N-30D 1 0001.txt HSBC - GROWTH & INCOME SEMI ANNUAL REPORT HSBC Mutual Funds Trust -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC Asset Management Americas Inc. -------------------------------------------------------------------------------- Growth and Income Fund ------------------------------------------------------------------ Portfolio Review July 18, 2000 Dear Shareholder: The United States equity market, as measured by the Standard & Poor's 500/1/ (the "S&P 500"), declined 0.42% during the first six months of 2000. The modest decline masked some of the most volatile trading seen in several years, as investors became concerned about aggressive Federal Reserve (the "Fed") tightening. The Fed did in fact raise the Federal Funds rate on three separate occasions for a total of 100 basis points during the first half of 2000. After trending lower for most of the first quarter, stocks turned dramatically higher in mid-March and reached new highs before retreating. After reaching an all- time high on March 24, the S&P 500 declined by 12% within three weeks. The NASDAQ Composite Index/2/ (the "NASDAQ"), which declined 2.46% during the six- month period ended June 30, 2000, is a prime example of the volatility experienced by investors. During the first quarter, the NASDAQ suffered through three separate corrections of 10% or more, yet registered a stunning 12.4% gain for the quarter. The NASDAQ reached an all-time high on March 10, then proceeded to decline by 34% in only five weeks. For the one week ended April 14, the index lost a staggering 25.3% and declined every trading day during the week; the first time since September 1994 that the NASDAQ has declined every day during a week. The NASDAQ rebounded in June, advancing 15%, the largest one-month gain ever for the NASDAQ. For the first half of 2000, the S&P 500, Dow Jones Industrial Average/3/ and the NASDAQ all registered six-month declines for the first time since 1994. As of June 30, 57% of the New York Stock Exchange stocks, and 76% of NASDAQ stocks, were down over 20% from their 52-week highs. Outlook Despite the market volatility, inflows into equity mutual funds have been spectacular. During the first quarter, net inflows totaled $133 billion, by far the largest inflows for a single quarter in history. For the first six months of 2000, net inflows were approximately $215 billion, well ahead of the $90 billion during the same period in 1999. ------ /1/The Standard & Poor's 500 Stock Index is an unmanaged index generally representative of the U.S. stock market as a whole. The performance of the Index does not reflect the deduction of expenses associated with a mutual fund, such as investment advisor and fund accounting fees. The Fund's performance reflects the deduction of fees for such value-added services. /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 the National Market System traded foreign common stocks and American Depositary Receipts. /3/The Dow Jones Industrial Average is an unmanaged index of thirty large company stocks that represents the New York Stock Exchange. Investors cannot invest directly in an index, although they can invest in its underlying securities. HSBC Mutual Funds Trust The supply/demand scenario for equities continues to be favorable. The Initial Public Offering (the "IPO") backlog is currently at $24.7 billion, down considerably from $45 billion in late 1999. Weekly IPO pricing of $15 billion occurred in March, but that figure is currently running at only $2 billion. The second half calendar of offerings should be minimal. Merger and acquisition activity appears to have slowed during the first half of 2000, but cash takeovers are on the rise. Stock buybacks continue to surge, driven by strong corporate free cash flow. In the twelve months since the Federal Reserve began tightening, they have raised short-term interest rates by 175 basis points. During the upcoming months, the economic statistics should show whether higher borrowing rates are narrowing the gap between consumption growth and the economy's productive capacity. We have already seen many signs pointing towards slower economic growth ahead. Recent market moves cause us to believe that investors are beginning to discount another successful soft landing for the U.S. economy, similar to 1995. Despite the anticipated slowdown in the U.S. economy, earnings estimates for the S&P 500 are estimated to grow between 14-16% in 2000, and 10-12% in 2001. The first quarter saw S&P 500 earnings rise 29.6% on a market capitalization weighted basis. Estimates for the second quarter call for a rise in earnings of 16-18%. The substantial increase in earnings will significantly lower the P/E multiples of the major indices. Since 1995, there have been almost 200 company changes in the S&P 500, shifting the index towards higher growth, less economically sensitive companies. The S&P 500 now resembles a large-cap, growth-oriented portfolio of companies. We would also note that earnings are beginning to matter to investors again. During 1999, NASDAQ companies with no earnings generated an average stock price gain of 115%, while those companies with profits showed an average price gain of 51%. For the S&P 500, the 11 companies with no earnings showed average price gains of 107%, while the remaining companies with profits posted an average price gain of 24%. This year, companies with estimated losses for 2000 are showing average price declines of approximately 10% in both indices. For companies with profits, the gains are modest, with average price increases of 10% and 1% for the NASDAQ and S&P 500, respectively. Growth and Income Fund Portfolio Summary During the first half of 2000, the Class A Shares of the Growth and Income Fund had a total return of 3.15% (without maximum sales charge)*. This return easily surpassed the negative return of the S&P 500/1/, as well as the Lipper Growth and Income Index/4/ gain of 1.89%. We remain positioned towards large-capitalization, growth-oriented companies. During the dramatic market moves in April, we selectively reduced overweightings in certain technology holdings on a case-by-case basis where our valuation model so indicated. We did not raise significant portions of cash, as the speed and volatility of the correction during the month would have made any such moves emotional by definition. We will continue to maintain our long-term position in high-quality companies with superior earnings prospects. 2 HSBC Mutual Funds Trust Our sector weighting decisions had a neutral effect on relative results. We benefited by being overweight in technology, and underweight in Consumer Cyclicals and Basic Materials. We continued to shift away from Consumer Cyclicals because of our belief that higher rates would lead to slower consumer spending, which accounts for two-thirds of economic activity. Stock selection was very strong across most sectors, particularly Technology, Utilities, Capital Goods, Financials and Healthcare. Stock selection in Consumer Cyclicals and Basic Materials adversely affected relative results. Sincerely, /s/ Fredric P. Lutcher Fredric P. Lutcher, III, CFA Chief Investment Officer, U.S. Equities -------- The performance data quoted represents past performance and is not an indication of future results. The investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. * With the maximum sales charge of 5.00%, the total return was (2.04%). The total return set forth reflects the reduction of a portion of the fund's fees. Without such reduction of fees, the total return for the period would have been lower. /4/The Lipper Growth and Income Fund Index is an index based on the thirty largest growth and income mutual funds (equally weighted) tracked by Lipper Analytical Services Incorporated. Investors cannot invest directly in an index, although they can invest in its underlying securities. Portfolio composition is subject to change. The views expressed in this report reflect those of the portfolio manager through the six months ended June 30, 2000. The manager's views are subject to change at any time based on the market and other conditions. 3 HSBC Mutual Funds Trust Growth and Income Fund Performance (as of June 30, 2000) [GRAPH APPEARS HERE] Growth & Growth & Income Fund Income Fund Lipper Growth Class A Shares Class A Shares Standard & Poor's & Income Fund (without load) (with load) 500 Index(7) Index(8) June 1990 10,000 9,504 10,000 10,000 December 1990 9,485 9,014 9,399 9,300 December 1991 12,513 11,892 12,262 11,881 December 1992 13,482 12,813 13,197 13,026 December 1993 14,995 14,251 14,527 14,930 December 1994 14,550 13,828 14,718 14,868 December 1995 19,368 18,407 20,249 19,498 December 1996 22,836 21,702 24,899 23,529 December 1997 29,097 27,653 33,206 29,853 December 1998 36,943 35,110 42,695 33,907 December 1999 43,770 41,598 51,680 37,928 June 2000 45,149 42,908 51,460 37,599 Average Annual Total Return 1 Year 5 Year 10 Year Class A Shares Offering Price(1) 5.01% 20.12% 15.68% NAV(2) 10.56% 21.36% 16.27% Class B Shares With CDSC(3) 5.57% 21.14% 16.16% Without CDSC(4) 9.55% 21.14% 16.16% Class C Shares With CDSC(5) 8.49% 21.13% 16.15% Without CDSC(6) 9.48% 21.13% 16.15% - - Growth and Income Fund Class A Shares (without load) ------- Growth and Income Fund Class A Shares (with load) _______ Standard & Poor's 500 Index(7) -- - -- Lipper Growth & Income Fund Index(8) The performance data quoted represents past performance and is not an indication of future results. The investment return and net asset 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%. (3) Performance of the Class B Shares, which commenced offering on 7/1/99 is based on the historical performance of the Class A Shares prior to that date which do not reflect the higher distribution fees or the contingent deferred sales charge (CDSC) associated with the Class B Shares. Had the higher distribution fees and the CDSC been incorporated, total return and hypothetical growth figures would have been lower. (4) Excludes contingent deferred sales charge for Class B Shares. (5) Performance of the Class C Shares, which commenced offering on 7/1/99 is based on the historical performance of the Class A Shares prior to that date which do not reflect the higher distribution fees or the contingent deferred sales charge (CDSC) associated with the Class C Shares. Had the higher distribution fees and the CDSC been incorporated, total return and hypothetical growth figures would have been lower. (6) Excludes contingent deferred sales charge for Class C Shares. (7) The Standard & Poor's 500 Index is a widely accepted unmanaged index of overall stock market performance and does not reflect the expenses associated with a mutual fund, such as investment advisory and fund accounting fees. The Fund's performance reflects the deduction of fees for these value added services. (8) The Lipper Growth and Income Fund Index is an index based on the thirty largest growth and income mutual funds (equally weighted) tracked by Lipper Analytical Services Incorporated. The above illustration compares a $10,000 investment in the Growth and Income Fund, Class A shares, on July 1, 1990 to a $10,000 investment in the Standard & Poor's 500 Index and the Lipper Growth and Income Fund Index. All dividends and realized gains are reinvested. The Fund's performance reflects the reduction of a portion of the Fund's fees. Without the reduction of such fees the performance for the period would have been lower. Investors cannot invest directly in an index, although they can invest in its underlying securities. 4 HSBC Mutual Funds Trust HSBC Fixed Income Fund -------------------------------------------------------------------------------- Portfolio Review Dear Shareholder: The primary driving force during the first half of the year was the activity of the Federal Reserve (the "Fed") Open Market Committee (the "FOMC") which on May 16 raised both the Fed Funds and Discount rates by 50 basis points. This marked the first time that the Fed Funds rate had moved by a full 50 basis points at one time since it began its tightening cycle in June 1999, after having moved gradually in 25 basis point increments. The current Fed Funds rate now stands at 6.50%, which represents 175 basis points of cumulative tightening since June 1999. After the Fed's aggressiveness in May, the bond markets reflected on the consequences of the June 28, 2000 Fed meeting. As such the markets were looking for further increases in interest rates but the widespread evidence of a slowdown in economic activity and inflation cooled down the Fed, leaving rates unchanged. The primary drivers behind this cooling off were a benign employment report as well as a fairly tame Producer Price Index and Consumer Price Index reports/1/. The shift in market sentiment during June has been quite noticeable, as the United States (U.S.) Treasury markets have rallied nicely all across the yield curve. Additionally, mortgage rates have fallen from their recent highs and with corporate yields falling as well, we expect to see a large calendar of corporate issuance coming over the next several weeks. Spread product fared well recently as spreads narrowed versus their previous high levels and U.S. Agencies, mortgages and corporate bonds all posted higher returns compared to those of U.S. Treasuries. The Class A Shares of the Fixed Income Fund returned (excluding maximum sales charge)* 1.74% for the second quarter and 3.89% for the six months ended June 30, 2000. This compares favorably to the Lipper Corporate Debt Funds A-Rated Index/2/ which returned 0.86% for the second quarter and 3.01% on a year to date basis. The Lehman Aggregate Bond Index/3/ returned 1.74% for the second quarter and 3.99% for the first six months of 2000. ------- * With the maximum sales charge of 4.75% the total returns were (3.08%) and (1.05%), respectively. The total return set forth reflects the reduction of a portion of the fund's fees. Without such a reduction of fees, the total return for the periods would have been lower. /1/The Producer Price Index and the Consumer Price Index are two measures of the average changes in prices, over time, of two fixed market baskets of goods. /2/The Lipper Corporate Debt Funds A-Rated Index consists of funds that invest at least 65% of its assets in corporate debt issues rated "A" or better or government issues. /3/The Lehman Aggregate Bond Index (the "Index") is composed of the Lehman Government/Corporate Index and the Mortgage-Backed Securities Index and includes Treasury issues, agency issues, corporate bond issues and mortgage- backed securities. The performance of the Index does not reflect the expenses associated with a mutual fund such as investment advisory and fund 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 its underlying securities. 5 HSBC Mutual Funds Trust Our duration bets, which saw the fund short of the Lehman Aggregate Bond Index benchmark, as well as our overweight in corporate bond spread product helped our performance considerably as spreads narrowed in from their historical highs. In particular, our holdings of J.C. Penney, Philip Morris and Lockheed all generated excellent returns. Sincerely, /s/ Edward J. Merkle Edward J. Merkle Managing Director, Fixed Income -------- The performance data quoted represents past performance and is not an indication of future results. The investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Portfolio composition is subject to change. The views expressed in this report reflect those of the portfolio manager for the six months ended June 30, 2000. The manager's views are subject to change at any time based on the market and other conditions. 6 HSBC Mutual Funds Trust Fixed Income Fund Performance (as of June 30, 2000) [GRAPH APPEARS HERE] Fixed Fixed Income Fund Income Fund Lehman Class A Shares Class A Shares Aggregate (without load) (with load) Bond Index(3) January 1993 10,000 9,527 10,000 December 1993 10,859 10,342 10,768 December 1994 10,653 10,146 10,454 December 1995 12,435 11,843 12,386 December 1996 12,698 12,094 12,835 December 1997 13,793 13,136 14,075 December 1998 14,942 14,231 15,297 December 1999 14,664 13,966 15,172 December 2000 15,235 14,509 15,776 Average Annual Total Return Inception 1 Year 5 Year (1/15/93) Class A Shares Offering Price(1) -0.76% 4.26% 5.12% NAV(2) 4.16% 5.28% 5.81% - - Fixed Income Fund Class A Shares (without load) ------- Fixed Income Fund Class A Shares (with load) _______ Lehman Aggregate Bond Index(3) The performance data quoted represents past performance and is not an indication of future results. The investment return and net asset 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%. (3) Lehman Aggregate Bond Index (the "Index") is composed of the Lehman Government/Corporate Index and the Mortgage-Backed Securities Index and includes Treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Index does not reflect the expenses associated with a mutual fund, such as investment advisory and fund accounting fees. The performance of the Fixed Income Fund reflects the deduction of fees for these value added services. The above illustration compares a $10,000 investment in the Fixed Income Fund, Class A shares, on January 15, 1993 (date of inception) to a $10,000 investment in the Lehman Aggregate Bond Index on that date. All dividends and realized gains are reinvested. The Fund's performance reflects the reduction of a portion of the Fund's fees. Without the reduction of such fees the performance for the period would have been lower. Investors cannot invest directly in an index, although they can invest in its underlying securities. 7 HSBC Mutual Funds Trust New York Tax-Free Bond Fund+ -------------------------------------------------------------------------------- Portfolio Review Dear Shareholder: Municipal bonds outperformed taxable bonds on a pretax basis in the first half of 2000. The year to date return of the Lehman Aggregate Bond Index/1/ was 3.99%. By comparison the Lehman Municipal Bond Index/2/ returned 4.48% for the same period. Yields were lower across the treasury yield curve ranging from 16 basis points lower on five year bonds to 58 basis points lower on thirty year bonds while municipal bond yields were lower by just 4-20 basis points across the municipal yield curve. New York outperformed the rest of the municipal market by 16 basis points as reflected by the total return of the Lehman New York State Exempt Index/3/ (the "Lehman Index") which returned 4.64%. For the six months ended June 30, 2000, the Class A Shares of the New York Tax- Free Bond Fund had a total return of 4.13% (excluding maximum sales charge)* versus the 4.31% return of the Lipper New York Municipal Debt Funds/4/. As of June 30, 2000 the fund's duration which takes into account interim principal payments was 6.68 years which approximated about 93% of the duration of the Lehman Index. The average maturity of the fund was 8.52 years. In terms of sector diversification, the largest sectors consisted of general obligations (18.0%), medical revenue (16.5%) and higher education (15.3%). Given our fixed income outlook for additional Fed tightening and higher rates, we anticipate that the municipal market will outperform taxables in line with the propensity of municipals to outperform in a rising yield environment. Supply technicals should continue to be favorable going forward as higher rates and no hard landing in the economy is in our forecast. This outperformance will only be seen in bonds with premium dollar prices. Bonds trading at a discount will experience negative convexity associated with the deminimus rule and subsequently underperform. We expect that the municipal credit curve's flattening will continue over the near term in sympathy with the treasury curve inversion. In contrast, stronger cash flows will probably favor the intermediate and short-term portion of the curve as casualty companies and retail continue to be relatively strong participants. Our duration target positioning of 93% of benchmark target represents a bias toward higher rates. We continue to favor insured credits along the credit curve and underweight A and Baa bonds. We have seen the insured paper and A paper price as tight as 2 basis points. Insured hospitals with a good underlying story can be obtained with a significant yield pick up to many A rated credits in other sectors. Baa paper continues to be only about 15 basis points cheaper than A rated credits. If we were to get involved in Baa credits we would select the 1-5 year portion of the curve as that is where credit spreads to the generic AAA G.O. curve are at their widest as 8 HSBC Mutual Funds Trust compared to the long end of the curve. The short end of lower rated municipals is where one receives the greater relative compensation for extending along the credit curve. Currently, our portfolio does not contain any issues rated below A. The fund began investing in the hospital sector. Over the course of the last five years, we have benefited from a significant underweight in this sector. Nevertheless current spreads between this sector and other similarly rated issuers in different sectors have become quite compelling. We approach this sector looking for credits which in addition to strong operations also have an outlying credit factor which lends support to the credit beyond simply its financial operations. Sincerely, /s/ Jerry Samet Jerry Samet Senior Fixed Income Portfolio Manager -------- The performance data quoted represents past performance and is not an indication of future results. The investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. + A fund's income may be subject to certain state and local taxes and, depending upon your tax status, the federal alternative minimum tax. Regional funds may be subject to additional risks, since the issues they invest in are located in one geographical location. * With the maximum sales charge of 4.75%, the Class A Shares of the Fund had a total return of (0.86%). The total return set forth reflect the reduction of a portion of the Fund's fees. Without such a reduction of fees, the total return for the period would have been lower. /1/The Lehman Aggregate Bond Index is a market value-weighted index that tracks the daily price, coupon, paydowns and total return performance of fixed-rate, publicly placed, dollar denominated and nonconvertible, investment-grade debt issues with at least $100 million par amount outstanding and with at least one year to final maturity. /2/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. /3/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. /4/The Lipper New York Municipal Debt Funds Index consists of funds that invest at least 65% of their assets in municipal debt issues that are exempt from taxation in New York (double tax-exempt) or a city in New York (triple tax-exempt). The performance of the indices (except for the Lipper New York Municipal Debt Funds Index) does not reflect the deduction of expenses associated with a mutual fund such as investment advisory and fund 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 its underlying securities. Portfolio composition is subject to change. The views expressed in this report reflect those of the portfolio manager through the six months ended June 30, 2000. The manager's views are subject to change at any time based on the market and other conditions. 9 HSBC Mutual Funds Trust New York Tax-Free Bond Fund Performance (as of June 30, 2000) [GRAPH APPEARS HERE] New York New York Tax-Free Tax-Free Lehman Bond Fund Bond Fund 7-Year Class A Shares Class A Shares Municipal (without load) (with load) Bond Index(5) June 1990 10,000 9,528 10,000 December 1990 10,398 9,907 10,454 December 1991 11,708 11,155 11,673 December 1992 12,954 12,343 12,613 December 1993 14,802 14,104 13,929 December 1994 13,598 12,956 13,546 December 1995 15,660 14,921 15,459 December 1996 16,286 15,517 16,136 December 1997 17,746 16,908 17,377 December 1998 16,809 17,921 18,459 December 1999 18,137 17,281 18,433 December 2000 18,885 17,994 19,031 Average Annual Total Return 1 Year 5 Year 10 Year Class A Shares Offering Price(1) -2.88% 4.25% 6.05% NAV(2) 1.97% 5.26% 6.56% Class B Shares With CDSC(3) -2.96% 5.05% 6.46% Without CDSC(4) 0.94% 5.05 % 6.46% - - New York Tax-Free Bond Fund Class A Shares (without load) ------- New York Tax-Free Bond Fund Class A Shares (with load) _______ Lehman 7-Year Municipal Bond Index(5) The performance data quoted represents past performance and is not a indication of future results. The investment return and net asset 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%. (3) Performance of the Class B Shares, which commenced offering on 7/1/99 is based on the historical performance of the Class A Shares prior to that date which do not reflect the higher distribution fees or the contingent deferred sales charge (CDSC) associated with the Class B Shares. Had the higher distribution fees and the CDSC been incorporated, total return and hypothetical growth figures would have been lower. (4) Excludes contingent deferred sales charge for Class B Shares. (5) The Lehman 7-Year Municipal Bond Index is a widely accepted unmanaged index of overall municipal bond market performance and does not reflect the expenses associated with a mutual fund, such as investment advisory and fund accounting fees. The Fund's performance reflects the deduction of fees for these value added services. The above illustration compares a $10,000 investment the New York Tax-Free Bond Fund, Class A Shares, on July 1, 1990 to a $10,000 investment in the Lehman 7-Year Municipal Bond Index on that date. All dividends and capital gain distributions are reinvested. The Fund's performance reflects the reduction of a portion of the Fund's fees. Without the reduction of such fees the performance for the period would have been lower. Investors cannot invest directly in an index, although they can invest in its underlying securities. 10 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. JOHN C. MEDITZ President, Horizon Asset Management, Inc. HARALD PAUMGARTEN Managing Director, Heritage Capital Corp. JOHN P. PFANN Former Senior Vice President and Treasurer, ITT ROBERT A. ROBINSON Trustee, Henrietta and B. Frederick H. Bugher Foundation -------------------------------------------------------------------------------- Officers WALTER B. GRIMM President ANTHONY J. FISCHER Vice President CHARLES L. BOOTH Vice President MARK L. SUTER Vice President NADEEM YOUSAF Treasurer STEVEN R. HOWARD Secretary ALAINA V. METZ Assistant Secretary ROBERT L. TUCH Assistant Secretary 11 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) GROWTH AND INCOME FUND
Shares Security Description Value ------ -------------------- ------------ COMMON STOCKS (98.3%) Automotive (0.8%) 21,100 Ford Motor Co............................................ $ 907,300 2,763 Visteon Corp.(b)......................................... 33,498 ------------ 940,798 ------------ Banking (4.3%) 27,200 Bank of New York Co., Inc................................ 1,264,800 39,750 Chase Manhattan Corp..................................... 1,830,984 50,300 Wells Fargo & Co......................................... 1,949,125 ------------ 5,044,909 ------------ Beverages (2.3%) 29,400 Coca-Cola Co............................................. 1,688,662 23,000 PepsiCo, Inc............................................. 1,022,063 ------------ 2,710,725 ------------ Broadcasting/Cable (2.0%) 15,500 AMFM Inc.(b)............................................. 1,069,500 18,600 Comcast Corp.(b)......................................... 753,300 8,200 MediaOne Group, Inc.(b).................................. 543,773 ------------ 2,366,573 ------------ Chemicals (0.9%) 20,300 Union Carbide Corp....................................... 1,004,850 ------------ Computer Software (8.8%) 21,200 Automatic Data Processing, Inc........................... 1,135,525 61,000 Microsoft Corp.(b)....................................... 4,880,000 41,200 Oracle Corp.(b).......................................... 3,463,375 6,500 Veritas Software Corp.(b)................................ 734,602 ------------ 10,213,502 ------------ Computers & Peripherals (19.5) 8,800 Applied Materials, Inc.(b)............................... 797,500 69,400 Cisco Systems, Inc.(b)................................... 4,411,237 51,400 Dell Computer Corp.(b)................................... 2,534,663 45,400 EMC Corp.(b)............................................. 3,492,962 10,900 Hewlett-Packard Co....................................... 1,361,138 34,900 Intel Corp............................................... 4,665,693
12 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) GROWTH AND INCOME FUND
Shares Security Description Value ------ -------------------- ------------ COMMON STOCKS (continued) Computers & Peripherals (continued) 16,700 International Business Machines Corp..................... $ 1,829,694 11,000 LSI Logic Corp.(b)....................................... 595,375 21,100 Sun Microsystems, Inc.(b)................................ 1,918,781 15,600 Texas Instruments, Inc................................... 1,071,525 ------------ 22,678,568 ------------ Consumer Goods & Services (1.6%) 49,900 Philip Morris Cos., Inc.................................. 1,325,468 9,700 Sealed Air Corp.(b)...................................... 508,038 ------------ 1,833,506 ------------ Diversified (6.6%) 91,800 General Electric Co...................................... 4,865,400 58,500 Tyco International Ltd................................... 2,771,438 ------------ 7,636,838 ------------ Electric (0.5%) 15,500 Peco Energy Co........................................... 624,844 ------------ Entertainment (0.6%) 19,000 Walt Disney Co........................................... 737,438 ------------ Financial Services (6.2%) 15,000 American Express Co...................................... 781,875 54,000 Citigroup, Inc........................................... 3,253,500 38,600 MBNA Corp................................................ 1,047,025 25,000 Morgan Stanley Dean Witter & Co.......................... 2,081,250 ------------ 7,163,650 ------------ Health Care (2.5%) 19,100 Johnson & Johnson........................................ 1,945,812 18,300 Medtronic, Inc........................................... 911,569 ------------ 2,857,381 ------------ Industrial Goods & Services (2.6%) 30,900 American Power Conversion Corp.(b)....................... 1,261,106 19,200 Calpine Corp.(b)......................................... 1,262,400 7,700 Eaton Corp............................................... 515,900 ------------ 3,039,406 ------------
13 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) GROWTH AND INCOME FUND
Shares Security Description Value ------ -------------------- ------------ COMMON STOCKS (continued) Insurance (2.9%) 19,200 American International Group, Inc........................ $ 2,256,000 33,000 AXA Financial, Inc....................................... 1,122,000 ------------ 3,378,000 ------------ Internet Software (1.1%) 24,100 America Online, Inc.(b).................................. 1,271,275 ------------ Multimedia (2.4%) 13,400 Time Warner, Inc......................................... 1,018,400 26,000 Viacom, Inc.(b).......................................... 1,772,875 ------------ 2,791,275 ------------ Oil & Gas Exploration, Production, and Services (5.9%) 16,800 Enron Corp............................................... 1,083,600 43,500 Exxon Mobil Corp......................................... 3,414,749 18,600 Royal Dutch Petroleum Co................................. 1,145,063 7,700 Schlumberger Ltd......................................... 574,613 10,800 Transocean Sedco Forex, Inc.............................. 577,125 ------------ 6,795,150 ------------ Paper Products (0.6%) 22,000 International Paper Co................................... 655,875 ------------ Pharmaceuticals (9.1%) 20,900 American Home Products Corp.............................. 1,227,875 27,200 Cardinal Health, Inc.*................................... 2,012,800 18,600 Eli Lilly & Co.*......................................... 1,857,675 34,900 Merck & Co., Inc......................................... 2,674,213 56,975 Pfizer, Inc.............................................. 2,734,800 ------------ 10,507,363 ------------ Retail Stores (5.7%) 19,600 Circuit City Stores, Inc................................. 650,475 32,600 CVS Corp................................................. 1,304,000 36,200 Home Depot, Inc.......................................... 1,807,738 50,100 Wal-Mart Stores, Inc..................................... 2,887,012 ------------ 6,649,225 ------------
14 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) GROWTH AND INCOME FUND
Shares Security Description Value --------- -------------------- ------------ COMMON STOCKS (continued) Telecommunications (11.4%) 46,300 AT&T Corp............................................ $ 1,464,238 31,300 GTE Corp............................................. 1,948,425 5,400 JDS Uniphase Corp.(b)................................ 647,325 25,700 Lucent Technologies, Inc............................. 1,522,725 46,100 MCI Worldcom, Inc.(b)................................ 2,114,837 26,700 Motorola, Inc........................................ 775,969 15,400 Nextel Communications, Inc.(b)....................... 942,288 29,600 Nortel Networks Corp................................. 2,020,199 10,800 Sprint Corp.......................................... 550,800 14,100 US West, Inc......................................... 1,209,075 ------------ 13,195,881 ------------ Total Common Stocks (Cost - $78,948,118)..................... 114,097,032 ------------ INVESTMENT COMPANIES (1.7%) 2,001,000 Provident Institutional Temporary Investment Fund.... 2,001,000 ------------ Total Investment Companies (Cost - $2,001,000)............... 2,001,000 ------------ Total Investments (Cost - $80,949,118) (a)--100.0%........... 116,098,032 Liabilities in excess of other assets--0.0%.................. (21,643) ------------ NET ASSETS--100.0%........................................... $116,076,389 ============
-------- (a) Represents cost for financial reporting purposes and differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation....................................... $38,639,808 Unrealized depreciation....................................... (3,490,894) ----------- Net unrealized appreciation................................... $35,148,914 ===========
(b) Represents a non-income producing security. * A portion of the security is segregated for call options written. Schedule of Written Call Options:
Growth and Income Fund ------------------ Contracts Value --------- -------- Options outstanding at the end of period consist of: Cardinal Health, Inc., $65, 9/18/00 ........................ 110 $127,875 Eli Lilly & Co., $105, 7/24/00.............................. 50 8,438 --- -------- Total (premiums received $102,642).......................... 160 $136,313 === ========
See Notes to Financial Statements. 15 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) FIXED INCOME FUND
Maturity Principal Market Rate Date Amount Value ---- -------- ---------- ----------- CORPORATE BONDS (39.7%) Aerospace & Defense (5.8%) Lockheed Martin Corp................... 8.20% 12/1/09 $2,500,000 $ 2,523,760 ----------- Banking (5.8%) BankAmerica Corp....................... 7.88 12/1/02 2,500,000 2,523,355 ----------- Consumer Goods & Services (3.1%) Philip Morris Cos., Inc................ 8.25 10/15/03 1,363,000 1,360,026 ----------- Electric Utility (10.0%) American Electric Power, Inc........... 7.25 10/1/02 2,500,000 2,480,813 Commonwealth Edison.................... 6.95 7/15/18 2,000,000 1,803,204 ----------- 4,284,017 ----------- Financial Services (6.2%) Associates Corp., NA................... 5.75 11/1/03 1,500,000 1,417,219 Chase Manhattan Grantor Trust, Series 1996-A, Class A, ABS.................. 5.20 2/15/02 72,945 72,681 Ford Credit Auto Owner Trust, 1998-C, Class A-4............................. 5.81 3/15/02 186,616 185,824 Travelers Property Casualty Corp....... 7.75 4/15/26 1,000,000 967,848 ----------- 2,643,572 ----------- Retail (4.6%) Penney (JC) Co., Inc., Callable 7/15/00 @ 100................................. 9.45 7/15/02 2,000,000 2,000,976 ----------- Telecommunications (4.2%) MCI Worldcom, Inc...................... 6.50 4/15/10 2,000,000 1,817,274 ----------- Total Corporate Bonds (Cost - $17,822,222)...................... 17,152,980 ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (38.9%) Federal National Mortgage Association (16.2%) Medium Term Note, Callable 7/24/00 @100.................................. 6.34 3/8/04 1,000,000 971,592 Pool #250414........................... 7.00 12/1/25 2,482,394 2,396,493 Pool #310001........................... 6.00 9/1/00 338,466 335,822 Pool #343195........................... 7.50 5/1/26 1,212,261 1,195,581 Pool #343812........................... 7.50 5/1/26 160,102 157,899 Series 1993-104, Class C, REMIC........ 6.50 3/25/21 2,000,000 1,933,836 ----------- 6,991,223 -----------
16 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) FIXED INCOME FUND
Maturity Principal Market Rate Date Amount Value -------------------------- ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS (continued) Federal Home Loan Mortgage Corporation (18.4%) Medium Term Note, Callable 7/24/00 @ 100.................................... 8.00% 10/27/09 $2,500,000 $ 2,472,933 Pool #220019............................ 7.75 1/1/02 9,246 9,301 Pool #C00922............................ 8.00 2/1/30 3,916,021 3,939,844 Pool #D62926............................ 6.50 8/1/25 1,627,510 1,535,809 ----------- 7,957,887 ----------- Government National Mortgage Association (4.3%) Pool # 356578........................... 7.50 6/15/23 1,882,173 1,877,805 ----------- Total U.S. Government Agency Obligations (Cost - $16,793,243)..... 16,826,915 ----------- U.S. TREASURY OBLIGATIONS (9.5%) U.S. Treasury Bonds (0.6%) U.S. Treasury Bonds..................... 8.75 8/15/20 200,000 256,563 ----------- U.S. Treasury Notes (8.9%) U.S. Treasury Notes..................... 7.50 2/15/05 3,200,000 3,355,999 U.S. Treasury Notes..................... 6.63 5/15/07 500,000 510,313 ----------- 3,866,312 ----------- Total U.S. Treasury Obligations (Cost - $4,056,950)............... 4,122,875 ----------- MUNICIPAL OBLIGATIONS (4.5%) Oakland, California Pension Obligation, Sub-Series A (MBIA Insured)............ 6.91 12/15/07 2,000,000 1,931,800 ----------- Total Municipal Obligations (Cost - $2,000,000)................... 1,931,800 -----------
17 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) FIXED INCOME FUND
Market Shares Value ---------- ----------- INVESTMENT COMPANIES (6.9%) Provident Federal Fund................................. 886,000 $ 886,000 Provident Institutional Temporary Investment Fund...... 2,096,000 2,096,000 ----------- Total Investment Companies (Cost - $2,982,000).................... 2,982,000 ----------- Total Investments (Cost - $43,654,415) (a)--99.5%................. 43,016,570 Other assets in excess of liabilities--0.5%....................... 236,838 ----------- NET ASSETS--100.0%................................................ $43,253,408 ===========
-------- (a) Represents cost for financial reporting purposes and differs from value by net unrealized depreciation of securities as follows: Unrealized appreciation........................................ $ 322,993 Unrealized depreciation........................................ (960,838) --------- Net unrealized depreciation.................................... $(637,845) =========
ABS - Automated Bond System MBIA - Municipal Bond Insurance Association NA - National Association (National Bank) REMIC - Real Estate Mortgage Investment Conduit See Notes to Financial Statements. 18 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) NEW YORK TAX-FREE BOND FUND
Moody's/S&P Principal Ratings Security Description Amount Value ----------- -------------------- ---------- ----------- MUNICIPAL BONDS (96.6%) New York (96.6%) Aaa, AAA Albany County, New York Airport Authority, Airport Revenue, AMT (FSA Insured), 5.50%, 12/15/19, Callable 12/15/07 @ 102.......................... $ 750,000 $ 721,875 Aaa, AAA Bethlehem, New York Central School District, GO, (AMBAC Insured), 7.10%, 11/1/07................................. 200,000 225,250 Aaa, AAA Metropolitan Transportation Authority, New York Transportation Facilities Revenue, Series A (MBIA Insured), 5.63%, 7/1/25, Callable 7/1/07 @ 101.5......... 1,200,000 1,176,000 Aa2, AA Monroe County, New York, Series B, GO, 7.00%, 6/1/04, Callable 12/1/00 @ 101... 10,000 10,198 A3, A- New York City, Series A, GO, 7.75%, 8/15/04, Callable 8/15/01 @ 101.5....... 10,000 10,488 N/R, A- New York City, Series A, GO, 7.75%, 8/15/04, Prerefunded 8/15/01 @ 101.5.... 590,000 618,763 AAA, A- New York City, Series A, GO, 7.75%, 8/15/04, Prerefunded 8/15/01 @ 101.5.... 305,000 320,250 A3, A- New York City, Series A, GO, 7.75%, 8/15/07, Callable 8/15/01 @ 101.5....... 70,000 73,413 A3, A- New York City, Series B, GO, 7.50%, 2/1/07, Callable 2/1/02 @ 101.5......... 1,000,000 1,053,750 A3, A- New York City, Series E, GO, 6.50%, 2/15/06................................. 1,200,000 1,287,000 A3, A- New York City, Series F, GO, 8.40%, 11/15/05, Callable 11/15/01 @ 101.5..... 45,000 47,925 AAA, AAA New York City, Series F, GO, 8.40%, 11/15/05, Prerefunded 11/15/01 @ 101.5.. 105,000 111,825 A3, A- New York City, Series G, GO, 6.75%, 2/1/09.................................. 1,000,000 1,108,750 Aa3, AA New York City, Transitional Finance Authority Revenue, Series B, FTS, 4.75%, 11/1/23, Callable 5/1/09 @ 101.......... 1,500,000 1,276,875 Aaa, AAA New York City, Trust For Cultural Resources Revenue, Museum of Modern Art (AMBAC Insured), 6.40%, 1/1/04, Prerefunded 1/1/02 @ 102................ 350,000 365,750 Aaa New York State, Dormitory Authority Revenue, Series A-55 (MBIA Insured), 4.85%, 2/15/07*......................... 1,300,000 1,300,000 Aaa, AAA New York State, Dormitory Authority Revenue, City University System Revenue, Series A (FGIC-TCRS Insured), 5.75%, 7/1/18.................................. 2,370,000 2,444,062
19 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) NEW YORK TAX-FREE BOND FUND
Moody's/S&P Principal Ratings Security Description Amount Value ----------- -------------------- ---------- ----------- MUNICIPAL BONDS (continued) New York (continued) Aaa, AAA New York State, Dormitory Authority Revenues, Mental Health Services Facilities Revenue, Series G, 4.50%, 8/15/18, Callable 8/15/08 @ 101.......... $1,650,000 $ 1,396,313 Aaa, AAA New York State, Dormitory Authority Revenues, State University Education Facilities Revenue, Series A (MBIA Insured), 5.88%, 5/15/11................. 1,500,000 1,599,375 Aaa, AAA New York State, Dormitory Authority, Lease Revenue, Municipal Health Facilities Improvement Programs, Series 1, 4.75%, 1/15/29, Callable 1/15/09 @ 101.......... 1,000,000 826,250 Aaa, AA+ New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series A, 7.00%, 6/15/12, Callable 6/15/01 @ 102................... 150,000 156,333 Aaa, AA+ New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series A, 7.00%, 6/15/12, Prerefunded 6/15/01 @ 102................ 150,000 156,603 Aa1, AA- New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series B, 7.50%, 3/15/11, Callable 8/21/00 @ 101................... 250,000 252,023 Aa2, A+ New York State, Environmental Facilities Corporation, Pollution Control Revenue, State Water, Series C, 7.20%, 3/15/11, Callable 8/21/00 @ 102................... 200,000 203,750 Aa1, AA New York State, Housing Finance Agency Revenue, Multifamily Mortgage Housing Revenue, Series A (FHA Insured), 7.00%, 8/15/22, Callable 8/15/02 @ 102.......... 900,000 942,750 Aa1, N/R 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 2,020,368 Aaa, AAA New York State, Medical Care Facilities Finance Agency Revenue, Series A (FSA Insured), 7.70%, 2/15/18, Callable 8/21/00 @ 100............................ 80,000 80,160 Aaa, AAA New York State, Urban Development Corporation, Senior Lien, Corporate Purpose, 5.50%, 7/1/16, Callable 7/1/06 @ 102...................................... 2,000,000 1,997,500 Aaa, AAA Niagara, New York Frontier Authority, Airport Revenue, Series A, AMT (AMBAC Insured), 6.13%, 4/1/14, Callable 4/1/04 @ 102.................................... 2,400,000 2,480,999 N/A/A-1+ Suffolk County, New York Industrial Development Agency Research Facilities Revenue, 4.55%, 7/1/23*.................. 400,000 400,000
20 HSBC Mutual Funds Trust Schedule of Portfolio Investments as of June 30, 2000 (Unaudited) (continued) NEW YORK TAX-FREE BOND FUND
Principal Moody's/S&P Amount Ratings Security Description or Shares Value ----------- -------------------- ---------- ----------- MUNICIPAL BONDS (continued) New York (continued) Aa3, A TSASC, Inc., New York, Revenue, 6.38%, 7/15/39, Callable 7/15/09 @101.......... $1,000,000 $ 1,012,500 ----------- 25,677,098 ----------- Total Municipal Bonds (Cost - $25,504,462)........... 25,677,098 ----------- INVESTMENT COMPANIES (1.9%) Dreyfus New York Tax Free................ 229,000 229,000 New York Money Fund...................... 284,000 284,000 ----------- Total Investment Companies (Cost - $513,000)......... 513,000 ----------- Total Investments (Cost - $26,017,462) (a)--98.5%.... 26,190,098 Other assets in excess of liabilities--1.5%.......... 395,712 ----------- NET ASSETS--100.0%................................... $26,585,810 ===========
-------- (a) Represents cost for financial reporting purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation......................................... $ 675,197 Unrealized depreciation......................................... (502,561) --------- Net unrealized appreciation..................................... $ 172,636 =========
* Variable rate security. Rate represents rate in effect at June 30, 2000. Date presented represents the next rate change date. AMBAC - American Municipal Bond Assurance Corp. AMT - Alternative Minimum Taxable Paper FGIC - Financial Guaranty Insurance Corp. FHA - Federal Housing Administration FSA - Financial Security Assurance, Inc. FTS - Future Tax Secured GO - General Obligation MBIA - Municipal Bond Assurance Association SONYMA - State of New York Mortgage Agency TCRS - Transferable Custody Receipts See Notes to Financial Statements. 21 HSBC Mutual Funds Trust Statements of Assets and Liabilities June 30, 2000 (Unaudited)
Growth Fixed New York and Income Tax-Free Income Fund Fund Bond Fund ------------ ----------- ----------- Assets: Investments, at value (cost $80,982,789, $43,654,415, $26,017,462, respectively)............ $116,098,032 $43,016,570 $26,190,098 Cash................................... 215 2,606 882 Interest receivable.................... -- 455,252 518,655 Dividends receivable................... 91,663 40,837 4,988 Receivable for capital shares issued... 65,612 25 -- Receivable from investment securities sold.................................. 20,475 16 -- Prepaid expenses....................... 12,149 4,820 3,024 ------------ ----------- ----------- Total Assets............................ 116,288,146 43,520,126 26,717,647 ------------ ----------- ----------- Liabilities: Dividends payable...................... -- 230,831 98,479 Payable for capital shares redeemed.... 3,387 -- -- Option contracts written, at market value (Premiums received $102,642, $0, $0, respectively)..................... 136,313 -- -- Accrued expenses and other liabilities: Investment advisory................... 51,843 19,431 10,095 Administration........................ 9,426 3,533 2,243 Service organization.................. 1,251 -- 96 Distribution.......................... 4,306 133 3,916 Other................................. 5,231 12,790 17,008 ------------ ----------- ----------- Total Liabilities....................... 211,757 266,718 131,837 ------------ ----------- ----------- Net Assets.............................. $116,076,389 $43,253,408 $26,585,810 ============ =========== =========== Composition of Net Assets: Capital................................ $ 73,780,593 $46,153,829 $26,972,339 Accumulated net investment income (distributions in excess)............. (56,973) 53,100 (18,944) Accumulated net realized gain/(loss) from investment and options transactions.......................... 7,237,526 (2,315,676) (540,221) Unrealized appreciation (depreciation) from investments and options.......... 35,115,243 (637,845) 172,636 ------------ ----------- ----------- Net Assets.............................. $116,076,389 $43,253,408 $26,585,810 ============ =========== =========== Class A Shares: Net assets............................ $109,570,286 $43,253,408 $26,113,897 Shares outstanding.................... 7,119,861 4,474,395 2,391,956 ------------ ----------- ----------- Net Asset Value and Redemption Price per share............................ $15.39 $9.67 $10.92 ============ =========== =========== Maximum sales charge.................. 5.00% 4.75% 4.75% Maximum Offering Price per share (Net Asset Value/(100%--Maximum sales charge))............................. $16.20 $10.15 $11.46 ============ =========== =========== Class B Shares: Net assets............................ $ 6,338,222 $ 471,913 Shares outstanding................... 415,474 43,232 ------------ ----------- Net Asset Value, Offering Price and Redemption Price per share*.......... $15.26 $10.92 ============ =========== Class C Shares: Net assets............................ $ 167,881 Shares outstanding................... 11,006 ------------ Net Asset Value, Offering Price and Redemption Price per share*.......... $15.25 ============
-------- *Redemption Price per share varies by the length of time that shares are held. See Notes to Financial Statements. 22 HSBC Mutual Funds Trust Statements of Operations For the six months ended June 30, 2000 (Unaudited)
Growth Fixed New York and Income Tax-Free Income Fund Fund Bond Fund ----------- ---------- ---------- Investment Income: Interest.................................. $ -- $1,512,775 $ 804,868 Dividends................................. 478,197 54,602 7,138 ---------- ---------- ---------- Total Investment Income.................... 478,197 1,567,377 812,006 ---------- ---------- ---------- Expenses: Investment advisory....................... 318,288 117,044 61,808 Administration............................ 86,807 31,921 20,603 Service Organization: Class B Shares........................... 11,840 -- 881 Class C Shares........................... 270 -- -- Distribution: Class A Shares........................... 1,880 175 22,792 Class B Shares........................... 17,760 -- 1,321 Class C Shares........................... 405 -- -- Custodian................................. 9,366 4,150 3,307 Legal..................................... 31,681 12,177 7,816 Transfer agent............................ 46,405 11,078 44,167 Other..................................... 57,163 28,026 23,717 ---------- ---------- ---------- Total expenses before contractual fee reductions.............................. 581,865 204,571 186,412 Contractual fee reductions............... (34,990) (10,640) (7,308) ---------- ---------- ---------- Net expenses............................... 546,875 193,931 179,104 ---------- ---------- ---------- Net Investment Income (Loss)............... (68,678) 1,373,446 632,902 ---------- ---------- ---------- Net Realized/Unrealized Gains (Losses) from Investments: Net realized gains/(losses) from investment transactions.................. 3,894,750 (138,154) 76,849 Net realized gains from options transactions............................. 70,830 -- -- Change in unrealized appreciation/depreciation from investment and options transactions................. (446,205) 375,749 407,634 ---------- ---------- ---------- Net realized/unrealized gains from investments and options.................. 3,519,375 237,595 484,483 ---------- ---------- ---------- Change in net assets resulting from operations................................ $3,450,697 $1,611,041 $1,117,385 ========== ========== ==========
See Notes to Financial Statements. 23 HSBC Mutual Funds Trust Statements of Changes in Net Assets
Growth and Income Fund ---------------------------------- For the For the six months ended year ended June 30, 2000 December 31, 1999 ---------------- ----------------- (Unaudited) Investment Activities: Operations: Net investment income (loss)............... $ (68,678) $ 149,623 Net realized gains (losses) from investment and options transactions.................. 3,965,580 12,129,768 Change in unrealized appreciation (depreciation) from investments........... (446,205) 7,082,383 ------------ ------------ Change in net assets resulting from operations................................ 3,450,697 19,361,774 ------------ ------------ Dividends: From net investment income: Class A Shares............................ -- (137,848) Class B Shares*........................... -- (64) Class C Shares*........................... -- (6) From net realized gains from investment and options transactions: Class A Shares............................ -- (10,530,718) Class B Shares*........................... -- (250,808) Class C Shares*........................... -- (2,072) ------------ ------------ Change in net assets from shareholder dividends................................. -- (10,921,516) ------------ ------------ Change in net assets from capital share transactions.............................. (8,398,158) 6,316,652 ------------ ------------ Change in net assets....................... (4,947,461) 14,756,910 ------------ ------------ Net Assets: Beginning of period........................ 121,023,850 106,266,940 ------------ ------------ End of period.............................. $116,076,389 $121,023,850 ============ ============
-------- *Class B Shares and Class C Shares commenced operations on July 1, 1999. See Notes to Financial Statements. 24 HSBC Mutual Funds Trust Statements of Changes in Net Assets
Fixed Income Fund New York Tax-Free Bond Fund ---------------------------------- ---------------------------------- For the For the For the For the six months ended year ended six months ended year ended June 30, 2000 December 31, 1999 June 30, 2000 December 31, 1999 ---------------- ----------------- ---------------- ----------------- (Unaudited) (Unaudited) Investment Activities: Operations: Net investment income (loss)................ $ 1,373,446 $ 2,638,570 $ 632,902 $ 1,414,437 Net realized gains (losses) from investment and options transactions.......... (138,154) (405,827) 76,849 (125,254) Change in unrealized appreciation (depreciation) from investments........... 375,749 (3,184,724) 407,634 (2,457,036) ----------- ------------ ----------- ----------- Change in net assets resulting from operations............ 1,611,041 (951,981) 1,117,385 (1,167,853) ----------- ------------ ----------- ----------- Dividends: From net investment income: Class A Shares........ (1,373,446) (2,649,910) (626,358) (1,410,156) Class B Shares*....... -- -- (6,544) (4,281) In excess of net investment income: Class A Shares........ -- -- -- (18,944) ----------- ------------ ----------- ----------- Change in net assets from shareholder dividends............. (1,373,446) (2,649,910) (632,902) (1,433,381) ----------- ------------ ----------- ----------- Change in net assets from capital share transactions.......... 663,285 (7,879,139) (2,365,776) (2,599,702) ----------- ------------ ----------- ----------- Change in net assets... 900,880 (11,481,030) (1,881,293) (5,200,936) ----------- ------------ ----------- ----------- Net Assets: Beginning of period.... 42,352,528 53,833,558 28,467,103 33,668,039 ----------- ------------ ----------- ----------- End of period.......... $43,253,408 $ 42,352,528 $26,585,810 $28,467,103 =========== ============ =========== ===========
-------- *Class B Shares and Class C Shares commenced operations on July 1, 1999. See Notes to Financial Statements. 25 HSBC Mutual Funds Trust Notes to Financial Statements June 30, 2000 (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 authorized to issue three classes of shares as follows: Class A Shares, Class B Shares, and Class C Shares. At June 30, 2000, the Fixed Income Fund had not issued Class B Shares or Class C Shares and the New York Tax-Free Bond Fund had not issued Class C Shares. Each class has identical rights and privileges except with respect to the service organization and distribution 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. Securities Valuation: The value of each equity security is based either on the last sale price on a national securities exchange, or in the absence of recorded sales, at the closing bid prices on such exchanges, or at the quoted bid price in the over-the-counter market. Securities or other assets for which market quotations are not readily available are valued at fair value as determined by the Funds' Board of Trustees. 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 Funds' 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, discount or premium, if any, is accreted or amortized, 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 26 HSBC Mutual Funds Trust Notes to Financial Statements (continued) 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 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. 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 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. The following is a summary of written call option activity for the six months ended June 30, 2000, by the Growth and Income Fund:
Call Options ------------------- Number of Contracts Premiums --------- -------- Balance at beginning of year............................ 50 $ 26,724 Options written......................................... 1,396 591,580 Options closed.......................................... (1,286) (515,662) ------ --------- Options outstanding at end of period.................... 160 $ 102,642 ====== =========
27 HSBC Mutual Funds Trust Notes to Financial Statements (continued) 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. Federal Income Taxes 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 all three Funds, if any, are distributed at least annually. Additional dividends are also made to the Funds' 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. 3.Related Party Transactions: Investment Adviser: The Trust retains HSBC Asset Management Americas Inc. to act as Investment Adviser (the "Investment Adviser") for the Fund. The Investment Adviser is the North American investment management affiliate of HSBC Holdings plc (Hong Kong and Shanghai Banking Corporation). As compensation for its services, the Investment Adviser is entitled to a fee accrued daily, and paid monthly, at the following annual rates:
Investment Advisory Fee Rate ------------------------ Growth and Fixed Income Based on Each Fund's Average Daily Net Assets Income 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%
28 HSBC Mutual Funds Trust Notes to Financial Statements (continued)
Investment Advisory Fee Rate ----------------- 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 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 a fee accrued daily, and paid monthly, at the following 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. With respect to the Class A Shares, Class B Shares and Class C Shares 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 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, 2000, the total commission the Distributor received, retained, and re-allowed to affiliated broker/dealers of the Funds are as follow:
Commissions Commissions Reallowed to Total Retained by Affiliated Commissions the Distributor Broker/Dealer ----------- --------------- ------------- Growth and Income Fund............ $19,477 $139 $19,338 Fixed Income Fund................. 2 -- 2 New York Tax-Free Bond Fund....... 8,147 -- 8,147 ------- ---- ------- $27,626 $139 $27,487 ======= ==== =======
29 HSBC Mutual Funds Trust Notes to Financial Statements (continued) 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, 2000, the Class A Shares did not participate in any service agreement. Fund Accountant, Transfer Agent, and Custodian: BISYS provides fund accounting and transfer agent services for the Funds. In addition, Bank of New York serves as custodian for the Funds. For these services to the Funds, BISYS and Bank of New York receive 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: Information regarding these transactions is as follows for the six months ended June 30, 2000:
Service Organization Administration Fees Fees Contractually Contractually Reduced Reduced --------------------- -------------------- Growth and Income Fund........... $28,935 $6,055 Fixed Income Fund................ 10,640 -- New York Tax-Free Bond Fund...... 6,867 441
4.Portfolio Securities: Purchases and sales of securities (excluding short-term securities) for the six months ended June 30, 2000, were as follows:
Purchases Sales ----------- ----------- Growth and Income Fund.............................. $38,062,751 $38,206,070 Fixed Income Fund................................... 13,934,557 13,470,067 New York Tax-Free Bond Fund......................... 1,329,008 5,303,304
30 HSBC Mutual Funds Trust Notes to Financial Statements (continued) 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, 2000, were as follows:
New York Tax-Free Growth and Income Fund Fixed Income Fund Bond Fund -------------------------- ------------------------- ------------------------- For the For the For the Six Months For the Six Months For the Six Months For the Ended Year Ended Ended Year Ended Ended Year Ended June 30, December 31, June 30, December 31, June 30, December 31, 2000 1999 2000 1999 2000 1999 ------------ ------------ ----------- ------------ ----------- ------------ (Unaudited) (Unaudited) (Unaudited) CAPITAL TRANSACTIONS: Class A Shares: Proceeds from shares issued................. $ 3,746,467 $ 9,955,766 $ 2,234,280 $ 6,778,445 $ 438,242 $ 1,276,057 Dividends reinvested... -- 9,322,388 15,176 45,015 271,896 861,424 Cost of shares redeemed............... (14,991,387) (16,362,843) (1,586,171) (14,702,599) (3,148,624) (5,139,821) ------------ ------------ ----------- ------------ ----------- ----------- Class A Shares capital transactions........... (11,244,920) 2,915,311 663,285 (7,879,139) (2,438,486) (3,002,340) ------------ ------------ ----------- ------------ ----------- ----------- Class B Shares: Proceeds from shares issued................. 2,877,275 3,150,439 -- -- 243,704 403,571 Dividends reinvested... -- 250,838 -- -- 4,992 4,022 Cost of shares redeemed............... (166,794) (24,436) -- -- (175,986) (4,955) ------------ ------------ ----------- ------------ ----------- ----------- Class B Shares capital transactions........... 2,710,481 3,376,841 -- -- 72,710 402,638 ------------ ------------ ----------- ------------ ----------- ----------- Class C Shares: Proceeds from shares issued................. 141,327 22,455 -- -- -- -- Dividends reinvested... -- 2,045 -- -- -- -- Cost of shares redeemed............... (5,046) -- -- -- -- -- ------------ ------------ ----------- ------------ ----------- ----------- Class C Shares capital transactions........... 136,281 24,500 -- -- -- -- ------------ ------------ ----------- ------------ ----------- ----------- Change in net assets from capital transactions........... $ (8,398,158) $ 6,316,652 $ 663,285 $ (7,879,139) $(2,365,776) $(2,599,702) ============ ============ =========== ============ =========== =========== SHARE TRANSACTIONS: Class A Shares: Issued................. 251,877 684,171 232,806 685,707 40,596 111,664 Reinvested............. -- 646,833 1,583 4,510 25,284 76,461 Redeemed............... (1,011,975) (1,115,495) (165,199) (1,476,476) (291,525) (461,798) ------------ ------------ ----------- ------------ ----------- ----------- Change in Class A Shares................. (760,098) 215,509 69,190 (786,259) (225,645) (273,673) ------------ ------------ ----------- ------------ ----------- ----------- Class B Shares: Issued................. 194,301 216,842 -- -- 22,651 36,607 Reinvested............. -- 17,554 -- -- 464 372 Redeemed............... (11,511) (1,712) -- -- (16,404) (458) ------------ ------------ ----------- ------------ ----------- ----------- Change in Class B Shares................. 182,790 232,684 -- -- 6,711 36,521 ------------ ------------ ----------- ------------ ----------- ----------- Class C Shares: Issued................. 9,787 1,426 -- -- -- -- Reinvested............. -- 142 -- -- -- -- Redeemed............... (349) -- -- -- -- -- ------------ ------------ ----------- ------------ ----------- ----------- Change in Class C Shares................. 9,438 1,568 -- -- -- -- ------------ ------------ ----------- ------------ ----------- ----------- Change in shares from share transactions..... (567,870) 449,761 69,190 (786,259) (218,934) (237,152) ============ ============ =========== ============ =========== ===========
31 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS GROWTH AND INCOME FUND Selected per share data for a share outstanding throughout each period indicated.
Class A Shares --------------------------------------------------------------- For the six months For the year ended December 31, ended June 30, ---------------------------------------------- 2000 1999 1998 1997 1996 1995 -------------- -------- -------- ------- -------- ------- (Unaudited) Net Asset Value, Beginning of Period.... $ 14.92 $ 13.86 $ 12.36 $ 16.28 $ 14.77 $ 11.93 -------- -------- -------- ------- -------- ------- Investment Activities: Net investment income (loss)................ (0.01) 0.02 0.07 0.18 0.18 0.30 Net realized and unrealized gains from investment and options transactions.......... 0.48 2.47 3.23 4.28* 2.46 3.64 -------- -------- -------- ------- -------- ------- Total from Investment Activities............. 0.47 2.49 3.30 4.46 2.64 3.94 -------- -------- -------- ------- -------- ------- Dividends: Net investment income.. -- (0.02) (0.08) (0.19) (0.18) (0.30) Net realized gains from investment and options transactions.......... -- (1.41) (1.72) (8.19) (0.95) (0.80) -------- -------- -------- ------- -------- ------- Total Dividends......... -- (1.43) (1.80) (8.38) (1.13) (1.10) -------- -------- -------- ------- -------- ------- Net Asset Value, End of Period................. $ 15.39 $ 14.92 $ 13.86 $ 12.36 $ 16.28 $ 14.77 ======== ======== ======== ======= ======== ======= Total Return (excludes sales charge).......... 3.15%(a) 18.48% 26.97% 27.42% 17.90% 33.11% Ratios/Supplemental Data: Net assets at end of period (000's)........ $109,570 $117,542 $106,267 $55,195 $140,688 $66,062 Ratio of expenses to average net assets.... 0.90%(b) 0.88% 0.89% 0.83% 0.85% 0.94% Ratio of net investment income to average net assets................ (0.08%)(b) 0.14% 0.58% 0.95% 1.43% 2.06% Ratio of expenses to average net assets**.. (c) 1.00% 1.01% 0.95% 0.96% 0.97% Portfolio turnover***.. 32.90% 94.36% 82.19% 69.07% 61.68% 52.77%
-------- (a) Not annualized. (b) Annualized. (c) For the six months ended June 30, 2000, there were no voluntary fee reductions/reimbursements. * 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. ** During the period, certain fees were contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Ratios for periods prior to January 1, 2000 were calculated including voluntary and contractual fee reductions/reimbursements. Starting with the six months ended June 30, 2000, ratios are calculated using voluntary reductions/reimbursements only. *** Porfolio 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. 32 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS GROWTH AND INCOME FUND Selected per share data for a share outstanding throughout each period indicated.
Class B Shares Class C Shares --------------------------- --------------------------- For the six For the period For the six For the period months ended ended months ended ended June 30, December 31, June 30, December 31, 2000 1999* 2000 1999* ------------ -------------- ------------ -------------- (Unaudited) (Unaudited) Net Asset Value, Beginning of Period.... $14.86 $15.32 $14.86 $15.32 ------ ------ ------ ------ Investment Activities: Net investment (loss).. (0.06) (0.03) (0.06) (0.06) Net realized and unrealized gains from investment and options transactions.......... 0.46 0.98 0.45 1.01 ------ ------ ------ ------ Total from Investment Activities............. 0.40 0.95 0.39 0.95 ------ ------ ------ ------ Dividends: Net investment (loss).. -- (0.00)(c) -- (0.00)(c) Net realized gains from investment and options transactions.......... -- (1.41) -- (1.41) ------ ------ ------ ------ Total Dividends......... -- (1.41) -- (1.41) ------ ------ ------ ------ Net Asset Value, End of Period................. $15.26 $14.86 $15.25 $14.86 ====== ====== ====== ====== Total Return (excludes redemption charge)(a).. 2.69% 6.68% 2.62% 6.68% Ratios/Supplemental Data: Net assets at end of period (000's)........ $6,338 $3,459 $ 168 $ 23 Ratio of expenses to average net assets(b)............. 1.91% 1.77% 1.93% 1.72% Ratio of net investment income to average net assets(b)............. (1.08%) (0.87)% (1.12%) (0.81)% Ratio of expenses to average net assets**(b)........... (d) 2.13% (d) 2.07% Portfolio turnover***.. 32.90% 94.36% 32.90% 94.36%
-------- (a) Not annualized. (b) Annualized. (c) Less than $0.005 per share. (d) For the six months ended June 30, 2000, there were no voluntary fee reductions/reimbursements. * Class B Shares & Class C Shares commenced offering on July 1, 1999. ** During the period, certain fees were contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Ratios for periods prior to January 1, 2000 were calculated including voluntary and contractual fee reductions/reimbursements. Starting with the six months ended June 30, 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. 33 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS FIXED INCOME FUND Selected per share data for a share outstanding throughout each period indicated.
Class A Shares ------------------------------------------------------------- For the six months For the year ended December 31, ended June 30, --------------------------------------------- 2000 1999 1998 1997 1996 1995 -------------- ------- ------- ------- -------- ------- (Unaudited) Net Asset Value, Beginning of Period.... $ 9.61 $ 10.37 $ 10.12 $ 9.89 $ 10.28 $ 9.35 ------- ------- ------- ------- -------- ------- Investment Activities: Net investment income.. 0.31 0.57 0.57 0.59 0.59 0.59 Net realized and unrealized gains/(losses) from investment transactions.......... 0.06 (0.76) 0.25 0.23 (0.39) 0.93 ------- ------- ------- ------- -------- ------- Total from Investment Activities............. 0.37 (0.19) 0.82 0.82 0.20 1.52 ------- ------- ------- ------- -------- ------- Dividends: Net investment income.. (0.31) (0.57) (0.57) (0.59) (0.59) (0.59) ------- ------- ------- ------- -------- ------- Total Dividends......... (0.31) (0.57) (0.57) (0.59) (0.59) (0.59) ------- ------- ------- ------- -------- ------- Net Asset Value, End of Period................. $ 9.67 $ 9.61 $ 10.37 $ 10.12 $ 9.89 $ 10.28 ======= ======= ======= ======= ======== ======= Total Return (excludes sales charge).......... 3.89%(a) (1.86%) 8.33% 8.62% 2.11% 16.73% Ratios/Supplemental Data: Net assets at end of period (000's)........ $43,253 $42,353 $53,834 $61,402 $104,875 $99,942 Ratio of expenses to average net assets.... 0.91%(b) 0.92% 0.89% 0.88% 0.88% 0.93% Ratio of net investment income to average net assets................ 6.46%(b) 5.70% 5.59% 6.00% 5.94% 6.03% Ratio of expenses to average net assets*... (c) 1.04% 1.01% 1.00% 0.98% 0.96% Portfolio turnover..... 33.22% 75.75% 71.05% 60.98% 156.05% 41.58%
-------- (a) Not annualized. (b) Annualized. (c) For the six months ended June 30, 2000, there were no voluntary fee reductions/reimbursements. * During the period, certain fees were contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Ratios for periods prior to January 1, 2000 were calculated including voluntary and contractual fee reductions/reimbursements. Starting with the six months ended June 30, 2000, ratios are calculated using voluntary reductions/reimbursements only. See Notes to Financial Statements. 34 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS NEW YORK TAX-FREE BOND FUND Selected per share data for a share outstanding throughout each period indicated.
Class A Shares ----------------------------------------------------------- For the six months ended For the year ended December 31, June 30, -------------------------------------------- 2000 1999 1998 1997 1996 1995 ------------ ------- ------- ------- ------- ------- (Unaudited) Net Asset Value, Beginning of Period.... $ 10.73 $ 11.64 $ 11.48 $ 11.05 $ 11.17 $ 10.20 ------- ------- ------- ------- ------- ------- Investment Activities: Net investment income.. 0.25 0.51 0.51 0.53 0.55 0.54 Net realized and unrealized gains/(losses) from investment transactions.......... 0.19 (0.91) 0.16 0.43 (0.12) 0.97 ------- ------- ------- ------- ------- ------- Total from Investment Activities............. 0.44 (0.40) 0.67 0.96 0.43 1.51 ------- ------- ------- ------- ------- ------- Dividends: Net investment income.. (0.25) (0.51) (0.51) (0.53) (0.55) (0.54) ------- ------- ------- ------- ------- ------- Total Dividends......... (0.25) (0.51) (0.51) (0.53) (0.55) (0.54) ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period................. $ 10.92 $ 10.73 $ 11.64 $ 11.48 $ 11.05 $ 11.17 ======= ======= ======= ======= ======= ======= Total Return (excludes sales charge).......... 4.13%(a) (3.58%) 5.99% 8.97% 3.99% 15.17% Ratios/Supplemental Data: Net assets at end of period (000's)........ $26,114 $28,075 $33,668 $37,524 $41,975 $50,677 Ratio of expenses to average net assets.... 1.28%(b) 1.08% 0.96% 0.92% 0.91% 0.99% Ratio of net investment income to average net assets................ 4.56%(b) 4.40% 4.47% 4.79% 5.02% 5.07% Ratio of expenses to average net assets*... (c) 1.31% 1.28% 1.24% 1.21% 1.20% Portfolio turnover**... 5.01% 11.85% 56.81% 35.64% 87.40% 24.43%
-------- (a) Not annualized. (b) Annualized. (c) For the six months ended June 30, 2000, there were no voluntary fee reductions/reimbursements. * During the period, certain fees were contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Ratios for periods prior to January 1, 2000 were calculated including voluntary and contractual fee reductions/reimbursements. Starting with the six months ended June 30, 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. 35 HSBC Mutual Funds Trust FINANCIAL HIGHLIGHTS NEW YORK TAX-FREE BOND FUND Selected per share data for a share outstanding throughout each period indicated.
Class B Shares ------------------------- For the six months ended Period ended June 30, December 31, 2000 1999* ------------ ------------ (Unaudited) Net Asset Value, Beginning of Period................. $10.72 $11.21 ------ ------ Investment Activities: Net investment income............................... 0.20 0.19 Net realized and unrealized gains/(losses) from investment transactions............................ 0.20 (0.49) ------ ------ Total from Investment Activities..................... 0.40 (0.30) ------ ------ Dividends: Net investment income............................... (0.20) (0.19) ------ ------ Total Dividends...................................... (0.20) (0.19) ------ ------ Net Asset Value, End of Period....................... $10.92 $10.72 ====== ====== Total Return (excludes redemption charge)(a)......... 3.75% (2.71%) Ratios/Supplemental Data: Net assets at end of period (000's)................. $ 472 $ 392 Ratio of expenses to average net assets(b).......... 2.20% 2.01% Ratio of net investment income to average net assets(b).......................................... 3.71% 3.37% Ratio of expenses to average net assets**(b)........ (c) 2.35% Portfolio turnover rate***.......................... 5.01% 11.85%
-------- (a) Not annualized. (b) Annualized. (c) For the six months ended June 30, 2000, there were no voluntary fee reductions/reimbursements. * Class B Shares commenced offering on July 1, 1999. ** During the period, certain fees were contractually reduced. If such fee reductions had not occurred, the ratios would have been as indicated. Ratios for periods prior to January 1, 2000 were calculated including voluntary and contractual fee reductions/reimbursements. Starting with the six months ended June 30, 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. 36 HSBC Mutual Funds Trust -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- [LOGO OF HSBC ASSET MANAGEMENT AMERICAS INC. APPEARS HERE] -------------------------------------------------------------------------------- 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. 8/00 Semi-Annual Report June 30, 2000 Managed by: HSBC Asset Management Americas Inc. Sponsored and distributed by: BISYS Fund Services