-----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, PLDmmYLfjWT3ELl67d6KUfJ/TADfHVKXgTa4KTI3SxSvgYIzM4ULBDrDdeXxq7OJ FEQ3fm0m7Hsl+B29ttkw7g== 0000930413-07-000146.txt : 20070108 0000930413-07-000146.hdr.sgml : 20070108 20070108132223 ACCESSION NUMBER: 0000930413-07-000146 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20061031 FILED AS OF DATE: 20070108 DATE AS OF CHANGE: 20070108 EFFECTIVENESS DATE: 20070108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC ADVISOR FUNDS TRUST CENTRAL INDEX KEY: 0001010296 IRS NUMBER: 000000000 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: 07516897 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 0001010296 S000009283 Core Plus Fixed Income Fund C000025345 Y Shares RFXIX 0001010296 S000009284 International Equity Fund C000025346 Y Shares RINEX 0001010296 S000009285 Small Cap Equity Fund C000025347 Y Shares RESCX N-CSR 1 c44853_ncsr.txt 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) 452 FIFTH AVENUE NEW YORK, NY 10018 (Address of principal executive offices) (Zip code) 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, 2006 Date of reporting period: October 31, 2006 ITEM 1. REPORTS TO STOCKHOLDERS. Annual Report OCTOBER 31, 2006 HSBC Investor Family of Funds - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS HSBC INVESTOR GROWTH FUND FIXED INCOME FUND (ADVISOR) HSBC INVESTOR GROWTH AND INCOME FUND HSBC INVESTOR CORE PLUS FIXED INCOME FUND HSBC INVESTOR INTERNATIONAL EQUITY FUND HSBC INVESTOR HIGH YIELD HSBC INVESTOR MID-CAP FUND FIXED INCOME FUND HSBC INVESTOR OPPORTUNITY FUND HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME FUND HSBC INVESTOR OVERSEAS EQUITY FUND HSBC INVESTOR NEW YORK HSBC INVESTOR SMALL CAP EQUITY FUND TAX-FREE BOND FUND HSBC INVESTOR VALUE FUND [HSBC LOGO] - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS ANNUAL REPORT - OCTOBER 31, 2006 Glossary of Terms Chairman's Message ....................................................... 1 Commentary From the Certain parties ...................................... 2 Portfolio Reviews ........................................................ 3 Schedules of Portfolio Investments HSBC Investor New York Tax-Free Bond Fund ............................. 26 HSBC Investor Growth and Income Fund .................................. 28 HSBC Investor Mid-Cap Fund ............................................ 29 Statements of Assets and Liabilities ..................................... 31 Statements of Operations ................................................. 34 Statements of Changes in Net Assets ...................................... 37 Financial Highlights ..................................................... 51 Notes to Financial Statements ............................................ 64 Report of Independent Registered Public Accounting Firm .................. 77 Other Federal Income Tax Information ..................................... 78 Table of Shareholder Expenses ............................................ 79 HSBC INVESTOR PORTFOLIOS Schedules of Portfolio Investments HSBC Investor Core Plus Fixed Income Portfolio ........................ 83 HSBC Investor High Yield Fixed Income Portfolio ....................... 87 HSBC Investor Intermediate Duration Fixed Income Portfolio ............ 90 HSBC Investor Growth Portfolio ........................................ 93 HSBC Investor International Equity Portfolio .......................... 94 HSBC Investor Small Cap Equity Portfolio .............................. 97 HSBC Investor Value Portfolio ......................................... 98 Statements of Assets and Liabilities ..................................... 99 Statements of Operations ................................................. 101 Statements of Changes in Net Assets ...................................... 103 Financial Highlights ..................................................... 107 Notes to Financial Statements ............................................ 108 Report of Independent Registered Public Accounting Firm .................. 115 Table of Shareholder Expenses ............................................ 116 Board of Trustees ........................................................ 118 This page intentionally left blank. - -------------------------------------------------------------------------------- GLOSSARY OF TERMS - -------------------------------------------------------------------------------- CONSUMER PRICE INDEX ("CPI") A measure of price changes in consumer goods and services such as gasoline, food, and automobiles. Sometimes referred to as "headline inflation." GROSS DOMESTIC PRODUCT (GDP) is the measure of the market value of the goods and services produced by labor and property in the United States. LEHMAN BROTHERS U.S. 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 U.S. AGGREGATE BOND INDEX is an unmanaged index generally representative of investment-grade issues with maturities between three and ten years. LEHMAN BROTHERS NEW YORK TAX EXEMPT INDEX is an unmanaged index composed of investment grade New York tax-exempt securities, all having a $50 million minimum maturity value. LIPPER GENERAL BOND FUNDS AVERAGE is comprised of managed funds that do not have quality or maturity restrictions. The Funds primary goal is to keep the bulk of the portfolio's assets in corporate and government debt issues. LIPPER INTERMEDIATE INVESTMENT-GRADE DEBT FUNDS AVERAGE is an average of managed funds that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. LIPPER INTERNATIONAL LARGE-CAP CORE AVERAGE consists of funds that, by portfolio practice, invest at least 75% of their equity assets in companies strictly outside of the U.S. with market capitalizations (on a three-year weighted basis) greater than the 250th largest company in the S&P/Citigroup World ex-U.S. Broad Market Index. LIPPER LARGE-CAP CORE FUNDS AVERAGE is comprised of managed funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the Standard & Poor's Mid-Cap 400 Index. LIPPER LARGE-CAP GROWTH FUNDS AVERAGE 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 middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 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 MULTI-CAP VALUE FUNDS AVERAGE is comprised of managed funds that, by portfolio practice, invest in a variety of market capitalization ranges, without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap funds will generally have between 25% to 75% of their assets invested in companies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the S&P MidCap 400 Index. Multi-Cap Value funds seek long-term growth of capital by investing in companies that are considered to be undervalued relative to a major unmanaged stock index based on price-to-current earnings, book value, asset value, or other factors. These funds will normally have a below-average price-to-earnings ratio, price-to-book ratio, and three-year earnings growth figure, compared to the U S diversified multi-cap funds universe average. LIPPER NEW YORK MUNICIPAL DEBT 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 CAPITAL INTERNATIONAL 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. PRODUCER PRICE INDEX ("PPI") A family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. THE RUSSELL UNIVERSE - In 1984, Russell created the Russell family of stock indices as part of a more accurate and comprehensive system for evaluating the performance of Certain partiess. 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(R) GROWTH INDEX is an unmanaged index which measures the performance of securities found in the Russell universe that fall in the mid-range sector. RUSSELL 1000(R) VALUE INDEX is unmanaged index which measures the performance of the 1,000 largest of the 3,000 largest U.S.-domiciled companies (based on total market capitalization) with lower price-to-book ratios and lower forecasted growth values. RUSSELL 2500(R) GROWTH INDEX is unmanaged index which represents the smallest 2500 securities found in the Russell universe with higher price-to-book and higher forecasted growth values. STANDARD & POOR'S MIDCAP 400 INDEX ("S&P MIDCAP 400") is an unmanaged index comprised of 400 domestic stocks chosen for market size (median market capitalization of $676 million), liquidity and industry group representation. STANDARD & POOR'S 500 INDEX ("S&P 500") is an unmanaged index that measures the performance of the stock market as a whole. 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. - -------------------------------------------------------------------------------- CHAIRMAN'S MESSAGE - -------------------------------------------------------------------------------- DEAR FELLOW SHAREHOLDERS: In the world of investing, one of the keys to success is finding experienced professionals who are dedicated to the interests of shareholders. To achieve positive results, HSBC Investor Funds embrace the "multi-manager" process for each of their equity funds. These equity funds engage HSBC Investments as advisor to help select sub-advisors who have expertise in specific asset classes of the investment universe. The fixed income and money market funds are managed by HSBC Investments. The Board monitors the results of HSBC Investments and each of the sub-advisors in a variety of ways. The board reviews the investment results of each fund at their quarterly meetings. Importantly, at most quarterly meetings, selected sub-advisors are invited to discuss their investing philosophy, their decision-making process and, of course, their performance. The Board is especially interested in how these sub-advisors monitor their own internal systems and how they communicate with HSBC Investments. The sub-advisors must also establish a code of ethics that complies with SEC regulations. This "hands-on" approach enables the Board to ask probing questions and to hold the Advisor and sub-advisors accountable. The Advisor and sub-advisors appreciate the opportunity to make their case about how they perform for the shareholders. If performance clearly lags over a period of time, the sub-advisors are put on notice; and, if they do not improve, they are replaced. The mutual fund business is sometimes thought of as impersonal and market-driven. While, certainly, the fast pace of investing requires well-thought out and well-managed systems, it is important to understand that people manage money for people. In recognizing their responsibility to shareholders, the HSBC Investor Funds believe in open and personal communication. We encourage you to be part of this communication process. Please feel free to contact us with your observations and concerns. We appreciate the confidence you have shown by investing in the funds, and we want to make sure that your confidence is warranted. Sincerely, /s/ Larry M. Robbins Larry M. Robbins, Chairman, HSBC Investor Funds 1 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- COMMENTARY FROM THE CERTAIN PARTIES - -------------------------------------------------------------------------------- HSBC INVESTMENTS (USA) INC. U.S. ECONOMIC REVIEW Economic growth moderated during the 12-month period between November 1, 2005 and October 31, 2006, as a slowing housing market and higher interest rates and energy prices combined to restrain the economy. The aftereffects of hurricanes Katrina, Wilma and Rita slowed economic growth during the final months of 2005. The economy rebounded powerfully during the first calendar quarter of 2006, however. Gross domestic product grew by an annualized rate of 5.8% between January and March, due to strong corporate spending and a warm winter, which boosted housing construction. Economic growth subsequently cooled. The once-booming housing market fell sharply, removing what had been the economy's primary source of strength during recent years. High energy costs also weighed on the economy. Oil prices, which hovered around $10 a barrel as recently as 1999, climbed past $70 a barrel in the spring as strong global demand and concerns about supply disruptions fueled speculation. Signs emerged during spring that the high cost of oil and other commodities had begun to push up inflation. The increase in inflation came despite a two-year campaign by the Federal Reserve to forestall rapid price escalation by raising short-term interest rates. All told, the Fed increased its target Federal Funds rate 17 times between June, 2004 and June, 2006, bringing the rate from 1.00% to 5.25%. The persistence of inflationary pressures led to concerns that the Fed, under the guidance of new chairman Ben Bernanke, might raise interest rates far enough to choke off economic growth. More-benign economic and inflationary data emerged during summer, however. Energy prices receded, due to strong levels of oil and gas supplies. The price of a barrel of crude oil fell from more than $78 in July to less than $60 in early fall. Meanwhile the weakening housing market contributed to slower economic growth, productivity remained solid and wage growth stagnated. Those developments removed much of the inflationary pressure on the economy, allowing the Federal Reserve to leave interest rates unchanged at its meetings in August, September and October. The U.S. economy grew at an annualized rate of 1.6% during the third calendar quarter of 2006. MARKET REVIEW Stocks posted strong returns for the 12 months through October. The S&P 500 gained 16.33%, while the Russell 2000 Index of small-company stocks gained 19.98% and the MSCI EAFE Index of foreign stocks gained 28.04%. The corporate sector was very healthy during this fiscal year. Corporations enjoyed strong balance sheets, including large cash holdings, and generated powerful profit and cash-flow growth. Many companies used their strong positions to engage in shareholder-friendly activities such as mergers and acquisitions, share repurchases and dividend increases. Market leadership showed signs of shifting during this period. Relatively volatile shares of small caps and foreign stocks had led the bull market that began in 2002, while energy and materials stocks soared in recent years on the strength of rising commodity prices. The dominance of those sections of the market continued during the first half of this period. Stocks experienced a correction between May and July, however, and the former market leaders fell the farthest. Shares of large, high-quality firms held up relatively well during the downturn, and continued to lead the market during the summer. Technology stocks, which had suffered generally poor returns since 2000, generated strong gains between July and October, as investors anticipating a slow-growing economy sought shares of firms that appeared poised to generate good earnings growth. Shares of smaller, weaker firms rallied again late in the period, due largely to investor optimism about the prospects for an interest-rate cut early in 2007. Lower gasoline prices also gave a boost to consumer-oriented stocks late in the fiscal year, by freeing up consumers' income for discretionary spending. The S&P 500 hit its highest level in five and a half years in late September, and the Dow Jones Industrial Average in October passed 12,000 for the first time in its history. The stock market following the run-up between July and October appeared fully valued, potentially providing room for growth over the coming months but leaving little buffer to shield investors in case of negative developments in earnings, economic growth or interest rates HSBC INVESTOR FAMILY OF FUNDS 2 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME FUND (ADVISOR, CLASS A SHARES, B SHARES AND C SHARES) BY HSBC INVESTMENTS (USA) INC. U.S. CORE FIXED INCOME TEAM The HSBC Investor Core Plus Fixed Income Fund (the "Fund") seeks to provide investors with above-average total return, consistent with reasonable risk, through investments in a diversified portfolio of fixed-income securities. The Fund utilizes a two-tier structure, commonly known as a "master-feeder," in which the Fund invest all of its investable assets in the HSBC Investor Core Plus Fixed Income Portfolio (the "Portfolio"). INVESTMENT CONCERNS Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. MARKET COMMENTARY For the 12-month period ended October 31, 2006, the Advisor shares of the Fund produced a 5.56% total return, and the Class A Shares returned 5.45% (without sales charge). That compared to a total return of 5.19% and 6.61% for the Lehman Brothers U.S. Aggregate Bond Index(1) and the Lipper General Bond Funds Average(1), respectively. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. GDP(1) growth fell significantly in the 4th quarter of 2005, but rebounded dramatically in the first half of 2006. The economy continued to strengthen in the third quarter of 2006 with GDP growth of 1.6%, albeit at a markedly slower pace than the first half of the year. Energy prices rose through most of the year, but they began to fall in the second half of 2006. Oil prices eased substantially during the third quarter, even dipping below $60 and touching a six-month low. Citing slower economic growth and falling energy prices despite elevated core inflation, the Federal Reserve Open Market Committee kept rates at 5.25% during its last two sessions. This came on the heels of 17 straight increases. Perhaps the most significant data pertains to the housing market, which slowed amid rising inventories and higher mortgage rates. Home sales and construction data came in well below expectations over the last part of the period, indicating the housing slow down may prove to be a substantial drag on the economy going forward. Thus far, the slowdown in the housing sector does not appear to have spilled over into the broader economy as business and consumer spending remain relatively healthy. During the period interest rates were somewhat volatile, but the 10-year Treasury rate ended (4.59%) the period at almost the point it began (4.56%). Short-term rates rose with the Fed hikes, as the 2-year rose from 4.30% to 4.69%. This rise in rates caused a bearish flattening of the yield curve, and created a somewhat difficult period of performance for much of the period under review. However, a rally in rates in the third quarter helped the U.S. fixed income market register its best quarter since the 3rd quarter of 2002, with the Lehman Aggregate Index returning 3.81 percent. For the year, the Lehman Aggregate Index returned 5.27%. Spreads tightened in most sectors over the period, and all spread sectors had excess returns versus Treasury securities of similar duration. Mortgages were the best performing sector within the Aggregate Index, outperforming Treasuries of comparable duration by 1.01%. Lower quality sectors performed even better, with High Yield and Emerging Market Debt beating comparable duration Treasuries by 5.57% and 7.16% respectively. PORTFOLIO PERFORMANCE The Fund outperformed the benchmark for the period under review. The key component of that outperformance was select, off-benchmark holdings in high yield and emerging market debt. An overweight in spread sectors generally relative to the benchmark, particularly asset backed securities and collateralized mortgage backed securities and individual security selection in corporate credit also had a positive impact on performance. Our short, defensive positioning relative to the benchmark for most of the period helped performance, as did our yield curve positioning.* Going forward, we will maintain duration that approximates that of the benchmark. We continue to analyze the yield curve for pricing anomalies and subject to portfolio restrictions, we will attempt to add high quality securitized debt issues that offer attractive yields without the issuer specific risk of corporate bonds. Within corporates, we will continue our focus on security selection, including select off-benchmark names that we think in a relatively homogenized credit environment, may offer greater opportunities for value.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 3 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Lehman Brothers U.S. HSBC Investor Core Plus Aggregate Bond Index Fixed Income Fund (Advisor) 10/31/96 10000 10000 12/31/96 10077 10231 10020 10130 10388 10521 10734 10856 12/31/97 11050 11078 11221 11240 11484 11434 11969 11709 12/31/98 12009 11837 11950 11842 11845 11669 11925 11712 12/31/99 11911 11709 12174 11927 12386 12105 12759 12512 12/31/00 13295 13024 13699 13473 13776 13609 14412 14091 12/31/01 14418 14208 14432 14167 14965 14559 15650 15172 12/31/02 15897 15426 16118 15646 16521 16084 16497 16060 12/31/03 16549 16125 16989 16508 16574 16142 17104 16620 12/31/04 17267 16812 17184 16740 17701 17222 17582 17142 12/31/05 17687 17215 17572 17163 17559 17193 18227 17811 10/31/06 18348 17961 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Lehman Brothers U.S. HSBC Investor Core Plus Aggregate Bond Index Fixed Income Fund Class A(1) 10/31/96 10000 9526 12/31/96 10077 9651 10020 9614 10388 9958 10734 10261 12/31/97 11050 10470 11221 10627 11484 10792 11969 11064 12/31/98 12009 11141 11950 11143 11845 10969 11925 10996 12/31/99 11911 10998 12174 11162 12386 11337 12759 11695 12/31/00 13295 12164 13699 12547 13776 12668 14412 13094 12/31/01 14418 13186 14432 13138 14965 13486 15650 14017 12/31/02 15897 14247 16118 14432 16521 14822 16497 14777 12/31/03 16549 14813 16989 15152 16574 14790 17104 15223 12/31/04 17267 15387 17184 15318 17701 15737 17582 15646 12/31/05 17687 15718 17572 15652 17559 15672 18227 16220 10/31/06 18348 16369 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 10 SINCE AS OF OCTOBER 31, 2006 DATE YEAR YEAR YEAR INCEPTION - ------------------------------------------------------------------------------------------------- HSBC Investor Core Plus Fixed Income Fund (Advisor) 1/9/95 5.56 4.44 6.03 6.83 - ------------------------------------------------------------------------------------------------- HSBC Investor Core Plus Fixed Income Fund Class A(1) 8/26/96 0.48 3.04 5.05 5.32 - ------------------------------------------------------------------------------------------------- HSBC Investor Core Plus Fixed Income Fund Class B(2) 1/6/98 0.67 3.29 -- 4.53 - ------------------------------------------------------------------------------------------------- HSBC Investor Core Plus Fixed Income Fund Class C(3) 11/4/98 3.67 3.30 -- 4.41 - ------------------------------------------------------------------------------------------------- Lehman Brothers U.S. Aggregate Bond Index(4) -- 5.19 4.51 6.26 N/A - ------------------------------------------------------------------------------------------------- Lipper General Bond Funds Average(4) -- 6.61 5.32 5.42 N/A - -------------------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 4.75%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Funds are measured against the Lehman Brothers U.S. Aggregate Bond Index, an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 4 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME FUND (CLASS A SHARES, B SHARES, C SHARES AND I SHARES) BY HSBC INVESTMENTS (USA) INC. HIGH YIELD TEAM HSBC Investments (USA) Inc. serves as investment adviser to the Fund. The HSBC High Yield Team provides the day to day management of the portfolio. The Team's philosophy is focused on delivering sustainable value added performance in the high yield fixed income market. The investment approach is a combination of top-down sector/industry selection and bottom-up security/quality selection. The team rotates sectors and themes within the high yield universe during different market environments seeking to add value, endeavoring to take advantage of market inefficiencies in order to outperform in both up and down markets. INVESTMENT CONCERNS Bond funds will tend to experience smaller fluctuations in value than stock funds. However, investors in any bond fund should anticipate fluctuations in price, especially for longer-term issues and in environments of rising interest rates. High yield bonds are subject to greater risks than investment grade bonds, such as the increased risk of default because of the lower credit quality of the issues. MARKET COMMENTARY The Fund delivered a total return of 8.38% (without sales charge) for Class A Shares and 8.73% for Class I Shares from the Fund's inception on November 18, 2005 to the period ended October 31, 2006. That compared to 10.47% and 9.18% for the Fund's benchmarks, the Merrill Lynch U.S. High Yield Master II Index(1) and the Lipper High Current Yield Funds Average(1), respectively. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. GDP(1) growth fell significantly in the 4th quarter of 2005, but rebounded dramatically in the first half of 2006. The economy continued to strengthen in the third quarter of 2006 with GDP growth of 1.6%, albeit at a markedly slower pace than the first half of the year. Energy prices rose through most of the year, but they began to fall in the second half of 2006. Oil prices eased substantially during the third quarter, even dipping below $60 and touching a six-month low. Citing slower economic growth and falling energy prices despite elevated core inflation, the Federal Reserve Open Market Committee kept rates at 5.25% during its last two sessions. This came on the heels of 17 straight increases. Perhaps the most significant data pertains to the housing market, which slowed amid rising inventories and higher mortgage rates. Home sales and construction data came in well below expectations over the last part of the period, indicating the housing slow down may prove to be a substantial drag on the economy going forward. Thus far, the slowdown in the housing sector does not appear to have spilled over into the broader economy as business and consumer spending remain relatively healthy. During the past 12-months, a decline in Treasury yields and the failure of issuance volumes to match market expectations drove high yield spreads tighter. With Fed policy now seemingly on extended pause, probability of a rise on volatility by year-end has decreased. Strong equity market performance - coupled with low volatility - have led to solid returns for the high yield asset class. From an industry perspective, strength in the market has been broad based over the past 12-months. The Airline (+44.46%), Broadband (+43.98%) and Cable (+13.95%) industries posted the strongest returns. With regard to high yield issuance, primary market activity continues to accelerate. Notably, acquisition-related volumes accounted for more than two-thirds of proceeds during the month. 24 new issues were priced during October for a total of $12.9 billion, compared with 22 issues for $7.8 billion in September. Year-to-date, 264 issues have price for a total of $104.9 billion, compared with 303 issues for $83.6 billion same period last year. Continuing to dominate their higher-quality counterparts, CCC-rated issues returned 2.91% for the month of October, followed by B-rated issues up 1.32% and BB-rated issues up 1.18%. For the past 12-months, CCC-rated issuers have returned 14.29%, B-rated bonds have returned 11.31%, and BB-rated bonds have returned 7.69%. PORTFOLIO PERFORMANCE The Fund underperformed the benchmark for the period under review. Performance has been driven since inception by the fund's overweight to CCC-rated issuers and its overweight to the Cable & Aerospace industries offset somewhat by our underweight to the Airline industry coupled with our short duration position relative to the benchmark.* Going forward, we will maintain duration that approximates that of the benchmark. We continue to analyze the yield curve for pricing anomalies and subject to portfolio restrictions, we will attempt to add high quality securitized debt issues that offer attractive yields without the issuer specific risk of corporate bonds. Within corporates, we will continue our focus on security selection, including select off-benchmark names that we think in a relatively homogenized credit environment, may offer greater opportunities for value.* Our outlook for the remainder of 2006 is cautiously optimistic. We continue to be positive about sustained economic growth, low default rates, and constructive capital markets. Although wider spreads are an eventual certainty, we believe that strong fundamentals and technicals will lead to a prolonged period of compressed spread levels. On an industry front, we remain positive on the Energy, Gaming, Wireless, and Cable sectors.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 5 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Merrill Lynch U.S. High HSBC Investor High Yield Yield Master II Index Fixed Income Fund Class I 11/18/05 10000 10000 11/30/05 10060 9972 12/31/05 10152 10064 1/31/06 10313 10219 2/28/06 10378 10349 3/31/06 10443 10436 4/30/06 10510 10521 5/31/06 10504 10463 6/30/06 10464 10352 7/31/06 10575 10473 8/31/06 10746 10606 9/30/06 10885 10717 10/31/06 11047 10873 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Merrill Lynch U.S. High HSBC Investor High Yield Yield Master II Index Fixed Income Fund Class A 11/18/05 10000 9524 11/30/05 10060 9497 12/31/05 10152 9583 1/31/06 10313 9728 2/28/06 10378 9850 3/31/06 10443 9931 4/30/06 10510 10010 5/31/06 10504 9952 6/30/06 10464 9845 7/31/06 10575 9958 8/31/06 10746 10082 9/30/06 10885 10185 10/31/06 11047 10322 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. - -------------------------------------------------------------------------------- AGGREGATE TOTAL RETURN (%) - -------------------------------------------------------------------------------- INCEPTION SINCE AS OF OCTOBER 31, 2006 DATE INCEPTION - ------------------------------------------------------------------------------ HSBC Investor High Yield Fixed Income Fund Class A(1) 11/18/05 3.22 - ------------------------------------------------------------------------------ HSBC Investor High Yield Fixed Income Fund Class B(2) 11/21/05 3.68 - ------------------------------------------------------------------------------ HSBC Investor High Yield Fixed Income Fund Class C(3) 12/14/05 6.42 - ------------------------------------------------------------------------------ HSBC Investor High Yield Fixed Income Fund Class I 11/18/05 8.73 - ------------------------------------------------------------------------------ Merrill Lynch U.S. High Yield Master II Index(4) -- 10.47+ - ------------------------------------------------------------------------------ Lipper High Current Yield Funds Average(4) -- 9.18++ - ------------------------------------------------------------------------------ PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 4.75%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. + THE SINCE INCEPTION RETURN REFLECTED FOR THE MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX IS RUN FROM 11/18/05, WHICH IS THE CLOSEST POSSIBLE DATE TO THE FUND'S INCEPTION DATE THAT THE INDEX IS AVAILABLE. ++ THE SINCE INCEPTION RETURN REFLECTED FOR THE LIPPER HIGH CURRENT YIELD FUNDS AVERAGE IS RUN FROM 10/31/05, WHICH IS THE CLOSEST POSSIBLE DATE TO THE FUND'S INCEPTION DATE THAT THE AVERAGE IS AVAILABLE. The Fund is measured against the Merrill Lynch U.S. High Yield Master II Index an unmanaged index which represents the broad high yield market. 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 6 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME FUND (CLASS A SHARES, B SHARES, C SHARES AND I SHARES) BY HSBC INVESTMENTS (USA) INC. U.S. CORE FIXED INCOME TEAM The HSBC Investor Intermediate Duration Fixed Income 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 Intermediate Duration Fixed Income Portfolio (the "Portfolio"). INVESTMENT CONCERNS Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. MARKET COMMENTARY The Fund returned 5.30% (without sales charge) for the Class A Shares and 5.56% for the Class I Shares during the 12-month period ended October 31, 2006. That compared to a total return of 5.12% for Lehman Brothers Intermediate U.S. Aggregate Bond Index.(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. GDP(1) growth fell significantly in the 4th quarter of 2005, but rebounded dramatically in the first half of 2006. The economy continued to strengthen in the third quarter of 2006 with GDP growth of 1.6%, albeit at a markedly slower pace than the first half of the year. Energy prices rose through most of the year, but they began to fall in the second half of 2006. Oil prices eased substantially during the third quarter, even dipping below $60 and touching a six-month low. Citing slower economic growth and falling energy prices despite elevated core inflation, the Federal Reserve Open Market Committee kept rates at 5.25% during its last two sessions. This came on the heels of 17 straight increases. Perhaps the most significant data pertains to the housing market, which slowed amid rising inventories and higher mortgage rates. Home sales and construction data came in well below expectations over the last part of the period, indicating the housing slow down may prove to be a substantial drag on the economy going forward. Thus far, the slowdown in the housing sector does not appear to have spilled over into the broader economy as business and consumer spending remain relatively healthy. During the period interest rates were somewhat volatile, but the 10-year Treasury rate ended (4.59%) the period at almost the point it began (4.56%). Short-term rates rose with the Fed hikes, as the 2-year rose from 4.30% to 4.69%. This rise in rates caused a bearish flattening of the yield curve, and created a somewhat difficult period of performance for much of the period under review. However, a rally in rates in the third quarter helped the U.S. fixed income market register its best quarter since the 3rd quarter of 2002, with the Lehman Aggregate Index returning 3.81 percent. For the year, the Lehman Aggregate Index returned 5.27%. Spreads tightened in most sectors over the period, and all spread sectors had excess returns versus Treasury securities of similar duration. Mortgages were the best performing sector within the Aggregate Index, outperforming Treasuries of comparable duration by 1.01%. Lower quality sectors performed even better, with High Yield and Emerging Market Debt beating comparable duration Treasuries by 5.57% and 7.16% respectively. PORTFOLIO PERFORMANCE The Fund outperformed the benchmark for the period under review. The key component of that outperformance was select, off-benchmark holdings in high yield and emerging market debt. An overweight in spread sectors generally relative to the benchmark, particularly asset backed securities and collateralized mortgage backed securities and individual security selection in corporate credit also had a positive impact on performance. Our short, defensive positioning relative to the benchmark for most of the period helped performance, as did our yield curve positioning.* Going forward, we will maintain duration that approximates that of the benchmark. We continue to analyze the yield curve for pricing anomalies and subject to portfolio restrictions, we will attempt to add high quality securitized debt issues that offer attractive yields without the issuer specific risk of corporate bonds. Within corporates, we will continue our focus on security selection, including select off-benchmark names that we think in a relatively homogenized credit environment, may offer greater opportunities for value.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 7 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Lehman Brothers Intermediate HSBC Investor Intermediate U.S. Aggregate Bond Index Duration Fixed Income Fund Class I 1/23/01 10000 10000 10147 10237 10230 10278 10690 10813 12/31/01 10696 10767 10731 10701 11115 10988 11535 11451 12/31/02 11711 11581 11860 11705 12084 11974 12106 11953 12/31/03 12157 11969 12433 12214 12188 11969 12515 12268 12/31/04 12612 12355 12542 12260 12845 12534 12795 12483 12/31/05 12866 12514 12833 12514 12848 12555 13286 13003 10/31/06 13368 13101 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Lehman Brothers Intermediate HSBC Investor Intermediate U.S. Aggregate Bond Index Duration Fixed Income Fund Class A(2) 2/7/01 10000 9526 10147 9691 10230 9732 10690 10198 12/31/01 10696 10159 10731 10080 11115 10355 11535 10775 12/31/02 11711 10900 11860 11001 12084 11257 12106 11230 12/31/03 12157 11238 12433 11461 12188 11214 12515 11499 12/31/04 12612 11573 12542 11477 12845 11727 12795 11671 12/31/05 12866 11694 12833 11687 12848 11717 13286 12128 10/31/06 13368 12217 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, 2006 DATE YEAR YEAR INCEPTION - ------------------------------------------------------------------------------------------------------ HSBC Investor Intermediate Duration Fixed Income Fund Class A(1) 2/7/01 0.32 2.34 3.56 - ------------------------------------------------------------------------------------------------------ HSBC Investor Intermediate Duration Fixed Income Fund Class B(2) 2/15/01 0.40 2.57 3.64 - ------------------------------------------------------------------------------------------------------ HSBC Investor Intermediate Duration Fixed Income Fund Class C(3) 2/13/01 3.51 2.59 3.62 - ------------------------------------------------------------------------------------------------------ HSBC Investor Intermediate Duration Fixed Income Fund Class I 1/23/01 5.56 3.60 4.79 - ------------------------------------------------------------------------------------------------------ Lehman Brothers Intermediate U.S. Aggregate Bond Index(4) -- 5.12 4.25 N/A - ------------------------------------------------------------------------------------------------------ Lipper Intermediate Investment-Grade Debt Funds Average(4) -- 4.62 3.96 N/A - ------------------------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 4.75%. (2) REFLECTS THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Fund is measured against the Lehman Brothers Intermediate U.S. 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 8 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR NEW YORK TAX-FREE BOND FUND (CLASS A SHARES, B SHARES, C SHARES AND I SHARES) BY HSBC INVESTMENTS (USA) INC. U.S. CORE FIXED INCOME TEAM The HSBC Investor New York Tax-Free Bond Fund (the "Fund") seeks to provide shareholders with income exempt from regular, federal, New York state and New York city personal income taxes. INVESTMENT CONCERNS Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. The 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. MARKET COMMENTARY The Fund delivered a total return of 4.45% (without sales charge) for Class A Shares and 4.71% for Class I Shares for the 12-month period ended October 31, 2006. That compared to 4.38% and 5.51% for the Fund's benchmarks, the Lehman Brothers New York Tax Exempt Index(1) and the Lipper New York Municipal Debt Funds Average(1), respectively. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. GDP(1) growth fell significantly in the 4th quarter of 2005, but rebounded dramatically in the first half of 2006. The economy continued to strengthen in the third quarter of 2006 with GDP growth of 1.6%, albeit at a markedly slower pace than the first half of the year. Energy prices rose through most of the year, but they began to fall in the second half of 2006. Oil prices eased substantially during the third quarter, even dipping below $60 and touching a six-month low. Citing slower economic growth and falling energy prices despite elevated core inflation, the Federal Reserve Open Market Committee kept rates at 5.25% during its last two sessions. This came on the heels of 17 straight increases. Perhaps the most significant data pertains to the housing market, which slowed amid rising inventories and higher mortgage rates. Home sales and construction data came in well below expectations over the last part of the period, indicating the housing slow down may prove to be a substantial drag on the economy going forward. Thus far, the slowdown in the housing sector does not appear to have spilled over into the broader economy as business and consumer spending remain relatively healthy. During the period interest rates were somewhat volatile, but the 10-year Treasury rate ended (4.59%) the period at almost the point it began (4.56%). Short-term rates rose with the Fed hikes, as the 2-year rose from 4.30% to 4.69%. This rise in rates caused a bearish flattening of the yield curve, and created a somewhat difficult period of performance for much of the period under review. However, a rally in rates in the third quarter helped the US fixed income market register its best quarter since the 3rd quarter of 2002, with the Lehman Aggregate Index returning 3.81 percent. Following the lead of the Treasury curve, the municipal curve flattened even more dramatically. The yield on two year generic AAA bonds rose 42 basis points (0.42%) in the period to close at 3.50%, while the ten year yield declined by 15 basis points (0.15%), ending at 3.80% on October 31st. PERFORMANCE REVIEW The Fund underperformed its benchmark for the period of review. One of the contributors to performance during the annual period was the duration positioning of the portfolio. Gains from duration were offset by the portfolio's higher quality profile relative to the benchmark and continued positive performance of lower rated credits and sectors. The portfolio's barbelled positioning marginally enhanced returns as the municipal yield curve continued to flatten. Finally sector allocation detracted from performance as the portfolio tended to be overweight in lower volatility and higher quality sectors. Lower quality revenue sectors such as tobacco securitization, hospital, and resource recovery bonds all outperformed as quality spreads continued to compress.* Going forward, we will maintain duration that approximates that of the benchmark. We intend to add higher yielding insured paper and mixed collateral pre-refunded bonds on a tactical basis. Additionally, we are considering various bond strategies in light of the potential impact of the alternative minimum tax.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 9 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR NEW YORK TAX-FREE BOND FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Lehman Brothers New York HSBC Investor N.Y. Tax-Free Tax Exempt Index Bond Fund Class I 10/31/96 10000 10000 12/31/96 10145 10126 10126 10068 10510 10436 10839 10767 12/31/97 11143 11073 11291 11190 11476 11349 11828 11754 12/31/98 11909 11786 12017 11860 11804 11599 11759 11466 12/31/99 11667 11423 12021 11758 12208 11850 12494 12128 12/31/00 13069 12660 13357 12931 13467 13001 13768 13313 12/31/01 13702 13175 13870 13315 14342 13710 15021 14411 12/31/02 15026 14393 15211 14541 15589 14936 15619 14885 12/31/03 15819 15068 16079 15259 15704 14948 16308 15441 12/31/04 16494 15564 16485 15494 16947 15888 16919 15835 12/31/05 17043 15922 17093 15918 17095 15887 17660 16400 10/31/06 17766 16478 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Lehman Brothers New York HSBC Investor N.Y. Tax-Free Tax Exempt Index Bond Fund Class A(1) 10/31/96 10000 9528 12/31/96 10145 9644 10126 9584 10510 9932 10839 10254 12/31/97 11143 10533 11291 10629 11476 10773 11828 11152 12/31/98 11909 11175 12017 11238 11804 10983 11759 10849 12/31/99 11667 10801 12021 11111 12208 11191 12494 11447 12/31/00 13069 11941 13357 12190 13467 12248 13768 12534 12/31/01 13702 12396 13870 12520 14342 12884 15021 13533 12/31/02 15026 13508 15211 13639 15589 14000 15619 13943 12/31/03 15819 14107 16079 14276 15704 13977 16308 14429 12/31/04 16494 14535 16485 14460 16947 14819 16919 14761 12/31/05 17043 14832 17093 14819 17095 14781 17660 15248 10/31/06 17766 15318 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 10 SINCE AS OF OCTOBER 31, 2006 DATE YEAR YEAR YEAR INCEPTION - -------------------------------------------------------------------------------------------------- HSBC Investor New York Tax-Free Bond Fund Class A(1) 5/1/95 -0.49 2.92 4.36 4.76 - -------------------------------------------------------------------------------------------------- HSBC Investor New York Tax-Free Bond Fund Class B(2) 1/6/98 -0.33 3.16 -- 3.77 - -------------------------------------------------------------------------------------------------- HSBC Investor New York Tax-Free Bond Fund Class C(3) 11/4/98 2.66 3.15 -- 3.36 - -------------------------------------------------------------------------------------------------- HSBC Investor New York Tax-Free Bond Fund Class I 7/1/96 4.71 4.19 5.12 5.23 - -------------------------------------------------------------------------------------------------- Lehman Brothers New York Tax Exempt Index(4) -- 4.38 5.10 5.97 N/A - -------------------------------------------------------------------------------------------------- Lipper New York Municipal Debt Funds Average(4) -- 5.51 4.46 5.05 N/A - --------------------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 4.75%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Fund is measured against the Lehman Brothers New York Tax Exempt Index, an unmanaged index composed of investment grade New York tax-exempt securities, all having a $50 million minimum maturity value. 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 10 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH FUND (CLASS A SHARES, B SHARES, C SHARES AND I SHARES) BY PHILIP J. SANDERS, SENIOR VICE PRESIDENT/PORTFOLIO MANAGER, CFA AND DANIEL P. BECKER, SENIOR VICE PRESIDENT/PORTFOLIO MANAGER, CFA WADDELL & REED INVESTMENT MANAGEMENT COMPANY The HSBC Investor Growth Fund (the "Fund") seeks long-term growth of capital by investing primarily in U.S. and foreign equity securities of high quality companies with market capitalization generally in excess of $2 billion, which the sub-adviser believes have the potential to generate superior levels of long-term profitability and growth. The Fund utilizes a two tier structure, commonly known as a "master-feeder", and invests all of its assets in the HSBC Investor Growth Portfolio (the "Portfolio"), which acts as the master fund. The Portfolio employs Waddell & Reed Investment Management Company (Waddell & Reed) as sub-adviser. INVESTMENT CONCERNS Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. MARKET COMMENTARY The Fund returned 6.92% (without sales charge) for the Class A Shares and 7.21% for the Class I Shares for the 12-month period ended October 31, 2006. That compared to a 16.33% return for the Standard & Poor's 500 Index(1), 10.84% for the Russell 1000(R) Growth Index(1) and a 7.42% return for the Lipper Large-Cap Growth Funds Average(1). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Growth stocks produced solid returns during the fiscal year, although growth shares trailed value stocks by a wide margin. Growth stocks gained ground during the first six months of the period, declined during spring, and then recovered during late summer and early fall. All told, growth stocks posted returns roughly in line with historical averages, helping this Fund post a healthy gain. Strong performance from financial stocks boosted the absolute performance of the Fund and its benchmark, while weakness in the health care sector generated a substantial drag on absolute returns.* Stock selection in the energy sector boosted returns against the benchmark index, and a relatively large position in energy stocks helped lift the Fund's relative performance as well. Strong security selection in the materials sector also boosted returns during the 12-month period under review.* Stock selection in the health care sector produced the largest drag on performance versus the benchmark. Poor performance by the health care stocks in the Fund's portfolio more than offset the positive impact provided by an underweight allocation to the health care sector. Security selection in the information technology and financials sectors also weighed on returns against the benchmark during the fiscal year.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 11 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH]
Standard & Poor's 500 Index Russell 1000(R) Growth Index HSBC Investor Growth Fund Class I 5/10/04 10000 10000 10000 10334 10314 10486 10141 9775 9944 12/31/04 11077 10671 10629 10839 10235 10340 10987 10487 10805 11383 10908 11190 12/31/05 11620 11233 11849 12109 11580 12248 11934 11129 12012 12610 11567 11898 10/31/06 13020 11973 12142
- -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH]
Standard & Poor's 500 Index Russell 1000(R) Growth Index HSBC Investor Growth Fund Class A 5/10/04 10000 10000 9500 10334 10314 9962 10141 9775 9440 12/31/04 11077 10671 10085 10839 10235 9805 10987 10487 10241 11383 10908 10598 12/31/05 11620 11233 11222 12109 11580 11593 11934 11129 11361 12610 11567 11246 10/31/06 13020 11973 11469
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, 2006 DATE YEAR INCEPTION - -------------------------------------------------------------------------------- HSBC Investor Growth Fund Class A(1) 5/10/04 1.59 5.69 - -------------------------------------------------------------------------------- HSBC Investor Growth Fund Class B(2) 5/10/04 2.16 6.35 - -------------------------------------------------------------------------------- HSBC Investor Growth Fund Class C(3) 5/10/04 5.13 7.08 - -------------------------------------------------------------------------------- HSBC Investor Growth Fund Class I 5/10/04 7.21 8.15 - -------------------------------------------------------------------------------- Russell 1000(R) Growth Index(4) -- 10.84 N/A - -------------------------------------------------------------------------------- Standard & Poor's 500 Index(4) -- 16.33 N/A - -------------------------------------------------------------------------------- Lipper Large-Cap Growth Funds Average(4) -- 7.42 N/A - -------------------------------------------------------------------------------- PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Fund is measured against the Russell 1000(R) Growth Index and the Standard & Poor's 500 Index. The Russell 1000(R) Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Standard & Poor's 500 Index is generally representative of the U.S. stock market as a whole. 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 12 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH AND INCOME FUND (CLASS A SHARES, B SHARES, C SHARES AND I SHARES) BY GARY U. ROLLE, CFA, PRINCIPAL/CHIEF INVESTMENT OFFICER AND EDWARD S. HAN, PRINCIPAL/PORTFOLIO MANAGER AND TRANSAMERICA INVESTMENT MANAGEMENT, LLC 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 employs Transamerica Investment Management, LLC ("TIM") as the sub-adviser to the Fund. INVESTMENT CONCERNS Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. MARKET COMMENTARY The Fund returned 12.62% (without sales charge) for the Class A Shares and 12.88% for the Class I Shares for the 12-month period ended October 31, 2006. That compared to a 16.33% return for the Standard & Poor's 500 Index(1) and a 14.23% return for the Lipper Large-Cap Core Funds Average(1). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Stocks generally performed well during the fiscal year, despite uncertainty about the direction of interest rates and concerns about inflation. The stock market generated healthy gains during the first half of the 12-month period, endured a correction in the spring, and then rebounded during late summer and early fall. That environment helped this Fund post strong absolute returns for the period as a whole. Investments in energy and technology stocks generated the majority of the Fund's gain.* The Fund held larger positions than the benchmark in shares of consumer discretionary and industrial firms. Stocks in the industrial sector performed well, boosting the Fund's returns relative to the index. Stocks in the consumer discretionary sector did not perform as well, ultimately detracting from relative performance.* Stock selection in the energy sector provided the greatest contribution to relative returns during the 12-month period as a whole. The Fund also held an overweight stake in energy stocks. That position boosted returns versus the index when energy stocks surged early in the period, but weighed on relative performance during the second half of the fiscal year as falling oil and gas prices led investors to sell energy shares. Selection in the health care sector dragged on performance against the S&P 500, as particular biotechnology and pharmaceutical stocks lagged the broad market.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 13 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH AND INCOME FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] HSBC Investor Growth and Income Fund Class I Standard & Poor's 500 Stock Index 4/2/01 10000 10000 10588 10585 9019 9032 12/31/01 9598 9997 9436 10024 8138 8682 6675 7183 12/31/02 7180 7788 7067 7543 8114 8704 8227 8934 12/31/03 9091 10021 9174 10191 9178 10366 8940 10172 12/31/04 9784 11111 9492 10872 9590 11021 10355 11418 12/31/05 10780 11656 11357 12146 11105 11971 11126 12649 10/31/06 11535 13061 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] HSBC Investor Growth and Income Fund Class A (Investor)(1) Standard & Poor's 500 Stock Index 4/2/01 9498 10000 9730 10585 8277 9032 12/31/01 8811 9997 8653 10024 7459 8682 6117 7183 12/31/02 6575 7788 6462 7543 7423 8704 7517 8934 12/31/03 8299 10021 8365 10191 8377 10366 8150 10172 12/31/04 8922 11111 8646 10872 8733 11021 9419 11418 12/31/05 9801 11656 10316 12146 10077 11971 10096 12649 10/31/06 10468 13061 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, 2006 DATE YEAR YEAR INCEPTION - -------------------------------------------------------------------------------------- HSBC Investor Growth and Income Fund Class A(1) 4/12/01 7.02 3.69 0.83 - -------------------------------------------------------------------------------------- HSBC Investor Growth and Income Fund Class B(2) 4/5/01 7.76 3.98 1.52 - -------------------------------------------------------------------------------------- HSBC Investor Growth and Income Fund Class C(3) 11/3/03 10.65 -- 8.89 - -------------------------------------------------------------------------------------- HSBC Investor Growth and Income Fund Class I 4/2/01 12.88 5.02 2.59 - -------------------------------------------------------------------------------------- Standard & Poor's 500 Index(4) -- 16.33 7.25 N/A - -------------------------------------------------------------------------------------- Lipper Large-Cap Core Funds Average(4) -- 14.23 5.78 N/A - --------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Fund is measured against the Standard & Poor's 500 Index, an unmanaged index that is generally representative of the U.S. stock market as a whole. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund's performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 14 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY FUND HSBC INVESTOR OVERSEAS EQUITY FUND (ADVISOR, CLASS A SHARES, B SHARES, AND C SHARES) BY KEVIN F. SIMMS CO-CIO INTERNATIONAL VALUE EQUITIES AND DIRECTOR OF RESEARCH - GLOBAL AND INTERNATIONAL VALUE EQUITIES ALLIANCEBERNSTEIN INVESTMENT RESEARCH AND MANAGEMENT The HSBC Investor International Equity Fund and the HSBC Investor Overseas Equity Fund (the "Funds") seek to provide their shareholders with long-term growth of capital and future income by investing primarily in securities of non-U.S. issuers and securities of issuers whose principal markets are outside of the United States. The Funds employ a two-tier fund structure, known as "master-feeder," in which the Funds invest all of their investable assets in the HSBC Investor International Equity Portfolio (the "Portfolio"). The Portfolio employs AllianceBernstein Investment Research and Management ("AllianceBernstein"), a unit of AllianceBernstein Investment Research and Management as sub-investment adviser. The Portfolio invests primarily in equity securities of companies organized and domiciled in developed nations outside the U.S., or for which the principal trading market is outside the U.S., including Europe, Canada, Australia and the Far East. INVESTMENT CONCERNS There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability and fluctuations in currency and exchange rates. Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. MARKET COMMENTARY For the 12-month period ended October 31, 2006, the Advisor shares of the HSBC Investor International Equity Fund produced a 32.70% return and the Class A Shares of the HSBC Investor Overseas Equity Fund returned 31.85% (without sales charge). That compared to a total return of 28.04% and 25.62% for the Funds' benchmarks, the MSCI EAFE Index(1) and the Lipper International Large-Cap Core Funds Average(1). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Robust global economic growth, strong corporate profits and modest inflation helped international stock markets perform well during the fiscal year. Foreign stocks posted strong gains during the first half of the period, declined in spring, and then rebounded as benign global economic data, lower oil prices and moderate interest rates fueled investor optimism. That environment helped this Fund post very strong absolute returns for the 12-month period as a whole.* Stock selection drove the Fund's superior relative performance. The Fund's sub-advisor employs deep fundamental research to uncover value opportunities across a broad range of industries throughout global stock markets. The portfolio's holdings in the industrial commodities sector benefited from surging commodity prices and strong earnings, and significantly boosted returns relative to the benchmark. Security selection in the financial, consumer staples and utilities sectors also lifted the Fund's relative performance.* An overweight position in the energy sector weighed on the Fund's relative gains. Energy stocks produced strong returns early in the period, but gave up much of that gain when crude-oil prices softened between July and October. That development led the energy sector to trail the broad market for the period as a whole. The energy stocks in the Fund's portfolio outperformed the energy stocks in the benchmark, but that positive selection effect did not fully offset the negative impact of the relatively large sector weighting. Likewise, an underweight stake in the construction and housing sector dragged on relative performance, despite strong security selection within that sector.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 15 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY FUND HSBC INVESTOR OVERSEAS EQUITY FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] MSCI EAFE Index HSBC Investor International Equity Fund 10/31/96 10000 10000 12/31/96 10269 10561 10116 10925 11436 12637 11363 12874 12/31/97 10480 11586 12030 13428 12166 13200 10444 11112 12/31/98 12611 13027 12796 14153 13130 15671 13715 17026 12/31/99 16054 22278 16046 23092 15420 21901 14185 19275 12/31/00 13813 17901 11927 15830 11824 15830 10174 13168 12/31/01 10884 14773 10997 14884 10734 14150 8621 11071 12/31/02 9180 12059 8434 10894 10084 12795 10909 13519 12/31/03 12775 15600 13338 16229 13397 16322 13366 16887 12/31/04 15420 19300 15405 19430 15289 19170 16885 21583 12/31/05 17581 22457 19246 25272 19427 25197 20202 26393 10/31/06 20989 27526 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] MSCI EAFE Index HSBC Investor Overseas Equity Fund Class A(1) 10/31/96 10000 9504 12/31/96 10269 9989 10116 10242 11436 11760 11363 11938 12/31/97 10480 10779 12030 12450 12166 12213 10444 10247 12/31/98 12611 11917 12796 12906 13130 14257 13715 15436 12/31/99 16054 20106 16046 20760 15420 19711 14185 17314 12/31/00 13813 16047 11927 14164 11824 14132 10174 11743 12/31/01 10884 13151 10997 13239 10734 12596 8621 9972 12/31/02 9180 10858 8434 9725 10084 11265 10909 12091 12/31/03 12775 13939 13338 14480 13397 14546 13366 15021 12/31/04 15420 17131 15405 17225 15289 16955 16885 19054 12/31/05 17581 19781 19246 22236 19427 22121 20202 23131 10/31/06 20989 24103 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 10 SINCE AS OF OCTOBER 31, 2006 DATE YEAR YEAR YEAR INCEPTION - ------------------------------------------------------------------------------------------------- HSBC Investor International Equity Fund (Advisor) 1/9/95 32.70 14.88 10.66 10.85 - ------------------------------------------------------------------------------------------------- HSBC Investor Overseas Equity Fund Class A(1) 8/26/96 25.26 13.30 9.20 9.18 - ------------------------------------------------------------------------------------------------- HSBC Investor Overseas Equity Fund Class B(2) 1/6/98 26.87 13.60 -- 8.87 - ------------------------------------------------------------------------------------------------- HSBC Investor Overseas Equity Fund Class C(3) 11/4/98 29.92 13.61 -- 9.16 - ------------------------------------------------------------------------------------------------- MSCI EAFE Index(4) -- 28.04 15.00 7.70 N/A - ------------------------------------------------------------------------------------------------- Lipper International Large-Cap Core Average(4) -- 25.62 12.10 7.10 N/A - -------------------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Funds are measured against the Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE) Index, which is an unmanaged index that measures performance of a diverse range of developed countries in the indicated regions. The performance of the index does not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. During the period shown, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 16 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR MID-CAP FUND (CLASS A SHARES, B SHARES, C SHARES AND TRUST SHARES) BY TONY Y. DONG, CFA, DIRECTOR, MID-CAP EQUITY AND SENIOR PORTFOLIO MANAGER AND BRIAN S. MATUSZAK, CFA, SENIOR EQUITY ANALYST AND ANDY Y. MUI, CPA, SENIOR EQUITY ANALYST MUNDER CAPITAL MANAGEMENT The HSBC Investor Mid-Cap Fund (the "Fund") seeks to achieve its objective by investing in common or preferred stocks and convertible securities. The Fund will normally invest at least 80% of its assets in equity securities of mid-sized companies with market capitalizations falling within the range of the S&P MidCap 400 Index (between $270 million and $8.6 billion as of March 31, 2005) at the time of acquisition. Investments are primarily in domestic common stocks but also may include, to a limited degree, preferred stocks, and convertible securities. The Portfolio employs Munder Capital Management ("Munder") as sub-investment adviser. INVESTMENT CONCERNS Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. Mid capitalization funds typically carry additional risks since smaller companies generally have a higher risk of failure, and historically, their stocks have experienced a greater degree of market volatility than stocks on average. MARKET COMMENTARY The Fund's Class A Shares posted a return of 13.66% (without sales charge) and 13.97% for the Trust Shares for the 12-month period ended October 31, 2006. That compares to 13.43% and 11.51% for the Fund's benchmarks, the S&P MidCap 400 Index(1) and the Lipper Mid-Cap Growth Funds Average(1). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Medium-sized stocks posted strong gains for the fiscal year as a whole, despite a correction between May and July. That environment helped this Fund generate good absolute returns. Mid-cap stocks significantly out-gained larger shares during the first half of the period, as investors began to anticipate that the Federal Reserve would stop raising interest rates. The broad stock market slumped in spring, however, as investors worried about inflation and the potential for higher interest rates. That decline contributed to losses for this Fund during the second calendar quarter of 2006. Falling oil prices and lower equity market volatility led investors to adopt a more aggressive stance during the final months of the period, helping the Fund earn back much of its spring loss. For the 12-month period under review, the Fund's holdings in all ten economic sectors posted positive absolute returns.* Strong stock selection allowed the Fund to outperform its benchmark. Security selection in the health care, industrials, materials, consumer discretionary and telecommunications sectors boosted relative returns. That said, selection within the energy sector was the largest single detractor to relative performance, due to weak performance by two energy stocks. We under-weighted utilities stocks, which generally do not possess the high-growth characteristics we demand. Utilities stocks performed well, so the Fund's relatively small stake in that sector weighed somewhat on returns against the benchmark.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 17 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR MID-CAP FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH]
Standard & Poor's Russell MidCap(R) HSBC Investor Mid-Cap HSBC Investor Mid-Cap MidCap 400 Index Growth Index Fund Class A(1) Fund Trust 10/31/96 10000 10000 9492 10000 12/31/96 10575 10411 9691 10235 10418 10031 10044 10610 11949 11508 11611 12254 13870 13118 12892 13615 12/31/97 13986 12758 12671 13404 15526 14280 13885 14695 15193 14271 14194 15023 12995 11889 11589 12277 12/31/98 16659 15037 13841 14671 15596 15550 14437 15305 17804 17170 16159 17160 16309 16311 15055 15962 12/31/99 19111 22749 19117 20305 21536 27555 22561 23967 20826 25514 22075 23474 23356 26158 23554 25070 12/31/00 22457 20076 21198 22565 20038 15040 19316 20564 22674 17474 21355 22732 18918 12616 17456 18610 12/31/01 22321 16031 19204 20468 23822 15748 19092 20373 21605 12872 16403 17514 18030 10661 13445 14368 12/31/02 19082 11638 13983 14940 18236 11636 13624 14583 21450 13818 15686 16799 22864 14807 16403 17561 12/31/03 25879 16608 18420 19730 27189 17411 19047 20421 27453 17594 19338 20730 26877 16832 18397 19753 12/31/04 30144 19179 20997 22541 30024 18859 20705 22232 31305 19506 21960 23590 32832 20783 23058 24781 12/31/05 33929 21499 23157 24911 36517 23135 25648 27613 35369 22049 24601 26472 34987 22245 24318 26202 10/31/06 36441 23099 25139 27102
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, 2006 DATE YEAR YEAR YEAR INCEPTION - -------------------------------------------------------------------------------------- HSBC Investor Mid-Cap Fund Class A(1) 7/1/93 7.98 6.16 9.66 10.75 - -------------------------------------------------------------------------------------- HSBC Investor Mid-Cap Fund Class B(2) 7/1/93 9.25 6.46 9.40 10.37 - -------------------------------------------------------------------------------------- HSBC Investor Mid-Cap Fund Class C(3) 7/1/93 12.04 6.62 9.48 10.41 - -------------------------------------------------------------------------------------- HSBC Investor Mid-Cap Fund Trust 7/1/93 13.97 7.53 10.48 11.45 - -------------------------------------------------------------------------------------- Standard & Poor's MidCap 400 Index(4) -- 13.43 13.03 13.80 N/A - -------------------------------------------------------------------------------------- Russell MidCap(R) Growth Index(4) -- 14.51 10.62 8.73 N/A - -------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Funds Average(4) -- 11.51 7.79 7.33 N/A - --------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. + For periods prior to July 1, 2000, the performance shown above includes the total return (adjusted for Fund expenses) generated by HSBC Investments (USA) Inc's management of a pooled investment vehicle called a collective investment trust (CTF) with the same investment objective as the Fund. The assets from that CTF were converted into the HSBC Investor Mid-Cap Fund on July 1, 2000. The CTF was not registered with the Securities & Exchange Commission (SEC) and thus was not subject to certain investment restrictions that are imposed on the Fund. If the CTF had been registered with the SEC, its performance might have been adversely affected. Performance assumes reinvestment of dividends and distributions. The Fund has changed its standardized benchmark from the Russell MidCap(R) Growth Index to the Standard & Poor's MidCap 400 Index ("S&P MidCap 400") to provide a more appropriate market comparison. The S&P MidCap 400 Index is comprised of 400 domestic stocks chosen for market size (median market capitalization of $676 million), liquidity and industry group representation. The Russell MidCap(R) Growth Index tracks the performance of those Russell securities in the Russell Universe(4) with higher price-to-book ratios and higher forecasted growth values. The performance of the indices 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 18 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR SMALL CAP EQUITY FUND HSBC INVESTOR OPPORTUNITY FUND (ADVISOR, CLASS A SHARES, B SHARES AND C SHARES) BY WILLIAM A. MUGGIA PRESIDENT-CHIEF INVESTMENT OFFICER WESTFIELD CAPITAL MANAGEMEN 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 Company, LLC as sub-investment adviser. The Portfolio invests primarily in common stocks of small and medium-sized companies that may have the potential to become major enterprises. INVESTMENT CONCERNS Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. Small-capitalization funds typically carry additional risks since smaller companies generally have a higher risk of failure, and historically, their stocks have experienced a greater degree of market volatility than stocks on average. MARKET COMMENTARY For the 12-month period ended October 31, 2006, the Advisor shares of the HSBC Investor Small Cap Equity Fund produced a 19.40% return and the Class A Shares of the HSBC Investor Opportunity Fund produced a 18.81% return (without sales charge). The Funds' benchmarks, the Russell 2500(R) Growth Index(1) and the Lipper Mid-Cap Growth Funds Average(1), returned 15.56% and 11.51%, respectively. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Small-cap stocks performed well, helping this Fund and its benchmark post strong returns. Technology and health care stocks provided the largest contributions to the Fund's gains.* Stock selection in the health care sector boosted returns against the benchmark. The benchmark's health care allocation lagged the index as a whole, but strong performance by the Fund's holdings in various health care industries, including biotechnology, pharmaceuticals, health care equipment, health care facilities and life science tools & services, helped the Fund's heath care stake outperform the benchmark and add significantly to relative gains.* Selection among technology stocks also boosted relative returns. The sub-advisor's selection of stocks in the communications equipment, applications software and data processing & outsourced services industries particularly lifted the Fund's return versus its benchmark.* An underweight stake in the consumer discretionary sector helped the Fund out-perform its benchmark index as well. Consumer discretionary stocks trailed the index for the period as a whole, despite a surge late in the period. Stock selection in this sector also boosted relative returns.* The Fund had no exposure to the telecommunications services or consumer staples sectors, and owned only one stock in the materials sector. Those three sectors led the benchmark for the 12-month period under review, so the Fund's underweight positions dragged on relative performance. An underweight stake in financials also weighed on relative returns, as did security selection in that sector. Selection among industrials weakened performance against the benchmark as well.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 19 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR SMALL CAP EQUITY FUND HSBC INVESTOR OPPORTUNITY FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Russell 2500(R) Growth Index HSBC Investor Small Cap Equity Fund 10/31/96 10000 10000 12/31/96 10417 10220 9584 9699 11141 11772 12995 13428 12/31/97 11955 12546 13287 14444 12639 14444 9832 11549 12/31/98 12325 14231 12195 13011 14245 15209 13750 14376 12/31/99 19163 21089 22066 23528 20541 23555 19937 24151 12/31/00 16080 22152 12877 19083 15616 22633 11388 17043 12/31/01 14338 21862 13914 21413 11600 17477 9389 14489 12/31/02 10166 14618 9841 14248 12077 17268 13281 18585 12/31/03 14875 20336 15693 21156 15714 21188 14833 20176 12/31/04 17045 22762 16307 22023 16888 23099 17950 25364 12/31/05 18438 25718 20619 28637 19356 27609 19123 27708 10/31/06 20065 28653 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] HSBC Investor Opportunity Russell 2500(R) Growth Index Fund Class A(1) 10/31/96 10000 9496 12/31/96 10417 9695 9584 9190 11141 11129 12995 12651 12/31/97 11955 11814 13287 13588 12639 13588 9832 10846 12/31/98 12325 13347 12195 12177 14245 14216 13750 13411 12/31/99 19163 19629 22066 21857 20541 21904 19937 22417 12/31/00 16080 20471 12877 17601 15616 20836 11388 15670 12/31/01 14338 20071 13914 19636 11600 16001 9389 13270 12/31/02 10166 13375 9841 12992 12077 15705 13281 16888 12/31/03 14875 18436 15693 19166 15714 19184 14833 18244 12/31/04 17045 20540 16307 19844 16888 20784 17950 22801 12/31/05 18438 23076 20619 25674 19356 24707 19123 24760 10/31/06 20065 25602 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 10 SINCE AS OF OCTOBER 31, 2006 DATE YEAR YEAR YEAR INCEPTION - -------------------------------------------------------------------------------------------- HSBC Investor Small Cap Equity Fund (Advisor) 9/3/96 19.40 9.52 11.10 11.59 - -------------------------------------------------------------------------------------------- HSBC Investor Opportunity Fund Class A(1) 9/23/96 12.89 7.80 9.86 9.53 - -------------------------------------------------------------------------------------------- HSBC Investor Opportunity Fund Class B(2) 1/6/98 13.91 8.09 -- 8.74 - -------------------------------------------------------------------------------------------- HSBC Investor Opportunity Fund Class C(3) 11/4/98 16.92 8.11 -- 9.58 - -------------------------------------------------------------------------------------------- Russell 2500(R) Growth Index(4) -- 15.56 9.91 7.21 N/A - -------------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Funds Average(4) -- 11.51 7.79 7.33 N/A - --------------------------------------------------------------------------------------------
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Funds are measured against the Russell 2500(R) Growth Index, an unmanaged index that tracks the performance of 2500 securities found in the Russell Universe(4) with higher price-to-book and higher forecasted growth values. The performance for 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 20 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR VALUE FUND (CLASS A SHARES, B SHARES, C SHARES AND I SHARES) BY JON D. BOSSE, CFA CHIEF INVESTMENT OFFICER NWQ INVESTMENT MANAGEMENT CO., LLC The HSBC Investor Value Fund (the "Fund") seeks long-term growth of capital and income by investing primarily in U.S. and foreign companies with large and medium capitalizations that possess hidden opportunities underpriced by the market. The Fund utilizes a two tier structure, commonly known as a "master-feeder" and invests all of its assets in the HSBC Investor Value Portfolio (the "Portfolio"), which acts as the master fund. The Portfolio employs NWQ Investment Management Company, LLC ("NWQ") as sub-adviser. INVESTMENT CONCERNS Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value. Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this fund will fluctuate as the value of the securities in the Portfolio changes. MARKET COMMENTARY The Fund returned 21.70% (without sales charge) for the Class A Shares and 21.90% for the Class I Shares for the 12-month period ended October 31, 2006. That compared to a 21.46% return for the Russell 1000(R) Value Index(1) and a 17.77% return for the Lipper Multi-Cap Value Funds Average(1). PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Value stocks rallied during the period as a whole, despite a stock-market correction in the spring. That environment helped the Fund and its benchmark generate strong returns.* The Fund's sub-advisor held a significantly overweight position in stocks in the oil and natural gas exploration and production (E&P) industry. That stake had a substantial positive effect on returns against the benchmark, in part because the Fund's largest holding, an E&P firm, was acquired in an all-cash deal at a substantial premium to its market value. The Fund's relative returns also benefited from greater-than-benchmark weightings in defense, telephone, cable television and radio stocks.* The sub-advisor found a number of attractively valued stocks in the information technology sector, which appeared poised to benefit from a rebound in capital spending. The Fund held an overweight position in technology as a result. Technology stocks in general generated strong performance, but poor earnings weighed on the returns of several technology stocks in the Fund's portfolio. Those company-specific issues caused the Fund's technology position to weaken the Fund's returns versus its benchmark.* The Fund held a smaller position than the benchmark in financials stocks, because the sub-advisor expected a flat yield curve to hurt profit margins at financial companies. The financials sector generated strong gains, however, led by a rally in shares of large brokerage firms. The Fund's underweight stake therefore weighed on relative returns.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 21 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- HSBC INVESTOR VALUE FUND - AS OF OCTOBER 31, 2006 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Russell 1000(R) Value Index HSBC Investor Value Fund Class A(1) 5/10/04 10000 10000 10341 10774 10500 10819 12/31/04 11590 11697 11600 11519 11794 11894 12253 12660 12/31/05 12408 13026 13144 13617 13221 13856 14044 14530 10/31/06 14504 15016 - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT - -------------------------------------------------------------------------------- [LINE GRAPH] Russell 1000(R) Value Index HSBC Investor Value Fund Class I 5/10/04 10000 9501 10341 10226 10500 10262 12/31/04 11590 11088 11600 10911 11794 11261 12253 11985 12/31/05 12408 12322 13144 12871 13221 13089 14044 13716 10/31/06 14504 14174 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, 2006 DATE YEAR INCEPTION - -------------------------------------------------------------------------------- HSBC Investor Value Fund Class A(1) 5/10/04 15.59 15.12 - -------------------------------------------------------------------------------- HSBC Investor Value Fund Class B(2) 5/10/04 16.78 16.02 - -------------------------------------------------------------------------------- HSBC Investor Value Fund Class C(3) 5/10/04 19.72 16.64 - -------------------------------------------------------------------------------- HSBC Investor Value Fund Class I 5/10/04 21.90 17.84 - -------------------------------------------------------------------------------- Russell 1000(R) Value Index(4) -- 21.46 N/A - -------------------------------------------------------------------------------- Lipper Multi-Cap Value Funds Average(4) -- 17.77 N/A - -------------------------------------------------------------------------------- PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND CURRENT RETURNS MAY BE LOWER OR HIGHER. TOTAL RETURN FIGURES INCLUDE CHANGE IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS AND DO NOT REFLECT THE TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. TO OBTAIN PERFORMANCE INFORMATION CURRENT TO THE MOST RECENT MONTH END, PLEASE CALL 1-800-782-8183. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (2) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 4.00%. (3) REFLECTS THE CONTINGENT DEFERRED SALES CHARGE, MAXIMUM OF 1.00%. (4) FOR ADDITIONAL INFORMATION, PLEASE REFER TO THE GLOSSARY OF TERMS. The Fund is measured against the Russell 1000(R) Value Index, an unmanaged index comprised of the 1000 securities found in the Russell universe with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earning ratios, higher dividend yields, and lower forecasted growth values. 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, certain parties waived and/or reimbursed fees for various expenses. Had these waivers and/or reimbursements not been in effect, performance quoted would have been lower. HSBC INVESTOR FAMILY OF FUNDS 22 - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION* OCTOBER 31, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Mortgage Backed Securities 23.3% - -------------------------------------------------------------------------------- Corporate Bonds 21.5% - -------------------------------------------------------------------------------- U.S. Treasury Securities 16.1% - -------------------------------------------------------------------------------- Asset Backed Securities 12.2% - -------------------------------------------------------------------------------- Commercial Mortgage Backed Securities 9.3% - -------------------------------------------------------------------------------- Foreign Bonds 7.8% - -------------------------------------------------------------------------------- Collateralized Mortgage 7.4% - -------------------------------------------------------------------------------- Cash Equivalents 2.4% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Corporate Bonds 97.8% - -------------------------------------------------------------------------------- Cash Equivalents 2.2% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Corporate Bonds 23.7% - -------------------------------------------------------------------------------- Mortgage Backed Securities 23.6% - -------------------------------------------------------------------------------- Asset Backed Securities 15.1% - -------------------------------------------------------------------------------- Collateralized Mortgage Obligations 8.5% - -------------------------------------------------------------------------------- Commercial Mortgage Backed Securities 9.8% - -------------------------------------------------------------------------------- U.S. Treasury Securities 9.2% - -------------------------------------------------------------------------------- Foreign Bonds 7.2% - -------------------------------------------------------------------------------- Cash Equivalents 2.9% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Municipal Bonds 94.8% - -------------------------------------------------------------------------------- Variable Rate Notes 3.3% - -------------------------------------------------------------------------------- Cash Equivalents 1.9% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Information Technology 27.3% - -------------------------------------------------------------------------------- Health Care 19.4% - -------------------------------------------------------------------------------- Industrials 14.4% - -------------------------------------------------------------------------------- Financials 11.1% - -------------------------------------------------------------------------------- Consumer Discretionary 10.3% - -------------------------------------------------------------------------------- Consumer Staples 8.2% - -------------------------------------------------------------------------------- Energy 5.8% - -------------------------------------------------------------------------------- Cash Equivalents 3.5% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH AND INCOME FUND - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Consumer Discretionary 21.9% - -------------------------------------------------------------------------------- Information Technology 18.0% - -------------------------------------------------------------------------------- Industrials 16.8% - -------------------------------------------------------------------------------- Financials 14.5% - -------------------------------------------------------------------------------- Energy 7.3% - -------------------------------------------------------------------------------- Materials 6.4% - -------------------------------------------------------------------------------- Transportation 5.2% - -------------------------------------------------------------------------------- Consumer Staples 5.1% - -------------------------------------------------------------------------------- Health Care 4.7% - -------------------------------------------------------------------------------- Cash Equivalents 0.1% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Europe 61.4% - -------------------------------------------------------------------------------- Japan 23.9% - -------------------------------------------------------------------------------- Australia & Far East 6.4% - -------------------------------------------------------------------------------- Canada 3.6% - -------------------------------------------------------------------------------- Cash Equivalents 2.4% - -------------------------------------------------------------------------------- Other 2.3% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ * Portfolio composition is subject to change. 23 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- PORTFOLIO REVIEWS - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION* OCTOBER 31, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- HSBC INVESTOR MID-CAP FUND - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Industrials 18.7% - -------------------------------------------------------------------------------- Financials 16.2% - -------------------------------------------------------------------------------- Information Technology 15.7% - -------------------------------------------------------------------------------- Consumer Discretionary 15.2% - -------------------------------------------------------------------------------- Health Care 11.0% - -------------------------------------------------------------------------------- Energy 8.8% - -------------------------------------------------------------------------------- Utilities 6.4% - -------------------------------------------------------------------------------- Materials 5.0% - -------------------------------------------------------------------------------- Consumer Staples 3.0% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- HealthCare 29.3% - -------------------------------------------------------------------------------- Information Technology 25.7% - -------------------------------------------------------------------------------- Consumer Discretionary 12.6% - -------------------------------------------------------------------------------- Industrials 10.8% - -------------------------------------------------------------------------------- Energy 8.9% - -------------------------------------------------------------------------------- Financial 5.5% - -------------------------------------------------------------------------------- Cash Equivalents 5.4% - -------------------------------------------------------------------------------- Materials 1.8% - -------------------------------------------------------------------------------- Total 100.0% ================================================================================ - -------------------------------------------------------------------------------- HSBC INVESTOR VALUE PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE - -------------------------------------------------------------------------------- Financials 28.3% - -------------------------------------------------------------------------------- Consumer Discretionary 11.3% - -------------------------------------------------------------------------------- Industrials 9.3% - ------------------------------------------------------------------------------- Consumer Staples 7.7% - ------------------------------------------------------------------------------- Information Technology 7.7% - ------------------------------------------------------------------------------- Materials 7.5% - ------------------------------------------------------------------------------- Energy 7.4% - ------------------------------------------------------------------------------- Telecommunication Services 7.4% - ------------------------------------------------------------------------------- Cash Equivalents 6.7% - ------------------------------------------------------------------------------- Utilities 2.0% - ------------------------------------------------------------------------------- Miscellaneous 1.9% - ------------------------------------------------------------------------------- Transportation 1.8% - ------------------------------------------------------------------------------- Health Care 1.0% - ------------------------------------------------------------------------------- Total 100.0% ================================================================================ * Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 24 This page intentionally left blank. 25 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- MUNICIPAL BONDS--93.4% - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- NEW YORK - 84.2% Buffalo, New York Fiscal Stability Authority (MBIA Insured), 5.25%, 8/15/13 ................. 500,000 548,575 Corning City, New York School District GO (FSA Insured), 4.00%, 6/15/08 ................... 930,000 937,245 Corning City, New York School District GO (FSA Insured), 5.00%, 6/15/09 ................... 790,000 819,451 Metropolitan Transportation Authority of New York Revenue, 5.25%, 11/15/11 ............... 1,000,000 1,072,540 Metropolitan Transportation Authority of New York Revenue (FGIC Insured), 5.25%, 7/1/17, Prerefunded 7/1/08 @ 100.5 ....... 1,145,000 1,182,705 Metropolitan Transportation Authority of New York Revenue (FGIC Insured), 5.50%, 11/15/19 ................................. 1,000,000 1,164,530 Metropolitan Transportation Authority of New York Revenue (FSA Insured), 5.00%, 11/15/32, Callable 11/15/12 @ 100 ........ 1,625,000 1,698,092 Metropolitan Transportation Authority of New York Revenue (MBIA Insured), 5.50%, 1/1/19, Callable 7/1/12 @ 100 ............ 480,000 525,835 Metropolitan Transportation Authority of New York Revenue, Escrowed to Maturity, 5.75%, 7/1/13 ......................... 285,000 307,962 Monroe County, New York, Airport Authority Revenue, AMT (MBIA Insured), 5.625%, 1/1/10 ........................ 1,240,000 1,307,605 Monroe County, New York, Airport Authority Revenue, AMT (MBIA Insured), 5.75%, 1/1/14 ......................... 750,000 832,020 New York City GO, 5.00%, 8/1/08 .................... 990,000 1,013,552 New York City GO, 5.00%, 8/1/14 .................... 200,000 216,108 New York City GO, 6.00%, 8/1/14, Callable 8/1/07 @ 101 .................................... 55,000 56,421 New York City GO, 5.00%, 8/1/15 .................... 325,000 352,196 New York City GO (LOC UBS Financial Services), 5.00%, 12/1/13 ....................... 1,000,000 1,076,580 New York City Housing Development Corp. Revenue, AMT, 5.60%, 11/1/19, Callable 11/1/09 @ 101 ................................... 100,000 103,782 New York City Industrial Development Agency (FSA Insured), 5.00%, 11/15/19, Callable 5/1/13 @ 100 ........................... 1,000,000 1,070,080 New York City Industrial Development Agency, AMT, 5.00%, 1/1/09 ...................... 1,000,000 1,023,010 New York City Municipal Water Finance Authority, 5.00%, 6/15/34, Callable 6/15/13 @ 100 ................................... 1,250,000 1,306,500 New York City Municipal Water Finance Authority, 5.00%, 6/15/36, Callable 12/15/14 @ 100 .................................. 1,000,000 1,051,720 New York City Transitional Finance Authority Revenue, 5.25%, 5/1/17, Callable 5/1/11 @ 100 ........................... 400,000 426,680 New York City Transitional Finance Authority Revenue, 5.25%, 2/1/29, Callable 2/1/11 @ 100 ........................... 1,540,000 1,637,852 New York State Dormitory Authority Revenue, Cooper Union (MBIA Insured), 6.00%, 7/1/19, Callable 7/1/09 @ 101 ............ 350,000 374,892 - -------------------------------------------------------------------------------- MUNICIPAL BONDS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- New York State Dormitory Authority Revenue, Department of Health, 5.25%, 7/1/16, Callable 7/1/14 @ 100 ................... 500,000 544,850 New York State Dormitory Authority Revenue, Master Boces PG (FSA Insured), 5.25%, 8/15/19, Callable 8/15/12 @ 100 ........................................... 1,000,000 1,081,670 New York State Dormitory Authority Revenue, Mental Health, 6.50%, 8/15/11 .......... 225,000 252,086 New York State Dormitory Authority Revenue, Mental Health, 5.50%, 8/15/17, Prerefunded 2/15/07 @ 102 ....................... 15,000 15,381 New York State Dormitory Authority Revenue, Mental Health, 5.50%, 8/15/17, Partially Prerefunded 2/15/07 @ 102 ............. 985,000 1,009,093 New York State Dormitory Authority Revenue, Mental Health (FGIC Insured), 5.00%, 2/15/15 .................................. 1,245,000 1,359,379 New York State Dormitory Authority Revenue, New York Presbyterian Hospital (AMBAC Insured), 5.50%, 8/1/10 .................. 750,000 797,580 New York State Dormitory Authority Revenue, New York University (AMBAC Insured), 5.50%, 7/1/18 ......................... 500,000 576,925 New York State Dormitory Authority Revenue, NYSARC (FSA Insured), 5.25%, 7/1/18, Callable 7/1/12 @ 101 ............ 1,460,000 1,588,860 New York State Dormitory Authority Revenue, Rockefeller University, 5.25%, 7/1/13, Callable 7/1/08 @ 101 ................... 500,000 517,915 New York State Dormitory Authority Revenue, School District Board Financing, 5.00%, 7/1/08 ................................... 595,000 608,816 New York State Dormitory Authority Revenue, Sloan Kettering Institute (MBIA Insured), 5.50%, 7/1/23 ......................... 1,300,000 1,519,856 New York State Dormitory Authority, Personal Income Tax Revenue, 5.00%, 3/15/23, Callable 3/15/15 @ 100 ................. 1,000,000 1,068,300 New York State Environmental Facscorp., 5.70%, 1/15/14, Prerefunded 7/15/09 @ 101 ........................................... 15,000 15,997 New York State Environmental Facscorp., 5.70%, 1/15/14, Callable 7/15/09 @ 101 ......... 415,000 440,510 New York State Environmental Facscorp., 5.70%, 1/15/14, Prerefunded 7/15/09 @ 101 ........................................... 570,000 607,871 New York State Mortgage Agency Revenue, AMT, 5.60%, 10/1/14, Callable 9/1/07 @ 101.5 ......................................... 1,000,000 1,023,890 New York State Municipal Bond Bank Revenue, 5.50%, 12/1/12 ......................... 850,000 933,214 New York State Thruway Authority Revenue, Highway & Bridge (FGIC Insured), 5.50%, 4/1/17, Callable 4/1/11 @ 101 ........................................... 1,000,000 1,090,590 New York State Thruway Authority Revenue, Highway & Bridge (MBIA Insured), 5.00%, 4/1/22, Callable 4/1/14 @ 100 ........................................... 1,000,000 1,063,600 New York State Thruway Authority, Personal Income Tax Revenue, 5.50%, 3/15/20, Prerefunded 3/15/12 @ 100 .............. 500,000 547,645 SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 26 - -------------------------------------------------------------------------------- HSBC INVESTOR NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- MUNICIPAL BONDS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- New York State Thruway Authority, Personal Income Tax Revenue (FSA Insured), 5.00%, 3/15/13 ........................ 645,000 695,452 New York State Thruway Authority, Personal Income Tax Revenue (MBIA Insured), 5.00%, 3/15/19, Callable 3/15/13 @ 100 ........................................... 1,400,000 1,497,496 New York State Thruway Authority, Personal Income Tax Revenue (MBIA Insured), 5.00%, 3/15/21, Callable 3/15/13 @ 100 ........................................... 500,000 534,820 New York State Thruway Authority, Second General Highway & Bridge (AMBAC Insured), 5.00%, 4/1/16 ......................... 1,000,000 1,098,790 New York State Thruway Authority, Service Contract Revenue, 5.50%, 4/1/11 ................. 1,000,000 1,076,910 New York State Urban Development Corp. Revenue, 5.75%, 4/1/12 .......................... 500,000 549,360 New York State Urban Development Corp. Revenue, 5.125%, 1/1/22, Callable 7/1/14 @ 100 ........................................... 885,000 943,507 New York State Urban Development Corp. Revenue, 5.125%, 1/1/25, Prerefunded 1/1/11 @ 100 .................................... 175,000 185,929 New York State Urban Development Corp. Revenue, Series A (MBIA Insured), 6.50%, 1/1/09 ................................... 500,000 530,575 New York State Urban Development Corp. Revenue, Series B (FSA Insured), 5.00%, 3/15/21, Callable 3/15/15 @100 .................. 1,000,000 1,073,450 Onondaga County, New York Water Authority Revenue (FSA Insured), 5.00%, 9/15/14, Callable 9/15/10 @ 101 ................. 300,000 317,544 Onondaga County, New York Water Authority Revenue (FSA Insured), 5.00%, 9/15/15, Callable 9/15/10 @ 101 ................. 665,000 702,160 Port Authority of New York & New Jersey Revenue, 5.00%, 9/1/27, Callable 9/1/13 @ 101 ........................................... 795,000 840,808 Port Authority of New York & New Jersey Revenue, 5.375%, 3/1/28 ......................... 1,100,000 1,280,884 Port Authority of New York & New Jersey Special Obligation Revenue, AMT (MBIA Insured), 5.75%, 12/1/22, Callable 12/1/07 @ 102 ........................................... 500,000 520,435 Suffolk County, New York (FSA Insured), 5.25%, 5/1/12 ................................... 515,000 560,083 Suffolk County, New York (FSA Insured), 5.25%, 5/1/15 ................................... 100,000 111,781 Tobacco Settlement Corp., 5.50%, 6/1/21, Callable 6/1/13 @ 100 ........................... 1,000,000 1,093,290 Webster, New York Central School District GO (FSA Insured), 5.00%, 6/15/14 ................ 500,000 544,230 Yonkers New York, Series E (MBIA Insured), 5.00%, 12/1/14 ........................ 750,000 813,848 ----------- 51,741,313 ----------- PUERTO RICO - 9.2% Puerto Rico Commonwealth, Highway and Transportation (MBIA Insured), 5.00%, 9/15/17, Callable 3/15/14 @ 100 ................. 1,000,000 1,080,220 Puerto Rico Electric Power Authority Revenue (MBIA Insured), 5.25%, 7/1/22 ........... 1,000,000 1,146,940 - -------------------------------------------------------------------------------- MUNICIPAL BONDS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Puerto Rico Municipal Finance Agency, 5.00%, 8/1/12 ................................... 995,000 1,052,302 Puerto Rico Public Buildings Authority Revenue, 5.25%, 7/1/33, Callable 7/1/14 @ 100 ........................................... 700,000 748,657 Puerto Rico Public Finance Corp. Revenue (MBIA Insured), 5.25%, 8/1/29, Callable 2/1/12 @ 100 .................................... 1,000,000 1,074,270 Puerto Rico Publishing Finance Corp. Revenue (AMBAC Insured), 5.375%, 6/1/18 .......................................... 500,000 570,700 ----------- 5,673,089 ----------- TOTAL MUNICIPAL BONDS (COST $54,927,573) .............................. 57,414,402 ----------- - -------------------------------------------------------------------------------- VARIABLE RATE DEMAND NOTES* - 3.3% - -------------------------------------------------------------------------------- NEW YORK - 3.3% New York City Housing Development Corp. Revenue, AMT (LOC Bank of America N.A.), 3.57%, 11/1/38 ........................... 1,000,000 1,000,000 New York State Housing Finance Agency, AMT (LOC FNMA), 3.56%, 5/15/33 .................. 1,000,000 1,000,000 ----------- 2,000,000 ----------- TOTAL VARIABLE RATE DEMAND NOTES* (COST $2,000,000) ........................ 2,000,000 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 1.9% - -------------------------------------------------------------------------------- BlackRock Liquidity New York Money Fund Portfolio Institutional Shares, 3.37%(a) ........................................ 1,157,865 1,157,865 ----------- TOTAL INVESTMENT COMPANIES (COST $1,157,865) ............................... 1,157,865 ----------- TOTAL INVESTMENTS (COST $58,085,438) - 98.6% ...................... 60,572,267 =========== - ---------- Percentages indicated are based on net assets of $61,453,319. * Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rate presented represents the rate in effect on October 31, 2006. The maturity dates presented reflect the final maturity dates. However, some of these securities may contain put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (a) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. AMBAC--American Municipal Bond Assurance Corporation AMT --Interest on security is subject to Federal Alternative Minimum Tax FGIC --Federal Guaranty Insurance Corporation FNMA --Federal National Mortgage Association FSA --Financial Security Assurance GO --General Obligation LOC --Letter of Credit MBIA --Municipal Bond Insurance Association 27 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH AND INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- COMMON STOCKS - 99.6% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- AEROSPACE & DEFENSE - 2.5% United Technologies Corp. .......................... 18,100 1,189,532 ----------- AUTOMOTIVE & TRANSPORT - 5.2% BorgWarner, Inc. ................................... 10,650 612,375 FedEx Corp. ........................................ 7,500 859,050 PACCAR, Inc. ....................................... 16,000 947,360 ----------- 2,418,785 ----------- CHEMICALS - 4.1% Ecolab, Inc. ....................................... 25,000 1,133,750 Monsanto Co. ....................................... 17,600 778,272 ----------- 1,912,022 ----------- COMPUTER SOFTWARE - 6.8% Electronic Arts, Inc. (a) .......................... 22,000 1,163,580 Microsoft Corp. .................................... 50,000 1,435,500 SanDisk Corp. (a) .................................. 12,000 577,200 ----------- 3,176,280 ----------- COMPUTERS - 4.3% Apple Computer, Inc. (a) ........................... 25,000 2,027,000 ----------- CONSUMER PRODUCTS - 4.9% Nike, Inc., Class B ................................ 9,950 914,206 PepsiCo, Inc. ...................................... 22,000 1,395,680 ----------- 2,309,886 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 17.5% Caterpillar, Inc. .................................. 25,000 1,517,749 Donaldson Co., Inc. ................................ 20,500 769,775 Fastenal Co. ....................................... 12,500 503,000 Graco, Inc. ........................................ 15,000 611,400 Jacobs Engineering Group, Inc. (a) ................. 19,650 1,484,361 Kennametal, Inc. ................................... 18,000 1,110,780 Plum Creek Timber Co., Inc. ........................ 30,000 1,078,200 W. W. Grainger, Inc. ............................... 15,000 1,091,700 ----------- 8,166,965 ----------- FINANCIAL SERVICES - 12.1% American Express Co. ............................... 31,000 1,792,110 Ameriprise Financial, Inc. ......................... 20,000 1,030,000 Blackrock, Inc., Class A ........................... 4,500 678,780 J.P. Morgan Chase & Co. ............................ 17,500 830,200 The Chicago Mercantile Exchange Holdings, Inc. .................................. 2,700 1,352,700 ----------- 5,683,790 ----------- HEALTH CARE - 2.7% WellPoint, Inc. (a) ................................ 7,000 534,240 Zimmer Holdings, Inc. (a) .......................... 10,000 720,100 ----------- 1,254,340 ----------- HOTELS & LODGING - 4.8% Hilton Hotels Corp. ................................ 41,500 1,200,180 Las Vegas Sands Corp. (a) .......................... 14,000 1,066,800 ----------- 2,266,980 ----------- - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- INTERNET RELATED - 2.3% Google, Inc., Class A (a) .......................... 2,250 1,071,878 ----------- LEISURE - 1.0% Carnival Corp. ..................................... 10,000 488,200 ----------- MEDIA - 5.7% McGraw-Hill Cos., Inc. ............................. 27,000 1,732,590 The Walt Disney Co. ................................ 30,240 951,350 ----------- 2,683,940 ----------- MOTOR VEHICLES - 2.3% Harley-Davidson, Inc. .............................. 15,400 1,056,902 ----------- OIL & GAS - 7.2% Anadarko Petroleum Corp. ........................... 10,300 478,126 Apache Corp. ....................................... 10,000 653,200 Schlumberger Ltd. .................................. 19,600 1,236,368 Suncor Energy, Inc. ADR ............................ 13,450 1,030,943 ----------- 3,398,637 ----------- PHARMACEUTICALS - 2.1% Amgen, Inc. (a) .................................... 13,000 986,830 ----------- RESTAURANTS - 2.1% Starbucks Corp. (a) ................................ 26,000 981,500 ----------- RETAIL - 6.1% Nordstrom, Inc. .................................... 18,500 875,975 Walgreen Co. ....................................... 23,000 1,004,640 Whole Foods Market, Inc. ........................... 15,000 957,600 ----------- 2,838,215 ----------- TELECOMMUNICATIONS - 4.5% QUALCOMM, Inc. ..................................... 33,000 1,200,870 Verizon Communications, Inc. ....................... 25,000 925,000 ----------- 2,125,870 ----------- TRANSPORTATION - 1.4% Expeditors International of Washington, Inc. ....... 14,100 668,481 ----------- TOTAL COMMON STOCKS (COST $36,828,066) .............................. 46,706,033 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 0.1% - -------------------------------------------------------------------------------- HSBC Investor Money Market Fund Class I Shares, 5.23% (b) * ............................. 28,459 28,459 ----------- TOTAL INVESTMENT COMPANIES (COST $28,459) .................................. 28,459 ----------- TOTAL INVESTMENTS (COST $36,856,525) - 99.7% ...................... 46,734,492 =========== - ---------- Percentages indicated are based on net assets of $46,890,964. (a) Represents non-income producing security. (b) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. * Investment in affiliate. ADR--American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 28 - -------------------------------------------------------------------------------- HSBC INVESTOR MID-CAP FUND - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- COMMON STOCKS - 98.0% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- AEROSPACE & DEFENSE - 2.4% L-3 Communications Holdings, Inc. .................. 8,400 676,368 ----------- AGRICULTURAL CHEMICALS - 0.7% Syngenta AG ADR .................................... 6,100 196,603 ----------- BANKING - 2.5% Compass Bancshares, Inc. ........................... 6,000 337,560 HDFC Bank Ltd. ADR ................................. 5,100 353,226 ----------- 690,786 ----------- BIOTECHNOLOGY - 0.5% Vertex Pharmaceuticals, Inc. (a) ................... 3,550 144,130 ----------- CHEMICALS - 2.4% Airgas, Inc. ....................................... 9,200 347,852 Praxair, Inc. ...................................... 5,225 314,806 ----------- 662,658 ----------- COMMERCIAL SERVICES - 1.0% Sotheby's Holdings, Inc. ........................... 7,500 285,000 ----------- COMMUNICATIONS - 1.4% CommScope, Inc. (a) ................................ 12,300 392,493 ----------- COMPUTER EQUIPMENT - 1.2% Logitech International S.A. (a) .................... 13,050 345,173 ----------- COMPUTER SERVICES - 5.5% aQuantive, Inc. (a) ................................ 13,400 364,212 Cognizant Technology Solutions Corp. (a) ........... 7,350 553,308 Euronet Worldwide, Inc. (a) ........................ 7,575 225,129 Wright Express Corp. (a) ........................... 14,250 390,023 ----------- 1,532,672 ----------- COMPUTER SOFTWARE - 4.5% Akamai Technologies, Inc. (a) ...................... 6,400 299,904 Blackbaud, Inc. .................................... 17,150 428,750 NAVTEQ Corp. (a) ................................... 4,850 161,020 SRA International, Inc., Class A (a) ............... 10,775 345,339 ----------- 1,235,013 ----------- CONSTRUCTION & ENGINEERING - 1.8% McDermott International, Inc. (a) .................. 11,275 503,993 ----------- CONSUMER PRODUCTS -3.8% Constellation Brands, Inc. (a) ..................... 15,375 422,658 Jarden Corp. (a) ................................... 8,600 309,428 Thor Industries, Inc. .............................. 7,375 323,173 ----------- 1,055,259 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 3.4% Emcor Group, Inc. (a) .............................. 10,975 649,171 Graco, Inc. ........................................ 6,950 283,282 ----------- 932,453 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 2.8% FormFactor, Inc. (a) ............................... 7,300 278,714 Microchip Technology, Inc. ......................... 8,275 272,496 Veeco Instruments, Inc. (a) ........................ 11,725 219,140 ----------- 770,350 ----------- ENVIRONMENTAL SERVICES - 2.0% Stericycle, Inc. (a) ............................... 7,900 558,609 ----------- FINANCIAL SERVICES - 7.2% Affiliated Managers Group, Inc. (a) ................ 5,000 500,700 Blackrock, Inc., Class A ........................... 2,025 305,451 Global Signal, Inc. ................................ 8,800 477,840 TD Ameritrade Holding Corp. (a) .................... 18,325 301,813 The Chicago Mercantile Exchange Holdings, Inc. ............................................ 800 400,800 ----------- 1,986,604 ----------- - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- FOOD & BEVERAGE - 1.4% Flowers Foods, Inc. ................................ 13,950 379,022 ----------- HEALTH CARE - 10.3% Coventry Health Care, Inc. (a) ..................... 5,775 271,136 CYTYC Corp. (a) .................................... 9,425 249,009 DaVita, Inc. (a) ................................... 4,700 261,461 Hologic, Inc. (a) .................................. 8,325 400,849 Laboratory Corp. of America Holdings (a) ........... 4,825 330,464 Psychiatric Solutions, Inc. (a) .................... 8,200 272,240 ResMed, Inc. (a) ................................... 11,500 505,884 Techne Corp. (a) ................................... 1,275 71,247 VCA Antech, Inc. (a) ............................... 15,000 485,550 ----------- 2,847,840 ----------- INDUSTRIAL MANUFACTURING - 1.5% Ceradyne, Inc. (a) ................................. 2,575 106,219 Mobile Mini, Inc. (a) .............................. 9,300 299,181 ----------- 405,400 ----------- INSURANCE - 1.4% Proassurance Corp. (a) ............................. 7,300 355,510 StanCorp Financial Group, Inc. ..................... 900 41,121 ----------- 396,631 ----------- LEISURE - 1.9% Penn National Gaming, Inc. (a) ..................... 14,400 526,608 ----------- LIFE SCIENCES TOOLS AND SERVICES - 0.2% Nektar Therapeutics (a) ............................ 3,625 52,309 ----------- MACHINERY - 1.8% Oshkosh Truck Corp. ................................ 10,825 489,398 ----------- METALS & MINING - 1.8% Phelps Dodge Corp. ................................. 5,100 511,938 ----------- MORTGAGE - 2.6% American Home Mortgage Investment Corp. ........................................... 9,875 337,429 The PMI Group, Inc. ................................ 9,225 393,446 ----------- 730,875 ----------- OIL & GAS - 8.8% Chesapeake Energy Corp. ............................ 11,325 367,383 Helmerich & Payne, Inc. ............................ 7,550 180,823 National-Oilwell, Inc. (a) ......................... 7,550 456,019 Noble Corp. ........................................ 2,675 187,518 Oil States International, Inc. (a) ................. 5,775 167,706 Precision Drilling Trust ........................... 9,900 283,734 Superior Energy Services, Inc. (a) ................. 4,050 126,765 Weatherford International Ltd. (a) ................. 5,134 210,905 XTO Energy, Inc. ................................... 9,808 457,640 ----------- 2,438,493 ----------- REAL ESTATE - 1.0% Jones Lang LaSalle, Inc. ........................... 3,000 276,000 ----------- RESIDENTIAL BUILDING CONSTRUCTION - 2.0% KB Home, Inc. ...................................... 5,475 246,047 Pulte Homes, Inc. .................................. 9,625 298,278 ----------- 544,325 ----------- RETAIL - 5.7% Dick's Sporting Goods, Inc. (a) .................... 9,325 464,012 GameStop Corp., Class A (a) ........................ 10,275 524,642 Jos. A. Bank Clothiers, Inc. (a) ................... 9,587 284,638 Tractor Supply Co. (a) ............................. 6,400 309,888 ----------- 1,583,180 ----------- 29 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR MID-CAP FUND - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- SPECIALTY RETAIL - 2.2% Tiffany & Co. ...................................... 8,075 288,439 United Auto Group, Inc. ............................ 14,450 332,061 ----------- 620,500 ----------- TELECOMMUNICATIONS - 2.4% j2 Global Communications, Inc. (a) ................. 16,175 443,842 NII Holdings, Inc. Class B (a) ..................... 3,575 232,482 ----------- 676,324 ----------- TRANSPORTATION - 3.5% American Commercial Lines, Inc. (a) ................ 7,200 461,880 Old Dominion Freight Line, Inc. (a) ................ 18,437 509,967 ----------- 971,847 ----------- UTILITIES - 6.4% Entergy Corp. ...................................... 2,850 244,616 Equitable Resources, Inc. .......................... 13,425 543,980 ITC Holdings Corp. ................................. 9,500 337,440 New Jersey Resources Corp. ......................... 6,500 337,090 Northeast Utilities ................................ 12,050 301,371 ----------- 1,764,497 ----------- TOTAL COMMON STOCKS (COST $21,413,420) .............................. 27,183,351 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 1.4% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- MidCap S&P Depositary Receipt Trust Series 1 ........................................ 2,700 386,937 ----------- TOTAL INVESTMENT COMPANIES (COST $365,097) ................................. 386,937 ----------- TOTAL INVESTMENTS (COST $21,778,517) - 99.4% ...................... 27,570,288 =========== - ---------- Percentages indicated are based on net assets of $27,733,752. (a) Represents non-income producing security. ADR--American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 30 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF ASSETS AND LIABILITIES--OCTOBER 31, 2006
INTERMEDIATE CORE PLUS CORE PLUS HIGH YIELD DURATION NEW YORK FIXED INCOME FIXED INCOME FIXED INCOME FIXED INCOME TAX-FREE FUND (ADVISOR) FUND FUND FUND BOND FUND - ------------------------------------------------------------------------------------------------------------------------------ ASSETS: Investments in Portfolio $ 81,041,088 $ 16,773,643 $ 9,673,038 $ 18,252,279 $ -- Investments, at value (non-affiliated) -- -- -- -- 60,572,267 Cash -- -- -- -- 165,465 Interest and dividends receivable -- -- -- -- 798,031 Receivable for capital shares issued 979 14,469 2,500 550 106,942 Receivable from Investment Adviser -- -- -- -- -- Receivable from Sub-Administrator 78,120 21,147 62,551 51,318 -- Prepaid expenses and other assets 6,548 3,958 3,775 2,187 7,134 -------------- ------------ ------------ ------------ ------------ TOTAL ASSETS 81,126,735 16,813,217 9,741,864 18,306,334 61,649,839 -------------- ------------ ------------ ------------ ------------ LIABILITIES: Dividends payable 117,929 4,329 6,818 16,851 54,452 Payable for capital shares redeemed 4,813 39,684 68,019 57,828 87,283 Accrued expenses and other liabilities: Investment management -- -- -- -- 12,888 Administration 4,648 723 315 1,211 5,151 Distribution -- 6,131 1,426 4,363 9,934 Shareholder servicing -- 3,515 1,481 1,121 10,021 Accounting -- -- -- -- 204 Transfer Agent 5,884 4,741 5,355 5,123 6,058 Trustee 122 28 14 32 201 Other 17,184 2,231 1,198 2,537 10,328 -------------- ------------ ------------ ------------ ------------ TOTAL LIABILITIES 150,580 61,382 84,626 89,066 196,520 -------------- ------------ ------------ ------------ ------------ NET ASSETS $ 80,976,155 $ 16,751,835 $ 9,657,238 $ 18,217,268 $ 61,453,319 ============== ============ ============ ============ ============ - ------------------------------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS: Capital $ 81,845,247 $ 17,608,066 $ 9,549,568 $ 18,848,928 $ 58,950,157 Accumulated net investment income (loss) 29,636 5,120 6,484 7,071 (5,389) Accumulated net realized gains (losses) from investments and foreign currency transactions (1,557,785) (997,648) 31,454 (729,614) 21,722 Unrealized appreciation/depreciation from investments and foreign currencies 659,057 136,297 69,732 90,883 2,486,829 -------------- ------------ ------------ ------------ ------------ NET ASSETS $ 80,976,155 $ 16,751,835 $ 9,657,238 $ 18,217,268 $ 61,453,319 ============== ============ ============ ============ ============ - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS: Class A Shares $ -- $ 12,248,378 $ 4,742,071 $ 976,318 $ 32,726,890 Class B Shares $ -- $ 4,267,300 $ 2,106,101 $ 3,738,101 $ 13,735,224 Class C Shares $ -- $ 236,157 $ 240,745 $ 502,657 $ 1,245,534 Class I Shares $ -- $ -- $ 2,568,321 $ 13,000,192 $ 13,745,671 Advisor Shares $ 80,976,155 $ -- $ -- $ -- $ -- -------------- ------------ ------------ ------------ ------------ $ 80,976,155 $ 16,751,835 $ 9,657,238 $ 18,217,268 $ 61,453,319 ============== ============ ============ ============ ============ - ------------------------------------------------------------------------------------------------------------------------------ SHARES OUTSTANDING ($0.001 par value; unlimited number of shares authorized): Class A Shares -- 1,188,994 467,913 100,492 2,927,514 Class B Shares -- 413,799 207,743 384,072 1,229,925 Class C Shares -- 22,939 23,696 51,671 111,100 Class I Shares -- -- 253,399 1,336,348 1,229,421 Advisor Shares 7,990,577 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE: Class A Shares $ -- $ 10.30 $ 10.13 $ 9.72 $ 11.18 Class B Shares* $ -- $ 10.31 $ 10.14 $ 9.73 $ 11.17 Class C Shares* $ -- $ 10.30 $ 10.16 $ 9.73 $ 11.21 Class I Shares $ -- $ -- $ 10.14 $ 9.73 $ 11.18 Advisor Shares $ 10.13 $ -- $ -- $ -- $ -- Maximum sales charge--Class A Shares -- 4.75% 4.75% 4.75% 4.75% ============== ============ ============ ============ ============ Maximum Offering Price per share (Net Asset Value/(100%--maximum sales charge)) $ -- $ 10.82 $ 10.64 $ 10.20 $ 11.74 ============== ============ ============ ============ ============ Total Investments, at cost $ 58,085,438 ============
- ---------- * Redemption price per share varies by length of time shares are held. 31 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF ASSETS AND LIABILITIES--OCTOBER 31, 2006 (CONTINUED)
GROWTH GROWTH AND INTERNATIONAL MID-CAP OPPORTUNITY FUND INCOME FUND EQUITY FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------------------ ASSETS: Investments in Portfolio $ 38,824,353 $ -- $ 283,223,082 $ -- $ 29,644,202 Investments, at value (non-affiliated) -- 46,706,033 -- 27,570,288 -- Investment in affiliates, at value -- 28,459 -- -- -- Interest and dividends receivable -- 30,625 -- 5,354 -- Receivable for capital shares issued 9,582 645 304,883 1,877 16,793 Receivable for investments sold -- 500,470 -- 692,262 -- Receivable from Investment Adviser -- 24,552 -- 7,164 -- Receivable from Sub-Administrator 34,731 -- -- 17,780 14,702 Tax reclaim receivable -- -- 282,581 -- -- Prepaid expenses and other assets 5,534 11,874 14,850 3,522 5,186 ------------- ------------ ------------- ------------ ------------ TOTAL ASSETS 38,874,200 47,302,658 283,825,396 28,298,247 29,680,883 ------------- ------------ ------------- ------------ ------------ LIABILITIES: Cash overdraft -- -- -- 197,764 -- Payable for investments purchased -- 123,636 -- 309,230 -- Payable for capital shares redeemed 110,785 236,000 3,981 13,801 129,677 Accrued expenses and other liabilities: Investment management -- 23,990 -- 17,910 -- Administration 1,269 10,370 11,377 4,826 1,182 Distribution 1,103 2,972 -- 4,930 2,408 Shareholder servicing 4,989 1,262 -- 2,267 6,239 Accounting -- 139 -- 42 -- Transfer Agent 8,169 5,973 2,788 7,308 7,549 Printing 3,162 3,810 24,825 2,278 2,377 Trustee 56 134 393 81 42 Other 1,769 3,408 33,427 4,058 1,330 ------------- ------------ ------------- ------------ ------------ TOTAL LIABILITIES 131,302 411,694 76,791 564,495 150,804 ------------- ------------ ------------- ------------ ------------ NET ASSETS $ 38,742,898 $ 46,890,964 $ 283,748,605 $ 27,733,752 $ 29,530,079 ============= ============ ============= ============ ============ - ------------------------------------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS: Capital $ 31,811,847 $ 47,154,412 $ 191,671,263 $ 20,006,524 $ 21,418,219 Accumulated net investment income (loss) -- -- 4,473,624 -- -- Accumulated net realized gains (losses) from investments and foreign currency transactions 2,947,973 (10,141,415) 23,884,676 1,935,457 3,547,264 Unrealized appreciation/depreciation from investments and foreign currencies 3,983,078 9,877,967 63,719,042 5,791,771 4,564,596 ------------- ------------ ------------- ------------ ------------ NET ASSETS $ 38,742,898 $ 46,890,964 $ 283,748,605 $ 27,733,752 $ 29,530,079 ============= ============ ============= ============ ============ - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS: Class A Shares $ 21,985,130 $ 1,393,800 $ -- $ 3,184,782 $ 24,462,811 Class B Shares $ 1,446,084 $ 4,537,077 $ -- $ 7,424,814 $ 4,768,367 Class C Shares $ 269,832 $ 34,890 $ -- $ 94,714 $ 298,901 Class I Shares $ 15,041,852 $ 40,925,197 $ -- $ -- $ -- Advisor Shares $ -- $ -- $ 283,748,605 $ -- $ -- Trust Shares $ -- $ -- $ -- $ 17,029,442 $ -- ------------- ------------ ------------- ------------ ------------ $ 38,742,898 $ 46,890,964 $ 283,748,605 $ 27,733,752 $ 29,530,079 ============= ============ ============= ============ ============ - ------------------------------------------------------------------------------------------------------------------------------------ SHARES OUTSTANDING ($0.001 par value; unlimited number of shares authorized): Class A Shares 1,479,163 126,937 -- 358,460 1,711,980 Class B Shares 102,068 422,426 -- 886,580 359,790 Class C Shares 18,942 3,221 -- 11,212 22,342 Class I Shares 1,009,421 3,719,872 -- -- -- Advisor Shares -- -- 12,838,892 -- -- Trust Shares -- -- -- 1,885,709 -- - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE: Class A Shares $ 14.86 $ 10.98 $ -- $ 8.88 $ 14.29 Class B Shares* $ 14.17 $ 10.74 $ -- $ 8.37 $ 13.25 Class C Shares* $ 14.24** $ 10.83 $ -- $ 8.45 $ 13.38 Class I Shares $ 14.90 $ 11.00 $ -- $ -- $ -- Advisor Shares $ -- $ -- $ 22.10 $ -- $ -- Trust Shares $ -- $ -- $ -- $ 9.03 $ -- Maximum sales charge--Class A Shares 5.00% 5.00% -- 5.00% 5.00% ============= ============ ============= ============ ============ Maximum Offering Price per share (Net Asset Value/(100%--maximum sales charge)) $ 15.65 $ 11.56 $ -- $ 9.35 $ 15.04 ============= ============ ============= ============ ============ Total Investments, at cost $ 36,856,525 $ 21,778,517 ============ ============
- ---------- * Redemption price per share varies by length of time shares are held. ** Due to rounding, net assets divided by shares outstanding does not equal the NAV. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 32 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF ASSETS AND LIABILITIES--OCTOBER 31, 2006 (CONTINUED)
OVERSEAS SMALL CAP VALUE EQUITY FUND EQUITY FUND FUND - -------------------------------------------------------------------------------------------------------------- ASSETS: Investments in Portfolio $ 26,236,606 $ 192,129,492 $ 44,929,433 Receivable for capital shares issued 15,837 82,838 9,053 Receivable from Sub Administrator -- -- 32,570 Tax reclaims receivable 54,200 -- -- Prepaid expenses and other assets 4,958 8,566 5,587 ------------ ------------- ------------ TOTAL ASSETS 26,311,601 192,220,896 44,976,643 ------------ ------------- ------------ LIABILITIES: Payable for capital shares redeemed 134,912 41,200 135,962 Accrued expenses and other liabilities: Administration 971 9,149 1,447 Distribution 2,427 -- 1,357 Shareholder servicing 5,451 -- 5,636 Compliance service -- -- 1 Trustee 41 263 66 Transfer agent 5,963 3,819 7,896 Printing 2,153 22,827 3,206 Other 1,194 19,866 2,085 ------------ ------------- ------------ TOTAL LIABILITIES 153,112 97,124 157,656 ------------ ------------- ------------ NET ASSETS $ 26,158,489 $ 192,123,772 $ 44,818,987 ============ ============= ============ - -------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS: Capital $ 15,686,277 $ 130,339,368 $ 31,086,077 Accumulated net investment income (loss) 294,103 -- 94,489 Accumulated net realized gains (losses) from investments and foreign currency transactions 2,915,409 29,236,841 4,492,522 Unrealized appreciation/depreciation from investments and foreign currencies 7,262,700 32,547,563 9,145,899 ------------ ------------- ------------ NET ASSETS $ 26,158,489 $ 192,123,772 $ 44,818,987 ============ ============= ============ - -------------------------------------------------------------------------------------------------------------- NET ASSETS: Class A Shares $ 22,761,061 -- $ 24,687,571 Class B Shares 3,234,056 -- 1,938,662 Class C Shares 163,372 -- 156,818 Class I Shares -- -- 18,035,936 Advisor Shares -- 192,123,772 -- ------------ ------------- ------------ $ 26,158,489 $ 192,123,772 $ 44,818,987 ============ ============= ============ - -------------------------------------------------------------------------------------------------------------- SHARES OUTSTANDING ($0.001 par value; unlimited number of shares authorized): Class A Shares 1,207,322 -- 1,476,764 Class B Shares 179,656 -- 120,587 Class C Shares 8,895 -- 9,692 Class I Shares -- -- 1,079,826 Advisor Shares -- 11,116,806 -- - -------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE: Class A Shares $ 18.85 $ -- $ 16.72 Class B Shares* $ 18.00 $ -- $ 16.08 Class C Shares* $ 18.37 $ -- $ 16.18 Class I Shares $ -- $ -- $ 16.70 Advisor Shares $ -- $ 17.28 $ -- Maximum sales charge--Class A Shares 5.00% -- 5.00% ============ ============= ============ Maximum Offering Price per share (Net Asset Value/(100%-- maximum sales charge)) $ 19.84 $ -- $ 17.60 ============ ============= ============
- ---------- * Redemption price per share varies by length of time shares are held. 33 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2006
CORE PLUS INTERMEDIATE FIXED INCOME CORE PLUS HIGH YIELD DURATION NEW YORK FUND FIXED INCOME FIXED INCOME FIXED INCOME TAX-FREE (ADVISOR) FUND FUND (a) FUND BOND FUND - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ -- $ -- $ -- $ -- $ 2,731,640 Dividends -- -- -- -- 45,681 Investment income from Portfolio (b) 4,562,210 1,030,455 644,323 1,162,377 -- Expenses from Portfolio (b) (517,613) (116,995) (146,438) (168,352) -- ------------ ------------ ------------ ------------ ----------- TOTAL INVESTMENT INCOME 4,044,597 913,460 497,885 994,025 2,777,321 ------------ ------------ ------------ ------------ ----------- - --------------------------------------------------------------------------------------------------------------------------- EXPENSES: Investment management -- -- -- -- 163,986 Administration 30,499 6,891 2,971 8,130 49,147 Distribution: Class B Shares -- 39,241 9,615 32,055 113,266 Class C Shares -- 1,884 993 3,823 11,010 Shareholder servicing: Class A Shares -- 32,266 10,462 2,513 83,204 Class B Shares -- 13,080 3,205 10,685 37,755 Class C Shares -- 628 331 1,274 3,670 Accounting 9,000 27,000 34,300 35,250 74,567 Compliance service 1,171 270 113 322 8,303 Custodian -- -- -- -- 21,995 Registration 6,248 3,346 7,696 2,584 1,491 Printing 31,255 14,359 4,953 21,995 39,337 Transfer agent 40,886 44,437 61,628 57,094 61,630 Trustee 2,285 540 181 654 4,279 Other 11,823 3,877 2,640 5,445 21,185 ------------ ------------ ------------ ------------ ----------- Total expenses before fee reductions 133,167 187,819 139,088 181,824 694,825 Fees reduced by Investment Adviser (115,915) (97,063) (154,511) (123,803) -- Expenses waived or reimbursed by Sub-Administrator (78,120) (21,147) (62,551) (51,318) -- ------------ ------------ ------------ ------------ ----------- NET EXPENSES (60,868) 69,609 (77,974) 6,703 694,825 ------------ ------------ ------------ ------------ ----------- - --------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 4,105,465 843,851 575,859 987,322 2,082,496 ------------ ------------ ------------ ------------ ----------- - --------------------------------------------------------------------------------------------------------------------------- NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: (b) Net realized gains (losses) from investments and foreign currency transactions (1,501,702) (377,777) 31,454 (420,155) 21,722 Change in unrealized appreciation/depreciation from investments and foreign currencies 1,816,915 452,867 69,732 480,307 641,574 ------------ ------------ ------------ ------------ ----------- - --------------------------------------------------------------------------------------------------------------------------- Net realized/unrealized gains from investments and foreign currency transactions 315,213 75,090 101,186 60,152 663,296 ------------ ------------ ------------ ------------ ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 4,420,678 $ 918,941 $ 677,045 $ 1,047,474 $ 2,745,792 ============ ============ ============ ============ ===========
- ---------- (a) High Yield Fixed Income Fund commenced operations on November 18, 2005. (b) With the exception of New York Tax-Free Bond Fund, represents amounts allocated from the respective Portfolios. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 34 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2006 (CONTINUED)
GROWTH AND INTERNATIONAL GROWTH INCOME EQUITY MID-CAP OPPORTUNITY FUND FUND FUND FUND FUND - ---------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ -- $ 466,125 $ -- $ 417,619 $ -- Dividends from affiliated investments -- 31,842 -- 16,502 -- Foreign tax withholding -- (188) -- -- -- Income from securities lending -- 106 -- 1,800 -- Investment income from Portfolio (a) 411,559 -- 7,772,188 -- 150,865 Tax reclaims -- -- 243,780 -- -- Foreign tax withholding from Portfolio (a) -- -- (825,983) -- -- Expenses from Portfolio (a) (266,940) -- (2,059,473) -- (268,617) ------------ ----------- ------------- ----------- ----------- TOTAL INVESTMENT INCOME (LOSS) 144,619 497,885 5,130,512 435,921 (117,752) ------------ ----------- ------------- ----------- ----------- - ---------------------------------------------------------------------------------------------------------------------------- EXPENSES: Investment management -- 283,995 -- 213,550 -- Administration 14,472 35,462 89,784 21,333 10,988 Distribution: Class B Shares 10,548 33,712 -- 57,769 36,314 Class C Shares 2,477 444 -- 878 2,461 Shareholder servicing: Class A Shares 55,621 3,405 -- 6,215 60,393 Class B Shares 3,516 11,237 -- 19,256 12,105 Class C Shares 826 148 -- 293 820 Accounting 36,000 64,255 9,000 64,054 27,000 Compliance service 553 1,286 3,319 787 416 Custodian -- 18,724 -- 16,025 -- Interest -- 14,008 -- 5,082 -- Legal 2,210 7,100 12,638 3,615 1,660 Printing 31,265 56,666 96,308 30,178 19,622 Transfer agent 94,310 67,687 30,720 85,428 86,904 Trustee 1,038 2,637 6,309 1,499 797 Other 12,056 26,691 27,443 13,402 9,049 ------------ ----------- ------------- ----------- ----------- Total expenses before fee reductions 264,892 627,457 275,521 539,364 268,529 Fees reduced by Investment Advisor (57,108) (99,275) -- (80,765) (29,007) Expenses waived or reimbursed by Sub-Administrator (34,731) -- -- (17,780) (14,702) ------------ ----------- ------------- ----------- ----------- NET EXPENSES 173,053 528,182 275,521 440,819 224,820 ------------ ----------- ------------- ----------- ----------- - ---------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (28,434) (30,297) 4,854,991 (4,898) (342,572) ------------ ----------- ------------- ----------- ----------- - ---------------------------------------------------------------------------------------------------------------------------- NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: (a) Net realized gains (losses) from investments and foreign currency transactions (b) 3,103,028 3,592,585 24,717,984 1,957,696 3,994,994 Change in unrealized appreciation/depreciation from investments and foreign currencies (525,374) 2,346,553 35,300,745 1,800,748 1,342,022 ------------ ----------- ------------- ----------- ----------- - ---------------------------------------------------------------------------------------------------------------------------- Net realized/unrealized gains from investments and foreign currency transactions 2,577,654 5,939,138 60,018,729 3,758,444 5,337,016 ------------ ----------- ------------- ----------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,549,220 $ 5,908,841 $ 64,873,720 $ 3,753,546 $ 4,994,444 ============ =========== ============= =========== ===========
- ---------- (a) With the exception of the Growth and Income Fund and Mid-Cap Fund, represents amounts allocated from the respective Portfolios. (b) Growth Fund includes $1,200 related to the reimbursement of losses realized from the disposal of an investment that violated certain investment policies and limitations. 35 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2006 (CONTINUED)
OVERSEAS SMALL CAP EQUITY EQUITY VALUE FUND FUND FUND - --------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Investment income from Portfolio (a) $ 788,547 $ 963,201 $ 819,606 Tax reclaims 21,979 -- -- Foreign tax withholding from Portfolio (a) (83,153) -- (1) Expenses from Portfolio (a) (214,239) (1,715,706) (298,741) ------------ ------------ ------------ TOTAL INVESTMENT INCOME 513,134 (752,505) 520,864 ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------- EXPENSES: Administration 9,341 70,230 15,824 Distribution: Class B Shares 21,919 -- 13,926 Class C Shares 1,403 -- 2,196 Shareholder servicing: Class A Shares 54,551 -- 59,773 Class B Shares 7,306 -- 4,642 Class C Shares 468 -- 732 Accounting 27,000 9,000 36,000 Compliance service 354 2,648 601 Legal 1,398 10,834 2,432 Printing 15,872 57,210 38,606 Transfer agent 71,342 30,941 92,699 Trustee 677 5,062 1,139 Other 12,714 21,897 12,553 ------------ ------------ ------------ Total expenses before fee reductions 224,345 207,822 281,123 Fees reduced by Investment Advisor -- -- (64,670) Expenses waived or reimbursed by Sub-Administrator -- -- (32,570) ------------ ------------ ------------ NET EXPENSES 224,345 207,822 183,883 ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 288,789 (960,327) 336,981 ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------- NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: (a) Net realized gains (losses) from investments and foreign currency transactions 3,038,364 31,062,646 4,265,780 Change in unrealized appreciation/depreciation from investments and foreign currencies 3,516,165 2,986,040 3,709,021 ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------- Net realized/unrealized gains from investments and foreign currency transactions 6,554,529 34,048,686 7,974,801 ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,843,318 $ 33,088,359 $ 8,311,782 ============ ============ ============
- ---------- (a) Represents amounts allocated from the respective Portfolios. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 36 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS
CORE PLUS CORE PLUS FIXED FIXED INCOME FUND (ADVISOR) INCOME FUND - -------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - -------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 4,105,465 $ 4,410,508 $ 843,851 $ 917,047 Net realized gains (losses) from investments and foreign currency transactions (1,501,702) 5,419,977 (377,777) 357,536 Change in unrealized appreciation/depreciation from investments and foreign currencies 1,816,915 (7,924,615) 452,867 (1,010,611) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 4,420,678 1,905,870 918,941 263,972 ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares -- -- (622,411) (736,448) Class B Shares -- -- (212,869) (217,164) Class C Shares -- -- (10,246) (12,298) Advisor Shares (4,104,585) (4,620,609) -- -- NET REALIZED GAINS: Class A Shares -- -- (73,046) -- Class B Shares -- -- (29,921) -- Class C Shares -- -- (1,351) -- Advisor Shares (3,712,469) -- -- -- ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (7,817,054) (4,620,609) (949,844) (965,910) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (5,370,906) (17,060,133) (7,315,720) 158,293 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS (8,767,282) (19,774,872) (7,346,623) (543,645) - -------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 89,743,437 109,518,309 24,098,458 24,642,103 ------------- ------------- ------------- ------------- End of period $ 80,976,155 $ 89,743,437 $ 16,751,835 $ 24,098,458 ============= ============= ============= ============= Accumulated net investment income (loss) $ 29,636 $ 1,400,871 $ 5,120 $ 108,687 ============= ============= ============= =============
37 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
CORE PLUS CORE PLUS FIXED FIXED INCOME FUND (ADVISOR) INCOME FUND - -------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - -------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ -- $ -- $ 1,922,955 $ 5,377,389 Dividends reinvested -- -- 683,474 686,992 Cost of shares redeemed -- -- (7,996,165) (5,153,657) ------------ ------------ ------------ ------------ Class A Shares capital transactions -- -- (5,389,736) 910,724 ------------ ------------ ------------ ------------ - -------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Proceeds from shares issued -- -- 107,919 276,141 Dividends reinvested -- -- 219,337 182,474 Cost of shares redeemed -- -- (2,205,242) (1,128,034) ------------ ------------ ------------ ------------ Class B Shares capital transactions -- -- (1,877,986) (669,419) ------------ ------------ ------------ ------------ - -------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Proceeds from shares issued -- -- 5 41,252 Dividends reinvested -- -- 11,807 12,108 Cost of shares redeemed -- -- (59,810) (136,372) ------------ ------------ ------------ ------------ Class C Shares capital transactions -- -- (47,998) (83,012) ------------ ------------ ------------ ------------ - -------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES: Proceeds from shares issued 18,068,509 19,120,519 -- -- Dividends reinvested 5,415,411 2,839,680 -- -- Cost of shares redeemed (28,854,826) (39,020,332) -- -- ------------ ------------ ------------ ------------ Advisor Shares capital transactions (5,370,906) (17,060,133) -- -- ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (5,370,906) $(17,060,133) $ (7,315,720) $ 158,293 ============ ============ ============ ============ - -------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: CLASS A SHARES: Issued -- -- 188,221 510,841 Reinvested -- -- 66,942 65,729 Redeemed -- -- (779,053) (491,249) ------------ ------------ ------------ ------------ Change in Class A Shares -- -- (523,890) 85,321 ------------ ------------ ------------ ------------ - -------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Issued -- -- 10,598 26,263 Reinvested -- -- 21,472 17,068 Redeemed -- -- (216,292) (107,440) ------------ ------------ ------------ ------------ Change in Class B Shares -- -- (184,222) (64,109) ------------ ------------ ------------ ------------ - -------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Issued -- -- -- 3,914 Reinvested -- -- 1,158 1,153 Redeemed -- -- (5,866) (13,005) ------------ ------------ ------------ ------------ Change in Class C Shares -- -- (4,708) (7,938) ------------ ------------ ------------ ------------ - -------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES: Issued 1,788,443 1,776,405 -- -- Reinvested 536,720 264,105 -- -- Redeemed (2,843,745) (3,627,137) -- -- ------------ ------------ ------------ ------------ Change in Advisor Shares (518,582) (1,586,627) -- -- ------------ ------------ ------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 38 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD FIXED INTERMEDIATE DURATION INCOME FUND FIXED INCOME FUND - ------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE PERIOD ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 (a) OCTOBER 31, 2006 OCTOBER 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 575,859 $ 987,322 $ 1,217,650 Net realized gains (losses) from investments and foreign currency transactions 31,454 (420,155) (164,652) Change in unrealized appreciation/depreciation from investments and foreign currencies 69,732 480,307 (909,347) ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 677,045 1,047,474 143,651 ------------ ------------ ------------ - ------------------------------------------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (301,928) (46,821) (46,585) Class B Shares (84,509) (166,109) (167,671) Class C Shares (8,755) (19,885) (17,702) Class I Shares (174,183) (767,823) (1,107,840) - ------------------------------------------------------------------------------------------------------------------------------- NET REALIZED GAINS: Class A Shares -- -- (8,294) Class B Shares -- -- (34,076) Class C Shares -- -- (3,623) Class I Shares -- -- (168,256) ------------ ------------ ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (569,375) (1,000,638) (1,554,047) ------------ ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 9,549,568 (13,008,376) (7,184,938) ------------ ------------ ------------ CHANGE IN NET ASSETS 9,657,238 (12,961,540) (8,595,334) - ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period -- 31,178,808 39,774,142 ------------ ------------ ------------ End of period $ 9,657,238 $ 18,217,268 $ 31,178,808 ============ ============ ============ Accumulated net investment income (loss) $ 6,484 $ 7,071 $ 14,682 ============ ============ ============
- ---------- (a) The High Yield Fixed Income Fund commenced operation on November 18, 2005. 39 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD FIXED INTERMEDIATE DURATION INCOME FUND FIXED INCOME FUND - --------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE PERIOD ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 (a) OCTOBER 31, 2006 OCTOBER 31, 2005 - --------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 5,577,211 $ 25,306 $ 34,242 Dividends reinvested 287,526 43,347 50,200 Cost of shares redeemed (1,183,299) (151,593) (535,335) ------------ ------------ ------------ Class A Shares capital transactions 4,681,438 (82,940) (450,893) ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------------- CLASS B SHARES: Proceeds from shares issued 2,078,468 75,008 321,814 Dividends reinvested 56,791 141,353 167,106 Cost of shares redeemed (45,574) (1,343,632) (1,732,661) ------------ ------------ ------------ Class B Shares capital transactions 2,089,685 (1,127,271) (1,243,741) ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------------- CLASS C SHARES: Proceeds from shares issued 230,344 1,800 73,800 Dividends reinvested 8,113 20,272 20,896 Cost of shares redeemed (110) (49,000) (222,961) ------------ ------------ ------------ Class C Shares capital transactions 238,347 (26,928) (128,265) ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------------- CLASS I SHARES: Proceeds from shares issued 2,775,374 908,462 3,589,138 Dividends reinvested 173,189 613,135 949,314 Cost of shares redeemed (408,465) (13,292,834) (9,900,491) ------------ ------------ ------------ Class I Shares capital transactions 2,540,098 (11,771,237) (5,362,039) ------------ ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 9,549,568 $(13,008,376) $ (7,184,938) ============ ============ ============ - --------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: CLASS A SHARES: Issued 557,001 2,635 3,469 Reinvested 28,555 4,508 5,075 Redeemed (117,643) (15,783) (54,165) ------------ ------------ ------------ Change in Class A Shares 467,913 (8,640) (45,621) ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------------- CLASS B SHARES: Issued 206,587 7,820 32,423 Reinvested 5,627 14,681 16,867 Redeemed (4,471) (139,306) (175,199) ------------ ------------ ------------ Change in Class B Shares 207,743 (116,805) (125,909) ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------------- CLASS C SHARES: Issued 22,902 187 7,375 Reinvested 804 2,107 2,111 Redeemed (10) (5,095) (22,459) ------------ ------------ ------------ Change in Class C Shares 23,696 (2,801) (12,973) ------------ ------------ ------------ - --------------------------------------------------------------------------------------------------------- CLASS I SHARES: Issued 276,989 94,210 362,553 Reinvested 17,198 63,673 95,902 Redeemed (40,788) (1,377,269) (1,000,441) ------------ ------------ ------------ Change in Class I Shares 253,399 (1,219,386) (541,986) ------------ ------------ ------------
- ---------- (a) The High Yield Fixed Income Fund commenced operations on November 18, 2005. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 40 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 - -------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 2,082,496 $ 2,050,916 Net realized gains (losses) from investment transactions 21,722 100,731 Change in unrealized appreciation/depreciation from investments 641,574 (1,531,859) ------------ ------------ CHANGE IN NET ASSETS FROM OPERATIONS 2,745,792 619,788 ------------ ------------ - -------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (1,102,509) (1,025,066) Class B Shares (387,661) (381,218) Class C Shares (37,439) (46,591) Class I Shares (560,276) (598,043) NET REALIZED GAINS: Class A Shares (50,865) (52,912) Class B Shares (23,139) (26,947) Class C Shares (2,487) (3,247) Class I Shares (24,240) (30,806) ------------ ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (2,188,616) (2,164,830) ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (8,565,736) (1,586,390) ------------ ------------ CHANGE IN NET ASSETS (8,008,560) (3,131,432) - -------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 69,461,879 72,593,311 ------------ ------------ End of period $ 61,453,319 $ 69,461,879 ============ ============ Accumulated net investment income (loss) $ (5,389) $ -- ============ ============
41 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
NEW YORK TAX-FREE BOND FUND - ------------------------------------------------------------------------------------ FOR THE FOR THE YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 - ------------------------------------------------------------------------------------ CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 8,315,770 $ 11,178,427 Dividends reinvested 1,100,289 997,193 Cost of shares redeemed (11,409,207) (9,874,970) ------------ ------------ Class A Shares capital transactions (1,993,148) 2,300,650 ------------ ------------ - ------------------------------------------------------------------------------------ CLASS B SHARES: Proceeds from shares issued 724,932 1,160,530 Dividends reinvested 316,025 300,525 Cost of shares redeemed (3,683,709) (2,294,196) ------------ ------------ Class B Shares capital transactions (2,642,752) (833,141) ------------ ------------ - ------------------------------------------------------------------------------------ CLASS C SHARES: Proceeds from shares issued 3,537 168,099 Dividends reinvested 24,112 31,499 Cost of shares redeemed (575,373) (712,746) ------------ ------------ Class C Shares capital transactions (547,724) (513,148) ------------ ------------ - ------------------------------------------------------------------------------------ CLASS I SHARES: Proceeds from shares issued 1,615,824 3,878,812 Dividends reinvested 51,571 88,333 Cost of shares redeemed (5,049,507) (6,507,896) ------------ ------------ Class I Shares capital transactions (3,382,112) (2,540,751) ------------ ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (8,565,736) $ (1,586,390) ============ ============ - ------------------------------------------------------------------------------------ SHARE TRANSACTIONS: CLASS A SHARES: Issued 750,787 994,246 Reinvested 99,371 88,791 Redeemed (1,031,733) (879,250) ------------ ------------ Change in Class A Shares (181,575) 203,787 ------------ ------------ - ------------------------------------------------------------------------------------ CLASS B SHARES: Issued 65,596 103,036 Reinvested 28,569 26,746 Redeemed (333,344) (204,345) ------------ ------------ Change in Class B Shares (239,179) (74,563) ------------ ------------ - ------------------------------------------------------------------------------------ CLASS C SHARES: Issued 318 14,856 Reinvested 2,171 2,794 Redeemed (51,822) (63,317) ------------ ------------ Change in Class C Shares (49,333) (45,667) ------------ ------------ - ------------------------------------------------------------------------------------ CLASS I SHARES: Issued 145,686 345,617 Reinvested 4,650 7,844 Redeemed (453,581) (579,080) ------------ ------------ Change in Class I Shares (303,245) (225,619) ------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 42 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GROWTH FUND GROWTH AND INCOME FUND - -------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - -------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (28,434) $ 133,116 $ (30,297) $ 1,924,523 Net realized gains (losses) from investment transactions 3,103,028 1,569,705 3,592,585 42,217,628 Change in unrealized appreciation/depreciation from investments (525,374) 3,355,369 2,346,553 (22,761,234) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM OPERATIONS 2,549,220 5,058,190 5,908,841 21,380,917 ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares -- (71,973) -- (13,734) Class B Shares -- -- -- (14,001) Class C Shares -- -- -- (192) Class I Shares -- (120,143) (25,548) (2,477,542) NET REALIZED GAINS: Class A Shares (357,021) -- -- -- Class B Shares (22,246) -- -- -- Class C Shares (5,635) -- -- -- Class I Shares (219,862) -- -- -- ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (604,764) (192,116) (25,548) (2,505,469) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 164,248 (6,429,843) (11,382,983) (168,065,613) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS 2,108,704 (1,563,769) (5,499,690) (149,190,165) - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 36,634,194 38,197,963 52,390,654 201,580,819 ------------- ------------- ------------- ------------- End of period $ 38,742,898 $ 36,634,194 $ 46,890,964 $ 52,390,654 ============= ============= ============= ============= Accumulated net investment income (loss) $ -- $ -- $ -- $ -- ============= ============= ============= =============
43 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GROWTH FUND GROWTH AND INCOME FUND - -------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - -------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 4,530,725 $ 7,190,005 $ 112,013 $ 137,722 Dividends reinvested 354,352 71,637 -- 13,438 Cost of shares redeemed (5,905,203) (5,124,260) (135,477) (534,595) ------------- ------------- ------------- ------------- Class A Shares capital transactions (1,020,126) 2,137,382 (23,464) (383,435) ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Proceeds from shares issued 233,048 179,753 398,426 527,760 Dividends reinvested 21,697 -- -- 13,755 Cost of shares redeemed (181,902) (421,388) (543,576) (592,341) ------------- ------------- ------------- ------------- Class B Shares capital transactions 72,843 (241,635) (145,150) (50,826) ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Proceeds from shares issued 1,004 1,916 19,650 2,599 Dividends reinvested 5,623 -- -- 183 Cost of shares redeemed (94,166) (4,610) (38,887) (20) ------------- ------------- ------------- ------------- Class C Shares capital transactions (87,539) (2,694) (19,237) 2,762 ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES: Proceeds from shares issued 4,081,210 3,674,487 4,960,323 8,479,032 Dividends reinvested 213,190 95,917 1,654 622,998 Cost of shares redeemed (3,095,330) (12,093,300) (16,157,109) (131,458,444) Redemption In-Kind -- -- -- (45,277,700) ------------- ------------- ------------- ------------- Class I Shares capital transactions 1,199,070 (8,322,896) (11,195,132) (167,634,114) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 164,248 $ (6,429,843) $ (11,382,983) $(168,065,613) ============= ============= ============= ============= - -------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: CLASS A SHARES: Issued 306,676 543,733 10,618 14,916 Reinvested 24,254 5,380 -- 1,443 Redeemed (400,591) (385,043) (12,870) (58,381) ------------- ------------- ------------- ------------- Change in Class A Shares (69,661) 164,070 (2,252) (42,022) ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Issued 16,381 13,881 38,279 57,646 Reinvested 1,549 -- -- 1,492 Redeemed (12,915) (32,632) (52,090) (64,860) ------------- ------------- ------------- ------------- Change in Class B Shares 5,015 (18,751) (13,811) (5,722) ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Issued 70 169 1,938 287 Reinvested 399 -- -- 20 Redeemed (6,716) (357) (3,743) (2) ------------- ------------- ------------- ------------- Change in Class C Shares (6,247) (188) (1,805) 305 ------------- ------------- ------------- ------------- - -------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES: Issued 276,028 278,002 465,603 917,280 Reinvested 14,592 7,226 160 66,974 Redeemed (209,584) (880,050) (1,552,705) (13,877,205) Redemption In-Kind -- -- -- (4,672,621) ------------- ------------- ------------- ------------- Change in Class I Shares 81,036 (594,822) (1,086,942) (17,565,572) ------------- ------------- ------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 44 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERNATIONAL EQUITY FUND MID-CAP FUND - ------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 4,854,991 $ 3,493,764 $ (4,898) $ (258,037) Net realized gains (losses) from investment and foreign currency transactions 24,717,984 12,653,084 1,957,696 30,598,634 Change in unrealized appreciation/depreciation from investments and foreign currencies 35,300,745 14,319,665 1,800,748 (13,661,163) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 64,873,720 30,466,513 3,753,546 16,679,434 ------------- ------------- ------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Advisor Shares (4,030,977) (2,396,450) -- -- NET REALIZED GAINS: Class A Shares -- -- (464,228) -- Class B Shares -- -- (1,688,238) -- Class C Shares -- -- (25,282) -- Advisor Shares (6,656,885) -- -- -- Trust Shares -- -- (4,269,467) -- ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (10,687,862) (2,396,450) (6,447,215) -- ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 36,418,624 16,757,285 1,132,987 (113,747,380) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS 90,604,482 44,827,348 (1,560,682) (97,067,946) - ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 193,144,123 148,316,775 29,294,434 126,362,380 ------------- ------------- ------------- ------------- End of period $ 283,748,605 $ 193,144,123 $ 27,733,752 $ 29,294,434 ============= ============= ============= ============= Accumulated net investment income (loss) $ 4,473,624 $ 3,030,485 $ -- $ -- ============= ============= ============= =============
45 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 MID-CAP FUND - --------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - --------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ -- $ -- $ 1,084,845 $ 364,447 Dividends reinvested -- -- 455,929 -- Cost of shares redeemed -- -- (371,463) (405,751) ------------ ------------ ----------- ------------- Class A Shares capital transactions -- -- 1,169,311 (41,304) ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Proceeds from shares issued -- -- 437,454 496,846 Dividends reinvested -- -- 1,661,260 -- Cost of shares redeemed -- -- (1,317,254) (1,227,997) ------------ ------------ ----------- ------------- Class B Shares capital transactions -- -- 781,460 (731,151) ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Proceeds from shares issued -- -- 4,002 1,800 Dividends reinvested -- -- 25,282 -- Cost of shares redeemed -- -- (32,766) (25) ------------ ------------ ----------- ------------- Class C Shares capital transactions -- -- (3,482) 1,775 ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES: Proceeds from shares issued 58,467,386 58,275,702 -- -- Dividend reinvested 7,069,762 1,241,344 -- -- Cost of shares redeemed (29,118,524) (42,759,761) -- -- ------------ ------------ ----------- ------------- Advisor Shares capital transactions 36,418,624 16,757,285 -- -- ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- TRUST SHARES: Proceeds from shares issued -- -- 2,741,624 5,350,460 Dividends reinvested -- -- 1,566,969 -- Cost of shares redeemed -- -- (5,122,895) (69,769,880) Redemption In-Kind -- -- -- (48,557,280) ------------ ------------ ----------- ------------- Trust Shares capital transactions -- -- (814,302) (112,976,700) ------------ ------------ ----------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ 36,418,624 $ 16,757,285 $ 1,132,987 $(113,747,380) ============ ============ =========== ============= SHARE TRANSACTIONS: CLASS A SHARES: Issued -- -- 126,901 38,102 Reinvested -- -- 54,997 -- Redeemed -- -- (41,265) (42,829) ------------ ------------ ----------- ------------- Change in Class A Shares -- -- 140,633 (4,727) ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Issued -- -- 52,031 55,019 Reinvested -- -- 211,250 -- Redeemed -- -- (158,683) (134,933) ------------ ------------ ----------- ------------- Change in Class B Shares -- -- 104,598 (79,914) ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Issued -- -- 462 201 Reinvested -- -- 3,184 -- Redeemed -- -- (4,014) (3) ------------ ------------ ----------- ------------- Change in Class C Shares -- -- (368) 198 ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES: Issued 2,922,941 3,503,991 -- -- Reinvested 390,377 77,827 -- -- Redeemed (1,488,865) (2,539,074) -- -- ------------ ------------ ----------- ------------- Change in Advisor Shares 1,824,453 1,042,744 -- -- ------------ ------------ ----------- ------------- - --------------------------------------------------------------------------------------------------------------------------- TRUST SHARES: Issued -- -- 305,751 561,225 Reinvested -- -- 186,322 -- Redeemed -- -- (572,059) (7,160,908) Redemption In-Kind -- -- -- (5,215,605) ------------ ------------ ----------- ------------- Change in Trust Shares -- -- (79,986) (11,815,288) ------------ ------------ ----------- -------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 46 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
OPPORTUNITY FUND OVERSEAS EQUITY FUND - ------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (342,572) $ (346,828) $ 288,789 $ 261,810 Net realized gains (losses) from investment and foreign currency transactions 3,994,994 4,141,172 3,038,364 1,709,313 Change in unrealized appreciation/depreciation from investments and foreign currencies 1,342,022 (361,730) 3,516,165 1,850,263 ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 4,994,444 3,432,614 6,843,318 3,821,386 ------------ ------------ ----------- ------------ - ------------------------------------------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares -- -- (326,916) (86,962) Class B Shares -- -- (23,264) -- Class C Shares -- -- (1,601) -- NET REALIZED GAINS: Class A Shares (711,320) -- (1,507,747) (1,064,452) Class B Shares (150,813) -- (185,747) (122,864) Class C Shares (10,198) -- (12,624) (7,702) ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (872,331) -- (2,057,899) (1,281,980) ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (2,312,697) (1,568,177) (1,874,669) 789,114 ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS 1,809,416 1,864,437 2,910,750 3,328,520 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 27,720,663 25,856,226 23,247,739 19,919,219 ------------ ------------ ----------- ------------ End of period $ 29,530,079 $ 27,720,663 $26,158,489 $ 23,247,739 ============ ============ =========== ============ Accumulated net investment income (loss) $ -- $ -- $ 294,103 $ 247,876 ============ ============ =========== ============
47 HSBC INVESTOR FAMILY OF FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
OPPORTUNITY FUND OVERSEAS EQUITY FUND - ---------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ---------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 3,495,715 $ 4,837,326 $ 3,898,094 $ 5,532,757 Dividends reinvested 703,432 -- 1,818,046 1,138,107 Cost of shares redeemed (6,056,187) (5,698,960) (7,848,982) (5,992,575) ------------ ------------ ----------- ------------ Class A Shares capital transactions (1,857,040) (861,634) (2,132,842) 678,289 ------------ ------------ ----------- ------------ - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Proceeds from shares issued 253,088 244,211 426,797 342,387 Dividends reinvested 147,234 -- 204,672 119,012 Cost of shares redeemed (805,798) (877,468) (338,565) (360,874) ------------ ------------ ----------- ------------ Class B Shares capital transactions (405,476) (633,257) 292,904 100,525 ------------ ------------ ----------- ------------ - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Proceeds from shares issued 2,010 16,069 4,254 11,807 Dividends reinvested 10,101 -- 14,125 7,641 Cost of shares redeemed (62,292) (89,355) (53,110) (9,148) ------------ ------------ ----------- ------------ Class C Shares capital transactions (50,181) (73,286) (34,731) 10,300 ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $ (2,312,697) $ (1,568,177) $(1,874,669) $ 789,114 ============ ============ =========== ============ - ---------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: CLASS A SHARES: Issued 255,030 411,566 228,774 375,295 Reinvested 54,419 -- 116,471 79,895 Redeemed (443,567) (481,625) (464,081) (400,918) ------------ ------------ ----------- ------------ Change in Class A Shares (134,118) (70,059) (118,836) 54,272 ------------ ------------ ----------- ------------ - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Issued 19,744 22,382 25,997 24,056 Reinvested 12,202 -- 13,637 8,435 Redeemed (63,328) (79,084) (20,687) (25,222) ------------ ------------ ----------- ------------ Change in Class B Shares (31,382) (56,702) 18,947 7,269 ------------ ------------ ----------- ------------ - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Issued 148 1,413 249 831 Reinvested 829 -- 922 544 Redeemed (4,807) (8,351) (3,034) (609) ------------ ------------ ----------- ------------ Change in Class C Shares (3,830) (6,938) (1,863) 766 ------------ ------------ ----------- ------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 48 HSBC INVESTOR FAMILY OF FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SMALL CAP EQUITY FUND VALUE FUND - ------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (960,327) $ (1,207,469) $ 336,981 $ 360,402 Net realized gains (losses) from investment and foreign currency transactions 31,062,646 47,977,577 4,265,780 3,260,840 Change in unrealized appreciation/depreciation from investments and foreign currencies 2,986,040 (11,295,639) 3,709,021 3,423,080 ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 33,088,359 35,474,469 8,311,782 7,044,322 ------------ ------------ ----------- ------------ - ------------------------------------------------------------------------------------------------------------------------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares -- -- (284,513) (125,206) Class B Shares -- -- (8,626) -- Class C Shares -- -- (1,160) (294) Class I Shares -- -- (229,486) (201,076) NET REALIZED GAINS: Class A Shares -- -- (1,923,289) (208,943) Class B Shares -- -- (154,501) (18,614) Class C Shares -- -- (29,129) (3,904) Class I Shares -- -- (1,220,351) (241,526) Advisor Shares (5,803,618) -- -- -- ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (5,803,618) -- (3,851,055) (799,563) ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS (12,679,647) (137,624,740) (155,652) (14,599,343) ------------ ------------ ----------- ------------ CHANGE IN NET ASSETS 14,605,094 (102,150,271) 4,305,075 (8,354,584) - ------------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 177,518,678 279,668,949 40,513,912 48,868,496 ------------ ------------ ----------- ------------ End of period $192,123,772 $177,518,678 $44,818,987 $ 40,513,912 ============ ============ =========== ============ Accumulated net investment income (loss) $ -- $ -- $ 94,489 $ 294,913 ============ ============ =========== ============
49 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 VALUE FUND - ---------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ---------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ -- $ -- 3,803,760 $ 6,244,508 Dividends reinvested -- -- 2,187,527 332,959 Cost of shares redeemed -- -- (7,101,747) (6,994,075) ------------ ------------- ----------- ------------- Class A Shares capital transactions -- -- (1,110,460) (416,608) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Proceeds from shares issued -- -- 108,230 221,506 Dividends reinvested -- -- 158,811 18,074 Cost of shares redeemed -- -- (281,760) (645,696) ------------ ------------- ----------- ------------- Class B Shares capital transactions -- -- (14,719) (406,116) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Proceeds from shares issued -- -- 1,051 1,918 Dividends reinvested -- -- 30,205 4,190 Cost of shares redeemed -- -- (287,134) (66,676) ------------ ------------- ----------- ------------- Class C Shares capital transactions -- -- (255,878) (60,568) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES: Proceeds from shares issued -- -- 2,983,526 3,422,732 Dividends reinvested -- -- 1,363,115 388,870 Cost of shares redeemed -- -- (3,121,236) (17,527,653) ------------ ------------- ----------- ------------- Class I Shares capital transactions -- -- 1,225,405 (13,716,051) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES: Proceeds from shares issued 15,925,063 14,466,184 -- -- Dividends reinvested 4,071,601 -- -- -- Cost of shares redeemed (32,676,311) (90,280,738) -- -- Redemption In-Kind -- (61,810,186) -- -- ------------ ------------- ----------- ------------- Advisor Shares capital transactions (12,679,647) (137,624,740) -- -- ------------ ------------- ----------- ------------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $(12,679,647) $(137,624,740) $ (155,652) $ (14,599,343) ============ ============= =========== ============= - ---------------------------------------------------------------------------------------------------------------------------- SHARE TRANSACTIONS: CLASS A SHARES: Issued -- -- 245,996 432,340 Reinvested -- -- 149,309 23,041 Redeemed -- -- (459,025) (479,115) ------------ ------------- ----------- ------------- Change in Class A Shares -- -- (63,720) (23,734) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES: Issued -- -- 7,211 15,903 Reinvested -- -- 11,270 1,182 Redeemed -- -- (18,887) (45,745) ------------ ------------- ----------- ------------- Change in Class B Shares -- -- (406) (28,660) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES: Issued -- -- 69 131 Reinvested -- -- 2,131 299 Redeemed -- -- (18,964) (4,608) ------------ ------------- ----------- ------------- Change in Class C Shares -- -- (16,764) (4,178) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES: Issued -- -- 193,483 237,945 Reinvested -- -- 93,166 26,943 Redeemed -- -- (201,427) (1,184,279) ------------ ------------- ----------- ------------- Change in Class I Shares -- -- 85,222 (919,391) ------------ ------------- ----------- ------------- - ---------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES: Issued 962,234 1,031,358 -- -- Reinvested 262,486 -- -- -- Redeemed (1,990,135) (6,178,289) -- -- Redemption In-Kind -- (4,362,046) -- -- ------------ ------------- ----------- ------------- Change in Advisor Shares (765,415) (9,508,977) -- -- ------------ ------------- ----------- -------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 50 - -------------------------------------------------------------------------------- HSBC ADVISOR FUNDS TRUST--CORE PLUS FIXED INCOME FUND (ADVISOR) - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ------------------------------------- NET REALIZED NET REALIZED AND GAINS UNREALIZED GAINS FROM NET ASSET NET (LOSSES) FROM INVESTMENTS VALUE, INVESTMENT INVESTMENT AND TOTAL FROM NET AND BEGINNING OF INCOME FUTURES INVESTMENT INVESTMENT FUTURES TOTAL PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 2002 $10.81 0.55 (0.14) 0.41 (0.59) -- (0.59) Year ended October 31, 2003 10.63 0.41 0.19 0.60 (0.50) -- (0.50) Year ended October 31, 2004 10.73 0.45 0.12 0.57 (0.45) -- (0.45) Year ended October 31, 2005 10.85 0.44 (0.27) 0.17 (0.47) -- (0.47) Year ended October 31, 2006 10.55 0.53 0.02 0.55 (0.51) (0.46) (0.97) - ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ----------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF NET ASSET AT END OF EXPENSES TO INCOME TO EXPENSES TO VALUE, END TOTAL PERIOD AVERAGE AVERAGE AVERAGE NET PORTFOLIO OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------------------------ ADVISOR SHARES Year ended October 31, 2002 $10.63 3.94% $ 284,841 0.56% 5.06% 0.56% 77.82% Year ended October 31, 2003 10.73 5.71% 110,968 0.56% 4.30% 0.56% 70.91% Year ended October 31, 2004 10.85 5.46% 109,518 0.64% 4.20% 0.64% 34.88% Year ended October 31, 2005 10.55 1.55%(f) 89,743 0.52%(f) 4.15%(f) 0.52%(f) 176.60% Year ended October 31, 2006 10.13 5.56% 80,976 0.56% 5.05% 0.80% 273.91% - ------------------------------------------------------------------------------------------------------------------------------
(a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Core Plus Fixed Income Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return were 0.11% for the Advisor Shares. SEE NOTES TO FINANCIAL STATEMENTS. 51 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--CORE PLUS FIXED INCOME FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ------------------------------------- NET REALIZED AND NET UNREALIZED GAINS REALIZED NET ASSET NET (LOSSES) FROM GAINS FROM VALUE, INVESTMENT INVESTMENT AND TOTAL FROM NET INVESTMENT BEGINNING OF INCOME FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $10.55 0.49 (0.14) 0.35 (0.52) -- (0.52) Year ended October 31, 2003 10.38 0.40 0.13 0.53 (0.43) -- (0.43) Year ended October 31, 2004 10.48 0.40 0.12 0.52 (0.40) -- (0.40) Year ended October 31, 2005 10.60 0.39 (0.27) 0.12 (0.42) -- (0.42) Year ended October 31, 2006 10.30 0.49* 0.05 0.54 (0.49) (0.05) (0.54) - ------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $10.55 0.41 (0.13) 0.28 (0.44) -- (0.44) Year ended October 31, 2003 10.39 0.32 0.13 0.45 (0.35) -- (0.35) Year ended October 31, 2004 10.49 0.32 0.11 0.43 (0.32) -- (0.32) Year ended October 31, 2005 10.60 0.32 (0.27) 0.05 (0.34) -- (0.34) Year ended October 31, 2006 10.31 0.41* 0.06 0.47 (0.42) (0.05) (0.47) - ------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $10.54 0.41 (0.13) 0.28 (0.44) -- (0.44) Year ended October 31, 2003 10.38 0.32 0.13 0.45 (0.35) -- (0.35) Year ended October 31, 2004 10.48 0.32 0.11 0.43 (0.32) -- (0.32) Year ended October 31, 2005 10.59 0.32 (0.27) 0.05 (0.34) -- (0.34) Year ended October 31, 2006 10.30 0.41* 0.06 0.47 (0.42) (0.05) (0.47) - ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------- RATIO OF NET NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF VALUE, AT END OF EXPENSES TO INCOME TO EXPENSES TO END OF TOTAL PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e) - ---------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $10.38 3.44% $12,053 1.10% 4.52% 1.47% 77.82% Year ended October 31, 2003 10.48 5.17% 14,143 1.10% 3.76% 1.21% 70.91% Year ended October 31, 2004 10.60 5.07% 17,248 1.04% 3.78% 1.26% 34.88% Year ended October 31, 2005 10.30 1.16%(f) 17,646 0.84%(f) 3.82%(f) 1.15%(f) 176.60% Year ended October 31, 2006 10.30 5.45% 12,248 0.79% 4.82% 1.43% 273.91% - ---------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $10.39 2.76% $ 6,124 1.85% 3.66% 2.18% 77.82% Year ended October 31, 2003 10.49 4.38% 7,430 1.85% 3.01% 1.96% 70.91% Year ended October 31, 2004 10.60 4.19% 7,017 1.79% 3.05% 2.01% 34.88% Year ended October 31, 2005 10.31 0.50%(f) 6,168 1.59%(f) 3.08%(f) 1.90%(f) 176.60% Year ended October 31, 2006 10.31 4.67% 4,267 1.54% 4.06% 2.19% 273.91% - ---------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $10.38 2.77% $ 983 1.85% 3.75% 2.21% 77.82% Year ended October 31, 2003 10.48 4.39% 606 1.85% 3.06% 1.97% 70.91% Year ended October 31, 2004 10.59 4.20% 377 1.80% 3.07% 2.02% 34.88% Year ended October 31, 2005 10.30 0.51%(f) 285 1.58%(f) 3.14%(f) 1.89%(f) 176.60% Year ended October 31, 2006 10.30 4.67% 236 1.54% 4.07% 2.19% 273.91% - ----------------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Core Plus Fixed Income Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return were 0.11%, 0.11% and 0.12% for Class A Shares, Class B Shares and Class C Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 52 - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--HIGH YIELD FIXED INCOME FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ---------------------- NET REALIZED AND NET ASSET NET UNREALIZED GAINS VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET NET ASSET BEGINNING OF INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL VALUE, END TOTAL PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS OF PERIOD RETURN(b) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2006 (f) $10.00 0.69 0.12 0.81 (0.68) (0.68) $10.13 8.38% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2006 (g) $10.00 0.62 0.13 0.75 (0.61) (0.61) $10.14 7.68% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2006 (h) $10.01 0.58 0.15 0.73 (0.58) (0.58) $10.16 7.42% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES Period ended October 31, 2006 (i) $10.00 0.71 0.14 0.85 (0.71) (0.71) $10.14 8.73% - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA ----------------------------------------------------------------------------- RATIO OF NET NET ASSETS AT RATIO OF INVESTMENT RATIO OF END OF EXPENSES TO INCOME TO EXPENSES TO PERIOD AVERAGE AVERAGE NET AVERAGE PORTFOLIO (000'S) NET ASSETS(c) ASSETS(c) NET ASSETS(c)(d) TURNOVER(e) - -------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2006 (f) $4,742 0.80% 7.27% 3.53% 13.61% - -------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2006 (g) $2,106 1.55% 6.65% 4.26% 13.61% - -------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2006 (h) $ 241 1.55% 6.65% 4.29% 13.61% - -------------------------------------------------------------------------------------------------------- CLASS I SHARES Period ended October 31, 2006 (i) $2,568 0.55% 7.53% 3.29% 13.61% - --------------------------------------------------------------------------------------------------------
(a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor High Yield Fixed Income Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all its investable assets. (f) Class A Shares commenced operations on November 18, 2005. (g) Class B Shares commenced operations on November 21, 2005. (h) Class C Shares commenced operations on December 14, 2005. (i) Class I Shares commenced operations on November 18, 2005. SEE NOTES TO FINANCIAL STATEMENTS. 53 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--INTERMEDIATE DURATION FIXED INCOME FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------ ----------------------------------- NET REALIZED AND UNREALIZED GAINS NET NET ASSET NET (LOSSES) TOTAL REALIZED VALUE, INVESTMENT FROM FROM NET GAINS FROM BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------ CLASS A SHARES 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) Year ended October 31, 2004 10.47 0.32* 0.06 0.38 (0.33) (0.46) (0.79) Year ended October 31, 2005 10.06 0.33 (0.29) 0.04 (0.37) (0.06) (0.43) Year ended October 31, 2006 9.67 0.45 0.05 0.50 (0.45) -- (0.45) - ------------------------------------------------------------------------------------------------------------------ CLASS B SHARES 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) Year ended October 31, 2004 10.49 0.23 0.08 0.31 (0.26) (0.46) (0.72) Year ended October 31, 2005 10.08 0.25 (0.29) (0.04) (0.29) (0.06) (0.35) Year ended October 31, 2006 9.69 0.38 0.04 0.42 (0.38) -- (0.38) - ------------------------------------------------------------------------------------------------------------------ CLASS C SHARES 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) Year ended October 31, 2004 10.49 0.22* 0.08 0.30 (0.26) (0.46) (0.72) Year ended October 31, 2005 10.07 0.25 (0.29) (0.04) (0.29) (0.06) (0.35) Year ended October 31, 2006 9.68 0.38 0.05 0.43 (0.38) -- (0.38) - ------------------------------------------------------------------------------------------------------------------ CLASS I SHARES 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) Year ended October 31, 2004 10.48 0.33 0.09 0.42 (0.36) (0.46) (0.82) Year ended October 31, 2005 10.08 0.35 (0.30) 0.05 (0.39) (0.06) (0.45) Year ended October 31, 2006 9.68 0.47 0.05 0.52 (0.47) -- (0.47) - ------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------- RATIO OF NET RATIO OF NET NET ASSETS EXPENSES INVESTMENT ASSET AT END TO INCOME TO RATIO OF VALUE, OF AVERAGE AVERAGE EXPENSES TO END OF TOTAL PERIOD NET NET AVERAGE NET PORTFOLIO PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Year ended October 31, 2002 $ 10.43 3.34% $ 1,608 0.96% 4.14% 0.96% 44.04% Year ended October 31, 2003 10.47 3.97% 3,309 1.01% 2.99% 1.01% 98.42% Year ended October 31, 2004 10.06 3.90% 1,558 1.10% 3.01% 1.21% 50.06% Year ended October 31, 2005 9.67 0.31%(f) 1,055 1.01%(f) 3.37%(f) 1.10%(f) 107.26% Year ended October 31, 2006 9.72 5.30% 976 0.80% 4.61% 1.65% 236.51% - ------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 2002 $ 10.45 2.65% $ 4,178 1.70% 3.30% 1.70% 44.04% Year ended October 31, 2003 10.49 3.19% 6,443 1.73% 2.30% 1.73% 98.42% Year ended October 31, 2004 10.08 3.11% 6,321 1.85% 2.28% 1.96% 50.06% Year ended October 31, 2005 9.69 (0.44)%(f) 4,852 1.76%(f) 2.60%(f) 1.85%(f) 107.26% Year ended October 31, 2006 9.73 4.40% 3,738 1.56% 3.84% 2.40% 236.51% - ------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Year ended October 31, 2002 $ 10.44 2.65% $ 1,759 1.70% 3.26% 1.70% 44.04% Year ended October 31, 2003 10.49 3.29% 2,544 1.73% 2.31% 1.73% 98.42% Year ended October 31, 2004 10.07 3.03% 679 1.85% 2.25% 1.96% 50.06% Year ended October 31, 2005 9.68 (0.44)%(f) 527 1.77%(f) 2.60%(f) 1.86%(f) 107.26% Year ended October 31, 2006 9.73 4.51% 503 1.55% 3.86% 2.40% 236.51% - ------------------------------------------------------------------------------------------------------------------ CLASS I SHARES 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% Year ended October 31, 2004 10.08 4.25% 31,217 0.85% 3.28% 0.96% 50.06% Year ended October 31, 2005 9.68 0.45%(f) 24,744 0.76%(f) 3.60%(f) 0.85%(f) 107.26% Year ended October 31, 2006 9.73 5.56% 13,000 0.58% 4.77% 1.38% 236.51% - ------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding (a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Intermediate Duration Fixed Income Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return were 0.09%, 0.09%, 0.09% and 0.08% for Class A Shares, Class B Shares, Class C Shares and Class I Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 54 - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--NEW YORK TAX-FREE BOND FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------ ----------------------------------- NET REALIZED AND UNREALIZED GAINS NET (LOSSES) REALIZED NET ASSET NET FROM TOTAL GAINS FROM VALUE, INVESTMENT INVESTMENT FROM NET INVESTMENT BEGINNING INCOME AND FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Year ended October 31, 2002 $ 10.93 0.38 0.16 0.54 (0.38) -- (0.38) Year ended October 31, 2003 11.09 0.38 0.12 0.50 (0.38) -- (0.38) Year ended October 31, 2004 11.21 0.34 0.17 0.51 (0.34) (0.06) (0.40) Year ended October 31, 2005 11.32 0.34 (0.22) 0.12 (0.34) (0.02) (0.36) Year ended October 31, 2006 11.08 0.37 0.12 0.49 (0.37) (0.02) (0.39) - ------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 2002 $ 10.92 0.30 0.16 0.46 (0.30) -- (0.30) Year ended October 31, 2003 11.08 0.30 0.12 0.42 (0.30) -- (0.30) Year ended October 31, 2004 11.20 0.25 0.17 0.42 (0.25) (0.06) (0.31) Year ended October 31, 2005 11.31 0.25 (0.22) 0.03 (0.25) (0.02) (0.27) Year ended October 31, 2006 11.07 0.28 0.12 0.40 (0.28) (0.02) (0.30) - ------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Year ended October 31, 2002 $ 10.96 0.30 0.16 0.46 (0.30) -- (0.30) Year ended October 31, 2003 11.12 0.30 0.13 0.43 (0.30) -- (0.30) Year ended October 31, 2004 11.25 0.25 0.16 0.41 (0.25) (0.06) (0.31) Year ended October 31, 2005 11.35 0.25 (0.22) 0.03 (0.25) (0.02) (0.27) Year ended October 31, 2006 11.11 0.28 0.12 0.40 (0.28) (0.02) (0.30) - ------------------------------------------------------------------------------------------------------------------ CLASS I SHARES Year ended October 31, 2002 $ 10.93 0.41 0.16 0.57 (0.41) -- (0.41) Year ended October 31, 2003 11.09 0.41 0.12 0.53 (0.41) -- (0.41) Year ended October 31, 2004 11.21 0.37 0.17 0.54 (0.37) (0.06) (0.43) Year ended October 31, 2005 11.32 0.37 (0.22) 0.15 (0.37) (0.02) (0.39) Year ended October 31, 2006 11.08 0.39 0.12 0.51 (0.39) (0.02) (0.41) - ------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------- RATIO OF NET RATIO OF NET NET ASSETS EXPENSES INVESTMENT ASSET AT END TO INCOME TO RATIO OF VALUE, OF AVERAGE AVERAGE EXPENSES TO END OF TOTAL PERIOD NET NET AVERAGE NET PORTFOLIO PERIOD RETURN(a) (000'S) ASSETS(b) ASSETS(b) ASSETS(b)(c) TURNOVER(d) - ------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Year ended October 31, 2002 $ 11.09 5.08% $ 16,341 0.95% 3.52% 0.95% 30.70% Year ended October 31, 2003 11.21 4.57% 22,326 0.91% 3.39% 0.91% 29.79% Year ended October 31, 2004 11.32 4.57% 32,889 0.87% 3.01% 0.87% 26.96% Year ended October 31, 2005 11.08 1.03%(e) 34,441 0.88%(e) 3.02%(e) 0.89% 13.87% Year ended October 31, 2006 11.18 4.45% 32,727 0.93% 3.30% 0.93% 12.69% - ------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Year ended October 31, 2002 $ 11.08 4.30% $ 12,699 1.70% 2.74% 1.70% 30.70% Year ended October 31, 2003 11.20 3.80% 18,352 1.66% 2.64% 1.66% 29.79% Year ended October 31, 2004 11.31 3.80% 17,457 1.62% 2.27% 1.62% 26.96% Year ended October 31, 2005 11.07 0.28%(e) 16,258 1.63%(e) 2.27%(e) 1.64% 13.87% Year ended October 31, 2006 11.17 3.67% 13,735 1.68% 2.56% 1.68% 12.69% - ------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Year ended October 31, 2002 $ 11.12 4.28% $ 2,608 1.70% 2.74% 1.70% 30.70% Year ended October 31, 2003 11.25 3.87% 3,252 1.66% 2.64% 1.66% 29.79% Year ended October 31, 2004 11.35 3.69% 2,340 1.62% 2.26% 1.62% 26.96% Year ended October 31, 2005 11.11 0.28%(e) 1,782 1.63%(e) 2.26%(e) 1.64% 13.87% Year ended October 31, 2006 11.21 3.66% 1,246 1.68% 2.55% 1.68% 12.69% - ------------------------------------------------------------------------------------------------------------------ CLASS I SHARES Year ended October 31, 2002 $ 11.09 5.34% $ 19,753 0.70% 3.76% 0.70% 30.70% Year ended October 31, 2003 11.21 4.84% 20,290 0.67% 3.67% 0.67% 29.79% Year ended October 31, 2004 11.32 4.83% 19,908 0.62% 3.27% 0.62% 26.96% Year ended October 31, 2005 11.08 1.28%(e) 16,981 0.63%(e) 3.27%(e) 0.64% 13.87% Year ended October 31, 2006 11.18 4.71% 13,746 0.68% 3.55% 0.68% 12.69% - ------------------------------------------------------------------------------------------------------------------
(a) Not Annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (b) Annualized for periods less than one year. (c) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (d) Portfolio turnover is calculated on the basis of the Fund as a whole, without the distinguishing between the classes of shares issued. (e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the Fund related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio and total return were 0.01%, 0.01%, 0.01% and 0.01% for Class A Shares, Class B Shares, Class C Shares and Class I Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 55 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--GROWTH FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS -------------------------------------- ------------------------------------- NET REALIZED AND UNREALIZED GAINS NET NET ASSET NET (LOSSES) TOTAL REALIZED VALUE, INVESTMENT FROM FROM NET GAINS FROM BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2004 (f) $ 12.68 (0.02) (0.11) (0.13) -- -- -- Year ended October 31, 2005 12.55 0.03 1.59 1.62 (0.05) -- (0.05) Year ended October 31, 2006 14.12 (0.02)* 0.99 0.97 -- (0.23) (0.23) - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2004 (f) $ 12.28 (0.07) (0.10) (0.17) -- -- -- Year ended October 31, 2005 12.11 (0.07) 1.53 1.46 -- -- -- Year ended October 31, 2006 13.57 (0.12)* 0.95 0.83 -- (0.23) (0.23) - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2004 (f) $ 12.35 (0.06) (0.12) (0.18) -- -- -- Year ended October 31, 2005 12.17 (0.07) 1.54 1.47 -- -- -- Year ended October 31, 2006 13.64 (0.13)* 0.96 0.83 -- (0.23) (0.23) - ------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES Period ended October 31, 2004 (f) $ 12.67 (0.01) (0.11) (0.12) -- -- -- Year ended October 31, 2005 12.55 0.06 1.59 1.65 (0.08) -- (0.08) Year ended October 31, 2006 14.12 0.02* 0.99 1.01 -- (0.23) (0.23) - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------------ RATIO OF NET INVESTMENT INCOME RATIO OF NET ASSETS RATIO OF (LOSS) TO EXPENSES NET ASSET AT END OF EXPENSES TO AVERAGE TO AVERAGE VALUE, END TOTAL PERIOD AVERAGE NET NET NET PORTFOLIO OF PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2004 (f) $ 12.55 (1.03)% $ 17,372 1.20% (0.42)% 1.31% 53.08% Year ended October 31, 2005 14.12 12.91%(g) 21,866 1.15%(g) 0.19%(g) 1.35%(g) 79.54% Year ended October 31, 2006 14.86 6.92% 21,985 1.20% (0.14)% 1.44% 75.06% - ------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2004 (f) $ 12.11 (1.38)% $ 1,402 1.95% (1.17)% 2.06% 53.08% Year ended October 31, 2005 13.57 12.06%(g) 1,317 1.90%(g) (0.48)%(g) 2.09%(g) 79.54% Year ended October 31, 2006 14.17 6.16% 1,446 1.95% (0.88)% 2.19% 75.06% - ------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2004 (f) $ 12.17 (1.46)% $ 309 1.95% (1.18)% 2.06% 53.08% Year ended October 31, 2005 13.64 12.08%(g) 344 1.90%(g) (0.51)%(g) 2.10%(g) 79.54% Year ended October 31, 2006 14.24 6.13% 270 1.95% (0.89)% 2.18% 75.06% - ------------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES Period ended October 31, 2004 (f) $ 12.55 0.95% $ 19,115 0.95% (0.17)% 1.06% 53.08% Year ended October 31, 2005 14.12 13.17%(g) 13,107 0.90%(g) 0.56%(g) 1.07%(g) 79.54% Year ended October 31, 2006 14.90 7.21% 15,042 0.95% 0.12% 1.19% 75.06% - -------------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Growth Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all its investable assets. (f) Class A Shares, Class B Shares, Class C Shares and Class I Shares commenced operations on May 7, 2004. (g) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return were 0.05%, 0.05%, 0.05% and 0.05% for Class A Shares, Class B Shares, Class C Shares and Class I Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 56 - -------------------------------------------------------------------------------- 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 UNREALIZED GAINS NET ASSET NET (LOSSES) TOTAL VALUE, INVESTMENT FROM FROM NET BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS - --------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 8.91 0.04 (1.73) (1.69) (0.01) (0.01) Year ended October 31, 2003 7.21 0.06 1.18 1.24 (0.06) (0.06) Year ended October 31, 2004 8.39 0.05 0.36 0.41 (0.04) (0.04) Year ended October 31, 2005 8.76 0.07 1.01 1.08 (0.09) (0.09) Year ended October 31, 2006 9.75 (0.02)* 1.25 1.23 -- -- - --------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 8.88 (0.00)> (1.74) (1.74) -- -- Year ended October 31, 2003 7.14 (0.01) 1.18 1.17 (0.01) (0.01) Year ended October 31, 2004 8.30 (0.02)* 0.36 0.34 (0.00)> (0.00)> Year ended October 31, 2005 8.64 (0.01) 1.01 1.00 (0.03) (0.03) Year ended October 31, 2006 9.61 (0.10)* 1.23 1.13 -- -- - --------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2004 (f) $ 8.40 (0.02)* 0.38 0.36 (0.03) (0.03) Year ended October 31, 2005 8.73 (0.01) 1.02 1.01 (0.04) (0.04) Year ended October 31, 2006 9.70 (0.09)* 1.22 1.13 -- -- - --------------------------------------------------------------------------------------------------------------- CLASS I SHARES Year ended October 31, 2002 $ 8.92 0.06 (1.73) (1.67) (0.03) (0.03) Year ended October 31, 2003 7.22 0.07 1.19 1.26 (0.08) (0.08) Year ended October 31, 2004 8.40 0.07 0.36 0.43 (0.06) (0.06) Year ended October 31, 2005 8.77 0.10 0.99 1.10 (0.12) (0.12) Year ended October 31, 2006 9.75 0.01* 1.25 1.26 (0.01) (0.01) - --------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ----------------------------------------------------------------- RATIO OF NET INVESTMENT INCOME RATIO OF NET ASSETS RATIO OF (LOSS) TO EXPENSES NET ASSET AT END OF EXPENSES TO AVERAGE TO AVERAGE VALUE, END TOTAL PERIOD AVERAGE NET NET NET PORTFOLIO OF PERIOD RETURN(a) (000'S) ASSETS(b) ASSETS(b) ASSETS(b)(c) TURNOVER(d) - ------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 7.21 (18.97)% $ 1,306 1.01% 0.39% 1.01% 59.85% Year ended October 31, 2003 8.39 17.26% 1,827 1.04% 0.70% 1.04% 64.52% Year ended October 31, 2004 8.76 4.94% 1,500 1.02% 0.50% 1.02% 73.68% Year ended October 31, 2005 9.75 12.36%(e) 1,260 1.11%(e) 0.73%(e) 1.16% 106.49% Year ended October 31, 2006 10.98 12.62% 1,394 1.26% (0.22)% 1.47% 34.85% - ------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 7.14 (19.59)% $ 1,154 1.76% (0.30)% 1.76% 59.85% Year ended October 31, 2003 8.30 16.40% 2,235 1.79% (0.07)% 1.79% 64.52% Year ended October 31, 2004 8.64 4.13% 3,820 1.77% (0.25)% 1.77% 73.68% Year ended October 31, 2005 9.61 11.61%(e) 4,194 1.87%(e) (0.10)%(e) 1.93% 106.49% Year ended October 31, 2006 10.74 11.76% 4,537 2.01% (0.97)% 2.22% 34.85% - ------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2004 (f) $ 8.73 3.57% $ 41 1.77% (0.28)% 1.77% 73.68% Year ended October 31, 2005 9.70 11.59%(e) 49 1.88%(e) (0.13)%(e) 1.93% 106.49% Year ended October 31, 2006 10.83 11.65% 35 2.01% (0.90)% 2.22% 34.85% - ------------------------------------------------------------------------------------------------------------------------------- CLASS I SHARES Year ended October 31, 2002 $ 7.22 (18.76)% $168,812 0.76% 0.66% 0.76% 59.85% Year ended October 31, 2003 8.40 17.63% 203,458 0.79% 0.96% 0.79% 64.52% Year ended October 31, 2004 8.77 5.18% 196,219 0.77% 0.77% 0.77% 73.68% Year ended October 31, 2005 9.75 12.61%(e) 46,888 0.80%(e) 1.20%(e) 0.86% 106.49% Year ended October 31, 2006 11.00 12.88% 40,925 1.01% 0.04% 1.22% 34.85% - -------------------------------------------------------------------------------------------------------------------------------
> Less than $0.005 per share. * Calculated based on average shares outstanding. (a) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (b) Annualized for periods less than one year. (c) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been indicated. (d) Portfolio turnover is calculated on the basis of the Fund as a whole, without the distinguishing between the classes of shares issued. (e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the Fund related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio and total return were 0.02%, 0.02%, 0.02% and 0.03% for Class A Shares, Class B Shares, Class C Shares and Class I Shares, respectively. (f) Class C Shares commenced operations on November 3, 2003. SEE NOTES TO FINANCIAL STATEMENTS. 57 HSBC INVESTOR FAMILY OF FUNDS HSBC ADVISOR FUNDS TRUST--INTERNATIONAL EQUITY FUND FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS -------------------------------------- ------------------------------------- NET REALIZED AND UNREALIZED GAINS NET (LOSSES) REALIZED FROM GAINS FROM NET ASSET NET INVESTMENT TOTAL INVESTMENT VALUE, INVESTMENT AND FOREIGN FROM NET AND FOREIGN BEGINNING INCOME CURRENCY INVESTMENT INVESTMENT CURRENCY TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - -------------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 2002 $ 12.56 0.09 (1.73) (1.64) (0.19) -- (0.19) Year ended October 31, 2003 10.73 0.20 2.02 2.22 (0.19) -- (0.19) Year ended October 31, 2004 12.76 0.18 2.32 2.50 (0.39) -- (0.39) Year ended October 31, 2005 14.87 0.31 2.59 2.90 (0.23) -- (0.23) Year ended October 31, 2006 17.54 0.38 5.14 5.52 (0.36) (0.60) (0.96) - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------------- RATIO OF RATIO OF NET NET NET EXPENSES INVESTMENT ASSET ASSETS AT TO INCOME TO RATIO OF VALUE, END OF AVERAGE AVERAGE EXPENSES TO END TOTAL PERIOD NET NET AVERAGE NET PORTFOLIO OF PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ----------------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 2002 $ 10.73 (13.32)% $ 194,704 0.99% 0.70% 0.99% 31.63% Year ended October 31, 2003 12.76 21.03% 123,658 1.07% 1.16% 1.07% 68.51% Year ended October 31, 2004 14.87 20.06% 148,317 1.05% 1.39% 1.05% 106.11% Year ended October 31, 2005 17.54 19.69% 193,144 0.92% 2.01% 0.92% 31.32% Year ended October 31, 2006 22.10 32.70% 283,749 0.97% 2.02% 0.97% 33.39% - -----------------------------------------------------------------------------------------------------------------------------
(a) The per share amounts and percentages reflect income and expense assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor International Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its inevitable assets. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 58 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 NET (LOSSES) REALIZED NET ASSET NET FROM GAINS FROM VALUE, INVESTMENT INVESTMENTS TOTAL FROM INVESTMENTS BEGINNING INCOME AND OPTIONS INVESTMENT AND OPTIONS TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS - ----------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 7.90 (0.03) (1.57) (1.60) -- -- Year ended October 31, 2003 6.30 (0.03)* 1.68 1.65 -- -- Year ended October 31, 2004 7.95 (0.04)* 0.53 0.49 -- -- Year ended October 31, 2005 8.44 (0.06)* 1.49 1.43 -- -- Year ended October 31, 2006 9.87 (0.00)*> 1.19 1.19 (2.18) (2.18) - ----------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 7.82 (0.08) (1.55) (1.63) -- -- Year ended October 31, 2003 6.19 (0.08) 1.64 1.56 -- -- Year ended October 31, 2004 7.75 (0.10)* 0.51 0.41 -- -- Year ended October 31, 2005 8.16 (0.13)* 1.45 1.32 -- -- Year ended October 31, 2006 9.48 (0.06)* 1.13 1.07 (2.18) (2.18) - ----------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $ 7.82 (0.08) (1.54) (1.62) -- -- Year ended October 31, 2003 6.20 (0.08) 1.68 1.60 -- -- Year ended October 31, 2004 7.80 (0.10)* 0.52 0.42 -- -- Year ended October 31, 2005 8.22 (0.13)* 1.45 1.32 -- -- Year ended October 31, 2006 9.54 (0.06)* 1.15 1.09 (2.18) (2.18) - ----------------------------------------------------------------------------------------------------------------- TRUST SHARES Year ended October 31, 2002 $ 7.91 (0.02) (1.56) (1.58) -- -- Year ended October 31, 2003 6.33 (0.01) 1.69 1.68 -- -- Year ended October 31, 2004 8.01 (0.02)* 0.53 0.51 -- -- Year ended October 31, 2005 8.52 (0.02)* 1.48 1.46 -- -- Year ended October 31, 2006 9.98 0.03 * 1.20 1.23 (2.18) (2.18) - ----------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------- RATIO OF RATIO OF NET NET NET EXPENSES INVESTMENT ASSET ASSETS AT TO (LOSS) TO RATIO OF VALUE, END OF AVERAGE AVERAGE EXPENSES TO END TOTAL PERIOD NET NET AVERAGE NET PORTFOLIO OF PERIOD RETURN(a) (000'S) ASSETS(b) ASSETS(b) ASSETS(b)(c) TURNOVER(d) - ----------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 6.30 (20.25)% $ 1,010 1.08% (0.46)% 1.08% 140.23% Year ended October 31, 2003 7.95 26.19% 1,539 1.10% (0.43)% 1.10% 100.86% Year ended October 31, 2004 8.44 6.16% 1,878 1.09% (0.54)% 1.09% 106.72% Year ended October 31, 2005 9.87 16.94%(e) 2,151 1.38%(e) (0.65)%(e) 1.53% 169.62% Year ended October 31, 2006 8.88 13.66% 3,185 1.48% (0.01)% 1.85% 53.16% - ----------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 6.19 (20.84)% $ 4,391 1.83% (1.21)% 1.83% 140.23% Year ended October 31, 2003 7.75 25.20% 6,009 1.85% (1.16)% 1.85% 100.86% Year ended October 31, 2004 8.16 5.29% 7,037 1.84% (1.29)% 1.84% 106.72% Year ended October 31, 2005 9.48 16.18%(e) 7,415 2.11%(e) (1.38)%(e) 2.27% 169.62% Year ended October 31, 2006 8.37 12.78% 7,425 2.25% (0.72)% 2.60% 53.16% - ----------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $ 6.20 (20.72)% $ 20 1.83% (1.20)% 1.83% 140.23% Year ended October 31, 2003 7.80 25.81% 54 1.85% (1.23)% 1.85% 100.86% Year ended October 31, 2004 8.22 5.38% 94 1.84% (1.29)% 1.84% 106.72% Year ended October 31, 2005 9.54 16.06%(e) 111 2.13%(e) (1.40)%(e) 2.28% 169.62% Year ended October 31, 2006 8.45 12.93% 95 2.25% (0.72)% 2.60% 53.16% - ----------------------------------------------------------------------------------------------------------------------------- TRUST SHARES Year ended October 31, 2002 $ 6.33 (19.97)% $ 98,059 0.82% (0.18)% 0.82% 140.23% Year ended October 31, 2003 8.01 26.54% 160,621 0.85% (0.17)% 0.85% 100.86% Year ended October 31, 2004 8.52 6.37% 117,354 0.84% (0.28)% 0.84% 106.72% Year ended October 31, 2005 9.98 17.14%(e) 19,618 0.89%(e) (0.19)%(e) 1.02% 169.62% Year ended October 31, 2006 9.03 13.97% 17,029 1.26% 0.29 % 1.60% 53.16% - -----------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. > Less than $0.005 per share. (a) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (b) Annualized for periods less than one year. (c) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been indicated. (d) Portfolio turnover is calculated on the basis of the Fund as a whole, without the distinguishing between the classes of shares issued. (e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the Fund related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio and net income ratio were 0.10%, 0.10%, 0.10% and 0.09% for Class A Shares, Class B Shares, Class C Shares and Trust Shares, respectively. The corresponding impact to the total return was 0.57%, 0.57%, 0.57% and 0.56% for Class A Shares, Class B Shares, Class C Shares and Trust Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 59 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--OPPORTUNITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------ ----------------------- NET REALIZED AND NET UNREALIZED REALIZED GAINS GAINS NET ASSET NET (LOSSES) TOTAL (LOSSES) VALUE, INVESTMENT FROM FROM FROM BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS - ----------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 9.60 (0.13) (1.64) (1.77) -- -- Year ended October 31, 2003 7.83 (0.10) 2.63 2.53 -- -- Year ended October 31, 2004 10.36 (0.13) 0.68 0.55 -- -- Year ended October 31, 2005 10.91 (0.14) 1.62 1.48 -- -- Year ended October 31, 2006 12.39 (0.14)* 2.43 2.29 (0.39) (0.39) - ----------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 9.27 (0.20)* (1.56) (1.76) -- -- Year ended October 31, 2003 7.51 (0.18)* 2.52 2.34 -- -- Year ended October 31, 2004 9.85 (0.20) 0.64 0.44 -- -- Year ended October 31, 2005 10.29 (0.22) 1.53 1.31 -- -- Year ended October 31, 2006 11.60 (0.23)* 2.27 2.04 (0.39) (0.39) - ----------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $ 9.35 (0.21)* (1.57) (1.78) -- -- Year ended October 31, 2003 7.57 (0.18) 2.55 2.37 -- -- Year ended October 31, 2004 9.94 (0.22) 0.67 0.45 -- -- Year ended October 31, 2005 10.39 (0.21) 1.53 1.32 -- -- Year ended October 31, 2006 11.71 (0.23)* 2.29 2.06 (0.39) (0.39) - ----------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA --------------------------------------------- RATIO OF NET NET NET ASSETS INVESTMENT ASSET AT END RATIO OF (LOSS) TO RATIO OF VALUE, OF EXPENSES TO AVERAGE EXPENSES TO END OF TOTAL PERIOD AVERAGE NET NET AVERAGE NET PORTFOLIO PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ---------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 7.83 (18.44)% $11,384 1.65% (1.45)% 2.08% 103.90% Year ended October 31, 2003 10.36 32.31% 16,695 1.65% (1.36)% 2.09% 152.05% Year ended October 31, 2004 10.91 5.31% 20,902 1.61% (1.24)% 1.72% 81.75% Year ended October 31, 2005 12.39 13.57%(f) 22,875 1.51%(f) (1.11)%(f) 1.69%(f) 63.95% Year ended October 31, 2006 14.29 18.81% 24,463 1.55% (1.04)% 1.70% 60.83% - ---------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 7.51 (18.99)% $ 2,374 2.40% (2.18)% 2.86% 103.90% Year ended October 31, 2003 9.85 31.16% 3,952 2.40% (2.11)% 2.83% 152.05% Year ended October 31, 2004 10.29 4.47% 4,611 2.36% (2.00)% 2.47% 81.75% Year ended October 31, 2005 11.60 12.73%(f) 4,539 2.26%(f) (1.86)%(f) 2.44%(f) 63.95% Year ended October 31, 2006 13.25 17.91% 4,768 2.30% (1.79)% 2.45% 60.83% - ---------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $ 7.57 (19.04)% $ 329 2.40% (2.20)% 2.83% 103.90% Year ended October 31, 2003 9.94 31.31% 395 2.40% (2.11)% 2.84% 152.05% Year ended October 31, 2004 10.39 4.53% 344 2.37% (2.00)% 2.48% 81.75% Year ended October 31, 2005 11.71 12.70%(f) 306 2.26%(f) (1.86)%(f) 2.44%(f) 63.95% Year ended October 31, 2006 13.38 17.92% 299 2.30% (1.78)% 2.45% 60.83% - ----------------------------------------------------------------------------------------------------------------
* Calculated using average shares. (a) The per share amounts and percentages reflect income and expense assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Small Cap Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return were 0.04%, 0.04% and 0.04% for Class A Shares, Class B Shares and Class C Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 60 - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--OVERSEAS EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------ ----------------------------------- NET REALIZED AND UNREALIZED GAINS NET (LOSSES) REALIZED FROM GAINS FROM INVESTMENT INVESTMENT NET ASSET NET AND TOTAL AND VALUE, INVESTMENT FOREIGN FROM NET FOREIGN BEGINNING OF INCOME CURRENCY INVESTMENT INVESTMENT CURRENCY TOTAL PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - -------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 11.66 (0.04) (1.34) (1.38) (0.12) (0.29) (0.41) Year ended October 31, 2003 9.87 0.01 1.95 1.96 (0.10) -- (0.10) Year ended October 31, 2004 11.73 0.08 2.19 2.27 (0.07) -- (0.07) Year ended October 31, 2005 13.93 0.18 2.33 2.51 (0.06) (0.79) (0.85) Year ended October 31, 2006 15.59 0.22 4.45 4.67 (0.25) (1.16) (1.41) - -------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 11.30 (0.08) (1.34) (1.42) (0.03) (0.29) (0.32) Year ended October 31, 2003 9.56 (0.06) 1.89 1.83 (0.05) -- (0.05) Year ended October 31, 2004 11.34 0.01* 2.08 2.09 -- -- -- Year ended October 31, 2005 13.43 0.07 2.24 2.31 -- (0.79) (0.79) Year ended October 31, 2006 14.95 0.09 4.26 4.35 (0.14) (1.16) (1.30) - -------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $ 11.41 (0.08) (1.36) (1.44) -- (0.29) (0.29) Year ended October 31, 2003 9.68 (0.06) 1.93 1.87 (0.01) -- (0.01) Year ended October 31, 2004 11.54 (0.01) 2.14 2.13 -- -- -- Year ended October 31, 2005 13.67 0.06 2.29 2.35 -- (0.79) (0.79) Year ended October 31, 2006 15.23 0.11 4.33 4.44 (0.14) (1.16) (1.30) - -------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------- RATIO OF NET NET RATIO OF INVESTMENT NET ASSETS EXPENSES INCOME ASSET AT TO (LOSS) TO RATIO OF VALUE, END OF AVERAGE AVERAGE EXPENSES TO END TOTAL PERIOD NET NET AVERAGE NET PORTFOLIO OF PERIOD RETURN(b) (000's) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------- CLASS A SHARES Year ended October 31, 2002 $ 9.87 (12.42)% $ 7,203 1.85% (0.18)% 2.28% 31.63% Year ended October 31, 2003 11.73 20.09% 10,096 1.85% 0.07% 2.34% 68.51% Year ended October 31, 2004 13.93 19.40% 17,721 1.78% 0.79% 1.88% 106.11% Year ended October 31, 2005 15.59 18.64% 20,680 1.66% 1.21% 1.66% 31.32% Year ended October 31, 2006 18.85 31.85% 22,761 1.67% 1.24% 1.67% 33.39% - ------------------------------------------------------------------------------------------------------------- CLASS B SHARES Year ended October 31, 2002 $ 9.56 (13.07)% $ 588 2.60% (0.87)% 3.04% 31.63% Year ended October 31, 2003 11.34 19.26% 1,076 2.60% (0.62)% 3.16% 68.51% Year ended October 31, 2004 13.43 18.43% 2,061 2.53% 0.05% 2.63% 106.11% Year ended October 31, 2005 14.95 17.72% 2,403 2.41% 0.47% 2.41% 31.32% Year ended October 31, 2006 18.00 30.87% 3,234 2.42% 0.58% 2.42% 33.39% - ------------------------------------------------------------------------------------------------------------- CLASS C SHARES Year ended October 31, 2002 $ 9.68 (13.08)% $ 96 2.60% (1.00)% 3.04% 31.63% Year ended October 31, 2003 11.54 19.28% 121 2.60% (0.64)% 3.17% 68.51% Year ended October 31, 2004 13.67 18.46% 137 2.54% (0.10)% 2.66% 106.11% Year ended October 31, 2005 15.23 17.70% 164 2.41% 0.48% 2.41% 31.32% Year ended October 31, 2006 18.37 30.92% 163 2.41% 0.58% 2.41% 33.39% - -------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) The per share amounts and percentages reflect income and expense assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor International Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) 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. 61 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. (a)
INVESTMENT ACTIVITIES DIVIDENDS -------------------------------------- ------------------------ NET REALIZED AND UNREALIZED GAINS NET NET ASSET NET (LOSSES) TOTAL REALIZED VALUE, INVESTMENT FROM FROM GAINS FROM BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS - --------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 2002 $11.32 (0.09) (1.96) (2.05) -- -- Year ended October 31, 2003 9.27 (0.06) 3.15 3.09 -- -- Year ended October 31, 2004 12.36 (0.08) 0.79 0.71 -- -- Year ended October 31, 2005 13.07 (0.10) 1.97 1.87 -- -- Year ended October 31, 2006 14.94 (0.09) 2.93 2.84 (0.50) (0.50) - --------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------------- RATIO OF RATIO OF NET NET NET EXPENSES INVESTMENT ASSET ASSETS AT TO (LOSS) TO RATIO OF VALUE, END OF AVERAGE AVERAGE EXPENSES TO END OF TOTAL PERIOD NET NET AVERAGE NET PORTFOLIO PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - --------------------------------------------------------------------------------------------------------------------- ADVISOR SHARES Year ended October 31, 2002 $ 9.27 (18.11)% $190,686 1.07% (0.87)% 1.07% 103.90% Year ended October 31, 2003 12.36 33.33 % 326,072 1.01% (0.72)% 1.01% 152.05% Year ended October 31, 2004 13.07 5.74 % 279,669 0.98% (0.62)% 0.98% 81.75% Year ended October 31, 2005 14.94 14.31 %(f) 177,519 0.94%(f) (0.54)%(f) 0.94%(f) 63.95% Year ended October 31, 2006 17.28 19.40 % 192,124 1.03% (0.51)% 1.03% 60.83% - ---------------------------------------------------------------------------------------------------------------------
(a) The per share amounts and percentages reflect income and expense assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Small Cap Equity Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all of its investable assets. (f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return was 0.04% for the Advisor Shares. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR FAMILY OF FUNDS 62 - -------------------------------------------------------------------------------- HSBC INVESTOR FUNDS--VALUE FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS -------------------------------------- ------------------------------------- NET REALIZED AND UNREALIZED GAINS NET NET ASSET NET (LOSSES) REALIZED VALUE, INVESTMENT FROM TOTAL FROM NET GAINS FROM BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2004 (f) $12.68 0.05 0.69 0.74 (0.04) -- (0.04) Year ended October 31, 2005 13.38 0.10 1.86 1.96 (0.08) (0.13) (0.21) Year ended October 31, 2006 15.13 0.12 * 2.95 3.07 (0.19) (1.29) (1.48) - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2004 (f) $12.28 -- 0.68 0.68 (0.01) -- (0.01) Year ended October 31, 2005 12.95 (0.02) 1.80 1.78 -- (0.13) (0.13) Year ended October 31, 2006 14.60 (0.00)>* 2.84 2.84 (0.07) (1.29) (1.36) - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2004 (f) $12.35 0.01 0.67 0.68 (0.02) -- (0.02) Year ended October 31, 2005 13.01 (0.02) 1.82 1.80 (0.01) (0.13) (0.14) Year ended October 31, 2006 14.67 0.00 >* 2.85 2.85 (0.05) (1.29) (1.34) - ------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES Period ended October 31, 2004 (f) $12.67 0.07 0.70 0.77 (0.06) -- (0.06) Year ended October 31, 2005 13.38 0.13 1.86 1.99 (0.11) (0.13) (0.24) Year ended October 31, 2006 15.13 0.15 * 2.94 3.09 (0.23) (1.29) (1.52) - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------------- RATIO OF NET NET INVESTMENT NET ASSETS INCOME ASSET AT END RATIO OF (LOSS) TO RATIO OF VALUE, OF EXPENSES TO AVERAGE EXPENSES TO END OF TOTAL PERIOD AVERAGE NET NET AVERAGE NET PORTFOLIO PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2004 (f) $13.38 7.79% $20,933 1.20% 0.81% 1.25% 10.33% Year ended October 31, 2005 15.13 14.69%(g) 23,315 1.15%(g) 0.64%(g) 1.30%(g) 16.45% Year ended October 31, 2006 16.72 21.70% 24,688 1.20% 0.74% 1.43% 20.63% - ------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2004 (f) $12.95 9.06% $ 1,938 1.95% 0.05% 2.00% 10.33% Year ended October 31, 2005 14.60 13.78%(g) 1,767 1.90%(g) (0.10)%(g) 2.04%(g) 16.45% Year ended October 31, 2006 16.08 20.78% 1,939 1.95% (0.01)% 2.18% 20.63% - ------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2004 (f) $13.01 8.47% $ 399 1.95% 0.04% 2.00% 10.33% Year ended October 31, 2005 14.67 13.86%(g) 388 1.90%(g) (0.12)%(g) 2.05%(g) 16.45% Year ended October 31, 2006 16.18 20.72% 157 1.95% 0.01% 2.17% 20.63% - ------------------------------------------------------------------------------------------------------------------------------ CLASS I SHARES Period ended October 31, 2004 (f) $13.38 6.05% $25,600 0.95% 1.05% 1.00% 10.33% Year ended October 31, 2005 15.13 14.96%(g) 15,044 0.90%(g) 0.91%(g) 1.02%(g) 16.45% Year ended October 31, 2006 16.70 21.90% 18,036 0.95% 0.99% 1.18% 20.63% - ------------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. > Less than $0.005 per share. (a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the HSBC Investor Value Portfolio. (b) Not annualized for periods less than one year. Total return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated on the basis of the respective Portfolio in which the Fund invests all its investable assets. (f) Class A Shares, Class B Shares, Class C Shares and Class I Shares commenced operations on May 7, 2004. (g) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the respective Portfolio in which the Fund invests related to violation of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio, gross expense ratio and total return were 0.05%, 0.05%, 0.05% and 0.05% for Class A Shares, Class B Shares, Class C Shares and Class I Shares, respectively. SEE NOTES TO FINANCIAL STATEMENTS. 63 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 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. As of October 31, 2006, the Trust is comprised of 24 separate funds and the Advisor Trust is comprised of 3 separate funds, each a diversified series of the HSBC Investor Family of Funds. The accompanying financial statements are presented for the following 13 funds (individually a "Fund", collectively the "Funds") of the Trust and Advisor Trust (collectively the "Trusts"):
FUND SHORT NAME TRUST - ---- ---------- ----- HSBC Investor Core Plus Fixed Income Fund Core Plus Fixed (Advisor) (formerly the HSBC Investor Fixed Income Fund Income Fund) (Advisor) Advisor Trust HSBC Investor Core Plus Fixed Income Fund Core Plus Fixed (formerly the HSBC Investor Bond Fund) Income Fund Trust HSBC Investor High Yield Fixed Income Fund High Yield Fixed Income Fund Trust HSBC Investor Intermediate Duration Fixed Intermediate Income Fund (formerly the HSBC Investor Duration Fixed Limited Maturity Fund) Income Fund Trust HSBC Investor New York Tax-Free Bond Fund New York Tax-Free Bond Fund Trust HSBC Investor Growth Fund Growth Fund Trust HSBC Investor Growth and Income Fund Growth and Income Fund Trust HSBC Investor International Equity Fund International Equity Fund Advisor Trust HSBC Investor Mid-Cap Fund Mid-Cap Fund Trust HSBC Investor Opportunity Fund Opportunity Fund Trust HSBC Investor Overseas Equity Fund Overseas Equity Fund Trust HSBC Investor Small Cap Equity Fund Small Cap Equity Fund Advisor Trust HSBC Investor Value Fund Value Fund Trust
Financial statements for all other funds of the HSBC Investor Family of Funds are published separately. The Core Plus Fixed Income Fund (Advisor), Core Plus Fixed Income Fund, High Yield Fixed Income Fund, Intermediate Duration Fixed Income Fund, Growth Fund, International Equity Fund, Opportunity Fund, Overseas Equity Fund, Small Cap Equity Fund, and the Value 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). HSBC INVESTOR FAMILY OF FUNDS 64 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED)
PROPORTIONATE INTEREST ON FUND RESPECTIVE PORTFOLIO OCTOBER 31, 2006 - ---- -------------------- ---------------- Core Plus Fixed Income HSBC Investor Core Plus Fixed Income Fund (Advisor) Portfolio 72.9% Core Plus Fixed Income HSBC Investor Core Plus Fixed Income Fund Portfolio 15.1% High Yield Fixed Income HSBC Investor High Yield Fixed Income Fund Portfolio 76.1% Intermediate Duration HSBC Investor Intermediate Duration Fixed Fixed Income Fund Income Portfolio 93.5% Growth Fund HSBC Investor Growth Portfolio 64.9% International Equity Fund HSBC Investor International Equity Portfolio 84.9% Opportunity Fund HSBC Investor Small Cap Equity Portfolio 12.3% Overseas Equity Fund HSBC Investor International Equity Portfolio 7.9% Small Cap Equity Fund HSBC Investor Small Cap Equity Portfolio 79.6% Value Fund HSBC Investor Value Portfolio 66.6%
Financial statements for all other funds of the HSBC Investor Family of Funds are published separately. The HSBC Investor Core Plus Fixed Income Portfolio (formerly the HSBC Investor Fixed Income Portfolio), HSBC Investor High Yield Fixed Income Portfolio, HSBC Investor Intermediate Duration Fixed Income Portfolio (formerly the HSBC Investor Limited Maturity Portfolio), HSBC Investor Growth Portfolio, HSBC Investor International Equity Portfolio, HSBC Investor Small Cap Equity Portfolio and the HSBC Investor Value Portfolio (individually a "Portfolio", collectively the "Portfolios") are diversified series of the HSBC Investor Portfolios (the "Portfolio Trust"). The Portfolios operate as master funds in master-feeder arrangements. The financial statements of the Portfolios, including the Schedules of Portfolio Investments, are included elsewhere 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 High Yield Fixed Income Fund, Intermediate Duration Fixed Income Fund, New York Tax-Free Bond Fund, Growth Fund, Growth and Income Fund, and the Value Fund each offers four classes of shares: Class A Shares, Class B Shares, Class C Shares and Class I Shares. The Mid-Cap Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Trust Shares. The Core Plus Fixed Income Fund (Advisor), International Equity Fund, and the Small Cap Equity Fund each offers one class of shares: Advisor Shares. The Core Plus Fixed Income Fund, Opportunity Fund, and the Overseas Equity Fund each offers three classes of shares: Class A Shares, Class B Shares and Class C Shares. Class A Shares of the Growth Fund, Growth and Income Fund, Mid-Cap Fund, Opportunity Fund, Overseas Fund and Value Fund have a maximum sales charge of 5.00% as a percentage of the original purchase price while Class A Shares of the Core Plus Fixed Income Fund, High Yield Fixed Income Fund, Intermediate Duration Fixed Income Fund, and New York Tax-Free Bond Fund have a maximum sales charge of 4.75% as a percentage of the original purchase price. The Class B Shares of the Funds are offered without any front-end sales charge but will be subject to a contingent deferred sales charge ("CDSC") ranging from a maximum of 4.00% if redeemed less than one year after purchase to 0.00% if redeemed more than four years after purchase. Class C Shares of the Funds are offered without any front-end sales charge but will be subject to a maximum CDSC of 1.00% if redeemed less than one year after purchase. No sales charges are assessed with respect to Advisor, Trust, Class I or Class Y Shares of the Funds. Each class of shares in the Funds has identical rights and privileges except with respect to arrangements pertaining to shareholder servicing or distribution, class-related expenses, voting rights on matters affecting a single class of shares, and the exchange privilege of each class of shares. Under the Trusts' organizational documents, the Funds' officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with service providers, which also provide for indemnifications by the Funds. The Funds' maximum exposure under these arrangements is unknown, as this would involve any future claims that may be made against the Funds. However, based on experience, the Funds expect that risk of loss to be remote. 65 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. SECURITIES VALUATION: A. NEW YORK TAX-FREE BOND FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND Bonds and other fixed income securities (other than short-term obligations but including listed issues) are valued on the basis of valuations furnished by a pricing service, the use of which has been approved by the Funds' Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and the use of matrix techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics other than market data and without exclusive reliance upon quoted prices or exchanges or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. All debt portfolio securities with a remaining maturity of 60 days or less are valued at amortized cost. Under the amortized cost method, premium or discount, if any, is amortized or accreted, respectively, on a constant (straight-line) basis to the maturity of the security. The value of each equity security is based either on the last sale price on a national securities exchange, or in the absence of recorded sales, at the closing bid prices on such exchanges, or at the quoted bid price in the over-the-counter market. Securities or other assets for which market quotations are not readily available, or are deemed unreliable due to a significant event or otherwise, are valued by or at the direction of the Funds' Board of Trustees. In addition, specific securities may need to be valued by or at the direction of the Funds' Board of Trustees due to potentially significant events. Examples of potentially significant events that could affect the value of an individual security include corporate actions by the issuer, announcements by the issuer relating to its earnings or products, regulatory news, natural disasters and litigation. Examples of potentially significant events that could affect multiple securities held by a Fund include governmental actions, natural disasters and armed conflicts. B. FEEDER FUNDS The Feeder Funds record their investments in their respective Portfolios at fair value. Securities of the Portfolios are recorded at fair value as more fully discussed in the notes to those financial statements. SECURITIES TRANSACTIONS AND RELATED INCOME: A. NEW YORK TAX-FREE BOND FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND During the fiscal year, security transactions are accounted for no later than one business day following trade date. For financial reporting purposes, however, changes in holdings are accounted for on trade date on the last business day of the reporting period. 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 income, expenses, changes in unrealized appreciation and depreciation and realized gains and losses derived from their respective Portfolios. In addition, the Feeder Funds accrue their own expenses daily as incurred. HSBC INVESTOR FAMILY OF FUNDS 66 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) FUTURES CONTRACTS: The New York Tax-Free Bond Fund, Growth and Income Fund and Mid-Cap Fund may invest in futures contracts for the purpose of hedging existing portfolio securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, a Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made each day, depending on the daily fluctuations in the fair value of the underlying security. A gain or loss equal to the daily variation margin is recognized on a daily basis. Should market conditions move unexpectedly, a Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. OPTIONS: The Growth and Income Fund and the Mid-Cap Fund may write covered call options against some of the securities in their portfolios provided the securities are listed on a national securities exchange. A call option is "covered" if the Fund owns the underlying securities covered by the call. The premium received is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain or loss. If the call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining a realized gain or loss. For the year ended October 31, 2006, the funds did not write any covered call options. SECURITIES LOANS: To generate additional income, the Funds may lend portfolio securities, in amounts up to 33 1/3% of their respective assets pursuant to agreements requiring that the loan be collateralized by cash, U.S. Government or U.S. Government agency securities, equal at all times to at least 100% of the fair value of the loaned securities. HSBC Bank USA ("HSBC Bank"), an affiliate of the Investment Adviser (defined below), acted as the securities lending agent for this activity through March 30, 2006. The Funds receive payments from borrowers equivalent to the dividends and interest that would have been earned on securities loaned while simultaneously seeking to earn income on the investment of collateral. Collateral is marked to market daily and adjusted, if needed, to provide the required level of collateral. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will be made only to borrowers, such as broker-dealers, banks or institutional borrowers of securities, deemed by HSBC Bank to be of good standing and creditworthy under guidelines approved by the Board of Trustees and when, in the judgement of HSBC Bank, the amounts that can be earned currently from such securities loans justifies the attendant risks. Loans are subject to termination by the Funds or the borrower at any time and are, therefore, not considered to be illiquid investments. As of October 31, 2006, the Funds had no securities on loan. LINE OF CREDIT: The New York Tax-Free Bond Fund, Growth and Income Fund and Mid-Cap Fund participate in a short-term, demand note agreement with HSBC Bank USA, an affiliate of the Investment Adviser (defined below). Under the agreement, these Funds may borrow up to $50 million. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. During the year ended October 31, 2006, the details of the borrowing were as follows (based on the actual number of days in which the respective Fund borrowed monies): 67 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) AVERAGE AVERAGE AMOUNT INTEREST FUND OUTSTANDING RATE ---- ----------- -------- Growth and Income Fund ..................... $ 675,204 4.65% Mid-Cap Fund ............................... 1,546,571 5.13% ALLOCATIONS: Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among various or all Funds within the HSBC Investor Family of Funds in relation to the net assets of each Fund or on another reasonable basis. Expenses specific to a class are charged to that class. In addition, income, expenses (other than class specific expenses), and unrealized/realized gains and losses are allocated to each class based on relative net assets on a daily basis. DIVIDENDS TO SHAREHOLDERS: The Core Plus Fixed Income Fund (Advisor), Core Plus Fixed Income Fund, High Yield Fixed Income, Intermediate Duration Fixed Income 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 semi-annually in the case of the Growth Fund, Growth and Income Fund, Opportunity Fund, Small Cap Equity Fund, and the Value Fund, and annually in the case of the International Equity Fund, Mid-Cap Fund, and Overseas 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 and character of net investment income and net realized gains distributions 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 (e.g., reclassification of market discounts, certain gain/loss, paydowns, and certain distributions), such amounts are reclassified within the components of net assets; temporary differences (e.g., wash losses and post-october loss deferrals) do not require reclassification. The Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as a part of the dividends paid deduction for income tax purposes. REDEMPTION FEE: A redemption fee of 2.00% is charged and recorded as paid-in-capital for any shares redeemed or exchanged after holding them for less than 30 days. This fee does not apply to shares purchased through reinvested dividends or capital gains or shares held in certain omnibus accounts or retirement plans that cannot implement the fee. For the year ended October 31, 2006, the following Funds collected redemption fees as follows: HSBC INVESTOR FAMILY OF FUNDS 68 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) FUND FEES COLLECTED ---- --------------- Core Plus Fixed Income Fund (Advisor) ............ $ 164 Core Plus Fixed Income Fund ...................... $ 684 High Yield Fixed Income Fund ..................... $1,869 Intermediate Duration Fixed Income Fund .......... $ 7 New York Tax-Free Bond Fund ...................... $ 493 Growth Fund ...................................... $ 896 Growth and Income Fund ........................... $ 2 International Equity Fund ........................ $ 808 Mid-Cap Fund ..................................... $ 10 Opportunity Fund ................................. $ 540 Overseas Equity Fund ............................. $ 548 Small Cap Equity Fund ............................ $ 469 Value Fund ....................................... $ 613 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. NEW ACCOUNTING PRONOUNCEMENTS: In September 2006 the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current GAAP from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of October 31, 2006, the Funds do not believe the adoption of SFAS No. 157 will impact the financial statement amounts, however, additional disclosures will be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. On July 13, 2006, the FASB released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax return to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more likely-than-not threshold would be recorded as a tax benefit or expense in the year of determination. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management is in the process of completing their analysis on whether the adoption of FIN 48 will have an impact to the financial statements upon adoption. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Investments (USA) Inc. ("HSBC" or the "Investment Adviser"), a wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank, acts as Investment Adviser to the New York Tax-Free Bond Fund, Growth and Income Fund, and the Mid-Cap Fund. As Investment Adviser, HSBC manages the investments of the Funds and continuously reviews, supervises and administers the Funds' investments. Sub-Investment Adviser services 69 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) are provided by Transamerica Investment Management, LLC ("Transamerica") and Munder Capital Management ("Munder") for the Growth and Income Fund and Mid-Cap Fund, respectively. For its services as Investment Adviser, HSBC is entitled to receive a fee, accrued daily and paid monthly, at an annual rate of 0.25% of the average daily net assets of the New York Tax-Free Bond Fund. For its services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and Transamerica receive, in the aggregate, a fee accrued daily and paid monthly at an annual rate of 0.60% of the Growth and Income Fund's average daily net assets. For its services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and Munder receive, in the aggregate, a fee accrued daily and paid monthly at an annual rate of 0.75% of the Mid-Cap Fund's average daily net assets. Feeder Funds are not directly charged any investment management fees. ADMINISTRATION: HSBC serves the Funds as Administrator. Under the terms of the administration agreement, HSBC 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 series of the HSBC Investor Family of Funds based upon its pro-rata share of net assets for each class. For assets invested in the underlying Portfolios by the Feeder Funds, the Portfolios pay half of the administration fee and the Feeder Funds pay half, for a combination of the total fee rate above. The administration fees accrued for each class by fund, of which 50% of such fees are deemed to be class specific since June 1, 2006 (100% was deemed class specific prior to that date), are as follows:
INTERMEDIATE CORE PLUS DURATION FIXED INCOME CORE PLUS HIGH YIELD FIXED NEW YORK FUND FIXED INCOME FIXED INCOME TAX-FREE GROWTH GROWTH AND (ADVISOR) FUND INCOME FUND FUND BOND FUND FUND INCOME FUND ------------- ------------ ----------- ------------ --------- ------- ----------- Class A .................... $ -- $ 4,836 $ 1,570 $ 377 $ 24,934 $ 8,335 $ 1,021 Class B .................... -- 1,961 476 1,605 11,331 527 3,371 Class C .................... -- 94 49 191 1,098 124 44 Advisor .................... 30,499 -- -- -- -- -- -- Class I .................... -- -- 876 5,957 11,784 5,486 31,026 ------------- ------------ ----------- ------------ --------- ------- ----------- Total ................... $ 30,499 $ 6,891 $ 2,971 $ 8,130 $ 49,147 $14,472 $ 35,462 ============= ============ =========== ============ ========= ======= =========== INTERNATIONAL MID-CAP OPPORTUNITY OVERSEAS SMALL CAP VALUE EQUITY FUND FUND FUND EQUITY FUND EQUITY FUND FUND ------------- ------- ----------- ----------- ----------- ------- Class A ..................................... $ -- $ 1,864 $ 9,051 $ 8,175 $ -- $ 8,957 Class B ..................................... -- 5,772 1,814 1,096 -- 696 Class C ..................................... -- 88 123 70 -- 109 Advisor ..................................... 89,784 -- -- -- 70,230 -- Class I ..................................... -- -- -- -- -- 6,062 Trust ....................................... -- 13,609 -- -- -- -- ------------- ------- ----------- ----------- ----------- ------- Total .................................... $ 89,784 $21,333 $ 10,988 $ 9,341 $ 70,230 $15,824 ============= ======= =========== =========== =========== =======
Pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), a wholly-owned subsidiary of The BISYS Group, Inc, serves as sub-administrator to each Fund subject to the general HSBC INVESTOR FAMILY OF FUNDS 70 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) supervision of the Funds' Board of Trustees and HSBC. For these services, BISYS Ohio is entitled to a fee, payable by HSBC, at an annual rate equivalent to the fee rates set forth above, minus 0.02% (2 basis points) which is retained by HSBC. Under a Compliance Services Agreement between the Funds' and BISYS Ohio (the "CCO Agreement"), BISYS Ohio makes an employee available to serve as the Funds' Chief Compliance Officer (the "CCO"). Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Funds' compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $240,000 for the year ended October 31, 2006, plus reimbursement of certain expenses. Expenses incurred by each Fund are reflected on the Statements of Operations as "Compliance service". BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio. DISTRIBUTION PLAN: BISYS Fund Services Limited Partnership ("BISYS"), a wholly-owned subsidiary of BISYS Fund Services, 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 reimbursement of expenses incurred by the Distributor related to distribution and marketing, at a rate not to exceed 0.25%, 1.00% and 1.00% of the average daily net assets of Class A Shares (currently not being charged), Class B Shares (currently charging 0.75%) and Class C Shares (currently charging 0.75%) of the Funds, respectively. BISYS, as Distributor, also received $1,248,150, $797,394 and $18,602 in commissions from sales of HSBC Investor Family of Funds, for Class A Shares, Class B Shares and Class C Shares, respectively of which $1,247,785, $797,194 and $18,602, was reallowed to HSBC affiliated brokers and dealers, for Class A Shares, Class B Shares and Class C Shares, respectively. SHAREHOLDER SERVICING: The Trusts have adopted an Administrative Services Plan which provides for payments to shareholder servicing agents (which currently consists of HSBC and its affiliates) for providing various shareholder services. For performing these services, the shareholder servicing agents receive a fee up to 0.25%, 0.25%, and 0.25% that is computed daily and paid monthly equal to a percentage of average daily net assets of Class A Shares, Class B Shares and Class C Shares of the Funds, respectively. The aggregate fees paid to the Distributor pursuant to the Distribution Plan and to shareholder servicing agents pursuant to the Administrative Services Plan currently are not intended to exceed 0.25% of the average daily net assets of Class A Shares, and 1.00% of the average daily net assets of Class B Shares and Class C Shares. FUND ACCOUNTING, TRANSFER AGENCY, CUSTODIAN AND TRUSTEE: BISYS Ohio provides fund accounting and transfer agency services for each Fund. In addition, HSBC serves as custodian for the New York Tax-Free Bond Fund, Mid-Cap Fund and Growth and Income Fund. As transfer agent for the Funds, BISYS receives a fee based on the number of Funds and shareholder accounts, subject to certain minimums and reimbursement of certain expenses. As fund accountant for the Funds, BISYS receives an annual fee per Fund and share class, subject to certain minimums and reimbursement of certain expenses. As custodian for the Funds, HSBC Bank receives a fee based on average daily net assets, number of transactions and reimbursement of certain expenses. Compensation to HSBC for services to the Funds as custodian is presented in the Statement of Operations as custodian fees. Effective May 18, 2006 each of the six non-interested Trustees are compensated with a $35,000 annual Board retainer, as well as a $3,000 annual retainer for each Committee of the Board. Each non-interested Trustee also receives a $5,000 and $3,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. Furthermore, each non-interested Trustee receives compensation for attending special meetings and/or functioning as a Committee Chairperson or Lead Trustee. In addition, the non-interested Trustees are reimbursed for certain expenses incurred in connection with their Board membership. 71 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) Prior to May 18, 2006 each of the six non-interested Trustees were compensated with a $24,000 annual Board retainer, as well as a $1,000 annual retainer for each Committee of the Board. Each non-interested Trustee also received a $4,000 and $2,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. FEE REDUCTIONS: The Investment Adviser has agreed to contractually waive 0.05% of its management fee, computed daily and paid monthly, and based on the average daily net assets of the Growth and Income Fund and the Mid-Cap Fund. The Investment Adviser has also agreed to contractually limit, through March 1, 2007, the total expenses, exclusive of interest, taxes, brokerage commissions and extraordinary expenses, of certain Funds. Each affected Fund Class has its own expense limitations based on the average daily net assets for any full fiscal year as follows:
CONTRACTUAL PRE 2/28/06 CURRENT EXPENSE EXPENSE FUND CLASS LIMITATION LIMITATION ---- ------- ----------- ----------- Core Plus Fixed Income Fund ..................... A 1.10% 0.70% Core Plus Fixed Income Fund ..................... B 1.85% 1.45% Core Plus Fixed Income Fund ..................... C 1.85% 1.45% Core Plus Fixed Income Fund (Advisor) ........... Advisor N/A 0.45% High Yield Fixed Income Fund .................... A 0.80% 0.80% High Yield Fixed Income Fund .................... B 1.55% 1.55% High Yield Fixed Income Fund .................... C 1.55% 1.55% High Yield Fixed Income Fund .................... I 0.55% 0.55% Intermediate Duration Fixed Income Fund ......... A N/A 0.65% Intermediate Duration Fixed Income Fund ......... B N/A 1.40% Intermediate Duration Fixed Income Fund ......... C N/A 1.40% Intermediate Duration Fixed Income Fund ......... I N/A 0.40% Growth Fund ..................................... A 1.20% 1.20% Growth Fund ..................................... B 1.95% 1.95% Growth Fund ..................................... C 1.95% 1.95% Growth Fund ..................................... I 0.95% 0.95% Growth and Income Fund .......................... A N/A 1.20% Growth and Income Fund .......................... B N/A 1.95% Growth and Income Fund .......................... C N/A 1.95% Growth and Income Fund .......................... I N/A 0.95% Mid-Cap Fund .................................... A N/A 1.35% Mid-Cap Fund .................................... B N/A 2.10% Mid-Cap Fund .................................... C N/A 2.10% Mid-Cap Fund .................................... Trust N/A 1.10% Opportunity Fund ................................ A 1.65% 1.65% Opportunity Fund ................................ B 2.40% 2.40% Opportunity Fund ................................ C 2.40% 2.40% Overseas Equity Fund ............................ A 1.85% 1.85% Overseas Equity Fund ............................ B 2.60% 2.60% Overseas Equity Fund ............................ C 2.60% 2.60% Value Fund ...................................... A 1.20% 1.20% Value Fund ...................................... B 1.95% 1.95% Value Fund ...................................... C 1.95% 1.95% Value Fund ...................................... I 0.95% 0.95%
The Administrator and BISYS Ohio may voluntarily waive/reimburse fees to help support the expense limits of the Funds. In addition, the Investment Adviser may waive/reimburse additional fees at their discretion. Amounts waived/reimbursed by the Investment Adviser, Administrator and BISYS Ohio are reported separately on the HSBC INVESTOR FAMILY OF FUNDS 72 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) Statements of Operations. All contractual and any voluntary fee waivers/reimbursements are not subject to recoupment in subsequent fiscal periods. Voluntary waivers/reimbursements may be stopped at any time. OTHER: For its services as securities lending agent, HSBC Bank (see note 2--Security Loans), received a fee equal to 0.06% of the average dollar value of the loans outstanding from the Funds. Income from securities lending, net of related expenses, is recorded as earned by the Funds. The fees collected by HSBC Bank for the year ended October 31, 2006 were: FUND FEE ---- ----- Growth and Income Fund ................... $ 94 Mid-Cap Fund ............................. 398 The HSBC Investor Family of Funds may use affiliated broker/dealers for the execution of portfolio investment trades. For the year ended October 31, 2006, affiliated broker/dealers received $31 in commissions on the execution of trades related to the HSBC Investor Family of Funds. 4. INVESTMENT TRANSACTIONS: Purchases of and proceeds from sales, excluding short-term securities, for the Funds for the year ended October 31, 2006 totaled:
FUND PURCHASES SALES ---- ------------- ------------ New York Tax-Free Bond Fund .............. $ 7,974,526 $ 12,440,659 Growth and Income Fund ................... 16,447,903 31,209,681 Mid-Cap Fund ............................. 15,042,782 20,323,957
There were no long-term U.S. Government securities held during the year ended October 31, 2006. Contributions and withdrawals of the respective Portfolios for the year ended October 31, 2006 totaled:
FUND CONTRIBUTIONS WITHDRAWALS ---- ------------- ------------ Core Plus Fixed Income Fund (Advisor) .... $ 13,174,524 $ 26,441,644 Core Plus Fixed Income Fund .............. 1,294,485 9,649,269 High Yield Fixed Income Fund ............. 10,083,096 1,009,129 Intermediate Duration Fixed Income Fund .. 836,649 14,891,228 Growth Fund .............................. 5,430,793 5,947,158 International Equity Fund ................ 49,518,732 24,194,191 Opportunity Fund ......................... 3,684,560 6,990,010 Overseas Equity Fund ..................... 3,947,831 7,984,486 Small Cap Equity Fund .................... 10,428,101 29,180,838 Value Fund ............................... 4,373,863 8,465,831
5. CONCENTRATION OF CREDIT RISK: The New York Tax-Free Bond Fund invests primarily in debt obligations issued by the State of New York and its respective political subdivisions, agencies and public authorities. The Fund is more susceptible to economic and political factors adversely affecting issuers of New York specific municipal securities than are municipal bond funds that are not concentrated in these issuers to the same extent. 6. LEGAL AND REGULATORY MATTERS: On September 26, 2006 BISYS Fund Services, Inc. ("BISYS"), an affiliate of BISYS Fund Services Ohio, Inc. which provides various services to the Funds as described in footnote 3, reached a settlement with the Securities and Exchange Commission ("SEC") regarding the SEC's investigation related to BISYS' past payment of certain marketing and other expenses with respect to certain of its mutual fund clients. Although BISYS has reached a settlement with the 73 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) SEC, the Funds' management is not aware that any determination has been made as to how the BISYS settlement monies will be distributed. The SEC's examination of BISYS' mutual fund clients and their advisers, including HSBC, has not been completed. While the Funds' management is currently unable to determine the impact, if any, of such matters on the Funds or the Funds' financial statements, management does not anticipate a material, adverse impact to the Funds or the Funds' financial statements. 7. FEDERAL INCOME TAX INFORMATION: At October 31, 2006, the cost, unrealized appreciation and unrealized depreciation of securities, for federal income tax purposes, were as follows:
GROSS GROSS NET UNREALIZED TAX UNREALIZED TAX UNREALIZED APPRECIATION PORTFOLIO NAME TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) -------------- ------------ -------------- ------------- -------------- New York Tax-Free Bond Fund ..... $ 58,085,438 $ 2,508,349 $ (21,520) $ 2,486,829 Growth and Income Fund .......... 36,955,600 10,158,966 (380,074) 9,778,892 Mid-Cap Fund .................... 21,790,933 5,791,771 (12,416) 5,779,355
The tax characteristics of dividends paid by the Funds during the fiscal year ended October 31, 2006 were as follows:
DIVIDENDS PAID FROM --------------------------- ORDINARY NET LONG TERM TOTAL TAXABLE TAX EXEMPT TOTAL DIVIDENDS FUND INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS PAID(1) ---- ----------- ------------- ------------- ------------- --------------- Core Plus Fixed Income Fund (Advisor) .......... $ 5,304,945 $ 2,329,061 $ 7,634,006 $ -- $ 7,634,006 Core Plus Fixed Income Fund .................... 922,409 -- 922,409 -- 922,409 High Yield Fixed Income Fund .................... 508,987 -- 508,987 -- 508,987 Intermediate Duration Fixed Income Fund ....... 973,678 -- 973,678 -- 973,678 New York Tax-Free Bond Fund .................... 4,399 100,731 105,130 2,003,584 2,108,714 Growth Fund ................ -- 604,764 604,764 -- 604,764 Growth and Income Fund ..... 25,548 -- 25,548 -- 25,548 International Equity Fund .. 4,030,977 6,656,885 10,687,862 -- 10,687,862 Mid-Cap Fund ............... -- 6,447,215 6,447,215 -- 6,447,215 Opportunity Fund ........... -- 872,331 872,331 -- 872,331 Overseas Equity Fund ....... 754,636 1,303,263 2,057,899 -- 2,057,899 Small Cap Equity Fund ...... -- 5,803,618 5,803,618 -- 5,803,618 Value Fund ................. 523,785 3,327,270 3,851,055 -- 3,851,055
The tax characteristics of dividends paid by the Funds during the fiscal year ended October 31, 2005 were as follows: HSBC INVESTOR FAMILY OF FUNDS 74 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED)
DIVIDENDS PAID FROM --------------------------- ORDINARY NET LONG TERM TOTAL TAXABLE TAX EXEMPT TOTAL DIVIDENDS FUND INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS PAID(1) ---- ----------- ------------- ------------- ------------- --------------- Core Plus Fixed Income Fund (Advisor) .......... $ 4,616,716 $ -- $ 4,616,716 $ -- $ 4,616,716 Core Plus Fixed Income Fund .................... 959,222 -- 959,222 -- 959,222 Intermediate Duration Fixed Income Fund ....... 1,354,679 201,978 1,556,657 -- 1,556,657 New York Tax-Free Bond Fund .................... 3,990 113,912 117,902 2,040,705 2,158,607 Growth Fund ................ 133,116 59,000 192,116 -- 192,116 Growth and Income Fund ..... 2,505,469 -- 2,505,469 -- 2,505,469 International Equity Fund .. 2,396,450 -- 2,396,450 -- 2,396,450 Overseas Equity Fund ....... 1,082,546 199,434 1,281,980 -- 1,281,980 Value Fund ................. 542,918 256,645 799,563 -- 799,563
As of October 31, 2006, the components of accumulated earnings/(deficit) on a tax basis for the Funds were as follows:
UNDISTRIBUTED UNDISTRIBUTED LONG ACCUMULATED TOTAL UNDISTRIBUTED TAX TERM CAPITAL AND UNREALIZED ACCUMULATED ORDINARY EXEMPT CAPITAL ACCUMULATED DIVIDENDS OTHER APPRECIATION/ EARNINGS/ FUND INCOME INCOME GAINS EARNINGS PAYABLE(2) LOSSES DEPRECIATION(3) (DEFICIT) ---- ------------- ------------- ------------- ----------- ----------- ----------- --------------- ------------ Core Plus Fixed Income Fund (Advisor) .... $ 388,161 $ -- $ -- $ 388,161 $ (358,525) $(1,470,345) $ 571,618 $ (869,091) Core Plus Fixed Income Fund .. 73,067 -- -- 73,067 (67,947) (977,088) 115,737 (856,231) High Yield Fixed Income Fund .. 98,326 -- -- 98,326 (60,388) -- 69,732 107,670 Intermediate Duration Fixed Income Fund .. 84,936 -- -- 84,936 (77,865) (723,084) 84,354 (631,659) New York Tax-Free Bond Fund .... 12,628 157,955 9,094 179,677 (163,344) -- 2,486,829 2,503,162 Growth Fund ..... -- -- 2,996,693 2,996,693 -- -- 3,934,358 6,931,051 Growth and Income Fund .. -- -- -- -- -- (10,042,340) 9,778,892 (263,448) International Equity Fund .. 8,126,375 -- 22,931,569 31,057,944 -- -- 61,019,398 92,077,342 Mid-Cap Fund .... 647,121 -- 1,300,752 1,947,873 -- -- 5,779,355 7,727,228 Opportunity Fund ......... 75,818 -- 3,560,218 3,636,036 -- -- 4,475,824 8,111,860 Overseas Equity Fund ......... 667,589 -- 2,786,165 3,453,754 -- -- 7,018,458 10,472,212 Small Cap Equity Fund .. 3,149,480 -- 26,789,336 29,938,816 -- -- 31,845,588 61,784,404 Value Fund ...... 315,357 -- 4,064,790 4,380,147 -- -- 9,352,763 13,732,910
- ---------- (1) Total dividends paid may differ from the amount reported in the Statement of Changes in Net Assets because dividends are recognized when actually paid for tax purposes. (2) Dividends payable may differ from the amount reported in the Statements of Assets and Liabilities because dividends reinvested on October 31, 2006 are booked as capital for financial reporting purposes but are reflected as a payable for tax purposes. (3) 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. As of October 31, 2006, the following Funds have net capital loss carryforwards, which are available to offset future realized gains. 75 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) FUND AMOUNT EXPIRES ---- ----------- ------- Core Plus Fixed Income Fund (Advisor) ...... $ 1,470,345 2014 Core Plus Fixed Income Fund ................ 28,334 2008 185,518 2010 182,320 2011 208,391 2012 372,525 2014 Intermediate Duration Fixed Income Fund .... 288,779 2013 434,305 2014 Growth and Income Fund ..................... 445,319 2010 9,597,021 2011 HSBC INVESTOR FAMILY OF FUNDS 76 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 Core Plus Fixed Income Fund (Advisor), HSBC Investor Core Plus Fixed Income Fund, HSBC Investor High Yield Fixed Income Fund, HSBC Investor Intermediate Duration Fixed Income Fund, HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Growth Fund, HSBC Investor Growth and Income Fund, HSBC Investor International Equity Fund, HSBC Investor Mid-Cap Fund, HSBC Investor Opportunity Fund, HSBC Investor Overseas Equity Fund, HSBC Investor Small Cap Equity Fund and HSBC Investor Value Fund (the Funds), including the schedules of portfolio investments of HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Growth and Income Fund and HSBC Investor Mid-Cap Fund, as of October 31, 2006, and the related statements of operations for the year or period then ended, the statements of changes in net assets for each period in the two-year period then ended and the financial highlights for each period in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodians and brokers; or other appropriate auditing 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 Funds as of October 31, 2006, and the results of their operations for the year or period then ended, the changes in their net assets for each period in the two-year period then ended, and the financial highlights for each period in the five-year period then ended, in conformity with U.S. generally accepted accounting principles. KPMG LLP Columbus, Ohio December 22, 2006 77 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- OTHER FEDERAL INCOME TAX INFORMATION (UNAUDITED): For the year ended October 31, 2006, 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 FUND DEDUCTION ---- --------- Value Fund ............................................. 100% The International Equity Fund and the Overseas Equity Fund intend to elect to pass through to shareholders the income tax credit for taxes paid to foreign countries. Foreign source income and foreign tax expense per outstanding share on October 31, 2006 are as follows: FOREIGN SOURCE FOREIGN TAX FUND INCOME EXPENSE ---- -------------- ----------- International Equity Fund ............. $0.53 $0.04 Overseas Equity Fund .................. $0.50 0.04 The pass-through of the foreign tax credit will only affect those persons who are shareholders on the dividend record date in December 2006. These shareholders will receive more detailed information along with their 2006 Form 1099-DIV. For the year ended October 31, 2006, dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth 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 2006 Form 1099-DIV. QUALIFIED DIVIDEND FUND INCOME ---- --------- International Equity Fund ............................. 96% Overseas Equity Fund .................................. 81% Value Fund ............................................ 100% The New York Tax-Free Bond Fund designated 96.0% of its income dividends as exempt-interest dividends for the year ended October 31, 2006. During the year ended October 31, 2006, the following Funds declared tax-exempt income distributions: AMOUNT ---------- New York Tax-Free Bond Fund ........................ $2,003,584 During the year ended October 31, 2006, the following Funds declared net long term capital gain distributions: AMOUNT ---------- Core Plus Fixed Income Fund (Advisor) .............. $2,329,061 New York Tax-Free Bond Fund ........................ 100,731 Growth Fund ........................................ 604,764 International Equity Fund .......................... 6,656,885 Mid-Cap Fund ....................................... 6,447,215 Opportunity Fund ................................... 872,331 Overseas Equity Fund ............................... 1,303,263 Small Cap Equity Fund .............................. 5,803,618 Value Fund ......................................... 3,327,270 HSBC INVESTOR FAMILY OF FUNDS 78 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--OCTOBER 31, 2006 As a shareholder of the HSBC Investor Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and shareholder servicing fees; and other fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the HSBC Investor Funds and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2006 through October 31, 2006. ACTUAL EXPENSES The table on the following page provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
ANNUALIZED BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/06 10/31/06 5/1/06-10/31/06 5/1/06-10/31/06 ------------- ------------- --------------- --------------- Core Plus Fixed Income Fund (Advisor) Advisor Shares $1,000.00 $1,046.40 $ 2.32 0.45% Core Plus Fixed Income Fund Class A 1,000.00 1,045.80 3.61 0.70% Class B 1,000.00 1,041.90 7.46 1.45% Class C 1,000.00 1,042.90 7.47 1.45% High Yield Fixed Income Fund Class A 1,000.00 1,031.20 4.10 0.80% Class I 1,000.00 1,033.50 2.82 0.55% Class B 1,000.00 1,027.30 7.92 1.55% Class C 1,000.00 1,027.20 7.92 1.55% Intermediate Duration Fixed Income Fund Class A 1,000.00 1,044.60 3.35 0.65% Class I 1,000.00 1,045.80 2.06 0.40% Class B 1,000.00 1,039.50 7.20 1.40% Class C 1,000.00 1,040.60 7.20 1.40% New York Tax-Free Bond Fund Class A 1,000.00 1,035.60 4.82 0.94% Class I 1,000.00 1,035.90 3.49 0.68% Class B 1,000.00 1,031.70 8.65 1.69% Class C 1,000.00 1,031.60 8.65 1.69% Growth Fund Class A 1,000.00 989.30 6.02 1.20% Class I 1,000.00 990.70 4.77 0.95% Class B 1,000.00 986.10 9.76 1.95% Class C 1,000.00 985.50 9.76 1.95% Growth & Income Fund Class A 1,000.00 1,003.70 6.06 1.20% Class I 1,000.00 1,004.60 4.80 0.95% Class B 1,000.00 1,000.00 9.83 1.95% Class C 1,000.00 1,000.00 9.83 1.95% International Equity Fund Advisor Shares 1,000.00 1,036.60 5.03 0.98% Mid-Cap Fund Class A 1,000.00 982.30 6.75 1.35% Trust Shares 1,000.00 983.70 5.50 1.10% Class B 1,000.00 977.80 10.47 2.10% Class C 1,000.00 979.10 10.48 2.10% Opportunity Fund Class A 1,000.00 984.20 7.75 1.55% Class B 1,000.00 980.00 11.48 2.30% Class C 1,000.00 980.20 11.48 2.30% Overseas Fund Class A 1,000.00 1,032.30 8.66 1.69% Class B 1,000.00 1,028.60 12.48 2.44% Class C 1,000.00 1,028.60 12.48 2.44%
79 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--OCTOBER 31, 2006 (CONTINUED)
ANNUALIZED BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/06 10/31/06 5/1/06-10/31/06 5/1/06-10/31/06 ------------- ------------- --------------- --------------- Small Cap Equity Fund Advisor Shares 1,000.00 986.90 5.16 1.03% Value Fund Class A 1,000.00 1,073.10 6.27 1.20% Class I 1,000.00 1,073.80 4.97 0.95% Class B 1,000.00 1,069.30 10.17 1.95% Class C 1,000.00 1,068.70 10.17 1.95%
- ---------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. HSBC INVESTOR FAMILY OF FUNDS 80 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--OCTOBER 31, 2006 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each HSBC Investor Funds's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
ANNUALIZED BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/06 10/31/06 5/1/06-10/31/06 5/1/06-10/31/06 ------------- ------------- --------------- --------------- Core Plus Fixed Income Fund (Advisor) Advisor Shares $1,000.00 $1,022.94 $ 2.29 0.45% Core Plus Fixed Income Fund Class A 1,000.00 1,021.68 3.57 0.70% Class B 1,000.00 1,017.90 7.37 1.45% Class C 1,000.00 1,017.90 7.37 1.45% High Yield Fixed Income Fund Class A 1,000.00 1,020.77 4.08 0.80% Class I 1,000.00 1,022.13 2.80 0.55% Class B 1,000.00 1,016.38 7.88 1.55% Class C 1,000.00 1,015.02 7.88 1.55% Intermediate Duration Fixed Income Fund Class A 1,000.00 1,021.93 3.31 0.65% Class I 1,000.00 1,023.19 2.04 0.40% Class B 1,000.00 1,018.15 7.12 1.40% Class C 1,000.00 1,018.15 7.12 1.40% New York Tax-Free Bond Fund Class A 1,000.00 1,020.47 4.79 0.94% Class I 1,000.00 1,021.78 3.47 0.68% Class B 1,000.00 1,016.69 8.59 1.69% Class C 1,000.00 1,016.69 8.59 1.69% Growth Fund Class A 1,000.00 1,019.16 6.11 1.20% Class I 1,000.00 1,020.42 4.84 0.95% Class B 1,000.00 1,015.38 9.91 1.95% Class C 1,000.00 1,015.38 9.91 1.95% Growth & Income Fund Class A 1,000.00 1,019.16 6.11 1.20% Class I 1,000.00 1,020.42 4.84 0.95% Class B 1,000.00 1,015.38 9.91 1.95% Class C 1,000.00 1,015.38 9.91 1.95% International Equity Fund Advisor Shares 1,000.00 1,020.27 4.99 0.98% Mid-Cap Fund Class A 1,000.00 1,018.40 6.87 1.35% Trust Shares 1,000.00 1,019.66 5.60 1.10% Class B 1,000.00 1,014.62 10.66 2.10% Class C 1,000.00 1,014.62 10.66 2.10% Opportunity Fund Class A 1,000.00 1,017.39 7.88 1.55% Class B 1,000.00 1,013.61 11.67 2.30% Class C 1,000.00 1,013.61 11.67 2.30%
81 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--OCTOBER 31, 2006 (CONTINUED)
ANNUALIZED BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/06 10/31/06 5/1/06-10/31/06 5/1/06-10/31/06 ------------- ------------- --------------- --------------- Overseas Fund Class A 1,000.00 1,016.69 8.59 1.69% Class B 1,000.00 1,012.91 12.38 2.44% Class C 1,000.00 1,012.91 12.38 2.44% Small Cap Equity Fund Advisor Shares 1,000.00 1,020.01 5.24 1.03% Value Fund Class A 1,000.00 1,019.16 6.11 1.20% Class I 1,000.00 1,020.42 4.84 0.95% Class B 1,000.00 1,015.38 9.91 1.95% Class C 1,000.00 1,015.38 9.91 1.95%
- ---------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. HSBC INVESTOR FAMILY OF FUNDS 82 - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 44.7% - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- FEDERAL HOME LOAN MORTGAGE CORP. - 4.3% Pool #1B2655, 4.14%, 12/1/34 (a) ................... 1,559,661 1,545,870 Pool #1J1313, 6.58%, 6/1/36 ........................ 2,055,189 2,085,555 Pool #C00368, 8.50%, 10/1/24 ....................... 33,810 36,238 Pool #C00922, 8.00%, 2/1/30 ........................ 218,412 229,944 Pool #C54447, 7.00%, 7/1/31 ........................ 39,406 40,662 Pool #C60712, 6.50%, 11/1/31 ....................... 625,614 641,534 Pool #C80387, 6.50%, 4/1/26 ........................ 33,745 34,679 Pool #D62926, 6.50%, 8/1/25 ........................ 20,404 20,940 Pool #G01317, 7.00%, 10/1/31 ....................... 175,627 181,224 ----------- 4,816,646 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.7% Pool #253438, 8.50%, 9/1/30 ........................ 55,696 59,891 Pool #255770, 5.50%, 7/1/35 ........................ 4,358,875 4,310,043 Pool #329530, 7.00%, 12/1/25 ....................... 101,168 104,672 Pool #329655, 7.00%, 11/1/25 ....................... 44,889 46,444 Pool #356905, 7.06%, 10/1/36 (a) ................... 261,927 264,909 Pool #398958, 6.50%, 10/1/12 ....................... 79,173 80,745 Pool #535332, 8.50%, 4/1/30 ........................ 50,442 54,216 Pool #535440, 8.50%, 8/1/30 ........................ 59,918 64,430 Pool #548965, 8.50%, 7/1/30 ........................ 55,685 59,879 Pool #568486, 7.00%, 1/1/31 ........................ 39,878 41,204 Pool #573752, 8.50%, 2/1/31 ........................ 46,926 50,460 Pool #575328, 6.50%, 4/1/31 ........................ 57,635 59,079 TBA December, 5.00%, 12/1/35 ....................... 7,370,000 7,112,050 TBA December, 6.50%, 12/1/35 ....................... 1,910,000 1,946,894 TBA December, 6.00%, 12/15/35 ...................... 2,900,000 2,915,405 TBA November, 5.50%, 11/15/36 ...................... 5,950,000 5,879,344 ----------- 23,049,665 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.3% Pool #346406, 7.50%, 2/15/23 ....................... 70,219 73,232 Pool #412530, 7.50%, 12/15/25 ...................... 92,567 96,644 Pool #781300, 7.00%, 6/15/31 ....................... 166,934 172,709 TBA November, 6.00%, 11/15/36 ...................... 1,080,000 1,094,514 ----------- 1,437,099 ----------- U.S. TREASURY BONDS - 3.4% 4.50%, 2/15/36 ..................................... 3,890,000 3,754,457 ----------- U.S. TREASURY INFLATION PROTECTED BONDS - 1.0% 2.50%, 7/15/16 ..................................... 1,050,000 1,075,372 ----------- U.S. TREASURY NOTES - 14.0% 4.875%, 4/30/08 .................................... 1,398,000 1,399,911 4.875%, 5/31/08 .................................... 5,850,000 5,859,829 5.125%, 6/30/08 .................................... 350,000 352,078 4.875%, 10/31/08 ................................... 800,000 802,687 4.50%, 2/15/09 ..................................... 2,350,000 2,342,015 4.875%, 5/15/09 .................................... 450,000 452,566 4.75%, 3/31/11 ..................................... 470,000 473,176 4.50%, 9/30/11 ..................................... 950,000 946,697 4.875%, 8/15/16 .................................... 2,830,000 2,888,810 ----------- 15,517,769 ----------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $49,270,548) .................. $49,651,008 ----------- - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS - 24.4% - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- AUTO MANUFACTURERS - 0.3% General Motors Corp., 7.125%, 7/15/13 .............. 400,000 358,000 ----------- BANKS - 0.3% JP Morgan Chase Bank NA, 2.53%, 1/3/12 (b)** .................................... 845,000 356,763 ----------- BUILDING PRODUCTS - 1.1% Masco Corp., 6.125%, 10/3/16 ....................... 1,200,000 1,204,788 ----------- CABLE - 0.6% Comcast Corp., 6.50%, 1/15/15 ...................... 650,000 680,237 ----------- CHEMICALS - 0.4% Lyondell Chemical Co., 8.25%, 9/15/16, Callable 9/15/11 @ 104.125 ...................... 400,000 412,000 ----------- COLLEGES & UNIVERSITIES - 1.5% Tulane University of Louisiana, 6.21%, 11/15/12 (a) (c) ................................ 1,700,000 1,705,100 ----------- ELECTRIC - 2.4% General Electric Co., 5.00%, 2/1/13 ................ 1,700,000 1,685,023 Progress Energy, Inc., 5.80%, 11/14/08, Callable 11/14/06 @ 100 (a) ..................... 1,000,000 1,001,631 ----------- 2,686,654 ----------- FINANCE - 4.0% Ford Motor Credit Corp., 5.80%, 1/12/09 ............ 1,250,000 1,193,950 General Motors Acceptance Corp., 4.375%, 12/10/07 ........................................ 2,250,000 2,207,196 International Lease Finance Corp., 5.70%, 7/1/11 (a) ...................................... 1,000,000 1,004,873 ----------- 4,406,019 ----------- HOTELS & LODGING - 0.7% MGM Mirage, Inc., 6.00%, 10/1/09 ................... 800,000 790,000 ----------- OFFICE EQUIPMENT & SERVICES - 1.4% Xerox Corp., 6.16%, 12/18/09 (a) ................... 550,000 552,750 Xerox Corp., 6.875%, 8/15/11 ....................... 950,000 973,750 ----------- 1,526,500 ----------- OIL & GAS - 0.4% Williams Partners LP, 7.50%, 6/15/11 (c) ........... 400,000 410,000 ----------- REAL ESTATE - 1.1% Realogy, Corp., 6.50%, 10/15/16 (c) ................ 1,150,000 1,178,743 ----------- RETAIL - 0.7% Federated Department Stores, 6.90%, 4/1/29 .......................................... 750,000 774,291 ----------- TELECOMMUNICATIONS - 7.0% AOL Time Warner, Inc., 7.70%, 5/1/32 ............... 1,000,000 1,138,892 AT&T, Inc., 5.10%, 9/15/14 ......................... 1,150,000 1,120,293 Bell Atlantic Virginia, 7.625%, 12/1/12 ............ 1,000,000 1,083,364 Bell Telephone Co. Pennsylvania, 8.75%, 8/15/31 ......................................... 850,000 1,027,181 Sprint Capital Corp., 8.75%, 3/15/32 ............... 1,600,000 1,976,730 Time Warner Entertainment Co., 8.375%, 3/15/23 ......................................... 1,300,000 1,534,449 ----------- 7,880,909 ----------- 83 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- TRANSPORTATION - 1.5% Burlington Northern Santa Fe Railway Co., 7.57%, 1/2/21 ................................... 309,623 349,673 Union Pacific Corp., 6.85%, 1/2/19 ................. 1,218,585 1,308,711 ----------- 1,658,384 ----------- WASTE DISPOSAL - 1.0% Allied Waste North America, 7.125%, 5/15/16, Callable 5/15/11 @ 103.563 ............. 1,150,000 1,138,500 ----------- TOTAL CORPORATE OBLIGATIONS (COST $26,889,337) .............................. 27,166,888 ----------- - -------------------------------------------------------------------------------- ASSET BACKED SECURITIES - 13.8% - -------------------------------------------------------------------------------- Americredit Auto Receivables Trust Series 2004-DF, Class A3, 2.98%, 7/6/09 .......................................... 610,420 605,432 Asset Backed Funding Certificates Series 2003-AHL1, Class A1, 3.68%, 3/25/33 ......................................... 738,743 722,079 Capital Auto Receivables Asset Trust Series 2006-1, Class A2A, 5.03%, 9/15/08 ......................................... 1,447,890 1,445,442 Capital One Auto Finance Trust Series 2006-B, Class A2, 5.53%, 5/15/09 ......................................... 600,000 601,508 Citigroup Mortgage Loan Trust, Inc. Series 2005-WF2, Class AF2, 4.92%, 8/25/35 ......................................... 694,366 687,133 Countrywide Asset-Backed Certificates Series 2006-S4, Class A3, 5.80%, 10/25/36 ........................................ 1,060,000 1,057,875 DB Master Finance LLC Series 2006-1, Class A2, 5.78%, 6/20/31, (c) ................... 650,000 660,930 GMAC Mortgage Corp. Loan Trust Series 2006-HE3, Class A3, 5.805%, 10/25/36 ........................................ 900,000 903,622 GSAA Home Equity Trust Series 2006-15, Class AF3A, 5.88%, 9/25/36 ...................... 870,000 872,071 MBNA Credit Card Master Note Trust Series 2006-A4, Class A4, 5.31%, 9/15/11 (a) ..................................... 2,000,000 2,000,452 Nomura Asset Acceptance Corp. Series 2006-AP1, Class A2, 5.515%, 2/25/36 ......................................... 750,000 745,483 SLM Student Loan Trust Series 2003-12, Class A3, 5.51%, 12/15/15 (a) ................... 1,838,989 1,843,552 Target Credit Card Master Trust Series 2002-1, Class A, 5.515%, 6/27/11 (a) ..................................... 3,200,000 3,202,795 ----------- TOTAL ASSET BACKED SECURITIES (COST $15,333,281) .............................. 15,348,374 ----------- - -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES - 10.6% - -------------------------------------------------------------------------------- Banc of America Commercial Mortgage, Inc. Series 2006-3, Class A4, 5.89%, 7/10/44 ......................................... 760,000 792,415 Bear Stearns Commercial Mortgage Securities Series 2006-T24, Class A4, 5.54%, 10/12/41 ................................. 1,100,000 1,119,422 Citigroup Commercial Mortgage Trust Series 2006-C4, Class A3, 5.72%, 3/15/49 (a) ..................................... 1,000,000 1,035,973 - -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Citigroup/Deutsche Bank Commercial Mortgage Series 2006-CD3, Class A2, 5.56%, 10/15/48 ................................. 1,100,000 1,114,007 Commercial Mortgage Pass-Through Certificate Series 2005-FL11, Class A1, 5.47%, 11/15/17 (a) (c) ......................... 569,916 569,990 DLJ Mortgage Acceptance Corp. IO Series 1997-CF1, Class S, 0.90%, 5/15/30 (c) (d) ................................. 275,857 2,151 GMAC Commercial Mortgage Securities, Inc. IO Series 1996-C1, Class X2, 2.89%, 10/15/28 (d) ............................. 42,404 3 GMAC Commercial Mortgage Securities, Inc. Series 1999-C3, Class A2, 7.18%, 8/15/36 ......................................... 1,340,049 1,396,306 Greenwich Capital Commercial Funding Corp. Series 2005-GG3, Class A2, 4.305%, 8/10/42 ................................. 1,260,000 1,230,874 Greenwich Capital Commercial Funding Corp. Series 2006-GG7, Class A4, 5.91%, 7/10/38 (a) .............................. 1,000,000 1,050,190 GS Mortgage Securities Corp. IO Series 1997-GL, Class X2, 0.82%, 7/13/30 (d) ..................................... 360,933 2,135 LB-UBS Commercial Mortgage Trust Series 2000-C3, Class A1, 7.95%, 7/15/09 ......................................... 45,349 45,564 LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4, 5.16%, 2/15/31 ......................................... 1,300,000 1,288,178 LB-UBS Commercial Mortgage Trust Series 2006-C6, Class A4, 5.37%, 9/15/39 ......................................... 1,100,000 1,105,918 Morgan Stanley Capital I Series 2006-IQ11, Class AM, 5.95%, 10/15/42 (a) .................................... 1,000,000 1,035,638 ----------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $11,632,494) .............................. 11,788,764 ----------- - -------------------------------------------------------------------------------- FOREIGN BONDS - 8.8% - -------------------------------------------------------------------------------- CANADA - 1.9% Conocophilips Canada, 5.625%, 10/15/16 ............. 1,000,000 1,014,030 Nova Chemicals Corp., 6.50%, 1/15/12 ............... 1,200,000 1,128,000 ----------- 2,142,030 ----------- CAYMAN ISLANDS - 1.0% Preferred Term Securities XXII, 5.73%, 9/22/36, Callable 6/22/11 @ 100 (a) (c) ......................................... 1,100,000 1,102,750 ----------- DOMINICAN REPUBLIC - 0.2% Dominican Republic Treasury Bill, 13.00%, 10/22/07 (b) (c) ................................ 300,000 261,790 ----------- ICELAND - 2.5% Kaupthing Bank, 6.07%, 1/15/10 (a) (c) ............. 500,000 499,745 Kaupthing Bank, 7.125%, 5/19/16 (c) ................ 500,000 532,627 Kaupthing Bank, 6.125%, 10/4/16 (c) ................ 500,000 508,027 Landsbanki Islands HF, 6.10%, 8/25/09 (a) (c) ................................. 1,250,000 1,250,262 ----------- 2,790,661 ----------- SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 84 - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- FOREIGN BONDS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- KOREA - 1.3% Citibank Korea Inc., 4.68%, 6/18/13, Callable 6/18/08 @ 100 (a) ...................... 1,400,000 1,402,759 ----------- UNITED KINGDOM - 1.9% Barclays Bank plc, 5.93%, 12/15/16 (c) ............. 700,000 706,734 Granite Master Issuer plc Series 2005-4, Class A3, 5.46%, 12/20/54 (a) ................... 1,400,000 1,400,154 ----------- 2,106,888 ----------- TOTAL FOREIGN BONDS (COST $9,707,560) ............................... 9,806,878 ----------- - -------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 8.4% - -------------------------------------------------------------------------------- Countrywide Home Loans Series 2005-HYB8, Class 2A1, 5.34%, 12/20/35 (a) .................................... 1,520,345 1,520,676 Fannie Mae IO Series 2000-16, Class PS, 3.28%, 10/25/29 (d) ............................. 65,854 3,870 Fannie Mae IO Series 2000-32, Class SV, 3.28%, 3/18/30 (d) .............................. 14,957 248 Fannie Mae IO Series 2001-4, Class SA, 2.23%, 2/17/31 (d) .............................. 271,370 17,121 Fannie Mae IO Series 270, Class 2, 8.50%, 9/1/23 (d) ............................... 56,363 12,295 Fannie Mae IO Series 296, Class 2, 8.00%, 4/1/24 (d) ............................... 66,174 15,577 Fannie Mae IO Series 306, Class IO, 8.00%, 5/1/30 (d) ............................... 80,259 18,792 FHA Weyerhauser, 7.43%, 1/1/24 (e) (f) ............. 33,926 33,926 Freddie Mac IO Series 1534, Class K, 2.025%, 6/15/23 (d) ............................. 175,172 7,814 Freddie Mac IO Series 2141, Class SD, 2.83%, 4/15/29 (d) .............................. 136,110 12,717 Freddie Mac IO Series 2247, Class SC, 2.18%, 8/15/30 (d) .............................. 90,779 3,361 Freddie Mac Reference Remic Series R009, Class AJ, 5.75%, 12/15/18 .......... 1,350,000 1,357,863 Freddie Mac Series 2962, Class CJ, 5.50%, 11/15/23 ........................................ 1,926,276 1,927,686 Government National Mortgage Association IO Series 1999-30, Class S, 3.28%, 8/16/29 (d) ..................................... 75,200 5,169 Government National Mortgage Association IO Series 1999-30, Class SA, 2.68%, 4/16/29 (d) ..................................... 101,630 5,587 Government National Mortgage Association IO Series 1999-32, Class SB, 2.68%, 7/16/27 (d) ..................................... 16,710 225 J.P. Morgan Alternative Loan Trust Series 2005-S1, Class 2A9, 6.00%, 12/25/35 ........................................ 2,169,565 2,165,861 Morgan Stanley Mortgage Loan Trust Series 2006-3AR, Class 2A3, 5.90%, 3/25/36 (a) ..................................... 1,515,739 1,530,967 Residential Asset Securitization Trust Series 2006-A1, Class 1A3, 6.00%, 4/25/36 ......................................... 687,899 694,193 ----------- - -------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $9,350,400) ............................... 9,333,948 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 2.7% - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 2.7% HSBC Investor Money Market Fund Class I Shares, 5.23% (g) * ..................... 2,998,076 2,998,076 ----------- TOTAL INVESTMENT COMPANIES (COST $2,998,076) ............................... 2,998,076 ----------- TOTAL INVESTMENTS (COST $125,181,696) - 113.4% .................... 126,093,936 =========== - ---------- Percentages indicated are based on net assets of $111,191,931. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented represent the rates in effect on October 31, 2006. The maturity dates presented reflect the final maturity date. However, some of these securities may contain 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. (b) Discount note. Rate presented represents the effective yield at time of purchase. (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 Adviser 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. Interest rate adjusts periodically based on the pay off of the underlying mortgage. The interest rate presented represents the rates in effect on October 31, 2006. The principal amount shown is the notional amount of the underlying mortgages. (e) Rule 144a, section 4(2) or other security which is restricted as to resale to institutional investors. The Investment Adviser, using Board approved procedures, has deemed these securities to be illiquid. Represents 0.03% of net assets. (f) Security was fair valued as of October 31, 2006. Represents 0.03% of net assets. (g) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. * Investment in affiliate. ** The principal amount of the security is denominated in Brazilian Real. IO - Interest-only security. Represents 0.10% of net assets. TBA - Security was traded on a "to be announced" basis. Represents 17.04% of net assets. 85 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) At October 31, 2006, 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) - -------- --------- ---------------- ------------- -------- -------------- SHORT CONTRACTS Icelandic Krona vs. U.S. Dollar ..... 11/2/2006 18,643,438 $ 273,436 $275,668 $ (2,232) Mexican Nuevo Peso vs. U.S. Dollar .. 11/1/2006 6,143,733 573,966 571,494 2,472 ------------- -------- -------------- TOTAL SHORT CONTRACTS .............................................. $ 847,402 $847,162 $ 240 ============= ======== ==============
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 86 - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS - 96.7% - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- ADVERTISING SERVICES - 3.4% Iron Mountain, Inc., 8.625%, 4/1/13, Callable 4/1/06 @ 104.313 ...................... 250,000 257,500 R.H. Donnelley Corp., 6.875%, 1/15/13, Callable 1/15/09 @ 103.438 ..................... 100,000 94,125 R.H. Donnelley Corp., 6.875%, 1/15/13, Callable 1/15/09 @ 103.438 ..................... 90,000 84,713 ---------- 436,338 ---------- AEROSPACE & DEFENCE - 0.8% DRS Technologies, Inc., 7.625%, 2/1/18, Callable 2/1/11 @ 103.813 ...................... 100,000 102,250 ---------- APPAREL MANUFACTURERS - 1.5% Levi Strauss & Co., 8.875%, 4/1/16, Callable 4/1/11 @ 104.44 ....................... 50,000 51,375 Quiksilver, Inc., 6.875%, 4/15/15, Callable 04/15/10 @ 103.44 .............................. 150,000 144,375 ---------- 195,750 ---------- AUTO MANUFACTURERS - 1.1% General Motors Corp., 7.125%, 7/15/13 ............. 150,000 134,250 ---------- BUILDING & CONSTRUCTION PRODUCTS -2.3% Ainsworth Lumber Co. Ltd., 7.25%, 10/1/12, Callable 10/1/08 @ 103.63 ............. 150,000 111,375 Interline Brands, Inc., 8.125%, 6/15/14, Callable 6/15/10 @ 104.06 ...................... 50,000 51,125 Ply Gem Industries, Inc., 9.00%, 2/15/12, Callable 2/15/08 @ 104.50 ...................... 150,000 125,250 ---------- 287,750 ---------- CABLE TELEVISION - 3.9% Cablevision Systems Corp., 8.00%, 4/15/12 ......... 250,000 242,813 Mediacom LLC, 7.875%, 2/15/11, Callable 2/15/06 @ 103.938 .............................. 250,000 248,750 ---------- 491,563 ---------- CHEMICALS - 4.6% Georgia Gulf Corp., 9.50%, 10/15/14, Callable 10/15/10 @ 104.75 (a) ................. 75,000 73,875 Huntsman International LLC, 7.875%, 11/15/14, Callable 11/15/10 @103.94(a) ......... 35,000 35,219 JohnsonDiversey, Inc., 9.625%, 5/15/12, Callable 5/15/07 @ 104.813 ..................... 250,000 255,312 Lyondell Chemical Co., 8.00%, 9/15/14, Callable 9/15/10 @ 104 ......................... 25,000 25,563 Lyondell Chemical Co., 8.25%, 9/15/16, Callable 9/15/11 @ 104.125 ..................... 25,000 25,750 Millennium America, Inc., 9.25%, 6/15/08 .......... 25,000 25,750 PQ Corp., 7.50%, 2/15/13, Callable 02/15/09 @ 103.75 .............................. 150,000 143,624 ---------- 585,093 ---------- COMPUTER SERVICES - 0.2% Compucom Systems, Inc., 12.00%, 11/1/14, Callable 11/1/10 @ 106 (a) ..................... 25,000 25,156 ---------- COMPUTER SOFTWARE - 0.4% Activant Solutions Holdings, Inc., 9.50%, 5/1/16, Callable 5/1/11 @ 104.75 (a) ........... 50,000 46,500 ---------- - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- CONTAINERS-PAPER AND PLASTIC - 3.5% Solo Cup Co., 8.50%, 2/15/14, Callable 2/15/09 @ 104.25 ............................... 250,000 211,250 Stone Container Finance Co. of Canada, 7.375%, 7/15/14, Callable 7/15/09 @ 103.688 ...................................... 250,000 229,688 ---------- 440,938 ---------- DISTRIBUTION & WHOLESALE - 0.8% Baker & Taylor, Inc., 11.50%, 7/1/13, Callable 7/1/10 @ 105.75 (a) ................... 100,000 100,000 ---------- DIVERSIFIED OPERATIONS - 0.6% Stripes Acquisition LLC/Susser Finance Corp., 10.625%, 12/15/13, Callable 12/15/09 @ 105.313 (a) ......................... 72,000 78,120 ---------- EDUCATION - 0.4% Education Management LLC, 8.75%, 6/1/14, Callable 6/1/10 @104.38 (a) ............ 25,000 25,625 Education Management LLC, 10.25%, 6/1/16, Callable 6/1/11 @ 105.13 (a) ........... 25,000 25,938 ---------- 51,563 ---------- ELECTRIC - 1.3% AES Corp., 7.75%, 3/1/14 .......................... 60,000 62,850 CMS Energy Corp., 6.875%, 12/15/15 ................ 100,000 101,750 ---------- 164,600 ---------- ENERGY - 3.7% Copano Energy LLC, 8.125%, 3/1/16, Callable 3/1/11 @ 104.06 ....................... 80,000 81,400 Massey Energy, Co., 6.875%, 12/15/13, Callable 12/15/09 @ 103.44 ..................... 100,000 93,750 Mirant North America LLC, 7.375%, 12/31/13, Callable 12/31/09 @ 103.688 .......... 50,000 50,563 Williams Cos., 6.375%, 10/1/10 (a) ................ 250,000 248,750 ---------- 474,463 ---------- FINANCE - 10.6% Basell AF SCA, 8.375%, 8/15/15, Callable 8/15/10 @ 104.188 (a) .......................... 250,000 253,750 CCM Merger, Inc., 8.00%, 8/1/13, Callable 8/1/09 @ 104 (a) ............................... 250,000 240,938 Crystal U.S. Holdings Corp., 0.00%, 10/1/14, Rate set to step up to 10.5% on 10/1/09, Callable 10/1/09 @ 105.25 (b) (c) ................................. 250,000 210,000 Ford Motor Credit Co., 7.375%, 10/28/09 ........... 250,000 243,343 Ford Motor Credit Co., 7.375%, 2/1/11 ............. 50,000 47,774 General Motors Accept Corp., 6.875%, 8/28/12 ........................................ 300,000 300,804 Nalco Finance Holdings, Inc., 0.00%, 2/1/14, Rate set to step to 9.0% on 2/1/09, Callable 2/1/09 @ 104.5 (b)(c) ......... 75,000 60,750 ---------- 1,357,359 ---------- GAMBLING - 6.5% Choctaw Resort Development Entertainment, 7.25%, 11/15/19, Callable 11/15/11 @ 103.63 (b) .......................... 50,000 49,750 Greektown Holdings, Inc., 10.75%, 12/1/13, Callable 12/1/10 @ 105.375 (b) ................. 100,000 105,749 Inn of the Mountain Gods, 12.00%, 11/15/10, Callable 11/15/07 @ 106 .............. 50,000 53,500 87 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- Isle of Capri Casinos, Inc., 7.00%, 3/1/14, Callable 3/1/09 @ 103.50 ....................... 250,000 239,999 MGM MIRAGE, Inc., 6.75%, 4/1/13 ................... 100,000 97,000 MTR Gaming Group, Inc., 9.00%, 6/1/12, Callable 6/1/09 @ 104.50 (a) ................... 100,000 101,375 Pokagon Gaming Authority, 10.375%, 6/15/14, Callable 6/15/10 @ 105.19 (a) ......... 75,000 80,438 San Pasqual Casino, 8.00%, 9/15/13, Callable 9/15/09 @ 104 (b) ..................... 25,000 25,500 Turning Stone Resort Casino, 9.125%, 9/15/14, Callable 9/15/10 @ 104.563 (a) ........ 75,000 76,313 ---------- 829,624 ---------- INTERNET SERVICES - 0.4% Atlantic Broadband Finance LLC, 9.375%, 1/15/14, Callable 01/15/09 @ 104.69 ............ 50,000 49,750 ---------- LEISURE - 2.9% AMC Entertainment, Inc., 11.00%, 2/1/16, Callable 2/1/11 @ 105.5 ........................ 100,000 110,625 K2, Inc., 7.375%, 7/1/14, Callable 7/1/09 @ 103.688 ...................................... 258,000 255,420 ---------- 366,045 ---------- MACHINERY--FARM - 0.4% Case New Holland, Inc., 7.125%, 3/1/14, Callable 3/1/10 @ 103.563 ...................... 50,000 50,375 ---------- MANUFACTURING - 0.8% AGY Holding Corp., 11.00%, 11/15/14, Callable 11/15/10 @ 105.50 (a) ................. 50,000 50,250 Libbey Glass, Inc., 12.435%, 6/1/11, Callable 6/1/08 @ 107.50 (a) ................... 25,000 26,500 Nutro Products, Inc., 10.75%, 4/15/14, Callable 4/15/09 @ 108.063 (a) ................. 25,000 26,875 ---------- 103,625 ---------- MEDICAL - 1.6% MultiPlan, Inc., 10.375%, 4/15/16, Callable 4/15/11 @ 105.188 (a) .......................... 100,000 100,000 Omnicare, Inc., 6.75%, 12/15/13, Callable 12/15/09 @ 103.375 ............................. 100,000 98,000 ---------- 198,000 ---------- METAL PROCESSORS & FABRICATION - 1.1% PNA Group, Inc., 10.75%, 9/1/16, Callable 9/1/11 @ 105.375 (a) ........................... 50,000 51,500 TriMas Corp., 9.875%, 6/15/12, Callable 6/15/07 @ 104.938 .............................. 100,000 94,250 ---------- 145,750 ---------- METALS & MINING - 3.1% AK Steel Corp., 7.75%, 6/15/12, Callable 6/15/07 @ 103.875 .............................. 200,000 200,000 Gibraltar Industries, Inc., 8.00%, 12/1/15, Callable 12/1/10 @ 104 ......................... 150,000 148,500 International Coal Group, Inc., 10.25%, 7/15/14, Callable 7/15/10 @ 105.13 (a) ......... 50,000 48,625 ---------- 397,125 ---------- OIL & GAS - 10.5% Chaparral Energy, Inc., 8.50%, 12/1/15, Callable 12/1/10 @ 104.25 ...................... 100,000 99,750 Chesapeake Energy Corp., 6.875%, 1/15/16, Callable 1/15/09 @ 103.438 ............ 250,000 248,124 - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- Clayton Williams Energy, Inc., 7.75%, 8/1/13, Callable 8/1/09 @ 103.875 .............. 200,000 184,500 Colorado Interstate Gas Co., 6.80%, 11/15/15 ....................................... 150,000 152,440 Compton Petroleum Finance Corp., 7.625%, 12/1/13, Callable 12/1/09 @ 103.813 ........................................ 250,000 236,875 El Paso Production Holdings, 7.75%, 6/1/13, Callable 6/1/08 @ 103.875 .............. 150,000 153,750 Inergy LP/Inergy Finance, 8.25%, 3/1/16, Callable 3/1/11 @ 104.13 ....................... 100,000 103,750 Pogo Producing Co., 7.875%, 5/1/13, Callable 5/1/10 @ 103.94 (a) ................... 100,000 101,750 Swift Energy Co., 7.625%, 7/15/11, Callable 7/15/08 @ 103.81 ...................... 50,000 50,125 ---------- 1,331,064 ---------- PAPER & RELATED PRODUCTS - 4.1% Abitibi-Consolidated Co. of Canada, 8.375%, 4/1/15 ................................. 250,000 217,813 Exopack Holding Corp., 11.25%, 2/1/14, Callable 2/1/10 @ 105.625 (a) .................. 50,000 52,375 Georgia-Pacific Corp., 7.70%, 6/15/15 ............. 150,000 152,250 Norampac, Inc., 6.75%, 6/1/13, Callable 6/1/08 @ 103.38 ................................ 100,000 96,250 ---------- 518,688 ---------- PIPELINES - 1.6% Dynegy Holdings, Inc., 8.375%,5/1/16 .............. 150,000 154,125 Semgroup LP, 8.75%, 11/15/15, Callable 11/15/10 @ 104.375 (a) ......................... 50,000 50,375 ---------- 204,500 ---------- PRINTING - 0.8% Sheridan Group, Inc., 10.25%, 8/15/11, Callable 08/15/07 @ 105.12 ..................... 100,000 102,000 ---------- PUBLISHING - 2.3% Block Communications, Inc., 8.25%, 12/15/15, Callable 12/15/10 @ 104.125 (a) .................................... 50,000 49,250 Morris Publishing, 7.00%, 8/1/13, Callable 8/1/08 @ 103.50 ................................ 250,000 237,813 ---------- 287,063 ---------- RENTAL--AUTO AND EQUIPMENT - 1.6% Avis Budget Car Rental, Inc., 7.625%, 5/15/14, Callable 5/15/10 @ 103.81 (a) ......... 100,000 97,750 Hertz Corp., 8.875%, 1/1/14, Callable 1/1/10 @ 104.44 (b) ............................ 100,000 104,500 ---------- 202,250 ---------- RESEARCH AND TESTING SERVICES - 0.4% Sensata Technologies BV, 8.00%, 5/1/14, Callable 5/1/10 @ 104 (a) ...................... 50,000 48,250 ---------- RESTAURANTS - 2.7% Buffets, Inc., 12.50%, 11/1/14, Callable 11/1/10 @ 106.25 (a) ........................... 50,000 50,250 Dave & Busters, Inc., 11.25%, 3/15/14, Callable 3/15/10 @ 105.62 ...................... 50,000 48,500 Landry's Restaurants, Inc., 7.50%, 12/15/14, Callable 12/15/09 @103.75 ............ 200,000 191,000 SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 88 - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- NPC International, Inc., 9.50%, 5/1/14, Callable 5/1/10 @ 104.75 (a) ................... 50,000 50,625 ---------- 340,375 ---------- RETAIL - 2.3% Linens 'N Things, Inc., 11.00%, 1/15/14, Callable 1/15/08 @ 102 (b) ..................... 50,000 49,000 The Jean Coutu Group PJC, Inc., 8.50%, 8/1/14, Callable 8/1/09 @ 104.25 ............... 250,000 245,313 ---------- 294,313 ---------- SEISMIC DATA COLLECTION - 0.4% CIE Gener de Geophysique, 7.50%, 5/15/15, Callable 5/15/10 @ 103.75 ............. 50,000 49,375 ---------- SPECIAL PURPOSE ENTITY - 0.4% TFS Acquisition Corp., 12.90%, 8/1/14, Callable 8/1/10 @ 106.50 (a) (b) ............... 50,000 49,438 ---------- TELECOMMUNICATIONS - 11.7% Centennial Communications Corp., 10.00%, 1/1/13, Callable 1/1/09 @ 107.50 ............... 100,000 103,750 Cincinnati Bell, Inc., 8.375%, 1/15/14, Callable 1/15/09 @ 104.1885 .................... 250,000 254,999 Cricket Communications I, 9.375%, 11/1/14, Callable 11/1/10 @ 104.69 (a) ......... 50,000 51,000 Insight Midwest L.P., 9.75%, 10/1/09, Callable 10/1/07 @ 100 ......................... 250,000 254,374 Level 3 Financing, Inc., 9.25%, 11/1/14, Callable 11/1/10 @ 104.63 (a) .................. 50,000 50,313 Metropcs Wireless, Inc., 9.25%, 11/1/14, Callable 11/1/10 @ 104.625 (a) ................. 50,000 50,438 Nordic Telephone Co. Holdings, 8.875%, 5/1/16, Callable 5/1/11 @ 104.438 (a) .......... 50,000 52,375 NTL Cable plc, 9.125%, 8/15/16, Callable 8/15/11 @ 104.56 ............................... 125,000 131,406 Panamsat Corp., 9.00%, 6/15/16, Callable 6/15/11 @ 104.50 (a) ........................... 50,000 52,250 Qwest Corp., 5.625%, 11/15/08 ..................... 150,000 149,437 Rural Cellular Corp., 9.75%, 1/15/10, Callable 1/15/07 @ 103.25 ...................... 50,000 50,625 Suncom Wireless Holdings, Inc., 8.50%, 6/1/13, Callable 6/1/08 @ 104.25 ............... 150,000 142,500 - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- West Corp., 11.00%, 10/15/16, Callable 10/15/11 @ 105.50 (b) .......................... 25,000 25,063 Wind Acquisition Financial SA, 10.75%, 12/1/15, Callable 12/1/10 @ 105.375 (a) ........ 100,000 111,125 Windstream Corp., 8.625%, 8/1/16, Callable 8/1/11 @ 104.31 (a) ................... 25,000 26,969 ---------- 1,506,624 ---------- WASTE DISPOSAL - 2.0% Allied Waste North America, Inc., 7.375%, 4/15/14, Callable 4/15/09 @ 103.688 ............ 250,000 248,750 ---------- TOTAL CORPORATE OBLIGATIONS (COST $12,228,088) ............................. 12,294,677 ---------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 2.2% - -------------------------------------------------------------------------------- Investors Bank Trust Cash Reserve, 3.65% (d) ...................................... 281,588 281,588 ---------- TOTAL INVESTMENT COMPANIES (COST $281,588) ................................ 281,588 ---------- TOTAL INVESTMENTS (COST $12,509,676) - 98.9% ........................ 12,576,265 ========== - ---------- Percentages indicated are based on net assets of $12,718,765. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented represent the rates in effect on October 31, 2006. The maturity dates presented reflect the final maturity date. However, some of these securities may contain put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the Investment Adviser based on procedures approved by the Board of Trustees. (c) Step Bond. Income recognition is on the effective yield method for Step Bonds. (d) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. 89 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 36.9% - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- FEDERAL HOME LOAN MORTGAGE CORP. - 3.5% Pool #1B2655, 4.14%, 12/1/34(a) ................... 288,826 286,272 Pool #1J1313, 6.58%, 6/1/36 ....................... 382,361 388,010 ---------- 674,282 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 22.0% Pool #255770, 5.50%, 7/1/35 ....................... 888,703 878,747 Pool #740686, 6.50%, 10/1/33 ...................... 539,712 552,694 TBA December, 5.00%, 12/1/35 ...................... 1,300,000 1,254,500 TBA December, 6.00%, 12/15/35 ..................... 600,000 603,187 TBA November, 5.50%, 11/15/36 ..................... 1,000,000 988,125 ---------- 4,277,253 ---------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -1.0% TBA November, 6.00%, 11/15/36 ..................... 200,000 202,688 ---------- U.S. TREASURY INFLATION PROTECTED BONDS -1.0% 2.50%, 7/15/16 .................................... 200,000 204,833 ---------- U.S. TREASURY NOTES - 9.4% 5.125%, 6/30/08 ................................... 50,000 50,297 4.625%, 9/30/08 ................................... 1,200,000 1,198,077 4.875%, 10/31/08 .................................. 150,000 150,504 4.50%, 9/30/11 .................................... 265,000 264,079 4.875%, 8/15/16 ................................... 150,000 153,117 ---------- 1,816,074 ---------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $7,153,629) .................. 7,175,130 ---------- - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS -26.6% - -------------------------------------------------------------------------------- AUTO MANUFACTURERS - 0.2% General Motors Corp., 7.125%, 7/15/13 ............. 50,000 44,750 ---------- BUILDING PRODUCTS - 1.0% Masco Corp., 6.125%, 10/3/16 ...................... 200,000 200,798 ---------- CABLE - 1.6% Comcast Corp., 6.50%, 1/15/15 ..................... 300,000 313,956 ---------- CHEMICALS - 0.4% Lyondell Chemical Co., 8.25%, 9/15/16, Callable 9/15/11 @ 104.125 ..................... 75,000 77,250 ---------- COLLEGES & UNIVERSITIES - 2.1% Tulane University of Louisiana, 6.21%, 11/15/12 (a) (b) ............................... 400,000 401,200 ---------- ELECTRIC - 2.8% General Electric Co., 5.00%, 2/1/13 ............... 300,000 297,357 Progress Energy, Inc., 5.80%, 11/14/08, Callable 11/14/06 @ 100 (a) .................... 250,000 250,408 ---------- 547,765 ---------- FINANCE - 4.9% Ford Motor Credit Corp., 5.80%, 1/12/09 ........... 275,000 262,669 General Motors Acceptance Corp., 4.375%, 12/10/07 ....................................... 500,000 490,488 International Lease Finance Corp., 5.70%, 7/1/11 (a) ..................................... 200,000 200,975 ---------- 954,132 ---------- HOTELS & LODGING - 0.5% MGM Mirage, Inc., 6.00%, 10/1/09 .................. 100,000 98,750 ---------- MEDIA - 2.1% Time Warner Entertainment, 8.875%, 10/1/12 ........ 350,000 403,788 ---------- - -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- OFFICE EQUIPMENT & SERVICES - 1.6% Xerox Corp., 6.16%, 12/18/09 (a) .................. 100,000 100,500 Xerox Corp., 6.875%, 8/15/11 ...................... 200,000 205,000 ---------- 305,500 ---------- OIL & GAS - 0.4% Williams Partners LP, 7.50%, 6/15/11, (b) ......... 75,000 76,875 ---------- TELECOMMUNICATIONS - 5.0% AT&T, Inc., 5.10%, 9/15/14 ........................ 300,000 292,250 Bell Atlantic Virginia, 7.625%, 12/1/12 ........... 200,000 216,673 Sprint Capital Corp., 8.75%, 3/15/32 .............. 150,000 185,318 Verizon Pennsylvania, Inc., 5.65%, 11/15/11 ....... 275,000 276,690 ---------- 970,931 ---------- TRANSPORTATION - 2.9% Burlington Northern Santa Fe Railway Co., 4.83%, 1/15/23 ................................. 279,656 279,326 Union Pacific Railroad, 5.08%, 1/2/29 ............. 299,958 290,887 ---------- 570,213 ---------- WASTE DISPOSAL - 1.1% Allied Waste North America, 7.125%, 5/15/16, Callable 5/15/11 @ 103.563 ............ 225,000 222,750 ---------- TOTAL CORPORATE OBLIGATIONS (COST $5,160,758) .............................. 5,188,658 ---------- - -------------------------------------------------------------------------------- ASSET BACKED SECURITIES - 16.9% - -------------------------------------------------------------------------------- Americredit Auto Receivables Trust Series 2004-DF, Class A3, 2.98%, 7/6/09 ............... 122,084 121,086 Asset Backed Funding Certificates Series 2003-AHL1, Class A1, 3.68%, 3/25/33 ............ 210,318 205,574 Capital One Auto Finance Trust Series 2006-B, Class A2, 5.53%, 5/15/09 ............... 110,000 110,277 Citigroup Mortgage Loan Trust, Inc. Series 2005-WF2, Class AF2, 4.92%, 8/25/35 ............ 121,819 120,550 Countrywide Asset-Backed Certificates Series 2006-S4, Class A3, 5.80%, 7/25/34 .............. 210,000 209,579 DB Master Finance LLC Series 2006-1, Class A2, 5.78%, 6/20/31 (b) ................... 130,000 132,186 GMAC Mortgage Corp. Loan Trust Series 2006-HE3, Class A3, 5.805%, 10/25/36 ........... 170,000 170,684 GSAA Home Equity Trust Series 2006-15, Class AF3A, 5.88%, 9/25/36 ..................... 160,000 160,381 MBNA Credit Card Master Note Trust Series 2003-A3, Class A3, 5.44%, 8/16/10 (a) .......... 500,000 500,804 MBNA Credit Card Master Note Trust Series 2006-A4, Class A4, 5.31%, 9/15/11 (a) .......... 500,000 500,113 Nomura Asset Acceptance Corp. Series 2006-AP1, Class A2, 5.515%, 2/25/36 ............ 150,000 149,097 SLM Student Loan Trust Series 2003-12, Class A3, 5.51%, 12/15/15 (a) .................. 367,798 368,710 Target Credit Card Master Trust Series 2002-1, Class A, 5.515%, 6/27/11 (a) ........... 550,000 550,479 ---------- TOTAL ASSET BACKED SECURITIES (COST $3,297,802) .............................. 3,299,520 ---------- SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 90 - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES - 10.9% - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- Banc of America Commercial Mortgage, Inc. Series 2006-3, Class A4, 5.89%, 7/10/44 ........ 140,000 145,971 Bear Stearns Commercial Mortgage Securities Series 2006-T24, Class A4, 5.54%, 10/12/41 ....................................... 200,000 203,531 Citigroup Commercial Mortgage Trust Series 2006-C4, Class A3, 5.72%, 3/15/49 (a) .......... 180,000 186,475 Citigroup/Deutsche Bank Commercial Mortgage Series 2006-CD3, Class A2, 5.56%, 10/15/48 ................................ 200,000 202,547 Commercial Mortgage Pass-Through Certificate Series 2005-FL11, Class A1, 5.47%, 11/15/17 (a) (b) ........................ 140,143 140,161 GMAC Commercial Mortgage Securities, Inc. Series 1999-C3, Class A2, 7.18%, 8/15/36........ 211,587 220,470 Greenwich Capital Commercial Funding Corp. Series 2005-GG3, Class A2, 4.305%, 8/10/42 ........................................ 225,000 219,799 Greenwich Capital Commercial Funding Corp. Series 2006-GG7, Class A4, 6.11%, 6/10/16 (a) .................................... 200,000 210,038 LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4, 5.16%, 2/15/31 .............. 200,000 198,181 LB-UBS Commercial Mortgage Trust Series 2006-C6, Class A4, 5.37%, 9/15/39 .............. 200,000 201,076 Morgan Stanley Capital I Series 2006-IQ11, Class AM, 5.95%, 10/15/42 (a) .................. 200,000 207,128 ---------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $2,104,723) .............................. 2,135,377 ---------- - -------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 9.5% - -------------------------------------------------------------------------------- Countrywide Home Loans Series 2005-HYB8, Class 2A1, 5.34%, 12/20/35 (a) ................................... 382,035 382,119 Freddie Mac Reference Remic Series R009, Class AJ, 5.75%, 12/15/18 ...................... 250,000 251,456 Freddie Mac Series 2962, Class CJ, 5.50%, 11/15/23 ....................................... 308,204 308,430 J.P. Morgan Alternative Loan Trust Series 2005-S1, Class 2A9, 6.00%, 12/25/35 ............ 467,945 467,146 Morgan Stanley Mortgage Loan Trust Series 2006-3AR, Class 2A3, 5.90%, 3/25/36 (a) ........ 324,801 328,064 Residential Asset Securitization Trust Series 2006-A1, Class 1A3, 6.00%, 4/25/36 ............. 122,503 123,623 ---------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $1,863,431) .............................. 1,860,838 ---------- - -------------------------------------------------------------------------------- FOREIGN BONDS - 8.0% - -------------------------------------------------------------------------------- CANADA - 1.7% Conocophilips Canada, 5.625%, 10/15/16 ............ 150,000 152,105 Nova Chemicals Corp., 6.50%, 1/15/12 .............. 200,000 188,000 ---------- 340,105 ---------- - -------------------------------------------------------------------------------- FOREIGN BONDS, CONTINUED - -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ---------- CAYMAN ISLANDS - 1.0% Preferred Term Securities XXII, 5.73%, 9/22/36, Callable 6/22/11 @ 100 (a) (b) ........ 200,000 200,500 ---------- DOMINICAN REPUBLIC - 0.2% Dominican Republic Treasury Bill, 13.00%, 10/22/07 (c) ................................... 50,000 43,632 ---------- ICELAND - 2.8% Kaupthing Bank, 6.07%, 1/15/10 (a) (b) ............ 100,000 99,949 Kaupthing Bank, 7.125%, 5/19/16 (b) ............... 100,000 106,525 Kaupthing Bank, 6.125%, 10/4/16 (b) ............... 100,000 101,605 Landsbanki Islands HF, 6.10%, 8/25/09 (a)(b) ...... 225,000 225,047 ---------- 533,126 ---------- KOREA - 1.3% Citibank Korea Inc., 4.68%, 6/18/13, Callable 6/18/08 @ 100 (a) ..................... 250,000 250,493 ---------- UNITED KINGDOM - 1.0% Granite Master Issuer plc Series 2005-4, Class A3, 5.46%, 12/20/54 (a) .................. 200,000 200,022 ---------- TOTAL FOREIGN BONDS (COST $1,549,956) .............................. 1,567,878 ---------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES -3.2% - -------------------------------------------------------------------------------- HSBC Investor Money Market Fund Class I Shares, 5.23% (d) * ............................ 634,275 634,275 ---------- TOTAL INVESTMENT COMPANIES (COST $634,275) ................................ 634,275 ---------- TOTAL INVESTMENTS (COST $21,764,574) -- 112.0% ................... 21,861,676 ========== - ---------- Percentages indicated are based on net assets of $19,516,568. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented represent the rates in effect on October 31, 2006. The maturity dates presented reflect the final maturity date. However, some of these securities may contain 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. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the Investment Adviser based on procedures approved by the Board of Trustees. (c) Discount note. Rate presented represents the effective yield at time of purchase. (d) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. * Investment in affiliate. TBA--Security was traded on a "to be announced" basis. Represents 15.62% of net assets. 91 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) At October 31, 2006, the Portfolio's open forward currency contracts were as follows:
CURRENCY CONTRACT UNREALIZED DELIVERY AMOUNT VALUE APPRECIATION/ CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION) - -------- --------- ---------------- ------------- -------- -------------- SHORT CONTRACTS Icelandic Krona vs. U.S. Dollar ................ 11/2/2006 3,699,858 $ 54,264 $ 54,707 $(443) Mexican Nuevo Peso vs. U.S. Dollar ............. 11/1/2006 1,165,191 108,856 108,387 469 -------- -------- ----- TOTAL SHORT CONTRACTS .......................... $163,120 $163,094 $ 26 ======== ======== ====
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 92 - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- COMMON STOCKS - 97.0% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- AEROSPACE & DEFENSE - 3.4% General Dynamics Corp. ............................. 15,700 1,116,270 The Boeing Co. ..................................... 11,250 898,425 ----------- 2,014,695 ----------- BIOTECHNOLOGY - 3.5% Gilead Sciences, Inc. (a) .......................... 30,600 2,108,340 ----------- BUSINESS SERVICES - 2.9% Paychex, Inc. ...................................... 43,700 1,725,276 ----------- CHEMICALS - 2.9% Monsanto Co. ....................................... 39,250 1,735,635 ----------- COMPUTER SOFTWARE - 10.3% Adobe Systems, Inc. (a) ............................ 32,600 1,246,950 Automatic Data Processing, Inc. .................... 12,800 632,832 CheckFree Corp. (a) ................................ 24,100 951,468 Electronic Arts, Inc. (a) .......................... 18,250 965,243 Microsoft Corp. .................................... 61,500 1,765,665 SAP AG-ADR ......................................... 11,900 590,716 ----------- 6,152,874 ----------- COMPUTERS - 5.0% Apple Computer, Inc. (a) ........................... 21,400 1,735,112 Research In Motion Ltd. (a) ........................ 10,700 1,257,036 ----------- 2,992,148 ----------- CONSUMER PRODUCTS - 11.6% Colgate-Palmolive Co. .............................. 37,700 2,411,668 Harman International Industries, Inc. .............. 4,100 419,635 PepsiCo, Inc. ...................................... 31,700 2,011,048 The Procter & Gamble Co. ........................... 31,900 2,022,141 ----------- 6,864,492 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 3.2% General Electric Co. ............................... 54,562 1,915,672 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 4.0% Broadcom Corp., Class A (a) ........................ 9,850 298,160 Emerson Electric Co. ............................... 10,200 860,880 Microchip Technology, Inc. ......................... 38,000 1,251,340 ----------- 2,410,380 ----------- FINANCIAL SERVICES - 10.6% Goldman Sachs Group, Inc. .......................... 7,250 1,375,978 SLM Corp. .......................................... 30,050 1,462,834 The Chicago Mercantile Exchange Holdings, Inc. .................................. 4,000 2,003,999 UBS AG-ADR ......................................... 25,050 1,498,992 ----------- 6,341,803 ----------- GAMING - 1.4% International Game Technology ...................... 20,300 862,953 ----------- HEALTH CARE - 4.2% Baxter International, Inc. ......................... 18,850 866,535 DENTSPLY International, Inc. ....................... 18,050 564,604 Medtronic, Inc. .................................... 22,250 1,083,130 ----------- 2,514,269 ----------- - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- HOTELS & LODGING - 2.2% Las Vegas Sands Corp. (a) .......................... 17,500 1,333,500 ----------- INSURANCE - 0.5% AFLAC, Inc. ..................................... 6,900 309,948 ----------- INTERNET RELATED - 3.0% Google, Inc., Class A (a) .......................... 3,800 1,810,282 ----------- MOTOR VEHICLES - 0.5% Harley-Davidson, Inc. .............................. 4,200 288,246 ----------- OIL & GAS - 5.9% Schlumberger Ltd. .................................. 26,450 1,668,466 Smith International, Inc. .......................... 46,450 1,833,846 ----------- 3,502,312 ----------- PHARMACEUTICALS - 11.8% Abbott Laboratories ................................ 11,750 558,243 Alcon, Inc.-ADR .................................... 6,050 641,784 Allergan, Inc. ..................................... 8,700 1,004,850 Genentech, Inc. (a) ................................ 21,229 1,768,375 Johnson & Johnson .................................. 28,150 1,897,309 Roche Holdings Ltd.-ADR ............................ 6,300 551,317 Schering-Plough Corp. .............................. 27,050 598,887 ----------- 7,020,765 ----------- RETAIL - 2.9% Kohl's Corp. (a) ................................... 6,000 423,600 Target Corp. ....................................... 7,850 464,563 Walgreen Co. ....................................... 19,867 867,791 ----------- 1,755,954 ----------- TELECOMMUNICATIONS - 5.2% Cisco Systems, Inc. (a) ............................ 106,950 2,580,703 QUALCOMM, Inc. ..................................... 15,350 558,587 ----------- 3,139,290 ----------- TRANSPORTATION - 2.0% Expeditors International of Washington, Inc. ....... 25,450 1,206,585 ----------- TOTAL COMMON STOCKS (COST $52,398,200) .............................. 58,005,419 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 3.5% - -------------------------------------------------------------------------------- HSBC Investor Money Market Fund Class I Shares, 5.23% (b)* ...................... 2,114,763 2,114,763 ----------- TOTAL INVESTMENT COMPANIES (COST $2,114,763) ............................... 2,114,763 ----------- TOTAL INVESTMENTS (COST $54,512,963) - 100.5% ..................... 60,120,182 =========== - ---------- Percentages indicated are based on net assets of $59,827,764. (a) Represents non-income producing security. (b) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. * Investment in affiliate. ADR --American Depositary Receipt 93 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- COMMON STOCKS - 96.1% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- AUSTRALIA - 1.2% Coles Myer, Ltd. ................................... 148,900 1,565,282 Macquarie Airports ................................. 966,900 2,402,617 ----------- 3,967,899 ----------- AUSTRIA - 1.6% Omv AG ............................................. 49,300 2,679,403 Voestalpine AG ..................................... 59,600 2,810,244 ----------- 5,489,647 ----------- BELGIUM - 1.7% Fortis ............................................. 106,100 4,453,102 KBC Bankverzekeringsholding ........................ 11,300 1,234,342 ----------- 5,687,444 ----------- BRAZIL - 1.5% Gerdau SA ADR ...................................... 75,150 1,109,966 Petroleo Brasileiro SA ADR ......................... 27,700 2,242,591 Unibanco ADR ....................................... 8,100 637,875 Usinas Siderurgicas de Minas Gerais SA ............. 30,200 1,027,125 ----------- 5,017,557 ----------- CANADA - 3.5% Canadian Natural Resources Ltd. .................... 40,300 2,098,098 EnCana Corp. ....................................... 30,000 1,425,047 Gerdau Ameristeel Corp. ............................ 102,700 1,047,399 ING Canada, Inc. ................................... 43,693 2,302,755 IPSCO, Inc. ........................................ 16,449 1,511,757 Nexen, Inc. ........................................ 20,018 1,068,057 Teck Cominco, Ltd., B shares ....................... 32,300 2,378,123 ----------- 11,831,236 ----------- CHINA - 0.3% China Petroleum & Chemical Corp. ................... 592,000 411,074 China Telecom Corp., Ltd. .......................... 1,264,000 476,233 ----------- 887,307 ----------- FRANCE - 12.1% Air France-KLM ..................................... 6,400 227,941 BNP Paribas SA ..................................... 57,980 6,374,071 Credit Agricole SA ................................. 89,990 3,825,184 France Telecom SA .................................. 107,200 2,783,829 Michelin, B Shares ................................. 20,900 1,704,239 Renault SA ......................................... 62,300 7,286,248 Sanofi-Aventis ..................................... 57,800 4,912,307 Societe Generale ................................... 35,385 5,879,137 Total SA ........................................... 110,600 7,487,277 ----------- 40,480,233 ----------- GERMANY - 9.6% Allianz AG ......................................... 9,300 1,720,104 Continental AG ..................................... 51,400 5,745,145 DaimlerChrysler AG ................................. 23,300 1,322,823 Deutsche Lufthansa AG .............................. 162,600 3,741,103 E.ON AG (a) ........................................ 41,000 4,900,809 Fresenius Medical Care AG .......................... 11,800 1,570,543 Muenchener Rueckversicherungs-Gesellschaft AG .............................................. 43,400 7,021,402 RWE AG ............................................. 44,500 4,385,037 TUI AG ............................................. 75,300 1,643,140 ----------- 32,050,106 ----------- GREECE - 0.5% Public Power Corp. ................................. 61,000 1,556,837 ----------- HONG KONG - 0.5% China Netcom Group Corp., Ltd. ..................... 462,000 821,022 Sino Land Co., Ltd. ................................ 406,695 708,096 ----------- 1,529,118 ----------- HUNGARY - 0.3% MOL Magyar Olaj-es Gazipari Rt. GDR ................ 9,600 955,200 ----------- - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- INDIA - 0.3% State Bank of India GDR ............................ 17,600 1,105,280 ----------- ISRAEL - 0.4% Bank Hapoalim BM ................................... 286,600 1,428,975 ----------- ITALY - 3.7% Buzzi Unicem SpA ................................... 91,400 2,408,517 ENI SpA ............................................ 166,500 5,020,666 Fondiaria-SAI SpA .................................. 45,600 2,029,667 Fondiaria-SAI SpA-RNC .............................. 18,700 621,392 Italcementi SpA .................................... 91,700 2,428,124 ----------- 12,508,366 ----------- JAPAN - 23.6% Alps Electric Co., Ltd. ............................ 55,000 550,753 Canon, Inc. ........................................ 32,250 1,729,156 East Japan Railway Co. ............................. 195 1,364,033 EDION Corp. ........................................ 67,800 976,937 Hitachi, Ltd. ...................................... 144,000 831,195 Honda Motor Co., Ltd. .............................. 47,000 1,663,930 Isuzu Motors, Ltd. ................................. 342,000 1,184,454 ITOCHU Corp. ....................................... 167,000 1,330,973 Japan Tobacco, Inc. ................................ 1,200 5,233,453 JFE Holdings, Inc. ................................. 140,100 5,630,836 Kobe Steel, Ltd. ................................... 958,000 2,932,820 Leopalace21 Corp. .................................. 24,900 936,891 Mitsubishi Corp. ................................... 129,000 2,493,073 Mitsubishi UFJ Financial Group, Inc. ............... 172 2,162,134 Mitsui & Co., Ltd. ................................. 171,000 2,335,275 Mitsui Chemicals, Inc. ............................. 417,000 2,863,443 Mitsui O.S.K. Lines, Ltd. .......................... 451,000 3,760,262 Nippon Mining Holdings, Inc. ....................... 360,000 2,690,611 Nippon Telegraph & Telephone Corp. ................. 728 3,666,769 Nissan Motor Co., Ltd. ............................. 225,100 2,696,811 ORIX Corp. ......................................... 19,300 5,438,131 Sharp Corp. ........................................ 216,000 3,851,206 Sony Corp. ......................................... 12,510 518,843 Sumitomo Heavy Industries, Ltd. .................... 163,000 1,396,665 Sumitomo Metal Industries, Ltd. .................... 294,000 1,106,208 Sumitomo Mitsui Financial Group, Inc. .............. 598 6,545,579 The Tokyo Electric Power Co., Inc. ................. 90,600 2,634,171 Tokyo Gas Co., Ltd. ................................ 293,000 1,495,818 Toyota Motor Corp. ................................. 123,900 7,342,459 UNY Co., Ltd. ...................................... 90,000 1,130,580 ----------- 78,493,469 ----------- NETHERLANDS - 8.1% ABN AMRO Holding NV ................................ 97,283 2,836,655 European Aeronautic Defence and Space Co. .......... 125,160 3,393,969 ING Groep NV ....................................... 190,468 8,436,457 Koninklijke Philips Electronics NV ................. 52,120 1,820,382 Mittal Steel Co. NV ................................ 107,652 4,622,645 Royal Dutch Shell plc, A Shares .................... 98,400 3,409,167 Wolters Kluwer NV .................................. 89,700 2,465,594 ----------- 26,984,869 ----------- SINGAPORE - 0.6% Flextronics International, Ltd. (a) ................ 162,400 1,883,840 ----------- SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 94 - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- SOUTH AFRICA - 0.7% Sanlam, Ltd. ....................................... 554,040 1,318,031 Standard Bank Group, Ltd. .......................... 59,000 693,769 Tiger Brands, Ltd. ................................. 20,800 432,586 ----------- 2,444,386 ----------- SOUTH KOREA - 1.9% Honam Petrochemical Corp. .......................... 8,100 507,379 Hyundai Motors Co., Second Preferred ............... 15,950 753,557 Industrial Bank of Korea GDR ....................... 88,300 1,546,133 Kookmin Bank ADR ................................... 14,600 1,158,656 LG.Philips LCD Co., Ltd. (a) ....................... 13,600 433,167 POSCO ADR .......................................... 29,000 2,045,079 ----------- 6,443,971 ----------- SPAIN - 1.7% Endesa SA .......................................... 22,200 984,161 Repsol YPF SA ...................................... 141,100 4,681,486 ----------- 5,665,647 ----------- SWEDEN - 0.6% Svenska Cellusoa AB, B Shares ...................... 44,800 2,057,038 ----------- SWITZERLAND - 1.9% Credit Suisse Group ................................ 81,100 4,890,649 Novartis AG ........................................ 24,830 1,507,329 ----------- 6,397,978 ----------- TAIWAN - 1.4% China Steel Corp. GDR .............................. 37,746 666,217 Compal Electronics, Inc. GDR ....................... 229,388 1,000,131 Gigabyte Technology Co., Ltd. ...................... 261,112 189,394 Siliconware Precision Industries Co. ............... 694,000 881,442 Taiwan Semiconductor Manufacturing Co., Ltd. ............................................ 505,870 928,733 United Microelectronics Corp. ...................... 1,570,000 876,527 ----------- 4,542,444 ----------- THAILAND - 0.2% PTT Public Company Ltd. plc ........................ 121,400 728,234 ----------- UNITED KINGDOM - 18.2% AstraZeneca plc .................................... 61,200 3,616,204 Aviva plc .......................................... 346,270 5,118,429 Barclays plc ....................................... 410,200 5,535,314 BHP Billiton plc ................................... 47,100 908,222 - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- UNITED KINGDOM, CONTINUED BP Amoco plc ....................................... 125,000 1,389,949 British Aerospace plc .............................. 485,500 3,884,556 British American Tobacco plc ....................... 75,900 2,068,684 Friends Provident plc .............................. 782,500 3,089,405 George Wimpey plc .................................. 167,400 1,679,428 HBOS plc ........................................... 260,121 5,392,934 Mitchells & Butlers plc ............................ 99,346 1,129,323 Punch Taverns plc .................................. 91,000 1,785,981 Royal & Sun Alliance Insurance Group plc ........... 752,249 2,116,283 Royal Bank of Scotland Group plc ................... 169,100 6,024,772 Royal Dutch Shell plc, B Shares .................... 45,973 1,646,716 Sainsbury plc ...................................... 410,062 3,063,929 Taylor Woodrow plc ................................. 235,300 1,632,469 Vodafone Group plc ................................. 2,512,958 6,470,520 Whitbread plc ...................................... 1,220 32,600 Xstrata plc ........................................ 96,000 4,101,469 ----------- 60,687,187 ----------- TOTAL COMMON STOCKS (COST $241,761,903) ............................. 320,824,268 ----------- - -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS - 2.4% - -------------------------------------------------------------------------------- Investors Bank & Trust, 3.52%, purchased on 10/31/06, due 11/1/06 with a maturity value of $7,901,801 (Collateralized fully by various U.S. Government Obligations) .................................... 7,901,028 7,901,028 ----------- TOTAL REPURCHASE AGREEMENTS (COST $7,901,028) ............................... 7,901,028 ----------- - -------------------------------------------------------------------------------- RIGHTS & WARRANTS - 0.0% - -------------------------------------------------------------------------------- UNITED KINGDOM TI Automotive Ltd., Class A (b) .................... 190,000 0 ----------- TOTAL RIGHTS & WARRANTS (COST $0) ....................................... 0 ----------- TOTAL INVESTMENTS (COST $249,662,931) - 98.5% ..................... 328,725,296 =========== - ---------- Percentages indicated are based on net assets of $333,754,693. (a) Represents non-income producing security. (b) Illiquid security, representing 0.00% of net assets. ADR-American Depositary Receipt GDR-Global Depositary Receipt 95 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 (CONTINUED) PERCENT OF INDUSTRY NET ASSETS - -------- ---------- Aerospace & Defense .............................................. 2.2% Automotive ....................................................... 8.9% Banking & Financial Services ..................................... 22.7% Building & Construction .......................................... 3.3% Chemicals ........................................................ 1.0% Computer Related ................................................. 0.4% Drugs--Medical ................................................... 3.5% Electrical ....................................................... 5.2% Electronic Components & Semiconductors ........................... 2.6% Food & Beverage .................................................. 0.9% Insurance ........................................................ 7.6% Manufacturing .................................................... 2.1% Metals & Mining .................................................. 9.6% Oil & Gas ........................................................ 12.8% Publishing ....................................................... 0.7% Real Estate ...................................................... 0.2% Repurchase Agreement ............................................. 2.4% Retail ........................................................... 2.0% Telecommunications ............................................... 4.3% Tobacco .......................................................... 2.2% Tourism .......................................................... 0.5% Transportation Services .......................................... 3.4% ------ Total Investments ................................................ 98.5% ------ Other assets in excess of liabilities ............................ 1.5% ------ Net Assets ....................................................... 100.0% ====== SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 96 - -------------------------------------------------------------------------------- HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- COMMON STOCKS - 95.5% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- ADVERTISING - 1.5% Monster Worldwide, Inc. (a) ........................ 87,000 3,524,370 ----------- AEROSPACE & DEFENSE - 1.7% Esterline Technologies Corp. (a) ................... 41,800 1,575,860 Hexcel Corp. (a) ................................... 162,900 2,637,351 ----------- 4,213,211 ----------- BANKING - 1.6% East West Bancorp, Inc. ............................ 107,500 3,924,825 ----------- BIOTECHNOLOGY - 3.7% Celgene Corp. (a) .................................. 97,400 5,205,056 Invitrogen Corp. (a) ............................... 63,200 3,666,232 ----------- 8,871,288 ----------- COMMERCIAL SERVICES - 3.5% Alliance Data Systems Corp. (a) .................... 62,500 3,795,000 Schawk, Inc., Class A .............................. 107,700 2,030,145 Sotheby's Holdings, Inc. ........................... 67,200 2,553,600 ----------- 8,378,745 ----------- COMPUTER SOFTWARE - 9.4% CheckFree Corp. (a) ................................ 94,900 3,746,652 Red Hat, Inc. (a) .................................. 148,900 2,438,982 Satyam Computer Services Ltd. ADR ................. 190,600 4,214,166 Sina Corp. (a) ..................................... 99,300 2,553,003 SRA International, Inc., ClasA (a) ................ 148,300 4,753,015 Transaction Systems Architects, Inc., Class A (a) ..................................... 148,700 5,012,677 ----------- 22,718,495 ----------- CONSUMER PRODUCTS - 0.9% Jarden Corp. (a) ................................... 62,600 2,252,348 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 6.5% Actuant Corp., Class A ............................. 41,600 2,135,744 AMETEK, Inc. ....................................... 156,400 7,300,752 IDEX Corp. ......................................... 135,300 6,345,570 ----------- 15,782,066 ----------- EDUCATION - 1.5% Corinthian Colleges, Inc. (a) ...................... 304,379 3,728,643 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 11.2% Atmel Corp. (a) .................................... 647,500 3,723,125 ATMI, Inc. (a) ..................................... 102,400 3,245,056 Cognos, Inc. (a) ................................... 192,300 7,015,104 Silicon Laboratories, Inc. (a) ..................... 57,000 1,859,910 Thermo Electron Corp. (a) .......................... 143,400 6,147,558 Varian Semiconductor Equipment Associates, Inc. (a) ........................................ 138,050 5,037,445 ----------- 27,028,198 ----------- ENVIRONMENTAL SERVICES - 1.1% Waste Connections, Inc. (a) ........................ 63,100 2,567,539 ----------- FINANCIAL SERVICES - 4.2% Affiliated Managers Group, Inc. (a) ................ 59,700 5,978,358 eFunds Corp. (a) ................................... 165,700 4,109,360 ----------- 10,087,718 ----------- HEALTH CARE - 13.4% Charles River Laboratories International, Inc. (a) ........................................ 83,000 3,562,360 CYTYC Corp. (a) .................................... 145,600 3,846,752 Manor Care, Inc. ................................... 90,400 4,338,296 Omnicare, Inc. ..................................... 116,600 4,416,808 Pediatrix Medical Group, Inc. (a) .................. 78,300 3,518,019 Respironics, Inc. (a) .............................. 212,400 7,501,968 Ventana Medical Systems (a) ........................ 126,000 5,089,140 ----------- 32,273,343 ----------- - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- HOTELS & LODGING - 1.1% Strategic Hotels and Resorts, Inc. ................. 121,100 2,575,797 ----------- MEDIA - 3.0% Dreamworks Animation SKG, Inc. (a) ................. 95,500 2,525,975 Meredith Corp. ..................................... 88,800 4,662,000 ----------- 7,187,975 ----------- OIL & GAS - 9.0% Chesapeake Energy Corp. ............................ 103,500 3,357,540 Consol Energy, Inc. ................................ 86,000 3,043,540 Denbury Resources, Inc. (a) ........................ 163,200 4,690,368 Grant Prideco, Inc. (a) ............................ 86,500 3,267,105 Massey Energy Co. .................................. 148,300 3,744,575 Smith International, Inc. .......................... 92,600 3,655,848 ----------- 21,758,976 ----------- PHARMACEUTICALS - 10.0% Alexion Pharmaceuticals, Inc. (a) .................. 68,104 2,544,365 Elan Corp. PLC ADR (a) ............................. 438,300 6,346,584 MGI Pharma, Inc. (a) ............................... 213,000 4,053,390 OSI Pharmaceuticals, Inc. (a) ...................... 217,100 8,310,588 Santarus, Inc. (a) ................................. 384,400 2,956,036 ----------- 24,210,963 ----------- REAL ESTATE - 0.4% Northstar Realty Finance Corp. ..................... 62,000 939,300 ----------- RETAIL - 6.2% Advance Auto Parts, Inc. ........................... 6,500 227,630 Dick's Sporting Goods, Inc. (a) .................... 105,800 5,264,608 P.F. Chang's China Bistro, Inc. (a) ................ 38,900 1,626,798 PETsMART, Inc. ..................................... 144,200 4,150,076 Williams-Sonoma, Inc. .............................. 108,400 3,686,684 ----------- 14,955,796 ----------- TELECOMMUNICATIONS - 3.7% Comverse Technology, Inc. (a) ...................... 117,300 2,553,621 Polycom, Inc. (a) .................................. 236,700 6,485,580 ----------- 9,039,201 ----------- TRANSPORTATION - 1.9% J.B. Hunt Transport Services, Inc. ................. 210,200 4,548,728 ----------- TOTAL COMMON STOCKS (COST $189,713,278) ............................. 230,567,525 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 5.5% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- HSBC Investor Money Market Fund Class I Shares, 5.23% (b)* .............................. 13,240,979 13,240,979 ----------- TOTAL INVESTMENT COMPANIES (COST $13,240,979) .............................. 13,240,979 ----------- TOTAL INVESTMENTS (COST $202,954,257) - 101.0% .................... 243,808,504 =========== - ---------- Percentages indicated are based on net assets of $241,494,843. (a) Represents non-income producing security. (b) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. * Investment in affiliate. ADR-American Depository Receipt 97 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR VALUE PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--OCTOBER 31, 2006 - -------------------------------------------------------------------------------- COMMON STOCKS - 93.1% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- AEROSPACE & DEFENSE - 4.6% Lockheed Martin Corp. .............................. 19,400 1,686,442 Raytheon Co. ....................................... 28,300 1,413,585 ----------- 3,100,027 ----------- BANKING - 4.7% Bank of America Corp. .............................. 23,600 1,271,332 Wells Fargo & Co. .................................. 51,600 1,872,564 ----------- 3,143,896 ----------- BUSINESS SERVICES - 2.9% Pitney Bowes, Inc. ................................. 42,100 1,966,491 ----------- COMPUTER SOFTWARE - 6.4% CA, Inc. ........................................... 110,800 2,743,408 Microsoft Corp. .................................... 54,300 1,558,953 ----------- 4,302,361 ----------- CONGLOMERATES - 1.9% Loews Corp. ........................................ 33,600 1,307,712 ----------- CONSUMER PRODUCTS - 7.7% Altria Group, Inc. ................................. 35,700 2,903,481 Kimberly-Clark Corp. ............................... 27,000 1,796,040 Tyson Foods, Inc., Class A ......................... 34,200 494,190 ----------- 5,193,711 ----------- DIVERSIFIED MANUFACTURING OPERATIONS -1.6% Ingersoll-Rand Co., Class A ....................... 29,800 1,093,958 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 1.3% Agilent Technologies, Inc. (a) ..................... 24,564 874,478 ----------- FINANCIAL SERVICES - 16.6% Citigroup, Inc. .................................... 36,707 1,841,223 Countrywide Financial Corp. ........................ 76,600 2,919,993 Fannie Mae ......................................... 41,500 2,459,290 Genworth Financial, Inc., Class A .................. 50,900 1,702,096 J.P. Morgan Chase & Co. ............................ 34,150 1,620,076 MGIC Investment Corp. .............................. 11,800 693,368 ----------- 11,236,046 ----------- GAS & ELECTRIC UTILITY - 2.0% Dominion Resources, Inc. ........................... 17,000 1,376,830 ----------- INSURANCE - 8.1% Aetna, Inc. ........................................ 16,600 684,252 AON Corp. .......................................... 46,400 1,614,256 Radian Group, Inc. ................................. 17,400 927,420 The Hartford Financial Services Group, Inc. ........ 25,700 2,240,269 ----------- 5,466,197 ----------- MEDIA - 11.2% CBS Corp., Class B ................................. 33,050 956,467 Clear Channel Communications, Inc. ................. 33,500 1,167,475 Comcast Corp., Special Class A (a) ................. 42,300 1,712,304 Liberty Media Capital Group, Class A (a) .......... 5,017 446,814 Liberty Media Interactive Group, Class A (a) ....... 37,087 818,510 Viacom Inc., Class B (a) ........................... 63,800 2,483,096 ----------- 7,584,666 ----------- - -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- METALS & MINING - 6.2% Barrick Gold Corp. ................................. 62,700 1,943,700 POSCO ADR .......................................... 11,800 832,136 Rio Tinto PLC ADR .................................. 2,900 642,031 United States Steel Corp. .......................... 10,900 736,840 ----------- 4,154,707 ----------- OIL & GAS - 7.4% Apache Corp. ....................................... 12,200 796,904 ConocoPhillips ..................................... 16,271 980,165 Noble Energy, Inc. ................................. 65,500 3,185,265 ----------- 4,962,334 ----------- PAPER PRODUCTS - 1.3% International Paper Co. ............................ 26,800 893,780 ----------- TELECOMMUNICATIONS - 7.4% AT&T, Inc. ......................................... 44,900 1,537,825 BellSouth Corp. .................................... 21,050 949,355 Motorola, Inc. ..................................... 70,200 1,618,812 Sprint Nextel Corp. ................................ 45,600 852,264 ----------- 4,958,256 ----------- TRANSPORTATION - 1.8% Union Pacific Corp. ................................ 13,200 1,196,316 ----------- TOTAL COMMON STOCKS (COST $50,318,029) .............................. 62,811,766 ----------- - -------------------------------------------------------------------------------- INVESTMENT COMPANIES - 6.7% - -------------------------------------------------------------------------------- SHARES VALUE($) ---------- ----------- HSBC Investor Money Market Fund Class I Shares, 5.23% (b)* ...................... 4,508,066 4,508,066 ----------- TOTAL INVESTMENT COMPANIES (COST $4,508,066) ............................... 4,508,066 ----------- - -------------------------------------------------------------------------------- RIGHTS AND WARRANTS - 0.1% - -------------------------------------------------------------------------------- AEROSPACE & DEFENSE Raytheon Co., 37.5 strike price, expires 6/16/11 (a) ..................................... 4,833 75,975 ----------- TOTAL RIGHTS AND WARRANTS (COST $0) ....................................... 75,975 ----------- TOTAL INVESTMENTS (COST $54,826,095) - 99.9% ...................... 67,395,807 =========== - ---------- Percentages indicated are based on net assets of $67,432,095. (a) Represents non-income producing security. (b) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2006. * Investment in affiliate. ADR-American Depository Receipt SEE NOTES TO FINANCIAL STATEMENTS HSBC INVESTOR PORTFOLIOS 98 HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES--OCTOBER 31, 2006
INTERMEDIATE CORE PLUS HIGH YIELD DURATION INTERNATIONAL FIXED INCOME FIXED INCOME FIXED INCOME GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO - -------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in non-affiliates, at value $123,095,860 $ 12,576,265 $ 21,227,401 $58,005,419 $ 328,725,296 Investments in affiliates, at value 2,998,076 -- 634,275 2,114,763 -- Cash -- 16 -- -- 44,591 Foreign currency -- -- -- -- 2,125,252 Interest and dividends receivable 989,785 261,881 155,141 50,388 636,904 Receivable for investments sold 13,281,508 32,289 2,026,784 142,543 2,718,203 Unrealized appreciation on forward foreign currency contracts 2,472 -- 469 -- -- Prepaid expenses and other assets 1,698 301 490 774 4,559 ------------ ------------ ------------ ----------- ------------- TOTAL ASSETS 140,369,399 12,870,752 24,044,560 60,313,887 334,254,805 ------------ ------------ ------------ ----------- ------------- - -------------------------------------------------------------------------------------------------------------------------- LIABILITIES: Payable for investments purchased 29,121,190 135,219 4,517,975 457,514 192,318 Unrealized depreciation on forward foreign currency contracts 2,232 -- 443 -- -- Accrued expenses and other liabilities: Investment management 44,042 6,316 6,626 24,589 238,047 Administration 6,794 404 1,822 1,966 14,078 Accounting -- -- -- 388 -- Compliance service 1 -- -- -- -- Custodian -- 9,975 516 -- 46,608 Trustee 167 17 34 83 465 Other 3,042 56 576 1,583 8,596 ------------ ------------ ------------ ----------- ------------- TOTAL LIABILITIES 29,177,468 151,987 4,527,992 486,123 500,112 ------------ ------------ ------------ ----------- ------------- - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Applicable to investors' beneficial interest $111,191,931 $ 12,718,765 $ 19,516,568 $59,827,764 $ 333,754,693 ============ ============ ============ =========== ============= Total Investments, at cost $125,181,696 $ 12,509,676 $ 21,764,574 $54,512,963 $ 249,662,931 ============ ============ ============ =========== ============= Foreign currency, at cost $ 2,091,355 =============
99 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES--OCTOBER 31, 2006 (CONTINUED) SMALL CAP EQUITY VALUE PORTFOLIO PORTFOLIO - --------------------------------------------------------------------------- ASSETS: Investments in non-affiliates, at value $230,567,525 $62,887,741 Investments in affiliates, at value 13,240,979 4,508,066 Cash 4,765 -- Interest and dividends receivable 61,218 69,383 Receivable for investments sold 4,265,643 -- Prepaid expenses and other assets 7,919 805 ------------ ----------- TOTAL ASSETS 248,148,049 67,465,995 ------------ ----------- - --------------------------------------------------------------------------- LIABILITIES: Payable for investments purchased 6,470,680 -- Accrued expenses and other liabilities: Investment management 163,675 29,600 Administration 12,040 2,202 Accounting 114 200 Trustee 329 95 Other 6,368 1,803 ------------ ----------- TOTAL LIABILITIES 6,653,206 33,900 ------------ ----------- - --------------------------------------------------------------------------- NET ASSETS: Applicable to investors' beneficial interest $241,494,843 $67,432,095 ============ =========== Total Investments, at cost $202,954,257 $54,826,095 ============ =========== SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 100 HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2006
INTERMEDIATE CORE PLUS HIGH YIELD DURATION INTERNATIONAL FIXED INCOME FIXED INCOME FIXED INCOME GROWTH EQUITY PORTFOLIO PORTFOLIO (a) PORTFOLIO PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME: Interest $ 6,074,170 $ 764,816 $ 1,208,927 $ 1 $ 134,644 Dividends -- 10,683 -- 499,254 9,042,924 Dividend income from affiliated investments 97,176 -- 26,213 95,644 -- Foreign tax withholding -- -- -- -- (974,388) Income from securities lending 17,878 -- 3,075 19 -- ------------ ------------- ------------ ----------- ------------- TOTAL INVESTMENT INCOME 6,189,224 775,499 1,238,215 594,918 8,203,180 ------------ ------------- ------------ ----------- ------------- - ------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Investment management 521,319 56,612 92,601 274,052 1,905,467 Administration 41,473 3,535 8,677 20,859 106,142 Accounting 65,688 57,056 59,562 52,882 92,992 Compliance service 1,593 131 341 789 3,930 Custodian 45,750 57,077 13,418 25,798 276,849 Interest 4,939 -- -- -- -- Trustee 3,105 217 689 1,477 7,462 Other 18,240 1,101 4,014 8,815 42,574 ------------ ------------- ------------ ----------- ------------- TOTAL EXPENSES 702,107 175,729 179,302 384,672 2,435,416 ------------ ------------- ------------ ----------- ------------- - ------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) 5,487,117 599,770 1,058,913 210,246 5,767,764 ------------ ------------- ------------ ----------- ------------- - ------------------------------------------------------------------------------------------------------------------------------ NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions (2,015,195) 36,553 (458,266) 3,913,855 31,508,299 Change in unrealized appreciation/depreciation from investments and foreign currencies 2,496,112 66,589 518,623 (380,204) 39,700,669 ------------ ------------- ------------ ----------- ------------- - ------------------------------------------------------------------------------------------------------------------------------ Net realized/unrealized gains (losses) from investments and foreign currency transactions 480,917 103,142 60,357 3,533,651 71,208,968 ------------ ------------- ------------ ----------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,968,034 $ 702,912 $ 1,119,270 $ 3,743,897 $ 76,976,732 ============ ============= ============ =========== =============
(a) The High Yield Fixed Income Portfolio commenced operations on November 18, 2005. 101 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2006 (CONTINUED)
SMALL CAP EQUITY VALUE PORTFOLIO PORTFOLIO - ---------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 947,741 $ 1,051,111 Dividend income from affiliated investments 244,837 115,771 Income from securities lending 7,230 113 ------------ ------------ TOTAL INVESTMENT INCOME 1,199,808 1,166,995 ------------ ------------ - ---------------------------------------------------------------------------------- EXPENSES: Investment management 1,868,748 316,677 Administration 87,545 22,605 Accounting 53,770 52,651 Compliance service 3,296 849 Custodian 86,396 21,762 Trustee 6,294 1,607 Other 31,376 9,827 ------------ ------------ TOTAL EXPENSES 2,137,425 425,978 ------------ ------------ - ---------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (937,617) 741,017 ------------ ------------ - ---------------------------------------------------------------------------------- NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions 38,504,562 5,586,911 Change in unrealized appreciation/depreciation from investments and foreign currencies 3,658,201 5,704,297 ------------ ------------ - ---------------------------------------------------------------------------------- Net realized/unrealized gains (losses) from investments and foreign currency transactions 42,162,763 11,291,208 ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 41,225,146 $ 12,032,225 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 102 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS
CORE PLUS HIGH YIELD FIXED INCOME FIXED INCOME PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------------------------------------------------ FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED PERIOD ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 (a) - ------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 5,487,117 $ 6,493,010 $ 599,770 Net realized gains (losses) from investment and foreign currency transactions (2,015,195) 7,083,274 36,553 Change in unrealized appreciation/depreciation from investments and foreign currencies 2,496,112 (10,643,468) 66,589 ---------------- ---------------- -------------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 5,968,034 2,932,816 702,912 ---------------- ---------------- -------------------- Proceeds from contributions 23,850,640 31,409,368 13,667,509 Value of withdrawals (41,156,523) (81,271,788) (1,651,656) ---------------- ---------------- -------------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (17,305,883) (49,862,420) 12,015,853 ---------------- ---------------- -------------------- CHANGE IN NET ASSETS (11,337,849) (46,929,604) 12,718,765 - ------------------------------------------------------------------------------------------------------------------ NET ASSETS: Beginning of period 122,529,780 169,459,384 -- ---------------- ---------------- -------------------- End of period $ 111,191,931 $ 122,529,780 $ 12,718,765 ================ ================ ====================
- ---------- (a) The High Yield Fixed Income Portfolio commenced operations on November 18, 2005. 103 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - ------------------------------------------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 - ------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 1,058,913 $ 1,897,871 Net realized gains (losses) from investment and foreign currency transactions (458,266) (162,231) Change in unrealized appreciation/depreciation from investments and foreign currencies 518,623 (1,247,772) ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,119,270 487,868 ---------------- ---------------- Proceeds from contributions 1,801,738 6,926,443 Value of withdrawals (16,214,126) (38,301,414) ---------------- ---------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (14,412,388) (31,374,971) ---------------- ---------------- CHANGE IN NET ASSETS (13,293,118) (30,887,103) - ------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 32,809,686 63,696,789 ---------------- ---------------- End of period $ 19,516,568 $ 32,809,686 ================ ================
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 104 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GROWTH INTERNATIONAL EQUITY PORTFOLIO PORTFOLIO - ---------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ---------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 210,246 $ 403,238 $ 5,767,764 $ 4,381,037 Net realized gains (losses) from investment and foreign currency transactions 3,913,855 2,375,542 31,508,299 18,977,305 Change in unrealized appreciation/depreciation from investments and foreign currencies (380,204) 3,995,556 39,700,669 17,737,274 ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 3,743,897 6,774,336 76,976,732 41,095,616 ---------------- ---------------- ---------------- ---------------- Proceeds from contributions 15,350,040 15,081,868 62,831,133 68,931,727 Value of withdrawals (8,680,872) (22,121,709) (36,283,024) (99,822,646) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST 6,669,168 (7,039,841) 26,548,109 (30,890,919) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS 10,413,065 (265,505) 103,524,841 10,204,697 - ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 49,414,699 49,680,204 230,229,852 220,025,155 ---------------- ---------------- ---------------- ---------------- End of period $ 59,827,764 $ 49,414,699 $ 333,754,693 $ 230,229,852 ================ ================ ================ ================
105 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SMALL CAP EQUITY VALUE PORTFOLIO PORTFOLIO - ---------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2006 OCTOBER 31, 2005 OCTOBER 31, 2006 OCTOBER 31, 2005 - ---------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (937,617) $ (1,294,078) $ 741,017 $ 721,613 Net realized gains (losses) from investment transactions 38,504,562 62,035,547 5,586,911 4,124,126 Change in unrealized appreciation/depreciation from investments 3,658,201 (17,237,446) 5,704,297 4,254,259 ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 41,225,146 43,504,023 12,032,225 9,099,998 ---------------- ---------------- ---------------- ---------------- Proceeds from contributions 22,244,597 24,917,377 13,285,641 14,013,050 Value of withdrawals (a) (40,753,125) (208,976,448) (12,036,219) (30,376,597) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (18,508,528) (184,059,071) 1,249,422 (16,363,547) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS 22,716,618 (140,555,048) 13,281,647 (7,263,549) - ---------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 218,778,225 359,333,273 54,150,448 61,413,997 ---------------- ---------------- ---------------- ---------------- End of period $ 241,494,843 $ 218,778,225 $ 67,432,095 $ 54,150,448 ================ ================ ================ ================
- ---------- (a) During the year ended October 31, 2005, the Small Cap Equity Portfolio delivered cash and securities with a market value of $61,810,186 in connection with a redemption in-kind of the HSBC Investor Small Cap Equity Fund. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 106 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------------------ RATIO OF RATIO OF NET NET ASSETS AT EXPENSES INVESTMENT RATIO OF END OF TO AVERAGE INCOME (LOSS) EXPENSES TOTAL PERIOD NET TO AVERAGE TO AVERAGE PORTFOLIO RETURN(a) (000'S) ASSETS(b) NET ASSETS(b) NET ASSETS(b)(c) TURNOVER(a) - ----------------------------------------------------------------------------------------------------------------------- CORE PLUS FIXED INCOME PORTFOLIO Year ended October 31, 2002 $385,802 0.48% 5.14% 0.48% 77.82% Year ended October 31, 2003 5.80% 203,551 0.48% 4.38% 0.48% 70.91% Year ended October 31, 2004 5.56% 169,459 0.52% 4.31% 0.52% 34.88% Year ended October 31, 2005 1.64% (d) 122,530 0.40% (d) 4.25% (d) 0.53% 176.60% Year ended October 31, 2006 5.55% 111,192 0.63% 4.96% 0.63% 273.91% - ----------------------------------------------------------------------------------------------------------------------- HIGH YIELD FIXED INCOME PORTFOLIO Period ended October 31, 2006 (e) 7.41% $ 12,719 1.86% 6.33% 1.86% 13.61% - ----------------------------------------------------------------------------------------------------------------------- INTERMEDIATE DURATION FIXED INCOME PORTFOLIO Year ended October 31, 2002 $149,815 0.51% 4.60% 0.51% 44.04% Year ended October 31, 2003 4.42% 84,488 0.53% 3.70% 0.53% 98.42% Year ended October 31, 2004 4.48% 63,697 0.57% 3.54% 0.57% 50.06% Year ended October 31, 2005 0.76% (d) 32,810 0.49% (d) 3.85% (d) 0.58% 107.26% Year ended October 31, 2006 5.29% 19,517 0.78% 4.58% 0.78% 236.51% - ----------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO Period ended October 31, 2004 (e) (0.86%) $ 49,680 0.72% 0.06% 0.72% 53.08% Year ended October 31, 2005 13.59% (d) 49,415 0.63% (d) 0.77% (d) 0.68% 79.54% Year ended October 31, 2006 7.53% 59,828 0.69% 0.38% 0.69% 75.06% - ----------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY PORTFOLIO Year ended October 31, 2002 $256,616 0.91% 0.63% 0.91% 31.63% Year ended October 31, 2003 23.70% 201,805 0.96% 1.00% 0.96% 68.51% Year ended October 31, 2004 20.29% 220,025 0.94% 1.53% 0.94% 106.11% Year ended October 31, 2005 19.54% 230,230 0.84% 1.92% 0.84% 31.32% Year ended October 31, 2006 32.79% 333,755 0.86% 2.03% 0.86% 33.39% - ----------------------------------------------------------------------------------------------------------------------- SMALL CAP EQUITY PORTFOLIO Year ended October 31, 2002 $266,217 0.99% (0.78%) 0.99% 103.90% Year ended October 31, 2003 33.30% 426,181 0.91% (0.62%) 0.91% 152.05% Year ended October 31, 2004 5.93% 359,333 0.88% (0.52%) 0.88% 81.75% Year ended October 31, 2005 14.35% (d) 218,778 0.85% (d) (0.45%) (d) 0.90% 63.95% Year ended October 31, 2006 19.54% 241,495 0.91% (0.40%) 0.91% 60.83% - ----------------------------------------------------------------------------------------------------------------------- VALUE PORTFOLIO Period ended October 31, 2004 (e) 6.12% $ 61,414 0.71% 1.28% 0.71% 10.33% Year ended October 31, 2005 15.23% (d) 54,150 0.64% (d) 1.15% (d) 0.69% 16.45% Year ended October 31, 2006 22.21% 67,432 0.71% 1.23% 0.71% 20.63% - -----------------------------------------------------------------------------------------------------------------------
(a) Not annualized for periods less than one year. (b) Annualized for periods less than one year. (c) During the period, certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (d) During the year ended October 31, 2005, HSBC reimbursed certain amounts to the Portfolios related to violations of certain investment policies and limitations. The corresponding impact to the net expense ratio, net income ratio and total return were 0.12%, 0.09%, 0.05%, 0.04% and 0.05% for the Core Plus Fixed Income Portfolio, Intermediate Duration Fixed Income Portfolio, Growth Portfolio, Small Cap Equity Portfolio and Value Portfolio, respectively. (e) High Yield Fixed Income Portfolio commenced operations on November 18, 2005. Growth Portfolio commenced operations on May 7, 2004. Value Portfolio commenced operations on May 7, 2004. 107 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 1. ORGANIZATION: The HSBC Investor Portfolios (the "Portfolio Trust"), is an open-end management investment company organized as a New York trust under the laws of the State of New York on November 1, 1994. The Portfolio Trust contains the following master funds (individually a "Portfolio," collectively the "Portfolios"):
PORTFOLIO SHORT NAME - --------- ---------- HSBC Investor Core Plus Fixed Income Portfolio Core Plus Fixed Income Portfolio (formerly the HSBC Investor Fixed Income Portfolio) HSBC Investor High Yield Fixed Income Portfolio High Yield Fixed Income Portfolio HSBC Investor Intermediate Duration Fixed Intermediate Duration Fixed Income Portfolio Income Portfolio (formerly the HSBC Investor Limited Maturity Portfolio) HSBC Investor Growth Portfolio Growth Portfolio HSBC Investor International Equity Portfolio International Equity Portfolio HSBC Investor Small Cap Equity Portfolio Small Cap Equity Portfolio HSBC Investor Value Portfolio Value Portfolio
The Portfolios operate as master funds in master-feeder arrangements, in which other funds invest their assets in the Portfolios. The Declaration of Trust permits the Board of Trustees to issue an unlimited number of beneficial interests in the Portfolios. The Portfolios are diversified series of the Portfolio Trust and are part of the HSBC Investor Family of Funds. Financial Statements for all other funds of the HSBC Investor Family of Funds are published separately. Under the Portfolio Trust's organizational documents, the Portfolios' officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolios. In addition, in the normal course of business, the Portfolios enter into contracts with their service providers, which also provide for indemnifications by the Portfolios. The Portfolios' maximum exposure under these arrangements is unknown as this would involve any future claims that may be made against the Portfolios. However, based on experience, the Portfolios expect that risk of loss to be remote. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Portfolios in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ("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: 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, or are deemed unreliable due to HSBC INVESTOR PORTFOLIOS 108 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) a significant event or otherwise, are valued by or at the direction of the Portfolios' Board of Trustees. Examples of potentially significant events that could affect the value of an individual security include corporate actions by the issuer, announcements by the issuer relating to its earnings or products, regulatory news, natural disasters and litigation. Examples of potentially significant events that could affect multiple securities held by a Portfolio include governmental actions, natural disasters and armed conflicts. In addition, if events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Portfolios' net assets are calculated, such securities may be valued using fair value pricing in accordance with procedures adopted by the Board of Trustees. Management identifies possible fluctuations in foreign securities by monitoring the rise or fall in the value of a designated benchmark index. In the event of a rise or fall greater than predetermined levels, the International Equity Portfolio may use a systematic valuation model provided by an independent third party to value its foreign securities, rather than local market closing prices. When the International Equity Portfolio uses such a valuation model, the value assigned to the International Equity Portfolio's foreign securities may not be the quoted or published prices of the investment on their primary markets or exchanges. SECURITIES TRANSACTIONS AND RELATED INCOME: During the period, security transactions are accounted for no later than one business day following trade date. For financial reporting purposes, however, changes in holdings are accounted for on trade date on the last business day of the reporting period. Securities gains and losses are calculated on the identified cost basis. Interest income is recognized on the accrual basis and includes, where applicable, the amortization or accretion of premium or discount. Dividend income is recorded on the ex-dividend date. FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. The Portfolios do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currencies. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolios may enter into forward foreign currency exchange contracts in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolio securities denominated in a particular currency. The Portfolios could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized gains or losses until the contract settlement date. FUTURES CONTRACTS: Each Portfolio may invest in futures contracts for the purpose of hedging their existing portfolio securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, the Portfolio is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Portfolio each day, depending on the daily fluctuations in the fair value of the underlying security. The Portfolio recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Portfolio may not achieve the anticipated benefits of the futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. 109 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) MORTGAGE DOLLAR ROLL TRANSACTIONS: The Core Plus Fixed Income Portfolio, the High Yield Fixed Income Portfolio and the Intermediate Duration 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. RESTRICTED AND ILLIQUID SECURITIES: A restricted security is a security which has been purchased through a private offering and cannot be resold to the general public without prior registration under the Securities Act of 1933 (the "1933 Act") or pursuant to the resale limitations provided by Rule 144 under the 1933 Act, or an exemption from the registration requirements of the 1933 Act. Certain restricted securities may be resold in transactions exempt from registration, normally to qualified institutional buyers, and may be deemed liquid by the investment adviser based on procedures established by the Board of Trustees. Therefore, not all restricted securities are considered illiquid. At October 31, 2006 the HSBC Core Plus Fixed Income Portfolio held restricted securities that were illiquid, representing 0.03% of net assets, as follows:
ACQUISITION ACQUISITION PRINCIPAL SECURITY NAME DATE COST($) AMOUNT($) VALUE($) - ------------- ----------- ----------- ---------- -------- FHA Weyerhauser, 7.43%, 1/1/24 3/28/2002 32,060 33,926 33,926
SECURITY LOANS: To generate additional income, the Portfolios may lend portfolio securities in amounts up to 33 1/3%, except for the Small Cap Equity Portfolio, which may lend up to 30%, of its respective assets pursuant to agreements requiring that the loan be collateralized by cash, U.S. Government or U.S. Government agency securities, equal at all times to at least 100% of the fair value of the loaned securities. HSBC Bank USA ("HSBC Bank"), an affiliate of the Investment Adviser (defined below), acted as the securities lending agent for this activity through March 30, 2006. The Portfolios receive payments from borrowers equivalent to the dividends and interest that would have been earned on securities loaned while simultaneously seeking to earn income on the investment of collateral. Collateral is marked to market daily to provide the required level of collateral. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will be made only to borrowers, such as broker-dealers, banks or institutional borrowers of securities, deemed by HSBC Bank to be of good standing and creditworthy under guidelines approved by the Board of Trustees and when, in the judgment of HSBC Bank, the amounts that can be earned currently from such securities loans justifies the attendant risks. Loans are subject to termination by the Portfolios or the borrower at any time and are, therefore, not considered to be illiquid investments. As of October 31, 2006 the Portfolios did not have any securities on loan. REPURCHASE AGREEMENTS: The Funds may enter into repurchase agreements with an entity which is a member of the Federal Reserve System or which is a "primary dealer" (as designated by the Federal Reserve Bank of New York) in U.S. Government obligations. The repurchase price generally equals the price paid by a Portfolio plus interest negotiated on the basis of current short-term rates, which may be more or less than the rate on the underlying portfolio securities. The seller, under a repurchase agreement, is required to maintain the collateral held pursuant to the agreement, with a fair value equal to or greater than the repurchase price (including accrued interest). Collateral subject to repurchase agreements is held by the Portfolios' custodian or another qualified custodian or in the Federal Reserve/Treasury book-entry system. In the event of counterparty default, the Portfolio has the right to use the collateral to offset losses incurred. There is potential for loss to the Portfolio in the event the Portfolio is delayed or prevented from exercising its rights to dispose of the collateral securities, including the risk of a possible decline in the fair value of the underlying securities during the period while the Portfolio seeks to assert its rights. HSBC INVESTOR PORTFOLIOS 110 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) LINE OF CREDIT: The Portfolios may borrow up to $50 million under the terms of a short-term, demand note agreement with HSBC Bank. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. During the year ended October 31, 2006, the details of the borrowings were as follows (based on actual number of days in which the respective Portfolios borrowed monies): AVERAGE AMOUNT AVERAGE FUND OUTSTANDING INTEREST RATE ---- -------------- -------------- Core Plus Fixed Income Portfolio $7,732,592 4.60% EXPENSE ALLOCATIONS: Expenses directly attributable to a Portfolio are charged to that Portfolio. Expenses not directly attributable to a Portfolio are allocated proportionally among various or all funds within the HSBC Investor Family of Funds in relation to net assets or on another reasonable basis. 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 feeder funds, and is therefore not subject to U.S. Federal income tax. As such, investors in the Portfolios will be taxed on their respective 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. NEW ACCOUNTING PRONOUNCEMENTS: In September 2006 the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current GAAP from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of October 31, 2006, the Portfolios do not believe the adoption of SFAS No. 157 will impact the financial statement amounts, however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period. On July 13, 2006, the FASB released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Portfolios' tax return to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more likely-than-not threshold would be recorded as a tax benefit or expense in the year of determination. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management is in the process of completing their analysis on whether the adoption of FIN 48 will have an impact to the financial statements upon adoption. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Investments (USA) 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, except that Waddell & 111 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) Reed Investment Management Company, AllianceBernstein Investment Research and Management, Westfield Capital Management, LLC and NWQ Investment Management Co., LLC serve as sub-investment advisers for the Growth Portfolio, International Equity Portfolio, Small Cap Equity Portfolio and the Value Portfolio, respectively, and are paid for their services directly by the respective Portfolios. For its services, the Investment Adviser receives a fee, accrued daily and paid monthly, at an annual rate of 0.60% of the High Yield Fixed Income Portfolio's average daily net assets and 0.40% of the Intermediate Duration Fixed Income Portfolio's average daily net assets. For its services as Investment Adviser, HSBC receives, from the Core Plus 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, the Investment Adviser and Waddell & Reed Investment Management Company receive in aggregate, from the Growth Portfolio, a fee, accrued daily and paid monthly, at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE - ------------------------------------ -------- Up to $50 million ................................................................. 0.500% In excess of $50 million but not exceeding $100 million ........................... 0.425% In excess of $100 million but not exceeding $200 million .......................... 0.375% In excess of $200 million ......................................................... 0.325%
For their services, the Investment Adviser and AllianceBernstein Investment Research and Management receive in aggregate, from the International Equity Portfolio, a fee, accrued daily and paid monthly, at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE - ------------------------------------ -------- Up to $10 million ................................................................. 1.015% In excess of $10 million but not exceeding $25 million ............................ 0.925% In excess of $25 million but not exceeding $50 million ............................ 0.79% In excess of $50 million but not exceeding $100 million ........................... 0.70% In excess of $100 million ......................................................... 0.61%
For their services, the Investment Adviser 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. For their services, the Investment Adviser and NWQ Investment Management Co., LLC receive in aggregate, from the Value Portfolio, a fee, accrued daily and paid monthly, at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE - ------------------------------------ -------- Up to $500 million ................................................................ 0.525% In excess of $500 million but not exceeding $1 billion ............................ 0.475% In excess of $1 billion ........................................................... 0.425%
ADMINISTRATION: HSBC serves the Portfolios as Administrator. Under the terms of the administration agreement, HSBC 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 .................................................................. 0.075% 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%
HSBC INVESTOR PORTFOLIOS 112 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) The fee rates and breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds, however, the assets of the Portfolios and Feeder Funds that invest in the Portfolios are not double-counted. The total administration fee paid to BISYS is allocated to each series in the HSBC Investor Family of Funds based upon its proportionate share of the aggregate net assets of the Family of Funds. For assets invested in the Portfolios by Feeder Funds, the Portfolios pay half of the administration fee and the Feeder Funds pay half of the administration fee, for a combination of the total fee rate set forth above. Pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund Services Ohio, Inc. ("BISYS Ohio"), a wholly-owned subsidiary of The BISYS Group, Inc., serves as the Portfolio Trust's sub-administrator subject to the general supervision of the Portfolio Trust's Board of Trustees and HSBC. For these services, BISYS Ohio is entitled to a fee, payable by HSBC, at an annual rate equivalent to the fee rates set forth above, minus 0.02% (2 basis points) which is retained by HSBC. Under a Compliance Services Agreement between the Portfolios' and BISYS Ohio (the "CCO Agreement"), BISYS Ohio makes an employee available to serve as the Portfolios' Chief Compliance Officer (the "CCO"). Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Portfolios' compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $240,000 for the year ended October 31, 2006, plus reimbursement of certain expenses. Expenses incurred by each Portfolio are reflected on the Statements of Operations as "Compliance Service". BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio. FUND ACCOUNTING, CUSTODIAN AND TRUSTEE: BISYS Ohio provides fund accounting services for the Portfolios. For its services to the Portfolios, BISYS Ohio receives an annual fee per Portfolio, including reimbursement of certain expenses, that is accrued daily and paid monthly. Investor's Bank & Trust Company ("IBT") serves as custodian for the High Yield Fixed Income Portfolio and the International Equity Portfolio. HSBC Bank serves as custodian to all the other Portfolios. Compensation paid to IBT and HSBC Bank for services to the Portfolios as custodian is presented in the Statements of Operations as custodian fees. Effective May 18, 2006 each of the six non-interested Trustees are compensated with a $35,000 annual Board retainer, as well as a $3,000 annual retainer for each Committee of the Board. Each non-interested Trustee also receives a $5,000 and $3,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. Furthermore, each non-interested Trustee receives compensation for attending special meetings and/or functioning as a Committee Chairperson or Lead Trustee. In addition, the non-interested Trustees are reimbursed for certain expenses incurred in connection with their Board membership. Prior to May 18, 2006 each of the six non-interested Trustees were compensated with a $24,000 annual Board retainer, as well as a $1,000 annual retainer for each Committee of the Board. Each non-interested Trustee also received a $4,000 and $2,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. OTHER: For its services as securities lending agent, HSBC Bank (see note 2--Security Loans) received a fee equal to 0.06% of the average dollar value of the loans outstanding from the Portfolios. Income from securities lending, net of related expenses, is recorded as earned by the Portfolios. The fees collected by HSBC Bank for the period ended October 31, 2006 were: PORTFOLIO FEE --------- ------ Core Plus Fixed Income Portfolio ................................. $ 940 Intermediate Duration Fixed Income Portfolio ..................... 161 Growth Portfolio ................................................. 38 Small Cap Equity Portfolio ....................................... 7,966 Value Portfolio .................................................. 188 113 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2006 (CONTINUED) The HSBC Investor Family of Funds may use affiliated broker/dealers for the execution of portfolio investment trades. For the year ended October 31, 2006, affiliated broker/dealers received $31 in commissions on the execution of trades related to the HSBC Investor Family of Funds. 4. INVESTMENT TRANSACTIONS: For the year ended October 31, 2006, each Portfolio purchased and sold securities, excluding short-term securities, in the following amounts:
PURCHASES SALES PURCHASES SALES (EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S. PORTFOLIO NAME GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT - -------------- --------------- --------------- ------------ ------------ Core Plus Fixed Income Portfolio .............. $ 134,526,696 $ 172,510,986 $118,026,656 $113,130,153 High Yield Fixed Income Portfolio ............. 12,433,301 1,205,330 -- -- Intermediate Duration Fixed Income Portfolio .. 23,023,323 36,797,439 22,747,051 22,556,861 Growth Portfolio .............................. 46,482,340 40,299,206 -- -- International Equity Portfolio ................ 115,023,721 92,278,196 -- -- Small Cap Equity Portfolio .................... 139,376,585 166,871,695 -- -- Value Portfolio ............................... 11,960,212 12,990,518 -- --
5. LEGAL AND REGULATORY MATTERS: On September 26, 2006 BISYS Fund Services, Inc. ("BISYS"), an affiliate of BISYS Fund Services Ohio, Inc. which provides various services to the Portfolios as described in footnote 3, reached a settlement with the Securities and Exchange Commission ("SEC") regarding the SEC's investigation related to BISYS' past payment of certain marketing and other expenses with respect to certain of its mutual fund clients. Although BISYS has reached a settlement with the SEC, the Portfolios' management is not aware that any determination has been made as to how the BISYS settlement monies will be distributed. The SEC's examination of BISYS' mutual fund clients and their advisers, including HSBC, has not been completed. While the Portfolios' management is currently unable to determine the impact, if any, of such matters on the Portfolios or the Portfolios' financial statements, management does not anticipate a material, adverse impact to the Portfolios or the Portfolios' financial statements. 6. FEDERAL INCOME TAX INFORMATION: As of October 31, 2006, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows:
NET UNREALIZED TAX UNREALIZED TAX UNREALIZED APPRECIATION PORTFOLIO NAME TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) - -------------- ------------ -------------- -------------- -------------- Core Plus Fixed Income Portfolio .............. $125,300,474 $ 1,085,114 $ (291,652) $ 793,462 High Yield Fixed Income Portfolio ............. 12,509,676 66,589 0 66,589 Intermediate Duration Fixed Income Portfolio ................................... 21,771,631 143,186 (53,141) 90,045 Growth Portfolio .............................. 54,631,776 6,517,205 (1,028,799) 5,488,406 International Portfolio ....................... 252,905,339 79,099,774 (3,279,816) 75,819,958 Small Cap Equity Portfolio .................... 203,854,870 46,004,811 (6,051,177) 39,953,634 Value Portfolio ............................... 54,501,953 14,341,092 (1,447,238) 12,893,854
HSBC INVESTOR PORTFOLIOS 114 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of HSBC Investor Portfolios: We have audited the accompanying statements of assets and liabilities of HSBC Investor Core Plus Fixed Income Portfolio, HSBC Investor High Yield Fixed Income Portfolio, HSBC Investor Intermediate Duration Fixed Income Portfolio, HSBC Investor Growth Portfolio, HSBC Investor International Equity Portfolio, HSBC Investor Small Cap Equity Portfolio and HSBC Investor Value Portfolio (the Funds), including the schedules of portfolio investments, as of October 31, 2006, and the related statements of operations for the year or period then ended, the changes in net assets for each period in the two-year period then ended and the financial highlights for each period in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2006, by correspondence with the custodians and brokers; or other appropriate auditing 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 Funds as of October 31, 2006, and the results of their operations for the year or period then ended, the changes in their net assets for each period in the two-year period then ended, and the financial highlights for each period in the five-year period then ended, in conformity with U.S. generally accepted accounting principles. KPMG LLP Columbus, Ohio December 22, 2006 115 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--OCTOBER 31, 2006 As a shareholder of the HSBC Investor Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or shareholder servicing fees; and other fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the HSBC Investor Funds and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2006 through October 31, 2006. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
ANNUALIZED BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/06 10/31/06 5/1/06-10/31/06 5/1/06-10/31/06 ------------- ------------- --------------- --------------- Core Plus Fixed Income Portfolio $1,000.00 $1,046.30 $3.30 0.64% High Yield Fixed Income Portfolio 1,000.00 1,026.10 9.50 1.86% Intermediate Duration Fixed Income Portfolio 1,000.00 1,043.70 4.02 0.78% Growth Portfolio 1,000.00 992.70 3.47 0.69% International Equity Portfolio 1,000.00 1,036.40 4.41 0.86% Small Cap Equity Portfolio 1,000.00 987.40 4.61 0.92% Value Portfolio 1,000.00 1,076.00 3.61 0.69%
- ---------- * Expenses are equal to the average account value times the Portfolio's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. HSBC INVESTOR PORTFOLIOS 116 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--OCTOBER 31, 2006 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each HSBC Investor Funds's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXPENSE PAID ANNUALIZED BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 5/1/06 10/31/06 5/1/06-10/31/06 5/1/06-10/31/06 ------------- ------------- --------------- --------------- Core Plus Fixed Income Portfolio $1,000.00 $1,021.98 $3.26 0.64% High Yield Fixed Income Portfolio 1,000.00 1,015.83 9.45 1.86% Intermediate Duration Fixed Income Portfolio 1,000.00 1,021.27 3.97 0.78% Growth Portfolio 1,000.00 1,021.73 3.52 0.69% International Equity Portfolio 1,000.00 1,020.87 4.38 0.86% Small Cap Equity Portfolio 1,000.00 1,020.57 4.69 0.92% Value Portfolio 1,000.00 1,021.73 3.52 0.69%
- ---------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. 117 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 LENGTH OF TIME PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN OTHER DIRECTORSHIPS AND AGE WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Frederick C. Chen Emeritus Trustee Indefinite; Trustee Management Consultant, 38 None P.O. Box 182845 from 1990 to June since 1988 Columbus, Ohio 43218 2005; Age: 79 16 years - ------------------------------------------------------------------------------------------------------------------------------------ Larry M. Robbins Trustee Indefinite; 19 years Director, Center for 38 None P.O. Box 182845 Teaching and Learning, Columbus, Ohio 43218 University of Pennsylvania Age: 68 - ------------------------------------------------------------------------------------------------------------------------------------ Alan S. Parsow Trustee Indefinite; 19 years General Partner of Elkhorn 38 None P.O. Box 182845 Partners, L.P., since 1989 Columbus, Ohio 43218 Age: 56 - ------------------------------------------------------------------------------------------------------------------------------------ Michael Seely Trustee Indefinite; 19 years Private Investor; Finance 38 None P.O. Box 182845 Chair of the Vermont Columbus, Ohio 43218 Republican Party; President Age: 61 of Investor Access Corporation, 1981-2004 - ------------------------------------------------------------------------------------------------------------------------------------ Thomas Robards Trustee Indefinite; 2 years Private Investor; Chief 38 Financial Federal P.O. Box 182845 Financial Officer, American Corporation and Columbus, Ohio 43218 Museum of Natural History Overseas Age: 60 (2003 to 2004); Chief Shipholding Financial Officer, Datek Group Online Holding Corp. (2000 to 2002); Executive member of Board of Directors, Executive Vice President and Chief Financial Officer, Republic New York Corporation (1976 to 1999) - ------------------------------------------------------------------------------------------------------------------------------------ Richard Brealey Trustee Indefinite; 2 years Emeritus Professor, London 38 None P.O. Box 182845 School of Business (2002 Columbus, Ohio 43218 to present); Deputy Age: 70 Chairman, Balancing and Settlement Code Panel (September 2000 to present) - ------------------------------------------------------------------------------------------------------------------------------------ Stephen J. Baker* Trustee Indefinite; 3 years Chief Executive Officer, 38 None P.O. Box 182845 HSBC Investments (USA), Columbus, Ohio 43218 Inc. (2003 to present); Age: 50 Chief Executive Officer, HSBC Asset Management (Canada) Limited (1998 to 2003) - ------------------------------------------------------------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS 118 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- BOARD OF TRUSTEES (UNAUDITED) (CONTINUED) The names of the Officers, their addresses, ages, position(s) held with each Trust, and principal occupation(s) during the past five years are described in the table below. Unless otherwise indicated, the address for each Officer is 3435 Stelzer Road, Columbus, Ohio 43219-3035.
TERM OF OFFICE AND NAME, ADDRESS POSITION(S) HELD LENGTH OF TIME PRINCIPAL OCCUPATION(S) AND AGE WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Richard A. Fabietti President Indefinite; March Senior Vice President, Head of Product Management, 3435 Stelzer Road 2004-Present HSBC Investments (USA) Inc., 1998-Present Columbus, Ohio 43219 Age: 48 - ------------------------------------------------------------------------------------------------------------------------------------ Elba Vasquez Vice President Indefinite; 2006-Present Vice President of Product Administration, HSBC 452 Fifth Avenue Investments (USA) Inc. (2005 to present); Vice President New York, NY 10018 of Client Services, BISYS Fund Services, Inc. (1996 to Age: 45 2005) - ------------------------------------------------------------------------------------------------------------------------------------ Marc Schuman Secretary Indefinite; 2005-Present Senior Counsel of BISYS Fund Services, Inc., 2005- 90 Park Avenue Present; Senior Corporate Counsel of The BISYS Group, 10th Floor Inc. 2001-2005; Of Counsel to Morgan, Lewis & Bockius New York, NY 10016 LLP (law firm) 2000-2001. Age: 46 - ------------------------------------------------------------------------------------------------------------------------------------ Michael Lawlor Assistant Secretary Indefinite; March Assistant Counsel of BISYS Fund Services, Inc. 2005- 100 Summer Street 2005-Present Present; Associate Counsel of IXIS Advisors Group 2003- Suite 1500 2005; Staff Counsel Loomis, Sayles & Company, L.P. Boston, MA 02110 2000-2003; Legal Product Manager, Scudder Kemper Age: 37 Investments 1999-2000. - ------------------------------------------------------------------------------------------------------------------------------------ Troy Sheets * Treasurer Indefinite; 2004-Present Employee of BISYS Fund Services, Inc., 2002-Present; 3435 Stelzer Road Senior Manager, KPMG LLP, 1993-2002 Columbus, Ohio 43219 Age: 35 - ------------------------------------------------------------------------------------------------------------------------------------ Frederick J. Schmidt* Chief Compliance Expires 2006; 2004-Present Senior Vice President and Chief Compliance Officer, CCO 90 Park Avenue Officer Services of BISYS Fund Services, 2004-Present; President, 10th Floor FJS Associates, 2002-2004; Vice President, Credit New York, NY 10016 Agricole Asset Mangement, U.S., 1987-2002 Age: 47 - ------------------------------------------------------------------------------------------------------------------------------------
* Messrs. Sheets and Schmidt also are officers of certain other investment companies of which BISYS or an affiliate is the administrator. 119 HSBC INVESTOR FAMILY OF FUNDS A description of the policies and procedures that the Funds use to determine how to vote proxies relating to the portfolio securities is available without charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on the Fund's website at www.investorfunds.us.hsbc.com and the Securities and Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting record for the most recent 12 month period ending June 30 is available at the Security and Exchange Commission's website at http://www.sec.gov. Schedules of Portfolio Investments for fiscal quarters ending January 31 and July 31 will be available no later than 60 days after each period end, without charge, on the Fund's website at www.investorfunds.us.hsbc.com and on the Securities and Exchange Commission's website at http://www.sec.gov. An investment in a Fund is not a deposit of HSBC Bank USA, National Association, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. HSBC INVESTOR FAMILY OF FUNDS: INVESTMENT ADVISER AND ADMINISTRATOR HSBC Investments (USA) Inc. 452 Fifth Avenue New York, NY 10018 SUB-ADVISERS HSBC INVESTOR GROWTH PORTFOLIO Waddell & Reed Investment Management Company 6300 Lamar Avenue Overland Park, KS 66202 HSBC GROWTH AND INCOME FUND TransAmerica Investment Management, LLC 1150 S. Olive Street, Suite 2700 Los Angeles, CA 90015 HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO AllianceBernstein Investment Research and Management 1345 Avenue of the Americas, 39th Floor New York, NY 10105 HSBC INVESTOR MID-CAP FUND Munder Capital Management Munder Capital Center 480 Pierce Street Birmingham, MI 48009-6063 HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO Westfield Capital Management, LLC One Financial Center Boston, MA 02111 HSBC INVESTOR VALUE PORTFOLIO NWQ Investment Management Co., LLC 2049 Century Park East, 4th Floor Los Angeles, CA 90067 SHAREHOLDER SERVICING AGENTS FOR HSBC BANK USA, N.A. AND HSBC BROKERAGE (USA) INC. CLIENTS HSBC Bank USA, N.A. 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 TRANSFER AGENT, DISTRIBUTOR AND SPONSOR BISYS Fund Services 3435 Stelzer Road Columbus, OH 43219 CUSTODIANS HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO HSBC INVESTOR NEW YORK TAX-FREE BOND FUND HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO HSBC INVESTOR GROWTH PORTFOLIO HSBC INVESTOR GROWTH AND INCOME FUND HSBC INVESTOR MID-CAP FUND HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO HSBC INVESTOR VALUE PORTFOLIO HSBC Bank USA, N.A. 452 Fifth Avenue New York, NY 10018 HSBC HIGH YIELD FIXED INCOME PORTFOLIO HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO Investors Bank & Trust Company 200 Clarendon Street - 16th Floor Boston, MA 02116 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 191 West Nationwide Blvd., Suite 500 Columbus, OH 43215 LEGAL COUNSEL Dechert LLP 1775 Eye Street, N.W. Washington, D.C. 20006 The HSBC Investor Family of Funds are distributed by BISYS Fund Services. This document must be preceded or accompanied by a current prospectus for the HSBC Investor Funds, which you should read carefully before you invest or send money. -- NOT FDIC INSURED -- NO BANK GUARANTEE -- MAY LOSE VALUE HSB-0008 12/06 ITEM 2. CODE OF ETHICS. (a) 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 12(A)(I). (B) DURING THE PERIOD COVERED BY THE REPORT, WITH RESPECT TO THE REGISTRANT'S CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER OR CONTROLLER, OR PERSONS PERFORMING SIMILAR FUNCTIONS; THERE HAVE BEEN NO AMENDMENTS TO, NOR ANY WAIVERS GRANTED FROM, A PROVISION THAT RELATES TO ANY ELEMENT OF THE CODE OF ETHICS DEFINITION ENUMERATED IN PARAGRAPH (B) OF THIS ITEM 2. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. 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 THOMAS ROBARDS, WHO IS "INDEPENDENT" FOR PURPOSES OF THIS ITEM 3 OF FORM N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) AUDIT FEES, 2005 $255,000 2006 $284,700 (b) AUDIT-RELATED FEES, 2005 $40,000 2006 $41,600 2005 - Fees of $5,000 relate to the consent of N1A filing and $35,000 relate to the performance of the Funds' 17f-2 examinations. 2006 - Fees of $5,200 relate to the consent of N1A filing and $36,400 relate to the performance of the Funds' 17f-2 examinations. (c) TAX FEES, 2005 $139,200 2006 $154,800 Fees for both 2005 and 2006 relate to the preparation of federal income and excise tax returns and the review of excise tax distributions. (d) ALL OTHER FEES, 2005 $0 2006 $0 (e)(1) Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust's Audit Committee must preapprove all audit and non-audit services by the independent accountants relating to the operations or financial reporting of the Funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law. (2) None of the services summarized in (b) - (d), above, were approved by the audit Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X. (f) Not applicable. (g) Non-Audit Fees. 2005 $228,200 2006 $238,800 (h) THE AUDIT COMMITTEE CONSIDERED THE NONAUDIT SERVICES RENDERED TO THE REGISTRANT'S INVESTMENT ADVISER AND ANY ENTITY CONTROLLING, CONTROLLED BY, OR UNDER COMMON CONTROL WITH THE INVESTMENT ADVISER, AND BELIEVES THE SERVICES ARE COMPATIBLE WITH THE PRINCIPAL ACCOUNTANT'S INDEPENDENCE. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 11. CONTROLS AND PROCEDURES. (a)THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES AS CONDUCTED WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT THESE DISCLOSURE CONTROLS AND PROCEDURES ARE ADEQUATELY DESIGNED AND ARE OPERATING EFFECTIVELY TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE TIME PERIODS SPECIFIED IN THE SECURITIES AND EXCHANGE COMMISSION'S RULES AND FORMS. (b)THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE SECOND FISCAL QUARTER OF THE PERIOD COVERED BY THIS REPORT THAT HAVE MATERIALLY AFFECTED OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING. ITEM 12. EXHIBITS. (a)(1) THE CODE OF ETHICS THAT IS THE SUBJECT OF THE DISCLOSURE REQUIRED BY ITEM 2 IS ATTACHED HERETO. (a)(2) CERTIFICATIONS PURSUANT TO RULE 30A-2(A) ARE ATTACHED HERETO. (a)(3) NOT APPLICABLE. (b) CERTIFICATIONS PURSUANT TO RULE 30A-2(B) ARE FURNISHED HEREWITH. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) HSBC ADVISOR FUNDS TRUST By (Signature and Title)* /S/ RICHARD A. FABIETTI ------------------------------------------------------- Richard A. Fabietti President Date_____January 5, 2007_______________________________ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /S/ RICHARD A. FABIETTI ------------------------------------------------------- Richard A. Fabietti President Date____January 5, 2007________________________________ By (Signature and Title)* /S/ TROY A. SHEETS ------------------------------------------------------- Troy A. Sheets Treasurer Date_____January 5, 2007_______________________________ * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 c44853_ex99-code.txt EX-99.CODE ETH 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, HSBC Investor Portfolios and HSBC Absolute Return Portfolio LLC (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 2 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. 3 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. 4 (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. 5 (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. 6 SCHEDULE 1 COMPLIANCE OFFICER Martin R. Dean 7 EXHIBIT A CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS INITIAL AND ANNUAL CERTIFICATION OF COMPLIANCE WITH THE CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS [ ] I hereby certify that I have received the Code of Ethics for Principal Executive and Senior Financial Officers adopted pursuant to the Sarbanes-Oxley Act of 2002 (the "Code") and that I have read and understood the Code. I further certify that I am subject to the Code and will comply with each of the Code's provisions to which I am subject. [ ] I hereby certify that I have received the Code of Ethics for Principal Executive and Senior Financial Officers adopted pursuant to the Sarbanes-Oxley Act of 2002 (the "Code") and that I have read and understood the Code. I further certify that I have complied with and will continue to comply with each of the provisions of the Code to which I am subject. ___________________________________________ (Signature) Name:______________________________________ Title/Department:__________________________ Date:______________________________________ Received By (Name/Title):_____________________________ Signature:____________________________________________ Date:_________________________________________________ 8 EX-99.CERT 3 c44853_ex99-cert.txt EX-99.CERT CERTIFICATIONS I, Richard A. Fabietti, certify that: 1. I have reviewed this report on Form N-CSR of HSBC Advisor Funds Trust (the "registrant"); 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. January 5, 2007 /s/ Richard A. Fabietti - --------------- ----------------------- Date Richard A. Fabietti President CERTIFICATIONS I, Troy A. Sheets, certify that: 1. I have reviewed this report on Form N-CSR of HSBC Advisor Funds Trust (the "registrant"); 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 officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. January 5, 2007 /s/ Troy A. Sheets - ------------------ ------------------ Date Troy A. Sheets Treasurer EX-99.906CERT 4 c44853_ex99-906.txt EX-99.906 CERT 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, 2006 of HSBC Advisor Funds Trust (the "Registrant"). Each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of the Registrant, hereby certifies that, to such officer's 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 5, 2007 - --------------- Date /s/ Richard A. Fabietti ----------------------- Richard A. Fabietti President /s/ Troy A. Sheets ----------------------- Troy A. Sheets Treasurer This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----