HSBC MUTUAL FUNDS TRUST
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HSBC Asset Management Americas Inc. (LOGO) [GRAPHIC OMITTED]
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Growth & Income Fund
Fixed Income Fund
New York Tax-Free Bond Fund
SEMI-ANNUAL REPORT (UNAUDITED)
June 30, 1998
Managed by:
HSBC ASSET MANAGEMENT AMERICAS INC.
Sponsored and distributed by:
BISYS FUND SERVICES
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HSBC MUTUAL FUNDS TRUST
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HSBC Asset Management Americas Inc. (LOGO) [GRAPHIC OMITTED]
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GROWTH & INCOME FUND
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July 13, 1998
Dear Shareholder:
Showing resilience in the face of renewed Asian turmoil, the U.S. equity market
rose 17.7% on a total return basis for the first six months of 1998. While the
return was quite spectacular, volatility increased markedly over the period,
from the straight, upward line of the first quarter, to a much choppier second
quarter. Later in the period, concerns of the dollar's strength, Asian weakness,
the possibility of a slowdown in global demand, and the subsequent impact on
U.S. corporate earnings, buffeted the equity market.
Rates were generally supportive over the six months as the 30-year Treasury
yield fell from 5.92% at year-end 1997 to 5.63% by June 30, 1998. However, while
stocks were in an overall-declining trend saved only by a late June rally, they
diverged from bonds during the second quarter as Treasuries attained new highs
with a downshift of the entire Treasury curve. A strong U.S. dollar had also
been a significant factor in the divergent performance of the capital markets as
it rose sharply against the yen as well as emerging market currencies though
less so against the European basket.
Rates aside, there was little change in equity fundamentals as the economy has
continued its "virtuous cycle" as termed by Federal Reserve Chairman Alan
Greenspan, that is strong domestic growth with little inflation despite growing
wage pressures. First quarter earnings (reported in April and May) rose 6.3% on
a weighted basis for S&P 500 companies and positive earnings surprises
outnumbered negative surprises by a two-to-one margin. While results showed a
marked slowdown from the double-digit growth of the previous several quarters,
they outpaced analysts expectations which had been revised down substantially in
the wake of the fourth quarter Asian turbulence. Further, merger and acquisition
(M&A) activity continued to be robust with nearly $592 billion in transactions
announced in the first five months of 1998 alone, up 146% from the comparable
year-ago period. Finally, equity mutual fund inflows remained strong, totaling
$109 billion through May, up 15% from the comparable year-ago period,
maintaining an important source of liquidity to fuel the market's move higher.
MARKET OUTLOOK
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At this juncture, the equity market remains at historic high levels on valuation
measures such as price-to-earnings, cash flow, book value, and on the basis of
valuation methods which are based on dividend yield and nominal rates. However,
we believe that this valuation is justified by the current and unprecedented
backdrop of low inflation and stable, low interest rates; in combination with
strong operating earnings growth and perhaps most importantly, record returns on
equity and invested capital.
While the earnings concerns relative to the impact of the dollar and the
weakening of Asia cannot be dismissed, fully 85% of S&P 500 profits are
generated in the U.S., Canada and Europe. Further, there have already been
earnings cuts in the Basic and Capital Goods sector of the market as well as in
the semiconductor industry, as well as adjustments in estimates due to currency
translation. Finally, the dearth of second quarter pre-announcements -- which
usually consist of bad news -- may well be a harbinger of good news to come on
the earnings front albeit relative to reduced expectations.
<PAGE>
In terms of support, we continue to forecast a patient Federal Reserve with no
upward movement in rates expected, and for bonds to remain strong. Recently the
economy has shown some signs of moderation from the torrid pace earlier in the
year, notably in the National Association of Purchasing Managers (NAPM) data, as
well as on the employment and wage front which should lend credence to our
positive rate outlook. Further, inflows into the market should remain robust, in
part buoyed by the increasing interest of foreign investors in the U.S. as
evidenced by the $116 billion annualized rate of investment in the first quarter
of 1998 (latest available).
In summary, while a pullback in the market is a possibility if second quarter
earnings disappoint, we would not expect a significant correction given the
constructive outlook for rates and the ongoing positive supply/dynamic for U.S.
equities.
HSBC GROWTH & INCOME FUND
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The Fund turned in a strong relative performance for the first half of 1998 and
gained 16.91% on a net total return basis. This return placed the Fund in the
14th percentile of the Lipper Growth & Income fund universe, well ahead of the
average return of 12.11%.
The Fund was positioned towards domestic growth for the period, underweighted in
the Basic Materials, Capital Goods and Energy sectors and overweight in the
Consumer Cyclical, Financial, Healthcare and Technology areas of the market.
This was reflective of a positive view on the U.S. consumer -- given strong
personal income gains, employment and record levels of consumer confidence -- as
well as our forecast of stable/low rates. This strategy bore fruit as both our
sector weighting decisions and superior stock selection contributed to relative
returns.
Going into the second half of 1998 we have maintained an emphasis on growth as
these stocks should continue to perform well in a slowing growth, low inflation,
stable rate environment we envision for the balance of the year.
Sincerely,
/s/ FRED LUTCHER
Fred Lutcher
Managing Director, U.S. Equities
The views expressed in this report reflect those of the portfolio manager
through the end of the period covered by the report as stated on the cover. The
manager's views are subject to change at any time based on the market and other
conditions. Past Performance is no guarantee of future results.
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GROWTH & INCOME FUND VS. S&P 500 COMPOSITE STOCK INDEX
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Average Annual Total Return
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1 Year 5 Years 10 Years
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Offering Price(1) 19.23% 17.98% 15.36%
NAV(2) 25.53% 19.19% 15.95%
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[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
WITH MAXIMUM WITHOUT MAXIMUM
SALES CHARGE S&P 500 LIPPER SALES CHARGE
1/1/88 $ 9,496.68 $10,000 $10,000 $10,000
12/88 $11,016.1 $11,650.3 $11,836.5 $11,600
12/89 $13,831.9 $15,311.7 $14,650 $14,565
12/90 $13,221.9 $14,823 $13,771.1 $13,922.6
12/91 $17,442.3 $19,351.3 $17,574 $18,366.8
12/92 $18,792.3 $20,837.8 $19,267.3 $19,788.3
12/93 $20,902.7 $22,921.6 $22,083.7 $22,010.6
12/94 $20,281.9 $23,226 $21,933.7 $21,356.9
12/95 $26,997.3 $31,952.9 $28,732.7 $28,428.1
12/96 $31,829.8 $39,288.3 $34,694.2 $33,516.7
12/97 $40,557.5 $52,399.9 $44,092.3 $42,707
6/98 $47,434 $61,680.4 $49,349 $49,930
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR 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 GROWTH & INCOME FUND
ON JANUARY 1, 1988, TO A $10,000 INVESTMENT IN THE STANDARD & POOR'S 500
COMPOSITE STOCK PRICE INDEX AND THE LIPPER GROWTH AND INCOME FUND INDEX ON THAT
DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE STANDARD &
POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF
OVERALL STOCK MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES
AND OTHER EXPENSES.
THE LIPPER GROWTH AND INCOME FUND INDEX IS AN INDEX BASED ON THIRTY LARGEST
GROWTH AND INCOME MUTUAL FUNDS (EQUALLY WEIGHTED) TRACKED BY LIPPER ANALYTICAL
SERVICES INCORPORATED.
3
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FIXED INCOME FUND
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July 13, 1998
Dear Shareholder:
The primary focus of the bond market this year has been the troubles in Asia.
There is an economic crisis unfolding there which was initiated by the financial
crisis last year. We are seeing evidence of the Asian drag in the form of a
ballooning trade deficit and a weaker manufacturing sector. In spite of this,
the U.S. economy as a whole continues to exhibit strong growth. First quarter
GDP growth was finalized at 5.4% and the unemployment rate stands at 4.3%. The
inflation news continued to be bullish with commodity prices plummeting and
consumer prices and wages benign. The Dollar continued to appreciate versus the
Yen and a "flight to quality" bid developed for U.S. Treasury debt given the
severity of the problems in the Asian economies.
The market rallied and pushed interest rates lower across the curve,
particularly in the long end. In the past three months yields fell 30 basis
points on thirty year Treasury bonds and only 8 basis points on the two year
Treasury note which flattened the yield curve by 22 basis points. In terms of
sector performance, Corporate supply continued unabated and pushed spreads to a
five year wide. The Corporate sector returned 47 basis points below similar
duration Treasuries in the month of June alone and 25 basis points below
Treasuries year to date. Analysts cite several reasons, including Asia, for the
wider spreads but the broad-based nature of the market softness argues for the
supply/demand mismatch as the most credible. The Mortgage sector managed to
outperform Treasuries on a duration and curve adjusted basis by ten basis points
year to date. The reduced volatility and the strong support of FHLMC and FNMA
are cited as the main reasons the Mortgage sector has been able to put in a
credible performance in spite of a rallying market.
The Fund returned 3.65% for the first half versus 3.93% for the benchmark, the
Lehman Aggregate Index. As for a peer group comparison, the Lipper Corporate
debt A-rated category averaged a total return of 3.78% for the first six months
of 1998. In terms of duration strategy, we maintained a bullish position during
the period and barbelled yield curve exposure. Both of these strategies added
value as the market rallied and the yield curve flattened. The overweight in the
corporate sector hurt relative performance as the sector underperformed
Treasuries substantially. A small underweight in the Mortgage sector had little
overall impact. As of quarter end the average quality of the portfolio was AA,
the effective duration was 4.8 years and the average coupon was 6.78%.
sincerely,
/s/ JAMES LARK
James Lark
Director, Fixed Income
The views expressed in this report reflect those of the portfolio manager
through the end of the period covered by the report as stated on the cover. The
manager's views are subject to change at any time based on the market and other
conditions. Past performance is no guarantee of future results.
4
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FIXED INCOME FUND VS. LEHMAN AGGREGATE BOND INDEX
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Average Annual Total Return
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Inception
1 Year 5 Years (1/15/93)
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Offering Price(1) 4.44% 5.22% 5.82%
NAV(2) 9.64% 6.25% 6.77%
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[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
WITH MAXIMUM LEHMAN WITHOUT MAXIMUM
SALES CHARGE AGGREGATE SALES CHARGE
1/15/93 $ 9,497 $10,000 $10,000
12/93 $10,312 $10,870 $10,859
12/94 $10,117 $10,554 $10,652.7
12/95 $11,809 $12,504 $12,434.9
12/96 $12,059 $12,956 $12,698.5
12/97 $13,099 $14,206 $13,793.1
6/98 $13,618 $14,766 $14,297
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
(1) INCLUDES THE MAXIMUM SALES CHARGE OF 4.75%
(2) EXCLUDES THE MAXIMUM SALES CHARGE OF 4.75%
THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE FIXED INCOME FUND ON
JANUARY 15, 1993 (DATE OF INCEPTION), TO A $10,000 INVESTMENT IN THE LEHMAN
AGGREGATE BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
ARE REINVESTED.
THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE LEHMAN
AGGREGATE BOND INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL GOVERNMENT
CORPORATE/MORTGAGE BOND MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT
CHARGES, FEES AND OTHER EXPENSES.
5
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NEW YORK TAX-FREE BOND FUND
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July 13, 1998
Dear Shareholder:
Municipal bonds underperformed taxable bonds on a pretax basis during the first
half of 1998. The year to date return of the Lehman Aggregate Index as of June
30, 1998 was 3.93%. By comparison the Lehman Municipal Bond Index returned 2.69%
over the same period. This reflected lower yields across the treasury yield
curve ranging from 16 basis points lower on two year bonds to 30 basis points
lower on thirty year bonds, while municipal bonds were unchanged across the
municipal yield curve.
The Fund's total return as of June 30, 1998 on a year to date basis was 2.69%.
The fund outperformed Lipper's New York Municipal Debt Funds Average of 2.37%,
which placed the fund in the upper quartile of its peer group. As of June 30,
1998 the Fund's duration, which takes into account interim principal and income
payments as well as maturity levels, was 6.86 which represented a 7% longer
duration positioning than the index and a moderately constructive view of the
fixed income markets. The average maturity of the fund was 10.8 years.
In terms of sector diversification, the largest sectors consisted of general
obligations (27.0%), higher education (18.4%), and airport revenue (9.8%).
Municipal bond's relative underperformance is a result of shrinking retail
participation as a `sticker shock' environment continues as yields grind lower.
Refunding supply has, at times, served to overwhelm the market. In addition, the
natural lag which municipals tend to run into when treasuries rally caused
municipal yield ratios to cheapen. Going forward, we look for municipal bonds to
improve slightly from these levels and look for strength in the municipal market
as an opportunity to sell. We have pared our duration positioning which reached
a period high of 115% to benchmark of 107%, and taken profits as the reward for
having long duration in the current market environment has been reduced. In the
scenario that treasury yields decline from current levels, we expect municipal
bonds to continue to underperform significantly, particularly on the long end of
the curve. In the event that treasury yields should begin to rise from current
levels we expect municipal bonds to produce strong returns but more so in the
intermediate portion of the curve. Therefore, we will be overweighting the
intermediate (10 year bonds) portion of the curve going forward.
New York continued to outperform the rest of the municipal market as lower rated
credits, in which New York is significantly overweighted relative to the
municipal universe, within the investment grade spectrum continued to outperform
higher rated credits. For the year to date period ending June 30, 1998 the
Lehman NYS Exempt Index returned 2.99% versus 2.69% for the Lehman Municipal
Bond Index.
Given the strong performance of New York State and its local credits, we believe
that the recent financial improvement is at its peak. We believe that the
drastic compression in credit spreads, despite the continuing underlying
structural weakness in many states and local government fiscal profiles, will
provide us the opportunity going forward to upgrade the overall quality of the
portfolio without giving up yield.
Sincerely,
/s/ JERRY SAMET
Jerry Samet
Municipal Portfolio Manager
The views expressed in this report reflect those of the portfolio manager
through the end of the period covered by the report as stated on the cover. The
manager's views are subject to change at any time based on the market and other
conditions. Past performance is no guarantee of future results.
6
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NEW YORK TAX-FREE BOND FUND VS. LEHMAN MUNICIPAL
BOND INDEX
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Average Annual Total Return
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Inception
1 Year 5 Years (3/21/89)
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Offering Price(1) 3.47% 4.34% 7.15%
NAV(2) 8.59% 5.36% 7.71%
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[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
WITH MAXIMUM LEHMAN MUNI WITHOUT MAXIMUM
SALES CHARGE BOND INDEX SALES CHARGE
3/21/89 $ 9,497 $10,000 $10,000
12/89 $10,174 $11,005 $10,713
12/90 $10,797 $11,807 $11,370
12/91 $12,157 $13,242 $12,801
12/92 $13,452 $14,409 $14,164
12/93 $15,371 $14,178 $16,186
12/94 $14,120 $15,340 $14,868
12/95 $16,262 $18,018 $17,124
12/96 $16,911 $18,817 $17,807
12/97 $18,428 $20,551 $19,404
6/98 $18,981 $21,103 $19,927
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
(1) INCLUDES THE MAXIMUM SALES CHARGE OF 4.75%
(2) EXCLUDES THE MAXIMUM SALES CHARGE OF 4.75%
THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE NEW YORK TAX-FREE
BOND FUND ON MARCH 21, 1989 (DATE OF INCEPTION), TO A $10,000 INVESTMENT IN THE
LEHMAN MUNICIPAL BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS ARE REINVESTED.
THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND
WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE LEHMAN
MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL MUNICIPAL
BOND MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER
EXPENSES.
7
<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
RICHARD J. LOOS Vice Chairman Emeritus
*Member of the Audit and Nominating Committees
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OFFICERS
WALTER B. GRIMM PRESIDENT
ERIC F. ALMQUIST SENIOR VICE PRESIDENT
ANTHONY J. FISCHER VICE PRESIDENT
CHARLES L. BOOTH VICE PRESIDENT
PAUL KANE ASSISTANT TREASURER
STEVEN R. HOWARD SECRETARY
ALAINA V. METZ ASSISTANT SECRETARY
ROBERT L. TUCH ASSISTANT SECRETARY
8
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
GROWTH & INCOME FUND
SECURITY VALUE
SHARES DESCRIPTION (NOTE 2)
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COMMON STOCKS (99.1%):
AUTOMOTIVE (1.6%):
14,000 General Motors Corp. ........................ $ 935,375
12,300 Lear Corp.(b) ............................... 631,144
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1,566,519
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BANKING (10.5%):
19,830 Banc One Corp. .............................. 1,106,762
20,600 Bank of New York Co., Inc. .................. 1,250,163
19,100 BankAmerica Corp. ........................... 1,650,955
16,600 Chase Manhattan Corp. ....................... 1,253,300
3,200 Citicorp .................................... 477,600
21,600 First Union Corp. ........................... 1,258,199
15,000 NationsBank Corp. ........................... 1,147,500
24,300 Norwest Corp. ............................... 908,213
22,500 U.S. Bancorp ................................ 967,500
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10,020,192
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BEVERAGES (4.1%):
26,600 Coca-Cola Co. ............................... 2,274,300
26,400 Coca-Cola Enterprises, Inc. ................. 1,036,200
15,800 PepsiCo, Inc. ............................... 650,763
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3,961,263
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BROADCASTING/CABLE (2.2%):
20,300 Chancellor Media Corp. ...................... 1,008,022
19,800 Viacom, Inc. ................................ 1,160,775
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2,168,797
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CHEMICALS (1.6%):
21,400 Air Products & Chemical, Inc. ............... 856,000
9,400 E.I. du Pont de Nemours & Co. ............... 701,475
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1,557,475
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COMPUTER SOFTWARE (4.9%):
19,800 BMC Software, Inc.(b) ....................... 1,028,363
32,170 Cadence Design Systems, Inc. ................ 1,005,313
25,130 Microsoft Corp.(b) .......................... 2,723,463
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4,757,139
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9
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
GROWTH & INCOME FUND
SECURITY VALUE
SHARES DESCRIPTION (NOTE 2)
- -------- ----------- -----------
COMMON STOCKS (CONTINUED)
COMPUTERS & PERIPHERALS (6.2%):
17,350 Cisco Systems, Inc.(b) ...................... $ 1,597,284
20,872 EMC Corp. ................................... 935,327
17,900 Intel Corp. ................................. 1,326,838
9,110 International Business Machines Corp. ....... 1,045,942
25,500 Sun Microsystems, Inc.(b) ................... 1,107,656
-----------
6,013,047
-----------
CONSUMER GOODS & SERVICES (3.5%):
15,200 Philip Morris Cos., Inc. .................... 598,500
18,000 Procter & Gamble Co. ........................ 1,639,125
17,100 Whirlpool ................................... 1,175,625
-----------
3,413,250
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COSMETICS & TOILETRIES (0.7%):
11,800 Gillette Co. ................................ 668,913
-----------
DIVERSIFIED (6.1%):
26,500 AlliedSignal, Inc. .......................... 1,175,938
37,000 General Electric Co. ........................ 3,367,000
22,200 Tyco International .......................... 1,398,600
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5,941,538
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ELECTRIC UTILITY (2.9%):
22,300 Duke Energy Corp. ........................... 1,321,275
10,400 Florida Power & Light, Inc. ................. 655,200
24,900 Public Service Enterprise Group, Inc. ....... 857,494
-----------
2,833,969
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ELECTRICAL & ELECTRONIC (0.9%):
15,200 Emerson Electric Co. ........................ 917,700
-----------
ENTERTAINMENT (0.7%):
6,500 Walt Disney Co. ............................. 682,906
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FINANCIAL SERVICES (4.2%):
9,000 American Express Co. ........................ 1,026,000
19,600 Fannie Mae .................................. 1,190,700
16,850 Travelers Group, Inc. ....................... 1,021,531
19,950 Washington Mutual, Inc. ..................... 866,578
-----------
4,104,809
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10
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
GROWTH & INCOME FUND
SECURITY VALUE
SHARES DESCRIPTION (NOTE 2)
- -------- ----------- -----------
COMMON STOCKS (CONTINUED)
FOOD PRODUCTS & SERVICES (2.7%):
20,400 H.J. Heinz Co. .............................. $ 1,144,950
11,900 Nabisco Holdings Corp., Class A ............. 429,144
24,400 Safeway, Inc.(b) ............................ 992,775
-----------
2,566,869
-----------
HEALTH CARE (3.4%):
47,900 HEALTHSOUTH Corp.(b) ........................ 1,278,331
26,700 Johnson & Johnson ........................... 1,969,125
-----------
3,247,456
-----------
INSURANCE (2.2%):
10,400 Allstate Corp. .............................. 952,250
8,300 American International Group, Inc. .......... 1,211,800
-----------
2,164,050
-----------
MACHINERY & EQUIPMENT (1.4%):
16,500 Applied Materials, Inc.(b) .................. 486,750
20,700 Ingersoll-Rand Co. .......................... 912,094
-----------
1,398,844
-----------
MEDICAL EQUIPMENT & SUPPLIES (0.9%):
12,580 Boston Scientific Corp. 901,043
-----------
OFFICE EQUIPMENT & SERVICES (1.3%):
5,700 Hewlett-Packard Co. ......................... 341,288
9,400 Xerox Corp. ................................. 955,275
-----------
1,296,563
-----------
OIL & GAS EXPLORATION, PRODUCTION AND SERVICES (7.6%):
10,800 Atlantic Richfield Co. ...................... 843,750
7,100 Chevron Corp. ............................... 589,744
18,200 Enron Corp. ................................. 983,938
26,200 Exxon Corp. ................................. 1,868,387
9,600 Mobil Corp. ................................. 735,600
19,000 Royal Dutch Petroleum Co., New York Shares .. 1,041,437
16,800 Schlumberger Ltd. ........................... 1,147,649
-----------
7,210,505
-----------
11
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
GROWTH & INCOME FUND
SECURITY VALUE
SHARES DESCRIPTION (NOTE 2)
- -------- ----------- -----------
COMMON STOCKS (CONTINUED)
PAPER PRODUCTS (0.8%):
18,060 International Paper Co. ..................... $ 776,580
-----------
PHARMACEUTICALS (7.4%):
27,100 American Home Products Corp. ................ 1,402,425
20,400 Bristol-Myers Squibb Co. .................... 2,344,724
13,100 Merck & Co., Inc. ........................... 1,752,125
15,000 Pfizer, Inc. ................................ 1,630,313
-----------
7,129,587
-----------
PRINTING & PUBLISHING (0.8%):
11,900 Tribune Co. ................................. 818,869
-----------
REAL ESTATE INVESTMENT TRUST (1.4%):
13,900 Boston Properties Inc. ...................... 479,550
9,000 Equity Residential Properties Trust ......... 426,938
12,600 Mack Cali Realty Corp. ...................... 433,125
-----------
1,339,613
-----------
RETAIL STORES (8.5%):
20,200 Gap, Inc. ................................... 1,244,825
23,800 Home Depot, Inc. ............................ 1,976,888
17,300 J.C. Penney, Inc. ........................... 1,251,006
31,100 Rite Aid Corp. .............................. 1,168,194
22,232 TJX Cos., Inc. .............................. 536,347
32,600 Wal-Mart Stores, Inc. ....................... 1,980,449
-----------
8,157,709
-----------
TELECOMMUNICATIONS (9.2%):
12,300 AT&T Corp. .................................. 702,638
25,800 Bell Atlantic Corp. ......................... 1,177,124
16,600 Bellsouth Corp. ............................. 1,114,274
16,900 Ciena Corp .................................. 1,176,662
7,000 Lucent Technologies, Inc. ................... 582,313
15,300 MCI Communications Corp. .................... 889,313
18,800 Omnipoint Corp. ............................. 431,225
19,700 SBC Communications, Inc. .................... 788,000
10,100 Tellabs, Inc.(b) ............................ 723,413
26,100 WorldCom, Inc.(b) ........................... 1,264,218
-----------
8,849,180
-----------
12
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
GROWTH & INCOME FUND
SECURITY VALUE
SHARES DESCRIPTION (NOTE 2)
- -------- ----------- -----------
COMMON STOCKS (CONTINUED)
TIRE & RUBBER (0.4%):
6,600 Goodyear Tire & Rubber Co. .................. $ 425,288
-----------
TRANSPORTATION (1.0%):
7,800 Delta Air Lines, Inc. ....................... 1,008,150
-----------
Total Common Stocks (Cost - $73,961,132) .... 95,897,823
-----------
OPEN END INVESTMENT COMPANIES (0.9%):
897,000 Provident Institutional Temporary Investment
Fund ...................................... 897,000
-----------
Total Open End Investment Companies
(Cost - $897,000) ......................... 897,000
-----------
TOTAL INVESTMENTS (100.0%)
(Cost $74,858,132)(a) ..................... 96,794,823
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%) (46,441)
-----------
TOTAL NET ASSETS (100.0%) ................... $96,748,382
===========
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation ............................... $23,114,248
Unrealized depreciation ............................... (1,177,557)
-----------
Net unrealized appreciation ........................... $21,936,691
===========
(b) Represents non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
FIXED INCOME FUND
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS (43.1%):
AEROSPACE & DEFENSE (4.8%):
Lockheed Martin Corp. (Guaranteed by Lockheed
Martin Tactical Systems, Inc.) ............................... 6.85% 5/15/01 $ 2,500,000 $ 2,549,475
-----------
BANKING (13.8%):
ABN Amro Bank N.V. .............................................. 7.13 6/18/07 2,000,000 2,118,582
BankAmerica Corp. ............................................... 7.88 12/1/02 2,500,000 2,674,264
Provident Bank .................................................. 6.13 12/15/00 2,500,000 2,508,223
-----------
7,301,069
-----------
ELECTRIC UTILITY (4.9%):
Columbus Southern Power Company (American
Electrical Power) ............................................ 7.25 10/1/02 2,500,000 2,606,573
-----------
ENTERTAINMENT (0.9%):
Walt Disney Co., Series A ....................................... 6.38 3/30/01 500,000 505,388
-----------
FINANCIAL SERVICES (7.4%):
American Express Credit Corp. ................................... 6.13 6/15/00 2,000,000 2,010,660
Chase Manhattan Grantor Trust, Series 1996-A,
Class A, ABS ................................................. 5.20 2/15/02 827,550 823,967
Travelers Property Casualty Corp. ............................... 7.75 4/15/26 1,000,000 1,138,386
-----------
3,973,013
-----------
TELECOMMUNICATIONS (11.3%):
Lucent Technologies, Inc. ....................................... 6.90 7/15/01 2,000,000 2,053,746
MCI Communications .............................................. 6.50 4/15/10 2,000,000 1,999,426
New York Telephone .............................................. 6.13 1/15/10 2,000,000 1,983,900
-----------
6,037,072
-----------
Total Corporate Bonds (Cost - $22,540,997) ........................................................ 22,972,590
-----------
CANADIAN GOVERNMENT AGENCY OBLIGATIONS (0.7%):
Export Development Corp., Debenture ............................. 8.13 8/10/99 380,000 389,221
-----------
Total Canadian Government Agency Obligations (Cost - $409,218) .................................... 389,221
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS (27.9%):
FEDERAL HOME LOAN MORTGAGE ASSOCIATION (4.9%):
Federal Home Loan Mortgage Corp., Pool #220019 .................. 7.75 1/1/02 75,834 77,784
Federal Home Loan Mortgage Corp., Gold Pool #D62926 ............. 6.50 8/1/25 2,539,155 2,530,408
-----------
2,608,192
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (17.5%):
Federal National Mortgage Association, Pool #310001 ............. 6.00 9/1/00 1,172,713 1,170,148
Federal National Mortgage Association, Series 1993-104,
Class C, REMIC ............................................... 6.50 3/25/21 2,000,000 1,990,801
Federal National Mortgage Association, Pool #250414 ............. 7.00 12/1/25 4,048,330 4,105,228
Federal National Mortgage Association, Pool #343195 ............. 7.50 5/1/26 1,678,301 1,721,296
Federal National Mortgage Association, Pool #343812 ............. 7.50 5/1/26 343,735 352,541
-----------
9,340,014
-----------
</TABLE>
14
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
FIXED INCOME FUND
<TABLE>
<CAPTION>
SHARES
INTEREST MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (5.5%):
Government National Mortgage Association, Pool #356578 .......... 7.50% 6/15/23 $2,833,280 $ 2,916,721
-----------
Total U.S. Government Agency Obligations (Cost - $14,268,240) ..................................... 14,864,927
-----------
U.S. GOVERNMENT OBLIGATIONS (17.4%):
U.S. TREASURY BONDS (9.1%):
U.S. Treasury Bonds ............................................. 8.75 8/15/20 2,280,000 3,135,714
U.S. Treasury Bonds ............................................. 6.63 2/15/27 1,500,000 1,694,532
-----------
4,830,246
-----------
U.S. TREASURY NOTES (8.3%):
U.S. Treasury Notes ............................................. 6.13 12/31/01 2,000,000 2,035,626
U.S. Treasury Notes ............................................. 5.75 4/30/03 1,000,000 1,009,688
U.S. Treasury Notes ............................................. 7.88 11/15/04 1,250,000 1,403,906
-----------
4,449,220
-----------
Total U.S. Government Obligations (Cost - $8,631,796) ............................................. 9,279,466
-----------
MUNICIPAL OBLIGATIONS (8.9%):
GOVERNMENTS (DOMESTIC) (4.0%):
Oakland, California Pension Obligation, Subseries A
(MBIA Insured) ............................................... 6.91 12/15/07 2,000,000 2,135,794
-----------
GOVERNMENTS (FOREIGN) (4.9%):
Puerto Rico Electric Power Authority ............................ 5.00 7/1/08 2,500,000 2,607,982
-----------
Total Municipal Obligations (Cost - $4,611,850) ................................................... 4,743,776
-----------
OPEN END INVESTMENT COMPANIES (1.6%):
Provident Institutional Temporary Investment Fund .......................................... 873,000 873,000
-----------
Total Open End Investment Companies (Cost - $873,000) ............................................. 873,000
-----------
TOTAL INVESTMENTS (99.6%) (Cost - $51,335,101)(a) ................................................. 53,122,980
-----------
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%) ...................................................... 224,048
-----------
TOTAL NET ASSETS (100.0%) ......................................................................... $53,347,028
===========
<FN>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by net unrealized appreciation of securities
as follows:
Unrealized appreciation ........................................................................... $1,833,896
Unrealized depreciation ........................................................................... (46,017)
----------
Net unrealized appreciation ....................................................................... 1,787,879
----------
ABS - Asset Backed Security
MBIA - Municipal Bond Insurance Association
REMIC - Real Estate Mortgage Investment Conduit
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (98.8%):
NEW YORK (95.2%):
Albany County Airport Authority, Airport Revenue,
AMT (FSA Insured), Callable 12/15/07 @ 102 ................... 5.50% 12/15/19 $ 750,000 $ 769,688
Bethlehem Central School District, GO (AMBAC Insured) ........... 7.10 11/1/07 200,000 241,000
Long Island Power Authority, Electric System
Revenue, Series A, Callable 6/1/08 @ 101 ..................... 5.25 12/1/26 1,250,000 1,232,813
Metropolitan Transportation Authority,
Transportation Facilities Revenue, Series A
(MBIA Insured), Callable 7/1/07 @ 101.5 ...................... 5.63 7/1/25 1,200,000 1,258,500
Monroe County Water Authority, Water Revenue .................... 5.00 8/1/08 1,000,000 1,043,750
Monroe County, Series B, GO, Callable 6/1/98 @102 ............... 7.00 6/1/04 10,000 10,327
New York City, Series A, GO, Prerefunded 8/15/01
@ 101.5 ...................................................... 7.75 8/15/04 565,000 632,800
New York City, Series A, GO, Callable 8/15/01 @ 101.5 ........... 7.75 8/15/07 355,000 394,050
New York City, Series A, GO, Prerefunded 8/15/01
@ 101.5 ...................................................... 7.75 8/15/04 35,000 38,806
New York City, Series B, GO ..................................... 6.10 8/15/05 2,000,000 2,185,000
New York City, Series B, GO, Callable 2/1/02 @ 101.5 ............ 7.50 2/1/07 1,000,000 1,111,250
New York City, Series E, GO ..................................... 6.50 2/15/06 2,000,000 2,240,000
New York City, Series F, GO, Callable 11/15/01
@ 101.5 ...................................................... 8.40 11/15/05 45,000 51,131
New York City, Series F, GO, Prerefunded 11/15/01
@ 101.5 ...................................................... 8.40 11/15/01 105,000 120,750
New York City, Series G, GO ..................................... 6.75 2/1/09 1,000,000 1,160,000
New York City Municipal Water Finance Authority,
Water & Sewer System Revenue, Series A,
Callable 6/15/06 @ 101 ....................................... 5.50 6/15/24 1,800,000 1,856,250
New York City, Trust For Cultural Resources, Museum
of Modern Art (AMBAC Insured) Prerefunded 1/1/02
@ 102 ........................................................ 6.40 1/1/04 350,000 382,375
New York State Dormitory Authority, City
University System Revenue, Series A
(FGIC-TCRS Insured) .......................................... 5.75 7/1/18 2,370,000 2,612,924
New York State Dormitory Authority, State Service
Contract, Albany County ...................................... 5.50% 4/1/08 1,000,000 1,065,000
New York State Dormitory Authority, State
University Educational Facilities Revenue, Series A .......... 5.88 5/15/11 1,500,000 1,666,875
New York State Dormitory Revenue, New York Medical
College (MBIA Insured) ....................................... 5.00 7/1/06 1,065,000 1,102,275
New York State Dormitory Revenue, New York State
Department of Health ......................................... 5.00 7/1/08 1,000,000 1,015,000
New York State Energy Research & Development
Authority, Pollution Control Revenue,
Niagara Power Corp (LOC - Morgan Guaranty Trust)* ............ 3.80 7/1/27 1,500,000 1,500,000
</TABLE>
16
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INTEREST MATURITY PRINCIPAL VALUE
RATE DATE AMOUNT (NOTE 2)
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONTINUED)
New York State Environmental Facilities Corp.,
Series B, Callable 6/15/08 @ 102 ............................. 5.05 6/15/13 $ 500,000 $ 506,875
New York State Environmental Facilities Corp.,
Pollution Control Revenue, State Water, Series A,
Callable 6/15/01 @ 102 ....................................... 7.00 6/15/12 150,000 164,813
New York State Environmental Facilities Corp.,
Pollution Control Revenue, State Water, Series A,
Prerefunded 6/15/01 @ 102 .................................... 7.00 6/15/12 150,000 165,000
New York State Environmental Facilities Corp.,
Pollution Control Revenue, State Water, Series B,
Callable 3/15/99 @ 102 ....................................... 7.50 3/15/11 250,000 261,265
New York State Environmental Facilities Corp.,
Pollution Control Revenue, State Water, Series C,
Callable 3/15/00 @ 102 ....................................... 7.20 3/15/11 200,000 214,000
New York State Housing Finance Agency, Multifamily
Mortgage Housing Revenue, Series A (FHA Insured)
Callable 8/15/02 @ 102 ....................................... 7.00 8/15/22 900,000 965,250
New York State Medical Care Facilities Finance
Agency, Adult Day Care Facility, Series A (SONYMA
Insured) Callable 11/15/05 @ 102 ............................. 6.38 11/15/20 1,975,000 2,167,563
New York State Medical Care Facilities Finance Agency,
Series A (FSA Insured) Callable 2/15/98 @ 102 ................ 7.70 2/15/18 80,000 81,918
New York State Urban Development Corp., Senior
Lien, Corporate Purpose, Callable 7/1/06 @ 102 ............... 5.50 7/1/16 2,000,000 2,080,000
Niagara Frontier Transportation Authority, Greater
Buffalo International Airport Revenue, Series A, AMT
(AMBAC Insured) Callable 4/1/04 @ 102 ........................ 6.13 4/1/14 2,400,000 2,588,999
Syracuse, GO, Prerefunded 2/15/01 @ 102 ......................... 6.70 2/15/01 300,000 324,750
Triborough Bridge & Tunnel Authority, General Purpose
Revenue, Series A, GO, Callable 1/1/07 @ 101 ................. 5.25 1/1/28 500,000 500,000
-----------
33,710,997
-----------
PUERTO RICO (3.6%):
Puerto Rico Electric Power Authority Revenue,
Callable 7/1/08 @ 101.5 ...................................... 5.00 7/1/28 500,000 486,875
Puerto Rico GO (MBIA Insured) ................................... 5.00 7/1/05 750,000 780,938
-----------
1,267,813
-----------
Total Municipal Bonds (Cost - $32,718,949) ........................................................ 34,978,810
-----------
</TABLE>
17
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
---------- -----------
<S> <C> <C>
OPEN-END INVESTMENT COMPANIES (1.2%):
New York Money Fund ....................................................................... 417,000 $ 417,000
-----------
Total Open-End Investment Companies (Cost - $417,000) ............................................. 417,000
-----------
TOTAL INVESTMENTS (100.0%) (Cost - $33,135,949)(a) ................................................ 35,395,810
-----------
OTHER ASSETS IN EXCESS OF LIABILITIES (0.0%) ...................................................... 310
-----------
TOTAL NET ASSETS (100%) ........................................................................... $35,396,120
===========
<FN>
- ---------------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation ........................................................................... $ 2,259,861
Unrealized depreciation ........................................................................... -0-
-----------
Net unrealized appreciation ....................................................................... $ 2,259,861
===========
* Variable rate security. Rate represents rate in effect at June 30, 1998.
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Taxable Paper
FGIC - Financial Guaranty Insurance Corp.
FHA - Federal Housing Administration
FSA - Financial Security Assurance
GO - General Obligation
LOC - Letter of Credit
MBIA - Municipal Bond Insurance Association
SONYMA - State of New York Mortgage Agency
TCRS - Transferable Custody Receipts
</FN>
</TABLE>
18
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
AS OF JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & FIXED NEW YORK
INCOME INCOME TAX-FREE
FUND FUND BOND FUND
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost $74,858,132,
$51,335,101, $33,135,949, respectively) ......................... $96,794,823 $53,122,980 $35,395,810
Cash .............................................................. 403 509 310
Interest and dividends receivable ................................. 63,567 535,810 568,309
Receivable from investment securities sold ........................ -- 152 --
Receivable for capital shares sold ................................ 640 25 --
Prepaid expenses .................................................. 908 507 378
----------- ----------- -----------
Total Assets ......................................................... 96,860,341 53,659,983 35,964,807
----------- ----------- -----------
LIABILITIES:
Dividends payable ................................................. -- 256,689 130,111
Payable to brokers for investments purchased ...................... -- -- 1,100,433
Accrued expenses and other payables:
Investment advisory fees ........................................ 42,950 25,280 7,167
Administration fees ............................................. 7,809 4,596 2,867
Distribution fees ............................................... -- -- 13,417
Fund accounting and transfer agent fees ......................... 10,014 5,081 521
Deferred trustee fees payable ................................... 23,119 11,768 21,134
Other liabilities ............................................... 28,067 9,541 4,856
----------- ----------- -----------
Total Liabilities .................................................... 111,959 312,955 1,280,506
----------- ----------- -----------
Net Assets ........................................................... $96,748,382 $53,347,028 $34,684,301
=========== =========== ===========
COMPUTATION OF NET ASSET VALUE:
Net assets ........................................................ $96,748,382 $53,347,028 $34,684,301
Shares of beneficial interest issued and outstanding
(par value $.001 per share, unlimited number of
shares authorized) .............................................. 6,695,589 5,228,049 3,008,551
----------- ----------- -----------
Net asset value, redemption price per share ....................... $ 14.45 $ 10.20 $ 11.53
Maximum sales charge .............................................. 5.00% 4.75% 4.75%
Maximum offering price (Net asset value /
(100% - Maximum sales charge)) .................................... $ 15.21 $ 10.71 $ 12.10
=========== =========== ===========
COMPOSITION OF NET ASSETS:
Paid-in capital. .................................................. $61,904,792 $53,751,080 $33,302,537
Accumulated undistributed (distributions in excess of) net
investment income. .............................................. 284,085 14,033 --
Accumulated undistributed net realized gains (losses)
from investment transactions. ................................... 12,622,814 (2,205,964) (878,097)
Net unrealized appreciation from investments ...................... 21,936,691 1,787,879 2,259,861
----------- ----------- -----------
Net Assets ........................................................... $96,748,382 $53,347,028 $34,684,301
=========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & FIXED NEW YORK
INCOME INCOME TAX-FREE
FUND FUND BOND FUND
----------- ---------- ---------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest .......................................................... $ 21,897 $1,863,375 $964,880
Dividends ......................................................... 646,654 34,848 14,023
----------- ---------- --------
Total Income ......................................................... 668,551 1,898,223 978,903
----------- ---------- --------
EXPENSES:
Advisory fees ..................................................... 251,406 159,860 80,655
Administration fees ............................................... 68,565 43,598 26,885
Co-administration and shareholder servicer assistance fees ........ 31,997 20,346 12,546
Distribution fees ................................................. -- -- 37,193
Custody fees ...................................................... 16,092 3,554 2,974
Legal and audit fees .............................................. 39,069 22,568 15,612
Fund accounting fees .............................................. 2,548 2,184 2,673
Transfer agent fees ............................................... 28,236 15,036 40,536
Other expenses .................................................... 37,459 21,441 12,979
----------- ---------- --------
Gross Expenses ....................................................... 475,372 288,587 232,053
Less: Fee waivers ................................................ (54,878) (34,896) (57,365)
----------- ---------- --------
Total Net Expenses ................................................... 420,494 253,691 174,688
----------- ---------- --------
Net Investment Income ................................................ 248,057 1,644,532 804,215
----------- ---------- --------
NET REALIZED / UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains (losses) from investment transactions .......... 7,618,759 790,510 419,022
Net change in unrealized appreciation (depreciation)
from investments ................................................ 6,560,758 (292,134) (262,214)
----------- ---------- --------
Net Realized / Unrealized Gains (Losses) from Investments ......... 14,179,517 498,376 156,808
----------- ---------- --------
Change in Net Assets Resulting from Operations .................... $14,427,574 $2,142,908 $961,023
=========== ========== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH & INCOME FUND FIXED INCOME FUND
------------------------------------ ----------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997 (UNAUDITED) DECEMBER 31, 1997
--------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income .......................... $ 248,057 $ 1,301,839 $ 1,644,532 $ 3,866,301
Net realized gains (losses) from investment
transactions ................................. 7,618,759 40,637,112 790,510 (421,712)
Net change in unrealized appreciation
(depreciation) from investments .............. 6,560,758 (4,934,551) (292,134) 1,841,223
----------- ------------ ------------ ------------
Change in net assets resulting from
operations ..................................... 14,427,574 37,004,400 2,142,908 5,285,812
----------- ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS:
From net investment income ..................... -- (1,305,354) (1,644,532) (3,866,301)
From net realized gain from investment
transactions ................................. -- (36,862,753) -- --
----------- ------------ ------------ ------------
Change in net assets from
shareholder distributions .................... -- (38,168,107) (1,644,532) (3,866,301)
----------- ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .................... 34,241,810 30,839,794 6,321,130 10,843,888
Dividends reinvested ........................... 2,802,342 446,344 28,389 68,234
Cost of shares redeemed ........................ (9,918,088) (115,615,426) (14,903,145) (55,804,404)
----------- ------------ ------------ ------------
Change in net assets from share
transactions ................................... 27,126,064 (84,329,288) (8,553,626) (44,892,282)
----------- ------------ ------------ ------------
Change in net assets .............................. 41,553,638 (85,492,995) (8,055,250) (43,472,771)
----------- ------------ ------------ ------------
NET ASSETS:
Beginning of period ............................ 55,194,744 140,687,739 61,402,278 104,875,049
----------- ------------ ------------ ------------
End of period (including undistributed net
investment income of $284,085, $36,028,
$14,033, and $14,033, respectively) .......... $96,748,382 $ 55,194,744 $ 53,347,028 $ 61,402,278
=========== ============ ============ ============
SHARE TRANSACTIONS:
Issued ......................................... 2,745,823 1,740,537 622,935 1,101,997
Reinvested ..................................... 226,727 26,099 2,798 6,909
Redeemed ....................................... (742,477) (5,941,405) (1,465,660) (5,649,518)
----------- ------------ ------------ ------------
Change in shares .................................. 2,230,073 (4,174,769) (839,927) (4,540,612)
=========== ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
NEW YORK TAX-FREE BOND FUND
-------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
------------ -----------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income ............................................... $ 804,215 $ 1,885,020
Net realized gains (losses) from investment transactions ............ 419,022 613,728
Net change in unrealized appreciation (depreciation) from investments (262,214) 850,123
------------ ------------
Change in net assets resulting from operations ......................... 961,023 3,348,871
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income .......................................... (804,215) (1,885,020)
------------ ------------
Change in net assets from shareholder distributions ................. (804,215) (1,885,020)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ......................................... 874,378 2,112,149
Dividends reinvested ................................................ 473,704 1,114,438
Cost of shares redeemed ............................................. (4,344,563) (9,141,149)
------------ ------------
Change in net assets from share transactions ........................... (2,996,481) (5,914,562)
------------ ------------
Change in net assets ................................................... (2,839,673) (4,450,711)
------------ ------------
NET ASSETS:
Beginning of period ................................................. 37,523,974 41,974,685
------------ ------------
End of period ....................................................... $ 34,684,301 $ 37,523,974
============ ============
SHARE TRANSACTIONS:
Issued .............................................................. 76,109 188,254
Reinvested .......................................................... 41,267 100,156
Redeemed ............................................................ (378,398) (818,395)
------------ ------------
Change in shares ....................................................... (261,022) (529,985)
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
HSBC Mutual Funds Trust, (the "Trust") was organized 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,
including the Growth & Income Fund, the Fixed Income Fund and the New York
Tax-Free Bond Fund (herein referred to individually as a "Fund" and
collectively as the "Funds").
The investment objective of the Growth & Income Fund is long-term growth of
capital and current income by investing, under ordinary market conditions,
at least 65% of its total assets in common stocks, preferred stocks and
securities convertible into or with rights to purchase common stocks. The
balance of the Fund's assets may be invested in various types of fixed
income and money market instruments. The investment objective of the Fixed
Income Fund is generation of high current income consistent with
appreciation of capital by investing in a variety of fixed-income
securities. The investment objective of the New York Tax-Free Bond Fund is
to provide its investors with as high a level of current income exempt from
regular Federal, New York State and New York City income taxes as is
consistent with relative stability of capital. Economic changes affecting
the state and certain of its public bodies and municipalities may affect
the ability of issuers within the state to pay interest on, or repay
principal of, municipal obligations held by the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their 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 equity securities traded on an
exchange are valued at the last quoted sales price on a given day, or if a
sale is not reported for that day, at the mean between the most recent bid
and ask prices. The bid price is used when no ask price is available. Debt
securities for which market quotations are readily available are valued at
the quoted bid price. Debt 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. Investments in open-end investment companies are valued at
their net asset value as reported by such investment companies. Short-term
obligations having maturities of 60 days or less are valued at amortized
cost which approximates market value.
TAXES: It is the Funds' policy to comply with the provisions of the
Internal Revenue Code, as amended, applicable to regulated investment
companies, and to distribute substantially all of their taxable income and
net realized capital gains to its shareholders for each taxable year.
Therefore, no provision is required for federal income tax.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS: The Growth & Income Fund intends to pay, as a
semi-annual dividend, substantially all of its net investment income. The
Fixed Income and New York Tax-Free Bond Funds intend 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 for all three Funds, if any, are distributed at
least annually.
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. 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 including amortization
of discount and premium, 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.
3. PORTFOLIO SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 1998 were as follows:
PURCHASES SALES
----------- -----------
Growth & Income Fund ......... $46,917,689 $38,939,186
Fixed Income Fund ............ 23,556,618 31,540,388
New York Tax-Free Bond Fund .. 8,155,463 10,094,306
4. RELATED PARTY TRANSACTIONS
The Trust retains HSBC Asset Management Americas Inc. to act as Investment
Adviser for the Funds. 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 investment portfolios of the Funds, subject to
policies established by the Board of Trustees.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
As compensation for its services, HSBC Asset Management Americas Inc. is paid
monthly advisory fees at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE RATE
--------------------------------
GROWTH & INCOME FIXED INCOME
PORTIONS OF THE FUND'S AVERAGE DAILY NET ASSETS FUND FUND
--------------------------------------------------------------- --------------- ------------
<S> <C> <C>
Up to $400 million ............................................ 0.550% 0.550%
In excess of $400 million but not exceeding $800 million ...... 0.505% 0.505%
In excess of $800 million but not exceeding $1.2 billion ...... 0.460% 0.460%
In excess of $1.2 billion but not exceeding $1.6 billion ...... 0.415% 0.415%
In excess of $1.6 billion but not exceeding $2.0 billion ...... 0.370% 0.370%
In excess of $2.0 billion ..................................... 0.315% 0.315%
</TABLE>
<TABLE>
<CAPTION>
ADVISORY FEE RATE
-----------------
NEW YORK
TAX-FREE BOND
PORTIONS OF THE FUND'S AVERAGE DAILY NET ASSETS FUND
--------------------------------------------------------------- -----------------
<S> <C>
Up to $300 million ............................................ 0.450%
In excess of $300 million but not exceeding $600 million ...... 0.420%
In excess of $600 million but not exceeding $1.0 billion ...... 0.385%
In excess of $1.0 billion but not exceeding $1.5 billion ...... 0.350%
In excess of $1.5 billion but not exceeding $2.0 billion ...... 0.315%
In excess of $2.0 billion ..................................... 0.280%
</TABLE>
For the six months ended June 30, 1998, HSBC Asset Management Americas Inc.
waived advisory fees of $35,847 for the New York Tax-Free Bond Fund.
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 are affiliated, serves the Trust as distributor,
administrator, transfer agent and fund accountant. Such officers are not paid
any fees directly by the Funds for serving as officers of the Trust.
In accordance with the terms of the Management and Administration Agreement,
BISYS is paid a monthly asset-based fee of 0.15% (annualized) of the Fund's
first $200 million of average net assets; 0.125% of the Fund's next $200 million
of average net assets; 0.10% of the Fund's next $200 million of average net
assets; and 0.08% of the Fund's average net assets in excess of $600 million;
exclusive of out-of-pocket expenses. For the six months ended June 30, 1998,
BISYS waived administrative services fees of $22,881 from the Growth & Income
Fund, $14,550 from the Fixed Income Fund, and $8,972 from the New York Tax-Free
Bond Fund.
HSBC Asset Management Americas Inc. earned co-administration/shareholder
servicer assistance fees of 0.07% of each Fund's average daily net assets
totaling $31,997 for the Growth & Income Fund, $20,346 for the Fixed Income Fund
and $12,546 for the New York Tax-Free Bond Fund, all of which was waived.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
The Funds have adopted a Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the 1940 Act. The Plan provides for a monthly
payment by the Fund to BISYS Fund Services for expenses incurred in
connection with distribution services provided to the Fund not to exceed an
annual rate of 0.50% of Growth & Income Fund's, and 0.35% of Fixed Income
Fund's and New York Tax-Free Bond Fund's average net assets during the
preceding month. The expenses incurred as a result of these agreements
totaled $37,193 from the New York Tax-Free Bond Fund. As distributor, BISYS
is entitled to receive commissions on sales of shares of the variable net
asset value funds. For the six months ended June 30, 1998, the total
commission BISYS received, retained, and reallowed to affiliated
broker/dealers of the Funds are as follow:
<TABLE>
<CAPTION>
TOTAL COMMISSIONS COMMISSIONS REALLOWED
FUND COMMISSIONS RETAINED BY BISYS TO AFFILIATED BROKER/DEALER
---- ----------- ----------------- ---------------------------
<S> <C> <C> <C>
Growth & Income Fund ............... $ 2,379 $ 353 $1,353
Fixed Income Fund .................. 412 302 25
New York Tax-Free Bond Fund ........ 7,758 1,008 4,128
------- ------ ------
Total: ........................ $10,549 $1,663 $5,506
======= ====== ======
</TABLE>
The Funds 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 Funds
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 Funds 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. For the six
months ended June 30, 1998, the Funds did not participate in any Service
Agreements.
A partner of the Trust's legal counsel served as secretary of the Trust.
Baker & McKenzie served as legal counsel until April 2, 1998. Paul, Weiss,
Rifkind, Wharton and Garrison assumed the role of legal counsel as of April
3, 1998. For the six months ended June 30, 1998 the Funds incurred legal
fees of $31,681 for the Growth & Income Fund, $18,798 for the Fixed Income
Fund, and $12,478 for the New York Tax-Free Bond Fund.
5. CONCENTRATION OF CREDIT
The New York Tax-Free Bond Fund invests primarily in debt obligations
issued by the State of New York and its respective political subdivisions,
agencies and public authorities to obtain funds for various public
purposes. The Fund is more susceptible to economic and political factors
adversely affecting issuers of New York specific municipal securities than
is a municipal bond fund that is not concentrated in these issuers to the
same extent.
26
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 --------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 12.36 $ 16.28 $ 14.77 $ 11.93 $ 12.87 $ 12.02
------- ------- -------- ------- ------- -------
Investment Activities
Net investment income .......................... 0.03 0.18 0.18 0.30 0.29 0.33
Net realized and unrealized gains (losses)
from investment transactions ................. 2.06 4.28** 2.46 3.64 (0.67) 1.00
------- ------- -------- ------- ------- -------
Total from Investment Activities ............... 2.09 4.46 2.64 3.94 (0.38) 1.33
------- ------- -------- ------- ------- -------
Distributions
From net investment income ..................... -- (0.19) (0.18) (0.30) (0.29) (0.33)
From net realized gains ........................ -- (8.19) (0.95) (0.80) (0.15) (0.15)
In excess of net realized gains ................ -- -- -- -- (0.12) --
------- ------- -------- ------- ------- -------
Total Distributions ............................ -- (8.38) (1.13) (1.10) (0.56) (0.48)
------- ------- -------- ------- ------- -------
Net Asset Value, End of Period .................... $ 14.45 $ 12.36 $ 16.28 $ 14.77 $ 11.93 $ 12.87
======= ======= ======== ======= ======= =======
Total Return (excludes sales or
redemption charges) ............................ 16.91%(a) 27.42% 17.90% 33.11% (2.97)% 11.23%
Ratios/Supplemental Data:
Net Assets at end of period (000) .............. $96,748 $55,195 $140,688 $66,062 $64,999 $77,718
Ratio of expenses to average net assets ........ 0.92%(b) 0.83% 0.85% 0.94% 0.78% 0.23%
Ratio of net investment income to
average net assets ........................... 0.54%(b) 0.95% 1.43% 2.06% 2.25% 2.95%
Ratio of expenses to average net assets* ....... 1.04%(b) 0.95% 0.96% 0.97% 0.86% 0.88%
Ratio of net investment income to
average net assets* .......................... 0.42%(b) 0.83% 1.32% 2.03% 2.17% 2.30%
Portfolio Turnover Rate ........................ 43.72% 69.07% 61.68% 52.77% 23.31% 14.25%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** In addition to the net realized and unrealized gains from investment
transactions, this amount includes a decrease in net asset value per share
resulting from the timing of issuances and redemptions of Fund shares in
relation to fluctuating market values for the portfolio.
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FIXED INCOME FUND
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, FOR THE PERIOD
MONTHS ENDED --------------------------------------- ----------------------
JUNE 30, 1998 JANUARY 15, 1993(c) TO
(UNAUDITED) 1997 1996 1995 1994 DECEMBER 31, 1993
------------- ------- -------- ------- ------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period ............................ $ 10.12 $ 9.89 $ 10.28 $ 9.35 $ 10.13 $ 10.00
------- ------- -------- ------- ------- -------
Investment Activities
Net investment income .............. 0.29 0.59 0.59 0.59 0.59 0.63
Net realized and unrealized gains
(losses) from investments ....... 0.08 0.23 (0.39) 0.93 (0.78) 0.21
------- ------- -------- ------- ------- -------
Total from Investment Activities ... 0.37 0.82 0.20 1.52 (0.19) 0.84
------- ------- -------- ------- ------- -------
Distributions
From net investment income ......... (0.29) (0.59) (0.59) (0.59) (0.59) (0.63)
From net realized gains ............ -- -- -- -- -- (0.08)
------- ------- -------- ------- ------- -------
Total Distributions ................ -- (0.59) (0.59) (0.59) (0.59) (0.71)
------- ------- -------- ------- ------- -------
Net Asset Value, End of Period .......... $ 10.20 $ 10.12 $ 9.89 $ 10.28 $ 9.35 $ 10.13
======= ======= ======== ======= ======= =======
Total Return (excludes sales or
redemption charges) .................. 3.65%(a) 8.62% 2.11% 16.73% (1.89)% 8.57%(a)
Ratios/Supplemental Data:
Net Assets at end of
period (000) .................... $53,347 $61,402 $104,875 $99,942 $84,774 $90,907
Ratio of expenses to average
net assets ...................... 0.87%(b) 0.88% 0.88% 0.93% 0.77% 0.22%(b)
Ratio of net investment income
to average net assets ........... 5.66%(b) 6.00% 5.94% 6.03% 6.10% 6.40%(b)
Ratio of expenses to average
net assets* ..................... 0.99%(b) 1.00% 0.98% 0.96% 0.86% 0.87%(b)
Ratio of net investment income
to average net assets* .......... 5.54%(b) 5.88% 5.84% 6.00% 6.01% 5.75%(b)
Portfolio Turnover Rate ............ 42.57% 60.98% 156.05% 41.58% 63.96% 107.34%(a)
<FN>
- ----------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Commencement of operations.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NEW YORK TAX-FREE BOND FUND
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 11.48 $ 11.05 $ 11.17 $ 10.20 $ 11.70 $ 11.01
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income ......................... 0.26 0.53 0.55 0.54 0.53 0.59
Net realized and unrealized gains from
investments ................................ 0.05 0.43 (0.12) 0.97 (1.47) 0.95
------- ------- ------- ------- ------- -------
Total from Investment Activities .............. 0.31 0.96 0.43 1.51 (0.94) 1.54
------- ------- ------- ------- ------- -------
Distributions
From net investment income .................... (0.26) (0.53) (0.55) (0.54) (0.53) (0.59)
From net realized gains ....................... -- -- -- -- (0.03) (0.26)
------- ------- ------- ------- ------- -------
Total distributions ........................... (0.26) (0.53) (0.55) (0.54) (0.56) (0.85)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ..................... $ 11.53 $ 11.48 $ 11.05 $ 11.17 $ 10.20 $ 11.70
======= ======= ======= ======= ======= =======
Total Return (excludes sales or
redemption charges) ............................. 2.69%(a) 8.97% 3.99% 15.17% (8.13)% 14.27%
Ratios/Supplemental Data:
Net Assets at end of period (000) ............. $34,684 $37,524 $41,975 $50,677 $50,711 $61,740
Ratio of expenses to average net assets ....... 0.98%(b) 0.92% 0.91% 0.99% 0.84% 0.63%
Ratio of net investment income to
average net assets ......................... 4.53%(b) 4.79% 5.02% 5.07% 4.93% 4.98%
Ratio of expenses to average net assets* ...... 1.31%(b) 1.24% 1.21% 1.20% 1.10% 1.06%
Ratio of net investment income to
average net assets* ........................ 4.20%(b) 4.47% 4.72% 4.86% 4.67% 4.55%
Portfolio Turnover Rate ....................... 23.53% 35.64% 87.40% 24.43% 122.43% 70.36%
<FN>
- ------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the ratios
would have been as indicated.
(a) Not annualized.
(b) Annualized.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<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.
140 Broadway (6th Floor)
New York, New York 10005-1180
DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
LEGAL COUNSEL
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of Americas
New York, New York 10019
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. Shares of the Funds are not an obligation of or guaranteed
or endorsed by HSBC Holdings plc or its affiliates. In addition, such shares are
not insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other agency and may involve investment risks, including the
possible loss of principal.
8/98
