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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: 811-07583
HSBC ADVISOR FUNDS TRUST
(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: October 31, 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).
Annual Report
[GRAPHIC]
HSBC Investor
Family of Funds
October 31, 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 Growth Fund
HSBC Investor Value 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
Annual Report - October 31, 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 Growth and Income Fund................................. 23
HSBC Investor Mid-Cap Fund........................................... 25
Statements of Assets and Liabilities................................... 27
Statements of Operations............................................... 29
Statements of Changes in Net Assets.................................... 31
Financial Highlights................................................... 43
Notes to Financial Statements.......................................... 55
Report of Independent Registered Public Accounting Firm................ 63
Table of Shareholder Expenses.......................................... 64
Special Meeting of Shareholders........................................ 66
Board of Trustees...................................................... 67
HSBC Investor Portfolios
Schedules of Portfolio Investments
HSBC Investor Limited Maturity Portfolio............................ 69
HSBC Investor Fixed Income Portfolio................................ 71
HSBC Investor Growth Portfolio...................................... 74
HSBC Investor Value Portfolio....................................... 75
HSBC Investor International Equity Portfolio........................ 76
HSBC Investor Small Cap Equity Portfolio............................ 79
Statements of Assets and Liabilities................................... 80
Statements of Operations............................................... 81
Statements of Changes in Net Assets.................................... 82
Financial Highlights................................................... 85
Notes to Financial Statements.......................................... 86
Report of Independent Registered Public Accounting Firm................ 91
Table of Shareholder Expenses.......................................... 92
Board of Trustees...................................................... 94
Privacy Policy......................................................... 96
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."
Institute for Supply Management (ISM) exists to educate, develop, and advance
the purchasing and supply management profession.
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 Large-Cap Core Average consists of funds that, by portfolio
practice, invest at least 75% of their equity assets in companies strictly
outside of the U.S. with market capitalizations (on a three-year weighted basis)
greater than the 250th largest company in the S&P/Citigroup World ex-U.S. Broad
Market Index.
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.
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.
Volatility Index (VIX) measures market expectation of near term volatility
conveyed by stock index option prizes.
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 annual reports for the HSBC Investor
Family of Funds for the twelve months ended October 31, 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
December 2004
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 1
Commentary From the Investment Manager
HSBC Asset Management (Americas) Inc.
U.S. Economic Review
The United States economy produced sustained growth during the 12-month period
ended October 31, 2004. Stronger capital spending helped support an economic
recovery despite high oil prices and sporadic job growth.
The Federal Reserve Board (the "Fed") kept short-term interest rates at the
historically low level of 1% during the first seven months of the period. That
accommodative monetary policy encouraged businesses and consumers to spend,
helping support an economic expansion that began in early 2003. The Fed raised
the federal funds rate three times during the second half of the period,
bringing the rate to 1.75% in an effort to restrain inflation as the economy
grew.
Inflation showed signs of picking up during 2004, after a long period of
disinflation. Expanding economies in the U.S., China, India and other
countries boosted demand for oil and other commodities, and prices on those
items climbed as a result. Hurricanes led to disruptions in the oil supply,
which also boosted oil prices, as did fears about terrorism and instability in
the Middle East. Crude oil prices climbed past $50 per barrel--very high by
historical standards. Higher oil and commodity prices pushed inflation higher,
but that effect was partially offset by increases in productivity.
High costs for oil and commodities weighed on the economy by forcing consumers
and businesses to curtail investment and spending in other areas. Meanwhile,
the rate of job growth fluctuated considerably from month to month, as
cautious businesses struggled with an uncertain economic and political
outlook. Consumer confidence and spending also fluctuated. Consumer spending
benefited early in the period from low mortgage rates, which allowed
homeowners to free up cash by refinancing loans. That trend abated during
2004, after most eligible consumers had taken advantage of refinancing
opportunities.
Manufacturing activity grew strongly. Exporters got a boost from weakness in
the dollar, which made their prices more attractive to foreign consumers.
Corporate profits came in higher than expected throughout the period, although
some firms began warning of a likely earnings slowdown in 2005.
Global Economic Review
The global economy produced strong growth during the 12-month period. The
International Monetary Fund projected that the global economy would grow 5% in
2004, which would be the fastest rate in 30 years.
Asia's surging economies led the worldwide economic expansion. China and India
grew rapidly, and demand from those countries boosted growth in surrounding
nations such as Taiwan, South Korea and Australia. For example, China's growth
created demand for goods and services from Japan, bolstering that country's
economic recovery. Unemployment in Japan fell, while exports, profits and
capital spending grew.
Europe's economy improved moderately. Industrial activity increased
significantly, and the services sector also gained. But unemployment remained
high throughout the period, at approximately 9%, weighing down consumer
spending. A strong euro early in the period hurt exports, which had been a
primary driver of growth. European companies in response cut costs and limited
job growth. The U.K.'s economy continued to strengthen, powered by rising
employment and solid retail and housing markets.
Emerging economies in Latin America benefited from rising commodity prices and
growing exports. Mexico's peso weakened early in the period, boosting its
exports. Meanwhile, Brazil's trade surplus pushed up the value of that
country's currency, the real, and its central bank was able to reduce its high
interest rates.
Market environment
U.S. equities generated sizable gains during the first third of the 12-month
period, then declined significantly. The market was characterized by a great
deal of volatility, as investors tried to weigh the potential impacts of
positive factors, such as economic growth and corporate profits, with negative
factors including problems in Iraq, rising energy prices, uneven job growth,
political uncertainty and the risk of terrorism. Value stocks outperformed
growth stocks throughout much of the period. Energy stocks led the market,
supported by rising energy prices.
2 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Commentary From the Investment Manager - (continued)
HSBC Asset Management (Americas) Inc.
The stock market's early rally was broad-based, as many sectors benefited from
signs of sustainable economic growth. Small-cap stocks led the market during
this period, due to investors' belief that small companies' earnings would
benefit the most from an improving economy.
The market began to stagnate in spring, as slower-than-expected job growth and
the prospect of rising interest rates caused many investors to revise their
expectations. Investors shifted their emphasis to large-cap stocks, which
typically fare best during periods of rising interest rates. Financial stocks
lagged during this period, due to fears that rising rates and regulatory
difficulties would eat into profit margins.
Stocks fell during the summer, led by large losses among technology shares.
High oil prices seemed likely to slow economic growth, causing investors to
question their assumptions about earnings growth and stock valuations. Shares
of semiconductor firms suffered especially poor performance, as demand
weakened and inventories climbed.
The market rebounded in early fall. Technology stocks improved, led by a
strong recovery in semiconductor stocks, and energy stocks continued their
strong run. Those sectors helped offset weak performance by health care
stocks, which suffered from fears about weak drug pipelines, patent
expirations, and the prospect for increased government regulation.
International markets outperformed U.S. equities during the period. European
stocks generated solid gains, as investors came to believe that the region's
economic recovery was sustainable. Japan's market continued to benefit from
the country's improving economy. Emerging markets were very volatile: They
climbed early in the period, then fell dramatically during summer, and then
rebounded strongly during early fall. Value stocks generally led international
markets during the 12-month period.
Bond yields fluctuated as investors tried to gauge the strength of job growth
and the economy. Treasury yields fell early in the period on weak job-growth
data, and then rose in anticipation of a rate increase by the Federal Reserve.
High oil prices during the summer seemed likely to slow the economy, and
yields fell as a result.
Investment-grade corporate bonds performed well during much of the period.
Investors found corporate yields attractive, given the low yields offered by
Treasury bonds and very strong corporate balance sheets.
New in 2004
HSBC introduced the HSBC Investor Growth Fund and the HSBC Investor Value Fund
on May 7, 2004. The objective of the Growth Fund is long-term growth of
capital, primarily investing in U.S. and foreign equity securities of high
quality companies. The objective of the Value Fund is long-term growth of
capital and income primarily investing in U.S. and foreign equity securities
of companies with large and medium capitalizations.
The HSBC Investor Growth Fund is sub-advised by Waddell & Reed Investment
Management Company. The HSBC Investor Value Fund is sub-advised by NWQ
Investment Management Company, LLC. To obtain performance information current
to the most recent month end, please call 1-800-782-8183.
See notes to financial statements. 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
Fixed Income 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 Omaster-feeder,O 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 3.90%, (without sales charge) for the Class A (Investor)
Shares and 4.25%, for the Class Y Shares during the twelve-month period ended
October 31, 2004. That compared to a return of 4.88% for Lehman Brothers
Intermediate Aggregate Bond Index.
Past performance is no guarantee of future results.
The Fund was overweight the Corporate and U.S. Agency sectors while
under-weight the U.S. Treasury sector during the review period. In addition,
the Fund maintained a "barbell" position along the yield curve. These
strategies enhanced the Fund's performance overall however the Fund did
slightly underperform its benchmark for the period.
For a majority of the review period, the Fed left the target on the federal
funds rate unchanged at 1.00%. Then on June 30th, at their scheduled Federal
Open Market Committee ("FOMC") meeting they raised the funds rate to 1.25% and
continued on that course with their next scheduled meetings. At earlier FOMC
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 Gross
Domestic Product(4) (the "GDP") 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 spreads 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 of 2003 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
moves 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 as
evident from the latest reading in the Unemployment Rate of 5.4% from 6% a
year earlier. It appeared that the economy was firing on all cylinders.
Manufacturing cooled slightly from mid-year levels, but remained above 50 for
the remainder of period according to the Institute for Supply Management. A
reading above 50 suggests expansion in manufacturing activity. The consumer
sectors such as housing, retail sales, personal income and personal spending
remained solid. On the inflation front, the year-over-year change in the
overall Producer Price Index(4) declined slightly to 3.3% from 3.4%, while the
Consumer Price Index(4) fell to 2.5% from 2.7% for the same period. At the end
of the review period, text from the Federal Reserve Board's Summary of
Commentary on Current Economic Conditions (Beige Book) was released. Reports
from the twelve federal districts generally suggested that economic activity
continued to expand in September and early October. Capital spending and
hiring appeared to pick up modestly, with hiring varied by region and
industry. The report also indicated that wage pressures remained stable and
that firms across the nation expressed concern regarding higher input costs,
especially for petroleum-based products, energy, metals and construction
materials.
We are convinced that downside risk is significantly greater than upside risk
for bonds and we maintain a defensive outlook. Relative valuations and our
monetary policy forecast both provide substantial support for the current
outlook. Hence, we believe the Fed will tighten policy over a 12-month time
horizon as the FOMC continues its `measured' removal of monetary stimulus.
Recent economic releases are more positive than previously observed indicating
the economy's possible emergence from the summer `soft patch'. Uncertainties
surrounding the growth implications of China's interest rate increase, and oil
volatility continues to keep a bid in bonds. Our view on corporate credit is
neutral. We feel that the stable credit environment will maintain spreads near
current levels but are focused on the carry benefits of credit exposure. As
such, the Fund's interest rate profile and sector exposure will be positioned
accordingly.
4 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor Limited Maturity Fund - As of October 31, 2004
Value of a $10,000 Investment
HSBC Investor Limited Lehman Brothers
Maturity Fund Intermediate Aggregate
Class Y (Adviser) Bond Funds Index
--------------------- -----------------------
1/23/01.............................. 10,000 10,000
12/31/01.............................. 10,769 10,695
12/31/02.............................. 11,581 11,712
12/31/03.............................. 11,969 12,157
10/31/04.............................. 12,356 12,608
Value of a $10,000 Investment
HSBC Investor Limited Lehman Brothers
Maturity Fund Intermediate Aggregate
Class A (Investor)(1) Bond Funds Index
--------------------- -----------------------
2/7/01............................. 9,526 10,000
12/31/01............................. 10,160 10,695
12/31/02............................. 10,901 11,712
12/31/03............................. 11,238 12,157
10/31/04............................. 11,567 12,608
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 3 Since
AS of October 31, 2004 Date Year Year Inception
HSBC Investor Limited Maturity Fund Class A (Investor)(1) 2/7/01 -1.02 2.06 3.98
HSBC Investor Limited Maturity Fund Class B(2) 2/15/01 -0.73 2.38 4.32
HSBC Investor Limited Maturity Fund Class C(3) 2/13/01 2.07 2.99 4.50
HSBC Investor Limited Maturity Fund Class Y 1/23/01 4.25 4.02 5.77
Lehman Brothers Intermediate Aggregate Bond Index -- 4.88 5.12 --
Lipper Intermediate Investment-Grade Funds Average(4) -- 4.88 4.74 --
- --------------------------------------------------------------------------------
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Fund is measured against the Lehman Brothers Intermediate Aggregate Bond
Index, an unmanaged index generally representative of investment-grade issues
with maturities between three and ten years. The performance of the index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Fund's performance reflects
the deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities.
During the period shown, the Investment Manager waived and/or voluntarily
reimbursed fees for various expenses. Had these waivers and/or reimbursements
not been in effect, performance quoted would have been lower.
See notes to financial statements. 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 Robert Lee
Fixed Income Portfolio Manager
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 12-month period ended October 31, 2004, the shares of the HSBC
Investor Fixed Income Fund produced a 5.46% total return, and the Class A
(Investor) Shares of the HSBC Investor Bond Fund returned 5.07%, (without
sales charge). That compared to a return of 5.53% and 4.79% for the Lehman
Brothers Aggregate Bond Index and the Lipper General Bond Funds Average(4),
respectively.
Past performance is no guarantee of future results.
The Fund only slightly underperformed its benchmark index for the ?12-month
period. While outperforming its peer group and benchmark on a gross basis the
Fund underperformed the index on a net basis.
For a majority of the review period, the Fed left the target on the federal
funds rate unchanged at 1.00%. Then on June 30th, at their scheduled Federal
Open Market Committee ("FOMC") meeting they raised the funds rate and
continued on that course over their next scheduled meetings. At earlier FOMC
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 Gross
Domestic Product(4) ("GDP") 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 spreads 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 of 2003 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
moves 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, which 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 as
evident from the latest reading in the Unemployment Rate of 5.4% from 6% a
year earlier. It appeared that the economy was firing on all cylinders.
Manufacturing cooled slightly from mid-year levels, but remained above 50 for
the remainder of period according to the Institute for Supply Management. A
reading above 50 suggests expansion in manufacturing activity. The consumer
sectors such as housing, retail sales, personal income and personal spending
remained solid. On the inflation front, the year-over-year change in the
overall Producer Price Index declined slightly to 3.3% from 3.4%, while the
Consumer Price index fell to 2.5% from 2.7% for the same period. At the end of
the review period, text from the Federal Reserve Board's Summary of Commentary
on Current Economic Conditions (Beige Book) was released. Reports from the
twelve federal districts generally suggested that economic activity continued
to expand in September and early October. Capital spending and hiring appeared
to pick up modestly, with hiring varied by region and industry. The report
also indicated that wage pressures remained stable and that firms across the
nation expressed concern regarding higher input costs, especially for
petroleum-based products, energy, metals and construction materials.
We are convinced that downside risk is significantly greater than upside risk
for bonds and we maintain a defensive outlook. Relative valuations and our
monetary policy forecast both provide substantial support for the current
outlook. Hence, we believe the Fed will tighten policy over a 12-month time
horizon as the FOMC continues its `measured' removal of monetary stimulus.
Recent economic releases are more positive than previously observed indicating
the economy's possible emergence from the summer's `soft patch'. Uncertainties
surrounding the growth implications of China's interest rate increase, and oil
volatility continues to keep a bid in bonds. Our view on corporate credit is
neutral. We feel that the stable credit environment will maintain spreads near
current levels but are focused on the carry benefits of credit exposure. As
such, the Fund's interest rate profile and sector exposure will be positioned
accordingly.
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 mid October reached a low of 87% of benchmark before closing out the review
period at 91% of benchmark. On a duration weighted basis we decreased our
weighting in the Mortgage Backed sector by approximately 5% in the in the
third quarter of calendar 2005. This was reallocated to the Corporate and
taxable municipal bond sector. Additionally, we increased the portfolio's
exposure to low grade credit (A/BBB) by approximately 10% and rotating out of
higher quality credit (AAA/AA)'D' 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 the
benchmark.*
'D' Standard and Poor or Moody's Fund Ratings represent an opinion only, not a
recommendation to buy or sell.
* Portfolio composition is subject to change.
6 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor Fixed Income Fund
HSBC Investor Bond Fund - As of October 31, 2004
Value of a $10,000 Investment
Citigroup Broad Lehman Brothers
HSBC Investor Investment-Grade Aggregate
Fixed Income Fund Bond Fund Index Bond Index
----------------- ---------------- ---------------
1/9/95................. 10,000 10,000 10,000
12/31/95................. 11,847 11,742 11,855
12/31/96................. 12,278 12,433 12,284
12/31/97................. 13,463 13,463 13,468
12/31/98................. 14,632 14,384 14,642
12/31/99................. 14,512 14,229 14,520
12/31/00................. 16,199 15,827 16,203
12/31/01................. 17,567 17,269 17,584
12/31/02................. 19,369 18,744 19,358
12/31/03................. 20,164 19,594 20,171
10/31/04................. 21,014 20,358 21,049
Value of a $10,000 Investment
HSBC Investor Citigroup Broad Lehman Brothers
Bond Fund Investment-Grade Aggregate
Class A (Investor)(1) Bond Fund Index Bond Index
--------------------- ---------------- ---------------
8/26/96................. 9,524 10,000 10,000
12/31/96................. 9,997 10,481 10,479
12/31/97................. 10,845 11,491 11,491
12/31/98................. 11,539 12,493 12,489
12/31/99................. 11,391 12,389 12,387
12/31/00................. 12,599 13,825 13,827
12/31/01................. 13,659 15,003 14,994
12/31/02................. 14,756 16,516 16,532
12/31/03................. 15,342 17,211 17,211
10/31/04................. 15,892 17,960 17,937
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Average Annual Total Return (%)
Inception 1 5 Since
As of October 31, 2004 Date Year Year Inception
HSBC Investor Fixed Income Fund 1/9/95 5.46 7.37 7.52
HSBC Investor Bond Fund Class A (Investor)(1) 8/26/96 0.10 5.79 5.83
HSBC Investor Bond Fund Class B(2) 1/6/98 0.19 6.02 4.90
HSBC Investor Bond Fund Class C(3) 11/4/98 3.20 6.04 5.04
Lehman Brothers Aggregate Bond Index -- 5.53 7.58 --
Lipper General Bond Funds Average(4) 4.79 5.91 --
- --------------------------------------------------------------------------------
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Funds have changed their standardized benchmark from the Citigroup Broad
Investment-Grade Bond Fund Index to the Lehman Brothers Aggregate Bond Index to
provide a more appropriate market comparison for the Fund's performance. The
Citigroup Broad Investment-Grade Bond Index is a market capitalization-weighted
index that includes fixed-rate Treasury, government-sponsored, corporate and
mortgage securities. All issues mature in one year or more and have at least $50
million face amount outstanding for entry into the index. The Lehman Brothers
Aggregate Bond Index is a market value-weighted performance benchmark for
investment-grade fixed-rate debt issues, including government, corporate,
asset-backed, and mortgage-backed securities, with maturities of at least one
year. The indices are unmanaged and do not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund accounting
fees. The Funds' performance reflects the deduction of fees for these
value-added services. Investors cannot invest directly in an index, although
they can invest in its underlying securities. During the period shown, the
Investment Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
See notes to financial statements. 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 4.57% (without sales charge) for Class A (Investor) Shares and 4.83%
for Class Y Shares for the period ended October 31, 2004. That compared to
5.79% and 5.03% for the Fund's benchmarks, the Lehman Brothers New York Exempt
Index and the Lipper New York Municipal Debt Funds Average(4), respectively.
The Fund underperformed its benchmark index due to its higher quality profile
than the index as well as expenses to the fund. Over the period lower quality
paper and sectors such as tobacco significantly outperformed higher quality
sectors. In addition, one of the standout performers in the New York market
was New York City General Obligation debt which makes up approximately 15% of
the benchmark index. By fund diversification rules the fund attempts to
maintain a limit of 5% per issuer and as such was significantly underweight
New York City bonds.
Past performance does not guarantee future results.
For the year, the broader municipal market outperformed the taxable market on
an absolute basis. The return of the Lehman Brothers Muni Bond Index(4) was
6.03% while the return of the Lehman Brothers Aggregate Bond Index(4) was
5.53%. Relative outperformance in the municipal market was a result of the
municipal market having a duration that on average was approximately 12%
longer than that of the Lehman Aggregate index over the course of the year.
Thus, on a duration-adjusted basis the municipal market actually marginally
underperformed the taxable market on a pretax basis. Both yield curves
flattened quite dramatically with yields on two-year and five-year Treasuries
moving 73 (0.73%) and 4 (0.04%) basis points higher. In contrast, Ten-year and
thirty year bonds were 27 (0.27%) and 34 (0.34%) basis points lower. In tax
exempts, two-year municipal yields were just 48 (0.48%) basis points higher;
five-year munis were 15 (0.15%) basis points higher. Ten-year munis were 36
(0.36%) basis points lower while thirty-year bonds were 24 (0.24%) basis
points lower.
The Fund's duration at the beginning of the 12-month period approximated 115%
of benchmark but over the period adapted a positioning that moved to
approximate 94% of benchmark and was one of the key factors that helped drive
the Fund's strong performance relative to benchmark. The Fund 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 Fund maintained its high credit quality profile. This tended to take away
from performance as many lower rated credits outperformed due to increased
revenue flows and a positive upgrade to downgrade ratio from the rating
agencies.
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. Moodys put the state's rating as well as its appropriated debt on
positive outlook while S&P revised its outlook from negative to stable. At A2
by Moodys and AA by S&P, New York is the lowest rated state in the nation with
the sole exception being the lower rated California. The average rating of
states across the country stand at Aa2 according to Moodys'D'. As a result of
higher than expected tax revenue a $290 million dollar budget gap narrowed to
just $224 million. It now appears that the worst of the states economic stress
of 2002 is behind it.*
There has been very little change to our outlook over the past few months as
we continue to trade in a very narrow range with low volatility. The portfolio
remains positioned for a rising yield environment and a flattening yield
curve. In fact in October municipals did flatten at a greater pace than
Treasuries. While the tightening trend remains intact we do not believe that
the pace of municipal flattening is likely to outpace Treasury flattening
going forward. We would suspect that over the next three to four months the
spread between five and ten year municipals is likely to flatten from the
present 79 to an approximate spread range of 50-60. The spread between 2 and
5-year municipals flattened by 33 (0.33%) basis points point to 78 (0.78%).
However, the spread between 5 and 10-year municipals narrowed by 51 (0.51%)
basis points and now stands at 79 (0.79%) basis points while the 10-30 year
spread actually steepened by another 12 (0.12%) basis points. The portfolio
will continue to barbell. We will continue to overweigh the 10-20 year portion
of the yield curve, which we believe should perform well in a rising yield
environment on a duration-adjusted basis relative to the five-year portion of
the yield curve. From a quality standpoint the portfolio will continue to
overweigh insured and higher quality paper.*
'D' Standard and Poor or Moody's Fund Ratings represent an opinion only, not a
recommendation to buy or sell.
* Portfolio composition is subject to change.
8 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor New York Tax-Free Bond Fund - As of October 31, 2004
Value of a $10,000 Investment
HSBC Investor N.Y. Lehman Brothers Lehman Brothers
Tax Free Bond Fund 7-Year Municipal NY Exempt
Class Y (Adviser) Bond Index Index
------------------ ---------------- ---------------
7/1/96................. 10,000 10,000 10,000
12/31/96................. 10,411 10,428 10,520
12/31/97................. 11,384 11,228 11,555
12/31/98................. 12,117 11,927 12,350
12/31/99................. 11,743 11,910 12,099
12/31/00................. 13,015 12,990 13,552
12/31/01................. 13,542 13,663 14,208
12/31/02................. 14,791 15,077 15,581
12/31/03................. 15,486 15,899 16,407
10/31/04................. 15,967 16,382 17,057
Value of a $10,000 Investment
HSBC Investor N.Y. Lehman Brothers Lehman Brothers
Tax Free Bond Fund 7-Year Municipal NY Exempt
Class A (Investor)(1) Bond Index Index
--------------------- ---------------- ---------------
5/1/95................. 9,524 10,000 10,000
12/31/95................. 10,415 10,816 10,979
12/31/96................. 10,745 11,288 11,499
12/31/97................. 11,735 12,154 12,630
12/31/98................. 12,449 12,910 13,499
12/31/99................. 12,033 12,892 13,225
12/31/00................. 13,303 14,061 14,813
12/31/01................. 13,808 14,790 15,529
12/31/02................. 15,044 16,321 17,031
12/31/03................. 15,711 17,210 17,933
10/31/04................. 16,166 17,732 18,644
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 5 Since
As of October 31, 2004 Date Year Year Inception
HSBC Investor New York Tax-Free Bond Fund Class A (Investor)(1) 5/1/95 -0.41 5.26 5.19
HSBC Investor New York Tax-Free Bond Fund Class B(2) 1/6/98 -0.20 5.50 4.07
HSBC Investor New York Tax-Free Bond Fund Class C(3) 11/4/98 2.69 5.48 3.82
HSBC Investor New York Tax-Free Bond Fund Class Y 7/1/96 4.83 6.57 5.78
Lehman Brothers NY Exempt Index -- 5.79 0.74 --
Lipper New York Municipal Debt Funds Average(4) -- 5.03 6.42 --
- --------------------------------------------------------------------------------
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Fund has changed its standardized benchmark from the Lehman Brothers 7-Year
Municipal Bond Index to the Lehman Brothers NY Exempt Index to provide a more
appropriate market comparison for the Fund's performance. The Fund is measured
against the Lehman Brothers NY Exempt Index, a index composed of investment
grade New York tax-exempt securities, all having a $50 million minimum maturity
value and the Lehman Brothers 7-Year Municipal Bond Fund Index, a broad based
index comprised of investment grade, fixed-rate and tax-exempt securities with a
remaining maturity of at least 7 years. The indices are unmanaged and the
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees. The
Fund's performance reflects the deduction of fees for these value-added
services. Investors cannot invest directly in an index, although they can invest
in its underlying securities. During the period shown, the Investment Manager
waived and/or voluntarily reimbursed fees for various expenses. Had these
waivers and/or reimbursements not been in effect, performance quoted would have
been lower.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 9
Portfolio Reviews
HSBC Investor Growth and Income Fund
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
by Thomas D'Auria, CFA
Chief Investment Officer - U.S. Equities
HSBC Asset Management (Americas) Inc.
The HSBC Investor Growth and Income Fund (the "Fund") normally invests at least
65% of its total assets in common stocks, preferred stocks, and convertible
securities. The Fund may invest the balance of its assets in various types of
fixed income securities and in money market instruments.
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 4.94% (without sales charge) for the Class A (Investor) Shares
and 5.18% for the Class Y Shares for the year ended October 31, 2004. That
compared to a 9.41% return for the S&P 500 Index and a 5.87% return for the
Lipper Large-Cap Core Funds Average(4)
The Fund underperformed its benchmark primarily due to its underweight
positioning in the Energy sector during the year, along with poor stock
selection in the Financial and Technology sectors.
Past performance does not guarantee future results.
The U.S. equity markets produced modest gains over the 12-month period ending
October 31, 2004, with the S&P 500 and NASDAQ Composite Index(4) returning 9.41%
and 2.21%, respectively. After a strong rally from late November 2003 through
late January 2004, that took markets up by nearly 10%, the S&P 500 traded in a
very narrow range for the balance of the period. The market was essentially
trendless for much of this period with sharp movements higher or lower based on
the latest economic or geopolitical news events.
The major equity indices have remained listless and harder to forecast with many
stocks trading in ranges without established trends. Volatility levels as
proxied by the VIX index(4), have drifted to their lowest levels in several
years. Geopolitical events continue to plague the markets, resulting in oil
touching record levels near $55 a barrel. Not surprisingly, investors have
stampeded into Energy stocks, pushing them even higher, their phenomenal returns
over the past year notwithstanding. Interest rates also trended higher despite
seasonally adjusted core inflation ex energy remaining tame. With rising rates
and the beginnings of inflation fears surfacing, value stocks outperformed
growth for most of the period. Throughout the summer, investors were confronted
by softer readings of a gamut of indicators measuring employment, consumer
sentiment, and manufacturing activity and leading economic activity. In
addressing the weak numbers, the Federal Open Market Committee characterized the
economy as going through a "soft patch", and maintained their expectations of
strong economic growth for quarters ahead. Like many other investors, we too
anticipated interest rate increases by the Fed. However, we still view the
absolute levels of rates to be far from being restrictive. In addition, we find
the tame inflation outside of energy costs to be encouraging. Similar to our
interest rate view, we think the levels in the Institutional Supply Management
("ISM")(4) indicator of manufacturing activity to be more encouraging than
recent changes. With levels still above 50, the ISM index is still portending
further expansion in the manufacturing sector, although the extent of any growth
remains admittedly the main point of controversy.
Geopolitical events stubbornly show no signs of improving with violence flaring
again as insurgency rises before anticipated elections in Iraq. In addition, the
conditions in Israel, Sudan, Afghanistan and Nigeria are still volatile. Russia
is also locking down with the abolition of gubernatorial elections and Iran and
North Korea continue to cause nuclear tension, regionally and globally.
Unchanged for the past several quarters, our optimism in improved company
balance sheets and strong cash flows lead us to believe continued improvement in
capital spending should materialize.
With rising rates and ISM numbers having peaked, we continue to expect the
moderation in earnings growth to continue into 2005. We are closely watching for
issues with corporate pensions (returns & rates lower than expected) and the
potential slowing in China as key issues. We do think that the recent increase
in Chinese lending rates was a positive step as it signals prudent caution among
Chinese leaders about the rate of growth and speculation. We continue to believe
that higher energy prices are helping do the Fed's job, dampening consumer
demand and allowing the Fed to move at a slower pace than it may otherwise have
done. Although likely to nudge rates up a bit more in coming months, Fed policy
is a long way from restrictive. Oil prices, in conjunction with tame inflation
argue against any aggressive tightening by the Fed.
The recent rally has taken the markets to the higher end of its fair valuation
band, so we only see modest gains for stocks in the coming year. Current
overweight positions include Healthcare, Industrials and Materials. Underweights
include Consumer Discretionary and Utilities. The portfolios remain positioned
with a focus on valuation, sustainable competitive advantages, consistent growth
and earnings predictability, which leads to a preference for larger-cap stocks
at this point in the cycle.
* Portfolio composition is subject to change.
10 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor Growth and Income Fund - As of October 31, 2004
Value of a $10,000 Investment
HSBC Investor Growth Standard &
and Income Fund Poor's 500
Class Y (Adviser) Stock Index
-------------------- -----------
4/2/01................... 10,000 10,000
12/31/01................... 9,598 9,997
12/31/02................... 7,180 7,788
12/31/03................... 9,091 10,021
10/31/04................... 9,075 10,327
Value of a $10,000 Investment
HSBC Investor Growth Standard &
and Income Fund Poor's 500
Class A (Investor)(1) Stock Index
--------------------- -----------
4/12/01................... 9,498 10,000
12/31/01................... 8,811 9,997
12/31/02................... 6,575 7,788
12/31/03................... 8,299 10,021
10/31/04................... 8,273 10,327
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 Since
As of October 31, 2004 Date Year Inception
HSBC Investor Growth and Income Fund Class A (Investor)(1) 4/12/01 -0.29 -5.20
HSBC Investor Growth and Income Fund Class B(2) 4/5/01 0.13 -4.03
HSBC Investor Growth and Income Fund Class C(3) 11/3/03 N/A 2.57
HSBC Investor Growth and Income Fund Class Y 4/2/01 5.18 -2.68
S&P 500 Index -- 9.41 --
Lipper Large-Cap Core Funds Average(4) -- 5.87 --
- --------------------------------------------------------------------------------
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Fund is measured against the Standard & Poor's 500 Index, an unmanaged index
that is generally representative of the U.S. stock market as a whole. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees. The
Fund's performance reflects the deduction of fees for these value-added
services. Investors cannot invest directly in an index, although they can invest
in its underlying securities. During the period shown, the Investment Manager
waived and/or voluntarily reimbursed fees for various expenses. Had these
waivers and/or reimbursements not been in effect, performance quoted would have
been lower.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 11
Portfolio Reviews
HSBC Investor Mid-Cap Fund (Class A Shares, B Shares, C Shares and Trust
Shares)
by Thomas D'Auria, CFA
Chief Investment Officer - U.S. Equities
HSBC Asset Management (Americas) Inc.
The HSBC Investor Mid-Cap Fund (the "Fund") seeks to achieve a higher rate of
return than that generated by the Russell MidCap Growth Index by investing at
least 80% of its total assets in stocks of mid-sized companies with market
capitalization, at the time of acquisition, falling within the range of the
Russell MidCap Growth ($190 million to $13.3 billion).
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 6.16% (without sales
charge) and 6.37% for the Trust Shares for the 12-months ended October 31,
2004. That compares to 8.77% and 5.30% for the Fund's benchmarks, the Russell
MidCap'r' Growth Index, and the Lipper Mid-Cap Growth Funds Average.(4)
The Fund underperformed its benchmark primarily due to its underweight
positioning in the Energy sector during the year, along with poor stock
selection in the Financial sector.
Past performance does not guarantee future results.
The U.S. equity markets produced modest gains over the one-year period ending
October 31, 2004, with the Russell MidCap'r' Growth Index returning 8.77%
during the period. The Midcap Index moved sideways from early November 2003
until mid-December 2003, before embarking on an 11% upwards move which ended
in early March 2004. From that point on the markets moved sideways to lower,
particularly during a swift downwards plunge in July and August when the
market shed 12% in about six weeks. From mid-August through the end of
October, the markets regained what they had lost during the summer decline,
ending the 12-month period 8.77% higher.
The equity indices have remained listless and harder to forecast with many
stocks trading in ranges without established trends. Volatility levels as
proxied by the VIX(4) index, have drifted to their lowest levels in several
year. Geopolitical events continue to plague the markets, resulting in oil
touching record levels near $55 a barrel. Not surprisingly, investors have
stampeded into Energy stocks, pushing them even higher, their phenomenal
returns over the past year notwithstanding. Interest rates also trended higher
despite seasonally adjusted core inflation ex energy remaining tame. With
rising rates and the beginnings of inflation fears surfacing, value stocks
outperformed growth for most of the period. Throughout the summer, investors
were confronted by softer readings of a gamut of indicators measuring
employment, consumer sentiment, and manufacturing activity and leading
economic activity. In addressing the weak numbers, the FOMC characterized the
economy as going through a "soft patch", and maintained their expectations of
strong economic growth for quarters ahead. Like many other investors, we too
anticipated interest rate increases by the Fed. However, we still view the
absolute levels of rates to be far from being restrictive. In addition, we
find the tame inflation outside of energy costs to be encouraging. Similar to
our interest rate view, we think the levels in the Institute Supply
Management4 ("ISM") indicator of manufacturing activity to be more encouraging
than recent changes. With levels still above 50, the ISM index is still
portending further expansion in the manufacturing sector, although the extent
of any growth remains admittedly the main point of controversy.
Geopolitical events stubbornly show no signs of improving with violence
flaring again as insurgency rises before anticipated elections in Iraq. In
addition, the conditions in Israel, Sudan, Afghanistan and Nigeria are still
volatile. Russia is also locking down with the abolition of gubernatorial
elections and Iran and North Korea continue to cause nuclear tension,
regionally and globally.
Unchanged for the past several quarters, our optimism in improved company
balance sheets and strong cash flows lead us to believe continued improvement
in capital spending should materialize.
With rising rates and ISM numbers having peaked, we continue to expect the
moderation in earnings growth to continue into 2005. We are closely watching
for issues with corporate pensions (returns & rates lower than expected) and
the potential slowing in China as key issues. We do think that the recent
increase in Chinese lending rates was a positive step as it signals prudent
caution among Chinese leaders about the rate of growth and speculation. We
continue to believe that higher energy prices are helping do the Fed's job,
dampening consumer demand and allowing the Fed to move at a slower pace than
it may otherwise have done. Although likely to nudge rates up a bit more in
coming months, Fed policy is a long way from restrictive. Oil prices, in
conjunction with tame inflation argue against any aggressive tightening by the
Fed.
The recent rally has taken the markets to the higher end of its fair valuation
band, so we only see modest gains for stocks in the coming year. Current
overweight positions include Healthcare, Industrials and Materials.
Underweights include Consumer Discretionary and Technology. The portfolios
remain positioned with a focus on valuation, sustainable competitive
advantages, consistent growth and earnings predictability, which leads to a
preference for leading companies and those with above-average market-caps
versus the benchmark.*
* Portfolio composition is subject to change.
12 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor Mid-Cap Fund - As of October 31, 2004
Value of a $10,000 Investment
HSBC Investor HSBC Investor Russell
Mid-Cap Fund Mid-Cap Mid-Cap
Class A(1) Fund Trust Growth Index
------------- ------------- ------------
10/31/94..................... 9,490 10,000 10,000
12/31/94..................... 9,045 9,524 9,693
12/31/95..................... 12,006 12,687 12,986
12/31/96..................... 13,981 14,830 15,256
12/31/97..................... 18,280 19,422 18,695
12/31/98..................... 19,968 21,259 22,035
12/31/99..................... 27,580 29,422 33,337
12/31/00..................... 30,582 32,697 29,420
12/31/01..................... 27,705 29,658 23,492
12/31/02..................... 20,173 21,648 17,054
12/31/03..................... 26,573 28,588 24,338
10/31/04..................... 27,285 29,417 25,503
The chart above represents a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 5 10 Since
As of October 31, 2004 Date'D' Year Year Year Inception
HSBC Investor Mid-Cap Fund Class A(1) 7/1/93 0.84 2.53 10.56 9.96
HSBC Investor Mid-Cap Fund Class B(2) 7/1/93 1.29 2.81 10.29 9.64
HSBC Investor Mid-Cap Fund Class C(3) 7/1/93 4.38 2.97 10.37 9.71
HSBC Investor Mid-Cap Fund Trust 7/1/93 6.37 3.82 11.39 10.74
Russell MidCap Growth Index -- 8.77 -0.19 9.81 --
Lipper Mid-Cap Growth Funds Average(4) -- 5.30 -0.46 8.30 --
- --------------------------------------------------------------------------------
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Fund is measured against the Russell Midcap Growth Index, which measures the
performance of those Russell securities in the Russell universe with higher
price-to-book ratios and higher forecasted growth values. The indices are
unmanaged and do not reflect the deduction of expenses associated with a mutual
fund, such as investment management and fund accounting fees. The Fund's
performance reflects the deduction of fees for these value-added services.
Investors cannot invest directly in an index, although they can invest in its
underlying securities. During the period shown, the Investment Manager waived
and/or voluntarily reimbursed fees for various expenses. Had these waivers
and/or reimbursements not been in effect, performance quoted would have been
lower.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 13
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
AllianceBernstein Investment Research and Management
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 Bernstein Investment Research and Management
("AllianceBernstein"), a unit of AllianceBernstein Investment Research and
Management 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 12-months ended October 31, 2004, the shares of the HSBC Investor
International Equity Fund produced a 20.06% return, and the Class A (Investor)
Shares of the HSBC Investor Overseas Equity Fund returned 19.40% (without
sales charge). That compared to a total return of 18.84% and 14.63% for the
Funds' benchmarks, the Morgan Stanley Capital International, Europe,
Australasia and Far East Index and the Lipper International Large-Cap Core
Funds Average.(4)
Past performance does not guarantee future results.
Foreign markets generally moved higher, due in part to an improving
environment for corporate earnings. That environment helped the Fund and its
benchmark produce moderate gains during the period.
Strong stock selection was the primary reason that the Fund out-gained the
benchmark. Sector and regional allocations had little effect on relative
returns during most of the period. AllianceBerstein, which assumed management
of this Fund in January, seeks undervalued stocks of firms with attractive
characteristics, such as higher-than-average profitability. That approach
particularly helped the Funds' stake in consumer discretionary stocks. For
example, shares of a Japanese gaming-machines maker, a Japanese carmaker and a
German auto-parts supplier performed especially well. Stock selection also
helped the Fund's allocations to the materials, financial services and
consumer staples sectors outperform the benchmark's holdings in those sectors.
Stock selection in the technology sector hurt the Funds' relative returns. The
Funds' managers emphasized shares of contract manufacturers and other stocks
they considered reasonably valued. Such stocks suffered because corporate and
consumer spending on technology did not rebound as quickly as it has during
previous economic recoveries.
Foreign value stocks outperformed foreign growth stocks, so the Fund benefited
from its value-oriented investment style. That advantage was offset by the
Funds' tilt toward large-capitalization stocks within the value universe,
however, as small caps led the market for the 12-month period.
The Funds as of October 31, 2004 held 8.5% of their assets in emerging
markets. Emerging markets performed poorly early in 2004, but surged from May
through October. The Fund's emerging markets stake helped returns against the
benchmark, largely because of strong stock selection. The Funds will not hold
more than 10% of assets in emerging markets stocks.*
* Portfolio composition is subject to change.
14 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor International Equity Fund
HSBC Investor Overseas Equity Fund - As of October 31, 2003
Value of a $10,000 Investment
HSBC Investor MSCI
International EAFE
Equity Fund Index
------------- -----
1/9/95................... 10,000 10,000
12/31/95................... 11,254 11,121
12/31/96................... 12,950 11,793
12/31/97................... 14,208 12,003
12/31/98................... 15,975 14,403
12/31/99................... 27,319 18,287
12/31/00................... 21,952 15,696
12/31/01................... 18,116 12,330
12/31/02................... 14,788 10,365
12/31/03................... 19,130 14,364
10/31/04................... 21,252 15,489
Value of a $10,000 Investment
HSBC Investor MSCI
Overseas Equity Fund EAFE
Class A (Investor)(1) Index
--------------------- -----
8/26/96................... 9,497 10,000
12/31/96................... 10,132 10,429
12/31/97................... 10,932 10,614
12/31/98................... 12,087 12,737
12/31/99................... 20,392 16,171
12/31/00................... 16,276 13,880
12/31/01................... 13,339 10,904
12/31/02................... 11,013 9,166
12/31/03................... 14,138 12,703
10/31/04................... 15,627 13,697
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Average Annual Total Return
Inception 1 5 Since
As of October 31, 2004 Date Year Year Inception
HSBC Investor International Equity Fund 1/9/95 20.06 -0.46 7.99
HSBC Investor Overseas Equity Fund Class A (Investor)(1) 8/26/96 13.40 -1.86 5.61
HSBC Investor Overseas Equity Fund Class B(2) 1/6/98 14.43 -1.61 4.53
HSBC Investor Overseas Equity Fund Class C(3) 11/4/98 17.46 -1.62 4.57
MSCI EAFE Index -- 18.84 -0.92 --
Lipper International Large-Cap Core Average(4) -- 14.63 -2.42 --
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Funds are measured against the Morgan Stanley Capital International (MSCI)
Europe, Australasia and Far East (EAFE) Index, which is an unmanaged index that
measures performance of a diverse range of developed countries in the indicated
regions. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund accounting
fees. The Funds' performance reflects the deduction of fees for these
value-added services. Investors cannot invest directly in an index, although
they can invest in its underlying securities. During the period shown, the
Investment Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 15
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 Company
The HSBC Investor Small Cap Equity Fund and the HSBC Investor Opportunity Fund
("the Funds") seek to provide their shareholders with long-term growth of
capital by investing in equity securities of emerging small and medium-sized
companies expected to deliver earnings growth well above the growth rate of
the economy and the rate of inflation. The Funds employ a two-tier structure,
commonly referred to as "master-feeder." The Funds invest all of their
investable assets in the HSBC Investor Small Cap Equity Portfolio (the
"Portfolio"). The Portfolio employs Westfield Capital Management, LLC 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 12-months ended October 31, 2004, the shares of the HSBC Investor
Small Cap Equity Fund produced a 5.74% return and the Class A (Investor)
Shares of the HSBC Investor Opportunity Fund produced a 5.31% return (without
sales charge). The Funds' benchmarks, the Russell 2500'r' Growth Index and the
Lipper Mid Cap Growth Funds Average, returned 6.14% and 5.30%,
respectively.(4)
Small cap stocks produced positive returns, helping the Fund and its benchmark
generate moderate gains. Investors during 2004 focused on small-cap shares
with strong current earnings and clear potential for future earnings growth.
This focus was in contrast to the more speculative rally that occurred during
2003. The portfolio's largest gains came from the industrials, materials,
financials and energy sectors.
While the Fund underperformed the benchmark, stock selection within the
technology sector contributed positively. Technology was among the index's
weakest sectors during the period, with a loss of 12%. The Funds' technology
holdings lost just 3%, however. The Fund's focus on stocks with strong
earnings in the security services, information technology services, storage
and software industries helped it avoid many of the sector's largest declines.
Management's decision to reduce holdings among the most interest-rate
sensitive financial service stocks boosted the portfolio's performance in that
sector. Meanwhile, a focus on industrial shares with improving pricing power
and cyclical earnings growth helped the Funds' stake in that sector
significantly outperform the benchmark's industrial holdings. Increasing the
Fund's overweight position in energy stocks also boosted relative performance,
as energy stocks produced some of the period's strongest returns.
The Funds' health care stake dragged on performance against the benchmark, as
some of the stocks in the portfolio suffered from weaker-than-expected
earnings and investor concerns about potential regulatory issues. In the
consumer-discretionary sector, management's emphasis on media stocks hampered
relative returns. The expected pick-up in advertising spending due to the
improving economy, the Olympics and the election did not meet expectations,
and media stocks performed poorly as a result. The Funds' management in
response trimmed its media stake in favor of stocks that are less dependent on
the U.S. consumer.
16 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
HSBC Investor Small Cap Equity Fund
HSBC Investor Opportunity Fund - As of October 31, 2003
Value of a $10,000 Investment
HSBC Investor Russell 2000 Russell 2500
Small Cap Stock Growth
Equity Fund Index Index
------------- ------------ ------------
9/3/96................. 10,000 10,000 10,000
12/31/96................. 10,864 10,931 10,629
12/31/97................. 13,336 13,376 12,197
12/31/98................. 15,127 13,036 12,575
12/31/99................. 22,418 15,806 19,552
12/31/00................. 23,547 15,329 16,406
12/31/01................. 23,240 15,710 14,629
12/31/02................. 15,539 12,492 10,373
12/31/03................. 21,618 18,395 15,177
10/31/04................. 22,318 19,453 15,564
Value of a $10,000 Investment
HSBC Investor Russell 2000 Russell 2500
Opportunity Fund Stock Growth
Class A (Investor)(1) Index Index
--------------------- ------------ ------------
9/23/96................. 9,497 10,000 10,000
12/31/96................. 9,501 10,520 10,093
12/31/97................. 11,579 12,873 11,583
12/31/98................. 13,080 12,545 11,942
12/31/99................. 19,238 15,212 18,567
12/31/00................. 20,062 14,752 15,579
12/31/01................. 19,670 15,119 13,892
12/31/02................. 13,108 12,022 9,850
12/31/03................. 18,068 17,703 14,412
10/31/04................. 18,596 18,722 14,780
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Average Annual Total Return (%)
Inception 1 5 Since
As of October 31, 2004 Date Year Year Inception
HSBC Investor Small Cap Equity Fund 9/3/96 5.74 6.71 10.34
HSBC Investor Opportunity Fund Class A (Investor)(1) 9/23/96 0.00 4.97 7.96
HSBC Investor Opportunity Fund Class B(2) 1/6/98 0.47 5.23 6.65
HSBC Investor Opportunity Fund Class C(3) 11/4/98 3.53 5.26 7.75
Russell 2500 Growth Index -- 6.14 1.13 --
Lipper Mid-Cap Growth Funds Average(4) -- 5.30 -0.46 --
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 and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. 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.
The Funds have changed their standardized benchmark from the Russell 2000 Index
to the Russell 2500 Growth Index which is a better representative of the types
of securities in which the Funds invest and will provide a better performance
comparison. The Russell 2000 Index is generally representative of the
performance of small-capitalization stocks, and the Russell 2500 Growth Index
represents the smallest 2500 securities found in the Russell universe with
higher price-to-book and higher forecasted growth values. The indices are
unmanaged and the performance for the indices does not reflect the deduction of
expenses associated with a mutual fund, such as investment management and fund
accounting fees. The Funds' performance reflects the deduction of fees for these
value-added services. Investors cannot invest directly in an index, although
they can invest in its underlying securities. During the period shown, the
Investment Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 17
Portfolio Reviews
Portfolio Composition
October 31, 2004
(Unaudited)
HSBC Investor Limited Maturity Portfolio
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
U.S. Government Agencies 60.7
Corporate Bond 26.0
U.S. Treasury Notes 7.5
Asset Backed Securities 4.3
Sovereign 1.2
Cash Equivalents 0.3
Total 100.0
HSBC Investor Fixed Income Portfolio
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
U.S. Government Agencies 43.7
Corporate Bond 23.5
U.S. Treasury Notes 16.5
Asset Backed Securities 6.2
Cash Equivalents 4.2
Collateralized Mortgage Obligations 3.6
Municipal Bond 1.5
Sovereign 0.7
Total 100.0
HSBC Investor New York Tax Free Fund
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Municipal Bonds 94.5
Cash Equivalents 3.3
Variable Rate Notes 2.2
Total 100.0
HSBC Investor Growth Portfolio
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Financials 33.3
Industrials 11.3
Information Technology 10.1
Cash Equivalents 9.5
Energy 8.9
Materials 7.6
Consumer Discretionary 6.4
Consumer Staples 5.2
Telecommunication Services 4.5
Health Care 1.8
Utilities 1.4
Total 100.0
HSBC Investor Growth and Income Fund
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Financials 20.3
Information Technology 14.7
Consumer Discretionary 14.3
Health Care 13.8
Industrials 10.9
Energy 7.5
Consumer Staples 6.8
Telecommunication Services 5.9
Materials 4.7
Utilities 1.1
Total 100.0
HSBC Investor Mid-Cap Fund
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Consumer Discretionary 23.2
Health Care 19.6
Information Technology 18.5
Financials 13.2
Industrials 12.4
Energy 5.6
Telecommunication Services 2.8
Consumer Staples 2.7
Materials 1.9
Cash Equivalents 0.1
Total 100.0
HSBC Investor International Equity Portfolio
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Europe 61.6
Japan 24.5
Other 8.9
Australia and Far East 5.0
Total 100.0
* Portfolio composition is subject to change.
18 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
Portfolio Reviews
Portfolio Composition
October 31, 2004
(Unaudited)
HSBC Investor Small Cap Equity Portfolio
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Health Care 22.0
Information Technology 21.4
Industrials 19.6
Energy 14.5
Consumer Discretionary 10.6
Financials 8.9
Materials 2.2
Cash Equivalents 0.8
Total 100.0
* Portfolio composition is subject to change.
HSBC Investor Value Portfolio
Security Allocation Percentage of Investments at Value
------------------- ----------------------------------
Financials 33.3
Industrials 11.3
Information Technology 10.1
Cash Equivalents 9.5
Energy 8.9
Materials 7.6
Consumer Discretionary 6.4
Consumer Staples 5.2
Telecommunication Services 4.5
Health Care 1.8
Utilities 1.4
Total 100.0
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 19
<Page>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS - 93.2%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK - 83.9%
Brookhaven, New York GO (FGIC Insured),
5.50%, 10/1/12, Callable 10/1/06 @
102................................... 500,000 544,050
Buffalo, New York Fiscal Stability
Authority (FSA Insured), 5.25%,
8/15/13............................... 500,000 570,595
Corning City, New York School District
GO (FSA Insured), 4.00%, 6/15/08...... 930,000 983,773
Corning City, New York School District
GO (FSA Insured), 5.00%, 6/15/09...... 790,000 872,468
Erie County, New York GO (FGIC
Insured), 5.375%, 6/15/07............. 250,000 258,883
Grand Central New York District
Management, 3.00%, 1/1/06............. 400,000 404,652
Grand Central New York District
Management, 4.00%, 1/1/07............. 400,000 415,960
Guilderland, New York Central School
District GO (FSA Insured), 3.50%,
6/15/05............................... 250,000 252,720
Long Island, New York Power Authority
Revenue (MBIA Insured), 4.50%, 4/1/11,
Mandatory Tender 4/1/05 @ 100......... 1,075,000 1,087,363
Metropolitan Transportation Authority
of New York Revenue (FGIC Insured),
5.25%, 7/1/17, Prerefunded 7/1/08 @
100.5................................. 1,145,000 1,272,369
Metropolitan Transportation Authority
of New York Revenue (FGIC Insured),
5.50%, 11/15/19....................... 1,000,000 1,183,300
Metropolitan Transportation Authority
of New York Revenue (FSA Insured),
5.00%, 11/15/32, Callable 11/15/12 @
100................................... 1,625,000 1,669,362
Metropolitan Transportation Authority
of New York Revenue (MBIA Insured),
5.50%, 1/1/19......................... 480,000 542,808
Metropolitan Transportation Authority
of New York Revenue, Escrowed to
Maturity, 5.75%, 7/1/13............... 285,000 325,866
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.625%, 1/1/10........................ 1,240,000 1,374,131
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.75%, 1/1/14......................... 750,000 854,843
New York City GO, 5.00%, 8/1/05........ 1,000,000 1,022,790
New York City GO, 5.00%, 8/1/08........ 990,000 1,074,863
New York City GO, 5.00%, 8/1/14........ 200,000 220,326
New York City GO, 6.00%, 8/1/14,
Prerefunded 8/1/07 @ 101.............. 20,000 22,321
New York City GO, 6.00%, 8/1/14,
Callable 8/1/07 @ 101................. 980,000 1,075,207
New York City Housing Development Corp.
Revenue, AMT, 5.60%, 11/1/19.......... 100,000 105,902
New York City Industrial Development
Agency (FSA Insured), 5.00%,
11/15/19.............................. 1,000,000 1,078,510
New York City Municipal Assistance
Corp. Revenue, 6.00%, 7/1/06.......... 735,000 785,730
New York City Municipal Water Authority
Revenue, 5.00%, 6/15/34, Callable
6/15/13 @ 100......................... 1,250,000 1,276,463
New York City Transitional Finance
Authority Revenue, 5.00%, 11/1/07..... 1,000,000 1,081,790
New York City Transitional Finance
Authority Revenue, 5.25%, 5/1/17,
Callable 5/1/11 @ 100................. 400,000 438,460
New York City Transitional Finance
Authority Revenue, 5.25%, 2/1/29,
Callable 2/1/11 @ 100................. 1,540,000 1,699,374
</Table>
<Table>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
New York State Dormitory Authority
Revenue (CIFG Group Insured), 4.00%,
7/1/06................................ 1,120,000 1,155,885
New York State Dormitory Authority
Revenue, Columbia University, 4.00%,
7/1/06................................ 1,000,000 1,035,390
New York State Dormitory Authority
Revenue, Columbia University, 5.00%,
7/1/29, Mandatory put 7/1/07 @ 100.... 1,000,000 1,067,220
New York State Dormitory Authority
Revenue, Cooper Union (MBIA Insured),
6.00%, 7/1/19, Callable 7/1/09 @
101................................... 350,000 400,960
New York State Dormitory Authority
Revenue, Department of Health, 5.25%,
7/1/16................................ 500,000 553,075
New York State Dormitory Authority
Revenue, Master Boces PG, 5.25%,
8/15/19, (FSA Insured)................ 1,000,000 1,094,150
New York State Dormitory Authority
Revenue, Mental Health, 4.00%,
2/15/06............................... 1,140,000 1,167,486
New York State Dormitory Authority
Revenue, Mental Health, 6.50%,
8/15/11............................... 225,000 266,805
New York State Dormitory Authority
Revenue, Mental Health, 5.50%,
8/15/17, Prerefunded 2/15/07 @ 102.... 15,000 16,469
New York State Dormitory Authority
Revenue, Mental Health, 5.50%,
8/15/17, Callable 2/15/07 @ 102....... 985,000 1,057,466
New York State Dormitory Authority
Revenue, New York Presbyterian
Hospital (AMBAC Insured), 5.50%,
8/1/10................................ 750,000 845,948
New York State Dormitory Authority
Revenue, New York State Rehabilitation
Association (CIFG Group Insured),
3.00%, 7/1/05......................... 1,025,000 1,033,169
New York State Dormitory Authority
Revenue, New York University (AMBAC
Insured), 5.50%, 7/1/18............... 500,000 588,785
New York State Dormitory Authority
Revenue, NYSARC (FSA Insured), 2.00%,
7/1/05................................ 785,000 786,036
New York State Dormitory Authority
Revenue, NYSARC (FSA Insured), 2.00%,
7/1/06................................ 475,000 474,995
New York State Dormitory Authority
Revenue, NYSARC(FSA Insured), 5.25%,
7/1/18, Callable 7/1/12 @ 101......... 1,460,000 1,612,658
New York State Dormitory Authority
Revenue, Rockefeller University,
5.25%, 7/1/13, Callable 7/1/08 @
101................................... 500,000 551,760
New York State Dormitory Authority
Revenue, School District Board
Financing, 5.00%, 7/1/08.............. 595,000 646,426
New York State Dormitory Authority
Revenue, School District Rescue,
5.00%, 4/1/07......................... 500,000 532,230
New York State Dormitory Authority
Revenue, Sloan Kettering Institute
(MBIA Insured), 5.50%, 7/1/23......... 1,300,000 1,506,075
New York State Environmental Facscorp,
5.70%, 1/15/14, Callable 7/15/09 @
101................................... 415,000 470,037
New York State Environmental Facscorp,
5.70%, 1/15/14, Prerefunded 7/15/09 @
101................................... 570,000 655,472
New York State Environmental Facscorp,
5.70%, 1/15/14, Prerefunded 7/15/09 @
101................................... 15,000 17,249
</Table>
20 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
New York State Local Government
Assistance Corp., 6.00%, 4/1/16,
Prerefunded 4/1/05 @ 102.............. 1,000,000 1,037,810
New York State Mortgage Agency Revenue,
AMT, 5.60%, 10/1/14, Callable 9/1/07 @
101.5................................. 1,000,000 1,052,020
New York State Municipal Bond Bank
Revenue, 5.50%, 12/1/12............... 850,000 970,122
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.25%, 4/1/07............... 300,000 322,938
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.50%, 4/1/17, Callable
4/1/11 @ 101.......................... 1,000,000 1,126,420
New York State Thruway Authority
Revenue, Highway & Bridge (MBIA
Insured), 5.00%, 4/1/22, Callable
4/1/14 @ 100.......................... 1,000,000 1,068,110
New York State Thruway Authority,
Personal Income Tax Revenue, 5.00%,
3/15/13............................... 645,000 719,865
New York State Thruway Authority,
Personal Income Tax Revenue, 5.50%,
3/15/20, Callable 3/15/12 @ 100....... 500,000 563,960
New York State Thruway Authority,
Personal Income Tax Revenue (MBIA
Insured), 5.00%, 3/15/19, Callable
3/15/12 @ 100......................... 1,400,000 1,511,174
New York State Thruway Authority,
Personal Income Tax Revenue (MBIA
Insured), 5.00%, 3/15/21, Callable
3/15/13 @ 100......................... 500,000 533,805
New York State Thruway Authority,
Service Contract Revenue, 5.50%,
4/1/11................................ 1,000,000 1,133,780
New York State Urban Development Corp.,
5.125%, 1/1/22, Callable 7/1/14 @
100................................... 885,000 940,065
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12, Prerefunded
4/1/07 @ 102.......................... 1,000,000 1,108,290
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12................ 500,000 576,490
New York State Urban Development Corp.
Revenue, 5.125%, 1/1/25, Prerefunded
1/1/11 @ 100.......................... 175,000 196,014
New York State Urban Development Corp.
Revenue, Series A (MBIA Insured),
6.50%, 1/1/09......................... 500,000 577,035
Niagara Falls New York Bridge Common
Toll Revenue (MBIA Insured), 2.00%,
10/1/05............................... 400,000 400,800
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/14, Callable 9/15/10 @
101................................... 300,000 332,763
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/15, Callable 9/15/10 @
101................................... 665,000 727,862
Port Authority of New York & New Jersey
Revenue, 5.00%, 9/1/27................ 795,000 823,024
Port Authority of New York & New Jersey
Revenue, 5.375%, 3/1/28............... 1,100,000 1,215,774
Port Authority of New York & New Jersey
Special Obligation Revenue (MBIA
Insured), AMT, 5.75%, 12/1/22,
Callable 12/1/07 @ 102................ 500,000 544,560
Suffolk County, New York (FSA Insured),
5.25%, 5/1/12......................... 515,000 582,012
Suffolk County, New York (FSA Insured),
5.25%, 5/1/15......................... 100,000 114,233
Tobacco Settlement Corp., 5.00%,
6/1/06................................ 1,000,000 1,046,690
Tobacco Settlement Corp. Series C-1,
5.50%, 6/1/21, Callable 6/1/13 @
100................................... 1,000,000 1,093,640
Webster, New York Central School
District GO (FSA Insured), 5.00%,
6/15/14............................... 500,000 559,750
----------
60,909,631
----------
PUERTO RICO - 9.3%
Puerto Rico Commonwealth (FSA Insured),
5.50%, 7/1/15......................... 500,000 588,395
Puerto Rico Commonwealth, Highway and
Transportation (MBIA Insured), 5.00%,
9/15/17, Callable 3/15/14 @ 100....... 1,000,000 1,105,520
Puerto Rico Electric Power Authority
Revenue (MBIA Insured), 5.25%,
7/1/22................................ 1,000,000 1,143,520
Puerto Rico Electric Power Authority
Revenue, Series HH (FSA Insured),
5.25%, 7/1/29, Callable 7/1/10 @
101................................... 1,430,000 1,515,943
Puerto Rico Public Buildings Authority
Revenue, 5.25%, 7/1/33, Callable
7/1/14 @ 100.......................... 700,000 732,368
Puerto Rico Public Finance Corp.
Revenue (MBIA Insured), 5.25%, 8/1/29,
Callable 7/1/10 @ 101................. 1,000,000 1,115,090
Puerto Rico Publishing Finance Corp.
Revenue (AMBAC Insured), 5.375%,
6/1/18................................ 500,000 583,545
----------
6,784,381
----------
TOTAL MUNICIPAL BONDS.................. 67,694,012
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 3.3%
Provident New York Tax-Free Money
Market Fund Institutional Shares...... 2,385,031 2,385,031
----------
TOTAL INVESTMENT COMPANIES............. 2,385,031
----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 21
<Page>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* - 2.2%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK - 2.2%
New York State Job Development
Authority, 1.74%, 3/1/05, AMT......... 1,600,000 1,600,000
----------
TOTAL VARIABLE RATE DEMAND NOTES*...... 1,600,000
----------
TOTAL INVESTMENTS
(COST $68,301,929) (a) - 98.7%....... 71,679,043
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $72,593,311.
(a) Represents cost for financial reporting and federal income tax purposes, and
differs from value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.......... $3,406,092
Unrealized depreciation.......... (28,978)
----------
Net unrealized appreciation...... $3,377,114
----------
----------
</Table>
* Variable rate security. The interest rates on these securities are adjusted
periodically to reflect then-current short-term interest rates. The rates
presented in this report represent the rates that were in effect on October
31, 2004. However, each of these securities contains put or demand features
that allow the fund to require the issuer to repurchase the security from the
fund within various time periods, including daily, weekly, monthly, or
semi-annually.
<Table>
AMBAC -- American Municipal Bond Assurance Corporation
AMT -- Interest on security is subject to Federal
Alternative Minimum Tax
FGIC -- Federal Guaranty Insurance Corporation
FSA -- Financial Security Assurance
GO -- General Obligation
MBIA -- Municipal Bond Insurance Association
</Table>
22 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS - 99.9%
SHARES VALUE($)
------- -----------
AEROSPACE & DEFENSE - 1.0%
United Technologies Corp.............. 21,900 2,032,758
-----------
BANKING - 6.4%
Bank of America Corp.................. 113,300 5,074,707
BB&T Corp............................. 33,300 1,368,963
National City Corp.................... 52,300 2,038,131
Wachovia Corp......................... 38,400 1,889,664
Wells Fargo & Co...................... 42,100 2,514,212
-----------
12,885,677
-----------
BIOTECHNOLOGY - 1.3%
Amgen, Inc. (b)....................... 46,000 2,612,800
-----------
CHEMICALS - 3.2%
Du Pont (E.I) de Nemours and Co....... 35,750 1,532,603
Lyondell Chemical Co.................. 51,500 1,183,470
The Dow Chemical Co................... 80,900 3,635,646
-----------
6,351,719
-----------
COMMERCIAL SERVICES - 1.6%
Cendant Corp.......................... 155,150 3,194,539
-----------
COMPUTER SOFTWARE - 6.3%
Adobe Systems, Inc.................... 17,300 969,319
Affiliated Computer Services, Inc.
(b).................................. 23,700 1,292,835
Avaya, Inc. (b)....................... 63,800 918,720
Lexmark International, Inc. (b)....... 10,000 831,100
Microsoft Corp........................ 220,450 6,170,396
Oracle Corp. (b)...................... 196,900 2,492,754
-----------
12,675,124
-----------
COMPUTERS - 3.1%
Dell, Inc. (b)........................ 59,900 2,100,094
Hewlett-Packard Co.................... 103,800 1,936,908
International Business Machines
Corp................................. 25,300 2,270,675
-----------
6,307,677
-----------
CONSUMER PRODUCTS - 8.2%
Altria Group, Inc..................... 54,600 2,645,916
Anheuser-Busch Cos., Inc.............. 27,700 1,383,615
Black & Decker Corp................... 19,900 1,597,572
Colgate-Palmolive Co.................. 43,600 1,945,432
Harley-Davidson, Inc.................. 21,000 1,208,970
PepsiCo, Inc.......................... 86,000 4,263,880
The Coca-Cola Co...................... 48,300 1,963,878
The Procter & Gamble Co............... 30,900 1,581,462
-----------
16,590,725
-----------
DIVERSIFIED MANUFACTURING
OPERATIONS - 9.9%
Eaton Corp............................ 44,600 2,852,170
General Electric Co................... 269,200 9,185,103
ITT Industries, Inc................... 30,590 2,482,073
Tyco International Ltd................ 143,300 4,463,795
Whirlpool Corp........................ 17,200 1,010,500
-----------
19,993,641
-----------
ELECTRIC UTILITIES - 1.1%
Exelon Corp........................... 55,400 2,194,948
-----------
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 3.1%
Analog Devices........................ 23,200 934,032
Intel Corp............................ 160,000 3,561,600
KLA-Tencor Corp. (b).................. 16,200 737,586
Texas Instruments, Inc................ 40,200 982,890
-----------
6,216,108
-----------
FINANCIAL SERVICES - 10.0%
Capital One Financial Corp............ 15,400 1,135,904
Citigroup, Inc........................ 107,200 4,756,463
Countrywide Financial Corp............ 21,400 683,302
Fannie Mae............................ 47,600 3,339,140
Goldman Sachs Group, Inc.............. 23,900 2,351,282
J.P. Morgan Chase & Co................ 94,700 3,655,420
Merrill Lynch & Co., Inc.............. 35,800 1,931,052
Prudential Financial, Inc............. 46,400 2,156,208
-----------
20,008,771
-----------
HEALTH CARE - 5.2%
Anthem, Inc. (b)...................... 18,600 1,495,440
Cardinal Health, Inc.................. 58,800 2,748,900
Caremark Rx, Inc. (b)................. 106,800 3,200,796
Guidant Corp.......................... 45,200 3,011,224
-----------
10,456,360
-----------
INSURANCE - 3.9%
American International Group, Inc..... 57,400 3,484,754
Chubb Corp............................ 29,200 2,106,196
Lincoln National Corp................. 23,500 1,029,300
MetLife, Inc.......................... 34,200 1,311,570
-----------
7,931,820
-----------
INTERNET RELATED - 1.0%
eBay, Inc. (b)........................ 11,200 1,093,232
Yahoo!, Inc. (b)...................... 27,500 995,225
-----------
2,088,457
-----------
MEDIA - 2.9%
Gannett Co., Inc...................... 21,900 1,816,605
McGraw-Hill Cos., Inc................. 15,500 1,336,875
Viacom, Inc., Class B................. 73,000 2,663,770
-----------
5,817,250
-----------
METALS & MINING - 1.5%
Alcoa, Inc............................ 41,150 1,337,375
Phelps Dodge Corp..................... 20,250 1,772,685
-----------
3,110,060
-----------
OIL & GAS - 7.5%
ChevronTexaco Corp.................... 44,000 2,334,640
Exxon Mobil Corp...................... 184,400 9,076,168
Nabors Industries Ltd. (b)............ 43,150 2,119,528
Occidental Petroleum Corp............. 28,450 1,588,364
-----------
15,118,700
-----------
PHARMACEUTICALS - 7.3%
Abbott Laboratories................... 49,800 2,122,974
Johnson & Johnson..................... 53,950 3,149,601
Pfizer, Inc........................... 221,200 6,403,740
Wyeth................................. 74,400 2,949,960
-----------
14,626,275
-----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 23
<Page>
HSBC INVESTOR GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
RETAIL - 8.4%
Best Buy Co., Inc..................... 37,900 2,244,438
Home Depot, Inc....................... 61,000 2,505,880
Lowe's Cos., Inc...................... 20,900 1,176,252
McDonald's Corp....................... 76,900 2,241,635
Target Corp........................... 34,800 1,740,696
Wal-Mart Stores, Inc.................. 130,550 7,039,256
-----------
16,948,157
-----------
TECHNOLOGY - 1.1%
Computer Sciences Corp. (b)........... 19,000 943,730
QUALCOMM, Inc......................... 31,600 1,321,196
-----------
2,264,926
-----------
TELECOMMUNICATIONS - 5.9%
Cisco Systems, Inc. (b)............... 151,400 2,908,394
Comcast Corp. Class A (b)............. 55,400 1,634,300
Motorola, Inc......................... 91,900 1,586,194
SBC Communications, Inc............... 74,550 1,883,133
Verizon Communications, Inc........... 99,600 3,894,360
-----------
11,906,381
-----------
TOTAL COMMON STOCKS................... 201,332,873
-----------
TOTAL INVESTMENTS
(COST $171,040,225) (a) - 99.9%..... 201,332,873
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $201,580,819.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $1,390,610. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation............ $32,354,300
Unrealized depreciation............ (3,452,262)
-----------
Net unrealized appreciation........ $28,902,038
-----------
-----------
</Table>
(b) Represents non-income producing security.
24 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR MID-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 99.6%
SHARES VALUE($)
------- -----------
ADVERTISING SERVICES - 0.7%
Getty Images, Inc. (b) .................. 15,600 922,428
-----------
AEROSPACE & DEFENSE - 1.1%
L-3 Communications Holdings, Inc. ....... 21,500 1,417,495
-----------
BIOTECHNOLOGY - 1.6%
Genzyme Corp. (b) ....................... 27,500 1,442,925
Medimmune, Inc. (b) ..................... 21,000 596,820
-----------
2,039,745
-----------
CHEMICALS - 1.9%
Lyondell Chemical Co. ................... 52,500 1,206,450
The Dow Chemical Co. .................... 25,700 1,154,958
-----------
2,361,408
-----------
COMMERCIAL SERVICES - 3.2%
Cendant Corp. ........................... 94,100 1,937,519
H & R Block, Inc. ....................... 17,700 841,635
Weight Watchers International, Inc.
(b) .................................... 34,200 1,228,464
-----------
4,007,618
-----------
COMMUNICATIONS - 1.0%
Harris Corp. ............................ 20,000 1,230,600
-----------
COMPUTER HARDWARE - 1.1%
Western Digital Corp. (b) ............... 168,100 1,400,273
-----------
COMPUTER SOFTWARE - 12.8%
Adobe Systems, Inc. ..................... 20,100 1,126,203
Affiliated Computer Services, Inc., Class
A (b) .................................. 31,500 1,718,325
Avaya, Inc. (b) ......................... 85,800 1,235,520
BMC Software, Inc. (b) .................. 42,500 804,100
Citrix Systems, Inc. (b) ................ 59,700 1,440,561
Factset Research Systems, Inc. .......... 37,800 1,883,952
Intuit, Inc. (b) ........................ 28,400 1,288,224
Lexmark International, Inc. (b) ......... 20,700 1,720,377
SunGard Data Systems, Inc. (b) .......... 40,000 1,059,600
Symantec Corp. (b) ...................... 19,900 1,133,106
Synopsys, Inc. (b) ...................... 34,700 563,528
VeriSign, Inc. (b) ...................... 48,800 1,309,304
Veritas Software Corp. (b) .............. 40,300 881,764
-----------
16,164,564
-----------
CONSUMER PRODUCTS - 6.2%
American Standard Cos., Inc. (b) ........ 22,800 833,796
Black & Decker Corp. .................... 17,500 1,404,900
Coach, Inc. (b) ......................... 37,400 1,743,962
Constellation Brands, Inc. (b) .......... 43,500 1,706,505
Fortune Brands, Inc. .................... 18,000 1,310,760
The Clorox Co. .......................... 14,500 791,700
-----------
7,791,623
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 9.5%
Danaher Corp. ........................... 26,200 1,444,406
Eaton Corp. ............................. 27,900 1,784,205
ITT Industries, Inc. .................... 17,400 1,411,836
Pentair, Inc. ........................... 56,900 2,126,922
Textron, Inc. ........................... 25,700 1,751,455
Tyco International Ltd. ................. 111,800 3,482,570
-----------
12,001,394
-----------
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 4.6%
Arrow Electronics, Inc. (b) ............. 55,000 1,317,800
Fisher Scientific International, Inc.
(b) .................................... 17,600 1,009,536
Jabil Circuit, Inc. (b) ................. 88,800 2,158,728
Linear Technology Corp. ................. 35,000 1,325,800
-----------
5,811,864
-----------
FINANCIAL SERVICES - 13.2%
Capital One Financial Corp. ............. 15,900 1,172,784
Countrywide Financial Corp. ............. 28,100 897,233
E*Trade Group, Inc. (b) ................. 69,000 890,100
Legg Mason, Inc. ........................ 16,650 1,060,772
Lehman Brothers Holdings, Inc. .......... 22,100 1,815,515
MGIC Investment Corp. ................... 10,400 668,824
Moody's, Corp. .......................... 12,000 933,720
National Financial Partners Corp. ....... 32,000 983,680
Semicondutor Holders Trust .............. 176,000 5,684,800
Synovus Financial Corp. ................. 43,000 1,169,170
TCF Financial Corp. ..................... 44,100 1,390,032
-----------
16,666,630
-----------
HEALTH CARE - 13.5%
Bausch & Lomb, Inc. ..................... 18,900 1,152,144
Beckman Coulter, Inc. ................... 17,100 1,017,450
Becton Dickinson & Co. .................. 23,800 1,249,500
Cardinal Health, Inc. ................... 34,900 1,631,575
Caremark Rx, Inc. (b) ................... 80,400 2,409,587
DENTSPLY International, Inc. ............ 26,200 1,362,662
Express Scripts, Inc. (b) ............... 13,200 844,800
Guidant Corp. ........................... 30,500 2,031,910
Laboratory Corp. of America Holdings
(b) .................................... 35,200 1,612,160
Neurocrine Biosciences, Inc. (b) ........ 29,900 1,391,845
Varian Medical Systems, Inc. (b) ........ 18,800 754,820
Wellpoint Health Networks, Inc. (b) ..... 17,100 1,669,986
-----------
17,128,439
-----------
HOTELS & LODGING - 1.0%
Marriott International, Inc., Class A ... 24,000 1,307,760
-----------
MEDIA - 2.4%
Liberty Media Corp., Class A (b) ........ 131,200 1,170,304
New York Times Co., Class A ............. 14,800 592,740
The Washington Post Company, Class B .... 1,400 1,281,000
-----------
3,044,044
-----------
METALS & MINING - 1.8%
Phelps Dodge Corp. ...................... 25,600 2,241,024
-----------
OIL & GAS - 5.6%
Baker Hughes, Inc. ...................... 31,900 1,366,277
BJ Services Co. ......................... 11,200 571,200
EOG Resources, Inc. ..................... 10,000 665,600
Nabors Industries Ltd. (b) .............. 25,000 1,228,000
Newfield Exploration Co. (b) ............ 12,900 750,780
Patterson-UTI Energy, Inc. .............. 50,800 976,884
Peabody Energy Corp. .................... 10,000 637,800
XTO Energy, Inc. ........................ 25,300 844,514
-----------
7,041,055
-----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 25
<Page>
HSBC INVESTOR MID-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
PHARMACEUTICALS - 4.3%
Allergan, Inc. .......................... 16,800 1,202,208
McKesson Corp. .......................... 53,200 1,418,312
Mylan Laboratories, Inc. ................ 88,900 1,530,858
Teva Pharmaceutical Industries Ltd.
ADR .................................... 50,700 1,318,200
-----------
5,469,578
-----------
REAL ESTATE - 0.7%
The St. Joe Co. ......................... 17,800 906,020
-----------
RESIDENTIAL BUILDING
CONSTRUCTION - 1.1%
Toll Brothers, Inc. (b) ................. 29,800 1,381,230
-----------
RESTAURANTS - 1.3%
YUM! Brands, Inc. ....................... 37,900 1,648,650
-----------
RETAIL - 9.2%
Bed Bath & Beyond, Inc. (b) ............. 49,300 2,010,947
Best Buy Co., Inc. ...................... 30,000 1,776,600
Brinker International, Inc. (b) ......... 37,600 1,214,480
Chico's FAS, Inc. (b) ................... 33,500 1,341,005
Dollar Tree Stores, Inc. (b) ............ 26,900 777,410
Michaels Stores, Inc. ................... 39,800 1,158,180
PETsMART, Inc. .......................... 48,900 1,563,822
Radioshack Corp. ........................ 30,300 906,879
Reynolds American, Inc. ................. 12,900 888,294
-----------
11,637,617
-----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- -----------
TELECOMMUNICATIONS - 1.8%
Adelphia Business Solutions, Inc. (b) ... 19,923 319
Juniper Networks, Inc. (b) .............. 68,900 1,833,429
Lucent Technologies, Inc. (b) ........... 130,100 461,855
-----------
2,295,603
-----------
TOTAL COMMON STOCKS...................... 125,916,662
-----------
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 0.1%
HSBC Investor Money Market Fund Class I
Shares*................................. 104,768 104,768
-----------
TOTAL INVESTMENT COMPANIES............... 104,768
-----------
TOTAL INVESTMENTS
(COST $108,369,244) (a) - 99.7%........ 126,021,430
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $126,362,380.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $155,182. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.............. $20,708,105
Unrealized depreciation.............. (3,211,101)
-----------
Net unrealized appreciation.......... $17,497,004
-----------
-----------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
26 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
LIMITED FIXED NEW YORK
MATURITY INCOME BOND TAX-FREE
FUND FUND FUND BOND FUND
- --------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in master $39,840,773 $109,719,844 $24,704,441
Investments, at value (non
affiliated) $71,679,043
Interest and dividends receivable -- -- -- 883,271
Receivable for capital shares issued 550 9,796 23,776 200,313
Receivable from Investment Adviser 9,956 -- 15,022 --
Prepaid expenses 867 6,909 321 3,177
----------- ------------ ----------- -----------
TOTAL ASSETS 39,852,146 109,736,549 24,743,560 72,765,804
----------- ------------ ----------- -----------
LIABILITIES:
Cash overdraft -- -- -- 11,151
Dividends payable 53,515 171,584 33,824 77,219
Payable for capital shares redeemed 4,000 4,724 44,518 22,264
Accrued expenses and other
liabilities:
Investment management -- -- -- 15,169
Administration 1,890 5,575 967 5,694
Distribution 5,930 -- 7,827 12,732
Shareholder servicing 1,811 -- 5,241 10,982
Other 10,858 36,357 9,080 17,282
----------- ------------ ----------- -----------
TOTAL LIABILITIES 78,004 218,240 101,457 172,493
----------- ------------ ----------- -----------
NET ASSETS $39,774,142 $109,518,309 $24,642,103 $72,593,311
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
COMPOSITION OF NET ASSETS:
Capital $39,042,242 $104,276,286 $24,765,493 $69,102,282
Accumulated undistributed
(overdistributed) net investment
income (2,273) 61,426 11,787 3
Accumulated net realized gains
(losses) from investment
transactions 214,250 (1,586,160) (829,218) 113,912
Unrealized appreciation/depreciation
from investments 519,923 6,766,757 694,041 3,377,114
----------- ------------ ----------- -----------
NET ASSETS $39,774,142 $109,518,309 $24,642,103 $72,593,311
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 1,557,501 $ -- $17,248,098 $32,889,203
Shares Outstanding 154,753 -- 1,627,563 2,905,302
Net Asset Value and Redemption Price
per share $ 10.06 $ -- $ 10.60 $ 11.32
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Maximum sales charge 4.75% -- 4.75% 4.75%
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 10.56 $ -- $ 11.13 $ 11.88
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS B SHARES
Net Assets $ 6,320,623 $ -- $ 7,017,191 $17,456,645
Shares Outstanding 626,786 -- 662,130 1,543,667
Net Asset Value, Offering Price and
Redemption Price per share* $ 10.08 $ -- $ 10.60 $ 11.31
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS C SHARES
Net Assets $ 679,403 $ -- $ 376,814 $ 2,339,677
Shares Outstanding 67,445 -- 35,585 206,100
Net Asset Value, Offering Price and
Redemption Price per share* $ 10.07 $ -- $ 10.59 $ 11.35
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
CLASS Y SHARES
Net Assets $31,216,615 $ -- $ -- $19,907,786
Shares Outstanding 3,097,720 -- -- 1,758,285
Net Asset Value, Offering Price and
Redemption Price per share $ 10.08 $ -- $ -- $ 11.32
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
...............................................................................................................
ADVISOR SHARES
Net Assets $ -- $109,518,309 $ -- $ --
Shares Outstanding -- 10,095,786 -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ 10.85 $ -- $ --
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Investments, at cost $68,301,929
-----------
-----------
</Table>
<Table>
<Caption>
GROWTH VALUE
FUND FUND
--------------- ---------------
ASSETS:
Investments in master $38,195,749 $48,959,543
Investments, at value (non
affiliated)
Interest and dividends receivable -- --
Receivable for capital shares issued 42,650 34,723
Receivable from Investment Adviser 1,489 --
Prepaid expenses 775 851
----------- -----------
TOTAL ASSETS 38,240,663 48,995,117
----------- -----------
LIABILITIES:
Cash overdraft -- --
Dividends payable -- --
Payable for capital shares redeemed 34,756 115,107
Accrued expenses and other
liabilities:
Investment management -- 223
Administration 1,183 1,542
Distribution 1,089 1,502
Shareholder servicing 3,922 4,893
Other 1,750 3,354
----------- -----------
TOTAL LIABILITIES 42,700 126,621
----------- -----------
NET ASSETS $38,197,963 $48,868,496
----------- -----------
----------- -----------
.........................................................................
COMPOSITION OF NET ASSETS:
Capital $38,473,324 $46,389,386
Accumulated undistributed
(overdistributed) net investment
income -- 30,849
Accumulated net realized gains
(losses) from investment
transactions (1,428,444) 434,463
Unrealized appreciation/depreciation
from investments 1,153,083 2,013,798
----------- -----------
NET ASSETS $38,197,963 $48,868,496
----------- -----------
----------- -----------
.........................................................................
CLASS A (INVESTOR) SHARES
Net Assets $17,371,871 $20,932,531
Shares Outstanding 1,384,754 1,564,218
Net Asset Value and Redemption Price
per share $ 12.55 $ 13.38
----------- -----------
----------- -----------
Maximum sales charge 5.00% 5.00%
----------- -----------
----------- -----------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 13.21 $ 14.08
----------- -----------
----------- -----------
.........................................................................
CLASS B SHARES
Net Assets $ 1,402,224 $ 1,937,616
Shares Outstanding 115,804 149,653
Net Asset Value, Offering Price and
Redemption Price per share* $ 12.11 $ 12.95
----------- -----------
----------- -----------
.........................................................................
CLASS C SHARES
Net Assets $ 308,913 $ 398,640
Shares Outstanding 25,377 30,634
Net Asset Value, Offering Price and
Redemption Price per share* $ 12.17 $ 13.01
----------- -----------
----------- -----------
.........................................................................
CLASS Y SHARES
Net Assets $19,114,955 $25,599,709
Shares Outstanding 1,523,207 1,913,995
Net Asset Value, Offering Price and
Redemption Price per share $ 12.55 $ 13.38
----------- -----------
----------- -----------
.........................................................................
ADVISOR 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 27
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
GROWTH AND MID-CAP INTERNATIONAL OVERSEAS
INCOME FUND FUND EQUITY FUND EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in master $148,304,804 $19,928,105
Investments, at value (non affiliated)
(Note 2) $201,332,873 $125,916,662
Investment in affiliates at value -- 104,768 -- --
Interest and dividends receivable 241,696 33,033 -- --
Receivable for capital shares issued 763 1,061 1,281 29,944
Receivable for investments sold 837,633 1,678,866 -- --
Receivable from Investment Adviser -- -- -- --
Tax reclaims receivable -- -- 64,778 16,269
Prepaid expenses 9,188 3,149 2,451 248
------------ ------------ ------------ -----------
TOTAL ASSETS 202,422,153 127,737,539 148,373,314 19,974,566
------------ ------------ ------------ -----------
LIABILITIES:
Cash overdraft 71,947 -- -- --
Payable for investments purchased 604,725 1,259,014 -- --
Payable for capital shares redeemed 1,711 12,639 5,168 43,818
Accrued expenses and other
liabilities:
Investment management 93,331 57,789 -- --
Administration 19,943 10,805 6,886 741
Distribution 2,479 4,489 -- 1,675
Shareholder servicing 1,169 1,861 -- 4,157
Other 46,029 28,562 44,485 4,956
------------ ------------ ------------ -----------
TOTAL LIABILITIES 841,334 1,375,159 56,539 55,347
------------ ------------ ------------ -----------
NET ASSETS $201,580,819 $126,362,380 $148,316,775 $19,919,219
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
COMPOSITION OF NET ASSETS:
Capital $219,314,413 $118,859,260 $138,495,354 $16,771,152
Accumulated undistributed
(overdistributed) net investment
income 566,583 -- 2,066,521 86,769
Accumulated net realized gains
(losses) from investment and foreign
currency transactions (48,592,825) (10,149,066) (6,343,732) 1,165,026
Unrealized appreciation/depreciation
from investments and foreign
currencies 30,292,648 17,652,186 14,098,632 1,896,272
------------ ------------ ------------ -----------
NET ASSETS $201,580,819 $126,362,380 $148,316,775 $19,919,219
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
.................................................................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 1,500,077 $ 1,877,843 $ -- $17,721,430
Shares Outstanding 171,211 222,554 -- 1,271,886
Net Asset Value and Redemption Price
per share $ 8.76 $ 8.44 $ -- $ 13.93
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Maximum sales charge 5.00% 5.00% -- 5.00%
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Maximum Offering Price per share (Net
Asset Value/(100% - maximum sales
charge)) $ 9.22 $ 8.88 $ -- $ 14.66
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
.................................................................................................................
CLASS B SHARES
Net Assets $ 3,820,480 $ 7,036,937 $ -- $ 2,061,188
Shares Outstanding 441,959 861,896 -- 153,440
Net Asset Value, Offering Price and
Redemption Price per share* $ 8.64 $ 8.16 $ -- $ 13.43
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
.................................................................................................................
CLASS C SHARES
Net Assets $ 41,220 $ 93,537 $ -- $ 136,601
Shares Outstanding 4,721 11,382 -- 9,992
Net Asset Value, Offering Price and
Redemption Price per share* $ 8.73 $ 8.22 $ -- $ 13.67
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
.................................................................................................................
CLASS Y SHARES
Net Assets $196,219,042 $ -- $ -- $ --
Shares Outstanding 22,372,386 -- -- --
Net Asset Value, Offering Price and
Redemption Price per share $ 8.77 $ -- $ -- $ --
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
.................................................................................................................
ADVISOR SHARES
Net Assets $ -- $ -- $148,316,775 $ --
Shares Outstanding -- -- 9,971,695 --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ -- $ 14.87 $ --
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
.................................................................................................................
TRUST SHARES
Net Assets $ -- $117,354,063 $ -- $ --
Shares Outstanding -- 13,780,983 -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ 8.52 $ -- $ --
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Investments, at cost $171,040,225 $108,369,244
------------ ------------
------------ ------------
</Table>
<Table>
<Caption>
SMALL CAP OPPORTUNITY
EQUITY FUND FUND
-------------- ---------------
ASSETS:
Investments in master $279,762,634 $25,873,141
Investments, at value (non affiliated)
(Note 2)
Investment in affiliates at value -- --
Interest and dividends receivable -- --
Receivable for capital shares issued 908 17,548
Receivable for investments sold -- --
Receivable from Investment Adviser -- 8,329
Tax reclaims receivable -- --
Prepaid expenses 7,838 892
------------ -----------
TOTAL ASSETS 279,771,380 25,899,910
------------ -----------
LIABILITIES:
Cash overdraft -- --
Payable for investments purchased -- --
Payable for capital shares redeemed 3,728 28,698
Accrued expenses and other
liabilities:
Investment management -- --
Administration 11,644 1,019
Distribution -- 2,228
Shareholder servicing -- 5,426
Other 87,059 6,313
------------ -----------
TOTAL LIABILITIES 102,431 43,684
------------ -----------
NET ASSETS $279,668,949 $25,856,226
------------ -----------
------------ -----------
...........................................................................
COMPOSITION OF NET ASSETS:
Capital $267,996,465 $24,442,837
Accumulated undistributed
(overdistributed) net investment
income -- --
Accumulated net realized gains
(losses) from investment and foreign
currency transactions (29,184,678) (2,170,915)
Unrealized appreciation/depreciation
from investments and foreign
currencies 40,857,162 3,584,304
------------ -----------
NET ASSETS $279,668,949 $25,856,226
------------ -----------
------------ -----------
...........................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ -- $20,901,610
Shares Outstanding -- 1,916,157
Net Asset Value and Redemption Price
per share $ -- $ 10.91
------------ -----------
------------ -----------
Maximum sales charge -- 5.00%
------------ -----------
------------ -----------
Maximum Offering Price per share (Net
Asset Value/(100% - maximum sales
charge)) $ -- $ 11.48
------------ -----------
------------ -----------
...........................................................................
CLASS B SHARES
Net Assets $ -- $ 4,610,633
Shares Outstanding -- 447,874
Net Asset Value, Offering Price and
Redemption Price per share* $ -- $ 10.29
------------ -----------
------------ -----------
...........................................................................
CLASS C SHARES
Net Assets $ -- $ 343,983
Shares Outstanding -- 33,110
Net Asset Value, Offering Price and
Redemption Price per share* $ -- $ 10.39
------------ -----------
------------ -----------
...........................................................................
CLASS Y SHARES
Net Assets $ -- $ --
Shares Outstanding -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ --
------------ -----------
------------ -----------
...........................................................................
ADVISOR SHARES
Net Assets $279,668,949 $ --
Shares Outstanding 21,391,198 --
Net Asset Value, Offering Price and
Redemption Price per share $ 13.07 $ --
------------ -----------
------------ -----------
...........................................................................
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.
28 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2004 (a)
......................................................................
<Table>
<Caption>
LIMITED FIXED NEW YORK
MATURITY INCOME BOND TAX-FREE
FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
INVESTMENT INCOME:
Interest $ -- $ -- $ -- $2,697,209
Dividends -- -- -- 12,508
Investment income from portfolio 1,679,052 5,153,890 1,181,187 --
Foreign tax withholding from
portfolio -- -- -- --
Expenses from portfolio (233,585) (555,214) (127,546) --
---------- ---------- ---------- ----------
TOTAL INVESTMENT INCOME 1,445,467 4,598,676 1,053,641 2,709,717
---------- ---------- ---------- ----------
...............................................................................................................
EXPENSES:
Investment management -- -- -- 174,494
Administration 15,239 39,914 9,164 52,292
Distribution:
Class B Shares 47,349 -- 54,562 138,367
Class C Shares 11,091 -- 3,204 20,233
Shareholder servicing:
Class A (Investor) Shares 6,035 -- 41,900 72,123
Class B Shares 15,783 -- 18,187 46,122
Class C Shares 3,697 -- 1,068 6,744
Accounting 35,999 9,001 27,000 72,746
Custodian -- -- -- 21,989
Insurance 1,517 3,914 434 1,639
Registration 2,344 14,826 8,215 3,206
Printing 14,746 24,192 9,150 21,617
Transfer agent 80,063 27,211 62,938 69,889
Trustee 321 370 182 1,025
Other 5,299 11,044 3,320 13,487
---------- ---------- ---------- ----------
Total expenses before fee
reductions 239,483 130,472 239,324 715,973
Fees reduced by Investment Adviser (43,698) -- (54,731) --
---------- ---------- ---------- ----------
NET EXPENSES 195,785 130,472 184,593 715,973
---------- ---------- ---------- ----------
...............................................................................................................
NET INVESTMENT INCOME (LOSS) 1,249,682 4,468,204 869,048 1,993,744
---------- ---------- ---------- ----------
...............................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS: (b)
Net realized gains (losses) from
investment transactions 331,944 1,275,025 (157,901) 113,912
Change in unrealized
appreciation/depreciation from
investments 32,330 (86,587) 377,523 817,257
---------- ---------- ---------- ----------
...............................................................................................................
Net realized/unrealized gains (losses)
from investment transactions 364,274 1,188,438 219,622 931,169
---------- ---------- ---------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $1,613,956 $5,656,642 $1,088,670 $2,924,913
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</Table>
<Table>
<Caption>
GROWTH VALUE
FUND FUND
--------------- ---------------
INVESTMENT INCOME:
Interest $ -- $ --
Dividends -- --
Investment income from portfolio 135,660 453,975
Foreign tax withholding from
portfolio (16) (1,224)
Expenses from portfolio (127,675) (163,306)
----------- ----------
TOTAL INVESTMENT INCOME 7,969 289,445
----------- ----------
..........................................................................
EXPENSES:
Investment management -- --
Administration 6,534 8,459
Distribution:
Class B Shares 5,100 6,843
Class C Shares 1,045 1,368
Shareholder servicing:
Class A (Investor) Shares 19,374 24,303
Class B Shares 1,700 2,281
Class C Shares 348 456
Accounting 17,130 17,130
Custodian -- --
Insurance 350 445
Registration -- --
Printing 8,372 10,670
Transfer agent 21,675 21,677
Trustee 74 93
Other 3,644 4,056
----------- ----------
Total expenses before fee
reductions 85,346 97,781
Fees reduced by Investment Adviser (19,457) (10,929)
----------- ----------
NET EXPENSES 65,889 86,852
----------- ----------
..........................................................................
NET INVESTMENT INCOME (LOSS) (57,920) 202,593
----------- ----------
..........................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS: (b)
Net realized gains (losses) from
investment transactions (1,428,444) 434,463
Change in unrealized
appreciation/depreciation from
investments 1,153,083 2,013,798
----------- ----------
..........................................................................
Net realized/unrealized gains (losses)
from investment transactions (275,361) 2,448,261
----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ (333,281) $2,650,854
----------- ----------
----------- ----------
</Table>
- --------------
(a) The Growth Fund and Value Fund commenced operations on May 7, 2004.
(b) With the exception of New York Tax-Free Bond Fund, represents amounts
allocated from the respective Master Portfolios.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 29
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
GROWTH AND MID-CAP INTERNATIONAL OVERSEAS
INCOME FUND FUND EQUITY FUND EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 3,232,778 $ 733,695 $ -- $ --
Dividends from affiliated
investments 2,950 11,581 -- --
Investment income from portfolio -- -- 3,763,791 498,174
Tax reclaims -- -- 8,469 4,101
Foreign tax withholding from
portfolio -- -- (534,436) (71,211)
Expenses from portfolio -- -- (1,234,862) (152,651)
----------- ------------ ----------- ----------
TOTAL INVESTMENT INCOME (LOSS) 3,235,728 745,276 2,002,962 278,413
----------- ------------ ----------- ----------
...............................................................................................................
EXPENSES:
Investment management 1,156,774 734,735 -- --
Administration 157,574 100,085 49,743 6,271
Distribution:
Class B Shares 24,823 50,294 -- 12,213
Class C Shares 145 461 -- 1,001
Shareholder servicing:
Class A (Investor) Shares 6,467 4,424 -- 37,446
Class B Shares 8,274 16,765 -- 4,071
Class C Shares 48 154 -- 334
Accounting 63,101 63,079 8,898 27,000
Custodian 56,717 47,146 -- --
Registration 15,485 13,715 26,928 10,464
Printing 59,867 35,170 32,542 10,449
Transfer agent 66,527 96,268 29,618 63,321
Trustee 3,223 2,164 766 121
Other 43,513 28,851 14,154 2,759
----------- ------------ ----------- ----------
Total expenses before fee
reductions 1,662,538 1,193,311 162,649 175,450
Fees reduced by Investment Adviser -- -- -- (15,880)
----------- ------------ ----------- ----------
NET EXPENSES 1,662,538 1,193,311 162,649 159,570
----------- ------------ ----------- ----------
...............................................................................................................
NET INVESTMENT INCOME (LOSS) 1,573,190 (448,035) 1,840,313 118,843
----------- ------------ ----------- ----------
...............................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS AND FOREIGN
CURRENCIES: (a)
Net realized gains from investment and
foreign currency transactions 9,000,926 21,489,500 19,965,089 2,009,405
Change in unrealized
appreciation/depreciation from
investments and foreign currencies (23,421) (11,346,234) 2,586,405 693,652
----------- ------------ ----------- ----------
...............................................................................................................
Net realized/unrealized gains from
investment, options and foreign
currency transactions 8,977,505 10,143,266 22,551,494 2,703,057
----------- ------------ ----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $10,550,695 $ 9,695,231 $24,391,807 $2,821,900
----------- ------------ ----------- ----------
----------- ------------ ----------- ----------
</Table>
<Table>
<Caption>
SMALL CAP OPPORTUNITY
EQUITY FUND FUND
-------------- ---------------
INVESTMENT INCOME:
Dividends $ -- $ --
Dividends from affiliated
investments -- --
Investment income from portfolio 1,033,870 92,645
Tax reclaims -- --
Foreign tax withholding from
portfolio -- --
Expenses from portfolio (2,516,337) (223,032)
------------ ----------
TOTAL INVESTMENT INCOME (LOSS) (1,482,467) (130,387)
------------ ----------
..........................................................................
EXPENSES:
Investment management -- --
Administration 106,877 9,458
Distribution:
Class B Shares -- 33,404
Class C Shares -- 2,694
Shareholder servicing:
Class A (Investor) Shares -- 51,086
Class B Shares -- 11,135
Class C Shares -- 898
Accounting 9,000 27,000
Custodian -- --
Registration 20,246 9,660
Printing 77,378 12,436
Transfer agent 30,153 84,849
Trustee 2,161 183
Other 29,085 3,764
------------ ----------
Total expenses before fee
reductions 274,900 246,567
Fees reduced by Investment Adviser -- (26,819)
------------ ----------
NET EXPENSES 274,900 219,748
------------ ----------
..........................................................................
NET INVESTMENT INCOME (LOSS) (1,757,367) (350,135)
------------ ----------
..........................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS AND FOREIGN
CURRENCIES: (a)
Net realized gains from investment and
foreign currency transactions 30,929,551 1,634,222
Change in unrealized
appreciation/depreciation from
investments and foreign currencies (11,885,640) (121,946)
------------ ----------
..........................................................................
Net realized/unrealized gains from
investment, options and foreign
currency transactions 19,043,911 1,512,276
------------ ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 17,286,544 $1,162,141
------------ ----------
------------ ----------
</Table>
- --------------
(a) With the exception of Growth and Income Fund and Mid-Cap Fund, represents
amounts allocated from the respective Master Portfolios.
30 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
......................................................................
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,249,682 $ 3,333,115 $ 4,468,204 $ 10,945,642
Net realized gains from
investment transactions 331,944 4,918,617 1,275,025 11,905,117
Change in unrealized
appreciation/depreciation from
investments 32,330 (2,609,744) (86,587) (2,456,592)
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 1,613,956 5,641,988 5,656,642 20,394,167
----------- ------------ ------------ -------------
.............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (79,559) (100,206) -- --
Class B Shares (161,712) (152,669) -- --
Class C Shares (37,490) (63,642) -- --
Class Y Shares (1,086,077) (3,280,529) -- --
Advisor Shares -- -- (4,500,718) (11,850,331)
NET REALIZED GAINS:
Class A (Investor) Shares (135,028) -- -- --
Class B Shares (282,131) -- -- --
Class C Shares (105,514) -- -- --
Class Y Shares (1,415,704) -- -- --
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (3,303,215) (3,597,046) (4,500,718) (11,850,331)
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (2,200,141) (60,812,597) (2,606,046) (182,416,067)
----------- ------------ ------------ -------------
CHANGE IN NET ASSETS (3,889,400) (58,767,655) (1,450,122) (173,872,231)
.............................................................................................................................
NET ASSETS:
Beginning of year 43,663,542 102,431,197 110,968,431 284,840,662
----------- ------------ ------------ -------------
End of year $39,774,142 $ 43,663,542 $109,518,309 $ 110,968,431
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
Accumulated undistributed
(overdistributed) net
investment income $ (2,273) $ (6,183) $ 61,426 $ 3,875
----------- ------------ ------------ -------------
----------- ------------ ------------ -------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 31
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 420,136 $ 32,333,443 $ -- $ --
Dividends reinvested 200,881 86,864 -- --
Cost of shares redeemed (2,229,725) (30,657,661) -- --
------------ ------------- ------------ -------------
Class A (Investor) Shares capital
transactions (1,608,708) 1,762,646 -- --
------------ ------------- ------------ -------------
..............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 893,262 3,107,219 -- --
Dividends reinvested 397,930 130,108 -- --
Cost of shares redeemed (1,163,686) (964,324) -- --
------------ ------------- ------------ -------------
Class B Shares capital transactions 127,506 2,273,003 -- --
------------ ------------- ------------ -------------
..............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 83,393 1,471,188 -- --
Dividends reinvested 141,149 57,276 -- --
Cost of shares redeemed (1,990,271) (733,409) -- --
------------ ------------- ------------ -------------
Class C Shares capital transactions (1,765,729) 795,055 -- --
------------ ------------- ------------ -------------
..............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 9,931,279 35,228,965 -- --
Dividends reinvested 1,913,383 2,958,619 -- --
Cost of shares redeemed (10,797,872) (103,830,885) -- --
------------ ------------- ------------ -------------
Class Y Shares capital transactions 1,046,790 (65,643,301) -- --
------------ ------------- ------------ -------------
..............................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued -- -- 26,239,405 174,706,822
Dividends reinvested -- -- 2,670,922 3,243,190
Cost of shares redeemed -- -- (31,516,373) (360,366,079)
------------ ------------- ------------ -------------
Advisor Shares capital transactions -- -- (2,606,046) (182,416,067)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (2,200,141) $ (60,812,597) $ (2,606,046) $(182,416,067)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
..............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 41,873 3,077,715 -- --
Reinvested 19,911 8,421 -- --
Redeemed (223,097) (2,924,192) -- --
------------ ------------- ------------ -------------
Change in Class A (Investor) Shares (161,313) 161,944 -- --
------------ ------------- ------------ -------------
..............................................................................................................................
CLASS B SHARES:
Issued 88,212 293,513 -- --
Reinvested 39,414 12,334 -- --
Redeemed (115,235) (91,409) -- --
------------ ------------- ------------ -------------
Change in Class B Shares 12,391 214,438 -- --
------------ ------------- ------------ -------------
..............................................................................................................................
CLASS C SHARES:
Issued 8,294 138,667 -- --
Reinvested 13,973 5,442 -- --
Redeemed (197,361) (70,036) -- --
------------ ------------- ------------ -------------
Change in Class C Shares (175,094) 74,073 -- --
------------ ------------- ------------ -------------
..............................................................................................................................
CLASS Y SHARES:
Issued 984,517 3,349,080 -- --
Reinvested 189,646 279,954 -- --
Redeemed (1,068,607) (9,718,276) -- --
------------ ------------- ------------ -------------
Change in Class Y Shares 105,556 (6,089,242) -- --
------------ ------------- ------------ -------------
..............................................................................................................................
ADVISOR SHARES:
Issued -- -- 2,434,997 16,137,521
Reinvested -- -- 247,974 299,797
Redeemed -- -- (2,927,030) (32,896,242)
------------ ------------- ------------ -------------
Change in Advisor Shares -- -- (244,059) (16,458,924)
------------ ------------- ------------ -------------
</Table>
32 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
NEW YORK
BOND FUND TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 869,048 $ 747,914 $ 1,993,744 $ 1,858,380
Net realized gains (losses) from
investment transactions (157,901) 323,271 113,912 718,711
Change in unrealized
appreciation/depreciation
from investments 377,523 (145,359) 817,257 (200,970)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 1,088,670 925,826 2,924,913 2,376,121
----------- ----------- ----------- -----------
.............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (638,457) (551,717) (868,263) (645,402)
Class B Shares (223,750) (237,511) (419,400) (415,040)
Class C Shares (13,252) (27,506) (61,105) (82,589)
Class Y Shares -- -- (646,490) (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 (875,459) (816,734) (2,320,264) (1,857,748)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 2,250,029 2,909,577 7,769,011 12,299,920
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS 2,463,240 3,018,669 8,373,660 12,818,293
.............................................................................................................................
NET ASSETS:
Beginning of year 22,178,863 19,160,194 64,219,651 51,401,358
----------- ----------- ----------- -----------
End of year $24,642,103 $22,178,863 $72,593,311 $64,219,651
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Accumulated undistributed
(overdistributed) net investment income $ 11,787 $ (174) $ 3 $ 1,515
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
-------------------- --------------- --------------- ---------------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 33
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
NEW YORK
BOND FUND TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 11,120,582 $ 8,398,463 $19,778,905 $ 11,543,580
Dividends reinvested 592,247 501,654 907,234 590,442
Cost of shares redeemed (8,748,191) (6,884,172) (10,395,878) (6,313,380)
------------ ----------- ----------- ------------
Class A (Investor) Shares capital
transactions 2,964,638 2,015,945 10,290,261 5,820,642
------------ ----------- ----------- ------------
..............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 899,953 2,250,164 2,134,581 6,989,555
Dividends reinvested 191,588 196,735 389,604 319,238
Cost of shares redeemed (1,572,057) (1,164,858) (3,543,472) (1,755,775)
------------ ----------- ----------- ------------
Class B Shares capital transactions (480,516) 1,282,041 (1,019,287) 5,553,018
------------ ----------- ----------- ------------
..............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 9,167 18,000 276,101 1,160,527
Dividends reinvested 12,757 20,473 54,385 63,214
Cost of shares redeemed (256,017) (426,882) (1,262,303) (610,458)
------------ ----------- ----------- ------------
Class C Shares capital transactions (234,093) (388,409) (931,817) 613,283
------------ ----------- ----------- ------------
..............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued -- -- 3,969,688 8,199,696
Dividends reinvested -- -- 188,028 197,795
Cost of shares redeemed -- -- (4,727,862) (8,084,514)
------------ ----------- ----------- ------------
Class Y Shares capital transactions -- -- (570,146) 312,977
------------ ----------- ----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 2,250,029 $ 2,909,577 $ 7,769,011 $ 12,299,920
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
..............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 1,055,569 794,521 1,759,416 1,028,866
Reinvested 56,325 47,355 80,838 52,637
Redeemed (833,673) (653,528) (926,189) (564,319)
------------ ----------- ----------- ------------
Change in Class A (Investor) Shares 278,221 188,348 914,065 517,184
------------ ----------- ----------- ------------
..............................................................................................................................
CLASS B SHARES:
Issued 85,059 211,083 189,522 620,289
Reinvested 18,245 18,625 34,705 28,472
Redeemed (149,766) (110,752) (318,736) (157,037)
------------ ----------- ----------- ------------
Change in Class B Shares (46,462) 118,956 (94,509) 491,724
------------ ----------- ----------- ------------
..............................................................................................................................
CLASS C SHARES:
Issued 868 1,669 24,608 103,233
Reinvested 1,213 1,940 4,817 5,614
Redeemed (24,313) (40,512) (112,449) (54,259)
------------ ----------- ----------- ------------
Change in Class C Shares (22,232) (36,903) (83,024) 54,588
------------ ----------- ----------- ------------
..............................................................................................................................
CLASS Y SHARES:
Issued -- -- 353,878 734,436
Reinvested -- -- 16,713 17,662
Redeemed -- -- (421,929) (724,104)
------------ ----------- ----------- ------------
Change in Class Y Shares -- -- (51,338) 27,994
------------ ----------- ----------- ------------
------------------- --------------- --------------- ---------------
</Table>
34 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
GROWTH FUND VALUE FUND
- ----------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2004 (a) OCTOBER 31, 2004 (a)
- ----------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ (57,920) $ 202,593
Net realized gains (losses) from investment transactions (1,428,444) 434,463
Change in unrealized appreciation/depreciation from
investments 1,153,083 2,013,798
------------ -----------
CHANGE IN NET ASSETS FROM OPERATIONS (333,281) 2,650,854
------------ -----------
............................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares -- (68,463)
Class B Shares -- (1,749)
Class C Shares -- (444)
Class Y Shares -- (105,185)
------------ -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS -- (175,841)
------------ -----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 38,531,244 46,393,483
------------ -----------
CHANGE IN NET ASSETS 38,197,963 48,868,496
............................................................................................................
NET ASSETS:
Beginning of period -- --
------------ -----------
End of period $ 38,197,963 $48,868,496
------------ -----------
------------ -----------
Accumulated undistributed (overdistributed) net investment
income $ -- $ 30,849
------------ -----------
------------ -----------
</Table>
- --------------
(a) The Growth Fund and Value Fund commenced operations on May 7, 2004.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 35
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
GROWTH FUND VALUE FUND
- -------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2004 (a) OCTOBER 31, 2004 (a)
- -------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $19,786,406 $23,212,388
Dividends reinvested -- 67,173
Cost of shares redeemed (2,253,596) (3,411,150)
----------- -----------
Class A (Investor) Shares capital transactions 17,532,810 19,868,411
----------- -----------
..............................................................................................................
CLASS B SHARES:
Proceeds from shares issued 1,516,870 1,963,686
Dividends reinvested -- 1,711
Cost of shares redeemed (93,968) (124,729)
----------- -----------
Class B Shares capital transactions 1,422,902 1,840,668
----------- -----------
..............................................................................................................
CLASS C SHARES:
Proceeds from shares issued 329,711 402,773
Dividends reinvested -- 440
Cost of shares redeemed (17,780) (23,948)
----------- -----------
Class C Shares capital transactions 311,931 379,265
----------- -----------
..............................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 20,852,452 26,452,278
Dividends reinvested -- 81,165
Cost of shares redeemed (1,588,851) (2,228,304)
----------- -----------
Class Y Shares capital transactions 19,263,601 24,305,139
----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $38,531,244 $46,393,483
----------- -----------
----------- -----------
..............................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 1,564,821 1,818,480
Reinvested -- 5,025
Redeemed (180,067) (259,287)
----------- -----------
Change in Class A (Investor) Shares 1,384,754 1,564,218
----------- -----------
..............................................................................................................
CLASS B SHARES:
Issued 123,574 159,465
Reinvested -- 133
Redeemed (7,770) (9,945)
----------- -----------
Change in Class B Shares 115,804 149,653
----------- -----------
..............................................................................................................
CLASS C SHARES:
Issued 26,836 32,464
Reinvested -- 34
Redeemed (1,459) (1,864)
----------- -----------
Change in Class C Shares 25,377 30,634
----------- -----------
..............................................................................................................
CLASS Y SHARES:
Issued 1,651,120 2,077,872
Reinvested -- 6,073
Redeemed (127,913) (169,950)
----------- -----------
Change in Class Y Shares 1,523,207 1,913,995
----------- -----------
---------------------- ----------------
</Table>
- --------------
(a) The Growth Fund and Value Fund commenced operations on May 7, 2004.
36 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 1,573,190 $ 1,762,934 $ (448,035) $ (277,390)
Net realized gains (losses) from
investment and options transactions 9,000,926 (9,441,001) 21,489,500 9,437
Change in unrealized
appreciation/depreciation from
investments and options (23,421) 38,518,987 (11,346,234) 33,785,071
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM OPERATIONS 10,550,695 30,840,920 9,695,231 33,517,118
------------ ------------ ------------ ------------
...........................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (12,296) (10,010) -- --
Class B Shares (876) (2,046) -- --
Class C Shares (a) (24) -- -- --
Class Y Shares (1,535,871) (2,030,344) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (1,549,067) (2,042,400) -- --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (14,941,610) 7,450,742 (51,555,708) 31,225,520
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS (5,939,982) 36,249,262 (41,860,477) 64,742,638
............................................................................................................................
NET ASSETS:
Beginning of year 207,520,801 171,271,539 168,222,857 103,480,219
------------ ------------ ------------ ------------
End of year $201,580,819 $207,520,801 $126,362,380 $168,222,857
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Accumulated undistributed
(overdistributed) net investment income $ 566,583 $ 542,460 $ -- $ --
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
- --------------
(a) Growth and Income Class C Shares commenced operations on November 3, 2003.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 37
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 1,500,035 $ 900,030 $ 863,793 $ 638,547
Dividends reinvested 12,137 9,705 -- --
Cost of shares redeemed (1,915,097) (576,695) (614,831) (388,850)
------------ ------------ ------------ ------------
Class A (Investor) Shares capital
transactions (402,925) 333,040 248,962 249,697
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 1,837,750 945,891 1,257,527 873,543
Dividends reinvested 869 2,022 -- --
Cost of shares redeemed (320,783) (139,831) (548,619) (429,567)
------------ ------------ ------------ ------------
Class B Shares capital transactions 1,517,836 808,082 708,908 443,976
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS C SHARES: (a)
Proceeds from shares issued 45,962 -- 38,477 25,000
Cost of shares redeemed (5,303) -- (4,165) --
------------ ------------ ------------ ------------
Class C Shares capital transactions 40,659 -- 34,312 25,000
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 12,306,056 33,049,306 -- --
Dividends reinvested 348,375 421,341 -- --
Cost of shares redeemed (28,751,611) (27,161,027) -- --
------------ ------------ ------------ ------------
Class Y Shares capital transactions (16,097,180) 6,309,620 -- --
------------ ------------ ------------ ------------
..............................................................................................................................
TRUST SHARES:
Proceeds from shares issued -- -- 11,848,793 46,107,032
Cost of shares redeemed -- -- (64,396,683) (15,600,185)
------------ ------------ ------------ ------------
Trust Shares capital transactions -- -- (52,547,890) 30,506,847
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(14,941,610) $ 7,450,742 $(51,555,708) $ 31,225,520
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
..............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 170,577 114,468 103,921 90,070
Reinvested 1,389 1,290 -- --
Redeemed (218,685) (78,927) (74,968) (56,634)
------------ ------------ ------------ ------------
Change in Class A (Investor) Shares (46,719) 36,831 28,953 33,436
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS B SHARES:
Issued 209,864 125,862 155,872 131,936
Reinvested 101 265 -- --
Redeemed (37,302) (18,379) (69,124) (65,762)
------------ ------------ ------------ ------------
Change in Class B Shares 172,663 107,748 86,748 66,174
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS C SHARES: (a)
Issued 5,315 -- 4,931 3,671
Redeemed (595) -- (506) --
------------ ------------ ------------ ------------
Change in Class C Shares 4,720 -- 4,425 3,671
------------ ------------ ------------ ------------
..............................................................................................................................
CLASS Y SHARES:
Issued 1,406,257 4,459,324 -- --
Reinvested 39,834 56,068 -- --
Redeemed (3,307,085) (3,647,279) -- --
------------ ------------ ------------ ------------
Change in Class Y Shares (1,860,994) 868,113 -- --
------------ ------------ ------------ ------------
..............................................................................................................................
TRUST SHARES:
Issued -- -- 1,427,284 6,913,528
Redeemed -- -- (7,710,357) (2,336,030)
------------ ------------ ------------ ------------
Change in Trust Shares -- -- (6,283,073) 4,577,498
------------ ------------ ------------ ------------
</Table>
- --------------
(a) Growth and Income Fund class C Shares commenced operations on November 3,
2003.
38 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,840,313 $ 2,282,789 $ 118,843 $ 1,123
Net realized gains (losses) from
investment and foreign currency
transactions 19,965,089 (889,405) 2,009,405 194,623
Change in unrealized
appreciation/depreciation from
investments and foreign currencies 2,586,405 43,679,183 693,652 2,572,761
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 24,391,807 45,072,567 2,821,900 2,768,507
------------- ------------ ----------- -----------
.............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares -- -- (75,763) (71,236)
Class B Shares -- -- -- (3,341)
Class C Shares -- -- -- (54)
Advisor Shares (3,737,768) (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 (3,737,768) (3,705,000) (75,763) (74,631)
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 4,005,057 (112,413,621) 5,879,349 713,058
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS 24,659,096 (71,046,054) 8,625,486 3,406,934
.............................................................................................................................
NET ASSETS:
Beginning of year 123,657,679 194,703,733 11,293,733 7,886,799
------------- ------------ ----------- -----------
End of year $ 148,316,775 $123,657,679 $19,919,219 $11,293,733
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
Accumulated undistributed net investment
income $ 2,066,521 $ 3,732,087 $ 86,769 $ 77,699
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 39
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $10,468,157 $ 74,256,371
Dividends reinvested -- -- 74,544 69,478
Cost of shares redeemed -- -- (5,380,471) (73,955,056)
------------ --------------- ----------- ------------
Class A (Investor) Shares capital
transactions -- -- 5,162,230 370,793
------------ --------------- ----------- ------------
.............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 836,302 400,571
Dividends reinvested -- -- -- 3,234
Cost of shares redeemed -- -- (111,311) (67,981)
------------ --------------- ----------- ------------
Class B Shares capital
transactions -- -- 724,991 335,824
------------ --------------- ----------- ------------
.............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 24,526 10,780
Dividends reinvested -- -- -- 54
Cost of shares redeemed -- -- (32,398) (4,393)
------------ --------------- ----------- ------------
Class C Shares capital
transactions -- -- (7,872) 6,441
------------ --------------- ----------- ------------
.............................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 26,978,110 1,033,987,233 -- --
Dividends reinvested 1,968,545 2,711,050 -- --
Cost of shares redeemed (24,941,598) (1,149,111,904) -- --
------------ --------------- ----------- ------------
Advisor Shares capital
transactions 4,005,057 (112,413,621) -- --
------------ --------------- ----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 4,005,057 $ (112,413,621) $ 5,879,349 $ 713,058
------------ --------------- ----------- ------------
------------ --------------- ----------- ------------
.............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 816,578 7,113,411
Reinvested -- -- 5,847 7,075
Redeemed -- -- (411,221) (6,989,865)
------------ --------------- ----------- ------------
Change in Class A (Investor)
Shares -- -- 411,204 130,621
------------ --------------- ----------- ------------
.............................................................................................................................
CLASS B SHARES:
Issued -- -- 67,626 40,360
Reinvested -- -- -- 339
Redeemed -- -- (9,063) (7,369)
------------ --------------- ----------- ------------
Change in Class B Shares -- -- 58,563 33,330
------------ --------------- ----------- ------------
.............................................................................................................................
CLASS C SHARES:
Issued -- -- 1,956 1,049
Reinvested -- -- -- 6
Redeemed -- -- (2,475) (439)
------------ --------------- ----------- ------------
Change in Class C Shares -- -- (519) 616
------------ --------------- ----------- ------------
.............................................................................................................................
ADVISOR SHARES:
Issued 1,962,577 92,631,040 -- --
Reinvested 151,249 255,518 -- --
Redeemed (1,835,748) (101,337,125) -- --
------------ --------------- ----------- ------------
Change in Advisor Shares 278,078 (8,450,567) -- --
------------ --------------- ----------- ------------
</Table>
40 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss $ (1,757,367) $ (1,565,842) $ (350,135) $ (234,805)
Net realized gains from
investment transactions 30,929,551 4,018,810 1,634,222 275,213
Change in unrealized
appreciation/depreciation from
investments (11,885,640) 65,152,323 (121,946) 4,550,177
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 17,286,544 67,605,291 1,162,141 4,590,585
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (63,689,406) 67,780,861 3,652,913 2,364,162
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS (46,402,862) 135,386,152 4,815,054 6,954,747
............................................................................................................................
NET ASSETS:
Beginning of year 326,071,811 190,685,659 21,041,172 14,086,425
End of year $279,668,949 $326,071,811 $25,856,226 $21,041,172
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Accumulated undistributed
(overdistributed) net
investment income $ -- $ -- $ -- $ --
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 41
<Page>
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $11,062,186 $ 5,083,521
Cost of shares redeemed -- -- (7,827,796) (3,421,035)
------------- ------------- ----------- -----------
Class A (Investor) Shares capital
transactions -- -- 3,234,390 1,662,486
------------- ------------- ----------- -----------
.............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 1,037,036 1,009,644
Cost of shares redeemed -- -- (548,444) (281,855)
------------- ------------- ----------- -----------
Class B Shares capital transactions -- -- 488,592 727,789
------------- ------------- ----------- -----------
.............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 46,142 65,774
Cost of shares redeemed -- -- (116,211) (91,887)
------------- ------------- ----------- -----------
Class C Shares capital transactions -- -- (70,069) (26,113)
------------- ------------- ----------- -----------
.............................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 49,388,314 204,930,414 -- --
Cost of shares redeemed (113,077,720) (137,149,553) -- --
------------- ------------- ----------- -----------
Advisor Shares capital transactions (63,689,406) 67,780,861 -- --
------------- ------------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (63,689,406) $ 67,780,861 $ 3,652,913 $ 2,364,162
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
.............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 1,041,089 554,127
Redeemed -- -- (736,333) (395,887)
------------- ------------- ----------- -----------
Change in Class A (Investor) Shares -- -- 304,756 158,240
------------- ------------- ----------- -----------
.............................................................................................................................
CLASS B SHARES:
Issued -- -- 102,168 119,900
Redeemed -- -- (55,286) (35,134)
------------- ------------- ----------- -----------
Change in Class B Shares -- -- 46,882 84,766
------------- ------------- ----------- -----------
.............................................................................................................................
CLASS C SHARES:
Issued -- -- 4,725 7,537
Redeemed -- -- (11,371) (11,212)
------------- ------------- ----------- -----------
Change in Class C Shares -- -- (6,646) (3,675)
------------- ------------- ----------- -----------
.............................................................................................................................
ADVISOR SHARES:
Issued 3,907,178 19,641,503 -- --
Redeemed (8,901,381) (13,824,591) -- --
------------- ------------- ----------- -----------
Change in Advisor Shares (4,994,203) 5,816,912 -- --
------------- ------------- ----------- -----------
------------------- --------------- --------------- ---------------
</Table>
42 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR FUNDS -- LIMITED MATURITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(k).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS TOTAL
VALUE, NET (LOSSES) FROM FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD INCOME TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $10.04 0.33 0.54 0.87
Year ended October 31, 2002 10.58 0.44 (0.10) 0.34
Year ended October 31, 2003 10.43 0.33 0.08 0.41
Year ended October 31, 2004 10.47 0.32* 0.06 0.38
- -------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) $10.07 0.25 0.52 0.77
Year ended October 31, 2002 10.59 0.36 (0.09) 0.27
Year ended October 31, 2003 10.45 0.25 0.08 0.33
Year ended October 31, 2004 10.49 0.23 0.08 0.31
- -------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) $10.07 0.26 0.51 0.77
Year ended October 31, 2002 10.58 0.36 (0.09) 0.27
Year ended October 31, 2003 10.44 0.25 0.09 0.34
Year ended October 31, 2004 10.49 0.22* 0.08 0.30
- -------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) $10.00 0.37 0.59 0.96
Year ended October 31, 2002 10.59 0.46 (0.09) 0.37
Year ended October 31, 2003 10.45 0.33 0.10 0.43
Year ended October 31, 2004 10.48 0.33 0.09 0.42
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
-------------------------------------
NET
REALIZED
NET GAINS FROM NET ASSET
INVESTMENT INVESTMENT TOTAL VALUE, END TOTAL
INCOME TRANSACTIONS DIVIDENDS OF PERIOD RETURN
- ------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) (0.33) -- (0.33) $10.58 8.78%(c)(d)
Year ended October 31, 2002 (0.44) (0.05) (0.49) 10.43 3.34%(d)
Year ended October 31, 2003 (0.37) -- (0.37) 10.47 3.97%(d)
Year ended October 31, 2004 (0.33) (0.46) (0.79) 10.06 3.90%(d)
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) (0.25) -- (0.25) $10.59 8.02%(c)(h)
Year ended October 31, 2002 (0.36) (0.05) (0.41) 10.45 2.65%(h)
Year ended October 31, 2003 (0.29) -- (0.29) 10.49 3.19%(h)
Year ended October 31, 2004 (0.26) (0.46) (0.72) 10.08 3.11%(h)
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) (0.26) -- (0.26) $10.58 7.80%(c)(h)
Year ended October 31, 2002 (0.36) (0.05) (0.41) 10.44 2.65%(h)
Year ended October 31, 2003 (0.29) -- (0.29) 10.49 3.29%(h)
Year ended October 31, 2004 (0.26) (0.46) (0.72) 10.07 3.03%(h)
- ------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) (0.37) -- (0.37) $10.59 9.78%(c)
Year ended October 31, 2002 (0.46) (0.05) (0.51) 10.45 3.69%
Year ended October 31, 2003 (0.40) -- (0.40) 10.48 4.12%
Year ended October 31, 2004 (0.36) (0.46) (0.82) 10.08 4.25%
- ------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT RATIO OF
NET ASSETS AT EXPENSES INCOME TO EXPENSES TO
END OF TO AVERAGE AVERAGE AVERAGE NET PORTFOLIO
PERIOD(000'S) NET ASSETS(k) NET ASSETS(k) ASSETS(f)(k) TURNOVER(a)
- --------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $ 977 1.10%(e) 4.27%(e) 1.49%(e) 102.01%
Year ended October 31, 2002 1,608 0.96% 4.14% 0.96% 44.04%
Year ended October 31, 2003 3,309 1.01% 2.99% 1.01% 98.42%
Year ended October 31, 2004 1,558 1.10% 3.01% 1.21% 50.06%
- --------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (g) $ 896 1.85%(e) 3.52%(e) 7.59%(e) 102.01%
Year ended October 31, 2002 4,178 1.70% 3.30% 1.70% 44.04%
Year ended October 31, 2003 6,443 1.73% 2.30% 1.73% 98.42%
Year ended October 31, 2004 6,321 1.85% 2.28% 1.96% 50.06%
- --------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2001 (i) $ 161 1.85%(e) 3.60%(e) 17.61%(e) 102.01%
Year ended October 31, 2002 1,759 1.70% 3.26% 1.70% 44.04%
Year ended October 31, 2003 2,544 1.73% 2.31% 1.73% 98.42%
Year ended October 31, 2004 679 1.85% 2.25% 1.96% 50.06%
- --------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (j) $ 67,315 0.85%(e) 4.59%(e) 0.85%(e) 102.01%
Year ended October 31, 2002 94,886 0.71% 4.42% 0.71% 44.04%
Year ended October 31, 2003 31,368 0.69% 3.62% 0.69% 98.42%
Year ended October 31, 2004 31,217 0.85% 3.28% 0.96% 50.06%
- --------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding
(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.
(k) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Limited Maturity Portfolio.
HSBC INVESTOR FAMILY OF FUNDS 43
<Page>
HSBC ADVISOR FUNDS TRUST -- FIXED INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(b).
<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, 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
Year ended October 31, 2004 10.73 0.45 0.12 0.57
- -----------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
----------------------
NET ASSET
NET VALUE,
INVESTMENT TOTAL END OF TOTAL
INCOME DIVIDENDS PERIOD RETURN
- ---------------------------------------------------------------------------
ADVISOR SHARES
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%
Year ended October 31, 2004 (0.45) (0.45) 10.85 5.46%
- ---------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------
RATIO OF
RATIO OF NET
NET ASSETS EXPENSES INVESTMENT
AT END OF TO AVERAGE INCOME TO
PERIOD NET AVERAGE NET PORTFOLIO
(000's) ASSETS(b) ASSET(b) TURNOVER(a)
- -----------------------------------------------------------------------------------
ADVISOR SHARES
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%
Year ended October 31, 2004 109,518 0.64% 4.20% 34.88%
- -----------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(b) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Fixed Income Portfolio.
See notes to financial statements.
44 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FUNDS -- BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(e).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM TOTAL
VALUE, NET INVESTMENT AND FROM
BEGINNING INVESTMENT FUTURES INVESTMENT
OF PERIOD INCOME TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $ 9.78 0.61 (0.01) 0.60
Year ended October 31, 2001 9.76 0.60 0.77 1.37
Year ended October 31, 2002 10.55 0.49 (0.14) 0.35
Year ended October 31, 2003 10.38 0.40 0.13 0.53
Year ended October 31, 2004 10.48 0.40 0.12 0.52
- -------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $ 9.78 0.54 (0.01) 0.53
Year ended October 31, 2001 9.77 0.52 0.76 1.28
Year ended October 31, 2002 10.55 0.41 (0.13) 0.28
Year ended October 31, 2003 10.39 0.32 0.13 0.45
Year ended October 31, 2004 10.49 0.32 0.11 0.43
- -------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $ 9.77 0.55 (0.01) 0.54
Year ended October 31, 2001 9.76 0.51 0.77 1.28
Year ended October 31, 2002 10.54 0.41 (0.13) 0.28
Year ended October 31, 2003 10.38 0.32 0.13 0.45
Year ended October 31, 2004 10.48 0.32 0.11 0.43
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
----------------------
NET ASSET
NET VALUE,
INVESTMENT TOTAL END OF TOTAL
INCOME DIVIDENDS PERIOD RETURN
- ------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 (0.62) (0.62) $ 9.76 6.39%(c)
Year ended October 31, 2001 (0.58) (0.58) 10.55 14.41%(c)
Year ended October 31, 2002 (0.52) (0.52) 10.38 3.44%(c)
Year ended October 31, 2003 (0.43) (0.43) 10.48 5.17%(c)
Year ended October 31, 2004 (0.40) (0.40) 10.60 5.07%(c)
- ------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 (0.54) (0.54) $ 9.77 5.67%(d)
Year ended October 31, 2001 (0.50) (0.50) 10.55 13.43%(d)
Year ended October 31, 2002 (0.44) (0.44) 10.39 2.76%(d)
Year ended October 31, 2003 (0.35) (0.35) 10.49 4.38%(d)
Year ended October 31, 2004 (0.32) (0.32) 10.60 4.19%(d)
- ------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 (0.55) (0.55) $ 9.76 5.71%(d)
Year ended October 31, 2001 (0.50) (0.50) 10.54 13.44%(d)
Year ended October 31, 2002 (0.44) (0.44) 10.38 2.77%(d)
Year ended October 31, 2003 (0.35) (0.35) 10.48 4.39%(d)
Year ended October 31, 2004 (0.32) (0.32) 10.59 4.20%(d)
- ------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME TO EXPENSES TO
PERIOD AVERAGE NET AVERAGE AVERAGE PORTFOLIO
(000's) ASSETS(e) NET ASSETS(e) NET ASSETS(a)(e) TURNOVER(b)
- ---------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $ 3,828 1.10% 6.13% 3.31% 440.49%
Year ended October 31, 2001 6,683 1.10% 5.92% 2.61% 341.26%
Year ended October 31, 2002 12,053 1.10% 4.52% 1.47% 77.82%
Year ended October 31, 2003 14,143 1.10% 3.76% 1.21% 70.91%
Year ended October 31, 2004 17,248 1.04% 3.78% 1.26% 34.88%
- ---------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $ 279 1.85% 5.38% 4.03% 440.49%
Year ended October 31, 2001 1,494 1.85% 5.04% 3.32% 341.26%
Year ended October 31, 2002 6,124 1.85% 3.66% 2.18% 77.82%
Year ended October 31, 2003 7,430 1.85% 3.01% 1.96% 70.91%
Year ended October 31, 2004 7,017 1.79% 3.05% 2.01% 34.88%
- ---------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $ 138 1.85% 5.38% 4.05% 440.49%
Year ended October 31, 2001 526 1.85% 5.11% 3.34% 341.26%
Year ended October 31, 2002 983 1.85% 3.75% 2.21% 77.82%
Year ended October 31, 2003 606 1.85% 3.06% 1.97% 70.91%
Year ended October 31, 2004 377 1.80% 3.07% 2.02% 34.88%
- ---------------------------------------------------------------------------------------------------------------------
</Table>
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(c) Excludes sales charge.
(d) Excludes redemption charge.
(e) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Fixed Income Portfolio.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 45
<Page>
HSBC INVESTOR FUNDS -- NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.......................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET FROM
VALUE, NET INVESTMENT AND TOTAL FROM
BEGINNING OF INVESTMENT FUTURES INVESTMENT
PERIOD INCOME TRANSACTIONS ACTIVITIES
- ----------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $10.08 0.46 0.33 0.79
Year ended October 31, 2001 10.39 0.41 0.54 0.95
Year ended October 31, 2002 10.93 0.38 0.16 0.54
Year ended October 31, 2003 11.09 0.38 0.12 0.50
Year ended October 31, 2004 11.21 0.34 0.17 0.51
- ----------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $10.07 0.39 0.33 0.72
Year ended October 31, 2001 10.38 0.33 0.54 0.87
Year ended October 31, 2002 10.92 0.30 0.16 0.46
Year ended October 31, 2003 11.08 0.30 0.12 0.42
Year ended October 31, 2004 11.20 0.25 0.17 0.42
- ----------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $10.11 0.39 0.33 0.72
Year ended October 31, 2001 10.42 0.33 0.54 0.87
Year ended October 31, 2002 10.96 0.30 0.16 0.46
Year ended October 31, 2003 11.12 0.30 0.13 0.43
Year ended October 31, 2004 11.25 0.25 0.16 0.41
- ----------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 2000 $10.07 0.49 0.34 0.83
Year ended October 31, 2001 10.39 0.44 0.54 0.98
Year ended October 31, 2002 10.93 0.41 0.16 0.57
Year ended October 31, 2003 11.09 0.41 0.12 0.53
Year ended October 31, 2004 11.21 0.37 0.17 0.54
- ----------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
---------------------------------------
NET REALIZED
GAINS FROM NET ASSET
NET INVESTMENT AND VALUE,
INVESTMENT FUTURES TOTAL END OF TOTAL
INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN
- -----------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 (0.46) (0.02) (0.48) $10.39 8.03%(b)
Year ended October 31, 2001 (0.41) -- (0.41) 10.93 9.26%(b)
Year ended October 31, 2002 (0.38) -- (0.38) 11.09 5.08%(b)
Year ended October 31, 2003 (0.38) -- (0.38) 11.21 4.57%(b)
Year ended October 31, 2004 (0.34) (0.06) (0.40) 11.32 4.57%(b)
- -----------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 (0.39) (0.02) (0.41) $10.38 7.27%(d)
Year ended October 31, 2001 (0.33) -- (0.33) 10.92 8.44%(d)
Year ended October 31, 2002 (0.30) -- (0.30) 11.08 4.30%(d)
Year ended October 31, 2003 (0.30) -- (0.30) 11.20 3.80%(d)
Year ended October 31, 2004 (0.25) (0.06) (0.31) 11.31 3.80%(d)
- -----------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 (0.39) (0.02) (0.41) $10.42 7.23%(d)
Year ended October 31, 2001 (0.33) -- (0.33) 10.96 8.40%(d)
Year ended October 31, 2002 (0.30) -- (0.30) 11.12 4.28%(d)
Year ended October 31, 2003 (0.30) -- (0.30) 11.25 3.87%(d)
Year ended October 31, 2004 (0.25) (0.06) (0.31) 11.35 3.69%(d)
- -----------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 2000 (0.49) (0.02) (0.51) $10.39 8.41%
Year ended October 31, 2001 (0.44) -- (0.44) 10.93 9.53%
Year ended October 31, 2002 (0.41) -- (0.41) 11.09 5.34%
Year ended October 31, 2003 (0.41) -- (0.41) 11.21 4.84%
Year ended October 31, 2004 (0.37) (0.06) (0.43) 11.32 4.83%
- -----------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF
NET RATIO OF
NET ASSETS RATIO OF INVESTMENT EXPENSES TO
AT END OF EXPENSES TO INCOME AVERAGE
PERIOD AVERAGE TO AVERAGE NET PORTFOLIO
(000's) NET ASSETS NET ASSETS ASSETS(c) TURNOVER(a)
- -----------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $12,401 0.93% 4.60% 1.06% 34.12%
Year ended October 31, 2001 17,722 0.95% 3.91% 1.07% 0.00%
Year ended October 31, 2002 16,341 0.95% 3.52% 0.95% 30.70%
Year ended October 31, 2003 22,326 0.91% 3.39% 0.91% 29.79%
Year ended October 31, 2004 32,889 0.87% 3.01% 0.87% 26.96%
- -----------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $ 828 1.70% 3.81% 1.74% 34.12%
Year ended October 31, 2001 5,619 1.70% 3.05% 1.82% 0.00%
Year ended October 31, 2002 12,699 1.70% 2.74% 1.70% 30.70%
Year ended October 31, 2003 18,352 1.66% 2.64% 1.66% 29.79%
Year ended October 31, 2004 17,457 1.62% 2.27% 1.62% 26.96%
- -----------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $ 416 1.71% 3.77% 1.73% 34.12%
Year ended October 31, 2001 1,523 1.70% 3.04% 1.83% 0.00%
Year ended October 31, 2002 2,608 1.70% 2.74% 1.70% 30.70%
Year ended October 31, 2003 3,252 1.66% 2.64% 1.66% 29.79%
Year ended October 31, 2004 2,340 1.62% 2.26% 1.62% 26.96%
- -----------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 2000 $ 9,514 0.69% 4.82% 0.78% 34.12%
Year ended October 31, 2001 14,989 0.70% 4.19% 0.83% 0.00%
Year ended October 31, 2002 19,753 0.70% 3.76% 0.70% 30.70%
Year ended October 31, 2003 20,290 0.67% 3.67% 0.67% 29.79%
Year ended October 31, 2004 19,908 0.62% 3.27% 0.62% 26.96%
- -----------------------------------------------------------------------------------------------------------------
</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) Excludes redemption charge.
See notes to financial statements.
46 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FUNDS -- GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(h).
<Table>
<Caption>
INVESTMENT ACTIVITIES
----------------------------------------
NET REALIZED
AND UNREALIZED
NET ASSET GAINS FROM TOTAL NET ASSET
VALUE, NET INVESTMENT FROM VALUE,
BEGINNING INVESTMENT AND FUTURES INVESTMENT END OF
OF PERIOD LOSS TRANSACTIONS ACTIVITIES PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2004 (c) $12.68 (0.02) (0.11) (0.13) $12.55 (1.03)%(d)(e)
- ----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2004 (c) $12.28 (0.07) (0.10) (0.17) $12.11 (1.38)%(d)(g)
- ----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (c) $12.35 (0.06) (0.12) (0.18) $12.17 (1.46)%(d)(g)
- ----------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2004 (c) $12.67 (0.01) (0.11) (0.12) $12.55 (0.95)%(d)
- ----------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
----------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO LOSS TO EXPENSES TO
PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO
(000's) NET ASSETS(h) NET ASSETS(h) NET ASSETS(a)(h) TURNOVER(b)
- -----------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2004 (c) $17,372 1.20%(f) (0.42)%(f) 1.31%(f) 53.08%
- -----------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2004 (c) $ 1,402 1.95%(f) (1.17)%(f) 2.06%(f) 53.08%
- -----------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (c) $ 309 1.95%(f) (1.18)%(f) 2.06%(f) 53.08%
- -----------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2004 (c) $19,115 0.95%(f) (0.17)%(f) 1.06%(f) 53.08%
- -----------------------------------------------------------------------------------------------------------------
</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 its investable assets.
(c) Class A Shares, Class B Shares, Class C Shares and Class Y Shares commenced
operations on May 7, 2004.
(d) Not annualized.
(e) Excludes sales charge.
(f) Annualized.
(g) Excludes redemption charge.
(h) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Growth Portfolio.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 47
<Page>
HSBC INVESTOR FUNDS -- VALUE FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(h).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS
VALUE, NET FROM INVESTMENT TOTAL FROM
BEGINNING OF INVESTMENT AND FUTURES INVESTMENT
PERIOD INCOME TRANSACTIONS ACTIVITIES
- ----------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2004 (c) $12.68 0.05 0.69 0.74
- ----------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2004 (c) $12.28 -- 0.68 0.68
- ----------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (c) $12.35 0.01 0.67 0.68
- ----------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2004 (c) $12.67 0.07 0.70 0.77
- ----------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
----------------------
NET ASSET
NET VALUE,
INVESTMENT TOTAL END OF TOTAL
INCOME DIVIDENDS PERIOD RETURN
- ---------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2004 (c) (0.04) (0.04) $13.38 7.79%
- ---------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2004 (c) (0.01) (0.01) $12.95 9.06%
- ---------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (c) (0.02) (0.02) $13.01 8.47%
- ---------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2004 (c) (0.06) (0.06) $13.38 6.05%
- ---------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------------------
RATIO OF RATIO OF NET
NET ASSETS EXPENSES TO INVESTMENT RATIO OF
AT END OF AVERAGE INCOME TO EXPENSES TO
PERIOD NET AVERAGE NET AVERAGE NET PORTFOLIO
(000's) ASSETS(h) ASSETS(h) ASSETS(a)(h) TURNOVER(b)
- ------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2004 (c) $ 20,933 1.20%(f) 0.81%(f) 1.25%(f) 10.33%
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2004 (c) $ 1,938 1.95%(f) 0.05%(f) 2.00%(f) 10.33%
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (c) $ 399 1.95%(f) 0.04%(f) 2.00%(f) 10.33%
- ------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2004 (c) $ 25,600 0.95%(f) 1.05%(f) 1.00%(f) 10.33%
- ------------------------------------------------------------------------------------------------------------
</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 its investable assets.
(c) Class A Shares, Class B Shares, Class C Shares and Class Y Shares commenced
operations on May 7, 2004.
(d) Not annualized.
(e) Excludes sales charge.
(f) Annualized.
(g) Excludes redemption charge.
(h) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Value Portfolio.
See notes to financial statements.
48 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FUNDS -- GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.......................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
-------------------------------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM
BEGINNING OF INCOME INVESTMENT INVESTMENT
PERIOD (LOSS) TRANSACTIONS ACTIVITIES
- -----------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $10.06 0.01 (1.15) (1.14)
Year ended October 31, 2002 8.91 0.04 (1.73) (1.69)
Year ended October 31, 2003 7.21 0.06 1.18 1.24
Year ended October 31, 2004 8.39 0.05 0.36 0.41
- -----------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (f) $ 9.54 (0.01) (0.64) (0.65)
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
Year ended October 31, 2004 8.30 (0.02)> 0.36 0.34
- -----------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (h) $ 8.40 (0.02)> 0.38 0.36
- -----------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (i) $10.00 0.02 (1.09) (1.07)
Year ended October 31, 2002 8.92 0.06 (1.73) (1.67)
Year ended October 31, 2003 7.22 0.07 1.19 1.26
Year ended October 31, 2004 8.40 0.07 0.36 0.43
- -----------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
----------------------
NET ASSET
NET VALUE,
INVESTMENT TOTAL END OF
INCOME DIVIDENDS PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) (0.01) (0.01) $8.91 (12.65)%(c)(d)
Year ended October 31, 2002 (0.01) (0.01) 7.21 (18.97)%(d)
Year ended October 31, 2003 (0.06) (0.06) 8.39 17.26 %(d)
Year ended October 31, 2004 (0.04) (0.04) 8.76 4.94 %(d)
- ----------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (f) (0.01) (0.01) $8.88 (10.52)%(c)(g)
Year ended October 31, 2002 -- -- 7.14 (19.59)%(g)
Year ended October 31, 2003 (0.01) (0.01) 8.30 16.40 %(g)
Year ended October 31, 2004 (0.00)* (0.00)* 8.64 4.13 %(g)
- ----------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (h) (0.03) (0.03) $8.73 3.57 %(c)(g)
- ----------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (i) (0.01) (0.01) $8.92 (9.71)%(c)
Year ended October 31, 2002 (0.03) (0.03) 7.22 (18.76)%
Year ended October 31, 2003 (0.08) (0.08) 8.40 17.63 %
Year ended October 31, 2004 (0.06) (0.06) 8.77 5.18 %
- ----------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES TO INCOME (LOSS)
PERIOD AVERAGE TO AVERAGE PORTFOLIO
(000's) NET ASSETS NET ASSETS TURNOVER(a)
- ----------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2001 (b) $ 1,927 1.11%(e) 0.15%(e) 43.13%
Year ended October 31, 2002 1,306 1.01% 0.39% 59.85%
Year ended October 31, 2003 1,827 1.04% 0.70% 64.52%
Year ended October 31, 2004 1,500 1.02% 0.50% 73.68%
- ----------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2001 (f) $ 330 1.84%(e) (0.64)(e) 43.13%
Year ended October 31, 2002 1,154 1.76% (0.30)% 59.85%
Year ended October 31, 2003 2,235 1.79% (0.07)% 64.52%
Year ended October 31, 2004 3,820 1.77% (0.25)% 73.68%
- ----------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2004 (h) $ 41 1.77%(e) (0.28)%(e) 73.68%
- ----------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31, 2001 (i) $219,221 0.82%(e) 0.38%(e) 43.13%
Year ended October 31, 2002 168,812 0.76% 0.66% 59.85%
Year ended October 31, 2003 203,458 0.79% 0.96% 64.52%
Year ended October 31, 2004 196,219 0.77% 0.77% 73.68%
- ----------------------------------------------------------------------------------------------
</Table>
* Less than $0.005 per share.
> 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 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
<Page>
HSBC INVESTOR FUNDS -- MID-CAP FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
.......................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED
AND UNREALIZED
GAINS (LOSSES)
NET ASSET FROM TOTAL
VALUE, NET INVESTMENT FROM
BEGINNING INVESTMENT AND OPTION INVESTMENT
OF PERIOD LOSS TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
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)
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
Year ended October 31, 2004 7.95 (0.04)* 0.53 0.49
- -------------------------------------------------------------------------------------------
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)
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
Year ended October 31, 2004 7.75 (0.10)* 0.51 0.41
- -------------------------------------------------------------------------------------------
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)
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
Year ended October 31, 2004 7.80 (0.10)* 0.52 0.42
- -------------------------------------------------------------------------------------------
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)
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
Year ended October 31, 2004 8.01 (0.02)* 0.53 0.51
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
------------------------
NET REALIZED
GAINS FROM NET ASSET
INVESTMENT VALUE,
AND OPTION TOTAL END OF TOTAL
TRANSACTIONS DIVIDENDS PERIOD RETURN
- ------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2000 (b) -- -- $10.07 (1.95)%(c)(d)
Year ended October 31, 2001 (0.14) (0.14) 7.90 (20.37)%(d)
Year ended October 31, 2002 -- -- 6.30 (20.25)%(d)
Year ended October 31, 2003 -- -- 7.95 26.19 %(d)
Year ended October 31, 2004 -- -- 8.44 6.16 %(d)
- ------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2000 (f) -- -- $10.06 (6.16)%(c)(g)
Year ended October 31, 2001 (0.14) (0.14) 7.82 (21.09)%(g)
Year ended October 31, 2002 -- -- 6.19 (20.84)%(g)
Year ended October 31, 2003 -- -- 7.75 25.20 %(g)
Year ended October 31, 2004 -- -- 8.16 5.29 %(g)
- ------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2000 (h) -- -- $10.06 0.20 %(c)(g)
Year ended October 31, 2001 (0.14) (0.14) 7.82 (21.09)%(g)
Year ended October 31, 2002 -- -- 6.20 (20.72)%(g)
Year ended October 31, 2003 -- -- 7.80 25.81 %(g)
Year ended October 31, 2004 -- -- 8.22 5.38 %(g)
- ------------------------------------------------------------------------------------------------
TRUST SHARES
Period ended October 31, 2000 (i) -- -- $10.08 0.80 %(c)
Year ended October 31, 2001 (0.14) (0.14) 7.91 (20.34)%
Year ended October 31, 2002 -- -- 6.33 (19.97)%
Year ended October 31, 2003 -- -- 8.01 26.54 %
Year ended October 31, 2004 -- -- 8.52 6.37 %
- ------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES LOSS TO
PERIOD TO AVERAGE AVERAGE PORTFOLIO
(000's) NET ASSETS NET ASSETS TURNOVER(a)
- -------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31, 2000 (b) $ 445 1.28%(e) (0.42)%(e) 57.69%
Year ended October 31, 2001 927 1.13% (0.40)% 112.67%
Year ended October 31, 2002 1,010 1.08% (0.46)% 140.23%
Year ended October 31, 2003 1,539 1.10% (0.43)% 100.86%
Year ended October 31, 2004 1,878 1.09% (0.54)% 106.72%
- -------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2000 (f) $ 1,557 2.02%(e) (1.17)%(e) 57.69%
Year ended October 31, 2001 3,827 1.88% (1.16)% 112.67%
Year ended October 31, 2002 4,391 1.83% (1.21)% 140.23%
Year ended October 31, 2003 6,009 1.85% (1.16)% 100.86%
Year ended October 31, 2004 7,037 1.84% (1.29)% 106.72%
- -------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2000 (h) $ 18 2.11%(e) (1.29)%(e) 57.69%
Year ended October 31, 2001 21 1.87% (1.13)% 112.67%
Year ended October 31, 2002 20 1.83% (1.20)% 140.23%
Year ended October 31, 2003 54 1.85% (1.23)% 100.86%
Year ended October 31, 2004 94 1.84% (1.29)% 106.72%
- -------------------------------------------------------------------------------------------------
TRUST SHARES
Period ended October 31, 2000 (i) $108,487 1.01%(e) (0.22)%(e) 57.69%
Year ended October 31, 2001 129,390 0.87% (0.13)% 112.67%
Year ended October 31, 2002 98,059 0.82% (0.18)% 140.23%
Year ended October 31, 2003 160,621 0.85% (0.17)% 100.86%
Year ended October 31, 2004 117,354 0.84% (0.28)% 106.72%
- -------------------------------------------------------------------------------------------------
</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
<Page>
HSBC ADVISOR FUNDS TRUST -- INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(b).
<Table>
<Caption>
INVESTMENT ACTIVITIES
---------------------------------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM TOTAL
VALUE, NET INVESTMENT AND FROM
BEGINNING OF INVESTMENT FOREIGN CURRENCY INVESTMENT
PERIOD INCOME TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2000 $18.58 0.11 0.75 0.86
Year ended October 31, 2001 18.13 0.09 (4.38) (4.29)
Year ended October 31, 2002 12.56 0.09 (1.73) (1.64)
Year ended October 31, 2003 10.73 0.20 2.02 2.22
Year ended October 31, 2004 12.76 0.18 2.32 2.50
- -------------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
-------------------------------------
NET REALIZED
GAINS FROM
INVESTMENT NET ASSET
NET AND FOREIGN VALUE,
INVESTMENT CURRENCY TOTAL END OF TOTAL
INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN
- --------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2000 (0.11) (1.20) (1.31) $18.13 4.05 %
Year ended October 31, 2001 -- (1.28) (1.28) 12.56 (25.42)%
Year ended October 31, 2002 (0.19) -- (0.19) 10.73 (13.32)%
Year ended October 31, 2003 (0.19) -- (0.19) 12.76 21.03 %
Year ended October 31, 2004 (0.39) -- (0.39) 14.87 20.06 %
- --------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES TO INCOME TO
PERIOD AVERAGE AVERAGE PORTFOLIO
(000's) NET ASSETS(b) NET ASSETS(b) TURNOVER(a)
- --------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2000 $219,837 0.90% 0.51% 27.81%
Year ended October 31, 2001 184,494 0.99% 0.51% 26.90%
Year ended October 31, 2002 194,704 0.99% 0.70% 31.63%
Year ended October 31, 2003 123,658 1.07% 1.16% 68.51%
Year ended October 31, 2004 148,317 1.05% 1.39% 106.11%
- --------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(b) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor International Portfolio.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 51
<Page>
HSBC INVESTOR FUNDS -- OVERSEAS EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(e).
<Table>
<Caption>
INVESTMENT ACTIVITIES
-----------------------------------------
NET REALIZED
AND UNREALIZED
GAINS (LOSSES)
NET ASSET NET FROM INVESTMENT
VALUE, INVESTMENT AND FOREIGN TOTAL FROM
BEGINNING INCOME CURRENCY INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES
- ------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $16.90 (0.11) 0.64 0.53
Year ended October 31, 2001 17.21 (0.04) (4.05) (4.09)
Year ended October 31, 2002 11.66 (0.04) (1.34) (1.38)
Year ended October 31, 2003 9.87 0.01 1.95 1.96
Year ended October 31, 2004 11.73 0.08 2.19 2.27
- ------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $16.69 (0.10) 0.48 0.38
Year ended October 31, 2001 16.85 (0.14) (3.95) (4.09)
Year ended October 31, 2002 11.30 (0.08) (1.34) (1.42)
Year ended October 31, 2003 9.56 (0.06) 1.89 1.83
Year ended October 31, 2004 11.34 0.01 * 2.08 2.09
- ------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $16.84 (0.14) 0.52 0.38
Year ended October 31, 2001 17.00 (0.18) (3.95) (4.13)
Year ended October 31, 2002 11.41 (0.08) (1.36) (1.44)
Year ended October 31, 2003 9.68 (0.06) 1.93 1.87
Year ended October 31, 2004 11.54 (0.01) 2.14 2.13
- ------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
---------------------------------------
NET REALIZED
GAINS FROM
INVESTMENT
NET AND FOREIGN NET ASSET
INVESTMENT CURRENCY TOTAL VALUE, END TOTAL
INCOME TRANSACTIONS DIVIDENDS OF PERIOD RETURN
- --------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 -- (0.22) (0.22) $17.21 3.05 %(c)
Year ended October 31, 2001 -- (1.46) (1.46) 11.66 (25.93)%(c)
Year ended October 31, 2002 (0.12) (0.29) (0.41) 9.87 (12.42)%(c)
Year ended October 31, 2003 (0.10) -- (0.10) 11.73 20.09 %(c)
Year ended October 31, 2004 (0.07) -- (0.07) 13.93 19.40 %(c)
- --------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 -- (0.22) (0.22) $16.85 2.18 %(d)
Year ended October 31, 2001 -- (1.46) (1.46) 11.30 (26.52)%(d)
Year ended October 31, 2002 (0.03) (0.29) (0.32) 9.56 (13.07)%(d)
Year ended October 31, 2003 (0.05) -- (0.05) 11.34 19.26 %(d)
Year ended October 31, 2004 -- -- -- 13.43 18.43 %(d)
- --------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 -- (0.22) (0.22) $17.00 2.10 %(d)
Year ended October 31, 2001 -- (1.46) (1.46) 11.41 (26.53)%(d)
Year ended October 31, 2002 -- (0.29) (0.29) 9.68 (13.08)%(d)
Year ended October 31, 2003 (0.01) -- (0.01) 11.54 19.28 %(d)
Year ended October 31, 2004 -- -- -- 13.67 18.46 %(d)
- --------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------------------------------
RATIO OF
NET
INVESTMENT
RATIO OF INCOME RATIO OF
NET ASSETS EXPENSES TO (LOSS) EXPENSES TO
AT END OF AVERAGE TO AVERAGE AVERAGE PORTFOLIO
PERIOD (000's) NET ASSETS(e) NET ASSETS(e) NET ASSETS(a)(e) TURNOVER(b)
- -------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $ 7,252 1.85% (0.49)% 2.43% 27.81%
Year ended October 31, 2001 6,940 1.85% (0.35)% 2.44% 26.90%
Year ended October 31, 2002 7,203 1.85% (0.18)% 2.28% 31.63%
Year ended October 31, 2003 10,096 1.85% 0.07 % 2.34% 68.51%
Year ended October 31, 2004 17,721 1.78% 0.79 % 1.88% 106.11%
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $ 358 2.60% (1.17)% 2.96% 27.81%
Year ended October 31, 2001 294 2.60% (1.09)% 3.18% 26.90%
Year ended October 31, 2002 588 2.60% (0.87)% 3.04% 31.63%
Year ended October 31, 2003 1,076 2.60% (0.62)% 3.16% 68.51%
Year ended October 31, 2004 2,061 2.53% 0.05 % 2.63% 106.11%
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $ 248 2.60% (1.14)% 2.96% 27.81%
Year ended October 31, 2001 139 2.60% (1.10)% 3.16% 26.90%
Year ended October 31, 2002 96 2.60% (1.00)% 3.04% 31.63%
Year ended October 31, 2003 121 2.60% (0.64)% 3.17% 68.51%
Year ended October 31, 2004 137 2.54% (0.10)% 2.66% 106.11%
- -------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated using the average shares outstanding method.
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(c) Excludes sales charge.
(d) Excludes redemption charge.
(e) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor International Portfolio.
See notes to financial statements.
52 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC ADVISOR FUNDS TRUST -- SMALL CAP EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(b).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS TOTAL
VALUE, NET (LOSSES) FROM FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD LOSS TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2000 $12.56 (0.10) 6.73 6.63
Year ended October 31, 2001 17.81 (0.10) (3.65) (3.75)
Year ended October 31, 2002 11.32 (0.09) (1.96) (2.05)
Year ended October 31, 2003 9.27 (0.06) 3.15 3.09
Year ended October 31, 2004 12.36 (0.08) 0.79 0.71
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
------------------------
NET REALIZED NET ASSET
GAINS FROM VALUE,
INVESTMENT TOTAL END OF TOTAL
TRANSACTIONS DIVIDENDS PERIOD RETURN
- ------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2000 (1.38) (1.38) $17.81 55.59 %
Year ended October 31, 2001 (2.74) (2.74) 11.32 (22.98)%
Year ended October 31, 2002 -- -- 9.27 (18.11)%
Year ended October 31, 2003 -- -- 12.36 33.33 %
Year ended October 31, 2004 -- -- 13.07 5.74 %
- ------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT
AT END OF EXPENSES TO LOSS TO
PERIOD AVERAGE AVERAGE PORTFOLIO
(000's) NET ASSETS(b) NET ASSETS(b) TURNOVER(a)
- --------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2000 $253,724 1.05% (0.68)% 79.51%
Year ended October 31, 2001 180,265 1.07% (0.74)% 52.47%
Year ended October 31, 2002 190,686 1.07% (0.87)% 103.90%
Year ended October 31, 2003 326,072 1.01% (0.72)% 152.05%
Year ended October 31, 2004 279,669 0.98% (0.62)% 81.75%
- --------------------------------------------------------------------------------------------------
</Table>
(a) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(b) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Small Cap Portfolio.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 53
<Page>
HSBC INVESTOR FUNDS -- OPPORTUNITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
..........................................................................
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(e).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS TOTAL
VALUE, NET (LOSSES) FROM FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT
OF PERIOD LOSS TRANSACTIONS ACTIVITIES
- -------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $13.19 (0.26) 7.13 6.87
Year ended October 31, 2001 18.75 (0.14) (3.58) (3.72)
Year ended October 31, 2002 9.60 (0.13) (1.64) (1.77)
Year ended October 31, 2003 7.83 (0.10) 2.63 2.53
Year ended October 31, 2004 10.36 (0.13) 0.68 0.55
- -------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $13.06 (0.28) 6.93 6.65
Year ended October 31, 2001 18.40 (0.23)* (3.47) (3.70)
Year ended October 31, 2002 9.27 (0.20)* (1.56) (1.76)
Year ended October 31, 2003 7.51 (0.18)* 2.52 2.34
Year ended October 31, 2004 9.85 (0.20) 0.64 0.44
- -------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $13.13 (0.32) 7.01 6.69
Year ended October 31, 2001 18.51 (0.24)* (3.49) (3.73)
Year ended October 31, 2002 9.35 (0.21)* (1.57) (1.78)
Year ended October 31, 2003 7.57 (0.18) 2.55 2.37
Year ended October 31, 2004 9.94 (0.22) 0.67 0.45
- -------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
------------------------
NET REALIZED NET ASSET
GAINS FROM VALUE,
INVESTMENT TOTAL END OF TOTAL
TRANSACTIONS DIVIDENDS PERIOD RETURN
- ---------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 (1.31) (1.31) $18.75 54.54 %(c)
Year ended October 31, 2001 (5.43) (5.43) 9.60 (23.65)%(c)
Year ended October 31, 2002 -- -- 7.83 (18.44)%(c)
Year ended October 31, 2003 -- -- 10.36 32.31 %(c)
Year ended October 31, 2004 -- -- 10.91 5.31 %(c)
- ---------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 (1.31) (1.31) $18.40 53.30 %(d)
Year ended October 31, 2001 (5.43) (5.43) 9.27 (24.16)%(d)
Year ended October 31, 2002 -- -- 7.51 (18.99)%(d)
Year ended October 31, 2003 -- -- 9.85 31.16 %(d)
Year ended October 31, 2004 -- -- 10.29 4.47 %(d)
- ---------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 (1.31) (1.31) $18.51 53.32 %(d)
Year ended October 31, 2001 (5.43) (5.43) 9.35 (24.17)%(d)
Year ended October 31, 2002 -- -- 7.57 (19.04)%(d)
Year ended October 31, 2003 -- -- 9.94 31.31 %(d)
Year ended October 31, 2004 -- -- 10.39 4.53 %(d)
- ---------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------------------------------
RATIO OF
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO LOSS TO EXPENSES TO
PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO
(000's) NET ASSETS(e) NET ASSETS(e) NET ASSETS(a)(e) TURNOVER(b)
- ------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2000 $15,415 1.65% (1.29)% 1.84% 79.51%
Year ended October 31, 2001 11,892 1.65% (1.32)% 1.97% 52.47%
Year ended October 31, 2002 11,384 1.65% (1.45)% 2.08% 103.90%
Year ended October 31, 2003 16,695 1.65% (1.36)% 2.09% 152.05%
Year ended October 31, 2004 20,902 1.61% (1.24)% 1.72% 81.75%
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2000 $ 1,273 2.40% (2.02)% 2.49% 79.51%
Year ended October 31, 2001 1,315 2.40% (2.08)% 2.73% 52.47%
Year ended October 31, 2002 2,374 2.40% (2.18)% 2.86% 103.90%
Year ended October 31, 2003 3,952 2.40% (2.11)% 2.83% 152.05%
Year ended October 31, 2004 4,611 2.36% (2.00)% 2.47% 81.75%
- ------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2000 $ 707 2.40% (2.02)% 2.46% 79.51%
Year ended October 31, 2001 407 2.40% (2.06)% 2.71% 52.47%
Year ended October 31, 2002 329 2.40% (2.20)% 2.83% 103.90%
Year ended October 31, 2003 395 2.40% (2.11)% 2.84% 152.05%
Year ended October 31, 2004 344 2.37% (2.00)% 2.48% 81.75%
- ------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated using average shares outstanding method.
(a) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(b) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(c) Excludes sales charge.
(d) Excludes redemption charge.
(e) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Small Cap Portfolio.
See notes to financial statements.
54 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004
......................................................................
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 Growth Fund Growth Fund Trust
HSBC Investor Value Fund Value 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, Growth Fund,
Value 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:
On May 7, 2004 the Equity Fund reorganized into two separate HSBC
Investor Funds, the HSBC Investor Growth Fund and HSBC Investor Value Fund.
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. The
beginning NAV for the HSBC Investor Value Fund and the HSBC Investor Growth
Fund was the closing NAV for the respective class of shares of the Equity
Fund.
<Table>
<Caption>
PROPORTIONATE
INTEREST ON
FUND RESPECTIVE PORTFOLIO OCTOBER 31, 2004
- ---- -------------------- ----------------
Limited Maturity Fund HSBC Investor Limited Maturity Portfolio 62.5%
Fixed Income Fund HSBC Investor Fixed Income Portfolio 64.7%
Bond Fund HSBC Investor Fixed Income Portfolio 14.6%
Growth Fund HSBC Investor Growth Portfolio 76.9%
Value Fund HSBC Investor Value Portfolio 79.7%
International Equity Fund HSBC Investor International Equity Portfolio 67.4%
Overseas Equity Fund HSBC Investor International Equity Portfolio 9.1%
Small Cap Equity Fund HSBC Investor Small Cap Equity Portfolio 77.9%
Opportunity Fund HSBC Investor Small Cap Equity Portfolio 7.2%
</Table>
The HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income
Portfolio, HSBC Investor Growth Portfolio, HSBC Investor Value 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
HSBC INVESTOR FAMILY OF FUNDS 55
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
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, Growth Fund, Value 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
(Advisor). 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 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, 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. In addition, specific securities may need to
be valued by or at the direction of the Funds' Board of Trustees due to
potentially significant events. Examples of potentially significant events
that could affect the value of an individual security include corporate
actions by the issuer, announcements by the issuer relating to its earnings
or products, regulatory news, natural disasters and litigation. Examples of
potentially significant events that could affect multiple securities held by
a Fund include governmental actions, natural disasters and armed conflicts.
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.
56 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
SECURITIES TRANSACTIONS AND RELATED INCOME:
A. NEW YORK TAX-FREE BOND FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND
Changes in holdings of portfolio securities are reflected no later than
the first business day following the trade date. Securities gains and losses
are calculated on the identified cost basis. Interest income is recognized
on the accrual basis and includes, where applicable, the amortization or
accretion of premium or discount. Dividend income is recorded on the
ex-dividend date.
B. FEEDER FUNDS
The Feeder Funds record daily their pro-rata share of their respective
Portfolio's income, expenses and realized and unrealized gains and losses.
In addition, the Feeder Funds accrue their own expenses daily as incurred.
Realized gains or losses and changes in unrealized appreciation or
depreciation represent the Feeder Fund's share of such elements allocated
from the Portfolio.
FUTURES CONTRACTS:
The New York Tax-Free Bond Fund may invest in futures contracts for the
purpose of hedging 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 futures contract, the New York
Tax-Free Bond Fund 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 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 may not achieve the anticipated benefits of the 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
fiscal year ended October 31, 2004, the funds did not write any covered call
options.
ALLOCATIONS:
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. In addition, income,
expenses (other than class specific), and unrealized/realized gains and
losses are allocated to each class based on relative net assets on a daily
basis.
HSBC INVESTOR FAMILY OF FUNDS 57
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
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 Growth Fund and Value Fund, semi-annually 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 within the
components of net assets; temporary differences do not require
reclassification. The Funds may utilize equalization accounting for tax
purposes and designate earnings and profits, including net realized gains
distributed to shareholders on redemption of shares, as a part of the
dividends paid deduction for income tax purposes.
REDEMPTION FEE:
Effective April 1, 2004, a redemption fee of 2.00% will be charged and
recorded as paid-in-capital 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 fee for the International
Equity Fund and Overseas Equity Fund was effective beginning September 1,
2003. For the fiscal year ended October 31, 2004 the following Funds
collected redemption fees as follows:
<Table>
<Caption>
FUND FEES COLLECTED
- ---- --------------
International Equity Fund................................... $12,666
Overseas Equity Fund........................................ $ 5,581
NY Tax-free Bond Fund....................................... $ 1,166
Fixed Income Fund........................................... $ 483
Bond Fund................................................... $ 415
Growth Fund................................................. $ 366
Growth & Income Fund........................................ $ 223
Value Fund.................................................. $ 194
Opportunity Fund............................................ $ 93
Mid-Cap Fund................................................ $ 6
Limited Maturity Fund....................................... $ 2
</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
58 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
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>
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, with the
exception of the Chief Compliance Officer as noted below, 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 directly
or through an affiliate, use their fee revenue, past profits, or other
revenue sources to pay promotional, administrative, shareholder support, and
other expenses to third parties, including broker dealers, in connection
with the offer, sale and administration of shares of the Funds. In addition,
BISYS provides an employee to serve as Chief Compliance Officer for the
Funds including providing certain related services, for which it receives an
additional fee.
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, received $597,255 in commissions from sales of the funds
of which $597,211 was reallowed to affiliated brokers and dealers.
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. For performing these
services the shareholder servicing agents receive a fee of 0.25%, 0.25%, and
0.25% that is computed daily and paid monthly equal to a percentage of
average daily net assets of Class A (Investor) Shares, Class B Shares and
Class C Shares of the Fund, respectively. The aggregate fees paid to the
Distributor pursuant to the Distribution Plan and to shareholder servicing
agents pursuant to the Shareholder Servicing Agreement may not exceed 0.25%
of the average daily net assets of Class A (Investor) Shares, and 1.00% of
the average daily net assets of Class B Shares and Class C Shares.
HSBC INVESTOR FAMILY OF FUNDS 59
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
FEE REDUCTIONS:
The Investment Adviser has agreed to limit the total expenses, exclusive
of taxes, brokerage commissions and extraordinary expenses, of the Limited
Maturity Fund, Bond Fund, New York Tax-Free Bond Fund, 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
- ---- ----- ----------
Bond Fund................................................... A 1.10
Bond Fund................................................... B 1.85
Bond Fund................................................... C 1.85
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>
All contractual and voluntary investment advisory fee waivers are not
subject to recoupment in subsequent fiscal periods. In addition, the
investment advisor may waive additional fees at their discretion.
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, Mid-Cap Fund and Growth and Income Fund. For services to
the Funds, BISYS Ohio, receives an annual fee, including reimbursement of
certain expenses, from each fund accrued daily and paid monthly.
Compensation HSBC receives for services to the Funds as custodian is
presented in the Statement of Operations as custodian fees.
4. INVESTMENT TRANSACTIONS:
Purchases of and proceeds from sales, excluding short-term securities,
for the Funds for the fiscal year ended October 31, 2004, totaled:
<Table>
<Caption>
PURCHASES SALES
--------- -----
New York Tax-Free Bond Fund............................... $ 26,753,863 $ 18,709,578
Growth and Income Fund.................................... 154,156,979 167,656,658
Mid-Cap Fund.............................................. 141,831,679 193,392,708
</Table>
There were no long-term U.S. Government securities held during the
fiscal year ended October 31, 2004.
Contributions and withdrawals of the respective Portfolios for the
fiscal year ended October 31, 2004, totaled:
<Table>
<Caption>
CONTRIBUTIONS WITHDRAWALS
------------- -----------
Limited Maturity Fund...................................... $11,445,572 $ 17,084,967
Fixed Income Fund.......................................... 26,267,746 33,512,499
Bond Fund.................................................. 12,142,073 10,874,503
Growth Fund................................................ 42,459,984 3,996,843
Value Fund................................................. 52,006,478 5,784,640
International Equity Fund.................................. 27,419,510 26,854,981
Overseas Equity Fund....................................... 11,450,704 5,705,280
Small Cap Equity Fund...................................... 49,406,374 113,317,427
Opportunity Fund........................................... 12,274,598 8,788,407
</Table>
60 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (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. FEDERAL INCOME TAX INFORMATION:
The tax characteristics of dividends paid by the Funds during the fiscal
year ended October 31, 2004 were as follows:
<Table>
<Caption>
DIVIDENDS PAID FROM
--------------------------
NET TOTAL TOTAL
ORDINARY LONG TERM TAXABLE TAX EXEMPT DIVIDENDS
INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS PAID(1)
------ ------------- --------- ------------- -------
Limited Maturity Fund.... $1,573,548 $ 1,736,087 $ 3,309,635 $ -- $3,309,635
Fixed Income Fund........ 4,544,831 -- 4,544,831 -- 4,544,831
Bond Fund................ 876,878 -- 876,878 -- 876,878
NY Tax-Free Bond Fund.... 4,914 325,008 329,922 1,995,085 2,325,007
Value Fund............... 175,840 -- 175,840 -- 175,840
Growth & Income Fund..... 1,549,067 -- 1,549,067 -- 1,549,067
International Equity
Fund................... 3,737,768 -- 3,737,768 -- 3,737,768
Overseas Equity Fund..... 75,763 -- 75,763 -- 75,763
</Table>
As of October 31, 2004, the components of accumulated earnings/(deficit)
on a tax basis for the Funds were as follows:
<Table>
<Caption>
UNDISTRIBUTED ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED LONG TERM CAPITAL AND
ORDINARY TAX EXEMPT CAPITAL ACCUMULATED DIVIDENDS OTHER
INCOME INCOME GAINS EARNINGS PAYABLE LOSSES
------ ------ ----- -------- ------- ------
Limited Maturity Fund....... $ 63,514 $ -- $201,978 $ 265,492 $ (53,515) $ --
Fixed Income Fund........... 233,010 -- -- 233,010 (171,584) (1,581,953)
Bond Fund................... 45,611 -- -- 45,611 (33,824) (827,070)
NY Tax-Free Bond Fund....... -- 77,222 113,912 191,134 (77,219) --
Growth Fund................. -- -- -- -- -- (1,225,706)
Value Fund.................. 503,837 -- -- 503,837 -- --
Growth & Income Fund........ 566,583 -- -- 566,583 -- (47,202,215)
Mid-Cap Fund................ -- -- -- -- -- (9,993,884)
International Equity Fund... 2,066,371 -- -- 2,066,371 -- (5,876,028)
Overseas Equity Fund........ 1,082,333 -- 199,434 1,281,767 -- --
Opportunity Fund............ -- -- -- -- -- (2,107,205)
Small Cap Equity Fund....... -- -- -- -- -- (28,555,918)
<Caption>
TOTAL
UNREALIZED ACCUMULATED
APPRECIATION/ EARNINGS/
(DEPRECIATION)(2) (DEFICIT)
----------------- ---------
Limited Maturity Fund....... $ 519,923 $ 731,900
Fixed Income Fund........... 6,762,550 5,242,023
Bond Fund................... 691,893 (123,390)
NY Tax-Free Bond Fund....... 3,377,114 3,491,029
Growth Fund................. 950,345 (275,361)
Value Fund.................. 1,975,273 2,479,110
Growth & Income Fund........ 28,902,038 (17,733,594)
Mid-Cap Fund................ 17,497,004 7,503,120
International Equity Fund... 13,631,078 9,821,421
Overseas Equity Fund........ 1,866,300 3,148,067
Opportunity Fund............ 3,520,594 1,413,389
Small Cap Equity Fund....... 40,228,402 11,672,484
</Table>
---------------------
(1) Total dividends paid may differ from the amount reported in the
Statement of Changes in Net Assets because for tax purposes dividends
are recognized when actually paid.
(2) The differences between book-basis and tax-basis unrealized
appreciation/deprecation are attributable primarily to: tax deferral
of losses on wash sales, the realization for tax purposes of
unrealized gains/losses on certain derivative instruments, the
difference between book and tax amortization methods for premium and
market discount, the realization for tax purposes of unrealized
gains/losses on investments in passive foreign investment companies,
and the return of capital adjustments from real estate investment
trusts.
HSBC INVESTOR FAMILY OF FUNDS 61
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
As of October 31, 2004, the following Funds have net capital loss
carryforwards, which are available to offset future realized gains.
<Table>
<Caption>
AMOUNT EXPIRES
------ -------
Fixed Income Fund.......................................... $ 1,484,323 2008
97,630 2010
Bond Fund.................................................. $ 159,153 2007
91,688 2008
185,518 2010
182,320 2011
208,391 2012
Growth Fund................................................ $ 1,225,706 2012
Growth & Income Fund....................................... $11,648,430 2009
25,956,764 2010
9,597,021 2011
Mid-Cap Fund............................................... $ 9,993,884 2010
Opportunity Fund........................................... $ 2,107,205 2010
International Equity Fund.................................. $ 5,876,028 2010
Small Cap Equity Fund...................................... $28,555,918 2010
</Table>
7. OTHER FEDERAL INCOME INFORMATION (UNAUDITED):
For the fiscal year ended October 31, 2004, the following percentage of
the total ordinary income dividends paid by the Funds qualify for the
corporate dividends received deduction available to corporate shareholders.
<Table>
<Caption>
DIVIDENDS
RECEIVED
DEDUCTION
---------
Value Fund.................................................. 57%
Growth & Income Fund........................................ 100%
</Table>
The Funds intend to elect to pass through to shareholders the income tax
credit for taxes paid to foreign countries. Shareholders will receive more
detailed information along with their 2004 Form 1099-DIV.
<Table>
<Caption>
FOREIGN TAX
CREDIT PASS
THROUGH
-------
International Equity Fund................................... $534,436
Overseas Equity Fund........................................ 71,211
</Table>
For the fiscal year ended October 31, 2004, dividends paid by the Funds
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate
the maximum amount allowable as taxed at a maximum rate of 15%. Complete
information will be reported in conjunction with your 2004 Form 1099-DIV.
<Table>
<Caption>
AMOUNT
------
Value Fund.................................................. $ 175,840
Growth & Income Fund........................................ 1,549,067
International Equity Fund................................... 4,272,204
Overseas Equity Fund........................................ 146,974
</Table>
62 HSBC INVESTOR FAMILY OF FUNDS
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
HSBC Investor Funds
HSBC Advisor Funds Trust:
We have audited the accompanying statements of assets and liabilities of HSBC
Investor Limited Maturity Fund, HSBC Investor Fixed Income Fund, HSBC Investor
Bond Fund, HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Growth Fund,
HSBC Investor Value Fund, HSBC Investor Growth and Income Fund, HSBC Investor
Mid-Cap Fund, HSBC Investor International Equity Fund, HSBC Investor Overseas
Equity Fund, HSBC Investor Small Cap Equity Fund and HSBC Investor Opportunity
Fund (collectively, the Funds), including the schedules of portfolio investments
of HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Growth and Income
Fund and HSBC Investor Mid-Cap Fund, as of October 31, 2004, and the related
statements of operations for the period then ended, the statements of changes in
net assets for each period in the two-year period then ended, and the financial
highlights for each period in the five-year period then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned by HSBC Investor New York Tax-Free Bond Fund, HSBC Investor
Growth and Income Fund and HSBC Investor Mid-Cap Fund as of October 31, 2004, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of October 31, 2004, the results of their operations for the period
then ended, the changes in their net assets for each period in the two-year
period then ended, and the financial highlights for each period in the five-
year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Columbus, Ohio
December 20, 2004
HSBC INVESTOR FAMILY OF FUNDS 63
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES -- OCTOBER 31, 2004 (UNAUDITED)
......................................................................
As a shareholder of the HSBC Investor Funds, you incur two types of costs:
(1) transaction costs, including sales charges (loads) on purchases, reinvested
dividends, or other distributions; redemption fees; and exchange fees;
(2) ongoing costs, including management fees; distribution and shareholder
servicing fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the HSBC Investor
Funds and to compare these costs with the ongoing costs of investing in other
mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period from May 1, 2004 through October 31,
2004.
ACTUAL EXPENSES
The table below provides information about actual account values and actual
expenses. You may use the information below, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the table under the
heading entitled 'Expenses Paid During Period' to estimate the expenses you paid
on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
5/1/04 10/31/04 5/1/04-10/31/04 5/1/04-10/31/04
------ -------- --------------- ---------------
N.Y. Tax-Free Bond Fund................. Class A 1,000.00 1,039.20 4.57 0.89%
Class Y 1,000.00 1,040.50 3.29 0.64%
Class B 1,000.00 1,036.30 8.42 1.64%
Class C 1,000.00 1,035.20 8.36 1.63%
Growth & Income Fund.................... Class A 1,000.00 1,010.60 5.27 1.04%
Class Y 1,000.00 1,010.80 4.00 0.79%
Class B 1,000.00 1,005.80 9.05 1.79%
Class C 1,000.00 1,006.90 9.05 1.79%
International Equity Fund............... Advisor 1,000.00 1,101.10 5.14 0.97%
Overseas Equity Fund.................... Class A 1,000.00 1,097.50 9.15 1.73%
Class B 1,000.00 1,093.60 13.09 2.48%
Class C 1,000.00 1,093.60 13.09 2.48%
Fixed Income Fund....................... Advisor 1,000.00 1,040.00 3.39 0.66%
Bond Fund............................... Class A 1,000.00 1,038.70 5.04 0.98%
Class B 1,000.00 1,033.80 8.92 1.74%
Class C 1,000.00 1,033.90 8.92 1.74%
Small Cap Equity Fund................... Advisor 1,000.00 1,039.00 5.14 1.00%
Opportunity Fund........................ Class A 1,000.00 1,037.10 8.06 1.57%
Class B 1,000.00 1,032.10 11.88 2.32%
Class C 1,000.00 1,033.80 11.89 2.32%
Limited Maturity Fund................... Class A 1,000.00 1,030.90 5.63 1.10%
Class Y 1,000.00 1,032.10 4.35 0.85%
Class B 1,000.00 1,026.90 9.45 1.85%
Class C 1,000.00 1,027.00 9.45 1.85%
Mid-Cap Fund............................ Class A 1,000.00 1,024.30 5.66 1.11%
Trust 1,000.00 1,025.30 4.39 0.86%
Class B 1,000.00 1,018.70 9.46 1.86%
Class C 1,000.00 1,019.90 9.47 1.86%
</Table>
The expense ratios of the Feeder Funds listed above include expenses
allocated from the respective Master Portfolio.
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
** The Value and Growth Funds commenced operations on May 7, 2004, and as such
did not have a full 6 months of expenses during the period.
64 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES -- OCTOBER 31, 2004 (CONTINUED) (UNAUDITED)
.........................................................................
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values and
hypothetical expenses based on each HSBC Investor Funds's actual expense ratio
and an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare this 5% hypothetical example
with the 5% hypothetical examples that appear in the shareholder reports of
other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
5/1/04 10/31/04 5/1/04-10/31/04 5/1/04-10/31/04
------ -------- --------------- ---------------
N.Y. Tax-Free Bond Fund................. Class A 1,000.00 1,020.72 4.53 0.89%
Class Y 1,000.00 1,021.98 3.26 0.64%
Class B 1,000.00 1,016.94 8.34 1.64%
Class C 1,000.00 1,016.99 8.29 1.63%
Growth & Income Fund.................... Class A 1,000.00 1,019.96 5.30 1.04%
Class Y 1,000.00 1,021.22 4.02 0.79%
Class B 1,000.00 1,016.18 9.10 1.79%
Class C 1,000.00 1,016.18 9.10 1.79%
International Equity Fund............... Advisor 1,000.00 1,020.32 4.94 0.97%
Overseas Equity Fund.................... Class A 1,000.00 1,016.48 8.79 1.73%
Class B 1,000.00 1,012.70 12.58 2.48%
Class C 1,000.00 1,012.70 12.58 2.48%
Fixed Income Fund....................... Advisor 1,000.00 1,021.88 3.36 0.66%
Bond Fund............................... Class A 1,000.00 1,020.27 4.99 0.98%
Class B 1,000.00 1,016.43 8.84 1.74%
Class C 1,000.00 1,016.43 8.84 1.74%
Small Cap Equity Fund................... Advisor 1,000.00 1,020.16 5.09 1.00%
Opportunity Fund........................ Class A 1,000.00 1,017.29 7.98 1.57%
Class B 1,000.00 1,013.51 11.77 2.32%
Class C 1,000.00 1,013.51 11.77 2.32%
Limited Maturity Fund................... Class A 1,000.00 1,019.66 5.60 1.10%
Class Y 1,000.00 1,020.92 4.33 0.85%
Class B 1,000.00 1,015.88 9.40 1.85%
Class C 1,000.00 1,015.88 9.40 1.85%
Mid-Cap Fund............................ Class A 1,000.00 1,019.61 5.65 1.11%
Trust 1,000.00 1,020.87 4.38 0.86%
Class B 1,000.00 1,015.83 9.45 1.86%
Class C 1,000.00 1,015.83 9.45 1.86%
</Table>
The expense ratios of the Feeder Funds listed above include expenses
allocated from the respective Master Portfolio.
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
** The Value and Growth Funds commenced operations on May 7, 2004, and as such
did not have a full 6 months of expenses during the period.
HSBC INVESTOR FAMILY OF FUNDS 65
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
......................................................................
At the Special Meeting of Shareholders of HSBC Investor Equity Fund (the
'Fund'), a series of the HSBC Investor Funds (The 'Trust'), held on February 27,
2004, shares were voted as follows on one proposal presented to the
Shareholders:
1. To approve or disapprove an Agreement and Plan of Reorganization
providing for the acquisition of all of the assets of the Fund by the
HSBC Investor Growth Fund ('Growth Fund') and the HSBC Investor Value
Fund ('Value Fund'), each a separate series of the Trust, and the
assumption of all liabilities of the Fund by the Growth Fund and the
Value Fund in exchange for shares of the Growth Fund and the Value Fund
and the subsequent liquidation of the Fund.
<Table>
<Caption>
FOR AGAINST ABSTAIN
--- ------- -------
3,338,217 (99.00%) 24,353 (0.72%) 9,222 (0.28%)
</Table>
66 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED)
......................................................................
The following table contains information regarding HSBC Investor Family of Funds
Board of Trustees. Asterisks indicate those Trustees who are 'interested
persons,' as defined in the Investment Company Act of 1940, as amended, of the
Funds. The Funds' Statement of Additional Information includes additional
information about the Trustees and is available by calling (888) 525-5757.
<Table>
<Caption>
NUMBER OF PORTFOLIOS
TERM OF OFFICE AND IN THE FUND
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN
AND YEAR OF BIRTH HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------
Frederick C. Chen Trustee Indefinite; 1990 to Management Consultant, since 1988 32
P.O. Box 182845 present
Columbus, Ohio 43218
Date of Birth: 1927
- -----------------------------------------------------------------------------------------------------------------------------
Larry M. Robbins Trustee Indefinite; 1987 to Director for the Center of Teaching 32
P.O. Box 182845 present and Learning, University of
Columbus, Ohio 43218 Pennsylvania
Date of Birth: 1938
- -----------------------------------------------------------------------------------------------------------------------------
Alan S. Parsow Trustee Indefinite; 1987 to General Partner of Parsow 32
P.O. Box 182845 present Partnership, Ltd., since 1989
Columbus, Ohio 43218
Date of Birth: 1950
- -----------------------------------------------------------------------------------------------------------------------------
Michael Seely Trustee Indefinite; 1987 to President of Investor Access 32
P.O. Box 182845 present Corporation, 1978-present
Columbus, Ohio 43218
Date of Birth: 1945
- -----------------------------------------------------------------------------------------------------------------------------
Stephen J. Baker* Trustee Indefinite; March Chief Executive Officer, HSBC Asset 32
P.O. Box 182845 2004 to present Management (Americas) Inc., 2003-
Columbus, Ohio 43218 present; Chief Executive Officer,
Date of Birth: 1956 HSBC Asset Management (Canada)
Limited, 1998-2003
- -----------------------------------------------------------------------------------------------------------------------------
Thomas Robards Advisory Board Indefinite; 2004 to Senior Vice President and Chief 32
P.O. Box 182845 Member present Financial Officer, American Museum
Columbus, Ohio 43218 of Natural History, 2003-present;
Date of Birth: 1946 Chief Financial Officer, Datek
Online Holding Corp., 2000-2003;
Executive Vice President and Chief
Financial Officer, Republic New
York Corporation, 1976-2000
- -----------------------------------------------------------------------------------------------------------------------------
<Caption>
NAME, ADDRESS OTHER DIRECTORSHIPS
AND YEAR OF BIRTH HELD BY TRUSTEE
- ---------------------------------------------------
Frederick C. Chen None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1927
- ---------------------------------------------------
Larry M. Robbins None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1938
- ---------------------------------------------------
Alan S. Parsow None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1950
- ---------------------------------------------------
Michael Seely None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1945
- ---------------------------------------------------
Stephen J. Baker* None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1956
- ---------------------------------------------------
Thomas Robards None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1946
- ---------------------------------------------------
</Table>
HSBC INVESTOR FAMILY OF FUNDS 67
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED) (CONTINUED)
......................................................................
The names of the Officers, their addresses, ages, position(s) held with each
Trust, and principal occupation(s) during the past five years are described in
the table below. Unless otherwise indicated, the address for each Officer is
3435 Stelzer Road, Columbus, Ohio 43219-3035.
OFFICERS
<Table>
<Caption>
TERM OF OFFICE AND
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND YEAR OF BIRTH HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------------------------
Richard A. Fabietti President Indefinite; March Senior Vice President, Head of Product Management, HSBC
3435 Stelzer Road 2004- Present Asset Management (Americas) Inc., 1998-Present
Columbus, Ohio 43219
Date of Birth: 1958
- ----------------------------------------------------------------------------------------------------------------------------
Mark L. Suter* Vice President Indefinite; Employee of BISYS Fund Services, Inc., 2000-Present; Vice
90 Park Avenue 2000-Present President of Client Services, Seligman Data 1997-1999;
10th Floor Vice President, Capitalink, 1996-1997
New York, NY 10018
Date of Birth: 1962
- ----------------------------------------------------------------------------------------------------------------------------
Salvatore Iocolano Vice President Indefinite; Senior Compliance Officer, HSBC Asset Management (Americas)
452 5th Avenue 2002-Present Inc., 2001-Present; Director of Compliance, KPMG Investment
18th Floor Advisors, 1999-2001; Securities Compliance Examiner, U.S.
New York, NY 10018 Securities Exchange Commission, 1995-1998
Date of Birth: 1962
- ----------------------------------------------------------------------------------------------------------------------------
Troy Sheets* Treasurer Indefinite; Employee of BISYS Fund Services, Inc., 2002-Present; Senior
3435 Stelzer Road 2004-Present Manager, KPMG LLP, 1993-2002
Columbus, Ohio 43219
Date of Birth: 1971
- ----------------------------------------------------------------------------------------------------------------------------
Alaina Metz* Assistant Secretary Indefinite; Employee of BISYS Fund Services, Inc., 1995-Present
3435 Stelzer Road 1996-Present
Columbus, Ohio 43219
Date of Birth: 1967
- ----------------------------------------------------------------------------------------------------------------------------
Frederick J. Schmidt* Chief Compliance Expires 2005; Senior Vice President and Chief Compliance Officer, CCO
90 Park Avenue Officer 2004-Present Services of BISYS Fund Services, 2004-Present; President,
10th Floor FJS Associates, 2002-2004; Vice President, Credit Agricole
New York, NY 10016 Asset Management, U.S., 1987-2002
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
- ---------
* Messrs. Suter, Sheets and Schmidt and Ms. Metz also are officers of certain
other investment companies of which BISYS or an affiliate is the
administrator.
68 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 67.7%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
FEDERAL HOME LOAN BANK - 6.5%
2.95%, 9/14/06......................... 2,500,000 2,506,740
5.75%, 5/15/12......................... 1,500,000 1,653,918
----------
4,160,658
----------
FEDERAL HOME LOAN MORTGAGE CORP. - 20.8%
3.25%, 2/25/08, Callable 2/25/05
@100.................................. 2,000,000 1,988,970
Pool #E92282, 5.50%, 11/1/17........... 1,450,972 1,504,106
Pool #2642, 4.50%, 10/25/27............ 3,000,000 3,071,243
Pool #C01188, 7.00%, 6/1/31............ 403,938 429,139
Pool #C75371, 6.00%, 1/1/33............ 895,585 928,521
Pool #A11010, 5.00%, 7/1/33............ 1,708,642 1,708,373
Pool #A14659, 6.50%, 10/1/33........... 1,585,933 1,677,735
Pool #E96835, 4.50%, 6/1/18............ 1,942,429 1,952,717
----------
13,260,804
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 26.3%
4.00%, 9/2/08.......................... 1,000,000 1,016,819
5.50%, 3/15/11......................... 500,000 542,242
4.625%, 5/1/13......................... 1,250,000 1,247,780
Pool #535063, 6.50%, 12/1/14........... 384,527 408,262
Pool #535933, 6.50%, 5/1/31............ 302,445 318,635
Pool #593187, 7.00%, 11/1/31........... 943,404 1,002,570
Pool #695204, 5.50%, 3/1/33............ 1,363,718 1,391,241
Pool #694985, 6.00%, 3/1/33............ 1,681,359 1,745,706
Pool #555427, 6.00%, 2/1/18............ 2,193,514 2,303,286
Pool #704439, 5.00%, 5/1/18............ 1,986,621 2,030,223
Pool #722985, 3.95%, 7/1/33............ 1,442,800 1,451,524
Pool #740686, 6.50%, 10/1/33........... 1,383,478 1,458,568
Pool #753474, 5.50%, 11/1/33........... 1,809,978 1,845,436
----------
16,762,292
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 6.6%
Pool #2687, 6.00%, 12/20/28............ 569,116 593,609
Pool #3415, 5.50%, 7/20/33............. 1,620,619 1,658,470
Pool #612373, 6.00%, 11/15/33.......... 1,860,856 1,937,699
----------
4,189,778
----------
U.S. TREASURY BONDS - 1.7%
5.375%, 2/15/31........................ 1,000,000 1,086,133
----------
U.S. TREASURY NOTES - 5.8%
3.125%, 4/15/09........................ 1,550,000 1,545,823
4.875%, 2/15/12........................ 1,000,000 1,071,680
4.75%, 5/15/14......................... 1,000,000 1,057,344
----------
3,674,847
----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS.................... 43,134,512
----------
<Caption>
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS, - 25.4%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 1.2%
Honeywell International, Inc., 5.125%,
11/1/06............................... 750,000 780,906
----------
AUTO MANUFACTURERS - 1.2%
General Motors Corp., 7.20%, 1/15/11... 750,000 790,064
----------
BANKING - 1.7%
Corestates Capital, 6.75%, 11/15/06.... 1,000,000 1,074,861
----------
BROKERAGE SERVICES - 4.4%
Goldman Sachs Group, Inc., 5.70%,
9/1/12................................ 500,000 532,567
Goldman Sachs Group, Inc., 6.125%,
2/15/33............................... 750,000 764,776
Lehman Brothers Holdings, Inc., 6.25%,
5/15/06............................... 500,000 525,284
Merrill Lynch & Co., 3.375%, 9/14/07... 1,000,000 1,002,959
----------
2,825,586
----------
ELECTRONIC COMPUTERS - 1.6%
Hewlett-Packard Co., 7.15%, 6/15/05.... 1,000,000 1,028,797
----------
FINANCE - 10.2%
CIT Group, Inc., 4.125%, 2/21/06....... 1,000,000 1,016,608
Countrywide Home Loans, Inc., 5.50%,
8/1/06................................ 1,250,000 1,301,940
Ford Motor Credit Co., 6.50%,
1/25/07............................... 1,250,000 1,313,317
General Motors Accept Corp., 4.50%,
7/15/06............................... 250,000 253,707
General Motors Accept Corp., 5.125%,
5/9/08................................ 500,000 507,721
MGIC Investment Corp., 6.00%,
3/15/07............................... 750,000 797,214
Morgan Stanley, 4.75%, 4/1/14.......... 750,000 734,724
Washington Mutual, Inc., 4.625%,
4/1/14................................ 500,000 481,677
----------
6,406,908
----------
GOVERNMENTS (FOREIGN) - 1.2%
United Mexican States, 4.625%,
10/8/08............................... 750,000 762,750
----------
INSURANCE - 0.4%
Travelers Property Casualty Corp.,
6.375%, 3/15/33....................... 250,000 257,141
----------
MEDIA - 2.4%
Comcast Corp., 5.30%, 1/15/14.......... 1,000,000 1,019,686
AOL Time Warner, Inc., 6.125%,
4/15/06............................... 500,000 522,697
----------
1,542,383
----------
TELECOMMUNICATIONS - 0.8%
Deutsche Telekom International Finance
BV, 3.875%, 7/22/08................... 500,000 503,858
----------
UTILITIES - 0.3%
Pacific Gas & Electric Co., 2.72%,
4/3/06, Callable 1/3/05 @100 (b)...... 69,000 69,085
Pacific Gas & Electric Co., 4.80%,
3/1/14................................ 135,000 135,203
----------
204,288
----------
TOTAL CORPORATE OBLIGATIONS............ 16,177,542
----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 69
<Page>
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ---------------------------------------------------------------
ASSET BACKED SECURITIES - 5.9%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
Carmax Auto Owner Trust, 3.00%,
9/15/08............................... 1,250,000 1,247,850
Honda Auto Receivables Owner Trust 03 1
A4, 2.48%, 7/18/08.................... 2,500,000 2,491,889
----------
TOTAL ASSET BACKED SECURITIES.......... 3,739,739
----------
<Caption>
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 0.3%
SHARES VALUE($)
--------- ----------
HSBC Investor Money Market Fund Class I
Shares*............................... 168,429 168,429
----------
TOTAL INVESTMENT COMPANIES............. 168,429
----------
TOTAL INVESTMENTS
(COST $62,393,888) (a) - 99.3%....... 63,220,222
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $63,696,789.
(a) Cost for federal income tax and financial reporting purposes are the same
and differs from value by net unrealized appreciation as follows.
<Table>
Unrealized appreciation.......... $ 970,041
Unrealized depreciation.......... (143,707)
---------
$ 826,334
---------
---------
</Table>
(b) 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.
* Investment in affiliate.
70 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 59.4%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
FEDERAL HOME LOAN BANK - 10.9%
2.875%, 9/15/06....................... 1,850,000 1,855,295
4.40%, 11/20/06....................... 4,500,000 4,640,675
5.05%, 2/6/13, Callable 12/8/04 @
100.................................. 5,795,000 5,795,724
5.00%, 2/7/13, Callable 2/7/05 @
100.................................. 6,085,000 6,113,337
-----------
18,405,031
-----------
FEDERAL HOME LOAN MORTGAGE CORP. - 10.8%
5.75%, 9/15/10**...................... 4,910,000 6,976,348
5.00%, 7/15/14........................ 1,300,000 1,351,093
Pool #2642, 4.50%, 10/25/27........... 7,000,000 7,166,235
Pool #C00368, 8.50%, 10/1/24.......... 69,420 76,545
Pool #C00922, 8.00%, 2/1/30........... 514,564 559,152
Pool #C54447, 7.00%, 7/1/31........... 111,715 118,684
Pool #C60712, 6.50%, 11/1/31.......... 950,337 1,000,461
Pool #C80387, 6.50%, 4/1/26........... 59,271 62,519
Pool #D62926, 6.50%, 8/1/25........... 44,523 46,989
Pool #G00951, 6.00%, 7/1/28........... 539,165 559,631
Pool #G01317, 7.00%, 10/1/31.......... 419,744 445,931
-----------
18,363,588
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 18.6%
6.75%, 1/25/08........................ 112,199 112,126
4.625%, 5/1/13........................ 3,300,000 3,294,139
5.75%, 11/7/17........................ 2,575,000 2,557,899
6.25%, 5/15/29........................ 1,798,000 2,039,008
6.625%, 11/15/30...................... 500,000 593,766
5.50%, 8/1/33......................... 11,147,627 11,366,010
Pool #253438, 8.50%, 9/1/30........... 131,327 143,281
Pool #329530, 7.00%, 12/1/25.......... 128,715 137,310
Pool #329655, 7.00%, 11/1/25.......... 100,699 107,423
Pool #356905, 3.97%, 10/1/36, (b)..... 415,189 424,487
Pool #398958, 6.50%, 10/1/12.......... 131,195 139,342
Pool #535332, 8.50%, 4/1/30........... 110,157 120,282
Pool #535440, 8.50%, 8/1/30........... 131,033 142,961
Pool #535608, 9.50%, 4/1/30........... 213,006 240,616
Pool #548965, 8.50%, 7/1/30........... 104,565 114,084
Pool #568486, 7.00%, 1/1/31........... 88,219 93,776
Pool #573752, 8.50%, 2/1/31........... 113,381 123,703
Pool #575328, 6.50%, 4/1/31........... 161,561 170,209
Pool #623129, 6.50%, 1/1/32........... 1,723,097 1,815,333
Pool #651901, 6.00%, 8/1/32........... 1,902,334 1,975,515
Pool #695777, 5.50%, 4/1/33........... 1,847,485 1,884,772
Pool #722985, 3.95%, 7/1/33........... 4,111,979 4,136,843
-----------
31,732,885
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.7%
Pool #346406, 7.50%, 2/15/23.......... 157,099 170,362
Pool #412530, 7.50%, 12/15/25......... 167,075 180,584
Pool #587112, 6.00%, 6/15/32.......... 2,753,890 2,870,282
Pool #780804, 10.00%, 12/15/20........ 131,904 148,072
Pool #780826, 9.50%, 5/15/18.......... 80,765 91,331
Pool #781300, 7.00%, 6/15/31.......... 367,100 392,003
Pool #781345, 6.00%, 10/15/31......... 699,284 729,313
-----------
4,581,947
-----------
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS, CONT'D.
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
U.S. TREASURY BONDS - 2.9%
6.00%, 2/15/26........................ 1,200,000 1,385,016
5.25%, 11/15/28....................... 2,200,000 2,319,111
5.375%, 2/15/31....................... 1,085,000 1,178,454
-----------
4,882,581
-----------
U.S. TREASURY NOTES - 13.5%
5.875%, 11/15/04...................... 10,000,000 10,014,840
1.625%, 3/31/05....................... 800,000 798,562
1.625%, 2/28/06....................... 3,000,000 2,972,226
2.75%, 6/30/06........................ 2,800,000 2,813,782
4.00%, 2/15/14........................ 4,365,000 4,365,170
4.25%, 8/15/14........................ 790,000 803,948
5.50%, 8/15/28........................ 1,000,000 1,089,062
-----------
22,857,590
-----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS................... 100,823,622
-----------
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS - 24.0%
AEROSPACE & DEFENSE - 0.2%
Lockheed Martin Corp., 8.50%,
12/1/29.............................. 300,000 402,887
-----------
AUTO MANUFACTURERS - 0.6%
General Motors Corp., 7.125%,
7/15/13.............................. 1,050,000 1,089,417
-----------
FINANCE - 18.5%
AIG SunAmerica Global Financing VI,
6.30%, 5/10/11, (c).................. 642,000 708,035
Anthem Insurance, 9.125%, 4/1/10,
(c).................................. 205,000 250,713
Anthem Insurance, 9.00%, 4/1/27,
(c).................................. 305,000 417,167
AXA Financial, Inc., 6.50%, 4/1/08.... 165,000 180,914
Capital One Bank, 5.125%, 2/15/14..... 725,000 728,241
CIT Group, Inc., 7.375%, 4/2/07....... 4,725,000 5,175,136
Citigroup, Inc., 5.625%, 8/27/12...... 2,500,000 2,695,455
Citigroup, Inc., 5.00%, 9/15/14,
(c).................................. 775,000 786,312
EOP Operating LP, 7.50%, 4/19/29...... 163,000 185,671
Farmers Exchange Capital, 7.05%,
7/15/28, (c)......................... 388,000 392,937
Farmers Insurance Exchange, 8.625%,
5/1/24, (c).......................... 238,000 277,534
Florida Windstorm, 7.125%, 2/25/19,
(c).................................. 608,000 709,594
Ford Motor Credit Co., 7.00%,
10/1/13.............................. 850,000 897,646
General Electric Capital Corp., 8.75%,
5/21/07.............................. 1,300,000 1,482,321
General Electric Capital Corp.,
7.375%, 1/19/10...................... 447,000 519,234
General Electric Capital Corp.,
6.875%, 11/15/10..................... 1,200,000 1,368,410
Goldman Sachs Capital I, 6.345%,
2/15/34.............................. 500,000 509,579
Goldman Sachs Group, Inc., 6.875%,
1/15/11.............................. 3,080,000 3,503,990
Hutchison Whampoa Finance CI Ltd.,
7.45%, 8/1/17, (c)................... 402,000 442,817
J.P. Morgan Chase & Co., 5.25%,
5/30/07.............................. 3,500,000 3,670,716
Metropolitan Life Insurance Co.,
7.80%, 11/1/25, (c).................. 275,000 338,387
Morgan Stanley, 5.80%, 4/1/07......... 2,500,000 2,654,390
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 71
<Page>
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
New York Life Insurance, 7.50%,
12/15/23, Callable 1/3/05 @103.25
(c).................................. 250,000 259,359
PNC Institutional Capital Trust A,
7.95%, 12/15/26 (c).................. 187,000 209,201
Prudential Insurance Co., 8.30%,
7/1/25 (c)........................... 548,000 692,625
Travelers Property Casualty Corp.,
7.75%, 4/15/26....................... 1,000,000 1,202,069
Washington Mutual, Inc., 4.625%,
4/1/14............................... 1,000,000 963,354
-----------
31,221,807
-----------
GOVERNMENTS (FOREIGN) - 0.6%
United Mexican States, 8.125%,
12/30/19............................. 495,000 579,892
United Mexican States, 6.75%,
9/27/34.............................. 525,000 513,188
-----------
1,093,080
-----------
OIL & GAS - 1.3%
Anadarko Finance Co., 6.75%, 5/1/11,
(c).................................. 1,250,000 1,422,659
Conoco, Inc., 6.95%, 4/15/29.......... 565,000 660,850
-----------
2,083,509
-----------
TELECOMMUNICATIONS - 2.1%
Comcast Cable Communications Holdings,
Inc., 8.375%, 3/15/13................ 2,200,000 2,699,183
Lenfest Communications, 7.625%,
2/15/08.............................. 330,000 367,511
SBC Global Communications, Inc.,
5.10%, 9/15/14....................... 380,000 382,643
-----------
3,449,337
-----------
UTILITIES - 0.7%
Pacific Gas & Electric Co., 4.80%,
3/1/14............................... 480,000 480,721
Pacific Gas & Electric Co., 6.05%,
3/1/34............................... 350,000 360,475
RAS Laffan Liquid Natural Gas, 8.29%,
3/15/14, (c)......................... 348,000 414,558
-----------
1,255,754
-----------
TOTAL CORPORATE OBLIGATIONS........... 40,595,791
-----------
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.8%
Banc of America Commercial Mortgage,
Inc. 00 2 A2, 7.20%, 5/15/10......... 675,000 771,756
Chase Commercial Mortgage Securities
Corp. 99 2 A2, 7.20%, 1/15/32........ 700,000 799,306
DLJ Mortgage Acceptance Corp. IO 97
CF1 S, 0.94%, 5/15/30, (b) (d)....... 710,657 13,066
Fannie Mae IO 00 16 PS, 6.67%,
10/25/29, (b) (d).................... 177,591 13,209
Fannie Mae IO 01 4 SA, 5.66%, 2/17/31,
(b) (d).............................. 488,528 45,985
Fannie Mae IO 200 32 SV, 6.71%,
3/18/30, (b) (d)..................... 98,141 5,510
Fannie Mae IO 270 2, 8.50%, 9/1/23,
(d).................................. 106,495 21,064
Fannie Mae IO 296 2, 8.00%, 4/1/24,
(d).................................. 121,373 22,878
Fannie Mae IO 306 2, 8.00%, 5/1/30,
(d).................................. 180,382 35,832
FHA Weyerhauser, 7.43%, 1/1/24 (i).... 80,120 80,376
First Union-Chase Commercial Mortgage
99 C2 A2, 6.645%, 6/15/31............ 597,000 660,527
Freddie Mac IO 1534 K, 5.53%, 6/15/23,
(b) (d).............................. 335,659 28,915
Freddie Mac IO 2141 SD, 6.28%,
4/15/29, (b) (d)..................... 231,317 24,423
<Caption>
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Freddie Mac IO 2247 SC, 5.63%,
8/15/30, (b) (d)..................... 177,434 10,323
GE Capital Commercial Mortgage Corp.
01 1 A1, 6.08%, 5/15/33.............. 273,694 292,118
GMAC Commercial Mortgage Securities,
Inc. 98 C2 A2, 6.42%, 5/15/35........ 587,000 639,623
GMAC Commercial Mortgage Securities,
Inc. IO 96 C1 X2, 1.74%,
10/15/28, (b) (d).................... 341,938 9,110
Government National Mortgage
Association IO 99 29 SD, 6.11%,
3/16/26, (b) (d)..................... 112,037 3,507
Government National Mortgage
Association IO 99 30 S, 6.71%,
8/16/29, (b) (d)..................... 194,639 19,420
Government National Mortgage
Association IO 99 30 SA, 6.11%,
4/16/29, (b) (d)..................... 242,365 19,303
Government National Mortgage
Association IO 99 32 SB, 6.11%,
7/16/27, (b) (d)..................... 135,311 6,839
GS Mortgage Securities Corp. IO 97 GL
X2, 0.83%, 7/13/30, (b) (d).......... 374,325 7,585
LB-UBS Commercial Mortgage Trust 00 C3
A1, 7.95%, 7/15/09................... 287,291 308,967
LB-UBS Commercial Mortgage Trust 00 C4
A2, 7.37%, 8/15/26................... 600,000 695,147
PNC Mortgage Acceptance Corp. 00 C2
A2, 7.30%, 10/12/33.................. 600,000 693,654
Ryland Mortgage Securities Corp. 94 4
C1, 4.00%, 9/25/30, (b).............. 417,328 416,721
Salomon Brothers Mortgage Securities
VII 00 C3 A2, 6.59%, 12/18/33........ 650,000 727,691
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS.......................... 6,372,855
-----------
- ----------------------------------------------------------------
ASSET BACKED SECURITIES - 6.2%
Citibank Credit Card Issuance Trust 00
A3, 6.875%, 11/16/09................. 1,115,000 1,230,102
Connecticut RRB Special Purpose Trust
CL&P-1 01 1 A5, 6.21%, 12/30/11...... 700,000 777,204
Detroit Edison Securitization Funding
LLC 01 1 A3, 5.875%, 3/1/10.......... 357,000 377,873
Detroit Edison Securitization Funding
LLC 01 1 A5, 6.42%, 3/1/15........... 417,000 472,939
MBNA Master Credit Card Trust 00 E A,
7.80%, 10/15/12...................... 600,000 717,199
MBNA Master Credit Card Trust 99 B A,
5.90%, 8/15/11....................... 527,000 575,880
Peco Energy Transition Trust 00 A A3,
7.625%, 3/1/10....................... 600,000 691,983
Peco Energy Transition Trust 01 A A1,
6.52%, 12/31/10...................... 550,000 619,879
PSE&G Transition Funding LLC 01 1 A6,
6.61%, 6/15/15....................... 355,000 407,462
Union Acceptance Corp. 01 C B, 4.73%,
11/9/09.............................. 2,500,000 2,553,124
WFS Financial Owner Trust, 3.35%,
4/17/09.............................. 2,000,000 2,010,374
-----------
TOTAL ASSET BACKED SECURITIES......... 10,434,019
-----------
</Table>
72 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- ----------------------------------------------------------------
MUNICIPAL BONDS - 1.5%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
FINANCE - 0.6%
Sales Tax Asset Receivables Corp. New
York, 3.29%, 10/15/07................ 1,060,000 1,060,000
-----------
URBAN AND COMMUNITY DEVELOPMENT - 0.9%
Indianapolis Indiana Local Public
Improvement, 3.00%, 10/15/05......... 1,500,000 1,506,570
-----------
TOTAL MUNICIPAL BONDS................. 2,566,570
-----------
<Caption>
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 4.2%
SHARES VALUE($)
---------- -----------
HSBC Investor Money Market Fund Class
I Shares *........................... 7,135,742 7,135,742
-----------
TOTAL INVESTMENT COMPANIES............ 7,135,742
-----------
TOTAL INVESTMENTS
(COST $158,869,578) (a) - 99.1%..... 167,928,599
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $169,459,384.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $8,734. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation........... $10,139,822
Unrealized depreciation........... (1,089,535)
-----------
Net unrealized appreciation....... $ 9,050,287
-----------
-----------
</Table>
(b) Variable rate security. The interest rates on these securities are adjusted
periodically to reflect then-current short-term interest rates. The rates
presented in this report represent the rates that were in effect on October
31, 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.
(i) Rule 144a, section 4(2) or other security which is restricted as to resale
to institutional investors. The Investment Advisor, using Board approved
procedures, has deemed these securities to be illiquid. Represents .05% of
net assets.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 73
<Page>
HSBC INVESTOR GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 91.3%
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 1.8%
Lockheed Martin Corp..................... 16,600 914,494
----------
BIOTECHNOLOGY - 1.3%
Gilead Sciences, Inc. (b)................ 18,400 637,192
----------
BUSINESS SERVICES - 2.0%
Cintas Corp.............................. 8,450 364,533
Paychex, Inc............................. 18,750 614,888
----------
979,421
----------
COMPUTER SOFTWARE - 11.4%
Apple Computer, Inc. (b)................. 12,150 638,240
Automatic Data Processing, Inc........... 19,000 824,409
Electronic Arts, Inc. (b)................ 10,200 458,184
First Data Corp.......................... 16,700 689,376
Lexmark International, Inc. (b).......... 5,600 465,416
Microsoft Corp........................... 75,550 2,114,644
SAP AG................................... 12,765 544,427
----------
5,734,696
----------
COMPUTERS - 2.4%
Dell, Inc. (b)........................... 34,150 1,197,299
----------
CONSUMER PRODUCTS - 7.3%
Avon Products, Inc....................... 11,500 454,825
Coach, Inc. (b).......................... 11,600 540,908
Harley-Davidson, Inc..................... 21,113 1,215,475
Harman International Industries, Inc..... 3,700 444,666
The Estee Lauder Cos., Inc. Class A...... 12,650 543,318
The Procter & Gamble Co.................. 8,500 435,030
----------
3,634,222
----------
DIVERSIFIED MANUFACTURING OPERATIONS -
6.4%
3M Co.................................... 7,650 593,411
Danaher Corp............................. 14,150 780,090
General Electric Co...................... 52,812 1,801,944
----------
3,175,445
----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 2.6%
Linear Technology Corp................... 6,600 250,008
Maxim Integrated Products, Inc........... 5,650 248,544
Microchip Technology, Inc................ 25,500 771,375
----------
1,269,927
----------
FINANCE - 0.9%
Robert Half International, Inc........... 16,150 428,460
----------
FINANCIAL SERVICES - 11.6%
Goldman Sachs Group, Inc................. 15,200 1,495,376
Legg Mason, Inc.......................... 7,400 471,454
Morgan Stanley........................... 9,400 480,246
SLM Corp................................. 36,700 1,661,041
T. Rowe Price Group, Inc................. 9,900 552,123
The Chicago Mercantile Exchange.......... 6,550 1,151,032
----------
5,811,272
----------
HEALTH CARE - 9.6%
Boston Scientific Corp. (b).............. 13,600 480,080
DENTSPLY International, Inc.............. 6,400 332,864
Guidant Corp............................. 11,750 782,785
Medtronic, Inc........................... 29,650 1,515,412
UnitedHealth Group, Inc.................. 6,650 481,460
Zimmer Holdings, Inc. (b)................ 15,100 1,171,609
----------
4,764,210
----------
HOTELS & LODGING - 1.0%
Starwood Hotels & Resorts Worldwide,
Inc..................................... 9,900 472,527
----------
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
INTERNET RELATED - 3.8%
eBay, Inc. (b)........................... 10,800 1,054,188
Google, Inc. Class A (b)................. 2,350 448,157
Yahoo!, Inc. (b)......................... 10,000 361,900
----------
1,864,245
----------
LEISURE - 2.4%
Carnival Corp............................ 23,250 1,175,520
----------
MEDICAL & HEALTH PRODUCTS - 1.8%
Biomet, Inc.............................. 10,100 471,468
Genentech, Inc. (b)...................... 8,879 404,261
----------
875,729
----------
OIL & GAS - 4.7%
Schlumberger Ltd......................... 18,550 1,167,537
Smith International, Inc. (b)............ 20,500 1,190,640
----------
2,358,177
----------
PHARMACEUTICALS - 5.3%
Alcon, Inc............................... 6,900 491,280
Allergan, Inc............................ 6,500 465,140
Pfizer, Inc.............................. 57,950 1,677,653
----------
2,634,073
----------
RETAIL - 11.1%
Best Buy Co., Inc........................ 4,250 251,685
Costco Wholesale Corp.................... 21,797 1,044,948
Home Depot, Inc.......................... 26,250 1,078,350
Kohl's Corp. (b)......................... 9,600 487,296
Staples, Inc............................. 31,650 941,271
Wal-Mart Stores, Inc..................... 12,350 665,912
Walgreen Co.............................. 30,117 1,080,899
----------
5,550,361
----------
TELECOMMUNICATIONS - 2.8%
Cisco Systems, Inc. (b).................. 36,700 705,007
Research in Motion Ltd. (b).............. 7,650 674,730
----------
1,379,737
----------
TRANSPORTATION - 1.1%
Expeditors International of Washington,
Inc..................................... 9,300 531,030
----------
TOTAL COMMON STOCKS...................... 45,388,037
----------
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 7.3%
SHARES VALUE($)
--------- ----------
HSBC Investor Money Market Fund Class I
Shares*................................. 3,619,333 3,619,333
----------
TOTAL INVESTMENT COMPANIES............... 3,619,333
----------
TOTAL INVESTMENTS
(COST $47,015,502) (a) - 98.6%......... 49,007,370
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $49,680,204.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $228,316. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.......... $ 3,126,466
Unrealized depreciation.......... (1,362,914)
-----------
Net unrealized appreciation...... $ 1,763,552
-----------
-----------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
74 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR VALUE PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 90.5%
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 8.6%
Lockheed Martin Corp..................... 28,000 1,542,520
Northrop Grumman Corp.................... 32,600 1,687,050
Raytheon Co.............................. 56,300 2,053,824
----------
5,283,394
----------
BANKING - 5.1%
Bank of America Corp..................... 32,100 1,437,759
Wells Fargo & Co......................... 28,800 1,719,936
----------
3,157,695
----------
BUSINESS SERVICES - 2.3%
Pitney Bowes, Inc........................ 32,100 1,404,375
----------
COMPUTER SOFTWARE - 5.0%
Computer Associates International,
Inc..................................... 111,100 3,078,581
----------
CONGLOMERATES - 2.0%
Loews Corp............................... 20,700 1,239,930
----------
CONSUMER PRODUCTS - 8.2%
Albertson's, Inc......................... 50,400 1,149,624
Altria Group, Inc........................ 42,200 2,045,012
Kimberly-Clark Corp...................... 31,000 1,849,770
----------
5,044,406
----------
DIVERSIFIED MANUFACTURING
OPERATIONS - 2.7%
Delphi Corp.............................. 52,500 441,525
Ingersoll-Rand Co........................ 17,400 1,190,856
----------
1,632,381
----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 2.8%
Agilent Technologies, Inc. (b)........... 67,400 1,689,044
----------
FINANCIAL SERVICES - 16.3%
Citigroup, Inc........................... 32,307 1,433,462
Countrywide Financial Corp............... 76,600 2,445,838
Fannie Mae............................... 36,400 2,553,459
Genworth Financial, Inc. Class A......... 58,000 1,383,880
J.P. Morgan Chase & Co................... 39,150 1,511,190
MGIC Investment Corp..................... 11,800 758,858
----------
10,086,687
----------
GAS & ELECTRIC UTILITY - 1.4%
Dominion Resources, Inc.................. 13,000 836,160
----------
HEALTH CARE - 1.8%
HCA, Inc................................. 30,000 1,101,900
----------
INSURANCE - 9.9%
Aetna, Inc............................... 16,900 1,605,500
AON Corp................................. 77,200 1,575,652
Radian Group, Inc........................ 34,900 1,672,757
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
The Hartford Financial Services Group,
Inc..................................... 21,100 1,233,928
----------
6,087,837
----------
MEDIA - 1.5%
Liberty Media Corp., Class A (b)......... 100,350 895,122
----------
MINING - 5.9%
Barrick Gold Corp........................ 93,700 2,109,187
Posco ADR................................ 13,800 515,982
Rio Tinto PLC ADR........................ 9,300 988,590
----------
3,613,759
----------
OIL & GAS - 8.9%
ConocoPhillips........................... 19,491 1,643,286
Kerr-McGee Corp.......................... 46,700 2,765,574
Transocean, Inc. (b)..................... 30,700 1,082,175
----------
5,491,035
----------
PAPER PRODUCTS - 1.7%
International Paper Co................... 26,800 1,032,068
----------
TELECOMMUNICATIONS - 4.5%
BellSouth Corp........................... 36,050 961,454
Motorola, Inc............................ 65,650 1,133,119
Sprint Corp.............................. 30,600 641,070
----------
2,735,643
----------
TRANSPORTATION - 1.9%
Union Pacific Corp....................... 18,700 1,177,539
----------
TOTAL COMMON STOCKS...................... 55,587,556
----------
<Caption>
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 9.5%
SHARES VALUE($)
--------- ----------
HSBC Investor Money Market Fund
Class I Shares*......................... 5,823,353 5,823,353
----------
TOTAL INVESTMENT COMPANIES............... 5,823,353
----------
TOTAL (COST $58,799,753) (a) - 100.0%... 61,410,909
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $61,413,997.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $38,526. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.......... $ 3,734,100
Unrealized depreciation.......... (1,161,470)
-----------
Net unrealized appreciation...... $ 2,572,630
-----------
-----------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
ADR -- American Depository Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 75
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 99.2%
SHARES VALUE($)
----------- -----------
AUSTRALIA - 1.1%
BlueScope Steel Ltd................... 418,300 2,419,801
-----------
BELGIUM - 2.9%
Belgacom (b).......................... 18,300 674,007
Delhaize Group........................ 51,900 3,351,813
KBC Bankverzekeringsholding........... 31,600 2,321,657
-----------
6,347,477
-----------
BRAZIL - 1.1%
CIA de Saneamento Basico do Estado de
Sao Paulo............................ 7,710,000 311,959
Gerdau SA ADR......................... 33,400 492,984
Petroleo Brasileiro SA ADR............ 27,700 903,020
Unibanco GDR.......................... 13,000 343,850
Votorantim Celulos Papel SA ADR....... 13,700 473,335
-----------
2,525,148
-----------
CANADA - 4.2%
Alcan, Inc............................ 49,900 2,308,402
Bank of Nova Scotia................... 109,800 3,569,559
BCE, Inc.............................. 31,500 731,578
Manulife Financial Corp............... 56,400 2,633,636
-----------
9,243,175
-----------
CHINA - 0.1%
China Petroleum & Chemical Corp....... 592,000 224,369
-----------
FINLAND - 1.0%
Nokia Corp., Class A.................. 140,800 2,176,958
-----------
FRANCE - 10.2%
Assurances Generales de France........ 75,600 5,046,767
BNP Paribas SA........................ 15,800 1,077,985
Credit Agricole SA.................... 75,900 2,229,584
France Telecom SA..................... 32,800 941,278
Renault SA............................ 38,100 3,196,317
Sanofi-Aventis........................ 57,800 4,235,488
Societe Generale...................... 33,700 3,133,180
Total SA.............................. 12,500 2,605,665
-----------
22,466,264
-----------
GERMANY - 7.9%
Continental AG........................ 70,800 3,875,235
E.ON AG............................... 42,300 3,462,114
Fresenius Medical Care AG............. 22,800 1,752,388
HeidelbergCement AG................... 47,600 2,346,063
MAN AG................................ 66,000 2,297,487
Siemens AG............................ 26,600 1,990,025
Volkswagen AG......................... 35,200 1,571,047
-----------
17,294,359
-----------
HUNGARY - 0.6%
MOL Magyar Olaj -- es Gazipari Rt.
GDR.................................. 21,600 1,211,760
-----------
INDIA - 0.3%
ICICI Bank Ltd. ADR................... 47,300 745,448
-----------
ISRAEL - 0.4%
Bank Hapoalim Ltd..................... 286,600 778,277
-----------
ITALY - 3.0%
Banca Intesa SpA...................... 252,492 1,036,510
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
----------- -----------
ENI SpA............................... 241,500 5,497,411
-----------
6,533,921
-----------
JAPAN - 24.5%
Aiful Corp............................ 26,400 2,639,127
Canon, Inc............................ 124,000 6,127,651
Daito Trust Construction Co., Ltd..... 36,700 1,553,513
Daiwa House Industry Co., Ltd......... 171,000 1,751,443
Hitachi, Ltd.......................... 144,000 907,526
Honda Motor Co., Ltd.................. 96,600 4,673,236
ITOCHU Corp........................... 317,000 1,365,824
Japan Tobacco, Inc.................... 240 2,111,211
JFE Holdings, Inc..................... 104,700 2,814,490
Leopalace21 Corp...................... 29,300 535,974
Nippon Meat Packers, Inc.............. 151,000 1,886,162
Nippon Mining Holdings, Inc........... 360,000 1,714,367
Nissan Motor Co., Ltd................. 281,100 3,173,945
Promise Co., Ltd...................... 49,000 3,120,518
Sanyo Shinpan Finance Co., Ltd........ 20,400 1,144,952
Sega Sammy Holdings, Inc. (b)......... 43,000 1,998,961
Sony Corp............................. 12,510 436,169
Sumitomo Mitsui Financial Group,
Inc.................................. 718 4,674,275
Takeda Chemical Industries, Ltd....... 21,500 1,040,110
Tanabe Seiyaku Co., Ltd............... 129,000 1,173,780
The Tokyo Electric Power Co., Inc..... 90,600 2,054,519
Toyota Motor Co....................... 82,000 3,199,887
UFJ Holdings, Inc..................... 453 2,105,882
UNY Co., Ltd.......................... 146,000 1,463,656
-----------
53,667,178
-----------
LUXEMBOURG - 2.6%
Arcelor............................... 307,680 5,760,516
-----------
NETHERLANDS - 3.7%
ABN AMRO Holding NV................... 160,553 3,849,823
ING Groep NV.......................... 94,168 2,498,863
Royal Dutch Petroleum Co.............. 33,800 1,840,964
-----------
8,189,650
-----------
NORWAY - 0.3%
Yara International ASA (b)............ 52,100 559,171
-----------
SINGAPORE - 2.0%
Flextronics International Ltd. (b).... 112,400 1,354,420
Singapore Telecommunications Ltd...... 2,104,630 3,062,569
-----------
4,416,989
-----------
SOUTH AFRICA - 1.4%
ABSA Group Ltd........................ 100,500 1,104,223
Sanlam Ltd............................ 615,600 1,088,262
Telkom South Africa Ltd............... 60,000 853,074
-----------
3,045,559
-----------
SOUTH KOREA - 2.0%
Hyundai Motor Co. Ltd................. 16,300 790,683
Industrial Bank of Korea GDR.......... 88,300 538,630
Kookmin Bank ADR...................... 14,600 490,998
POSCO ADR............................. 34,200 1,278,738
Shinhan Financial Group Co. Ltd.
ADR.................................. 35,150 1,376,825
-----------
4,475,874
-----------
</Table>
76 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
----------- -----------
SPAIN - 1.9%
Altadis SA............................ 19,800 728,494
Repsol SA............................. 155,000 3,367,799
-----------
4,096,293
-----------
SWEDEN - 1.3%
Svenska Cellusoa AB, B shares......... 77,800 2,903,888
-----------
SWITZERLAND - 3.3%
Credit Suisse Group................... 106,800 3,662,864
Givaudan SA........................... 3,000 1,880,653
Nestle SA Registered.................. 7,048 1,671,982
-----------
7,215,499
-----------
TAIWAN - 1.2%
China Steel Corp. GDR................. 41,400 820,962
Compal Electronics, Inc............... 214,321 970,875
Gigabyte Technology Co. Ltd........... 257,250 290,791
Taiwan Semiconductor Manufacturing Co.
Ltd.................................. 467,755 612,670
-----------
2,695,298
-----------
THAILAND - 0.2%
PTT Public Company Ltd. PLC........... 121,400 546,913
-----------
TURKEY - 0.6%
Akbank TAS............................ 175,000,000 787,582
Ford Otomotiv Sanayi A.S.............. 80,700,000 638,992
-----------
1,426,574
-----------
UNITED KINGDOM - 21.4%
Associated British Foods PLC.......... 147,000 1,877,170
Aviva PLC............................. 340,000 3,404,685
Barclays PLC.......................... 237,700 2,323,498
BP Amoco PLC.......................... 609,200 5,904,512
British American Tobacco PLC.......... 159,000 2,395,590
Depfa Bank PLC........................ 96,470 1,469,349
George Wimpey PLC..................... 244,600 1,572,990
Glaxosmithkline PLC................... 162,400 3,422,560
InterContinental Hotels Group PLC..... 183,600 2,248,404
Lloyds TSB Group PLC.................. 83,200 658,874
Mitchells & Butlers PLC............... 119,800 626,790
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
----------- -----------
Punch Taverns PLC..................... 185,000 1,879,743
RMC Group PLC......................... 132,300 2,067,453
Royal & Sun Alliance Insurance Group
PLC.................................. 736,000 1,010,859
Royal Bank Of Scotland Group PLC...... 42,600 1,256,279
J Sainsbury PLC....................... 410,062 1,942,002
Shell Transport & Trading Co. PLC..... 160,000 1,260,450
Taylor Woodrow PLC.................... 361,600 1,538,087
Trinity Mirror PLC.................... 145,600 1,725,531
Vodafone Group PLC.................... 1,461,053 3,744,914
Whitbread PLC......................... 169,400 2,527,383
Xstrata PLC........................... 146,000 2,266,789
-----------
47,123,912
-----------
TOTAL COMMON STOCKS................... 218,090,271
-----------
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 0.0%
Investors Bank Trust Cash Reserve..... 79,394 79,394
-----------
TOTAL INVESTMENT COMPANIES............ 79,394
-----------
- -----------------------------------------------------------------
RIGHTS & WARRANTS - 0.0%
UNITED KINGDOM - 0.0%
TI Automotive Ltd., Class A (b)....... 190,000 0
-----------
TOTAL RIGHTS & WARRANTS............... 0
-----------
TOTAL INVESTMENTS
(COST $196,771,568) (a) - 99.2%..... 218,169,665
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $220,025,155.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $690,604. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation........... $24,854,662
Unrealized depreciation........... (4,147,169)
-----------
Net unrealized appreciation....... $20,707,493
-----------
-----------
</Table>
(b) Represents non-income producing security.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 77
<Page>
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Automotive.................................................. 9.6%
Banking & Financial Services................................ 22.3%
Building & Construction..................................... 1.5%
Building Materials.......................................... 2.7%
Chemicals................................................... 0.5%
Computer Related............................................ 1.6%
Diversified Manufacturing Operations........................ 1.0%
Drugs -- Medical............................................ 4.8%
Electrical.................................................. 2.7%
Electronic Components & Semiconductors...................... 4.1%
Food & Beverage............................................. 4.2%
Insurance................................................... 6.0%
Leisure..................................................... 1.3%
Metals & Mining............................................. 6.1%
Manufacturing............................................... 5.6%
Multimedia.................................................. 0.8%
Oil & Gas................................................... 10.6%
Paper Products.............................................. 1.5%
Real Estate................................................. 0.2%
Restaurants................................................. 1.2%
Retail...................................................... 3.0%
Telecommunciations.......................................... 5.5%
Tobacco..................................................... 2.4%
Investment Companies........................................ 0.0%
------
Total Investments........................................... 99.2%
Other assets in excess of liabilities....................... 0.8%
------
Net Assets.................................................. 100.0%
------
------
</Table>
At October 31, 2004, the Portfolio's open forward currency contracts were as
follows:
<Table>
<Caption>
CONTRACT CONTRACT UNREALIZED
DELIVERY AMOUNT VALUE APPRECIATION/
CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION)
- -------- --------- ---------------- ------------- ----- --------------
SHORT CONTRACTS
Japanese Yen................................ 11/1/2004 9,404,328 $88,636 $88,858 $ (222)
------- ------- ------
TOTAL SHORT CONTRACTS $88,636 $88,858 $ (222)
------- ------- ------
------- ------- ------
</Table>
78 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 97.4%
SHARES VALUE($)
--------- -----------
ADVERTISING - 1.9%
Monster Worldwide, Inc. (b)............. 245,300 6,880,665
-----------
BANKING - 6.5%
East West Bancorp, Inc.................. 208,200 8,336,328
Southwest Bancorp. of Texas, Inc........ 354,000 8,297,760
Wintrust Financial Corp................. 119,800 6,828,600
-----------
23,462,688
-----------
BIOTECHNOLOGY - 3.5%
Celgene Corp. (b)....................... 429,200 12,712,904
-----------
COMMERCIAL SERVICES - 2.1%
Alliance Data Systems Corp. (b)......... 182,000 7,694,960
-----------
COMPUTER SOFTWARE - 6.1%
Ascential Software Corp. (b)............ 350,800 4,942,772
CheckFree Corp. (b)..................... 115,900 3,592,900
SRA International, Inc. Class A (b)..... 154,200 8,289,792
Transaction Systems Architects, Inc.
Class A (b)............................ 306,100 5,018,510
-----------
21,843,974
-----------
CONSTRUCTION - 1.5%
D. R. Horton, Inc....................... 177,650 5,329,500
-----------
CONSULTING SERVICES - 1.2%
LECG Corp. (b).......................... 236,500 4,325,585
-----------
CRUISE LINES - 1.7%
Royal Caribbean Cruises Ltd............. 129,000 6,011,400
-----------
DIVERSIFIED MANUFACTURING
OPERATIONS - 7.8%
Actuant Corp. Class A (b) 219,100 8,691,697
AMETEK, Inc............................. 308,900 10,168,988
Roper Industries, Inc................... 147,700 9,107,182
-----------
27,967,867
-----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 8.5%
ATMI, Inc. (b).......................... 227,400 5,309,790
Power Integrations, Inc. (b)............ 146,400 3,132,960
Semtech Corp. (b)....................... 274,000 5,721,120
Thermo Electron Corp. (b)............... 327,400 9,494,600
Varian Semiconductor Equipment
Associates, Inc. (b)................... 202,000 6,991,220
-----------
30,649,690
-----------
ENVIRONMENTAL SERVICES - 6.0%
Pioneer Natural Resources Co............ 203,900 6,606,360
Republic Services, Inc. Class A......... 268,900 8,282,120
Waste Connections, Inc. (b)............. 214,500 6,761,040
-----------
21,649,520
-----------
FINANCIAL SERVICES - 1.2%
CapitalSource, Inc. (b)................. 188,300 4,217,920
-----------
HEALTH CARE - 8.5%
Cytyc Corp. (b)......................... 313,200 8,171,388
Manor Care, Inc......................... 299,500 9,805,630
Omnicare, Inc........................... 196,700 5,426,953
PacifiCare Health Systems, Inc. (b)..... 197,300 7,027,826
-----------
30,431,797
-----------
HOSPITALS - 1.4%
Triad Hospitals, Inc. (b)............... 157,700 5,208,831
-----------
HUMAN RESOURCES - 0.0%
Employee Solutions, Inc. (b) (c)........ 2,483 2
-----------
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
INSURANCE - 1.0%
Direct General Corp..................... 122,700 3,619,650
-----------
INTERNET RELATED - 5.0%
Check Point Software Technologies Ltd.
(b).................................... 279,000 6,311,259
Concur Technologies, Inc. (b)........... 505,200 5,256,606
RSA Security, Inc. (b).................. 315,300 6,451,038
-----------
18,018,903
-----------
MEDIA - 2.4%
The E.W. Scripps Co. Class A............ 73,400 3,502,648
Westwood One, Inc. (b).................. 228,600 5,276,088
-----------
8,778,736
-----------
OIL & GAS - 12.5%
Amerada Hess Corp....................... 104,500 8,434,195
Chesapeake Energy Corp.................. 526,500 8,466,120
Consol Energy, Inc...................... 106,600 3,773,640
Denbury Resources, Inc. (b)............. 209,400 5,193,120
Peabody Energy Corp..................... 182,700 11,652,605
Smith International, Inc. (b)........... 120,900 7,021,872
-----------
44,541,552
-----------
PHARMACEUTICALS - 8.2%
Elan Corp., PLC (b)..................... 374,000 9,649,200
OSI Pharmaceuticals, Inc. (b)........... 113,696 7,387,966
Santarus, Inc. (b)...................... 553,500 5,435,370
The Medicines Co. (b)................... 259,892 6,923,523
-----------
29,396,059
-----------
RAILROAD EQUIPMENT - 2.0%
Wabtec Corp............................. 350,400 7,102,608
-----------
RETAIL - 4.8%
Cost Plus, Inc. (b)..................... 159,800 5,161,540
P.F. Chang's China Bistro, Inc. (b)..... 79,800 4,057,032
Williams-Sonoma, Inc. (b)............... 212,000 8,092,040
-----------
17,310,612
-----------
STEEL PRODUCERS - 2.2%
United States Steel Corp................ 211,100 7,751,592
-----------
TELECOMMUNICATIONS - 1.4%
Scientific-Atlanta, Inc................. 184,800 5,061,672
-----------
TOTAL COMMON STOCKS..................... 349,968,687
-----------
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 0.8%
SHARES VALUE($)
--------- -----------
HSBC Investor Money Market Fund Class I
Shares *............................... 2,753,755 2,753,755
-----------
TOTAL INVESTMENT COMPANIES.............. 2,753,755
-----------
TOTAL INVESTMENTS
(COST $298,288,950) (a) - 98.2%....... 352,722,442
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $359,333,273.
(a) Represents cost for financial reporting purposes and differs for federal
income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of federal income tax reporting of
approximately $853,300. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<Table>
Unrealized appreciation.......... $ 66,472,438
Unrealized depreciation.......... (12,892,246)
------------
Net unrealized appreciation...... $ 53,580,192
------------
------------
</Table>
(b) Represents non-income producing security.
* Investment in affiliate.
(c) Represents illiquid security.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 79
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2004
......................................................................
<Table>
<Caption>
LIMITED INTERNATIONAL SMALL CAP
MATURITY FIXED INCOME GROWTH VALUE EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in
non-affiliates, at value $63,051,793 $160,792,857 $45,388,037 $55,587,556 $218,169,665 $349,968,687
Investments in affiliates,
at value 168,429 7,135,742 3,619,333 5,823,353 -- 2,753,755
Cash 21 109 -- 73,345 3,689 --
Foreign currency -- -- -- -- 1,651,283 --
Interest and dividends
receivable 511,941 1,837,026 17,490 107,847 348,913 38,622
Receivable for investments
sold -- 1,216,881 1,263,167 476,443 261,321 8,637,157
Prepaid expenses 592 1,410 3,345 4,453 1,949 3,538
----------- ------------ ----------- ----------- ------------ ------------
TOTAL ASSETS 63,732,776 170,984,025 50,291,372 62,072,997 220,436,820 361,401,759
----------- ------------ ----------- ----------- ------------ ------------
.................................................................................................................................
LIABILITIES:
Cash overdraft -- -- -- -- -- 652
Payable for investments
purchased -- 1,439,586 586,187 626,719 107,562 1,790,439
Unrealized depreciation on
forward foreign currency
contracts -- -- -- -- 222 --
Accrued expenses and other
liabilities:
Investment management 21,944 57,580 20,593 27,185 183,595 245,168
Administration 3,285 8,785 1,573 1,976 10,481 15,644
Other 10,758 18,690 2,815 3,120 109,805 16,583
----------- ------------ ----------- ----------- ------------ ------------
TOTAL LIABILITIES 35,987 1,524,641 611,168 659,000 411,665 2,068,486
----------- ------------ ----------- ----------- ------------ ------------
.................................................................................................................................
NET ASSETS:
Applicable to investors'
beneficial interest $63,696,789 $169,459,384 $49,680,204 $61,413,997 $220,025,155 $359,333,273
----------- ------------ ----------- ----------- ------------ ------------
----------- ------------ ----------- ----------- ------------ ------------
Investments, at cost $62,393,888 $158,869,578 $47,015,502 $58,799,753 $196,771,568 $298,288,950
----------- ------------ ----------- ----------- ------------ ------------
----------- ------------ ----------- ----------- ------------ ------------
Foreign currency, at cost $ 1,391,612
------------
------------
</Table>
80 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2004 (a)
......................................................................
<Table>
<Caption>
LIMITED FIXED
MATURITY INCOME GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $3,100,206 $8,907,851 $ 47
Dividends 9,295 18,184 140,045
Dividend income from
affiliated
investments 11,026 44,789 14,843
Foreign tax withholding -- -- (17)
---------- ---------- -----------
TOTAL INVESTMENT INCOME 3,120,527 8,970,824 154,918
---------- ---------- -----------
..................................................................................
EXPENSES:
Investment management 303,933 743,417 99,225
Administration 28,433 69,546 7,426
Accounting 58,976 70,575 24,815
Custodian 34,174 62,616 8,646
Trustee 637 927 73
Other 8,607 18,969 3,524
---------- ---------- -----------
TOTAL EXPENSES 434,760 966,050 143,709
---------- ---------- -----------
..................................................................................
NET INVESTMENT INCOME
(LOSS) 2,685,767 8,004,774 11,209
---------- ---------- -----------
..................................................................................
NET REALIZED/UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gains
(losses) from
investment and
foreign currency
transactions 350,688 1,234,753 (1,576,336)
Change in unrealized
appreciation/depreciation
from investments and
foreign currencies 195,249 533,676 1,991,868
---------- ---------- -----------
..................................................................................
Net realized/unrealized
gains from investment
and foreign currency
transactions 545,937 1,768,429 415,532
---------- ---------- -----------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $3,231,704 $9,773,203 $ 426,741
---------- ---------- -----------
---------- ---------- -----------
<Caption>
INTERNATIONAL SMALL CAP
VALUE EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 106 $ 29,462 $ --
Dividends 485,952 6,146,706 1,333,092
Dividend income from
affiliated
investments 21,537 -- 52,198
Foreign tax withholding (1,224) (879,940) --
---------- ----------- ------------
TOTAL INVESTMENT INCOME 506,371 5,296,228 1,385,290
---------- ----------- ------------
...........................................................................
EXPENSES:
Investment management 132,482 1,504,012 3,057,110
Administration 9,445 80,469 142,996
Accounting 24,482 88,674 53,012
Custodian 10,711 317,414 83,692
Trustee 93 1,783 1,982
Other 3,972 19,785 31,483
---------- ----------- ------------
TOTAL EXPENSES 181,185 2,012,137 3,370,275
---------- ----------- ------------
...........................................................................
NET INVESTMENT INCOME
(LOSS) 325,186 3,284,091 (1,984,985)
---------- ----------- ------------
...........................................................................
NET REALIZED/UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS AND FOREIGN
CURRENCIES:
Net realized gains
(losses) from
investment and
foreign currency
transactions 506,578 32,731,371 41,945,235
Change in unrealized
appreciation/depreciation
from investments and
foreign currencies 2,611,156 3,338,622 (17,175,725)
---------- ----------- ------------
...........................................................................
Net realized/unrealized
gains from investment
and foreign currency
transactions 3,117,734 36,069,993 24,769,510
---------- ----------- ------------
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS $3,442,920 $39,354,084 $ 22,784,525
---------- ----------- ------------
---------- ----------- ------------
</Table>
- ---------
(a) The Value & Growth Portfolios commenced operations on May 7, 2004.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 81
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
......................................................................
<Table>
<Caption>
LIMITED MATURITY FIXED INCOME
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 2,685,767 $ 5,193,602 $ 8,004,774 $ 15,566,715
Net realized gains from investment
transactions 350,688 7,058,455 1,234,753 14,700,573
Change in unrealized
appreciation/depreciation from
investments 195,249 (4,380,150) 533,676 (3,893,969)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 3,231,704 7,871,907 9,773,203 26,373,319
------------ ------------- ------------ -------------
Proceeds from contributions 19,537,952 76,560,059 47,385,442 210,631,816
Value of withdrawals (43,561,156) (149,758,568) (91,249,818) (419,256,855)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (24,023,204) (73,198,509) (43,864,376) (208,625,039)
------------ ------------- ------------ -------------
CHANGE IN NET ASSETS (20,791,500) (65,326,602) (34,091,173) (182,251,720)
...............................................................................................................................
NET ASSETS:
Beginning of year 84,488,289 149,814,891 203,550,557 385,802,277
------------ ------------- ------------ -------------
End of year $ 63,696,789 $ 84,488,289 $169,459,384 $ 203,550,557
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</Table>
82 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
GROWTH VALUE
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2004(a) OCTOBER 31, 2004(a)
- ------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 11,209 $ 325,186
Net realized gains (losses) from investment transactions (1,576,336) 506,578
Change in unrealized appreciation/depreciation from
investments 1,991,868 2,611,156
----------- -----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 426,741 3,442,920
----------- -----------
Proceeds from contributions 53,535,759 64,069,267
Value of withdrawals (4,282,296) (6,098,190)
----------- -----------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST 49,253,463 57,971,077
----------- -----------
CHANGE IN NET ASSETS 49,680,204 61,413,997
.......................................................................................................
NET ASSETS:
Beginning of period -- --
----------- -----------
End of period $49,680,204 $61,413,997
----------- -----------
----------- -----------
----------------------- -----------------
</Table>
- ---------
(a) The Value & Growth Portfolios commenced operations on May 7, 2004.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 83
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
......................................................................
<Table>
<Caption>
INTERNATIONAL EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004 OCTOBER 31, 2003
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 3,284,091 $ 2,659,063 $ (1,984,985) $ (1,839,018)
Net realized gains (losses) from
investment and foreign currency
transactions 32,731,371 (3,720,334) 41,945,235 5,028,175
Change in unrealized
appreciation/depreciation from
investments and foreign currencies 3,338,622 61,679,947 (17,175,725) 88,818,863
------------ --------------- ------------ -------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 39,354,084 60,618,676 22,784,525 92,008,020
------------ --------------- ------------ -------------
Proceeds from contributions 44,516,479 1,115,446,503 67,718,326 219,219,044
Value of withdrawals (65,649,972) (1,230,876,337) (157,351,034) (151,262,999)
------------ --------------- ------------ -------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (21,133,493) (115,429,834) (89,632,708) 67,956,045
------------ --------------- ------------ -------------
CHANGE IN NET ASSETS 18,220,591 (54,811,158) (66,848,183) 159,964,065
............................................................................................................................
NET ASSETS:
Beginning of year 201,804,564 256,615,722 426,181,456 266,217,391
------------ --------------- ------------ -------------
End of year $220,025,155 $ 201,804,564 $359,333,273 $ 426,181,456
------------ --------------- ------------ -------------
------------ --------------- ------------ -------------
</Table>
84 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
......................................................................
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT
END OF EXPENSES INCOME (LOSS)
PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
TOTAL RETURN (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 4.42% 84,488 0.53% 3.70% 98.42%
Year ended October 31, 2004 4.48% 63,697 0.57% 3.54% 50.06%
- ----------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
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 5.80% 203,551 0.48% 4.38% 70.91%
Year ended October 31, 2004 5.56% 169,459 0.52% 4.31% 34.88%
- ----------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
Period ended October 31, 2004 (a) (0.86%)(c) $ 49,680 0.72%(b) 0.06%(b) 53.08%
- ----------------------------------------------------------------------------------------------------------------------------
VALUE PORTFOLIO
Period ended October 31, 2004 (a) 6.12%(c) $ 61,414 0.71%(b) 1.28%(b) 10.33%
- ----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
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 23.70% 201,805 0.96% 1.00% 68.51%
Year ended October 31, 2004 20.29% 220,025 0.94% 1.53% 106.11%
- ----------------------------------------------------------------------------------------------------------------------------
SMALL CAP EQUITY PORTFOLIO
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 33.30% 426,181 0.91% (0.62%) 152.05%
Year ended October 31, 2004 5.93% 359,333 0.88% (0.52%) 81.75%
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The Limited Maturity Portfolio commenced operations on January 24, 2001.
Value Portfolio commenced operations on May 7, 2004. Growth Portfolio
commenced operations on May 7, 2004.
(b) Annualized.
(c) Not annualized.
See notes to financial statements.
HSBC INVESTOR PORTFOLIOS 85
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004
......................................................................
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 Growth Portfolio Growth Portfolio
HSBC Investor Value Portfolio Value 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.
The Growth and Value Portfolios commenced operation on May 7, 2004.
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. Examples of potentially significant
events that could affect the value of an individual security include
corporate actions by the issuer, announcements by the issuer relating to its
earnings or products, regulatory news, natural disasters and litigation.
Examples of potentially significant events that could affect multiple
securities held by a Portfolio include governmental actions, natural
disasters and armed conflicts. In addition, if events materially affecting
the value of foreign securities occur between the time when the exchange on
which they
86 HSBC INVESTOR PORTFOLIOS
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
are traded closes and the time when the Portfolios' net assets are
calculated, such securities may be valued using fair value pricing in
accordance with procedures adopted by the Trustees. Management identifies
possible fluctuations in foreign securities by monitoring the rise or fall
in the value of a designated benchmark index. In the event of a rise or fall
greater than predetermined levels, the International Equity Portfolio may
use a systematic valuation model provided by an independent third party to
value its foreign securities. When the International Equity Portfolio uses
fair value pricing, the value assigned to the International Equity
Portfolio's foreign securities may not be the quoted or published prices of
the investment on their primary markets or exchanges.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Changes in holdings of portfolio securities are reflected no later than
on the first business day following the trade date. Securities gains and
losses are calculated on the identified cost basis. Interest income is
recognized on the accrual basis and includes, where applicable, the
amortization or accretion of premium or discount. Dividend income is
recorded on the ex-dividend date.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Portfolios are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars at the current
rate of exchange to determine the value of investments, assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of
such transactions. The Portfolios do not isolate the 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 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 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
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
HSBC INVESTOR PORTFOLIOS 87
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
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.
RESTRICTED SECURITIES:
A restricted security is a security which has been purchased through a
private offering and cannot be resold to the general public without prior
registration under the Securities Act of 1933 (the '1933 Act') or pursuant
to the resale limitations provided by Rule 144 under the 1933 Act, or an
exemption from the registration requirements of the 1933 Act. Whether a
restricted security is illiquid is determined pursuant to guidelines
established by the Board of Trustees. Not all restricted securities are
consider illiquid. At October 31, 2004, the HSBC Limited Maturity Portfolio
and HSBC Fixed Income Portfolio held restricted securities representing 0.1%
and 3.6% of net assets, respectively. The restricted securities held as of
October 31, 2004 are identified below:
<Table>
<Caption>
ACQUISITION ACQUISITION PRINCIPAL
SECURITY DATE COST AMOUNT VALUE($)
- -------- ---- ---- ------ --------
HSBC LIMITED MATURITY PORTFOLIO
Pacific Gas & Electric Co., 2.72%, 4/3/06, Callable
1/3/05@100............................................... 3/23/2004 $ 69,000 $ 69,000 $ 69,085
HSBC FIXED INCOME PORTFOLIO
AIG SunAmerica Global Financing VI, 6.30%, 5/10/11........ 5/2/2001 $ 641,056 $ 642,000 $ 708,035
Anadarko Finance Co., 6.75%, 5/1/11....................... 3/18/2002 1,257,588 1,250,000 1,422,659
Anthem Insurance, 9.125%, 4//1/10......................... 8/1/2000 192,665 205,000 250,713
Anthem Insurance, 9.00%, 4//1/27.......................... 8/6/1997 63,899 60,000 82,066
Anthem Insurance, 9.00%, 4/1/27........................... 3/27/2000 98,016 105,000 143,615
Anthem Insurance, 9.00%, 4/1/27........................... 11/1/2000 113,831 140,000 191,467
Citigroup, Inc., 5.00%, 9/15/14........................... 11/30/2000 244,474 273,307 277,296
Citigroup, Inc., 5.00%, 9/15/14........................... 12/22/2000 448,617 501,693 509,016
DLJ Mortgage Acceptance Corp. IO 97 CFI S, 0.94%,
5/15/30.................................................. 5/16/1997 40,172 710,657 13,066
Farmers Exchange Capital, 7.05%, 7/15/28.................. 1/27/1999 38,692 38,000 38,484
Farmers Exchange Capital, 7.05%, 7/15/28.................. 7/16/1999 124,321 135,000 136,718
Farmers Exchange Capital, 7.05%, 7/15/28.................. 11/7/2000 178,457 215,000 217,736
Farmers Exchange Capital, 8.625%, 5/1/24.................. 5/9/1997 238,212 238,000 277,534
Florida Windstorm, 7.125%, 2/25/19........................ 5/27/1999 7,910 8,000 9,337
Florida Windstorm, 7.125%, 2/25/19........................ 8/7/2000 141,008 150,000 175,064
Florida Windstorm, 7.125%, 2/25/19........................ 11/28/2000 426,488 450,000 525,193
Hutchinson Whampoa Finance CI Ltd., 7.45%, 8/1/17......... 8/13/1998 111,221 132,000 145,403
Hutchinson Whampoa Finance CI Ltd., 7.45%, 8/1/17......... 10/9/1998 91,336 120,000 132,184
Hutchinson Whampoa Finance CI Ltd., 7.45%, 8/1/17......... 2/11/1999 132,765 150,000 165,230
Metropolitan Life Insurance Co., 7.80%, 11/1/25........... 6/2/1999 26,564 25,000 30,762
Metropolitan Life Insurance Co., 7.80%, 11/1/25........... 1/18/2001 250,755 250,000 307,624
RAS Laffan Liquid Natural Gas, 8.29%, 3/15/14............. 11/24/1998 40,930 48,000 57,180
RAS Laffan Liquid Natural Gas, 8.29%, 3/15/14............. 11/25/1998 175,879 200,000 238,252
RAS Laffan Liquid Natural Gas, 8.29%, 3/15/14............. 3/19/2001 100,313 100,000 119,126
</Table>
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, or another appropriate basis. Expenses directly attributable to a
Portfolio are charged to that Portfolio.
FEDERAL INCOME TAXES:
Each Portfolio will be treated as a partnership for U.S. Federal income
tax purposes. Accordingly, each Portfolio passes through all of its net
investment income and gains and losses to its Feeders, and is therefore not
subject to U.S. Federal income tax. As such, an investor in the Portfolios
will be taxed on their share of the Portfolios' ordinary income and realized
gains. It is intended that the Portfolios will be managed in such a way that
an investor will be able to satisfy the requirements of the Internal Revenue
Code applicable to regulated investment companies.
88 HSBC INVESTOR PORTFOLIOS
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
3. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Asset Management (Americas) Inc. ('HSBC' or the 'Investment
Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State
chartered bank, acts as the Investment Adviser to the Portfolios pursuant to
an investment management contract with the Portfolio Trust. As Investment
Adviser, HSBC manages the investments of the Portfolios and continuously
reviews, supervises and administers the Portfolios' investments. Waddell &
Reed Investment Management Company, NWQ Investment Management Co., LLC, The
Bernstein Unit of Alliance Capital Management L.P. and Westfield Capital
Management, LLC serve as Sub-Investment Advisers for the Growth Portfolio,
Value Portfolio, 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 Waddell & Reed Investment Management Company receive
in aggregate, from the Growth 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........................................... 0.500%
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>
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and NWQ Investment Management Co., LLC receive in
aggregate, from the Value 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 $500 million.......................................... 0.525%
In excess of $500 million but not exceeding $1 billion...... 0.475%
In excess of $1 billion..................................... 0.425%
</Table>
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and The Bernstein Unit of Alliance Capital Management
L.P. (now known as AllianceBernstein Investment Research and Management)
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.
HSBC INVESTOR PORTFOLIOS 89
<Page>
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2004 (CONTINUED)
......................................................................
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,
except for the Chief Compliance Officer as described below, are paid no fees
directly by the Portfolios for serving as officers of the Portfolio Trust.
Under the terms of the administration agreement with the Portfolios, BISYS
Ohio receives, from the Portfolios, a fee accrued daily and paid monthly at
an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE
- ------------------------------------ --------
Up to $8 billion............................................ 0.0375%
In excess of $8 billion but not exceeding $9.25 billion..... 0.0350%
In excess of $9.25 billion but not exceeding $12 billion.... 0.0250%
In excess of $12 billion.................................... 0.0150%
</Table>
The fee breakpoints are determined on the basis of the aggregate average
daily net assets of the HSBC Investor Family of Funds. The fee is allocated
to each of the Portfolios based upon its pro-rata share of net assets. BISYS
Ohio may directly or through an affiliate, use their fee revenue, past
profits, or other revenue sources to pay promotional, administrative,
shareholder support, and other expenses to third parties, including broker
dealers, in connection with the offer, sale and administration of shares of
the Portfolios. In addition, BISYS provides an employee to serve as Chief
Compliance Officer for the Portfolios including providing certain related
services, for which it receives an additional fee.
FUND ACCOUNTING AND CUSTODIAN:
BISYS provides fund accounting services for the Portfolios. For its
services to the Portfolios, BISYS receives an annual fee, including
reimbursement of certain expenses, from each Portfolio accrued daily and
paid monthly. HSBC serves as custodian to the Limited Maturity Portfolio,
Fixed Income Portfolio, Growth Portfolio, Value Portfolio and Small Cap
Equity Portfolio. Investor's Bank & Trust Company serves as custodian to the
International Equity Portfolio. Compensation HSBC receives for services to
the Portfolios as custodian is presented in the Statement of Operations as
custodian fees.
4. INVESTMENT TRANSACTIONS:
For the period ended October 31, 2004, each Portfolio purchased and sold
securities, excluding short-term securities, in the following amounts:
<Table>
<Caption>
PURCHASES SALES PURCHASES SALES
(EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S.
GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT
----------- ----------- ---------- ----------
Limited Maturity Portfolio........ $ 25,159,916 $ 34,669,535 $10,472,344 $18,849,371
Fixed Income Portfolio............ 19,305,178 53,370,147 38,496,118 46,428,904
Growth Portfolio.................. 65,958,425 20,984,058 -- --
Value Portfolio................... 57,604,451 5,134,629 -- --
International Portfolio........... 229,869,363 225,559,654 -- --
Small Cap Equity Portfolio........ 303,993,798 349,082,782 -- --
</Table>
90 HSBC INVESTOR PORTFOLIOS
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
HSBC Investor Portfolios:
We have audited the accompanying statements of assets and liabilities of HSBC
Investor Limited Maturity Portfolio, HSBC Investor Fixed Income Portfolio, HSBC
Investor Growth Portfolio, HSBC Investor Value Portfolio, HSBC Investor
International Equity Portfolio and HSBC Investor Small Cap Equity Portfolio
(collectively, the Funds), including the schedules of portfolio investments, as
of October 31, 2004, and the related statements of operations for the period
then ended, the statements of changes in net assets for each period in the
two-year period then ended, and the financial highlights for each period in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of October 31, 2004, the results of their operations for the period
then ended, the changes in their net assets for each period in the two-year
period then ended, and the financial highlights for each period in the five-
year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Columbus, Ohio
December 20, 2004
HSBC INVESTOR FAMILY OF FUNDS 91
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES -- OCTOBER 31, 2004 (UNAUDITED)
......................................................................
As a shareholder of the HSBC Investor Funds, you incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchases,
reinvested dividends, or other distributions; redemption fees; and exchange
fees; (2) ongoing costs, including management fees; distribution [and/or
service] 12b-1 fees; and other Fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in the HSBC
Investor Funds and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
5/1/04 10/31/04 5/1/04-10/31/04 5/1/04-10/31/04
------ -------- --------------- ---------------
Fixed Income Portfolio...................... 1,000.00 1,060.10 2.70 0.52%
Small Cap Portfolio......................... 1,000.00 1,036.60 4.57 0.89%
International Portfolio..................... 1,000.00 1,114.70 4.48 0.84%
Limited Maturity Portfolio.................. 1,000.00 1,061.30 3.01 0.58%
</Table>
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
** The following portfolios did not have a full 6 months of expenses during the
period and as such are not presented in the table above:
Value Portfolio
Growth Portfolio
92 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES -- OCTOBER 31, 2004 (CONTINUED) (UNAUDITED)
.........................................................................
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor Funds's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
5/1/04 10/31/04 5/1/04-10/31/04 5/1/04-10/31/04
------ -------- --------------- ---------------
Fixed Income Portfolio........................ 1,000.00 1,022.58 2.65 0.52%
Small Cap Portfolio........................... 1,000.00 1,020.72 4.53 0.89%
International Portfolio....................... 1,000.00 1,020.97 4.28 0.84%
Limited Maturity Portfolio.................... 1,000.00 1,022.28 2.96 0.58%
</Table>
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
** The following portfolios did not have a full 6 months of expenses during the
period and as such are not presented in the table above:
Value Portfolio
Growth Portfolio
HSBC INVESTOR FAMILY OF FUNDS 93
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED)
......................................................................
The following table contains information regarding HSBC Investor Family of Funds
Board of Trustees. Asterisks indicate those Trustees who are 'interested
persons,' as defined in the Investment Company Act of 1940, as amended, of the
Funds. The Funds' Statement of Additional Information includes additional
information about the Trustees and is available by calling (888) 525-5757.
<Table>
<Caption>
TERM OF OFFICE AND
NAME, ADDRESS POSITION(S) LENGTH OF TIME
AND YEAR OF BIRTH HELD WITH THE FUNDS SERVED WITH THE FUNDS
- ----------------------------------------------------------------
Frederick C. Chen Trustee Indefinite; 1990 to
P.O. Box 182845 present
Columbus, Ohio 43218
Date of Birth: 1927
- ----------------------------------------------------------------
Larry M. Robbins Trustee Indefinite; 1987 to
P.O. Box 182845 present
Columbus, Ohio 43218
Date of Birth: 1938
- ----------------------------------------------------------------
Alan S. Parsow Trustee Indefinite; 1987 to
P.O. Box 182845 present
Columbus, Ohio 43218
Date of Birth: 1950
- ----------------------------------------------------------------
Michael Seely Trustee Indefinite; 1987 to
P.O. Box 182845 present
Columbus, Ohio 43218
Date of Birth: 1945
- ----------------------------------------------------------------
Stephen J. Baker* Trustee Indefinite; March
P.O. Box 182845 2004 to present
Columbus, Ohio 43218
Date of Birth: 1956
- ----------------------------------------------------------------
Thomas Robards Advisory Board Indefinite; 2004 to
P.O. Box 182845 Member present
Columbus, Ohio 43218
Date of Birth: 1946
- ----------------------------------------------------------------
<Caption>
NUMBER OF PORTFOLIOS
IN THE FUND
NAME, ADDRESS PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN OTHER DIRECTORSHIPS
AND YEAR OF BIRTH DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE
- -----------------------------------------------------------------------------------------------------
Frederick C. Chen Management Consultant, since 1988 32 None
P.O. Box 182845
Columbus, Ohio 43218
Date of Birth: 1927
- -----------------------------------------------------------------------------------------------------
Larry M. Robbins Director for the Center of Teaching 32 None
P.O. Box 182845 and Learning, University of
Columbus, Ohio 43218 Pennsylvania
Date of Birth: 1938
- -----------------------------------------------------------------------------------------------------
Alan S. Parsow General Partner of Parsow 32 None
P.O. Box 182845 Partnership, Ltd., since 1989
Columbus, Ohio 43218
Date of Birth: 1950
- -----------------------------------------------------------------------------------------------------
Michael Seely President of Investor Access 32 None
P.O. Box 182845 Corporation, 1978-present
Columbus, Ohio 43218
Date of Birth: 1945
- -----------------------------------------------------------------------------------------------------
Stephen J. Baker* Chief Executive Officer, HSBC Asset 32 None
P.O. Box 182845 Management (Americas) Inc., 2003-
Columbus, Ohio 43218 present; Chief Executive Officer,
Date of Birth: 1956 HSBC Asset Management (Canada)
Limited, 1998-2003
- -----------------------------------------------------------------------------------------------------
Thomas Robards Senior Vice President and Chief 32 None
P.O. Box 182845 Financial Officer, American Museum
Columbus, Ohio 43218 of Natural History, 2003-present;
Date of Birth: 1946 Chief Financial Officer, Datek
Online Holding Corp., 2000-2003;
Executive Vice President and Chief
Financial Officer, Republic New York
Corporation, 1976-2000
- -----------------------------------------------------------------------------------------------------
</Table>
94 HSBC INVESTOR FAMILY OF FUNDS
<Page>
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED) (CONTINUED)
......................................................................
The names of the Officers, their addresses, ages, position(s) held with each
Trust, and principal occupation(s) during the past five years are described in
the table below. Unless otherwise indicated, the address for each Officer is
3435 Stelzer Road, Columbus, Ohio 43219-3035.
OFFICERS
<Table>
<Caption>
TERM OF OFFICE AND
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND YEAR OF BIRTH HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------------------------
Richard A. Fabietti President Indefinite; March Senior Vice President, Head of Product Management, HSBC
3435 Stelzer Road 2004-Present Asset Management (Americas) Inc., 1998-Present
Columbus, Ohio 43219
Date of Birth: 1958
- ----------------------------------------------------------------------------------------------------------------------------
Mark L. Suter* Vice President Indefinite; Employee of BISYS Fund Services, Inc., 2000-Present; Vice
90 Park Avenue 2000-Present President of Client Services, Seligman Data 1997-1999; Vice
10th Floor President, Capitalink, 1996-1997
New York, NY 10018
Date of Birth: 1962
- ----------------------------------------------------------------------------------------------------------------------------
Salvatore Iocolano Vice President Indefinite; Senior Compliance Officer, HSBC Asset Management (Americas)
452 5th Avenue 2002-Present Inc., 2001-Present; Director of Compliance, KPMG Investment
18th Floor Advisors, 1999-2001; Securities Compliance Examiner, U.S.
New York, NY 10018 Securities Exchange Commission, 1995-1998
Date of Birth: 1962
- ----------------------------------------------------------------------------------------------------------------------------
Troy Sheets* Treasurer Indefinite; Employee of BISYS Fund Services, Inc., 2002-Present; Senior
3435 Stelzer Road 2004-Present Manager, KPMG LLP, 1993-2002
Columbus, Ohio 43219
Date of Birth: 1971
- ----------------------------------------------------------------------------------------------------------------------------
Alaina Metz* Assistant Secretary Indefinite; Employee of BISYS Fund Services, Inc., 1995-Present
3435 Stelzer Road 1996-Present
Columbus, Ohio 43219
Date of Birth: 1967
- ----------------------------------------------------------------------------------------------------------------------------
Frederick J. Schmidt* Chief Compliance Expires 2005; Senior Vice President and Chief Compliance Officer, CCO
90 Park Avenue Officer 2004-Present Services of BISYS Fund Services, 2004-Present; President,
10th Floor FJS Associates, 2002-2004; Vice President, Credit Agricole
New York, NY 10016 Asset Management, U.S., 1987-2002
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
- ---------
* Messrs. Suter, Sheets and Schmidt and Ms. Metz also are officers of certain
other investment companies of which BISYS or an affiliate is the
administrator.
HSBC INVESTOR FAMILY OF FUNDS 95
<Page>
PRIVACY POLICY FOR
HSBC INVESTOR FUNDS AND
HSBC ADVISOR FUNDS TRUST
- --------------------------------------------------------------------------------
THIS PRIVACY POLICY NOTICE SUMMARIZES THE COLLECTION AND DISCLOSURE OF NONPUBLIC
PERSONAL INFORMATION ('INFORMATION') OF CUSTOMERS ('YOU') OF THE HSBC INVESTOR
FAMILY OF FUNDS ('WE' OR 'US'). IF YOU ARE AN INDIVIDUAL SHAREHOLDER OF RECORD
OF ANY SERIES OF THE FUNDS, WE CONSIDER YOU TO BE A CUSTOMER OF THE HSBC
INVESTOR FAMILY OF FUNDS. SHAREHOLDERS PURCHASING OR OWNING SHARES OF ANY OF THE
HSBC INVESTOR FAMILY OF FUNDS THROUGH THEIR BANK, BROKER, OR OTHER FINANCIAL
INSTITUTION SHOULD CONSULT THAT FINANCIAL INSTITUTION'S PRIVACY POLICIES.
WE COLLECT THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
- --------------------------------------------------------------------------------
We collect Information about you from the following sources: information we
receive from you on applications or other forms; information about your
transactions with us, our affiliates, or others; and information we receive from
a consumer reporting agency.
WE DISCLOSE THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
- --------------------------------------------------------------------------------
We do not disclose any Information about you or any former customer to anyone,
except as permitted by law, including to our affiliates and third party service
providers.
WE DISCLOSE INFORMATION ABOUT YOU TO THE FOLLOWING TYPES OF THIRD PARTIES
- --------------------------------------------------------------------------------
We may disclose Information about you and any former customer to our affiliates,
which we consider to include HSBC Bank USA, HSBC Asset Management (Americas)
Inc. and their affiliates, and to nonaffiliated third parties, as permitted by
law.
We may disclose all of the Information we collect to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing agreements.
PROTECTING THE SECURITY AND CONFIDENTIALITY OF YOUR INFORMATION
- --------------------------------------------------------------------------------
We restrict access to Information about you to those employees who need to know
that information to provide products or services to you. We maintain physical,
electronic, and procedural safeguards that comply with federal standards to
guard your Information.
96 HSBC INVESTOR FAMILY OF FUNDS
<Page>
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to the portfolio securities is available without
charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC
Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on
the Fund's website at www.investorfunds.us.hsbc.com and the Securities and
Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting
record for the 12-month period ending June 30, 2004 is available at the SEC's
website at www.sec.gov.
Schedules of Portfolio Investments for fiscal quarters ending January 31 and
July 31 will be available no later than 60 days after period end, without
charge, on the Fund's website at www.investorfunds.us.hsbc.com and on the
Securities and Exchange Commission's website at http://www.sec.gov.
<Page>
[THIS PAGE INTENTIONALLY LEFT BLANK]
HSBC Investor Family of funds:
INVESTMENT ADVISER
HSBC Asset Management (Americas) Inc.
452 Fifth Avenue
New York, NY 10018
SUB-ADVISERS
HSBC Investor Growth Portfolio
Waddell & Reed Investment Management Company
6300 Lamar Avenue
Overland Park, KS 66202
HSBC Investor Value Portfolio
NWQ Investment Management Co., LLC
2049 Century Park East, 4th Floor
Los Angeles, CA 90067
HSBC Investor International Equity Portfolio
AllianceBernstein Investment Research and Management
1345 Avenue of the Americas, 39th Floor
New York, NY 10105
HSBC Investor Small Cap Equity Portfolio
Westfield Capital Management Company
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 Growth Portfolio
HSBC Investor Value Portfolio
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 REGISTERED PUBLIC ACCOUNTING
Firm
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
12/04
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.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. This code of ethics is included as Exhibit 11 (a)(1).
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) The registrant's board of directors has determined that the
registrant has at least one audit committee financial expert
serving on its audit committee.
3(a)(2) The audit committee financial expert is Frederick C. Chen
who is "independent" for purposes of this Item 3 of Form N-CSR.
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.
2003 $165,450
2004 $200,230
(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.
2003 $47,900
2004 $36,130
2003- Fees of $30,000 relate to the preparation and review of the Funds' 17f-2
filings, $10,000 relates to an N14 filing, $4,000 relates to a PEA No. 83 filing
and $3,900 relates to the consent of the annual N-1A filing.
2004- Fees of $31,980 relate to the preparation and review of the Funds' 17f-2
filings and $4,150 relates to the consent of the annual N-1A filing.
(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.
2003 $89,250
2004 $108,115
Fees for both 2003 and 2004 relate to the preparation of federal income and
excise tax returns and the review of excise taxes.
(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.
2003 $0
2004 $0
(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.
Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust's
Audit Committee must preapprove all audit and non-audit services by the
independent accountants relating to the operations or financial reporting of the
Funds. Prior to the commencement of any audit or non-audit services to a fund,
the Audit Committee reviews the services to determine whether they are
appropriate and permissible under applicable law.
(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.
None of the services summarized in (b)-(d), above, were approved by the audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) 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.
Not applicable.
(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.
2003 $137,150
2004 $144,245
(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.
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.
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 second fiscal quarter of the period covered by this 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 second fiscal quarter of the period covered
by this 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.
The code of ethics that is the subject of the disclosure required by Item 2 is
attached hereto.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2(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
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) HSBC Advisor Funds Trust
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By (Signature and Title) /s/ Richard A. Fabietti
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Richard A. Fabietti
President
Date January 10, 2005
----------------------
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 (Signature and Title) /s/ Richard A. Fabietti
--------------------------------------------------------
Richard A. Fabietti
President
Date January 10, 2005
----------------------
By (Signature and Title) /s/ Troy Sheets
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Troy Sheets
Treasurer
Date January 10, 2005
----------------------
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as................................. 'SS'