HSBC FUNDS TRUST
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MONEY MARKET FUNDS
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HSBC Asset Management Americas Inc. [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
SEMI-ANNUAL REPORT (UNAUDITED)
June 30, 1998
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 Americas Inc. [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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July 13, 1998
Dear Shareholder:
The first half of 1998 continued as a tug-of-war when the financial markets
weighed domestic inflation and the effects of the Asian situation's drag on
trade versus the underlying strength of the economy. In particular, inflation
was tame as the monthly Consumer Price Index and the Producer Price Index
reflected levels lower than last year and the Asian situation caused the U.S.
dollar to rally sharply against the Japanese yen contributing to a substantial
rally in US Treasury securities.
On the other side of the coin, the economy continued to expand. This was
reflected in very strong numbers in the housing sector as new home sales rose to
an 890,000 annual rate in May, which was the highest rate of this present
economic expansion. Additionally, unsold homes inventory fell to a very low 3.9
months which is another indicator of the market's strength. Lastly, the first
quarter Gross Domestic Product was revised sharply higher than expected and came
in at 5.4%, a sign that the effects of Asia haven't slowed our economy just yet.
Given this ongoing tug-of-war, the Federal Reserve at its June 30 - July 1
meeting ending as expected with the decision to leave short term interest rates
unchanged at 5.50%. This decision didn't surprise the markets given Mr.
Greenspan's testimony in early June before Congress where he expressed the need
for monetary patience as Asian uncertainty remained high and inflationary levels
remained low.
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 our relationship, and we appreciate
this chance to work on your behalf.
Sincerely,
(/S/ Edward J.Merkle)
Edward J. Merkle
Managing Director, Fixed Income
The views expressed in this report reflect those of the portfolio manager
through the end of the period covered by the report as stated on the cover. The
manager's views are subject to change at any time based on the market and other
conditions. Past performance is no guarantee of future results.
<PAGE>
BOARD OF TRUSTEES
JOHN P. PFANN* Chairman and President, JPP Equities, Inc.
WOLFE J. FRANKL* Former Director, North America, Berlin Economic
Development Corporation
HARALD PAUMGARTEN President, Paumgarten and Company
ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher
Foundation
RICHARD J. LOOS Vice Chairman Emeritus
*Member of the Audit and Nominating Committees
- --------------------------------------------------------------------------------
OFFICERS
WALTER B. GRIMM PRESIDENT
ERIC F. ALMQUIST SENIOR VICE PRESIDENT
ANTHONY J. FISCHER VICE PRESIDENT
CHARLES L. BOOTH VICE PRESIDENT
PAUL KANE ASSISTANT TREASURER
STEVEN R. HOWARD SECRETARY
ALAINA V. METZ ASSISTANT SECRETARY
ROBERT L. TUCH ASSISTANT SECRETARY
2
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER (30.5%):
AGRICULTURE (0.9%):
P1, A1 AES Shady Point
(LOC - Bank of Tokyo) ......................... 5.65% 7/21/98 $ 1,900,000 $ 1,894,036
------------
BUILDING PRODUCTS (4.9%):
P1, A1+ Onoda USA
(LOC - Chase Bank) ............................ 5.73 9/21/98 10,000,000 9,869,483
------------
ELECTRIC UTILITY (3.0%):
P1, A1+ Jacksonville Electric ........................... 5.54 8/14/98 6,000,000 6,000,000
------------
ELECTRICAL & ELECTRONIC (1.0%):
P1, A1 Minebea Inc. (LOC - Bank of Tokyo) .............. 5.70 7/10/98 2,000,000 1,997,150
------------
FINANCIAL SERVICES (20.7%):
P1, A1 Ford Motor Credit Co. ........................... 5.53 7/7/98 9,500,000 9,491,244
P1, A1+ Glencore Finance (LOC - ABN Amro. Bank) ......... 5.58 7/10/98 9,500,000 9,486,748
P1, A1 GTE Funding, Inc. ............................... 5.60 7/9/98 4,320,000 4,314,624
P1, A1 GTE Funding, Inc. ............................... 5.55 7/20/98 2,337,000 2,330,155
P1, A1 Ryobi Finance Corp. (LOC - Bank of Tokyo) ....... 5.67 7/8/98 5,850,000 5,843,556
P1, A1+ Toyota Motor Credit ............................. 5.53 7/21/98 9,726,000 9,696,119
------------
41,162,446
------------
TOTAL COMMERCIAL PAPER (Amortized Cost - $60,923,115) .......................... 60,923,115
------------
CORPORATE NOTES (14.9%):
FINANCIAL SERVICES (9.9%):
P1, A1+ General Electric Capital Corp.* ................. 5.56 9/9/98 9,900,000 9,895,892
P1, A1 Prudential Funding Corp.* ....................... 5.73 7/7/98 9,900,000 9,900,000
------------
19,795,892
------------
INDUSTRIAL GOODS & SERVICES (5.0%):
P1, A1 PHH Corp.* ...................................... 5.60 7/10/98 10,000,000 9,999,069
------------
TOTAL CORPORATE NOTES (Amortized Cost - $29,794,961) ........................... 29,794,961
------------
MEDIUM TERM NOTES (4.4%):
FINANCIAL SERVICES (4.4%):
P1, A1 Bear Stearns Co., Inc.* ......................... 5.67 7/9/98 4,700,000 4,700,000
P1, A1 Bear Stearns Co., Inc.* ......................... 5.65 8/24/98 4,000,000 4,000,000
------------
TOTAL MEDIUM TERM NOTES (Amortized Cost - $8,700,000) .......................... 8,700,000
------------
</TABLE>
3
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
PROMISSORY NOTES (4.9%):
FINANCIAL SERVICES (4.9%):
P1, A1 Goldman Sachs L.P. .............................. 5.64 7/20/98 $ 9,700,000 $ 9,700,000
------------
TOTAL PROMISSORY NOTES (Amortized Cost - $9,700,000) ........................... 9,700,000
------------
YANKEE CERTIFICATES OF DEPOSIT (21.6%):
BANKING (21.6%):
P1, A1 Bank of America, N.A. ........................... 5.94 10/22/98 8,200,000 8,198,544
P1, A1 Bankers Trust New York Corp. .................... 5.97 10/27/98 8,000,000 7,999,259
P1, A1+ Bayerische Landesbank ........................... 5.81 12/17/98 4,000,000 3,998,388
P1, A1+ Canadian Imperial Bank of Commerce .............. 5.87 8/11/98 5,000,000 4,999,436
P1, A1+ Deutsche Bank ................................... 5.94 9/15/98 5,000,000 4,999,697
P1, A1+ Deutsche Bank ................................... 5.94 10/23/98 3,000,000 3,000,018
P1, A1 Svenska Handelsbanken NY ........................ 5.79 5/7/99 10,000,000 9,997,412
------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (Amortized Cost - $43,192,754) ............ 43,192,754
------------
REPURCHASE AGREEMENTS (23.3%):
Chase Securities, Inc., (Purchased on 6/30/98,
proceeds at maturity $18,953,053;
Collateralized by $19,680,000 FHLMC,
6.00%, 4/1/13, market value $19,440,598) ...... 5.80 7/1/98 18,950,000 18,950,000
Chase Securities, Inc., (Purchased on 6/30/98,
proceeds at maturity $27,464,424;
Collateralized by $28,960,000 FHLMC,
7.00%, 10/1/27, market value $28,109,970) ..... 5.80 7/1/98 27,460,000 27,460,000
------------
TOTAL REPURCHASE AGREEMENTS
(Amortized Cost - $46,410,000) .............................................. 46,410,000
------------
TOTAL INVESTMENT (99.6%)
(Amortized Cost - $198,720,830)(a) .......................................... 198,720,830
------------
OTHER ASSETS IN EXESS OF LIABILITIES (0.4%) .................................... 859,126
------------
TOTAL NET ASSETS (100%) ........................................................ $199,579,956
============
<FN>
- -----------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable rate security. Rate represents rate in effect at June 30, 1998.
Date presented represents the next rate change date.
FHLMC -- Federal Home Loan Mortgage Corporation
LOC -- Letter of Credit
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS (2.8%):
Aaa, AAA U.S. Treasury Bills ............................ 5.09% 4/1/99 $ 2,600,000 $ 2,499,275
------------
TOTAL U.S. TREASURY BILLS (Amortized Cost - $2,499,275) ........................ 2,499,275
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (59.7%):
Aaa, N/R Federal Home Loan Bank ......................... 5.65 3/30/99 7,000,000 7,000,000
Aaa, N/R Federal Home Loan Bank ......................... 5.73 7/7/99 5,000,000 5,000,000
Aaa, N/R Federal Home Loan Bank* ........................ 5.51 7/1/98 20,000,000 19,997,164
Aaa, N/R Federal Home Loan Bank* ........................ 5.79 7/1/98 7,000,000 7,006,889
Aaa, N/R Federal National Mortgage Association* ......... 5.52 7/1/98 15,000,000 14,999,740
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Amortized Cost - $54,003,794) ........ 54,003,793
------------
REPURCHASE AGREEMENTS (43.0%):
Chase Securities, Inc., (Purchased on 6/30/98,
proceeds at maturity $22,623,644;
Collateralized by $23,860,000 FHLMC,
7%, 10/1/27, market value $23,159,664) ....... 5.80 7/1/98 22,620,000 22,620,000
Donaldson, Lufkin & Jenrette Securities Corp.,
(Purchased on 6/30/98, proceeds at maturity
$16,339,609; Collateralized by $43,049,000
U.S. Treasury Strips, 8/15/18, market
value $16,640,601) ........................... 5.75 7/1/98 16,337,000 16,337,000
------------
TOTAL REPURCHASE AGREEMENTS (Amortized Cost - $38,957,000) ..................... 38,957,000
------------
TOTAL INVESTMENTS (105.5%)
(Amortized Cost - $95,460,068)(a) ........................................... 95,460,068
------------
LIABILITIES IN EXCESS OF OTHER ASSETS (-5.5%) .................................. (4,978,006)
------------
TOTAL NET ASSETS (100.0%) ...................................................... $ 90,482,062
============
<FN>
- -------------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable rate security. Rate represents rate in effect at June 30, 1998.
Date presented represents the next rate change date.
FHLMC -- Federal Home Loan Mortgage Corporation
N/R -- Not rated
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
SHARES
CREDIT RATING INTEREST/ OR
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BILLS (58.2%):
Aaa, AAA U.S. Treasury Bills ............................. 4.55% 7/16/98 $7,000,000 $ 6,986,728
Aaa, AAA U.S. Treasury Bills ............................. 5.23 7/23/98 2,000,000 1,993,608
Aaa, AAA U.S. Treasury Bills ............................. 5.19 8/20/98 1,500,000 1,489,188
Aaa, AAA U.S. Treasury Bills ............................. 5.24 10/15/98 2,000,000 1,969,172
Aaa, AAA U.S. Treasury Bills ............................. 5.27 11/12/98 1,500,000 1,470,576
Aaa, AAA U.S. Treasury Bills ............................. 5.09 4/1/99 2,500,000 2,403,149
------------
TOTAL U.S. TREASURY BILLS (Amortized Cost - $16,312,421) ....................... 16,312,421
------------
REPURCHASE AGREEMENTS (42.3%):
Chase Securities, Inc., (Purchased on 5/18/98,
proceeds at maturity $6,000,958;
Collateralized by $6,040,000 U.S.
Treasury Notes, 6.25%, 3/31/99,
market value $6,219,237) ...................... 5.75 7/1/98 6,000,000 6,000,000
Donaldson Lufkin & Jenrette Securities Corp.,
(Purchased on 6/30/98, proceeds at maturity
$3,363,537; Collateralized by $10,865,000
U.S. Treasury Strips, 2/15/15,
market value $3,418,497) ...................... 5.75 7/1/98 3,363,000 3,363,000
Merrill Lynch, (Purchased on 6/24/98,
proceeds at maturity $2,511,146;
Collateralized by $2,505,000 U.S.Treasury
Notes, 6.625%, 6/30/01, market
value $2,583,743) ............................. 5.35 7/24/98 2,500,000 2,500,000
------------
TOTAL REPURCHASE AGREEMENTS
(Amortized Cost - $11,863,000) .............................................. 11,863,000
------------
TOTAL INVESTMENTS (100.5%)
(Amortized Cost - $28,175,421)(a) ........................................... 28,175,421
------------
LIABILITIES IN EXCESS OF OTHER ASSETS (-0.5%) .................................. (129,373)
------------
TOTAL NET ASSETS (100.0%) ...................................................... $ 28,046,048
============
<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 JUNE 30, 1998 (UNAUDITED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
MUNICIPAL NOTES (6.4%):
NEW YORK (3.9%):
MIG1, Sp1+ Buffalo, GO, RAN (LOC - Landesbank
Hessen) ....................................... 4.40% 8/5/98 $1,000,000 $ 1,000,543
N/R, N/R Town of Hempstead, GO, Series D, BAN ............ 4.00 10/15/98 2,000,000 2,001,118
------------
3,001,661
------------
PUERTO RICO (2.5%):
MIG1, Sp1+ Puerto Rico Commonwealth, Series A,
TRAN .......................................... 4.50 7/30/98 2,000,000 2,001,168
------------
TOTAL MUNICIPAL NOTES (Amortized Cost - $5,002,828) ............................ 5,002,829
------------
MUNICIPAL COMMERCIAL PAPER (23.8%):
NEW YORK (23.8%):
P1, A1+ Long Island Power Authority
(LOC-Bayerische ............................... 3.80 7/8/98 4,500,000 4,500,000
P1, A1 Landesbank, Westdeutdu Landesbank)
New York City Municipal Assist Corp. .......... 3.50 7/15/98 2,000,000 2,000,000
P1, A1+ New York City Municipal Water
(LOC - Canadian Imperial Bank) ................ 3.60 7/14/98 1,500,000 1,500,000
P1, A1 New York City Municipal Water
(LOC - Canadian Imperial Bank) ................ 3.50 7/15/98 2,000,000 2,000,000
New York City Municipal Water
(LOC - Bayerische Westdutche) ................. 3.65 7/10/98 1,500,000 1,500,000
P1, A1+ New York State Energy Reserve
and Development Authority For
General Electric .............................. 3.70 7/7/98 3,150,000 3,150,000
P1, A1+ New York State GO ............................... 3.55 7/21/98 2,000,000 2,000,000
P1, A1 New York State Powers ........................... 3.50 8/3/98 2,000,000 2,000,000
------------
TOTAL MUNICIPAL COMMERCIAL PAPER (Amortized Cost - $18,650,000) ................ 18,650,000
------------
MANDATORY PUT MUNICIPAL BONDS (5.1%):
NEW YORK (2.6%):
VMIG1, N/R New York State Energy, Research &
Development Authority, Pollution
Control Revenue, Long Island Lighting
Co. Project, Series A, (LOC - Deutsche
Bank AG)* ..................................... 3.58 3/1/99 2,000,000 2,000,000
------------
</TABLE>
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
MANDATORY PUT MUNICIPAL BONDS (CONTINUED)
PUERTO RICO (2.5%):
P-1, A-1+ Puerto Rico Industrial, Medical &
Environmental Financing Authority,
Pollution Control Revenue, Reynolds
Metals Co. Project, (LOC - ABN AMRO
Bank) Callable 9/1/98 @ 100* .................. 3.80% 9/1/98 $2,000,000 $ 2,000,000
------------
TOTAL MANDATORY PUT MUNICIPAL BONDS (Amortized Cost - $4,000,000) .............. 4,000,000
------------
NON-VARIABLE MUNICIPAL BONDS (10.4%):
NEW YORK (8.4%):
A2/A- New York City Municipal Water Financial
Authority, Water and Sewer System
Revenue, Series A ............................. 4.50 6/15/99 1,000,000 1,006,020
AA/Aa2 New York City Municipal Assistance Corp. ........ 4.00 7/1/98 2,000,000 2,000,000
A3/A- New York State Dormitory Authority
Revenue, State University Educational
Facilities, Series C .......................... 7.00 5/15/99 3,500,000 3,595,030
------------
6,601,050
------------
PUERTO RICO (2.0%):
AAA/AAA Puerto Rico Highway Revenue ..................... 8.13 7/1/98 1,500,000 1,530,000
------------
TOTAL NON-VARIABLE MUNICIPAL BONDS (Amortized Cost - $8,131,050) ............... 8,131,050
------------
VARIABLE MUNICIPAL BONDS* (45.8%):
NEW YORK (43.9%):
N/R, A-1+ Montgomery Industrial Development
Authority, Industrial Development
Revenue, Service Merchandise Co.
(LOC - Canadian Imperial Bank)(b) ............. 4.05 7/8/98 100,000 100,000
VMIG1/Aa2 New York City GO, Series C
(LOC - Morgan Guaranty Trust) ................. 4.10 7/1/98 1,700,000 1,700,000
VMIG1/Aa2 New York City, GO, Sub-Series B-3
(LOC - Morgan Guaranty Trust) ................. 4.10 7/1/98 1,500,000 1,500,000
VMIG1, A-1+ New York City, GO, Series B
(FGIC Insured) ................................ 4.10 7/1/98 325,000 325,000
VMIG1, A-1+ New York City, GO, Series B,
Subseries B2 (MBIA Insured,
SPA Bank of Austria) .......................... 4.00 7/1/98 1,000,000 1,000,000
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
VARIABLE MUNICIPAL BONDS (CONTINUED)
VMIG1, A-1+ New York City, GO, Series B, Subseries B3
(MBIA Insured, SPA Bank of
Nova Scotia) ................................. 4.10% 7/1/98 $1,100,000 $ 1,100,000
VMIG1, A-1+ New York City, Health & Hospital
Corp., Health Systems, Series A
(LOC - Morgan Guaranty Trust) ................ 3.20 7/8/98 3,500,000 3,500,000
N/R, A-1+ New York City, Housing Development
Corp., Multi-Family Rental Housing
Revenue, TriBeCa Tower, Series A, AMT
(FNMA Collateral) ............................ 3.25 7/8/98 2,000,000 2,000,000
N/R, A-1 New York City, Housing Development
Corp., Special Obligation, Montefiore
Medical Center, Series A (LOC - Chase
Manhattan Bank) .............................. 3.35 7/8/98 2,500,000 2,500,000
N/R, A-1 New York City, Industrial Development
Agency, Civic Facilities Revenue,
Columbia Grammar School Project,
(LOC - Chase Manhattan Bank) ................. 3.45 7/8/98 1,000,000 1,000,000
VMIG1, A-1+ New York City, Municipal Water Finance
Authority, Water & Sewer System
Revenue, Series G (FGIC Insured) ............. 3.75 7/1/98 1,500,000 1,500,000
VMIG1, A-1+ New York City, Trust for Cultural Resources,
Carnegie Hall (LOC - Westdeutsche
Landesbank) .................................. 3.50 7/8/98 400,000 400,000
VMIG1, A-1+ New York City, Trust for Cultural Resources,
Carnegie Hall (LOC - Westdeutsche
Landesbank) .................................. 3.50 7/8/98 2,200,000 2,200,000
VMIG1, A-1+ New York City, Trust for Cultural Resources,
Museum of Broadcasting (LOC -
Kredietbank NV) .............................. 3.35 7/8/98 800,000 800,000
VMIG1, N/R New York State Dormitory Authority
Revenue ...................................... 3.55 7/8/98 4,300,000 4,300,000
AA/A-1+ New York State Energy Research &
Development Authority, Pollution Control
Revenue, Niagara Mohawk Power, Series A
(LOC - Toronto Dominion Bank) ................ 3.75 7/1/98 900,000 900,000
</TABLE>
9
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY PRINCIPAL VALUE
(UNAUDITED) DESCRIPTION RATE DATE AMOUNT (NOTE 2)
------------- ----------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
VARIABLE MUNICIPAL BONDS (CONTINUED)
VMIG1, A-1+ New York State Energy, Research &
Development Authority, Brooklyn Union
Gas Co. Project, Series A-1, (MBIA Insured,
SPA Union Bank of Switzerland) ................ 3.45% 7/8/98 $2,000,000 $ 2,000,000
VMIG1, A-1+ New York State Energy, Research &
Development Authority, Pollution Control
Revenue, Orange & Rockland Utilities
Project, Series A (LOC - Societe
Generale) ..................................... 3.25 7/8/98 2,000,000 2,000,000
VMIG1, Aaa New York State Housing Finance Agency,
Multifamily Housing Revenue, Series A
(AMBAC Insured) ............................... 3.35 7/8/98 1,100,000 1,100,000
VMIG1, A-1+ New York State Local Government
Assistance Corp., Series A (LOC - Union
Bank of Switzerland, Credit Suisse) ........... 3.20 7/8/98 1,400,000 1,400,000
VMIG1, A-1+ Niagara Falls Bridge Commission, Toll
Revenue, Series A (FGIC Insured) .............. 3.25 7/8/98 1,300,000 1,300,000
VMIG1, A-1+ Triborough Bridge & Tunnel Authority,
Special Obligation (FGIC Insured) ............. 3.20 7/8/98 400,000 400,000
VMIG1, N/R Wallkill Industrial Development Agency,
Pollution Control Revenue, Reynolds Metal
Co. Project (LOC - Dresdner Bank AG) .......... 3.70 7/8/98 500,000 500,000
VMIG1, N/R Yonkers Industrial Development Agency,
Civic Facilities Revenue, Consumers Union
Facility (LOC - Credit Local de France) ....... 3.45 7/8/98 900,000 900,000
------------
34,425,000
------------
PUERTO RICO (1.9%):
VMIG1/Aaa Puerto Rico Commonwealth Highway &
Transportation ................................ 3.00 7/8/98 1,500,000 1,500,000
------------
TOTAL VARIABLE MUNICIPAL BONDS (Amortized Cost - $35,925,001) .................. 35,925,000
------------
</TABLE>
10
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
CREDIT RATING INTEREST/
MOODY'S/S&P SECURITY DISCOUNT MATURITY AMORTIZED
(UNAUDITED) DESCRIPTION RATE DATE SHARES COST
------------- ----------- -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
OPEN-END INVESTMENT COMPANIES (8.5%):
Dreyfus New York Tax Free ........................................... 3,200,000 $ 3,200,000
New York Money Fund ................................................. 3,588,000 3,588,000
-----------
TOTAL OPEN-END INVESTMENT COMPANIES (Amortized Cost - $6,788,000) .............. 6,788,000
-----------
TOTAL INVESTMENTS (100%):
(Amortized Cost - $78,496,879)(a) ........................................... 78,496,879
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%) ................................... (450)
-----------
TOTAL NET ASSETS (100.0%) ...................................................... $78,496,429
===========
<FN>
- ---------------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Date presented represents next put date.
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Tax Paper
BAN - Bond Anticipation Note
FGIC - Financial Guaranty Insurance Corp.
GO - General Obligation
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
N/R - Not Rated
RAN - Revenue Anticipation Note
SPA - Standby Purchase Agreement
TRAN - Tax and Revenue Anticipation Note
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1998 (UNAUDITED)
<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>
ASSETS:
Investments in securities, at value
(cost $152,310,830, $56,503,068, $16,312,421,
$78,496,879, respectively) ................................ $152,310,830 $ 56,503,068 $ 16,312,421 $ 78,496,879
Repurchase Agreements
(cost $46,410,000, $38,957,000, $11,863,000, $0,
respectively) ............................................. 46,410,000 38,957,000 11,863,000 --
------------ ------------ ------------ ------------
Total Investment ....................................... 198,720,830 95,460,068 28,175,421 78,496,879
Cash ........................................................ 780 808 384 --
Interest and dividends receivable ........................... 1,825,175 393,347 43,218 540,510
Prepaid expenses ............................................ 15,521 7,251 1,688 6,702
------------ ------------ ------------ ------------
Total Assets ................................................... 200,562,306 95,861,474 28,220,711 79,044,091
------------ ------------ ------------ ------------
LIABILITIES:
Payable to custodian ........................................ -- -- -- 262,411
Dividends payable ........................................... 823,473 294,576 115,263 192,345
Payable to brokers for investments purchased ................ -- 5,000,000 -- --
Accrued expenses and other payables:
Investment advisory fees .................................. 52,178 20,636 3,640 22,989
Administration fees ....................................... 16,426 5,896 2,387 6,603
Distribution fees ......................................... 11,137 6,588 9,708 6,469
Fund accounting and transfer agent fees ................... 2,754 3,604 15,085 7,855
Other liabilities ......................................... 76,382 48,112 28,580 48,990
------------ ------------ ------------ ------------
Total Liabilities .............................................. 982,350 5,379,412 174,663 547,662
------------ ------------ ------------ ------------
Net Assets ..................................................... $199,579,956 $ 90,482,062 $ 28,046,048 $ 78,496,429
============ ============ ============ ============
COMPUTATION OF NET ASSET VALUE:
Net assets .................................................. $199,579,956 $ 90,482,062 $ 28,046,048 $ 78,496,429
Shares of beneficial interest issued and outstanding
(par value $.001 per share, unlimited number
of shares authorized) ..................................... 199,582,563 90,483,969 28,046,060 78,505,220
------------ ------------ ------------ ------------
Net asset value, offering price and redemption
price per share ........................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============
COMPOSITION OF NET ASSETS:
Paid-in capital ............................................. $199,585,697 $ 90,483,102 $ 28,046,404 $ 78,539,327
Accumulated undistributed net realized gains
(losses) from investment transactions ..................... (5,741) (1,040) (356) (42,898)
------------ ------------ ------------ ------------
Net Assets ..................................................... $199,579,956 $ 90,482,062 $ 28,046,048 $ 78,496,429
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. NEW YORK
CASH GOVERNMENT TREASURY TAX-FREE
MANAGEMENT MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest .......................................... $5,612,186 $1,954,179 $760,682 $1,332,318
Dividends ......................................... 13,160 1,548 4,878 74,848
---------- ---------- -------- ----------
Total Income ...................................... 5,625,346 1,955,727 765,560 1,407,166
---------- ---------- -------- ----------
EXPENSES:
Advisory fees ..................................... 342,220 121,178 48,338 138,066
Administration fees ............................... 146,594 51,934 20,716 59,171
Co-administration and shareholder
servicer assistance fees ........................ 68,444 24,236 9,668 27,613
Custodian fees . .................................. 8,791 6,274 4,137 8,430
Distribution fees ................................. 75,201 16,219 3,730 31,703
Legal and audit fees .............................. 48,616 19,619 7,293 23,515
Fund accounting fees .............................. 2,184 624 284 2,886
Transfer agent fees ............................... 71,776 22,086 27,331 26,151
Service organization fees ......................... 13,336 686 9,253 --
Other expenses .................................... 48,159 19,738 7,193 21,645
---------- ---------- -------- ----------
Gross Expenses ....................................... 825,321 282,594 137,943 339,180
Less: Fee waivers ................................. (117,390) (41,568) (16,581) (47,360)
Less: Reimbursements .............................. (72,452) (23,261) (31,591) (39,458)
---------- ---------- -------- ----------
Total Net Expenses ................................... 635,479 217,765 89,771 252,362
---------- ---------- -------- ----------
Net Investment Income ................................ 4,989,867 1,737,962 675,789 1,154,804
---------- ---------- -------- ----------
NET REALIZED / UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment
transactions .................................... -- (116) (540) (1,030)
---------- ---------- -------- ----------
Net Realized / Unrealized Gains (Losses)
from Investments ................................ -- (116) (540) (1,030)
---------- ---------- -------- ----------
Change in Net Assets Resulting from Operations ....... $4,989,867 $1,737,846 $675,249 $1,153,774
========== ========== ======== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
GOVERNMENT
CASH MANAGEMENT FUND MONEY MARKET FUND
----------------------------------- -----------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997 (UNAUDITED) DECEMBER 31, 1997
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ............................. $ 4,989,867 $ 9,353,016 $ 1,737,962 $ 3,564,667
Net realized gains (losses) from
investment transactions ........................ -- 5 (116) (329)
--------------- --------------- --------------- ---------------
Change in net assets resulting from operations .... 4,989,867 9,353,021 1,737,846 3,564,338
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ........................ (4,989,867) (9,353,016) (1,737,962) (3,564,667)
--------------- --------------- --------------- ---------------
Change in net assets from shareholder
distributions ................................... (4,989,867) (9,353,016) (1,737,962) (3,564,667)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ....................... 543,349,544 1,156,962,210 124,173,238 235,133,212
Dividends reinvested .............................. 3,482,687 4,569,829 585,712 1,188,858
Cost of shares redeemed ........................... (531,457,539) (1,198,286,576) (135,138,383) (222,851,766)
--------------- --------------- --------------- ---------------
Change in net assets from share transactions ...... 15,374,692 (36,754,537) (10,379,433) 13,470,304
--------------- --------------- --------------- ---------------
Change in Net Assets ................................. 15,374,692 (36,754,532) (10,379,549) 13,469,975
--------------- --------------- --------------- ---------------
NET ASSETS:
Beginning of period .................................. 184,205,264 220,959,796 100,861,611 87,391,636
--------------- --------------- --------------- ---------------
End of period ........................................ $ 199,579,956 $ 184,205,264 $ 90,482,062 $ 100,861,611
=============== =============== =============== ===============
SHARE TRANSACTIONS:
Issued ............................................ 543,349,544 1,156,959,601 124,173,238 235,133,212
Reinvested ........................................ 3,482,687 4,569,829 585,712 1,188,858
Redeemed .......................................... (531,457,539) (1,198,286,576) (135,138,383) (222,851,766)
--------------- --------------- --------------- ---------------
Change in shares ..................................... 15,374,692 (36,757,146) (10,379,433) 13,470,304
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY NEW YORK TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND
----------------------------------- -----------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997 (UNAUDITED) DECEMBER 31, 1997
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ............................. $ 675,789 $ 1,277,630 $ 1,154,804 $ 2,501,607
Net realized gains (losses) from
investment transactions ........................ (540) 184 (1,030) (7,385)
--------------- --------------- --------------- ---------------
Change in net assets resulting from operations .... 675,249 1,277,814 1,153,774 2,494,222
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ........................ (675,789) (1,277,630) (1,154,804) (2,501,607)
--------------- --------------- --------------- ---------------
Change in net assets from shareholder
distributions ................................... (675,789) (1,277,630) (1,154,804) (2,501,607)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ....................... 95,922,627 221,502,675 74,628,636 160,027,422
Dividends reinvested .............................. 321,456 551,579 855,996 1,604,558
Cost of shares redeemed ........................... (93,704,762) (225,509,647) (83,716,000) (145,234,462)
--------------- --------------- --------------- ---------------
Change in net assets from share transactions ...... 2,539,321 (3,455,393) (8,231,368) 16,397,518
--------------- --------------- --------------- ---------------
Change in Net Assets ................................. 2,538,781 (3,455,209) (8,232,398) 16,390,133
--------------- --------------- --------------- ---------------
NET ASSETS:
Beginning of period .................................. 25,507,267 28,962,476 86,728,827 70,338,694
--------------- --------------- --------------- ---------------
End of period ........................................ $ 28,046,048 $ 25,507,267 $ 78,496,429 $ 86,728,827
=============== =============== =============== ===============
SHARE TRANSACTIONS:
Issued ............................................ 95,922,627 221,502,675 74,628,636 160,027,422
Reinvested ........................................ 321,456 551,579 855,996 1,604,558
Redeemed .......................................... (93,704,762) (225,509,647) (83,716,000) (145,234,462)
--------------- --------------- --------------- ---------------
Change in shares ..................................... 2,539,321 (3,455,393) (8,231,368) 16,397,518
=============== =============== =============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14-15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
HSBC 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 amended ("1940 Act"), 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 the Cash Management Fund, the Government Money
Market Fund and the U.S. Treasury Money Market 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 Money Market
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. The Cash
Management Fund invests in a variety of high quality, short-term money
market instruments, with remaining maturities of thirteen months or less.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their 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: The money market funds each value portfolio
securities at amortized cost, which approximates market value. The
amortized cost method involves valuing a security at cost on the date of
purchase and thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and initial cost.
In addition, the money market funds may not (a) purchase any instrument
with a remaining maturity greater than thirteen months unless such
instrument is subject to a demand feature, or (b) maintain a
dollar-weighted average maturity which exceeds 90 days.
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 income and
net realized capital gains, if any, 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)
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are
declared daily to shareholders and are paid monthly. Distributions of net
realized gains, if any, will be paid at least annually. However, to the
extent that net realized gains of a Fund can be reduced by any capital loss
carryovers of that Fund, such gains will not be distributed. Dividends and
distributions are recorded by the Funds on the ex-dividend date. The
amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations that may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent
in nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions to shareholders which exceed
net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in
excess of net investment income or distributions in excess of net realized
gains. To the extent they exceed net investment income and net realized
gains for tax purposes, they are reported as distributions of capital.
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 on the basis of relative net assets or
another appropriate basis.
3. RELATED PARTY TRANSACTIONS
The Trust retains HSBC Asset Management Americas Inc. to act as Investment
Adviser for the Fund. HSBC Asset Management Americas Inc. is the North
American investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai
Banking Corporation). As Investment Adviser, HSBC Asset Management Americas
Inc. furnishes investment guidance and policy direction in connection with
the management of the investment portfolios of the Funds, subject to
policies established by the Board of Trustees.
As compensation for its services, HSBC Asset Management Americas Inc. 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>
Up to $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)
HSBC Asset Management Americas Inc. has voluntarily agreed to reimburse
Fund expenses to the extent a Fund's ordinary operating expenses exceed
0.65% of such Fund's average daily net assets. For the six months ended
June 30, 1998, HSBC Asset Management Americas Inc. agreed to reimburse
expenses totaling $72,452; $23,261; $31,591 and $39,458 for the Cash
Management, Government Money Market, U.S. Treasury Money Market, and New
York Tax-Free Money Market Fund, respectively, pursuant to this voluntary
agreement.
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 are affiliated, serves the Trust as
distributor, administrator, transfer agent and fund accountant. Such
officers are not paid any fees directly by the Funds for serving as
officers of the Trust.
In accordance with the terms of the Management and Administration
Agreement, BISYS is paid a monthly asset-based fee of 0.15% (annualized) of
a Fund's first $200 million of average net assets; 0.125% of a Fund's next
$200 million of average net assets; 0.10% of a Fund's next $200 million of
average net assets; and 0.08% of a Fund's average net assets in excess of
$600 million; exclusive of out-of-pocket expenses. For the six months ended
June 30, 1998, BISYS waived administrative services fees of $48,946 from
the Cash Management Fund, $17,332 from the Government Money Market Fund,
$6,913 from the U.S. Treasury Money Market Fund and $19,747 from the New
York Tax-Free Money Market Fund, respectively.
HSBC Asset Management Americas Inc. earned co-administration/shareholder
servicer assistance fees of 0.07% of each Fund's average net assets
totaling $68,444 from the Cash Management Fund, $24,236 from the Government
Money Market Fund, $9,668 from the U.S. Treasury Money Market Fund and
$27,613 from the New York Tax-Free Money Market Fund for the six months
ended June 30, 1998, all of which was waived.
The Trust has adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the 1940 Act. The Plan provides for a monthly
payment by a 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 the Fund's average net assets during the preceding
month.
The Fund 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 for the performance of its
service under the Service Agreement. The payments from the Funds on an
annual basis will not exceed 0.35% of the average value of the Funds'
shares held in the subaccounts of the Service Organizations. For the six
months ended June 30, 1998, the Funds did not participate in any Service
Agreements.
A partner of the Trust's legal counsel served as Secretary of the Trust.
Baker & McKenzie served as legal counsel until April 2, 1998. Paul, Weiss,
Rifkind, Wharton andGarrison assumed the role of legal counsel as of April
3, 1998. For the six months ended June 30, 1998, legal fees incurred by the
Funds totaled $33,713 for the Cash Management Fund, $12,242 for the
Government Money Market Fund, $4,539 for the U.S. Treasury Money Market
Fund and $14,733 for the New York Tax-Free Money Market Fund, respectively.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CONCENTRATION OF CREDIT
The New York Tax-Free Money Market Fund invests primarily in debt
obligations issued by the State of New York and its respective political
subdivisions, agencies and public authorities to obtain funds for various
public purposes. The Fund is more susceptible to economic and political
factors adversely affecting issuers of New York specific municipal
securities than is a municipal bond fund that is not concentrated in these
issuers to the same extent.
19
<PAGE>
FINANCIAL HIGHLIGHTS
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- --------
Investment Activities
Net investment income ................. 0.025 0.051 0.049 0.053 0.039 0.027
Net realized and unrealized gains
from investment transactions ....... -- -- -- -- -- 0.002
-------- -------- -------- -------- -------- --------
Total from Investment Activities ...... 0.025 0.051 0.049 0.053 0.039 0.029
-------- -------- -------- -------- -------- --------
Distributions
From net investment income ............ (0.025) (0.051) (0.049) (0.053) (0.039) (0.027)
From net realized gains ............... -- -- -- -- -- (0.002)
-------- -------- -------- -------- -------- --------
Total distributions ................... (0.025) (0.051) (0.049) (0.053) (0.039) (0.029)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ========
Total Return ............................... 2.56%(a) 5.18% 5.00% 5.41% 3.95% 3.11%
Ratios/Supplemental Data:
Net assets at end of period (000) ..... $199,580 $184,205 $220,960 $170,869 $200,492 $172,518
Ratio of expenses to average
net assets ......................... 0.65%(b) 0.63% 0.68% 0.79% 0.63% 0.58%
Ratio of net investment income to
average net assets ................. 5.10%(b) 5.06% 4.88% 5.29% 3.84% 2.88%
Ratio of expenses to average
net assets* ........................ 0.84%(b) 0.83% 0.80% 0.80% 0.64% 0.58%
Ratio of net investment income to
average net assets* ................ 4.91%(b) 4.86% 4.76% 5.28% 3.83% 2.88%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
FINANCIAL HIGHLIGHTS
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income ................. 0.025 0.049 0.048 0.052 0.038 0.028
Net realized and unrealized gains
from investment transactions ....... -- -- -- -- -- 0.001
------- ------- ------- ------- ------- -------
Total from Investment Activities ...... 0.025 0.049 0.048 0.052 0.038 0.029
------- ------- ------- ------- ------- -------
Distributions
From net investment income ............ (0.025) (0.049) (0.048) (0.052) (0.038) (0.028)
From net realized gains ............... -- -- -- -- -- (0.001)
------- ------- ------- ------- ------- -------
Total distributions ................... (0.025) (0.049) (0.048) (0.052) (0.038) (0.029)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total Return ............................... 2.52%(a) 5.05% 4.87% 5.32% 3.83% 2.99%
Ratios/Supplemental Data:
Net assets at end of period (000) ..... $90,482 $100,862 $87,392 $86,850 $166,796 $138,085
Ratio of expenses to average
net assets ......................... 0.63%(b) 0.63% 0.72% 0.76% 0.63% 0.61%
Ratio of net investment income to
average net assets ................. 5.02%(b) 4.94% 4.75% 5.21% 3.76% 2.89%
Ratio of expenses to average
net assets* ........................ 0.82%(b) 0.79% 0.84% 0.78% 0.64% 0.61%
Ratio of net investment income to
average net assets* ................ 4.83%(b) 4.78% 4.63% 5.19% 3.75% 2.89%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------- --------
Investment Activities
Net investment income ................. 0.024 0.049 0.046 0.049 0.036 0.026
Distributions
From net investment income ............ (0.024) (0.049) (0.046) (0.049) (0.036) (0.026)
------- ------- ------- ------- -------- --------
Net Asset Value, End of Period ............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======== ========
Total Return ............................... 2.45%(a) 4.98% 4.68% 5.04% 3.60% 2.65%
Ratios/Supplemental Data:
Net assets at end of period (000) ..... $28,046 $25,507 $28,962 $32,500 $105,720 $133,070
Ratio of expenses to average
net assets ......................... 0.65%(b) 0.65% 0.78% 0.82% 0.68% 0.59%
Ratio of net investment income to
average net assets ................. 4.89%(b) 4.86% 4.57% 4.94% 3.48% 2.62%
Ratio of expenses to average
net assets* ........................ 1.00%(b) 0.94% 0.95% 0.84% 0.69% 0.59%
Ratio of net investment income to
average net assets* ................ 4.54%(b) 4.57% 4.40% 4.92% 3.47% 2.62%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
FINANCIAL HIGHLIGHTS
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income ................. 0.015 0.031 0.029 0.031 0.022 0.018
Distributions
From net investment income ............ (0.015) (0.031) (0.029) (0.031) (0.022) (0.018)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= =======
Total Return ............................... 1.46%(a) 3.14% 2.92% 3.17% 2.23% 1.86%
Ratios/Supplemental Data:
Net assets at end of period (000) ..... $78,496 $86,729 $70,339 $64,884 $53,538 $59,394
Ratio of expenses to average
net assets ......................... 0.64%(b) 0.52% 0.59% 0.69% 0.57% 0.55%
Ratio of net investment income to
average net assets ................. 2.93%(b) 3.09% 2.88% 3.13% 2.20% 1.85%
Ratio of expenses to average
net assets* ........................ 0.86%(b) 0.80% 0.87% 0.85% 0.73% 0.72%
Ratio of net investment income to
average net assets* ................ 2.71%(b) 2.81% 2.60% 2.97% 2.04% 1.68%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
HSBC(SERVICE MARK) MUTUAL FUNDS TRUST
3435 Stelzer Road
Columbus, Ohio 43219
INFORMATION:
(800) 634-2536
INVESTMENT ADVISER
HSBC Asset Management Americas Inc.
140 Broadway (6th Floor)
New York, New York 10005-1180
DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
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
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of Americas
New York, New York 10019
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. Shares of the Funds are not an obligation of or guaranteed
or endorsed by HSBCHoldings plc or its affiliates.An investment in the trust is
neither insured nor guaranteed by the U.S.Government and there can be no
assurance that the trust will be able to maintain a stable net asset value of
$1.00 per share.
8/98
