<PAGE>
HSBC Mutual Funds Trust
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF HSBC ASSET MANAGEMENT AMERICAS INC. APPEARS HERE]
- --------------------------------------------------------------------------------
Growth and Income Fund
------------------------------------------------------------------
July 26, 1999
Dear Shareholders:
The US market posted another spectacular return in the first half of 1999, as
the S&P 500 Index/1/ rose 12.38% on a total return basis for the six-month
period. Once again the market showed resilience in the face of a multitude of
concerns including the devaluation of the Brazilian real, the Microsoft
antitrust suit, US involvement in the Kosovo conflict and the sharp run up in
oil prices. Further, interest rates rose significantly during the first half as
strong economic growth ignited inflationary fears and increased the probability
of tightening action by the Federal Reserve. However, very positive first
quarter earnings reports and the highest earnings revision ratio
(positive:negative) in a decade provided solace to equity market participants,
allowing stock prices to move higher.
The US economy continued to defy expectations in the first half of 1999, with
first quarter GDP growth of 4.3% and estimated second quarter growth of over
3%. While the consumer continued to drive growth--as evidenced by extremely
strong personal consumption expenditures--the back end of the economy picked up
over the first half as well. However, inflationary pressures failed to
materialize despite this growth, reflecting continued global overcapacity and
commodity price weakness.
Strong domestic growth in the first quarter, in combination with the belief
that the emerging markets were on the rebound led to near-violent sector
rotation in April, as the cyclical stocks took center stage. Concurrently, the
high quality, growth issues--which had been leaders during much of the extended
bull market--were all but abandoned by investors as they moved down the
capitalization and quality scale in search of "value".
Outlook and Strategy
- --------------------
We are in a prolonged period of domestic economic growth with little price
inflation. Further, it is likely that any incipient inflation will be quickly
quashed by the bond market vigilantes if not directly via tightening action by
the Federal Reserve. It is still entirely possible that the June tightening of
the Federal funds rate (25 basis points to 5%) will be a one-off move in 1999--
a replay of the Fed's single tightening move in 1997. We continue to anticipate
new evidence of moderating economic growth and still-modest inflation
pressures. Key reasons for expecting slowdown signals in the near term include
[already] rising bond yields this year, the absence of the stimulative seasonal
Federal income tax refunds in the second half of 1999, and an inflow of Asian
imports from an export-led recovery in Asia. Currently, a cumulative 75 basis
point tightening move is being priced into the Fed futures market which would
completely reverse the 75 basis point easing in "98, when the Fed temporarily
became very concerned about weak foreign economies and the quite fragile state
of domestic and international financial markets.
While interest rates have been a recent focus of investors--and rising rates
are clearly negative for equity market valuations--a long bond yield of 6-6.25%
with little inflation accompanied by strong corporate earnings growth is no
recipe for disaster for domestic equity prices. In fact positive earnings
revisions are a powerful impetus for stocks, and the global healing--if not
rebound--should certainly bode well for profits. Further, this recovery should
- ------
/1/ The Standard & Poor's 500 Index is a widely accepted unmanaged index of
overall stock market performance.
<PAGE>
allow for a healthy broadening of the market to include cyclical sectors and
stocks that have been out of favor for a lengthy period. The consumer--which
had supported the domestic economy when exports suffered and manufacturing
weakened--remains strong as evidenced by near record high levels of consumer
confidence.
HSBC Growth & Income Fund--Performance Commentary
- -------------------------------------------------
The HSBC Growth & Income Fund gained 10.53% on a net, total return basis in
the first half of 1999, pacing the Lipper Growth & Income median return of
10.87% but short of the S&P 500 return of 12.38%. The Fund remains in the top
quartile of its peer universe for the one and three year periods ended
concurrently.
While the Fund results for the first quarter were quite positive, a weak
relative performance in the second quarter hurt year-to-date results. The most
significant negative impact to first-half performance was the fund's emphasis
on high quality, durable growth issues. This growth tilt had been beneficial
to results in 1998 and in the first quarter of 1999, and is reflective of our
overall "growth at a reasonable price' (GARP) philosophy/style of investing.
However, the second quarter rotation from growth to value and down the market
capitalization scale reflected a wholesale discounting of an Asian recovery.
We found this to be a bit premature given the ongoing uncertainty in global
emerging markets as well as a complete lack of follow-through in commodity
prices, which remained under pressure.
In aggregate, sector weighting decisions dampened comparative performance with
an average overweight in Technology and underweights in Basic Materials and
Energy the most significant negatives. Stock selection also detracted from
results for the period, with Consumer Staples, Energy and Technology the
weakest sectors on a comparative basis. On the positive side, Consumer
Cyclicals and Utilities posted strong relative results.
During the period the funds became more sector neutral as the near-term
outlook became increasingly uncertain, notably the outlook for rates and
inflation. To this end, Basic Materials and Capital Goods sector exposure was
increased to market weights from significantly underweighted positions.
Further, the magnitude of the overweight in Consumer Cyclicals was pared, due
to a belief that the relative earnings power of the group versus the broader
market was contracting. Healthcare was also reduced from an overweight to an
underweight primarily through the partial sale of the Pfizer position.
Sincerely,
/s/ Fredric P. Lutcher
Fredric P. Lutcher
Chief Investment Officer, 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>
[CHART APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GROWTH AND INCOME FUND VS. S&P 500 INDEX
Average Annual Total Return
------------------------------------
1 Year 5 Year 10 Year
------ ------ -------
Offering Price(1) 14.04% 20.00% 15.72%
NAV(2) 20.04% 23.26% 16.31%
Growth Growth Standard Lipper Growth
and and & &
Income Income Poor's Income Fund
(without load) (with load) 500 Index Index
-------------- ----------- --------- -------------
June 1989 10,000 9,502 10,000 10,000
Dec. 1989 11,007 10,460 11,292 10,796
Dec. 1990 10,522 9,998 10,934 10,149
Dec. 1991 13,881 13,190 14,274 12,966
Dec. 1992 14,955 14,211 15,369 14,214
Dec. 1993 16,634 15,806 16,905 16,293
Dec. 1994 16,140 15,337 17,126 16,225
Dec. 1995 21,485 20,416 23,536 24,277
Dec. 1996 25,331 24,071 28,966 25,676
Dec. 1997 32,227 30,671 38,630 32,577
Dec. 1998 40,981 38,942 49,671 37,001
June 1999 45,298 43,044 55,822 41,290
--- --- Growth and Income Fund (without load)
- - - - Growth and Income Fund (with load)
------- Standard & Poor's 500 Index
-- - -- Lipper Growth & Income Fund Index
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 and Income
Fund on July 1, 1989 to a $10,000 investment in the Standard & Poor's 500
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 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 & Income Fund Index is an index based on the thirty largest
growth and income mutual funds (equally weighted) tracked by Lipper Inc.
3
<PAGE>
HSBC Fixed Income Fund
- --------------------------------------------------------------------------------
It appears the excesses of the second half of last year have been largely
reversed. The flight to quality which led to Treasury securities outperforming
Corporates by 220 basis points last year has partially turned around and
Corporates are up 104 basis points so far this year. Interest rates are roughly
1% higher than where we closed 1998 and are now very close to the levels
experienced prior to the Asian crisis last year. Unfortunately the move to
higher rates has made it very difficult for fixed income investors. The ten
year Treasury has produced a total return of 6.47% and the Long bond is down
10.53% so far this year. This is the first time since the rout of 1994 that the
Lehman Aggregate Index, a proxy for the investment grade universe, has
experienced back to back quarters of negative total returns.
The strength of the U.S. economy along with signs of stability and recovery in
Asia and Japan has clearly swung the focus of monetary policy to reigning in
growth. This is a marked contrast from the second half of last year when the
Asian crisis sparked fears of global deflation and recession. Economic growth
has been much stronger than expected so far this year. Predictions for 1999 GDP
centered around 2.5% when we began the year but it appears we are steaming
along at a 4% clip with no real evidence of a slowdown in sight. Fortunately,
inflation has been well behaved for the most part but a spike in April CPI
struck fear into the hearts of bond market investors and policy makers alike.
This may have been what put the Fed back into pre-emptive mode after what has
been termed a "growth experiment" over the past several months when growth was
well above the long term sustainable pace. With the change to a pre-emptive Fed
there has been considerably less discussion on the "new paradigm" economy and
the ideas of the Phillips Curve are once again taking precedence.
The fund returned (2.12)% for the first half of the year on a net basis
compared to (1.37)% for the Lehman Aggregate Bond Index/1/, a proxy for the
investment grade market. Our neutral to long duration positioning throughout
the year has been a negative in terms of relative performance. Our sector
positioning which has been overweight high quality Corporate securities helped
in the first quarter but has hurt in the second quarter. Over the entire period
the Corporate positioning has only been a mild positive in spite of the overall
sector performance being strong. This is because the performance in the sector
has been narrow and largely in the lowest quality credits. For example AAA
rated Corporates returned 22 basis points below similar duration Treasuries;
while BBB rated paper, returned 233 basis point more than Treasuries. This has
made it difficult to compete with the index while concentrating in high quality
paper. We have fared better in our peer group where according to Lipper Inc.
the fund was ranked in the 39th percentile and returned 31 basis points more
than the average similar fund for the period.
Sincerely,
/s/ James Lark
James Lark
Director, Fixed Income
- -------
/1/The Lehman Aggregate Bond Index is composed of the Lehman
Government/Corporate Index and the Mortgage-Backed Securities Index and
includes treasury issues, agency issues, corporate bond issues and mortgage
backed securities.
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>
[CHART APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FIXED INCOME FUND VS. LEHMAN AGGREGATE BOND INDEX
Average Annual Total Return
------------------------------------
Inception
1 Year 5 Year (1/15/93)
------ ------ --------
Offering Price(1) (2.57)% 5.66% 5.27%
NAV(2) 2.30 % 6.69% 6.06%
Fixed Fixed Lehman
Income Income Aggregate
Fund Fund Bond
(without load) (with load) Index
-------------- ----------- ---------
Jan. 1993 10,000 9,527 10,000
Dec. 1993 10,764 10,255 10,975
Dec. 1994 10,560 10,060 10,655
Dec. 1995 12,327 11,743 12,623
Dec. 1996 12,587 11,991 13,080
Dec. 1997 13,672 13,025 14,346
Dec. 1998 14,812 14,110 15,591
June 1999 14,538 13,850 15,375
--- --- Fixed Income Fund (without load)
- - - - Fixed Income Fund (with load)
------- Lehman Aggregate Bond Index
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
<PAGE>
HSBC New York Tax-Free Bond Fund
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Market Review
Municipal bonds outperformed taxable bonds on a pretax basis in the first half
of 1999. The semi-annual return of the Lehman Aggregate Index was (1.37)% on a
year to date basis. By comparison the Lehman Municipal Bond Index returned
(0.90)% for the same period. The above reflected higher yields across the
treasury yield curve ranging from 99 basis points higher on two year bonds to
88 basis points higher on thirty year bonds while municipal bonds were higher
by 40-70 basis points across the curve.
Fund Review
The fund's total return through June 30, 1999 stood at (1.54)% versus the
(1.80)% average return of Lipper's New York Municipal Debt Funds. On a year to
date basis the fund has placed in the top third percentile of its peer group.
As of June 30, 1999 the fund's duration which takes into account interim
principal payments was 7.18 years which approximated about 108% of the duration
of the Lehman New York State Exempt Index ("Lehman NYS Exempt Index")./1/ The
average maturity of the fund was 12.45 years. In terms of sector
diversification, the largest sectors consisted of general obligations (28.9%),
higher education (17.1%), and medical revenue (16.1%).
Market Outlook
New York outrperformed the rest of the municipal market by 1 basis point as
reflected by the total return of the Lehman NYS Exempt Index. For the first six
months of the year the Lehman NYS Exempt Index returned (0.89)%. 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 of fiscal profiles in many New York credits both on the state and
local government levels provides us the opportunity to upgrade the overall
quality of the portfolio without giving up yield. In fact, despite the lower
overall credit profile of the Lehman NYS Exempt Index as compared with the
Lehman Municipal Bond Index (AA3/A1 versus AA1/AA2) the yield to worst of the
New York index is only 2 basis point higher than that of the Municipal Bond
Index. This differential remains very narrow from a historical perspective. Our
credit strategy is to overweight insured credits as the yield spread between
insured and single A rated credits is only 5 basis points. Currently the
average quality of the fund is AA2.
Municipal relative outperformance is due to municipal's typical historical
pattern of lagging behind in a rising yield environment and therefore providing
greater pretax returns. Going forward we look for munis to continue to lag
treasuries. We have taken on a long duration position of 108% of benchmark as a
reflection of a constructive bias in our fixed income outlook for the second
half of 1999. In the event of a grind towards lower rates we expect municipals
to track treasuries in the intermediate portion of the curve and lag slightly
on the longer end of the curve. Therefore we will be overweighing the
intermediate (5-10 year bonds) portion of the curve going forward. We continue
to favor higher rated credits within the investment grade spectrum. The
municipal credit curve remains flat even as other fixed income product widened
dramatically over the course of the year. Narrow credit spreads in the
municipal market are a function of increased penetration of insurance into the
municipal market which currently stands at better than 50% of all new issuance.
This has dramatically reduced the supply of lower rated credits within
- -------
/1/ The Lehman New York State Exempt Index is a broad based total return index
which is comprised of 8,000 actual bonds issued in the State of New York.
6
<PAGE>
the investment grade spectrum and therefore caused many investors to reach for
yield. Subsequently, this has helped to narrow credit spreads. Credit spreads
also narrowed with an overall shift in investor sentiment toward risk and the
appropriate premium being placed on risk. Upgrades outpaced downgrades for the
14th consecutive quarter as municipal governments and authorities continue to
show improving balance sheets. This being a result of a strong economy but
even more importantly from a long term fundamental perspective for the most
part municipalities are exhibiting conservatively sound fiscal management.
With the spread between Baa and insured paper as tight as 15-20 basis points
we do not feel that credit risk is adequately compensated and as such we will
favor an overweight in natural AAA and insured AAA bonds with an underweight
in A and lower rated credits. Going forward we feel that the potential for
further credit performance in the form of a further narrowing credit curve is
less likely than a widening of credit spreads. As spreads widen the fund will
be selectively searching for appropriate opportunities. Currently the fund is
not invested in any credits rated Baa1 or lower.
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.
7
<PAGE>
[CHART APPEARS HERE]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
NEW YORK TAX-FREE BOND FUND VS. LEHMAN MUNICIPAL BOND INDEX
Average Annual Total Return
------------------------------------
1 Year 5 Year 10 Year
------ ------- --------
Offering Price(1) (3.16)% 4.83% 6.40%
NAV(2) 1.63 % 5.86% 6.92%
New York New York Lehman
Tax Free Tax-Free Municipal
Bond Fund Bond Fund Bond
(without load) (with load) Index
-------------- ----------- ---------
June 1989 10,000 9,523 10,000
Dec. 1989 10,326 9,834 10,391
Dec. 1990 10,959 10,437 11,148
Dec. 1991 12,340 11,751 12,502
Dec. 1992 13,653 13,002 13,604
Dec. 1993 15,601 14,857 15,275
Dec. 1994 14,331 13,649 14,485
Dec. 1995 16,505 15,719 17,014
Dec. 1996 17,164 16,346 17,767
Dec. 1997 18,703 17,812 19,400
Dec. 1998 19,823 18,879 20,657
June 1999 19,520 18,590 20,472
--- --- New York Tax-Free Bond Fund (without load)
- - - - New York Tax-Free Bond Fund (with load)
------- Lehman Municipal Bond Index
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 July 1, 1989, 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.
8
<PAGE>
Board of Trustees
WOLFE J. FRANKL Former Director, North America, Berlin Economic
Development Corporation
JEFFREY J. HASS Professor of Law, New York Law School
RICHARD J. LOOS Vice Chairman Emeritus
CLIFTON H.W. MALONEY President, C.H.W. Maloney & Co. Incorporated
JOHN C. MEDITZ President, Horizon Asset Management, Inc.
HARALD PAUMGARTEN President, Paumgarten and Company
JOHN P. PFANN Chairman and President, JPP Equities, Inc.
ROBERT A. ROBINSON Trustee, Henrietta and B. Frederick H. Bugher
Foundation
- --------------------------------------------------------------------------------
Officers
WALTER B. GRIMM President
ERIC F. ALMQUIST Senior Vice President
ANTHONY J. FISCHER Vice President
CHARLES L. BOOTH Vice President
JOEL B. ENGLE Treasurer
STEVEN R. HOWARD Secretary
ALAINA V. METZ Assistant Secretary
ROBERT L. TUCH Assistant Secretary
9
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited)
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ----------- ------------
<C> <S> <C>
COMMON STOCKS (99.3%):
Automotive (1.5%):
14,300 General Motors Corporation.............................. $ 943,800
16,800 Lear Corporation(b)..................................... 835,800
------------
1,779,600
------------
Banking (6.6%):
18,600 Bank of America Corporation............................. 1,363,613
39,300 Bank of New York Co., Inc............................... 1,441,819
26,000 Bank One Corporation.................................... 1,548,625
13,100 Chase Manhattan Corporation............................. 1,134,788
54,400 Wells Fargo Co.......................................... 2,325,599
------------
7,814,444
------------
Beverages (1.7%):
15,300 Coca-Cola Co............................................ 956,250
26,500 PepsiCo, Inc............................................ 1,025,219
------------
1,981,469
------------
Brewery (0.5%):
7,900 Anheuser-Busch Co., Inc................................. 560,406
------------
Broadcasting/Cable (1.3%):
9,000 Adelphia Communications Corporation Class A(b).......... 572,625
25,400 AT&T Corporation--Liberty Media Corporation(b).......... 933,450
------------
1,506,075
------------
Business Equipment & Service (0.5%):
18,200 Ceridian Corporation(b)................................. 594,913
------------
Chemicals (2.7%):
29,400 Air Products & Chemicals, Inc........................... 1,183,350
19,100 E.I. du Pont de Nemours & Co............................ 1,304,769
10,800 Sealed Air Corporation(b)............................... 700,650
------------
3,188,769
------------
Computer Software (5.5%):
15,000 BMC Software, Inc.(b)................................... 810,000
54,300 Microsoft Corporation(b)................................ 4,897,181
21,200 Oracle Corporation(b)................................... 787,050
------------
6,494,231
------------
</TABLE>
10
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited) (continued)
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ----------- ------------
<C> <S> <C>
COMMON STOCKS (continued)
Computers & Peripherals (11.8%):
45,200 Cisco Systems, Inc.(b).................................. $ 2,915,399
34,300 Dell Computer Corporation(b)............................ 1,269,100
40,344 EMC Corporation(b)...................................... 2,218,920
6,900 Hewlett-Packard Co...................................... 693,450
40,100 Intel Corporation....................................... 2,385,950
18,200 International Business Machines Corporation............. 2,352,350
21,600 Sun Microsystems, Inc.(b)............................... 1,487,700
20,100 Unisys Corporation(b)................................... 782,644
------------
14,105,513
------------
Consumer Goods & Services (3.7%):
8,200 Clorox Co............................................... 875,863
19,300 Maytag Corporation...................................... 1,344,968
24,500 Philip Morris Cos., Inc................................. 984,594
12,700 Procter & Gamble Co..................................... 1,133,475
------------
4,338,900
------------
Diversified (5.8%):
10,700 AlliedSignal, Inc....................................... 674,100
38,688 General Electric Co..................................... 4,371,744
19,800 Tyco International, Ltd................................. 1,876,050
------------
6,921,894
------------
Environmental Services (1.1%):
24,100 Waste Management, Inc.(b)............................... 1,295,375
------------
Financial Services (5.8%):
5,700 American Express Co..................................... 741,713
52,000 Citigroup, Inc.......................................... 2,469,999
18,400 Fannie Mae.............................................. 1,258,100
32,700 MBNA Corporation........................................ 1,001,438
8,500 Morgan Stanley Dean Witter & Co......................... 871,250
14,600 Washington Mutual, Inc.................................. 516,475
------------
6,858,975
------------
Food Products & Services (1.6%):
10,300 H.J. Heinz Co........................................... 516,288
27,000 Safeway, Inc.(b)........................................ 1,336,500
------------
1,852,788
------------
</TABLE>
11
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited) (continued)
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ----------- ------------
<C> <S> <C>
COMMON STOCKS (continued)
Health Care (2.2%):
15,200 Cardinal Health, Inc.................................... $ 974,700
16,700 Johnson & Johnson....................................... 1,636,600
------------
2,611,300
------------
Household Products (0.8%):
25,600 Dial Corporation........................................ 952,000
------------
Industrial Goods & Services (0.6%):
8,100 Eaton Corporation....................................... 745,200
------------
Insurance (3.7%):
13,300 American International Group, Inc....................... 1,556,931
19,500 Equitable Companies, Inc................................ 1,306,500
9,800 Hartford Financial Services Group....................... 571,463
6,500 Progressive Corporation................................. 942,500
------------
4,377,394
------------
Internet Software (1.2%):
12,700 America Online, Inc.(b)................................. 1,403,350
------------
Medical Equipment & Supplies (0.7%):
11,200 Medtronic, Inc.......................................... 872,200
------------
Oil & Gas Exploration, Production, and Services (8.5%):
18,500 Chevron Corporation..................................... 1,760,969
18,800 Enron Corporation....................................... 1,536,900
40,800 Exxon Corporation....................................... 3,146,699
7,100 Mobil Corporation....................................... 702,900
21,200 Schlumberger, Ltd....................................... 1,350,175
14,200 Unocal Corporation...................................... 562,675
24,200 Williams Co............................................. 1,030,013
------------
10,090,331
------------
Paper Products (0.7%):
16,300 International Paper Co.................................. 823,150
------------
Pharmaceuticals (8.1%):
27,300 American Home Products Corporation...................... 1,569,750
31,100 Bristol-Myers Squibb Co................................. 2,190,606
31,200 Merck & Co., Inc........................................ 2,308,800
8,800 Pfizer, Inc............................................. 965,800
</TABLE>
12
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited) (continued)
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Security Market
Shares Description Value
------- ----------- -----------
<C> <S> <C>
COMMON STOCKS (continued)
18,400 Schering-Plough Corporation.............................. $ 975,200
22,400 Warner-Lambert Co........................................ 1,554,000
-----------
9,564,156
-----------
Photography (0.6%):
10,500 Eastman Kodak Co......................................... 711,375
-----------
Printing & Publishing (1.8%):
28,300 Time Warner, Inc......................................... 2,080,050
-----------
Railroads (0.9%):
33,400 Burlington Northern Santa Fe Corporation................. 1,035,400
-----------
Restaurants (0.9%):
25,900 McDonald's Corporation................................... 1,069,994
-----------
Retail Stores (7.3%):
25,700 Bed Bath & Beyond, Inc.(b)............................... 989,450
26,550 Gap, Inc................................................. 1,337,456
30,300 Home Depot, Inc.......................................... 1,952,456
18,600 Rite Aid Corporation..................................... 458,025
32,100 TJX Cos., Inc............................................ 1,069,331
60,000 Wal-Mart Stores, Inc..................................... 2,895,001
-----------
8,701,719
-----------
Telecommunications (9.5%):
25,800 Ameritech Corporation.................................... 1,896,300
54,881 AT&T Corporation......................................... 3,063,046
31,000 Lucent Technologies, Inc................................. 2,090,563
48,400 MCI Worldcom, Inc.(b).................................... 4,174,499
-----------
11,224,408
-----------
Utilities (1.7%):
12,800 GTE Corporation.......................................... 969,600
14,000 MediaOne Group, Inc.(b).................................. 1,041,250
-----------
2,010,850
-----------
Total Common Stocks (Cost $87,779,796)................... 117,566,229
-----------
</TABLE>
13
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited) (continued)
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Security Market
Shares Description Value
-------- ----------- ------------
<C> <S> <C>
OPEN END INVESTMENT COMPANIES (0.4%):
Open End Investment Companies (0.4%):
484,000 Provident Institutional Temporary Investment Fund..... $ 484,000
------------
Total Open End Investment Companies (Cost -
$484,000)........................................... 484,000
------------
TOTAL INVESTMENTS (Cost - $88,263,796)(a) (99.7%) 118,050,229
OTHER ASSETS IN EXCESS OF LIABILITIES (0.3%):......... 371,307
------------
TOTAL NET ASSETS (100.0%)............................. $118,421,536
============
</TABLE>
- --------
Percentages indicated are based on net assets of $118,421,536.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $31,828,374
Unrealized depreciation....................................... (2,041,941)
-----------
Net unrealized appreciation................................... $29,786,433
===========
</TABLE>
(b) Represents non-income producing security.
See Notes to Financial Statements.
14
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited)
FIXED INCOME FUND
<TABLE>
<CAPTION>
Maturity Principal Market
Rate Date Amount Value
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (1.5%):
Financial Services (1.5%):
Chase Manhattan Grantor Trust, Series
1996-A, Class A....................... 5.20% 2/15/02 $ 329,085 $ 328,568
Ford Motor Credit, 1998-C.............. 5.81 3/15/02 300,000 300,363
-----------
Total Asset Backed Securities (Cost-$626,819).................. 628,931
-----------
CORPORATE BONDS (39.3%):
Aerospace & Defense (6.0%):
Lockheed Martin Corporation (Guaranteed
by Lockheed Martin Tactical Systems,
Inc.)................................. 6.85 5/15/01 2,500,000 2,511,238
-----------
Banking (12.0%):
Provident Bank......................... 6.13 12/15/00 2,500,000 2,484,710
BankAmerica Corporation................ 7.88 12/1/02 2,500,000 2,603,530
-----------
5,088,240
-----------
Electric Utility (10.7%):
Columbus Southern Power Company
(American Electric Power)............. 7.25 10/1/02 2,500,000 2,533,705
Commonwealth Edison.................... 6.95 7/15/18 2,000,000 1,929,890
-----------
4,463,595
-----------
Financial Services (6.0%):
Associates Corporation NA.............. 5.75 11/1/03 1,500,000 1,453,454
Travelers Property Casualty
Corporation........................... 7.75 4/15/26 1,000,000 1,039,297
-----------
2,492,751
-----------
Telecommunications (4.6%):
MCI Communications Corporation......... 6.50 4/15/10 2,000,000 1,909,408
-----------
Total Corporate Bonds (Cost-$16,740,775)....................... 16,465,232
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS
(34.2%):
Federal Home Loan Mortgage Corporation
(11.9%):
Federal Home Loan Mortgage Corp., Pool
#220019............................... 7.75 1/1/02 44,758 45,538
Federal Home Loan Mortgage Corp., Gold
Pool #D62926.......................... 6.50 8/1/25 1,813,052 1,754,775
Federal Home Loan Mortgage Corp., Pool#
C00742................................ 6.50 4/1/29 3,287,896 3,182,214
-----------
4,982,527
-----------
Federal National Mortgage Association
(17.1%):
Federal National Mortgage Association,
Pool #310001.......................... 6.00 9/1/00 760,525 757,673
Federal National Mortgage Association,
Series 1993-104, Class C, REMIC....... 6.50 3/25/21 2,000,000 1,959,312
</TABLE>
15
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited) (continued)
FIXED INCOME FUND
<TABLE>
<CAPTION>
Maturity Principal Market
Rate Date Amount Value
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS
(continued)
Federal National Mortgage Association
(continued)
Federal National Mortgage Association,
Pool #250414.......................... 7.00% 12/1/25 $2,852,863 $ 2,824,080
Federal National Mortgage Association,
Pool #343195.......................... 7.50 5/1/26 1,402,034 1,417,931
Federal National Mortgage Association,
Pool #343812.......................... 7.50 5/1/26 192,946 195,134
-----------
7,154,130
-----------
Government National Mortgage Association
(5.2%):
Government National Mortgage
Association, Pool# 356578............. 7.50 6/15/23 2,169,697 2,198,565
-----------
Total U.S. Government Agency Obligations (Cost - $14,163,426).. 14,335,222
-----------
U.S. GOVERNMENT OBLIGATIONS (17.4%):
U.S. Treasury Bonds (14.9%):
U.S. Treasury Bonds.................... 8.75 8/15/20 1,050,000 1,346,954
U.S. Treasury Bonds.................... 6.63 2/15/27 4,650,000 4,895,580
-----------
6,242,534
-----------
U.S. Treasury Notes (2.5%):
U.S. Treasury Notes.................... 6.63 5/15/07 1,000,000 1,041,563
-----------
Total U.S. Government Obligations (Cost - $7,348,804).......... 7,284,097
-----------
MUNICIPAL OBLIGATIONS (4.8%):
Oakland, California Pension Obligation,
Subseries A (MBIA Insured)............ 6.91 12/15/07 2,000,000 2,006,250
-----------
Total Municipal Obligations (Cost - $2,000,000)................ 2,006,250
-----------
</TABLE>
16
<PAGE>
Schedule of Portfolio Investments as of June 30 (Unaudited) (continued)
FIXED INCOME FUND
<TABLE>
<CAPTION>
Market
Shares Value
--------- -----------
<S> <C> <C>
OPEN END INVESTMENT COMPANIES (2.4%):
Provident Institutional Temporary Investment Fund....... 1,001,000 $ 1,001,000
-----------
Total Open End Investment Companies (Cost - $1,001,000).......... 1,001,000
-----------
TOTAL INVESTMENTS (Cost - $41,880,824)(a) (99.6%)................ 41,720,732
OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%)..................... 161,724
-----------
TOTAL NET ASSETS (100.0%)........................................ $41,882,456
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $41,882,456.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $498,536
Unrealized depreciation........................................ (658,628)
---------
Net unrealized depreciation.................................... $(160,092)
=========
</TABLE>
MBIA--Municipal Bond Insurance Association
NA--National Association
REMIC--Real Estate Mortgage Investment Conduit
See Notes to Financial Statements.
17
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
Maturity Principal Market
Rate Date Amount Value
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
Municipal Bonds--98.3%
New York--98.3%
Albany County Airport Authority,
Airport Revenue, AMT (FSA Insured)
Callable 12/15/07 @ 102............... 5.50% 12/15/19 $ 750,000 $ 746,250
Bethlehem Central School District, GO
(AMBAC Insured)....................... 7.10 11/1/07 200,000 231,750
Metropolitan Transportation Authority,
Transportation Facilities Revenue,
Series A (MBIA Insured) Callable
7/1/07 @ 101.5........................ 5.63 7/1/25 1,200,000 1,212,000
Monroe County, Series B, GO, Callable
12/01/99 @ 101.5...................... 7.00 6/1/04 10,000 10,272
New York City, Municipal Water Finance
Authority, Water & Sewer System
Revenue, Series A (FGIC Insured)*..... 3.55 7/1/99 800,000 800,000
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 1,793,250
New York City, Series A, GO, Callable
8/15/01 @ 101.5....................... 7.75 8/15/04 20,000 21,600
New York City, Series A, GO, Callable
8/15/01 @ 101.5....................... 7.75 8/15/07 175,000 188,344
New York City, Series A, GO,
Prerefunded 8/15/01 @ 101.5........... 7.75 8/15/04 580,000 630,025
New York City, Series A, GO,
Prerefunded 8/15/01 @ 101.5........... 7.75 8/15/07 200,000 217,500
New York City, Series B, GO............ 6.10 8/15/05 2,000,000 2,142,500
New York City, Series B, GO, Callable
2/1/02 @ 101.5........................ 7.50 2/1/07 1,000,000 1,081,250
New York City, Series E, GO............ 6.50 2/15/06 2,000,000 2,184,999
New York City, Series F, GO, Callable
11/15/01 @ 101.5...................... 8.40 11/15/05 45,000 49,500
New York City, Series F, GO,
Prerefunded 11/15/01 @ 101.5.......... 8.40 11/15/01 105,000 116,550
New York City, Series G, GO,........... 6.75 2/1/09 1,000,000 1,125,000
New York City, Transitional Aa3, Aa
Finance Authority Revenue, Series B
(FTS), Callable 5/1/09 @101........... 4.75 11/1/23 1,500,000 1,336,875
New York City, Trust For Cultural
Resources, Museum of Modern Art (AMBAC
Insured) Prerefunded 1/1/02 @ 102..... 6.40 1/1/04 350,000 374,063
New York State, Dormitory Authority
Lease Revenue, Court Facilities,
Westchester County.................... 5.00 8/1/08 800,000 810,000
New York State, Dormitory Authority,
Lease Revenue, Municipal Health
Facilities Improvement Programs,
Series 1 (FSA Insured) Callable
1/15/09 @ 101......................... 4.75 1/15/29 1,000,000 885,000
New York State, Dormitory Authority,
City University System Revenue, Series
A (FGIC-TCRS Insured)................. 5.75 7/1/18 2,370,000 2,497,387
New York State, Dormitory Authority,
Mental Health Services Facilities
Revenue, Series G (AMBAC Insured)
Callable 8/15/08 @ 101................ 4.50 8/15/18 1,650,000 1,458,188
New York State, Dormitory Authority,
State University Education Facilities
Revenue, Series A (MBIA Insured)...... 5.88 5/15/11 1,500,000 1,606,875
New York State, Environmental
Facilities Corporation, Clean Water,
Series B, Callable 6/15/08 @ 102...... 5.05 6/15/13 500,000 495,000
</TABLE>
18
<PAGE>
Schedule of Portfolio Investments as of June 30, 1999 (Unaudited) (continued)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
Maturity Principal Market
Rate Date Amount Value
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
Municipal Bonds (continued)
New York (continued)
New York State, Environmental
Facilities Corporation, Pollution
Control Revenue, State Water, Series
A, Callable 6/15/01 @ 102............. 7.00% 6/15/12 $ 150,000 $ 160,125
New York State, Environmental
Facilities Corporation, Pollution
Control Revenue, State Water, Series
A, Prerefunded 6/15/01 @ 102.......... 7.00 6/15/12 150,000 161,063
New York State, Environmental
Facilities Corporation, Pollution
Control Revenue, State Water, Series
B, Callable 8/02/99 @ 102............. 7.50 3/15/11 250,000 256,598
New York State, Environmental
Facilities Corporation, Pollution
Control Revenue, State Water, Series
C, Callable 3/15/00 @ 102............. 7.20 3/15/11 200,000 207,890
New York State, Housing Finance Agency,
Multifamily Mortgage Housing Revenue,
Series A (FHA Insured) Callable
8/15/02 @ 102......................... 7.00 8/15/22 900,000 961,875
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 1,945,000 2,098,169
New York State, Medical Care Facilities
Finance Agency, Series A (FSA Insured)
Callable 9/02/99 @ 101................ 7.70 2/15/18 80,000 81,129
New York State, Urban Development
Corporation, Senior Lien, Corporate
Purpose, Callable 7/1/06 @ 102........ 5.50 7/1/16 2,000,000 2,035,000
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 2,549,999
Syracuse, GO, Prerefunded 2/15/01 @
102................................... 6.70 2/15/01 300,000 317,625
Triborough Bridge & Tunnel Authority,
General Purpose Revenue, Series A, GO,
Callable 1/1/07 @ 101................. 5.25 1/1/28 500,000 479,375
-----------
Total Municipal Bonds (Cost-$30,262,263)........................ 31,323,026
===========
</TABLE>
19
<PAGE>
Schedule of Portfolio Investments as of June 30, 1998 (Unaudited) (continued)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
Market
Shares Value
------ -----------
<S> <C> <C>
OPEN-END INVESTMENT COMPANIES (0.3%):
New York (0.3%):
Dreyfus New York Money Fund............................... 87,000 $ 87,000
-----------
Total Open-End Investment Companies (Cost - $87,000)............ 87,000
-----------
TOTAL INVESTMENTS (Cost - $30,349,263)(a) (98.6%)............... 31,410,026
OTHER ASSETS IN EXCESS OF LIABILITIES (1.4%).................... 435,921
-----------
TOTAL NET ASSETS (100.0%)....................................... $31,845,947
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $31,845,947.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $ 1,420,115
Unrealized depreciation....................................... (359,352)
-----------
Net unrealized appreciation................................... $ 1,060,763
===========
</TABLE>
* Variable rate security. Rate represents rate in effect at June 30, 1999.
Date presented represents the next rate change date.
AMBAC - American Municipal Bond Assurance Corp.
AMT - Alternative Minimum Taxable Paper
FHA - Federal Housing Administration
FGIC - Financial Guaranty Insurance Corp.
FSA - Financial Security Assurance
FTS - Future Tax Secured
GO - General Obligation
MBIA - Municipal Bond Insurance Association
SONYMA - State of New York Mortgage Agency
TCRS - Transferable Custody Receipts
See Notes to Financial Statements.
20
<PAGE>
Statement of Assets and Liabilities
As of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Growth Fixed New York
and Income Tax-Free
Income Fund Fund Bond Fund
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(amortized cost $88,263,796,
$41,880,824, $30,349,263,
respectively)........................ $118,050,229 $41,720,732 $31,410,026
Cash.................................. 44 301 373
Interest and dividends receivable..... 91,633 404,313 582,107
Receivable for capital shares sold.... 2,959 25 --
Receivable from investment securities
sold................................. 669,723 71 --
Prepaid expenses...................... 3,758 1,966 547
------------ ----------- -----------
Total Assets........................... 118,818,346 42,127,408 31,993,053
------------ ----------- -----------
LIABILITIES:
Dividends payable..................... 292,670 198,077 117,462
Payable for capital shares redeemed... 500 -- --
Accrued expenses and other payables:
Investment advisory fees............. 51,350 18,987 6,620
Administration fees.................. 9,336 3,452 2,648
Distribution fees.................... -- 48 3,651
Accounting and transfer agent fees... 4,377 5,438 2,168
Other................................ 38,577 18,950 14,557
------------ ----------- -----------
Total Liabilities...................... 396,810 244,952 147,106
------------ ----------- -----------
Net Assets............................. $118,421,536 $41,882,456 $31,845,947
============ =========== ===========
COMPUTATION OF NET ASSET VALUE:
Net assets............................ $118,421,536 $41,882,456 $31,845,947
Shares of beneficial interest issued
and outstanding (par value $0.001 per
share, unlimited number of shares
authorized).......................... 7,729,483 4,245,144 2,841,135
------------ ----------- -----------
Net asset value....................... $ 15.32 $ 9.87 $ 11.21
============ =========== ===========
Maximum sales charge.................. 5.00% 4.75% 4.75%
Maximum offering price (Net asset
value / (100%--
Maximum sales charge))............... $ 16.13 $ 10.36 $ 11.77
============ =========== ===========
COMPOSITION OF NET ASSETS:
Paid-in capital....................... $ 76,801,006 $43,952,109 $31,365,928
Undistributed (distributions in excess
of) net investment income............ 99,915 33,514 (18,944)
Accumulated net realized gain (losses)
from investment transactions......... 11,734,182 (1,943,075) (561,800)
Net unrealized appreciation
(depreciation) from investments...... 29,786,433 (160,092) 1,060,763
------------ ----------- -----------
Net Assets............................. $118,421,536 $41,882,456 $31,845,947
============ =========== ===========
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
Statement of Operations
For the period ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Growth Fixed New York
and Income Tax-Free
Income Fund Fund Bond Fund
----------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest............................... $ 10 $ 1,658,539 $ 879,704
Dividends.............................. 603,181 10,025 2,358
----------- ----------- -----------
Total Income............................ 603,191 1,668,564 882,062
----------- ----------- -----------
EXPENSES:
Investment advisory fees............... 305,941 139,654 74,166
Administration fees.................... 83,439 38,088 24,722
Co-administration and shareholder
servicer assistance fees.............. 38,938 17,774 11,537
Distribution fees...................... 27 66 24,636
Legal fees............................. 54,903 25,634 16,357
Accounting and transfer agent fees..... 30,632 14,713 43,719
Other expenses......................... 56,148 31,651 22,055
----------- ----------- -----------
Gross Expenses.......................... 570,028 267,580 217,192
Less: Fee waivers...................... (66,752) (30,470) (52,741)
----------- ----------- -----------
Net Expenses............................ 503,276 237,110 164,451
----------- ----------- -----------
Net Investment Income................... 99,915 1,431,454 717,611
----------- ----------- -----------
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions................ 9,808,406 (202,306) (69,984)
Net change in unrealized appreciation
(depreciation) from investments....... 1,307,368 (2,331,222) (1,161,275)
----------- ----------- -----------
Net Realized/Unrealized Gains (Losses)
from Investments...................... 11,115,774 (2,533,528) (1,231,259)
----------- ----------- -----------
Change in Net Assets Resulting from
Operations............................ $11,215,689 $(1,102,074) $ (513,648)
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Growth and Income Fund
--------------------------------
For the For the
period ended year ended
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income......................... $ 99,915 $ 530,461
Net realized gains (losses) from investment
transactions................................. 9,808,406 9,102,892
Net change in unrealized appreciation
(depreciation) from investments.............. 1,307,368 13,103,132
------------ ------------
Change in net assets resulting from
operations................................... 11,215,689 22,736,485
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................... -- (531,024)
From net realized gains (losses) from
investment transactions...................... -- (12,216,636)
------------ ------------
Change in net assets from shareholder
distributions................................ -- (12,747,660)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued................... 5,735,380 42,875,131
Dividends reinvested.......................... -- 13,780,310
Cost of shares redeemed....................... (4,796,473) (15,572,070)
------------ ------------
Change in net assets from capital share
transactions................................. 938,907 41,083,371
------------ ------------
Change in Net Assets.......................... 12,154,596 51,072,196
------------ ------------
NET ASSETS:
Beginning of period........................... 106,266,940 55,194,744
------------ ------------
End of period................................. $118,421,536 $106,266,940
============ ============
SHARE TRANSACTIONS:
Issued........................................ 396,245 3,357,173
Reinvested.................................... -- 1,009,942
Redeemed...................................... (331,212) (1,168,181)
------------ ------------
Change in shares.............................. 65,033 3,198,934
============ ============
</TABLE>
See Notes to Financial Statememts.
23
<PAGE>
Statement of Changes in Net Assets (Unaudited)
<TABLE>
<CAPTION>
Fixed Income Fund New York Tax-Free Bond Fund
------------------------------- -------------------------------
For the For the For the For the
period ended year ended period ended year ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
From Investment Activities:
OPERATIONS:
Net investment income...... $ 1,431,454 $ 3,146,518 $ 717,611 $ 1,568,024
Net realized gains (losses)
from
investment transactions... (202,306) 1,275,186 (69,984) 805,303
Net change in unrealized
appreciation
(depreciation) from
investments............... (2,331,222) 91,117 (1,161,275) (300,037)
----------- ----------- ----------- -----------
Change in net assets
resulting
from operations........... (1,102,074) 4,512,821 (513,648) 2,073,290
----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income.................... (1,431,454) (3,146,518) (736,555) (1,568,024)
----------- ----------- ----------- -----------
Change in net assets from
shareholder distributions.. (1,431,454) (3,146,518) (736,555) (1,568,024)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares
issued.................... 2,960,135 9,201,178 806,066 1,667,644
Dividends reinvested....... 23,693 54,313 414,074 904,671
Cost of shares redeemed.... (12,401,402) (18,190,514) (1,792,029) (6,933,516)
----------- ----------- ----------- -----------
Change in net assets from
capital
share transactions........ (9,417,574) (8,935,023) (571,889) (4,361,201)
----------- ----------- ----------- -----------
Change in Net Assets....... (11,951,102) (7,568,720) (1,822,092) (3,855,935)
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period........ 53,833,558 61,402,278 33,668,039 37,523,974
----------- ----------- ----------- -----------
End of period.............. $41,882,456 $53,833,558 $31,845,947 $33,668,039
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued..................... 292,018 902,978 69,515 144,518
Reinvested................. 2,325 5,316 35,701 78,329
Redeemed................... (1,240,663) (1,784,806) (155,355) (601,146)
----------- ----------- ----------- -----------
Change in shares........... (946,320) (876,512) (50,139) (378,299)
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statememts.
24
<PAGE>
Notes to Financial Statements
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 and Income Fund, Fixed Income Fund, and New York Tax-
Free Bond Fund (herein referred collectively as the "Funds").
The investment objectives and policies are as follows:
<TABLE>
<C> <S>
Growth and Income Fund-- To provide investors with long-term growth of
capital and current income by investing
primarily in common stocks, preferred stocks
and securities convertible into or with rights
to purchase common stocks ("equity
securities").
Fixed Income Fund-- Generation of high current income consistent
with appreciation of capital by investing
primarily in notes, bonds, debentures and
other fixed income securities.
New York Tax-Free Bond Fund-- To provide investors with as high a level of
current income exempt from regular Federal,
New York State and New York City personal
income taxes as is consistent with relative
stability of capital.
</TABLE>
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 each Funds' policy to continue to comply with the provisions
of the Internal Revenue Code, as amended, applicable to regulated
investment companies, and to distribute substantially all of its taxable
income and net realized capital gains, if any, to its shareholders for each
taxable year. Therefore, no provision is required for federal income tax.
25
<PAGE>
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Dividends and Distributions: The Growth and Income Fund intends to declare
and 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.
Dividends and distributions are recorded by the Funds on the ex-dividend
date. The amounts of dividends from net investment income and of
distributions from net realized gains are determined in accordance with
federal income tax regulations that 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 is recorded on the
accrual basis and includes, where applicable, discount and premium.
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
period ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
Growth and Income Fund............................... $43,849,704 $42,574,987
Fixed Income Fund.................................... 21,574,646 31,675,967
New York Tax-Free Bond Fund.......................... 1,466,025 2,551,755
</TABLE>
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 management 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. As
compensation
26
<PAGE>
Notes to Financial Statements (continued)
4. Related Party Transactions (continued)
for its services, HSBC Asset Management Americas Inc. is paid monthly
advisory fees at the following annual rates:
<TABLE>
<CAPTION>
Investment Advisory Fee Rate
------------------------------
Growth and Income Fixed Income
Portion of Each 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>
Investment
Advisory Fee Rate
-----------------
New York
Tax-Free Bond
Portion 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>
The Fund may enter into agreements (the "Service Agreements") with certain
banks, financial institutions and corporations ("Service Organizations")
whereby each Service Organization provides recordkeeping and 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. During the period ended June 30,
1999, the Funds did not participate in any service agreement.
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.
<TABLE>
<CAPTION>
Administration
Portion of Each Fund's Average Daily Net Assets Fee Rate
----------------------------------------------- --------------
<S> <C>
Up to $200 million........................................... 0.150%
In excess of $200 million but not exceeding $400 million..... 0.125%
In excess of $400 million but not exceeding $600 million..... 0.100%
In excess of $600 million.................................... 0.080%
</TABLE>
27
<PAGE>
Notes to Financial Statements (continued)
4. Related Party Transactions (continued)
HSBC Asset Management Inc. earned co-administration and shareholder
servicer assistance fees of 0.07% of each Fund's average net assets.
Information regarding these transactions is as follows for the period ended
June 30, 1999:
<TABLE>
<CAPTION>
Co-Administration
Investment and Shareholder
Advisory Fees Administration Servicer Assistance
voluntarily Fees voluntarily Fees voluntarily
reduced reduced reduced
------------- ---------------- -------------------
<S> <C> <C> <C>
Growth and Income Fund.. $ -- $27,814 $38,938
Fixed Income Fund....... -- 12,696 17,774
New York Tax-Free Bond
Fund.................... 32,963 8,241 11,537
</TABLE>
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 0.35% (0.50% for Growth and Income Fund) of each Fund's
average net assets during the preceding month. As distributor, BISYS is
entitled to receive commissions on sales of shares of the Funds. For the
period ended June 30, 1999, the total commission BISYS received, retained,
and reallowed to affiliated broker/dealers of the Funds are as follow:
<TABLE>
<CAPTION>
Commissions
Commissions Reallowed to
Retained by Affiliated
Total Commissions BISYS Broker/Dealer
----------------- ----------- -------------
<S> <C> <C> <C>
Growth and Income Fund.......... $16,150 $2,705 $13,445
Fixed Income Fund............... 245 27 218
New York Tax-Free Bond Fund..... 18,218 2,226 15,992
------- ------ -------
$34,614 $4,958 $29,655
======= ====== =======
</TABLE>
A partner of the Trust's legal counsel served as Secretary of the Trust.
Paul, Weiss, Rifkind, Wharton and Garrison serves as the Trust's legal
counsel for the period ended June 30, 1999.
5. Options Written
When a Fund writes an option, an amount equal to the premium received by
the Fund is recorded as a liability and is subsequently adjusted to the
current fair value of the option written. Premiums received from writing
options that expire unexercised are treated by the Fund on the expiration
date as realized gains from investments. The difference between the premium
and the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain, or if the
premium is less than the amount paid for the closing purchase transaction,
as a realized loss. If a call option is exercised, the premium is added to
the proceeds from the sale of the underlying security or currency in
determining whether the Fund has realized a gain or loss. If a put option
is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund as writer of an option bears the market
risk of an unfavorable change in the price of the security underlying the
written option.
28
<PAGE>
Notes to Financial Statements (continued)
5. Options Written (continued)
A Fund may seek to earn premiums by writing covered call options against
some of the securities in its portfolio. A call option is "covered" if the
Fund owns the underlying securities covered by the call. The purchaser of
the call option obtains the right to acquire these securities at a fixed
price (which may be less than, the same as, or greater than the current
market price of such securities) during a specific period of time. Until an
option lapses or is canceled by a closing transaction, the maximum sales
price the Fund can realize on the underlying security is limited to the
strike price. The Fund continues to bear the risk of a decline in the
market price of the security during the option period, although the decline
in value would be mitigated by the amount of the premium received for the
call. The aggregate value of the securities subject to options written by
the Fund may not exceed 25% of the value of the Fund's net assets.
The following is a summary of written call option activity for the period
ended June 30, 1999 by the Growth and Income Fund:
<TABLE>
<CAPTION>
Call Options
------------------
Number of
Contracts Premiums
--------- --------
<S> <C> <C>
Balance at beginning of year............................. 70 $ 23,415
Options written.......................................... 355 176,879
Options closed........................................... (425) (200,294)
---- --------
Options outstanding at end of year....................... -- $ --
==== ========
</TABLE>
6. Concentration of Credit Risk
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.
29
<PAGE>
Notes to Financial Statements (continued)
7. Voting Results of Special Meeting of Shareholders
At a special meeting of the shareholders of HSBC Mutual Fund Trust (the
"Trust"), held on May 10, 1999, at 10:00 a.m. ET, the following actions
were taken:
(1) The approval of the election of four existing members of the Board of
Trustees of the Trust and the election of four new members to the
Board of Trustees of the Trust to serve until their successors are
duly elected and qualified as presented in the proxy materials:
<TABLE>
<CAPTION>
Number of Number of
Name of Trustee Votes For Votes Withheld
--------------- ---------- --------------
<S> <C> <C>
Wolfe J. Frankl.................................. 14,145,144 22,306
Jeffery J. Hass.................................. 14,144,633 22,817
Richard J. Loos.................................. 14,144,633 22,817
Clifton H. W. Maloney............................ 14,144,600 22,850
John C. Meditz................................... 14,145,776 21,674
Harald Paumgarten................................ 14,143,568 23,882
John P. Pfann.................................... 14,146,374 21,076
Robert A. Robinson............................... 14,146,374 21,076
</TABLE>
(2) The approval of the existing Investment Advisory agreement between the
Trust and HSBC Asset Management Americas Inc. is as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,250,579 162,491 45,628
HSBC Fixed Income Fund........................... 5,117,460 -- --
HSBC New York Tax-Free Bond Fund................. 1,528,534 18,495 44,260
</TABLE>
(3) The approval that Ernst & Young, LLP has been selected as independent
accountants for the Trust for the fiscal year ending December 31,
1999:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C> <C>
HSBC Mutual Funds Trust......................... 14,119,754 14,533 33,159
</TABLE>
(4) The approval that a change in the investment policies of all of the
Funds to permit each Fund to make loans, including loans of its
portfolio securities if, as a result, the aggregate of such loans does
not exceed 33 1/3% of the value of a Fund's total assets:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,276,454 17,305 164,940
HSBC Fixed Income Fund........................... 5,090,567 956 25,937
HSBC New York Tax-Free Bond Fund................. 1,256,310 93,643 241,338
</TABLE>
30
<PAGE>
Notes to Financial Statements (continued)
7. Voting Results of Special Meeting of Shareholders (continued)
(5) The approval that a change in the investment policies of all of the
Funds to permit each Fund to: (I) borrow from banks, for any purpose,
up to 33 1/3% of the current value of its total assets; (II) pledge up
to 33 1/3% of its total assets to secure such borrowings; and (III) to
eliminate any limits on purchasing securities when borrowings exist:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,272,304 19,128 167,267
HSBC Fixed Income Fund........................... 5,090,565 956 25,939
HSBC New York Tax-Free Bond Fund................. 1,257,437 93,838 240,016
</TABLE>
(6) The approval that a change in the investment policies of each of the
Funds to remove the restriction on each Fund purchasing securities of
any company with a record of less than three years continuous
operation if such purchase would cause the Fund's investments in all
such companies taken at cost to exceed 5% of the total assets of the
Fund:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,276,793 17,634 164,272
HSBC Fixed Income Fund........................... 5,091,033 488 25,939
HSBC New York Tax-Free Bond Fund................. 1,295,112 71,853 224,326
</TABLE>
(7) The approval that a change in the investment policies of each of the
Funds to remove the restriction on each Fund investing in warrants in
excess of 5% of the Fund's net assets, and to remove the restriction
on the Funds investing in warrants which are listed on the New York or
American Stock Exchange in excess of 2% of the Fund's net assets:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,275,641 16,571 166,487
HSBC Fixed Income Fund........................... 5,091,033 488 25,939
HSBC New York Tax-Free Bond Fund................. 1,271,022 52,177 268,092
</TABLE>
(8) The approval that a change in the investment policies of each of the
Funds to permit each Fund to purchase or retain securities of any
company which the officers and trustees of the trust, and officers and
directors of the advisor, who individual own more than of 1% of the
securities of that company, together own beneficially more than 5% of
such company:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,276,529 16,495 165,675
HSBC Fixed Income Fund........................... 5,091,033 488 25,939
HSBC New York Tax-Free Bond Fund................. 1,290,142 80,671 220,478
</TABLE>
(9) The approval that a change in the investment policies of all of the
Funds to remove the restriction on each Fund participating on a joint,
or a joint and several basis, in any securities trading account:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,276,593 14,007 168,099
HSBC Fixed Income Fund........................... 5,091,081 956 25,423
HSBC New York Tax-Free Bond Fund................. 1,286,317 70,856 234,118
</TABLE>
31
<PAGE>
Notes to Financial Statements (continued)
7. Voting Results of Special Meeting of Shareholders (continued)
(10) The approval that a change in the investment policies of the Growth
and Income Fund and the New York Tax-Free Bond Fund to permit each
Fund to invest up to 15% of its net assets in illiquid securities:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,277,170 15,099 166,430
HSBC New York Tax-Free Bond Fund................. 1,289,658 65,009 236,624
</TABLE>
(11) The approval that a change in the investment policies of all of the
Funds, except the International Equity Fund, to provide that each
Fund, with respect to 75% of its total assets (taken at market
value), may not purchase a security if as a result (1) more than 5%
of its total assets (taken at market value) would be invested in the
securities (including securities subject to repurchase agreements),
of any one issuer, other than obligations which are issued or
guaranteed by the United States Government, its agencies or
instrumentalities or (2) the Fund would own more than 10% of the
outstanding voting securities of such issuer:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
HSBC Growth and Income Fund...................... 7,281,890 13,027 163,782
HSBC Fixed Income Fund........................... 5,091,033 488 25,939
HSBC New York Tax-Free Bond Fund................. 1,311,685 42,738 236,868
</TABLE>
8. Subsequent Events
Effective July 1, 1999, the Growth and Income Fund, Fixed Income Fund and
New York Tax-Free Bond Fund are authorized to issue two additional classes
of shares: Class B and Class C shares. Also effective July 1, 1999, the
existing share class is designated as Class A shares. Each class of shares
in a Fund has substantially identical rights and privileges except with
respect to sales charges, fees paid under service organization or
distribution plans, expenses allocable exclusively to each class of shares,
voting rights on matters affecting a single class of shares, and the
exchange privileges of each class of shares.
The following is a summary of the maximum annual fund operating expenses
(fees paid from Fund assets) for Class A, Class B and Class C shares
effective July 1, 1999:
<TABLE>
<CAPTION>
Growth and Fixed New York
Income Fund Income Fund Tax-Free Bond Fund
----------------------- ----------------------- -----------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fee.......... 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.45% 0.45% 0.45%
Administrative Services
fee/1/ ................ 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15% 0.15%
Distribution (12b-1)
fee.................... 0.50% 0.75% 0.75% 0.35% 0.75% 0.75% 0.35% 0.75% 0.75%
Service Organization
fee/2/ ................ 0.35% 0.50% 0.50% 0.35% 0.50% 0.50% 0.35% 0.50% 0.50%
Fee Waivers & Expense
Reimbursements......... 0.65% 0.30% 0.30% 0.50% 0.30% 0.30% 0.50% 0.30% 0.30%
Net expenses............ 1.15% 1.90% 1.90% 1.14% 1.89% 1.89% 1.25% 2.00% 2.00%
</TABLE>
--------
/1/The Administrator is contractually limiting its Administrative Services
fee to .10% for each class of shares until December 31, 1999.
/2/The Service Organization fee is being contractually waived in its
entirety for Class A shares and contractually limited to .25% for the
Class B and Class C shares until December 31, 1999.
32
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Year and Periods Indicated (Unaudited).
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
For the For the Year Ended December 31,
period ended ----------------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.86 $ 12.36 $ 16.28 $ 14.77 $ 11.93 $ 12.87
-------- -------- ------- -------- ------- -------
Investment Activities
Net investment income.. 0.01 0.07 0.18 0.18 0.30 0.29
Net realized and
unrealized gains from
investment
transactions.......... 1.45 3.23 4.28** 2.46 3.64 (0.67)
-------- -------- ------- -------- ------- -------
Total from Investment
Activities............ 1.46 3.30 4.46 2.64 3.94 (0.38)
-------- -------- ------- -------- ------- -------
Distributions
From net investment
income................ -- (0.08) (0.19) (0.18) (0.30) (0.29)
From net realized
gains................. -- (1.72) (8.19) (0.95) (0.80) (0.15)
From excess of net
realized gains........ -- -- -- -- -- (0.12)
-------- -------- ------- -------- ------- -------
Total Distributions.... -- (1.80) (8.38) (1.13) (1.10) (0.56)
-------- -------- ------- -------- ------- -------
Net Asset Value, End of
Period................. $ 15.32 $ 13.86 $ 12.36 $ 16.28 $ 14.77 $ 11.93
======== ======== ======= ======== ======= =======
Total Return (excludes
sales charges)......... 10.53%(a) 26.97% 27.42% 17.90% 33.11% (2.97)%
Ratios/Supplemental
Data:
Net Assets at end of
period (000).......... $118,422 $106,267 $55,195 $140,688 $66,062 $64,999
Ratio of expenses to
average net
assets (b)............ 0.90% 0.89% 0.83% 0.85% 0.94% 0.78%
Ratio of net investment
income to average net
assets (b)............ 0.18% 0.58% 0.95% 1.43% 2.06% 2.25%
Ratio of expenses to
average net
assets* (b)........... 1.02% 1.01% 0.95% 0.96% 0.97% 0.86%
Portfolio Turnover
Rate.................. 38.26%(a) 82.19% 69.07% 61.68% 52.77% 23.31%
</TABLE>
- --------
(a) Not annualized.
(b) Annualized.
* 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.
33
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Year and Periods Indicated (Unaudited).
FIXED INCOME FUND
<TABLE>
<CAPTION>
For the For the Year Ended December 31,
period ended --------------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.37 $ 10.12 $ 9.89 $ 10.28 $ 9.35 $ 10.13
------- ------- ------- -------- ------- -------
Investment Activities
Net investment income.. 0.29 0.57 0.59 0.59 0.59 0.59
Net realized and
unrealized gains from
investments........... (0.51) 0.25 0.23 (0.39) 0.93 (0.78)
------- ------- ------- -------- ------- -------
Total from Investment
Activities............ (0.22) 0.82 0.82 0.20 1.52 (0.19)
------- ------- ------- -------- ------- -------
Distributions
From net investment
income................ (0.28) (0.57) (0.59) (0.59) (0.59) (0.59)
------- ------- ------- -------- ------- -------
Total Distributions.... (0.28) (0.57) (0.59) (0.59) (0.59) (0.59)
------- ------- ------- -------- ------- -------
Net Asset Value, End of
Period................. $ 9.87 $ 10.37 $ 10.12 $ 9.89 $ 10.28 $ 9.35
======= ======= ======= ======== ======= =======
Total Return (excludes
sales charges)......... (2.12)%(a) 8.33% 8.62% 2.11% 16.73% (1.89)%
Ratios/Supplemental
Data:
Net Assets at end of
period (000).......... $41,882 $53,834 $61,402 $104,875 $99,942 $84,774
Ratio of expenses to
average net
assets (b)............ 0.94% 0.89% 0.88% 0.88% 0.93% 0.77%
Ratio of net investment
income to average net
assets (b)............ 5.64% 5.59% 6.00% 5.94% 6.03% 6.10%
Ratio of expenses to
average net
assets* (b)........... 1.06% 1.01% 1.00% 0.98% 0.96% 0.86%
Portfolio Turnover
Rate.................. 44.04%(a) 71.05% 60.98% 156.05% 41.58% 63.96%
</TABLE>
- --------
(a) Not annualized.
(b) Annualized.
* 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.
34
<PAGE>
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each
Year and Periods Indicated. (Unaudited)
NEW YORK TAX-FREE BOND FUND
<TABLE>
<CAPTION>
For the For the Year Ended December 31,
period ended -------------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 11.64 $ 11.48 $ 11.05 $ 11.17 $ 10.20 $ 11.70
------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.02 0.51 0.53 0.55 0.54 0.53
Net realized and
unrealized gains from
investments........... (0.42) 0.16 0.43 (0.12) 0.97 (1.47)
------- ------- ------- ------- ------- -------
Total from Investment
Activities............ (0.40) 0.67 0.96 0.43 1.51 (0.94)
------- ------- ------- ------- ------- -------
Distributions
From net investment
income................ (0.03) (0.51) (0.53) (0.55) (0.54) (0.53)
From net realized
gains................. -- -- -- -- -- (0.03)
------- ------- ------- ------- ------- -------
Total Distributions.... (0.03) (0.51) (0.53) (0.55) (0.54) (0.56)
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 11.21 $ 11.64 $ 11.48 $ 11.05 $ 11.17 $ 10.20
======= ======= ======= ======= ======= =======
Total Return (excludes
sales charges)......... (1.54)%(a) 5.99% 8.97% 3.99% 15.17% (8.13)%
Ratios/Supplemental
Data:
Net Assets at end of
period (000).......... $31,846 $33,668 $37,524 $41,975 $50,677 $50,711
Ratio of expenses to
average net
assets (b)............ 1.00% 0.96% 0.92% 0.91% 0.99% 0.84%
Ratio of net investment
income to average
net assets (b)........ 4.36% 4.47% 4.79% 5.02% 5.07% 4.93%
Ratio of expenses to
average net
assets* (b)........... 1.32% 1.28% 1.24% 1.21% 1.20% 1.10%
Portfolio Turnover
Rate.................. 4.59%(a) 56.81% 35.64% 87.40% 24.43% 122.43%
</TABLE>
- --------
(a) Not annualized.
(b) Annualized.
* 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.
35
<PAGE>
HSBC Mutual Funds Trust
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[LOGO OF HSBC ASSET MANAGEMENT
AMERICAS INC. APPEARS HERE]
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Growth and Income Fund
Fixed Income Fund
New York Tax-Free Bond Fund
HSBC SM 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.
8/99
Semi-Annual Report (Unaudited)
June 30, 1999
Managed by:
HSBC Asset Management Americas Inc.
Sponsored and distributed by:
BISYS Fund Services
