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hours per response. . . . . . . 5.0
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-08928
HSBC INVESTOR PORTFOLIOS
(Exact name of registrant as specified in charter)
3435 STELZER ROAD
COLUMBUS, OH 43219
(Address of principal executive offices)
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OH 43219
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-782-8183
Date of fiscal year end: October 31, 2003
Date of reporting period: October 31, 2003
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. 'SS' 3507.
Item 1. Reports to Stockholders.
Include a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1).
<Page>
Annual Report
[GRAPHIC]
HSBC Investor
Family of Funds
October 31, 2003
HSBC Investor Limited Maturity Fund
HSBC Investor Fixed Income Fund
HSBC Investor Bond Fund
HSBC Investor New York
Tax-Free Bond Fund
HSBC Investor Balanced Fund
HSBC Investor Equity Fund
HSBC Investor Growth and Income Fund
HSBC Investor Mid-Cap Fund
HSBC Investor International Equity Fund
HSBC Investor Overseas Equity Fund
HSBC Investor Small Cap Equity Fund
HSBC Investor Opportunity Fund
HSBC [LOGO]
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR FAMILY OF FUNDS
ANNUAL REPORT - OCTOBER 31, 2003
Glossary of Terms
President's Message 1
Commentary From the Investment Manager 2
Portfolio Reviews 4
Schedules of Portfolio Investments
HSBC Investor New York Tax-Free Bond Fund 22
HSBC Investor Balanced Fund 24
HSBC Investor Equity Fund 26
HSBC Investor Growth and Income Fund 28
HSBC Investor Mid-Cap Fund 29
Statements of Assets and Liabilities 31
Statements of Operations 33
Statements of Changes in Net Assets 35
Financial Highlights 47
Notes to Financial Statements 59
Independent Auditors' Report 68
HSBC INVESTOR PORTFOLIOS
Schedules of Portfolio Investments
HSBC Investor Limited Maturity Portfolio 69
HSBC Investor Fixed Income Portfolio 71
HSBC Investor International Equity Portfolio 74
HSBC Investor Small Cap Equity Portfolio 79
Statements of Assets and Liabilities 81
Statements of Operations 82
Statements of Changes in Net Assets 83
Financial Highlights 85
Notes to Financial Statements 86
Independent Auditors' Report 90
Board of Trustees 91
Privacy Policy 92
<Page>
GLOSSARY OF TERMS
Beta is a coefficient measuring a stock's relative volatility. The beta is the
covariance of a stock in relation to the rest of the stock market. The S&P 500
Index has a beta coefficient of 1. Therefore, any stock with a higher beta is
more volatile than the market, and any with a lower beta can be expected to rise
and fall more slowly than the market.
CITIGROUP BROAD INVESTMENT-GRADE BOND FUND INDEX is an unmanaged market
capitalization-weighted index that includes fixed-rate Treasury,
government-sponsored, corporate and mortgage securities. All issues mature in
one year or more and have at least $50 million face amount outstanding for entry
into the index.
GROSS DOMESTIC PRODUCT (GDP) is the monetary value of all the goods and services
produced by an economy over a specified period. It includes consumption,
government purchases, investments, and exports minus imports.
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX is an unmanaged broad based index
comprised of investment grade, fixed-rate and tax-exempt securities with a
remaining maturity of at least 7 years.
LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index generally
representative of the investment-grade debt issues with at least one year to
final maturity.
LEHMAN BROTHERS INTERMEDIATE AGGREGATE BOND INDEX is an unmanaged index
generally representative of investment-grade issues with maturities between
three and ten years.
LIPPER BALANCED FUNDS AVERAGE is comprised of managed funds that primarily
conserve principal by maintaining at all times a balanced portfolio of both
stocks and bonds. Typically the stock/bond ratio ranges around 60%/40%.
LIPPER GENERAL BOND FUNDS AVERAGE is comprised of managed funds that do not have
quality or maturity restrictions and keep the bulk of assets in corporate and
government debt issues.
LIPPER INTERMEDIATE INVESTMENT-GRADE DEBT FUNDS AVERAGE is an average of managed
funds that invest at least 65% of their assets in investment-grade debt issues
(rated in the top four grades) with dollar-weighted average maturities of five
to ten years.
LIPPER INTERNATIONAL FUNDS AVERAGE is comprised of managed funds that invest
their assets in securities whose primary trading markets are outside of the
United States.
LIPPER LARGE-CAP CORE FUNDS AVERAGE is comprised of managed funds that, by
portfolio practice, invest at least 75% of their equity assets in companies with
market capitalizations (on a three-year weighted basis) greater than 300% of the
dollar-weighted median market capitalization of the Standard & Poor's Mid-Cap
400 Index.
LIPPER MID-CAP GROWTH FUNDS AVERAGE is comprised of managed funds that, by
portfolio practice, invest at least 75% of their equity assets in companies with
market capitalizations (on a three-year weighted basis) of less than 300% of the
dollar-weighted median market capitalization of the Standard & Poor's Mid-Cap
400 Index.
LIPPER N.Y. MUNICIPAL BOND FUNDS AVERAGE is an average of managed funds that
invest at least 65% of their assets in municipal debt issues that are exempt
from taxation in New York or a city in New York.
MORGAN STANLEY EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX is an
unmanaged index that measures performance of a diverse range of developed
countries in the indicated regions.
NASDAQ COMPOSITE INDEX is a market price only index that tracks the performance
of domestic common stocks traded on the regular Nasdaq market as well as
National Market System traded foreign common stocks and American Depositary
Receipts.
THE RUSSELL UNIVERSE - In 1984, Russell created the Russell family of stock
indices as part of a more accurate and comprehensive system for evaluating the
performance of investment managers. Russell now maintains 21 U.S. stock indices
and has launched similar broad-market and style indices in Canada and Japan.
Today, more than $214 billion is invested in funds modeling Russell's U.S.
indices, and more than $1 trillion in funds is benchmarked against the global
family of Russell indices.
RUSSELL MIDCAP GROWTH INDEX is an unmanaged index which measures the performance
of those Russell MidCap companies with higher price-to-book ratios and higher
forecasted growth values.
RUSSELL 1000 INDEX is an unmanaged index which measures the performance of the
1,000 largest companies in the Russell universe.
RUSSELL 1000 GROWTH INDEX is an unmanaged index which measures the performance
of 1,000 securities found in the Russell universe with higher price-to-book
ratios and higher forecasted growth values.
RUSSELL 2000 INDEX is an unmanaged index that generally representative of the
performance of small-capitalization stocks.
STANDARD & POOR'S 500 INDEX (S&P 500) is an unmanaged index that measures the
performance of the stock market as a whole.
STANDARD & POOR'S MID CAP 400 INDEX is an unmanaged index that consists of 400
domestic stocks chosen for market size, liquidity and industry group
representation.
Lipper is an independent mutual fund performance monitor whose results are based
on total return and do not reflect a sales charge.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or expenses. Securities in
the Fund do not match those in the indexes and performance of the Fund will
differ. Investors cannot invest directly in an index, although they can invest
in the underlying funds or securities. HSBC Investor Family of Funds
HSBC INVESTOR FAMILY OF FUNDS
<Page>
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
We are pleased to present you with the annual reports for the HSBC Investor
Family of Funds for the year ended October 31, 2003. The report contains the
following features:
* Commentary From the Investment Manager
* Portfolio Reviews-investment strategy, performance overview and outlook for
the coming months
* Schedules of Portfolio Investments-listing of the security holdings in each
Fund
* Statements of Assets and Liabilities-summary of the assets and liabilities
of each Fund
* Statements of Operations-summary of operations and its effect on the assets
of each Fund
* Statements of Changes in Net Assets-summary of changes in net assets during
the period
* Schedules of Capital Stock Activity-summary of capital and share
transactions during the period
* Financial Highlights-per share summary of activity affecting net asset
value per share
* Notes to Financial Statements
Finally, we thank you for your continued confidence in us. We look forward to
providing you with investment management services to meet your needs now and in
the years ahead.
Sincerely,
Walter B. Grimm
Walter B. Grimm
President
December 2003
HSBC INVESTOR FAMILY OF FUNDS 1
<Page>
COMMENTARY FROM THE INVESTMENT MANAGER
HSBC ASSET MANAGEMENT (AMERICAS) INC.
U.S. ECONOMIC REVIEW
The United States economy struggled during much of the 12-month
period ended October 31, 2003, but staged a strong rebound near the
end of the period. The Federal Reserve Board (the "Fed") lowered
short-term interest rates by 0.5 percentage points in November 2002
in an attempt to stimulate the economy.
The economy continued to be hampered by weak corporate spending,
however. The build-up to war with Iraq weighed on business
investment, as the uncertainty of the political environment caused
business leaders to delay spending initiatives. Corporations cut
costs by laying off workers, causing the unemployment rate to reach a
nine-year high of 6.4% during the second calendar quarter.
Many economists in June became concerned about the potential for
deflation, leading the Fed to cut interest rates again, by 0.25
percentage points. Corporations increased spending late in the year,
helping fuel 7.2% annualized Gross Domestic Product (the "GDP")(1)
growth during the three months through September.
Strong consumer spending buttressed the economy during the early part
of the period. Rising unemployment was offset by gains in worker
productivity, which supported wage growth. Consumers also took
advantage of the lowest long-term interest rates in 45 years to
refinance mortgages, which freed up cash and supported purchases of
large items such as automobiles. Consumer spending dipped during the
final months of the period, after interest rates rose and the rate of
refinancing slowed.
Corporate profits improved markedly. Corporations cleaned up their
balance sheets and lowered interest costs by refinancing the high
debt burdens they had taken on during the economic expansion. Lower
interest expenses combined with other cost reductions helped to
improve cash flow and earnings for many firms. The dollar weakened
versus other currencies during the period, boosting U.S. exports and
improving conditions for manufacturing firms. The three months ended
in September marked the sixth consecutive quarter of improving
corporate profits.
GLOBAL ECONOMIC REVIEW
European economies struggled during the period. Many European
economies suffered from weak U.S. imports, as the euro's strength
against the dollar made European products relatively expensive. The
German economy was especially weak, as high taxes and labor costs
restrained growth. Economic-forecasting data such as Germany's
business confidence index improved during the quarter, however. The
U.K.'s economy stayed somewhat stronger than continental Europe's,
thanks to strength in housing and consumer spending.
Severe acute respiratory syndrome (SARS) hurt Asian economies early
in the year. Fears about the highly-contagious disease drastically
reduced travel and business activity throughout many parts of the
region, particularly China and Hong Kong. Meanwhile, Japan's economy
continued to suffer from massive levels of bad debt. Japanese
business spending picked up late in the period, helping fuel an
economic rebound in that country.
Emerging economies were mixed. Export-oriented economies such as
Taiwan's suffered from the weak dollar and low U.S. business
spending. But countries with strong domestic markets, such as South
Korea, remained somewhat insulated from the global economy's
weakness. Latin American economies improved somewhat. Brazil's
president adopted moderate economic positions that helped stabilize
the country's currency, while Argentina's economy gradually improved
from its collapse of 2001 and 2002.
Market Environment
The U.S. stock market rallied to begin the period, as investors hoped that the
Fed's interest-rate cut and improved corporate profits marked the beginning of
an economic recovery. Weak economic data and tensions with Iraq caused stocks to
decline in December, however. Technology stocks led the market, due to signs
that demand was recovering in that sector. Meanwhile, investors favored the
relative stability of large-cap stocks.
- --------------------------------------------------------------------------------
(1) FOR ADDITIONAL INFORMATION, PLEASE SEE THE GLOSSARY OF TERMS.
2 HSBC INVESTOR FAMILY OF FUNDS
<Page>
COMMENTARY FROM THE INVESTMENT MANAGER - (CONTINUED)
HSBC ASSET MANAGEMENT (AMERICAS) INC.
That pattern repeated itself during the first quarter of 2003: Stocks
rallied on hopes of an economic recovery, then retreated due to signs
of economic weakness and saber-rattling between the U.S. and Iraq.
Large caps and technology stocks again led the market.
The stock market surged after the U.S. invasion of Iraq, in part
because the invasion did not create any of the worst-case scenarios
experts had feared, such as the destruction of Iraq's oil fields or
the use of chemical or biological weapons. Investors anticipated a
quick resolution to the war would lead to an economic recovery, and
they bid up prices of stocks most likely to benefit from a recovery.
Such shares included small caps, which often lead the market heading
into an economic rebound. Some lower-quality firms with weak balance
sheets and little or no earnings also benefited from the economic
outlook, as did stocks in highly-cyclical sectors such as technology.
Conversely, sectors not closely tied to the economy, such as consumer
staples, fared relatively poorly.
Those trends continued through August. Shares of lower-quality firms
surged, small caps outperformed larger shares, and technology stocks
led the market. Stocks declined in September, as investors took
profits following the rally, but share prices gained again in October
amid signs of accelerating economic growth.
European markets generally trailed the S&P 500 on a local-currency
basis during the period. However, weakness in the U.S. dollar caused
European markets to perform in-line or better on a dollar basis.
Asian markets suffered in the spring from Japan's economic weakness
and the effects of the SARS epidemic. However, Japan, Hong Kong and
China showed signs of economic strength late in the period, helping
boost stocks in that region.
Treasury securities performed well through the spring, as Fed action,
the run-up to war and fears about deflation helped push yields lower.
Signs of economic strength in July led to a dramatic rise in yields
on long-term Treasury bonds, as the likelihood increased that an
economic recovery would lead to an up-tick in inflation. The yield on
the 10-year Treasury bond gained 0.9 percentage points in July, and
then declined during ensuing months. Short-term Treasuries were more
stable, anchored by the Fed's decision to maintain low short-term
interest rates.
Corporate bonds led the fixed-income markets. Investors faced with
the lowest interest rates in a generation favored the high yields
available on lower-quality issues. Lower-quality bonds also got a
boost from the resurgent economy, which made investors more confident
that weaker firms would be able to pay their debts. Those trends
caused an inverse relationship between credit quality and
performance. Emerging-markets bonds also benefited from investors'
pursuit of higher yields.
HSBC INVESTOR FAMILY OF FUNDS 3
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR LIMITED MATURITY FUND
(CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES)
by John B. Cuccia
Portfolio Manager
HSBC Asset Management (Americas) Inc.
The HSBC Investor Limited Maturity Fund (the "Fund") seeks to realize
above-average total return, consistent with reasonable risk, by
investing in a diversified investment grade portfolio of U.S.
government obligations, corporate bonds and mortgage-backed
securities. The Fund utilizes a two tier structure, commonly known as
"master-feeder," in which the Fund invests all of its investable
assets in the HSBC Investor Limited Maturity Portfolio (the
"Portfolio").
The Fund returned 3.97%, (without sales charge) for the Class A
(Investor) Shares and 4.12%, for the Class Y Shares during the year
ended October 31, 2003. That compared to a return of 4.27% and 5.61%
for the Fund's benchmark the Lehman Brothers Intermediate Aggregate
Bond Index.(1)
The U.S. markets were taken by surprise back on November 6 when the
Fed decided to lower their target interest rate by a larger than
expected 50 basis points to a rate of 1.25% at their scheduled FOMC
meeting. They also decided to change their bias to neutral,
indicating no further anticipated moves in the near term. The U.S.
bond market initially responded with higher yields as the U.S. equity
market rallied. However, as 2002 drew to a close the Fixed Income
market finished on a high note as yields declined.
With the start of the New Year, the U.S. economy proved weaker than
previously anticipated as initial estimates for fourth quarter GDP1
grew at only a 0.7% annual pace. The U.S. dollar declined against a
broad index of currencies. Bond yields moved higher as many investors
abroad reduced their investments in dollar denominated assets. As the
year progressed, the economy did show some signs of strength, mainly
in the housing sector and in retail sales. Fourth quarter GDP was
later revised upward to a reading of 1.4%, but many investors began
to question whether the consumer would continue to spend in an
economy with a deteriorating labor market, weakening consumer
confidence and contracting manufacturing.
Toward the end of the first quarter, heightened geo-political risk
became the main driver as the countdown to and inception of the war
in Iraq diminished economic expectations. For most of the second
quarter, financial markets remained volatile, economic data remained
weak as the war, and severe winter weather hindered the consumer.
Many investors felt the military campaign in Iraq would last two to
four months, but then by the second week of April, Baghdad fell.
Nonetheless, with a swift conclusion to the war, not all was well.
The economy did not get the instant magical post war bounce for which
investors were hoping. Many investors believed in order to stimulate
the economy further, the Federal Reserve would implement
non-conventional monetary policy methods aimed at the longer end of
the yield curve. U.S. Treasury 10-year and 30-year yields declined to
the lowest level during the review period to end the month of May
yielding 3.37% and 4.38%, roughly 50 basis points lower from were
they began the year.
During the second half of the review period, the economy improved and
bond yields moved higher. The manufacturing sector signaled
expansion, while jobs were being created instead of lost. The Fed
lowered their target interest rate again, to a 45-year low of 1%. In
addition, Fed Chairman Alan Greenspan kept reiterating that monetary
policy would remain accommodative for a considerable period. By the
end of the review period, third-quarter GDP was released and exceeded
all analysts' expectation, showing growth at a 7.2% annual rate, the
fastest since the first quarter of 1984. The economy was firing on
all cylinders from the demand side as strength was seen across the
board.
At their most recent FOMC meeting, the Fed left their target rate
unchanged at 1% and maintained their split balance of risk
assessment, remained neutral on economic growth but saw the risks on
the price level as still leaning toward disinflation. They also
reiterated that policy would remain accommodative for a "considerable
period". We feel the Federal Reserve moves to dismantle their current
policy outlook slowly, remaining on hold over the next three months
and increasing only gradually, by approximately 50 basis points in
2004. We remain constructive on the corporate sector, as fundamental
and technical factors are positive and should remain entrenched. As
such, the Fund's interest rate profile and credit exposure will be
positioned accordingly.
During the past year, the Fund made use of duration, sector, and
credit calls to add additional yield to the Fund. We made use of
various sectors (U.S. Treasury, U.S. agency, mortgages, and corporate
bonds) to find favorable relative spread values and used U.S.
Treasury securities to adjust our duration positions. On the credit
side, we bought and sold "A" and "BBB" rated corporate bonds during
the year, which generated additional yield to the Fund. As the review
period ended, we held a slight overweight in duration as well as in
corporate bonds & U.S. agency securities.*
- --------------------------------------------------------------------------------
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Performance
is as of date indicated and may differ from current performance due
to market volatility. For more information about the HSBC Investor
Funds, including fees, expenses, historical fund performance and
ongoing charges, call 1-800-782-8183.
4 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR LIMITED MATURITY FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Limited Lehman Brothers
Maturity Fund Class A Intermediate Aggregate
(Investor)2 Bond Index
2/7/2001 9526 10000
9645 10079
9691 10147
9670 10138
9706 10199
9732 10230
9924 10430
10007 10532
10199 10689
10362 10854
10233 10747
12/31/2001 10160 10695
10208 10771
10292 10874
10081 10730
10219 10922
10319 11018
10355 11115
10481 11248
10608 11383
10775 11536
10708 11529
10681 11515
12/31/2002 10900 11712
10884 11724
11030 11854
11001 11861
11077 11934
11257 12082
11258 12085
10949 11794
10989 11844
11230 12106
10/31/2003 11133 12021
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Limited Lehman Brothers
Maturity Fund Class Y Intermediate Aggregate
Bond Index
1/23/2001 10000 10000
10077 10100
10175 10079
10237 10147
10217 10138
10248 10199
10278 10230
10494 10430
10597 10532
10813 10689
10978 10854
10843 10747
12/31/2001 10768 10695
10821 10771
10913 10874
10702 10730
10840 10922
10958 11018
10988 11115
11135 11248
11261 11383
11452 11536
11383 11529
11356 11515
12/31/2002 11581 11712
11566 11724
11734 11854
11706 11861
11778 11934
11972 12082
11975 12085
11649 11794
11695 11844
11954 12106
10/31/2003 11852 12021
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share class versus a similar investment
in the Fund's benchmark and represents the reinvestment of dividends
and capital gains in the Fund.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR INCEPTION
- ------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class A (Investor)(2) 2/7/01 -0.97% 4.01%
HSBC Investor Limited Maturity Fund Class B(3) 2/15/01 -0.81% 4.42%
HSBC Investor Limited Maturity Fund Class C(4) 2/13/01 2.29% 5.05%
HSBC Investor Limited Maturity Fund Class Y 1/23/01 4.12% 6.33%
(2) Reflects the maximum sales charge of 4.75%
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Fund is measured against the Lehman Brothers Intermediate
Aggregate Bond Index, an unmanaged index generally representative of
investment-grade issues with maturities between three and ten years.
The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management
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. During the period shown, the Investment
Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 5
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR FIXED INCOME FUND
HSBC INVESTOR BOND FUND (CLASS A (INVESTOR) SHARES, B SHARES AND C SHARES)
by Edward Merkle
Senior Portfolio Manager, Managing Director
HSBC Asset Management (Americas) Inc.
The HSBC Investor Fixed Income Fund and the HSBC Investor Bond Fund
(the "Funds") seek to provide investors with above-average total
return, consistent with reasonable risk, through investments in a
diversified portfolio of fixed-income securities. The Funds utilize a
two-tier structure, commonly known as a "master-feeder," in which the
Funds invest all of their investable assets in the HSBC Investor
Fixed Income Portfolio (the "Portfolio").
For the year ended October 31, 2003, the shares of the HSBC Investor
Fixed Income Fund produced a 5.71% return, and the Class A (Investor)
Shares of the HSBC Investor Bond Fund returned 5.17% (without sales
charge). That compared to a 4.99% and 6.92% return for the Funds'
benchmark, the Citigroup Broad Investment-Grade Bond Fund Index and
the Funds' peer group, the Lipper General Bond Funds Average1,
respectively.
The U.S. markets were taken by surprise back on November 6 when the
Fed decided to lower their target interest rate by a larger than
expected 50 basis points to a rate of 1.25% at their scheduled FOMC
meeting. They also decided to change their bias to neutral,
indicating no further anticipated moves in the near term. The U.S.
bond market initially responded with higher yields as the U.S. equity
market rallied. However, as 2002 drew to a close the Fixed Income
market finished on a high note as yields declined.
With the start of the New Year, the U.S. economy proved weaker than
previously anticipated as initial estimates for fourth quarter GDP1
grew at only a 0.7% annual pace. The U.S. dollar declined against a
broad index of currencies. Bond yields moved higher as many investors
abroad reduced their investments in dollar denominated assets. As the
year progressed, the economy did show some signs of strength, mainly
in the housing sector and in retail sales. Fourth quarter GDP was
later revised upward to a reading of 1.4%, but many investors began
to question whether the consumer would continue to spend in an
economy with a deteriorating labor market, weakening consumer
confidence and contracting manufacturing.
Toward the end of the first quarter, heightened geo-political risk
became the main driver as the countdown to and inception of the war
in Iraq diminished economic expectations. For most of the second
quarter, financial markets remained volatile, economic data remained
weak as the war, and severe winter weather hindered the consumer.
Many investors felt the military campaign in Iraq would last two to
four months, but then by the second week of April, Baghdad fell.
Nonetheless, with a swift conclusion to the war, not all was well.
The economy did not get the instant magical post war bounce for which
investors were hoping. Many investors believed in order to stimulate
the economy further, the Federal Reserve would implement
non-conventional monetary policy methods aimed at the longer end of
the yield curve. U.S. Treasury 10-year and 30-year yields declined to
the lowest level during the review period to end the month of May
yielding 3.37% and 4.38%, roughly 50 basis points lower from were
they began the year.
During the second half of the review period, the economy improved and
bond yields moved higher. The manufacturing sector signaled
expansion, while jobs were being created instead of lost. The Fed
lowered their target interest rate again, to a 45-year low of 1%. In
addition, Fed Chairman Alan Greenspan kept reiterating that monetary
policy would remain accommodative for a considerable period. By the
end of the review period, third-quarter GDP was released and exceeded
all analysts' expectation, showing growth at a 7.2% annual rate, the
fastest since the first quarter of 1984. The economy was firing on
all cylinders from the demand side as strength was seen across the
board.
At their most recent FOMC meeting, the Fed left their target rate
unchanged at 1% and maintained their split balance of risk
assessment, remained neutral on economic growth but saw the risks on
the price level as still leaning toward disinflation. They also
reiterated that policy would remain accommodative for a "considerable
period". We feel the Federal Reserve moves to dismantle their current
policy outlook slowly, remaining on hold over the next three months
and increasing only gradually, by 50 basis points in 2004. We remain
constructive on the corporate sector, as fundamental and technical
factors are positive and should remain entrenched. As such, the
Fund's interest rate profile and credit exposure will be positioned
accordingly.
During the past year, the Fund made use of duration, sector, and
credit calls to add additional yield to the Fund. We made use of
various sectors (U.S. Treasury, U.S. agency, mortgages, and corporate
bonds) to find favorable relative spread values and used U.S.
Treasury securities to adjust our duration positions. On the credit
side, we bought and sold "A" and "BBB" rated corporate bonds during
the year, which generated additional yield to the Fund. As the review
period ended, we held a slight overweight in duration as well as in
corporate bonds & U.S. agency securities.*
- --------------------------------------------------------------------------------
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current performance
due to market volatility. For more information about the HSBC
Investor Funds, including fees, expenses, historical fund performance
and ongoing charges, call 1-800-782-8183.
6 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR FIXED INCOME FUND
HSBC INVESTOR BOND FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
Citigroup Broad
HSBC Investor Fixed Investment-Grade Bond
Income Fund Fund Index
1/9/1995 10000 10000
10119 10207
10340 10446
10445 10506
10535 10650
10983 11073
11018 11151
10995 11128
11173 11256
11298 11362
11444 11514
11601 11694
12/31/1995 11741 11855
11839 11936
11640 11733
11573 11648
11533 11563
11506 11556
11649 11706
11609 11737
11736 11720
11926 11924
12153 12192
12389 12394
12/31/1996 12433 12284
12322 12332
12435 12345
12311 12221
12351 12395
12556 12512
12785 12661
13067 13004
12987 12893
13194 13082
13291 13270
13354 13332
12/31/1997 13463 13468
13613 13641
13609 13632
13658 13685
13685 13756
13841 13887
13893 14002
13949 14031
13979 14247
14228 14582
14124 14516
14338 14596
12/31/1998 14384 14642
14525 14750
14286 14491
14391 14574
14472 14623
14299 14489
14181 14439
14057 14382
14018 14371
14233 14543
14267 14587
14310 14587
12/31/1999 14229 14520
14188 14479
14371 14648
14495 14838
14441 14794
14334 14781
14712 15090
14841 15228
15046 15445
15205 15550
15261 15649
15467 15903
12/31/2000 15827 16203
16205 16470
16317 16616
16372 16703
16381 16625
16501 16734
16539 16789
16845 17177
17058 17366
17124 17581
17567 17935
17395 17687
12/31/2001 17269 17584
17400 17722
17563 17892
17216 17596
17481 17929
17664 18082
17692 18215
17905 18432
18204 18754
18436 19053
18261 18967
18339 18964
12/31/2002 18744 19358
18785 19372
19045 19648
19013 19630
19208 19803
19633 20168
19544 20133
18799 19452
18924 19585
19515 20098
10/31/2003 19304 19913
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
Citigroup Broad
HSBC Investor Bond Investment-Grade Bond
Fund Class A (Investor)2 Fund Index
8/26/1996 9524 10000
9466 10100
9652 10174
9868 10403
10095 10575
12/31/1996 9997 10481
10029 10522
10078 10533
9958 10427
10102 10576
10197 10676
10314 10803
10583 11095
10499 11000
10628 11162
10723 11322
10760 11375
12/31/1997 10845 11491
10967 11639
10950 11631
11007 11677
11066 11737
11139 11849
11177 11947
11207 11972
11227 12156
11459 12442
11346 12386
11517 12454
12/31/1998 11539 12493
11662 12585
11461 12364
11542 12435
11602 12477
11464 12362
11362 12320
11256 12271
11230 12262
11389 12409
11423 12446
11441 12446
12/31/1999 11391 12389
11341 12354
11479 12498
11562 12660
11524 12623
11442 12611
11743 12875
11830 12993
11990 13178
12113 13268
12152 13352
12313 13568
12/31/2000 12599 13825
12887 14053
12971 14177
12996 14251
13009 14185
13086 14278
13122 14325
13350 14656
13515 14817
13563 15000
13903 15303
13769 15091
12/31/2001 13659 15003
13759 15121
13883 15266
13608 15013
13801 15298
13940 15428
13968 15541
14119 15726
14352 16002
14518 16256
14382 16183
14451 16180
12/31/2002 14756 16516
14780 16529
14982 16764
14948 16748
15097 16896
15417 17208
15351 17178
14760 16596
14852 16710
15304 17148
10/31/2003 15125 16990
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share class versus a similar investment
in the Funds' benchmark and represents the reinvestment of dividends
and capital gains in the Funds.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION
- --------------------------------------------------------------------------------------------------
HSBC Investor Fixed Income Fund 1/9/95 5.71% 6.45% 7.75%
HSBC Investor Bond Fund Class A (Investor)(2) 8/26/96 0.15% 4.90% 5.93%
HSBC Investor Bond Fund Class B(3) 1/6/98 0.38% 5.15% 4.92%
HSBC Investor Bond Fund Class C(4) 11/4/98 3.39% N/A 5.20%
(2) Reflects the maximum sales charge of 4.75%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Funds are measured against the Citigroup Broad Investment-Grade
Bond Fund Index, an unmanaged market capitalization-weighted index
that includes fixed-rate Treasury, government-sponsored, corporate
and mortgage securities. All issues mature in one year or more and
have at least $50 million face amount outstanding for entry into the
index. The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management
and fund accounting fees. The Funds' 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. During the period shown, the Investment
Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 7
<Page>
Portfolio Reviews
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND'D'
(CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES)
by Jerry Samet
Senior Fixed Income Portfolio Manager
HSBC Asset Management (Americas) Inc.
The HSBC Investor New York Tax-Free Bond Fund (the "Fund") seeks to
provide shareholders with income exempt from regular, federal, New
York state and New York city personal income taxes.
The Fund posted a total return of 4.57% (without sales charge) for
Class A (Investor) shares and 4.84% for the Class Y Shares for the
year ended October 31, 2003. That compared to a 2.21% and 4.62%
return for the Fund's benchmark, the Lehman Brothers 7-Year Municipal
Bond Index and the Fund's peer group, the Lipper New York Municipal
Bond Funds Average(1), respectively.
Following an unprecedented 475 basis points of Federal Reserve easing
in 2001 and 2002 in the Federal Funds target the Fed eased another 25
basis points in June to bring the rate down to a generational low of
1.00%. Growth remained below trend and inflationary pressures were
practically non-existent. In fact the Fed began basing its
accommodative policy on concerns of an unwelcome risk of deflation
albeit assessing that risk as somewhat small but not insignificant.
The yield on 10-year municipal AAA rated bonds reached a low yield of
2.85% in mid June. As it became apparent that growth would pick up
the market sold off and yields rose. As of October 31, 2003 the
ten-year, AAA municipal stood at 3.71%. Asset reallocation away from
speculative asset classes receded as speculative asset classes
performed well. However, for the year the flow of funds into the
municipal market remained strongly positive though not as robust as
in 2002. Correspondingly, municipals underperformed the corporate
credit market on a pretax basis while outperforming all other
investment grade taxable fixed income markets on a pretax basis.
Supply was a negative factor for the market as municipalities issued
record paper because of refundings into lower yields as well as
increased deficit financing as tax receipts and revenues declined.
The municipal yield curve continued to steepen as shorter duration
bonds outperformed. Two to five year maturities moved lower in yield
by 45-55 basis points while 7-30 year maturities were lower by 16-34
basis points.
Over the course of the year, the Fund's duration was approximately
10% longer than that of its benchmark but ended the quarter at
approximately 96% of benchmark. Additionally, the portfolio was
overweighted in intermediate (5-12) term maturities. This helped
performance somewhat as the shorter end of the yield curve
outperformed. The average quality AA1 (as rated by Standard &
Poor's)'D''D' of our portfolio remained higher in quality than the
average of our benchmark index AA2. This hurt performance as lower
rated credits generally outperformed higher quality.*
New York has acted as a microcosm of local credit profiles across the
country. We see tough budget conditions both now and in the future.
Of the 53 rated counties in New York, Moody's has put on negative
outlook or negative watch, or downgraded a total of 21. The problem
lies in declining tax and revenue collections in the face of
increasing salary, benefits, and Medicaid expenses. Increasing the
sources of revenue will be challenging given that politicians have
already raised taxes and fees quite significantly and face resistance
to further increases. This applies to high rated credits such as
Westchester County, which raised property taxes, an average 15%, as
well as lower rated credits such as Nassau County where the average
hike was 19%.
We believe the municipal market is coming into a three-month period,
which from a technical standpoint is a very strong period in terms of
relative performance. Coupon and redemption payments are typically at
their strongest and in this low yield environment investors could
'reach for yield' by moving further out along the yield curve.
Once again, we continue to emphasize that given the change in yields,
one issue that becomes an element of concern at the new level of
rates is deminimus original issue discount (OID) which will cause
negative convexity price declines. The portfolio will continue to be
proactive in limiting exposure to deminimus. At present the portfolio
is considerably underweight relative to benchmark in terms of
deminimus exposure in the event of a 50-75 basis point backup in
yields. This was the key performance determinant within the municipal
market in the last rising yield environment in 1999.
- --------------------------------------------------------------------------------
'D' A fund's income may be subject to certain state and local taxes
and, depending on 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.
'D''D' Standard & Poor's and Moody's ratings represent an opinion only,
not a recommendation to buy or sell.
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
8 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor N.Y. Tax-
Free Bond Fund Class A Lehman Brothers 7-Year
(Investor)2 Municipal Bond Index
5/1/1995 9524 10000
9890 10266
9760 10257
9839 10387
9986 10510
10007 10550
10133 10642
10341 10759
12/31/1995 10415 10816
10506 10921
10408 10884
10239 10778
10200 10758
10190 10742
10263 10825
10373 10914
10361 10920
10493 11019
10616 11137
10811 11323
12/31/1996 10745 11288
10734 11329
10827 11423
10678 11275
10771 11333
10939 11476
11065 11585
11435 11854
11285 11770
11424 11894
11488 11965
11563 12007
12/31/1997 11735 12154
11841 12281
11838 12292
11841 12293
11750 12221
11960 12401
12002 12436
12024 12477
12247 12667
12424 12830
12367 12848
12421 12883
12/31/1998 12449 12910
12572 13099
12531 13025
12520 13020
12552 13051
12447 12987
12236 12799
12268 12885
12126 12857
12087 12904
11920 12849
12082 12943
12/31/1999 12033 12892
11975 12861
12091 12913
12379 13096
12282 13047
12164 13018
12468 13309
12652 13477
12825 13653
12752 13611
12877 13727
12960 13791
12/31/2000 13303 14061
13433 14300
13460 14311
13578 14426
13393 14296
13538 14459
13643 14530
13851 14712
14085 14934
13961 14930
14069 15080
13942 14912
12/31/2001 13808 14790
14033 15069
14241 15267
13944 14933
14152 15301
14232 15388
14350 15570
14537 15762
14712 15958
15072 16274
14783 16025
14679 15958
12/31/2002 15044 16321
14956 16277
15186 16516
15190 16510
15329 16619
15699 17028
15592 16948
14966 16371
15131 16520
15528 17040
10/31/2003 15460 16947
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor N.Y. Tax- Lehman Brothers 7-Year
Free Bond Fund Class Y Municipal Bond Index
7/1/1996 10000 10000
10040 10082
10030 10088
10160 10179
10281 10289
10473 10460
12/31/1996 10411 10428
10402 10466
10495 10553
10351 10416
10442 10470
10606 10601
10729 10703
11089 10951
10944 10873
11069 10988
11143 11053
11216 11092
12/31/1997 11384 11228
11489 11346
11498 11356
11503 11356
11417 11290
11624 11456
11667 11488
11691 11527
11931 11702
12084 11853
12032 11870
12075 11902
12/31/1998 12117 11927
12239 12101
12201 12033
12193 12028
12216 12057
12128 11997
11925 11824
11959 11904
11824 11877
11788 11921
11616 11870
11788 11957
12/31/1999 11743 11910
11677 11881
11804 11929
12088 12099
11996 12053
11883 12026
12182 12295
12365 12450
12537 12613
12468 12574
12593 12681
12676 12740
12/31/2000 13014 12990
13133 13211
13162 13220
13292 13327
13114 13206
13258 13357
13364 13424
13571 13591
13803 13796
13684 13792
13793 13931
13672 13776
12/31/2001 13542 13663
13766 13921
13973 14104
13685 13795
13892 14135
13973 14216
14091 14384
14279 14561
14454 14743
14810 15034
14529 14804
14443 14743
12/31/2002 14791 15077
14708 15037
14937 15258
14944 15252
15084 15353
15452 15730
15350 15657
14737 15124
14902 15262
15296 15742
10/31/2003 15232 15656
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share class versus a similar investment
in the Fund's benchmark, and represents the reinvestment of dividends
and capital gains in the Fund.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION
- -----------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class A (Investor)(2) 5/1/95 -0.37% 3.54% 5.26%
HSBC Investor New York Tax-Free Bond Fund Class B(3) 1/6/98 -0.20% 3.80% 4.01%
HSBC Investor New York Tax-Free Bond Fund Class C(4) 11/4/98 2.87% N/A 3.85%
HSBC Investor New York Tax-Free Bond Fund Class Y 7/1/96 4.84% 4.83% 5.91%
- --------------------------------------------------------------------------------
(2) Reflects the maximum sales charge of 4.75%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Fund is measured against the Lehman Brothers 7-Year Municipal
Bond Fund Index, an unmanaged broad based index comprised of
investment grade, fixed-rate and tax-exempt securities with a
remaining maturity of at least 7 years. The performance of the index
does not reflect the deduction of expenses associated with a mutual
fund, such as investment management 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.
During the period shown, the Investment Manager waived and/or
voluntarily reimbursed fees for various expenses. Had these waivers
and/or reimbursements not been in effect, performance quoted would
have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 9
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR BALANCED FUND
(CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES)
by Thomas D'Auria, CFA,
Chief Investment Officer - U.S. Equities and
Edward Merkle,
Senior Portfolio Manager, Managing Director
HSBC Asset Management (Americas) Inc.
The HSBC Investor Balanced Fund (the "Fund") seeks to provide current
income and long-term growth of capital consistent with reasonable
risk by investing in a broadly diversified portfolio of U.S.
government securities, common stocks, preferred stocks and
high-quality bonds.
The Fund produced a total return of 10.39% (without sales charge) for
Class A (Investor) Shares and 10.70% for the Class Y Shares for the
12-months ended October 31, 2003. That compared to a 5.18%, 15.08%
and 12.21% return for the Fund's benchmarks, the Lehman Brothers
Aggregate Bond Index, the S&P 500 Index and the Fund's peer group,
the Lipper Balanced Funds Average(1), respectively.
The U.S. markets were taken by surprise back on November 6 when the
Federal Reserve decided to lower their target interest rate by a
larger than expected 50 basis points to a rate of 1.25% at their
scheduled FOMC meeting. They also decided to change their bias to
neutral, indicating no further anticipated moves in the near term.
The U.S. bond market initially responded with higher yields as the
U.S. equity market rallied. However, as 2002 drew to a close the
Fixed Income market finished on a high note as yields declined.
With the start of the new year, the U.S. economy proved weaker than
previously anticipated as initial estimates for fourth quarter GDP
grew at only a 0.7% annual pace. As the year progressed, the economy
did show some signs of strength, mainly in the housing sector and in
retail sales. Fourth quarter GDP was later revised upward to a
reading of 1.4%, but many investors began to question whether the
consumer would continue to spend in an economy with a deteriorating
labor market, weakening consumer confidence and contracting
manufacturing.
Toward the end of the first quarter, heightened geo-political risk
became the main driver as the countdown to and inception of the war
in Iraq diminished economic expectations. Many investors felt the
military campaign in Iraq would last two to four months, but then by
the second week of April, Baghdad fell. Nonetheless, with a swift
conclusion to the war, all was not well. The economy did not get the
instant magical post war bounce investors were hoping for.
During the second half of the review period, the economy improved and
bond yields moved higher. The manufacturing sector signaled
expansion, while jobs were being created instead of lost. The Fed
lowered its target interest rate again, to a 45-year low of 1%. In
addition, Fed Chairman Alan Greenspan kept reiterating that monetary
policy would remain accommodative for a considerable period of time.
By the end of the review period, third-quarter GDP was released and
exceeded all analysts' expectation, showing growth at a 7.2% annual
rate, the fastest since the first quarter of 1984. The economy was
firing on all cylinders from the demand side as strength was seen
across the board.
At their most recent FOMC meeting, the Fed left its target rate
unchanged at 1% and maintained its split balance of risk assessment,
remained neutral on economic growth but saw the risks on the price
level as still leaning toward disinflation. They also reiterated
that policy would remain accommodative for a "considerable period".
We feel the Fed moves to dismantle their current policy outlook
slowly, remaining on hold over the next three months and increasing
only gradually, by 50 basis points in 2004.
During the past year, the Fund made use of duration, sector, and
credit calls to add additional yield to the Fund. We made use of
various sectors (U.S. Treasury, U.S. agency, mortgages, and corporate
bonds) to find favorable relative spread values and used U.S.
Treasury securities to adjust our duration positions. On the credit
side, we bought and sold "A" and "BBB" rated corporate bonds during
the year, which generated additional yield to the Fund. As the review
period ended, we held a slight overweight in duration as well as in
corporate bonds & U.S. agency securities.*
- --------------------------------------------------------------------------------
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
10 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR BALANCED FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Balanced Lehman Brothers Standard & Poor's 500
Fund Class A (Investor)2 Aggregate Bond Index Index
2/20/2001 9499 10000 10000
9369 10010 10000
9019 10050 9367
9399 10008 10094
9429 10069 10162
9227 10107 9915
9257 10333 9817
8904 10451 9203
8540 10573 8460
8641 10794 8621
8894 10645 9283
12/31/2001 8848 10578 9364
8746 10663 9227
8654 10767 9049
8756 10588 9390
8501 10793 8821
8429 10885 8756
8133 10979 8132
7878 11111 7499
7939 11299 7548
7459 11482 6728
7857 11430 7320
8041 11427 7750
12/31/2002 7791 11663 7295
7707 11673 7104
7707 11834 6998
7749 11825 7065
8145 11922 7647
8436 12145 8050
8505 12121 8153
8400 11713 8296
8453 11791 8458
8484 12103 8368
10/31/2003 8673 11990 8841
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Balanced Lehman Brothers Standard & Poor's 500
Fund Class Y Aggregate Bond Index Index
1/18/2001 10000 10087.1 9088.77
10010 10137.8 8513.31
9420 10095.7 9174.36
9060 10156.6 9235.91
9450 10195 9011.2
9490 10422.9 8922.46
9281 10542.2 8364.46
9311 10665.1 7689.06
8968 10888.2 7835.77
8594 10738.1 8436.67
8705 10669.9 8510.63
8958 10756.3 8386.5
12/31/2001 8912 10860.6 8224.72
8809 10679.9 8534.08
8728 10887 8016.91
8830 10979.5 7958.06
8564 11074.4 7391.4
8493 11208.1 6815.38
8196 11397.3 6860
7941 11581.9 6115.2
8002 11529.1 6652.84
7522 11526.1 7044.04
7920 11764.1 6630.43
8114 11774.2 6457.07
12/31/2002 7865 11937.1 6360.04
7771 11927.9 6421.62
7782 12026.3 6950.32
7823 12250.6 7316.17
8230 12226.2 7409.63
8522 11815.2 7540.33
8589 11893.7 7687.09
8484 12208.5 7605.7
8536 12094.6 8035.73
8578 12208 7606
10/31/2003 8768 12095 8036
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share class versus a similar investment
in the Fund's benchmarks, and represents the reinvestment of
dividends and capital gains in the Fund.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR INCEPTION
- ----------------------------------------------------------------------------------------
HSBC Investor Balanced Fund Class A (Investor)(2) 2/20/01 4.93% -5.15%
HSBC Investor Balanced Fund Class B(3) 2/9/01 5.70% -5.45%
HSBC Investor Balanced Fund Class C(4) 2/13/01 8.67% -4.79%
HSBC Investor Balanced Fund Class Y 1/18/01 10.70% -4.62%
- --------------------------------------------------------------------------------
(2) Reflects the maximum sales charge of 5.00%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Fund is measured against the Lehman Brothers Aggregate Bond
Index, which is an unmanaged index generally representative of the
investment-grade debt issues with at least one year to final
maturity, and the Standard & Poor's 500 Index, which is an unmanaged
index generally representative of the U.S. stock market asa whole.
The performance of the index does not reflect the deduction of
expenses associated with a mutual fund, such as investment management
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. During the period shown, the Investment
Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 11
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR EQUITY FUND
(CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES)
by John L. Blundin
Portfolio Manager, Alliance Capital Management, L.P. and
Robert H. Lyon
Portfolio Manager, Institutional Capital Corporation
The HSBC Investor Equity Fund (the "Fund") seeks to provide its
shareholders with long-term growth of capital and income without
excessive fluctuations in market value. The Fund invests at least 80%
of its assets in equity securities of seasoned mid-sized and large
companies whose shares are expected to show above-average price
appreciation. The Fund employs two sub-investment advisers to achieve
its investment objective. Each sub-investment adviser pursues a
different investment style, and receives a fee for their services.
Alliance Capital Management, L.P. pursues a growth style of
investing, focusing on financially secure firms that have established
operating histories and are proven leaders in their industries or
market sectors. These companies may possess characteristics such as
participation in expanding markets, increasing unit sales volume,
growth in revenues and earnings per share or increasing return on
investments.
Institutional Capital Corporation pursues a value style of investing,
focusing on shares of companies that are undervalued relative to the
stock market as a whole. The firm employs a fundamentals-based,
bottom-up stock-picking method to find these companies.
The Fund returned 17.94% (without sales charge) for Class A
(Investor) Shares and 18.26% for the Class Y Shares for the year
ended October 31, 2003. That compared to 37.68% and 13.04% return
for the Fund's benchmarks, the Russell 1000 Growth Index, the Russell
1000 Index and the Fund's peer group, the Lipper Large-Cap Core Funds
Average(1), respectively.
A strong rally among equity stocks benefited the Fund's absolute
performance. That rally reflected improving economic fundamentals and
positive investor sentiment. The high-quality large-cap stocks in
which the Fund invests under-performed lower-quality stocks and
shares of small- and mid-cap companies, which posted very strong
returns during the period.*
The portion of the Fund managed by Alliance Capital held a
significant stake in the technology sector, which boosted
performance. Shares of such firms posted some of the period's
strongest returns, as investors anticipated that corporations would
increase technology spending as the economy improved. The Alliance
Capital portion of the Fund also benefited from its holdings in the
financial sector. Increased revenues from equity trading and
merger-and-acquisition activity boosted earnings growth among such
firms, boosting their stock prices.*
The Fund's growth portfolio was hurt by its overweight exposure to
health-care stocks. Such stocks performed poorly as investors sought
shares of firms with higher growth potential. Shares of
consumer-services companies also hurt relative performance in this
portion of the Fund. Weak advertising spending continued to dampen
such firms' profits.*
The portion of the Fund managed by Institutional Capital Corporation
(ICAP) benefited in relative terms from its individual stock
selection in the capital spending, basic industries, transportation,
energy and consumer-durables sectors. Holdings in the services
sector, particularly among media and travel companies, also boosted
performance, as the economic upturn positively affected shares of
such firms. The ICAP portion of the Fund also benefited from reducing
its holdings in the consumer staples and defense sectors.*
ICAP found attractive opportunities during the period among shares of
firms with strong balance sheets, excellent franchises and growing
free cash flow. Such companies performed well during the period.*
- --------------------------------------------------------------------------------
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
12 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR EQUITY FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Equity Russells 1000 Growth
Fund Class A (Investor)2 Index Russell 1000 Index
8/1/1995 9497 10000 10000
9630 10011 10075
9915 10472 10490
9758 10480 10442
10349 10887 10908
12/31/1995 10530 10949 11074
10817 11316 11432
10903 11523 11581
11007 11537 11685
10988 11841 11863
11093 12255 12148
10955 12271 12161
10396 11552 11575
10598 11850 11889
11069 12713 12558
11543 12790 12836
12395 13750 13783
12/31/1996 12161 13481 13560
12705 14427 14364
12676 14329 14419
12143 13554 13770
12787 14454 14515
13728 15497 15445
14351 16117 16085
15699 17542 17401
15035 16515 16580
15686 17328 17489
14882 16688 16923
15259 17396 17656
12/31/1997 15612 17591 18015
15832 18117 18149
17240 19480 19443
18032 20257 20424
18106 20537 20633
17875 19954 20187
18501 21176 20934
18448 21036 20683
15439 17879 17591
16359 19253 18776
17855 20800 20259
18750 22382 21513
12/31/1998 20170 24400 22883
20827 25833 23700
20051 24653 22948
20766 25951 23827
21661 25985 24823
21122 25186 24287
22433 26950 25524
21495 26094 24745
21365 26520 24513
20280 25963 23839
21467 27924 25442
21446 29430 26096
12/31/1999 22144 32491 27668
21163 30968 26536
19955 32482 26465
22150 34806 28876
21647 33150 27914
20916 31481 27192
21291 33867 27885
21087 32455 27422
22417 35393 29451
21101 32045 28084
20957 30529 27746
18943 26029 25209
12/31/2000 19353 25205 25513
20456 26947 26353
18310 22372 23895
16796 19937 22308
18488 22459 24100
18632 22128 24263
18072 21616 23715
17724 21076 23391
16416 19352 21966
15088 17420 20103
15616 18334 20521
16936 20095 22101
12/31/2001 17140 20058 22337
16504 19703 22053
15844 18886 21614
16521 19539 22502
15501 17944 21213
15368 17510 21026
14145 15890 19474
13051 15017 18033
13232 15062 18127
11704 13499 16180
12378 14738 17525
12943 15538 18550
12/31/2002 12189 14465 17501
12032 14114 17076
11875 14049 16812
12097 14310 16986
12978 15368 18357
13436 16136 19404
13567 16358 19659
13869 16765 20051
14098 17182 20458
13910 16998 20248
10/31/2003 14599 17952 21436
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Equity Russell 1000 Growth
Fund Class Y Index Russell 1000 Index
7/1/1996 10000 10000 10000
9391 9518 9414
9582 9776 9657
10007 10326 10360
10436 10555 10423
11205 11334 11205
12/31/1996 10999 11150 10986
11501 11812 11756
11474 11857 11677
10997 11323 11045
11579 11935 11778
12422 12700 12628
12992 13226 13134
14212 14308 14295
13620 13633 13459
14211 14381 14121
13492 13915 13599
13833 14518 14177
12/31/1997 14142 14813 14335
14351 14924 14764
15627 15988 15875
16352 16794 16507
16419 16966 16736
16219 16599 16261
16788 17214 17257
16750 17007 17143
14018 14465 14570
14853 15439 15689
16211 16658 16950
17024 17690 18240
12/31/1998 18326 18816 19884
18923 19488 21052
18228 18869 20090
18877 19592 21148
19700 20412 21175
19201 19970 20524
20405 20988 21962
19552 20347 21264
19444 20157 21611
18459 19602 21157
19549 20920 22755
19529 21458 23983
12/31/1999 20168 22751 26477
19274 21820 25236
18185 21761 26470
20184 23744 28364
19725 22953 27014
19070 22359 25654
19413 22929 27598
19238 22548 26448
20451 24217 28843
19252 23093 26114
19120 22815 24878
17283 20729 21211
12/31/2000 17671 20979 20540
18689 21669 21959
16729 19648 18231
15346 18343 16247
16902 19817 18302
17023 19951 18033
16522 19500 17615
16204 19234 17175
15019 18062 15770
13794 16530 14196
14288 16874 14941
15496 18174 16376
12/31/2001 15684 18367 16345
15113 18134 16056
14508 17773 15390
15137 18503 15922
14202 17443 14623
14081 17289 14269
12968 16013 12949
11965 14828 12237
12131 14906 12274
10737 13305 11001
11355 14410 12010
11863 15254 12662
12/31/2002 11192 14390 11787
11048 14042 11501
10893 13824 11449
11104 13967 11662
11912 15095 12524
12334 15956 13149
12461 16165 13330
12749 16488 13662
12960 16822 14002
12784 16650 13852
10/31/2003 13428 17626 14630
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share class versus a similar investment
in the Fund's benchmark, and represents the reinvestment of dividends
and capital gains in the Fund.
INCEPTION 1 5 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------------
HSBC Investor Equity Fund Class A (Investor)(2) 8/1/95 12.06% -4.93% 4.69%
HSBC Investor Equity Fund Class B(3) 1/6/98 13.13% -4.67% -1.86%
HSBC Investor Equity Fund Class C(4) 11/4/98 16.03% N/A -4.73%
HSBC Investor Equity Fund Class Y 7/1/96 18.26% -3.70% 4.10%
- --------------------------------------------------------------------------------
(2) Reflects the maximum sales charge of 5.00%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Fund is measured against the Russell 1000 Index and the Russell
1000 Growth Index, the Russell 1000 Index measures the performance of
the 1,000 largest companies in the Russell universe. The Russell 1000
Growth Index measures the performance of 1,000 securitities found in
the Russell universe with higher price-to-book ratios and higher
forecasted growth values. The indices are unmanaged and do not
reflect the deduction of expenses associated with a mutual fund, such
as investment management 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. During the period shown, the
Investment Manager waived and/or voluntarily reimbursed fees for
various expenses. Had these waivers and/or reimbursements not been in
effect, performance quoted would have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 13
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR GROWTH AND INCOME FUND
(CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES)
by Thomas D'Auria, CFA
Chief Investment Officer - U.S. Equities
HSBC Asset Management (Americas) Inc.
The HSBC Investor Growth and Income Fund (the "Fund") normally
invests at least 65% of its total assets in common stocks, preferred
stocks, and convertible securities. The Fund may invest the balance
of its assets in various types of fixed income securities and in
money market instruments.
The Fund returned 17.26% (without sales charge) for the Class A
(Investor) Shares and 17.63% for the Class Y Shares for the year
ended October 31, 2003. That compared to a 15.08% return for the S&P
500 and a 13.04% return for the Lipper Large Cap-Core Funds Average1.
The U.S. equity markets produced strong gains over the one-year
period ending October 31, 2003, with the S&P 500 and NASDAQ Composite
Index(1) returning 20.8% and 46.1%, respectively. Each of the ten
economic sectors in the S&P 500 advanced, led by strength in the
information technology, materials, and consumer discretionary sectors.
Investors endured a volatile trading environment early in the period
due to a number of headwinds, including a looming military conflict
with Iraq, escalating tensions with North Korea, an increased threat
of terrorist activity, and rising oil prices. The S&P 500 experienced
its worst December performance in almost 70 years due to some of
these issues, overshadowing a greater than expected reduction in
short term interest rates by the Fed in late November. The equity
markets managed a short-lived rally in early January on news of
President Bush's proposed economic stimulus package, but the S&P 500
eventually reached its lowest level since October 2002 by March 11,
as concerns over Iraq continued to dominate the headlines. However,
the S&P 500 moved meaningfully higher from these levels once it
appeared a military conflict with Iraq was imminent, effectively
removing the lingering uncertainty regarding the situation.
The equity markets posted strong double-digit gains during the second
quarter of 2003, with the S&P 500 generating its strongest quarterly
gain in over four years. With the passage of an economic stimulus
package in May, military success in Iraq, a sharp rebound in consumer
confidence, and a further reduction in the Federal Funds rate in
June, investors turned their attention to an anticipated recovery in
the economy and corporate profits in the second half of 2003. The
equity markets ended the period strongly, as third quarter earnings
results, reported in October, continued to beat consensus
expectations, as did third quarter GDP, which posted its biggest gain
in twenty years. Several high profile mergers and acquisitions
announced late in the period also boosted the markets, as did the
Fed's repeated intentions to keep interest rates unchanged for the
near future.
After trading sideways from June through early September, the markets
have bounced again and seem to be discounting a continued flow of
good news on both the economic and earnings fronts. This rally
continues to be led by higher-beta(1), and lower-quality stocks and we
think many of these stocks may be ahead of their fundamentals. The
markets will rely on revenue and earnings growth to continue moving
higher. So far this year, we have gotten better than expected
earnings growth with little top-line improvement, so most of the
gains come from cost cutting which cannot continue forever. Although
the backdrop for equities remains constructive, much of this appears
to be discounted in current stock prices.
We have invested the portfolio with a slight pro-cyclical tilt while
being very focused on valuations. The portfolio is positioned for a
12 to 18 month forecast, which includes a rebound in global
economies. We believe a modest pro-cyclical tilt, with an emphasis on
higher quality companies showing strong cash flow growth is prudent.
Consistent growth and earnings predictability remains a focus. We do
not have many style bets in the portfolio at present. We are modestly
overweight in the industrial cyclical, and defensive growth styles,
and modestly underweight cyclical growth. Within the defensive growth
style, we favor healthcare services, pharmaceuticals, beverages, and
tobacco. In the cyclical growth area, we remain cautious on
semiconductors after their huge move, favoring software and services.*
- --------------------------------------------------------------------------------
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
14 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR GROWTH AND INCOME FUND -- AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Growth
and Income Fund Class Standard & Poor's 500
A (Investor)2 Index
4/12/2001 9498 10000
10112 10776
10130 10849
9730 10585
9646 10481
8985 9825
8277 9032
8296 9204
8836 9910
12/31/2001 8811 9997
8597 9851
8401 9661
8653 10024
8131 9417
7991 9348
7459 8682
6863 8006
6881 8058
6117 7183
6723 7815
6993 8274
12/31/2002 6575 7788
6444 7585
6397 7471
6462 7543
6996 8164
7324 8594
7423 8704
7564 8857
7611 9030
7517 8934
10/31/2003 7883 9439
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Growth
and Income Fund Class Standard & Poor's 500
Y Index
4/2/2001 10000 10000
10991 10776
11011 10849
10588 10585
10486 10481
9778 9825
9019 9032
9029 9204
9626 9910
12/31/2001 9598 9997
9375 9851
9152 9661
9436 10024
8868 9417
8716 9348
8138 8682
7487 8006
7508 8058
6675 7183
7335 7815
7640 8274
12/31/2002 7180 7788
7037 7585
6985 7471
7067 7543
7650 8164
8008 8594
8114 8704
8268 8857
8330 9030
8227 8934
10/31/2003 8628 9439
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
AVERAGE ANNUAL TOTAL RETURN
<Table>
<Caption>
INCEPTION 1 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR INCEPTION
- -------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class A (Investor)(2) 4/12/01 11.39% - 8.89%
HSBC Investor Growth and Income Fund Class B(3) 4/5/01 12.40% - 7.39%
HSBC Investor Growth and Income Fund Class Y 4/2/01 17.63% - 5.56%
</Table>
(2) Reflects the maximum sales charge of 5.00%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
The Fund is measured against the Standard & Poor's 500 Index, an unmanaged index
that is 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 management 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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net
asset value will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than the original cost. Performance is as of date indicated
and may differ from current performance due to market volatility. For more
information about HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 15
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR MID-CAP FUND
(CLASS A SHARES, B SHARES, C SHARES AND TRUST SHARES)
by Thomas D'Auria, CFA
Chief Investment Officer - U.S. Equities
HSBC Asset Management (Americas) Inc.
The HSBC Investor Mid-Cap Fund (the "Fund") seeks to achieve a higher
rate of return than that generated by the Russell MidCap Growth Index
by investing at least 80% of its total assets in stocks of mid-sized
companies with market capitalization, at the time of acquisition,
falling within the range of the Russell MidCap Growth ($190 million
to $13.3 billion).
The Fund's Class A Shares posted a return of 26.19% (without sales
charge) and 26.54% for the Trust Shares for the year ended October
31, 2003. That compares to 32.64%, 37.68% and 26.48% for the Fund's
benchmarks, the Russell MidCap Growth Index, the S&P Mid Cap 400
Index and the Fund's peer group, the Lipper Mid-Cap Growth Funds
Average(1).
The U.S. equity markets produced strong gains over the one-year
period ending October 31, 2003, with the S&P 500 Index1 and NASDAQ
Composite Index(1) returning 20.8% and 46.1%, respectively. The Russell
MidCap Growth Index returned 39.3% during the period. Each of the ten
economic sectors in the S&P 500 advanced, led by strength in the
information technology, materials, and consumer discretionary sectors.
Investors endured a volatile trading environment early in the period
due to a number of headwinds, including a looming military conflict
with Iraq, escalating tensions with North Korea, an increased threat
of terrorist activity, and rising oil prices. The S&P 500 experienced
its worst December performance in almost 70 years due to some of
these issues, overshadowing a greater than expected reduction in
short term interest rates by the Fed in late November. The equity
markets managed a short-lived rally in early January on news of
President Bush's proposed economic stimulus package, but the S&P 500
eventually reached its lowest level since October 2002 by March 11,
as concerns over Iraq continued to dominate the headlines. However,
the S&P 500 moved meaningfully higher from these levels once it
appeared a military conflict with Iraq was imminent, effectively
removing the lingering uncertainty regarding the situation.
Military success in Iraq, along with the passage of an economic
stimulus package in Congress in May, a sharp rebound in consumer
confidence, and a further reduction in the Federal Funds rate in
June, helped push the equity markets higher during the second quarter
of 2003. Investors turned their attention to an anticipated recovery
in economic activity and corporate profits in the second half of
2003. The equity markets ended the period strongly, as third quarter
earnings results, reported in October, continued to beat consensus
expectations, as did third quarter GDP, which posted its biggest gain
in twenty years. Several high profile mergers and acquisitions
announced late in the period also boosted the markets, as did the
Fed's repeated intentions to keep interest rates unchanged for the
near future.
With our recent increase in earnings expectations for the S&P 500, we
see modest upside for the equity markets heading into 2004. After
trading sideways from June through early September, the markets have
bounced again and seem to be discounting a continued flow of good
news on both the economic and earnings fronts. This rally continues
to be led by higher-beta1, and lower-quality stocks and we think many
of these stocks may be ahead of their fundamentals. The markets will
rely on revenue and earnings growth to continue moving higher. So far
this year, we have gotten better than expected earnings growth with
little top-line improvement, so most of the gains come from cost
cutting which cannot continue forever. Although the backdrop for
equities remains constructive, much of this appears to be discounted
in current stock prices.
We have invested the portfolio with a slight pro-cyclical tilt while
being very focused on valuations. The portfolio is positioned for a
12 to 18 month forecast, which includes a rebound in global
economies. We believe a modest pro-cyclical tilt, with an emphasis on
higher quality companies showing strong cash flow growth is prudent.
Consistent growth and earnings predictability remains a focus.*
- --------------------------------------------------------------------------------
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
16 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR MID-CAP FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Mid-Cap HSBC Investor Mid-Cap Standard & Poor's Mid Russell MidCap Growth
Fund Class A2 Fund Trust Cap 400 InDEX Index
7/1/1993 9510 10000 10000 10000
9412 9895 9767 9779
9641 10105 10159 10233
9837 10314 10421 10471
9575 10070 10331 10322
9216 9686 9844 9845
12/31/1993 9281 9756 9820 9918
9248 9721 9835 9824
9085 9547 9411 9486
9510 9965 9672 9807
9935 10453 10249 10321
9542 10035 10080 10128
9739 10244 10254 10239
9248 9721 9802 9777
9281 9756 9940 9867
9477 9965 10059 9970
9902 10418 10594 10492
10065 10592 11014 10674
12/31/1994 10392 10941 11107 10889
10654 11220 11381 11151
10915 11498 11899 11605
11340 11951 12647 12211
11569 12195 12786 12437
11830 12474 13070 12738
11797 12439 12740 12410
12353 12997 13309 12952
12320 12997 13317 12920
12647 13310 13552 13108
12908 13589 14064 13553
13072 13798 14175 13715
12/31/1995 13333 14077 14860 14134
13627 14390 15164 14325
13464 14216 14705 14110
12582 13310 13564 13156
13268 14042 14297 13915
13922 14704 15205 14521
14052 14843 15027 14563
14739 15575 15912 15384
14346 15192 15644 15401
15327 16202 16336 15979
15294 16167 15977 15848
14869 15749 15074 15172
12/31/1996 15131 16028 15443 15566
16601 17561 16827 16927
17190 18188 17292 17402
18627 19686 18948 19125
17941 19024 18763 19102
19085 20209 19712 20200
18268 19373 18725 19322
18497 19582 18922 19608
18758 19895 19170 20369
18333 19408 18825 19981
19739 20906 20595 21636
20556 21812 21458 22612
12/31/1997 20948 22230 21750 23025
20523 21777 20855 21989
21013 22300 21445 22128
19967 21185 20527 21270
16078 17073 16609 17311
17157 18223 17865 18927
18170 19268 19181 20618
19216 20418 20474 21647
20490 21777 22595 24262
21111 22404 23272 23318
20131 21394 22134 22097
21373 22718 23367 22714
12/31/1998 22386 23798 24432 24506
22582 24042 24117 24612
23922 25470 25801 25930
23301 24774 24979 25379
22451 23902 24720 24509
22288 23693 24510 23753
23464 24983 26405 24963
25980 27666 29139 26273
28301 30139 34185 27835
27843 29652 34178 27051
32353 34460 41363 28944
33399 35575 41405 31366
12/31/1999 31667 33728 37386 30271
30621 32613 34661 29893
32680 34843 38339 30332
31569 33659 35911 30811
35882 38293 41327 34252
34869 37213 39307 34017
32908 35122 36617 32863
29118 31045 28659 30383
31382 33494 30169 32707
31979 34131 31892 33436
30320 32362 26376 31527
28595 30523 22601 29183
12/31/2000 31846 33954 26368 32403
31979 34131 26244 33158
31614 33742 26258 33024
30950 33034 24487 32531
29524 31513 22712 31467
25842 27623 18959 27553
26207 27976 20952 28772
27865 29780 23207 30912
28429 30382 24089 32509
27965 29886 23307 32340
26737 28578 21986 32380
28263 30240 23664 34695
12/31/2001 27235 29144 22411 34533
26870 28719 21742 33950
24283 25996 19343 31465
22093 23626 17463 28417
21795 23343 17403 28560
19904 21327 16020 26259
20899 22388 17261 27397
22027 23591 18612 28982
20700 22176 17487 27791
20501 21964 17316 26979
19804 21221 17165 26337
20169 21646 17485 26558
12/31/2002 21463 23025 18675 28486
22956 24652 20472 30847
23221 24935 20764 31240
23851 25607 21506 32348
25145 26986 22691 33816
24283 26067 22251 33298
10/31/2003 26372 28330 24044 35816
The chart above represents a comparison of a hypothetical $10,000
investment in the indicated share class versus a similar investment
in the Fund's benchmark, and represents the reinvestment of dividends
and capital gains in the Fund.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 10 SINCE
AS OF OCTOBER 31, 2003 DATE'D' YEAR YEAR YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class A(2) 7/1/93 19.91% 6.65% 10.18% 10.34%
HSBC Investor Mid-Cap Fund Class B(3) 7/1/93 21.20% 6.96% 9.90% 10.07%
HSBC Investor Mid-Cap Fund Class C(4) 7/1/93 24.81% 7.10% 9.97% 10.13%
HSBC Investor Mid-Cap Fund Trust 7/1/93 26.54% 8.01% 10.97% 11.18%
(2) Reflects the maximum sales charge of 5.00%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
'D' Prior to July 1, 2000, HSBC Asset Management (Americas), Inc.
managed another pooled investment vehicle called a collective
investment trust (CTF) with the same investment objective as the Fund
since 1993. The assets from that CTF were converted into the HSBC
Investor Mid-Cap Fund on July 1. The CTF was not registered with the
Securities & Exchange Commission (SEC) and thus was not subject to
certain investment restrictions that are imposed on the Fund. If the
CTF had been registered with the SEC, its performance might have been
adversely affected. Performance assumes reinvestment of dividends
and distributions. Total returns of the CTF have been adjusted for
the Fund's expenses.
The Fund has changed its standardized benchmark from the Standard &
Poor's 400 Mid Cap Index to the Russell MidCap Growth Index to better
represent the objectives of the Fund. The Standard & Poor's 400 Mid
Cap Index consists of 400 domestic stocks chosen for market size,
liquidity and industry group representation. The Russell Midcap
Growth Index measures the performance of those Russell securities in
the Russell universe with higher price-to-book ratios and higher
forecasted growth values. The indices are unmanaged and do not
reflect the deduction of expenses associated with a mutual fund, such
as investment management 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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 17
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR INTERNATIONAL EQUITY FUND
HSBC INVESTOR OVERSEAS EQUITY FUND'D' (CLASS A (INVESTOR) SHARES, B
SHARES AND C SHARES)
by David Fisher
Portfolio Manager
Capital Guardian Trust Company
The HSBC Investor International Equity Fund and the HSBC Investor
Overseas Equity Fund (the "Funds") seek to provide their shareholders
with long-term growth of capital and future income by investing
primarily in securities of non-U.S. issuers and securities of issuers
whose principal markets are outside of the United States. The Funds
employ a two-tier fund structure, known as a "master-feeder," in
which the Funds invest all of their investable assets in the HSBC
Investor International Equity Portfolio (the "Portfolio"). The
Portfolio employs Capital Guardian Trust Company as sub-investment
adviser.
The Portfolio invests primarily in equity securities of companies
organized and domiciled in developed nations outside the U.S., or for
which the principal trading market is outside the U.S., including
Europe, Canada, Australia and the Far East.
For the year ended October 31, 2003, the shares of the HSBC Investor
International Equity Fund produced a 21.03% return, and the Class A
(Investor) Shares of the HSBC Investor Overseas Equity Fund returned
20.09% (without sales charge). That compared to a total return of
24.75% and 21.64% for the Funds' benchmark, the Morgan Stanley
Capital International, Europe, Australasia and Far East Index and the
Fund's peer group, the Lipper International Funds Average(1),
respectively.
The Fund's absolute returns benefited from an international-equity
rally, which was driven by investor expectations for an improving
global economy. The Fund also benefited from a weakening U.S. dollar,
which fell against the Euro and the British pound. Japanese stocks
performed well as government intervention in the currency markets
stabilized the yen and banking reform appeared to gain momentum.*
The Fund's performance relative to its benchmark benefited from our
overweight position in the information technology sector,
particularly among shares of semiconductor and
semiconductor-equipment companies. Semiconductor-equipment stocks
performed well as investors believed that semiconductor manufacturers
would increase spending. The Fund's exposure to Japanese financial
stocks also boosted relative performance, as such stocks were buoyed
by the country's improving economic and financial picture.*
European financial stocks-particularly shares of insurance firms-were
a drag on the Fund's relative performance. Although the Fund's
insurance holdings rose from their 2002 lows, these companies
continued to experience solvency problems during the period.*
- --------------------------------------------------------------------------------
'D' International investing involves increased risk and volatility.
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
18 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR INTERNATIONAL EQUITY FUND
HSBC INVESTOR OVERSEAS EQUITY FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PEFORMANCE GRAPH]
HSBC Investor
International Equity
Fund MSCI EAFE Index
1/9/1995 10000 10000
9740 9618
9800 9593
9910 10194
10300 10580
10440 10457
10330 10276
10902 10919
10771 10505
11002 10713
10831 10428
11012 10720
12/31/1995 11254 11155
11467 11204
11528 11244
11639 11486
12045 11823
12035 11608
12090 11676
11744 11338
11917 11365
12242 11670
12263 11554
12843 12016
12/31/1996 12950 11865
13085 11452
13324 11642
13397 11687
13667 11752
14644 12520
15497 13213
16027 13430
14779 12429
15788 13128
14301 12122
14197 12001
12/31/1997 14208 12109
14823 12665
15874 13481
16466 13899
16690 14012
16433 13948
16187 14056
16187 14202
13839 12446
13627 12067
14801 13329
15695 14015
12/31/1998 15975 14571
16806 14531
16443 14188
17356 14784
18292 15386
17777 14597
19217 15170
19930 15624
20305 15685
20878 15846
21744 16443
23652 17018
12/31/1999 27319 18549
26145 17373
27693 17844
28317 18539
26944 17567
25521 17142
26857 17816
25322 17072
25846 17224
23637 16389
22626 16005
21565 15408
12/31/2000 21952 15960
22529 15952
20461 14757
19413 13780
21253 14747
20340 14238
19413 13661
18822 13414
18204 13077
16148 11755
16874 12056
17868 12501
12/31/2001 18116 12575
17230 11908
17325 11992
18252 12705
18211 12738
18266 12911
17352 12402
15485 11179
15185 11156
13577 9961
14626 10497
15512 10975
12/31/2002 14788 10606
14192 10164
13859 9932
13359 9744
14594 10711
15385 11369
15690 11651
16162 11935
16398 12225
16578 12604
10/31/2003 17702 13391
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Overseas
Equity Fund Class A
(Investor)2 MSCI EAFE Index
8/26/1996 9497 10000
9383 10100
9630 10268
9639 10166
10066 10573
12/31/1996 10132 10439
10227 10076
10407 10244
10388 10283
10578 10340
11301 11016
11928 11626
12318 11816
11358 10936
12108 11551
10996 10666
10920 10560
12/31/1997 10932 10654
11404 11144
12194 11861
12628 12229
12791 12329
12579 12272
12387 12367
12387 12496
10595 10950
10393 10617
11212 11727
11876 12331
12/31/1998 12087 12820
12695 12785
12415 12484
13090 13008
13794 13538
13389 12844
14460 13347
14981 13747
15251 13800
15656 13942
16303 14468
17711 14973
12/31/1999 20392 16320
19474 15286
20607 15700
21056 16312
20021 15457
19006 15082
19992 15675
18840 15021
19221 15155
17561 14420
16800 14082
15999 13557
12/31/2000 16276 14042
16692 14036
15144 12984
14365 12125
15721 12975
15027 12527
14333 12020
13906 11802
13437 11505
11911 10343
12444 10607
13170 10999
12/31/2001 13339 11064
12687 10477
12754 10551
13427 11179
13383 11208
13427 11360
12776 10912
11484 9836
11274 9816
10114 8764
10898 9236
11561 9656
12/31/2002 11013 9332
10544 8943
10243 8739
9864 8574
10734 9424
11225 10003
11426 10251
11805 10501
12006 10756
12263 11090
10/31/2003 13089 11782
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share classes versus a similar investment
in the Funds' benchmark and represents the reinvestment of dividends
and capital gains in the Funds.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------------
HSBC Investor International Equity Fund 1/9/95 21.03% 3.64% 6.70%
HSBC Investor Overseas Equity Fund Class A (Investor)(2) 8/26/96 14.08% 2.10% 3.82%
HSBC Investor Overseas Equity Fund Class B(3) 1/6/98 15.26% 2.34% 2.20%
HSBC Investor Overseas Equity Fund Class C(4) 11/4/98 18.28% N/A 1.99%
(2) Reflects the maximum sales charge of 5.00%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Funds are measured against the Morgan Stanley Capital
International (MSCI) Europe, Australasia and Far East (EAFE) Index,
which is an unmanaged index that measures performance of a diverse
range of developed countries in the indicated regions. The
performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund
accounting fees. The Funds' 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.
During the period shown, the Investment Manager waived and/or
voluntarily reimbursed fees for various expenses. Had these waivers
and/or reimbursements not been in effect, performance quoted would
have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 19
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR SMALL CAP EQUITY FUND
HSBC INVESTOR OPPORTUNITY FUND'D' (CLASS A (INVESTOR) SHARES, B SHARES
AND C SHARES)
by William A. Muggia
President - Chief Investment Officer
Westfield Capital Management
The HSBC Investor Small Cap Equity Fund and the HSBC Investor
Opportunity Fund ("the Funds") seek to provide their shareholders
with long-term growth of capital by investing in equity securities of
emerging small and medium-sized companies expected to deliver
earnings growth well above the growth rate of the economy and the
rate of inflation. The Funds employ a two-tier structure, commonly
referred to as "master-feeder." The Funds invest all of their
investable assets in the HSBC Investor Small Cap Equity Portfolio
(the "Portfolio"). The Portfolio employs Westfield Capital
Management, as sub-investment adviser.
The Portfolio invests primarily in common stocks of small and
medium-sized companies that may have the potential to become major
enterprises.
During the year ended October 31, 2003, the shares of the HSBC
Investor Small Cap Equity Fund produced a 33.33% return and the Class
A (Investor) Shares of the HSBC Investor Opportunity Fund produced a
32.31% return (without sales charge). The Funds' benchmark, the
Russell 2000 Index and the Fund's peer group, the Lipper Mid-Cap
Growth Funds Average(1), returned 36.29% and 26.48%, respectively.
Small-company stocks staged a powerful rally during the period,
helping the Fund produce strong absolute returns. Investors
anticipating an economic recovery bought shares of firms in cyclical
industries. That trend especially boosted technology stocks, which
were the best-performing sector among small caps. Shares of firms
with weak business fundamentals led the rally, as those firms
recovered from very poor performance during the previous three years.
The HSBC Investor Small Cap Equity Fund employs a "growth at a
reasonable price" investment strategy. That approach led to an
underweight position within technology stocks, because many
technology shares had become very expensive relative to future
earnings growth. We did increase the Fund's technology stake from
dramatically underweight to modestly underweight during the period,
because we believed that specific technology firms had rationalized
their cost structures such that any top-line growth would translate
into solid earnings growth.
Shares of the smallest firms, particularly firms without earnings,
led the small-cap surge. Our investment strategy leads us to avoid
more-speculative stocks in favor of what we view as higher-quality
companies with proven business models. We believe that investors will
again focus on proven management teams and that the portfolio could
benefit from this shift.
Our decision to overweight the energy sector detracted from
performance on a relative basis. Energy stocks lagged as investors
rotated money into technology stocks. We maintained the Fund's 8%
stake in energy shares-compared to the benchmark's 4%
position-because the industry's fundamentals are very sound. The
majority of the Fund's energy holdings operate in the natural gas
industry, and they should benefit as supply for natural gas continues
to outstrip demand. We believe this trend should become more dramatic
as the economic rebound unfolds.*
We maintained the Fund's 28% health-care position (compared to 21%
for the benchmark), because we believe attractive demographic trends
and business fundamentals will produce good long-term returns in that
industry. Additionally, we have found a number of companies within
the healthcare services and facilities spaces that have benefited
from consolidation and a stabilization of reimbursement trends.*
We began the period with an overweight position in financial-services
stocks, but we trimmed those holdings as some stocks exceeded our
price targets. Those reductions led us to under-weight
financial-services shares during most of the period, which helped
relative returns.*
- --------------------------------------------------------------------------------
'D' Small-capitalization funds typically carry additional risks, since
smaller companies generally have a higher risk of failure.
Historically, smaller companies' stocks have experienced a greater
degree of market volatility than average.
(1) For additional information, please refer to the Glossary of Terms.
* Portfolio composition is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
20 HSBC INVESTOR FAMILY OF FUNDS
<Page>
PORTFOLIO REVIEWS
HSBC INVESTOR SMALL CAP EQUITY FUND
HSBC INVESTOR OPPORTUNITY FUND - AS OF OCTOBER 31, 2003
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor Small
Cap Equity Fund Russell 2000 Index
9/3/1996 10000 10000
10900 10391
10630 10231
11060 10652
12/31/1996 10864 10931
11216 11150
10864 10879
10310 10366
10502 10395
11860 11551
12513 12047
13238 12607
13409 12896
14274 13839
13519 13231
13509 13146
12/31/1997 13336 13376
13336 13165
14655 14138
15354 14721
15738 14803
15005 14006
15354 14035
14340 12899
11318 10394
12277 11208
12942 11665
13720 12276
12/31/1998 15127 13036
14999 13209
13663 12139
13830 12328
14447 13433
15166 13629
16168 14246
15680 13855
15294 13342
15281 13345
16129 13399
18325 14199
12/31/1999 22418 15806
21502 15553
26180 18121
25011 16926
23517 15908
22573 14980
25039 16286
23757 15762
26504 16965
25673 16466
25095 15731
21502 14116
12/31/2000 23547 15329
25374 16127
22864 15069
20286 14332
23103 15453
23223 15833
24059 16379
22847 15493
21600 14992
18117 12974
19329 13733
21635 14797
12/31/2001 23240 15710
22591 15547
21139 15120
22762 16336
21139 16485
20252 15753
18578 14971
16017 12710
16188 12678
15402 11767
15829 12145
16410 13229
12/31/2002 15539 12492
15436 12146
14975 11779
15146 11931
16273 13062
18083 14464
18356 14726
19364 15647
20234 16364
19756 16062
10/31/2003 21105 17411
VALUE OF A $10,000 INVESTMENT
[PERFORMANCE GRAPH]
HSBC Investor
Opportunity Fund Class
A (Investor)2 Russell 2000 Index
9/23/1996 9497 10000
9687 10100
9307 9846
9677 10252
12/31/1996 9501 10520
9805 10730
9501 10470
9007 9976
9169 10004
10337 11117
10907 11593
11525 12133
11667 12411
12399 13319
11753 12734
11724 12651
12/31/1997 11578 12873
11578 12670
12715 13607
13317 14168
13643 14246
13011 13479
13317 13507
12428 12414
9800 10003
10630 10786
11203 11226
11865 11814
12/31/1998 13080 12545
12965 12712
11808 11682
11934 11865
12471 12928
13080 13117
13932 13710
13511 13334
13164 12840
13143 12843
13869 12895
15751 13665
12/31/1999 19238 15212
18415 14968
22416 17439
21421 16289
20141 15309
19352 14417
21467 15674
20347 15169
22690 16327
21970 15847
21433 15140
18346 13586
12/31/2000 20062 14752
21613 15520
19466 14502
17250 13793
19636 14872
19721 15237
20420 15763
19398 14910
18324 14428
15358 12486
16363 13217
18307 14240
12/31/2001 19670 15119
19091 14962
17863 14552
19244 15721
17863 15865
17096 15161
15682 14408
13534 12232
13670 12201
13006 11325
13346 11688
13841 12731
12/31/2002 13108 12022
13006 11689
12614 11336
12733 11482
13670 12571
15170 13920
15392 14172
16227 15059
16943 15749
16551 15458
10/31/2003 17659 16756
The charts above represent a comparison of a hypothetical $10,000
investment in the indicated share classes versus a similar investment
in the Funds' benchmark and represents the reinvestment of dividends
and capital gains in the Funds.
AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE
AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION
- ---------------------------------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Fund 9/3/96 33.33% 10.28% 11.00%
HSBC Investor Opportunity Fund Class A (Investor)(2) 9/23/96 25.73% 8.40% 8.33%
HSBC Investor Opportunity Fund Class B(3) 1/6/98 27.16% 8.72% 6.90%
HSBC Investor Opportunity Fund Class C(4) 11/4/98 30.31% N/A 8.40%
(2) Reflects the maximum sales charge of 5.00%.
(3) Reflects the contingent deferred sales charge maximum of 4.00%.
(4) Reflects the contingent deferred sales charge maximum of 1.00%.
- --------------------------------------------------------------------------------
The Funds are measured against the Russell 2000 Index, an unmanaged
index generally representative of the performance of
small-capitalization stocks. The performance of the index does not
reflect the deduction of expenses associated with a mutual fund, such
as investment management and fund accounting fees. The Funds'
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. During the period shown, the
Investment Manager waived and/or voluntarily reimbursed fees for
various expenses. Had these waivers and/or reimbursements not been in
effect, performance quoted would have been lower.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return
and net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
Performance is as of date indicated and may differ from current
performance due to market volatility. For more information about the
HSBC Investor Funds, including fees, expenses, historical fund
performance and ongoing charges, call 1-800-782-8183.
HSBC INVESTOR FAMILY OF FUNDS 21
<Page>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
.................................................................
<Table>
<Caption>
MUNICIPAL BONDS - 90.2%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
GUAM - 0.1%
Guam Economic Development Authority
Revenue, 5.50%, 5/15/41, Callable
5/15/11 @ 100......................... 100,000 86,378
----------
NEW YORK - 79.9%
Brookhaven, New York GO (FGIC Insured),
5.50%, 10/1/12........................ 500,000 552,580
Corning City, New York School District
GO (FSA Insured), 4.00%, 6/15/08...... 930,000 995,174
Corning City, New York School District
GO (FSA Insured), 5.00%, 6/15/09...... 790,000 881,719
Erie County, New York GO (FGIC
Insured), 5.375%, 6/15/07............. 250,000 266,853
Guilderland, New York Central School
District GO (FSA Insured), 3.50%,
6/15/05............................... 250,000 258,990
Honeoye, New York Central School
District GO (FGIC Insured), 3.00%,
6/15/04............................... 310,000 313,757
Long Island, New York Power Authority
Revenue (MBIA Insured), 4.50%, 4/1/11,
Mandatory Tender 4/1/05 @ 100......... 1,075,000 1,122,504
Metropolitan Transportation Authority
of New York Revenue (FGIC Insured),
5.25%, 7/1/17, Prerefunded 7/1/08 @
100.5................................. 1,145,000 1,299,311
Metropolitan Transportation Authority
of New York Revenue (FSA Insured),
5.00%, 11/15/32, Callable 11/15/12 @
100................................... 1,625,000 1,637,902
Metropolitan Transportation Authority
of New York Revenue (MBIA Insured),
5.50%, 1/1/19......................... 480,000 525,274
Metropolitan Transportation Authority
of New York Revenue, Escrowed to
Maturity, 5.75%, 7/1/13............... 285,000 328,491
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.625%, 1/1/10........................ 1,240,000 1,376,970
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.75%, 1/1/14......................... 750,000 837,443
Nassau County Interim Finance Authority
(MBIA Insured), 5.00%, 11/15/11....... 500,000 554,590
New York City GO, 5.00%, 8/1/05........ 1,000,000 1,056,690
New York City GO, 5.00%, 8/1/08........ 990,000 1,078,516
New York City GO, 6.00%, 8/1/14,
Callable 8/1/07 @ 101................. 1,000,000 1,113,410
New York City Housing Development Corp.
Revenue, AMT, 5.60%, 11/1/19.......... 100,000 104,034
New York City Industrial Development
Agency (FSA Insured), 5.00%,
11/15/19.............................. 1,000,000 1,047,900
New York City Municipal Assistance
Corp. Revenue, 6.00%, 7/1/06.......... 1,000,000 1,115,780
New York City Municipal Water Finance
Authority Revenue, 5.00%, 6/15/34,
Callable 6/15/13 @ 100................ 1,800,000 1,800,306
New York City Transitional Finance
Authority Revenue, 5.25%, 5/1/17,
Callable 5/1/11 @ 100................. 400,000 427,844
New York City Transitional Finance
Authority Revenue, 5.25%, 2/1/29,
Callable 2/1/11 @ 100................. 1,500,000 1,640,595
New York City Transitional Finance
Authority Revenue, 5.00%, 5/1/30,
Callable 11/1/12 @ 101................ 1,500,000 1,502,160
New York State Dormitory Authority
Revenue, 5.00%, 4/1/07................ 500,000 545,655
</Table>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
New York State Dormitory Authority
Revenue, 6.50%, 8/15/11............... 225,000 267,597
New York State Dormitory Authority
Revenue, 5.25%, 7/1/13, Callable
7/1/08 @ 101.......................... 500,000 548,795
New York State Dormitory Authority
Revenue, 5.50%, 8/15/17............... 990,000 1,043,529
New York State Dormitory Authority
Revenue, 5.50%, 8/15/17, Prerefunded
2/15/07 @ 102......................... 10,000 11,353
New York State Dormitory Authority
Revenue, 6.00%, 7/1/19, Callable
7/1/09 @ 101.......................... 350,000 402,031
New York State Dormitory Authority
Revenue (FSA Insured), 5.25%, 8/15/19,
Callable 8/15/12 @ 100................ 1,000,000 1,071,120
New York State Dormitory Authority
Revenue (AMBAC Insured), 4.00%,
7/1/04................................ 975,000 993,788
New York State Dormitory Authority
Revenue (AMBAC Insured), 5.50%,
8/1/10................................ 750,000 851,648
New York State Dormitory Authority
Revenue (AMBAC Insured), 5.50%,
7/1/18................................ 500,000 567,665
New York State Dormitory Authority
Revenue (CIFG Group Insured), 3.00%,
7/1/05................................ 1,025,000 1,052,429
New York State Dormitory Authority
Revenue (CIFG Group Insured), 4.00%,
7/1/06................................ 1,120,000 1,185,654
New York State Dormitory Authority
Revenue (FSA Insured), 5.25%, 7/1/18,
Callable 7/1/12 @ 101................. 1,460,000 1,582,714
New York State Dormitory Authority
Revenue (MBIA Insured), 5.50%,
7/1/23................................ 1,300,000 1,432,443
New York State Dormitory Authority
Revenue, Series A (FSA Insured),
5.00%, 7/1/26, Callable 7/1/11 @
102................................... 500,000 505,700
New York State Environmental Facscorp,
5.70%, 1/15/14, Callable 7/15/09 @
101................................... 15,000 17,567
New York State Environmental Facscorp,
5.70%, 1/15/14, Callable 7/15/09 @
101................................... 415,000 467,805
New York State Environmental Facscorp,
5.70%, 1/15/14, Prerefunded 7/15/09 @
101................................... 570,000 667,532
New York State Local Government
Assistance Corp. Revenue, 6.00%,
4/1/16, Prerefunded 4/1/05 @ 102...... 1,000,000 1,087,320
New York State Mortgage Agency Revenue,
AMT, 5.60%, 10/1/14, Callable 9/1/07 @
101.5................................. 1,000,000 1,050,190
New York State Thruway Authority
Revenue, 5.50%, 4/1/11................ 1,000,000 1,130,180
New York State Thruway Authority
Revenue, 5.50%, 3/15/20............... 500,000 542,150
New York State Thruway Authority
Revenue, Series A, 5.00%, 3/15/19..... 1,400,000 1,466,066
New York State Thruway Authority
Revenue (MBIA Insured), 5.00%,
3/15/21, Callable 3/15/13 @ 100....... 500,000 516,215
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.25%, 4/1/07............... 300,000 332,460
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.50%, 4/1/17, Callable
4/1/11 @ 101.......................... 1,000,000 1,100,160
</Table>
22 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
- ---------------------------------------------------------------
<Table>
<Caption>
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12, Callable
4/1/07 @ 102.......................... 1,000,000 1,146,950
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12................ 500,000 569,385
New York State Urban Development Corp.
Revenue, 5.125%, 1/1/25, Prerefunded
1/1/11 @ 100.......................... 175,000 195,939
New York State Urban Development Corp.
Revenue (MBIC Insured), 5.00%,
3/15/33, Callable 3/15/13 @ 100....... 500,000 504,065
New York State Urban Development Corp.
Revenue, Series A (MBIA Insured),
6.50%, 1/1/09......................... 500,000 587,865
Niagara Falls New York Bridge Common
Toll Revenue, 2.00%, 10/1/05.......... 400,000 405,280
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/14........................ 300,000 323,709
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/15........................ 665,000 714,210
Peru, New York Central School District
(FGIC Insured), 4.00%, 6/15/04........ 225,000 229,118
Port Authority of New York & New Jersey
Revenue, 5.00%, 9/1/27................ 795,000 799,182
Port Authority of New York & New Jersey
Revenue, 5.375%, 3/1/28............... 1,100,000 1,175,019
Port Authority of New York & New Jersey
Special Obligation Revenue, AMT,
5.75%, 12/1/22, Callable 12/1/07 @
102................................... 500,000 551,620
Triborough, New York Bridge & Tunnel
Authority Revenue, 5.00%, 11/15/32,
Callable 11/15/12 @ 100............... 800,000 803,448
Triborough, New York Bridge & Tunnel
Authority Revenue (MBIA Insured),
5.00%, 11/15/32....................... 1,000,000 1,008,620
----------
51,292,969
----------
PUERTO RICO - 10.2%
Puerto Rico Commonwealth (FGIC
Insured), 5.25%, 7/1/17, Callable
7/1/13 @ 100.......................... 500,000 548,830
Puerto Rico Commonwealth, Public
Improvement, Series A (MBIA Insured),
5.125%, 7/1/31, Callable 7/1/11 @
100................................... 1,650,000 1,694,814
Puerto Rico Electric Power Authority
Revenue (MBIA Insured), 5.25%,
7/1/22................................ 1,000,000 1,092,650
Puerto Rico Electric Power Authority
Revenue, Series HH (FSA Insured),
5.25%, 7/1/29, Callable 7/1/10 @
101................................... 1,430,000 1,486,571
Puerto Rico Municipal Financial Agency
(FSA Insured), 5.00%, 8/1/27.......... 250,000 255,025
Puerto Rico Public Buildings Authority
Revenue, Government Facilities, Series
D, 5.375%, 7/1/33, Callable 7/1/12 @
100................................... 900,000 925,983
Puerto Rico Publishing Finance Corp.
Revenue (AMBAC Insured), 5.375%,
6/1/18................................ 500,000 564,150
----------
6,568,023
----------
TOTAL MUNICIPAL BONDS.................. 57,947,370
----------
</Table>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
<Table>
<Caption>
VARIABLE RATE DEMAND NOTES* - 5.6%
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK - 5.6%
Long Island, New York Power Authority
Revenue (LOC Bayerische Landesbank),
1.15%, 5/1/33......................... 1,500,000 1,500,000
New York City GO (LOC JP Morgan),
1.13%, 8/1/20......................... 300,000 300,000
New York State Job Development
Authority, AMT (LOC Bayerische
Landesbank), 1.13%, 3/1/05............ 1,300,000 1,300,000
New York City Water & Sewer Authority
Revenue (SPA LOC Bayerische
Landesbank), 1.13%, 6/15/35........... 500,000 500,000
----------
TOTAL VARIABLE RATE DEMAND NOTES*...... 3,600,000
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 2.8%
Provident New York Tax-Free Money
Market Fund........................... 1,772,351 1,772,351
----------
TOTAL INVESTMENT COMPANIES............. 1,772,351
----------
TOTAL INVESTMENTS
(COST $60,759,864) (a) - 98.6%....... 63,319,721
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $64,219,651.
(a) Represents cost for financial reporting and federal income tax purposes and
differs from value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.......... $2,648,002
Unrealized depreciation.......... (88,145)
----------
Net unrealized appreciation...... $2,559,857
----------
----------
</Table>
* Variable rate security. The interest rates on these securities are adjusted
periodically to reflect then-current short-term interest rates. The rates
presented in this report represent the rates that were in effect on October
31, 2003. Each of these securities contains put or demand features that allow
the fund to require the issuer to repurchase the security from the fund
within various time periods, including daily, weekly, monthly, or
semi-annually.
AMT -- Interest on security is subject to Federal Alternative
Minimum Tax
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GO -- General Obligation
LOC -- Letter of Credit
SPA -- Standby Purchase Agreement
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 23
<Page>
HSBC INVESTOR BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
- ---------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS - 57.5%
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 0.7%
United Technologies Corp............... 300 25,407
----------
AIR FREIGHT & LOGISTICS - 0.3%
United Parcel Service, Inc.,
Class B............................... 160 11,603
----------
BANKING - 3.2%
Bank of America Corp................... 700 53,011
Mellon Financial Corp.................. 600 17,922
Wells Fargo & Co....................... 800 45,056
----------
115,989
----------
BIOTECHNOLOGY - 0.7%
Amgen, Inc. (b)........................ 400 24,704
----------
CHEMICALS - 0.6%
Du Pont (E.I) de Nemours and Co........ 500 20,200
----------
COMMERCIAL SERVICES - 0.7%
Cendant Corp. (b)...................... 1,200 24,516
----------
COMPUTER SOFTWARE - 4.0%
Affiliated Computer Services, Inc.
(b)................................... 230 11,254
First Data Corp........................ 690 24,633
Microsoft Corp......................... 2,600 67,990
Oracle Corp. (b)....................... 3,200 38,272
----------
142,149
----------
COMPUTERS - 2.8%
Dell, Inc. (b)......................... 1,030 37,204
Hewlett-Packard Co..................... 1,700 37,927
International Business Machines
Corp.................................. 300 26,844
----------
101,975
----------
CONSUMER PRODUCTS - 4.8%
Altria Group, Inc...................... 1,000 46,500
Anheuser-Busch Cos., Inc............... 300 14,778
PepsiCo, Inc........................... 800 38,256
The Coca-Cola Co....................... 500 23,200
The Procter & Gamble Co................ 280 27,521
TJX Companies, Inc..................... 1,000 20,990
----------
171,245
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 4.8%
3M Co.................................. 300 23,661
General Electric Co.................... 2,800 81,228
ITT Industries, Inc.................... 200 13,598
Parker Hannifin Corp................... 300 15,291
SPX Corp. (b).......................... 200 9,624
Tyco International Ltd................. 1,300 27,144
----------
170,546
----------
ELECTRIC UTILITIES - 1.6%
Exelon Corp............................ 700 44,415
Southern Co............................ 400 11,920
----------
56,335
----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 1.9%
Intel Corp............................. 2,100 69,405
----------
ENERGY EQUIPMENT & SERVICES - 1.1%
Nabors Industries Ltd. (b)............. 1,010 38,178
----------
</Table>
- ---------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
FINANCIAL SERVICES - 6.5%
Capital One Financial Corp............. 200 12,160
Citigroup, Inc......................... 1,700 80,580
Countrywide Credit Industries, Inc..... 200 21,024
Fannie Mae............................. 300 21,507
Goldman Sachs Group, Inc............... 400 37,560
J.P. Morgan Chase & Co................. 1,100 39,490
Merrill Lynch & Co., Inc............... 400 23,680
----------
236,001
----------
FOREST PRODUCTS & PAPER - 0.9%
International Paper Co................. 800 31,480
----------
HEALTH CARE - 2.3%
Cardinal Health, Inc................... 600 35,604
Caremark Rx, Inc. (b).................. 1,200 30,060
Guidant Corp........................... 300 15,303
----------
80,967
----------
INSURANCE - 2.3%
American International Group, Inc...... 700 42,581
The Allstate Corp...................... 600 23,700
Willis Group Holdings Ltd.............. 530 17,649
----------
83,930
----------
LEISURE EQUIPMENT & PRODUCTS - 0.9%
Mattel, Inc............................ 1,600 30,976
----------
MEDIA - 1.6%
Time Warner, Inc. (b).................. 1,400 21,406
Viacom, Inc. Class B................... 900 35,883
----------
57,289
----------
METALS & MINING - 0.4%
Alcoa, Inc............................. 400 12,628
----------
OIL & GAS - 2.2%
Exxon Mobil Corp....................... 1,600 58,528
Occidental Petroleum Corp.............. 600 21,156
----------
79,684
----------
PHARMACEUTICALS - 4.9%
Abbott Laboratories.................... 600 25,572
Johnson & Johnson...................... 700 35,231
Merck & Co., Inc....................... 400 17,700
Pfizer, Inc............................ 2,400 75,840
Wyeth.................................. 500 22,070
----------
176,413
----------
RETAIL - 4.7%
Abercrombie & Fitch Co., Class A (b)... 600 17,100
Home Depot, Inc........................ 1,100 40,777
Kohl's Corp. (b)....................... 500 28,035
Target Corp............................ 300 11,922
Wal-Mart Stores, Inc................... 1,200 70,740
----------
168,574
----------
TELECOMMUNICATIONS - 3.6%
Cisco Systems, Inc. (b)................ 2,300 48,254
Comcast Corp. Class A (b).............. 700 23,744
SBC Communications, Inc................ 900 21,582
Verizon Communications, Inc............ 1,100 36,960
----------
130,540
----------
TOTAL COMMON STOCKS.................... 2,060,734
----------
</Table>
24 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
- ---------------------------------------------------------------
<Table>
<Caption>
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 36.6%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
FEDERAL HOME LOAN BANK - 3.6%
3.25%, 8/15/05......................... 125,000 127,725
----------
FEDERAL HOME LOAN MORTGAGE CORP. - 13.9%
2.125%, 11/15/05....................... 100,000 99,982
4.75%, 1/2/07.......................... 100,000 104,921
5.375%, 11/15/11....................... 50,000 52,968
Pool #A11010, 5.00%, 7/1/33............ 248,127 244,348
----------
502,219
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.1%
Pool #2687, 6.00%, 12/20/28............ 108,662 112,081
----------
U.S. TREASURY BONDS - 2.1%
5.25%, 2/15/29......................... 75,000 74,921
----------
U.S. TREASURY NOTES - 13.9%
2.375%, 8/15/06........................ 50,000 50,156
2.625%, 5/15/08........................ 275,000 269,576
4.375%, 8/15/12........................ 175,000 177,652
----------
497,384
----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS.................... 1,314,330
----------
</Table>
- ---------------------------------------------------------------
<Table>
<Caption>
INVESTMENT COMPANIES - 4.5%
SHARES VALUE($)
--------- ----------
Dreyfus Cash Management Fund........... 162,985 162,985
----------
TOTAL INVESTMENT COMPANIES............. 162,985
----------
TOTAL INVESTMENTS
(COST $3,377,114) (A) - 98.6%........ 3,538,049
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $3,588,470.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $131,636. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation................. $67,434
Unrealized depreciation................. (38,135)
-------
Net unrealized appreciation............. $29,299
-------
-------
</Table>
(b) Represents non-income producing security.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 25
<Page>
HSBC INVESTOR EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
- -----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS - 96.8%
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 2.1%
Lockheed Martin Corp. ................... 12,350 572,546
United Technologies Corp. ............... 9,519 806,164
----------
1,378,710
----------
AUTO PARTS & EQUIPMENT - 0.9%
Johnson Controls, Inc. .................. 5,550 596,792
----------
BANKING - 4.4%
Bank of America Corp. ................... 20,450 1,548,679
Wells Fargo & Co. ....................... 24,500 1,379,840
----------
2,928,519
----------
BIOTECHNOLOGY - 1.7%
Amgen, Inc. (b).......................... 14,800 914,048
Gilead Sciences, Inc. (b)................ 4,000 218,320
----------
1,132,368
----------
CHEMICALS - 1.5%
Air Products and Chemicals, Inc. ........ 6,800 308,788
Du Pont (E.I) de Nemours and Co. ........ 17,350 700,940
----------
1,009,728
----------
COMMERCIAL SERVICES - 1.6%
Cendant Corp. (b)........................ 53,000 1,082,790
----------
COMPUTER SOFTWARE - 6.6%
Affiliated Computer Services, Inc. (b)... 4,100 200,613
Electronic Arts, Inc. (b)................ 3,575 354,068
Intuit, Inc. (b)......................... 5,450 272,391
Mercury Interactive Corp. (b)............ 8,200 380,808
Microsoft Corp. ......................... 76,150 1,991,323
Symantec Corp. (b)....................... 6,300 419,895
Unisys Corp. (b)......................... 2,100 32,256
Veritas Software Corp. (b)............... 19,300 697,695
----------
4,349,049
----------
COMPUTERS - 2.4%
Dell, Inc. (b)........................... 30,300 1,094,436
Hewlett-Packard Co. ..................... 23,300 519,823
----------
1,614,259
----------
CONSTRUCTION & HOUSING - 0.3%
Masco Corp. ............................. 7,750 213,125
----------
CONSUMER MANUFACTURING - 0.8%
Harley-Davidson, Inc. ................... 10,500 497,805
----------
CONSUMER PRODUCTS - 6.2%
Anheuser-Busch Cos., Inc. ............... 2,900 142,854
Avon Products, Inc. ..................... 7,600 516,496
Colgate-Palmolive Co. ................... 5,850 311,162
Diageo PLC ADR........................... 17,150 819,942
PepsiCo, Inc. ........................... 23,550 1,126,160
The Clorox Co. .......................... 9,450 428,085
The Estee Lauder Cos., Inc. Class A...... 2,100 78,519
The Procter & Gamble Co. ................ 5,650 555,339
Tiffany & Co. ........................... 2,400 113,880
----------
4,092,437
----------
</Table>
- -----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
DIVERSIFIED MANUFACTURING OPERATIONS - 3.4%
Danaher Corp. ........................... 3,100 256,835
General Electric Co. .................... 50,213 1,456,679
Tyco International Ltd. ................. 26,350 550,188
----------
2,263,702
----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 6.2%
Altera Corp. (b)......................... 14,500 293,335
Broadcom Corp. (b)....................... 12,300 392,985
Flextronics International Ltd. (b)....... 11,840 165,760
Intel Corp. ............................. 45,240 1,495,182
Koninklijke (Royal) Philips Electronics
NV ADR.................................. 35,331 948,284
Linear Technology Corp. ................. 9,400 400,534
Maxim Integrated Products, Inc. ......... 8,000 397,680
----------
4,093,760
----------
FINANCIAL SERVICES - 12.2%
Citigroup, Inc. ......................... 56,725 2,688,764
Fannie Mae............................... 10,700 767,083
Goldman Sachs Group, Inc. ............... 12,900 1,211,310
MBNA Corp. .............................. 43,250 1,070,438
Merrill Lynch & Co., Inc. ............... 10,600 627,520
Morgan Stanley........................... 31,100 1,706,457
----------
8,071,572
----------
GAS & ELECTRIC UTILITY - 2.1%
Entergy Corp. ........................... 15,550 838,145
Public Service Enterprise Group, Inc. ... 13,500 551,745
----------
1,389,890
----------
HEALTH CARE - 4.5%
Aventis ADR.............................. 14,750 781,160
Caremark Rx, Inc. (b).................... 14,400 360,720
Express Scripts, Inc. (b)................ 2,500 137,300
Health Management Associates, Inc. ...... 11,200 248,080
Medtronic, Inc. ......................... 11,300 514,941
Stryker Corp. ........................... 2,400 194,664
UnitedHealth Group, Inc. ................ 2,850 145,008
Wellpoint Health Networks, Inc. (b)...... 4,700 417,830
Zimmer Holdings, Inc. (b)................ 2,400 153,144
----------
2,952,847
----------
INSURANCE - 6.1%
American International Group, Inc. ...... 34,900 2,122,967
MetLife, Inc. ........................... 23,450 736,330
The Progressive Corp. ................... 2,000 147,600
Travelers Property Casualty Corp. ....... 55,418 903,313
Willis Group Holdings Ltd. .............. 3,900 129,870
----------
4,040,080
----------
INTERNET RELATED - 0.9%
Ebay, Inc. (b)........................... 8,800 492,272
Yahoo!, Inc. (b)......................... 2,100 91,770
----------
584,042
----------
</Table>
26 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
- -----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
LEISURE - 0.6%
Carnival Corp. .......................... 10,500 366,555
----------
MEDIA - 4.9%
Clear Channel Communications, Inc. ...... 23,700 967,434
Cox Communications, Inc. Class A (b)..... 3,500 119,245
Gannett Co., Inc. ....................... 8,440 709,888
Liberty Media Corp. Class A (b).......... 69,600 702,264
Time Warner, Inc. (b).................... 5,350 81,802
Viacom, Inc. Class B..................... 15,800 629,946
----------
3,210,579
----------
OIL & GAS - 6.2%
BP PLC ADR............................... 27,400 1,161,212
ConocoPhillips........................... 18,662 1,066,533
EnCana Corp. ............................ 21,927 753,631
Noble Corp. (b).......................... 11,400 391,362
Occidental Petroleum Corp. .............. 20,100 708,726
----------
4,081,464
----------
PHARMACEUTICALS - 8.2%
Abbott Laboratories...................... 18,450 786,339
Alcon, Inc. ............................. 2,800 154,308
Allergan, Inc. .......................... 4,580 346,340
Forest Laboratories, Inc. (b)............ 8,400 420,084
Johnson & Johnson........................ 20,100 1,011,633
Pfizer, Inc. ............................ 69,250 2,188,299
Wyeth.................................... 11,900 525,266
----------
5,432,269
----------
REAL ESTATE - 0.3%
Centex Corp. ............................ 900 87,750
Lennar Corp. ............................ 1,000 91,850
----------
179,600
----------
RETAIL - 5.3%
Bed Bath & Beyond, Inc. (b).............. 12,000 506,880
Lowe's Cos., Inc. ....................... 19,700 1,160,921
Staples, Inc. (b)........................ 14,700 394,254
Target Corp. ............................ 16,550 657,697
Wal-Mart Stores, Inc. ................... 13,300 784,035
----------
3,503,787
----------
</Table>
- -----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
TELECOMMUNICATIONS - 6.7%
BellSouth Corp. ......................... 36,700 965,577
Cisco Systems, Inc. (b).................. 41,200 864,376
Comcast Corp. Class A (b)................ 32,102 1,088,900
Comcast Corp. Special Class A (b)........ 20,400 665,448
EchoStar Communications Corp. Class A (b) 1,287 49,318
Juniper Networks, Inc. (b)............... 26,300 473,137
Motorola, Inc. .......................... 23,400 316,602
----------
4,423,358
----------
TRANSPORTATION - 0.7%
Union Pacific Corp. ..................... 7,250 453,850
----------
TOTAL COMMON STOCKS...................... 63,942,937
----------
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 2.8%
Dreyfus Cash Management Fund............. 1,855,126 1,855,126
----------
TOTAL INVESTMENT COMPANIES............... 1,855,126
----------
TOTAL INVESTMENTS
(COST $58,910,482) (a) - 99.6%........ 65,798,063
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $66,066,370.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $3,390,665. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation............... $3,811,428
Unrealized depreciation............... (314,512)
----------
Net unrealized appreciation........... $3,496,916
----------
----------
</Table>
(b) Represents non-income producing security.
ADR -- American Depositary Receipt
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 27
<Page>
HSBC INVESTOR GROWTH AND INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
- ---------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS - 99.2%
SHARES VALUE($)
--------- -----------
AEROSPACE & DEFENSE - 1.0%
United Technologies Corp. ............ 25,100 2,125,719
-----------
AIR FREIGHT & LOGISTICS - 0.5%
United Parcel Service, Inc. .......... 15,700 1,138,564
-----------
BANKING - 5.5%
Bank of America Corp. ................ 71,900 5,444,987
Mellon Financial Corp. ............... 54,600 1,630,902
Wells Fargo & Co. .................... 78,200 4,404,224
-----------
11,480,113
-----------
BIOTECHNOLOGY - 1.3%
Amgen, Inc. (b)....................... 42,700 2,637,152
-----------
CHEMICALS - 1.0%
Du Pont (E.I) de Nemours and Co. ..... 53,600 2,165,440
-----------
COMMERCIAL SERVICES - 1.2%
Cendant Corp. (b)..................... 126,420 2,582,761
-----------
COMPUTER SOFTWARE - 6.9%
Affiliated Computer Services, Inc.
(b).................................. 23,110 1,130,772
First Data Corp. ..................... 69,900 2,495,430
Microsoft Corp. ...................... 259,400 6,783,310
Oracle Corp. (b)...................... 325,700 3,895,372
-----------
14,304,884
-----------
COMPUTERS - 5.1%
Dell, Inc. (b)........................ 98,700 3,565,044
Hewlett-Packard Co. .................. 177,000 3,948,870
International Business Machines
Corp. ............................... 33,300 2,979,684
-----------
10,493,598
-----------
CONSUMER PRODUCTS - 8.5%
Altria Group, Inc. ................... 100,200 4,659,300
Anheuser-Busch Cos., Inc. ............ 30,300 1,492,578
PepsiCo, Inc. ........................ 87,900 4,203,378
The Coca-Cola Co. .................... 50,300 2,333,920
The Procter & Gamble Co. ............. 26,680 2,622,377
TJX Companies, Inc. .................. 99,800 2,094,802
-----------
17,406,355
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 8.0%
3M Co. ............................... 22,300 1,758,801
General Electric Co. ................. 292,700 8,491,227
ITT Industries, Inc. ................. 18,400 1,251,016
Parker Hannifin Corp. ................ 26,400 1,345,608
SPX Corp. (b)......................... 20,300 976,836
Tyco International Ltd. .............. 137,600 2,873,088
-----------
16,696,576
-----------
ELECTRIC UTILITIES - 2.5%
Exelon Corp. ......................... 64,100 4,067,145
Southern Co. ......................... 37,500 1,117,500
-----------
5,184,645
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 3.1%
Intel Corp. .......................... 197,600 6,530,680
-----------
ENERGY EQUIPMENT & SERVICES - 1.9%
Nabors Industries Ltd. (b)............ 102,450 3,872,610
-----------
FINANCIAL SERVICES - 11.5%
Capital One Financial Corp. .......... 17,000 1,033,600
Citigroup, Inc. ...................... 167,000 7,915,800
Countrywide Credit Industries,
Inc. ................................ 22,400 2,354,688
Fannie Mae............................ 30,300 2,172,207
Goldman Sachs Group, Inc. ............ 41,800 3,925,020
J.P. Morgan Chase & Co. .............. 116,300 4,175,170
Merrill Lynch & Co., Inc. ............ 35,500 2,101,600
-----------
23,678,085
-----------
FOREST PRODUCTS & PAPER - 1.4%
International Paper Co. .............. 75,800 2,982,730
-----------
</Table>
- ---------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
HEALTH CARE - 3.7%
Cardinal Health, Inc. ................ 54,300 3,222,162
Caremark Rx, Inc. (b)................. 110,400 2,765,520
Guidant Corp. ........................ 33,400 1,703,734
-----------
7,691,416
-----------
INSURANCE - 4.3%
American International Group, Inc. ... 74,900 4,556,167
The Allstate Corp. ................... 65,400 2,583,300
Willis Group Holdings Ltd. ........... 51,400 1,711,620
-----------
8,851,087
-----------
LEISURE EQUIPMENT & PRODUCTS - 1.5%
Mattel, Inc. ......................... 156,800 3,035,648
-----------
MEDIA - 2.7%
Time Warner, Inc. (b)................. 140,700 2,151,303
Viacom, Inc. Class B.................. 88,300 3,520,521
-----------
5,671,824
-----------
METALS & MINING - 0.6%
Alcoa, Inc. .......................... 41,150 1,299,106
-----------
OIL & GAS - 3.8%
Exxon Mobil Corp. .................... 159,900 5,849,142
Occidental Petroleum Corp. ........... 60,000 2,115,600
-----------
7,964,742
-----------
PHARMACEUTICALS - 8.6%
Abbott Laboratories................... 63,300 2,697,846
Johnson & Johnson..................... 76,100 3,830,113
Merck & Co., Inc. .................... 36,260 1,604,505
Pfizer, Inc. ......................... 237,200 7,495,520
Wyeth................................. 46,700 2,061,338
-----------
17,689,322
-----------
RETAIL - 8.2%
Abercrombie & Fitch Co., Class A
(b).................................. 60,500 1,724,250
Home Depot, Inc. ..................... 120,600 4,470,642
Kohl's Corp. (b)...................... 42,700 2,394,189
Target Corp. ......................... 31,000 1,231,940
Wal-Mart Stores, Inc. ................ 122,200 7,203,690
-----------
17,024,711
-----------
TELECOMMUNICATIONS - 6.4%
Cisco Systems, Inc. (b)............... 240,200 5,039,396
Comcast Corp. Class A (b)............. 66,200 2,245,504
SBC Communications, Inc. ............. 101,800 2,441,164
Verizon Communications, Inc. ......... 108,100 3,632,160
-----------
13,358,224
-----------
TOTAL COMMON STOCKS................... 205,865,992
-----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 0.7%
Dreyfus Cash Management Fund.......... 1,532,564 1,532,564
-----------
TOTAL INVESTMENT COMPANIES............ 1,532,564
-----------
TOTAL INVESTMENTS
(COST $177,082,487) (a) - 99.9%..... 207,398,556
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $207,520,801.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $1,303,023. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation............. $ 32,113,320
Unrealized depreciation............. (3,100,274)
------------
Net unrealized appreciation......... $ 29,013,046
------------
------------
</Table>
(b) Represents non-income producing security.
28 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR MID-CAP FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
- ----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS - 99.4%
SHARES VALUE($)
------- -----------
AEROSPACE & DEFENSE - 1.1%
L-3 Communications Holdings, Inc. (b).... 40,000 1,869,600
-----------
BANKING - 1.9%
Astoria Financial Corp. ................. 44,000 1,524,160
New York Community Bancorp, Inc. ........ 11,666 422,309
TCF Financial Corp. ..................... 25,000 1,304,500
-----------
3,250,969
-----------
BIOTECHNOLOGY - 3.3%
Chiron Corp. (b)......................... 19,300 1,054,359
Genzyme Corp. (b)........................ 16,000 734,400
Gilead Sciences, Inc. (b)................ 17,500 955,150
IDEC Pharmaceuticals Corp. (b)........... 42,500 1,493,025
Medimmune, Inc. (b)...................... 49,100 1,309,006
-----------
5,545,940
-----------
CHEMICALS - 0.8%
Sigma-Aldrich Corp. ..................... 27,100 1,421,395
-----------
COMMERCIAL SERVICES - 3.1%
Cendant Corp. (b)........................ 170,000 3,473,100
H & R Block, Inc. ....................... 38,400 1,808,256
-----------
5,281,356
-----------
COMPUTER HARDWARE - 4.4%
Emulex Corp. (b)......................... 71,500 2,024,880
Lexmark International, Inc. (b).......... 29,100 2,142,051
SanDisk Corp. (b)........................ 25,100 2,023,060
Western Digital Corp. (b)................ 94,000 1,264,300
-----------
7,454,291
-----------
COMPUTER SOFTWARE - 12.6%
Adobe Systems, Inc. ..................... 20,800 911,872
Affiliated Computer Services, Inc. (b)... 28,000 1,370,040
BEA Systems, Inc. (b).................... 89,500 1,244,050
BMC Software, Inc. (b)................... 76,100 1,322,618
Citrix Systems, Inc. (b)................. 81,200 2,052,736
Electronic Arts, Inc. (b)................ 18,200 1,802,528
Factset Research Systems, Inc. .......... 22,300 973,172
Fair, Issac & Co., Inc. ................. 25,400 1,620,012
Intuit, Inc. (b)......................... 60,800 3,038,783
SunGard Data Systems, Inc. (b)........... 72,000 2,019,600
Symantec Corp. (b)....................... 33,700 2,246,105
Synopsys, Inc. (b)....................... 47,100 1,494,012
VeriSign, Inc. (b)....................... 57,000 904,590
-----------
21,000,118
-----------
CONSUMER MANUFACTURING - 0.8%
Harley-Davidson, Inc. ................... 29,800 1,412,818
-----------
CONSUMER PRODUCTS - 2.6%
Constellation Brands, Inc. (b)........... 55,000 1,725,350
TJX Companies, Inc. ..................... 126,300 2,651,037
-----------
4,376,387
-----------
</Table>
- ----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
DIVERSIFIED MANUFACTURING OPERATIONS - 6.6%
Danaher Corp. ........................... 15,000 1,242,750
ITT Industries, Inc. .................... 24,000 1,631,760
SPX Corp. (b)............................ 39,000 1,876,680
Textron, Inc. ........................... 40,000 1,987,600
The Scotts Company (b)................... 30,000 1,732,500
Tyco International Ltd. ................. 124,800 2,605,824
-----------
11,077,114
-----------
ELECTRIC UTILITIES - 1.0%
Exelon Corp. ............................ 27,500 1,744,875
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 10.4%
Altera Corp. (b)......................... 33,800 683,774
American Power Conversion Corp. ......... 120,000 2,427,600
Applied Materials, Inc. (b).............. 38,700 904,419
Arrow Electronics, Inc. (b).............. 38,500 821,975
Cognos, Inc. (b)......................... 38,100 1,313,307
Jabil Circuit, Inc. (b).................. 52,300 1,456,555
KLA-Tencor Corp. (b)..................... 44,900 2,574,117
Lam Research Corp. (b)................... 41,900 1,204,206
LSI Logic Corp. (b)...................... 150,100 1,386,924
Microchip Technology, Inc. .............. 52,200 1,707,462
National Semiconductor Corp. (b)......... 39,600 1,608,948
Novellus Systems, Inc. (b)............... 32,400 1,337,796
-----------
17,427,083
-----------
ENERGY EQUIPMENT & SERVICES - 1.1%
Nabors Industries Ltd. (b)............... 49,950 1,888,110
-----------
FINANCIAL SERVICES - 5.0%
Concord EFS, Inc. (b).................... 76,400 816,716
Countrywide Credit Industries, Inc. ..... 22,500 2,365,200
Lehman Brothers Holdings, Inc. .......... 27,300 1,965,600
MBNA Corp. .............................. 131,400 3,252,150
-----------
8,399,666
-----------
HEALTH CARE - 12.0%
Beckman Coulter, Inc. ................... 25,000 1,241,250
Cardinal Health, Inc. ................... 27,100 1,608,114
Caremark Rx, Inc. (b).................... 92,500 2,317,125
DENTSPLY International, Inc. ............ 27,200 1,201,968
Edwards Lifesciences Corp. (b)........... 40,000 1,160,000
Guidant Corp. ........................... 19,400 989,594
Health Management Associates, Inc. ...... 83,600 1,851,740
Laboratory Corp. of America Holdings
(b)..................................... 37,100 1,315,195
Neurocrine Biosciences, Inc. (b)......... 18,000 842,940
Oxford Health Plans, Inc. (b)............ 40,000 1,620,000
Varian Medical Systems, Inc. (b)......... 20,000 1,278,800
Wellpoint Health Networks, Inc. (b)...... 27,000 2,400,300
Zimmer Holdings, Inc. (b)................ 35,000 2,233,350
-----------
20,060,376
-----------
HOUSEHOLD DURABLES - 2.1%
Black & Decker Corp. .................... 45,000 2,151,450
Furniture Brands International, Inc. .... 60,000 1,455,600
-----------
3,607,050
-----------
INSURANCE - 1.2%
Willis Group Holdings Ltd. .............. 60,000 1,998,000
-----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 29
<Page>
HSBC INVESTOR MID-CAP FUND
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
- ----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
LEISURE EQUIPMENT & PRODUCTS - 2.1%
Mattel, Inc. ............................ 180,000 3,484,800
-----------
MEDIA - 1.2%
Liberty Media Corp. Class A (b).......... 200,000 2,018,000
-----------
METALS -- DIVERSIFIED - 0.6%
Freeport-McMoran Copper & Gold, Inc.
Class B................................. 27,000 1,046,250
-----------
OIL & GAS - 2.5%
EOG Resources, Inc. ..................... 62,700 2,642,178
Occidental Petroleum Corp. .............. 42,000 1,480,920
-----------
4,123,098
-----------
PHARMACEUTICALS - 4.8%
Allergan, Inc. .......................... 21,800 1,648,516
Biogen, Inc. (b)......................... 31,200 1,262,664
Forest Laboratories, Inc. (b)............ 15,800 790,158
McKesson Corp. .......................... 45,000 1,362,150
Mylan Laboratories, Inc. ................ 90,450 2,184,368
Teva Pharmaceutical Industries Ltd.
ADR..................................... 15,000 853,350
-----------
8,101,206
-----------
RESIDENTIAL BUILDING CONSTRUCTION - 1.1%
Toll Brothers, Inc. (b).................. 50,000 1,842,000
-----------
RESTAURANTS - 1.1%
YUM! Brands, Inc. (b).................... 53,400 1,823,076
-----------
RETAIL - 10.7%
Abercrombie & Fitch Co., Class A (b)..... 100,300 2,858,550
Barnes & Noble, Inc. (b)................. 80,500 2,398,900
Best Buy Co., Inc. (b)................... 14,400 839,664
Brinker International, Inc. (b).......... 55,800 1,776,114
Chico's FAS, Inc. (b).................... 22,800 855,912
Dollar Tree Stores, Inc. (b)............. 58,800 2,244,984
Micheal Stores, Inc. .................... 55,000 2,610,850
PETsMART, Inc. .......................... 90,000 2,304,900
Staples, Inc. (b)........................ 80,000 2,145,600
-----------
18,035,474
-----------
</Table>
- ----------------------------------------------------------------
<Table>
<Caption>
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
TECHNOLOGY - 1.5%
Qlogic Corp. (b)......................... 46,400 2,600,720
-----------
TELECOMMUNICATIONS - 2.1%
Adelphia Business Solutions, Inc. (b).... 19,923 299
Advanced Fibre Communications, Inc.
(b)..................................... 58,900 1,417,723
InterActiveCorp (b)...................... 21,327 782,907
Netscreen Technologies, Inc. (b)......... 32,300 859,826
Sprint Corp. (b)......................... 126,000 548,100
-----------
3,608,855
-----------
TEXTILES APPAREL & LUXURY GOODS - 1.7%
Coach, Inc. (b).......................... 80,000 2,837,600
-----------
TOTAL COMMON STOCKS...................... 167,336,227
-----------
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 0.6%
Dreyfus Cash Management Fund............. 940,452 940,452
-----------
TOTAL INVESTMENT COMPANIES............... 940,452
-----------
TOTAL INVESTMENTS
(COST $139,278,259) (a) - 100.0%....... 168,276,679
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $168,222,857.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $476,695. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation......... $31,379,254
Unrealized depreciation......... (2,857,529)
-----------
Net unrealized appreciation..... $28,521,725
-----------
-----------
</Table>
(b) Represents non-income producing security.
ADR -- American Depositary Receipt
30 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2003
<Table>
<Caption>
..................................................................................................................
LIMITED FIXED NEW YORK
MATURITY INCOME BOND TAX-FREE
FUND FUND FUND BOND FUND
--------------- -------------- --------------- ---------------
ASSETS:
Investments, at value (Note 2) $43,670,428 $111,177,482 $22,163,608 $63,319,721
Cash -- -- -- 800
Interest and dividends receivable -- -- -- 800,602
Receivable for capital shares issued 83,772 37,577 84,411 285,436
Receivable for investments sold -- -- -- --
Receivable from Investment Adviser -- -- 9,751 --
Prepaid expenses and other assets 7,848 7,469 2,597 1,551
----------- ------------ ----------- -----------
TOTAL ASSETS 43,762,048 111,222,528 22,260,367 64,408,110
----------- ------------ ----------- -----------
LIABILITIES:
Dividends payable 59,935 215,697 35,243 81,963
Payable for investments purchased -- -- -- --
Payable for capital shares redeemed 21,681 26 17,912 41,322
Accrued expenses and other
liabilities:
Investment management -- -- -- 13,428
Administration 1,909 5,408 841 4,841
Distribution 7,110 -- 8,309 13,589
Shareholder servicing 2,604 -- 4,762 9,140
Other 5,267 32,966 14,437 24,176
----------- ------------ ----------- -----------
TOTAL LIABILITIES 98,506 254,097 81,504 188,459
----------- ------------ ----------- -----------
NET ASSETS $43,663,542 $110,968,431 $22,178,863 $64,219,651
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
..............................................................................................................
COMPOSITION OF NET ASSETS:
Capital $41,242,383 $106,882,332 $22,515,464 $61,333,271
Accumulated (dividends in excess of)
net investment income (6,183) 3,875 (174) 1,515
Accumulated net realized gains
(losses) from investment
transactions 1,939,749 (2,771,120) (652,945) 325,008
Unrealized appreciation/depreciation
from investments 487,593 6,853,344 316,518 2,559,857
----------- ------------ ----------- -----------
NET ASSETS $43,663,542 $110,968,431 $22,178,863 $64,219,651
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 3,308,784 $ -- $14,142,952 $22,325,670
Shares Outstanding 316,066 -- 1,349,342 1,991,237
Net Asset Value and Redemption Price
per share $ 10.47 $ -- $ 10.48 $ 11.21
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Maximum sales charge 4.75% -- 4.75% 4.75%
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 10.99 $ -- $ 11.00 $ 11.77
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
.................................................................................................................
CLASS B SHARES
Net Assets $ 6,443,496 $ -- $ 7,430,270 $18,352,069
Shares Outstanding 614,395 -- 708,592 1,638,176
Net Asset Value, Offering Price and
Redemption Price per share* $ 10.49 $ -- $ 10.49 $ 11.20
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS C SHARES
Net Assets $ 2,543,505 $ -- $ 605,641 $ 3,251,533
Shares Outstanding 242,539 -- 57,817 289,124
Net Asset Value, Offering Price and
Redemption Price per share* $ 10.49 $ -- $ 10.48 $ 11.25
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS Y SHARES
Net Assets $31,367,757 $ -- $ -- $20,290,379
Shares Outstanding 2,992,164 -- -- 1,809,623
Net Asset Value, Offering Price and
Redemption Price per share $ 10.48 $ -- $ -- $ 11.21
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
ADVISOR SHARES
Net Assets $ -- $110,968,431 $ -- $ --
Shares Outstanding -- 10,339,845 -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ 10.73 $ -- $ --
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Investments, at cost $60,759,864
-----------
-----------
</Table>
<Table>
<Caption>
BALANCED EQUITY
FUND FUND
----------- -------------
ASSETS:
Investments, at value (Note 2) $3,538,049 $ 65,798,063
Cash -- 134,086
Interest and dividends receivable 13,892 73,871
Receivable for capital shares issued 6,439 283,085
Receivable for investments sold 10,464 557,456
Receivable from Investment Adviser 40,284 12,948
Prepaid expenses and other assets 340 6,281
---------- ------------
TOTAL ASSETS 3,609,468 66,865,790
---------- ------------
LIABILITIES:
Dividends payable -- --
Payable for investments purchased 6,106 661,259
Payable for capital shares redeemed 231 95,502
Accrued expenses and other
liabilities:
Investment management 1,645 --
Administration 457 7,685
Distribution 1,634 1,995
Shareholder servicing 556 5,425
Other 10,369 27,554
---------- ------------
TOTAL LIABILITIES 20,998 799,420
---------- ------------
NET ASSETS $3,588,470 $ 66,066,370
---------- ------------
---------- ------------
..........................................................................
COMPOSITION OF NET ASSETS:
Capital $7,050,556 $112,119,567
Accumulated (dividends in excess of)
net investment income 37,341 17,859
Accumulated net realized gains
(losses) from investment
transactions (3,660,362) (52,958,637)
Unrealized appreciation/depreciation
from investments 160,935 6,887,581
---------- ------------
NET ASSETS $3,588,470 $ 66,066,370
---------- ------------
---------- ------------
..........................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 418,585 $ 23,130,935
Shares Outstanding 50,603 1,913,343
Net Asset Value and Redemption Price
per share $ 8.27 $ 12.09
---------- ------------
---------- ------------
Maximum sales charge 5.00% 5.00%
---------- ------------
---------- ------------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 8.71 $ 12.73
---------- ------------
---------- ------------
..........................................................................
CLASS B SHARES
Net Assets $2,098,573 $ 2,682,123
Shares Outstanding 255,445 228,107
Net Asset Value, Offering Price and
Redemption Price per share* $ 8.22 $ 11.76
---------- ------------
---------- ------------
..........................................................................
CLASS C SHARES
Net Assets $ 139,005 $ 502,532
Shares Outstanding 16,883 42,516
Net Asset Value, Offering Price and
Redemption Price per share* $ 8.23 $ 11.82
---------- ------------
---------- ------------
..........................................................................
CLASS Y SHARES
Net Assets $ 932,307 $ 39,750,780
Shares Outstanding 111,721 3,288,465
Net Asset Value, Offering Price and
Redemption Price per share $ 8.34 $ 12.09
---------- ------------
---------- ------------
..........................................................................
ADVISOR SHARES
Net Assets $ -- $ --
Shares Outstanding -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ --
---------- ------------
---------- ------------
Investments, at cost $3,377,114 $ 58,910,482
---------- ------------
---------- ------------
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 31
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
GROWTH AND MID-CAP INTERNATIONAL OVERSEAS
INCOME FUND FUND EQUITY FUND EQUITY FUND
-------------- -------------- -------------- -------------
ASSETS:
Investments, at value (Note 2) $207,398,556 $168,276,679 $123,194,289 $11,205,311
Cash -- -- -- --
Interest and dividends receivable 238,060 18,160 -- --
Receivable for capital shares issued 61,659 67,964 22,738 111,139
Receivable for investments sold 816,157 -- -- --
Receivable from Investment Adviser -- -- -- 14,746
Tax reclaims receivable -- -- 475,491 23,402
Prepaid expenses 2,399 7,239 11,680 3,013
------------ ------------ ------------ -----------
TOTAL ASSETS 208,516,831 168,370,042 123,704,198 11,357,611
------------ ------------ ------------ -----------
LIABILITIES:
Payable for investments purchased 824,256 -- -- --
Payable for capital shares redeemed 624 4,428 -- 47,483
Accrued expenses and other
liabilities:
Investment management 96,105 76,794 -- --
Administration 19,272 12,668 5,789 448
Distribution 1,427 3,768 -- 1,002
Shareholder servicing 817 1,552 -- 2,420
Other 53,529 47,975 40,730 12,525
------------ ------------ ------------ -----------
TOTAL LIABILITIES 996,030 147,185 46,519 63,878
------------ ------------ ------------ -----------
NET ASSETS $207,520,801 $168,222,857 $123,657,679 $11,293,733
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
COMPOSITION OF NET ASSETS:
Capital $234,256,023 $170,863,003 $134,490,297 $10,890,028
Accumulated (dividends in excess of)
net investment income 542,460 -- 3,732,087 77,699
Accumulated net realized losses from
investment, option and foreign
currency transactions (57,593,751) (31,638,566) (26,076,932) (876,614)
Unrealized appreciation/depreciation
from investments, options and foreign
currencies 30,316,069 28,998,420 11,512,227 1,202,620
------------ ------------ ------------ -----------
NET ASSETS $207,520,801 $168,222,857 $123,657,679 $11,293,733
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 1,827,476 $ 1,539,200 $ -- $10,096,209
Shares Outstanding 217,930 193,601 -- 860,682
Net Asset Value and Redemption Price
per share $ 8.39 $ 7.95 $ -- $ 11.73
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Maximum sales charge 5.00% 5.00% -- 5.00%
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Maximum Offering Price per share (Net
Asset Value/(100% - maximum sales
charge)) $ 8.83 $ 8.37 $ -- $ 12.35
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
CLASS B SHARES
Net Assets $ 2,235,012 $ 6,008,850 $ -- $ 1,076,175
Shares Outstanding 269,296 775,148 -- 94,877
Net Asset Value, Offering Price and
Redemption Price per share* $ 8.30 $ 7.75 $ -- $ 11.34
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
CLASS C SHARES
Net Assets $ 8** $ 54,275 $ -- $ 121,349
Shares Outstanding 1 6,957 -- 10,511
Net Asset Value, Offering Price and
Redemption Price per share* $ 8.40*** $ 7.80 $ -- $ 11.54
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
CLASS Y SHARES
Net Assets $203,458,305 $ -- $ -- $ --
Shares Outstanding 24,233,380 -- -- --
Net Asset Value, Offering Price and
Redemption Price per share $ 8.40 $ -- $ -- $ --
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
ADVISOR SHARES
Net Assets $ -- $ -- $123,657,679 $ --
Shares Outstanding -- -- 9,693,617 --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ -- $ 12.76 $ --
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
...............................................................................................................
TRUST SHARES
Net Assets $ -- $160,620,532 $ -- $ --
Shares Outstanding -- 20,064,056 -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ 8.01 $ -- $ --
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Investments, at cost $177,082,487 $139,278,259
------------ ------------
------------ ------------
</Table>
<Table>
<Caption>
SMALL CAP OPPORTUNITY
EQUITY FUND FUND
----------- -----------
Investments, at value (Note 2) $326,112,240 $21,005,061
Cash -- --
Interest and dividends receivable -- --
Receivable for capital shares issued 18,738 106,637
Receivable for investments sold -- --
Receivable from Investment Adviser -- 19,840
Tax reclaims receivable -- --
Prepaid expenses 8,072 2,707
------------ -----------
TOTAL ASSETS 326,139,050 21,134,245
------------ -----------
LIABILITIES:
Payable for investments purchased -- --
Payable for capital shares redeemed -- 69,307
Accrued expenses and other
liabilities:
Investment management -- --
Administration 10,596 792
Distribution -- 1,749
Shareholder servicing -- 4,289
Other 56,643 16,936
------------ -----------
TOTAL LIABILITIES 67,239 93,073
------------ -----------
NET ASSETS $326,071,811 $21,041,172
------------ -----------
------------ -----------
.........................................................................
COMPOSITION OF NET ASSETS:
Capital $333,443,238 $21,140,059
Accumulated (dividends in excess of)
net investment income -- --
Accumulated net realized losses from
investment, option and foreign
currency transactions (60,114,229) (3,805,137)
Unrealized appreciation/depreciation
from investments, options and foreign
currencies 52,742,802 3,706,250
------------ -----------
NET ASSETS $326,071,811 $21,041,172
------------ -----------
------------ -----------
.........................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ -- $16,694,543
Shares Outstanding -- 1,611,401
Net Asset Value and Redemption Price
per share $ -- $ 10.36
------------ -----------
------------ -----------
Maximum sales charge -- 5.00%
------------ -----------
------------ -----------
Maximum Offering Price per share (Net
Asset Value/(100% - maximum sales
charge)) $ -- $ 10.91
------------ -----------
------------ -----------
.........................................................................
CLASS B SHARES
Net Assets $ -- $ 3,951,547
Shares Outstanding -- 400,992
Net Asset Value, Offering Price and
Redemption Price per share* $ -- $ 9.85
------------ -----------
------------ -----------
.........................................................................
CLASS C SHARES
Net Assets $ -- $ 395,082
Shares Outstanding -- 39,756
Net Asset Value, Offering Price and
Redemption Price per share* $ -- $ 9.94
------------ -----------
------------ -----------
.........................................................................
CLASS Y SHARES
Net Assets $ -- $ --
Shares Outstanding -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ --
------------ -----------
------------ -----------
.........................................................................
ADVISOR SHARES
Net Assets $326,071,811 $ --
Shares Outstanding 26,385,401 --
Net Asset Value, Offering Price and
Redemption Price per share $ 12.36 $ --
------------ -----------
------------ -----------
.........................................................................
TRUST SHARES
Net Assets $ -- $ --
Shares Outstanding -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ --
------------ -----------
------------ -----------
Investments, at cost
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
** Net assets of the Growth and Income Fund Class C Shares represent seed
money only. As of October 31, 2003 the class has not commenced operations.
*** Due to rounding, Net Assets divided by Shares Outstanding does not equal
the NAV.
32 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
LIMITED FIXED NEW YORK
MATURITY INCOME BOND TAX-FREE
FUND FUND FUND BOND FUND
--------------- --------------- --------------- -----------
INVESTMENT INCOME:
Interest $ -- $ -- $ -- $2,462,180
Dividends -- -- -- 13,899
Investment income from portfolio 4,082,535 12,367,155 1,043,946 --
Expenses from portfolio (499,224) (1,207,888) (104,158) --
---------- ----------- ---------- ----------
TOTAL INVESTMENT INCOME 3,583,311 11,159,267 939,788 2,476,079
---------- ----------- ---------- ----------
.............................................................................................................
EXPENSES:
Investment management -- -- -- 143,469
Administration 35,865 95,630 8,041 42,995
Distribution:
Class B Shares 42,170 -- 53,686 117,924
Class C Shares 17,598 -- 6,102 23,470
Shareholder servicing:
Class A (Investor) Shares 7,299 -- 33,738 47,587
Class B Shares 14,057 -- 17,895 39,308
Class C Shares 5,866 -- 2,034 7,823
Accounting 36,100 9,025 27,074 69,609
Custodian -- -- -- 18,786
Registration 13,553 15,999 18,989 9,131
Transfer agent 48,598 24,463 39,768 67,477
Trustee 848 2,689 154 831
Other 28,242 65,819 9,046 29,289
---------- ----------- ---------- ----------
Total expenses before fee
reductions 250,196 213,625 216,527 617,699
Fees reduced by Investment Adviser -- -- (24,653) --
---------- ----------- ---------- ----------
NET EXPENSES 250,196 213,625 191,874 617,699
---------- ----------- ---------- ----------
.............................................................................................................
NET INVESTMENT INCOME 3,333,115 10,945,642 747,914 1,858,380
---------- ----------- ---------- ----------
.............................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions 4,918,617 11,905,117 323,271 718,711
Change in unrealized
appreciation/depreciation from
investments (2,609,744) (2,456,592) (145,359) (200,970)
---------- ----------- ---------- ----------
.............................................................................................................
Net realized/unrealized gains from
investment transactions 2,308,873 9,448,525 177,912 517,741
---------- ----------- ---------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $5,641,988 $20,394,167 $ 925,826 $2,376,121
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
</Table>
<Table>
<Caption>
BALANCED EQUITY
FUND FUND
---------- -----------
INVESTMENT INCOME:
Interest $ 207,555 $ --
Dividends 131,727 2,301,391
Investment income from portfolio -- --
Expenses from portfolio -- --
---------- -----------
TOTAL INVESTMENT INCOME 339,282 2,301,391
---------- -----------
.......................................................................
EXPENSES:
Investment management 67,521 789,932
Administration 9,198 128,392
Distribution:
Class B Shares 13,099 14,954
Class C Shares 855 3,865
Shareholder servicing:
Class A (Investor) Shares 1,151 45,699
Class B Shares 4,366 4,985
Class C Shares 285 1,288
Accounting 63,960 84,421
Custodian 14,342 86,497
Registration 12,872 22,748
Transfer agent 63,193 80,927
Trustee 226 3,066
Other 6,116 61,272
---------- -----------
Total expenses before fee
reductions 257,184 1,328,046
Fees reduced by Investment Adviser (121,070) --
---------- -----------
NET EXPENSES 136,114 1,328,046
---------- -----------
.......................................................................
NET INVESTMENT INCOME 203,168 973,345
---------- -----------
.......................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions (491,172) (13,278,173)
Change in unrealized
appreciation/depreciation from
investments 1,594,556 39,013,499
---------- -----------
.......................................................................
Net realized/unrealized gains from
investment transactions 1,103,384 25,735,326
---------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $1,306,552 $26,708,671
---------- -----------
---------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 33
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
GROWTH AND MID-CAP INTERNATIONAL OVERSEAS
INCOME FUND FUND EQUITY FUND EQUITY FUND
--------------- --------------- --------------- ---------------
INVESTMENT INCOME:
Interest $ -- $ 845 $ -- $ --
Dividends 3,255,568 881,404 -- --
Investment income from portfolio -- -- 4,775,934 206,700
Tax reclaims -- -- 396,100 14,698
Foreign tax withholding from
portfolio -- -- (788,290) (33,521)
Expenses from portfolio -- -- (1,896,472) (94,294)
----------- ----------- ----------- ----------
TOTAL INVESTMENT INCOME (LOSS) 3,255,568 882,249 2,487,272 93,583
----------- ----------- ----------- ----------
...............................................................................................................
EXPENSES:
Investment management 1,025,892 715,471 -- --
Administration 139,745 97,460 73,919 3,650
Distribution:
Class B Shares 12,022 36,294 -- 5,543
Class C Shares -- 211 -- 752
Shareholder servicing:
Class A (Investor) Shares 3,300 2,794 -- 22,263
Class B Shares 4,007 12,098 -- 1,848
Class C Shares -- 70 -- 251
Accounting 63,960 63,565 9,126 27,074
Custodian 53,626 51,807 -- --
Registration 27,687 14,110 32,286 17,240
Transfer agent 69,084 98,794 31,303 57,092
Trustee 2,659 1,740 1,665 60
Other 90,652 65,225 56,184 5,034
----------- ----------- ----------- ----------
Total expenses before fee
reductions 1,492,634 1,159,639 204,483 140,807
Fees reduced by Investment Adviser -- -- -- (48,347)
----------- ----------- ----------- ----------
NET EXPENSES 1,492,634 1,159,639 204,483 92,460
----------- ----------- ----------- ----------
...............................................................................................................
NET INVESTMENT INCOME (LOSS) 1,762,934 (277,390) 2,282,789 1,123
----------- ----------- ----------- ----------
...............................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES:
Net realized gains (losses) from
investment, option and foreign
currency transactions (9,441,001) 9,437 (889,405) 194,623
Change in unrealized
appreciation/depreciation from
investments, options and foreign
currencies 38,518,987 33,785,071 43,679,183 2,572,761
----------- ----------- ----------- ----------
...............................................................................................................
Net realized/unrealized gains from
investment, options and foreign
currency transactions 29,077,986 33,794,508 42,789,778 2,767,384
----------- ----------- ----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $30,840,920 $33,517,118 $45,072,567 $2,768,507
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</Table>
<Table>
<Caption>
SMALL CAP OPPORTUNITY
EQUITY FUND FUND
------------ -----------
INVESTMENT INCOME:
Interest $ -- $ --
Dividends -- --
Investment income from portfolio 623,317 45,082
Tax reclaims -- --
Foreign tax withholding from
portfolio -- --
Expenses from portfolio (1,966,557) (141,117)
----------- ----------
TOTAL INVESTMENT INCOME (LOSS) (1,343,240) (96,035)
----------- ----------
..........................................................................
EXPENSES:
Investment management -- --
Administration 80,773 5,805
Distribution:
Class B Shares -- 21,359
Class C Shares -- 2,503
Shareholder servicing:
Class A (Investor) Shares -- 30,786
Class B Shares -- 7,120
Class C Shares -- 834
Accounting 9,025 27,074
Custodian -- --
Registration 24,680 17,934
Transfer agent 29,890 79,698
Trustee 1,221 73
Other 77,013 12,991
----------- ----------
Total expenses before fee
reductions 222,602 206,177
Fees reduced by Investment Adviser -- (67,407)
----------- ----------
NET EXPENSES 222,602 138,770
----------- ----------
.........................................................................
NET INVESTMENT INCOME (LOSS) (1,565,842) (234,805)
----------- ----------
.........................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES:
Net realized gains (losses) from
investment, option and foreign
currency transactions 4,018,810 275,213
Change in unrealized
appreciation/depreciation from
investments, options and foreign
currencies 65,152,323 4,550,177
----------- ----------
.........................................................................
Net realized/unrealized gains from
investment, options and foreign
currency transactions 69,171,133 4,825,390
----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $67,605,291 $4,590,585
----------- ----------
----------- ----------
</Table>
34 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
.................................................................................
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
--------------------------------- ---------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 3,333,115 $ 3,687,229 $ 10,945,642 $ 12,199,896
Net realized gains (losses) from
investment transactions 4,918,617 (696,711) 11,905,117 877,629
Change in unrealized
appreciation/depreciation from
investments (2,609,744) 526,764 (2,456,592) 1,637,228
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 5,641,988 3,517,282 20,394,167 14,714,753
------------ ------------ ------------ ------------
...........................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (100,206) (51,982) -- --
Class B Shares (152,669) (82,791) -- --
Class C Shares (63,642) (29,109) -- --
Class Y Shares (3,280,529) (3,587,497) -- --
Advisor Shares -- -- (11,850,331) (13,256,763)
NET REALIZED GAINS:
Class A (Investor) Shares -- (4,520) -- --
Class B Shares -- (4,356) -- --
Class C Shares -- (718) -- --
Class Y Shares -- (302,276) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (3,597,046) (4,063,249) (11,850,331) (13,256,763)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (60,812,597) 33,628,772 (182,416,067) 132,803,103
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS (58,767,655) 33,082,805 (173,872,231) 134,261,093
...........................................................................................................................
NET ASSETS:
Beginning of year 102,431,197 69,348,392 284,840,662 150,579,569
------------ ------------ ------------ ------------
End of year $ 43,663,542 $102,431,197 $110,968,431 $284,840,662
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Accumulated (dividends in excess
of) net investment income $ (6,183) $ (6,277) $ 3,875 $ (74,172)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 35
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 32,333,443 $ 690,236 $ -- $ --
Dividends reinvested 86,864 53,853 -- --
Cost of shares redeemed (30,657,661) (110,071) -- --
------------- ----------- ------------- -------------
Class A (Investor) Shares capital
transactions 1,762,646 634,018 -- --
------------- ----------- ------------- -------------
............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 3,107,219 3,542,800 -- --
Dividends reinvested 130,108 72,882 -- --
Cost of shares redeemed (964,324) (377,321) -- --
------------- ----------- ------------- -------------
Class B Shares capital transactions 2,273,003 3,238,361 -- --
------------- ----------- ------------- -------------
............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 1,471,188 1,659,670 -- --
Dividends reinvested 57,276 26,924 -- --
Cost of shares redeemed (733,409) (118,452) -- --
------------- ----------- ------------- -------------
Class C Shares capital transactions 795,055 1,568,142 -- --
------------- ----------- ------------- -------------
............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 35,228,965 32,116,873 -- --
Dividends reinvested 2,958,619 3,764,345 -- --
Cost of shares redeemed (103,830,885) (7,692,967) -- --
------------- ----------- ------------- -------------
Class Y Shares capital transactions (65,643,301) 28,188,251 -- --
------------- ----------- ------------- -------------
............................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued -- -- 174,706,822 312,915,542
Dividends reinvested -- -- 3,243,190 4,745,964
Cost of shares redeemed -- -- (360,366,079) (184,858,403)
------------- ----------- ------------- -------------
Advisor Shares capital transactions -- -- (182,416,067) 132,803,103
------------- ----------- ------------- -------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (60,812,597) $33,628,772 $(182,416,067) $ 132,803,103
------------- ----------- ------------- -------------
------------- ----------- ------------- -------------
............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 3,077,715 67,284 -- --
Reinvested 8,421 5,236 -- --
Redeemed (2,924,192) (10,737) -- --
------------- ----------- ------------- -------------
Change in Class A (Investor) Shares 161,944 61,783 -- --
------------- ----------- ------------- -------------
............................................................................................................................
CLASS B SHARES:
Issued 293,513 344,798 -- --
Reinvested 12,334 7,140 -- --
Redeemed (91,409) (36,553) -- --
------------- ----------- ------------- -------------
Change in Class B Shares 214,438 315,385 -- --
------------- ----------- ------------- -------------
............................................................................................................................
CLASS C SHARES:
Issued 138,667 162,291 -- --
Reinvested 5,442 2,611 -- --
Redeemed (70,036) (11,656) -- --
------------- ----------- ------------- -------------
Change in Class C Shares 74,073 153,246 -- --
------------- ----------- ------------- -------------
............................................................................................................................
CLASS Y SHARES:
Issued 3,349,080 3,107,329 -- --
Reinvested 279,954 365,786 -- --
Redeemed (9,718,276) (746,625) -- --
------------- ----------- ------------- -------------
Change in Class Y Shares (6,089,242) 2,726,490 -- --
------------- ----------- ------------- -------------
............................................................................................................................
ADVISOR SHARES:
Issued -- -- 16,137,521 29,905,358
Reinvested -- -- 299,797 449,538
Redeemed -- -- (32,896,242) (17,491,684)
------------- ----------- ------------- -------------
Change in Advisor Shares -- -- (16,458,924) 12,863,212
------------- ----------- ------------- -------------
</Table>
36 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
NEW YORK
BOND FUND TAX-FREE BOND FUND
------------------------------------ -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 747,914 $ 609,977 $ 1,858,380 $ 1,523,914
Net realized gains (losses) from
investment transactions 323,271 (125,841) 718,711 230,884
Change in unrealized
appreciation/depreciation
from investments (145,359) 134,884 (200,970) 606,908
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 925,826 619,020 2,376,121 2,361,706
----------- ----------- ----------- -----------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (551,717) (476,334) (645,402) (536,951)
Class B Shares (237,511) (161,790) (415,040) (249,302)
Class C Shares (27,506) (35,707) (82,589) (52,534)
Class Y Shares -- -- (714,717) (684,658)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (816,734) (673,831) (1,857,748) (1,523,445)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 2,909,577 10,511,328 12,299,920 10,709,100
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS 3,018,669 10,456,517 12,818,293 11,547,361
...........................................................................................................................
NET ASSETS:
Beginning of year 19,160,194 8,703,677 51,401,358 39,853,997
----------- ----------- ----------- -----------
End of year $22,178,863 $19,160,194 $64,219,651 $51,401,358
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated (dividends in excess of) net
investment income $ (174) $ (3,714) $ 1,515 $ 883
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 37
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
NEW YORK
BOND FUND TAX-FREE BOND FUND
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 8,398,463 $ 8,793,395 $11,543,580 $ 8,641,241
Dividends reinvested 501,654 438,217 590,442 517,840
Cost of shares redeemed (6,884,172) (3,793,983) (6,313,380) (10,712,477)
----------- ----------- ----------- ------------
Class A (Investor) Shares capital
transactions 2,015,945 5,437,629 5,820,642 (1,553,396)
----------- ----------- ----------- ------------
............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 2,250,164 4,883,502 6,989,555 7,565,354
Dividends reinvested 196,735 130,482 319,238 189,995
Cost of shares redeemed (1,164,858) (402,978) (1,755,775) (866,052)
----------- ----------- ----------- ------------
Class B Shares capital transactions 1,282,041 4,611,006 5,553,018 6,889,297
----------- ----------- ----------- ------------
............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 18,000 789,595 1,160,527 1,745,774
Dividends reinvested 20,473 32,561 63,214 44,081
Cost of shares redeemed (426,882) (359,463) (610,458) (743,128)
----------- ----------- ----------- ------------
Class C Shares capital transactions (388,409) 462,693 613,283 1,046,727
----------- ----------- ----------- ------------
............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued -- -- 8,199,696 15,051,732
Dividends reinvested -- -- 197,795 258,502
Cost of shares redeemed -- -- (8,084,514) (10,983,762)
----------- ----------- ----------- ------------
Class Y Shares capital transactions -- -- 312,977 4,326,472
----------- ----------- ----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 2,909,577 $10,511,328 $12,299,920 $ 10,709,100
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 794,521 852,357 1,028,866 793,327
Reinvested 47,355 42,473 52,637 47,508
Redeemed (653,528) (367,469) (564,319) (988,665)
----------- ----------- ----------- ------------
Change in Class A (Investor) Shares 188,348 527,361 517,184 (147,830)
----------- ----------- ----------- ------------
............................................................................................................................
CLASS B SHARES:
Issued 211,083 474,356 620,289 693,973
Reinvested 18,625 12,636 28,472 17,430
Redeemed (110,752) (38,903) (157,037) (79,697)
----------- ----------- ----------- ------------
Change in Class B Shares 118,956 448,089 491,724 631,706
----------- ----------- ----------- ------------
............................................................................................................................
CLASS C SHARES:
Issued 1,669 76,684 103,233 159,355
Reinvested 1,940 3,159 5,614 4,018
Redeemed (40,512) (35,037) (54,259) (67,865)
----------- ----------- ----------- ------------
Change in Class C Shares (36,903) 44,806 54,588 95,508
----------- ----------- ----------- ------------
............................................................................................................................
CLASS Y SHARES:
Issued -- -- 734,436 1,388,804
Reinvested -- -- 17,662 23,646
Redeemed -- -- (724,104) (1,002,656)
----------- ----------- ----------- ------------
Change in Class Y Shares -- -- 27,994 409,794
----------- ----------- ----------- ------------
</Table>
38 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
BALANCED FUND EQUITY FUND
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 203,168 $ 296,118 $ 973,345 $ 1,072,599
Net realized losses from investment
transactions (491,172) (1,733,733) (13,278,173) (29,117,568)
Change in unrealized
appreciation/depreciation from
investments 1,594,556 (90,459) 39,013,499 (27,338,527)
------------ ----------- ------------- ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 1,306,552 (1,528,074) 26,708,671 (55,383,496)
------------ ----------- ------------- ------------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (11,895) (3,748) (65,354) (36,107)
Class B Shares (30,581) (5,763) -- --
Class C Shares (1,995) (813) -- --
Class Y Shares (369,595) (179,777) (1,118,576) (842,473)
------------ ----------- ------------- ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (414,066) (190,101) (1,183,930) (878,580)
------------ ----------- ------------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (11,888,601) 90,197 (152,352,431) 102,470,636
------------ ----------- ------------- ------------
CHANGE IN NET ASSETS (10,996,115) (1,627,978) (126,827,690) 46,208,560
............................................................................................................................
NET ASSETS:
Beginning of year 14,584,585 16,212,563 192,894,060 146,685,500
------------ ----------- ------------- ------------
End of year $ 3,588,470 $14,584,585 $ 66,066,370 $192,894,060
------------ ----------- ------------- ------------
------------ ----------- ------------- ------------
Accumulated net investment income $ 37,341 $ 241,091 $ 17,859 $ 228,444
------------ ----------- ------------- ------------
------------ ----------- ------------- ------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 39
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
BALANCED FUND EQUITY FUND
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 193,612 $ 254,543 $ 8,180,284 $ 11,957,002
Dividends reinvested 10,110 3,367 63,443 35,456
Cost of shares redeemed (240,793) (103,414) (5,015,569) (8,621,362)
------------ ----------- ------------- ------------
Class A (Investor) Shares capital
transactions (37,071) 154,496 3,228,158 3,371,096
------------ ----------- ------------- ------------
............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 679,436 1,077,745 853,169 1,081,923
Dividends reinvested 29,958 5,589 -- --
Cost of shares redeemed (230,315) (97,724) (208,591) (279,702)
------------ ----------- ------------- ------------
Class B Shares capital transactions 479,079 985,610 644,578 802,221
------------ ----------- ------------- ------------
............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 38,274 2,500 24,206 31,580
Dividends reinvested 1,995 813 -- --
Cost of shares redeemed (7,243) (821) (165,268) (63,795)
------------ ----------- ------------- ------------
Class C Shares capital transactions 33,026 2,492 (141,062) (32,215)
------------ ----------- ------------- ------------
............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 2,805,945 2,172,114 45,465,549 120,030,391
Dividends reinvested 369,594 179,778 1,042,585 769,198
Cost of shares redeemed (15,539,174) (3,404,293) (202,592,239) (22,470,055)
------------ ----------- ------------- ------------
Class Y Shares capital transactions (12,363,635) (1,052,401) (156,084,105) 98,329,534
------------ ----------- ------------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(11,888,601) $ 90,197 $(152,352,431) $102,470,636
------------ ----------- ------------- ------------
------------ ----------- ------------- ------------
............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 24,619 30,620 729,759 986,765
Reinvested 1,298 390 6,026 3,050
Redeemed (29,879) (13,028) (463,074) (672,658)
------------ ----------- ------------- ------------
Change in Class A (Investor) Shares (3,962) 17,982 272,711 317,157
------------ ----------- ------------- ------------
............................................................................................................................
CLASS B SHARES:
Issued 87,827 130,189 78,761 86,551
Reinvested 3,893 647 -- --
Redeemed (29,803) (12,342) (20,721) (25,209)
------------ ----------- ------------- ------------
Change in Class B Shares 61,917 118,494 58,040 61,342
------------ ----------- ------------- ------------
............................................................................................................................
CLASS C SHARES:
Issued 4,794 298 2,154 2,531
Reinvested 258 94 -- --
Redeemed (907) (108) (15,839) (6,145)
------------ ----------- ------------- ------------
Change in Class C Shares 4,145 284 (13,685) (3,614)
------------ ----------- ------------- ------------
............................................................................................................................
CLASS Y SHARES:
Issued 353,697 261,958 4,290,203 8,983,553
Reinvested 47,239 20,688 99,898 64,275
Redeemed (1,913,232) (417,055) (17,991,472) (1,940,804)
------------ ----------- ------------- ------------
Change in Class Y Shares (1,512,296) (134,409) (13,601,371) 7,107,024
------------ ----------- ------------- ------------
</Table>
40 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
---------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 1,762,934 $ 1,337,897 $ (277,390) $ (304,696)
Net realized gains (losses) from
investment and options transactions (9,441,001) (24,672,615) 9,437 (18,552,349)
Change in unrealized
appreciation/depreciation from
investments and options 38,518,987 (17,117,988) 33,785,071 (8,355,049)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 30,840,920 (40,452,706) 33,517,118 (27,212,094)
------------ ------------ ------------ ------------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (10,010) (2,986) -- --
Class B Shares (2,046) -- -- --
Class Y Shares (2,030,344) (799,787) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (2,042,400) (802,773) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 7,450,742 (8,951,741) 31,225,520 (3,472,044)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS 36,249,262 (50,207,220) 64,742,638 (30,684,138)
............................................................................................................................
NET ASSETS:
Beginning of year 171,271,539 221,478,759 103,480,219 134,164,357
------------ ------------ ------------ ------------
End of year $207,520,801 $171,271,539 $168,222,857 $103,480,219
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Accumulated net investment income $ 542,460 $ 821,926 $ -- $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 41
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 900,030 $ 601,471 $ 638,547 $ 577,280
Dividends reinvested 9,705 2,897 -- --
Cost of shares redeemed (576,695) (899,525) (388,850) (212,541)
------------ ------------ ------------ ------------
Class A (Investor) Shares capital
transactions 333,040 (295,157) 249,697 364,739
------------ ------------ ------------ ------------
............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 945,891 1,229,558 873,543 2,417,457
Dividends reinvested 2,022 -- -- --
Cost of shares redeemed (139,831) (120,487) (429,567) (592,594)
------------ ------------ ------------ ------------
Class B Shares capital transactions 808,082 1,109,071 443,976 1,824,863
------------ ------------ ------------ ------------
............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 25,000 26,336
Cost of shares redeemed -- -- -- (21,556)
------------ ------------ ------------ ------------
Class C Shares capital transactions -- -- 25,000 4,780
------------ ------------ ------------ ------------
............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 33,049,306 16,872,208 -- --
Dividends reinvested 421,341 178,816 -- --
Cost of shares redeemed (27,161,027) (26,816,679) -- --
------------ ------------ ------------ ------------
Class Y Shares capital transactions 6,309,620 (9,765,655) -- --
------------ ------------ ------------ ------------
............................................................................................................................
TRUST SHARES:
Proceeds from shares issued -- -- 46,107,032 42,412,795
Cost of shares redeemed -- -- (15,600,185) (48,079,221)
------------ ------------ ------------ ------------
Trust Shares capital transactions -- -- 30,506,847 (5,666,426)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 7,450,742 $ (8,951,741) $ 31,225,520 $ (3,472,044)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 114,468 69,737 90,070 71,687
Reinvested 1,290 308 -- --
Redeemed (78,927) (105,318) (56,634) (28,927)
------------ ------------ ------------ ------------
Change in Class A (Investor) Shares 36,831 (35,273) 33,436 42,760
------------ ------------ ------------ ------------
............................................................................................................................
CLASS B SHARES:
Issued 125,862 140,389 131,936 305,404
Reinvested 265 -- -- --
Redeemed (18,379) (16,034) (65,762) (85,941)
------------ ------------ ------------ ------------
Change in Class B Shares 107,748 124,355 66,174 219,463
------------ ------------ ------------ ------------
............................................................................................................................
CLASS C SHARES:
Issued -- -- 3,671 3,391
Redeemed -- -- -- (2,753)
------------ ------------ ------------ ------------
Change in Class C Shares -- -- 3,671 638
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS Y SHARES:
Issued 4,459,324 1,990,822 -- --
Reinvested 56,068 19,925 -- --
Redeemed (3,647,279) (3,209,191) -- --
------------ ------------ ------------ ------------
Change in Class Y Shares 868,113 (1,198,444) -- --
------------ ------------ ------------ ------------
............................................................................................................................
TRUST SHARES:
Issued -- -- 6,913,528 5,158,172
Redeemed -- -- (2,336,030) (6,022,361)
------------ ------------ ------------ ------------
Change in Trust Shares -- -- 4,577,498 (864,189)
------------ ------------ ------------ ------------
</Table>
42 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
------------------------------------ -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 2,282,789 $ 1,520,651 $ 1,123 $ (20,655)
Net realized gains (losses) from
investment and foreign currency
transactions (889,405) (14,464,908) 194,623 (570,945)
Change in unrealized
appreciation/depreciation from investments
and foreign currencies 43,679,183 (13,761,843) 2,572,761 (753,586)
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 45,072,567 (26,706,100) 2,768,507 (1,345,186)
------------- ------------ ----------- -----------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares -- -- (71,236) (83,152)
Class B Shares -- -- (3,341) (894)
Class C Shares -- -- (54) --
Advisor Shares (3,705,000) (2,797,529) -- --
NET REALIZED GAINS FROM INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS:
Class A (Investor) Shares -- -- -- (189,407)
Class B Shares -- -- -- (7,926)
Class C Shares -- -- -- (3,527)
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (3,705,000) (2,797,529) (74,631) (284,906)
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (112,413,621) 39,713,366 713,058 2,143,644
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS (71,046,054) 10,209,737 3,406,934 513,552
...........................................................................................................................
NET ASSETS:
Beginning of year 194,703,733 184,493,996 7,886,799 7,373,247
------------- ------------ ----------- -----------
End of year $ 123,657,679 $194,703,733 $11,293,733 $ 7,886,799
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
Accumulated net investment income $ 3,732,087 $ 3,242,965 $ 77,699 $ 56,257
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 43
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
------------------------------------- ---------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $ 74,256,371 $ 6,142,944
Dividends reinvested -- -- 69,478 270,064
Cost of shares redeemed -- -- (73,955,056) (4,650,406)
--------------- ------------- ------------ -----------
Class A (Investor) Shares capital
transactions -- -- 370,793 1,762,602
--------------- ------------- ------------ -----------
..........................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 400,571 436,595
Dividends reinvested -- -- 3,234 8,694
Cost of shares redeemed -- -- (67,981) (40,890)
--------------- ------------- ------------ -----------
Class B Shares capital
transactions -- -- 335,824 404,399
--------------- ------------- ------------ -----------
..........................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 10,780 8,840
Dividends reinvested -- -- 54 3,527
Cost of shares redeemed -- -- (4,393) (35,724)
--------------- ------------- ------------ -----------
Class C Shares capital
transactions -- -- 6,441 (23,357)
--------------- ------------- ------------ -----------
..........................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 1,033,987,233 638,506,248 -- --
Dividends reinvested 2,711,050 1,765,422 -- --
Cost of shares redeemed (1,149,111,904) (600,558,304) -- --
--------------- ------------- ------------ -----------
Advisor Shares capital
transactions (112,413,621) 39,713,366 -- --
--------------- ------------- ------------ -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (112,413,621) $ 39,713,366 $ 713,058 $ 2,143,644
--------------- ------------- ------------ -----------
--------------- ------------- ------------ -----------
..........................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 7,113,411 534,842
Reinvested -- -- 7,075 22,454
Redeemed -- -- (6,989,865) (422,514)
--------------- ------------- ------------ -----------
Change in Class A (Investor)
Shares -- -- 130,621 134,782
--------------- ------------- ------------ -----------
..........................................................................................................................
CLASS B SHARES:
Issued -- -- 40,360 38,648
Reinvested -- -- 339 744
Redeemed -- -- (7,369) (3,888)
--------------- ------------- ------------ -----------
Change in Class B Shares -- -- 33,330 35,504
--------------- ------------- ------------ -----------
..........................................................................................................................
CLASS C SHARES:
Issued -- -- 1,049 885
Reinvested -- -- 6 299
Redeemed -- -- (439) (3,453)
--------------- ------------- ------------ -----------
Change in Class C Shares -- -- 616 (2,269)
--------------- ------------- ------------ -----------
..........................................................................................................................
ADVISOR SHARES:
Issued 92,631,040 53,518,520 -- --
Reinvested 255,518 134,868 -- --
Redeemed (101,337,125) (50,202,271) -- --
--------------- ------------- ------------ -----------
Change in Advisor Shares (8,450,567) 3,451,117 -- --
--------------- ------------- ------------ -----------
</Table>
44 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
-------------------------------------- ---------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss $ (1,565,842) $ (1,827,171) $ (234,805) $ (244,098)
Net realized gains (losses) from
investment transactions 4,018,810 (49,966,937) 275,213 (3,360,778)
Change in unrealized
appreciation/depreciation from
investments 65,152,323 2,106,990 4,550,177 230,012
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 67,605,291 (49,687,118) 4,590,585 (3,374,864)
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 67,780,861 60,107,797 2,364,162 3,847,236
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS 135,386,152 10,420,679 6,954,747 472,372
..........................................................................................................................
NET ASSETS:
Beginning of year 190,685,659 180,264,980 14,086,425 13,614,053
------------ ------------ ----------- -----------
End of year $326,071,811 $190,685,659 $21,041,172 $14,086,425
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Accumulated net investment
income $ -- $ -- $ -- $ --
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 45
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
------------------------------ ------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $ 5,083,521 $ 4,308,030
Cost of shares redeemed -- -- (3,421,035) (2,279,481)
------------- ------------- ----------- -----------
Class A (Investor) Shares capital
transactions -- -- 1,662,486 2,028,549
------------- ------------- ----------- -----------
...........................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 1,009,644 2,185,532
Cost of shares redeemed -- -- (281,855) (368,574)
------------- ------------- ----------- -----------
Class B Shares capital transactions -- -- 727,789 1,816,958
------------- ------------- ----------- -----------
...........................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 65,774 109,966
Cost of shares redeemed -- -- (91,887) (108,237)
------------- ------------- ----------- -----------
Class C Shares capital transactions -- -- (26,113) 1,729
------------- ------------- ----------- -----------
...........................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 204,930,414 166,252,280 -- --
Cost of shares redeemed (137,149,553) (106,144,483) -- --
------------- ------------- ----------- -----------
Advisor Shares capital transactions 67,780,861 60,107,797 -- --
------------- ------------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 67,780,861 $ 60,107,797 $ 2,364,162 $ 3,847,236
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
...........................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 554,127 456,632
Redeemed -- -- (395,887) (241,867)
------------- ------------- ----------- -----------
Change in Class A (Investor) Shares -- -- 158,240 214,765
------------- ------------- ----------- -----------
...........................................................................................................................
CLASS B SHARES:
Issued -- -- 119,900 217,277
Redeemed -- -- (35,134) (42,806)
------------- ------------- ----------- -----------
Change in Class B Shares -- -- 84,766 174,471
------------- ------------- ----------- -----------
...........................................................................................................................
CLASS C SHARES:
Issued -- -- 7,537 10,963
Redeemed -- -- (11,212) (11,072)
------------- ------------- ----------- -----------
Change in Class C Shares -- -- (3,675) (109)
------------- ------------- ----------- -----------
...........................................................................................................................
ADVISOR SHARES:
Issued 19,641,503 14,288,390 -- --
Redeemed (13,824,591) (9,644,921) -- --
------------- ------------- ----------- -----------
Change in Advisor Shares 5,816,912 4,643,469 -- --
------------- ------------- ----------- -----------
</Table>
46 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FUNDS -- LIMITED MATURITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
-------------------------------------- ------------------------------------
NET REALIZED AND NET
NET ASSET UNREALIZED GAINS TOTAL REALIZED
VALUE, NET (LOSSES) FROM FROM NET GAINS FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $10.04 0.33 0.54 0.87 (0.33) -- (0.33)
Year ended October 31, 2002 10.58 0.44 (0.10) 0.34 (0.44) (0.05) (0.49)
Year ended October 31, 2003 10.43 0.33 0.08 0.41 (0.37) -- (0.37)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) $10.07 0.25 0.52 0.77 (0.25) -- (0.25)
Year ended October 31, 2002 10.59 0.36 (0.09) 0.27 (0.36) (0.05) (0.41)
Year ended October 31, 2003 10.45 0.25 0.08 0.33 (0.29) -- (0.29)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) $10.07 0.26 0.51 0.77 (0.26) -- (0.26)
Year ended October 31, 2002 10.58 0.36 (0.09) 0.27 (0.36) (0.05) (0.41)
Year ended October 31, 2003 10.44 0.25 0.09 0.34 (0.29) -- (0.29)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) $10.00 0.37 0.59 0.96 (0.37) -- (0.37)
Year ended October 31, 2002 10.59 0.46 (0.09) 0.37 (0.46) (0.05) (0.51)
Year ended October 31, 2003 10.45 0.33 0.10 0.43 (0.40) -- (0.40)
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT RATIO OF
NET ASSET NET ASSETS AT EXPENSES INCOME TO EXPENSES
VALUE, END TOTAL END OF TO AVERAGE AVERAGE TO AVERAGE PORTFOLIO
OF PERIOD RETURN PERIOD(000'S) NET ASSETS NET ASSETS NET ASSETS TURNOVER(a)
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $10.58 8.78%(c)(d) $ 977 1.10%(e) 4.27%(e) 1.49%(e)(f) 102.01%
Year ended October 31, 2002 10.43 3.34%(d) 1,608 0.96% 4.14% 0.96% 44.04%
Year ended October 31, 2003 10.47 3.97%(d) 3,309 1.01% 2.99% 1.01% 98.42%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) $10.59 8.02%(c)(h) $ 896 1.85%(e) 3.52%(e) 7.59%(e)(f) 102.01%
Year ended October 31, 2002 10.45 2.65%(h) 4,178 1.70% 3.30% 1.70% 44.04%
Year ended October 31, 2003 10.49 3.19%(h) 6,443 1.73% 2.30% 1.73% 98.42%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) $10.58 7.80%(c)(h) $ 161 1.85%(e) 3.60%(e) 17.61%(e)(f) 102.01%
Year ended October 31, 2002 10.44 2.65%(h) 1,759 1.70% 3.26% 1.70% 44.04%
Year ended October 31, 2003 10.49 3.29%(h) 2,544 1.73% 2.31% 1.73% 98.42%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) $10.59 9.78%(c) $ 67,315 0.85%(e) 4.59%(e) 0.85%(e) 102.01%
Year ended October 31, 2002 10.45 3.69% 94,886 0.71% 4.42% 0.71% 44.04%
Year ended October 31, 2003 10.48 4.12% 31,368 0.69% 3.62% 0.69% 98.42%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
(b) Class A (Investor) Shares commenced operations on February 7, 2001.
(c) Not annualized.
(d) Excludes sales charge.
(e) Annualized.
(f) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(g) Class B Shares commenced operations on February 15, 2001.
(h) Excludes redemption charge.
(i) Class C Shares commenced operations on February 13, 2001.
(j) Class Y Shares commenced operations on January 23, 2001.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 47
<Page>
HSBC ADVISOR FUNDS TRUST -- FIXED INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM TOTAL
VALUE, NET INVESTMENT AND FROM
BEGINNING OF INVESTMENT FUTURES INVESTMENT
PERIOD INCOME TRANSACTIONS ACTIVITIES
- ----------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $10.81 0.62 (0.51) 0.11
Year ended October 31, 2000 10.01 0.69 (0.02) 0.67
Year ended October 31, 2001 9.99 0.67 0.80 1.47
Year ended October 31, 2002 10.81 0.55 (0.14) 0.41
Year ended October 31, 2003 10.63 0.41 0.19 0.60
- ----------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
---------------------------------------
NET REALIZED
GAINS FROM NET ASSETS
NET INVESTMENT VALUE,
INVESTMENT AND FUTURES TOTAL END OF TOTAL
INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN
- --------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 (0.62) (0.29) (0.91) $10.01 1.01%
Year ended October 31, 2000 (0.69) -- (0.69) 9.99 6.98%
Year ended October 31, 2001 (0.65) -- (0.65) 10.81 15.11%
Year ended October 31, 2002 (0.59) -- (0.59) 10.63 3.94%
Year ended October 31, 2003 (0.50) -- (0.50) 10.73 5.71%
- --------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE NET PORTFOLIO
(000'S) NET ASSETS ASSET TURNOVER(a)
- ---------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $114,405 0.69% 6.31% 433.26%
Year ended October 31, 2000 134,458 0.61% 6.66% 440.49%
Year ended October 31, 2001 150,580 0.63% 6.45% 341.26%
Year ended October 31, 2002 284,841 0.56% 5.06% 77.82%
Year ended October 31, 2003 110,968 0.56% 4.30% 70.91%
- ---------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
See notes to financial statements.
48 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FUNDS -- BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM TOTAL
VALUE, NET INVESTMENT AND FROM NET
BEGINNING INVESTMENT FUTURES INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME
- --------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $10.51 0.57 (0.49) 0.08 (0.57)
Year ended October 31, 2000 9.78 0.61 (0.01) 0.60 (0.62)
Year ended October 31, 2001 9.76 0.60 0.77 1.37 (0.58)
Year ended October 31, 2002 10.55 0.49 (0.14) 0.35 (0.52)
Year ended October 31, 2003 10.38 0.40 0.13 0.53 (0.43)
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $10.51 0.49 (0.49) -- (0.49)
Year ended October 31, 2000 9.78 0.54 (0.01) 0.53 (0.54)
Year ended October 31, 2001 9.77 0.52 0.76 1.28 (0.50)
Year ended October 31, 2002 10.55 0.41 (0.13) 0.28 (0.44)
Year ended October 31, 2003 10.39 0.32 0.13 0.45 (0.35)
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $10.46 0.47 (0.45) 0.02 (0.47)
Year ended October 31, 2000 9.77 0.55 (0.01) 0.54 (0.55)
Year ended October 31, 2001 9.76 0.51 0.77 1.28 (0.50)
Year ended October 31, 2002 10.54 0.41 (0.13) 0.28 (0.44)
Year ended October 31, 2003 10.38 0.32 0.13 0.45 (0.35)
- --------------------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
------------------------
NET
REALIZED
GAINS FROM
INVESTMENT
AND FUTURES TOTAL
TRANSACTIONS DIVIDENDS
- ---------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 (0.24) (0.81)
Year ended October 31, 2000 -- (0.62)
Year ended October 31, 2001 -- (0.58)
Year ended October 31, 2002 -- (0.52)
Year ended October 31, 2003 -- (0.43)
- ---------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 (0.24) (0.73)
Year ended October 31, 2000 -- (0.54)
Year ended October 31, 2001 -- (0.50)
Year ended October 31, 2002 -- (0.44)
Year ended October 31, 2003 -- (0.35)
- ---------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) (0.24) (0.71)
Year ended October 31, 2000 -- (0.55)
Year ended October 31, 2001 -- (0.50)
Year ended October 31, 2002 -- (0.44)
Year ended October 31, 2003 -- (0.35)
- ---------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES INCOME TO EXPENSES TO
END OF TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $ 9.78 0.68%(c) $ 4,331 1.07% 5.84% 2.62% 433.26%
Year ended October 31, 2000 9.76 6.39%(c) 3,828 1.10% 6.13% 3.31% 440.49%
Year ended October 31, 2001 10.55 14.41%(c) 6,683 1.10% 5.92% 2.61% 341.26%
Year ended October 31, 2002 10.38 3.44%(c) 12,053 1.10% 4.52% 1.47% 77.82%
Year ended October 31, 2003 10.48 5.17%(c) 14,143 1.10% 3.76% 1.21% 70.91%
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $ 9.78 (0.01)%(d) $ 345 1.79% 5.13% 3.37% 433.26%
Year ended October 31, 2000 9.77 5.67%(d) 279 1.85% 5.38% 4.03% 440.49%
Year ended October 31, 2001 10.55 13.43%(d) 1,494 1.85% 5.04% 3.32% 341.26%
Year ended October 31, 2002 10.39 2.76%(d) 6,124 1.85% 3.66% 2.18% 77.82%
Year ended October 31, 2003 10.49 4.38%(d) 7,430 1.85% 3.01% 1.96% 70.91%
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $ 9.77 0.11%(d)(e) $ 152 1.95%(f) 4.96%(f) 3.50%(f) 433.26%
Year ended October 31, 2000 9.76 5.71%(d) 138 1.85% 5.38% 4.05% 440.49%
Year ended October 31, 2001 10.54 13.44%(d) 526 1.85% 5.11% 3.34% 341.26%
Year ended October 31, 2002 10.38 2.77%(d) 983 1.85% 3.75% 2.21% 77.82%
Year ended October 31, 2003 10.48 4.39%(d) 606 1.85% 3.06% 1.97% 70.91%
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
(c) Excludes sales charge.
(d) Excludes redemption charge.
(e) Not annualized.
(f) Annualized.
(g) Class C Shares commenced operations on November 4, 1998.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 49
<Page>
HSBC INVESTOR FUNDS -- NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM
VALUE, NET INVESTMENT AND TOTAL FROM
BEGINNING OF INVESTMENT FUTURES INVESTMENT
PERIOD INCOME TRANSACTIONS ACTIVITIES
- ----------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $10.93 0.46 (0.83) (0.37)
Year ended October 31, 2000 10.08 0.46 0.33 0.79
Year ended October 31, 2001 10.39 0.41 0.54 0.95
Year ended October 31, 2002 10.93 0.38 0.16 0.54
Year ended October 31, 2003 11.09 0.38 0.12 0.50
- ----------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $10.92 0.38 (0.83) (0.45)
Year ended October 31, 2000 10.07 0.39 0.33 0.72
Year ended October 31, 2001 10.38 0.33 0.54 0.87
Year ended October 31, 2002 10.92 0.30 0.16 0.46
Year ended October 31, 2003 11.08 0.30 0.12 0.42
- ----------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $10.90 0.34 (0.77) (0.43)
Year ended October 31, 2000 10.11 0.39 0.33 0.72
Year ended October 31, 2001 10.42 0.33 0.54 0.87
Year ended October 31, 2002 10.96 0.30 0.16 0.46
Year ended October 31, 2003 11.12 0.30 0.13 0.43
- ----------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 1999 $10.93 0.48 (0.84) (0.36)
Year ended October 31, 2000 10.07 0.49 0.34 0.83
Year ended October 31, 2001 10.39 0.44 0.54 0.98
Year ended October 31, 2002 10.93 0.41 0.16 0.57
Year ended October 31, 2003 11.09 0.41 0.12 0.53
- ----------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
---------------------------------------
NET REALIZED
GAINS FROM NET ASSET
NET INVESTMENT AND VALUE,
INVESTMENT FUTURES TOTAL END OF TOTAL
INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN
- ------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 (0.46) (0.02) (0.48) $10.08 (3.62)%(b)
Year ended October 31, 2000 (0.46) (0.02) (0.48) 10.39 8.03 %(b)
Year ended October 31, 2001 (0.41) -- (0.41) 10.93 9.26 %(b)
Year ended October 31, 2002 (0.38) -- (0.38) 11.09 5.08 %(b)
Year ended October 31, 2003 (0.38) -- (0.38) 11.21 4.57 %(b)
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 (0.38) (0.02) (0.40) $10.07 (4.30)%(f)
Year ended October 31, 2000 (0.39) (0.02) (0.41) 10.38 7.27 %(f)
Year ended October 31, 2001 (0.33) -- (0.33) 10.92 8.44 %(f)
Year ended October 31, 2002 (0.30) -- (0.30) 11.08 4.30 %(f)
Year ended October 31, 2003 (0.30) -- (0.30) 11.20 3.80 %(f)
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) (0.34) (0.02) (0.36) $10.11 (4.10)%(d)(f)
Year ended October 31, 2000 (0.39) (0.02) (0.41) 10.42 7.23 %(f)
Year ended October 31, 2001 (0.33) -- (0.33) 10.96 8.40 %(f)
Year ended October 31, 2002 (0.30) -- (0.30) 11.12 4.28 %(f)
Year ended October 31, 2003 (0.30) -- (0.30) 11.25 3.87 %(f)
- ------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 1999 (0.48) (0.02) (0.50) $10.07 (3.45)%
Year ended October 31, 2000 (0.49) (0.02) (0.51) 10.39 8.41 %
Year ended October 31, 2001 (0.44) -- (0.44) 10.93 9.53 %
Year ended October 31, 2002 (0.41) -- (0.41) 11.09 5.34 %
Year ended October 31, 2003 (0.41) -- (0.41) 11.21 4.84 %
- ------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF
NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME EXPENSES TO
PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO
(000'S) NET ASSETS NET ASSETS NET ASSETS TURNOVER(a)
- ---------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $17,568 0.96% 4.22% 1.21%(c) 46.56%
Year ended October 31, 2000 12,401 0.93% 4.60% 1.06%(c) 34.12%
Year ended October 31, 2001 17,722 0.95% 3.91% 1.07%(c) 0.00%
Year ended October 31, 2002 16,341 0.95% 3.52% 0.95%(c) 30.70%
Year ended October 31, 2003 22,326 0.91% 3.39% 0.91% 29.79%
- ---------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $ 564 1.71% 3.48% 1.96%(c) 46.56%
Year ended October 31, 2000 828 1.70% 3.81% 1.74%(c) 34.12%
Year ended October 31, 2001 5,619 1.70% 3.05% 1.82%(c) 0.00%
Year ended October 31, 2002 12,699 1.70% 2.74% 1.70%(c) 30.70%
Year ended October 31, 2003 18,352 1.66% 2.64% 1.66% 29.79%
- ---------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $ 256 1.70%(e) 3.46%(e) 2.02%(c)(e) 46.56%
Year ended October 31, 2000 416 1.71% 3.77% 1.73%(c) 34.12%
Year ended October 31, 2001 1,523 1.70% 3.04% 1.83%(c) 0.00%
Year ended October 31, 2002 2,608 1.70% 2.74% 1.70%(c) 30.70%
Year ended October 31, 2003 3,252 1.66% 2.64% 1.66% 29.79%
- ---------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 1999 $ 8,619 0.71% 4.49% 0.96%(c) 46.56%
Year ended October 31, 2000 9,514 0.69% 4.82% 0.78%(c) 34.12%
Year ended October 31, 2001 14,989 0.70% 4.19% 0.83%(c) 0.00%
Year ended October 31, 2002 19,753 0.70% 3.76% 0.70%(c) 30.70%
Year ended October 31, 2003 20,290 0.67% 3.67% 0.67% 29.79%
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the fund as a whole,
without the distinguishing between the classes of shares issued.
(b) Excludes sales charge.
(c) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(d) Not annualized.
(e) Annualized.
(f) Excludes redemption charge.
(g) Class C Shares commenced operations on November 4, 1998.
See notes to financial statements.
50 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FUNDS -- BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
---------------------------------------- ----------------------
NET REALIZED
AND UNREALIZED
NET ASSET GAINS (LOSSES) TOTAL NET ASSET
VALUE, NET FROM FROM NET VALUE,
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL END OF
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (c) $ 9.55 0.11 (1.02) (0.91) (0.09) (0.09) $8.55
Year ended October 31, 2002 8.55 0.15 (0.92) (0.77) (0.09) (0.09) 7.69
Year ended October 31, 2003 7.69 0.10 0.68 0.78 (0.20) (0.20) 8.27
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) $ 9.80 0.08 (1.25) (1.17) (0.08) (0.08) $8.55
Year ended October 31, 2002 8.55 0.13 (0.97) (0.84) (0.07) (0.07) 7.64
Year ended October 31, 2003 7.64 0.04 0.69 0.73 (0.15) (0.15) 8.22
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) $ 9.78 0.07 (1.24) (1.17) (0.06) (0.06) $8.55
Year ended October 31, 2002 8.55 0.12 (0.96) (0.84) (0.06) (0.06) 7.65
Year ended October 31, 2003 7.65 0.04 0.69 0.73 (0.15) (0.15) 8.23
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) $10.00 0.16 (1.45) (1.29) (0.09) (0.09) $8.62
Year ended October 31, 2002 8.62 0.16 (0.93) (0.77) (0.10) (0.10) 7.75
Year ended October 31, 2003 7.75 0.15* 0.66 0.81 (0.22) (0.22) 8.34
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME TO EXPENSES TO
PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO
TOTAL RETURN (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b)
- --------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (c) (9.04)%(d)(e) $ 313 1.20%(f) 1.88%(f) 2.05%(f) 39.95%
Year ended October 31, 2002 (9.07)%(e) 419 1.20% 1.71% 1.88% 58.06%
Year ended October 31, 2003 10.39 %(e) 419 1.20% 1.43% 2.90% 89.56%
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) (11.41)%(d)(h) $ 641 1.95%(f) 1.14%(f) 2.78%(f) 39.95%
Year ended October 31, 2002 (9.93)%(h) 1,479 1.95% 0.97% 2.63% 58.06%
Year ended October 31, 2003 9.70 %(h) 2,099 1.95% 0.63% 3.86% 89.56%
- --------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) (11.46)%(d)(h) $ 107 1.95%(f) 1.19%(f) 2.71%(f) 39.95%
Year ended October 31, 2002 (9.85)%(h) 97 1.95% 0.96% 2.63% 58.06%
Year ended October 31, 2003 9.67 %(h) 139 1.95% 0.62% 3.89% 89.56%
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) (12.95)%(d) $15,152 0.95%(f) 2.29%(f) 1.58%(f) 39.95%
Year ended October 31, 2002 (9.02)% 12,589 0.95% 1.96% 1.63% 58.06%
Year ended October 31, 2003 10.70 % 932 0.95% 1.86% 1.73% 89.56%
- --------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the fund as a whole,
without the distinguishing between the classes of shares issued.
(c) Class A (Investor) Shares commenced operations on February 20, 2001.
(d) Not annualized.
(e) Excludes sales charge.
(f) Annualized.
(g) Class B Shares commenced operations on February 9, 2001.
(h) Excludes redemption charge.
(i) Class C Shares commenced operations on February 13, 2001.
(j) Class Y Shares commenced operations on January 18, 2001.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 51
<Page>
HSBC INVESTOR FUNDS -- EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
--------------------------------- -----------------------------------
NET REALIZED
AND UNREALIZED NET
GAINS (LOSSES) REALIZED
NET ASSET NET FROM TOTAL GAINS FROM NET ASSET
VALUE, INVESTMENT INVESTMENT FROM NET INVESTMENT VALUE,
BEGINNING INCOME AND FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL END OF
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $16.95 0.05 3.32 3.37 (0.04) (0.39) (0.43) $19.89
Year ended October 31, 2000 19.89 0.06 (0.51) (0.45) (0.07) (1.89) (1.96) 17.48
Year ended October 31, 2001 17.48 0.03 (4.48) (4.45) (0.02) -- (0.02) 13.01
Year ended October 31, 2002 13.01 0.07 (2.76) (2.69) (0.03) -- (0.03) 10.29
Year ended October 31, 2003 10.29 0.04 1.80 1.84 (0.04) -- (0.04) 12.09
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $16.92 (0.08) 3.30 3.22 (0.01) (0.39) (0.40) $19.74
Year ended October 31, 2000 19.74 (0.07) (0.52) (0.59) -- (1.89) (1.89) 17.26
Year ended October 31, 2001 17.26 (0.08) (4.40) (4.48) -- -- -- 12.78
Year ended October 31, 2002 12.78 (0.04) (2.70) (2.74) -- -- -- 10.04
Year ended October 31, 2003 10.04 (0.04) 1.76 1.72 -- -- -- 11.76
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999(d) $17.08 -- 3.19 3.19 (0.05) (0.39) (0.44) $19.83
Year ended October 31, 2000 19.83 (0.07) (0.51) (0.58) -- (1.89) (1.89) 17.36
Year ended October 31, 2001 17.36 (0.10) (4.42) (4.52) -- -- -- 12.84
Year ended October 31, 2002 12.84 (0.05) (2.69) (2.74) -- -- -- 10.10
Year ended October 31, 2003 10.10 (0.04) 1.76 1.72 -- -- -- 11.82
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 1999 $16.95 0.10 3.32 3.42 (0.09) (0.39) (0.48) $19.89
Year ended October 31, 2000 19.89 0.10 (0.51) (0.41) (0.11) (1.89) (2.00) 17.48
Year ended October 31, 2001 17.48 0.06 (4.47) (4.41) (0.06) -- (0.06) 13.01
Year ended October 31, 2002 13.01 0.12 (2.78) (2.66) (0.06) -- (0.06) 10.29
Year ended October 31, 2003 10.29 0.06 1.81 1.87 (0.07) -- (0.07) 12.09
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------
RATIO OF
NET
INVESTMENT
NET ASSETS RATIO OF INCOME
AT END OF EXPENSES TO (LOSS) TO
PERIOD AVERAGE AVERAGE PORTFOLIO
TOTAL RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a)
- ------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 20.23 %(b) $ 27,942 0.94% 0.26% 70.85%
Year ended October 31, 2000 (2.38)%(b) 22,558 0.93% 0.34% 91.81%
Year ended October 31, 2001 (25.49)%(b) 17,223 1.01% 0.14% 51.65%
Year ended October 31, 2002 (20.74)%(b) 16,881 0.96% 0.34% 62.60%
Year ended October 31, 2003 17.94 %(b) 23,131 1.07% 0.31% 72.30%
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 19.32 %(c) $ 1,775 1.69% (0.50)% 70.85%
Year ended October 31, 2000 (3.13)%(c) 1,604 1.65% (0.40)% 91.81%
Year ended October 31, 2001 (25.96)%(c) 1,389 1.76% (0.61)% 51.65%
Year ended October 31, 2002 (21.44)%(c) 1,708 1.70% (0.41)% 62.60%
Year ended October 31, 2003 17.13 %(c) 2,682 1.82% (0.44)% 72.30%
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999(d) 19.05 %(c)(e) $ 1,626 1.33%(f) (0.16)%(f) 70.85%
Year ended October 31, 2000 (3.11)%(c) 1,204 1.65% (0.37)% 91.81%
Year ended October 31, 2001 (26.04)%(c) 768 1.75% (0.60)% 51.65%
Year ended October 31, 2002 (21.34)%(c) 568 1.71% (0.43)% 62.60%
Year ended October 31, 2003 17.03 %(c) 503 1.79% (0.42)% 72.30%
- ------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 1999 20.59 % $245,342 0.69% 0.51% 70.85%
Year ended October 31, 2000 (2.19)% 204,772 0.68% 0.58% 91.81%
Year ended October 31, 2001 (25.27)% 127,306 0.75% 0.40% 51.65%
Year ended October 31, 2002 (20.53)% 173,738 0.70% 0.60% 62.60%
Year ended October 31, 2003 18.26 % 39,751 0.72% 0.62% 72.30%
- ------------------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the fund as a whole,
without the distinguishing between the classes of shares issued.
(b) Excludes sales charge.
(c) Excludes redemption charge.
(d) Class C Shares commenced operations on November 4, 1998.
(e) Not annualized.
(f) Annualized.
See notes to financial statements.
52 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FUNDS -- GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------- ----------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS NET ASSET
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET VALUE,
BEGINNING OF INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF
PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $10.06 0.01 (1.15) (1.14) (0.01) (0.01) $8.91
Year ended October 31, 2002 8.91 0.04 (1.73) (1.69) (0.01) (0.01) 7.21
Year ended October 31, 2003 7.21 0.06 1.18 1.24 (0.06) (0.06) 8.39
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (f) $ 9.54 (0.01) (0.64) (0.65) (0.01) (0.01) $8.88
Year ended October 31, 2002 8.88 (0.00)* (1.74) (1.74) -- -- 7.14
Year ended October 31, 2003 7.14 (0.01) 1.18 1.17 (0.01) (0.01) 8.30
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (h) $10.00 0.02 (1.09) (1.07) (0.01) (0.01) $8.92
Year ended October 31, 2002 8.92 0.06 (1.73) (1.67) (0.03) (0.03) 7.22
Year ended October 31, 2003 7.22 0.07 1.19 1.26 (0.08) (0.08) 8.40
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES TO INCOME (LOSS)
PERIOD AVERAGE TO AVERAGE PORTFOLIO
TOTAL RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a)
- ----------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) (12.65)%(c)(d) $ 1,927 1.11%(e) 0.15%(e) 43.13%
Year ended October 31, 2002 (18.97)%(d) 1,306 1.01% 0.39% 59.85%
Year ended October 31, 2003 17.26 %(d) 1,827 1.04% 0.70% 64.52%
- ----------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (f) (10.52)%(c)(g) $ 330 1.84%(e) (0.64)(e) 43.13%
Year ended October 31, 2002 (19.59)%(g) 1,154 1.76% (0.30)% 59.85%
Year ended October 31, 2003 16.40 %(g) 2,235 1.79% (0.07)% 64.52%
- ----------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (h) (9.71)%(c) $219,221 0.82%(e) 0.38%(e) 43.13%
Year ended October 31, 2002 (18.76)% 168,812 0.76% 0.66% 59.85%
Year ended October 31, 2003 17.63 % 203,458 0.79% 0.96% 64.52%
- ----------------------------------------------------------------------------------------------------------------
</Table>
* Less than $0.005 per share.
(a) Portfolio turnover is calculated on the basis of the fund as a whole,
without the distinguishing between the classes of shares issued.
(b) Class A (Investor) Shares commenced operations on April 12, 2001.
(c) Not annualized.
(d) Excludes sales charge.
(e) Annualized.
(f) Class B Shares commenced operations on April 5, 2001.
(g) Excludes redemption charge.
(h) Class Y Shares commenced operations on April 2, 2001.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 53
<Page>
HSBC INVESTOR FUNDS -- MID-CAP FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ -------------------------
NET REALIZED
AND
UNREALIZED
GAINS (LOSSES) NET REALIZED
NET ASSET FROM TOTAL GAINS FROM
VALUE, NET INVESTMENT FROM INVESTMENT
BEGINNING INVESTMENT AND OPTION INVESTMENT AND OPTION TOTAL
OF PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2000 (b) $10.27 (0.01) (0.19) (0.20) -- --
Year ended October 31,
2001 10.07 (0.03) (2.00) (2.03) (0.14) (0.14)
Year ended October 31,
2002 7.90 (0.03) (1.57) (1.60) -- --
Year ended October 31,
2003 6.30 (0.03)* 1.68 1.65 -- --
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2000 (f) $10.72 (0.02) (0.64) (0.66) -- --
Year ended October 31,
2001 10.06 (0.08) (2.02) (2.10) (0.14) (0.14)
Year ended October 31,
2002 7.82 (0.08) (1.55) (1.63) -- --
Year ended October 31,
2003 6.19 (0.08)* 1.64 1.56 -- --
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2000 (h) $10.04 (0.01) 0.03 (j) 0.02 -- --
Year ended October 31,
2001 10.06 (0.09) (2.01) (2.10) (0.14) (0.14)
Year ended October 31,
2002 7.82 (0.08) (1.54) (1.62) -- --
Year ended October 31,
2003 6.20 (0.08)* 1.68 1.60 -- --
- -------------------------------------------------------------------------------------------------------------
TRUST SHARES
Period ended October 31,
2000 (i) $10.00 (0.01) 0.09 (j) 0.08 -- --
Year ended October 31,
2001 10.08 (0.01) (2.02) (2.03) (0.14) (0.14)
Year ended October 31,
2002 7.91 (0.02) (1.56) (1.58) -- --
Year ended October 31,
2003 6.33 (0.01) 1.69 1.68 -- --
- -------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
VALUE, AT END OF EXPENSES LOSS TO
END OF TOTAL PERIOD TO AVERAGE AVERAGE PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a)
- -----------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2000 (b) $10.07 (1.95)%(c)(d) $ 445 1.28%(e) (0.42)%(e) 57.69%
Year ended October 31,
2001 7.90 (20.37)%(d) 927 1.13% (0.40)% 112.67%
Year ended October 31,
2002 6.30 (20.25)%(d) 1,010 1.08% (0.46)% 140.23%
Year ended October 31,
2003 7.95 26.19 %(d) 1,539 1.10% (0.43)% 100.86%
- -----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2000 (f) $10.06 (6.16)%(c)(g) $ 1,557 2.02%(e) (1.17)%(e) 57.69%
Year ended October 31,
2001 7.82 (21.09)%(g) 3,827 1.88% (1.16)% 112.67%
Year ended October 31,
2002 6.19 (20.84)%(g) 4,391 1.83% (1.21)% 140.23%
Year ended October 31,
2003 7.75 25.20 %(g) 6,009 1.85% (1.16)% 100.86%
- -----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2000 (h) $10.06 0.20 %(c)(g) $ 18 2.11%(e) (1.29)%(e) 57.69%
Year ended October 31,
2001 7.82 (21.09)%(g) 21 1.87% (1.13)% 112.67%
Year ended October 31,
2002 6.20 (20.72)%(g) 20 1.83% (1.20)% 140.23%
Year ended October 31,
2003 7.80 25.81 %(g) 54 1.85% (1.23)% 100.86%
- -----------------------------------------------------------------------------------------------------------------------
TRUST SHARES
Period ended October 31,
2000 (i) $10.08 0.80 %(c) $108,487 1.01%(e) (0.22)%(e) 57.69%
Year ended October 31,
2001 7.91 (20.34)% 129,390 0.87% (0.13)% 112.67%
Year ended October 31,
2002 6.33 (19.97)% 98,059 0.82% (0.18)% 140.23%
Year ended October 31,
2003 8.01 26.54 % 160,621 0.85% (0.17)% 100.86%
- -----------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) Portfolio turnover is calculated on the basis of the fund as a whole,
without the distinguishing between the classes of shares issued.
(b) Class A (Investor) Shares commenced operations on July 10, 2000.
(c) Not annualized.
(d) Excludes sales charge.
(e) Annualized.
(f) Class B Shares commenced operations on July 17, 2000.
(g) Excludes redemption charge.
(h) Class C Shares commenced operations on August 9, 2000.
(i) Trust Shares commenced operations on July 1, 2000.
(j) The amount shown for a share outstanding throughout the period does not
accord with the change in aggregate gains and losses in the portfolio of
securities during the period because of the timing of sales and purchases of
fund shares in relation to fluctuating values during the period.
See notes to financial statements.
54 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC ADVISOR FUNDS TRUST -- INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM
VALUE, NET INVESTMENT AND
BEGINNING OF INVESTMENT FOREIGN CURRENCY
PERIOD INCOME TRANSACTIONS
- ----------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $13.24 0.09 5.87
Year ended October 31, 2000 18.58 0.11 0.75
Year ended October 31, 2001 18.13 0.09 (4.38)
Year ended October 31, 2002 12.56 0.09 (1.73)
Year ended October 31, 2003 10.73 0.20 2.02
- ----------------------------------------------------------------------------------
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
--------------------- -----------------------------------
NET REALIZED
GAINS FROM
TOTAL INVESTMENT NET ASSET
FROM NET AND FOREIGN VALUE,
INVESTMENT INVESTMENT CURRENCY TOTAL END OF TOTAL
ACTIVITIES INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN
- --------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 5.96 (0.15) (0.47) (0.62) $18.58 46.92 %
Year ended October 31, 2000 0.86 (0.11) (1.20) (1.31) 18.13 4.05 %
Year ended October 31, 2001 (4.29) -- (1.28) (1.28) 12.56 (25.42)%
Year ended October 31, 2002 (1.64) (0.19) -- (0.19) 10.73 (13.32)%
Year ended October 31, 2003 2.22 (0.19) -- (0.19) 12.76 21.03 %
- --------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------
RATIO OF
NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE PORTFOLIO
(000'S) NET ASSETS NET ASSETS TURNOVER(a)
- --------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $172,004 1.05% 0.54% 34.26%
Year ended October 31, 2000 219,837 0.90% 0.51% 27.81%
Year ended October 31, 2001 184,494 0.99% 0.51% 26.90%
Year ended October 31, 2002 194,704 0.99% 0.70% 31.63%
Year ended October 31, 2003 123,658 1.07% 1.16% 68.51%
- --------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 55
<Page>
HSBC INVESTOR FUNDS -- OVERSEAS EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
-----------------------------------------
NET REALIZED
AND UNREALIZED
GAINS (LOSSES)
NET ASSET NET FROM INVESTMENT
VALUE, INVESTMENT AND FOREIGN TOTAL FROM
BEGINNING INCOME CURRENCY INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES
- ------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $11.64 (0.04) 5.32 5.28
Year ended October 31, 2000 16.90 (0.11) 0.64 0.53
Year ended October 31, 2001 17.21 (0.04) (4.05) (4.09)
Year ended October 31, 2002 11.66 (0.04) (1.34) (1.38)
Year ended October 31, 2003 9.87 0.01 1.95 1.96
- ------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $11.57 (0.12) 5.24 5.12
Year ended October 31, 2000 16.69 (0.10) 0.48 0.38
Year ended October 31, 2001 16.85 (0.14) (3.95) (4.09)
Year ended October 31, 2002 11.30 (0.08) (1.34) (1.42)
Year ended October 31, 2003 9.56 (0.06) 1.89 1.83
- ------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $11.88 (0.08) 5.04 4.96
Year ended October 31, 2000 16.84 (0.14) 0.52 0.38
Year ended October 31, 2001 17.00 (0.18) (3.95) (4.13)
Year ended October 31, 2002 11.41 (0.08) (1.36) (1.44)
Year ended October 31, 2003 9.68 (0.06) 1.93 1.87
- ------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
---------------------------
NET REALIZED
GAINS FROM
INVESTMENT
NET AND FOREIGN
INVESTMENT CURRENCY
INCOME TRANSACTIONS
- ----------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 (0.02) --
Year ended October 31, 2000 -- (0.22)
Year ended October 31, 2001 -- (1.46)
Year ended October 31, 2002 (0.12) (0.29)
Year ended October 31, 2003 (0.10) --
- ----------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 -- --
Year ended October 31, 2000 -- (0.22)
Year ended October 31, 2001 -- (1.46)
Year ended October 31, 2002 (0.03) (0.29)
Year ended October 31, 2003 (0.05) --
- ----------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) -- --
Year ended October 31, 2000 -- (0.22)
Year ended October 31, 2001 -- (1.46)
Year ended October 31, 2002 -- (0.29)
Year ended October 31, 2003 (0.01) --
- ----------------------------------------------------------------
<Caption>
DIVIDENDS RATIOS/SUPPLEMENTARY DATA
---------------------------- ---------------------------------------------------------------
RATIO OF
NET
INVESTMENT
RATIO OF INCOME RATIO OF
NET ASSET NET ASSETS EXPENSES TO (LOSS) EXPENSES TO
TOTAL VALUE, END TOTAL AT END OF AVERAGE TO AVERAGE AVERAGE PORTFOLIO
DIVIDENDS OF PERIOD RETURN PERIOD (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 (0.02) $16.90 45.41 %(c) $ 8,138 1.86% (0.30)% 2.44% 34.26%
Year ended October 31, 2000 (0.22) 17.21 3.05 %(c) 7,252 1.85% (0.49)% 2.43% 27.81%
Year ended October 31, 2001 (1.46) 11.66 (25.93)%(c) 6,940 1.85% (0.35)% 2.44% 26.90%
Year ended October 31, 2002 (0.41) 9.87 (12.42)%(c) 7,203 1.85% (0.18)% 2.28% 31.63%
Year ended October 31, 2003 (0.10) 11.73 20.09 %(c) 10,096 1.85% 0.07 % 2.34% 68.51%
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 -- $16.69 44.25 %(f) $ 90 2.59% (1.04)% 3.24% 34.26%
Year ended October 31, 2000 (0.22) 16.85 2.18 %(f) 358 2.60% (1.17)% 2.96% 27.81%
Year ended October 31, 2001 (1.46) 11.30 (26.52)%(f) 294 2.60% (1.09)% 3.18% 26.90%
Year ended October 31, 2002 (0.32) 9.56 (13.07)%(f) 588 2.60% (0.87)% 3.04% 31.63%
Year ended October 31, 2003 (0.05) 11.34 19.26 %(f) 1,076 2.60% (0.62)% 3.16% 68.51%
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) -- $16.84 41.84 %(d)(f) $ 98 2.57%(e) (1.01)%(e) 3.15%(e) 34.26%
Year ended October 31, 2000 (0.22) 17.00 2.10 %(f) 248 2.60% (1.14)% 2.96% 27.81%
Year ended October 31, 2001 (1.46) 11.41 (26.53)%(f) 139 2.60% (1.10)% 3.16% 26.90%
Year ended October 31, 2002 (0.29) 9.68 (13.08)%(f) 96 2.60% (1.00)% 3.04% 31.63%
Year ended October 31, 2003 (0.01) 11.54 19.28 %(f) 121 2.60% (0.64)% 3.17% 68.51%
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(c) Excludes sales charge.
(d) Not annualized.
(e) Annualized.
(f) Excludes redemption charge.
(g) Class C Shares commenced operations on November 4, 1998.
See notes to financial statements.
56 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC ADVISOR FUNDS TRUST -- SMALL CAP EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS TOTAL
VALUE, NET (LOSSES) FROM FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD LOSS TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $11.48 (0.09) 2.65 2.56
Year ended October 31, 2000 12.56 (0.10) 6.73 6.63
Year ended October 31, 2001 17.81 (0.10) (3.65) (3.75)
Year ended October 31, 2002 11.32 (0.09) (1.96) (2.05)
Year ended October 31, 2003 9.27 (0.06) 3.15 3.09
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
------------------------
NET REALIZED
GAINS FROM
INVESTMENT TOTAL
TRANSACTIONS DIVIDENDS
- -------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 (1.48) (1.48)
Year ended October 31, 2000 (1.38) (1.38)
Year ended October 31, 2001 (2.74) (2.74)
Year ended October 31, 2002 -- --
Year ended October 31, 2003 -- --
- -------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
----------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
VALUE, AT END OF EXPENSES TO LOSS TO
END OF TOTAL PERIOD AVERAGE AVERAGE PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a)
- --------------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $12.56 24.63 % $148,538 1.18% (0.81)% 77.74%
Year ended October 31, 2000 17.81 55.59 % 253,724 1.05% (0.68)% 79.51%
Year ended October 31, 2001 11.32 (22.98)% 180,265 1.07% (0.74)% 52.47%
Year ended October 31, 2002 9.27 (18.11)% 190,686 1.07% (0.87)% 103.90%
Year ended October 31, 2003 12.36 33.33 % 326,072 1.01% (0.72)% 152.05%
- --------------------------------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 57
<Page>
HSBC INVESTOR FUNDS -- OPPORTUNITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS TOTAL
VALUE, NET (LOSSES) FROM FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD LOSS TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $11.33 (0.19) 2.78 2.59
Year ended October 31, 2000 13.19 (0.26) 7.13 6.87
Year ended October 31, 2001 18.75 (0.14) (3.58) (3.72)
Year ended October 31, 2002 9.60 (0.13) (1.64) (1.77)
Year ended October 31, 2003 7.83 (0.10) 2.63 2.53
- -------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $11.31 (0.23) 2.71 2.48
Year ended October 31, 2000 13.06 (0.28) 6.93 6.65
Year ended October 31, 2001 18.40 (0.23)* (3.47) (3.70)
Year ended October 31, 2002 9.27 (0.20)* (1.56) (1.76)
Year ended October 31, 2003 7.51 (0.18)* 2.52 2.34
- -------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $11.55 (0.10) 2.41 2.31
Year ended October 31, 2000 13.13 (0.32) 7.01 6.69
Year ended October 31, 2001 18.51 (0.24)* (3.49) (3.73)
Year ended October 31, 2002 9.35 (0.21)* (1.57) (1.78)
Year ended October 31, 2003 7.57 (0.18) 2.55 2.37
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
------------------------
NET REALIZED
GAINS FROM
INVESTMENT TOTAL
TRANSACTIONS DIVIDENDS
- -------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 (0.73) (0.73)
Year ended October 31, 2000 (1.31) (1.31)
Year ended October 31, 2001 (5.43) (5.43)
Year ended October 31, 2002 -- --
Year ended October 31, 2003 -- --
- -----------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 (0.73) (0.73)
Year ended October 31, 2000 (1.31) (1.31)
Year ended October 31, 2001 (5.43) (5.43)
Year ended October 31, 2002 -- --
Year ended October 31, 2003 -- --
- -----------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) (0.73) (0.73)
Year ended October 31, 2000 (1.31) (1.31)
Year ended October 31, 2001 (5.43) (5.43)
Year ended October 31, 2002 -- --
Year ended October 31, 2003 -- --
- -----------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------------
RATIO OF
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES TO LOSS TO EXPENSES TO
END OF TOTAL PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 1999 $13.19 23.80 %(c) $13,015 1.75% (1.38)% 2.14% 77.74%
Year ended October 31, 2000 18.75 54.54 %(c) 15,415 1.65% (1.29)% 1.84% 79.51%
Year ended October 31, 2001 9.60 (23.65)%(c) 11,892 1.65% (1.32)% 1.97% 52.47%
Year ended October 31, 2002 7.83 (18.44)%(c) 11,384 1.65% (1.45)% 2.08% 103.90%
Year ended October 31, 2003 10.36 32.31 %(c) 16,695 1.65% (1.36)% 2.09% 152.05%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 1999 $13.06 22.93 %(f) $ 536 2.48% (2.12)% 2.92% 77.74%
Year ended October 31, 2000 18.40 53.30 %(f) 1,273 2.40% (2.02)% 2.49% 79.51%
Year ended October 31, 2001 9.27 (24.16)%(f) 1,315 2.40% (2.08)% 2.73% 52.47%
Year ended October 31, 2002 7.51 (18.99)%(f) 2,374 2.40% (2.18)% 2.86% 103.90%
Year ended October 31, 2003 9.85 31.16 %(f) 3,952 2.40% (2.11)% 2.83% 152.05%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 1999 (g) $13.13 21.00 %(d)(f) $ 289 2.38%(e) (2.02)%(e) 2.77%(e) 77.74%
Year ended October 31, 2000 18.51 53.32 %(f) 707 2.40% (2.02)% 2.46% 79.51%
Year ended October 31, 2001 9.35 (24.17)%(f) 407 2.40% (2.06)% 2.71% 52.47%
Year ended October 31, 2002 7.57 (19.04)%(f) 329 2.40% (2.20)% 2.83% 103.90%
Year ended October 31, 2003 9.94 31.31 %(f) 395 2.40% (2.11)% 2.84% 152.05%
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
(c) Excludes sales charge.
(d) Not annualized.
(e) Annualized.
(f) Excludes redemption charge.
(g) Class C Shares commenced operations on November 4, 1998.
See notes to financial statements.
58 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003
.................................................................................
1. ORGANIZATION:
The HSBC Investor Funds (the 'Trust'), a Massachusetts business trust
organized on April 22, 1987, and the HSBC Advisor Funds Trust (the 'Advisor
Trust'), a Massachusetts business trust organized on April 5, 1996, are
registered under the Investment Company Act of 1940, as amended (the 'Act'),
as open-end management investment companies. The Trust and Advisor Trust
(collectively the 'Trusts') contain the following funds (individually a
'Fund,' collectively the 'Funds'):
<Table>
<Caption>
FUND SHORT NAME TRUST
- ---- ---------- -----
HSBC Investor Limited Maturity Fund Limited Maturity Fund Trust
HSBC Investor Fixed Income Fund Fixed Income Fund Advisor Trust
HSBC Investor Bond Fund Bond Fund Trust
HSBC Investor New York Tax-Free Bond Fund New York Tax-Free Bond Fund Trust
HSBC Investor Balanced Fund Balanced Fund Trust
HSBC Investor Equity Fund Equity Fund Trust
HSBC Investor Growth and Income Fund Growth and Income Fund Trust
HSBC Investor Mid-Cap Fund Mid-Cap Fund Trust
HSBC Investor International Equity Fund International Equity Fund Advisor Trust
HSBC Investor Overseas Equity Fund Overseas Equity Fund Trust
HSBC Investor Small Cap Equity Fund Small Cap Equity Fund Advisor Trust
HSBC Investor Opportunity Fund Opportunity Fund Trust
</Table>
The Funds are separate series of the Trusts and are part of the HSBC
Investor Family of Funds. Financial statements for all other series of HSBC
Investor Family of Funds are published separately.
The Limited Maturity Fund, Fixed Income Fund, Bond Fund, International
Equity Fund, Overseas Equity Fund, Small Cap Equity Fund, and the
Opportunity Fund (individually a 'Feeder Fund,' collectively the 'Feeder
Funds') utilize the Master Feeder Fund Structure and seek to achieve their
investment objectives by investing all of their investable assets in their
Respective Portfolios (as defined below), per the following schedule:
<Table>
<Caption>
PROPORTIONATE
INTEREST ON
FUND RESPECTIVE PORTFOLIO OCTOBER 31, 2003
- ---- -------------------- ----------------
Limited Maturity Fund HSBC Investor Limited Maturity Portfolio 51.7%
Fixed Income Fund HSBC Investor Fixed Income Portfolio 54.6%
Bond Fund HSBC Investor Fixed Income Portfolio 10.9%
International Equity Fund HSBC Investor International Equity Portfolio 61.0%
Overseas Equity Fund HSBC Investor International Equity Portfolio 5.6%
Small Cap Equity Fund HSBC Investor Small Cap Equity Portfolio 76.5%
Opportunity Fund HSBC Investor Small Cap Equity Portfolio 4.9%
</Table>
The HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income
Portfolio, HSBC Investor International Equity Portfolio, and the HSBC
Investor Small Cap Equity Portfolio (individually a 'Portfolio,'
collectively the 'Portfolios'), are diversified series of the HSBC Investor
Portfolios (the 'Portfolio Trust'), and like each Feeder Fund, are open-end
management investment companies. The financial statements of the Portfolios,
including the Schedules of Portfolio Investments, are included in this
report. The financial statements of the Portfolios should be read in
conjunction with the financial statements of the Feeder Funds.
The Funds are authorized to issue an unlimited number of shares of
beneficial interest with a par value of $0.001 per share. The Limited
Maturity Fund, New York Tax-Free Bond Fund, Balanced Fund, Equity Fund, and
the Growth and Income Fund each offers four classes of shares, Class A
(Investor) Shares, Class B Shares, Class C Shares and Class Y Shares. The
Mid-Cap Fund offers four classes of shares, Class A Shares, Class B Shares,
Class C Shares, and Trust Shares. The Fixed Income Fund, International
Equity Fund, and the Small Cap Equity Fund each offers one class of shares.
The Bond Fund, Overseas Equity Fund, and the Opportunity Fund each offers
three classes of shares,
HSBC INVESTOR FAMILY OF FUNDS 59
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
Class A (Investor) Shares, Class B Shares and Class C Shares. Each class of
shares in the Funds has identical rights and privileges except with respect
to fees paid under shareholder servicing or distribution plans, voting
rights on matters affecting a single class of shares, and the exchange
privilege of each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with accounting principles generally accepted in
the United States of America ('GAAP'). The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
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:
A. NEW YORK TAX-FREE BOND FUND, BALANCED FUND, EQUITY FUND, GROWTH AND
INCOME FUND, AND MID-CAP FUND
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 the use of
matrix 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 portfolio
securities with a remaining maturity of 60 days or less are valued at
amortized cost. 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.
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 by or at the direction of
the Funds' Board of Trustees.
B. FEEDER FUNDS
The Feeder Funds record their investments in their respective Portfolios
at value. Securities of the Portfolios are recorded at value as more fully
discussed in the notes to those financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
A. NEW YORK TAX-FREE BOND FUND, BALANCED FUND, EQUITY FUND, GROWTH AND
INCOME FUND, AND MID-CAP FUND
Changes in holdings of portfolio securities shall be reflected no later
than in the first calculation on the first business day following the trade
date. Securities gains and losses are calculated on the identified cost
basis. Interest income is recognized on the accrual basis and includes,
where applicable, the amortization or accretion of premium or discount.
Dividend income is recorded on the ex-dividend date.
B. FEEDER FUNDS
The Feeder Funds record daily their pro-rata share of their respective
Portfolio's income, expenses and realized and unrealized gains and losses.
In addition, the Feeder Funds accrue their own expenses daily as incurred.
Realized gains or losses and changes in unrealized appreciation or
depreciation represent the Feeder Fund's share of such elements allocated
from the Portfolio.
60 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
FUTURES CONTRACTS:
The New York Tax-Free Bond Fund and Equity Fund invest in futures
contracts for the purpose of hedging their existing portfolio securities or
securities they intend to purchase against fluctuations in fair value caused
by changes in prevailing market interest rates. Upon entering into a futures
contract, the New York Tax-Free Bond Fund and Equity Fund are required to
pledge to the broker an amount of cash and/or other assets equal to a
certain percentage of the contract amount (initial margin deposit).
Subsequent payments, known as 'variation margin', are made each day,
depending on the daily fluctuations in the fair value of the underlying
security. A gain or loss equal to the daily variation margin is recognized
on a daily basis.
Futures contracts may also be entered into for non-hedging purposes. A
'sale' of futures contract means a contractual obligation to deliver the
securities or foreign currency called for by the contract at a fixed price
at a specified time in the future. A 'purchase' of a futures contract means
a contractual obligation to acquire the securities or foreign currency at a
fixed price at a specified time in the future.
Should market conditions move unexpectedly, the New York Tax-Free Bond
Fund and the Equity Fund may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assets.
OPTIONS:
The Growth and Income Fund and the Mid-Cap Fund write covered call
options against some of the securities in their portfolios provided the
securities are listed on a national securities exchange. A call option is
'covered' if the Fund owns the underlying securities covered by the call.
The premium received is recorded as a liability and is subsequently adjusted
to the current fair value of the option written. Premiums received from
writing options that expire unexercised are treated on the expiration date
as realized gains from investments. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain or loss. If the
call option is exercised, the premium is added to the proceeds from the sale
of the underlying security in determining a realized gain or loss.
EXPENSE ALLOCATION:
Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are allocated proportionately
among various or all Funds within the HSBC Investor Family of Funds in
relation to the net assets of each Fund or on another reasonable basis.
Expenses specific to a class are charged to that class.
DIVIDENDS TO SHAREHOLDERS:
The Limited Maturity Fund, Fixed Income Fund, Bond Fund, and the New
York Tax-Free Bond Fund declare all net investment income daily as dividends
to their shareholders and distribute such dividends monthly. Dividends from
net investment income, if any, are declared and distributed quarterly in the
case of the Equity Fund, semiannually in the case of the Balanced Fund,
Growth and Income Fund, Small Cap Equity Fund, and the Opportunity Fund and
annually in the case of the Mid-Cap Fund, International Equity Fund and
Overseas Equity Fund.
The Funds' net realized gains, if any, are distributed to shareholders
at least annually. Additional distributions are also made to the Funds'
shareholders to the extent necessary to avoid the federal excise tax on
certain undistributed income and net capital gains of regulated investment
companies.
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 GAAP. These 'book/tax' differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature (i.e. reclassification of market discounts, gain/loss,
paydowns, and distributions), such amounts are reclassified to paid-in
capital; temporary differences do not require reclassification. The Funds
may utilize equalization accounting for tax purposes and designate earnings
and profits, including net realized gains distributed to shareholders on
redemption of shares, as a part of the dividends paid deduction for income
tax purposes.
HSBC INVESTOR FAMILY OF FUNDS 61
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
REDEMPTION FEE:
Effective September 1, 2003, the International Equity Fund and Overseas
Equity Fund, Class B and Class C, charge a redemption fee of 2%, paid to the
funds, on the redemption and exchange of shares of the funds held less than
30 days. The fee does not apply to shares representing the reinvestment of
dividends or capital gains distributions or shares held in certain omnibus
accounts or retirement plans that cannot implement the fee. For the year
ended October 31, 2003, the funds did not collect any redemption fees.
FEDERAL INCOME TAXES:
Each Fund is a separate taxable entity for federal income tax purposes.
Each Fund has qualified and intends to continue to qualify each year as a
'regulated investment company' under Subchapter M of the Internal Revenue
Code, as amended and to distribute substantially all of their taxable net
investment income and net realized gains, if any, to their shareholders.
Accordingly, no provision for federal income or excise tax is required.
3. CALL OPTIONS WRITTEN:
The following is a summary of covered call option activity for the
Growth and Income Fund for the year ended October 31, 2003:
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
Options outstanding at October 31, 2002..................... 252 $ 45,988
Options written............................................. 252 87,567
Options terminated in closing purchase transactions......... (504) (133,555)
---- ---------
Options outstanding at October 31, 2003..................... -- $ --
---- ---------
---- ---------
</Table>
The following is a summary of covered call option activity for the
Mid-Cap Fund for the year ended October 31, 2003:
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
Options outstanding at October 31, 2002..................... 1,700 $ 297,713
Options written............................................. 4,650 987,650
Options terminated in closing purchase transactions......... (6,350) (1,285,363)
------ -----------
Options outstanding at October 31, 2003..................... -- $ --
------ -----------
------ -----------
</Table>
4. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Asset Management (Americas) Inc. ('HSBC' or the 'Investment
Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State
chartered bank, acts as Investment Adviser to the New York Tax-Free Bond
Fund, Balanced Fund, Growth and Income Fund and Mid-Cap Fund. As Investment
Adviser, HSBC manages the investments of the Funds and continuously reviews,
supervises and administers the Funds' investments. For its services as
Investment Adviser, HSBC is entitled to receive a fee, computed daily and
paid monthly, based on average daily net assets, at an annual rate of:
<Table>
<Caption>
FUND FEE RATE
- ---- --------
New York Tax-Free Bond Fund................................. 0.25%
Balanced Fund............................................... 0.55%
Growth and Income Fund...................................... 0.55%
Mid-Cap Fund................................................ 0.55%
</Table>
62 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
HSBC also serves as Investment Adviser to the Equity Fund. Alliance
Capital Management L.P. and Institutional Capital Corporation serve as
Sub-Investment Advisers to the Equity Fund and are paid for their services
directly by HSBC. For their services as Investment Adviser and
Sub-Investment Advisers to the Equity Fund, HSBC, Alliance Capital
Management and Institutional Capital Corporation receive in aggregate a fee
accrued daily and paid monthly at an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS FEE RATE
- --------------------------------- --------
Up to $50 million........................................... 0.500%
In excess of $50 million but not exceeding $100 million..... 0.425%
In excess of $100 million but not exceeding $200 million.... 0.375%
In excess of $200 million................................... 0.325%
</Table>
ADMINISTRATION:
BISYS Fund Services Ohio, Inc. ('BISYS Ohio'), a wholly-owned subsidiary
of The BISYS Group, Inc., with whom certain officers of the Trusts are
affiliated, serves the Trusts as Administrator. Such officers are paid no
fees directly by the Funds for serving as officers of the Trusts. Under the
terms of the administration agreement, BISYS Ohio receives from the Funds a
fee accrued daily and paid monthly at an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS FEE RATE
- --------------------------------- --------
Up to $8 billion............................................ 0.075%
In excess of $8 billion but not exceeding $9.25 billion..... 0.070%
In excess of $9.25 billion but not exceeding $12 billion.... 0.050%
In excess of $12 billion.................................... 0.030%
</Table>
The fee breakpoints are determined on the basis of the aggregate average
daily net assets of the HSBC Investor Family of Funds. The fee is allocated
to each of the HSBC Investor Family of Funds based upon its pro-rata share
of net assets. The Portfolios pay half of each Feeder Fund's administration
fee for a combination of the total fee rate above. BISYS Ohio may use its
fees to pay advertising and marketing expenses for the benefit of the Funds.
DISTRIBUTION PLAN:
BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned
subsidiary of The BISYS Group, Inc., serves the Funds as Distributor (the
'Distributor'). The Trusts have adopted a non-compensatory Distribution Plan
and Agreement (the 'Plan') pursuant to Rule 12b-1 of the Act. The Plan
provides for a monthly payment of actual expenses by the Funds to the
Distributor at a rate not to exceed 0.25% of the average daily net assets of
Class A (Investor) Shares (currently not being charged) and 0.75% of the
average daily net assets of Class B Shares and Class C Shares of the Funds.
This payment represents expenses incurred by the Distributor for marketing
costs and services rendered in distributing the Funds' shares. BISYS, as the
Funds' distributor, recovered $1,032,406 in commissions from sales of the
funds of which $110,635 was reallowed to affiliated brokers and dealers. The
Distributor also receives the proceeds of any CDSC imposed on redemptions of
Class B Shares and Class C Shares. In addition, the Distributor retains a
portion of the front-end sales charge of Class A (Investor) Shares. For the
year ended October 31, 2003, the Distributor retained $389 from dealer
commissions.
SHAREHOLDER SERVICING:
The Trusts have entered into a Shareholder Servicing Agreement with its
shareholder servicing agents (which currently consists of HSBC and its
affiliates) for providing various shareholder services. The aggregate fees
paid to the Distributor pursuant to the Distribution Plan and to shareholder
servicing agents pursuant to the Shareholder Servicing Agreement may not
exceed 0.25% of the average daily net assets of Class A (Investor) Shares,
and 1.00% of the average daily net assets of Class B Shares and Class C
Shares.
HSBC INVESTOR FAMILY OF FUNDS 63
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
FEE REDUCTIONS:
The Investment Adviser has agreed to limit the total expenses, exclusive
of taxes, brokerage commissions and extraordinary expenses, of the Limited
Maturity Fund, Bond Fund, New York Tax-Free Bond Fund, Balanced Fund,
Overseas Equity Fund and Opportunity Fund. Each Fund Class has it's own
expense limitations based on average daily net assets for any full fiscal
year as follows:
<Table>
<Caption>
EXPENSE
FUND CLASS LIMITATION
- ---- ----- ----------
Limited Maturity Fund....................................... A 1.10%
Limited Maturity Fund....................................... B 1.85
Limited Maturity Fund....................................... C 1.85
Limited Maturity Fund....................................... Y 0.85
Bond Fund................................................... A 1.10
Bond Fund................................................... B 1.85
Bond Fund................................................... C 1.85
New York Tax-Free Bond Fund................................. A 0.95
New York Tax-Free Bond Fund................................. B 1.70
New York Tax-Free Bond Fund................................. C 1.70
New York Tax-Free Bond Fund................................. Y 0.70
Balanced Fund............................................... A 1.20
Balanced Fund............................................... B 1.95
Balanced Fund............................................... C 1.95
Balanced Fund............................................... Y 0.95
Overseas Equity Fund........................................ A 1.85
Overseas Equity Fund........................................ B 2.60
Overseas Equity Fund........................................ C 2.60
Opportunity Fund............................................ A 1.65
Opportunity Fund............................................ B 2.40
Opportunity Fund............................................ C 2.40
</Table>
FUND ACCOUNTING, TRANSFER AGENCY AND CUSTODIAN:
BISYS Ohio provides fund accounting and transfer agency services for all
classes of each Fund. In addition, HSBC serves as custodian for the New York
Tax-Free Bond Fund, Equity Fund, Balanced Fund and Growth and Income Fund.
For services to the Funds, BISYS Ohio receives an annual fee from each fund
accrued daily and paid monthly.
5. INVESTMENT TRANSACTIONS:
Purchases of and proceeds from sales, excluding short-term securities,
for the Funds for the year ended October 31, 2003, totaled:
<Table>
<Caption>
PURCHASES SALES
--------- -----
New York Tax-Free Bond Fund............................... $ 24,263,541 $ 16,017,555
Balanced Fund............................................. 9,919,228 20,789,679
Equity Fund............................................... 137,614,571 287,586,729
Growth and Income Fund.................................... 125,903,733 118,324,526
Mid-Cap Fund.............................................. 160,697,226 128,538,361
</Table>
64 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
Contributions and withdrawals of the respective Portfolios for the year
ended October 31, 2003, totaled:
<Table>
<Caption>
CONTRIBUTIONS WITHDRAWALS
------------- -----------
Limited Maturity Fund.................................. $ 72,065,903 $ 136,914,366
Fixed Income Fund...................................... 175,350,814 369,644,303
Bond Fund.............................................. 10,621,856 8,765,576
International Equity Fund.............................. 1,035,303,087 1,149,911,797
Overseas Equity Fund................................... 74,606,901 74,105,596
Small Cap Equity Fund.................................. 204,925,127 137,344,852
Opportunity Fund....................................... 6,131,516 3,926,582
</Table>
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. The Fund is more susceptible to economic
and political factors adversely affecting issuers of New York specific
municipal securities than are municipal bond funds that are not concentrated
in these issuers to the same extent.
HSBC INVESTOR FAMILY OF FUNDS 65
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
7. FEDERAL INCOME TAX INFORMATION:
The tax characteristics of dividends paid by the Funds during the fiscal
year ended October 31, 2003 were as follows:
<Table>
<Caption>
DIVIDENDS PAID FROM
-----------------------
NET
LONG TERM TOTAL TOTAL
ORDINARY CAPITAL TAXABLE TAX EXEMPT RETURN OF DIVIDENDS
INCOME GAINS DIVIDENDS DISTRIBUTIONS CAPITAL PAID(1)
------ ----- --------- ------------- ------- -------
Limited Maturity Fund $ 3,718,750 $ -- $ 3,718,750 $ -- $ -- $ 3,718,750
Fixed Income Fund 12,270,749 -- 12,270,749 -- -- 12,270,749
Bond Fund 817,860 -- 817,860 -- -- 817,860
NY Tax-Free Bond Fund 10,320 -- 10,320 1,840,939 -- 1,851,259
Balanced Fund 414,170 -- 414,170 -- -- 414,170
Equity Fund 1,183,930 -- 1,183,930 -- -- 1,183,930
Growth & Income Fund 2,042,400 -- 2,042,400 -- -- 2,042,400
International Equity Fund 3,705,000 -- 3,705,000 -- -- 3,705,000
Overseas Equity Fund 72,856 -- 72,856 -- 1,775 74,631
</Table>
As of October 31, 2003, the components of accumulated earnings/(deficit)
on a tax basis for the Funds were as follows:
<Table>
<Caption>
UNDISTRIBUTED
UNDISTRIBUTED UNDISTRIBUTED LONG-TERM ACCUMULATED
ORDINARY TAX EXEMPT CAPITAL ACCUMULATED DIVIDENDS CAPITAL AND
INCOME INCOME GAINS EARNINGS PAYABLE OTHER LOSSES
------ ------ ----- -------- ------- ------------
Limited Maturity Fund $ 257,414 $ -- $1,736,087 $1,993,501 $ (59,935) $ --
Fixed Income Fund 219,572 -- -- 219,572 (215,697) (2,596,722)
Bond Fund 35,069 -- -- 35,069 (35,243) (618,679)
NY Tax-Free Bond Fund -- 83,477 325,009 408,486 (81,963) --
Balanced Fund 37,237 -- -- 37,237 104 (3,528,726)
Equity Fund 17,859 -- -- 17,859 -- (49,567,972)
Growth & Income Fund 542,460 -- -- 542,460 -- (56,290,728)
Mid-Cap Fund -- -- -- -- -- (31,161,871)
International Equity Fund 3,737,768 -- -- 3,737,768 -- (21,857,308)
Overseas Equity Fund 78,218 -- -- 78,218 -- (606,026)
Small Cap Equity Fund -- -- -- -- -- (59,874,210)
Opportunity Fund -- -- -- -- -- (3,788,220)
<Caption>
TOTAL
UNREALIZED ACCUMULATED
APPRECIATION/ EARNINGS/
(DEPRECIATION)(2) (DEFICIT)
----------------- ---------
Limited Maturity Fund $ 487,593 $ 2,421,159
Fixed Income Fund 6,678,946 4,086,099
Bond Fund 282,252 (336,601)
NY Tax-Free Bond Fund 2,559,857 2,886,380
Balanced Fund 29,299 (3,462,086)
Equity Fund 3,496,916 (46,053,197)
Growth & Income Fund 29,013,046 (26,735,222)
Mid-Cap Fund 28,521,725 (2,640,146)
International Equity Fund 7,292,603 (10,826,937)
Overseas Equity Fund 932,032 404,224
Small Cap Equity Fund 52,502,783 (7,371,427)
Opportunity Fund 3,689,333 (98,887)
</Table>
As of October 31, 2003, the following Funds have net capital loss
carryforwards, which are available to offset future realized gains.
<Table>
<Caption>
AMOUNT EXPIRES AMOUNT EXPIRES
------ ------- ------ -------
Fixed Income Fund $ 922,509 2007 Growth & Income Fund $20,736,943 2009
1,576,583 2008 25,956,764 2010
97,630 2010 9,597,021 2011
Bond Fund 159,153 2007 Mid-Cap Fund 12,233,929 2009
91,688 2008 18,927,942 2010
185,518 2010 International Equity Fund 5,241,988 2009
182,320 2011 16,615,320 2010
Balanced Fund 1,420,035 2009 Overseas Equity Fund 606,026 2010
1,569,217 2010 Small Cap Equity Fund 9,859,579 2009
539,474 2011 50,014,631 2010
Equity Fund 5,765,400 2008 Opportunity Fund 415,662 2009
1,404,374 2009 3,372,558 2010
28,126,576 2010
14,271,622 2011
</Table>
(1) Total dividends paid may differ from the amount reported in the Statement of
Changes in Net Assets because for tax purposes dividends are recognized when
actually paid.
(2) The differences between book-basis and tax-basis unrealized
appreciation/deprecation are attributable primarily to: tax deferral of
losses on wash sales, the realization for tax purposes of unrealized
gains/losses on certain derivative instruments, the difference between book
and tax amortization methods for premium and market discount, the
realization for tax purposes of unrealized gains/losses on investments in
passive foreign investment companies, and the return of capital adjustments
from real estate investment trusts.
66 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
8. OTHER FEDERAL INCOME TAX INFORMATION (UNAUDITED):
For the fiscal year ended October 31, 2003, the following percentage of
the total ordinary income dividends paid by the Funds qualify for the
corporate dividends received deduction available to corporate shareholders.
<Table>
<Caption>
DIVIDENDS
RECEIVED
DEDUCTION
---------
Balanced Fund 51%
Equity Fund 100%
Growth & Income Fund 100%
</Table>
The Funds intend to elect to pass through to shareholders the income tax
credit for taxes paid to foreign countries. Shareholders will receive more
detailed information along with their 2003 Form 1099-DIV.
<Table>
<Caption>
FOREIGN TAX CREDIT
PASS THROUGH
------------
International Equity Fund $392,190
Overseas Equity Fund 18,823
</Table>
For the fiscal year ended October 31, 2003, dividends paid by the Funds
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate
the maximum amount allowable as taxed at a maximum rate of 15%. Complete
information will be reported in conjunction with your 2003 Form 1099-DIV.
<Table>
<Caption>
AMOUNT
------
Balanced Fund $ 94,957
Equity Fund 737,418
Growth & Income Fund 838,253
</Table>
HSBC INVESTOR FAMILY OF FUNDS 67
<Page>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Trustees of
HSBC Investor Funds
HSBC Investor Advisor Funds Trust:
We have audited the accompanying statements of assets and liabilities of HSBC
Investor Limited Maturity Fund, HSBC Investor Fixed Income Fund, HSBC Investor
Bond Fund, HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Balanced
Fund, HSBC Investor Equity Fund, HSBC Investor Growth and Income Fund, HSBC
Investor Mid-Cap Fund, HSBC Investor International Equity Fund, HSBC Investor
Overseas Equity Fund, HSBC Investor Small Cap Equity Fund and HSBC Investor
Opportunity Fund (collectively, the Funds), including the schedules of portfolio
investments of HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Balanced
Fund, HSBC Investor Equity Fund, HSBC Investor Growth and Income Fund and HSBC
Investor Mid-Cap Fund, as of October 31, 2003, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included verification of
securities owned by HSBC Investor New York Tax-Free Bond Fund, HSBC Investor
Balanced Fund, HSBC Investor Equity Fund, HSBC Investor Growth and Income Fund
and HSBC Investor Mid-Cap Fund as of October 31, 2003, by confirmation with the
custodian, correspondence with brokers and other appropriate audit procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
aforementioned funds as of October 31, 2003, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Columbus, Ohio
December 15, 2003
68 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 65.3%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
FEDERAL HOME LOAN BANK - 9.6%
1.625%, 4/15/05........................ 2,500,000 2,499,425
3.25%, 8/15/05......................... 1,500,000 1,532,697
2.50%, 12/15/05........................ 1,600,000 1,610,523
4.50%, 11/15/12........................ 1,000,000 992,855
4.50%, 9/16/13......................... 1,500,000 1,468,439
----------
8,103,939
----------
FEDERAL HOME LOAN MORTGAGE CORP. - 19.9%
3.625%, 9/15/08........................ 1,000,000 1,003,211
Pool #E92282, 5.50%, 11/1/17........... 1,937,179 1,995,587
Pool #C01188, 7.00%, 6/1/31............ 859,148 903,937
Pool #C75371, 6.00%, 1/1/33............ 1,352,536 1,388,377
Pool #2642, 4.50%, 10/25/27............ 3,000,000 3,039,738
Pool #A11010, 5.00%, 7/1/33............ 1,985,014 1,954,790
Pool #A14659, 6.50%, 10/1/33........... 2,000,000 2,080,237
Pool #E96835, 4.50%, 6/1/18............ 2,394,064 2,389,807
Series 40 HA, 6.50%, 8/17/21........... 1,973,481 1,981,364
----------
16,737,048
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.9%
5.75%, 2/15/08......................... 500,000 547,875
4.00%, 9/2/08.......................... 1,000,000 1,005,199
6.40%, 5/14/09......................... 1,000,000 1,024,872
5.50%, 3/15/11......................... 750,000 805,219
4.625%, 5/1/13......................... 1,250,000 1,203,466
Pool #535063, 6.50%, 12/1/14........... 621,377 654,205
Pool #535933, 6.50%, 5/1/31............ 598,090 621,442
Pool #593187, 7.00%, 11/1/31........... 1,799,781 1,895,031
Pool #695204, 5.50%, 3/1/33............ 1,662,090 1,678,138
Pool #694985, 6.00%, 3/1/33............ 2,377,137 2,440,844
Pool #704439, 5.00%, 5/1/18............ 2,401,313 2,440,904
----------
14,317,195
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.5%
Pool #2687, 6.00%, 12/20/28............ 931,386 960,696
Pool #3415, 5.50%, 7/20/33............. 1,974,839 1,998,322
----------
2,959,018
----------
U.S. TREASURY NOTES - 15.4%
2.00%, 11/30/04........................ 1,400,000 1,410,500
1.625%, 4/30/05........................ 1,250,000 1,251,611
5.625%, 2/15/06........................ 500,000 540,762
2.00%, 5/15/06......................... 3,000,000 2,992,734
3.25%, 8/15/07......................... 750,000 762,920
5.50%, 2/15/08......................... 750,000 826,670
3.25%, 8/15/08......................... 1,500,000 1,503,458
5.00%, 2/15/11......................... 1,500,000 1,605,762
4.875%, 2/15/12........................ 2,000,000 2,109,844
----------
13,004,261
----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS.................... 55,121,461
----------
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS - 27.7%
AEROSPACE & DEFENSE - 1.0%
Honeywell International, Inc., 5.125%,
11/1/06............................... 750,000 804,529
----------
AUTO MANUFACTURERS - 0.9%
General Motors Corp., 7.20%, 1/15/11... 750,000 786,584
----------
<Caption>
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
BANKING - 2.9%
Citigroup, Inc., 6.50%, 1/18/11........ 750,000 844,083
Wachovia Corp., 6.15%, 3/15/09......... 750,000 827,743
Washington Mutual Financial Corp.,
6.25%, 5/15/06........................ 750,000 813,673
----------
2,485,499
----------
BROKERAGE SERVICES - 5.7%
Goldman Sachs Group, Inc., 5.70%,
9/1/12................................ 500,000 522,663
Goldman Sachs Group, Inc., 6.125%,
2/15/33............................... 750,000 748,809
Lehman Brothers Holdings, Inc., 6.25%,
5/15/06............................... 500,000 544,703
Lehman Brothers Holdings, Inc., 3.50%,
8/7/08................................ 1,000,000 985,495
Merrill Lynch & Co., 5.70%, 2/6/04..... 1,000,000 1,011,208
Merrill Lynch & Co., 3.375%, 9/14/07... 1,000,000 1,004,217
----------
4,817,095
----------
CONSUMER PRODUCTS - 3.6%
Archer Daniels Midland Co., 5.935%,
10/1/32............................... 500,000 495,531
General Electric Co., 5.00%, 2/1/13.... 500,000 503,168
Kellogg Co., 2.875%, 6/1/08............ 750,000 721,732
The Procter & Gamble Co., 4.00%,
4/30/05............................... 1,250,000 1,294,273
----------
3,014,704
----------
FINANCE - 7.1%
CIT Group, Inc., 4.125%, 2/21/06....... 1,000,000 1,030,443
Countrywide Home Loans, Inc., 5.50%,
8/1/06................................ 1,250,000 1,333,525
Ford Motor Credit Co., 6.50%,
1/25/07............................... 1,250,000 1,289,736
General Electric Capital Corp., 6.75%,
3/15/32............................... 500,000 554,432
General Motors Accept Corp., 4.50%,
7/15/06............................... 250,000 253,840
General Motors Accept Corp., 5.125%,
5/9/08................................ 500,000 507,834
SLM Corp., 3.95%, 8/15/08.............. 1,000,000 1,006,642
----------
5,976,452
----------
GOVERNMENTS (FOREIGN) - 0.6%
United Mexican States, 4.625%,
10/8/08............................... 500,000 501,250
----------
INSURANCE - 0.3%
Travelers Property Casualty Corp.,
6.375%, 3/15/33....................... 250,000 259,666
----------
MEDIA - 1.8%
Comcast Corp., 5.30%, 1/15/14.......... 1,000,000 982,860
Time Warner, Inc., 6.125%, 4/15/06..... 500,000 537,802
----------
1,520,662
----------
PHARMACEUTICALS - 1.2%
Pfizer, Inc., 3.625%, 11/1/04.......... 1,000,000 1,021,672
----------
RETAIL - 1.5%
Safeway, Inc., 3.80%, 8/15/05.......... 750,000 765,402
Wal-Mart Stores, Inc., 4.375%,
7/12/07............................... 500,000 524,520
----------
1,289,922
----------
TELECOMMUNICATIONS - 1.1%
Deutsche Telekom International Finance
BV, 3.875%, 7/22/08................... 500,000 498,442
Verizon Global Funding Corp., 4.375%,
6/1/13................................ 500,000 466,286
----------
964,728
----------
TOTAL CORPORATE OBLIGATIONS............ 23,442,763
----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 69
<Page>
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
ASSET BACKED SECURITIES - 4.2%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
American Express Credit Account Master
Trust 99 2 A, 5.95%, 12/15/06......... 750,000 768,771
CIT Equipment Collateral 01 A A3,
4.32%, 5/20/05........................ 294,002 295,833
Honda Auto Receivables Owner Trust 03 1
A4, 2.48%, 7/18/08.................... 2,500,000 2,503,064
----------
TOTAL ASSET BACKED SECURITIES.......... 3,567,668
----------
<Caption>
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 2.0%
SHARES VALUE($)
--------- ----------
Dreyfus Cash Management Fund........... 1,706,257 1,706,257
----------
TOTAL INVESTMENT COMPANIES............. 1,706,257
----------
TOTAL INVESTMENTS
(COST $83,207,064) (a) - 99.2%....... 83,838,149
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $84,488,289.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of gains recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $52,599. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation............ $1,242,997
Unrealized depreciation............ (559,313)
----------
Net unrealized appreciation........ $ 683,684
----------
----------
</Table>
70 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 56.4%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
FEDERAL FARM CREDIT BANK - 1.0%
3.60%, 10/29/07, Callable 10/29/04 @
100.................................. 2,100,000 2,101,510
-----------
FEDERAL HOME LOAN BANK - 11.8%
4.40%, 11/20/06....................... 4,500,000 4,711,527
5.05%, 2/6/13, Callable 2/6/04 @
100.................................. 5,795,000 5,784,540
5.00%, 2/7/13, Callable 2/7/05 @
100.................................. 6,085,000 6,092,242
5.10%, 4/24/13........................ 4,000,000 3,990,924
6.20%, 8/21/17........................ 1,250,000 1,256,945
6.25%, 8/27/18, Callable 8/27/04 @
100.................................. 2,200,000 2,234,456
-----------
24,070,634
-----------
FEDERAL HOME LOAN MORTGAGE CORP. - 7.1%
4.125%, 1/17/06, Callable 1/15/04 @
100.................................. 2,500,000 2,513,770
5.75%, 9/15/10........................ 4,910,000* 6,211,452
Pool #C00368, 8.50%, 10/1/24.......... 102,050 111,052
Pool #C00922, 8.00%, 2/1/30........... 909,279 979,639
Pool #C54447, 7.00%, 7/1/31........... 241,758 254,361
Pool #C60712, 6.50%, 11/1/31.......... 2,333,383 2,427,157
Pool #C80387, 6.50%, 4/1/26........... 99,365 103,660
Pool #D62926, 6.50%, 8/1/25........... 77,327 80,723
Pool #G00951, 6.00%, 7/1/28........... 861,093 885,848
Pool #G01317, 7.00%, 10/1/31.......... 931,658 980,227
-----------
14,547,889
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.5%
6.75%, 1/25/08........................ 1,545,356 1,580,294
4.625%, 5/1/13........................ 3,300,000 3,177,151
6.25%, 5/15/29........................ 2,998,000 3,214,752
7.25%, 5/15/30........................ 865,000 1,046,618
5.50%, 8/1/33......................... 13,852,325 13,986,069
Pool #253438, 8.50%, 9/1/30........... 230,483 248,106
Pool #329530, 7.00%, 12/1/25.......... 228,778 241,578
Pool #329655, 7.00%, 11/1/25.......... 190,708 201,378
Pool #356905, 4.32%, 10/1/36 (b)...... 555,034 574,149
Pool #398958, 6.50%, 10/1/12.......... 208,935 220,133
Pool #535332, 8.50%, 4/1/30........... 195,840 210,962
Pool #535440, 8.50%, 8/1/30........... 241,404 259,862
Pool #535608, 9.50%, 4/1/30........... 328,201 365,922
Pool #548965, 8.50%, 7/1/30........... 149,951 161,416
Pool #568486, 7.00%, 1/1/31........... 115,677 121,826
Pool #573752, 8.50%, 2/1/31........... 213,876 230,230
Pool #575328, 6.50%, 4/1/31........... 342,721 356,103
Pool #623129, 6.50%, 1/1/32........... 3,372,960 3,504,659
Pool #651901, 6.00%, 8/1/32........... 3,072,198 3,154,668
Pool #694655, 5.50%, 4/1/33........... 6,304,878 6,365,753
Pool #695777, 5.50%, 4/1/33........... 2,287,162 2,309,245
-----------
41,530,874
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.7%
Pool #346406, 7.50%, 2/15/23.......... 279,218 300,435
Pool #412530, 7.50%, 12/15/25......... 310,978 333,896
Pool #587112, 6.00%, 6/15/32.......... 4,465,672 4,615,201
Pool #780804, 10.00%, 12/15/20........ 191,590 215,170
Pool #780826, 9.50%, 5/15/18.......... 109,291 121,195
Pool #781300, 7.00%, 6/15/31.......... 763,119 809,144
Pool #781345, 6.00%, 10/15/31......... 1,098,527 1,135,357
-----------
7,530,398
-----------
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS, CONT'D.
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
U.S. TREASURY BONDS - 1.0%
5.25%, 11/15/28....................... 1,950,000 1,946,192
-----------
U.S. TREASURY NOTES - 11.3%
3.00%, 11/15/07....................... 2,500,000 2,512,110
4.375%, 8/15/12....................... 3,700,000 3,756,077
3.875%, 2/15/13....................... 1,600,000 1,555,437
3.625%, 5/15/13....................... 15,850,000 15,175,757
-----------
22,999,381
-----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS................... 114,726,878
-----------
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS - 30.7%
AEROSPACE & DEFENSE - 0.9%
Lockheed Martin Corp., 8.20%,
12/1/09.............................. 1,250,000 1,510,128
Lockheed Martin Corp., 8.50%,
12/1/29.............................. 300,000 390,032
-----------
1,900,160
-----------
ELECTRIC - INTEGRATED - 1.4%
Ontario Electricity Financial, 6.10%,
1/30/08.............................. 2,500,000 2,764,370
-----------
FINANCE - 17.1%
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11 (c)................... 642,000 706,332
Anthem Insurance, 9.125%, 4/1/10
(c).................................. 205,000 255,619
Anthem Insurance, 9.00%, 4/1/27 (c)... 305,000 398,483
AXA Financial, Inc., 6.50%, 4/1/08.... 165,000 182,729
CIT Group, Inc., 7.375%, 4/2/07....... 4,725,000 5,329,748
Citigroup, Inc., 7.25%, 10/1/10....... 657,000 764,349
Citigroup, Inc., 5.625%, 8/27/12...... 2,500,000 2,637,598
EOP Operating LP, 7.50%, 4/19/29...... 163,000 178,394
Farmers Exchange Capital, 7.05%,
7/15/28 (c).......................... 388,000 359,517
Farmers Insurance Exchange, 8.625%,
5/1/24 (c)........................... 238,000 245,735
Florida Windstorm, 7.125%, 2/25/19,
(c).................................. 608,000 707,082
Ford Motor Credit Co., 7.00%,
10/1/13.............................. 3,150,000 3,096,585
General Electric Capital Corp., 8.75%,
5/21/07.............................. 1,300,000 1,541,508
General Electric Capital Corp.,
7.375%, 1/19/10...................... 447,000 521,528
General Electric Capital Corp.,
6.875%, 11/15/10..................... 2,000,000 2,284,086
General Motors Acceptance Corp.,
8.00%, 11/1/31....................... 775,000 797,011
Goldman Sachs Group, Inc., 6.875%,
1/15/11.............................. 3,080,000 3,483,289
Hutchison Whampoa Finance CI Ltd.,
7.45%, 8/1/17 (c).................... 402,000 432,874
Illinois State, 5.10%, 6/1/33......... 1,542,500 1,394,806
J.P. Morgan Chase & Co., 5.25%,
5/30/07.............................. 3,500,000 3,737,696
Metropolitan Life Insurance Co.,
7.45%, 11/1/23, Callable 11/1/03 @
103.53 (c)........................... 312,000 323,010
Metropolitan Life Insurance Co.,
7.80%, 11/1/25 (c)................... 275,000 319,557
Morgan Stanley, 5.80%, 4/1/07......... 2,500,000 2,728,308
New York Life Insurance, 7.50%,
12/15/23 (c)......................... 250,000 260,440
PNC Institutional Capital Trust A,
7.95%, 12/15/26 (c).................. 187,000 205,014
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 71
<Page>
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Prime Property Funding II, 7.00%,
8/15/04 (c).......................... 210,000 218,130
Prudential Insurance Co., 8.30%,
7/1/25 (c)........................... 548,000 665,716
Travelers Property Casualty Corp.,
7.75%, 4/15/26....................... 1,000,000 1,190,550
-----------
34,965,694
-----------
FOOD - DIVERSIFIED - 1.8%
Kellogg Co., 6.60%, 4/1/11............ 3,250,000 3,631,160
-----------
GOVERNMENTS (FOREIGN) - 0.3%
United Mexican States, 8.125%,
12/30/19............................. 495,000 546,975
-----------
HEALTH CARE - 0.7%
Health Net, Inc., 8.375%, 4/15/11..... 295,000 348,880
Pharmacia Corp., 6.60%, 12/1/28....... 513,000 570,498
Wyeth, 6.70%, 3/15/11................. 480,000 539,440
-----------
1,458,818
-----------
HOTELS & LODGING - 0.2%
Harrahs Operating Co., Inc., 8.00%,
2/1/11............................... 287,000 334,028
-----------
MEDIA - 0.2%
Viacom, Inc., 6.625%, 5/15/11......... 392,000 439,105
-----------
OIL & GAS - 1.0%
Anadarko Finance Co., 6.75%, 5/1/11
(c).................................. 1,250,000 1,405,625
Conoco, Inc., 6.95%, 4/15/29.......... 565,000 632,957
-----------
2,038,582
-----------
REFUSE SYSTEMS - 0.1%
Waste Management, Inc., 7.375%,
5/15/29.............................. 160,000 179,271
-----------
RENTAL - AUTO AND EQUIPMENT - 1.7%
Hertz Corp., 1.66%, 8/13/04 (b)....... 3,500,000 3,478,013
-----------
RETAIL - 3.5%
Sears Roebuck Acceptance, 4.10%,
1/7/04 (b)........................... 5,080,000 5,085,278
Wal-Mart Stores, Inc., 5.45%,
8/1/06............................... 1,850,000 1,992,200
-----------
7,077,478
-----------
TELECOMMUNICATIONS - 1.5%
Comcast Cable Communications Holdings,
Inc., 8.375%, 3/15/13................ 2,200,000 2,659,351
Lenfest Communications, 7.625%,
2/15/08.............................. 330,000 370,960
-----------
3,030,311
-----------
UTILITIES - 0.3%
PSEG Energy Holdings, 9.125%,
2/10/04.............................. 215,000 218,225
RAS Laffan Liquid Natural Gas, 8.29%,
3/15/14 (c).......................... 348,000 403,680
-----------
621,905
-----------
TOTAL CORPORATE OBLIGATIONS........... 62,465,870
-----------
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.8%
Banc of America Commercial Mortgage,
Inc. 00 2 A2, 7.20%, 5/15/10......... 675,000 775,607
Chase Commercial Mortgage Securities
Corp. 99 2 A2, 7.20%, 1/15/32........ 700,000 803,061
DLJ Mortgage Acceptance Corp. IO 97
CF1 S, 0.98%, 5/15/30 (d)............ 975,996 21,918
Fannie Mae IO 00 16 PS, 7.48%,
10/25/29 (d)......................... 339,213 25,862
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Fannie Mae IO 01 4 SA, 6.43%,
2/17/31 (d).......................... 702,687 66,925
Fannie Mae IO 200 32 SV, 7.48%,
3/18/30 (d).......................... 216,683 18,060
Fannie Mae IO 270 2, 8.50%, 9/1/23
(d).................................. 174,292 35,676
Fannie Mae IO 296 2, 8.00%, 4/1/24
(d).................................. 197,002 35,217
Fannie Mae IO 306, 8.00%, 5/1/30
(d).................................. 327,388 59,107
FHA Weyerhauser, 7.43%, 1/1/24........ 82,207 82,464
First Union-Chase Commercial Mortgage
99 C2 A2, 6.645%, 6/15/31............ 597,000 665,237
Freddie Mac IO 1534 K, 6.275%,
6/15/23 (d).......................... 556,035 42,221
Freddie Mac IO 2141 SD, 7.03%,
4/15/29 (d).......................... 371,441 39,341
Freddie Mac IO 2247 SC, 6.38%,
8/15/30 (d).......................... 297,356 18,898
Freddie Mac, Pool #2642, 4.50%,
10/25/27............................. 7,000,000 7,092,724
GE Capital Commercial Mortgage Corp.
01 1 A1, 6.08%, 5/15/33.............. 298,113 321,328
GMAC Commercial Mortgage Securities,
Inc. 98 C2 A2, 6.42%, 5/15/35........ 587,000 651,686
GMAC Commercial Mortgage Securities,
Inc. IO 96 C1 X2, 2.27%,
10/15/28 (d)......................... 441,155 17,518
Government National Mortgage
Association IO 99 29 SD, 6.88%,
3/16/26 (d).......................... 305,447 16,868
Government National Mortgage
Association IO 99 30 S, 7.48%,
8/16/29 (d).......................... 358,964 38,422
Government National Mortgage
Association IO 99 30 SA, 6.88%,
4/16/29 (d).......................... 435,544 40,476
Government National Mortgage
Association IO 99 32 SB, 6.88%,
7/16/27 (d).......................... 287,089 21,905
GS Mortgage Securities Corp.
IO 97 GL X2, 1.01%, 7/13/30 (d)...... 555,287 10,237
LB-UBS Commercial Mortgage Trust
00 C3 A1, 7.95%, 7/15/09............. 315,898 352,807
LB-UBS Commercial Mortgage Trust
00 C4 A2, 7.37%, 8/15/26............. 600,000 696,778
PNC Mortgage Acceptance Corp. 00 C2
A2, 7.30%, 10/12/33.................. 600,000 693,862
Ryland Mortgage Securities Corp. 94 4
C1, 4.24%, 9/25/30 (b)............... 569,254 568,701
Salomon Brothers Mortgage Securities
VII 00 C3 A2, 6.59%, 12/18/33........ 650,000 723,514
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS.......................... 13,936,420
-----------
- ----------------------------------------------------------------
ASSET BACKED SECURITIES - 4.2%
Citibank Credit Card Issuance Trust 00
A3 A3, 6.875%, 11/16/09.............. 1,115,000 1,269,933
Connecticut RRB Special Purpose Trust
CL&P-1 01 1 A5, 6.21%, 12/30/11...... 700,000 783,377
Detroit Edison Securitization Funding
LLC 01 1 A3, 5.875%, 3/1/10.......... 357,000 387,822
Detroit Edison Securitization Funding
LLC 01 1 A5, 6.42%, 3/1/15........... 417,000 467,191
MBNA Master Credit Card Trust 00 E A,
7.80%, 10/15/12...................... 600,000 721,112
MBNA Master Credit Card Trust 99 B A,
5.90%, 8/15/11....................... 527,000 580,575
</Table>
72 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
ASSET BACKED SECURITIES, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Peco Energy Transition Trust 00 A A3,
7.625%, 3/1/10....................... 600,000 704,869
Peco Energy Transition Trust 01 A A1,
6.52%, 12/31/10...................... 550,000 619,455
PSE&G Transition Funding LLC 01 1 A6,
6.61%, 6/15/15....................... 355,000 401,565
Union Acceptance Corp. 01 C B, 4.73%,
11/9/09.............................. 2,500,000 2,601,562
-----------
TOTAL ASSET BACKED SECURITIES......... 8,537,461
-----------
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 2.2%
SHARES VALUE($)
---------- -----------
Dreyfus Cash Management Fund.......... 4,529,077 4,529,077
-----------
TOTAL INVESTMENT COMPANIES............ 4,529,077
-----------
TOTAL INVESTMENTS
(COST $195,671,845) (a) - 100.3%.... 204,195,706
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $203,550,557.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $289,421. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation......... $ 9,853,932
Unrealized depreciation......... (1,619,492)
-----------
Net unrealized appreciation..... $ 8,234,440
-----------
-----------
</Table>
(b) Variable rate security. The interest rates on these securities are adjusted
periodically to reflect then-current short-term interest rates. The rates
presented in this report represent the rates that were in effect on October
31, 2003. Each of these securities contains put or demand features that
allow the fund to require the issuer to repurchase the security from the
fund within various time periods, including daily, weekly, monthly, or
semi-annually.
(c) Security exempt from registration under Rule 144a of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. These securities
have been deemed liquid by the investment manager based on procedures
approved by the Board of Trustees.
(d) Interest-only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of an
Interest-only is extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of principal repayments
may have an adverse (positive) effect on yield to maturity. The principal
amount shown is the notional amount of the underlying mortgages.
* The principal amount of the security is denominated in Euro.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 73
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 94.7%
SHARES VALUE($)
--------- -----------
AUSTRALIA - 2.3%
Alumina Ltd............................ 204,000 862,699
Australia & New Zealand Bank Group
Ltd................................... 37,321 471,364
Fosters Group Ltd...................... 313,694 1,017,198
National Australia Bank Ltd............ 40,606 881,359
News Corp. Ltd......................... 45,526 405,402
QBE Insurance Group Ltd................ 33,388 244,012
Wesfarmers Ltd......................... 1,000 20,577
WMC Resources Ltd. (b)................. 85,800 311,702
Woolworths Ltd......................... 49,500 390,565
-----------
4,604,878
-----------
BRAZIL - 0.2%
Cia. Vale do Rio Doce ADR.............. 9,000 411,750
-----------
CANADA - 4.1%
Abitibi-Consolidated, Inc.............. 131,000 881,583
Alcan Inc.............................. 10,000 399,074
BCE, Inc............................... 48,000 1,087,060
Bombardier, Inc. Class B............... 375,900 1,688,349
Inco Ltd. (b).......................... 13,800 457,958
Placer Dome, Inc....................... 18,800 290,262
Suncor Energy, Inc..................... 20,600 433,012
TELUS Corp., non voting................ 37,100 649,929
Thomson Corp........................... 73,400 2,403,509
-----------
8,290,736
-----------
DENMARK - 0.4%
Novo Nordisk A/S Class B............... 21,100 758,927
TDC A/S Class B........................ 4,400 141,402
-----------
900,329
-----------
FINLAND - 1.2%
Nokia Corp., Class A................... 112,000 1,902,222
UPM-Kymmene Corp....................... 28,400 531,542
-----------
2,433,764
-----------
FRANCE - 11.0%
Accor SA............................... 19,500 766,884
Banque Nationale de Paris.............. 58,900 3,094,900
Bouygues SA............................ 37,290 1,014,381
Carrefour SA........................... 11,000 577,484
Essilor................................ 15,100 726,374
France Telecom SA (b).................. 58,800 1,423,151
Groupe Danone.......................... 8,900 1,342,943
L'Air Liquide.......................... 9,650 1,430,311
L'Oreal SA............................. 11,400 842,859
Renault SA............................. 40,900 2,705,382
Sanofi-Synthelabo...................... 86,020 5,324,906
Schneider SA........................... 19,500 1,141,372
Societe Generale....................... 7,200 534,843
Vivendi Universal SA (b)............... 57,500 1,207,867
-----------
22,133,657
-----------
GERMANY - 4.1%
Allianz AG............................. 8,200 877,943
Bayerische Motoren Werke AG............ 8,872 355,823
DaimlerChrysler AG..................... 21,700 808,501
Deutsche Bank AG....................... 18,800 1,239,179
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
Infineon Technologies AG (b)........... 14,300 211,122
Muenchener Rueckversicher AG........... 10,400 1,240,434
SAP AG................................. 9,900 1,435,141
Siemens AG............................. 29,900 2,009,055
-----------
8,177,198
-----------
HONG KONG - 2.7%
Cheung Kong Holdings Ltd............... 47,000 391,884
China Mobile Ltd....................... 81,500 231,412
Hang Lung Properties Ltd............... 774,000 1,011,641
Hang Seng Bank Ltd..................... 52,500 655,768
Hong Kong Land Holdings Ltd............ 376,000 581,997
Hutchison Whampoa Ltd.................. 49,600 384,820
Johnson Electric Holdings Ltd.......... 304,500 396,030
Li & Fung Ltd.......................... 306,000 514,223
Sun Hung Kai Properties Ltd............ 72,000 609,604
Swire Pacific Ltd. Class A............. 112,000 683,622
-----------
5,461,001
-----------
IRELAND - 0.3%
CRH PLC................................ 29,375 528,276
-----------
ITALY - 0.8%
Assicurazioni Generali SpA............. 9,000 207,158
ENI SpA................................ 60,300 957,548
Uni Credito Italiano SpA............... 82,400 406,150
-----------
1,570,856
-----------
JAPAN - 21.7%
Advantest Corp......................... 9,700 722,636
AEON Co., Ltd.......................... 66,000 2,179,287
Aiful Corp............................. 5,445 344,228
Canon, Inc............................. 24,000 1,161,414
Dai Nippon Printing Co., Ltd........... 26,000 401,583
Daiwa House Industry Co., Ltd.......... 61,000 658,080
Daiwa Securities Group, Inc............ 67,000 489,999
Fanuc Ltd.............................. 9,200 553,163
Fuji Photo Film Co., Ltd............... 17,000 501,023
Hirose Electric Co., Ltd............... 5,700 700,478
Honda Motor Co., Ltd................... 14,800 584,273
Hoya Corp.............................. 20,000 1,810,161
Japan Telecom Co., Ltd................. 153 457,880
Kansai Electric Power Co., Inc......... 51,500 890,071
Millea Holdings, Inc................... 56 667,303
Mitsubishi Corp........................ 86,000 892,582
Mitsubishi Estate Co., Ltd............. 147,000 1,409,360
Mitsubishi Heavy Industries, Ltd....... 109,000 299,431
Mitsubishi Motors Corp. (b)............ 118,000 253,313
Mitsubishi Tokyo Financial Group,
Inc................................... 91 653,932
Mitsui Fudosan Co., Ltd................ 46,000 428,053
Mitsui Sumitomo Insurance Co., Ltd..... 149,370 1,230,993
Murata Manufacturing Co., Ltd.......... 11,700 665,166
NEC Corp............................... 364,000 3,215,026
NEC Electronics Corp. (b).............. 400 30,782
Nidec Corp............................. 13,200 1,278,756
Nikko Cordial Securities Co., Ltd...... 67,000 361,404
Nikon Corp. (b)........................ 6,000 91,090
Nintendo Co., Ltd...................... 4,000 308,910
</Table>
74 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
Nippon Steel Corp...................... 252,000 518,052
Nissan Motor Co., Ltd.................. 151,000 1,692,200
Nitto Denko Corp....................... 23,500 1,233,411
Nomura Securities Corp................. 46,000 789,994
ORIX Corp.............................. 10,800 908,719
Ricoh Co. Ltd.......................... 24,000 455,178
Rohm Co., Ltd.......................... 14,300 1,927,739
Sankyo Co., Ltd........................ 54,000 864,511
Sekisui House, Ltd..................... 79,000 775,376
Shimamura Co., Ltd..................... 5,400 375,276
Shin-Etsu Chemical Co., Ltd............ 8,300 308,792
Shionogi & Co., Ltd.................... 37,000 620,958
SMC Corp............................... 5,700 685,960
Sompo Japan Insurance, Inc............. 24,000 198,663
Sony Corp.............................. 16,810 585,640
Sumitomo Chemical Co., Ltd............. 51,000 190,203
Sumitomo Forestry Co., Ltd............. 84,000 687,679
Suzuki Motor Corp...................... 72,000 1,041,343
Tokyo Electron, Ltd.................... 36,600 2,623,440
Toray Industries, Inc.................. 91,000 378,287
Tostem Inax Holding Corp............... 30,000 534,589
Toyota Motor Co........................ 30,000 854,141
Yahoo Japan Corp. (b).................. 74 1,097,194
Yamanouchi Pharmaceutical Co., Ltd..... 19,000 477,009
Yamato Transport Co., Ltd.............. 40,000 531,587
-----------
43,596,318
-----------
LUXEMBOURG - 0.1%
SES Global SA, Class A FDR............. 30,600 272,485
-----------
MEXICO - 0.5%
America Movil SA de CV, Series L ADR... 25,800 614,040
Telefonos De Mexico SA de CV, Class L
ADR................................... 13,700 440,455
-----------
1,054,495
-----------
NETHERLANDS - 10.3%
ABN AMRO Holding NV.................... 160,553 3,368,904
Aegon NV............................... 105,176 1,379,173
Heineken NV............................ 39,025 1,392,753
Heineken NV, Class A................... 33,475 1,043,692
ING Groep NV........................... 68,107 1,414,055
Koninklijke Numico Class C NV (b)...... 27,800 627,283
Koninklijke Philips Electronics NV..... 39,800 1,072,943
Koninklijke (Royal) KPN NV (b)......... 279,900 2,128,010
Royal Dutch Petroleum Co............... 118,300 5,249,281
STMicroelectronics NV.................. 36,600 974,338
Unilever NV............................ 24,300 1,411,590
VNU NV................................. 26,160 796,768
-----------
20,858,790
-----------
NORWAY - 1.5%
DNB Holding ASA........................ 61,400 358,569
Norsk Hydro ASA........................ 29,300 1,648,942
Statoil ASA............................ 103,000 968,531
-----------
2,976,042
-----------
SINGAPORE - 1.4%
DBS Group Holdings Ltd. ADR............ 145,000 1,191,320
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
Singapore Airlines Ltd................. 31,000 215,457
Singapore Press Holdings Ltd........... 19,370 219,184
Singapore Telecommunications Ltd....... 1,261,520 1,246,340
-----------
2,872,301
-----------
SOUTH AFRICA - 0.2%
Anglo American PLC..................... 20,400 417,490
-----------
SOUTH KOREA - 0.8%
Samsung Electronics Co., Ltd........... 8,505 1,701,000
-----------
SPAIN - 2.7%
Antena 3 Television (b)................ 417 13,617
Banco Bilbao Vizcaya Argentina SA...... 182,000 2,088,246
Industria de Diseno Textil, SA
(Inditex)............................. 69,500 1,435,705
Repsol SA.............................. 25,900 451,631
Telefonica SA.......................... 123,227 1,532,790
-----------
5,521,989
-----------
SWEDEN - 1.3%
Assa Abloy AB Class B.................. 82,900 818,283
ForeningsSparbanken AB, Class A........ 71,600 1,193,202
Sandvik AB............................. 13,700 407,443
Svenska Handelsbanken Group, Class A... 13,800 243,243
-----------
2,662,171
-----------
SWITZERLAND - 8.7%
Cie Financier Richemont AG, unit, Class
A..................................... 78,930 1,776,198
Holcim Ltd............................. 37,083 1,560,688
Nestle SA.............................. 11,032 2,428,882
Novartis AG............................ 83,887 3,197,551
Roche Holding AG....................... 12,369 1,023,533
Serono SA, Class B..................... 828 571,697
Swiss Reinsurance Co................... 40,501 2,549,226
Swisscom AG............................ 7,786 2,265,220
Synthes-Stratec, Inc................... 585 537,095
UBS AG................................. 26,192 1,608,375
-----------
17,518,465
-----------
TAIWAN - 1.6%
Taiwan Semiconductor Manufacturing Co.,
Ltd. ADR (b).......................... 286,673 3,170,603
-----------
UNITED KINGDOM - 16.8%
ARM Holdings PLC (b)................... 191,800 370,228
AstraZeneca PLC........................ 148,951 7,074,401
Barclays PLC........................... 104,800 883,867
BG Group PLC........................... 400,000 1,824,221
BHP Billiton PLC....................... 328,304 2,578,052
Brambles Industries PLC................ 77,500 234,752
British Aerospace PLC.................. 170,862 530,598
Centrica PLC........................... 224,100 701,629
Compass Group PLC...................... 38,600 222,544
Diageo PLC............................. 55,400 651,496
HBOS PLC............................... 87,100 1,013,199
National Grid Transco PLC.............. 137,100 875,353
Pearson PLC............................ 113,600 1,175,918
Prudential Corp. PLC................... 34,400 266,920
Reckitt Benckiser PLC.................. 26,900 566,035
Reed Elsevier PLC...................... 103,000 800,519
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 75
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES OR
PRINCIPAL
AMOUNT* VALUE($)
--------- -----------
Rio Tinto PLC.......................... 12,400 300,693
Royal Bank Of Scotland Group PLC....... 97,600 2,615,176
Smith & Nephew PLC..................... 79,600 632,499
Smiths Group PLC....................... 87,900 1,046,371
Standard Chartered Bank................ 105,400 1,685,742
Unilever PLC........................... 45,900 391,397
Vodafone Group PLC..................... 3,243,053 6,810,332
Xstrata PLC............................ 65,800 675,539
-----------
33,927,481
-----------
TOTAL COMMON STOCKS.................... 191,062,075
-----------
- -----------------------------------------------------------------
CONVERTIBLE BONDS - 1.2%
JAPAN - 0.7%
SMFG Finance (Cayman) Ltd., 2.25%,
7/11/05, (c)(d)...................... 84,000,000 1,388,729
-----------
SWITZERLAND - 0.5%
Credit Suisse Group Finance
(Guernsey), 6.00%, 12/23/05.......... 960,000 1,018,340
-----------
TOTAL CONVERTIBLE BONDS............... 2,407,069
-----------
- -----------------------------------------------------------------
RIGHTS & WARRANTS - 0.1%
AUSTRALIA - 0.0%
Australia & New Zealand Banking
Group Ltd., expire 2003.............. 6,785 20,750
-----------
GERMANY - 0.1%
Muenchener Rueckver, expire 2003...... 10,400 85,960
-----------
UNITED KINGDOM - 0.0%
TI Automotive Ltd., Class A (b)....... 190,000 0
-----------
TOTAL RIGHTS & WARRANTS............... 106,710
-----------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 3.9%
SHARES VALUE($)
----------- -----------
UNITED STATES - 3.9%
Investors Cash Reserve................ 7,962,310 7,962,310
-----------
TOTAL INVESTMENT COMPANIES............ 7,962,310
-----------
TOTAL INVESTMENTS
(COST $183,219,726) (a) - 99.9%..... 201,538,164
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $201,804,564.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial reporting
purposes in excess of federal income tax reporting of approximately $6,230,630.
Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<Table>
Unrealized appreciation........... $15,405,384
Unrealized depreciation........... (3,317,576)
-----------
Net unrealized appreciation....... $12,087,808
-----------
-----------
</Table>
(b) Represents non-income producing security.
(c) Security exempt from registration under Rule 144a of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. These securities
have been deemed liquid by the investment manager based on procedures
approved by the Board of Trustees.
(d) Step-up bond; coupon rate is zero until step-up date. Step-up rate is
provided.
* The principal amount of each security is denominated in the local issue
currency of each security.
ADR -- American Depositary Receipt
FDR -- Fiduciary Depositary Receipt
76 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Aerospace & Defense......................................... 0.3%
Airlines.................................................... 0.1%
Automotive.................................................. 4.5%
Banking & Financial Services................................ 15.6%
Building & Construction..................................... 1.0%
Building Materials.......................................... 0.3%
Business Services........................................... 0.9%
Chemicals................................................... 1.8%
Computer Related............................................ 3.6%
Diversified Manufacturing Operations........................ 2.2%
Drugs -- Medical............................................ 10.4%
Electrical.................................................. 2.1%
Electronic Components & Semiconductors...................... 5.7%
Food & Beverage............................................. 6.4%
Insurance................................................... 3.0%
Leisure..................................................... 2.7%
Metals & Mining............................................. 4.5%
Manufacturing............................................... 3.1%
Multimedia.................................................. 3.4%
Office Equipment & Supplies................................. 0.3%
Oil & Gas................................................... 6.6%
Paper Products.............................................. 0.7%
Publishing.................................................. 1.9%
Real Estate................................................. 2.2%
Retail...................................................... 2.4%
Telecommunciations.......................................... 9.8%
Transportation.............................................. 0.3%
Wholesale Distribution...................................... 0.3%
Investment Companies........................................ 3.9%
------
Total Investments........................................... 100.0%
Other assets in excess of liabilities....................... 0.0%
------
Net Assets.................................................. 100.0%
------
------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 77
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
At October 31, 2003, the portfolio's open forward currency contracts were as
follows:
<Table>
<Caption>
CONTRACT CONTRACT UNREALIZED
DELIVERY AMOUNT VALUE APPRECIATION/
CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION)
- -------- ---- ---------------- ------------- ----- --------------
LONG CONTRACTS
British Pound................................... 11/3/2003 24,960 $ 42,457 $ 42,347 $ (110)
British Pound................................... 11/5/2003 58,568 99,244 99,351 107
Canadian Dollar................................. 1/20/2004 1,607,451 1,209,437 1,215,204 5,767
Euro............................................ 11/5/2003 10,070 11,656 11,705 49
Japanese Yen.................................... 11/5/2003 8,023,418 73,998 72,998 (1,000)
Japanese Yen.................................... 11/25/2003 199,879,810 1,702,890 1,820,037 117,147
Japanese Yen.................................... 11/25/2003 2,509,000 21,420 22,846 1,426
---------- ---------- ---------
TOTAL LONG CONTRACTS........................................................... $3,161,102 $3,284,488 $ 123,386
---------- ---------- ---------
---------- ---------- ---------
SHORT CONTRACTS
Hong Kong Dollar................................ 11/3/2003 165,249 $ 21,286 $ 21,281 $ 5
Hong Kong Dollar................................ 11/4/2003 164,495 21,180 21,185 (5)
Japanese Yen.................................... 11/4/2003 3,379,625 31,250 30,747 503
Japanese Yen.................................... 11/6/2003 37,845,887 344,188 344,342 (154)
Japanese Yen.................................... 1/20/2004 131,376,998 1,209,437 1,198,722 10,715
Japanese Yen.................................... 3/4/2004 64,374,840 556,924 588,249 (31,325)
Swiss Franc..................................... 11/25/2003 2,397,215 1,702,890 1,796,744 (93,854)
---------- ---------- ---------
TOTAL SHORT CONTRACTS.......................................................... $3,887,155 $4,001,270 $(114,115)
---------- ---------- ---------
---------- ---------- ---------
</Table>
78 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 84.3%
SHARES VALUE($)
---------- -----------
ADVERTISING - 1.3%
Monster Worldwide, Inc. (b)............ 216,500 5,514,255
-----------
BANKING - 3.6%
East West Bancorp, Inc................. 131,500 6,455,335
Southwest Bancorporation of Texas,
Inc................................... 173,600 6,233,976
Wintrust Financial Corp................ 58,800 2,548,392
-----------
15,237,703
-----------
BIOTECHNOLOGY - 1.4%
Celgene Corp. (b)...................... 148,100 6,174,289
-----------
COMPUTER SERVICES - 1.8%
Ceridian Corp. (b)..................... 372,800 7,828,800
-----------
COMPUTER SOFTWARE - 4.3%
CheckFree Corp. (b).................... 151,100 4,159,783
SRA International, Inc. Class A (b).... 229,600 10,001,376
Transaction Systems Architects, Inc.
Class A (b)........................... 214,400 4,288,000
-----------
18,449,159
-----------
COMPUTER STORAGE DEVICES - 0.9%
Storage Technology Corp. (b)........... 156,500 3,771,650
-----------
CONSTRUCTION - 0.9%
D. R. Horton, Inc...................... 100,500 3,999,900
-----------
CONSUMER PRODUCTS - 3.7%
LeapFrog Enterprises, Inc. (b)......... 189,500 6,551,015
Tiffany & Co........................... 192,800 9,148,360
-----------
15,699,375
-----------
CRUISE LINES - 1.6%
Royal Caribbean Cruises Ltd............ 236,400 7,023,444
-----------
DIVERSIFIED MANUFACTURING
OPERATIONS - 2.0%
Actuant Corp. Class A (b).............. 189,200 6,099,808
AMETEK, Inc............................ 49,000 2,305,450
-----------
8,405,258
-----------
E-MARKETING/INFORMATION - 1.1%
DoubleClick, Inc. (b).................. 586,500 4,885,545
-----------
EDUCATIONAL SERVICES - 4.5%
Apollo Group, Inc. (b)................. 120,000 8,251,200
Career Education Corp. (b)............. 204,200 10,934,910
-----------
19,186,110
-----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 8.4%
ASM International N.V. (b)............. 249,100 4,361,741
Power Integrations, Inc. (b)........... 120,000 4,178,400
Semtech Corp. (b)...................... 296,100 6,573,420
Thermo Electron Corp. (b).............. 358,700 7,884,226
Varian Semiconductor Equipment
Associates, Inc. (b).................. 199,100 9,626,485
White Electronic Designs (b)........... 233,300 2,566,300
-----------
35,190,572
-----------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
---------- -----------
EMPLOYMENT AGENCIES - 0.8%
Cross Country Healthcare, Inc. (b)..... 256,500 3,562,785
-----------
ENVIRONMENTAL SERVICES - 2.9%
Republic Services, Inc................. 318,900 7,414,425
Waste Connections, Inc. (b)............ 143,000 4,959,240
-----------
12,373,665
-----------
FINANCIAL SERVICES - 0.2%
CapitalSource, Inc. (b)................ 42,400 922,200
-----------
HEALTH CARE - 11.5%
Caremark Rx, Inc. (b).................. 336,100 8,419,305
Express Scripts, Inc. (b).............. 115,700 6,354,244
Humana, Inc. (b)....................... 236,600 4,800,614
Lincare Holdings, Inc. (b)............. 220,090 8,570,305
Manor Care, Inc........................ 341,400 11,361,791
NDCHealth Corp......................... 339,800 8,967,322
-----------
48,473,581
-----------
HOSPITALS - 1.9%
Community Health Systems, Inc. (b)..... 334,200 8,027,484
-----------
HUMAN RESOURCES - 0.0%
Employee Solutions, Inc. (b)........... 2,483 10
-----------
INSURANCE - 1.8%
Philadelphia Consolidated Holding Corp.
(b)................................... 110,500 5,210,075
RenaissanceRe Holdings Ltd............. 58,400 2,626,832
-----------
7,836,907
-----------
INTERNET RELATED - 2.7%
Concur Technologies, Inc. (b).......... 406,000 4,656,820
RSA Security, Inc. (b)................. 536,200 6,954,514
-----------
11,611,334
-----------
MEDIA - 4.2%
Entravision Communications Corp. (b)... 288,500 2,760,945
The E.W. Scripps Co. Class A........... 65,900 6,122,769
Westwood One, Inc. (b)................. 297,900 8,916,147
-----------
17,799,861
-----------
MEDICAL EQUIPMENT & SUPPLIES - 2.2%
C.R. Bard, Inc......................... 118,800 9,509,940
-----------
OIL & GAS - 6.2%
Chesapeake Energy Corp................. 795,300 9,487,929
Cooper Cameron Corp. (b)............... 111,100 4,757,302
Helmerich & Payne, Inc................. 222,400 5,895,824
Varco International, Inc. (b).......... 352,000 6,191,680
-----------
26,332,735
-----------
PHARMACEUTICALS - 3.8%
Biogen, Inc. (b)....................... 189,100 7,652,877
King Pharmaceuticals, Inc. (b)......... 335,700 4,498,380
QLT Phototherapeutics, Inc. (b)........ 266,000 4,109,700
-----------
16,260,957
-----------
RAILROAD EQUIPMENT - 0.8%
Wabtec Corp............................ 227,300 3,477,690
-----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 79
<Page>
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
---------- -----------
RETAIL - 8.2%
99 Cents Only Stores (b)............... 125,100 3,724,227
Abercrombie & Fitch Co. (b)............ 122,100 3,479,850
Cost Plus, Inc. (b).................... 187,000 8,577,690
Dollar Tree Stores, Inc. (b)........... 178,500 6,815,130
P.F. Chang's China Bistro, Inc. (b).... 86,400 4,211,136
Williams-Sonoma, Inc. (b).............. 223,900 7,910,387
-----------
34,718,420
-----------
TELECOMMUNICATIONS - 1.6%
Advanced Fibre Communications, Inc.
(b)................................... 279,080 6,717,456
-----------
TOTAL COMMON STOCKS.................... 358,991,085
-----------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 4.9%
SHARES VALUE($)
---------- -----------
Dreyfus Cash Management Fund........... 18,224,010 18,224,010
Ishares Russell 2000 Growth............ 50,000 2,857,500
-----------
TOTAL INVESTMENT COMPANIES............. 21,081,510
-----------
TOTAL INVESTMENTS
(COST $308,463,378) (a) - 89.2%...... 380,072,595
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $426,181,456.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $333,082. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.......... $74,489,340
Unrealized depreciation.......... (3,213,205)
-----------
Net unrealized appreciation...... $71,276,135
-----------
-----------
</Table>
(b) Represents non-income producing security.
80 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
INTERNATIONAL
LIMITED MATURITY FIXED INCOME EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ------------------ ------------------ ----------------
ASSETS:
Investments, at value $ 83,838,149 $204,195,706 $201,538,164 $380,072,595
Cash -- -- -- 49,474,307
Foreign currency -- 328,203 11,792 --
Interest and dividends receivable 686,241 2,235,588 213,783 25,309
Receivable for investments sold -- -- 721,897 965,266
Unrealized appreciation on forward
foreign currency contracts -- -- 135,719 --
Prepaid expenses 1,028 2,542 1,315 1,217
------------ ------------ ------------ ------------
TOTAL ASSETS 84,525,418 206,762,039 202,622,670 430,538,694
------------ ------------ ------------ ------------
............................................................................................................................
LIABILITIES:
Payable for investments purchased -- 3,116,036 507,940 4,075,313
Unrealized depreciation on forward
foreign currency contracts -- -- 126,448 --
Accrued expenses and other liabilities:
Investment management 28,824 69,424 122,516 248,922
Administration 3,728 9,418 9,304 14,870
Other 4,577 16,604 51,898 18,133
------------ ------------ ------------ ------------
TOTAL LIABILITIES 37,129 3,211,482 818,106 4,357,238
------------ ------------ ------------ ------------
............................................................................................................................
NET ASSETS:
Applicable to investors' beneficial
interest $ 84,488,289 $203,550,557 $201,804,564 $426,181,456
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Investments, at cost $ 83,207,064 $195,671,845 $183,219,726 $308,463,378
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 81
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2003
.................................................................................
<Table>
<Caption>
INTERNATIONAL
LIMITED MATURITY FIXED INCOME EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------ ------------------ ------------------ ----------------
INVESTMENT INCOME:
Interest $ 5,861,583 $ 17,075,483 $ 72,873 $ 18,005
Dividends 69,577 185,868 6,167,211 837,976
Foreign tax withholding -- -- (1,026,969) --
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME 5,931,160 17,261,351 5,213,115 855,981
------------ ------------ ------------ ------------
............................................................................................................................
EXPENSES:
Investment management 562,599 1,366,115 1,888,827 2,409,043
Administration 52,631 133,294 99,942 110,550
Accounting 58,561 84,229 85,232 54,933
Custodian 55,372 88,062 453,509 97,508
Trustee 1,124 3,531 1,719 2,428
Other 7,271 19,405 24,823 20,537
------------ ------------ ------------ ------------
TOTAL EXPENSES 737,558 1,694,636 2,554,052 2,694,999
------------ ------------ ------------ ------------
............................................................................................................................
NET INVESTMENT INCOME (LOSS) 5,193,602 15,566,715 2,659,063 (1,839,018)
------------ ------------ ------------ ------------
............................................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS, FORWARDS AND FOREIGN
CURRENCIES:
Net realized gains (losses) from
investment, forward and foreign currency
transactions 7,058,455 14,700,573 (3,720,334) 5,028,175
Change in unrealized
appreciation/depreciation from
investments, forwards and foreign
currencies (4,380,150) (3,893,969) 61,679,947 88,818,863
------------ ------------ ------------ ------------
............................................................................................................................
Net realized/unrealized gains from
investment, forward and foreign currency
transactions 2,678,305 10,806,604 57,959,613 93,847,038
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 7,871,907 $ 26,373,319 $ 60,618,676 $ 92,008,020
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
82 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
.................................................................................
<Table>
<Caption>
LIMITED MATURITY
PORTFOLIO FIXED INCOME PORTFOLIO
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 5,193,602 $ 6,131,946 $ 15,566,715 $ 17,602,568
Net realized gains (losses) from
investment and foreign currency
transactions 7,058,455 (787,558) 14,700,573 1,531,345
Change in unrealized
appreciation/depreciation from
investments and foreign currencies (4,380,150) 429,535 (3,893,969) 215,590
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 7,871,907 5,773,923 26,373,319 19,349,503
------------ ------------ ------------ ------------
............................................................................................................................
Proceeds from contributions 76,560,059 53,476,926 210,631,816 353,082,260
Fair value of withdrawals (149,758,568) (24,615,925) (419,256,855) (229,543,187)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (73,198,509) 28,861,001 (208,625,039) 123,539,073
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS (65,326,602) 34,634,924 (182,251,720) 142,888,576
............................................................................................................................
NET ASSETS:
Beginning of year 149,814,891 115,179,967 385,802,277 242,913,701
------------ ------------ ------------ ------------
End of year $ 84,488,289 $149,814,891 $203,550,557 $385,802,277
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 83
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO
------------------------------------- -------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 2,659,063 $ 1,884,444 $ (1,839,018) $ (2,357,766)
Net realized gains (losses) from
investment, forward and foreign
currency transactions (3,720,334) (20,223,366) 5,028,175 (68,582,200)
Change in unrealized
appreciation/depreciation from
investments, forwards and foreign
currencies 61,679,947 (17,088,070) 88,818,863 4,212,403
--------------- ------------- ------------- -------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 60,618,676 (35,426,992) 92,008,020 (66,727,563)
--------------- ------------- ------------- -------------
............................................................................................................................
Proceeds from contributions 1,115,446,503 651,096,825 219,219,044 187,109,547
Fair value of withdrawals (1,230,876,337) (634,901,691) (151,262,999) (119,737,618)
--------------- ------------- ------------- -------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (115,429,834) 16,195,134 67,956,045 67,371,929
--------------- ------------- ------------- -------------
CHANGE IN NET ASSETS (54,811,158) (19,231,858) 159,964,065 644,366
............................................................................................................................
NET ASSETS:
Beginning of year 256,615,722 275,847,580 266,217,391 265,573,025
--------------- ------------- ------------- -------------
End of year $ 201,804,564 $ 256,615,722 $ 426,181,456 $ 266,217,391
--------------- ------------- ------------- -------------
--------------- ------------- ------------- -------------
</Table>
84 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT
END OF EXPENSES INCOME (LOSS)
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
(000'S) NET ASSETS NET ASSETS TURNOVER
- --------------------------------------------------------------------------------------------------------------------
LIMITED MATURITY PORTFOLIO
Period ended October 31, 2001 (a) $115,180 0.55%(b) 4.97%(b) 102.01%
Year ended October 31, 2002 149,815 0.51% 4.60% 44.04%
Year ended October 31, 2003 84,488 0.53% 3.70% 98.42%
- --------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
Year ended October 31, 1999 $196,871 0.56% 6.43% 433.26%
Year ended October 31, 2000 226,366 0.51% 6.74% 440.49%
Year ended October 31, 2001 242,914 0.53% 6.53% 341.26%
Year ended October 31, 2002 385,802 0.48% 5.14% 77.82%
Year ended October 31, 2003 203,551 0.48% 4.38% 70.91%
- --------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Year ended October 31, 1999 $288,830 0.91% 0.61% 34.26%
Year ended October 31, 2000 332,325 0.84% 0.53% 27.81%
Year ended October 31, 2001 275,848 0.90% 0.54% 26.90%
Year ended October 31, 2002 256,616 0.91% 0.63% 31.63%
Year ended October 31, 2003 201,805 0.96% 1.00% 68.51%
- --------------------------------------------------------------------------------------------------------------------
SMALL CAP EQUITY PORTFOLIO
Year ended October 31, 1999 $237,305 1.04% (0.68)% 77.74%
Year ended October 31, 2000 369,166 0.97% (0.60)% 79.51%
Year ended October 31, 2001 265,573 0.98% (0.65)% 52.47%
Year ended October 31, 2002 266,217 0.99% (0.78)% 103.90%
Year ended October 31, 2003 426,181 0.91% (0.62)% 152.05%
- --------------------------------------------------------------------------------------------------------------------
</Table>
(a) Limited Maturity Portfolio commenced operations on January 24, 2001.
(b) Annualized.
For the year ended October 31, 2003, the Limited Maturity Portfolio, Fixed
Income Portfolio, International Equity Portfolio and Small Cap Equity Portfolio
returned 4.42%, 5.80%, 23.70% and 33.30%, respectively.
See notes to financial statements.
HSBC INVESTOR PORTFOLIOS 85
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003
.................................................................................
1. ORGANIZATION:
The HSBC Investor Portfolios (the 'Portfolio Trust'), is an open-end
management investment company organized as a master trust fund under the
laws of the State of New York on November 1, 1994. The Portfolios operate as
master funds in master-feeder arrangements. The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of beneficial interests
in the Portfolios. The Portfolio Trust contains the following (individually
a 'Portfolio,' collectively the 'Portfolios'):
<Table>
<Caption>
PORTFOLIO SHORT NAME
- --------- ----------
HSBC Investor Limited Maturity Portfolio Limited Maturity Portfolio
HSBC Investor Fixed Income Portfolio Fixed Income Portfolio
HSBC Investor International Equity Portfolio International Equity Portfolio
HSBC Investor Small Cap Equity Portfolio Small Cap Equity Portfolio
</Table>
The Portfolios are diversified series of the Portfolio Trust and are
part of the HSBC Investor Family of Funds. Financial Statements for all
other series of the HSBC Investor Family of Funds are published separately.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the Portfolios in the preparation of their financial statements.
The policies are in conformity with accounting principles generally accepted
in the United States of America ('U.S.'). The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
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:
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 Portfolios' Board of Trustees. In making such valuations,
the pricing service utilizes both dealer-supplied valuations and the use of
matrix 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 portfolio
securities with a remaining maturity of 60 days or less are valued at
amortized cost. 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.
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 by or at the direction of
the Portfolios' Board of Trustees.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Changes in holdings of portfolio securities shall be reflected no later
than in the first calculation on the first business day following the trade
date. Securities gains and losses are calculated on the identified cost
basis. Interest income is recognized on the accrual basis and includes,
where applicable, the amortization or accretion of premium or discount.
Dividend income is recorded on the ex-dividend date.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Portfolios are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars at the current
rate of exchange to determine the value of investments, assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of
such transactions. The Portfolios do not isolate that portion of the results
of operations resulting from changes
86 HSBC INVESTOR PORTFOLIOS
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
in foreign exchange rates on investments from fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments and
foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Portfolios may enter into forward foreign currency exchange
contracts in connection with planned purchases or sales of securities or to
hedge the U.S. dollar value of portfolio securities denominated in a
particular currency. The Portfolios could be exposed to risks if the
counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purposes as
unrealized gains or losses until the contract settlement date.
FUTURES CONTRACTS:
Each Portfolio may invest in financial futures contracts for the purpose
of hedging their existing portfolio securities or securities it intends to
purchase against fluctuations in fair value caused by changes in prevailing
market interest rates. Upon entering into a financial futures contract, the
Portfolio is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as 'variation margin,' are made or
received by the Portfolio each day, depending on the daily fluctuations in
the fair value of the underlying security. The Portfolio recognizes a gain
or loss equal to the daily variation margin. Should market conditions move
unexpectedly, the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assets.
MORTGAGE DOLLAR ROLL TRANSACTIONS:
The Fixed Income Portfolio may engage in dollar roll transactions with
respect to mortgage securities issued by the Government National Mortgage
Association, the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation. In a dollar roll transaction, the Portfolio sells
a mortgage-backed security and simultaneously agrees to repurchase a similar
security on a specified future date at an agreed upon price. During the roll
period, the Portfolio will not be entitled to receive any interest or
principal paid on the securities sold. The Portfolio is compensated for the
lost interest on the securities sold by the difference between the sales
price and the lower price for the future repurchase as well as by the
interest earned on the reinvestment of the sales proceeds. The Portfolio may
also be compensated by receipt of a commitment fee. When the Portfolio
enters into a mortgage dollar roll transaction, liquid assets in an amount
sufficient to pay for the future repurchase are segregated with the
custodian.
EXPENSE ALLOCATION:
Expenses incurred by the HSBC Investor Family of Funds with respect to
any two or more funds within the HSBC Investor Family of Funds are allocated
in proportion to the net assets of each fund within the HSBC Investor Family
of Funds, except when allocations of direct expenses to each Portfolio can
otherwise be made fairly. Expenses directly attributable to a Portfolio are
charged to that Portfolio.
FEDERAL INCOME TAXES:
Each Portfolio will be treated as a partnership for U.S. Federal income
tax purposes. Accordingly, each Portfolio passes through all of its net
investment income and gains and losses to its Feeders, and is therefore not
subject to U.S. Federal income tax. As such, an investor in the Portfolios
will be taxed on their share of the Portfolios' ordinary income and realized
gains. It is intended that the Portfolios will be managed in such a way that
an investor will be able to satisfy the requirements of the Internal Revenue
Code applicable to regulated investment companies.
HSBC INVESTOR PORTFOLIOS 87
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
3. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Asset Management (Americas) Inc. ('HSBC' or the 'Investment
Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State
chartered bank, acts as the Investment Adviser to the Portfolios pursuant to
an investment management contract with the Portfolio Trust. As Investment
Adviser, HSBC manages the investments of the Portfolios and continuously
reviews, supervises and administers the Portfolios' investments. Capital
Guardian Trust Company and Westfield Capital Management, LLC serve as
Sub-Investment Advisers for the International Equity Portfolio and the Small
Cap Equity Portfolio, respectively, and are paid for their services directly
by HSBC. On January 20, 2003, Westfield Capital Management replaced MFS
Institutional Advisors, Inc. as Sub-Investment Adviser for the Small Cap
Equity Portfolio.
For its services as Investment Adviser, HSBC receives a fee, accrued
daily and paid monthly, at an annual rate of 0.40% of the Limited Maturity
Portfolio's average daily net assets.
For its services as Investment Adviser, HSBC receives, from the Fixed
Income Portfolio, a fee accrued daily and paid monthly at an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE
- ------------------------------------ --------
Up to $50 million........................................... 0.575%
In excess of $50 million but not exceeding $95 million...... 0.450%
In excess of $95 million but not exceeding $150 million..... 0.200%
In excess of $150 million but not exceeding $250 million.... 0.400%
In excess of $250 million................................... 0.350%
</Table>
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and Capital Guardian Trust Company receive in aggregate,
from the International Equity Portfolio, a fee accrued daily and paid
monthly at an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE
- ------------------------------------ --------
Up to $25 million........................................... 0.950%
In excess of $25 million but not exceeding $50 million...... 0.800%
In excess of $50 million but not exceeding $250 million..... 0.675%
In excess of $250 million................................... 0.625%
</Table>
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and Westfield Capital Management LLC receive in
aggregate, a fee accrued daily and paid monthly at an annual rate of 0.80%
of the Small Cap Equity Portfolio's average daily net assets.
ADMINISTRATION:
BISYS Fund Services Ohio, Inc. ('BISYS Ohio'), a wholly-owned subsidiary
of The BISYS Group, Inc., with whom certain officers of the Portfolio Trust
are affiliated, serves the Portfolio Trust as Administrator. Such officers
are paid no fees directly by the Portfolios for serving as officers of the
Portfolio Trust. Under the terms of the administration agreement with the
Portfolios, BISYS Ohio receives, from the Portfolios, a fee accrued daily
and paid monthly at an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE
- ------------------------------------ --------
Up to $8 billion............................................ 0.0375%
In excess of $8 billion but not exceeding $9.25 billion..... 0.0350%
In excess of $9.25 billion but not exceeding $12 billion.... 0.0250%
In excess of $12 billion.................................... 0.0150%
</Table>
The fee breakpoints are determined on the basis of the aggregate average
daily net assets of the HSBC Investor Family of Funds. The fee is allocated
to each of the Portfolios based upon its pro-rata share of net assets. BISYS
Ohio may use its fees to pay advertising and marketing expenses for the
benefit of the Funds.
88 HSBC INVESTOR PORTFOLIOS
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED)
.................................................................................
FUND ACCOUNTING AND CUSTODIAN:
BISYS provides fund accounting services for the Portfolios. For its
services to the Portfolios, BISYS receives an annual fee from each Portfolio
accrued daily and paid monthly. HSBC serves as custodian to the Fixed Income
Portfolio, Small Cap Equity Portfolio and Limited Maturity Portfolio.
Investor's Bank & Trust Company serves as custodian to the International
Equity Portfolio.
4. INVESTMENT TRANSACTIONS:
For the year ended October 31, 2003, each Portfolio purchased and sold
securities, excluding short-term securities, in the following amounts:
<Table>
<Caption>
PURCHASES SALES
--------- -----
Limited Maturity Portfolio................................ $141,467,348 $204,670,067
Fixed Income Portfolio.................................... 241,405,012 410,173,946
International Equity Portfolio............................ 243,679,459 374,000,754
Small Cap Equity Portfolio................................ 465,087,083 435,413,020
</Table>
HSBC INVESTOR PORTFOLIOS 89
<Page>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Trustees of
HSBC Investor Portfolios:
We have audited the accompanying statements of assets and liabilities of HSBC
Investor Limited Maturity Portfolio, HSBC Investor Fixed Income Portfolio, HSBC
Investor International Equity Portfolio and HSBC Investor Small Cap Equity
Portfolio (collectively, the Funds), including the schedules of portfolio
investments, as of October 31, 2003, and the related statements of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included verification of
securities owned as of October 31, 2003, by confirmation with the custodian,
correspondence with brokers and other appropriate audit procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
aforementioned funds as of October 31, 2003, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Columbus, Ohio
December 15, 2003
90 HSBC INVESTOR PORTFOLIOS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED)
.................................................................................
The following table contains information regarding HSBC Investor Family of Funds
Board of Trustees. Asterisks indicate those Trustees who are 'interested
persons,' as defined in the Investment Company Act of 1940, as amended, of the
Funds. The Funds' Statement of Additional Information includes additional
information about the Trustees and is available by calling (888) 525-5757.
<Table>
<Caption>
NUMBER OF PORTFOLIOS
TERM OF OFFICE AND IN THE FUND
NAME, ADDRESS POSITION HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATIONS(S) COMPLEX OVERSEEN
AND AGE THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------
Frederick C. Chen Trustee Indefinite; 13 years Management Consultant, since 1988 28
P.O. Box 182845
Columbus, Ohio 43218
Age: 76
- -----------------------------------------------------------------------------------------------------------------------------
Larry M. Robbins Trustee Indefinite; 16 years Director for the Center of Teaching 28
P.O. Box 182845 and Learning, University of
Columbus, Ohio 43218 Pennsylvania
Age: 64
- -----------------------------------------------------------------------------------------------------------------------------
Alan S. Parsow Trustee Indefinite; 16 years General Partner of Parsow 28
P.O. Box 818 Partnership, Ltd., since 1989
Elkhorn, NE 68022
Age: 53
- -----------------------------------------------------------------------------------------------------------------------------
Michael Seely Trustee Indefinite; 16 years President of Investor Access 28
475 Lexington Avenue Corporation, 1978-present
New York, NY 10017
Age: 58
- -----------------------------------------------------------------------------------------------------------------------------
Leslie E. Bains* Trustee Indefinite; 3 years Executive Vice President, Republic 28
452 Fifth Avenue National Bank, 1993-1999; Senior
New York, NY 10018 Executive Vice President, HSBC Bank
Age: 60 USA, since 2000
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
NAME, ADDRESS OTHER DIRECTORSHIPS
AND AGE HELD BY TRUSTEE
- --------------------------------------------------
Frederick C. Chen None
P.O. Box 182845
Columbus, Ohio 43218
Age: 76
- --------------------------------------------------
Larry M. Robbins None
P.O. Box 182845
Columbus, Ohio 43218
Age: 64
- --------------------------------------------------
Alan S. Parsow None
P.O. Box 818
Elkhorn, NE 68022
Age: 53
- --------------------------------------------------
Michael Seely None
475 Lexington Avenue
New York, NY 10017
Age: 58
- --------------------------------------------------
Leslie E. Bains* None
452 Fifth Avenue
New York, NY 10018
Age: 60
- --------------------------------------------------
</Table>
HSBC INVESTOR FAMILY OF FUNDS 91
<Page>
PRIVACY POLICY FOR
HSBC INVESTOR FUNDS
AND
HSBC ADVISOR FUNDS TRUST
THIS PRIVACY POLICY NOTICE SUMMARIZES THE COLLECTION AND DISCLOSURE OF
NONPUBLIC PERSONAL INFORMATION ('INFORMATION') OF CUSTOMERS ('YOU') OF THE HSBC
INVESTOR FAMILY OF FUNDS ('WE' OR 'US'). IF YOU ARE AN INDIVIDUAL SHAREHOLDER OF
RECORD OF ANY SERIES OF THE FUNDS, WE CONSIDER YOU TO BE A CUSTOMER OF THE HSBC
INVESTOR FAMILY OF FUNDS. SHAREHOLDERS PURCHASING OR OWNING SHARES OF ANY OF THE
HSBC INVESTOR FAMILY OF FUNDS THROUGH THEIR BANK, BROKER, OR OTHER FINANCIAL
INSTITUTION SHOULD CONSULT THAT FINANCIAL INSTITUTION'S PRIVACY POLICIES.
WE COLLECT THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
We collect Information about you from the following sources: information we
receive from you on applications or other forms; information about your
transactions with us, our affiliates, or others; and information we receive from
a consumer reporting agency.
WE DISCLOSE THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
We do not disclose any Information about you or any former customer to
anyone, except as permitted by law, including to our affiliates and third party
service providers.
WE DISCLOSE INFORMATION ABOUT YOU TO THE FOLLOWING TYPES OF THIRD PARTIES
We may disclose Information about you and any former customer to our
affiliates, which we consider to include HSBC Bank USA, HSBC Asset Management
(Americas) Inc. and their affiliates, and to nonaffiliated third parties, as
permitted by law.
We may disclose all of the Information we collect to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing agreements.
PROTECTING THE SECURITY AND CONFIDENTIALITY OF YOUR INFORMATION
We restrict access to Information about you to those employees who need to
know that information to provide products or services to you. We maintain
physical, electronic, and procedural safeguards that comply with federal
standards to guard your Information.
92 HSBC INVESTOR FAMILY OF FUNDS
<Page>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<Page>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<Page>
HSBC Investor Family of funds:
Investment ADVISER
HSBC Asset Management (Americas) Inc.
452 Fifth Avenue
New York, NY 10018
SUB-ADVISERS
HSBC Investor Equity Fund
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, NY 10105
Institutional Capital Corporation
225 West Wacker Drive
Chicago, IL 60606
HSBC Investor International Equity Portfolio
Capital Guardian Trust Company
11100 Santa Monica Boulevard
Los Angeles, CA 90025
HSBC Investor Small Cap Equity Portfolio
Westfield Capital Management
One Financial Center
Boston, MA 02111
Shareholder Servicing Agents
For HSBC Bank USA and
HSBC Brokerage (USA) Inc. Clients
HSBC Bank USA
452 Fifth Avenue
New York, NY 10018
1-888-525-5757
For All Other Shareholders
HSBC Investor Funds
P.O. Box 182845
Columbus, OH 43218-2845
1-800-782-8183
ADMINISTRATOR, TRANSFER AGENT,
DISTRIBUTOR, AND SPONSOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
Custodians
HSBC Investor Limited Maturity Portfolio
HSBC Investor Fixed Income Portfolio
HSBC Investor New York Tax-Free Bond Fund
HSBC Investor Balanced Fund
HSBC Investor Equity Fund
HSBC Investor Growth and Income Fund
HSBC Investor Mid-Cap Fund
HSBC Investor Small Cap Equity Portfolio
HSBC Bank USA
452 Fifth Avenue
New York, NY 10018
HSBC Investor International Equity Portfolio
Investors Bank & Trust Company
200 Clarendon Street - 16th Floor
Boston, MA 02116
Independent Auditors
KPMG LLP
191 West Nationwide Blvd., Suite 500
Columbus, OH 43215
Legal Counsel
Dechert LLP
1775 Eye Street, N.W.
Washington, D.C. 20006
The HSBC Investor Family of Funds are distributed by BISYS Fund
Services. This document must be preceded or accompanied by a current
prospectus for the HSBC Investor Funds, which you should read
carefully before you invest or send money.
<Page>
Item 2. Code of Ethics.
Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. If the registrant has not adopted such a code of ethics,
explain why it has not done so.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. This code of ethics is included as Exhibit 10 (a)(1).
Item 3. Audit Committee Financial Expert.
(a) (1) Disclose that the registrant's board of directors has
determined that the registrant either:
(i) Has at least one audit committee financial expert serving
on its audit committee; or
(ii) Does not have an audit committee financial expert serving
on its audit committee.
(2) If the registrant provides the disclosure required by
paragraph (a)(1)(i) of this Item, it must disclose the name of the
audit committee financial expert and whether that person is
"independent." In order to be considered "independent" for
purposes of this Item, a member of an audit committee may not,
other than in his or her capacity as a member of the audit
committee, the board of directors, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-
2(a)(19)).
(3) If the registrant provides the disclosure required by
paragraph (a)(1)(ii) of this Item, it must explain why it does not
have an audit committee financial expert.
3(a)(1) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on its audit
committee.
3(a)(2) The audit committee financial expert is Frederick C. Chen. He is an
independent trustee.
Item 4. Principal Accountant Fees and Services.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed
for each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in
each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
(d) Disclose, under the caption All Other Fees, the aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
<Page>
(f) If greater than 50 percent, disclose the percentage of hours
expended on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
Only effective for annual reports with periods ending on or after
December 15, 2003.
Item 5. Audit Committee of Listed Registrants.
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17CFR 240.10A-3), state whether or not the
registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange
Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a
committee, however designated, identify each committee member. If
the entire board of directors is acting as the registrant's audit
committee as specified in Section 3(a)(58)(B) of the Exchange Act
(15 U.S.C. 78c(a)(58)(B)), so state.
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption
from the listing standards for all audit committees.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
A closed-end management investment company that is filing an annual
report on this Form N-CSR must, unless it invests exclusively in non-voting
securities, describe the policies and procedures that it uses to determine how
to vote proxies relating to portfolio securities, including the procedures that
the company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) Disclose the conclusions of the registrant's principal executive
and principal financial officers, or persons performing similar functions,
regarding the effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as
of a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
In the opinion of the principal executive officer and principal financial
officer, based on their evaluation, the registrant's disclosure controls and
procedures are adequately designed and are operating effectively to ensure (i)
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to them by others within those entities,
particularly during the period in which this report is being prepared; and (ii)
that information required to be disclosed by the registrant on Form N-CSR is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.
<Page>
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that
occurred during the registrant's last fiscal half-year (the registrant's second
fiscal half-year in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
have materially affected or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit. The code of ethics
that is the subject of the disclosure required by Item 2 is attached hereto.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2). Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 are attached hereto.
(b) A separate or combined certification for each principal executive
officer and principal officer of the registrant as required by Rule 30a-2(b)
under the Act of 1940. Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 are attached hereto.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
HSBC Investor Portfolios
By: /s/ Walter B. Grimm
-------------------------------------------------------
Walter B. Grimm
President
Date: January 2, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Nadeem Yousaf
-------------------------------------------------------
Nadeem Yousaf
Treasurer
Date: January 2, 2004
By: /s/ Walter B. Grimm
-------------------------------------------------------
Walter B. Grimm
President
Date: January 2, 2004
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as............................. 'SS'
The dagger symbol shall be expressed as.............................. 'D'