-----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, Ad8mxaD/z+LQJXHs4c3wMIA1brhXsAgs1fq4wYcOG1aqM9cmRhJSMaHI1JqN6qRs ZhJ6kw6GOH/Wwq0TdepUsQ== 0000935069-96-000038.txt : 19960312 0000935069-96-000038.hdr.sgml : 19960312 ACCESSION NUMBER: 0000935069-96-000038 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: 96533216 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 MARINER MUTUAL INTERNATIONAL EQUITY FUND MARINER MUTUAL FUNDS TRUST - ------------------------------------------------------------------------------- INTERNATIONAL 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 MARINER MUTUAL FUNDS TRUST - ------------------------------------------------------------------------------- INTERNATIONAL EQUITY FUND - ------------------------------------------------------------------------------- HSBC Asset Management (LOGO) - ------------------------------------------------------------------------------- February 12, 1996 Dear Shareholder: The Mariner International Equity fund rose 5.93% during the second half of 1995. This brings the net return to shareholders for the full year 1995 to 4.40% for Class A (Service Class). The positive impacts of country selection were offset by negative stock selection, primarily in Japan and Continental Europe. The following pages review the major geographical regions in which the fund invests as well as our current outlook for each region: JAPAN: - ------ After dropping 8.27% in U.S. dollar terms during the first half of 1995, the Morgan Stanley Capital International (MSCI) Japan Index rose 9.92% for the second half. The result was a positive return of 0.83% for the full year 1995. During the first half of 1995, the combination of the Kobe earthquake, Yen strength and slowing economic growth undermined the confidence in Japan's economic recovery. Since mid-year, however, government efforts to help re-flate the economy coupled with a 22% depreciation of the Yen lent support to the second half equity market rally. On a valuation basis, the equity market in Japan looks attractive relative to the 3% yield on 10 year government bonds. We are therefore more positive on Japanese equities. However, continued improvements in the economy along with an improved corporate earnings environment would be necessary before we commit further funds to Japan. UNITED KINGDOM: - --------------- The equity market rally in the first half of 1995 continued through the second half. After returning over 10% through June, the MSCI United Kingdom Index returned 9.57% during the second half of 1995. This brings its year to date return to 21.19%. As was the case in the first half of 1995, the market was supported by takeover activity. However, the earnings picture has deteriorated somewhat as the economy showed signs of slowing in late 1995. Further, earnings estimates for 1996 are being revised downwards, with disappointments in 1996 likely to be met with harsh market reaction. As a result of the economic slowdown and with inflation subdued, interest rates were lowered in December. We look to see if lower rates will be the stimulus for further economic growth in 1996. After holding near market exposure to UK equities for most of 1995, we reduced our exposure in December. Given the earnings environment, we shifted to the more attractively valued region of Continental Europe. CONTINENTAL EUROPE: - ------------------- The MSCI Europe Index (ex UK) returned 7.12% for the second half of 1995, bringing its year to date return to 22.6%. The markets held up well in spite of economic slowing in Germany, political uncertainty in Italy, and social unrest due to the transportation workers strike in France. We view Continental Europe attractive on a valuation basis, especially France and Germany. Their economies are viewed as being about 6-12 months behind the UK. With inflation low and interest rates coming down to support slowing economies, the earnings outlook for Germany and France looks positive. As a result of these attractive valuations, we increased our exposure to Continental Europe in December of 1995. ASIA (EX JAPAN): - ---------------- The Asian markets rallied in the second half of 1995 as shown by the return of 5.78% on the MSCI Pacific ex. Japan Index. This brings its year to date return to 13.4%. The returns in Asia were primarily a function of a strong Hong Kong market (up 23%) and weaker markets in the rest of the region (Malaysia up 5.0%, Singapore up 6.5%). Hong Kong was a beneficiary of lower U.S. interest rates. As rates in the U.S. declined, both domestic and overseas investors began buying Hong Kong equities. The lower interest rate environment lent support to what had been a very weak property market. Further, financial stocks benefitted in Hong Kong as well. The rest of the region's markets did not participate with Hong Kong's rally. Reactions to an early 1995 sell-off in the emerging markets along with increasing political tensions in the region put a damper on the other equity markets. Our outlook for the region can best be described as neutral. Although valuations do not appear to be over-stretched, we are somewhat cautious given Hong Kong's strong run. Earnings growth in Hong Kong may be decelerating as we look forward into 1996. Singapore's outlook is more positive given its macroeconomic picture. Although the economy appears to be slowing, its massive current account surplus should help keep interest rates low. Further, Australia should benefit from a lower rate environment. EMERGING MARKETS: - ----------------- After declining 7.06% during the first half of 1995, the IFC Investable Index declined another 1.31% to end the year down 8.24%. For the Emerging Markets, 1995 was a year of tremendous volatility. The markets declined globally in the first quarter in reaction to the crisis in Mexico. They stabilized in the second quarter as the Mexican situation calmed. A "mini crisis" in Mexico in the third quarter led to further market declines globally. Finally, the year closed with the IFC Index up a strong 3.5% in December. 2 The decline in 1995 has increased the attractiveness of the Emerging Markets on a valuation basis. Despite the existence of continued political risks in certain countries, the Emerging Market nations continue to offer economic growth rates at twice that of the more developed nations. Therefore, we look for favorable returns in the Emerging Markets for 1996. Our goal is to ensure the Mariner International Equity Fund, and all Mariner Funds, are characterized by strong performance and outstanding client service. We thank you for choosing the Mariner International Equity Fund to be a part of your total investment program. Sincerely, /s/ JAMES B. McHUGH James B. McHugh 3 COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN INTERNATIONAL EQUITY FUND VS. MSCI-EAFE
- ------------------------------------------------------------------------------------------ Total Return -- Class A Shares Class B Shares - ------------------------------------------------------------------------------------------ 1 Year Inception Inception - ------------------------------------------------------------------------------------------ Offering Price(1) (0.80%) (3.15%) 13.28 - ------------------------------------------------------------------------------------------ NAV(2) 4.40% (0.18%) 13.28 - ------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] Plot Points:
FUND(1) MSCI-EAFE FUND(2) APRIL 1994 $9,397 $10,000 $10,000 JUNE 1994 9,544 10,088 10,050 DECEMBER 1994 9,069 9,991 9,550 JUNE 1995 8,946 10,250 9,420 DECEMBER 1995 9,478 11,111 9,970 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 CLASS A SHARES OF THE INTERNATIONAL EQUITY FUND ON APRIL 25, 1994, TO A $10,000 INVESTMENT IN THE EUROPE, AFRICA AND FAR EAST INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. PLEASE REFER TO THE BOX ABOVE FOR RETURNS ON CLASS B SHARES, WHICH HAVE BEEN OFFERED SINCE MARCH 1, 1995. THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES. THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA, FAR EAST INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVER 900 SECURITIES LISTED ON THE STOCK EXCHANGES OF THE FOLLOWING COUNTRIES IN EUROPE, AUSTRALIA, AND THE FAR EAST: AUSTRALIA, AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, HONG KONG, IRELAND, ITALY, JAPAN, MALAYSIA, NETHERLANDS, NEW ZEALAND. THIS INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL STOCK MARKET PERFORMANCE, AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. 4 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 5 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- ARGENTINA - --------- Beverage 300 Buenos Aires Embotelladora ADR "B" $ 6,188 0.0% ----------- ---- Oil 400 YPF Sociedad Anonima ADR 8,650 0.1 ----------- ---- Real Estate 357 IRSA Inversiones y Representaciones ADR 9,104 0.1 ----------- ---- Utilities 300 Telefonicas de Argentina ADR "B" 8,173 0.0 ----------- ----- Total Investments in Argentina 32,115 0.2 ----------- ---- (Cost $ 33,619) AUSTRALIA - --------- Banks 26,262 Australia & New Zealand Bank Group 123,170 0.7 ----------- ---- Broadcasting 29,014 News Corporation 154,839 1.0 ----------- ---- Conglomerates 17,875 CSR Limited 58,193 0.4 ----------- ---- Food & Beverages 35,081 SouthCorp Holdings Ltd 81,614 0.5 ----------- ---- Non-Ferrous Metals 8,700 Western Mining Corp. 55,870 0.4 ----------- ---- Petroleum Services 17,046 Broken Hill Property 240,727 1.4 ----------- ---- Trucking & Freight Forwarding 42,460 TNT 56,176 0.4 ----------- ---- Total Investments in Australia 770,589 4.8 ----------- ---- (Cost $ 734,649) BELGIUM - ------- Commercial Bank 286 Generale De Banque 99,124 0.6 ----------- ---- Iron / Steel 730 Arbed SA 82,599 0.5 ----------- ---- Total Investments in Belgium 181,723 1.1 ----------- ---- (Cost $ 195,537) BRAZIL - ------ Energy 1,500 Centrais Eletricas Brasileira ADR 20,250 0.1 ----------- ---- Industrial 1,200 Industrias Klabin De Paper ADR 10,875 0.1 2,500 *Lojas Arapua ADR 20,500 0.1 ----------- ---- Total Industrial 31,375 0.2 ----------- ---- Mining 700 Compania Vale Do Rio Doce ADR 28,700 0.2 ----------- ---- Retail 1,000 Lojas Americanas ADR 23,500 0.1 ----------- ----
7 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- BRAZIL (continued) - ------ Steel 3,500 Usinas Siderurgicas De Minas ADR $ 28,448 0.2% ----------- ---- Total Investments in Brazil 132,273 0.8 ----------- ---- (Cost $ 149,059) CHILE - ----- Beverage / Tobacco 500 Embotelladora Andina SAADR 18,063 0.1 ----------- ---- Commercial Bank 1,600 *Banco De A Edward ADR 31,200 0.2 ----------- ---- Non-oil Energy 1,100 Enersis SAADR 31,350 0.2 ----------- ---- Total Investments in Chile 80,613 0.5 ----------- ---- (Cost $ 75,970) COLOMBIA - -------- Commercial Bank 400 Banco INDL Colombiano S A 5,600 0.0 ----------- ---- Construction Building 600 Cementos Diamante 10,950 0.1 ----------- ---- Total Investments in Colombia 16,550 0.1 ----------- ---- (Cost $ 16,074) CZECHOSLOVAKIA - -------------- Utilities 200 SPTTelecom 18,900 0.1 ----------- ---- Total Investment in Czechoslovakia 18,900 0.1 ----------- ---- (Cost $ 20,026) DENMARK - ------- Telecommunications 1,483 Tele Danmark AS 80,927 0.5 ----------- ---- Total Investment in Denmark 80,927 0.5 ----------- ---- (Cost $ 79,357) FINLAND - ------- Electronics 1,650 Nokia Oy 63,733 0.4 ----------- ---- Total Investment in Finland 63,733 0.4 ----------- ---- (Cost $ 68,999) FRANCE - ------ Automobiles 930 Peugeot SA 122,683 0.8 ----------- ---- Auto Parts 2,158 Valeo 99,946 0.6 ----------- ---- Banks 1,120 Societe Generale 138,370 0.9 ----------- ---- Building Material 1,620 Lafarge Coppee SA 104,372 0.7 ----------- ----
8 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- FRANCE (continued) - ------ Business Services 3,000 Cap Gemini Sogeti $ 84,542 0.5% 1,200 Eaux (Cie Generale) 119,804 0.8 ----------- ---- Total Business Services 204,346 1.3 ----------- ---- Electronics 2,300 SGS Thomson Microelectronics 88,064 0.6 ----------- ---- Gas Exploration 1,600 Societe Nat Elf Aquitaine 117,884 0.7 ----------- ---- Health Care 1,566 Society Elf Sanofi 100,381 0.6 ----------- ---- Insurance 1,400 Axa 94,343 0.6 ----------- ---- Liquor 620 LVMH Moet Hennessy 129,140 0.8 ----------- ---- Retail-Speciality 210 Carrefour 127,407 0.8 ----------- ---- Total Investments in France 1,326,936 8.4 ----------- ---- (Cost $ 1,278,789) GERMANY - ------- Automobiles 420 Volkswagen AG 140,420 0.9 ----------- ---- Banks 4,200 Deutsche Bank AG 199,006 1.3 ----------- ---- Chemicals 520 Bayer AG 137,205 0.9 ----------- ---- Electric Utilities 3,430 Veba AG 145,617 0.9 ----------- ---- Industrial Machinery 380 Mannesmann AG 120,980 0.8 1,060 SGL Carbon 82,022 0.5 ----------- ---- Total Industrial Machinery 203,002 1.3 ----------- ---- Insurance 110 Allianz AG Holding 214,402 1.3 ----------- ---- Retail - Dept Store 125 Karstadt AG 50,976 0.3 ----------- ---- Transportation - Air 700 Lufthansa AG 96,373 0.6 ----------- ---- Total Investments in Germany 1,187,001 7.5 ----------- ---- (Cost $ 1,073,258) GHANA - ----- Metals / Minerals 900 Ashanti Goldfields 26,550 0.2 ----------- ---- Total Investment in Ghana 26,550 0.2 ----------- ---- (Cost $ 18,464)
9 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- HONG KONG - --------- Banks 14,600 Bank of East Asia $ 52,396 0.3% 18,500 Dao Heng BankGroup 66,511 0.4 ----------- ---- Total Banks 118,907 0.7 ----------- ---- Business Services 5,000 Wharf (Hldgs) 16,651 0.1 ----------- ---- Conglomerates 6,500 Swire Pacific 50,434 0.3 ----------- ---- Electric Utilities 6,000 China Light &Power 27,624 0.2 6,000 Hong Kong Electric 19,670 0.1 ----------- ---- Total Electric Utilities 47,294 0.3 ----------- ---- Oil 168,000 Shanghai Petrochemical Co. 48,341 0.3 ----------- ---- Publishing 6,000 Citic Pacific LTD 20,524 0.2 ----------- ---- Real Estate 9,000 Cheung Kong (HLDGS) 54,821 0.3 10,000 Hysan Development 26,447 0.2 6,000 New World Devel Co. 26,149 0.2 6,000 Sun Hung Kai Props 49,079 0.3 ----------- ---- Total Real Estate 156,496 1.0 ----------- ---- Telephone 28,400 Hong Kong Telecomm 50,683 0.3 ----------- ---- Total Investments in Hong Kong 509,330 3.2 ----------- ---- (Cost $ 484,310) INDIA - ----- Automobiles 1,600 Tata Engineering & Locom Co. 21,008 0.1 ----------- ---- Engineering & Construction 1,000 Larsen & Toubro 17,750 0.1 ----------- ---- Industrial 800 Hindalco Inds LTD 27,096 0.2 ----------- ---- Total Investments in India 65,854 0.4 ----------- ---- (Cost $ 65,318) INDONESIA - --------- Banks 15,000 Lippo Bank 23,125 0.1 ----------- ---- Pharmaceuticals 8,000 *Darya Varya Labora 14,520 0.1 ----------- ---- Misc. Dist - Wholesale 3,000 Modern Photo Film 17,385 0.1 ----------- ---- Total Investments in Indonesia 55,030 0.3 ----------- ---- (Cost $ 55,087)
10 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- IRELAND - ------- Banks 9,000 Bank of Ireland $ 65,562 0.4% ----------- ---- Total Investment in Ireland 65,562 0.4 ----------- ---- (Cost $ 55,227) ITALY - ----- Household Durables/ Appliances 80,000 Olivetti &C Spa 64,125 0.4 ----------- ---- Insurance 8,200 Assicurazioni Generali 198,530 1.3 ----------- ---- Telecommunications 62,000 Telecom Italia 96,428 0.6 30,000 *Telecom Italia (MOB) 52,798 0.3 ----------- ---- Total Telecommunications 149,226 0.9 ----------- ---- Total Investments in Italy 411,881 2.6 ----------- ---- (Cost $ 381,500) JAPAN - ----- Apparel & Textiles 20,000 Itochu Corp 134,625 0.8 ----------- ---- Banks 14,000 Asahi Bank 176,271 1.1 8,000 Sanwa Bank 162,712 1.0 8,000 Sumitomo Bank 169,685 1.1 10,000 Bank of Tokyo 175,303 1.1 11,000 SumitomoTrust &Banking 155,545 1.0 ----------- ---- Total Banks 839,516 5.3 ----------- ---- Brewery 7,000 Kirin Brewery Co. 82,712 0.5 ----------- ---- Building Materials 4,000 Tostem Corp . 132,881 0.8 ----------- ---- Business Services 3,000 Kurita Water Industries 79,903 0.5 ----------- ---- Chemical 20,000 Asahi Chemical Ind. 153,027 1.0 ----------- ---- Construction 9,000 JGCCorp. 95,012 0.6 8,000 Nat'l House Indl 146,441 0.9 ----------- ---- Total Construction 241,453 1.5 ----------- ---- Cosmetics - Health Care 12,000 KAO Corp. 148,765 0.9 ----------- ----
11 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- JAPAN (continued) - ----- Electrical Equipment 10,000 Fujitsu. $ 111,380 0.7% 12,000 Hitachi 120,872 0.8 7,000 Omron Corp. 161,356 1.0 ----------- ---- Total Electrical Equipment 393,608 2.5 ----------- ---- Electronics 1,000 Keyence Corp 115,254 0.7 2,000 Rohm Co 112,930 0.7 3,000 Secom Co 208,620 1.3 1,500 Sony Corp. 89,927 0.6 3,000 TDK Corp. 153,124 1.0 ----------- ---- Total Electronics 679,855 4.3 ----------- ---- Financial Services 3,000 Orix Corp 123,487 0.8 ----------- ---- Forest Products & Paper 20,000 Nippon Paper Ind. 138,886 0.9 ----------- ---- Industrial Machinery 4,000 Bandai Co. 163,874 1.0 20,000 Mitsubishi Hvy Ind 159,419 1.0 ----------- ---- Total Industrial Machinery 323,293 2.0 ----------- ---- Insurance 20,000 Mitsui Marine & Fire 142,567 0.9 ----------- ---- Investment Companies 7,000 Nomura Securities 152,542 1.0 ----------- ---- Land Transport 12,000 Suzuki Motor Corp. 133,656 0.8 ----------- ---- Machine 4,000 Daifuku Co. 56,562 0.4 2,000 SMCCorp. 144,697 0.9 2,000 Tokyo Electron 77,482 0.5 ----------- ---- Total Machine 278,741 1.8 ----------- ---- Pharmaceuticals 6,000 Sankyo Co 134,818 0.8 ----------- ---- Photography 10,000 Canon Inc 181,114 1.2 4,000 Fuji Photo Film Co. 115,448 0.7 ----------- ---- Total Photography 296,562 1.9 ----------- ---- Real Estate 10,000 Mitsui Fudosan Co. 123,002 0.8 ----------- ---- Retail-Specialty 2,000 Autobacs Seven Co. 166,197 1.0 ----------- ---- Rubber Products 15,000 Sumitomo Rubber 125,230 0.8 ----------- ----
12 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- JAPAN (continued) - ----- Software 5,000 Hitachi Software $ 130,751 0.8% ----------- ---- Steel 42,000 Nippon SteelCorp. 144,000 0.9 ----------- ---- Total Investments in Japan 5,300,077 33.3 ----------- ---- (Cost $ 5,249,480) LEBANON - ------- Commercial Banks 1,500 *Banque Audi GDR 18,375 0.1 ----------- ---- Total Investment in Lebanon 18,375 0.1 ----------- ---- (Cost $ 18,750) MALAYSIA - -------- Electrical Equipment 13,666 Leader Univ Holdings 31,210 0.2 ----------- ---- Finance 6,000 Malayan Bk BHD 50,557 0.3 ----------- ---- Holding Companies 6,000 Road Builder 20,790 0.1 28,000 Renong Berhad 41,454 0.3 ----------- ---- Total Holding Companies 62,244 0.4 ----------- ---- Industrial 3,000 *DCB Holdings Berhad WTS 2,977 0.0 4,000 *DCB Holdings Berhad 11,655 0.1 11,000 IJMCorp Berhad 17,498 0.1 6,000 Petronas Gas Berhad 20,435 0.1 ----------- ---- Total Industrial 52,565 0.3 ----------- ---- Leisure/Hotels 18,000 Berjaya Sports 41,816 0.3 ----------- ---- Total Investments in Malaysia 238,392 1.5 ----------- ---- (Cost $ 245,106) MEXICO - ------ Construction 6,200 Corporacion Geo 18,242 0.1 ----------- ---- Consumer Goods/Services 2,000 Kimberly Clark De Mexico 30,201 0.2 ----------- ---- Financial Institutions 6,000 Grupo Financiero Inbursa 17,498 0.1 ----------- ---- Food / Grocery Products 9,000 *Gruma 25,315 0.2 ----------- ---- Industrial - Diversified 2,000 *GrupoCarso 10,785 0.1 ----------- ---- Total Investments in Mexico 102,041 0.7 ----------- ---- (Cost $ 107,103)
13 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- NETHERLANDS - ----------- Banks 2,150 Int'l Nederlanden Groep NV $ 143,628 0.9% ----------- ---- Chemicals 600 Akzo Nobel NV 69,396 0.5 ----------- ---- Packaging 2,570 KNP BTNV 65,984 0.4 ----------- ---- Petroleum Services 1,600 Royal Dutch Petroleum 223,543 1.4 ----------- ---- Telecommunication Services 7,350 Elsevier NV 98,019 0.6 ----------- ---- Total Investments in Netherlands 600,570 3.8 ----------- ---- (Cost $ 506,024) NORWAY - ------ Chemicals 1,570 Norsk Hydro AS 65,932 0.4 ----------- ---- Telecommunications 877 Nera AS 28,522 0.2 ----------- ---- Total Investments in Norway 94,454 0.6 ----------- ---- (Cost $ 82,494) PAKISTAN - -------- Utilities 700 *Pakistan Telecom C 60,900 0.4 ----------- ---- Total Investment in Pakistan 60,900 0.4 ----------- ---- (Cost $ 74,900) PERU - ---- Banks 457 Credicorp LTD 7,826 0.0 ----------- ---- Mining 1,637 *Minas Buenaventura 10,625 0.1 ----------- ---- Telecommunications 6,950 CPT Telefonica Del Peru 14,887 0.1 ----------- ---- Total Investments in Peru 33,338 0.2 ----------- ---- (Cost $ 27,560) PHILIPPINES - ----------- Building Materials 100,000 *Aboitiz Equity Ven 19,062 0.1 ----------- ---- Utilities 2,500 Manila Electric Co. 20,398 0.1 ----------- ---- Total Investments in Philippines 39,460 0.2 ----------- ---- (Cost $ 38,946) POLAND - ------ Auto Components 1,000 *Stomil Olsztyn SA 9,329 0.1 ----------- ----
14 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- POLAND (continued) - ------ Engineering 1,268 Elecktrim SA $ 4,294 0.0% ----------- ---- Total Investments in Poland 13,623 0.1 ----------- ---- (Cost $ 13,779) RUSSIA - ------ Electrical 2,000 *ADMosenergo 16,250 0.1 ----------- ---- Total Investment in Russia 16,250 0.1 ----------- ---- (Cost $ 16,931) SINGAPORE - --------- Banks 3,000 Overseas Chinese Banks 37,540 0.2 4,000 United Overseas Bank 38,459 0.3 ----------- ---- Total Banks 75,999 0.5 ----------- ---- Beverages 1,000 Fraser & Neave 12,724 0.1 ----------- ---- Industrial Machinery 3,000 Keppel Corp. 26,723 0.2 ----------- ---- Publishing 400 Singapore Press HD (Alien) 7,069 0.0 ----------- ---- Real Estate 4,000 City Developments 29,127 0.2 1,000 Singapore Land 6,469 0.0 6,000 Hong Kong Land (Hldgs) 11,100 0.1 ----------- ---- Total Real Estate 46,696 0.3 ----------- ---- Total Investments in Singapore 169,211 1.1 ----------- ---- (Cost $ 157,585) SOUTH AFRICA - ------------ Banks 1,000 Nedcor Ltd.GDR 17,282 0.1 ----------- ---- Construction/ Building Materials 2,750 Malbak 19,047 0.1 ----------- ---- Financial Services 7,130 Bid Corporation Ltd. 25,426 0.2 2,530 Smith (CG) 19,432 0.1 ----------- ---- Total Financial Services 44,858 0.3 ----------- ---- Food & Beverage 900 Cadbury Schwps (SA) 15,307 0.1 11,300 Premier Group 18,598 0.1 711 South Africa Brews 26,037 0.2 ----------- ---- Total Food & Beverage 59,942 0.4 ----------- ----
15 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- SOUTH AFRICA (continued) - ------------ Holding Company 1,000 Barlow LTD $ 14,264 0.1% 1,250 Richemont Secs AG 18,859 0.1 ----------- ---- Total Holding Company 33,123 0.2 ----------- ---- Insurance 1,700 Fedsure Holdings 11,425 0.1 ----------- ---- Mining 2,800 Ingwe CoalCorp. 15,361 0.1 ----------- ---- Oil 2,600 Engen 19,613 0.1 ----------- ---- Paper &Packaging 2,600 Nampak 14,444 0.1 ----------- ---- Total Investments in South Africa 235,095 1.5 ----------- ---- (Cost $ 197,799) SOUTH KOREA - ----------- Iron / Steel 640 Pohang Iron &SteelLTD 14,000 0.1 ----------- ---- Paper 1,147 Hansol Paper Co. ADR 21,793 0.1 ----------- ---- Investment Trust 10,000 Korea Europe Fund IDR 83,800 0.6 ----------- ---- Total Investments in South Korea 119,593 0.8 ----------- ---- (Cost $ 131,760) SPAIN - ----- Banks 700 BCOPopular ESP 129,093 0.8 ----------- ---- Petroleum Services 3,200 Repsol SA 104,864 0.7 ----------- ---- Real Estate 4,217 Vallehermoso SA. 78,395 0.5 ----------- ---- Utilities 1,850 EMPNACElectricid 104,779 0.7 ----------- ---- Total Investments in Spain 417,131 2.7 ----------- ---- (Cost $ 361,222) SWEDEN - ------ Auto Parts Manufacturing 1,190 Autoliv AB 69,539 0.4 ----------- ---- Consumer Goods/Services 2,000 Pharmacia AB 71,539 0.5 900 Pharmacia Upjohn 35,514 0.2 ----------- ---- Total Consumer Goods/Services 107,053 0.7 ----------- ---- Forest Products 7,677 Stora Kopparbergs 91,920 0.6 ----------- ----
16 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- SWEDEN (continued) - ------ Telecommunications 4,750 Ericsson(LM)TEL $ 93,003 0.6% ----------- ---- Total Investments in Sweden 361,515 2.3 ----------- ---- (Cost $ 296,829) SWITZERLAND - ----------- Banks 1,700 CS Holding 174,274 1.1 ----------- ---- Electronics 115 BBC Brown Boveri 133,593 0.8 ----------- ---- Food & Beverages 130 Nestle SA 143,807 0.9 ----------- ---- Insurance 50 Baloise Holdings 104,032 0.7 ----------- ---- Pharmaceuticals 16 Roche Holdings AG 126,571 0.8 200 Sandoz AG 183,095 1.1 ----------- ---- Total Pharmaceuticals 309,666 1.9 ----------- ---- Total Investments in Switzerland 865,372 5.4 ----------- ---- (Cost $ 711,726) TAIWAN - ------ Iron / Steel 3,827 *Tung Ho Steel Enterprise Corp. ADR 39,227 0.2 ----------- ---- Total Investment in Taiwan 39,227 0.2 ----------- ---- (Cost $ 50,312) THAILAND - -------- Banks 4,000 Siam CommercialBank PLC 52,720 0.3 ----------- ---- Finance 6,000 Industrial FinThailand Corp. 20,365 0.1 ----------- ---- Oil & Gas Exploration 3,800 Pit Explortn & Prd 39,825 0.3 ----------- ---- Wholesale Products 10,000 Siam Makro Public Co Ltd 36,720 0.2 ----------- ---- Total Investments in Thailand 149,630 0.9 ----------- ---- (Cost $ 141,832) TURKEY - ------ Breweries 12,800 EGEBiracilik Ve Malt Sanay 4,414 0.0 ----------- ---- Diversified Holdings 4,800 Alarko Holdings 1,931 0.0 ----------- ---- Food / Grocery Products 3,520 Migros Turk TAS 2,688 0.0 5,800 Tat Konserve Sanayi Anonim Serke 3,666 0.0 ----------- ---- Total Food / Grocery Products 6,354 0.1 ----------- ----
17 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ SHARES VALUE PERCENT OF INDUSTRY HELD STOCKS (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- TURKEY (continued) - ------ Textiles &Apparel 13,800 Altinyildiz Men $ 3,003 0.0% ----------- ---- Total Investments in Turkey 15,702 0.1 ----------- ---- (Cost $ 15,889) UNITED KINGDOM - -------------- Banks 9,315 Standard Chartered 79,277 0.5 6,500 Natl Westminster 65,464 0.4 ----------- ---- Total Banks 144,741 0.9 ----------- ---- Conglomerates 16,000 BTR 81,503 0.5 18,000 Tomkins 78,692 0.5 ----------- ---- Total Conglomerates 160,195 1.0 ----------- ---- Drugs & Healthcare 8,300 Smithkline Beecham 91,520 0.6 ----------- ---- Electrical Utilities 14,500 National Power 101,223 0.6 ----------- ---- Holding Company 17,000 General Electric 93,462 0.6 ----------- ---- International Oil 14,750 British Petroleum 123,127 0.8 ----------- ---- Leisure Time 8,200 Granada Group 82,140 0.5 ----------- ---- Manufacturing 6,600 GKN 79,848 0.5 ----------- ---- Mineral Extract 4,000 RTZ Corp. 58,146 0.4 ----------- ---- Packaging 24,287 Smurfit (Jefferson) 58,464 0.4 ----------- ---- Retail Trade 12,000 Marks & Spencer 83,864 0.5 ----------- ---- Telephone 19,700 British Telecom 108,000 0.6 ----------- ---- Tobacco 5,000 BAT Industries 44,026 0.3 ----------- ---- Total Investments in United Kingdom 1,228,756 7.7 ----------- ---- (Cost $ 1,093,446) ZIMBABWE - -------- Building Materials 10,800 Delta Corp 18,083 0.1 ----------- ---- Total Investment in Zimbabwe 18,083 0.1 ----------- ---- (Cost $ 16,129) Total Investments in Stocks $15,162,362 95.3% ----------- ---- (Cost $ 14,340,845)
18 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND COUNTRY/ VALUE PERCENT OF INDUSTRY PRINCIPAL (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- FIXED INCOME BOND ------------------------------------------------------------- TAIWAN - ------ 40,000 *Walsin Lihwa Corp 3.25% Due 6/16/04 $ 40,200 0.3% ----------- ----- Total Investment in Bond 40,200 0.3% ----------- ----- (Cost $ 42,400)
SHORT-TERM INVESTMENT --------------------------------------------------------------- UNITED STATES - ------------- Repurchase Agreement $700,000 State Street Bank and Trust Company 700,000 4.4 ----------- ----- 2.25% due 1/2/96, purchased on 12/29/95, (Proceeds at maturity-$700,175), collateralized by $490,000 U.S. Treasury Bond 12% due 5/15/05, market value $714,938 Total Short-Term Investment 700,000 4.4% ----------- ----- (Cost $ 700,000) Total Investments** $15,902,562 100.0% ----------- ----- (Cost $ 15,083,245)
19 STATEMENT OF NET ASSETS AS OF DECEMBER 31, 1995 (CONTINUED)
INTERNATIONAL EQUITY FUND VALUE PERCENT OF (NOTE 1A) NET ASSETS - --------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS (LIABILITIES): Cash $ 2,686 Foreign currency ( Cost $ 177,640) 179,311 Dividend receivable 17,764 Interest receivable 835 Foreign tax receivable 20,361 Deferred organizational expenses 32,243 Receivable for fund shares sold 5,250 Receivable from investment advisor 18,970 Net payable for forward foreign currency exchange contracts (319) Payable for fund shares purchased (9,980) Payable for investments purchased (225,463) Accrued expenses payables (31,347) Foreign withholding tax payable (2,479) ----------- OTHER ASSETS IN EXCESS OF LIABILITIES-NET 7,832 0.0% ----------- ------ NET ASSETS-100% $15,910,394 100.0% =========== ====== NET ASSET VALUE PER SHARE- CLASS A SHARES: Applicable to net assets of $657,641 and 65,937 shares outstanding ($0.001 par value, 10,000,000 shares authorized) $9.97 ===== CLASS B SHARES: Applicable to net assets of $15,252,753 and 1,528,095 shares outstanding ($0.001 par value, 10,000,000 shares authorized) $9.98 ===== * Non-income producing security ** The cost of investments for Federal income tax purposes is $15,094,245. As of December 31, 1995, unrealized appreciation for Federal income tax purposes aggregated $830,319 of which $1,275,921 related to appreciated securities and ($445,602) related to depreciated securities.
SEE NOTES TO FINANCIAL STATEMENTS. 20 STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
THE INTERNATIONAL EQUITY FUND INVESTMENT INCOME: Income: Interest $ 38,977 Dividends (Net of foreign withholding tax of $35,052) 244,012 ---------- 282,989 ---------- Expenses: Advisory 149,012 Custodian 179,616 Audit 25,724 Administration 24,797 Amortization of organizational costs 17,872 Distribution (Class A) 18,229 Legal 16,248 Transfer Agent 12,067 Trustees 11,274 Co-administration (Class A) 986 Co-administration (Class B) 3,998 Shareholder servicing (Class A) 1,359 Printing 2,577 Miscellaneous 353 ---------- Total expenses before waivers/reimbursements 464,112 Less expense waivers/reimbursements (110,425) ---------- Net expenses 353,687 ---------- Net investment loss (70,698) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (NOTES 1B, 1D AND 3) Net realized loss on investments (855,066) Net realized gain on foreign currency transactions 270,478 Net change in unrealized appreciation on investments 1,487,512 Net change in unrealized loss on other assets and liabilities denominated in foreign currencies (232) ---------- Net realized and unrealized gain on investment and foreign currency transactions 902,692 ---------- Net increase in net assets resulting from operations $ 831,994 ==========
SEE NOTES TO FINANCIAL STATEMENTS 21 STATEMENT OF CHANGES IN NET ASSETS
THE INTERNATIONAL EQUITY FUND PERIOD FROM APRIL 25, 1994 FOR THE (COMMENCEMENT YEAR ENDED OF OPERATIONS) DECEMBER 31, 1995 TO DECEMBER 31, 1994 ----------------- ------------------ OPERATIONS: Net investment loss $ (70,698) $ (3,752) Net realized loss on investments and foreign currency transactions (584,588) (256,676) Net unrealized appreciation(depreciation) on investments and foreign currency transactions 1,487,280 (666,611) ----------- ---------- Net increase (decrease) in net assets resulting from operations 831,994 (927,039) ----------- ---------- DISTRIBUTIONS TO SHAREHOLDERS: In excess of current period net investment loss -- (27,437) ----------- ---------- Total distributions -- (27,437) ----------- ---------- CAPITAL SHARES TRANSACTIONS: CLASS A Proceeds from sales of 52,332 and 1,919,732 shares, respectively 478,270 19,332,284 Net asset value of shares issued to shareholders in reinvestment of distributions of 142 shares 1,355 -- Payments for redemptions of 1,746,947 and 159,180 shares, respectively (15,499,489) (1,558,784) CLASS B Proceeds from sales of 2,033,244 shares 18,129,061 -- Payments for redemption of 505,149 shares (4,849,821) -- ----------- ---------- Net (decrease) increase in net assets from capital share transactions (1,740,624) 17,773,500 ----------- ----------- Total (decrease) increase in net assets (908,630) 16,819,024 NET ASSETS: Beginning of period 16,819,024 -- ----------- ----------- End of period $15,910,394 $16,819,024 =========== ===========
See Notes to Financial Statements 22 NOTES TO FINANCIAL STATEMENTS 1. International 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. The Fund's commencement date of operations was April 25, 1994. The investment objective of the Fund is to provide investors with long-term capital appreciation by investing at least 80% of its total assets in equity securities (including American and European Depository Receipts) issued by companies based outside of the United States. The Fund offers two classes of shares. The Institutional Class (Class B) is available to customers of financial institutions or corporations on behalf of their customers or employees, or on behalf of any trust, pension, profit sharing or other benefit plan for such customers or employees. The Service Class (Class A) is available to all other investors. The Institutional Class and Service Class shares are identical in all respects except that Institutional Class shares are not subject to a sales load and do not impose any shareholder servicing fee or Rule 12b-1 fees. The following summarizes significant accounting policies followed by the Fund in its financial statements. A. Investments in securities are valued at the last quoted sale price as of the close of business on the day the valuation is made, or lacking any sales, at the mean between closing bid and asked prices. Price information for listed securities is taken from the exchange where the securities are primarily traded. Investments in futures and related options, which are traded on commodities exchanges, are valued at their last sale price as of the close of such exchanges. Other securities for which no quotations are readily available are valued at fair value as determined in good faith by or under the direction of the Board of Trustees. Short-term investments are valued at amortized cost, which approximates market value. All assets and liabilities initially expressed in foreign currencies will be translated into U.S. dollars at the bid price of such currencies against the U.S. dollar's last quoted price by a major bank or broker. If such quotations are not available as of the close of the New York Stock Exchange, the rate of exchange will be determined in accordance with policies established in good faith by the Board of Trustees. B. Transactions denominated in foreign currencies are recorded at the prevailing rate as incurred or earned. Asset and liability accounts are adjusted to reflect the current rate at the end of each period. Such adjustments are recorded in net unrealized appreciation of other assets and liabilities denominated in foreign currencies. Net realized foreign currency gains or losses include exchange rate differences between trade date and settlement date for security purchases and sales, and between the date the Fund records income, expenses and other assets and liabilities and the date such assets and liabilities are received or paid. The portion of both realized and unrealized gains and losses on investments that result from fluctuations in foreign currency exchange rates is not seperately disclosed. The Fund may enter into forward currency exchange contracts for investments purposes and to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to hedge certain firm purchase and sales commitments denominated in foreign currencies. A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in realized gains or losses from foreign currency transactions. Fluctuations in the value of forward currency exchange contracts are recorded for financial reporting purposes as unrealized gains or losses by the Fund. 23 NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Fund's custodian will place and maintain cash not available for investment or government securities in a seperate account of the Fund having a value equal to the aggregate amount of the Fund's commitments under forward currency exchange contracts entered into with respect to position hedges. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The face or contract amount, in U.S. dollars, as reflected in the following table, reflects the total exposure the Fund has in that particular currency contract. At December 31, 1995, the Fund had outstanding forward currency exchange contracts, as follows:
Purchases IN SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS NET UNREALIZED DATE DELIVER FOR AT VALUE DEPRECIATION ---------- ------------------------ -------- --------- -------------- 1/4/96 Japanese Yen 8,507,299 $82,676 $82,395 $(281) 1/2/96 Turkish Lira 155,329,378 2,589 2,551 (38) -------- ------- ------- $85,265 $84,946 $(319) ======= ======= ======
C. Costs incurred in connection with the organization of the Fund are being amortized on a straight-line basis over a five year period from the date operations commenced. D. It is the Fund's policy to comply with the requirements of the Internal Revenue Code, as amended, applicable to regulated investment companies and to distribute substantially all of its taxable income, and net capital gains to its shareholders. Therefore, no provision is required for Federal income tax. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends, and capital gains at various rates. Where available, the Fund will file for claims on foreign taxes withheld. For Federal income tax purposes, at December 31, 1995, the Fund had capital loss carryforwards available to offset future realized gains, if any, of approximately $ 26,500 and $ 553,500 expiring on December 31, 2002 and December 31, 2003, respectively. Additionally, foreign currency losses of approximately $ 8,000 are attributable to foreign currency transactions that occurred after October 31, 1995 and are recognized for Federal income tax purposes as arising on January 1, 1996, the first day of the Fund's next taxable year. E. The Fund intends to distribute annually substantially all of its net investment income and net realized capital gains, if any, in the form of dividends. The Fund distinguishes between distributions on a tax basis and a financial reporting basis and requires that only distributions in excess of tax basis earning and profits are reported in the financial statements as a tax return of capital. Differences in the recognition or classfication of income between the financial statements and tax earnings and profits which result in temporary overdistributions for financial statements purposes, are classified as distributions in excess of net investment income or accumulated undistributed net realized gains. For the year ended December 31, 1995, the net 24 NOTES TO FINANCIAL STATEMENTS (CONTINUED) investment loss of $70,698 and losses totalling $30,712 from certain currency transactions have been reclassified from accumulated net investment loss and accumulated net realized loss, respectively, to paid-in capital since such losses may not be carried forward for Federal income tax purposes. Net assets were not affected by these reclassifications. F. Security transactions are recorded on the trade date. Dividend income is recorded on the ex-dividend date. Interest income is recorded as earned. Identified cost of investments sold is used for both financial statements and Federal income tax purposes. G. 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. H. The Fund offers Class A and Class B shares. The two classes of shares differ in their respective shareholder servicing agent, distribution and service fees. All shareholders bear the common expenses of the Fund pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends are declared seperately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in seperate class expenses. 2. The Trust is authorized to issue an unlimited number of shares of beneficial interest, par value $0.001 per share. At December 31, 1995, the composition of net assets of the Fund is as follows: Capital paid-in $15,865,922 Accumulated net realized loss on investments and foreign currency transactions (776,197) Net unrealized appreciation on investments and foreign currency transactions 820,669 ----------- Total net assets $15,910,394 =========== 3. The cost of securities purchased and proceeds from securities sold, excluding short-term securities, for the year ended December 31, 1995 were $ 14,014,121 and $ 15,337,804, respectively. 4. The Fund retains HSBC Asset Management Americas ("HSBC Americas"), to act as Adviser and Administrator. HSBC Americas is the North American investment affiliate of HSBC Holdings plc (Hongkong and Shanghai Banking Corporation). As Adviser, HSBC Americas furnishes to the Fund investment guidance and policy direction in connection with the management of the Fund, subject to policy established by the Board of Trustees of the Trust. For such services, HSBC Americas is paid a monthly fee at an annual rate of 0.90% of the Fund's average daily net assets. As administrator, HSBC Americas, provides personnel, office space and administrative services necessary for the operation of the Fund. As compensation for its administrative services, HSBC Americas receives from the Fund a monthly fee equal to an annual rate of 0.15% of the average daily net assets. The Adviser retains HSBC Asset Management Europe Ltd ("HSBC Europe"), HSBC Asset Management Hong Kong Ltd. ("HSBC Hong Kong"), HSBC Asset Management (Japan) KK ("HSBC Japan") and 25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) HSBC Asset Management Australia Limited ("HSBC Australia") to act as sub-advisers (the "Sub-Advisers") to the Fund. HSBC Europe, HSBC Hong Kong, HSBC Japan and HSBC Australia are all investment advisory affiliates of the Adviser. Under its Sub-Advisory Contract with HSBC Americas, each Sub-Advisor will undertake at its own expense to furnish the Fund and HSBC Americas with micro- and macreonomic research, advice and recommendations, and economic and statistical data, with respect to the Fund's investments, subject to the overall review by HSBC Americas and the Board of Trustees. For its services, the Sub-Advisers receives a fee from HSBC Americas at an annual rate not to exceed 0.45% of the Fund's average daily net assets. For the year ended December 31, 1995, as Adviser and Administrator, HSBC Americas earned $149,012 (before fee waivers of $66,081) and $24,797, respectively. Effective February 1, 1995, HSBC Americas earned co-administration fees of 0.03% for both share classes and shareholder servicing fees of 0.04% for the Service Class (Class A) of the Fund's average net assets, respectively. For the period ending December 31, 1995 the Fund paid co-administrative / shareholder servicing fees of $ 6,343. HSBC Americas waived co-administrative fees for the month of January totaling $ 944. The Fund has adopted a Distribution Plan and Agreement (the "Plan") for the Service Class (Class A) shares pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended, with Mariner Fund Services. The Plan provides, with respect to the Service Class (Class A) shares only, for reimbursement to the distributor of expenses incurred in connection with distribution services provided to the Fund not to exceed an annual rate of 0.25% of the average daily value of such Class' net assets during the preceding month. PFPC Inc. acts as transfer agent and dividend disbursing agent for the Fund effective August 29, 1994. For such services, PFPC Inc. earned $12,067 for the year ended December 31, 1995. State Street Bank and Trust Company acts as custodian for the Fund. For furnishing custodian services, State Street is paid a monthly fee with respect to the Fund for safekeeping its assets plus certain transaction charges and out-of-pocket expenses. For the year ended December 31, 1995, the Fund paid custody related expenses of approximately $179,000. One state in which the shares of the Fund are qualified for sale imposes limitations on the expenses of the Fund. 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 reimburse the Fund in an amount 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 the average daily net assets, 2.0% of the next $70 million of average daily net assets and 1.5% of average daily net assets in excess of $100 million. For the year ended December 31, 1995, HSBC Americas has reimbursed the Fund $ 110,425 of which none was required, pursuant to this expense limitation. A partner of Baker & McKenzie, legal counsel to the Trust, acts as Secretary of the Trust. For the year ended December 31, 1995, legal fees incurred by the Fund paid to Fund counsel were approximately $16,000. 26 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR AND THE PERIODS INDICATED
THE INTERNATIONAL EQUITY FUND CLASS A SHARES CLASS B SHARES ------------------------------------ ----------------- PERIOD FROM PERIOD FROM APRIL 25, 1994 MARCH 1, 1995 FOR THE (COMMENCEMENT (COMMENCEMENT YEAR ENDED OF OPERATIONS) TO OF OPERATIONS) TO DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995 ----------------- ----------------- ----------------- Net asset value, beginning of period: $ 9.55 $ 10.00 $ 8.81 ------- ------- ------- Loss From Investment Operations:** Net investment loss (0.07) -- (0.03) Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.49 (0.43) 1.20 ------- ------- ------- Total from investment operations 0.42 (0.43) 1.17 ------- ------- ------- Less Distributions from: In excess of net realized loss on investments -- (0.02) -- ------- ------- ------- Total distributions -- (0.02) -- ------- ------- ------- Net asset value, end of period 9.97 9.55 9.98 ======= ======= ======= Total return (a) 4.40% (4.30)%(b) 13.28%(b) Ratios/Supplemental Data: Net assets (000), end of year $658 $16,819 $15,253 Ratio of expenses (with fee waivers) to average net assets 1.98% 2.16%* 2.62%* Ratio of expenses (without fee waivers) to average net assets 3.66% 2.50%* 3.12%* Ratio of net investment loss (with fee waivers) to average net assets (1.01)% (0.04)%* (0.34)%* Ratio of net investment loss (without fee waivers) to average net assets (2.69)% (0.39)%* (0.84)%* Portfolio turnover rate 90.31% 29.37%(b) 90.31% - ------------------- (a) Excludes sales charge. (b) Not annualized. * Annualized. ** Based on average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS. 27 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 International 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, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund'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 International Equity Fund at December 31, 1995, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the indicated periods, in conformity with generally accepted accounting principles. /s/Ernst & Young LLP Ernst & Young LLP New York, New York February 16, 1996 28 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- MARINER SM MUTUAL FUNDS TRUST 3435 Stelzer Road Columbus,Ohio 43219 GENERAL INFORMATION: (800) 753-4462 INVESTMENT ADVISER AND ADMINISTRATOR HSBC Asset Management Americas Inc. 250 Park Avenue New York, New York 10177 SPONSOR AND DISTRIBUTOR (EFFECTIVE JANUARY 1, 1996) BISYS Fund Services 3435 Stelzer Road Columbus, Ohio 43219 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT PFPC, Inc. 400 Bellevue Parkway Wilmington, Delaware 19809 CUSTODIAN State Street Bank and and Trust Company P.O. Box 1713 Boston, Massachusetts 02105 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-----