HSBC MUTUAL FUNDS TRUST
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- --------------------------------------------------------------------------------
HSBC Asset Management Americas Inc. [GRAPHIC OMITTED]
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International Equity Fund
SEMI-ANNUAL REPORT (UNAUDITED)
June 30, 1997
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
BISYS FUND SERVICES
<PAGE>
HSBC MUTUAL FUNDS TRUST
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INTERNATIONAL EQUITY FUND
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HSBC Asset Management Americas Inc. [GRAPHIC OMITTED]
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INTERNATIONAL EQUITY FUND
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July 11, 1997
Dear Shareholder:
The HSBC International Equity Fund Service Class Shares gained 9.25% (without
load and 3.76% with load) and the Institutional Shares gained 9.33% for the six
months ended June 30, 1997. This compares to the return on the Morgan Stanley
Capital International (MSCI) EAFE Index of 11.36%.
The Fund benefitted from its country allocation during the first six months of
1997. Favoring Continental Europe over Asia was a positive for the Fund as the
MSCI Europe Index rose 14.45%. In comparison the MSCI All Country Far East Free
(ex-Japan) Index was up 2.10%. Further, favoring the Continental European
Markets at the expense of the UK proved positive as the UK lagged many of its
European Counterparts.
The major factor detracting from performance was stock selection in Europe. The
portfolio lagged the comparable market indices in Germany, France, the
Netherlands and Spain. These markets account for 59% of the capitalization of
the MSCI Europe (ex. UK) Index.
MARKET REVIEW AND OUTLOOK
- -------------------------
EUROPE:
- -------
The MSCI Europe Index rose 14.45% for the first six months of 1997. The table
below summarizes the MSCI Country returns.
COUNTRY RETURN (IN U.S. DOLLAR)
Belgium 11.87%
Denmark 13.82
Finland 17.74
France 9.39
Germany 16.97
Ireland 4.64
Italy 11.63
Netherlands 20.38
Norway 5.83
Spain 21.12
Sweden 14.90
Switzerland 31.62
United Kingdom 9.23
<PAGE>
There was a real dichotomy between the performance in the UK and on the
continent. The UK had to digest a change to a labor government, fiscal
tightening as a result of new budgets, a strong consumer and strength in
manufacturing. On the continent, monetary ease was priced into the equity
markets to help fuel economic growth. However, the need for monetary ease
continued to conflict with the fiscal requirements of EMU.
Strong growth is likely to continue in the UK. Real incomes are rising and
consumers are benefitting from windfalls approaching 30 billion sterling
equivalent to 5% of disposable income. The inflationary pressure remains benign
with retail prices growing at a moderate 2.5%. With this positive outlook for
the UK, we will maintain our exposure relative to the continent.
We expect further volatility on the continent for the rest of 1997. We have
already seen two surprises which have implications for EMU. First, in Germany,
the pro-EMU government under Kohl stated it intended to revalue the Bundesbank's
gold reserves in an attempt to bring Germany's budget deficit close to the 3% of
GDP Maastricht limit. The second was the election of a socialist government in
France. These types of surprises are likely to lead to increased volatility on
the continent. After two years of strong performance, we are happy to reduce our
exposure.
ASIA:
- -----
Asia can best be described as desynchronized. In the larger, more liquid markets
(Japan, Hong Kong, Australia) there are signs of strong positive earnings
momentum as these economies remain largely unaffected by a slowdown in demand
from abroad. The rest of the region continues to suffer from an export slowdown
with a corresponding cycle of earnings downgrades.
Japan remains the most interesting story in the region. Economic recovery
appears to be well in place and we believe it is sustaining against a backdrop
of a large output gap. Monetary policy is expected to remain accommodative. The
valuation of the market appears attractive on both absolute and relative terms.
Consequently, we have increased our exposure to Japan by reducing Continental
Europe.
In summary, our goal continues to be to ensure the HSBC International Equity
Fund is characterized by strong investment performance and solid client service.
Thank you for choosing the HSBC International Equity Fund to be a part of your
total investment program.
Sincerely,
[/S/ JAMESB. McHUGH]
James B. McHugh
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL EQUITY FUND VS. MSCI-EAFE
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Total Return - Service Class Shares Institutional Class Shares
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Inception Inception
1 Year (4/25/94) 1 Year (3/1/95)
- -----------------------------------------------------------------------
Offering Price(1) 5.75% 3.08% 11.54% 12.49%
NAV(2) 11.35% 4.77% 11.54% 12.49%
- -----------------------------------------------------------------------
CHART [GRAPHIC OMITTED]
Following are plot points for Chart:
FUND(1) MSCI-EAFE FUND(2)
4/94 9,476 10,000 10,000
6/94 9,544 10,088 10,050
12/94 9,069 9,991 9,550
6/95 8,946 10,250 9,420
12/95 9,478 11,111 9,970
6/96 9,893 11,605 10,417
12/96 10,083 11,775 10,617
6/97 11,015 13,104 11,599
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE, WITHOUT CERTAIN FEE
WAIVERS RETURN WOULD HAVE BEEN LOWER. THE FUND'S INVESTMENT RETURN AND PRINCIPAL
VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THE ORIGINAL COST.
(1) INCLUDES THE MAXIMUM SALES CHARGE OF 5.00%
(2) EXCLUDES THE MAXIMUM SALES CHARGE OF 5.00%
THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE SERVICE CLASS SHARES
OF THE INTERNATIONAL EQUITY FUND ON APRIL 25, 1994 (DATE OF INCEPTION), TO A
$10,000 INVESTMENT IN THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA
AND FAR EAST INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
ARE REINVESTED. PLEASE REFER TO THE BOX ABOVE FOR RETURNS ON INSTITUTIONAL CLASS
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 AND 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.
INTERNATIONAL INVESTING INVOLVES INCREASED RISKS AND VOLATILITY.
3
<PAGE>
BOARD OF TRUSTEES
JOHN P. PFANN* Chairman and President, JPP Equities, Inc.
WOLFE J. FRANKL* Former Director-North America, Berlin Economic
Development Corporation
HARALD PAUMGARTEN President, Paumgarten and Company
ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher Foundation
*Member of the Audit and Nominating Committees
- --------------------------------------------------------------------------------
OFFICERS
MICHAEL J. KANE PRESIDENT
ERIC F. ALMQUIST VICE PRESIDENT
KAREN DOYLE VICE PRESIDENT
KEVIN MARTIN TREASURER
STEVEN R. HOWARD SECRETARY
CURTIS BARNES ASSISTANT SECRETARY
ALAINA V. METZ ASSISTANT SECRETARY
ROBERT L. TUCH ASSISTANT SECRETARY
4
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS
AUSTRALIA
- ---------
BANKING 24,273 Australia & New Zealand Bank Group......... $ 181,609 0.5%
----------- -----
BROADCASTING 46,670 News Corp., Ltd............................ 223,970 0.6
----------- -----
CONGLOMERATES 21,275 CSR Ltd.................................... 82,483 0.2
----------- -----
FOOD & BEVERAGES 27,148 SouthCorp Holdings Ltd..................... 101,765 0.3
----------- -----
METALS (NON-FERROUS) 12,251 WMC Holdings Ltd........................... 77,310 0.2
----------- -----
PETROLEUM SERVICES 21,852 Broken Hill Proprietary Co., Ltd........... 321,755 0.8
----------- -----
TRUCKING & FREIGHT
FORWARDING 13,400 Mayne Nickless Ltd......................... 78,181 0.2
----------- -----
TOTAL AUSTRALIA............................ 1,067,073 2.8
----------- -----
(COST - $999,853)
AUSTRIA
- -------
ENERGY 1,000 OMV AG..................................... 128,096 0.3
----------- -----
TOTAL AUSTRIA.............................. 128,096 0.3
----------- -----
(COST - $106,790)
BELGIUM
- -------
BANKING 1,100 Credit Communal de Belgique SA............. 118,163 0.3
----------- -----
TOTAL BELGIUM.............................. 118,163 0.3
----------- -----
(COST - $102,564)
FINLAND
- -------
CONGLOMERATES 2,350 Nokia AB, Class A.......................... 175,546 0.5
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TOTAL FINLAND.............................. 175,546 0.5
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(COST - $138,243)
FRANCE
- ------
AUTO PARTS 2,400 Valeo...................................... 149,063 0.4
----------- -----
BANKING 4,600 Credit Commercial de France................ 194,905 0.5
----------- -----
BROADCASTING 700 Canal Plus................................. 136,267 0.4
----------- -----
BUSINESS SERVICES 1,400 Compagnie Generale des Eaux................ 179,386 0.5
----------- -----
CONGLOMERATES 2,120 Lafarge SA................................. 131,853 0.4
----------- -----
CONSTRUCTION MATERIALS 780 Lafarge Coppee SA.......................... 48,512 0.1
----------- -----
</TABLE>
5
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (continued)
FRANCE(continued)
- ------
<S> <C> <C> <C> <C>
DRUGS & HEALTHCARE 1,900 Societe Elf Sanofi SA....................... $ 186,227 0.5%
----------- -----
ELECTRONICS 2,000 SGS Thomson Microelectronics(b)............. 157,912 0.4
----------- -----
FINANCIAL SERVICES 954 Compagnie Bancaire.......................... 121,752 0.3
----------- -----
INSURANCE 2,750 Axa SA...................................... 171,036 0.5
----------- -----
PETROLEUM SERVICES 2,300 Total Francaise Petroleum................... 232,477 0.6
----------- -----
RETAIL-SPECIALTY 370 Carrefour................................... 268,715 0.7
----------- -----
TIRES & RUBBER 3,500 Michelin.................................... 210,177 0.5
----------- -----
TOTAL FRANCE................................. 2,188,282 5.9
----------- -----
(COST - $1,984,773)
GERMANY
- -------
APPAREL & TEXTILES 1,100 Adidas AG................................... 121,725 0.3
----------- -----
AUTOMOBILES 330 Bayerische Motoren Werke AG................. 273,029
350 Volkswagen AG............................... 268,305
----------- -----
541,334 1.4
----------- -----
BANKING 12,300 Commerzbank AG.............................. 348,386 0.9
----------- -----
CHEMICALS 4,750 BASF AG..................................... 175,527
4,400 Bayer AG.................................... 169,077
1,300 SGL Carbon AG............................... 177,994
----------- -----
522,598 1.4
----------- -----
INDUSTRIAL MACHINERY 600 Mannesmann AG............................... 267,301 0.7
----------- -----
INSURANCE 1,600 Allianz AG.................................. 334,843 0.9
----------- -----
UTILITIES-GAS &
ELECTRIC 4,550 Veba AG..................................... 255,662 0.7
----------- -----
TOTAL GERMANY............................... 2,391,849 6.3
----------- -----
(COST - $2,077,900)
HONG KONG
- ---------
BANKING 42,204 Bank of East Asia 175,957
33,000 China Resources EN 161,863
33,000 Dao Heng Bank Group Ltd. 180,605
----------- -----
518,425 1.4
----------- -----
</TABLE>
6
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
HSBC INTERNATIONAL EQUITY FUND
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
HONG KONG(continued)
- --------
CONGLOMERATES 40,000 Hutchison Whampoa............................ $ 345,927 0.9%
----------- -----
REAL ESTATE 29,000 Cheung Kong Holdings......................... 286,358
18,000 Sun Hung Kai Properties Ltd.................. 216,656
----------- -----
503,014 1.3
----------- -----
TELEPHONE 58,200 Hong Kong Telecommunications................. 138,977 0.4
----------- -----
TOTAL HONG KONG.............................. 1,506,343 4.0
----------- -----
(COST - $1,265,094)
IRELAND
- -------
BANKING 3,741 Bank of Ireland.............................. 41,063 0.1
----------- -----
PAPER 45,000 Jefferson Smurfit Group PLC.................. 130,810 0.3
----------- -----
TOTAL IRELAND................................ 171,873 0.4
----------- -----
(COST - $161,849)
ITALY
- -----
INSURANCE 15,700 Assicurazioni Generali SPA................... 285,443 0.7
----------- -----
TELEPHONE 48,700 Telecom Italia Mobile SPA.................... 157,599
55,000 Telecom Italia SPA........................... 177,339
----------- -----
334,938 0.9
----------- -----
TOTAL ITALY.................................. 620,381 1.6
----------- -----
(COST - $514,713)
JAPAN
- -----
BANKING 22,000 Bank of Tokyo - Mitsubishi................... 441,459
16,000 Dai-ichi Kangyo Bank......................... 217,763
65,000 Long-Term Credit Bank of Japan............... 280,710
22,000 Nomura Securities Investment Co.............. 303,263
16,000 Sanwa Bank................................... 237,306
15,000 Sumitomo Bank................................ 246,030
25,000 Sumitomo Trust & Banking..................... 268,278
----------- -----
1,994,809 5.2
----------- -----
BREWERIES 3,000 Kirin Brewery Co............................. 31,146
36,000 Sapporo Breweries............................ 299,005
----------- -----
330,151 0.9
----------- -----
</TABLE>
7
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
JAPAN(continued)
- -----
BUSINESS SERVICES 5,000 Secom........................................ $ 366,864 1.0%
----------- -----
CHEMICALS 52,000 Asahi Chemical Industries Co., Ltd........... 310,766 0.8
----------- -----
COMPUTERS 19,000 Ricoh Co., Ltd............................... 248,648 0.7
----------- -----
CONGLOMERATES 24,000 Mitsubishi Estate Co......................... 347,583 0.9
----------- -----
DRUGS & HEALTHCARE 23,000 KAO Corp..................................... 319,054 0.8
----------- -----
ELECTRICAL EQUIPMENT 36,000 Hitachi...................................... 402,024
12,000 Omron Corp................................... 254,406
----------- -----
656,430 1.7
----------- -----
ELECTRONICS 8,000 Murata Mfg. Co............................... 318,269
3,000 Rohm Co...................................... 308,847
----------- -----
627,116 1.6
----------- -----
HOMEBUILDERS 37,000 Obayashi Corp................................ 247,592 0.6
----------- -----
HOUSEHOLD APPLIANCES
& FURNISHINGS 3,600 Sony Corp.................................... 313,767 0.8
----------- -----
INDUSTRIAL MACHINERY 8,000 Fuji Machine Manufacturing................... 289,653
33,000 Juken Sangyo Co.............................. 233,205
44,000 Mitsubishi Heavy Industries Ltd.............. 337,428
----------- -----
860,286 2.3
----------- -----
INSURANCE 22,000 Tokio Marine & Fire Insurance Co., ADR....... 287,908 0.8
----------- -----
INTERNATIONAL OIL 60,000 Cosmo Oil Co., Ltd........................... 286,861 0.8
----------- -----
PAPER 55,000 Nippon Paper Industries...................... 318,138 0.8
----------- -----
PHARMACEUTICALS 14,000 Sankyo Co., Ltd.............................. 470,250 1.2
----------- -----
PHOTOGRAPHY 9,000 Fuji Photo Film Co........................... 361,979
6,200 Noritsu Koki Co., Ltd. 305,619
----------- -----
667,598 1.8
----------- -----
</TABLE>
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
JAPAN(continued)
- -----
RETAIL TRADE 6,400 Familymart Co. ............................... $ 313,802
3,000 Ito Yokado Co. ............................... 174,053
39,000 Mitsui and Co. ............................... 374,280
----------- -----
862,135 2.3%
----------- -----
STEEL 115,000 Nippon Steel Corp. ........................... 367,213 1.0
----------- -----
TRANSPORTATION 110,000 Mitsui O.S.K. Lines Ltd. ..................... 226,488 0.6
----------- -----
TELECOMMUNICATION
SERVICES 47 Nippon Telegraph & Telephone Corp. ........... 451,056 1.2
----------- -----
TOTAL JAPAN .................................. 10,560,713 27.8
----------- -----
(COST - $9,443,652)
MALAYSIA
- --------
BANKING 22,000 Malayan Bank Berhad .......................... 230,983
38,000 DCB Holdings Berhad-WTS ...................... 120,444
----------- -----
351,427 0.9
----------- -----
CAPITAL GOODS 15,000 Unlimited Engineers Berhad ................... 108,162 0.3
. ----------- -----
CONSUMER SERVICES 38,000 Magnum Corp. Berhad .......................... 57,211 0.2
----------- -----
TOTAL MALAYSIA ............................... 516,800 1.4
----------- -----
(COST - $545,251)
NETHERLANDS
- -----------
CONSUMER NON-DURABLES 2,150 Koninklijke Ahold NV ......................... 181,385
2,400 Gucci Group NV ............................... 156,503
----------- -----
337,888 0.9
----------- -----
FINANCIAL SERVICES 8,000 Internationale Nederlanden Group NV .......... 368,842 1.0
----------- -----
PETROLEUM SERVICES 9,200 Royal Dutch Petroleum Co. NV ................. 478,537 1.3
----------- -----
TELECOMMUNICATION
SERVICES 17,000 Elsevier NV .................................. 284,069 0.7
----------- -----
TOTAL NETHERLANDS ............................ 1,469,336 3.9
----------- -----
(COST - $1,228,339)
</TABLE>
9
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
SINGAPORE
- ---------
APPAREL & TEXTILES 41,000 Wing Tai Holdings ........................... $ 118,151 0.3%
----------- -----
BANKING 24,000 Overseas Chinese Bank ....................... 248,444 0.7
----------- -----
TOTAL SINGAPORE ............................. 366,595 1.0
----------- -----
(COST - $372,949)
SPAIN
- -----
BANKING 1,100 Banco Popular Espanol ....................... 269,494 0.7
----------- -----
CONSUMER NON-DURABLES 7,995 Centros Com Pryca ........................... 173,085 0.5
----------- -----
PETROLEUM SERVICES 3,000 Repsol SA ................................... 126,841 0.3
----------- -----
TELECOMMUNICATION
SERVICES 5,900 Telefonica de Espana ........................ 170,573 0.4
----------- -----
TOTAL SPAIN ................................. 739,993 1.9
----------- -----
(COST - $635,440)
SWEDEN
- ------
CONSUMER BASICS 12,000 Astra AB .................................... 223,386 0.6
----------- -----
FOREST PRODUCTS 10,000 Stora Kopparbergsl AB ....................... 162,885 0.4
----------- -----
RETAIL TRADE 6,000 Hennes and Mauritz .......................... 210,975 0.6
----------- -----
TELECOMMUNICATION
SERVICES 6,800 Telelfonaktiebolaget LM Ericsson ............ 267,675 0.7
----------- -----
TOTAL SWEDEN ................................ 864,921 2.3
----------- -----
(COST - $672,348)
SWITZERLAND
- -----------
BANKING 2,000 CS Holdings ................................. 256,849 0.7
----------- -----
DRUGS & HEALTHCARE 130 Ares-Serono Group SA ........................ 188,322
340 Novartis AG ................................. 543,534
40 Roche Holdings AG Genusscheine .............. 361,781
----------- -----
1,093,637 2.9
----------- -----
ELECTRICAL EQUIPMENT 180 ABB AG ...................................... 272,466 0.7
----------- -----
FOOD & BEVERAGES 140 Nestle SA ................................... 184,685 0.5
----------- -----
</TABLE>
10
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (continued)
SWITZERLAND(continued)
- -----------
INSURANCE 130 Schweitzer Ruckversicher .................... $ 183,870 0.4%
----------- -----
TOTAL SWITZERLAND ........................... 1,991,507 5.2
----------- -----
(COST - $1,611,366)
UNITED KINGDOM
- --------------
AIR TRAVEL 45,000 British Airways PLC ......................... 512,954 1.4
----------- -----
BANKING 8,259 Bank of Ireland ............................. 90,775
39,000 National Westminster Bank PLC ............... 524,445
26,384 Standard Chartered PLC ...................... 402,466
----------- -----
1,017,686 2.7
----------- -----
CHEMICALS 26,337 BOC Group PLC ............................... 457,669 1.2
----------- -----
ELECTRICAL EQUIPMENT 61,000 General Electric Co. PLC .................... 364,684 1.0
----------- -----
CONSUMER BASICS 43,000 B.A.T. Industries PLC ....................... 384,893
33,000 Scot & Newcastle ............................ 355,009
----------- -----
739,902 2.0
----------- -----
CONSUMER NON-DURABLES 34,953 Next ........................................ 394,645 1.0
----------- -----
DRUGS & HEALTHCARE 33,999 SmithKline Beecham PLC ...................... 625,918 1.7
----------- -----
FINANCE 39,343 Grand Metropolitan Capital Corp. ............ 378,694 1.0
----------- -----
HOTELS & RESTAURANTS 72,000 Ladbroke Group PLC .......................... 282,968 0.7
----------- -----
INDUSTRIAL MACHINERY 18,000 GKN PLC ..................................... 308,747 0.8
----------- -----
INSURANCE 65,000 Norwich Union PLC(b) ........................ 344,218 0.9
----------- -----
INTERNATIONAL OIL 50,319 British Petroleum Co. PLC ................... 625,958 1.6
----------- -----
METALS (NON-FERROUS) 18,000 RTZ Corp. PLC ............................... 313,693 0.8
----------- -----
TELEPHONE 97,342 Vodafone Group PLC .......................... 474,964 1.2
----------- -----
WATER AND WASTEWATER
TREATMENT 33,000 Thames Water PLC ............................ 379,189 1.0
----------- -----
TOTAL UNITED KINGDOM ........................ 7,221,889 19.0
----------- -----
(COST - $6,439,594)
TOTAL COMMON STOCKS ......................... 32,099,360 84.5
----------- -----
(COST - $28,300,718)
</TABLE>
11
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED)
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
COUNTRY/ PRINCIPAL MARKET PERCENT OF
INDUSTRY AMOUNT SECURITY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS
$4,724,000 State Street Bank (Purchased on 6/30/97,
proceeds at maturity $4,724,525;
(Collateralized by $4,760,000 U.S.
Treasury Notes, 5.13%, 2/28/98,
market value $4,903,155) ............... $ 4,724,000 12.4%
----------- -----
TOTAL REPURCHASE AGREEMENTS
(COST - $4,724,000) ................... 4,724,000 12.4
----------- -----
TOTAL INVESTMENTS ........................ 36,823,360 97.0
-----
(COST - $33,024,718)
OTHER ASSETS IN EXCESS OF
LIABILITIES ........................... 1,157,024 3.0
----------- -----
NET ASSETS ............................... $37,980,384 100.0%
=========== =====
<FN>
- -------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation ............................................................. $4,036,178
Unrealized depreciation ............................................................. (237,536)
----------
Net unrealized appreciation ......................................................... $3,798,642
==========
(b) Represents non-income producing security.
ADR - American Depository Receipt
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
<S> <C>
ASSETS:
Investment in securities, at value (cost $33,024,718) ......................................... $36,823,360
Cash .......................................................................................... 520
Foreign currency (cost $878,077) .............................................................. 873,887
Interest and dividends receivable ............................................................. 78,937
Receivable for investments sold ............................................................... 270,609
Deferred organization costs ................................................................... 15,294
Foreign tax receivable ........................................................................ 48,337
Prepaid expenses and other assets ............................................................. 685
-----------
Total Assets ................................................................................ 38,111,629
-----------
LIABILITIES:
Payable for investments purchased ............................................................. 103,038
Foreign withholding tax payable ............................................................... 10,163
Accrued expenses and other payables:
Administration fees ......................................................................... 4,482
Custodian fees .............................................................................. 74,002
Transfer agent fees ......................................................................... 6,013
Legal and audit fees ........................................................................ 4,292
Printing fees ............................................................................... 11,316
Other ....................................................................................... 7,939
-----------
Total Liabilities ........................................................................ 221,245
-----------
Net Assets ....................................................................................... $37,890,384
===========
COMPUTATION OF NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
SERVICE CLASS SHARES
Net assets .................................................................................... $ 381,115
Shares of beneficial interest issued and outstanding ($.001 par value per share,
unlimited number of shares authorized) ........................................................ 32,899
-----------
Net asset value and redemption price per share ................................................ $ 11.58
Maximum sales charge-5.00% of offering price .................................................. 0.61
-----------
Maximum offering price ........................................................................ $ 12.19
===========
INSTITUTIONAL CLASS SHARES
Net assets ....................................................................................... $37,509,269
Shares of beneficial interest issued and outstanding ($.001 par value per share,
unlimited number of shares authorized) ........................................................ 3,234,919
-----------
Net asset value, offering price and redemption price per share ................................... $ 11.60
===========
COMPOSITION OF NET ASSETS:
Paid-in capital ............................................................................... $33,457,730
Undistributed net investment income ........................................................... 139,880
Accumulated undistributed net realized gains from investment
and foreign currency transactions ........................................................... 499,750
Net unrealized appreciation from investments and foreign currency transactions ................ 3,793,024
-----------
Net Assets, June 30, 1997 ..................................................................... $37,890,384
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $39,901) ........................................... $ 279,749
Interest ........................................................................................ 39,779
----------
Total Income .................................................................................. 319,528
----------
EXPENSES:
Advisory fees ................................................................................... 117,940
Administration fees ............................................................................. 19,721
Co-administration fees .......................................................................... 9,203
Audit fees ...................................................................................... 3,847
Transfer agent fees ............................................................................. 25,435
Custodian fees .................................................................................. 97,557
Printing costs .................................................................................. 12,132
Registration fees ............................................................................... 4,480
Amortization of organization costs .............................................................. 4,611
Legal fees ...................................................................................... 3,328
Trustees' fees .................................................................................. 3,967
Other expenses .................................................................................. 4,696
----------
Gross Expenses ..................................................................................... 306,917
Less: Fee waivers ............................................................................... (133,760)
----------
Net Expenses ....................................................................................... 173,157
----------
Net Investment Income .............................................................................. 146,371
----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) on investments ......................................................... 1,894,449
Net realized gains (losses) on foreign currency transactions ....................................... (1,049,410)
----------
Net realized gains (losses) from investments and foreign currency transactions .................. 845,039
----------
Net change in unrealized appreciation/depreciation on investments .................................. 2,233,618
Net change in unrealized gains (losses) on other assets and liabilities
denominated in foreign currencies ............................................................... (2,300)
----------
Net change in unrealized appreciation/depreciation from investments and
foreign currency transactions ................................................................. 2,231,318
----------
Net Realized and Unrealized Gains (Losses) from Investments ........................................ 3,076,357
----------
Net Increase in Net Assets Resulting from Operations ............................................... $3,222,728
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income (loss) ........................................... $ 146,371 $ (18,907)
Net realized gains (losses) from investments and
foreign currency transactions ........................................ 845,039 492,258
Net change in unrealized appreciation/depreciation from
investments and foreign currency transactions ........................ 2,231,318 741,037
----------- -----------
Change in net assets
resulting from operations ............................................ 3,222,728 1,214,388
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued ............................................ 14,257,487 8,010,945
Dividends reinvested ................................................... -- --
Cost of shares redeemed ................................................ (1,099,059) (3,626,499)
----------- -----------
Change in net assets from share transactions ........................... 13,158,428 4,384,446
----------- -----------
Change in net assets ...................................................... 16,381,156 5,598,834
NET ASSETS:
Beginning of period .................................................... 21,509,228 15,910,394
----------- -----------
End of period .......................................................... $37,890,384 $21,509,228
=========== ===========
SHARE TRANSACTIONS:
Issued ................................................................. 1,344,438 788,991
Reinvested ............................................................. -- --
Redeemed ............................................................... (103,702) (355,941)
----------- -----------
Change in shares .......................................................... 1,240,736 433,050
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
HSBC Mutual Funds Trust, (the "Trust") was organized in Massachusetts on
November 1, 1989 as a Massachusetts business trust, and is registered under
the Investment Company Act of 1940, as amended ("1940 Act"), as a
diversified, open-end management investment company with multiple
investment portfolios. The accompanying financial statements and notes
relate only to the International Equity Fund ("the Fund"). The Fund offers
two classes of shares: Institutional Shares and Service Shares. The
Institutional Class 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 is available to all other investors. The
Institutional Class Shares and Service Class Shares are identical in all
respects except that Institutional Class Shares are not subject to a sales
load or the imposition of any shareholder servicing fees or Rule 12b-1
fees.
The Fund's investment objective is to seek to provide investors with
long-term capital appreciation by investing at least 80% of its total
assets in equity securities (including American and European Depositary
Receipts) issued by companies based outside of the United States. The
balance of the Fund's assets will be invested in equity and debt securities
of companies based in the United States and outside of the United States
including bonds and money market instruments. The Fund may also use other
investment practices to enhance return or to hedge against fluctuations in
the value of portfolio securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
SECURITIES VALUATION: 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 if a sale is not reported for that day, 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 having
maturities of 60 days or less are valued at amortized cost, which
approximates market value.
All assets and liabilities initially expressed in foreign currencies are
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.
FOREIGN CURRENCIES: Transactions denominated in foreign currencies are
recorded at the prevailing rate of exchange 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
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 separately
disclosed. The Fund may enter into forward foreign currency exchange
contracts for investment 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 foreign 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
foreign currency exchange contracts are recorded for financial reporting
purposes as unrealized gains or losses by the Fund until settlement date.
The Fund's custodian will place cash or liquid high grade debt securities
into a segregated account of the Fund in an amount equal to the value of
the Fund's total assets committed to the consummation of forward foreign
exchange contracts requiring the Fund to purchase foreign currency of
foreign exchange contracts entered into for non-hedging purposes. If the
value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of the Fund's
commitments with respect to such contracts.
Risks may arise from the potential inability of a counter party 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 reflects the total exposure the Fund has in that particular
currency contract. No outstanding forward foreign currency exchange
contracts existed as of June 30, 1997.
TAXES: 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 realized capital gains, if any, 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 earned on foreign investments at various rates. Where
available, the Fund will file for claims on foreign taxes withheld.
At December 31, 1996, the International Equity Fund had available $272,287
of capital loss carryforwards which, if not utilized, will expire in the
year 2003.
DIVIDENDS AND DISTRIBUTIONS: The Fund intends to distribute substantially
all of its net investment income and net realized capital gains, if any,
annually in the form of dividends.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not
require reclassification.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Dividends and distributions to shareholders which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized gains. To the extent they
exceed net investment income and net realized gains for tax purposes, they
are reported as distributions of capital.
SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are
recorded on trade date. Identified cost of investments sold is used for
both financial statement and federal income tax purposes. Dividend income
is recorded on the ex-dividend date. Interest income is recorded as earned.
EXPENSE ALLOCATION: Expenses directly attributed to each Fund in the Trust
are charged to that Fund's operations; expenses which are applicable to all
Funds are allocated among them on the basis of relative net assets or
another appropriate basis.
ORGANIZATIONAL COSTS: Costs incurred in connection with the organization of
the Fund have been deferred and are being amortized on a straight-line
basis over a five year period beginning on the date operations commenced.
3. PORTFOLIO SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 1997 were $21,988,049 and $13,373,724,
respectively.
4. RELATED PARTY TRANSACTIONS
The Trust retains HSBC Asset Management Americas Inc. to act as Investment
Adviser for the Fund. HSBC Asset Management Americas Inc. is the North
American investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai
Banking Corporation). As Investment Adviser, HSBC Asset Management Americas
Inc. 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 Asset Management Americas Inc. is paid a monthly advisory fee at an
annual rate of 0.90% of the Fund's average daily net assets. For the six
months ended June 30, 1997, HSBC Asset Management Americas Inc. earned
advisory fees of $117,940, all of which was waived.
The Adviser retains HSBC Asset Management Europe Ltd., HSBC Asset
Management Hong Kong Ltd., HSBC Asset Management (Japan) and HSBC Asset
Management Australia Ltd. to act as sub-advisers (the "Sub-Advisers") to
the Fund. HSBCAsset Management Europe Ltd., HSBCAsset Management Hong Kong
Ltd., HSBCAsset Management (Japan) and HSBCAsset Management Australia Ltd.
are all investment advisory affiliates of HSBC Americas.
Under its Sub-Advisory Contract with HSBC Asset Management Americas Inc.,
each Sub-Advisor will undertake at its own expense to furnish the Fund and
HSBC Asset Management Americas Inc. with micro- and macroeconomics
research, advice and recommendations, and economic and statistical data,
with respect to the Fund's investments, subject to the overall review by
HSBC Asset Management Americas Inc. and the Board of Trustees.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership is a subsidiary of The BISYS Group,
Inc. BISYS, with whom certain officers of the Trust are affiliated, serves
the Trust as distributor, administrator and transfer agent. Such officers
are not paid any fees directly by the Funds for serving as officers of the
Trust.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
In accordance with the terms of the Administration agreement, BISYS is paid
a monthly fee equal to an annual rate of 0.15% of the Fund's average daily
net assets. For the six months ended June 30, 1997, BISYS earned $13,104 in
administrative services fees, net of fee waivers of $6,617.
HSBC Asset Management Americas Inc. earned co-administration/shareholder
servicing fees of up to 0.07% of the Fund's average net assets totaling
$9,203 from the Fund for the six months ended June 30, 1997, all of which
was waived.
The Fund has adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the 1940 Act with respect to Service Shares of
the Fund. The Service Class Plan provides for a monthly payment by the Fund
to BISYS for expenses incurred in connection with distribution services
provided to the Fund not to exceed an annual rate of 0.35% of the Fund's
average net assets. The Fund did not incur any expenses with regard to the
Plan for the six months ended June 30, 1997.
The Fund may enter into agreements (the "Service Agreements") with certain
banks, financial institutions and corporations ("Service Organizations")
whereby each Service Organization handles record-keeping and provides
certain administration services for its customers who invest in the Fund
through accounts maintained at that Service Organization. Each Service
Organization will receive monthly payments for the performance of its
service under the Service Agreement. The payments from the Fund on an
annual basis will not exceed 0.35% of the average value of the Funds'
shares held in the subaccounts of the Service Organizations.
A partner of Baker & McKenzie, legal counsel to the Trust, serves as
Secretary of the Trust. For the six months ended June 30, 1997 the Fund
incurred legal fees of $3,328.
5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1997 FOR THE YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
-------------------------- ---------------------------
AMOUNT SHARES AMOUNT SHARES
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
SERVICE CLASS SHARES:
Shares issued $ 4,902 465 $ 63,618 6,253
Shares redeemed (64,817) (6,144) (344,943) (33,612)
----------- --------- ----------- --------
Net decrease $ (59,915) (5,679) $ (281,325) (27,359)
=========== ========= =========== ========
INSTITUTIONAL CLASS SHARES:
Shares issued $14,252,585 1,343,973 $ 7,947,327 782,738
Shares redeemed (1,034,242) (97,558) (3,281,556) (322,329)
----------- --------- ----------- --------
Net increase $13,218,343 1,246,415 $ 4,665,771 460,409
=========== ========= =========== ========
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SUBSEQUENT EVENTS
Effective July 1, 1997, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") became the fund accountant for the Fund. These
services were previously provided by State Street Bank and Trust Company.
Also effective July 1, 1997, Bank of New York became the custodian for the
Fund. These services were also previously provided by State Street Bank and
Trust Company.
20
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
AND PERIODS INDICATED
HSBC INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
SERVICE CLASS SHARES
------------------------------------------------------------------
FOR THE SIX FOR THE FOR THE FOR THE PERIOD
MONTHS ENDED YEAR ENDED YEAR ENDED APRIL 25, 1994(a)
JUNE 30, 1997 DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
(UNAUDITED) 1996 1995 1994
-------------- ------------ ------------ -----------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .......... $ 10.60 $ 9.97 $9.55 $ 10.00
------- -------- ----- -------
Investment Operations:**
Net investment income
(loss) ..................... 0.05 (0.02) (0.07) --
Net realized and unrealized
gains (losses) from
investments ................ 0.93 0.65 0.49 (0.43)
------- -------- ----- -------
Total from Investment
Operations ................. 0.98 0.63 0.42 (0.43)
------- -------- ----- -------
Distributions
In excess of net realized
gains on investments ....... -- -- -- (0.02)
------- -------- ----- -------
Net Change in
Net Asset Value .............. 0.98 0.63 0.42 (0.45)
------- -------- ----- -------
Net Asset Value,
End of Period ................ $ 11.58 $ 10.60 $9.97 $ 9.55
======= ======== ===== =======
Total Return(b) ................. 9.25%(d) 6.32% 4.40% (4.30)%(d)
Ratios/Supplemental Data:
Net Assets at end of
period (000) ............... $ 381 $ 409 $ 658 $16,819
Ratio of expenses to
average net assets ......... 1.34%(c) 2.10% 1.98% 2.16%(c)
Ratio of net investment
income (loss) to average
net assets ................. 0.90%(c) (0.19)% (1.01)% (0.04)%(c)
Ratio of expenses to
average net assets* ........ 2.36%(c) 2.94% 3.66% 2.50%(c)
Ratio of net investment
income (loss) to average
net assets* ................ 0.12%(c) (1.03)% (2.69)% (0.39)%(c)
Portfolio turnover rate(e) ... 53.41% 77.91% 90.31% 29.37%(d)
Average commission
rate paid(f) ............... $0.0005 $0.0006 -- --
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS SHARES
-----------------------------------------------------
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED FOR THE PERIOD
JUNE 30, 1997 DECEMBER 31, MARCH 1, 1995(a) TO
(UNAUDITED) 1996 DECEMBER 31, 1995
------------- ------------ -------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period .......... $ 10.61 $ 9.98 $ 8.81
------- ------ -------
Investment Operations:**
Net investment income
(loss) ..................... 0.05 (0.01) (0.03)
Net realized and unrealized
gains (losses) from
investments ................ 0.94 0.64 1.20
------- ------ -------
Total from Investment
Operations ................. 0.99 0.63 1.17
------- ------ -------
Distributions
In excess of net realized
gains on investments ....... -- -- --
------- ------ -------
Net Change in
Net Asset Value .............. 0.99 0.63 1.17
------- ------ -------
Net Asset Value,
End of Period ................ $ 11.60 $10.61 $ 9.98
======= ====== =======
Total Return(b) ................. 9.33%(d) 6.31% 13.28%(d)
Ratios/Supplemental Data:
Net Assets at end of
period (000) ............... $37,509 $21,100 $15,253
Ratio of expenses to
average net assets ......... 1.32%(c) 2.04% 2.62%(c)
Ratio of net investment
income (loss) to average
net assets ................. 1.12%(c) (0.10)% (0.34)%(c)
Ratio of expenses to
average net assets* ........ 2.34%(c) 2.89% 3.12%(c)
Ratio of net investment
income (loss) to average
net assets* ................ 0.10%(c) (0.95)% (0.84)%(c)
Portfolio turnover rate(e) ... 53.41% 77.91% 91.31%(d)
Average commission
rate paid(f) ............... $0.0005 $0.0006 --
<FN>
- ---------------
* During the period certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
** Based on average shares outstanding.
(a) Commencement of operations.
(b) Excludes sales charge.
(c) Annualized.
(d) Not annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(f) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of portfolio shares purchased and sold
for which commissions were charged. Disclosure is not required for periods
prior to September 30, 1996.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
[This page intentionally left blank.]
<PAGE>
HSBC(SERVICE MARK) MUTUAL FUNDS TRUST
3435 Stelzer Road
Columbus, Ohio 43219
INFORMATION:
(800) 634-2536
INVESTMENT ADVISER
HSBC Asset Management Americas Inc.
250 Park Avenue
New York, New York 10177
DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
LEGAL COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
This report is for the information of the shareholders of HSBC 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.
8/97
