MARINER MUTUAL FUNDS TRUST
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U.S. GOVERNMENT SECURITIES 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
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MARINER MUTUAL FUNDS TRUST
U.S. GOVERNMENT SECURITIES FUND
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HSBC Asset Management [Logo]
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July 21, 1995
Dear Shareholder:
The fixed income market has enjoyed a significant rally in the first half of
1995. Interest rates have declined substantially from 1994 year end levels as
GDP has slowed from the feverish pace experienced in the last quarter of 1994.
Over the past six months there has been a shift in monetary policy. In February
the Fed raised the Fed Fund rate to 6%. It turns out this was the last move in a
year long tightening cycle which saw Fed Funds increase 3%. Since that move
slower economic growth and a reduction of inflationary pressures allowed the Fed
to adopt a more accomodative stance. On July 6 they lowered the Fed Funds rate
by 25 basis points citing an absence of inflationary pressure.
MANAGER'S DISCUSSION OF PERFORMANCE
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Year to date the Fund has returned 11.36% versus 11.04% for the benchmark, the
Lehman Government/Mortgage Index. The returns are excellent, both on an absolute
basis and better than benchmark. This is due to primarily to fairly small
duration bets and good timing on sector rotation out of Mortgages. At quarter
end we were fully invested in Treasury issues and were looking for opportunity
to reenter the Mortgage sector.
Sincerely,
[GRAPHIC OMITTED]
/s/W. Robert Alexander
W. Robert Alexander
PRESIDENT
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COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN
U.S. GOVERNMENT SECURITIES FUND VS. LEHMAN MUTUAL FUND
GOVERNMENT/MORTGAGE INDEX
Average Annual Total Return
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1 Year Inception
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Offering Price(1) 5.25% 2.37%
NAV(2) 10.50% 4.99%
[GRAPHIC OMITTED]
FUND(1) LEHMAN FUND (2)
JUL 1993 10000 10000 10000
SEP 1993 9793 10189 10282
DEC 1993 9770 10199 10282
MAR 1994 9566 9917 10044
JUN 1994 9468 9823 9942
SEP 1994 9469 9880 9943
DEC 1994 9395 9918 9864
MAR 1995 9892 10387 10403
JUNE 1995 10463 11551 10986
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 U.S. Government
Securities Fund on July 27, 1993, to a $10,000 investment in the Lehman Mutual
Fund Government/Mortgage Index on that date. All dividends and capital gain
distributions are reinvested.
The performance takes into account all applicable fees and expenses. The Lehman
Mutual Fund Government/ Mortgage 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.
2
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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
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OFFICERS
W. ROBERT ALEXANDER PRESIDENT
STEVEN R. HOWARD SECRETARY
MARK A. POUGNET VICE PRESIDENT AND TREASURER
3
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<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS AS OF JUNE 30, 1995 (UNAUDITED)
U.S. GOVERNMENT SECURITIES FUND
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT VALUE
------ -------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS-95.1%
U.S. Treasury Notes .................................... 3.875% 10/31/95 $ 500,000 $ 497,188
6.125 07/31/96 500,000 501,718
5.500 07/31/97 1,750,000 1,739,063
6.500 08/15/97 3,000,000 3,038,436
7.500 05/15/02 1,300,000 1,398,312
7.500 02/15/05 4,900,000 5,337,938
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12,512,655
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U.S. Treasury Bond ..................................... 7.125 02/15/23 250,000 263,906
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Total U.S. Treasury Obligations (Cost-$12,528,844) .................................................... 12,776,561
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SHORT-TERM INVESTMENTS-2.3%
Federated Prime Obligation ............................. 5.970 On Demand 82,000 82,000
Federated Short-Term U.S. Government ................... 5.800 On Demand 85,000 85,000
Goldman ILA Federal Portfolio .......................... 5.750 On Demand 146,000 146,000
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Total Short-Term Investments (Cost-$313,000) .......................................................... 313,000
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TOTAL INVESTMENTS-97.4%
(Cost-$12,841,844) ................................................................................. 13,089,561
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OTHER ASSETS (LIABILITIES)-2.6%
Cash .................................................................................................. 710
Interest and dividends receivable ..................................................................... 288,364
Organizational costs, net ............................................................................. 39,911
Receivable from investment adviser .................................................................... 45,355
Prepaid expenses ...................................................................................... 3,587
Receivable for fund shares sold ....................................................................... 1,122
Dividends payable ..................................................................................... (4,968)
Accrued expenses ...................................................................................... (17,473)
Due to affiliates ..................................................................................... (3,880)
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Other assets in excess of liabilities-net ............................................................. 352,728
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NET ASSETS-100% ....................................................................................... $ 13,442,289
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NET ASSET VALUE PER SHARE-applicable to 1,370,910 shares
($0.001 par value) outstanding ................................................................... $9.81
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<FN>
* Also cost for Federal income tax purposes. As of June 30, 1995, net
unrealized appreciation for Federal income tax purposes aggregated $247,717, of
which $349,740 related to appreciated securities and $102,023 related to
depreciated securities.
</FN>
</TABLE>
See Notes to Financial Statements.
5
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<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
U.S. GOVERNMENT SECURITIES FUND
<S> <C>
INVESTMENT INCOME:
Income:
Interest ....................................... $ 402,194
Dividends ...................................... 10,532
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412,726
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Expenses:
Advisory fees .................................. 25,370
Audit fee ...................................... 10,622
Distribution expenses .......................... 7,833
Legal fees ..................................... 6,945
Amortization of organizational costs ........... 6,670
Administrative services fee .................... 6,343
Printing ....................................... 4,478
Co-administrative and shareholder servicing fees 4,440
Trustees' fees and expenses .................... 4,320
Transfer agent fees ............................ 3,933
Custodian fee .................................. 1,624
Miscellaneous expenses ......................... 1,780
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Total expenses ............................. 84,358
Less expense waivers / reimbursements .......... (49,054)
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Net expenses ............................... 35,304
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Net investment income ................................. 377,422
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NET REALIZED LOSS AND UNREALIZED GAIN ON INVESTMENTS:
Net realized loss on investments ................... (280,469)
Net change in unrealized appreciation on investments 1,277,608
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Net gain on investments ............................ 997,139
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Net increase in net assets resulting from operations $ 1,374,561
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</TABLE>
See Notes to Financial Statements.
6
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<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
U.S. GOVERNMENT SECURITIES FUND
FOR THE
SIX MONTHS ENDED FOR THE
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
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<S> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 377,422 $ 739,218
Net realized loss on investments .................................. (280,469) (191,680)
Net change in unrealized appreciation (depreciation) on investments 1,277,608 (1,078,849)
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Net increase (decrease) in net assets resulting from operations . 1,374,561 (531,311)
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................. (377,422) (739,218)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 20,480 and 215,718 shares, respectively .... 191,867 2,069,306
Net asset value of 36,698 and 79,239 shares issued in reinvestment
of distributions, respectively .................................... 348,481 751,558
Payments for redemptions of 25,144 and 173,394 shares, respectively (238,475) (1,642,290)
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Net increase in net assets from capital share transactions ...... 301,873 1,178,574
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Total increase (decrease) in net assets ............................. 1,299,012 (91,955)
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NET ASSETS:
Beginning of period ............................................... 12,143,277 12,235,232
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End of period ..................................................... $ 13,442,289 $ 12,143,277
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</TABLE>
See Notes to Financial Statements.
7
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Mariner U.S. Government Securities 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 with multiple investment portfolios, including the Fund.
SECURITIES VALUATION: Portfolio securities for which market quotations
are readily available are valued at the quoted bid price. Securities
for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the supervision of
the Trust's officers in accordance with guidelines which have been
adopted by the Board of Trustees. Such procedures include the use of
independent pricing services which use prices based on yields or prices
of securities of comparable quality, coupon, maturity and type,
indicators as to value from dealers and general market conditions.
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 capital gains to its shareholders for each taxable
year. Therefore, no provision is required for Federal income tax.
The Fund has available a $191,680 capital loss carryforward which, if
not utilized, will expire in the year 2002.
DIVIDENDS AND DISTRIBUTIONS: The Fund intends to declare as a dividend
substantially all of its net investment income at the end of each
business day and pay within five business days after the end of each
month. Net capital gains, if any, will be distributed annually.
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.
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.
ORGANIZATIONAL COSTS: Costs incurred in connection with the
organization of the Fund are being amortized on a straight-line basis
over a five year period from the date operations commenced.
2. CAPITAL
The Trust is authorized to issue an unlimited number of shares of
beneficial interest each with a par value $0.001 per share. At June 30,
1995, the composition of net assets of the Fund was as follows:
Paid-in capital ............................ $ 13,683,296
Accumulated net realized loss on investments (488,724)
Net unrealized depreciation on investments . 247,717
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Total net assets ......................... $ 13,442,289
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8
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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 $5,057,000 and $4,732,000, respectively.
4. AGREEMENTS
The Trust retains Marine Midland Bank, as advised by 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, Marine Midland Bank 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, Marine Midland Bank is paid monthly
advisory fees at the following annual rates:
Advisory
Portion of the Fund's average daily net assets Fee Rate
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Not exceeding $400 million ............................. 0.400%
In excess of $400 million but not exceeding $800 million 0.365%
In excess of $800 million but not exceeding $1.2 billion 0.330%
In excess of $1.2 billion but not exceeding $1.6 billion 0.295%
In excess of $1.6 billion but not exceeding $2 billion . 0.260%
In excess of $2 billion ................................ 0.230%
For the six months ended June 30, 1995, Marine Midland Bank waived its
entire advisory fee of approximately $25,400. In addition, HSBC
Americas will reimburse approximately $22,300 of operating expenses
incurred by the Fund for the six months ended June 30, 1995.
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
$5,700, net of fee waivers of approximately $600, 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 on 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 the Fund's shares held in the subaccounts of the
Service Organizations.
9
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 $1,600.
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 $4,400. Of that total, HSBC Americas waived
approximately $700 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.
10
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<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
U.S. GOVERNMENT SECURITIES FUND
FOR THE PERIOD
FOR THE JULY 27, 1993
SIX MONTHS ENDED FOR THE (COMMENCEMENT OF
JUNE 30, 1995 YEAR ENDED OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1994 DECEMBER 31, 1993
---------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period ............................. $ 9.07 $ 10.05 $ 10.00
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Income From Investment Operations
Net investment income ....................................... 0.28 0.56 0.25
Net realized and unrealized gain (loss) on investments ...... 0.74 (0.98) 0.05
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Total from investment operations ............................ 1.02 (0.42) 0.30
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Less Distributions from:
Net investment income ....................................... (0.28) (0.56) (0.25)
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Net asset value, end of period ................................... $ 9.81 $ 9.07 $ 10.05
========== ========== ==========
Total return (a) ................................................. 11.36%(b) (4.22)% 2.59%(b)
Ratios/Supplemental Data
Net assets (000), end of period ............................. $ 13,442 $ 12,143 $ 12,235
Ratio of expenses (net of fee waivers) to average net assets* 0.55%(c) 0.55% 0.53%(c)
Ratio of net investment income (net of fee waivers)
to average net assets* .................................... 5.95%(c) 5.94% 5.61%(c)
Portfolio turnover rate ..................................... 39.99%(b) 38.73% 16.04%(b)
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<FN>
(a) Excludes 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 0.78% or $0.04 per share
(1994 - 0.73% or $0.07) and (1993 - 0.88% or $0.04) due to fee waivers.
</FN>
</TABLE>
See Notes to Financial Statements.
11
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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.
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