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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, 2004
Date of reporting period: April 30, 2004
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).
Semi-Annual Report
HSBC Investor Family of Funds
April 30, 2004
HSBC Investor Limited Maturity Fund
HSBC Investor Fixed Income Fund
HSBC Investor Bond Fund
HSBC Investor New York Tax-Free Bond 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]
Table of Contents
HSBC Investor Family of Funds
Semi-Annual Report - April 30, 2004
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........................ 20
HSBC Investor Equity Fund........................................ 22
HSBC Investor Growth and Income Fund............................. 24
HSBC Investor Mid-Cap Fund....................................... 26
Statements of Assets and Liabilities..................................... 28
Statements of Operations................................................. 30
Statements of Changes in Net Assets...................................... 32
Financial Highlights..................................................... 44
Notes to Financial Statements............................................ 55
HSBC Investor Portfolios
Schedules of Portfolio Investments
HSBC Investor Limited Maturity Portfolio......................... 62
HSBC Investor Fixed Income Portfolio............................. 64
HSBC Investor International Equity Portfolio..................... 67
HSBC Investor Small Cap Equity Portfolio......................... 71
Statements of Assets and Liabilities..................................... 72
Statements of Operations................................................. 73
Statements of Changes in Net Assets...................................... 74
Financial Highlights..................................................... 76
Notes to Financial Statements............................................ 77
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 Growth (GDP) is the measure of the market value of the
goods and services produced by labor and property in the United States.
Consumer Price Index (CPI) A measure of price changes in consumer goods and
services such as gasoline, food, and automobiles. Sometimes referred to as
"headline inflation."
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. The Funds primary goal is to keep the bulk of
the portfolio's 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 Depository
Receipts.
Price/Earnings (P/E) Ratio is the price of a stock divided by its historical
earnings per share.
Price-to-Book Ratio (P/B) is used to compare a stock's market value to its book
value. This ratio gives some idea of whether you're paying too much for what
would be left if the company went bankrupt immediately.
Price-to-Cash Flow (P/C) is the price per share divided by cash flow per share.
It's used as a measure of the market's expectations regarding a firm's future
financial health.
Producer Price Index (PPI) A family of indexes that measures the average change
over time in selling prices received by domestic producers of goods and
services. PPIs measure price change from the perspective of the seller.
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 securities found in the Russell universe that fall in the mid-range sector.
Russell 1000 Index is an unmanaged index which measures the performance of the
1,000 largest securities found in the Russell 3000 Index, which represents
approximately 92% of the total market capitalization of the Russell 3000 Index.
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 1000 Value Index is unmanaged index which measures the performance of
the 1,000 largest of the 3,000 largest U.S.-domiciled companies (based on total
market capitalization) with lower price-to-book ratios and lower forecasted
growth values.
Russell 2000 Index is an unmanaged index that generally representative of the
performance of small-capitalization stocks.
Russell 2000 Growth Index is an unmanaged index which tracks the performance of
domestically traded common stocks of small- to mid-sized companies with higher
price-to-book ratios and higher forecasted growth values.
Russell 2000 Value Index is unmanaged index which measures the performance of
those Russell 2000 companies with lower price-to-book ratios and lower
forecasted growth values.
Russell 2500 Growth Index is an unmanaged index which measures the performance
of those Russell 2500 companies with higher price-to-book ratios and higher
forecasted growth values.
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.
President's Message
Dear Shareholder:
We are pleased to present you with the semi-annual reports for the HSBC Investor
Family of Funds for the six months ended April 30, 2004. The report contains the
following features:
o Commentary From the Investment Manager
o Portfolio Reviews--investment strategy, performance overview and outlook for
the coming months
o Schedules of Portfolio Investments--listing of the security holdings in each
Fund
o Statements of Assets and Liabilities--summary of the assets and liabilities of
each Fund
o Statements of Operations--summary of operations and its effect on the assets
of each Fund
o Statements of Changes in Net Assets--summary of changes in net assets during
the period
o Financial Highlights--per share summary of activity affecting net asset value
per share
o 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,
Richard A. Fabietti
Richard A. Fabietti
President
June 2004
HSBC INVESTOR FAMILY OF FUNDS 1
Commentary From the Investment Manager
HSBC Asset Management (Americas) Inc.
U.S. Economic Review
The United States economy grew during the six-month period ended April 30, 2004,
continuing a recovery that began early in 2003. Historically low interest rates
helped spur growth by encouraging business and consumer spending.
The Federal Reserve Board (the "Fed") began the period concerned about the
possibility of deflation, which can have very negative implications for the
economy. The Fed responded by maintaining short-term interest rates at 1.0%.
Those low rates and low inflation helped keep mortgage rates near 40-year lows.
Consumers took advantage of inexpensive mortgage rates to refinance their home
loans and free up cash for large purchases such as cars, home improvements and
more-expensive homes. That trend, which has been in place for more than a year,
began to wane late in the period. Strengthening business spending also helped
power the economic recovery. Corporate spending rebounded from very low levels,
as companies restocked depleted inventories and increased their investments in
software and equipment.
Corporations were hesitant to increase their hiring, however, and the lack of
new job creation slowed the pace of economic growth. The weak job market
convinced the Fed to leave short-term interest rates unchanged throughout the
period, despite the possibility that the strengthening economy could lead to
higher inflation. Meanwhile, strong demand for oil-particularly from developing
countries such as China and India-as well as instability in the Middle East and
OPEC production cuts combined to push oil prices higher. High prices for oil
also hampered economic growth. Rising prices for energy and other commodities
combined with the weakening dollar to raise concerns late in the period that
inflation could rise.
Corporate profits were exceptionally strong during the six-month period. For
example, 75% of the companies reporting financial results for the quarter ending
in March produced stronger-than-expected earnings. That strong showing continued
a trend of improving corporate earnings that began during 2003. Manufacturing
companies enjoyed solid domestic demand and a weak dollar, which made their
exports more affordable to foreign consumers. Technology firms benefited from
the upturn in the technology-buying cycle, while financial-services companies
got a boost from low interest rates and strong financial markets. Meanwhile,
energy firms saw their profit margins increase as energy prices rose.
Global Economic Review
Asia generated some of the world's strongest growth during the six-month period.
China led the way, producing annualized GDP(1) growth of 9.9% during the fourth
calendar quarter of 2003. That country's burgeoning economy benefited from high
levels of direct foreign investment, strong exports and improvements in its
infrastructure. China's strength helped boost many of its neighbors, including
Taiwan, South Korea and Australia. Meanwhile, Japan continued its emergence from
the stagnation it experienced during much of the past decade, as reforms began
to take hold and the credit environment improved. Japan's GDP(1) grew at an
annualized rate of 7% during the fourth calendar quarter.
The European Union's economy remained frail during this time, but growing
investment, an expanding services sector and rebounding inventory levels helped
the economic environment improve in that region. High unemployment remains an
obstacle in the E.U., however, as does the strong euro, which hinders exports.
Meanwhile, the United Kingdom's economy strengthened considerably, powered by an
expanding retail sector, a healthy housing market, and rising employment. The
British central bank raised interest rates during the period to ward off higher
inflation.
Latin America also showed signs of strength. Mexico's peso weakened, helping
boost that country's exports. The growing economy in that country led to
increased inflation, causing the Mexican central bank to tighten the monetary
supply. Brazil managed to produce solid growth despite high interest rates and
unemployment. The Brazilian central bank lowered interest rates during the
period.
Market Environment
The stock market began the six-month period with strong gains, and then traded
in a narrow range for the remainder of the period. Investors in November and
December rotated out
2 HSBC INVESTOR FAMILY OF FUNDS
Commentary From the Investment Manager - (continued)
HSBC Asset Management (Americas) Inc.
of the high-growth sectors that had led the market rally earlier in the year,
and into value-oriented shares in sectors such as basic materials and
industrials. The S&P 500 Index(1) ended 2003 up 28.7% for the year, while the
NASDAQ Composite Index(1) finished the year with a gain of 50.1%. Those returns
represented those indices' first calendar-year gains since 1999.
Stocks moved slightly higher during the three months through March, and then
declined in April. Value-oriented shares significantly outperformed growth
stocks during this period. Sectors that performed well included energy and basic
materials, which benefited from rising commodity prices, and manufacturing,
which with help from the weak dollar began to recover after several difficult
years. Small-cap stocks led the market, powered by shares of regional banks,
real-estate firms and retail establishments.
Value also outperformed growth in the international markets, and U.S.
shareholders benefited from foreign currencies' strength against the dollar.
Markets in the Far East, particularly Japan, helped the MSCI EAFE Index(1)
produce gains. Europe's returns were mixed, with the emerging markets of
Eastern Europe and Russia producing strong performance. Germany's returns
led the region early in the period, but generated Europe's worst losses during
the first quarter of 2004.
Treasury bonds were somewhat volatile during the period. Yields rose in the fall
as economic data showed strong growth, fell during early 2004 as job creation
stagnated, and rose again in April due to fears of rising inflation.
Mortgage-backed securities performed poorly early in the period, but
strengthened later due to investors' belief that mortgage refinancing will
decrease going forward.
Investment-grade corporate bonds led the fixed-income markets. Investors prized
the yield advantage high-quality corporates offered over Treasuries. Yields on
lower-bonds had declined precipitously during 2003, and no longer offered as
attractive a yield premium.
(1) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 3
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").
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
The Fund returned 0.79%, (without sales charge) for the Class A (Investor)
Shares and 1.01% for the Class Y shares during the six-month period ended April
30, 2004. That compared to a return of 1.20% for the Lehman Brothers
Intermediate Aggregate Bond Index.(4)
Past performance does not guarantee future results.
The Fund outperformed its benchmark, the Lehman Brothers U.S. Intermediate
Aggregate before fee's and expenses are subtracted from performance. The fund
was overweighted in the Corporate sector and underweighted in the U.S. Treasury
sector during the review period. In addition, the Fund maintained a barbell
position along the yield curve. All strategy enhanced the Fund's performance.
Throughout the review period, the Fed decided to leave the target on the federal
funds rate unchanged at 1.00%. At their earlier meetings, their comments were
surprisingly dovish with respect to the timing of the beginning of any
tightening cycle, despite much firmer economic data released during the period.
As 2003 drew to a close, third-quarter GDP(4) was revised higher to 8.2% from
an initially reported 7.2%. Non-farm Productivity was revised higher to 9.4%,
giving emphasis to a strong cyclical economic recovery. In addition,
manufacturing soared to twenty-year highs, according to the Institute for Supply
Management. Investment-grade corporate bond spread's continued to contract
generating positive returns. The Fed reiterated that policy would remain
accommodative for a "considerable period of time."
With the start of the new year, the U.S. economy continued to thrive. The GDP
for the fourth quarter grew 4.0%. Manufacturing continued to soar while Capacity
Utilization and Industrial Production both inched higher. With respect to the
consumer, their assessment of the economy was strong. Overall Retail Sales were
off to a robust start, consistent with an increase in personal spending. All the
housing data released still pointed to a robust housing market. Then at their
first FOMC meeting of the year, the Fed changed the wording of their statement
in which they discussed the removal of accommodation. Nonetheless, it was clear
that no move in rates were imminent. The bond market took that news in stride,
as it rallied through the end of the first quarter. All appeared to be going
well except for the employment picture, it was gloomy. The economy had failed to
create the number of jobs necessary to support the economic recovery.
Towards the end the review period, the job data had dramatically improved which
was evident from the latest reading in Non-farm payrolls, which jumped 308,000
with large upward revision for the two previous months. It appeared that the
economy was now firing on all cylinders. Manufacturing cooled slightly, but
remained robust while orders for durable goods registered robust broad-based
gains. It was apparent that the recovery in the manufacturing sector had
continued in a cyclical upswing and had not lost any momentum in the economic
recovery. The consumer sectors such as housing, retail sales, personal income
and personal spending all increased. On the inflation front, the year-over-year
change in the overall Producer Price Index(4) slowed to 1.4% from 2.1%, while
the Consumer Price Index(4) increased to 1.6% from 1.2% for the same period.
During April there was no FOMC meeting however, in a short testimony Mr.
Greenspan upgraded his assessment on employment and economic growth from the
March 16th FOMC meeting. He also reiterated that the threat of deflation
appears to have passed and that the federal funds target rate will increase
at some point to prevent pressures on price inflation from ultimately emerging.
The bond market responded with some of the highest yields of the year.
At the beginning of the review period, the Fund slightly increased its exposure
to the corporate sector, decreasing its exposure to U.S. Treasury's, while
remaining virtually idle in the Mortgage-Backed-Securities sector. The prior two
strategies enhanced the Fund's performance. Throughout the
4 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor Limited Maturity Fund, continued
review period, the Fund continued to increase and maintained its overweight
position in the Corporate sector versus the benchmark, right through the review
period. With respect to duration exposure, the Fund began the period with a
slightly shorter profile than that of the benchmark and continued with that
theme throughout. The Fund also maintained a barbell position along the yield
curve, a strategy that proved effective as the yield curve narrowed for the
review period.*
Inflation remains low though recent indicators suggest that prices may be
starting to rise. Fed officials no longer speak of deflation risks and have now
focused on the timing of the tightening interest rate cycle. Hence, we believe
the Fed may tighten policy over a twelve-month time horizon. The technical
factors that drove significant spread contraction in the corporate market have
subsided, thus we feel both high and low-grade corporate credit is at fair
value. With the improvement in the economy we are likely to see pressure on
yields to rise. As such, the Fund's interest rate profile and credit exposure
will be positioned accordingly.
* Portfolio composition is subject to change.
- ---------------------------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------------------------------------------------------------------------
Inception Six 1 Since
As of April 30, 2004 Date Months Year Inception
- ---------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class A
(Investor)(1) 2/7/01 -3.98% -3.53% 3.64%
- ---------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class B(2) 2/15/01 -3.38% -3.12% 4.15%
- ---------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class C(3) 2/13/01 -0.62% -0.39% 4.36%
- ---------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class Y 1/23/01 1.01% 1.65% 5.67%
- ---------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index(4) -- 1.20% 1.94% N/A
- ---------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 5
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").
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
For the six-months ended April 30, 2004, the shares of the HSBC Investor Fixed
Income Fund produced a 1.41% total return, and the Class A (Investor) Shares of
the HSBC Investor Bond Fund returned 1.15% (without sales charge). That compared
to 1.32% and 1.54% total return for the Funds' benchmarks, the Citigroup Broad
Investment-Grade Bond Fund Index and the Lipper General Bond Funds Average,
respectively.(4)
Past performance does not guarantee future results.
The Fund outperformed its benchmark index the Citigroup Broad for the six-month
period ended April 30, 2004. We believe this was due to effective duration
positioning over the course of the period as well as an overweight in A and BBB
rated corporate credit.
Throughout the review period, the Fed decided to leave the target on the federal
funds rate unchanged at 1.00%. At their earlier meetings, their comments were
surprisingly dovish with respect to the timing of the beginning of any
tightening cycle, despite much firmer economic data released during the period.
As 2003 drew to a close, third-quarter GDP(4) was revised higher to 8.2% from an
initially reported 7.2%. Non-farm Productivity was revised higher to 9.4%,
giving emphasis to a strong cyclical economic recovery. In addition,
manufacturing soared to twenty-year highs, according to the Institute for Supply
Management. Investment-grade corporate bond spread's continued to contract
generating positive returns. The Fed reiterated that policy would remain
accommodative for a "considerable period of time."
With the start of the new year, the U.S. economy continued to thrive. The GDP
grew 4.0% for the fourth quarter. Manufacturing continued to soar while Capacity
Utilization and Industrial Production both inched higher. With respect to the
consumer, their assessment of the economy was strong. Overall Retail Sales were
off to a robust start, consistent with an increase in personal spending. All
the housing data released still pointed to a robust housing market. Then at
their first FOMC meeting of the year, the Fed changed the wording of their
statement in which they discussed the removal of accommodation. Nonetheless,
it was clear that no move in rates was imminent. The bond market took that
news in stride, as it rallied through the end of the first quarter. All appeared
to be going well except for the employment picture, it was gloomy. The economy
had failed to create the number of jobs necessary to support the economic
recovery.
Towards the end the review period, the job data had dramatically improved which
was evident from the latest reading in Non-farm payrolls, which jumped 308,000
with large upward revision for the two previous months. It appeared the economy
was now firing on all cylinders. Manufacturing cooled slightly, but remained
robust while orders for durable goods registered robust broad-based gains. It
was apparent that the recovery in the manufacturing sector had continued in a
cyclical upswing and had not lost any momentum in the economic recovery. The
consumer sectors such as housing, retail sales, personal income and personal
spending all increased. On the inflation front, the year-over-year change in the
overall Producer Price Index(4) slowed to 1.4% from 2.1%, while the Consumer
Price Index(4) increased to 1.6% from 1.2% for the same period. During April
there was no FOMC meeting however, in a short testimony Mr. Greenspan upgraded
his assessment on employment and economic growth from the March 16th FOMC
meeting. He also reiterated that the threat of deflation appears to have passed
and that the federal funds target rate will increase at some point to prevent
pressures on price inflation from ultimately emerging. The bond market
responded with some of the highest yields of the year.
At the beginning of the review period, the Fund approximated 103% of the
duration of its benchmark index. Slowly the fund began to reduce duration and by
the end of January was at 95% of benchmark before closing out the review period
at 92% of benchmark. On a duration weighted basis we decreased our weighting in
high grade corporates (AAA/AA
6 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor Fixed Income Fund
HSBC Investor Bond Fund (Class A (Investor) Shares, B Shares and C Shares)
continued
rated) by approximately 12% as spreads to Government Agencies narrowed to
historically tight spreads and from a valuation standpoint did not provide
justification for being in corporate credit. The 12% was reallocated with our
exposure to Agencies increasing by 4%. Additionally, we increased our exposure
to low grade credit (A/BBB) by approximately 8% and into sectors that stood to
benefit most from the sustained economic rebound. These strategies as well as a
barbelled yield curve allocation added performance to the portfolio relative to
benchmark.*
Inflation remains low though recent indicators suggest that prices may be
starting to rise. Fed officials no longer speak of deflation risks and have now
focused on the timing of the tightening interest rate cycle. Hence, we believe
the Fed may tighten policy over a twelve-month time horizon. The technical
factors that drove significant spread contraction in the corporate market have
subsided, thus we feel both high and low-grade corporate credit is at fair
value. With the improvement in the economy we are likely to see pressure on
yields to rise. As such, the Fund's interest rate profile and credit exposure
will be positioned accordingly.
* Portfolio composition is subject to change.
- ------------------------------------------------------------------------------------------------
Average Annual Total Return
- ------------------------------------------------------------------------------------------------
Inception Six 1 5 Since
As of April 30, 2004 Date Months Year Year Inception
- ------------------------------------------------------------------------------------------------
HSBC Investor Fixed Income Fund 1/9/95 1.41% 1.92% 6.23% 7.49%
- ------------------------------------------------------------------------------------------------
HSBC Investor Bond Fund Class A (Investor)(1) 8/26/96 -3.63% -3.46% 4.67% 5.70%
- ------------------------------------------------------------------------------------------------
HSBC Investor Bond Fund Class B(2) 1/6/98 -3.19% -3.23% 4.91% 4.67%
- ------------------------------------------------------------------------------------------------
HSBC Investor Bond Fund Class C(3) 11/4/98 -0.20% -0.29% 4.93% 4.87%
- ------------------------------------------------------------------------------------------------
Citigroup Broad Investment-Grade
Bond Funds Index(4) -- 1.32% 1.88% 6.65% N/A
- ------------------------------------------------------------------------------------------------
Lipper General Bond Funds Average(4) -- 1.54% 3.39% 5.01% N/A
- ------------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 7
Portfolio Reviews
HSBC Investor New York Tax-Free Bond Fund
(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.
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
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.
The HSBC Investor New York Tax-Free Bond Fund (the "Fund") delivered a total
return of 0.62% (without sales charge) for Class A (Investor) Shares and 0.75%
for Class Y Shares for the period ended April 30, 2004. That compared to 0.36%
and 0.71% for the Fund's benchmarks, the Lehman Brothers 7-Year Municipal Bond
Index and the Lipper New York Municipal Debt Funds Average, respectively.(4)
Past performance does not guarantee future results.
During the semi-annual period ended April 30, 2004, municipal returns were
tempered as the fixed income markets sold off with yields moving higher. In the
process municipals once again underperformed taxable fixed income on a pretax
basis by just 6 basis points (0.06%). The return of the Lehman Brothers Muni
Bond Index(4) was 1.19% while the return of the Lehman Brothers U.S. Aggregate
Bond Index(4) was 1.25%. Relative underperformance in the municipal market was a
result of the municipal market having a duration that is approximately 20%
longer than that of the Lehman Aggregate index. Thus, on a duration-adjusted
basis the municipal market actually outperformed the taxable market on a pretax
basis. Furthermore, yields in the municipal market were able to actually move
higher by a smaller margin than many points on the U.S. Treasury yield curve.
Yields on the two-year Treasuries were 50 basis points (0.50%) higher while
five-year bonds were 38 basis points (0.38%) higher. Ten-year bonds were 21
basis points higher (0.21%). In contrast, two- and five-year municipal yields
were just 36 (0.36%) basis points higher while 10-year munis were 11 (0.11%)
basis points higher.
The Fund's duration at the beginning of the semi-annual period approximated 115%
of benchmark but over the period adapted a positioning that moved to approximate
92% of benchmark and was one of the key factors that helped drive the Fund's
strong performance relative to our benchmarks. The portfolio also maintained a
barbelled position, which helped performance as the long- and short-end of the
curve outperformed the intermediate portion of the curve. Additionally, the
portfolio maintained its high credit quality profile. This tended to take away
from performance as many lower rated credits outperformed due to increased
revenue flows.
The Fund remains positioned for a rising yield environment. We are positioned
with a short duration position relative to our benchmark and are short convexity
as well. However, given any further rise in rates we will likely begin the
process of covering our short duration position. We believe the Retail will
likely become more active as yields rise. As arbitrage buyers start becoming net
sellers into relative outperformance from the municipal market it is likely that
retail players will be able to fill in and become stronger buyers particularly
in the longer end of the curve as a 5% yield becomes available. Additionally, we
believe casualty companies will likely remain strong buyers in the intermediate
portion of the curve as insurance company earnings have been posting strong
results. Technicals in the municipal market are likely to remain firm from a
supply standpoint as the number of refundings are likely to fall. This is the
result of the new higher yield range that has come upon the market. Furthermore,
as the yield ratios emerge after a heavy supply month we can expect that those
crossover buyers who were on hiatus in March may likely reenter the municipal
market given the attractive yield ratios. Supply going forward is likely to
taper off as refundings have played themselves out.
What has now taken more importance given a higher yield environment is concern
regarding the deminimus factor. At present the portfolios are considerably
underweight relative to our benchmark in terms of deminimus exposure in the
event
8 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor New York Tax-Free Bond Fund, continued
of a 50-75 (0.50% to 0.75%) basis point backup in yields. This was the key
performance determinant within the municipal market in the last rising yield
environment in 1999. At year-end approximately 10% of the Lehman Muni Bond index
was within a 50 (0.50%) basis points ofits deminimus cutoff. This represents a
significantly greater exposure than at the end of 1998 when the figure was only
6%. We are presently 35-45 (0.35% to 0.45%) basis points higher in yield along
the yield curve which has only tended to inflate that figure. At present the
portfolio has just 5/7% deminimus exposure to a 50 (0.50%) basis point rise in
yields.
The State of New York is representative of what is symptomatic of many state
credits across the nation. From a credit perspective states continued to improve
but the outlook going forward remains cautious. Most states are now expecting to
produce surpluses in 2004 as compared to last year when states were challenged
by record deficits. The economic rebounded has buoyed revenue expectations to
the upside. However, state Medicaid costs continue to mount as well as pension
costs. Additionally, many budget gaps were closed by one time budget effects
which may not be able to be replicated going forward. However, the rating
agencies have reduced the number of states on negative outlook after several
downgrades. State spending is expected to increase by just to 2.8%, which is
below the 25 year annual average increase of 6.2%. However, reserve funds will
still be below 4%, which is below the historical average of 5.1%. As for New
York State, fiscal year 2004 revenues are now estimated to be about $600 Million
over what Governor Pataki estimated in January.
The yield spread between 5 and 10-year municipals currently narrowed a bit to
104 (1.04%) basis points. This still remains relatively steep as the spread
within the Treasury market stands at just 88 (0.88%) basis points. Going forward
the Fund will continue to barbell along the yield curve as the incremental yield
pick up remains near decade highs. Duration-wise we will approximate our
benchmarks. The Fund will underweight the 5-8-year portion of the curve, as that
portion is highly susceptible to large crossover selling while over weighing the
'sweet spot' which we see as the 10-year portion. From a quality standpoint the
Funds should continue to overweigh insured paper.*
* Portfolio composition is subject to change.
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return
- -----------------------------------------------------------------------------------------------------------------
Inception Six 1 5 Since
As of April 30, 2004 Date Months Year Year Inception
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class A (Investor)(1) 5/1/95 -4.16% -3.31% 3.38% 5.03%
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class B(2) 1/6/98 -3.78% -3.27% 3.60% 3.77%
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class C(3) 11/4/98 -0.82% -0.25% 3.60% 3.53%
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class Y 7/1/96 0.75% 1.74% 4.67% 5.62%
- -----------------------------------------------------------------------------------------------------------------
Lehman Brothers 7-Year Municipal Bond Index -- 0.36% 2.34% 5.44% N/A
- -----------------------------------------------------------------------------------------------------------------
Lipper New York Municipal Debt Funds Average -- 0.71% 2.17% 4.33% N/A
- -----------------------------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 9
Portfolio Reviews
HSBC Investor Equity Fund
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
by Phil Sanders, Senior Vice President/Portfolio Manager, CFA and
Dan Becker, Senior Vice President/Portfolio Manager, CFA
Waddell & Reed Investment Management Company and
Jon D. Bosse, CFA
Chief Investment Officer
NWQ Investment Management Co., LLC
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% ofits 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.
Waddell & Reed Investment Mangement Company ("Waddell & Reed") 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.
NWQ Investment Management Co., LLC ("NWQ") 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.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than
other forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as
the value of the securities in the portfolio changes. Common stocks, and funds
investing in common stocks, generally provide greater return potential when
compared with other types of investments.
Mid capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
The Fund returned 5.66% (without sales charge) for Class A (Investor) Shares and
5.70% for the Class Y Shares for the six-months ended April 30, 2004. That
compared to a 6.11% and 4.51% return for the Fund's benchmarks, the Russell 1000
Index and the Lipper Large-Cap Core Funds Average.(4)
Past performance does not guarantee future results.
The overall market performed well early in the period, and then traded in a
narrow range through April. That stock-market environment helped the Fund
produce gains for the period as a whole. HSBC in January changed subadvisors for
each portion of the Fund: Waddell & Reed assumed management of the Fund's growth
allocation, while NWQ assumed management of the value portion.
Waddell & Reed seek to invest the Fund's growth allocation in shares of firms
with strong margins and predictable earnings. That approach led the managers to
over-weight shares of health-care firms, which typically offer large profit
margins and good earnings visibility. That position helped returns against the
large-cap growth benchmark, as health-care stocks performed relatively well.
That boost was offset by the Fund's overweight stake in technology stocks, which
lagged the benchmark.*
NWQ established overweight stakes relative to the value benchmark in the
technology, financial services, producer durables and materials and processing
sectors. Strong stock selection helped the Fund's technology and
financial-services positions out-gain the benchmark during the three months
under NWQ's management. Meanwhile, some struggling stocks in producer durables
and materials and processing dragged on the Fund's relative returns during
February and March.
* Portfolio composition is subject to change.
10 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor Equity Fund, continued
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------
Inception Six 1 5 Since
As of April 30, 2004 Date Months Year Year Inception
- ---------------------------------------------------------------------------------------------------
HSBC Investor Equity Fund Class A (Investor)(1) 8/1/95 0.35% 12.88% -7.52% 5.08%
- ---------------------------------------------------------------------------------------------------
HSBC Investor Equity Fund Class B(2) 1/6/98 1.19% 13.92% -7.27% -0.88%
- ---------------------------------------------------------------------------------------------------
HSBC Investor Equity Fund Class C(3) 11/4/98 4.25% 17.03% -7.25% -3.41%
- ---------------------------------------------------------------------------------------------------
HSBC Investor Equity Fund Class Y 7/1/96 5.70% 19.15% -6.35% 4.57%
- ---------------------------------------------------------------------------------------------------
Russell 1000 Index(4) -- 6.11% 23.90% -1.73% -
- ---------------------------------------------------------------------------------------------------
Lipper Large-Cap Core Funds Average(4) -- 4.51% 19.51% -3.27% -
- ---------------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 11
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
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.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes. Common stocks, and funds
investing in common stocks, generally provide greater return potential when
compared with other types of investments.
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
The Fund returned 3.84% (without sales charge) for the Class A (Investor) Shares
and 4.06% for the Class Y Shares for the six months ended April 30, 2004. That
compared to a 6.27% return for the S&P 500 Index and a 4.51% return for the
Lipper Large Cap Core Funds Average.(4)
Past performance does not guarantee future results.
Our focus on high-quality companies with strong balance sheets and high cash
flows did not pay rewards during this period.
The major U.S. equity market indices were mixed during the period, as the S&P
500 rose 6.3% during the six-month period ended April 30, 2004, while the NASDAQ
Composite Index(4) returned -0.4%.
The equity markets traded in a narrow range early in the period, before trending
higher over the latter part of December. Encouraging economic data, as well as
comments by the Fed, reaffirming their intentions to keep short-term interest
rates low for a "considerable period" helped move the major equity indices
higher. With the strong finish during December, the S&P 500 and NASDAQ posted
the first yearly gains since 1999. Stocks continued to move higher through the
early part of 2004, driven by optimism regarding corporate profits and solid
economic data. However, with the sharp upward move in the equity markets from
November through late January, the S&P 500 traded in a narrow range through
February. By early March, the equity markets turned volatile as investors became
increasingly concerned over a deceleration in corporate profits and economic
activity, while geopolitical concerns and news of terrorism also weighed on the
markets. The S&P 500 had posted its first monthly decline during March since
September 2003, and that weakness continued into April.
While corporate profits remained strong during the first quarter, this was
overshadowed by expectations of higher interest rates. Stocks continued to move
lower towards the end of the period as the strong surge in employment data, and
signs of higher inflation ignited fears that the Fed would raise interest rates
earlier than many had been expecting.
We believe the economy is growing strongly, and that above trend economic growth
could continue into 2005. However, it is clear the Fed is edging closer to
commencing a tightening cycle, which will serve to pre-empt any inflationary
pressures from building. It will also put a limit on GDP(4) growth as the
interest rate hikes work through the system.
The consumer related area of the economy could cause some concern over the next
several months. While the U.S. consumer is enjoying incremental tax refunds,
thanks to the changes in withholding taxes implemented last July, higher energy
prices have largely offset this benefit. We believe there is little pent up
demand on the part of the consumer, considering consumer spending remained solid
through the economic downturn. Thus, there is a risk the consumer could
disappoint investors in the latter part of the year.
The pullback in the equity indices since early March has been helpful, and
served to remove some of the speculation in the equity market. We continue to
believe there is limited upside in the S&P 500 currently, and only a
continuation of earnings results above consensus could keep the markets moving
higher. Over the past two months, we have begun to see more
12 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor Growth and Income Fund, continued
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
signs of normalcy returning to the market, with the highest beta(4) stocks
having cooled off a bit, while investors appear to be looking at balance
sheets, returns on capital, competitive positioning, and to some extent, size.
We had been holding a pro-cyclical bias across the portfolio, with emphasis on
the Industrial, Material, and Financial sectors since late in 2003. We have
recently begun to temper that stance, getting a bit more defensive by adding to
the Healthcare sector. The portfolio remains positioned for a 12-18 month
timeframe, with a disciplined focus on valuation. We continue to emphasize
consistent growth and earnings predictability in our stock selection.*
* Portfolio composition is subject to change.
- ---------------------------------------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------------
Inception Six 1 Since
As of April 30, 2004 Date Months Year Inception
- ---------------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class A (Investor)(1) 4/12/01 -1.34% 11.20% -6.35%
- ---------------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class B(2) 4/5/01 -0.47% 12.20% -4.85%
- ---------------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class C(3) 11/3/03 2.59% 15.65% -4.04%
- ---------------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class Y 4/2/01 4.06% 17.35% -3.44%
- ---------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index(4) -- 6.27% 22.87% N/A
- ---------------------------------------------------------------------------------------------------------
Lipper Large Cap Core Funds Average(4) -- 4.51% 19.51% N/A
- ---------------------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 13
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
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).
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes. Common stocks, and funds
investing in common stocks, generally provide greater return potential when
compared with other types of investments.
Mid capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
The Fund's Class A Shares posted a return of 3.65% (without sales charge) and
3.75% for the Trust Shares for the six months ended April 30, 2004. That
compares to 6.93% and 2.64% for the Fund's benchmarks, the Russell Mid-Cap
Growth Index, and the Lipper Mid-Cap Growth Funds Average.(4)
Past performance does not guarantee future results.
The major U.S. equity market indices were mixed during the period, as the S&P
500 Index4 rose 6.3% during the six-month period ending April 30, 2004 on a
total return basis, while the NASDAQ returned -0.4%. The equity markets traded
in a narrow range early in the period, before trending higher over the latter
part of December. Encouraging economic data, as well as comments by the Fed,
reaffirming their intentions to keep short-term interest rates low for a
"considerable period" helped move the major equity indices higher. With the
strong finish during December, the S&P 500 and NASDAQ posted the first yearly
gains since 1999. Stocks continued to move higher through the early part of
2004, driven by optimism regarding corporate profits and solid economic data.
However, with the sharp upward move in the equity markets from November through
late January, the S&P 500 traded in a narrow range through February. By early
March, the equity markets turned volatile as investors became increasingly
concerned over a deceleration in corporate profits and economic activity, while
geopolitical concerns and news of terrorism also weighed on the markets. The S&P
500 had posted its first monthly decline during March since September 2003, and
that weakness continued into April.
While corporate profits remained strong during the first quarter, this was
overshadowed by expectations of higher interest rates. Stocks continued to move
lower towards the end of the period as the strong surge in employment data, and
signs of higher inflation ignited fears that the Fed would raise interest rates
earlier than many had been expecting.
We believe the economy is growing strongly, and that above trend economic growth
will continue into 2005. However, it is clear the Fed is edging closer to
commencing a tightening cycle, which will serve to pre-empt any inflationary
pressures from building. It will also put a limit on GDP(4) growth as the
interest rate hikes work through the system.
The consumer related area of the economy could cause some concern over the next
several months. While the US consumer is enjoying incremental tax refunds,
thanks to the changes in withholding taxes implemented last July, higher energy
prices have largely offset this benefit. We believe there is little pent up
demand on the part of the consumer, considering consumer spending remained solid
through the economic downturn. Thus, there is a risk the consumer could
disappoint investors in the latter part of the year.
The pullback in the equity indices since early March has been helpful, and
served to remove some of the speculation in the equity market. We continue to
believe there is limited upside
14 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor Mid-Cap Fund, continued
in the S&P 500 currently, and only a continuation of earnings results above
consensus will keep the markets moving higher. Over the past two months, we have
begun to see more signs of normalcy returning to the market, with the highest
beta stocks having cooled off a bit, while investors appear to be looking at
balance sheets, returns on capital, competitive positioning, and to some extent,
size.
The Fund is currently employing a modest "barbell" approach, with an overweight
position in Materials, specifically cyclical Metal and Chemical names, while the
fund remains overweight in Health Care, with an emphasis on Equipment & Supplies
companies due to very attractive valuations. The Fund remains positioned for a
12-18 month timeframe, with a disciplined focus on valuation. We continue to
emphasize strong growth prospects and earnings predictability in our stock
selection.*
* Portfolio composition is subject to change.
- ----------------------------------------------------------------------------------------
Average Annual Total Return
- ----------------------------------------------------------------------------------------
Inception Six 1 5 10
As of April 30, 2004 Date'D' Months Year Year Year
- ----------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class A(1) 7/1/93 -1.55% 21.00% 3.01% 10.83%
- ----------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class B(2) 7/1/93 -0.65% 22.34% 3.31% 10.60%
- ----------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class C(3) 7/1/93 2.33% 26.13% 3.44% 10.67%
- ----------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Trust 7/1/93 3.75% 27.65% 4.31% 11.66%
- ----------------------------------------------------------------------------------------
Russell Mid-Cap Growth Index(4) -- 6.93% 34.45% 9.34% 14.47%
- ----------------------------------------------------------------------------------------
Lipper Mid-Cap Growth Funds Average(4) -- 2.64% 28.91% 1.16% 8.54%
- ----------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
'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.
HSBC INVESTOR FAMILY OF FUNDS 15
Portfolio Reviews
HSBC Investor International Equity Fund
HSBC Investor Overseas Equity Fund (Class A (Investor) Shares, B Shares and C
Shares)
by Kevin F. Simms
Co-CIO International Value Equities and Director of Research - Global and
International Value Equities
The Bernstein Unit of Alliance Capital Management, L.P.
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
"master-feeder," in which the Funds invest all of their investable assets in the
HSBC Investor International Equity Portfolio (the "Portfolio"). The Portfolio
employs The Bernstein Unit of Alliance Capital Management, L.P. ("Bernstein") 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.
Investment Concerns
There are risks associated with investing in foreign companies, such as erratic
market conditions, economic and political instability and fluctuations in
currency and exchange rates.
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes. Common stocks, and funds
investing in common stocks, generally provide greater return potential when
compared with other types of investments.
For the six months ended April 30, 2004, the shares of the HSBC Investor
International Equity Fund produced a 9.04% return, and the Class A (Investor)
Shares of the HSBC Investor Overseas Equity Fund returned 8.79% (without sales
charge). That compared to a total return of 12.58% and 10.46% for the Funds'
benchmarks, the Morgan Stanley Capital International, Europe, Australasia and
Far East Index and the Lipper International Funds Average.(4)
Past performance does not guarantee future results.
The Fund and its index benefited from strong performance in global stock
markets, as investors were encouraged by the prospects for an international
economic recovery. The dollar weakened against most major currencies during the
period. The weaker dollar helped the Fund's returns, because it made stocks
denominated in foreign currencies worth more relative to U.S. securities.
Bernstein assumed management duties for the Fund as of January 30, 2004.
Bernstein screens international stocks using valuation metrics such as
price-to-cash(4) flow, price-to-book(4) value and price-to-earnings(4). The
firm then conducts bottom-up fundamental analysis on the least-expensive
stocks, and invests in shares that present the most attractive values.
Bernstein upon assuming management of the Fund invested an overweight portion of
assets in Japanese financial-services firms. That position boosted returns
against the benchmark, as the Japanese financial industry benefited from a
dramatically improving credit environment in that country. The Fund's overweight
position in energy stocks also helped relative returns, as investor's expected
rising oil and gas prices to boost energy firms' profits.*
Transaction costs associated with repositioning the Fund hurt the Fund's returns
during February and March, as did several positions that the Fund had acquired
before the management transition. The Fund's relative returns also were hurt by
an investment in Vodafone, the UK wireless company, which lost ground on fears
that it might pay too high a price to increase its presence in the U.S. market.
* Portfolio composition is subject to change.
16 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor International Equity Fund
HSBC Investor Overseas Equity Fund (Class A (Investor) Shares, B Shares and C
Shares)
continued
- ---------------------------------------------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------------------------------------------------------------------------------------------
Inception Six 1 5 Since
As of April 30, 2003 Date Months Year Year Inception
- ---------------------------------------------------------------------------------------------------------------
HSBC Investor International Equity Fund 1/9/95 9.04% 32.25% 1.08% 7.32%
- ---------------------------------------------------------------------------------------------------------------
HSBC Investor Overseas Equity Fund Class A (Investor)(1) 8/26/96 3.32% 25.97% -0.39% 4.71%
- ---------------------------------------------------------------------------------------------------------------
HSBC Investor Overseas Equity Fund Class B(2) 1/6/98 4.29% 27.48% -0.14% 3.37%
- ---------------------------------------------------------------------------------------------------------------
HSBC Investor Overseas Equity Fund Class C(3) 11/4/98 7.32% 30.44% -0.16% 3.30%
- ---------------------------------------------------------------------------------------------------------------
MSCI EAFE Index(4) -- 12.58% 40.75% -0.41% N/A
- ---------------------------------------------------------------------------------------------------------------
Lipper International Funds Average(4) -- 10.46% 36.28% 0.20% N/A
- ---------------------------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
HSBC INVESTOR FAMILY OF FUNDS 17
Portfolio Reviews
HSBC Investor Small Cap Equity Fund
HSBC Investor Opportunity Fund (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 growthof 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.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes. Common stocks, and funds
investing in common stocks, generally provide greater return potential when
compared with other types of investments.
Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
For the six months ended April 30, 2004, the shares of the HSBC Investor Small
Cap Equity Fund produced a 1.78% return and the Class A (Investor) Shares of the
HSBC Investor Opportunity Fund produced a 1.54% return (without sales charge).
The Funds' benchmarks, the Russell 2000 Index, Russell 2500 Growth Index and the
Lipper Mid Cap Growth Funds Average, returned 7.55%, 4.56% and 2.64%,
respectively.(4)
Past performance does not guarantee future results.
Small-cap stocks outperformed large caps during the three months through
January, helping boost returns for the Fund and its benchmark. Market leadership
shifted to large stocks during the second half of the period, however, and small
stocks posted negative returns during the three months through April.
Industrials, health-care and basic-materials stocks were the strongest positive
contributors to performance, while shares in the consumer-discretionary sector
hampered absolute returns.
Westfield Capital Management is sub-adviser to this Fund. Westfield employs a
fundamentals-based, bottom-up process to identify firms with strong, reliable
expected earnings growth whose shares trade at reasonable valuations. That
approach caused the Fund to trail its benchmark during the first three months of
the period, when speculative stocks of low-quality companies led the small-cap
market. The Fund's earnings-oriented selection process helped it outperform the
benchmark during the second half of the period, as investors focused their
attention on stocks with attractive business fundamentals and lower valuations.
The Fund's stock selection in the technology sector helped boost returns against
the benchmark. The index's technology holdings finished the period with a loss
of nearly 11%, after the speculative shares that led the market during 2003 fell
dramatically during the three months through April. The Fund avoided those
stocks in favor of shares with better earnings power, and as a result the Fund's
technology stake out-performed that of the index.*
The Fund's investments in consumer-discretionary stocks dragged on returns
against the benchmark, due to poor returns among shares of certain toy makers
and retailers in the portfolio. The Fund's stake in health-care stocks did not
keep pace with the index's health-care allocation, as speculative biotechnology
firms--the kinds of stocks this Fund avoids--led that sector's gains.
Furthermore, the Fund's relative returns were hampered by its underweight
exposure to energy stocks, which led the market.*
* Portfolio composition is subject to change.
18 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
HSBC Investor Small Cap Equity Fund
HSBC Investor Opportunity Fund (Class A (Investor) Shares, B Shares
and C Shares)
continued
- ------------------------------------------------------------------------------------------------------------
Average Annual Total Return
- ------------------------------------------------------------------------------------------------------------
Inception Six 1 5 Since
As of April 30, 2004 Date Months Year Year Inception
- ------------------------------------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Fund 9/3/96 1.78% 32.00% 8.26% 10.50%
- ------------------------------------------------------------------------------------------------------------
HSBC Investor Opportunity Fund Class A (Investor)(1) 9/23/96 -3.57% 24.64% 6.44% 7.99%
- ------------------------------------------------------------------------------------------------------------
HSBC Investor Opportunity Fund Class B(2) 1/6/98 -2.78% 26.16% 6.75% 6.58%
- ------------------------------------------------------------------------------------------------------------
HSBC Investor Opportunity Fund Class C(3) 11/4/98 0.11% 29.18% 6.71% 7.83%
- ------------------------------------------------------------------------------------------------------------
Russell 2000 Index(4,5) -- 6.54% 42.01% 6.67% N/A
- ------------------------------------------------------------------------------------------------------------
Russell 2500 Growth Index(4,5) -- 4.56% 40.45% 2.68% N/A
- ------------------------------------------------------------------------------------------------------------
Lipper Mid Cap Growth Funds Average(4) -- 2.64% 28.91% 1.16% N/A
- ------------------------------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains. The investment return and principal value will fluctuate so that
an investor's shares, when redeemed may be worth more or less than the original
cost. To obtain performance information current to the most recent month end,
please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
(5) The Funds were formerly compared with the Russell 2000 Index. This change
was effected because the Russell 2500 Growth Index better represents the
types of securities in which the Funds may invest.
HSBC INVESTOR FAMILY OF FUNDS 19
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- -------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
................................................................................
<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 91,223
----------
NEW YORK - 83.0%
Brookhaven, New York GO (FGIC Insured),
5.50%, 10/1/12........................ 500,000 551,410
Corning City, New York School District
GO (FSA Insured), 4.00%, 6/15/08...... 930,000 976,649
Corning City, New York School District
GO (FSA Insured), 5.00%, 6/15/09...... 790,000 863,099
Erie County, New York GO (FGIC
Insured), 5.375%, 6/15/07............. 250,000 261,980
Grand Central New York District
Management, 3.00%, 1/1/06............. 400,000 406,396
Grand Central New York District
Management, 4.00%, 1/1/07............. 400,000 416,020
Guilderland, New York Central School
District GO (FSA Insured), 3.50%,
6/15/05............................... 250,000 255,868
Honeoye, New York Central School
District GO (FGIC Insured), 3.00%,
6/15/04............................... 310,000 310,676
Long Island, New York Power Authority
Revenue (MBIA Insured), 4.50%, 4/1/11,
Mandatory Tender 4/1/05 @ 100......... 1,075,000 1,105,229
Metropolitan Transportation Authority
of New York Revenue (FGIC Insured),
5.25%, 7/1/17......................... 1,145,000 1,265,912
Metropolitan Transportation Authority
of New York Revenue (FSA Insured),
5.00%, 11/15/32, Callable 11/15/12 @
100................................... 1,625,000 1,617,623
Metropolitan Transportation Authority
of New York Revenue (MBIA Insured),
5.50%, 1/1/19......................... 480,000 518,218
Metropolitan Transportation Authority
of New York Revenue, Escrowed to
Maturity, 5.75%, 7/1/13............... 285,000 321,506
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.625%, 1/1/10........................ 1,240,000 1,351,079
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.75%, 1/1/14......................... 750,000 820,950
Nassau County Interim Finance Authority
(MBIA Insured), 5.00%, 11/15/11....... 750,000 816,473
New York City GO, 6.00%, 8/1/14,
Callable 8/1/07 @ 101................. 1,000,000 1,098,160
New York City GO, 5.00%, 8/1/05........ 1,000,000 1,040,490
New York City GO, 5.00%, 8/1/08........ 990,000 1,062,359
New York City Housing Development Corp.
Revenue, AMT, 5.60%, 11/1/19.......... 100,000 103,959
New York City Industrial Development
Agency (FSA Insured), 5.00%,
11/15/19.............................. 1,000,000 1,036,030
New York City Municipal Assistance
Corp. Revenue, 6.00%, 7/1/06.......... 1,035,000 1,124,734
New York City Municipal Water Authority
Revenue, 5.00%, 6/15/34, Callable
6/15/13 @ 100......................... 1,250,000 1,231,925
New York City Transitional Finance
Authority Revenue, 5.25%, 5/1/17,
Callable 5/1/11 @ 100................. 400,000 422,520
New York City Transitional Finance
Authority Revenue, 5.25%, 2/1/29,
Callable 2/1/11 @ 100................. 1,540,000 1,662,337
New York City Transitional Finance
Authority Revenue, 5.00%, 11/1/07..... 1,000,000 1,082,750
New York General Obligation, 5.00%,
8/1/14................................ 200,000 209,132
New York State Dormitory Authority
Revenue, 5.25%, 7/1/13, Callable
7/1/08 @ 101.......................... 500,000 541,960
New York State Dormitory Authority
Revenue, 5.50%, 8/15/17, Prerefunded
2/15/07 @ 102......................... 15,000 16,593
New York State Dormitory Authority
Revenue, 6.00%, 7/1/19, Callable
7/1/09 @ 101.......................... 350,000 396,172
New York State Dormitory Authority
Revenue, 2.00%, 7/1/05................ 785,000 789,891
New York State Dormitory Authority
Revenue, 4.00%, 2/15/06............... 1,140,000 1,176,434
New York State Dormitory Authority
Revenue, 2.00%, 7/1/06................ 475,000 474,492
New York State Dormitory Authority
Revenue, 5.00%, 4/1/07................ 500,000 533,805
New York State Dormitory Authority
Revenue, 5.00%, 7/1/08................ 595,000 637,429
New York State Dormitory Authority
Revenue, 6.50%, 8/15/11............... 225,000 261,878
New York State Dormitory Authority
Revenue, 5.25%, 7/1/16................ 500,000 526,960
New York State Dormitory Authority
Revenue, 5.50%, 8/15/17............... 985,000 1,029,118
New York State Dormitory Authority
Revenue, 5.25%, 8/15/19............... 1,000,000 1,059,880
New York State Dormitory Authority
Revenue, 5.00%, 7/1/21................ 1,000,000 1,009,460
New York State Dormitory Authority
Revenue (AMBAC Insured), 4.00%,
7/1/04................................ 975,000 979,475
New York State Dormitory Authority
Revenue (AMBAC Insured), 5.50%,
8/1/10................................ 750,000 833,453
New York State Dormitory Authority
Revenue (AMBAC Insured), 5.50%,
7/1/18................................ 500,000 559,750
New York State Dormitory Authority
Revenue (CIFG Group Insured), 3.00%,
7/1/05................................ 1,025,000 1,042,989
New York State Dormitory Authority
Revenue (CIFG Group Insured), 4.00%,
7/1/06................................ 1,120,000 1,165,114
New York State Dormitory Authority
Revenue (FSA Insured), 5.25%,
7/1/18................................ 1,460,000 1,564,915
New York State Dormitory Authority
Revenue (MBIA Insured), 5.50%,
7/1/23................................ 1,300,000 1,416,544
New York State Environmental Facscorp,
5.70%, 1/15/14, Prerefunded 7/15/09 @
101................................... 570,000 648,905
New York State Environmental Facscorp,
5.70%, 1/15/14, Callable 7/15/09 @
101................................... 415,000 460,339
New York State Environmental Facscorp,
5.70%, 1/15/14........................ 15,000 17,076
New York State Local Government
Assistance Corp., 6.00%, 4/1/16....... 1,000,000 1,062,380
New York State Mortgage Agency Revenue,
AMT, 5.60%, 10/1/14, Callable 9/1/07 @
101.5................................. 1,000,000 1,047,220
New York State Thruway Authority
Revenue, 5.50%, 4/1/11................ 1,000,000 1,105,110
New York State Thruway Authority
Revenue, 5.00%, 3/15/13............... 645,000 696,258
New York State Thruway Authority
Revenue, 5.50%, 3/15/20............... 500,000 537,390
</Table>
20 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
New York State Thruway Authority
Revenue (MBIA Insured), 5.00%,
3/15/21, Callable 3/15/13 @ 100....... 500,000 514,780
New York State Thruway Authority
Revenue (MBIA Insured), 5.00%,
3/15/19............................... 1,400,000 1,453,802
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.50%, 4/1/17, Callable
4/1/11 @ 101.......................... 1,000,000 1,084,830
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.25%, 4/1/07............... 300,000 324,579
New York State Urban Development Corp.,
5.125%, 1/1/22........................ 885,000 882,389
New York State Urban Development Corp.
Revenue, 5.125%, 1/1/25, Prerefunded
1/1/11 @ 100.......................... 175,000 192,213
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12, Callable
4/1/07 @ 102.......................... 1,000,000 1,117,680
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12................ 500,000 560,065
New York State Urban Development Corp.
Revenue, Series A (MBIA Insured),
6.50%, 1/1/09......................... 500,000 574,285
Niagara Falls New York Bridge Common
Toll Revenue, 2.00%, 10/1/05.......... 400,000 402,292
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/14........................ 300,000 319,482
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/15........................ 665,000 699,174
Peru, New York Central School District
(FGIC Insured), 4.00%, 6/15/04........ 225,000 225,770
Port Authority of New York & New Jersey
Revenue, 5.00%, 9/1/27................ 795,000 792,122
Port Authority of New York & New Jersey
Revenue, 5.375%, 3/1/28............... 1,100,000 1,154,318
Port Authority of New York & New Jersey
Special Obligation Revenue, AMT,
5.75%, 12/1/22, Callable 12/1/07 @
102................................... 500,000 536,210
Tobacco Settlement Corp. Series C-1,
5.50%, 6/01/21, Callable 6/1/13 @
100................................... 1,000,000 1,054,780
Tobacco Settlement Corp., 5.00%,
6/1/06................................ 1,000,000 1,052,160
Triborough, New York Bridge & Tunnel
Authority Revenue, 5.00%, 11/15/32,
Callable 11/15/12 @ 100............... 800,000 790,392
Triborough, New York Bridge & Tunnel
Authority Revenue (MBIA Insured),
5.00%, 11/15/32....................... 1,000,000 998,470
----------
58,254,267
----------
PUERTO RICO - 7.1%
Puerto Rico Commonwealth, 5.50%,
7/1/15................................ 500,000 564,590
Puerto Rico Commonwealth, Highway and
Transportation, 5.00%, 7/1/17,
Callable 3/15/14 @ 100................ 1,000,000 1,064,909
Puerto Rico Electric Power Authority
Revenue (MBIA Insured), 5.25%,
7/1/22................................ 1,000,000 1,081,970
Puerto Rico Electric Power Authority
Revenue, Series HH (FSA Insured),
5.25%, 7/1/29, Callable 7/1/10 @
101................................... 1,430,000 1,464,206
Puerto Rico Municipal Financial Agency
(FSA Insured), 5.00%, 8/1/27.......... 250,000 253,713
Puerto Rico Publishing Finance Corp.
Revenue (AMBAC Insured), 5.375%,
6/1/18................................ 500,000 555,210
----------
4,984,598
----------
TOTAL MUNICIPAL BONDS.................. 63,330,088
----------
- ---------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* - 8.0%
NEW YORK - 8.0%
Long Island, New York Power Authority
Revenue (LOC Bayerische Landesbank),
1.09%, 5/1/33......................... 1,500,000 1,500,000
New York State Job Development
Authority, 1.08%, 3/1/05.............. 1,000,000 1,000,000
New York State Job Development
Authority, AMT (LOC Bayerische
Landesbank), 1.08%, 3/1/05............ 1,975,000 1,975,000
New York State Local Government
Assistance Corp., 1.03%, 4/1/21....... 1,150,000 1,150,000
----------
TOTAL VARIABLE RATE DEMAND NOTES*...... 5,625,000
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 0.8%
Provident New York Tax-Free Money
Market Fund........................... 550,529 550,529
----------
TOTAL INVESTMENT COMPANIES............. 550,529
----------
TOTAL INVESTMENTS
(COST $67,890,592) (a) - 99.0%....... 69,505,617
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $70,189,323.
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<Table>
Unrealized appreciation.......... $1,925,171
Unrealized depreciation.......... (310,146)
----------
Net unrealized appreciation...... $1,615,025
----------
----------
</Table>
* Variable rate security. The interest rates on these securities are adjusted
periodically to reflect then-current short-term interest rates. The rates
presented in this report represent the rates that were in effect on April 30,
2004. However, each of these securities contains put or demand features that
allow the fund to require the issuer to repurchase the security from the fund
within various time periods, including daily, weekly, monthly, or
semi-annually.
AMT -- Interest on security is subject to Federal Alternative
Minimum Tax
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GO -- General Obligation
LOC -- Letter of Credit
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 21
HSBC INVESTOR EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS - 93.8%
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 4.8%
Lockheed Martin Corp................... 20,050 956,385
Northrop Grumman Corp.................. 12,900 1,280,325
Raytheon Co............................ 48,100 1,551,706
----------
3,788,416
----------
APPAREL - 1.3%
Coach, Inc. (b)........................ 10,700 455,820
Nike, Inc. Class B..................... 7,750 557,613
----------
1,013,433
----------
BANKING - 3.0%
Bank of America Corp................... 12,750 1,026,248
Wells Fargo & Co....................... 23,150 1,307,049
----------
2,333,297
----------
BIOTECHNOLOGY - 1.0%
Amgen, Inc. (b)........................ 11,150 627,411
Gilead Sciences, Inc. (b).............. 3,000 182,490
----------
809,901
----------
BUSINESS SERVICES - 2.9%
Cintas Corp............................ 5,900 265,264
Manpower, Inc.......................... 8,100 379,890
Paychex, Inc........................... 13,300 495,824
Pitney Bowes, Inc...................... 26,000 1,137,500
----------
2,278,478
----------
COMPUTER SOFTWARE - 8.2%
Computer Associates International,
Inc................................... 72,400 1,941,043
Electronic Arts, Inc. (b).............. 8,450 427,739
International Game Technologies........ 22,600 852,924
Mercury Interactive Corp. (b).......... 7,450 316,998
Microsoft Corp......................... 39,600 1,028,412
Oracle Corp. (b)....................... 49,750 558,195
SAP AG................................. 21,700 808,976
Veritas Software Corp. (b)............. 18,490 493,128
----------
6,427,415
----------
COMPUTERS - 1.7%
Dell, Inc. (b)......................... 23,850 827,834
EMC Corp. (b).......................... 43,150 481,554
----------
1,309,388
----------
CONSUMER PRODUCTS - 5.6%
Altria Group, Inc...................... 26,500 1,467,570
Kimberly-Clark Corp.................... 24,800 1,623,160
The Coca-Cola Co....................... 10,450 528,457
The Estee Lauder Cos., Inc. Class A.... 8,800 402,248
The Procter & Gamble Co................ 3,700 391,275
----------
4,412,710
----------
CONSUMER STAPLES - 1.2%
Albertson's, Inc....................... 38,700 904,032
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 1.7%
Danaher Corp........................... 4,950 457,974
Ingersoll-Rand Co...................... 13,300 858,515
----------
1,316,489
----------
ELECTRONIC COMPONENTS - 0.2%
Garmin Ltd............................. 5,200 167,232
----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 5.1%
Agilent Technologies, Inc. (b)......... 28,800 777,888
Analog Devices......................... 22,650 964,890
KLA-Tencor Corp. (b)................... 9,000 375,030
Linear Technology Corp................. 9,150 326,015
Maxim Integrated Products, Inc......... 7,500 344,925
Microchip Technology, Inc.............. 42,150 1,181,043
----------
3,969,791
----------
FINANCIAL SERVICES - 14.6%
Citigroup, Inc......................... 45,525 2,189,296
Countrywide Credit Industries, Inc..... 34,050 2,019,164
Fannie Mae............................. 26,400 1,814,208
Goldman Sachs Group, Inc............... 14,900 1,437,850
J.P. Morgan Chase & Co................. 20,700 778,320
MGIC Investment Corp................... 15,300 1,126,386
Morgan Stanley......................... 9,050 465,080
SLM Corp............................... 21,350 817,919
T. Rowe Price Group Inc................ 4,600 235,888
The Chicago Mercantile Exchange........ 4,150 486,795
----------
11,370,906
----------
GAS & ELECTRIC UTILITY - 1.7%
Dominion Resources, Inc................ 9,800 625,338
FirstEnergy Corp....................... 17,000 664,700
----------
1,290,038
----------
HEALTH CARE - 6.4%
Boston Scientific Corp. (b)............ 29,650 1,221,284
Guidant Corp........................... 12,200 768,722
HCA, Inc............................... 23,200 942,616
Medtronic, Inc......................... 16,150 814,929
Zimmer Holdings, Inc. (b).............. 15,950 1,273,607
----------
5,021,158
----------
INSURANCE - 7.4%
Aetna, Inc............................. 13,500 1,117,125
AON Corp............................... 59,700 1,555,781
Loews Corp............................. 16,000 928,160
Radian Group, Inc...................... 25,900 1,204,609
The Hartford Financial Services Group,
Inc................................... 16,000 977,280
----------
5,782,955
----------
INTERNET RELATED - 1.2%
eBay, Inc. (b)......................... 12,100 965,822
----------
MEDIA - 0.8%
Liberty Media Corp. Class A (b)........ 56,850 621,939
----------
MINING - 2.6%
Barrick Gold Corp...................... 74,200 1,426,866
Rio Tinto PLC ADR...................... 6,600 591,360
----------
2,018,226
----------
OIL & GAS - 7.3%
ConocoPhillips......................... 21,262 1,515,980
Kerr-McGee Corp........................ 27,700 1,355,360
Praxair, Inc........................... 13,150 480,633
Smith International, Inc. (b).......... 21,550 1,179,863
Transocean, Inc. (b)................... 42,800 1,188,556
----------
5,720,392
----------
PAPER PRODUCTS - 1.0%
International Paper Co................. 20,300 818,496
----------
</Table>
22 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
PHARMACEUTICALS - 4.4%
Eli Lilly & Co......................... 3,900 287,859
Forest Laboratories, Inc. (b).......... 14,500 934,960
Pfizer, Inc............................ 36,500 1,305,240
Teva Pharmaceutical Industries Ltd.
ADR................................... 14,200 874,152
----------
3,402,211
----------
RESTAURANTS - 0.7%
Wendy's International, Inc............. 13,750 536,250
----------
RETAIL - 2.3%
Costco Wholesale Corp. (b)............. 4,800 179,760
Home Depot, Inc........................ 12,550 441,635
Lowe's Cos., Inc....................... 8,100 421,686
Staples, Inc........................... 16,900 435,344
Wal-Mart Stores, Inc................... 6,200 353,400
----------
1,831,825
----------
TELECOMMUNICATIONS - 5.1%
BellSouth Corp......................... 36,050 930,451
Cisco Systems, Inc. (b)................ 40,850 852,540
Ericsson (L.M.) Tel ADR (b)............ 12,900 344,043
Motorola, Inc.......................... 64,650 1,179,862
Research in Motion Ltd. (b)............ 3,200 277,632
Sprint Corp............................ 23,000 411,470
----------
3,995,998
----------
TRANSPORTATION - 1.1%
Union Pacific Corp..................... 14,000 825,020
----------
TRANSPORTATION EQUIPMENT - 0.5%
Delphi Corp............................ 40,100 409,020
----------
TOTAL COMMON STOCKS.................... 73,340,838
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 5.8%
INVESTMENT COMPANIES - 5.8%
HSBC Investor Money Market Fund Class I
Shares*............................... 4,522,792 4,522,792
----------
TOTAL INVESTMENT COMPANIES............. 4,522,792
----------
TOTAL INVESTMENT
(COST $76,384,998) (a) - 99.6%....... 77,863,630
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $78,166,474.
(a) Cost differs from value by net unrealized appreciation as follows:
<Table>
Unrealized appreciation........ $ 3,619,113
Unrealized depreciation........ (2,140,481)
-----------
Net unrealized appreciation.... $ 1,478,632
-----------
-----------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
ADR -- American Depositary Receipt
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 23
HSBC INVESTOR GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS - 99.9%
SHARES VALUE($)
--------- -----------
AEROSPACE & DEFENSE - 1.0%
United Technologies Corp.............. 25,100 2,165,126
-----------
AIR FREIGHT & LOGISTICS - 0.5%
United Parcel Service, Inc............ 15,700 1,101,355
-----------
AUTO PARTS & EQUIPMENT - 0.8%
Johnson Controls, Inc................. 29,200 1,601,912
-----------
BANKING - 5.8%
Fifth Third Bancorp................... 71,540 3,838,836
Mellon Financial Corp................. 87,800 2,602,392
The Bank of New York Co., Inc......... 76,190 2,220,177
Wells Fargo & Co...................... 63,090 3,562,061
-----------
12,223,466
-----------
BIOTECHNOLOGY - 1.1%
Amgen, Inc. (b)....................... 41,080 2,311,572
-----------
CHEMICALS - 2.0%
Du Pont (E.I) de Nemours and Co....... 48,550 2,085,223
The Dow Chemical Co................... 51,300 2,036,097
-----------
4,121,320
-----------
COMMERCIAL SERVICES - 1.4%
Cendant Corp.......................... 122,400 2,898,432
-----------
COMPUTER SOFTWARE - 7.0%
Affiliated Computer Services, Inc.(b). 54,150 2,626,275
Microsoft Corp........................ 286,780 7,447,677
Oracle Corp. (b)...................... 325,700 3,654,354
Veritas Software Corp. (b)............ 35,900 957,453
-----------
14,685,759
-----------
COMPUTERS - 3.7%
Dell, Inc. (b)........................ 128,400 4,456,764
Hewlett-Packard Co.................... 173,500 3,417,950
-----------
7,874,714
-----------
CONSUMER MANUFACTURING - 0.7%
Harley-Davidson, Inc.................. 24,400 1,374,208
-----------
CONSUMER PRODUCTS - 8.4%
Altria Group, Inc..................... 58,270 3,226,993
Anheuser-Busch Cos., Inc.............. 30,300 1,552,572
Black & Decker Corp................... 20,500 1,185,925
Colgate-Palmolive Co.................. 49,100 2,841,908
PepsiCo, Inc.......................... 87,900 4,789,670
The Coca-Cola Co...................... 50,300 2,543,671
The Procter & Gamble Co............... 17,200 1,818,900
-----------
17,959,639
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 8.5%
3M Co................................. 19,600 1,695,008
General Electric Co................... 285,400 8,547,730
ITT Industries, Inc................... 18,400 1,458,936
Parker Hannifin Corp.................. 26,400 1,459,656
SPX Corp. (b)......................... 20,300 900,305
Tyco International Ltd................ 137,600 3,777,120
-----------
17,838,755
-----------
ELECTRIC UTILITIES - 2.0%
Exelon Corp........................... 62,300 4,170,362
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 2.4%
Intel Corp............................ 193,100 4,968,463
-----------
ENERGY EQUIPMENT & SERVICES - 1.4%
Nabors Industries Ltd. (b) (b)........ 68,540 3,040,434
-----------
FINANCIAL SERVICES - 11.3%
Capital One Financial Corp............ 61,700 4,043,201
Citigroup, Inc........................ 127,130 6,113,681
Fannie Mae............................ 85,700 5,889,304
Goldman Sachs Group, Inc.............. 41,800 4,033,700
Merrill Lynch & Co., Inc.............. 71,200 3,861,176
-----------
23,941,062
-----------
HEALTH CARE - 5.6%
Cardinal Health, Inc.................. 64,400 4,717,300
Caremark Rx, Inc. (b)................. 88,700 3,002,495
Express Scripts, Inc. (b)............. 16,300 1,260,642
Guidant Corp.......................... 44,400 2,797,644
-----------
11,778,081
-----------
INSURANCE - 5.0%
AFLAC, Inc............................ 55,450 2,341,654
American International Group, Inc..... 67,900 4,865,035
Chubb Corp............................ 49,200 3,394,800
-----------
10,601,489
-----------
MEDIA - 2.8%
Gannett Co., Inc...................... 14,500 1,256,860
Time Warner, Inc. (b)................. 114,400 1,924,208
Viacom, Inc. Class B.................. 71,800 2,775,070
-----------
5,956,138
-----------
METALS & MINING - 2.0%
Alcoa, Inc............................ 41,150 1,265,363
Phelps Dodge Corp. (b)................ 45,400 2,988,682
-----------
4,254,045
-----------
OIL & GAS - 4.0%
Exxon Mobil Corp...................... 196,520 8,361,926
-----------
PHARMACEUTICALS - 7.7%
Abbott Laboratories................... 49,800 2,192,196
Johnson & Johnson..................... 62,100 3,355,263
Pfizer, Inc........................... 230,350 8,237,316
Wyeth................................. 64,200 2,444,094
-----------
16,228,869
-----------
RETAIL - 7.1%
Home Depot, Inc....................... 128,420 4,519,100
Kohl's Corp. (b)...................... 28,300 1,182,657
McDonald's Corp....................... 76,900 2,093,987
Wal-Mart Stores, Inc.................. 124,840 7,115,880
-----------
14,911,624
-----------
TELECOMMUNICATIONS - 7.1%
Cisco Systems, Inc. (b)............... 275,500 5,749,685
Comcast Corp. Class A (b)............. 94,500 2,844,450
Motorola, Inc......................... 95,300 1,739,225
SBC Communications, Inc............... 74,800 1,862,520
Verizon Communications, Inc........... 75,800 2,860,692
-----------
15,056,572
-----------
</Table>
24 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
TRANSPORTATION - 0.6%
Burlington Northern Santa Fe Corp..... 35,600 1,164,120
-----------
TOTAL COMMON STOCKS................... 210,589,443
-----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 0.1%
HSBC Investor Money Market Fund Class
I Shares *........................... 122,943 122,943
-----------
TOTAL INVESTMENT COMPANIES............ 122,943
-----------
TOTAL INVESTMENTS
(COST $180,208,023) (a) - 100.0%.... 210,712,386
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $210,746,818.
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<Table>
Unrealized appreciation.............. $33,820,191
Unrealized depreciation.............. (3,315,828)
-----------
Net unrealized appreciation.......... $30,504,363
-----------
-----------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 25
HSBC INVESTOR MID-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS - APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS - 98.6%
SHARES VALUE($)
--------- -----------
AEROSPACE & DEFENSE - 1.4%
L-3 Communications Holdings, Inc...... 27,700 1,710,198
-----------
BANKING - 0.8%
New York Community Bancorp, Inc....... 38,700 970,209
-----------
BIOTECHNOLOGY - 1.7%
Chiron Corp. (b)...................... 14,030 650,992
Medimmune, Inc. (b)................... 24,080 583,699
Sepracor, Inc. (b).................... 19,000 908,390
-----------
2,143,081
-----------
CHEMICALS - 1.9%
Ecolab, Inc........................... 28,470 848,406
Sigma-Aldrich Corp.................... 26,200 1,483,968
-----------
2,332,374
-----------
COMMERCIAL SERVICES - 3.6%
Cendant Corp.......................... 60,460 1,431,693
H & R Block, Inc...................... 36,300 1,637,493
Weight Watchers International, Inc.(b) 34,690 1,352,910
-----------
4,422,096
-----------
COMMUNICATIONS - 0.7%
Harris Corp........................... 20,500 923,525
-----------
COMPUTER HARDWARE - 3.7%
Lexmark International, Inc. (b)....... 21,300 1,926,798
SanDisk Corp. (b)..................... 55,600 1,284,916
Western Digital Corp. (b)............. 172,470 1,393,558
-----------
4,605,272
-----------
COMPUTER SOFTWARE - 11.5%
Adobe Systems, Inc.................... 20,900 864,006
Affiliated Computer Services, Inc.(b). 38,100 1,847,850
BMC Software, Inc. (b)................ 55,320 957,036
Citrix Systems, Inc. (b).............. 61,300 1,167,765
Electronic Arts, Inc. (b)............. 24,320 1,231,078
Factset Research Systems, Inc......... 47,280 1,879,853
Fair, Issac & Co., Inc................ 35,195 1,186,775
Intuit, Inc. (b)...................... 29,600 1,257,112
Symantec Corp. (b).................... 15,620 703,681
Synopsys, Inc. (b).................... 34,700 927,531
VeriSign, Inc. (b).................... 85,960 1,386,535
Veritas Software Corp. (b)............ 33,500 893,445
-----------
14,302,667
-----------
CONSUMER PRODUCTS - 7.2%
Black & Decker Corp................... 32,750 1,894,588
Coach, Inc. (b)....................... 54,900 2,338,740
Constellation Brands, Inc. (b)........ 40,060 1,327,188
Furniture Brands International,
Inc.................................. 43,660 1,228,592
TJX Companies, Inc.................... 85,839 2,109,064
-----------
8,898,172
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 7.4%
Danaher Corp.......................... 10,910 1,009,393
ITT Industries, Inc................... 17,490 1,386,782
Pentair, Inc.......................... 23,400 1,394,406
SPX Corp. (b)......................... 26,400 1,170,840
Textron, Inc.......................... 29,050 1,602,979
The Scotts Company (b)................ 16,280 1,073,666
Tyco International Ltd................ 54,900 1,507,005
-----------
9,145,071
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 7.0%
Altera Corp. (b)...................... 58,480 1,170,185
Arrow Electronics, Inc. (b)........... 56,460 1,427,309
Cognos, Inc. (b)...................... 19,930 628,393
Jabil Circuit, Inc. (b)............... 56,300 1,485,757
Lam Research Corp. (b)................ 30,440 673,942
National Semiconductor Corp. (b)...... 60,500 2,467,794
Novellus Systems, Inc. (b)............ 27,780 804,509
-----------
8,657,889
-----------
FINANCIAL SERVICES - 6.0%
Allmerica Financial Corp. (b)......... 36,200 1,258,312
Capital One Financial Corp............ 18,900 1,238,517
City National Corp.................... 20,800 1,282,320
E*Trade Group, Inc. (b)............... 102,510 1,164,514
Legg Mason, Inc....................... 6,950 639,817
MGIC Investment Corp.................. 8,600 633,132
National Financial Partners Corp...... 41,400 1,293,750
-----------
7,510,362
-----------
HEALTH CARE - 20.8%
Bausch & Lomb, Inc.................... 22,500 1,413,675
Beckman Coulter, Inc.................. 39,440 2,202,330
Becton Dickinson & Co................. 16,900 854,295
Cardinal Health, Inc.................. 19,700 1,443,025
Caremark Rx, Inc. (b)................. 76,470 2,588,509
DENTSPLY International, Inc........... 36,020 1,745,529
Edwards Lifesciences Corp. (b)........ 26,400 909,744
Express Scripts, Inc. (b)............. 7,900 610,986
Guidant Corp.......................... 19,500 1,228,695
Health Management Associates, Inc..... 60,820 1,406,767
Hillenbrand Industry, Inc............. 15,800 1,066,500
IMS Health, Inc....................... 47,600 1,201,900
Laboratory Corp. of America
Holdings (b)......................... 23,800 945,812
Neurocrine Biosciences, Inc. (b)...... 34,800 2,283,923
Oxford Health Plans, Inc.............. 30,600 1,665,864
Varian Medical Systems, Inc. (b)...... 14,620 1,254,981
Wellpoint Health Networks, Inc. (b)... 11,100 1,239,759
Zimmer Holdings, Inc. (b)............. 23,400 1,868,490
-----------
25,930,784
-----------
MEDIA - 1.3%
Liberty Media Corp. Class A (b)....... 150,900 1,650,846
-----------
METALS & MINING - 2.0%
Freeport-McMoran Copper & Gold, Inc.
Class B.............................. 21,900 667,950
Phelps Dodge Corp. (b)................ 28,200 1,856,406
-----------
2,524,356
-----------
OIL & GAS - 2.9%
EOG Resources, Inc.................... 33,890 1,669,083
Newfield Exploration Co. (b).......... 18,900 995,652
Patterson-UTI Energy, Inc. (b)........ 25,400 919,226
-----------
3,583,961
-----------
PHARMACEUTICALS - 3.2%
Allergan, Inc......................... 15,840 1,394,712
Mylan Laboratories, Inc............... 81,760 1,873,121
Teva Pharmaceutical Industries Ltd.
ADR.................................. 11,710 720,868
-----------
3,988,701
-----------
</Table>
26 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR MID-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS - APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
RESIDENTIAL BUILDING CONSTRUCTION - 1.0%
Toll Brothers, Inc. (b)............... 31,200 1,234,584
-----------
RESTAURANTS - 1.2%
YUM! Brands, Inc. (b)................. 38,910 1,509,319
-----------
RETAIL - 10.4%
Abercrombie & Fitch Co., Class A...... 55,600 1,748,620
Barnes & Noble, Inc. (b).............. 36,400 1,087,268
Best Buy Co., Inc..................... 23,200 1,258,600
Brinker International, Inc. (b)....... 38,600 1,484,556
Chico's FAS, Inc. (b)................. 16,580 675,303
Dollar Tree Stores, Inc. (b).......... 50,470 1,360,167
Micheal Stores, Inc................... 40,060 2,004,202
PETsMART, Inc......................... 65,500 1,814,350
Staples, Inc.......................... 58,200 1,499,232
-----------
12,932,298
-----------
TECHNOLOGY - 0.5%
Qlogic Corp. (b)...................... 23,100 623,469
-----------
TELECOMMUNICATIONS - 2.4%
Adelphia Business Solutions,
Inc. (b)............................. 19,923 319
Advanced Fibre Communications,
Inc. (b)............................. 45,670 762,689
Corning, Inc. (b)..................... 57,740 636,872
InterActiveCorp (b)................... 15,510 494,304
Scientific-Atlanta, Inc............... 32,500 1,052,675
-----------
2,946,859
-----------
TOTAL COMMON STOCKS................... 122,546,093
-----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 2.6%
HSBC Investor Money Market Fund Class
I Shares *........................... 3,244,395 3,244,395
-----------
TOTAL INVESTMENT COMPANIES............ 3,244,395
-----------
TOTAL INVESTMENTS
(COST $107,233,577) (a) - 101.2%.... 125,790,488
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $124,319,165.
(a) Cost differs from value by net unrealized appreciation of securities as
follows:
<Table>
Unrealized appreciation.............. $21,944,543
Unrealized depreciation.............. (3,387,632)
-----------
Net unrealized appreciation.......... $18,556,911
-----------
-----------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 27
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2004 (UNAUDITED)
.............................................................................
<Table>
<Caption>
LIMITED FIXED NEW YORK
MATURITY INCOME TAX-FREE EQUITY
FUND FUND BOND FUND BOND FUND FUND
--------------- -------------- --------------- --------------- --------------
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 2) $39,326,815 $104,722,902 $25,139,411 $69,505,617 $ 77,863,630
Cash -- -- -- 103 174,692
Interest and dividends receivable -- -- -- 795,513 86,079
Receivable for capital shares
issued 425 15,565 83,167 79,003 217,076
Receivable for investments sold -- -- -- -- --
Receivable from Investment
Adviser 7,136 -- 5,602 -- --
Prepaid expenses 507 6,399 3,227 1,601 6,210
----------- ------------ ----------- ----------- ------------
TOTAL ASSETS 39,334,883 104,744,866 25,231,407 70,381,837 78,347,687
----------- ------------ ----------- ----------- ------------
LIABILITIES:
Dividends payable 53,986 177,097 35,280 79,177 --
Payable for investments purchased -- -- -- -- 127,231
Payable for capital shares
redeemed 10,726 -- 7,709 43,816 60
Accrued expenses and other
liabilities:
Investment management -- -- -- 14,599 3,377
Administration 1,832 5,338 951 5,485 4,977
Distribution 6,268 -- 7,951 13,627 2,553
Shareholder servicing 2,169 -- 5,172 10,589 7,812
Other 7,301 29,339 12,839 25,221 35,203
----------- ------------ ----------- ----------- ------------
TOTAL LIABILITIES 82,282 211,774 69,902 192,514 181,213
----------- ------------ ----------- ----------- ------------
NET ASSETS $39,252,601 $104,533,092 $25,161,505 $70,189,323 $ 78,166,474
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
..............................................................................................................................
COMPOSITION OF NET ASSETS:
Capital $39,037,229 $101,224,909 $25,736,227 $68,384,611 $120,549,897
Accumulated (dividends in excess
of) net investment income (78,389) (44,305) (10,554) 1 10,409
Accumulated net realized losses
from investment transactions 162,006 (2,044,633) (671,532) 189,686 (43,872,464)
Unrealized
appreciation/depreciation from
investments 131,755 5,397,121 107,364 1,615,025 1,478,632
----------- ------------ ----------- ----------- ------------
NET ASSETS $39,252,601 $104,533,092 $25,161,505 $70,189,323 $ 78,166,474
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
..............................................................................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 2,847,751 $ -- $17,366,751 $29,317,853 $ 33,429,636
Shares Outstanding 286,741 -- 1,669,453 2,651,890 2,618,703
Net Asset Value and Redemption
Price per share $ 9.93 $ -- $ 10.40 $ 11.06 $ 12.77
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
Maximum sales charge 4.75% -- 4.75% 4.75% 5.00%
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
Maximum Offering Price per share
(Net Asset Value/(100%-
maximum sales charge)) $ 10.43 $ -- $ 10.92 $ 11.61 $ 13.44
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
..............................................................................................................................
CLASS B SHARES
Net Assets $ 6,330,129 $ -- $ 7,388,576 $19,080,831 $ 3,326,811
Shares Outstanding 636,206 -- 709,889 1,727,599 268,935
Net Asset Value, Offering Price
and Redemption Price per share* $ 9.95 $ -- $ 10.41 $ 11.04 $ 12.37
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
..............................................................................................................................
CLASS C SHARES
Net Assets $ 1,367,661 $ -- $ 406,178 $ 2,538,544 $ 633,150
Shares Outstanding 137,545 -- 39,063 228,947 50,914
Net Asset Value, Offering Price
and Redemption Price per share* $ 9.94 $ -- $ 10.40 $ 11.09 $ 12.44
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
..............................................................................................................................
CLASS Y SHARES
Net Assets $28,707,060 $ -- $ -- $19,252,095 $ 40,776,877
Shares Outstanding 2,886,460 -- -- 1,740,954 3,195,575
Net Asset Value, Offering Price
and Redemption Price per share $ 9.95 $ -- $ -- $ 11.06 $ 12.76
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
..............................................................................................................................
ADVISOR SHARES
Net Assets $ -- $104,533,092 $ -- $ -- $ --
Shares Outstanding -- 9,811,991 -- -- --
Net Asset Value, Offering Price
and Redemption Price per share $ -- $ 10.65 $ -- $ -- $ --
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
Investments, at cost $67,890,592 $ 76,384,998
----------- ------------
----------- ------------
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
28 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2004 (UNAUDITED)
.............................................................................
<Table>
<Caption>
GROWTH AND MID-CAP INTERNATIONAL
INCOME FUND FUND EQUITY FUND
-------------- -------------- --------------
ASSETS:
Investments, at value
(Note 2) $210,712,386 $125,790,488 $130,152,447
Cash -- -- --
Interest and dividends
receivable 227,827 36,495 --
Receivable for capital
shares issued 8,419 6,929 16,274
Receivable for
investments sold 1,256,684 1,969,486 --
Receivable from
Investment Adviser -- -- --
Tax reclaims receivable -- -- 458,369
Prepaid expenses 10,330 4,289 6,199
------------ ------------ ------------
TOTAL ASSETS 212,215,646 127,807,687 130,633,289
------------ ------------ ------------
LIABILITIES:
Payable for investments
purchased 1,289,773 3,356,880 --
Payable for capital
shares redeemed 3,930 4,664 --
Accrued expenses and
other liabilities:
Investment management 98,251 58,303 --
Administration 20,501 10,815 6,342
Distribution 2,337 4,458 --
Shareholder servicing 1,376 1,862 --
Other 52,660 51,540 36,844
------------ ------------ ------------
TOTAL LIABILITIES 1,468,828 3,488,522 43,186
------------ ------------ ------------
NET ASSETS $210,746,818 $124,319,165 $130,590,103
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
COMPOSITION OF NET
ASSETS:
Capital $230,100,403 $120,191,180 $134,084,426
Accumulated (dividends
in excess of) net
investment income 377,350 (228,661) 789,868
Accumulated net
realized losses from
investment, option and
foreign currency
transactions (50,235,298) (14,200,265) (7,927,415)
Unrealized
appreciation/depreciation
from investments,
options and foreign
currencies 30,504,363 18,556,911 3,643,224
------------ ------------ ------------
NET ASSETS $210,746,818 $124,319,165 $130,590,103
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 2,928,511 $ 1,906,817 $ --
Shares Outstanding 337,274 231,280 --
Net Asset Value and
Redemption Price per
share $ 8.68 $ 8.24 $ --
------------ ------------ ------------
------------ ------------ ------------
Maximum sales charge 5.00% 5.00% --
------------ ------------ ------------
------------ ------------ ------------
Maximum Offering Price
per share (Net Asset
Value/(100% - maximum
sales charge)) $ 9.14 $ 8.67 $ --
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
CLASS B SHARES
Net Assets $ 3,680,698 $ 6,890,901 $ --
Shares Outstanding 428,501 860,323 --
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 8.59 $ 8.01 $ --
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
CLASS C SHARES
Net Assets $ 19,168 $ 56,032 $ --
Shares Outstanding 2,210 6,951 --
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 8.67 $ 8.06 $ --
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
CLASS Y SHARES
Net Assets $204,118,441 $ -- $ --
Shares Outstanding 23,473,681 -- --
Net Asset Value,
Offering Price and
Redemption Price per
share $ 8.70 $ -- $ --
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
ADVISOR SHARES
Net Assets $ -- $ -- $130,590,103
Shares Outstanding -- -- 9,661,000
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ -- $ 13.52
------------ ------------ ------------
------------ ------------ ------------
..............................................................................
TRUST SHARES
Net Assets $ -- $115,465,415 $ --
Shares Outstanding -- 13,890,825 --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ 8.31 $ --
------------ ------------ ------------
------------ ------------ ------------
Investments, at cost $180,208,023 $107,233,577
------------ ------------
------------ ------------
<Caption>
OVERSEAS SMALL-CAP OPPORTUNITY
EQUITY FUND EQUITY FUND FUND
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value
(Note 2) $17,279,294 $271,749,700 $26,001,406
Cash -- -- --
Interest and dividends
receivable -- -- --
Receivable for capital
shares issued 78,047 16,521 55,085
Receivable for
investments sold -- -- --
Receivable from
Investment Adviser -- -- --
Tax reclaims receivable 26,907 -- --
Prepaid expenses 4,781 10,097 4,561
----------- ------------ -----------
TOTAL ASSETS $17,389,029 $271,776,318 $26,061,052
----------- ------------ -----------
LIABILITIES:
Payable for investments
purchased -- -- --
Payable for capital
shares redeemed -- -- --
Accrued expenses and
other liabilities:
Investment management -- -- --
Administration 657 11,565 1,036
Distribution 1,435 -- 2,323
Shareholder servicing 3,618 -- 5,581
Other 14,595 60,373 24,467
----------- ------------ -----------
TOTAL LIABILITIES 20,305 71,938 33,407
----------- ------------ -----------
NET ASSETS $17,368,724 $271,704,380 $26,027,645
----------- ------------ -----------
----------- ------------ -----------
........................................................................
COMPOSITION OF NET
ASSETS:
Capital $16,005,971 $272,762,875 $25,914,700
Accumulated (dividends
in excess of) net
investment income 71,758 (953,396) (179,800)
Accumulated net
realized losses from
investment, option and
foreign currency
transactions 962,608 (38,125,447) (2,383,836)
Unrealized
appreciation/depreciation
from investments,
options and foreign
currencies 328,387 38,020,348 2,676,581
----------- ------------ -----------
NET ASSETS $17,368,724 $271,704,380 $26,027,645
----------- ------------ -----------
----------- ------------ -----------
........................................................................
CLASS A (INVESTOR) SHARES
Net Assets $15,533,581 $ -- $21,028,810
Shares Outstanding 1,221,380 -- 1,999,261
Net Asset Value and
Redemption Price per
share $ 12.72 $ -- $ 10.52
----------- ------------ -----------
----------- ------------ -----------
Maximum sales charge 5.00% -- 5.00%
----------- ------------ -----------
----------- ------------ -----------
Maximum Offering Price
per share (Net Asset
Value/(100% - maximum
sales charge)) $ 13.39 $ -- $ 11.07
----------- ------------ -----------
----------- ------------ -----------
...........................................................................
CLASS B SHARES
Net Assets $ 1,702,720 $ -- $ 4,627,935
Shares Outstanding 138,625 -- 464,408
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 12.28 $ -- $ 9.97
----------- ------------ -----------
----------- ------------ -----------
........................................................................
CLASS C SHARES
Net Assets $ 132,423 $ -- $ 370,900
Shares Outstanding 10,592 -- 36,909
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 12.50 $ -- $ 10.05
----------- ------------ -----------
----------- ------------ -----------
.........................................................................
CLASS Y SHARES
Net Assets $ -- $ -- $ --
Shares Outstanding -- -- --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ -- $ --
----------- ------------ -----------
----------- ------------ -----------
.........................................................................
ADVISOR SHARES
Net Assets $ -- $271,704,380 $ --
Shares Outstanding -- 21,599,646 --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ 12.58 $ --
----------- ------------ -----------
----------- ------------ -----------
........................................................................
TRUST SHARES
Net Assets $ -- $ -- $ --
Shares Outstanding -- -- --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ -- $ --
----------- ------------ -----------
----------- ------------ -----------
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 29
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
................................................................................
<Table>
<Caption>
NEW YORK
LIMITED FIXED INCOME BOND TAX-FREE
MATURITY FUND FUND FUND BOND FUND EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ -- $ -- $ -- $1,306,235 $ --
Dividends -- -- -- 6,681 476,134
Dividends from affiliates -- -- -- -- 7,755
Investment income from portfolio 821,192 2,600,347 570,172 -- --
Expenses from portfolio (119,060) (276,352) (60,840) -- --
--------- ---------- --------- ---------- -----------
TOTAL INVESTMENT INCOME 702,132 2,323,995 509,332 1,312,916 483,889
--------- ---------- --------- ---------- -----------
...............................................................................................................................
EXPENSES:
Investment management -- -- -- 85,474 185,716
Administration 7,843 19,980 4,389 25,615 27,828
Distribution:
Class B Shares 23,951 -- 28,032 71,084 11,625
Class C Shares 7,619 -- 1,737 11,578 2,338
Shareholder servicing:
Class A (Investor) Shares 3,653 -- 19,371 32,695 36,306
Class B Shares 7,984 -- 9,344 23,695 3,875
Class C Shares 2,540 -- 579 3,859 779
Accounting 17,923 4,012 13,442 35,651 41,966
Custodian -- -- -- 9,995 33,955
Transfer agent 37,953 12,241 28,518 34,040 40,710
Trustee 142 154 74 423 1,779
Other 10,557 23,312 9,533 14,754 31,342
--------- ---------- --------- ---------- -----------
Total expenses before fee
reductions 120,165 59,699 115,019 348,863 418,219
Fees reduced by Investment
Adviser (15,815) -- (17,239) -- --
--------- ---------- --------- ---------- -----------
NET EXPENSES 104,350 59,699 97,780 348,863 418,219
--------- ---------- --------- ---------- -----------
...............................................................................................................................
NET INVESTMENT INCOME 597,782 2,264,296 411,552 964,053 65,670
--------- ---------- --------- ---------- -----------
...............................................................................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions 161,958 726,487 (18,587) 189,684 9,086,173
Change in unrealized
appreciation/depreciation from
investments (355,838) (1,456,223) (209,154) (944,832) (5,408,949)
--------- ---------- --------- ---------- -----------
...............................................................................................................................
Net realized/unrealized gains from
investment transactions (193,880) (729,736) (227,741) (755,148) 3,677,224
--------- ---------- --------- ---------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 403,902 $1,534,560 $ 183,811 $ 208,905 $ 3,742,894
--------- ---------- --------- ---------- -----------
--------- ---------- --------- ---------- -----------
</Table>
30 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
GROWTH AND
INCOME MID-CAP INTERNATIONAL OVERSEAS
FUND FUND EQUITY FUND EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ -- $ -- $ -- $ --
Dividends 1,646,934 400,264 -- --
Dividends from affiliates 1,044 530 -- --
Investment income from portfolio -- -- 1,601,329 196,312
Tax reclaims -- -- 8,268 4,101
Foreign tax withholding from portfolio -- -- (228,108) (28,729)
Expenses from portfolio -- -- (666,768) (73,167)
---------- ----------- ----------- ----------
TOTAL INVESTMENT INCOME 1,647,978 400,794 714,721 98,517
---------- ----------- ----------- ----------
.................................................................................................................
EXPENSES:
Investment management 590,155 396,562 -- --
Administration 80,390 54,019 24,288 2,721
Distribution:
Class B Shares 10,767 24,445 -- 5,166
Class C Shares 38 210 -- 491
Shareholder servicing:
Class A (Investor) Shares 3,071 2,140 -- 16,277
Class B Shares 3,589 8,148 -- 1,722
Class C Shares 13 70 -- 164
Accounting 31,490 32,376 3,966 13,443
Custodian 27,122 24,715 -- --
Transfer agent 33,302 47,993 13,404 28,663
Trustee 1,355 1,003 306 43
Other 45,447 37,774 32,331 9,642
---------- ----------- ----------- ----------
Total expenses before fee reductions 826,739 629,455 74,295 78,332
Fees reduced by Investment Adviser -- -- -- (11,208)
---------- ----------- ----------- ----------
NET EXPENSES 826,739 629,455 74,295 67,124
---------- ----------- ----------- ----------
.................................................................................................................
NET INVESTMENT INCOME (LOSS) 821,239 (228,661) 640,426 31,393
---------- ----------- ----------- ----------
.................................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES:
Net realized gains (losses) from
investment, option and foreign currency
transactions 7,358,453 17,438,301 18,149,517 1,839,222
Change in unrealized
appreciation/depreciation from
investments, options and foreign
currencies 188,294 (10,441,509) (7,869,003) (874,233)
---------- ----------- ----------- ----------
.................................................................................................................
Net realized/unrealized gains from
investment, options and foreign
currency transactions 7,546,747 6,996,792 10,280,514 964,989
---------- ----------- ----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $8,367,986 $ 6,768,131 $10,920,940 $ 996,382
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
<Caption>
SMALL CAP OPPORTUNITY
EQUITY FUND FUND
--------------- ---------------
Interest $ -- $ --
Dividends -- --
Dividends from affiliates -- --
Investment income from portfolio 479,911 38,793
Tax reclaims -- --
Foreign tax withholding from portfolio -- --
Expenses from portfolio (1,308,708) (106,541)
----------- ----------
TOTAL INVESTMENT INCOME (828,797) (67,748)
----------- ----------
............................................................................
EXPENSES:
Investment management -- --
Administration 56,037 4,551
Distribution:
Class B Shares -- 16,529
Class C Shares -- 1,484
Shareholder servicing:
Class A (Investor) Shares -- 24,378
Class B Shares -- 5,510
Class C Shares -- 495
Accounting 4,480 13,442
Custodian -- --
Transfer agent 13,189 41,290
Trustee 968 71
Other 49,925 17,692
----------- ----------
Total expenses before fee reductions 124,599 125,442
Fees reduced by Investment Adviser -- (13,390)
----------- ----------
NET EXPENSES 124,599 112,052
----------- ----------
.........................................................................
NET INVESTMENT INCOME (LOSS) (953,396) (179,800)
----------- ----------
.........................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS, OPTIONS AND FOREIGN
CURRENCIES:
Net realized gains (losses) from
investment, option and foreign currency
transactions 21,988,782 1,421,301
Change in unrealized
appreciation/depreciation from
investments, options and foreign
currencies (14,722,454) (1,029,669)
----------- ----------
.........................................................................
Net realized/unrealized gains from
investment, options and foreign
currency transactions 7,266,328 391,632
----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 6,312,932 $ 211,832
----------- ----------
----------- ----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 31
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 597,782 $ 3,333,115 $ 2,264,296 $ 10,945,642
Net realized gains (losses) from
investment transactions 161,958 4,918,617 726,487 11,905,117
Change in unrealized
appreciation/depreciation from
investments (355,838) (2,609,744) (1,456,223) (2,456,592)
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 403,902 5,641,988 1,534,560 20,394,167
----------- ------------ ------------ -------------
...........................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (46,501) (100,206) -- --
Class B Shares (77,153) (152,669) -- --
Class C Shares (24,967) (63,642) -- --
Class Y Shares (521,367) (3,280,529) -- --
Advisor Shares -- -- (2,312,476) (11,850,331)
NET REALIZED GAINS:
Class A (Investor) Shares (135,028) -- -- --
Class B Shares (283,455) -- -- --
Class C Shares (105,514) -- -- --
Class Y Shares (1,415,704) -- -- --
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (2,609,689) (3,597,046) (2,312,476) (11,850,331)
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (2,205,154) (60,812,597) (5,657,423) (182,416,067)
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS (4,410,941) (58,767,655) (6,435,339) (173,872,231)
............................................................................................................................
NET ASSETS:
Beginning of period 43,663,542 102,431,197 110,968,431 284,840,662
----------- ------------ ------------ -------------
End of period $39,252,601 $ 43,663,542 $104,533,092 $ 110,968,431
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
Accumulated (dividends in excess
of) net investment income $ (78,389) $ (6,183) $ (44,305) $ 3,875
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
</Table>
32 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 293,262 $ 32,333,443 $ -- $ --
Dividends reinvested 170,101 86,864 -- --
Cost of shares redeemed (769,626) (30,657,661) -- --
----------- ------------- ------------ -------------
Class A (Investor) Shares capital
transactions (306,263) 1,762,646 -- --
----------- ------------- ------------ -------------
.............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 566,047 3,107,219 -- --
Dividends reinvested 328,410 130,108 -- --
Cost of shares redeemed (675,683) (964,324) -- --
----------- ------------- ------------ -------------
Class B Shares capital transactions 218,774 2,273,003 -- --
----------- ------------- ------------ -------------
.............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 74,493 1,471,188 -- --
Dividends reinvested 128,665 57,276 -- --
Cost of shares redeemed (1,273,930) (733,409) -- --
----------- ------------- ------------ -------------
Class C Shares capital transactions (1,070,772) 795,055 -- --
----------- ------------- ------------ -------------
.............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 4,775,625 35,228,965 -- --
Dividends reinvested 1,466,727 2,958,619 -- --
Cost of shares redeemed (7,289,245) (103,830,885) -- --
----------- ------------- ------------ -------------
Class Y Shares capital transactions (1,046,893) (65,643,301) -- --
----------- ------------- ------------ -------------
.............................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued -- -- 13,798,029 174,706,822
Dividends reinvested -- -- 1,361,081 3,243,190
Cost of shares redeemed -- -- (20,816,533) (360,366,079)
----------- ------------- ------------ -------------
Advisor Shares capital transactions -- -- (5,657,423) (182,416,067)
----------- ------------- ------------ -------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(2,205,154) $ (60,812,597) $ (5,657,423) $(182,416,067)
----------- ------------- ------------ -------------
----------- ------------- ------------ -------------
.............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 29,013 3,077,715 -- --
Reinvested 16,815 8,421 -- --
Redeemed (75,153) (2,924,192) -- --
----------- ------------- ------------ -------------
Change in Class A (Investor) Shares (29,325) 161,944 -- --
----------- ------------- ------------ -------------
.............................................................................................................................
CLASS B SHARES:
Issued 55,414 293,513 -- --
Reinvested 32,441 12,334 -- --
Redeemed (66,044) (91,409) -- --
----------- ------------- ------------ -------------
Change in Class B Shares 21,811 214,438 -- --
----------- ------------- ------------ -------------
.............................................................................................................................
CLASS C SHARES:
Issued 7,392 138,667 -- --
Reinvested 12,717 5,442 -- --
Redeemed (125,103) (70,036) -- --
----------- ------------- ------------ -------------
Change in Class C Shares (104,994) 74,073 -- --
----------- ------------- ------------ -------------
.............................................................................................................................
CLASS Y SHARES:
Issued 466,486 3,349,080 -- --
Reinvested 144,834 279,954 -- --
Redeemed (717,024) (9,718,276) -- --
----------- ------------- ------------ -------------
Change in Class Y Shares (105,704) (6,089,242) -- --
----------- ------------- ------------ -------------
.............................................................................................................................
ADVISOR SHARES:
Issued -- -- 1,271,922 16,137,521
Reinvested -- -- 125,445 299,797
Redeemed -- -- (1,925,221) (32,896,242)
----------- ------------- ------------ -------------
Change in Advisor Shares -- -- (527,854) (16,458,924)
----------- ------------- ------------ -------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 33
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
.................................................................................
<Table>
<Caption>
BOND FUND NEW YORK TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 411,552 $ 747,914 $ 964,053 $ 1,858,380
Net realized gains (losses) from
investment transactions (18,587) 323,271 189,684 718,711
Change in unrealized
appreciation/depreciation from
investments (209,154) (145,359) (944,832) (200,970)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 183,811 925,826 208,905 2,376,121
----------- ----------- ----------- -----------
...........................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (298,155) (551,717) (389,814) (645,402)
Class B Shares (116,468) (237,511) (213,557) (415,040)
Class C Shares (7,309) (27,506) (34,804) (82,589)
Class Y Shares -- -- (327,392) (714,717)
NET REALIZED GAINS:
Class A (Investor) Shares -- -- (120,953) --
Class B Shares -- -- (92,061) --
Class C Shares -- -- (15,865) --
Class Y (Adviser) Shares -- -- (96,127) --
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (421,932) (816,734) (1,290,573) (1,857,748)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 3,220,763 2,909,577 7,051,340 12,299,920
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS 2,982,642 3,018,669 5,969,672 12,818,293
...........................................................................................................................
NET ASSETS:
Beginning of period 22,178,863 19,160,194 64,219,651 51,401,358
----------- ----------- ----------- -----------
End of period $25,161,505 $22,178,863 $70,189,323 $64,219,651
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated (dividends in excess of) net
investment income $ (10,554) $ (174) $ 1 $ 1,515
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</Table>
34 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
...............................................................................
<Table>
<Caption>
NEW YORK
BOND FUND TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 5,974,649 $ 8,398,463 $12,463,430 $ 11,543,580
Dividends reinvested 273,051 501,654 463,785 590,442
Cost of shares redeemed (2,842,654) (6,884,172) (5,433,076) (6,313,380)
----------- ----------- ----------- ------------
Class A (Investor) Shares capital
transactions 3,405,046 2,015,945 7,494,139 5,820,642
----------- ----------- ----------- ------------
.............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 653,363 2,250,164 1,714,776 6,989,555
Dividends reinvested 98,844 196,735 237,245 319,238
Cost of shares redeemed (738,603) (1,164,858) (938,646) (1,755,775)
----------- ----------- ----------- ------------
Class B Shares capital transactions 13,604 1,282,041 1,013,375 5,553,018
----------- ----------- ----------- ------------
.............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 3,224 18,000 39,601 1,160,527
Dividends reinvested 6,892 20,473 37,500 63,214
Cost of shares redeemed (208,003) (426,882) (760,819) (610,458)
----------- ----------- ----------- ------------
Class C Shares capital transactions (197,887) (388,409) (683,718) 613,283
----------- ----------- ----------- ------------
.............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued -- -- 2,191,688 8,199,696
Dividends reinvested -- -- 122,052 197,795
Cost of shares redeemed -- -- (3,086,196) (8,084,514)
----------- ----------- ----------- ------------
Class Y Shares capital transactions -- -- (772,456) 312,977
----------- ----------- ----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 3,220,763 $ 2,909,577 $ 7,051,340 $ 12,299,920
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
.............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 562,880 794,521 1,101,288 1,028,866
Reinvested 25,763 47,355 40,979 52,637
Redeemed (268,532) (653,528) (481,614) (564,319)
----------- ----------- ----------- ------------
Change in Class A (Investor) Shares 320,111 188,348 660,653 517,184
----------- ----------- ----------- ------------
.............................................................................................................................
CLASS B SHARES:
Issued 61,447 211,083 151,775 620,289
Reinvested 9,352 18,625 20,977 28,472
Redeemed (69,502) (110,752) (83,329) (157,037)
----------- ----------- ----------- ------------
Change in Class B Shares 1,297 118,956 89,423 491,724
----------- ----------- ----------- ------------
.............................................................................................................................
CLASS C SHARES:
Issued 307 1,669 3,463 103,233
Reinvested 651 1,940 3,303 5,614
Redeemed (19,712) (40,512) (66,943) (54,259)
----------- ----------- ----------- ------------
Change in Class C Shares (18,754) (36,903) (60,177) 54,588
----------- ----------- ----------- ------------
.............................................................................................................................
CLASS Y SHARES:
Issued -- -- 194,449 734,436
Reinvested -- -- 10,782 17,662
Redeemed -- -- (273,900) (724,104)
----------- ----------- ----------- ------------
Change in Class Y Shares -- -- (68,669) 27,994
----------- ----------- ----------- ------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 35
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
EQUITY FUND
- -------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003
- -------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 65,670 $ 973,345
Net realized losses from investment
transactions 9,086,173 (13,278,173)
Change in unrealized
appreciation/depreciation from
investments (5,408,949) 39,013,499
----------- -------------
................................................................................
CHANGE IN NET ASSETS FROM OPERATIONS 3,742,894 26,708,671
----------- -------------
................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (11,370) (65,354)
Class B Shares -- --
Class C Shares -- --
Class Y Shares (61,750) (1,118,576)
----------- -------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (73,120) (1,183,930)
----------- -------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 8,430,330 (152,352,431)
----------- -------------
CHANGE IN NET ASSETS 12,100,104 (126,827,690)
................................................................................
NET ASSETS:
Beginning of period 66,066,370 192,894,060
----------- -------------
End of period $78,166,474 $ 66,066,370
----------- -------------
----------- -------------
Accumulated (dividends in excess of) net
investment income $ 10,409 $ 17,859
----------- -------------
----------- -------------
</Table>
36 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
EQUITY FUND
- ------------------------------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $13,204,337 $ 8,180,284
Dividends reinvested 11,175 63,443
Cost of shares redeemed (4,151,238) (5,015,569)
----------- -------------
Class A (Investor) Shares capital transactions 9,064,274 3,228,158
----------- -------------
..................................................................................................
CLASS B SHARES:
Proceeds from shares issued 651,651 853,169
Dividends reinvested -- --
Cost of shares redeemed (143,172) (208,591)
----------- -------------
Class B Shares capital transactions 508,479 644,578
----------- -------------
..................................................................................................
CLASS C SHARES:
Proceeds from shares issued 134,631 24,206
Dividends reinvested -- --
Cost of shares redeemed (34,586) (165,268)
----------- -------------
Class C Shares capital transactions 100,045 (141,062)
----------- -------------
..................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 6,732,530 45,465,549
Dividends reinvested 45,236 1,042,585
Cost of shares redeemed (8,020,234) (202,592,239)
----------- -------------
Class Y Shares capital transactions (1,242,468) (156,084,105)
----------- -------------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 8,430,330 $(152,352,431)
----------- -------------
----------- -------------
..................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 1,024,301 729,759
Reinvested 873 6,026
Redeemed (319,814) (463,074)
----------- -------------
Change in Class A (Investor) Shares 705,360 272,711
----------- -------------
..................................................................................................
CLASS B SHARES:
Issued 52,101 78,761
Reinvested -- --
Redeemed (11,273) (20,721)
----------- -------------
Change in Class B Shares 40,828 58,040
----------- -------------
..................................................................................................
CLASS C SHARES:
Issued 11,212 2,154
Reinvested -- --
Redeemed (2,814) (15,839)
----------- -------------
Change in Class C Shares 8,398 (13,685)
----------- -------------
..................................................................................................
CLASS Y SHARES:
Issued 525,582 4,290,203
Reinvested 3,554 99,898
Redeemed (622,026) (17,991,472)
----------- -------------
Change in Class Y Shares (92,890) (13,601,371)
----------- -------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 37
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 821,239 $ 1,762,934 $ (228,661) $ (277,390)
Net realized gains (losses) from
investment and options transactions 7,358,453 (9,441,001) 17,438,301 9,437
Change in unrealized
appreciation/depreciation from
investments and options 188,294 38,518,987 (10,441,509) 33,785,071
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM OPERATIONS 8,367,986 30,840,920 6,768,131 33,517,118
------------ ------------ ------------ ------------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (8,112) (10,010) -- --
Class B Shares (876) (2,046) -- --
Class C Shares (24) -- -- --
Class Y Shares (977,337) (2,030,344) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (986,349) (2,042,400) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (4,155,620) 7,450,742 (50,671,823) 31,225,520
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS 3,226,017 36,249,262 (43,903,692) 64,742,638
............................................................................................................................
NET ASSETS:
Beginning of period 207,520,801 171,271,539 168,222,857 103,480,219
------------ ------------ ------------ ------------
End of period $210,746,818 $207,520,801 $124,319,165 $168,222,857
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Accumulated (dividends in excess of) net
investment income $ 377,350 $ 542,460 $ (228,661) $ --
------------ ------------ ------------ ------------
</Table>
38 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 1,248,292 $ 900,030 $ 538,069 $ 638,547
Dividends reinvested 8,022 9,705 -- --
Cost of shares redeemed (203,140) (576,695) (219,440) (388,850)
----------- ------------ ------------ ------------
Class A (Investor) Shares capital
transactions 1,053,174 333,040 318,629 249,697
----------- ------------ ------------ ------------
............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 1,528,284 945,891 877,233 873,543
Dividends reinvested 869 2,022 -- --
Cost of shares redeemed (126,544) (139,831) (183,730) (429,567)
----------- ------------ ------------ ------------
Class B Shares capital transactions 1,402,609 808,082 693,503 443,976
----------- ------------ ------------ ------------
............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 24,894 -- 660 25,000
Cost of shares redeemed (5,304) -- (687) --
----------- ------------ ------------ ------------
Class C Shares capital transactions 19,590 -- (27) 25,000
----------- ------------ ------------ ------------
............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 6,994,312 33,049,306 -- --
Dividends reinvested 219,530 421,341 -- --
Cost of shares redeemed (13,844,835) (27,161,027) -- --
----------- ------------ ------------ ------------
Class Y Shares capital transactions (6,630,993) 6,309,620 -- --
----------- ------------ ------------ ------------
............................................................................................................................
TRUST SHARES:
Proceeds from shares issued -- -- 5,591,844 46,107,032
Cost of shares redeemed -- -- (57,275,772) (15,600,185)
----------- ------------ ------------ ------------
Trust Shares capital transactions -- -- (51,683,928) 30,506,847
----------- ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(4,155,620) $ 7,450,742 $(50,671,823) $ 31,225,520
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 141,378 114,468 64,477 90,070
Reinvested 924 1,290 -- --
Redeemed (22,958) (78,927) (26,798) (56,634)
----------- ------------ ------------ ------------
Change in Class A (Investor) Shares 119,344 36,831 37,679 33,436
----------- ------------ ------------ ------------
............................................................................................................................
CLASS B SHARES:
Issued 173,638 125,862 108,014 131,936
Reinvested 101 265 -- --
Redeemed (14,534) (18,379) (22,839) (65,762)
----------- ------------ ------------ ------------
Change in Class B Shares 159,205 107,748 85,175 66,174
----------- ------------ ------------ ------------
............................................................................................................................
CLASS C SHARES:
Issued 2,804 -- 79 3,671
Redeemed (595) -- (85) --
----------- ------------ ------------ ------------
Change in Class C Shares 2,209 -- (6) 3,671
----------- ------------ ------------ ------------
............................................................................................................................
CLASS Y SHARES:
Issued 790,927 4,459,324 -- --
Reinvested 25,291 56,068 -- --
Redeemed (1,575,917) (3,647,279) -- --
----------- ------------ ------------ ------------
Change in Class Y Shares (759,699) 868,113 -- --
----------- ------------ ------------ ------------
............................................................................................................................
TRUST SHARES:
Issued -- -- 669,430 6,913,528
Redeemed -- -- (6,842,661) (2,336,030)
----------- ------------ ------------ ------------
Change in Trust Shares -- -- (6,173,231) 4,577,498
----------- ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 39
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 640,426 $ 2,282,789 $ 31,393 $ 1,123
Net realized gains (losses) from
investment and foreign currency
transactions 18,149,517 (889,405) 1,839,222 194,623
Change in unrealized
appreciation/depreciation from
investments and foreign currencies..... (7,869,003) 43,679,183 (874,233) 2,572,761
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 10,920,940 45,072,567 996,382 2,768,507
------------ ------------ ------------ ------------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares -- -- (37,334) (71,236)
Class B Shares -- -- -- (3,341)
Class C Shares -- -- -- (54)
Advisor Shares (3,582,645) (3,705,000) -- --
NET REALIZED GAINS FROM INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS:
Class A (Investor) Shares -- -- -- --
Class B Shares -- -- -- --
Class C Shares -- -- -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (3,582,645) (3,705,000) (37,334) (74,631)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (405,871) (112,413,621) 5,115,943 713,058
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS 6,932,424 (71,046,054) 6,074,991 3,406,934
............................................................................................................................
NET ASSETS:
Beginning of period 123,657,679 194,703,733 11,293,733 7,886,799
------------ ------------ ------------ ------------
End of period $130,590,103 $123,657,679 $ 17,368,724 $ 11,293,733
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Accumulated (dividends in excess of) net
investment income $ 789,868 $ 3,732,087 $ 71,758 $ 77,699
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
40 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $ 6,187,065 $ 74,256,371
Dividends reinvested -- -- 36,661 69,478
Cost of shares redeemed -- -- (1,646,788) (73,955,056)
----------- --------------- ----------- ------------
Class A (Investor) Shares capital
transactions -- -- 4,576,938 370,793
----------- --------------- ----------- ------------
...........................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 584,414 400,571
Dividends reinvested -- -- -- 3,234
Cost of shares redeemed -- -- (46,294) (67,981)
----------- --------------- ----------- ------------
Class B Shares capital
transactions -- -- 538,120 335,824
----------- --------------- ----------- ------------
...........................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 2,895 10,780
Dividends reinvested -- -- -- 54
Cost of shares redeemed -- -- (2,010) (4,393)
----------- --------------- ----------- ------------
Class C Shares capital
transactions -- -- 885 6,441
----------- --------------- ----------- ------------
...........................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 13,604,863 1,033,987,233 -- --
Dividends reinvested 1,888,285 2,711,050 -- --
Cost of shares redeemed (15,899,019) (1,149,111,904) -- --
----------- --------------- ----------- ------------
Advisor Shares capital
transactions (405,871) (112,413,621) -- --
----------- --------------- ----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (405,871) $ (112,413,621) $ 5,115,943 $ 713,058
----------- --------------- ----------- ------------
----------- --------------- ----------- ------------
...........................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 487,396 7,113,411
Reinvested -- -- 2,998 7,075
Redeemed -- -- (129,696) (6,989,865)
----------- --------------- ----------- ------------
Change in Class A (Investor)
Shares -- -- 360,698 130,621
----------- --------------- ----------- ------------
...........................................................................................................................
CLASS B SHARES:
Issued -- -- 47,560 40,360
Reinvested -- -- -- 339
Redeemed -- -- (3,812) (7,369)
----------- --------------- ----------- ------------
Change in Class B Shares -- -- 43,748 33,330
----------- --------------- ----------- ------------
...........................................................................................................................
CLASS C SHARES:
Issued -- -- 236 1,049
Reinvested -- -- -- 6
Redeemed -- -- (155) (439)
----------- --------------- ----------- ------------
Change in Class C Shares -- -- 81 616
----------- --------------- ----------- ------------
...........................................................................................................................
ADVISOR SHARES:
Issued 1,008,533 92,631,040 -- --
Reinvested 145,589 255,518 -- --
Redeemed (1,186,739) (101,337,125) -- --
----------- --------------- ----------- ------------
Change in Advisor Shares (32,617) (8,450,567) -- --
----------- --------------- ----------- ------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 41
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss $ (953,396) $ (1,565,842) $ (179,800) $ (234,805)
Net realized gains (losses) from
investment transactions 21,988,782 4,018,810 1,421,301 275,213
Change in unrealized
appreciation/depreciation from
investments (14,722,454) 65,152,323 (1,029,669) 4,550,177
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 6,312,932 67,605,291 211,832 4,590,585
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (60,680,363) 67,780,861 4,774,641 2,364,162
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS (54,367,431) 135,386,152 4,986,473 6,954,747
------------ ------------ ----------- -----------
...........................................................................................................................
NET ASSETS:
Beginning of period 326,071,811 190,685,659 21,041,172 14,086,425
------------ ------------ ----------- -----------
End of period $271,704,380 $326,071,811 $26,027,645 $21,041,172
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Accumulated (dividends in excess
of) net investment income $ (953,396) $ -- $ (179,800) $ --
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</Table>
42 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
................................................................................
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $ 6,818,570 $ 5,083,521
Cost of shares redeemed -- -- (2,662,027) (3,421,035)
------------ ------------- ----------- -----------
Class A (Investor) Shares capital
transactions -- -- 4,156,543 1,662,486
------------ ------------- ----------- -----------
...........................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 805,789 1,009,644
Cost of shares redeemed -- -- (157,991) (281,855)
------------ ------------- ----------- -----------
Class B Shares capital transactions -- -- 647,798 727,789
------------ ------------- ----------- -----------
...........................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 2,685 65,774
Cost of shares redeemed -- -- (32,385) (91,887)
------------ ------------- ----------- -----------
Class C Shares capital transactions -- -- (29,700) (26,113)
------------ ------------- ----------- -----------
...........................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 23,525,260 204,930,414 -- --
Cost of shares redeemed (84,205,623) (137,149,553) -- --
------------ ------------- ----------- -----------
Advisor Shares capital transactions (60,680,363) 67,780,861 -- --
------------ ------------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(60,680,363) $ 67,780,861 $ 4,774,641 $ 2,364,162
------------ ------------- ----------- -----------
------------ ------------- ----------- -----------
...........................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 635,230 554,127
Redeemed -- -- (247,370) (395,887)
------------ ------------- ----------- -----------
Change in Class A (Investor) Shares -- -- 387,860 158,240
------------ ------------- ----------- -----------
...........................................................................................................................
CLASS B SHARES:
Issued -- -- 78,879 119,900
Redeemed -- -- (15,463) (35,134)
------------ ------------- ----------- -----------
Change in Class B Shares -- -- 63,416 84,766
------------ ------------- ----------- -----------
...........................................................................................................................
CLASS C SHARES:
Issued -- -- 258 7,537
Redeemed -- -- (3,105) (11,212)
------------ ------------- ----------- -----------
Change in Class C Shares -- -- (2,847) (3,675)
------------ ------------- ----------- -----------
...........................................................................................................................
ADVISOR SHARES:
Issued 1,832,229 19,641,503 -- --
Redeemed (6,617,984) (13,824,591) -- --
------------ ------------- ----------- -----------
Change in Advisor Shares (4,785,755) 5,816,912 -- --
------------ ------------- ----------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 43
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)
Six months ended April 30,
2004 (Unaudited) 10.47 0.14 (0.06) 0.08 (0.16) (0.46) (0.62)
- ------------------------------------------------------------------------------------------------------------------------------
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)
Six months ended April 30,
2004 (Unaudited) 10.49 0.10 (0.06) 0.04 (0.12) (0.46) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------
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)
Six months ended April 30,
2004 (Unaudited) 10.49 0.09 (0.06) 0.03 (0.12) (0.46) (0.58)
- ------------------------------------------------------------------------------------------------------------------------------
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)
Six months ended April 30,
2004 (Unaudited) 10.48 0.15 (0.05) 0.10 (0.17) (0.46) (0.63)
- ------------------------------------------------------------------------------------------------------------------------------
<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%
Six months ended April 30,
2004 (Unaudited) 9.93 0.79%(c)(d) 2,848 1.10%(e) 2.84%(e) 1.18%(e) 24.42%
- ------------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April 30,
2004 (Unaudited) 9.95 0.41%(c)(h) 6,330 1.85%(e) 2.07%(e) 1.93%(e) 24.42%
- ------------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April 30,
2004 (Unaudited) 9.94 0.32%(c)(h) 1,368 1.85%(e) 2.12%(e) 1.93%(e) 24.42%
- ------------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April 30,
2004 (Unaudited) 9.95 1.01%(c) 28,707 0.85%(e) 3.07%(e) 0.92%(e) 24.42%
- ------------------------------------------------------------------------------------------------------------------------------
</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.
44 HSBC INVESTOR FAMILY OF FUNDS
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
Six months ended April 30, 2004
(Unaudited) 10.73 0.23 (0.08) 0.15
- ----------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
---------------------------------------
NET REALIZED
GAINS FROM NET ASSET
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%
Six months ended April 30, 2004
(Unaudited) (0.23) -- (0.23) 10.65 1.41%(b)
- ----------------------------------------------------------------------------------------------------
<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 ASSETS 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%
Six months ended April 30, 2004
(Unaudited) 104,533 0.63%(c) 4.24%(c) 16.14%
- ---------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 45
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 REALIZED
NET ASSET (LOSSES) FROM TOTAL GAINS FROM
VALUE, NET INVESTMENT AND FROM NET INVESTMENT AND
BEGINNING INVESTMENT FUTURES INVESTMENT INVESTMENT FUTURES TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $10.51 0.57 (0.49) 0.08 (0.57) (0.24) (0.81)
Year ended October 31,
2000 9.78 0.61 (0.01) 0.60 (0.62) -- (0.62)
Year ended October 31,
2001 9.76 0.60 0.77 1.37 (0.58) -- (0.58)
Year ended October 31,
2002 10.55 0.49 (0.14) 0.35 (0.52) -- (0.52)
Year ended October 31,
2003 10.38 0.40 0.13 0.53 (0.43) -- (0.43)
Six months ended April
30, 2004 (Unaudited) 10.48 0.20 (0.08) 0.12 (0.20) -- (0.20)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $10.51 0.49 (0.49) -- (0.49) (0.24) (0.73)
Year ended October 31,
2000 9.78 0.54 (0.01) 0.53 (0.54) -- (0.54)
Year ended October 31,
2001 9.77 0.52 0.76 1.28 (0.50) -- (0.50)
Year ended October 31,
2002 10.55 0.41 (0.13) 0.28 (0.44) -- (0.44)
Year ended October 31,
2003 10.39 0.32 0.13 0.45 (0.35) -- (0.35)
Six months ended April
30, 2004 (Unaudited) 10.49 0.16 (0.08) 0.08 (0.16) -- (0.16)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999(g) $10.46 0.47 (0.45) 0.02 (0.47) (0.24) (0.71)
Year ended October 31,
2000 9.77 0.55 (0.01) 0.54 (0.55) -- (0.55)
Year ended October 31,
2001 9.76 0.51 0.77 1.28 (0.50) -- (0.50)
Year ended October 31,
2002 10.54 0.41 (0.13) 0.28 (0.44) -- (0.44)
Year ended October 31,
2003 10.38 0.32 0.13 0.45 (0.35) -- (0.35)
Six months ended April
30, 2004 (Unaudited) 10.48 0.15 (0.07) 0.08 (0.16) -- (0.16)
- ---------------------------------------------------------------------------------------------------------------------------
<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 NET AVERAGE NET PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS ASSETS 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%
Six months ended April
30, 2004 (Unaudited) 10.40 1.15%(c)(d) 17,367 1.10%(e) 3.76%(e) 1.25%(e) 16.14%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $ 9.78 (0.01)(f) $ 345 1.79% 5.13% 3.37% 433.26%
Year ended October 31,
2000 9.77 5.67%(f) 279 1.85% 5.38% 4.03% 440.49%
Year ended October 31,
2001 10.55 13.43%(f) 1,494 1.85% 5.04% 3.32% 341.26%
Year ended October 31,
2002 10.39 2.76%(f) 6,124 1.85% 3.66% 2.18% 77.82%
Year ended October 31,
2003 10.49 4.38%(f) 7,430 1.85% 3.01% 1.96% 70.91%
Six months ended April
30, 2004 (Unaudited) 10.41 0.78%(f)(d) 7,389 1.85%(e) 3.03%(e) 2.00%(e) 16.14%
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999(g) $ 9.77 0.11%(f)(d) $ 152 1.95%(e) 4.96%(e) 3.50%(e) 433.26%
Year ended October 31,
2000 9.76 5.71%(f) 138 1.85% 5.38% 4.05% 440.49%
Year ended October 31,
2001 10.54 13.44%(f) 526 1.85% 5.11% 3.34% 341.26%
Year ended October 31,
2002 10.38 2.77%(f) 983 1.85% 3.75% 2.21% 77.82%
Year ended October 31,
2003 10.48 4.39%(f) 606 1.85% 3.06% 1.97% 70.91%
Six months ended April
30, 2004 (Unaudited) 10.40 0.79%(f)(d) 406 1.85%(e) 3.08%(e) 2.01%(e) 16.14%
- ------------------------------------------------------------------------------------------------------------------------------
</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.
46 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
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 DIVIDENDS
---------------------------------------- -------------------------------------
NET REALIZED
AND UNREALIZED NET
GAINS (LOSSES) REALIZED
NET ASSET FROM TOTAL GAINS FROM
VALUE, NET INVESTMENT FROM NET INVESTMENT
BEGINNING INVESTMENT AND FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- -----------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $10.93 0.46 (0.83) (0.37) (0.46) (0.02) (0.48)
Year ended October 31,
2000 10.08 0.46 0.33 0.79 (0.46) (0.02) (0.48)
Year ended October 31,
2001 10.39 0.41 0.54 0.95 (0.41) -- (0.41)
Year ended October 31,
2002 10.93 0.38 0.16 0.54 (0.38) -- (0.38)
Year ended October 31,
2003 11.09 0.38 0.12 0.50 (0.38) -- (0.38)
Six months ended April
30, 2004 (Unaudited) 11.21 0.17 (0.09) 0.08 (0.17) (0.06) (0.23)
- -----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $10.92 0.38 (0.83) (0.45) (0.38) (0.02) (0.40)
Year ended October 31,
2000 10.07 0.39 0.33 0.72 (0.39) (0.02) (0.41)
Year ended October 31,
2001 10.38 0.33 0.54 0.87 (0.33) -- (0.33)
Year ended October 31,
2002 10.92 0.30 0.16 0.46 (0.30) -- (0.30)
Year ended October 31,
2003 11.08 0.30 0.12 0.42 (0.30) -- (0.30)
Six months ended April
30, 2004 (Unaudited) 11.20 0.13 (0.10) 0.03 (0.13) (0.06) (0.19)
- -----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999 (g) $10.90 0.34 (0.77) (0.43) (0.34) (0.02) (0.36)
Year ended October 31,
2000 10.11 0.39 0.33 0.72 (0.39) (0.02) (0.41)
Year ended October
31, 2001 10.42 0.33 0.54 0.87 (0.33) -- (0.33)
Year ended October 31,
2002 10.96 0.30 0.16 0.46 (0.30) -- (0.30)
Year ended October 31,
2003 11.12 0.30 0.13 0.43 (0.30) -- (0.30)
Six months ended April
30, 2004 (Unaudited) 11.25 0.13 (0.10) 0.03 (0.13) (0.06) (0.19)
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31,
1999 $10.93 0.48 (0.84) (0.36) (0.48) (0.02) (0.50)
Year ended October 31,
2000 10.07 0.49 0.34 0.83 (0.49) (0.02) (0.51)
Year ended October 31,
2001 10.39 0.44 0.54 0.98 (0.44) -- (0.44)
Year ended October 31,
2002 10.93 0.41 0.16 0.57 (0.41) -- (0.41)
Year ended October 31,
2003 11.09 0.41 0.12 0.53 (0.41) -- (0.41)
Six months ended April
30, 2004 (Unaudited) 11.21 0.18 (0.09) 0.09 (0.18) (0.06) (0.24)
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES TO INCOME TO EXPENSES TO
END OF TOTAL PERIOD AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO
PERIOD RETURN (000'S) ASSETS ASSETS ASSETS TURNOVER(a)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $10.08 (3.62)%(b) $17,568 0.96% 4.22% 1.21%(c) 46.56%
Year ended October 31,
2000 10.39 8.03%(b) 12,401 0.93% 4.60% 1.06%(c) 34.12%
Year ended October 31,
2001 10.93 9.26%(b) 17,722 0.95% 3.91% 1.07%(c) 0.00%
Year ended October 31,
2002 11.09 5.08%(b) 16,341 0.95% 3.52% 0.95%(c) 30.70%
Year ended October 31,
2003 11.21 4.57%(b) 22,326 0.91% 3.39% 0.91% 29.79%
Six months ended April
30, 2004 (Unaudited) 11.06 0.62%(b)(d) 29,318 0.85%(e) 2.97%(e) 0.85%(e) 15.49%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $10.07 (4.30)%(f) $ 564 1.71% 3.48% 1.96%(c) 46.56%
Year ended October 31,
2000 10.38 7.27%(f) 828 1.70% 3.81% 1.74%(c) 34.12%
Year ended October 31,
2001 10.92 8.44%(f) 5,619 1.70% 3.05% 1.82%(c) 0.00%
Year ended October 31,
2002 11.08 4.30%(f) 12,699 1.70% 2.74% 1.70%(c) 30.70%
Year ended October 31,
2003 11.20 3.80%(f) 18,352 1.66% 2.64% 1.66% 29.79%
Six months ended April
30, 2004 (Unaudited) 11.04 0.16%(d)(f) 19,081 1.60%(e) 2.25%(e) 1.60%(e) 15.49%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999 (g) $10.11 (4.10)%(d)(f) $ 256 1.70%(e) 3.46%(e) 2.02%(c)(e) 46.56%
Year ended October 31,
2000 10.42 7.23%(f) 416 1.71% 3.77% 1.73%(c) 34.12%
Year ended October 31,
2001 10.96 8.40%(f) 1,523 1.70% 3.04% 1.83%(c) 0.00%
Year ended October 31,
2002 11.12 4.28%(f) 2,608 1.70% 2.74% 1.70%(c) 30.70%
Year ended October 31,
2003 11.25 3.87%(f) 3,252 1.66% 2.64% 1.66% 29.79%
Six months ended April
30, 2004 (Unaudited) 11.09 0.16%(d)(f) 2,539 1.61%(e) 2.25%(e) 1.61%(e) 15.49%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31,
1999 $10.07 (3.45)% $ 8,619 0.71% 4.49% 0.96%(c) 46.56%
Year ended October 31,
2000 10.39 8.41% 9,514 0.69% 4.82% 0.78%(c) 34.12%
Year ended October 31,
2001 10.93 9.53% 14,989 0.70% 4.19% 0.83%(c) 0.00%
Year ended October 31,
2002 11.09 5.34% 19,753 0.70% 3.76% 0.70%(c) 30.70%
Year ended October 31,
2003 11.21 4.84% 20,290 0.67% 3.67% 0.67% 29.79%
Six months ended April
30, 2004 (Unaudited) 11.06 0.75%(d) 19,252 0.60%(e) 3.25%(e) 0.60%(e) 15.49%
- ---------------------------------------------------------------------------------------------------------------------------
</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.
HSBC INVESTOR FAMILY OF FUNDS 47
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
VALUE, INVESTMENT INVESTMENT FROM NET INVESTMENT
BEGINNING INCOME AND FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- -----------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $16.95 0.05 3.32 3.37 (0.04) (0.39) (0.43)
Year ended October 31,
2000 19.89 0.06 (0.51) (0.45) (0.07) (1.89) (1.96)
Year ended October 31,
2001 17.48 0.03 (4.48) (4.45) (0.02) -- (0.02)
Year ended October 31,
2002 13.01 0.07 (2.76) (2.69) (0.03) -- (0.03)
Year ended October 31,
2003 10.29 0.04 1.80 1.84 (0.04) -- (0.04)
Six months ended April
30, 2004 (Unaudited) 12.09 -- 0.68 0.68 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $16.92 (0.08) 3.30 3.22 (0.01) (0.39) (0.40)
Year ended October 31,
2000 19.74 (0.07) (0.52) (0.59) -- (1.89) (1.89)
Year ended October 31,
2001 17.26 (0.08) (4.40) (4.48) -- -- --
Year ended October 31,
2002 12.78 (0.04) (2.70) (2.74) -- -- --
Year ended October 31,
2003 10.04 (0.04) 1.76 1.72 -- -- --
Six months ended April
30, 2004 (Unaudited) 11.76 (0.04) 0.65 0.61 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999 (d) $17.08 -- 3.19 3.19 (0.05) (0.39) (0.44)
Year ended October 31,
2000 19.83 (0.07) (0.51) (0.58) -- (1.89) (1.89)
Year ended October 31,
2001 17.36 (0.10) (4.42) (4.52) -- -- --
Year ended October 31,
2002 12.84 (0.05) (2.69) (2.74) -- -- --
Year ended October 31,
2003 10.10 (0.04) 1.76 1.72 -- -- --
Six months ended April
30, 2004 (Unaudited) 11.82 (0.04) 0.66 0.62 -- -- --
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31,
1999 $16.95 0.10 3.32 3.42 (0.09) (0.39) (0.48)
Year ended October 31,
2000 19.89 0.10 (0.51) (0.41) (0.11) (1.89) (2.00)
Year ended October 31,
2001 17.48 0.06 (4.47) (4.41) (0.06) -- (0.06)
Year ended October 31,
2002 13.01 0.12 (2.78) (2.66) (0.06) -- (0.06)
Year ended October 31,
2003 10.29 0.06 1.81 1.87 (0.07) -- (0.07)
Six months ended April
30, 2004 (Unaudited) 12.09 0.03 0.66 0.69 (0.02) -- (0.02)
- -----------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------
RATIO OF
NET
INVESTMENT
NET ASSET NET ASSETS RATIO OF INCOME
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)
- ----------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $19.89 20.23 %(b) $ 27,942 0.94% 0.26% 70.85%
Year ended October 31,
2000 17.48 (2.38)%(b) 22,558 0.93% 0.34% 91.81%
Year ended October 31,
2001 13.01 (25.49)%(b) 17,223 1.01% 0.14% 51.65%
Year ended October 31,
2002 10.29 (20.74)%(b) 16,881 0.96% 0.34% 62.60%
Year ended October 31,
2003 12.09 17.94 %(b) 23,131 1.07% 0.31% 72.30%
Six months ended April
30, 2004 (Unaudited) 12.77 5.66 %(b)(e) 33,430 1.23%(f) 0.07%(f) 101.25%
- ----------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $19.74 19.32 %(c) $ 1,775 1.69% (0.50)% 70.85%
Year ended October 31,
2000 17.26 (3.13)%(c) 1,604 1.65% (0.40)% 91.81%
Year ended October 31,
2001 12.78 (25.96)%(c) 1,389 1.76% (0.61)% 51.65%
Year ended October 31,
2002 10.04 (21.44)%(c) 1,708 1.70% (0.41)% 62.60%
Year ended October 31,
2003 11.76 17.13 %(c) 2,682 1.82% (0.44)% 72.30%
Six months ended April
30, 2004 (Unaudited) 12.37 5.19 %(c)(e) 3,327 1.98%(f) (0.67)%(f) 101.25%
- ----------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999 (d) $19.83 19.05 %(c)(e) $ 1,626 1.33%(f) (0.16)%(f) 70.85%
Year ended October 31,
2000 17.36 (3.11)%(c) 1,204 1.65% (0.37)% 91.81%
Year ended October 31,
2001 12.84 (26.04)%(c) 768 1.75% (0.60)% 51.65%
Year ended October 31,
2002 10.10 (21.34)%(c) 568 1.71% (0.43)% 62.60%
Year ended October 31,
2003 11.82 17.03 %(c) 503 1.79% (0.42)% 72.30%
Six months ended April
30, 2004 (Unaudited) 12.44 5.25 %(c)(e) 633 1.98%(f) (0.68)%(f) 101.25%
- ----------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31,
1999 $19.89 20.59 % $245,342 0.69% 0.51% 70.85%
Year ended October 31,
2000 17.48 (2.19)% 204,772 0.68% 0.58% 91.81%
Year ended October 31,
2001 13.01 (25.27)% 127,306 0.75% 0.40% 51.65%
Year ended October 31,
2002 10.29 (20.53)% 173,738 0.70% 0.60% 62.60%
Year ended October 31,
2003 12.09 18.26 % 39,751 0.72% 0.62% 72.30%
Six months ended April
30, 2004 (Unaudited) 12.76 5.70 %(e) 40,777 0.98%(f) 0.33%(f) 101.25%
- ----------------------------------------------------------------------------------------------------------------
</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.
48 HSBC INVESTOR FAMILY OF FUNDS
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
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET
BEGINNING OF INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL
PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS
- -------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2001 (b) $10.06 0.01 (1.15) (1.14) (0.01) (0.01)
Year ended October 31,
2002 8.91 0.04 (1.73) (1.69) (0.01) (0.01)
Year ended October 31,
2003 7.21 0.06 1.18 1.24 (0.06) (0.06)
Six months ended April
30, 2004 (Unaudited) 8.39 0.02 0.30 0.32 (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2001 (f) $ 9.54 (0.01) (0.64) (0.65) (0.01) (0.01)
Year ended October 31,
2002 8.88 (0.00)* (1.74) (1.74) -- --
Year ended October 31,
2003 7.14 (0.01) 1.18 1.17 (0.01) (0.01)
Six months ended April
30, 2004 (Unaudited) 8.30 (0.02) 0.31 0.29 -- --
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Six months ended April
30, 2004 (h) (Unaudited) $ 8.40 (0.01) 0.31 0.30 (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2001 (i) $10.00 0.02 (1.09) (1.07) (0.01) (0.01)
Year ended October 31,
2002 8.92 0.06 (1.73) (1.67) (0.03) (0.03)
Year ended October 31,
2003 7.22 0.07 1.19 1.26 (0.08) (0.08)
Six months ended April
30, 2004 (Unaudited) 8.40 0.04 0.30 0.34 (0.04) (0.04)
- -------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
VALUE, AT END OF EXPENSES TO INCOME (LOSS)
END OF TOTAL PERIOD AVERAGE NET TO AVERAGE PORTFOLIO
PERIOD RETURN (000'S) ASSETS NET ASSETS TURNOVER(a)
- -------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2001 (b) $8.91 (12.65)%(c)(d) $ 1,927 1.11%(e) 0.15 %(e) 43.13%
Year ended October 31,
2002 7.21 (18.97)%(d) 1,306 1.01% 0.39 % 59.85%
Year ended October 31,
2003 8.39 17.26 %(d) 1,827 1.04% 0.70 % 64.52%
Six months ended April
30, 2004 (Unaudited) 8.68 3.84 %(c)(d) 2,929 1.00%(e) 0.50 %(e) 32.78%
- -------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2001 (f) $8.88 (10.52)%(c)(g) $ 330 1.84%(e) (0.64)%(e) 43.13%
Year ended October 31,
2002 7.14 (19.59)%(g) 1,154 1.76% (0.30)% 59.85%
Year ended October 31,
2003 8.30 16.40 %(g) 2,235 1.79% (0.07)% 64.52%
Six months ended April
30, 2004 (Unaudited) 8.59 3.53 %(c)(g) 3,681 1.75%(e) (0.25)%(e) 32.78%
- -------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Six months ended April
30, 2004 (h) (Unaudited) $8.67 3.59 %(c)(g) $ 19 1.73%(e) (0.37)%(e) 32.78%
- -------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2001 (i) $8.92 (9.71)%(c) $219,221 0.82%(e) 0.38 %(e) 43.13%
Year ended October 31,
2002 7.22 (18.76)% 168,812 0.76% 0.66 % 59.85%
Year ended October 31,
2003 8.40 17.63 % 203,458 0.79% 0.96 % 64.52%
Six months ended April
30, 2004 (Unaudited) 8.70 4.06 %(c) 204,118 0.75%(e) 0.78 %(e) 32.78%
- -------------------------------------------------------------------------------------------------------------------
</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 C Shares commenced operations on November 3, 2003.
(i) Class Y Shares commenced operations on April 2, 2001.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 49
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 -- --
Six months ended April
30, 2004 (Unaudited) 7.95 (0.02) 0.31 0.29 -- --
- -------------------------------------------------------------------------------------------------------------
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 -- --
Six months ended April
30, 2004 (Unaudited) 7.75 (0.05) 0.31 0.26 -- --
- -------------------------------------------------------------------------------------------------------------
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 -- --
Six months ended April
30, 2004 (Unaudited) 7.80 (0.05) 0.31 0.26 -- --
- -------------------------------------------------------------------------------------------------------------
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 -- --
Six months ended April
30, 2004 (Unaudited) 8.01 (0.01) 0.31 0.30 -- --
- -------------------------------------------------------------------------------------------------------------
<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 NET PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS 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%
Six months ended April
30, 2004 (Unaudited) 8.24 3.65 %(c)(d) 1,907 1.07%(e) (0.53)%(e) 44.75%
- ------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April
30, 2004 (Unaudited) 8.01 3.35 %(c)(g) 6,891 1.83%(e) (1.28)%(e) 44.75%
- ------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April
30, 2004 (Unaudited) 8.06 3.33 %(c)(g) 56 1.83%(e) (1.28)%(e) 44.75%
- ------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April
30, 2004 (Unaudited) 8.31 3.75 %(c) 115,465 0.83%(e) (0.27)%(e) 44.75%
- ------------------------------------------------------------------------------------------------------------------------
</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 market values during the period.
See notes to financial statements.
50 HSBC INVESTOR FAMILY OF FUNDS
HSBC ADVISOR FUNDS TRUST -- INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
-------------------------------------------- -----------------------------------
NET REALIZED AND NET
UNREALIZED GAINS REALIZED
(LOSSES) FROM GAINS FROM
NET ASSET INVESTMENT TOTAL INVESTMENT
VALUE, NET AND FOREIGN FROM NET AND FOREIGN
BEGINNING INVESTMENT CURRENCY INVESTMENT INVESTMENT CURRENCY TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $13.24 0.09 5.87 5.96 (0.15) (0.47) (0.62)
Year ended October 31, 2000 18.58 0.11 0.75 0.86 (0.11) (1.20) (1.31)
Year ended October 31, 2001 18.13 0.09 (4.38) (4.29) -- (1.28) (1.28)
Year ended October 31, 2002 12.56 0.09 (1.73) (1.64) (0.19) -- (0.19)
Year ended October 31, 2003 10.73 0.20 2.02 2.22 (0.19) -- (0.19)
Six months ended April 30,
2004 (Unaudited) 12.72 0.07 1.11 1.18 (0.38) -- (0.38)
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------
RATIO OF
NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
VALUE, AT END OF EXPENSES INCOME TO
END OF TOTAL PERIOD TO AVERAGE AVERAGE NET PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS ASSETS TURNOVER(a)
- ---------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 1999 $18.58 46.92 % $172,004 1.05% 0.54% 34.26%
Year ended October 31, 2000 18.13 4.05 % 219,837 0.90% 0.51% 27.81%
Year ended October 31, 2001 12.56 (25.42)% 184,494 0.99% 0.51% 26.90%
Year ended October 31, 2002 10.73 (13.32)% 194,704 0.99% 0.70% 31.63%
Year ended October 31, 2003 12.76 21.03 % 123,658 1.07% 1.16% 68.51%
Six months ended April 30,
2004 (Unaudited) 13.52 9.04 %(b) 130,590 1.14%(c) 0.99%(c) 87.37%
- ---------------------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 51
HSBC INVESTOR FUNDS -- OVERSEAS EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
----------------------------------------- -------------------------------------
NET REALIZED
AND UNREALIZED NET REALIZED
GAINS (LOSSES) GAINS FROM
NET ASSET NET FROM INVESTMENT INVESTMENT
VALUE, INVESTMENT AND FOREIGN TOTAL FROM NET AND FOREIGN
BEGINNING INCOME CURRENCY INVESTMENT INVESTMENT CURRENCY TOTAL
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $11.64 (0.04) 5.32 5.28 (0.02) -- (0.02)
Year ended October 31,
2000 16.90 (0.11) 0.64 0.53 -- (0.22) (0.22)
Year ended October 31,
2001 17.21 (0.04) (4.05) (4.09) -- (1.46) (1.46)
Year ended October 31,
2002 11.66 (0.04) (1.34) (1.38) (0.12) (0.29) (0.41)
Year ended October 31,
2003 9.87 0.01 1.95 1.96 (0.10) -- (0.10)
Six months ended April
30, 2004 (Unaudited) 11.73 0.01 1.02 1.03 (0.04) -- (0.04)
- ------------------------------------------------------------------------------------------------------------------------
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 -- (0.22) (0.22)
Year ended October 31,
2001 16.85 (0.14) (3.95) (4.09) -- (1.46) (1.46)
Year ended October 31,
2002 11.30 (0.08) (1.34) (1.42) (0.03) (0.29) (0.32)
Year ended October 31,
2003 9.56 (0.06) 1.89 1.83 (0.05) -- (0.05)
Six months ended April
30, 2004 (Unaudited) 11.34 (0.03) 0.97 0.94 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
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 -- (0.22) (0.22)
Year ended October 31,
2001 17.00 (0.18) (3.95) (4.13) -- (1.46) (1.46)
Year ended October 31,
2002 11.41 (0.08) (1.36) (1.44) -- (0.29) (0.29)
Year ended October 31,
2003 9.68 (0.06) 1.93 1.87 (0.01) -- (0.01)
Six months ended April
30, 2004 (Unaudited) 11.54 (0.03) 0.99 0.96 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT RATIO OF
NET ASSET NET ASSETS EXPENSES TO LOSS TO EXPENSES TO
VALUE, END TOTAL AT END OF AVERAGE NET AVERAGE NET AVERAGE NET PORTFOLIO
OF PERIOD RETURN PERIOD (000'S) ASSETS ASSETS ASSETS(a) TURNOVER(b)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $16.90 45.41 %(c) $ 8,138 1.86% (0.30)% 2.44% 34.26%
Year ended October 31,
2000 17.21 3.05 %(c) 7,252 1.85% (0.49)% 2.43% 27.81%
Year ended October 31,
2001 11.66 (25.93)%(c) 6,940 1.85% (0.35)% 2.44% 26.90%
Year ended October 31,
2002 9.87 (12.42)%(c) 7,203 1.85% (0.18)% 2.28% 31.63%
Year ended October 31,
2003 11.73 20.09 %(c) 10,096 1.85% 0.07 % 2.34% 68.51%
Six months ended April
30, 2004 (Unaudited) 12.72 8.79 %(c)(d) 15,534 1.85%(e) 0.51 %(e) 2.00%(e) 87.37%
- ------------------------------------------------------------------------------------------------------------------------------
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 16.85 2.18 %(f) 358 2.60% (1.17)% 2.96% 27.81%
Year ended October 31,
2001 11.30 (26.52)%(f) 294 2.60% (1.09)% 3.18% 26.90%
Year ended October 31,
2002 9.56 (13.07)%(f) 588 2.60% (0.87)% 3.04% 31.63%
Year ended October 31,
2003 11.34 19.26 %(f) 1,076 2.60% (0.62)% 3.16% 68.51%
Six months ended April
30, 2004 (Unaudited) 12.28 8.29 %(d)(f) 1,703 2.60%(e) (0.20)%(e) 2.75%(e) 87.37%
- ------------------------------------------------------------------------------------------------------------------------------
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 17.00 2.10 %(f) 248 2.60% (1.14)% 2.96% 27.81%
Year ended October 31,
2001 11.41 (26.53)%(f) 139 2.60% (1.10)% 3.16% 26.90%
Year ended October 31,
2002 9.68 (13.08)%(f) 96 2.60% (1.00)% 3.04% 31.63%
Year ended October 31,
2003 11.54 19.28 %(f) 121 2.60% (0.64)% 3.17% 68.51%
Six months ended April
30, 2004 (Unaudited) 12.50 8.32 %(d)(f) 132 2.60%(e) (0.43)%(e) 2.79%(e) 87.37%
- ------------------------------------------------------------------------------------------------------------------------------
</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.
52 HSBC INVESTOR FAMILY OF FUNDS
HSBC ADVISOR FUNDS TRUST -- SMALL CAP EQUITY 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 GAINS FROM
BEGINNING OF INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL
PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- ---------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31,
1999 $11.48 (0.09) 2.65 2.56 (1.48) (1.48)
Year ended October 31,
2000 12.56 (0.10) 6.73 6.63 (1.38) (1.38)
Year ended October 31,
2001 17.81 (0.10) (3.65) (3.75) (2.74) (2.74)
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 -- --
Six months ended April
30, 2004 (Unaudited) 12.36 (0.04) 0.26 0.22 -- --
- ---------------------------------------------------------------------------------------------------------------
<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 NET PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS 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%
Six months ended April
30, 2004 (Unaudited) 12.58 1.78 %(b) 271,704 0.96%(c) (0.64)%(c) 59.71%
- --------------------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(b) Not annualized.
(c) Annualized.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 53
HSBC INVESTOR FUNDS -- OPPORTUNITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.................................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ --------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS TOTAL NET REALIZED
VALUE, NET (LOSSES) FROM FROM GAINS FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL
OF PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- --------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31,
1999 $11.33 (0.19) 2.78 2.59 (0.73) (0.73)
Year ended October 31,
2000 13.19 (0.26) 7.13 6.87 (1.31) (1.31)
Year ended October 31,
2001 18.75 (0.14) (3.58) (3.72) (5.43) (5.43)
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 -- --
Six months ended April
30, 2004 (Unaudited) 10.36 (0.06) 0.22 0.16 -- --
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31,
1999 $11.31 (0.23) 2.71 2.48 (0.73) (0.73)
Year ended October 31,
2000 13.06 (0.28) 6.93 6.65 (1.31) (1.31)
Year ended October 31,
2001 18.40 (0.23)* (3.47) (3.70) (5.43) (5.43)
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 -- --
Six months ended April
30, 2004 (Unaudited) 9.85 (0.10) 0.22 0.12 -- --
- --------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
1999 (g) $11.55 (0.10) 2.41 2.31 (0.73) (0.73)
Year ended October 31,
2000 13.13 (0.32) 7.01 6.69 (1.31) (1.31)
Year ended October 31,
2001 18.51 (0.24)* (3.49) (3.73) (5.43) (5.43)
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 -- --
Six months ended April
30, 2004 (Unaudited) 9.94 (0.11) 0.22 0.11 -- --
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES LOSS TO EXPENSES TO
END OF TOTAL PERIOD TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
PERIOD RETURN (000'S) NET ASSETS ASSETS 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%
Six months ended April
30, 2004 (Unaudited) 10.52 1.54 %(c)(d) 21,029 1.65%(e) (1.33)%(e) 1.76%(e) 59.71%
- ------------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April
30, 2004 (Unaudited) 9.97 1.22 %(d)(f) 4,628 2.40%(e) (2.08)%(e) 2.51%(e) 59.71%
- ------------------------------------------------------------------------------------------------------------------------------
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%
Six months ended April
30, 2004 (Unaudited) 10.05 1.11 %(d)(f) 371 2.40%(e) (2.08)%(e) 2.53%(e) 59.71%
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated using average shares.
(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.
54 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
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 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 APRIL 30, 2004
- ---- -------------------- --------------
Limited Maturity Fund HSBC Investor Limited Maturity Portfolio 50.1%
Fixed Income Fund HSBC Investor Fixed Income Portfolio 55.4%
Bond Fund HSBC Investor Fixed Income Portfolio 13.3%
International Equity Fund HSBC Investor International Equity Portfolio 59.7%
Overseas Equity Fund HSBC Investor International Equity Portfolio 7.9%
Small Cap Equity Fund HSBC Investor Small Cap Equity Portfolio 72.7%
Opportunity Fund HSBC Investor Small Cap Equity Portfolio 6.9%
</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, 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, Class A (Investor) Shares, Class B Shares and Class C Shares. Each
class of shares in the Funds has identical rights and privileges except
HSBC INVESTOR FAMILY OF FUNDS 55
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
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.
Under the Funds' organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, in the normal course of business,
the Funds enter into contracts with their vendors and others that provide
for general indemnifications. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Funds. However, based on experience, the Funds expect that risk
of loss to be remote.
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, 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, 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
56 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
gains or losses and changes in unrealized appreciation or depreciation
represent the Feeder Fund's share of such elements allocated from the
Portfolio.
FUTURES CONTRACTS:
The New York Tax-Free Bond Fund and Equity Fund invest in financial
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 financial 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 may 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. For the
six months ended April 30, 2004, the funds did not write any covered call
options.
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 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
HSBC INVESTOR FAMILY OF FUNDS 57
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
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.
REDEMPTION/EXCHANGE FEE:
Effective April 1, 2004, a redemption/exchange fee of 2.00% will be
charged for any shares redeemed or exchanged after holding them for less
than 30 days. This fee does not apply to shares purchased or exchanged into
the Funds prior to April 1, 2004. Additionally, this fee does not apply to
shares purchased through reinvested dividends or capital gains or shares
held in certain omnibus accounts or retirement plans that cannot implement
the fee. The redemption/exchange fee for the International Equity Fund and
Overseas Equity Fund was effective beginning September 1, 2003. For the six
months ended April 30, 2004 the following Funds collected
redemption/exchange fees as follows:
<Table>
<Caption>
FUND FEES COLLECTED
- ---- --------------
International Equity Fund................................... $12,613
Overseas Equity Fund........................................ 5,455
</Table>
FEDERAL INCOME TAXES:
Each Fund is a separate taxable entity for federal income tax purposes.
Each Fund has qualified and intends to qualify each year as a 'regulated
investment company' under Subchapter M of the Internal Revenue Code, as
amended 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. 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, 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%
Growth and Income Fund...................................... 0.55%
Mid-Cap Fund................................................ 0.55%
</Table>
HSBC also serves as Investment Adviser to the Equity Fund. Waddell &
Reed Investment Management Company ('W&R') and NWQ Investment Management
Co., LLC ('NWQ') serve as Sub-Investment Advisers to the Equity Fund and are
paid for their services directly by HSBC. On January 30, 2004, W&R and NWQ
replaced Alliance Capital Management L.P. and Institutional Capital
Corporation, respectively, as Sub-Investment Advisers to the Equity Fund.
For their services as Investment Adviser and Sub-Investment Advisers to the
Equity Fund, HSBC, W&R and NWQ 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>
58 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FAMILY OF FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
................................................................................
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 $450,459 in commissions from sales of the
funds of which $450,415 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
six months ended April 30, 2004, the Distributor retained $169 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.
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,
HSBC INVESTOR FAMILY OF FUNDS 59
HSBC INVESTOR FAMILY OF FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
................................................................................
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
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.
4. INVESTMENT TRANSACTIONS:
Purchases of and proceeds from sales, excluding short-term securities,
for the Funds for the six months ended April 30, 2004, totaled:
<Table>
<Caption>
PURCHASES SALES
--------- -----
New York Tax-Free Bond Fund................................. $15,699,435 $ 9,407,605
Equity Fund................................................. 76,906,912 71,186,237
Growth and Income Fund...................................... 69,757,675 72,580,971
Mid-Cap Fund................................................ 63,586,490 115,373,417
</Table>
Contributions and withdrawals of the respective Portfolios for the six
months ended April 30, 2004, totaled:
<Table>
<Caption>
CONTRIBUTIONS WITHDRAWALS
------------- -----------
Limited Maturity Fund....................................... $ 5,802,350 $10,654,215
Fixed Income Fund........................................... 13,821,111 21,869,948
Bond Fund................................................... 6,653,238 3,959,026
International Equity Fund................................... 13,633,931 17,662,739
Overseas Equity Fund........................................ 6,828,147 1,813,570
Small Cap Equity Fund....................................... 23,525,450 84,325,522
Opportunity Fund............................................ 7,709,972 3,037,511
</Table>
60 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FAMILY OF FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
................................................................................
5. 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.
6. SUBSEQUENT EVENT:
On May 7, 2004 the Equity Fund reorganization into two separate HSBC
Investor Funds, the HSBC Investor Growth Fund and HSBC Investor Value Fund,
took place. Shareholders of the Equity Fund became shareholders of both the
HSBC Investor Growth Fund and the HSBC Investor Value Fund as a result of
the reorganization, receiving shares of the HSBC Investor Growth Fund and
the HSBC Investor Value Fund having an aggregate net asset value equal to
the aggregate net asset value of their investment in the Equity Fund.
HSBC INVESTOR FAMILY OF FUNDS 61
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 62.7%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
FEDERAL HOME LOAN BANK - 2.0%
2.50%, 12/15/05........................ 1,600,000 1,608,488
----------
FEDERAL HOME LOAN MORTGAGE CORP. - 18.4%
3.25%, 2/25/08......................... 2,000,000 1,967,086
Pool #E92282, 5.50%, 11/1/17........... 1,753,210 1,800,241
4.50%, 10/25/27........................ 3,000,000 3,024,920
Pool #C01188, 7.00%, 6/1/31............ 572,597 604,669
Pool #C75371, 6.00%, 1/1/33............ 1,081,160 1,106,581
Pool #A11010, 5.00%, 7/1/33............ 1,860,116 1,804,810
Pool #A14659, 6.50%, 10/1/33........... 1,835,988 1,925,486
Pool #E96835, 4.50%, 6/1/18............ 2,239,840 2,209,633
----------
14,443,426
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 21.3%
5.75%, 2/15/08......................... 500,000 538,275
4.00%, 9/2/08.......................... 1,000,000 999,716
6.40%, 5/14/09......................... 1,000,000 1,001,480
5.50%, 3/15/11......................... 750,000 793,138
4.625%, 5/1/13......................... 1,250,000 1,196,256
Pool #535063, 6.50%, 12/1/14........... 482,132 510,859
Pool #535933, 6.50%, 5/1/31............ 416,897 433,964
Pool #593187, 7.00%, 11/1/31........... 1,317,203 1,392,434
Pool #695204, 5.50%, 3/1/33............ 1,524,793 1,522,426
Pool #694985, 6.00%, 3/1/33............ 2,123,379 2,173,159
Pool #704439, 5.00%, 5/1/18............ 2,217,640 2,233,263
Pool #740686, 6.50%, 10/1/33........... 1,804,576 1,881,978
Pool #753474, 5.50%, 11/1/33........... 1,934,671 1,931,496
----------
16,608,444
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.3%
Pool #2687, 6.00%, 12/20/28............ 722,063 740,874
Pool #3415, 5.50%, 7/20/33............. 1,837,430 1,838,077
----------
2,578,951
----------
U.S. TREASURY BILLS - 3.8%
0.785%, 5/6/04 (b)..................... 1,800,000 1,799,892
0.79%, 5/13/04 (b)..................... 1,200,000 1,199,743
----------
2,999,635
----------
U.S. TREASURY NOTES - 13.9%
2.00%, 11/30/04........................ 1,200,000 1,205,110
5.75%, 11/15/05........................ 1,800,000 1,900,969
5.625%, 2/15/06........................ 500,000 530,176
3.25%, 8/15/07......................... 750,000 756,211
5.50%, 2/15/08......................... 750,000 811,319
3.125%, 4/15/09........................ 3,300,000 3,227,425
4.875%, 2/15/12........................ 1,000,000 1,039,609
4.375%, 8/15/12........................ 500,000 500,957
4.00%, 2/15/14......................... 1,000,000 960,625
----------
10,932,401
----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS.................... 49,171,345
----------
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS - 30.2%
AEROSPACE & DEFENSE - 1.0%
Honeywell International, Inc., 5.125%,
11/1/06............................... 750,000 789,008
----------
AUTO MANUFACTURERS - 1.0%
General Motors Corp., 7.20%, 1/15/11... 750,000 797,513
----------
BANKING - 4.5%
Citigroup, Inc., 6.50%, 1/18/11........ 750,000 829,596
Corestates Capital, 6.75%, 11/15/06.... 1,000,000 1,096,485
Wachovia Corp., 6.15%, 3/15/09......... 750,000 813,314
Washington Mutual Financial Corp.,
6.25%, 5/15/06........................ 750,000 802,898
----------
3,542,293
----------
BROKERAGE SERVICES - 4.8%
Goldman Sachs Group, Inc., 5.70%,
9/1/12................................ 500,000 515,505
Goldman Sachs Group, Inc., 6.125%,
2/15/33............................... 750,000 721,427
Lehman Brothers Holdings, Inc., 6.25%,
5/15/06............................... 500,000 534,500
Lehman Brothers Holdings, Inc., 3.50%,
8/7/08................................ 1,000,000 981,877
Merrill Lynch & Co., 3.375%, 9/14/07... 1,000,000 1,001,214
----------
3,754,523
----------
CONSUMER PRODUCTS - 2.9%
Archer Daniels Midland Co., 5.935%,
10/1/32............................... 500,000 489,556
General Electric Co., 5.00%, 2/1/13.... 500,000 497,131
The Procter & Gamble Co., 4.00%,
4/30/05............................... 1,250,000 1,275,780
----------
2,262,467
----------
FINANCE - 10.3%
CIT Group, Inc., 4.125%, 2/21/06....... 1,000,000 1,025,297
CIT Group, Inc., 5.00%, 2/13/14........ 1,000,000 955,177
Countrywide Home Loans, Inc., 5.50%,
8/1/06................................ 1,250,000 1,315,393
Ford Motor Credit Co., 6.50%,
1/25/07............................... 1,250,000 1,325,555
General Electric Capital Corp., 6.75%,
3/15/32............................... 500,000 538,304
General Motors Accept Corp., 4.50%,
7/15/06............................... 250,000 255,416
General Motors Accept Corp., 5.125%,
5/9/08................................ 500,000 508,221
Morgan Stanley, 4.75%, 4/1/14.......... 750,000 700,718
SLM Corp., 3.95%, 8/15/08.............. 1,000,000 999,542
Washington Mutual, Inc., 4.625%,
4/1/14................................ 500,000 462,566
----------
8,086,189
----------
</Table>
62 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
GOVERNMENTS (FOREIGN) - 0.6%
United Mexican States, 4.625%,
10/8/08............................... 500,000 497,500
----------
INSURANCE - 0.3%
Travelers Property Casualty Corp.,
6.375%, 3/15/33....................... 250,000 248,831
----------
MEDIA - 1.9%
Comcast Corp., 5.30%, 1/15/14.......... 1,000,000 976,171
Time Warner, Inc., 6.125%, 4/15/06..... 500,000 530,263
----------
1,506,434
----------
PHARMACEUTICALS - 1.3%
Pfizer, Inc., 3.625%, 11/1/04.......... 1,000,000 1,011,114
----------
RETAIL - 0.7%
Wal-Mart Stores, Inc., 4.375%,
7/12/07............................... 500,000 516,222
----------
TELECOMMUNICATIONS - 0.6%
Deutsche Telekom International Finance
BV, 3.875%, 7/22/08................... 500,000 497,307
----------
UTILITIES - 0.3%
Pacific Gas & Electric Co., 1.81%,
4/3/06................................ 100,000 100,039
Pacific Gas & Electric Co., 4.80%,
3/1/14................................ 135,000 129,165
----------
229,204
----------
TOTAL CORPORATE OBLIGATIONS............ 23,738,605
----------
- ---------------------------------------------------------------
ASSET BACKED SECURITIES - 4.1%
American Express Credit Account Master
Trust 99 2 A, 5.95%, 12/15/06......... 750,000 751,508
Honda Auto Receivables Owner Trust 03
1 A4, 2.48%, 7/18/08.................. 2,500,000 2,497,689
----------
TOTAL ASSET BACKED SECURITIES.......... 3,249,197
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 2.2%
HSBC Investor Money Market Fund Class I
Shares*............................... 1,745,622 1,745,622
----------
TOTAL INVESTMENT COMPANIES............. 1,745,622
----------
TOTAL INVESTMENTS
(COST $77,925,328) (a) - 99.2%....... 77,904,769
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $78,504,755.
(a) Cost differs from value by net unrealized depreciation as
follows:
<Table>
Unrealized appreciation........... $ 802,870
Unrealized depreciation........... (823,429)
---------
Net unrealized depreciation....... $ (20,559)
---------
---------
</Table>
* Investment in affiliate.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 63
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 60.7%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
FEDERAL FARM CREDIT BANK - 1.1%
3.60%, 10/29/07, Callable 10/29/04 @
100.................................. 2,100,000 2,092,451
-----------
FEDERAL HOME LOAN BANK - 10.8%
2.875%, 9/15/06....................... 1,850,000 1,855,924
4.40%, 11/20/06....................... 4,500,000 4,668,894
5.05%, 2/6/13, Callable 5/17/04 @
100.................................. 5,795,000 5,740,481
5.00%, 2/7/13, Callable 2/7/05 @
100.................................. 6,085,000 6,025,914
6.25%, 8/27/18, Callable 8/27/04 @
100.................................. 2,200,000 2,207,753
-----------
20,498,966
-----------
FEDERAL HOME LOAN MORTGAGE CORP. - 9.4%
5.75%, 9/15/10........................ 4,910,000** 6,487,146
4.50%, 10/25/27....................... 7,000,000 7,058,147
Pool #C00368, 8.50%, 10/1/24.......... 85,326 93,225
Pool #C00922, 8.00%, 2/1/30........... 677,176 732,187
Pool #C54447, 7.00%, 7/1/31........... 187,068 197,546
Pool #C60712, 6.50%, 11/1/31.......... 1,616,287 1,683,232
Pool #C80387, 6.50%, 4/1/26........... 78,496 81,947
Pool #D62926, 6.50%, 8/1/25........... 46,403 48,471
Pool #G00951, 6.00%, 7/1/28........... 674,087 690,851
Pool #G01317, 7.00%, 10/1/31.......... 608,880 642,984
-----------
17,715,736
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 17.0%
6.75%, 1/25/08........................ 768,225 777,326
4.625%, 5/1/13........................ 3,300,000 3,158,118
5.75%, 11/7/17........................ 2,575,000 2,582,650
6.25%, 5/15/29........................ 1,798,000 1,909,041
6.625%, 11/15/30...................... 1,400,000 1,555,414
5.50%, 8/1/33......................... 12,777,449 12,756,482
Pool #253438, 8.50%, 9/1/30........... 182,355 196,988
Pool #329530, 7.00%, 12/1/25.......... 177,853 188,563
Pool #329655, 7.00%, 11/1/25.......... 114,021 120,888
Pool #356905, 3.36%, 10/1/36 (b)...... 497,173 509,883
Pool #398958, 6.50%, 10/1/12.......... 176,497 187,172
Pool #535332, 8.50%, 4/1/30........... 146,530 158,431
Pool #535440, 8.50%, 8/1/30........... 175,784 189,890
Pool #535608, 9.50%, 4/1/30........... 264,865 298,011
Pool #548965, 8.50%, 7/1/30........... 115,851 125,147
Pool #568486, 7.00%, 1/1/31........... 105,907 111,956
Pool #573752, 8.50%, 2/1/31........... 154,733 167,150
Pool #575328, 6.50%, 4/1/31........... 257,509 268,050
Pool #623129, 6.50%, 1/1/32........... 2,196,746 2,286,675
Pool #651901, 6.00%, 8/1/32........... 2,366,697 2,422,255
Pool #695777, 5.50%, 4/1/33........... 2,113,063 2,109,782
-----------
32,079,872
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.1%
Pool #346406, 7.50%, 2/15/23.......... 207,950 224,768
Pool #412530, 7.50%, 12/15/25......... 237,806 256,572
Pool #587112, 6.00%, 6/15/32.......... 3,490,276 3,580,881
Pool #780804, 10.00%, 12/15/20........ 157,284 176,616
Pool #780826, 9.50%, 5/15/18.......... 93,221 104,907
Pool #781300, 7.00%, 6/15/31.......... 523,973 557,445
Pool #781345, 6.00%, 10/15/31......... 869,712 891,947
-----------
5,793,136
-----------
U.S. TREASURY BILLS - 2.6%
0.96%, 6/24/04 (b).................... 5,000,000 4,993,680
-----------
U.S. TREASURY BONDS - 4.6%
2.25%, 2/15/07........................ 3,000,000 2,959,452
5.25%, 11/15/28....................... 2,000,000 1,965,390
5.375%, 2/15/31....................... 3,705,000 3,753,628
-----------
8,678,470
-----------
U.S. TREASURY NOTES - 12.1%
2.00%, 11/30/04....................... 4,000,000 4,017,032
1.625%, 1/31/05....................... 6,000,000 6,010,548
1.625%, 3/31/05....................... 3,500,000 3,502,870
1.625%, 2/28/06....................... 3,000,000 2,968,125
3.875%, 2/15/13....................... 1,120,000 1,077,213
3.625%, 5/15/13....................... 2,925,000 2,760,012
4.00%, 2/15/14........................ 2,600,000 2,497,625
-----------
22,833,425
-----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS................... 114,685,736
-----------
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS - 25.9%
AEROSPACE & DEFENSE - 1.0%
Lockheed Martin Corp., 8.20%,
12/1/09.............................. 1,250,000 1,484,774
Lockheed Martin Corp., 8.50%,
12/1/29.............................. 300,000 379,656
-----------
1,864,430
-----------
FINANCE - 18.5%
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11 (c)................... 642,000 693,902
Anthem Insurance, 9.125%, 4/1/10
(c).................................. 205,000 254,244
Anthem Insurance, 9.00%, 4/1/27 (c)... 305,000 404,931
AXA Financial, Inc., 6.50%, 4/1/08.... 165,000 180,818
Capital One Bank, 5.125%, 2/15/14..... 725,000 693,504
CIT Group, Inc., 7.375%, 4/2/07....... 4,725,000 5,243,539
Citigroup, Inc., 7.25%, 10/1/10....... 657,000 750,384
Citigroup, Inc., 5.625%, 8/27/12...... 2,500,000 2,606,880
EOP Operating LP, 7.50%, 4/19/29...... 163,000 176,196
Farmers Exchange Capital, 7.05%,
7/15/28 (c).......................... 388,000 376,634
Farmers Insurance Exchange, 8.625%,
5/1/24 (c)........................... 238,000 269,202
Florida Windstorm, 7.125%, 2/25/19
(c).................................. 608,000 697,014
Ford Motor Credit Co., 7.00%,
10/1/13.............................. 3,150,000 3,239,554
General Electric Capital Corp., 8.75%,
5/21/07.............................. 1,300,000 1,510,285
General Electric Capital Corp.,
7.375%, 1/19/10...................... 447,000 514,430
General Electric Capital Corp.,
6.875%, 11/15/10..................... 2,000,000 2,247,052
General Motors Acceptance Corp.,
8.00%, 11/1/31....................... 775,000 817,954
Goldman Sachs Capital I, 6.345%,
2/15/34.............................. 500,000 477,919
Goldman Sachs Group, Inc., 6.875%,
1/15/11.............................. 3,080,000 3,427,090
Hutchison Whampoa Finance CI Ltd.,
7.45%, 8/1/17 (c).................... 402,000 424,942
J.P. Morgan Chase & Co., 5.25%,
5/30/07.............................. 3,500,000 3,687,498
Metropolitan Life Insurance Co.,
7.80%,
11/1/25 (c).......................... 275,000 320,258
Morgan Stanley, 5.80%, 4/1/07......... 2,500,000 2,670,409
New York Life Insurance, 7.50%,
12/15/23 (c)......................... 250,000 259,653
PNC Institutional Capital Trust A,
7.95%, 12/15/26 (c).................. 187,000 200,727
Prime Property Funding II, 7.00%,
8/15/04 (c).......................... 210,000 213,431
Prudential Insurance Co., 8.30%,
7/1/25 (c)........................... 548,000 664,647
Travelers Property Casualty Corp.,
7.75%, 4/15/26....................... 1,000,000 1,179,153
</Table>
64 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Washington Mutual, Inc., 4.625%,
4/1/14............................... 1,000,000 925,132
-----------
35,127,382
-----------
GOVERNMENTS (FOREIGN) - 0.3%
United Mexican States, 8.125%,
12/30/19............................. 495,000 538,313
-----------
HEALTH CARE - 0.5%
Health Net, Inc., 8.375%, 4/15/11..... 295,000 348,243
Wyeth, 6.70%, 3/15/11................. 480,000 530,518
-----------
878,761
-----------
HOTELS & LODGING - 0.2%
Harrahs Operating Co., Inc., 8.00%,
2/1/11............................... 287,000 331,556
-----------
MEDIA - 0.2%
Viacom, Inc., 6.625%, 5/15/11......... 392,000 434,322
-----------
OIL & GAS - 1.1%
Anadarko Finance Co., 6.75%, 5/1/11
(c).................................. 1,250,000 1,377,618
Conoco, Inc., 6.95%, 4/15/29.......... 565,000 621,477
-----------
1,999,095
-----------
REFUSE SYSTEMS - 0.1%
Waste Management, Inc., 7.375%,
5/15/29.............................. 160,000 175,921
-----------
RENTAL -- AUTO AND EQUIPMENT - 1.8%
Hertz Corp., 1.66%, 8/13/04 (b)....... 3,500,000 3,500,021
-----------
TELECOMMUNICATIONS - 1.6%
Comcast Cable Communications Holdings,
Inc., 8.375%, 3/15/13................ 2,200,000 2,624,882
Lenfest Communications, 7.625%,
2/15/08.............................. 330,000 366,832
-----------
2,991,714
-----------
UTILITIES - 0.6%
Pacific Gas & Electric Co., 4.80%,
3/1/14............................... 480,000 459,256
Pacific Gas & Electric Co., 6.05%,
3/1/34............................... 350,000 330,995
RAS Laffan Liquid Natural Gas, 8.29%,
3/15/14 (c).......................... 348,000 403,874
-----------
1,194,125
-----------
TOTAL CORPORATE OBLIGATIONS........... 49,035,640
-----------
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.5%
Banc of America Commercial Mortgage,
Inc. 00 2 A2, 7.20%, 5/15/10......... 675,000 762,628
Chase Commercial Mortgage Securities
Corp. 99 2 A2, 7.20%, 1/15/32........ 700,000 793,716
DLJ Mortgage Acceptance Corp. IO 97
CF1 S, 0.945%, 5/15/30 (b) (c)....... 881,888 16,497
Fannie Mae IO 00 16 PS, 7.50%,
10/25/29 (b)......................... 237,036 20,189
Fannie Mae IO 01 4 SA, 6.45%,
2/17/31 (b).......................... 573,604 53,981
Fannie Mae IO 200 32 SV, 7.50%,
3/18/30 (b).......................... 135,124 8,885
Fannie Mae IO 270 2, 8.50%,
9/1/23 (d)........................... 133,110 27,434
Fannie Mae IO 296 2, 8.00%,
4/1/24 (d)........................... 149,741 27,633
Fannie Mae IO 306, 8.00%,
5/1/30 (d)........................... 237,526 49,162
FHA Weyerhauser, 7.43%, 1/1/24........ 81,265 81,525
First Union-Chase Commercial Mortgage
99 C2 A2, 6.645%, 6/15/31............ 597,000 655,456
Freddie Mac IO 1534 K, 6.275%,
6/15/23 (d).......................... 416,842 36,301
Freddie Mac IO 2141 SD, 7.05%,
4/15/29 (d).......................... 286,325 40,915
Freddie Mac IO 2247 SC, 6.40%,
8/15/30 (d).......................... 220,255 13,809
GE Capital Commercial Mortgage Corp.
01 1 A1, 6.08%, 5/15/33.............. 286,144 305,168
GMAC Commercial Mortgage Securities,
Inc. 98 C2 A2, 6.42%, 5/15/35........ 587,000 641,219
GMAC Commercial Mortgage Securities,
Inc. IO 96 C1 X2, 1.83%, 10/15/28
(b).................................. 403,586 15,134
Government National Mortgage
Association IO 99 29 SD, 6.90%,
3/16/26 (b).......................... 178,917 7,868
Government National Mortgage
Association IO 99 30 S, 7.50%,
8/16/29 (b).......................... 250,002 25,072
Government National Mortgage
Association IO 99 30 SA, 6.90%,
4/16/29 (b).......................... 308,894 29,502
Government National Mortgage
Association IO 99 32 SB, 6.90%,
7/16/27 (b).......................... 192,095 12,294
GS Mortgage Securities Corp. IO 97 GL
X2, 0.78%, 7/13/30 (b)............... 376,827 8,908
LB-UBS Commercial Mortgage Trust 00 C3
A1, 7.95%, 7/15/09................... 307,445 337,453
LB-UBS Commercial Mortgage Trust 00 C4
A2, 7.37%, 8/15/26................... 600,000 686,819
PNC Mortgage Acceptance Corp. 00 C2
A2, 7.30%, 10/12/33.................. 600,000 682,064
Ryland Mortgage Securities Corp. 94 4
C1, 3.84%, 9/25/30 (b)............... 521,564 521,073
Salomon Brothers Mortgage Securities
VII 00 C3 A2, 6.59%, 12/18/33........ 650,000 715,375
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS.......................... 6,576,080
-----------
- ----------------------------------------------------------------
ASSET BACKED SECURITIES - 4.4%
Citibank Credit Card Issuance Trust 00
A3, 6.875%, 11/16/09................. 1,115,000 1,237,845
Connecticut RRB Special Purpose Trust
CL&P-1 01 1 A5, 6.21%, 12/30/11...... 700,000 765,549
Detroit Edison Securitization Funding
LLC 01 1 A3, 5.875%, 3/1/10.......... 357,000 381,953
Detroit Edison Securitization Funding
LLC 01 1 A5, 6.42%, 3/1/15........... 417,000 459,936
MBNA Master Credit Card Trust 00 E A,
7.80%, 10/15/12...................... 600,000 708,623
MBNA Master Credit Card Trust 99 B A,
5.90%, 8/15/11....................... 527,000 570,262
Peco Energy Transition Trust 00 A A3,
7.625%, 3/1/10....................... 600,000 691,685
Peco Energy Transition Trust 01 A A1,
6.52%, 12/31/10...................... 550,000 610,518
PSE&G Transition Funding LLC 01 1 A6,
6.61%, 6/15/15....................... 355,000 396,996
Union Acceptance Corp. 01 C B, 4.73%,
11/9/09.............................. 2,500,000 2,575,110
-----------
TOTAL ASSET BACKED SECURITIES......... 8,398,477
-----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 65
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
(CONTINUED)
.................................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 4.3%
SHARES($) VALUE($)
---------- -----------
HSBC Investor Money Market Fund Class
I Shares*............................ 8,077,533 8,077,533
-----------
TOTAL INVESTMENT COMPANIES............ 8,077,533
-----------
TOTAL INVESTMENTS
(COST $180,231,010) (A) - 98.8%..... 186,773,466
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $188,994,375.
(a) Cost differs from value by net unrealized appreciation as follows:
<Table>
Unrealized appreciation......... $ 8,193,193
Unrealized depreciation......... (1,650,737)
-----------
Net unrealized appreciation..... $ 6,542,456
-----------
-----------
</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 represents the rates that were in effect on April
30, 2004. However, 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.
* Investment in affiliate.
** The principal amount of the security is denominated in Euro.
66 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 98.6%
SHARES VALUE($)
----------- -----------
AUSTRALIA - 0.9%
BlueScope Steel Ltd................... 418,300 1,763,279
WMC Resources Ltd..................... 85,800 295,803
-----------
2,059,082
-----------
BELGIUM - 1.7%
Agfa Gevaert NV....................... 57,700 1,306,687
Belgacom (b).......................... 18,300 554,662
KBC Bankverzekeringsholding........... 31,600 1,769,217
-----------
3,630,566
-----------
BRAZIL - 0.8%
Gerdau SA ADR......................... 16,700 351,034
Petroleo Brasileiro SA ADR............ 41,000 1,022,950
Unibanco GDR.......................... 13,000 254,800
Votorantim Celulos Papel SA ADR....... 6,400 200,960
-----------
1,829,744
-----------
CANADA - 3.6%
Bank of Nova Scotia................... 144,800 3,711,603
BCE, Inc.............................. 31,500 633,767
Canadian National Railway Co.......... 37,500 1,413,804
CP Railway Ltd........................ 59,500 1,323,379
Manulife Financial Corp............... 19,100 706,309
-----------
7,788,862
-----------
DENMARK - 0.8%
Danske Bank A/S....................... 82,100 1,835,820
-----------
FINLAND - 0.9%
Nokia Corp., Class A.................. 140,800 1,968,035
-----------
FRANCE - 7.3%
Assurances Generales de France........ 75,600 4,587,213
BNP Paribas SA........................ 58,900 3,507,002
Credit Agricole SA.................... 75,900 1,860,949
France Telecom SA (b)................. 32,800 783,674
Societe Generale (b).................. 33,700 2,786,615
Total SA.............................. 12,500 2,299,441
-----------
15,824,894
-----------
GERMANY - 7.2%
Continental AG........................ 45,000 1,930,886
E.ON AG............................... 42,300 2,798,408
Fraport AG (b)........................ 50,500 1,419,227
Fresenius Medical Care AG............. 22,800 1,574,220
HeidelbergCement AG (b)............... 47,600 2,153,671
MAN AG................................ 66,000 2,397,174
Siemens AG............................ 26,600 1,893,848
Volkswagen AG......................... 35,200 1,537,252
-----------
15,704,686
-----------
HUNGARY - 0.5%
MOL Magyar Olaj -- es Gazipari Rt.
GDR.................................. 31,700 1,131,135
-----------
INDIA - 0.6%
ICICI Bank Ltd. ADR................... 89,300 1,384,150
-----------
INDONESIA - 0.3%
PT Astra International Tbk............ 878,000 571,130
-----------
ITALY - 3.9%
Banca Intesa SpA...................... 539,492 1,772,536
ENI SpA............................... 241,500 4,903,222
Uni Credito Italiano SpA.............. 401,400 1,864,126
-----------
8,539,884
-----------
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
<Caption>
SHARES VALUE($)
----------- -----------
JAPAN - 23.6%
Canon, Inc............................ 110,000 5,698,553
Daito Trust Construction Co., Ltd..... 36,700 1,229,208
Daiwa House Industry Co., Ltd......... 171,000 1,892,308
Hitachi, Ltd.......................... 144,000 1,003,924
Honda Motor Co., Ltd.................. 96,600 3,845,708
ITOCHU Corp........................... 317,000 1,327,066
Japan Tobacco, Inc.................... 240 1,906,020
JFE Holdings, Inc..................... 104,700 2,307,303
Nippon Meat Packers, Inc.............. 151,000 1,789,305
Nissan Motor Co., Ltd................. 508,100 5,543,993
Promise Co., Ltd...................... 41,000 2,674,197
Sammy Corp............................ 43,000 1,803,989
Sony Corp............................. 12,510 477,973
Sumitomo Mitsui Financial Group,
Inc.................................. 588 4,376,872
Takeda Chemical Industries, Ltd....... 48,100 1,921,000
Tanabe Seiyaku Co., Ltd............... 129,000 1,234,419
The Tokyo Electric Power Co., Inc..... 90,600 1,935,058
Toyota Motor Co....................... 126,300 4,565,065
UFJ Holdings, Inc..................... 675 4,088,736
UNY Co., Ltd.......................... 146,000 1,699,001
-----------
51,319,698
-----------
LUXEMBOURG - 1.9%
Arcelor............................... 256,400 4,232,878
-----------
MEXICO - 0.8%
America Movil SA de CV, Series L ADR.. 21,900 740,220
Cemex SA de CV........................ 165,000 962,934
-----------
1,703,154
-----------
NETHERLANDS - 5.3%
ABN AMRO Holding NV................... 160,553 3,452,312
DSM NV................................ 60,200 2,871,146
ING Groep NV.......................... 68,107 1,442,879
Royal Dutch Petroleum Co.............. 78,300 3,801,052
-----------
11,567,389
-----------
NORWAY - 0.3%
Yara International ASA (b)............ 92,300 652,359
-----------
SINGAPORE - 2.6%
DBS Group Holdings Ltd. ADR........... 88,000 739,605
Flextronics International Ltd. (b).... 112,400 1,809,640
Singapore Telecommunications Ltd...... 2,266,520 3,099,494
-----------
5,648,739
-----------
SOUTH AFRICA - 1.1%
ABSA Group Ltd........................ 163,000 1,047,009
Sanlam Ltd............................ 615,600 769,494
Telkom South Africa Ltd. (b).......... 60,000 649,121
-----------
2,465,624
-----------
SOUTH KOREA - 1.6%
Industrial Bank of Korea (b).......... 88,300 640,175
Kookmin Bank ADR...................... 14,600 541,660
Pohang Iron & Steel Co. Ltd. ADR...... 34,200 1,051,650
Shinhan Financial Group Co., Ltd.
ADR.................................. 35,150 1,235,523
-----------
3,469,008
-----------
SPAIN - 3.7%
Banco Santander Central
Hispanoamericano SA.................. 122,300 1,300,047
Repsol SA............................. 155,000 3,241,295
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 67
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
(CONTINUED)
.................................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
----------- -----------
Tabacalera SA Class A................. 59,800 1,682,810
Telefonica SA......................... 123,227 1,816,636
-----------
8,040,788
-----------
SWEDEN - 1.4%
Svenska Cellusoa AB................... 77,800 3,028,060
-----------
SWITZERLAND - 3.5%
Credit Suisse Group................... 90,800 3,181,136
Givaudan SA........................... 3,000 1,490,234
Nestle SA............................. 11,548 2,915,841
-----------
7,587,211
-----------
TAIWAN - 1.0%
China Steel Corp. GDR................. 40,000 700,000
Compal Electronics, Inc............... 200,000 1,130,000
Gigabyte Technology Co., Ltd.......... 245,000 447,098
-----------
2,277,098
-----------
THAILAND - 0.4%
PTT Public Company Ltd................ 260,000 910,000
-----------
TURKEY - 0.3%
Akbank TAS............................ 140,000,000 647,755
-----------
UNITED KINGDOM - 22.6%
Abbey National PLC.................... 104,000 833,058
Associated British Foods PLC.......... 147,000 1,629,716
Barclays PLC.......................... 80,700 725,984
BP Amoco PLC.......................... 609,200 5,284,375
British American Tobacco PLC.......... 159,000 2,418,618
Commercial Union PLC.................. 340,000 3,310,125
George Wimpey PLC..................... 244,600 1,777,074
Glaxosmithkline PLC................... 267,500 5,525,758
InterContinental Hotels Group PLC..... 183,600 1,718,633
J Sainsbury PLC....................... 355,500 1,755,708
Lloyds TSB Group PLC.................. 282,100 2,111,866
Pearson PLC........................... 113,600 1,323,490
Rexam PLC............................. 217,600 1,754,827
RMC Group PLC......................... 132,300 1,379,566
Royal & Sun Alliance Insurance Group
PLC.................................. 736,000 1,039,554
Royal Bank Of Scotland Group PLC...... 97,600 2,922,102
Shell Transport & Trading Co. PLC..... 160,000 1,103,846
Signet Group PLC...................... 977,300 2,002,956
Taylor Woodrow PLC.................... 361,600 1,801,930
Trinity Mirror PLC.................... 145,600 1,590,185
Vodafone Group PLC.................... 2,011,053 4,875,111
Whitbread PLC......................... 169,400 2,237,028
-----------
49,121,510
-----------
TOTAL COMMON STOCKS................... 214,939,259
-----------
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 0.2%
Investors Bank Trust Cash Reserve..... 447,301 447,301
-----------
TOTAL INVESTMENT COMPANIES............ 447,301
-----------
- -----------------------------------------------------------------
RIGHTS & WARRANTS - 0.0%
UNITED KINGDOM - 0.0%
TI Automotive Ltd., Class A (b)....... 190,000 0
-----------
TOTAL RIGHTS & WARRANTS............... 0
-----------
TOTAL INVESTMENTS
(COST $209,397,640) (A) - 98.8%..... 215,386,560
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $218,029,659.
(a) Cost differs from value by net unrealized appreciation as follows:
<Table>
Unrealized appreciation........... $13,909,692
Unrealized depreciation........... (7,920,772)
-----------
Net unrealized appreciation....... $ 5,988,920
-----------
-----------
</Table>
(b) Represents non-income producing security.
ADR -- American Depositary Receipt
FDR -- Fiduciary Depositary Receipt
68 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
(CONTINUED)
................................................................................
<Table>
<Caption>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Automotive.................................................. 7.4%
Banking & Financial Services................................ 25.6%
Building & Construction..................................... 3.1%
Building Materials.......................................... 1.4%
Chemicals................................................... 1.2%
Computer Related............................................ 4.5%
Diversified Manufacturing Operations........................ 2.1%
Drugs -- Medical............................................ 3.8%
Electrical.................................................. 0.9%
Electronic Components & Semiconductors...................... 1.0%
Food & Beverage............................................. 5.0%
Insurance................................................... 3.3%
Leisure..................................................... 0.8%
Metals & Mining............................................. 4.6%
Manufacturing............................................... 2.0%
Multimedia.................................................. 1.6%
Oil & Gas................................................... 12.2%
Paper Products.............................................. 2.3%
Real Estate................................................. 0.6%
Restaurants................................................. 1.0%
Retail...................................................... 1.7%
Telecommunciations.......................................... 7.8%
Tobacco..................................................... 2.8%
Transportation.............................................. 1.9%
Investment Companies........................................ 0.2%
------
Total Investments........................................... 98.8%
Other assets in excess of liabilities....................... 1.2%
------
Net Assets.................................................. 100.0%
------
------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 69
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
(CONTINUED)
.................................................................................
At April 30, 2004, the Portfolio's open forward currency contracts were as
follows:
<Table>
<Caption>
CURRENCY CONTRACT UNREALIZED
DELIVERY AMOUNT VALUE APPRECIATION/
CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION)
- -------- ---- ---------------- ------------- ----- --------------
LONG CONTRACTS
British Pound...................................... 5/12/2004 847,892 $1,395,052 $1,505,294 $ 110,242
British Pound...................................... 5/12/2004 6,109 11,129 10,845 (284)
Japanese Yen....................................... 5/26/2004 257,560,237 2,380,878 2,333,454 (47,424)
Japanese Yen....................................... 5/26/2004 3,631,944 34,475 32,905 (1,570)
Japanese Yen....................................... 5/26/2004 3,631,944 34,475 32,905 (1,570)
Swiss Franc........................................ 5/12/2004 1,904,449 1,529,396 1,470,836 (58,560)
Swiss Franc........................................ 5/26/2004 3,077,919 2,472,666 2,377,964 (94,702)
---------- ---------- ---------
TOTAL LONG CONTRACTS............................................................. $7,858,071 $7,764,203 $ (93,868)
---------- ---------- ---------
---------- ---------- ---------
SHORT CONTRACTS
British Pound...................................... 5/12/2004 6,109 $ 11,129 $ 10,845 $ 284
British Pound...................................... 5/12/2004 6,110 11,129 10,845 284
British Pound...................................... 5/12/2004 841,783 1,529,396 1,494,449 34,947
Japanese Yen....................................... 5/26/2004 3,631,944 34,475 32,905 1,570
Japanese Yen....................................... 5/26/2004 261,192,181 2,472,666 2,366,359 106,307
Swiss Franc........................................ 5/12/2004 1,904,449 1,395,052 1,470,836 (75,784)
Swiss Franc........................................ 5/26/2004 3,077,919 2,380,878 2,377,964 2,914
---------- ---------- ---------
TOTAL SHORT CONTRACTS............................................................ $7,834,725 $7,764,203 $ 70,522
---------- ---------- ---------
---------- ---------- ---------
</Table>
70 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
.................................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 98.8%
SHARES VALUE($)
---------- -----------
ADVERTISING - 2.1%
Monster Worldwide, Inc. (b)............ 300,500 7,695,805
-----------
BANKING - 8.0%
East West Bancorp, Inc................. 137,500 7,745,375
Greater Bay Bancorp.................... 226,900 6,437,153
Southwest Bancorporation of Texas,
Inc................................... 207,300 8,430,891
The South Financial Group, Inc......... 138,600 3,839,220
Wintrust Financial Corp................ 73,400 3,485,766
-----------
29,938,405
-----------
BIOTECHNOLOGY - 2.6%
Celgene Corp. (b)...................... 189,400 9,790,086
-----------
COMMERCIAL SERVICES - 2.3%
Alliance Data Systems Corp. (b)........ 250,300 8,702,931
-----------
COMPUTER SOFTWARE - 7.0%
Ascential Software Corp. (b)........... 320,500 5,448,500
CheckFree Corp. (b).................... 201,400 6,050,056
SRA International, Inc. Class A (b).... 215,000 8,066,800
Transaction Systems Architects, Inc.
Class A (b)........................... 306,100 6,498,503
-----------
26,063,859
-----------
CONSTRUCTION - 1.8%
D. R. Horton, Inc...................... 227,650 6,556,320
-----------
CONSULTING SERVICES - 0.9%
LECG Corp. (b)......................... 182,600 3,469,400
-----------
CRUISE LINES - 1.6%
Royal Caribbean Cruises Ltd............ 152,000 6,160,560
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 6.1%
Actuant Corp. Class A (b).............. 176,000 6,015,680
AMETEK, Inc............................ 336,200 8,909,300
Roper Industries, Inc.................. 161,000 7,816,550
-----------
22,741,530
-----------
EDUCATIONAL SERVICES - 5.4%
Apollo Group, Inc. (b)................. 99,500 8,662,470
Career Education Corp. (b)............. 177,800 11,379,200
-----------
20,041,670
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 10.5%
ATMI, Inc. (b)......................... 227,400 5,020,992
Nvidia Corp. (b)....................... 339,400 6,971,276
Power Integrations, Inc. (b)........... 172,000 4,236,360
Semtech Corp. (b)...................... 296,100 6,224,022
Thermo Electron Corp. (b).............. 358,700 10,474,040
Varian Semiconductor Equipment
Associates, Inc. (b).................. 202,000 6,577,120
-----------
39,503,810
-----------
ENVIRONMENTAL SERVICES - 3.6%
Republic Services, Inc................. 268,900 7,749,698
Waste Connections, Inc. (b)............ 143,000 5,758,610
-----------
13,508,308
-----------
FINANCIAL SERVICES - 1.1%
CapitalSource, Inc. (b)................ 188,300 3,965,598
-----------
FOOD SERVICES - 1.3%
Performance Food Group Co. (b)......... 140,800 4,946,304
-----------
HEALTH CARE - 7.4%
Manor Care, Inc........................ 312,600 10,140,744
NDCHealth Corp......................... 205,200 4,692,924
Omnicare, Inc.......................... 136,700 5,670,316
PacifiCare Health Systems, Inc. (b).... 197,300 7,055,448
-----------
27,559,432
-----------
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
---------- -----------
HOSPITALS - 4.3%
Community Health Systems, Inc. (b)..... 312,500 8,059,375
Triad Hospitals, Inc. (b).............. 231,500 7,873,315
-----------
15,932,690
-----------
HUMAN RESOURCES - 0.0%
Employee Solutions, Inc. (b)........... 2,483 4
-----------
INSURANCE - 2.0%
Bristol West Holdings, Inc. (b)........ 200,100 4,102,050
Direct General Corp.................... 95,400 3,410,550
-----------
7,512,600
-----------
INTERNET RELATED - 3.7%
Concur Technologies, Inc. (b).......... 514,100 5,320,935
RSA Security, Inc. (b)................. 529,100 8,476,182
-----------
13,797,117
-----------
MEDIA - 4.5%
Entravision Communications Corp. (b)... 288,500 2,634,005
The E.W. Scripps Co. Class A........... 71,000 7,494,050
Westwood One, Inc. (b)................. 228,600 6,752,844
-----------
16,880,899
-----------
OIL & GAS - 8.7%
Amerada Hess Corp...................... 84,400 6,003,372
Chesapeake Energy Corp................. 626,000 8,607,500
Denbury Resources, Inc. (b)............ 55,300 1,009,778
Peabody Energy Corp.................... 215,000 10,081,350
Varco International, Inc. (b).......... 335,800 6,947,702
-----------
32,649,702
-----------
PHARMACEUTICALS - 3.6%
Medicines Co. (b)...................... 225,492 7,375,843
QLT, Inc. (b).......................... 161,500 4,355,655
Santarus, Inc. (b)..................... 136,600 1,758,042
-----------
13,489,540
-----------
RAILROAD EQUIPMENT - 1.0%
Wabtec Corp............................ 227,300 3,704,990
-----------
RETAIL - 6.3%
Cost Plus, Inc. (b).................... 175,500 6,353,100
Dollar Tree Stores, Inc. (b)........... 178,500 4,810,575
P.F. Chang's China Bistro, Inc. (b).... 115,300 5,633,558
Williams-Sonoma, Inc. (b).............. 212,000 6,885,760
-----------
23,682,993
-----------
STEEL PRODUCERS - 1.8%
United States Steel Corp............... 234,400 6,710,872
-----------
TELECOMMUNICATIONS - 1.2%
Advanced Fibre Communications, Inc.
(b)................................... 273,380 4,565,446
-----------
TOTAL COMMON STOCKS.................... 369,570,871
-----------
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 3.8%
HSBC Investor Money Market Fund Class I
Shares*............................... 14,051,313 14,051,313
-----------
TOTAL INVESTMENT COMPANIES............. 14,051,313
-----------
TOTAL INVESTMENTS
(COST $332,246,391) (a) - 102.6%..... 383,622,184
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $374,001,134.
(a) Cost differs from value by net unrealized appreciation as follows:
<Table>
Unrealized appreciation.......... $ 58,185,562
Unrealized depreciation.......... (6,809,769)
------------
Net unrealized appreciation...... $ 51,375,793
------------
------------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
ADR -- American Depositary Receipt
HSBC INVESTOR PORTFOLIOS 71
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2004 (UNAUDITED)
.............................................................................
<Table>
<Caption>
INTERNATIONAL
LIMITED MATURITY FIXED INCOME EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value $77,904,769 $186,773,466 $215,386,560 $383,622,184
Foreign currency -- 338,437 3,201,589 --
Interest and dividends receivable 638,916 1,970,578 1,059,344 37,715
Receivable for investments sold -- -- 210,962 483,035
Unrealized appreciation on forward
foreign currency contracts -- -- 256,548 --
Prepaid expenses 182 451 325 441
----------- ------------ ------------ ------------
TOTAL ASSETS 78,543,867 189,082,932 220,115,328 384,143,375
----------- ------------ ------------ ------------
............................................................................................................................
LIABILITIES:
Payable to custodian -- -- -- 229,817
Payable for investments purchased -- -- 1,450,579 9,628,768
Unrealized depreciation on forward
foreign currency contracts -- -- 279,894 --
Accrued expenses and other liabilities:
Investment management 25,213 61,848 181,566 260,167
Administration 3,553 9,095 10,292 16,189
Other 10,346 17,614 163,338 7,300
----------- ------------ ------------ ------------
TOTAL LIABILITIES 39,112 88,557 2,085,669 10,142,241
----------- ------------ ------------ ------------
............................................................................................................................
NET ASSETS:
Applicable to investors' beneficial
interest $78,504,755 $188,994,375 $218,029,659 $374,001,134
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
Investments, at cost $77,925,328 $180,231,010 $209,397,640 $332,246,391
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</Table>
72 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
................................................................................
<Table>
<Caption>
INTERNATIONAL
LIMITED MATURITY FIXED INCOME EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $1,561,190 $ 4,672,553 $ 17,246 $ --
Dividends 8,368 18,184 2,655,202 638,812
Dividends from affiliates 4,498 7,270 -- 6,758
Foreign tax withholding -- -- (381,382) --
---------- ----------- ------------ ------------
TOTAL INVESTMENT INCOME 1,574,056 4,698,007 2,291,066 645,570
---------- ----------- ------------ ------------
............................................................................................................................
EXPENSES:
Investment management 160,922 386,081 757,437 1,610,527
Administration 15,054 36,118 40,153 75,332
Accounting 28,244 32,981 44,617 23,758
Custodian 19,146 33,380 252,844 37,662
Trustee 281 401 736 874
Other 4,592 10,017 9,836 14,027
---------- ----------- ------------ ------------
TOTAL EXPENSES 228,239 498,978 1,105,623 1,762,180
---------- ----------- ------------ ------------
............................................................................................................................
NET INVESTMENT INCOME (LOSS) 1,345,817 4,199,029 1,185,443 (1,116,610)
---------- ----------- ------------ ------------
............................................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS, FUTURES AND FOREIGN
CURRENCIES:
Net realized gains from investment,
futures and foreign currency transactions 251,422 748,821 29,415,797 29,721,571
Change in unrealized
appreciation/depreciation from
investments, futures and foreign
currencies (651,645) (1,973,659) (12,410,020) (20,233,424)
---------- ----------- ------------ ------------
............................................................................................................................
Net realized/unrealized gains (losses)
from investment, futures and foreign
currency transactions (400,223) (1,224,838) 17,005,777 9,488,147
---------- ----------- ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 945,594 $ 2,974,191 $ 18,191,220 $ 8,371,537
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 73
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
.................................................................................
<Table>
<Caption>
LIMITED MATURITY PORTFOLIO FIXED INCOME PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,345,817 $ 5,193,602 $ 4,199,029 $ 15,566,715
Net realized gains from investment and
futures transactions 251,422 7,058,455 748,821 14,700,573
Change in unrealized
appreciation/depreciation from
investments and futures (651,645) (4,380,150) (1,973,659) (3,893,969)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 945,594 7,871,907 2,974,191 26,373,319
------------ ------------- ------------ -------------
............................................................................................................................
Proceeds from contributions 9,889,408 76,560,059 25,525,999 210,631,816
Fair value of withdrawals (16,818,536) (149,758,568) (43,056,372) (419,256,855)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (6,929,128) (73,198,509) (17,530,373) (208,625,039)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS (5,983,534) (65,326,602) (14,556,182) (182,251,720)
.............................................................................................................................
NET ASSETS:
Beginning of period 84,488,289 149,814,891 203,550,557 385,802,277
------------ ------------- ------------ -------------
End of period $ 78,504,755 $ 84,488,289 $188,994,375 $ 203,550,557
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</Table>
74 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
..............................................................................................................................
INTERNATIONAL EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 2004 YEAR ENDED APRIL 30, 2004 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2003 (UNAUDITED) OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 1,185,443 $ 2,659,063 $ (1,116,610) $ (1,839,018)
Net realized gains (losses) from
investment and foreign currency
transactions 29,415,797 (3,720,334) 29,721,571 5,028,175
Change in unrealized
appreciation/depreciation from
investments and foreign currencies (12,410,020) 61,679,947 (20,233,424) 88,818,863
------------- --------------- ------------ -------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 18,191,220 60,618,676 8,371,537 92,008,020
------------- --------------- ------------ -------------
............................................................................................................................
Proceeds from contributions 24,346,772 1,115,446,503 35,687,892 219,219,044
Fair value of withdrawals (26,312,897) (1,230,876,337) (96,239,751) (151,262,999)
------------- --------------- ------------ -------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (1,966,125) (115,429,834) (60,551,859) 67,956,045
------------- --------------- ------------ -------------
CHANGE IN NET ASSETS 16,225,095 (54,811,158) (52,180,322) 159,964,065
............................................................................................................................
NET ASSETS:
Beginning of period 201,804,564 256,615,722 426,181,456 266,217,391
------------- --------------- ------------ -------------
End of period $ 218,029,659 $ 201,804,564 $374,001,134 $ 426,181,456
------------- --------------- ------------ -------------
------------- --------------- ------------ -------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 75
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%
Six months ended April 30, 2004 (Unaudited) 78,505 0.57%(b) 3.35% (b) 24.42%
- ----------------------------------------------------------------------------------------------------------------------
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%
Six months ended April 30, 2004 (Unaudited) 188,994 0.52%(b) 4.36% (b) 16.14%
- ----------------------------------------------------------------------------------------------------------------------
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%
Six months ended April 30, 2004 (Unaudited) 218,030 1.03%(b) 1.11% (b) 87.37%
- ----------------------------------------------------------------------------------------------------------------------
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%
Six months ended April 30, 2004 (Unaudited) 374,001 0.88%(b) (0.56%)(b) 59.71%
- ----------------------------------------------------------------------------------------------------------------------
</Table>
(a) Limited Maturity Portfolio commenced operations on January 24, 2001.
(b) Annualized.
See notes to financial statements.
76 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED)
................................................................................
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.
Under the Portfolios' organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Portfolios. In addition, in the normal
course of business, the Portfolios enter into contracts with their vendors
and others that provide for general indemnifications. The Portfolios'
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Portfolios. However, based on
experience, the Portfolios expect that risk of loss to be remote.
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.
HSBC INVESTOR PORTFOLIOS 77
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
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 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
78 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) (CONTINUED)
.................................................................................
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.
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. The
Bernstein Unit of Alliance Capital Management L.P. 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 30, 2004, the Bernstein
Unit of Alliance Capital Management L.P. replaced Capital Guardian Trust
Company as the Sub-Investment Adviser to the International 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 The Bernstein Unit of Alliance Capital Management
L.P. 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>
HSBC INVESTOR PORTFOLIOS 79
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED)
(CONTINUED)
................................................................................
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 Portfolios.
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 six months ended April 30, 2004, each Portfolio purchased and
sold securities, excluding short-term securities, in the following amounts:
<Table>
<Caption>
PURCHASES SALES
--------- -----
Limited Maturity Portfolio................................ $ 18,159,700 $ 25,342,062
Fixed Income Portfolio.................................... 27,877,922 60,567,475
International Equity Portfolio............................ 186,756,240 181,718,364
Small Cap Equity Portfolio................................ 231,079,619 232,828,345
</Table>
80 HSBC INVESTOR PORTFOLIOS
[THIS PAGE INTENTIONALLY LEFT BLANK]
HSBC INVESTOR PORTFOLIOS 81
[THIS PAGE INTENTIONALLY LEFT BLANK]
82 HSBC INVESTOR PORTFOLIOS
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
Waddell & Reed Investment Management Company
6300 Lamar Avenue
Overland Park, KS 66202
NWQ Investment Management Co., LLC
2049 Century Park East, 4th Floor
Los Angeles, CA 90067
HSBC Investor International Equity Portfolio
The Bernstein Unit of Alliance
Capital Management, L.P.
1345 Avenue of the Americas, 39th Floor
New York, NY 10105
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 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.
HSB -0008 06/04
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.
Not applicable - only for annual reports.
The registrant must briefly describe the nature of any amendment, during
the period covered by the report, to a provision of its 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, and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of
this Item. The registrant must file a copy of any such amendment as an
exhibit pursuant to Item 11(a)(1), unless the registrant has elected to
satisfy paragraph (f) of this Item by posting its code of ethics on its
website pursuant to paragraph (f)(2) of this Item, or by undertaking to
provide its code of ethics to any person without charge, upon request,
pursuant to paragraph (f)(3) of this Item.
If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the 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, that relates
to one or more items set forth in paragraph (b) of this Item, the
registrant must briefly describe the nature of the waiver, the name of the
person to whom the waiver was granted, and the date of the waiver.
During the period covered by the report, with respect to the registrant's
code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions; there have been no amendments to, nor any
waivers granted from, a provision that relates to any element of the code
of ethics definition enumerated in paragraph (b) of this Item 2.
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) Not applicable - only for annual reports.
3(a)(2) Not applicable - only for annual reports.
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.
(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.
Not applicable - only for annual reports.
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. Schedule of Investments.
File Schedule I - Investments in securities of unaffiliated issuers as of the
close of the reporting period as set forth in 'SS' 210.12-12 of Regulation S-X,
unless the schedule is included as part of the report to shareholders filed
under Item 1 of this Form.
Not applicable.
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. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
If the registrant is a closed-end management investment company,
provide the information specified in paragraph (b) of this Item with respect to
any purchase made by or on behalf of the registrant or any "affiliated
purchaser," as defined in Rule 10b-18(a)(3) under the
Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of
the registrant's equity securities that is registered by the registrant pursuant
to Section 12 of the Exchange Act (15 U.S.C. 781).
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
Not applicable - the Registrant does not have such procedures.
Item 10. 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)).
The registrant's principal executive officer and principal financial
officer have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant on Form N-CSR is (i) accumulated and communicated to
the investment company's management, including its certifying officers, to allow
timely decisions regarding required disclosure; and (ii) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(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 11. 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.
Not applicable - only for annual reports.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2(a)
under the Act (17 CFR 270.30a-2).
Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1
under the Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons.
Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange
Act, provide the certifications required by rule 30a-2(b) under the Act as an
exhibit. A certification furnished pursuant to this paragraph will not be deemed
"filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to
the liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the registrant incorporates it by
reference.
Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
HSBC Investor Portfolios
By: /s/ Richard A. Fabietti
------------------------------------------------------------------------
Richard A. Fabietti
President
Date: July 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: July 2, 2004
By: /s/ Richard A. Fabietti
------------------------------------------------------------------------
Richard A. Fabietti
President
Date: July 2, 2004
STATEMENT OF DIFFERENCES
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The section symbol shall be expressed as ..................................'SS'
The dagger symbol shall be expressed as................................... 'D'