-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JWVJqK+SkVs7AeMNbqF79k/NSRhXLBm0qpgjdjy5ugJAAZL7bYu4mnwuEByACwJ5 EtCElmi0QLrNLGi6EgqMyA== 0000935069-96-000034.txt : 19960312 0000935069-96-000034.hdr.sgml : 19960312 ACCESSION NUMBER: 0000935069-96-000034 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960311 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARINER MUTUAL FUNDS TRUST CENTRAL INDEX KEY: 0000861106 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06057 FILM NUMBER: 96533212 BUSINESS ADDRESS: STREET 1: 370 17TH STREET STREET 2: SUITE 2700 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036232577 MAIL ADDRESS: STREET 1: 370 17TH STREET STREET 2: SUITE 2700 CITY: DENVER STATE: CO ZIP: 80202 N-30D 1 FILING OF MARINER MUTUAL TOTAL RETURN EQUITY FUND MARINER MUTUAL FUNDS TRUST - ------------------------------------------------------------------------------- TOTAL RETURN EQUITY FUND HSBC Asset Management [LOGO] - ------------------------------------------------------------------------------- ANNUAL REPORT December 31, 1995 Managed by: HSBC ASSET MANAGEMENT AMERICAS INC. Sponsored and distributed by: MARINER FUNDS SERVICES COVER MARINER MUTUAL FUNDS TRUST - ------------------------------------------------------------------------------- TOTAL RETURN EQUITY FUND HSBC Asset Management [LOGO] - ------------------------------------------------------------------------------- February 12, 1996 Dear Shareholder: The year 1995 witnessed a remarkable confluence of events that carried the U.S. equity market to new highs, with nary a true pause on the way. Stocks, as measured by the S&P 500 posted their best return since 1958, up 37.6%. Economic conditions were nearly ideal as the Federal Reserve was able to engineer the much touted but often questioned "soft landing" -- marked by low inflation, low interest rates and moderate GDP growth -- while moving toward a more accommodative policy via two easing moves in July and December. This drove bonds higher and rates lower as yields declined approximately 200 basis points all along the Treasury yield curve during the year. While the economic environment in itself was quite positive and supportive to equity valuations, corporate profits were surprisingly strong and well ahead of expectations, which provided the real impetus to the equity market. Earnings growth was driven by the highest margins in 25 years, as corporations continued to reap the benefits of the massive restructurings of the early '90s. In addition, margins were augmented by technological efficiencies gained via increased expenditures on office equipment, which nearly doubled as a percent of real GDP since 1990. Further fueling market gains was an intense level of consolidation activity as U.S. companies announced a record $465 billion in mergers and acquisitions (M&A) in 1995, while the global tally was in excess of $865 billion. Consolidation was noted across all sectors and industries but activity among the banks was particularly noteworthy. Finally, providing much of the necessary liquidity to fuel the market were record inflows into equity mutual funds. Inflows into domestic equity mutual funds reached a record $117.2 billion in 1995, surpassing the previous annual high of $91.1 set in 1993. These inflows helped to absorb a healthy, if not record-breaking, stream of initial public offerings (IPO's) during the year. Sectorally, the Health Care stocks led the market, returning over 58%, benefitting by a late year rally as investors became more defensively oriented. Financials also posted an annual return in excess of 50%, driven in part by the aforementioned torrid pace of M&A activity, as well as lower rates. Surprisingly, after a very weak fourth quarter showing, Technology stocks ended the year in line with the market after a stunning first half 1995 performance. Consumer Cyclicals turned in the weakest returns, up 18%, battered by poor retail sales from a consumer that was preoccupied with job (in)security and a heavy credit burden. Also weak on a relative basis were the Basic Materials stocks, up 24%, as it appeared that most commodity prices hit their cyclical peaks. 1 We are forecasting a positive, but less spectacular return from U.S. stocks in 1996. We expect that corporate profits, a prime driver of the market in 1995, will be restrained by a lack of pricing power in combination with declining contributions from productivity improvements, as margins have already reached 25-year highs. For the year 1996, we expect corporate earnings to rise, but only by 5%, compared with an approximate increase of 20% in 1995. Further, we see little room for price/earnings multiples to expand from current levels given an essentially benign interest rate outlook. However the current economic environment of low rates/low inflation should provide solid support for the U.S. equity market. Our forecast of modest GDP growth is also positive for stocks, though we do expect a first half slowdown. Further, the supply/demand scenario for U.S. equities appears quite positive. On the demand side, equity mutual fund inflows are expected to remain strong given the uncompelling yields on money market alternatives and growing popularity of defined contribution (401K) plans. Further, foreign investors, who have been very underinvested in the U.S. market, could provide significant liquidity as the U.S. dollar continues to strengthen. On the supply side, corporate stock repurchases continue to replace dividend increases as the favored method of `increasing shareholder value'. Finally, it is difficult to envision an end to the torrid pace of consolidation activity (via mergers and acquisitions) so prevalent in 1995, given the momentum coming into 1996. In summary, it is difficult to forecast a repeat of 1995 in a climate of slowing earnings such as we envision for 1996, but the continuing presence of many of the key drivers of last year's phenomenal equity market should yield a respectable annual return. MANAGER'S DISCUSSION OF FUND PERFORMANCE - ---------------------------------------- For the year 1995 the Fund posted a return of 33.11%. Results fell short of the S&P 500 but were ahead of most peer group comparisons, as the Lipper Growth and Income Average rose 30.82%. In 1995, Financial Services were a positive contributor to results as the Fund benefitted from very strong stock selection and a fairly neutral weighting. Utilities and Capital Goods also contributed positively, primarily due to correct sector positioning as stock selection was slightly negative. However, an underweight in the Technology sector during a strong first half had a major negative impact on results. Travelers Corp, Intel, Chase Manhattan, and Meridian Bancorp led the Fund during the year, as each returned more than 75%. Coltec, which was sold prior to year end, and Motorola, proved the Fund's weakest issues. The Fund was positioned fairly defensively at year end, overweighted in Energy and Utilities, underweighted in Consumer Cyclicals. At year-end the Fund maintained an attractive valuation versus the market on historical fundamental such as price/earnings and price/book while exhibiting forward earnings growth expectations above those of the market as a whole. Sincerely, /s/ LEO GROHOWSKI Leo Grohowski 2 COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN TOTAL RETURN EQUITY FUND VS. S&P 500
- ------------------------------------------------------------------------ Average Annual Total Return - ------------------------------------------------------------------------ 1 Year 5 Years Inception - ------------------------------------------------------------------------ Offering Price(1) 26.44% 14.16% 11.21% NAV(2) 33.11% 15.34% 11.81% - ------------------------------------------------------------------------
CHART [CHART OMITTED]
Plot Points: FUND(1) S&P 500 FUND(2) LIPPER JUN 1986 10,000 10,000 10,000 10,000 DEC 1986 9,860 10,049 10,320 10,134 DEC 1987 9,780 10,578 10,300 10,400 DEC 1988 11,300 12,334 11,900 12,310 DEC 1989 14,190 16,241 14,940 15,236 DEC 1990 13,560 15,737 14,280 14,322 DEC 1991 17,890 20,532 18,840 18,277 DEC 1992 19,280 22,097 20,300 20,038 DEC 1993 21,440 24,322 22,580 22,967 DEC 1994 20,439 24,643 21,523 22,811 DEC 1995 27,696 33,901 29,165 29,882 Past performance is not predictive of future performance (1) Includes the maximum sales charge (2) Excludes the maximum sales charge
The above illustration compares a $10,000 investment in the Total Return Equity Fund on June 2, 1986, 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. The Standard & Poor's 500 Composite Stock Price Index is a widely accepted unmanaged indices of overall stock market performance and does not take into account charges, fees and other expenses. The Lipper Growth and Income FundIndex is an index based on thirty largest growth and income mutual funds (equally weighted) traded by Lipper Analytical ServicesIncorporated and does take into account out of fees of expenses with capital gain distribution and dividend income reinvested. 3 BOARD OF TRUSTEES JOHN P. PFANN* CHAIRMAN OF THE BOARD; Chairman and President, JPP Equities, Inc. WOLFE J. FRANKL* Former Director, North America, Berlin Economic Development Corporation WILLIAM L. KUFTA Chief Investment Officer, Beacon Trust Company ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher Foundation *Member of the Audit and Nominating Committees - ------------------------------------------------------------------------------- OFFICERS WILLIAM B. BLUNDIN CHIEF EXECUTIVE OFFICER ANN E. BERGIN PRESIDENT WILLIAM J. TOMKO VICE PRESIDENT MARK E. NAGLE TREASURER MARTIN R. DEAN ASSISTANT TREASURER ROBERT L. TUCH ASSISTANT SECRETARY ALAINA V. METZ ASSISTANT SECRETARY 4 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 TOTAL RETURN EQUITY FUND
NUMBER OF SHARES VALUE - ---------- ----------- COMMON STOCKS - 106.3% AEROSPACE/DEFENSE - 3.3% 14,218 Boeing Co. $ 1,114,336 22,244 Raytheon Co. 1,051,029 ----------- 2,165,365 ----------- AUTO & RELATED - 1.2% 17,769 Goodyear Tire & Rubber Co. 806,268 ----------- BANKS - 5.5% 17,800 Bank of New York Co., Inc. 867,750 17,710 Chase Manhattan Corp. 1,073,668 61 Meridian Bancorp Inc. 2,837 24,600 Nations Bank Corp. 1,712,775 ----------- 3,657,030 ----------- BROADCASTING - 1.5% 10,710 * Liberty Media Group 287,830 34,541 * Tele-Communications, Inc. 686,502 ----------- 974,332 ----------- CHEMICALS - 4.5% 17,375 Allied-Signal Inc. 825,312 14,592 Du Pont de Nemours & Co., E.I. 1,019,615 24,400 PPG Industries, Inc. 1,116,300 ----------- 2,961,227 ----------- COMPUTER SOFTWARE AND SYSTEMS - 1.8% 28,400 * Bay Networks, Inc. 1,167,950 ----------- COMPUTERS - 2.7% 19,500 International Business Machines Corp. 1,789,125 ----------- CONGLOMERATES - 1.1% 14,946 Tenneco, Inc. 741,695 ----------- CONSUMER DURABLES - 1.2% 38,555 Maytag Corp. 780,739 -----------
5 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED) TOTAL RETURN EQUITY FUND
NUMBER OF SHARES VALUE - ---------- ----------- COMMON STOCKS - (CONTINUED) DRUGS - 6.6% 25,021 Bristol-Meyers Squibb Co. $ 2,148,678 22,756 Warner Lambert Co. 2,210,177 ----------- 4,358,855 ----------- ELECTRICAL EQUIPMENT - 5.2% 15,382 Emerson Electric Co. 1,257,478 29,789 General Electric Co. 2,144,808 ----------- 3,402,286 ----------- ELECTRONICS - SEMICONDUCTORS - 4.3% 19,300 Intel Corp. 1,095,275 30,839 Motorola, Inc. 1,757,823 ----------- 2,853,098 ----------- ELECTRONICS - INSTRUMENTATION - 2.8% 22,124 Hewlett Packard Co. 1,852,885 ----------- ENVIRONMENTAL CONTROL - 1.7% 36,931 WMX Technologies, Inc. 1,103,314 ----------- FINANCIAL SERVICES - 4.7% 15,126 Federal National Mortgage Association 1,877,515 19,031 Travelers, Inc. 1,196,574 ----------- 3,074,089 ----------- FOOD PROCESSING - 6.4% 52,500 H.J. Heinz Co. 1,739,063 21,000 IBP, Inc. 1,060,500 44,600 Sara Lee Corp. 1,421,625 ----------- 4,221,188 ----------- HOSPITAL MANAGEMENT & SUPPLIES - 4.9% 28,600 Columbia / HCA Healthcare Corp. 1,451,450 20,500 Johnson & Johnson 1,755,313 ----------- 3,206,763 -----------
6 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED) TOTAL RETURN EQUITY FUND
NUMBER OF SHARES VALUE - ---------- ----------- COMMON STOCKS - (CONTINUED) INSURANCE - 3.2 % 15,100 UNUM Corp. $ 830,500 74,700 USF&G Corp. 1,260,563 ----------- 2,091,063 ----------- MACHINERY - 1.1% 21,300 Ingersoll-Rand Co. 748,163 ----------- OIL - DOMESTIC - 3.7% 9,334 Atlantic Richfield Co. 1,033,741 35,800 Burlington Resources, Inc. 1,405,150 ----------- 2,438,891 ----------- OIL - INTERNATIONAL - 6.6% 27,281 Chevron Corporation 1,432,253 26,138 Exxon Corp. 2,094,307 6,126 Royal Dutch Petroleum Co. 864,532 ----------- 4,391,092 ----------- OIL - WELL SERVICE - 1.2% 11,381 Schlumberger Ltd.. 788,134 ----------- PAPER & RELATED - 1.2% 18,930 Weyerhaeuser Co. 818,723 ----------- PUBLISHING - 1.9% 32,988 Time Warner Inc. 1,249,421 ----------- RAILROADS - 1.5% 15,490 Union Pacific Corp. 1,022,340 ----------- RETAIL - DRUG STORES - 1.7% 32,174 Rite Aid Corp. 1,101,960 ----------- RETAIL - GROCERY - 1.4% 28,500 Albertson's, Inc. 936,938 ----------- RETAIL - SPECIALTY - 3.3% 16,553 Home Depot, Inc. 792,475 33,500 May Department Stores Corp. 1,415,375 ----------- 2,207,850 -----------
7 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED) TOTAL RETURN EQUITY FUND
NUMBER OF SHARES VALUE - ---------- ----------- COMMON STOCKS - (CONTINUED) TOBACCO - 3.8% 20,005 Philip Morris Cos., Inc. $ 1,810,453 23,579 RJR Nabisco Holdings Co. 728,002 ----------- 2,538,455 ----------- UTILITIES - COMMUNICATIONS - 9.7% 32,248 American Telephone & Telegraph Co. 2,088,058 33,530 Bell South Corp. 1,458,555 46,272 GTE Corp. 2,035,968 31,578 MCI Communications 824,975 ----------- 6,407,556 ----------- UTILITIES - ELECTRIC - 5.4% 46,599 Central & South West Corp. 1,298,947 38,036 Public Service Enterprise Group. 1,164,852 36,606 Wisconsin Energy Corp. 1,121,058 ----------- 3,584,857 ----------- UTILITIES - GAS PIPELINES - 1.2% 17,472 Consolidated Natural Gas 792,792 ----------- Total Common Stocks (Cost - $56,682,451) 70,234,444 ----------- PRINCIPAL AMOUNT - ---------- CORPORATE BOND - 1.0% $638,700 Time Warner Inc., 8.75%, 01/10/15 (Cost - $657,302) 657,859 -----------
8 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED) TOTAL RETURN EQUITY FUND
PRINCIPAL AMOUNT VALUE - ---------- ----------- SHORT-TERM INVESTMENT - 2.1% $1,404,000 Provident Institutional Temporary Investment Fund, 5.59%, On Demand (Cost - $1,404,000) $ 1,404,000 ----------- TOTAL INVESTMENTS - 109.4% (Cost - $58,743,753)** 72,296,303 ----------- OTHER ASSETS ( LIABILITIES ) - (9.4%) Cash 1,194 Dividends and interest receivable 164,335 Receivable for securities sold 4,276,375 Receivable for fund shares sold 15,415 Prepaid expenses 5,206 Payable for securities purchased (5,016,137) Dividends payable (4,243,052) Payable for fund shares redeemed (1,362,068) Accrued expenses (21,987) Due to affiliates (53,526) ----------- Liabilities in excess of other assets - net (6,234,245) ----------- NET ASSETS - 100% $66,062,058 =========== NET ASSET VALUE PER SHARE - applicable to 4,474,227 shares ($0.001 par value) outstanding $14.77 ====== * Non-income producing security. ** As of December 31, 1995, unrealized appreciation for Federal income tax purposes aggregated $13,521,081 of which $13,951,283 related to appreciated securities and $430,202 related to depreciated securities. The aggregate cost of investments for Federal income tax purposes was $58,775,222.
See Notes to Financial Statements. 9 STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 TOTAL RETURN EQUITY FUND INVESTMENT INCOME: Income: Dividends $ 2,005,943 ----------- Expenses: Advisory fees 367,306 Administrative services fee 66,783 Co-administrative and shareholder servicing fees 46,748 Distribution expenses 45,616 Transfer agent fees 35,052 Audit fee 25,508 Legal fees 18,244 Trustees' fees and expenses 17,647 Printing 10,523 Custodian fee 9,163 Miscellaneous expenses 3,786 ----------- Total expenses 646,376 Less expense waivers (17,126) ----------- Net expenses 629,250 ----------- Net investment income 1,376,693 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 4,058,707 Net change in unrealized appreciation on investments 13,600,231 ----------- Net gain on investments 17,658,938 ----------- Net increase in net assets resulting from operations $19,035,631 =========== See Notes to Financial Statements. 10 STATEMENT OF CHANGES IN NET ASSETS TOTAL RETURN EQUITY FUND
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- OPERATIONS: Net investment income $ 1,376,693 $ 1,691,542 Net realized gain on investments 4,058,707 840,993 Net change in unrealized appreciation (depreciation) on investments 13,600,231 (4,840,469) ----------- ----------- Net increase (decrease) in net assets resulting from operations 19,035,631 (2,307,934) ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (1,372,062) (1,691,542) Net realized gain on investments (3,645,492) (840,993) Excess of current year net realized gain on investments -- (704,753) ----------- ----------- Total distributions (5,017,554) (3,237,288) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of 357,298 and 469,035 shares, respectively 4,889,068 5,911,845 Net asset value of 3,538 and 18,274 shares issued on reinvestment of distributions, respectively 50,736 224,259 Payments for redemptions of 1,332,928 and 1,078,661 shares, respectively (17,894,688) (13,310,513) ----------- ----------- Net decrease in net assets from capital share transactions (12,954,884) (7,174,409) ----------- ----------- Net increase (decrease) in net assets 1,063,193 (12,719,631) NET ASSETS: Beginning of year 64,998,865 77,718,496 ----------- ----------- End of year (including undistributed net investment income of $5,770 and $1,139, respectively) $66,062,058 $64,998,865 =========== ===========
See Notes to Financial Statements. 11 NOTES TO FINANCIAL STATEMENTS TOTAL RETURN EQUITY FUND 1. SIGNIFICANT ACCOUNTING POLICIES Mariner Total Return Equity Fund (the "Fund") is an investment portfolio of Mariner Mutual Funds Trust (the "Trust"). The Trust is a Massachusetts business trust and is an open-end, diversified investment company which has multiple investment portfolios, including the Fund. SECURITIES VALUATION: Investments in 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 asked prices. The bid price is used when no asked price is available. Short-term obligations having maturities of 60 days or less are valued at amortized cost which approximates market value. TAXES: It is the Fund's policy to comply with the provisions of the Internal Revenue Code, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income and net realized gains to its shareholders for each taxable year. Therefore, no provision is required for Federal income tax. DIVIDENDS AND DISTRIBUTIONS: The Fund intends to pay, as a semi-annual dividend, substantially all of its net investment income. Net capital gains, if any, will be distributed at least annually. On December 27, 1995, the Fund declared an income and capital gain distribution of $0.13 and $0.80 per share payable on January 4, 1996 to shareholders on record as of December 28, 1995. Distributions to shareholders in excess of net realized gain on investments in a given year result primarily from losses on security transactions during that year which are treated for Federal income tax purposes as arising in the following year. SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Security transactions are recorded on trade date. Identified cost of investments sold is used for both financial statement and Federal income tax purposes. Dividend income is recorded on the ex-dividend date. Interest income is recorded as earned. EXPENSE ALLOCATION: Expenses directly attributed to each Fund in the Trust are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them. 2. CAPITAL The Trust is authorized to issue an unlimited number of shares of beneficial interest each with a par value of $0.001. At December 31, 1995, the composition of net assets of the Fund was as follows: Paid-in capital $52,510,329 Undistributed net investment income 5,770 Distributions in excess of net realized gain (6,591) Net unrealized appreciation on investments 13,552,550 =========== Total net assets $66,062,058 ----------- 12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. PORTFOLIO SECURITIES The cost of securities purchased and proceeds from securities sold (excluding short-term securities) for the year ended December 31, 1995 were approximately $35,712,000 and $33,671,000, respectively. 4. AGREEMENTS The Trust retains HSBC Asset Management Americas Inc. ("HSBC Americas") to act as Investment Adviser for the Fund. HSBC Americas is the North American investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking Corporation). As Investment Adviser, HSBC Americas furnishes investment guidance and policy direction in connection with the management of the portfolio of the Fund, subject to policies established by the Board of Trustees. As compensation for its services, HSBC Americas is paid monthly advisory fees at the following annual rates:
ADVISORY PORTION OF THE FUND'S AVERAGE DAILY NET ASSETS FEE RATE ------------------------------------------------------------- -------- Not exceeding $400 million 0.550% In excess of $400 million but not exceeding $800 million 0.505% In excess of $800 million but not exceeding $1.2 billion 0.460% In excess of $1.2 billion but not exceeding $1.6 billion 0.415% In excess of $1.6 billion but not exceeding $2 billion 0.370% In excess of $2 billion 0.315%
For the year ended December 31, 1995, HSBC Americas earned approximately $367,300 in advisory fees. As administrator, PFPC Inc. ("PFPC") is paid a monthly asset based fee of 0.10% of the Fund's first $200 million of average net assets; 0.075% of the Fund's next $200 million of average net assets; 0.05% of the Fund's next $200 million of average net assets; and 0.03% of the Fund's average net assets in excess of $600 million; exclusive of out-of-pocket expenses. PFPC has agreed to waive 10% and 5% of its fee during the first and second year of its administration, respectively. For the year ended December 31, 1995, PFPC earned approximately $61,800, net of fee waivers of approximately $5,000, in administrative services fees. Effective March 1996, PFPC will be terminated as administrator and transfer agent for the Fund. HSBC Americas may enter into agreements (the "Service Agreements") with certain banks, financial institutions and corporations ("Service Organizations") whereby each Service Organization handles recordkeeping and provides certain administrative services for its customers who invest in the Fund through accounts maintained at that Service Organization. Each Service Organization will receive monthly payments, which are based upon expenses that the Service Organization has incurred in the performance of its services under the Service Agreement. The payments from the Fund on an annual basis will not exceed 0.25% of the average value of Fund shares held in the subaccounts of the Service Organizations. 13 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. AGREEMENTS (CONTINUED) Effective September 25, 1995, Bank of New York replaced Marine Midland Bank, N.A. ("Marine Midland"), an affiliate of the Adviser, as custodian for the Fund. For furnishing custodian services, Marine Midland was paid a monthly fee with respect to the Fund for safekeeping its assets plus certain transaction charges and out-of-pocket expenses. For the period January 1, 1995 through September 25, 1995, HSBC Americas paid the Fund's entire custodian fee of approximately $8,200. HSBC Americas earned co-administration and shareholder servicing fees of 0.03% and 0.04% of the Fund's average net assets, respectively, totaling approximately $46,700. Of that total, HSBC Americas waived approximately $3,900 of these fees for the month of January 1995. The Fund has adopted a Distribution Plan and Agreement (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended. The Plan provides for a monthly payment by the Fund to Mariner Funds Services for expenses incurred in connection with distribution services provided to the Fund not to exceed an annual rate of 0.35% of the average daily value of the Fund's net assets during the preceding month. One state in which the shares of the Fund are qualified for sale imposes limitations on the expenses of the Fund. The Advisory Contract and the Administrative Services Contract with HSBC Americas provide that if, in any fiscal year, the total expenses of the Fund (excluding taxes, interest, distribution expenses, brokerage commissions and other portfolio transaction expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles and extraordinary expenses, but including the advisory and administrative services fees) exceed the expense limitation applicable to the Fund imposed by the securities regulations of such state, HSBC Americas will pay or reimburse the Fund in amounts equal to the excess. Although there is no certainty that this limitation will be in effect in the future, the effective limitation on an annual basis with respect to the Fund is currently 2.5% per annum of the first $30 million of average net assets, 2.0% of the next $70 million of average net assets and 1.5% of average net assets in excess of $100 million. For the year ended December 31, 1995, there were no payments or reimbursements required as a result of this expense limitation. A partner of Baker & McKenzie, legal counsel to the Trust, serves as Secretary of the Trust. For the year ended December 31, 1995, the Fund incurred legal fees of approximately $16,200 to Fund counsel. 14 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR TOTAL RETURN EQUITY FUND
FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- 1995 1994 1993 1992 1991 -------- ------- ------- ------ ------ Net asset value, beginning of year $ 11.93 $ 12.87 $ 12.02 $13.12 $10.77 ------- ------- ------- ------ ------ Income From Investment Operations Net investment income 0.30 0.29 0.33 0.15 0.21 Net realized and unrealized gain (loss) on investments 3.64 (0.67) 1.00 0.80 3.21 ------- ------- ------- ------ ------ Total from investment operations 3.94 (0.38) 1.33 0.95 3.42 ------- ------- ------- ------ ------ Less Distributions from: Net investment income (0.30) (0.29) (0.33) (0.15) (0.21) Net realized gain (0.80) (0.15) (0.15) (1.90) (0.86) Excess of current year realized gain on investments -- (0.12) -- -- -- ------- ------- ------- ------ ------ Total distributions (1.10) (0.56) (0.48) (2.05) (1.07) ------- ------- ------- ------ ------ Net asset value, end of year $14.77 $11.93 $12.87 $12.02 $13.12 ======= ======= ======= ====== ====== Total Return (a) 33.11% (2.97)% 11.23% 7.74% 31.92% Ratios/Supplemental Data Net assets (000), end of year $66,062 $64,999 $77,718 $3,609 $4,798 Ratio of expenses (without fee waivers) to average net assets 0.97% 0.86% 0.88% 2.29% 2.18% Ratio of expenses (with fee waivers) to average net assets 0.94% 0.78% 0.23% 1.68% 1.40% Ratio of net investment income (without fee waivers) to average net assets 2.03% 2.17% 2.30% 0.51% 0.91% Ratio of net investment income (with fee waivers) to average net assets 2.06% 2.25% 2.95% 1.12% 1.69% Portfolio turnover rate 52.77% 23.31% 14.25% 54.99% 77.11% - ----------------- (a) Exclusive of sales charge.
See Notes to Financial Statements. 15 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS To the Shareholders and Board of Trustees Mariner Mutual Funds Trust We have audited the accompanying statement of net assets of the Mariner Total Return Equity Fund (one of the portfolios comprising Mariner Mutual Funds Trust) as of December 31, 1995, and the related statement of operations for the year then ended, and the statement of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the years indicated therein. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Mariner Total Return Equity Fund at December 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the indicated years, in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP New York, New York February 5, 1996 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- MARINER SM MUTUAL FUNDS TRUST 3435 Stelzer Road Columbus,Ohio 43219 GENERAL INFORMATION: (800) 753-4462 INVESTMENT ADVISER AND CO-ADMINISTRATOR HSBC Asset Management Americas Inc. 250 Park Avenue New York, New York 10177 SPONSOR AND DISTRIBUTOR (EFFECTIVE JANUARY 1, 1996) BISYSFund Services 3435 Stelzer Road Columbus, Ohio 43219 ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT PFPC, INC. 400 BELLEVUE PARKWAY WILMINGTON, DELAWARE 19809 CUSTODIAN Bank of New York 90 Washington Street New York, New York 10286 LEGAL COUNSEL Baker & McKenzie 805 Third Avenue New York, New York 10022 INDEPENDENT AUDITORS Ernst & Young LLP 787 Seventh Avenue New York, New York 10019 This report is for the information of the shareholders of Mariner Mutual Funds Trust. Its use in connection with any offering of the Trust's shares is authorized only in the case of a concurrent or prior delivery of the Trust's current prospectus. -----END PRIVACY-ENHANCED MESSAGE-----