-----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, UnWERK7pwjG4D1+A+L7/Cl4116Qn3eAbUBi2zYMDzs0jGPdx8QqbE1Seu98317hU gko9UVbeuxzHhHZYz5wlbA== 0000950109-01-503342.txt : 20010906 0000950109-01-503342.hdr.sgml : 20010906 ACCESSION NUMBER: 0000950109-01-503342 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC MUTUAL FUNDS TRUST CENTRAL INDEX KEY: 0000861106 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06057 FILM NUMBER: 1730824 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 dn30d.txt HSBC GROWTH & INCOME FUND SEMI ANNUAL REPORT HSBC Mutual Funds Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO] HSBC Asset Management (Americas) Inc. - -------------------------------------------------------------------------------- HSBC Growth and Income Fund ------------------------------------------------------------------ Portfolio Review July 17, 2001 Dear Shareholder: The United States equity market was not a place for the faint-hearted investor during the first half of 2001, as the Standard & Poor's 500 Stock Index/1/ (the "S&P 500") declined 6.7%, and the technology-heavy Nasdaq Composite Index/2/ declined 12.4%. Aggressive interest rate cuts by the Federal Reserve Board (the "Fed") were welcomed by investors, but were not enough to ease concerns over declining corporate profits and a slowing U.S. economy. The S&P 500 fell into a bear market territory by the end of the first quarter, as the U.S. equity markets reached their lowest levels since 1998. The first quarter proved to be a very difficult environment for investors, as a record number of negative corporate earnings announcements pushed the equity markets down dramatically. With earnings disappointments from companies in economic sectors ranging from technology companies to "safe haven" consumer staples, the Nasdaq and the S&P 500 registered seven and eight consecutive weekly declines, respectively, during the first quarter of 2001. As the markets dropped, net cash flows into equity mutual funds followed suit, highlighted by a record $20.5 billion net outflow during March. The U.S. equity markets finally bottomed in early April, as attractive valuation levels and hopes that monetary easing by the Fed would revive the slowing U.S. economy later in the year, and encourage investors to return to the stock market. The equity markets surged early in the second quarter, with the S&P 500 and the Nasdaq rising an astounding 14% and 33%, respectively, for the two-week period ended April 19th. Both indices posted a gain during the second quarter, ending an unprecedented string of four consecutive quarterly declines. With the rebound in the equity markets, cash flows into equity mutual funds improved considerably, with net inflows totaling over $40 billion during the second quarter. Mid- and small-capitalization stocks outperformed their large-cap brethren during the first half of 2001, with the Standard & Poor's MidCap 400 Stock Index/3/ and the Standard & Poor's SmallCap 600 Index/4/ rising 1% and 6.2%, respectively. Due to the weak stock market, the Initial Public Offering market remained at depressed levels when - ------ Past performance is no guarantee of future results. The investment return and net asset value will fluctuate, so the investors' shares, when redeemed, may be worth more of less than the original cost. /1/The Standard & Poor's 500 Stock Index is an unmanaged index that reflects the U.S. stock market as a whole. /2/The Nasdaq Composite Index is a market-capitalization price-only index that tracks the performance of domestic common stocks traded on the regular NASDAQ market, as well as national market system-traded common stocks and American Depositary Receipts. /3/The Standard & Poor's MidCap 400 Stock Index is an unmanaged capitalization weighted index that measures the performance of the mid-range sector of the U.S. stock market where the market capitalization is approximately $700 million. /4/The Standard & Poor's SmallCap 600 Index is an unmanaged capitalization weighted index that measures the performance of selected U.S. stocks with a small market capitalization. The above indices do not reflect the expenses associated with a mutual fund such as investment advisory and accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index although they can invest in the underlying securities. HSBC Mutual Funds Trust compared to the number of pricings witnessed over the past few years. The total number of deals during the first half of the year were less than half the amount in just the second quarter of 2000. Outlook and Strategy Our view since the beginning of the year has been that the tone of the equity markets would improve following clarification on several issues, including the Fed, investor cash flows, and corporate earnings. With the Fed lowering the Federal Funds rate a combined 275 basis points over six occasions this year, it is seems the Fed is actively trying to prevent a severe economic downturn. With the federal funds rate at its lowest level in seven years, the "hawks" within the Federal Reserve Open Market Committee (the "FOMC") are calling for caution regarding additional monetary easing. However, the Fed indicated that the risks are still weighted towards economic weakness, and many market participants expect the Fed to cut rates again at the August FOMC meeting. In spite of the above rebound in equity mutual fund inflows in April and May, money market assets still total over $2 trillion and yields are at their lowest levels in seven years. Therefore, we believe there is an ample supply of cash on the sidelines, waiting to return to the stock market. Right now, the economy and corporate profits are the biggest uncertainties. We would expect market volatility to continue as investor sentiment sways with the seemingly unending stream of earnings announcements. We recognize the evidence of a wide dichotomy between the broader market and the near recession in the industrial sector, and we believe the consumer is still keeping the economy afloat. Consumer confidence has rebounded from its lowest level in over four years, the housing market remains steady, unemployment is still at relatively low levels, and consumer spending remains strong. In light of aggressive interest rate cuts, combined with tax rebates that will be mailed to consumers beginning in July, we maintain our view that the economy is at or near the bottom of a "U" shaped recovery. We would expect the stock market to turn before a rebound in the economy and corporate profits. With over two- thirds of the companies in the S&P 500 posting positive returns during the second quarter, we believe the market may soon anticipate a recovery. Performance Commentary For the six months ended June 30, 2000, the HSBC Growth and Income Fund underperformed the S&P 500, Class A Shares of the Fund returned -9.99% (without sales charge)/1/, compared to a -6.69% return for the S&P 500. The underperformance was primarily driven by stock selection in the Technology and consumer cyclicals sectors. Our stock selection in the consumer staples and health care positively contributed to relative performance, as did a modest cash position held in the Fund. Despite the uncertainty and volatility witnessed in the stock market, we maintained our long-term investment philosophy of buying companies with above-average long-term growth prospects at reasonable valuations. Unfortunately, large capitalization growth related issues underperformed the broader market, in favor of small- and mid- capitalization value issues during the first half of 2001. We maintained our growth bias during the period under discussion; however, we acted to enhance the portfolio's return going forward by lowering the average market capitalization of the stocks held. We believe smaller, more nimble companies can react quicker to the current economic environment than their large cap brethren. Even after the last - -------- Past performance is no guarantee of future results. The investment return and net asset value will fluctuate, so the investors' shares, when redeemed, may be worth more of less than the original cost. /1/With the maximum sales charge of 5.00%, the Class A Share's return for the period was -14.50%. The total return set forth reflects the reduction of a portion of the Fund's fees. Without the reduction of fees, total return for the period would have been lower. 2 HSBC Mutual Funds Trust 18 months of outperformance by small- and mid-capitalization stocks, they continue to sell at a meaningful discount to large-capitalization stocks on nearly every valuation measure. As we have stated in the past, the road ahead will not be smooth. However, we remain confident that our long-term strategy of buying select companies with the best long-term growth prospects should be rewarded in the future. Sincerely, /s/ Fredric P. Lutcher Fredric P. Lutcher, III, CFA Chief Investment Officer, U.S. Equities 3 HSBC Mutual Funds Trust HSBC Fixed Income Fund - -------------------------------------------------------------------------------- Portfolio Review July 17, 2001 Dear Shareholder: The Federal Reserve Board (the "Fed") continued their easing cycle in the second quarter lowering interest rates three times for a total of 125 basis points. The first cut of 50 basis points took place between regularly scheduled meetings on April 18th. Just as it seemed that the last market strategists had called for an interim meeting by the Fed, the Fed surprised the market with ease and lowered its target to 4.50%. The next Fed ease was at the regularly scheduled meeting on May 15th when they once again cut rates 50 basis points to a 4.00% target. The Fed cited risks of continued deterioration in economic conditions but did not make mention of inflationary concerns. The last cut took place at the June 27th meeting but only for 25 basis points to a 3.75% target, which surprised some Fed watchers who anticipated a 50 basis point ease. This sixth interest rate cut since the beginning of the year brought the total easing to 275 basis points as the Fed has lowered the target from 6.50% to 3.75%. On the economic front, we found a mixed bag of signals although as the quarter ended there were hints of economic stability in some areas. Weakness was reflected in the first quarter Gross Domestic Product/1/ figure, which posted at 2.0% in April, was revised downward to 1.3% in May and finalized at 1.2% in June. Additionally, corporate profits continued to disappoint and the National Association of Purchasing Managers Index/2/ remained well below the magical 50 reading which indicates a contraction in manufacturing. On the brighter side, consumer confidence rose during both May and June rising from 109.9 to 117.9 and in June both existing and new home sales rose from the previous months totals. Additionally, durable goods, which were expected to print in negative territory, came in at 2.9% in May after recording a negative 5.5% during the month of April. The quarter ended up with positive inflation news as gas futures fell to a 17 month low and over 25% since the beginning of June, and crude oil reflected its biggest price decrease since March. Additionally, commodity prices have plunged over the last several weeks reflecting a slowing global economy. On the wholesale and retail front the Producer Price Index/3/ and the Consumer Price Index/4/ reported that inflation was contained aided by lower energy costs. With the adopting of an unaggressive stance and easing interest rates only 25 basis points after 5 straight easings of 50 basis points, can the end of the Fed easing cycle be far behind. The minutes of the Fed's May 15th meeting - ------- /1/The Gross Domestic Product is the measure of the market value of goods and services produced by labor and property in the United States of America. /2/The National Association of Purchasing Managers Index is based on a national survey of purchasing managers which covers such indicators as new orders, production, employment, inventories, delivery times, prices, export orders and import orders. /3/The Producer Price Index is an inflationary indicator published by the U.S. Bureau of Labor Statistics to evaluate wholesale price levels in the economy. /4/The Consumer Price Index is a measure of the average change in prices over time in a fixed market basket of goods and services. 4 HSBC Mutual Funds Trust showed disagreement among the members with 7 of the 10 voters going along with Mr. Greenspan's 50 basis point easing. Apparently, this set the stage for the Fed's modest 25 basis points ease on June 27th. The house view calls for only up to 50 basis points in further easing as economic news is starting to reflect stability in many areas including manufacturing. The tight as a drum labor market has now relaxed a bit with the unemployment rate now at 4.4%. Additionally, inflation concerns over $2 per gallon of gasoline has subsided greatly as prices have dropped over the past few weeks. We anticipate that the next scheduled Fed meeting on August 21st could produce that final cut in interest rates. For now, we retain a neutral duration position with a curve bias towards flattening. We expect yields in the short end to back up as the street assumes the Fed is finished, or about to finish their easing cycle. On the credit side, we will look to attain a neutral position as second quarter corporate earnings create new scuds and the dealer community decreases liquidity as yields begin to rise. Sincerely, /s/ Edward J. Merkle Edward J. Merkle Managing Director, Fixed Income 5 HSBC Mutual Funds Trust HSBC New York Tax-Free Bond Fund* - -------------------------------------------------------------------------------- Portfolio Review July 17, 2001 Dear Shareholder: The Fund returned 1.83% (without sales charge)+ for Class A Shares, which was 74 basis points less than the Lipper New York Municipal Debt Funds Average./1/ This was due to an overweight in longer duration securities which underperformed shorter duration credits on a duration-adjusted basis. The average maturity of the Fund was 8.03 years. In terms of sector diversification, the largest sectors consisted of higher education (18.6% of net assets), general obligations (17.2%), and medical revenue (14.9%).** Municipal bonds underperformed taxable bonds on a pretax basis in the first half of 2001. The semi-annual return of the Lehman Brothers Aggregate Bond Index/2/ was 3.62%. By comparison the Lehman Brothers Municipal Bond Index/3/ returned 2.88% for the same period. Yields were mixed across the U.S. Treasury yield curve ranging from 86 basis points lower on two year bonds to 30 basis points higher on ten year and 30- year bonds. Municipal bond yields were lower by 78 basis points on two year notes, one basis point lower on ten year bonds, and 11 basis points higher on 30-year bonds. While the municipal market outperformed the treasury market by 93 basis points it underperformed all other taxable sectors. In particular municipals underperformed corporate bonds by 250 basis points and corporates represented the only spread sector to have outperformed municipals on an after tax basis. Much of the outperformance was a retracement of the severe underperformance, which the corporate market experienced, in the second half of last year. New York outperformed the rest of the municipal market as the Lehman New York State Exempt Index/4/ returned 3.06%. This was due to the New York market experiencing an acute reduction in new issuance. - ------- Past performance is no guarantee of future results. The investment return and net asset value will fluctuate, so the investors' shares, when redeemed, may be worth more of less than the original cost. * The New York Tax-Free Bond Fund's income may be subject to certain state and local taxes and, depending on your tax status, the Federal Alternative Minimum Tax. **Portfolio composition is subject to change. + With the maximum sales charge of 4.75%, the Class A Share's return for the period was -3.04%. The total return set forth reflects the reduction of a portion of the Fund's fees. Without the reduction of fees, total return for the period would have been lower. /1/The Lipper New York Municipal Debt Fund Average is an equal weighted average of the largest managed mutual funds in the Municipal Debt fund objective, the funds within this category limit their assets to securities that are exempt from state (double tax-exempt) or city (triple tax-exempt) tax. /2/The Lehman Brothers Aggregate Bond Index is an unmanaged index which tracks the total return performance of fixed-rate, publicly placed, dollar denominated, and non-convertible investment grade issues with at least one year to final maturity. /3/The Lehman Brothers Municipal Bond Index is an unmanaged index considered to be representative of the performance of the municipal bond market as a whole. /4/The Lehman New York State Exempt Index is a broad based, total return index which is comprised of bonds issued in the State of New York. The above indices do not reflect the expenses associated with a mutual fund such as investment advisory and accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index although they can invest in the underlying securities. 6 HSBC Mutual Funds Trust Despite the lower overall credit profile of the Lehman New York State Exempt Index as compared with the Lehman Brothers Municipal Bond Index (AA2/AA3 versus AA1/AA2) the yield to worst of the Lehman New York State Exempt Index presently is 6 basis points less than that of the Lehman Brothers Municipal Bond Index which represents a historic low. Given that the economy has slowed and recovery is expected to be moderate we see very little reason to extend along the credit curve, as the backdrop may not be as rosy for local government coffers as has it has been the past several years. Municipal credit risk, which appeared for the last year to be immune from the quickly degenerating credit conditions of corporate markets, may be starting to see some cracks. Certainly, California credits are coming under pressure as a result of the power crisis and the slow pace of resolution. Rating agencies are beginning to increase downgrades and negative outlooks. We believe that at the present time the municipal credit cycle has peaked, and in fact may be on the verge of some degeneration of its own. As such the portfolio will continue to overweight insured credits and maintain a relatively high credit profile as the reward for extending along the credit curve is still not adequately compensated for by the risk. In one particular instance we will be looking to underweight our Fund's exposure to New York City General Obligation debt on duration adjusted basis relative to our benchmark. Although the city has successfully diversified itself to industries beyond financial services we still believe that revenue forecasts could be at risk given the slowdown that the sector is presently seeing. The market clearly has not adjusted spreads to reflect a higher risk premium and in fact remains at historically tight levels. We believe the average fund will avoid any credits that have not upgraded their fiscal balance sheets over the last three years, as they most certainly will be vulnerable to the economic slowdown. Strong technicals for the municipal market have resurfaced as seasonal coupon payments and maturities tend to hit the municipal market quite strongly in June and July. Fund flows remain positive yet not as strong as they had been. Year to date new issuance has increased by 39% but only by 15% in New York due to the impasse over the New York budget. The risk to the municipal market going forward will be that once a budget is passed a flood of new issue supply will overwhelm the market particularly at a time when crossover buyers are preferring other fixed income sectors. Also, we feel the weakness in equity markets seems to have somewhat bottomed and asset reallocation into safer type securities such as municipals may have abated. The municipal yield curve continued to steepen as represented by the spread between two year and ten year bond yields currently at 129. Given our outlook that the Federal Reserve is approaching the conclusion of this easing cycle we would suspect that by year-end the municipal yield curve would be flatter than it is today. As such we will tend to be barbelled along the yield curve while short the intermediate portion. Sincerely, /s/ Jerry Samet Jerry Samet Senior Fixed Income Portfolio Manager 7 HSBC Mutual Funds Trust Board of Trustees JEFFREY J. HAAS Professor of Law, New York Law School RICHARD J. LOOS Former Managing Director, HSBC Asset Management (Americas) Inc. CLIFTON H.W. MALONEY President, C.H.W. Maloney & Co. Inc. HARALD PAUMGARTEN Managing Director, Heritage Capital Corp. - -------------------------------------------------------------------------------- Officers WALTER B. GRIMM President CHARLES L. BOOTH Vice President MARK L. SUTER Vice President NADEEM YOUSAF Treasurer STEVEN R. HOWARD Secretary ALAINA V. METZ Assistant Secretary 8 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) GROWTH AND INCOME FUND
Shares Value ------ ----------- COMMON STOCKS (98.5%) Aerospace & Defense (2.6%) 34,900 Honeywell International, Inc............................. $ 1,221,151 12,900 United Technologies Corp................................. 945,054 ----------- 2,166,205 ----------- Banking (6.1%) 24,900 Bank of America Corp. ................................... 1,494,747 36,000 Bank of New York Co., Inc. .............................. 1,728,000 48,400 FleetBoston Financial Corp............................... 1,909,380 ----------- 5,132,127 ----------- Basic Materials (1.2%) 24,700 Alcoa, Inc. ............................................. 973,180 ----------- Beverages (1.6%) 29,400 Coca-Cola Co. ........................................... 1,323,000 ----------- Computer Software (6.1%) 58,800 Microsoft Corp.(b)....................................... 4,292,400 43,900 Oracle Corp.(b).......................................... 834,100 ----------- 5,126,500 ----------- Computers & Peripherals (13.0%) 71,700 Cisco Systems, Inc.(b)................................... 1,304,940 17,800 Dell Computer Corp.(b)................................... 465,470 16,800 EMC Corp.(b)............................................. 488,040 17,900 First Data Corp. ........................................ 1,150,075 85,300 Intel Corp. ............................................. 2,495,025 23,300 International Business Machines Corp..................... 2,632,899 71,600 Sun Microsystems, Inc.(b)................................ 1,125,552 40,820 Texas Instruments, Inc. ................................. 1,285,830 ----------- 10,947,831 ----------- Consumer Goods & Services (3.5%) 48,800 Mattel, Inc.............................................. 923,296 39,500 Philip Morris Cos., Inc.................................. 2,004,625 ----------- 2,927,921 -----------
9 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) (continued) GROWTH AND INCOME FUND
Shares Value ------ ----------- COMMON STOCKS (continued) Diversified (7.0%) 53,400 General Electric Co. ..................................... $ 2,603,250 60,900 Tyco International Ltd. .................................. 3,319,050 ----------- 5,922,300 ----------- Electric Utility (1.0%) 22,800 Calpine Corp.(b).......................................... 861,840 ----------- Financial Services (10.6%) 66,300 Citigroup, Inc............................................ 3,503,292 19,900 Fannie Mae................................................ 1,694,485 60,000 MBNA Corp. ............................................... 1,977,000 47,550 Washington Mutual, Inc.................................... 1,785,503 ----------- 8,960,280 ----------- Health Care (4.7%) 57,200 HEALTHSOUTH Corp.(b)...................................... 913,484 47,700 Johnson & Johnson......................................... 2,385,000 15,300 Medtronic, Inc. .......................................... 703,953 ----------- 4,002,437 ----------- Insurance (4.1%) 24,000 Allstate Corp. ........................................... 1,055,760 27,900 American International Group, Inc. ....................... 2,399,400 ----------- 3,455,160 ----------- Multimedia (3.9%) 43,600 AOL Time Warner, Inc.(b).................................. 2,310,800 23,000 Comcast Corp.(b).......................................... 998,200 ----------- 3,309,000 ----------- Oil & Gas Exploration, Production, and Services (7.5%) 13,500 Enron Corp. .............................................. 661,500 42,100 Exxon Mobil Corp. ........................................ 3,677,435 18,600 Royal Dutch Petroleum Co. ................................ 1,083,822 21,300 Transocean Sedco Forex, Inc. ............................. 878,625 ----------- 6,301,382 -----------
10 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) (continued) GROWTH AND INCOME FUND
Shares Value ------ ----------- COMMON STOCKS (continued) Pharmaceuticals (10.4%) 19,200 American Home Products Corp. ............................. $ 1,122,048 25,800 Bristol-Myers Squibb Co. ................................. 1,349,340 24,300 Cardinal Health, Inc. .................................... 1,676,700 9,400 Eli Lilly & Co. .......................................... 695,600 26,300 Merck & Co., Inc. ........................................ 1,680,833 37,100 Pfizer, Inc. ............................................. 1,485,855 20,680 Schering-Plough Corp. .................................... 749,443 ----------- 8,759,819 ----------- Retail Stores (9.5%) 21,000 Costco Wholesale Corp.(b)................................. 862,680 31,400 CVS Corp. ................................................ 1,212,040 42,200 Home Depot, Inc. ......................................... 1,964,410 23,500 Target Corp. ............................................. 813,100 31,600 Toys 'R Us, Inc.(b)....................................... 782,100 49,000 Wal-Mart Stores, Inc. .................................... 2,391,200 ----------- 8,025,530 ----------- Telecommunications (5.7%) 29,900 Broadwing, Inc.(b)........................................ 731,055 27,000 Qwest Communications International, Inc. ................. 860,490 28,100 SBC Communications, Inc. ................................. 1,125,686 32,917 Verizon Communications, Inc. ............................. 1,761,060 23,050 WorldCom, Inc.(b)......................................... 327,310 ----------- 4,805,601 ----------- Total Common Stocks............................................ 83,000,113 -----------
11 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) (continued) GROWTH AND INCOME FUND
Principal Shares Amount Value ------ --------- ----------- INVESTMENT COMPANIES (1.5%) Provident Institutional Temporary Investment Fund......................................... 1,284,000 $ 1,284,000 ----------- Total Investment Companies...................................... 1,284,000 ----------- DAILY SWEEP VEHICLES (0.0%) Bank of New York Cash Sweep............................. $158 158 ----------- Total Daily Sweep Vehicles...................................... 158 ----------- Total Investments (Cost $67,640,407)(a)--100.0%................. $84,284,271 ===========
- -------- Percentages indicated are based on net assets of $84,262,856. (a) Cost differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation....................................... $19,335,752 Unrealized depreciation....................................... (2,691,888) ----------- Net unrealized appreciation................................... $16,643,864 ===========
(b) Represents non-income producing security. See Notes to Financial Statements. 12 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) FIXED INCOME FUND
Maturity Principal Rate Date Amount Value ---- -------- ---------- ----------- CORPORATE BONDS (46.5%) Aerospace & Defense (3.4%) Lockheed Martin Corp. ................. 8.20% 12/1/09 $1,000,000 $ 1,078,720 ----------- Banking (8.1%) Bank of America Corp. ................. 7.88 12/1/02 2,500,000 2,602,480 ----------- Consumer Goods & Services (3.1%) Philip Morris Cos., Inc. .............. 6.38 2/1/06 1,000,000 998,953 ----------- Electric Utilities (11.0%) American Electric Power, Inc. ......... 7.25 10/1/02 2,500,000 2,566,595 Commonwealth Edison.................... 6.95 7/15/18 1,000,000 943,340 ----------- 3,509,935 ----------- Financial Services (15.9%) Associates Corp., NA................... 5.75 11/1/03 1,500,000 1,513,135 Ford Motor Credit Co. ................. 6.88 2/1/06 1,000,000 1,014,080 General Motors Acceptance Corp. ....... 5.80 3/12/03 1,000,000 1,008,067 Lehman Brothers Holdings, Inc. ........ 7.88 8/15/10 500,000 527,673 Travelers Property Casualty Corp. ..... 7.75 4/15/26 1,000,000 1,047,036 ----------- 5,109,991 ----------- Industrial Goods & Services (5.0%) Xerox Corp., Callable 11/15/03 @ 100... 6.25 11/15/26 2,000,000 1,590,000 ----------- Total Corporate Bonds........................................... 14,890,079 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (40.6%) Federal Farm Credit Bank (3.1%) 5.56, 6/14/05.......................... 5.56 6/14/05 1,000,000 1,000,105 ----------- Federal Home Loan Mortgage Corporation (15.9%) Medium Term Note, Callable 7/9/01 @ 100................................... 6.04 3/21/06 1,000,000 1,000,465 Pool #220019........................... 7.75 1/1/02 7,811 7,885 Pool #C00922........................... 8.00 2/1/30 2,641,602 2,736,126 Pool #D62926........................... 6.50 8/1/25 1,359,317 1,340,854 ----------- 5,085,330 -----------
13 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) (continued) FIXED INCOME FUND
Maturity Principal Rate Date Amount Value ---- -------- ---------- ------------- U.S. GOVERNMENT AGENCY OBLIGATIONS (continued) Federal National Mortgage Association (16.5%) Pool #250414.......................... 7.00% 12/1/25 $2,085,650 $ 2,095,882 Pool #343195.......................... 7.50 5/1/26 1,023,148 1,045,060 Pool #343812.......................... 7.50 5/1/26 132,697 135,539 Series 1993-104, Class C.............. 6.50 3/25/21 2,000,000 2,033,161 ----------- 5,309,642 ----------- Government National Mortgage Association (5.1%) Pool #356578.......................... 7.50 6/15/23 1,567,763 1,620,322 ----------- Total U.S. Government Agency Obligations....................... 13,015,399 ----------- U.S. TREASURY OBLIGATIONS (12.8%) U.S. Treasury Bonds (12.8%) U.S. Treasury Bonds................... 6.63 2/15/27 3,500,000 3,835,143 U.S. Treasury Bonds................... 8.75 8/15/20 200,000 264,775 ----------- Total U.S. Treasury Obligations................................ 4,099,918 ----------- Total Investments (Cost $31,795,556)(a)--99.9%................. $32,005,396 ===========
- -------- Percentages indicated are based on net assets of $32,043,452. (a) Cost differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation......................................... $673,571 Unrealized depreciation......................................... (463,731) -------- Net unrealized appreciation..................................... $209,840 ========
NA - National Association See Notes to Financial Statements. 14 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) NEW YORK TAX-FREE BOND FUND
Principal Amount Value ---------- ---------- MUNICIPAL BONDS (99.1%) New York (95.6%) Albany County, New York Airport Authority, Airport Revenue, AMT (FSA Insured), 5.50%, 12/15/19, Callable 12/15/07 @ 102......................................... $ 750,000 $ 765,705 Bethlehem, New York Central School District, GO, (AMBAC Insured), 7.10%, 11/1/07............................... 200,000 234,074 Metropolitan Transportation Authority Facilities Revenue, Series A (MBIA Insured), 5.63%, 7/1/25, Callable 7/1/07 @ 101.5................................ 1,200,000 1,231,404 Monroe County, New York, GO, 6.00%, 3/1/16.............. 675,000 760,253 Monroe County, New York, Series B, GO, 7.00%, 6/1/04, Callable 6/1/01 @ 100.5................................ 10,000 10,210 New York City, GO, Series B, 7.50%, 2/1/07, Callable 2/1/02 @ 101.50........................................ 635,000 658,508 New York City, GO, Series B, 7.50%, 2/1/07, Prerefunded 2/1/02 @ 101.50........................................ 365,000 380,542 New York City, Series A, GO, 7.75%, 8/15/04, Callable 8/15/01 @ 101.5........................................ 10,000 10,200 New York City, Series A, GO, 7.75%, 8/15/07, Callable 8/15/01 @ 101.5........................................ 70,000 71,373 New York City, Series A, GO, 7.75%, 8/15/07, Prerefunded 8/15/01 @ 101.5........................................ 305,000 311,304 New York City, Series E, GO, 6.50%, 2/15/06............. 1,200,000 1,331,520 New York City, Series F, GO, 8.40%, 11/15/05, Callable 11/15/01 @ 101.5....................................... 40,000 41,335 New York City, Series F, GO, 8.40%, Prerefunded 11/15/01 @ 101.5................................................ 110,000 113,917 New York City, Series G, GO, 6.75%, 2/1/09.............. 1,000,000 1,153,390 New York City, Transitional Finance Authority Revenue, Series B, FTS, 4.75%, 11/1/23, Callable 5/1/09 @ 101... 1,500,000 1,374,300 New York City, Trust for Cultural Resources Revenue, Museum of Modern Art (AMBAC Insured), 6.40%, 1/1/04, Prerefunded 1/1/02 @ 102............................... 350,000 363,472 New York City, Water Finance Authority, Water & Sewer System Revenue, Series B, 5.13%, 6/15/31, Callable 6/15/10 @ 101.......................................... 1,350,000 1,306,814 New York State, Dormitory Authority Revenue, City University System, Series A (FGIC-TCRS Insured), 5.75%, 7/1/18................................................. 2,370,000 2,600,482 New York State, Dormitory Authority Revenue, Cornell University, Series B (SPA Morgan Guaranty Trust), 3.10%, 7/2/01, Callable 7/1/02 @ 100*.................. 400,000 400,000 New York State, Dormitory Authority Revenue, Mental Health Services Facilities, Series G, 4.50%, 8/15/18, Callable 8/15/08 @ 101................................. 1,650,000 1,528,907 New York State, Dormitory Authority Revenue, Siena College (MBIA), 5.00%, 7/1/10.......................... 350,000 368,372 New York State, Dormitory Authority Revenue, State University Education Facilities, Series A (MBIA-IBC Insured), 5.88%, 5/15/11............................... 1,500,000 1,680,480 New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series A, 7.00%, 6/15/12, Callable 6/15/02 @ 101................. 150,000 153,377
15 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) (continued) NEW YORK TAX-FREE BOND FUND
Principal Amount Value ---------- ----------- MUNICIPAL BONDS (continued) New York (continued) New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series B, 7.50%, 3/15/11, Callable 3/15/02 @ 100................ $ 250,000 $ 252,218 New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series C, 7.20%, 3/15/11, Callable 3/15/02 @ 100................ 200,000 202,460 New York State, Housing Finance Agency Revenue, Multifamily Mortgage Housing, Series A (FHA Insured), 7.00%, 8/15/22, Callable 8/15/02 @ 102................ 900,000 936,090 New York State, Job Development Authority, Series A, 3.20%, 7/2/01, Callable 3/1/02 @ 100*................. 995,000 995,000 New York State, Medical Care Facilities Finance Agency Revenue, Security Management Programs, Adult Day Care, Series A (SONYMA Insured), 6.38%, 11/15/20, Callable 11/15/05 @ 102........................................ 1,945,000 2,074,322 New York State, Thruway Authority, Series B-1 (MBIA), 5.50%, 4/1/07......................................... 1,300,000 1,404,559 New York State, Urban Development Corporation, Senior Lien, Corporate Purpose, 5.50%, 7/1/16, Callable 7/1/06 @ 102.......................................... 2,000,000 2,075,079 Niagara County, New York Frontier Authority, Airport Revenue, Series A, AMT (AMBAC Insured), 6.13%, 4/1/14, Callable 4/1/04 @ 102................................. 2,400,000 2,535,983 ----------- 27,325,650 ----------- Puerto Rico (3.5%) Puerto Rico Electric Power Authority Revenue, Electric Power & Light, Series HH (FSA Insured), 5.38%, 7/1/30, Callable 7/1/05 @ 101................................. 1,000,000 1,010,660 ----------- Total Municipal Bonds............................................ 28,336,310 ----------- INVESTMENT COMPANIES (1.0%) Dreyfus New York Tax Free.............................. 296,000 296,000 ----------- Total Investment Companies....................................... 296,000 ----------- DAILY SWEEP VEHICLES (0.0%) Bank of New York Cash Sweep............................ 251 251 ----------- Total Daily Cash Sweep Vehicles.................................. 251 ----------- Total Investments (Cost $27,528,028)(a)--100.1%.................. $28,632,561 ===========
16 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2001 (Unaudited) (continued) NEW YORK TAX-FREE BOND FUND - -------- Percentages indicated are based on net assets of $28,614,689. (a) Cost differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation........................................ $1,182,915 Unrealized depreciation........................................ (78,382) ---------- Net unrealized appreciation.................................... $1,104,533 ==========
* Variable rate security. Rate represents rate in effect on June 30, 2001. Date presented represents the next rate change date. AMBAC - American Municipal Bond Assurance Corp. AMT - Interest on security is subject to Federal Alternative Minimum Tax FGIC - Financial Guaranty Insurance Corp. FHA - Federal Housing Administration FSA - Financial Security Assurance, Inc. FTS - Future Tax Secured GO - General Obligation SONYMA - State of New York Mortgage Agency TCRS - Transferable Custody Receipts See Notes to Financial Statements. 17 HSBC Mutual Funds Trust Statement of Assets and Liabilities June 30, 2001 (Unaudited)
Growth New York and Income Fixed Tax-Free Bond Fund Income Fund Fund ----------- ----------- ------------- Assets: Investments, at value (cost $67,640,407, $31,795,556, and $27,528,028, respectively).......... $84,284,271 $32,005,396 $28,632,561 Interest receivable.................. -- 406,836 475,361 Dividends receivable................. 70,251 874 514 Receivable for capital shares issued.............................. 10,187 75 -- Receivable for investments sold...... -- 16 -- Prepaid expenses..................... 5,270 2,205 549 ----------- ----------- ----------- Total Assets........................ 84,369,979 32,415,402 29,108,985 ----------- ----------- ----------- Liabilities: Payable to custodian................. -- 149,108 -- Dividends payable.................... -- 177,087 92,086 Payable for investments purchased.... -- -- 369,362 Accrued expenses and other liabilities: Investment adviser................... 39,017 15,483 5,874 Administration....................... 7,095 2,815 2,349 Service organization................. 3,534 438 812 Distribution......................... 11,385 1,311 10,267 Other................................ 46,092 25,708 13,546 ----------- ----------- ----------- Total Liabilities................... 107,123 371,950 494,296 ----------- ----------- ----------- Net Assets.......................... $84,262,856 $32,043,452 $28,614,689 =========== =========== =========== Composition of Net Assets: Capital.............................. $70,949,508 $33,989,575 $28,050,783 Undistributed (dividends in excess of) net investment income........... (83,056) (208,850) (10,203) Accumulated net realized losses from investment and options transactions........................ (3,247,460) (1,947,113) (530,424) Unrealized appreciation from investments......................... 16,643,864 209,840 1,104,533 =========== =========== =========== Net Assets............................ $84,262,856 $32,043,452 $28,614,689 =========== =========== =========== Class A Shares: Net Assets........................... $76,074,947 $30,818,787 $26,488,877 Shares outstanding................... 6,545,899 3,105,835 2,341,209 Net Asset Value and Redemption Price per share........................... $ 11.62 $ 9.92 $ 11.31 =========== =========== =========== Maximum sales charge................. 5.00% 4.75% 4.75% Maximum Offering Price per share (Net Asset Value/(100%--maximum sales charge)............................. $ 12.23 $ 10.41 $ 11.87 =========== =========== =========== Class B Shares: Net Assets........................... $ 8,106,419 $ 687,233 $ 1,823,946 Shares outstanding................... 710,533 69,261 161,151 Net Asset Value, Offering Price and Redemption Price per share*......... $ 11.41 $ 9.92 $ 11.32 =========== =========== =========== Class C Shares: Net Assets........................... $ 81,490 $ 537,432 $ 301,866 Shares outstanding................... 7,146 54,162 26,682 Net Asset Value, Offering Price and Redemption Price per share*......... $ 11.40 $ 9.92 $ 11.31 =========== =========== ===========
- -------- * Redemption Price per share varies based on the length of time shares are held. See Notes to Financial Statements. 18 HSBC Mutual Funds Trust Statement of Operations For the six months ended June 30, 2001 (Unaudited)
Growth Fixed New York and Income Income Tax-Free Bond Fund Fund Fund ------------ ---------- ------------- Investment Income: Interest................................ $ -- $1,053,922 $ 757,637 Dividend................................ 495,579 19,132 6,822 ------------ ---------- --------- Total Investment Income.................. 495,579 1,073,054 764,459 ------------ ---------- --------- Expenses: Investment adviser...................... 246,269 96,747 62,209 Administration.......................... 67,164 26,386 20,736 Service organization: Class B Shares......................... 19,068 833 3,029 Class C Shares(a)...................... 220 825 500 Distribution: Class A Shares......................... 2,265 39 23,178 Class B Shares......................... 28,602 1,249 4,543 Class C Shares(a)...................... 330 1,238 750 Accounting.............................. 1,743 1,849 2,450 Custodian............................... 6,908 3,804 2,681 Legal................................... 110,108 44,658 34,239 Transfer agent.......................... 69,276 25,076 42,482 Other................................... 58,715 29,551 23,496 ------------ ---------- --------- Total expenses before fee reductions and reimbursements.................... 610,668 232,255 220,293 Administration fees reduced........... (22,389) (8,796) (6,912) Service organization fee reductions... (9,644) (829) (1,764) Reimbursements from Investment adviser.............................. -- -- (27,646) ------------ ---------- --------- Net Expenses............................. 578,635 222,630 183,971 ------------ ---------- --------- Net Investment Income/(Loss)............. (83,056) 850,424 580,488 ------------ ---------- --------- Net Realized/Unrealized Gains/(Losses) from Investments: Net realized gains/(losses) from investment transactions................ (3,547,568) 532,114 60,157 Net realized gains from options transactions........................... 207,989 -- -- Change in unrealized appreciation/depreciation from investments and options................ (6,595,172) 570,834 (123,487) ------------ ---------- --------- Net realized/unrealized gains/(losses) from investments and options........... (9,934,751) 1,102,948 (63,330) ------------ ---------- --------- Change in net assets resulting from operations.............................. $(10,017,807) $1,953,372 $ 517,158 ============ ========== =========
- -------- (a) The Fixed Income Fund Class C Shares commenced operations on January 17, 2001. See Notes to Financial Statements. 19 HSBC Mutual Funds Trust Statements of Changes in Net Assets
Growth and Income Fund -------------------------- For the six For the year months ended ended June 30, December 31, 2001 2000 ------------ ------------ (Unaudited) Investment Activities: Operations: Net investment loss................................ $ (83,056) $ (222,414) Net realized gains/(losses) from investment and option transactions............................... (3,339,579) 651,811 Change in unrealized appreciation/depreciation from investments and options........................... (6,595,172) (12,322,412) ------------ ------------ Change in net assets from operations............... (10,017,807) (11,893,015) ------------ ------------ Dividends: Net investment income Class A Shares.................................... -- (11,705) Net realized gain from investments Class A Shares.................................... -- (3,596,177) Class B Shares.................................... -- (229,993) Class C Shares.................................... -- (5,468) ------------ ------------ Change in net assets from shareholder dividends.... -- (3,843,343) ------------ ------------ Change in net assets from capital share transactions...................................... (5,462,701) (5,544,128) ------------ ------------ Change in net assets............................... (15,480,508) (21,280,486) ------------ ------------ Net Assets: Beginning of period................................ 99,743,364 121,023,850 ------------ ------------ End of period...................................... $ 84,262,856 $ 99,743,364 ============ ============
- -------- See Notes to Financial Statements. 20 HSBC Mutual Funds Trust Statement of Changes in Net Assets
New York Tax-Free Fixed Income Fund Bond Fund ------------------------- ------------------------ For the six For the six For the months For the months ended year ended ended year ended June 30, December June 30, December 2001 31, 2000 2001 31, 2000 ------------ ----------- ----------- ----------- (Unaudited) (Unaudited) Investment Activities: Operations: Net investment income..... $ 850,424 $ 2,715,805 $ 580,488 $ 1,224,132 Net realized gains/(losses) from investment transactions.. 532,114 (282,363) 60,157 26,489 Change in unrealized appreciation/depreciation from investment transactions............. 570,834 652,600 (123,487) 1,463,018 ------------ ----------- ----------- ----------- Change in net assets from operations............... 1,953,372 3,086,042 517,158 2,713,639 ------------ ----------- ----------- ----------- Dividends: Net investment income Class A Shares........... (1,113,269) (2,715,633) (548,064) (1,206,858) Class B Shares(a)........ (9,308) (171) (20,326) (15,863) Class C Shares(b)........ (9,140) -- (3,357) (1,411) ------------ ----------- ----------- ----------- Change in net assets from shareholder dividends.... (1,131,717) (2,715,804) (571,747) (1,224,132) ------------ ----------- ----------- ----------- Change in net assets from capital share transactions............. (12,209,669) 708,700 1,425,534 (2,712,866) ------------ ----------- ----------- ----------- Change in Net Assets...... (11,388,014) 1,078,938 1,370,945 (1,223,359) ------------ ----------- ----------- ----------- Net Assets: Beginning of period....... 43,431,466 42,352,528 27,243,744 28,467,103 ------------ ----------- ----------- ----------- End of period............. $ 32,043,452 $43,431,466 $28,614,689 $27,243,744 ============ =========== =========== ===========
- -------- (a) The Fixed Income Fund Class B Shares commenced operations on November 6, 2000. (b) The Fixed Income Fund and the New York Tax-Free Bond Fund Class C Shares commenced operations on January 17, 2001, and September 11, 2000, respectively. See Notes to Financial Statements. 21 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS GROWTH AND INCOME FUND Selected per share data for a share outstanding throughout the period indicated.
Class A Shares -------------------------------------------------------------------- For the six months For the years ended December 31, ended ------------------------------------------------- June 30, 2001 2000 1999 1998 1997 1996 ------------------ ------- -------- -------- ------- -------- (Unaudited) Net Asset Value, Beginning of Period.... $ 12.91 $ 14.92 $ 13.86 $ 12.36 $ 16.28 $ 14.77 ------- ------- -------- -------- ------- -------- Investment Activities: Net investment income.. (0.01) (0.02) 0.02 0.07 0.18 0.18 Net realized and unrealized gains/(losses) from investments........... (1.28) (1.48) 2.47 3.23 4.28* 2.46 ------- ------- -------- -------- ------- -------- Total from Investment Activities............. (1.29) (1.50) 2.49 3.30 4.46 2.64 ------- ------- -------- -------- ------- -------- Dividends: Net investment income.. -- (0.00)(a) (0.02) (0.08) (0.19) (0.18) Net realized gains from investment and options transactions.......... -- (0.51) (1.41) (1.72) 8.19 (0.95) ------- ------- -------- -------- ------- -------- Total Dividends......... -- (0.51) (1.43) (1.80) 8.38 (1.13) ------- ------- -------- -------- ------- -------- Net Asset Value, End of Period................. $ 11.62 $ 12.91 $ 14.92 $ 13.86 $ 12.36 $ 16.28 ======= ======= ======== ======== ======= ======== Total Return (excludes sales charge).......... (9.99%)(b) (10.52%) 18.48% 26.97% 27.42% 17.90% Ratios/Supplemental Data: Net Assets at end of period (000's)........ $76,075 $92,646 $117,542 $106,267 $55,195 $140,688 Ratio of expenses to average net assets.... 1.21%(c) 1.02% 0.88% 0.89% 0.83% 0.85% Ratio of net investment income/(loss) to average net assets.... (0.10%)(c) (0.14%) 0.14% 0.58% 0.95% 1.43% Ratio of expenses to average net assets**.. (d) (d) 1.00% 1.01% 0.95% 0.96% Portfolio turnover***.. 25.96% 67.17% 94.36% 82.19% 69.07% 61.68%
- -------- (a) Less than $0.005 per share. (b) Not annualized. (c) Annualized. (d) During the period, there were no voluntary reductions/reimbursements. * In addition to the net realized and unrealized gains from investment transaction, 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. ** During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. *** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 22 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS GROWTH AND INCOME FUND Selected per share data for a share outstanding throughout the period indicated.
Class B Shares ------------------------------------------- For the six For the year For the period months ended ended July 1, 1999 to June 30, December 31, December 31, 2001 2000 1999* ------------ ------------ --------------- (Unaudited) Net Asset Value, Beginning of Period............................ $12.73 $14.86 $15.32 ------ ------ ------ Investment Activities: Net investment loss............... (0.06) (0.13) (0.03) Net realized and unrealized gains/(losses) from investments.. (1.26) (1.49) 0.98 ------ ------ ------ Total from Investment Activities... (1.32) (1.62) 0.95 ------ ------ ------ Dividends: Net realized gains................ -- (0.51) (1.41) ------ ------ ------ Total Dividends.................... -- (0.51) (1.41) ------ ------ ------ Net Asset Value, End of Period..... $11.41 $12.73 $14.86 ====== ====== ====== Total Return (excludes redemption charge)........................... (10.37%)(a) (11.39%) 6.68%(a) Ratios/Supplemental Data: Net Assets at end of period (000's).......................... $8,106 $6,984 $3,459 Ratio of expenses to average net assets........................... 2.20%(b) 2.05% 1.77%(b) Ratio of net investment loss to average net assets**............. (1.10%)(b) (1.16%) (0.87%)(b) Ratio of expenses to average net assets........................... (c) (c) 2.13%(b) Portfolio turnover***............. 25.96% 67.17% 94.36%
- -------- (a) Not annualized. (b) Annualized. (c) During the period, there were no voluntary reductions/reimbursements. * Period from commencement of operations. ** During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. *** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 23 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS GROWTH AND INCOME FUND Selected per share data for a share outstanding throughout the period indicated.
Class C Shares -------------------------------------------- For the six For the For the period months ended year ended July 1, 1999 to June 30, December 31, December 31, 2001 2000 1999* ------------ ------------ --------------- (Unaudited) Net Asset Value, Beginning of Period............................ $ 12.73 $14.86 $15.32 ------- ------ ------ Investment Activities: Net investment loss............... (0.07) (0.16) (0.06) Net realized and unrealized gains/(losses) from investments.. (1.26) (1.46) 1.01 ------- ------ ------ Total from Investment Activities... (1.33) (1.62) 0.95 ------- ------ ------ Dividends: Net realized gains from investment and options transactions......... -- (0.51) (1.41) ------- ------ ------ Total Dividends.................... -- (0.51) (1.41) ------- ------ ------ Net Asset Value, End of Period..... $ 11.40 $12.73 $14.86 ======= ====== ====== Total Return (excludes redemption charge)........................... (10.45%)(a) (11.39%) 6.68%(a) Ratios/Supplemental Data: Net Assets at end of period (000's).......................... $ 81 $ 114 $ 23 Ratio of expenses to average net assets........................... 2.20%(b) 2.04% 1.72%(b) Ratio of net investment loss to average net assets............... (1.08%)(b) (1.17%) (0.81%)(b) Ratio of expenses to average net assets**......................... (c) (c) 2.07%(b) Portfolio turnover***............. 25.96% 67.17% 94.36%
- -------- (a) Not annualized. (b) Annualized. (c) During the period, there were no voluntary reductions/reimbursements. * Period from commencement of operations. ** During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. *** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 24 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS FIXED INCOME FUND Selected per share data for a share outstanding throughout the period indicated.
Class A Shares ------------------------------------------------------------ For the six months ended For the years ended December 31, June 30, --------------------------------------------- 2001 2000 1999 1998 1997 1996 ------------ ------- ------- ------- ------- -------- (Unaudited) Net Asset Value, Beginning of Period.... $ 9.70 $ 9.61 $ 10.37 $ 10.12 $ 9.89 $ 10.28 ------- ------- ------- ------- ------- -------- Investment Activities: Net investment income.. 0.32 0.61 0.57 0.57 0.59 0.59 Net realized and unrealized gains/(losses) from investments........... 0.22 0.09 (0.76) 0.25 0.23 (0.39) ------- ------- ------- ------- ------- -------- Total from Investment Activities............. 0.54 0.70 (0.19) 0.82 0.82 0.20 ------- ------- ------- ------- ------- -------- Dividends: Net investment income.. (0.32) (0.61) (0.57) (0.57) (0.59) (0.59) ------- ------- ------- ------- ------- -------- Total Dividends......... (0.32) (0.61) (0.57) (0.57) (0.59) (0.59) ------- ------- ------- ------- ------- -------- Net Asset Value, End of Period................. $ 9.92 $ 9.70 $ 9.61 $ 10.37 $ 10.12 $ 9.89 ======= ======= ======= ======= ======= ======== Total Return (excludes sales charge).......... 5.60%(a) 7.48% (1.86%) 8.33% 8.62% 2.11% Ratios/Supplemental Data: Net Assets at end of period (000's)........ $30,819 $43,376 $42,353 $53,834 $61,402 $104,875 Ratio of expenses to average net assets.... 1.25%(b) 1.00% 0.92% 0.89% 0.88% 0.88% Ratio of net investment income to average net assets................ 4.86%(b) 6.30% 5.70% 5.59% 6.00% 5.94% Ratio of expenses to average net assets*... (c) (c) 1.04% 1.01% 1.00% 0.98% Portfolio turnover**... 37.41% 54.57% 75.75% 71.05% 60.89% 156.05%
- -------- (a) Not annualized. (b) Annualized. (c) During the period, there were no voluntary reductions/reimbursements. * During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. ** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 25 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS FIXED INCOME FUND Selected per share data for a share outstanding throughout the period indicated.
Class B Shares Class C Shares --------------------------------- ------------------- For the six For the period For the period months ended November 6, 2000 to January 17, 2001 to June 30, December 31, June 30, 2001 2000* 2001* ------------ ------------------- ------------------- (Unaudited) (Unaudited) Net Asset Value, Beginning of Period..... $ 9.70 $ 9.56 $ 9.79 ------ ------ ------ Investment Activities: Net investment income... 0.27 0.07 0.20 Net realized and unrealized gains from investments............ 0.22 0.14 0.18 ------ ------ ------ Total from Investment Activities.............. 0.49 0.21 0.38 ------ ------ ------ Dividends: Net investment income... (0.27) (0.07) (0.25) ------ ------ ------ Total Dividends.......... (0.27) (0.07) (0.25) ------ ------ ------ Net Asset Value, End of Period.................. $ 9.92 $ 9.70 $ 9.92 ====== ====== ====== Total Return (excludes redemption charge)...... 5.09%(a) 2.24%(a) 3.90%(a) Ratios/Supplemental Data: Net Assets at end of period (000's)......... $ 687 $ 55 $ 537 Ratio of expenses to average net assets..... 2.24%(b) 2.30%(b) 2.23%(b) Ratio of net investment income to average net assets................. 3.92%(b) 5.32%(b) 3.72%(b) Portfolio turnover rate**................. 37.41% 54.57% 37.41%
- -------- (a) Not annualized. (b) Annualized. * Period from commencement of operations. ** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 26 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS NEW YORK TAX-FREE BOND FUND Selected per share data for a share outstanding throughout the period indicated.
Class A Shares ----------------------------------------------------------- For the six months ended For the years ended December 31, June 30, -------------------------------------------- 2001 2000 1999 1998 1997 1996 ------------ ------- ------- ------- ------- ------- (Unaudited) Net Asset Value, Beginning of Period.... $ 11.34 $ 10.73 $ 11.64 $ 11.48 $ 11.05 $ 11.17 ------- ------- ------- ------- ------- ------- Investment Activities: Net investment income.. 0.24 0.49 0.51 0.51 0.53 0.55 Net realized and unrealized gains/(losses) from investments........... (0.03) 0.61 (0.91) 0.16 0.43 (0.12) ------- ------- ------- ------- ------- ------- Total from Investment Activities............. 0.21 1.10 (0.40) 0.67 0.96 0.43 ------- ------- ------- ------- ------- ------- Dividends: Net investment income.. (0.24) (0.49) (0.51) (0.51) (0.53) (0.55) ------- ------- ------- ------- ------- ------- Total Dividends......... (0.24) (0.49) (0.51) (0.51) (0.53) (0.55) ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period................. $ 11.31 $ 11.34 $ 10.73 $ 11.64 $ 11.48 $ 11.05 ======= ======= ======= ======= ======= ======= Total Return (excludes sales charge).......... 1.83%(a) 10.56% (3.58%) 5.99% 8.97% 3.99% Ratios/Supplemental Data: Net Assets at end of period (000's)........ $26,489 $26,336 $28,075 $33,668 $37,524 $41,975 Ratio of expenses to average net assets.... 1.29%(b) 1.28% 1.08% 0.96% 0.92% 0.91% Ratio of net investment income to average net assets................ 4.24%(b) 4.53% 4.40% 4.47% 4.79% 5.02% Ratio of expenses to average net assets*... 1.49%(b) 1.37% 1.31% 1.28% 1.24% 1.21% Portfolio turnover**... 6.57% 20.91% 11.85% 56.81% 35.64% 87.40%
- -------- (a) Not annualized. (b) Annualized. * During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. ** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 27 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS NEW YORK TAX-FREE BOND FUND Selected per share data for a share outstanding throughout the period indicated.
Class B Shares ------------------------------------------- For the six For the year For the period months ended ended July 1, 1999 to June 30, December 31, December 31, 2001 2000 1999* ------------- ------------ --------------- (Unaudited) Net Asset Value, Beginning of Period............................. $11.34 $10.72 $11.21 ------ ------ ------ Investment Activities: Net investment income.............. 0.19 0.40 0.19 Net realized and unrealized gains/(losses) from investments... (0.02) 0.62 (0.49) ------ ------ ------ Total from Investment Activities.... 0.17 1.02 (0.30) ------ ------ ------ Dividends: Net investment income.............. (0.19) (0.40) (0.19) ------ ------ ------ Total Dividends..................... (0.19) (0.40) (0.19) ------ ------ ------ Net Asset Value, End of Period...... $11.32 $11.34 $10.72 ====== ====== ====== Total Return (excludes redemption charge)............................ 1.59%(a) 9.61% (2.71%)(a) Ratios/Supplemental Data: Net Assets at end of period (000's)........................... $1,824 $ 754 $ 392 Ratio of expenses to average net assets............................ 2.11%(b) 2.14% 2.01%(b) Ratio of net investment income to average net assets................ 3.39%(b) 3.65% 3.37%(b) Ratio of expenses to average net assets**.......................... 2.31%(b) 2.26% 2.35%(b) Portfolio turnover rate***......... 6.57% 20.91% 11.85%
- -------- (a) Not annualized. (b) Annualized. * Period from commencement of operations. ** During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. *** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 28 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS NEW YORK TAX-FREE BOND FUND
Class C Shares -------------------------------- For the six For the period months ended September 11, 2000 June 30, to December 31, 2001 2000* ------------ ------------------ (Unaudited) Net Asset Value, Beginning of Period.......... $11.34 $11.10 ------ ------ Investment Activities: Net investment income........................ 0.19 0.12 Net realized and unrealized gains/(losses) from investments............................ (0.03) 0.24 ------ ------ Total from Investment Activities.............. 0.16 0.36 ------ ------ Dividends: Net investment income........................ (0.19) (0.12) ------ ------ Total Dividends............................... (0.19) (0.12) ------ ------ Net Asset Value, End of Period................ $11.31 $11.34 ====== ====== Total Return (excludes redemption charge)..... 1.41%(a) 3.27%(a) Ratios/Supplemental Data: Net Assets at end of period (000's).......... $ 302 $ 154 Ratio of expenses to average net assets...... 2.11%(b) 2.16%(b) Ratio of net investment income to average net assets...................................... 3.40%(b) 3.52%(b) Ratio of expenses to average net assets**.... 2.31%(b) 2.36%(b) Portfolio turnover rate***................... 6.57% 20.91%
- -------- (a) Not annualized. (b) Annualized. * Period from commencement of operations ** During the period, certain fees were voluntarily/contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Starting with the year ended December 31, 2000, ratios are calculated using voluntary reductions/reimbursements only. *** Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued. See Notes to Financial Statements. 29 HSBC Mutual Funds Trust Notes to Financial Statements June 30, 2001 (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. The accompanying financial statements are for the Growth and Income Fund, Fixed Income Fund, and New York Tax-Free Bond Fund (individually a "Fund", collectively the "Funds"). The Funds are part of the HSBC Family of Funds. Financial statements for all other funds are published separately. The Funds are authorized to issue three classes of shares as follows: Class A Shares, Class B Shares, and Class C Shares. Each class has identical rights and privileges except with respect to the distribution and service organization fees paid by each respective class, voting matters affecting a single class of shares and the exchange privileges of each class of shares. 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 in the United States of America. 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. Change in Accounting Principle: As required, effective January 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing discount or premium on debt securities. Prior to January 1, 2001, the Fund did not amortize premiums on debt securities. The cumulative effect of this accounting change had no impact on total net assets of the Fund, but resulted in a $150,816 reduction in cost of securities and a corresponding $150,816 increase in net unrealized appreciation (depreciation), based on securities held by the Fund on January 1, 2001. Securities Valuation: Portfolio securities are valued at the last quoted sales price as of the close of business on the day the valuation is made, or lacking any sales, at the mean between closing bid and asked prices. Price information on listed securities is taken from the exchange where the security is primarily traded. The value for each unlisted security on a day such security is not traded shall be based on the mean of the bid and ask quotation for that day. The value for each unlisted security is based on the last trade price for that security on a day in which the security is traded. The value of each security for which readily available market quotations exist will be based on a decision as to the broadest and most representative market for such security. Options on stock indices traded on national securities exchanges are valued at the close of option trading on such exchanges. Other assets and securities for which no quotations are readily available are valued at fair value as determined in good faith by 30 HSBC Mutual Funds Trust Notes to Financial Statements (continued) the Trustees. Securities may be valued on the basis of prices provided by a pricing service when such prices are believed to reflect the fair market value of such securities. Bonds and other fixed-income securities (other than short-term obligations but including listed issues) are valued on the basis of valuations furnished by a pricing service, the use of which has been approved by the Fund's Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics other than market data and without exclusive reliance upon quoted prices or exchanges or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. All debt securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates value. Under the amortized cost method, premium or discount, if any, is amortized or accreted, respectively, on a constant (straight- line) basis to the maturity of the security. Security Transactions and Related Income: Security transactions are recorded on the date the security is purchased or sold ("trade date"). Dividend income is recorded on the ex-dividend date. Interest income is recognized on the accrual basis and includes, where applicable, the amortization of premium or accretion of discount. Securities gains and losses are calculated on the identified cost basis. Expense Allocation: Expenses directly attributed to each Fund are charged to that Fund's operations; expenses, which are applicable to all funds in the HSBC Family of Funds, are allocated among them on the basis of relative net assets or another appropriate basis. Expenses specific to a class are charged to that class. Options: The Funds may purchase and write (sell) put and call options on securities, currencies and indices of securities (collectively, an "underlying asset"). These transactions are to hedge against changes in interest rates, security prices, currency fluctuations and other market developments, or for purposes of earning additional income (i.e. speculation). The risk associated with purchasing an option is that the Funds pay a premium whether or not the option is exercised. Additionally, the Funds bear the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as other securities owned. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. In writing an option, the Funds contract with a specified counter-party to purchase (written put option) or sell (written call option) a specified quantity (notional amount) of an underlying asset at a specified price during a 31 HSBC Mutual Funds Trust Notes to Financial Statements (continued) specified period upon demand of the counter-party. The risk associated with writing an option is that the Funds bear the market risk of an unfavorable change in the price of an underlying asset, and may be required to buy or sell an underlying asset under the contractual terms of the option at a price different from the current market value. Written options involve financial risk which may exceed amounts reflected in the accompanying financial statements. Transactions in options written during the six months ended June 30, 2001, for the Growth and Income Fund:
Call Options ------------------- Number of Contracts Premiums --------- --------- Balance at beginning of year........................... 90 $ 35,639 Options written........................................ 716 241,395 Options expired........................................ (43) (8,707) Options terminated in closing purchase transactions.... (763) (268,327) ---- --------- Options at end of period............................... 0 $ 0 ==== =========
Federal Income Tax and Dividends: Each Fund is a separate taxable entity for federal tax purposes. Each Fund has qualified and intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended. The Growth and Income Fund declares and pays, as a semi-annual dividend, substantially all net investment income. The Fixed Income and New York Tax- Free Bond Funds declare dividends from net investment income daily and pay them monthly. Net realized gains for the Funds, if any, are distributed at least annually. To the extent that net realized gains of a Fund can be reduced by any capital loss carryovers of that Fund, such gains will not be distributed. Additional distributions are also made to the Fund's shareholders to the extent necessary to avoid the federal excise tax on certain undistributed income and net realized gains of regulated investment companies. Accordingly, no provision for federal or excise tax is required. The amount of dividends from net investment income and net realized gains are determined in accordance with federal income tax regulations which may differ from the generally accepted accounting principles of the United States of America. 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 to capital: temporary differences do not require reclassification. For the six months ended June 30, 2001, no reclassifications have been made to increase/(decrease) such accounts. 3. Related Party Transactions Investment Adviser: The Trust retains HSBC Asset Management (Americas) Inc., a wholly owned subsidiary of HSBC Bank USA, a New York state chartered bank, to act as Investment Adviser (the "Adviser") for the Funds. As compensation 32 HSBC Mutual Funds Trust Notes to Financial Statements (continued) for its services, the Adviser is entitled to receive a fee accrued daily, and paid monthly, at the following annual rates:
Growth and Income Fund and Based on each Fund's Average Daily Net Assets Fixed Income 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% New York Tax Free Portion of the Fund's Average Daily Net Assets Bond 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% Administrator: BISYS Fund Services Ohio, Inc. ("BISYS"), a subsidiary of The BISYS Group, Inc., with whom certain officers of the trust are affiliated, serves the Trust as administrator. 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 entitled to receive a fee accrued daily, and paid monthly, at the following annual rate: Administration Based on each Fund's Average Daily Net Assets Fee Rate --------------------------------------------- -------------------------- Up to $200 million.............................. 0.150% In excess of $200 million but not exceeding $400 million........................................ 0.125% In excess of $400 million but not exceeding $600 million........................................ 0.100% In excess of $600 million....................... 0.080%
Distribution Plan: BISYS Fund Services Limited Partnership (the "Distributor") serves as distributor of the Funds. 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 the Distributor for expenses incurred in connection with distribution services provided to the Fund not to exceed an annual rate of 0.35% (0.50% for the Growth and Income Fund) of the average net assets for Class A Shares, and 0.75% of the average net assets for Class B 33 HSBC Mutual Funds Trust Notes to Financial Statements (continued) Shares and Class C Shares. The Distributor is entitled to receive commissions on sales of shares of the Funds. For the six months ended June 30, 2001, the total commission the Distributor received, retained, and re- allowed to affiliated broker/dealers of the Funds are as follows:
Commissions Commissions Reallowed to Total Retained by Affiliated Commissions the Distributor Broker/Dealer ----------- --------------- ------------- Growth and Income Fund............ $20,696 $ 863 $19,833 Fixed Income Fund................. 3,277 9 3,268 New York Tax-Free Bond Fund....... 49,869 429 49,440 ------- ------ ------- $73,842 $1,301 $72,541 ======= ====== =======
Service Organization: The Fund may enter into agreements (the "Service Agreements") with certain banks, financial institutions and corporations ("Service Organizations") whereby each Service Organization provides record-keeping and certain administration services for its customers who invest in the Funds through accounts maintained at that Service Organization. Each Service Organization will receive monthly payments for the performance of its service under the Service Agreement. The payments from the Funds on an annual basis will not exceed 0.35% (Class A Shares) and 0.50% (Class B Shares and Class C Shares) of the average daily net assets of the Funds' shares held in the sub- accounts of the Service Organizations. During the six months ended June 30, 2001, the Class A Shares did not participate in any service agreement. Fund Accountant and Transfer Agent: BISYS provides fund accounting and transfer agent services for the Funds. For these services to the Funds, BISYS receives an annual fee accrued daily and paid monthly. Legal Counsel: A partner of the Trust's legal counsel served as Secretary of the Trust. Paul, Weiss, Rifkind, Wharton and Garrison served as the Trust's legal counsel for the six months ended June 30, 2000. Fee Reductions: The Administrator has agreed to limit its Administrative service fees to 0.10% for each Fund for a one year period ending April 30, 2002. The Distributor has agreed to limit its Distribution fee to 0.10% for Class A Shares of the Growth and Income and Fixed Income Fund and 0.20% for Class A Shares of the New York Tax-Free Bond Fund for a one year period ending April 30, 2002. The Funds are waiving Service organization fees for Class A Shares and limiting Class B Shares and Class C Shares to 0.25% for a one year period ending April 30, 2002. 34 HSBC Mutual Funds Trust Notes to Financial Statements (continued) 4.Portfolio Securities Purchases and sales of securities (excluding short-term securities) for the six months ended June 30, 2001, were as follows:
Purchases Sales ----------- ----------- Growth and Income Fund.............................. $23,271,789 $27,695,235 Fixed Income Fund................................... 12,790,155 24,562,499 New York Tax-Free Bond Fund......................... 2,454,687 1,762,665
5.Capital Share Transactions The Funds are authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share. Transactions in capital and shares of beneficial interest by class for the six months ended June 30, 2001, were as follows:
Growth and Income Fund Fixed Income Fund New York Tax-Free Bond Fund -------------------------- -------------------------- --------------------------- For the six For the For the six For the For the six For the months ended year ended months ended year ended months ended year ended June 30, December 31, June 30, December 31, June 30, December 31, 2001 2000 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ------------- ------------- (Unaudited) (Unaudited) (Unaudited) CAPITAL TRANSACTIONS: Class A Shares: Proceeds from shares issued................ $ 4,632,853 $ 7,186,194 $ 3,842,979 $ 4,086,906 $ 1,588,798 $ 599,785 Dividends reinvested... -- 3,192,429 39,385 35,594 283,649 572,789 Cost of shares redeemed.............. (12,000,890) (20,692,430) (17,268,544) (3,468,527) (1,670,122) (4,369,778) ------------ ------------ ------------ ----------- ------------- ------------- Class A Shares capital transactions.......... (7,368,037) (10,313,807) (13,386,180) 653,973 202,325 (3,197,204) ------------ ------------ ------------ ----------- ------------- ------------- Class B Shares(a): Proceeds from shares issued................ 2,419,398 5,214,939 649,671 54,727 1,302,876 627,227 Dividends reinvested... 9 229,641 5,896 -- 16,128 13,757 Cost of shares redeemed.............. (492,809) (780,041) (22,000) -- (244,304) (307,013) ------------ ------------ ------------ ----------- ------------- ------------- Class B Shares capital transactions.......... 1,926,598 4,664,539 633,567 54,727 1,074,700 333,971 ------------ ------------ ------------ ----------- ------------- ------------- Class C Shares(b): Proceeds from shares issued................ 15,549 145,827 537,000 -- 145,434 149,392 Dividends reinvested... -- 5,468 5,944 -- 3,075 975 Cost of shares redeemed.............. (36,811) (46,155) -- -- -- -- ------------ ------------ ------------ ----------- ------------- ------------- Class C capital transactions.......... (21,262) 105,140 542,944 -- 148,509 150,367 ------------ ------------ ------------ ----------- ------------- ------------- Change in net assets from capital transactions........... $ (5,462,701) $ (5,544,128) $(12,209,669) $ 708,700 $ 1,425,534 $ (2,712,866) ============ ============ ============ =========== ============= =============
35 HSBC Mutual Funds Trust Notes to Financial Statements (continued)
Growth and Income Fund Fixed Income Fund New York Tax-Free Bond Fund ------------------------- ------------------------- --------------------------- For the six For the For the six For the For the six For the months ended year ended months ended year ended months ended year ended June 30, December 31, June 30, December 31, June 30, December 31, 2001 2000 2001 2000 2001 2000 ------------ ------------ ------------ ------------ ------------- ------------- (Unaudited) (Unaudited) (Unaudited) SHARE TRANSACTIONS: Class A Shares: Issued................. 378,089 487,954 386,070 424,237 140,088 55,161 Reinvested............. -- 213,384 3,965 3,694 25,024 52,581 Redeemed............... (1,009,246) (1,404,241) (1,756,084) (361,252) (147,063) (402,183) ---------- ---------- ---------- -------- ------------- ------------- Change in Class A Shares................ (631,157) (702,903) (1,366,049) 66,679 18,049 (294,441) ---------- ---------- ---------- -------- ------------- ------------- Class B Shares (a): Issued................. 204,418 354,158 65,220 5,669 114,798 56,992 Reinvested............. 1 15,559 592 -- 1,424 1,260 Redeemed............... (42,412) (53,875) (2,220) -- (21,551) (28,293) ---------- ---------- ---------- -------- ------------- ------------- Change in Class B Shares................ 162,007 315,842 63,592 5,669 94,671 29,959 ---------- ---------- ---------- -------- ------------- ------------- Class C Shares (b): Issued................. 1,255 10,103 53,566 -- 12,836 13,487 Reinvested............. -- 368 596 -- 271 88 Redeemed............... (3,059) (3,089) -- -- -- -- ---------- ---------- ---------- -------- ------------- ------------- Change in Class C Shares................ (1,804) 7,382 54,162 -- 13,107 13,575 ---------- ---------- ---------- -------- ------------- ------------- Change in shares from share transactions........... (470,954) (379,679) (1,248,295) 72,348 125,827 (250,907) ========== ========== ========== ======== ============= =============
- -------- (a) The Fixed Income Fund Class B Shares commenced operations on November 6, 2000. (b) The Fixed Income Fund and the New York Tax-Free Bond Fund Class C Shares commenced operations on January 17, 2001, and September 11, 2000, respectively. 6.Concentration of Credit Risk The New York Tax-Free Bond Fund invests primarily in debt obligations issued by the State of New York and its respective political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to economic and political factors adversely affecting issuers of New York specific municipal securities than is a municipal bond fund that is not concentrated in these issuers to the same extent. 7.Subsequent Event Effective September 28, 2001, Wilmington Trust Company will replace HSBC Asset Management (Americas) Inc. as Investment Adviser. 36 HSBC Mutual Funds Trust - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [LOGO OF HSBC ASSET MANAGEMENT AMERICAS INC.] - -------------------------------------------------------------------------------- Growth and Income Fund Fixed Income Fund New York Tax-Free Bond Fund HSBC SM Mutual Funds Trust 3435 Stelzer Road Columbus, Ohio 43219 Information: (800) 634-2536 Investment Adviser HSBC Asset Management (Americas) Inc. 140 Broadway (6th Floor) New York, New York 10005-1180 Distributor, Administrator, Transfer Agent and Dividend Disbursing Agent BISYS Fund Services 3435 Stelzer Road Columbus, Ohio 43219 Custodian The Bank of New York 90 Washington Street New York, New York 10286 Independent Auditors Ernst & Young LLP 787 Seventh Avenue New York, New York 10019 Legal Counsel Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of Americas New York, New York 10019 This report is for the information of the shareholders of HSBC Mutual Funds Trust. Its use in connection with any offering of the Trust's shares is authorized only in the case of a concurrent or prior delivery of the Trust's current prospectus. Shares of the Funds are not an obligation of or guaranteed or endorsed by HSBC Holdings plc or its affiliates. In addition, such shares are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency and may involve investment risks, including the possible loss of principal. 8/01 Semi-Annual Report June 30, 2001 Managed by: HSBC Asset Management (Americas) Inc. Sponsored and distributed by: BISYS Fund Services -----END PRIVACY-ENHANCED MESSAGE-----