N-CSR 1 c51799_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: 811-08928 HSBC INVESTOR PORTFOLIOS (Exact name of registrant as specified in charter) 452 FIFTH AVENUE NEW YORK, NY 10018 (Address of principal executive offices) (Zip code) CITI 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 Date of reporting period: October 31, 2007 ITEM 1. REPORTS TO STOCKHOLDERS. Annual Report HSBC Investor LifeLine Funds(TM) ================================================================================ OCTOBER 31, 2007 HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND LifeLine HSBC INVESTOR GROWTH It's simple. STRATEGY FUND It's easy. HSBC INVESTOR MODERATE GROWTH STRATEGY FUND It's affordable. HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND HSBC INVESTOR LIFELINE FUNDS HSBC [LOGO] -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS ANNUAL REPORT - OCTOBER 31, 2007 Chairman's Message 1 Commentary From the Investment Manager 2 Portfolio Reviews 3 Statements of Assets and Liabilities 19 Statements of Operations 20 Statements of Changes in Net Assets 21 Financial Highlights 25 Notes to Financial Statements 29 Report of Independent Registered Public Accounting Firm 36 Other Federal Income Tax Information 37 Table of Shareholder Expenses 39 HSBC INVESTOR PORTFOLIOS Schedules of Portfolio Investments HSBC Investor Core Plus Fixed Income Portfolio 41 HSBC Investor High Yield Fixed Income Portfolio 45 HSBC Investor Intermediate Duration Fixed Income Portfolio 50 HSBC Investor Growth Portfolio 53 HSBC Investor International Equity Portfolio 54 HSBC Investor Opportunity Portfolio 56 HSBC Investor Value Portfolio 58 Statements of Assets and Liabilities 59 Statements of Operations 61 Statements of Changes in Net Assets 63 Financial Highlights 67 Notes to Financial Statements 68 Report of Independent Registered Public Accounting Firm 75 Investment Adviser Contract Approval 76 Table of Shareholder Expenses 77 Board of Trustees 79 -------------------------------------------------------------------------------- GLOSSARY OF TERMS -------------------------------------------------------------------------------- CITIGROUP U.S. DOMESTIC THREE MONTH TREASURY BILL INDEX is government guaranteed and offers a fixed rate of return. Return and principal of stocks and bonds will vary with market conditions. Treasury bills are less volatile than longer-term fixed-income securities and are guaranteed as to timely payment of principal and interest by the U.S. Government. LEHMAN BROTHERS U.S. AGGREGATE 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 INDEX is an unmanaged index 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. 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 HIGH CURRENT YIELDS FUNDS AVERAGE is an average of managed funds that aims at high (relative) current yield from fixed income securities, has no quality or maturity restrictions, and tends to invest in lower grade debt issues. MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX is an unmanaged index which measures the performance of the broad high yield market. 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. 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) GROWTH INDEX is unmanaged index which measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 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. SECURITIES INDUSTRY AND FINANCIAL MARKETS ASSOCIATION MUNICIPAL SWAP INDEX ("SIFMA") is produced by Municipal Market Data, is a 7-day high-grade market index comprised of tax-exempt VRDOs from MMD's extensive MMD's extensive database. 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. 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. [This Page Intentionally Left Blank] -------------------------------------------------------------------------------- CHAIRMAN'S MESSAGE -------------------------------------------------------------------------------- DEAR SHAREHOLDERS, It is no secret that in today's global economy, investing is extremely complex. From the days when goods and services were bartered to the relatively modern period of "exchanges," many people are involved with many chances for both success and failure. The mutual fund industry of the 21st century exemplifies the most complex of investment vehicles, with the result that government agencies like the U.S. Securities and Exchange Commission and boards of mutual funds must be vigilant on behalf of the private investor. To protect and support their shareholders, mutual fund boards need to have the most current information about general market trends and individual companies in which the funds invest. Boards must also determine who will be the best providers of this information and the best managers of the processes of the funds. Our board relies on the advice of the counsel to the fund and on its own counsel to the independent trustees to analyze all the financial and managerial issues related to operations. For example, when approving advisory agreements, the board considers: o Nature, extent and quality of services to be provided o Cost of services and profits realized by the advisors o Determination of equitable fees o Comparison of fees and services provided by other advisors o Performance of the funds and fund advisors o Economies of scale as funds grow This list generally represents the factors for approving advisory agreements. If any of the service providers to the funds begins to fall short in its performance, the board will find out the reasons, recommend remedial action or make a change. This is an ongoing process, not limited to quarterly meetings. The board and all its service providers work every day on behalf of the shareholders. As always, as you read this report about the status of your investment, if you have questions, concerns or ideas, please contact us. Yours truly, /s/ Larry M. Robbins Larry M. Robbins, Chairman, HSBC Investor Funds 1 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- COMMENTARY FROM THE INVESTMENT MANAGER -------------------------------------------------------------------------------- HSBC INVESTMENTS (USA) INC. U.S. ECONOMIC REVIEW The U.S. economy slowed during the year ended October 31, 2007. Less consumption, housing weakness, subprime turmoil, and a recent slowing of corporate profits marked the year. While overall inflation was fine, inflationary pressures have been building through higher commodity prices. The housing market has been a main drag on the U.S. economy and its growth. Housing continues to deteriorate, as indicated by August's 4.4% year-over-year decline in the Case-Shiller index of home prices and cyclical low in existing home sales. After record years, corporate profits have begun to weaken led by a summer downturn in real estate, followed by subprime writedowns in Financials. A booming technology sector has been an exception to the slowdown in most industries. Employment is good, but growing anemically and matched with a less-tight 4.7% unemployment rate. Therefore, while the most recent quarterly economic growth was a strong 4.9% annualized, that reading appears both high and unsustainable. In 2008, we believe continued growth is an uncertainty as the country braces for more rounds of mortgage resets, and increased defaults. The housing market has declined, driven by tighter credit and slow underlying demand. Housing will likely remain weak to allow time for underlying housing fundamentals to stabilize. Continued tight credit, lower housing wealth, and slower job growth, all combine to increase the downside risk to growth. Our central scenario remains one of a soft-landing as indicators stay mixed, the employment situation remains reasonably healthy, and we believe we see a Federal Reserve Board (the "Fed") ready to support. However, we acknowledge downside risks to growth have increased given the potential implications of the subprime fallout for corporates and the economy at large. According to our central scenario, growth is expected to slow moderately in other developed markets like Europe, and remain strong in emerging markets. MARKET REVIEW Stocks posted strong returns in the year ended October 31, 2007. The S&P 500 Index (price only) gained 12.4%, the Russell 2000(R) Index (price only) gained 8.0%, and the MSCI EAFE gained 25.4%. International indexes created new highs, and the S&P this year finally surpassed its 2000 peak. The most significant market change in the past few months was due to the subprime contagion. When borrowers began to default on mortgages connected to souring housing investments, industries surrounding risky loan origination saw losses accelerate. Losses also spread to companies exposed to this sector, and tighter credit meant restrictive borrowing capacity for both consumers and companies. The subprime situation led to a spike in risk-aversion. This was evidenced by a drop in financials stocks and a flight towards more safe-haven instruments like gold and U.S. Treasuries. In the past three months, gold has rallied 19.9% to $797/oz and 10-year bond yields dropped 26 basis points (0.26%) to 4.47%. While the Fed has helpfully cut target rates, the situation remains critical. Looking at 2008, we believe we see a soft landing for the U.S. economy but a more difficult environment for corporate profits. We are therefore somewhat more cautious on equities over the next 12 months. Among fixed income markets, we prefer government debt to credit assets due to the market volatility and less attractive credit valuations. HSBC INVESTOR FAMILY OF FUNDS 2 -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND HSBC INVESTOR GROWTH STRATEGY FUND HSBC INVESTOR MODERATE GROWTH STRATEGY FUND HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY 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 the Fund will fluctuate as the value of the securities in the portfolio changes. Common stocks, and funds investing in common stocks, generally provide greater return potential when compared with other types of investments. Value-based investments are subject to the risk that the broad market may not recognize their intrinsic value. Small capitalization funds typically carry additional risks, since smaller companies generally have a higher risk of failure and historically have experienced a greater degree of market volatility than average. There are risks associated with investing in a fund that invests in securities of foreign countries, such as erratic market conditions, economic and political instabilities and fluctuations in currency exchanges. AN INVESTMENT IN MONEY MARKET FUNDS IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00. The HSBC Investor Funds feature a number of funds that are structured as "master/feeder" funds. Under this two-tier structure, one fund (the "feeder fund") invests all of its investable assets in a second fund (the "master fund"). The LifeLine Funds, through this master/feeder structure, provide an asset allocation option to investors who seek to diversify their investment across a variety of asset classes. Each LifeLine Fund provides an asset allocation option corresponding to different investment objectives and risk tolerances. Each LifeLine Fund is a feeder fund. However, unlike most feeder funds, a LifeLine Fund will not direct all of its assets to a single master fund. Instead, the LifeLine Fund will allocate its assets to different master funds in accordance with its asset allocation model. HSBC Investments (USA) Inc. (the "Adviser"), according to specific target allocations, invested each LifeLine Fund's assets in some or all of the following master funds ("underlying Portfolios"): HSBC Investor Growth Portfolio ("Growth Portfolio"); HSBC Investor Value Portfolio ("Value Portfolio"); HSBC Investor Opportunity Portfolio ("Small Cap Equity Portfolio"); HSBC Investor International Equity Portfolio ("International Equity Portfolio"); HSBC Investor Core Plus Fixed Income Portfolio ("Core Plus Fixed Income Portfolio"); HSBC Investor High Yield Fixed Income Portfolio (High Yield Fixed Income Fund); HSBC Investor Intermediate Duration Fixed Income Portfolio ("Intermediate Duration Fixed Income Portfolio"); and the HSBC Investor Money Market Fund ("Money Market Fund"). 3 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- During the last fiscal period, each LifeLine Fund invested in a different combination of the underlying Portfolios according to the various target percentage weightings selected by the Adviser, approximately as set forth in the charts below.
---------------------------------------------------------------------------------- HSBC INVESTOR HSBC INVESTOR HSBC INVESTOR HSBC INVESTOR AGGRESSIVE GROWTH GROWTH MODERATE GROWTH CONSERVATIVE GROWTH STRATEGY STRATEGY STRATEGY STRATEGY UNDERLYING PORTFOLIO FUND FUND FUND FUND ------------------------------------------------------------------------------------------------------------------------------------ Money Market Fund 1% 1% 6% 21% ------------------------------------------------------------------------------------------------------------------------------------ Core Plus Fixed Income Portfolio None 15% 26% 25% ------------------------------------------------------------------------------------------------------------------------------------ High Yield Fixed Income Portfolio None 2% 5% 8% ------------------------------------------------------------------------------------------------------------------------------------ Intermediate Duration Fixed Income Portfolio None None None 3% ------------------------------------------------------------------------------------------------------------------------------------ Growth Portfolio 21% 21% 19% 15% ------------------------------------------------------------------------------------------------------------------------------------ International Equity Portfolio 23% 20% 15% 10% ------------------------------------------------------------------------------------------------------------------------------------ Opportunity Portfolio 34% 20% 11% 4% ------------------------------------------------------------------------------------------------------------------------------------ Value Portfolio 21% 21% 18% 14% ------------------------------------------------------------------------------------------------------------------------------------ Total: 100% 100% 100% 100% ====================================================================================================================================
HSBC INVESTOR FAMILY OF FUNDS 4 -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT -------------------------------------------------------------------------------- [The following tables represent line charts in the printed piece.] Citigroup HSBC Investor Russell Russell Russell U.S. Domestic Aggressive 1000(R) 1000(R) MSCI 2500(R) Three Month Growth Growth Value EAFE Growth Treasury Bill Strategy Fund Index Index Index Index Index (B Shares)(2) 2/9/05 10000 10000 10000 10000 10000 10000 3/05 9922 10190 10176 9917 10039 9850 6/05 10167 10360 10100 10270 10108 10110 9/05 10575 10763 11154 10916 10188 10900 12/05 10889 10899 11614 11213 10282 11233 3/06 11226 11546 12714 12539 10387 12128 6/06 10788 11614 12834 11771 10507 11907 9/06 11213 12336 13345 11629 10638 12118 12/06 11878 13323 14733 12588 10771 12962 3/07 12019 13489 15344 13095.8 10904 13283 6/07 12843 14153 16367 14010.5 11039 14368 9/07 13383 14119 16732 14102.3 11171 14750 10/07 13839 14120 17392 14686.1 11211 15143 Aggressive HSBC Investor Growth Aggressive Blended Growth Portfolio Strategy Index(5) Fund (B Shares)(2) 2/9/05 10000 10000 3/05 10036 9850 6/05 10232 10110 9/05 10868 10900 12/05 11172 11233 3/06 12075 12128 6/06 11765 11907 9/06 12078 12118 12/06 13060 12962 3/07 13433 13283 6/07 14293 14368 9/07 14521 14750 10/07 14961 15143 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 EXPENSE FUND PERFORMANCE TOTAL RETURN (%) RATIO (%)(4) ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION 1 SINCE AS OF OCTOBER 31, 2007 DATE YEAR INCEPTION GROSS NET ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Aggressive Growth Strategy Fund Class A(1) 2/14/05 17.54 15.68 3.52 1.50 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Aggressive Growth Strategy Fund Class B(2) 2/9/05 18.75 16.46 4.27 2.25 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Aggressive Growth Strategy Fund Class C(3) 6/9/05 21.97 19.54 4.27 2.25 ------------------------------------------------------------------------------------------------------------------------------------ Aggressive Growth Blended Portfolio Index(5) 19.11 N/A N/A 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. THE PERFORMANCE ABOVE REFLECTS ANY FEE WAIVERS THAT HAVE BEEN IN EFFECT DURING THE APPLICABLE PERIODS, AS WELL AS ANY EXPENSE REIMBURSEMENTS THAT HAVE PERIODICALLY BEEN MADE. ABSENT SUCH WAIVERS AND REIMBURSEMENTS, RETURNS WOULD HAVE BEEN LOWER. CURRENTLY, CONTRACTUAL FEE WAIVERS ARE IN EFFECT FROM MARCH 1, 2007 THROUGH MARCH 1, 2008. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (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) REFLECTS THE EXPENSE RATIO AS REPORTED IN THE PROSPECTUS DATED FEBRUARY 28, 2007. (5) THE AGGRESSIVE GROWTH BLENDED PORTFOLIO INDEX CONSISTS OF A BLEND BY PERCENTAGE OF THE FOLLOWING INDICES. THE CITIGROUP U.S. DOMESTIC 3-MONTH T-BILL (1%); RUSSELL 1000(R) GROWTH INDEX (21%); RUSSELL 1000(R) VALUE INDEX (21%); RUSSELL 2500(R) GROWTH INDEX (34%) AND THE MSCI EAFE INDEX (23%). 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. FOR A COMPLETE DEFINITION OF THE ABOVE REFERENCED INDICES, PLEASE REFER TO THE GLOSSARY OF TERMS. 5 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH STRATEGY FUND -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT -------------------------------------------------------------------------------- [The following tables represent line charts in the printed piece.]
Citigroup Russell Russell Russell U.S. Domestic Lehman Merrill Lynch 1000(R) 1000(R) 2500(R) MSCI Three Month Brothers U.S. High Yield HSBC Investor Growth Value Growth EAFE Treasury U.S. Aggregate Master II Growth Strategy Index Index Index Index Bill Index Index Index (B Shares)(2) 2/1/05 10000 10000 10000 10000 10000 10000 10000 10000 3/05 9922 10190 9917 10176 10039 9890 9866 10150 6/05 10167 10360 10270 10100 10108 10188 10124 10410 9/05 10575 10763 10916 11154 10188 10119 10217 11040 12/05 10889 10899 11213 11614 10282 10179 10284 11336 3/06 11226 11546 12539 12714 10387 10114 10579 12018 6/06 10788 11614 11771 12834 10507 10105 10600 11877 9/06 11213 12336 11629 13345 10638 10490 11030 12128 12/06 11878 13323 12588 14733 10771 10620 11494 12883 3/07 12019 13489 13095.8 15344 10904 10779 11807 13176 6/07 12843 14153 14010.5 16367 11039 10723 11845 13984 9/07 13383 14119 14102.3 16732 11171 11028 11885 14368 10/07 13839 14120 14686.1 17392 11211 11127 11957 14623
Growth Blended Portfolio Index HSBC Investor Growth (5) Strategy Fund (B Shares)2 2/1/05 10000 10000 3/05 10025 10150 6/05 10224 10410 9/05 10725 11040 12/05 10982 11336 3/06 11643 12018 6/06 11439 11877 9/06 11825 12128 12/06 12643 12883 3/07 12952 13176 6/07 13618 13984 9/07 13874 14368 10/07 14218 14623 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 EXPENSE FUND PERFORMANCE TOTAL RETURN (%) RATIO (%)(4) ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION 1 SINCE AS OF OCTOBER 31, 2007 DATE YEAR INCEPTION GROSS NET ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Growth Strategy Fund Class A(1) 2/8/05 13.88 13.76 2.19 1.50 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Growth Strategy Fund Class B(2) 2/1/05 14.98 14.85 2.94 2.25 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Growth Strategy Fund Class C(3) 4/27/05 18.04 17.17 2.94 2.25 ------------------------------------------------------------------------------------------------------------------------------------ Growth Blended Portfolio Index(5) 16.38 N/A N/A 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. THE PERFORMANCE ABOVE REFLECTS ANY FEE WAIVERS THAT HAVE BEEN IN EFFECT DURING THE APPLICABLE PERIODS, AS WELL AS ANY EXPENSE REIMBURSEMENTS THAT HAVE PERIODICALLY BEEN MADE. ABSENT SUCH WAIVERS AND REIMBURSEMENTS, RETURNS WOULD HAVE BEEN LOWER. CURRENTLY, CONTRACTUAL FEE WAIVERS ARE IN EFFECT FROM MARCH 1, 2007 THROUGH MARCH 1, 2008. THE TOTAL RETURNS FOR EACH CLASS OF SHARES OF THE FUND FOR THE YEAR ENDED OCTOBER 31, 2007 INCLUDED THE RECEIPT OF A ONE-TIME PAYMENT IN RESPECT OF A CLASS ACTION SETTLEMENT. WITHOUT THE RECEIPT OF THIS PAYMENT, THE RETURNS FOR THE FUND FOR THE YEAR ENDED OCTOBER 31, 2007 WOULD HAVE BEEN LOWER. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (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) REFLECTS THE EXPENSE RATIO AS REPORTED IN THE PROSPECTUS DATED FEBRUARY 28, 2007. (5) THE PERFORMANCE SHOWN FOR THE GROWTH BLENDED PORTFOLIO INDEX PRIOR TO APRIL 30, 2006 DOES NOT REFLECT THE 2.0% ALLOCATION TO THE MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX. THE GROWTH BLENDED PORTFOLIO INDEX CONSISTS OF A BLEND BY PERCENTAGE OF THE FOLLOWING INDICES. THE CITIGROUP U.S. DOMESTIC 3-MONTH T-BILL (1%); MERRILL LYNCH HIGH YIELD MASTER II INDEX (2.0%); LEHMAN BROTHERS U.S. AGGREGATE FUND INDEX (15%); RUSSELL 1000(R) GROWTH INDEX (21%); RUSSELL 1000(R) VALUE INDEX (21%); RUSSELL 2500(R) GROWTH INDEX (20%), AND THE MSCI EAFE INDEX (20%). 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. FOR A COMPLETE DEFINITION OF THE ABOVE REFERENCED INDICES, PLEASE REFER TO THE GLOSSARY OF TERMS. HSBC INVESTOR FAMILY OF FUNDS 6 -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- HSBC INVESTOR MODERATE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT -------------------------------------------------------------------------------- [The following tables represent line charts in the printed piece.]
Russell Russell Russell Citigroup HSBC Investor 1000(R) 1000(R) 2500(R) MSCI U.S. Domestic Lehman Brothers Merrill Lynch Moderate Growth Growth Value Growth EAFE Three Month U.S. Aggregate U.S. High Yield Strategy Index Index Index Index Treasury Bill Index Index Master II Index (B Shares)(2) 2/1/05 10000 10000 10000 10000 10000 10000 10000 10000 3/05 9922 10190 9917 10176 10039 9890 9866 10032 6/05 10167 10360 10270 10100 10108 10188 10124 10263 9/05 10575 10763 10916 11154 10188 10119 10217 10693 12/05 10889 10899 11213 11614 10282 10179 10284 10935 3/06 11226 11546 12539 12714 10387 10114 10579 11391 6/06 10788 11614 11771 12834 10507 10105 10600 11302 9/06 11213 12336 11629 13345 10638 10490 11030 11553 12/06 11878 13323 12588 14733 10771 10620 11494 12170 3/07 12019 13489 13095.8 15344 10904 10779 11807 12400 6/07 12843 14153 14010.5 16367 11039 10723 11845 12947 9/07 13383 14119 14102.3 16732 11171 11028 11885 13283 10/07 13839 14120 14686.1 17392 11211 11127 11957 13412
Moderate Growth HSBC Investor Blended Moderate Growth Portfolio Strategy Fund Index(5) (B Shares)(2) 2/1/05 10000 10000 3/05 10006 10032 6/05 10213 10263 9/05 10575 10693 12/05 10784 10935 3/06 11237 11391 6/06 11109 11302 9/06 11510 11553 12/06 12156 12170 3/07 12415 12400 6/07 12899 12947 9/07 13160 13283 10/07 13420 13412 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 EXPENSE FUND PERFORMANCE TOTAL RETURN (%) RATIO (%)(4) ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION 1 SINCE AS OF OCTOBER 31, 2007 DATE YEAR INCEPTION GROSS NET ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Moderate Growth Strategy Fund Class A(1) 2/3/05 10.28 10.43 2.14 1.52 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Moderate Growth Strategy Fund Class B(2) 2/1/05 11.25 11.29 2.89 2.27 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Moderate Growth Strategy Fund Class C(3) 6/9/05 14.20 12.74 2.89 2.27 ------------------------------------------------------------------------------------------------------------------------------------ Moerate Growth Blended Portfolio Index(5) -- 13.58 N/A N/A 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. THE PERFORMANCE ABOVE REFLECTS ANY FEE WAIVERS THAT HAVE BEEN IN EFFECT DURING THE APPLICABLE PERIODS, AS WELL AS ANY EXPENSE REIMBURSEMENTS THAT HAVE PERIODICALLY BEEN MADE. ABSENT SUCH WAIVERS AND REIMBURSEMENTS, RETURNS WOULD HAVE BEEN LOWER. CURRENTLY, CONTRACTUAL FEE WAIVERS ARE IN EFFECT FROM MARCH 1, 2007 THROUGH MARCH 1, 2008. THE TOTAL RETURNS FOR EACH CLASS OF SHARES OF THE FUND FOR THE YEAR ENDED OCTOBER 31, 2007 INCLUDED THE RECEIPT OF A ONE-TIME PAYMENT IN RESPECT OF A CLASS ACTION SETTLEMENT. WITHOUT THE RECEIPT OF THIS PAYMENT, THE RETURNS FOR THE FUND FOR THE YEAR ENDED OCTOBER 31, 2007 WOULD HAVE BEEN LOWER. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (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) REFLECTS THE EXPENSE RATIO AS REPORTED IN THE PROSPECTUS DATED FEBRUARY 28, 2007. (5) THE PERFORMANCE SHOWN FOR THE MODERATE GROWTH BLENDED PORTFOLIO INDEX PRIOR TO APRIL 30, 2006 DOES NOT REFLECT THE 5.0% ALLOCATION TO THE MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX. THE MODERATE GROWTH BLENDED PORTFOLIO INDEX CONSISTS OF A BLEND BY PERCENTAGE OF THE FOLLOWING INDICES. THE CITIGROUP U.S. DOMESTIC 3-MONTH T-BILL (6%); LEHMAN BROTHERS U.S. AGGREGATE FUND INDEX (26%); MERRILL LYNCH HIGH YIELD MASTER II INDEX (5%); RUSSELL 1000(R) GROWTH INDEX (19%); RUSSELL 1000(R) VALUE INDEX (18%); RUSSELL 2500(R) GROWTH INDEX (11%) AND THE MSCI EAFE INDEX (15%). 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. FOR A COMPLETE DEFINITION OF THE ABOVE REFERENCED INDICES, PLEASE REFER TO THE GLOSSARY OF TERMS. 7 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT -------------------------------------------------------------------------------- [The following tables represent line charts in the printed piece.]
HSBC Merrill Investor Citigroup Lehman Lehman Lynch Conservative Russell Russell Russell U.S. Domestic Brothers Brothers U.S. High Growth 1000(R) 1000(R) 2500(R) MSCI Three Month U.S. Intermediate Yield Strategy Growth Value Growth EAFE Treasury Bill Aggregate U.S. Aggregate Master II (B Shares) Index Index Index Index Index Index Index Index (2) 2/17/05 10000 10000 10000 10000 10000 10000 10000 10000 10000 3/05 9922 10190 9917 10176 10039 9890 9910 9866 9872 6/05 10167 10360 10270 10100 10108 10188 10150 10124 10032 9/05 10575 10763 10916 11154 10188 10119 10110 10217 10312 12/05 10889 10899 11213 11614 10282 10179 10166 10284 10530 3/06 11226 11546 12539 12714 10387 10114 10140 10579 10809 6/06 10788 11614 11771 12834 10507 10105 10153 10600 10766 9/06 11213 12336 11629 13345 10638 10490 10499 11030 10998 12/06 11878 13323 12588 14733 10771 10620 10631 11494 11457 3/07 12019 13489 13096 15344 10904 10779 10798 11807 11639 6/07 12843 14153 14011 16367 11039 10723 10761 11845 11972 9/07 13383 14119 14102 16732 11171 11028 11058 11885 12243 10/07 13839 14120 14686 17392 11211 11127 11147 11957 12263
HSBC Investor Conservative Growth Conservative Growth Blended Portfolio Strategy Fund Index(5) (B Shares)(2) 2/17/05 10000 10000 3/05 10004 9872 6/05 10189 10032 9/05 10444 10312 12/05 10611 10530 3/06 10918 10809 6/06 10873 10766 9/06 11249 10998 12/06 11732 11457 3/07 11948 11639 6/07 12283 11972 9/07 12522 12243 10/07 12703 12263 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 EXPENSE FUND PERFORMANCE TOTAL RETURN (%) RATIO (%)(4) ------------------------------------------------------------------------------------------------------------------------------------ INCEPTION 1 SINCE AS OF OCTOBER 31, 2007 DATE YEAR INCEPTION GROSS NET ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Conservative Growth Strategy Fund Class A(1) 2/23/05 6.57 7.40 3.26 1.54 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Conservative Growth Strategy Fund Class B(2) 2/17/05 7.51 7.84 4.01 2.29 ------------------------------------------------------------------------------------------------------------------------------------ HSBC Investor Conservative Growth Strategy Fund Class C(3) 4/19/05 10.97 10.17 4.01 2.29 ------------------------------------------------------------------------------------------------------------------------------------ Conservative Growth Blended Portfolio Index(5) -- 10.75 N/A N/A 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. THE PERFORMANCE ABOVE REFLECTS ANY FEE WAIVERS THAT HAVE BEEN IN EFFECT DURING THE APPLICABLE PERIODS, AS WELL AS ANY EXPENSE REIMBURSEMENTS THAT HAVE PERIODICALLY BEEN MADE. ABSENT SUCH WAIVERS AND REIMBURSEMENTS, RETURNS WOULD HAVE BEEN LOWER. CURRENTLY, CONTRACTUAL FEE WAIVERS ARE IN EFFECT FROM MARCH 1, 2007 THROUGH MARCH 1, 2008. THE TOTAL RETURNS FOR EACH CLASS OF SHARES OF THE FUND FOR THE YEAR ENDED OCTOBER 31, 2007 INCLUDED THE RECEIPT OF A ONE-TIME PAYMENT IN RESPECT OF A CLASS ACTION SETTLEMENT. WITHOUT THE RECEIPT OF THIS PAYMENT, THE RETURNS FOR THE FUND FOR THE YEAR ENDED OCTOBER 31, 2007 WOULD HAVE BEEN LOWER. (1) REFLECTS THE MAXIMUM SALES CHARGE OF 5.00%. (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) REFLECTS THE EXPENSE RATIO AS REPORTED IN THE PROSPECTUS DATED FEBRUARY 28, 2007. (5) THE PERFORMANCE SHOWN FOR THE CONSERVATIVE GROWTH BLENDED PORTFOLIO INDEX PRIOR TO APRIL 30, 2006 DOES NOT REFLECT THE 8.0% ALLOCATION TO THE MERRILL LYNCH U.S. HIGH YIELD MASTER II INDEX. THE CONSERVATIVE GROWTH BLENDED PORTFOLIO INDEX CONSISTS OF A BLEND BY PERCENTAGE OF THE FOLLOWING INDICES. THE CITIGROUP U.S. DOMESTIC 3-MONTH T-BILL (21%); MERRILL LYNCH HIGH YIELD MASTER II INDEX (8%); LEHMAN BROTHERS U.S. AGGREGATE BOND FUND INDEX (25%); LEHMAN BROTHERS INTERMEDIATE U.S. AGGREGATE BOND INDEX (3%); RUSSELL 1000(R) GROWTH INDEX (15%); RUSSELL 1000(R) VALUE INDEX (14%); RUSSELL 2500(R) GROWTH INDEX (4%) AND THE MSCI EAFE INDEX (10%). 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. FOR A COMPLETE DEFINITION OF THE ABOVE REFERENCED INDICES, PLEASE REFER TO THE GLOSSARY OF TERMS. HSBC INVESTOR FAMILY OF FUNDS 8 -------------------------------------------------------------------------------- PORTFOLIO REVIEWS -------------------------------------------------------------------------------- [GRAPHIC OMITTED] -------------------------------------------------------------------------------- STANDARDIZED PERFORMANCE BENCHMARK INDICES FOR THE 1 YEAR ENDED OCTOBER 31, 2007 YEAR (%) -------------------------------------------------------------------------------- Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index 4.95 Lehman Brothers U.S. Aggregate Bond Index 7.36 Lehman Brothers Intermediate U.S. Aggregate Bond Index 6.96 Merrill Lynch High Yield Master II Index 12.36 MSCI EAFE Index 20.32 Russell 1000(R) Growth Index 12.25 Russell 1000(R) Value Index 18.15 Russell 2500(R) Growth Index 7.32 CITIGROUP U.S. DOMESTIC 3-MONTH U.S. TREASURY BILL INDEX reflects monthly return equivalents of yield averages that are not marked to the market. The Index is an average of the last three -month Treasury Bill issues. The three-month Treasury Bills are the short-term debt obligations of the U.S. government. LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. LEHMAN BROTHERS INTERMEDIATE U.S. AGGREGATE BOND INDEX is generally representative of investment-grade debt issues with maturities between three and ten years. THE MERRILL LYNCH HIGH YIELD MASTER II INDEX consists of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default. MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST INDEX (MSCI EAFE) is a market capitalization-weighted equity index comprising 20 of the 48 countries in the MSCI universe and representing the developed world outside of North America. Each MSCI country index is created separately, then aggregated, without change, into regional MSCI indices. EAFE performance data is calculated in U.S. dollars and in local currency. RUSSELL 1000(R) GROWTH INDEX measures the performance of 1000 securities in the Russell Universe with higher price-to-book ratios and higher forecasted growth values. RUSSELL 1000(R) VALUE INDEX measures the performance of 1000 securities in the Russell Universe with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earnings ratios, higher dividend yields, and lower forecasted growth values. Investors cannot invest directly in an index. RUSSELL 2500(R) GROWTH INDEX measures the performance of those 2500 securities in the Russell Universe with higher price-to-book ratios and higher forecasted growth values. Investors cannot invest directly in an index, although they can invest in the underlying securities. 9 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS MOODY'S HAS ASSIGNED AN "AAA" RATING TO THE HSBC INVESTOR MONEY MARKET FUND.(1) HSBC INVESTOR MONEY MARKET FUND BY THOMAS RIORDAN SENIOR FIXED INCOME PORTFOLIO MANAGER INVESTMENT CONCERNS AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. During the third quarter of 2007 the fixed income markets were stressed due to liquidity concerns. As home prices declined throughout 2007, investors became increasingly concerned about the subprime mortgage market and certain related securities. In response, investors shunned most structured securities including asset backed commercial paper and structured investment vehicles ("SIV"). At October 31, the HSBC Investor Money Market Fund owned SIVs issued by several issuers, totaling $1.0 billion, which represented about 14% of the Fund's net assets. Because of sales and maturities that occurred after the Fund's fiscal year end, the Fund's SIV holdings were reduced to $558 million or about 7% of its net assets by December 17, 2007.* As Advisor to the HSBC Investor Money Market Fund, HSBC Investments believes that the SIVs held by the Fund are high quality tranches of well-established programs, many of which are bank-sponsored. HSBC Investments' credit teams continue to monitor these SIV holdings and are in regular contact with SIV sponsors and rating agencies. Management believes that the Fund has remained in compliance with the relevant regulations for money market mutual funds.* In terms of the broader market, in spite of the housing market woes, the economy grew at close to 3.0% annual rate for much of 2007 and the third quarter Gross Domestic Product(2) posted a surprisingly strong 3.9% growth rate. The broader measures of inflation have remained largely within the Federal Reserve's ("the Fed") target range of 1%-2%. Over the course of 2007, the core Producer Price Index(2), which excludes food and energy costs, rose at a 1.8% annual rate. The core Consumer Price Index(2) rose at a 2.3% annual rate. The core Personal Consumption Expenditure(2) index rose an average of 2.1% for 2007. Recently, there have been signs of inflation that have caused the Fed concern, including oil and gold prices at historical highs and a weakening dollar. The Fed has an unusually difficult job of late, as there have been mixed signals on the economy, in addition to the ongoing liquidity issues. The Fed has taken several actions to ease liquidity concerns in the markets. In a surprise move on August 17, 2007, the Fed lowered the discount rate by 50 basis points (0.50%) to 5.75% and added massive amounts of cash reserves to the system to prevent a seizing up of economic activity and attempt to restore confidence to the markets. At the September 18, 2007 Federal Open Market Committee ("FOMC") meeting they lowered the target fed funds and discount rates by a greater than expected 50 basis points (0.50%) to 4.75% and 5.25% respectively. This gave investors a boost of confidence as they saw the Fed aggressively taking steps to add liquidity to the financial system. The signs of a slowing economy, including layoffs in the financial services industry, in addition to the housing collapse have been offset by concerns of increased inflation. A statement from the October FOMC meeting highlighted these concerns. After cutting the target federal funds and discount rates by 25 basis points (0.25%) to 4.5% and 5.0% respectively, they issued a statement identifying the risks to economic growth and inflation as roughly balanced. *Portfolio composition is subject to change 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 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. HSBC INVESTOR FAMILY OF FUNDS 10 PORTFOLIO REVIEWS HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO BY HSBC INVESTMENTS (USA) INC. U.S. CORE FIXED INCOME TEAM The HSBC Investor Fixed Income Portfolio (the "Portfolio") seeks to provide investors with above-average total return, consistent with reasonable risk, through investments in a diversified portfolio of fixed-income securities. 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 outperformed the benchmark for the period under review. The key component of that outperformance was the Fund's defensive positioning. Early in the year, exposure to select off-benchmark holdings in high yield and emerging market debt contributed to positive performance. These gains were further enhanced later in the year, as the Fund moved to an underweight in corporates, as spread sectors underperformed duration adjusted treasuries. The Fund also benefited from individual security selection within corporate credits and mortgages.* Going forward, we will continue to analyze the yield curve for pricing anomalies and opportunistically add duration as higher yields reflect fair value. We look to remain defensive as we believe that the fundamentals may continue to deteriorate over the next 6-12 months eventually causing speculative grade defaults to rise from current levels. If this occurs, we will see a much more dramatic widening in credit spreads than we have seen in the current market environment. We believe the excesses of the past several years have yet to be resolved through short-term market volatility and central bank reaction. Consequently, we believe these will continue to have an economic and market impact. * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. 11 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO 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 (Class I Shares) outperformed the benchmark for the period under review. Performance was driven by the Fund's overweight exposure in CCC-rated issuers and its underweight in the building products and home builders industries.* Going forward, we will maintain duration that approximates that of the benchmark. We continue to analyze the yield curve for pricing anomalies. Our outlook for the remainder of 2007 is cautiously optimistic. On an industry front, we remain positive on the energy, gaming, wireless, and cable sectors. Although we remain cautious on home builders, financials and autos.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. HSBC INVESTOR FAMILY OF FUNDS 12 PORTFOLIO REVIEWS HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO BY HSBC INVESTMENTS (USA) INC. U.S. CORE FIXED INCOME TEAM The HSBC Investor Intermediate Duration Fixed Income Portfolio (the "Portfolio") 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. 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 (Class I Shares) outperformed the benchmark for the period under review. The key component of that outperformance was the Fund's defensive positioning. Early in the year, exposure to select off-benchmark holdings in high yield and emerging market debt contributed to positive performance. These gains were further enhanced later in the year, as the Fund moved to an underweight in corporates, as spread sectors underperformed duration adjusted treasuries. The Fund also benefited from individual security selection within corporate credits and mortgages.* Going forward, we will continue to analyze the yield curve for pricing anomalies and opportunistically add duration as higher yields reflect fair value. We look to remain defensive as we believe that the fundamentals may continue to deteriorate over the next 6-12 months eventually causing speculative grade defaults to rise from current levels. If this occurs, we will see a much more dramatic widening in credit spreads than we have seen in the current market environment. We believe the excesses of the past several years have yet to be resolved through short-term market volatility and central bank reaction. Consequently, we believe these will continue to have an economic and market impact.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. 13 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR GROWTH PORTFOLIO 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 Portfolio (the "Portfolio") 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 Portfolio employs Waddell & Reed Investment Management Company (Waddell & Reed) as the 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 Equities in general performed well during the Fund's fiscal year ended October 31, 2007, and large-cap growth stocks in particular generated healthy returns. Investors worried that the housing market's slump and the subprime mortgage crisis would weaken economic growth, so they sought shares of firms that appeared poised to deliver earnings growth in a slowing economy. Those trends helped the Fund post a strong absolute gain for the 12-month period under review. The Fund outperformed its benchmark index largely due to strong stock selection. In fact, security selection added to relative returns in seven of the eight economic sectors in which the Fund invested during the period. The performance of the Fund's holdings in the technology, consumer discretionary, materials and energy sectors especially lifted its return relative to the benchmark.* The Fund's holdings in the financial sector weighed on its relative performance. The subprime mortgage crisis caused problems for many of the financial stocks in the Fund's portfolio, as investors worried that a deteriorating credit environment could eat into financial firms' profits.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. HSBC INVESTOR FAMILY OF FUNDS 14 PORTFOLIO REVIEWS HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO 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 Portfolio (the "Portfolio") seeks 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 Portfolio employs AllianceBernstein L.P. ("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 International stocks performed well during the period. Investors encouraged by solid global economic growth and generally low interest rates bid up stocks in foreign markets, helping the Fund post strong absolute returns. Substantial declines in the value of the U.S. dollar also boosted absolute returns, as they increased the value of assets denominated in foreign currencies. The Fund held an overweight position relative to its benchmark index in shares of industrial commodities firms. Strong global demand, fueled by powerful economic growth in China and elsewhere, pushed up prices on commodities and bolstered the profits of commodities-related firms. Commodities stocks surged as a result, helping the Fund to produce positive performance. The Fund's holdings in the financial sector weighed on relative performance. Global investors during the second half of the period became concerned about rising mortgage defaults by U.S. homeowners with weak credit. Investors worried that sub-prime mortgage defaults could undermine securities backed by such loans, potentially leading to a global credit crunch. Financial stocks generally declined as a result of those fears, so the Fund's overweight position in the sector detracted from its returns relative to the benchmark which resulted with the Fund's (Advisor Shares) slightly underperforming the MSCI EAFE Index. * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. 15 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS HSBC INVESTOR OPPORTUNITY PORTFOLIO BY WILLIAM A. MUGGIA PRESIDENT-CHIEF INVESTMENT OFFICER WESTFIELD CAPITAL MANAGEMENT, LLC The HSBC Investor Opportunity Fund ("the Fund") seeks to provide its 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 Opportunity Portfolio (the "Portfolio"). The Portfolio employs Westfield Capital Management, LLC as sub-investment adviser. The Portfolio invests primarily in common stocks of small and medium-sized companies that may have the potential to become major enterprises. INVESTMENT CONCERNS Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. 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 In a period of slowing corporate profit growth, small- and mid-capitalization growth stocks meaningfully outperformed value stocks as measured by Russell indices. Materials, energy and industrial stocks were among the performance leaders, as stocks in those sectors appeared to benefit from exposure to the healthy pace of economic activity outside the U.S. Broad participation within the health care sector helped the Fund outperform the benchmark. Stocks from five different industries contributed to relative gains, but the impact of stocks within pharmaceuticals & life science tools was most significant. Maintaining a commitment to the energy sector yielded positive results relative to the benchmark as well. Stock selection within energy equipment and services was notable as companies with exposure to markets in the eastern hemisphere performed well.* The consumer discretionary sector also provided a source of superior performance during the year. An underweight position in this lagging sector was of some benefit, but the bulk of excess return against the benchmark stemmed from stock selection. Our emphasis on shares of firms with unique franchises exposed to the high-end consumer, particularly in apparel retail, publishing and specialized consumer services, helped the Fund's consumer discretionary stake outperform that of the benchmark.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. HSBC INVESTOR FAMILY OF FUNDS 16 PORTFOLIO REVIEWS HSBC INVESTOR VALUE PORTFOLIO BY JON D. BOSSE, CFA CHIEF INVESTMENT OFFICER NWQ INVESTMENT MANAGEMENT COMPANY, LLC The HSBC Investor Value Portfolio (the "Portfolio") 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 Portfolio employs NWQ Investment Management Company, LLC ("NWQ") as the 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 Strong performance by energy and basic materials stocks enhanced the Fund's absolute return. Those sectors benefited as fast-expanding international economies contributed to powerful demand for oil and other raw materials. Select stocks in such diverse industries as insurance brokerage, railroads, tobacco, technology and telecommunications also contributed to the Fund's absolute return. The Fund's exposure to the financial sector negatively influenced performance, as financial stocks--and particularly mortgage-related stocks--suffered from investor concerns about the subprime mortgage crisis.* Strong performance by the Fund's holdings in the oil and natural gas exploration industry was the primary positive contributor to relative gains. Mining and metals stocks also were significant contributors to the Fund's performance against its benchmark, as those stocks benefited from strong global demand for precious and base metals.* The Fund held an underweight position in the lagging financial sector. Selection among financial stocks caused the Fund's allocation to the sector to weigh on relative returns, however. Shares of mortgage origination and service firms in the portfolio suffered from the loss of investor confidence in the mortgage business, while mortgage insurance-related holdings came under pressure as investors became increasingly concerned about loan defaults.* * Portfolio composition is subject to change. (1) For additional information, please refer to the Glossary of Terms. 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 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. 17 HSBC INVESTOR FAMILY OF FUNDS PORTFOLIO REVIEWS PORTFOLIO COMPOSITION* OCTOBER 31, 2007 (UNAUDITED) -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Corporate Bonds 33.4% -------------------------------------------------------------------------------- Mortgage Backed Securities 23.2% -------------------------------------------------------------------------------- Commercial Mortgage Backed Securities 15.8% -------------------------------------------------------------------------------- Collateralized Mortgage Obligations 7.6% -------------------------------------------------------------------------------- Asset Backed Securities 7.2% -------------------------------------------------------------------------------- U.S. Treasury Securities 6.3% -------------------------------------------------------------------------------- Cash and Equivalents 4.0% -------------------------------------------------------------------------------- Foreign Bond 2.5% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Corporate Bonds 97.5% -------------------------------------------------------------------------------- Cash and Equivalents 2.5% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Mortgage Backed Securities 24.3% -------------------------------------------------------------------------------- Corporate Bond 36.4% -------------------------------------------------------------------------------- Collateralized Mortgage Obligations 10.1% -------------------------------------------------------------------------------- Asset Backed Securities 7.2% -------------------------------------------------------------------------------- Commercial Mortgage Backed Securities 16.6% -------------------------------------------------------------------------------- Foreign Bond 4.4% -------------------------------------------------------------------------------- Cash and Equivalents 1.0% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Information Technology 31.1% -------------------------------------------------------------------------------- Health Care 16.4% -------------------------------------------------------------------------------- Industrials 13.0% -------------------------------------------------------------------------------- Consumer Staples 10.1% -------------------------------------------------------------------------------- Consumer Discretionary 9.3% -------------------------------------------------------------------------------- Financials 8.4% -------------------------------------------------------------------------------- Energy 5.2% -------------------------------------------------------------------------------- Materials 4.2% -------------------------------------------------------------------------------- Cash and Equivalents 2.3% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Europe 62.6% -------------------------------------------------------------------------------- Japan 21.1% -------------------------------------------------------------------------------- Australia & Far East 7.4% -------------------------------------------------------------------------------- Cash and Equivalents 1.6% -------------------------------------------------------------------------------- Other 4.7% -------------------------------------------------------------------------------- Canada 2.6% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC INVESTOR OPPORTUNITY PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Health Care 26.6% -------------------------------------------------------------------------------- Information Technology 17.6% -------------------------------------------------------------------------------- Industrials 15.4% -------------------------------------------------------------------------------- Energy 13.7% -------------------------------------------------------------------------------- Consumer Discretionary 12.2% -------------------------------------------------------------------------------- Financials 6.0% -------------------------------------------------------------------------------- Business Services 2.7% -------------------------------------------------------------------------------- Consumer Staples 2.7% -------------------------------------------------------------------------------- Cash and Equivalents 1.7% -------------------------------------------------------------------------------- Telecommunications 1.4% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- HSBC INVESTOR VALUE PORTFOLIO -------------------------------------------------------------------------------- INVESTMENT ALLOCATION PERCENTAGE OF INVESTMENTS AT VALUE -------------------------------------------------------------------------------- Financials 25.1% -------------------------------------------------------------------------------- Information Technology 10.9% -------------------------------------------------------------------------------- Consumer Discretionary 9.3% -------------------------------------------------------------------------------- Energy 11.5% -------------------------------------------------------------------------------- Industrials 7.7% -------------------------------------------------------------------------------- Materials 6.6% -------------------------------------------------------------------------------- Cash 9.4% -------------------------------------------------------------------------------- Consumer Staples 6.7% -------------------------------------------------------------------------------- Telecommunication Services 3.5% -------------------------------------------------------------------------------- Miscellaneous 2.3% -------------------------------------------------------------------------------- Transportation 2.3% -------------------------------------------------------------------------------- Health Care 4.7% -------------------------------------------------------------------------------- Total 100.0% -------------------------------------------------------------------------------- * Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 18 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF ASSETS AND LIABILITIES--AS OF OCTOBER 31, 2007
AGGRESSIVE GROWTH MODERATE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH STRATEGY FUND FUND STRATEGY FUND STRATEGY FUND ------------------------------------------------------------------------------------------------------------------------------------ ASSETS: Investments in Affiliated Portfolios $12,398,291 $36,289,798 $35,994,580 $ 9,506,832 Investments in Affiliated Fund, at value (a) 124,808 365,927 2,295,024 2,523,618 ------------- ------------- ------------- ------------- Total Investments 12,523,099 36,655,725 38,289,604 12,030,450 ------------- ------------- ------------- ------------- Receivable for capital shares issued 19,200 84,127 194,218 17,922 Receivable from Investment Adviser 5,992 1,512 1,583 609 Prepaid expenses and other assets 5,486 3,885 7,643 6,213 ------------- ------------- ------------- ------------- TOTAL ASSETS 12,553,777 36,745,249 38,493,048 12,055,194 ------------- ------------- ------------- ------------- LIABILITIES: Payable for capital shares redeemed 20,328 163,711 14,489 3,696 Accrued expenses and other liabilities: Investment Management 516 5,494 9,393 502 Administration 333 986 1,041 344 Distribution 3,377 9,356 11,376 3,240 Shareholder Servicing 2,590 7,594 7,968 2,527 Compliance Service 7 22 22 4 Transfer Agent 3,367 4,410 4,570 3,165 Trustee 19 58 59 14 Other 7,680 23,781 24,285 7,399 ------------- ------------- ------------- ------------- TOTAL LIABILITIES 38,217 215,412 73,203 20,891 ------------- ------------- ------------- ------------- NET ASSETS $12,515,560 $36,529,837 $38,419,845 $12,034,303 ============= ============= ============= ============= COMPOSITION OF NET ASSETS: Capital $ 9,805,279 $29,646,780 $32,895,252 $10,947,282 Accumulated net investment income (loss) (4,459) 112,089 14,138 18,083 Accumulated net realized gains( losses) from investment and foreign currency transactions 757,521 1,874,813 1,482,315 265,540 Unrealized appreciation/depreciation from investments and foreign currencies 1,957,219 4,896,155 4,028,140 803,398 ------------- ------------- ------------- ------------- NET ASSETS $12,515,560 $36,529,837 $38,419,845 $12,034,303 ============= ============= ============= ============= NET ASSETS: Class A Shares $ 7,046,424 $21,351,615 $20,140,221 $ 6,669,226 Class B Shares 4,941,621 13,905,109 16,513,396 4,928,257 Class C Shares 527,515 1,273,113 1,766,228 436,820 ------------- ------------- ------------- ------------- $12,515,560 $36,529,837 $38,419,845 $12,034,303 ============= ============= ============= ============= SHARES OUTSTANDING ($0.001 par value, unlimited number of shares authorized): Class A Shares 453,257 1,449,732 1,518,064 553,740 Class B Shares 323,671 947,939 1,244,290 412,831 Class C Shares 34,570 86,383 136,126 35,652 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE: Class A Shares $ 15.55 $ 14.73 $ 13.27 $ 12.04 Class B Shares* $ 15.27 $ 14.67 $ 13.27 $ 11.94 Class C Shares* $ 15.26 $ 14.74 $ 12.97 $ 12.25 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)) -- Class A Shares $ 16.37 $ 15.51 $ 13.97 $ 12.67 ============= ============= ============= ============= Investments in Affiliated Fund, at cost $ 124,808 $ 365,927 $ 2,295,024 $ 2,523,618 ============= ============= ============= =============
--------- * Redemption Price per share varies by length of time shares are held. (a) The investment in the affiliated fund are holdings of the HSBC Investor Money Market Fund Class Y Shares (see Note 1). The shares held in the Fund are identical to value since it is at $1.00 net asset value per share. In addition, value and cost for financial reporting and federal income tax purposes are the same. 19 HSBC INVESTOR LIFELINE FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2007
AGGRESSIVE GROWTH MODERATE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH STRATEGY FUND FUND STRATEGY FUND STRATEGY FUND --------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Investment Income from Affiliated Portfolios (a) $ 148,417 $ 694,556 $ 905,275 $ 234,011 Investment Income from Affiliated Fund 4,920 14,702 92,324 82,458 Foreign tax withholding from Affiliated Portfolios (a) (7,822) (20,533) (16,040) (2,646) Expenses from Affiliated Portfolios (a) (75,007) (212,990) (207,459) (45,260) ----------- ----------- ----------- --------- TOTAL INVESTMENT INCOME 70,508 475,735 774,100 268,563 ----------- ----------- ----------- --------- EXPENSES: Investment Management 4,939 14,697 15,332 3,893 Administration 2,884 8,581 8,960 2,260 Distribution: Class B Shares 30,028 84,308 102,735 24,720 Class C Shares 2,255 6,809 8,526 2,941 Shareholder Servicing: Class A Shares 13,922 43,066 39,499 10,179 Class B Shares 10,019 28,143 34,306 8,297 Class C Shares 753 2,274 2,853 987 Accounting 29,086 29,086 29,086 29,086 Compliance Service 107 319 332 82 Transfer Agent 54,054 75,886 76,585 44,039 Trustee 234 698 726 179 Printing 19,109 54,617 56,278 13,174 Registration fees 28 69 71 56 Other 14,669 15,735 18,968 3,991 ----------- ----------- ----------- --------- Total expenses before fee reductions 182,087 364,288 394,257 143,884 Fees reduced by Investment Adviser (76,364) (44,426) (29,557) (44,214) ----------- ----------- ----------- --------- NET EXPENSES 105,723 319,862 364,700 99,670 ----------- ----------- ----------- --------- NET INVESTMENT INCOME (LOSS) (35,215) 155,873 409,400 168,893 ----------- ----------- ----------- --------- NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: (a) Net realized gains (losses) from investments and foreign currency transactions 810,981 1,888,561 1,499,302 267,881 Change in unrealized appreciation/depreciation from investments 1,335,250 3,251,636 2,609,124 433,433 ----------- ----------- ----------- --------- NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENT TRANSACTIONS 2,146,231 5,140,197 4,108,426 701,314 ----------- ----------- ----------- --------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $2,111,016 $5,296,070 $4,517,826 $870,207 =========== =========== =========== =========
---------- (a) Represents amounts allocated from the respective Affiliated Portfolios. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS 20 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH STRATEGY FUND GROWTH STATEGY FUND --------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 --------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (35,215) $ (12,945) $ 155,873 $ 67,776 Net realized gains (losses) from investment transactions 810,981 (17,813) 1,888,561 150,344 Change in unrealized appreciation/ depreciation from investments 1,335,250 557,180 3,251,636 1,449,423 ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 2,111,016 526,422 5,296,070 1,667,543 ---------------- ---------------- ---------------- ---------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares -- -- (91,507) (22) Class B Shares -- -- (11,110) -- Class C Shares -- -- (784) -- NET REALIZED GAINS: Class A Shares -- (4,248) (94,565) (7,479) Class B Shares -- (4,512) (64,734) (8,003) Class C Shares -- (298) (5,227) (626) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM SHAREHOLDER DIVIDENDS -- (9,058) (267,927) (16,130) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS 3,061,815 5,378,169 9,652,802 14,606,757 ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS 5,172,831 5,895,533 14,680,945 16,258,170 NET ASSETS: Beginning of period 7,342,729 1,447,196 21,848,892 5,590,722 ---------------- ---------------- ---------------- ---------------- End of period $ 12,515,560 $ 7,342,729 $ 36,529,837 $ 21,848,892 ================ ================ ================ ================ Accumulated net investment income (loss) $ (4,459) $ (14,704) $ 112,089 $ 55,913 ================ ================ ================ ================
21 HSBC INVESTOR LIFELINE FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
AGGRESSIVE GROWTH STRATEGY FUND GROWTH STATEGY FUND ---------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 ---------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 2,836,042 $3,199,933 $ 7,969,359 $ 9,462,116 Dividends reinvested -- 4,248 185,652 7,500 Value of shares redeemed (1,111,410) (77,034) (2,339,143) (634,007) -------------- ------------ ------------- ------------- Class A Shares capital transactions 1,724,632 3,127,147 5,815,868 8,835,609 -------------- ------------ ------------- ------------- CLASS B SHARES: Proceeds from shares issued 1,516,999 2,171,105 4,252,061 5,742,896 Dividends reinvested -- 4,512 75,546 8,002 Value of shares redeemed (405,168) (116,411) (1,033,237) (412,505) -------------- ------------ ------------- ------------- Class B Shares capital transactions 1,111,831 2,059,206 3,294,370 5,338,393 -------------- ------------ ------------- ------------- CLASS C SHARES: Proceeds from shares issued 328,562 196,567 768,456 547,274 Dividends reinvested -- 298 6,011 627 Value of shares redeemed (103,210) (5,049) (231,903) (115,146) -------------- ------------ ------------- ------------- Class C Shares capital transactions 225,352 191,816 542,564 432,755 -------------- ------------ ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS $ 3,061,815 $5,378,169 $ 9,652,802 $14,606,757 ============== ============ ============= ============= SHARE TRANSACTIONS: CLASS A SHARES: Issued 206,802 265,210 599,873 799,471 Reinvested -- 378 14,632 664 Redeemed (81,057) (6,528) (173,704) (53,747) -------------- ------------ ------------- ------------- Change in Class A Shares 125,745 259,060 440,801 746,388 -------------- ------------ ------------- ------------- CLASS B SHARES: Issued 112,606 183,959 318,815 486,469 Reinvested -- 405 5,949 705 Redeemed (29,929) (9,634) (77,193) (34,595) -------------- ------------ ------------- ------------- Change in Class B Shares 82,677 174,730 247,571 452,579 -------------- ------------ ------------- ------------- CLASS C SHARES: Issued 24,063 16,830 56,478 46,515 Reinvested -- 27 471 55 Redeemed (7,943) (407) (17,406) (9,539) -------------- ------------ ------------- ------------- Change in Class C Shares 16,120 16,450 39,543 37,031 -------------- ------------ ------------- -------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS 22 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MODERATE GROWTH STRATEGY FUND CONSERVATIVE GROWTH STATEGY FUND --------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 --------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 409,400 $ 196,149 $ 168,893 $ 85,034 Net realized gains from investment transactions 1,499,302 196,766 267,881 66,363 Change in unrealized appreciation/ depreciation from investments 2,609,124 1,241,590 433,433 247,105 ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 4,517,826 1,634,505 870,207 398,502 ---------------- ---------------- ---------------- ---------------- DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (262,090) (125,404) (94,234) (51,938) Class B Shares (132,843) (57,383) (56,207) (31,029) Class C Shares (11,916) (5,807) (6,383) (4,345) NET REALIZED GAINS: Class A Shares (107,302) (3,616) (34,028) -- Class B Shares (94,696) (3,427) (29,598) -- Class C Shares (6,378) (500) (3,582) -- ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM SHAREHOLDER DIVIDENDS (615,225) (196,137) (224,032) (87,312) ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS 11,050,090 14,905,868 5,431,997 3,202,429 ---------------- ---------------- ---------------- ---------------- CHANGE IN NET ASSETS 14,952,691 16,344,236 6,078,172 3,513,619 NET ASSETS: Beginning of period 23,467,154 7,122,918 5,956,131 2,442,512 ---------------- ---------------- ---------------- ---------------- End of period $ 38,419,845 $ 23,467,154 $ 12,034,303 $ 5,956,131 ================ ================ ================ ================ Accumulated net investment income $ 14,138 $ 4,489 $ 18,083 $ 4,342 ================ ================ ================ ================
23 HSBC INVESTOR LIFELINE FUNDS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MODERATE GROWTH STRATEGY FUND CONSERVATIVE GROWTH STATEGY FUND ---------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 ---------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 7,912,763 $ 8,904,235 $1,988,365 $2,584,751 Proceeds from shares issued in conversion -- -- 1,774,237 -- Dividends reinvested 366,055 126,311 127,648 51,938 Value of shares redeemed (2,131,003) (1,004,146) (631,447) (773,807) ------------- ------------- ------------ ------------ Class A Shares capital transactions 6,147,815 8,026,400 3,258,803 1,862,882 ------------- ------------- ------------ ------------ CLASS B SHARES: Proceeds from shares issued 4,788,564 6,939,098 1,387,844 1,216,860 Proceeds from shares issued in conversion -- -- 981,527 -- Dividends reinvested 226,308 60,467 84,374 30,500 Value of shares redeemed (966,698) (544,781) (366,939) (130,465) ------------- ------------- ------------ ------------ Class B Shares capital transactions 4,048,174 6,454,784 2,086,806 1,116,895 ------------- ------------- ------------ ------------ CLASS C SHARES: Proceeds from shares issued 1,158,749 574,091 109,629 285,040 Proceeds from shares issued in conversion -- -- 23,289 -- Dividends reinvested 18,281 6,307 9,965 4,345 Value of shares redeemed (322,929) (155,714) (56,495) (66,733) ------------- ------------- ------------ ------------ Class C Shares capital transactions 854,101 424,684 86,388 222,652 ------------- ------------- ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM CAPITAL TRANSACTIONS $11,050,090 $14,905,868 $5,431,997 $3,202,429 ============= ============= ============ ============ SHARE TRANSACTIONS: CLASS A SHARES: Issued 638,805 791,634 172,826 240,413 Issued in conversion -- -- 148,136 -- Reinvested 29,777 11,134 11,167 4,788 Redeemed (173,246) (89,017) (54,690) (71,416) ------------- ------------- ------------ ------------ Change in Class A Shares 495,336 713,751 277,439 173,785 ------------- ------------- ------------ ------------ CLASS B SHARES: Issued 387,531 615,692 121,528 114,343 Issued in conversion -- -- 82,738 -- Reinvested 18,521 5,311 7,465 2,841 Redeemed (77,311) (48,672) (31,991) (12,263) ------------- ------------- ------------ ------------ Change in Class B Shares 328,741 572,331 179,740 104,921 ------------- ------------- ------------ ------------ CLASS C SHARES: Issued 95,099 52,985 9,224 26,278 Issued in conversion -- -- 1,922 -- Reinvested 1,520 572 864 398 Redeemed (27,016) (14,028) (4,861) (6,091) ------------- ------------- ------------ ------------ Change in Class C Shares 69,603 39,529 7,149 20,585 ------------- ------------- ------------ ------------
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS 24 -------------------------------------------------------------------------------- HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ---------------------------------------- ------------------------ NET REALIZED AND UNREALIZED NET NET GAINS REALIZED NET ASSET NET (LOSSES) TOTAL GAINS ASSET VALUE, INVESTMENT FROM FROM FROM VALUE, BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS OF PERIOD ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period Ended October 31, 2005 (g) $10.00 (0.01) 0.61 0.60 -- -- $10.60 Year Ended October 31, 2006 10.60 0.01 2.01 2.02 (0.05) (0.05) 12.57 Year Ended October 31, 2007 12.57 0.00*(f) 2.98 2.98 -- -- 15.55 CLASS B SHARES Period Ended October 31, 2005 (h) $10.00 (0.04) 0.61 0.57 -- -- $10.57 Year Ended October 31, 2006 10.57 (0.05) 1.97 1.92 (0.05) (0.05) 12.44 Year Ended October 31, 2007 12.44 (0.11)* 2.94 2.83 -- -- 15.27 CLASS C SHARES Period Ended October 31, 2005 (i) $10.00 (0.05) 0.60 0.55 -- -- $10.55 Year Ended October 31, 2006 10.55 (0.04) 1.95 1.91 (0.05) (0.05) 12.41 Year Ended October 31, 2007 12.41 (0.11)* 2.96 2.85 -- -- 15.26 RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------- RATIO OF NET RATIO INVESTMENT OF NET INCOME RATIO OF NET EXPENSES (LOSS) EXPENSES ASSETS TO TO TO AT END OF AVERAGE AVERAGE AVERAGE PORTFOLIO TOTAL PERIOD NET NET NET TURNOVER RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) RATE(e) ------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period Ended October 31, 2005 (g) 6.00% $ 726 1.50% (0.20)% 11.72% 49.10% Year Ended October 31, 2006 19.15% 4,116 1.50% 0.05% 3.52% 48.46% Year Ended October 31, 2007 23.71% 7,046 1.50% (0.03)% 2.27% 45.50% CLASS B SHARES Period Ended October 31, 2005 (h) 5.70% $ 700 2.25% (1.01)% 11.63% 49.10% Year Ended October 31, 2006 18.25% 2,998 2.25% (0.70)% 4.33% 48.46% Year Ended October 31, 2007 22.75% 4,942 2.25% (0.77)% 3.02% 45.50% CLASS C SHARES Period Ended October 31, 2005 (i) 5.50% $ 21 2.25% (1.15)% 9.79% 49.10% Year Ended October 31, 2006 18.19% 229 2.25% (0.69)% 4.20% 48.46% Year Ended October 31, 2007 22.97% 528 2.25% (0.79)% 2.99% 45.50%
* 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 applicable HSBC Investor Portfolios. (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 rate is calculated by aggregating the results of multiplying the Fund's investment percentage in the respective Portfolios by the corresponding Portfolio's portfolio turnover rates. Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. (f) Rounds to less than $0.01. (g) Class A Shares commenced operations on February 14, 2005. (h) Class B Shares commenced operations on February 9, 2005. (i) Class C Shares commenced operations on June 9, 2005. 25 HSBC INVESTOR LIFELINE FUNDS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ---------------------------------------- ----------------------------------------- NET REALIZED AND UNREALIZED NET NET GAINS REALIZED ASSET NET (LOSSES) TOTAL GAINS VALUE, INVESTMENT FROM FROM NET FROM BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period Ended October 31, 2005 (f) $10.00 0.02 0.70 0.72 -- -- -- Year Ended October 31, 2006 10.72 0.07 1.69 1.76 -- (0.03) (0.03) Year Ended October 31, 2007 12.45 0.11* 2.34 2.45 (0.08) (0.09) (0.17) CLASS B SHARES Period Ended October 31, 2005 (h) $10.00 (0.01) 0.79 0.78 -- -- -- Year Ended October 31, 2006 10.78 0.02 1.66 1.68 -- (0.03) (0.03) Year Ended October 31, 2007 12.43 0.01* 2.34 2.35 (0.02) (0.09) (0.11) CLASS C SHARES Period Ended October 31, 2005 (i) $10.00 (0.02) 0.84 0.82 -- -- -- Year Ended October 31, 2006 10.82 0.02 1.67 1.69 -- (0.03) (0.03) Year Ended October 31, 2007 12.48 0.01* 2.35 2.36 (0.01) (0.09) (0.10) RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------- RATIO OF NET RATIO INVESTMENT OF NET INCOME RATIO OF NET NET EXPENSES (LOSS) EXPENSES ASSET ASSETS TO TO TO VALUE, AT END OF AVERAGE AVERAGE AVERAGE PORTFOLIO END TOTAL PERIOD NET NET NET TURNOVER OF PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) RATE(e) ----------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period Ended October 31, 2005 (f) $10.72 7.20% $ 2,814 1.50% 0.42% 5.19% 69.23% Year Ended October 31, 2006 12.45 16.41% 12,562 1.50% 0.87% 2.19% 80.30% Year Ended October 31, 2007 14.73 19.92%(g) 21,352 1.50% 0.84% 1.65% 73.45% CLASS B SHARES Period Ended October 31, 2005 (h) $10.78 7.80% $ 2,670 2.25% (0.38)% 5.74% 69.23% Year Ended October 31, 2006 12.43 15.57% 8,702 2.25% 0.11% 2.94% 80.30% Year Ended October 31, 2007 14.67 18.98%(g) 13,905 2.25% 0.09% 2.40% 73.45% CLASS C SHARES Period Ended October 31, 2005 (i) $10.82 8.20% $ 106 2.25% (0.55)% 5.24% 69.23% Year Ended October 31, 2006 12.48 15.61% 585 2.25% 0.14% 2.90% 80.30% Year Ended October 31, 2007 14.74 19.04%(g) 1,273 2.25% 0.07% 2.39% 73.45%
* 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 applicable HSBC Investor Portfolios. (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 rate is calculated by aggregating the results of multiplying the Fund's investment percentage in the respective Portfolios by the corresponding Portfolio's portfolio turnover rates. Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. (f) Class A Shares commenced operations on February 8, 2005. (g) During the year ended October 31, 2007, certain HSBC Investor Portfolios in which the Fund invests in received monies related to certain nonrecurring litigation settlements. The corresponding impact to the total return was 0.23%, 0.24% and 0.23% for Class A Shares, Class B Shares and Class C Shares, respectively. (h) Class B Shares commenced operations on February 1, 2005. (i) Class C Shares commenced operations on April 27, 2005. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS 26 -------------------------------------------------------------------------------- HSBC INVESTOR MODERATE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ---------------------------------------- ----------------------------------------- NET REALIZED AND UNREALIZED NET NET GAINS REALIZED ASSET (LOSSES) TOTAL GAINS VALUE, NET FROM FROM NET FROM BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS ----------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period Ended October 31, 2005 (f) $10.00 0.04 0.45 0.49 --(g) -- --(g) Year Ended October 31, 2006 10.49 0.17 1.23 1.40 (0.17) (0.01) (0.18) Year Ended October 31, 2007 11.71 0.21* 1.65 1.86 (0.20) (0.10) (0.30) CLASS B SHARES Period Ended October 31, 2005 (i) $10.00 0.01 0.49 0.50 --(g) -- --(g) Year Ended October 31, 2006 10.50 0.09 1.22 1.31 (0.08) (0.01) (0.09) Year Ended October 31, 2007 11.72 0.12* 1.65 1.77 (0.12) (0.10) (0.22) CLASS C SHARES Period Ended October 31, 2005 (j) $10.00 --(g) 0.28 0.28 -- -- -- Year Ended October 31, 2006 10.28 0.09 1.19 1.28 (0.08) (0.01) (0.09) Year Ended October 31, 2007 11.47 0.12* 1.60 1.72 (0.12) (0.10) (0.22) RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------------------- RATIO OF NET RATIO INVESTMENT OF NET INCOME RATIO OF NET NET EXPENSES INCOME EXPENSES ASSET ASSETS TO TO TO VALUE, AT END OF AVERAGE AVERAGE AVERAGE PORTFOLIO END TOTAL PERIOD NET NET NET TURNOVER OF PERIOD RETUR00b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) RATE(e) ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period Ended October 31, 2005 (f) $10.49 4.94% $ 3,241 1.50% 0.95% 4.30% 84.55% Year Ended October 31, 2006 11.71 13.40% 11,973 1.50% 1.65% 2.12% 101.57% Year Ended October 31, 2007 13.27 16.12%(h) 20,140 1.50% 1.70% 1.60% 92.87% CLASS B SHARES Period Ended October 31, 2005 (i) $10.50 5.03% $ 3,604 2.25% 0.18% 5.01% 84.55% Year Ended October 31, 2006 11.72 12.45% 10,731 2.25% 0.91% 2.87% 101.57% Year Ended October 31, 2007 13.27 15.25%(h) 16,513 2.25% 0.95% 2.35% 92.87% CLASS C SHARES Period Ended October 31, 2005 (j) $10.28 2.80% $ 278 2.25% 0.05% 4.69% 84.55% Year Ended October 31, 2006 11.47 12.53% 763 2.25% 0.87% 2.83% 101.57% Year Ended October 31, 2007 12.97 15.20%(h) 1,766 2.25% 0.95% 2.33% 92.87%
* 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 applicable HSBC Investor Portfolios. (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 rate is calculated by aggregating the results of multiplying the Fund's investment percentage in the respective Portfolios by the corresponding Portfolio's portfolio turnover rates. Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. (f) Class A Shares commenced operations on February 3, 2005. (g) Rounds to less than $0.01. (h) During the year ended October 31, 2007, certain HSBC Investor Portfolios in which the Fund invests in received monies related to certain nonrecurring litigation settlements. The corresponding impact to the total return was 0.41%, 0.41% and 0.33% for Class A Shares, Class B Shares and Class C Shares, respectively. (i) Class B Shares commenced operations on February 1, 2005. (j) Class C Shares commenced operations on June 9, 2005. 27 HSBC INVESTOR LIFELINE FUNDS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- Financial Highlights SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ---------------------------------------- -------------------------------------- NET REALIZED AND UNREALIZED NET NET GAINS REALIZED ASSET (LOSSES) TOTAL GAINS VALUE, NET FROM FROM NET FROM BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period Ended October 31, 2005 (h) $10.00 0.04 0.26 0.30 (0.01) -- (0.01) Year Ended October 31, 2006 10.29 0.22 0.85 1.07 (0.25) -- (0.25) Year Ended October 31, 2007 11.11 0.29* 1.03 1.32 (0.27) (0.12) (0.39) CLASS B SHARES Period Ended October 31, 2005 (i) $10.00 0.03 0.16 0.19 --(f) -- --(f) Year Ended October 31, 2006 10.19 0.15 0.83 0.98 (0.16) -- (0.16) Year Ended October 31, 2007 11.01 0.20* 1.05 1.25 (0.20) (0.12) (0.32) CLASS C SHARES Period Ended October 31, 2005 (j) $10.00 0.03 0.38 0.41 -- -- -- Year Ended October 31, 2006 10.41 0.15 0.85 1.00 (0.17) -- (0.17) Year Ended October 31, 2007 11.24 0.21* 1.11 1.32 (0.19) (0.12) (0.31) RATIOS/SUPPLEMENTARY DATA ----------------------------------------------------------- RATIO RATIO OF NET OF NET INVESTMENT RATIO OF NET NET EXPENSES INCOME EXPENSES ASSET ASSETS TO TO TO VALUE, AT END OF AVERAGE AVERAGE AVEERAGE PORTFOLIO END TOTAL PERIOD NET NET NET TURNOVER OF PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) ASSETS(c)(d) RATE(e) ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period Ended October 31, 2005 (h) $10.29 2.96% $1,054 1.50% 1.28% 8.01% 72.14% Year Ended October 31, 2006 11.11 10.48% 3,069 1.50% 2.33% 3.22% 96.58% Year Ended October 31, 2007 12.04 12.13%(g) 6,669 1.50% 2.52% 2.06% 88.67% CLASS B SHARES Period Ended October 31, 2005 (i) $10.19 1.92% $1,306 2.25% 0.53% 9.21% 72.14% Year Ended October 31, 2006 11.01 9.65% 2,567 2.25% 1.54% 3.98% 96.58% Year Ended October 31, 2007 11.94 11.51%(g) 4,928 2.25% 1.77% 2.82% 88.67% CLASS C SHARES Period Ended October 31, 2005 (j) $10.41 4.10% $ 82 2.25% 0.66% 7.94% 72.14% Year Ended October 31, 2006 11.24 9.66% 320 2.25% 1.56% 3.92% 96.58% Year Ended October 31, 2007 12.25 11.97%(g) 437 2.25% 1.78% 2.85% 88.67%
* 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 applicable HSBC Investor Portfolios. (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 rate is calculated by aggregating the results of multiplying the Fund's investment percentage in the respective Portfolios by the corresponding Portfolio's portfolio turnover rates. Portfolio turnover rate is calculated on the basis of the Fund as a whole without distinguishing between classes of shares issued. (f) Rounds to less than $0.01. (g) During the year ended October 31, 2007, certain HSBC Investor Portfolios in which the Fund invests in received monies related to certain nonrecurring litigation settlements. The corresponding impact to the total return was 0.44%, 0.47% and 0.48% for Class A Shares, Class B Shares and Class C Shares, respectively. (h) Class A Shares commenced operations on February 23, 2005. (i) Class B Shares commenced operations on February 17, 2005. (j) Class C Shares commenced operations on April 19, 2005. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR LIFELINE FUNDS 28 -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 1. ORGANIZATION: The HSBC Investor Funds (the "Trust"), a Massachusetts business trust organized on April 22, 1987, is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. As of October 31, 2007, the Trust is comprised of 20 separate operational funds, each a diversified series of the HSBC Investor Family of Funds. The accompanying financial statements are presented for the following 4 funds (individually a "Fund", collectively the "LifeLine Funds"):
FUND SHORT NAME -------- -------------------- HSBC Investor Aggressive Growth Strategy Fund Aggressive Growth Fund HSBC Investor Growth Strategy Fund Growth Strategy Fund HSBC Investor Moderate Growth Strategy Fund Moderate Growth Fund HSBC Investor Conservative Growth Strategy Fund Conservative Growth Fund
Financial statements for all other funds of the HSBC Investor Family of Funds are published separately. The LifeLine Funds utilize a master-feeder fund structure and seek to achieve their investment objectives by investing all of their investable assets in the Portfolios and the Money Market Fund (collectively the "Underlying Portfolios") per the following schedule from November 1, 2006 to October 31, 2007: LIFELINE FUNDS PORTFOLIO WEIGHTINGS
AGGRESSIVE GROWTH MODERATE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH UNDERLYING PORTFOLIOS FUND FUND FUND FUND ------------------------------------ ------------- ----------- ----------- ------------ Core Plus Fixed Income Portfolio None 15% 26% 25% High Yield Fixed Income Portfolio None 2% 5% 8% Intermediate Duration Fixed Income Portfolio None None None 3% Growth Portfolio 21% 21% 19% 15% International Equity Portfolio 23% 20% 15% 10% Opportunity Portfolio 34% 20% 11% 4% Value Portfolio 21% 21% 18% 14% Money Market Fund 1% 1% 6% 21% ---------- ---------- ---------- ---------- Total 100% 100% 100% 100% ---------- ---------- ---------- ----------
LIFELINE FUNDS PORTFOLIO INVESTMENTS
AGGRESSIVE GROWTH MODERATE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH UNDERLYING PORTFOLIOS FUND FUND FUND FUND ------------------------------------ ------------- ----------- ----------- ------------ Core Plus Fixed Income Portfolio $ -- $ 5,455,857 $ 9,894,446 $ 2,993,564 High Yield Fixed Income Portfolio -- 731,032 1,912,153 962,520 Intermediate Duration Fixed Income Portfolio -- -- -- 358,749 Growth Portfolio 2,629,654 7,713,239 7,301,611 1,813,801 International Equity Portfolio 2,878,352 7,341,529 5,760,979 1,208,503 Opportunity Portfolio 4,274,319 7,374,952 4,243,955 485,645 Value Portfolio 2,615,966 7,673,189 6,881,436 1,684,050 Money Market Fund 124,808 365,927 2,295,024 2,523,618 ----------- ----------- ----------- ----------- Total $12,523,099 $36,655,725 $38,289,604 $12,030,450 =========== =========== =========== ===========
29 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) The 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 Opportunity 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 HSBC Investor Money Market Fund (the "Money Market Fund") is an open-end management investment company and, like each LifeLine Fund, is a diversified series of the Trust. 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 LifeLine Funds. The LifeLine Funds are authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share. Each Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Class R Shares (currently not operational with assets). Class A Shares of the Aggressive Growth Fund, Growth Strategy Fund, Moderate Growth Fund, and the Conservative Growth Fund have a maximum sales charge of 5.00% as a percentage of the original purchase price. The Class B Shares of the LifeLine 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 LifeLine 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 Class R Shares of the Funds. Each class of shares in the LifeLine 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 privileges of each class of shares. Under the Trust's organizational documents, the LifeLine Funds' officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the LifeLine Funds. In addition, in the normal course of business, the LifeLine Funds enter into contracts with its service providers, which also provide for indemnifications by the LifeLine Funds. The LifeLine Funds' maximum exposure under these arrangements is unknown as this would involve any future claims that may be made against the LifeLine Funds. However, based on experience, the LifeLine Funds expect that risk of loss to be remote. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the LifeLine Funds in the preparation of their financial statements. The policies are in conformity with U.S. generally accepted accounting principles ("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: The LifeLine Funds record their investments in the Underlying Portfolios at fair value. The LifeLine Funds record their investments in the Money Market Fund at the respective net asset value reported by the fund. The underlying securities of the Portfolios and the Money Market Fund are recorded at fair value and at amortized cost, respectively, as more fully discussed in the notes to those financial statements. INVESTMENT TRANSACTIONS AND RELATED INCOME: The LifeLine Funds record daily their pro-rata income, expenses and unrealized/realized gains and losses derived from their respective Portfolio. Dividend income is recorded on the ex-dividend date for the Money Market Fund. Changes in holdings of the Money Market Fund for each LifeLine Fund are reflected no later than the first business day following trade date. However, for financial reporting purposes, changes in holdings of the Money Market Fund are reflected as of trade date. In addition, the LifeLine Funds accrue their own expenses daily as incurred. HSBC INVESTOR LIFELINE FUNDS 30 -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) 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 LifeLine Funds within the HSBC Investor Family of Funds in relation to the net assets of each Fund or on another reasonable basis. Class specific expenses are charged directly to the class incurring the expense. 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: Dividends from net investment income, if any, are declared and distributed quarterly in the case of the Moderate Growth Fund and Conservative Growth Fund, and annually in the case of the Aggressive Growth Fund and Growth Strategy Fund. The LifeLine Funds' net realized gains, if any, are distributed to shareholders at least annually. Additional distributions are also made to the LifeLine 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 composition of net assets; temporary differences (e.g., wash losses and post-october loss deferrals) do not require reclassification. The LifeLine 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% will be charged and recorded as paid-in-capital for any shares redeemed or exchanged after holding them for less than 30 days. This fee does not apply to shares purchased 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, 2007, the following LifeLine Funds collected redemption fees as follows: FUND FEES COLLECTED ---- -------------- Aggressive Growth Fund.............................. $1,573 Growth Strategy Fund................................ 729 Moderate Growth Fund................................ 515 Conservative Growth Fund............................ 1,305 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"("SFAS No. 157") 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. Management does not believe the adoption of SFAS No. 157 will materially impact the LifeLine Funds' financial statements; 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. 31 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) In July 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 LifeLine Funds' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority based on technical merits of the position. 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 no later than the last business day of the first financial statement reporting period for fiscal years beginning after December 15, 2006 and is applied to all open tax years as of the effective date. Management is currently in the process of evaluating the impact that will result from adopting FIN 48. At this time, management does not believe the adoption of FIN 48 will have a material impact to the financial statements. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Investments (USA) Inc. ("HSBC" or the "Investment Adviser"), a wholly owned subsidiary of HSBC Bank USA, N.A., a national bank organized under the laws of the United States, acts as Investment Adviser to the LifeLine Funds. As Investment Adviser, HSBC manages the investments of the LifeLine Funds and continuously reviews, supervises and administers the LifeLine Funds' investments. For its services as Investment Adviser, HSBC is entitled to receive a fee, computed daily and paid monthly, based on average daily net assets, at an annual rate of 0.05% for each Fund. ADMINISTRATION: HSBC serves the Lifeline Funds as Administrator. Under the terms of the Administration Agreement effective April 1, 2007, HSBC receives from the Lifeline Funds a fee, accrued daily and paid monthly, at an annual rate of: BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE ------------------------------------ -------- Up to $12 billion .......................................... 0.0525% In excess of $12 billion ................................... 0.0350% Prior to April 1, 2007, under the terms of the Administration Agreement, the Lifeline Funds paid fees under the following schedule: 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% 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 assets invested in Underlying Portfolios by LifeLine Funds, the Portfolios pay half of the administration fee and the LifeLine 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, are as follows:
MODERATE CONSERVATIVE AGGRESSIVE GROWTH GROWTH GROWTH GROWTH STRATEGY STRATEGY STRATEGY FUND STRATEGY FUND FUND FUND ------------- ------------- --------- ----------- Class A Shares..................... $1,625 $5,019 $4,615 $1,177 Class B Shares..................... 1,174 3,302 4,021 966 Class C Shares..................... 85 260 324 117 --------- --------- --------- --------- Total......................... $2,884 $8,581 $8,960 $2,260 ========= ========= ========= =========
Pursuant to a Sub-Administration Agreement with HSBC, Citi Fund Services Ohio, Inc. ("Citi Ohio "), a wholly-owned subsidiary of Citigroup, Inc. (Citigroup, Inc. acquired The BISYS Group, Inc. effective August 1, 2007), serves as the Trust's sub-administrator, subject to the general supervision of the Trusts' Board of Trustees and HSBC. For these HSBC INVESTOR LIFELINE FUNDS 32 -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) services, Citi 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 Trusts and Citi Ohio (the "CCO Agreement"), Citi Ohio makes an employee available to serve as the Trusts' Chief Compliance Officer (the "CCO"). Under the CCO Agreement, Citi Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Trusts' compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the HSBC Investor Family of Funds paid Citi Ohio $251,569 for the year ended October 31, 2007, plus reimbursement of certain out of pocket expenses. Expenses incurred are reflected on the Statements of Operations as "Compliance Service." Citi Ohio pays the salary and other compensation earned by any such individuals as employees of Citi Ohio. DISTRIBUTION PLAN: Prior to August 1, 2007 BISYS Fund Services Limited Partnership ("BISYS"), a wholly-owned subsidiary of BISYS Fund Services, Inc., served the Trust as Distributor. Since August 1, 2007 Foreside Distribution Services, L.P. ("Foreside"), a wholly-owned subsidiary of Foreside Financial Group LLC, serves the Trust as Distributor (the "Distributor"). The Trust has 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 LifeLine Funds, respectively. The Distributor also received $1,050,424, $522,962 and $24,364 in commissions from sales of HSBC Investor Family of Funds for Class A Shares, Class B Shares, and Class C Shares, respectively, of which $1,047,148, $522,574 and $23,905 were reallowed to affiliated brokers and dealers, for Class A Shares, Class B Shares, and Class C Shares, respectively. SHAREHOLDER SERVICING: The Trust has adopted an Shareholder Services Plan, formerly known as Administrative Services Plan, which provides for payments to shareholder servicing agents (which currently consist 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%, 0.25%, and 0.75% 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 Lifeline Funds, respectively. The fees paid to the Distributor pursuant to the Distribution Plan and to shareholder servicing agents pursuant to the Shareholder Services Plan currently are not intended to exceed, in the aggregate, 0.25% of the average daily net assets of Class A Shares, 1.00% of the average daily net assets of Class B Shares and Class C Shares. FUND ACCOUNTING, TRANSFER AGENCY, CUSTODIAN AND TRUSTEE: Citi Ohio provides fund accounting and transfer agency services for each Fund. As transfer agent for the LifeLine Funds, Citi Ohio receives a fee based on the number of LifeLine Funds and shareholder accounts, subject to certain minimums and reimbursement of certain expenses. As fund accountant for the LifeLine Funds, Citi Ohio receives an annual fee per Fund and share class, subject to minimums and reimbursement of certain expenses. Prior to April 6, 2007, HSBC Bank was the named Custodian for the LifeLine Funds, however, the LifeLine Funds maintained no securities for which such services were rendered during the period. The Northern Trust Company serves as custodian effective April 6, 2007. 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. FEE REDUCTIONS: The Investment Adviser has agreed to contractually limit through March 1, 2008 the total expenses, exclusive of interest, taxes, brokerage commissions, and extraordinary expenses of the LifeLine Funds. Each Fund Class has its own expense limitations based on the average daily net assets for any full fiscal year as follows: Class A Shares 1.50%, Class B Shares 2.25%, and Class C Shares 2.25%. 33 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) The Administrator and Citi Ohio may voluntarily waive/reimburse fees to help support the expense limits of each Fund. In addition, the Investment Adviser may waive/reimburse additional fees at their discretion. Amounts waived/reimbursed by the Investment Adviser, Administrator, and Citi Ohio are reported separately on the Statements of Operations, as applicable. 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. 4. INVESTMENT TRANSACTIONS: Aggregate contributions and withdrawals of the Underlying Portfolios for the year ended October 31, 2007 totaled: CONTRIBUTIONS WITHDRAWALS ------------- ----------- Aggressive Growth Fund............... $ 4,380,255 $1,360,204 Growth Strategy Fund................. 11,987,208 2,880,662 Moderate Growth Fund................. 12,015,477 2,835,077 Conservative Growth Fund............. 4,958,499 1,118,694 5. MERGER OF THE CONSERVATIVE INCOME FUND AND THE CONSERVATIVE GROWTH FUND On October 5, 2007 net assets of the HSBC Investor Conservative Income Fund were exchanged in a tax-free conversion for shares of the Conservative Growth Fund and the Adviser incurred all merger related expenses. The following is a summary of shares issued, net assets converted, net asset value per share issued and unrealized appreciation/depreciations of assets acquired as of the conversion date:
NET ASSET VALUE NET ASSETS UNREALIZED PER SHARE ISSUED SHARES ISSUED CONVERTED APPRECIATION ---------------- ------------- ------------ ------------ Conservative Growth Fund A Shares....................... $11.98 148,136 $1,774,237 $49,220 B Shares....................... 11.86 82,738 981,527 31,630 C Shares....................... 12.12 1,922 23,289 4,125
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 LifeLine Funds as described in footnote 3, reached a settlement with the Securities and Exchange Commission ("the 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 LifeLine 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 LifeLine Funds' management is currently unable to determine the impact, if any, of such matters on the Portfolios or the LifeLine Funds' financial statements, management does not anticipate a material, adverse impact to the LifeLine Funds or the LifeLine Funds' financial statements. 7. FEDERAL TAX INFORMATION: The tax characteristics of dividends paid by the LifeLine Funds during the year ended October 31, 2007 were as follows:
Dividends paid from -------------------------- Total Tax Total Ordinary Net Long Term Taxable Exempt Dividends Income Capital Gains Dividends Distributions Paid(1) ----------- ----------- ----------- ----------- ----------- Growth Strategy Fund $ 103,401 $ 164,526 $ 267,927 $ -- $ 267,927 Moderate Growth Fund 406,849 208,376 615,225 -- 615,225 Conservative Growth Fund 156,824 67,208 224,032 -- 224,032
The tax characteristics of dividends paid by the LifeLine Funds during the year ended October 31, 2006 were as follows:
Dividends paid from -------------------------- Total Tax Total Ordinary Net Long Term Taxable Exempt Dividends Income Capital Gains Dividends Distributions Paid(1) ----------- ------------ ----------- ------------- ---------- Aggressive Growth Fund $ -- $ 9,058 $ 9,058 $ -- $ 9,058 Growth Strategy Fund 22 16,108 16,130 -- 16,130 Moderate Growth Fund 188,594 7,543 196,137 -- 196,137 Conservative Growth Fund 87,312 -- 87,312 -- 87,312
HSBC INVESTOR LIFELINE FUNDS 34 -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) As of October 31, 2007, the components of accumulated earnings/(deficit) on a tax basis for the LifeLine Funds were as follows:
Total Undistributed Undistributed Undistributed Accumulated Unrealized Accumulated Ordinary Tax Exempt Long Term Accumulated Dividends Capital and Appreciation/ Earnings/ Income Income Capital Gains Earnings Payable Other Losses (Depreciation)(2) (Deficit) ------------ ------------- ------------- ----------- --------- ------------ ----------------- ----------- Aggressive Growth Fund $ 87,226 $ -- $ 667,264 $ 754,490 $ -- $ -- $ 1,955,791 $ 2,710,281 Growth Strategy Fund 417,995 -- 1,575,493 1,993,488 -- -- 4,889,569 6,883,057 Moderate Growth Fund 246,714 -- 1,257,947 1,504,661 -- -- 4,019,932 5,524,593 Conservative Growth Fund 57,735 -- 228,458 286,193 -- -- 800,828 1,087,021
(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) The differences between book-basis and tax-basis unrealized appreciation/depreciation 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 taxamortization 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. 35 HSBC INVESTOR LIFELINE FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of HSBC Investor LifeLine Funds: We have audited the accompanying statements of assets and liabilities of HSBC Investor Aggressive Growth Strategy Fund, HSBC Investor Growth Strategy Fund, HSBC Investor Moderate Growth Strategy Fund and HSBC Investor Conservative Growth Strategy Fund (the Funds), including the related statements of operations for the year then ended, the statements of changes in net assets for each year in the two-year period then ended and the financial highlights for each period in the three-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. 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, 2007, the results of their operations for the year then ended, the changes in their net assets for each year in the two-year period then ended and the financial highlights for each period in the three-year period then ended, in conformity with U.S. generally accepted accounting principles. KPMG LLP Columbus, Ohio December 27, 2007 HSBC INVESTOR LIFELINE FUNDS 36 -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- OTHER FEDERAL INCOME TAX INFORMATION (UNAUDITED): For the year ended October 31, 2007, the following percentages of the total ordinary income dividends paid by the LifeLine Funds qualify for the corporate dividends received deduction available to corporate shareholders: DIVIDENDS FUND RECEIVED DEDUCTION ---- ------------------ Growth Strategy Fund............................... 78.79% Moderate Growth Strategy Fund...................... 24.17% Conservative Growth Strategy Fund.................. 13.86% For the year ended October 31, 2007, dividends paid by the LifeLine Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The LifeLine 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 2007 Form 1099-DIV. QUALIFIED DIVIDEND FUND INCOME ---- ----------- Growth Strategy Fund................................ 95.50% Moderate Growth Strategy Fund....................... 42.74% Conservative Growth Strategy Fund................... 23.10% During the year ended October 31, 2007, the following LifeLine Funds declared net long term capital gain distributions: FUND AMOUNT ---- ----------- Growth Strategy Fund................................ $164,526 Moderate Growth Strategy Fund....................... 208,376 Conservative Growth Strategy Fund................... 67,208 HSBC INVESTOR LIFELINE FUNDS 37 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) At a Special Meeting of Shareholders of the HSBC Conservative Income Strategy Fund (the "Acquired Fund"), a series of the HSBC Family of Funds, held on September 24, 2007, shareholders of the Acquired Fund voted to approve a Plan of Reorganization for (1) the acquisition of all the assets and liabilities the Acquired Fund in exchange for shares of the HSBC Conservative Growth Fund and (2) subsequent termination and liquidation of the Acquired Fund. The results of the voting are as follows: Affirmative Against Abstain ------------ ------- ------- 129,444 -- 939 HSBC INVESTOR LIFELINE FUNDS 38 -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- TABLE OF SHAREHOLDERS EXPENSES (UNAUDITED)--AS OF OCTOBER 31, 2007 As a shareholder of the HSBC Investor LifeLine Funds ("Funds"), you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases, redemption fees; and exchange fees; (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 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, 2007 through October 31, 2007. ACTUAL EXAMPLE 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 ACCOUNT EXPENSES PAID EXPENSE RATIO ACCOUNT VALUE VALUE DURING PERIOD* DURING PERIOD 5/1/07 10/31/07 5/1/07 - 10/31/07 5/1/07 - 10/31/07 ------------- -------------- ----------------- ----------------- Aggressive Growth Strategy Fund Class A Shares $1,000.00 $1,119.50 $ 8.01 1.50% Class B Shares 1,000.00 1,115.40 12.00 2.25% Class C Shares 1,000.00 1,115.50 12.00 2.25% Growth Strategy Fund Class A Shares 1,000.00 1,096.00 7.92 1.50% Class B Shares 1,000.00 1,092.30 11.87 2.25% Class C Shares 1,000.00 1,092.70 11.87 2.25% Moderate Growth Strategy Fund Class A Shares 1,000.00 1,075.20 7.85 1.50% Class B Shares 1,000.00 1,071.30 11.75 2.25% Class C Shares 1,000.00 1,070.80 11.74 2.25% Conservative Growth Strategy Fund Class A Shares 1,000.00 1,053.40 7.71 1.49% Class B Shares 1,000.00 1,052.00 11.59 2.24% Class C Shares 1,000.00 1,055.90 11.66 2.25%
---------- * Expenses are equal to the average account value over the period multiplied by the Funds' 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 (to reflect the one half year period). 39 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- TABLE OF SHAREHOLDERS EXPENSES (UNAUDITED)--AS OF OCTOBER 31, 2007 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on the Fund'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 EXPENSES PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/07 10/31/07 5/1/07 - 10/31/07 5/1/07 - 10/31/07 ------------- ------------- ----------------- ----------------- Aggressive Growth Strategy Fund Class A Shares $1,000.00 $1,017.64 $ 7.63 1.50% Class B Shares 1,000.00 1,013.86 11.42 2.25% Class C Shares 1,000.00 1,013.86 11.42 2.25% Growth Strategy Fund Class A Shares 1,000.00 1,017.64 7.63 1.50% Class B Shares 1,000.00 1,013.86 11.42 2.25% Class C Shares 1,000.00 1,013.86 11.42 2.25% Moderate Growth Strategy Fund Class A Shares 1,000.00 1,017.64 7.63 1.50% Class B Shares 1,000.00 1,013.86 11.42 2.25% Class C Shares 1,000.00 1,013.86 11.42 2.25% Conservative Growth Strategy Fund Class A Shares 1,000.00 1,017.69 7.58 1.49% Class B Shares 1,000.00 1,013.91 11.37 2.24% Class C Shares 1,000.00 1,013.86 11.42 2.25%
---------- * Expenses are equal to the average account value over the period multiplied by the Funds' 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 (to reflect the one half year period). HSBC INVESTOR LIFELINE FUNDS 40 -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS--33.6% -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- FEDERAL HOME LOAN MORTGAGE CORP. - 13.8% Pool #G12317, 5.50%, 8/1/21.................... 1,148,078 1,149,893 Pool #C00368, 8.50%, 10/1/24................... 26,564 28,499 Pool #D62926, 6.50%, 8/1/25.................... 19,734 20,362 Pool #C80387, 6.50%, 4/1/26.................... 28,536 29,454 Pool #C00922, 8.00%, 2/1/30.................... 175,764 186,601 Pool #C54447, 7.00%, 7/1/31.................... 38,797 40,521 Pool #G01317, 7.00%, 10/1/31................... 137,821 143,943 Pool #C60712, 6.50%, 11/1/31................... 577,337 595,163 Pool #847557, 5.54%, 7/1/34(a)(g).............. 1,092,079 1,111,816 Pool #1B2655, 4.20%, 12/1/34(a)(g)............. 1,075,301 1,081,051 Pool #1J1313, 6.43%, 6/1/36(a)................. 1,469,028 1,501,168 Pool #G02981, 6.00%, 6/1/37.................... 1,204,623 1,212,448 TBA November, 6.00%, 11/11/37.................. 1,900,000 1,911,875 TBA November, 5.50%, 11/15/37.................. 7,650,000 7,530,469 ----------- 16,543,263 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 11.5% Pool #398958, 6.50%, 10/1/12................... 53,807 55,298 Pool #781922, 5.00%, 2/1/21.................... 2,339,252 2,303,419 Pool #329655, 7.00%, 11/1/25................... 38,924 40,745 Pool #329530, 7.00%, 12/1/25................... 81,301 85,106 Pool #535332, 8.50%, 4/1/30.................... 39,881 42,836 Pool #548965, 8.50%, 7/1/30.................... 44,326 47,620 Pool #535440, 8.50%, 8/1/30.................... 45,119 48,473 Pool #253438, 8.50%, 9/1/30.................... 39,581 42,522 Pool #568486, 7.00%, 1/1/31.................... 39,026 40,894 Pool #573752, 8.50%, 2/1/31.................... 33,580 36,076 Pool #575328, 6.50%, 4/1/31.................... 49,521 51,020 Pool #356905, 7.23%, 10/1/36(a)................ 166,247 167,193 Pool #922090, 5.90%, 3/1/37(a)................. 2,054,764 2,077,199 Pool #256723, 6.50%, 5/1/37.................... 1,155,184 1,182,401 TBA November. 5.00%, 11/15/36.................. 1,000,000 959,688 TBA November, 5.50%, 11/15/36.................. 3,710,000 3,655,508 TBA December, 6.00%, 12/15/36.................. 2,900,000 2,918,125 ----------- 13,754,123 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.2% Pool #346406, 7.50%, 2/15/23................... 45,999 48,654 Pool #412530, 7.50%, 12/15/25.................. 71,981 76,226 Pool #781300, 7.00%, 6/15/31................... 132,432 139,479 TBA November, 6.00%, 11/15/36.................. 1,080,000 1,093,500 ----------- 1,357,859 ----------- U.S. TREASURY NOTES - 7.1% 4.75%, 2/28/09................................. 1,750,000 1,766,954 3.88%, 5/15/09................................. 1,500,000 1,498,008 4.75%, 1/31/12................................. 1,480,000 1,517,000 4.13%, 8/31/12................................. 2,270,000 2,267,694 4.75%, 8/15/17................................. 305,000 311,719 6.38%, 8/15/27................................. 1,000,000 1,199,922 ----------- 8,561,297 ----------- -------------------------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS, CONT'D -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $40,014,893)................. 40,216,542 ----------- -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS--38.0% -------------------------------------------------------------------------------- AGRICULTURAL CHEMICALS - 0.5% Cargill, Inc., 5.60%, 9/15/12 (b)................. 600,000 606,040 ----------- 606,040 ----------- AUTO MANUFACTURERS - 0.4% General Motors, 8.25%, 7/15/23.................... 550,000 496,375 ----------- 496,375 ----------- BANKING - 2.2% American Express Centurion Bank, 5.95%, 6/12/17................................. 700,000 704,174 Bank of America N.A., 6.10%, 6/15/17.............. 1,000,000 1,023,475 Washington Mutual Bank, 5.56%, 2/4/11 (a)......... 400,000 386,686 Washington Mutual, Inc., 6.09%, 9/17/12 (a)....... 500,000 476,609 ----------- 2,590,944 ----------- BUILDING & CONSTRUCTION PRODUCTS - 1.8% Martin Marietta Materials, Inc., 5.13%, 4/30/10 (a)............................. 600,000 593,218 Masco Corp., 6.00%, 3/12/10 (a)(g)................ 550,000 540,293 USG Corp., 7.75%, 1/15/18......................... 1,000,000 1,012,681 ----------- 2,146,192 ----------- CONSUMER PRODUCTS - 1.2% Clorox Co., 5.45%, 10/15/12....................... 900,000 901,106 VF Corp., 5.95%, 11/1/17.......................... 550,000 555,314 ----------- 1,456,420 ----------- ELECTRIC - 3.8% MidAmerican Energy Co., 5.95%, 7/15/17............ 2,900,000 2,999,197 Progress Energy, Inc., 5.98%, 11/14/08, Callable 2/14/08 @ 100 (a)(g).................. 1,000,000 1,001,266 Puget Sound Energy, Inc., 6.97%, 6/1/67, Callable 6/1/17 @ 100.......................... 600,000 567,594 ----------- 4,568,057 ----------- FINANCE - 8.7% First Data Corp., 9.88%, 9/24/15, Callable 9/30/11 @ 105 (b)..................... 300,000 287,250 Ford Motor Credit Co., LLC 4.95%, 1/15/08................................. 2,000,000 1,991,342 5.80%, 1/12/09................................. 1,550,000 1,495,369 7.25%, 10/25/11................................ 150,000 139,532 General Motors Acceptance Corp. 4.38%, 12/10/07................................ 2,250,000 2,246,413 7.25%, 3/2/11.................................. 600,000 567,353 41 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- FINANCE, CONTINUED Preferred Term Securities Ltd., 8.79%, 9/15/30, Callable 9/15/10 @ 104 (b)............ 787,500 858,375 SLM Corp. 4.00%, 1/15/10................................. 1,000,000 937,762 4.50%, 7/26/10................................. 1,300,000 1,217,176 XTRA Finance Corp., 5.15%, 4/1/17 (b)............. 750,000 724,342 ----------- 10,464,914 ----------- HOSPITALS - 1.8% Covidien International Finance SA, 5.45%, 10/15/12 (b)............................ 550,000 552,059 HCA, Inc., 8.75%, 9/1/10.......................... 1,525,000 1,551,687 ----------- 2,103,746 ----------- MEDIA - 0.4% News America Holdings, 7.90%, 12/1/95............. 500,000 545,450 ----------- 545,450 ----------- MEDICAL - 1.9% Astrazeneca plc, 5.90%, 9/15/17................... 1,000,000 1,022,492 Schering-Plough, 6.00%, 9/15/17................... 1,200,000 1,220,524 ----------- 2,243,016 ----------- OFFICE EQUIPMENT & SERVICES - 1.3% IBM Corp., 5.70%, 9/14/17......................... 950,000 964,237 Xerox Corp., 6.40%, 12/18/09 (a)(g)............... 550,000 549,627 ----------- 1,513,864 ----------- RETAIL - 5.7% Home Depot, Inc., 5.88%, 12/16/36................. 2,700,000 2,357,362 Kohl's Corp., 6.25%, 12/15/17..................... 1,100,000 1,101,233 Kroger Co., 6.40%, 8/15/17........................ 850,000 884,343 Wal-Mart Stores, Inc., 5.88%, 4/5/27.............. 900,000 882,095 Wal-Mart Stores, Inc., 6.50%, 8/15/37............. 1,500,000 1,577,524 ----------- 6,802,557 ----------- TELECOMMUNICATIONS - 3.4% AOL Time Warner, Inc., 7.70%, 5/1/32.............. 1,150,000 1,292,260 BellSouth Telecommunications, 7.00%, 12/1/95................................. 700,000 704,163 Motorola, Inc., 6.00%, 11/15/17................... 1,200,000 1,184,972 Time Warner Entertainment Co., 8.38%, 3/15/23................................. 800,000 943,585 ----------- 4,124,980 ----------- TRANSPORTATION - 4.9% American Airlines, Inc. 6.98%, 4/1/11.................................. 530,195 530,195 7.86%, 10/1/11................................. 1,250,000 1,320,312 Burlington North Santa Fe 5.65%, 5/1/17.................................. 600,000 593,497 7.57%, 1/2/21.................................. 294,292 332,826 Continental Airlines, Inc., 5.98%, 4/19/22........ 750,000 737,303 Union Pacific Corp., 5.75%, 11/15/17................................ 1,200,000 1,189,475 6.85%, 1/2/19.................................. 1,161,581 1,220,589 ----------- 5,924,197 ----------- -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- TOTAL CORPORATE OBLIGATIONS (COST $45,236,536)............................. 45,586,752 ----------- -------------------------------------------------------------------------------- ASSET BACKED SECURITIES--8.2% -------------------------------------------------------------------------------- Americredit Automobile Receivables Trust, Series 2005-CF, Class A3, 4.47%, 5/6/10 (g).............................. 735,608 734,160 Asset Backed Funding Certificates, Series 2003-AHL1, Class A1, 3.68%, 3/25/33................................. 738,743 727,109 Cairn Mezzanine plc, Series 2007-3A, Class B1, 6.40%, 8/13/47 (a)(b)................ 905,000 497,750 Capital Auto Receivables Asset Trust, Series 2006-1, Class A2A, 5.03%, 9/15/08 (g)............................. 79,632 79,620 Citigroup Mortgage Loan Trust, Inc., Series 2005-WF2, Class AF2, 4.92%, 8/25/35................................. 87,464 87,197 Countrywide Asset-Backed Certificates, Series 2006-S4, Class A3, 5.80%, 7/25/34................................. 1,060,000 1,029,076 Dominos Pizza Master Issuer LLC, Series 2007-1, Class A2, 5.26%, 4/25/37 (b)............................. 1,200,000 1,193,272 Duane Street CLO, Series 2007-4A, Class C, 6.36%, 11/14/21 (a)(b)................ 850,000 735,250 GE Business Loan Trust, Series 2006-2A, Class A, 5.27%, 11/15/34 (a)(b)(g)............. 1,455,232 1,450,429 GE Equipment Small Ticket LLC, Series 2005-2A, Class A3, 4.88%, 10/22/09 (b)(g)......................... 1,430,147 1,430,469 GMAC Mortgage Corp., Loan Trust, Series 2006-HE3, Class A3, 5.81%, 10/25/36................................ 900,000 852,865 Preferred Term Securities XXII Ltd., 6.03%, 9/22/36, Callable 6/22/11 @ 100 (a)(b)(g)........................ 1,096,250 1,048,563 ----------- TOTAL ASSET BACKED SECURITIES (COST $10,380,701)............................. 9,865,760 ----------- -------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS--8.6% -------------------------------------------------------------------------------- Banc of America Mortgage Securities, Series 2005-D, Class 2A4, 4.78%, 5/25/35 (a)............................. 1,100,000 1,093,289 Deutsche Mortgage Securities, Inc., Series 2006-WF1, Class 1A1, 5.07%, 6/26/35 (a)(b).......................... 1,179,355 1,174,846 Fannie Mae IO Series 270, Class 2, 8.50%, 9/1/23 (c)......... 45,063 10,612 Series 296, Class 2, 8.00%, 4/1/24 (c)......... 54,506 13,553 Series 2000-16, Class PS, 3.73%, 10/25/29 (a)(c)................................ 35,357 1,652 Series 2000-32, Class SV, 3.57%, 3/18/30 (a)(c).......................... 7,911 134 Series 306, Class IO, 8.00%, 5/1/30 (c)........ 61,771 15,329 Series 2001-4, Class SA, 2.51%, 2/17/31 (a)(c).......................... 219,630 16,222 FHA Weyerhauser, 7.43%, 1/1/24 (d)(f)............. 33,082 33,082 SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 42 -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- Freddie Mac Series 2988, Class AF, 5.39%, 6/15/35 (a)(g)... 1,131,947 1,115,057 Series 3212, Class BK, 5.40%, 9/15/36.......... 900,000 864,162 Freddie Mac IO Series 1534, Class K, 2.28%, 6/15/23 (a)(c)................................. 143,843 7,739 Series 2141, Class SD, 3.06%, 4/15/29 (c)...... 115,816 11,584 Series 2247, Class SC, 2.41%, 8/15/30 (a)(c)................................. 58,785 4,096 Government National Mortgage Association IO, Series 1999-30 Class SA, 2.94%, 4/16/29 (a)(c)................ 76,287 4,944 Class S, 3.54%, 8/16/29 (a)(c)................. 58,536 4,757 Morgan Stanley Mortgage Loan Trust, Series 2006-3AR, Class 2A3, 5.71%, 3/25/36 (a)............................. 1,268,533 1,286,552 Residential Accredit Loans, Inc. Series 2007-QS1, Class 2A8, 5.17%, 1/25/37 (a)(g).......................... 2,070,680 2,053,205 Series 2007-QS2, Class A4, 6.25%, 1/25/37................................. 1,019,245 1,018,629 Residential Asset Securitization Trust, Series 2003-A15, Class 1A2, 5.32%, 2/25/34 (a)(g).......................... 1,600,199 1,594,059 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $10,337,795)................. 10,323,503 ----------- -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES--18.0% -------------------------------------------------------------------------------- Banc of America Commercial Mortgage, Inc., Series 2006-4, Class A4, 5.63%, 7/10/46................................. 1,540,000 1,540,750 Bear Stearns Commercial Mortgage Securities, Inc. Series 2006-T24, Class A4, 5.43%, 10/12/41................................ 1,100,000 1,094,316 Series 2007-T28, Class AJ, 6.18%, 9/11/42................................. 620,000 615,607 Citigroup Commercial Mortgage Trust Series 2006-C4, Class A3, 5.72%, 3/15/49 (a)............................. 1,550,000 1,568,583 Series 2006-C5, Class A2, 5.38%, 10/15/49................................ 1,100,000 1,100,090 Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class A2B, 5.21%, 12/11/49..................... 1,300,000 1,290,118 Commercial Mortgage Pass - Through Certificate Series 2005-FL11, Class A1, 5.24%, 11/15/17 (a)(b)(g)...................... 139,247 139,008 Series 2006-FL12, Class A2, 5.19%, 12/15/20 (a)(b)(g)............................. 1,514,909 1,510,064 Series 2005-LP5, Class AJ, 5.05%, 5/10/43................................. 1,550,000 1,457,240 CWCapital Cobalt Series 2007-C3, Class AJ, 6.02%, 5/15/46....... 1,240,000 1,217,107 Series 2006-C1, Class A2, 5.17%, 8/15/48....... 1,232,000 1,222,746 DLJ Mortgage Acceptance Corp., IO, Series 1997-CF1, Class S, 0.94%, 5/15/30 (a)(b)(c).............................. 50,186 692 -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- GS Mortgage Securities Corp. II Series 2006-GG8, Class AJ, 5.62%, 11/10/39................................ 1,300,000 1,258,923 Series 2007-GG10, Class AJ, 5.80%, 8/10/45 (a).................................... 1,550,000 1,522,156 GS Mortgage Securities Corp., IO, Series 1997-GL, Class X2, 0.29%, 7/13/30 (a)(c)................................. 36,505 597 JP Morgan Chase Commercial Mortgage Securities Corp., Series 2007-CB20, Class AJ, 6.10%, 2/12/51....................... 1,440,000 1,444,714 LB-UBS Commercial Mortgage Trust, Series 2007-C6, Class AM, 6.11%, 7/15/40 (a).................................... 1,180,000 1,207,103 Morgan Stanley Capital I Series 2006-HQ10, Class A4, 5.33%, 11/12/41................................ 1,000,000 978,950 Series 2007-IQ14, Class A2, 5.61%, 4/15/49................................. 1,380,000 1,387,575 Washington Mutual Commercial Mortgage Securities Trust, Series 2006-SL1, Class A, 5.30%, 11/23/43 (a)(b)................ 982,905 971,199 ----------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $21,612,767)............................. 21,527,538 ----------- -------------------------------------------------------------------------------- FOREIGN BONDS--2.9% -------------------------------------------------------------------------------- ICELAND - 1.0% Kaupthing Bank, 5.94%, 1/15/10 (a)(b)(g).......... 1,250,000 1,245,746 ----------- 1,245,746 ----------- SOUTH KOREA - 1.2% Citibank Korea, Inc., 4.68%, 6/18/13, Callable 6/18/08 @ 100 (a)..................... 1,400,000 1,396,206 ----------- 1,396,206 ----------- UNITED KINGDOM - 0.7% Barclays Bank plc, 5.93%, 12/31/49 (b)............ 850,000 804,549 ----------- 804,549 ----------- TOTAL FOREIGN BONDS (COST $3,503,008).............................. 3,446,501 ----------- 43 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- INVESTMENT COMPANY--4.7% -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- Northern Institutional Diversified Assets Portfolio, Shares class, 4.80% (e)............. 5,641,041 5,641,041 ------------ TOTAL INVESTMENT COMPANY (COST $5,641,041).............................. 5,641,041 ------------ TOTAL INVESTMENTS (COST $136,726,741) -- 114.0%................... 136,607,637 ============ ----------------- Percentages indicated are based on net assets of $119,811,908. (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, 2007. 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. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid by the Investment Adviser based on procedures approved by the Board of Trustees. (c) 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, 2007. The principal amount shown is the notional amount of the underlying mortgages. (d) 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. (e) Variable rate security. The rates presented represent the annualized one day yield that was in effect on October 31, 2007. (f) Fair valued security. Represents 0.03% of net assets. (g) Security held as collateral for to be announced securities. FHA -- Federal Housing Administration IO -- Interest-Only security. Represents 0.001% of net assets. LLC -- Limited Liability Co. PLC -- Public Limited Co. TBA -- Security was traded on a "to be announced" basis. Represents 15.08% of net assets. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 44 -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS--95.6% -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- ADVERTISING - 1.9% Iron Mountain, Inc., 8.63%, 4/1/13, Callable 4/1/08 @ 101.......................... 100,000 101,750 R.H. Donnelley Corp. 6.88%, 1/15/13, Callable 1/15/09 @ 103......... 100,000 94,000 6.88%, 1/15/13, Callable 1/15/09 @ 103......... 90,000 84,600 ----------- 280,350 ----------- AEROSPACE & DEFENSE - 1.1% DRS Technologies, Inc., 7.63%, 2/1/18, Callable 2/1/11 @ 104.......................... 100,000 102,250 Transdigm, Inc., 7.75%, 7/15/14, Callable 7/15/09 @ 106......................... 50,000 50,875 ----------- 153,125 ----------- APPAREL MANUFACTURERS - 1.7% Hanesbrands, Inc., 8.78%, 12/15/14, Callable 12/15/08@ 102 (a)..................... 50,000 50,250 Levi Strauss & Co., 8.88%, 4/1/16, Callable 4/1/11 @ 104.......................... 50,000 51,250 Quiksilver, Inc., 6.88%, 4/15/15, Callable 4/15/10 @ 103......................... 150,000 139,875 ----------- 241,375 ----------- AUTO MANUFACTURERS - 1.9% Cooper Standard Automotive, Inc., 8.38%, 12/15/14, Callable 12/15/09 @ 104................................. 50,000 44,500 General Motors Corp. 7.70%, 4/15/16................................. 50,000 46,000 7.13%, 7/15/13................................. 175,000 162,313 Goodyear Tire & Rubber Co., 8.63%, 12/1/11, Callable 12/1/09 @ 104................ 17,000 18,105 ----------- 270,918 ----------- BUILDING & CONSTRUCTION PRODUCTS - 2.2% Ainsworth Lumber Co., Ltd., 7.25%, 10/1/12, Callable 10/1/08 @ 104................ 150,000 103,125 Interline Brands, Inc., 8.13%, 6/15/14, Callable 6/15/10 @ 104......................... 50,000 49,875 Ply Gem Industries, Inc., 9.00%, 2/15/12, Callable 2/18/08 @ 105......................... 150,000 122,250 U.S. Concrete, Inc., 8.38%, 4/1/14, Callable 4/1/09 @ 104.......................... 50,000 45,500 ----------- 320,750 ----------- CABLE TELEVISION - 3.0% Barrington Broadcasting Co. LLC, 10.50%, 8/15/14, Callable 8/15/10 @ 105................ 50,000 51,875 Bonten Media Acquisition, 9.00%, 6/1/15, Callable 6/1/11@ 105(b)........................ 75,000 68,906 Cablevision Systems Corp., 8.00%, 4/15/12......... 100,000 97,750 Mediacom LLC, 7.88%, 2/15/11, Callable 2/15/08 @ 100......................... 200,000 193,500 Quebecor Media, Inc., 7.75%, 3/15/16, Callable 3/15/11 @ 104(b)...................... 25,000 24,125 ----------- 436,156 ----------- -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- CASINOS & GAMBLING - 8.4% Choctaw Resort Development Entertainment, 7.25%, 11/15/19, Callable 11/15/11 @ 104(b)..................... 48,000 46,800 Fontainebleau Las Vegas, 10.25%, 6/15/15, Callable 6/15/11@ 105(b)....................... 100,000 93,500 Great Canadian Gaming Co., 7.25%, 2/15/15, Callable 2/15/11 @ 104(b)...................... 50,000 49,750 Greektown Holdings, Inc., 10.75%, 12/1/13, Callable 12/1/10 @ 105(b)...................... 125,000 124,375 Herbst Gaming, Inc., 7.00%, 11/15/14, Callable 11/15/09 @ 104........................ 50,000 40,500 Indianapolis Downs LLC, 11.00%, 11/1/12, Callable 11/1/10 @ 106(b)...................... 25,000 25,125 Inn of the Mountain Gods, 12.00%, 11/15/10, Callable 11/15/07 @ 106........................ 50,000 52,750 Isle of Capri Casinos, Inc., 7.00%, 3/1/14, Callable 3/1/09 @ 103.50....................... 150,000 133,125 MGM MIRAGE, Inc., 6.75%, 4/1/13................... 100,000 97,500 Mohegan Tribal Gaming, 7.13%, 8/15/14, Callable 8/15/09 @ 104......................... 50,000 49,000 MTR Gaming Group, Inc., 9.00%, 6/1/12, Callable 6/1/09 @ 105.......................... 100,000 100,000 Pinnacle Entertainment, 7.50%, 6/15/15, Callable 6/15/10 @ 104(b)...................... 50,000 48,250 Pokagon Gaming Authority, 10.38%, 6/15/14, Callable 6/15/10 @ 105(b)...................... 75,000 82,875 San Pasqual Casino, 8.00%, 9/15/13, Callable 9/15/09 @ 104(b)...................... 25,000 25,250 Seminole Hard Rock Entertainment, 8.19%, 3/15/14, Callable 3/15/09 @ 102 (a)(b)......... 50,000 48,875 Seneca Gaming Corp., 7.25%, 5/1/12, Callable 5/1/08 @ 104.......................... 50,000 50,375 Shingle Springs, 9.38%, 6/15/15, Callable 6/15/11@ 105(b)....................... 50,000 50,250 Turning Stone Resort Casino, 9.13%, 9/15/14, Callable 9/15/10 @ 105(b)...................... 75,000 77,625 Waterford Gaming LLC, 8.63%, 9/15/14(b)........... 25,000 25,000 ----------- 1,220,925 ----------- CHEMICALS - 3.6% Georgia Gulf Corp., 9.50%, 10/15/14, Callable 10/15/10 @ 105........................ 100,000 86,500 Huntsman International LLC, 7.88%, 11/15/14, Callable 11/15/10 @ 104.............. 35,000 37,625 Innophos, Inc., 8.88%, 8/15/14, Callable 8/16/09 @ 104......................... 50,000 50,375 JohnsonDiversey, Inc., 9.63%, 5/15/12, Callable 11/23/07 @ 105........................ 100,000 103,750 Lyondell Chemical Co. 6.88%, 6/15/17, Callable 6/15/12 @ 103......... 50,000 55,000 8.25%, 9/15/16, Callable 9/15/11 @ 104......... 25,000 28,562 8.00%, 9/15/14, Callable 9/15/10 @ 104......... 25,000 27,687 45 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- CHEMICALS, CONTINUED Mosaic Co., 7.63%, 12/1/16, Callable 12/1/11 @ 104(b)...................... 25,000 26,938 Nova Chemicals Corp., 6.50%, 1/15/12.............. 50,000 48,000 Terra Capital, Inc., 7.00%, 2/1/17, Callable 2/1/12@ 104........................... 50,000 50,000 ----------- 514,437 ----------- COMPUTER SERVICES - 0.3% Activant Solutions, Inc., 9.50%, 5/1/16, Callable 5/1/11 @ 105.......................... 50,000 45,625 ----------- 45,625 ----------- CONSUMER PRODUCTS - 1.4% Sealy Mattress Co., 8.25%, 6/15/14, Callable 6/15/09 @ 104......................... 50,000 49,750 Smithfield Foods, Inc., 7.75%, 7/1/17............. 50,000 51,500 Spectrum Brands, Inc., 7.38%, 2/1/15, Callable 2/1/10@ 104........................... 75,000 54,188 Yankee Acquisition Corp., 9.75%, 2/15/17, Callable 2/15/12@ 105.......................... 50,000 46,250 ----------- 201,688 ----------- CONTAINERS - PAPER AND PLASTIC - 2.6% Owens-Brockway Glass Containers, 6.75%, 12/1/14, Callable 12/1/09 @ 103................ 50,000 50,125 Solo Cup Co., 8.50%, 2/15/14, Callable 2/15/09 @ 104......................... 200,000 180,000 Stone Container Finance Co. of Canada, 7.38%, 7/15/14, Callable 7/15/09 @ 104......... 150,000 145,125 ----------- 375,250 ----------- COSMETICS - 0.3% Chattem, Inc., 7.00%, 3/1/14, Callable 3/1/09 @ 104.......................... 50,000 49,500 ----------- 49,500 ----------- DISTRIBUTION & WHOLESALE - 2.0% Baker & Taylor, Inc., 11.50%, 7/1/13, Callable 7/1/10 @ 106(b)....................... 100,000 98,500 Beverages & More, Inc., 9.25%, 3/1/12, Callable 9/1/09 @ 105(b)....................... 50,000 51,500 Central Garden & Pet Co., 9.13%, 2/1/13, Callable 2/1/08 @ 105.......................... 50,000 47,750 Jarden Corp., 7.50%, 5/1/17, Callable 5/1/12 @ 104.......................... 25,000 23,750 Pegasus Solutions, Inc., 10.50%, 4/15/15, Callable 4/15/11 @ 105(b)...................... 50,000 45,000 Pilgrim's Pride Corp., 8.38%, 5/1/17, Callable 5/1/12 @ 104.......................... 25,000 25,187 ----------- 291,687 ----------- -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- DIVERSIFIED OPERATIONS - 1.4% Bombardier, Inc., 8.00%, 11/15/14, Callable 11/15/10 @ 104(b)..................... 25,000 26,000 Koppers Holdings, Inc., 0.00%, 11/15/14, Callable 11/15/09 @ 105 (c).......... 25,000 21,437 Snoqualmie Entertainment Authority, 9.06%, 2/1/14, Callable 2/1/09 @ 103 (a)(b)................... 25,000 24,094 Susser Holdings LLC 10.63%, 12/15/13, Callable 12/15/09 @ 105................................. 50,000 52,000 10.63%, 12/15/13, Callable 12/15/09 @ 105................................. 72,000 74,880 ----------- 198,411 ----------- EDUCATION - 0.4% Education Management LLC 10.25%, 6/1/16, Callable 6/1/11 @ 105.......... 25,000 26,250 8.75%, 6/1/14, Callable 6/1/10 @ 104........... 25,000 25,813 ----------- 52,063 ----------- ELECTRIC - 2.5% AES Corp. 7.75%, 3/1/14.................................. 60,000 60,000 7.75%, 10/15/15(b)............................. 50,000 50,062 Baldor Electic Co., 8.63%, 2/15/17, Callable 2/15/12 @ 104......................... 50,000 52,125 CMS Energy Corp., 6.88%, 12/15/15................. 100,000 100,458 Edison Mission Energy, 7.20%, 5/15/19............. 50,000 48,875 General Cable Corp., 7.13%, 4/1/17, Callable 4/1/12 @ 104.......................... 50,000 50,000 ----------- 361,520 ----------- ENERGY - 3.6% Aventine Renewable Energy, Inc., 10.00%, 4/1/17, Callable 4/1/12 @ 105................................... 50,000 44,500 Copano Energy LLC, 8.13%, 3/1/16, Callable 3/1/11 @ 104.......................... 80,000 82,200 Massey Energy Co., 6.88%, 12/15/13, Callable 12/15/09 @ 103........................ 100,000 94,500 Mirant North America LLC, 7.38%, 12/31/13, Callable 12/31/09 @ 104.............. 50,000 50,687 NRG Energy, Inc., 7.38%, 2/1/16, Callable 2/1/11 @ 104.......................... 50,000 49,875 Reliant Energy, Inc., 7.63%, 6/15/14.............. 50,000 50,437 Verasun Energy Corp., 9.88%, 12/15/12, Callable 12/15/09 @ 105........................ 50,000 49,563 Williams Cos., Inc., 6.38%, 10/1/10 (b)........... 100,000 101,250 ----------- 523,012 ----------- SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 46 -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- FINANCE - 6.8% Basell AF SCA, 8.38%, 8/15/15, Callable 8/15/10 @ 104 (b)..................... 150,000 134,250 CCM Merger, Inc., 8.00%, 8/1/13, Callable 8/1/09 @ 104(b)....................... 150,000 144,000 Ford Motor Credit Co. 7.38%, 2/1/11.................................. 50,000 47,160 7.38%, 10/28/09................................ 250,000 241,113 General Motors Acceptance Corp., 6.88%, 8/28/12................................. 300,000 270,448 MSX International, 12.50%, 4/1/12, Callable 4/1/09 @ 110(b)....................... 25,000 23,750 Nalco Finance Holdings, Inc., 0.00%, 2/1/14, Callable 2/1/09 @ 105 (c).............. 75,000 68,250 Nuveen Investments, Inc., 10.50%, 11/15/15, Callable 11/15/11 @ 105(b)..................... 50,000 50,000 ----------- 978,971 ----------- HEALTH CARE - 0.2% HCA, Inc., 9.25%, 11/15/16, Callable 11/15/11 @ 105................................. 25,000 26,313 ----------- 26,313 ----------- INTERNET RELATED - 0.3% Atlantic Broadband Finance LLC, 9.38%, 1/15/14, Callable 1/15/09 @ 105................ 50,000 49,000 ----------- 49,000 ----------- LEISURE - 0.7% AMC Entertainment, Inc., 11.00%, 2/1/16, Callable 2/1/11@ 106........................... 100,000 108,250 ----------- 108,250 ----------- MACHINERY - 0.7% Case New Holland, Inc., 7.13%, 3/1/14, Callable 3/1/10 @ 104.......................... 50,000 51,750 Sensata Technologies, 8.00%, 5/1/14, Callable 5/1/10 @ 104.......................... 50,000 49,063 ----------- 100,813 ----------- MANUFACTURING - 1.7% AGY Holding Corp., 11.00%, 11/15/14, Callable 11/15/10 @ 106(b)..................... 50,000 49,250 American Railcar Industries, 7.50%, 3/1/14, Callable 3/1/11 @ 104.......................... 25,000 24,688 Coleman Cable, Inc., 9.88%, 10/1/12, Callable 10/1/08 @ 105......................... 50,000 49,250 Freescale Semiconductor, Inc., 10.13%, 12/15/16, Callable 12/15/11 @ 105.............. 50,000 45,312 Libbey Glass, Inc., 12.38%, 6/1/11, Callable 6/1/08 @ 108 (a)...................... 25,000 27,187 Maax Corp., 9.75%, 6/15/12, Callable 6/15/08 @ 105......................... 50,000 17,000 -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- MANUFACTURING, CONTINUED Ryerson, Inc., 12.00%, 11/1/15, Callable 11/1/11 @ 106(b)...................... 25,000 25,688 Tembec Industries, Inc., 7.75%, 3/15/12........... 25,000 10,344 ----------- 248,719 ----------- MEDICAL - 2.7% Advanced Medical Optics, 7.50%, 5/1/17, Callable 5/1/12 @ 104.......................... 50,000 47,125 Community Health, 8.88%, 7/15/15, Callable 7/15/11 @ 104......................... 50,000 50,625 MQ Associates, Inc., 0.00%, 8/15/12, Callable 8/15/08 @ 109 (c)..................... 100,000 90,000 MultiPlan, Inc., 10.38%, 4/15/16, Callable 4/15/11 @ 105(b)...................... 100,000 102,250 Omnicare, Inc., 6.75%, 12/15/13, Callable 12/15/09 @ 103........................ 100,000 96,500 ----------- 386,500 ----------- METAL PROCESSORS & FABRICATION - 0.5% TriMas Corp., 9.88%, 6/15/12, Callable 12/10/07 @ 105........................ 77,000 79,118 ----------- 79,118 ----------- METALS & MINING - 3.0% AK Steel Corp., 7.75%, 6/15/12, Callable 11/23/07 @ 104........................ 100,000 102,000 Freeport-McMoran Copper & Gold, Inc., 8.25%, 4/1/15, Callable 4/1/11 @ 104........... 50,000 54,000 Gibraltar Industries, Inc., 8.00%, 12/1/15, Callable 12/1/10 @ 104......................... 150,000 141,000 International Coal Group, Inc., 10.25%, 7/15/14, Callable 7/15/10 @ 105................ 50,000 48,500 Noranda Aluminium Acquisition, 9.36%, 5/15/15, Callable 5/15/08 @ 102 (a)(b)........................... 50,000 46,125 Tube City IMS Corp., 9.75%, 2/1/15, Callable 2/1/11 @ 105.......................... 50,000 49,125 ----------- 440,750 ----------- OIL & GAS - 8.7% Chaparral Energy, Inc., 8.50%, 12/1/15, Callable 12/1/10 @ 104......................... 100,000 93,250 Chesapeake Energy Corp., 6.88%, 1/15/16, Callable 1/15/09 @ 103......................... 100,000 99,500 Cimarex Energy Co., 7.13%, 5/1/17, Callable 5/1/12 @ 104.......................... 50,000 49,938 Clayton Williams Energy, Inc., 7.75%, 8/1/13, Callable 8/1/09 @ 104.......................... 200,000 187,500 Colorado Interstate Gas Co., 6.80%, 11/15/15................................ 150,000 155,726 Compton Petroleum Finance Corp., 7.63%, 12/1/13, Callable 12/1/09 @ 104......... 100,000 95,750 47 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- OIL & GAS, CONTINUED Energy Partners Ltd., 9.75%, 4/15/14, Callable 4/15/11 @ 105......................... 50,000 49,500 Forest Oil Corp., 7.25%, 6/15/19, Callable 6/15/12 @ 104(b)...................... 50,000 50,000 Grant Prideco, Inc., 6.13%, 8/15/15, Callable 8/15/10 @ 103......................... 25,000 25,125 Inergy LP/Inergy Finance, 8.25%, 3/1/16, Callable 3/1/11 @ 104.......................... 100,000 104,500 Newfield Exploration Co., 6.63%, 9/1/14, Callable 9/1/09 @ 103.......................... 100,000 98,250 Opti Canada, Inc., 7.88%, 12/15/14, Callable 12/15/10 @ 104(b)..................... 50,000 49,625 Pogo Producing Co., 7.88%, 5/1/13, Callable 5/1/10 @ 104.......................... 100,000 102,000 Swift Energy Co., 7.63%, 7/15/11, Callable 7/15/08 @ 104......................... 50,000 50,500 Tesoro Corp., 6.50%, 6/1/17, Callable 6/1/12 @ 103.......................... 50,000 49,375 ----------- 1,260,539 ----------- PAPER & RELATED PRODUCTS - 2.5% Aleris International, Inc., 10.00%, 12/15/16, Callable 12/15/11 @ 105........................ 25,000 22,000 Catalyst Paper Corp., 8.63%, 6/15/11, Callable 12/6/07 @ 103......................... 50,000 39,500 Exopack Holding Corp., 11.25%, 2/1/14, Callable 2/1/10 @ 106.......................... 50,000 50,625 Georgia-Pacific Corp., 7.70%, 6/15/15............. 100,000 98,500 Norampac, Inc., 6.75%, 6/1/13, Callable 6/1/08 @ 103.......................... 100,000 95,250 Verso Paper Holdings LLC, 9.13%, 8/1/14, Callable 8/1/10 @ 105.......................... 50,000 51,625 ----------- 357,500 ----------- PIPELINES - 3.1% Atlas Pipeline Partners LP, 8.13%, 12/15/15, Callable 12/15/10 @ 104........................ 50,000 49,750 Dynegy Holdings, Inc., 8.38%, 5/1/16.............. 150,000 150,375 El Paso Corp., 7.00%, 6/15/17..................... 100,000 100,204 Mueller Water Products, Inc., 7.38%, 6/1/17, Callable 6/1/12 @ 104.......................... 50,000 46,500 Semgroup LP, 8.75%, 11/15/15, Callable 11/15/10 @ 104(b)..................... 50,000 48,000 Williams Partners LP, 7.25%, 2/1/17............... 50,000 51,563 ----------- 446,392 ----------- PRINTING & PUBLISHING - 2.8% Block Communications, Inc., 8.25%, 12/15/15, Callable 12/15/10 @ 104(b)........... 50,000 50,250 Canwest Mediaworks LP, 9.25%, 8/1/15, Callable 8/1/11 @ 105(b)....................... 50,000 50,750 Idearc, Inc., 8.00%, 11/15/16, Callable 11/15/11 @ 104........................ 50,000 50,125 Medimedia USA, Inc., 11.38%, 11/15/14, Callable 11/15/09 @ 106(b)..................... 50,000 52,250 Morris Publishing, 7.00%, 8/1/13, Callable 8/1/08 @ 103.......................... 100,000 76,750 -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- PRINTING & PUBLISHING, CONTINUED Sheridan Group, Inc., 10.25%, 8/15/11, Callable 11/23/07 @ 105........................ 100,000 102,500 Valassis Communications, Inc., 8.25%, 3/1/15, Callable 3/1/11 @ 104.......................... 35,000 29,487 ----------- 412,112 ----------- RENTAL - AUTO AND EQUIPMENT - 1.7% Avis Budget Car Rental, Inc., 7.63%, 5/15/14, Callable 5/15/10 @ 104......................... 100,000 99,000 Hertz Corp., 8.88%, 1/1/14, Callable 1/1/10 @ 104.......................... 100,000 103,000 Rental Service Corp., 9.50%, 12/1/14, Callable 12/1/10 @ 105......................... 50,000 48,063 ----------- 250,063 ----------- RESTAURANTS - 3.0% Buffets, Inc., 12.50%, 11/1/14, Callable 11/1/10 @ 106......................... 50,000 32,375 Dave & Buster's, Inc., 11.25%, 3/15/14, Callable 3/15/10 @ 106......................... 50,000 50,875 Landry's Restaurants, Inc., 9.50%, 12/15/14, Callable 2/28/09 @ 101 ........................ 200,000 200,000 NPC International, Inc., 9.50%, 5/1/14, Callable 5/1/10 @ 105.......................... 50,000 46,750 Outback Steakhouse, Inc., 10.00%, 6/15/15, Callable 6/15/11 @ 105(b)...................... 75,000 64,500 Sbarro, Inc., 10.38%, 2/1/15, Callable 2/1/10 @ 108.......................... 50,000 45,187 ----------- 439,687 ----------- RETAIL - 1.9% Claire's Stores, Inc., 9.63%, 6/1/15, Callable 6/1/11 @ 105(b)....................... 50,000 40,875 Linens `N' Things, Inc., 10.87%, 1/15/14, Callable 1/15/08 @ 102 (a)..................... 50,000 33,000 Pep Boys, 7.50%, 12/15/14, Callable 12/15/09 @ 104........................ 50,000 48,125 Stater Bros. Holdings, Inc., 7.75%, 4/15/15, Callable 4/15/11 @ 104......................... 50,000 49,875 Suburban Propane Partners LP, 6.88%, 12/15/13, Callable 12/15/08 @ 103.............. 50,000 48,750 United Auto Group, Inc., 7.75%, 12/15/16, Callable 12/15/11 @ 104........................ 50,000 48,625 ----------- 269,250 ----------- SEISMIC DATA COLLECTION - 0.7% CIE Gener de Geophysique, 7.50%, 5/15/15, Callable 5/15/10 @ 104......................... 50,000 51,000 Seitel, Inc., 9.75%, 2/15/14, Callable 2/15/11 @ 105......................... 50,000 46,375 ----------- 97,375 ----------- SPECIAL PURPOSE ENTITY - 4.2% Altra Industrial Motion, Inc., 9.00%, 12/1/11, Callable 12/1/08 @ 105................ 50,000 50,250 Buffalo Thunder Development Authority, 9.38%, 12/15/14, Callable 12/15/10 @ 105(b)..................... 50,000 46,750 SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 48 -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- SPECIAL PURPOSE ENTITY, CONTINUED Cellu Tissue Holdings, Inc., 9.75%, 3/15/10, Callable 11/23/07 @ 107........................ 50,000 49,125 Chukchansi Economic Development Authority, 8.00%, 11/15/13, Callable 11/15/09 @ 104(b)..................... 25,000 25,188 Hawker Beechcraft Acquisition Co. 9.75%, 4/1/17, Callable 4/1/12 @ 105(b)........ 25,000 25,437 8.50%, 4/1/15, Callable 4/1/11 @ 104(b)........ 50,000 50,875 Kar Holdings, Inc., 8.75%, 5/1/14, Callable 5/1/10 @ 104(b)....................... 50,000 48,250 Local TV Finance LLC, 9.25%, 6/15/15, Callable 6/15/11 @ 105(b)...................... 50,000 47,875 MCBC Holdings, Inc., 11.52%, 10/15/14, Callable 10/15/09 @ 103 (a)(b)................. 25,000 25,000 Momentive Performance, 9.75%, 12/1/14, Callable 12/1/10 @ 105(b)...................... 50,000 48,750 Petroplus Finance Ltd., 7.00%, 5/1/17, Callable 5/1/12 @ 104(b)....................... 75,000 70,500 Rare Restaurant Group Ll, 9.25%, 5/15/14, Callable 5/15/11 @ 105(b)...................... 50,000 48,500 Regency Energy Partners LP, 8.38%, 12/15/13, Callable 12/15/10 @ 104.19........... 17,000 17,893 UCI Holdco, Inc., 12.69%, 12/15/13, Callable 12/15/07 @ 100 (a)(b)................. 54,687 53,593 ----------- 607,986 ----------- TELECOMMUNICATIONS - 10.1% Broadview Network Holdings, 11.38%, 9/1/12, Callable 9/1/09 @ 106(b)....................... 25,000 26,500 Centennial Communications Corp., 10.00%, 1/1/13, Callable 1/1/09 @ 108.................. 100,000 106,000 Cincinnati Bell, Inc., 8.38%, 1/15/14, Callable 1/15/09 @ 104......................... 100,000 100,250 Cricket Communications, 9.38%, 11/1/14, Callable 11/1/10 @ 105......................... 50,000 49,625 Insight Midwest LP, 9.75%, 10/1/09, Callable 11/23/07 @ 100........................ 130,000 130,162 IPCS, Inc., 8.61%, 5/1/14, Callable 5/1/08 @ 102 (a)...................... 100,000 97,000 Level 3 Financing, Inc., 9.25%, 11/1/14, Callable 11/1/10 @ 105......................... 50,000 47,125 Metropcs Wireless, Inc. 9.25%, 11/1/14, Callable 11/1/10 @ 105.................................. 50,000 49,625 9.25%, 11/1/14, Callable 11/1/10 @ 105.................................. 50,000 49,625 Nordic Telephone Co., Holdings, 8.88%, 5/1/16, Callable 5/1/11 @ 104 (b).............. 50,000 52,875 NTL Cable plc, 9.13%, 8/15/16, Callable 8/15/11 @ 105......................... 125,000 131,875 Paetec Holding Corp., 9.50%, 7/15/15, Callable 7/15/11 @ 105(b)...................... 50,000 51,250 Panamsat Corp., 9.00%, 6/15/16, Callable 6/15/11 @ 105......................... 50,000 51,125 Qwest Corp., 5.63%, 11/15/08...................... 150,000 149,250 Radio One, Inc., 6.38%, 2/15/13, Callable 2/15/09 @ 103......................... 50,000 44,000 -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- TELECOMMUNICATIONS, CONTINUED Suncom Wireless Holdings, Inc., 8.50%, 6/1/13, Callable 6/1/08 @ 104.................. 150,000 157,312 West Corp., 11.00%, 10/15/16, Callable 10/15/11 @ 106........................ 25,000 26,188 Wind Acquisition Financial SA, 10.75%, 12/1/15, Callable 12/1/10 @ 105(b)............. 100,000 111,250 Windstream Corp., 8.63%, 8/1/16, Callable 8/1/11 @ 104.......................... 25,000 26,750 ----------- 1,457,787 ----------- TOBACCO - 0.2% Alliance One International, Inc., 8.50%, 5/15/12................................. 25,000 24,875 ----------- 24,875 ----------- TRANSPORTATION - 0.8% Bristow Group, Inc., 7.50%, 9/15/17, Callable 9/15/12 @ 104(b)...................... 50,000 51,500 Navios Maritime Holdings, Inc., 9.50%, 12/15/14, Callable 12/15/10 @ 105.............. 30,000 31,725 Saint Acquisition Corp., 13.31%, 5/15/15, Callable 5/15/09 @ 102 (a)(b).................. 50,000 31,875 ----------- 115,100 ----------- WASTE DISPOSAL - 1.0% Allied Waste North America, Inc., 7.38%, 4/15/14, Callable 4/15/09 @ 104................ 150,000 151,500 ----------- 151,500 ----------- TOTAL CORPORATE OBLIGATIONS (COST $14,058,455)............................. 13,845,392 ----------- -------------------------------------------------------------------------------- INVESTMENT COMPANY--2.4% -------------------------------------------------------------------------------- Northern Institutional Diversified Assets Portfolio, Shares class, 4.80% (d)............. 355,288 355,288 ----------- TOTAL INVESTMENT COMPANY (COST $355,288)................................ 355,288 ----------- TOTAL INVESTMENTS (COST $14,413,743) -- 98.0%..................... 14,200,680 =========== ------------- Percentages indicated are based on net assets of $14,487,263. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented represent the rates in effect on October 31, 2007. The maturity dates presented reflect the final maturity dates. However, some of these securities may contain put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid by the Investment Adviser based on procedures approved by the Board of Trustees. (c) Step Bond. Income recognition is on the effective yield method for Step Bonds. (d) The rate presented represents the annualized one day yield that was in effect on October 31, 2007. LLC -- Limited Liability Co. LP -- Limited Partnership PLC -- Public Limited Co. 49 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS--28.0% -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- Federal Home Loan Mortgage Corp. - 12.5% Pool #1B2655, 4.20%, 12/1/34(a)(d)............. 199,130 200,195 Pool #1J1313, 6.43%, 6/1/36(a)................. 273,308 279,287 Pool #847557, 5.54%, 7/1/34(a)(d).............. 173,761 176,901 Pool #G02981, 6.00%, 6/1/37.................... 194,294 195,556 Pool #G12317, 5.50%, 8/1/21.................... 187,094 187,390 TBA November, 6.00%, 11/11/37.................. 150,000 150,938 TBA November, 5.50%, 11/15/37.................. 700,000 689,062 ----------- 1,879,329 ----------- Federal National Mortgage Association - 14.5% Pool #781922, 5.00%, 2/1/21.................... 379,120 373,313 Pool #922090, 5.90%, 3/1/37(a)................. 329,112 332,705 TBA December 2007 6.50%, 12/1/35............................... 850,000 870,027 6.00%, 12/15/36.............................. 600,000 603,750 ----------- 2,179,795 ----------- Government National Mortgage Association - 1.0% 6.00%, 11/15/36................................ 150,000 151,875 ----------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $4,198,134).................. 4,210,999 ----------- -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS--41.8% -------------------------------------------------------------------------------- AUTO MANUFACTURERS - 0.6% General Motors, 8.25%, 7/15/23.................... 100,000 90,250 ----------- 90,250 ----------- BANKING - 2.5% American Express Centurion Bank, 5.95%, 6/12/17................................. 100,000 100,596 Bank of America N.A., 6.10%, 6/15/17.............. 150,000 153,521 Washington Mutual, Inc., 6.09%, 9/17/12 (a).................................... 75,000 71,492 Washington Mutual Bank, 5.56%, 2/4/11 (a)..................................... 50,000 48,336 ----------- 373,945 ----------- BUILDING & CONSTRUCTION PRODUCTS - 1.3% Martin Marietta Materials, Inc., 5.13%, 4/30/10 (a)............................. 100,000 98,870 Masco Corp., 6.00%, 3/12/10 (a)(d)................ 100,000 98,235 ----------- 197,105 ----------- ELECTRIC - 5.4% MidAmerican Energy Co., 5.95%, 7/15/17............ 450,000 465,393 Progress Energy, Inc., 5.98%, 11/14/08, Callable 2/14/08 @ 100 (a)(d).................. 250,000 250,316 Puget Sound Energy, Inc., 6.97%, 6/1/67, Callable 6/1/17 @ 100.......................... 100,000 94,599 ----------- 810,308 ----------- FINANCE - 9.9% Ford Motor Credit Co., LLC 4.95%, 1/15/08................................. 250,000 248,918 5.80%, 1/12/09................................. 300,000 289,426 7.25%, 10/25/11................................ 25,000 23,255 -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- FINANCE, CONTINUED General Motors Acceptance Corp. 4.38%, 12/10/07................................ 500,000 499,203 7.25%, 3/2/11.................................. 100,000 94,559 SLM Corp. 4.00%, 1/15/10................................. 150,000 140,664 4.50%, 7/26/10................................. 50,000 46,814 XTRA Finance Corp., 5.15%, 4/1/17................. 150,000 144,869 ----------- 1,487,708 ----------- HOSPITALS - 1.4% HCA, Inc., 8.75%, 9/1/10.......................... 200,000 203,500 ----------- 203,500 ----------- MEDIA - 3.6% Time Warner Cable, Inc., 5.85%, 5/1/17............ 150,000 148,720 Time Warner Entertainment, 8.88%, 10/1/12................................. 350,000 398,354 ----------- 547,074 ----------- MEDICAL - 2.0% Astrazeneca plc, 5.90%, 9/15/17................... 150,000 153,374 Schering-Plough, 6.00%, 9/15/17................... 150,000 152,565 ----------- 305,939 ----------- OFFICE EQUIPMENT & SERVICES - 1.7% IBM Corp., 5.70%, 9/14/17......................... 150,000 152,248 Xerox Corp., 6.40%, 12/18/09 (a)(d)............... 100,000 99,932 ----------- 252,180 ----------- RETAIL - 3.5% Federated Retail Holdings, Inc., 5.90%, 12/1/16................................. 150,000 143,204 Home Depot, Inc., 5.25%, 12/16/13................. 400,000 387,331 ----------- 530,535 ----------- TELECOMMUNICATIONS - 2.8% Motorola, Inc., 6.00%, 11/15/17................... 150,000 148,122 Verizon Pennsylvania, Inc., 5.65%, 11/15/11....... 275,000 279,320 ----------- 427,442 ----------- TRANSPORTATION - 7.1% American Airlines, Inc. 6.98%, 4/1/11.................................. 77,970 77,970 7.86%, 10/1/11................................. 200,000 211,250 Burlington Northern Santa Fe Railway Co., 4.83%, 1/15/23................................. 251,263 242,328 Continental Airlines, Inc., 5.98%, 4/19/22........ 100,000 98,307 Union Pacific Corp., 5.75%, 11/15/17.............. 150,000 148,684 Union Pacific Railroad, 5.08%, 1/2/29............. 299,279 288,622 ----------- 1,067,161 ----------- SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 50 -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- TOTAL CORPORATE OBLIGATIONS (COST $6,284,555).............................. 6,293,147 ----------- -------------------------------------------------------------------------------- ASSET BACKED SECURITIES--8.2% -------------------------------------------------------------------------------- Americredit Automobile Receivables Trust, Series 2005-CF, Class A3, 4.47%, 5/6/10 (d).............................. 133,747 133,484 Asset Backed Funding Certificates, Series 2003-AHL1, Class A1, 3.68%, 3/25/33................................. 210,318 207,006 Cairn Mezzanine plc, Series 2007-3A, Class B1, 6.40%, 8/13/47 (a)(b)................ 145,000 79,750 Citigroup Mortgage Loan Trust, Inc., Series 2005-WF2, Class AF2, 4.92%, 8/25/35................................. 15,345 15,297 Countrywide Asset-Backed Certificates, Series 2006-S4, Class A3, 5.80%, 7/25/34................................. 210,000 203,873 GE Business Loan Trust, Series 2006-2A, Class A, 5.27%, 11/15/34 (a)(b)(d)............. 248,921 248,100 GMAC Mortgage Corp., Loan Trust, Series 2006-HE3, Class A3, 5.81%, 10/25/36................................ 170,000 161,097 Preferred Term Securities XXII Ltd., 6.03%, 9/22/36, Callable 6/22/11 @ 100 (a)(b)(d)........................ 199,318 190,648 ----------- TOTAL ASSET BACKED SECURITIES (COST $1,324,232).............................. 1,239,255 ----------- -------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS--11.6% -------------------------------------------------------------------------------- Banc of America Mortgage Securities, Series 2005-D, Class 2A4, 4.78%, 5/25/35 (a)............................. 200,000 198,780 Deutsche Mortgage Securities, Inc., Series 2006-WF1, Class 1A1, 5.07%, 6/26/35 (a)(b)................................. 179,467 178,781 Freddie Mac Series 2988, Class AF, 5.39%, 6/15/35 (a)(d)... 169,792 167,259 Series 3212, Class BK, 5.40%, 9/15/36.......... 150,000 144,027 Morgan Stanley Mortgage Loan Trust, Series 2006-3AR, Class 2A3, 5.71%, 3/25/36 (a).................................... 271,828 275,690 Residential Accredit Loans, Inc. Series 2007-QS1, Class 2A8, 5.17%, 1/25/37 (a)(d)................................. 360,118 357,079 Series 2007-QS2, Class A4, 6.25%, 1/25/37................................. 169,876 169,773 Residential Asset Securitization Trust, Series 2003-A15, Class 1A2, 5.32%, 2/25/34 (a)(d).......................... 259,492 258,496 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $1,754,762).............................. 1,749,885 ----------- -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES--19.1% -------------------------------------------------------------------------------- Banc of America Commercial Mortgage, Inc., Series 2006-4, Class A4, 5.63%, 7/10/46 (a).................................... 230,000 230,112 -------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- Bear Stearns Commercial Mortgage Securities, Inc. Series 2006-T24, Class A4, 5.43%, 10/12/41................................ 200,000 198,967 Series 2007-T28, Class AJ, 6.18%, 9/11/42........................................ 80,000 79,433 Citigroup Commercial Mortgage Trust, Series 2006-C4, Class A3, 5.72%, 3/15/49 (a)............................. 240,000 242,877 Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class A2B, 5.21%, 12/11/49..................... 200,000 198,480 Commercial Mortgage Pass - Through Certificate Series 2005-FL11, Class A1, 5.24%, 11/15/17 (a)(b)(d)............................. 34,241 34,182 Series 2006-FL12, Class A2, 5.19%, 12/15/20 (a)(d)................................ 251,337 250,533 Series 2005-LP5, Class AJ, 5.05%, 5/10/43........................................ 200,000 188,031 CWCapital Cobalt, Series 2007-C3, Class AJ, 6.02%, 5/15/46....................... 160,000 157,046 GS Mortgage Securities Corp. II Series 2006-GG8, Class AJ, 5.62%, 11/10/39................................ 180,000 174,312 Series 2007-GG10, Class AJ, 5.80%, 8/10/45 (a)............................. 210,000 206,228 JP Morgan Chase Commercial Mortgage Securities Corp., Series 2007-CB20, Class AJ, 6.10%, 2/12/51....................... 190,000 190,622 LB-UBS Commercial Mortgage Trust, Series 2007-C6, Class AM, 6.11%, 7/15/40 (a)............................. 180,000 184,134 Morgan Stanley Capital I Series 2006-HQ10, Class A4, 5.33%, 11/12/41................................ 180,000 176,211 Series 2007-IQ14, Class A2, 5.61%, 4/15/49................................. 220,000 221,208 Washington Mutual Commercial Mortgage Securities Trust, Series 2006-SL1, Class A, 5.30%, 11/23/43 (a)(b)................ 147,436 145,680 ----------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $2,886,901).............................. 2,878,056 ----------- -------------------------------------------------------------------------------- FOREIGN BONDS--5.1% -------------------------------------------------------------------------------- ICELAND - 1.5% Kaupthing Bank, 5.94%, 1/15/10 (a)(b)(d).......... 225,000 224,234 ----------- 224,234 ----------- NETHERLANDS - 1.0% Shell International Finance BV, 5.20%, 3/22/17................................. 150,000 149,342 ----------- 149,342 ----------- 51 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- FOREIGN BONDS, CONTINUED -------------------------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- -------- SOUTH KOREA - 1.7% Citibank Korea, Inc., 4.68%, 6/18/13, Callable 6/18/08 @ 100 (a)..................... 250,000 249,323 ----------- 249,323 ----------- UNITED KINGDOM - 0.9% Barclays Bank plc, 5.93%, 12/31/49 (b)............ 150,000 141,979 ----------- 141,979 ----------- TOTAL FOREIGN BONDS (COST $773,460)................................ 764,878 ----------- -------------------------------------------------------------------------------- INVESTMENT COMPANY--1.1% -------------------------------------------------------------------------------- Northern Institutional Diversified Assets Portfolio, Shares class, 4.80% (c)............. 169,259 169,259 ----------- TOTAL INVESTMENT COMPANY (COST $169,259)................................ 169,259 ----------- TOTAL INVESTMENTS (COST $17,391,303) -- 114.9%.................... 17,305,479 =========== ------------ Percentages indicated are based on net assets of $15,058,569. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented represent the rates in effect on October 31, 2007. The maturity dates presented reflect the final maturity dates. However, some of these securities may contain put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid by the Investment Adviser based on procedures approved by the Board of Trustees. (c) The rate presented represents the annualized one day yield that was in effect on October 31, 2007. (d) Security held as collateral for to be announced securities. LLC -- Limited Liability Co. PLC -- Public Limited Co. TBA -- Security was traded on a "to be announced" basis. Represents 15.37% of net assets. SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 52 -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- COMMON STOCKS--97.7% -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- AEROSPACE & DEFENSE - 6.1% General Dynamics Corp............................. 25,400 2,310,384 The Boeing Co..................................... 19,750 1,947,153 United Technologies Corp.......................... 15,900 1,217,781 ----------- 5,475,318 ----------- BIOTECHNOLOGY - 3.6% Gilead Sciences, Inc. (a)......................... 70,500 3,256,395 ----------- 3,256,395 ----------- BUSINESS SERVICES - 1.1% Fluor Corp........................................ 6,450 1,019,100 ----------- 1,019,100 ----------- CASINOS & GAMBLING - 1.0% International Game Technology..................... 19,950 870,020 ----------- 870,020 ----------- CHEMICALS - 4.2% Monsanto Co....................................... 38,400 3,748,992 ----------- 3,748,992 ----------- COMPUTER SOFTWARE - 5.8% Adobe Systems, Inc. (a)........................... 74,600 3,573,340 Electronic Arts, Inc. (a)......................... 26,750 1,634,960 ----------- 5,208,300 ----------- COMPUTERS - 12.4% Apple Computer, Inc. (a).......................... 23,700 4,501,815 Hewlett-Packard Co................................ 47,150 2,436,712 Research In Motion Ltd. (a)....................... 33,450 4,164,859 ----------- 11,103,386 ----------- CONSUMER PRODUCTS - 7.4% Colgate-Palmolive Co.............................. 47,300 3,607,571 PepsiCo, Inc...................................... 40,900 3,015,148 ----------- 6,622,719 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 2.5% Joy Global, Inc................................... 18,600 1,079,916 Thermo Fisher Scientific, Inc. (a)................ 19,500 1,146,795 ----------- 2,226,711 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 1.7% Emerson Electric Co............................... 15,600 815,412 Microchip Technology, Inc......................... 21,000 696,570 ----------- 1,511,982 ----------- FARM MACHINERY & EQUIPMENT - 3.7% Deere & Co........................................ 21,500 3,330,350 ----------- 3,330,350 ----------- FINANCIAL SERVICES - 6.6% Ambac Financial Group, Inc........................ 7,900 290,957 CME Group, Inc.................................... 5,175 3,447,844 Goldman Sachs Group, Inc.......................... 4,500 1,115,640 Nymex Holdings, Inc............................... 2,800 359,856 UBS AG-ADR........................................ 12,550 673,809 ----------- 5,888,106 ----------- -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- FOOD & BEVERAGE - 4.4% The Coca-Cola Co.................................. 29,000 1,791,040 Wm. Wrigley Jr. Co................................ 10,850 669,120 Yum! Brands, Inc.................................. 36,900 1,485,963 ----------- 3,946,123 ----------- HEALTH CARE - 2.9% Baxter International, Inc......................... 22,300 1,338,223 DENTSPLY International, Inc....................... 20,800 862,784 Zimmer Holdings, Inc. (a)......................... 5,700 396,093 ----------- 2,597,100 ----------- HOTELS & LODGING - 4.3% Las Vegas Sands Corp. (a)......................... 29,200 3,885,936 ----------- 3,885,936 ----------- INSURANCE - 1.8% AFLAC, Inc........................................ 25,850 1,622,863 ----------- 1,622,863 ----------- INTERNET RELATED - 4.4% Google, Inc., Class A (a)......................... 5,600 3,959,200 ----------- 3,959,200 ----------- OIL & GAS - 5.2% Schlumberger Ltd.................................. 23,050 2,225,939 Smith International, Inc.......................... 36,450 2,407,522 ----------- 4,633,461 ----------- PHARMACEUTICALS - 8.6% Abbott Laboratories............................... 54,200 2,960,404 Alcon, Inc. ADR................................... 6,950 1,057,859 Allergan, Inc..................................... 16,000 1,081,280 Genentech, Inc. (a)............................... 22,329 1,655,249 Schering-Plough Corp.............................. 32,100 979,692 ----------- 7,734,484 ----------- RETAIL - 2.4% Kohl's Corp. (a).................................. 19,900 1,093,903 Target Corp....................................... 17,100 1,049,256 ----------- 2,143,159 ----------- TELECOMMUNICATIONS - 7.6% Cisco Systems, Inc. (a)........................... 110,450 3,651,477 Nokia Corp. ADR................................... 57,150 2,269,998 QUALCOMM, Inc..................................... 20,900 893,057 ----------- 6,814,532 ----------- TOTAL COMMON STOCKS (COST $65,379,364)............................. 87,598,237 ----------- -------------------------------------------------------------------------------- INVESTMENT COMPANY--2.3% -------------------------------------------------------------------------------- Northern Institutional Diversified Assets Portfolio, Shares class, 4.80% (b)............. 2,057,774 2,057,774 ----------- TOTAL INVESTMENT COMPANY (COST $2,057,774).............................. 2,057,774 ----------- TOTAL INVESTMENTS (COST $67,437,138) -- 100.0%.................... 89,656,011 =========== ------------ Percentages indicated are based on net assets of $89,685,877. (a) Represents non-income producing security. (b) The rate presented represents the annualized one day yield that was in effect on October 31, 2007. ADR -- American Depositary Receipt 53 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- COMMON STOCKS--96.9% -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- AUSTRALIA - 3.2% Macquarie Airports................................ 579,924 2,382,795 National Australia Bank Ltd....................... 131,665 5,325,753 QBE Insurance Group Ltd........................... 102,500 3,136,099 Zinifex Ltd....................................... 235,900 3,732,463 ------------- 14,577,110 ------------- AUSTRIA - 1.0% Voestalpine AG.................................... 51,400 4,643,784 ------------- BELGIUM - 1.3% Fortis............................................ 176,832 5,678,420 Fortis - Strip WPR................................ 70,732 707 ------------- 5,679,127 ------------- BRAZIL - 2.6% Banco Do Brasil SA................................ 60,000 1,087,062 Gerdau SA ADR..................................... 75,150 2,337,165 Petroleo Brasileiro SA ADR........................ 55,400 4,608,726 Unibanco ADR...................................... 8,100 1,280,124 Usinas Siderurgicas de Minas Gerais SA............ 30,200 2,368,966 ------------- 11,682,043 ------------- CANADA - 2.6% Canadian Imperial Bank of Commerce................ 21,000 2,268,107 Encana Corp....................................... 59,500 4,164,496 Gerdau Ameristeel Corp............................ 161,000 2,200,879 Nexen, Inc........................................ 34 1,152 Teck Cominco Ltd., B Shares....................... 64,600 3,236,156 ------------- 11,870,790 ------------- CHINA - 0.5% China Petroleum & Chemical Corp................... 592,000 942,622 China Telecom Corp., Ltd.......................... 1,264,000 1,092,937 ------------- 2,035,559 ------------- FINLAND - 1.0% Nokia Oyj......................................... 52,100 2,068,954 Stora Enso Oyj, R Shares.......................... 123,400 2,276,027 ------------- 4,344,981 ------------- FRANCE - 12.3% Air France-KLM.................................... 28,700 1,095,055 BNP Paribas SA.................................... 64,580 7,156,768 Compagnie Generale des Establissements Michelin, B Shares............................. 39,700 5,346,150 Credit Agricole SA................................ 142,779 5,656,125 France Telecom SA................................. 107,200 3,963,857 Lagardere S.C.A................................... 34,800 2,950,824 Renault SA........................................ 62,300 10,521,374 Sanofi-Aventis.................................... 68,900 6,060,101 Societe Generale.................................. 35,385 5,977,343 Total SA.......................................... 92,000 7,423,280 ------------- 56,150,877 ------------- GERMANY - 11.7% Allianz SE........................................ 39,800 8,978,500 BASF AG........................................... 48,300 6,704,660 Daimler AG........................................ 10,100 1,113,722 Deutsche Bank AG.................................. 43,200 5,770,810 -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- GERMANY, CONTINUED Deutsche Lufthansa AG............................. 162,600 4,804,736 Deutsche Telekom AG............................... 241,900 4,969,293 E.ON AG........................................... 41,000 8,024,178 Muenchener Rueckversicherungs- Gesellschaft AG................................ 35,000 6,696,622 RWE AG............................................ 44,500 6,069,450 ------------- 53,131,971 ------------- GREECE - 0.4% Public Power Corp................................. 49,210 1,999,075 ------------- HONG KONG - 0.3% China Netcom Group Corp., Ltd..................... 462,000 1,419,925 ------------- INDIA - 0.5% State Bank of India GDR........................... 17,600 2,182,400 ------------- ITALY - 3.5% Buzzi Unicem SpA.................................. 91,400 2,598,343 ENI SpA........................................... 210,800 7,696,173 Fondiaria-SAI SpA................................. 60,800 2,960,054 Fondiaria-SAI SpA-RNC............................. 18,700 637,951 Italcementi SpA................................... 91,700 2,112,133 ------------- 16,004,654 ------------- JAPAN - 20.8% Alps Electric Co., Ltd............................ 55,000 688,675 Canon, Inc........................................ 32,250 1,632,043 EDION Corp........................................ 67,800 778,870 FUJITSU Ltd....................................... 573,000 4,499,634 Honda Motor Co., Ltd.............................. 47,000 1,760,231 Isuzu Motors Ltd.................................. 570,000 2,841,996 JFE Holdings, Inc................................. 101,600 5,948,279 Kyushu Electric Power Co., Inc.................... 101,300 2,470,261 Mitsubishi Chemical Holdings Corp................. 303,000 2,507,365 Mitsubishi Corp................................... 129,000 4,016,987 Mitsubishi UFJ Financial Group, Inc............... 645,000 6,454,802 Mitsui & Co., Ltd................................. 209,000 5,421,760 Mitsui Chemicals, Inc............................. 417,000 3,922,589 Mitsui O.S.K. Lines Ltd........................... 327,000 5,405,205 NAMCO BANDAI Holdings, Inc........................ 123,800 1,908,955 Nippon Mining Holdings, Inc....................... 360,000 3,405,454 Nippon Telegraph & Telephone Corp................. 881 4,032,546 Nippon Yusen Kabushiki Kaisha..................... 152,000 1,569,480 Nissan Motor Co., Ltd............................. 534,700 6,135,284 ORIX Corp......................................... 21,300 4,369,758 Sharp Corp........................................ 261,000 4,117,518 Sony Corp......................................... 12,510 617,905 Sumitomo Heavy Industries Ltd..................... 163,000 2,153,647 Sumitomo Mitsui Financial Group, Inc.............. 731 5,988,637 The Tokyo Electric Power Co., Inc................. 165,200 4,192,466 Toshiba Corp...................................... 543,000 4,598,873 Toyota Motor Corp................................. 56,700 3,246,168 ------------- 94,685,388 ------------- NETHERLANDS - 5.8% ArcelorMittal..................................... 107,652 8,685,755 Corporate Express NV.............................. 107,400 1,202,178 ING Groep NV...................................... 216,068 9,764,998 SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 54 -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- NETHERLANDS, CONTINUED Koninklijke Ahold NV (a).......................... 266,720 4,018,278 Wolters Kluwer NV................................. 89,700 2,817,023 ------------- 26,488,232 ------------- SINGAPORE - 0.3% Neptune Orient Lines Ltd.......................... 427,000 1,529,966 ------------- SOUTH AFRICA - 0.6% Sanlam Ltd........................................ 554,040 2,036,446 Standard Bank Group Ltd........................... 34,900 634,141 ------------- 2,670,587 ------------- SOUTH KOREA - 1.7% Honam Petrochemical Corp.......................... 8,100 1,236,892 Hynix Semiconductor, Inc. (a)..................... 24,700 693,102 Hyundai Motors Co. Ltd., Second Preferred......... 15,950 612,766 Industrial Bank of Korea GDR...................... 88,300 1,735,095 Kookmin Bank ADR.................................. 14,600 1,192,674 POSCO ADR......................................... 11,400 2,094,750 ------------- 7,565,279 ------------- SPAIN - 1.2% Repsol YPF SA..................................... 141,100 5,573,895 ------------- SWEDEN - 1.0% Electrolux AB, B Shares........................... 118,500 2,302,821 Svenska Cellusoa AB (SCA), B Shares............... 134,400 2,375,563 ------------- 4,678,384 ------------- SWITZERLAND - 1.5% Credit Suisse Group............................... 81,100 5,481,917 Novartis AG....................................... 24,830 1,321,158 ------------- 6,803,075 ------------- TAIWAN - 1.0% China Steel Corp. GDR............................. 38,878 1,098,303 Gigabyte Technology Co., Ltd...................... 11,112 9,298 Siliconware Precision Industries Co............... 707,691 1,485,923 Taiwan Semiconductor Manufacturing Co., Ltd....................................... 508,398 1,016,208 United Microelectronics Corp...................... 1,094,551 718,098 ------------- 4,327,830 ------------- THAILAND - 0.3% PTT Public Company Ltd. plc....................... 121,400 1,498,281 ------------- UNITED KINGDOM - 21.8% Associated British Foods plc...................... 45,800 871,288 AstraZeneca plc................................... 110,300 5,431,176 Aviva plc......................................... 346,270 5,455,083 BAE Systems plc................................... 485,500 5,043,387 Barclays plc...................................... 457,700 5,792,255 BP plc............................................ 125,000 1,626,084 British American Tobacco plc...................... 111,100 4,232,209 British Energy Group plc.......................... 277,000 3,076,454 GlaxoSmithKline plc............................... 259,600 6,667,396 HBOS plc.......................................... 373,041 6,799,121 Home Retail Group plc............................. 358,100 3,255,319 ITV plc........................................... 879,270 1,817,421 Kazakhmys plc..................................... 143,300 4,408,193 -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- UNITED KINGDOM, CONTINUED Punch Taverns plc................................. 91,000 1,907,859 Royal & Sun Alliance Insurance Group plc...................................... 762,188 2,511,165 Royal Bank of Scotland Group plc.................. 635,724 6,865,117 Royal Dutch Shell plc, A Shares................... 232,387 10,195,009 Royal Dutch Shell plc, B Shares................... 45,973 2,005,584 SABMiller plc..................................... 48,100 1,448,682 Taylor Wimpey plc................................. 468,220 2,421,936 Vodafone Group plc................................ 2,879,158 11,344,276 Xstrata plc....................................... 85,950 6,196,853 ------------- 99,371,867 ------------- TOTAL COMMON STOCKS (COST $319,304,574)............................ 440,915,080 ------------- -------------------------------------------------------------------------------- INVESTMENT COMPANY--1.6% -------------------------------------------------------------------------------- Northern Institutional Diversified Assets Portfolio, Shares class, 4.80% (b)............. 7,328,500 7,328,500 ------------- TOTAL INVESTMENT COMPANY (COST $7,328,500).............................. 7,328,500 ------------- TOTAL INVESTMENTS (COST $326,633,074) -- 98.5%.................... 448,243,580 ============= --------------- Percentages indicated are based on net assets of $455,061,609. (a) Represents non-income producing security. (b) The rate presented represents the annualized one day yield that was in effect on October 31, 2007. ADR -- American Depositary Receipt GDR -- Global Depositary Receipt PLC -- Public Limited Co. SPA -- Societa Per Azioni 55 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR OPPORTUNITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- COMMON STOCKS--98.0% -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- AEROSPACE & DEFENSE - 3.7% Empresa Brasileira de Aeronautica S.A. ADR............................................ 63,600 3,101,772 Esterline Technologies Corp. (a).................. 43,300 2,371,974 Hexcel Corp. (a).................................. 115,400 2,888,462 ------------- 8,362,208 ------------- BANKING - 1.4% East West Bancorp, Inc............................ 95,000 3,205,300 ------------- 3,205,300 ------------- BIOTECHNOLOGY - 1.8% Invitrogen Corp. (a).............................. 44,100 4,007,367 ------------- 4,007,367 ------------- COMMERCIAL SERVICES - 1.1% Schawk, Inc., Class A............................. 108,600 2,467,392 ------------- 2,467,392 ------------- COMPUTER SOFTWARE - 8.8% ACI Worldwide, Inc. (a)........................... 125,100 2,861,037 BMC Software, Inc. (a)............................ 65,900 2,230,056 Brocade Communications Systems, Inc. (a).......... 434,400 4,131,144 Nuance Communications, Inc. (a)................... 200,200 4,426,422 Red Hat, Inc. (a)................................. 151,900 3,279,521 Satyam Computer Services Ltd. ADR................. 93,300 2,831,655 ------------- 19,759,835 ------------- CONSUMER PRODUCTS - 3.7% Church & Dwight Co., Inc.......................... 83,100 3,931,461 Jarden Corp. (a).................................. 125,600 4,461,312 ------------- 8,392,773 ------------- DIVERSIFIED MANUFACTURING OPERATIONS - 3.6% Actuant Corp., Class A............................ 47,500 3,276,550 AMETEK, Inc....................................... 100,100 4,704,700 ------------- 7,981,250 ------------- EDUCATION - 1.4% Corinthian Colleges, Inc. (a)..................... 131,229 2,150,843 DeVry, Inc........................................ 19,000 1,039,110 ------------- 3,189,953 ------------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 8.1% Atmel Corp. (a)................................... 497,200 2,431,308 ATMI, Inc. (a).................................... 67,900 2,182,306 Cognos, Inc. (a).................................. 136,200 6,854,946 Silicon Laboratories, Inc. (a).................... 80,600 3,522,220 Thomas & Betts Corp. (a).......................... 55,800 3,125,358 ------------- 18,116,138 ------------- FINANCIAL SERVICES - 4.5% Affiliated Managers Group, Inc. (a)............... 40,700 5,354,085 MF Global Ltd. (a)................................ 163,700 4,838,972 ------------- 10,193,057 ------------- HEALTH CARE - 12.9% Gen-Probe, Inc. (a)............................... 75,500 5,286,510 Manor Care, Inc................................... 63,600 4,234,488 Pediatrix Medical Group, Inc. (a)................. 56,800 3,720,400 -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- HEALTH CARE, CONTINUED ResMed, Inc. (a).................................. 84,000 3,480,120 Respironics, Inc. (a)............................. 129,000 6,457,740 Ventana Medical Systems, Inc. (a)................. 44,100 3,880,800 Volcano Corp. (a)................................. 108,600 1,855,974 ------------- 28,916,032 ------------- INDUSTRIAL MANUFACTURING - 7.1% Gardner Denver, Inc. (a).......................... 104,400 3,771,972 IDEX Corp......................................... 134,900 4,778,158 Manitowoc Co., Inc................................ 70,500 3,472,830 WESCO International, Inc. (a)..................... 83,100 3,876,615 ------------- 15,899,575 ------------- MEDIA - 4.0% DreamWorks Animation SKG, Inc. (a)................ 100,100 3,259,256 Meredith Corp..................................... 91,600 5,702,100 ------------- 8,961,356 ------------- OIL & GAS - 13.7% Chesapeake Energy Corp............................ 96,700 3,817,716 Consol Energy, Inc................................ 101,000 5,706,500 Denbury Resources, Inc. (a)....................... 94,100 5,326,060 Grant Prideco, Inc. (a)........................... 61,100 3,003,676 Massey Energy Co.................................. 124,700 3,950,496 Range Resources Corp.............................. 78,900 3,544,977 Smith International, Inc.......................... 79,700 5,264,185 ------------- 30,613,610 ------------- PHARMACEUTICALS - 11.8% Alexion Pharmaceuticals, Inc. (a)................. 60,850 4,655,025 Elan Corp. plc ADR (a)............................ 442,900 10,541,020 MGI Pharma, Inc. (a).............................. 144,200 4,698,036 OSI Pharmaceuticals, Inc. (a)..................... 144,200 5,994,394 Santarus, Inc. (a)................................ 272,300 593,614 ------------- 26,482,089 ------------- RETAIL - 5.7% Dick's Sporting Goods, Inc. (a)................... 76,400 2,549,468 PETsMART, Inc..................................... 157,800 4,726,110 Rite Aid Corp. (a)................................ 534,100 2,088,331 Urban Outfitters, Inc. (a)........................ 136,600 3,451,882 ------------- 12,815,791 ------------- TELECOMMUNICATIONS - 3.5% Comverse Technology, Inc. (a)..................... 111,100 2,135,342 NeuStar, Inc. (a)................................. 93,300 3,190,860 Polycom, Inc. (a)................................. 90,100 2,520,998 ------------- 7,847,200 ------------- TRANSPORTATION - 1.2% Aircastle Ltd..................................... 79,700 2,575,107 ------------- 2,575,107 ------------- TOTAL COMMON STOCKS (COST $177,041,397)............................ 219,786,033 ------------ SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 56 -------------------------------------------------------------------------------- HSBC INVESTOR OPPORTUNITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) -------------------------------------------------------------------------------- INVESTMENT COMPANY--1.7% -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- Northern Institutional Government Select Portfolio, Shares class, 4.65%, (b)..... 3,918,791 3,918,791 ------------ TOTAL INVESTMENT COMPANY (COST $3,918,791).............................. 3,918,791 ------------ TOTAL INVESTMENTS (COST $180,960,188) -- 99.7%................... 223,704,824 ============ ------------ Percentages indicated are based on net assets of $224,268,466. (a) Represents non-income producing security. (b) The rate presented represents the annualized one day yield that was in effect on October 31, 2007. ADR -- American Depositary Receipt PLC -- Public Limited Co. 57 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. -------------------------------------------------------------------------------- HSBC INVESTOR VALUE PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS--AS OF OCTOBER 31, 2007 -------------------------------------------------------------------------------- COMMON STOCKS--92.2% -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- AEROSPACE & DEFENSE - 3.9% Lockheed Martin Corp.............................. 12,500 1,375,500 Raytheon Co....................................... 28,300 1,800,163 ----------- 3,175,663 ----------- BANKING - 3.8% Bank of America Corp.............................. 29,100 1,404,948 Wells Fargo & Co.................................. 50,700 1,724,307 ----------- 3,129,255 ----------- BUSINESS SERVICES - 2.0% Pitney Bowes, Inc................................. 42,100 1,685,684 ----------- 1,685,684 ----------- COMPUTER SOFTWARE - 7.2% CA, Inc........................................... 135,600 3,586,620 Microsoft Corp.................................... 64,500 2,374,245 ----------- 5,960,865 ----------- CONGLOMERATES - 2.3% Loews Corp........................................ 39,000 1,914,510 ----------- 1,914,510 ----------- CONSUMER PRODUCTS - 6.8% Altria Group, Inc................................. 30,800 2,246,244 Kimberly-Clark Corp............................... 27,500 1,949,475 Kraft Foods, Inc.................................. 25,069 837,555 Tyson Foods, Inc., Class A........................ 35,600 562,480 ----------- 5,595,754 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 2.0% Ingersoll-Rand Co., Class A....................... 32,400 1,631,340 ----------- 1,631,340 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 0.8% Agilent Technologies, Inc. (a).................... 17,464 643,548 ----------- 643,548 ----------- FINANCIAL SERVICES - 11.7% Citigroup, Inc.................................... 77,307 3,239,163 Countrywide Financial Corp........................ 89,600 1,390,592 Fannie Mae........................................ 56,000 3,194,240 JP Morgan Chase & Co.............................. 39,950 1,877,650 ----------- 9,701,645 ----------- INSURANCE - 11.1% Aetna, Inc........................................ 16,700 938,039 Aon Corp.......................................... 36,800 1,667,776 Genworth Financial, Inc., Class A................. 80,800 2,205,840 MGIC Investment Corp.............................. 18,400 356,224 Radian Group, Inc................................. 32,100 404,139 The Hartford Financial Services Group, Inc........ 37,300 3,619,219 ----------- 9,191,237 ----------- MEDIA - 9.5% CBS Corp., Class B................................ 34,350 985,845 Clear Channel Communications, Inc................. 38,800 1,465,476 Comcast Corp., Class A (a)........................ 48,450 1,011,152 Liberty Media Corp. Interactive, Class A (a)...... 37,087 787,357 Viacom, Inc., Class B (a)......................... 87,000 3,592,230 ----------- 7,842,060 ----------- -------------------------------------------------------------------------------- COMMON STOCKS, CONTINUED -------------------------------------------------------------------------------- SHARES VALUE($) --------- -------- METALS & MINING - 5.2% Barrick Gold Corp................................. 80,000 3,530,400 United States Steel Corp.......................... 7,300 787,670 ----------- 4,318,070 ----------- OIL & GAS - 11.7% Apache Corp....................................... 31,400 3,259,634 ConocoPhillips.................................... 15,771 1,339,904 Hess Corp......................................... 13,600 973,896 Noble Energy, Inc................................. 53,300 4,079,582 ----------- 9,653,016 ----------- PAPER & RELATED PRODUCTS - 1.5% International Paper Co............................ 34,100 1,260,336 ----------- 1,260,336 ----------- PHARMACEUTICALS - 3.7% Amgen, Inc. (a)................................... 23,000 1,336,530 Sanofi-Aventis ADR................................ 38,500 1,694,385 ----------- 3,030,915 ----------- TELECOMMUNICATIONS - 6.6% AT&T, Inc......................................... 51,791 2,164,346 Motorola, Inc..................................... 134,600 2,529,134 Sprint Nextel Corp................................ 45,600 779,760 ----------- 5,473,240 ----------- TRANSPORTATION - 2.4% Union Pacific Corp................................ 15,300 1,959,012 ----------- 1,959,012 ----------- TOTAL COMMON STOCKS (COST $63,525,197)............................. 76,166,150 ----------- -------------------------------------------------------------------------------- INVESTMENT COMPANY--9.5% -------------------------------------------------------------------------------- Northern Institutional Government Select Portfolio, Shares class, 4.65% (b)...... 7,879,803 7,879,803 ----------- TOTAL INVESTMENT COMPANY (COST $7,879,803).............................. 7,879,803 ----------- TOTAL INVESTMENTS (COST $71,405,000) -- 101.7%................... 84,045,953 =========== ------------ Percentages indicated are based on net assets of $82,658,240. (a) Represents non-income producing security. (b) The rate presented represents the annualized one day yield that was in effect on October 31, 2007. ADR -- American Depositary Receipt SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 58 HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES--AS OF OCTOBER 31, 2007
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 $136,607,637 $ 14,200,680 $ 17,305,479 $ 89,656,011 $448,243,580 Foreign currency, at value -- -- -- -- 3,204,996 Interest and dividends receivable 1,081,970 343,043 139,809 72,962 1,225,858 Receivable for investments sold 6,916,275 49,875 2,334,516 -- 2,827,732 Prepaid expenses and other assets 1,219 3,527 433 786 4,328 ------------ ------------ ------------ ------------ ------------ TOTAL ASSETS 144,607,101 14,597,125 19,780,237 89,729,759 455,506,494 ------------ ------------ ------------ ------------ ------------ LIABILITIES: Payable for investments purchased 24,731,970 101,250 4,711,705 -- 52,605 Accrued expenses and other liabilities: Investment Management 45,982 7,230 5,255 35,078 299,629 Administration 6,716 407 1,680 2,424 15,779 Compliance Service 86 10 14 49 295 Trustee 222 27 37 135 757 Other 10,217 938 2,977 6,196 75,820 ------------ ------------ ------------ ------------ ------------ TOTAL LIABILITIES 24,795,193 109,862 4,721,668 43,882 444,885 ------------ ------------ ------------ ------------ ------------ NET ASSETS: Applicable to investors' beneficial interest $119,811,908 $ 14,487,263 $ 15,058,569 $ 89,685,877 $455,061,609 ============ ============ ============ ============ ============ Total Investments, at cost $136,726,741 $ 14,413,743 $ 17,391,303 $ 67,437,138 $326,633,074 ------------ ------------ ------------ ------------ ------------ Foreign Currency, at cost $ -- $ -- $ -- $ -- $ 3,140,535 ============ ============ ============ ============ ============
59 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES--AS OF OCTOBER 31, 2007 (CONTINUED) OPPORTUNITY VALUE PORTFOLIO PORTFOLIO -------------------------------------------------------------------------------- ASSETS: Investments in non-affiliates, at value $223,704,824 $ 84,045,953 Interest and dividends receivable 33,168 95,209 Receivable for investments sold 704,385 -- Prepaid expenses and other assets 11,273 970 ------------ ------------ TOTAL ASSETS 224,453,650 84,142,132 ------------ ------------ LIABILITIES: Payable for investments purchased -- 1,439,086 Accrued expenses and other liabilities: Investment Management 148,016 36,376 Administration 10,509 2,344 Compliance Service 272 65 Trustee 673 159 Other 25,714 5,862 ------------ ------------ TOTAL LIABILITIES 185,184 1,483,892 ------------ ------------ NET ASSETS: Applicable to investors' beneficial interest $224,268,466 $ 82,658,240 ============ ============ Total Investments, at cost $180,960,188 $ 71,405,000 ============ ============ SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 60 HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2007
INTERMEDIATE CORE PLUS HIGH YIELD DURATION INTERNATIONAL FIXED INCOME FIXED INCOME FIXED INCOME GROWTH EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME: Interest $ 6,435,643 $ 1,099,982 $ 1,012,039 $ -- $ 84,293 Dividends 132,498 11,350 23,668 757,173 12,919,538 Dividend income from affiliated investments 39,360 -- 6,707 36,044 -- Foreign tax withholding -- -- -- -- (1,354,165) ------------ ------------ ------------ ------------ ------------ TOTAL INVESTMENT INCOME 6,607,501 1,111,332 1,042,414 793,217 11,649,666 ------------ ------------ ------------ ------------ ------------ EXPENSES: Investment Management 536,695 78,518 75,588 350,983 2,579,245 Administration 35,282 3,889 5,704 21,700 116,088 Accounting 72,903 70,851 65,598 55,756 94,354 Compliance Service 1,328 148 220 801 4,355 Custodian 33,382 24,596 9,078 18,158 265,711 Interest -- -- -- 401 -- Printing 454 48 78 257 1,395 Trustee 2,919 319 478 1,761 8,716 Other 15,162 1,520 2,696 9,387 52,078 ------------ ------------ ------------ ------------ ------------ TOTAL EXPENSES 698,125 179,889 159,440 459,204 3,121,942 ------------ ------------ ------------ ------------ ------------ NET INVESTMENT INCOME (LOSS) 5,909,376 931,443 882,974 334,013 8,527,724 ------------ ------------ ------------ ------------ ------------ NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions 2,910,717 119,132 848,391 4,271,356 36,079,080 Change in unrealized appreciation/depreciation from investments and foreign currencies (1,031,793) (279,652) (182,994) 16,611,654 42,586,569 ------------ ------------ ------------ ------------ ------------ Net realized\unrealized gains (losses) from investment transactions and foreign currency transactions 1,878,924 (160,520) 665,397 20,883,010 78,665,649 ------------ ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,788,300 $ 770,923 $ 1,548,371 $ 21,217,023 $ 87,193,373 ============ ============ ============ ============ ============
61 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS--FOR THE YEAR ENDED OCTOBER 31, 2007 (CONTINUED)
OPPORTUNITY VALUE PORTFOLIO PORTFOLIO ----------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 691,128 $ 1,438,654 Dividend income from affiliated investments 95,891 62,866 ------------ ------------ Total Investment Income 787,019 1,501,520 ------------ ------------ EXPENSES: Investment Management 1,751,650 403,225 Administration 66,103 22,758 Accounting 57,017 55,785 Compliance Service 2,660 866 Custodian 53,663 14,389 Interest 15,603 400 Printing 1,191 153 Trustee 5,867 1,894 Other 34,773 9,619 ------------ ------------ TOTAL EXPENSES 1,988,527 509,089 ------------ ------------ NET INVESTMENT INCOME (LOSS) (1,201,508) 992,431 ------------ ------------ NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions 58,390,322 6,083,399 Change in unrealized appreciation/depreciation from investments and foreign currencies 1,890,389 71,241 ------------ ------------ Net realized\unrealized gains (losses) from investment and foreign currency transactions 60,280,711 6,154,640 ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 59,079,203 $ 7,147,071 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 62 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 FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 (A) ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 5,909,376 $ 5,487,117 $ 931,443 $ 599,770 Net realized gains (losses) from investment of foreign currency transactions 2,910,717 (2,015,195) 119,132 36,553 Change in unrealized appreciation/depreciation from investments and foreign currencies (1,031,793) 2,496,112 (279,652) 66,589 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 7,788,300 5,968,034 770,923 702,912 ------------- ------------- ------------- ------------- Proceeds from contributions 24,166,324 23,850,640 5,258,548 13,667,509 Value of withdrawals (23,334,647) (41,156,523) (4,260,973) (1,651,656) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST 831,677 (17,305,883) 997,575 12,015,853 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS 8,619,977 (11,337,849) 1,768,498 12,718,765 NET ASSETS: Beginning of period 111,191,931 122,529,780 12,718,765 -- ------------- ------------- ------------- ------------- End of period $ 119,811,908 $ 111,191,931 $ 14,487,263 $ 12,718,765 ============= ============= ============= =============
----------- (a) The High Yield Fixed Income Portfolio commenced operations on November 18, 2005. 63 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, 2007 OCTOBER 31, 2006 -------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 882,974 $ 1,058,913 Net realized gains (losses) from investment of foreign currency transactions 848,391 (458,266) Change in unrealized appreciation/depreciation from investments and foreign currencies (182,994) 518,623 ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 1,548,371 1,119,270 ------------ ------------ Proceeds from contributions 2,605,895 1,801,738 Value of withdrawals (8,612,265) (16,214,126) ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (6,006,370) (14,412,388) ------------ ------------ CHANGE IN NET ASSETS (4,457,999) (13,293,118) NET ASSETS: Beginning of period 19,516,568 32,809,686 ------------ ------------ End of period $ 15,058,569 $ 19,516,568 ============ ============ SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 64 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 YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 334,013 $ 210,246 $ 8,527,724 $ 5,767,764 Net realized gains (losses) from investment of foreign currency transactions 4,271,356 3,913,855 36,079,080 31,508,299 Change in unrealized appreciation/depreciation from investments and foreign currencies 16,611,654 (380,204) 42,586,569 39,700,669 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 21,217,023 3,743,897 87,193,373 76,976,732 ------------- ------------- ------------- ------------- Proceeds from contributions 25,944,124 15,350,040 90,634,524 62,831,133 Value of withdrawals (17,303,034) (8,680,872) (56,520,981) (36,283,024) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST 8,641,090 6,669,168 34,113,543 26,548,109 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS 29,858,113 10,413,065 121,306,916 103,524,841 NET ASSETS: Beginning of period 59,827,764 49,414,699 333,754,693 230,229,852 ------------- ------------- ------------- ------------- End of period $ 89,685,877 $ 59,827,764 $ 455,061,609 $ 333,754,693 ============= ============= ============= =============
65 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
OPPORTUNITY VALUE PORTFOLIO PORTFOLIO ------------------------------------------------------------------------------------------------------------------------------------ FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2007 OCTOBER 31, 2006 OCTOBER 31, 2007 OCTOBER 31, 2006 ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (1,201,508) $ (937,617) $ 992,431 $ 741,017 Net realized gains (losses) from investment of foreign currency transactions 58,390,322 38,504,562 6,083,399 5,586,911 Change in unrealized appreciation/depreciation from investments and foreign currencies 1,890,389 3,658,201 71,241 5,704,297 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 59,079,203 41,225,146 7,147,071 12,032,225 ------------- ------------- ------------- ------------- Proceeds from contributions 77,393,032 22,244,597 23,927,675 13,285,641 Value of withdrawals (153,698,612) (40,753,125) (15,848,601) (12,036,219) ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (76,305,580) (18,508,528) 8,079,074 1,249,422 ------------- ------------- ------------- ------------- CHANGE IN NET ASSETS (17,226,377) 22,716,618 15,226,145 13,281,647 NET ASSETS: Beginning of period 241,494,843 218,778,225 67,432,095 54,150,448 ------------- ------------- ------------- ------------- End of period $ 224,268,466 $ 241,494,843 $ 82,658,240 $ 67,432,095 ============= ============= ============= =============
SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS 66 HSBC INVESTOR PORTFOLIOS FINANCIAL HIGHLIGHTS
RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------------------ RATIO OF NET NET ASSETS RATIO OF NET INVESTMENT RATIO OF AT END OF EXPENSES INCOME (LOSS) EXPENSES PORTFOLIO TOTAL PERIOD TO AVERAGE TO AVERAGE TO AVERAGE TURNOVER RETURN(a) (000'S) NET ASSETS(b) NET ASSETS(b) NET ASSETS(b)(c) RATE(a) ------------------------------------------------------------------------------------------------------------------------------------ CORE PLUS FIXED INCOME PORTFOLIO 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% Year Ended October 31, 2007 6.94% 119,812 0.59% 4.99% 0.59% 252.56% ------------------------------------------------------------------------------------------------------------------------------------ HIGH YIELD FIXED INCOME PORTFOLIO Period Ended October 31, 2006 (e) 7.41% $ 12,719 1.86% 6.33% 1.86% 13.61% Year Ended October 31, 2007 6.41% 14,487 1.37% 7.12% 1.37% 30.77% ------------------------------------------------------------------------------------------------------------------------------------ INTERMEDIATE DURATION FIXED INCOME PORTFOLIO 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% Year Ended October 31, 2007 8.38% 15,059 0.84% 4.68% 0.84% 219.76% ------------------------------------------------------------------------------------------------------------------------------------ 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% Year Ended October 31, 2007 31.11% 89,686 0.62% 0.45% 0.62% 57.04% ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL EQUITY PORTFOLIO 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% Year Ended October 31, 2007 25.17% 455,062 0.79% 2.16% 0.79% 26.08% ------------------------------------------------------------------------------------------------------------------------------------ OPPORTUNITY PORTFOLIO 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% Year Ended October 31, 2007 30.54% 224,268 0.91% (0.55%) 0.91% 69.41% ------------------------------------------------------------------------------------------------------------------------------------ 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% Year Ended October 31, 2007 10.28% 82,658 0.66% 1.29% 0.66% 18.67% ------------------------------------------------------------------------------------------------------------------------------------
(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, Opportunity 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. 67 HSBC INVESTOR PORTFOLIOS SEE NOTES TO FINANCIAL STATEMENTS. HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 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 HSBC Investor High Yield Fixed Income Portfolio High Yield Fixed Income Portfolio HSBC Investor Intermediate Duration Fixed Income Portfolio Intermediate Duration Fixed Income Portfolio HSBC Investor Growth Portfolio Growth Portfolio HSBC Investor International Equity Portfolio International Equity Portfolio HSBC Investor Opportunity Portfolio Opportunity Portfolio HSBC Investor Value Portfolio Value Portfolio
The Portfolios operate as master funds in master-feeder arrangements, in which other funds invest their investable 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 may 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 U.S. generally accepted accounting principles ("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 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 HSBC INVESTOR PORTFOLIOS 68 HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) 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. INVESTMENT TRANSACTIONS AND RELATED INCOME: Investment transactions are accounted for no later than one business day after trade date. For financial reporting purposes, changes in holdings are accounted for on trade date on the last business day of the reporting period. Investments 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. 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. 69 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) 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, 2007 the HSBC Core Plus Fixed Income Portfolio held restricted securities
ACQUISITION ACQUISITION PRINCIPAL SECURITY NAME DATE COST($) AMOUNT($) VALUE($) ------------- ---------- ---------- --------- ------- FHA Weyerhauser, 7.43%, 1/1/24......... 3/28/2002 32,060 33,082 33,082
REPURCHASE AGREEMENTS: The Portfolios 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 a 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. LINE OF CREDIT: Prior to February 1, 2007 High Yield Fixed Income Portfolio, Growth Portfolio, International Portfolio, Opportunity Portfolio, and Value Portfolio and prior to March 9, 2007 Core Plus Fixed Income Portfolio and Intermediate Duration Fixed Income Portfolio were able to borrow up to $50 million under the terms of a short-term, demand note agreement with HSBC Bank. The purpose of the agreement was to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. During the period November 1, 2006 through February 1, 2007, the details of the borrowings were as follows (based on actual number of days in which the respective Portfolios borrowed monies): AVERAGE NUMBER AVERAGE AMOUNT OF DAYS INTEREST FUND OUTSTANDING OUTSTANDING RATE ----- ----------- ----------- ------- Growth Portfolio.............. $2,481,136 1 5.82% Opportunity Portfolio......... $8,756,484 11 5.83% Value Portfolio............... $2,781,119 1 5.25% The Core Plus Fixed Income Portfolio, Intermediate Duration Fixed Income Portfolio, High Yield Fixed Income Portfolio and International Portfolio did not have such borrowings during the period. 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. HSBC INVESTOR PORTFOLIOS 70 HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS: In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157") 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. Management does not believe the adoption of SFAS No. 157 will materially impact the Portfolios' financial statements; 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. In July 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 returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority based on technical merits of the position. 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 no later than the last business day of the first financial statement reporting period for fiscal years beginning after December 15, 2006 and is applied to all open tax years as of the effective date. Management is currently in the process of evaluating the impact that will result from adopting FIN 48. At this time, management does not believe the adoption of FIN 48 will have a material impact to the financial statements. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Investments (USA) Inc. ("HSBC" or the "Investment Adviser"), a wholly owned subsidiary of HSBC Bank USA, N.A., a national bank organized under the laws of the United States, 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 & 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, Opportunity 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% 71 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) 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 Management, LLC receive in aggregate, a fee, accrued daily and paid monthly, at an annual rate of 0.80% of the Opportunity 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 effective April 1, 2007, 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 $12 billion............................................. 0.0525% In excess of $12 billion...................................... 0.0350% Prior to April 1, 2007, under the terms of the Administration Agreement, the Portfolios paid fees under the following schedule: 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% 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 HSBC 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, Citi Fund Services Ohio, Inc. ("Citi Ohio"), a wholly-owned subsidiary of The Citigroup, Inc. (Citigroup, Inc. acquired The BISYS Group, Inc. effective August 1, 2007), 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, Citi 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 Citi Ohio (the "CCO Agreement"), Citi Ohio makes an employee available to serve as the Portfolios' Chief Compliance Officer (the "CCO"). Under the CCO Agreement, Citi 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 Citi Ohio $251,569 for the period ended October 31, 2007, plus reimbursement of certain expenses. Expenses incurred by each Portfolio are reflected on the Statements of Operations as "Compliance Service." Citi Ohio pays the salary and other compensation earned by any such individuals as employees of Citi Ohio. HSBC INVESTOR PORTFOLIOS 72 HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) FUND ACCOUNTING, CUSTODIAN AND TRUSTEE: Citi Ohio provides fund accounting services for the Portfolios. For its services to the Portfolios, Citi Ohio receives an annual fee per Portfolio, including reimbursement of certain expenses, that is accrued daily and paid monthly. Prior to February 1, 2007 Investor's Bank & Trust Company ("IBT") served as Custodian for the High Yield Fixed Income Portfolio and the International Equity Portfolio. HSBC Bank served as Custodian to the Growth Portfolio, Opportunity Portfolio, and Value Portfolio prior to February 1, 2007 and Core Plus Fixed Income Portfolio, and Intermediate Duration Fixed Income Portfolio prior to March 9, 2007. Compensation paid to IBT and HSBC Bank for services to the Portfolios as custodian is as follows:
HSBC IBT CUSTODIAN CUSTODIAN FUND FEES FEES ----- ----------- ---------- Core Plus Fixed Income Portfolio...................... $17,525 $ -- High Yield Fixed Income Portfolio..................... -- 16,635 Intermediate Duration Fixed Income Portfolio.......... 6,308 -- Growth Portfolio...................................... 6,553 -- International Equity Portfolio........................ -- 78,641 Opportunity Portfolio................................. 17,644 -- Value Portfolio....................................... 6,553 -- ------- ------- Total............................................... $54,583 $95,276 ------- -------
The Northern Trust Company began serving as Custodian of the Portfolios subsequent to the dates noted above. 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. 4. INVESTMENT TRANSACTIONS: Purchases and sales of securities (excluding securities maturing less than one year from acquisition) for the year ended October 31, 2007 were as follows:
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 $173,677,320 $154,916,609 $121,417,074 $133,139,816 High Yield Fixed Income Portfolio 5,571,345 3,905,400 -- -- Intermediate Duration Fixed Income Portfolio 23,042,241 24,133,204 17,532,833 19,533,301 Growth Portfolio 49,476,307 40,564,430 -- -- International Equity Portfolio 142,051,687 100,370,820 -- -- Opportunity Portfolio 146,616,170 216,533,261 -- -- Value Portfolio 20,643,270 13,432,353 -- --
73 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS NOTES TO FINANCIAL STATEMENTS--AS OF OCTOBER 31, 2007 (CONTINUED) 5. FEDERAL INCOME TAX INFORMATION: At October 31, 2007, the cost, gross unrealized appreciation and gross unrealized depreciation on securities for federal income tax purposes, were as follows:
NET TAX TAX UNREALIZED UNREALIZED UNREALIZED APPRECIATION PORTFOLIO NAME TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------- ------------ ------------ ------------ -------------- Core Plus Fixed Income Portfolio.............. $136,842,084 $ 947,826 $(1,182,273) $ (234,447) High Yield Fixed Income Portfolio............. 14,413,743 212,662 (425,725) (213,063) Intermediate Duration Fixed Income Portfolio......................... 17,395,840 100,254 (190,615) (90,361) Growth Portfolio.............................. 67,459,229 23,556,912 (1,360,130) 22,196,782 International Equity Portfolio................ 327,640,578 128,724,821 (8,121,819) 120,603,002 Opportunity Portfolio......................... 181,452,366 47,927,197 (5,674,739) 42,252,458 Value Portfolio............................... 71,153,479 17,505,536 (4,613,062) 12,892,474
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 Portfolios as described in footnote 3, reached a settlement with the Securities and Exchange Commission ("the 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. HSBC INVESTOR PORTFOLIOS 74 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 Opportunity Portfolio and HSBC Investor Value Portfolio (the Funds), including the schedules of portfolio investments, as of October 31, 2007, and the related statements of operations for the year 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, 2007, by correspondence with 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, 2007, the results of their operations for the year 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 27, 2007 75 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS INVESTMENT ADVISER CONTRACT APPROVAL (UNAUDITED)--OCTOBER 31, 2007 NWQ Investment Management Co. LLC, a wholly owned subsidiary of Nuveen Investments. Inc. ("Nuveen Investments"), a publicly traded company and a Sub-Adviser to the HSBC Investor Value Portfolio Fund, (the master portfolio into which the HSBC Investor Value Fund (the "Value Fund") invests all their assets), announced in June 2007 its intention to be acquired by investors led by Madison Dearborn Partners LLC. As a result, Nuveen Investments has experienced a change in control. Consequently, the Board of Trustees (the "Board of Trustees") of the HSBC Investor Trust, HSBC Advisor Trust and HSBC Portfolio Trust (collectively, the "Trusts"), and the non-interested Trustees, voting separately, reviewed and approved at their in person meeting held on September 17-18, 2007, the new Sub-Advisery Contract with respect to the Value Fund. The Value Fund and Sub-Advisery Contract are collectively referred to as the "Agreement". The Board of Trustees, including the Independent Trustees, at a meeting held on September 17-18, 2007, unanimously approved a new Sub-Advisory agreement between HSBC Investments (USA) Inc. and NWQ Investment management Company, LLC (the "New Agreement"). In determining whether it was appropriate to approve the New Agreement, the Board requested information, provided by HSBC and NWQ, that it believed to be reasonably necessary to reach its conclusion. The Board also took note of its comprehensive review of the performance of the Fund and NWQ in connection with the continuance of the prior Sub-Advisory Agreement for the Fund at its December 4-5, 2006 meeting pursuant to the requirements of Section 15(c) of the 1940 Act. In addition to any materials prepared specifically for Section 15(c) contract renewal analysis, on an ongoing basis the Trustees receive information and reports from HSBC and its Multimanager unit and other service providers to the Fund on investment performance as well as operational, compliance and other matters. The Board carefully evaluated this information, and was advised by independent legal counsel with respect to its deliberations. Based on its review of the information requested and provided, the Board determined that the New Agreement was consistent with the best interests of the Fund and its shareholders, and enables the Fund to receive a high quality of services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. The Board made these determinations and approved the New Agreement on the basis of the following considerations, among others: NATURE, EXTENT, AND QUALITY OF SERVICES PROVIDED BY NWQ. The Trustees considered the nature, quality and extent of the investment advisory services provided by NWQ and its historic performance managing accounts having similar investment objectives as the Fund. The Trustees concluded that the services to be provided by NWQ are extensive and that NWQ would deliver a high level of service to the Fund. INVESTMENT PERFORMANCE OF THE FUND AND NWQ. The Trustees took note of their comprehensive review of the Fund's short- and long-term investment performance during the Board's December 4-5, 2006 meeting, at which the Board approved the continuance of the Old Agreement for the Fund pursuant to the requirements of Section 15(c) of the 1940 Act. In this regard, the Trustees had considered short- and long-term investment performance of the Fund over various periods of time as compared to a peer group of comparable funds, as well as NWQ's historic performance managing accounts having similar investment objectives as the Fund. Additionally, the Trustees considered fee and expense information regarding the Fund's peer groups. The Trustees compared expenses of the Fund to the expenses of its peers, noting that the expenses for the Fund compared favorably with industry averages for other funds of similar size. COSTS OF SERVICES AND PROFITS REALIZED BY NWQ. The Trustees took note of their comprehensive review of the costs of services and profits realized by NWQ during the Board's December 4-5, 2006 meeting, at which the Board approved the continuance of the Old Agreement for the Fund pursuant to the requirements of Section 15(c) of the 1940 Act. The Trustees also considered that the Transaction had no material effect upon the analysis of NWQ's overall profitability and costs that had been prepared in connection with the continuance of the Old Agreement, and would not change any factors bearing upon the profitability to NWQ from its relationship with the Fund. ADVISER PERSONNEL. The Trustees considered NWQ's representations regarding staffing and capabilities to manage the assets of the HSBC Investor Value Portfolio (the "master fund" into which the Fund invests all its assets). The Trustees also considered the overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of NWQ. HSBC INVESTOR PORTFOLIOS 76 HSBC INVESTOR PORTFOLIOS TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--AS OF OCTOBER 31, 2007 As a shareholder of the HSBC Investor Portfolios ("Portfolios"), you incur ongoing costs, including management fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolios 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, 2007 through October 31, 2007. ACTUAL EXAMPLE 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 EXPENSES PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/07 10/31/07 5/1/07 - 10/31/07 5/1/07 - 10/31/07 ----------- ------------ ----------------- --------------- Core Plus Fixed Income Portfolio..................... $1,000.00 $1,048.30 $2.89 0.56% High Yield Fixed Income Portfolio.................... 1,000.00 1,029.40 5.58 1.09% Intermediate Duration Fixed Income Portfolio......... 1,000.00 1,039.20 4.16 0.81% Growth Portfolio..................................... 1,000.00 1,215.90 3.35 0.60% International Equity Portfolio....................... 1,000.00 1,111.50 4.04 0.76% Opportunity Portfolio................................ 1,000.00 1,161.60 4.96 0.91% Value Portfolio...................................... 1,000.00 1,018.80 3.26 0.64%
---------------- * Expenses are equal to the average account value over the period multiplied by the Portfolios' 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 (to reflect the one half year period). 77 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS TABLE OF SHAREHOLDER EXPENSES (UNAUDITED)--AS OF OCTOBER 31, 2007 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolios' 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 EXPENSES PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 5/1/07 10/31/07 5/1/07 - 10/31/07 5/1/07 - 10/31/07 ----------- ------------ ---------------- ----------------- Core Plus Fixed Income Portfolio.......................... $1,000.00 $1,022.38 $2.85 0.56% High Yield Fixed Income Portfolio......................... 1,000.00 1,019.71 5.55 1.09% Intermediate Duration Fixed Income Portfolio.............. 1,000.00 1,021.12 4.13 0.81% Growth Portfolio.......................................... 1,000.00 1,022.18 3.06 0.60% International Equity Portfolio............................ 1,000.00 1,021.37 3.87 0.76% Opportunity Portfolio..................................... 1,000.00 1,020.62 4.63 0.91% Value Portfolio........................................... 1,000.00 1,021.98 3.26 0.64%
----------- * Expenses are equal to the average account value over the period multiplied by the Portfolios' 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 (to reflect the one half year period). HSBC INVESTOR PORTFOLIOS 78 HSBC INVESTOR FAMILY OF FUNDS BOARD OF TRUSTEES AND OFFICERS (UNAUDITED) MANAGEMENT OF THE TRUST The following table contains information regarding HSBC Investor Family of Funds Board of Trustees ("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 IN FUND POSITION(S) TERM OF OFFICE AND COMPLEX OTHER NAME, ADDRESS, HELD WITH LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) OVERSEEN DIRECTORSHIPS AND AGE FUNDS WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE HELD BY TRUSTEE ----------------------------------------------------------------------------------------------------------------------------------- NON-INTERESTED TRUSTEES Richard A. Brealey Trustee Indefinite; March 2005 Emeritus Professor, London Business 41 None P.O. Box 182845 to present School (1968 to present); Deputy Columbus, OH 43218 Chairman, Balancing and Settlement Age: 71 Code Panel (September 2000 to present) ----------------------------------------------------------------------------------------------------------------------------------- Alan S. Parsow Trustee Indefinite; 1987 General Partner of Elkhorn Partners, 41 None P.O. Box 182845 to present L.P. (a private investment partnership) Columbus, OH 43218 (since 1989) Age: 57 ----------------------------------------------------------------------------------------------------------------------------------- Larry M. Robbins Trustee Indefinite; 1987 Private Investor; Director, Center for 41 None P.O. Box 182845 to present Teaching and Learning, University of Columbus, OH 43218 Pennsylvania (1999-2006) Age: 68 ----------------------------------------------------------------------------------------------------------------------------------- Michael Seely Trustee Indefinite; 1987 Private Investor; General Partner of Global 41 None P.O. Box 182845 to present Multi Manager Partners (1999-2003); Columbus, OH 43218 President of Investor Access Corporation Age: 62 (1981-2003) ----------------------------------------------------------------------------------------------------------------------------------- Thomas F. Robards Trustee Indefinite; March 2005 Partner, Robards & Co. LLC (2005-present); 41 Overseas P.O. Box 182845 to present Chief Financial Officer, American Museum Shipholding Columbus, OH 43218 of Natural History (2003 to 2004); Chief Group Age: 61 Financial Officer, Datek Online Inc. (2000 to 2002) ----------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEE Stephen J. Baker* Trustee Indefinite; 2004 Chief Executive Officer, HSBC Investments 41 None P.O. Box 182845 to present (USA) Inc. and Executive Vice President, Columbus, OH 43218 HSBC (USA), N.A. (2003 to present); Chief Age: 51 Executive Officer, HSBC Asset Management (Canada) Limited (1998 to 2003) ----------------------------------------------------------------------------------------------------------------------------------- EMERITUS TRUSTEE Frederick C. Chen Emeritus Until March 31, 2009; Management Consultant (1988 to present) 41 None P.O. Box 182845 Trustee Trustee from 1990 Columbus, OH 43218 to June, 2005 Age: 80 -----------------------------------------------------------------------------------------------------------------------------------
79 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (UNAUDITED) (CONTINUED) The names of the officers, their addresses, ages, position(s) held with the Trust, and principal occupation(s) during the past five years are described in the table below.
NAME, ADDRESS, POSITION(S) AND AGE/DATE HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) OF BIRTH FUND LENGTH OF TIME SERVED DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ Richard A. Fabietti President Indefinite; March 2004 Senior Vice President, Head of Product Management, 452 Fifth Avenue to present HSBC Investments (USA) Inc. (1998 to present). New York, NY 10018 Age: 49 ------------------------------------------------------------------------------------------------------------------------------------ Elba Vasquez Vice President Indefinite; March 2006 Vice President of Product Administration, HSBC 452 Fifth Avenue to present Investments (USA) Inc. (2005 to present); Vice New York, NY 10018 President of Client Services, Citi Fund Services Age: 45 Ohio, Inc. (1996 to 2005). ------------------------------------------------------------------------------------------------------------------------------------ Troy Sheets* Treasurer Indefinite; 2004 Vice President of Citi Fund Services Ohio, Inc. 3435 Stelzer Road to present (2002 to present); Senior Manager, KPMG LLP (1993 to Columbus, OH 43219-3035 2002). Age: 36 ------------------------------------------------------------------------------------------------------------------------------------ Gary A. Ashjian* Secretary Indefinite; June 2007 Manager, Citi Fund Services (November 2006 - 100 Summer Street to present Present); Senior Legal Product Manager, Pioneer Suite 1500 Investments (June 2004 - November 2006); Putnam Boston, MA 02110 Investments, Legal Product Manager (September 1993 - Age: 48 June 2004). ------------------------------------------------------------------------------------------------------------------------------------ Frederick J. Schmidt* Chief Term expires 2007; Senior Vice President and Chief Compliance Officer, 585 Stewart Avenue Compliance Officer 2004 to present CCO Services of Citi Fund Services (2004 to Garden City, NY 11530 present); President, FJS Associates (2002 to 2004); Age: 48 Vice President Credit Agricole Asset Management, U.S. (1987 to 2002). ------------------------------------------------------------------------------------------------------------------------------------
* Messrs. Sheets, Schmidt and Ashjian also are officers of certain other investment companies of which Citi or an affiliate is the administrator or sub-administrator. HSBC INVESTOR FAMILY OF FUNDS 80 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 LIFELINE FUNDS: TRANSFER AGENT AND SPONSOR Citi Fund Services INVESTMENT ADVISER AND ADMINISTRATOR 3435 Stelzer Road HSBC Investments (USA) Inc. Columbus, OH 43219 452 Fifth Avenue New York, NY 10018 DISTRIBUTOR Foreside Distribution Services, L.P. SUB-ADVISERS 3435 Stelzer Road HSBC INVESTOR GROWTH PORTFOLIO Columbus, OH 43219 Waddell & Reed Investment Management Company 6300 Lamar Avenue CUSTODIAN Overland Park, KS 66202 HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO HSBC INVESTOR HIGH YIELD FIXED INCOME FUND HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO AllianceBerstein Investment Research and Management HSBC INVESTOR GROWTH PORTFOLIO 1345 Avenue of the Americas, 39th Floor HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO New York, NY 10105 HSBC INVESTOR OPPORTUNITY PORTFOLIO HSBC INVESTOR VALUE PORTFOLIO HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO The Northern Trust Company Westfield Capital Management, LLC 50 South LaSalle Street One Financial Center Chicago, IL 60603 Boston, MA 02111 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HSBC INVESTOR VALUE PORTFOLIO KPMG LLP NWQ Investment Management Co., LLC 191 West Nationwide Blvd. Suite 500 2049 Century Park East, 16th Floor Columbus, OH 43215 Los Angeles, CA 90067 LEGAL COUNSEL SHAREHOLDER SERVICING AGENTS Dechert LLP FOR HSBC BANK USA, N.A. AND 1775 Eye Street, N.W. HSBC SECURITIES (USA) INC. CLIENTS: Washington, D.C. 20006 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
The HSBC Lifeline Funds are distributed by Foreside Distribution Services, L.P. 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-SR-LL 12/07 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, 2006 $284,700 2007 $305,380 (b) AUDIT-RELATED FEES, 2006 $41,600 2007 $14,000 2006 - Fees of $5,200 relate to the consent of N-1A filing and $36,400 relate to the performance of the Funds' 17f-2 examinations. 2007 - Fees of $14,000 relate to the consent of N-1A filing and the consent of the N-14 filing for the Conservative Income Strategy Fund and the Conservative Growth Strategy Fund. (c) TAX FEES, 2006 $154,800 2007 $162,068 Fees for both 2006 and 2007 relate to the preparation of federal income and excise tax returns and the review of excise tax distributions. (d) ALL OTHER FEES, 2006 $0 2007 $0 (e) 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) Aggregate non-audit fees 2006 $238,800 2007 $176,068 (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 INVESTOR PORTFOLIOS ------------------------------------------------------------------- By (Signature and Title)* /s/ Richard A. Fabietti ------------------------------------------------------ Richard A. Fabietti President Date December 21, 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 December 21, 2007 ------------------------------------ By (Signature and Title)* /s/ Troy A. Sheets ------------------------------------------------------ Troy A. Sheets Treasurer Date December 21, 2007 ------------------------------------ * Print the name and title of each signing officer under his or her signature.