-----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, GjS1H4ASuzIc6BocoG9zjhmds3Bt3lYAtuFVHYQlv06b1hp2b6NZnVYWzRG/dlXT LRTwxertbhRKlX1ZYs15Nw== 0000935069-98-000162.txt : 19980907 0000935069-98-000162.hdr.sgml : 19980907 ACCESSION NUMBER: 0000935069-98-000162 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980904 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: 98704465 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 REPORT HSBC MUTUAL FUNDS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HSBC Asset Management Americas Inc. (LOGO) [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Growth & Income Fund Fixed Income Fund New York Tax-Free Bond Fund SEMI-ANNUAL REPORT (UNAUDITED) June 30, 1998 Managed by: HSBC ASSET MANAGEMENT AMERICAS INC. Sponsored and distributed by: BISYS FUND SERVICES HSBC MUTUAL FUNDS TRUST - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HSBC Asset Management Americas Inc. (LOGO) [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- GROWTH & INCOME FUND - -------------------------------------------------------------------------------- July 13, 1998 Dear Shareholder: Showing resilience in the face of renewed Asian turmoil, the U.S. equity market rose 17.7% on a total return basis for the first six months of 1998. While the return was quite spectacular, volatility increased markedly over the period, from the straight, upward line of the first quarter, to a much choppier second quarter. Later in the period, concerns of the dollar's strength, Asian weakness, the possibility of a slowdown in global demand, and the subsequent impact on U.S. corporate earnings, buffeted the equity market. Rates were generally supportive over the six months as the 30-year Treasury yield fell from 5.92% at year-end 1997 to 5.63% by June 30, 1998. However, while stocks were in an overall-declining trend saved only by a late June rally, they diverged from bonds during the second quarter as Treasuries attained new highs with a downshift of the entire Treasury curve. A strong U.S. dollar had also been a significant factor in the divergent performance of the capital markets as it rose sharply against the yen as well as emerging market currencies though less so against the European basket. Rates aside, there was little change in equity fundamentals as the economy has continued its "virtuous cycle" as termed by Federal Reserve Chairman Alan Greenspan, that is strong domestic growth with little inflation despite growing wage pressures. First quarter earnings (reported in April and May) rose 6.3% on a weighted basis for S&P 500 companies and positive earnings surprises outnumbered negative surprises by a two-to-one margin. While results showed a marked slowdown from the double-digit growth of the previous several quarters, they outpaced analysts expectations which had been revised down substantially in the wake of the fourth quarter Asian turbulence. Further, merger and acquisition (M&A) activity continued to be robust with nearly $592 billion in transactions announced in the first five months of 1998 alone, up 146% from the comparable year-ago period. Finally, equity mutual fund inflows remained strong, totaling $109 billion through May, up 15% from the comparable year-ago period, maintaining an important source of liquidity to fuel the market's move higher. MARKET OUTLOOK - -------------- At this juncture, the equity market remains at historic high levels on valuation measures such as price-to-earnings, cash flow, book value, and on the basis of valuation methods which are based on dividend yield and nominal rates. However, we believe that this valuation is justified by the current and unprecedented backdrop of low inflation and stable, low interest rates; in combination with strong operating earnings growth and perhaps most importantly, record returns on equity and invested capital. While the earnings concerns relative to the impact of the dollar and the weakening of Asia cannot be dismissed, fully 85% of S&P 500 profits are generated in the U.S., Canada and Europe. Further, there have already been earnings cuts in the Basic and Capital Goods sector of the market as well as in the semiconductor industry, as well as adjustments in estimates due to currency translation. Finally, the dearth of second quarter pre-announcements -- which usually consist of bad news -- may well be a harbinger of good news to come on the earnings front albeit relative to reduced expectations. In terms of support, we continue to forecast a patient Federal Reserve with no upward movement in rates expected, and for bonds to remain strong. Recently the economy has shown some signs of moderation from the torrid pace earlier in the year, notably in the National Association of Purchasing Managers (NAPM) data, as well as on the employment and wage front which should lend credence to our positive rate outlook. Further, inflows into the market should remain robust, in part buoyed by the increasing interest of foreign investors in the U.S. as evidenced by the $116 billion annualized rate of investment in the first quarter of 1998 (latest available). In summary, while a pullback in the market is a possibility if second quarter earnings disappoint, we would not expect a significant correction given the constructive outlook for rates and the ongoing positive supply/dynamic for U.S. equities. HSBC GROWTH & INCOME FUND - ------------------------- The Fund turned in a strong relative performance for the first half of 1998 and gained 16.91% on a net total return basis. This return placed the Fund in the 14th percentile of the Lipper Growth & Income fund universe, well ahead of the average return of 12.11%. The Fund was positioned towards domestic growth for the period, underweighted in the Basic Materials, Capital Goods and Energy sectors and overweight in the Consumer Cyclical, Financial, Healthcare and Technology areas of the market. This was reflective of a positive view on the U.S. consumer -- given strong personal income gains, employment and record levels of consumer confidence -- as well as our forecast of stable/low rates. This strategy bore fruit as both our sector weighting decisions and superior stock selection contributed to relative returns. Going into the second half of 1998 we have maintained an emphasis on growth as these stocks should continue to perform well in a slowing growth, low inflation, stable rate environment we envision for the balance of the year. Sincerely, /s/ FRED LUTCHER Fred Lutcher Managing Director, U.S. Equities The views expressed in this report reflect those of the portfolio manager through the end of the period covered by the report as stated on the cover. The manager's views are subject to change at any time based on the market and other conditions. Past Performance is no guarantee of future results. 2 COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN GROWTH & INCOME FUND VS. S&P 500 COMPOSITE STOCK INDEX - ------------------------------------------------ Average Annual Total Return - ------------------------------------------------ 1 Year 5 Years 10 Years - ------------------------------------------------ Offering Price(1) 19.23% 17.98% 15.36% NAV(2) 25.53% 19.19% 15.95% - ------------------------------------------------ [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC WITH MAXIMUM WITHOUT MAXIMUM SALES CHARGE S&P 500 LIPPER SALES CHARGE 1/1/88 $ 9,496.68 $10,000 $10,000 $10,000 12/88 $11,016.1 $11,650.3 $11,836.5 $11,600 12/89 $13,831.9 $15,311.7 $14,650 $14,565 12/90 $13,221.9 $14,823 $13,771.1 $13,922.6 12/91 $17,442.3 $19,351.3 $17,574 $18,366.8 12/92 $18,792.3 $20,837.8 $19,267.3 $19,788.3 12/93 $20,902.7 $22,921.6 $22,083.7 $22,010.6 12/94 $20,281.9 $23,226 $21,933.7 $21,356.9 12/95 $26,997.3 $31,952.9 $28,732.7 $28,428.1 12/96 $31,829.8 $39,288.3 $34,694.2 $33,516.7 12/97 $40,557.5 $52,399.9 $44,092.3 $42,707 6/98 $47,434 $61,680.4 $49,349 $49,930 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (1) INCLUDES THE MAXIMUM SALES CHARGE OF 5.00% (2) EXCLUDES THE MAXIMUM SALES CHARGE OF 5.00% THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE GROWTH & INCOME FUND ON JANUARY 1, 1988, TO A $10,000 INVESTMENT IN THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND THE LIPPER GROWTH AND INCOME FUND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL STOCK MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. THE LIPPER GROWTH AND INCOME FUND INDEX IS AN INDEX BASED ON THIRTY LARGEST GROWTH AND INCOME MUTUAL FUNDS (EQUALLY WEIGHTED) TRACKED BY LIPPER ANALYTICAL SERVICES INCORPORATED. 3 FIXED INCOME FUND - -------------------------------------------------------------------------------- July 13, 1998 Dear Shareholder: The primary focus of the bond market this year has been the troubles in Asia. There is an economic crisis unfolding there which was initiated by the financial crisis last year. We are seeing evidence of the Asian drag in the form of a ballooning trade deficit and a weaker manufacturing sector. In spite of this, the U.S. economy as a whole continues to exhibit strong growth. First quarter GDP growth was finalized at 5.4% and the unemployment rate stands at 4.3%. The inflation news continued to be bullish with commodity prices plummeting and consumer prices and wages benign. The Dollar continued to appreciate versus the Yen and a "flight to quality" bid developed for U.S. Treasury debt given the severity of the problems in the Asian economies. The market rallied and pushed interest rates lower across the curve, particularly in the long end. In the past three months yields fell 30 basis points on thirty year Treasury bonds and only 8 basis points on the two year Treasury note which flattened the yield curve by 22 basis points. In terms of sector performance, Corporate supply continued unabated and pushed spreads to a five year wide. The Corporate sector returned 47 basis points below similar duration Treasuries in the month of June alone and 25 basis points below Treasuries year to date. Analysts cite several reasons, including Asia, for the wider spreads but the broad-based nature of the market softness argues for the supply/demand mismatch as the most credible. The Mortgage sector managed to outperform Treasuries on a duration and curve adjusted basis by ten basis points year to date. The reduced volatility and the strong support of FHLMC and FNMA are cited as the main reasons the Mortgage sector has been able to put in a credible performance in spite of a rallying market. The Fund returned 3.65% for the first half versus 3.93% for the benchmark, the Lehman Aggregate Index. As for a peer group comparison, the Lipper Corporate debt A-rated category averaged a total return of 3.78% for the first six months of 1998. In terms of duration strategy, we maintained a bullish position during the period and barbelled yield curve exposure. Both of these strategies added value as the market rallied and the yield curve flattened. The overweight in the corporate sector hurt relative performance as the sector underperformed Treasuries substantially. A small underweight in the Mortgage sector had little overall impact. As of quarter end the average quality of the portfolio was AA, the effective duration was 4.8 years and the average coupon was 6.78%. sincerely, /s/ JAMES LARK James Lark Director, Fixed Income The views expressed in this report reflect those of the portfolio manager through the end of the period covered by the report as stated on the cover. The manager's views are subject to change at any time based on the market and other conditions. Past performance is no guarantee of future results. 4 COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FIXED INCOME FUND VS. LEHMAN AGGREGATE BOND INDEX - ------------------------------------------------- Average Annual Total Return - ------------------------------------------------- Inception 1 Year 5 Years (1/15/93) - ------------------------------------------------- Offering Price(1) 4.44% 5.22% 5.82% NAV(2) 9.64% 6.25% 6.77% - ------------------------------------------------- [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC WITH MAXIMUM LEHMAN WITHOUT MAXIMUM SALES CHARGE AGGREGATE SALES CHARGE 1/15/93 $ 9,497 $10,000 $10,000 12/93 $10,312 $10,870 $10,859 12/94 $10,117 $10,554 $10,652.7 12/95 $11,809 $12,504 $12,434.9 12/96 $12,059 $12,956 $12,698.5 12/97 $13,099 $14,206 $13,793.1 6/98 $13,618 $14,766 $14,297 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (1) INCLUDES THE MAXIMUM SALES CHARGE OF 4.75% (2) EXCLUDES THE MAXIMUM SALES CHARGE OF 4.75% THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE FIXED INCOME FUND ON JANUARY 15, 1993 (DATE OF INCEPTION), TO A $10,000 INVESTMENT IN THE LEHMAN AGGREGATE BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE LEHMAN AGGREGATE BOND INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL GOVERNMENT CORPORATE/MORTGAGE BOND MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. 5 NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- July 13, 1998 Dear Shareholder: Municipal bonds underperformed taxable bonds on a pretax basis during the first half of 1998. The year to date return of the Lehman Aggregate Index as of June 30, 1998 was 3.93%. By comparison the Lehman Municipal Bond Index returned 2.69% over the same period. This reflected lower yields across the treasury yield curve ranging from 16 basis points lower on two year bonds to 30 basis points lower on thirty year bonds, while municipal bonds were unchanged across the municipal yield curve. The Fund's total return as of June 30, 1998 on a year to date basis was 2.69%. The fund outperformed Lipper's New York Municipal Debt Funds Average of 2.37%, which placed the fund in the upper quartile of its peer group. As of June 30, 1998 the Fund's duration, which takes into account interim principal and income payments as well as maturity levels, was 6.86 which represented a 7% longer duration positioning than the index and a moderately constructive view of the fixed income markets. The average maturity of the fund was 10.8 years. In terms of sector diversification, the largest sectors consisted of general obligations (27.0%), higher education (18.4%), and airport revenue (9.8%). Municipal bond's relative underperformance is a result of shrinking retail participation as a `sticker shock' environment continues as yields grind lower. Refunding supply has, at times, served to overwhelm the market. In addition, the natural lag which municipals tend to run into when treasuries rally caused municipal yield ratios to cheapen. Going forward, we look for municipal bonds to improve slightly from these levels and look for strength in the municipal market as an opportunity to sell. We have pared our duration positioning which reached a period high of 115% to benchmark of 107%, and taken profits as the reward for having long duration in the current market environment has been reduced. In the scenario that treasury yields decline from current levels, we expect municipal bonds to continue to underperform significantly, particularly on the long end of the curve. In the event that treasury yields should begin to rise from current levels we expect municipal bonds to produce strong returns but more so in the intermediate portion of the curve. Therefore, we will be overweighting the intermediate (10 year bonds) portion of the curve going forward. New York continued to outperform the rest of the municipal market as lower rated credits, in which New York is significantly overweighted relative to the municipal universe, within the investment grade spectrum continued to outperform higher rated credits. For the year to date period ending June 30, 1998 the Lehman NYS Exempt Index returned 2.99% versus 2.69% for the Lehman Municipal Bond Index. Given the strong performance of New York State and its local credits, we believe that the recent financial improvement is at its peak. We believe that the drastic compression in credit spreads, despite the continuing underlying structural weakness in many states and local government fiscal profiles, will provide us the opportunity going forward to upgrade the overall quality of the portfolio without giving up yield. Sincerely, /s/ JERRY SAMET Jerry Samet Municipal Portfolio Manager The views expressed in this report reflect those of the portfolio manager through the end of the period covered by the report as stated on the cover. The manager's views are subject to change at any time based on the market and other conditions. Past performance is no guarantee of future results. 6 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) 3.47% 4.34% 7.15% NAV(2) 8.59% 5.36% 7.71% - ------------------------------------------------- [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC WITH MAXIMUM LEHMAN MUNI WITHOUT MAXIMUM SALES CHARGE BOND INDEX SALES CHARGE 3/21/89 $ 9,497 $10,000 $10,000 12/89 $10,174 $11,005 $10,713 12/90 $10,797 $11,807 $11,370 12/91 $12,157 $13,242 $12,801 12/92 $13,452 $14,409 $14,164 12/93 $15,371 $14,178 $16,186 12/94 $14,120 $15,340 $14,868 12/95 $16,262 $18,018 $17,124 12/96 $16,911 $18,817 $17,807 12/97 $18,428 $20,551 $19,404 6/98 $18,981 $21,103 $19,927 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. (1) INCLUDES THE MAXIMUM SALES CHARGE OF 4.75% (2) EXCLUDES THE MAXIMUM SALES CHARGE OF 4.75% THE ABOVE ILLUSTRATION COMPARES A $10,000 INVESTMENT IN THE NEW YORK TAX-FREE BOND FUND ON MARCH 21, 1989 (DATE OF INCEPTION), TO A $10,000 INVESTMENT IN THE LEHMAN MUNICIPAL BOND INDEX ON THAT DATE. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED. THE FUND'S PERFORMANCE TAKES INTO ACCOUNT ALL APPLICABLE FEES AND EXPENSES AND WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED. THE LEHMAN MUNICIPAL BOND INDEX IS A WIDELY ACCEPTED UNMANAGED INDEX OF OVERALL MUNICIPAL BOND MARKET PERFORMANCE AND DOES NOT TAKE INTO ACCOUNT CHARGES, FEES AND OTHER EXPENSES. 7 BOARD OF TRUSTEES JOHN P. PFANN* Chairman and President, JPP Equities, Inc. WOLFE J. FRANKL* Former Director, North America, Berlin Economic Development Corporation HARALD PAUMGARTEN President, Paumgarten and Company ROBERT A. ROBINSON* Trustee, Henrietta and B. Frederick H. Bugher Foundation RICHARD J. LOOS Vice Chairman Emeritus *Member of the Audit and Nominating Committees - -------------------------------------------------------------------------------- OFFICERS WALTER B. GRIMM PRESIDENT ERIC F. ALMQUIST SENIOR VICE PRESIDENT ANTHONY J. FISCHER VICE PRESIDENT CHARLES L. BOOTH VICE PRESIDENT PAUL KANE ASSISTANT TREASURER STEVEN R. HOWARD SECRETARY ALAINA V. METZ ASSISTANT SECRETARY ROBERT L. TUCH ASSISTANT SECRETARY 8 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) GROWTH & INCOME FUND SECURITY VALUE SHARES DESCRIPTION (NOTE 2) - -------- ----------- ----------- COMMON STOCKS (99.1%): AUTOMOTIVE (1.6%): 14,000 General Motors Corp. ........................ $ 935,375 12,300 Lear Corp.(b) ............................... 631,144 ----------- 1,566,519 ----------- BANKING (10.5%): 19,830 Banc One Corp. .............................. 1,106,762 20,600 Bank of New York Co., Inc. .................. 1,250,163 19,100 BankAmerica Corp. ........................... 1,650,955 16,600 Chase Manhattan Corp. ....................... 1,253,300 3,200 Citicorp .................................... 477,600 21,600 First Union Corp. ........................... 1,258,199 15,000 NationsBank Corp. ........................... 1,147,500 24,300 Norwest Corp. ............................... 908,213 22,500 U.S. Bancorp ................................ 967,500 ----------- 10,020,192 ----------- BEVERAGES (4.1%): 26,600 Coca-Cola Co. ............................... 2,274,300 26,400 Coca-Cola Enterprises, Inc. ................. 1,036,200 15,800 PepsiCo, Inc. ............................... 650,763 ----------- 3,961,263 ----------- BROADCASTING/CABLE (2.2%): 20,300 Chancellor Media Corp. ...................... 1,008,022 19,800 Viacom, Inc. ................................ 1,160,775 ----------- 2,168,797 ----------- CHEMICALS (1.6%): 21,400 Air Products & Chemical, Inc. ............... 856,000 9,400 E.I. du Pont de Nemours & Co. ............... 701,475 ----------- 1,557,475 ----------- COMPUTER SOFTWARE (4.9%): 19,800 BMC Software, Inc.(b) ....................... 1,028,363 32,170 Cadence Design Systems, Inc. ................ 1,005,313 25,130 Microsoft Corp.(b) .......................... 2,723,463 ----------- 4,757,139 ----------- 9 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) GROWTH & INCOME FUND SECURITY VALUE SHARES DESCRIPTION (NOTE 2) - -------- ----------- ----------- COMMON STOCKS (CONTINUED) COMPUTERS & PERIPHERALS (6.2%): 17,350 Cisco Systems, Inc.(b) ...................... $ 1,597,284 20,872 EMC Corp. ................................... 935,327 17,900 Intel Corp. ................................. 1,326,838 9,110 International Business Machines Corp. ....... 1,045,942 25,500 Sun Microsystems, Inc.(b) ................... 1,107,656 ----------- 6,013,047 ----------- CONSUMER GOODS & SERVICES (3.5%): 15,200 Philip Morris Cos., Inc. .................... 598,500 18,000 Procter & Gamble Co. ........................ 1,639,125 17,100 Whirlpool ................................... 1,175,625 ----------- 3,413,250 ----------- COSMETICS & TOILETRIES (0.7%): 11,800 Gillette Co. ................................ 668,913 ----------- DIVERSIFIED (6.1%): 26,500 AlliedSignal, Inc. .......................... 1,175,938 37,000 General Electric Co. ........................ 3,367,000 22,200 Tyco International .......................... 1,398,600 ----------- 5,941,538 ----------- ELECTRIC UTILITY (2.9%): 22,300 Duke Energy Corp. ........................... 1,321,275 10,400 Florida Power & Light, Inc. ................. 655,200 24,900 Public Service Enterprise Group, Inc. ....... 857,494 ----------- 2,833,969 ----------- ELECTRICAL & ELECTRONIC (0.9%): 15,200 Emerson Electric Co. ........................ 917,700 ----------- ENTERTAINMENT (0.7%): 6,500 Walt Disney Co. ............................. 682,906 ----------- FINANCIAL SERVICES (4.2%): 9,000 American Express Co. ........................ 1,026,000 19,600 Fannie Mae .................................. 1,190,700 16,850 Travelers Group, Inc. ....................... 1,021,531 19,950 Washington Mutual, Inc. ..................... 866,578 ----------- 4,104,809 ----------- 10 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) GROWTH & INCOME FUND SECURITY VALUE SHARES DESCRIPTION (NOTE 2) - -------- ----------- ----------- COMMON STOCKS (CONTINUED) FOOD PRODUCTS & SERVICES (2.7%): 20,400 H.J. Heinz Co. .............................. $ 1,144,950 11,900 Nabisco Holdings Corp., Class A ............. 429,144 24,400 Safeway, Inc.(b) ............................ 992,775 ----------- 2,566,869 ----------- HEALTH CARE (3.4%): 47,900 HEALTHSOUTH Corp.(b) ........................ 1,278,331 26,700 Johnson & Johnson ........................... 1,969,125 ----------- 3,247,456 ----------- INSURANCE (2.2%): 10,400 Allstate Corp. .............................. 952,250 8,300 American International Group, Inc. .......... 1,211,800 ----------- 2,164,050 ----------- MACHINERY & EQUIPMENT (1.4%): 16,500 Applied Materials, Inc.(b) .................. 486,750 20,700 Ingersoll-Rand Co. .......................... 912,094 ----------- 1,398,844 ----------- MEDICAL EQUIPMENT & SUPPLIES (0.9%): 12,580 Boston Scientific Corp. 901,043 ----------- OFFICE EQUIPMENT & SERVICES (1.3%): 5,700 Hewlett-Packard Co. ......................... 341,288 9,400 Xerox Corp. ................................. 955,275 ----------- 1,296,563 ----------- OIL & GAS EXPLORATION, PRODUCTION AND SERVICES (7.6%): 10,800 Atlantic Richfield Co. ...................... 843,750 7,100 Chevron Corp. ............................... 589,744 18,200 Enron Corp. ................................. 983,938 26,200 Exxon Corp. ................................. 1,868,387 9,600 Mobil Corp. ................................. 735,600 19,000 Royal Dutch Petroleum Co., New York Shares .. 1,041,437 16,800 Schlumberger Ltd. ........................... 1,147,649 ----------- 7,210,505 ----------- 11 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) GROWTH & INCOME FUND SECURITY VALUE SHARES DESCRIPTION (NOTE 2) - -------- ----------- ----------- COMMON STOCKS (CONTINUED) PAPER PRODUCTS (0.8%): 18,060 International Paper Co. ..................... $ 776,580 ----------- PHARMACEUTICALS (7.4%): 27,100 American Home Products Corp. ................ 1,402,425 20,400 Bristol-Myers Squibb Co. .................... 2,344,724 13,100 Merck & Co., Inc. ........................... 1,752,125 15,000 Pfizer, Inc. ................................ 1,630,313 ----------- 7,129,587 ----------- PRINTING & PUBLISHING (0.8%): 11,900 Tribune Co. ................................. 818,869 ----------- REAL ESTATE INVESTMENT TRUST (1.4%): 13,900 Boston Properties Inc. ...................... 479,550 9,000 Equity Residential Properties Trust ......... 426,938 12,600 Mack Cali Realty Corp. ...................... 433,125 ----------- 1,339,613 ----------- RETAIL STORES (8.5%): 20,200 Gap, Inc. ................................... 1,244,825 23,800 Home Depot, Inc. ............................ 1,976,888 17,300 J.C. Penney, Inc. ........................... 1,251,006 31,100 Rite Aid Corp. .............................. 1,168,194 22,232 TJX Cos., Inc. .............................. 536,347 32,600 Wal-Mart Stores, Inc. ....................... 1,980,449 ----------- 8,157,709 ----------- TELECOMMUNICATIONS (9.2%): 12,300 AT&T Corp. .................................. 702,638 25,800 Bell Atlantic Corp. ......................... 1,177,124 16,600 Bellsouth Corp. ............................. 1,114,274 16,900 Ciena Corp .................................. 1,176,662 7,000 Lucent Technologies, Inc. ................... 582,313 15,300 MCI Communications Corp. .................... 889,313 18,800 Omnipoint Corp. ............................. 431,225 19,700 SBC Communications, Inc. .................... 788,000 10,100 Tellabs, Inc.(b) ............................ 723,413 26,100 WorldCom, Inc.(b) ........................... 1,264,218 ----------- 8,849,180 ----------- 12 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) GROWTH & INCOME FUND SECURITY VALUE SHARES DESCRIPTION (NOTE 2) - -------- ----------- ----------- COMMON STOCKS (CONTINUED) TIRE & RUBBER (0.4%): 6,600 Goodyear Tire & Rubber Co. .................. $ 425,288 ----------- TRANSPORTATION (1.0%): 7,800 Delta Air Lines, Inc. ....................... 1,008,150 ----------- Total Common Stocks (Cost - $73,961,132) .... 95,897,823 ----------- OPEN END INVESTMENT COMPANIES (0.9%): 897,000 Provident Institutional Temporary Investment Fund ...................................... 897,000 ----------- Total Open End Investment Companies (Cost - $897,000) ......................... 897,000 ----------- TOTAL INVESTMENTS (100.0%) (Cost $74,858,132)(a) ..................... 96,794,823 LIABILITIES IN EXCESS OF OTHER ASSETS (0.0%) (46,441) ----------- TOTAL NET ASSETS (100.0%) ................... $96,748,382 =========== - --------------- (a) Represents cost for federal income tax purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation ............................... $23,114,248 Unrealized depreciation ............................... (1,177,557) ----------- Net unrealized appreciation ........................... $21,936,691 =========== (b) Represents non-income producing security. SEE NOTES TO FINANCIAL STATEMENTS. 13 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) FIXED INCOME FUND
INTEREST MATURITY PRINCIPAL VALUE RATE DATE AMOUNT (NOTE 2) -------- -------- ----------- ----------- CORPORATE BONDS (43.1%): AEROSPACE & DEFENSE (4.8%): Lockheed Martin Corp. (Guaranteed by Lockheed Martin Tactical Systems, Inc.) ............................... 6.85% 5/15/01 $ 2,500,000 $ 2,549,475 ----------- BANKING (13.8%): ABN Amro Bank N.V. .............................................. 7.13 6/18/07 2,000,000 2,118,582 BankAmerica Corp. ............................................... 7.88 12/1/02 2,500,000 2,674,264 Provident Bank .................................................. 6.13 12/15/00 2,500,000 2,508,223 ----------- 7,301,069 ----------- ELECTRIC UTILITY (4.9%): Columbus Southern Power Company (American Electrical Power) ............................................ 7.25 10/1/02 2,500,000 2,606,573 ----------- ENTERTAINMENT (0.9%): Walt Disney Co., Series A ....................................... 6.38 3/30/01 500,000 505,388 ----------- FINANCIAL SERVICES (7.4%): American Express Credit Corp. ................................... 6.13 6/15/00 2,000,000 2,010,660 Chase Manhattan Grantor Trust, Series 1996-A, Class A, ABS ................................................. 5.20 2/15/02 827,550 823,967 Travelers Property Casualty Corp. ............................... 7.75 4/15/26 1,000,000 1,138,386 ----------- 3,973,013 ----------- TELECOMMUNICATIONS (11.3%): Lucent Technologies, Inc. ....................................... 6.90 7/15/01 2,000,000 2,053,746 MCI Communications .............................................. 6.50 4/15/10 2,000,000 1,999,426 New York Telephone .............................................. 6.13 1/15/10 2,000,000 1,983,900 ----------- 6,037,072 ----------- Total Corporate Bonds (Cost - $22,540,997) ........................................................ 22,972,590 ----------- CANADIAN GOVERNMENT AGENCY OBLIGATIONS (0.7%): Export Development Corp., Debenture ............................. 8.13 8/10/99 380,000 389,221 ----------- Total Canadian Government Agency Obligations (Cost - $409,218) .................................... 389,221 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (27.9%): FEDERAL HOME LOAN MORTGAGE ASSOCIATION (4.9%): Federal Home Loan Mortgage Corp., Pool #220019 .................. 7.75 1/1/02 75,834 77,784 Federal Home Loan Mortgage Corp., Gold Pool #D62926 ............. 6.50 8/1/25 2,539,155 2,530,408 ----------- 2,608,192 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (17.5%): Federal National Mortgage Association, Pool #310001 ............. 6.00 9/1/00 1,172,713 1,170,148 Federal National Mortgage Association, Series 1993-104, Class C, REMIC ............................................... 6.50 3/25/21 2,000,000 1,990,801 Federal National Mortgage Association, Pool #250414 ............. 7.00 12/1/25 4,048,330 4,105,228 Federal National Mortgage Association, Pool #343195 ............. 7.50 5/1/26 1,678,301 1,721,296 Federal National Mortgage Association, Pool #343812 ............. 7.50 5/1/26 343,735 352,541 ----------- 9,340,014 -----------
14 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) FIXED INCOME FUND
SHARES INTEREST MATURITY PRINCIPAL VALUE RATE DATE AMOUNT (NOTE 2) -------- -------- ----------- ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (5.5%): Government National Mortgage Association, Pool #356578 .......... 7.50% 6/15/23 $2,833,280 $ 2,916,721 ----------- Total U.S. Government Agency Obligations (Cost - $14,268,240) ..................................... 14,864,927 ----------- U.S. GOVERNMENT OBLIGATIONS (17.4%): U.S. TREASURY BONDS (9.1%): U.S. Treasury Bonds ............................................. 8.75 8/15/20 2,280,000 3,135,714 U.S. Treasury Bonds ............................................. 6.63 2/15/27 1,500,000 1,694,532 ----------- 4,830,246 ----------- U.S. TREASURY NOTES (8.3%): U.S. Treasury Notes ............................................. 6.13 12/31/01 2,000,000 2,035,626 U.S. Treasury Notes ............................................. 5.75 4/30/03 1,000,000 1,009,688 U.S. Treasury Notes ............................................. 7.88 11/15/04 1,250,000 1,403,906 ----------- 4,449,220 ----------- Total U.S. Government Obligations (Cost - $8,631,796) ............................................. 9,279,466 ----------- MUNICIPAL OBLIGATIONS (8.9%): GOVERNMENTS (DOMESTIC) (4.0%): Oakland, California Pension Obligation, Subseries A (MBIA Insured) ............................................... 6.91 12/15/07 2,000,000 2,135,794 ----------- GOVERNMENTS (FOREIGN) (4.9%): Puerto Rico Electric Power Authority ............................ 5.00 7/1/08 2,500,000 2,607,982 ----------- Total Municipal Obligations (Cost - $4,611,850) ................................................... 4,743,776 ----------- OPEN END INVESTMENT COMPANIES (1.6%): Provident Institutional Temporary Investment Fund .......................................... 873,000 873,000 ----------- Total Open End Investment Companies (Cost - $873,000) ............................................. 873,000 ----------- TOTAL INVESTMENTS (99.6%) (Cost - $51,335,101)(a) ................................................. 53,122,980 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES (0.4%) ...................................................... 224,048 ----------- TOTAL NET ASSETS (100.0%) ......................................................................... $53,347,028 =========== - --------------- (a) Represents cost for federal income tax purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation ........................................................................... $1,833,896 Unrealized depreciation ........................................................................... (46,017) ---------- Net unrealized appreciation ....................................................................... 1,787,879 ---------- ABS - Asset Backed Security MBIA - Municipal Bond Insurance Association REMIC - Real Estate Mortgage Investment Conduit
SEE NOTES TO FINANCIAL STATEMENTS. 15 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) NEW YORK TAX-FREE BOND FUND
INTEREST MATURITY PRINCIPAL VALUE RATE DATE AMOUNT (NOTE 2) -------- -------- ----------- ----------- MUNICIPAL BONDS (98.8%): NEW YORK (95.2%): Albany County Airport Authority, Airport Revenue, AMT (FSA Insured), Callable 12/15/07 @ 102 ................... 5.50% 12/15/19 $ 750,000 $ 769,688 Bethlehem Central School District, GO (AMBAC Insured) ........... 7.10 11/1/07 200,000 241,000 Long Island Power Authority, Electric System Revenue, Series A, Callable 6/1/08 @ 101 ..................... 5.25 12/1/26 1,250,000 1,232,813 Metropolitan Transportation Authority, Transportation Facilities Revenue, Series A (MBIA Insured), Callable 7/1/07 @ 101.5 ...................... 5.63 7/1/25 1,200,000 1,258,500 Monroe County Water Authority, Water Revenue .................... 5.00 8/1/08 1,000,000 1,043,750 Monroe County, Series B, GO, Callable 6/1/98 @102 ............... 7.00 6/1/04 10,000 10,327 New York City, Series A, GO, Prerefunded 8/15/01 @ 101.5 ...................................................... 7.75 8/15/04 565,000 632,800 New York City, Series A, GO, Callable 8/15/01 @ 101.5 ........... 7.75 8/15/07 355,000 394,050 New York City, Series A, GO, Prerefunded 8/15/01 @ 101.5 ...................................................... 7.75 8/15/04 35,000 38,806 New York City, Series B, GO ..................................... 6.10 8/15/05 2,000,000 2,185,000 New York City, Series B, GO, Callable 2/1/02 @ 101.5 ............ 7.50 2/1/07 1,000,000 1,111,250 New York City, Series E, GO ..................................... 6.50 2/15/06 2,000,000 2,240,000 New York City, Series F, GO, Callable 11/15/01 @ 101.5 ...................................................... 8.40 11/15/05 45,000 51,131 New York City, Series F, GO, Prerefunded 11/15/01 @ 101.5 ...................................................... 8.40 11/15/01 105,000 120,750 New York City, Series G, GO ..................................... 6.75 2/1/09 1,000,000 1,160,000 New York City Municipal Water Finance Authority, Water & Sewer System Revenue, Series A, Callable 6/15/06 @ 101 ....................................... 5.50 6/15/24 1,800,000 1,856,250 New York City, Trust For Cultural Resources, Museum of Modern Art (AMBAC Insured) Prerefunded 1/1/02 @ 102 ........................................................ 6.40 1/1/04 350,000 382,375 New York State Dormitory Authority, City University System Revenue, Series A (FGIC-TCRS Insured) .......................................... 5.75 7/1/18 2,370,000 2,612,924 New York State Dormitory Authority, State Service Contract, Albany County ...................................... 5.50% 4/1/08 1,000,000 1,065,000 New York State Dormitory Authority, State University Educational Facilities Revenue, Series A .......... 5.88 5/15/11 1,500,000 1,666,875 New York State Dormitory Revenue, New York Medical College (MBIA Insured) ....................................... 5.00 7/1/06 1,065,000 1,102,275 New York State Dormitory Revenue, New York State Department of Health ......................................... 5.00 7/1/08 1,000,000 1,015,000 New York State Energy Research & Development Authority, Pollution Control Revenue, Niagara Power Corp (LOC - Morgan Guaranty Trust)* ............ 3.80 7/1/27 1,500,000 1,500,000
16 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) NEW YORK TAX-FREE BOND FUND
INTEREST MATURITY PRINCIPAL VALUE RATE DATE AMOUNT (NOTE 2) -------- -------- ----------- ----------- MUNICIPAL BONDS (CONTINUED) New York State Environmental Facilities Corp., Series B, Callable 6/15/08 @ 102 ............................. 5.05 6/15/13 $ 500,000 $ 506,875 New York State Environmental Facilities Corp., Pollution Control Revenue, State Water, Series A, Callable 6/15/01 @ 102 ....................................... 7.00 6/15/12 150,000 164,813 New York State Environmental Facilities Corp., Pollution Control Revenue, State Water, Series A, Prerefunded 6/15/01 @ 102 .................................... 7.00 6/15/12 150,000 165,000 New York State Environmental Facilities Corp., Pollution Control Revenue, State Water, Series B, Callable 3/15/99 @ 102 ....................................... 7.50 3/15/11 250,000 261,265 New York State Environmental Facilities Corp., Pollution Control Revenue, State Water, Series C, Callable 3/15/00 @ 102 ....................................... 7.20 3/15/11 200,000 214,000 New York State Housing Finance Agency, Multifamily Mortgage Housing Revenue, Series A (FHA Insured) Callable 8/15/02 @ 102 ....................................... 7.00 8/15/22 900,000 965,250 New York State Medical Care Facilities Finance Agency, Adult Day Care Facility, Series A (SONYMA Insured) Callable 11/15/05 @ 102 ............................. 6.38 11/15/20 1,975,000 2,167,563 New York State Medical Care Facilities Finance Agency, Series A (FSA Insured) Callable 2/15/98 @ 102 ................ 7.70 2/15/18 80,000 81,918 New York State Urban Development Corp., Senior Lien, Corporate Purpose, Callable 7/1/06 @ 102 ............... 5.50 7/1/16 2,000,000 2,080,000 Niagara Frontier Transportation Authority, Greater Buffalo International Airport Revenue, Series A, AMT (AMBAC Insured) Callable 4/1/04 @ 102 ........................ 6.13 4/1/14 2,400,000 2,588,999 Syracuse, GO, Prerefunded 2/15/01 @ 102 ......................... 6.70 2/15/01 300,000 324,750 Triborough Bridge & Tunnel Authority, General Purpose Revenue, Series A, GO, Callable 1/1/07 @ 101 ................. 5.25 1/1/28 500,000 500,000 ----------- 33,710,997 ----------- PUERTO RICO (3.6%): Puerto Rico Electric Power Authority Revenue, Callable 7/1/08 @ 101.5 ...................................... 5.00 7/1/28 500,000 486,875 Puerto Rico GO (MBIA Insured) ................................... 5.00 7/1/05 750,000 780,938 ----------- 1,267,813 ----------- Total Municipal Bonds (Cost - $32,718,949) ........................................................ 34,978,810 -----------
17 SCHEDULE OF PORTFOLIO INVESTMENTS AS OF JUNE 30, 1998 (UNAUDITED) (CONTINUED) NEW YORK TAX-FREE BOND FUND
VALUE SHARES (NOTE 2) ---------- ----------- OPEN-END INVESTMENT COMPANIES (1.2%): New York Money Fund ....................................................................... 417,000 $ 417,000 ----------- Total Open-End Investment Companies (Cost - $417,000) ............................................. 417,000 ----------- TOTAL INVESTMENTS (100.0%) (Cost - $33,135,949)(a) ................................................ 35,395,810 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES (0.0%) ...................................................... 310 ----------- TOTAL NET ASSETS (100%) ........................................................................... $35,396,120 =========== - --------------- (a) Represents cost for federal income tax purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation ........................................................................... $ 2,259,861 Unrealized depreciation ........................................................................... -0- ----------- Net unrealized appreciation ....................................................................... $ 2,259,861 =========== * Variable rate security. Rate represents rate in effect at June 30, 1998. AMBAC - American Municipal Bond Assurance Corp. AMT - Alternative Minimum Taxable Paper FGIC - Financial Guaranty Insurance Corp. FHA - Federal Housing Administration FSA - Financial Security Assurance GO - General Obligation LOC - Letter of Credit MBIA - Municipal Bond Insurance Association SONYMA - State of New York Mortgage Agency TCRS - Transferable Custody Receipts
18 STATEMENTS OF ASSETS AND LIABILITIES AS OF JUNE 30, 1998 (UNAUDITED)
GROWTH & FIXED NEW YORK INCOME INCOME TAX-FREE FUND FUND BOND FUND ----------- ----------- ----------- ASSETS: Investments in securities, at value (cost $74,858,132, $51,335,101, $33,135,949, respectively) ......................... $96,794,823 $53,122,980 $35,395,810 Cash .............................................................. 403 509 310 Interest and dividends receivable ................................. 63,567 535,810 568,309 Receivable from investment securities sold ........................ -- 152 -- Receivable for capital shares sold ................................ 640 25 -- Prepaid expenses .................................................. 908 507 378 ----------- ----------- ----------- Total Assets ......................................................... 96,860,341 53,659,983 35,964,807 ----------- ----------- ----------- LIABILITIES: Dividends payable ................................................. -- 256,689 130,111 Payable to brokers for investments purchased ...................... -- -- 1,100,433 Accrued expenses and other payables: Investment advisory fees ........................................ 42,950 25,280 7,167 Administration fees ............................................. 7,809 4,596 2,867 Distribution fees ............................................... -- -- 13,417 Fund accounting and transfer agent fees ......................... 10,014 5,081 521 Deferred trustee fees payable ................................... 23,119 11,768 21,134 Other liabilities ............................................... 28,067 9,541 4,856 ----------- ----------- ----------- Total Liabilities .................................................... 111,959 312,955 1,280,506 ----------- ----------- ----------- Net Assets ........................................................... $96,748,382 $53,347,028 $34,684,301 =========== =========== =========== COMPUTATION OF NET ASSET VALUE: Net assets ........................................................ $96,748,382 $53,347,028 $34,684,301 Shares of beneficial interest issued and outstanding (par value $.001 per share, unlimited number of shares authorized) .............................................. 6,695,589 5,228,049 3,008,551 ----------- ----------- ----------- Net asset value, redemption price per share ....................... $ 14.45 $ 10.20 $ 11.53 Maximum sales charge .............................................. 5.00% 4.75% 4.75% Maximum offering price (Net asset value / (100% - Maximum sales charge)) .................................... $ 15.21 $ 10.71 $ 12.10 =========== =========== =========== COMPOSITION OF NET ASSETS: Paid-in capital. .................................................. $61,904,792 $53,751,080 $33,302,537 Accumulated undistributed (distributions in excess of) net investment income. .............................................. 284,085 14,033 -- Accumulated undistributed net realized gains (losses) from investment transactions. ................................... 12,622,814 (2,205,964) (878,097) Net unrealized appreciation from investments ...................... 21,936,691 1,787,879 2,259,861 ----------- ----------- ----------- Net Assets ........................................................... $96,748,382 $53,347,028 $34,684,301 =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS. 19 STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
GROWTH & FIXED NEW YORK INCOME INCOME TAX-FREE FUND FUND BOND FUND ----------- ---------- --------- INVESTMENT INCOME: Interest .......................................................... $ 21,897 $1,863,375 $964,880 Dividends ......................................................... 646,654 34,848 14,023 ----------- ---------- -------- Total Income ......................................................... 668,551 1,898,223 978,903 ----------- ---------- -------- EXPENSES: Advisory fees ..................................................... 251,406 159,860 80,655 Administration fees ............................................... 68,565 43,598 26,885 Co-administration and shareholder servicer assistance fees ........ 31,997 20,346 12,546 Distribution fees ................................................. -- -- 37,193 Custody fees ...................................................... 16,092 3,554 2,974 Legal and audit fees .............................................. 39,069 22,568 15,612 Fund accounting fees .............................................. 2,548 2,184 2,673 Transfer agent fees ............................................... 28,236 15,036 40,536 Other expenses .................................................... 37,459 21,441 12,979 ----------- ---------- -------- Gross Expenses ....................................................... 475,372 288,587 232,053 Less: Fee waivers ................................................ (54,878) (34,896) (57,365) ----------- ---------- -------- Total Net Expenses ................................................... 420,494 253,691 174,688 ----------- ---------- -------- Net Investment Income ................................................ 248,057 1,644,532 804,215 ----------- ---------- -------- NET REALIZED / UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions .......... 7,618,759 790,510 419,022 Net change in unrealized appreciation (depreciation) from investments ................................................ 6,560,758 (292,134) (262,214) ----------- ---------- -------- Net Realized / Unrealized Gains (Losses) from Investments ......... 14,179,517 498,376 156,808 ----------- ---------- -------- Change in Net Assets Resulting from Operations .................... $14,427,574 $2,142,908 $961,023 =========== ========== ========
SEE NOTES TO FINANCIAL STATEMENTS. 20 STATEMENTS OF CHANGES IN NET ASSETS
GROWTH & INCOME FUND FIXED INCOME FUND ------------------------------------ ---------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE JUNE 30, 1998 YEAR ENDED JUNE 30, 1998 YEAR ENDED (UNAUDITED) DECEMBER 31, 1997 (UNAUDITED) DECEMBER 31, 1997 --------------- ----------------- ------------- ----------------- From Investment Activities: OPERATIONS: Net investment income .......................... $ 248,057 $ 1,301,839 $ 1,644,532 $ 3,866,301 Net realized gains (losses) from investment transactions ................................. 7,618,759 40,637,112 790,510 (421,712) Net change in unrealized appreciation (depreciation) from investments .............. 6,560,758 (4,934,551) (292,134) 1,841,223 ----------- ------------ ------------ ------------ Change in net assets resulting from operations ..................................... 14,427,574 37,004,400 2,142,908 5,285,812 ----------- ------------ ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: From net investment income ..................... -- (1,305,354) (1,644,532) (3,866,301) From net realized gain from investment transactions ................................. -- (36,862,753) -- -- ----------- ------------ ------------ ------------ Change in net assets from shareholder distributions .................... -- (38,168,107) (1,644,532) (3,866,301) ----------- ------------ ------------ ------------ CAPITAL TRANSACTIONS: Proceeds from shares issued .................... 34,241,810 30,839,794 6,321,130 10,843,888 Dividends reinvested ........................... 2,802,342 446,344 28,389 68,234 Cost of shares redeemed ........................ (9,918,088) (115,615,426) (14,903,145) (55,804,404) ----------- ------------ ------------ ------------ Change in net assets from share transactions ................................... 27,126,064 (84,329,288) (8,553,626) (44,892,282) ----------- ------------ ------------ ------------ Change in net assets .............................. 41,553,638 (85,492,995) (8,055,250) (43,472,771) ----------- ------------ ------------ ------------ NET ASSETS: Beginning of period ............................ 55,194,744 140,687,739 61,402,278 104,875,049 ----------- ------------ ------------ ------------ End of period (including undistributed net investment income of $284,085, $36,028, $14,033, and $14,033, respectively) .......... $96,748,382 $ 55,194,744 $ 53,347,028 $ 61,402,278 =========== ============ ============ ============ SHARE TRANSACTIONS: Issued ......................................... 2,745,823 1,740,537 622,935 1,101,997 Reinvested ..................................... 226,727 26,099 2,798 6,909 Redeemed ....................................... (742,477) (5,941,405) (1,465,660) (5,649,518) ----------- ------------ ------------ ------------ Change in shares .................................. 2,230,073 (4,174,769) (839,927) (4,540,612) =========== ============ ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. 21 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
NEW YORK TAX-FREE BOND FUND ------------------------------- FOR THE SIX MONTHS ENDED FOR THE JUNE 30, 1998 YEAR ENDED (UNAUDITED) DECEMBER 31, 1997 ------------ ----------------- From Investment Activities: OPERATIONS: Net investment income ............................................... $ 804,215 $ 1,885,020 Net realized gains (losses) from investment transactions ............ 419,022 613,728 Net change in unrealized appreciation (depreciation) from investments (262,214) 850,123 ------------ ------------ Change in net assets resulting from operations ......................... 961,023 3,348,871 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: From net investment income .......................................... (804,215) (1,885,020) ------------ ------------ Change in net assets from shareholder distributions ................. (804,215) (1,885,020) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued ......................................... 874,378 2,112,149 Dividends reinvested ................................................ 473,704 1,114,438 Cost of shares redeemed ............................................. (4,344,563) (9,141,149) ------------ ------------ Change in net assets from share transactions ........................... (2,996,481) (5,914,562) ------------ ------------ Change in net assets ................................................... (2,839,673) (4,450,711) ------------ ------------ NET ASSETS: Beginning of period ................................................. 37,523,974 41,974,685 ------------ ------------ End of period ....................................................... $ 34,684,301 $ 37,523,974 ============ ============ SHARE TRANSACTIONS: Issued .............................................................. 76,109 188,254 Reinvested .......................................................... 41,267 100,156 Redeemed ............................................................ (378,398) (818,395) ------------ ------------ Change in shares ....................................................... (261,022) (529,985) ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 22 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION HSBC Mutual Funds Trust, (the "Trust") was organized on November 1, 1989 as a Massachusetts business trust, and is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as a diversified, open-end management investment company with multiple investment portfolios, including the Growth & Income Fund, the Fixed Income Fund and the New York Tax-Free Bond Fund (herein referred to individually as a "Fund" and collectively as the "Funds"). The investment objective of the Growth & Income Fund is long-term growth of capital and current income by investing, under ordinary market conditions, at least 65% of its total assets in common stocks, preferred stocks and securities convertible into or with rights to purchase common stocks. The balance of the Fund's assets may be invested in various types of fixed income and money market instruments. The investment objective of the Fixed Income Fund is generation of high current income consistent with appreciation of capital by investing in a variety of fixed-income securities. The investment objective of the New York Tax-Free Bond Fund is to provide its investors with as high a level of current income exempt from regular Federal, New York State and New York City income taxes as is consistent with relative stability of capital. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the Fund. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with generally accepted accounting principles. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. SECURITIES VALUATION: Investments in equity securities traded on an exchange are valued at the last quoted sales price on a given day, or if a sale is not reported for that day, at the mean between the most recent bid and ask prices. The bid price is used when no ask price is available. Debt securities for which market quotations are readily available are valued at the quoted bid price. Debt securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in accordance with guidelines which have been adopted by the Board of Trustees. Such procedures include the use of independent pricing services which use prices based on yields or prices of securities of comparable quality, coupon, maturity and type, indicators as to value from dealers and general market conditions. Investments in open-end investment companies are valued at their net asset value as reported by such investment companies. Short-term obligations having maturities of 60 days or less are valued at amortized cost which approximates market value. TAXES: It is the Funds' policy to comply with the provisions of the Internal Revenue Code, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income and net realized capital gains to its shareholders for each taxable year. Therefore, no provision is required for federal income tax. 23 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DIVIDENDS AND DISTRIBUTIONS: The Growth & Income Fund intends to pay, as a semi-annual dividend, substantially all of its net investment income. The Fixed Income and New York Tax-Free Bond Funds intend to declare as a dividend substantially all of its net investment income at the end of each business day and to pay within five business days after the end of each month. Net capital gains for all three Funds, if any, are distributed at least annually. The amounts of dividends from net investment income and of distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions to shareholders which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized gains. To the extent they exceed net investment income and net realized gains for tax purposes, they are reported as distributions of capital. SECURITY TRANSACTIONS AND RELATED INCOME: Security transactions are recorded on trade date. Identified cost of investments sold is used for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date. Interest income including amortization of discount and premium, is recorded as earned. EXPENSE ALLOCATION: Expenses directly attributed to each Fund in the Trust are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them on the basis of relative net assets or another appropriate basis. 3. PORTFOLIO SECURITIES Purchases and sales of securities (excluding short-term securities) for the six months ended June 30, 1998 were as follows: PURCHASES SALES ----------- ----------- Growth & Income Fund ......... $46,917,689 $38,939,186 Fixed Income Fund ............ 23,556,618 31,540,388 New York Tax-Free Bond Fund .. 8,155,463 10,094,306 4. RELATED PARTY TRANSACTIONS The Trust retains HSBC Asset Management Americas Inc. to act as Investment Adviser for the Funds. HSBC Asset Management Americas Inc. is the North American investment affiliate of HSBC Holdings PLC (Hong Kong and Shanghai Banking Corporation). As Investment Adviser, HSBC Asset Management Americas Inc. furnishes investment guidance and policy direction in connection with the management of the investment portfolios of the Funds, subject to policies established by the Board of Trustees. 24 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 -------------------------------- GROWTH & INCOME FIXED INCOME PORTIONS OF THE FUND'S AVERAGE DAILY NET ASSETS FUND FUND --------------------------------------------------------------- --------------- ------------ Up to $400 million ............................................ 0.550% 0.550% In excess of $400 million but not exceeding $800 million ...... 0.505% 0.505% In excess of $800 million but not exceeding $1.2 billion ...... 0.460% 0.460% In excess of $1.2 billion but not exceeding $1.6 billion ...... 0.415% 0.415% In excess of $1.6 billion but not exceeding $2.0 billion ...... 0.370% 0.370% In excess of $2.0 billion ..................................... 0.315% 0.315%
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, 1998, HSBC Asset Management Americas Inc. waived advisory fees of $35,847 for the New York Tax-Free Bond Fund. BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"), an Ohio limited partnership is a subsidiary of the BISYS Group, Inc. BISYS, with whom certain officers are affiliated, serves the Trust as distributor, administrator, transfer agent and fund accountant. Such officers are not paid any fees directly by the Funds for serving as officers of the Trust. In accordance with the terms of the Management and Administration Agreement, BISYS is paid a monthly asset-based fee of 0.15% (annualized) of the Fund's first $200 million of average net assets; 0.125% of the Fund's next $200 million of average net assets; 0.10% of the Fund's next $200 million of average net assets; and 0.08% of the Fund's average net assets in excess of $600 million; exclusive of out-of-pocket expenses. For the six months ended June 30, 1998, BISYS waived administrative services fees of $22,881 from the Growth & Income Fund, $14,550 from the Fixed Income Fund, and $8,972 from the New York Tax-Free Bond Fund. HSBC Asset Management Americas Inc. earned co-administration/shareholder servicer assistance fees of 0.07% of each Fund's average daily net assets totaling $31,997 for the Growth & Income Fund, $20,346 for the Fixed Income Fund and $12,546 for the New York Tax-Free Bond Fund, all of which was waived. 25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. RELATED PARTY TRANSACTIONS (CONTINUED) The Funds have adopted a Distribution Plan and Agreement (the "Plan") pursuant to Rule 12b-1 of the 1940 Act. The Plan provides for a monthly payment by the Fund to BISYS Fund Services for expenses incurred in connection with distribution services provided to the Fund not to exceed an annual rate of 0.50% of Growth & Income Fund's, and 0.35% of Fixed Income Fund's and New York Tax-Free Bond Fund's average net assets during the preceding month. The expenses incurred as a result of these agreements totaled $37,193 from the New York Tax-Free Bond Fund. As distributor, BISYS is entitled to receive commissions on sales of shares of the variable net asset value funds. For the six months ended June 30, 1998, the total commission BISYS received, retained, and reallowed to affiliated broker/dealers of the Funds are as follow:
TOTAL COMMISSIONS COMMISSIONS REALLOWED FUND COMMISSIONS RETAINED BY BISYS TO AFFILIATED BROKER/DEALER ---- ----------- ----------------- --------------------------- Growth & Income Fund ............... $ 2,379 $ 353 $1,353 Fixed Income Fund .................. 412 302 25 New York Tax-Free Bond Fund ........ 7,758 1,008 4,128 ------- ------ ------ Total: ........................ $10,549 $1,663 $5,506 ======= ====== ======
The Funds may enter into agreements (the "Service Agreements") with certain banks, financial institutions and corporations ("Service Organizations") whereby each Service Organization handles record keeping and provides certain administration services for its customers who invest in the Funds through accounts maintained at that Service Organization. Each Service Organization will receive monthly payments for the performance of its service under the Service Agreement. The payments from the Funds on an annual basis will not exceed 0.35% of the average value of the Funds' shares held in the subaccounts of the Service Organizations. For the six months ended June 30, 1998, the Funds did not participate in any Service Agreements. A partner of the Trust's legal counsel served as secretary of the Trust. Baker & McKenzie served as legal counsel until April 2, 1998. Paul, Weiss, Rifkind, Wharton and Garrison assumed the role of legal counsel as of April 3, 1998. For the six months ended June 30, 1998 the Funds incurred legal fees of $31,681 for the Growth & Income Fund, $18,798 for the Fixed Income Fund, and $12,478 for the New York Tax-Free Bond Fund. 5. CONCENTRATION OF CREDIT The New York Tax-Free Bond Fund invests primarily in debt obligations issued by the State of New York and its respective political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to economic and political factors adversely affecting issuers of New York specific municipal securities than is a municipal bond fund that is not concentrated in these issuers to the same extent. 26 FINANCIAL HIGHLIGHTS
GROWTH & INCOME FUND FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 1998 -------------------------------------------------- (UNAUDITED) 1997 1996 1995 1994 1993 ------------- ------- -------- ------- ------- ------- Net Asset Value, Beginning of Period .............. $ 12.36 $ 16.28 $ 14.77 $ 11.93 $ 12.87 $ 12.02 ------- ------- -------- ------- ------- ------- Investment Activities Net investment income .......................... 0.03 0.18 0.18 0.30 0.29 0.33 Net realized and unrealized gains (losses) from investment transactions ................. 2.06 4.28** 2.46 3.64 (0.67) 1.00 ------- ------- -------- ------- ------- ------- Total from Investment Activities ............... 2.09 4.46 2.64 3.94 (0.38) 1.33 ------- ------- -------- ------- ------- ------- Distributions From net investment income ..................... -- (0.19) (0.18) (0.30) (0.29) (0.33) From net realized gains ........................ -- (8.19) (0.95) (0.80) (0.15) (0.15) In excess of net realized gains ................ -- -- -- -- (0.12) -- ------- ------- -------- ------- ------- ------- Total Distributions ............................ -- (8.38) (1.13) (1.10) (0.56) (0.48) ------- ------- -------- ------- ------- ------- Net Asset Value, End of Period .................... $ 14.45 $ 12.36 $ 16.28 $ 14.77 $ 11.93 $ 12.87 ======= ======= ======== ======= ======= ======= Total Return (excludes sales or redemption charges) ............................ 16.91%(a) 27.42% 17.90% 33.11% (2.97)% 11.23% Ratios/Supplemental Data: Net Assets at end of period (000) .............. $96,748 $55,195 $140,688 $66,062 $64,999 $77,718 Ratio of expenses to average net assets ........ 0.92%(b) 0.83% 0.85% 0.94% 0.78% 0.23% Ratio of net investment income to average net assets ........................... 0.54%(b) 0.95% 1.43% 2.06% 2.25% 2.95% Ratio of expenses to average net assets* ....... 1.04%(b) 0.95% 0.96% 0.97% 0.86% 0.88% Ratio of net investment income to average net assets* .......................... 0.42%(b) 0.83% 1.32% 2.03% 2.17% 2.30% Portfolio Turnover Rate ........................ 43.72% 69.07% 61.68% 52.77% 23.31% 14.25% - ------------ * During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated. ** In addition to the net realized and unrealized gains from investment transactions, this amount includes a decrease in net asset value per share resulting from the timing of issuances and redemptions of Fund shares in relation to fluctuating market values for the portfolio. (a) Not annualized. (b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS. 27 FINANCIAL HIGHLIGHTS
FIXED INCOME FUND FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, FOR THE PERIOD MONTHS ENDED --------------------------------------- ---------------------- JUNE 30, 1998 JANUARY 15, 1993(c) TO (UNAUDITED) 1997 1996 1995 1994 DECEMBER 31, 1993 ------------- ------- -------- ------- ------- ---------------------- Net Asset Value, Beginning of Period ............................ $ 10.12 $ 9.89 $ 10.28 $ 9.35 $ 10.13 $ 10.00 ------- ------- -------- ------- ------- ------- Investment Activities Net investment income .............. 0.29 0.59 0.59 0.59 0.59 0.63 Net realized and unrealized gains (losses) from investments ....... 0.08 0.23 (0.39) 0.93 (0.78) 0.21 ------- ------- -------- ------- ------- ------- Total from Investment Activities ... 0.37 0.82 0.20 1.52 (0.19) 0.84 ------- ------- -------- ------- ------- ------- Distributions From net investment income ......... (0.29) (0.59) (0.59) (0.59) (0.59) (0.63) From net realized gains ............ -- -- -- -- -- (0.08) ------- ------- -------- ------- ------- ------- Total Distributions ................ -- (0.59) (0.59) (0.59) (0.59) (0.71) ------- ------- -------- ------- ------- ------- Net Asset Value, End of Period .......... $ 10.20 $ 10.12 $ 9.89 $ 10.28 $ 9.35 $ 10.13 ======= ======= ======== ======= ======= ======= Total Return (excludes sales or redemption charges) .................. 3.65%(a) 8.62% 2.11% 16.73% (1.89)% 8.57%(a) Ratios/Supplemental Data: Net Assets at end of period (000) .................... $53,347 $61,402 $104,875 $99,942 $84,774 $90,907 Ratio of expenses to average net assets ...................... 0.87%(b) 0.88% 0.88% 0.93% 0.77% 0.22%(b) Ratio of net investment income to average net assets ........... 5.66%(b) 6.00% 5.94% 6.03% 6.10% 6.40%(b) Ratio of expenses to average net assets* ..................... 0.99%(b) 1.00% 0.98% 0.96% 0.86% 0.87%(b) Ratio of net investment income to average net assets* .......... 5.54%(b) 5.88% 5.84% 6.00% 6.01% 5.75%(b) Portfolio Turnover Rate ............ 42.57% 60.98% 156.05% 41.58% 63.96% 107.34%(a) - ---------- * During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated. (a) Not annualized. (b) Annualized. (c) Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS. 28 FINANCIAL HIGHLIGHTS
NEW YORK TAX-FREE BOND FUND FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 1998 ------------------------------------------------- (UNAUDITED) 1997 1996 1995 1994 1993 ------------- ------- ------- ------- ------- ------- Net Asset Value, Beginning of Period ............... $ 11.48 $ 11.05 $ 11.17 $ 10.20 $ 11.70 $ 11.01 ------- ------- ------- ------- ------- ------- Investment Activities Net investment income ......................... 0.26 0.53 0.55 0.54 0.53 0.59 Net realized and unrealized gains from investments ................................ 0.05 0.43 (0.12) 0.97 (1.47) 0.95 ------- ------- ------- ------- ------- ------- Total from Investment Activities .............. 0.31 0.96 0.43 1.51 (0.94) 1.54 ------- ------- ------- ------- ------- ------- Distributions From net investment income .................... (0.26) (0.53) (0.55) (0.54) (0.53) (0.59) From net realized gains ....................... -- -- -- -- (0.03) (0.26) ------- ------- ------- ------- ------- ------- Total distributions ........................... (0.26) (0.53) (0.55) (0.54) (0.56) (0.85) ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period ..................... $ 11.53 $ 11.48 $ 11.05 $ 11.17 $ 10.20 $ 11.70 ======= ======= ======= ======= ======= ======= Total Return (excludes sales or redemption charges) ............................. 2.69%(a) 8.97% 3.99% 15.17% (8.13)% 14.27% Ratios/Supplemental Data: Net Assets at end of period (000) ............. $34,684 $37,524 $41,975 $50,677 $50,711 $61,740 Ratio of expenses to average net assets ....... 0.98%(b) 0.92% 0.91% 0.99% 0.84% 0.63% Ratio of net investment income to average net assets ......................... 4.53%(b) 4.79% 5.02% 5.07% 4.93% 4.98% Ratio of expenses to average net assets* ...... 1.31%(b) 1.24% 1.21% 1.20% 1.10% 1.06% Ratio of net investment income to average net assets* ........................ 4.20%(b) 4.47% 4.72% 4.86% 4.67% 4.55% Portfolio Turnover Rate ....................... 23.53% 35.64% 87.40% 24.43% 122.43% 70.36% - ------------ * During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated. (a) Not annualized. (b) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS. 29 [THIS PAGE INTENTIONALLY LEFT BLANK] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HSBC (SERVICE MARK) MUTUAL FUNDS TRUST 3435 Stelzer Road Columbus, Ohio 43219 INFORMATION: (800) 634-2536 INVESTMENT ADVISER HSBC Asset Management Americas Inc. 140 Broadway (6th Floor) New York, New York 10005-1180 DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT BISYS Fund Services 3435 Stelzer Road Columbus, Ohio 43219 CUSTODIAN The Bank of New York 90 Washington Street New York, New York 10286 INDEPENDENT AUDITORS Ernst & Young LLP 787 Seventh Avenue New York, New York 10019 LEGAL COUNSEL Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of Americas New York, New York 10019 This report is for the information of the shareholders of HSBC Mutual Funds Trust. Its use in connection with any offering of the Trust's shares is authorized only in the case of a concurrent or prior delivery of the Trust's current prospectus. Shares of the Funds are not an obligation of or guaranteed or endorsed by HSBC Holdings plc or its affiliates. In addition, such shares are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency and may involve investment risks, including the possible loss of principal. 8/98 -----END PRIVACY-ENHANCED MESSAGE-----