[GRAPHIC OMITTED]
HGK
FIXED INCOME FUND
EQUITY VALUE FUND
ANNUAL REPORT TO SHAREHOLDERS
AS OF OCTOBER 31, 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 U.S. Government/ Credit 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 total return of 3.26% and 3.58% for the 6
month and 1 year period ending October 31, 2000, respectively versus a total
return of 5.54% and 7.11%, respectively for the Lehman U.S. Government/Credit
Index.
REVIEW
During the period ended October 31, the fixed income markets have been
meaningfully affected by: 1) price volatility in the equity markets, 2) the
Federal Reserve's continuing battle against the threat of inflation, and 3) the
Treasury buyback of longer dated securities. Equity market volatility created
demand for Treasury securities as investors looked for a safe haven for their
money until stocks once again could demonstrate the ability to rise, driven by
such basic measures as earnings and rational valuations. Countering the
increased demand for Treasuries, the Fed's hawkish attitude towards inflation
combined with the technical impact of the Treasury buyback of longer dated bonds
has caused a significant inversion the yield curve. This inversion of the yield
curve severely reduces the risk tolerance of fixed income investors. The
positive carry normally associated with bonds disappears as short rates rise in
response to Fed tightening. The resulting lack of demand for all spread products
caused a significant widening of spreads versus Treasuries. Additionally,
individual credits (i.e. Conseco, Service, Owens Corning) that have disappointed
investors have been punished severely and have significantly impacted the
performance of many fixed income portfolios.
OUTLOOK
The Fed appears to be on hold for the remainder of 2000. Many Fed watchers are
beginning to believe a rate cut is likely in the first quarter of 2001 as the
possibility of a hard landing (flat or negative GDP growth) or a recession (two
or more quarters of negative GDP growth) increases. High oil prices, tensions in
the Middle East, volatility in the domestic equity markets, and previous rate
increases by the Fed are all contributing to an anticipated slowdown in consumer
spending. On the opposite side of the macro economic equation, GDP growth is in
the 3.5% to 4.0% range; the unemployment rate is just 4.0%, core inflation is at
2.5% and the Fed continues to maintain a bias towards raising rates. Considering
all of the above, we believe the next move by the Fed is more likely to be a
rate cut than a rate hike. However, we believe it is unlikely rates will be cut
prior to the second quarter of 2001. Based on the above, we do not foresee any
significant recovery in corporate spreads over the next three to six months. In
fact we are concerned that any economic slowdown will cause credit spreads to
widen even further versus Treasuries. Considering this, we have reduced exposure
to BBB-rated Corporates and upgraded overall credit quality by increasing
exposure to Treasuries, Agencies, and Mortgage-backed securities.
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 and one year period ending October 31, 2000, the Fund returned
3.21% and 3.79%, respectively. The Fund's performance benchmark, the Wilshire
Target Large Value Index, posted a return of 10.66% and 5.52%, respectively over
the same periods. The S&P 500 Composite Index was down -1.03% for the six months
ending October 31, 2000. This performance reflects a reversal from the last
shareholder report, when the Fund exceeded the benchmark, but trailed the
broader market.
REVIEW
After five consecutive years of double digit returns for the S&P 500 Composite
Index it appears the string will be broken. The year 2000 may provide negative
stock market returns for the first time since 1990. Hardest hit of the major
averages has been the Technology-laden NASDAQ market whose sharp declines year
to date threaten to wipe out last years stunning gains. This year may turn out
to be an aberration or it could signal the end of the long-standing bull market
of the past decade. We think the answer lies somewhere in between.
The economic and investment climate is changing. Interest rates have little room
to decline meaningfully from present levels. The magnitude of productivity gains
is diminishing. Inflation benefits from global price competition are waning.
Central Banks including the Federal Reserve appear reluctant to ease in the face
of a slowing economic growth. Debt growth that has financed much of the growth,
particularly in Technology and specifically with Telecommunication is becoming a
troublesome problem bordering on a crisis. Plunging stock prices are destroying
wealth at least on paper, creating the potential for a negative effect on
consumer confidence and spending. Finally, the Presidential Election fiasco
added additional uncertainty to the markets.
OUTLOOK
Some of these above-mentioned factors will have a significant and long lasting
impact on the stock market. Other factors will have only a transitory effect. We
expect the stock market to continue to be plagued by excessive volatility and
price swings as we enter next year. Our opinion is that returns should regress
more toward their historical average of 8%-10% not the +28% of the past five
years. The significant investment theme, however, will be the rediscovery of
"Value Investing". Today's outrageous valuation measures such as multiples of
revenue, page views, eyeballs and hits will once again be replaced by earnings,
assets and cash flow metrics. Technology as a percentage of the S&P 500
Composite Index should continue to decrease allowing for a broadening of market
participation as investment monies flow into overlooked sectors. Our key
investment theme going forward will be to focus on old economy companies who are
benefiting from the application and integration of technology and the Internet.
This will enable them to leverage their sales and earnings as efficiency flows
to the bottom line as their cost fall. The ultimate result should be higher
levels of profitability and less cyclicality of earnings resulting in higher
valuations and significant price appreciation for their shares.
2
<PAGE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE HGK FIXED
INCOME FUND VERSUS THE LEHMAN U.S. GOVERNMENT/CREDIT INDEX
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
HGK Fixed Income Fund Lehman Government/Corporate Index
11/30/94 $10,000 $10,000
10/31/95 $11,500 $11,637
10/31/96 $11,991 $12,264
10/31/97 $13,006 $13,344
10/31/98 $13,787 $14,715
10/31/99 $13,853 $14,618
10/31/00 $14,349 $15,647
Total Return(1)
--------------------------------------------------------------------------------
Annualized Annualized Annualized
One-Year 3-Year 5-Year Inception
Return Return Return to Date
--------------------------------------------------------------------------------
3.58% 3.33% 4.53% 6.35%
(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
[Graphic Omitted]
HGK Fixed Income Fund Wilshire
6/30/99 10,000 10,000
10/31/99 9,334 8,904
10/31/00 9,687 9,395
Total Return(1)
-------------------------------------
Annualized
One-Year Inception
Return to Date
-------------------------------------
3.79% -2.10% Without Load
-------------------------------------
-1.88% -5.98% With Load
(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>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
Face Market
Amount Value
HGK FIXED INCOME FUND (000) (000)
--------------------------------------------------------------------------------
[Pie-chart Graphic Omitted]
Plot points as follows:
Corporate Obligations 37%
U.S. Gov't. Agency Obligations 24
U.S. Treasury Obligations 21
U.S. Gov't. Mortgage Backed Securities 10
Asset-Backed Securities 8
U.S. TREASURY OBLIGATIONS (20.2%)
U.S. Treasury Bond
5.250%, 02/15/29 $1,000 $ 911
U.S. Treasury Notes
6.875%, 05/15/06 150 157
6.500%, 02/15/10 525 550
5.875%, 11/30/01 275 274
5.750%, 08/15/10 100 100
-------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,937) 1,992
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS (23.8%)
FHLMC
7.375%, 05/15/03 350 358
6.750%, 10/25/02 725 723
6.300%, 06/01/04 175 172
FNMA
6.400%, 05/14/09 250 239
FNMA, MTN
6.400%, 11/04/02 350 348
TVA, Ser G
5.375%, 11/13/08 550 503
-------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $2,307) 2,343
-------
U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS (10.1%)
FHLMC
7.500%, 12/01/29 240 240
GNMA
7.000%, 09/20/29 265 260
6.500%, 10/20/30 500 498
-------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $997) 998
-------
CORPORATE OBLIGATIONS (36.2%)
ELECTRICAL SERVICES (5.9%)
Emerson Electric
7.125%, 08/15/10 350 350
Empresa Nacional Electric
7.750%, 07/15/08 250 233
-------
583
-------
FINANCIAL SERVICES (13.2%)
Ford Motor Credit
7.875%, 06/15/10 500 504
General Motors Acceptance
7.500%, 07/15/05 150 151
Lehman Brothers Holdings
8.250%, 06/15/07 350 357
Sears Roebuck Acceptance
6.250%, 05/01/09 175 153
Tiers-PXRE
8.850%, 02/15/27 150 138
-------
1,303
-------
INSURANCE (7.0%)
American General Capital II
8.500%, 07/01/30 250 249
Conseco
8.750%, 02/09/04 280 181
Trenwick Capital Trust I
8.820%, 02/01/37 325 261
-------
691
-------
RETAIL (3.8%)
Service International
6.000%, 12/15/05 680 374
-------
TELEPHONES & TELECOMMUNICATIONS (6.3%)
AT&T
6.500%, 03/15/29 600 471
Deutsche Telekom
8.250%, 06/15/30 150 154
-------
625
-------
TOTAL CORPORATE OBLIGATIONS
(Cost $3,686) 3,576
-------
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
Face Market
HGK FIXED INCOME FUND Amount Value
(concluded) (000) (000)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (8.1%)
IMC Home Equity, Ser 1998-A5 (A)
6.360%, 08/20/22 $225 $ 222
Merrill Lynch Mortgage Investors,
Ser 1999-C1, Cl A-2 (A)
7.560%, 09/15/09 275 283
Nomura Asset Securities,
Ser 1998, Cl D6
6.590%, 03/17/28 300 292
-------
TOTAL ASSET-BACKED SECURITIES
(Cost $787) 797
-------
TOTAL INVESTMENTS (98.4%)
(Cost $9,714) 9,706
-------
OTHER ASSETS AND LIABILITIES, NET (1.6%) 154
-------
Value
(000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 1,028,117 outstanding
shares of beneficial interest $11,044
Accumulated net realized loss
on investments (1,176)
Net unrealized depreciation
on investments (8)
-------
TOTAL NET ASSETS (100.0%) $ 9,860
=======
Net Asset Value, Offering and
Redemption Price Per Share $9.59
=======
(A) VARIABLE RATE SECURITY -- THE RATE REPORTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT AS OF OCTOBER 31, 2000.
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SER -- SERIES
TVA -- TENNESSEE VALLEY AUTHORITY
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
Market
Value
HGK EQUITY VALUE FUND Shares (000)
--------------------------------------------------------------------------------
% of Portfolio
[Pie-chart graphic omitted]
plot points as follows:
Common Stocks 97%
Repurchase Agreement 3%
COMMON STOCKS (97.0%)
AUTOMOTIVE (3.4%)
Dana 3,764 $ 84
General Motors 1,800 112
-------
196
-------
BANKS (12.6%)
Bank of America 3,700 178
Chase Manhattan 3,400 155
Golden West Financial 3,000 168
National City 800 17
PNC Financial Services Group 3,200 214
-------
732
-------
BUILDING CONSTRUCTION (1.6%)
Martin Marietta Materials 2,500 96
-------
CHEMICALS (2.3%)
E.I. du Pont de Nemours 3,000 136
-------
COMPUTERS & SERVICES (6.9%)
Compaq Computer 4,500 137
First Data 2,000 100
Hewlett-Packard 1,000 46
IBM 1,200 118
-------
401
-------
CONTAINERS & PACKAGING (1.6%)
Newell Rubbermaid 4,800 92
-------
DIVERSIFIED OPERATIONS (2.4%)
Honeywell International 2,600 140
-------
DRUGS (6.2%)
Abbott Laboratories 3,900 206
Bristol-Myers Squibb 2,500 152
-------
358
-------
Market
Value
Shares (000)
--------------------------------------------------------------------------------
ELECTRICAL SERVICES (5.0%)
Emerson Electric 1,900 140
TXU 4,000 148
-------
288
-------
FOOD, BEVERAGE & TOBACCO (4.6%)
H.J. Heinz 3,600 151
Supervalu 7,700 118
-------
269
-------
GAS/NATURAL GAS (2.1%)
KeySpan 3,400 120
-------
INSURANCE (4.9%)
Lincoln National 1,800 87
Torchmark 5,900 197
-------
284
-------
LEISURE PRODUCTS (1.0%)
Brunswick 3,000 58
-------
MACHINERY (4.5%)
Ingersoll-Rand 3,200 121
Parker Hannifin 3,300 137
-------
258
-------
MEDICAL PRODUCTS & SERVICES (5.3%)
Merck 1,700 153
Tenet Healthcare* 4,000 157
-------
310
-------
METALS (1.8%)
Alcoa 3,600 103
-------
PAPER & PAPER PRODUCTS (4.9%)
Kimberly-Clark 2,400 158
Mead 4,300 124
-------
282
-------
PETROLEUM REFINING (10.5%)
Baker Hughes 2,900 100
Chevron 1,400 115
Texaco 2,400 142
USX-Marathon Group 5,000 136
Williams 2,800 117
-------
610
-------
RAILROADS (0.7%)
Burlington Northern Santa Fe 1,500 40
-------
RETAIL (2.7%)
McDonald's 5,000 155
-------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF NET ASSETS THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
Shares/ Market
HGK EQUITY VALUE FUND Face Amount Value
(CONCLUDED) (000) (000)
--------------------------------------------------------------------------------
SEMI-CONDUCTORS/INSTRUMENTS (2.3%)
Intel 3,000 $ 135
-------
TELEPHONES & TELECOMMUNICATIONS (7.6%)
Motorola 4,800 120
Nortel Networks 1,500 68
Tellabs* 3,000 150
Verizon Communications 1,800 104
-------
442
-------
TRANSPORTATION SERVICES (2.1%)
Sabre Holdings* 3,589 120
-------
TOTAL COMMON STOCKS
(Cost $5,765) 5,625
-------
REPURCHASE AGREEMENT (3.5%)
Morgan Stanley Dean Witter 6.250%, dated
10/31/00, matures 11/01/00, repurchase
price $203,346 (collateralized by U.S.
Treasury Note, 02/15/01, market
value $208,405) $203 203
-------
TOTAL REPURCHASE AGREEMENT
(Cost $203) 203
-------
TOTAL INVESTMENTS (100.5%)
(Cost $5,968) 5,828
-------
OTHER ASSETS AND LIABILITIES, NET (-0.5%) (31)
-------
Value
(000)
--------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares (unlimited
authorization -- no par value)
based on 613,263 outstanding 5,808
Distributions in excess of
net investment income (1)
Accumulated net realized gain
on investments 130
Net unrealized depreciation
on investments (140)
-------
TOTAL NET ASSETS (100.0%) $ 5,797
=======
Net Asset Value and
Redemption Price Per Share $ 9.45
=======
Maximum Offering Price
Per Share ($9.45 / 94.5%) $10.00
=======
* NON-INCOME PRODUCING SECURITY
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENTS OF OPERATIONS (000) THE ADVISORS' INNER CIRCLE FUND
For the Year Ended October 31, 2000
<TABLE>
<CAPTION>
HGK HGK
FIXED INCOME EQUITY VALUE
FUND FUND
----------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividend Income.................................................. $ -- $126
Interest Income ................................................. 1,036 8
----------------------------------------------------------------------------------------------------
Total Investment Income........................................ 1,036 134
----------------------------------------------------------------------------------------------------
Expenses:
Investment Advisory Fees ........................................ 70 55
Investment Advisory Fee Waiver .................................. (70) (55)
Reimbursements by Adviser........................................ (26) (119)
Administrative Fees ............................................. 75 75
Professional Fees ............................................... 28 66
Transfer Agent Fees ............................................. 23 30
Printing Fees ................................................... 18 10
Trustee Fees .................................................... 6 5
Registration and Filing Fees .................................... 6 1
Insurance and Other Fees ........................................ 4 1
Amortization of Organizational Fees ............................. -- 5
Custodian Fees .................................................. 5 4
Distribution Fees................................................ -- 15
----------------------------------------------------------------------------------------------------
Total Expenses, Net ............................................. 139 93
----------------------------------------------------------------------------------------------------
Net Investment Income ...................................... 897 41
----------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) from Securities Sold ................... (629) 134
Net Change in Unrealized Appreciation on Investment Securities .. 170 7
----------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments ........ (459) 141
----------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations ............ $ 438 $182
====================================================================================================
</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 (000) THE ADVISORS' INNER CIRCLE FUND
For the Periods Ended October 31,
<TABLE>
<CAPTION>
HGK HGK
FIXED INCOME EQUITY VALUE
FUND FUND
------------------------- -------------------------
11/01/99 11/01/98 11/01/99 06/09/99(1)
TO 10/31/00 TO 10/31/99 TO 10/31/00 TO 10/31/99
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income ............................. $ 897 $ 887 $ 41 $ 10
Net Realized Gain (Loss) from Securities Sold ..... (629) (545) 134 113
Net Change in Unrealized Appreciation (Depreciation)
on Investment Securities ........................ 170 (290) 7 (147)
---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
from Operations.................................. 438 52 182 (24)
---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income ............................. (896) (888) (41) (15)
Realized Capital Gains ............................ -- (208) (113) --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions................................ (896) (1,096) (154) (15)
---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from Shares Issued ....................... 511 4,936 834 6,633
Reinvestment of Cash Distributions ................ 870 1,153 153 15
Cost of Shares Redeemed ........................... (7,305) (3,748) (1,638) (189)
---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets from Capital Share
Transactions .................................... (5,924) 2,341 (651) 6,459
Total Increase (Decrease) in Net Assets ........... (6,382) 1,297 (623) 6,420
---------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of Period ............................... 16,242 14,945 6,420 --
---------------------------------------------------------------------------------------------------------------------------
End of Period ..................................... $ 9,860 $16,242 $ 5,797 $6,420
===========================================================================================================================
Shares Issued and Redeemed:
Shares Issued ..................................... 53 484 91 707
Shares Issued in Lieu of Cash Distributions ....... 90 113 17 2
Shares Redeemed ................................... (759) (375) (184) (20)
---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares.................. (616) 222 (76) 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 THE ADVISORS' INNER CIRCLE FUND
For a Share Outstanding Throughout Each Period
For the Periods Ended October 31,
<TABLE>
<CAPTION>
Ratio
Net Realized and Net Net of Net
Asset Unrealized Distributions Distributions Asset Assets, Ratio Investment
Value, Net Gains from Net From Value, End of Expenses Income
Beginning Investment (Losses) on Investment Capital End Total of Period to Average to Average
of Period Income Securities Income Gains of Period Return (000) Net Assets Net Assets
--------- ---------- ---------- ----------- ----------- --------- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------
HGK FIXED INCOME
-----------------
2000 $ 9.88 $0.63 $(0.29) $(0.63) $ -- $ 9.59 3.58% $ 9,860 1.00% 6.48%
1999 10.51 0.54 (0.49) (0.54) (0.14) 9.88 0.48 16,242 1.00 5.33
1998 10.53 0.60 0.02 (0.60) (0.04) 10.51 6.00 14,945 1.00 5.62
1997 10.29 0.60 0.24 (0.60) -- 10.53 8.47 13,371 1.00 5.85
1996 10.88 0.61 (0.17) (0.61) (0.42) 10.29 4.29 12,515 1.00 5.92
------------------
HGK EQUITY VALUE
------------------
2000 $ 9.32 $0.07 $ 0.28 $(0.06) $(0.16) $ 9.45 3.79%+ $ 5,797 1.50% 0.67%
1999(1) 10.00 0.02 (0.68) (0.02) -- 9.32 (6.46)+ 6,420 1.50 0.52
</TABLE>
Ratio
Ratio of Net
of Expenses Investment
to Average Income (Loss) to
Net Assets Average Net
(Excluding Assets (Excluding Portfolio
Waivers and Waivers and Turnover
Reimbursements) Reimbursements) Rate
--------------- --------------- ----------
-----------------
HGK FIXED INCOME
-----------------
2000 1.69% 5.79% 210.04%
1999 1.71 4.62 322.36
1998 1.70 4.92 173.93
1997 1.64 5.21 256.52
1996 1.51 5.41 264.02
------------------
HGK EQUITY VALUE
------------------
2000 4.27% (2.10)% 29.98%
1999(1) 5.53 (3.51) 5.01
(1) The HGK Equity Value Fund commenced operations on June 9, 1999. All ratios
for the period have been annualized.
+ Returns are for the period indicated and have not been annualized. Total
return figures do not include applicable sales loads.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
10
<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
HGK Fixed Income Fund and HGK Equity Value 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 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 of which there were none
as of October 31, 2000.
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 Fund are
charged to the Fund. Other operating expenses of the Trust are prorated to
the Fund on the basis of relative daily net assets.
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) THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
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 $200 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 $75,000 or 0.18% of the first $250 million,
0.14% of the next $250 million, and 0.10% 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 related to the HGK Fixed Income Fund 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 Distributor at an annual rate of 0.25%
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 0.50% and 0.90% 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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded) THE ADVISORS' INNER CIRCLE FUND
October 31, 2000
order to keep total operating expense from exceeding 1.50% 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 year ended October 31, 2000 are as follows:
HGK FIXED HGK EQUITY
INCOME FUND VALUE FUND
(000) (000)
----------- ----------
Purchases
Government .......... $10,153 $ --
Other ............... 13,156 1,795
Sales
Government .......... 13,631 --
Other ............... 15,057 2,615
The Funds also have capital loss carryforwards at October 31, 2000 as follows:
Capital Loss
Carryover Expires Expires
10/31/00 2007 2008
Fund (000) (000) (000)
-------- ------------- ------- -------
HGK Fixed Income Fund $1,164 $543 $621
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:
HGK FIXED HGK EQUITY
INCOME FUND VALUE FUND
(000) (000)
----------- ----------
Aggregate gross
unrealized
appreciation ......... $ 131 $ 564
Aggregate gross
unrealized
depreciation ......... (139) (704)
------ -----
Net unrealized
depreciation ......... $ (8) $(140)
====== =====
13
<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 statements of net assets of HGK Fixed Income
and HGK Equity Value Funds (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 and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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, 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
14
<PAGE>
NOTICE TO SHAREHOLDERS
OF
THE ADVISORS' INNER CIRCLE FUND
(UNAUDITED)
For the 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>
HGK Fixed Income Fund .. . 0.00% 100.00% 0.00% 100.00% 0.00%
HGK Equity Value Fund ... 73.37% 26.63% 0.00% 100.00% 79.46%
</TABLE>
----------------------------
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION AND IS REFLECTED AS A PERCENTAGE OF "ORDINARY
INCOME DISTRIBUTIONS".
15
<PAGE>
NOTES
<PAGE>
TRUST:
The Advisors' Inner Circle Fund
HGK FUNDS:
HGK Fixed Income Fund
HGK Equity Value Fund
ADVISER:
HGK Asset 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-DIAL-HGK
HGK-F-004-07
