-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NVTeuQx7Ia1K8jHIGVStHa3/1Kwjec6FNEdpydCoBGCRuLbeHBwYv/B+MAmJ0FvR Jh/a0kzfETesA5tpO+acmg== 0000950117-04-000079.txt : 20040107 0000950117-04-000079.hdr.sgml : 20040107 20040107111853 ACCESSION NUMBER: 0000950117-04-000079 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20040107 EFFECTIVENESS DATE: 20040107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC ADVISOR FUNDS TRUST CENTRAL INDEX KEY: 0001010296 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07583 FILM NUMBER: 04512166 BUSINESS ADDRESS: STREET 1: C/O BISYS STREET 2: 3435 STELZER RD CITY: COLUMBUS STATE: OH ZIP: 43219-3035 BUSINESS PHONE: (617) 470-8000 MAIL ADDRESS: STREET 1: C/O BISYS STREET 2: 3435 STELZER ROAD CITY: COLUMBUS STATE: OH ZIP: 43219-3035 FORMER COMPANY: FORMER CONFORMED NAME: REPUBLIC ADVISOR FUNDS TRUST DATE OF NAME CHANGE: 19960403 FORMER COMPANY: FORMER CONFORMED NAME: REPUBLIC INVESTMENT MANAGEMENT TRUST DATE OF NAME CHANGE: 19960308 N-CSR 1 a36783.txt ADVISOR FUNDS TRUST - -------------------------------------------------------------------------------- OMB APPROVAL OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response. . . . . . . 5.0 - -------------------------------------------------------------------------------- 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, 2003 Date of reporting period: October 31, 2003 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 'SS' 3507. Item 1. Reports to Stockholders. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). Annual Report [GRAPHIC] HSBC Investor Family of Funds October 31, 2003 HSBC Investor Limited Maturity Fund HSBC Investor Fixed Income Fund HSBC Investor Bond Fund HSBC Investor New York Tax-Free Bond Fund HSBC Investor Balanced Fund HSBC Investor Equity Fund HSBC Investor Growth and Income Fund HSBC Investor Mid-Cap Fund HSBC Investor International Equity Fund HSBC Investor Overseas Equity Fund HSBC Investor Small Cap Equity Fund HSBC Investor Opportunity Fund HSBC [LOGO] PORTFOLIO REVIEWS HSBC INVESTOR FAMILY OF FUNDS ANNUAL REPORT - OCTOBER 31, 2003 Glossary of Terms President's Message 1 Commentary From the Investment Manager 2 Portfolio Reviews 4 Schedules of Portfolio Investments HSBC Investor New York Tax-Free Bond Fund 22 HSBC Investor Balanced Fund 24 HSBC Investor Equity Fund 26 HSBC Investor Growth and Income Fund 28 HSBC Investor Mid-Cap Fund 29 Statements of Assets and Liabilities 31 Statements of Operations 33 Statements of Changes in Net Assets 35 Financial Highlights 47 Notes to Financial Statements 59 Independent Auditors' Report 68 HSBC INVESTOR PORTFOLIOS Schedules of Portfolio Investments HSBC Investor Limited Maturity Portfolio 69 HSBC Investor Fixed Income Portfolio 71 HSBC Investor International Equity Portfolio 74 HSBC Investor Small Cap Equity Portfolio 79 Statements of Assets and Liabilities 81 Statements of Operations 82 Statements of Changes in Net Assets 83 Financial Highlights 85 Notes to Financial Statements 86 Independent Auditors' Report 90 Board of Trustees 91 Privacy Policy 92 GLOSSARY OF TERMS Beta is a coefficient measuring a stock's relative volatility. The beta is the covariance of a stock in relation to the rest of the stock market. The S&P 500 Index has a beta coefficient of 1. Therefore, any stock with a higher beta is more volatile than the market, and any with a lower beta can be expected to rise and fall more slowly than the market. CITIGROUP BROAD INVESTMENT-GRADE BOND FUND INDEX is an unmanaged market capitalization-weighted index that includes fixed-rate Treasury, government-sponsored, corporate and mortgage securities. All issues mature in one year or more and have at least $50 million face amount outstanding for entry into the index. GROSS DOMESTIC PRODUCT (GDP) is the monetary value of all the goods and services produced by an economy over a specified period. It includes consumption, government purchases, investments, and exports minus imports. LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX is an unmanaged broad based index comprised of investment grade, fixed-rate and tax-exempt securities with a remaining maturity of at least 7 years. LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index generally representative of the investment-grade debt issues with at least one year to final maturity. LEHMAN BROTHERS INTERMEDIATE AGGREGATE BOND INDEX is an unmanaged index generally representative of investment-grade issues with maturities between three and ten years. LIPPER BALANCED FUNDS AVERAGE is comprised of managed funds that primarily conserve principal by maintaining at all times a balanced portfolio of both stocks and bonds. Typically the stock/bond ratio ranges around 60%/40%. LIPPER GENERAL BOND FUNDS AVERAGE is comprised of managed funds that do not have quality or maturity restrictions and keep the bulk of assets in corporate and government debt issues. LIPPER INTERMEDIATE INVESTMENT-GRADE DEBT FUNDS AVERAGE is an average of managed funds that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. LIPPER INTERNATIONAL FUNDS AVERAGE is comprised of managed funds that invest their assets in securities whose primary trading markets are outside of the United States. LIPPER LARGE-CAP CORE FUNDS AVERAGE is comprised of managed funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the Standard & Poor's Mid-Cap 400 Index. LIPPER MID-CAP GROWTH FUNDS AVERAGE is comprised of managed funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) of less than 300% of the dollar-weighted median market capitalization of the Standard & Poor's Mid-Cap 400 Index. LIPPER N.Y. MUNICIPAL BOND FUNDS AVERAGE is an average of managed funds that invest at least 65% of their assets in municipal debt issues that are exempt from taxation in New York or a city in New York. MORGAN STANLEY EUROPE, AUSTRALASIA AND FAR EAST (MSCI EAFE) INDEX is an unmanaged index that measures performance of a diverse range of developed countries in the indicated regions. NASDAQ COMPOSITE INDEX is a market price only index that tracks the performance of domestic common stocks traded on the regular Nasdaq market as well as National Market System traded foreign common stocks and American Depositary Receipts. THE RUSSELL UNIVERSE - In 1984, Russell created the Russell family of stock indices as part of a more accurate and comprehensive system for evaluating the performance of investment managers. Russell now maintains 21 U.S. stock indices and has launched similar broad-market and style indices in Canada and Japan. Today, more than $214 billion is invested in funds modeling Russell's U.S. indices, and more than $1 trillion in funds is benchmarked against the global family of Russell indices. RUSSELL MIDCAP GROWTH INDEX is an unmanaged index which measures the performance of those Russell MidCap companies with higher price-to-book ratios and higher forecasted growth values. RUSSELL 1000 INDEX is an unmanaged index which measures the performance of the 1,000 largest companies in the Russell universe. RUSSELL 1000 GROWTH INDEX is an unmanaged index which measures the performance of 1,000 securities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. RUSSELL 2000 INDEX is an unmanaged index that generally representative of the performance of small-capitalization stocks. STANDARD & POOR'S 500 INDEX (S&P 500) is an unmanaged index that measures the performance of the stock market as a whole. STANDARD & POOR'S MID CAP 400 INDEX is an unmanaged index that consists of 400 domestic stocks chosen for market size, liquidity and industry group representation. Lipper is an independent mutual fund performance monitor whose results are based on total return and do not reflect a sales charge. Securities indexes assume reinvestment of all distributions and interest payments and do not take in account brokerage fees or expenses. Securities in the Fund do not match those in the indexes and performance of the Fund will differ. Investors cannot invest directly in an index, although they can invest in the underlying funds or securities. HSBC Investor Family of Funds HSBC INVESTOR FAMILY OF FUNDS PRESIDENT'S MESSAGE DEAR SHAREHOLDER: We are pleased to present you with the annual reports for the HSBC Investor Family of Funds for the year ended October 31, 2003. The report contains the following features: * Commentary From the Investment Manager * Portfolio Reviews-investment strategy, performance overview and outlook for the coming months * Schedules of Portfolio Investments-listing of the security holdings in each Fund * Statements of Assets and Liabilities-summary of the assets and liabilities of each Fund * Statements of Operations-summary of operations and its effect on the assets of each Fund * Statements of Changes in Net Assets-summary of changes in net assets during the period * Schedules of Capital Stock Activity-summary of capital and share transactions during the period * Financial Highlights-per share summary of activity affecting net asset value per share * Notes to Financial Statements Finally, we thank you for your continued confidence in us. We look forward to providing you with investment management services to meet your needs now and in the years ahead. Sincerely, Walter B. Grimm Walter B. Grimm President December 2003 HSBC INVESTOR FAMILY OF FUNDS 1 COMMENTARY FROM THE INVESTMENT MANAGER HSBC ASSET MANAGEMENT (AMERICAS) INC. U.S. ECONOMIC REVIEW The United States economy struggled during much of the 12-month period ended October 31, 2003, but staged a strong rebound near the end of the period. The Federal Reserve Board (the "Fed") lowered short-term interest rates by 0.5 percentage points in November 2002 in an attempt to stimulate the economy. The economy continued to be hampered by weak corporate spending, however. The build-up to war with Iraq weighed on business investment, as the uncertainty of the political environment caused business leaders to delay spending initiatives. Corporations cut costs by laying off workers, causing the unemployment rate to reach a nine-year high of 6.4% during the second calendar quarter. Many economists in June became concerned about the potential for deflation, leading the Fed to cut interest rates again, by 0.25 percentage points. Corporations increased spending late in the year, helping fuel 7.2% annualized Gross Domestic Product (the "GDP")(1) growth during the three months through September. Strong consumer spending buttressed the economy during the early part of the period. Rising unemployment was offset by gains in worker productivity, which supported wage growth. Consumers also took advantage of the lowest long-term interest rates in 45 years to refinance mortgages, which freed up cash and supported purchases of large items such as automobiles. Consumer spending dipped during the final months of the period, after interest rates rose and the rate of refinancing slowed. Corporate profits improved markedly. Corporations cleaned up their balance sheets and lowered interest costs by refinancing the high debt burdens they had taken on during the economic expansion. Lower interest expenses combined with other cost reductions helped to improve cash flow and earnings for many firms. The dollar weakened versus other currencies during the period, boosting U.S. exports and improving conditions for manufacturing firms. The three months ended in September marked the sixth consecutive quarter of improving corporate profits. GLOBAL ECONOMIC REVIEW European economies struggled during the period. Many European economies suffered from weak U.S. imports, as the euro's strength against the dollar made European products relatively expensive. The German economy was especially weak, as high taxes and labor costs restrained growth. Economic-forecasting data such as Germany's business confidence index improved during the quarter, however. The U.K.'s economy stayed somewhat stronger than continental Europe's, thanks to strength in housing and consumer spending. Severe acute respiratory syndrome (SARS) hurt Asian economies early in the year. Fears about the highly-contagious disease drastically reduced travel and business activity throughout many parts of the region, particularly China and Hong Kong. Meanwhile, Japan's economy continued to suffer from massive levels of bad debt. Japanese business spending picked up late in the period, helping fuel an economic rebound in that country. Emerging economies were mixed. Export-oriented economies such as Taiwan's suffered from the weak dollar and low U.S. business spending. But countries with strong domestic markets, such as South Korea, remained somewhat insulated from the global economy's weakness. Latin American economies improved somewhat. Brazil's president adopted moderate economic positions that helped stabilize the country's currency, while Argentina's economy gradually improved from its collapse of 2001 and 2002. Market Environment The U.S. stock market rallied to begin the period, as investors hoped that the Fed's interest-rate cut and improved corporate profits marked the beginning of an economic recovery. Weak economic data and tensions with Iraq caused stocks to decline in December, however. Technology stocks led the market, due to signs that demand was recovering in that sector. Meanwhile, investors favored the relative stability of large-cap stocks. - -------------------------------------------------------------------------------- (1) FOR ADDITIONAL INFORMATION, PLEASE SEE THE GLOSSARY OF TERMS. 2 HSBC INVESTOR FAMILY OF FUNDS COMMENTARY FROM THE INVESTMENT MANAGER - (CONTINUED) HSBC ASSET MANAGEMENT (AMERICAS) INC. That pattern repeated itself during the first quarter of 2003: Stocks rallied on hopes of an economic recovery, then retreated due to signs of economic weakness and saber-rattling between the U.S. and Iraq. Large caps and technology stocks again led the market. The stock market surged after the U.S. invasion of Iraq, in part because the invasion did not create any of the worst-case scenarios experts had feared, such as the destruction of Iraq's oil fields or the use of chemical or biological weapons. Investors anticipated a quick resolution to the war would lead to an economic recovery, and they bid up prices of stocks most likely to benefit from a recovery. Such shares included small caps, which often lead the market heading into an economic rebound. Some lower-quality firms with weak balance sheets and little or no earnings also benefited from the economic outlook, as did stocks in highly-cyclical sectors such as technology. Conversely, sectors not closely tied to the economy, such as consumer staples, fared relatively poorly. Those trends continued through August. Shares of lower-quality firms surged, small caps outperformed larger shares, and technology stocks led the market. Stocks declined in September, as investors took profits following the rally, but share prices gained again in October amid signs of accelerating economic growth. European markets generally trailed the S&P 500 on a local-currency basis during the period. However, weakness in the U.S. dollar caused European markets to perform in-line or better on a dollar basis. Asian markets suffered in the spring from Japan's economic weakness and the effects of the SARS epidemic. However, Japan, Hong Kong and China showed signs of economic strength late in the period, helping boost stocks in that region. Treasury securities performed well through the spring, as Fed action, the run-up to war and fears about deflation helped push yields lower. Signs of economic strength in July led to a dramatic rise in yields on long-term Treasury bonds, as the likelihood increased that an economic recovery would lead to an up-tick in inflation. The yield on the 10-year Treasury bond gained 0.9 percentage points in July, and then declined during ensuing months. Short-term Treasuries were more stable, anchored by the Fed's decision to maintain low short-term interest rates. Corporate bonds led the fixed-income markets. Investors faced with the lowest interest rates in a generation favored the high yields available on lower-quality issues. Lower-quality bonds also got a boost from the resurgent economy, which made investors more confident that weaker firms would be able to pay their debts. Those trends caused an inverse relationship between credit quality and performance. Emerging-markets bonds also benefited from investors' pursuit of higher yields. HSBC INVESTOR FAMILY OF FUNDS 3 PORTFOLIO REVIEWS HSBC INVESTOR LIMITED MATURITY FUND (CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES) by John B. Cuccia Portfolio Manager HSBC Asset Management (Americas) Inc. The HSBC Investor Limited Maturity Fund (the "Fund") seeks to realize above-average total return, consistent with reasonable risk, by investing in a diversified investment grade portfolio of U.S. government obligations, corporate bonds and mortgage-backed securities. The Fund utilizes a two tier structure, commonly known as "master-feeder," in which the Fund invests all of its investable assets in the HSBC Investor Limited Maturity Portfolio (the "Portfolio"). The Fund returned 3.97%, (without sales charge) for the Class A (Investor) Shares and 4.12%, for the Class Y Shares during the year ended October 31, 2003. That compared to a return of 4.27% and 5.61% for the Fund's benchmark the Lehman Brothers Intermediate Aggregate Bond Index.(1) The U.S. markets were taken by surprise back on November 6 when the Fed decided to lower their target interest rate by a larger than expected 50 basis points to a rate of 1.25% at their scheduled FOMC meeting. They also decided to change their bias to neutral, indicating no further anticipated moves in the near term. The U.S. bond market initially responded with higher yields as the U.S. equity market rallied. However, as 2002 drew to a close the Fixed Income market finished on a high note as yields declined. With the start of the New Year, the U.S. economy proved weaker than previously anticipated as initial estimates for fourth quarter GDP1 grew at only a 0.7% annual pace. The U.S. dollar declined against a broad index of currencies. Bond yields moved higher as many investors abroad reduced their investments in dollar denominated assets. As the year progressed, the economy did show some signs of strength, mainly in the housing sector and in retail sales. Fourth quarter GDP was later revised upward to a reading of 1.4%, but many investors began to question whether the consumer would continue to spend in an economy with a deteriorating labor market, weakening consumer confidence and contracting manufacturing. Toward the end of the first quarter, heightened geo-political risk became the main driver as the countdown to and inception of the war in Iraq diminished economic expectations. For most of the second quarter, financial markets remained volatile, economic data remained weak as the war, and severe winter weather hindered the consumer. Many investors felt the military campaign in Iraq would last two to four months, but then by the second week of April, Baghdad fell. Nonetheless, with a swift conclusion to the war, not all was well. The economy did not get the instant magical post war bounce for which investors were hoping. Many investors believed in order to stimulate the economy further, the Federal Reserve would implement non-conventional monetary policy methods aimed at the longer end of the yield curve. U.S. Treasury 10-year and 30-year yields declined to the lowest level during the review period to end the month of May yielding 3.37% and 4.38%, roughly 50 basis points lower from were they began the year. During the second half of the review period, the economy improved and bond yields moved higher. The manufacturing sector signaled expansion, while jobs were being created instead of lost. The Fed lowered their target interest rate again, to a 45-year low of 1%. In addition, Fed Chairman Alan Greenspan kept reiterating that monetary policy would remain accommodative for a considerable period. By the end of the review period, third-quarter GDP was released and exceeded all analysts' expectation, showing growth at a 7.2% annual rate, the fastest since the first quarter of 1984. The economy was firing on all cylinders from the demand side as strength was seen across the board. At their most recent FOMC meeting, the Fed left their target rate unchanged at 1% and maintained their split balance of risk assessment, remained neutral on economic growth but saw the risks on the price level as still leaning toward disinflation. They also reiterated that policy would remain accommodative for a "considerable period". We feel the Federal Reserve moves to dismantle their current policy outlook slowly, remaining on hold over the next three months and increasing only gradually, by approximately 50 basis points in 2004. We remain constructive on the corporate sector, as fundamental and technical factors are positive and should remain entrenched. As such, the Fund's interest rate profile and credit exposure will be positioned accordingly. During the past year, the Fund made use of duration, sector, and credit calls to add additional yield to the Fund. We made use of various sectors (U.S. Treasury, U.S. agency, mortgages, and corporate bonds) to find favorable relative spread values and used U.S. Treasury securities to adjust our duration positions. On the credit side, we bought and sold "A" and "BBB" rated corporate bonds during the year, which generated additional yield to the Fund. As the review period ended, we held a slight overweight in duration as well as in corporate bonds & U.S. agency securities.* - -------------------------------------------------------------------------------- (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 4 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR LIMITED MATURITY FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Limited Lehman Brothers Maturity Fund Class A Intermediate Aggregate (Investor)2 Bond Index 2/7/2001 9526 10000 9645 10079 9691 10147 9670 10138 9706 10199 9732 10230 9924 10430 10007 10532 10199 10689 10362 10854 10233 10747 12/31/2001 10160 10695 10208 10771 10292 10874 10081 10730 10219 10922 10319 11018 10355 11115 10481 11248 10608 11383 10775 11536 10708 11529 10681 11515 12/31/2002 10900 11712 10884 11724 11030 11854 11001 11861 11077 11934 11257 12082 11258 12085 10949 11794 10989 11844 11230 12106 10/31/2003 11133 12021
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
Lehman Brothers HSBC Investor Limited Intermediate Aggregate Maturity Fund Class Y Bond Index 1/23/2001 10000 10000 10077 10100 10175 10079 10237 10147 10217 10138 10248 10199 10278 10230 10494 10430 10597 10532 10813 10689 10978 10854 10843 10747 12/31/2001 10768 10695 10821 10771 10913 10874 10702 10730 10840 10922 10958 11018 10988 11115 11135 11248 11261 11383 11452 11536 11383 11529 11356 11515 12/31/2002 11581 11712 11566 11724 11734 11854 11706 11861 11778 11934 11972 12082 11975 12085 11649 11794 11695 11844 11954 12106 10/31/2003 11852 12021
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Fund's benchmark and represents the reinvestment of dividends and capital gains in the Fund. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 SINCE AS OF OCTOBER 31, 2003 DATE YEAR INCEPTION - ------------------------------------------------------------------------------------------ HSBC Investor Limited Maturity Fund Class A (Investor)(2) 2/7/01 -0.97% 4.01% HSBC Investor Limited Maturity Fund Class B(3) 2/15/01 -0.81% 4.42% HSBC Investor Limited Maturity Fund Class C(4) 2/13/01 2.29% 5.05% HSBC Investor Limited Maturity Fund Class Y 1/23/01 4.12% 6.33%
(2) Reflects the maximum sales charge of 4.75% (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Fund is measured against the Lehman Brothers Intermediate Aggregate Bond Index, an unmanaged index generally representative of investment-grade issues with maturities between three and ten years. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 5 PORTFOLIO REVIEWS HSBC INVESTOR FIXED INCOME FUND HSBC INVESTOR BOND FUND (CLASS A (INVESTOR) SHARES, B SHARES AND C SHARES) by Edward Merkle Senior Portfolio Manager, Managing Director HSBC Asset Management (Americas) Inc. The HSBC Investor Fixed Income Fund and the HSBC Investor Bond Fund (the "Funds") seek to provide investors with above-average total return, consistent with reasonable risk, through investments in a diversified portfolio of fixed-income securities. The Funds utilize a two-tier structure, commonly known as a "master-feeder," in which the Funds invest all of their investable assets in the HSBC Investor Fixed Income Portfolio (the "Portfolio"). For the year ended October 31, 2003, the shares of the HSBC Investor Fixed Income Fund produced a 5.71% return, and the Class A (Investor) Shares of the HSBC Investor Bond Fund returned 5.17% (without sales charge). That compared to a 4.99% and 6.92% return for the Funds' benchmark, the Citigroup Broad Investment-Grade Bond Fund Index and the Funds' peer group, the Lipper General Bond Funds Average1, respectively. The U.S. markets were taken by surprise back on November 6 when the Fed decided to lower their target interest rate by a larger than expected 50 basis points to a rate of 1.25% at their scheduled FOMC meeting. They also decided to change their bias to neutral, indicating no further anticipated moves in the near term. The U.S. bond market initially responded with higher yields as the U.S. equity market rallied. However, as 2002 drew to a close the Fixed Income market finished on a high note as yields declined. With the start of the New Year, the U.S. economy proved weaker than previously anticipated as initial estimates for fourth quarter GDP1 grew at only a 0.7% annual pace. The U.S. dollar declined against a broad index of currencies. Bond yields moved higher as many investors abroad reduced their investments in dollar denominated assets. As the year progressed, the economy did show some signs of strength, mainly in the housing sector and in retail sales. Fourth quarter GDP was later revised upward to a reading of 1.4%, but many investors began to question whether the consumer would continue to spend in an economy with a deteriorating labor market, weakening consumer confidence and contracting manufacturing. Toward the end of the first quarter, heightened geo-political risk became the main driver as the countdown to and inception of the war in Iraq diminished economic expectations. For most of the second quarter, financial markets remained volatile, economic data remained weak as the war, and severe winter weather hindered the consumer. Many investors felt the military campaign in Iraq would last two to four months, but then by the second week of April, Baghdad fell. Nonetheless, with a swift conclusion to the war, not all was well. The economy did not get the instant magical post war bounce for which investors were hoping. Many investors believed in order to stimulate the economy further, the Federal Reserve would implement non-conventional monetary policy methods aimed at the longer end of the yield curve. U.S. Treasury 10-year and 30-year yields declined to the lowest level during the review period to end the month of May yielding 3.37% and 4.38%, roughly 50 basis points lower from were they began the year. During the second half of the review period, the economy improved and bond yields moved higher. The manufacturing sector signaled expansion, while jobs were being created instead of lost. The Fed lowered their target interest rate again, to a 45-year low of 1%. In addition, Fed Chairman Alan Greenspan kept reiterating that monetary policy would remain accommodative for a considerable period. By the end of the review period, third-quarter GDP was released and exceeded all analysts' expectation, showing growth at a 7.2% annual rate, the fastest since the first quarter of 1984. The economy was firing on all cylinders from the demand side as strength was seen across the board. At their most recent FOMC meeting, the Fed left their target rate unchanged at 1% and maintained their split balance of risk assessment, remained neutral on economic growth but saw the risks on the price level as still leaning toward disinflation. They also reiterated that policy would remain accommodative for a "considerable period". We feel the Federal Reserve moves to dismantle their current policy outlook slowly, remaining on hold over the next three months and increasing only gradually, by 50 basis points in 2004. We remain constructive on the corporate sector, as fundamental and technical factors are positive and should remain entrenched. As such, the Fund's interest rate profile and credit exposure will be positioned accordingly. During the past year, the Fund made use of duration, sector, and credit calls to add additional yield to the Fund. We made use of various sectors (U.S. Treasury, U.S. agency, mortgages, and corporate bonds) to find favorable relative spread values and used U.S. Treasury securities to adjust our duration positions. On the credit side, we bought and sold "A" and "BBB" rated corporate bonds during the year, which generated additional yield to the Fund. As the review period ended, we held a slight overweight in duration as well as in corporate bonds & U.S. agency securities.* - -------------------------------------------------------------------------------- (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 6 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR FIXED INCOME FUND HSBC INVESTOR BOND FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
Citigroup Broad HSBC Investor Fixed Investment-Grade Bond Income Fund Fund Index 1/9/1995 10000 10000 10119 10207 10340 10446 10445 10506 10535 10650 10983 11073 11018 11151 10995 11128 11173 11256 11298 11362 11444 11514 11601 11694 12/31/1995 11741 11855 11839 11936 11640 11733 11573 11648 11533 11563 11506 11556 11649 11706 11609 11737 11736 11720 11926 11924 12153 12192 12389 12394 12/31/1996 12433 12284 12322 12332 12435 12345 12311 12221 12351 12395 12556 12512 12785 12661 13067 13004 12987 12893 13194 13082 13291 13270 13354 13332 12/31/1997 13463 13468 13613 13641 13609 13632 13658 13685 13685 13756 13841 13887 13893 14002 13949 14031 13979 14247 14228 14582 14124 14516 14338 14596 12/31/1998 14384 14642 14525 14750 14286 14491 14391 14574 14472 14623 14299 14489 14181 14439 14057 14382 14018 14371 14233 14543 14267 14587 14310 14587 12/31/1999 14229 14520 14188 14479 14371 14648 14495 14838 14441 14794 14334 14781 14712 15090 14841 15228 15046 15445 15205 15550 15261 15649 15467 15903 12/31/2000 15827 16203 16205 16470 16317 16616 16372 16703 16381 16625 16501 16734 16539 16789 16845 17177 17058 17366 17124 17581 17567 17935 17395 17687 12/31/2001 17269 17584 17400 17722 17563 17892 17216 17596 17481 17929 17664 18082 17692 18215 17905 18432 18204 18754 18436 19053 18261 18967 18339 18964 12/31/2002 18744 19358 18785 19372 19045 19648 19013 19630 19208 19803 19633 20168 19544 20133 18799 19452 18924 19585 19515 20098 10/31/2003 19304 19913
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
Citigroup Broad HSBC Investor Bond Investment-Grade Bond Fund Class A (Investor)2 Fund Index 8/26/1996 9524 10000 9466 10100 9652 10174 9868 10403 10095 10575 12/31/1996 9997 10481 10029 10522 10078 10533 9958 10427 10102 10576 10197 10676 10314 10803 10583 11095 10499 11000 10628 11162 10723 11322 10760 11375 12/31/1997 10845 11491 10967 11639 10950 11631 11007 11677 11066 11737 11139 11849 11177 11947 11207 11972 11227 12156 11459 12442 11346 12386 11517 12454 12/31/1998 11539 12493 11662 12585 11461 12364 11542 12435 11602 12477 11464 12362 11362 12320 11256 12271 11230 12262 11389 12409 11423 12446 11441 12446 12/31/1999 11391 12389 11341 12354 11479 12498 11562 12660 11524 12623 11442 12611 11743 12875 11830 12993 11990 13178 12113 13268 12152 13352 12313 13568 12/31/2000 12599 13825 12887 14053 12971 14177 12996 14251 13009 14185 13086 14278 13122 14325 13350 14656 13515 14817 13563 15000 13903 15303 13769 15091 12/31/2001 13659 15003 13759 15121 13883 15266 13608 15013 13801 15298 13940 15428 13968 15541 14119 15726 14352 16002 14518 16256 14382 16183 14451 16180 12/31/2002 14756 16516 14780 16529 14982 16764 14948 16748 15097 16896 15417 17208 15351 17178 14760 16596 14852 16710 15304 17148 10/31/2003 15125 16990
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION - -------------------------------------------------------------------------------------------------- HSBC Investor Fixed Income Fund 1/9/95 5.71% 6.45% 7.75% HSBC Investor Bond Fund Class A (Investor)(2) 8/26/96 0.15% 4.90% 5.93% HSBC Investor Bond Fund Class B(3) 1/6/98 0.38% 5.15% 4.92% HSBC Investor Bond Fund Class C(4) 11/4/98 3.39% N/A 5.20%
(2) Reflects the maximum sales charge of 4.75%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Funds are measured against the Citigroup Broad Investment-Grade Bond Fund Index, an unmanaged market capitalization-weighted index that includes fixed-rate Treasury, government-sponsored, corporate and mortgage securities. All issues mature in one year or more and have at least $50 million face amount outstanding for entry into the index. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 7 Portfolio Reviews HSBC INVESTOR NEW YORK TAX-FREE BOND FUND'D' (CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES) by Jerry Samet Senior Fixed Income Portfolio Manager HSBC Asset Management (Americas) Inc. The HSBC Investor New York Tax-Free Bond Fund (the "Fund") seeks to provide shareholders with income exempt from regular, federal, New York state and New York city personal income taxes. The Fund posted a total return of 4.57% (without sales charge) for Class A (Investor) shares and 4.84% for the Class Y Shares for the year ended October 31, 2003. That compared to a 2.21% and 4.62% return for the Fund's benchmark, the Lehman Brothers 7-Year Municipal Bond Index and the Fund's peer group, the Lipper New York Municipal Bond Funds Average(1), respectively. Following an unprecedented 475 basis points of Federal Reserve easing in 2001 and 2002 in the Federal Funds target the Fed eased another 25 basis points in June to bring the rate down to a generational low of 1.00%. Growth remained below trend and inflationary pressures were practically non-existent. In fact the Fed began basing its accommodative policy on concerns of an unwelcome risk of deflation albeit assessing that risk as somewhat small but not insignificant. The yield on 10-year municipal AAA rated bonds reached a low yield of 2.85% in mid June. As it became apparent that growth would pick up the market sold off and yields rose. As of October 31, 2003 the ten-year, AAA municipal stood at 3.71%. Asset reallocation away from speculative asset classes receded as speculative asset classes performed well. However, for the year the flow of funds into the municipal market remained strongly positive though not as robust as in 2002. Correspondingly, municipals underperformed the corporate credit market on a pretax basis while outperforming all other investment grade taxable fixed income markets on a pretax basis. Supply was a negative factor for the market as municipalities issued record paper because of refundings into lower yields as well as increased deficit financing as tax receipts and revenues declined. The municipal yield curve continued to steepen as shorter duration bonds outperformed. Two to five year maturities moved lower in yield by 45-55 basis points while 7-30 year maturities were lower by 16-34 basis points. Over the course of the year, the Fund's duration was approximately 10% longer than that of its benchmark but ended the quarter at approximately 96% of benchmark. Additionally, the portfolio was overweighted in intermediate (5-12) term maturities. This helped performance somewhat as the shorter end of the yield curve outperformed. The average quality AA1 (as rated by Standard & Poor's)'D''D' of our portfolio remained higher in quality than the average of our benchmark index AA2. This hurt performance as lower rated credits generally outperformed higher quality.* New York has acted as a microcosm of local credit profiles across the country. We see tough budget conditions both now and in the future. Of the 53 rated counties in New York, Moody's has put on negative outlook or negative watch, or downgraded a total of 21. The problem lies in declining tax and revenue collections in the face of increasing salary, benefits, and Medicaid expenses. Increasing the sources of revenue will be challenging given that politicians have already raised taxes and fees quite significantly and face resistance to further increases. This applies to high rated credits such as Westchester County, which raised property taxes, an average 15%, as well as lower rated credits such as Nassau County where the average hike was 19%. We believe the municipal market is coming into a three-month period, which from a technical standpoint is a very strong period in terms of relative performance. Coupon and redemption payments are typically at their strongest and in this low yield environment investors could 'reach for yield' by moving further out along the yield curve. Once again, we continue to emphasize that given the change in yields, one issue that becomes an element of concern at the new level of rates is deminimus original issue discount (OID) which will cause negative convexity price declines. The portfolio will continue to be proactive in limiting exposure to deminimus. At present the portfolio is considerably underweight relative to benchmark in terms of deminimus exposure in the event of a 50-75 basis point backup in yields. This was the key performance determinant within the municipal market in the last rising yield environment in 1999. - -------------------------------------------------------------------------------- 'D' A fund's income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax. Regional funds may be subject to additional risks, since the issues they invest in are located in one geographical location. 'D''D' Standard & Poor's and Moody's ratings represent an opinion only, not a recommendation to buy or sell. (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 8 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR NEW YORK TAX-FREE BOND FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor N.Y. Tax- Free Bond Fund Class A Lehman Brothers 7-Year (Investor)2 Municipal Bond Index 5/1/1995 9524 10000 9890 10266 9760 10257 9839 10387 9986 10510 10007 10550 10133 10642 10341 10759 12/31/1995 10415 10816 10506 10921 10408 10884 10239 10778 10200 10758 10190 10742 10263 10825 10373 10914 10361 10920 10493 11019 10616 11137 10811 11323 12/31/1996 10745 11288 10734 11329 10827 11423 10678 11275 10771 11333 10939 11476 11065 11585 11435 11854 11285 11770 11424 11894 11488 11965 11563 12007 12/31/1997 11735 12154 11841 12281 11838 12292 11841 12293 11750 12221 11960 12401 12002 12436 12024 12477 12247 12667 12424 12830 12367 12848 12421 12883 12/31/1998 12449 12910 12572 13099 12531 13025 12520 13020 12552 13051 12447 12987 12236 12799 12268 12885 12126 12857 12087 12904 11920 12849 12082 12943 12/31/1999 12033 12892 11975 12861 12091 12913 12379 13096 12282 13047 12164 13018 12468 13309 12652 13477 12825 13653 12752 13611 12877 13727 12960 13791 12/31/2000 13303 14061 13433 14300 13460 14311 13578 14426 13393 14296 13538 14459 13643 14530 13851 14712 14085 14934 13961 14930 14069 15080 13942 14912 12/31/2001 13808 14790 14033 15069 14241 15267 13944 14933 14152 15301 14232 15388 14350 15570 14537 15762 14712 15958 15072 16274 14783 16025 14679 15958 12/31/2002 15044 16321 14956 16277 15186 16516 15190 16510 15329 16619 15699 17028 15592 16948 14966 16371 15131 16520 15528 17040 10/31/2003 15460 16947
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor N.Y. Tax- Lehman Brothers 7-Year Free Bond Fund Class Y Municipal Bond Index 7/1/1996 10000 10000 10040 10082 10030 10088 10160 10179 10281 10289 10473 10460 12/31/1996 10411 10428 10402 10466 10495 10553 10351 10416 10442 10470 10606 10601 10729 10703 11089 10951 10944 10873 11069 10988 11143 11053 11216 11092 12/31/1997 11384 11228 11489 11346 11498 11356 11503 11356 11417 11290 11624 11456 11667 11488 11691 11527 11931 11702 12084 11853 12032 11870 12075 11902 12/31/1998 12117 11927 12239 12101 12201 12033 12193 12028 12216 12057 12128 11997 11925 11824 11959 11904 11824 11877 11788 11921 11616 11870 11788 11957 12/31/1999 11743 11910 11677 11881 11804 11929 12088 12099 11996 12053 11883 12026 12182 12295 12365 12450 12537 12613 12468 12574 12593 12681 12676 12740 12/31/2000 13014 12990 13133 13211 13162 13220 13292 13327 13114 13206 13258 13357 13364 13424 13571 13591 13803 13796 13684 13792 13793 13931 13672 13776 12/31/2001 13542 13663 13766 13921 13973 14104 13685 13795 13892 14135 13973 14216 14091 14384 14279 14561 14454 14743 14810 15034 14529 14804 14443 14743 12/31/2002 14791 15077 14708 15037 14937 15258 14944 15252 15084 15353 15452 15730 15350 15657 14737 15124 14902 15262 15296 15742 10/31/2003 15232 15656
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Fund's benchmark, and represents the reinvestment of dividends and capital gains in the Fund. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION - ----------------------------------------------------------------------------------------------------------- HSBC Investor New York Tax-Free Bond Fund Class A (Investor)(2) 5/1/95 -0.37% 3.54% 5.26% HSBC Investor New York Tax-Free Bond Fund Class B(3) 1/6/98 -0.20% 3.80% 4.01% HSBC Investor New York Tax-Free Bond Fund Class C(4) 11/4/98 2.87% N/A 3.85% HSBC Investor New York Tax-Free Bond Fund Class Y 7/1/96 4.84% 4.83% 5.91%
- -------------------------------------------------------------------------------- (2) Reflects the maximum sales charge of 4.75%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Fund is measured against the Lehman Brothers 7-Year Municipal Bond Fund Index, an unmanaged broad based index comprised of investment grade, fixed-rate and tax-exempt securities with a remaining maturity of at least 7 years. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 9 PORTFOLIO REVIEWS HSBC INVESTOR BALANCED FUND (CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES) by Thomas D'Auria, CFA, Chief Investment Officer - U.S. Equities and Edward Merkle, Senior Portfolio Manager, Managing Director HSBC Asset Management (Americas) Inc. The HSBC Investor Balanced Fund (the "Fund") seeks to provide current income and long-term growth of capital consistent with reasonable risk by investing in a broadly diversified portfolio of U.S. government securities, common stocks, preferred stocks and high-quality bonds. The Fund produced a total return of 10.39% (without sales charge) for Class A (Investor) Shares and 10.70% for the Class Y Shares for the 12-months ended October 31, 2003. That compared to a 5.18%, 15.08% and 12.21% return for the Fund's benchmarks, the Lehman Brothers Aggregate Bond Index, the S&P 500 Index and the Fund's peer group, the Lipper Balanced Funds Average(1), respectively. The U.S. markets were taken by surprise back on November 6 when the Federal Reserve decided to lower their target interest rate by a larger than expected 50 basis points to a rate of 1.25% at their scheduled FOMC meeting. They also decided to change their bias to neutral, indicating no further anticipated moves in the near term. The U.S. bond market initially responded with higher yields as the U.S. equity market rallied. However, as 2002 drew to a close the Fixed Income market finished on a high note as yields declined. With the start of the new year, the U.S. economy proved weaker than previously anticipated as initial estimates for fourth quarter GDP grew at only a 0.7% annual pace. As the year progressed, the economy did show some signs of strength, mainly in the housing sector and in retail sales. Fourth quarter GDP was later revised upward to a reading of 1.4%, but many investors began to question whether the consumer would continue to spend in an economy with a deteriorating labor market, weakening consumer confidence and contracting manufacturing. Toward the end of the first quarter, heightened geo-political risk became the main driver as the countdown to and inception of the war in Iraq diminished economic expectations. Many investors felt the military campaign in Iraq would last two to four months, but then by the second week of April, Baghdad fell. Nonetheless, with a swift conclusion to the war, all was not well. The economy did not get the instant magical post war bounce investors were hoping for. During the second half of the review period, the economy improved and bond yields moved higher. The manufacturing sector signaled expansion, while jobs were being created instead of lost. The Fed lowered its target interest rate again, to a 45-year low of 1%. In addition, Fed Chairman Alan Greenspan kept reiterating that monetary policy would remain accommodative for a considerable period of time. By the end of the review period, third-quarter GDP was released and exceeded all analysts' expectation, showing growth at a 7.2% annual rate, the fastest since the first quarter of 1984. The economy was firing on all cylinders from the demand side as strength was seen across the board. At their most recent FOMC meeting, the Fed left its target rate unchanged at 1% and maintained its split balance of risk assessment, remained neutral on economic growth but saw the risks on the price level as still leaning toward disinflation. They also reiterated that policy would remain accommodative for a "considerable period". We feel the Fed moves to dismantle their current policy outlook slowly, remaining on hold over the next three months and increasing only gradually, by 50 basis points in 2004. During the past year, the Fund made use of duration, sector, and credit calls to add additional yield to the Fund. We made use of various sectors (U.S. Treasury, U.S. agency, mortgages, and corporate bonds) to find favorable relative spread values and used U.S. Treasury securities to adjust our duration positions. On the credit side, we bought and sold "A" and "BBB" rated corporate bonds during the year, which generated additional yield to the Fund. As the review period ended, we held a slight overweight in duration as well as in corporate bonds & U.S. agency securities.* - -------------------------------------------------------------------------------- (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 10 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR BALANCED FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Balanced Lehman Brothers Standard & Poor's 500 Fund Class A (Investor)2 Aggregate Bond Index Index 2/20/2001 9499 10000 10000 9369 10010 10000 9019 10050 9367 9399 10008 10094 9429 10069 10162 9227 10107 9915 9257 10333 9817 8904 10451 9203 8540 10573 8460 8641 10794 8621 8894 10645 9283 12/31/2001 8848 10578 9364 8746 10663 9227 8654 10767 9049 8756 10588 9390 8501 10793 8821 8429 10885 8756 8133 10979 8132 7878 11111 7499 7939 11299 7548 7459 11482 6728 7857 11430 7320 8041 11427 7750 12/31/2002 7791 11663 7295 7707 11673 7104 7707 11834 6998 7749 11825 7065 8145 11922 7647 8436 12145 8050 8505 12121 8153 8400 11713 8296 8453 11791 8458 8484 12103 8368 10/31/2003 8673 11990 8841
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Balanced Lehman Brothers Standard & Poor's 500 Fund Class Y Aggregate Bond Index Index 1/18/2001 10000 10087.1 9088.77 10010 10137.8 8513.31 9420 10095.7 9174.36 9060 10156.6 9235.91 9450 10195 9011.2 9490 10422.9 8922.46 9281 10542.2 8364.46 9311 10665.1 7689.06 8968 10888.2 7835.77 8594 10738.1 8436.67 8705 10669.9 8510.63 8958 10756.3 8386.5 12/31/2001 8912 10860.6 8224.72 8809 10679.9 8534.08 8728 10887 8016.91 8830 10979.5 7958.06 8564 11074.4 7391.4 8493 11208.1 6815.38 8196 11397.3 6860 7941 11581.9 6115.2 8002 11529.1 6652.84 7522 11526.1 7044.04 7920 11764.1 6630.43 8114 11774.2 6457.07 12/31/2002 7865 11937.1 6360.04 7771 11927.9 6421.62 7782 12026.3 6950.32 7823 12250.6 7316.17 8230 12226.2 7409.63 8522 11815.2 7540.33 8589 11893.7 7687.09 8484 12208.5 7605.7 8536 12094.6 8035.73 8578 12208 7606 10/31/2003 8768 12095 8036
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Fund's benchmarks, and represents the reinvestment of dividends and capital gains in the Fund. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 SINCE AS OF OCTOBER 31, 2003 DATE YEAR INCEPTION - ---------------------------------------------------------------------------------------- HSBC Investor Balanced Fund Class A (Investor)(2) 2/20/01 4.93% -5.15% HSBC Investor Balanced Fund Class B(3) 2/9/01 5.70% -5.45% HSBC Investor Balanced Fund Class C(4) 2/13/01 8.67% -4.79% HSBC Investor Balanced Fund Class Y 1/18/01 10.70% -4.62%
- -------------------------------------------------------------------------------- (2) Reflects the maximum sales charge of 5.00%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Fund is measured against the Lehman Brothers Aggregate Bond Index, which is an unmanaged index generally representative of the investment-grade debt issues with at least one year to final maturity, and the Standard & Poor's 500 Index, which is an unmanaged index generally representative of the U.S. stock market asa whole. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 11 PORTFOLIO REVIEWS HSBC INVESTOR EQUITY FUND (CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES) by John L. Blundin Portfolio Manager, Alliance Capital Management, L.P. and Robert H. Lyon Portfolio Manager, Institutional Capital Corporation The HSBC Investor Equity Fund (the "Fund") seeks to provide its shareholders with long-term growth of capital and income without excessive fluctuations in market value. The Fund invests at least 80% of its assets in equity securities of seasoned mid-sized and large companies whose shares are expected to show above-average price appreciation. The Fund employs two sub-investment advisers to achieve its investment objective. Each sub-investment adviser pursues a different investment style, and receives a fee for their services. Alliance Capital Management, L.P. pursues a growth style of investing, focusing on financially secure firms that have established operating histories and are proven leaders in their industries or market sectors. These companies may possess characteristics such as participation in expanding markets, increasing unit sales volume, growth in revenues and earnings per share or increasing return on investments. Institutional Capital Corporation pursues a value style of investing, focusing on shares of companies that are undervalued relative to the stock market as a whole. The firm employs a fundamentals-based, bottom-up stock-picking method to find these companies. The Fund returned 17.94% (without sales charge) for Class A (Investor) Shares and 18.26% for the Class Y Shares for the year ended October 31, 2003. That compared to 37.68% and 13.04% return for the Fund's benchmarks, the Russell 1000 Growth Index, the Russell 1000 Index and the Fund's peer group, the Lipper Large-Cap Core Funds Average(1), respectively. A strong rally among equity stocks benefited the Fund's absolute performance. That rally reflected improving economic fundamentals and positive investor sentiment. The high-quality large-cap stocks in which the Fund invests under-performed lower-quality stocks and shares of small- and mid-cap companies, which posted very strong returns during the period.* The portion of the Fund managed by Alliance Capital held a significant stake in the technology sector, which boosted performance. Shares of such firms posted some of the period's strongest returns, as investors anticipated that corporations would increase technology spending as the economy improved. The Alliance Capital portion of the Fund also benefited from its holdings in the financial sector. Increased revenues from equity trading and merger-and-acquisition activity boosted earnings growth among such firms, boosting their stock prices.* The Fund's growth portfolio was hurt by its overweight exposure to health-care stocks. Such stocks performed poorly as investors sought shares of firms with higher growth potential. Shares of consumer-services companies also hurt relative performance in this portion of the Fund. Weak advertising spending continued to dampen such firms' profits.* The portion of the Fund managed by Institutional Capital Corporation (ICAP) benefited in relative terms from its individual stock selection in the capital spending, basic industries, transportation, energy and consumer-durables sectors. Holdings in the services sector, particularly among media and travel companies, also boosted performance, as the economic upturn positively affected shares of such firms. The ICAP portion of the Fund also benefited from reducing its holdings in the consumer staples and defense sectors.* ICAP found attractive opportunities during the period among shares of firms with strong balance sheets, excellent franchises and growing free cash flow. Such companies performed well during the period.* - -------------------------------------------------------------------------------- (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 12 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR EQUITY FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Equity Russell 1000 Growth Fund Class A (Investor)2 Index Russell 1000 Index 8/1/1995 9497 10000 10000 9630 10011 10075 9915 10472 10490 9758 10480 10442 10349 10887 10908 12/31/1995 10530 10949 11074 10817 11316 11432 10903 11523 11581 11007 11537 11685 10988 11841 11863 11093 12255 12148 10955 12271 12161 10396 11552 11575 10598 11850 11889 11069 12713 12558 11543 12790 12836 12395 13750 13783 12/31/1996 12161 13481 13560 12705 14427 14364 12676 14329 14419 12143 13554 13770 12787 14454 14515 13728 15497 15445 14351 16117 16085 15699 17542 17401 15035 16515 16580 15686 17328 17489 14882 16688 16923 15259 17396 17656 12/31/1997 15612 17591 18015 15832 18117 18149 17240 19480 19443 18032 20257 20424 18106 20537 20633 17875 19954 20187 18501 21176 20934 18448 21036 20683 15439 17879 17591 16359 19253 18776 17855 20800 20259 18750 22382 21513 12/31/1998 20170 24400 22883 20827 25833 23700 20051 24653 22948 20766 25951 23827 21661 25985 24823 21122 25186 24287 22433 26950 25524 21495 26094 24745 21365 26520 24513 20280 25963 23839 21467 27924 25442 21446 29430 26096 12/31/1999 22144 32491 27668 21163 30968 26536 19955 32482 26465 22150 34806 28876 21647 33150 27914 20916 31481 27192 21291 33867 27885 21087 32455 27422 22417 35393 29451 21101 32045 28084 20957 30529 27746 18943 26029 25209 12/31/2000 19353 25205 25513 20456 26947 26353 18310 22372 23895 16796 19937 22308 18488 22459 24100 18632 22128 24263 18072 21616 23715 17724 21076 23391 16416 19352 21966 15088 17420 20103 15616 18334 20521 16936 20095 22101 12/31/2001 17140 20058 22337 16504 19703 22053 15844 18886 21614 16521 19539 22502 15501 17944 21213 15368 17510 21026 14145 15890 19474 13051 15017 18033 13232 15062 18127 11704 13499 16180 12378 14738 17525 12943 15538 18550 12/31/2002 12189 14465 17501 12032 14114 17076 11875 14049 16812 12097 14310 16986 12978 15368 18357 13436 16136 19404 13567 16358 19659 13869 16765 20051 14098 17182 20458 13910 16998 20248 10/31/2003 14599 17952 21436
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Equity Russell 1000 Growth Fund Class Y Index Russell 1000 Index 7/1/1996 10000 10000 10000 9391 9518 9414 9582 9776 9657 10007 10326 10360 10436 10555 10423 11205 11334 11205 12/31/1996 10999 11150 10986 11501 11812 11756 11474 11857 11677 10997 11323 11045 11579 11935 11778 12422 12700 12628 12992 13226 13134 14212 14308 14295 13620 13633 13459 14211 14381 14121 13492 13915 13599 13833 14518 14177 12/31/1997 14142 14813 14335 14351 14924 14764 15627 15988 15875 16352 16794 16507 16419 16966 16736 16219 16599 16261 16788 17214 17257 16750 17007 17143 14018 14465 14570 14853 15439 15689 16211 16658 16950 17024 17690 18240 12/31/1998 18326 18816 19884 18923 19488 21052 18228 18869 20090 18877 19592 21148 19700 20412 21175 19201 19970 20524 20405 20988 21962 19552 20347 21264 19444 20157 21611 18459 19602 21157 19549 20920 22755 19529 21458 23983 12/31/1999 20168 22751 26477 19274 21820 25236 18185 21761 26470 20184 23744 28364 19725 22953 27014 19070 22359 25654 19413 22929 27598 19238 22548 26448 20451 24217 28843 19252 23093 26114 19120 22815 24878 17283 20729 21211 12/31/2000 17671 20979 20540 18689 21669 21959 16729 19648 18231 15346 18343 16247 16902 19817 18302 17023 19951 18033 16522 19500 17615 16204 19234 17175 15019 18062 15770 13794 16530 14196 14288 16874 14941 15496 18174 16376 12/31/2001 15684 18367 16345 15113 18134 16056 14508 17773 15390 15137 18503 15922 14202 17443 14623 14081 17289 14269 12968 16013 12949 11965 14828 12237 12131 14906 12274 10737 13305 11001 11355 14410 12010 11863 15254 12662 12/31/2002 11192 14390 11787 11048 14042 11501 10893 13824 11449 11104 13967 11662 11912 15095 12524 12334 15956 13149 12461 16165 13330 12749 16488 13662 12960 16822 14002 12784 16650 13852 10/31/2003 13428 17626 14630
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Fund's benchmark, and represents the reinvestment of dividends and capital gains in the Fund.
INCEPTION 1 5 SINCE AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION - --------------------------------------------------------------------------------------------------------- HSBC Investor Equity Fund Class A (Investor)(2) 8/1/95 12.06% -4.93% 4.69% HSBC Investor Equity Fund Class B(3) 1/6/98 13.13% -4.67% -1.86% HSBC Investor Equity Fund Class C(4) 11/4/98 16.03% N/A -4.73% HSBC Investor Equity Fund Class Y 7/1/96 18.26% -3.70% 4.10%
- -------------------------------------------------------------------------------- (2) Reflects the maximum sales charge of 5.00%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Fund is measured against the Russell 1000 Index and the Russell 1000 Growth Index, the Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell universe. The Russell 1000 Growth Index measures the performance of 1,000 securitities found in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The indices are unmanaged and do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 13 PORTFOLIO REVIEWS HSBC INVESTOR GROWTH AND INCOME FUND (CLASS A (INVESTOR) SHARES, B SHARES, C SHARES AND Y SHARES) by Thomas D'Auria, CFA Chief Investment Officer - U.S. Equities HSBC Asset Management (Americas) Inc. The HSBC Investor Growth and Income Fund (the "Fund") normally invests at least 65% of its total assets in common stocks, preferred stocks, and convertible securities. The Fund may invest the balance of its assets in various types of fixed income securities and in money market instruments. The Fund returned 17.26% (without sales charge) for the Class A (Investor) Shares and 17.63% for the Class Y Shares for the year ended October 31, 2003. That compared to a 15.08% return for the S&P 500 and a 13.04% return for the Lipper Large Cap-Core Funds Average1. The U.S. equity markets produced strong gains over the one-year period ending October 31, 2003, with the S&P 500 and NASDAQ Composite Index(1) returning 20.8% and 46.1%, respectively. Each of the ten economic sectors in the S&P 500 advanced, led by strength in the information technology, materials, and consumer discretionary sectors. Investors endured a volatile trading environment early in the period due to a number of headwinds, including a looming military conflict with Iraq, escalating tensions with North Korea, an increased threat of terrorist activity, and rising oil prices. The S&P 500 experienced its worst December performance in almost 70 years due to some of these issues, overshadowing a greater than expected reduction in short term interest rates by the Fed in late November. The equity markets managed a short-lived rally in early January on news of President Bush's proposed economic stimulus package, but the S&P 500 eventually reached its lowest level since October 2002 by March 11, as concerns over Iraq continued to dominate the headlines. However, the S&P 500 moved meaningfully higher from these levels once it appeared a military conflict with Iraq was imminent, effectively removing the lingering uncertainty regarding the situation. The equity markets posted strong double-digit gains during the second quarter of 2003, with the S&P 500 generating its strongest quarterly gain in over four years. With the passage of an economic stimulus package in May, military success in Iraq, a sharp rebound in consumer confidence, and a further reduction in the Federal Funds rate in June, investors turned their attention to an anticipated recovery in the economy and corporate profits in the second half of 2003. The equity markets ended the period strongly, as third quarter earnings results, reported in October, continued to beat consensus expectations, as did third quarter GDP, which posted its biggest gain in twenty years. Several high profile mergers and acquisitions announced late in the period also boosted the markets, as did the Fed's repeated intentions to keep interest rates unchanged for the near future. After trading sideways from June through early September, the markets have bounced again and seem to be discounting a continued flow of good news on both the economic and earnings fronts. This rally continues to be led by higher-beta(1), and lower-quality stocks and we think many of these stocks may be ahead of their fundamentals. The markets will rely on revenue and earnings growth to continue moving higher. So far this year, we have gotten better than expected earnings growth with little top-line improvement, so most of the gains come from cost cutting which cannot continue forever. Although the backdrop for equities remains constructive, much of this appears to be discounted in current stock prices. We have invested the portfolio with a slight pro-cyclical tilt while being very focused on valuations. The portfolio is positioned for a 12 to 18 month forecast, which includes a rebound in global economies. We believe a modest pro-cyclical tilt, with an emphasis on higher quality companies showing strong cash flow growth is prudent. Consistent growth and earnings predictability remains a focus. We do not have many style bets in the portfolio at present. We are modestly overweight in the industrial cyclical, and defensive growth styles, and modestly underweight cyclical growth. Within the defensive growth style, we favor healthcare services, pharmaceuticals, beverages, and tobacco. In the cyclical growth area, we remain cautious on semiconductors after their huge move, favoring software and services.* - -------------------------------------------------------------------------------- (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 14 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR GROWTH AND INCOME FUND -- AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Growth and Income Fund Class Standard & Poor's 500 A (Investor)2 Index 4/12/2001 9498 10000 10112 10776 10130 10849 9730 10585 9646 10481 8985 9825 8277 9032 8296 9204 8836 9910 12/31/2001 8811 9997 8597 9851 8401 9661 8653 10024 8131 9417 7991 9348 7459 8682 6863 8006 6881 8058 6117 7183 6723 7815 6993 8274 12/31/2002 6575 7788 6444 7585 6397 7471 6462 7543 6996 8164 7324 8594 7423 8704 7564 8857 7611 9030 7517 8934 10/31/2003 7883 9439
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Growth and Income Fund Class Standard & Poor's 500 Y Index 4/2/2001 10000 10000 10991 10776 11011 10849 10588 10585 10486 10481 9778 9825 9019 9032 9029 9204 9626 9910 12/31/2001 9598 9997 9375 9851 9152 9661 9436 10024 8868 9417 8716 9348 8138 8682 7487 8006 7508 8058 6675 7183 7335 7815 7640 8274 12/31/2002 7180 7788 7037 7585 6985 7471 7067 7543 7650 8164 8008 8594 8114 8704 8268 8857 8330 9030 8227 8934 10/31/2003 8628 9439
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Fund's benchmark, and represents the reinvestment of dividends and capital gains in the Fund. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 SINCE AS OF OCTOBER 31, 2003 DATE YEAR INCEPTION - ------------------------------------------------------------------------------------------- HSBC Investor Growth and Income Fund Class A (Investor)(2) 4/12/01 11.39% - 8.89% HSBC Investor Growth and Income Fund Class B(3) 4/5/01 12.40% - 7.39% HSBC Investor Growth and Income Fund Class Y 4/2/01 17.63% - 5.56%
(2) Reflects the maximum sales charge of 5.00%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. The Fund is measured against the Standard & Poor's 500 Index, an unmanaged index that is generally representative of the U.S. stock market as a whole. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 15 PORTFOLIO REVIEWS HSBC INVESTOR MID-CAP FUND (CLASS A SHARES, B SHARES, C SHARES AND TRUST SHARES) by Thomas D'Auria, CFA Chief Investment Officer - U.S. Equities HSBC Asset Management (Americas) Inc. The HSBC Investor Mid-Cap Fund (the "Fund") seeks to achieve a higher rate of return than that generated by the Russell MidCap Growth Index by investing at least 80% of its total assets in stocks of mid-sized companies with market capitalization, at the time of acquisition, falling within the range of the Russell MidCap Growth ($190 million to $13.3 billion). The Fund's Class A Shares posted a return of 26.19% (without sales charge) and 26.54% for the Trust Shares for the year ended October 31, 2003. That compares to 32.64%, 37.68% and 26.48% for the Fund's benchmarks, the Russell MidCap Growth Index, the S&P Mid Cap 400 Index and the Fund's peer group, the Lipper Mid-Cap Growth Funds Average(1). The U.S. equity markets produced strong gains over the one-year period ending October 31, 2003, with the S&P 500 Index1 and NASDAQ Composite Index(1) returning 20.8% and 46.1%, respectively. The Russell MidCap Growth Index returned 39.3% during the period. Each of the ten economic sectors in the S&P 500 advanced, led by strength in the information technology, materials, and consumer discretionary sectors. Investors endured a volatile trading environment early in the period due to a number of headwinds, including a looming military conflict with Iraq, escalating tensions with North Korea, an increased threat of terrorist activity, and rising oil prices. The S&P 500 experienced its worst December performance in almost 70 years due to some of these issues, overshadowing a greater than expected reduction in short term interest rates by the Fed in late November. The equity markets managed a short-lived rally in early January on news of President Bush's proposed economic stimulus package, but the S&P 500 eventually reached its lowest level since October 2002 by March 11, as concerns over Iraq continued to dominate the headlines. However, the S&P 500 moved meaningfully higher from these levels once it appeared a military conflict with Iraq was imminent, effectively removing the lingering uncertainty regarding the situation. Military success in Iraq, along with the passage of an economic stimulus package in Congress in May, a sharp rebound in consumer confidence, and a further reduction in the Federal Funds rate in June, helped push the equity markets higher during the second quarter of 2003. Investors turned their attention to an anticipated recovery in economic activity and corporate profits in the second half of 2003. The equity markets ended the period strongly, as third quarter earnings results, reported in October, continued to beat consensus expectations, as did third quarter GDP, which posted its biggest gain in twenty years. Several high profile mergers and acquisitions announced late in the period also boosted the markets, as did the Fed's repeated intentions to keep interest rates unchanged for the near future. With our recent increase in earnings expectations for the S&P 500, we see modest upside for the equity markets heading into 2004. After trading sideways from June through early September, the markets have bounced again and seem to be discounting a continued flow of good news on both the economic and earnings fronts. This rally continues to be led by higher-beta1, and lower-quality stocks and we think many of these stocks may be ahead of their fundamentals. The markets will rely on revenue and earnings growth to continue moving higher. So far this year, we have gotten better than expected earnings growth with little top-line improvement, so most of the gains come from cost cutting which cannot continue forever. Although the backdrop for equities remains constructive, much of this appears to be discounted in current stock prices. We have invested the portfolio with a slight pro-cyclical tilt while being very focused on valuations. The portfolio is positioned for a 12 to 18 month forecast, which includes a rebound in global economies. We believe a modest pro-cyclical tilt, with an emphasis on higher quality companies showing strong cash flow growth is prudent. Consistent growth and earnings predictability remains a focus.* - -------------------------------------------------------------------------------- (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 16 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR MID-CAP FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Mid-Cap HSBC Investor Mid-Cap Standard & Poor's Mid Russell MidCap Growth Fund Class A2 Fund Trust Cap 400 Index Index 7/1/1993 9510 10000 10000 10000 9412 9895 9767 9779 9641 10105 10159 10233 9837 10314 10421 10471 9575 10070 10331 10322 9216 9686 9844 9845 12/31/1993 9281 9756 9820 9918 9248 9721 9835 9824 9085 9547 9411 9486 9510 9965 9672 9807 9935 10453 10249 10321 9542 10035 10080 10128 9739 10244 10254 10239 9248 9721 9802 9777 9281 9756 9940 9867 9477 9965 10059 9970 9902 10418 10594 10492 10065 10592 11014 10674 12/31/1994 10392 10941 11107 10889 10654 11220 11381 11151 10915 11498 11899 11605 11340 11951 12647 12211 11569 12195 12786 12437 11830 12474 13070 12738 11797 12439 12740 12410 12353 12997 13309 12952 12320 12997 13317 12920 12647 13310 13552 13108 12908 13589 14064 13553 13072 13798 14175 13715 12/31/1995 13333 14077 14860 14134 13627 14390 15164 14325 13464 14216 14705 14110 12582 13310 13564 13156 13268 14042 14297 13915 13922 14704 15205 14521 14052 14843 15027 14563 14739 15575 15912 15384 14346 15192 15644 15401 15327 16202 16336 15979 15294 16167 15977 15848 14869 15749 15074 15172 12/31/1996 15131 16028 15443 15566 16601 17561 16827 16927 17190 18188 17292 17402 18627 19686 18948 19125 17941 19024 18763 19102 19085 20209 19712 20200 18268 19373 18725 19322 18497 19582 18922 19608 18758 19895 19170 20369 18333 19408 18825 19981 19739 20906 20595 21636 20556 21812 21458 22612 12/31/1997 20948 22230 21750 23025 20523 21777 20855 21989 21013 22300 21445 22128 19967 21185 20527 21270 16078 17073 16609 17311 17157 18223 17865 18927 18170 19268 19181 20618 19216 20418 20474 21647 20490 21777 22595 24262 21111 22404 23272 23318 20131 21394 22134 22097 21373 22718 23367 22714 12/31/1998 22386 23798 24432 24506 22582 24042 24117 24612 23922 25470 25801 25930 23301 24774 24979 25379 22451 23902 24720 24509 22288 23693 24510 23753 23464 24983 26405 24963 25980 27666 29139 26273 28301 30139 34185 27835 27843 29652 34178 27051 32353 34460 41363 28944 33399 35575 41405 31366 12/31/1999 31667 33728 37386 30271 30621 32613 34661 29893 32680 34843 38339 30332 31569 33659 35911 30811 35882 38293 41327 34252 34869 37213 39307 34017 32908 35122 36617 32863 29118 31045 28659 30383 31382 33494 30169 32707 31979 34131 31892 33436 30320 32362 26376 31527 28595 30523 22601 29183 12/31/2000 31846 33954 26368 32403 31979 34131 26244 33158 31614 33742 26258 33024 30950 33034 24487 32531 29524 31513 22712 31467 25842 27623 18959 27553 26207 27976 20952 28772 27865 29780 23207 30912 28429 30382 24089 32509 27965 29886 23307 32340 26737 28578 21986 32380 28263 30240 23664 34695 12/31/2001 27235 29144 22411 34533 26870 28719 21742 33950 24283 25996 19343 31465 22093 23626 17463 28417 21795 23343 17403 28560 19904 21327 16020 26259 20899 22388 17261 27397 22027 23591 18612 28982 20700 22176 17487 27791 20501 21964 17316 26979 19804 21221 17165 26337 20169 21646 17485 26558 12/31/2002 21463 23025 18675 28486 22956 24652 20472 30847 23221 24935 20764 31240 23851 25607 21506 32348 25145 26986 22691 33816 24283 26067 22251 33298 10/31/2003 26372 28330 24044 35816
The chart above represents a comparison of a hypothetical $10,000 investment in the indicated share class versus a similar investment in the Fund's benchmark, and represents the reinvestment of dividends and capital gains in the Fund. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 10 SINCE AS OF OCTOBER 31, 2003 DATE'D' YEAR YEAR YEAR INCEPTION - --------------------------------------------------------------------------------------------------------------- HSBC Investor Mid-Cap Fund Class A(2) 7/1/93 19.91% 6.65% 10.18% 10.34% HSBC Investor Mid-Cap Fund Class B(3) 7/1/93 21.20% 6.96% 9.90% 10.07% HSBC Investor Mid-Cap Fund Class C(4) 7/1/93 24.81% 7.10% 9.97% 10.13% HSBC Investor Mid-Cap Fund Trust 7/1/93 26.54% 8.01% 10.97% 11.18%
(2) Reflects the maximum sales charge of 5.00%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- 'D' Prior to July 1, 2000, HSBC Asset Management (Americas), Inc. managed another pooled investment vehicle called a collective investment trust (CTF) with the same investment objective as the Fund since 1993. The assets from that CTF were converted into the HSBC Investor Mid-Cap Fund on July 1. The CTF was not registered with the Securities & Exchange Commission (SEC) and thus was not subject to certain investment restrictions that are imposed on the Fund. If the CTF had been registered with the SEC, its performance might have been adversely affected. Performance assumes reinvestment of dividends and distributions. Total returns of the CTF have been adjusted for the Fund's expenses. The Fund has changed its standardized benchmark from the Standard & Poor's 400 Mid Cap Index to the Russell MidCap Growth Index to better represent the objectives of the Fund. The Standard & Poor's 400 Mid Cap Index consists of 400 domestic stocks chosen for market size, liquidity and industry group representation. The Russell Midcap Growth Index measures the performance of those Russell securities in the Russell universe with higher price-to-book ratios and higher forecasted growth values. The indices are unmanaged and do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 17 PORTFOLIO REVIEWS HSBC INVESTOR INTERNATIONAL EQUITY FUND HSBC INVESTOR OVERSEAS EQUITY FUND'D' (CLASS A (INVESTOR) SHARES, B SHARES AND C SHARES) by David Fisher Portfolio Manager Capital Guardian Trust Company The HSBC Investor International Equity Fund and the HSBC Investor Overseas Equity Fund (the "Funds") seek to provide their shareholders with long-term growth of capital and future income by investing primarily in securities of non-U.S. issuers and securities of issuers whose principal markets are outside of the United States. The Funds employ a two-tier fund structure, known as a "master-feeder," in which the Funds invest all of their investable assets in the HSBC Investor International Equity Portfolio (the "Portfolio"). The Portfolio employs Capital Guardian Trust Company as sub-investment adviser. The Portfolio invests primarily in equity securities of companies organized and domiciled in developed nations outside the U.S., or for which the principal trading market is outside the U.S., including Europe, Canada, Australia and the Far East. For the year ended October 31, 2003, the shares of the HSBC Investor International Equity Fund produced a 21.03% return, and the Class A (Investor) Shares of the HSBC Investor Overseas Equity Fund returned 20.09% (without sales charge). That compared to a total return of 24.75% and 21.64% for the Funds' benchmark, the Morgan Stanley Capital International, Europe, Australasia and Far East Index and the Fund's peer group, the Lipper International Funds Average(1), respectively. The Fund's absolute returns benefited from an international-equity rally, which was driven by investor expectations for an improving global economy. The Fund also benefited from a weakening U.S. dollar, which fell against the Euro and the British pound. Japanese stocks performed well as government intervention in the currency markets stabilized the yen and banking reform appeared to gain momentum.* The Fund's performance relative to its benchmark benefited from our overweight position in the information technology sector, particularly among shares of semiconductor and semiconductor-equipment companies. Semiconductor-equipment stocks performed well as investors believed that semiconductor manufacturers would increase spending. The Fund's exposure to Japanese financial stocks also boosted relative performance, as such stocks were buoyed by the country's improving economic and financial picture.* European financial stocks-particularly shares of insurance firms-were a drag on the Fund's relative performance. Although the Fund's insurance holdings rose from their 2002 lows, these companies continued to experience solvency problems during the period.* - -------------------------------------------------------------------------------- 'D' International investing involves increased risk and volatility. (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 18 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR INTERNATIONAL EQUITY FUND HSBC INVESTOR OVERSEAS EQUITY FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PEFORMANCE GRAPH]
HSBC Investor International Equity Fund MSCI EAFE Index 1/9/1995 10000 10000 9740 9618 9800 9593 9910 10194 10300 10580 10440 10457 10330 10276 10902 10919 10771 10505 11002 10713 10831 10428 11012 10720 12/31/1995 11254 11155 11467 11204 11528 11244 11639 11486 12045 11823 12035 11608 12090 11676 11744 11338 11917 11365 12242 11670 12263 11554 12843 12016 12/31/1996 12950 11865 13085 11452 13324 11642 13397 11687 13667 11752 14644 12520 15497 13213 16027 13430 14779 12429 15788 13128 14301 12122 14197 12001 12/31/1997 14208 12109 14823 12665 15874 13481 16466 13899 16690 14012 16433 13948 16187 14056 16187 14202 13839 12446 13627 12067 14801 13329 15695 14015 12/31/1998 15975 14571 16806 14531 16443 14188 17356 14784 18292 15386 17777 14597 19217 15170 19930 15624 20305 15685 20878 15846 21744 16443 23652 17018 12/31/1999 27319 18549 26145 17373 27693 17844 28317 18539 26944 17567 25521 17142 26857 17816 25322 17072 25846 17224 23637 16389 22626 16005 21565 15408 12/31/2000 21952 15960 22529 15952 20461 14757 19413 13780 21253 14747 20340 14238 19413 13661 18822 13414 18204 13077 16148 11755 16874 12056 17868 12501 12/31/2001 18116 12575 17230 11908 17325 11992 18252 12705 18211 12738 18266 12911 17352 12402 15485 11179 15185 11156 13577 9961 14626 10497 15512 10975 12/31/2002 14788 10606 14192 10164 13859 9932 13359 9744 14594 10711 15385 11369 15690 11651 16162 11935 16398 12225 16578 12604 10/31/2003 17702 13391
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Overseas Equity Fund Class A (Investor)2 MSCI EAFE Index 8/26/1996 9497 10000 9383 10100 9630 10268 9639 10166 10066 10573 12/31/1996 10132 10439 10227 10076 10407 10244 10388 10283 10578 10340 11301 11016 11928 11626 12318 11816 11358 10936 12108 11551 10996 10666 10920 10560 12/31/1997 10932 10654 11404 11144 12194 11861 12628 12229 12791 12329 12579 12272 12387 12367 12387 12496 10595 10950 10393 10617 11212 11727 11876 12331 12/31/1998 12087 12820 12695 12785 12415 12484 13090 13008 13794 13538 13389 12844 14460 13347 14981 13747 15251 13800 15656 13942 16303 14468 17711 14973 12/31/1999 20392 16320 19474 15286 20607 15700 21056 16312 20021 15457 19006 15082 19992 15675 18840 15021 19221 15155 17561 14420 16800 14082 15999 13557 12/31/2000 16276 14042 16692 14036 15144 12984 14365 12125 15721 12975 15027 12527 14333 12020 13906 11802 13437 11505 11911 10343 12444 10607 13170 10999 12/31/2001 13339 11064 12687 10477 12754 10551 13427 11179 13383 11208 13427 11360 12776 10912 11484 9836 11274 9816 10114 8764 10898 9236 11561 9656 12/31/2002 11013 9332 10544 8943 10243 8739 9864 8574 10734 9424 11225 10003 11426 10251 11805 10501 12006 10756 12263 11090 10/31/2003 13089 11782
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION - --------------------------------------------------------------------------------------------------------- HSBC Investor International Equity Fund 1/9/95 21.03% 3.64% 6.70% HSBC Investor Overseas Equity Fund Class A (Investor)(2) 8/26/96 14.08% 2.10% 3.82% HSBC Investor Overseas Equity Fund Class B(3) 1/6/98 15.26% 2.34% 2.20% HSBC Investor Overseas Equity Fund Class C(4) 11/4/98 18.28% N/A 1.99%
(2) Reflects the maximum sales charge of 5.00%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Funds are measured against the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, which is an unmanaged index that measures performance of a diverse range of developed countries in the indicated regions. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 19 PORTFOLIO REVIEWS HSBC INVESTOR SMALL CAP EQUITY FUND HSBC INVESTOR OPPORTUNITY FUND'D' (CLASS A (INVESTOR) SHARES, B SHARES AND C SHARES) by William A. Muggia President - Chief Investment Officer Westfield Capital Management The HSBC Investor Small Cap Equity Fund and the HSBC Investor Opportunity Fund ("the Funds") seek to provide their shareholders with long-term growth of capital by investing in equity securities of emerging small and medium-sized companies expected to deliver earnings growth well above the growth rate of the economy and the rate of inflation. The Funds employ a two-tier structure, commonly referred to as "master-feeder." The Funds invest all of their investable assets in the HSBC Investor Small Cap Equity Portfolio (the "Portfolio"). The Portfolio employs Westfield Capital Management, as sub-investment adviser. The Portfolio invests primarily in common stocks of small and medium-sized companies that may have the potential to become major enterprises. During the year ended October 31, 2003, the shares of the HSBC Investor Small Cap Equity Fund produced a 33.33% return and the Class A (Investor) Shares of the HSBC Investor Opportunity Fund produced a 32.31% return (without sales charge). The Funds' benchmark, the Russell 2000 Index and the Fund's peer group, the Lipper Mid-Cap Growth Funds Average(1), returned 36.29% and 26.48%, respectively. Small-company stocks staged a powerful rally during the period, helping the Fund produce strong absolute returns. Investors anticipating an economic recovery bought shares of firms in cyclical industries. That trend especially boosted technology stocks, which were the best-performing sector among small caps. Shares of firms with weak business fundamentals led the rally, as those firms recovered from very poor performance during the previous three years. The HSBC Investor Small Cap Equity Fund employs a "growth at a reasonable price" investment strategy. That approach led to an underweight position within technology stocks, because many technology shares had become very expensive relative to future earnings growth. We did increase the Fund's technology stake from dramatically underweight to modestly underweight during the period, because we believed that specific technology firms had rationalized their cost structures such that any top-line growth would translate into solid earnings growth. Shares of the smallest firms, particularly firms without earnings, led the small-cap surge. Our investment strategy leads us to avoid more-speculative stocks in favor of what we view as higher-quality companies with proven business models. We believe that investors will again focus on proven management teams and that the portfolio could benefit from this shift. Our decision to overweight the energy sector detracted from performance on a relative basis. Energy stocks lagged as investors rotated money into technology stocks. We maintained the Fund's 8% stake in energy shares-compared to the benchmark's 4% position-because the industry's fundamentals are very sound. The majority of the Fund's energy holdings operate in the natural gas industry, and they should benefit as supply for natural gas continues to outstrip demand. We believe this trend should become more dramatic as the economic rebound unfolds.* We maintained the Fund's 28% health-care position (compared to 21% for the benchmark), because we believe attractive demographic trends and business fundamentals will produce good long-term returns in that industry. Additionally, we have found a number of companies within the healthcare services and facilities spaces that have benefited from consolidation and a stabilization of reimbursement trends.* We began the period with an overweight position in financial-services stocks, but we trimmed those holdings as some stocks exceeded our price targets. Those reductions led us to under-weight financial-services shares during most of the period, which helped relative returns.* - -------------------------------------------------------------------------------- 'D' Small-capitalization funds typically carry additional risks, since smaller companies generally have a higher risk of failure. Historically, smaller companies' stocks have experienced a greater degree of market volatility than average. (1) For additional information, please refer to the Glossary of Terms. * Portfolio composition is subject to change. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. 20 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR SMALL CAP EQUITY FUND HSBC INVESTOR OPPORTUNITY FUND - AS OF OCTOBER 31, 2003 VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Small Cap Equity Fund Russell 2000 Index 9/3/1996 10000 10000 10900 10391 10630 10231 11060 10652 12/31/1996 10864 10931 11216 11150 10864 10879 10310 10366 10502 10395 11860 11551 12513 12047 13238 12607 13409 12896 14274 13839 13519 13231 13509 13146 12/31/1997 13336 13376 13336 13165 14655 14138 15354 14721 15738 14803 15005 14006 15354 14035 14340 12899 11318 10394 12277 11208 12942 11665 13720 12276 12/31/1998 15127 13036 14999 13209 13663 12139 13830 12328 14447 13433 15166 13629 16168 14246 15680 13855 15294 13342 15281 13345 16129 13399 18325 14199 12/31/1999 22418 15806 21502 15553 26180 18121 25011 16926 23517 15908 22573 14980 25039 16286 23757 15762 26504 16965 25673 16466 25095 15731 21502 14116 12/31/2000 23547 15329 25374 16127 22864 15069 20286 14332 23103 15453 23223 15833 24059 16379 22847 15493 21600 14992 18117 12974 19329 13733 21635 14797 12/31/2001 23240 15710 22591 15547 21139 15120 22762 16336 21139 16485 20252 15753 18578 14971 16017 12710 16188 12678 15402 11767 15829 12145 16410 13229 12/31/2002 15539 12492 15436 12146 14975 11779 15146 11931 16273 13062 18083 14464 18356 14726 19364 15647 20234 16364 19756 16062 10/31/2003 21105 17411
VALUE OF A $10,000 INVESTMENT [PERFORMANCE GRAPH]
HSBC Investor Opportunity Fund Class A (Investor)2 Russell 2000 Index 9/23/1996 9497 10000 9687 10100 9307 9846 9677 10252 12/31/1996 9501 10520 9805 10730 9501 10470 9007 9976 9169 10004 10337 11117 10907 11593 11525 12133 11667 12411 12399 13319 11753 12734 11724 12651 12/31/1997 11578 12873 11578 12670 12715 13607 13317 14168 13643 14246 13011 13479 13317 13507 12428 12414 9800 10003 10630 10786 11203 11226 11865 11814 12/31/1998 13080 12545 12965 12712 11808 11682 11934 11865 12471 12928 13080 13117 13932 13710 13511 13334 13164 12840 13143 12843 13869 12895 15751 13665 12/31/1999 19238 15212 18415 14968 22416 17439 21421 16289 20141 15309 19352 14417 21467 15674 20347 15169 22690 16327 21970 15847 21433 15140 18346 13586 12/31/2000 20062 14752 21613 15520 19466 14502 17250 13793 19636 14872 19721 15237 20420 15763 19398 14910 18324 14428 15358 12486 16363 13217 18307 14240 12/31/2001 19670 15119 19091 14962 17863 14552 19244 15721 17863 15865 17096 15161 15682 14408 13534 12232 13670 12201 13006 11325 13346 11688 13841 12731 12/31/2002 13108 12022 13006 11689 12614 11336 12733 11482 13670 12571 15170 13920 15392 14172 16227 15059 16943 15749 16551 15458 10/31/2003 17659 16756
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds. AVERAGE ANNUAL TOTAL RETURN
INCEPTION 1 5 SINCE AS OF OCTOBER 31, 2003 DATE YEAR YEAR INCEPTION - --------------------------------------------------------------------------------------------------------- HSBC Investor Small Cap Equity Fund 9/3/96 33.33% 10.28% 11.00% HSBC Investor Opportunity Fund Class A (Investor)(2) 9/23/96 25.73% 8.40% 8.33% HSBC Investor Opportunity Fund Class B(3) 1/6/98 27.16% 8.72% 6.90% HSBC Investor Opportunity Fund Class C(4) 11/4/98 30.31% N/A 8.40%
(2) Reflects the maximum sales charge of 5.00%. (3) Reflects the contingent deferred sales charge maximum of 4.00%. (4) Reflects the contingent deferred sales charge maximum of 1.00%. - -------------------------------------------------------------------------------- The Funds are measured against the Russell 2000 Index, an unmanaged index generally representative of the performance of small-capitalization stocks. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, the Investment Manager waived and/or voluntarily reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Investment return and net asset value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. Performance is as of date indicated and may differ from current performance due to market volatility. For more information about the HSBC Investor Funds, including fees, expenses, historical fund performance and ongoing charges, call 1-800-782-8183. HSBC INVESTOR FAMILY OF FUNDS 21 HSBC INVESTOR NEW YORK TAX-FREE BOND FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 .................................................................
MUNICIPAL BONDS - 90.2% PRINCIPAL AMOUNT($) VALUE($) --------- ---------- GUAM - 0.1% Guam Economic Development Authority Revenue, 5.50%, 5/15/41, Callable 5/15/11 @ 100......................... 100,000 86,378 ---------- NEW YORK - 79.9% Brookhaven, New York GO (FGIC Insured), 5.50%, 10/1/12........................ 500,000 552,580 Corning City, New York School District GO (FSA Insured), 4.00%, 6/15/08...... 930,000 995,174 Corning City, New York School District GO (FSA Insured), 5.00%, 6/15/09...... 790,000 881,719 Erie County, New York GO (FGIC Insured), 5.375%, 6/15/07............. 250,000 266,853 Guilderland, New York Central School District GO (FSA Insured), 3.50%, 6/15/05............................... 250,000 258,990 Honeoye, New York Central School District GO (FGIC Insured), 3.00%, 6/15/04............................... 310,000 313,757 Long Island, New York Power Authority Revenue (MBIA Insured), 4.50%, 4/1/11, Mandatory Tender 4/1/05 @ 100......... 1,075,000 1,122,504 Metropolitan Transportation Authority of New York Revenue (FGIC Insured), 5.25%, 7/1/17, Prerefunded 7/1/08 @ 100.5................................. 1,145,000 1,299,311 Metropolitan Transportation Authority of New York Revenue (FSA Insured), 5.00%, 11/15/32, Callable 11/15/12 @ 100................................... 1,625,000 1,637,902 Metropolitan Transportation Authority of New York Revenue (MBIA Insured), 5.50%, 1/1/19......................... 480,000 525,274 Metropolitan Transportation Authority of New York Revenue, Escrowed to Maturity, 5.75%, 7/1/13............... 285,000 328,491 Monroe County, New York, Airport Authority Revenue, AMT (MBIA Insured), 5.625%, 1/1/10........................ 1,240,000 1,376,970 Monroe County, New York, Airport Authority Revenue, AMT (MBIA Insured), 5.75%, 1/1/14......................... 750,000 837,443 Nassau County Interim Finance Authority (MBIA Insured), 5.00%, 11/15/11....... 500,000 554,590 New York City GO, 5.00%, 8/1/05........ 1,000,000 1,056,690 New York City GO, 5.00%, 8/1/08........ 990,000 1,078,516 New York City GO, 6.00%, 8/1/14, Callable 8/1/07 @ 101................. 1,000,000 1,113,410 New York City Housing Development Corp. Revenue, AMT, 5.60%, 11/1/19.......... 100,000 104,034 New York City Industrial Development Agency (FSA Insured), 5.00%, 11/15/19.............................. 1,000,000 1,047,900 New York City Municipal Assistance Corp. Revenue, 6.00%, 7/1/06.......... 1,000,000 1,115,780 New York City Municipal Water Finance Authority Revenue, 5.00%, 6/15/34, Callable 6/15/13 @ 100................ 1,800,000 1,800,306 New York City Transitional Finance Authority Revenue, 5.25%, 5/1/17, Callable 5/1/11 @ 100................. 400,000 427,844 New York City Transitional Finance Authority Revenue, 5.25%, 2/1/29, Callable 2/1/11 @ 100................. 1,500,000 1,640,595 New York City Transitional Finance Authority Revenue, 5.00%, 5/1/30, Callable 11/1/12 @ 101................ 1,500,000 1,502,160 New York State Dormitory Authority Revenue, 5.00%, 4/1/07................ 500,000 545,655
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MUNICIPAL BONDS, CONTINUED PRINCIPAL AMOUNT($) VALUE($) --------- ---------- New York State Dormitory Authority Revenue, 6.50%, 8/15/11............... 225,000 267,597 New York State Dormitory Authority Revenue, 5.25%, 7/1/13, Callable 7/1/08 @ 101.......................... 500,000 548,795 New York State Dormitory Authority Revenue, 5.50%, 8/15/17............... 990,000 1,043,529 New York State Dormitory Authority Revenue, 5.50%, 8/15/17, Prerefunded 2/15/07 @ 102......................... 10,000 11,353 New York State Dormitory Authority Revenue, 6.00%, 7/1/19, Callable 7/1/09 @ 101.......................... 350,000 402,031 New York State Dormitory Authority Revenue (FSA Insured), 5.25%, 8/15/19, Callable 8/15/12 @ 100................ 1,000,000 1,071,120 New York State Dormitory Authority Revenue (AMBAC Insured), 4.00%, 7/1/04................................ 975,000 993,788 New York State Dormitory Authority Revenue (AMBAC Insured), 5.50%, 8/1/10................................ 750,000 851,648 New York State Dormitory Authority Revenue (AMBAC Insured), 5.50%, 7/1/18................................ 500,000 567,665 New York State Dormitory Authority Revenue (CIFG Group Insured), 3.00%, 7/1/05................................ 1,025,000 1,052,429 New York State Dormitory Authority Revenue (CIFG Group Insured), 4.00%, 7/1/06................................ 1,120,000 1,185,654 New York State Dormitory Authority Revenue (FSA Insured), 5.25%, 7/1/18, Callable 7/1/12 @ 101................. 1,460,000 1,582,714 New York State Dormitory Authority Revenue (MBIA Insured), 5.50%, 7/1/23................................ 1,300,000 1,432,443 New York State Dormitory Authority Revenue, Series A (FSA Insured), 5.00%, 7/1/26, Callable 7/1/11 @ 102................................... 500,000 505,700 New York State Environmental Facscorp, 5.70%, 1/15/14, Callable 7/15/09 @ 101................................... 15,000 17,567 New York State Environmental Facscorp, 5.70%, 1/15/14, Callable 7/15/09 @ 101................................... 415,000 467,805 New York State Environmental Facscorp, 5.70%, 1/15/14, Prerefunded 7/15/09 @ 101................................... 570,000 667,532 New York State Local Government Assistance Corp. Revenue, 6.00%, 4/1/16, Prerefunded 4/1/05 @ 102...... 1,000,000 1,087,320 New York State Mortgage Agency Revenue, AMT, 5.60%, 10/1/14, Callable 9/1/07 @ 101.5................................. 1,000,000 1,050,190 New York State Thruway Authority Revenue, 5.50%, 4/1/11................ 1,000,000 1,130,180 New York State Thruway Authority Revenue, 5.50%, 3/15/20............... 500,000 542,150 New York State Thruway Authority Revenue, Series A, 5.00%, 3/15/19..... 1,400,000 1,466,066 New York State Thruway Authority Revenue (MBIA Insured), 5.00%, 3/15/21, Callable 3/15/13 @ 100....... 500,000 516,215 New York State Thruway Authority Revenue, Highway & Bridge (FGIC Insured), 5.25%, 4/1/07............... 300,000 332,460 New York State Thruway Authority Revenue, Highway & Bridge (FGIC Insured), 5.50%, 4/1/17, Callable 4/1/11 @ 101.......................... 1,000,000 1,100,160
22 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR NEW YORK TAX-FREE BOND FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) - ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED PRINCIPAL AMOUNT($) VALUE($) --------- ---------- New York State Urban Development Corp. Revenue, 5.75%, 4/1/12, Callable 4/1/07 @ 102.......................... 1,000,000 1,146,950 New York State Urban Development Corp. Revenue, 5.75%, 4/1/12................ 500,000 569,385 New York State Urban Development Corp. Revenue, 5.125%, 1/1/25, Prerefunded 1/1/11 @ 100.......................... 175,000 195,939 New York State Urban Development Corp. Revenue (MBIC Insured), 5.00%, 3/15/33, Callable 3/15/13 @ 100....... 500,000 504,065 New York State Urban Development Corp. Revenue, Series A (MBIA Insured), 6.50%, 1/1/09......................... 500,000 587,865 Niagara Falls New York Bridge Common Toll Revenue, 2.00%, 10/1/05.......... 400,000 405,280 Onondaga County, New York Water Authority Revenue (FSA Insured), 5.00%, 9/15/14........................ 300,000 323,709 Onondaga County, New York Water Authority Revenue (FSA Insured), 5.00%, 9/15/15........................ 665,000 714,210 Peru, New York Central School District (FGIC Insured), 4.00%, 6/15/04........ 225,000 229,118 Port Authority of New York & New Jersey Revenue, 5.00%, 9/1/27................ 795,000 799,182 Port Authority of New York & New Jersey Revenue, 5.375%, 3/1/28............... 1,100,000 1,175,019 Port Authority of New York & New Jersey Special Obligation Revenue, AMT, 5.75%, 12/1/22, Callable 12/1/07 @ 102................................... 500,000 551,620 Triborough, New York Bridge & Tunnel Authority Revenue, 5.00%, 11/15/32, Callable 11/15/12 @ 100............... 800,000 803,448 Triborough, New York Bridge & Tunnel Authority Revenue (MBIA Insured), 5.00%, 11/15/32....................... 1,000,000 1,008,620 ---------- 51,292,969 ---------- PUERTO RICO - 10.2% Puerto Rico Commonwealth (FGIC Insured), 5.25%, 7/1/17, Callable 7/1/13 @ 100.......................... 500,000 548,830 Puerto Rico Commonwealth, Public Improvement, Series A (MBIA Insured), 5.125%, 7/1/31, Callable 7/1/11 @ 100................................... 1,650,000 1,694,814 Puerto Rico Electric Power Authority Revenue (MBIA Insured), 5.25%, 7/1/22................................ 1,000,000 1,092,650 Puerto Rico Electric Power Authority Revenue, Series HH (FSA Insured), 5.25%, 7/1/29, Callable 7/1/10 @ 101................................... 1,430,000 1,486,571 Puerto Rico Municipal Financial Agency (FSA Insured), 5.00%, 8/1/27.......... 250,000 255,025 Puerto Rico Public Buildings Authority Revenue, Government Facilities, Series D, 5.375%, 7/1/33, Callable 7/1/12 @ 100................................... 900,000 925,983 Puerto Rico Publishing Finance Corp. Revenue (AMBAC Insured), 5.375%, 6/1/18................................ 500,000 564,150 ---------- 6,568,023 ---------- TOTAL MUNICIPAL BONDS.................. 57,947,370 ----------
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VARIABLE RATE DEMAND NOTES* - 5.6% SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- NEW YORK - 5.6% Long Island, New York Power Authority Revenue (LOC Bayerische Landesbank), 1.15%, 5/1/33......................... 1,500,000 1,500,000 New York City GO (LOC JP Morgan), 1.13%, 8/1/20......................... 300,000 300,000 New York State Job Development Authority, AMT (LOC Bayerische Landesbank), 1.13%, 3/1/05............ 1,300,000 1,300,000 New York City Water & Sewer Authority Revenue (SPA LOC Bayerische Landesbank), 1.13%, 6/15/35........... 500,000 500,000 ---------- TOTAL VARIABLE RATE DEMAND NOTES*...... 3,600,000 ---------- - --------------------------------------------------------------- INVESTMENT COMPANIES - 2.8% Provident New York Tax-Free Money Market Fund........................... 1,772,351 1,772,351 ---------- TOTAL INVESTMENT COMPANIES............. 1,772,351 ---------- TOTAL INVESTMENTS (COST $60,759,864) (a) - 98.6%....... 63,319,721 ---------- ----------
- -------------- Percentages indicated are based on net assets of $64,219,651. (a) Represents cost for financial reporting and federal income tax purposes and differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation.......... $2,648,002 Unrealized depreciation.......... (88,145) ---------- Net unrealized appreciation...... $2,559,857 ---------- ----------
* Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented in this report represent the rates that were in effect on October 31, 2003. Each of these securities contains put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. AMT -- Interest on security is subject to Federal Alternative Minimum Tax FGIC -- Federal Guaranty Insurance Corporation FSA -- Financial Security Assurance GO -- General Obligation LOC -- Letter of Credit SPA -- Standby Purchase Agreement See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 23 HSBC INVESTOR BALANCED FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 - ---------------------------------------------------------------
COMMON STOCKS - 57.5% SHARES VALUE($) --------- ---------- AEROSPACE & DEFENSE - 0.7% United Technologies Corp............... 300 25,407 ---------- AIR FREIGHT & LOGISTICS - 0.3% United Parcel Service, Inc., Class B............................... 160 11,603 ---------- BANKING - 3.2% Bank of America Corp................... 700 53,011 Mellon Financial Corp.................. 600 17,922 Wells Fargo & Co....................... 800 45,056 ---------- 115,989 ---------- BIOTECHNOLOGY - 0.7% Amgen, Inc. (b)........................ 400 24,704 ---------- CHEMICALS - 0.6% Du Pont (E.I) de Nemours and Co........ 500 20,200 ---------- COMMERCIAL SERVICES - 0.7% Cendant Corp. (b)...................... 1,200 24,516 ---------- COMPUTER SOFTWARE - 4.0% Affiliated Computer Services, Inc. (b)................................... 230 11,254 First Data Corp........................ 690 24,633 Microsoft Corp......................... 2,600 67,990 Oracle Corp. (b)....................... 3,200 38,272 ---------- 142,149 ---------- COMPUTERS - 2.8% Dell, Inc. (b)......................... 1,030 37,204 Hewlett-Packard Co..................... 1,700 37,927 International Business Machines Corp.................................. 300 26,844 ---------- 101,975 ---------- CONSUMER PRODUCTS - 4.8% Altria Group, Inc...................... 1,000 46,500 Anheuser-Busch Cos., Inc............... 300 14,778 PepsiCo, Inc........................... 800 38,256 The Coca-Cola Co....................... 500 23,200 The Procter & Gamble Co................ 280 27,521 TJX Companies, Inc..................... 1,000 20,990 ---------- 171,245 ---------- DIVERSIFIED MANUFACTURING OPERATIONS - 4.8% 3M Co.................................. 300 23,661 General Electric Co.................... 2,800 81,228 ITT Industries, Inc.................... 200 13,598 Parker Hannifin Corp................... 300 15,291 SPX Corp. (b).......................... 200 9,624 Tyco International Ltd................. 1,300 27,144 ---------- 170,546 ---------- ELECTRIC UTILITIES - 1.6% Exelon Corp............................ 700 44,415 Southern Co............................ 400 11,920 ---------- 56,335 ---------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 1.9% Intel Corp............................. 2,100 69,405 ---------- ENERGY EQUIPMENT & SERVICES - 1.1% Nabors Industries Ltd. (b)............. 1,010 38,178 ----------
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COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ---------- FINANCIAL SERVICES - 6.5% Capital One Financial Corp............. 200 12,160 Citigroup, Inc......................... 1,700 80,580 Countrywide Credit Industries, Inc..... 200 21,024 Fannie Mae............................. 300 21,507 Goldman Sachs Group, Inc............... 400 37,560 J.P. Morgan Chase & Co................. 1,100 39,490 Merrill Lynch & Co., Inc............... 400 23,680 ---------- 236,001 ---------- FOREST PRODUCTS & PAPER - 0.9% International Paper Co................. 800 31,480 ---------- HEALTH CARE - 2.3% Cardinal Health, Inc................... 600 35,604 Caremark Rx, Inc. (b).................. 1,200 30,060 Guidant Corp........................... 300 15,303 ---------- 80,967 ---------- INSURANCE - 2.3% American International Group, Inc...... 700 42,581 The Allstate Corp...................... 600 23,700 Willis Group Holdings Ltd.............. 530 17,649 ---------- 83,930 ---------- LEISURE EQUIPMENT & PRODUCTS - 0.9% Mattel, Inc............................ 1,600 30,976 ---------- MEDIA - 1.6% Time Warner, Inc. (b).................. 1,400 21,406 Viacom, Inc. Class B................... 900 35,883 ---------- 57,289 ---------- METALS & MINING - 0.4% Alcoa, Inc............................. 400 12,628 ---------- OIL & GAS - 2.2% Exxon Mobil Corp....................... 1,600 58,528 Occidental Petroleum Corp.............. 600 21,156 ---------- 79,684 ---------- PHARMACEUTICALS - 4.9% Abbott Laboratories.................... 600 25,572 Johnson & Johnson...................... 700 35,231 Merck & Co., Inc....................... 400 17,700 Pfizer, Inc............................ 2,400 75,840 Wyeth.................................. 500 22,070 ---------- 176,413 ---------- RETAIL - 4.7% Abercrombie & Fitch Co., Class A (b)... 600 17,100 Home Depot, Inc........................ 1,100 40,777 Kohl's Corp. (b)....................... 500 28,035 Target Corp............................ 300 11,922 Wal-Mart Stores, Inc................... 1,200 70,740 ---------- 168,574 ---------- TELECOMMUNICATIONS - 3.6% Cisco Systems, Inc. (b)................ 2,300 48,254 Comcast Corp. Class A (b).............. 700 23,744 SBC Communications, Inc................ 900 21,582 Verizon Communications, Inc............ 1,100 36,960 ---------- 130,540 ---------- TOTAL COMMON STOCKS.................... 2,060,734 ----------
24 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR BALANCED FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) - ---------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 36.6% PRINCIPAL AMOUNT($) VALUE($) --------- ---------- FEDERAL HOME LOAN BANK - 3.6% 3.25%, 8/15/05......................... 125,000 127,725 ---------- FEDERAL HOME LOAN MORTGAGE CORP. - 13.9% 2.125%, 11/15/05....................... 100,000 99,982 4.75%, 1/2/07.......................... 100,000 104,921 5.375%, 11/15/11....................... 50,000 52,968 Pool #A11010, 5.00%, 7/1/33............ 248,127 244,348 ---------- 502,219 ---------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.1% Pool #2687, 6.00%, 12/20/28............ 108,662 112,081 ---------- U.S. TREASURY BONDS - 2.1% 5.25%, 2/15/29......................... 75,000 74,921 ---------- U.S. TREASURY NOTES - 13.9% 2.375%, 8/15/06........................ 50,000 50,156 2.625%, 5/15/08........................ 275,000 269,576 4.375%, 8/15/12........................ 175,000 177,652 ---------- 497,384 ---------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS.................... 1,314,330 ----------
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INVESTMENT COMPANIES - 4.5% SHARES VALUE($) --------- ---------- Dreyfus Cash Management Fund........... 162,985 162,985 ---------- TOTAL INVESTMENT COMPANIES............. 162,985 ---------- TOTAL INVESTMENTS (COST $3,377,114) (A) - 98.6%........ 3,538,049 ---------- ----------
- -------------- Percentages indicated are based on net assets of $3,588,470. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $131,636. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation................. $67,434 Unrealized depreciation................. (38,135) ------- Net unrealized appreciation............. $29,299 ------- -------
(b) Represents non-income producing security. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 25 HSBC INVESTOR EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 - -----------------------------------------------------------------
COMMON STOCKS - 96.8% SHARES VALUE($) --------- ---------- AEROSPACE & DEFENSE - 2.1% Lockheed Martin Corp. ................... 12,350 572,546 United Technologies Corp. ............... 9,519 806,164 ---------- 1,378,710 ---------- AUTO PARTS & EQUIPMENT - 0.9% Johnson Controls, Inc. .................. 5,550 596,792 ---------- BANKING - 4.4% Bank of America Corp. ................... 20,450 1,548,679 Wells Fargo & Co. ....................... 24,500 1,379,840 ---------- 2,928,519 ---------- BIOTECHNOLOGY - 1.7% Amgen, Inc. (b).......................... 14,800 914,048 Gilead Sciences, Inc. (b)................ 4,000 218,320 ---------- 1,132,368 ---------- CHEMICALS - 1.5% Air Products and Chemicals, Inc. ........ 6,800 308,788 Du Pont (E.I) de Nemours and Co. ........ 17,350 700,940 ---------- 1,009,728 ---------- COMMERCIAL SERVICES - 1.6% Cendant Corp. (b)........................ 53,000 1,082,790 ---------- COMPUTER SOFTWARE - 6.6% Affiliated Computer Services, Inc. (b)... 4,100 200,613 Electronic Arts, Inc. (b)................ 3,575 354,068 Intuit, Inc. (b)......................... 5,450 272,391 Mercury Interactive Corp. (b)............ 8,200 380,808 Microsoft Corp. ......................... 76,150 1,991,323 Symantec Corp. (b)....................... 6,300 419,895 Unisys Corp. (b)......................... 2,100 32,256 Veritas Software Corp. (b)............... 19,300 697,695 ---------- 4,349,049 ---------- COMPUTERS - 2.4% Dell, Inc. (b)........................... 30,300 1,094,436 Hewlett-Packard Co. ..................... 23,300 519,823 ---------- 1,614,259 ---------- CONSTRUCTION & HOUSING - 0.3% Masco Corp. ............................. 7,750 213,125 ---------- CONSUMER MANUFACTURING - 0.8% Harley-Davidson, Inc. ................... 10,500 497,805 ---------- CONSUMER PRODUCTS - 6.2% Anheuser-Busch Cos., Inc. ............... 2,900 142,854 Avon Products, Inc. ..................... 7,600 516,496 Colgate-Palmolive Co. ................... 5,850 311,162 Diageo PLC ADR........................... 17,150 819,942 PepsiCo, Inc. ........................... 23,550 1,126,160 The Clorox Co. .......................... 9,450 428,085 The Estee Lauder Cos., Inc. Class A...... 2,100 78,519 The Procter & Gamble Co. ................ 5,650 555,339 Tiffany & Co. ........................... 2,400 113,880 ---------- 4,092,437 ----------
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COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ---------- DIVERSIFIED MANUFACTURING OPERATIONS - 3.4% Danaher Corp. ........................... 3,100 256,835 General Electric Co. .................... 50,213 1,456,679 Tyco International Ltd. ................. 26,350 550,188 ---------- 2,263,702 ---------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 6.2% Altera Corp. (b)......................... 14,500 293,335 Broadcom Corp. (b)....................... 12,300 392,985 Flextronics International Ltd. (b)....... 11,840 165,760 Intel Corp. ............................. 45,240 1,495,182 Koninklijke (Royal) Philips Electronics NV ADR.................................. 35,331 948,284 Linear Technology Corp. ................. 9,400 400,534 Maxim Integrated Products, Inc. ......... 8,000 397,680 ---------- 4,093,760 ---------- FINANCIAL SERVICES - 12.2% Citigroup, Inc. ......................... 56,725 2,688,764 Fannie Mae............................... 10,700 767,083 Goldman Sachs Group, Inc. ............... 12,900 1,211,310 MBNA Corp. .............................. 43,250 1,070,438 Merrill Lynch & Co., Inc. ............... 10,600 627,520 Morgan Stanley........................... 31,100 1,706,457 ---------- 8,071,572 ---------- GAS & ELECTRIC UTILITY - 2.1% Entergy Corp. ........................... 15,550 838,145 Public Service Enterprise Group, Inc. ... 13,500 551,745 ---------- 1,389,890 ---------- HEALTH CARE - 4.5% Aventis ADR.............................. 14,750 781,160 Caremark Rx, Inc. (b).................... 14,400 360,720 Express Scripts, Inc. (b)................ 2,500 137,300 Health Management Associates, Inc. ...... 11,200 248,080 Medtronic, Inc. ......................... 11,300 514,941 Stryker Corp. ........................... 2,400 194,664 UnitedHealth Group, Inc. ................ 2,850 145,008 Wellpoint Health Networks, Inc. (b)...... 4,700 417,830 Zimmer Holdings, Inc. (b)................ 2,400 153,144 ---------- 2,952,847 ---------- INSURANCE - 6.1% American International Group, Inc. ...... 34,900 2,122,967 MetLife, Inc. ........................... 23,450 736,330 The Progressive Corp. ................... 2,000 147,600 Travelers Property Casualty Corp. ....... 55,418 903,313 Willis Group Holdings Ltd. .............. 3,900 129,870 ---------- 4,040,080 ---------- INTERNET RELATED - 0.9% Ebay, Inc. (b)........................... 8,800 492,272 Yahoo!, Inc. (b)......................... 2,100 91,770 ---------- 584,042 ----------
26 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR EQUITY FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) - -----------------------------------------------------------------
COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ---------- LEISURE - 0.6% Carnival Corp. .......................... 10,500 366,555 ---------- MEDIA - 4.9% Clear Channel Communications, Inc. ...... 23,700 967,434 Cox Communications, Inc. Class A (b)..... 3,500 119,245 Gannett Co., Inc. ....................... 8,440 709,888 Liberty Media Corp. Class A (b).......... 69,600 702,264 Time Warner, Inc. (b).................... 5,350 81,802 Viacom, Inc. Class B..................... 15,800 629,946 ---------- 3,210,579 ---------- OIL & GAS - 6.2% BP PLC ADR............................... 27,400 1,161,212 ConocoPhillips........................... 18,662 1,066,533 EnCana Corp. ............................ 21,927 753,631 Noble Corp. (b).......................... 11,400 391,362 Occidental Petroleum Corp. .............. 20,100 708,726 ---------- 4,081,464 ---------- PHARMACEUTICALS - 8.2% Abbott Laboratories...................... 18,450 786,339 Alcon, Inc. ............................. 2,800 154,308 Allergan, Inc. .......................... 4,580 346,340 Forest Laboratories, Inc. (b)............ 8,400 420,084 Johnson & Johnson........................ 20,100 1,011,633 Pfizer, Inc. ............................ 69,250 2,188,299 Wyeth.................................... 11,900 525,266 ---------- 5,432,269 ---------- REAL ESTATE - 0.3% Centex Corp. ............................ 900 87,750 Lennar Corp. ............................ 1,000 91,850 ---------- 179,600 ---------- RETAIL - 5.3% Bed Bath & Beyond, Inc. (b).............. 12,000 506,880 Lowe's Cos., Inc. ....................... 19,700 1,160,921 Staples, Inc. (b)........................ 14,700 394,254 Target Corp. ............................ 16,550 657,697 Wal-Mart Stores, Inc. ................... 13,300 784,035 ---------- 3,503,787 ----------
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COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ---------- TELECOMMUNICATIONS - 6.7% BellSouth Corp. ......................... 36,700 965,577 Cisco Systems, Inc. (b).................. 41,200 864,376 Comcast Corp. Class A (b)................ 32,102 1,088,900 Comcast Corp. Special Class A (b)........ 20,400 665,448 EchoStar Communications Corp. Class A (b) 1,287 49,318 Juniper Networks, Inc. (b)............... 26,300 473,137 Motorola, Inc. .......................... 23,400 316,602 ---------- 4,423,358 ---------- TRANSPORTATION - 0.7% Union Pacific Corp. ..................... 7,250 453,850 ---------- TOTAL COMMON STOCKS...................... 63,942,937 ---------- - ----------------------------------------------------------------- INVESTMENT COMPANIES - 2.8% Dreyfus Cash Management Fund............. 1,855,126 1,855,126 ---------- TOTAL INVESTMENT COMPANIES............... 1,855,126 ---------- TOTAL INVESTMENTS (COST $58,910,482) (a) - 99.6%........ 65,798,063 ---------- ----------
- -------------- Percentages indicated are based on net assets of $66,066,370. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $3,390,665. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation............... $3,811,428 Unrealized depreciation............... (314,512) ---------- Net unrealized appreciation........... $3,496,916 ---------- ----------
(b) Represents non-income producing security. ADR -- American Depositary Receipt See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 27 HSBC INVESTOR GROWTH AND INCOME FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 - ---------------------------------------------------------------
COMMON STOCKS - 99.2% SHARES VALUE($) --------- ----------- AEROSPACE & DEFENSE - 1.0% United Technologies Corp. ............ 25,100 2,125,719 ----------- AIR FREIGHT & LOGISTICS - 0.5% United Parcel Service, Inc. .......... 15,700 1,138,564 ----------- BANKING - 5.5% Bank of America Corp. ................ 71,900 5,444,987 Mellon Financial Corp. ............... 54,600 1,630,902 Wells Fargo & Co. .................... 78,200 4,404,224 ----------- 11,480,113 ----------- BIOTECHNOLOGY - 1.3% Amgen, Inc. (b)....................... 42,700 2,637,152 ----------- CHEMICALS - 1.0% Du Pont (E.I) de Nemours and Co. ..... 53,600 2,165,440 ----------- COMMERCIAL SERVICES - 1.2% Cendant Corp. (b)..................... 126,420 2,582,761 ----------- COMPUTER SOFTWARE - 6.9% Affiliated Computer Services, Inc. (b).................................. 23,110 1,130,772 First Data Corp. ..................... 69,900 2,495,430 Microsoft Corp. ...................... 259,400 6,783,310 Oracle Corp. (b)...................... 325,700 3,895,372 ----------- 14,304,884 ----------- COMPUTERS - 5.1% Dell, Inc. (b)........................ 98,700 3,565,044 Hewlett-Packard Co. .................. 177,000 3,948,870 International Business Machines Corp. ............................... 33,300 2,979,684 ----------- 10,493,598 ----------- CONSUMER PRODUCTS - 8.5% Altria Group, Inc. ................... 100,200 4,659,300 Anheuser-Busch Cos., Inc. ............ 30,300 1,492,578 PepsiCo, Inc. ........................ 87,900 4,203,378 The Coca-Cola Co. .................... 50,300 2,333,920 The Procter & Gamble Co. ............. 26,680 2,622,377 TJX Companies, Inc. .................. 99,800 2,094,802 ----------- 17,406,355 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 8.0% 3M Co. ............................... 22,300 1,758,801 General Electric Co. ................. 292,700 8,491,227 ITT Industries, Inc. ................. 18,400 1,251,016 Parker Hannifin Corp. ................ 26,400 1,345,608 SPX Corp. (b)......................... 20,300 976,836 Tyco International Ltd. .............. 137,600 2,873,088 ----------- 16,696,576 ----------- ELECTRIC UTILITIES - 2.5% Exelon Corp. ......................... 64,100 4,067,145 Southern Co. ......................... 37,500 1,117,500 ----------- 5,184,645 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 3.1% Intel Corp. .......................... 197,600 6,530,680 ----------- ENERGY EQUIPMENT & SERVICES - 1.9% Nabors Industries Ltd. (b)............ 102,450 3,872,610 ----------- FINANCIAL SERVICES - 11.5% Capital One Financial Corp. .......... 17,000 1,033,600 Citigroup, Inc. ...................... 167,000 7,915,800 Countrywide Credit Industries, Inc. ................................ 22,400 2,354,688 Fannie Mae............................ 30,300 2,172,207 Goldman Sachs Group, Inc. ............ 41,800 3,925,020 J.P. Morgan Chase & Co. .............. 116,300 4,175,170 Merrill Lynch & Co., Inc. ............ 35,500 2,101,600 ----------- 23,678,085 ----------- FOREST PRODUCTS & PAPER - 1.4% International Paper Co. .............. 75,800 2,982,730 -----------
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COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- HEALTH CARE - 3.7% Cardinal Health, Inc. ................ 54,300 3,222,162 Caremark Rx, Inc. (b)................. 110,400 2,765,520 Guidant Corp. ........................ 33,400 1,703,734 ----------- 7,691,416 ----------- INSURANCE - 4.3% American International Group, Inc. ... 74,900 4,556,167 The Allstate Corp. ................... 65,400 2,583,300 Willis Group Holdings Ltd. ........... 51,400 1,711,620 ----------- 8,851,087 ----------- LEISURE EQUIPMENT & PRODUCTS - 1.5% Mattel, Inc. ......................... 156,800 3,035,648 ----------- MEDIA - 2.7% Time Warner, Inc. (b)................. 140,700 2,151,303 Viacom, Inc. Class B.................. 88,300 3,520,521 ----------- 5,671,824 ----------- METALS & MINING - 0.6% Alcoa, Inc. .......................... 41,150 1,299,106 ----------- OIL & GAS - 3.8% Exxon Mobil Corp. .................... 159,900 5,849,142 Occidental Petroleum Corp. ........... 60,000 2,115,600 ----------- 7,964,742 ----------- PHARMACEUTICALS - 8.6% Abbott Laboratories................... 63,300 2,697,846 Johnson & Johnson..................... 76,100 3,830,113 Merck & Co., Inc. .................... 36,260 1,604,505 Pfizer, Inc. ......................... 237,200 7,495,520 Wyeth................................. 46,700 2,061,338 ----------- 17,689,322 ----------- RETAIL - 8.2% Abercrombie & Fitch Co., Class A (b).................................. 60,500 1,724,250 Home Depot, Inc. ..................... 120,600 4,470,642 Kohl's Corp. (b)...................... 42,700 2,394,189 Target Corp. ......................... 31,000 1,231,940 Wal-Mart Stores, Inc. ................ 122,200 7,203,690 ----------- 17,024,711 ----------- TELECOMMUNICATIONS - 6.4% Cisco Systems, Inc. (b)............... 240,200 5,039,396 Comcast Corp. Class A (b)............. 66,200 2,245,504 SBC Communications, Inc. ............. 101,800 2,441,164 Verizon Communications, Inc. ......... 108,100 3,632,160 ----------- 13,358,224 ----------- TOTAL COMMON STOCKS................... 205,865,992 ----------- - --------------------------------------------------------------- INVESTMENT COMPANIES - 0.7% Dreyfus Cash Management Fund.......... 1,532,564 1,532,564 ----------- TOTAL INVESTMENT COMPANIES............ 1,532,564 ----------- TOTAL INVESTMENTS (COST $177,082,487) (a) - 99.9%..... 207,398,556 ----------- -----------
- -------------- Percentages indicated are based on net assets of $207,520,801. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $1,303,023. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation............. $ 32,113,320 Unrealized depreciation............. (3,100,274) ------------ Net unrealized appreciation......... $ 29,013,046 ------------ ------------
(b) Represents non-income producing security. 28 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR MID-CAP FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 - ----------------------------------------------------------------
COMMON STOCKS - 99.4% SHARES VALUE($) ------- ----------- AEROSPACE & DEFENSE - 1.1% L-3 Communications Holdings, Inc. (b).... 40,000 1,869,600 ----------- BANKING - 1.9% Astoria Financial Corp. ................. 44,000 1,524,160 New York Community Bancorp, Inc. ........ 11,666 422,309 TCF Financial Corp. ..................... 25,000 1,304,500 ----------- 3,250,969 ----------- BIOTECHNOLOGY - 3.3% Chiron Corp. (b)......................... 19,300 1,054,359 Genzyme Corp. (b)........................ 16,000 734,400 Gilead Sciences, Inc. (b)................ 17,500 955,150 IDEC Pharmaceuticals Corp. (b)........... 42,500 1,493,025 Medimmune, Inc. (b)...................... 49,100 1,309,006 ----------- 5,545,940 ----------- CHEMICALS - 0.8% Sigma-Aldrich Corp. ..................... 27,100 1,421,395 ----------- COMMERCIAL SERVICES - 3.1% Cendant Corp. (b)........................ 170,000 3,473,100 H & R Block, Inc. ....................... 38,400 1,808,256 ----------- 5,281,356 ----------- COMPUTER HARDWARE - 4.4% Emulex Corp. (b)......................... 71,500 2,024,880 Lexmark International, Inc. (b).......... 29,100 2,142,051 SanDisk Corp. (b)........................ 25,100 2,023,060 Western Digital Corp. (b)................ 94,000 1,264,300 ----------- 7,454,291 ----------- COMPUTER SOFTWARE - 12.6% Adobe Systems, Inc. ..................... 20,800 911,872 Affiliated Computer Services, Inc. (b)... 28,000 1,370,040 BEA Systems, Inc. (b).................... 89,500 1,244,050 BMC Software, Inc. (b)................... 76,100 1,322,618 Citrix Systems, Inc. (b)................. 81,200 2,052,736 Electronic Arts, Inc. (b)................ 18,200 1,802,528 Factset Research Systems, Inc. .......... 22,300 973,172 Fair, Issac & Co., Inc. ................. 25,400 1,620,012 Intuit, Inc. (b)......................... 60,800 3,038,783 SunGard Data Systems, Inc. (b)........... 72,000 2,019,600 Symantec Corp. (b)....................... 33,700 2,246,105 Synopsys, Inc. (b)....................... 47,100 1,494,012 VeriSign, Inc. (b)....................... 57,000 904,590 ----------- 21,000,118 ----------- CONSUMER MANUFACTURING - 0.8% Harley-Davidson, Inc. ................... 29,800 1,412,818 ----------- CONSUMER PRODUCTS - 2.6% Constellation Brands, Inc. (b)........... 55,000 1,725,350 TJX Companies, Inc. ..................... 126,300 2,651,037 ----------- 4,376,387 -----------
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COMMON STOCKS, CONTINUED SHARES VALUE($) ------- ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 6.6% Danaher Corp. ........................... 15,000 1,242,750 ITT Industries, Inc. .................... 24,000 1,631,760 SPX Corp. (b)............................ 39,000 1,876,680 Textron, Inc. ........................... 40,000 1,987,600 The Scotts Company (b)................... 30,000 1,732,500 Tyco International Ltd. ................. 124,800 2,605,824 ----------- 11,077,114 ----------- ELECTRIC UTILITIES - 1.0% Exelon Corp. ............................ 27,500 1,744,875 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 10.4% Altera Corp. (b)......................... 33,800 683,774 American Power Conversion Corp. ......... 120,000 2,427,600 Applied Materials, Inc. (b).............. 38,700 904,419 Arrow Electronics, Inc. (b).............. 38,500 821,975 Cognos, Inc. (b)......................... 38,100 1,313,307 Jabil Circuit, Inc. (b).................. 52,300 1,456,555 KLA-Tencor Corp. (b)..................... 44,900 2,574,117 Lam Research Corp. (b)................... 41,900 1,204,206 LSI Logic Corp. (b)...................... 150,100 1,386,924 Microchip Technology, Inc. .............. 52,200 1,707,462 National Semiconductor Corp. (b)......... 39,600 1,608,948 Novellus Systems, Inc. (b)............... 32,400 1,337,796 ----------- 17,427,083 ----------- ENERGY EQUIPMENT & SERVICES - 1.1% Nabors Industries Ltd. (b)............... 49,950 1,888,110 ----------- FINANCIAL SERVICES - 5.0% Concord EFS, Inc. (b).................... 76,400 816,716 Countrywide Credit Industries, Inc. ..... 22,500 2,365,200 Lehman Brothers Holdings, Inc. .......... 27,300 1,965,600 MBNA Corp. .............................. 131,400 3,252,150 ----------- 8,399,666 ----------- HEALTH CARE - 12.0% Beckman Coulter, Inc. ................... 25,000 1,241,250 Cardinal Health, Inc. ................... 27,100 1,608,114 Caremark Rx, Inc. (b).................... 92,500 2,317,125 DENTSPLY International, Inc. ............ 27,200 1,201,968 Edwards Lifesciences Corp. (b)........... 40,000 1,160,000 Guidant Corp. ........................... 19,400 989,594 Health Management Associates, Inc. ...... 83,600 1,851,740 Laboratory Corp. of America Holdings (b)..................................... 37,100 1,315,195 Neurocrine Biosciences, Inc. (b)......... 18,000 842,940 Oxford Health Plans, Inc. (b)............ 40,000 1,620,000 Varian Medical Systems, Inc. (b)......... 20,000 1,278,800 Wellpoint Health Networks, Inc. (b)...... 27,000 2,400,300 Zimmer Holdings, Inc. (b)................ 35,000 2,233,350 ----------- 20,060,376 ----------- HOUSEHOLD DURABLES - 2.1% Black & Decker Corp. .................... 45,000 2,151,450 Furniture Brands International, Inc. .... 60,000 1,455,600 ----------- 3,607,050 ----------- INSURANCE - 1.2% Willis Group Holdings Ltd. .............. 60,000 1,998,000 -----------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 29 HSBC INVESTOR MID-CAP FUND SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) - ----------------------------------------------------------------
COMMON STOCKS, CONTINUED SHARES VALUE($) ------- ----------- LEISURE EQUIPMENT & PRODUCTS - 2.1% Mattel, Inc. ............................ 180,000 3,484,800 ----------- MEDIA - 1.2% Liberty Media Corp. Class A (b).......... 200,000 2,018,000 ----------- METALS -- DIVERSIFIED - 0.6% Freeport-McMoran Copper & Gold, Inc. Class B................................. 27,000 1,046,250 ----------- OIL & GAS - 2.5% EOG Resources, Inc. ..................... 62,700 2,642,178 Occidental Petroleum Corp. .............. 42,000 1,480,920 ----------- 4,123,098 ----------- PHARMACEUTICALS - 4.8% Allergan, Inc. .......................... 21,800 1,648,516 Biogen, Inc. (b)......................... 31,200 1,262,664 Forest Laboratories, Inc. (b)............ 15,800 790,158 McKesson Corp. .......................... 45,000 1,362,150 Mylan Laboratories, Inc. ................ 90,450 2,184,368 Teva Pharmaceutical Industries Ltd. ADR..................................... 15,000 853,350 ----------- 8,101,206 ----------- RESIDENTIAL BUILDING CONSTRUCTION - 1.1% Toll Brothers, Inc. (b).................. 50,000 1,842,000 ----------- RESTAURANTS - 1.1% YUM! Brands, Inc. (b).................... 53,400 1,823,076 ----------- RETAIL - 10.7% Abercrombie & Fitch Co., Class A (b)..... 100,300 2,858,550 Barnes & Noble, Inc. (b)................. 80,500 2,398,900 Best Buy Co., Inc. (b)................... 14,400 839,664 Brinker International, Inc. (b).......... 55,800 1,776,114 Chico's FAS, Inc. (b).................... 22,800 855,912 Dollar Tree Stores, Inc. (b)............. 58,800 2,244,984 Micheal Stores, Inc. .................... 55,000 2,610,850 PETsMART, Inc. .......................... 90,000 2,304,900 Staples, Inc. (b)........................ 80,000 2,145,600 ----------- 18,035,474 -----------
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED SHARES VALUE($) ------- ----------- TECHNOLOGY - 1.5% Qlogic Corp. (b)......................... 46,400 2,600,720 ----------- TELECOMMUNICATIONS - 2.1% Adelphia Business Solutions, Inc. (b).... 19,923 299 Advanced Fibre Communications, Inc. (b)..................................... 58,900 1,417,723 InterActiveCorp (b)...................... 21,327 782,907 Netscreen Technologies, Inc. (b)......... 32,300 859,826 Sprint Corp. (b)......................... 126,000 548,100 ----------- 3,608,855 ----------- TEXTILES APPAREL & LUXURY GOODS - 1.7% Coach, Inc. (b).......................... 80,000 2,837,600 ----------- TOTAL COMMON STOCKS...................... 167,336,227 ----------- - ---------------------------------------------------------------- INVESTMENT COMPANIES - 0.6% Dreyfus Cash Management Fund............. 940,452 940,452 ----------- TOTAL INVESTMENT COMPANIES............... 940,452 ----------- TOTAL INVESTMENTS (COST $139,278,259) (a) - 100.0%....... 168,276,679 ----------- -----------
- -------------- Percentages indicated are based on net assets of $168,222,857. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $476,695. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation......... $31,379,254 Unrealized depreciation......... (2,857,529) ----------- Net unrealized appreciation..... $28,521,725 ----------- -----------
(b) Represents non-income producing security. ADR -- American Depositary Receipt 30 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2003
.................................................................................................................. LIMITED FIXED NEW YORK MATURITY INCOME BOND TAX-FREE FUND FUND FUND BOND FUND --------------- -------------- --------------- --------------- ASSETS: Investments, at value (Note 2) $43,670,428 $111,177,482 $22,163,608 $63,319,721 Cash -- -- -- 800 Interest and dividends receivable -- -- -- 800,602 Receivable for capital shares issued 83,772 37,577 84,411 285,436 Receivable for investments sold -- -- -- -- Receivable from Investment Adviser -- -- 9,751 -- Prepaid expenses and other assets 7,848 7,469 2,597 1,551 ----------- ------------ ----------- ----------- TOTAL ASSETS 43,762,048 111,222,528 22,260,367 64,408,110 ----------- ------------ ----------- ----------- LIABILITIES: Dividends payable 59,935 215,697 35,243 81,963 Payable for investments purchased -- -- -- -- Payable for capital shares redeemed 21,681 26 17,912 41,322 Accrued expenses and other liabilities: Investment management -- -- -- 13,428 Administration 1,909 5,408 841 4,841 Distribution 7,110 -- 8,309 13,589 Shareholder servicing 2,604 -- 4,762 9,140 Other 5,267 32,966 14,437 24,176 ----------- ------------ ----------- ----------- TOTAL LIABILITIES 98,506 254,097 81,504 188,459 ----------- ------------ ----------- ----------- NET ASSETS $43,663,542 $110,968,431 $22,178,863 $64,219,651 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- .............................................................................................................. COMPOSITION OF NET ASSETS: Capital $41,242,383 $106,882,332 $22,515,464 $61,333,271 Accumulated (dividends in excess of) net investment income (6,183) 3,875 (174) 1,515 Accumulated net realized gains (losses) from investment transactions 1,939,749 (2,771,120) (652,945) 325,008 Unrealized appreciation/depreciation from investments 487,593 6,853,344 316,518 2,559,857 ----------- ------------ ----------- ----------- NET ASSETS $43,663,542 $110,968,431 $22,178,863 $64,219,651 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- ............................................................................................................... CLASS A (INVESTOR) SHARES Net Assets $ 3,308,784 $ -- $14,142,952 $22,325,670 Shares Outstanding 316,066 -- 1,349,342 1,991,237 Net Asset Value and Redemption Price per share $ 10.47 $ -- $ 10.48 $ 11.21 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- Maximum sales charge 4.75% -- 4.75% 4.75% ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- Maximum Offering Price per share (Net Asset Value/(100%-maximum sales charge)) $ 10.99 $ -- $ 11.00 $ 11.77 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- ................................................................................................................. CLASS B SHARES Net Assets $ 6,443,496 $ -- $ 7,430,270 $18,352,069 Shares Outstanding 614,395 -- 708,592 1,638,176 Net Asset Value, Offering Price and Redemption Price per share* $ 10.49 $ -- $ 10.49 $ 11.20 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- ............................................................................................................... CLASS C SHARES Net Assets $ 2,543,505 $ -- $ 605,641 $ 3,251,533 Shares Outstanding 242,539 -- 57,817 289,124 Net Asset Value, Offering Price and Redemption Price per share* $ 10.49 $ -- $ 10.48 $ 11.25 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- ............................................................................................................... CLASS Y SHARES Net Assets $31,367,757 $ -- $ -- $20,290,379 Shares Outstanding 2,992,164 -- -- 1,809,623 Net Asset Value, Offering Price and Redemption Price per share $ 10.48 $ -- $ -- $ 11.21 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- ............................................................................................................... ADVISOR SHARES Net Assets $ -- $110,968,431 $ -- $ -- Shares Outstanding -- 10,339,845 -- -- Net Asset Value, Offering Price and Redemption Price per share $ -- $ 10.73 $ -- $ -- ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- Investments, at cost $60,759,864 ----------- -----------
BALANCED EQUITY FUND FUND ----------- ------------- ASSETS: Investments, at value (Note 2) $3,538,049 $ 65,798,063 Cash -- 134,086 Interest and dividends receivable 13,892 73,871 Receivable for capital shares issued 6,439 283,085 Receivable for investments sold 10,464 557,456 Receivable from Investment Adviser 40,284 12,948 Prepaid expenses and other assets 340 6,281 ---------- ------------ TOTAL ASSETS 3,609,468 66,865,790 ---------- ------------ LIABILITIES: Dividends payable -- -- Payable for investments purchased 6,106 661,259 Payable for capital shares redeemed 231 95,502 Accrued expenses and other liabilities: Investment management 1,645 -- Administration 457 7,685 Distribution 1,634 1,995 Shareholder servicing 556 5,425 Other 10,369 27,554 ---------- ------------ TOTAL LIABILITIES 20,998 799,420 ---------- ------------ NET ASSETS $3,588,470 $ 66,066,370 ---------- ------------ ---------- ------------ .......................................................................... COMPOSITION OF NET ASSETS: Capital $7,050,556 $112,119,567 Accumulated (dividends in excess of) net investment income 37,341 17,859 Accumulated net realized gains (losses) from investment transactions (3,660,362) (52,958,637) Unrealized appreciation/depreciation from investments 160,935 6,887,581 ---------- ------------ NET ASSETS $3,588,470 $ 66,066,370 ---------- ------------ ---------- ------------ .......................................................................... CLASS A (INVESTOR) SHARES Net Assets $ 418,585 $ 23,130,935 Shares Outstanding 50,603 1,913,343 Net Asset Value and Redemption Price per share $ 8.27 $ 12.09 ---------- ------------ ---------- ------------ Maximum sales charge 5.00% 5.00% ---------- ------------ ---------- ------------ Maximum Offering Price per share (Net Asset Value/(100%-maximum sales charge)) $ 8.71 $ 12.73 ---------- ------------ ---------- ------------ .......................................................................... CLASS B SHARES Net Assets $2,098,573 $ 2,682,123 Shares Outstanding 255,445 228,107 Net Asset Value, Offering Price and Redemption Price per share* $ 8.22 $ 11.76 ---------- ------------ ---------- ------------ .......................................................................... CLASS C SHARES Net Assets $ 139,005 $ 502,532 Shares Outstanding 16,883 42,516 Net Asset Value, Offering Price and Redemption Price per share* $ 8.23 $ 11.82 ---------- ------------ ---------- ------------ .......................................................................... CLASS Y SHARES Net Assets $ 932,307 $ 39,750,780 Shares Outstanding 111,721 3,288,465 Net Asset Value, Offering Price and Redemption Price per share $ 8.34 $ 12.09 ---------- ------------ ---------- ------------ .......................................................................... ADVISOR SHARES Net Assets $ -- $ -- Shares Outstanding -- -- Net Asset Value, Offering Price and Redemption Price per share $ -- $ -- ---------- ------------ ---------- ------------ Investments, at cost $3,377,114 $ 58,910,482 ---------- ------------ ---------- ------------
- -------------- * Redemption Price per share varies by length of time shares are held. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 31 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2003 .................................................................................
GROWTH AND MID-CAP INTERNATIONAL OVERSEAS INCOME FUND FUND EQUITY FUND EQUITY FUND -------------- -------------- -------------- ------------- ASSETS: Investments, at value (Note 2) $207,398,556 $168,276,679 $123,194,289 $11,205,311 Cash -- -- -- -- Interest and dividends receivable 238,060 18,160 -- -- Receivable for capital shares issued 61,659 67,964 22,738 111,139 Receivable for investments sold 816,157 -- -- -- Receivable from Investment Adviser -- -- -- 14,746 Tax reclaims receivable -- -- 475,491 23,402 Prepaid expenses 2,399 7,239 11,680 3,013 ------------ ------------ ------------ ----------- TOTAL ASSETS 208,516,831 168,370,042 123,704,198 11,357,611 ------------ ------------ ------------ ----------- LIABILITIES: Payable for investments purchased 824,256 -- -- -- Payable for capital shares redeemed 624 4,428 -- 47,483 Accrued expenses and other liabilities: Investment management 96,105 76,794 -- -- Administration 19,272 12,668 5,789 448 Distribution 1,427 3,768 -- 1,002 Shareholder servicing 817 1,552 -- 2,420 Other 53,529 47,975 40,730 12,525 ------------ ------------ ------------ ----------- TOTAL LIABILITIES 996,030 147,185 46,519 63,878 ------------ ------------ ------------ ----------- NET ASSETS $207,520,801 $168,222,857 $123,657,679 $11,293,733 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... COMPOSITION OF NET ASSETS: Capital $234,256,023 $170,863,003 $134,490,297 $10,890,028 Accumulated (dividends in excess of) net investment income 542,460 -- 3,732,087 77,699 Accumulated net realized losses from investment, option and foreign currency transactions (57,593,751) (31,638,566) (26,076,932) (876,614) Unrealized appreciation/depreciation from investments, options and foreign currencies 30,316,069 28,998,420 11,512,227 1,202,620 ------------ ------------ ------------ ----------- NET ASSETS $207,520,801 $168,222,857 $123,657,679 $11,293,733 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... CLASS A (INVESTOR) SHARES Net Assets $ 1,827,476 $ 1,539,200 $ -- $10,096,209 Shares Outstanding 217,930 193,601 -- 860,682 Net Asset Value and Redemption Price per share $ 8.39 $ 7.95 $ -- $ 11.73 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- Maximum sales charge 5.00% 5.00% -- 5.00% ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- Maximum Offering Price per share (Net Asset Value/(100% - maximum sales charge)) $ 8.83 $ 8.37 $ -- $ 12.35 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... CLASS B SHARES Net Assets $ 2,235,012 $ 6,008,850 $ -- $ 1,076,175 Shares Outstanding 269,296 775,148 -- 94,877 Net Asset Value, Offering Price and Redemption Price per share* $ 8.30 $ 7.75 $ -- $ 11.34 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... CLASS C SHARES Net Assets $ 8** $ 54,275 $ -- $ 121,349 Shares Outstanding 1 6,957 -- 10,511 Net Asset Value, Offering Price and Redemption Price per share* $ 8.40*** $ 7.80 $ -- $ 11.54 ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... CLASS Y SHARES Net Assets $203,458,305 $ -- $ -- $ -- Shares Outstanding 24,233,380 -- -- -- Net Asset Value, Offering Price and Redemption Price per share $ 8.40 $ -- $ -- $ -- ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... ADVISOR SHARES Net Assets $ -- $ -- $123,657,679 $ -- Shares Outstanding -- -- 9,693,617 -- Net Asset Value, Offering Price and Redemption Price per share $ -- $ -- $ 12.76 $ -- ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- ............................................................................................................... TRUST SHARES Net Assets $ -- $160,620,532 $ -- $ -- Shares Outstanding -- 20,064,056 -- -- Net Asset Value, Offering Price and Redemption Price per share $ -- $ 8.01 $ -- $ -- ------------ ------------ ------------ ----------- ------------ ------------ ------------ ----------- Investments, at cost $177,082,487 $139,278,259 ------------ ------------ ------------ ------------
SMALL CAP OPPORTUNITY EQUITY FUND FUND ----------- ----------- Investments, at value (Note 2) $326,112,240 $21,005,061 Cash -- -- Interest and dividends receivable -- -- Receivable for capital shares issued 18,738 106,637 Receivable for investments sold -- -- Receivable from Investment Adviser -- 19,840 Tax reclaims receivable -- -- Prepaid expenses 8,072 2,707 ------------ ----------- TOTAL ASSETS 326,139,050 21,134,245 ------------ ----------- LIABILITIES: Payable for investments purchased -- -- Payable for capital shares redeemed -- 69,307 Accrued expenses and other liabilities: Investment management -- -- Administration 10,596 792 Distribution -- 1,749 Shareholder servicing -- 4,289 Other 56,643 16,936 ------------ ----------- TOTAL LIABILITIES 67,239 93,073 ------------ ----------- NET ASSETS $326,071,811 $21,041,172 ------------ ----------- ------------ ----------- ......................................................................... COMPOSITION OF NET ASSETS: Capital $333,443,238 $21,140,059 Accumulated (dividends in excess of) net investment income -- -- Accumulated net realized losses from investment, option and foreign currency transactions (60,114,229) (3,805,137) Unrealized appreciation/depreciation from investments, options and foreign currencies 52,742,802 3,706,250 ------------ ----------- NET ASSETS $326,071,811 $21,041,172 ------------ ----------- ------------ ----------- ......................................................................... CLASS A (INVESTOR) SHARES Net Assets $ -- $16,694,543 Shares Outstanding -- 1,611,401 Net Asset Value and Redemption Price per share $ -- $ 10.36 ------------ ----------- ------------ ----------- Maximum sales charge -- 5.00% ------------ ----------- ------------ ----------- Maximum Offering Price per share (Net Asset Value/(100% - maximum sales charge)) $ -- $ 10.91 ------------ ----------- ------------ ----------- ......................................................................... CLASS B SHARES Net Assets $ -- $ 3,951,547 Shares Outstanding -- 400,992 Net Asset Value, Offering Price and Redemption Price per share* $ -- $ 9.85 ------------ ----------- ------------ ----------- ......................................................................... CLASS C SHARES Net Assets $ -- $ 395,082 Shares Outstanding -- 39,756 Net Asset Value, Offering Price and Redemption Price per share* $ -- $ 9.94 ------------ ----------- ------------ ----------- ......................................................................... CLASS Y SHARES Net Assets $ -- $ -- Shares Outstanding -- -- Net Asset Value, Offering Price and Redemption Price per share $ -- $ -- ------------ ----------- ------------ ----------- ......................................................................... ADVISOR SHARES Net Assets $326,071,811 $ -- Shares Outstanding 26,385,401 -- Net Asset Value, Offering Price and Redemption Price per share $ 12.36 $ -- ------------ ----------- ------------ ----------- ......................................................................... TRUST SHARES Net Assets $ -- $ -- Shares Outstanding -- -- Net Asset Value, Offering Price and Redemption Price per share $ -- $ -- ------------ ----------- ------------ ----------- Investments, at cost
- -------------- * Redemption Price per share varies by length of time shares are held. ** Net assets of the Growth and Income Fund Class C Shares represent seed money only. As of October 31, 2003 the class has not commenced operations. *** Due to rounding, Net Assets divided by Shares Outstanding does not equal the NAV. 32 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2003 .................................................................................
LIMITED FIXED NEW YORK MATURITY INCOME BOND TAX-FREE FUND FUND FUND BOND FUND --------------- --------------- --------------- ----------- INVESTMENT INCOME: Interest $ -- $ -- $ -- $2,462,180 Dividends -- -- -- 13,899 Investment income from portfolio 4,082,535 12,367,155 1,043,946 -- Expenses from portfolio (499,224) (1,207,888) (104,158) -- ---------- ----------- ---------- ---------- TOTAL INVESTMENT INCOME 3,583,311 11,159,267 939,788 2,476,079 ---------- ----------- ---------- ---------- ............................................................................................................. EXPENSES: Investment management -- -- -- 143,469 Administration 35,865 95,630 8,041 42,995 Distribution: Class B Shares 42,170 -- 53,686 117,924 Class C Shares 17,598 -- 6,102 23,470 Shareholder servicing: Class A (Investor) Shares 7,299 -- 33,738 47,587 Class B Shares 14,057 -- 17,895 39,308 Class C Shares 5,866 -- 2,034 7,823 Accounting 36,100 9,025 27,074 69,609 Custodian -- -- -- 18,786 Registration 13,553 15,999 18,989 9,131 Transfer agent 48,598 24,463 39,768 67,477 Trustee 848 2,689 154 831 Other 28,242 65,819 9,046 29,289 ---------- ----------- ---------- ---------- Total expenses before fee reductions 250,196 213,625 216,527 617,699 Fees reduced by Investment Adviser -- -- (24,653) -- ---------- ----------- ---------- ---------- NET EXPENSES 250,196 213,625 191,874 617,699 ---------- ----------- ---------- ---------- ............................................................................................................. NET INVESTMENT INCOME 3,333,115 10,945,642 747,914 1,858,380 ---------- ----------- ---------- ---------- ............................................................................................................. NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions 4,918,617 11,905,117 323,271 718,711 Change in unrealized appreciation/depreciation from investments (2,609,744) (2,456,592) (145,359) (200,970) ---------- ----------- ---------- ---------- ............................................................................................................. Net realized/unrealized gains from investment transactions 2,308,873 9,448,525 177,912 517,741 ---------- ----------- ---------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $5,641,988 $20,394,167 $ 925,826 $2,376,121 ---------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
BALANCED EQUITY FUND FUND ---------- ----------- INVESTMENT INCOME: Interest $ 207,555 $ -- Dividends 131,727 2,301,391 Investment income from portfolio -- -- Expenses from portfolio -- -- ---------- ----------- TOTAL INVESTMENT INCOME 339,282 2,301,391 ---------- ----------- ....................................................................... EXPENSES: Investment management 67,521 789,932 Administration 9,198 128,392 Distribution: Class B Shares 13,099 14,954 Class C Shares 855 3,865 Shareholder servicing: Class A (Investor) Shares 1,151 45,699 Class B Shares 4,366 4,985 Class C Shares 285 1,288 Accounting 63,960 84,421 Custodian 14,342 86,497 Registration 12,872 22,748 Transfer agent 63,193 80,927 Trustee 226 3,066 Other 6,116 61,272 ---------- ----------- Total expenses before fee reductions 257,184 1,328,046 Fees reduced by Investment Adviser (121,070) -- ---------- ----------- NET EXPENSES 136,114 1,328,046 ---------- ----------- ....................................................................... NET INVESTMENT INCOME 203,168 973,345 ---------- ----------- ....................................................................... NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: Net realized gains (losses) from investment transactions (491,172) (13,278,173) Change in unrealized appreciation/depreciation from investments 1,594,556 39,013,499 ---------- ----------- ....................................................................... Net realized/unrealized gains from investment transactions 1,103,384 25,735,326 ---------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $1,306,552 $26,708,671 ---------- ----------- ---------- -----------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 33 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2003 .................................................................................
GROWTH AND MID-CAP INTERNATIONAL OVERSEAS INCOME FUND FUND EQUITY FUND EQUITY FUND --------------- --------------- --------------- --------------- INVESTMENT INCOME: Interest $ -- $ 845 $ -- $ -- Dividends 3,255,568 881,404 -- -- Investment income from portfolio -- -- 4,775,934 206,700 Tax reclaims -- -- 396,100 14,698 Foreign tax withholding from portfolio -- -- (788,290) (33,521) Expenses from portfolio -- -- (1,896,472) (94,294) ----------- ----------- ----------- ---------- TOTAL INVESTMENT INCOME (LOSS) 3,255,568 882,249 2,487,272 93,583 ----------- ----------- ----------- ---------- ............................................................................................................... EXPENSES: Investment management 1,025,892 715,471 -- -- Administration 139,745 97,460 73,919 3,650 Distribution: Class B Shares 12,022 36,294 -- 5,543 Class C Shares -- 211 -- 752 Shareholder servicing: Class A (Investor) Shares 3,300 2,794 -- 22,263 Class B Shares 4,007 12,098 -- 1,848 Class C Shares -- 70 -- 251 Accounting 63,960 63,565 9,126 27,074 Custodian 53,626 51,807 -- -- Registration 27,687 14,110 32,286 17,240 Transfer agent 69,084 98,794 31,303 57,092 Trustee 2,659 1,740 1,665 60 Other 90,652 65,225 56,184 5,034 ----------- ----------- ----------- ---------- Total expenses before fee reductions 1,492,634 1,159,639 204,483 140,807 Fees reduced by Investment Adviser -- -- -- (48,347) ----------- ----------- ----------- ---------- NET EXPENSES 1,492,634 1,159,639 204,483 92,460 ----------- ----------- ----------- ---------- ............................................................................................................... NET INVESTMENT INCOME (LOSS) 1,762,934 (277,390) 2,282,789 1,123 ----------- ----------- ----------- ---------- ............................................................................................................... NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS, OPTIONS AND FOREIGN CURRENCIES: Net realized gains (losses) from investment, option and foreign currency transactions (9,441,001) 9,437 (889,405) 194,623 Change in unrealized appreciation/depreciation from investments, options and foreign currencies 38,518,987 33,785,071 43,679,183 2,572,761 ----------- ----------- ----------- ---------- ............................................................................................................... Net realized/unrealized gains from investment, options and foreign currency transactions 29,077,986 33,794,508 42,789,778 2,767,384 ----------- ----------- ----------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $30,840,920 $33,517,118 $45,072,567 $2,768,507 ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------
SMALL CAP OPPORTUNITY EQUITY FUND FUND ------------ ----------- INVESTMENT INCOME: Interest $ -- $ -- Dividends -- -- Investment income from portfolio 623,317 45,082 Tax reclaims -- -- Foreign tax withholding from portfolio -- -- Expenses from portfolio (1,966,557) (141,117) ----------- ---------- TOTAL INVESTMENT INCOME (LOSS) (1,343,240) (96,035) ----------- ---------- .......................................................................... EXPENSES: Investment management -- -- Administration 80,773 5,805 Distribution: Class B Shares -- 21,359 Class C Shares -- 2,503 Shareholder servicing: Class A (Investor) Shares -- 30,786 Class B Shares -- 7,120 Class C Shares -- 834 Accounting 9,025 27,074 Custodian -- -- Registration 24,680 17,934 Transfer agent 29,890 79,698 Trustee 1,221 73 Other 77,013 12,991 ----------- ---------- Total expenses before fee reductions 222,602 206,177 Fees reduced by Investment Adviser -- (67,407) ----------- ---------- NET EXPENSES 222,602 138,770 ----------- ---------- ......................................................................... NET INVESTMENT INCOME (LOSS) (1,565,842) (234,805) ----------- ---------- ......................................................................... NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS, OPTIONS AND FOREIGN CURRENCIES: Net realized gains (losses) from investment, option and foreign currency transactions 4,018,810 275,213 Change in unrealized appreciation/depreciation from investments, options and foreign currencies 65,152,323 4,550,177 ----------- ---------- ......................................................................... Net realized/unrealized gains from investment, options and foreign currency transactions 69,171,133 4,825,390 ----------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $67,605,291 $4,590,585 ----------- ---------- ----------- ----------
34 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS .................................................................................
LIMITED MATURITY FUND FIXED INCOME FUND --------------------------------- --------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ---------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 3,333,115 $ 3,687,229 $ 10,945,642 $ 12,199,896 Net realized gains (losses) from investment transactions 4,918,617 (696,711) 11,905,117 877,629 Change in unrealized appreciation/depreciation from investments (2,609,744) 526,764 (2,456,592) 1,637,228 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 5,641,988 3,517,282 20,394,167 14,714,753 ------------ ------------ ------------ ------------ ........................................................................................................................... DIVIDENDS: NET INVESTMENT INCOME: Class A (Investor) Shares (100,206) (51,982) -- -- Class B Shares (152,669) (82,791) -- -- Class C Shares (63,642) (29,109) -- -- Class Y Shares (3,280,529) (3,587,497) -- -- Advisor Shares -- -- (11,850,331) (13,256,763) NET REALIZED GAINS: Class A (Investor) Shares -- (4,520) -- -- Class B Shares -- (4,356) -- -- Class C Shares -- (718) -- -- Class Y Shares -- (302,276) -- -- ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (3,597,046) (4,063,249) (11,850,331) (13,256,763) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (60,812,597) 33,628,772 (182,416,067) 132,803,103 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS (58,767,655) 33,082,805 (173,872,231) 134,261,093 ........................................................................................................................... NET ASSETS: Beginning of year 102,431,197 69,348,392 284,840,662 150,579,569 ------------ ------------ ------------ ------------ End of year $ 43,663,542 $102,431,197 $110,968,431 $284,840,662 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Accumulated (dividends in excess of) net investment income $ (6,183) $ (6,277) $ 3,875 $ (74,172) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 35 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ................................................................................
LIMITED MATURITY FUND FIXED INCOME FUND ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A (INVESTOR) SHARES: Proceeds from shares issued $ 32,333,443 $ 690,236 $ -- $ -- Dividends reinvested 86,864 53,853 -- -- Cost of shares redeemed (30,657,661) (110,071) -- -- ------------- ----------- ------------- ------------- Class A (Investor) Shares capital transactions 1,762,646 634,018 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ CLASS B SHARES: Proceeds from shares issued 3,107,219 3,542,800 -- -- Dividends reinvested 130,108 72,882 -- -- Cost of shares redeemed (964,324) (377,321) -- -- ------------- ----------- ------------- ------------- Class B Shares capital transactions 2,273,003 3,238,361 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ CLASS C SHARES: Proceeds from shares issued 1,471,188 1,659,670 -- -- Dividends reinvested 57,276 26,924 -- -- Cost of shares redeemed (733,409) (118,452) -- -- ------------- ----------- ------------- ------------- Class C Shares capital transactions 795,055 1,568,142 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ CLASS Y SHARES: Proceeds from shares issued 35,228,965 32,116,873 -- -- Dividends reinvested 2,958,619 3,764,345 -- -- Cost of shares redeemed (103,830,885) (7,692,967) -- -- ------------- ----------- ------------- ------------- Class Y Shares capital transactions (65,643,301) 28,188,251 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ ADVISOR SHARES: Proceeds from shares issued -- -- 174,706,822 312,915,542 Dividends reinvested -- -- 3,243,190 4,745,964 Cost of shares redeemed -- -- (360,366,079) (184,858,403) ------------- ----------- ------------- ------------- Advisor Shares capital transactions -- -- (182,416,067) 132,803,103 ------------- ----------- ------------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (60,812,597) $33,628,772 $(182,416,067) $ 132,803,103 ------------- ----------- ------------- ------------- ------------- ----------- ------------- ------------- ............................................................................................................................ SHARE TRANSACTIONS: CLASS A (INVESTOR) SHARES: Issued 3,077,715 67,284 -- -- Reinvested 8,421 5,236 -- -- Redeemed (2,924,192) (10,737) -- -- ------------- ----------- ------------- ------------- Change in Class A (Investor) Shares 161,944 61,783 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ CLASS B SHARES: Issued 293,513 344,798 -- -- Reinvested 12,334 7,140 -- -- Redeemed (91,409) (36,553) -- -- ------------- ----------- ------------- ------------- Change in Class B Shares 214,438 315,385 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ CLASS C SHARES: Issued 138,667 162,291 -- -- Reinvested 5,442 2,611 -- -- Redeemed (70,036) (11,656) -- -- ------------- ----------- ------------- ------------- Change in Class C Shares 74,073 153,246 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ CLASS Y SHARES: Issued 3,349,080 3,107,329 -- -- Reinvested 279,954 365,786 -- -- Redeemed (9,718,276) (746,625) -- -- ------------- ----------- ------------- ------------- Change in Class Y Shares (6,089,242) 2,726,490 -- -- ------------- ----------- ------------- ------------- ............................................................................................................................ ADVISOR SHARES: Issued -- -- 16,137,521 29,905,358 Reinvested -- -- 299,797 449,538 Redeemed -- -- (32,896,242) (17,491,684) ------------- ----------- ------------- ------------- Change in Advisor Shares -- -- (16,458,924) 12,863,212 ------------- ----------- ------------- -------------
36 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
NEW YORK BOND FUND TAX-FREE BOND FUND ------------------------------------ ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 747,914 $ 609,977 $ 1,858,380 $ 1,523,914 Net realized gains (losses) from investment transactions 323,271 (125,841) 718,711 230,884 Change in unrealized appreciation/depreciation from investments (145,359) 134,884 (200,970) 606,908 ----------- ----------- ----------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 925,826 619,020 2,376,121 2,361,706 ----------- ----------- ----------- ----------- ............................................................................................................................ DIVIDENDS: NET INVESTMENT INCOME: Class A (Investor) Shares (551,717) (476,334) (645,402) (536,951) Class B Shares (237,511) (161,790) (415,040) (249,302) Class C Shares (27,506) (35,707) (82,589) (52,534) Class Y Shares -- -- (714,717) (684,658) ----------- ----------- ----------- ----------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (816,734) (673,831) (1,857,748) (1,523,445) ----------- ----------- ----------- ----------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 2,909,577 10,511,328 12,299,920 10,709,100 ----------- ----------- ----------- ----------- CHANGE IN NET ASSETS 3,018,669 10,456,517 12,818,293 11,547,361 ........................................................................................................................... NET ASSETS: Beginning of year 19,160,194 8,703,677 51,401,358 39,853,997 ----------- ----------- ----------- ----------- End of year $22,178,863 $19,160,194 $64,219,651 $51,401,358 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Accumulated (dividends in excess of) net investment income $ (174) $ (3,714) $ 1,515 $ 883 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 37 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
NEW YORK BOND FUND TAX-FREE BOND FUND ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ---------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A (INVESTOR) SHARES: Proceeds from shares issued $ 8,398,463 $ 8,793,395 $11,543,580 $ 8,641,241 Dividends reinvested 501,654 438,217 590,442 517,840 Cost of shares redeemed (6,884,172) (3,793,983) (6,313,380) (10,712,477) ----------- ----------- ----------- ------------ Class A (Investor) Shares capital transactions 2,015,945 5,437,629 5,820,642 (1,553,396) ----------- ----------- ----------- ------------ ............................................................................................................................ CLASS B SHARES: Proceeds from shares issued 2,250,164 4,883,502 6,989,555 7,565,354 Dividends reinvested 196,735 130,482 319,238 189,995 Cost of shares redeemed (1,164,858) (402,978) (1,755,775) (866,052) ----------- ----------- ----------- ------------ Class B Shares capital transactions 1,282,041 4,611,006 5,553,018 6,889,297 ----------- ----------- ----------- ------------ ............................................................................................................................ CLASS C SHARES: Proceeds from shares issued 18,000 789,595 1,160,527 1,745,774 Dividends reinvested 20,473 32,561 63,214 44,081 Cost of shares redeemed (426,882) (359,463) (610,458) (743,128) ----------- ----------- ----------- ------------ Class C Shares capital transactions (388,409) 462,693 613,283 1,046,727 ----------- ----------- ----------- ------------ ............................................................................................................................ CLASS Y SHARES: Proceeds from shares issued -- -- 8,199,696 15,051,732 Dividends reinvested -- -- 197,795 258,502 Cost of shares redeemed -- -- (8,084,514) (10,983,762) ----------- ----------- ----------- ------------ Class Y Shares capital transactions -- -- 312,977 4,326,472 ----------- ----------- ----------- ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 2,909,577 $10,511,328 $12,299,920 $ 10,709,100 ----------- ----------- ----------- ------------ ----------- ----------- ----------- ------------ ............................................................................................................................ SHARE TRANSACTIONS: CLASS A (INVESTOR) SHARES: Issued 794,521 852,357 1,028,866 793,327 Reinvested 47,355 42,473 52,637 47,508 Redeemed (653,528) (367,469) (564,319) (988,665) ----------- ----------- ----------- ------------ Change in Class A (Investor) Shares 188,348 527,361 517,184 (147,830) ----------- ----------- ----------- ------------ ............................................................................................................................ CLASS B SHARES: Issued 211,083 474,356 620,289 693,973 Reinvested 18,625 12,636 28,472 17,430 Redeemed (110,752) (38,903) (157,037) (79,697) ----------- ----------- ----------- ------------ Change in Class B Shares 118,956 448,089 491,724 631,706 ----------- ----------- ----------- ------------ ............................................................................................................................ CLASS C SHARES: Issued 1,669 76,684 103,233 159,355 Reinvested 1,940 3,159 5,614 4,018 Redeemed (40,512) (35,037) (54,259) (67,865) ----------- ----------- ----------- ------------ Change in Class C Shares (36,903) 44,806 54,588 95,508 ----------- ----------- ----------- ------------ ............................................................................................................................ CLASS Y SHARES: Issued -- -- 734,436 1,388,804 Reinvested -- -- 17,662 23,646 Redeemed -- -- (724,104) (1,002,656) ----------- ----------- ----------- ------------ Change in Class Y Shares -- -- 27,994 409,794 ----------- ----------- ----------- ------------
38 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
BALANCED FUND EQUITY FUND ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 203,168 $ 296,118 $ 973,345 $ 1,072,599 Net realized losses from investment transactions (491,172) (1,733,733) (13,278,173) (29,117,568) Change in unrealized appreciation/depreciation from investments 1,594,556 (90,459) 39,013,499 (27,338,527) ------------ ----------- ------------- ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,306,552 (1,528,074) 26,708,671 (55,383,496) ------------ ----------- ------------- ------------ ............................................................................................................................ DIVIDENDS: NET INVESTMENT INCOME: Class A (Investor) Shares (11,895) (3,748) (65,354) (36,107) Class B Shares (30,581) (5,763) -- -- Class C Shares (1,995) (813) -- -- Class Y Shares (369,595) (179,777) (1,118,576) (842,473) ------------ ----------- ------------- ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (414,066) (190,101) (1,183,930) (878,580) ------------ ----------- ------------- ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (11,888,601) 90,197 (152,352,431) 102,470,636 ------------ ----------- ------------- ------------ CHANGE IN NET ASSETS (10,996,115) (1,627,978) (126,827,690) 46,208,560 ............................................................................................................................ NET ASSETS: Beginning of year 14,584,585 16,212,563 192,894,060 146,685,500 ------------ ----------- ------------- ------------ End of year $ 3,588,470 $14,584,585 $ 66,066,370 $192,894,060 ------------ ----------- ------------- ------------ ------------ ----------- ------------- ------------ Accumulated net investment income $ 37,341 $ 241,091 $ 17,859 $ 228,444 ------------ ----------- ------------- ------------ ------------ ----------- ------------- ------------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 39 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
BALANCED FUND EQUITY FUND ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A (INVESTOR) SHARES: Proceeds from shares issued $ 193,612 $ 254,543 $ 8,180,284 $ 11,957,002 Dividends reinvested 10,110 3,367 63,443 35,456 Cost of shares redeemed (240,793) (103,414) (5,015,569) (8,621,362) ------------ ----------- ------------- ------------ Class A (Investor) Shares capital transactions (37,071) 154,496 3,228,158 3,371,096 ------------ ----------- ------------- ------------ ............................................................................................................................ CLASS B SHARES: Proceeds from shares issued 679,436 1,077,745 853,169 1,081,923 Dividends reinvested 29,958 5,589 -- -- Cost of shares redeemed (230,315) (97,724) (208,591) (279,702) ------------ ----------- ------------- ------------ Class B Shares capital transactions 479,079 985,610 644,578 802,221 ------------ ----------- ------------- ------------ ............................................................................................................................ CLASS C SHARES: Proceeds from shares issued 38,274 2,500 24,206 31,580 Dividends reinvested 1,995 813 -- -- Cost of shares redeemed (7,243) (821) (165,268) (63,795) ------------ ----------- ------------- ------------ Class C Shares capital transactions 33,026 2,492 (141,062) (32,215) ------------ ----------- ------------- ------------ ............................................................................................................................ CLASS Y SHARES: Proceeds from shares issued 2,805,945 2,172,114 45,465,549 120,030,391 Dividends reinvested 369,594 179,778 1,042,585 769,198 Cost of shares redeemed (15,539,174) (3,404,293) (202,592,239) (22,470,055) ------------ ----------- ------------- ------------ Class Y Shares capital transactions (12,363,635) (1,052,401) (156,084,105) 98,329,534 ------------ ----------- ------------- ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $(11,888,601) $ 90,197 $(152,352,431) $102,470,636 ------------ ----------- ------------- ------------ ------------ ----------- ------------- ------------ ............................................................................................................................ SHARE TRANSACTIONS: CLASS A (INVESTOR) SHARES: Issued 24,619 30,620 729,759 986,765 Reinvested 1,298 390 6,026 3,050 Redeemed (29,879) (13,028) (463,074) (672,658) ------------ ----------- ------------- ------------ Change in Class A (Investor) Shares (3,962) 17,982 272,711 317,157 ------------ ----------- ------------- ------------ ............................................................................................................................ CLASS B SHARES: Issued 87,827 130,189 78,761 86,551 Reinvested 3,893 647 -- -- Redeemed (29,803) (12,342) (20,721) (25,209) ------------ ----------- ------------- ------------ Change in Class B Shares 61,917 118,494 58,040 61,342 ------------ ----------- ------------- ------------ ............................................................................................................................ CLASS C SHARES: Issued 4,794 298 2,154 2,531 Reinvested 258 94 -- -- Redeemed (907) (108) (15,839) (6,145) ------------ ----------- ------------- ------------ Change in Class C Shares 4,145 284 (13,685) (3,614) ------------ ----------- ------------- ------------ ............................................................................................................................ CLASS Y SHARES: Issued 353,697 261,958 4,290,203 8,983,553 Reinvested 47,239 20,688 99,898 64,275 Redeemed (1,913,232) (417,055) (17,991,472) (1,940,804) ------------ ----------- ------------- ------------ Change in Class Y Shares (1,512,296) (134,409) (13,601,371) 7,107,024 ------------ ----------- ------------- ------------
40 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
GROWTH AND INCOME FUND MID-CAP FUND ---------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 1,762,934 $ 1,337,897 $ (277,390) $ (304,696) Net realized gains (losses) from investment and options transactions (9,441,001) (24,672,615) 9,437 (18,552,349) Change in unrealized appreciation/depreciation from investments and options 38,518,987 (17,117,988) 33,785,071 (8,355,049) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 30,840,920 (40,452,706) 33,517,118 (27,212,094) ------------ ------------ ------------ ------------ ............................................................................................................................ DIVIDENDS: NET INVESTMENT INCOME: Class A (Investor) Shares (10,010) (2,986) -- -- Class B Shares (2,046) -- -- -- Class Y Shares (2,030,344) (799,787) -- -- ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (2,042,400) (802,773) -- -- ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 7,450,742 (8,951,741) 31,225,520 (3,472,044) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS 36,249,262 (50,207,220) 64,742,638 (30,684,138) ............................................................................................................................ NET ASSETS: Beginning of year 171,271,539 221,478,759 103,480,219 134,164,357 ------------ ------------ ------------ ------------ End of year $207,520,801 $171,271,539 $168,222,857 $103,480,219 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Accumulated net investment income $ 542,460 $ 821,926 $ -- $ -- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 41 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
GROWTH AND INCOME FUND MID-CAP FUND ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A (INVESTOR) SHARES: Proceeds from shares issued $ 900,030 $ 601,471 $ 638,547 $ 577,280 Dividends reinvested 9,705 2,897 -- -- Cost of shares redeemed (576,695) (899,525) (388,850) (212,541) ------------ ------------ ------------ ------------ Class A (Investor) Shares capital transactions 333,040 (295,157) 249,697 364,739 ------------ ------------ ------------ ------------ ............................................................................................................................ CLASS B SHARES: Proceeds from shares issued 945,891 1,229,558 873,543 2,417,457 Dividends reinvested 2,022 -- -- -- Cost of shares redeemed (139,831) (120,487) (429,567) (592,594) ------------ ------------ ------------ ------------ Class B Shares capital transactions 808,082 1,109,071 443,976 1,824,863 ------------ ------------ ------------ ------------ ............................................................................................................................ CLASS C SHARES: Proceeds from shares issued -- -- 25,000 26,336 Cost of shares redeemed -- -- -- (21,556) ------------ ------------ ------------ ------------ Class C Shares capital transactions -- -- 25,000 4,780 ------------ ------------ ------------ ------------ ............................................................................................................................ CLASS Y SHARES: Proceeds from shares issued 33,049,306 16,872,208 -- -- Dividends reinvested 421,341 178,816 -- -- Cost of shares redeemed (27,161,027) (26,816,679) -- -- ------------ ------------ ------------ ------------ Class Y Shares capital transactions 6,309,620 (9,765,655) -- -- ------------ ------------ ------------ ------------ ............................................................................................................................ TRUST SHARES: Proceeds from shares issued -- -- 46,107,032 42,412,795 Cost of shares redeemed -- -- (15,600,185) (48,079,221) ------------ ------------ ------------ ------------ Trust Shares capital transactions -- -- 30,506,847 (5,666,426) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 7,450,742 $ (8,951,741) $ 31,225,520 $ (3,472,044) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ............................................................................................................................ SHARE TRANSACTIONS: CLASS A (INVESTOR) SHARES: Issued 114,468 69,737 90,070 71,687 Reinvested 1,290 308 -- -- Redeemed (78,927) (105,318) (56,634) (28,927) ------------ ------------ ------------ ------------ Change in Class A (Investor) Shares 36,831 (35,273) 33,436 42,760 ------------ ------------ ------------ ------------ ............................................................................................................................ CLASS B SHARES: Issued 125,862 140,389 131,936 305,404 Reinvested 265 -- -- -- Redeemed (18,379) (16,034) (65,762) (85,941) ------------ ------------ ------------ ------------ Change in Class B Shares 107,748 124,355 66,174 219,463 ------------ ------------ ------------ ------------ ............................................................................................................................ CLASS C SHARES: Issued -- -- 3,671 3,391 Redeemed -- -- -- (2,753) ------------ ------------ ------------ ------------ Change in Class C Shares -- -- 3,671 638 ------------ ------------ ------------ ------------ .............................................................................................................................. CLASS Y SHARES: Issued 4,459,324 1,990,822 -- -- Reinvested 56,068 19,925 -- -- Redeemed (3,647,279) (3,209,191) -- -- ------------ ------------ ------------ ------------ Change in Class Y Shares 868,113 (1,198,444) -- -- ------------ ------------ ------------ ------------ ............................................................................................................................ TRUST SHARES: Issued -- -- 6,913,528 5,158,172 Redeemed -- -- (2,336,030) (6,022,361) ------------ ------------ ------------ ------------ Change in Trust Shares -- -- 4,577,498 (864,189) ------------ ------------ ------------ ------------
42 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND ------------------------------------ ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 2,282,789 $ 1,520,651 $ 1,123 $ (20,655) Net realized gains (losses) from investment and foreign currency transactions (889,405) (14,464,908) 194,623 (570,945) Change in unrealized appreciation/depreciation from investments and foreign currencies 43,679,183 (13,761,843) 2,572,761 (753,586) ------------- ------------ ----------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 45,072,567 (26,706,100) 2,768,507 (1,345,186) ------------- ------------ ----------- ----------- ............................................................................................................................ DIVIDENDS: NET INVESTMENT INCOME: Class A (Investor) Shares -- -- (71,236) (83,152) Class B Shares -- -- (3,341) (894) Class C Shares -- -- (54) -- Advisor Shares (3,705,000) (2,797,529) -- -- NET REALIZED GAINS FROM INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS: Class A (Investor) Shares -- -- -- (189,407) Class B Shares -- -- -- (7,926) Class C Shares -- -- -- (3,527) ------------- ------------ ----------- ----------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (3,705,000) (2,797,529) (74,631) (284,906) ------------- ------------ ----------- ----------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (112,413,621) 39,713,366 713,058 2,143,644 ------------- ------------ ----------- ----------- CHANGE IN NET ASSETS (71,046,054) 10,209,737 3,406,934 513,552 ........................................................................................................................... NET ASSETS: Beginning of year 194,703,733 184,493,996 7,886,799 7,373,247 ------------- ------------ ----------- ----------- End of year $ 123,657,679 $194,703,733 $11,293,733 $ 7,886,799 ------------- ------------ ----------- ----------- ------------- ------------ ----------- ----------- Accumulated net investment income $ 3,732,087 $ 3,242,965 $ 77,699 $ 56,257 ------------- ------------ ----------- ----------- ------------- ------------ ----------- -----------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 43 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND ------------------------------------- --------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - --------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A (INVESTOR) SHARES: Proceeds from shares issued $ -- $ -- $ 74,256,371 $ 6,142,944 Dividends reinvested -- -- 69,478 270,064 Cost of shares redeemed -- -- (73,955,056) (4,650,406) --------------- ------------- ------------ ----------- Class A (Investor) Shares capital transactions -- -- 370,793 1,762,602 --------------- ------------- ------------ ----------- .......................................................................................................................... CLASS B SHARES: Proceeds from shares issued -- -- 400,571 436,595 Dividends reinvested -- -- 3,234 8,694 Cost of shares redeemed -- -- (67,981) (40,890) --------------- ------------- ------------ ----------- Class B Shares capital transactions -- -- 335,824 404,399 --------------- ------------- ------------ ----------- .......................................................................................................................... CLASS C SHARES: Proceeds from shares issued -- -- 10,780 8,840 Dividends reinvested -- -- 54 3,527 Cost of shares redeemed -- -- (4,393) (35,724) --------------- ------------- ------------ ----------- Class C Shares capital transactions -- -- 6,441 (23,357) --------------- ------------- ------------ ----------- .......................................................................................................................... ADVISOR SHARES: Proceeds from shares issued 1,033,987,233 638,506,248 -- -- Dividends reinvested 2,711,050 1,765,422 -- -- Cost of shares redeemed (1,149,111,904) (600,558,304) -- -- --------------- ------------- ------------ ----------- Advisor Shares capital transactions (112,413,621) 39,713,366 -- -- --------------- ------------- ------------ ----------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (112,413,621) $ 39,713,366 $ 713,058 $ 2,143,644 --------------- ------------- ------------ ----------- --------------- ------------- ------------ ----------- .......................................................................................................................... SHARE TRANSACTIONS: CLASS A (INVESTOR) SHARES: Issued -- -- 7,113,411 534,842 Reinvested -- -- 7,075 22,454 Redeemed -- -- (6,989,865) (422,514) --------------- ------------- ------------ ----------- Change in Class A (Investor) Shares -- -- 130,621 134,782 --------------- ------------- ------------ ----------- .......................................................................................................................... CLASS B SHARES: Issued -- -- 40,360 38,648 Reinvested -- -- 339 744 Redeemed -- -- (7,369) (3,888) --------------- ------------- ------------ ----------- Change in Class B Shares -- -- 33,330 35,504 --------------- ------------- ------------ ----------- .......................................................................................................................... CLASS C SHARES: Issued -- -- 1,049 885 Reinvested -- -- 6 299 Redeemed -- -- (439) (3,453) --------------- ------------- ------------ ----------- Change in Class C Shares -- -- 616 (2,269) --------------- ------------- ------------ ----------- .......................................................................................................................... ADVISOR SHARES: Issued 92,631,040 53,518,520 -- -- Reinvested 255,518 134,868 -- -- Redeemed (101,337,125) (50,202,271) -- -- --------------- ------------- ------------ ----------- Change in Advisor Shares (8,450,567) 3,451,117 -- -- --------------- ------------- ------------ -----------
44 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) ................................................................................
SMALL CAP EQUITY FUND OPPORTUNITY FUND -------------------------------------- --------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment loss $ (1,565,842) $ (1,827,171) $ (234,805) $ (244,098) Net realized gains (losses) from investment transactions 4,018,810 (49,966,937) 275,213 (3,360,778) Change in unrealized appreciation/depreciation from investments 65,152,323 2,106,990 4,550,177 230,012 ------------ ------------ ----------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 67,605,291 (49,687,118) 4,590,585 (3,374,864) ------------ ------------ ----------- ----------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 67,780,861 60,107,797 2,364,162 3,847,236 ------------ ------------ ----------- ----------- CHANGE IN NET ASSETS 135,386,152 10,420,679 6,954,747 472,372 .......................................................................................................................... NET ASSETS: Beginning of year 190,685,659 180,264,980 14,086,425 13,614,053 ------------ ------------ ----------- ----------- End of year $326,071,811 $190,685,659 $21,041,172 $14,086,425 ------------ ------------ ----------- ----------- ------------ ------------ ----------- ----------- Accumulated net investment income $ -- $ -- $ -- $ -- ------------ ------------ ----------- ----------- ------------ ------------ ----------- -----------
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 45 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
SMALL CAP EQUITY FUND OPPORTUNITY FUND ------------------------------ ------------------------------ FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A (INVESTOR) SHARES: Proceeds from shares issued $ -- $ -- $ 5,083,521 $ 4,308,030 Cost of shares redeemed -- -- (3,421,035) (2,279,481) ------------- ------------- ----------- ----------- Class A (Investor) Shares capital transactions -- -- 1,662,486 2,028,549 ------------- ------------- ----------- ----------- ........................................................................................................................... CLASS B SHARES: Proceeds from shares issued -- -- 1,009,644 2,185,532 Cost of shares redeemed -- -- (281,855) (368,574) ------------- ------------- ----------- ----------- Class B Shares capital transactions -- -- 727,789 1,816,958 ------------- ------------- ----------- ----------- ........................................................................................................................... CLASS C SHARES: Proceeds from shares issued -- -- 65,774 109,966 Cost of shares redeemed -- -- (91,887) (108,237) ------------- ------------- ----------- ----------- Class C Shares capital transactions -- -- (26,113) 1,729 ------------- ------------- ----------- ----------- ........................................................................................................................... ADVISOR SHARES: Proceeds from shares issued 204,930,414 166,252,280 -- -- Cost of shares redeemed (137,149,553) (106,144,483) -- -- ------------- ------------- ----------- ----------- Advisor Shares capital transactions 67,780,861 60,107,797 -- -- ------------- ------------- ----------- ----------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 67,780,861 $ 60,107,797 $ 2,364,162 $ 3,847,236 ------------- ------------- ----------- ----------- ------------- ------------- ----------- ----------- ........................................................................................................................... SHARE TRANSACTIONS: CLASS A (INVESTOR) SHARES: Issued -- -- 554,127 456,632 Redeemed -- -- (395,887) (241,867) ------------- ------------- ----------- ----------- Change in Class A (Investor) Shares -- -- 158,240 214,765 ------------- ------------- ----------- ----------- ........................................................................................................................... CLASS B SHARES: Issued -- -- 119,900 217,277 Redeemed -- -- (35,134) (42,806) ------------- ------------- ----------- ----------- Change in Class B Shares -- -- 84,766 174,471 ------------- ------------- ----------- ----------- ........................................................................................................................... CLASS C SHARES: Issued -- -- 7,537 10,963 Redeemed -- -- (11,212) (11,072) ------------- ------------- ----------- ----------- Change in Class C Shares -- -- (3,675) (109) ------------- ------------- ----------- ----------- ........................................................................................................................... ADVISOR SHARES: Issued 19,641,503 14,288,390 -- -- Redeemed (13,824,591) (9,644,921) -- -- ------------- ------------- ----------- ----------- Change in Advisor Shares 5,816,912 4,643,469 -- -- ------------- ------------- ----------- -----------
46 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements. HSBC INVESTOR FUNDS -- LIMITED MATURITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS -------------------------------------- ------------------------------------ NET REALIZED AND NET NET ASSET UNREALIZED GAINS TOTAL REALIZED VALUE, NET (LOSSES) FROM FROM NET GAINS FROM BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Period ended October 31, 2001 (b) $10.04 0.33 0.54 0.87 (0.33) -- (0.33) Year ended October 31, 2002 10.58 0.44 (0.10) 0.34 (0.44) (0.05) (0.49) Year ended October 31, 2003 10.43 0.33 0.08 0.41 (0.37) -- (0.37) - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2001 (g) $10.07 0.25 0.52 0.77 (0.25) -- (0.25) Year ended October 31, 2002 10.59 0.36 (0.09) 0.27 (0.36) (0.05) (0.41) Year ended October 31, 2003 10.45 0.25 0.08 0.33 (0.29) -- (0.29) - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2001 (i) $10.07 0.26 0.51 0.77 (0.26) -- (0.26) Year ended October 31, 2002 10.58 0.36 (0.09) 0.27 (0.36) (0.05) (0.41) Year ended October 31, 2003 10.44 0.25 0.09 0.34 (0.29) -- (0.29) - ------------------------------------------------------------------------------------------------------------------------------ CLASS Y SHARES Period ended October 31, 2001 (j) $10.00 0.37 0.59 0.96 (0.37) -- (0.37) Year ended October 31, 2002 10.59 0.46 (0.09) 0.37 (0.46) (0.05) (0.51) Year ended October 31, 2003 10.45 0.33 0.10 0.43 (0.40) -- (0.40) - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA -------------------------------------------------------------- RATIO OF NET RATIO OF INVESTMENT RATIO OF NET ASSET NET ASSETS AT EXPENSES INCOME TO EXPENSES VALUE, END TOTAL END OF TO AVERAGE AVERAGE TO AVERAGE PORTFOLIO OF PERIOD RETURN PERIOD(000'S) NET ASSETS NET ASSETS NET ASSETS TURNOVER(a) CLASS A (INVESTOR) SHARES Period ended October 31, 2001 (b) $10.58 8.78%(c)(d) $ 977 1.10%(e) 4.27%(e) 1.49%(e)(f) 102.01% Year ended October 31, 2002 10.43 3.34%(d) 1,608 0.96% 4.14% 0.96% 44.04% Year ended October 31, 2003 10.47 3.97%(d) 3,309 1.01% 2.99% 1.01% 98.42% - --------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2001 (g) $10.59 8.02%(c)(h) $ 896 1.85%(e) 3.52%(e) 7.59%(e)(f) 102.01% Year ended October 31, 2002 10.45 2.65%(h) 4,178 1.70% 3.30% 1.70% 44.04% Year ended October 31, 2003 10.49 3.19%(h) 6,443 1.73% 2.30% 1.73% 98.42% - --------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2001 (i) $10.58 7.80%(c)(h) $ 161 1.85%(e) 3.60%(e) 17.61%(e)(f) 102.01% Year ended October 31, 2002 10.44 2.65%(h) 1,759 1.70% 3.26% 1.70% 44.04% Year ended October 31, 2003 10.49 3.29%(h) 2,544 1.73% 2.31% 1.73% 98.42% - --------------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Period ended October 31, 2001 (j) $10.59 9.78%(c) $ 67,315 0.85%(e) 4.59%(e) 0.85%(e) 102.01% Year ended October 31, 2002 10.45 3.69% 94,886 0.71% 4.42% 0.71% 44.04% Year ended October 31, 2003 10.48 4.12% 31,368 0.69% 3.62% 0.69% 98.42% - ---------------------------------------------------------------------------------------------------------------------------
(a) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (b) Class A (Investor) Shares commenced operations on February 7, 2001. (c) Not annualized. (d) Excludes sales charge. (e) Annualized. (f) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (g) Class B Shares commenced operations on February 15, 2001. (h) Excludes redemption charge. (i) Class C Shares commenced operations on February 13, 2001. (j) Class Y Shares commenced operations on January 23, 2001. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 47 HSBC ADVISOR FUNDS TRUST -- FIXED INCOME FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES ------------------------------------------ NET REALIZED AND UNREALIZED GAINS NET ASSET (LOSSES) FROM TOTAL VALUE, NET INVESTMENT AND FROM BEGINNING OF INVESTMENT FUTURES INVESTMENT PERIOD INCOME TRANSACTIONS ACTIVITIES - ---------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 $10.81 0.62 (0.51) 0.11 Year ended October 31, 2000 10.01 0.69 (0.02) 0.67 Year ended October 31, 2001 9.99 0.67 0.80 1.47 Year ended October 31, 2002 10.81 0.55 (0.14) 0.41 Year ended October 31, 2003 10.63 0.41 0.19 0.60 - ---------------------------------------------------------------------------------------------- DIVIDENDS --------------------------------------- NET REALIZED GAINS FROM NET ASSETS NET INVESTMENT VALUE, INVESTMENT AND FUTURES TOTAL END OF TOTAL INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN - -------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 (0.62) (0.29) (0.91) $10.01 1.01% Year ended October 31, 2000 (0.69) -- (0.69) 9.99 6.98% Year ended October 31, 2001 (0.65) -- (0.65) 10.81 15.11% Year ended October 31, 2002 (0.59) -- (0.59) 10.63 3.94% Year ended October 31, 2003 (0.50) -- (0.50) 10.73 5.71% - -------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA -------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT AT END OF EXPENSES INCOME TO PERIOD TO AVERAGE AVERAGE NET PORTFOLIO (000'S) NET ASSETS ASSET TURNOVER(a) - --------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 $114,405 0.69% 6.31% 433.26% Year ended October 31, 2000 134,458 0.61% 6.66% 440.49% Year ended October 31, 2001 150,580 0.63% 6.45% 341.26% Year ended October 31, 2002 284,841 0.56% 5.06% 77.82% Year ended October 31, 2003 110,968 0.56% 4.30% 70.91% - ---------------------------------------------------------------------------------------------
(a) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. See notes to financial statements. 48 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FUNDS -- BOND FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ---------- NET REALIZED AND UNREALIZED GAINS NET ASSET (LOSSES) FROM TOTAL VALUE, NET INVESTMENT AND FROM NET BEGINNING INVESTMENT FUTURES INVESTMENT INVESTMENT OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME - -------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $10.51 0.57 (0.49) 0.08 (0.57) Year ended October 31, 2000 9.78 0.61 (0.01) 0.60 (0.62) Year ended October 31, 2001 9.76 0.60 0.77 1.37 (0.58) Year ended October 31, 2002 10.55 0.49 (0.14) 0.35 (0.52) Year ended October 31, 2003 10.38 0.40 0.13 0.53 (0.43) - -------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 $10.51 0.49 (0.49) -- (0.49) Year ended October 31, 2000 9.78 0.54 (0.01) 0.53 (0.54) Year ended October 31, 2001 9.77 0.52 0.76 1.28 (0.50) Year ended October 31, 2002 10.55 0.41 (0.13) 0.28 (0.44) Year ended October 31, 2003 10.39 0.32 0.13 0.45 (0.35) - -------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) $10.46 0.47 (0.45) 0.02 (0.47) Year ended October 31, 2000 9.77 0.55 (0.01) 0.54 (0.55) Year ended October 31, 2001 9.76 0.51 0.77 1.28 (0.50) Year ended October 31, 2002 10.54 0.41 (0.13) 0.28 (0.44) Year ended October 31, 2003 10.38 0.32 0.13 0.45 (0.35) - -------------------------------------------------------------------------------------------------------- DIVIDENDS ------------------------ NET REALIZED GAINS FROM INVESTMENT AND FUTURES TOTAL TRANSACTIONS DIVIDENDS - --------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 (0.24) (0.81) Year ended October 31, 2000 -- (0.62) Year ended October 31, 2001 -- (0.58) Year ended October 31, 2002 -- (0.52) Year ended October 31, 2003 -- (0.43) - --------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 (0.24) (0.73) Year ended October 31, 2000 -- (0.54) Year ended October 31, 2001 -- (0.50) Year ended October 31, 2002 -- (0.44) Year ended October 31, 2003 -- (0.35) - --------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) (0.24) (0.71) Year ended October 31, 2000 -- (0.55) Year ended October 31, 2001 -- (0.50) Year ended October 31, 2002 -- (0.44) Year ended October 31, 2003 -- (0.35) - --------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------------- RATIO OF NET NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF VALUE, AT END OF EXPENSES INCOME TO EXPENSES TO END OF TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE PORTFOLIO PERIOD RETURN (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b) - ----------------------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $ 9.78 0.68%(c) $ 4,331 1.07% 5.84% 2.62% 433.26% Year ended October 31, 2000 9.76 6.39%(c) 3,828 1.10% 6.13% 3.31% 440.49% Year ended October 31, 2001 10.55 14.41%(c) 6,683 1.10% 5.92% 2.61% 341.26% Year ended October 31, 2002 10.38 3.44%(c) 12,053 1.10% 4.52% 1.47% 77.82% Year ended October 31, 2003 10.48 5.17%(c) 14,143 1.10% 3.76% 1.21% 70.91% - ----------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 $ 9.78 (0.01)%(d) $ 345 1.79% 5.13% 3.37% 433.26% Year ended October 31, 2000 9.77 5.67%(d) 279 1.85% 5.38% 4.03% 440.49% Year ended October 31, 2001 10.55 13.43%(d) 1,494 1.85% 5.04% 3.32% 341.26% Year ended October 31, 2002 10.39 2.76%(d) 6,124 1.85% 3.66% 2.18% 77.82% Year ended October 31, 2003 10.49 4.38%(d) 7,430 1.85% 3.01% 1.96% 70.91% - ----------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) $ 9.77 0.11%(d)(e) $ 152 1.95%(f) 4.96%(f) 3.50%(f) 433.26% Year ended October 31, 2000 9.76 5.71%(d) 138 1.85% 5.38% 4.05% 440.49% Year ended October 31, 2001 10.54 13.44%(d) 526 1.85% 5.11% 3.34% 341.26% Year ended October 31, 2002 10.38 2.77%(d) 983 1.85% 3.75% 2.21% 77.82% Year ended October 31, 2003 10.48 4.39%(d) 606 1.85% 3.06% 1.97% 70.91% - -----------------------------------------------------------------------------------------------------------------------------
(a) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (b) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (c) Excludes sales charge. (d) Excludes redemption charge. (e) Not annualized. (f) Annualized. (g) Class C Shares commenced operations on November 4, 1998. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 49 HSBC INVESTOR FUNDS -- NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES ------------------------------------------ NET REALIZED AND UNREALIZED GAINS NET ASSET (LOSSES) FROM VALUE, NET INVESTMENT AND TOTAL FROM BEGINNING OF INVESTMENT FUTURES INVESTMENT PERIOD INCOME TRANSACTIONS ACTIVITIES - ---------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $10.93 0.46 (0.83) (0.37) Year ended October 31, 2000 10.08 0.46 0.33 0.79 Year ended October 31, 2001 10.39 0.41 0.54 0.95 Year ended October 31, 2002 10.93 0.38 0.16 0.54 Year ended October 31, 2003 11.09 0.38 0.12 0.50 - ---------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 $10.92 0.38 (0.83) (0.45) Year ended October 31, 2000 10.07 0.39 0.33 0.72 Year ended October 31, 2001 10.38 0.33 0.54 0.87 Year ended October 31, 2002 10.92 0.30 0.16 0.46 Year ended October 31, 2003 11.08 0.30 0.12 0.42 - ---------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) $10.90 0.34 (0.77) (0.43) Year ended October 31, 2000 10.11 0.39 0.33 0.72 Year ended October 31, 2001 10.42 0.33 0.54 0.87 Year ended October 31, 2002 10.96 0.30 0.16 0.46 Year ended October 31, 2003 11.12 0.30 0.13 0.43 - ---------------------------------------------------------------------------------------------- CLASS Y SHARES Year ended October 31, 1999 $10.93 0.48 (0.84) (0.36) Year ended October 31, 2000 10.07 0.49 0.34 0.83 Year ended October 31, 2001 10.39 0.44 0.54 0.98 Year ended October 31, 2002 10.93 0.41 0.16 0.57 Year ended October 31, 2003 11.09 0.41 0.12 0.53 - ---------------------------------------------------------------------------------------------- DIVIDENDS --------------------------------------- NET REALIZED GAINS FROM NET ASSET NET INVESTMENT AND VALUE, INVESTMENT FUTURES TOTAL END OF TOTAL INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN - ------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Year ended October 31, 1999 (0.46) (0.02) (0.48) $10.08 (3.62)%(b) Year ended October 31, 2000 (0.46) (0.02) (0.48) 10.39 8.03 %(b) Year ended October 31, 2001 (0.41) -- (0.41) 10.93 9.26 %(b) Year ended October 31, 2002 (0.38) -- (0.38) 11.09 5.08 %(b) Year ended October 31, 2003 (0.38) -- (0.38) 11.21 4.57 %(b) - ------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 1999 (0.38) (0.02) (0.40) $10.07 (4.30)%(f) Year ended October 31, 2000 (0.39) (0.02) (0.41) 10.38 7.27 %(f) Year ended October 31, 2001 (0.33) -- (0.33) 10.92 8.44 %(f) Year ended October 31, 2002 (0.30) -- (0.30) 11.08 4.30 %(f) Year ended October 31, 2003 (0.30) -- (0.30) 11.20 3.80 %(f) - ------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 1999 (g) (0.34) (0.02) (0.36) $10.11 (4.10)%(d)(f) Year ended October 31, 2000 (0.39) (0.02) (0.41) 10.42 7.23 %(f) Year ended October 31, 2001 (0.33) -- (0.33) 10.96 8.40 %(f) Year ended October 31, 2002 (0.30) -- (0.30) 11.12 4.28 %(f) Year ended October 31, 2003 (0.30) -- (0.30) 11.25 3.87 %(f) - ------------------------------------------------------------------------------------------------------ CLASS Y SHARES Year ended October 31, 1999 (0.48) (0.02) (0.50) $10.07 (3.45)% Year ended October 31, 2000 (0.49) (0.02) (0.51) 10.39 8.41 % Year ended October 31, 2001 (0.44) -- (0.44) 10.93 9.53 % Year ended October 31, 2002 (0.41) -- (0.41) 11.09 5.34 % Year ended October 31, 2003 (0.41) -- (0.41) 11.21 4.84 % - ------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME EXPENSES TO PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO (000'S) NET ASSETS NET ASSETS NET ASSETS TURNOVER(a) - --------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $17,568 0.96% 4.22% 1.21%(c) 46.56% Year ended October 31, 2000 12,401 0.93% 4.60% 1.06%(c) 34.12% Year ended October 31, 2001 17,722 0.95% 3.91% 1.07%(c) 0.00% Year ended October 31, 2002 16,341 0.95% 3.52% 0.95%(c) 30.70% Year ended October 31, 2003 22,326 0.91% 3.39% 0.91% 29.79% - --------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 $ 564 1.71% 3.48% 1.96%(c) 46.56% Year ended October 31, 2000 828 1.70% 3.81% 1.74%(c) 34.12% Year ended October 31, 2001 5,619 1.70% 3.05% 1.82%(c) 0.00% Year ended October 31, 2002 12,699 1.70% 2.74% 1.70%(c) 30.70% Year ended October 31, 2003 18,352 1.66% 2.64% 1.66% 29.79% - --------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) $ 256 1.70%(e) 3.46%(e) 2.02%(c)(e) 46.56% Year ended October 31, 2000 416 1.71% 3.77% 1.73%(c) 34.12% Year ended October 31, 2001 1,523 1.70% 3.04% 1.83%(c) 0.00% Year ended October 31, 2002 2,608 1.70% 2.74% 1.70%(c) 30.70% Year ended October 31, 2003 3,252 1.66% 2.64% 1.66% 29.79% - --------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Year ended October 31, 1999 $ 8,619 0.71% 4.49% 0.96%(c) 46.56% Year ended October 31, 2000 9,514 0.69% 4.82% 0.78%(c) 34.12% Year ended October 31, 2001 14,989 0.70% 4.19% 0.83%(c) 0.00% Year ended October 31, 2002 19,753 0.70% 3.76% 0.70%(c) 30.70% Year ended October 31, 2003 20,290 0.67% 3.67% 0.67% 29.79% - ---------------------------------------------------------------------------------------------------------------
(a) Portfolio turnover is calculated on the basis of the fund as a whole, without the distinguishing between the classes of shares issued. (b) Excludes sales charge. (c) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (d) Not annualized. (e) Annualized. (f) Excludes redemption charge. (g) Class C Shares commenced operations on November 4, 1998. See notes to financial statements. 50 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FUNDS -- BALANCED FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS ---------------------------------------- ---------------------- NET REALIZED AND UNREALIZED NET ASSET GAINS (LOSSES) TOTAL NET ASSET VALUE, NET FROM FROM NET VALUE, BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL END OF OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD - ------------------------------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Period ended October 31, 2001 (c) $ 9.55 0.11 (1.02) (0.91) (0.09) (0.09) $8.55 Year ended October 31, 2002 8.55 0.15 (0.92) (0.77) (0.09) (0.09) 7.69 Year ended October 31, 2003 7.69 0.10 0.68 0.78 (0.20) (0.20) 8.27 - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2001 (g) $ 9.80 0.08 (1.25) (1.17) (0.08) (0.08) $8.55 Year ended October 31, 2002 8.55 0.13 (0.97) (0.84) (0.07) (0.07) 7.64 Year ended October 31, 2003 7.64 0.04 0.69 0.73 (0.15) (0.15) 8.22 - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2001 (i) $ 9.78 0.07 (1.24) (1.17) (0.06) (0.06) $8.55 Year ended October 31, 2002 8.55 0.12 (0.96) (0.84) (0.06) (0.06) 7.65 Year ended October 31, 2003 7.65 0.04 0.69 0.73 (0.15) (0.15) 8.23 - ------------------------------------------------------------------------------------------------------------------------------ CLASS Y SHARES Period ended October 31, 2001 (j) $10.00 0.16 (1.45) (1.29) (0.09) (0.09) $8.62 Year ended October 31, 2002 8.62 0.16 (0.93) (0.77) (0.10) (0.10) 7.75 Year ended October 31, 2003 7.75 0.15* 0.66 0.81 (0.22) (0.22) 8.34 - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME TO EXPENSES TO PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO TOTAL RETURN (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b) - -------------------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Period ended October 31, 2001 (c) (9.04)%(d)(e) $ 313 1.20%(f) 1.88%(f) 2.05%(f) 39.95% Year ended October 31, 2002 (9.07)%(e) 419 1.20% 1.71% 1.88% 58.06% Year ended October 31, 2003 10.39 %(e) 419 1.20% 1.43% 2.90% 89.56% - -------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2001 (g) (11.41)%(d)(h) $ 641 1.95%(f) 1.14%(f) 2.78%(f) 39.95% Year ended October 31, 2002 (9.93)%(h) 1,479 1.95% 0.97% 2.63% 58.06% Year ended October 31, 2003 9.70 %(h) 2,099 1.95% 0.63% 3.86% 89.56% - -------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2001 (i) (11.46)%(d)(h) $ 107 1.95%(f) 1.19%(f) 2.71%(f) 39.95% Year ended October 31, 2002 (9.85)%(h) 97 1.95% 0.96% 2.63% 58.06% Year ended October 31, 2003 9.67 %(h) 139 1.95% 0.62% 3.89% 89.56% - -------------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Period ended October 31, 2001 (j) (12.95)%(d) $15,152 0.95%(f) 2.29%(f) 1.58%(f) 39.95% Year ended October 31, 2002 (9.02)% 12,589 0.95% 1.96% 1.63% 58.06% Year ended October 31, 2003 10.70 % 932 0.95% 1.86% 1.73% 89.56% - --------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (b) Portfolio turnover is calculated on the basis of the fund as a whole, without the distinguishing between the classes of shares issued. (c) Class A (Investor) Shares commenced operations on February 20, 2001. (d) Not annualized. (e) Excludes sales charge. (f) Annualized. (g) Class B Shares commenced operations on February 9, 2001. (h) Excludes redemption charge. (i) Class C Shares commenced operations on February 13, 2001. (j) Class Y Shares commenced operations on January 18, 2001. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 51 HSBC INVESTOR FUNDS -- EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS --------------------------------- ----------------------------------- NET REALIZED AND UNREALIZED NET GAINS (LOSSES) REALIZED NET ASSET NET FROM TOTAL GAINS FROM NET ASSET VALUE, INVESTMENT INVESTMENT FROM NET INVESTMENT VALUE, BEGINNING INCOME AND FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL END OF OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS PERIOD - ------------------------------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $16.95 0.05 3.32 3.37 (0.04) (0.39) (0.43) $19.89 Year ended October 31, 2000 19.89 0.06 (0.51) (0.45) (0.07) (1.89) (1.96) 17.48 Year ended October 31, 2001 17.48 0.03 (4.48) (4.45) (0.02) -- (0.02) 13.01 Year ended October 31, 2002 13.01 0.07 (2.76) (2.69) (0.03) -- (0.03) 10.29 Year ended October 31, 2003 10.29 0.04 1.80 1.84 (0.04) -- (0.04) 12.09 - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 1999 $16.92 (0.08) 3.30 3.22 (0.01) (0.39) (0.40) $19.74 Year ended October 31, 2000 19.74 (0.07) (0.52) (0.59) -- (1.89) (1.89) 17.26 Year ended October 31, 2001 17.26 (0.08) (4.40) (4.48) -- -- -- 12.78 Year ended October 31, 2002 12.78 (0.04) (2.70) (2.74) -- -- -- 10.04 Year ended October 31, 2003 10.04 (0.04) 1.76 1.72 -- -- -- 11.76 - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 1999(d) $17.08 -- 3.19 3.19 (0.05) (0.39) (0.44) $19.83 Year ended October 31, 2000 19.83 (0.07) (0.51) (0.58) -- (1.89) (1.89) 17.36 Year ended October 31, 2001 17.36 (0.10) (4.42) (4.52) -- -- -- 12.84 Year ended October 31, 2002 12.84 (0.05) (2.69) (2.74) -- -- -- 10.10 Year ended October 31, 2003 10.10 (0.04) 1.76 1.72 -- -- -- 11.82 - ------------------------------------------------------------------------------------------------------------------------------ CLASS Y SHARES Year ended October 31, 1999 $16.95 0.10 3.32 3.42 (0.09) (0.39) (0.48) $19.89 Year ended October 31, 2000 19.89 0.10 (0.51) (0.41) (0.11) (1.89) (2.00) 17.48 Year ended October 31, 2001 17.48 0.06 (4.47) (4.41) (0.06) -- (0.06) 13.01 Year ended October 31, 2002 13.01 0.12 (2.78) (2.66) (0.06) -- (0.06) 10.29 Year ended October 31, 2003 10.29 0.06 1.81 1.87 (0.07) -- (0.07) 12.09 - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------- RATIO OF NET INVESTMENT NET ASSETS RATIO OF INCOME AT END OF EXPENSES TO (LOSS) TO PERIOD AVERAGE AVERAGE PORTFOLIO TOTAL RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a) - ------------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Year ended October 31, 1999 20.23 %(b) $ 27,942 0.94% 0.26% 70.85% Year ended October 31, 2000 (2.38)%(b) 22,558 0.93% 0.34% 91.81% Year ended October 31, 2001 (25.49)%(b) 17,223 1.01% 0.14% 51.65% Year ended October 31, 2002 (20.74)%(b) 16,881 0.96% 0.34% 62.60% Year ended October 31, 2003 17.94 %(b) 23,131 1.07% 0.31% 72.30% - ------------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 1999 19.32 %(c) $ 1,775 1.69% (0.50)% 70.85% Year ended October 31, 2000 (3.13)%(c) 1,604 1.65% (0.40)% 91.81% Year ended October 31, 2001 (25.96)%(c) 1,389 1.76% (0.61)% 51.65% Year ended October 31, 2002 (21.44)%(c) 1,708 1.70% (0.41)% 62.60% Year ended October 31, 2003 17.13 %(c) 2,682 1.82% (0.44)% 72.30% - ------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 1999(d) 19.05 %(c)(e) $ 1,626 1.33%(f) (0.16)%(f) 70.85% Year ended October 31, 2000 (3.11)%(c) 1,204 1.65% (0.37)% 91.81% Year ended October 31, 2001 (26.04)%(c) 768 1.75% (0.60)% 51.65% Year ended October 31, 2002 (21.34)%(c) 568 1.71% (0.43)% 62.60% Year ended October 31, 2003 17.03 %(c) 503 1.79% (0.42)% 72.30% - ------------------------------------------------------------------------------------------------------------ CLASS Y SHARES Year ended October 31, 1999 20.59 % $245,342 0.69% 0.51% 70.85% Year ended October 31, 2000 (2.19)% 204,772 0.68% 0.58% 91.81% Year ended October 31, 2001 (25.27)% 127,306 0.75% 0.40% 51.65% Year ended October 31, 2002 (20.53)% 173,738 0.70% 0.60% 62.60% Year ended October 31, 2003 18.26 % 39,751 0.72% 0.62% 72.30% - ------------------------------------------------------------------------------------------------------------
(a) Portfolio turnover is calculated on the basis of the fund as a whole, without the distinguishing between the classes of shares issued. (b) Excludes sales charge. (c) Excludes redemption charge. (d) Class C Shares commenced operations on November 4, 1998. (e) Not annualized. (f) Annualized. See notes to financial statements. 52 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FUNDS -- GROWTH AND INCOME FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------- ---------------------- NET REALIZED AND NET ASSET NET UNREALIZED GAINS NET ASSET VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET VALUE, BEGINNING OF INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD - ------------------------------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Period ended October 31, 2001 (b) $10.06 0.01 (1.15) (1.14) (0.01) (0.01) $8.91 Year ended October 31, 2002 8.91 0.04 (1.73) (1.69) (0.01) (0.01) 7.21 Year ended October 31, 2003 7.21 0.06 1.18 1.24 (0.06) (0.06) 8.39 - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2001 (f) $ 9.54 (0.01) (0.64) (0.65) (0.01) (0.01) $8.88 Year ended October 31, 2002 8.88 (0.00)* (1.74) (1.74) -- -- 7.14 Year ended October 31, 2003 7.14 (0.01) 1.18 1.17 (0.01) (0.01) 8.30 - ------------------------------------------------------------------------------------------------------------------------------ CLASS Y SHARES Period ended October 31, 2001 (h) $10.00 0.02 (1.09) (1.07) (0.01) (0.01) $8.92 Year ended October 31, 2002 8.92 0.06 (1.73) (1.67) (0.03) (0.03) 7.22 Year ended October 31, 2003 7.22 0.07 1.19 1.26 (0.08) (0.08) 8.40 - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT AT END OF EXPENSES TO INCOME (LOSS) PERIOD AVERAGE TO AVERAGE PORTFOLIO TOTAL RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a) - ---------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Period ended October 31, 2001 (b) (12.65)%(c)(d) $ 1,927 1.11%(e) 0.15%(e) 43.13% Year ended October 31, 2002 (18.97)%(d) 1,306 1.01% 0.39% 59.85% Year ended October 31, 2003 17.26 %(d) 1,827 1.04% 0.70% 64.52% - ---------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2001 (f) (10.52)%(c)(g) $ 330 1.84%(e) (0.64)(e) 43.13% Year ended October 31, 2002 (19.59)%(g) 1,154 1.76% (0.30)% 59.85% Year ended October 31, 2003 16.40 %(g) 2,235 1.79% (0.07)% 64.52% - ---------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Period ended October 31, 2001 (h) (9.71)%(c) $219,221 0.82%(e) 0.38%(e) 43.13% Year ended October 31, 2002 (18.76)% 168,812 0.76% 0.66% 59.85% Year ended October 31, 2003 17.63 % 203,458 0.79% 0.96% 64.52% - ----------------------------------------------------------------------------------------------------------------
* Less than $0.005 per share. (a) Portfolio turnover is calculated on the basis of the fund as a whole, without the distinguishing between the classes of shares issued. (b) Class A (Investor) Shares commenced operations on April 12, 2001. (c) Not annualized. (d) Excludes sales charge. (e) Annualized. (f) Class B Shares commenced operations on April 5, 2001. (g) Excludes redemption charge. (h) Class Y Shares commenced operations on April 2, 2001. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 53 HSBC INVESTOR FUNDS -- MID-CAP FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ------------------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) NET REALIZED NET ASSET FROM TOTAL GAINS FROM VALUE, NET INVESTMENT FROM INVESTMENT BEGINNING INVESTMENT AND OPTION INVESTMENT AND OPTION TOTAL OF PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Period ended October 31, 2000 (b) $10.27 (0.01) (0.19) (0.20) -- -- Year ended October 31, 2001 10.07 (0.03) (2.00) (2.03) (0.14) (0.14) Year ended October 31, 2002 7.90 (0.03) (1.57) (1.60) -- -- Year ended October 31, 2003 6.30 (0.03)* 1.68 1.65 -- -- - ------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2000 (f) $10.72 (0.02) (0.64) (0.66) -- -- Year ended October 31, 2001 10.06 (0.08) (2.02) (2.10) (0.14) (0.14) Year ended October 31, 2002 7.82 (0.08) (1.55) (1.63) -- -- Year ended October 31, 2003 6.19 (0.08)* 1.64 1.56 -- -- - ------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2000 (h) $10.04 (0.01) 0.03 (j) 0.02 -- -- Year ended October 31, 2001 10.06 (0.09) (2.01) (2.10) (0.14) (0.14) Year ended October 31, 2002 7.82 (0.08) (1.54) (1.62) -- -- Year ended October 31, 2003 6.20 (0.08)* 1.68 1.60 -- -- - ------------------------------------------------------------------------------------------------------------- TRUST SHARES Period ended October 31, 2000 (i) $10.00 (0.01) 0.09 (j) 0.08 -- -- Year ended October 31, 2001 10.08 (0.01) (2.02) (2.03) (0.14) (0.14) Year ended October 31, 2002 7.91 (0.02) (1.56) (1.58) -- -- Year ended October 31, 2003 6.33 (0.01) 1.69 1.68 -- -- - ------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------ RATIO OF NET NET ASSET NET ASSETS RATIO OF INVESTMENT VALUE, AT END OF EXPENSES LOSS TO END OF TOTAL PERIOD TO AVERAGE AVERAGE PORTFOLIO PERIOD RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a) - ----------------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Period ended October 31, 2000 (b) $10.07 (1.95)%(c)(d) $ 445 1.28%(e) (0.42)%(e) 57.69% Year ended October 31, 2001 7.90 (20.37)%(d) 927 1.13% (0.40)% 112.67% Year ended October 31, 2002 6.30 (20.25)%(d) 1,010 1.08% (0.46)% 140.23% Year ended October 31, 2003 7.95 26.19 %(d) 1,539 1.10% (0.43)% 100.86% - ----------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2000 (f) $10.06 (6.16)%(c)(g) $ 1,557 2.02%(e) (1.17)%(e) 57.69% Year ended October 31, 2001 7.82 (21.09)%(g) 3,827 1.88% (1.16)% 112.67% Year ended October 31, 2002 6.19 (20.84)%(g) 4,391 1.83% (1.21)% 140.23% Year ended October 31, 2003 7.75 25.20 %(g) 6,009 1.85% (1.16)% 100.86% - ----------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2000 (h) $10.06 0.20 %(c)(g) $ 18 2.11%(e) (1.29)%(e) 57.69% Year ended October 31, 2001 7.82 (21.09)%(g) 21 1.87% (1.13)% 112.67% Year ended October 31, 2002 6.20 (20.72)%(g) 20 1.83% (1.20)% 140.23% Year ended October 31, 2003 7.80 25.81 %(g) 54 1.85% (1.23)% 100.86% - ----------------------------------------------------------------------------------------------------------------------- TRUST SHARES Period ended October 31, 2000 (i) $10.08 0.80 %(c) $108,487 1.01%(e) (0.22)%(e) 57.69% Year ended October 31, 2001 7.91 (20.34)% 129,390 0.87% (0.13)% 112.67% Year ended October 31, 2002 6.33 (19.97)% 98,059 0.82% (0.18)% 140.23% Year ended October 31, 2003 8.01 26.54 % 160,621 0.85% (0.17)% 100.86% - -----------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) Portfolio turnover is calculated on the basis of the fund as a whole, without the distinguishing between the classes of shares issued. (b) Class A (Investor) Shares commenced operations on July 10, 2000. (c) Not annualized. (d) Excludes sales charge. (e) Annualized. (f) Class B Shares commenced operations on July 17, 2000. (g) Excludes redemption charge. (h) Class C Shares commenced operations on August 9, 2000. (i) Trust Shares commenced operations on July 1, 2000. (j) The amount shown for a share outstanding throughout the period does not accord with the change in aggregate gains and losses in the portfolio of securities during the period because of the timing of sales and purchases of fund shares in relation to fluctuating values during the period. See notes to financial statements. 54 HSBC INVESTOR FAMILY OF FUNDS HSBC ADVISOR FUNDS TRUST -- INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES ------------------------------ NET REALIZED AND UNREALIZED GAINS NET ASSET (LOSSES) FROM VALUE, NET INVESTMENT AND BEGINNING OF INVESTMENT FOREIGN CURRENCY PERIOD INCOME TRANSACTIONS - ---------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 $13.24 0.09 5.87 Year ended October 31, 2000 18.58 0.11 0.75 Year ended October 31, 2001 18.13 0.09 (4.38) Year ended October 31, 2002 12.56 0.09 (1.73) Year ended October 31, 2003 10.73 0.20 2.02 - ---------------------------------------------------------------------------------- INVESTMENT ACTIVITIES DIVIDENDS --------------------- ----------------------------------- NET REALIZED GAINS FROM TOTAL INVESTMENT NET ASSET FROM NET AND FOREIGN VALUE, INVESTMENT INVESTMENT CURRENCY TOTAL END OF TOTAL ACTIVITIES INCOME TRANSACTIONS DIVIDENDS PERIOD RETURN - -------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 5.96 (0.15) (0.47) (0.62) $18.58 46.92 % Year ended October 31, 2000 0.86 (0.11) (1.20) (1.31) 18.13 4.05 % Year ended October 31, 2001 (4.29) -- (1.28) (1.28) 12.56 (25.42)% Year ended October 31, 2002 (1.64) (0.19) -- (0.19) 10.73 (13.32)% Year ended October 31, 2003 2.22 (0.19) -- (0.19) 12.76 21.03 % - -------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT AT END OF EXPENSES INCOME TO PERIOD TO AVERAGE AVERAGE PORTFOLIO (000'S) NET ASSETS NET ASSETS TURNOVER(a) - -------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 $172,004 1.05% 0.54% 34.26% Year ended October 31, 2000 219,837 0.90% 0.51% 27.81% Year ended October 31, 2001 184,494 0.99% 0.51% 26.90% Year ended October 31, 2002 194,704 0.99% 0.70% 31.63% Year ended October 31, 2003 123,658 1.07% 1.16% 68.51% - --------------------------------------------------------------------------------------------
(a) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 55 HSBC INVESTOR FUNDS -- OVERSEAS EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES ----------------------------------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) NET ASSET NET FROM INVESTMENT VALUE, INVESTMENT AND FOREIGN TOTAL FROM BEGINNING INCOME CURRENCY INVESTMENT OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES - ------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $11.64 (0.04) 5.32 5.28 Year ended October 31, 2000 16.90 (0.11) 0.64 0.53 Year ended October 31, 2001 17.21 (0.04) (4.05) (4.09) Year ended October 31, 2002 11.66 (0.04) (1.34) (1.38) Year ended October 31, 2003 9.87 0.01 1.95 1.96 - ------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 1999 $11.57 (0.12) 5.24 5.12 Year ended October 31, 2000 16.69 (0.10) 0.48 0.38 Year ended October 31, 2001 16.85 (0.14) (3.95) (4.09) Year ended October 31, 2002 11.30 (0.08) (1.34) (1.42) Year ended October 31, 2003 9.56 (0.06) 1.89 1.83 - ------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 1999 (g) $11.88 (0.08) 5.04 4.96 Year ended October 31, 2000 16.84 (0.14) 0.52 0.38 Year ended October 31, 2001 17.00 (0.18) (3.95) (4.13) Year ended October 31, 2002 11.41 (0.08) (1.36) (1.44) Year ended October 31, 2003 9.68 (0.06) 1.93 1.87 - ------------------------------------------------------------------------------------------ DIVIDENDS --------------------------- NET REALIZED GAINS FROM INVESTMENT NET AND FOREIGN INVESTMENT CURRENCY INCOME TRANSACTIONS - ---------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 (0.02) -- Year ended October 31, 2000 -- (0.22) Year ended October 31, 2001 -- (1.46) Year ended October 31, 2002 (0.12) (0.29) Year ended October 31, 2003 (0.10) -- - ---------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 -- -- Year ended October 31, 2000 -- (0.22) Year ended October 31, 2001 -- (1.46) Year ended October 31, 2002 (0.03) (0.29) Year ended October 31, 2003 (0.05) -- - ---------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) -- -- Year ended October 31, 2000 -- (0.22) Year ended October 31, 2001 -- (1.46) Year ended October 31, 2002 -- (0.29) Year ended October 31, 2003 (0.01) -- - ---------------------------------------------------------------- DIVIDENDS RATIOS/SUPPLEMENTARY DATA ---------------------------- --------------------------------------------------------------- RATIO OF NET INVESTMENT RATIO OF INCOME RATIO OF NET ASSET NET ASSETS EXPENSES TO (LOSS) EXPENSES TO TOTAL VALUE, END TOTAL AT END OF AVERAGE TO AVERAGE AVERAGE PORTFOLIO DIVIDENDS OF PERIOD RETURN PERIOD (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b) - ----------------------------------------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 (0.02) $16.90 45.41 %(c) $ 8,138 1.86% (0.30)% 2.44% 34.26% Year ended October 31, 2000 (0.22) 17.21 3.05 %(c) 7,252 1.85% (0.49)% 2.43% 27.81% Year ended October 31, 2001 (1.46) 11.66 (25.93)%(c) 6,940 1.85% (0.35)% 2.44% 26.90% Year ended October 31, 2002 (0.41) 9.87 (12.42)%(c) 7,203 1.85% (0.18)% 2.28% 31.63% Year ended October 31, 2003 (0.10) 11.73 20.09 %(c) 10,096 1.85% 0.07 % 2.34% 68.51% - ----------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 -- $16.69 44.25 %(f) $ 90 2.59% (1.04)% 3.24% 34.26% Year ended October 31, 2000 (0.22) 16.85 2.18 %(f) 358 2.60% (1.17)% 2.96% 27.81% Year ended October 31, 2001 (1.46) 11.30 (26.52)%(f) 294 2.60% (1.09)% 3.18% 26.90% Year ended October 31, 2002 (0.32) 9.56 (13.07)%(f) 588 2.60% (0.87)% 3.04% 31.63% Year ended October 31, 2003 (0.05) 11.34 19.26 %(f) 1,076 2.60% (0.62)% 3.16% 68.51% - ----------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) -- $16.84 41.84 %(d)(f) $ 98 2.57%(e) (1.01)%(e) 3.15%(e) 34.26% Year ended October 31, 2000 (0.22) 17.00 2.10 %(f) 248 2.60% (1.14)% 2.96% 27.81% Year ended October 31, 2001 (1.46) 11.41 (26.53)%(f) 139 2.60% (1.10)% 3.16% 26.90% Year ended October 31, 2002 (0.29) 9.68 (13.08)%(f) 96 2.60% (1.00)% 3.04% 31.63% Year ended October 31, 2003 (0.01) 11.54 19.28 %(f) 121 2.60% (0.64)% 3.17% 68.51% - -----------------------------------------------------------------------------------------------------------------------------
(a) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (b) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (c) Excludes sales charge. (d) Not annualized. (e) Annualized. (f) Excludes redemption charge. (g) Class C Shares commenced operations on November 4, 1998. See notes to financial statements. 56 HSBC INVESTOR FAMILY OF FUNDS HSBC ADVISOR FUNDS TRUST -- SMALL CAP EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES ------------------------------------------ NET REALIZED AND NET ASSET UNREALIZED GAINS TOTAL VALUE, NET (LOSSES) FROM FROM BEGINNING INVESTMENT INVESTMENT INVESTMENT OF PERIOD LOSS TRANSACTIONS ACTIVITIES - ------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 $11.48 (0.09) 2.65 2.56 Year ended October 31, 2000 12.56 (0.10) 6.73 6.63 Year ended October 31, 2001 17.81 (0.10) (3.65) (3.75) Year ended October 31, 2002 11.32 (0.09) (1.96) (2.05) Year ended October 31, 2003 9.27 (0.06) 3.15 3.09 - ------------------------------------------------------------------------------------------- DIVIDENDS ------------------------ NET REALIZED GAINS FROM INVESTMENT TOTAL TRANSACTIONS DIVIDENDS - ------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 (1.48) (1.48) Year ended October 31, 2000 (1.38) (1.38) Year ended October 31, 2001 (2.74) (2.74) Year ended October 31, 2002 -- -- Year ended October 31, 2003 -- -- - ------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------- RATIO OF NET NET ASSET NET ASSETS RATIO OF INVESTMENT VALUE, AT END OF EXPENSES TO LOSS TO END OF TOTAL PERIOD AVERAGE AVERAGE PORTFOLIO PERIOD RETURN (000'S) NET ASSETS NET ASSETS TURNOVER(a) - -------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 1999 $12.56 24.63 % $148,538 1.18% (0.81)% 77.74% Year ended October 31, 2000 17.81 55.59 % 253,724 1.05% (0.68)% 79.51% Year ended October 31, 2001 11.32 (22.98)% 180,265 1.07% (0.74)% 52.47% Year ended October 31, 2002 9.27 (18.11)% 190,686 1.07% (0.87)% 103.90% Year ended October 31, 2003 12.36 33.33 % 326,072 1.01% (0.72)% 152.05% - --------------------------------------------------------------------------------------------------------------------------
(a) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 57 HSBC INVESTOR FUNDS -- OPPORTUNITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS ................................................................................. SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES ------------------------------------------ NET REALIZED AND NET ASSET UNREALIZED GAINS TOTAL VALUE, NET (LOSSES) FROM FROM BEGINNING INVESTMENT INVESTMENT INVESTMENT OF PERIOD LOSS TRANSACTIONS ACTIVITIES - ------------------------------------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $11.33 (0.19) 2.78 2.59 Year ended October 31, 2000 13.19 (0.26) 7.13 6.87 Year ended October 31, 2001 18.75 (0.14) (3.58) (3.72) Year ended October 31, 2002 9.60 (0.13) (1.64) (1.77) Year ended October 31, 2003 7.83 (0.10) 2.63 2.53 - ------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 $11.31 (0.23) 2.71 2.48 Year ended October 31, 2000 13.06 (0.28) 6.93 6.65 Year ended October 31, 2001 18.40 (0.23)* (3.47) (3.70) Year ended October 31, 2002 9.27 (0.20)* (1.56) (1.76) Year ended October 31, 2003 7.51 (0.18)* 2.52 2.34 - ------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) $11.55 (0.10) 2.41 2.31 Year ended October 31, 2000 13.13 (0.32) 7.01 6.69 Year ended October 31, 2001 18.51 (0.24)* (3.49) (3.73) Year ended October 31, 2002 9.35 (0.21)* (1.57) (1.78) Year ended October 31, 2003 7.57 (0.18) 2.55 2.37 - ------------------------------------------------------------------------------------------- DIVIDENDS ------------------------ NET REALIZED GAINS FROM INVESTMENT TOTAL TRANSACTIONS DIVIDENDS - ------------------------------------------------------------- CLASS A (INVESTOR) SHARES Year ended October 31, 1999 (0.73) (0.73) Year ended October 31, 2000 (1.31) (1.31) Year ended October 31, 2001 (5.43) (5.43) Year ended October 31, 2002 -- -- Year ended October 31, 2003 -- -- - ----------------------------------------------------------- CLASS B SHARES Year ended October 31, 1999 (0.73) (0.73) Year ended October 31, 2000 (1.31) (1.31) Year ended October 31, 2001 (5.43) (5.43) Year ended October 31, 2002 -- -- Year ended October 31, 2003 -- -- - ----------------------------------------------------------- CLASS C SHARES Period ended October 31, 1999 (g) (0.73) (0.73) Year ended October 31, 2000 (1.31) (1.31) Year ended October 31, 2001 (5.43) (5.43) Year ended October 31, 2002 -- -- Year ended October 31, 2003 -- -- - ----------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------------ RATIO OF NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF VALUE, AT END OF EXPENSES TO LOSS TO EXPENSES TO END OF TOTAL PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO PERIOD RETURN (000'S) NET ASSETS NET ASSETS NET ASSETS(a) TURNOVER(b) - ------------------------------------------------------------------------------------------------------------------------------ CLASS A (INVESTOR) SHARES Year ended October 31, 1999 $13.19 23.80 %(c) $13,015 1.75% (1.38)% 2.14% 77.74% Year ended October 31, 2000 18.75 54.54 %(c) 15,415 1.65% (1.29)% 1.84% 79.51% Year ended October 31, 2001 9.60 (23.65)%(c) 11,892 1.65% (1.32)% 1.97% 52.47% Year ended October 31, 2002 7.83 (18.44)%(c) 11,384 1.65% (1.45)% 2.08% 103.90% Year ended October 31, 2003 10.36 32.31 %(c) 16,695 1.65% (1.36)% 2.09% 152.05% - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 1999 $13.06 22.93 %(f) $ 536 2.48% (2.12)% 2.92% 77.74% Year ended October 31, 2000 18.40 53.30 %(f) 1,273 2.40% (2.02)% 2.49% 79.51% Year ended October 31, 2001 9.27 (24.16)%(f) 1,315 2.40% (2.08)% 2.73% 52.47% Year ended October 31, 2002 7.51 (18.99)%(f) 2,374 2.40% (2.18)% 2.86% 103.90% Year ended October 31, 2003 9.85 31.16 %(f) 3,952 2.40% (2.11)% 2.83% 152.05% - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 1999 (g) $13.13 21.00 %(d)(f) $ 289 2.38%(e) (2.02)%(e) 2.77%(e) 77.74% Year ended October 31, 2000 18.51 53.32 %(f) 707 2.40% (2.02)% 2.46% 79.51% Year ended October 31, 2001 9.35 (24.17)%(f) 407 2.40% (2.06)% 2.71% 52.47% Year ended October 31, 2002 7.57 (19.04)%(f) 329 2.40% (2.20)% 2.83% 103.90% Year ended October 31, 2003 9.94 31.31 %(f) 395 2.40% (2.11)% 2.84% 152.05% - ------------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (b) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (c) Excludes sales charge. (d) Not annualized. (e) Annualized. (f) Excludes redemption charge. (g) Class C Shares commenced operations on November 4, 1998. See notes to financial statements. 58 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 ................................................................................. 1. ORGANIZATION: The HSBC Investor Funds (the 'Trust'), a Massachusetts business trust organized on April 22, 1987, and the HSBC Advisor Funds Trust (the 'Advisor Trust'), a Massachusetts business trust organized on April 5, 1996, are registered under the Investment Company Act of 1940, as amended (the 'Act'), as open-end management investment companies. The Trust and Advisor Trust (collectively the 'Trusts') contain the following funds (individually a 'Fund,' collectively the 'Funds'):
FUND SHORT NAME TRUST - ---- ---------- ----- HSBC Investor Limited Maturity Fund Limited Maturity Fund Trust HSBC Investor Fixed Income Fund Fixed Income Fund Advisor Trust HSBC Investor Bond Fund Bond Fund Trust HSBC Investor New York Tax-Free Bond Fund New York Tax-Free Bond Fund Trust HSBC Investor Balanced Fund Balanced Fund Trust HSBC Investor Equity Fund Equity Fund Trust HSBC Investor Growth and Income Fund Growth and Income Fund Trust HSBC Investor Mid-Cap Fund Mid-Cap Fund Trust HSBC Investor International Equity Fund International Equity Fund Advisor Trust HSBC Investor Overseas Equity Fund Overseas Equity Fund Trust HSBC Investor Small Cap Equity Fund Small Cap Equity Fund Advisor Trust HSBC Investor Opportunity Fund Opportunity Fund Trust
The Funds are separate series of the Trusts and are part of the HSBC Investor Family of Funds. Financial statements for all other series of HSBC Investor Family of Funds are published separately. The Limited Maturity Fund, Fixed Income Fund, Bond Fund, International Equity Fund, Overseas Equity Fund, Small Cap Equity Fund, and the Opportunity Fund (individually a 'Feeder Fund,' collectively the 'Feeder Funds') utilize the Master Feeder Fund Structure and seek to achieve their investment objectives by investing all of their investable assets in their Respective Portfolios (as defined below), per the following schedule:
PROPORTIONATE INTEREST ON FUND RESPECTIVE PORTFOLIO OCTOBER 31, 2003 - ---- -------------------- ---------------- Limited Maturity Fund HSBC Investor Limited Maturity Portfolio 51.7% Fixed Income Fund HSBC Investor Fixed Income Portfolio 54.6% Bond Fund HSBC Investor Fixed Income Portfolio 10.9% International Equity Fund HSBC Investor International Equity Portfolio 61.0% Overseas Equity Fund HSBC Investor International Equity Portfolio 5.6% Small Cap Equity Fund HSBC Investor Small Cap Equity Portfolio 76.5% Opportunity Fund HSBC Investor Small Cap Equity Portfolio 4.9%
The HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income Portfolio, HSBC Investor International Equity Portfolio, and the HSBC Investor Small Cap Equity Portfolio (individually a 'Portfolio,' collectively the 'Portfolios'), are diversified series of the HSBC Investor Portfolios (the 'Portfolio Trust'), and like each Feeder Fund, are open-end management investment companies. The financial statements of the Portfolios, including the Schedules of Portfolio Investments, are included in this report. The financial statements of the Portfolios should be read in conjunction with the financial statements of the Feeder Funds. The Funds are authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share. The Limited Maturity Fund, New York Tax-Free Bond Fund, Balanced Fund, Equity Fund, and the Growth and Income Fund each offers four classes of shares, Class A (Investor) Shares, Class B Shares, Class C Shares and Class Y Shares. The Mid-Cap Fund offers four classes of shares, Class A Shares, Class B Shares, Class C Shares, and Trust Shares. The Fixed Income Fund, International Equity Fund, and the Small Cap Equity Fund each offers one class of shares. The Bond Fund, Overseas Equity Fund, and the Opportunity Fund each offers three classes of shares, HSBC INVESTOR FAMILY OF FUNDS 59 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. Class A (Investor) Shares, Class B Shares and Class C Shares. Each class of shares in the Funds has identical rights and privileges except with respect to fees paid under shareholder servicing or distribution plans, voting rights on matters affecting a single class of shares, and the exchange privilege of each class of shares. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ('GAAP'). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. SECURITIES VALUATION: A. NEW YORK TAX-FREE BOND FUND, BALANCED FUND, EQUITY FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND Bonds and other fixed income securities (other than short-term obligations but including listed issues) are valued on the basis of valuations furnished by a pricing service, the use of which has been approved by the Funds' Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and the use of matrix techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics other than market data and without exclusive reliance upon quoted prices or exchanges or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. All debt portfolio securities with a remaining maturity of 60 days or less are valued at amortized cost. Under the amortized cost method, premium or discount, if any, is amortized or accreted, respectively, on a constant (straight-line) basis to the maturity of the security. The value of each equity security is based either on the last sale price on a national securities exchange, or in the absence of recorded sales, at the closing bid prices on such exchanges, or at the quoted bid price in the over-the-counter market. Securities or other assets for which market quotations are not readily available are valued by or at the direction of the Funds' Board of Trustees. B. FEEDER FUNDS The Feeder Funds record their investments in their respective Portfolios at value. Securities of the Portfolios are recorded at value as more fully discussed in the notes to those financial statements. SECURITIES TRANSACTIONS AND RELATED INCOME: A. NEW YORK TAX-FREE BOND FUND, BALANCED FUND, EQUITY FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND Changes in holdings of portfolio securities shall be reflected no later than in the first calculation on the first business day following the trade date. Securities gains and losses are calculated on the identified cost basis. Interest income is recognized on the accrual basis and includes, where applicable, the amortization or accretion of premium or discount. Dividend income is recorded on the ex-dividend date. B. FEEDER FUNDS The Feeder Funds record daily their pro-rata share of their respective Portfolio's income, expenses and realized and unrealized gains and losses. In addition, the Feeder Funds accrue their own expenses daily as incurred. Realized gains or losses and changes in unrealized appreciation or depreciation represent the Feeder Fund's share of such elements allocated from the Portfolio. 60 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. FUTURES CONTRACTS: The New York Tax-Free Bond Fund and Equity Fund invest in futures contracts for the purpose of hedging their existing portfolio securities or securities they intend to purchase against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, the New York Tax-Free Bond Fund and Equity Fund are required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as 'variation margin', are made each day, depending on the daily fluctuations in the fair value of the underlying security. A gain or loss equal to the daily variation margin is recognized on a daily basis. Futures contracts may also be entered into for non-hedging purposes. A 'sale' of futures contract means a contractual obligation to deliver the securities or foreign currency called for by the contract at a fixed price at a specified time in the future. A 'purchase' of a futures contract means a contractual obligation to acquire the securities or foreign currency at a fixed price at a specified time in the future. Should market conditions move unexpectedly, the New York Tax-Free Bond Fund and the Equity Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. OPTIONS: The Growth and Income Fund and the Mid-Cap Fund write covered call options against some of the securities in their portfolios provided the securities are listed on a national securities exchange. A call option is 'covered' if the Fund owns the underlying securities covered by the call. The premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain or loss. If the call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining a realized gain or loss. EXPENSE ALLOCATION: Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among various or all Funds within the HSBC Investor Family of Funds in relation to the net assets of each Fund or on another reasonable basis. Expenses specific to a class are charged to that class. DIVIDENDS TO SHAREHOLDERS: The Limited Maturity Fund, Fixed Income Fund, Bond Fund, and the New York Tax-Free Bond Fund declare all net investment income daily as dividends to their shareholders and distribute such dividends monthly. Dividends from net investment income, if any, are declared and distributed quarterly in the case of the Equity Fund, semiannually in the case of the Balanced Fund, Growth and Income Fund, Small Cap Equity Fund, and the Opportunity Fund and annually in the case of the Mid-Cap Fund, International Equity Fund and Overseas Equity Fund. The Funds' net realized gains, if any, are distributed to shareholders at least annually. Additional distributions are also made to the Funds' shareholders to the extent necessary to avoid the federal excise tax on certain undistributed income and net capital gains of regulated investment companies. The amount of dividends from net investment income and net realized gains are determined in accordance with federal income tax regulations which may differ from GAAP. These 'book/tax' differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (i.e. reclassification of market discounts, gain/loss, paydowns, and distributions), such amounts are reclassified to paid-in capital; temporary differences do not require reclassification. The Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as a part of the dividends paid deduction for income tax purposes. HSBC INVESTOR FAMILY OF FUNDS 61 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. REDEMPTION FEE: Effective September 1, 2003, the International Equity Fund and Overseas Equity Fund, Class B and Class C, charge a redemption fee of 2%, paid to the funds, on the redemption and exchange of shares of the funds held less than 30 days. The fee does not apply to shares representing the reinvestment of dividends or capital gains distributions or shares held in certain omnibus accounts or retirement plans that cannot implement the fee. For the year ended October 31, 2003, the funds did not collect any redemption fees. FEDERAL INCOME TAXES: Each Fund is a separate taxable entity for federal income tax purposes. Each Fund has qualified and intends to continue to qualify each year as a 'regulated investment company' under Subchapter M of the Internal Revenue Code, as amended and to distribute substantially all of their taxable net investment income and net realized gains, if any, to their shareholders. Accordingly, no provision for federal income or excise tax is required. 3. CALL OPTIONS WRITTEN: The following is a summary of covered call option activity for the Growth and Income Fund for the year ended October 31, 2003:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- -------- Options outstanding at October 31, 2002..................... 252 $ 45,988 Options written............................................. 252 87,567 Options terminated in closing purchase transactions......... (504) (133,555) ---- --------- Options outstanding at October 31, 2003..................... -- $ -- ---- --------- ---- ---------
The following is a summary of covered call option activity for the Mid-Cap Fund for the year ended October 31, 2003:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- -------- Options outstanding at October 31, 2002..................... 1,700 $ 297,713 Options written............................................. 4,650 987,650 Options terminated in closing purchase transactions......... (6,350) (1,285,363) ------ ----------- Options outstanding at October 31, 2003..................... -- $ -- ------ ----------- ------ -----------
4. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Asset Management (Americas) Inc. ('HSBC' or the 'Investment Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank, acts as Investment Adviser to the New York Tax-Free Bond Fund, Balanced Fund, Growth and Income Fund and Mid-Cap Fund. As Investment Adviser, HSBC manages the investments of the Funds and continuously reviews, supervises and administers the Funds' investments. For its services as Investment Adviser, HSBC is entitled to receive a fee, computed daily and paid monthly, based on average daily net assets, at an annual rate of:
FUND FEE RATE - ---- -------- New York Tax-Free Bond Fund................................. 0.25% Balanced Fund............................................... 0.55% Growth and Income Fund...................................... 0.55% Mid-Cap Fund................................................ 0.55%
62 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. HSBC also serves as Investment Adviser to the Equity Fund. Alliance Capital Management L.P. and Institutional Capital Corporation serve as Sub-Investment Advisers to the Equity Fund and are paid for their services directly by HSBC. For their services as Investment Adviser and Sub-Investment Advisers to the Equity Fund, HSBC, Alliance Capital Management and Institutional Capital Corporation receive in aggregate a fee accrued daily and paid monthly at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS FEE RATE - --------------------------------- -------- Up to $50 million........................................... 0.500% In excess of $50 million but not exceeding $100 million..... 0.425% In excess of $100 million but not exceeding $200 million.... 0.375% In excess of $200 million................................... 0.325%
ADMINISTRATION: BISYS Fund Services Ohio, Inc. ('BISYS Ohio'), a wholly-owned subsidiary of The BISYS Group, Inc., with whom certain officers of the Trusts are affiliated, serves the Trusts as Administrator. Such officers are paid no fees directly by the Funds for serving as officers of the Trusts. Under the terms of the administration agreement, BISYS Ohio receives from the Funds a fee accrued daily and paid monthly at an annual rate of:
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%
The fee breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds. The fee is allocated to each of the HSBC Investor Family of Funds based upon its pro-rata share of net assets. The Portfolios pay half of each Feeder Fund's administration fee for a combination of the total fee rate above. BISYS Ohio may use its fees to pay advertising and marketing expenses for the benefit of the Funds. DISTRIBUTION PLAN: BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned subsidiary of The BISYS Group, Inc., serves the Funds as Distributor (the 'Distributor'). The Trusts have adopted a non-compensatory Distribution Plan and Agreement (the 'Plan') pursuant to Rule 12b-1 of the Act. The Plan provides for a monthly payment of actual expenses by the Funds to the Distributor at a rate not to exceed 0.25% of the average daily net assets of Class A (Investor) Shares (currently not being charged) and 0.75% of the average daily net assets of Class B Shares and Class C Shares of the Funds. This payment represents expenses incurred by the Distributor for marketing costs and services rendered in distributing the Funds' shares. BISYS, as the Funds' distributor, recovered $1,032,406 in commissions from sales of the funds of which $110,635 was reallowed to affiliated brokers and dealers. The Distributor also receives the proceeds of any CDSC imposed on redemptions of Class B Shares and Class C Shares. In addition, the Distributor retains a portion of the front-end sales charge of Class A (Investor) Shares. For the year ended October 31, 2003, the Distributor retained $389 from dealer commissions. SHAREHOLDER SERVICING: The Trusts have entered into a Shareholder Servicing Agreement with its shareholder servicing agents (which currently consists of HSBC and its affiliates) for providing various shareholder services. The aggregate fees paid to the Distributor pursuant to the Distribution Plan and to shareholder servicing agents pursuant to the Shareholder Servicing Agreement may not exceed 0.25% of the average daily net assets of Class A (Investor) Shares, and 1.00% of the average daily net assets of Class B Shares and Class C Shares. HSBC INVESTOR FAMILY OF FUNDS 63 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. FEE REDUCTIONS: The Investment Adviser has agreed to limit the total expenses, exclusive of taxes, brokerage commissions and extraordinary expenses, of the Limited Maturity Fund, Bond Fund, New York Tax-Free Bond Fund, Balanced Fund, Overseas Equity Fund and Opportunity Fund. Each Fund Class has it's own expense limitations based on average daily net assets for any full fiscal year as follows:
EXPENSE FUND CLASS LIMITATION - ---- ----- ---------- Limited Maturity Fund....................................... A 1.10% Limited Maturity Fund....................................... B 1.85 Limited Maturity Fund....................................... C 1.85 Limited Maturity Fund....................................... Y 0.85 Bond Fund................................................... A 1.10 Bond Fund................................................... B 1.85 Bond Fund................................................... C 1.85 New York Tax-Free Bond Fund................................. A 0.95 New York Tax-Free Bond Fund................................. B 1.70 New York Tax-Free Bond Fund................................. C 1.70 New York Tax-Free Bond Fund................................. Y 0.70 Balanced Fund............................................... A 1.20 Balanced Fund............................................... B 1.95 Balanced Fund............................................... C 1.95 Balanced Fund............................................... Y 0.95 Overseas Equity Fund........................................ A 1.85 Overseas Equity Fund........................................ B 2.60 Overseas Equity Fund........................................ C 2.60 Opportunity Fund............................................ A 1.65 Opportunity Fund............................................ B 2.40 Opportunity Fund............................................ C 2.40
FUND ACCOUNTING, TRANSFER AGENCY AND CUSTODIAN: BISYS Ohio provides fund accounting and transfer agency services for all classes of each Fund. In addition, HSBC serves as custodian for the New York Tax-Free Bond Fund, Equity Fund, Balanced Fund and Growth and Income Fund. For services to the Funds, BISYS Ohio receives an annual fee from each fund accrued daily and paid monthly. 5. INVESTMENT TRANSACTIONS: Purchases of and proceeds from sales, excluding short-term securities, for the Funds for the year ended October 31, 2003, totaled:
PURCHASES SALES --------- ----- New York Tax-Free Bond Fund............................... $ 24,263,541 $ 16,017,555 Balanced Fund............................................. 9,919,228 20,789,679 Equity Fund............................................... 137,614,571 287,586,729 Growth and Income Fund.................................... 125,903,733 118,324,526 Mid-Cap Fund.............................................. 160,697,226 128,538,361
64 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. Contributions and withdrawals of the respective Portfolios for the year ended October 31, 2003, totaled:
CONTRIBUTIONS WITHDRAWALS ------------- ----------- Limited Maturity Fund.................................. $ 72,065,903 $ 136,914,366 Fixed Income Fund...................................... 175,350,814 369,644,303 Bond Fund.............................................. 10,621,856 8,765,576 International Equity Fund.............................. 1,035,303,087 1,149,911,797 Overseas Equity Fund................................... 74,606,901 74,105,596 Small Cap Equity Fund.................................. 204,925,127 137,344,852 Opportunity Fund....................................... 6,131,516 3,926,582
6. CONCENTRATION OF CREDIT RISK: The New York Tax-Free Bond Fund invests primarily in debt obligations issued by the State of New York and its respective political subdivisions, agencies and public authorities. The Fund is more susceptible to economic and political factors adversely affecting issuers of New York specific municipal securities than are municipal bond funds that are not concentrated in these issuers to the same extent. HSBC INVESTOR FAMILY OF FUNDS 65 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. 7. FEDERAL INCOME TAX INFORMATION: The tax characteristics of dividends paid by the Funds during the fiscal year ended October 31, 2003 were as follows:
DIVIDENDS PAID FROM ----------------------- NET LONG TERM TOTAL TOTAL ORDINARY CAPITAL TAXABLE TAX EXEMPT RETURN OF DIVIDENDS INCOME GAINS DIVIDENDS DISTRIBUTIONS CAPITAL PAID(1) ------ ----- --------- ------------- ------- ------- Limited Maturity Fund $ 3,718,750 $ -- $ 3,718,750 $ -- $ -- $ 3,718,750 Fixed Income Fund 12,270,749 -- 12,270,749 -- -- 12,270,749 Bond Fund 817,860 -- 817,860 -- -- 817,860 NY Tax-Free Bond Fund 10,320 -- 10,320 1,840,939 -- 1,851,259 Balanced Fund 414,170 -- 414,170 -- -- 414,170 Equity Fund 1,183,930 -- 1,183,930 -- -- 1,183,930 Growth & Income Fund 2,042,400 -- 2,042,400 -- -- 2,042,400 International Equity Fund 3,705,000 -- 3,705,000 -- -- 3,705,000 Overseas Equity Fund 72,856 -- 72,856 -- 1,775 74,631
As of October 31, 2003, the components of accumulated earnings/(deficit) on a tax basis for the Funds were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED LONG-TERM ACCUMULATED ORDINARY TAX EXEMPT CAPITAL ACCUMULATED DIVIDENDS CAPITAL AND INCOME INCOME GAINS EARNINGS PAYABLE OTHER LOSSES ------ ------ ----- -------- ------- ------------ Limited Maturity Fund $ 257,414 $ -- $1,736,087 $1,993,501 $ (59,935) $ -- Fixed Income Fund 219,572 -- -- 219,572 (215,697) (2,596,722) Bond Fund 35,069 -- -- 35,069 (35,243) (618,679) NY Tax-Free Bond Fund -- 83,477 325,009 408,486 (81,963) -- Balanced Fund 37,237 -- -- 37,237 104 (3,528,726) Equity Fund 17,859 -- -- 17,859 -- (49,567,972) Growth & Income Fund 542,460 -- -- 542,460 -- (56,290,728) Mid-Cap Fund -- -- -- -- -- (31,161,871) International Equity Fund 3,737,768 -- -- 3,737,768 -- (21,857,308) Overseas Equity Fund 78,218 -- -- 78,218 -- (606,026) Small Cap Equity Fund -- -- -- -- -- (59,874,210) Opportunity Fund -- -- -- -- -- (3,788,220) TOTAL UNREALIZED ACCUMULATED APPRECIATION/ EARNINGS/ (DEPRECIATION)(2) (DEFICIT) ----------------- --------- Limited Maturity Fund $ 487,593 $ 2,421,159 Fixed Income Fund 6,678,946 4,086,099 Bond Fund 282,252 (336,601) NY Tax-Free Bond Fund 2,559,857 2,886,380 Balanced Fund 29,299 (3,462,086) Equity Fund 3,496,916 (46,053,197) Growth & Income Fund 29,013,046 (26,735,222) Mid-Cap Fund 28,521,725 (2,640,146) International Equity Fund 7,292,603 (10,826,937) Overseas Equity Fund 932,032 404,224 Small Cap Equity Fund 52,502,783 (7,371,427) Opportunity Fund 3,689,333 (98,887)
As of October 31, 2003, the following Funds have net capital loss carryforwards, which are available to offset future realized gains.
AMOUNT EXPIRES AMOUNT EXPIRES ------ ------- ------ ------- Fixed Income Fund $ 922,509 2007 Growth & Income Fund $20,736,943 2009 1,576,583 2008 25,956,764 2010 97,630 2010 9,597,021 2011 Bond Fund 159,153 2007 Mid-Cap Fund 12,233,929 2009 91,688 2008 18,927,942 2010 185,518 2010 International Equity Fund 5,241,988 2009 182,320 2011 16,615,320 2010 Balanced Fund 1,420,035 2009 Overseas Equity Fund 606,026 2010 1,569,217 2010 Small Cap Equity Fund 9,859,579 2009 539,474 2011 50,014,631 2010 Equity Fund 5,765,400 2008 Opportunity Fund 415,662 2009 1,404,374 2009 3,372,558 2010 28,126,576 2010 14,271,622 2011
(1) Total dividends paid may differ from the amount reported in the Statement of Changes in Net Assets because for tax purposes dividends are recognized when actually paid. (2) The differences between book-basis and tax-basis unrealized appreciation/deprecation are attributable primarily to: tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain derivative instruments, the difference between book and tax amortization methods for premium and market discount, the realization for tax purposes of unrealized gains/losses on investments in passive foreign investment companies, and the return of capital adjustments from real estate investment trusts. 66 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. 8. OTHER FEDERAL INCOME TAX INFORMATION (UNAUDITED): For the fiscal year ended October 31, 2003, the following percentage of the total ordinary income dividends paid by the Funds qualify for the corporate dividends received deduction available to corporate shareholders.
DIVIDENDS RECEIVED DEDUCTION --------- Balanced Fund 51% Equity Fund 100% Growth & Income Fund 100%
The Funds intend to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Shareholders will receive more detailed information along with their 2003 Form 1099-DIV.
FOREIGN TAX CREDIT PASS THROUGH ------------ International Equity Fund $392,190 Overseas Equity Fund 18,823
For the fiscal year ended October 31, 2003, dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2003 Form 1099-DIV.
AMOUNT ------ Balanced Fund $ 94,957 Equity Fund 737,418 Growth & Income Fund 838,253
HSBC INVESTOR FAMILY OF FUNDS 67 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Trustees of HSBC Investor Funds HSBC Investor Advisor Funds Trust: We have audited the accompanying statements of assets and liabilities of HSBC Investor Limited Maturity Fund, HSBC Investor Fixed Income Fund, HSBC Investor Bond Fund, HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Balanced Fund, HSBC Investor Equity Fund, HSBC Investor Growth and Income Fund, HSBC Investor Mid-Cap Fund, HSBC Investor International Equity Fund, HSBC Investor Overseas Equity Fund, HSBC Investor Small Cap Equity Fund and HSBC Investor Opportunity Fund (collectively, the Funds), including the schedules of portfolio investments of HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Balanced Fund, HSBC Investor Equity Fund, HSBC Investor Growth and Income Fund and HSBC Investor Mid-Cap Fund, as of October 31, 2003, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included verification of securities owned by HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Balanced Fund, HSBC Investor Equity Fund, HSBC Investor Growth and Income Fund and HSBC Investor Mid-Cap Fund as of October 31, 2003, by confirmation with the custodian, correspondence with brokers and other appropriate audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned funds as of October 31, 2003, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Columbus, Ohio December 15, 2003 68 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR LIMITED MATURITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 .................................................................................
- --------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 65.3% PRINCIPAL AMOUNT($) VALUE($) --------- ---------- FEDERAL HOME LOAN BANK - 9.6% 1.625%, 4/15/05........................ 2,500,000 2,499,425 3.25%, 8/15/05......................... 1,500,000 1,532,697 2.50%, 12/15/05........................ 1,600,000 1,610,523 4.50%, 11/15/12........................ 1,000,000 992,855 4.50%, 9/16/13......................... 1,500,000 1,468,439 ---------- 8,103,939 ---------- FEDERAL HOME LOAN MORTGAGE CORP. - 19.9% 3.625%, 9/15/08........................ 1,000,000 1,003,211 Pool #E92282, 5.50%, 11/1/17........... 1,937,179 1,995,587 Pool #C01188, 7.00%, 6/1/31............ 859,148 903,937 Pool #C75371, 6.00%, 1/1/33............ 1,352,536 1,388,377 Pool #2642, 4.50%, 10/25/27............ 3,000,000 3,039,738 Pool #A11010, 5.00%, 7/1/33............ 1,985,014 1,954,790 Pool #A14659, 6.50%, 10/1/33........... 2,000,000 2,080,237 Pool #E96835, 4.50%, 6/1/18............ 2,394,064 2,389,807 Series 40 HA, 6.50%, 8/17/21........... 1,973,481 1,981,364 ---------- 16,737,048 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.9% 5.75%, 2/15/08......................... 500,000 547,875 4.00%, 9/2/08.......................... 1,000,000 1,005,199 6.40%, 5/14/09......................... 1,000,000 1,024,872 5.50%, 3/15/11......................... 750,000 805,219 4.625%, 5/1/13......................... 1,250,000 1,203,466 Pool #535063, 6.50%, 12/1/14........... 621,377 654,205 Pool #535933, 6.50%, 5/1/31............ 598,090 621,442 Pool #593187, 7.00%, 11/1/31........... 1,799,781 1,895,031 Pool #695204, 5.50%, 3/1/33............ 1,662,090 1,678,138 Pool #694985, 6.00%, 3/1/33............ 2,377,137 2,440,844 Pool #704439, 5.00%, 5/1/18............ 2,401,313 2,440,904 ---------- 14,317,195 ---------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.5% Pool #2687, 6.00%, 12/20/28............ 931,386 960,696 Pool #3415, 5.50%, 7/20/33............. 1,974,839 1,998,322 ---------- 2,959,018 ---------- U.S. TREASURY NOTES - 15.4% 2.00%, 11/30/04........................ 1,400,000 1,410,500 1.625%, 4/30/05........................ 1,250,000 1,251,611 5.625%, 2/15/06........................ 500,000 540,762 2.00%, 5/15/06......................... 3,000,000 2,992,734 3.25%, 8/15/07......................... 750,000 762,920 5.50%, 2/15/08......................... 750,000 826,670 3.25%, 8/15/08......................... 1,500,000 1,503,458 5.00%, 2/15/11......................... 1,500,000 1,605,762 4.875%, 2/15/12........................ 2,000,000 2,109,844 ---------- 13,004,261 ---------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS.................... 55,121,461 ---------- - --------------------------------------------------------------- CORPORATE OBLIGATIONS - 27.7% AEROSPACE & DEFENSE - 1.0% Honeywell International, Inc., 5.125%, 11/1/06............................... 750,000 804,529 ---------- AUTO MANUFACTURERS - 0.9% General Motors Corp., 7.20%, 1/15/11... 750,000 786,584 ---------- - --------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED PRINCIPAL AMOUNT($) VALUE($) --------- ---------- BANKING - 2.9% Citigroup, Inc., 6.50%, 1/18/11........ 750,000 844,083 Wachovia Corp., 6.15%, 3/15/09......... 750,000 827,743 Washington Mutual Financial Corp., 6.25%, 5/15/06........................ 750,000 813,673 ---------- 2,485,499 ---------- BROKERAGE SERVICES - 5.7% Goldman Sachs Group, Inc., 5.70%, 9/1/12................................ 500,000 522,663 Goldman Sachs Group, Inc., 6.125%, 2/15/33............................... 750,000 748,809 Lehman Brothers Holdings, Inc., 6.25%, 5/15/06............................... 500,000 544,703 Lehman Brothers Holdings, Inc., 3.50%, 8/7/08................................ 1,000,000 985,495 Merrill Lynch & Co., 5.70%, 2/6/04..... 1,000,000 1,011,208 Merrill Lynch & Co., 3.375%, 9/14/07... 1,000,000 1,004,217 ---------- 4,817,095 ---------- CONSUMER PRODUCTS - 3.6% Archer Daniels Midland Co., 5.935%, 10/1/32............................... 500,000 495,531 General Electric Co., 5.00%, 2/1/13.... 500,000 503,168 Kellogg Co., 2.875%, 6/1/08............ 750,000 721,732 The Procter & Gamble Co., 4.00%, 4/30/05............................... 1,250,000 1,294,273 ---------- 3,014,704 ---------- FINANCE - 7.1% CIT Group, Inc., 4.125%, 2/21/06....... 1,000,000 1,030,443 Countrywide Home Loans, Inc., 5.50%, 8/1/06................................ 1,250,000 1,333,525 Ford Motor Credit Co., 6.50%, 1/25/07............................... 1,250,000 1,289,736 General Electric Capital Corp., 6.75%, 3/15/32............................... 500,000 554,432 General Motors Accept Corp., 4.50%, 7/15/06............................... 250,000 253,840 General Motors Accept Corp., 5.125%, 5/9/08................................ 500,000 507,834 SLM Corp., 3.95%, 8/15/08.............. 1,000,000 1,006,642 ---------- 5,976,452 ---------- GOVERNMENTS (FOREIGN) - 0.6% United Mexican States, 4.625%, 10/8/08............................... 500,000 501,250 ---------- INSURANCE - 0.3% Travelers Property Casualty Corp., 6.375%, 3/15/33....................... 250,000 259,666 ---------- MEDIA - 1.8% Comcast Corp., 5.30%, 1/15/14.......... 1,000,000 982,860 Time Warner, Inc., 6.125%, 4/15/06..... 500,000 537,802 ---------- 1,520,662 ---------- PHARMACEUTICALS - 1.2% Pfizer, Inc., 3.625%, 11/1/04.......... 1,000,000 1,021,672 ---------- RETAIL - 1.5% Safeway, Inc., 3.80%, 8/15/05.......... 750,000 765,402 Wal-Mart Stores, Inc., 4.375%, 7/12/07............................... 500,000 524,520 ---------- 1,289,922 ---------- TELECOMMUNICATIONS - 1.1% Deutsche Telekom International Finance BV, 3.875%, 7/22/08................... 500,000 498,442 Verizon Global Funding Corp., 4.375%, 6/1/13................................ 500,000 466,286 ---------- 964,728 ---------- TOTAL CORPORATE OBLIGATIONS............ 23,442,763 ----------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 69 HSBC INVESTOR LIMITED MATURITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) .................................................................................
- --------------------------------------------------------------- ASSET BACKED SECURITIES - 4.2% PRINCIPAL AMOUNT($) VALUE($) --------- ---------- American Express Credit Account Master Trust 99 2 A, 5.95%, 12/15/06......... 750,000 768,771 CIT Equipment Collateral 01 A A3, 4.32%, 5/20/05........................ 294,002 295,833 Honda Auto Receivables Owner Trust 03 1 A4, 2.48%, 7/18/08.................... 2,500,000 2,503,064 ---------- TOTAL ASSET BACKED SECURITIES.......... 3,567,668 ---------- - --------------------------------------------------------------- INVESTMENT COMPANIES - 2.0% SHARES VALUE($) --------- ---------- Dreyfus Cash Management Fund........... 1,706,257 1,706,257 ---------- TOTAL INVESTMENT COMPANIES............. 1,706,257 ---------- TOTAL INVESTMENTS (COST $83,207,064) (a) - 99.2%....... 83,838,149 ---------- ----------
- --------- Percentages indicated are based on net assets of $84,488,289. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of gains recognized for financial reporting purposes in excess of federal income tax reporting of approximately $52,599. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation............ $1,242,997 Unrealized depreciation............ (559,313) ---------- Net unrealized appreciation........ $ 683,684 ---------- ----------
70 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 .................................................................................
- ---------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 56.4% PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- FEDERAL FARM CREDIT BANK - 1.0% 3.60%, 10/29/07, Callable 10/29/04 @ 100.................................. 2,100,000 2,101,510 ----------- FEDERAL HOME LOAN BANK - 11.8% 4.40%, 11/20/06....................... 4,500,000 4,711,527 5.05%, 2/6/13, Callable 2/6/04 @ 100.................................. 5,795,000 5,784,540 5.00%, 2/7/13, Callable 2/7/05 @ 100.................................. 6,085,000 6,092,242 5.10%, 4/24/13........................ 4,000,000 3,990,924 6.20%, 8/21/17........................ 1,250,000 1,256,945 6.25%, 8/27/18, Callable 8/27/04 @ 100.................................. 2,200,000 2,234,456 ----------- 24,070,634 ----------- FEDERAL HOME LOAN MORTGAGE CORP. - 7.1% 4.125%, 1/17/06, Callable 1/15/04 @ 100.................................. 2,500,000 2,513,770 5.75%, 9/15/10........................ 4,910,000* 6,211,452 Pool #C00368, 8.50%, 10/1/24.......... 102,050 111,052 Pool #C00922, 8.00%, 2/1/30........... 909,279 979,639 Pool #C54447, 7.00%, 7/1/31........... 241,758 254,361 Pool #C60712, 6.50%, 11/1/31.......... 2,333,383 2,427,157 Pool #C80387, 6.50%, 4/1/26........... 99,365 103,660 Pool #D62926, 6.50%, 8/1/25........... 77,327 80,723 Pool #G00951, 6.00%, 7/1/28........... 861,093 885,848 Pool #G01317, 7.00%, 10/1/31.......... 931,658 980,227 ----------- 14,547,889 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.5% 6.75%, 1/25/08........................ 1,545,356 1,580,294 4.625%, 5/1/13........................ 3,300,000 3,177,151 6.25%, 5/15/29........................ 2,998,000 3,214,752 7.25%, 5/15/30........................ 865,000 1,046,618 5.50%, 8/1/33......................... 13,852,325 13,986,069 Pool #253438, 8.50%, 9/1/30........... 230,483 248,106 Pool #329530, 7.00%, 12/1/25.......... 228,778 241,578 Pool #329655, 7.00%, 11/1/25.......... 190,708 201,378 Pool #356905, 4.32%, 10/1/36 (b)...... 555,034 574,149 Pool #398958, 6.50%, 10/1/12.......... 208,935 220,133 Pool #535332, 8.50%, 4/1/30........... 195,840 210,962 Pool #535440, 8.50%, 8/1/30........... 241,404 259,862 Pool #535608, 9.50%, 4/1/30........... 328,201 365,922 Pool #548965, 8.50%, 7/1/30........... 149,951 161,416 Pool #568486, 7.00%, 1/1/31........... 115,677 121,826 Pool #573752, 8.50%, 2/1/31........... 213,876 230,230 Pool #575328, 6.50%, 4/1/31........... 342,721 356,103 Pool #623129, 6.50%, 1/1/32........... 3,372,960 3,504,659 Pool #651901, 6.00%, 8/1/32........... 3,072,198 3,154,668 Pool #694655, 5.50%, 4/1/33........... 6,304,878 6,365,753 Pool #695777, 5.50%, 4/1/33........... 2,287,162 2,309,245 ----------- 41,530,874 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.7% Pool #346406, 7.50%, 2/15/23.......... 279,218 300,435 Pool #412530, 7.50%, 12/15/25......... 310,978 333,896 Pool #587112, 6.00%, 6/15/32.......... 4,465,672 4,615,201 Pool #780804, 10.00%, 12/15/20........ 191,590 215,170 Pool #780826, 9.50%, 5/15/18.......... 109,291 121,195 Pool #781300, 7.00%, 6/15/31.......... 763,119 809,144 Pool #781345, 6.00%, 10/15/31......... 1,098,527 1,135,357 ----------- 7,530,398 -----------
- ---------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS, CONT'D. PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- U.S. TREASURY BONDS - 1.0% 5.25%, 11/15/28....................... 1,950,000 1,946,192 ----------- U.S. TREASURY NOTES - 11.3% 3.00%, 11/15/07....................... 2,500,000 2,512,110 4.375%, 8/15/12....................... 3,700,000 3,756,077 3.875%, 2/15/13....................... 1,600,000 1,555,437 3.625%, 5/15/13....................... 15,850,000 15,175,757 ----------- 22,999,381 ----------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS................... 114,726,878 ----------- - ---------------------------------------------------------------- CORPORATE OBLIGATIONS - 30.7% AEROSPACE & DEFENSE - 0.9% Lockheed Martin Corp., 8.20%, 12/1/09.............................. 1,250,000 1,510,128 Lockheed Martin Corp., 8.50%, 12/1/29.............................. 300,000 390,032 ----------- 1,900,160 ----------- ELECTRIC - INTEGRATED - 1.4% Ontario Electricity Financial, 6.10%, 1/30/08.............................. 2,500,000 2,764,370 ----------- FINANCE - 17.1% AIG SunAmerica Global Financing VI, 6.30%, 5/10/11 (c)................... 642,000 706,332 Anthem Insurance, 9.125%, 4/1/10 (c).................................. 205,000 255,619 Anthem Insurance, 9.00%, 4/1/27 (c)... 305,000 398,483 AXA Financial, Inc., 6.50%, 4/1/08.... 165,000 182,729 CIT Group, Inc., 7.375%, 4/2/07....... 4,725,000 5,329,748 Citigroup, Inc., 7.25%, 10/1/10....... 657,000 764,349 Citigroup, Inc., 5.625%, 8/27/12...... 2,500,000 2,637,598 EOP Operating LP, 7.50%, 4/19/29...... 163,000 178,394 Farmers Exchange Capital, 7.05%, 7/15/28 (c).......................... 388,000 359,517 Farmers Insurance Exchange, 8.625%, 5/1/24 (c)........................... 238,000 245,735 Florida Windstorm, 7.125%, 2/25/19, (c).................................. 608,000 707,082 Ford Motor Credit Co., 7.00%, 10/1/13.............................. 3,150,000 3,096,585 General Electric Capital Corp., 8.75%, 5/21/07.............................. 1,300,000 1,541,508 General Electric Capital Corp., 7.375%, 1/19/10...................... 447,000 521,528 General Electric Capital Corp., 6.875%, 11/15/10..................... 2,000,000 2,284,086 General Motors Acceptance Corp., 8.00%, 11/1/31....................... 775,000 797,011 Goldman Sachs Group, Inc., 6.875%, 1/15/11.............................. 3,080,000 3,483,289 Hutchison Whampoa Finance CI Ltd., 7.45%, 8/1/17 (c).................... 402,000 432,874 Illinois State, 5.10%, 6/1/33......... 1,542,500 1,394,806 J.P. Morgan Chase & Co., 5.25%, 5/30/07.............................. 3,500,000 3,737,696 Metropolitan Life Insurance Co., 7.45%, 11/1/23, Callable 11/1/03 @ 103.53 (c)........................... 312,000 323,010 Metropolitan Life Insurance Co., 7.80%, 11/1/25 (c)................... 275,000 319,557 Morgan Stanley, 5.80%, 4/1/07......... 2,500,000 2,728,308 New York Life Insurance, 7.50%, 12/15/23 (c)......................... 250,000 260,440 PNC Institutional Capital Trust A, 7.95%, 12/15/26 (c).................. 187,000 205,014
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 71 HSBC INVESTOR FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) .................................................................................
- ---------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Prime Property Funding II, 7.00%, 8/15/04 (c).......................... 210,000 218,130 Prudential Insurance Co., 8.30%, 7/1/25 (c)........................... 548,000 665,716 Travelers Property Casualty Corp., 7.75%, 4/15/26....................... 1,000,000 1,190,550 ----------- 34,965,694 ----------- FOOD - DIVERSIFIED - 1.8% Kellogg Co., 6.60%, 4/1/11............ 3,250,000 3,631,160 ----------- GOVERNMENTS (FOREIGN) - 0.3% United Mexican States, 8.125%, 12/30/19............................. 495,000 546,975 ----------- HEALTH CARE - 0.7% Health Net, Inc., 8.375%, 4/15/11..... 295,000 348,880 Pharmacia Corp., 6.60%, 12/1/28....... 513,000 570,498 Wyeth, 6.70%, 3/15/11................. 480,000 539,440 ----------- 1,458,818 ----------- HOTELS & LODGING - 0.2% Harrahs Operating Co., Inc., 8.00%, 2/1/11............................... 287,000 334,028 ----------- MEDIA - 0.2% Viacom, Inc., 6.625%, 5/15/11......... 392,000 439,105 ----------- OIL & GAS - 1.0% Anadarko Finance Co., 6.75%, 5/1/11 (c).................................. 1,250,000 1,405,625 Conoco, Inc., 6.95%, 4/15/29.......... 565,000 632,957 ----------- 2,038,582 ----------- REFUSE SYSTEMS - 0.1% Waste Management, Inc., 7.375%, 5/15/29.............................. 160,000 179,271 ----------- RENTAL - AUTO AND EQUIPMENT - 1.7% Hertz Corp., 1.66%, 8/13/04 (b)....... 3,500,000 3,478,013 ----------- RETAIL - 3.5% Sears Roebuck Acceptance, 4.10%, 1/7/04 (b)........................... 5,080,000 5,085,278 Wal-Mart Stores, Inc., 5.45%, 8/1/06............................... 1,850,000 1,992,200 ----------- 7,077,478 ----------- TELECOMMUNICATIONS - 1.5% Comcast Cable Communications Holdings, Inc., 8.375%, 3/15/13................ 2,200,000 2,659,351 Lenfest Communications, 7.625%, 2/15/08.............................. 330,000 370,960 ----------- 3,030,311 ----------- UTILITIES - 0.3% PSEG Energy Holdings, 9.125%, 2/10/04.............................. 215,000 218,225 RAS Laffan Liquid Natural Gas, 8.29%, 3/15/14 (c).......................... 348,000 403,680 ----------- 621,905 ----------- TOTAL CORPORATE OBLIGATIONS........... 62,465,870 ----------- - ---------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 6.8% Banc of America Commercial Mortgage, Inc. 00 2 A2, 7.20%, 5/15/10......... 675,000 775,607 Chase Commercial Mortgage Securities Corp. 99 2 A2, 7.20%, 1/15/32........ 700,000 803,061 DLJ Mortgage Acceptance Corp. IO 97 CF1 S, 0.98%, 5/15/30 (d)............ 975,996 21,918 Fannie Mae IO 00 16 PS, 7.48%, 10/25/29 (d)......................... 339,213 25,862
- ---------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Fannie Mae IO 01 4 SA, 6.43%, 2/17/31 (d).......................... 702,687 66,925 Fannie Mae IO 200 32 SV, 7.48%, 3/18/30 (d).......................... 216,683 18,060 Fannie Mae IO 270 2, 8.50%, 9/1/23 (d).................................. 174,292 35,676 Fannie Mae IO 296 2, 8.00%, 4/1/24 (d).................................. 197,002 35,217 Fannie Mae IO 306, 8.00%, 5/1/30 (d).................................. 327,388 59,107 FHA Weyerhauser, 7.43%, 1/1/24........ 82,207 82,464 First Union-Chase Commercial Mortgage 99 C2 A2, 6.645%, 6/15/31............ 597,000 665,237 Freddie Mac IO 1534 K, 6.275%, 6/15/23 (d).......................... 556,035 42,221 Freddie Mac IO 2141 SD, 7.03%, 4/15/29 (d).......................... 371,441 39,341 Freddie Mac IO 2247 SC, 6.38%, 8/15/30 (d).......................... 297,356 18,898 Freddie Mac, Pool #2642, 4.50%, 10/25/27............................. 7,000,000 7,092,724 GE Capital Commercial Mortgage Corp. 01 1 A1, 6.08%, 5/15/33.............. 298,113 321,328 GMAC Commercial Mortgage Securities, Inc. 98 C2 A2, 6.42%, 5/15/35........ 587,000 651,686 GMAC Commercial Mortgage Securities, Inc. IO 96 C1 X2, 2.27%, 10/15/28 (d)......................... 441,155 17,518 Government National Mortgage Association IO 99 29 SD, 6.88%, 3/16/26 (d).......................... 305,447 16,868 Government National Mortgage Association IO 99 30 S, 7.48%, 8/16/29 (d).......................... 358,964 38,422 Government National Mortgage Association IO 99 30 SA, 6.88%, 4/16/29 (d).......................... 435,544 40,476 Government National Mortgage Association IO 99 32 SB, 6.88%, 7/16/27 (d).......................... 287,089 21,905 GS Mortgage Securities Corp. IO 97 GL X2, 1.01%, 7/13/30 (d)...... 555,287 10,237 LB-UBS Commercial Mortgage Trust 00 C3 A1, 7.95%, 7/15/09............. 315,898 352,807 LB-UBS Commercial Mortgage Trust 00 C4 A2, 7.37%, 8/15/26............. 600,000 696,778 PNC Mortgage Acceptance Corp. 00 C2 A2, 7.30%, 10/12/33.................. 600,000 693,862 Ryland Mortgage Securities Corp. 94 4 C1, 4.24%, 9/25/30 (b)............... 569,254 568,701 Salomon Brothers Mortgage Securities VII 00 C3 A2, 6.59%, 12/18/33........ 650,000 723,514 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS.......................... 13,936,420 ----------- - ---------------------------------------------------------------- ASSET BACKED SECURITIES - 4.2% Citibank Credit Card Issuance Trust 00 A3 A3, 6.875%, 11/16/09.............. 1,115,000 1,269,933 Connecticut RRB Special Purpose Trust CL&P-1 01 1 A5, 6.21%, 12/30/11...... 700,000 783,377 Detroit Edison Securitization Funding LLC 01 1 A3, 5.875%, 3/1/10.......... 357,000 387,822 Detroit Edison Securitization Funding LLC 01 1 A5, 6.42%, 3/1/15........... 417,000 467,191 MBNA Master Credit Card Trust 00 E A, 7.80%, 10/15/12...................... 600,000 721,112 MBNA Master Credit Card Trust 99 B A, 5.90%, 8/15/11....................... 527,000 580,575
72 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) .................................................................................
- ---------------------------------------------------------------- ASSET BACKED SECURITIES, CONTINUED PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Peco Energy Transition Trust 00 A A3, 7.625%, 3/1/10....................... 600,000 704,869 Peco Energy Transition Trust 01 A A1, 6.52%, 12/31/10...................... 550,000 619,455 PSE&G Transition Funding LLC 01 1 A6, 6.61%, 6/15/15....................... 355,000 401,565 Union Acceptance Corp. 01 C B, 4.73%, 11/9/09.............................. 2,500,000 2,601,562 ----------- TOTAL ASSET BACKED SECURITIES......... 8,537,461 -----------
- ---------------------------------------------------------------- INVESTMENT COMPANIES - 2.2% SHARES VALUE($) ---------- ----------- Dreyfus Cash Management Fund.......... 4,529,077 4,529,077 ----------- TOTAL INVESTMENT COMPANIES............ 4,529,077 ----------- TOTAL INVESTMENTS (COST $195,671,845) (a) - 100.3%.... 204,195,706 ----------- -----------
- --------- Percentages indicated are based on net assets of $203,550,557. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $289,421. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation......... $ 9,853,932 Unrealized depreciation......... (1,619,492) ----------- Net unrealized appreciation..... $ 8,234,440 ----------- -----------
(b) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented in this report represent the rates that were in effect on October 31, 2003. Each of these securities contains put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (c) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the investment manager based on procedures approved by the Board of Trustees. (d) Interest-only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an Interest-only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. * The principal amount of the security is denominated in Euro. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 73 HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 .................................................................................
- ---------------------------------------------------------------- COMMON STOCKS - 94.7% SHARES VALUE($) --------- ----------- AUSTRALIA - 2.3% Alumina Ltd............................ 204,000 862,699 Australia & New Zealand Bank Group Ltd................................... 37,321 471,364 Fosters Group Ltd...................... 313,694 1,017,198 National Australia Bank Ltd............ 40,606 881,359 News Corp. Ltd......................... 45,526 405,402 QBE Insurance Group Ltd................ 33,388 244,012 Wesfarmers Ltd......................... 1,000 20,577 WMC Resources Ltd. (b)................. 85,800 311,702 Woolworths Ltd......................... 49,500 390,565 ----------- 4,604,878 ----------- BRAZIL - 0.2% Cia. Vale do Rio Doce ADR.............. 9,000 411,750 ----------- CANADA - 4.1% Abitibi-Consolidated, Inc.............. 131,000 881,583 Alcan Inc.............................. 10,000 399,074 BCE, Inc............................... 48,000 1,087,060 Bombardier, Inc. Class B............... 375,900 1,688,349 Inco Ltd. (b).......................... 13,800 457,958 Placer Dome, Inc....................... 18,800 290,262 Suncor Energy, Inc..................... 20,600 433,012 TELUS Corp., non voting................ 37,100 649,929 Thomson Corp........................... 73,400 2,403,509 ----------- 8,290,736 ----------- DENMARK - 0.4% Novo Nordisk A/S Class B............... 21,100 758,927 TDC A/S Class B........................ 4,400 141,402 ----------- 900,329 ----------- FINLAND - 1.2% Nokia Corp., Class A................... 112,000 1,902,222 UPM-Kymmene Corp....................... 28,400 531,542 ----------- 2,433,764 ----------- FRANCE - 11.0% Accor SA............................... 19,500 766,884 Banque Nationale de Paris.............. 58,900 3,094,900 Bouygues SA............................ 37,290 1,014,381 Carrefour SA........................... 11,000 577,484 Essilor................................ 15,100 726,374 France Telecom SA (b).................. 58,800 1,423,151 Groupe Danone.......................... 8,900 1,342,943 L'Air Liquide.......................... 9,650 1,430,311 L'Oreal SA............................. 11,400 842,859 Renault SA............................. 40,900 2,705,382 Sanofi-Synthelabo...................... 86,020 5,324,906 Schneider SA........................... 19,500 1,141,372 Societe Generale....................... 7,200 534,843 Vivendi Universal SA (b)............... 57,500 1,207,867 ----------- 22,133,657 ----------- GERMANY - 4.1% Allianz AG............................. 8,200 877,943 Bayerische Motoren Werke AG............ 8,872 355,823 DaimlerChrysler AG..................... 21,700 808,501 Deutsche Bank AG....................... 18,800 1,239,179
- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- Infineon Technologies AG (b)........... 14,300 211,122 Muenchener Rueckversicher AG........... 10,400 1,240,434 SAP AG................................. 9,900 1,435,141 Siemens AG............................. 29,900 2,009,055 ----------- 8,177,198 ----------- HONG KONG - 2.7% Cheung Kong Holdings Ltd............... 47,000 391,884 China Mobile Ltd....................... 81,500 231,412 Hang Lung Properties Ltd............... 774,000 1,011,641 Hang Seng Bank Ltd..................... 52,500 655,768 Hong Kong Land Holdings Ltd............ 376,000 581,997 Hutchison Whampoa Ltd.................. 49,600 384,820 Johnson Electric Holdings Ltd.......... 304,500 396,030 Li & Fung Ltd.......................... 306,000 514,223 Sun Hung Kai Properties Ltd............ 72,000 609,604 Swire Pacific Ltd. Class A............. 112,000 683,622 ----------- 5,461,001 ----------- IRELAND - 0.3% CRH PLC................................ 29,375 528,276 ----------- ITALY - 0.8% Assicurazioni Generali SpA............. 9,000 207,158 ENI SpA................................ 60,300 957,548 Uni Credito Italiano SpA............... 82,400 406,150 ----------- 1,570,856 ----------- JAPAN - 21.7% Advantest Corp......................... 9,700 722,636 AEON Co., Ltd.......................... 66,000 2,179,287 Aiful Corp............................. 5,445 344,228 Canon, Inc............................. 24,000 1,161,414 Dai Nippon Printing Co., Ltd........... 26,000 401,583 Daiwa House Industry Co., Ltd.......... 61,000 658,080 Daiwa Securities Group, Inc............ 67,000 489,999 Fanuc Ltd.............................. 9,200 553,163 Fuji Photo Film Co., Ltd............... 17,000 501,023 Hirose Electric Co., Ltd............... 5,700 700,478 Honda Motor Co., Ltd................... 14,800 584,273 Hoya Corp.............................. 20,000 1,810,161 Japan Telecom Co., Ltd................. 153 457,880 Kansai Electric Power Co., Inc......... 51,500 890,071 Millea Holdings, Inc................... 56 667,303 Mitsubishi Corp........................ 86,000 892,582 Mitsubishi Estate Co., Ltd............. 147,000 1,409,360 Mitsubishi Heavy Industries, Ltd....... 109,000 299,431 Mitsubishi Motors Corp. (b)............ 118,000 253,313 Mitsubishi Tokyo Financial Group, Inc................................... 91 653,932 Mitsui Fudosan Co., Ltd................ 46,000 428,053 Mitsui Sumitomo Insurance Co., Ltd..... 149,370 1,230,993 Murata Manufacturing Co., Ltd.......... 11,700 665,166 NEC Corp............................... 364,000 3,215,026 NEC Electronics Corp. (b).............. 400 30,782 Nidec Corp............................. 13,200 1,278,756 Nikko Cordial Securities Co., Ltd...... 67,000 361,404 Nikon Corp. (b)........................ 6,000 91,090 Nintendo Co., Ltd...................... 4,000 308,910
74 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) .................................................................................
- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- Nippon Steel Corp...................... 252,000 518,052 Nissan Motor Co., Ltd.................. 151,000 1,692,200 Nitto Denko Corp....................... 23,500 1,233,411 Nomura Securities Corp................. 46,000 789,994 ORIX Corp.............................. 10,800 908,719 Ricoh Co. Ltd.......................... 24,000 455,178 Rohm Co., Ltd.......................... 14,300 1,927,739 Sankyo Co., Ltd........................ 54,000 864,511 Sekisui House, Ltd..................... 79,000 775,376 Shimamura Co., Ltd..................... 5,400 375,276 Shin-Etsu Chemical Co., Ltd............ 8,300 308,792 Shionogi & Co., Ltd.................... 37,000 620,958 SMC Corp............................... 5,700 685,960 Sompo Japan Insurance, Inc............. 24,000 198,663 Sony Corp.............................. 16,810 585,640 Sumitomo Chemical Co., Ltd............. 51,000 190,203 Sumitomo Forestry Co., Ltd............. 84,000 687,679 Suzuki Motor Corp...................... 72,000 1,041,343 Tokyo Electron, Ltd.................... 36,600 2,623,440 Toray Industries, Inc.................. 91,000 378,287 Tostem Inax Holding Corp............... 30,000 534,589 Toyota Motor Co........................ 30,000 854,141 Yahoo Japan Corp. (b).................. 74 1,097,194 Yamanouchi Pharmaceutical Co., Ltd..... 19,000 477,009 Yamato Transport Co., Ltd.............. 40,000 531,587 ----------- 43,596,318 ----------- LUXEMBOURG - 0.1% SES Global SA, Class A FDR............. 30,600 272,485 ----------- MEXICO - 0.5% America Movil SA de CV, Series L ADR... 25,800 614,040 Telefonos De Mexico SA de CV, Class L ADR................................... 13,700 440,455 ----------- 1,054,495 ----------- NETHERLANDS - 10.3% ABN AMRO Holding NV.................... 160,553 3,368,904 Aegon NV............................... 105,176 1,379,173 Heineken NV............................ 39,025 1,392,753 Heineken NV, Class A................... 33,475 1,043,692 ING Groep NV........................... 68,107 1,414,055 Koninklijke Numico Class C NV (b)...... 27,800 627,283 Koninklijke Philips Electronics NV..... 39,800 1,072,943 Koninklijke (Royal) KPN NV (b)......... 279,900 2,128,010 Royal Dutch Petroleum Co............... 118,300 5,249,281 STMicroelectronics NV.................. 36,600 974,338 Unilever NV............................ 24,300 1,411,590 VNU NV................................. 26,160 796,768 ----------- 20,858,790 ----------- NORWAY - 1.5% DNB Holding ASA........................ 61,400 358,569 Norsk Hydro ASA........................ 29,300 1,648,942 Statoil ASA............................ 103,000 968,531 ----------- 2,976,042 ----------- SINGAPORE - 1.4% DBS Group Holdings Ltd. ADR............ 145,000 1,191,320
- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- Singapore Airlines Ltd................. 31,000 215,457 Singapore Press Holdings Ltd........... 19,370 219,184 Singapore Telecommunications Ltd....... 1,261,520 1,246,340 ----------- 2,872,301 ----------- SOUTH AFRICA - 0.2% Anglo American PLC..................... 20,400 417,490 ----------- SOUTH KOREA - 0.8% Samsung Electronics Co., Ltd........... 8,505 1,701,000 ----------- SPAIN - 2.7% Antena 3 Television (b)................ 417 13,617 Banco Bilbao Vizcaya Argentina SA...... 182,000 2,088,246 Industria de Diseno Textil, SA (Inditex)............................. 69,500 1,435,705 Repsol SA.............................. 25,900 451,631 Telefonica SA.......................... 123,227 1,532,790 ----------- 5,521,989 ----------- SWEDEN - 1.3% Assa Abloy AB Class B.................. 82,900 818,283 ForeningsSparbanken AB, Class A........ 71,600 1,193,202 Sandvik AB............................. 13,700 407,443 Svenska Handelsbanken Group, Class A... 13,800 243,243 ----------- 2,662,171 ----------- SWITZERLAND - 8.7% Cie Financier Richemont AG, unit, Class A..................................... 78,930 1,776,198 Holcim Ltd............................. 37,083 1,560,688 Nestle SA.............................. 11,032 2,428,882 Novartis AG............................ 83,887 3,197,551 Roche Holding AG....................... 12,369 1,023,533 Serono SA, Class B..................... 828 571,697 Swiss Reinsurance Co................... 40,501 2,549,226 Swisscom AG............................ 7,786 2,265,220 Synthes-Stratec, Inc................... 585 537,095 UBS AG................................. 26,192 1,608,375 ----------- 17,518,465 ----------- TAIWAN - 1.6% Taiwan Semiconductor Manufacturing Co., Ltd. ADR (b).......................... 286,673 3,170,603 ----------- UNITED KINGDOM - 16.8% ARM Holdings PLC (b)................... 191,800 370,228 AstraZeneca PLC........................ 148,951 7,074,401 Barclays PLC........................... 104,800 883,867 BG Group PLC........................... 400,000 1,824,221 BHP Billiton PLC....................... 328,304 2,578,052 Brambles Industries PLC................ 77,500 234,752 British Aerospace PLC.................. 170,862 530,598 Centrica PLC........................... 224,100 701,629 Compass Group PLC...................... 38,600 222,544 Diageo PLC............................. 55,400 651,496 HBOS PLC............................... 87,100 1,013,199 National Grid Transco PLC.............. 137,100 875,353 Pearson PLC............................ 113,600 1,175,918 Prudential Corp. PLC................... 34,400 266,920 Reckitt Benckiser PLC.................. 26,900 566,035 Reed Elsevier PLC...................... 103,000 800,519
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 75 HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) .................................................................................
- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES OR PRINCIPAL AMOUNT* VALUE($) --------- ----------- Rio Tinto PLC.......................... 12,400 300,693 Royal Bank Of Scotland Group PLC....... 97,600 2,615,176 Smith & Nephew PLC..................... 79,600 632,499 Smiths Group PLC....................... 87,900 1,046,371 Standard Chartered Bank................ 105,400 1,685,742 Unilever PLC........................... 45,900 391,397 Vodafone Group PLC..................... 3,243,053 6,810,332 Xstrata PLC............................ 65,800 675,539 ----------- 33,927,481 ----------- TOTAL COMMON STOCKS.................... 191,062,075 ----------- - ----------------------------------------------------------------- CONVERTIBLE BONDS - 1.2% JAPAN - 0.7% SMFG Finance (Cayman) Ltd., 2.25%, 7/11/05, (c)(d)...................... 84,000,000 1,388,729 ----------- SWITZERLAND - 0.5% Credit Suisse Group Finance (Guernsey), 6.00%, 12/23/05.......... 960,000 1,018,340 ----------- TOTAL CONVERTIBLE BONDS............... 2,407,069 ----------- - ----------------------------------------------------------------- RIGHTS & WARRANTS - 0.1% AUSTRALIA - 0.0% Australia & New Zealand Banking Group Ltd., expire 2003.............. 6,785 20,750 ----------- GERMANY - 0.1% Muenchener Rueckver, expire 2003...... 10,400 85,960 ----------- UNITED KINGDOM - 0.0% TI Automotive Ltd., Class A (b)....... 190,000 0 ----------- TOTAL RIGHTS & WARRANTS............... 106,710 -----------
- ----------------------------------------------------------------- INVESTMENT COMPANIES - 3.9% SHARES VALUE($) ----------- ----------- UNITED STATES - 3.9% Investors Cash Reserve................ 7,962,310 7,962,310 ----------- TOTAL INVESTMENT COMPANIES............ 7,962,310 ----------- TOTAL INVESTMENTS (COST $183,219,726) (a) - 99.9%..... 201,538,164 ----------- -----------
- --------- Percentages indicated are based on net assets of $201,804,564. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $6,230,630. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation........... $15,405,384 Unrealized depreciation........... (3,317,576) ----------- Net unrealized appreciation....... $12,087,808 ----------- -----------
(b) Represents non-income producing security. (c) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the investment manager based on procedures approved by the Board of Trustees. (d) Step-up bond; coupon rate is zero until step-up date. Step-up rate is provided. * The principal amount of each security is denominated in the local issue currency of each security. ADR -- American Depositary Receipt FDR -- Fiduciary Depositary Receipt 76 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 .................................................................................
PERCENT OF INDUSTRY NET ASSETS - -------- ---------- Aerospace & Defense......................................... 0.3% Airlines.................................................... 0.1% Automotive.................................................. 4.5% Banking & Financial Services................................ 15.6% Building & Construction..................................... 1.0% Building Materials.......................................... 0.3% Business Services........................................... 0.9% Chemicals................................................... 1.8% Computer Related............................................ 3.6% Diversified Manufacturing Operations........................ 2.2% Drugs -- Medical............................................ 10.4% Electrical.................................................. 2.1% Electronic Components & Semiconductors...................... 5.7% Food & Beverage............................................. 6.4% Insurance................................................... 3.0% Leisure..................................................... 2.7% Metals & Mining............................................. 4.5% Manufacturing............................................... 3.1% Multimedia.................................................. 3.4% Office Equipment & Supplies................................. 0.3% Oil & Gas................................................... 6.6% Paper Products.............................................. 0.7% Publishing.................................................. 1.9% Real Estate................................................. 2.2% Retail...................................................... 2.4% Telecommunciations.......................................... 9.8% Transportation.............................................. 0.3% Wholesale Distribution...................................... 0.3% Investment Companies........................................ 3.9% ------ Total Investments........................................... 100.0% Other assets in excess of liabilities....................... 0.0% ------ Net Assets.................................................. 100.0% ------ ------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 77 HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. At October 31, 2003, the portfolio's open forward currency contracts were as follows:
CONTRACT CONTRACT UNREALIZED DELIVERY AMOUNT VALUE APPRECIATION/ CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION) - -------- ---- ---------------- ------------- ----- -------------- LONG CONTRACTS British Pound................................... 11/3/2003 24,960 $ 42,457 $ 42,347 $ (110) British Pound................................... 11/5/2003 58,568 99,244 99,351 107 Canadian Dollar................................. 1/20/2004 1,607,451 1,209,437 1,215,204 5,767 Euro............................................ 11/5/2003 10,070 11,656 11,705 49 Japanese Yen.................................... 11/5/2003 8,023,418 73,998 72,998 (1,000) Japanese Yen.................................... 11/25/2003 199,879,810 1,702,890 1,820,037 117,147 Japanese Yen.................................... 11/25/2003 2,509,000 21,420 22,846 1,426 ---------- ---------- --------- TOTAL LONG CONTRACTS........................................................... $3,161,102 $3,284,488 $ 123,386 ---------- ---------- --------- ---------- ---------- --------- SHORT CONTRACTS Hong Kong Dollar................................ 11/3/2003 165,249 $ 21,286 $ 21,281 $ 5 Hong Kong Dollar................................ 11/4/2003 164,495 21,180 21,185 (5) Japanese Yen.................................... 11/4/2003 3,379,625 31,250 30,747 503 Japanese Yen.................................... 11/6/2003 37,845,887 344,188 344,342 (154) Japanese Yen.................................... 1/20/2004 131,376,998 1,209,437 1,198,722 10,715 Japanese Yen.................................... 3/4/2004 64,374,840 556,924 588,249 (31,325) Swiss Franc..................................... 11/25/2003 2,397,215 1,702,890 1,796,744 (93,854) ---------- ---------- --------- TOTAL SHORT CONTRACTS.......................................................... $3,887,155 $4,001,270 $(114,115) ---------- ---------- --------- ---------- ---------- ---------
78 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 .................................................................................
- ----------------------------------------------------------------- COMMON STOCKS - 84.3% SHARES VALUE($) ---------- ----------- ADVERTISING - 1.3% Monster Worldwide, Inc. (b)............ 216,500 5,514,255 ----------- BANKING - 3.6% East West Bancorp, Inc................. 131,500 6,455,335 Southwest Bancorporation of Texas, Inc................................... 173,600 6,233,976 Wintrust Financial Corp................ 58,800 2,548,392 ----------- 15,237,703 ----------- BIOTECHNOLOGY - 1.4% Celgene Corp. (b)...................... 148,100 6,174,289 ----------- COMPUTER SERVICES - 1.8% Ceridian Corp. (b)..................... 372,800 7,828,800 ----------- COMPUTER SOFTWARE - 4.3% CheckFree Corp. (b).................... 151,100 4,159,783 SRA International, Inc. Class A (b).... 229,600 10,001,376 Transaction Systems Architects, Inc. Class A (b)........................... 214,400 4,288,000 ----------- 18,449,159 ----------- COMPUTER STORAGE DEVICES - 0.9% Storage Technology Corp. (b)........... 156,500 3,771,650 ----------- CONSTRUCTION - 0.9% D. R. Horton, Inc...................... 100,500 3,999,900 ----------- CONSUMER PRODUCTS - 3.7% LeapFrog Enterprises, Inc. (b)......... 189,500 6,551,015 Tiffany & Co........................... 192,800 9,148,360 ----------- 15,699,375 ----------- CRUISE LINES - 1.6% Royal Caribbean Cruises Ltd............ 236,400 7,023,444 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 2.0% Actuant Corp. Class A (b).............. 189,200 6,099,808 AMETEK, Inc............................ 49,000 2,305,450 ----------- 8,405,258 ----------- E-MARKETING/INFORMATION - 1.1% DoubleClick, Inc. (b).................. 586,500 4,885,545 ----------- EDUCATIONAL SERVICES - 4.5% Apollo Group, Inc. (b)................. 120,000 8,251,200 Career Education Corp. (b)............. 204,200 10,934,910 ----------- 19,186,110 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 8.4% ASM International N.V. (b)............. 249,100 4,361,741 Power Integrations, Inc. (b)........... 120,000 4,178,400 Semtech Corp. (b)...................... 296,100 6,573,420 Thermo Electron Corp. (b).............. 358,700 7,884,226 Varian Semiconductor Equipment Associates, Inc. (b).................. 199,100 9,626,485 White Electronic Designs (b)........... 233,300 2,566,300 ----------- 35,190,572 -----------
- ----------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) ---------- ----------- EMPLOYMENT AGENCIES - 0.8% Cross Country Healthcare, Inc. (b)..... 256,500 3,562,785 ----------- ENVIRONMENTAL SERVICES - 2.9% Republic Services, Inc................. 318,900 7,414,425 Waste Connections, Inc. (b)............ 143,000 4,959,240 ----------- 12,373,665 ----------- FINANCIAL SERVICES - 0.2% CapitalSource, Inc. (b)................ 42,400 922,200 ----------- HEALTH CARE - 11.5% Caremark Rx, Inc. (b).................. 336,100 8,419,305 Express Scripts, Inc. (b).............. 115,700 6,354,244 Humana, Inc. (b)....................... 236,600 4,800,614 Lincare Holdings, Inc. (b)............. 220,090 8,570,305 Manor Care, Inc........................ 341,400 11,361,791 NDCHealth Corp......................... 339,800 8,967,322 ----------- 48,473,581 ----------- HOSPITALS - 1.9% Community Health Systems, Inc. (b)..... 334,200 8,027,484 ----------- HUMAN RESOURCES - 0.0% Employee Solutions, Inc. (b)........... 2,483 10 ----------- INSURANCE - 1.8% Philadelphia Consolidated Holding Corp. (b)................................... 110,500 5,210,075 RenaissanceRe Holdings Ltd............. 58,400 2,626,832 ----------- 7,836,907 ----------- INTERNET RELATED - 2.7% Concur Technologies, Inc. (b).......... 406,000 4,656,820 RSA Security, Inc. (b)................. 536,200 6,954,514 ----------- 11,611,334 ----------- MEDIA - 4.2% Entravision Communications Corp. (b)... 288,500 2,760,945 The E.W. Scripps Co. Class A........... 65,900 6,122,769 Westwood One, Inc. (b)................. 297,900 8,916,147 ----------- 17,799,861 ----------- MEDICAL EQUIPMENT & SUPPLIES - 2.2% C.R. Bard, Inc......................... 118,800 9,509,940 ----------- OIL & GAS - 6.2% Chesapeake Energy Corp................. 795,300 9,487,929 Cooper Cameron Corp. (b)............... 111,100 4,757,302 Helmerich & Payne, Inc................. 222,400 5,895,824 Varco International, Inc. (b).......... 352,000 6,191,680 ----------- 26,332,735 ----------- PHARMACEUTICALS - 3.8% Biogen, Inc. (b)....................... 189,100 7,652,877 King Pharmaceuticals, Inc. (b)......... 335,700 4,498,380 QLT Phototherapeutics, Inc. (b)........ 266,000 4,109,700 ----------- 16,260,957 ----------- RAILROAD EQUIPMENT - 0.8% Wabtec Corp............................ 227,300 3,477,690 -----------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 79 HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2003 (CONTINUED) .................................................................................
- ----------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) ---------- ----------- RETAIL - 8.2% 99 Cents Only Stores (b)............... 125,100 3,724,227 Abercrombie & Fitch Co. (b)............ 122,100 3,479,850 Cost Plus, Inc. (b).................... 187,000 8,577,690 Dollar Tree Stores, Inc. (b)........... 178,500 6,815,130 P.F. Chang's China Bistro, Inc. (b).... 86,400 4,211,136 Williams-Sonoma, Inc. (b).............. 223,900 7,910,387 ----------- 34,718,420 ----------- TELECOMMUNICATIONS - 1.6% Advanced Fibre Communications, Inc. (b)................................... 279,080 6,717,456 ----------- TOTAL COMMON STOCKS.................... 358,991,085 -----------
- ----------------------------------------------------------------- INVESTMENT COMPANIES - 4.9% SHARES VALUE($) ---------- ----------- Dreyfus Cash Management Fund........... 18,224,010 18,224,010 Ishares Russell 2000 Growth............ 50,000 2,857,500 ----------- TOTAL INVESTMENT COMPANIES............. 21,081,510 ----------- TOTAL INVESTMENTS (COST $308,463,378) (a) - 89.2%...... 380,072,595 ----------- -----------
- --------- Percentages indicated are based on net assets of $426,181,456. (a) Represents cost for financial reporting purposes and differs for federal income tax purposes by the amount of losses recognized for financial reporting purposes in excess of federal income tax reporting of approximately $333,082. Cost for federal income tax purposes differs from value by net unrealized appreciation of securities as follows: Unrealized appreciation.......... $74,489,340 Unrealized depreciation.......... (3,213,205) ----------- Net unrealized appreciation...... $71,276,135 ----------- -----------
(b) Represents non-income producing security. 80 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2003 .................................................................................
INTERNATIONAL LIMITED MATURITY FIXED INCOME EQUITY SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------------ ------------------ ------------------ ---------------- ASSETS: Investments, at value $ 83,838,149 $204,195,706 $201,538,164 $380,072,595 Cash -- -- -- 49,474,307 Foreign currency -- 328,203 11,792 -- Interest and dividends receivable 686,241 2,235,588 213,783 25,309 Receivable for investments sold -- -- 721,897 965,266 Unrealized appreciation on forward foreign currency contracts -- -- 135,719 -- Prepaid expenses 1,028 2,542 1,315 1,217 ------------ ------------ ------------ ------------ TOTAL ASSETS 84,525,418 206,762,039 202,622,670 430,538,694 ------------ ------------ ------------ ------------ ............................................................................................................................ LIABILITIES: Payable for investments purchased -- 3,116,036 507,940 4,075,313 Unrealized depreciation on forward foreign currency contracts -- -- 126,448 -- Accrued expenses and other liabilities: Investment management 28,824 69,424 122,516 248,922 Administration 3,728 9,418 9,304 14,870 Other 4,577 16,604 51,898 18,133 ------------ ------------ ------------ ------------ TOTAL LIABILITIES 37,129 3,211,482 818,106 4,357,238 ------------ ------------ ------------ ------------ ............................................................................................................................ NET ASSETS: Applicable to investors' beneficial interest $ 84,488,289 $203,550,557 $201,804,564 $426,181,456 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Investments, at cost $ 83,207,064 $195,671,845 $183,219,726 $308,463,378 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 81 HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2003 .................................................................................
INTERNATIONAL LIMITED MATURITY FIXED INCOME EQUITY SMALL CAP EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------------ ------------------ ------------------ ---------------- INVESTMENT INCOME: Interest $ 5,861,583 $ 17,075,483 $ 72,873 $ 18,005 Dividends 69,577 185,868 6,167,211 837,976 Foreign tax withholding -- -- (1,026,969) -- ------------ ------------ ------------ ------------ TOTAL INVESTMENT INCOME 5,931,160 17,261,351 5,213,115 855,981 ------------ ------------ ------------ ------------ ............................................................................................................................ EXPENSES: Investment management 562,599 1,366,115 1,888,827 2,409,043 Administration 52,631 133,294 99,942 110,550 Accounting 58,561 84,229 85,232 54,933 Custodian 55,372 88,062 453,509 97,508 Trustee 1,124 3,531 1,719 2,428 Other 7,271 19,405 24,823 20,537 ------------ ------------ ------------ ------------ TOTAL EXPENSES 737,558 1,694,636 2,554,052 2,694,999 ------------ ------------ ------------ ------------ ............................................................................................................................ NET INVESTMENT INCOME (LOSS) 5,193,602 15,566,715 2,659,063 (1,839,018) ------------ ------------ ------------ ------------ ............................................................................................................................ NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS, FORWARDS AND FOREIGN CURRENCIES: Net realized gains (losses) from investment, forward and foreign currency transactions 7,058,455 14,700,573 (3,720,334) 5,028,175 Change in unrealized appreciation/depreciation from investments, forwards and foreign currencies (4,380,150) (3,893,969) 61,679,947 88,818,863 ------------ ------------ ------------ ------------ ............................................................................................................................ Net realized/unrealized gains from investment, forward and foreign currency transactions 2,678,305 10,806,604 57,959,613 93,847,038 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,871,907 $ 26,373,319 $ 60,618,676 $ 92,008,020 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
82 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS .................................................................................
LIMITED MATURITY PORTFOLIO FIXED INCOME PORTFOLIO ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 5,193,602 $ 6,131,946 $ 15,566,715 $ 17,602,568 Net realized gains (losses) from investment and foreign currency transactions 7,058,455 (787,558) 14,700,573 1,531,345 Change in unrealized appreciation/depreciation from investments and foreign currencies (4,380,150) 429,535 (3,893,969) 215,590 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 7,871,907 5,773,923 26,373,319 19,349,503 ------------ ------------ ------------ ------------ ............................................................................................................................ Proceeds from contributions 76,560,059 53,476,926 210,631,816 353,082,260 Fair value of withdrawals (149,758,568) (24,615,925) (419,256,855) (229,543,187) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (73,198,509) 28,861,001 (208,625,039) 123,539,073 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS (65,326,602) 34,634,924 (182,251,720) 142,888,576 ............................................................................................................................ NET ASSETS: Beginning of year 149,814,891 115,179,967 385,802,277 242,913,701 ------------ ------------ ------------ ------------ End of year $ 84,488,289 $149,814,891 $203,550,557 $385,802,277 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 83 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) .................................................................................
INTERNATIONAL EQUITY SMALL CAP EQUITY PORTFOLIO PORTFOLIO ------------------------------------- ------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 2,659,063 $ 1,884,444 $ (1,839,018) $ (2,357,766) Net realized gains (losses) from investment, forward and foreign currency transactions (3,720,334) (20,223,366) 5,028,175 (68,582,200) Change in unrealized appreciation/depreciation from investments, forwards and foreign currencies 61,679,947 (17,088,070) 88,818,863 4,212,403 --------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 60,618,676 (35,426,992) 92,008,020 (66,727,563) --------------- ------------- ------------- ------------- ............................................................................................................................ Proceeds from contributions 1,115,446,503 651,096,825 219,219,044 187,109,547 Fair value of withdrawals (1,230,876,337) (634,901,691) (151,262,999) (119,737,618) --------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (115,429,834) 16,195,134 67,956,045 67,371,929 --------------- ------------- ------------- ------------- CHANGE IN NET ASSETS (54,811,158) (19,231,858) 159,964,065 644,366 ............................................................................................................................ NET ASSETS: Beginning of year 256,615,722 275,847,580 266,217,391 265,573,025 --------------- ------------- ------------- ------------- End of year $ 201,804,564 $ 256,615,722 $ 426,181,456 $ 266,217,391 --------------- ------------- ------------- ------------- --------------- ------------- ------------- -------------
84 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS .................................................................................
RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------ RATIO OF NET NET ASSETS AT RATIO OF INVESTMENT END OF EXPENSES INCOME (LOSS) PERIOD TO AVERAGE TO AVERAGE PORTFOLIO (000'S) NET ASSETS NET ASSETS TURNOVER - -------------------------------------------------------------------------------------------------------------------- LIMITED MATURITY PORTFOLIO Period ended October 31, 2001 (a) $115,180 0.55%(b) 4.97%(b) 102.01% Year ended October 31, 2002 149,815 0.51% 4.60% 44.04% Year ended October 31, 2003 84,488 0.53% 3.70% 98.42% - -------------------------------------------------------------------------------------------------------------------- FIXED INCOME PORTFOLIO Year ended October 31, 1999 $196,871 0.56% 6.43% 433.26% Year ended October 31, 2000 226,366 0.51% 6.74% 440.49% Year ended October 31, 2001 242,914 0.53% 6.53% 341.26% Year ended October 31, 2002 385,802 0.48% 5.14% 77.82% Year ended October 31, 2003 203,551 0.48% 4.38% 70.91% - -------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY PORTFOLIO Year ended October 31, 1999 $288,830 0.91% 0.61% 34.26% Year ended October 31, 2000 332,325 0.84% 0.53% 27.81% Year ended October 31, 2001 275,848 0.90% 0.54% 26.90% Year ended October 31, 2002 256,616 0.91% 0.63% 31.63% Year ended October 31, 2003 201,805 0.96% 1.00% 68.51% - -------------------------------------------------------------------------------------------------------------------- SMALL CAP EQUITY PORTFOLIO Year ended October 31, 1999 $237,305 1.04% (0.68)% 77.74% Year ended October 31, 2000 369,166 0.97% (0.60)% 79.51% Year ended October 31, 2001 265,573 0.98% (0.65)% 52.47% Year ended October 31, 2002 266,217 0.99% (0.78)% 103.90% Year ended October 31, 2003 426,181 0.91% (0.62)% 152.05% - --------------------------------------------------------------------------------------------------------------------
(a) Limited Maturity Portfolio commenced operations on January 24, 2001. (b) Annualized. For the year ended October 31, 2003, the Limited Maturity Portfolio, Fixed Income Portfolio, International Equity Portfolio and Small Cap Equity Portfolio returned 4.42%, 5.80%, 23.70% and 33.30%, respectively. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 85 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 ................................................................................. 1. ORGANIZATION: The HSBC Investor Portfolios (the 'Portfolio Trust'), is an open-end management investment company organized as a master trust fund under the laws of the State of New York on November 1, 1994. The Portfolios operate as master funds in master-feeder arrangements. The Declaration of Trust permits the Board of Trustees to issue an unlimited number of beneficial interests in the Portfolios. The Portfolio Trust contains the following (individually a 'Portfolio,' collectively the 'Portfolios'):
PORTFOLIO SHORT NAME - --------- ---------- HSBC Investor Limited Maturity Portfolio Limited Maturity Portfolio HSBC Investor Fixed Income Portfolio Fixed Income Portfolio HSBC Investor International Equity Portfolio International Equity Portfolio HSBC Investor Small Cap Equity Portfolio Small Cap Equity Portfolio
The Portfolios are diversified series of the Portfolio Trust and are part of the HSBC Investor Family of Funds. Financial Statements for all other series of the HSBC Investor Family of Funds are published separately. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Portfolios in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ('U.S.'). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. SECURITIES VALUATION: Bonds and other fixed income securities (other than short-term obligations but including listed issues) are valued on the basis of valuations furnished by a pricing service, the use of which has been approved by the Portfolios' Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and the use of matrix techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics other than market data and without exclusive reliance upon quoted prices or exchanges or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. All debt portfolio securities with a remaining maturity of 60 days or less are valued at amortized cost. Under the amortized cost method, premium or discount, if any, is amortized or accreted, respectively, on a constant (straight-line) basis to the maturity of the security. The value of each equity security is based either on the last sale price on a national securities exchange, or in the absence of recorded sales, at the closing bid prices on such exchanges, or at the quoted bid price in the over-the-counter market. Securities or other assets for which market quotations are not readily available are valued by or at the direction of the Portfolios' Board of Trustees. SECURITIES TRANSACTIONS AND RELATED INCOME: Changes in holdings of portfolio securities shall be reflected no later than in the first calculation on the first business day following the trade date. Securities gains and losses are calculated on the identified cost basis. Interest income is recognized on the accrual basis and includes, where applicable, the amortization or accretion of premium or discount. Dividend income is recorded on the ex-dividend date. FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. The Portfolios do not isolate that portion of the results of operations resulting from changes 86 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currencies. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolios may enter into forward foreign currency exchange contracts in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolio securities denominated in a particular currency. The Portfolios could be exposed to risks if the counter-parties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized gains or losses until the contract settlement date. FUTURES CONTRACTS: Each Portfolio may invest in financial futures contracts for the purpose of hedging their existing portfolio securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a financial futures contract, the Portfolio is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as 'variation margin,' are made or received by the Portfolio each day, depending on the daily fluctuations in the fair value of the underlying security. The Portfolio recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Portfolio may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. MORTGAGE DOLLAR ROLL TRANSACTIONS: The Fixed Income Portfolio may engage in dollar roll transactions with respect to mortgage securities issued by the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. In a dollar roll transaction, the Portfolio sells a mortgage-backed security and simultaneously agrees to repurchase a similar security on a specified future date at an agreed upon price. During the roll period, the Portfolio will not be entitled to receive any interest or principal paid on the securities sold. The Portfolio is compensated for the lost interest on the securities sold by the difference between the sales price and the lower price for the future repurchase as well as by the interest earned on the reinvestment of the sales proceeds. The Portfolio may also be compensated by receipt of a commitment fee. When the Portfolio enters into a mortgage dollar roll transaction, liquid assets in an amount sufficient to pay for the future repurchase are segregated with the custodian. EXPENSE ALLOCATION: Expenses incurred by the HSBC Investor Family of Funds with respect to any two or more funds within the HSBC Investor Family of Funds are allocated in proportion to the net assets of each fund within the HSBC Investor Family of Funds, except when allocations of direct expenses to each Portfolio can otherwise be made fairly. Expenses directly attributable to a Portfolio are charged to that Portfolio. FEDERAL INCOME TAXES: Each Portfolio will be treated as a partnership for U.S. Federal income tax purposes. Accordingly, each Portfolio passes through all of its net investment income and gains and losses to its Feeders, and is therefore not subject to U.S. Federal income tax. As such, an investor in the Portfolios will be taxed on their share of the Portfolios' ordinary income and realized gains. It is intended that the Portfolios will be managed in such a way that an investor will be able to satisfy the requirements of the Internal Revenue Code applicable to regulated investment companies. HSBC INVESTOR PORTFOLIOS 87 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Asset Management (Americas) Inc. ('HSBC' or the 'Investment Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank, acts as the Investment Adviser to the Portfolios pursuant to an investment management contract with the Portfolio Trust. As Investment Adviser, HSBC manages the investments of the Portfolios and continuously reviews, supervises and administers the Portfolios' investments. Capital Guardian Trust Company and Westfield Capital Management, LLC serve as Sub-Investment Advisers for the International Equity Portfolio and the Small Cap Equity Portfolio, respectively, and are paid for their services directly by HSBC. On January 20, 2003, Westfield Capital Management replaced MFS Institutional Advisors, Inc. as Sub-Investment Adviser for the Small Cap Equity Portfolio. For its services as Investment Adviser, HSBC receives a fee, accrued daily and paid monthly, at an annual rate of 0.40% of the Limited Maturity Portfolio's average daily net assets. For its services as Investment Adviser, HSBC receives, from the Fixed Income Portfolio, a fee accrued daily and paid monthly at an annual rate of:
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%
For their services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and Capital Guardian Trust Company receive in aggregate, from the International Equity Portfolio, a fee accrued daily and paid monthly at an annual rate of:
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%
For their services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and Westfield Capital Management LLC receive in aggregate, a fee accrued daily and paid monthly at an annual rate of 0.80% of the Small Cap Equity Portfolio's average daily net assets. ADMINISTRATION: BISYS Fund Services Ohio, Inc. ('BISYS Ohio'), a wholly-owned subsidiary of The BISYS Group, Inc., with whom certain officers of the Portfolio Trust are affiliated, serves the Portfolio Trust as Administrator. Such officers are paid no fees directly by the Portfolios for serving as officers of the Portfolio Trust. Under the terms of the administration agreement with the Portfolios, BISYS Ohio receives, from the Portfolios, a fee accrued daily and paid monthly at an annual rate of:
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%
The fee breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds. The fee is allocated to each of the Portfolios based upon its pro-rata share of net assets. BISYS Ohio may use its fees to pay advertising and marketing expenses for the benefit of the Funds. 88 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2003 (CONTINUED) ................................................................................. FUND ACCOUNTING AND CUSTODIAN: BISYS provides fund accounting services for the Portfolios. For its services to the Portfolios, BISYS receives an annual fee from each Portfolio accrued daily and paid monthly. HSBC serves as custodian to the Fixed Income Portfolio, Small Cap Equity Portfolio and Limited Maturity Portfolio. Investor's Bank & Trust Company serves as custodian to the International Equity Portfolio. 4. INVESTMENT TRANSACTIONS: For the year ended October 31, 2003, each Portfolio purchased and sold securities, excluding short-term securities, in the following amounts:
PURCHASES SALES --------- ----- Limited Maturity Portfolio................................ $141,467,348 $204,670,067 Fixed Income Portfolio.................................... 241,405,012 410,173,946 International Equity Portfolio............................ 243,679,459 374,000,754 Small Cap Equity Portfolio................................ 465,087,083 435,413,020
HSBC INVESTOR PORTFOLIOS 89 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Trustees of HSBC Investor Portfolios: We have audited the accompanying statements of assets and liabilities of HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income Portfolio, HSBC Investor International Equity Portfolio and HSBC Investor Small Cap Equity Portfolio (collectively, the Funds), including the schedules of portfolio investments, as of October 31, 2003, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included verification of securities owned as of October 31, 2003, by confirmation with the custodian, correspondence with brokers and other appropriate audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the aforementioned funds as of October 31, 2003, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Columbus, Ohio December 15, 2003 90 HSBC INVESTOR PORTFOLIOS 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.
NUMBER OF PORTFOLIOS TERM OF OFFICE AND IN THE FUND NAME, ADDRESS POSITION HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATIONS(S) COMPLEX OVERSEEN AND AGE THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE - ----------------------------------------------------------------------------------------------------------------------------- Frederick C. Chen Trustee Indefinite; 13 years Management Consultant, since 1988 28 P.O. Box 182845 Columbus, Ohio 43218 Age: 76 - ----------------------------------------------------------------------------------------------------------------------------- Larry M. Robbins Trustee Indefinite; 16 years Director for the Center of Teaching 28 P.O. Box 182845 and Learning, University of Columbus, Ohio 43218 Pennsylvania Age: 64 - ----------------------------------------------------------------------------------------------------------------------------- Alan S. Parsow Trustee Indefinite; 16 years General Partner of Parsow 28 P.O. Box 818 Partnership, Ltd., since 1989 Elkhorn, NE 68022 Age: 53 - ----------------------------------------------------------------------------------------------------------------------------- Michael Seely Trustee Indefinite; 16 years President of Investor Access 28 475 Lexington Avenue Corporation, 1978-present New York, NY 10017 Age: 58 - ----------------------------------------------------------------------------------------------------------------------------- Leslie E. Bains* Trustee Indefinite; 3 years Executive Vice President, Republic 28 452 Fifth Avenue National Bank, 1993-1999; Senior New York, NY 10018 Executive Vice President, HSBC Bank Age: 60 USA, since 2000 - -----------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS OTHER DIRECTORSHIPS AND AGE HELD BY TRUSTEE - -------------------------------------------------- Frederick C. Chen None P.O. Box 182845 Columbus, Ohio 43218 Age: 76 - -------------------------------------------------- Larry M. Robbins None P.O. Box 182845 Columbus, Ohio 43218 Age: 64 - -------------------------------------------------- Alan S. Parsow None P.O. Box 818 Elkhorn, NE 68022 Age: 53 - -------------------------------------------------- Michael Seely None 475 Lexington Avenue New York, NY 10017 Age: 58 - -------------------------------------------------- Leslie E. Bains* None 452 Fifth Avenue New York, NY 10018 Age: 60 - --------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS 91 PRIVACY POLICY FOR HSBC INVESTOR FUNDS AND HSBC ADVISOR FUNDS TRUST THIS PRIVACY POLICY NOTICE SUMMARIZES THE COLLECTION AND DISCLOSURE OF NONPUBLIC PERSONAL INFORMATION ('INFORMATION') OF CUSTOMERS ('YOU') OF THE HSBC INVESTOR FAMILY OF FUNDS ('WE' OR 'US'). IF YOU ARE AN INDIVIDUAL SHAREHOLDER OF RECORD OF ANY SERIES OF THE FUNDS, WE CONSIDER YOU TO BE A CUSTOMER OF THE HSBC INVESTOR FAMILY OF FUNDS. SHAREHOLDERS PURCHASING OR OWNING SHARES OF ANY OF THE HSBC INVESTOR FAMILY OF FUNDS THROUGH THEIR BANK, BROKER, OR OTHER FINANCIAL INSTITUTION SHOULD CONSULT THAT FINANCIAL INSTITUTION'S PRIVACY POLICIES. WE COLLECT THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU We collect Information about you from the following sources: information we receive from you on applications or other forms; information about your transactions with us, our affiliates, or others; and information we receive from a consumer reporting agency. WE DISCLOSE THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU We do not disclose any Information about you or any former customer to anyone, except as permitted by law, including to our affiliates and third party service providers. WE DISCLOSE INFORMATION ABOUT YOU TO THE FOLLOWING TYPES OF THIRD PARTIES We may disclose Information about you and any former customer to our affiliates, which we consider to include HSBC Bank USA, HSBC Asset Management (Americas) Inc. and their affiliates, and to nonaffiliated third parties, as permitted by law. We may disclose all of the Information we collect to companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. PROTECTING THE SECURITY AND CONFIDENTIALITY OF YOUR INFORMATION We restrict access to Information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your Information. 92 HSBC INVESTOR FAMILY OF FUNDS [THIS PAGE INTENTIONALLY LEFT BLANK] [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 Equity Fund Alliance Capital Management, L.P. 1345 Avenue of the Americas New York, NY 10105 Institutional Capital Corporation 225 West Wacker Drive Chicago, IL 60606 HSBC Investor International Equity Portfolio Capital Guardian Trust Company 11100 Santa Monica Boulevard Los Angeles, CA 90025 HSBC Investor Small Cap Equity Portfolio Westfield Capital Management One Financial Center Boston, MA 02111 Shareholder Servicing Agents For HSBC Bank USA and HSBC Brokerage (USA) Inc. Clients HSBC Bank USA 452 Fifth Avenue New York, NY 10018 1-888-525-5757 For All Other Shareholders HSBC Investor Funds P.O. Box 182845 Columbus, OH 43218-2845 1-800-782-8183 ADMINISTRATOR, TRANSFER AGENT, DISTRIBUTOR, AND SPONSOR BISYS Fund Services 3435 Stelzer Road Columbus, OH 43219 Custodians HSBC Investor Limited Maturity Portfolio HSBC Investor Fixed Income Portfolio HSBC Investor New York Tax-Free Bond Fund HSBC Investor Balanced Fund HSBC Investor Equity Fund HSBC Investor Growth and Income Fund HSBC Investor Mid-Cap Fund HSBC Investor Small Cap Equity Portfolio HSBC Bank USA 452 Fifth Avenue New York, NY 10018 HSBC Investor International Equity Portfolio Investors Bank & Trust Company 200 Clarendon Street - 16th Floor Boston, MA 02116 Independent Auditors KPMG LLP 191 West Nationwide Blvd., Suite 500 Columbus, OH 43215 Legal Counsel Dechert LLP 1775 Eye Street, N.W. Washington, D.C. 20006 The HSBC Investor Family of Funds are distributed by BISYS Fund Services. This document must be preceded or accompanied by a current prospectus for the HSBC Investor Funds, which you should read carefully before you invest or send money. Item 2. Code of Ethics. Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is included as Exhibit 10 (a)(1). Item 3. Audit Committee Financial Expert. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. 3(a)(1) The registrant's board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. 3(a)(2) The audit committee financial expert is Frederick C. Chen. He is an independent trustee. Item 4. Principal Accountant Fees and Services. (a) Disclose, under the caption Audit Fees, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption Audit-Related Fees, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption Tax Fees, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption All Other Fees, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. Only effective for annual reports with periods ending on or after December 15, 2003. Item 5. Audit Committee of Listed Registrants. (a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state. (b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees. Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). In the opinion of the principal executive officer and principal financial officer, based on their evaluation, the registrant's disclosure controls and procedures are adequately designed and are operating effectively to ensure (i) that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared; and (ii) that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2). Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HSBC Advisor Funds Trust By: /s/ Walter B. Grimm ----------------------------------------------------------------------- Walter B. Grimm President Date: January 2, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Nadeem Yousaf ----------------------------------------------------------------------- Nadeem Yousaf Treasurer Date: January 2, 2004 By: /s/ Walter B. Grimm ----------------------------------------------------------------------- Walter B. Grimm President Date: January 2, 2004 STATEMENT OF DIFFERENCES The section symbol shall be expressed as..................................'SS' The dagger symbol shall be expressed as...................................'D' EX-99.CODE ETH 3 ex99a1.txt EXHIBIT (A)(1) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS HSBC INVESTOR FUNDS HSBC ADVISOR FUNDS TRUST HSBC INVESTOR PORTFOLIOS Approved by the Boards of Trustees HSBC Investor Funds, HSBC Advisor Funds Trust and HSBC Investor Portfolios as of August 14, 2003 Pursuant to the Sarbanes-Oxley Act of 2002 I. Introduction and Application HSBC Investor Funds, HSBC Advisor Funds Trust and HSBC Investor Portfolios (each a "Trust") recognize the importance of high ethical standards in the conduct of their business and require this Code of Ethics ("Code") to be observed by their respective principal executive officers (each a "Covered Officer") (defined below). In accordance with the Sarbanes-Oxley Act of 2002 (the "Act") and the rules promulgated thereunder by the U.S. Securities and Exchange Commission ("SEC") each Trust is required to file reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended ("1934 Act"), and must disclose whether they have adopted a code of ethics applicable to the principal executive officers. Each Trust's Board of Trustees ("Board"), including a majority of its Independent Trustees (defined below) has approved this Code as compliant with the requirements of the Act and related SEC rules. This Code does not supersede or otherwise affect the separate code of ethics that each Trust has adopted pursuant to Rule 17j-1 under the Investment Company Act of 1940, as amended ("1940 Act"). All recipients of the Code are directed to read it carefully, retain it for future reference and abide by the rules and policies set forth herein. Any questions concerning the applicability or interpretation of such rules and policies, and compliance therewith, should be directed to the relevant Compliance Officer (defined below), as specified in Schedule 1. II. Purpose This Code has been adopted by the Board in accordance with the Act and the rules promulgated by the SEC in order to deter wrongdoing and promote: (A) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (B) full, fair, accurate, timely and understandable disclosure in reports and documents filed by the Trust with the SEC or made in other public communications by the Trust; (C) compliance with applicable governmental laws, rules and regulations; (D) prompt internal reporting to an appropriate person or persons of violations of the Code; and (E) accountability for adherence to the Code. III. Definitions (A) "Covered Officer" means the principal executive officer and senior financial officers, including the principal financial officer, controller or principal accounting officer, or persons performing similar functions. (B) "Compliance Officer" means the person appointed by the Trust's Board of Trustees to administer the Code. (C) "Trustee" means a trustee of the Trust. (D) "Executive Officer" shall have the same meaning as set forth in Rule 3b-7 of the 1934 Act. Subject to any changes in the Rule, an Executive Officer means the president, any vice president, any officer who performs a policy making function, or any other person who performs similar policy making functions for the Trust. (E) "Independent Trustee" means a trustee of the Trust who is not an "interested person" of the Trust within the meaning of Section 2(a)(19) of the 1940 Act. (F) "Implicit Waiver" means the Compliance Officer failed to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an Executive Officer. (G) "Restricted List" means that listing of securities maintained by the Trust Compliance Officer in which trading by certain individuals subject to the Trust's 17j-1 code of ethics is generally prohibited. (H) "Waiver" means the approval by the Compliance Office of a material departure from a provision of the Code. IV. Honest and Ethical Conduct (A) Overview. A "conflict of interest" occurs when a Covered Officer's personal interest interferes with the interests of, or his service to, the Trust. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trust and already are subject to the conflict of interest provisions in the 1940 Act and the Investment Advisers Act of 1940, as amended (the "Advisers Act"). The Trust's and each investment adviser and sub-adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. (B) General Policy. Each Covered Officer shall adhere to the highest standards of honest and ethical conduct. Each Covered Officer has a duty to exercise his or her authority and responsibility for the benefit of the Trust, to place the interests of the shareholders first and to refrain from having outside interests that conflict with the interests of the Trust and its shareholders. Each such person must avoid any circumstances that might adversely affect or appear to affect his or her duty of complete loyalty to the Trust and its shareholders in discharging his or her responsibilities, including the protection of confidential information and corporate integrity. (C) Examples of Conflicts. The following list provides examples of conflicts of interest under the Code but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trust. (1) Prohibited Conflicts of Interest. Each Covered Officer must: o not use his personal influence or personal relationships improperly to influence decisions or financial reporting by the Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; o not cause the Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than benefit the Trust; o not use material non-public knowledge of portfolio transactions made or contemplated for the Trust to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; (2) Conflicts of Interest that may be Waived. There are some conflict of interest situations for which a Covered Officer may seek a Waiver from a provision(s) of the Code. Waivers must be sought in accordance with Section VIII of the Code. Examples of these include: o Outside Employment or Activities. Covered Officers may not serve as directors, officers, general partners, consultants, agents, representatives or employees of any other business unless prior authorization is obtained from the Compliance Officer. Such authorization will be based on a determination that the business of such corporation does not conflict with the interests of the Trust, and that such service would be consistent with the best interests of the Trust and its shareholders, and that such service is not prohibited by law. o Gifts, Entertainment, Favors or Loans. No Covered Officer shall receive any gift or other thing of more than de minimis value from any person or entity that does business with or on behalf of the Trust. o Corporate Opportunities. Covered Officers may not exploit for their own personal gain opportunities that are discovered through the use of Trust property, information or position unless the opportunity is fully disclosed, in writing, to the Board and the Board declines to pursue such opportunity. o Ownership Interests. Covered Officers may not have: (i) any ownership interest in, or any consulting or employment relationship with, any of the Trust's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; or (ii) a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. V. Full, Fair, Accurate, Timely and Understandable Disclosure (A) General Policy. This Code is intended to promote the full, fair, accurate, timely and understandable disclosure in reports and other documents filed by the Trust with the SEC or made in other public communications by the Trust. Accordingly, the Covered Officers are expected to consider this to be central to their roles as officers of the Trust and shall ensure that full, fair, accurate, timely and understandable disclosure is made in the Trust's reports and other documents filed with the SEC and in other public communications. (B) Responsibilities. Covered Officers shall: (1) familiarize himself with the disclosure requirements generally applicable to the Trust; (2) not knowingly misrepresent, or cause other to misrepresent; facts about the Trust to others, whether within or outside the Trust, including to the Trust's Trustee's and auditors, and to governmental regulators and self-regulatory organizations; (3) to the extent appropriate within his area of responsibility, consult with the other officers and employees of the Trust and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trust files with, or submit to, the SEC and in other public communications made by the Trust; and (4) promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. (C) Changes in Disclosure Process. If, at any time, a Covered Officer believes that measures should be taken to improve the Trust's disclosure process, he or she shall advise the Compliance Officer and shall work with the Compliance Officer and other appropriate personnel to facilitate any changes in the process. VI. Internal Reporting by Covered Persons (A) Certifications. Each Covered Officer shall: (1) upon adoption of the Code (or thereafter as applicable upon becoming a Covered Officer), affirm in writing on Schedule A hereto that the Covered Officer has received, read, and understands the Code; and (2) annually thereafter affirm on Schedule A hereto that the Covered Officer has complied with the requirements of the Code. (B) Reporting. A Covered Officer shall promptly report any knowledge of a material violation of this Code to the Compliance Officer. Failure to do so is itself a violation of the Code. (C) Required Documentation. Any such report shall be in writing, and shall describe in reasonable detail the conduct that the Covered Officer believes to have violated this Code. If the Compliance Officer concludes that there has been a violation of the Code, he or she shall determine appropriate sanctions in accordance with Section IX(A) below. Notwithstanding the foregoing, the Compliance Officer shall be entitled to grant a Waiver of one or more provisions of this Code as set forth in Section VIII of the Code. VII. Waivers of Provisions of the Code (A) Waivers. The Compliance Officer may grant Waivers to the Code in circumstances that present special hardship. Waivers shall be structured to be as narrow as is reasonably practicable with appropriate safeguards designed to prevent abuse of the Waiver. To request a Waiver from the Code, the Covered Officer shall submit to the Compliance Officer a written request describing the transaction, activity or relationship for which a Waiver is sought. The request shall briefly explain the reason for engaging in the transaction, activity or relationship. (B) Implicit Waivers. In the event that the Compliance Officer has not acted upon a properly submitted request for a Waiver within a reasonable amount of time and a material departure from the Code has taken place in accordance with the request, the Compliance Officer may nevertheless, in lieu of finding a violation of the Code, determine retroactively to grant a Waiver. (C) Documentation. The Compliance Officer shall document all Waiver determinations. If a Waiver is granted under paragraphs (A) or (B), above, the Compliance Officer shall prepare a brief description of the nature of the Waiver, the name of the Covered Officer and the date of the Waiver so that this information may be disclosed in the next Form N-CSR to be filed on behalf of the Trust or posted on the Trust's internet website within five business days following the date of the Waiver. All Waivers must be reported to the Board at each quarterly meeting as set forth in Section IX below. VIII. Reporting and Monitoring (A) Sanctions. Compliance by Covered Officers with the provisions of the Code is required. Covered Officers should be aware that in response to any violation, the Trust will take whatever action is deemed necessary under the circumstances, including, but not limited to, fines, suspension or termination. (B) Board Reporting. The Compliance Officer shall report any material violations of the Code to the Board for its consideration on a quarterly basis. At a minimum, the report shall: (1) describe the violation under the Code and any sanctions imposed; (2) identify and describe any Waivers to the Code; and (3) identify any recommended changes to the Code. (C) Amendments to the Code. The Covered Officers and the Compliance Officer may recommend amendments to the Code for the consideration and approval of the Board. In connection with any amendment to the Code, the Compliance Officer shall prepare a brief description of the amendment, so that the necessary disclosure may be made with the next Form N-CSR to be filed on behalf of the Trust or posted on the Trust's internet website within five business days following the date of the amendment. IX. Record-keeping The Compliance Officer shall maintain all records, including any internal memoranda, relating to compliance with the Code or Waivers of the Code, for a period of 6 years from the end of the fiscal year in which such document was created, 2 years in an accessible place. Such records shall be furnished to the SEC or its staff upon request. XI. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained on a confidential basis and will be reasonably secured to prevent access to such records by unauthorized personnel. SCHEDULE 1 COMPLIANCE OFFICERS [INSERT NAMES] EX-99.CERT 4 ex99a2.txt EXHIBIT (A)(2) CERTIFICATIONS I, Nadeem Yousaf, certify that: 1. I have reviewed this report on Form N-CSR of HSBC Advisor Funds Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. January 2, 2004 /s/ Nadeem Yousaf - ------------------------ ------------------------------- Date Nadeem Yousaf, Treasurer I, Walter B. Grimm, certify that: 1. I have reviewed this report on Form N-CSR of HSBC Advisor Funds Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. January 2, 2004 /s/ Walter B. Grimm - ------------------------- --------------------------------- Date Walter B. Grimm, President EX-99.906CERT 5 ex99b.txt EXHIBIT (B) This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 'SS' 1350, and accompanies the report on Form N-CSR for the period ended October 31, 2003 of HSBC Advisor Funds Trust (the "Registrant"). I, Nadeem Yousaf, certify that, to the best of my knowledge,: 1. the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d); and 2. the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. January 2, 2004 - --------------------------------------------- Date /s/ Nadeem Yousaf - --------------------------------------------- Nadeem Yousaf, Treasurer This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 'SS' 1350, and accompanies the report on Form N-CSR for the period ended April 30, 2003 of HSBC Advisor Funds Trust (the "Registrant"). I, Walter B. Grimm, certify that, to the best of my knowledge,: 3. the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d); and 4. the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. January 2, 2004 - ------------------------------- Date /s/ Walter B. Grimm - ------------------------------- Walter B. Grimm, President -----END PRIVACY-ENHANCED MESSAGE-----