HSBC MUTUAL FUNDS TRUST
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HSBC FUND GROUP
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HSBC Asset Management (LOGO) [GRAPHIC OMITTED]
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International Equity Fund
SEMI-ANNUAL REPORT (UNAUDITED)
June 30, 1996
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
BISYS FUND SERVICES
<PAGE>
HSBC MUTUAL FUNDS TRUST
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INTERNATIONAL EQUITY FUND
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HSBC Asset Management (LOGO) [GRAPHIC OMITTED]
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INTERNATIONAL EQUITY FUND
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July 22, 1996
Dear Shareholder:
The HSBC International Equity Fund Service Class shares gained 1.66% and
Institutional Class shares gained 1.56% for the quarter ended June 30, 1996, in
comparison to the benchmark(1), which rose 1.72%. On a year to date basis,
Service Class shares have gained 4.31%, and Institutional Class shares 4.21%, in
comparison to the benchmark gain of 5.22%. Developed markets, as measured by the
EAFE Index have gained 1.6% for the quarter and 4.5% year-to-date.
The fund benefitted from its country allocation during the second quarter. The
Fund's high exposure to Japan added value as Japan was one of the top performing
markets within the Pacific Basin region in local currency terms. The Fund's Yen
exposure was partially hedged, allowing the Fund to benefit by locking into the
equity gains as the U.S. dollar strengthened during the second quarter. Finally,
overweighting Continental Europe at the expense of the United Kingdom was a
positive as much of the continent outperformed the UK.
Three factors detracted from performance during the quarter. First, within
Continental Europe, the Fund's exposure to Italy, a market which performed quite
well for the period, was underweight versus the benchmark. Secondly, the fund's
higher relative exposure to Singapore was a negative as its market was among the
weaker performing markets within the Pacific Basin region. Finally, stock
selection was a negative relative to the fund's benchmark as smaller
capitalization stocks led many of the global markets higher, and the Fund had a
higher exposure to the larger, more liquid stocks globally.
MARKET REVIEW AND OUTLOOK
- -------------------------
UNITED KINGDOM
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The UK equity market lagged the European region as a whole during the second
quarter as measured by the MSCI UK Index which rose 0.58% in local terms.
However, in U.S. dollar terms, the UK equity market gained 2.5%, virtually in
line with Continental Europe as a whole. Fears of higher inflation and higher
interest rates overshadowed a period of strong consumer spending. Additionally,
continued uncertainty over elections in 1997 further dampened equity prices. We
are currently underweight UK equities and will maintain this underweighted
exposure in the near term.
- ----------
1. The HSBC International Equity Fund's benchmark has changed as of May 1, 1996,
to the MSCI Europe, Australia and Far East Index (EAFE), with net dividends
reinvested. Prior to this, its benchmark was a blended benchmark that was
comprised of 90% MSCI EAFE Index/10% IFC Investable Index. This change was done
to more closely reflect the Fund's investment policies.
<PAGE>
CONTINENTAL EUROPE
- ------------------
The MSCI Europe (excluding the UK) Index returned 2.6% in U.S. dollar terms
during the second quarter bringing its year to date return to 8.4%. Returns in
U.S. dollar terms were dampened during the period as the U.S. dollar
strengthened against the major European currencies. The strongest performing
markets within this region for the quarter were Italy (+13.4%), Ireland (+8.7%),
and Spain (+7.4%). France (+2.5%) and Denmark (+2.3%) posted more moderate
results, while Switzerland (-2.5%) and Germany (-0.3%) declined in dollar terms.
Continental Europe benefitted from a moderate growth/low inflation environment
in Germany, as the Bundesbank's accommodative monetary policy spurred equity
gains throughout the region. We currently view Continental Europe as fairly
valued and expect a positive equity market environment going forward. However,
we also expect that volatility will be likely to increase in the near term as
the Continent comes to grips with the fiscal requirements of EMU and the
monetary policies required to fuel further economic growth.
JAPAN
- -----
The Japanese equity market turned in a strong second quarter gain in local
currency terms, however, USD returns were dampened as the U.S. dollar
strengthened against the Yen. Japanese equities, as measured by the MSCI Japan
Index, returned 3.5% in local currency terms for the quarter, which translated
to a gain of only 0.8% in U.S. dollar terms. The market's gain was fueled by
supportive monetary and fiscal policies which led to expectations for economic
growth. Furthermore, the Bank of Japan's efforts to maintain a weak yen also
helped to spur a recovery in corporate profits.
With much good news already priced into the market, we are not as positive on
Japan as we were earlier in 1996. With short term interest rates already at low
levels, it is likely the next move in rates will be higher. Furthermore, the
Japanese investor himself has yet to step up and participate due to a lack of
confidence. However, Japan is clearly in the early stages of its current
business cycle which leaves room for further earnings improvements. We will look
to maintain our exposure in Japan.
ASIA PACIFIC
- ------------
The MSCI Pacific Basin (excluding Japan) declined 0.3% during the second
quarter. A strong recovery in Taiwan on the easing of tensions with China was
offset by weakness throughout the region. Concerns over earnings growth and
higher interest rates were the major factors impacting equity prices in the
region. In addition, announcements by Morgan Stanley Capital International
(MSCI) regarding the recent inclusion of markets such as Korea in their indices,
resulted in the selling of some of the larger, more liquid markets within the
region.
We view the Asia Pacific region as fairly valued. Although we look for slowing
growth with lower inflation, the region could be impacted negatively by a rise
in U.S. interest rates. We also anticipate that fund flows into the region may
begin to slow as we get closer to the changeover of Hong Kong's rule from Great
Britain to China.
2
<PAGE>
SUMMARY
- -------
For the near term, we continue to favor Continental Europe where we expect
continued market advances, albeit with increased volatility. We also favor Japan
over some of the smaller countries within the Asia Pacific region. Outside of
the United Kingdom, we view most of the other global markets as fairly valued
and have positioned the Fund's investments accordingly. Our goal is to ensure
the HSBC International Equity Fund is characterized by strong investment
performance and solid client service. Thank you for choosing the HSBC
International Equity Fund to be a part of your total investment program.
Sincerely,
(/S/ James B. McHugh)
James B. McHugh
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL EQUITY FUND VS. MSCI-EAFE
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Total Return - Service Class Shares Institutional Class Shares
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1 Year Inception 1 Year Inception
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Offering Price(1) 4.84% (0.49%) 10.40% 13.21
NAV(2) 10.40% 1.89% 10.40% 13.21
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[GRAPHIC OMITTED]
MSCI
Fund 1 EAFE Fund 2
April 1994 9,467 10,000 10,000
June 1994 9,544 10,088 10,050
December 1994 9,069 9,991 9,550
June 1995 8,946 10,250 9,420
December 1995 9,478 11,111 9,970
June 1996 9,893 11,605 10,417
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE, WITHOUT CERTAIN FEE
WAIVERS RETURN WOULD HAVE BEEN LOWER.
(1) INCLUDES THE MAXIMUM SALES CHARGE
(2) EXCLUDES THE MAXIMUM SALES CHARGE
THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE SERVICE CLASS SHARES
OF THE INTERNATIONAL EQUITY FUND ON APRIL 25, 1994, TO A $10,000 INVESTMENT IN
THE EUROPE, AFRICA AND FAR EAST INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL
GAIN DISTRIBUTIONS ARE REINVESTED. PLEASE REFER TO THE BOX ABOVE FOR RETURNS ON
INSTITUTIONAL CLASS SHARES, WHICH HAVE BEEN OFFERED SINCE MARCH 1, 1995.
THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES. THE
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA AND FAR EAST INDEX IS A
WIDELY ACCEPTED UNMANAGED INDEX OF OVER 900 SECURITIES LISTED ON THE STOCK
EXCHANGES OF THE FOLLOWING COUNTRIES IN EUROPE, AUSTRALIA, AND THE FAR EAST:
AUSTRALIA, AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, HONG KONG, IRELAND,
ITALY, JAPAN, MALAYSIA, NETHERLANDS, NEW ZEALAND. THIS INDEX IS A WIDELY
ACCEPTED UNMANAGED INDEX OF OVERALL STOCK MARKET PERFORMANCE, AND DOES NOT TAKE
INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES.
4
<PAGE>
BOARD OF TRUSTEES
JOHN P. PFANN* CHAIRMAN OF THE BOARD; Chairman and President,
JPP Equities, Inc.
WOLFE J. FRANKL Former Director-North America,
Berlin Economic Development Corporation
WILLIAM L. KUFTA Chief Investment Officer, Beacon Trust Company
HARALD PAUMGARTEN President, Paumgarten and Company
ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher
Foundation
*Member of the Audit and Nominating Committees
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OFFICERS
WILLIAM B. BLUNDIN CHIEF EXECUTIVE OFFICER
ANN E. BERGIN PRESIDENT
WILLIAM J. TOMKO VICE PRESIDENT
MARK E. NAGLE TREASURER
MARTIN R. DEAN ASSISTANT TREASURER
STEVEN R. HOWARD SECRETARY
ROBERT L. TUCH ASSISTANT SECRETARY
ALAINA V. METZ ASSISTANT SECRETARY
5
<PAGE>
[This page intentionally left blank.]
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (UNAUDITED)
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS
AUSTRALIA
- ---------
BANKING 12,999 Australia & New Zealand Bank Group ............ $ 61,496 0.4%
------------ ----
BROADCASTING 13,143 News Corp. Ltd. ............................... 74,468 0.4
------------ ----
CONGLOMERATES 8,375 CSR Ltd. ...................................... 29,551 0.2
------------ ----
FOOD & BEVERAGES 13,981 SouthCorp Holdings Ltd. ....................... 34,609 0.2
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NON-FERROUS METALS 3,900 WMC Holdings Ltd. ............................. 27,890 0.2
------------ ----
PETROLEUM SERVICES 8,060 Broken Hill Proprietary Co., Ltd. ............. 111,288 0.7
------------ ----
TRUCKING & FREIGHT
FORWARDING 22,360 TNT Ltd.(b) ................................... 25,128 0.1
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TOTAL AUSTRALIA ............................... 364,430 2.2
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(COST - $363,155)
AUSTRIA
- -------
CONGLOMERATE 1,054 Bohler Uddeholm ............................... 81,724 0.5
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TOTAL AUSTRIA ................................. 81,724 0.5
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(COST - $83,977)
BELGIUM
- -------
BANKING 246 Generale de Banque SA ......................... 86,646 0.5
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TOTAL BELGIUM ................................. 86,646 0.5
------------ ----
(COST - $81,044)
DENMARK
- -------
TELEPHONE 1,600 Tele Danmark, Class B A/S ..................... 80,567 0.5
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TOTAL DENMARK ................................. 80,567 0.5
------------ ----
(COST - $83,377)
FINLAND
- -------
CONGLOMERATES 2,250 Nokia AB, Class A ............................. 83,071 0.5
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TOTAL FINLAND ................................. 83,071 0.5
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(COST - $90,518)
FRANCE
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AUTOMOTIVE 800 Peugeot SA .................................... 107,162 0.7
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AUTO PARTS 927 Valeo ......................................... 49,652 0.3
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</TABLE>
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
FRANCE (continued)
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BANKING 920 Societe Generale de Paris ..................... $ 101,236 0.6%
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BROADCASTING 356 Canal Plus .................................... 87,138 0.5
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BUSINESS SERVICES 790 Compagnie Generale des Eaux ................... 88,314 0.5
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CONSTRUCTION MATERIALS 1,350 Lafarge Coppee SA ............................. 81,757 0.5
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DRUGS & HEALTH CARE 1,500 Societe Elf Sanofi SA ......................... 112,509 0.7
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ELECTRONICS 1,500 SGS Thomson Microelectronics(b) ............... 52,784 0.3
----------- ----
FINANCIAL SERVICES 740 Cie Bancaire .................................. 83,444 0.5
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GAS EXPLORATION 1,200 Societe Nat Elf Aquitane SA ................... 88,327 0.5
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INSURANCE 1,595 Axa SA ........................................ 86,981 0.5
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LIQUOR 480 Moet Hennessy Louis Vuitton ................... 113,850 0.7
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MISCELLANEOUS 140 Carrefour ..................................... 38,704 0.3
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RETAIL-SPECIALTY 140 Carrefour ..................................... 78,498 0.5
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TOTAL FRANCE .................................. 1,170,356 7.0
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(COST - $1,088,532)
GERMANY
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AIRLINES 807 Lufthansa AG .................................. 114,110 0.7
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AUTOMOBILES 260 Bayer Motoren Werk ............................ 150,904 0.9
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BANKING 4,400 Deutsche Bank AG .............................. 208,353 1.3
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CHEMICALS 4,600 Bayer AG ...................................... 162,611 1.0
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INDUSTRIAL MACHINERY 333 Mannesmann AG ................................. 115,198 0.7
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INSURANCE 90 Allianz Holdings AG ........................... 155,968 0.9
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MISCELLANEOUS 1,100 Adidas AG ..................................... 92,529 0.6
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SOFTWARE 720 SAP AG ........................................ 106,781 0.6
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UTILITIES-ELECTRIC & GAS 3,100 Veba AG ....................................... 164,878 1.0
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TOTAL GERMANY ................................. 1,271,332 7.6
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(COST - $1,104,542)
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
HONG KONG
- ---------
BANKING 30,520 Bank of East Asia ............................. $ 111,580
28,000 Dao Heng Bank Group ........................... 108,154
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219,734 1.3%
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FINANCIAL SERVICES 16,000 Henderson Investments(b) ...................... 14,365 0.1
----------- ----
CONGLOMERATES 13,000 Citic Pacific Ltd. ............................ 52,566
19,000 Hutchison Whampoa ............................. 119,535
7,000 Swire Pacific Ltd., Class A ................... 59,910
----------- ----
232,011 1.4
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MISCELLANEOUS 500 Hysan Development ............................. 265 0.0
----------- ----
REAL ESTATE 14,000 Cheung Kong Holdings .......................... 100,830
12,000 Wharf Holdings ................................ 42,941
10,000 Hysan Development ............................. 30,617
9,000 New World Development Co. ..................... 41,740
12,000 Sun Hung Kai Properties Ltd. .................. 121,305
----------- ----
337,433 2.0
----------- ----
TELEPHONE 41,200 Hong Kong Telecommunications .................. 73,982 0.5
----------- ----
UTILITIES-ELECTRIC & GAS 6,500 China Light & Power ........................... 29,474
9,500 Hong Kong Electric ............................ 28,963
----------- ----
58,437 0.4
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TOTAL HONG KONG ............................... 936,227 5.6
----------- ----
(COST - $884,343)
IRELAND
- -------
BANKING 10,878 Bank of Ireland ............................... 74,109 0.4
------------ ----
TOTAL IRELAND ................................. 74,109 0.4
------------ ----
(COST - $68,917)
ITALY
- -----
AUTOMOTIVE 30,704 Fiat SPA ...................................... 102,965 0.6
------------ ----
INSURANCE 8,000 Assicurazioni Generali SPA .................... 184,686 1.1
------------ ----
</TABLE>
9
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
ITALY (continued)
- -----
TELEPHONE 62,000 Telecom Italia SPA ............................ $ 133,414
30,000 Telecom Italia Mobile SPA ..................... 67,102
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200,516 1.2%
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TOTAL ITALY ................................... 488,167 2.9
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(COST - $422,205)
JAPAN
- -----
APPAREL & TEXTILES 20,000 Gunze Ltd. .................................... 125,634
20,000 Itochu Corp. .................................. 140,082
------------ ----
265,716 1.6
------------ ----
AUTOMOBILES 1,200 Autobacs Seven Co. ............................ 116,308
16,000 Nissan Motors Co.(b) .......................... 142,349
12,000 Suzuki Motor Corp. ............................ 158,003
------------ ----
416,660 2.5
------------ ----
BANKING 14,000 Asahi Bank .................................... 162,575
8,000 Bank of Tokyo - Mitsubishi ................... 185,800
16,000 Long Credit Bank of Japan(b) .................. 124,208
8,000 Sanwa Bank .................................... 148,493
8,000 Sumitomo Bank ................................. 155,077
11,000 Sumitomo Trust & Banking ...................... 150,871
------------ ----
927,024 5.6
------------ ----
BREWERY 8,000 Kirin Brewery Co. ............................. 98,020
14,000 Sapporo Breweries ............................. 131,852
------------ ----
229,872 1.4
------------ ----
BUILDING CONSTRUCTION 8,000 National House Industrial ..................... 125,086 0.8
------------ ----
BUSINESS SERVICES 3,000 Secom ......................................... 198,601 1.2
------------ ----
CHEMICALS 11,000 Kuraray Co., Ltd.(b) .......................... 123,714 0.7
------------ ----
COMPUTERS 13,000 Ricoh Co.(b) .................................. 137,887 0.8
------------ ----
CONSTRUCTION MATERIALS 4,000 Tostem Corp. .................................. 118,136 0.7
------------ ----
DRUGS & HEALTH CARE 12,000 KAO Corp. ..................................... 162,392 1.0
------------ ----
</TABLE>
10
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
JAPAN (continued)
- -----
ELECTRICAL EQUIPMENT 14,000 Hitachi ....................................... $ 130,572
7,000 Omron Corp. ................................... 149,134
------------ ----
279,706 1.7%
------------ ----
ELECTRONICS 9,000 JGC Corp. ..................................... 118,502
1,000 Keyence Corp. ................................. 136,241
2,000 Rohm Co. ...................................... 132,401
2,000 TDK Corp. ..................................... 119,599
------------ ----
506,743 3.0
------------ ----
FINANCIAL SERVICES 3,000 Orix Corp. .................................... 111,370 0.7
------------ ----
HOMEBUILDERS 15,000 Obayashi Corp. ................................ 135,921 0.8
------------ ----
HOUSEHOLD APPLIANCES
& FURNISHINGS 2,000 Sony Corp. .................................... 131,852 0.8
------------ ----
INSURANCE 16,000 Mitsui Marine & Fire Insurance Co. ............ 127,427
11,000 Sumitomo Marine & Fire Insurance Co.(b) ....... 96,054
------------ ----
223,481 1.3
------------ ----
INDUSTRIAL MACHINERY 4,000 Bandai Co. .................................... 139,350
10,000 Mitsubishi Heavy Industries ................... 87,139
2,000 SMC Corp. ..................................... 155,077
15,000 Sumitomo Rubber ............................... 130,161
------------ ----
511,727 3.1
------------ ----
INTERNATIONAL OIL 21,000 Cosmo Oil Co., Ltd.(b) ........................ 130,188 0.8
------------ ----
INVESTMENT COMPANIES 7,000 Nomura Securities Co. ......................... 136,972 0.8
------------ ----
MISCELLANEOUS 3,000 Amway Japan Ltd. .............................. 150,871
5 NTT Data Communications Systems(b) ............ 149,957
------------ ----
300,828 1.8
------------ ----
PAPER 20,000 Nippon Paper Industries ....................... 125,269 0.8
------------ ----
</TABLE>
11
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
JAPAN (continued)
- -----
PHARMACEUTICALS 6,000 Sankyo Co. .................................... $ 155,808 0.9%
----------- ----
PHOTOGRAPHY 4,000 Fuji Photo Film Co. ........................... 126,549 0.8
----------- ----
REAL ESTATE 10,000 Mitsui Fudosan Co. ............................ 135,327 0.8
----------- ----
RETAIL TRADE 3,300 Familymart Co. ................................ 147,250 0.9
----------- ----
STEEL 30,000 Kawasaki Steel Corp. .......................... 108,353
42,000 Nippon Steel Corp. ............................ 144,397
----------- ----
252,750 1.5
----------- ----
TRUCKING & FREIGHT
FORWARDING 18,000 Tokyu Corp. ................................... 137,430 0.8
----------- ----
TOTAL JAPAN ................................... 6,254,259 37.5
----------- ----
(COST - $6,129,107)
NETHERLANDS
- -----------
BROADCASTING 859 Wolters Kluwer NV ............................. 97,660 0.6
----------- ----
CHEMICALS 600 Akzo Nobel NV ................................. 71,944 0.4
----------- ----
FINANCIAL SERVICES 4,250 Internationale Nederlanden Group NV(b) ........ 126,840 0.8
----------- ----
PACKAGING 1,800 KNP BT NV ..................................... 43,166 0.2
----------- ----
PETROLEUM SERVICES 1,500 Royal Dutch Petroleum Co. NV .................. 231,838 1.4
----------- ----
TELECOMMUNICATION
SERVICES 6,353 Elsevier NV ................................... 96,478 0.6
----------- ----
TOTAL NETHERLANDS ............................. 667,926 4.0
----------- ----
(COST - $565,087)
NORWAY
- ------
PETROLEUM SERVICES 2,058 Norsk Hydro A/S ............................... 100,853 0.6
----------- ----
TOTAL NORWAY .................................. 100,853 0.6
----------- ----
(COST - $86,119)
SINGAPORE
- ---------
AIRLINES 4,000 Singapore Airlines ............................ 42,240 0.2
----------- ----
</TABLE>
12
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
SIGNAPORE (continued)
- ---------
BANKING 5,000 Overseas Chinese Bank ......................... $ 58,469
1,500 Overseas Chinese Bank, Class A ................ 12,013
6,000 United Overseas Bank .......................... 57,406
----------- ----
127,888 0.8%
----------- ----
FOOD & BEVERAGES 1,000 Fraser & Neave ................................ 10,347 0.1
----------- ----
INDUSTRIAL MACHINERY 6,000 Jurong Shipyard(b) ............................ 30,404
7,000 Keppel Corp. .................................. 58,540
----------- ----
88,944 0.5
----------- ----
PUBLISHING 1,400 Singapore Press Holdings ...................... 27,484 0.2
----------- ----
REAL ESTATE 4,000 City Developments ............................. 31,184
2,000 Singapore Land ................................ 13,536
----------- ----
44,720 0.3
----------- ----
TOTAL SINGAPORE ............................... 341,623 2.1
----------- ----
(COST - $363,667)
SPAIN
- -----
BANKING 650 BCO Popular, Registered ....................... 115,980 0.7
----------- ----
PETROLEUM SERVICES 2,793 Repsol SA ..................................... 97,206 0.6
----------- ----
REAL ESTATE 3,200 Vallehermoso SA ............................... 63,247 0.4
----------- ----
UTILITIES-ELECTRIC & GAS 1,650 Empresa Nacional de Electricidad SA ........... 102,992 0.6
----------- ----
TOTAL SPAIN ................................... 379,425 2.3
----------- ----
(COST - $328,109)
SWEDEN
- ------
AUTO PARTS 2,920 Autoliv AB .................................... 89,098 0.5
----------- ----
DRUGS & HEALTH CARE 2,900 Pharmacia & Upjohn(b) ......................... 127,038 0.8
----------- ----
FOREST PRODUCTS 4,836 Stora Kopparbergs ............................. 63,919 0.4
----------- ----
</TABLE>
13
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
SWEDEN (continued)
- ------
TELECOMMUNICATION
SERVICES 6,100 Telelfonaktiebolaget LM Ericsson .............. $ 131,765 0.8%
----------- ----
TOTAL SWEDEN .................................. 411,820 2.5
----------- ----
(COST - $308,099)
SWITZERLAND
- -----------
BANKING 1,140 CS Holdings ................................... 108,511 0.6
----------- ----
ELECTRICAL EQUIPMENT 120 ABB AG ........................................ 148,584 0.9
----------- ----
FOOD & BEVERAGES 120 Nestle SA, Registered ......................... 137,162 0.8
----------- ----
INSURANCE 50 Baloise Holdings, Registered .................. 108,783 0.7
----------- ----
DRUGS & HEALTH CARE 26 Roche Holdings AG Genusscheine ................ 198,504
182 Sandoz AG, Registered ......................... 208,320
----------- ----
406,824 2.4
----------- ----
TOTAL SWITZERLAND ............................. 909,864 5.5
----------- ----
(COST - $760,495)
UNITED KINGDOM
- --------------
AIR TRAVEL 12,500 British Airways PLC ........................... 107,354 0.6
----------- ----
BANKING 16,000 National Westminster Bank PLC ................. 152,570
8,000 Standard Chartered PLC ........................ 79,640
----------- ----
232,210 1.4
----------- ----
CONGLOMERATES 30,000 BTR PLC ....................................... 117,876
20,000 Tomkins ....................................... 75,167
----------- ----
193,043 1.2
----------- ----
DRUGS & HEALTH CARE 16,000 Smithkline Beecham PLC ........................ 171,082 1.0
----------- ----
ELECTRICAL EQUIPMENT 14,000 General Electric Co. PLC ...................... 75,338 0.5
----------- ----
HOTELS & RESTAURANTS 30,000 Ladbroke Group ................................ 83,165 0.5
----------- ----
INDUSTRIAL MACHINERY 6,600 GKN PLC ....................................... 101,270 0.6
----------- ----
INTERNATIONAL OIL 20,000 British Petroleum Co. PLC ..................... 175,493 1.1
----------- ----
</TABLE>
14
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1996 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
UNITED KINGDOM(continued)
- --------------
METALS (NON-FERROUS) 5,000 RTZ Corp. ..................................... $ 74,002 0.4%
----------- ----
PAPER 24,287 Jefferson Smurfit(b) .......................... 65,465 0.4
----------- ----
RETAIL TRADE 15,000 Marks & Spencer ............................... 109,605 0.7
----------- ----
TELEPHONE 31,700 British Telecom PLC ........................... 170,340 1.0
----------- ----
TOBACCO 15,000 BAT Industries PLC ............................ 116,711 0.7
----------- ----
UTILITIES-ELECTRIC & GAS 20,200 National Power PLC ............................ 163,131 1.0
----------- ----
TOTAL UNITED KINGDOM .......................... 1,838,209 11.0
----------- ----
(COST - $1,739,332)
TOTAL COMMON STOCKS ........................... 15,540,608 93.3
----------- ----
(COST - $14,550,625)
CONVERTIBLE BONDS $100,000 MBL International Finance (Bermuda),
3.00%, 11/30/02 ............................ 117,000 0.7
----------- ----
TOTAL CONVERTIBLE BONDS ....................... 117,000 0.7
----------- ----
(COST - $116,500)
Total Investments, at value ................... 15,657,608 94.0
----------- ----
(COST - $14,667,125)
REPURCHASE AGREEMENTS
150,000 State Street Bank, 2.00%, 7/1/96 (Collateralized
by 155,000 U.S. Treasury Notes, 6.50%, 4/30/99,
market value $157,051) ..................... 150,000 0.9
----------- ----
TOTAL REPURCHASE AGREEMENTS ................... 150,000 0.9
----------- ----
(COST - $150,000)
TOTAL ......................................... $15,807,608 94.9%
=========== ====
(COST - $14,817,125)(a)
<FN>
- ----------
Percentages indicated are based on net assets of $16,649,279.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation ......................................................... $1,423,443
Unrealized depreciation ......................................................... (432,960)
----------
Net unrealized appreciation ..................................................... $ 990,483
==========
(b) Represents non-income producing security.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
INTERNATIONAL EQUITY FUND
ASSETS:
Investment in securities, at value (cost $14,817,125) ..... $15,807,608
Cash ...................................................... 3,885
Foreign currency (cost $187,837) .......................... 190,756
Interest and dividends receivable ......................... 28,591
Receivable from brokers for investments sold .............. 1,039,271
Receivable for shares sold ................................ 83,314
Receivable from Investment Adviser ........................ 62,795
Organization costs ........................................ 24,484
Foreign tax receivable .................................... 19,521
Prepaid expenses and other assets ......................... 911
-----------
Total Assets ............................................ 17,261,136
-----------
LIABILITIES:
Payable to brokers for investments purchased ............. 558,439
Accurred expenses and other payables:
Administration fees ..................................... 1,321
Legal and audit fees .................................... 12,718
Other ................................................... 39,379
-----------
Total Liabilities ..................................... 611,857
-----------
Net Assets ................................................... $16,649,279
===========
Net Asset Value, Offering Price and Redemption
Price per Share: ($.001 par value per share,
unlimited number of shares authorized)
SERVICE CLASS SHARES:
Net assets ................................................ $ 435,823
Shares of beneficial interest issued and outstanding ...... 41,926
Net asset value ........................................... $ 10.40
-----------
Sales charge-5.00% of offering price ...................... $ 0.55
-----------
Maximum offering price .................................... $ 10.95
-----------
INSTITUTIONAL CLASS SHARES:
Net assets ................................................ $16,213,456
Shares of beneficial interest issued and outstanding ...... 1,558,346
Net asset value ........................................... $ 10.40
-----------
COMPOSITION OF NET ASSETS:
Paid-in capital ........................................... $ 15,946,020
Distributions in excess of net investment income .......... (21,069)
Accumulated undistributed net realized losses from
investment and foreign currency transactions ............ (269,074)
Net unrealized appreciation from investments and
foreign currency transactions ............................ 993,402
-----------
Net Assets, June 30, 1996 ................................. $16,649,279
===========
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
INTERNATIONAL EQUITY FUND
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $24,219) ........ $157,708
Interest ..................................................... 8,755
--------
Total Income ............................................... 166,463
--------
Expenses:
Advisory fees ................................................ 74,124
Administration fees .......................................... 15,850
Distribution expenses ........................................ 67
Co-administration/Shareholder servicing fees ................. 4,633
Audit fees ................................................... 17,189
Transfer agent fees .......................................... 8,349
Custodian fees and expenses .................................. 67,641
Printing expenses ............................................ 3,354
Registration fees ............................................ 4,199
Amortization of organization expenses ........................ 7,759
Legal fees ................................................... 12,148
Trustees' fees ............................................... 3,412
Other expenses ............................................... 30,406
--------
Total expenses ............................................. 249,131
--------
Less: Fee waivers by advisor .................................... (61,599)
--------
Net expenses .................................................... 187,532
--------
Net Investment Loss ............................................. (21,069)
--------
REALIZED AND UNREALIZED GAINS FROM INVESTMENTS:
Net realized gains from investments and foreign
currency transactions ....................................... 507,123
Net change in unrealized appreciation from
investments and foreign currencies .......................... 172,733
--------
Net realized and unrealized gains from investments
and foreign currencies ....................................... 679,856
--------
Net increase in net assets resulting from operations ............ $658,787
========
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
INTERNATIONAL EQUITY FUND
FOR THE
SIX MONTHS FOR THE
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(UNAUDITED)
From Investment Activities:
OPERATIONS:
Net investment loss ....................... $ (21,069) $ (70,698)
Net realized gains (losses) from
investments and foreign currency
transactions ............................ 507,123 (584,588)
Net change in unrealized appreciation
from investments and foreign currency
transactions ............................ 172,733 1,487,280
----------- -----------
Change in net assets
resulting from operations ............... 658,787 831,994
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued ............... 1,989,673 18,607,331
Dividends reinvested ...................... -- 1,355
Cost of shares redeemed ................... (1,909,575) (20,349,310)
----------- -----------
Change in net assets
from share transactions ................... 80,098 (1,740,624)
----------- -----------
Change in net assets ......................... 738,885 (908,630)
----------- -----------
NET ASSETS:
Beginning of period ....................... 15,910,394 16,819,024
----------- -----------
End of period ............................. $16,649,279 $15,910,394
=========== ===========
SHARE TRANSACTIONS:
Issued .................................... 193,969 2,085,576
Reinvested ................................ -- 142
Redeemed .................................. (187,730) 2,255,096
----------- -----------
Change in shares ............................. 6,239 4,340,814
----------- -----------
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
HSBC Mutual Funds Trust, formerly known as Mariner Mutual Funds Trust, (the
"Trust") was organized in Massachusetts on November 1, 1989 as a
Massachusetts business trust and is an open-end, management investment
company with multiple investment portfolios, including the International
Equity Fund (the "Fund"). The Fund offers two classes of shares. The
Institutional Class is available to customers of financial institutions or
corporations on behalf of their customers or employees, or on behalf of any
trust, pension, profit sharing or other benefit plan for such customers or
employees. The Service Class is available to all other investors. The
Institutional Class and Service Class shares are identical in all respects
except that Institutional Class shares are not subject to a sales load and
do not impose any shareholder servicing fees or Rule 12b-1 fees.
The Fund's investment objective is to seek to provide investors with
long-term capital appreciation by investing at least 80% of its total
assets in equity securities (including American and European Depositary
Receipts) issued by companies based outside of the United States. The
balance of the Fund's assets will be invested in equity and debt securities
of companies based in the United States and outside of the United States
including bonds and money market instruments. Dividend income is expected
to be incidental to the Fund's investment objective. The Fund may also use
other investment practices to enhance return or to hedge against
fluctuations in the value of portfolio securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
SECURITIES VALUATION: Investments in securities are valued at the last
quoted sale price as of the close of business on the day the valuation is
made, or if a sale is not reported for that day, at the mean between
closing bid and asked prices. Price information for listed securities is
taken from the exchange where the securities are primarily traded.
Investments in futures and related options, which are traded on commodities
exchanges, are valued at their last sale price as of the close of such
exchanges. Other securities for which no quotations are readily available
are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees. Short-term investments having
maturities of 60 days or less are valued at amortized cost, which
approximates market value.
All assets and liabilities initially expressed in foreign currencies are
translated into U.S. dollars at the bid price of such currencies against
the U.S. dollar's last quoted price by a major bank or broker. If such
quotations are not available as of the close of the New York Stock
Exchange, the rate of exchange will be determined in accordance with
policies established in good faith by the Board of Trustees.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOREIGN CURRENCIES: Transactions denominated in foreign currencies are
recorded at the prevailing rate as incurred or earned. Net realized foreign
currency gains or losses include exchange rate differences between trade
date and settlement date for security purchases and sales, and between the
date the Fund records income, expenses and other assets and liabilities and
the date such assets and liabilities are received or paid. The portion of
both realized and unrealized gains and losses on investments that result
from fluctuations in foreign currency exchange rates is not separately
disclosed. The Fund may enter into forward currency exchange contracts for
investments purposes and to hedge its exposure to changes in foreign
currency exchange rates on its foreign portfolio holdings and to hedge
certain firm purchase and sales commitments denominated in foreign
currencies. A forward currency exchange contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated rate.
The gain or loss arising from the difference between the original contracts
and the closing of such contracts is included in realized gains or losses
from foreign currency transactions. Fluctuations in the value of forward
currency exchange contracts are recorded for financial reporting purposes
as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for
investment or government securities in a separate account of the Fund
having a value equal to the aggregate amount of the Fund's commitments
under forward currency exchange contracts entered into with respect to
position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. The face or contract amount,
in U.S. dollars reflects the total exposure the Fund has in that particular
currency contract. No outstanding forward currency exchange contracts
existed as of June 30, 1996.
TAXES: It is the Fund's policy to comply with the provisions of the
Internal Revenue Code, as amended, applicable to regulated investment
companies, and to distribute substantially all of its taxable income, and
net realized capital gains to its shareholders. Therefore, no provision is
required for Federal income tax. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital gains at
various rates. Where available, the Fund will file for claims on foreign
taxes withheld.
DIVIDENDS AND DISTRIBUTIONS: The Fund intends to distribute annually
substantially all of its net investment income and net realized capital
gains, if any, in the form of dividends.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earning and profits are reported in the financial statements as a tax
return of capital. Differences in the recognition or classification of
income between the financial statements and tax earnings and profits which
result in temporary over distributions for financial statements purposes,
are classified as distributions in excess of net investment income or
accumulated undistributed net realized gains.
SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are
recorded on trade date. Identified cost of investments sold is used for
both financial statement and Federal income tax purposes. Dividend income
is recorded on the ex-dividend date. Interest income is recorded as earned.
EXPENSE ALLOCATION: Expenses directly attributed to each Fund in the Trust
are charged to that Fund's operations; expenses which are applicable to all
Funds are allocated among them.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ORGANIZATIONAL COSTS: Costs incurred in connection with the organization of
the Fund are being amortized on a straight-line basis over a five year
period from the date operations commenced.
3. PORTFOLIO SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 1996 were $7,903,834 and $6,532,820,
respectively.
4. AGREEMENTS
The Trust retains HSBC Asset Management Americas Inc. ("HSBC Americas") to
act as Investment Adviser for the Fund. HSBC Americas is the North American
investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking
Corporation). As Investment Adviser, HSBC Americas furnishes investment
guidance and policy direction in connection with the management of the
portfolio of the Funds, subject to policies established by the Board of
Trustees. As compensation for its services, HSBC Americas is paid a monthly
advisory fee at an annual rate of 0.90% of the Fund's average daily net
assets. For the six months ended June 30, 1996, HSBC Americas earned
approximately $20,368 from the Fund, net of fee waivers of approximately
$53,756.
As administrator, BISYS is paid a monthly fee equal to an annual rate of
0.15% of the Fund's average daily net assets. For the six months ended June
30, 1996, BISYS earned approximately $10,920 from the Fund in
administrative services fees net of fee waivers of $4,930.
HSBC Americas earned co-administration/shareholder servicing fees of up to
0.07% of the Fund's average net assets totaling approximately $1,720 from
the Fund net of fee waivers of $2,913, during the six months ended June 30,
1996.
The Fund has adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended.
The Plan provides for a monthly payment by the Fund to BISYS Fund Services
for expenses incurred in connection with distribution services provided to
the Fund not to exceed an annual rate of 0.35% of the Fund's average net
assets during the preceding month.
HSBC Americas may enter into agreements (the "Service Agreements") with
certain banks, financial institutions and corporations ("Service
Organizations") whereby each Service Organization handles record keeping
and provides certain administration services for its customers who invest
in the Funds through accounts maintained at that Service Organization. Each
Service Organization will receive monthly payments, which are based upon
expenses that the Service Organization has incurred in the performance of
its service under the Service Agreement. The payments from the Funds on an
annual basis will not exceed 0.25% of the average value of the Funds'
shares held in the subaccounts of the Service Organizations.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
One state in which the shares of the Fund are qualified for sale imposes
limitations on the expenses of the Fund. The Advisory Contract with HSBC
Americas provides that if, in any fiscal year, the total expenses of the
Fund (excluding taxes, interest, distribution expenses, brokerage
commissions and other portfolio transaction expenses, other expenditures
which are capitalized in accordance with generally accepted accounting
principles and extraordinary expenses, but including the advisory and
administrative services fees) exceed the expense limitation applicable to
the Fund imposed by the securities regulations of such state, HSBC Americas
will waive fees in amounts equal to the excess. Although there is no
certainty that this limitation will be in effect in the future, the
effective limitation on an annual basis with respect to the Fund is
currently 2.5% per annum of the first $30 million of the average net
assets, 2.0% of the next $70 million of average net assets and 1.5% of
average net assets in the excess of $100 million. At June 30, 1996, there
were no payments or reimbursements required as a result of this expense
limitation.
A partner of Baker & McKenzie, legal counsel to the Trust, serves as
Secretary of the Trust. At June 30, 1996 the Fund incurred legal fees of
approximately $5,064 to Fund counsel.
5. CAPITAL SHARE TRANSACTIONS:
The Fund offers Service Class and Institutional Class shares. The two
classes of shares differ in their respective shareholder servicing agent,
distribution and service fees. All shareholders bear the common expenses of
the Fund pro rata based on the average daily net assets of each class,
without distinction between share classes. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses.
Transactions in capital shares for the Fund were as follows:
INTERNATIONAL EQUITY FUND
----------------------------------
AMOUNT SHARES
-------------- --------------
FOR THE SIX MONTHS ENDED
JUNE 30, 1996
----------------------------------
(UNAUDITED)
SERVICE CLASS:
Shares issued $ 34,978 3,444
Dividends reinvested -- --
Shares redeemed (281,696) (27,456)
---------- --------
Net increase $ (246,718) (24,012)
========== ========
INSTITUTIONAL CLASS:
Shares issued $1,954,695 190,525
Dividends reinvested -- --
Shares redeemed (1,627,879) (160,274)
---------- --------
Net increase $ 326,816 30,251
========== ========
22
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
HSBC INTERNATIONAL EQUITY FUND
SERVICE CLASS SHARES
--------------------------------------------------------------
FOR THE FOR THE FOR THE PERIOD
SIX MONTHS ENDED YEAR ENDED APRIL 25, 1994 TO
JUNE 30, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 (a)
---------------- ----------------- ---------------------
(UNAUDITED)
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period ................. $ 9.97 $9.55 $ 10.00
------ ----- -------
Investment Activities
Net investment loss ................. (0.03) (0.07) --
Net realized and unrealized
gains (losses) from
investments ....................... 0.46 0.49 (0.43)
------ ----- -------
Total from Investment Activities .... 0.43 0.42 (0.43)
------ ----- -------
Distributions
From excess of current year
realized losses on
investments ....................... -- -- (0.02)
------ ----- -------
Net Asset Value, End of Period ......... $10.40 $9.97 $ 9.55
====== ===== =======
Total Return(b) ........................ 4.31%(d) 4.40% (4.30)%(d)
Ratios/Supplemental Data:
Net Assets at end of
period (000) ...................... $ 436 $ 658 $16,819
Ratio of expenses to average
net assets ........................ 2.29%(c) 1.98% 2.16%(c)
Ratio of net investment loss
to average net assets ............. (0.26)%(c) (1.01)% (0.04)%(c)
Ratio of expenses to average
net assets* ....................... 3.06%(c) 3.66% 2.50%(c)
Ratio of net investment loss
to average net assets* ............ (1.03)%(c) (2.69)% (0.39)%(c)
Portfolio turnover rate ............. 42.70% 90.31% 29.37%
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
-------------------------------------------
FOR THE FOR THE PERIOD
SIX MONTHS ENDED MARCH 1, 1995 TO
JUNE 30, 1996 DECEMBER 31, 1995 (a)
---------------- ----------------------
(UNAUDITED)
<S> <C> <C>
Net Asset Value,
Beginning of Period ................. $ 9.98 $ 8.81
------ -------
Investment Activities
Net investment loss ................. (0.01) (0.03)
Net realized and unrealized
gains (losses) from
investments ....................... 0.43 1.20
------ -------
Total from Investment Activities .... 0.42 1.17
------ -------
Distributions
From excess of current year
realized losses on
investments ....................... -- --
------ -------
Net Asset Value, End of Period ......... $10.40 $ 9.98
====== =======
Total Return(b) ........................ 4.21%(d) 13.28%(d)
Ratios/Supplemental Data:
Net Assets at end of
period (000) ...................... $16,213 $15,253
Ratio of expenses to average
net assets ........................ 2.28%(c) 2.62%(c)
Ratio of net investment loss
to average net assets ............. (0.25)%(c) (0.34)%(c)
Ratio of expenses to average
net assets* ....................... 3.05%(c) 3.12%(c)
Ratio of net investment loss
to average net assets* ............ (1.02)%(c) (0.84)%(c)
Portfolio turnover rate ............. 42.70% 90.31%
<FN>
- ----------
* During the period certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Excludes sales charge.
(c) Annualized.
(d) Not annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
HSBC (SM) MUTUAL FUNDS TRUST
3435 Stelzer Road
Columbus, Ohio 43219
INFORMATION:
(800) 634-2536
INVESTMENT ADVISER AND CO-ADMINISTRATOR
HSBC Asset Management Americas Inc.
250 Park Avenue
New York, New York 10177
DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
This report is for the information of the shareholders of HSBC Mutual Funds
Trust. Its use in connection with any offering of the Trust's shares is
authorized only in the case of a concurrent or prior delivery of the Trust's
current prospectus.