<PAGE>
MARINER MUTUAL FUNDS TRUST
- - -------------------------------------------------------------------------------
FIXED INCOME FUND
HSBC Asset Management
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
- - -------------------------------------------------------------------------------
FIXED INCOME FUND
HSBC Asset Management [Logo]
- - -------------------------------------------------------------------------------
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
- - -------------------------------------------------------------------------------
Year to date the Fund has returned 10.58% versus 11.44% for the benchmark, the
Lehman Aggregate Index. While the returns are excellent on an absolute basis we
are lagging the index. This is due primarily to a poor first quarter when we
were positioned defensively expecting higher interest rates and the market
rallied. Second quarter performance was closer to benchmark and we fully expect
to close the gap in the second half of the year.
Sincerely,
[Graphic omitted]
/s/W. Robert Alexander
W. Robert Alexander
PRESIDENT
<PAGE>
COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN
FIXED INCOME FUND VS. LEHMAN AGGREGATE
Average Annual Total Return
-----------------------------------------
1 Year Inception
-----------------------------------------
Offering Price(1) 6.05% 4.79%
NAV(2) 11.36% 6.89%
[Graphic omitted]
FUND(1) LEHMAN FUND(2)
JAN 1993 10000 10000 10000
MAR 1993 9788 10315 10277
JUN 1993 10053 10589 10555
SEP 1993 10343 10865 10860
DEC 1993 10340 10870 10857
MAR 1994 10164 10558 10672
JUN 1994 10073 10450 10576
SEP 1994 10112 10514 10618
DEC 1994 10145 10554 10651
MAR 1995 10580 11086 11108
JUNE 1995 11218 12354 11778
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 Fixed Income Fund on
January 15, 1993, to a $10,000 investment in the Lehman Aggregate Bond Index on
that date. All dividends and capital gain distributions are reinvested.
The performance takes into account all applicable fees and expenses. The Lehman
Aggregate Bond Index is a widely accepted unmanaged index of overall
government/corporate/mortgage bond market performance and does not take into
account charges, fees and other expenses.
2
<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
3
<PAGE>
[This page intentionally left blank.]
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets as of June 30, 1995 (Unaudited)
FIXED INCOME FUND
Interest Maturity Principal
Rate Date Amount Value
------ -------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS-25.8%
MORTGAGE-BACKED SECURITIES-13.6%
Federal Home Loan Mortgage Corp:
Collateralized Mortgage Obligation #220019 ............. 7.750 01/01/02 $ 325,068 $ 327,318
Guaranteed Mortgage Certificate ........................ 10.000 09/15/09 521,625 545,750
........................ 7.500 01/01/10 5,090,410 5,166,741
Participation Certificates 33C ......................... 8.000 09/15/18 1,400,000 1,416,772
Participation Certificates 138C ........................ 8.850 04/15/20 453,642 455,669
Federal National Mortgage Association:
Real Estate Mortgage Investment Conduits: 1989-C ....... 10.000 12/25/17 2,286,946 2,378,698
Government National Mortgage Association:
Collateralized Mortgage Obligation #168414 ............. 10.000 08/15/22 964,608 1,047,902
-----------
Total Mortgage-Backed Securities (Cost-$11,429,650) ..................................................... 11,338,850
-----------
OTHER AGENCY OBLIGATIONS-12.2%
Federal Home Loan Bank .................................... 6.270 01/14/04 1,500,000 1,466,151
.................................... 6.160 01/21/04 1,500,000 1,448,797
Federal National Mortgage Association ..................... 5.500 02/12/99 1,500,000 1,471,633
..................... 8.000 04/01/25 3,670,126 3,737,777
State of Israel Agency for International Development ...... 4.375 03/15/96 2,160,000 2,137,255
-----------
Total Other Agency Obligations (Cost-$10,259,003) ................................................ 10,261,613
-----------
Total U.S. Government Agency Obligations (Cost-$21,688,653) ............................................. 21,600,463
-----------
U.S. GOVERNMENT OBLIGATIONS-53.2%
U.S. Treasury Bonds: ...................................... 11.625 01/19/04 1,000,000 1,375,000
...................................... 8.875 08/15/17 190,000 237,322
...................................... 8.750 08/15/20 2,280,000 2,834,325
...................................... 7.875 02/15/21 4,000,000 4,555,000
...................................... 8.000 11/15/21 1,160,000 1,340,525
...................................... 7.125 02/15/23 3,000,000 3,166,875
...................................... 7.500 11/15/24 1,000,000 1,107,500
...................................... 7.625 02/15/25 3,000,000 3,384,375
-----------
18,000,922
-----------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets as of June 30, 1995 (continued)
FIXED INCOME FUND
Interest Maturity Principal
Rate Date Amount Value
------ -------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS-(continued)
U.S. Treasury Notes: ......................................... 8.500% 07/15/97 $ 570,000 $ 599,034
......................................... 7.875 01/15/98 665,000 695,964
......................................... 5.375 05/31/98 2,000,000 1,973,124
......................................... 5.250 07/31/98 1,000,000 981,250
......................................... 5.125 11/30/98 1,500,000 1,462,500
......................................... 8.875 02/15/99 1,000,000 1,095,937
......................................... 6.875 07/31/99 3,500,000 3,611,563
......................................... 8.000 08/15/99 1,000,000 1,073,437
......................................... 7.750 01/31/00 1,000,000 1,068,750
......................................... 6.750 04/30/00 4,500,000 4,637,812
......................................... 7.875 11/15/04 3,000,000 3,339,375
......................................... 7.500 02/15/05 5,500,000 5,991,562
-----------
26,530,308
-----------
Total U.S. Government Obligations (Cost-$42,969,477) .............................................. 44,531,230
-----------
ASSET-BACKED SECURITIES-1.8%
Sears Credit Account 1991-B (Cost-$1,620,465) ................ 8.600 05/15/98 1,500,000 1,533,480
-----------
OTHER MORTGAGE-RELATED SECURITIES-0.2%
Resolution Trust Corp. 1992-MH3 (Cost-$153,644) ............. 6.800 12/15/11 151,150 151,906
-----------
CORPORATE BONDS-14.1%
AUTO-0.8%
Ford Motor Co. ............................................ 7.875 10/15/96 665,000 678,924
-----------
CHEMICAL-1.2%
Dow Chemical Co. .......................................... 4.625 10/15/95 1,000,000 996,123
-----------
FINANCIAL SERVICES-5.7%
American Express Credit Corp. ............................. 6.125 06/15/00 3,000,000 2,961,252
General Motors Acceptance Corp. .......................... 7.400 01/14/97 1,750,000 1,776,005
-----------
4,737,257
-----------
INDUSTRIAL-0.8%
Polaroid Corp. ............................................ 7.250 01/15/97 665,000 672,897
-----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets as of June 30, 1995 (continued)
FIXED INCOME FUND
Interest Maturity Principal
Rate Date Amount Value
------ -------- ---------- ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS-(continued)
UTILITIES-4.0%
Central Power & Light Co. Commonwealth Edison ..................... 6.000% 10/01/97 $ 1,500,000 $ 1,488,838
NYNEX ............................................................. 7.250 02/15/24 500,000 476,875
Pacific Telephone & Telegraph ..................................... 6.875 08/15/23 1,500,000 1,386,040
------------
3,351,753
------------
Yankees-1.6%
Export Development Corp. .......................................... 8.125 08/10/99 380,000 404,829
Ontario Province, Canada .......................................... 15.750 03/15/12 775,000 933,805
------------
1,338,634
------------
Total Corporate Bonds (Cost-$12,143,487) .................................................................... 11,775,588
------------
SHORT-TERM INVESTMENTS-3.9%
Goldman ILA Federal Portfolio (Cost-$3,266,000) ...................... 5.750 On Demand 3,266,000 3,266,000
------------
TOTAL INVESTMENTS-99.0%
(Cost-$81,841,726)* .................................................................................... 82,858,667
------------
OTHER ASSETS (LIABILITIES)-1.0%
Cash ........................................................................................................ 91
Interest and dividends receivable ........................................................................... 1,426,796
Organizational costs, net ................................................................................... 30,633
Other assets ................................................................................................ 20,106
Payable for fund shares redeemed ............................................................................ (129,627)
Dividends payable ........................................................................................... (396,578)
Accrued expenses ............................................................................................ (38,095)
Due to affiliates ........................................................................................... (53,883)
------------
Other assets in excess of liabilities-net .............................................................. 859,443
------------
NET ASSETS-100% ............................................................................................. $ 83,718,110
============
NET ASSET VALUE PER SHARE-applicable to 8,349,549
shares ($0.001 par value) outstanding ................................................................... $10.03
======
<FN>
* As of June 30, 1995, net unrealized appreciation for Federal Income tax
purposes aggregated $1,016,453 of which $2,089,441 related to appreciated
securities and $1,072,988 related to depreciated securities. The aggregate
cost of investment for Federal Income Tax purposes was $81,842,214.
</FN>
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Statement of Operations
For the Six Months ended June 30, 1995 (Unaudited)
FIXED INCOME FUND
INVESTMENT INCOME:
Income:
Interest ............................................ $ 2,812,339
Dividends ........................................... 100,957
-----------
2,913,296
-----------
Expenses:
Advisory fees ....................................... 225,721
Administrative services fee ......................... 41,040
Co-administrative and shareholder servicing fees .... 28,729
Distribution expenses ............................... 22,818
Transfer agent fee .................................. 16,237
Audit fee ........................................... 12,406
Legal fees .......................................... 7,273
Amortization of organizational expenses ............. 6,100
Insurance ........................................... 5,925
Custodian fee ....................................... 4,053
Trustees' fees and expenses ......................... 3,176
Printing ............................................ 3,583
Miscellaneous expenses .............................. 13,466
-----------
Total expenses .................................. 390,527
Less expense waivers / reimbursements ............... (13,258)
-----------
Net expenses .................................... 377,269
-----------
Net investment income ............................... 2,536,027
-----------
NET REALIZED LOSS AND UNREALIZED GAIN ON INVESTMENTS:
Net realized loss on investments ........................ (959,422)
Net change in unrealized appreciation on investments .... 6,755,174
-----------
Net gain on investments ................................. 5,795,752
-----------
Net increase in net assets resulting from operations .... $ 8,331,779
===========
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited)
FIXED INCOME FUND
For the
Six Months ended For the
June 30, 1995 Year ended
(Unaudited) December 31, 1994
--------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................. $ 2,536,027 $ 5,424,521
Net realized loss on investments ...................................... (959,422) (945,839)
Net change in unrealized appreciation (depreciation) on investments ... 6,755,174 (6,295,449)
------------ ------------
Net increase (decrease) in net assets resulting from operations .... 8,331,779 (1,816,767)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................. (2,536,027) (5,424,521)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 792,540 and 1,533,134 shares, respectively ..... 7,669,627 14,857,353
Net asset value of 4,898 and 15,721 shares issued in reinvestment
of distributions, respectively ........................................ 47,563 152,957
Payments for redemptions of 1,517,503 and 1,449,568 shares,
respectively .......................................................... (14,568,978) (13,902,241)
------------ ------------
Net increase (decrease) in net assets from capital share transactions (6,851,788) 1,108,069
------------ ------------
Total decrease in net assets ............................................ (1,056,036) (6,133,219)
------------ ------------
NET ASSETS:
Beginning of period ................................................... 84,774,146 90,907,365
------------ ------------
End of period ......................................................... $ 83,718,110 $ 84,774,146
============ ============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Notes to Financial Statements (Unaudited)
1. Significant Accounting Policies
Mariner Fixed Income 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 $945,839 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 .............................. $ 84,681,350
Accumulated net realized loss on investments.. (1,980,181)
Net unrealized appreciation on investments ... 1,016,941
------------
Total net assets ........................... $ 83,718,110
============
10
<PAGE>
Notes to Financial Statements (continued)
3. Portfolio Securities
The cost of securities purchased and proceeds from securities sold
(excluding short-term securities and principal paydowns) for the six
months ended June 30, 1995 were approximately $79,525,000 and
$15,511,000, 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 policy
established by the Board of Trustees.
As compensation for its services, HSBC Americas is paid monthly
advisory fees 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 $225,700 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
$36,900, net of fee waivers of approximately $4,100, 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 the Fund's 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 $4,100.
11
<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 $28,700. Of that total, HSBC Americas waived
approximately $5,100 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.
12
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios For a Share Outstanding Throughout Each Period
FIXED INCOME FUND
For the Period
For the January 15, 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 ............................. $ 9.35 $ 10.13 $ 10.00
---------- ---------- ----------
Income From Investment Operations
Net investment income ....................................... 0.29 0.59 0.63
Net realized and unrealized gain (loss) on investments ...... 0.68 (0.78) 0.21
---------- ---------- ----------
Total from investment operations ............................ 0.97 (0.19) 0.84
---------- ---------- ----------
Less Distributions from:
Net investment income ....................................... (0.29) (0.59) (0.63)
Net realized gain ........................................... -- -- (0.07)
Excess of current year realized gain on investments ......... -- -- (0.01)
---------- ---------- ----------
Total distributions ......................................... (0.29) (0.59) (0.71)
---------- ---------- ----------
Net asset value, end of period ............................ $ 10.03 $ 9.35 $ 10.13
========== ========== ==========
Total return (a) ................................................. 10.58%(b) (1.89%) 8.57%(b)
Ratios / Supplemental Data
Net assets (000), end of period ............................. $ 83,718 $ 84,774 $ 90,907
Ratio of expenses (net of fee waivers) to average net assets* 0.93%(c) 0.77% 0.22%(c)
Ratio of net investment income (net of fee waivers)
to average net assets* .................................... 6.18%(c) 6.10% 6.40%(c)
Portfolio turnover rate ..................................... 21.03%(b) 63.96% 107.34%(b)
- - ----------
<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 0.03% or $0.002 per
share (1994-0.09% or $0.01) and (1993-0.65% or $0.06) due to fee waivers.
</FN>
</TABLE>
See Notes to Financial Statements.
13
<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.
===============================================================================
