MARINER MUTUAL FUNDS TRUST
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SMALL CAP FUND
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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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SMALL CAP FUND
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HSBC Asset Management [LOGO]
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February 12, 1996
Dear Shareholder:
1995 was a very good year for equity investors with the S&P 500 Index returning
37.4% and the Dow Jones Index 36.7%. In contrast, small-cap stocks
underperformed in the first half of the year, surged in the summer, but after
Labor Day failed to keep pace with the large-caps. As a result, small-cap
performance was like a roller coaster ride for investors, with the Russell 2000
Index ending up only 28.4%. The NASDAQ Index, with its heavier weighting towards
the larger technology stocks such as Intel and Microsoft, was the standout
leader with a return of 39.9%. With a slowing in the growth of the economy,
declining interest rates and good prospects for a capital gains tax cut, you
would think small-caps should have outperformed.
<TABLE>
<CAPTION>
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EQUITY MARKET RETURNS
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RUSSELL NASDAQ DOW S&P
YEAR 2000 COMPOSITE JONES 500
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<S> <C> <C> <C> <C>
1991 46.04% 56.84% 24.51% 30.42%
1992 18.42 15.45 7.42 7.59
1993 18.89 14.75 17.03 10.04
1994 (1.82) (3.20) 4.89 1.21
1995 28.44 39.92 36.65 37.44
5 YEARS 21.00 23.00 17.54 16.55
ANNUALIZED
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</TABLE>
The reasons that are generally mentioned for this underperformance are several.
First, the large-caps reported better relative earnings due to the falling
dollar earlier this year. Secondly, most of the restructuring by corporate
America over the past few years has mostly occurred with large companies. As a
result, many larger companies are now reaping the benefits. Lastly, the strong
level of initial public offerings (especially in the last quarter) may have
diverted money away from existing small-cap issues since they both generally
compete for the same pool of money.
The best performing sectors of the Russell 2000 Index for the year were
technology (+47.0%), other energy (+46.5% -- includes offshore drilling and oil
well equipment and services), healthcare (+39.7%) and financial services
(+38.8%). With a weighting of 18.3% in the Russell 2000 Index, the great
performance of the financial services sector had a very large impact. Technology
and health care, with weightings of 13.1% and 10.9% respectively, also had an
impact. The worst performing sectors for the year were integrated oils (down
3.5%), real estate (+5.7%), consumer discretionary (+8.7%) and autos &
transportation (+9.1%). For most growth
<PAGE>
investors, the underperformance by the consumer discretionary sector was
disappointing, because it is a large sector (16.0% of the Russell 2000 Index)
with traditionally the fastest growing industries such as retailers, restaurants
and entertainment.
Currently, most economists are projecting moderate to slow growth for the U.S.
economy in 1996, accompanied by a flat to rising dollar. As we have mentioned in
the past, larger companies generally have greater exposure to foreign economies
and are more vulnerable to a strong dollar relative to small companies. In
addition, small growth companies are not as dependent upon a strong economy to
report great earnings as do larger companies. Generally speaking, in the past
small growth stocks have done well during periods of sluggish economic activity.
As we enter 1996, the question is whether small-caps will continue to
underperform large-caps. Even though we are concerned by the underperformance of
this sector, we continue to believe the group remains undervalued. We also
believe that small-caps should become beneficiaries of better earnings growth in
a slow growth environment. Furthermore, continued net inflows into small-cap
mutual funds should support additional gains. On balance, we continue to be
positive on the long-term outlook for small-cap stocks.
MANAGER'S DISCUSSION OF FUND PERFORMANCE:
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For the year 1995, the Mariner Small Cap Fund posted a return of 26.20% versus
28.44% for the Russell 2000 Index. For the last three years the Fund has
returned 14.78% on an annualized basis versus 14.45% for the Russell 2000.
During the year the Fund was positively impacted by the technology and financial
service sector. Conversely, the Fund was negatively impacted by the consumer
sector.
Currently, the Fund continues to reflect attractive characteristics. The Fund
has a higher projected growth in earnings and a lower debt-to-capital ratio than
the general market. However, for these attractive characteristics the Fund is
valued (in terms of price earnings ratio) at a modest premium to the market.
We continue to value your participation and interest in the Mariner Small Cap
Fund. Our objective is to strive to meet year expectations of a quality fund
that will meet your financial goals.
Sincerely,
/s/ JOE P. SING, JR.
Joe P.Sing, Jr.
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
SMALL CAP FUND VS. RUSSELL 2000
<TABLE>
<CAPTION>
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Average Annual Total Return
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1 Year Inception
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<S> <C> <C>
Offering Price(1) 19.85% 12.82%
NAV(2) 26.20% 14.78%
- -------------------------------------------------------
</TABLE>
CHART
[CHART OMITTED]
<TABLE>
<CAPTION>
Plot Points:
FUND (1) RUSSELL 2000 FUND (2)
<S> <C> <C> <C>
JAN 10,000 10,000 10,000
MAR 9,601 10,426 10,110
JUN 10,551 10,653 11,110
SEP 11,444 11,585 12,050
DEC 11,752 11,889 12,374
MAR 11,226 11,574 11,821
JUN 10,068 11,122 10,602
SEP 11,140 11,894 11,790
DEC 11,378 11,673 11,981
MAR 11,780 12,211 12,405
JUN 13,473 13,355 14,187
SEP 15,739 14,675 16,573
DEC 14,360 14,993 15,121
<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 Small Cap Fund on
January 4, 1993, to a $10,000 investment in the Russell 2000 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
Russell 2000 Index is a widely accepted unmanaged index of overall market
performance of many of the smallest publicly traded companies in the U.S. and
does not take into account charges, fees and other expenses.
PAGE 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
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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
PAGE 4
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995
SMALL CAP FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
- ---------- ----------
<S> <C> <C>
COMMON STOCKS-96.7%
BEVERAGES - 2.0%
15,900 * Canandaigua Wine Co., Inc. $ 518,738
----------
BROADCAST MEDIA - 1.5%
24,400 * International Family Entertainment Inc., Class B 399,550
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BUSINESS SERVICES - 2.3%
40,200 * Personnel Group of America, Inc. 587,925
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COMMERCIAL SERVICES - 8.5%
20,325 Paychex, Inc. 1,013,709
16,750 Sensormatic Electronics Corp. 291,031
31,800 * Verifone, Inc. 910,275
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2,215,015
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COMPUTER SOFTWARE - 4.5%
25,800 * Emulex Corporation 264,450
27,400 * Network General Corp. 914,475
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1,178,925
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COMPUTER SYSTEMS - 9.7%
19,300 * Cisco System, Inc. 1,440,263
20,900 * Optical Data Systems 527,725
25,400 * Proxima Corp. 561,975
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2,529,963
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DATA PROCESSING - 2.1%
32,100 (a)* Envoy Corp. 555,731
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DEPARTMENT STORES - 2.5%
25,000 * Proffitts, Inc. 656,250
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ELECTRONICS - 3.7%
24,045 Harman International Industries, Inc. 964,806
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FINANCE - CONSUMER LOANS - 3.0%
49,187 The Money Store, Inc. 768,547
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FINANCIAL SERVICES - 5.6%
24,000 Advanta Corp., Class A 918,000
8,050 First Data Corp. 538,344
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1,456,344
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</TABLE>
5
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
SMALL CAP FUND
<TABLE>
<CAPTION>
Number
of Shares Value
- ---------- -----------
<S> <C> <C>
COMMON STOCKS-(continued)
HEALTH CARE - DRUGS - 2.3%
13,100 * Forest Laboratories, Inc. $ 592,775
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HOSPITAL MANAGEMENT AND SUPPLIES - 2.5%
23,700 * Owen Healthcare, Inc. 654,712
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MACHINERY - 4.2%
44,200 * Electroglas, Inc. 1,082,900
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MEDICAL SERVICES - 8.0%
31,200 * Healthsource, Inc. 1,123,200
33,400 * Isolyser Company, Inc. 467,600
54,900 * Tokos Medical Corp. 500,963
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2,091,763
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OFFICE EQUIPMENT & SUPPLIES - 3.5%
32,700 * Silicon Graphics, Inc. 899,250
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RECREATION AND ENTERTAINMENT - 3.0%
25,400 * Movie Gallery, Inc. 774,700
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RESTAURANTS - 1.4%
41,000 * Davco Restaurants, Inc. 353,625
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RETAIL MERCHANDISING - 1.6%
22,000 * Friedman's Inc. 423,500
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RETAIL - SPECIALTY - 9.7 %
20,200 * Discount Auto Parts, Inc. 628,725
35,675 * Office Depot, Inc. 704,581
23,800 * Petco Animal Supplies 696,150
28,100 * Rex Stores Corporation 498,775
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2,528,231
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TELECOMMUNICATION - EQUIPMENT - 10.0%
19,000 * Cidco, Inc. 484,500
26,800 * Symmetricom, Inc. 368,500
20,000 U.S. Robotics, Inc. 1,755,000
-----------
2,608,000
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WHOLESALE TRADE - 5.1%
11,725 Cardinal Health Distribution 641,943
20,700 Fisher Scientific International, Inc. 690,862
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1,332,805
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Total Common Stocks (Cost - $17,472,928) 25,174,055
-----------
</TABLE>
6
<PAGE>
STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
SMALL CAP FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 8.6%
$1,335,000 Provident Institutional Fund Trust for
Federal Securities, 5.46%, On Demand. $ 1,335,000
896,000 Provident Institutional Temporary Investment Fund 5.59%,
On Demand 896,000
-----------
Total Short-Term Investments (Cost - $2,231,000) 2,231,000
-----------
TOTAL INVESTMENTS - 105.3%
(Cost - $19,703,928)** 27,405,055
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OTHER ASSETS (LIABILITIES) - (5.3%)
Cash 183,385
Organizational costs, net 17,872
Dividends and interest receivable 10,378
Prepaid expenses 2,380
Dividends payable (1,004,447)
Payable for securities purchased (528,408)
Payable for fund shares redeemed (4,470)
Accrued expenses (21,284)
Due to affiliates (24,769)
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Liabilities in excess of other assets - net (1,369,363)
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NET ASSETS - 100.0% $26,035,692
===========
NET ASSET VALUE PER SHARE - applicable to 1,800,980
shares ($0.001 par value) outstanding $14.46
======
</TABLE>
* Non-income producing security.
** Also, cost for Federal income tax purposes. As of December 31, 1995,
unrealized appreciation for Federal income tax purposes aggregated
$7,701,127 of which $8,918,979 related to appreciated securities and
$1,217,852 related to depreciated securities.
(a) In connection with a spinoff, the Fund is entitled to contingent value
rights by holding this security. Such value rights will allow the
purchase of shares of First Data Corp. if certain parameters are met. At
December 31, 1995, these rights had no market value.
See Notes to Financial Statements.
7
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
SMALL CAP FUND
INVESTMENT INCOME:
Income:
Dividends $ 123,461
----------
Expenses:
Advisory fees 179,340
Administrative services fee 25,620
Distribution expenses 23,699
Audit fee 22,810
Legal fees 18,604
Co-administrative and shareholder servicing fees 17,935
Transfer agent fees 14,619
Amortization of organizational costs 11,305
Trustees' fees and expenses 9,403
Printing 8,599
Custodian fee 3,619
Miscellaneous expenses 11,161
----------
Total expenses 346,714
Less expense waivers (6,342)
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Net expenses 340,372
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Net investment loss (216,911)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 2,920,761
Net change in unrealized appreciation on investments 2,875,059
----------
Net gain on investments 5,795,820
----------
Net increase in net assets resulting from operations $5,578,909
==========
See Notes to Financial Statements.
8
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
SMALL CAP FUND
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (216,911) $ (147,610)
Net realized gain (loss) on investments 2,920,761 (2,230,327)
Net change in unrealized appreciation on investments 2,875,059 1,830,241
----------- -----------
Net increase (decrease) in net assets resulting from operations 5,578,909 (547,696)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (1,004,447) --
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of 208,197 and 823,619 shares, respectively 3,111,609 9,625,604
Net asset value of 225 shares issued in reinvestment of distributions -- 2,763
Payments for redemptions of 450,720 and 217,556 shares, respectively (5,957,958) (2,431,794)
----------- -----------
Net increase (decrease) in net assets from capital share transactions (2,846,349) 7,196,573
----------- -----------
Net increase in net assets 1,728,113 6,648,877
----------- -----------
NET ASSETS:
Beginning of year 24,307,579 17,658,702
----------- -----------
End of year $26,035,692 $24,307,579
=========== ===========
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Mariner Small Cap 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: Investments in securities traded on an exchange
are valued at the last quoted sales price for 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, are distributed at least annually. On December 27, 1995,
the Fund declared a capital gain dividend of $0.56 per share payable on
January 4, 1996 to shareholders on record as of December 28, 1995.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Security transactions
are recorded on trade date. Identified cost of investments sold is used
for both financial statements 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.
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. At December 31,
1995, the composition of net assets of the Fund was as follows:
Paid-in capital $18,648,578
Accumulated net realized loss on investments (314,013)
Net unrealized appreciation on investments 7,701,127
-----------
Total net assets $26,035,692
===========
For the years ended December 31, 1995 and 1994, the Fund reclassified
$216,911 and $147,610 from accumulated net investment loss to paid-in
capital, respectively. Net assets were not affected by this change.
10
<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 $7,230,000 and $7,869,000, 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 0.700%
In excess of $400 million but not exceeding $800 million 0.645%
In excess of $800 million but not exceeding $1.2 billion 0.590%
In excess of $1.2 billion but not exceeding $1.6 billion 0.535%
In excess of $1.6 billion but not exceeding $2 billion 0.480%
In excess of $2 billion 0.415%
</TABLE>
HSBC Americas retains Investment Concepts, Inc. ("ICI") to serve as
sub-adviser to the Fund. As sub-adviser, ICI provides micro-and
macroeconomic 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. ICI is a
subsidiary of BancOklahoma Trust Company ("BOTC"). BOTC is a subsidiary
of Bank of Oklahoma, N.A. ("BOK") which, in turn, is a subsidiary of
BOK Corporation.
As compensation for its services, HSBC Americas pays ICI a monthly fee
at an annual rate not to exceed 0.50% of average net assets up to $400
million. The fee is reduced at several breakpoints for average net
assets in excess of $400 million up to $2 billion, at which point it
becomes 0.290% of the average net assets in excess of $2 billion.
For the year ended December 31, 1995, HSBC Americas earned
approximately $179,300 in advisory fees, of which approximately
$128,100 was paid to ICI.
As administrator, 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
$23,700, net of waivers of approximately $1,900, in administrative
services fees. Effective March 1996, PFPC will be terminated as
administrator and transfer agent for the Fund.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. AGREEMENTS (CONTINUED)
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's shares held in the
subaccounts of the Service Organizations.
Effective September 25, 1995, Bank of New York replaced Marine Midland
Bank, N.A. ("Marine Midland"), an affiliate of the Advisor, 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 $3,000.
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 $17,900. Of that total, HSBC Americas waived
approximately $1,400 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% 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.
12
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
SMALL CAP FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 4, 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 $ 11.90 $ 12.29 $ 10.00
------- ------- -------
Income from Investment Operations:
Net investment loss (0.12) (0.07) (0.05)
Net realized and unrealized gain (loss)
on investments 3.24 (0.32) 2.42
------- ------- -------
Total from investment operations 3.12 (0.39) 2.37
------- ------- -------
Less Distributions from:
Net realized gain (0.56) -- (0.08)
------- ------- -------
Net asset value, end of period $ 14.46 $ 11.90 $ 12.29
======= ======= =======
Total Return (a) 26.20% (3.17%) 23.74%(c)
Ratios/Supplemental Data
Net assets (000), end of period $26,036 $24,308 $17,659
Ratio of expenses (without fee waivers)
to average net assets 1.35% 1.38% 1.58%(b)
Ratio of expenses (with fee waivers ) to average
net assets 1.33% 1.23% 1.12%(b)
Ratios of net investment loss (without fee waivers)
to average net assets (0.87%) (0.73%) (0.97%)(b)
Ratio of net investment loss (with fee waivers)
to average net assets (0.85%) (0.68%) (0.51%)(b)
Portfolio turnover rate 29.86% 20.17% 5.96%(c)
<FN>
- -------------------
(a) Exclusive of sales charge.
(b) Annualized.
(c) Not annualized.
</FN>
</TABLE>
See Notes to Financial Statements.
13
<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
Small Cap 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 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 Small Cap 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 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.
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