<PAGE>
HSBC Funds Trust
- --------------------------------------------------------------------------------
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HSBC Asset Management Americas Inc. Logo
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Cash Management Fund
Government Money Market Fund
U.S. Treasury Money Market Fund
New York Tax-Free Money Market Fund
------------------------------------------------------------------
January 25, 1999
Dear Shareholder:
After enduring a tug-of-war between the strength of the economy versus
inflation and trade drag for most of the year, the financial markets heated up
substantially in the last 100 days of the year. Clearly the most notable events
of 1998 were the decision of the Federal Open Market Committee to ease interest
rates by 75 basis points from 5.50% to 4.75%.
These easings were in clear support of a blowup in global financial markets as
well as adverse financial situations at home. While we witnessed financial
problems in Russia and Japan, the United States markets were struggling with
hedge fund distress and recession like spreads between United States Treasuries
and Agencies and Corporate issues. To combat these situations, the Federal
Reserve cut interest rates 25 basis points after their September 29th and
November 17th meetings. Additionally, to reflect the seriousness of the
situation, the Fed also lowered rates 25 basis points between meetings on
October 15. This particular easing was significant in calming the markets since
the Federal Reserve hadn't acted between meetings in several years.
On the economic front, growth continued to remain fairly solid. Consumer
spending and historically high levels of residential home sales have driven the
economy while the manufacturing sector and net exports have applied the brakes.
Inflation remains well under control, especially with low oil prices, unit
labor costs and wage pressures which gives the market pause from inflationary
concerns.
As in the past, our main objective is to ensure that the HSBC Money Market
Funds reflect the highest standards characterized by safety, stability, service
and performance. 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 December 31, 1998
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
COMMERCIAL PAPER (70.8%):
Banking and Financial Services
(63.9%):
P-1, A-1+ Banco Bcn Barclays Ltd.,
(LOC Barclays Bank PLC)........... 5.48% 1/20/99 $11,400,000 $ 11,367,029
P-1, A-1+ Banco De Credito SA, (LOC Barclays
Bank PLC)......................... 4.77 5/7/99 3,500,000 3,441,568
P-1, A-1+ Banco Itau SA,
(LOC Bayerische Vereins Bank AG).. 5.52 2/19/99 14,000,000 13,894,813
P-1, A-1+ Bancomer SA, (LOC Bank of
Montreal)......................... 4.97 7/9/99 15,000,000 14,608,613
P-1, A-1 Budget Funding Corp................ 5.42 2/4/99 16,000,000 15,918,098
P-1, A-1 Dollar Thrifty Funding Group....... 5.45 1/28/99 12,078,000 12,028,631
P-1, A-1+ FCAR Owner Trust................... 5.52 1/12/99 15,000,000 14,974,700
P-1, A-1+ Glencore Finance Ltd.,
(LOC ABN - Amro Bank N.V.)........ 5.67 1/8/99 12,000,000 11,986,770
P-1, A-1 GTE Funding, Inc................... 5.25 2/16/99 4,430,000 4,400,282
P-1, A-1 Llama Retail Funding L.P........... 5.54 1/14/99 15,000,000 14,970,019
P-1, A-1+ Marsh & McLennam Companies......... 5.30 2/24/99 16,200,000 16,071,209
P-1, A-1+ Merrill Lynch & Co., Inc........... 5.50 1/15/99 10,000,000 9,978,611
P-1, A-1+ Merrill Lynch & Co., Inc........... 5.03 2/12/99 5,000,000 4,970,658
P-1, A-1+ Paccar Finance Corp................ 4.65 7/23/99 10,000,000 9,737,792
P-1, A-1 Paribas Finance, Inc............... 5.42 1/12/99 15,000,000 14,975,158
P-1, A-1+ Toyota Credit De Puerto Rico....... 5.33 1/27/99 15,000,000 14,942,258
P-1, A-1+ UBS Finance (Delaware), Inc........ 5.47 1/15/99 15,000,000 14,968,092
------------
203,234,301
------------
Building Products (5.0%):
P-1, A-1+ Taiheiyo Cement USA, Inc., (LOC
RaboBank)......................... 6.35 2/12/99 16,000,000 15,881,467
------------
Electrical & Electronic (1.9%):
P-1, A-1+ Jacksonville Electric Authority.... 5.53 1/12/99 5,900,000 5,900,000
------------
Total Commercial Paper (Amortized Cost - $225,015,768)........ 225,015,768
------------
MEDIUM TERM NOTES (19.5%):
Banking and Financial Services
(19.5%):
P-1, A-1 American Express Centurion Bank*... 5.51 1/8/99 14,000,000 14,000,000
P-1, A-1 Bear Stearns Co., Inc.*............ 5.51 1/14/99 6,400,000 6,400,000
P-1, A-1 Bear Stearns Co., Inc.*............ 5.74 1/14/99 9,600,000 9,600,000
P-1, A-1+ General Electric Capital Corp.*.... 5.11 3/9/99 9,900,000 9,898,096
P-1, A-1+ Nationsbank Corp.*................. 5.01 4/22/99 12,000,000 12,009,191
</TABLE>
3
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998 (continued)
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
Moody's/S&P Shares or
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
MEDIUM TERM NOTES
(continued)
P-1, A-1 Prudential Funding
Corp.*................ 5.24% 1/5/99 $ 9,900,000 $ 9,900,000
------------
Total Medium Term Notes (Amortized Cost -
$61,807,287).................................... 61,807,287
------------
YANKEE CERTIFICATES OF
DEPOSIT (7.9%):
Banking and Financial
Services (7.9%):
P-1, A-1 Norinchukin Bank NY.... 5.72 2/8/99 15,000,000 15,000,313
P-1, A-1 Svenska Handelsbanken
NY.................... 5.79 5/7/99 10,000,000 9,998,948
------------
Total Yankee Certificates of Deposit (Amortized
Cost - $24,999,261).............................. 24,999,261
------------
OPEN END INVESTMENT
COMPANIES (2.0%):
Provident Institutional
Temporary Investment
Fund.................. 6,299,000 6,299,000
------------
Total Open End Investment Companies (Amortized
Cost - $6,299,000)............................... 6,299,000
------------
TOTAL INVESTMENTS (100.2%)
(Amortized Cost - $318,121,316)(a)............... 318,121,316
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2%)...... (569,195)
------------
TOTAL NET ASSETS (100.0%)......................... $317,552,121
============
</TABLE>
- --------
Percentages indicated are based on net assets of $317,552,121.
(a) Amortized cost and value for federal income tax and financial reporting
purposes are the same.
* Variable rate security. Rate represents rate in effect at December 31, 1998.
Date presented represents the next rate change date.
AG -- Aktiengesellschaft (West German stock company)
N.V. -- Naamloze Vennootschap (Dutch corporation)
SA -- Societe Anonyme (French corporation)
PLC -- Public Limited Company
LOC -- Letter of Credit
See Notes to Financial Statements.
4
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Maturity Principal
(Unaudited) Security Description Rate Date Amount Value
-------------- -------------------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
U.S. Government Agency
Obligations (104.9%):
Aaa, N/R Fannie Mae.............. 4.90% 2/18/99 $ 5,000,000 $ 4,967,333
Aaa, N/R Fannie Mae.............. 4.63 4/1/99 8,530,000 8,431,265
Aaa, N/R Fannie Mae*............. 5.10 1/5/99 3,000,000 2,994,653
Aaa, N/R Federal Home Loan Bank.. 4.84 1/27/99 25,000,000 24,912,612
Aaa, N/R Federal Home Loan Bank.. 5.01 10/29/99 3,900,000 3,900,000
Aaa, N/R Federal Home Loan
Bank*.................. 5.04 1/4/99 20,000,000 20,005,315
Aaa, N/R Freddie Mac............. 4.90 3/17/99 5,675,000 5,617,068
Aaa, AAA Student Loan Marketing
Association*........... 4.70 1/5/99 10,400,000 10,353,461
-----------
Total U.S. Government Agency Obligations
(Amortized Cost - $81,181,707).................... 81,181,707
-----------
TOTAL INVESTMENTS (104.9%)
(Amortized Cost - $81,181,707)(a)................. 81,181,707
LIABILITIES IN EXCESS OF OTHER ASSETS (4.9%)....... (3,827,934)
-----------
TOTAL NET ASSETS (100.0%).......................... $77,353,773
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $77,353,773.
(a) Amortized cost and value for federal income tax and financial reporting
purposes are the same.
* Variable rate security. Rate represents rate in effect at December 31, 1998.
Date presented represents the next rate change date.
N/R -- Not rated. The security, as judged by the portfolio manager, is
comparable to the quality of investments that the fund may invest.
See Notes to Financial Statements.
5
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS (19.4%):
Aaa, AAA U.S. Treasury Notes..... 6.38% 7/15/99 $2,500,000 $ 2,511,735
Aaa, AAA U.S. Treasury Notes..... 5.88 8/31/99 2,500,000 2,506,207
-----------
Total U.S. Government Obligations
(Amortized Cost - $5,017,942).................... 5,017,942
-----------
U.S. TREASURY BILLS
(14.2%):
Aaa, AAA U.S. Treasury Bills..... 4.24 8/19/99 2,500,000 2,432,198
Aaa, AAA U.S. Treasury Bills..... 4.53 11/12/99 1,300,000 1,248,528
-----------
Total U.S. Treasury Bills
(Amortized Cost - $3,680,726).................... 3,680,726
-----------
REPURCHASE AGREEMENTS
(66.5%):
Bear Stearns Co., Inc.
(Purchased 12/24/98,
proceeds at maturity
$6,578,434;
collateralized by
$11,860,000 U.S.
Treasury Strips,
11/15/09, market value
$6,815,705)............ 4.70 1/4/99 6,575,000 6,575,000
C.S. First Boston, Inc.
(Purchased 12/31/98,
proceeds at maturity
$1,300,614;
collateralized by
$1,301,000 U.S.
Treasury Notes, 5.00%,
2/15/99, market value
$1,325,797)............ 4.25 1/4/99 1,300,000 1,300,000
Chase Securities, Inc.
(Purchased 12/31/98,
proceeds at maturity
$1,300,636;
collateralized by
$1,275,000 U.S.
Treasury Notes, 6.50%,
8/31/01, market value
$1,360,844)............ 4.40 1/4/99 1,300,000 1,300,000
Donaldson Lufkin &
Jenrette Securities
Corp. (Purchased
12/31/98, proceeds at
maturity $6,578,580;
collateralized by
$23,832,000 U.S.
Treasury Strips,
5/15/21, market value
$6,858,850)............ 4.90 1/4/99 6,575,000 6,575,000
Merrill Lynch & Co.,
Inc. (Purchased
12/31/98, proceeds at
maturity $1,443,738;
collateralized by
$1,410,000 U.S.
Treasury Notes, 6.88%,
3/31/00, market value
$1,470,810)............ 4.60 1/4/99 1,443,000 1,443,000
-----------
Total Repurchase Agreements
(Amortized Cost - $17,193,000)................... 17,193,000
-----------
</TABLE>
6
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998 (continued)
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
TOTAL INVESTMENTS (100.1%)
(Amortized Cost -
$25,891,668)(a)................... $25,891,668
LIABILITIES IN EXCESS OF OTHER
ASSETS (0.1%)...................... (15,928)
-----------
TOTAL NET ASSETS (100.0%)........... $25,875,740
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $25,875,740.
(a) Amortized cost and value for federal income tax and financial reporting
purposes are the same.
See Notes to Financial Statements.
7
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
MUNICIPAL COMMERCIAL PAPER
(14.6%):
P-1, A-1+ Long Island Power
Authority
(LOC - Westduetsche
Landsbank, Bayerische
Vereinsbank)........... 3.20% 1/8/99 $5,000,000 $ 5,000,000
P-1, A-1+ New York City, GO,
Series C (LOC - Bankers
Trust Company)......... 3.10 1/7/99 3,300,000 3,300,000
P-1, A-1+ New York City, Municipal
Water
(LOC - Bayerische)..... 3.25 1/21/99 1,500,000 1,500,000
P-1, A-1+ New York City, Municipal
Water (LOC - Canadian
Imperial Bank)......... 3.30 1/21/99 1,500,000 1,500,000
P-1, A-1 New York State,
Environmental
(LOC - Bayerische
Landesbank)............ 3.10 1/4/99 2,500,000 2,500,000
-----------
Total Municipal Commercial Paper (Amortized Cost -
$13,800,000)..................................... 13,800,000
-----------
MANDATORY PUT MUNICIPAL BONDS
(4.2%):
MIG1, N/R New York State Energy,
Research & Development
Authority, Pollution
Control Revenue, Long
Island Lighting Co.
Project, Series A,
(LOC - Deutsche Bank
AG) Putable 3/1/99
@ 100*................. 3.58 3/1/99 2,000,000 2,000,000
P-1, A-1 Puerto Rico Industrial,
Medical & Environmental
Financing Authority,
Pollution Control
Revenue, Reynolds
Metals Co. Project,
(LOC - ABN AMRO Bank)
Putable 9/1/99 @ 100*.. 3.60 9/1/99 2,000,000 2,000,000
-----------
Total Mandatory Put Municipal Bonds (Amortized
Cost - $4,000,000)................................ 4,000,000
-----------
NON-VARIABLE MUNICIPAL BONDS
(22.0%):
AAA, AAA New York City, Authority
Revenue, Prerefunded
5/1/99 @ 100........... 6.50 5/1/99 3,000,000 3,028,350
AAA, AAA New York City, GO,
Series A............... 7.50 3/15/99 2,000,000 2,017,876
A3, A- New York City, GO,
Series L............... 5.25 8/1/99 1,630,000 1,643,964
A2, A- New York City, Municipal
Water Financial
Authority, Water and
Sewer System Revenue,
Series A............... 4.50 6/15/99 1,000,000 1,002,846
AA1, N/R New York State,
Dormitory Authority,
Grace Manor Health Care
Facility Revenue
(LOC - Sonyma)......... 4.80 7/1/99 1,000,000 1,008,259
A3, A- New York State,
Dormitory Authority,
State University
Educational Facilities
Revenue, Series C...... 7.00 5/15/99 3,500,000 3,540,044
A3, A- New York State,
Dormitory Authority,
State University
Educational Facilities
Revenue, Series-B...... 7.25 5/15/99 3,580,000 3,632,460
</TABLE>
8
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998 (continued)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
NON-VARIABLE MUNICIPAL BONDS
(continued)
A3, A- New York State,
Dormitory Authority,
University Educational
Facilities Revenue
(LOC - Chase Manhattan
Bank).................. 4.00 5/15/99 $2,650,000 $ 2,653,285
A3, A- New York State, Local
Government Assistance
Corp. Revenue, Series
A...................... 4.25 4/1/99 2,160,000 2,165,474
-----------
Total Non-Variable Municipal Bonds (Amortized
Cost - $20,692,558).............................. 20,692,558
-----------
VARIABLE MUNICIPAL BONDS
(57.8%):
VMIG1, N/R Facilities Municipal
Trust For Mass Transit
Authority Revenue,
Series 98-1 (AMBAC
Insured)*.............. 5.25 1/4/99 4,000,000 4,000,000
MIG1, A-1+ New York City, GO,
Series D (FGIC
insured)*.............. 3.10 1/6/99 1,100,000 1,100,000
MIG1, A-1+ New York City, GO, Sub-
Series B-3
(LOC - Morgan Guaranty
Trust)*................ 5.00 1/4/99 2,100,000 2,100,000
P-1, A-1 New York City, GO, Sub-
Series A-4,
(LOC - Chase Manhattan
Bank)*................. 5.00 1/4/99 1,955,000 1,955,000
MIG1, A-1+ New York City, Health &
Hospital Corp., Health
Systems Revenue, Series
A (LOC - Morgan
Guaranty Trust)*....... 3.90 1/4/99 3,500,000 3,500,000
VMIG1, A-1+ New York City, Housing
Development Corp.,
Multi-Family Rental
Housing Revenue,
TriBeCa Tower, Series
A, AMT (FNMA
Collateral)*........... 3.70 1/6/99 2,000,000 2,000,000
N/R, A-1 New York City, Housing
Development Corp.,
Special Obligation,
Montefiore Medical
Center Revenue, Series
A (LOC - Chase
Manhattan Bank)*....... 4.00 1/6/99 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)*....... 3.75 1/6/99 1,000,000 1,000,000
MIG1, A-1 New York City,
Industrial Development
Agency, Korean Airlines
Special Facilities
Revenue, Series C, AMT
(LOC - Bankers Trust
Company)*.............. 4.50 1/6/99 2,800,000 2,800,000
MIG1, A-1+ New York City, Municipal
Assistance Corp.
Revenue, Sub-Series K-
3,
(LOC - Landesbank-
Hessen)*............... 3.80 1/6/99 2,000,000 2,000,000
</TABLE>
9
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998 (continued)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
VARIABLE MUNICIPAL BONDS
(continued)
MIG1, A-1+ New York City, Municipal
Water Finance
Authority, Water &
Sewer System Revenue,
Series C (FGIC
Insured)*.............. 5.10 1/4/99 $ 600,000 $ 600,000
MIG1, A-1 New York City, Trust for
Cultural Resources
Revenue, Carnegie Hall
(LOC - Westdeutsche
Landesbank)*........... 3.75 1/6/99 400,000 400,000
P-1, A-1+ New York City, Trust for
Cultural Resources
Revenue, Carnegie Hall
(LOC - Westdeutsche
Landesbank)*........... 3.75 1/6/99 2,200,000 2,200,000
MIG1, A-1 New York City, Trust for
Cultural Resources
Revenue, Museum of
Broadcasting
(LOC - Kredietbank
NV)*................... 4.00 1/6/99 800,000 800,000
MIG1, N/R New York State,
Dormitory Authority
Revenue, Municipal
Securities Trust
Receipts*.............. 4.15 1/6/99 4,300,000 4,300,000
MIG1, A-1+ New York State,
Dormitory Authority,
Cornell University
Revenue, Series-B (SPA
Morgan Guaranty
Trust)*................ 5.00 1/4/99 2,800,000 2,800,000
MIG1, A-1+ New York State, Electric
System Revenue, Long
Island Power Authority,
Sub-Series 5 (LOC - ABN
AMRO Bank, Morgan
Guaranty Trust)*....... 5.10 1/4/99 2,800,000 2,800,000
MIG1, SP1+ New York State, Energy
Research & Development
Authority, Brooklyn
Union Gas Co. Project,
Series A-1, (MBIA
Insured, SPA Union Bank
of Switzerland)*....... 4.00 1/6/99 2,000,000 2,000,000
MIG1, A-1+ New York State, Energy,
Research & Development
Authority, Pollution
Control Revenue, Orange
& Rockland Utilities
Project, Series A
(LOC - Societe
Generale)*............. 3.80 1/6/99 2,000,000 2,000,000
MIG1, N/R New York State, Housing
Finance Agency, Saxony
Housing Revenue, Series
A (LOC - Chase
Manhattan Bank)*....... 4.20 1/6/99 3,300,000 3,300,000
MIG1, P1 New York State, Housing
Finance Agency, Special
Surgery Staff Revenue
(LOC - Chase Manhattan
Bank)*................. 3.70 1/6/99 1,079,000 1,079,000
</TABLE>
10
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998 (continued)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security Maturity Principal
(Unaudited) Description Rate Date Amount Value
-------------- ----------- ---- -------- --------- -----
<C> <S> <C> <C> <C> <C>
VARIABLE MUNICIPAL BONDS
(continued)
N/R, A-1 New York State,
Industrial Development
Agency, Industrial
Montgomery Development
Revenue, Service
Merchandise Co.
(LOC - Canadian
Imperial Bank)*........ 4.05 1/6/99 $ 100,000 $ 100,000
MIG1, A-1+ New York State, Local
Government Assistance
Corp. Series A Revenue
(LOC - Union Bank of
Switzerland, Credit
Suisse)*............... 3.90 1/6/99 1,400,000 1,400,000
MIG1, AAA New York State, Township
Authority General
Revenue (FGIC
Insured)*.............. 5.05 1/4/99 2,300,000 2,300,000
MIG1, A-1 Niagara Falls, Bridge
Commission, Toll
Revenue, Series A (FGIC
Insured)*.............. 3.80 1/6/99 1,300,000 1,300,000
MIG1, A-1+ Puerto Rico Commonwealth
Highway &
Transportation
(LOC - Bank of Nova
Scotia)*............... 3.50 1/6/99 1,500,000 1,500,000
P-1, N/R Saint Lawrence County,
Industrial Development
Authority, Pollution
Control Revenue,
Reynolds Metals Co.
Project (LOC - Bank of
Nova Scotia)*.......... 5.10 1/4/99 1,200,000 1,200,000
VMI1, Aa1 Wallkill Industrial
Development Agency,
Pollution Control
Revenue, Reynolds
Metals Co. Project
(LOC - Dresdner Bank
AG)*................... 3.85 1/6/99 500,000 500,000
MIG1, N/R Yonkers, Industrial
Development Agency,
Civic Facilities
Revenue, Consumers
Union Facility
(LOC - Credit Local de
France)*............... 4.00 1/6/99 900,000 900,000
-----------
Total Variable Municipal Bonds (Amortized Cost -
$54,434,000).................................... 54,434,000
-----------
</TABLE>
11
<PAGE>
Schedule of Portfolio Investments as of December 31, 1998 (continued)
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Moody's/S&P
Credit Ratings Security
(Unaudited) Description Shares Value
-------------- ----------- ------ -----
<C> <S> <C> <C>
OPEN-END INVESTMENT
COMPANIES (1.0%):
New York Money Fund......... 520,000 $ 520,000
Dreyfus New York Municipal
Cash Management Fund....... 400,000 400,000
-----------
Total Open-End Investment Companies
(Amortized Cost - $920,000)............. 920,000
-----------
TOTAL INVESTMENTS (99.6%)
(Amortized Cost - $93,846,558)(a)....... 93,846,558
OTHER ASSETS IN EXCESS OF LIABILITIES
(0.4%).................................. 412,782
-----------
TOTAL NET ASSETS (100.0%)................ $94,259,340
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $94,259,340.
(a) Amortized cost and value for federal income tax and financial reporting
purposes are the same.
* Variable rate security. Rate represents rate in effect at December 31,
1998. Date presented represents the next rate change date.
AG - Aktiengesellschaft
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Tax Paper
FGIC - Financial Guaranty Insurance Corp.
FNMA - Federal National Mortgage Association
GO - General Obligation
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
N/R - Not rated. The security, as judged by the portfolio manager, is
comparable to the quality of investments that the fund may invest.
SPA - Standby Purchase Agreement
See Notes to Financial Statements.
12
<PAGE>
Statements of Assets and Liabilities as of December 31, 1998
<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
(amortized cost
$318,121,316,
$81,181,707,
$8,698,668, and
$93,846,558,
respectively)......... $318,121,316 $81,181,707 $ 8,698,668 $93,846,558
Repurchase agreements
(cost $0, $0,
$17,193,000, and $0,
respectively)......... -- -- 17,193,000 --
------------ ----------- ----------- -----------
Total Investments.... 318,121,316 81,181,707 25,891,668 93,846,558
Cash................... 415 -- 774 3,364,575
Interest and dividends
receivable............ 871,539 416,061 137,944 622,905
Prepaid expenses....... 22,993 8,523 2,679 6,488
------------ ----------- ----------- -----------
Total Assets............ 319,016,263 81,606,291 26,033,065 97,840,526
------------ ----------- ----------- -----------
LIABILITIES:
Payable to custodian... -- 3,788,398 -- --
Dividends payable...... 1,289,601 400,858 104,225 207,470
Payable to brokers for
investments
purchased............. -- -- -- 3,300,000
Accrued expenses and
other payables:
Investment advisory
fees................. 19,922 8,933 5,451 20,973
Administration fees... 24,614 8,926 2,469 8,009
Distribution fees..... 37,803 7,643 2,736 6,864
Other................. 92,202 37,760 42,444 37,870
------------ ----------- ----------- -----------
Total Liabilities....... 1,464,142 4,252,518 157,325 3,581,186
------------ ----------- ----------- -----------
Net Assets.............. $317,552,121 $77,353,773 $25,875,740 $94,259,340
============ =========== =========== ===========
COMPUTATION OF NET ASSET
VALUE:
Net assets............. $317,552,121 $77,353,773 $25,875,740 $94,259,340
Shares of beneficial
interest issued and
outstanding (par value
$0.001 per share,
unlimited number of
shares authorized).... 317,554,773 77,355,708 25,874,490 94,268,132
------------ ----------- ----------- -----------
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........ $317,557,907 $77,354,841 $25,876,116 $94,273,047
Accumulated net
realized losses from
investment
transactions.......... (5,786) (1,068) (376) (13,707)
------------ ----------- ----------- -----------
Net Assets.............. $317,552,121 $77,353,773 $25,875,740 $94,259,340
============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Statements of Operations
For the year ended December 31, 1998
<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.................. $13,674,688 $5,053,820 $1,582,603 $2,787,517
Dividends................. 89,951 24,560 17,194 156,264
----------- ---------- ---------- ----------
Total Income.............. 13,764,639 5,078,380 1,599,797 2,943,781
----------- ---------- ---------- ----------
EXPENSES:
Advisory fees............. 850,781 324,264 103,714 300,720
Administration fees....... 353,424 138,971 44,449 128,881
Co-administration and
shareholder servicing
assistance fees.......... 170,156 64,853 20,745 60,144
Distribution fees......... 286,571 74,966 14,318 69,919
Fund accounting fees...... 2,184 624 652 2,886
Transfer agent fees....... 180,920 44,186 43,337 52,935
Service organization
fees..................... 18,569 1,198 15,505 --
Legal fees................ 83,715 26,882 9,664 23,412
Other expenses............ 164,831 69,492 26,715 69,694
----------- ---------- ---------- ----------
Gross Expenses............. 2,111,151 745,436 279,099 708,591
Less: Fee waivers......... (291,755) (111,199) (35,569) (103,128)
Less: Reimbursements...... (242,212) (63,059) (51,472) (53,988)
----------- ---------- ---------- ----------
Net Expenses............... 1,577,184 571,178 192,058 551,475
----------- ---------- ---------- ----------
Net Investment Income...... 12,187,455 4,507,202 1,407,739 2,392,306
----------- ---------- ---------- ----------
NET REALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains
(losses) from investment
transactions............. (45) (144) 722 (1,031)
----------- ---------- ---------- ----------
Net Realized Gains
(Losses) from
Investments.............. (45) (144) 722 (1,031)
----------- ---------- ---------- ----------
Change in Net Assets
Resulting from
Operations................ $12,187,410 $4,507,058 $1,408,461 $2,391,275
=========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
[This Page Intentionally Left Blank]
15
<PAGE>
Statements of Changes in Net Assets as of December 31, 1998
<TABLE>
<CAPTION>
Cash Management Fund
--------------------------------
For the Year ended December 31,
--------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income....................... $ 12,187,455 $ 9,353,016
Net realized gains (losses) from investment
transactions............................... (45) 5
--------------- ---------------
Change in net assets resulting from
operations................................. 12,187,410 9,353,021
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................. (12,187,455) (9,353,016)
--------------- ---------------
Change in net assets from shareholder
distributions.............................. (12,187,455) (9,353,016)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................. 1,341,762,133 1,156,962,210
Dividends reinvested........................ 9,085,388 4,569,829
Cost of shares redeemed..................... (1,217,500,619) (1,198,286,576)
--------------- ---------------
Change in net assets from capital share
transactions............................... 133,346,902 (36,754,537)
--------------- ---------------
Change in Net Assets......................... 133,346,857 (36,754,532)
--------------- ---------------
NET ASSETS:
Beginning of period......................... 184,205,264 220,959,796
--------------- ---------------
End of period............................... $ 317,552,121 $ 184,205,264
=============== ===============
SHARE TRANSACTIONS:
Issued...................................... 1,341,762,133 1,156,959,601
Reinvested.................................. 9,085,388 4,569,829
Redeemed.................................... (1,217,500,619) (1,198,286,576)
--------------- ---------------
Change in shares............................. 133,346,902 (36,757,146)
=============== ===============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
<TABLE>
<CAPTION>
Government U.S. Treasury New York Tax-Free
Money Market Fund Money Market Fund Money Market Fund
- ---------------------------- ---------------------------- ----------------------------
For the Year ended For the Year ended For the Year ended
December 31, December 31, December 31,
- ---------------------------- ---------------------------- ----------------------------
1998 1997 1998 1997 1998 1997
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 4,507,202 $ 3,564,667 $ 1,407,739 $ 1,277,630 $ 2,392,306 $ 2,501,607
(144) (329) 722 184 (1,031) (7,385)
- ------------- ------------- ------------- ------------- ------------- -------------
4,507,058 3,564,338 1,408,461 1,277,814 2,391,275 2,494,222
- ------------- ------------- ------------- ------------- ------------- -------------
(4,507,202) (3,564,667) (1,407,739) (1,277,630) (2,392,306) (2,501,607)
- ------------- ------------- ------------- ------------- ------------- -------------
(4,507,202) (3,564,667) (1,407,739) (1,277,630) (2,392,306) (2,501,607)
- ------------- ------------- ------------- ------------- ------------- -------------
245,113,875 235,133,212 175,531,472 221,502,675 169,582,662 160,027,422
2,003,878 1,188,858 758,783 551,579 1,732,131 1,604,558
(270,625,447) (222,851,766) (175,922,504) (225,509,647) (163,783,249) (145,234,462)
- ------------- ------------- ------------- ------------- ------------- -------------
(23,507,694) 13,470,304 367,751 (3,455,393) 7,531,544 16,397,518
- ------------- ------------- ------------- ------------- ------------- -------------
(23,507,838) 13,469,975 368,473 (3,455,209) 7,530,513 16,390,133
- ------------- ------------- ------------- ------------- ------------- -------------
100,861,611 87,391,636 25,507,267 28,962,476 86,728,827 70,338,694
- ------------- ------------- ------------- ------------- ------------- -------------
$ 77,353,773 $ 100,861,611 $ 25,875,740 $ 25,507,267 $ 94,259,340 $ 86,728,827
============= ============= ============= ============= ============= =============
245,113,875 235,133,212 175,531,472 221,502,675 169,582,662 160,027,422
2,003,878 1,188,858 758,783 551,579 1,732,131 1,604,558
(270,625,447) (222,851,766) (175,922,504) (225,509,647) (163,783,249) (145,234,462)
- ------------- ------------- ------------- ------------- ------------- -------------
(23,507,694) 13,470,304 367,751 (3,455,393) 7,531,544 16,397,518
============= ============= ============= ============= ============= =============
</TABLE>
17
<PAGE>
Notes to Financial Statements
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 each Fund is to provide as high a level of
current income as is consistent with preservation of capital and liquidity.
The New York Tax-Free Money Market Fund seeks to provide as high a level of
current income that is exempt from Federal, New York State and New York
City income taxes as is consistent with preservation of capital and
liquidity.
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 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. Restricted securities
and securities for which market quotations are not readily available, if
any, are valued at fair value using methods approved by the Board of
Directors. Investments in investment companies are valued at their net
asset values as reported by such companies. In addition, the 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 each Fund's policy to continue 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.
Repurchase Agreements: The Funds may purchase instruments from financial
institutions, such as banks and broker-dealers, subject to the seller's
agreement to repurchase them at an agreed upon time and price ("repurchase
agreements"). The seller under a repurchase agreement is required to
maintain the value of the securities subject to the agreement at not less
than 102% of the repurchase price. Default by the seller would, however,
expose the relevant Funds to possible loss because of adverse market action
or delay in connection with the disposition of the underlying obligations.
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreements. Accordingly, the Funds could receive
less than the carrying value upon the sale of the underlying collateral
securities.
18
<PAGE>
Notes to Financial Statements (continued)
2.Significant Accounting Policies (continued)
For federal income tax purposes, the following Funds have capital loss
carryforwards as of December 31, 1998, which are available to offset future
gains, if any:
<TABLE>
<CAPTION>
Amount Expires
------- -------
<S> <C> <C>
Cash Management Fund......................................... $ 313 2002
2,228 2003
2,993 2004
-------
$ 5,534
=======
Government Money Market Fund................................. $ 252 2003
342 2004
330 2005
16 2006
-------
$ 940
=======
U.S. Treasury Money Market Fund.............................. $ 376 2006
=======
New York Tax-Free Money Market Fund.......................... $ 3,591 2001
1,324 2002
136 2003
240 2004
7,386 2005
1,030 2006
-------
$13,707
=======
</TABLE>
Capital losses incurred after October 31 for the Funds are deemed to arise
on the first business day of the following fiscal year for tax purposes.
The Cash Management Fund and Government Money Market Fund have incurred and
will elect to defer such capital losses of $252 and $128, respectively
after October 31, 1998.
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
19
<PAGE>
Notes to Financial Statements (continued)
2.Significant Accounting Policies (continued)
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.
As of December 31, 1998, the following reclassifications have been made to
increase (decrease) the indicated accounts with offsetting adjustments to
paid-in capital:
<TABLE>
<CAPTION>
Accumulated Net Realized
Losses from Investment
Transactions
------------------------
<S> <C>
U.S. Treasury Money Market Fund..................... $ (1,282)
New York Tax-Free Money Market Fund................. 29,192
</TABLE>
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
is recorded on the accrual basis and includes, where applicable, the
amortization of premium or accretion of discount.
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 Funds. HSBC Asset Management Americas Inc. is the North
American investment management 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>
Portion of Each Fund's Average Daily Net Assets Advisory Fee Rate
----------------------------------------------- -----------------
<S> <C>
Up to $500 million........................................ 0.350%
In excess of $500 million but not exceeding $1 billion.... 0.315%
In excess of $1 billion but not exceeding $1.5 billion.... 0.280%
In excess of $1.5 billion................................. 0.245%
</TABLE>
HSBC Asset Management Americas Inc. has voluntarily agreed to reimburse
Fund expenses to the extent each Fund's ordinary operating expenses net of
other fee waivers exceed 0.65% of each Fund's average daily net assets.
The Fund may enter into agreements (the "Service Agreements") with certain
banks, financial institutions and corporations ("Service Organizations")
whereby each Service Organization provides recordkeeping and 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
20
<PAGE>
Notes to Financial Statements (continued)
3.Related Party Transactions (continued)
average value of the Funds' shares held in the subaccounts of the Service
Organizations. HSBC Asset Management Americas Inc. agreed to reimburse the
Funds for a portion of these fees.
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 and the Fund Accounting Agreement, BISYS is paid a
monthly asset-based fee as follows:
<TABLE>
<CAPTION>
Portion of Each Fund's Average Daily Net Assets Administration Fee Rate
----------------------------------------------- -----------------------
<S> <C>
Up to $200 million................................. 0.150%
In excess of $200 million but not exceeding $400
million........................................... 0.125%
In excess of $400 million but not exceeding $600
million........................................... 0.100%
In excess of $600 million.......................... 0.080%
</TABLE>
HSBC Asset Management Inc. earned co-administration and shareholder
servicer assistance fees of 0.07% of each Fund's average net assets, all of
which were waived.
For the period ended December 31, 1998, fee waivers and voluntary
reimbursements for the Funds were:
<TABLE>
<CAPTION>
Co-Administration
Service and Shareholder
Investment Organization Administration Servicer Assistance
Advisory Fees Fees Fees Fees
------------- ------------ -------------- -------------------
<S> <C> <C> <C> <C>
Cash Management Fund.... $240,662 $1,550 $121,599 $170,156
Government Money Market
Fund................... 62,962 97 46,346 64,853
U.S. Treasury Money
Market Fund............ 51,472 -- 14,824 20,745
New York Tax-Free Money
Market Fund............ 53,988 -- 42,984 60,144
</TABLE>
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.
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 and Garrison assumed the role of legal counsel as of April
3, 1998. For the year ended December 31, 1998, legal fees incurred by the
Funds totaled $83,715 for the Cash Management Fund, $26,882 for the
Government Money Market Fund, $9,664 for the U.S. Treasury Money Market
Fund and $23,412 for the New York Tax-Free Money Market Fund, respectively.
21
<PAGE>
Notes to Financial Statements (continued)
4.Concentration of Credit Risk
The Cash Management Fund may not invest less than 25% of the current value
of its total assets in bank obligations (including bank obligations subject
to repurchase agreements), except that if at some future date adverse
economic conditions prevail in the banking industry, the Cash Management
Fund may, for defensive purposes, temporarily invest less than 25% of its
asset in bank obligations. The fund's policy on concentrating in the
banking industry could increase the fund's exposure to economic or
regulatory developments relating to or affecting banks.
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 money market fund that is not concentrated
in these issuers to the same extent.
5.Federal Income Tax Information (Unaudited)
For the taxable year ended December 31, 1998, the New York Tax-Free Money
Market Fund declared tax-exempt income distributions of $2,395,530.
22
<PAGE>
FINANCIAL HIGHLIGHTS
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income....... 0.050 0.051 0.049 0.053 0.039
Distributions
From net investment income.. (0.050) (0.051) (0.049) (0.053) (0.039)
-------- -------- -------- -------- --------
Net Asset Value, End of
Year........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return................. 5.15% 5.18% 5.00% 5.41% 3.95%
Ratios/Supplemental Data:
Net assets at end of
period (000)............... $317,552 $184,205 $220,960 $170,869 $200,492
Ratio of expenses to average
net assets................. 0.65% 0.63% 0.68% 0.79% 0.63%
Ratio of net investment
income to average
net assets................. 5.01% 5.06% 4.88% 5.29% 3.84%
Ratio of expenses to average
net assets*................ 0.87% 0.83% 0.80% 0.80% 0.64%
</TABLE>
- --------
* 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.
23
<PAGE>
FINANCIAL HIGHLIGHTS
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------
1998 1997 1996 1995 1994
------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year........................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- ------- ------- --------
Investment Activities
Net investment income.......... 0.049 0.049 0.048 0.052 0.038
Distributions
From net investment income..... (0.049) (0.049) (0.048) (0.052) (0.038)
------- -------- ------- ------- --------
Net Asset Value, End of Year.... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======= ======= ========
Total Return.................... 5.01% 5.05% 4.87% 5.32% 3.83%
Ratios/Supplemental Data:
Net assets at end of
period (000).................. $77,354 $100,862 $87,392 $86,850 $166,796
Ratio of expenses to average
net assets.................... 0.62% 0.63% 0.72% 0.76% 0.63%
Ratio of net investment income
to average net assets......... 4.86% 4.94% 4.75% 5.21% 3.76%
Ratio of expenses to average
net assets*................... 0.80% 0.79% 0.84% 0.78% 0.64%
</TABLE>
- --------
* 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.
24
<PAGE>
FINANCIAL HIGHLIGHTS
U.S. TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- --------
Investment Activities
Net investment income........... 0.048 0.049 0.046 0.049 0.036
Distributions
From net investment income...... (0.048) (0.049) (0.046) (0.049) (0.036)
------- ------- ------- ------- --------
Net Asset Value, End of Year..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ========
Total Return..................... 4.86% 4.98% 4.68% 5.04% 3.60%
Ratios/Supplemental Data:
Net assets at end of
period (000)................... $25,876 $25,507 $28,962 $32,500 $105,720
Ratio of expenses to average net
assets......................... 0.65% 0.65% 0.78% 0.82% 0.68%
Ratio of net investment income
to average net assets.......... 4.75% 4.86% 4.57% 4.94% 3.48%
Ratio of expenses to average net
assets*........................ 0.94% 0.94% 0.95% 0.84% 0.69%
</TABLE>
- --------
* 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.
25
<PAGE>
FINANCIAL HIGHLIGHTS
NEW YORK TAX-FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Year............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Investment Activities
Net investment income............ 0.028 0.031 0.029 0.031 0.022
Distributions
From net investment income....... (0.028) (0.031) (0.029) (0.031) (0.022)
------- ------- ------- ------- -------
Net Asset Value, End of Year...... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return...................... 2.83% 3.14% 2.92% 3.17% 2.23%
Ratios/Supplemental Data:
Net assets at end of
period (000).................... $94,259 $86,729 $70,339 $64,884 $53,538
Ratio of expenses to average net
assets.......................... 0.64% 0.52% 0.59% 0.69% 0.57%
Ratio of net investment income to
average net assets.............. 2.78% 3.09% 2.88% 3.13% 2.20%
Ratio of expenses to average net
assets*......................... 0.82% 0.80% 0.87% 0.85% 0.73%
</TABLE>
- --------
* 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.
26
<PAGE>
Report of Independent Auditors
The Board of Trustees and Shareholders
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, 1998, 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, 1998, 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,
1998, 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 12, 1999
27
<PAGE>
HSBC Funds Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HSBC Asset Management Americas
Inc. Logo
- --------------------------------------------------------------------------------
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
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 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 HSBC
Holdings plc or its affiliates. An investment in the Funds is neither insured
nor guaranteed by the FDIC or any other government agency. Although the trust
attempts to maintain the value of your investment at $1.00 per share, it is
possible to lose money by investing in these funds.
2/99
Annual Report
December 31, 1998
Managed by:
HSBC Asset Management Americas Inc.
Sponsored and distributed by:
BISYS Fund Services
