MARINER MUTUAL FUNDS TRUST
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TOTAL RETURN EQUITY FUND
HSBC Asset Management [LOGO]
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ANNUAL REPORT
December 31, 1995
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
MARINER FUNDS SERVICES
COVER
<PAGE>
MARINER MUTUAL FUNDS TRUST
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TOTAL RETURN EQUITY FUND
HSBC Asset Management [LOGO]
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February 12, 1996
Dear Shareholder:
The year 1995 witnessed a remarkable confluence of events that carried the U.S.
equity market to new highs, with nary a true pause on the way. Stocks, as
measured by the S&P 500 posted their best return since 1958, up 37.6%. Economic
conditions were nearly ideal as the Federal Reserve was able to engineer the
much touted but often questioned "soft landing" -- marked by low inflation, low
interest rates and moderate GDP growth -- while moving toward a more
accommodative policy via two easing moves in July and December. This drove bonds
higher and rates lower as yields declined approximately 200 basis points all
along the Treasury yield curve during the year.
While the economic environment in itself was quite positive and supportive to
equity valuations, corporate profits were surprisingly strong and well ahead of
expectations, which provided the real impetus to the equity market. Earnings
growth was driven by the highest margins in 25 years, as corporations continued
to reap the benefits of the massive restructurings of the early '90s. In
addition, margins were augmented by technological efficiencies gained via
increased expenditures on office equipment, which nearly doubled as a percent of
real GDP since 1990.
Further fueling market gains was an intense level of consolidation activity as
U.S. companies announced a record $465 billion in mergers and acquisitions (M&A)
in 1995, while the global tally was in excess of $865 billion. Consolidation was
noted across all sectors and industries but activity among the banks was
particularly noteworthy.
Finally, providing much of the necessary liquidity to fuel the market were
record inflows into equity mutual funds. Inflows into domestic equity mutual
funds reached a record $117.2 billion in 1995, surpassing the previous annual
high of $91.1 set in 1993. These inflows helped to absorb a healthy, if not
record-breaking, stream of initial public offerings (IPO's) during the year.
Sectorally, the Health Care stocks led the market, returning over 58%,
benefitting by a late year rally as investors became more defensively oriented.
Financials also posted an annual return in excess of 50%, driven in part by the
aforementioned torrid pace of M&A activity, as well as lower rates.
Surprisingly, after a very weak fourth quarter showing, Technology stocks ended
the year in line with the market after a stunning first half 1995 performance.
Consumer Cyclicals turned in the weakest returns, up 18%, battered by poor
retail sales from a consumer that was preoccupied with job (in)security and a
heavy credit burden. Also weak on a relative basis were the Basic Materials
stocks, up 24%, as it appeared that most commodity prices hit their cyclical
peaks.
1
<PAGE>
We are forecasting a positive, but less spectacular return from U.S. stocks in
1996. We expect that corporate profits, a prime driver of the market in 1995,
will be restrained by a lack of pricing power in combination with declining
contributions from productivity improvements, as margins have already reached
25-year highs. For the year 1996, we expect corporate earnings to rise, but only
by 5%, compared with an approximate increase of 20% in 1995. Further, we see
little room for price/earnings multiples to expand from current levels given an
essentially benign interest rate outlook.
However the current economic environment of low rates/low inflation should
provide solid support for the U.S. equity market. Our forecast of modest GDP
growth is also positive for stocks, though we do expect a first half slowdown.
Further, the supply/demand scenario for U.S. equities appears quite positive. On
the demand side, equity mutual fund inflows are expected to remain strong given
the uncompelling yields on money market alternatives and growing popularity of
defined contribution (401K) plans. Further, foreign investors, who have been
very underinvested in the U.S. market, could provide significant liquidity as
the U.S. dollar continues to strengthen. On the supply side, corporate stock
repurchases continue to replace dividend increases as the favored method of
`increasing shareholder value'. Finally, it is difficult to envision an end to
the torrid pace of consolidation activity (via mergers and acquisitions) so
prevalent in 1995, given the momentum coming into 1996.
In summary, it is difficult to forecast a repeat of 1995 in a climate of slowing
earnings such as we envision for 1996, but the continuing presence of many of
the key drivers of last year's phenomenal equity market should yield a
respectable annual return.
MANAGER'S DISCUSSION OF FUND PERFORMANCE
- ----------------------------------------
For the year 1995 the Fund posted a return of 33.11%. Results fell short of the
S&P 500 but were ahead of most peer group comparisons, as the Lipper Growth and
Income Average rose 30.82%.
In 1995, Financial Services were a positive contributor to results as the Fund
benefitted from very strong stock selection and a fairly neutral weighting.
Utilities and Capital Goods also contributed positively, primarily due to
correct sector positioning as stock selection was slightly negative. However, an
underweight in the Technology sector during a strong first half had a major
negative impact on results. Travelers Corp, Intel, Chase Manhattan, and Meridian
Bancorp led the Fund during the year, as each returned more than 75%. Coltec,
which was sold prior to year end, and Motorola, proved the Fund's weakest
issues.
The Fund was positioned fairly defensively at year end, overweighted in Energy
and Utilities, underweighted in Consumer Cyclicals. At year-end the Fund
maintained an attractive valuation versus the market on historical fundamental
such as price/earnings and price/book while exhibiting forward earnings growth
expectations above those of the market as a whole.
Sincerely,
/s/ LEO GROHOWSKI
Leo Grohowski
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TOTAL RETURN EQUITY FUND VS. S&P 500
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Average Annual Total Return
- ------------------------------------------------------------------------
1 Year 5 Years Inception
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Offering Price(1) 26.44% 14.16% 11.21%
NAV(2) 33.11% 15.34% 11.81%
- ------------------------------------------------------------------------
</TABLE>
CHART
[CHART OMITTED]
<TABLE>
<CAPTION>
Plot Points:
FUND(1) S&P 500 FUND(2) LIPPER
<S> <C> <C> <C> <C>
JUN 1986 10,000 10,000 10,000 10,000
DEC 1986 9,860 10,049 10,320 10,134
DEC 1987 9,780 10,578 10,300 10,400
DEC 1988 11,300 12,334 11,900 12,310
DEC 1989 14,190 16,241 14,940 15,236
DEC 1990 13,560 15,737 14,280 14,322
DEC 1991 17,890 20,532 18,840 18,277
DEC 1992 19,280 22,097 20,300 20,038
DEC 1993 21,440 24,322 22,580 22,967
DEC 1994 20,439 24,643 21,523 22,811
DEC 1995 27,696 33,901 29,165 29,882
<FN>
Past performance is not predictive of future performance
(1) Includes the maximum sales charge
(2) Excludes the maximum sales charge
</FN>
</TABLE>
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 and the Lipper Growth and Income Fund Index on that
date. All dividends and capital gain distributions are reinvested.
The Fund's performance takes into account all applicable fees and expenses. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted unmanaged
indices of overall stock market performance and does not take into account
charges, fees and other expenses.
The Lipper Growth and Income FundIndex is an index based on thirty largest
growth and income mutual funds (equally weighted) traded by Lipper Analytical
ServicesIncorporated and does take into account out of fees of expenses with
capital gain distribution and dividend income reinvested.
3
<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
WILLIAM B. BLUNDIN CHIEF EXECUTIVE OFFICER
ANN E. BERGIN PRESIDENT
WILLIAM J. TOMKO VICE PRESIDENT
MARK E. NAGLE TREASURER
MARTIN R. DEAN ASSISTANT TREASURER
ROBERT L. TUCH ASSISTANT SECRETARY
ALAINA V. METZ ASSISTANT SECRETARY
4
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------- -----------
<S> <C> <C>
COMMON STOCKS - 106.3%
AEROSPACE/DEFENSE - 3.3%
14,218 Boeing Co. $ 1,114,336
22,244 Raytheon Co. 1,051,029
-----------
2,165,365
-----------
AUTO & RELATED - 1.2%
17,769 Goodyear Tire & Rubber Co. 806,268
-----------
BANKS - 5.5%
17,800 Bank of New York Co., Inc. 867,750
17,710 Chase Manhattan Corp. 1,073,668
61 Meridian Bancorp Inc. 2,837
24,600 Nations Bank Corp. 1,712,775
-----------
3,657,030
-----------
BROADCASTING - 1.5%
10,710 * Liberty Media Group 287,830
34,541 * Tele-Communications, Inc. 686,502
-----------
974,332
-----------
CHEMICALS - 4.5%
17,375 Allied-Signal Inc. 825,312
14,592 Du Pont de Nemours & Co., E.I. 1,019,615
24,400 PPG Industries, Inc. 1,116,300
-----------
2,961,227
-----------
COMPUTER SOFTWARE AND SYSTEMS - 1.8%
28,400 * Bay Networks, Inc. 1,167,950
-----------
COMPUTERS - 2.7%
19,500 International Business Machines Corp. 1,789,125
-----------
CONGLOMERATES - 1.1%
14,946 Tenneco, Inc. 741,695
-----------
CONSUMER DURABLES - 1.2%
38,555 Maytag Corp. 780,739
-----------
</TABLE>
5
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
DRUGS - 6.6%
25,021 Bristol-Meyers Squibb Co. $ 2,148,678
22,756 Warner Lambert Co. 2,210,177
-----------
4,358,855
-----------
ELECTRICAL EQUIPMENT - 5.2%
15,382 Emerson Electric Co. 1,257,478
29,789 General Electric Co. 2,144,808
-----------
3,402,286
-----------
ELECTRONICS - SEMICONDUCTORS - 4.3%
19,300 Intel Corp. 1,095,275
30,839 Motorola, Inc. 1,757,823
-----------
2,853,098
-----------
ELECTRONICS - INSTRUMENTATION - 2.8%
22,124 Hewlett Packard Co. 1,852,885
-----------
ENVIRONMENTAL CONTROL - 1.7%
36,931 WMX Technologies, Inc. 1,103,314
-----------
FINANCIAL SERVICES - 4.7%
15,126 Federal National Mortgage Association 1,877,515
19,031 Travelers, Inc. 1,196,574
-----------
3,074,089
-----------
FOOD PROCESSING - 6.4%
52,500 H.J. Heinz Co. 1,739,063
21,000 IBP, Inc. 1,060,500
44,600 Sara Lee Corp. 1,421,625
-----------
4,221,188
-----------
HOSPITAL MANAGEMENT & SUPPLIES - 4.9%
28,600 Columbia / HCA Healthcare Corp. 1,451,450
20,500 Johnson & Johnson 1,755,313
-----------
3,206,763
-----------
</TABLE>
6
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
INSURANCE - 3.2 %
15,100 UNUM Corp. $ 830,500
74,700 USF&G Corp. 1,260,563
-----------
2,091,063
-----------
MACHINERY - 1.1%
21,300 Ingersoll-Rand Co. 748,163
-----------
OIL - DOMESTIC - 3.7%
9,334 Atlantic Richfield Co. 1,033,741
35,800 Burlington Resources, Inc. 1,405,150
-----------
2,438,891
-----------
OIL - INTERNATIONAL - 6.6%
27,281 Chevron Corporation 1,432,253
26,138 Exxon Corp. 2,094,307
6,126 Royal Dutch Petroleum Co. 864,532
-----------
4,391,092
-----------
OIL - WELL SERVICE - 1.2%
11,381 Schlumberger Ltd.. 788,134
-----------
PAPER & RELATED - 1.2%
18,930 Weyerhaeuser Co. 818,723
-----------
PUBLISHING - 1.9%
32,988 Time Warner Inc. 1,249,421
-----------
RAILROADS - 1.5%
15,490 Union Pacific Corp. 1,022,340
-----------
RETAIL - DRUG STORES - 1.7%
32,174 Rite Aid Corp. 1,101,960
-----------
RETAIL - GROCERY - 1.4%
28,500 Albertson's, Inc. 936,938
-----------
RETAIL - SPECIALTY - 3.3%
16,553 Home Depot, Inc. 792,475
33,500 May Department Stores Corp. 1,415,375
-----------
2,207,850
-----------
</TABLE>
7
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------- -----------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
TOBACCO - 3.8%
20,005 Philip Morris Cos., Inc. $ 1,810,453
23,579 RJR Nabisco Holdings Co. 728,002
-----------
2,538,455
-----------
UTILITIES - COMMUNICATIONS - 9.7%
32,248 American Telephone & Telegraph Co. 2,088,058
33,530 Bell South Corp. 1,458,555
46,272 GTE Corp. 2,035,968
31,578 MCI Communications 824,975
-----------
6,407,556
-----------
UTILITIES - ELECTRIC - 5.4%
46,599 Central & South West Corp. 1,298,947
38,036 Public Service Enterprise Group. 1,164,852
36,606 Wisconsin Energy Corp. 1,121,058
-----------
3,584,857
-----------
UTILITIES - GAS PIPELINES - 1.2%
17,472 Consolidated Natural Gas 792,792
-----------
Total Common Stocks (Cost - $56,682,451) 70,234,444
-----------
PRINCIPAL
AMOUNT
- ----------
CORPORATE BOND - 1.0%
$638,700 Time Warner Inc., 8.75%, 01/10/15
(Cost - $657,302) 657,859
-----------
</TABLE>
8
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENT - 2.1%
$1,404,000 Provident Institutional Temporary Investment Fund,
5.59%, On Demand (Cost - $1,404,000) $ 1,404,000
-----------
TOTAL INVESTMENTS - 109.4%
(Cost - $58,743,753)** 72,296,303
-----------
OTHER ASSETS ( LIABILITIES ) - (9.4%)
Cash 1,194
Dividends and interest receivable 164,335
Receivable for securities sold 4,276,375
Receivable for fund shares sold 15,415
Prepaid expenses 5,206
Payable for securities purchased (5,016,137)
Dividends payable (4,243,052)
Payable for fund shares redeemed (1,362,068)
Accrued expenses (21,987)
Due to affiliates (53,526)
-----------
Liabilities in excess of other assets - net (6,234,245)
-----------
NET ASSETS - 100% $66,062,058
===========
NET ASSET VALUE PER SHARE - applicable to 4,474,227 shares
($0.001 par value) outstanding $14.77
======
<FN>
* Non-income producing security.
** As of December 31, 1995, unrealized appreciation for Federal income tax
purposes aggregated $13,521,081 of which $13,951,283 related to appreciated
securities and $430,202 related to depreciated securities. The aggregate
cost of investments for Federal income tax purposes was $58,775,222.
</FN>
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
TOTAL RETURN EQUITY FUND
INVESTMENT INCOME:
Income:
Dividends $ 2,005,943
-----------
Expenses:
Advisory fees 367,306
Administrative services fee 66,783
Co-administrative and shareholder servicing fees 46,748
Distribution expenses 45,616
Transfer agent fees 35,052
Audit fee 25,508
Legal fees 18,244
Trustees' fees and expenses 17,647
Printing 10,523
Custodian fee 9,163
Miscellaneous expenses 3,786
-----------
Total expenses 646,376
Less expense waivers (17,126)
-----------
Net expenses 629,250
-----------
Net investment income 1,376,693
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 4,058,707
Net change in unrealized appreciation on investments 13,600,231
-----------
Net gain on investments 17,658,938
-----------
Net increase in net assets resulting from operations $19,035,631
===========
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,376,693 $ 1,691,542
Net realized gain on investments 4,058,707 840,993
Net change in unrealized appreciation (depreciation) on
investments 13,600,231 (4,840,469)
----------- -----------
Net increase (decrease) in net assets resulting from operations 19,035,631 (2,307,934)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,372,062) (1,691,542)
Net realized gain on investments (3,645,492) (840,993)
Excess of current year net realized gain on investments -- (704,753)
----------- -----------
Total distributions (5,017,554) (3,237,288)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 357,298 and 469,035 shares, respectively 4,889,068 5,911,845
Net asset value of 3,538 and 18,274 shares issued on reinvestment
of distributions, respectively 50,736 224,259
Payments for redemptions of 1,332,928 and 1,078,661 shares,
respectively (17,894,688) (13,310,513)
----------- -----------
Net decrease in net assets from capital share transactions (12,954,884) (7,174,409)
----------- -----------
Net increase (decrease) in net assets 1,063,193 (12,719,631)
NET ASSETS:
Beginning of year 64,998,865 77,718,496
----------- -----------
End of year (including undistributed net investment
income of $5,770 and $1,139, respectively) $66,062,058 $64,998,865
=========== ===========
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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. Short-term obligations having maturities 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. On December 27,
1995, the Fund declared an income and capital gain distribution of
$0.13 and $0.80 per share payable on January 4, 1996 to shareholders on
record as of December 28, 1995.
Distributions to shareholders in 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 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 December 31,
1995, the composition of net assets of the Fund was as follows:
Paid-in capital $52,510,329
Undistributed net investment income 5,770
Distributions in excess of net realized gain (6,591)
Net unrealized appreciation on investments 13,552,550
===========
Total net assets $66,062,058
-----------
12
<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 year ended December 31, 1995
were approximately $35,712,000 and $33,671,000, 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:
<TABLE>
<CAPTION>
ADVISORY
PORTION OF THE FUND'S AVERAGE DAILY NET ASSETS FEE RATE
------------------------------------------------------------- --------
<S> <C>
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%
</TABLE>
For the year ended December 31, 1995, HSBC Americas earned
approximately $367,300 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 year ended December 31, 1995, PFPC earned approximately
$61,800, net of fee waivers of approximately $5,000, in administrative
services fees. Effective March 1996, PFPC will be terminated as
administrator and transfer agent for the Fund.
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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. AGREEMENTS (CONTINUED)
Effective September 25, 1995, Bank of New York replaced Marine Midland
Bank, N.A. ("Marine Midland"), an affiliate of the Adviser, as
custodian for the Fund. For furnishing custodian services, Marine
Midland was paid a monthly fee with respect to the Fund for safekeeping
its assets plus certain transaction charges and out-of-pocket expenses.
For the period January 1, 1995 through September 25, 1995, HSBC
Americas paid the Fund's entire custodian fee of approximately $8,200.
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 $46,700. 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 year
ended December 31, 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 year ended December 31, 1995, the Fund
incurred legal fees of approximately $16,200 to Fund counsel.
14
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
TOTAL RETURN EQUITY FUND
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
-------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.93 $ 12.87 $ 12.02 $13.12 $10.77
------- ------- ------- ------ ------
Income From Investment Operations
Net investment income 0.30 0.29 0.33 0.15 0.21
Net realized and unrealized gain (loss)
on investments 3.64 (0.67) 1.00 0.80 3.21
------- ------- ------- ------ ------
Total from investment operations 3.94 (0.38) 1.33 0.95 3.42
------- ------- ------- ------ ------
Less Distributions from:
Net investment income (0.30) (0.29) (0.33) (0.15) (0.21)
Net realized gain (0.80) (0.15) (0.15) (1.90) (0.86)
Excess of current year realized gain
on investments -- (0.12) -- -- --
------- ------- ------- ------ ------
Total distributions (1.10) (0.56) (0.48) (2.05) (1.07)
------- ------- ------- ------ ------
Net asset value, end of year $14.77 $11.93 $12.87 $12.02 $13.12
======= ======= ======= ====== ======
Total Return (a) 33.11% (2.97)% 11.23% 7.74% 31.92%
Ratios/Supplemental Data
Net assets (000), end of year $66,062 $64,999 $77,718 $3,609 $4,798
Ratio of expenses (without fee waivers)
to average net assets 0.97% 0.86% 0.88% 2.29% 2.18%
Ratio of expenses (with fee waivers)
to average net assets 0.94% 0.78% 0.23% 1.68% 1.40%
Ratio of net investment income (without
fee waivers) to average net assets 2.03% 2.17% 2.30% 0.51% 0.91%
Ratio of net investment income (with
fee waivers) to average net assets 2.06% 2.25% 2.95% 1.12% 1.69%
Portfolio turnover rate 52.77% 23.31% 14.25% 54.99% 77.11%
<FN>
- -----------------
(a) Exclusive of sales charge.
</FN>
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
Mariner Mutual Funds Trust
We have audited the accompanying statement of net assets of the Mariner
Total Return Equity Fund (one of the portfolios comprising Mariner Mutual
Funds Trust) as of December 31, 1995, and the related statement of
operations for the year then ended, and the statement of changes in net
assets for each of the two years in the period then ended, and 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. Our procedures included confirmation of
securities owned as of December 31, 1995, by correspondence with the
custodian and brokers. 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 Mariner Total Return Equity Fund at December 31, 1995, the results
of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 5, 1996
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MARINER SM MUTUAL FUNDS TRUST
3435 Stelzer Road
Columbus,Ohio 43219
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 (EFFECTIVE JANUARY 1, 1996)
BISYSFund Services
3435 Stelzer Road
Columbus, Ohio 43219
ADMINISTRATOR, TRANSFER
AND DIVIDEND DISBURSING AGENT
PFPC, INC.
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
CUSTODIAN
Bank of New York
90 Washington Street
New York, New York 10286
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.
