-----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, Tb+6B+BrR2naQZ1naGyyiFEY5w+/Ayh9Dd4S29XbFjL4UmaXzOg8Bb2L5aP5n3mz cFZR+omNwM2Hri06fvst5w== 0000935069-97-000136.txt : 19970912 0000935069-97-000136.hdr.sgml : 19970912 ACCESSION NUMBER: 0000935069-97-000136 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970905 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC 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: SEC FILE NUMBER: 811-06057 FILM NUMBER: 97675823 BUSINESS ADDRESS: STREET 1: 3435 STELZER ROAD STREET 2: SUITE1000 CITY: COLUMBUS STATE: OH ZIP: 43219-8001 BUSINESS PHONE: 6144708000 MAIL ADDRESS: STREET 1: 3435 STELZER ROAD STREET 2: SUITE 1000 CITY: COLUMBUS STATE: OH ZIP: 43219-8001 FORMER COMPANY: FORMER CONFORMED NAME: MARINER MUTUAL FUNDS TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 HSBC FIXED INCOME - SEMI-ANNUAL HSBC MUTUAL FUNDS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HSBC Asset Management Americas Inc. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Fixed Income Fund New York Tax-Free Bond Fund SEMI-ANNUAL REPORT (UNAUDITED) June 30, 1997 Managed by: HSBC ASSET MANAGEMENT AMERICAS INC. Sponsored and distributed by: BISYS FUND SERVICES HSBC MUTUAL FUNDS TRUST - -------------------------------------------------------------------------------- FIXED INCOME FUNDS - -------------------------------------------------------------------------------- HSBC Asset Management Americas Inc. [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- FIXED INCOME FUND - -------------------------------------------------------------------------------- July 11, 1997 Dear Shareholder: The performance of the bond market has been a Jekyll/Hyde affair so far in 1997. The first quarter was fairly gruesome. Strong GDP growth of 5.9%, continued gains in the labor market and tighter monetary policy pushed interest rates higher and produced a negative total return of 0.56% in the first three months of the year according to the Lehman Aggregate Index. The second quarter was much kinder to the bond market. Slower growth, positive technicals and a lack of any price pressures propelled the market to gains of 3.67% for the period, bringing year to date returns to 3.09%. While we are not surprised by the result, the path taken was unexpected. The Fund returned 3.53% (no load) for the second quarter versus 3.67% for the benchmark, the Lehman Aggregate Index. Year to date, the Fund posted a 2.69% (no load) net return versus 3.09% for the benchmark. In our duration positioning, we have tended to go long relative to benchmark when long bond yields approach 7.125% and have moved to short of benchmark as long bonds have rallied to 6.5% - 6.75%. This strategy helped performance marginally over the first half. Sector allocation detracted slightly from performance in the second quarter after not being a factor in the first quarter. We were underweight in Mortgages and they outperformed similar duration in Treasuries by roughly 57 basis points in the second quarter. Corporates were 20 basis points tighter over the last three months and we had a very slight overweight in the sector. As of June 30, 1997, the average quality of the portfolio was AAA, the effective duration was 4.45 years and the average coupon was 7.04%. Sincerely, [\S\ JAMES LARK] James Lark COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FIXED INCOME FUND VS. LEHMAN AGGREGATE - -------------------------------------- Average Annual Total Return - -------------------------------------- Inception 1 Year (1/15/93) - -------------------------------------- Offering Price(1) 2.13% 4.98% NAV(2) 7.26% 6.13% - -------------------------------------- [GRAPHIC OMITTED] LEHMAN FUND(1) AGGREGATE FUND(2) 1/93 10,000 10,000 10,000 3/93 9,788 10,315 10,277 6/93 10,053 10,589 10,555 9/93 10,343 10,865 10,860 12/93 10,340 10,870 10,857 3/94 10,164 10,558 10,672 6/94 10,073 10,450 10,576 9/94 10,112 10,514 10,618 12/94 10,145 10,554 10,651 3/95 10,580 11,086 11,108 6/95 11,218 11,761 11,778 9/95 11,374 11,993 11,941 12/95 11,842 12,504 12,433 3/96 11,548 12,281 12,123 6/96 11,579 12,351 12,158 9/96 11,768 12,578 12,356 12/96 12,093 12,956 12,698 3/97 11,995 12,883 12,595 6/97 12,419 13,356 13,040 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. 2 NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- July 11, 1997 Dear Shareholder: Low supply and historically low volatility levels in the municipal fixed income market provided the background for municipals to outperform taxables on a total return basis over the course of the past six months. The total return of the Lehman Municipal Bond Index was 3.20%. By comparison the Lehman Aggregate Index posted a six month return of 3.09%. This reflected the fact that credit spreads in the fixed income markets had narrowed quite considerably. The average rating of the Municipal Bond Index is AA while that of the Aggregate index is AAA. This more than offset the fact that the taxable yields across the curve were lower (10-20 basis points) than yields in the municipal market (5-15 basis points). The fund's total return for the six month period ending June 30, 1997 was 3.05% (no load). The fund outperformed the average of Lipper's New York Municipal Debt Funds which stood at 2.96%. As of June 30, 1997, the fund's duration which takes into account interim principal and income payments as well as maturity levels was 7.18 which approximated 95% of the Lehman New York State Index. The average maturity of the fund was 11.46 years. In terms of sector diversification, the largest sectors consisted of general obligations (30.5%), medical revenue (13.8%) and higher education (12.9%). In terms of credit quality both New York State and New York City continued to sustain their recent improved economic condition. As a result, lower rated New York paper continued to outperform higher rated New York bonds as credit spreads between BAA to AAA rated paper continued to contract. There appear to be two areas of concern going forward in New York State and New York City. The first one relates to the new federal guidelines to welfare funding and how they will impact municipal finances. Next, there is still the fear that the strength in the New York economy may still be localized and highly dependent on the financial industry which historically sees periods of volatile earning fluctuations. Sincerely, [\S\ JERRYSAMET] Jerry Samet 3 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 - ----------------------------------------------- Inception 1 Year 5 Years (3/21/89) - ----------------------------------------------- Offering Price(1) 3.13% 5.34% 6.97% NAV(2) 8.30% 6.36% 7.60% - ----------------------------------------------- [GRAPHIC OMITTED] LEHMAN MUNI FUND(1) BOND INDEX FUND(2) 3/89 10,000 10,000 10,000 12/89 10,203 11,005 10,713 12/90 10,829 11,807 11,370 12/91 12,192 13,242 12,802 12/92 13,492 14,409 14,167 12/93 15,417 16,178 16,188 12/94 14,161 15,340 14,869 12/95 16,310 18,018 17,125 12/96 16,960 18,817 17,808 12/97 17,477 19,422 18,351 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (1) INCLUDES THE MAXIMUM SALES CHARGE OF 4.75% (2) EXCLUDES THE MAXIMUM SALES CHARGE OF 4.75% THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE NEW YORK TAX-FREE BOND FUND ON MARCH 21, 1989 (DATE OF INCEPTION), TO A $10,000 INVESTMENT IN THE LEHMAN MUNICIPAL BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE LEHMAN MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL MUNICIPAL BOND MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. 4 BOARD OF TRUSTEES JOHN P. PFANN* Chairman and President, JPP Equities, Inc. WOLFE J. FRANKL* Former Director, North America, Berlin Economic Development Corporation HARALD PAUMGARTEN President, Paumgarten and Company ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher Foundation *Member of the Audit and Nominating Committees - -------------------------------------------------------------------------------- OFFICERS MICHAEL J. KANE PRESIDENT ERIC ALMQUIST VICE PRESIDENT KAREN DOYLE VICE PRESIDENT KEVIN MARTIN TREASURER STEVEN R. HOWARD SECRETARY CURTIS BARNES ASSISTANT SECRETARY ALAINA V. METZ ASSISTANT SECRETARY ROBERT L. TUCH ASSISTANT SECRETARY 5 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) FIXED INCOME FUND
SHARES OR INTEREST MATURITY PRINCIPAL MARKET RATE DATE AMOUNT VALUE -------- -------- ----------- ----------- CORPORATE BONDS (20.0%): AEROSPACE AND DEFENSE EQUIPMENT (4.0%): Lockheed Martin Corp. ........................................ 6.85% 05/15/01 $ 2,500,000 $ 2,506,017 ----------- ENTERTAINMENT (0.8%): Walt Disney Co. .............................................. 6.38 03/30/01 500,000 496,939 ----------- FINANCIAL SERVICES (12.0%): ABN Amro Bank N.V. ........................................... 7.13 06/18/07 3,000,000 3,000,000 American Express Centurion Bank .............................. 6.13 06/15/00 2,000,000 1,978,076 Chase Manhattan Grantor Trust, Series 1996-A, Class A ........ 5.20 02/15/02 1,592,304 1,580,442 Travelers/Aetna Property & Casualty Corp. .................... 7.75 04/15/26 1,000,000 1,005,470 ----------- 7,563,988 ----------- TELECOMMUNICATIONS (3.2%): Lucent Technologies, Inc. .................................... 6.90 07/15/01 2,000,000 2,019,706 ----------- Total Corporate Bonds (Cost - $12,557,718) ....................................................... 12,586,650 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (36.9%): Export Development Corp. ..................................... 8.13 08/10/99 380,000 393,314 Federal Home Loan Mortgage Corp., Pool #D62926, .............. 6.50 08/01/25 2,814,819 2,697,835 Federal Home Loan Mortgage Corp. Pool #220019 ................ 7.75 01/01/02 158,617 161,358 Federal Home Loan Mortgage Corp., Debenture .................. 6.71 01/23/01 5,000,000 5,006,350 Federal Home Loan Mortgage Corporation, REMIC, PAC-1(21), Series 33, Class C, CMO ........................ 8.00 09/15/18 149,074 148,709 Federal National Mortgage Assoc., Pool # 310001 .............. 6.00 09/01/00 1,507,672 1,484,115 Federal National Mortgage Assoc., Pool # 343812 .............. 7.50 05/01/26 469,755 470,784 Federal National Mortgage Assoc., Pool # 343195 .............. 7.50 05/01/26 1,959,163 1,963,454 Federal National Mortgage Assoc., Pool # 250414 .............. 7.00 12/01/25 4,654,686 4,561,606 Federal National Mortgage Assoc., Series1993-104, Class C ................................................... 6.50 03/25/21 2,000,000 1,886,193 Government National Mortgage Assoc., Pool # 168414 ........... 10.00 08/15/22 950,048 1,016,849 Government National Mortgage Assoc., Pool # 356578 ........... 7.50 06/15/23 3,351,864 3,379,248 ----------- Total U.S. Government Agency Obligations (Cost - $23,017,645) ................................. 23,169,815 ----------- U.S. GOVERNMENT OBLIGATIONS (34.5%): U.S. TREASURY NOTES (26.7%): U.S. Treasury Notes .......................................... 7.25 02/15/98 1,000,000 1,009,063 U.S. Treasury Notes .......................................... 6.88 07/31/99 4,450,000 4,515,361 U.S. Treasury Notes .......................................... 8.00 08/15/99 1,000,000 1,036,875 U.S. Treasury Notes .......................................... 7.75 01/31/00 1,450,000 1,502,563 U.S. Treasury Notes .......................................... 7.50 05/15/02 2,000,000 2,092,500 U.S. Treasury Notes .......................................... 7.88 11/15/04 4,250,000 4,584,688 U.S. Treasury Notes .......................................... 6.88 05/15/06 2,000,000 2,041,250 ----------- 16,782,300 -----------
6 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED) FIXED INCOME FUND
SHARES OR INTEREST MATURITY PRINCIPAL MARKET RATE DATE AMOUNT VALUE -------- -------- ----------- ----------- U.S. GOVERNMENT OBLIGATIONS (CONTINUED) U.S. TREASURY BONDS (7.8%): U.S. Treasury Bonds ............................................ 8.75% 08/15/20 $ 2,280,000 $ 2,768,775 U.S. Treasury Bonds ............................................ 7.88 02/15/21 1,000,000 1,114,375 U.S. Treasury Bonds ............................................ 6.75 08/15/26 1,035,000 1,024,003 ----------- 4,907,153 ----------- Total U.S. Government Obligations (Cost - $21,455,393) ......................................... 21,689,453 ----------- MUNICIPAL OBLIGATIONS (3.2%): Oakland, California Pension Obligation, Subseries A (MBIA Insured) .................................. 6.91 12/15/07 2,000,000 1,985,258 ----------- Total Municipal Obligations (Cost - $2,000,000) ................................................ 1,985,258 ----------- CASH SWEEP ACCOUNT (0.0%): Bank of New York** ............................................. 4.60 703 703 ----------- Total Cash Sweep Account (Cost - $703) ......................................................... 703 ----------- OPEN-END INVESTMENT COMPANIES (4.6%): Provident Institutional Temporary Investment Fund .............. 2,889,000 2,889,000 ----------- Total Open-End Investment Companies (Cost - $2,889,000) ........................................ 2,889,000 ----------- TOTAL INVESTMENTS (99.2%) (Cost - $61,920,459)(a) ........................................................................ 62,320,879 OTHER ASSETS IN EXCESS OF LIABILITIES (0.8%) ................................................... 489,107 ----------- NET ASSETS (100.0%) ............................................................................ $62,809,986 =========== - -------------- (a) Represents cost for federal income tax purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation ........................................................................ $ 674,809 Unrealized depreciation ........................................................................ (274,389) ----------- Net unrealized appreciation .................................................................... $ 400,420 =========== ** Variable rate account. Rate presented represents rate in effect at June 30, 1997. CMO - Collateralized Mortgage Obligation MBIA - Municipal Bond Insurance Association REMIC - Real Estate Mortgage Investment Conduit
SEE NOTES TO FINANCIAL STATEMENTS. 7 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) NEW YORK TAX-FREE BOND FUND
SHARES OR INTEREST MATURITY PRINCIPAL MARKET RATE DATE AMOUNT VALUE -------- -------- ----------- ----------- MUNICIPAL BONDS (97.7%): NEW YORK (93.2%): Albany County Airport Authority, AMT (FSA Insured) Callable 12/15/07 @ 102 ................................... 5.50% 12/15/19 $ 750,000 $ 736,875 Bethlehem Central School District, G.O. (AMBAC Insured) ........................................... 7.10 11/01/07 200,000 237,000 Metropolitan Transportation Authority, Transportation Facilities Revenue, Series 1997-A (MBIA Insured), Callable 7/1/07 @ 101.5 ................................... 5.63 07/01/25 1,200,000 1,188,000 Monroe County, G.O., Series B, Pre-Refunded 6/1/98 @102 .................................. 7.00 06/01/04 40,000 41,884 Monroe County, G.O., Series B, Callable 6/1/98 @102 ...................................... 7.00 06/01/04 10,000 10,444 New York City, G.O., Series A, Prerefunded 8/15/01 @101.5 ................................ 7.75 08/15/04 20,000 22,650 New York City, G.O., Series A, Prerefunded 8/15/01 @ 101.5 ............................... 7.75 08/15/07 3,145,000 3,569,575 New York City, G.O., Series A, Callable 8/15/01 @ 101.5 .................................. 7.75 08/15/04 580,000 647,425 New York City, G.O., Series A, Callable 8/15/01 @ 101.5 .................................. 7.75 08/15/07 355,000 394,937 New York City, G.O., Series B ................................ 6.10 08/15/05 2,000,000 2,107,500 New York City, G.O., Series B, Callable 2/1/02 @101.5 .................................... 7.50 02/01/07 1,000,000 1,107,500 New York City, G.O., Series E ................................ 6.50 02/15/06 2,000,000 2,165,000 New York City, G.O., Series F, Pre-Refunded 11/15/01 @101.5 .............................. 8.40 11/15/05 105,000 122,719 New York City, G.O., Series F, Callable 11/15/01 @101.5 .................................. 8.40 11/15/05 45,000 51,412 New York City, G.O., Series G ................................ 6.75 02/01/09 1,000,000 1,106,250 New York City, Municipal Assistance Corp., Series E .......... 6.00 07/01/03 2,200,000 2,351,250 New York City, Municipal Water Finance Authority, Water & Sewer System Revenue, Series A, Callable 6/15/06 @101 ..................................... 5.50 06/15/24 1,800,000 1,741,500 New York City, Trust for Cultural Resources, Museum of Modern Art (AMBAC Insured) Callable 1/1/02 @102 ...................................... 6.40 01/01/04 350,000 382,375 New York State, Dormitory Authority, City University System Revenue, Series A (FGIC Insured) ........ 5.75 07/01/18 2,370,000 2,461,837 New York State, Dormitory Authority, State University Educational Facilities Revenue, Series A .................................................. 5.88 05/15/11 1,500,000 1,543,125 New York State, Environmental Facilities Corp., PCR, State Water, Revolving Fund, Series A, Callable 6/15/01 @102 ..................................... 7.00 06/15/12 300,000 328,500
8 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED) NEW YORK TAX-FREE BOND FUND
SHARES OR INTEREST MATURITY PRINCIPAL MARKET RATE DATE AMOUNT VALUE -------- -------- ----------- ----------- MUNICIPAL BONDS (CONTINUED) New York State, Environmental Facilities Corp., PCR, State Water, Revolving Fund, Series B, Callable 3/15/99 @102 ..................................... 7.50% 03/15/11 $ 250,000 $ 267,500 New York State, Environmental Facilities Corp., PCR, State Water, Revolving Fund, Series C, Callable 3/15/00 @102 ..................................... 7.20 03/15/11 200,000 216,250 New York State, Environmental Facilities Corp., Special Obligation Revenue, Riverbank State Park (AMBAC Insured) ........................................... 5.00 04/01/05 1,000,000 1,011,250 New York State, Housing Financial Agency, Multifamily Mortgage Housing Revenue, Series A (FHA Insured) Callable 8/15/02 @102 .............. 7.00 08/15/22 900,000 952,875 New York State, Medical Care Facilities Financial Agency, Series A (FSA Insured) Prerefunded 2/15/98 @ 102 .......... 7.70 02/15/18 35,000 36,504 New York State, Medical Care Facilities Financial Agency, Series A (FSA Insured) Callable 2/15/98 @102 .............. 7.70 02/15/18 80,000 83,175 New York State, Medical Care Facilities Financial Agency, Adult Day Care Facility, Series A (SONYMA Insured) Callable 11/15/05 @102 .................................... 6.38 11/15/20 2,000,000 2,102,500 New York State, Medical Care Facilities Financial Agency, Mental Health Services, Series F .......................... 6.00 08/15/03 1,900,000 2,004,500 New York State, Power Authority Revenue and General Purpose (MBIA Insured) Callable 1/1/03 @ 102 .............. 5.00 01/01/14 1,550,000 1,462,813 New York State, Urban Development Corp., Callable 7/1/06 @ 102 ..................................... 5.50 07/01/16 2,000,000 2,007,500 Niagara Frontier Transportation Authority, Greater Buffalo International Airport Revenue, Series A, AMT (AMBAC Insured) Callable 4/1/04 @102 ...................... 6.13 04/01/14 2,400,000 2,511,000 Port Authority of New York and New Jersey, Series 109 (FSA Insured) Callable 1/15/07 @ 107 ........... 5.38 07/15/27 1,000,000 971,250 Syracuse, G.O., Pre-Refunded 2/15/01 @102 .................... 6.70 02/15/01 300,000 326,625 ----------- 36,271,500 ----------- PUERTO RICO (4.5%): Puerto Rico Public Building Authority, Government Facilities Revenue, Series B (MBIA Insured) Callable 7/1/07 @ 101.5 ................................... 5.00 07/01/09 1,775,000 1,768,344 ----------- Total Municipal Bonds (Cost - $36,324,973) .................................................... 38,039,844 -----------
9 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1997 (UNAUDITED) (CONTINUED) NEW YORK TAX-FREE BOND FUND
SHARES OR INTEREST MATURITY PRINCIPAL MARKET RATE DATE AMOUNT VALUE -------- -------- ----------- ----------- CASH SWEEP ACCOUNTS (0.0%): Bank of New York** 4.60% $ 272 $ 272 ----------- Total Cash Sweep Accounts (Cost - $272) ...................................................... 272 ----------- OPEN-END INVESTMENT COMPANIES (0.9%): Provident Institutional New York Money Fund ....................................... 343,000 343,000 ----------- Total Open End Investment Companies (Cost - $343,000) ........................................ 343,000 ----------- TOTAL INVESTMENTS (98.6%) (Cost - $36,668,245)(a) ...................................................................... 38,383,116 OTHER ASSETS IN EXCESS OF LIABILITIES (1.4%) ................................................. 557,129 ----------- NET ASSETS (100.0%) .......................................................................... $38,940,245 =========== - ----------- (a) Represents cost for federal income tax purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation ...................................................................... $ 1,718,355 Unrealized depreciation ...................................................................... (3,484) ----------- Net unrealized appreciation .................................................................. $ 1,714,871 =========== ** Variable rate account. Rate presented represents rate in effect at June 30, 1997. AMBAC - AMBAC Indemnity Corporation. AMT - Alternative Minimum Taxable Paper FHA - Insured by Federal Housing Administration FSA - Insured by Financial Security Assurance G.O. - General Obligation MBIA - Municipal Bond Insurance Association PCR - Pollution Control Revenue SONYMA - State of New York Mortgage Agency
SEE NOTES TO FINANCIAL STATEMENTS. 10 STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1997 (UNAUDITED)
FIXED NEW YORK INCOME TAX-FREE FUND BOND FUND ----------- ----------- ASSETS: Investment in securities, at value (cost $61,920,459 and $36,668,245, respectively) ............................................................... $62,320,879 $38,383,116 Interest and dividends receivable ............................................. 850,674 752,303 Receivable from investments sold .............................................. 1,509 -- Deferred organization costs ................................................... 5,054 -- Prepaid expenses and other assets ............................................. 15,559 16,667 ----------- ----------- Total Assets ................................................................ 63,193,675 39,152,086 ----------- ----------- LIABILITIES: Dividends payable ............................................................. 317,233 157,166 Accrued expenses and other payables: Investment advisory fees .................................................... 28,773 8,073 Administration fees ......................................................... 5,370 3,284 Distribution fees ........................................................... -- 8,655 Legal and audit fees ........................................................ 10,236 3,864 Deferred trustee fees ....................................................... 11,006 20,490 Other ....................................................................... 11,071 10,309 ----------- ----------- Total Liabilities ........................................................... 383,689 211,841 ----------- ----------- Net Assets ....................................................................... $62,809,986 $38,940,245 =========== =========== COMPUTATION OF NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE: Net assets .................................................................... $62,809,986 $38,940,245 Shares of beneficial interest issued and outstanding ($0.001 par value per share, unlimited number of shares authorized) ..................... 6,379,260 3,503,911 ----------- ----------- Net asset value ............................................................... $ 9.85 $ 11.11 Maximum sales charge -- 4.75% of offering price ............................... 0.49 0.55 ----------- ----------- Maximum offering price ........................................................ $ 10.34 $ 11.66 =========== =========== COMPOSITION OF NET ASSETS: Paid-in capital ............................................................... $65,422,858 $38,965,987 Undistributed net investment income ........................................... 10,321 -- Accumulated undistributed net realized losses from investment transactions ..................................................... (3,023,613) (1,740,614) Net unrealized appreciation from investments .................................. 400,420 1,714,872 ----------- ----------- Net Assets, June 30, 1997 ........................................................ $62,809,986 $38,940,245 =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS. 11 STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
FIXED NEW YORK INCOME TAX-FREE FUND BOND FUND ----------- ----------- INVESTMENT INCOME: Dividends ...................................................................... $ 71,410 $ 17,171 Interest ....................................................................... 2,280,460 1,145,189 ---------- ---------- Total Income ................................................................. 2,351,870 1,162,360 ---------- ---------- EXPENSES: Advisory fees .................................................................. 184,787 89,852 Administration fees ............................................................ 50,396 29,951 Co-administration fees ......................................................... 23,518 13,977 Distribution fees .............................................................. -- 34,676 Audit fees ..................................................................... 2,801 3,494 Transfer agent fees ............................................................ 13,631 36,202 Custodian fees ................................................................. 5,060 3,102 Printing costs ................................................................. 12,155 7,122 Registration fees .............................................................. 2,626 2,338 Amortization of organization costs ............................................. 6,666 -- Legal fees ..................................................................... 7,995 5,236 Trustees' fees ................................................................. 3,076 2,013 Other expenses ................................................................. 8,655 5,385 ---------- ---------- Gross Expenses .................................................................... 321,366 233,348 Less: Fee waivers .............................................................. (40,350) (63,916) ---------- ---------- Net Expenses ...................................................................... 281,016 169,432 ---------- ---------- Net Investment Income ............................................................. $2,070,854 $992,928 ---------- ---------- REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions ....................... (452,563) 170,233 Net change in unrealized appreciation/depreciation from investments ............ 161,630 42,920 ---------- ---------- Net Realized and Unrealized Gains (Losses) from Investments ....................... (290,933) 213,153 ---------- ---------- Net Increase in Net Assets Resulting from Operations .............................. $1,779,921 $1,206,081 ========== ==========
SEE NOTES TO FINANCIAL STATEMENTS. 12 STATEMENTS OF CHANGES IN NET ASSETS
FIXED INCOME FUND NEW YORK TAX-FREE BOND FUND -------------------------------- -------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE JUNE 30, 1997 YEAR ENDED JUNE 30, 1997 YEAR ENDED (UNAUDITED) DECEMBER 31, 1996 (UNAUDITED) DECEMBER 31, 1996 ------------- ----------------- ------------- ----------------- From Investment Activities: OPERATIONS: Net investment income ......................... $ 2,070,854 $ 6,073,106 $ 992,928 $ 2,257,044 Net realized gains (losses) from investment transactions ................................ (452,563) (1,449,259) 170,233 1,168,816 Net change in unrealized appreciation/ depreciation from investments ............... 161,630 (2,191,530) 42,920 (1,819,652) ------------ ------------ ----------- ------------ Change in net assets resulting from operations .................................. 1,779,921 2,432,317 1,206,081 1,606,208 ------------ ------------ ----------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: From net investment income .................... (2,070,854) (6,073,106) (992,928) (2,257,044) In excess of net investment income ............ -- (1,496) -- -- ------------ ------------ ----------- ------------ Change in net assets from distributions to shareholders ................................ (2,070,854) (6,074,602) (992,928) (2,257,044) ------------ ------------ ----------- ------------ CAPITAL TRANSACTIONS: Proceeds from shares issued ................... 7,885,484 35,631,687 624,693 1,426,786 Dividends reinvested .......................... 38,218 76,121 591,536 1,243,334 Cost of shares redeemed ....................... (49,697,832) (27,132,519) (4,463,822) (10,721,363) ------------ ------------ ----------- ------------ Change in net assets from share transactions ................................ (41,774,130) 8,575,289 (3,247,593) (8,051,243) ------------ ------------ ----------- ------------ Change in net assets ............................. (42,065,063) 4,933,004 (3,034,440) (8,702,079) NET ASSETS: Beginning of period .............................. 104,875,049 99,942,045 41,974,685 50,676,764 ------------ ------------ ----------- ------------ End of period .................................... $ 62,809,986 $104,875,049 $38,940,245 $ 41,974,685 ============ ============ =========== ============ SHARE TRANSACTIONS: Issued ........................................ 805,649 3,608,906 56,895 130,184 Reinvested .................................... 3,902 7,721 53,851 114,042 Redeemed ...................................... (5,038,879) (2,726,104) (406,393) (983,166) ------------ ------------ ----------- ------------ Change in shares ................................. (4,229,328) 890,523 (295,647) (738,940) ============ ============ =========== ============
SEE NOTES TO FINANCIAL STATEMENTS. 13 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION HSBC Mutual Funds Trust, (the "Trust") was organized on November 1, 1989 as a Massachusetts business trust, and is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as a diversified, open-end management investment company with multiple investment portfolios, including the Fixed Income Fund and the New York Tax-Free Bond Fund (herein referred to individually as a "Fund" and collectively as the "Funds"). The investment objective of the Fixed Income Fund is generation of high current income consistent with appreciation of capital by investing in a variety of fixed-income securities. The investment objective of the New York Tax-Free Bond Fund is to provide its investors with as high a level of current income exempt from federal, New York State and New York City income taxes as is consistent with relative stability of capital. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. SECURITIES VALUATION: Portfolio securities for which market quotations are readily available are valued at the quoted bid price. 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 mutual funds are valued at their net asset value as reported by such investment companies. Short-term obligations having maturities of 60 days or less are valued at amortized cost which approximates market value. TAXES: It is the Funds' policy to comply with the provisions of the Internal Revenue Code, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income and net realized capital gains to its shareholders for each taxable year. Therefore, no provision is required for federal income tax. At December 31, 1996, the Fixed Income Fund had available $2,524,512 of capital loss carryforwards which, if not utilized, $1,082,278 and $1,442,234 will expire in the year 2003 and 2004, respectively. At December 31, 1996, the New York Tax-Free Bond Fund had available $1,905,167 of capital loss carryforwards which, if not utilized, $1,261,112 and $644,055 will expire in the year 2002 and 2003, respectively. 14 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DIVIDENDS AND DISTRIBUTIONS: The 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, if any, are distributed at least annually. The amounts of dividends from net investment income and of distributions from net realized gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions to shareholders which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized gains. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on trade date. Identified cost of investments sold is used for both financial statement and federal income tax purposes. Interest income including amortization of discount and premium, is recorded as earned. EXPENSE ALLOCATION: Expenses directly attributed to each Fund in the Trust are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them on the basis of relative net assets or another appropriate basis. ORGANIZATIONAL COSTS: 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. 3. PORTFOLIO SECURITIES Purchases and sales of securities (excluding short-term securities) for the six months ended June 30, 1997 were as follows: PURCHASES SALES ---------- ----------- Fixed Income Fund ................. $17,191,370 $36,660,625 New York Tax-Free Bond Fund ....... $ 7,261,881 $12,090,837 4. RELATED PARTY TRANSACTIONS The Trust retains HSBC Asset Management Americas Inc. to act as Investment Adviser for the Funds. HSBC Asset Management Americas Inc. is the North American investment affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking Corporation). As Investment Adviser, HSBC Asset Management Americas Inc. furnishes investment guidance and policy direction in connection with the management of the investment portfolios of the Funds, subject to policies established by the Board of Trustees. 15 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. RELATED PARTY TRANSACTIONS (CONTINUED) As compensation for its services, HSBC Asset Management Americas Inc. is paid monthly advisory fees at the following annual rates: ADVISORY FEE RATE ----------------- FIXED INCOME PORTIONS OF THE FUND'S AVERAGE DAILY NET ASSETS FUND ----------------------------------------------------------- ----------------- Up to $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 $2.0 billion .. 0.370% In excess of $2.0 billion ................................. 0.315% ADVISORY FEE RATE ----------------- NEW YORK TAX-FREE BOND PORTIONS OF THE FUND'S AVERAGE DAILY NET ASSETS FUND ----------------------------------------------------------- ----------------- 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% For the six months ended June 30, 1997, HSBC Asset Management Americas Inc. earned advisory fees of $184,787 from the Fixed Income Fund and $49,918 from the New York Tax-Free Bond Fund, net fee of waivers of $0 and $39,934, respectively. BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"), an Ohio limited partnership is a subsidiary of the BISYS Group, Inc. BISYS, with whom certain officers are affiliated, serves the Trust as distributor, administrator, transfer agent and fund accountant. Such officers are not paid any fees directly by the Funds for serving as officers of the Trust. In accordance with the terms of the Administration and Accounting Servicing agreements BISYS is paid a monthly asset-based fee of 0.15% (annualized) of the Fund's first $200 million of average net assets; 0.125% of the Fund's next $200 million of average net assets; 0.10% of the Fund's next $200 million of average net assets; and 0.08% of the Fund's average net assets in excess of $600 million; exclusive of out-of-pocket expenses. For the six months ended June 30, 1997, BISYS earned administrative services fees of $33,564 from the Fixed Income Fund, and $19,946 from the New York Tax-Free Bond Fund, net of fee waivers of $16,832 and $10,005, respectively. 16 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. RELATED PARTY TRANSACTIONS (CONTINUED) HSBC Asset Management Americas Inc. is paid a co-administration/shareholder servicing fee of 0.07% of each Fund's average daily net assets. For the six months ended June 30, 1997, HSBC Asset Management Americas Inc. waived all of their co-administration/shareholder servicing fees. These waivers totaled $23,518 for the Small Cap Fund and $13,977 for the Growth and Income Fund. 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% of each Fund's average net assets during the preceding month. The expenses incurred as a result of these agreements totaled $0 from the Fixed Income Fund and $34,676 from the New York Tax-Free Bond Fund. The Funds may enter into agreements (the "Service Agreements") with certain banks, financial institutions and corporations ("Service Organizations") whereby each Service Organization handles record keeping and provides certain administration services for its customers who invest in the Funds through accounts maintained at that Service Organization. Each Service Organization will receive monthly payments for the performance of its service under the Service Agreement. The payments from the Funds on an annual basis will not exceed 0.35% of the average value of the Funds' shares held in the subaccounts of the Service Organizations. A partner of Baker & McKenzie, legal counsel to the Trust, serves as Secretary of the Trust. For the six months ended June 30, 1997 the Funds incurred legal fees of $7,995 for the Fixed Income Fund, and $5,236 for the New York Tax-Free Bond Fund. 5. CONCENTRATION OF CREDIT The New York Tax-Free Bond Fund invests primarily in debt obligations issued by the State of New York and its respective political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to economic and political factors adversely affecting issuers of New York specific municipal securities than is a municipal bond fund that is not concentrated in these issuers to the same extent. 17 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD FIXED INCOME FUND
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, FOR THE PERIOD JUNE 30, 1997 ------------------------------ JANUARY 15, 1993(a) TO (UNAUDITED) 1996 1995 1994 DECEMBER 31, 1993 --------------- ------ ------ ------ ---------------------- Net Asset Value, Beginning of Period ............ $ 9.89 $ 10.28 $ 9.35 $ 10.13 $ 10.00 ------- -------- ------- ------- ------- Investment Activities Net investment income ...................... 0.30 0.59 0.59 0.59 0.63 Net realized and unrealized gains (losses) from investments ............... (0.04) (0.39) 0.93 (0.78) 0.21 ------- -------- ------- ------- ------- Total from Investment Activities ........... 0.26 0.20 1.52 (0.19) 0.84 ------- -------- ------- ------- ------- Distributions From net investment income ................. (0.30) (0.59) (0.59) (0.59) (0.63) From net realized gains .................... -- -- -- -- (0.08) ------- -------- ------- ------- ------- Total distributions ........................ (0.30) (0.59) (0.59) (0.59) (0.71) ------- -------- ------- ------- ------- Net Change in Net Asset Value ................... (0.04) (0.39) 0.93 (0.78) 0.13 ------- -------- ------- ------- ------- Net Asset Value, End of Period .................. $ 9.85 $ 9.89 $ 10.28 $ 9.35 $ 10.13 ======= ======== ======= ======= ======= Total Return(b) ................................. 2.69%(d) 2.11% 16.73% (1.89)% 8.57%(d) Ratios/Supplemental Data: Net Assets at end of period (000) .......... $62,810 $104,875 $99,942 $84,774 $90,907 Ratio of expenses to average net assets .... 0.84%(c) 0.88% 0.93% 0.77% 0.22%(c) Ratio of net investment income to average net assets ...................... 6.18%(c) 5.94% 6.03% 6.10% 6.40%(c) Ratio of expenses to average net assets* ... 0.96%(c) 0.98% 0.96% 0.86% 0.87%(c) Ratio of net investment income to average net assets* ..................... 6.06%(c) 5.84% 6.00% 6.01% 5.75%(c) Portfolio Turnover Rate .................... 26.59% 156.05% 41.58% 63.96% 107.34%(d) - ------------ * During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or expense reimbursements had not occurred, the ratios would have been as indicated. (a) Commencement of operations. (b) Excludes sales charge. (c) Annualized. (d) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS. 18 FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD NEW YORK TAX-FREE BOND FUND
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 1997 ------------------------------------------------------ (UNAUDITED) 1996 1995 1994 1993 1992 ------------- -------- -------- -------- -------- -------- Net Asset Value, Beginning of Period .......... $ 11.05 $ 11.17 $ 10.20 $ 11.70 $ 11.01 $ 10.66 ------- ------- ------- ------- ------- ------- Investment Activities Net investment income .................... 0.27 0.55 0.54 0.53 0.59 0.66 Net realized and unrealized gains (losses) from investments ...................... 0.06 (0.12) 0.97 (1.47) 0.95 0.44 ------- ------- ------- ------- ------- ------- Total from Investment Activities ......... 0.33 0.43 1.51 (0.94) 1.54 1.10 ------- ------- ------- ------- ------- ------- Distributions From net investment income ............... (0.27) (0.55) (0.54) (0.53) (0.59) (0.66) From net realized gains .................. 0.00 0.00 0.00 (0.03) (0.26) (0.09) ------- ------- ------- ------- ------- ------- Total distributions ...................... (0.27) (0.55) (0.54) (0.56) (0.85) (0.75) ------- ------- ------- ------- ------- ------- Net Change in Net Asset Value ................. 0.06 (0.12) 0.97 (1.50) 0.69 0.35 ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period ................ $ 11.11 $ 11.05 $ 11.17 $ 10.20 $ 11.70 $ 11.01 ======= ======= ======= ======= ======= ======= Total Return(a) ............................... 3.05%(c) 3.99% 15.17% (8.13)% 14.27% 10.66% Ratios/Supplemental Data: Net Assets at end of period (000) ........ $38,940 $41,975 $50,677 $50,711 $61,740 $32,407 Ratio of expenses to average net assets ............................ 0.85%(b) 0.91% 0.99% 0.84% 0.63% 0.38% Ratio of net investment income to average net assets ................. 4.97%(b) 5.02% 5.07% 4.93% 4.98% 6.04% Ratio of expenses to average net assets* ........................... 1.17%(b) 1.21% 1.20% 1.10% 1.06% 1.17% Ratio of net investment income to average net assets* ................... 4.65%(b) 4.72% 4.86% 4.67% 4.55% 5.25% Portfolio Turnover Rate .................. 18.83% 87.40% 24.43% 122.43% 70.36% 66.44% - ------------ * During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or expense reimbursements had not occurred, the ratios would have been as indicated. (a) Excludes sales charge. (b) Annualized. (c) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HSBC[SERVICE MARK] MUTUAL FUNDS TRUST 3435 Stelzer Road Columbus, Ohio 43219 INFORMATION: (800) 634-2536 INVESTMENT ADVISER HSBC Asset Management Americas Inc. 250 Park Avenue New York, New York 10177 DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT BISYS Fund Services 3435 Stelzer Road Columbus, Ohio 43219 CUSTODIAN 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 Baker & McKenzie 805 Third Avenue New York, New York 10022 This report is for the information of the shareholders of HSBC Mutual Funds Trust. Its use in connection with any offering of the Trust's shares is authorized only in the case of a concurrent or prior delivery of the Trust's current prospectus. 8/97 -----END PRIVACY-ENHANCED MESSAGE-----