Sanders
Chairman & CEO President
1
<PAGE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
MDL BROAD MARKET FIXED INCOME FUND VERSUS THE LEHMAN AGGREGATE BOND INDEX
Total Return(1)
---------------------------------
Annualized Annualized
One-Year 3 Year Inception
Return Return to Date
---------------------------------
7.13% 4.34% 4.34%
---------------------------------
[GRAPHIC OMITTED]
MDL Broad Market
Fixed Income Fund Lehman Aggregate Bond Index
10/31/97 10,000 10,000
10/98 10,910 10,932
10/99 10,605 10,990
10/00 11,361 11,792
(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 MDL LARGE CAP GROWTH EQUITY FUND
VERSUS THE S&P 500 COMPOSITE INDEX
[GRAPHIC OMITTED]
MDL Large Cap S&P 500
Growth Equity Fund Composite Index
10/31/97 10,000 10,000
10/31/98 11,872 12,200
10/31/99 15,006 15,332
10/31/00 15,042 16,265
----------------------------------
Total Return(1)
----------------------------------
Annualized Annualized
One-Year 3 Year Inception
Return Return to Date
----------------------------------
0.24% 14.58% 14.56%
----------------------------------
(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
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
Face Market
MDL BROAD MARKET Amount Value
FIXED INCOME FUND (000) (000)
--------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (63.8%)
U.S. Treasury Bond
6.250%, 05/15/30 $4,500 $ 4,793
U.S. Treasury Notes
7.000%, 07/15/06 1,520 1,602
6.625%, 05/15/07 1,345 1,400
6.500%, 02/15/10 3,400 3,559
6.375%, 08/15/02 1,000 1,006
6.250%, 02/15/03 1,400 1,409
6.000%, 08/15/09 275 278
4.250%, 11/15/03 1,050 1,003
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $15,086) 15,050
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS (4.5%)
FHLMC CMO, Ser 1410, Cl C
6.000%, 09/15/22 69 66
FNMA
7.250%, 01/15/10 950 984
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,029) 1,050
-------
U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS (23.1%)
FNMA
6.500%, 11/01/28 879 846
GNMA
7.500%, 06/15/28 83 84
7.500%, 09/15/29 1,321 1,327
7.500%, 04/15/30 2,188 2,197
6.500%, 01/15/26 162 156
6.500%, 04/15/26 114 110
6.500%, 12/15/27 38 37
6.500%, 06/15/28 231 224
6.500%, 10/15/28 248 239
6.500%, 04/15/29 233 225
-------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $5,491) 5,445
-------
ASSET-BACKED SECURITY (3.9%)
American Express Credit Account
Master Trust, Ser 1999-A1
5.600%, 11/15/06 950 918
-------
TOTAL ASSET-BACKED SECURITY
(Cost $948) 918
-------
Face Market
Amount Value
(000) (000)
--------------------------------------------------------------------------------
CORPORATE BONDS (2.2%)
SBC Communications
6.875%, 08/15/06 235 235
Wal-Mart Stores
6.875%, 08/10/09 300 298
-------
TOTAL CORPORATE BONDS
(Cost $549) 533
-------
REPURCHASE AGREEMENT (1.0%)
Morgan Stanley Dean Witter
6.250%, dated 10/31/00,
matures 11/01/00, repurchase
price $243,049 (collateralized
by U.S. Treasury Note, 02/15/01,
market value $249,095) 243 243
-------
TOTAL REPURCHASE AGREEMENT
(Cost $243) 243
-------
TOTAL INVESTMENTS (98.5%)
(Cost $23,346) 23,239
-------
OTHER ASSETS AND LIABILITIES, NET (1.5%) 354
-------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 2,377,120 outstanding
shares of beneficial interest 24,374
Accumulated Net Realized Loss
on Investments (674)
Net Unrealized Depreciation
on Investments (107)
-------
TOTAL NET ASSETS (100.0%) $23,593
=======
Net Asset Value, Offering and Redemption
Price Per Share $9.93
=======
CL -- CLASS
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
SER -- SERIES
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
Shares/ Market
MDL LARGE CAP Face Amount Value
GROWTH EQUITY FUND (000) (000)
--------------------------------------------------------------------------------
COMMON STOCKS (98.7%)
BANKS (2.7%)
Mellon Financial 14,088 $ 680
-------
COMMUNICATIONS EQUIPMENT (4.6%)
Network Appliance* 6,849 815
Nokia Oyj ADR 8,030 343
-------
1,158
-------
COMPUTERS & SERVICES (22.4%)
Adobe Systems 6,322 481
America Online* 7,700 388
Ariba* 4,107 519
Cisco Systems* 17,339 934
EMC-Mass* 8,893 792
Microsoft* 10,503 723
Oracle* 28,600 944
Sun Microsystems* 7,091 786
-------
5,567
-------
ELECTRICAL SERVICES (7.1%)
AES* 7,238 409
General Electric 24,634 1,350
-------
1,759
-------
FINANCIAL SERVICES (13.2%)
American Express 7,950 477
Charles Schwab 20,912 735
Citigroup 19,670 1,035
Fannie Mae 5,435 418
Morgan Stanley Dean Witter 7,692 618
-------
3,283
-------
INSURANCE (4.6%)
American International Group 11,613 1,138
-------
MACHINERY (1.2%)
Applied Materials* 5,417 288
-------
MANUFACTURING (2.9%)
Tyco International 12,463 707
-------
MEDICAL PRODUCTS & SERVICES (9.1%)
Genentech* 7,736 638
Merck 8,460 761
Pfizer 19,723 852
-------
2,251
-------
Shares/ Market
Face Amount Value
(000) (000)
--------------------------------------------------------------------------------
PETROLEUM REFINING (7.9%)
Coastal 9,585 723
Exxon Mobil 9,052 807
Transocean Sedco Forex 8,030 426
-------
1,956
-------
PIPELINES (2.9%)
Enron 8,762 719
-------
RETAIL (2.2%)
Wal-Mart Stores 11,844 537
-------
SEMI-CONDUCTORS/INSTRUMENTS (4.6%)
Flextronics International* 12,354 469
LSI Logic* 7,951 261
PMC - Sierra* 2,376 403
-------
1,133
-------
TELEPHONES & TELECOMMUNICATIONS (13.3%)
Avaya* 796 11
JDS Uniphase* 3,305 269
Lucent Technologies 9,560 223
Nortel Networks 18,038 821
SBC Communications 9,290 536
Verizon Communications 14,734 852
Vodafone Group ADR 13,835 589
-------
3,301
-------
TOTAL COMMON STOCKS
(Cost $21,229) 24,477
-------
REPURCHASE AGREEMENT (1.4%)
Morgan Stanley Dean Witter
6.250%, dated 10/31/00, matures
11/01/00, repurchase price
$337,209 (collateralized by
U.S. Treasury Note, 02/15/01,
market value $345,598) $337 337
-------
TOTAL REPURCHASE AGREEMENT
(Cost $337) 337
-------
TOTAL INVESTMENTS (100.1%)
(Cost $21,566) 24,814
-------
OTHER ASSETS AND LIABILITIES, NET (-0.1%) (14)
-------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
MDL LARGE CAP Value
GROWTH EQUITY FUND (concluded) (000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 1,775,155 outstanding
shares of beneficial interest $21,675
Accumulated Net Investment Loss (2)
Accumulated Net Realized Loss
on Investments (121)
Net Unrealized Appreciation
on Investments 3,248
-------
TOTAL NET ASSETS (100.0%) $24,800
=======
Net Asset Value, Offering and Redemption
Price Per Share $13.97
=======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENTS OF OPERATIONS (000) THE ADVISORS' INNER CIRCLE FUND
For the Year Ended October 31, 2000
<TABLE>
<CAPTION>
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND EQUITY FUND
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividend Income.................................................. $ -- $ 226
Interest ........................................................ 1,331 17
-----------------------------------------------------------------------------------------------------------
Total Investment Income........................................ 1,331 243
-----------------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................................ 100 195
Investment Advisory Fee Waiver .................................. (67) (54)
Administrative Fees ............................................. 80 80
Professional Fees ............................................... 30 32
Transfer Agent Fees ............................................. 25 30
Registration and Filing Fees .................................... 8 16
Printing Fees ................................................... 12 15
Custodian Fees .................................................. 4 4
Trustee Fees .................................................... 6 7
Amortization of Organizational Costs ............................ 2 --
Insurance and Other Fees ........................................ -- 3
-----------------------------------------------------------------------------------------------------------
Total Expenses, Net ............................................. 200 328
-----------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) ................................ 1,131 (85)
-----------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) from Securities Sold ................... 89 (121)
Net Change in Unrealized Appreciation on Investment Securities .. 332 276
-----------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments ............... 421 155
-----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations ............ $1,552 $ 70
===========================================================================================================
</TABLE>
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>
STATEMENTS OF CHANGES IN NET ASSETS (000) THE ADVISORS' INNER CIRCLE FUND
For the Years Ended October 31,
<TABLE>
<CAPTION>
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND EQUITY FUND
------------------------------------------------------------
11/01/99 11/01/98 11/01/99 11/01/98
10/31/00 10/31/99 10/31/00 10/31/99
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) ................................... $ 1,131 $ 776 $ (85) $ (41)
Net Realized Gain (Loss) from Securities Sold ................... 89 (763) (121) 1,905
Net Unrealized Appreciation (Depreciation) on Investment Securities 332 (576) 276 2,416
---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations 1,552 (563) 70 4,280
---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income .......................................... (1,148) (771) -- (9)
Realized Capital Gains ......................................... -- -- (1,856) --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions............................................. (1,148) (771) (1,856) (9)
---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued .................................... 2,654 4,029 627 2,325
Reinvestment of Cash Distributions ............................. 1,148 788 1,855 9
Proceeds from In-Kind Transaction............................... -- 13,003 -- 14,708
Cost of Shares Redeemed ........................................ (1,405) (1,105) (1,843) (1,355)
---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Derived From Capital Share Transactions 2,397 16,715 639 15,687
---------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets ........................ 2,801 15,381 (1,147) 19,958
Net Assets:
Beginning of Period ............................................ 20,792 5,411 25,947 5,989
---------------------------------------------------------------------------------------------------------------------------
End of Period .................................................. $23,593 $20,792 $24,800 $25,947
---------------------------------------------------------------------------------------------------------------------------
Shares Issued and Redeemed:
Issued ......................................................... 272 401 43 165
Issued in Lieu of Cash Distributions ........................... 118 79 127 1
Proceeds from In-Kind Transaction............................... -- 1,243 -- 1,160
Redeemed ...................................................... (144) (109) (129) (97)
---------------------------------------------------------------------------------------------------------------------------
Net Increase in Shares ......................................... 246 1,614 41 1,229
===========================================================================================================================
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS THE ADVISORS' INNER CIRCLE FUND
For a Share Outstanding Throughout Each Period
For the Years Ended October 31,
<TABLE>
<CAPTION>
Ratio
Net Net Net of Net
Asset Net Realized and Distributions Distributions Asset Assets, Ratio Investment
Value, Investment Unrealized from Net from Value, End of Expenses Income (Loss)
Beginning Income Gain (Loss) Investment Capital End Total of Period to Average to Average
of Period (Loss) on Securities Income Gains of Period Return (000) Net Assets Net Assets
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------
MDL BROAD MARKET FIXED INCOME FUND
-----------------------------------
2000 $ 9.76 $0.50 $ 0.17 $(0.50) $ -- $ 9.93 7.13% $23,593 0.90% 5.11%
1999 10.48 0.44 (0.73) (0.43) -- 9.76 (2.80) 20,792 0.90 4.40
1998(1) 10.00 0.41 0.48 (0.41) -- 10.48 9.10 5,411 0.90 4.38
----------------------------------
MDL LARGE CAP GROWTH EQUITY FUND
----------------------------------
2000 $14.96 $(0.03) $0.11 $ -- $(1.07) $13.97 0.24% $24,800 1.25% (0.32)%
1999 11.84 (0.01) 3.13 -- -- 14.96 26.40 25,947 1.26 (0.19)
1998(1) 10.00 0.04 1.83 (0.03) -- 11.84 18.72 5,989 1.26 0.41
</TABLE>
Ratio
of Net
Ratio Investment
of Expenses Income (Loss)
to Average to Average
Net Assets Net Assets
(Excluding (Excluding Portfolio
Waivers and Waivers and Turnover
Reimbursements) Reimbursements) Rate
--------------------------------------------------
-----------------------------------
MDL BROAD MARKET FIXED INCOME FUND
-----------------------------------
2000 1.21% 4.80% 168.42%
1999 1.50 3.80 198.83
1998(1) 11.24 (5.96) 72.82
----------------------------------
MDL LARGE CAP GROWTH EQUITY FUND
----------------------------------
2000 1.46% (0.53)% 71.82%
1999 1.57 (0.50) 75.29
1998(1) 12.88 (11.21) 127.68
Amounts designated as "--" are either $0 or have been rounded to $0.
(1) The Funds commenced operations on October 31, 1997.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE ADVISORS' INNER CIRCLE 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 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
MDL Broad Market Fixed Income Fund and the MDLLarge Cap Growth Equity Fund (the
"Funds"). The financial statements of the remaining Funds are presented
separately. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. The Funds' prospectus provides
a description of the Funds' 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 -- Investments in equity securities 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. Debt obligations exceeding sixty days to
maturity for which market quotations are readily available are valued at
the most recently quoted bid 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 Funds may be delayed or limited.
EXPENSES -- Expenses that are directly related to one of the Funds are
charged to the Fund. Other operating expenses of the Trust are prorated to
the Funds on the basis of relative daily net assets to the aggregate daily
net assets of the Trust.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared monthly for the MDL Broad Market Fixed Income Fund and are
paid monthly. Distributions from net investment income are declared
quarterly for the MDL Large Cap Growth Equity Fund and are paid quarterly.
Any net realized capital gains are distributed to shareholders at least
annually.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
RECLASSIFICATION OF COMPONENTS OF NET ASSETS The timing and
characterization of certain income and capital gains distributions are
determined annually in accordance with federal tax regulations which may
differ from accounting principles generally accepted in the United States.
As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. These book/tax differences may be
temporary or permanent in nature. To the extent these differences are
permanent, they are charged or credited to paid-in-capital or accumulated
net realized gain, as appropriate, in the period that the differences
arise. Accordingly, the following permanent differences, primarily
attributable to net operating losses and the classification of short-term
capital gains and ordinary income for tax purposes, have been reclassified
to/from the following accounts:
Undistributed
Paid-In- Accumulated Net Investment
Capital Realized Gain/ Income/(Loss)
(000) (Loss) (000) (000)
--------- -------------- ---------------
MDL Large Cap
Growth Equity Fund $(90) $1 $89
These reclassifications have no effect on net assets or net asset values
per share.
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. ORGANIZATION COSTS AND TRANSACTIONS WITH AFFILIATES:
In April 1998, the AICPA issued Statement of Position "SOP" No. 98-5, "Reporting
on the Costs of Start-Up Activities." This SOP provides guidance on the
financial reporting of start-up costs and organization costs and requires costs
of start-up activities and organization costs to be expensed as incurred.
Investment companies that began operations prior to June 30, 1998 can adopt the
SOP prospectively. Therefore, previously capitalized costs will continue to be
amortized over a period of sixty months. Any future start-up organization costs
will be expensed as incurred.
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 Fund 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 the Distributor to act as an agent
in placing repurchase agreements for the Funds. For its services, the
Distributor received $274 for the year ended 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 $80,000, or of 0.15% on the first $50
million of average daily net assets; 0.125% on the next $50 million of average
net assets; and 0.10% on average net assets over $100 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 Funds 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.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
5. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENTS:
The Funds and MDL Capital Management, Inc. (the "Adviser") are parties to an
Investment Advisory Agreement dated October 31, 1997 under which the Adviser
receives an annual fee equal to 0.45% and 0.74% of the Fund's average daily net
assets of the MDL Broad Market Fixed Income and MDL Large Cap Growth Equity
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 MDL Broad Market Fixed Income and MDL Large Cap Growth Equity
Funds to an annual rate of not more than 0.90% and 1.26% of the average daily
net assets, respectively. Fee waivers and expense reimbursements are voluntary
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 Funds.
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:
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND EQUITY FUND
------------- ------------
Purchases
Government ........... $37,467 $ --
Other ................ 300 18,660
Sales
Government ........... 35,540 --
Other ................ -- 19,838
The Funds have capital loss carryforwards at October 31, 2000 as follows:
Capital Loss
Carryover Expires Expires
10/31/00 2007 2008
(000) (000) (000)
------------ ------- -------
MDL Broad Market
Fixed Income Fund .. $670 $670 $--
MDL Large Cap
Growth Equity Fund . 98 -- 98
For tax purposes, the losses in the Funds can be carried forward for a maximum
of eight years to offset any net realized capital gains.
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 Funds
at October 31, 2000, are as follows:
MDL BROAD MDL LARGE
MARKET FIXED CAP GROWTH
INCOME FUND EQUITY FUND
------------ -----------
Aggregate gross
unrealized
appreciation ........... $ 132 $ 4,284
Aggregate gross
unrealized
depreciation ........... (239) (1,036)
----- -------
Net unrealized
appreciation/
(depreciation) ......... $(107) $ 3,248
===== =======
7. IN-KIND TRANSFERS:
During the period ended October 31, 1999, the MDL Broad Market Fixed Income Fund
and MDL Large Cap Growth Equity Fund issued 1,243,103 and 1,159,960 shares,
respectively of beneficial interest in exchange for securities from an account
managed by MDL Capital Management, Inc. valued at $13,002,854 and $14,708,293,
respectively.
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MDL Broad Market Fixed Income and
MDL Large Cap Growth Equity Funds of The Advisors' Inner Circle Fund:
We have audited the accompanying statements of net assets of MDL Broad Market
Fixed Income Fund and MDL Large Cap Growth Equity Fund (the "Funds"), two of the
funds constituting The Advisors' Inner Circle Fund, as of October 31, 2000, 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 Funds'
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. 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
MDL Broad Market Fixed Income Fund and the MDL Large Cap Growth Equity Fund of
The Advisors' Inner Circle Fund as of October 31, 2000, and the results of their
operations, the changes in their 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
12
<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>
MDL Broad Market
Fixed Income Fund 0.00% 100.00% 0.00% 100.00% 0.00%
MDL Large Cap
Growth Equity Fund 1.53% 98.47% 0.00% 100.00% 75.50%
</TABLE>
-----------
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION AND IS REFLECTED AS A PERCENTAGE OF "ORDINARY
INCOME DISTRIBUTIONS".
13
<PAGE>
TRUST:
The Advisors' Inner Circle Fund
MDL FUNDS:
MDL Broad Market Fixed Income Fund
MDL Large Cap Growth Equity Fund
ADVISER:
MDL Capital Management, Inc.
DISTRIBUTOR:
SEI Investments Distribution Co.
ADMINISTRATOR:
SEI Investments Mutual Funds Services
LEGAL COUNSEL:
Morgan, Lewis & Bockius LLP
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
For information call: 1-877-MDL-FUND
This information may be prededed or accompanied by a current prospectus for
the fund described.
MDL-F-004-03
