MARINER MUTUAL FUNDS TRUST
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SHORT-TERM FIXED INCOME 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
<PAGE>
MARINER MUTUAL FUNDS TRUST
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SHORT-TERM FIXED INCOME FUND
HSBC Asset Management (LOGO)
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February 12, 1996
Dear Shareholder:
This was a record year in the fixed income markets. The total return of the
market, as measured by the Lehman Aggregate Index was 18.47%, the highest in
over a decade and third highest in history. The forces driving the market were
low inflation, slowing economic activity and the prospect of a balanced budget.
This combination has been potent and we have finished the year with a strong
rally.
MANAGER'S DISCUSSION OF PERFORMANCE
- -----------------------------------
The Fund returned 10.99% versus 12.88% for the Lehman Mutual Fund 1-5 year
Government/Corporate Index.Our returns were below the index because of a higher
average quality, incorrect duration positioning in the first quarter, and
underweighting in Corporates which were the best performing sector in 1995. The
combination of these factors caused the funds to lag the index in what was a
terrific rally.
Sincerely,
/s/ JAMES LARK
James Lark
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
SHORT-TERM FIXED INCOME FUND VS. LEHMAN MUTUAL FUND 1-5 YEAR
GOVERNMENT/CORPORATE INDEX
<TABLE>
<CAPTION>
- -------------------------------------------------
Average Annual Total Return
- -------------------------------------------------
1 Year Inception
- -------------------------------------------------
<S> <C> <C>
Offering Price(1) 8.82% 4.50%
NAV(2) 10.99% 5.23%
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CHART
{GRAPHIC OMITTED]
Plot Points:
FUND (1) LEHMAN MF FUND (2)
<S> <C> <C> <C>
MARCH 1993 $10,000 $10,000 $10,000
JUNE 1993 9,930 10,157 10,125
SEPTEMBER 1993 10,048 10,334 10,250
DECEMBER 1993 10,121 10,382 10,324
MARCH 1994 10,104 10,262 10,306
JUNE 1994 10,108 10,231 10,310
SEPTEMBER 1994 10,194 10,324 10,398
DECEMBER 1994 10,207 10,308 10,411
MARCH 1995 10,529 10,707 10,739
JUNE 1995 10,928 11,136 11,146
SEPTEMBER 1995 11,059 11,306 11,280
DECEMBER 1995 11,330 11,405 11,556
<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 Short-Term Fixed
Income Fund on March 1, 1993, to a $10,000 investment in the Lehman Mutual Fund
1-5 Year Government/Corporate Index on that date. All dividends and capital
gains distributions are reinvested.
The Fund's performance takes into account all applicable fees and expenses. The
Lehman Mutual Fund 1-5 Year Government/Corporate Index is a widely accepted
unmanaged index of overall treasury, government agency and corporate 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
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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
3
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHORT-TERM FIXED INCOME FUND
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT VALUE
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS-82.3%
U.S. GOVERNMENT AGENCY OBLIGATIONS-12.3%
Federal Home Loan Bank 7.944% 02/21/00 $ 500,000 $ 523,543
Federal National Mortgage Association 5.550 02/12/99 500,000 497,013
State of Israel Agency for International Development 4.375 03/15/96 325,000 324,343
-----------
Total U.S. Government Agency Obligations (Cost-$1,343,811) 1,344,899
-----------
U.S. GOVERNMENT OBLIGATIONS-59.0%
U.S. Treasury Notes: 8.875 02/15/96 400,000 401,750
6.500 08/15/97 2,000,000 2,040,000
7.750 01/31/00 1,500,000 1,629,843
7.125 02/29/00 1,500,000 1,597,500
5.750 10/31/00 750,000 761,484
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Total U.S. Government Obligations (Cost-$6,232,227) 6,430,577
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES-11.0%
Federal National Mortgage Association 6.000 09/01/00 935,430 933,969
-----------
Federal National Mortgage Association Real Estate
Mortgage Investment Conduits:
1991-G24K 8.500 04/25/96 24,897 24,890
G34D 7.250 10/25/96 109,561 109,848
1992-2OC 7.500 01/25/97 132,199 132,971
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267,709
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Total U.S. Government Agency Mortgage-Backed Securities (Cost-$1,202,957) 1,201,678
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Total U.S. Government and Agency Obligations (Cost-$8,778,995) 8,977,154
-----------
ASSET BACKED SECURITIES-0.2%
General Motors Acceptance Corp.
1992-F Grantor Trust (Cost-$27,226) 4.500 09/15/97 27,199 27,090
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CORPORATE BONDS-9.5%
BANKS-2.6%
International Bank R&D 8.300 11/01/96 275,000 281,492
-----------
</TABLE>
5
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
<TABLE>
<CAPTION>
SHORT-TERM FIXED INCOME FUND
INTEREST MATURITY PRINCIPAL
RATE DATE AMOUNT VALUE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS-(CONTINUED)
FINANCIAL SERVICES-2.2%
Associates Corp. of North America 6.875% 01/15/97 $ 240,000 $ 243,417
-----------
TOBACCO-4.7%
Phillip Morris Cos., Inc. 8.875 07/01/96 500,000 507,641
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Total Corporate Bonds (Cost-$1,106,752) 1,032,550
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MEDIUM-TERM NOTE-3.7%
General Motors Acceptance Corp. (Cost-$424,160) 7.400 01/14/97 400,000 407,304
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SHORT-TERM INVESTMENT-2.8%
Provident Institutional Temporary
Investment Fund (Cost-$301,000) 5.590 On Demand 301,000 301,000
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TOTAL INVESTMENTS-98.5%
(Cost-$10,638,133)* 10,745,098
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OTHER ASSETS (LIABILITIES)-1.5%
Cash 24
Interest and dividends receivable 235,516
Prepaid expenses 1,386
Organizational costs, net 22,037
Accrued expenses (11,465)
Dividends payable (42,041)
Payable for fund shares redeemed (34,735)
Due to affiliates (8,011)
-----------
Other assets in excess of liabilities-net 162,711
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NET ASSETS-100% $10,907,809
===========
NET ASSET VALUE PER SHARE-applicable to 1,094,435 shares
($0.001 par value) outstanding $9.97
=====
<FN>
* As of December 31, 1995, net unrealized appreciation for Federal income tax
purposes aggregated $106,251, of which $211,326 related to appreciated and
$105,075 related to depreciated securities. The aggregate cost of investments
for Federal income tax purposes was $10,638,847.
</FN>
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
SHORT-TERM FIXED INCOME FUND
INVESTMENT INCOME:
Income:
Interest $ 836,356
----------
Expenses:
Advisory fees 69,957
Audit fee 25,653
Legal fees 18,471
Distribution expenses 16,537
Administrative services fee 12,719
Amortization of organizational costs 12,552
Trustees' fees and expenses 9,164
Co-administrative and shareholder servicing fees 8,904
Custodian fee 4,513
Miscellaneous expenses 4,828
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Total expenses 183,298
Less expense waivers (50,694)
----------
Net expenses 132,604
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Net investment income 703,752
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 10,304
Net change in unrealized appreciation on investments 619,944
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Net gain on investments 630,248
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Net increase in net assets resulting from operations $1,334,000
==========
See Notes to Financial Statements.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM FIXED INCOME FUND
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 703,752 $ 926,567
Net realized gain(loss) on investments 10,304 (383,911)
Net change in unrealized appreciation(depreciation) on investments 619,944 (389,230)
----------- -----------
Net increase in net assets resulting from operations 1,334,000 153,426
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (703,752) (926,567)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 300,917 and 407,880 shares, respectively 2,948,477 3,977,439
Net asset value of 2,522 and 6,674 shares issued in reinvestment
of distributions, respectively 24,680 64,701
Payments for redemptions of 751,431 and 638,947 shares, respectively (7,337,356) (6,138,444)
----------- -----------
Net decrease in net assets from capital share transactions (4,364,199) (2,096,304)
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Net decrease in net assets (3,733,951) (2,869,445)
NET ASSETS:
Beginning of year 14,641,760 17,511,205
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End of year $10,907,809 $14,641,760
=========== ===========
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Mariner Short-Term 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 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 capital gains to its shareholders for each taxable
year. Therefore, no provision is required for Federal income tax.
The Fund has available a $392,439 capital loss carryforward which, if
not utilized, $29,220, $278,476 and $84,743 will expire in year 2000,
2001 and 2002, respectively.
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 to 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 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 of $0.001 per share. At
December 31, 1995, the composition of net assets of the Fund was as
follows:
Paid-in capital $11,213,541
Accumulated net realized loss on investments (412,697)
Net unrealized appreciation on investments 106,965
-----------
Total net assets $10,907,809
===========
9
<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 year
ended December 31, 1995 were approximately $10,880,000 and $5,328,000,
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 $25,500 in advisory fees, net of fee waivers of
approximately $44,500.
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
$11,600, net of fee waivers of approximately $1,000, in administrative
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 the Fund's shares held in the
subaccounts of the Service Organizations.
10
<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.
From the period January 1, 1995 through September 25, 1995, HSBC
Americas paid the Fund's entire custodian fees totaling approximately
$4,300.
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 $8,900. Of that total, HSBC Americas waived
approximately $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.
11
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
SHORT-TERM FIXED INCOME FUND
FOR THE PERIOD
MARCH 1, 1993
FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.49 $ 9.91 $10.00
------ ------ ------
Income From Investment Operations:
Net investment income 0.54 0.50 0.41
Net realized and unrealized gain(loss) on investments 0.48 (0.42) (0.09)
------ ------ ------
Total from investment operations 1.02 0.08 0.32
------ ------ ------
Less Distributions from:
Net investment income (0.54) (0.50) (0.41)
------ ------ ------
Net asset value, end of period $ 9.97 $ 9.49 $ 9.91
====== ====== ======
Total Return (a) 10.99% 0.86% 3.24%(b)
Ratios/Supplemental Data
Net assets (000), end of period $10,908 $14,642 $17,511
Ratio of expenses (without fee waivers)
to average net assets 1.44% 1.21% 1.29%(c)
Ratio of expenses (with fee waivers)
to average net assets 1.04% 0.78% 0.60%(c)
Ratio of net investment income (without fee
waivers) to average net assets 5.13% 4.75% 4.22%(c)
Ratio of net investment income (with fee
waivers) to average net assets 5.53% 5.18% 4.91%(c)
Portfolio turnover rate 53.28% 68.13% 32.02%(b)
<FN>
- -------------------
(a) Excludes sales charge.
(b) Not annualized.
(c) Annualized.
</FN>
</TABLE>
See Notes to Financial Statements.
12
<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
Short-Term Fixed Income 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
financial highlights for each of the periods 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. 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 Short-Term Fixed Income Fund at
December 31, 1995, the results of its operations for the year then
ended, the changes in 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
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.
