N-CSR 1 a41125.txt HSBC INVESTOR PORTFOLIOS 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) BISYS FUND SERVICES 3435 STELZER ROAD COLUMBUS, OH 43219 (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-782-8183 Date of fiscal year end: October 31, 2005 Date of reporting period: October 31, 2005 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 'SS' 3507. Item 1. Reports to Stockholders. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). Annual Report HSBC Investor LifeLine Funds'TM' LifeLine It's simple. It's easy. It's affordable. October 31, 2005 HSBC Investor Aggressive Growth Strategy Fund HSBC Investor Growth Strategy Fund HSBC Investor Moderate Growth Strategy Fund HSBC Investor Conservative Growth Strategy Fund HSBC Investor Conservative Income Strategy Fund HSBC Investor LifeLine Funds THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [HSBC LOGO] Table of Contents -------------------------------------------------------------------------------- HSBC Investor Lifeline Funds Annual Report - October 31, 2005 Chairman's Message ............. ............................................ 1 Commentary From the Investment Manager ...................................... 2 Portfolio Reviews ........................................................... 3 Statements of Assets and Liabilities ........................................ 18 Statements of Operations .................................................... 19 Statements of Changes in Net Assets ......................................... 20 Financial Highlights ........................................................ 26 Notes to Financial Statements ............................................... 31 Report of Independent Registered Public Accounting Firm ..................... 37 Table of Shareholder Expenses ............................................... 38 HSBC Investor Portfolios Schedules of Portfolio Investments HSBC Investor Limited Maturity Portfolio ............................ 40 HSBC Investor Fixed Income Portfolio ................................ 42 HSBC Investor Growth Portfolio ...................................... 45 HSBC Investor Value Portfolio ....................................... 46 HSBC Investor International Equity Portfolio ........................ 47 HSBC Investor Small Cap Equity Portfolio ............................ 50 Statements of Assets and Liabilities ........................................ 51 Statements of Operations .................................................... 52 Statements of Changes in Net Assets ......................................... 53 Financial Highlights ........................................................ 56 Notes to Financial Statements ............................................... 57 Report of Independent Registered Public Accounting Firm ..................... 64 Investment Adviser Contract Approval ........................................ 65 Table of Shareholder Expenses ............................................... 66 Board of Trustees ........................................................... 68 Privacy Policy .............................................................. 70 Chairman's Message Dear Fellow Shareholders: You have probably read about a number of new and proposed rules that the Securities and Exchange Commission has announced to enhance the corporate governance structure of mutual funds. In my letter to you in the Funds' most recent Semi-Annual Report, I noted that the Board of Trustees was committed to following the recommendations of the SEC and to work on its own to operate in a manner that is most beneficial to you, the shareholders. The HSBC Investor Funds instituted a number of sound governance practices even before the SEC made them rules. For example, the SEC is currently considering a requirement that the chairman of a mutual fund board be an independent person, with no significant ties to fund management. Our funds were among the first in the industry to create the position of independent chairman, and we are determined to maintain much more than a majority of independent trustees. The SEC requirement regarding the minimum number of independent trustees is 40%. Current regulations stipulate that independent trustees must hold at least a majority of board positions. Our board consists of five independent members (84%) and one interested trustee, who is the CEO of HSBC Investments (USA) Inc. The independent trustees also lead and work on various board committees, including audit, nominating/governance and valuation. The full board meets at least quarterly to receive reports from fund management on topics such as investment performance, administrative activities and government regulations. At these sessions, the board meets with the various sub-advisers to the HSBC Investor Funds to review their investment operations and results. We work closely with fund counsel and our own independent legal counsel to ensure that the funds continue to comply with all regulatory requirements, including any new rules promulgated by the SEC. Between board meetings, ongoing communication among board members and with management helps us fulfill our responsibilities to oversee the operations of the funds. All of us who are involved in the management of the HSBC Investor Funds welcome communication with you as well. We will keep you informed about industry trends and our commitment to 'best practices.' If you have any concerns, please contact us at: HSBC Investor Funds PO Box 182845 Columbus, Ohio 43218-2845 On behalf of the Board of Trustees and fund management, I would like to thank you for your continuing support. Sincerely, 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 generated healthy growth during the 12-month period ended October 31, 2005, despite a number of negative influences. Strong business and consumer spending helped the economy expand in the face of headwinds that included rising interest rates, surging energy prices and the devastation wrought by hurricanes on the Gulf Coast. Energy prices climbed dramatically throughout much of the period, as production capacity did not keep pace with demand from growing economies in China, India and much of the rest of the world. Meanwhile, concerns about instability in the Middle East and other oil-producing regions led commodities traders to bid up oil prices. Hurricanes Katrina and Rita in late August and early September decimated much of the United States' oil refining capacity, resulting in a spike in gasoline prices. Higher energy prices appeared to have a mildly negative impact on consumer spending. That development seemed to dampen the economy, decreasing the threat of inflation for a time -- but data in the fall of 2005 suggested that high energy prices finally had begun to translate into rising consumer prices. The Federal Reserve Board (the 'Fed') throughout this period was concerned that economic growth and rising commodity and energy prices might lead to higher inflation. The Fed therefore increased its target short-term interest rate seven times for a total increase of 1.75 percentage points. (The Fed increased the federal funds rate by another quarter-point on November 1, just after the end of the period under discussion.) That tighter monetary policy was designed to increase borrowing costs, thereby restraining economic growth and keeping inflation in check. Long-term interest rates remained low throughout much of the period, however. Investors showed little concern about the prospect of higher inflation and foreign investors poured money into Treasury bonds, which supported their prices and put a ceiling on yields. Low long-term rates helped keep mortgage rates at very low levels throughout most of this 12-month period. Inexpensive mortgages buttressed consumer spending by allowing consumers to refinance their home loans and free up cash. Low mortgage rates also supported strong growth in the housing sector. Business spending remained strong throughout the period. Corporations entered this fiscal year with historically high levels of cash and low debt. Many companies had waited to make significant investments until the presidential election provided a less cloudy outlook on taxes and regulations. The election's resolution freed those firms to invest in hiring, equipment and other initiatives during this 12-month period. Corporate profit growth exceeded analysts' expectations throughout this fiscal year. Many companies sought to generate continued strong growth through mergers and acquisitions. Market Review Stocks experienced an up-and-down year. The market generated strong gains early in the period, fell sharply in the spring of 2005, rallied during summer and then declined again in early autumn. The Standard & Poor's 500 index gained 8.72% for the period as a whole. Energy stocks produced much of the market's gains. Shares in that sector benefited from higher energy prices, which expanded profit margins in the sector and increased demand for energy-related products and services. Other traditionally defensive sectors such as utilities and basic materials also fared well. Financial-services stocks struggled. The combination of rising short-term interest rates and consistently low long-term interest rates led to a flatter yield curve. The smaller spread between short- and long-term interest rates crimped profits for many lenders, which make money by borrowing cash at short-term rates and lending it at long-term rates. Consumer-related stocks declined during the second half of the period, as investors grew concerned that stagnant wages and higher energy prices would take a toll on consumer spending. The health-care sector surged early in the period, but subsequently was dragged down by ongoing problems among large pharmaceutical stocks. Drug companies continued to struggle with slow revenue growth, patent expirations, weak drug pipelines and high-profile legal problems. Technology shares struggled early in the period, but staged a comeback toward the end of the fiscal year as demand for technology appeared to pick up and advertising revenues strengthened at Internet media stocks. Value indices outperformed growth benchmarks, due to the strength of value-oriented sectors such as energy and utilities and the weakness of growth sectors including health care, consumer discretionary and -- for much of the period -- technology. Small- and mid-cap shares continued a long run of superior performance to large caps. Foreign stocks generally outperformed the U.S. market. Foreign shares performed especially well for U.S. investors early in the period, as the dollar declined versus foreign currencies. Emerging markets significantly outperformed developed markets on the strength of faster-than-expected economic growth. 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 HSBC Investor Conservative Income 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 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 Small Cap Equity Portfolio ('Small Cap Equity Portfolio'); HSBC Investor International Equity Portfolio ('International Equity Portfolio'); HSBC Investor Fixed Income Portfolio ('Fixed Income Portfolio'); HSBC Investor Limited Maturity Portfolio ('Limited Maturity Portfolio'), and the HSBC Investor Money Market Fund ('Money Market Fund'). During the last fiscal year, 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 chart below.
HSBC Investor HSBC Investor HSBC Investor HSBC Investor HSBC Investor Aggressive Growth Growth Moderate Growth Conservative Growth Conservative Income Strategy Strategy Strategy Strategy Strategy Underlying Portfolio Fund Fund Fund Fund Fund ---------------------------------------------------------------------------------------------------------------------- Money Market Fund 1% 1% 6% 20% 30% ---------------------------------------------------------------------------------------- Fixed Income Portfolio None 17% 31% 20% 25% ---------------------------------------------------------------------------------------- Limited Maturity Portfolio None None None 15% 25% ---------------------------------------------------------------------------------------- Growth Portfolio 21% 21% 19% 15% 8% ---------------------------------------------------------------------------------------- Value Portfolio 21% 21% 18% 15% 8% ---------------------------------------------------------------------------------------- Small Cap Equity Portfolio 34% 20% 11% 5% None ---------------------------------------------------------------------------------------- International Equity Portfolio 23% 20% 15% 10% 4% ---------------------------------------------------------------------------------------- Total: 100% 100% 100% 100% 100% ----------------------------------------------------------------------------------------------------------------------
3 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Aggressive Growth Strategy Fund Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Aggressive Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI EAFE Index Citigroup U.S. Growth Strategy Growth Index Value Index Growth Index Domestic Three Month Fund (B Shares)(2) Treasury Bill Index 2/9/05 10,000 10,000 10,000 10,000 10,000 10,000 2/28/05 10,050 10,331 10,106 10,253 10,434 10,018 3/31/05 9,850 10,190 9,922 10,103 10,176 10,039 4/30/05 9,570 10,007 9,733 9,704 9,949 10,060 5/31/05 9,910 10,248 10,204 10,259 9,964 10,084 6/30/05 10,110 10,360 10,167 10,450 10,100 10,108 7/31/05 10,530 10,660 10,664 11,060 10,410 10,134 8/31/05 10,660 10,614 10,526 10,992 10,676 10,161 9/30/05 10,900 10,763 10,575 11,135 11,154 10,188 10/31/05 10,170 10,489 10,472 10,807 10,829 10,218
Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Aggressive Aggressive Growth Blended Growth Strategy Fund Portfolio Index(4) (B Shares)(2) 2/9/05 10,000 10,000 2/28/05 10,050 10,278 3/31/05 9,850 10,100 4/30/05 9,570 9,834 5/31/05 9,910 10,179 6/30/05 10,110 10,291 7/31/05 10,530 10,736 8/31/05 10,660 10,738 9/30/05 10,900 10,938 10/31/05 10,170 10,675
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%) ------------------------------------------------------------------------------------ Inception Since As of October 31, 2005 Date Inception ------------------------------------------------------------------------------------ HSBC Investor Aggressive Growth Strategy Fund Class A(1) 2/14/05 0.66 ------------------------------------------------------------------------------------ HSBC Investor Aggressive Growth Strategy Fund Class B(2) 2/9/05 1.70 ------------------------------------------------------------------------------------ HSBC Investor Aggressive Growth Strategy Fund Class C(3) 6/9/05 4.50 ------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183. (1) Reflects the maximum sales charge of 5.00%. (2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%. (3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%. (4) For additional information, please refer to page 9. The Fund is measured against the Russell 1000'r' Growth Index, the Russell 1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index and the Citigroup U.S. Domestic Three Month Treasury Bill Index. The performance for the indices do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. For a complete definition of each index please refer to page 9. HSBC INVESTOR FAMILY OF FUNDS 4 Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Growth Strategy Fund Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Growth Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI EAFE Citigroup U.S. Lehman Brothers Strategy Fund Growth Index Value Index Growth Index Index Domestic Three Month Aggregate Bond (B Shares)(2) Treasury Bill Index Index 2/1/05 10,000 10,000 10,000 10,000 10,000 10,000 10,000 2/28/05 10,250 10,331 10,106 10,253 10,434 10,018 9,941 3/31/05 10,150 10,190 9,922 10,103 10,176 10,039 9,890 4/30/05 9,950 10,007 9,733 9,704 9,949 10,060 10,024 5/31/05 10,250 10,248 10,204 10,259 9,964 10,084 10,132 6/30/05 10,410 10,360 10,167 10,450 10,100 10,108 10,188 7/31/05 10,730 10,660 10,664 11,060 10,410 10,134 10,095 8/31/05 10,860 10,614 10,526 10,992 10,676 10,161 10,224 9/30/05 11,040 10,763 10,575 11,135 11,154 10,188 10,119 10/31/05 10,380 10,489 10,472 10,807 10,829 10,218 10,039
Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Growth Growth Blended Strategy Fund Portfolio Index(4) (B Shares)(2) 2/1/05 10,000 10,000 2/28/05 10,250 10,220 3/31/05 10,150 10,062 4/30/05 9,950 9,883 5/31/05 10,250 10,168 6/30/05 10,410 10,258 7/31/05 10,730 10,593 8/31/05 10,860 10,619 9/30/05 11,040 10,765 10/31/05 10,380 10,546
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%) ------------------------------------------------------------------------------------ Inception Since As of October 31, 2005 Date Inception ------------------------------------------------------------------------------------ HSBC Investor Growth Strategy Fund Class A(1) 2/8/05 1.80 ------------------------------------------------------------------------------------ HSBC Investor Growth Strategy Fund Class B(2) 2/1/05 3.80 ------------------------------------------------------------------------------------ HSBC Investor Growth Strategy Fund Class C(3) 4/27/05 7.20 ------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183. (1) Reflects the maximum sales charge of 5.00%. (2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%. (3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%. (4) For additional information, please refer to page 9. The Fund is measured against the Russell 1000'r' Growth Index, the Russell 1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index, the Citigroup U.S. Domestic Three Month Treasury Bill Index and the Lehman Brothers Aggregate Bond Index. The performance for the indices do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. For a complete definition of each index please refer to page 9. 5 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Moderate Growth Strategy Fund Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Moderate Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI EAFE Citigroup U.S. Lehman Brothers Growth Strategy Fund Growth Index Value Index Growth Index Index Domestic Three Aggregate Bond (B Shares)(2) Month Treasury Index Bill Index 2/1/05 10,000 10,000 10,000 10,000 10,000 10,000 10,000 2/28/05 10,160 10,331 10,106 10,253 10,434 10,018 9,941 3/31/05 10,032 10,190 9,922 10,103 10,176 10,039 9,890 4/30/05 9,912 10,007 9,733 9,704 9,949 10,060 10,024 5/31/05 10,133 10,248 10,204 10,259 9,964 10,084 10,132 6/30/05 10,263 10,360 10,167 10,450 10,100 10,108 10,188 7/31/05 10,483 10,660 10,664 11,060 10,410 10,134 10,095 8/31/05 10,583 10,614 10,526 10,992 10,676 10,161 10,224 9/30/05 10,693 10,763 10,575 11,135 11,154 10,188 10,119 10/31/05 10,103 10,489 10,472 10,807 10,829 10,218 10,039
Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Moderate Moderate Growth Blended Growth Strategy Fund Portfolio Index(4) (B Shares)(2) 2/1/05 10,000 10,000 2/28/05 10,160 10,156 3/31/05 10,032 10,027 4/30/05 9,912 9,924 5/31/05 10,133 10,158 6/30/05 10,263 10,231 7/31/05 10,483 10,465 8/31/05 10,583 10,507 9/30/05 10,693 10,597 10/31/05 10,103 10,424
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%) ------------------------------------------------------------------------------------ Inception Since As of October 31, 2005 Date Inception ------------------------------------------------------------------------------------ HSBC Investor Moderate Growth Strategy Fund Class A(1) 2/3/05 -0.34 ------------------------------------------------------------------------------------ HSBC Investor Moderate Growth Strategy Fund Class B(2) 2/1/05 1.03 ------------------------------------------------------------------------------------ HSBC Investor Moderate Growth Strategy Fund Class C(3) 6/10/05 1.80 ------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183. (1) Reflects the maximum sales charge of 5.00%. (2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%. (3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%. (4) For additional information, please refer to page 9. The Fund is measured against the Russell 1000'r' Growth Index, the Russell 1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index, the Citigroup U.S. Domestic Three Month Treasury Bill Index and the Lehman Brothers Aggregatge Bond Index. The performance for the indices do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. For a complete definition of each index please refer to page 9. HSBC INVESTOR FAMILY OF FUNDS 6 Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Conservative Growth Strategy Fund Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI Citigroup U.S. Lehman Brothers Lehman Brothers Conservative Growth Index Value Index Growth Index EAFE Domestic Three Aggregate Bond Intermediate Growth Strategy Index Month Treasury Index Aggregate Bond Fund (B Shares)(2) Bill Index Index 2/17/05 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 2/28/05 9,970 10,331 10,106 10,253 10,434 10,018 9,941 9,948 3/31/05 9,872 10,190 9,922 10,103 10,176 10,039 9,890 9,910 4/30/05 9,792 10,007 9,733 9,704 9,949 10,060 10,024 10,023 5/31/05 9,952 10,248 10,204 10,259 9,964 10,084 10,132 10,109 6/30/05 10,032 10,360 10,167 10,450 10,100 10,108 10,188 10,150 7/31/05 10,172 10,660 10,664 11,060 10,410 10,134 10,095 10,078 8/31/05 10,252 10,614 10,526 10,992 10,676 10,161 10,224 10,186 9/30/05 10,312 10,763 10,575 11,135 11,154 10,188 10,119 10,110 10/31/05 9,792 10,489 10,472 10,807 10,829 10,218 10,039 10,049
Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Conservative Growth Conservative Blended Portfolio Growth Strategy Index(4) Fund (B Shares)(2) 2/17/05 10,000 10,000 2/28/05 9,970 10,106 3/31/05 9,872 10,013 4/30/05 9,792 9,964 5/31/05 9,952 10,141 6/30/05 10,032 10,198 7/31/05 10,172 10,353 8/31/05 10,252 10,399 9/30/05 10,312 10,454 10/31/05 9,792 10,333
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%) --------------------------------------------------------------------------------------- Inception Since As of October 31, 2005 Date Inception --------------------------------------------------------------------------------------- HSBC Investor Conservative Growth Strategy Fund Class A(1) 2/23/05 -2.22 --------------------------------------------------------------------------------------- HSBC Investor Conservative Growth Strategy Fund Class B(2) 2/17/05 -2.08 --------------------------------------------------------------------------------------- HSBC Investor Conservative Growth Strategy Fund Class C(3) 4/19/05 3.10 ---------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183. (1) Reflects the maximum sales charge of 5.00%. (2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%. (3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%. (4) For additional information, please refer to page 9. The Fund is measured against the Russell 1000'r' Growth Index, the Russell 1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index, the Citigroup U.S. Domestic Three Month Treasury Bill Index, the Lehman Brothers Aggregate Bond Index and the Lehman Brothers Intermediate Aggregate Bond Index. The performance for the indices do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. For a complete definition of each index please refer to page 9. 7 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Conservative Income Strategy Fund Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Russell 1000'r' Russell 1000'r' MSCI EAFE Citigroup U.S. Lehman Brothers Lehman Brothers Conservative Growth Index Value Index Index Domestic Three Aggregate Bond Intermediate Income Strategy Fund Month Treasury Index Aggregate Bond (A Shares)(1) Bill Index Index 2/8/05 9,497 10,000 10,000 10,000 10,000 10,000 10,000 2/28/05 9,484 10,331 10,106 10,434 10,018 9,941 9,948 3/31/05 9,417 10,190 9,922 10,176 10,039 9,890 9,910 4/30/05 9,420 10,007 9,733 9,949 10,060 10,024 10,023 5/31/05 9,517 10,248 10,204 9,964 10,084 10,132 10,109 6/30/05 9,560 10,360 10,167 10,100 10,108 10,188 10,150 7/31/05 9,607 10,660 10,664 10,410 10,134 10,095 10,078 8/31/05 9,669 10,614 10,526 10,676 10,161 10,224 10,186 9/30/05 9,666 10,763 10,575 11,154 10,188 10,119 10,110 10/31/05 9,608 10,489 10,472 10,829 10,218 10,039 10,049
Value of a $10,000 Investment [PERFORMANCE GRAPH]
HSBC Investor Conservative Income Conservative Blended Portfolio Income Strategy Fund Index(4) (A Shares)(1) 2/8/05 9,497 10,000 2/28/05 9,484 10,030 3/31/05 9,417 9,978 4/30/05 9,420 10,009 5/31/05 9,517 10,123 6/30/05 9,560 10,165 7/31/05 9,607 10,208 8/31/05 9,669 10,272 9/30/05 9,666 10,269 10/31/05 9,608 10,201
The charts above represent a comparison of a hypothetical $10,000 investment in the indicated share classes versus a similar investment in the Funds' benchmark and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%) --------------------------------------------------------------------------------------- Inception Since As of October 31, 2005 Date Inception --------------------------------------------------------------------------------------- HSBC Investor Conservative Income Strategy Fund Class A(1) 2/8/05 -3.92 --------------------------------------------------------------------------------------- HSBC Investor Conservative Income Strategy Fund Class B(2) 2/14/05 -3.32 --------------------------------------------------------------------------------------- HSBC Investor Conservative Income Strategy Fund Class C(3) 5/4/05 0.41 ---------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect the taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than the original cost. To obtain performance information current to the most recent month end, please call 1-800-782-8183. (1) Reflects the maximum sales charge of 5.00%. (2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%. (3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%. (4) For additional information, please refer to page 9. The Fund is measured against the Russell 1000'r' Growth Index, the Russell 1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index, the Citigroup U.S. Domestic Three Month Treasury Bill Index, the Lehman Brothers Aggregate Bond Index and the Lehman Brothers Intermediate Aggregate Bond Index. The performance for the indices do not reflect the deduction of expenses associated with a mutual fund, such as investment management and fund accounting fees. The Funds' performance reflects the deduction of fees for these value-added services. Investors cannot invest directly in an index, although they can invest in its underlying securities. For a complete definition of each index please refer to page 9. HSBC INVESTOR FAMILY OF FUNDS 8 Portfolio Reviews -------------------------------------------------------------------------------- Aggressive Growth Blended Portfolio Index [PIE CHART] 34.0% Russell MidCap'r' Growth Index 23.0% MSCI EAFE Index 21.0% Russell 1000'r' Value Index 21.0% Russell 1000'r' Growth Index 1.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index Growth Blended Portfolio Index [PIE CHART] 21.0% Russell 1000'r' Value Index 21.0% Russell 1000'r' Growth Index 20.0% Russell MidCap'r' Growth Index 20.0% MSCI EAFE Index 17.0% Lehman Brothers Aggregate Bond Index 1.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index Moderate Growth Blended Portfolio Index [PIE CHART] 31.0% Lehman Brothers Aggregate Bond Index 19.0% Russell 1000'r' Growth Index 18.0% Russell 1000'r' Value Index 11.0% Russell MidCap'r' Growth Index 15.0% MSCI EAFE Index 6.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index Conservative Growth Blended Portfolio Index [PIE CHART] 20.0% Lehman Brothers Aggregate Bond Index 20.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index 15.0% Lehman Brothers Intermediate Aggregate Bond Index 15.0% Russell 1000'r' Growth Index 15.0% Russell 1000'r' Value Index 10.0% MSCI EAFE Index 5.0% Russell MidCap'r' Growth Index Conservative Income Blended Portfolio Index [PIE CHART] 30.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index 25.0% Lehman Brothers Aggregate Bond Index 25.0% Lehman Brothers Intermediate Aggregate Bond Index 8.0% Russell 1000'r' Growth Index 8.0% Russell 1000'r' Value Index 4.0% MSCI EAFE Index 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 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 Aggregate Bond Index is generally representative of investment-grade debt issues with maturities between three and ten years. 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-earning ratios, higher dividend yields, and lower forecasted growth values. Investors cannot invest directly in an index. Russell Midcap'r' Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000'r' Growth index. Investors cannot invest directly in an index, although they can invest in the underlying securities. 9 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- 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. The third quarter of 2005 closed with the Fed's eleventh consecutive 25 basis point (0.25%) increase in the target federal funds rate. This tightening cycle began in June 2004 with the federal funds rate at 1.0%. The federal funds rate reached 3.75% following the Federal Open Market Committee's September 20 meeting. For much of the period the economy has grown in excess of a 3.5% annual rate. The economy has produced more than 175,000 non-farm payroll jobs for most of the year. Core inflation also remains under control, with both Consumer and Producer Price indexes(2) posting annual gains of less than 2.0%. Oil prices have risen steadily over the period, and are currently at approximately $60 per barrel. There are a number of reasons for the rising prices such as increased worldwide demand, unrest in oil producing countries, and insufficient domestic refining capacity. Despite this, rising energy prices have not yet been able to derail the economic expansion. There have also been several shocks to the economy. Hurricanes Katrina and Rita wrecked havoc on the Gulf Coast region. In addition to the human costs, much of the nations' oil refining capacity was damaged. The impact on the regional and national economies is not yet clear, but the federal government has committed itself to spending whatever necessary to rebuild the battered region. The effects of this commitment are twofold. First, it appears to have restored a degree of confidence in the region and second, due to the dramatic increase in federal spending, it has given inflation hawks something to worry about. Among the uncertainties faced by the U.S. economy is the pending retirement of Federal Reserve Chairman Alan Greenspan. Chairman Greenspan has been a reassuring presence on the economic scene since his appointment in 1987 and it will take the market some time to adjust to the economic stewardship of his announced successor, Ben Bernanke. Trading activity the past year continues to be centered primarily in the purchase of A1+/P1 or A1/P1(3) commercial paper in the 30 to 90 day range. Additionally, we bought Variable Rate Notes ('VRN') that are indexed to either Prime or Libor(1) and offer incremental yield pick-up over shorter dated paper. As it is likely that the Fed will continue to raise the target federal funds rate, we look to add to both our VRN and short dated securities position.* As we approach the end of 2005, the short-term market is adjusting to the possibility of additional federal funds rate increases than previously anticipated. Because we believe the Fed still considers the federal funds rate to be at an accommodative level, we look for rate increases to continue as long as the economic data remains as strong as it has been for much of 2005. Of course, this strategy is subject to change should economic conditions necessitate a change. *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. (1) The 'Aaa' money market fund rating is historical and reflects the superior quality of the Fund's investments, sound liquidity management, and strong operations and trading support. Periodic reviews are conducted to ensure a secure operations environment. Moody's rating represents an opinion only, not a recommendation to buy or sell. (2) Consumer Price Index ('CPI') a measure of price changes in consumer goods and services such as gasoline, food, and automobiles. Sometimes referred to as 'headline inflation.' Producer Price Index ('PPI') a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. (3) The London Inter-Bank Offer Rate (LIBOR) is the interest rate that the largest international banks charge each other for loans. HSBC INVESTOR FAMILY OF FUNDS 10 Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Limited Maturity Portfolio by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team The HSBC Investor Limited Maturity 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 economy continued to expand at a slightly above trend pace. For the annual period ending September 2005 Gross Domestic Product(1) growth was 3.7%. The Federal Reserve Board (the 'Fed') maintained a measured approach to raising the target rate by 25 basis points (0.25%) at each meeting since the Fed's first increase of the current cycle, which began on June 30, 2004. Yields on short maturity U.S. Treasury securities increased with the fed funds rate. Yields on 2-year notes rose by 183 basis points (1.83%) whereas 10-year notes rose by only 53 basis points (0.53%). Further, yields on the 30-year yields actually fell by 4 basis points (0.04%). Changing investor expectations about inflationary pressures and the level of economic activity caused intra-period volatility. This was due to uncertainty about the impact of Hurricane Katrina and the effects of higher energy prices. However, core inflation remained relatively tame. As a result, the yield curve flattened by 179 basis points (1.79%) as measured by the yield differential between 2-year and 30-year yields. Despite strong performance through February, corporate bonds ended the period with poor relative performance as yields among most corporate bonds widened. A confluence of factors including disappointing operating performance within the automotive sector and a greater focus on shareholder value by many companies led investors to demand higher yield premiums. General Motors and Ford provided the biggest drag on the corporate market as both companies announced disappointing results and sustained reduced market share. The rise in corporate yield premiums filtered through to other market sectors as investors realigned valuations across sectors. In contrast spreads on agencies, asset backed securities and commercial mortgage backed securities performed well as investor demand for high quality assets drove yield spreads tighter versus Treasuries. In contrast, mortgage pass-throughs underperformed due to poor market technicals. Specifically a reduction in agency demand and an increase in supply due to convexity related hedging drove spreads wider. A defense duration, a 'barbelled' yield curve strategy and a higher than benchmark position in asset backed securities benefited the Fund's absolute and relative to benchmark total return over the annual period. However, price declines from rise in yields and the widening yield premiums in certain corporate bonds held in the Fund detracted from relative performance resulting in an underperformance of the Fund in comparison to its benchmark index.* Going forward we will continue to position the portfolio defensively. We believe we have positioned the portfolio with a lower sensitivity to a change in interest rates than that of the Fund's benchmark. We also remain concerned about the level yield premiums on corporate bonds and securitized debt. During this time we feel it is important to remind our investors of the benefits of active management. Current valuations allow us to construct a portfolio where, we believe, the investor has less exposure to some of the risks in the current market. (1) Gross Domestic Product (GDP) is the measure of the market value of the goods and services produced by labor and property in the United States. * Portfolio composition is subject to change. 11 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor 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 economy continued to expand at a slightly above trend pace. For the annual period ending September 2005 Gross Domestic Product(1) growth was 3.7%. The Federal Reserve Board (the 'Fed') maintained a measured approach to raising the target rate by 25 basis points (0.25%) at each meeting since the Fed's first increase of the current cycle, which began on June 30, 2004. Yields on short maturity U.S. Treasury securities increased with the fed funds rate. Yields on 2-year notes rose by 183 basis points (1.83%) whereas 10-year notes rose by only 53 basis points (0.53%). Further, yields on the 30-year yields actually fell by 4 basis points (0.04%). Changing investor expectations about inflationary pressures and the level of economic activity caused intra-period volatility. This was due to uncertainty about the impact of Hurricane Katrina and the effects of higher energy prices. However core inflation remained relatively tame. As a result, the yield curve flattened by 179 basis points (1.79%) as measured by the yield differential between 2-year and 30-year yields. Despite strong performance through February, corporate bonds ended the period with poor relative performance. A confluence of factors including disappointing operating performance within the automotive sector and a greater focus on shareholder value by many companies led investors to demand higher yield premiums. General Motors and Ford provided the biggest drag on the corporate market as both companies announced disappointing results and sustained reduced market share. The rise in corporate yield premiums filtered through to other market sectors as investors realigned valuations across sectors. In contrast spreads on agencies, asset backed securities and commercial mortgage backed securities performed well as investor demand for high quality assets drove yield spreads tighter versus Treasuries. In contrast, mortgage pass-throughs underperformed due to poor market technicals. Specifically a reduction in agency demand and an increase in supply due to convexity related hedging drove spreads wider. A defense duration, a 'barbelled' yield curve strategy and a lower than benchmark position in mortgage pass-throughs benefited the Fund's absolute and relative to benchmark total return over the annual period. Price declines from rise in yields and the widening yield premiums in certain corporate bonds held in the portfolio detracted from relative performance.* (1) Gross Domestic Product (GDP) is the measure of the market value of the goods and services produced by labor and property in the United States. * Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 12 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 Large-cap growth stocks generated roughly flat returns during the first half of this fiscal year, then produced solid gains during the period's second half. That environment contributed to healthy absolute returns for the Fund. Energy stocks led the market during this period, supported by large increases in oil and gas prices. The Fund's sub-adviser held an overweight allocation to energy, so the sector's surge boosted performance relative to the benchmark. The sub-adviser also over-weighted financial-services stocks. That strategy helped relative gains, as did strong stock selection in the financial sector. The Fund's managers de-emphasized interest-rate sensitive bank stocks in favor of shares in the capital-markets, student loan and asset management industries.* Stock selection in the technology sector also boosted returns against the benchmark. The Fund's managers focused on shares of firms that they believed could generate reliable earnings growth, and such stocks posted solid gains during the second half of the period.* The Fund's holdings in the consumer discretionary sector weighed on relative returns. The sub-adviser invested in shares of consumer-oriented firms with strong franchises, but investor concerns about potential weakness in consumer spending led to losses for many of those stocks. The Fund's overweight position in health care stocks also hurt returns against the index, despite good stock selection in the sector.* * Portfolio composition is subject to change. 13 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Value Portfolio by Jon D. Bosse, CFA Chief Investment Officer NWQ Investment Management Co., 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 The stock market generated healthy returns during this period. Energy shares led the equity market, as investors bid them up on the strength of rising oil and gas prices. That environment and strong performance from several individual holdings helped this Fund generate strong absolute and relative gains. Security selection was the largest contributor to the Fund's superior relative performance. The strong performance of individual stocks in the insurance, technology, retail and business services sectors contributed to the Fund's absolute and positive relative returns. The Fund's sub-adviser held an underweight stake in the market-leading energy sector, but the negative impact of that positioning was more than offset by a relative overweighting in the 'other energy' sub-sector, which includes oil and gas exploration and production companies. That part of the energy market significantly outperformed the energy sector as a whole, and boosted the Fund's relative gains.* Overweighting the Fund's allocation to media and publishing stocks weighed on relative performance, as weak advertising revenues pressured this group. An underweighted position in the financial sector helped relative returns. Financial stocks generally were weak during the period, primarily due to the flattening of the yield curve, which investors worried would reduce profit margins for the sector. Financial stocks typically make up a substantial portion of most value indices and benchmarks. Within financials, mortgage-related stocks detracted from performance due to concerns of a potential slowdown in mortgage refinancing activity.* * Portfolio composition is subject to change. 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 Bernstein Investment Research and Management ('AllianceBernstein'), a unit of AllianceBernstein Investment Research and Management as sub-investment adviser. The Portfolio invests primarily in equity securities of companies organized and domiciled in developed nations outside the U.S., or for which the principal trading market is outside the U.S., including Europe, Canada, Australia and the Far East. Investment Concerns There are risks associated with investing in foreign companies, such as erratic market conditions, economic and political instability and fluctuations in currency and exchange rates. Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. Market Commentary Stronger-than-expected economic and earnings growth helped foreign markets post good returns during this period. That environment contributed to strong gains for the Fund. The Fund generated returns superior to its benchmark in part because of its overweight position in shares of industrial commodities firms. Such stocks benefited from the unexpected strength of the global economy, which investors believed would contribute to greater demand for basic commodities such as steel and coal. An overweight position in Japanese and Korean financial-services stocks also boosted relative returns, as solid economic growth in Asia led investors to expect higher profits for such firms.* The Fund's returns against the benchmark also benefited from a relatively large stake in emerging markets. Developing markets tend to perform well during periods of strong economic growth, so better-than-expected economic data during this period contributed to significant gains.* The Fund's return advantage over the benchmark was diminished by relatively large weightings in certain aluminum and paper stocks, which suffered from unexpectedly strong capacity in those industries. Likewise, the Fund held relatively large positions in certain consumer stocks that fared poorly due to company-specific issues.* * Portfolio composition is subject to change. 15 HSBC INVESTOR FAMILY OF FUNDS Portfolio Reviews -------------------------------------------------------------------------------- HSBC Investor Small Cap Equity Portfolio by William A. Muggia President-Chief Investment Officer Westfield Capital Management The HSBC Investor Small Cap Equity Fund and the HSBC Investor Opportunity Fund ('the Funds') seek to provide their shareholders with long-term growth of capital by investing in equity securities of emerging small and medium-sized companies expected to deliver earnings growth well above the growth rate of the economy and the rate of inflation. The Funds employ a two-tier structure, commonly referred to as 'master-feeder.' The Funds invest all of their investable assets in the HSBC Investor Small Cap Equity Portfolio (the 'Portfolio'). The Portfolio employs Westfield Capital Management, 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 Small-capitalization stocks produced solid gains, helping power this Fund's strong returns. Energy stocks led the small-cap market, while technology stocks generated the benchmark's weakest returns. This Fund's sub-adviser, Westfield Capital Management, generated positive performance through a combination of successful sector allocation and strong stock selection. The manager held an overweight position in energy stocks throughout the period, which boosted relative returns as such stocks surged. The manager trimmed the overweight position in recent months as many of the Fund's energy stocks rose to levels in line with the managers' price targets. Selection among technology stocks had the second-largest positive impact on relative gains. The technology stocks held by the Fund gained an average of more than 15%, supported by strong performance among Internet, software and computer services stocks. Meanwhile, the technology stocks represented in the benchmark delivered average returns of 5.4%.* Selection among consumer discretionary stocks weighed on relative returns. Westfield Capital Management avoided richly valued shares of particular retailers, so strong performance among those stocks hurt performance against the benchmark. And disappointing performance by shares of some medical devices manufacturers and specialty pharmaceutical firms caused the Fund's health care allocation to lag that of the benchmark, despite strong gains by certain managed care and biotechnology stocks.* * Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 16 Portfolio Reviews -------------------------------------------------------------------------------- Portfolio Composition* October 31, 2005 (Unaudited)
HSBC Investor Limited Maturity Portfolio -------------------------------------------------------------------------------- Investment Allocation Percentage of Investments at Value -------------------------------------------------------------------------------- U.S. Government Agencies 34.1% -------------------------------------------------------------------------------- Corporate Bond 26.7% -------------------------------------------------------------------------------- U.S. Treasury Notes 14.6% -------------------------------------------------------------------------------- Asset Backed Securities 10.2% -------------------------------------------------------------------------------- Collateralized Mortgage Obligations 10.2% -------------------------------------------------------------------------------- Cash and Equivalents 2.3% -------------------------------------------------------------------------------- Repurchase Agreements 1.9% -------------------------------------------------------------------------------- Total 100.0% --------------------------------------------------------------------------------
HSBC Investor Fixed Income Portfolio -------------------------------------------------------------------------------- Investment Allocation Percentage of Investments at Value -------------------------------------------------------------------------------- U.S. Government Agencies 29.1% -------------------------------------------------------------------------------- Corporate Bond 28.8% -------------------------------------------------------------------------------- Collateralized Mortgage Obligations 14.8% -------------------------------------------------------------------------------- U.S. Treasury Securities 11.9% -------------------------------------------------------------------------------- Asset Backed Securities 8.2% -------------------------------------------------------------------------------- Repurchase Agreements 5.7% -------------------------------------------------------------------------------- Cash and Equivalents 0.8% -------------------------------------------------------------------------------- Municipal Bond 0.7% -------------------------------------------------------------------------------- Total 100.0% --------------------------------------------------------------------------------
HSBC Investor Growth Portfolio -------------------------------------------------------------------------------- Investment Allocation Percentage of Investments at Value -------------------------------------------------------------------------------- Health Care 23.4% -------------------------------------------------------------------------------- Information Technology 22.4% -------------------------------------------------------------------------------- Financials 15.2% -------------------------------------------------------------------------------- Industrials 13.1% -------------------------------------------------------------------------------- Energy 8.6% -------------------------------------------------------------------------------- Consumer Discretionary 8.6% -------------------------------------------------------------------------------- Consumer Staples 6.5% -------------------------------------------------------------------------------- Cash and Equivalents 2.2% -------------------------------------------------------------------------------- Total 100.0% --------------------------------------------------------------------------------
HSBC International Equity Portfolio -------------------------------------------------------------------------------- Investment Allocation Percentage of Investments at Value -------------------------------------------------------------------------------- Europe 61.9% -------------------------------------------------------------------------------- Japan 24.7% -------------------------------------------------------------------------------- Australia and Far East 7.7% -------------------------------------------------------------------------------- Other 3.0% -------------------------------------------------------------------------------- Canada 2.3% -------------------------------------------------------------------------------- Cash and Equivalents 0.4% -------------------------------------------------------------------------------- Total 100.0% --------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Portfolio -------------------------------------------------------------------------------- Investment Allocation Percentage of Investments at Value -------------------------------------------------------------------------------- Health Care 25.2% -------------------------------------------------------------------------------- Information Technology 17.8% -------------------------------------------------------------------------------- Repurchase Agreements 16.2% -------------------------------------------------------------------------------- Industrials 14.6% -------------------------------------------------------------------------------- Energy 12.9% -------------------------------------------------------------------------------- Financials 5.5% -------------------------------------------------------------------------------- Consumer Discretionary 5.1% -------------------------------------------------------------------------------- Transportation 1.4% -------------------------------------------------------------------------------- Cash and Equivalents 1.3% -------------------------------------------------------------------------------- Total 100.0% --------------------------------------------------------------------------------
HSBC Investor Value Portfolio -------------------------------------------------------------------------------- Investment Allocation Percentage of Investments at Value -------------------------------------------------------------------------------- Financials 28.4% -------------------------------------------------------------------------------- Information Technology 14.0% -------------------------------------------------------------------------------- Energy 12.8% -------------------------------------------------------------------------------- Industrials 12.7% -------------------------------------------------------------------------------- Materials 7.7% -------------------------------------------------------------------------------- Consumer Staples 7.4% -------------------------------------------------------------------------------- Consumer Discretionary 5.4% -------------------------------------------------------------------------------- Telecommunication Services 3.1% -------------------------------------------------------------------------------- Transportation 2.2% -------------------------------------------------------------------------------- Health Care 2.1% -------------------------------------------------------------------------------- Miscellaneous 2.0% -------------------------------------------------------------------------------- Utilities 1.6% -------------------------------------------------------------------------------- Cash and Equivalents 0.6% -------------------------------------------------------------------------------- Total 100.0% --------------------------------------------------------------------------------
* Portfolio composition is subject to change. 17 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH INCOME STRATEGY FUND FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND --------------- --------------- --------------- --------------- --------------- ASSETS: Investments in Portfolios $1,425,345 $5,511,039 $6,668,909 $1,953,247 $ 803,891 Investment in affiliates, at value (a) 14,310 55,309 423,097 485,625 343,330 Receivable for capital shares issued 10,802 16,093 24,139 2,770 15 Receivable from Investment Adviser 2,700 20,314 21,724 6,378 -- Prepaid expenses 1,047 2,008 2,306 647 647 ---------- ---------- ---------- ---------- ---------- TOTAL ASSETS 1,454,204 5,604,763 7,140,175 2,448,667 1,147,883 ---------- ---------- ---------- ---------- ---------- LIABILITIES: Dividends payable -- -- -- -- 2,761 Payable for capital shares redeemed 3,319 -- -- -- -- Accrued expenses and other liabilities: Investment Management -- -- -- -- 205 Administration 44 177 226 76 42 Distribution 458 1,839 2,496 867 484 Shareholder Servicing 302 1,182 1,492 502 238 Compliance service 2 3 2 5 6 Transfer Agent 20 20 20 20 20 Trustee 3 11 15 6 3 Other 2,860 10,809 13,006 4,679 2,403 ---------- ---------- ---------- ---------- ---------- TOTAL LIABILITIES 7,008 14,041 17,257 6,155 6,162 ---------- ---------- ---------- ---------- ---------- NET ASSETS $1,447,196 $5,590,722 $7,122,918 $2,442,512 $1,141,721 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ............................................................................................................................... COMPOSITION OF NET ASSETS: Capital $1,375,606 $5,387,221 $6,939,294 $2,398,988 $1,137,163 Accumulated net investment income (loss) (1,486) (4,996) 1,628 7,315 3,253 Accumulated net realized gains (losses) from investment transactions 8,287 13,401 4,570 (1,676) (3,441) Unrealized appreciation/depreciation from investments 64,789 195,096 177,426 37,885 4,746 ---------- ---------- ---------- ---------- ---------- NET ASSETS $1,447,196 $5,590,722 $7,122,918 $2,442,512 $1,141,721 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS A SHARES Net Assets $ 725,720 $2,814,159 $3,241,228 $1,054,405 $ 419,120 Shares Outstanding 68,452 262,543 308,977 102,516 41,855 Net Asset Value and Redemption Price per share $ 10.60 $ 10.72 $ 10.49 $ 10.29 $ 10.01 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Maximum sales charge 5.00% 5.00% 5.00% 5.00% 4.75% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Maximum Offering Price per share (Net Asset Value/(100%-maximum sales charge)) $ 11.16 $ 11.28 $ 11.04 $ 10.83 $ 10.51 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS B SHARES Net Assets $ 700,381 2,670,396 $3,604,156 $1,305,707 $ 477,743 Shares Outstanding 66,264 247,789 343,218 128,170 47,632 Net Asset Value, Offering Price and Redemption Price per share* $ 10.57 $ 10.78 $ 10.50 $ 10.19 $ 10.03 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS C SHARES Net Assets $ 21,095 106,167 $ 277,534 $ 82,400 $ 244,858 Shares Outstanding 2,000 9,809 26,994 7,918 24,302 Net Asset Value, Offering Price and Redemption Price per share* $ 10.55 $ 10.82 $ 10.28 $ 10.41 $ 10.08 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Investments in affiliates, at cost (a) $ 14,310 $ 55,309 $ 423,097 $ 485,625 $ 343,330 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
-------------- * Redemption Price per share varies by length of time shares are held. (a) The investment in affiliates 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 purpose are the same. See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 18 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF OPERATIONS -- FOR THE PERIOD ENDED OCTOBER 31, 2005
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH INCOME FUND (a) FUND (b) FUND (b) FUND (c) FUND (d) ---------------- ---------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Investment income from Portfolios $ 6,996 $ 40,156 $ 60,534 $ 19,147 $ 12,493 Investment income from Money Market Fund 163 634 4,828 5,352 4,214 Foreign tax withholding from Portfolios (411) (1,409) (1,373) (288) (71) Expenses from Portfolios (4,026) (14,585) (16,335) (4,436) (2,028) -------- -------- -------- -------- -------- TOTAL INVESTMENT INCOME 2,722 24,796 47,654 19,775 14,608 -------- -------- -------- -------- -------- ................................................................................................................................ EXPENSES: Investment Management 260 1,033 1,305 432 243 Administration -- HSBC (see note 3) 150 570 712 245 127 Administration -- BISYS (see note 3) 45 195 256 76 54 Distribution: Class B Shares 1,746 6,924 9,878 3,417 1,417 Class C Shares 62 288 561 198 612 Shareholder Servicing: Class A Shares 714 2,762 3,044 955 543 Class B Shares 582 2,308 3,293 1,139 472 Class C Shares 20 96 187 66 204 Fund Accounting 17,250 18,750 17,250 18,750 17,250 Chief Compliance Officer 7 24 30 15 12 Printing 6,024 34,026 37,207 14,824 8,375 Transfer Agent 28,182 28,416 28,658 28,160 28,063 Trustee 5 21 28 10 6 Other 2,721 3,179 3,996 2,471 2,415 -------- -------- -------- -------- -------- Total expenses before fee reductions 57,768 98,592 106,405 70,758 59,793 Fees reduced by Fund Accounting and Transfer Agent (45,172) (46,588) (45,139) (46,689) (45,226) Fees reduced by Administrator -- BISYS (see note 3) (12) (48) (63) (19) (11) Fees reduced and expenses reimbursed by Investment Adviser (6,830) (28,046) (27,598) (11,785) (7,175) -------- -------- -------- -------- -------- NET EXPENSES 5,754 23,910 33,605 12,265 7,381 -------- -------- -------- -------- -------- ................................................................................................................................ NET INVESTMENT INCOME (LOSS) (3,032) 886 14,049 7,510 7,227 -------- -------- -------- -------- -------- ................................................................................................................................ NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: (E) Net realized gains (losses) from investment transactions 4,441 (1,238) (11,530) (4,777) (4,123) Change in unrealized appreciation/depreciation from investments 64,789 195,096 177,426 37,885 4,746 -------- -------- -------- -------- -------- ................................................................................................................................ Net realized/unrealized gains (losses) from investment transactions and foreign currencies 69,230 193,858 165,896 33,108 623 -------- -------- -------- -------- -------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 66,198 $194,744 $179,945 $ 40,618 $ 7,850 -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------------- (a) The Aggressive Growth Strategy Fund commenced operations on February 9, 2005. (b) The Growth Strategy Fund and Moderate Growth Strategy Fund commenced operations on February 1, 2005. (c) The Conservative Growth Strategy Fund commenced operations on February 17, 2005. (d) The Conservative Income Strategy Fund commenced operations on February 8, 2005. (e) Represents amounts allocated from the Respective Portfolios. 19 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH GROWTH STRATEGY FUND STRATEGY FUND ----------------------------------------------------------------------------------------------------------------- FOR THE FOR THE PERIOD ENDED PERIOD ENDED OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b) ----------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (3,032) $ 886 Net realized gains (losses) from investment transactions 4,441 (1,238) Change in unrealized appreciation/depreciation from investments 64,789 195,096 ---------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 66,198 194,744 ---------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 1,380,998 5,395,978 ---------- ---------- CHANGE IN NET ASSETS 1,447,196 5,590,722 ................................................................................................................................ NET ASSETS: Beginning of period -- -- ---------- ---------- End of period $1,447,196 $5,590,722 ---------- ---------- ---------- ---------- Accumulated net investment income (loss) $ (1,486) $ (4,996) ---------- ---------- ---------- ----------
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 20 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
AGGRESSIVE GROWTH GROWTH STRATEGY FUND STRATEGY FUND ------------------------------------------------------------------------------------------------------------------------ FOR THE FOR THE PERIOD ENDED PERIOD ENDED OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b) ------------------------------------------------------------------------------------------------------------------------ CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 693,884 $2,731,568 Cost of shares redeemed (9,512) (26,214) ---------- ---------- Class A Shares capital transactions 684,372 2,705,354 ---------- ---------- ................................................................................................................................ CLASS B SHARES: Proceeds from shares issued 690,126 2,623,574 Cost of shares redeemed (13,505) (35,907) ---------- ---------- Class B Shares capital transactions 676,621 2,587,667 ---------- ---------- ................................................................................................................................ CLASS C SHARES: Proceeds from shares issued 20,005 102,957 ---------- ---------- Class C Shares capital transactions 20,005 102,957 ---------- ---------- ................................................................................................................................ CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $1,380,998 $5,395,978 ---------- ---------- ---------- ---------- ................................................................................................................................ SHARE TRANSACTIONS: CLASS A SHARES: Issued 69,359 265,018 Redeemed (907) (2,475) ---------- ---------- Change in Class A Shares 68,452 262,543 ---------- ---------- ................................................................................................................................ CLASS B SHARES: Issued 67,597 251,135 Redeemed (1,333) (3,346) ---------- ---------- Change in Class B Shares 66,264 247,789 ---------- ---------- ................................................................................................................................ CLASS C SHARES: Issued 2,000 9,809 ---------- ---------- Change in Class C Shares 2,000 9,809 ---------- ----------
-------------- (a) Aggressive Growth Strategy Fund Class A Shares commenced operations on February 14, 2005, Class B Shares commenced operations on February 9, 2005, and Class C Shares commenced operations on June 10, 2005. (b) Growth Strategy Fund Class A Shares commenced operations on February 8, 2005, Class B Shares commenced operations on February 1, 2005, and Class C Shares commenced operations on April 27, 2005. 21 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MODERATE CONSERVATIVE GROWTH GROWTH STRATEGY FUND STRATEGY FUND ------------------------------------------------------------------------------------------------------------------------ FOR THE FOR THE PERIOD ENDED PERIOD ENDED OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b) ------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 14,049 $ 7,510 Net realized gains (losses) from investment transactions (11,530) (4,777) Change in unrealized appreciation/depreciation from investments 177,426 37,885 ---------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 179,945 40,618 ---------- ---------- ................................................................................................................................ DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (116) (203) Class B Shares (73) (5) ---------- ---------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (189) (208) ---------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 6,943,162 2,402,102 ---------- ---------- CHANGE IN NET ASSETS 7,122,918 2,442,512 ................................................................................................................................ NET ASSETS: Beginning of period -- -- ---------- ---------- End of period $7,122,918 $2,442,512 ---------- ---------- ---------- ---------- Accumulated net investment income (loss) $ 1,628 $ 7,315 ---------- ---------- ---------- ----------
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 22 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MODERATE CONSERVATIVE GROWTH GROWTH STRATEGY FUND STRATEGY FUND -------------------------------------------------------------------------------------------------------------- FOR THE FOR THE PERIOD ENDED PERIOD ENDED OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b) -------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $3,264,968 $1,046,895 Dividends reinvested 117 203 Cost of shares redeemed (110,833) (11,388) ---------- ---------- Class A Shares capital transactions 3,154,252 1,035,710 ---------- ---------- ................................................................................................................................ CLASS B SHARES: Proceeds from shares issued 3,640,156 1,298,439 Dividends reinvested 63 4 Cost of shares redeemed (125,948) (13,275) ---------- ---------- Class B Shares capital transactions 3,514,271 1,285,168 ---------- ---------- ................................................................................................................................ CLASS C SHARES: Proceeds from shares issued 275,464 81,224 Cost of shares redeemed (825) -- ---------- ---------- Class C Shares capital transactions 274,639 81,224 ---------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $6,943,162 $2,402,102 ---------- ---------- ---------- ---------- ................................................................................................................................ SHARE TRANSACTIONS: CLASS A SHARES: Issued 319,580 103,636 Reinvested 12 20 Redeemed (10,615) (1,140) ---------- ---------- Change in Class A Shares 308,977 102,516 ---------- ---------- ................................................................................................................................ CLASS B SHARES: Issued 355,469 129,472 Reinvested 6 --(c) Redeemed (12,257) (1,302) ---------- ---------- Change in Class B Shares 343,218 128,170 ---------- ---------- ................................................................................................................................ CLASS C SHARES: Issued 27,076 7,918 Redeemed (82) -- ---------- ---------- Change in Class C Shares 26,994 7,918 ---------- ----------
-------------- (a) Moderate Growth Strategy Fund Class A Shares commenced operations on February 3, 2005, Class B Shares commenced operations on February 1, 2005, and Class C Shares commenced operations on June 10, 2005. (b) Conservative Growth Strategy Fund Class A Shares commenced operations on February 23, 2005, Class B Shares commenced operations on February 17, 2005, and Class C Shares commenced operations on April 19, 2005. (c) Rounds to less than 1.0 shares. 23 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
CONSERVATIVE INCOME STRATEGY FUND ------------------------------------------------------------------------------------- FOR THE PERIOD ENDED OCTOBER 31, 2005 (a) ------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 7,227 Net realized gains (losses) from investment transactions (4,123) Change in unrealized appreciation/depreciation from investments 4,746 ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 7,850 ---------- .................................................................................... DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (3,758) Class B Shares (1,409) Class C Shares (1,093) ---------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (6,260) ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 1,140,131 ---------- CHANGE IN NET ASSETS 1,141,721 .................................................................................... NET ASSETS: Beginning of period -- ---------- End of period $1,141,721 ---------- ---------- Accumulated net investment income (loss) $ 3,253 ---------- ----------
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 24 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
CONSERVATIVE INCOME STRATEGY FUND -------------------------------------------------------------------------------------- FOR THE PERIOD ENDED OCTOBER 31, 2005 (a) -------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $ 420,293 Dividends reinvested 2,097 Cost of shares redeemed (3,999) ---------- Class A Shares capital transactions 418,391 ---------- ..................................................................................... CLASS B SHARES: Proceeds from shares issued 516,383 Dividends reinvested 695 Cost of shares redeemed (40,981) ---------- Class B Shares capital transactions 476,097 ---------- ..................................................................................... CLASS C SHARES: Proceeds from shares issued 245,019 Dividends reinvested 624 ---------- Class C Shares capital transactions 245,643 ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $1,140,131 ---------- ---------- ..................................................................................... SHARE TRANSACTIONS: CLASS A SHARES: Issued 42,045 Reinvested 208 Redeemed (398) ---------- Change in Class A Shares 41,855 ---------- ..................................................................................... CLASS B SHARES: Issued 51,661 Reinvested 69 Redeemed (4,098) ---------- Change in Class B Shares 47,632 ---------- ..................................................................................... CLASS C SHARES: Issued 24,240 Reinvested 62 ---------- Change in Class C Shares 24,302 ----------
-------------- (a) The Conservative Income Strategy Fund Class A Shares commenced operations on February 8, 2005, Class B Shares commenced operations on February 14, 2005, and Class C Shares commenced operations on May 4, 2005. 25 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements. HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
INVESTMENT ACTIVITIES ------------------------------------------ NET REALIZED AND NET ASSET NET UNREALIZED GAINS TOTAL NET ASSET VALUE, INVESTMENT (LOSSES) FROM FROM VALUE, BEGINNING OF INCOME INVESTMENT INVESTMENT END OF TOTAL PERIOD (LOSS) TRANSACTIONS ACTIVITIES PERIOD RETURN(b) ----------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 (0.01) 0.61 0.60 $10.60 6.00% ----------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 (0.04) 0.61 0.57 $10.57 5.70% ----------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.00 (0.05) 0.60 0.55 $10.55 5.50% ----------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ----------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES INCOME (LOSS) EXPENSES TO PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e) ------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $726 1.50% (0.20)% 11.72% 49.10% ------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $700 2.25% (1.01)% 11.63% 49.10% ------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $ 21 2.25% (1.15)% 9.79% 49.10% -------------------------------------------------------------------------------------------------------
(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 is calculated by aggregating the results of multiplying the Fund's investment percentage in the respective Portfolios by the corresponding Portfolio's entire fiscal 2005 portfolio turnover rate. 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 14, 2005. (g) Class B Shares commenced operations on February 9, 2005. (h) Class C Shares commenced operations on June 10, 2005. See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 26 HSBC INVESTOR GROWTH STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
INVESTMENT ACTIVITIES ------------------------------------------ NET REALIZED AND NET ASSET NET UNREALIZED GAINS TOTAL VALUE, INVESTMENT (LOSSES) FROM FROM BEGINNING OF INCOME INVESTMENT INVESTMENT PERIOD (LOSS) TRANSACTIONS ACTIVITIES ---------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.02 0.70 0.72 ---------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 (0.01) 0.79 0.78 ---------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.00 (0.02) 0.84 0.82 ---------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF TOTAL PERIOD RETURN(b) -------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.72 7.20% -------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.78 7.80% -------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.82 8.20% -------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ---------------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES INCOME (LOSS) EXPENSES TO PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e) ----------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $2,814 1.50% 0.42 % 5.19% 69.23% ----------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $2,670 2.25% (0.38)% 5.74% 69.23% ----------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $ 106 2.25% (0.55)% 5.24% 69.23% -----------------------------------------------------------------------------------------------------------------------
(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 is calculated by aggregating the results of multiplying the Funds investment percentage in the respective Portfolios by the corresponding Portfolio's entire fiscal 2005 portfolio turnover rate. 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) Class B Shares commenced operations on February 1, 2005. (h) Class C Shares commenced operations on April 27, 2005. See notes to financial statements. 27 HSBC INVESTOR LIFELINE FUNDS 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 NET ASSET NET UNREALIZED GAINS NET ASSET VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET VALUE, BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD --------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.04 0.45 0.49 --(g) --(g) $10.49 --------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (h) $10.00 0.01 0.49 0.50 --(g) --(g) $10.50 --------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) $10.00 --(g) 0.28 0.28 -- -- $10.28 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA -------------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e) --------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) 4.94% $3,241 1.50% 0.95% 4.30% 84.55% --------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (h) 5.03% $3,604 2.25% 0.18% 5.01% 84.55% --------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) 2.80% $ 278 2.25% 0.05% 4.69% 84.55% ---------------------------------------------------------------------------------------------------------------------------------
(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 is calculated by aggregating the results of multiplying the Funds investment percentage in the respective Portfolios by the corresponding Portfolio's entire fiscal 2005 portfolio turnover rate. 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) Class B Shares commenced operations on February 1, 2005. (i) Class C Shares commenced operations on June 10, 2005. See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 28 HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
INVESTMENT ACTIVITIES ------------------------------------------- NET REALIZED AND NET ASSET NET UNREALIZED GAINS VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM BEGINNING INCOME INVESTMENT INVESTMENT OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES -------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.04 0.26 0.30 -------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 0.03 0.16 0.19 -------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) $10.00 0.03 0.38 0.41 -------------------------------------------------------------------------------------------- DIVIDENDS ---------------------- NET ASSET NET VALUE, INVESTMENT TOTAL END OF TOTAL INCOME DIVIDENDS PERIOD RETURN(b) ---------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) (0.01) (0.01) $10.29 2.96% ---------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) --(h) --(h) $10.19 1.92% ---------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) -- -- $10.41 4.10% ---------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e) -------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $1,054 1.50% 1.28% 8.01% 72.14% -------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $1,306 2.25% 0.53% 9.21% 72.14% -------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) $ 82 2.25% 0.66% 7.94% 72.14% --------------------------------------------------------------------------------------------------------------------------
(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 is calculated by aggregating the results of multiplying the Funds investment percentage in the respective Portfolios by the corresponding Portfolio's entire fiscal 2005 portfolio turnover rate. 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 23, 2005. (g) Class B Shares commenced operations on February 17, 2005. (h) Rounds to less than $0.01. (i) Class C Shares commenced operations on April 19, 2005. See notes to financial statements. 29 HSBC INVESTOR LIFELINE FUNDS HSBC INVESTOR CONSERVATIVE INCOME STRATEGY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ---------------------- NET REALIZED AND NET ASSET NET UNREALIZED GAINS NET ASSET VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET VALUE, BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD --------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.11 0.01 0.12 (0.11) (0.11) $10.01 --------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 0.06 0.01 0.07 (0.04) (0.04) $10.03 --------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.00 0.06 0.08 0.14 (0.06) (0.06) $10.08 --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA -------------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e) --------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) 1.18% $419 1.50% 1.79% 14.10% 79.90% --------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) 0.68% $478 2.25% 1.21% 12.16% 79.90% --------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) 1.41% $245 2.25% 1.24% 9.60% 79.90% ---------------------------------------------------------------------------------------------------------------------------------
(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 is calculated by aggregating the results of multiplying the Funds investment percentage in the respective Portfolios by the corresponding Portfolio's entire fiscal 2005 portfolio turnover rate. 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) Class B Shares commenced operations on February 14, 2005. (h) Class C Shares commenced operations on May 4, 2005. See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 30 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 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. The Trust contains the following 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 HSBC Investor Conservative Income Strategy Fund Conservative Income Fund
The LifeLine Funds are separate series of the Trust and are part of the HSBC Investor Family of Funds. Financial statements for all other series of HSBC Investor Family of Funds are published separately. The LifeLine Funds (individually a 'Feeder Fund,' collectively the 'Feeder Funds') utilize the Master Feeder Fund Structure and seek to achieve their investment objectives by investing all of their investable assets in their Respective Portfolios (as defined below) and the HSBC Investor Money Market Fund (the 'Money Market Fund'), per the following schedule through the fiscal year ended October 31, 2005: HSBC INVESTOR LIFELINE FUNDS PORTFOLIO WEIGHTINGS
AGGRESSIVE MODERATE CONSERVATIVE CONSERVATIVE GROWTH GROWTH GROWTH GROWTH INCOME STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY UNDERLYING PORTFOLIO OR FUND FUND FUND FUND FUND FUND ---------------------------- ---- ---- ---- ---- ---- Money Market Fund................................... 1% 1% 6% 20% 30% Fixed Income Portfolio.............................. None 17% 31% 20% 25% Limited Maturity Portfolio.......................... None None None 15% 25% Growth Portfolio.................................... 21% 21% 19% 15% 8% Value Portfolio..................................... 21% 21% 18% 15% 8% Small Cap Equity Portfolio.......................... 34% 20% 11% 5% None International Equity Portfolio...................... 23% 20% 15% 10% 4% ---- ---- ---- ---- ---- Total............................................... 100% 100% 100% 100% 100% ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
The HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income Portfolio, HSBC Investor Growth Portfolio, HSBC Investor Value Portfolio, HSBC Investor International Equity Portfolio, and the HSBC Investor Small Cap Equity Portfolio (individually a 'Portfolio,' collectively the 'Portfolios'), are diversified series of the HSBC Investor Portfolios (the 'Portfolio Trust'), and like each Feeder Fund, are registered open-end management investment companies. The financial statements of the Portfolios, including the Schedules of Portfolio Investments, are included in this report. The financial statements of the Portfolios should be read in conjunction with the financial statements of the Feeder Funds. The HSBC Investor Money Market Fund is a diversified series of the Trust, and like each Feeder Fund is an open-end management investment company. 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). 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 privilege of each class of shares. Under the LifeLine Funds' organizational documents, its 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 their vendors and others that provide for general indemnifications. The LifeLine Funds' maximum exposure under these arrangements is unknown as this would involve 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. 31 HSBC INVESTOR LIFELINE FUNDS HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ('GAAP'). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. SECURITIES VALUATION: Feeder Funds record their investments in the Portfolios at fair value. Securities of the Portfolios' are recorded at value as more fully discussed in the notes to those financial statements. Investments in the Money Market Fund are recorded at net asset value as reported by the Fund. SECURITIES TRANSACTIONS AND RELATED INCOME: Feeder Funds record daily their pro-rata share of their underlying Portfolios' income, expenses and realized and unrealized gains and losses. 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 Feeder Funds accrue their own expenses daily as incurred. Realized gains or losses and changes in unrealized appreciation or depreciation represent each Feeder Fund's share of such elements allocated from the Portfolios. ALLOCATIONS: Expenses directly attributable to a Fund are charged to that Fund. Expenses not directly attributable to a Fund are allocated proportionately among various or all Funds within the HSBC Investor Family of Funds in relation to the net assets of each Fund or on another reasonable basis. Expenses specific to a class are charged to that class. In addition, income, expenses (other than class specific), and unrealized/realized gains and losses are allocated to each class based on relative net assets on a daily basis. DIVIDENDS TO SHAREHOLDERS: The Conservative Income Fund declares and distributes all net investment income as dividends to their shareholders monthly. 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 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 (i.e. reclassification of market discounts, gain/loss, paydowns, and certain distributions), such amounts are reclassified within the components of net assets; temporary differences do not require reclassification. The Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as a part of the dividends paid deduction for income tax purposes. REDEMPTION FEE: 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, 2005, the following LifeLine Funds collected redemption fees as follows: HSBC INVESTOR LIFELINE FUNDS 32 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
FUND FEES COLLECTED ---- -------------- Growth Strategy Fund........................................ $ 78 Moderate Growth Strategy Fund............................... 3,411 Conservative Growth Strategy Fund........................... 162 Conservative Income Strategy Fund........................... 252
FEDERAL INCOME TAXES: Each Fund is a separate taxable entity for federal income tax purposes. Each Fund has qualified and intends to qualify each year as a 'regulated investment company' under Subchapter M of the Internal Revenue Code, as amended and to distribute substantially all of their taxable net investment income and net realized gains, if any, to their shareholders. Accordingly, no provision for federal income or excise tax is required. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Investments (USA) Inc. ('HSBC' or the 'Investment Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank, acts as Investment Adviser to the LifeLine Funds. As Investment Adviser, HSBC manages the investments of the Funds and continuously reviews, supervises and administers the Funds' investments. For its services as Investment Adviser, HSBC is entitled to receive a fee, computed daily and paid monthly, based on average daily net assets, at an annual rate of 0.05% for each Fund. ADMINISTRATION: Effective July 1, 2005, HSBC serves the Funds as Administrator. Under the terms of the administration agreement, HSBC receives from the Funds a fee accrued daily and paid monthly at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS FEE RATE --------------------------------- -------- Up to $8 billion............................................ 0.075% In excess of $8 billion but not exceeding $9.25 billion..... 0.070% In excess of $9.25 billion but not exceeding $12 billion.... 0.050% In excess of $12 billion.................................... 0.030%
The fee breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds. The fee is allocated to each of the HSBC Investor Family of Funds based upon its pro-rata share of net assets. For assets invested in the underlying Portfolios by Feeder Funds, the Portfolios pay half of the administration fee and the Feeder Funds pay half, for a combination of the total fee rate above. HSBC may directly or through an affiliate, use their fee revenue, past profits, or other revenue sources to pay promotional, administrative, shareholder support, and other expenses to third parties, including broker dealers, in connection with the offer, sale and administration of shares of the Funds. Effective July 1, 2005, pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund Services Ohio, Inc. ('BISYS Ohio') a wholly-owned subsidiary of The BISYS Group, Inc, serves as the Trusts sub-administrator to each Fund subject to the general supervision of the Funds' Board of Trustees and HSBC. For these services, BISYS is entitled to a fee, payable by HSBC. Prior to July 1, 2005, BISYS Ohio received compensation for providing administration services to the Funds under the same compensation structure as those currently with HSBC. Under a Compliance Services Agreement between the Funds' and BISYS Ohio (the 'CCO Agreement'), BISYS Ohio makes an employee available to serve as the Funds' Chief Compliance Officer (the 'CCO'). Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Funds' compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $200,000 for the fiscal year ended October 31, 2005, plus certain out of pocket expenses. Expenses incurred are reflected on the Statements of Operations as 'Compliance Service'. In addition, BISYS Ohio received a one-time implementation fee of $50,000 which is included 33 HSBC INVESTOR LIFELINE FUNDS HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) in Other Expenses on the Statements of Operations. BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio. All voluntary administration fee waivers are not subject to recoupment in subsequent fiscal periods. DISTRIBUTION PLAN: BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned subsidiary of The BISYS Fund Services, Inc., serves the Funds 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 a monthly payment of actual expenses by the LifeLine Funds to the Distributor at a rate not to exceed 0.25% of the average daily net assets of Class A Shares (currently not being charged) and 0.75% of the average daily net assets of Class B Shares and Class C Shares of the LifeLine Funds. This payment represents expenses incurred by the Distributor for marketing costs and services rendered in distributing the LifeLine Funds' shares. BISYS, as the LifeLine Funds' distributor, received $930,944 in commissions from sales of the HSBC Investor Family of Funds of which $930,503 was reallowed to affiliated brokers and dealers. SHAREHOLDER SERVICING: The Trust has entered into a Shareholder Servicing Agreement with its shareholder servicing agents (which currently consists of HSBC and its affiliates) for providing various shareholder services. For performing these services, the shareholder servicing agents receive a fee of 0.25%, 0.25%, 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, Class C Shares and Class R Shares of the Fund, respectively. The aggregate fees paid to the Distributor pursuant to the Distribution Plan and to shareholder servicing agents pursuant to the Shareholder Servicing Agreement currently are not intended to exceed 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, and 0.75% of the average daily net assets of Class R Shares. FUND ACCOUNTING, TRANSFER AGENCY, CUSTODIAN AND TRUSTEE: BISYS Ohio provides fund accounting and transfer agency services for all classes of each Fund. As transfer agent for the Funds, BISYS receives a fee based on the number of Funds and shareholder accounts, subject to certain minimums and reimbursement of certain expenses. As fund accountant for the Funds, BISYS receives an annual fee per Fund and share class, subject to certain minimums and reimbursement of certain expenses. HSBC is the named Custodian for the LifeLine Funds, however, there was no security maintained for which services were rendered during the period. Each of the six non-interested Trustees are compensated a $24,000 annual Board retainer, a $1,000 annual retainer for each Committee of the Board, and a $4,000 and $2,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. In addition, Trustees may receive compensation for special meetings and/or functioning as a Committee Chairperson or Lead Trustee. Also, the Trustees are reimbursed for certain expenses. FEE REDUCTIONS: The Investment Adviser has agreed to limit 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 average daily net assets for any full fiscal year as follows, Class A 1.50%, Class B 2.25%, Class C 2.25% and Class R 2.00%. In addition, the investment adviser may waive additional fees at their discretion. All contractual and any voluntary investment advisory fee waivers are not subject to recoupment in subsequent fiscal periods. HSBC INVESTOR LIFELINE FUNDS 34 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) 4. INVESTMENT TRANSACTIONS: Aggregate contributions and withdrawals of the underlying Portfolios for the fiscal year ended October 31, 2005, totaled:
CONTRIBUTIONS WITHDRAWALS ------------- ----------- Aggressive Growth Fund...................................... $1,427,065 $ 73,039 Growth Fund................................................. 5,439,422 145,205 Moderate Growth Fund........................................ 6,772,906 307,156 Conservative Growth Fund.................................... 1,980,205 71,413 Conservative Income Fund.................................... 863,411 71,019
5. FEDERAL INCOME TAX INFORMATION: The tax characteristics of dividends paid by the Funds during the fiscal year ended October 31, 2005 were as follows:
DIVIDENDS PAID FROM -------------------------------- NET LONG TERM TOTAL TAXABLE TAX EXEMPT TOTAL DIVIDENDS ORDINARY INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS PAID(1) --------------- ------------- --------- ------------- ------- Moderate Growth Strategy Fund........ $ 189 $ -- $ 189 $ -- $ 189 Conservative Growth Strategy Fund.... 208 -- 208 -- 208 Conservative Income Strategy Fund.... 3,499 -- 3,499 -- 3,499
As of October 31, 2005, the components of accumulated earnings/(deficit) on a tax basis for the Funds were as follows:
UNDISTRIBUTED LONG TERM ACCUMULATED UNDISTRIBUTED UNDISTRIBUTED TAX CAPITAL ACCUMULATED DIVIDENDS CAPITAL AND OTHER ORDINARY INCOME EXEMPT INCOME GAINS EARNINGS PAYABLE LOSSES --------------- ------------- ----- -------- ------- ------ Aggressive Growth Fund................ $ -- $ -- $ 9,058 $ 9,058 $ -- -- Growth Strategy Fund................ -- -- 16,108 16,108 -- -- Moderate Growth Fund................ 6,406 -- 7,543 13,949 -- -- Conservative Growth Fund................ 8,411 -- -- 8,411 -- (996) Conservative Income Fund................ 6,221 -- -- 6,221 (2,761) (3,111) UNREALIZED TOTAL APPRECIATION/ ACCUMULATED (DEPRECIATION)(2) EARNINGS/(DEFICIT) ----------------- ------------------ Aggressive Growth Fund................ $ 62,532 $ 71,590 Growth Strategy Fund................ 187,393 203,501 Moderate Growth Fund................ 169,675 183,624 Conservative Growth Fund................ 36,109 43,524 Conservative Income Fund................ 4,209 4,558
------------- (1) Total dividends paid may differ from the amount reported in the Statement of Changes in Net Assets because for tax purposes dividends are recognized when actually paid. (2) The differences between book-basis and tax-basis unrealized appreciation/deprecation are attributable primarily to: tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain derivative instruments, the difference between book and tax amortization methods for premium and market discount, the realization for tax purposes of unrealized gains/losses on investments in passive foreign investment companies, and the return of capital adjustments from real estate investment trusts. As of October 31, 2005, the following Funds have net capital loss carryforwards, which are available to offset future realized gains.
AMOUNT EXPIRES ------ ------- Conservative Growth Fund.................................... $ 996 2013 Conservative Income Fund.................................... 3,111 2013
6. OTHER FEDERAL INCOME INFORMATION (UNAUDITED): For the fiscal year ended October 31, 2005, the following percentage of the total ordinary income dividends paid by the Funds qualify for the corporate dividends received deduction available to corporate shareholders. 35 HSBC INVESTOR LIFELINE FUNDS HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
DIVIDENDS RECEIVED DEDUCTION --------- Moderate Growth Strategy Fund............................... 100% Conservative Growth Strategy Fund........................... 36% Conservative Income Strategy Fund........................... 9%
For the fiscal year ended October 31, 2005, dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate the maximum amount allowable as taxed at a maximum rate of 15%. Complete information will be reported in conjunction with your 2005 Form 1099-DIV.
AMOUNT ------ Moderate Growth Fund........................................ 100% Conservative Growth Fund.................................... 62% Conservative Income Fund.................................... 15%
HSBC INVESTOR LIFELINE FUNDS 36 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, HSBC Investor Conservative Growth Strategy Fund and HSBC Investor Conservative Income Strategy Fund (collectively, the Funds), as of October 31, 2005, including the related statements of operations, changes in net assets and financial highlights for the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with 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, 2005, and the results of their operations, the changes in their net assets and the financial highlights for the period then ended, in conformity with U.S. generally accepted accounting principles. KPMG LLP Columbus, Ohio December 27, 2005 37 HSBC INVESTOR LIFELINE FUNDS HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 As a shareholder of the HSBC Investor LifeLine 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 shareholder servicing fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the HSBC Investor LifeLine Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2005 through October 31, 2005. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled 'Expenses Paid During Period' to estimate the expenses you paid on your account during this period.
EXPENSE PAID BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 5/1/05 10/31/05 5/1/05 - 10/31/05 5/1/05 - 10/31/05 ------ -------- ----------------- ----------------- Aggressive Growth Strategy Fund... Class A $1,000.00 $1,107.60 $ 7.97 1.50% Class B 1,000.00 1,104.50 11.94 2.25% Class C** 1,000.00 1,055.00 9.12 2.25% Conservative Growth Strategy Fund............................ Class A 1,000.00 1,044.80 7.73 1.50% Class B 1,000.00 1,040.90 11.57 2.25% Class C 1,000.00 1,046.20 11.60 2.25% Conservative Income Strategy Fund............................ Class A 1,000.00 1,020.00 7.64 1.50% Class B 1,000.00 1,016.50 11.54 2.27% Class C*** 1,000.00 1,014.10 11.24 2.25% Growth Strategy Fund.............. Class A 1,000.00 1,086.10 7.89 1.50% Class B 1,000.00 1,083.40 11.82 2.25% Class C 1,000.00 1,083.10 11.81 2.25% Moderate Growth Strategy Fund..... Class A 1,000.00 1,063.90 7.80 1.50% Class B 1,000.00 1,059.50 11.68 2.25% Class C**** 1,000.00 1,028.00 9.00 2.25%
------------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. ** Information shown reflects values using the expense ratios and rates of return for the period from June 10, 2005 to October 31, 2005. *** Information shown reflects values using the expense ratios and rates of return for the period from May 4, 2005 to October 31, 2005. **** Information shown reflects values using the expense ratios and rates of return from the period from June 10, 2005 to October 31, 2005. HSBC INVESTOR LIFELINE FUNDS 38 HSBC INVESTOR LIFELINE FUNDS -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each HSBC Investor LifeLine Funds's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXPENSE PAID BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 5/1/05 10/31/05 5/1/05 - 10/31/05 5/1/05 - 10/31/05 ------ -------- ----------------- ----------------- Aggressive Growth Strategy Fund... Class A $1,000.00 $1,017.64 $ 7.63 1.50% Class B 1,000.00 1,013.86 11.42 2.25% Class C** 1,000.00 1,013.86 11.42 2.25% Conservative Growth Strategy Fund............................ Class A 1,000.00 1,017.64 7.63 1.50% Class B 1,000.00 1,013.86 11.42 2.25% Class C 1,000.00 1,013.86 11.42 2.25% Conservative Income Strategy Fund............................ Class A 1,000.00 1,017.64 7.63 1.50% Class B 1,000.00 1,013.76 11.52 2.27% Class C*** 1,000.00 1,013.86 11.42 2.25% Growth Strategy Fund.............. Class A 1,000.00 1,017.64 7.63 1.50% Class B 1,000.00 1,013.86 11.42 2.25% Class C 1,000.00 1,013.86 11.42 2.25% Moderate Growth Strategy Fund..... Class A 1,000.00 1,017.64 7.63 1.50% Class B 1,000.00 1,013.86 11.42 2.25% Class C**** 1,000.00 1,013.86 11.42 2.25%
------------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. ** Information shown reflects values using the expense ratios for the period from June 10, 2005 to October 31, 2005 and has been annualized to reflect values for the period May 1, 2005 to October 31, 2005. *** Information shown reflects values using the expense ratios for the period from May 4, 2005 to October 31, 2005 and has been annualized to reflect values for the period May 1, 2005 to October 31, 2005. **** Information shown reflects values using the expense ratios for the period from June 10, 2005 to October 31, 2005 and has been annualized to reflect values for the period May 1, 2005 to October 31, 2005. 39 HSBC INVESTOR LIFELINE FUNDS HSBC INVESTOR LIMITED MATURITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
--------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 48.8% PRINCIPAL AMOUNT($) VALUE($) --------- ---------- FEDERAL HOME LOAN MORTGAGE CORP. - 13.5% 5.00%, 7/15/14......................... 400,000 401,788 Pool #C01188, 7.00%, 6/1/31............ 256,793 268,094 Pool #C75371, 6.00%, 1/1/33............ 602,424 609,014 Pool #G01740, 5.50%, 12/1/34........... 3,209,052 3,170,163 ---------- 4,449,059 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.6% Pool #535063, 6.50%, 12/1/14........... 269,740 278,726 Pool #535933, 6.50%, 5/1/31............ 188,728 194,095 Pool #555427, 6.00%, 2/1/18............ 1,612,877 1,650,312 Pool #593187, 7.00%, 11/1/31........... 536,388 561,129 Pool #704439, 5.00%, 5/1/18............ 1,525,037 1,505,448 Pool #735224, 5.50%, 2/1/35............ 1,396,020 1,379,427 Pool #740686, 6.50%, 10/1/33........... 674,816 694,105 Pool #781560, 4.49%, 10/1/34........... 502,330 495,173 ---------- 6,758,415 ---------- U.S. TREASURY NOTES - 14.7% 4.00%, 9/30/07......................... 750,000 744,668 4.125%, 8/15/08........................ 400,000 397,031 3.875%, 9/15/10........................ 1,975,000 1,923,311 4.25%, 8/15/15 (c)..................... 1,790,000 1,746,648 ---------- 4,811,658 ---------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $16,218,579).................... 16,019,132 ---------- --------------------------------------------------------------- CORPORATE OBLIGATIONS - 26.8% AUTO MANUFACTURERS - 1.0% DaimlerChrysler North American Holdings, 4.05%, 6/4/08............... 350,000 339,798 ---------- BANKS - 0.9% Sovereign Bank, 5.125%, 3/15/13........ 300,000 294,146 ---------- FINANCE - 9.3% American General Finance, 4.875%, 5/15/10............................... 500,000 494,441 Ford Motor Credit Corp., 5.80%, 1/12/09............................... 475,000 435,029 General Motors Acceptance Corp., 4.50%, 7/15/06 (c)........................... 250,000 247,100 General Motors Acceptance Corp., 4.375%, 12/10/07...................... 500,000 472,045 J.P. Morgan Chase & Co., 5.15%, 10/1/15............................... 350,000 341,004 MBNA Europe Funding PLC, 3.88%, 9/7/07, (a) (b)............................... 600,000 599,881 Met Life Global Funding, 4.50%, 5/5/10, (b)................................... 450,000 440,921 ---------- 3,030,421 ---------- MEDIA - 2.7% AOL Time Warner, Inc., 6.875%, 5/1/12................................ 500,000 535,179 Tribune Co., 4.875%, 8/15/10........... 350,000 341,597 ---------- 876,776 ---------- PHARMACEUTICALS - 1.0% American Home Products, 6.95%, 3/15/11............................... 300,000 323,345 ---------- --------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- REAL ESTATE - 1.2% Erp Operating LP, 5.125%, 3/15/16...... 400,000 387,950 ---------- RETAIL - 3.7% Fred Meyer, Inc., 7.45%, 3/1/08........ 400,000 418,470 May Department Stores Co., 5.75%, 7/15/14............................... 800,000 799,380 ---------- 1,217,850 ---------- TELECOMMUNICATIONS - 3.6% Comcast Corp., 4.95%, 6/15/16.......... 400,000 371,531 SBC Communications, Inc., 6.25%, 3/15/11............................... 400,000 416,439 Verizon Pennsylvania, Inc., 5.65%, 11/15/11.............................. 400,000 397,192 ---------- 1,185,162 ---------- TRANSPORTATION - 3.4% Burlington Northern Santa Fe Railway Co., 4.83%, 1/15/23................... 600,000 590,646 Union Pacific Railroad, 5.08%, 1/2/29................................ 550,000 537,240 ---------- 1,127,886 ---------- TOTAL CORPORATE OBLIGATIONS (COST $8,950,792)........................... 8,783,334 ---------- --------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 10.3% Citigroup Mortgage Loan Trust, Inc. 2005-WF2 AF2, 4.92%, 8/25/35.......... 426,686 424,549 Countrywide Alternative Loan Trust 2004-30CB 3A1, 5.00%, 2/25/20......... 708,898 700,954 Countrywide Home Loans 2005-HYB8 2A1, 5.41%, 12/31/49, (a).................. 490,000 490,306 FHLB Series 00-0582, Class H, 4.75%, 10/25/10.............................. 488,484 485,739 Freddie Mac 2962 CJ, 5.50%, 11/15/23... 900,421 906,392 Greenwich Capital Commercial Funding Corp., 5.12%, 4/10/37................. 360,000 359,775 ---------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $3,391,164)......... 3,367,715 ---------- --------------------------------------------------------------- ASSET BACKED SECURITIES - 10.2% Asset Backed Funding Certificates 2003- AHL1 A1, 3.68%, 3/25/33............... 502,170 487,738 Capital Auto Receivables Asset Trust 2003-2 CL A4A, 1.96%, 1/15/09......... 400,000 392,198 Carmax Auto Owner Trust, 3.00%, 9/15/08............................... 1,250,000 1,230,631 Chase Issuance Trust 2005-A8, 4.01%, 10/15/12, (a)......................... 500,000 500,000 DaimlerChrysler Auto Trust 2005-B A3, 4.04%, 9/8/09......................... 750,000 741,975 ---------- TOTAL ASSET BACKED SECURITIES (COST $3,383,627)........................... 3,352,542 ---------- --------------------------------------------------------------- INVESTMENT COMPANIES - 2.3% HSBC Investor Money Market Fund Class Y Shares*....................... 746,417 746,417 ---------- TOTAL INVESTMENT COMPANIES (COST $746,417)....................... 746,417 ----------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 40 HSBC INVESTOR LIMITED MATURITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
--------------------------------------------------------------- SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 1.9% PRINCIPAL AMOUNT($) VALUE($) --------- ---------- Pool of various securities for HSBC Family of Funds -- Note 2 -- Security Loans................................. 629,969 629,969 ---------- TOTAL SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN (COST $629,969).... 629,969 ---------- TOTAL INVESTMENTS (COST $33,320,548) - 100.3%................................ 32,899,109 ---------- ----------
--------- Percentages indicated are based on net assets of $32,809,686. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented in this report represent the rates that were in effect on October 31, 2005. The maturity dates presented reflect the final maturity date. However, each of these securities contains put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the investment manager based on procedures approved by the Board of Trustees. (c) All or a portion of the security was on loan as of October 31, 2005. * Investment in affiliate. 41 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
---------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 43.4% PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- FEDERAL HOME LOAN MORTGAGE CORP. - 14.8% Pool #C00368, 8.50%, 10/1/24.......... 44,602 48,493 Pool #C00922, 8.00%, 2/1/30........... 298,755 318,325 Pool #C54447, 7.00%, 7/1/31........... 52,857 55,183 Pool #C60712, 6.50%, 11/1/31.......... 702,412 721,502 Pool #C80387, 6.50%, 4/1/26........... 44,442 45,761 Pool #D62926, 6.50%, 8/1/25........... 32,379 33,338 Pool #G00951, 6.00%, 7/1/28........... 399,138 404,268 Pool #G01317, 7.00%, 10/1/31.......... 250,566 261,593 Pool #G01740, 5.50%, 12/1/34.......... 11,519,674 11,380,074 Pool #G01857, 5.00%, 10/1/33.......... 2,284,386 2,206,619 Pool #G01858, 5.00%, 7/1/34........... 2,802,521 2,702,448 ----------- 18,177,604 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.5% Pool #253438, 8.50%, 9/1/30........... 81,673 88,610 Pool #329530, 7.00%, 12/1/25.......... 121,647 127,560 Pool #329655, 7.00%, 11/1/25.......... 65,106 68,271 Pool #356905, 5.36%, 10/1/36, (a)..... 360,425 368,441 Pool #398958, 6.50%, 10/1/12.......... 97,522 100,739 Pool #535332, 8.50%, 4/1/30........... 69,829 75,773 Pool #535440, 8.50%, 8/1/30........... 79,129 85,850 Pool #535608, 9.50%, 4/1/30........... 150,783 166,243 Pool #548965, 8.50%, 7/1/30........... 72,134 78,260 Pool #568486, 7.00%, 1/1/31........... 40,526 42,396 Pool #573752, 8.50%, 2/1/31........... 66,235 71,861 Pool #575328, 6.50%, 4/1/31........... 95,961 98,690 Pool #623129, 6.50%, 1/1/32........... 1,168,229 1,201,451 Pool #725232, 5.00%, 3/1/34........... 1,895,784 1,830,989 Pool #735224, 5.50%, 2/1/35........... 5,122,852 5,061,959 Pool #781560, 4.49%, 10/1/34.......... 1,914,184 1,886,911 Pool #817347, 6.00%, 7/1/35........... 2,628,707 2,652,000 Pool #827171, 6.00%, 6/1/35........... 4,831,097 4,873,904 ----------- 18,879,908 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.5% Pool #346406, 7.50%, 2/15/23.......... 79,445 84,693 Pool #412530, 7.50%, 12/15/25......... 127,161 135,132 Pool #780804, 10.00%, 12/15/20........ 99,860 110,987 Pool #780826, 9.50%, 5/15/18.......... 58,324 64,144 Pool #781300, 7.00%, 6/15/31.......... 222,684 234,140 ----------- 629,096 ----------- U.S. TREASURY BONDS - 2.8% 5.375%, 2/15/31....................... 3,150,000 3,435,469 ----------- U.S. TREASURY NOTES - 9.8% 4.00%, 9/30/07........................ 1,650,000 1,638,270 4.125%, 8/15/08....................... 1,300,000 1,290,351 3.875%, 9/15/10....................... 760,000 740,109 4.25%, 8/15/15 (e).................... 8,510,000 8,303,897 ----------- 11,972,627 ----------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $53,757,787)......................... 53,094,704 ----------- ---------------------------------------------------------------- CORPORATE OBLIGATIONS - 30.6% PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- AUTO MANUFACTURERS - 1.0% DaimlerChrysler North American Holdings, 4.05%, 6/4/08.............. 1,275,000 1,237,835 ----------- BANKS - 0.9% Sovereign Bank, 5.125%, 3/15/13....... 1,075,000 1,054,025 ----------- BUSINESS SERVICES - 0.9% Xerox Corp., 9.75%, 1/15/09........... 1,000,000 1,105,000 ----------- CHEMICALS - 1.7% Nova Chemicals Corp., 7.00%, 5/15/06.............................. 1,200,000 1,209,000 Nova Chemicals Corp., 7.40%, 4/1/09... 900,000 913,500 ----------- 2,122,500 ----------- FINANCE - 8.8% American General Finance, 4.875%, 5/15/10.............................. 2,100,000 2,076,650 Ford Motor Credit Corp., 5.80%, 1/12/09 (e).......................... 1,600,000 1,465,362 General Motors Acceptance Corp., 4.375%, 12/10/07..................... 1,900,000 1,793,771 J.P. Morgan Chase & Co., 5.15%, 10/1/15.............................. 1,350,000 1,315,300 J.P. Morgan Chase XVII, 5.85%, 8/1/35............................... 500,000 472,110 MBNA Europe Funding PLC, 3.88%, 9/7/07, (a) (b)...................... 2,200,000 2,199,561 Met Life Global Funding, 4.50%, 5/5/10, (b).......................... 1,500,000 1,469,738 ----------- 10,792,492 ----------- MEDIA - 1.1% Tribune Co., 4.875%, 8/15/10.......... 1,350,000 1,317,589 ----------- MEDICAL - 0.8% HCA, Inc., 6.95%, 5/1/12.............. 1,000,000 1,018,820 ----------- PHARMACEUTICALS - 1.1% American Home Products, 6.95%, 3/15/11.............................. 1,250,000 1,347,270 ----------- REAL ESTATE - 1.0% Erp Operating LP, 5.125%, 3/15/16..... 1,250,000 1,212,345 ----------- RETAIL - 3.9% Fred Meyer, Inc., 7.45%, 3/1/08....... 1,500,000 1,569,263 May Department Stores Co., 6.65%, 7/15/14.............................. 3,200,000 3,233,804 ----------- 4,803,067 ----------- TELECOMMUNICATIONS - 7.0% AOL Time Warner, Inc., 7.70%, 5/1/32............................... 1,500,000 1,708,339 AT&T Wireless Services, Inc., 8.75%, 3/1/31............................... 650,000 847,633 Comcast Corp., 4.95%, 6/15/16......... 1,400,000 1,300,359 SBC Communications, Inc., 6.25%, 3/15/11.............................. 1,450,000 1,509,589 Time Warner Entertainment Co., 8.375%, 3/15/23.............................. 675,000 793,400 Verizon Global Funding Corp., 7.75%, 12/1/30.............................. 850,000 985,794 Verizon Pennsylvania, Inc., 5.65%, 11/15/11............................. 1,400,000 1,390,173 ----------- 8,535,287 -----------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 42 HSBC INVESTOR FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
---------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- TRANSPORTATION - 2.4% Burlington Northern Santa Fe Railway Co., 7.57%, 1/2/21................... 327,035 373,261 Burlington Northern Santa Fe Railway Co., 4.83%, 1/15/23.................. 1,100,000 1,082,851 Union Pacific Corp., 6.85%, 1/2/19.... 451,336 489,510 Union Pacific Railroad, 5.08%, 1/2/29............................... 1,050,000 1,025,640 ----------- 2,971,262 ----------- TOTAL CORPORATE OBLIGATIONS (COST $38,335,343)......................... 37,517,492 ----------- ---------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 15.6% Banc of America Commercial Mortgage, Inc. 00 2 A2, 7.20%, 5/15/10......... 675,000 726,153 Chase Commercial Mortgage Securities Corp. 99 2 A2, 7.20%, 1/15/32........ 700,000 751,717 Citigroup Mortgage Loan Trust, Inc. 2005-WF2 AF2, 4.92%, 8/25/35......... 1,351,171 1,344,405 Countrywide Alternative Loan Trust 2004-30CB 3A1, 5.00%, 2/25/20........ 2,543,172 2,514,673 Countrywide Home Loans 2005-HYB8 2A1, 5.41%, 12/31/49, (a)................. 1,840,000 1,841,150 DLJ Mortgage Acceptance Corp. IO 97 CF1 S, 0.91%, 5/15/30, (b) (c)....... 497,419 4,900 Fannie Mae IO 00 16 PS, 4.56%, 10/25/29, (c)........................ 101,337 6,206 Fannie Mae IO 01 4 SA, 3.58%, 2/17/31, (c)......................... 350,150 20,855 Fannie Mae IO 200 32 SV, 4.62%, 3/18/30, (c)......................... 48,440 2,172 Fannie Mae IO 270 2, 8.50%, 9/1/23, (c).................................. 74,943 18,391 Fannie Mae IO 296 2, 8.00%, 4/1/24, (c).................................. 83,848 19,538 Fannie Mae IO 306 2, 8.00%, 5/1/30, (c).................................. 110,914 26,099 FHA Weyerhauser, 7.43%, 1/1/24, (d) (f).................................. 78,037 78,037 First Union-Chase Commercial Mortgage 99 C2 A2, 6.645%, 6/15/31............ 582,622 607,740 Freddie Mac 2894 QA, 5.50%, 12/15/24............................. 4,047,957 4,089,291 Freddie Mac 2962 CJ, 5.50%, 11/15/23............................. 3,317,340 3,339,340 Freddie Mac IO 1534 K, 3.40%, 6/15/23, (c)......................... 231,789 12,583 Freddie Mac IO 2141 SD, 4.18%, 4/15/29, (c)......................... 165,707 16,224 Freddie Mac IO 2247 SC, 3.53%, 8/15/30, (c)......................... 112,472 4,330 GE Capital Commercial Mortgage Corp. 01 1 A1, 6.08%, 5/15/33.............. 215,244 219,552 GMAC Commercial Mortgage Securities, Inc. 98 C2 A2, 6.42%, 5/15/35........ 571,792 590,172 GMAC Commercial Mortgage Securities, Inc. IO 96 C1 X2, 2.08%, 10/15/28, (c)........................ 188,706 1,882 Government National Mortgage Association IO 99 29 SD, 4.03%, 3/16/26, (c)......................... 5,511 11 Government National Mortgage Association IO 99 30 S, 4.63%, 8/16/29, (c)......................... 112,397 8,825 Government National Mortgage Association IO 99 30 SA, 4.03%, 4/16/29, (c)......................... 145,516 9,532 Government National Mortgage Association IO 99 32 SB, 4.03%, 7/16/27, (c)......................... 52,862 1,294 ---------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Greenwich Capital Commercial Funding Corp., 5.12%, 4/10/37................ 1,350,000 1,349,156 GS Mortgage Securities Corp. IO 97 GL X2, 0.90%, 7/13/30, (c).............. 367,626 4,695 LB-UBS Commercial Mortgage Trust 00 C3 A1, 7.95%, 7/15/09................... 212,057 218,483 PNC Mortgage Acceptance Corp. 00 C2 A2, 7.30%, 10/12/33.................. 600,000 648,731 Salomon Brothers Mortgage Securities VII 00 C3 A2, 6.59%, 12/18/33........ 650,000 686,135 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $19,172,949)....... 19,162,272 ----------- ---------------------------------------------------------------- ASSET BACKED SECURITIES - 8.7% Asset Backed Funding Certificates 2003-AHL1 A1, 3.68%, 3/25/33......... 1,763,872 1,713,178 Capital Auto Receivables Asset Trust 2003-2 CL A4A, 1.96%, 1/15/09........ 1,450,000 1,421,719 DaimlerChrysler Auto Trust 2004-C A4, 3.28%, 12/8/09....................... 1,500,000 1,455,253 DaimlerChrysler Auto Trust 2005-B A3, 4.04%, 9/8/09........................ 950,000 939,835 Peco Energy Transition Trust 00 A A3, 7.625%, 3/1/10....................... 600,000 648,023 Union Acceptance Corp. 01 C B, 4.73%, 11/9/09.............................. 2,500,000 2,501,344 WFS Financial Owner Trust 2004-3 A3, 3.30%, 4/17/09....................... 2,000,000 1,974,292 ----------- TOTAL ASSET BACKED SECURITIES (COST $10,696,796)......................... 10,653,644 ----------- ---------------------------------------------------------------- INVESTMENT COMPANIES - 0.8% HSBC Investor Money Market Fund Class Y Shares *..................... 1,011,001 1,011,001 ----------- TOTAL INVESTMENT COMPANIES (COST $1,011,001).......................... 1,011,001 ----------- ---------------------------------------------------------------- MUNICIPAL BONDS - 0.7% URBAN AND COMMUNITY DEVELOPMENT - 0.7% Louisiana Local Government Environmental Facilities & Community Development (LOC AMBAC), 6.30%, 7/1/30............................... 850,000 882,521 ----------- TOTAL MUNICIPAL BONDS (COST $931,100)...................... 882,521 ----------- ---------------------------------------------------------------- SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 6.0% Pool of various securities for HSBC Family of Funds -- Note 2 -- Security Loans....................... 7,362,043 7,362,043 ----------- TOTAL SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN (COST $7,362,043).......................... 7,362,043 ----------- TOTAL INVESTMENTS (COST $131,267,019) - 105.8%........ 129,683,677 ----------- -----------
--------- Percentages indicated are based on net assets of $122,529,780. 43 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED) (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented in this report represents the rates that were in final on October 31, 2005. The maturity dates presented reflect the stated maturity dates. However, each of these securities contains put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. (b) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the investment manager based on procedures approved by the Board of Trustees. (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. The interest rate presented represents the rates that were in effect on October 31, 2005. 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 Advisor, using Board approved procedures, has deemed these securities to be illiquid. Represents 0.06% of net assets. (e) All or a portion of the security was on loan as of October 31, 2005. (f) Security was fair valued (See note 2) as of October 31, 2005. * Investment in affiliate. AMBAC - American Municipal Bank Assurance Corp. LOC - Letter of Credit See notes to financial statements. HSBC INVESTOR PORTFOLIOS 44 HSBC INVESTOR GROWTH PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
----------------------------------------------------------------- COMMON STOCKS - 97.8% SHARES VALUE($) --------- ---------- AEROSPACE & DEFENSE - 3.2% General Dynamics Corp.................... 10,650 1,238,595 The Boeing Co............................ 5,600 361,984 ---------- 1,600,579 ---------- BIOTECHNOLOGY - 4.4% Amgen, Inc. (a).......................... 19,050 1,443,228 Gilead Sciences, Inc. (a)................ 15,500 732,375 ---------- 2,175,603 ---------- BUSINESS SERVICES - 3.0% Paychex, Inc............................. 37,800 1,465,128 ---------- CHEMICALS - 2.3% Monsanto Co.............................. 18,150 1,143,632 ---------- COMPUTER SOFTWARE - 9.2% Adobe Systems, Inc....................... 18,600 599,850 Automatic Data Processing, Inc........... 25,250 1,178,165 EMC Corp. (a)............................ 33,550 468,358 Microsoft Corp........................... 71,850 1,846,544 SAP AG................................... 10,700 459,458 ---------- 4,552,375 ---------- COMPUTERS - 1.2% Apple Computer, Inc. (a)................. 10,650 613,334 ---------- CONSUMER PRODUCTS - 3.0% Harman International Industries, Inc..... 4,950 494,307 The Procter & Gamble Co.................. 17,950 1,005,021 ---------- 1,499,328 ---------- DIVERSIFIED MANUFACTURING OPERATIONS - 3.4% General Electric Co...................... 50,062 1,697,602 ---------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 3.3% Broadcom Corp. (a)....................... 11,000 467,060 Maxim Integrated Products, Inc........... 11,400 395,352 Microchip Technology, Inc................ 25,150 758,776 ---------- 1,621,188 ---------- FINANCIAL SERVICES - 17.0% American Express Co...................... 8,900 442,953 Franklin Resources, Inc.................. 16,100 1,422,757 Goldman Sachs Group, Inc................. 4,150 524,436 Legg Mason, Inc.......................... 15,000 1,609,649 Moody's Corp............................. 11,000 585,860 Robert Half International, Inc........... 22,650 835,332 SLM Corp................................. 39,400 2,187,881 The Chicago Mercantile Exchange Holdings, Inc..................................... 2,050 748,558 ---------- 8,357,426 ---------- HEALTH CARE - 8.4% DENTSPLY International, Inc.............. 7,100 391,494 Medtronic, Inc........................... 20,700 1,172,862 Stryker Corp............................. 11,850 486,680 UnitedHealth Group, Inc.................. 36,500 2,112,985 ---------- 4,164,021 ---------- ----------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ---------- HOTELS & LODGING - 1.5% Las Vegas Sands Corp. (a)................ 6,700 229,810 Starwood Hotels & Resorts Worldwide, Inc..................................... 8,700 508,341 ---------- 738,151 ---------- INTERNET RELATED - 6.5% eBay, Inc. (a)........................... 11,800 467,280 Google, Inc., Class A (a)................ 6,050 2,251,447 Yahoo!, Inc. (a)......................... 13,850 512,035 ---------- 3,230,762 ---------- MEDICAL & HEALTH PRODUCTS - 3.8% Genentech, Inc. (a)...................... 20,929 1,896,167 ---------- OIL & GAS - 8.6% Baker Hughes, Inc........................ 16,150 887,604 Schlumberger Ltd......................... 19,750 1,792,708 Smith International, Inc................. 48,200 1,561,680 ---------- 4,241,992 ---------- PHARMACEUTICALS - 6.7% Alcon, Inc............................... 8,400 1,116,360 Allergan, Inc............................ 4,350 388,455 Johnson & Johnson........................ 28,550 1,787,801 ---------- 3,292,616 ---------- RETAIL - 9.7% Advance Auto Parts (a)................... 10,025 375,938 Best Buy Co., Inc........................ 9,875 437,068 CVS Corp................................. 16,750 408,868 Home Depot, Inc.......................... 20,750 851,579 Staples, Inc............................. 22,775 517,676 Walgreen Co.............................. 40,017 1,817,971 Weight Watchers International, Inc. (a)..................................... 6,600 346,962 ---------- 4,756,062 ---------- TELECOMMUNICATIONS - 1.1% QUALCOMM, Inc............................ 13,200 524,832 ---------- TRANSPORTATION - 1.5% Expeditors International of Washington, Inc..................................... 12,300 746,241 ---------- TOTAL COMMON STOCKS (COST $42,329,616)...................... 48,317,039 ---------- ----------------------------------------------------------------- INVESTMENT COMPANIES - 2.2% SHARES VALUE($) --------- ---------- HSBC Investor Money Market Fund Class Y Shares*................................. 1,106,735 1,106,735 ---------- TOTAL INVESTMENT COMPANIES (COST $1,106,735)............................. 1,106,735 ---------- TOTAL INVESTMENTS (COST $43,436,351) - 100.0%............ 49,423,774 ---------- ----------
--------- Percentages indicated are based on net assets of $49,414,699. (a) Represents non-income producing security. * Investment in affiliate. 45 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR VALUE PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
---------------------------------------------------------------- COMMON STOCKS - 97.5% SHARES VALUE($) ------- ---------- AEROSPACE & DEFENSE - 7.9% Lockheed Martin Corp...................... 24,600 1,489,776 Northrop Grumman Corp..................... 32,600 1,748,990 Raytheon Co............................... 28,300 1,045,685 ---------- 4,284,451 ---------- BANKING - 4.8% Bank of America Corp...................... 23,600 1,032,264 Wells Fargo & Co.......................... 25,800 1,553,160 ---------- 2,585,424 ---------- BUSINESS SERVICES - 2.5% Pitney Bowes, Inc......................... 32,100 1,350,768 ---------- COMPUTER SOFTWARE - 7.1% Computer Associates International, Inc.... 87,100 2,436,187 Microsoft Corp............................ 54,300 1,395,510 ---------- 3,831,697 ---------- CONGLOMERATES - 1.9% Loews Corp................................ 11,200 1,041,376 ---------- CONSUMER PRODUCTS - 7.3% Altria Group, Inc......................... 29,200 2,191,460 Kimberly-Clark Corp....................... 31,000 1,762,040 ---------- 3,953,500 ---------- DIVERSIFIED MANUFACTURING OPERATIONS - 2.1% Ingersoll-Rand Co......................... 29,800 1,126,142 ---------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 3.7% Agilent Technologies, Inc. (a)............ 62,900 2,013,429 ---------- FINANCIAL SERVICES - 17.0% Citigroup, Inc............................ 36,707 1,680,446 Countrywide Financial Corp................ 76,600 2,433,582 Fannie Mae................................ 44,000 2,090,880 Genworth Financial, Inc., Class A......... 28,000 887,320 J.P. Morgan Chase & Co.................... 39,150 1,433,673 MGIC Investment Corp...................... 11,800 699,032 ---------- 9,224,933 ---------- GAS & ELECTRIC UTILITY - 1.5% Dominion Resources, Inc................... 11,000 836,880 ---------- INSURANCE - 8.1% Aetna, Inc................................ 12,400 1,098,144 AON Corp.................................. 26,900 910,565 Radian Group, Inc......................... 21,400 1,114,940 The Hartford Financial Services Group, Inc...................................... 15,700 1,252,075 ---------- 4,375,724 ---------- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) ------- ---------- MEDIA - 5.3% Liberty Media Corp., Class A (a).......... 100,350 799,790 Viacom, Inc., Class B..................... 66,100 2,047,117 ---------- 2,846,907 ---------- METALS & MINING - 6.2% Barrick Gold Corp......................... 62,700 1,583,175 POSCO ADR................................. 11,800 605,222 Rio Tinto PLC ADR......................... 7,500 1,144,650 ---------- 3,333,047 ---------- OIL & GAS - 12.6% Burlington Resources, Inc................. 9,500 686,090 ConocoPhillips............................ 14,082 920,681 Kerr-McGee Corp........................... 33,589 2,856,409 Noble Energy, Inc......................... 59,000 2,362,950 ---------- 6,826,130 ---------- PAPER PRODUCTS - 1.4% International Paper Co.................... 26,800 782,024 ---------- TELECOMMUNICATIONS - 6.0% BellSouth Corp............................ 36,050 938,021 Motorola, Inc............................. 72,000 1,595,520 Sprint Nextel Corp........................ 30,600 713,286 ---------- 3,246,827 ---------- TRANSPORTATION - 2.1% Union Pacific Corp........................ 16,700 1,155,306 ---------- TOTAL COMMON STOCKS (COST $45,949,150)....................... 52,814,565 ---------- ---------------------------------------------------------------- INVESTMENT COMPANIES - 0.6% SHARES VALUE($) ------- ---------- HSBC Investor Money Market Fund Class Y Shares*.......................... 312,264 312,264 ---------- TOTAL INVESTMENT COMPANIES (COST $312,264).......................... 312,264 ---------- TOTAL INVESTMENTS (COST $46,261,414) - 98.1%.............. 53,126,829 ---------- ----------
--------- Percentages indicated are based on net assets of $54,150,448. * Investment in Affiliate (a) Represents non-income producing security. ADR - American Depositary Receipt See notes to financial statements. HSBC INVESTOR PORTFOLIOS 46 HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
---------------------------------------------------------------- COMMON STOCKS - 98.5% SHARES VALUE($) --------- ----------- AUSTRALIA - 1.1% BlueScope Steel Ltd.................... 96,800 616,221 Macquarie Airports..................... 699,400 1,574,606 Macquarie Infrastructure Group......... 154,500 397,394 ----------- 2,588,221 ----------- AUSTRIA - 0.5% Omv AG................................. 20,500 1,105,950 ----------- BELGIUM - 1.7% Delhaize Group......................... 51,900 3,008,743 KBC Bankverzekeringsholding............ 11,300 920,875 ----------- 3,929,618 ----------- BRAZIL - 2.1% Braskem SA-Pref (b).................... 40,000 344,843 CIA de Saneamento Basico do Estado de Sao Paulo............................. 7,710,000 493,032 Gerdau SA ADR.......................... 50,100 679,857 Petroleo Brasileiro SA ADR............. 27,700 1,589,149 Unibanco GDR........................... 13,000 679,900 Usinas Siderurgicas de Minas Gerais SA.................................... 30,200 610,495 Votorantim Celulos Papel SA ADR........ 34,250 409,973 ----------- 4,807,249 ----------- CANADA - 2.3% Canadian Natural Resources............. 43,400 1,774,886 EnCana Corp............................ 30,000 1,371,951 Nexen, Inc............................. 20,000 823,171 Teck Cominco Ltd., B shares............ 32,300 1,361,152 ----------- 5,331,160 ----------- CHINA - 0.1% China Petroleum & Chemical Corp........ 592,000 239,076 ----------- FINLAND - 0.5% Sampo OYJ, Class A..................... 77,000 1,181,124 ----------- FRANCE - 10.9% Assurances Generales de France......... 36,800 3,504,532 BNP Paribas SA......................... 15,800 1,198,226 Credit Agricole SA..................... 75,900 2,225,300 France Telecom SA...................... 32,800 852,631 Renault SA............................. 55,300 4,788,787 Sanofi-Aventis......................... 57,800 4,630,180 Societe Generale....................... 33,700 3,848,704 Thomson SA............................. 58,900 1,110,378 Total SA, B Shares..................... 11,700 2,944,053 ----------- 25,102,791 ----------- GERMANY - 6.7% Continental AG......................... 51,400 3,928,072 E.ON AG................................ 41,000 3,714,684 Fresenius Medical Care AG.............. 22,800 2,058,314 MAN AG................................. 66,000 3,060,449 Muenchener Rueckversicherungs- Gesellschaft AG....................... 22,400 2,629,530 ----------- 15,391,049 ----------- HUNGARY - 0.4% MOL Magyar Olaj -- es Gazipari Rt. GDR................................... 9,600 904,800 ----------- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- IRELAND - 0.7% Depfa Bank plc......................... 96,470 1,504,564 ----------- ISRAEL - 0.5% Bank Hapoalim BM....................... 286,600 1,098,642 ----------- ITALY - 1.9% ENI SpA................................ 166,500 4,456,335 ----------- JAPAN - 24.4% Canon, Inc............................. 89,300 4,727,388 East Japan Railway Co.................. 102 606,134 Hitachi, Ltd........................... 144,000 886,868 Honda Motor Co., Ltd................... 96,600 5,373,359 ITOCHU Corp............................ 317,000 2,173,147 Japan Tobacco, Inc..................... 240 3,794,856 JFE Holdings, Inc...................... 121,400 3,771,805 Kobe Steel, Ltd........................ 958,000 2,830,925 Kyocera Corp........................... 11,400 739,491 Mitsubishi UFJ Financial Group, Inc.... 133 1,671,891 Mitsui Chemicals, Inc.................. 310,000 1,857,499 Nippon Mining Holdings, Inc............ 360,000 2,673,254 Nissan Motor Co., Ltd.................. 225,100 2,360,275 ORIX Corp.............................. 27,800 5,213,614 Sanyo Shinpan Finance Co., Ltd......... 26,900 1,957,695 Sega Sammy Holdings, Inc............... 9,800 352,698 Sega Sammy Holdings, Inc. (b).......... 9,800 352,797 Sony Corp.............................. 12,510 408,770 Sumitomo Metal Industries, Ltd......... 294,000 1,018,033 Sumitomo Mitsui Financial Group, Inc................................... 598 5,523,745 The Tokyo Electric Power Co., Inc...... 90,600 2,253,088 Tokyo Gas Co., Ltd..................... 529,000 2,080,678 Toyota Motor Corp...................... 51,600 2,393,128 UNY Co., Ltd........................... 90,000 1,121,975 ----------- 56,143,113 ----------- LUXEMBOURG - 2.2% Arcelor................................ 211,180 5,014,193 ----------- NETHERLANDS - 4.5% ABN AMRO Holding NV.................... 44,453 1,051,350 European Aeronautic Defence and Space Co.................................... 79,660 2,759,807 ING Groep NV........................... 190,468 5,492,775 Royal Dutch Shell plc, A Shares........ 33,600 1,035,958 ----------- 10,339,890 ----------- PHILIPPINES - 0.3% Philippine Long Distance Telephone Co.................................... 21,000 641,110 ----------- SINGAPORE - 1.9% Flextronics International Ltd. (b)..... 162,400 1,508,696 Singapore Telecommunications Ltd....... 2,104,630 2,900,304 ----------- 4,409,000 ----------- SOUTH AFRICA - 0.8% ABSA Group Ltd......................... 27,540 365,668 Sanlam Ltd............................. 554,040 1,021,108 Telkom South Africa Ltd................ 28,000 529,052 ----------- 1,915,828 -----------
47 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- SOUTH KOREA - 2.5% Hyundai Motor Co....................... 11,600 857,749 Industrial Bank of Korea GDR........... 88,300 1,081,675 Kookmin Bank ADR....................... 14,600 852,932 POSCO ADR.............................. 34,200 1,754,118 Shinhan Financial Group Co., Ltd. ADR................................... 19,450 1,312,681 ----------- 5,859,155 ----------- SPAIN - 3.7% Endesa SA.............................. 155,800 3,867,995 Repsol YPF SA.......................... 155,000 4,616,429 ----------- 8,484,424 ----------- SWITZERLAND - 1.8% Credit Suisse Group.................... 81,100 3,588,142 Micronas Semiconductor Holding AG (b)................................... 14,300 484,846 ----------- 4,072,988 ----------- TAIWAN - 1.4% China Steel Corp. GDR.................. 43,470 697,694 Compal Electronics, Inc. GDR........... 222,840 1,065,175 Far Eastone Telecommunications Co., Ltd. GDR.............................. 21,400 373,128 Gigabyte Technology Co., Ltd........... 270,112 224,669 Taiwan Semiconductor Manufacturing Co., Ltd................................... 491,141 763,122 ----------- 3,123,788 ----------- THAILAND - 0.3% PTT Public Company Ltd. plc............ 121,400 726,732 ----------- TURKEY - 0.1% Ford Otomotiv Sanayi AS................ 47,640 342,464 ----------- UNITED KINGDOM - 25.2% Aviva plc.............................. 346,270 4,088,803 Barclays plc........................... 410,200 4,064,675 BP Amoco plc........................... 410,200 4,543,590 British Aerospace plc.................. 485,500 2,840,581 British American Tobacco plc........... 28,000 616,085 Friends Provident plc.................. 782,500 2,441,216 George Wimpey plc...................... 244,600 1,772,262 Glaxosmithkline plc.................... 133,600 3,474,475 ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) --------- ----------- UNITED KINGDOM, CONTINUED HBOS plc............................... 260,121 3,842,156 Intercontinental Hotels Group plc...... 120,214 1,502,351 International Power plc................ 300,000 1,231,847 Mitchells & Butlers plc................ 119,800 769,498 Punch Taverns plc...................... 185,000 2,394,991 Royal & Sun Alliance Insurance Group plc................................... 736,000 1,252,824 Royal Bank of Scotland Group plc....... 169,100 4,682,159 Royal Dutch Shell plc, B Shares........ 45,973 1,499,509 Sainsbury plc.......................... 410,062 2,025,468 Tate & Lyle plc........................ 235,000 1,928,271 Taylor Woodrow plc..................... 361,600 2,004,519 Trinity Mirror plc..................... 145,600 1,534,559 Vodafone Group plc..................... 1,461,053 3,835,556 Whitbread plc.......................... 145,200 2,416,537 Xstrata plc............................ 146,000 3,344,512 ----------- 58,106,444 ----------- TOTAL COMMON STOCKS (COST $187,403,528)................... 226,819,708 ----------- ---------------------------------------------------------------- CASH RESERVE - 0.4% Investors Bank Trust Cash Reserve...... 937,632 937,632 ----------- TOTAL CASH RESERVE (COST $937,632)....................... 937,632 ----------- ---------------------------------------------------------------- RIGHTS & WARRANTS - 0.0% UNITED KINGDOM - 0.0% TI Automotive Ltd., Class A (b) (c).... 190,000 0 ----------- TOTAL RIGHTS & WARRANTS (COST $0)............................. 0 ----------- TOTAL INVESTMENTS (COST $188,341,160) - 98.9%.......... 227,757,340 ----------- -----------
--------- Percentages indicated are based on net assets of $230,229,852. (a) Not used. (b) Represents non-income producing security. (c) Represents illiquid security. ADR -- American Depositary Receipt GDR -- Global Depositary Receipt See notes to financial statements. HSBC INVESTOR PORTFOLIOS 48 HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
PERCENT OF INDUSTRY NET ASSETS -------- ---------- Aerospace & Defense......................................... 2.4% Automotive.................................................. 8.7% Banking & Financial Services................................ 22.7% Building & Construction..................................... 1.6% Chemicals................................................... 1.0% Computer Related............................................ 0.6% Drugs -- Medical............................................ 4.4% Electrical.................................................. 2.8% Electronic Components & Semiconductors...................... 2.1% Energy...................................................... 0.5% Food & Beverage............................................. 0.9% Insurance................................................... 7.0% Leisure..................................................... 1.9% Manufacturing............................................... 5.3% Metals & Mining............................................. 9.4% Multimedia.................................................. 1.1% Oil & Gas................................................... 15.7% Paper Products.............................................. 0.2% Cash........................................................ 0.4% Retail...................................................... 3.2% Telecommunications.......................................... 4.0% Tobacco..................................................... 1.9% Transportation Services..................................... 1.1% ------ Total Investments........................................... 98.9% ------ Other assets in excess of liabilities....................... 1.1% ------ Net Assets.................................................. 100.0% ------ ------
49 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
---------------------------------------------------------------- COMMON STOCKS - 98.7% SHARES VALUE($) ---------- ----------- ADVERTISING - 2.3% Monster Worldwide, Inc. (a) (b)....... 154,700 5,075,707 ----------- BANKING - 4.3% East West Bancorporation, Inc......... 112,000 4,288,480 Wintrust Financial Corp............... 95,200 5,110,336 ----------- 9,398,816 ----------- BIOTECHNOLOGY - 4.0% Celgene Corp. (a)..................... 154,100 8,645,010 ----------- COMMERCIAL SERVICES - 4.2% Alliance Data Systems Corp. (a)....... 123,000 4,373,880 ValueClick, Inc. (a).................. 275,300 4,817,750 ----------- 9,191,630 ----------- COMPUTER SOFTWARE - 7.0% CheckFree Corp. (a)................... 60,300 2,562,750 Satyam Computer Services Ltd. ADR..... 86,200 2,946,316 SRA International, Inc., Class A (a) (b).................................. 157,500 5,169,150 Transaction Systems Architects, Inc., Class A (a).......................... 173,500 4,686,235 ----------- 15,364,451 ----------- CONSULTING SERVICES - 1.4% LECG Corp. (a)........................ 138,600 3,061,674 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 8.6% Actuant Corp., Class A................ 98,300 4,787,210 AMETEK, Inc........................... 166,300 6,773,399 AptarGroup, Inc....................... 13,000 665,470 IDEX Corp............................. 140,100 5,606,802 Roper Industries, Inc................. 26,400 995,280 ----------- 18,828,161 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 9.1% Advanced Analogic Technologies, Inc. (a).................................. 92,000 1,002,800 Amphenol Corp., Class A............... 54,800 2,190,356 ATMI, Inc. (a)........................ 108,800 2,971,328 Cognos, Inc. (a)...................... 60,200 2,259,306 Power Integrations, Inc. (a).......... 133,700 2,822,407 Thermo Electron Corp. (a)............. 188,300 5,684,777 Varian Semiconductor Equipment Associates, Inc. (a) (b)............. 80,100 3,029,382 ----------- 19,960,356 ----------- ENVIRONMENTAL SERVICES - 5.5% Pioneer Natural Resources Co.......... 57,600 2,882,880 Republic Services, Inc., Class A...... 153,900 5,440,365 Waste Connections, Inc. (a)........... 109,200 3,644,004 ----------- 11,967,249 ----------- FINANCIAL SERVICES - 2.2% Affiliated Managers Group, Inc. (a) (b).................................. 62,800 4,819,900 ----------- HEALTH CARE - 16.9% Advanced Medical Optics, Inc. (a)..... 111,900 3,992,592 Amylin Pharmaceuticals Inc. (a)....... 32,500 1,092,000 Charles River Laboratories (a)........ 46,100 2,017,336 CYTYC Corp. (a)....................... 151,000 3,827,850 Inamed Corp. (a)...................... 97,900 6,960,690 Kinetic Concepts, Inc. (a)............ 72,000 2,584,800 Manor Care, Inc. (b).................. 161,000 5,997,250 Omnicare, Inc. (b).................... 154,700 8,369,270 PacifiCare Health Systems, Inc. (a)... 27,700 2,281,372 ----------- 37,123,160 ----------- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED SHARES VALUE($) ---------- ----------- HOSPITALS - 2.0% Triad Hospitals, Inc. (a)............. 103,800 4,269,294 ----------- INTERNET RELATED - 1.6% Concur Technologies, Inc. (a)......... 226,300 3,057,313 RSA Security, Inc. (a)................ 32,400 369,360 ----------- 3,426,673 ----------- OIL & GAS - 14.1% Chesapeake Energy Corp................ 149,000 4,782,900 Consol Energy, Inc.................... 76,200 4,640,580 Denbury Resources, Inc. (a)........... 100,400 4,380,452 Massey Energy Co...................... 186,900 7,489,083 Peabody Energy Corp................... 68,800 5,377,408 Smith International, Inc.............. 130,500 4,228,200 ----------- 30,898,623 ----------- PHARMACEUTICALS - 4.7% Elan Corp. plc ADR (a) (b)............ 555,800 4,585,350 OSI Pharmaceuticals, Inc. (a) (b)..... 160,100 3,730,330 Santarus, Inc. (a) (b)................ 333,100 2,048,565 ----------- 10,364,245 ----------- RETAIL - 6.1% Dick's Sporting Goods, Inc. (a) (b)... 75,300 2,253,729 P.F. Chang's China Bistro, Inc. (a) (b).................................. 41,700 1,907,358 Talbots, Inc.......................... 137,300 3,582,157 Weight Watchers International, Inc. (a).................................. 40,100 2,108,057 Williams-Sonoma, Inc. (a)............. 86,600 3,386,926 ----------- 13,238,227 ----------- TELECOMMUNICATIONS - 3.0% Polycom, Inc. (a)..................... 279,600 4,277,880 Scientific-Atlanta, Inc............... 67,200 2,381,568 ----------- 6,659,448 ----------- TRANSPORTATION - 1.7% J.B. Hunt Transport Services, Inc..... 186,400 3,618,024 ----------- TOTAL COMMON STOCKS (COST $178,714,602).................. 215,910,648 ----------- ---------------------------------------------------------------- INVESTMENT COMPANIES - 1.6% SHARES VALUE($) ---------- ----------- HSBC Investor Money Market Fund Class Y Shares *..................... 3,433,854 3,433,854 ----------- TOTAL INVESTMENT COMPANIES (COST $3,433,854).......................... 3,433,854 ----------- ---------------------------------------------------------------- SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 19.4% PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Pool of various securities for HSBC Family of Funds -- Note 2 -- Security Loans................................ 42,518,000 42,518,000 ----------- TOTAL SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN (COST $42,518,000)................... 42,518,000 ----------- TOTAL INVESTMENTS (COST $224,666,456) - 119.7%........ 261,862,502 ----------- -----------
--------- Percentages indicated are based on net assets of $218,778,225. (a) Represents non-income producing security. (b) All or portion of security was on loan as of October 31, 2005. * Investment in affiliate ADR -- American Depositary Receipt See notes to financial statements. HSBC INVESTOR PORTFOLIOS 50 HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
LIMITED INTERNATIONAL SMALL CAP MATURITY FIXED INCOME GROWTH VALUE EQUITY EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ------------- ------------ ------------- ------------- ------------ ------------ ASSETS: Investments in non-affiliates, at value* $32,152,692 $128,672,676 $48,317,039 $52,814,565 $227,757,340 $258,428,648 Investments in affiliates, at value 746,417 1,011,001 1,106,735 312,264 -- 3,433,854 Foreign currency -- -- -- -- 2,286,293 -- Interest and dividends receivable 236,392 1,071,200 22,243 32,035 414,521 20,549 Receivable for investments sold 1,687,524 7,792,581 -- 1,019,072 -- 2,452,491 Prepaid expenses 361 1,409 565 674 1,898 1,715 ----------- ------------ ----------- ----------- ------------ ------------ TOTAL ASSETS 34,823,386 138,548,867 49,446,582 54,178,610 230,460,052 264,337,257 ----------- ------------ ----------- ----------- ------------ ------------ ............................................................................................................................... LIABILITIES: Payable for investments purchased 1,365,675 8,597,581 -- -- -- 2,854,119 Payable for collateral received on loaned securities 629,969 7,362,043 -- -- -- 42,518,000 Accrued expenses and other liabilities: Investment management 11,326 46,531 20,507 24,041 190,249 152,511 Administration 2,246 7,177 1,571 1,756 10,904 11,338 Accounting 218 543 384 223 121 134 Compliance service 44 158 59 69 292 291 Custodian 2,722 -- 7,500 -- 18,887 12,692 Trustee 127 459 173 201 666 840 Other 1,373 4,595 1,689 1,872 9,081 9,107 ----------- ------------ ----------- ----------- ------------ ------------ TOTAL LIABILITIES 2,013,700 16,019,087 31,883 28,162 230,200 45,559,032 ----------- ------------ ----------- ----------- ------------ ------------ ............................................................................................................................... NET ASSETS: Applicable to investors' beneficial interest $32,809,686 $122,529,780 $49,414,699 $54,150,448 $230,229,852 $218,778,225 ----------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ ----------- ----------- ------------ ------------ Investments, at cost $33,320,548 $131,267,019 $43,436,351 $42,261,414 $188,341,160 $224,666,456 ----------- ------------ ----------- ----------- ------------ ------------ ----------- ------------ ----------- ----------- ------------ ------------ Foreign currency, at cost $ 2,296,002 ------------ ------------
--------- * The Limited Maturity Portfolio, Fixed Income Portfolio, and Small Cap Equity Portfolio include securities on loan of $617,119, $7,216,681, $41,194,226, respectively. 51 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2005
LIMITED FIXED INTERNATIONAL MATURITY INCOME GROWTH VALUE EQUITY PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------------- -------------- --------------- --------------- --------------- INVESTMENT INCOME: Interest $ 2,105,378 $ 6,989,667 $ 0 $ 0 $ 22,432 Dividends 217 1,242 688,580 1,061,066 7,050,398 Dividend income from affiliated investments 25,523 110,154 42,243 55,096 -- Foreign tax withholding -- -- -- -- (778,471) Income from securities lending 6,154 12,904 366 2,358 -- Other income (see note 5) 2,093 7,821 1,126 1,423 -- ----------- ------------ ---------- ---------- ----------- TOTAL INVESTMENT INCOME 2,139,365 7,121,788 732,315 1,119,943 6,294,359 ----------- ------------ ---------- ---------- ----------- ............................................................................................................................... EXPENSES: Investment management 197,360 620,549 259,397 328,104 1,568,100 Administration -- HSBC (see note 3) 4,684 17,001 6,370 7,303 29,205 Administration -- BISYS (see note 3) 13,745 40,031 13,209 16,106 56,179 Accounting 48,094 57,945 41,057 39,454 78,906 Compliance service 687 2,110 716 858 3,125 Custodian 16,066 42,418 26,567 30,165 145,360 Interest -- 93 -- -- -- Trustee 1,587 4,619 452 853 6,197 Other 6,005 18,231 7,005 7,885 30,270 ----------- ------------ ---------- ---------- ----------- Total expenses before voluntary fee reductions 288,228 802,997 354,773 430,728 1,917,342 Fees reduced by Investment Adviser (see note 3 and 5) (45,832) (171,285) (24,678) (31,167) -- Fees reduced by Administrator -- BISYS (see note 3) (902) (2,934) (1,018) (1,231) (4,020) ----------- ------------ ---------- ---------- ----------- NET EXPENSES 241,494 628,778 329,077 398,330 1,913,322 ----------- ------------ ---------- ---------- ----------- ............................................................................................................................... NET INVESTMENT INCOME (LOSS) 1,897,871 6,493,010 403,238 721,613 4,381,037 ----------- ------------ ---------- ---------- ----------- ............................................................................................................................... NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions (162,231) 7,083,274 2,375,542 4,124,126 18,977,305 Change in unrealized appreciation/depreciation from investments and foreign currencies (1,247,772) (10,643,468) 3,995,556 4,254,259 17,737,274 ----------- ------------ ---------- ---------- ----------- ............................................................................................................................... Net realized/unrealized gains (losses) from investments and foreign currency transactions (1,410,003) (3,560,194) 6,371,098 8,378,385 36,714,579 ----------- ------------ ---------- ---------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 487,868 $ 2,932,816 $6,774,336 $9,099,998 $41,095,616 ----------- ------------ ---------- ---------- ----------- ----------- ------------ ---------- ---------- ----------- SMALL CAP EQUITY PORTFOLIO -------------- Interest $ 0 Dividends 990,070 Dividend income from affiliated investments 138,034 Foreign tax withholding -- Income from securities lending 12,148 Other income (see note 5) 5,169 ------------ TOTAL INVESTMENT INCOME 1,145,421 ------------ ................ .................................. EXPENSES: Investment management 2,284,219 Administration -- HSBC (see note 3) 30,836 Administration -- BISYS (see note 3) 76,108 Accounting 40,138 Compliance service 4,038 Custodian 76,725 Interest 104 Trustee 8,600 Other 37,046 ------------ Total expenses before voluntary fee reductions 2,557,814 Fees reduced by Investment Adviser (see note 3 and 5) (113,213) Fees reduced by Administrator -- BISYS (see note 3) (5,102) ------------ NET EXPENSES 2,439,499 ------------ .................................................. NET INVESTMENT INCOME (LOSS) (1,294,078) ------------ .................................................. NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions 62,035,547 Change in unrealized appreciation/depreciation from investments and foreign currencies (17,237,446) ------------ .................................................. Net realized/unrealized gains (losses) from investments and foreign currency transactions 44,798,101 ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 43,504,023 ------------ ------------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 52 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS
LIMITED MATURITY FIXED INCOME PORTFOLIO PORTFOLIO --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004 --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 1,897,871 $ 2,685,767 $ 6,493,010 $ 8,004,774 Net realized gains (losses) from investment transactions (162,231) 350,688 7,083,274 1,234,753 Change in unrealized appreciation/depreciation from investments (1,247,772) 195,249 (10,643,468) 533,676 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 487,868 3,231,704 2,932,816 9,773,203 ------------ ------------ ------------ ------------ Proceeds from contributions 6,926,443 19,537,952 31,409,368 47,385,442 Value of withdrawals (38,301,414) (43,561,156) (81,271,788) (91,249,818) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (31,374,971) (24,023,204) (49,862,420) (43,864,376) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS (30,887,103) (20,791,500) (46,929,604) (34,091,173) ............................................................................................................................... NET ASSETS: Beginning of period 63,696,789 84,488,289 169,459,384 203,550,557 ------------ ------------ ------------ ------------ End of period $ 32,809,686 $ 63,696,789 $122,529,780 $169,459,384 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
53 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
GROWTH VALUE PORTFOLIO PORTFOLIO --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED OCTOBER 31, 2005 OCTOBER 31, 2004(a) OCTOBER 31, 2005 OCTOBER 31, 2004(a) --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 403,238 $ 11,209 $ 721,613 $ 325,186 Net realized gains (losses) from investment transactions 2,375,542 (1,576,336) 4,124,126 506,578 Change in unrealized appreciation/depreciation from investments 3,995,556 1,991,868 4,254,259 2,611,156 ------------ ----------- ------------ ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 6,774,336 426,741 9,099,998 3,442,920 ------------ ----------- ------------ ----------- Proceeds from contributions 15,081,868 53,535,759 14,013,050 64,069,267 Value of withdrawals (22,121,709) (4,282,296) (30,376,597) (6,098,190) ------------ ----------- ------------ ----------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (7,039,841) 49,253,463 (16,363,547) 57,971,077 ------------ ----------- ------------ ----------- CHANGE IN NET ASSETS (265,505) 49,680,204 (7,263,549) 61,413,997 ............................................................................................................................... NET ASSETS: Beginning of period 49,680,204 -- 61,413,997 -- ------------ ----------- ------------ ----------- End of period $ 49,414,699 $49,680,204 $ 54,150,448 $61,413,997 ------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
--------- (a) Growth Portfolio commenced operations on May 7, 2004. Value Portfolio commenced operations on May 7, 2004. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 54 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERNATIONAL EQUITY SMALL CAP EQUITY PORTFOLIO PORTFOLIO --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004 --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 4,381,037 $ 3,284,091 $ (1,294,078) $ (1,984,985) Net realized gains (losses) from investment and foreign currency transactions 18,977,305 32,731,371 62,035,547 41,945,235 Change in unrealized appreciation/depreciation from investments and foreign currencies 17,737,274 3,338,622 (17,237,446) (17,175,725) ------------ ---------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 41,095,616 39,354,084 43,504,023 22,784,525 ------------ ---------------- ------------- ------------- Proceeds from contributions 68,931,727 44,516,479 24,917,377 67,718,326 Value of withdrawals (99,822,646) (65,649,972) (208,976,448) (157,351,034) ------------ ---------------- ------------- ------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (30,890,919) (21,133,493) (184,059,071) (89,632,708) ------------ ---------------- ------------- ------------- CHANGE IN NET ASSETS 10,204,697 18,220,591 (140,555,048) (66,848,183) ............................................................................................................................... NET ASSETS: Beginning of period 220,025,155 201,804,564 359,333,273 426,181,456 ------------ ---------------- ------------- ------------- End of period $230,229,852 $ 220,025,155 $ 218,778,225 $ 359,333,273 ------------ ---------------- ------------- ------------- ------------ ---------------- ------------- -------------
55 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
RATIOS/SUPPLEMENTARY DATA --------------------------------------------------- RATIO OF RATIO OF NET NET ASSETS AT EXPENSES INVESTMENT END OF TO AVERAGE INCOME (LOSS) TOTAL PERIOD NET TO AVERAGE RETURN(a) (000'S) ASSETS(b) NET ASSETS(b) -------------------------------------------------------------------------------------------------------------------------- LIMITED MATURITY PORTFOLIO Period ended October 31, 2001 (d) $115,180 0.55% 4.97% Year ended October 31, 2002 149,815 0.51% 4.60% Year ended October 31, 2003 4.42% 84,488 0.53% 3.70% Year ended October 31, 2004 4.48% 63,697 0.57% 3.54% Year ended October 31, 2005 0.76%(e) 32,810 0.49%(e) 3.85%(e) -------------------------------------------------------------------------------------------------------------------------- FIXED INCOME PORTFOLIO Year ended October 31, 2001 $242,914 0.53% 6.53% Year ended October 31, 2002 385,802 0.48% 5.14% Year ended October 31, 2003 5.80% 203,551 0.48% 4.38% Year ended October 31, 2004 5.56% 169,459 0.52% 4.31% Year ended October 31, 2005 1.64%(e) 122,530 0.40%(e) 4.25%(e) -------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO Period ended October 31, 2004 (d) (0.86%) $ 49,680 0.72% 0.06% Year ended October 31, 2005 13.59%(e) 49,415 0.63%(e) 0.77%(e) -------------------------------------------------------------------------------------------------------------------------- VALUE PORTFOLIO Period ended October 31, 2004 (d) 6.12% $ 61,414 0.71% 1.28% Year ended October 31, 2005 15.23%(e) 54,150 0.64%(e) 1.15%(e) -------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY PORTFOLIO Year ended October 31, 2001 $275,848 0.90% 0.54% Year ended October 31, 2002 256,616 0.91% 0.63% Year ended October 31, 2003 23.70% 201,805 0.96% 1.00% Year ended October 31, 2004 20.29% 220,025 0.94% 1.53% Year ended October 31, 2005 19.54% 230,230 0.84% 1.92% -------------------------------------------------------------------------------------------------------------------------- SMALL CAP EQUITY PORTFOLIO Year ended October 31, 2001 $265,573 0.98% (0.65%) Year ended October 31, 2002 266,217 0.99% (0.78%) Year ended October 31, 2003 33.30% 426,181 0.91% (0.62%) Year ended October 31, 2004 5.93% 359,333 0.88% (0.52%) Year ended October 31, 2005 14.35%(e) 218,778 0.85%(e) (0.45%)(e) -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ---------------------------- RATIO OF EXPENSES TO AVERAGE PORTFOLIO NET ASSETS(b)(c) TURNOVER -------------------------------------------------------------------------------- LIMITED MATURITY PORTFOLIO Period ended October 31, 2001 (d) 0.55% 102.01% Year ended October 31, 2002 0.51% 44.04% Year ended October 31, 2003 0.53% 98.42% Year ended October 31, 2004 0.57% 50.06% Year ended October 31, 2005 0.58% 107.26% -------------------------------------------------------------------------------- FIXED INCOME PORTFOLIO Year ended October 31, 2001 0.53% 341.26% Year ended October 31, 2002 0.48% 77.82% Year ended October 31, 2003 0.48% 70.91% Year ended October 31, 2004 0.52% 34.88% Year ended October 31, 2005 0.53% 176.60% -------------------------------------------------------------------------------- GROWTH PORTFOLIO Period ended October 31, 2004 (d) 0.72% 53.08% Year ended October 31, 2005 0.68% 79.54% -------------------------------------------------------------------------------- VALUE PORTFOLIO Period ended October 31, 2004 (d) 0.71% 10.33% Year ended October 31, 2005 0.69% 16.45% -------------------------------------------------------------------------------- INTERNATIONAL EQUITY PORTFOLIO Year ended October 31, 2001 0.90% 26.90% Year ended October 31, 2002 0.91% 31.63% Year ended October 31, 2003 0.96% 68.51% Year ended October 31, 2004 0.94% 106.11% Year ended October 31, 2005 0.84% 31.32% -------------------------------------------------------------------------------- SMALL CAP EQUITY PORTFOLIO Year ended October 31, 2001 0.98% 52.47% Year ended October 31, 2002 0.99% 103.90% Year ended October 31, 2003 0.91% 152.05% Year ended October 31, 2004 0.88% 81.75% Year ended October 31, 2005 0.90% 63.95% --------------------------------------------------------------------------------
(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) Limited Maturity Portfolio commenced operations on January 24, 2001. Value Portfolio commenced operations on May 7, 2004. Growth Portfolio commenced operations on May 7, 2004. (e) 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 0.09%, 0.12%, 0.05%, 0.05% and 0.04% for Limited Maturity Portfolio, Fixed Income Portfolio, Growth Portfolio, Value Portfolio and Small Cap Equity Portfolio, respectively. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 56 HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 1. ORGANIZATION: The HSBC Investor Portfolios (the 'Portfolio Trust'), is a registered open-end management investment company organized as a master trust fund under the laws of the State of New York on November 1, 1994. The Portfolios operate as master funds in master-feeder arrangements. The Declaration of Trust permits the Board of Trustees to issue an unlimited number of beneficial interests in the Portfolios. The Portfolio Trust contains the following (individually a 'Portfolio,' collectively the 'Portfolios'):
PORTFOLIO SHORT NAME --------- ---------- HSBC Investor Limited Maturity Portfolio Limited Maturity Portfolio HSBC Investor Fixed Income Portfolio Fixed Income Portfolio HSBC Investor Growth Portfolio Growth Portfolio HSBC Investor Value Portfolio Value Portfolio HSBC Investor International Equity Portfolio International Equity Portfolio HSBC Investor Small Cap Equity Portfolio Small Cap Equity Portfolio
The Portfolios are diversified series of the Portfolio Trust and are part of the HSBC Investor Family of Funds. Financial Statements for all other series of the HSBC Investor Family of Funds are published separately. Under the Portfolios' organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolios. In addition, in the normal course of business, the Portfolios enter into contracts with their vendors and others that provide for general indemnifications. The Portfolios' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Portfolios. However, based on experience, the Portfolios expect that risk of loss to be remote. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the Portfolios in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ('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 are valued by or at the direction of the Portfolios' Board of Trustees. Examples of potentially significant events that could affect the value of an individual security include corporate actions by the issuer, announcements by the issuer relating to its earnings or products, regulatory news, natural disasters and litigation. Examples of potentially significant events that could affect multiple securities held by a Portfolio include governmental actions, natural disasters and armed conflicts. In addition, if events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Portfolios' net assets are calculated, such securities may be valued using fair 57 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) 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. When the International Equity Portfolio uses fair value pricing, the value assigned to the International Equity Portfolio's foreign securities may not be the quoted or published prices of the investment on their primary markets or exchanges. SECURITIES TRANSACTIONS AND RELATED INCOME: Changes in holdings of portfolio securities are reflected no later than on the first business day following trade date. However, for financial reporting purposes, portfolio securities are reflected as of trade date. Securities gains and losses are calculated on the identified cost basis. Interest income is recognized on the accrual basis and includes, where applicable, the amortization or accretion of premium or discount. Dividend income is recorded on the ex-dividend date. FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. The Portfolios do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currencies. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolios may enter into forward foreign currency exchange contracts in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolio securities denominated in a particular currency. The Portfolios could be exposed to risks if the counter-parties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized gains or losses until the contract settlement date. FUTURES CONTRACTS: Each Portfolio may invest in futures contracts for the purpose of hedging their existing portfolio securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a futures contract, the Portfolio is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as 'variation margin,' are made or received by the Portfolio each day, depending on the daily fluctuations in the fair value of the underlying security. The Portfolio recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Portfolio may not achieve the anticipated benefits of the futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. MORTGAGE DOLLAR ROLL TRANSACTIONS: The Fixed Income Portfolio may engage in dollar roll transactions with respect to mortgage securities issued by the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. In a dollar roll transaction, the Portfolio sells a mortgage-backed security and simultaneously agrees to repurchase a similar security on a specified future date at an agreed upon price. During the roll period, the Portfolio will not be entitled to receive any interest or principal paid on the securities sold. The Portfolio is compensated for the lost interest on the securities sold by the difference between the sales price and the lower price for the future repurchase as well as by the interest earned on the reinvestment of the sales proceeds. The HSBC INVESTOR PORTFOLIOS 58 HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) Portfolio may also be compensated by receipt of a commitment fee. When the Portfolio enters into a mortgage dollar roll transaction, liquid assets in an amount sufficient to pay for the future repurchase are segregated with the custodian. RESTRICTED 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 manager based on procedures established by the Board of Trustees. Not all restricted securities are considered illiquid. At October 31, 2005, the HSBC Fixed Income Portfolio held illiquid securities, representing 0.06% of net assets, as follows:
ACQUISITION ACQUISITION PRINCIPAL SECURITY NAME DATE COST($) AMOUNT($) VALUE($) ------------- ---- ------- --------- -------- FHA Weyerhauser, 7.43%, 1/1/24.............................. 3/28/2002 $411,213 $78,037 $78,037
SECURITIES LOANS: To generate additional income, the Portfolios may lend up to 33 1/3%, except for Small Cap Equity Portfolio which may lend up to 30%, of their respective assets pursuant to agreements requiring that the loan be collateralized by cash, U.S. Government or U.S. Government agency securities, equal at all times to at least 100% of the fair value. The Portfolios receive payments from borrowers equivalent to the dividends and interest that would have been earned on securities lent while simultaneously seeking to earn income on the investment of collateral. Collateral is marked to market daily to provide the required level of collateral. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will be made only to borrowers, such as broker-dealers, banks or institutional borrowers of securities, deemed by HSBC to be of good standing and creditworthy under guidelines established by the Board of Trustees and when, in the judgement of HSBC, the consideration which can be earned currently from such securities loans justifies the attendant risks. Loans are subject to termination by the Portfolios or the borrower at any time and are, therefore, not considered to be illiquid investments. As of October 31, 2005, the following Portfolios had collateral and loaned securities as follows:
VALUE VALUE OF LOANED PORTFOLIO NAME OF COLLATERAL SECURITIES -------------- ------------- ---------- Limited Maturity Portfolio.................................. $ 629,969 $ 617,119 Fixed Income Portfolio...................................... 7,362,043 7,216,681 Small Cap Equity Portfolio.................................. 42,518,000 41,194,226
The cash collateral received by the Portfolios was invested in a pooled account by HSBC Bank USA and at October 31, 2005, the pooled account consisted of the following:
FAIR MATURITY MATURITY SECURITY TYPE SECURITY NAME VALUE RATE DATE ------------- ------------- ----- ---- ---- Repurchase Agreement...................... Credit Suisse First Boston, Inc. $68,609,832 4.02% 11/01/2005
LINE OF CREDIT: The Portfolios participate in a short-term, demand note agreement with HSBC Bank USA, an affiliate of the Investment Adviser (defined below). Under the agreement, the Funds may borrow up to $50 million. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. 59 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) During the fiscal year ended October 31, 2005, the Fixed Income Portfolio, Limited Maturity Portfolio and Small Cap Equity Portfolio had borrowed against the Line of Credit. The details of the borrowing were as follows (based on actual number of days in which the respective Fund borrowed monies):
AVERAGE AMOUNT AVERAGE FUND OUTSTANDING INTEREST RATE ---- ----------- ------------- Fixed Income Portfolio..................................... $ 389,711 2.87% Small Cap Equity Portfolio................................. 1,038,000 3.59%
EXPENSE ALLOCATIONS: Expenses incurred by the HSBC Investor Family of Funds with respect to any two or more funds within the HSBC Investor Family of Funds are allocated in proportion to the net assets of each fund within the HSBC Investor Family of Funds, or another appropriate basis. Expenses directly attributable to a Portfolio are charged to that Portfolio. FEDERAL INCOME TAXES: Each Portfolio will be treated as a partnership for U.S. Federal income tax purposes. Accordingly, each Portfolio passes through all of its net investment income and gains and losses to its Feeders, and is therefore not subject to U.S. Federal income tax. As such, an investor in the Portfolios will be taxed on their share of the Portfolios' ordinary income and realized gains. It is intended that the Portfolios will be managed in such a way that an investor will be able to satisfy the requirements of the Internal Revenue Code applicable to regulated investment companies. 3. RELATED PARTY TRANSACTIONS: INVESTMENT MANAGEMENT: HSBC Investments (USA) Inc. ('HSBC' or the 'Investment Adviser'), a wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank, acts as the Investment Adviser to the Portfolios pursuant to an investment management contract with the Portfolio Trust. As Investment Adviser, HSBC manages the investments of the Portfolios and continuously reviews, supervises and administers the Portfolios' investments. Waddell & Reed Investment Management Company, NWQ Investment Management Co., LLC, AllianceBernstein Investment Research and Management, and Westfield Capital Management, LLC serve as Sub-Investment Advisers for the Growth Portfolio, Value Portfolio, International Equity Portfolio and the Small Cap Equity Portfolio, respectively. For its services as Investment Adviser, HSBC receives a fee, accrued daily and paid monthly, at an annual rate of 0.40% of the Limited Maturity Portfolio's average daily net assets. For its services as Investment Adviser, HSBC receives, from the Fixed Income Portfolio, a fee accrued daily and paid monthly at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE ------------------------------------ -------- Up to $50 million........................................... 0.575% In excess of $50 million but not exceeding $95 million...... 0.450% In excess of $95 million but not exceeding $150 million..... 0.200% In excess of $150 million but not exceeding $250 million.... 0.400% In excess of $250 million................................... 0.350%
For their services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and 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%
HSBC INVESTOR PORTFOLIOS 60 HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) For their services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and NWQ Investment Management Co., LLC receive in aggregate, from the Value Portfolio, a fee, accrued daily and paid monthly, at an annual rate of:
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%
For their services as Investment Adviser and Sub-Investment Adviser, respectively, HSBC 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 as Investment Adviser and Sub-Investment Adviser, respectively, HSBC and Westfield Capital Management LLC receive in aggregate, a fee, accrued daily and paid monthly, at an annual rate of 0.80% of the Small Cap Equity Portfolio's average daily net assets. ADMINISTRATION: Effective July 1, 2005, HSBC serves the Funds as Administrator. Under the terms of the administration agreement, HSBC receives from the Funds a fee, accrued daily and paid monthly, at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS 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 rate and breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds, but the assets of the Portfolios and Feeder Funds that invest in the Portfolios are not double-counted. The total administration fee to be paid to BISYS is allocated to each of the funds 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. Effective July 1, 2005, pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund Services Ohio, Inc. ('BISYS Ohio') a wholly-owned subsidiary of The BISYS Group, Inc, serves as the Trust's sub-administrator subject to the general supervision of the Portfolios' Board of Trustees and HSBC. For these services, BISYS is entitled to a fee, payable by HSBC. Prior to July 1, 2005, BISYS Ohio received compensation for providing administration services to the Portfolios under the same compensation structure as those currently with HSBC. All voluntary administration fee waivers are not subject to recoupment in subsequent fiscal periods. Under a Compliance Services Agreement between the Portfolios' and BISYS Ohio (the 'CCO Agreement'), BISYS Ohio makes an employee available to serve as the Portfolios' Chief Compliance Officer (the 'CCO'). Under the CCO Agreement, BISYS Ohio also provides infrastructure and support in implementing the written policies and procedures comprising the Portfolios' compliance program, including support services to the CCO. For the services provided under the CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $200,000 for the fiscal year ended October 31, 2005, plus certain out of pocket expenses. In addition, BISYS Ohio received a one-time implementation of $50,000 which is included in Other Expenses on the Statements of Operations. Expenses incurred 61 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) are reflected on the Statements of Operations as 'Compliance Service'. BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio. FUND ACCOUNTING, CUSTODIAN AND TRUSTEE: BISYS provides fund accounting services for the Portfolios. For its services to the Portfolios, BISYS receives an annual fee per Portfolio, including reimbursement of certain expenses, from each Portfolio accrued daily and paid monthly. HSBC serves as custodian to the Limited Maturity Portfolio, Fixed Income Portfolio, Growth Portfolio, Value Portfolio and Small Cap Equity Portfolio. Investor's Bank & Trust Company serves as custodian to the International Equity Portfolio. Compensation HSBC receives for services to the Portfolios as custodian is presented in the Statements of Operations as custodian fees. Each of the six non-interested Trustees are compensated a $24,000 annual Board retainer, a $1,000 annual retainer for each Committee of the Board, and a $4,000 and $2,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. In addition, Trustees may receive compensation for special meetings and/or functioning as a Committee Chairperson or Lead Trustee. Also, the Trustees are reimbursed for certain expenses. OTHER: For its service as security lending agent, HSBC Bank USA (see note 2 -- Security Loans), receives a fee equal to 0.06% of the average dollar value of the loans outstanding during a given month from the Portfolios. Income from securities lending net of related expenses, is recorded as earned. The fees collected by HSBC Bank USA for the fiscal year ended October 31, 2005 were:
PORTFOLIO FEE --------- --- Limited Maturity Portfolio.................................. $ 568 Fixed Income Portfolio...................................... 1,205 Growth Portfolio............................................ 254 Value Portfolio............................................. 653 Small Cap Equity Portfolio.................................. 8,970
The HSBC Investor Family of Funds may use affiliated broker/dealers for the execution of portfolio investment trades. For the year ended October 31, 2005, affiliated broker/dealers did not receive any commissions on the execution of trades related to the HSBC Investor Family of Funds. 4. INVESTMENT TRANSACTIONS: For the year ended October 31, 2005, each Portfolio purchased and sold securities, excluding short-term securities, in the following amounts:
PURCHASES SALES PURCHASES SALES (EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S. PORTFOLIO NAME GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT -------------- ----------- ----------- ---------- ---------- Limited Maturity Portfolio........ $ 32,546,569 $ 57,480,601 $17,111,529 $20,592,365 Fixed Income Portfolio............ 186,894,699 198,575,702 53,683,995 55,827,445 Growth Portfolio.................. 39,850,716 43,292,812 -- -- Value Portfolio................... 9,779,806 20,931,182 -- -- International Portfolio........... 70,579,054 98,846,092 -- -- Small Cap Equity Portfolio........ 180,474,013 359,258,559 -- --
5. PAYMENTS FROM AFFILIATE: During the year ended October 31, 2005, HSBC reimbursed certain advisory fees by some of the Portfolios related to violations of certain investment policies and limitations. HSBC also reimbursed the Portfolios for interest on these amounts. The amounts for the year ended October 31, 2005, are disclosed in the following table. The corresponding HSBC INVESTOR PORTFOLIOS 62 HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED) impact to the net expense ratio, net income ratio and total return for the year ended October 31, 2005, are disclosed in the Fund's Financial Highlights.
ADVISORY FUND FEES(1) INTEREST(2) TOTAL ---- ------- ----------- ----- Limited Maturity Portfolio.............................. $ 45,832 $ 2,093 $ 47,925 Fixed Income Portfolio.................................. 171,285 7,821 179,106 Growth Portfolio........................................ 24,678 1,126 25,804 Value Portfolio......................................... 31,167 1,423 32,590 Small Cap Equity Portfolio.............................. 113,213 5,169 118,382 -------- ------- -------- Total............................................... $386,175 $17,632 $403,807 -------- ------- -------- -------- ------- --------
------------- (1) Amounts relate to the reimbursement of investment advisory fees on the investment in certain investment companies and are included in 'Fees reduced by Investment Adviser' on the Statements of Operations. (2) Amounts relate to the reimbursement of computed interest on the amounts noted in (1) above and are included in 'Other income' on the Statements of Operations. 6. FEDERAL INCOME TAX INFORMATION: At October 31, 2005, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows:
NET UNREALIZED TAX UNREALIZED TAX UNREALIZED APPRECIATION PORTFOLIO NAME TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) -------------- -------- ------------ -------------- -------------- Limited Maturity Portfolio...... $ 33,339,365 $ 32,642 $ (472,898) $ (440,256) Fixed Income Portfolio.......... 131,332,427 289,246 (1,937,996) (1,648,750) Growth Portfolio................ 43,812,578 6,427,977 (816,781) 5,611,196 Value Portfolio................. 46,061,864 8,982,656 (1,917,691) 7,064,965 International Equity Portfolio..................... 189,689,427 42,503,870 (4,435,957) 38,067,913 Small Cap Equity Portfolio...... 225,744,877 43,684,514 (7,596,890) 36,087,624
63 HSBC INVESTOR PORTFOLIOS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of HSBC Investor Portfolios: We have audited the accompanying statements of assets and liabilities of HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income Portfolio, HSBC Investor Small Cap Equity Portfolio, HSBC Investor International Equity Portfolio, HSBC Investor Growth Portfolio and HSBC Investor Value Portfolio (collectively, the Funds), including the schedules of portfolio investments, as of October 31, 2005, 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, 2005, by correspondence with the custodian 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, 2005, the results of their operations 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, 2005 HSBC INVESTOR PORTFOLIOS 64 HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------------------- INVESTMENT ADVISER CONTRACT APPROVAL (UNAUDITED) -- OCTOBER 31, 2005 The Boards of Trustees (the 'Board of Trustees') of HSBC Investor Funds and HSBC Investor Portfolios approved a new sub-advisory agreement (the 'New Agreement') between the Investment Adviser and NWQ Investment Management Co., LLC ('NWQ'), with respect to the Value Fund, at a meeting of the Board of Trustees held on June 13-14, 2005. The New Agreement was approved by the Board of Trustees in order for NWQ to continue to provide investment sub-advisory services to the Value Fund after a change in control transaction terminated the old sub-advisory agreement dated January 30, 2004 (the 'Old Agreement'). The approval of the New Agreement did not result in any changes to the way in which the Value Fund is managed and did not cause any changes to the Value Fund's investment objectives and policies. Furthermore, the terms of the New Agreement, including the sub-advisory fee paid to NWQ, are the same in all respect as the Old Agreement. Additionally, there were no changes to the portfolio management team at NWQ that services the Value Fund. In determining whether it was appropriate to approve the New Agreement, the Board of Trustees requested and received extensive materials and information from the Investment Adviser to assist them in considering the approval of the New Agreement. Based on its review of the information requested and provided, and the discussions with management of the Investment Adviser, the Board of Trustees determined that approval of the New Agreement was consistent with the best interests of the Value Fund and its shareholders, and would enable the Value Fund to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Value Fund and its shareholders. The Board of Trustees made these determinations on the basis of the following factors, among others: - Nature, Extent, and Quality of Services Provided by the Investment Adviser and NWQ. The Board of Trustees considered the nature, quality and extent of the investment advisory services provided by NWQ, and NWQ's historic performance managing accounts having similar investment objectives as the Value Fund. The Board of Trustees concluded that the services to be provided by the Investment Adviser and NWQ are extensive and that the Investment Adviser and NWQ would deliver a high level of service to the Value Fund. - Investment Performance of the Value Fund, Investment Adviser and NWQ. The Board of Trustees considered short- and long-term investment performance of the Value 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 Value Fund. Additionally, the Board of Trustees considered fee and expense information regarding the Value Fund's peer groups. - Costs of Services and Profits Realized by the Investment Adviser. The Board of Trustees considered that the proposal had no material effect upon the analysis of the Investment Adviser's overall profitability and costs that had been prepared in connection with the last renewal of the advisory contract, and would not change any factors bearing upon the profitability to NWQ and Investment Adviser from their relationships with the Value Fund. - Other Relevant Considerations. The Board of Trustees considered NWQ's representations regarding staffing and capabilities to manage assets of the Value Portfolio. The Board of Trustees also considered the overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of the Investment Adviser and NWQ. Accordingly, in light of the above considerations and such other factors and information it considered relevant, the Board of Trustees by a unanimous vote of those present in person at the meeting (including a separate vote of the Independent Trustees present in person at the meeting) approved the New Agreement with respect to the Value Fund. 65 HSBC INVESTOR PORTFOLIOS HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 As a shareholder of the HSBC Investor Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; redemption fees; and exchange fees; (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the HSBC Investor Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2005 through October 31, 2005. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled 'Expenses Paid During Period' to estimate the expenses you paid on your account during this period.
EXPENSE PAID BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 5/1/05 10/31/05 5/1/05-10/31/05 5/1/05-10/31/05 ------ -------- --------------- --------------- Limited Maturity Portfolio $1,000.00 $1,003.40 $ 2.93 0.58% Fixed Income Portfolio 1,000.00 1,002.70 2.68 0.53% Growth Portfolio 1,000.00 1,127.20 3.54 0.66% Value Portfolio 1,000.00 1,085.00 3.57 0.68% International Equity Portfolio 1,000.00 1,100.30 4.29 0.81% Small Cap Equity Portfolio 1,000.00 1,136.70 4.90 0.91%
--------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. HSBC INVESTOR FAMILY OF FUNDS 66 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each HSBC Investor Funds's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXPENSE PAID BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 5/1/05 10/31/05 5/1/05-10/31/05 5/1/05-10/31/05 ------ -------- --------------- --------------- Limited Maturity Portfolio $1,000.00 $1,022.28 $ 2.96 0.58% Fixed Income Portfolio 1,000.00 1,022.53 2.70 0.53% Growth Portfolio 1,000.00 1,021.88 3.36 0.66% Value Portfolio 1,000.00 1,021.78 3.47 0.68% International Equity Portfolio 1,000.00 1,021.12 4.13 0.81% Small Cap Equity Portfolio 1,000.00 1,020.62 4.63 0.91%
--------- * Expenses are equal to the average account value times the Fund's annualized expense ratio multiplied by the number of days in the most recent fiscal half-year divided by the number of days in the fiscal year. 67 HSBC INVESTOR FAMILY OF FUNDS HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- BOARD OF TRUSTEES (UNAUDITED) The following table contains information regarding HSBC Investor Family of Funds Board of Trustees. Asterisks indicate those Trustees who are 'interested persons,' as defined in the Investment Company Act of 1940, as amended, of the Funds. The Funds' Statement of Additional Information includes additional information about the Trustees and is available by calling (888) 525-5757.
NUMBER OF PORTFOLIOS TERM OF OFFICE AND IN THE FUND NAME, ADDRESS POSITION LENGTH OF TIME PRINCIPAL OCCUPATIONS(S) COMPLEX OVERSEEN AND AGE HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE ----------------------------------------------------------------------------------------------------------------------------- Frederick C. Chen Emeritus Trustee Indefinite; Trustee Management Consultant, since 1988 35 P.O. Box 182845 from 1990 to June Columbus, Ohio 43218 2005; 15 years Age: 78 ----------------------------------------------------------------------------------------------------------------------------- Larry M. Robbins Trustee Indefinite; 18 years Director, Center for Teaching and 35 P.O. Box 182845 Learning, University of Columbus, Ohio 43218 Pennsylvania Age: 67 ----------------------------------------------------------------------------------------------------------------------------- Alan S. Parsow Trustee Indefinite; 18 years General Partner of Elkhorn 35 P.O. Box 182845 Partners, L.P., since 1989 Columbus, Ohio 43218 Age: 55 ----------------------------------------------------------------------------------------------------------------------------- Michael Seely Trustee Indefinite; 18 years Private Investor; Finance Chair of 35 P.O. Box 182845 the Vermont Republican Party; Columbus, Ohio 43218 President of Investor Access Age: 60 Corporation, 1981-2004 ----------------------------------------------------------------------------------------------------------------------------- Thomas Robards Trustee Indefinite; 1 year Private Investor; Chief Financial 35 P.O. Box 182845 Officer, American Museum of Natural Columbus, Ohio 43218 History (2003 to 2004); Chief Age: 59 Financial Officer, Datek Online Holding Corp. (2000 to 2002); Executive member of Board of Directors, Executive Vice President and Chief Financial Officer, Republic New York Corporation (1976 to 1999) ----------------------------------------------------------------------------------------------------------------------------- Richard Brealey Trustee Indefinite; 1 year Emeritus Professor, London School 35 P.O. Box 182845 of Business (2002 to present); Columbus, Ohio 43218 Deputy Chairman, Balancing and Age: 69 Settlement Code Panel (September 2000 to present) ----------------------------------------------------------------------------------------------------------------------------- Stephen J. Baker* Trustee Indefinite; 2 years Chief Executive Officer, HSBC 35 P.O. Box 182845 Investments (USA), Inc. (2003 to Columbus, Ohio 43218 present); Chief Executive Officer, Age: 49 HSBC Asset Management (Canada) Limited (1998 to 2003) ----------------------------------------------------------------------------------------------------------------------------- NAME, ADDRESS OTHER DIRECTORSHIPS AND AGE HELD BY TRUSTEE ------------------------------------------- Frederick C. Chen None P.O. Box 182845 Columbus, Ohio 43218 Age: 78 ------------------------------------------- Larry M. Robbins None P.O. Box 182845 Columbus, Ohio 43218 Age: 67 ------------------------------------------- Alan S. Parsow None P.O. Box 182845 Columbus, Ohio 43218 Age: 55 ------------------------------------------- Michael Seely None P.O. Box 182845 Columbus, Ohio 43218 Age: 60 ------------------------------------------- Thomas Robards Financial Federal P.O. Box 182845 Corporation and Columbus, Ohio 43218 Overseas Age: 59 Shipholding Group ------------------------------------------- Richard Brealey None P.O. Box 182845 Columbus, Ohio 43218 Age: 69 ------------------------------------------- Stephen J. Baker* None P.O. Box 182845 Columbus, Ohio 43218 Age: 49 -------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS 68 HSBC INVESTOR FAMILY OF FUNDS -------------------------------------------------------------------------------- BOARD OF TRUSTEES (UNAUDITED) (CONTINUED) The names of the Officers, their addresses, ages, position(s) held with each Trust, and principal occupation(s) during the past five years are described in the table below. Unless otherwise indicated, the address for each Officer is 3435 Stelzer Road, Columbus, Ohio 43219-3035.
TERM OF OFFICE AND NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S) AND AGE HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS -------------------------------------------------------------------------------------------------------------------------------- Richard A. Fabietti President Indefinite; March Senior Vice President, Head of Product Management, HSBC 3435 Stelzer Road 2004- Present Investments (USA) Inc, 1998-Present Columbus, Ohio 43219 Age: 47 -------------------------------------------------------------------------------------------------------------------------------- Mark L. Suter* Senior Vice Indefinite; Employee of BISYS Fund Services, Inc., 2000-Present 90 Park Avenue President 2000-Present 10th Floor New York, NY 10018 Age: 43 -------------------------------------------------------------------------------------------------------------------------------- Marc Schuman Secretary Indefinite; Senior Counsel of BISYS Fund Services, Inc., 2005-Present; 90 Park Avenue 2005-Present Senior Corporate Counsel of The BISYS Group, Inc. 2001-2005; 10th Floor Of Counsel to Morgan, Lewis & Bockius LLP (law firm) New York, NY 10016 2000-2001. Age: 45 -------------------------------------------------------------------------------------------------------------------------------- Michael Lawlor Assistant Secretary Indefinite; March Assistant Counsel of BISYS Fund Services, Inc. 2005-Present; 100 Summer Street 2005- Present Associate Counsel of IXIS Advisors Group 2003-2005; Staff Suite 1500 Counsel Loomis, Sayles & Company, L.P. 2000-2003; Legal Boston, MA 02110 Product Manager, Scudder Kemper Investments 1999-2000. Age: 36 -------------------------------------------------------------------------------------------------------------------------------- Troy Sheets* Treasurer Indefinite; Employee of BISYS Fund Services, Inc., 2002-Present; Senior 3435 Stelzer Road 2004-Present Manager, KPMG LLP, 1993-2002 Columbus, Ohio 43219 Age: 34 -------------------------------------------------------------------------------------------------------------------------------- Alaina Metz* Assistant Treasurer Indefinite; Employee of BISYS Fund Services, Inc., 1995-Present 3435 Stelzer Road 1996-Present Columbus, Ohio 43219 Age: 38 -------------------------------------------------------------------------------------------------------------------------------- Frederick J. Schmidt* Chief Compliance Expires 2006; 2004- Senior Vice President and Chief Compliance Officer, CCO 90 Park Avenue Officer Present Services of BISYS Fund Services, 2004-Present; President, 10th Floor FJS Associates, 2002-2004; Vice President, Credit Agricole New York, NY 10016 Asset Mangement, U.S., 1987-2002 Age: 46 --------------------------------------------------------------------------------------------------------------------------------
--------- * Messrs. Suter, Sheets and Schmidt and Ms. Metz also are officers of certain other investment companies of which BISYS or an affiliate is the administrator. 69 HSBC INVESTOR FAMILY OF FUNDS PRIVACY POLICY FOR HSBC INVESTOR FUNDS AND HSBC ADVISOR FUNDS TRUST -------------------------------------------------------------------------------- THIS PRIVACY POLICY NOTICE SUMMARIZES THE COLLECTION AND DISCLOSURE OF NONPUBLIC PERSONAL INFORMATION ('INFORMATION') OF CUSTOMERS ('YOU') OF THE HSBC INVESTOR FAMILY OF FUNDS ('WE' OR 'US'). IF YOU ARE AN INDIVIDUAL SHAREHOLDER OF RECORD OF ANY SERIES OF THE FUNDS, WE CONSIDER YOU TO BE A CUSTOMER OF THE HSBC INVESTOR FAMILY OF FUNDS. SHAREHOLDERS PURCHASING OR OWNING SHARES OF ANY OF THE HSBC INVESTOR FAMILY OF FUNDS THROUGH THEIR BANK, BROKER, OR OTHER FINANCIAL INSTITUTION SHOULD CONSULT THAT FINANCIAL INSTITUTION'S PRIVACY POLICIES. WE COLLECT THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU -------------------------------------------------------------------------------- We collect Information about you from the following sources: information we receive from you on applications or other forms; information about your transactions with us, our affiliates, or others; and information we receive from a consumer reporting agency. WE DISCLOSE THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU -------------------------------------------------------------------------------- We do not disclose any Information about you or any former customer to anyone, except as permitted by law, including to our affiliates and third party service providers. WE DISCLOSE INFORMATION ABOUT YOU TO THE FOLLOWING TYPES OF THIRD PARTIES -------------------------------------------------------------------------------- We may disclose Information about you and any former customer to our affiliates, which we consider to include HSBC Bank USA N.A., HSBC Investments (USA) Inc. and their affiliates, and to nonaffiliated third parties, as permitted by law. We may disclose all of the Information we collect to companies that perform marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. PROTECTING THE SECURITY AND CONFIDENTIALITY OF YOUR INFORMATION -------------------------------------------------------------------------------- We restrict access to Information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your Information. HSBC INVESTOR FAMILY OF FUNDS 70 A description of the policies and procedures that the Funds use to determine how to vote proxies relating to the portfolio securities is available without charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on the Fund's website at www.investorfunds.us.hsbc.com and the Securities and Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting record for the 12 month period ending June 30, 2005 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 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. HSBC Investor LifeLine Funds: INVESTMENT ADVISER AND ADMINISTRATOR HSBC Investments (USA) Inc. 452 Fifth Avenue New York, NY 10018 SUB-ADVISERS HSBC Investor Growth Portfolio Waddell & Reed Investment Management Company 6300 Lamar Avenue Overland Park, KS 66202 HSBC Investor Value Portfolio NWQ Investment Management Co., LLC 2049 Century Park East, 16th Floor Los Angeles, CA 90067 HSBC Investor International Equity Portfolio AllianceBernstein Investment Research and Management 1345 Avenue of the Americas, 39th Floor New York, NY 10105 HSBC Investor Small Cap Equity Portfolio Westfield Capital Management Company One Financial Center Boston, MA 02111 SHAREHOLDER SERVICING AGENTS For HSBC Bank USA, N.A. and HSBC Securities (USA) Inc. Clients HSBC Bank USA, N.A. 452 Fifth Avenue New York, NY 10018 1-888-525-5757 For All Other Shareholders HSBC Investor Funds P.O. Box 182845 Columbus, OH 43218-2845 1-800-782-8183 TRANSFER AGENT, DISTRIBUTOR AND SPONSOR BISYS Fund Services 3435 Stelzer Road Columbus, OH 43219 CUSTODIANS HSBC Investor Limited Maturity Portfolio HSBC Investor Fixed Income Portfolio HSBC Investor New York Tax-Free Bond Fund HSBC Investor Growth Portfolio HSBC Investor Value Portfolio HSBC Investor Growth and Income Fund HSBC Investor Small Cap Equity Portfolio HSBC Bank USA, N.A. 452 Fifth Avenue New York, NY 10018 HSBC Investor International Equity Portfolio Investors Bank & Trust Company 200 Clarendon Street -- 16th Floor Boston, MA 02116 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM KPMG LLP 191 West Nationwide Blvd., Suite 500 Columbus, OH 43215 LEGAL COUNSEL Dechert LLP 1775 Eye Street, N.W. Washington, D.C. 20006 The HSBC LifeLine Funds are distributed by BISYS Fund Services. This document must be preceded or accompanied by a current prospectus for the HSBC Investor Funds, which you should read carefully before you invest or send money. HSB-0008 12/05 Item 2. Code of Ethics. Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is included as Exhibit 12(a)(i). The registrant must briefly describe the nature of any amendment, during the period covered by the report, to a provision of its code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item. The registrant must file a copy of any such amendment as an exhibit pursuant to Item 12(a)(1), unless the registrant has elected to satisfy paragraph (f) of this Item by posting its code of ethics on its website pursuant to paragraph (f)(2) of this Item, or by undertaking to provide its code of ethics to any person without charge, upon request, pursuant to paragraph (f)(3) of this Item. If the registrant has, during the period covered by the report, granted a waiver, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more items set forth in paragraph (b) of this Item, the registrant must briefly describe the nature of the waiver, the name of the person to whom the waiver was granted, and the date of the waiver. During the period covered by the report, with respect to the registrant's code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2. Item 3. Audit Committee Financial Expert. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. 3(a)(1) The registrant's board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. 3(a)(2) The audit committee financial expert is Thomas Robards, who is "independent" for purposes of this Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. (a) Disclose, under the caption Audit Fees, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. 2004 $200,230 2005 $255,000 (b) Disclose, under the caption Audit-Related Fees, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. 2004 $36,130 2005 $40,000 2004 - Fees of $4,150 relate to the consent of N1A filing and $31,980 relate to the performance of the Funds' 17f-2 examinations. 2005 - Fees of $5,000 relate to the consent of N1A filing and $35,000 relate to the performance of the Funds' 17f-2 examinations. (c) Disclose, under the caption Tax Fees, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. 2004 $108,115 2005 $139,200 Fees for both 2004 and 2005 relate to the preparation of federal income and excise tax returns and the review of excise tax distributions. (d) Disclose, under the caption All Other Fees, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. 2004 $0 2005 $0 (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust's Audit Committee must preapprove all audit and non-audit services by the independent accountants relating to the operations or financial reporting of the Funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. None of the services summarized in (b) - (d), above, were approved by the audit Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. Not applicable. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. 2004 $1,952,245 2005 $228,200 (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. 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. (a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state. (b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees. Not applicable. Item 6. Schedule of Investments. File Schedule I - Investments in securities of unaffiliated issuers as of the close of the reporting period as set forth in 'SS' 210.12-12 of Regulation S-X, unless the schedule is included as part of the report to shareholders filed under Item 1 of this Form. Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. If the registrant is a closed-end management investment company that is filing an annual report on this Form N-CSR, provide the information specified in paragraphs (a) and (b) of this Item with respect to portfolio managers. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company. If the registrant is a closed-end management investment company, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the registrant or any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant's equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781). Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. Not applicable. Item 11. Controls and Procedures. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. There were no changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. The code of ethics that is the subject of the disclosure required by Item 2 is attached hereto. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2). Certifications pursuant to Rule 30a-2(a) are attached hereto. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable. (b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act, provide the certifications required by rule 30a-2(b) under the Act as an exhibit. A certification furnished pursuant to this paragraph will not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the registrant incorporates it by reference. Certifications pursuant to Rule 30a-2(b) are furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) HSBC INVESTOR PORTFOLIOS By (Signature and Title)* /s/ Richard A. Fabietti ----------------------------------------------------- Richard A. Fabietti President Date____January 6, 2006______________________________ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Richard A. Fabietti ----------------------------------------------------- Richard A. Fabietti President Date____January 6, 2006______________________________ By (Signature and Title)* /s/ Troy A. Sheets ----------------------------------------------------- Troy A. Sheets Treasurer Date____January 6, 2006______________________________ STATEMENT OF DIFFERENCES The trademark symbol shall be expressed as.......................... 'TM' The registered trademark symbol shall be expressed as............... 'r'