HSBC FUNDS TRUST
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HSBC FUND GROUP
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HSBC Asset Management [GRAPHIC OMITTED]
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Cash Management Fund
Government Money Market Fund
U.S. Treasury Money Market Fund
New York Tax-Free Money Market Fund
HSBC SM 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
AND DIVIDEND DISBURSING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
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 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.
ANNUAL REPORT
December 31, 1996
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
BISYS FUND SERVICES
<PAGE>
HSBC FUNDS TRUST
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MONEY MARKET FUNDS
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HSBC Asset Management [GRAPHIC OMITTED]
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CASH MANAGEMENT FUND
GOVERNMENT MONEY MARKET FUND
U.S. TREASURY MONEY MARKET FUND
NEW YORK TAX-FREE MONEY MARKET FUND
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January 17, 1997
Dear Shareholder:
The Federal Reserve started out 1996 by lowering short-term interest rates 25
basis points from 5.50% to 5.25% on January 31. This finished their 75 basis
point easing in monetary policy that had started back in July of 1995. However,
for the remainder of the year, monetary policy remained steady and all remaining
Federal Reserve meetings ended with the decision to leave short-term rates
unchanged.
Without Federal Reserve intervention, the markets traded primarily on
expectations and the release of several key economic indicators. This data
included employment numbers, the Consumer Price Index (CPI), the Producer Price
Index (PPI), housing starts and the Gross Domestic Product (GDP), which caused
market sentiment to swing widely from month to month and quarter to quarter as
each respective number was published.
As in the past, our primary goal is to ensure that the HSBC Money Market Funds
reflect the highest standards characterized by stability, safety, performance
and service. HSBC Asset Management values your relationship, and we appreciate
this chance to work on your behalf.
Sincerely,
/S/ EDWARD J. MERKLE
Edward J. Merkle
<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
WILLIAM B. BLUNDIN Senior Vice President, BISYS Fund Services, Inc.
*Member of the Audit and Nominating Committees
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OFFICERS
WILLIAM B. BLUNDIN PRESIDENT
TONY TURNER EXECUTIVE VICE PRESIDENT
KAREN DOYLE VICE PRESIDENT
KEVIN MARTIN TREASURER
STEVEN R. HOWARD SECRETARY
CURTIS BARNES ASSISTANT SECRETARY
ALAINA V. METZ ASSISTANT SECRETARY
2
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER (23.1%):
BANKING, INSURANCE & FINANCE (14.6%):
P1/A1+ Banco Itau S.A. Cayman BCH,
(Bayerische Vereinsbank LOC) ................... 5.52% 3/27/97 $ 4,646,000 $ 4,586,215
P1/A1+ Banco Nac de Com Ext Snc, (Societe
Generale LOC) .................................. 5.67 1/31/97 9,000,000 8,957,475
P1/A1 SRD Finance Inc., (Bank of Tokyo LOC) ............ 5.46 1/23/97 9,700,000 9,667,931
P1/A1 Yamaha Motors Financial Corp., (Dai-Ichi
Kangyo Bank Ltd. LOC) .......................... 5.53 2/4/97 9,000,000 8,953,420
------------
32,165,041
------------
MANUFACTURING (4.2%):
P1/A1+ Cosco Co. Ltd., (Credit Suisse LOC) .............. 5.36 4/16/97 9,400,000 9,253,047
------------
PETROLEUM & FUEL PRODUCTS (4.3%):
P1/A1+ Petroleo Brasileiro S.A., (Barclays Bank
PLC LOC) ....................................... 5.50 6/9/97 9,800,000 9,568,434
------------
TOTAL COMMERCIAL PAPER (Cost - $50,986,522) 50,986,522
------------
CORPORATE NOTES (12.7%):
BANKING, INSURANCE & FINANCE (12.7%):
P1/A1 American Express Centurion Bank* ................. 5.57 4/30/97 9,000,000 9,000,000
P1/A1+ Bank of America, Illinois Bank Note .............. 5.70 5/28/97 9,000,000 8,996,838
P1/A1+ Merrill Lynch & Co., Inc.* ....................... 5.45 6/2/97 10,000,000 9,999,186
------------
TOTAL CORPORATE NOTES (Cost - $27,996,024) ................................................. 27,996,024
------------
MEDIUM TERM NOTES (4.2%):
FINANCIAL SERVICES (4.2%):
P1/A1 Bear Stearns & Co., Inc.* ........................ 5.51 7/8/97 6,000,000 6,000,000
P1/A1 ................................................ 5.41 11/17/97 3,300,000 3,300,000
------------
TOTAL MEDIUM TERM NOTES (Cost - $9,300,000) ................................................ 9,300,000
------------
PROMISSORY NOTE (3.8%):
P1/A1+ Goldman Sachs Group, L.P. ........................ 5.53 1/21/97 8,500,000 8,500,000
------------
TOTAL PROMISSORY NOTE (Cost - $8,500,000) .................................................. 8,500,000
------------
</TABLE>
3
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996 (CONTINUED)
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
TIME DEPOSIT (3.6%):
P1/A1 Bank of New York ................................ 5.12% 1/2/97 $ 8,000,000 $ 8,000,000
------------
TOTAL TIME DEPOSIT (Cost - $8,000,000) ....................................................... 8,000,000
------------
U.S. GOVERNMENT AGENCIES (9.1%):
Aaa/NR Federal Home Loan Bank* ......................... 5.83 1/31/97 20,000,000 20,000,915
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost - $20,000,915) ....................................................................... 20,000,915
------------
CERTIFICATES OF DEPOSIT (25.3%):
BANKING (25.3%):
P1/A1 Bankers Trust NY Corp. .......................... 5.47 10/16/97 9,000,000 8,997,777
P1/A1+ Deutsche Bank ................................... 6.12 7/8/97 10,000,000 10,000,831
P1/A1 Industrial Bank of Japan, Ltd. .................. 5.52 2/7/97 9,000,000 9,000,091
P1/A1+ Royal Bank of Canada ............................ 5.73 8/13/97 10,000,000 9,998,337
P1/A1 Sanwa Bank ...................................... 5.50 1/13/97 9,000,000 9,000,052
P1/A1 Sumitomo Bank, Ltd. ............................. 5.51 1/13/97 9,000,000 9,000,020
------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost - $55,997,108) ....................................................................... 55,997,108
------------
REPURCHASE AGREEMENTS (17.9%):
Chase Securities Inc. (Purchased on 12/31/96,
proceeds at maturity $39,619,962;
Collateralized by $41,350,000 FHLMC,
7.00%, 11/1/26, market value $40,600,531) ..... 6.80 1/2/97 39,605,000 39,605,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost - $39,605,000) ....................................................................... 39,605,000
------------
TOTAL INVESTMENTS (99.7%)
(Cost - $220,385,569)(a) ................................................................... 220,385,569
------------
OTHER ASSETS, LESS LIABILITIES (0.3%) ........................................................ 574,227
------------
NET ASSETS (100.0%) .......................................................................... $220,959,796
============
<FN>
- --------------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* The interest rate, which will change periodically, is based on bank prime
rates or an index of market interest rates. The rate reflected on the
Schedule of Portfolio Investments is the rate in effect at December 31,
1996.
LOC Letter of Credit
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (72.9%):
Aaa, NR Federal Home Loan Bank* .......................... 6.58% 1/31/97 $10,000,000 $ 10,000,000
Aaa, NR Federal Home Loan Bank ........................... 5.65 1/7/98 10,000,000 10,000,000
Aaa, NR Federal National Mortgage Assoc.* ................ 5.12 4/4/97 4,000,000 3,999,533
Aaa, NR ............................................... 5.22 5/5/97 15,000,000 14,998,304
Aaa, NR ............................................... 5.59 8/1/97 20,000,000 20,001,550
Aaa, NR Federal National Mortgage Assoc. ................. 5.56 12/18/97 5,000,000 4,743,088
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost - $63,742,475) ..................................................................... 63,742,475
------------
REPURCHASE AGREEMENTS (38.4%):
Chase Securities, Inc. (Purchased on 12/31/96,
proceeds at maturity $8,544,227;
Collateralized by $8,920,000 FHLMC,
7.00%, 11/1/26, market value $8,758,325) ....... 6.80 1/2/97 8,541,000 8,541,000
Donaldson, Lufkin & Jenrette Securities Corp.
(Purchased on 12/31/96, proceeds at maturity
$10,003,750; Collateralized by $31,743,000
U.S. Treasury Note Strips, 11/15/13,
market value $10,177,599) ...................... 6.75 1/2/97 10,000,000 10,000,000
Lehman Government Securities, Inc. (Purchased
on 12/31/96, proceeds at maturity $15,004,875;
Collateralized by $14,260,000
U.S. Treasury Bonds, 7.25%, 5/15/16,
market value $15,351,695) ...................... 5.85 1/2/97 15,000,000 15,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(Cost - $33,541,000) ..................................................................... 33,541,000
------------
TOTAL INVESTMENTS (111.3%)
(Cost - $97,283,475)(a) .................................................................. 97,283,475
------------
LIABILITIES, LESS OTHER ASSETS (-11.3%) .................................................... (9,891,839)
------------
NET ASSETS (100.0%) ........................................................................ $ 87,391,636
============
<FN>
- --------------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* The interest rate, which will change periodically, is based on bank prime
rates or an index of market interest rates. The rate reflected on the
Schedule of Portfolio Investments is the rate in effect at December 31,
1996.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS (36.7%):
AAA, AAA ................................................ 4.93% 2/6/97 $2,000,000 $1,990,140
AAA, AAA ................................................ 5.24 4/3/97 1,000,000 986,609
AAA, AAA ................................................ 5.65 8/21/97 2,000,000 1,931,496
AAA, AAA ................................................ 5.20 11/13/97 6,000,000 5,726,265
-----------
TOTAL U.S. TREASURY BILLS (Cost - $10,634,510) ............................................... 10,634,510
-----------
REPURCHASE AGREEMENTS (63.9%):
Bear Stearns & Co., Inc. (Purchased on 12/31/96,
proceeds at maturity $1,400,486; Collateralized
by $1,400,000 U.S. Treasury Notes, 6.13%,
3/31/98, market value $1,427,798) .............. 6.25 1/2/97 1,400,000 1,400,000
Chase Securities, Inc. (Purchased on 12/10/96,
proceeds at maturity $5,218,799; Collateralized
by $4,785,000 U.S Treasury Notes,
7.50%, 2/15/05, market value $5,319,574) ....... 6.80 1/2/97 5,200,000 5,200,000
Donaldson, Lufkin & Jenrette Securities Corp.
(Purchased on 12/31/96, proceeds at maturity
$3,796,423; Collateralized by $14,419,000
U.S. Treasury Note Strips, 5/15/16, market
value $3,861,120) .............................. 6.75 1/2/97 3,795,000 3,795,000
Lehman Government Securities, Inc. (Purchased
on 12/31/96, proceeds at maturity $1,450,524;
Collateralized by $1,380,000 U.S. Treasury Bonds,
7.25%, 5/15/16, market value $1,472,934) ....... 6.50 1/2/97 1,450,000 1,450,000
Merrill Lynch Government Securities, Inc.
(Purchased on 12/31/96, proceeds at maturity
$1,450,479; Collateralized by $1,445,000
U.S. Treasury Notes, 6.25%, 1/31/97,
market value $1,483,226) ....................... 5.95 1/2/97 1,450,000 1,450,000
Union Bank (Purchased on 12/31/96, proceeds
at maturity $5,202,629; Collateralized by
$5,188,000 U.S. Treasury Notes, 5.63%,
1/31/98, market value $5,306,898) .............. 6.37 1/2/97 5,200,000 5,200,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost - $18,495,000) ...................................................................... 18,495,000
-----------
TOTAL INVESTMENTS (100.6%)
(Cost - $29,129,510)(a) ................................................................... 29,129,510
-----------
LIABILITIES, LESS OTHER ASSETS (-0.6%) ..................................................... (167,034)
-----------
NET ASSETS (100.0%) ......................................................................... $28,962,476
===========
<FN>
- --------------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
MUNICIPAL NOTES (16.4%):
MIG1, NR County of Erie, GO, (Union Bank of
Switzerland LOC) .............................. 4.25% 4/17/97 $1,000,000 $1,001,820
MIG1, NR Elmira City BANS ................................ 4.37 7/10/97 1,000,000 1,002,631
MIG1, SP1 Nassau County BANS .............................. 4.25 3/14/97 2,500,000 2,502,407
MIG1, NR Northport-East Northport School District ........ 4.50 6/30/97 2,000,000 2,005,312
MIG1, NR Oceanside School District TANS .................. 4.37 6/27/97 2,000,000 2,004,435
MIG1, NR Three Village School District ................... 4.25 6/30/97 1,005,000 1,006,378
MIG1, SP1+ Puerto Rico Transportation, Series A ............ 4.00 7/30/97 2,000,000 2,006,440
-----------
TOTAL MUNICIPAL NOTES (Cost - $11,529,423) ................................................... 11,529,423
-----------
MUNICIPAL BONDS (3.5%):
A, A New York State Urban Development Corp. ......... 5.00 7/1/97 1,715,000 1,724,549
AAA, AAA Triborough Bridge & Tunnel Authority,
(Pre-refunded) ................................ 8.25 1/1/97 700,000 721,391
-----------
TOTAL MUNICIPAL BONDS (Cost - $2,445,940) .................................................... 2,445,940
-----------
MANDATORY PUT MUNICIPAL BONDS (9.0%):
VMIG1, A-1 New York State Power Authority Revenue &
General Purpose ............................... 3.70 3/1/97 2,360,000 2,360,000
P-1, A-1+ Puerto Rico Individual Medical & Environmental
Financing Authority, PCR, Reynolds Metals Co.
Project, (ABN AMRO Bank LOC) .................. 3.80 9/1/97 2,000,000 2,000,000
VMIG1, NR New York State Energy Research & Development
Authority, PCR, Lilco Project, Series A,
(Deutsche Bank LOC), Putable 3/1/97 @100 ...... 3.25 3/1/97 2,000,000 2,000,000
-----------
TOTAL OTHER MUNICIPAL BONDS (Cost - $6,360,000) .............................................. 6,360,000
-----------
MUNICIPAL COMMERCIAL PAPER (11.9%):
P-1, A-1+ New York City, Municipal Assistance Corp.
(National Westminster LOC),
(Bank of Nova Scotia LOC) ..................... 3.45 1/3/97 2,500,000 2,500,000
P-1, A-1+ New York City, Municipal Water (Canadian
Imperial Bank LOC) ............................ 3.40 1/16/97 3,000,000 3,000,000
P-1, A-1+ New York State Dormitory Authority Sloane
Kettering (Morgan Guaranty LOC) ............... 3.40 1/6/97 2,900,000 2,900,000
-----------
TOTAL MUNICIPAL COMMERICAL PAPER (Cost - $8,400,000) ......................................... 8,400,000
-----------
</TABLE>
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996 (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
VARIABLE RATE MUNICIPAL BONDS* (58.7%):
VMIG1, A-1+ Babylon, GO, (Bank of Nova Scotia LOC) .......... 3.15% 1/13/97 $1,700,000 $1,700,000
VMIG1, A-1+ Metropolitan Transportation Authority,
Commuter Facilities, (JP Morgan Syndicate
LOC) ......................................... 3.35 1/13/97 900,000 900,000
NR, A-1 Montgomery Industrial Development Authority,
Service Merchandise, (Industrial Bank of Japan
LOC) ......................................... 4.05 1/13/97 100,000 100,000
VMIG1, A-1+ New York City, GO, Series B VRDN (FGIC
Insured) ..................................... 3.60 1/2/97 400,000 400,000
VMIG1, A-1+ New York City, GO, Series B (Union Bank of
Switzerland LOC) ............................. 3.10 1/2/97 100,000 100,000
VMIG1, SPI+ New York City, Housing Development Corp.,
East 96th Street Project, Series A, (Bank of
Tokyo/Mitsubishi LOC) ........................ 4.00 1/13/97 2,000,000 2,000,000
VMIG1, A-1 New York City, Housing Development Corp.,
Mortgage Revenue, Parkgate Tower 1,
(Citibank LOC) ............................... 3.00 1/13/97 670,000 670,000
P-1, A-1 New York City, Housing Development Corp.,
Multifamily Mortgage Revenue,
Queenswood A, (Sumitomo LOC) ................. 3.00 1/13/97 2,615,000 2,615,000
NR, A-1+ New York City, Housing Development Corp.,
Multifamily Mortgage Revenue, Tribeca
Towers A, AMT, (FNMA LOC) .................... 3.85 1/13/97 300,000 300,000
VMIG1, NR New York City, Industrial Development
Authority, Civic Facilities Revenue (Chase
Manhattan Bank LOC) .......................... 3.35 1/13/97 1,126,000 1,126,000
NR, A-1 New York City, Industrial Development
Authority, Civic Facilities Revenue,
Columbia Grammar, (Chase Manhattan Bank
LOC) ......................................... 2.50 1/13/97 1,950,000 1,950,000
VMIG1, A-1+ New York City, Municipal Water Finance
Authority, Water & Sewer System, Series C
(FGIC Insured) ............................... 3.05 1/2/97 1,100,000 1,100,000
VMIG1, A-1+ New York City, Municipal Water Finance Authority,
Water & Sewer System (FGIC Insured) .......... 3.50 1/2/97 200,000 200,000
VMIG1, A-1+ New York City, Municipal Water Finance Authority,
Water & Sewer System (FGIC Insured) .......... 3.70 1/2/97 1,725,000 1,725,000
VMIG1, A-1+ New York City, Series B (FGIC Insured) .......... 3.70 1/2/97 200,000 200,000
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996 (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
VARIABLE RATE MUNICIPAL BONDS* (CONTINUED):
VMIG1, A-1+ New York City, Series B, Subseries B-3
(MBIA Insured) ............................. 3.35% 1/2/97 $ 500,000 $ 500,000
VMIG1, A-1+ New York City, Series B, Subseries B-7 ........ 3.50 1/2/97 200,000 200,000
VMIG1, Aa3 New York City, Series B, Subseries B-8,
(Mitsubishi Bank LOC) ...................... 3.60 1/13/97 800,000 800,000
VMIG1, A-1+ New York City, Series B, Subseries B-10,
(Union Bank of Switzerland LOC) ............ 3.50 1/13/97 100,000 100,000
VMIG1, NR New York City, Trust for Cultural
Resources, Museum of Natural History
(Credit Suisse LOC) ........................ 3.35 1/13/97 400,000 400,000
VMIG1, A-1 New York City, Trust for Cultural
Resources, Carnegie Hall, (Dai Ichi
Kangyo LOC) ................................ 4.25 1/13/97 400,000 400,000
VMIG1, A-1+ New York City, Trust For Cultural Resources,
Carnegie Hall, (Dai Ichi Kangyo LOC) ....... 2.45 1/13/97 2,200,000 2,200,000
VMIG1, A-1 New York City, Trust for Cultural Resources,
Museum of Broadcasting, (Sumitomo
LOC) ....................................... 3.00 1/13/97 1,000,000 1,000,000
P1, NR New York State Energy, Research &
Development Authority, PCR, Niagara
Mohawk (Toronto Dominion LOC) .............. 3.40 1/2/97 1,000,000 1,000,000
NR, A-1+ New York State Energy, Research &
Development Authority, PCR, Niagara
Mohawk Power, Series A (Toronto Dominion
LOC) ....................................... 3.80 1/2/97 2,100,000 2,100,000
NR, A-1+ New York State Energy, Research &
Development Authority, PCR, Niagara
Mohawk Power Project, AMT (Morgan
Guaranty LOC) .............................. 4.05 1/2/97 1,600,000 1,600,000
P1-, NR New York State Energy, Research &
Development Authority PCR, Niagara
Mohawk Power Series B (Toronto Dominion
LOC) ....................................... 3.15 1/2/97 800,000 800,000
VMIG1, A-1+ New York State Energy, Research &
Development Authority, PCR, Orange &
Rockland Project, (Societe Generale
LOC) ....................................... 2.45 1/13/97 2,000,000 2,000,000
</TABLE>
9
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996 (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
VARIABLE RATE MUNICIPAL BONDS* (CONTINUED):
VMIG1, A-1+ New York State Housing Financial Agency,
Multifamily Housing, Series A, (Bank of
Tokyo LOC) ................................ 4.80% 1/13/97 $1,100,000 $1,100,000
VMIG1, A-1 New York State Housing Financial Agency,
Liberty View Apartments Housing, (Chase
Manhattan Bank LOC) ....................... 2.70 1/13/97 3,000,000 3,000,000
VMIG1, NR New York State Job Development Authority,
1994, Series A-1 to A-25 (Sumitomo Bank
LOC) ...................................... 3.05 1/2/97 100,000 100,000
VMIG1, A-1 New York State Job Development Authority,
1984, Series C-1 to C-30, (Sumitomo
LOC) ...................................... 3.60 1/13/97 235,000 235,000
VMIG1, A-1 New York State Job Development Authority,
1984, Series D-1 to D-9, (Sumitomo
LOC) ...................................... 3.60 1/13/97 475,000 475,000
VMIG1, A-1 New York State Job Development Authority,
1984, Series E-1 to E-55, (Sumitomo
LOC) ...................................... 3.60 1/13/97 480,000 480,000
VMIG1, A-1 New York State Job Development Authority,
1984, Series H-1 to H-11, (Sumitomo
LOC) ...................................... 3.60 1/13/97 695,000 695,000
VMIG1, A-1+ New York State Local Government
Assistance Corp., Series A, (Union Bank of
Switzerland, Credit Suisse/Swiss Bank
LOC) ...................................... 3.25 1/13/97 1,400,000 1,400,000
VMIG1, A-1+ New York State Local Government Assistance
Corp., Series B, (Credit Suisse/Swiss Bank
LOC) ...................................... 5.20 1/13/97 400,000 400,000
VMIG1, A-1+ New York State Local Government Assistance
Corp., Series F (Toronto Dominion
LOC) ...................................... 3.35 1/13/97 900,000 900,000
VMIG1, A-1 Niagara Falls Bridge Commission, (Industrial
Bank of Japan LOC) ........................ 3.35 1/13/97 1,300,000 1,300,000
NR, A-1 Onondaga County Industrial Development
Agency, Pass & Seymur Project, (Banque
National de Paris LOC) .................... 3.40 1/13/97 1,200,000 1,200,000
VMIG1, A-1+ Triborough Bridge & Tunnel Authority,
Special Obligation, (FGIC SPI) ............ 4.90 1/13/97 400,000 400,000
</TABLE>
10
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF DECEMBER 31, 1996 (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
INTEREST/
CREDIT RATING SECURITY DISCOUNT MATURITY PRINCIPAL
MDY/S&P DESCRIPTION RATE DATE AMOUNT VALUE
------------- ----------- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
VARIABLE RATE MUNICIPAL BONDS* (CONTINUED):
VMIG1, Aa1 Wallkill Industrial Development Authority,
PCR, Reynolds Metal Co. Project,
(Dresdner Bank LOC) ........................ 3.50% 1/13/97 $ 500,000 $ 500,000
VMIG1, NR Yonkers Industrial Development Authority,
Civic Facilities Revenue, Consumer Union
Facility, (Industrial Bank of Japan LOC) ... 3.90 1/13/97 900,000 900,000
-----------
VARIABLE RATE MUNICIPAL BONDS
(Cost - $41,271,000) .................................................................... 41,271,000
-----------
TOTAL INVESTMENTS (99.5%)
(Cost - $70,006,363)(a) ................................................................. 70,006,363
-----------
OTHER ASSETS, LESS LIABILITIES (0.5%) ..................................................... 332,331
-----------
NET ASSETS (100.0%) ....................................................................... $70,338,694
===========
<FN>
- --------------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate,
which will change periodically, is based upon bank prime rates or an index
of market interest rates. The rate reflected on the Schedule of Portfolio
Investments is the rate in effect at December 31, 1996.
AMT Alternative Minimum Tax Paper
BANS Bankers Acceptance Notes
FGIC Financial Guaranty Insurance Corporation
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
PCR Pollution Control Revenue
TANS Tax Anticpation Notes
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW YORK
GOVERNMENT U.S. TREASURY TAX-FREE
CASH MANAGEMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
--------------- ------------- ------------ ------------
ASSETS:
<S> <C> <C> <C> <C>
Investment in securities, at amortized cost ....... $180,780,569 $63,742,475 $10,634,510 $70,006,363
Repurchase agreements, at cost .................... 39,605,000 33,541,000 18,495,000 --
------------ ----------- ----------- -----------
220,385,569 97,283,475 29,129,510 70,006,363
Cash .............................................. 852 926 705 82,709
Interest receivable ............................... 1,558,803 463,080 19,757 505,678
Prepaid expenses and other assets ................. 25,003 7,410 2,086 5,398
------------ ----------- ----------- -----------
Total Assets ......................................... 221,970,227 97,754,891 29,152,058 70,600,148
------------ ----------- ----------- -----------
LIABILITIES:
Dividends payable ................................. 824,646 284,824 129,153 189,529
Payable to brokers for investments purchased ...... -- 10,000,000 -- --
Accrued expenses and other payable:
Investment advisory fees ........................ 58,029 20,699 9,427 6,336
Administration fees ............................. 16,883 6,005 2,745 11,428
Distribution fees ............................... 2,675 437 696 998
Fund accounting and transfer agent fees ......... 24,110 9,036 12,109 11,437
Legal and audit fees ............................ 42,312 16,462 10,264 15,937
Deferred trustees fees .......................... 27,425 21,083 19,113 20,352
Other ........................................... 14,351 4,709 6,075 5,437
------------ ----------- ----------- -----------
Total Liabilities .................................... 1,010,431 10,363,255 189,582 261,454
------------ ----------- ----------- -----------
Net Assets ........................................... $220,959,796 $87,391,636 $28,962,476 $70,338,694
============ =========== =========== ===========
Net Asset Value, Offering Price and Redemption
Price per Share: ($.001 par value per share,
unlimited number of shares authorized)
SHARES:
Net assets ........................................ $220,959,796 $87,391,636 $28,962,476 $70,338,694
Shares of beneficial interest issued and
outstanding ..................................... 220,965,017 87,393,098 28,962,132 70,339,070
Net asset value ................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ =========== =========== ===========
COMPOSITION OF NET ASSETS:
Paid-in capital ................................... $220,965,542 $87,393,097 $28,962,476 $70,395,581
Distributions in excess of net investment income .. -- (867) -- --
Accumulated undistributed net realized gains
(losses) from investment transactions ........... (5,746) (594) -- (56,887)
------------ ----------- ----------- -----------
Net Assets, December 31, 1996 ........................ $220,959,796 $87,391,636 $28,962,476 $70,338,694
============ =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
12
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW YORK
GOVERNMENT U.S. TREASURY TAX-FREE
CASH MANAGEMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
--------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest ............................................. $10,928,460 $3,965,220 $1,613,182 $2,306,834
----------- ---------- ---------- ----------
EXPENSES:
Advisory .......................................... 687,949 253,638 105,351 232,769
Administration .................................... 294,646 108,770 45,179 99,819
Co-administration ................................. 97,632 36,783 14,909 32,733
Distribution ...................................... 31,345 10,273 2,513 14,299
Shareholder servicing ............................. 43,304 15,278 6,797 15,029
Audit ............................................. 38,102 11,699 6,851 12,353
Accounting and transfer agent ..................... 156,481 57,901 43,780 46,013
Custodian ......................................... 23,198 11,164 13,259 12,764
Printing .......................................... 36,859 15,194 8,037 11,648
Registration ...................................... 16,466 9,027 4,666 6,907
Legal ............................................. 100,627 32,489 12,096 54,069
Trustees .......................................... 30,579 14,003 9,001 12,963
Miscellaneous ..................................... 22,020 30,327 14,339 29,019
----------- ---------- ---------- ----------
Total Expenses ....................................... 1,579,208 606,546 286,778 580,385
----------- ---------- ---------- ----------
Less: Fee waivers and reimbursements .............. (244,676) (81,335) (50,566) (185,135)
----------- ---------- ---------- ----------
Net Expenses ...................................... 1,334,532 525,211 236,212 395,250
----------- ---------- ---------- ----------
Net Investment Income ............................. 9,593,928 3,440,009 1,376,970 1,911,584
----------- ---------- ---------- ----------
REALIZED LOSSES FROM INVESTMENTS:
Net realized gains (losses) from investment
transactions .................................... (2,993) (342) 343 (240)
----------- ---------- ---------- ----------
Net Increase in Net Assets
Resulting from Operations ....................... $ 9,590,935 $3,439,667 $1,377,313 $1,911,344
=========== ========== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
CASH MANAGEMENT FUND
--------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ...................................................... $ 9,593,928 $ 11,262,195
Net realized gains (losses) from investment transactions ................... (2,993) (2,228)
--------------- ---------------
Change in net assets resulting from operations ............................. 9,590,935 11,259,967
--------------- ---------------
DIVIDENDS TO SHAREHOLDERS:
From net investment income ................................................. (9,593,928) (11,262,195)
In excess of net investment income ......................................... -- --
From net realized gains .................................................... -- (194)
--------------- ---------------
Change in net assets from shareholder distributions ........................ (9,593,928) (11,262,389)
--------------- ---------------
CAPITAL TRANSACTIONS (all at $1.00 per share):
Proceeds from shares issued ................................................ 1,165,750,259 1,530,377,381
Dividends reinvested ....................................................... 3,331,841 2,817,269
Cost of shares redeemed .................................................... (1,118,988,159) (1,562,814,955)
--------------- ---------------
Change in net assets from share transactions ............................... 50,093,941 (29,620,305)
--------------- ---------------
Change in net assets .......................................................... 50,090,948 (29,622,727)
--------------- ---------------
NET ASSETS:
Beginning of period ........................................................ 170,868,848 200,491,575
--------------- ---------------
End of period .............................................................. $ 220,959,796 $ 170,868,848
=============== ===============
Distributions in excess of net investment income included
in net assts, End of period .............................................. $ -- $ --
=============== ===============
SHARE TRANSACTIONS:
Issued ..................................................................... 1,165,750,259 1,530,377,381
Reinvested ................................................................. 3,331,841 2,817,269
Redeemed ................................................................... (1,118,988,159) (1,562,814,955)
--------------- ---------------
Change in shares .............................................................. 50,093,941 (29,620,305)
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT
MONEY MARKET FUND
--------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ...................................................... $ 3,440,009 $ 6,379,134
Net realized gains (losses) from investment transactions ................... (342) (252)
------------- -------------
Change in net assets resulting from operations ............................. 3,439,667 6,378,882
------------- -------------
DIVIDENDS TO SHAREHOLDERS:
From net investment income ................................................. (3,440,009) (6,379,134)
In excess of net investment income ......................................... (867) --
From net realized gains .................................................... -- --
------------- -------------
Change in net assets from shareholder distributions ........................ (3,440,876) (6,379,134)
------------- -------------
CAPITAL TRANSACTIONS (all at $1.00 per share):
Proceeds from shares issued ................................................ 222,091,173 586,320,449
Dividends reinvested ....................................................... 1,134,318 1,573,721
Cost of shares redeemed .................................................... (222,682,793) (667,839,459)
------------- -------------
Change in net assets from share transactions ............................... 542,698 (79,945,289)
------------- -------------
Change in net assets .......................................................... 541,489 (79,945,541)
------------- -------------
NET ASSETS:
Beginning of period ........................................................ 86,850,147 166,795,688
------------- -------------
End of period .............................................................. $ 87,391,636 $ 86,850,147
============= =============
Distributions in excess of net investment income included
in net assts, End of period .............................................. $ (867) $ --
============= =============
SHARE TRANSACTIONS:
Issued ..................................................................... 222,091,173 586,320,449
Reinvested ................................................................. 1,134,318 1,573,721
Redeemed ................................................................... (222,682,793) (667,839,459)
------------- -------------
Change in shares .............................................................. 542,698 (79,945,289)
============= =============
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY
MONEY MARKET FUND
--------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ...................................................... $ 1,376,970 $ 3,473,278
Net realized gains (losses) from investment transactions ................... 343 16,264
-------------- -------------
Change in net assets resulting from operations ............................. 1,377,313 3,489,542
-------------- -------------
DIVIDENDS TO SHAREHOLDERS:
From net investment income ................................................. (1,376,970) (3,473,278)
In excess of net investment income ......................................... -- --
From net realized gains .................................................... -- (16,264)
-------------- -------------
Change in net assets from shareholder distributions ........................ (1,376,970) (3,489,542)
-------------- -------------
CAPITAL TRANSACTIONS (all at $1.00 per share):
Proceeds from shares issued ................................................ 144,331,089 386,608,352
Dividends reinvested ....................................................... 567,034 708,250
Cost of shares redeemed .................................................... (148,436,061) (460,536,912)
-------------- -------------
Change in net assets from share transactions ............................... (3,537,938) (73,220,310)
-------------- -------------
Change in net assets .......................................................... (3,537,595) (73,220,310)
-------------- -------------
NET ASSETS:
Beginning of period ........................................................ 32,500,071 105,720,381
-------------- -------------
End of period .............................................................. $ 28,962,476 $ 32,500,071
============== =============
Distributions in excess of net investment income included
in net assts, End of period .............................................. $ -- $ --
============== =============
SHARE TRANSACTIONS:
Issued ..................................................................... 144,331,089 386,608,352
Reinvested ................................................................. 567,034 708,250
Redeemed ................................................................... (148,436,061) (460,536,912)
-------------- -------------
Change in shares .............................................................. (3,537,938) (73,220,310)
============== =============
</TABLE>
<TABLE>
<CAPTION>
NEW YORK TAX-FREE
MONEY MARKET FUND
--------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ...................................................... $ 1,911,584 $ 1,956,093
Net realized gains (losses) from investment transactions ................... (240) (136)
------------ ------------
Change in net assets resulting from operations ............................. 1,911,344 1,955,957
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
From net investment income ................................................. (1,911,584) (1,956,093)
In excess of net investment income ......................................... -- --
From net realized gains .................................................... -- --
------------ ------------
Change in net assets from shareholder distributions ........................ (1,911,584) (1,956,093)
------------ ------------
CAPITAL TRANSACTIONS (all at $1.00 per share):
Proceeds from shares issued ................................................ 98,191,108 91,135,964
Dividends reinvested ....................................................... 1,135,887 1,204,763
Cost of shares redeemed .................................................... (93,871,590) (80,995,359)
------------ ------------
Change in net assets from share transactions ............................... 5,455,405 11,345,368
------------ ------------
Change in net assets .......................................................... 5,455,165 11,345,232
------------ ------------
NET ASSETS:
Beginning of period ........................................................ 64,883,529 53,538,297
------------ ------------
End of period .............................................................. $ 70,338,694 $ 64,883,529
============ ============
Distributions in excess of net investment income included
in net assts, End of period .............................................. $ -- $ --
============ ============
SHARE TRANSACTIONS:
Issued ..................................................................... 98,191,108 91,135,964
Reinvested ................................................................. 1,135,887 1,204,763
Redeemed ................................................................... (93,871,590) (80,995,359)
------------ ------------
Change in shares .............................................................. 5,455,405 11,345,368
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14 and 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
HSBC Funds Trust, formerly known as Mariner Funds Trust, (the "Trust") was
organized in Massachusetts on October 31, 1985 as a Massachusetts business
trust, and is registered under the Investment Company Act of 1940, as a
diversified, open-end management investment company with multiple
investment portfolios, including the Cash Management Fund, the Government
Money Market Fund, the U.S. Treasury Money Market Fund and the New York
Tax-Free Money Market Fund (herein referred to individually as a "Fund" and
collectively as the "Funds").
The investment objective of each taxable Fund is to achieve as high a level
of current income as is consistent with preservation of capital and
liquidity. The investment objective of the New York Tax-Free Fund is to
provide its shareholders with as high a level of current income exempt from
regular Federal, New York State and New York City income taxes as is
consistent with preservation of capital and liquidity. Each Fund is
required to maintain a dollar-weighted average portfolio maturity of 90
days or less. The Cash Management Fund invests in a variety of high
quality, short-term money market instruments, with remaining maturities of
thirteen months or less, including obligations in which the Government
Money Market Fund invests. The Government Money Market Fund invests
exclusively in short-term obligations issued or guaranteed by the United
States Government or its agencies or instrumentalities with remaining
maturities of thirteen months or less, and repurchase agreements. The U.S.
Treasury Money Market Fund invests exclusively in short-term direct
obligations of the United States Treasury with remaining maturities of
thirteen months or less, and repurchase agreements. The New York Tax-Free
Money Market Fund invests primarily in high quality obligations issued by
or on behalf of New York, its cities, municipalities or other public
authorities that are exempt from regular Federal, New York State and New
York City income tax in the opinion of bond counsel to the issuer with
remaining maturities of thirteen months or less. Economic changes affecting
the state and certain of its public bodies and municipalities may affect
the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Fund.
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 amortized
cost which approximates market value. In the event that a deviation of 1/2
of 1% or more exists between a Fund's $1.00 per share net asset value,
calculated at amortized cost, and the net asset value calculated by
reference to market-based values, or if there is any other deviation which
the Board of Trustees believes would result in a material dilution to
shareholders or purchasers, the Board of Trustees will promptly consider
what action should be taken.
TAXES: It is the Funds' 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 and
tax-exempt income and net realized capital gains to its shareholders for
each taxable year. Therefore, no provision is required for Federal income
tax.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Cash Management Fund has available $5,746 of capital loss carryforwards
which, if not utilized, $525, $2,228, and $2,993 will expire in the year
2002, 2003, and 2004, respectively.
The Government Money Market Fund has available $594 of capital loss
carryforwards which, if not utilized, $252 and $342 will expire in the year
2003 and 2004, respectively.
The New York Tax-Free Money Market Fund has available $56,887 of capital
loss carryforwards which, if not utilized, $22,404, $29,192, $3,591,
$1,324, $136, and $240 will expire in the year 1997, 1998, 2001, 2002,
2003, and 2004, respectively.
DIVIDENDS AND DISTRIBUTIONS: The Funds intend to declare as a dividend
substantially all of their net investment income, which includes realized
gains and losses, if any, at the end of each business day and to pay within
five business days after the end of each month.
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. Interest income,
including the amortization of discount or premium, 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.
3. RELATED PARTY TRANSACTIONS
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
portfolios of the Funds, subject to policies established by the Board of
Trustees.
As compensation for its services, HSBC Americas is paid monthly advisory
fees at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE RATE
-----------------------------------------------
U.S. NEW YORK
GOVERNMENT TREASURY TAX-FREE
CASH MONEY MONEY MONEY
MANAGEMENT MARKET MARKET MARKET
PORTIONS OF EACH FUND'S AVERAGE DAILY NET ASSETS FUND FUND FUND FUND
---------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Not exceeding $500 million ............................... 0.350% 0.350% 0.350% 0.350%
In excess of $500 million but not exceeding $1 billion ... 0.315% 0.315% 0.315% 0.315%
In excess of $1 billion but not exceeding $1.5 billion ... 0.280% 0.280% 0.280% 0.280%
In excess of $1.5 billion ................................ 0.245% 0.245% 0.245% 0.245%
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
As of December 31, 1996, HSBC Americas earned $650,431 from the Cash
Management Fund, $246,525 from the Government Money Market Fund, $85,538
from the U.S. Treasury Money Market Fund, and $117,819 from the New York
Tax-Free Money Market Fund in advisory fees, net of fee waivers of $37,518,
$7,113, $19,813, and $114,950, respectively.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, is a subsidiary of The BISYS Group,
Inc. BISYS, with whom certain officers and a trustee of the Trust are
affiliated, serves the Trust as distributor, administrator, transfer agent
and fund accountant. Such officers and trustee are not paid any fees
directly by the Funds for serving as officers and trustee of the Trust.
In accordance with the terms of the Administration and Accounting Servicing
agreements, BISYS is paid a monthly asset based fee of 0.15% of each Fund's
first $200 million of average net assets; 0.125% of each Fund's next $200
million of average net assets; 0.10% of each Fund's next $200 million of
average net assets; and 0.08% of each Fund's average net assets in excess
of $600 million; exclusive of out-of-pocket expenses. At December 31, 1996,
BISYS earned $172,203 from the Cash Management Fund, $61,443 from the
Government Money Market Fund, $27,410 from the U.S. Treasury Money Market
Fund, and $57,375 from the New York Tax-Free Money Market Fund, net of fee
waivers of $92,529, $33,383, $12,585, and $31,528, respectively, in
administrative services fees.
As previous Administrator, PFPC Inc. ("PFPC") was paid a monthly asset
based fee of 0.10% of each Fund's first $200 million of average net assets;
0.075% of each Fund's next $200 million of average net assets; 0.05% of
each Fund's next $200 million of average net assets; and 0.03% of each
Fund's average net assets in excess of $600 million; exclusive of
out-of-pocket expenses. For the two months ended February 29, 1996, PFPC
earned $28,418 from the Cash Management Fund, $13,247 from the Government
Money Market Fund, $4,925 from the U.S. Treasury Money Market Fund, and
$10,370 from the New York Tax-Free Money Market Fund, net of fee waivers of
$1,496, $697, $259, and $546, respectively, in administrative services
fees.
HSBC Americas earned co-administration/shareholder servicing fees of 0.07%
of each Fund's average net assets totaling $27,803 from the Cash Management
Fund, $11,919 from the Government Money Market Fund, $3,797 from the U.S.
Treasury Money Market Fund, and $9,651 from the New York Tax-Free Money
Market Fund, net of fee waivers of $113,133, $40,142, $17,909, and $38,111,
respectively.
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 0.20% of each Fund's average net
assets during the preceding month. The expenses incurred as a result of
these agreements totaled $31,345 from the Cash Management Fund, $10,273
from the Government Money Market Fund, $2,513 from the U.S. Treasury Money
Market Fund, and $14,299 from the New York Tax-Free Money Market Fund.
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
18
<PAGE>
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.
A partner of Baker & McKenzie, legal counsel to the Trust, serves as
Secretary of the Trust. For the year ended December 31, 1996, the Funds
incurred legal fees of $97,569 for the Cash Management Fund, $31,446 for
the Government Money Market Fund, $11,722 for the U.S. Treasury Money
Market Fund, and $53,212 for the New York Tax-Free Money Market Fund to
Fund counsel.
19
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- ------- ------- -------
Investment Activities
Net investment income ............................ 0.049 0.053 0.039 0.027 0.037
Net realized and unrealized gains
from investments .............................. -- -- -- 0.002 --
-------- -------- ------- ------- -------
Total from Investment Activities ................. 0.049 0.053 0.039 0.029 0.037
-------- -------- ------- ------- -------
Distributions
From net investment income ....................... (0.049) (0.053) (0.039) (0.027) (0.037)
From net realized gains .......................... -- -- -- (0.002) --
-------- -------- ------- ------- -------
Total distributions .............................. (0.049) (0.053) (0.039) (0.029) (0.037)
-------- -------- ------- ------- -------
Net Asset Value, End of Period ........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======= ======= =======
Total Return .......................................... 5.00% 5.41% 3.95% 3.11% 3.77%
Ratios/Supplemental Data:
Net Assets at end of period (000) ................ $220,960 $170,869 $200,492 $172,518 $246,543
Ratio of expenses to average net assets .......... 0.68% 0.79% 0.63% 0.58% 0.62%
Ratio of net investment income
to average net assets ......................... 4.88% 5.29% 3.84% 2.88% 3.75%
Ratio of expenses to average net assets* ......... 0.80% 0.80% 0.64% 0.58% 0.62%
Ratio of net investment income
to average net assets* ........................ 4.76% 5.28% 3.83% 2.88% 3.75%
<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.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- -------- -------- --------
Investment Activities
Net investment income ............................ 0.048 0.052 0.038 0.028 0.037
Net realized and unrealized gains
from investments .............................. -- -- -- 0.001 --
------- ------- -------- -------- --------
Total from Investment Activities ................. 0.048 0.052 0.038 0.029 0.037
------- ------- -------- -------- --------
Distributions
From net investment income ....................... (0.048) (0.052) (0.038) (0.028) (0.037)
From net realized gains .......................... -- -- -- (0.001) --
------- ------- -------- -------- --------
Total distributions .............................. (0.048) (0.052) (0.038) (0.029) (0.037)
------- ------- -------- -------- --------
Net Asset Value, End of Period ........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======== ======== ========
Total Return .......................................... 4.87% 5.32% 3.83% 2.99% 3.80%
Ratios/Supplemental Data:
Net Assets at end of period (000) ................ $87,392 $86,850 $166,796 $138,085 $246,327
Ratio of expenses to average net assets .......... 0.72% 0.76% 0.63% 0.61% 0.62%
Ratio of net investment income
to average net assets ......................... 4.75% 5.21% 3.76% 2.89% 3.72%
Ratio of expenses to average net assets* ......... 0.84% 0.78% 0.64% 0.61% 0.62%
Ratio of net investment income
to average net assets* ........................ 4.63% 5.19% 3.75% 2.89% 3.72%
<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.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- -------- -------- --------
Investment Activities
Net investment income ........................... 0.046 0.049 0.036 0.026 0.032
------- -------- -------- -------- --------
Distributions
From net investment income ...................... (0.046) (0.049) (0.036) (0.026) (0.032)
------- -------- -------- -------- --------
Net Asset Value, End of Period ....................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======== ======== ========
Total Return ......................................... 4.68% 5.04% 3.60% 2.65% 3.27%
Ratios/Supplemental Data:
Net Assets at end of period (000) ............... $28,962 $32,500 $105,720 $133,070 $257,898
Ratio of expenses to average net assets ......... 0.78% 0.82% 0.68% 0.59% 0.67%
Ratio of net investment income
to average net assets ........................ 4.57% 4.94% 3.48% 2.62% 3.22%
Ratio of expenses to average net assets* ........ 0.95% 0.84% 0.69% 0.59% 0.67%
Ratio of net investment income
to average net assets* ....................... 4.40% 4.92% 3.47% 2.62% 3.22%
<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.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Investment Activities
Net investment income ........................... 0.029 0.031 0.022 0.018 0.024
------- ------- ------- ------- -------
Distributions
From net investment income ...................... (0.029) (0.031) (0.022) (0.018) (0.024)
------- ------- ------- ------- -------
Net Asset Value, End of Period ....................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return ......................................... 2.92% 3.17% 2.23% 1.86% 2.44%
Ratios/Supplemental Data:
Net Assets at end of period (000) ............... $70,339 $64,884 $53,538 $59,394 $56,386
Ratio of expenses to average net assets ......... 0.59% 0.69% 0.57% 0.55% 0.56%
Ratio of net investment income
to average net assets ........................ 2.88% 3.13% 2.20% 1.85% 2.41%
Ratio of expenses to average net assets* ........ 0.87% 0.85% 0.73% 0.72% 0.73%
Ratio of net investment income
to average net assets* ....................... 2.60% 2.97% 2.04% 1.68% 2.24%
<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.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
HSBC Funds Trust
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments, of the Cash Management Fund, the
Government Money Market Fund, the U.S. Treasury Money Market Fund and the New
York Tax-Free Money Market Fund (four of the portfolios comprising HSBC Funds
Trust) as of December 31, 1996, the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
years indicated therein. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1996, by correspondence with the custodian
and others. 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
Cash Management Fund, the Government Money Market Fund, the U.S. Treasury Money
Market Fund and the New York Tax-Free Money Market Fund at December 31, 1996,
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended and their
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
New York, New York
February 10, 1997
24
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