MARINER MUTUAL FUNDS TRUST
- - -------------------------------------------------------------------------------
TOTAL RETURN EQUITY FUND
HSBC Asset Management [Logo]
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SEMI-ANNUAL REPORT (UNAUDITED)
June 30, 1995
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
MARINER FUNDS SERVICES
<PAGE>
MARINER MUTUAL FUNDS TRUST
TOTAL RETURN EQUITY FUND
- - -------------------------------------------------------------------------------
HSBC Asset Management [Logo]
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July 21, 1995
Dear Shareholder:
U.S. equities posted another strong quarterly showing, up 9.6% for the period,
as signs of economic slowing continued to be evidenced giving rise to
speculation that the Federal Reserve's next move would be to cut rates, perhaps
as early as July. In anticipation of this rate cut the bond market rallied
sharply, most notably in the intermediate maturities, with the long bond yield
rallying to below 7%. Further fueling market gains were strong first quarter
earnings, up nearly 30% from prior year results and excellent supply/demand
conditions for equities as inflows into equity mutual funds remained strong.
As was the case in the first quarter, equities showed surprising resilience as
market participants overlooked the potential impact of the economic slowdown on
future earnings. Relatively few groups and sectors experienced estimate
revisions, and those that did (e.g. the retailers) quickly rebounded from the
initial earnings-related weakness. Even talk of a harder landing than originally
anticipated and the recessionary environment being indicated by the shape of
government yield curve was dismissed by investors. Further, the pick up in
inflation, though modest, did nothing to dispel this complacency.
Volatility increased during the period and market leadership changed, as the mid
and smaller capitalization stocks gathered momentum toward quarter end. However,
the Technology stocks continued their advance unchallenged, gaining more than
20% over the quarter - the best performing S&P sector. Financials, driven by an
increase in M&A activity and lower rates, Healthcare and Capital Goods also
posted above-market returns for the quarter. Transportation and Energy stocks
posted the weakest sectoral performances, the latter impacted by weakening crude
prices as oil dropped to 95 low of $17.40/barrel on the last day of the quarter.
For the first half ended concurrently, the equity market rose over 20% on a
total return basis, seemingly untouched by economic concerns surrounding a weak
dollar, the Mexican economic collapse or raw materials price increases. This
year has in fact witnessed a startling downshift in investor sentiment about the
economy. Early in the year, a continued boom in economic growth was feared which
led to a seventh and final, Fed Funds hike in February, 1995. In the wake of
this move, the soft landing scenario gained wide acceptance as investors
believed that the Federal Reserve had tightened sufficiently to slow growth and
head off inflation without stalling the economy. Finally, concerns of a possible
recession surfaced late in the second quarter, which led to speculation of a
change in Fed policy to more accommodative stance via an easing move or moves
during the summer of 1995. This sea change in economic expectations fueled a
bond market rally, propelling equities as well. As noted above, both
supply/demand dynamics and strong corporate earnings further drove market
returns.
<PAGE>
While active equity managers managed to pick up some ground against the S&P 500
late in the first half, as the secondary and smaller stocks returned to favor,
1995 has proved to be a very difficult year to generate even Index-like returns,
with less than 20% of managers actually outperforming. This weak relative
performance has been a function of the market's fairly narrow advance as,
through the end of June, the 100 largest companies in the S&P 500 accounted for
61% of the market's return. Diversification away from the largest
capitalization, multi-national companies, has generally not added value.
Further, sector weighting has been critical, with only four of the eleven
economic sectors outpacing the market through the end of June--Technology
(+38%), Financials (+26%), Healthcare (+22%) and Capital Goods (+21%). Managers
that were underweighted in the top two sectors--Technology and
Financials--suffered significantly on a relative basis.
We are currently anticipating a slowdown in the economy with a potential
resumption of modest growth by the fourth calendar quarter of 1995 aided by a
more accommodative Federal Reserve policy. While an easier Fed policy certainly
bodes well for equity valuation, the market appears to have already discounted
much of the good news. Further, forward earnings expectations are very
optimistic and Wall Street analysts will need to temper their forecasts for the
remainder of 1995. However, given the market's neutral valuation and the current
level of interest rates, we do not expect a major sell-off in the wake of
earnings releases.
Conversely, given the market's year-to-date rally, low mutual fund cash levels
(liquidity), increasing volatility and the lack of any catalyst to drive
equities from these levels,neither do we envision a continuation of the market's
phenomenal gains. Rotation into lagging sectors, particularly early cycle stocks
as well as mid-and small-cap issues is likely.
Sectorally, we are maintaining an overweighted position in Capital Goods,
emphasizing export-oriented companies and growth-oriented cyclicals. We are also
overweighting the Energy and Utilities (telephone) sectors, due to their
attractive yields and defensive characteristics. We are underweighting the
deeper cyclical (papers, metals), due to their sensitivity to an economic
slowdown, as well as Technology, given the spectacular move the sector has
experienced thus far in 1995.
At quarter end, reflective of our relative value approach, the Fund's valuation
characteristics including price/earnings multiples, both on a historical and
prospective basis, and price/book were below the market, as was the debt/capital
ratio. However, both historical and projected earnings growth as well as return
on equity were above that of the market in general. We believe that this
attractive relative valuation will bode well for the Fund in the slowing growth
environment we envision.
MANAGER'S DISCUSSION OF FUND PERFORMANCE
- - ----------------------------------------
The Mariner Total Return Equity Fund posted a strong absolute performance of
8.07% in the second quarter of 1995. Results were in line with competitive
medians but lagged the 9.54% return posted by S&P 500 Index, as active money
managers generally underperformed the market for the period. For the first half
ended concurrently, the Fund rose 17.85%, well outpacing the Lipper Growth &
Income average return of 16.75% but behind the S&P 500 Index return of 20.21%.
2
<PAGE>
During the second quarter, the Fund was overweighted in the Capital Goods,
Energy Healthcare, and Utilities sectors of the market, while maintaining
underweighted positions in the Basic Materials, Consumer Staples, Consumer
Cyclicals and Technology stocks. The Fund was approximately market-weighted in
the other three sectors. For the Fund, the best relative performance was
generated by the Capital Goods and Financial sectors while Technology and
Consumer Staples negatively impacted results due to a significant underweight,
despite superior stock selection. Sector weighting decisions were positive in
five of the eleven sectors but in aggregate detracted 80 basis points from
relative performance. Stock selection superior in six of the eleven sectors and
augmented relative results by approximately 60 basis points. The remainder of
the Fund's shortfall versus Index was caused by cash holdings as cash
equivalents generated a 1.4% return for the quarter.
During the second quarter, strong individual performances were generated by
Intel (+49%), IBP (+33%), and Chase Manhattan (+32%). Conversely, Home Depot,
Maytag and RJR Nabisco all fell more than 5% during the period.
As always, our goal is to ensure that The Mariner Total Return Equity Fund and
all Mariner Funds are characterized by quality, competitive performance and
outstanding service. We value your participation and appreciate the opportunity
to work on your behalf.
Sincerely,
[GRAPHIC OMITTED]
/s/W. Robert Alexander
W. Robert Alexander
PRESIDENT
3
<PAGE>
COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN
TOTAL RETURN EQUITY FUND VS. S&P 500
Average Annual Total Return
---------------------------------------------------
1 Year 5 Years Inception
---------------------------------------------------
Offering Price(1) 13.47% 10.25% 10.38%
NAV(2) 19.46% 11.38% 11.01%
FUND(1) S&P 500 FUND(2)
JUN 1986 10000 10000 10000
DEC 1986 9860 10049 10320
DEC 1987 9780 10578 10300
DEC 1988 11300 12334 11900
DEC 1989 14190 16241 14940
DEC 1990 13560 15737 14280
DEC 1991 17890 20532 18840
DEC 1992 19280 22097 20300
DEC 1993 21440 24322 22580
DEC 1994 20439 24643 21523
JUNE 1995 24521 29623 25822
Past performance is not predictive of future performance
(1) Includes the maximum sales charge
(2) Excludes the maximum sales charge
The above illustration compares a $10,000 investment in the Total Return Equity
Fund on June 2, 1986, to a $10,000 investment in the Standard & Poor's 500
Composite Stock Price Index on that date. All dividends and capital gain
distributions are reinvested.
The performance takes into account all applicable fees and expenses. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted unmanaged
index of overall government/mortgage bond market performance and does not take
into account charges, fees and other expenses.
4
<PAGE>
BOARD OF TRUSTEES
JOHN P. PFANN* CHAIRMAN OF THE BOARD; Chairman and President,
JPP Equities, Inc.
WOLFE J. FRANKL* Former Director, North America, Berlin Economic
Development Corporation
WILLIAM L. KUFTA Chief Investment Officer, Beacon Trust Company
ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher
Foundation
*Member of the Audit and Nominating Committees
- - ------------------------------------------------------------------------------
OFFICERS
W. ROBERT ALEXANDER PRESIDENT
STEVEN R. HOWARD SECRETARY
MARK A. POUGNET VICE PRESIDENT AND TREASURER
5
<PAGE>
[This page intentionally left blank.]
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AS OF JUNE 30, 1995 (UNAUDITED)
TOTAL RETURN EQUITY FUND
NUMBER
OF SHARES VALUE
- - ------------ ------------
<C> <S> <C>
STOCKS-93.3%
AEROSPACE/DEFENSE-4.6%
20,818 Boeing Co. ........................................... $1,303,727
45,208 * Coltec Industries, Inc ............................... 779,838
12,522 Raytheon Co. ......................................... 972,020
----------
3,055,585
----------
AUTO & RELATED-1.2%
19,769 Goodyear Tire & Rubber Co. ........................... 815,471
----------
BANKS-4.9%
22,410 Chase Manhattan Corp. ................................ 1,053,270
32,261 Meridian Bancorp Inc. ................................ 1,108,972
20,776 Nations Bank Corp. ................................... 1,114,113
----------
3,276,355
----------
BROADCASTING-1.5%
42,841 * Tele-Communications, Inc. ............................ 1,004,087
----------
CHEMICALS-5.2%
19,375 Allied-Signal Inc. ................................... 862,187
11,194 Dow Chemical Corp. ................................... 804,569
14,592 Du Pont de Nemours & Co., E.I......................... 1,003,200
21,441 Lubrizol Corp. ....................................... 758,475
----------
3,428,431
----------
CONGLOMERATES-0.9%
12,646 Tenneco, Inc. ........................................ 581,717
----------
CONSUMER DURABLES-1.1%
46,655 MAYTAG CORP .......................................... 746,481
----------
DRUGS-4.8%
25,921 Bristol-Meyers Squibb Co. ............................ 1,765,868
16,156 Warner Lambert Co. ................................... 1,395,474
----------
3,161,342
----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AS OF JUNE 30, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
NUMBER
OF SHARES VALUE
- - ------------ ------------
<C> <S> <C>
STOCKS-(continued)
ELECTRICAL EQUIPMENT-3.8%
15,382 Emerson Electric Co. .............................. $1,099,813
25,489 General Electric Co. .............................. 1,436,942
----------
2,536,755
----------
ELECTRONICS-SEMICONDUCTORS-3.8%
17,034 Intel Corp. ....................................... 1,078,465
21,939 Motorola, Inc. .................................... 1,472,655
----------
2,551,120
----------
ELECTRONICS-INSTRUMENTATION-1.6%
14,224 Hewlett Packard Co. ............................... 1,059,688
----------
ENVIRONMENTAL CONTROL-3.2%
50,567 * Wheelabrator Technologies, Inc. ................... 777,468
47,931 WMX Technologies, Inc. ............................ 1,360,042
----------
2,137,510
----------
FINANCIAL SERVICES-3.4%
14,826 Federal National Mortgage Association ............. 1,399,204
19,031 Travelers, Inc. ................................... 832,606
----------
2,231,810
----------
FOOD PROCESSING-4.6%
65,800 * Archer-Daniels Midland Co. ........................ 1,225,525
24,100 IBP, Inc. ......................................... 1,048,350
27,936 Sara Lee Corp. .................................... 796,176
----------
3,070,051
----------
HOSPITAL MANAGEMENT & SUPPLIES-4.4%
32,526 Columbia / HCA Healthcare Corp .................... 1,406,750
22,901 Johnson & Johnson ................................. 1,548,680
----------
2,955,430
----------
INSURANCE-1.2%
17,200 UNUM Corp. ........................................ 806,250
----------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AS OF JUNE 30, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
NUMBER
OF SHARES VALUE
- - ------------ ------------
<C> <S> <C>
STOCKS-(continued)
LODGINGS AND RESTAURANTS-1.8%
29,785 McDonald's Corp. ............................ $1,165,338
----------
MACHINERY-2.6%
45,208 Giddings & Lewis Inc ........................ 808,093
23,300 Ingersol-Rand Co. ........................... 891,225
----------
1,699,318
----------
OIL-DOMESTIC-1.5%
9,334 Atlantic Richfield Co. ...................... 1,024,406
----------
OIL-INTERNATIONAL-8.3%
28,581 Chevron Corp. ............................... 1,332,589
28,438 Exxon Corp. ................................. 2,008,434
11,410 Mobil Corp. ................................. 1,095,360
8,926 Royal Dutch Petroleum Co. ................... 1,087,856
----------
5,524,239
----------
OIL-WELL SERVICE-1.3%
13,781 Schlumberger Ltd. ........................... 856,145
----------
PAPER & RELATED-1.3%
18,930 Weyerhaeuser Co. ............................ 892,076
----------
PRINTING & PUBLISHING-1.8%
36,648 Deluxe Corp. ................................ 1,213,965
----------
PUBLISHING-2.0%
32,988 Time Warner Inc. ............................ 1,356,632
----------
RAILROADS-1.5%
18,190 Union Pacific Corp. ......................... 1,007,271
----------
RETAIL-DRUG STORES-1.7%
43,574 Rite Aid Corp. .............................. 1,116,584
----------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets as of June 30, 1995 (continued)
TOTAL RETURN EQUITY FUND
Number
of Shares Value
- - ------------ ------------
STOCKS-(continued)
RETAIL-SPECIALTY-1.7%
<C> <S> <C>
23,553 Home Depot, Inc. ............................... $ 956,841
4,000 * May Best Stores Co. ............................ 166,500
-----------
1,123,341
-----------
TOBACCO-3.7%
25,905 Philip Morris Cos., Inc. ....................... 1,926,684
19,279 RJR Nabisco Holdings Co. ....................... 537,402
-----------
2,464,086
-----------
UTILITIES-COMMUNICATIONS-7.8%
37,148 American Telephone & Telegraph Co. ............. 1,973,487
18,965 Bell South Corp. ............................... 1,204,277
34,272 GTE Corp. ...................................... 1,169,532
36,678 MCI Communications ............................. 806,916
-----------
5,154,212
-----------
UTILITIES-ELECTRIC-5.0%
46,599 Central & South West Corp. ..................... 1,223,224
38,036 Public Service Enterprise Group ................ 1,055,499
36,606 Wisconsin Energy Corp. ......................... 1,024,968
-----------
3,303,691
-----------
UTILITIES-GAS PIPELINES-1.1%
19,972 Consolidated Natural Gas ....................... 753,943
-----------
Total Stocks (Cost--$54,105,783) ............... 62,073,330
-----------
PAR
- - ------------
CORPORATE BOND-1.2%
$800,000 Time Warner Inc., 8.75%, 01/10/15 (Cost--$819,250) 828,000
-----------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AS OF JUNE 30, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
PRINCIPAL
AMOUNT VALUE
- - ------------ ------------
<C> <S> <C>
SHORT-TERM INVESTMENT-6.4%
$4,215,000 Merrill Lynch & Co., 6.04%, On Demand (Cost-$4,215,000) .. $ 4,215,000
------------
TOTAL INVESTMENTS-100.9%
(Cost-$59,140,033)** .................................. 67,116,330
------------
OTHER ASSETS ( LIABILITIES)-(0.9%)
Cash ..................................................... 94
Dividends and interest receivable ........................ 172,382
Receivable for fund share sold ........................... 4,776
Other assets ............................................. 7,930
Liability for securities purchased ....................... (161,940)
Payable for fund share redeemed .......................... (550,567)
Accrued Expenses ......................................... (35,283)
Due to affiliates ........................................ (35,010)
------------
Liabilities in excess of other assets--net ............... (597,618)
------------
NET ASSETS-100% .......................................... $ 66,518,712
============
NET ASSET VALUE PER SHARE-applicable to 4,731,085 shares
($0.001 par value) outstanding ......................... $14.06
======
<FN>
* Non-income producing security.
** As of June 30, 1995, unrealized appreciation for Federal income tax purposes
aggregated $7,960,996 of which $9,367,023 related to appreciated securities and
$1,406,027 related to depreciated securities. The aggregate cost of investments
for Federal Income Tax purposes was $59,155,334.
</FN>
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
TOTAL RETURN EQUITY FUND
<S> <C>
INVESTMENT INCOME:
Income:
Dividends ...................................... $ 1,036,087
Interest ....................................... 8,433
------------
1,044,520
------------
Expenses:
Advisory fees .................................. 178,488
Administrative services fee .................... 32,452
Co-administrative and shareholder servicing fees 22,717
Distribution expenses .......................... 18,318
Transfer agent fee ............................. 16,150
Audit fee ...................................... 11,828
Legal fees ..................................... 7,076
Printing ....................................... 4,501
Trustees' fees and expenses .................... 4,275
Custodian fee .................................. 3,241
Miscellaneous expenses ......................... 16,294
------------
Total expenses ............................. 315,340
Less expense waivers/reimbursements ............ (10,434)
------------
Net expenses ............................... 304,906
------------
Net investment income .......................... 739,614
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................... 1,971,793
Net change in unrealized appreciation on investments 8,023,979
------------
Net gain on investments ............................ 9,995,772
------------
Net increase in net assets resulting from operations $ 10,735,386
============
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
TOTAL RETURN EQUITY FUND
For the
Six Months ended For the
June 30, 1995 Year ended
(Unaudited) December 31, 1994
-------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 739,614 $ 1,691,542
Net realized gain on investments .................................. 1,971,793 840,993
Net change in unrealized appreciation (depreciation) on investments 8,023,979 (4,840,469)
------------ ------------
Net increase (decrease) in net assets resulting from operations . 10,735,386 (2,307,934)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................. -- (1,691,542)
Net realized gain on investments .................................. -- (840,993)
Excess of current year net realized gain on investments ........... -- (704,753)
------------ ------------
Total distributions ............................................. -- (3,237,288)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 181,220 and 469,035 shares, respectively ... 2,277,371 5,911,845
Net asset value of -0- and 18,274 shares, issued on reinvestment
of distributions, respectively .................................... -- 224,259
Payments for redemptions of 896,454 and 1,078,661 shares,
respectively ...................................................... (11,492,910) (13,310,513)
------------ ------------
Net decrease in net assets from capital share transactions ...... (9,215,539) (7,174,409)
------------ ------------
Total increase (decrease) in net assets ............................. 1,519,847 (12,719,631)
------------ ------------
NET ASSETS:
Beginning of period ............................................... 64,998,865 77,718,496
------------ ------------
End of period (including undistributed net investment
income of $740,753 and $1,139, respectively) ...................... $ 66,518,712 $ 64,998,865
============ ============
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
TOTAL RETURN EQUITY FUND
1. SIGNIFICANT ACCOUNTING POLICIES
Mariner Total Return Equity Fund (the "Fund") is an investment portfolio of
Mariner Mutual Funds Trust (the "Trust"). The Trust is a Massachusetts business
trust and is an open-end, diversified investment company which has multiple
investment portfolios, including the Fund.
SECURITIES VALUATION: Investments in securities traded on an exchange are valued
at the last quoted sales price on for a given day, or if a sale is not reported
for that day, at the mean between the most recent bid and asked prices. The bid
price is used when no asked price is available. Securities for which no
quotations are readily available are valued at fair value under procedures
established by the Board of Trustees. Short-term obligations having a maturity
of 60 days or less are valued at amortized cost which approximates market value.
TAXES: It is the Fund's policy to comply with the provisions of the Internal
Revenue Code, as amended, applicable to regulated investment companies, and to
distribute substantially all of its taxable income and net realized gains to its
shareholders for each taxable year. Therefore, no provision is required for
Federal income tax.
DIVIDENDS AND DISTRIBUTIONS: The Fund intends to pay, as a semi-annual dividend,
substantially all of its net investment income. Net capital gains, if any, will
be distributed at least annually.
Distributions to shareholders from excess of net realized gain on investments in
a given year result primarily from losses on security transactions during that
year which are treated for Federal income tax purposes as arising in the
following year.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on the trade date. Identified cost of investments sold is used for both
financial statement and Federal income tax purposes. Dividend income is recorded
on the ex-dividend date. Interest income is recorded as earned.
EXPENSE ALLOCATION: Expenses directly attributed to each Fund in the Trust are
charged to that Fund's operations; expenses which are applicable to all Funds
are allocated among them.
2. CAPITAL
The Trust is authorized to issue an unlimited number of shares of beneficial
interest each with a par value of $0.001. At June 30, 1995, the composition of
net assets of the Fund was as follows:
Paid-in capital .......................... $56,249,674
Undistributed net investment income ...... 740,753
Undistributed net realized gain .......... 1,551,988
Net unrealized appreciation on investments 7,976,297
-----------
Total net assets ....................... $66,518,712
===========
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PORTFOLIO SECURITIES
The cost of securities purchased and proceeds from securities sold (excluding
short-term securities) for the six months ended June 30, 1995 were approximately
$19,306,000 and $23,030,000, respectively.
4. Agreements
The Trust retains HSBC Asset Management Americas Inc. ("HSBC Americas") to act
as Investment Adviser for the Fund. HSBC Americas is the North American
investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking
Corporation). As Investment Adviser, HSBC Americas furnishes investment guidance
and policy direction in connection with the management of the portfolio of the
Fund, subject to policies established by the Board of Trustees.
As compensation for its services, HSBC Americas is paid monthly advisory fees at
the following annual rates:
Advisory
Portion of the Fund's average daily net assets Fee Rate
-------------------------------------------------------- --------
Not exceeding $400 million ............................. 0.550%
In excess of $400 million but not exceeding $800 million 0.505%
In excess of $800 million but not exceeding $1.2 billion 0.460%
In excess of $1.2 billion but not exceeding $1.6 billion 0.415%
In excess of $1.6 billion but not exceeding $2 billion . 0.370%
In excess of $2 billion ................................ 0.315%
For the six months ended June 30, 1995, HSBC Americas earned approximately
$178,000 in advisory fees.
As Administrator, PFPC Inc. ("PFPC") is paid a monthly asset based fee of 0.10%
of the Fund's first $200 million of average net assets; 0.075% of the Fund's
next $200 million of average net assets; 0.05% of the Fund's next $200 million
of average net assets; and 0.03% of the Fund's average net assets in excess of
$600 million; exclusive of out-of-pocket expenses. PFPC has agreed to waive 10%
and 5% of its fee during the first and second year of its administration,
respectively. For the six months ended June 30, 1995, PFPC earned approximately
$29,200, net of fee waivers of approximately $3,300, in administrative services
fees.
HSBC Americas may enter into agreements (the "Service Agreements") with certain
banks, financial institutions and corporations ("Service Organizations") whereby
each Service Organization handles recordkeeping and provides certain
administrative services for its customers who invest in the Fund through
accounts maintained at that Service Organization. Each Service Organization will
receive monthly payments, which are based upon expenses that the Service
Organization has incurred in the performance of its services under the Service
Agreement. The payments from the Fund on an annual basis will not exceed 0.25%
of the average value of Fund shares held in the subaccounts of the Service
Organizations.
Marine Midland Bank, N.A. ("Marine Midland"), an affiliate of the Adviser,
serves as custodian for the Fund. For furnishing custodian services, Marine
Midland is paid a monthly fee with respect to the Fund for safekeeping its
assets plus certain transaction charges and out-of-pocket expenses. For the six
months ended June 30, 1995, HSBC Americas paid the Fund's entire custodian fee
of approximately $3,200.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HSBC Americas earned co-administration and shareholder servicing fees of 0.03%
and 0.04% of the Fund's average net assets, respectively, totaling approximately
$22,700. Of that total, HSBC Americas waived approximately $3,900 of these fees
for the month of January 1995.
The Fund has adopted a Distribution Plan and Agreement (the "Plan") pursuant to
Rule 12b-1 of the Investment Company Act of 1940, as amended. The Plan provides
for a monthly payment by the Fund to Mariner Funds Services for expenses
incurred in connection with distribution services provided to the Fund not to
exceed an annual rate of 0.35% of the average daily value of the Fund's net
assets during the preceding month.
One state in which the shares of the Fund are qualified for sale imposes
limitations on the expenses of the Fund. The Advisory Contract and the
Administrative Services Contract with HSBC Americas provide that if, in any
fiscal year, the total expenses of the Fund (excluding taxes, interest,
distribution expenses, brokerage commissions and other portfolio transaction
expenses, other expenditures which are capitalized in accordance with generally
accepted accounting principles and extraordinary expenses, but including the
advisory and administrative services fees) exceed the expense limitation
applicable to the Fund imposed by the securities regulations of such state, HSBC
Americas will pay or reimburse the Fund in amounts equal to the excess. Although
there is no certainty that this limitation will be in effect in the future, the
effective limitation on an annual basis with respect to the Fund is currently
2.5% per annum of the first $30 million of average net assets, 2.0% of the next
$70 million of average net assets and 1.5% of average net assets in excess of
$100 million. For the six months ended June 30, 1995, there were no payments or
reimbursements required as a result of this expense limitation.
A partner of Baker & McKenzie, legal counsel to the Trust, serves as Secretary
of the Trust. For the six months ended June 30, 1995, the Fund paid legal fees
of approximately $9,300 to Fund counsel.
16
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
TOTAL RETURN EQUITY FUND
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1995 -------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ....... $ 11.93 $ 12.87 $ 12.02 $ 13.12 $ 10.77 $ 11.59
------- ---------- ---------- ---------- ---------- ----------
Income From Investment
Operations
Net investment income ..... 0.15 0.29 0.330.15 0.21 0.32
Net realized and
unrealized gain (loss)
on investments ........ 1.98 (0.67) 1.00 0.80 3.21 (0.82)
------- ---------- ---------- ---------- ---------- ----------
Total from investment
operations ............ 2.13 (0.38) 1.33 0.95 3.42 (0.50)
------- ---------- ---------- ---------- ---------- ----------
Less Distributions from:
Net investment income ... -- (0.29) (0.33) (0.15) (0.21) (0.32)
Net realized gain ....... -- (0.15) (0.15) (1.90) (0.86) (0.00)
Excess of current year
realized gain on
investments ........... -- (0.12) -- -- -- --
------- ---------- ---------- ---------- ---------- ----------
Total distributions ..... -- (0.56) (0.48) (2.05) (1.07) (0.32)
------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period ............. $ 14.06 $ 11.93 $ 12.87 $ 12.02 $ 13.12 $ 10.77
======= ========== ========== ========== ========== ==========
Total return (a) ............. 17.85%(b) (2.97%) 11.23% 7.74% 31.92% (4.41%)
Ratios/Supplemental Data
Net assets (000),
end of period ......... $66,519 $ 64,999 $ 77,718 $ 3,609 $ 4,798 $ 4,041
Ratio of expenses (net of
fee waivers) to average
net assets* ........... 0.95%(c) 0.78% 0.23% 1.68% 1.40% 1.19%
Ratio of net investment
income (net of fee
waivers) to average
net assets* ........... 2.28%(c) 2.25% 2.95% 1.12% 1.69% 2.90%
Portfolio turnover rate . 31.74%(b) 23.31% 14.25% 54.99% 77.11% 45.21%
- - ----------
<FN>
(a) Exclusive of sales charge.
(b) Not annualized.
(c) Annualized.
* The ratios of net investment income and expenses to average net assets for
the six months ended June 30, 1995 reflect a decrease of 0.03% or $0.002 per
share (1994-0.08% or $0.01) (1993-0.65% or $0.09) (1992-0.61% or $0.08)
(1991-0.78% or $0.10) and (1990-1.67% or $0.18) due to fee waivers.
</FN>
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
===============================================================================
MARINERSM MUTUAL FUNDS TRUST
370 17th Street, Suite 2700
Denver, Colorado 80202
GENERAL INFORMATION:
(800) 753-4462
INVESTMENT ADVISER AND CO-ADMINISTRATOR
HSBC Asset Management Americas Inc.
250 Park Avenue
New York, New York 10177
SPONSOR AND DISTRIBUTOR
MarinerSM Funds Services
370 17th Street, Suite 2700
Denver, Colorado 80202
ADMINISTRATOR, TRANSFER
AND DIVIDEND DISBURSING AGENT
PFPC, Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
CUSTODIAN
Marine Midland Bank, N.A.
140 Broadway
New York, New York 10015
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
This report is for the information of the shareholders of Mariner 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.
===============================================================================
