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Previous: MARINER MUTUAL FUNDS TRUST, N-30D, 1996-03-11 |
Next: MARINER MUTUAL FUNDS TRUST, N-30D, 1996-03-11 |
MARINER MUTUAL FUNDS TRUST
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
HSBC Asset Management (LOGO)
- -------------------------------------------------------------------------------
ANNUAL REPORT
December 31, 1995
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
MARINER FUNDS SERVICES
<PAGE>
MARINER MUTUAL FUNDS TRUST
- -------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
- -------------------------------------------------------------------------------
HSBC Asset Management (LOGO)
- -------------------------------------------------------------------------------
February 12, 1996
Dear Shareholder:
The Mariner International Equity fund rose 5.93% during the second half of 1995.
This brings the net return to shareholders for the full year 1995 to 4.40% for
Class A (Service Class). The positive impacts of country selection were offset
by negative stock selection, primarily in Japan and Continental Europe. The
following pages review the major geographical regions in which the fund invests
as well as our current outlook for each region:
JAPAN:
- ------
After dropping 8.27% in U.S. dollar terms during the first half of 1995, the
Morgan Stanley Capital International (MSCI) Japan Index rose 9.92% for the
second half. The result was a positive return of 0.83% for the full year 1995.
During the first half of 1995, the combination of the Kobe earthquake, Yen
strength and slowing economic growth undermined the confidence in Japan's
economic recovery. Since mid-year, however, government efforts to help re-flate
the economy coupled with a 22% depreciation of the Yen lent support to the
second half equity market rally.
On a valuation basis, the equity market in Japan looks attractive relative to
the 3% yield on 10 year government bonds. We are therefore more positive on
Japanese equities. However, continued improvements in the economy along with an
improved corporate earnings environment would be necessary before we commit
further funds to Japan.
UNITED KINGDOM:
- ---------------
The equity market rally in the first half of 1995 continued through the second
half. After returning over 10% through June, the MSCI United Kingdom Index
returned 9.57% during the second half of 1995. This brings its year to date
return to 21.19%.
As was the case in the first half of 1995, the market was supported by takeover
activity. However, the earnings picture has deteriorated somewhat as the economy
showed signs of slowing in late 1995. Further, earnings estimates for 1996 are
being revised downwards, with disappointments in 1996 likely to be met with
harsh market reaction. As a result of the economic slowdown and with inflation
subdued, interest rates were lowered in December. We look to see if lower rates
will be the stimulus for further economic growth in 1996.
<PAGE>
After holding near market exposure to UK equities for most of 1995, we reduced
our exposure in December. Given the earnings environment, we shifted to the more
attractively valued region of Continental Europe.
CONTINENTAL EUROPE:
- -------------------
The MSCI Europe Index (ex UK) returned 7.12% for the second half of 1995,
bringing its year to date return to 22.6%. The markets held up well in spite of
economic slowing in Germany, political uncertainty in Italy, and social unrest
due to the transportation workers strike in France.
We view Continental Europe attractive on a valuation basis, especially France
and Germany. Their economies are viewed as being about 6-12 months behind the
UK. With inflation low and interest rates coming down to support slowing
economies, the earnings outlook for Germany and France looks positive. As a
result of these attractive valuations, we increased our exposure to Continental
Europe in December of 1995.
ASIA (EX JAPAN):
- ----------------
The Asian markets rallied in the second half of 1995 as shown by the return of
5.78% on the MSCI Pacific ex. Japan Index. This brings its year to date return
to 13.4%. The returns in Asia were primarily a function of a strong Hong Kong
market (up 23%) and weaker markets in the rest of the region (Malaysia up 5.0%,
Singapore up 6.5%).
Hong Kong was a beneficiary of lower U.S. interest rates. As rates in the U.S.
declined, both domestic and overseas investors began buying Hong Kong equities.
The lower interest rate environment lent support to what had been a very weak
property market. Further, financial stocks benefitted in Hong Kong as well.
The rest of the region's markets did not participate with Hong Kong's rally.
Reactions to an early 1995 sell-off in the emerging markets along with
increasing political tensions in the region put a damper on the other equity
markets.
Our outlook for the region can best be described as neutral. Although valuations
do not appear to be over-stretched, we are somewhat cautious given Hong Kong's
strong run. Earnings growth in Hong Kong may be decelerating as we look forward
into 1996. Singapore's outlook is more positive given its macroeconomic picture.
Although the economy appears to be slowing, its massive current account surplus
should help keep interest rates low. Further, Australia should benefit from a
lower rate environment.
EMERGING MARKETS:
- -----------------
After declining 7.06% during the first half of 1995, the IFC Investable Index
declined another 1.31% to end the year down 8.24%. For the Emerging Markets,
1995 was a year of tremendous volatility. The markets declined globally in the
first quarter in reaction to the crisis in Mexico. They stabilized in the second
quarter as the Mexican situation calmed. A "mini crisis" in Mexico in the third
quarter led to further market declines globally. Finally, the year closed with
the IFC Index up a strong 3.5% in December.
2
<PAGE>
The decline in 1995 has increased the attractiveness of the Emerging Markets on
a valuation basis. Despite the existence of continued political risks in certain
countries, the Emerging Market nations continue to offer economic growth rates
at twice that of the more developed nations. Therefore, we look for favorable
returns in the Emerging Markets for 1996.
Our goal is to ensure the Mariner International Equity Fund, and all Mariner
Funds, are characterized by strong performance and outstanding client service.
We thank you for choosing the Mariner International Equity Fund to be a part of
your total investment program.
Sincerely,
/s/ JAMES B. McHUGH
James B. McHugh
3
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL EQUITY FUND VS. MSCI-EAFE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Total Return -- Class A Shares Class B Shares
- ------------------------------------------------------------------------------------------
1 Year Inception Inception
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Offering Price(1) (0.80%) (3.15%) 13.28
- ------------------------------------------------------------------------------------------
NAV(2) 4.40% (0.18%) 13.28
- ------------------------------------------------------------------------------------------
</TABLE>
[GRAPHIC OMITTED]
Plot Points:
<TABLE>
<CAPTION>
FUND(1) MSCI-EAFE FUND(2)
<S> <C> <C> <C>
APRIL 1994 $9,397 $10,000 $10,000
JUNE 1994 9,544 10,088 10,050
DECEMBER 1994 9,069 9,991 9,550
JUNE 1995 8,946 10,250 9,420
DECEMBER 1995 9,478 11,111 9,970
<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 CLASS A SHARES OF
THE INTERNATIONAL EQUITY FUND ON APRIL 25, 1994, TO A $10,000 INVESTMENT IN THE
EUROPE, AFRICA AND FAR EAST INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ARE REINVESTED. PLEASE REFER TO THE BOX ABOVE FOR RETURNS ON CLASS
B SHARES, WHICH HAVE BEEN OFFERED SINCE MARCH 1, 1995.
THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES. THE
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX IS A
WIDELY ACCEPTED UNMANAGED INDEX OF OVER 900 SECURITIES LISTED ON THE STOCK
EXCHANGES OF THE FOLLOWING COUNTRIES IN EUROPE, AUSTRALIA, AND THE FAR EAST:
AUSTRALIA, AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, HONG KONG, IRELAND,
ITALY, JAPAN, MALAYSIA, NETHERLANDS, NEW ZEALAND. THIS INDEX IS A WIDELY
ACCEPTED UNMANAGED INDEX OF OVERALL STOCK 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
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
5
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ARGENTINA
- ---------
Beverage 300 Buenos Aires Embotelladora ADR "B" $ 6,188 0.0%
----------- ----
Oil 400 YPF Sociedad Anonima ADR 8,650 0.1
----------- ----
Real Estate 357 IRSA Inversiones y Representaciones ADR 9,104 0.1
----------- ----
Utilities 300 Telefonicas de Argentina ADR "B" 8,173 0.0
----------- -----
Total Investments in Argentina 32,115 0.2
----------- ----
(Cost $ 33,619)
AUSTRALIA
- ---------
Banks 26,262 Australia & New Zealand Bank Group 123,170 0.7
----------- ----
Broadcasting 29,014 News Corporation 154,839 1.0
----------- ----
Conglomerates 17,875 CSR Limited 58,193 0.4
----------- ----
Food & Beverages 35,081 SouthCorp Holdings Ltd 81,614 0.5
----------- ----
Non-Ferrous Metals 8,700 Western Mining Corp. 55,870 0.4
----------- ----
Petroleum Services 17,046 Broken Hill Property 240,727 1.4
----------- ----
Trucking & Freight
Forwarding 42,460 TNT 56,176 0.4
----------- ----
Total Investments in Australia 770,589 4.8
----------- ----
(Cost $ 734,649)
BELGIUM
- -------
Commercial Bank 286 Generale De Banque 99,124 0.6
----------- ----
Iron / Steel 730 Arbed SA 82,599 0.5
----------- ----
Total Investments in Belgium 181,723 1.1
----------- ----
(Cost $ 195,537)
BRAZIL
- ------
Energy 1,500 Centrais Eletricas Brasileira ADR 20,250 0.1
----------- ----
Industrial 1,200 Industrias Klabin De Paper ADR 10,875 0.1
2,500 *Lojas Arapua ADR 20,500 0.1
----------- ----
Total Industrial 31,375 0.2
----------- ----
Mining 700 Compania Vale Do Rio Doce ADR 28,700 0.2
----------- ----
Retail 1,000 Lojas Americanas ADR 23,500 0.1
----------- ----
</TABLE>
7
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BRAZIL (continued)
- ------
Steel 3,500 Usinas Siderurgicas De Minas ADR $ 28,448 0.2%
----------- ----
Total Investments in Brazil 132,273 0.8
----------- ----
(Cost $ 149,059)
CHILE
- -----
Beverage / Tobacco 500 Embotelladora Andina SAADR 18,063 0.1
----------- ----
Commercial Bank 1,600 *Banco De A Edward ADR 31,200 0.2
----------- ----
Non-oil Energy 1,100 Enersis SAADR 31,350 0.2
----------- ----
Total Investments in Chile 80,613 0.5
----------- ----
(Cost $ 75,970)
COLOMBIA
- --------
Commercial Bank 400 Banco INDL Colombiano S A 5,600 0.0
----------- ----
Construction Building 600 Cementos Diamante 10,950 0.1
----------- ----
Total Investments in Colombia 16,550 0.1
----------- ----
(Cost $ 16,074)
CZECHOSLOVAKIA
- --------------
Utilities 200 SPTTelecom 18,900 0.1
----------- ----
Total Investment in Czechoslovakia 18,900 0.1
----------- ----
(Cost $ 20,026)
DENMARK
- -------
Telecommunications 1,483 Tele Danmark AS 80,927 0.5
----------- ----
Total Investment in Denmark 80,927 0.5
----------- ----
(Cost $ 79,357)
FINLAND
- -------
Electronics 1,650 Nokia Oy 63,733 0.4
----------- ----
Total Investment in Finland 63,733 0.4
----------- ----
(Cost $ 68,999)
FRANCE
- ------
Automobiles 930 Peugeot SA 122,683 0.8
----------- ----
Auto Parts 2,158 Valeo 99,946 0.6
----------- ----
Banks 1,120 Societe Generale 138,370 0.9
----------- ----
Building Material 1,620 Lafarge Coppee SA 104,372 0.7
----------- ----
</TABLE>
8
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FRANCE (continued)
- ------
Business Services 3,000 Cap Gemini Sogeti $ 84,542 0.5%
1,200 Eaux (Cie Generale) 119,804 0.8
----------- ----
Total Business Services 204,346 1.3
----------- ----
Electronics 2,300 SGS Thomson Microelectronics 88,064 0.6
----------- ----
Gas Exploration 1,600 Societe Nat Elf Aquitaine 117,884 0.7
----------- ----
Health Care 1,566 Society Elf Sanofi 100,381 0.6
----------- ----
Insurance 1,400 Axa 94,343 0.6
----------- ----
Liquor 620 LVMH Moet Hennessy 129,140 0.8
----------- ----
Retail-Speciality 210 Carrefour 127,407 0.8
----------- ----
Total Investments in France 1,326,936 8.4
----------- ----
(Cost $ 1,278,789)
GERMANY
- -------
Automobiles 420 Volkswagen AG 140,420 0.9
----------- ----
Banks 4,200 Deutsche Bank AG 199,006 1.3
----------- ----
Chemicals 520 Bayer AG 137,205 0.9
----------- ----
Electric Utilities 3,430 Veba AG 145,617 0.9
----------- ----
Industrial Machinery 380 Mannesmann AG 120,980 0.8
1,060 SGL Carbon 82,022 0.5
----------- ----
Total Industrial Machinery 203,002 1.3
----------- ----
Insurance 110 Allianz AG Holding 214,402 1.3
----------- ----
Retail - Dept Store 125 Karstadt AG 50,976 0.3
----------- ----
Transportation - Air 700 Lufthansa AG 96,373 0.6
----------- ----
Total Investments in Germany 1,187,001 7.5
----------- ----
(Cost $ 1,073,258)
GHANA
- -----
Metals / Minerals 900 Ashanti Goldfields 26,550 0.2
----------- ----
Total Investment in Ghana 26,550 0.2
----------- ----
(Cost $ 18,464)
</TABLE>
9
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HONG KONG
- ---------
Banks 14,600 Bank of East Asia $ 52,396 0.3%
18,500 Dao Heng BankGroup 66,511 0.4
----------- ----
Total Banks 118,907 0.7
----------- ----
Business Services 5,000 Wharf (Hldgs) 16,651 0.1
----------- ----
Conglomerates 6,500 Swire Pacific 50,434 0.3
----------- ----
Electric Utilities 6,000 China Light &Power 27,624 0.2
6,000 Hong Kong Electric 19,670 0.1
----------- ----
Total Electric Utilities 47,294 0.3
----------- ----
Oil 168,000 Shanghai Petrochemical Co. 48,341 0.3
----------- ----
Publishing 6,000 Citic Pacific LTD 20,524 0.2
----------- ----
Real Estate 9,000 Cheung Kong (HLDGS) 54,821 0.3
10,000 Hysan Development 26,447 0.2
6,000 New World Devel Co. 26,149 0.2
6,000 Sun Hung Kai Props 49,079 0.3
----------- ----
Total Real Estate 156,496 1.0
----------- ----
Telephone 28,400 Hong Kong Telecomm 50,683 0.3
----------- ----
Total Investments in Hong Kong 509,330 3.2
----------- ----
(Cost $ 484,310)
INDIA
- -----
Automobiles 1,600 Tata Engineering & Locom Co. 21,008 0.1
----------- ----
Engineering & Construction 1,000 Larsen & Toubro 17,750 0.1
----------- ----
Industrial 800 Hindalco Inds LTD 27,096 0.2
----------- ----
Total Investments in India 65,854 0.4
----------- ----
(Cost $ 65,318)
INDONESIA
- ---------
Banks 15,000 Lippo Bank 23,125 0.1
----------- ----
Pharmaceuticals 8,000 *Darya Varya Labora 14,520 0.1
----------- ----
Misc. Dist - Wholesale 3,000 Modern Photo Film 17,385 0.1
----------- ----
Total Investments in Indonesia 55,030 0.3
----------- ----
(Cost $ 55,087)
</TABLE>
10
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
IRELAND
- -------
Banks 9,000 Bank of Ireland $ 65,562 0.4%
----------- ----
Total Investment in Ireland 65,562 0.4
----------- ----
(Cost $ 55,227)
ITALY
- -----
Household Durables/
Appliances 80,000 Olivetti &C Spa 64,125 0.4
----------- ----
Insurance 8,200 Assicurazioni Generali 198,530 1.3
----------- ----
Telecommunications 62,000 Telecom Italia 96,428 0.6
30,000 *Telecom Italia (MOB) 52,798 0.3
----------- ----
Total Telecommunications 149,226 0.9
----------- ----
Total Investments in Italy 411,881 2.6
----------- ----
(Cost $ 381,500)
JAPAN
- -----
Apparel & Textiles 20,000 Itochu Corp 134,625 0.8
----------- ----
Banks 14,000 Asahi Bank 176,271 1.1
8,000 Sanwa Bank 162,712 1.0
8,000 Sumitomo Bank 169,685 1.1
10,000 Bank of Tokyo 175,303 1.1
11,000 SumitomoTrust &Banking 155,545 1.0
----------- ----
Total Banks 839,516 5.3
----------- ----
Brewery 7,000 Kirin Brewery Co. 82,712 0.5
----------- ----
Building Materials 4,000 Tostem Corp . 132,881 0.8
----------- ----
Business Services 3,000 Kurita Water Industries 79,903 0.5
----------- ----
Chemical 20,000 Asahi Chemical Ind. 153,027 1.0
----------- ----
Construction 9,000 JGCCorp. 95,012 0.6
8,000 Nat'l House Indl 146,441 0.9
----------- ----
Total Construction 241,453 1.5
----------- ----
Cosmetics - Health Care 12,000 KAO Corp. 148,765 0.9
----------- ----
</TABLE>
11
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JAPAN (continued)
- -----
Electrical Equipment 10,000 Fujitsu. $ 111,380 0.7%
12,000 Hitachi 120,872 0.8
7,000 Omron Corp. 161,356 1.0
----------- ----
Total Electrical Equipment 393,608 2.5
----------- ----
Electronics 1,000 Keyence Corp 115,254 0.7
2,000 Rohm Co 112,930 0.7
3,000 Secom Co 208,620 1.3
1,500 Sony Corp. 89,927 0.6
3,000 TDK Corp. 153,124 1.0
----------- ----
Total Electronics 679,855 4.3
----------- ----
Financial Services 3,000 Orix Corp 123,487 0.8
----------- ----
Forest Products & Paper 20,000 Nippon Paper Ind. 138,886 0.9
----------- ----
Industrial Machinery 4,000 Bandai Co. 163,874 1.0
20,000 Mitsubishi Hvy Ind 159,419 1.0
----------- ----
Total Industrial Machinery 323,293 2.0
----------- ----
Insurance 20,000 Mitsui Marine & Fire 142,567 0.9
----------- ----
Investment Companies 7,000 Nomura Securities 152,542 1.0
----------- ----
Land Transport 12,000 Suzuki Motor Corp. 133,656 0.8
----------- ----
Machine 4,000 Daifuku Co. 56,562 0.4
2,000 SMCCorp. 144,697 0.9
2,000 Tokyo Electron 77,482 0.5
----------- ----
Total Machine 278,741 1.8
----------- ----
Pharmaceuticals 6,000 Sankyo Co 134,818 0.8
----------- ----
Photography 10,000 Canon Inc 181,114 1.2
4,000 Fuji Photo Film Co. 115,448 0.7
----------- ----
Total Photography 296,562 1.9
----------- ----
Real Estate 10,000 Mitsui Fudosan Co. 123,002 0.8
----------- ----
Retail-Specialty 2,000 Autobacs Seven Co. 166,197 1.0
----------- ----
Rubber Products 15,000 Sumitomo Rubber 125,230 0.8
----------- ----
</TABLE>
12
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JAPAN (continued)
- -----
Software 5,000 Hitachi Software $ 130,751 0.8%
----------- ----
Steel 42,000 Nippon SteelCorp. 144,000 0.9
----------- ----
Total Investments in Japan 5,300,077 33.3
----------- ----
(Cost $ 5,249,480)
LEBANON
- -------
Commercial Banks 1,500 *Banque Audi GDR 18,375 0.1
----------- ----
Total Investment in Lebanon 18,375 0.1
----------- ----
(Cost $ 18,750)
MALAYSIA
- --------
Electrical Equipment 13,666 Leader Univ Holdings 31,210 0.2
----------- ----
Finance 6,000 Malayan Bk BHD 50,557 0.3
----------- ----
Holding Companies 6,000 Road Builder 20,790 0.1
28,000 Renong Berhad 41,454 0.3
----------- ----
Total Holding Companies 62,244 0.4
----------- ----
Industrial 3,000 *DCB Holdings Berhad WTS 2,977 0.0
4,000 *DCB Holdings Berhad 11,655 0.1
11,000 IJMCorp Berhad 17,498 0.1
6,000 Petronas Gas Berhad 20,435 0.1
----------- ----
Total Industrial 52,565 0.3
----------- ----
Leisure/Hotels 18,000 Berjaya Sports 41,816 0.3
----------- ----
Total Investments in Malaysia 238,392 1.5
----------- ----
(Cost $ 245,106)
MEXICO
- ------
Construction 6,200 Corporacion Geo 18,242 0.1
----------- ----
Consumer Goods/Services 2,000 Kimberly Clark De Mexico 30,201 0.2
----------- ----
Financial Institutions 6,000 Grupo Financiero Inbursa 17,498 0.1
----------- ----
Food / Grocery Products 9,000 *Gruma 25,315 0.2
----------- ----
Industrial - Diversified 2,000 *GrupoCarso 10,785 0.1
----------- ----
Total Investments in Mexico 102,041 0.7
----------- ----
(Cost $ 107,103)
</TABLE>
13
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NETHERLANDS
- -----------
Banks 2,150 Int'l Nederlanden Groep NV $ 143,628 0.9%
----------- ----
Chemicals 600 Akzo Nobel NV 69,396 0.5
----------- ----
Packaging 2,570 KNP BTNV 65,984 0.4
----------- ----
Petroleum Services 1,600 Royal Dutch Petroleum 223,543 1.4
----------- ----
Telecommunication
Services 7,350 Elsevier NV 98,019 0.6
----------- ----
Total Investments in Netherlands 600,570 3.8
----------- ----
(Cost $ 506,024)
NORWAY
- ------
Chemicals 1,570 Norsk Hydro AS 65,932 0.4
----------- ----
Telecommunications 877 Nera AS 28,522 0.2
----------- ----
Total Investments in Norway 94,454 0.6
----------- ----
(Cost $ 82,494)
PAKISTAN
- --------
Utilities 700 *Pakistan Telecom C 60,900 0.4
----------- ----
Total Investment in Pakistan 60,900 0.4
----------- ----
(Cost $ 74,900)
PERU
- ----
Banks 457 Credicorp LTD 7,826 0.0
----------- ----
Mining 1,637 *Minas Buenaventura 10,625 0.1
----------- ----
Telecommunications 6,950 CPT Telefonica Del Peru 14,887 0.1
----------- ----
Total Investments in Peru 33,338 0.2
----------- ----
(Cost $ 27,560)
PHILIPPINES
- -----------
Building Materials 100,000 *Aboitiz Equity Ven 19,062 0.1
----------- ----
Utilities 2,500 Manila Electric Co. 20,398 0.1
----------- ----
Total Investments in Philippines 39,460 0.2
----------- ----
(Cost $ 38,946)
POLAND
- ------
Auto Components 1,000 *Stomil Olsztyn SA 9,329 0.1
----------- ----
</TABLE>
14
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
POLAND (continued)
- ------
Engineering 1,268 Elecktrim SA $ 4,294 0.0%
----------- ----
Total Investments in Poland 13,623 0.1
----------- ----
(Cost $ 13,779)
RUSSIA
- ------
Electrical 2,000 *ADMosenergo 16,250 0.1
----------- ----
Total Investment in Russia 16,250 0.1
----------- ----
(Cost $ 16,931)
SINGAPORE
- ---------
Banks 3,000 Overseas Chinese Banks 37,540 0.2
4,000 United Overseas Bank 38,459 0.3
----------- ----
Total Banks 75,999 0.5
----------- ----
Beverages 1,000 Fraser & Neave 12,724 0.1
----------- ----
Industrial Machinery 3,000 Keppel Corp. 26,723 0.2
----------- ----
Publishing 400 Singapore Press HD (Alien) 7,069 0.0
----------- ----
Real Estate 4,000 City Developments 29,127 0.2
1,000 Singapore Land 6,469 0.0
6,000 Hong Kong Land (Hldgs) 11,100 0.1
----------- ----
Total Real Estate 46,696 0.3
----------- ----
Total Investments in Singapore 169,211 1.1
----------- ----
(Cost $ 157,585)
SOUTH AFRICA
- ------------
Banks 1,000 Nedcor Ltd.GDR 17,282 0.1
----------- ----
Construction/
Building Materials 2,750 Malbak 19,047 0.1
----------- ----
Financial Services 7,130 Bid Corporation Ltd. 25,426 0.2
2,530 Smith (CG) 19,432 0.1
----------- ----
Total Financial Services 44,858 0.3
----------- ----
Food & Beverage 900 Cadbury Schwps (SA) 15,307 0.1
11,300 Premier Group 18,598 0.1
711 South Africa Brews 26,037 0.2
----------- ----
Total Food & Beverage 59,942 0.4
----------- ----
</TABLE>
15
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOUTH AFRICA (continued)
- ------------
Holding Company 1,000 Barlow LTD $ 14,264 0.1%
1,250 Richemont Secs AG 18,859 0.1
----------- ----
Total Holding Company 33,123 0.2
----------- ----
Insurance 1,700 Fedsure Holdings 11,425 0.1
----------- ----
Mining 2,800 Ingwe CoalCorp. 15,361 0.1
----------- ----
Oil 2,600 Engen 19,613 0.1
----------- ----
Paper &Packaging 2,600 Nampak 14,444 0.1
----------- ----
Total Investments in South Africa 235,095 1.5
----------- ----
(Cost $ 197,799)
SOUTH KOREA
- -----------
Iron / Steel 640 Pohang Iron &SteelLTD 14,000 0.1
----------- ----
Paper 1,147 Hansol Paper Co. ADR 21,793 0.1
----------- ----
Investment Trust 10,000 Korea Europe Fund IDR 83,800 0.6
----------- ----
Total Investments in South Korea 119,593 0.8
----------- ----
(Cost $ 131,760)
SPAIN
- -----
Banks 700 BCOPopular ESP 129,093 0.8
----------- ----
Petroleum Services 3,200 Repsol SA 104,864 0.7
----------- ----
Real Estate 4,217 Vallehermoso SA. 78,395 0.5
----------- ----
Utilities 1,850 EMPNACElectricid 104,779 0.7
----------- ----
Total Investments in Spain 417,131 2.7
----------- ----
(Cost $ 361,222)
SWEDEN
- ------
Auto Parts Manufacturing 1,190 Autoliv AB 69,539 0.4
----------- ----
Consumer Goods/Services 2,000 Pharmacia AB 71,539 0.5
900 Pharmacia Upjohn 35,514 0.2
----------- ----
Total Consumer Goods/Services 107,053 0.7
----------- ----
Forest Products 7,677 Stora Kopparbergs 91,920 0.6
----------- ----
</TABLE>
16
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SWEDEN (continued)
- ------
Telecommunications 4,750 Ericsson(LM)TEL $ 93,003 0.6%
----------- ----
Total Investments in Sweden 361,515 2.3
----------- ----
(Cost $ 296,829)
SWITZERLAND
- -----------
Banks 1,700 CS Holding 174,274 1.1
----------- ----
Electronics 115 BBC Brown Boveri 133,593 0.8
----------- ----
Food & Beverages 130 Nestle SA 143,807 0.9
----------- ----
Insurance 50 Baloise Holdings 104,032 0.7
----------- ----
Pharmaceuticals 16 Roche Holdings AG 126,571 0.8
200 Sandoz AG 183,095 1.1
----------- ----
Total Pharmaceuticals 309,666 1.9
----------- ----
Total Investments in Switzerland 865,372 5.4
----------- ----
(Cost $ 711,726)
TAIWAN
- ------
Iron / Steel 3,827 *Tung Ho Steel Enterprise Corp. ADR 39,227 0.2
----------- ----
Total Investment in Taiwan 39,227 0.2
----------- ----
(Cost $ 50,312)
THAILAND
- --------
Banks 4,000 Siam CommercialBank PLC 52,720 0.3
----------- ----
Finance 6,000 Industrial FinThailand Corp. 20,365 0.1
----------- ----
Oil & Gas Exploration 3,800 Pit Explortn & Prd 39,825 0.3
----------- ----
Wholesale Products 10,000 Siam Makro Public Co Ltd 36,720 0.2
----------- ----
Total Investments in Thailand 149,630 0.9
----------- ----
(Cost $ 141,832)
TURKEY
- ------
Breweries 12,800 EGEBiracilik Ve Malt Sanay 4,414 0.0
----------- ----
Diversified Holdings 4,800 Alarko Holdings 1,931 0.0
----------- ----
Food / Grocery Products 3,520 Migros Turk TAS 2,688 0.0
5,800 Tat Konserve Sanayi Anonim Serke 3,666 0.0
----------- ----
Total Food / Grocery Products 6,354 0.1
----------- ----
</TABLE>
17
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ SHARES VALUE PERCENT OF
INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TURKEY (continued)
- ------
Textiles &Apparel 13,800 Altinyildiz Men $ 3,003 0.0%
----------- ----
Total Investments in Turkey 15,702 0.1
----------- ----
(Cost $ 15,889)
UNITED KINGDOM
- --------------
Banks 9,315 Standard Chartered 79,277 0.5
6,500 Natl Westminster 65,464 0.4
----------- ----
Total Banks 144,741 0.9
----------- ----
Conglomerates 16,000 BTR 81,503 0.5
18,000 Tomkins 78,692 0.5
----------- ----
Total Conglomerates 160,195 1.0
----------- ----
Drugs & Healthcare 8,300 Smithkline Beecham 91,520 0.6
----------- ----
Electrical Utilities 14,500 National Power 101,223 0.6
----------- ----
Holding Company 17,000 General Electric 93,462 0.6
----------- ----
International Oil 14,750 British Petroleum 123,127 0.8
----------- ----
Leisure Time 8,200 Granada Group 82,140 0.5
----------- ----
Manufacturing 6,600 GKN 79,848 0.5
----------- ----
Mineral Extract 4,000 RTZ Corp. 58,146 0.4
----------- ----
Packaging 24,287 Smurfit (Jefferson) 58,464 0.4
----------- ----
Retail Trade 12,000 Marks & Spencer 83,864 0.5
----------- ----
Telephone 19,700 British Telecom 108,000 0.6
----------- ----
Tobacco 5,000 BAT Industries 44,026 0.3
----------- ----
Total Investments in United Kingdom 1,228,756 7.7
----------- ----
(Cost $ 1,093,446)
ZIMBABWE
- --------
Building Materials 10,800 Delta Corp 18,083 0.1
----------- ----
Total Investment in Zimbabwe 18,083 0.1
----------- ----
(Cost $ 16,129)
Total Investments in Stocks $15,162,362 95.3%
----------- ----
(Cost $ 14,340,845)
</TABLE>
18
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COUNTRY/ VALUE PERCENT OF
INDUSTRY PRINCIPAL (NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
FIXED INCOME BOND
-------------------------------------------------------------
<S> <C> <C> <C> <C>
TAIWAN
- ------
40,000 *Walsin Lihwa Corp 3.25% Due 6/16/04 $ 40,200 0.3%
----------- -----
Total Investment in Bond 40,200 0.3%
----------- -----
(Cost $ 42,400)
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT
---------------------------------------------------------------
<S> <C> <C> <C> <C>
UNITED STATES
- -------------
Repurchase Agreement $700,000 State Street Bank and Trust Company 700,000 4.4
----------- -----
2.25% due 1/2/96, purchased on 12/29/95,
(Proceeds at maturity-$700,175), collateralized
by $490,000 U.S. Treasury Bond 12%
due 5/15/05, market value $714,938
Total Short-Term Investment 700,000 4.4%
----------- -----
(Cost $ 700,000)
Total Investments** $15,902,562 100.0%
----------- -----
(Cost $ 15,083,245)
</TABLE>
19
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
VALUE PERCENT OF
(NOTE 1A) NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER ASSETS (LIABILITIES):
Cash $ 2,686
Foreign currency ( Cost $ 177,640) 179,311
Dividend receivable 17,764
Interest receivable 835
Foreign tax receivable 20,361
Deferred organizational expenses 32,243
Receivable for fund shares sold 5,250
Receivable from investment advisor 18,970
Net payable for forward foreign currency
exchange contracts (319)
Payable for fund shares purchased (9,980)
Payable for investments purchased (225,463)
Accrued expenses payables (31,347)
Foreign withholding tax payable (2,479)
-----------
OTHER ASSETS IN EXCESS OF LIABILITIES-NET 7,832 0.0%
----------- ------
NET ASSETS-100% $15,910,394 100.0%
=========== ======
NET ASSET VALUE PER SHARE-
CLASS A SHARES:
Applicable to net assets of $657,641 and
65,937 shares outstanding ($0.001 par
value, 10,000,000 shares authorized) $9.97
=====
CLASS B SHARES:
Applicable to net assets of $15,252,753 and
1,528,095 shares outstanding ($0.001 par
value, 10,000,000 shares authorized) $9.98
=====
<FN>
* Non-income producing security
** The cost of investments for Federal income tax purposes is $15,094,245. As
of December 31, 1995, unrealized appreciation for Federal income tax purposes
aggregated $830,319 of which $1,275,921 related to appreciated securities and
($445,602) related to depreciated securities.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
THE INTERNATIONAL EQUITY FUND
<S> <C>
INVESTMENT INCOME:
Income:
Interest $ 38,977
Dividends (Net of foreign withholding tax of $35,052) 244,012
----------
282,989
----------
Expenses:
Advisory 149,012
Custodian 179,616
Audit 25,724
Administration 24,797
Amortization of organizational costs 17,872
Distribution (Class A) 18,229
Legal 16,248
Transfer Agent 12,067
Trustees 11,274
Co-administration (Class A) 986
Co-administration (Class B) 3,998
Shareholder servicing (Class A) 1,359
Printing 2,577
Miscellaneous 353
----------
Total expenses before waivers/reimbursements 464,112
Less expense waivers/reimbursements (110,425)
----------
Net expenses 353,687
----------
Net investment loss (70,698)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS (NOTES 1B, 1D AND 3)
Net realized loss on investments (855,066)
Net realized gain on foreign currency transactions 270,478
Net change in unrealized appreciation on investments 1,487,512
Net change in unrealized loss on other assets and liabilities denominated in foreign currencies (232)
----------
Net realized and unrealized gain on investment and foreign currency transactions 902,692
----------
Net increase in net assets resulting from operations $ 831,994
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE INTERNATIONAL EQUITY FUND
PERIOD FROM
APRIL 25, 1994
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS)
DECEMBER 31, 1995 TO DECEMBER 31, 1994
----------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (70,698) $ (3,752)
Net realized loss on investments and foreign currency transactions (584,588) (256,676)
Net unrealized appreciation(depreciation) on investments and foreign
currency transactions 1,487,280 (666,611)
----------- ----------
Net increase (decrease) in net assets resulting from operations 831,994 (927,039)
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
In excess of current period net investment loss -- (27,437)
----------- ----------
Total distributions -- (27,437)
----------- ----------
CAPITAL SHARES TRANSACTIONS:
CLASS A
Proceeds from sales of 52,332 and 1,919,732 shares, respectively 478,270 19,332,284
Net asset value of shares issued to shareholders
in reinvestment of distributions of 142 shares 1,355 --
Payments for redemptions of 1,746,947 and
159,180 shares, respectively (15,499,489) (1,558,784)
CLASS B
Proceeds from sales of 2,033,244 shares 18,129,061 --
Payments for redemption of 505,149 shares (4,849,821) --
----------- ----------
Net (decrease) increase in net assets from capital share transactions (1,740,624) 17,773,500
----------- -----------
Total (decrease) increase in net assets (908,630) 16,819,024
NET ASSETS:
Beginning of period 16,819,024 --
----------- -----------
End of period $15,910,394 $16,819,024
=========== ===========
</TABLE>
See Notes to Financial Statements
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. International 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. The Fund's commencement
date of operations was April 25, 1994. The investment objective of the Fund
is to provide investors with long-term capital appreciation by investing at
least 80% of its total assets in equity securities (including American and
European Depository Receipts) issued by companies based outside of the
United States. The Fund offers two classes of shares. The Institutional
Class (Class B) is available to customers of financial institutions or
corporations on behalf of their customers or employees, or on behalf of any
trust, pension, profit sharing or other benefit plan for such customers or
employees. The Service Class (Class A) is available to all other investors.
The Institutional Class and Service Class shares are identical in all
respects except that Institutional Class shares are not subject to a sales
load and do not impose any shareholder servicing fee or Rule 12b-1 fees.
The following summarizes significant accounting policies followed by the
Fund in its financial statements.
A. Investments in securities are valued at the last quoted sale
price as of the close of business on the day the valuation is
made, or lacking any sales, at the mean between closing bid and
asked prices. Price information for listed securities is taken
from the exchange where the securities are primarily traded.
Investments in futures and related options, which are traded on
commodities exchanges, are valued at their last sale price as of
the close of such exchanges. Other securities for which no
quotations are readily available are valued at fair value as
determined in good faith by or under the direction of the Board
of Trustees. Short-term investments are valued at amortized cost,
which approximates market value. All assets and liabilities
initially expressed in foreign currencies will be translated into
U.S. dollars at the bid price of such currencies against the U.S.
dollar's last quoted price by a major bank or broker. If such
quotations are not available as of the close of the New York
Stock Exchange, the rate of exchange will be determined in
accordance with policies established in good faith by the Board
of Trustees.
B. Transactions denominated in foreign currencies are recorded at
the prevailing rate as incurred or earned. Asset and liability
accounts are adjusted to reflect the current rate at the end of
each period. Such adjustments are recorded in net unrealized
appreciation of other assets and liabilities denominated in
foreign currencies. Net realized foreign currency gains or losses
include exchange rate differences between trade date and
settlement date for security purchases and sales, and between the
date the Fund records income, expenses and other assets and
liabilities and the date such assets and liabilities are received
or paid. The portion of both realized and unrealized gains and
losses on investments that result from fluctuations in foreign
currency exchange rates is not seperately disclosed. The Fund may
enter into forward currency exchange contracts for investments
purposes and to hedge its exposure to changes in foreign currency
exchange rates on its foreign portfolio holdings and to hedge
certain firm purchase and sales commitments denominated in
foreign currencies. A forward currency exchange contract is a
commitment to purchase or sell a foreign currency at a future
date at a negotiated rate. The gain or loss arising from the
difference between the original contracts and the closing of such
contracts is included in realized gains or losses from foreign
currency transactions. Fluctuations in the value of forward
currency exchange contracts are recorded for financial reporting
purposes as unrealized gains or losses by the Fund.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund's custodian will place and maintain cash not available
for investment or government securities in a seperate account of
the Fund having a value equal to the aggregate amount of the
Fund's commitments under forward currency exchange contracts
entered into with respect to position hedges.
Risks may arise from the potential inability of a counterparty to
meet the terms of a contract and from unanticipated movements in
the value of a foreign currency relative to the U.S. dollar. The
face or contract amount, in U.S. dollars, as reflected in the
following table, reflects the total exposure the Fund has in that
particular currency contract.
At December 31, 1995, the Fund had outstanding forward currency
exchange contracts, as follows:
<TABLE>
<CAPTION>
Purchases
IN
SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS NET UNREALIZED
DATE DELIVER FOR AT VALUE DEPRECIATION
---------- ------------------------ -------- --------- --------------
<S> <C> <C> <C> <C>
1/4/96 Japanese Yen 8,507,299 $82,676 $82,395 $(281)
1/2/96 Turkish Lira 155,329,378 2,589 2,551 (38)
-------- ------- -------
$85,265 $84,946 $(319)
======= ======= ======
</TABLE>
C. 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.
D. It is the Fund's policy to comply with the requirements of the
Internal Revenue Code, as amended, applicable to regulated
investment companies and to distribute substantially all of its
taxable income, and net capital gains to its shareholders.
Therefore, no provision is required for Federal income tax. Under
the applicable foreign tax law, a withholding tax may be imposed
on interest, dividends, and capital gains at various rates. Where
available, the Fund will file for claims on foreign taxes
withheld.
For Federal income tax purposes, at December 31, 1995, the Fund
had capital loss carryforwards available to offset future realized
gains, if any, of approximately $ 26,500 and $ 553,500 expiring on
December 31, 2002 and December 31, 2003, respectively.
Additionally, foreign currency losses of approximately $ 8,000 are
attributable to foreign currency transactions that occurred after
October 31, 1995 and are recognized for Federal income tax
purposes as arising on January 1, 1996, the first day of the
Fund's next taxable year.
E. The Fund intends to distribute annually substantially all of its
net investment income and net realized capital gains, if any, in
the form of dividends.
The Fund distinguishes between distributions on a tax basis and a
financial reporting basis and requires that only distributions in
excess of tax basis earning and profits are reported in the
financial statements as a tax return of capital. Differences in
the recognition or classfication of income between the financial
statements and tax earnings and profits which result in temporary
overdistributions for financial statements purposes, are
classified as distributions in excess of net investment income or
accumulated undistributed net realized gains. For the year ended
December 31, 1995, the net
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
investment loss of $70,698 and losses totalling $30,712 from
certain currency transactions have been reclassified from
accumulated net investment loss and accumulated net realized loss,
respectively, to paid-in capital since such losses may not be
carried forward for Federal income tax purposes. Net assets were
not affected by these reclassifications.
F. Security transactions are recorded on the trade date. Dividend
income is recorded on the ex-dividend date. Interest income is
recorded as earned. Identified cost of investments sold is used
for both financial statements and Federal income tax purposes.
G. 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.
H. The Fund offers Class A and Class B shares. The two classes of
shares differ in their respective shareholder servicing agent,
distribution and service fees. All shareholders bear the common
expenses of the Fund pro rata based on the average daily net
assets of each class, without distinction between share classes.
Dividends are declared seperately for each class. No class has
preferential dividend rights; differences in per share dividend
rates are generally due to differences in seperate class expenses.
2. The Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0.001 per share. At December 31, 1995,
the composition of net assets of the Fund is as follows:
Capital paid-in $15,865,922
Accumulated net realized loss on investments
and foreign currency transactions (776,197)
Net unrealized appreciation on investments
and foreign currency transactions 820,669
-----------
Total net assets $15,910,394
===========
3. The cost of securities purchased and proceeds from securities sold,
excluding short-term securities, for the year ended December 31, 1995
were $ 14,014,121 and $ 15,337,804, respectively.
4. The Fund retains HSBC Asset Management Americas ("HSBC Americas"), to
act as Adviser and Administrator. HSBC Americas is the North American
investment affiliate of HSBC Holdings plc (Hongkong and Shanghai
Banking Corporation). As Adviser, HSBC Americas furnishes to the Fund
investment guidance and policy direction in connection with the
management of the Fund, subject to policy established by the Board of
Trustees of the Trust. For such services, HSBC Americas is paid a
monthly fee at an annual rate of 0.90% of the Fund's average daily net
assets. As administrator, HSBC Americas, provides personnel, office
space and administrative services necessary for the operation of the
Fund. As compensation for its administrative services, HSBC Americas
receives from the Fund a monthly fee equal to an annual rate of 0.15%
of the average daily net assets.
The Adviser retains HSBC Asset Management Europe Ltd ("HSBC Europe"),
HSBC Asset Management Hong Kong Ltd. ("HSBC Hong Kong"), HSBC Asset
Management (Japan) KK ("HSBC Japan") and
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
HSBC Asset Management Australia Limited ("HSBC Australia") to act as
sub-advisers (the "Sub-Advisers") to the Fund. HSBC Europe, HSBC Hong
Kong, HSBC Japan and HSBC Australia are all investment advisory
affiliates of the Adviser.
Under its Sub-Advisory Contract with HSBC Americas, each Sub-Advisor
will undertake at its own expense to furnish the Fund and HSBC Americas
with micro- and macreonomic research, advice and recommendations, and
economic and statistical data, with respect to the Fund's investments,
subject to the overall review by HSBC Americas and the Board of
Trustees. For its services, the Sub-Advisers receives a fee from HSBC
Americas at an annual rate not to exceed 0.45% of the Fund's average
daily net assets.
For the year ended December 31, 1995, as Adviser and Administrator,
HSBC Americas earned $149,012 (before fee waivers of $66,081) and
$24,797, respectively. Effective February 1, 1995, HSBC Americas earned
co-administration fees of 0.03% for both share classes and shareholder
servicing fees of 0.04% for the Service Class (Class A) of the Fund's
average net assets, respectively. For the period ending December 31,
1995 the Fund paid co-administrative / shareholder servicing fees of $
6,343. HSBC Americas waived co-administrative fees for the month of
January totaling $ 944.
The Fund has adopted a Distribution Plan and Agreement (the "Plan") for
the Service Class (Class A) shares pursuant to Rule 12b-1 of the
Investment Company Act of 1940, as amended, with Mariner Fund Services.
The Plan provides, with respect to the Service Class (Class A) shares
only, for reimbursement to the distributor of expenses incurred in
connection with distribution services provided to the Fund not to
exceed an annual rate of 0.25% of the average daily value of such
Class' net assets during the preceding month.
PFPC Inc. acts as transfer agent and dividend disbursing agent for the
Fund effective August 29, 1994. For such services, PFPC Inc. earned
$12,067 for the year ended December 31, 1995.
State Street Bank and Trust Company acts as custodian for the Fund. For
furnishing custodian services, State Street 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 year ended December 31,
1995, the Fund paid custody related expenses of approximately $179,000.
One state in which the shares of the Fund are qualified for sale
imposes limitations on the expenses of the Fund. 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 reimburse the Fund in an
amount 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 the average daily net assets, 2.0% of the next
$70 million of average daily net assets and 1.5% of average daily net
assets in excess of $100 million. For the year ended December 31, 1995,
HSBC Americas has reimbursed the Fund $ 110,425 of which none was
required, pursuant to this expense limitation.
A partner of Baker & McKenzie, legal counsel to the Trust, acts as
Secretary of the Trust. For the year ended December 31, 1995, legal
fees incurred by the Fund paid to Fund counsel were approximately
$16,000.
26
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
AND THE PERIODS INDICATED
<TABLE>
<CAPTION>
THE INTERNATIONAL EQUITY FUND
CLASS A SHARES CLASS B SHARES
------------------------------------ -----------------
PERIOD FROM PERIOD FROM
APRIL 25, 1994 MARCH 1, 1995
FOR THE (COMMENCEMENT (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO OF OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period: $ 9.55 $ 10.00 $ 8.81
------- ------- -------
Loss From Investment Operations:**
Net investment loss (0.07) -- (0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.49 (0.43) 1.20
------- ------- -------
Total from investment operations 0.42 (0.43) 1.17
------- ------- -------
Less Distributions from:
In excess of net realized loss on investments -- (0.02) --
------- ------- -------
Total distributions -- (0.02) --
------- ------- -------
Net asset value, end of period 9.97 9.55 9.98
======= ======= =======
Total return (a) 4.40% (4.30)%(b) 13.28%(b)
Ratios/Supplemental Data:
Net assets (000), end of year $658 $16,819 $15,253
Ratio of expenses (with fee waivers)
to average net assets 1.98% 2.16%* 2.62%*
Ratio of expenses (without fee waivers)
to average net assets 3.66% 2.50%* 3.12%*
Ratio of net investment loss (with
fee waivers) to average net assets (1.01)% (0.04)%* (0.34)%*
Ratio of net investment loss (without
fee waivers) to average net assets (2.69)% (0.39)%* (0.84)%*
Portfolio turnover rate 90.31% 29.37%(b) 90.31%
<FN>
- -------------------
(a) Excludes sales charge.
(b) Not annualized.
* Annualized.
** Based on average shares outstanding.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<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
International 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, the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund'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 International Equity Fund at December 31, 1995, and 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 periods, in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
Ernst & Young LLP
New York, New York
February 16, 1996
28
<PAGE>
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MARINER SM MUTUAL FUNDS TRUST
3435 Stelzer Road
Columbus,Ohio 43219
GENERAL INFORMATION:
(800) 753-4462
INVESTMENT ADVISER AND ADMINISTRATOR
HSBC Asset Management Americas Inc.
250 Park Avenue
New York, New York 10177
SPONSOR AND DISTRIBUTOR (EFFECTIVE JANUARY 1, 1996)
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
PFPC, Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
CUSTODIAN
State Street Bank and and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
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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