-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CZU14Hz8PxdD7CzfpyAaqBSOkCPYEeiIxnaxRIjKotA+MZK+27m35bG7iQ8wUfxg KktU4D04mt8UNRvcGmaqRg== 0000950117-06-002914.txt : 20060710 0000950117-06-002914.hdr.sgml : 20060710 20060710161327 ACCESSION NUMBER: 0000950117-06-002914 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060430 FILED AS OF DATE: 20060710 DATE AS OF CHANGE: 20060710 EFFECTIVENESS DATE: 20060710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSBC INVESTOR PORTFOLIOS CENTRAL INDEX KEY: 0000934882 IRS NUMBER: 000000000 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-08928 FILM NUMBER: 06954084 BUSINESS ADDRESS: STREET 1: C/O BISYS FUND SERVICES (IRELAND) LIMITE STREET 2: BROOKLAWN HOUSE, CRAMPTON AVE/SHELBOURNE CITY: BALLSBRIDGE, DUBLIN4 STATE: L2 ZIP: 00000 BUSINESS PHONE: (617) 470-8000 MAIL ADDRESS: STREET 1: C/O BISYS FUND SERVICES (IRELAND) LIMITE STREET 2: BROOKLAWN HOUSE, CRAMPTON AVE/SHELBOURNE CITY: BALLSBRIDGE, DUBLIN4 STATE: L2 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: REPUBLIC PORTFOLIOS DATE OF NAME CHANGE: 19950104 0000934882 S000009274 Core Plus Fixed Income Portfolio C000025336 Master Portfolio 0000934882 S000009275 International Equity Portfolio C000025337 Master Porfolio 0000934882 S000009276 Intermediate Duration Fixed Income Portfolio C000025338 Master Portfolio 0000934882 S000009277 Small Cap Equity Portfolio C000025339 Master Portfolio 0000934882 S000009296 Value Portfolio C000025370 Master Portfolio 0000934882 S000009297 Growth Portfolio C000025371 Master Portfolio 0000934882 S000010132 High Yield Fixed Income Portfolio C000028129 Master Portfolio N-CSRS 1 a42322.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, 2006 Date of reporting period: April 30, 2006 Item 1. Reports to Stockholders. Semi-Annual Report HSBC Investor LifeLine Funds'TM' April 30, 2006 HSBC Investor Aggressive Growth Strategy Fund LifeLine HSBC Investor Growth Strategy Fund It's simple. HSBC Investor Moderate Growth Strategy Fund It's easy. HSBC Investor Conservative Growth Strategy Fund It's affordable. 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 Semi Annual Report - April 30, 2006 Chairman's Message ..................................................... 1 Commentary From the Investment Manager ................................. 2 Portfolio Reviews ...................................................... 3 Statements of Assets and Liabilities ...................................20 Statements of Operations ...............................................21 Statements of Changes in Net Assets ....................................22 Financial Highlights ...................................................28 Notes to Financial Statements ..........................................33 Table of Shareholder Expenses ..........................................38 HSBC Investor Portfolios Schedules of Portfolio Investments HSBC Investor Intermediate Duration Fixed Income Portfolio .....40 HSBC Investor Core Plus Fixed Income Portfolio .................43 HSBC Investor High Yield Fixed Income Portfolio ................47 HSBC Investor Growth Portfolio .................................49 HSBC Investor Value Portfolio ..................................50 HSBC Investor International Equity Portfolio ...................51 HSBC Investor Small Cap Equity Portfolio .......................55 Statements of Assets and Liabilities ...................................56 Statements of Operations ...............................................58 Statements of Changes in Net Assets ....................................60 Financial Highlights ...................................................64 Notes to Financial Statements ..........................................65 Investment Adviser Contract Approval ...................................72 Table of Shareholder Expenses ..........................................73
- -------------------------------------------------------------------------------- Chairman's Message - -------------------------------------------------------------------------------- Dear Fellow Shareholders: The phrase, "disinterested trustees" is an important one in the mutual fund industry, although it could easily conjure up the image of a bunch of board people sitting around rubber stamping management decisions. The term actually means "independent of management" and denotes not a lack of interest but loyalty to the shareholders in supporting their vested interest in the funds. To help the trustees monitor all fund activities, the advisors, sub-advisors and administrators must provide timely and accurate information. The independent trustees then interpret all the data they receive, giving special attention to expenses, performance and compliance. To perform the tasks of monitoring and decision-making, the board has created various committees: o Audit The Audit Committee is composed entirely of independent trustees. The Chair is designated as the Audit Committee Financial Expert and has the required professional qualifications and experience. The Committee meets quarterly to receive reports from management on financial matters of the Funds, as well as those relating to internal controls and compliance with established policies and procedures of the Funds and with pertinent laws and regulations. At each meeting the Committee holds separate executive sessions with the Funds' Treasurer, Chief Compliance Officer and Independent Auditors. o Nominating and Governance The Nominating and Governance Committee meets when it is necessary to select new trustees. At this time, the committee establishes what can be called the "job description" for an independent trustee and then solicits nominations. This committee also deals with such issues as ongoing trustee education, board responsibilities, compensation and leadership development. o Valuation The Valuation Committee is responsible for overseeing established procedures in determining the appropriate value of the securities held by the individual HSBC Investor Funds and the net asset value per share of each of the funds in the HSBC complex. Working with management, auditors and, especially, the Funds' Chief Compliance Officer, this committee is a watchdog against any aberration in pricing or breach of regulations. The committee's job is not to establish price but to determine and oversee implementation of best practice. The committee structure allows board members to focus on specific issues so that when the full board meets it has the information it needs to make decisions on behalf of the shareholders, creating efficiency in governance. The independent trustees and all of the members of fund management wish to take this opportunity to thank you for your continued confidence in the HSBC Investor Funds. As always, should you have any questions or comments, please feel free to contact me. Yours truly, 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 expanded at a solid pace during the six-month period between November 1, 2005 and April 30, 2006. Gross domestic product grew at a relatively slow rate during the final two months of 2005, as the economy absorbed the effects of the summer's Gulf Coast hurricanes, but expanded quickly during the first four months of 2006. Strong business spending helped the economy shrug off the negative effects of rising interest rates and high prices on energy and commodities. Powerful global economic growth contributed to high oil prices, as demand for fuel outstripped supply. A mild winter in the eastern U.S. allowed inventories of heating oil and natural gas to increase. But burgeoning demand from China and concerns that militant activity in Nigeria and nuclear tensions with Iran could disrupt global oil supplies more than offset the effect of higher inventories. Strong global growth also pushed up prices of other commodities. Gold prices approached $600 an ounce, copper and aluminum traded near their all-time highs, and silver hit its highest level in many decades. Agricultural products also rose in price. In particular, a new push toward crops that could be used to make ethanol raised the prices of sugar and corn. That environment caused concerns about the potential for higher inflation, despite the fact that strong productivity gains to that point had allowed the economy to absorb higher energy and commodity prices without a significant increase in inflation. The Federal Reserve Board attempted to forestall higher prices by raising interest rates continually during this period, bringing its target short-term rate to 4.75% as of April 30. The Federal Reserve Board (the "Fed") installed a new chairman during this period, as Ben Bernanke succeeded long-time chairman Alan Greenspan. The Feds interest-rate increases caused yields on short-term bonds to rise. Meanwhile, yields on long-term bonds generally were stable. The bond market briefly experienced an inverted yield curve--an environment in which short-term bonds offer higher yields than long-term bonds--which historically has been a harbinger of recession. The yield curve quickly flattened, however, easing concerns about future economic weakness. Some observers worried that higher interest rates would lead to a significant decline in the housing market, potentially imperiling consumer spending. Healthy employment reports and increased wage growth helped relieve those fears, however. Market Review Stocks generated strong returns for the six-month period. The S&P 500 gained 9.64%, while the Russell 2000 Index of small-cap stocks climbed 18.91%. Strong corporate earnings and healthy corporate balance sheets helped fuel the stock-market rally. U.S. corporations used their large cash holdings to add value for shareholders in the form of stock buybacks and higher dividend payouts. Merger and acquisition activity also picked up considerably and contributed to stock gains. Strong global economic growth boosted the returns of stocks in a number of sectors. Shares of industrial firms benefited as the powerful worldwide expansion increased demand for heavy equipment, airplanes and other items; meanwhile, a number of industrial stocks also got a boost from strong defense spending. Materials firms saw their profits increase dramatically as commodity prices climbed, and stocks in that sector posted strong gains. Likewise, shares of energy firms benefited from the high prices of oil and gas. Financial stocks posted good returns despite rising interest rates. Consumer-oriented stocks generally lagged the broad market, as investors worried about the effects higher interest rates and energy prices would have on consumer spending. Health-care shares were held back by troubles at several large pharmaceuticals firms, while technology stocks produced mixed results. Strong returns from value-oriented sectors such as energy and commodities, coupled with relatively weak returns from growth sectors such as health care and technology, helped value indices continue a long run of market leadership. Small- and mid-cap stocks significantly outperformed larger shares, also continuing a long-standing trend. Foreign stocks out-gained the U.S. market by a wide margin, with emerging-markets stocks leading the way on the strength of burgeoning emerging economies and surging demand for natural resources. 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 Core Plus Fixed Income Portfolio ("Core Plus Fixed Income Portfolio"); HSBC Investor High Yield Fixed Income Portfolio (High Yield Fixed Income Fund) HSBC Investor Intermediate Duration Fixed Income Portfolio ("Intermediate Duration Fixed Income Portfolio"), and the HSBC Investor Money Market Fund ("Money Market Fund"). 3 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- Effective April 28, 2006 the Lifeline Funds began investing in the HSBC Investor High Yield Fixed Income Portfolio, however due to the short performance period, that investment did not significantly contribute to the LifeLine Funds overall total return for the period ended April 30, 2006. 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 charts below.
- ------------------------------------------------------------------------------------------------------------------------------- HSBC Investor HSBC Investor HSBC Investor HSBC Investor HSBC Investor April 28, 2006 Aggressive Growth Growth Moderate Growth Conservative Growth Conservative Income Reallocation Strategy Strategy Strategy Strategy Strategy Underlying Portfolio Fund Fund Fund Fund Fund - ------------------------------------------------------------------------------------------------------------------------------- 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% Core Plus Fixed Income Portfolio None 17% 31% 20% 25% High Yield Fixed Income Portfolio None None None 15% 25% Intermediate Duration Fixed Income Portfolio 1% 1% 6% 20% 30% Money Market Fund 1% 1% 6% 21% 30% Total: 100% 100% 100% 100% 100%
- ------------------------------------------------------------------------------------------------------------------------------- HSBC Investor HSBC Investor HSBC Investor HSBC Investor HSBC Investor Pre April 28, 2006 Aggressive Growth Growth Moderate Growth Conservative Growth Conservative Income Reallocation Strategy Strategy Strategy Strategy Strategy Underlying Portfolio Fund Fund Fund Fund Fund - ------------------------------------------------------------------------------------------------------------------------------- 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% Core Plus Fixed Income Portfolio None 17% 31% 20% 25% Intermediate Duration Fixed Income Portfolio None None None 15% 25% Money Market Fund 1% 1% 6% 20% 30% Total: 100% 100% 100% 100% 100%
HSBC INVESTOR FAMILY OF FUNDS 4 - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Aggressive Growth Strategy Fund - -------------------------------------------------------------------------------- Fund Performance Average Annual Total Return (%) - --------------------------------------------------------------------------------
Inception Six 1 Since As of April 30, 2006 Date Month'D' Year Inception HSBC Investor Aggressive Growth Strategy Fund Class A(1) 2/14/05 11.55 23.62 14.90 HSBC Investor Aggressive Growth Strategy Fund Class B(2) 2/9/05 13.02 25.25 16.68 HSBC Investor Aggressive Growth Strategy Fund Class C(3) 6/9/05 15.96 -- 22.39 Aggressive Growth Blended Portfolio Index(4) 15.30 25.13 --
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. 'D' Aggregate total return. (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) The Aggressive Growth Blended Portfolio Index consists of a blend by percentage of the following indices. The 90-Day T-Bill (1%); Russell 1000'r' Growth Index (21%); Russell 1000'r' Value Index (21%); Russell 2500'r' Growth Index (34%) and the MSCI EAFE Index (23%). The 90-Day T-Bill is government guaranteed and offers a fixed rate of return. Return and principal of stocks and bonds will vary with market conditions. Treasury bills are less volatile than longer-term fixed-income securities and are guaranteed as to timely payment of principal and interest by the U.S. Government. The Russell 1000 Growth Index measures the performance of those Russell companies with higher price-to-book ratios and higherforecasted growth values. The Russell 1000 Value Index measures the performance of those Russell companies with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earning ratios, higher dividend yields, and lower forecasted growth values. The Russell Mid Cap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The MSCI EAFE Index 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. The above indices are unmanaged and do not reflect the fees associated with a mutual fund, and investors cannot directly invest in an index. 5 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Growth Strategy Fund - -------------------------------------------------------------------------------- Fund Performance Average Annual Total Return (%) - --------------------------------------------------------------------------------
Inception Six 1 Since As of April 30, 2006 Date Month'D' Year Inception HSBC Investor Growth Strategy Fund Class A(1) 2/8/05 8.23 17.50 12.86 HSBC Investor Growth Strategy Fund Class B(2) 2/1/05 9.43 18.89 15.26 HSBC Investor Growth Strategy Fund Class C(3) 4/27/05 12.48 21.90 22.58 Growth Blended Portfolio Index(4) 12.20 19.70 --
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. 'D' Aggregate total return. (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) The Growth Blended Portfolio Index consists of a blend by percentage of the following indices. The 90-Day T-Bill (1%); Merrill Lynch High Yield Master II Index (2.0%); Lehman Brothers U.S. Aggregate Bond Fund Index (15%); Russell 1000'r' Growth Index (21%); Russell 1000'r' Value Index (21%); Russell 2500'r' Growth Index (20%), and the MSCI EAFE Index (20%). The 90-Day T-Bill is government guaranteed and offers a fixed rate of return. Return and principal of stocks and bonds will vary with market conditions. Treasury bills are less volatile than longer-term fixed-income securities and are guaranteed as to timely payment of principal and interest by the U.S. Government. The Merrill Lynch High Yield Master II Index consists of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default. The Lehman Brothers U.S. Aggregate Bond Fund Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Russell 1000 Growth Index measures the performance of those Russell companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell companies with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earning ratios, higher dividend yields, and lower forecasted growth values. The Russell Mid Cap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The MSCI EAFE Index 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. The above indices are unmanaged and do not reflect the fees associated with a mutual fund, and investors cannot directly invest in an index. HSBC INVESTOR FAMILY OF FUNDS 6 - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Moderate Growth Strategy Fund - -------------------------------------------------------------------------------- Fund Performance Average Annual Total Return (%) - --------------------------------------------------------------------------------
Inception Six 1 Since As of April 30, 2006 Date Month'D' Year Inception HSBC Investor Moderate Growth Strategy Fund Class A(1) 2/3/05 4.82 11.48 7.97 HSBC Investor Moderate Growth Strategy Fund Class B(2) 2/1/05 5.89 12.43 9.89 HSBC Investor Moderate Growth Strategy Fund Class C(3) 6/10/05 8.97 -- 12.05 Moderate Growth Blended Portfolio Index(4) 9.11 14.60 --
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. 'D' Aggregate total return. (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) The Moderate Growth Blended Portfolio Index consists of a blend by percentage of the following indices. The 90-Day T-Bill (6%); Lehman Brothers U.S. Aggregate Bond Fund Index (26%); Merrill Lynch High Yield Master II Index (5.0%); Russell 1000'r' Growth Index (19%); Russell 1000'r' Value Index (18%); Russell 2500'r' Growth Index (11%) and the MSCI EAFE Index (15%). The 90-Day T-Bill is government guaranteed and offers a fixed rate of return. Return and principal of stocks and bonds will vary with market conditions. Treasury bills are less volatile than longer-term fixed-income securities and are guaranteed as to timely payment of principal and interest by the U.S. Government. The Merrill Lynch High Yield Master II Index consists of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default. The Lehman Brothers U.S. Aggregate Bond Fund Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Russell 1000 Growth Index measures the performance of those Russell companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell companies with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earning ratios, higher dividend yields, and lower forecasted growth values. The Russell Mid Cap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The MSCI EAFE Index 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. The above indices are unmanaged and do not reflect the fees associated with a mutual fund, and investors cannot directly invest in an index. 7 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Conservative Growth Strategy Fund - -------------------------------------------------------------------------------- Fund Performance Average Annual Total Return (%) - --------------------------------------------------------------------------------
Inception Six 1 Since As of April 30, 2006 Date Month'D' Year Inception HSBC Investor Conservative Growth Strategy Fund Class A(1) 2/23/05 2.10 6.65 4.28 HSBC Investor Conservative Growth Strategy Fund Class B(2) 2/17/05 3.13 7.51 5.15 HSBC Investor Conservative Growth Strategy Fund Class C(3) 4/19/05 6.06 11.01 11.10 Conservative Growth Blended Portfolio Index(4) 6.65 10.59 --
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. 'D' Aggregate total return. (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) The Conservative Growth Blended Portfolio Index consists of a blend by percentage of the following indices. The 90-Day T-Bill (21%); Merrill Lynch High Yield Master II Index (8.0%); Lehman Brothers U.S. Aggregate Bond Fund Index (25%); Lehman Brothers U.S. Interm. Aggregate Bond Index (3%); Russell 1000'r' Growth Index (15%); Russell 1000'r' Value Index (14%); Russell 2500'r' Growth Index (4%) and the MSCI EAFE Index (10%). The 90-Day T-Bill is gov't. guaranteed and offers a fixed rate of return. Return and principal of stocks and bonds will vary with market conditions. Treasury bills are less volatile than longer-term fixed-income securities and are guaranteed as to timely payment of principal and interest by the U.S. Government. The Merrill Lynch High Yield Master II Index consists of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default. The Lehman Bros. Aggregate Bond Fund Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including gov't, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Lehman Bros. Intermediate Aggregate Index is an unmanaged index generally representative of investment-grade debt issues with maturities between three and ten years. The Russell 1000 Growth Index measures the performance of those Russell companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell companies with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earning ratios, higher dividend yields, and lower forecasted growth values. The Russell Mid Cap Growth Index measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The MSCI EAFE Index 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. The above indices are unmanaged and do not reflect the fees associated with a mutual fund, and investors cannot directly invest in an index. HSBC INVESTOR FAMILY OF FUNDS 8 - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Conservative Income Strategy Fund - -------------------------------------------------------------------------------- Fund Performance Average Annual Total Return (%) - --------------------------------------------------------------------------------
Inception Six 1 Since As of April 30, 2006 Date Month'D' Year Inception HSBC Investor Conservative Income Strategy Fund Class A(1) 2/8/05 -1.88 0.13 -0.60 HSBC Investor Conservative Income Strategy Fund Class B(2) 2/14/05 -1.07 0.63 0.52 HSBC Investor Conservative Income Strategy Fund Class C(3) 5/4/05 1.91 -- 3.36 Conservative Income Blended Portfolio Index(4) 3.42 5.41 --
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. 'D' Aggregate total return. (1) Reflects the maximum sales charge of 4.75%. (2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%. (3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%. (4) The Conservative Income Blended Portfolio Index consists of a blend by percentage of the following indices. The 90-Day T-Bill (30%); Lehman Bros. U.S. Aggregate Bond Fund Index (15%); Merrill Lynch High Yield Master II Index (10%); Lehman Bros. U.S. Interm. Aggregate Bond Index (25%); Russell 1000'r' Growth Index (8%); Russell 1000'r' Value Index (8%) and the MSCI EAFE Index (4%). The 90-Day T-Bill is gov't. guaranteed and offers a fixed rate of return. Return and principal of stocks and bonds will vary with market conditions. Treasury bills are less volatile than longer-term fixed-income securities and are guaranteed as to timely payment of principal and interest by the U.S. Government. The Merrill Lynch High Yield Master II Index consists of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default. The Lehman Bros. Aggregate Bond Fund Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including gov't., corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. The Lehman Bros. Interm. Aggregate Index is an unmanaged index generally representative of investment-grade debt issues with maturities between three and ten years. The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-earning ratios, higher dividend yields, and lower forecasted growth values. The MSCI EAFE Index 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. The above indices are unmanaged and do not reflect the fees associated with a mutual fund, and investors cannot directly invest in an index. 9 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- The following graphs are illustrations of the HSBC Investor LifeLine Funds' Asset Allocations as represented by the underlying investments standardized indices: Aggressive Growth Blended Portfolio Index [Pie chart] 34.0% Russell 2500'r' Growth Index 23.0% MSCI EAFE Index 21.0% Russell 1000'r' Growth Index 21.0% Russell 1000'r' Value 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' Growth Index 21.0% Russell 1000'r' Value Index 20.0% Russell 2500'r' Growth Index 20.0% MSCI EAFE Index 15.0% Lehman Brothers U.S. Aggregate Bond Index 2.0% Merrill Lynch High Yield Master II Index 1.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index
Moderate Growth Blended Portfolio Index [Pie chart] 26.0% Lehman Brothers U.S. Aggregate Bond Index 19.0% Russell 1000'r' Growth Index 18.0% Russell 1000 'r'Value Index 15.0% MSCI EAFE Index 11.0% Russell 2500'r' Growth Index 6.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index 5.0% Merrill Lynch High Yield Master II Index
Conservative Growth Blended Portfolio Index [Pie chart] 25.0% Lehman Brothers U.S. Aggregate Bond Index 21.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index 15.0% Russell 1000'r' Growth Index 14.0% Russell 1000'r' Value Index 10.0% MSCI EAFE Index 8.0% Merrill Lynch High Yield Master II Index 4.0% Russell 2500'r' Growth Index 3.0% Lehman Brothers Intermediate Aggregate Bond 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 Intermediate Aggregate Bond Index 15.0% Lehman Brothers U.S. Aggregate Bond Index 10.0% Merrill Lynch High Yield Master II Index 8.0% Russell 1000'r' Growth Index 8.0% Russell 1000'r' Value Index 4.0% MSCI EAFE Index
- -------------------------------------------------------------------------------- Avearge Annual Total Return (%) - --------------------------------------------------------------------------------
1 3 5 10 Year Year Year Year Citigroup U.S. Domestic 3 Month Treasury Bill Index 3.63 2.11 2.14 3.69 Lehman Brothers U.S. Aggregate Bond Index 0.71 2.58 5.16 6.33 Lehman Brothers Intermediate Aggregate Bond Index 1.20 2.46 4.84 6.06 MSCI EAFE Index 34.00 29.60 9.59 7.03 Russell 1000'r' Growth Index 15.18 12.05 -0.76 6.21 Russell 1000'r' Value Index 18.31 19.39 7.30 11.21 Russell 2500'r' Growth Index 30.35 25.72 11.68 11.61
Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index reflects monthly return equivalents of yield averages that are not marked to the market. The Index is an average of the last three-month Treasury Bill issues. The three-month Treasury Bills are the short-term debt obligations of the U.S. government. Lehman Brothers U.S. Aggregate Bond Index is a market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of at least one year. Lehman Brothers Intermediate Aggregate Bond Index is generally representative of investment-grade debt issues with maturities between three and ten years. Merrill Lynch High Yield Master II Index consists of U.S. dollar denominated bonds that are issued in countries having a BBB3 or higher debt rating with at least one year remaining till maturity. All bonds must have a credit rating below investment grade but not in default. Morgan Stanley Capital International Europe, Australasia and Far East Index (MSCI EAFE) is a market capitalization-weighted equity index comprising 20 of the 48 countries in the MSCI universe and representing the developed world outside of North America. Each MSCI country index is created separately, then aggregated, without change, into regional MSCI indices. EAFE performance data is calculated in U.S. dollars and in local currency. Russell 1000'r' Growth Index measures the performance of 1000 securities in the Russell Universe with higher price-to-book ratios and higher forecasted growth values. Russell 1000'r' Value Index measures the performance of 1000 securities in the Russell Universe with a less-than-average growth orientation. Companies in this index generally have low price-to-book and price-to-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. HSBC INVESTOR FAMILY OF FUNDS 10 - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Money Market Fund by Thomas Riordan Senior Fixed Income Portfolio Manager Moody's has assigned an "Aaa" rating to the HSBC Investor Money Market Fund.(1) 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 first quarter of 2006 came to a close with another increase in the target federal funds rate to 4.75%. It was the fifteenth consecutive 25 basis point (0.25%) increase in the federal funds rate since the tightening cycle began in June 2004. Despite 375 basis points (3.75%) of tightening, the economy continues to expand at a healthy rate. Fourth quarter Gross Domestic Product(2) ("GDP") was initially estimated to have grown at a disappointing 1.1% annual rate. This was later revised upwards to a 1.7% rate. First quarter GDP rebounded and was estimated to have grown at a 4.8% annual rate, offsetting the prior quarter's sluggish growth. This was the fastest growth rate in two years. The Consumer Price Index(2) ("CPI") and the Producer Price Index(2) ("PPI") data released during the past 6 months suggested an emerging inflationary threat. Measured on a year over year basis, PPI was approximately 1.7% while CPI increased in excess of 2%. With the new Federal Reserve chairman, Ben Bernanke explicitly targeting an inflation comfort zone of between 1% and 2%, market participant's expectations have shifted to the likelihood of more rate increases. The rise in commodity prices has also added to the specter of an increase in the rate of inflation. Global growth creating increased demand for various metals and turmoil in several oil producing countries are two the reasons for the increase. Gold has traded above $700 an ounce and oil has traded over $70 per barrel. The question remains as to whether oil prices act as more of a tax on economic growth or whether it is a harbinger of future inflation. That will depend on producer's ability to pass along price increases of their goods. The housing market, which had been a source of strength in the economy for the past few years, has become an area of concern. Significant evidence of a slowdown in both new and existing home sales has raised concerns about the carry over effect on the wider economy. Low interest rates, which helped drive the housing boom, have largely run its course. Consumers who were able to draw significant spending power from mortgage refinancing and equity extraction from their home's value may lose the ability to drive the economy through spending. Trading activity the past 6 months continues to be centered primarily in the purchase of A1+/P1 or A1/P1 commercial paper in the 30 to 90 day range. Additionally, we bought Variable Rate Notes ("VRN") that are indexed to either Prime or Libor(3) and offer incremental yield pick-up over shorter dated paper. We believe 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 progress through 2006, the short-term market is awakening to the possibility that long dormant inflationary pressures are likely to increase. This increases the odds of future hikes in the target federal funds rate. While many market participants expect economic growth to slow in 2006, this may not be enough to prevent an increase in inflation, and may in turn force the Federal Open Market Committee to raise federal funds more than previously expected. We will therefore maintain a short weighted average maturity in anticipation of higher rates. Of course, this strategy is subject to the change should there be a change in economic conditions.* *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) The Consumer Price Index ("CPI") is 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") is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. The 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. (3) The London Inter-Bank Offer Rate ("LIBOR") is the interest rate that the largest international banks charge each other for loans. 11 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Intermediate Duration Fixed Income Portfolio (formerly HSBC Investor Limited Maturity Portfolio) by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team The HSBC Investor Intermediate Duration Fixed Income Portfolio (the "Portfolio") seeks to realize above-average total return, consistent with reasonable risk, by investing in a diversified investment grade portfolio of U.S. government obligations, corporate bonds and mortgage-backed securities. Investment Concerns Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher-quality bonds generally offer less risk than longer-term bonds and a lower rate of return. Market Commentary GDP(1) growth in the U.S. fell off significantly in the fourth quarter of 2005, slowing to a relative crawl of 1.7% in the wake of late summer gulf storms, but recovered dramatically in the first quarter of 2006, when GDP growth rebounded to 4.8%. Energy prices rose steadily over the course of the semi-annual period, reaching a high of almost $74 a barrel in late April. This, along with the rise in a host of other commodity prices, gold and copper in particular, generated concerns about inflation among central bankers and consumers alike. Robust growth in non-farm payrolls helped buoy consumer confidence even as the realization dawned that the housing market had begun to cool off. In the face of continued strong output growth and incipient pricing pressures, the Fed maintained its measured pace of policy tightening, raising the target federal funds rate by 25 basis points (0.25%) at each of the four Federal Open Market Committee meetings during the period under review, to end at 4.75%. During the period ended April 30, 2006, the yield on the three-month U.S. Treasury Bill rose 88 basis points (0.88%), climbing more or less in sync with the step-wise increase in the fed funds rate. Meanwhile, the yield on the two-year Treasury note rose 48 basis points (0.48%) to end at 4.86% and the ten-year rose 50 basis points (0.50%), ending the quarter at 5.05%. The rise in rates caused a bearish flattening in the yield curve during the period, and created a somewhat difficult environment for performance. Spreads continued to tighten and spread sectors generally had significant excess returns versus Treasury securities of similar duration with securitized debt (Asset Backed Securities in particular) and corporates leading the way and lower quality paper showing the strongest performance. The Fund underperformed its benchmark index for the period under review. The key component of that was select, off-benchmark holdings in high yield and emerging market debt. An overweight in spread sectors generally relative to the benchmark, particularly asset backed securities and collateralized mortgage backed securities and individual security selection in corporate credit also had a negative impact on performance. Our short, defensive duration positioning relative to the benchmark helped performance, as did our yield curve positioning over the course of the six month period.* Going forward, we will opportunistically add duration as higher yields reflect fair value. We continue to analyze the yield curve for pricing anomalies and, subject to portfolio restrictions, we will attempt to add high quality securitized debt issues that offer attractive yields without the issuer specific risk of corporate bonds. Within corporates we will continue our focus on security selection, including select off-benchmark names that we think, in a relatively homogenized credit environment, may offer greater opportunities for value.* * Portfolio composition is subject to change. (1) The 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. HSBC INVESTOR FAMILY OF FUNDS 12 - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Core Plus Fixed Income Portfolio (formerly HSBC Investor Fixed Income Portfolio) by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team The HSBC Investor Core Plus 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 GDP(1) growth in the U.S. fell off significantly in the fourth quarter of 2005, slowing to a relative crawl of 1.7% in the wake of late summer gulf storms, but recovered dramatically in the first quarter of 2006, when GDP growth rebounded to 4.8%. Energy prices rose steadily over the course of the semi-annual period, reaching a high of almost $74 a barrel in late April. This, along with the rise in a host of other commodity prices, gold and copper in particular, generated concerns about inflation among central bankers and consumers alike. Robust growth in non-farm payrolls helped buoy consumer confidence even as the realization dawned that the housing market had begun to cool off. In the face of continued strong output growth and incipient pricing pressures, the Federal Reserve maintained its measured pace of policy tightening, raising the target federal funds rate by 25 basis points (0.25%) at each of the four Federal Open Market Committee meetings during the period under review, to end at 4.75%. During this period, the yield on the three-month U.S. Treasury Bill rose 88 basis points (0.88%), climbing more or less in sync with the step-wise increase in the fed funds rate. Meanwhile, the yield on the two-year Treasury note rose 48 basis points (0.48%) to end at 4.86% and the ten-year rose 50 basis points (0.50%), ending the quarter at 5.05%. The rise in rates caused a bearish flattening in the yield curve during the period under review, and created a somewhat difficult environment for performance. Spreads continued to tighten and spread sectors generally had significant excess returns versus Treasury securities of similar duration with securitized debt (Asset Backed Securities in particular) and corporates leading the way and lower quality paper showing the strongest performance.* The Fund outperformed its benchmark index for the period under review. The key component of that outperformance was select, off-benchmark holdings in high yield and emerging market debt. An overweight in spread sectors generally relative to the benchmark, particularly asset backed securities and collateralized mortgage backed securities and individual security selection in corporate credit also had a positive impact on performance. Our short, defensive duration positioning relative to the benchmark helped performance, as did our yield curve positioning over the course of the semiannual period.* Going forward, we will opportunistically add duration as higher yields reflect fair value. We continue to analyze the yield curve for pricing anomalies and, subject to portfolio restrictions, we will attempt to add high quality securitized debt issues that offer attractive yields without the issuer specific risk of corporate bonds. Within corporates we will continue our focus on security selection, including select off-benchmark names that we think, in a relatively homogenized credit environment, may offer greater opportunities for value.* * Portfolio composition is subject to change. (1) The 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. 13 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- HSBC Investor Growth Portfolio by Philip J. Sanders, Senior Vice President/Portfolio Manager, CFA and Daniel P. Becker, Senior Vice President/Portfolio Manager, CFA Waddell & Reed Investment Management Company The HSBC Investor Growth Portfolio (the "Portfolio") seeks long-term growth of capital by investing primarily in U.S. and foreign equity securities of high quality companies with market capitalization generally in excess of $2 billion, which the sub-adviser believes have the potential to generate superior levels of long-term profitability and growth. The Portfolio employs Waddell & Reed Investment Management Company (Waddell & Reed) as the sub-adviser. Investment Concerns Equity securities (stocks) are more volatile and carry more risk than other forms of investments, including investments in high-grade fixed income securities. The net asset value per share of this Fund will fluctuate as the value of the securities in the portfolio changes. Market Commentary Large-capitalization growth stocks generated solid returns during the period, although they trailed smaller shares and value-oriented large caps. That environment helped the Fund post good absolute performance. The Fund outperformed its large-cap growth benchmark for the six-month period. That superior relative performance came primarily on the strength of stock selection within the energy sector. An overweight stake in energy stocks also contributed positively to the Fund's relative returns. The portfolio managers' stock selection within the information technology sector boosted the Fund's relative gains as well, as did selection among consumer discretionary stocks.* The Fund's investments in health-care stocks were the largest detractor from performance relative to the Russell 1000'r' Growth benchmark index. Selection among health-care stocks weighed on relative performance, as did a slightly overweight position in shares of health-care firms that was slightly larger than that of the benchmark. Several of the individual stocks that weighed the most on relative returns were in the health-care sector. * Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 14 - -------------------------------------------------------------------------------- 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 Fund's absolute return benefited from strong stock-market performance. Investor sentiment improved late in the period, as investors showed confidence in market fundamentals and the Fed's ability to restrain inflation without endangering economic growth. Corporate consolidation, supported by strong corporate balance sheets, inexpensive financing, good organic growth and shareholder activism, also helped push the market higher. Financial stocks provided the largest contribution to the Fund's absolute gains, followed by shares of miners, producer durables firms and industrial companies. Technology stocks reduced the Fund's absolute return.* Stock selection in the financials sector provided the largest boost to the Fund's relative returns. Mortgage stocks in particular lifted relative performance, as those stocks posted gains after lagging for much of 2005. An overweight stake in the materials and processing sector also helped performance against the benchmark, as did stock selection within that sector. Mining stocks were especially strong, as the prices of gold and other metals climbed due to bullish market fundamentals, as well as concerns about inflation and potential stockpiling by certain governments. Overweight stakes in producer durables and industrial stocks also boosted relative gains.* The Fund held an overweight position in technology stocks, due to the portfolio manager's belief that higher corporate spending would benefit such shares. That allocation weighed on relative performance, as certain of the Fund's technology holdings issued disappointing earnings results. Selection among consumer discretionary stocks also hindered returns against the benchmark, as a relatively large stake in attractively valued media shares underperformed the market for this period. Selection in the consumer staples sector likewise dragged on relative returns, due largely to weakness among food producers.* * Portfolio composition is subject to change. 15 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- 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 Global economic growth and corporate profits consistently exceeded expectations during this six-month period. Those developments generated optimism among global investors, supporting strong gains in international stock markets and boosting this Fund's returns.* The Fund generated benchmark-beating returns largely on the strength of good stock picking. The Fund's holdings in every economic sector except transportation outperformed the corresponding sectors in the EAFE index, while the Fund's transportation holdings lagged only slightly. Selection among financials and industrial commodities stocks was especially strong.* The Fund's sector weightings also contributed modestly to relative gains. An underweight position in the underperforming telecommunications sector boosted returns against the benchmark, as did overweight stakes in surging capital equipment and industrial commodities shares. Investments in emerging markets also helped the Fund outperform its index--which does not include emerging-markets stocks--as emerging markets led the global equity markets during the six-month period.* An overweight position in global energy stocks weighed on relative returns. The energy sector led the international markets during recent years, but trailed the markets during the recent six-month period.* * Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 16 - -------------------------------------------------------------------------------- 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 Portfolio (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 Stronger-than-expected profit growth propelled small- and mid-cap growth stocks to sizable gains during this six-month period, helping this Fund generate strong returns. Health care stocks provided the largest contribution to the Fund's absolute return, followed by technology, industrials, energy and consumer stocks. Financials and materials stocks contributed the least to the Fund's gains, although every sector posted positive returns during this period. Selection among health care stocks was a principal reason the Fund outperformed its benchmark. The Fund's investments in the biotechnology and health care industries performed especially well. The Fund's manager attempt to maximize the risk-to-return profile of their investments in those volatile industries by focusing on shares of firms that have high-quality management teams, proven drugs in late-stage clinical trials and a focus on developing therapies for which there are immediate, unmet medical needs.* The Fund's stake in energy stocks also boosted relative returns, largely on the strength of investments in coal companies. Selection in the technology sector lifted relative performance as well, as healthy gains among data processing, communications equipment and application software firms more than offset weakness in shares of IT consulting, semiconductors and semiconductor capital equipment companies. An underweight position in the lagging consumer discretionary sector also helped performance against the benchmark.* An underweight position in surging materials stocks detracted from relative gains. Stock selection among financials also reduced the Fund's advantage over the benchmark, as the growth-oriented regional bank stocks held by the Fund slid due to investor concerns about competition and a flat yield curve. Finally, the Fund's small cash stake, which averaged 2.2% of assets, reduced relative performance due to the strong market environment.* * Portfolio composition is subject to change. 17 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- Portfolio Reviews - -------------------------------------------------------------------------------- Portfolio Composition of Underlying Portfolios* April 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- HSBC Investor Intermediate Duration Fixed Income Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- Corporate Bonds 29.5% - --------------------------------------------------------------------------------------------------- Mortgage Backed Securities 29.1% - --------------------------------------------------------------------------------------------------- Asset Backed Securities 12.9% - --------------------------------------------------------------------------------------------------- Collateralized Mortgage Obligations 12.4% - --------------------------------------------------------------------------------------------------- U.S. Treasury Securities 8.0% - --------------------------------------------------------------------------------------------------- Commercial Mortgage Backed Securities 7.0% - --------------------------------------------------------------------------------------------------- Foreign Sovereign Bonds 0.5% - --------------------------------------------------------------------------------------------------- Cash and Equivalents 0.3% - --------------------------------------------------------------------------------------------------- Foreign Corporate Bonds 0.3% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HSBC Investor Core Plus Fixed Income Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- Corporate Bonds 28.7% - --------------------------------------------------------------------------------------------------- Mortgage Backed Securities 25.2% - --------------------------------------------------------------------------------------------------- Asset Backed Securities 11.6% - --------------------------------------------------------------------------------------------------- Collateralized Mortgage Obligations 11.2% - --------------------------------------------------------------------------------------------------- U.S. Treasury Securities 10.4% - --------------------------------------------------------------------------------------------------- Commercial Mortgage Backed Securities 7.1% - --------------------------------------------------------------------------------------------------- U.S. Government Agencies 3.8% - --------------------------------------------------------------------------------------------------- Municipal Bonds 0.8% - --------------------------------------------------------------------------------------------------- Foreign Sovereign Bonds 0.5% - --------------------------------------------------------------------------------------------------- Cash and Equivalents 0.4% - --------------------------------------------------------------------------------------------------- Foreign Corporate Bonds 0.3% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HSBC Investor Growth Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- Information Technology 24.3% - --------------------------------------------------------------------------------------------------- Industrials 18.9% - --------------------------------------------------------------------------------------------------- Financials 13.7% - --------------------------------------------------------------------------------------------------- Consumer Discretionary 12.1% - --------------------------------------------------------------------------------------------------- Health Care 11.0% - --------------------------------------------------------------------------------------------------- Consumer Staples 8.1% - --------------------------------------------------------------------------------------------------- Energy 7.3% - --------------------------------------------------------------------------------------------------- Repurchase Agreements 4.6% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
* Portfolio composition is subject to change. - -------------------------------------------------------------------------------- HSBC Investor High Yield Fixed Income Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- Corporate Bonds 84.0% - --------------------------------------------------------------------------------------------------- Cash and Equivalents 16.0% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HSBC International Equity Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- Europe 58.8% - --------------------------------------------------------------------------------------------------- Japan 27.6% - --------------------------------------------------------------------------------------------------- Australia & Far East 5.9% - --------------------------------------------------------------------------------------------------- Canada 3.4% - --------------------------------------------------------------------------------------------------- Other 2.8% - --------------------------------------------------------------------------------------------------- Cash and Equivalents 1.5% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HSBC Investor Small Cap Equity Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- HealthCare 26.5% - --------------------------------------------------------------------------------------------------- Information Technology 22.0% - --------------------------------------------------------------------------------------------------- Industrials 17.5% - --------------------------------------------------------------------------------------------------- Energy 12.2% - --------------------------------------------------------------------------------------------------- Consumer Discretionary 11.0% - --------------------------------------------------------------------------------------------------- Financial 6.5% - --------------------------------------------------------------------------------------------------- Cash and Equivalents 3.4% - --------------------------------------------------------------------------------------------------- Materials 0.9% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- HSBC Investor Value Portfolio - --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value - --------------------------------------------------------------------------------------------------- Financials 28.8% - --------------------------------------------------------------------------------------------------- Industrials 11.8% - --------------------------------------------------------------------------------------------------- Energy 11.0% - --------------------------------------------------------------------------------------------------- Consumer Discretionary 9.0% - --------------------------------------------------------------------------------------------------- Information Technology 8.9% - --------------------------------------------------------------------------------------------------- Materials 7.9% - --------------------------------------------------------------------------------------------------- Consumer Staples 6.6% - --------------------------------------------------------------------------------------------------- Cash and Equivalents 4.7% - --------------------------------------------------------------------------------------------------- Telecommunication Services 4.3% - --------------------------------------------------------------------------------------------------- Utilities 2.1% - --------------------------------------------------------------------------------------------------- Transportation 2.0% - --------------------------------------------------------------------------------------------------- Miscellaneous 1.9% - --------------------------------------------------------------------------------------------------- Health Care 1.0% - --------------------------------------------------------------------------------------------------- Total 100.0% - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
* Portfolio composition is subject to change. HSBC INVESTOR FAMILY OF FUNDS 18 This page is intentionally left blank. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH INCOME STRATEGY FUND FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND - --------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in Portfolios $3,921,612 $13,486,892 $15,450,050 $3,603,816 $1,412,810 Investment in affiliates, at value (a) 39,596 136,196 985,739 958,419 604,794 Receivable for capital shares issued 49,888 321,208 53,660 475 21,136 Prepaid expenses and other assets 8,817 13,440 17,648 6,260 4,454 ---------- ----------- ----------- ---------- ---------- TOTAL ASSETS 4,019,913 13,957,736 16,507,097 4,568,970 2,043,194 ---------- ----------- ----------- ---------- ---------- LIABILITIES: Dividends payable -- -- -- -- 4,589 Payable for capital shares redeemed -- 7,548 2,843 -- -- Accrued related party expenses and other liabilities: Investment Management 841 1,851 632 181 287 Administration 112 385 487 139 69 Transfer Agent -- -- -- -- 265 Distribution 1,227 3,860 5,059 1,472 520 Shareholder Servicing 754 2,559 3,215 920 417 Chief Compliance Officer -- -- -- -- 3 Other 1,825 6,773 8,044 2,991 1,552 ---------- ----------- ----------- ---------- ---------- TOTAL LIABILITIES 4,759 22,976 20,280 5,703 7,702 ---------- ----------- ----------- ---------- ---------- NET ASSETS $4,015,154 $13,934,760 $16,486,817 $4,563,267 $2,035,492 ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ............................................................................................................................... COMPOSITION OF NET ASSETS: Capital $3,598,876 $12,733,336 $15,387,932 $4,320,882 $2,011,689 Accumulated net investment income (loss) (8,380) 5,685 12,594 6,222 311 Accumulated net realized gains (losses) from investment transactions 56,588 147,122 113,850 23,149 (5,669) Unrealized appreciation/depreciation from investments 368,070 1,048,617 972,441 213,014 29,161 ---------- ----------- ----------- ---------- ---------- NET ASSETS $4,015,154 $13,934,760 $16,486,817 $4,563,267 $2,035,492 ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ............................................................................................................................... NET ASSETS Class A Shares: $1,888,954 $ 7,095,007 $ 7,949,262 $2,159,134 $1,230,198 Class B Shares: $1,997,173 $ 6,250,579 $ 7,757,526 $2,058,815 $ 553,225 Class C Shares: $ 129,027 $ 589,174 $ 780,029 $ 345,318 $ 252,069 ---------- ----------- ----------- ---------- ---------- $4,015,154 $13,934,760 $16,486,817 $4,563,267 $2,035,492 ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- ............................................................................................................................... SHARES OUTSTANDING Class A Shares: 152,471 582,692 691,839 197,335 120,869 Class B Shares: 162,280 512,412 674,237 189,802 54,239 Class C Shares: 10,507 48,081 69,305 31,210 24,595 ............................................................................................................................... NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE Class A Shares: $ 12.39 $ 12.18 $ 11.49 $ 10.94 $ 10.18 Class B Shares:* $ 12.31 $ 12.20 $ 11.51 $ 10.85 $ 10.20 Class C Shares:* $ 12.28 $ 12.25 $ 11.26 $ 11.06 $ 10.25 Maximum Sales Charge -- Class A Shares 5.00% 5.00% 5.00% 5.00% 4.75% ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- Maximum Offering Price per share (Net Asset Value/100%-maximum sales charge)) $ 13.04 $ 12.82 $ 12.09 $ 11.52 $ 10.69 ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- ---------- Investments in affiliates, at cost (a) $ 39,596 $ 136,196 $ 985,739 $ 958,419 $ 604,794 ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
- -------------- * 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 20 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH INCOME FUND FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Investment income from Portfolios $ 15,586 $ 87,260 $142,857 $ 44,301 $ 23,723 Investment income from affiliates 471 1,694 13,472 14,319 9,933 Foreign tax withholding from Portfolios (544) (1,656) (1,604) (323) (59) Expenses from Portfolios (9,293) (31,462) (37,573) (10,262) (4,002) -------- ---------- -------- -------- -------- TOTAL INVESTMENT INCOME 6,220 55,836 117,152 48,035 29,595 -------- ---------- -------- -------- -------- ............................................................................................................................... EXPENSES: Investment Management 586 2,094 2,748 873 397 Administration 439 1,570 2,061 654 298 Distribution: Class B Shares 4,448 15,092 18,854 6,239 1,893 Class C Shares 258 1,147 2,322 858 931 Shareholder Servicing: Class A Shares 1,359 5,055 6,682 1,997 1,046 Class B Shares 1,483 5,031 6,285 2,080 631 Class C Shares 86 382 774 286 310 Fund Accounting 15,620 15,620 15,620 15,620 15,620 Chief Compliance Officer 10 41 53 17 7 Printing 3,210 12,435 15,680 5,343 2,510 Transfer Agent 21,350 21,391 21,403 21,346 21,333 Trustee 17 64 79 27 13 Other 911 1,777 2,427 677 604 -------- ---------- -------- -------- -------- Total expenses before fee reductions 49,777 81,699 94,988 56,017 45,593 Fees reduced by Fund Accounting and Transfer Agent (36,566) (36,566) (36,566) (36,566) (36,566) Fees reduced and expenses reimbursed by Investment Adviser (97) -- -- -- -- -------- ---------- -------- -------- -------- NET EXPENSES 13,114 45,133 58,422 19,451 9,027 -------- ---------- -------- -------- -------- ............................................................................................................................... NET INVESTMENT INCOME (LOSS) (6,894) 10,703 58,730 28,584 20,568 -------- ---------- -------- -------- -------- ............................................................................................................................... NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS: (A) Net realized gains (losses) from investments 57,359 149,829 116,823 24,825 (2,228) Change in unrealized appreciation/depreciation from investments 303,281 853,521 795,015 175,129 24,415 -------- ---------- -------- -------- -------- ............................................................................................................................... Net realized/unrealized gains from investment transactions 360,640 1,003,350 911,838 199,954 22,187 -------- ---------- -------- -------- -------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $353,746 $1,014,053 $970,568 $228,538 $ 42,755 -------- ---------- -------- -------- -------- -------- ---------- -------- -------- --------
- -------------- (a) Represents amounts allocated from the Respective Portfolios. 21 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH STRATEGY FUND GROWTH STRATEGY FUND - --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b) - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ (6,894) $ (3,032) $ 10,703 $ 886 Net realized gains (losses) from investment transactions 57,359 4,441 149,829 (1,238) Change in unrealized appreciation/depreciation from investments 303,281 64,789 853,521 195,096 ---------- ---------- ----------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 353,746 66,198 1,014,053 194,744 ---------- ---------- ----------- ---------- ............................................................................................................................... DIVIDENDS: NET INVESTMENT INCOME: Class A Shares -- -- (22) -- Class B Shares -- -- -- -- Class C Shares -- -- -- -- NET REALIZED GAINS: Class A Shares (4,248) -- (7,479) -- Class B Shares (4,512) -- (8,003) -- Class C Shares (298) -- (626) -- ---------- ---------- ----------- ---------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (9,058) -- (16,130) -- ---------- ---------- ----------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 2,223,270 1,380,998 7,346,115 5,395,978 ---------- ---------- ----------- ---------- CHANGE IN NET ASSETS 2,567,958 1,447,196 8,344,038 5,590,722 ............................................................................................................................... NET ASSETS: Beginning of period 1,447,196 -- 5,590,722 -- ---------- ---------- ----------- ---------- End of period $4,015,154 $1,447,196 $13,934,760 $5,590,722 ---------- ---------- ----------- ---------- ---------- ---------- ----------- ---------- Accumulated net investment income (loss) $ (8,380) $ (1,486) $ 5,685 $ (4,996) ---------- ---------- ----------- ---------- ---------- ---------- ----------- ----------
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 22 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
AGGRESSIVE GROWTH STRATEGY FUND GROWTH STRATEGY FUND - --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $1,004,490 $ 693,884 $4,006,211 $2,731,568 Dividends reinvested 4,248 -- 7,500 -- Cost of shares redeemed (9,331) (9,512) (228,172) (26,214) ---------- ---------- ---------- ---------- Class A Shares capital transactions 999,407 684,372 3,785,539 2,705,354 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS B SHARES: Proceeds from shares issued 1,144,612 690,126 3,144,997 2,623,574 Dividends reinvested 4,512 -- 8,003 -- Cost of shares redeemed (23,827) (13,505) (42,770) (35,907) ---------- ---------- ---------- ---------- Class B Shares capital transactions 1,125,297 676,621 3,110,230 2,587,667 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS C SHARES: Proceeds from shares issued 98,268 20,005 449,735 102,957 Dividends reinvested 298 -- 626 -- Cost of shares redeemed -- -- (15) -- ---------- ---------- ---------- ---------- Class C Shares capital transactions 98,566 20,005 450,346 102,957 ---------- ---------- ---------- ---------- ............................................................................................................................... CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $2,223,270 $1,380,998 $7,346,115 $5,395,978 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ............................................................................................................................... SHARE TRANSACTIONS: CLASS A SHARES: Issued 84,441 69,359 339,369 265,018 Reinvested 378 -- 664 -- Redeemed (800) (907) (19,884) (2,475) ---------- ---------- ---------- ---------- Change in Class A Shares 84,019 68,452 320,149 262,543 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS B SHARES: Issued 97,561 67,597 267,493 251,135 Reinvested 402 -- 705 -- Redeemed (1,947) (1,333) (3,575) (3,346) ---------- ---------- ---------- ---------- Change in Class B Shares 96,016 66,264 264,623 247,789 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS C SHARES: Issued 8,480 2,000 38,217 9,809 Reinvested 27 -- 55 -- ---------- ---------- ---------- ---------- Change in Class C Shares 8,507 2,000 38,272 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. 23 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MODERATE GROWTH STRATEGY FUND CONSERVATIVE GROWTH STRATEGY FUND - --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b) - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 58,730 $ 14,049 $ 28,584 $ 7,510 Net realized gains (losses) from investment transactions 116,823 (11,530) 24,825 (4,777) Change in unrealized appreciation/ depreciation from investments 795,015 177,426 175,129 37,885 ----------- ---------- ---------- ---------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 970,568 179,945 228,538 40,618 ----------- ---------- ---------- ---------- ............................................................................................................................... DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (35,853) (116) (17,299) (203) Class B Shares (9,816) (73) (10,529) (5) Class C Shares (2,095) -- (1,849) -- ............................................................................................................................... NET REALIZED GAINS: Class A Shares (3,616) -- -- -- Class B Shares (3,427) -- -- -- Class C Shares (500) -- -- -- ----------- ---------- ---------- ---------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (55,307) (189) (29,677) (208) ----------- ---------- ---------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 8,448,638 6,943,162 1,921,894 2,402,102 ----------- ---------- ---------- ---------- CHANGE IN NET ASSETS 9,363,899 7,122,918 2,120,755 2,442,512 ----------- ---------- ---------- ---------- ............................................................................................................................... NET ASSETS: Beginning of period 7,122,918 -- 2,442,512 -- ----------- ---------- ---------- ---------- End of period $16,486,817 $7,122,918 $4,563,267 $2,442,512 ----------- ---------- ---------- ---------- ----------- ---------- ---------- ---------- Accumulated net investment income (loss) $ 12,594 $ 3,256 $ 6,222 $ 14,630 ----------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 24 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
MODERATE GROWTH STRATEGY FUND CONSERVATIVE GROWTH STRATEGY FUND - --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $4,461,131 $3,264,968 $1,140,810 $1,046,895 Dividends reinvested 38,859 117 17,299 203 Cost of shares redeemed (229,214) (110,833) (141,993) (11,388) ---------- ---------- ---------- ---------- Class A Shares capital transactions 4,270,776 3,154,252 1,016,116 1,035,710 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS B SHARES: Proceeds from shares issued 3,963,846 3,640,156 727,474 1,298,439 Dividends reinvested 13,186 63 10,396 4 Cost of shares redeemed (252,633) (125,948) (83,974) (13,275) ---------- ---------- ---------- ---------- Class B Shares capital transactions 3,724,399 3,514,271 653,896 1,285,168 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS C SHARES: Proceeds from shares issued 450,968 275,464 255,080 81,224 Dividends reinvested 2,594 -- 1,849 -- Cost of shares redeemed (99) (825) (5,047) -- ---------- ---------- ---------- ---------- Class C Shares capital transactions 453,463 274,639 251,882 81,224 ---------- ---------- ---------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $8,448,638 $6,943,162 $1,921,894 $2,402,102 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ............................................................................................................................... SHARE TRANSACTIONS: CLASS A SHARES: Issued 399,075 319,580 106,448 103,636 Reinvested 3,492 12 1,615 20 Redeemed (19,705) (10,615) (13,244) (1,140) ---------- ---------- ---------- ---------- Change in Class A Shares 382,862 308,977 94,819 102,516 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS B SHARES: Issued 352,404 355,469 68,615 129,472 Reinvested 1,177 6 979 -- (c) Redeemed (22,562) (12,257) (7,962) (1,302) ---------- ---------- ---------- ---------- Change in Class B Shares 331,019 343,218 61,632 128,170 ---------- ---------- ---------- ---------- ............................................................................................................................... CLASS C SHARES: Issued 42,072 27,076 23,590 7,918 Reinvested 239 -- 171 -- Redeemed -- (82) (469) -- ---------- ---------- ---------- ---------- Change in Class C Shares 42,311 26,994 23,292 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. 25 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 SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2005 (a) - ----------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 20,568 $ 7,227 Net realized gains (losses) from investment transactions (2,228) (4,123) Change in unrealized appreciation/depreciation from investments 24,415 4,746 ---------- ---------- CHANGE IN NET ASSETS FROM OPERATIONS 42,755 7,850 ---------- ---------- .............................................................................................................. DIVIDENDS: NET INVESTMENT INCOME: Class A Shares (14,299) (3,758) Class B Shares (6,218) (1,409) Class C Shares (2,993) (1,093) ---------- ---------- CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (23,510) (6,260) ---------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 874,526 1,140,131 ---------- ---------- CHANGE IN NET ASSETS 893,771 1,141,721 .............................................................................................................. NET ASSETS: Beginning of period 1,141,721 -- ---------- ---------- End of period $2,035,492 $1,141,721 ---------- ---------- ---------- ---------- Accumulated net investment income (loss) $ 311 $ 6,506 ---------- ---------- ---------- ----------
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 26 HSBC INVESTOR LIFELINE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
CONSERVATIVE INCOME STRATEGY FUND - ----------------------------------------------------------------------------------------------------------- FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2005 (a) - ----------------------------------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: CLASS A SHARES: Proceeds from shares issued $862,906 $ 420,293 Dividends reinvested 12,898 2,097 Cost of shares redeemed (71,871) (3,999) -------- ---------- Class A Shares capital transactions 803,933 418,391 -------- ---------- .......................................................................................................... CLASS B SHARES: Proceeds from shares issued 146,298 516,383 Dividends reinvested 5,270 695 Cost of shares redeemed (83,987) (40,981) -------- ---------- Class B Shares capital transactions 67,581 476,097 -------- ---------- .......................................................................................................... CLASS C SHARES: Proceeds from shares issued 27 245,019 Dividends reinvested 2,985 624 -------- ---------- Class C Shares capital transactions 3,012 245,643 -------- ---------- CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $874,526 $1,140,131 -------- ---------- -------- ---------- .......................................................................................................... SHARE TRANSACTIONS: CLASS A SHARES: Issued 84,814 42,045 Reinvested 1,272 208 Redeemed (7,072) (398) -------- ---------- Change in Class A Shares 79,014 41,855 -------- ---------- .......................................................................................................... CLASS B SHARES: Issued 14,336 51,661 Reinvested 519 69 Redeemed (8,248) (4,098) -------- ---------- Change in Class B Shares 6,607 47,632 -------- ---------- .......................................................................................................... CLASS C SHARES: Issued -- 24,240 Reinvested 293 62 -------- ---------- Change in Class C Shares 293 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. 27 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 DIVIDENDS ---------------------------------------- ------------------------ NET REALIZED NET ASSET NET AND UNREALIZED TOTAL NET REALIZED NET ASSET VALUE, INVESTMENT GAINS FROM FROM GAINS FROM VALUE, BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 (0.01) 0.61 0.60 -- -- $10.60 Six months ended April 30, 2006 (unaudited) 10.60 -- 1.84 1.84 (0.05) (0.05) 12.39 - ----------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 (0.04) 0.61 0.57 -- -- $10.57 Six months ended April 30, 2006 (unaudited) 10.57 (0.03) 1.82 1.79 (0.05) (0.05) 12.31 - ----------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.00 (0.05) 0.60 0.55 -- -- $10.55 Six months ended April 30, 2006 (unaudited) 10.55 (0.02) 1.80 1.78 (0.05) (0.05) 12.28 - ----------------------------------------------------------------------------------------------------------------------------------- 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 NET PORTFOLIO RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2005 (f) 6.00% $ 726 1.50% (0.20)% 11.72% 49.10% Six months ended April 30, 2006 (unaudited) 17.44% 1,889 1.50% (0.19)% 4.63% 23.47% - ------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2005 (g) 5.70% $ 700 2.25% (1.01)% 11.63% 49.10% Six months ended April 30, 2006 (unaudited) 17.02% 1,997 2.25% (0.93)% 5.35% 23.47% - ------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2005 (h) 5.50% $ 21 2.25% (1.15)% 9.79% 49.10% Six months ended April 30, 2006 (unaudited) 16.96% 129 2.25% (0.94)% 5.28% 23.47% - ------------------------------------------------------------------------------------------------------------------------
(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 2006 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 28 - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH STRATEGY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ------------------------------------------ ------------------------ NET REALIZED AND NET NET ASSET NET UNREALIZED GAINS TOTAL REALIZED VALUE, INVESTMENT FROM FROM GAINS FROM BEGINNING OF INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS - ------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.02 0.70 0.72 -- -- Six months ended April 30, 2006 (unaudited) 10.72 0.04* 1.45 1.49 (0.03) (0.03) - ------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 (0.01) 0.79 0.78 -- -- Six months ended April 30, 2006 (unaudited) 10.78 (0.01)* 1.46 1.45 (0.03) (0.03) - ------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.00 (0.02) 0.84 0.82 -- -- Six months ended April 30, 2006 (unaudited) 10.82 (0.01)* 1.47 1.46 (0.03) (0.03) - ------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ----------------------------------------------------------------------- RATIO OF NET NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF VALUE, AT END OF EXPENSES INCOME (LOSS) EXPENSES TO END OF TOTAL PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO PERIOD RETURN(B) (000'S) NET ASSETS(C) NET ASSETS(C) ASSETS(C)(D) TURNOVER(E) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2005 (f) $10.72 7.20% $2,814 1.50% 0.42% 5.19% 69.23% Six months ended April 30, 2006 (unaudited) 12.18 13.88% 7,095 1.43% 0.65% 2.30% 40.92% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2005 (g) $10.78 7.80% $2,670 2.25% (0.38)% 5.74% 69.23% Six months ended April 30, 2006 (unaudited) 12.20 13.43% 6,251 2.18% (0.12)% 3.06% 40.92% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2005 (h) $10.82 8.20% $ 106 2.25% (0.55)% 5.24% 69.23% Six months ended April 30, 2006 (unaudited) 12.25 13.48% 589 2.17% (0.09)% 3.02% 40.92% - ------------------------------------------------------------------------------------------------------------------------------------
* Calculated based on average shares outstanding. (a) The per share amounts and percentages reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the applicable HSBC Investor Portfolios. (b) Not annualized for periods less than one year. Total Return calculations do not include any sales or redemption charges. (c) Annualized for periods less than one year. (d) During the period certain fees were reduced. If such fee reductions had not occurred, the ratio would have been as indicated. (e) Portfolio turnover is calculated by aggregating the results of multiplying the Funds investment percentage in the respective Portfolios by the corresponding Portfolio's entire 2006 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. 29 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 NET REALIZED NET ASSET AND UNREALIZED TOTAL GAINS FROM VALUE, NET GAINS FROM FROM NET INVESTMENT BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT AND TOTAL OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS - --------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.04 0.45 0.49 -- (g) -- -- (g) Six months ended April 30, 2006 (unaudited) 10.49 0.08 1.00 1.08 (0.07) (0.01) (0.08) - --------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (h) $10.00 0.01 0.49 0.50 -- (g) -- -- (g) Six months ended April 30, 2006 (unaudited) 10.50 0.03 1.01 1.04 (0.02) (0.01) (0.03) - --------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) $10.00 --(g) 0.28 0.28 -- -- -- Six months ended April 30, 2006 (unaudited) 10.28 0.03 0.99 1.02 (0.03) (0.01) (0.04) - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA ------------------------------------------------------------------------ RATIO OF NET NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF VALUE, AT END OF EXPENSES TO INCOME TO EXPENSES TO END OF TOTAL PERIOD AVERAGE AVERAGE AVERAGE NET PORTFOLIO PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2005 (f) $10.49 4.94% $3,241 1.50% 0.95% 4.30% 84.55% Six months ended April 30, 2006 (unaudited) 11.49 10.31% 7,949 1.35% 1.45% 2.01% 52.81% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2005 (h) $10.50 5.03% $3,604 2.25% 0.18% 5.01% 84.55% Six months ended April 30, 2006 (unaudited) 11.51 9.89% 7,758 2.10% 0.70% 2.77% 52.81% - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2005 (i) $10.28 2.80% $ 278 2.25% 0.05% 4.69% 84.55% Six months ended April 30, 2006 (unaudited) 11.26 9.97% 780 2.10% 0.68% 2.77% 52.81% - ------------------------------------------------------------------------------------------------------------------------------------
(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 2006 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 30 - -------------------------------------------------------------------------------- HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED. (a)
INVESTMENT ACTIVITIES DIVIDENDS ---------------------------------------- ---------------------- NET REALIZED NET ASSET AND UNREALIZED NET ASSET VALUE, NET GAINS FROM TOTAL FROM NET VALUE, BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL END OF TOTAL OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD RETURN(b) - -------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.04 0.26 0.30 (0.01) (0.01) $10.29 2.96% Six months ended April 30, 2006 (unaudited) 10.29 0.09 0.67 0.76 (0.11) (0.11) 10.94 7.46% - -------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 0.03 0.16 0.19 -- (h) -- (h) $10.19 1.92% Six months ended April 30, 2006 (unaudited) 10.19 0.06 0.67 0.73 (0.07) (0.07) 10.85 7.13% - -------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (i) $10.00 0.03 0.38 0.41 --(h) --(h) $10.41 4.10% Six months ended April 30, 2006 (unaudited) 10.41 0.05 0.68 0.73 (0.08) (0.08) 11.06 7.06% - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME TO EXPENSES TO PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO (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% Six months ended April 30, 2006 (unaudited) 2,159 1.29% 2.05% 3.36% 50.54% - ------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2005 (g) $1,306 2.25% 0.53% 9.21% 72.14% Six months ended April 30, 2006 (unaudited) 2,059 2.04% 1.27% 4.15% 50.54% - ------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2005 (i) $ 82 2.25% 0.66% 7.94% 72.14% Six months ended April 30, 2006 (unaudited) 345 2.03% 1.32% 4.06% 50.54% - ------------------------------------------------------------------------------------------------------
(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 2006 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. 31 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 NET ASSET AND UNREALIZED TOTAL NET ASSET VALUE, NET GAINS FROM FROM NET VALUE, BEGINNING OF INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL END OF TOTAL PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD RETURN(b) - ----------------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Period ended October 31, 2005 (f) $10.00 0.11 0.01 0.12 (0.11) (0.11) $10.01 1.18% Six months ended April 30, 2006 (unaudited) 10.01 0.12 0.21 0.33 (0.16) (0.16) 10.18 3.32% - ----------------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Period ended October 31, 2005 (g) $10.00 0.06 0.01 0.07 (0.04) (0.04) 10.03 0.68% Six months ended April 30, 2006 (unaudited) 10.03 0.10 0.19 0.29 (0.12) (0.12) 10.20 2.93% - ----------------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Period ended October 31, 2005 (h) $10.00 0.06 0.08 0.14 (0.06) (0.06) $10.08 1.41% Six months ended April 30, 2006 (unaudited) 10.08 0.10 0.19 0.29 (0.12) (0.12) 10.25 2.91% - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA --------------------------------------------------------------------------- RATIO OF NET NET ASSETS RATIO OF INVESTMENT RATIO OF AT END OF EXPENSES TO INCOME EXPENSES TO PERIOD AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e) - ------------------------------------------------------------------------------------------------------ CLASS A SHARES Period ended October 31, 2005 (f) $ 419 1.50% 1.79% 14.10% 79.90% Six months ended April 30, 2006 (unaudited) 1,230 1.27% 2.97% 5.70% 58.07% - ------------------------------------------------------------------------------------------------------ CLASS B SHARES Period ended October 31, 2005 (g) $ 478 2.25% 1.21% 12.16% 79.90% Six months ended April 30, 2006 (unaudited) 553 2.04% 2.15% 6.78% 58.07% - ------------------------------------------------------------------------------------------------------ CLASS C SHARES Period ended October 31, 2005 (h) $ 245 2.25% 1.24% 9.60% 79.90% Six months ended April 30, 2006 (unaudited) 252 2.05% 2.14% 6.83% 58.07% - ------------------------------------------------------------------------------------------------------
(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 2006 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 32 - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) 1. ORGANIZATION: The HSBC Investor Funds (the 'Trust'), a Massachusetts business trust organized on April 22, 1987, is registered under the Investment Company Act of 1940, as amended (the 'Act'), as an open-end management investment company. As of April 30, 2006, the Trust is comprised of 24 separate funds, each a diversified series of the HSBC Investor Family of Funds. The accompanying financial statements are presented for the following 5 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
Financial statements for all other series of the HSBC Investor Family of Funds are published separately. The HSBC Investor Growth Portfolio, HSBC Investor Value Portfolio, HSBC Investor Small Cap Equity Portfolio, HSBC Investor International Equity Portfolio, HSBC Investor Core Plus Fixed Income Portfolio (formerly the HSBC Investor Fixed Income Portfolio), HSBC Investor High Yield Fixed Income Portfolio, and the HSBC Investor Intermediate Duration Fixed Income Portfolio (formerly the HSBC Investor Limited Maturity Portfolio) (individually a 'Portfolio,' collectively the 'Portfolios') are diversified series of the HSBC Investor Portfolios (the 'Portfolio Trust'). The Portfolio Trust is an open-end management investment company organized under the laws of the State of New York on November 1, 1994. The Portfolios operate as master funds in master-feeder arrangements. The Board of Trustees may authorize issuance of an unlimited number of shares of beneficial interest in the Portfolios under the Declaration of Trust of the Portfolio Trust. The HSBC Investor Money Market Fund (the 'Money Market Fund') is an open-end management investment company and, like each LifeLine Fund, is a diversified series of the Trust. The LifeLine Funds utilize a master feeder fund (collectively the 'Underlying Portfolios') structure and seek to achieve their investment objectives by investing all of their investable assets in the Portfolios and the Money Market Fund per the following schedule for the period ended April 30, 2006: LIFELINE FUNDS PORTFOLIO WEIGHTINGS
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH INCOME UNDERLYING PORTFOLIOS FUND FUND FUND FUND FUND --------------------- ---- ---- ---- ---- ---- Growth Portfolio................................ 21% 21% 19% 15% 8% Value Portfolio................................. 21% 21% 18% 14% 8% Small Cap Equity Portfolio...................... 34% 20% 11% 4% None International Equity Portfolio.................. 23% 20% 15% 10% 4% Core Plus Fixed Income Portfolio................ None 15% 26% 25% 15% High Yield Fixed Income Portfolio............... None 2% 5% 8% 10% Intermediate Duration Fixed Income Portfolio.... None None None 3% 25% Money Market Fund............................... 1% 1% 6% 21% 30% ---- ---- ---- ---- ---- Total........................................... 100% 100% 100% 100% 100% ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
33 HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) Prior to April 28, 2006, the Lifeline Funds utilized the following schedule:
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE GROWTH STRATEGY GROWTH GROWTH INCOME UNDERLYING PORTFOLIOS FUND FUND FUND FUND FUND --------------------- ---- ---- ---- ---- ---- 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% Core Plus Fixed Income Portfolio................ None 17% 31% 20% 25% Intermediate Duration Fixed Income Portfolio.... None None None 15% 25% Money Market Fund............................... 1% 1% 6% 20% 30% ---- ---- ---- ---- ---- Total........................................... 100% 100% 100% 100% 100% ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
The financial statements of the Underlying Portfolios, including the Schedules of Portfolio Investments, are included elsewhere in this report. The financial statements of the Portfolios should be read in conjunction with the financial statements of the LifeLine Funds. The LifeLine Funds are authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share. Each Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Class R Shares (currently not operational with assets). Each class of shares in the LifeLine Funds has identical rights and privileges except with respect to arrangements pertaining to shareholder servicing or distribution, class-related expenses, voting rights on matters affecting a single class of shares, and the exchange privileges of each class of shares. Under the Trust's organizational documents, the LifeLine Funds' officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the LifeLine Funds. In addition, in the normal course of business, the LifeLine Funds enter into contracts with service providers, which also provide for indemnifications by the Funds. 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. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of the significant accounting policies followed by the LifeLine Funds in the preparation of their financial statements. The policies are in conformity with 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: The LifeLine Funds record their investments in the Underlying Portfolios at fair value. Securities of the Portfolios' and the Money Market Fund are recorded at value and at amortized cost, respectively, as more fully discussed in the notes to those financial statements. SECURITIES TRANSACTIONS AND RELATED INCOME: The LifeLine Funds record daily their pro-rata Portfolios' income, expenses, changes in unrealized appreciation and depreciation, 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 LifeLine Funds accrue their own expenses daily as incurred. 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 HSBC INVESTOR LIFELINE FUNDS 34 - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) assets of each Fund or on another reasonable basis. Expenses specific to a class are charged to that class. In addition, income, expenses (other than class specific expenses), and unrealized/realized gains and losses are allocated to each class based on relative net assets on a daily basis. DIVIDENDS TO SHAREHOLDERS: The Conservative Income Fund declares and distributes all net investment income as dividends to its 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 and character of net investment income and net realized gains distributions are determined in accordance with federal income tax regulations which may differ from GAAP. These 'book/tax' differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature (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 LifeLine Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as a part of the dividends paid deduction for income tax purposes. REDEMPTION FEE: A redemption fee of 2.00% will be charged and recorded as paid-in-capital for any shares redeemed or exchanged after holding them for less than 30 days. This fee does not apply to shares purchased through reinvested dividends or capital gains or shares held in certain omnibus accounts or retirement plans that cannot implement the fee. For the period ended April 30, 2006, the following LifeLine Funds collected redemption fees as follows:
FUND FEES COLLECTED - ---- -------------- Aggressive Growth Fund...................................... $ 4 Growth Strategy Fund........................................ 32 Moderate Growth Fund........................................ 305 Conservative Growth Fund.................................... 30 Conservative Income Fund.................................... 70
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 LifeLine Funds and continuously reviews, supervises and administers the LifeLine Funds' investments. For its services as Investment Adviser, HSBC is entitled to receive a fee, computed daily and paid monthly, based on average daily net assets, at an annual rate of 0.05% for each Fund. 35 HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) ADMINISTRATION: HSBC serves the Funds as Administrator. Under the terms of the administration agreement, HSBC receives from the LifeLine Funds a fee accrued daily and paid monthly at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS FEE RATE --------------------------------- -------- Up to $8 billion............................................ 0.075% In excess of $8 billion but not exceeding $9.25 billion..... 0.070% In excess of $9.25 billion but not exceeding $12 billion.... 0.050% In excess of $12 billion.................................... 0.030%
The fee breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds. The fee is allocated to each series of the HSBC Investor Family of Funds based upon its pro-rata share of net assets. For assets invested in Underlying Portfolios by LifeLine Funds, the Portfolios pay half of the administration fee, and the LifeLine Funds pay the other 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. 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 to each LifeLine Fund subject to the general supervision of the Trust's Board of Trustees and HSBC. For these services, BISYS Ohio is entitled to a fee, payable by HSBC, at an annual rate equivalent to the fee rates set forth above, minus 0.02% (2 basis points), which is retained by HSBC. Under a Compliance Services Agreement between the Trust's and BISYS Ohio (the 'CCO Agreement'), BISYS Ohio makes an employee available to serve as the Trust's 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 Trust's 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 $117,433 for the period ended April 30, 2006, plus certain out of pocket expenses. Expenses incurred 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. All administration fee waivers are voluntary and not subject to recoupment in subsequent fiscal periods. DISTRIBUTION PLAN: BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned subsidiary of BISYS Fund Services, Inc., serves the LifeLine 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 $1,125,165 in commissions from sales of the HSBC Family of Funds, of which $1,124,903 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 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, on HSBC INVESTOR LIFELINE FUNDS 36 - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) the aggregate, 0.25% of the average daily net assets of Class A Shares, 1.00% of the average daily net assets of Class B Shares and Class C Shares, 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 LifeLine Funds, BISYS receives a fee based on the number of LifeLine Funds and shareholder accounts, subject to certain minimums and reimbursement of certain expenses. As fund accountant for the LifeLine Funds, BISYS receives an annual fee per Fund and share class, subject to certain minimums and reimbursement of certain expenses. HSBC Bank is the named Custodian for the LifeLine Funds, however, the LifeLine Funds maintained no securities for which such services were rendered during the period. Each of the six non-interested Trustees are compensated with a $24,000 annual Board retainer, as well as a $1,000 annual retainer for each Committee of the Board. Each non-interested Trustee also receives a $4,000 and $2,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. Furthermore, each non-interested Trustee receives compensation for attending special meetings and/or functioning as a Committee Chairperson or Lead Trustee. In addition, the non-interested Trustees are reimbursed for certain expenses incurred in connection with their Board membership. FEE REDUCTIONS: The Investment Adviser has agreed to 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. 4. INVESTMENT TRANSACTIONS: Aggregate contributions and withdrawals of the Underlying Portfolios for the period ended April 30, 2006, totaled:
CONTRIBUTIONS WITHDRAWALS ------------- ----------- Aggressive Growth Fund...................................... $2,217,478 $ 91,207 Growth Strategy Fund........................................ 7,267,863 333,410 Moderate Growth Fund........................................ 8,356,010 540,104 Conservative Growth Fund.................................... 1,708,763 227,215 Conservative Income Fund.................................... 714,610 141,587
37 HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDERS EXPENSES -- APRIL 30, 2006 (UNAUDITED) As a shareholder of the HSBC Investor LifeLine Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases, reinvested dividends, or other distributions; redemption fees; and exchange fees; (2) ongoing costs, including management fees; distribution and shareholder servicing fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the HSBC Investor 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 November 1, 2005 through April 30, 2006. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled 'Expenses Paid During Period' to estimate the expenses you paid on your account during this period.
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 11/1/05 4/30/06 11/1/05 - 4/30/06 11/1/05 - 4/30/06 ------- ------- ----------------- ----------------- Aggressive Growth Strategy Fund.... Class A $1,000.00 $1,174.40 $ 8.09 1.50% Class B 1,000.00 1,170.20 12.11 2.25% Class C 1,000.00 1,169.60 12.10 2.25% Growth Strategy Fund............... Class A 1,000.00 1,138.80 7.58 1.43% Class B 1,000.00 1,134.30 11.54 2.18% Class C 1,000.00 1,134.80 11.49 2.17% Moderate Growth Strategy Fund...... Class A 1,000.00 1,103.10 7.04 1.35% Class B 1,000.00 1,098.90 10.93 2.10% Class C 1,000.00 1,099.70 10.93 2.10% Conservative Growth Strategy Fund............................. Class A 1,000.00 1,074.60 6.64 1.29% Class B 1,000.00 1,071.30 10.48 2.04% Class C 1,000.00 1,070.60 10.42 2.03% Conservative Income Strategy Fund............................. Class A 1,000.00 1,033.20 6.40 1.27% Class B 1,000.00 1,029.30 10.26 2.04% Class C 1,000.00 1,029.10 10.31 2.05%
------------- * 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 LIFELINE FUNDS 38 - -------------------------------------------------------------------------------- HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDERS EXPENSES -- APRIL 30, 2006 (UNAUDITED) (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.
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD 11/1/05 4/30/06 11/1/05 - 4/30/06 11/1/05 - 4/30/06 ------- ------- ----------------- ----------------- Aggressive Growth Strategy Fund.... Class A $1,000.00 $1,017.36 $ 7.50 1.50% Class B 1,000.00 1,013.64 11.23 2.25% Class C 1,000.00 1,013.64 11.23 2.25% Growth Strategy Fund............... Class A 1,000.00 1,017.70 7.15 1.43% Class B 1,000.00 1,013.98 10.89 2.18% Class C 1,000.00 1,014.03 10.84 2.17% Moderate Growth Strategy Fund...... Class A 1,000.00 1,018.10 6.76 1.35% Class B 1,000.00 1,014.38 10.49 2.10% Class C 1,000.00 1,014.38 10.49 2.10% Conservative Growth Strategy Fund............................. Class A 1,000.00 1,018.40 6.46 1.29% Class B 1,000.00 1,014.68 10.19 2.04% Class C 1,000.00 1,014.73 10.14 2.03% Conservative Income Strategy Fund............................. Class A 1,000.00 1,018.50 6.36 1.27% Class B 1,000.00 1,014.68 10.19 2.04% Class C 1,000.00 1,014.63 10.24 2.05%
------------- * 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. 39 HSBC INVESTOR LIFELINE FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 39.9% - --------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- FEDERAL HOME LOAN MORTGAGE CORP. - 8.0% Pool #1B2655, 4.14%, 12/1/34, (a)...... 343,145 338,219 Pool #C01188, 7.00%, 6/1/31............ 218,072 224,345 Pool #C90893, 5.50%, 4/1/25............ 626,629 613,236 Pool #G01884, 5.00%, 9/1/35............ 578,579 547,201 ---------- 1,723,001 ---------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 23.3% Pool #254693, 5.50%, 4/1/33............ 959,400 934,334 Pool #535063, 6.50%, 12/1/14........... 232,417 237,840 Pool #593187, 7.00%, 11/1/31........... 481,176 495,321 Pool #740686, 6.50%, 10/1/33........... 607,938 620,504 Pool #781560, 4.49%, 10/1/34, (a)...... 450,728 441,795 Pool #825278, 5.00%, 7/1/35............ 575,260 544,265 TBA May, 5.50%, 5/1/35................. 1,200,000 1,165,126 TBA May, 6.00%, 5/15/36................ 600,000 597,187 ---------- 5,036,372 ---------- U.S. TREASURY NOTES - 8.6% 4.00%, 9/30/07......................... 95,000 93,835 4.50%, 2/15/09......................... 860,000 851,533 4.50%, 2/28/11......................... 265,000 260,156 4.75%, 3/31/11......................... 285,000 282,751 4.00%, 2/15/15......................... 405,000 375,258 ---------- 1,863,533 ---------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST $8,672,143)..................... 8,622,906 ---------- - --------------------------------------------------------------- CORPORATE OBLIGATIONS - 31.4% - --------------------------------------------------------------- AUTO MANUFACTURERS - 1.8% DaimlerChrysler North American Holdings, 4.05%, 6/4/08............... 400,000 388,256 ---------- BANKS - 1.8% Sovereign Bank, 5.125%, 3/15/13........ 300,000 285,883 Turanalem Finance BV, 7.75%, 4/25/13, (b)................................... 100,000 98,625 ---------- 384,508 ---------- CABLE - 1.6% Comcast Corp., 6.50%, 1/15/15.......... 350,000 356,490 ---------- CHEMICALS - 1.1% Nova Chemicals Corp., 6.50%, 1/15/12... 250,000 233,750 ---------- COLLEGES & UNIVERSITIES - 1.9% Tulane University of Louisiana, 5.55%, 11/15/12, (a)......................... 400,000 402,500 ---------- ELECTRIC - 1.2% Progress Energy, Inc., 5.14%, 11/14/08, (a)................................... 250,000 250,141 ---------- FINANCE - 7.8% American General Finance Corp., 4.875%, 5/15/10............................... 500,000 485,467 Ford Motor Credit Corp., 5.80%, 1/12/09............................... 475,000 429,946 General Motors Acceptance Corp., 4.50%, 7/15/06............................... 250,000 248,177 General Motors Acceptance Corp., 4.375%, 12/10/07...................... 500,000 470,319 - --------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - --------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- General Motors Corp., 8.25%, 7/15/23... 100,000 72,500 ---------- 1,706,409 ---------- MEDIA - 2.9% Time Warner Entertainment, 8.875%, 10/1/12............................... 550,000 622,808 ---------- OIL & GAS - 1.4% Pioneer Natural Resources, 6.875%, 5/1/18................................ 300,000 300,630 ---------- RETAIL - 3.8% Fred Meyer, Inc., 7.45%, 3/1/08........ 350,000 361,065 May Department Stores Co., 5.75%, 7/15/14............................... 500,000 491,312 ---------- 852,377 ---------- TELECOMMUNICATIONS - 3.6% AT&T, Inc., 5.10%, 9/15/14............. 400,000 376,584 Verizon Pennsylvania, Inc., 5.65%, 11/15/11.............................. 400,000 393,811 ---------- 770,395 ---------- TRANSPORTATION - 2.5% Burlington Northern Santa Fe Railway Co., 4.83%, 1/15/23................... 279,656 265,897 Union Pacific Railroad, 5.08%, 1/2/29................................ 299,958 279,513 ---------- 545,410 ---------- TOTAL CORPORATE OBLIGATIONS (COST $6,987,670)........................... 6,813,674 ---------- - --------------------------------------------------------------- ASSET BACKED SECURITIES - 13.9% - --------------------------------------------------------------- Asset Backed Funding Certificates Series 2003-AHL1, Class A1, 3.68%, 3/25/33............................... 210,318 202,621 Capital Auto Receivables Asset Trust Series 2003-2, Class A4A, 1.96%, 1/15/09............................... 339,159 335,860 Carmax Auto Owner Trust Series 2004-2, Class A3, 3.00%, 9/15/08.............. 491,354 486,651 Chase Issuance Trust 2005, Class A8, 4.94%, 10/15/12, (a).................. 300,000 300,212 Citibank Credit Card Issuance Trust Series 2005-A6, Class A6, 4.56%, 10/7/11, (a).......................... 450,000 449,986 MBNA Credit Card Master Note Trust Series 2002-A5, Class A5, 5.08%, 10/17/11, (a)......................... 450,000 452,282 SLM Student Loan Trust Series 2003-12, Class A3, 5.03%, 12/15/15, (a)........ 450,000 451,143 Volkswagen Auto Lease Trust Series 2004-A, Class A3, 2.84%, 7/20/07...... 333,359 331,462 ---------- TOTAL ASSET BACKED SECURITIES (COST $3,019,597)........................... 3,010,217 ---------- - --------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 13.2% - --------------------------------------------------------------- Citigroup Mortgage Loan Trust, Inc. Series 2005-WF2, Class AF2, 4.92%, 8/25/35............................... 324,477 320,735 Countrywide Home Loans Series 2005- HYB8, Class 2A1, 5.385%, 12/20/35, (a)................................... 439,800 436,223 Freddie Mac Reference Remic Series R004, Class AL, 5.125%, 12/15/13...... 556,319 549,630 Freddie Mac Series 2962, Class CJ, 5.50%, 11/15/23....................... 566,117 566,917 J.P. Morgan Alternative Loan Trust Series 2005-S1, Class 2A9, 6.00%, 12/25/35.............................. 507,249 499,640 Morgan Stanley Mortgage Loan Trust Series 2006-3AR, Class 2A3, 5.92%, 3/25/36............................... 348,329 349,323
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 40 - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED - --------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- Nomura Asset Acceptance Corp. Series 2006-AP1, Class A2, 5.515%, 2/25/36... 150,000 147,946 ---------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $2,906,325)......... 2,870,414 ---------- - --------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES - 7.5% - --------------------------------------------------------------- Banc of America Commercial Mortgage, Inc. Series 2005-6, Class AM, 5.18%, 9/10/47............................... 227,000 218,539 Commercial Mortgage Pass-Through Certificate Series 2005-FL11, Class A1, 5.05%, 11/15/17, (a) (b).... 299,842 299,821 Global Signal Trust Series 2006-1, Class A2, 5.45%, 2/15/36, (a) (b)..... 200,000 197,612 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2005-LDP5, Class AM, 5.22%, 12/15/44............. 325,000 314,025 LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4, 5.16%, 2/15/31..... 300,000 287,565 Morgan Stanley Capital I Series 2006-T21, Class A4, 5.16%, 10/12/52... 330,000 316,183 ---------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $1,686,732)..................... 1,633,745 ---------- - --------------------------------------------------------------- FOREIGN BONDS** - 0.9% - --------------------------------------------------------------- ICELAND SOVEREIGN - 0.2% Housing Finance Fund, 3.75%, 2/15/24... 3,877,344 53,548 ---------- MEXICO FINANCE - 0.3% General Electric Capital Corp., 9.50%, 8/4/10................................ 800,000 73,471 ---------- - --------------------------------------------------------------- FOREIGN BONDS**, CONTINUED - --------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) --------- ---------- SOVEREIGN - 0.4% Mexican Bonos, 9.00%, 12/22/11......... 750,000 69,679 ---------- TOTAL FOREIGN BONDS** (COST $197,280)....................... 196,698 ---------- - --------------------------------------------------------------- INVESTMENT COMPANIES - 0.3% - --------------------------------------------------------------- HSBC Investor Money Market Fund Class I Shares*............................... 60,896 60,896 ---------- TOTAL INVESTMENT COMPANIES (COST $60,896)........................ 60,896 ---------- TOTAL INVESTMENTS (COST $23,530,643) -- 107.1%................................ 23,208,550 ---------- ----------
- --------- Percentages indicated are based on net assets of $21,671,765. (a) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented in this report represent the rates that were in effect on April 30, 2006. 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. * Investment in affiliate. ** The principal amount of each security is denominated in the local currency of each respective country. TBA -- Security was traded on a 'to be announced' basis. 41 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) At April 30, 2006, the portfolio's open forward currency contracts were as follows:
CURRENCY CONTRACT UNREALIZED DELIVERY AMOUNT VALUE APPRECIATION/ CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION) - -------- ---- ---------------- ------------- ----- -------------- LONG CONTRACTS Icelandic Krona...................................... 5/4/2006 3,704,582 $ 50,088 $ 49,981 $(107) Mexican Neuvo Peso................................... 5/2/2006 794,575 71,442 71,810 368 -------- -------- ----- TOTAL LONG CONTRACTS............................................................... $121,530 $121,791 $ 261 -------- -------- ----- -------- -------- -----
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 42 - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- ---------------------------------------------------------------- U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 42.8% - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- FEDERAL HOME LOAN MORTGAGE CORP. - 7.7% Pool #1B2655, 4.14%, 12/1/34, (a)..... 1,681,409 1,657,271 Pool #C00368, 8.50%, 10/1/24.......... 37,780 40,634 Pool #C00922, 8.00%, 2/1/30........... 243,455 259,195 Pool #C54447, 7.00%, 7/1/31........... 39,732 40,875 Pool #C60712, 6.50%, 11/1/31.......... 631,015 643,843 Pool #C80387, 6.50%, 4/1/26........... 37,840 38,681 Pool #C90893, 5.50%, 4/1/25........... 2,351,702 2,301,440 Pool #D62926, 6.50%, 8/1/25........... 29,221 29,868 Pool #G01317, 7.00%, 10/1/31.......... 207,877 213,857 Pool #G01884, 5.00%, 9/1/35........... 3,278,612 3,100,805 ----------- 8,326,469 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 23.4% 5.50%, 3/15/11........................ 4,500,000 4,541,216 Pool #253438, 8.50%, 9/1/30........... 66,073 71,237 Pool #254693, 5.50%, 4/1/33........... 4,653,089 4,531,522 Pool #329530, 7.00%, 12/1/25.......... 118,083 121,702 Pool #329655, 7.00%, 11/1/25.......... 50,764 52,320 Pool #356905, 5.89%, 10/1/36, (a)..... 283,558 287,232 Pool #398958, 6.50%, 10/1/12.......... 88,373 90,149 Pool #535332, 8.50%, 4/1/30........... 58,519 63,066 Pool #535440, 8.50%, 8/1/30........... 68,680 74,049 Pool #535608, 9.50%, 4/1/30........... 131,706 144,376 Pool #548965, 8.50%, 7/1/30........... 59,661 64,324 Pool #568486, 7.00%, 1/1/31........... 40,222 41,426 Pool #573752, 8.50%, 2/1/31........... 54,755 59,036 Pool #575328, 6.50%, 4/1/31........... 72,360 73,862 Pool #781560, 4.49%, 10/1/34, (a)..... 1,717,545 1,683,507 Pool #825278, 5.00%, 7/1/35........... 3,259,805 3,084,167 TBA May, 5.50%, 5/1/35................ 5,950,000 5,777,081 TBA May, 6.50%, 5/1/35................ 1,910,000 1,942,231 TBA May, 6.00%, 5/15/36............... 2,900,000 2,886,405 ----------- 25,588,908 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.4% Pool #346406, 7.50%, 2/15/23.......... 75,085 78,809 Pool #412530, 7.50%, 12/15/25......... 102,512 107,712 Pool #781300, 7.00%, 6/15/31.......... 188,677 195,912 ----------- 382,433 ----------- U.S. TREASURY BONDS - 2.0% 5.375%, 2/15/31....................... 2,180,000 2,212,700 ----------- U.S. TREASURY NOTES - 9.3% 4.50%, 2/15/09........................ 2,810,000 2,782,338 4.50%, 2/28/11........................ 2,915,000 2,861,712 4.75%, 3/31/11........................ 1,220,000 1,210,373 4.00%, 2/15/15........................ 2,175,000 2,015,272 5.50%, 8/15/28........................ 1,205,000 1,235,313 ----------- 10,105,008 ----------- TOTAL U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS (COST 46,919,627).......................... $46,615,518 ----------- - ---------------------------------------------------------------- CORPORATE OBLIGATIONS - 31.2% - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- AUTO MANUFACTURERS - 1.4% DaimlerChrysler North American Holdings, 4.05%, 6/4/08.............. 1,575,000 1,528,760 ----------- BANKS - 1.4% Sovereign Bank, 5.125%, 3/15/13....... 1,075,000 1,024,415 Turanalem Finance BV, 7.75%, 4/25/13, (b).................................. 475,000 468,469 ----------- 1,492,884 ----------- CABLE - 1.5% Comcast Corp., 6.50%, 1/15/15......... 1,600,000 1,629,670 ----------- CHEMICALS - 2.1% Nova Chemicals Corp., 7.00%, 5/15/06.............................. 1,200,000 1,200,000 Nova Chemicals Corp., 6.50%, 1/15/12.............................. 1,190,000 1,112,650 ----------- 2,312,650 ----------- COLLEGES & UNIVERSITIES - 1.6% Tulane University of Louisiana, 5.55%, 11/15/12, (a)........................ 1,700,000 1,710,625 ----------- ELECTRIC - 0.9% Progress Energy, Inc., 5.14%, 11/14/08, (a)........................ 1,000,000 1,000,564 ----------- FINANCE - 5.9% American General Finance Corp., 4.875%, 5/15/10...................... 2,100,000 2,038,955 Ford Motor Credit Corp., 5.80%, 1/12/09.............................. 1,600,000 1,448,240 General Motors Acceptance Corp., 4.50%, 7/15/06....................... 1,250,000 1,240,886 General Motors Acceptance Corp., 4.375%, 12/10/07..................... 1,400,000 1,316,892 General Motors Corp., 8.25%, 7/15/23.............................. 500,000 362,500 ----------- 6,407,473 ----------- MEDICAL - 1.5% HCA, Inc., 6.95%, 5/1/12.............. 1,650,000 1,655,666 ----------- MULTIMEDIA - 0.5% Viacom, Inc., 6.25%, 4/30/16, (b)..... 600,000 594,652 ----------- OIL & GAS - 1.5% Pioneer Natural Resources, 6.875%, 5/1/18............................... 1,575,000 1,578,308 ----------- RETAIL - 3.4% Fred Meyer, Inc., 7.45%, 3/1/08....... 1,500,000 1,547,423 May Department Stores Co., 6.65%, 7/15/24.............................. 2,200,000 2,172,319 ----------- 3,719,742 ----------- TELECOMMUNICATIONS - 7.7% AOL Time Warner, Inc., 7.70%, 5/1/32............................... 1,000,000 1,092,837 AT&T, Inc., 5.10%, 9/15/14............ 1,750,000 1,647,554 Bell Telephone Co. Pennsylvania, 8.75%, 8/15/31....................... 850,000 978,585 Sprint Capital Corp., 8.75%, 3/15/32.............................. 1,300,000 1,613,023 Time Warner Entertainment Co., 8.375%, 3/15/23.............................. 1,300,000 1,457,862 Verizon Communications, Inc., 5.55%, 2/15/16.............................. 1,650,000 1,574,475 ----------- 8,364,336 -----------
43 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- TRANSPORTATION - 1.8% BNSF Funding Trust I, 6.61%, 12/15/55, Callable 01/15/26 @ 100.............. 1,200,000 1,153,183 Burlington Northern Santa Fe Railway Co., 7.57%, 1/2/21................... 312,308 343,926 Union Pacific Corp., 6.85%, 1/2/19.... 432,401 457,632 ----------- 1,954,741 ----------- TOTAL CORPORATE OBLIGATIONS (COST $34,798,525)......................... 33,950,071 ----------- - ---------------------------------------------------------------- ASSET BACKED SECURITIES - 12.7% - ---------------------------------------------------------------- Asset Backed Funding Certificates Series 2003-AHL1, Class A1, 3.68%, 3/25/33.............................. 738,743 711,708 Capital Auto Receivables Asset Trust Series 2003-2, Class A4A, 1.96%, 1/15/09.............................. 1,229,453 1,217,494 Capital Auto Receivables Asset Trust Series 2006-1, Class A2A, 5.03%, 9/15/08.............................. 2,040,000 2,037,347 Chase Issuance Trust 2005, Class A8, 4.94%, 10/15/12, (a)................. 1,000,000 1,000,707 Citibank Credit Card Issuance Trust Series 2005-A6, Class A6, 4.56%, 10/7/11, (a)......................... 2,150,000 2,149,933 MBNA Credit Card Master Note Trust Series 2002-A5, Class A5, 5.08%, 10/17/11, (a)........................ 2,250,000 2,261,410 Peco Energy Transition Trust Series 2000-A, Class A3, 7.625%, 3/1/10..... 600,000 634,253 SLM Student Loan Trust Series 2003-12, Class A3, 5.03%, 12/15/15, (a)....... 2,250,000 2,255,714 Volkswagen Auto Lease Trust Series 2004-A, Class A3, 2.84%, 7/20/07..... 1,514,300 1,505,683 ----------- TOTAL ASSET BACKED SECURITIES (COST $13,758,121)......................... 13,774,249 ----------- - ---------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS - 12.3% - ---------------------------------------------------------------- Citigroup Mortgage Loan Trust, Inc. Series 2005-WF2, Class AF2, 4.92%, 8/25/35.............................. 1,017,148 1,005,419 Countrywide Home Loans Series 2005- HYB8, Class 2A1, 5.385%, 12/20/35, (a).................................. 1,651,495 1,638,063 Fannie Mae IO Series 2000-16, Class PS, 3.64%, 10/25/29, (a) (c)......... 84,607 5,256 Fannie Mae IO Series 2000-32, Class SV, 3.69%, 3/18/30, (a) (c).......... 29,046 1,219 Fannie Mae IO Series 2001-4, Class SA, 2.64%, 2/17/31, (a) (c).............. 307,243 13,051 Fannie Mae IO Series 270, Class 2, 8.50%, 9/1/23, (c)................... 64,603 16,162 Fannie Mae IO Series 296, Class 2, 8.00%, 4/1/24, (c)................... 73,651 17,431 Fannie Mae IO Series 306, Class IO, 8.00%, 5/1/30, (c)................... 93,060 23,098 FHA Weyerhauser, 7.43%, 1/1/24, (d) (e).................................. 34,389 34,389 Freddie Mac IO Series 1534, Class K, 2.46%, 6/15/23, (a) (c).............. 202,076 8,347 Freddie Mac IO Series 2141, Class SD, 3.24%, 4/15/29, (a) (c).............. 148,106 13,562 Freddie Mac IO Series 2247, Class SC, 2.59%, 8/15/30, (a) (c).............. 97,524 3,511 - ---------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Freddie Mac Series 2894, Class QA, 5.50%, 12/15/24...................... 3,655,912 3,669,015 Freddie Mac Series 2962, Class CJ, 5.50%, 11/15/23...................... 2,177,372 2,180,447 Government National Mortgage Association IO Series 1999-30, Class S, 3.69%, 8/16/29, (a) (c)........... 89,114 5,741 Government National Mortgage Association IO Series 1999-30, Class SA, 3.09%, 4/16/29, (a) (c).......... 117,716 5,979 Government National Mortgage Association IO Series 1999-32, Class SB, 3.09%, 7/16/27, (a) (c).......... 32,152 678 J.P. Morgan Alternative Loan Trust Series 2005-S1, Class 2A9, 6.00%, 12/25/35............................. 2,351,793 2,316,514 Morgan Stanley Mortgage Loan Trust Series 2006-3AR, Class 2A3, 5.92%, 3/25/36.............................. 1,625,537 1,630,175 Nomura Asset Acceptance Corp. Series 2006-AP1, Class A2, 5.515%, 2/25/36.............................. 750,000 739,732 ----------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $13,572,216)................... 13,327,789 ----------- - ---------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES - 7.7% - ---------------------------------------------------------------- Banc of America Commercial Mortgage, Inc. Series 2000-2, Class A2, 7.20%, 5/15/10.............................. 675,000 713,514 Banc of America Commercial Mortgage, Inc. Series 2005-6, Class AM, 5.18%, 9/10/47.............................. 900,000 866,454 Commercial Mortgage Pass-Through Certificate Series 2005-FL11, Class A1, 5.05%, 11/15/17, (a) (b)......... 1,219,356 1,219,271 DLJ Mortgage Acceptance Corp. IO Series 1997-CF1, Class S, 0.92%, 5/15/30, (a) (b) (c)................. 416,997 2,749 Global Signal Trust Series 2006-1, Class A2, 5.45%, 2/15/36, (a) (b).... 850,000 839,850 GMAC Commercial Mortgage Securities, Inc. IO Series 1996-C1, Class X2, 2.22%, 10/15/28, (a) (c)............. 115,437 2,319 GS Mortgage Securities Corp. IO Series 1997-GL, Class X2, 0.90%, 7/13/30, (a) (c).............................. 364,321 3,407 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2005-LDP5, Class AM, 5.22%, 12/15/44............ 1,280,000 1,236,777 LB-UBS Commercial Mortgage Trust Series 2000-C3, Class A1, 7.95%, 7/15/09.............................. 204,401 207,331 LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4, 5.16%, 2/15/31.............................. 1,300,000 1,246,118 Morgan Stanley Capital I Series 2006-T21, Class A4, 5.16%, 10/12/52............................. 1,480,000 1,418,033 PNC Mortgage Acceptance Corp. Series 2000-C2, Class A2, 7.30%, 10/12/33... 600,000 637,610 ----------- TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES (COST $8,576,866).................... 8,393,433 -----------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 44 - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------- FOREIGN BONDS** - 0.9% - --------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- ICELAND - 0.2% SOVEREIGN - 0.2% Housing Finance Fund, 3.75%, 2/15/24.............................. 19,537,785 269,825 ----------- MEXICO - 0.7% FINANCE - 0.3% General Electric Capital Corp., 9.50%, 8/4/10............................... 3,800,000 348,989 ----------- SOVEREIGN - 0.4% Mexican Bonos, 9.00%, 12/22/11........ 3,600,000 334,459 ----------- TOTAL FOREIGN BONDS** (COST $956,057)...................... 953,273 ----------- - ---------------------------------------------------------------- MUNICIPAL BONDS - 0.9% - ---------------------------------------------------------------- ENVIRONMENTAL SERVICES - 0.9% Louisiana Local Government Environmental Facilities & Community Development, 6.30%, 7/1/30, (LOC AMBAC)............................... 850,000 923,559 ----------- TOTAL MUNICIPAL BONDS (COST $930,321)...................... 923,559 ----------- - ---------------------------------------------------------------- INVESTMENT COMPANIES - 0.5% - ---------------------------------------------------------------- HSBC Investor Money Market Fund Class I Shares *........................... 510,201 510,201 ----------- TOTAL INVESTMENT COMPANIES (COST $510,201)............................ 510,201 ----------- TOTAL INVESTMENTS (COST $120,021,934) -- 109.0%....... 118,448,093 ----------- -----------
- --------- Percentages indicated are based on net assets of $108,659,148. (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 effect on April 30, 2006. 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) 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 April 30, 2006. 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 manager, using Board approved procedures, has deemed these securities to be illiquid. Represents 0.03% of net assets. (e) Security was fair valued (See note 2) as of April 30, 2006. * Investment in affiliate. ** The principal amount of each security is denominated in the local currency of each respective country. AMBAC - American Municipal Bank Assurance Corp. LOC - Letter of Credit TBA - Security was traded on a 'to be announced' basis. 45 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) At April 30, 2006, the portfolio's open forward currency contracts were as follows:
CONTRACT CONTRACT UNREALIZED DELIVERY AMOUNT VALUE APPRECIATION/ CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION) - -------- ---- ---------------- ------------- ----- -------------- LONG CONTRACTS Icelandic Krona......................................... 5/4/2006 18,667,246 $252,392 $251,852 $ (540) Mexican Neuvo Peso...................................... 5/2/2006 3,813,960 342,920 344,687 1,767 -------- -------- ------ TOTAL LONG CONTRACTS................................................................. $595,312 $596,539 $1,227 -------- -------- ------ -------- -------- ------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 46 - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- ---------------------------------------------------------------- CORPORATE OBLIGATIONS - 83.9% - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- ADVERTISING SERVICES - 4.0% Iron Mountain, Inc., 8.625%, 4/1/13, Callable 4/1/06 @ 104.313............ 250,000 260,313 R.H. Donnelley Corp., 6.875%, 1/15/13, Callable 1/15/09 @ 103.438 (a)....... 90,000 83,700 R.H. Donnelley Corp., 6.875%, 1/15/13, Callable 1/15/09 @ 103.438........... 100,000 93,000 ----------- 437,013 ----------- AEROSPACE/DEFENSE -- EQUIPMENT - 0.9% DRS Technologies, Inc., 7.625%, 2/1/18, Callable 2/1/11 @ 103.813.... 100,000 102,625 ----------- APPAREL MANUFACTURERS - 0.5% Levi Strauss & Co., 8.875%, 4/1/16, Callable 4/1/11 @ 104.438 (a)........ 50,000 50,125 ----------- BUILDING & CONSTRUCTION PRODUCTS - 1.3% Ply Gem Industries, Inc., 9.00%, 2/15/12, Callable 2/18/08 @ 104.50... 150,000 144,375 ----------- CABLE TELEVISION - 4.5% Cablevision Systems Corp., 8.00%, 4/15/12.............................. 250,000 249,375 Mediacom LLC, 7.875%, 2/15/11, Callable 2/15/06 @ 103.938........... 250,000 242,500 ----------- 491,875 ----------- CHEMICALS - 3.0% JohnsonDiversey, Inc., 9.625%, 5/15/12, Callable 5/15/07 @ 104.813.............................. 250,000 255,313 Millennium America, Inc., 9.25%, 6/15/08.............................. 25,000 26,125 PQ Corp., 7.75%, 2/15/13, Callable 2/15/09 @ 103.75 (a)................. 50,000 47,500 ----------- 328,938 ----------- COMPUTER SOFTWARE - 0.5% Activant Solutions Holdings, Inc., 9.50%, 5/1/16, Callable 5/1/11 @ 104.75 (a)........................... 50,000 50,875 ----------- CONTAINERS -- PAPER/PLASTIC - 2.4% Solo Cup Co., 8.50%, 2/15/14, Callable 2/15/2009 @ 104.25................... 250,000 237,500 Stone Container Finance Co. of Canada, 7.375%, 7/15/14, Callable 7/15/09 @ 103.688............................ 25,000 23,000 ----------- 260,500 ----------- DIVERSIFIED OPERATIONS - 1.0% Stripes Acquisition LLC/Susser Finance Corp., 10.625%, 12/15/13, Callable 12/15/2009 @ 105.313 (a)............. 100,000 106,250 ----------- ELECTRIC - 1.5% AES Corp., 7.75%, 3/1/14,............. 60,000 62,550 CMS Energy Corp., 6.875%, 12/15/15.... 100,000 99,500 ----------- 162,050 ----------- ENERGY - 4.3% Copano Energy LLC, 8.125%, 3/1/16, Callable 3/1/11 @ 104.0625 (a)....... 80,000 82,200 Massey Energy Co., 6.875%, 12/15/13, Callable 12/15/09 @ 103.44 (a)....... 100,000 96,250 - ---------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Mirant North America LLC, 7.375%, 12/31/13, Callable 12/31/09 @ 103.688 (a)........................ 50,000 50,188 Williams Cos., 6.375%, 10/1/10, (a)... 250,000 249,375 ----------- 478,013 ----------- FINANCE - 8.3% Basell AF SCA, 8.375%, 8/15/15, Callable 8/15/10 @ 104.188 (a)....... 250,000 247,812 CCM Merger, Inc., 8.00%, 8/1/13, Callable 8/1/09 @ 104 (a)............ 250,000 242,500 Ford Motor Credit Co., 7.375%, 10/28/09............................. 100,000 92,398 General Motors Accept Corp., 6.875%, 8/28/12.............................. 300,000 279,542 Nalco Finance Holdings, Inc., 0.00%, 2/1/14, Callable 2/1/09 @ 104.5 (b).................................. 75,000 57,375 ----------- 919,627 ----------- GAMBLING - 6.4% Greektown Holdings, Inc., 10.75%, 12/1/13, Callable 12/1/10 @ 105.375 (a).................................. 100,000 105,000 Isle of Capri Casinos, Inc., 7.00%, 3/1/14, Callable 3/1/09 @ 103.50..... 250,000 245,625 Kerzner International Ltd., 6.75%, 10/1/15, Callable 10/1/10 @ 103.375.............................. 250,000 259,375 MGM MIRAGE, Inc., 6.75%, 4/1/13, (a).................................. 100,000 98,500 ----------- 708,500 ----------- LEISURE - 3.3% AMC Entertainment, Inc., 11.00%, 2/1/16, Callable 2/1/11 @ 105.50 (a).................................. 100,000 108,500 K2, Inc., 7.375%, 7/1/14, Callable 7/1/09 @ 103.688..................... 258,000 258,000 ----------- 366,500 ----------- MACHINERY -- FARM - 0.4% Case New Holland, Inc., 7.125%, 3/1/14, Callable 3/1/10 @ 103.563 (a).................................. 50,000 49,125 ----------- MANUFACTURING - 0.2% Nutro Products, Inc., 10.75%, 4/15/14, Callable 4/15/09 @ 108.063 (a)....... 25,000 25,875 ----------- MEDICAL - 0.9% MultiPlan, Inc., 10.375%, 4/15/16, Callable 4/15/11 @ 105.188 (a)....... 100,000 101,625 ----------- METAL PROCESSORS AND FABRICATION - 0.9% TriMas Corp., 9.875%, 6/15/12, Callable 6/15/07 @ 104.938........... 100,000 93,750 ----------- OIL & GAS - 10.0% Chaparral Energy, Inc., 8.50%, 12/1/15, Callable 12/1/10 @ 104.25 (a).................................. 100,000 103,000 Chesapeake Energy Corp., 6.875%, 1/15/16, Callable 1/15/09 @ 103.438.............................. 250,000 246,250 Clayton Williams Energy, Inc., 7.75%, 8/1/13, Callable 8/1/2009 @ 103.875 (a).................................. 100,000 94,250 Colorado Interstate Gas, 6.80%, 11/15/15, (a)........................ 150,000 150,109
47 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- Compton Petroleum Finance Corp., 7.625%, 12/1/13, Callable 12/1/09 @ 103.813............................ 250,000 247,499 El Paso Production Holdings, 7.75%, 6/1/13, Callable 6/1/08 @ 103.875.... 150,000 154,688 Inergy LP/Inergy Finance, 8.25%, 3/1/16, Callable 3/1/11 @ 104.125 (a).................................. 100,000 102,750 ----------- 1,098,546 ----------- PAPER & RELATED PRODUCTS - 5.0% Abitibi-Consolidated Co. of Canada, 8.375%, 4/1/15....................... 250,000 252,500 Exopac Holding Corp., 11.25%, 2/1/14, Callable 2/1/10 @ 105.625 (a)........ 50,000 50,625 Georgia-Pacific Corp., 7.70%, 6/15/15.............................. 250,000 250,000 ----------- 553,125 ----------- PHARMACY SERVICES - 0.9% Omnicare, Inc., 6.75%, 12/15/13, Callable 12/15/09 @ 103.375.......... 100,000 98,875 ----------- PUBLISHING - 2.6% Block Communications, Inc., 8.25%, 12/15/15, Callable 12/15/10 @ 104.125 (a)........................ 50,000 48,875 Morris Publishing, 7.00%, 8/1/13, Callable 8/1/08 @ 103.50............. 250,000 235,625 ----------- 284,500 ----------- RENTAL -- AUTO AND EQUIPMENT - 1.9% Avis Budget Car Rental, Inc., 7.625%, 5/15/14, Callable 5/15/10 @ 103.81 (a).................................. 100,000 101,750 Hertz Corp., 8.875%, 1/1/14, Callable 1/1/10 @ 104.44 (a).................. 100,000 106,250 ----------- 208,000 ----------- RESEARCH AND TESTING SERVICES - 0.5% Cie Gen Geophysique, 7.50%, 5/15/15, Callable 5/15/10 @ 103.75 (a)........ 50,000 51,625 ----------- RESTAURANTS - 2.7% Dave & Busters. Inc., 11.25%, 3/15/14, Callable 3/15/10 @ 105.625 (a)....... 50,000 50,500 Landry's Restaurants, Inc., 7.50%, 12/15/14, Callable 12/15/09 @ 103.75............................... 200,000 192,000 NPC International, Inc., 9.50%, 5/1/14, Callable 5/1/10 @ 104.75 (a).................................. 50,000 50,500 ----------- 293,000 ----------- RETAIL - 2.6% Linens 'n Things, Inc., 10.70%, 1/15/14, Callable 1/15/08 @ 102 (a) (c).................................. 50,000 50,625 The Jean Coutu Group PJC, Inc., 8.50%, 8/1/14, Callable 8/1/09 @ 104.25..... 250,000 234,375 ----------- 285,000 ----------- - ---------------------------------------------------------------- CORPORATE OBLIGATIONS, CONTINUED - ---------------------------------------------------------------- SHARES OR PRINCIPAL AMOUNT($) VALUE($) ---------- ----------- SEMICONDUCTOR EQUIPMENT - 0.5% Sensata Technologies BV, 8.00%, 5/1/14, Callable 5/1/10 @ 104 (a).... 50,000 50,250 ----------- STEEL - 3.2% AK Steel Corp., 7.75%, 6/15/12, Callable 6/15/07 @ 103.875........... 200,000 202,500 Gibraltar Industries, Inc., 8.00%, 12/1/15, Callable 12/1/10 @ 104 (a).................................. 150,000 152,625 ----------- 355,125 ----------- TELECOMMUNICATIONS - 7.5% Centennial Communications Corp., 10.00%, 1/1/13, Callable 1/1/09 @ 107.50............................... 100,000 104,000 Cincinnati Bell, Inc., 8.375%, 1/15/14, Callable 1/15/09 @ 104.1885............................. 250,000 255,625 Insight Midwest L.P., 9.75%, 10/1/09, Callable 10/1/06 @ 101.625........... 250,000 257,500 Nordic Telephone Co. Holdings, 8.875%, 5/1/16, Callable 5/1/11 @ 104.438 (a).................................. 50,000 51,750 Rural Cellular Corp., 9.75%, 1/15/10, Callable 1/15/07 @ 103.25............ 50,000 51,563 Wind Acquisition Financial SA, 10.75%, 12/1/15, Callable 12/1/10 @ 105.375.............................. 100,000 110,500 ----------- 830,938 ----------- WASTE DISPOSAL - 2.2% Allied Waste North America, Inc., 7.375%, 4/15/14, Callable 4/15/09 @ 103.688.............................. 250,000 246,250 ----------- TOTAL CORPORATE OBLIGATIONS (COST $9,076,618).......................... 9,232,875 ----------- - ---------------------------------------------------------------- INVESTMENT COMPANIES - 15.9% - ---------------------------------------------------------------- Investors Bank Trust Cash Reserve..... 1,754,963 1,754,963 ----------- TOTAL INVESTMENT COMPANIES (COST $1,754,963).......................... 1,754,963 ----------- TOTAL INVESTMENTS (COST $10,831,581) - 99.8%.......... 10,987,838 ----------- -----------
- --------- Percentages indicated are based on net assets of $11,015,360. (a) Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid by the investment manager based on procedures approved by the Board of Trustees. (b) Step Coupon. Rate set to step up to 9.0% on 2/2/09. (c) Variable rate security. The interest rates on these securities are adjusted periodically to reflect then-current short-term interest rates. The rates presented in this report, represents the rates that were in effect on April 30, 2006. The maturity dates presented reflect the final maturity date. However, each of these securities contains put or demand features that allow the fund to require the issuer to repurchase the security from the fund within various time periods, including daily, weekly, monthly, or semi-annually. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 48 - -------------------------------------------------------------------------------- HSBC INVESTOR GROWTH PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- ----------------------------------------------------------------- COMMON STOCKS - 95.3% - ----------------------------------------------------------------- SHARES VALUE($) --------- ---------- AEROSPACE & DEFENSE - 3.8% General Dynamics Corp.................... 20,300 1,332,086 The Boeing Co............................ 10,600 884,570 ---------- 2,216,656 ---------- BUSINESS SERVICES - 2.9% Paychex, Inc............................. 41,650 1,682,244 ---------- CHEMICALS - 3.0% Monsanto Co.............................. 20,700 1,726,380 ---------- COMPUTER SOFTWARE - 10.5% Adobe Systems, Inc. (a).................. 30,550 1,197,560 Automatic Data Processing, Inc........... 12,100 533,368 CheckFree Corp. (a)...................... 26,850 1,446,409 Electronic Arts, Inc. (a)................ 10,150 576,520 Microsoft Corp........................... 42,650 1,029,998 SAP AG ADR............................... 23,700 1,294,730 ---------- 6,078,585 ---------- COMPUTERS - 1.5% Apple Computer, Inc. (a)................. 12,250 862,278 ---------- CONSUMER PRODUCTS - 7.5% Colgate-Palmolive Co..................... 26,450 1,563,724 Harman International Industries, Inc..... 5,700 501,543 PepsiCo, Inc............................. 20,000 1,164,800 The Procter & Gamble Co.................. 18,650 1,085,617 ---------- 4,315,684 ---------- DIVERSIFIED MANUFACTURING OPERATIONS - 6.0% Caterpillar, Inc......................... 26,900 2,037,406 General Electric Co...................... 41,412 1,432,441 ---------- 3,469,847 ---------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 4.3% Broadcom Corp. (a)....................... 13,200 542,652 Maxim Integrated Products, Inc........... 11,850 417,831 Microchip Technology, Inc................ 41,750 1,555,605 ---------- 2,516,088 ---------- FINANCIAL SERVICES - 14.2% Franklin Resources, Inc.................. 5,950 554,064 Goldman Sachs Group, Inc................. 8,600 1,378,494 Legg Mason, Inc.......................... 17,900 2,120,792 Robert Half International, Inc........... 23,500 993,345 SLM Corp................................. 45,000 2,379,599 The Chicago Mercantile Exchange Holdings, Inc........................... 1,700 778,600 ---------- 8,204,894 ---------- HEALTH CARE - 3.5% DENTSPLY International, Inc.............. 9,650 575,816 Medtronic, Inc........................... 11,150 558,838 UnitedHealth Group, Inc.................. 17,400 865,476 ---------- 2,000,130 ---------- - ----------------------------------------------------------------- COMMON STOCKS, CONTINUED - ----------------------------------------------------------------- SHARES VALUE($) --------- ---------- HOTELS & LODGING - 3.5% Las Vegas Sands Corp. (a)................ 31,200 2,022,072 ---------- INSURANCE - 1.2% AFLAC, Inc............................... 15,200 722,608 ---------- INTERNET RELATED - 4.1% eBay, Inc. (a)........................... 12,450 428,405 Google, Inc., Class A (a)................ 4,700 1,964,318 ---------- 2,392,723 ---------- OIL & GAS - 7.3% Schlumberger Ltd......................... 29,850 2,063,829 Smith International, Inc................. 50,950 2,151,619 ---------- 4,215,448 ---------- PHARMACEUTICALS - 7.5% Alcon, Inc............................... 5,650 574,662 Allergan, Inc............................ 6,150 631,728 Genentech, Inc. (a)...................... 15,979 1,273,686 Gilead Sciences, Inc. (a)................ 22,600 1,299,499 Johnson & Johnson........................ 9,650 565,587 ---------- 4,345,162 ---------- RESTAURANTS - 1.0% Starbucks Corp. (a)...................... 15,300 570,231 ---------- RETAIL - 7.5% Abercrombie & Fitch Co., Class A......... 10,100 613,373 Best Buy Co., Inc........................ 10,225 579,349 Home Depot, Inc.......................... 23,750 948,337 Staples, Inc............................. 13,025 343,990 Walgreen Co.............................. 44,417 1,862,404 ---------- 4,347,453 ---------- TELECOMMUNICATIONS - 4.2% Cisco Systems, Inc. (a).................. 73,550 1,540,873 QUALCOMM, Inc............................ 17,400 893,316 ---------- 2,434,189 ---------- TRANSPORTATION - 1.8% Expeditors International of Washington, Inc..................................... 12,250 1,048,723 ---------- TOTAL COMMON STOCKS (COST $47,890,794)...................... 55,171,395 ---------- - ----------------------------------------------------------------- INVESTMENT COMPANIES - 4.6% - ----------------------------------------------------------------- SHARES VALUE($) --------- ---------- HSBC Investor Money Market Fund Class I Shares *............ 2,644,023 2,644,023 ---------- TOTAL INVESTMENT COMPANIES (COST $2,644,023)............................. 2,644,023 ---------- TOTAL INVESTMENTS (COST $50,534,817) - 99.9%............. 57,815,418 ---------- ----------
- --------- Percentages indicated are based on net assets of $57,888,505. (a) Represents non-income producing security. * Investment in affiliate. ADR -- American Depositary Receipt 49 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR VALUE PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- ----------------------------------------------------------------- COMMON STOCKS - 95.3% - ----------------------------------------------------------------- SHARES VALUE($) --------- ---------- AEROSPACE & DEFENSE - 7.5% Lockheed Martin Corp..................... 19,400 1,472,460 Northrop Grumman Corp.................... 28,600 1,913,340 Raytheon Co.............................. 28,300 1,252,841 ---------- 4,638,641 ---------- BANKING - 4.8% Bank of America Corp..................... 23,600 1,178,112 Wells Fargo & Co......................... 25,800 1,772,202 ---------- 2,950,314 ---------- BUSINESS SERVICES - 2.2% Pitney Bowes, Inc........................ 32,100 1,343,385 ---------- COMPUTER SOFTWARE - 5.7% CA, Inc.................................. 87,100 2,208,856 Microsoft Corp........................... 54,300 1,311,345 ---------- 3,520,201 ---------- CONGLOMERATES - 1.9% Loews Corp............................... 11,200 1,188,880 ---------- CONSUMER PRODUCTS - 6.6% Altria Group, Inc........................ 29,200 2,136,272 Kimberly-Clark Corp...................... 24,500 1,433,985 Tyson Foods, Inc. -- Class A............. 34,200 499,320 ---------- 4,069,577 ---------- DIVERSIFIED MANUFACTURING OPERATIONS - 2.1% Ingersoll-Rand Co., Class A.............. 29,800 1,303,750 ---------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 1.5% Agilent Technologies, Inc. (a)........... 24,564 943,749 ---------- FINANCIAL SERVICES - 18.0% Citigroup, Inc........................... 36,707 1,833,515 Countrywide Financial Corp............... 76,600 3,114,556 Fannie Mae............................... 41,500 2,099,900 Genworth Financial, Inc., Class A........ 50,900 1,689,880 J.P. Morgan Chase & Co................... 34,150 1,549,727 MGIC Investment Corp..................... 11,800 834,260 ---------- 11,121,838 ---------- GAS & ELECTRIC UTILITY - 2.1% Dominion Resources, Inc.................. 17,000 1,272,790 ---------- INSURANCE - 7.0% Aetna, Inc............................... 16,600 639,100 AON Corp................................. 26,900 1,127,379 Radian Group, Inc........................ 17,400 1,091,328 The Hartford Financial Services Group, Inc..................................... 15,700 1,443,301 ---------- 4,301,108 ---------- - ----------------------------------------------------------------- COMMON STOCKS, CONTINUED - ----------------------------------------------------------------- SHARES VALUE($) --------- ---------- MEDIA - 6.8% CBS Corp., Class B....................... 33,050 841,784 Liberty Media Corp., Class A (a)......... 100,350 837,923 Viacom, Inc., Class B (a)................ 63,800 2,541,153 ---------- 4,220,860 ---------- METALS & MINING - 6.4% Barrick Gold Corp........................ 62,700 1,911,096 POSCO ADR................................ 11,800 831,546 Rio Tinto PLC ADR........................ 5,300 1,180,310 ---------- 3,922,952 ---------- OIL & GAS - 11.0% ConocoPhillips........................... 16,271 1,088,530 Kerr-McGee Corp.......................... 30,589 3,054,617 Noble Energy, Inc........................ 59,000 2,653,820 ---------- 6,796,967 ---------- PAPER PRODUCTS - 1.6% International Paper Co................... 26,800 974,180 ---------- TELECOMMUNICATIONS - 8.1% AT&T, Inc................................ 44,900 1,176,829 BellSouth Corp........................... 21,050 711,069 Comcast Corp. Special Class A (a)........ 42,300 1,304,109 Motorola, Inc............................ 47,900 1,022,665 Sprint Nextel Corp....................... 30,600 758,880 ---------- 4,973,552 ---------- TRANSPORTATION - 2.0% Union Pacific Corp....................... 13,200 1,203,972 ---------- TOTAL COMMON STOCKS (COST $46,902,116)...................... 58,746,716 ---------- - ----------------------------------------------------------------- INVESTMENT COMPANIES - 4.7% - ----------------------------------------------------------------- SHARES VALUE($) --------- ---------- HSBC Investor Money Market Fund Class I Shares*......................... 2,922,921 2,922,921 ---------- TOTAL INVESTMENT COMPANIES (COST $2,922,921)....................... 2,922,921 ---------- TOTAL INVESTMENTS (COST $49,825,037) - 100.0%............ 61,669,637 ---------- ----------
- --------- Percentages indicated are based on net assets of $61,678,884. (a) Represents non-income producing security. * Investment in Affiliate ADR - American Depository Receipt See notes to financial statements. HSBC INVESTOR PORTFOLIOS 50 - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- ---------------------------------------------------------------- COMMON STOCKS - 97.4% - ---------------------------------------------------------------- SHARES VALUE($) --------- ----------- AUSTRALIA - 0.6% Macquarie Airports..................... 699,400 1,742,312 ----------- AUSTRIA - 0.5% Omv AG................................. 20,500 1,425,073 ----------- BELGIUM - 1.1% Delhaize Group......................... 29,300 2,110,360 KBC Bankverzekeringsholding............ 11,300 1,310,639 ----------- 3,420,999 ----------- BRAZIL - 1.9% Braskem SA-Pref........................ 40,000 275,234 Gerdau SA ADR.......................... 75,150 1,300,095 Petroleo Brasileiro SA ADR............. 27,700 2,462,253 Unibanco ADR........................... 8,100 642,735 Usinas Siderurgicas de Minas Gerais SA.................................... 30,200 1,146,890 ----------- 5,827,207 ----------- CANADA - 3.3% Canadian Natural Resources............. 43,400 2,609,126 EnCana Corp............................ 30,000 1,499,732 ING Canada, Inc........................ 32,800 1,766,176 IPSCO, Inc............................. 8,900 918,663 Nexen, Inc............................. 20,000 1,168,903 Teck Cominco Ltd., B shares............ 32,300 2,227,307 ----------- 10,189,907 ----------- CHINA - 0.1% China Petroleum & Chemical Corp........ 592,000 376,061 ----------- FINLAND - 0.5% Sampo OYJ, Class A..................... 77,000 1,589,011 ----------- FRANCE - 11.3% Assurances Generales de France......... 36,800 4,651,236 BNP Paribas New (a).................... 1,580 144,194 BNP Paribas SA......................... 15,800 1,492,766 Credit Agricole SA..................... 89,990 3,625,617 Renault SA............................. 55,300 6,417,498 Sanofi-Aventis......................... 57,800 5,449,941 Societe Generale....................... 33,700 5,147,861 Thomson SA............................. 58,900 1,218,462 Total SA, B Shares..................... 24,700 6,829,522 ----------- 34,977,097 ----------- GERMANY - 9.1% Allianz AG............................. 9,300 1,554,360 Continental AG......................... 51,400 6,117,921 E.ON AG (a)............................ 41,000 5,024,345 Fresenius Medical Care AG.............. 11,800 1,415,518 MAN AG................................. 66,000 5,001,804 Muenchener Rueckversicherungs- Gesellschaft AG....................... 28,600 4,047,010 RWE AG................................. 44,500 3,856,850 TUI AG................................. 41,500 884,159 ----------- 27,901,967 ----------- HONG KONG - 0.1% Sino Land Co., Ltd..................... 142,200 236,603 ----------- - ---------------------------------------------------------------- COMMON STOCKS, CONTINUED - ---------------------------------------------------------------- SHARES VALUE($) --------- ----------- HUNGARY - 0.4% MOL Magyar Olaj -- es Gazipari Rt. GDR................................... 9,600 1,128,000 ----------- ISRAEL - 0.5% Bank Hapoalim BM....................... 286,600 1,445,806 ----------- ITALY - 1.9% Buzzi Unicem SpA....................... 27,300 698,366 ENI SpA................................ 166,500 5,082,559 ----------- 5,780,925 ----------- JAPAN - 27.3% Alps Electric Co., Ltd................. 55,000 965,700 Canon, Inc............................. 89,300 6,831,822 East Japan Railway Co.................. 102 796,469 EDION Corp............................. 67,800 1,640,659 Hitachi, Ltd........................... 144,000 1,071,304 Honda Motor Co., Ltd................... 23,500 1,669,873 ITOCHU Corp............................ 317,000 2,879,034 Japan Tobacco, Inc..................... 1,200 4,827,404 JFE Holdings, Inc...................... 140,100 5,439,104 Kobe Steel, Ltd........................ 958,000 3,256,443 Kyocera Corp........................... 11,400 1,064,401 Mitsubishi Corp........................ 129,000 3,121,607 Mitsubishi UFJ Financial Group, Inc.... 172 2,704,260 Mitsui & Co., Ltd...................... 171,000 2,584,901 Mitsui Chemicals, Inc.................. 396,000 2,866,087 Mitsui O.S.K. Lines, Ltd............... 451,000 3,228,502 Nippon Mining Holdings, Inc............ 360,000 3,329,644 Nippon Telegraph & Telephone Corp...... 344 1,540,975 Nissan Motor Co., Ltd.................. 225,100 2,959,813 ORIX Corp.............................. 19,300 5,797,628 Sanyo Shinpan Finance Co., Ltd......... 23,750 1,403,931 Sega Sammy Holdings, Inc............... 17,400 693,860 Sony Corp.............................. 12,510 628,522 Sumitomo Heavy Industries, Ltd......... 128,000 1,349,144 Sumitomo Metal Industries, Ltd......... 294,000 1,239,526 Sumitomo Mitsui Financial Group, Inc................................... 598 6,565,657 The Tokyo Electric Power Co., Inc...... 90,600 2,327,668 Tokyo Gas Co., Ltd..................... 529,000 2,560,202 Toyota Motor Corp...................... 123,900 7,247,904 UNY Co., Ltd........................... 90,000 1,608,696 ----------- 84,200,740 ----------- LUXEMBOURG - 0.9% Arcelor................................ 63,680 2,618,626 ----------- NETHERLANDS - 5.2% ABN AMRO Holding NV.................... 92,253 2,756,756 European Aeronautic Defence and Space Co.................................... 79,660 3,143,112 ING Groep NV........................... 190,468 7,750,669 Koninklijke Philips Electronics NV..... 35,000 1,207,475 Royal Dutch Shell plc, A Shares........ 33,600 1,151,971 ----------- 16,009,983 ----------- PHILLIPINES - 0.3% Philippine Long Distance Telephone Co.................................... 21,000 830,658 -----------
51 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------- COMMON STOCKS, CONTINUED - ---------------------------------------------------------------- SHARES VALUE($) --------- ----------- SINGAPORE - 1.8% Flextronics International, Ltd. (a).... 162,400 1,844,864 Singapore Telecommunications, Ltd...... 2,104,630 3,648,416 ----------- 5,493,280 ----------- SOUTH AFRICA - 0.9% Sanlam, Ltd............................ 554,040 1,433,443 Telkom South Africa, Ltd............... 28,000 667,988 Tiger Brands, Ltd...................... 20,800 580,425 ----------- 2,681,856 ----------- SOUTH KOREA - 1.7% Industrial Bank of Korea GDR........... 88,300 1,910,812 Kookmin Bank ADR....................... 14,600 1,300,130 POSCO ADR.............................. 29,000 2,043,630 ----------- 5,254,572 ----------- SPAIN - 3.1% Endesa SA.............................. 143,600 4,767,527 Repsol YPF SA.......................... 155,000 4,629,842 ----------- 9,397,369 ----------- SWITZERLAND - 1.9% Credit Suisse Group.................... 81,100 5,095,734 Novartis AG............................ 13,460 772,446 ----------- 5,868,180 ----------- TAIWAN - 1.0% China Steel Corp. GDR.................. 36,470 708,612 Compal Electronics, Inc. GDR........... 222,840 1,236,762 Gigabyte Technology Co., Ltd........... 270,112 213,635 Taiwan Semiconductor Manufacturing Co., Ltd................................... 491,141 1,049,736 ----------- 3,208,745 ----------- THAILAND - 0.3% PTT Public Company Ltd. plc............ 121,400 795,959 ----------- - ---------------------------------------------------------------- COMMON STOCKS, CONTINUED - ---------------------------------------------------------------- SHARES VALUE($) --------- ----------- UNITED KINGDOM - 21.7% AstraZeneca plc........................ 61,200 3,381,031 Aviva plc.............................. 346,270 5,057,110 Barclays plc........................... 410,200 5,123,200 BHP Billiton plc....................... 47,100 969,549 BP Amoco plc........................... 255,100 3,146,540 British Aerospace plc.................. 485,500 3,695,734 British American Tobacco plc........... 110,300 2,819,542 Friends Provident plc.................. 782,500 2,807,076 George Wimpey plc...................... 244,600 2,334,684 HBOS plc............................... 260,121 4,564,899 Mitchells & Butlers plc................ 119,800 1,075,221 Punch Taverns plc...................... 185,000 2,954,819 Royal & Sun Alliance Insurance Group plc................................... 736,000 1,851,876 Royal Bank of Scotland Group plc....... 169,100 5,521,972 Royal Dutch Shell plc, B Shares........ 45,973 1,643,749 Sainsbury plc.......................... 410,062 2,499,056 Tate & Lyle plc........................ 191,100 1,933,787 Taylor Woodrow plc..................... 361,600 2,525,121 Vodafone Group plc..................... 2,871,953 6,781,132 Whitbread plc.......................... 145,200 2,965,102 Xstrata plc............................ 96,000 3,472,705 ----------- 67,123,905 ----------- TOTAL COMMON STOCKS (COST $208,441,583)................... 299,524,841 ----------- - ---------------------------------------------------------------- REPURCHASE AGREEMENTS - 1.4% - ---------------------------------------------------------------- Investors Bank & Trust, 3.21%, purchased on 4/28/06, due 5/01/06 with maturity value of $4,429,637 (Collateralized fully by various U.S. Government Obligations).......................... 4,428,452 4,428,452 ----------- TOTAL REPURCHASE AGREEMENTS (COST $4,428,452)..................... 4,428,452 ----------- - ---------------------------------------------------------------- RIGHTS & WARRANTS - 0.0% - ---------------------------------------------------------------- UNITED KINGDOM - 0.0% TI Automotive Ltd., Class A (a) (b).... 190,000 0 ----------- TOTAL RIGHTS & WARRANTS (COST $0)............................. 0 ----------- TOTAL INVESTMENTS (COST $212,870,035) - 98.8%.......... 303,953,293 ----------- -----------
- --------- Percentages indicated are based on net assets of $307,492,484. (a) Represents non-income producing security. (b) Represents illiquid security. ADR - American Depositary Receipt GDR - Global Depositary Receipt See notes to financial statements. HSBC INVESTOR PORTFOLIOS 52 - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
PERCENT OF INDUSTRY NET ASSETS - -------- ---------- Aerospace & Defense......................................... 2.2% Automotive.................................................. 7.9% Banking & Financial Services................................ 20.9% Building & Construction..................................... 1.8% Cash........................................................ 1.4% Chemicals................................................... 1.0% Computer Related............................................ 0.5% Drugs -- Medical............................................ 3.6% Electrical.................................................. 3.6% Electronic Components & Semiconductors...................... 2.5% Food & Beverage............................................. 1.0% Insurance................................................... 8.1% Leisure..................................................... 1.0% Manufacturing............................................... 7.1% Metals & Mining............................................. 8.2% Multimedia.................................................. 0.4% Oil & Gas................................................... 15.3% Real Estate................................................. 0.1% Retail...................................................... 3.1% Telecommunications.......................................... 4.4% Tobacco..................................................... 2.5% Tourism..................................................... 0.3% Transportation Services..................................... 1.9% ------ Total Investments........................................... 98.8% ------ Other assets in excess of liabilities....................... 1.2% ------ Net Assets.................................................. 100.0% ------ ------
53 HSBC INVESTOR PORTFOLIOS See notes to financial statements. - -------------------------------------------------------------------------------- HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) At April 30, 2006, the portfolio's open forward currency contracts were as follows:
CONTRACT CONTRACT UNREALIZED DELIVERY AMOUNT VALUE APPRECIATION/ CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION) - -------- ---- ---------------- ------------- ----- -------------- LONG CONTRACTS Japanese Yen......................................... 5/1/2006 105,000,000 $ 921,295 $ 922,266 $ 971 SHORT CONTRACTS Swiss Franc.......................................... 6/15/2006 6,520,000 $5,158,432 $5,285,637 $(127,205)
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 54 - -------------------------------------------------------------------------------- HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO - -------------------------------------------------------------------------------- SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- ---------------------------------------------------------------- COMMON STOCKS - 95.7% - ---------------------------------------------------------------- SHARES VALUE($) ---------- ----------- ADVERTISING - 2.6% Monster Worldwide, Inc. (a)........... 112,800 6,474,720 ----------- AEROSPACE & DEFENSE - 1.0% Hexcel Corp. (a)...................... 107,000 2,363,630 ----------- BANKING - 3.0% East West Bancorp, Inc................ 101,200 4,014,604 Wintrust Financial Corp............... 65,500 3,389,625 ----------- 7,404,229 ----------- BIOTECHNOLOGY - 2.9% Celgene Corp. (a)..................... 168,700 7,112,392 ----------- COMMERCIAL SERVICES - 4.2% Alliance Data Systems Corp. (a)....... 90,900 4,999,500 Schawk, Inc., Class A................. 67,400 1,707,916 Sotheby's Holdings, Inc. (a).......... 125,400 3,760,746 ----------- 10,468,162 ----------- COMPUTER SOFTWARE - 9.6% Activision, Inc. (a).................. 58,400 828,696 CheckFree Corp. (a)................... 55,100 2,968,237 Mercury Interactive Corp. (a)......... 78,400 2,822,400 Satyam Computer Services Ltd. ADR..... 96,500 3,472,070 Sina Corp. (a)........................ 103,100 2,726,995 SRA International, Inc., Class A (a).................................. 142,700 4,569,254 Transaction Systems Architects, Inc., Class A (a).......................... 157,000 6,270,580 ----------- 23,658,232 ----------- CONSULTING SERVICES - 1.1% LECG Corp. (a)........................ 19,400 358,706 Resources Connection, Inc. (a)........ 84,900 2,283,810 ----------- 2,642,516 ----------- DIVERSIFIED MANUFACTURING OPERATIONS - 8.6% Actuant Corp., Class A................ 40,100 2,564,395 AMETEK, Inc........................... 150,500 7,415,135 AptarGroup, Inc....................... 40,900 2,143,569 IDEX Corp............................. 130,300 6,619,240 The Stanley Works..................... 48,000 2,508,000 ----------- 21,250,339 ----------- ELECTRONIC COMPONENTS & SEMICONDUCTORS - 10.3% Atmel Corp. (a)....................... 470,300 2,464,372 ATMI, Inc. (a)........................ 98,600 2,800,240 Cognos, Inc. (a)...................... 128,600 4,792,922 Integrated Device Technology, Inc. (a).................................. 157,600 2,398,672 Power Integrations, Inc. (a).......... 90,200 1,909,534 Thermo Electron Corp. (a)............. 174,500 6,725,230 Varian Semiconductor Equipment Associates, Inc. (a)................. 132,850 4,350,838 ----------- 25,441,808 ----------- ENVIRONMENTAL SERVICES - 4.0% Republic Services, Inc., Class A...... 139,500 6,139,395 Waste Connections, Inc. (a)........... 98,900 3,807,650 ----------- 9,947,045 ----------- FINANCIAL SERVICES - 2.4% Affiliated Managers Group, Inc. (a)... 57,600 5,834,880 ----------- HEALTH CARE - 12.7% Advanced Medical Optics, Inc. (a)..... 51,200 2,385,920 Charles River Laboratories International, Inc. (a)............................. 42,800 2,022,300 - ---------------------------------------------------------------- COMMON STOCKS, CONTINUED - ---------------------------------------------------------------- SHARES VALUE($) ---------- ----------- CYTYC Corp. (a)....................... 117,400 3,034,790 Manor Care, Inc....................... 145,900 6,397,715 Omnicare, Inc......................... 140,100 7,945,070 Respironics, Inc. (a)................. 180,900 6,624,558 Ventana Medical Systems (a)........... 61,600 2,999,920 ----------- 31,410,273 ----------- HOSPITALS - 1.4% Triad Hospitals, Inc. (a)............. 86,900 3,580,280 ----------- MEDIA - 1.7% Meredith Corp......................... 85,600 4,245,760 ----------- OIL & GAS - 12.1% Chesapeake Energy Corp................ 140,700 4,457,376 Consol Energy, Inc.................... 65,500 5,577,980 Denbury Resources, Inc. (a)........... 157,000 5,118,200 Massey Energy Co...................... 142,700 5,515,355 Peabody Energy Corp................... 66,600 4,253,076 Smith International, Inc.............. 118,000 4,983,140 ----------- 29,905,127 ----------- PHARMACEUTICALS - 6.6% Elan Corp. PLC ADR (a)................ 505,400 7,434,434 MGI Pharma, Inc. (a).................. 33,000 616,440 OSI Pharmaceuticals, Inc. (a)......... 208,900 5,550,473 Santarus, Inc. (a).................... 369,700 2,854,084 ----------- 16,455,431 ----------- REAL ESTATE - 1.0% Northstar Realty Finance Corp......... 59,700 669,237 The Mills Corp........................ 60,000 1,914,600 ----------- 2,583,837 ----------- RETAIL - 6.6% Advance Auto Parts, Inc............... 116,800 4,697,696 Dick's Sporting Goods, Inc. (a)....... 70,700 2,980,005 P.F. Chang's China Bistro, Inc. (a)... 37,600 1,602,136 PETsMART, Inc......................... 138,700 3,836,442 Williams-Sonoma, Inc.................. 78,400 3,282,608 ----------- 16,398,887 ----------- TELECOMMUNICATIONS - 2.0% Polycom, Inc. (a)..................... 227,700 5,009,400 ----------- TRANSPORTATION - 1.9% J.B. Hunt Transport Services, Inc..... 202,300 4,820,809 ----------- TOTAL COMMON STOCKS (COST $177,833,854) 237,007,757 ----------- - ---------------------------------------------------------------- INVESTMENT COMPANIES - 3.3% - ---------------------------------------------------------------- SHARES VALUE($) ---------- ----------- HSBC Investor Money Market Fund Class I Shares*............................ 8,247,705 8,247,705 ----------- TOTAL INVESTMENT COMPANIES (COST $8,247,705) 8,247,705 ----------- TOTAL INVESTMENTS (COST $186,081,559) -- 99.0% 245,255,462 ----------- -----------
- --------- Percentages indicated are based on net assets of $247,708,167. (a) Represents non-income producing security. * Investment in Affiliate ADR -- American Depository Receipt 55 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
INTERMEDIATE DURATION CORE PLUS HIGH YIELD FIXED INCOME FIXED INCOME FIXED INCOME GROWTH VALUE PORTFOLIO PORTFOLIO PORTFOLIO (A) PORTFOLIO PORTFOLIO - --------------------------------------------------------------------------------------------------------------------------------- ASSETS: Investments in non-affiliates, at value $23,147,654 $117,937,892 $10,987,838 $55,171,395 $ 58,746,716 Investments in affiliates, at value 60,896 510,201 -- 2,644,023 2,922,921 Interest and dividends receivable 168,622 1,011,426 180,023 42,353 81,836 Receivable for investments sold 1,978,010 14,102,691 -- 1,338,859 -- Unrealized appreciation on forward foreign currency contracts 368 1,767 -- -- -- Prepaid expenses and other assets 520 7,177 7,058 976 1,137 ----------- ------------ ----------- ----------- ------------ TOTAL ASSETS 25,356,070 133,571,154 11,174,919 59,197,606 61,752,610 ----------- ------------ ----------- ----------- ------------ ................................................................................................................................... LIABILITIES: Cash overdraft -- -- -- -- 27,625 Payable for investments purchased 3,664,746 24,850,475 150,000 1,259,823 -- Unrealized depreciation on forward foreign currency contracts 107 540 -- -- -- Accrued expenses and other liabilities: Investment management 7,375 42,688 4,560 23,112 26,068 Administration 1,876 6,606 285 1,799 1,899 Accounting 3,595 6,278 4,114 5,335 4,213 Compliance service 61 160 55 20 39 Custodian 5,809 2,679 -- 18,212 13,092 Trustee -- -- 74 -- -- Other 736 2,580 471 800 790 ----------- ------------ ----------- ----------- ------------ TOTAL LIABILITIES 3,684,305 24,912,006 159,559 1,309,101 73,726 ----------- ------------ ----------- ----------- ------------ ................................................................................................................................... NET ASSETS: Applicable to investors' beneficial interest $21,671,765 $108,659,148 $11,015,360 $57,888,505 $ 61,678,884 ----------- ------------ ----------- ----------- ------------ ----------- ------------ ----------- ----------- ------------ Investments, at cost $23,530,643 $120,021,934 $10,831,581 $50,534,817 $ 49,825,037 ----------- ------------ ----------- ----------- ------------ ----------- ------------ ----------- ----------- ------------ Foreign currency, at cost --------------- ------------ ------------ ------------ ------------
(a) The High Yield Fixed Income Portfolio commenced operation on November 18, 2005. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 56 HSBC INVESTOR PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
INTERNATIONAL SMALL CAP EQUITY EQUITY PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------ ASSETS: Investments in non-affiliates, at value $303,953,293 $237,007,757 Investments in affiliates, at value -- 8,247,705 Cash -- 27,625 Foreign currency 3,480,827 -- Interest and dividends receivable 1,411,755 70,436 Receivable for investments sold 365,663 3,280,115 Unrealized appreciation on forward foreign currency contracts 971 -- Prepaid expenses and other assets 12,048 20,627 ------------ ------------ TOTAL ASSETS 309,224,557 248,654,265 ------------ ------------ .......................................................................... LIABILITIES: Payable for investments purchased 1,351,991 765,721 Unrealized depreciation on forward foreign currency contracts 127,205 -- Accrued expenses and other liabilities: Investment management 217,625 160,167 Administration 12,611 11,691 Accounting 3,504 3,610 Compliance service 130 188 Custodian 15,276 -- Trustee -- -- Other 3,731 4,721 ------------ ------------ TOTAL LIABILITIES 1,732,073 946,098 ------------ ------------ NET ASSETS: Applicable to investors' beneficial interest $307,492,484 $247,708,167 ------------ ------------ ------------ ------------ Investments, at cost $212,870,035 $186,081,559 ------------ ------------ ------------ ------------ Foreign currency, at cost $ 3,317,581 ------------ ------------
57 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
INTERMEDIATE DURATION CORE PLUS HIGH YIELD FIXED INCOME FIXED INCOME FIXED INCOME GROWTH VALUE PORTFOLIO PORTFOLIO PORTFOLIO (A) PORTFOLIO PORTFOLIO - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest $ 651,070 $ 2,995,063 $ 270,687 $ -- $ -- Dividends -- -- 6,930 225,785 531,470 Dividend income from affiliated investments 5,869 49,468 -- 34,315 31,292 Income from securities lending 3,075 17,878 -- 19 113 ----------- ------------ ---------- ---------- ----------- TOTAL INVESTMENT INCOME 660,014 3,062,409 277,617 260,119 562,875 ----------- ------------ ---------- ---------- ----------- ................................................................................................................................. EXPENSES: Investment management 51,488 261,162 21,182 132,919 149,916 Administration 4,827 21,074 1,324 10,088 10,708 Accounting 29,688 35,520 27,432 28,429 27,296 Compliance service 230 870 98 352 388 Custodian 10,633 25,069 15,049 10,712 13,092 Trustee 365 1,371 150 548 606 Other 2,127 8,100 645 3,284 3,535 ----------- ------------ ---------- ---------- ----------- TOTAL EXPENSES 99,358 353,166 65,880 186,332 205,541 ----------- ------------ ---------- ---------- ----------- ................................................................................................................................. NET INVESTMENT INCOME (LOSS) 560,656 2,709,243 211,737 73,787 357,334 ----------- ------------ ---------- ---------- ----------- ................................................................................................................................. NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions (402,173) (1,657,869) 12,241 2,754,704 1,945,744 Change in unrealized appreciation/depreciation from investments and foreign currencies 99,229 8,919 156,257 1,293,178 4,979,185 ----------- ------------ ---------- ---------- ----------- ................................................................................................................................. Net realized/unrealized gains (losses) from investments and foreign currency transactions (302,944) (1,648,950) 168,498 4,047,882 6,924,929 ----------- ------------ ---------- ---------- ----------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 257,712 $ 1,060,293 $ 380,235 $4,121,669 $ 7,282,263 ----------- ------------ ---------- ---------- ----------- ----------- ------------ ---------- ---------- -----------
(a) The High Yield Fixed Income Portfolio commenced operations on November 18, 2005. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 58 HSBC INVESTOR PORTFOLIOS STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED) (CONTINUED)
INTERNATIONAL SMALL CAP EQUITY EQUITY PORTFOLIO PORTFOLIO - ------------------------------------------------------------------------ INVESTMENT INCOME: Interest $ 33,150 $ -- Dividends 2,749,453 518,945 Dividend income from affiliated investments -- 97,727 Foreign tax withholding (215,505) -- Income from securities lending -- 7,230 ------------ ------------ TOTAL INVESTMENT INCOME 2,567,098 623,902 ------------ ------------ .......................................................................... EXPENSES: Investment management 882,918 931,724 Administration 48,859 43,675 Accounting 46,366 27,328 Compliance service 1,681 1,611 Custodian 119,047 34,367 Trustee 2,633 2,526 Other 14,758 14,224 ------------ ------------ TOTAL EXPENSES 1,116,262 1,055,455 ------------ ------------ .......................................................................... NET INVESTMENT INCOME (LOSS) 1,450,836 (431,553) ------------ ------------ .......................................................................... NET REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS AND FOREIGN CURRENCIES: Net realized gains (losses) from investments and foreign currency transactions 11,980,778 22,894,387 Change in unrealized appreciation/depreciation from investments and foreign currencies 51,766,202 21,977,857 ------------ ------------ .......................................................................... Net realized/unrealized gains (losses) from investments and foreign currency transactions 63,746,980 44,872,244 ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 65,197,816 $ 44,440,691 ------------ ------------ ------------ ------------
59 HSBC INVESTOR PORTFOLIOS See notes to financial statements. HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS
INTERMEDIATE DURATION CORE PLUS FIXED INCOME FIXED INCOME PORTFOLIO PORTFOLIO - --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 YEAR ENDED APRIL 30, 2006 YEAR ENDED (UNAUDITED) OCTOBER 31, 2005 (UNAUDITED) OCTOBER 31, 2005 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 560,656 $ 1,897,871 $ 2,709,243 $ 6,493,010 Net realized gains (losses) from investment and foreign currency transactions (402,173) (162,231) (1,657,869) 7,083,274 Change in unrealized appreciation/depreciation from investments and foreign currencies 99,229 (1,247,772) 8,919 (10,643,468) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 257,712 487,868 1,060,293 2,932,816 ------------ ------------ ------------ ------------ Proceeds from contributions 803,700 6,926,443 18,592,258 31,409,368 Value of withdrawals (12,199,333) (38,301,414) (33,523,183) (81,271,788) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST (11,395,633) (31,374,971) (14,930,925) (49,862,420) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS (11,137,921) (30,887,103) (13,870,632) (46,929,604) ................................................................................................................................ NET ASSETS: Beginning of period 32,809,686 63,696,789 122,529,780 169,459,384 ------------ ------------ ------------ ------------ End of period $ 21,671,765 $ 32,809,686 $108,659,148 $122,529,780 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 60 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
HIGH YIELD FIXED INCOME - --------------------------------------------------------------------------------- FOR THE PERIOD ENDED APRIL 30, 2006 (a) (UNAUDITED) - ------------------------------------------------------ INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 211,737 Net realized gains (losses) from investment transactions 12,241 Change in unrealized appreciation/depreciation from investments 156,257 ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 380,235 ------------ Proceeds from contributions 11,582,416 Value of withdrawals (947,291) ------------ CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST 10,635,125 ------------ CHANGE IN NET ASSETS 11,015,360 ........................................................... NET ASSETS: Beginning of period -- ------------ End of period $ 11,015,360 ------------ ------------
- --------- (a) The High Yield Fixed Income Portfolio commenced operations on November 18, 2005. 61 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 SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 YEAR ENDED (UNAUDITED) OCTOBER 31, 2005 (UNAUDITED) OCTOBER 31, 2005 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income $ 73,787 $ 403,238 $ 357,334 $ 721,613 Net realized gains (losses) from investment transactions 2,754,704 2,375,542 1,945,744 4,124,126 Change in unrealized appreciation/depreciation from investments 1,293,178 3,995,556 4,979,185 4,254,259 ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 4,121,669 6,774,336 7,282,263 9,099,998 ------------ ------------ ------------ ------------ Proceeds from contributions 11,019,790 15,081,868 8,492,544 14,013,050 Value of withdrawals (6,667,653) (22,121,709) (8,246,371) (30,376,597) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST 4,352,137 (7,039,841) 246,173 (16,363,547) ------------ ------------ ------------ ------------ CHANGE IN NET ASSETS 8,473,806 (265,505) 7,528,436 (7,263,549) ................................................................................................................................ NET ASSETS: Beginning of period 49,414,699 49,680,204 54,150,448 61,413,997 ------------ ------------ ------------ ------------ End of period $ 57,888,505 $ 49,414,699 $ 61,678,884 $ 54,150,448 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 62 HSBC INVESTOR PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INTERNATIONAL EQUITY SMALL CAP EQUITY PORTFOLIO PORTFOLIO - --------------------------------------------------------------------------------------------------------------------------------- FOR THE FOR THE SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE APRIL 30, 2006 YEAR ENDED APRIL 30, 2006 YEAR ENDED (UNAUDITED) OCTOBER 31, 2005 (UNAUDITED) OCTOBER 31, 2005 - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES: OPERATIONS: Net investment income (loss) $ 1,450,836 $ 4,381,037 $ (431,553) $ (1,294,078) Net realized gains (losses) from investment and foreign currency transactions 11,980,778 18,977,305 22,894,387 62,035,547 Change in unrealized appreciation/depreciation from investments and foreign currencies 51,766,202 17,737,274 21,977,857 (17,237,446) ------------ ---------------- ------------- ------------- CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 65,197,816 41,095,616 44,440,691 43,504,023 ------------ ---------------- ------------- ------------- Proceeds from contributions 38,879,905 68,931,727 15,966,433 24,917,377 Value of withdrawals (26,815,089) (99,822,646) (31,477,182) (208,976,448) ------------ ---------------- ------------- ------------- CHANGE IN NET ASSETS FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST 12,064,816 (30,890,919) (15,510,749) (184,059,071) ------------ ---------------- ------------- ------------- CHANGE IN NET ASSETS 77,262,632 10,204,697 28,929,942 (140,555,048) ................................................................................................................................ NET ASSETS: Beginning of period 230,229,852 220,025,155 218,778,225 359,333,273 ------------ ---------------- ------------- ------------- End of period $307,492,484 $ 230,229,852 $ 247,708,167 $ 218,778,225 ------------ ---------------- ------------- ------------- ------------ ---------------- ------------- -------------
63 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 RATIO OF END OF TO AVERAGE INCOME (LOSS) EXPENSES TOTAL PERIOD NET TO AVERAGE TO AVERAGE PORTFOLIO RETURN(a) (000'S) ASSETS(b) NET ASSETS(b) NET ASSETS(b)(c) TURNOVER - --------------------------------------------------------------------------------------------------------------------------------- INTERMEDIATE DURATION FIXED INCOME PORTFOLIO Period ended October 31, 2001 (d) $115,180 0.55% 4.97% 0.55% 102.01% Year ended October 31, 2002 149,815 0.51% 4.60% 0.51% 44.04% Year ended October 31, 2003 4.42% 84,488 0.53% 3.70% 0.53% 98.42% Year ended October 31, 2004 4.48% 63,697 0.57% 3.54% 0.57% 50.06% Year ended October 31, 2005 0.76%(e) 32,810 0.49%(e) 3.85%(e) 0.58% 107.26% Six months ended April 30, 2006 (unaudited) 0.88% 21,672 0.77% 4.37% 0.77% 124.22% - --------------------------------------------------------------------------------------------------------------------------------- CORE PLUS FIXED INCOME PORTFOLIO Year ended October 31, 2001 $242,914 0.53% 6.53% 0.53% 341.26% Year ended October 31, 2002 385,802 0.48% 5.14% 0.48% 77.82% Year ended October 31, 2003 5.80% 203,551 0.48% 4.38% 0.48% 70.91% Year ended October 31, 2004 5.56% 169,459 0.52% 4.31% 0.52% 34.88% Year ended October 31, 2005 1.64%(e) 122,530 0.40%(e) 4.25%(e) 0.53% 176.60% Six months ended April 30, 2006 (unaudited) 0.88% 108,659 0.63% 4.82% 0.63% 147.29% - --------------------------------------------------------------------------------------------------------------------------------- HIGH YIELD FIXED INCOME PORTFOLIO Period ended April 30, 2006 (unaudited) (d) 4.68% 11,015 1.84% 5.91% 1.84% 6.94% - --------------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO Period ended October 31, 2004 (d) (0.86%) $ 49,680 0.72% 0.06% 0.72% 53.08% Year ended October 31, 2005 13.59%(e) 49,415 0.63%(e) 0.77%(e) 0.68% 79.54% Six months ended April 30, 2006 (unaudited) 8.32% 57,889 0.69% 0.27% 0.69% 36.21% - --------------------------------------------------------------------------------------------------------------------------------- VALUE PORTFOLIO Period ended October 31, 2004 (d) 6.12% $ 61,414 0.71% 1.28% 0.71% 10.33% Year ended October 31, 2005 15.23%(e) 54,150 0.64%(e) 1.15%(e) 0.69% 16.45% Six months ended April 30, 2006 (unaudited) 13.58% 61,679 0.72% 1.25% 0.72% 9.31% - --------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL EQUITY PORTFOLIO Year ended October 31, 2001 $275,848 0.90% 0.54% 0.90% 26.90% Year ended October 31, 2002 256,616 0.91% 0.63% 0.91% 31.63% Year ended October 31, 2003 23.70% 201,805 0.96% 1.00% 0.96% 68.51% Year ended October 31, 2004 20.29% 220,025 0.94% 1.53% 0.94% 106.11% Year ended October 31, 2005 19.54% 230,230 0.84% 1.92% 0.84% 31.32% Six months ended April 30, 2006 (unaudited) 28.12% 307,492 0.86% 1.11% 0.86% 14.64% - --------------------------------------------------------------------------------------------------------------------------------- SMALL CAP EQUITY PORTFOLIO Year ended October 31, 2001 $265,573 0.98% (0.65%) 0.98% 52.47% Year ended October 31, 2002 266,217 0.99% (0.78%) 0.99% 103.90% Year ended October 31, 2003 33.30% 426,181 0.91% (0.62%) 0.91% 152.05% Year ended October 31, 2004 5.93% 359,333 0.88% (0.52%) 0.88% 81.75% Year ended October 31, 2005 14.35%(e) 218,778 0.85%(e) (0.45%)(e) 0.90% 63.95% Six months ended April 30, 2006 (unaudited) 21.06% 247,708 0.91% (0.37%) 0.91% 31.02% - ---------------------------------------------------------------------------------------------------------------------------------
(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) Intermediate Duration Fixed Income Portfolio commenced operations on January 24, 2001. High Yield Fixed Income Portfolio commenced operations on November 18, 2005. 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 Intermediate Duration Fixed Income Portfolio, Core Plus Fixed Income Portfolio, Growth Portfolio, Value Portfolio and Small Cap Equity Portfolio, respectively. See notes to financial statements. HSBC INVESTOR PORTFOLIOS 64 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) 1. ORGANIZATION: The HSBC Investor Portfolios (the 'Portfolio Trust'), is an open-end management investment company organized as a New York trust under the laws of the State of New York on November 1, 1994. The 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 master funds (individually a 'Portfolio,' collectively the 'Portfolios'):
PORTFOLIO SHORT NAME --------- ---------- HSBC Investor Intermediate Duration Fixed Intermediate Duration Fixed Income Income Portfolio (formerly the HSBC Investor Portfolio Limited Maturity Portfolio) HSBC Investor Core Plus Fixed Income Portfolio Core Plus Fixed Income Portfolio (formerly the HSBC Investor Fixed Income Portfolio) HSBC Investor High Yield Fixed Income Portfolio High Yield Fixed Income Portfolio HSBC Investor 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 Portfolio Trust's organizational documents, the Portfolios' officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Portfolios. In addition, in the normal course of business, the Portfolios enter into contracts with their service providers, which also provide for indemnifications by the Portfolios. The Portfolios' maximum exposure under these arrangements is unknown as this would involve 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 65 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) individual security include corporate actions by the issuer, announcements by the issuer relating to its earnings or products, regulatory news, natural disasters and litigation. Examples of potentially significant events that could affect multiple securities held by a Portfolio include governmental actions, natural disasters and armed conflicts. In addition, if events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Portfolios' net assets are calculated, such securities may be valued using fair value pricing in accordance with procedures adopted by the Board of Trustees. Management identifies possible fluctuations in foreign securities by monitoring the rise or fall in the value of a designated benchmark index. In the event of a rise or fall greater than predetermined levels, the International Equity Portfolio may use a systematic valuation model provided by an independent third party to value its foreign securities. 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: During the period, security transactions are accounted for no later than one business day following trade date. For financial reporting purposes, however, changes in holdings are accounted for on trade date on the last business day of the reporting period. Securities gains and losses are calculated on the identified cost basis. Interest income is recognized on the accrual basis and includes, where applicable, the amortization or accretion of premium or discount. Dividend income is recorded on the ex-dividend date. FOREIGN CURRENCY TRANSLATION: The accounting records of the Portfolios are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. The Portfolios do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and foreign currencies. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Portfolios may enter into forward foreign currency exchange contracts in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolio securities denominated in a particular currency. The Portfolios could be exposed to risks if the 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. HSBC INVESTOR PORTFOLIOS 66 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) MORTGAGE DOLLAR ROLL TRANSACTIONS: The Core Plus Fixed Income Portfolio may engage in dollar roll transactions with respect to mortgage securities issued by the Government National Mortgage Association, the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. In a dollar roll transaction, the Portfolio sells a mortgage-backed security and simultaneously agrees to repurchase a similar security on a specified future date at an agreed upon price. During the roll period, the Portfolio will not be entitled to receive any interest or principal paid on the securities sold. The Portfolio is compensated for the lost interest on the securities sold by the difference between the sales price and the lower price for the future repurchase as well as by the interest earned on the reinvestment of the sales proceeds. The Portfolio may also be compensated by receipt of a commitment fee. When the Portfolio enters into a mortgage dollar roll transaction, liquid assets in an amount sufficient to pay for the future repurchase are segregated with the custodian. 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. Therefore, not all restricted securities are considered illiquid. At April 30, 2006, the HSBC Core Plus Fixed Income Portfolio held restricted securities that were illiquid, representing 0.03% of net assets, as follows:
ACQUISITION ACQUISITION PRINCIPAL SECURITY NAME DATE COST($) AMOUNT($) VALUE($) ------------- ---- ------- --------- -------- FHA Weyerhauser, 7.43%, 1/1/24................ 3/28/2002 32,498 34,389 34,389
SECURITY LOANS: To generate additional income, the Portfolios may lend portfolio securities in amounts up to 33 1/3%, except for Small Cap Equity Portfolio, which may lend up to 30%, of its respective assets pursuant to agreements requiring that the loan be collateralized by cash, U.S. Government or U.S. Government agency securities, equal at all times to at least 100% of the fair value of the loaned securities. HSBC Bank USA ('HSBC Bank'), an affiliate of the Investment Adviser (defined below), acts as the securities lending agent for this activity. The Portfolios receive payments from borrowers equivalent to the dividends and interest that would have been earned on securities loaned while simultaneously seeking to earn income on the investment of collateral. Collateral is marked to market daily to provide the required level of collateral. There may be risks of delay in recovery of the securities or even loss of rights in the collateral should the borrower of the securities fail financially. However, loans will be made only to borrowers, such as broker-dealers, banks or institutional borrowers of securities, deemed by HSBC Bank to be of good standing and creditworthy under guidelines approved by the Board of Trustees and when, in the judgement of HSBC Bank, the amounts that can be earned currently from such securities loans justifies the attendant risks. Loans are subject to termination by the Portfolios or the borrower at any time and are, therefore, not considered to be illiquid investments. As of April 30, 2006, the Portfolios did not have any securities on loan. LINE OF CREDIT: The Portfolios may borrow up to $50 million under the terms of a short-term, demand note agreement with HSBC Bank. The purpose of the agreement is to meet temporary or emergency cash needs, including redemption requests that might otherwise require the untimely disposition of securities. During the period ended April 30, 2006, the details of the borrowings were as follows (based on actual number of days on which the respective Portfolios borrowed monies):
AVERAGE AMOUNT AVERAGE FUND OUTSTANDING INTEREST RATE ---- ----------- ------------- Core Plus Fixed Income Portfolio........................... $7,732,592 4.60%
67 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) EXPENSE ALLOCATIONS: Expenses directly attributable to a Portfolio are charged to that Portfolio. Expenses not directly attributable to a Portfolio are allocated proportionally among various or all series within the HSBC Investor Family of Funds in relation to net assets or on another reasonable basis. FEDERAL INCOME TAXES: Each Portfolio will be treated as a partnership for U.S. Federal income tax purposes. Accordingly, each Portfolio passes through all of its net investment income and gains and losses to its 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, and are paid for their services directly by HSBC. For its services as Investment Adviser, HSBC receives a fee, accrued daily and paid monthly, at an annual rate of 0.40% of the Intermediate Duration Fixed Income Portfolio's average daily net assets and 0.60% of the High Yield Fixed Income Portfolio's average daily net assets. For its services as Investment Adviser, HSBC receives, from the Core Plus Fixed Income Portfolio, a fee accrued daily and paid monthly at an annual rate of:
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE ------------------------------------ -------- Up to $50 million........................................... 0.575% In excess of $50 million but not exceeding $95 million...... 0.450% In excess of $95 million but not exceeding $150 million..... 0.200% In excess of $150 million but not exceeding $250 million.... 0.400% In excess of $250 million................................... 0.350%
For their services 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 68 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (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: HSBC serves the Portfolios as Administrator. Under the terms of the administration agreement, HSBC receives from the Portfolios 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 rates and breakpoints are determined on the basis of the aggregate average daily net assets of the HSBC Investor Family of Funds; however the assets of the Portfolios and Feeder Funds that invest in the Portfolios are not double-counted. The total administration fee paid to BISYS is allocated to each series in the HSBC Investor Family of Funds based upon its proportionate share of the aggregate net assets of the Family of Funds. For assets invested in the Portfolios by Feeder Funds, the Portfolios pay half of the administration fee and the Feeder Funds pay half of the administration fee, for a combination of the total fee rate set forth above. Pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund Services Ohio, Inc. ('BISYS Ohio') a wholly-owned subsidiary of The BISYS Group, Inc., serves as the Portfolio Trust's sub-administrator subject to the general supervision of the Portfolio Trust's Board of Trustees and HSBC. For these services, BISYS Ohio is entitled to a fee, payable by HSBC, at an annual rate equivalent to the fee rates set forth above, minus 0.02% (2 basis points), which is retained by HSBC. 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 $117,433 for the period ended April 30, 2006, plus certain out of pocket expenses. Expenses incurred are reflected on the Statement of Operations as 'Compliance Service'. BISYS Ohio pays the salary and other compensation earned by any such individuals as employees of BISYS Ohio. 69 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) FUND ACCOUNTING, CUSTODIAN AND TRUSTEE: BISYS Ohio provides fund accounting services for the Portfolios. For its services to the Portfolios, BISYS Ohio receives an annual fee per Portfolio, including reimbursement of certain expenses, from each Portfolio accrued daily and paid monthly. HSBC Bank serves as custodian to the Portfolios. Investor's Bank & Trust Company ('IBT') serves as custodian for the High Yield Fixed Income Portfolio and for the foreign assets of all Portfolios. Compensation paid to HSBC Bank and IBT 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 with a $24,000 annual Board retainer, as well as a $1,000 annual retainer for each Committee of the Board. Each non-interested Trustee also receives a $4,000 and $2,000 meeting fee for each regular in-person Board meeting and Committee meeting, respectively. Furthermore, each non-interested Trustee receives compensation for attending special meetings and/or functioning as a Committee Chairperson or Lead Trustee. In addition, the non-interested Trustees are reimbursed for certain expenses incurred in connection with their Board membership. OTHER: For its services as securities lending agent, HSBC Bank (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 by the Portfolios. The fees collected by HSBC Bank for the period ended April 30, 2006 were:
PORTFOLIO FEE --------- --- Intermediate Duration Fixed Income Portfolio................ $ 161 Core Plus Fixed Income Portfolio............................ 940 Growth Portfolio............................................ 38 Value Fund Portfolio........................................ 188 Small Cap Equity Portfolio.................................. 7,966
The HSBC Investor Family of Funds may use affiliated broker/dealers for the execution of portfolio investment trades. For the period ended April 30, 2006, 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 period ended April 30, 2006, each Portfolio purchased and sold securities, excluding short-term securities, in the following amounts:
PURCHASES SALES PURCHASES SALES (EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S. PORTFOLIO NAME GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT -------------- ----------- ----------- ---------- ---------- Intermediate Duration Fixed Income Portfolio....................... $18,980,122 $ 26,046,165 $10,635,614 $13,580,774 Core Plus Fixed Income Portfolio....................... 96,558,425 108,148,784 53,046,523 55,825,407 High Yield Fixed Income Portfolio....................... 8,661,436 460,125 -- -- Growth Portfolio.................. 21,737,014 18,902,135 -- -- Value Portfolio................... 5,195,941 6,171,912 -- -- International Equity Portfolio.... 46,727,645 37,687,328 -- -- Small Cap Equity Portfolio........ 71,494,223 95,269,342 -- --
HSBC INVESTOR PORTFOLIOS 70 - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED) 5. FEDERAL INCOME TAX INFORMATION: As of April 30, 2006, the cost, gross unrealized appreciation and gross unrealized depreciation on securities, for federal income tax purposes, were as follows:
NET UNREALIZED TAX UNREALIZED TAX UNREALIZED APPRECIATION PORTFOLIO NAME TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) -------------- -------- ------------ ------------ -------------- Intermediate Duration Fixed Income Portfolio.............. $ 23,555,072 $ 17,465 $ (363,987) $ (346,522) Core Plus Fixed Income Portfolio..................... 120,194,657 165,198 (1,911,762) (1,746,564) High Yield Fixed Income Portfolio..................... 10,831,581 191,438 (35,181) 156,257 Growth Portfolio................ 50,665,009 8,014,230 (863,821) 7,150,409 Value Portfolio................. 49,869,239 13,159,409 (1,359,011) 11,800,398 International Equity Portfolio..................... 213,186,293 92,595,218 (1,828,218) 90,767,000 Small Cap Equity Portfolio...... 187,367,893 60,814,195 (2,926,626) 57,887,569
71 HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- HSBC INVESTOR PORTFOLIOS - -------------------------------------------------------------------------------- INVESTMENT ADVISER CONTRACT APPROVAL -- APRIL 30, 2006 (UNAUDITED) The Board of Trustees (the 'Board of Trustees') of the HSBC Investor Trust, HSBC Advisor Trust and HSBC Portfolio Trust (collectively, the 'Trusts'), and the non-interested Trustees, voting separately, approved the renewal of the Investment Advisory Contracts and, where applicable Sub-Advisory Contracts, with respect to the respective series of the Trusts then existing (collectively, the 'Existing Funds') at an in-person meeting held on December 12, 2005. For the HSBC Investor High Yield Fixed Income Fund and HSBC Investor High Yield Fixed Income Portfolio (the 'High Yield Funds') the Board of Trustees reviewed and approved the initial investment advisory agreement on June 13, 2005 (the Existing Funds and High Yield Funds are collectively referred to as the 'Funds' and the Investment Advisory Contracts and Sub-Advisory Contracts are collectively referred to as the 'Agreements'). In determining whether it was appropriate to approve the Agreements for the Funds, the Board of Trustees requested information from the Adviser and the various Sub-Advisers that it believed to be reasonably necessary to reach its conclusion. The Board of Trustees carefully evaluated this information, and was advised by independent legal counsel with respect to its deliberations. Based on its review of the information requested and provided for each Fund, the Board of Trustees determined that the relevant Agreement is consistent with the best interests of the Funds and their shareholders, and enables the Funds to receive high quality services at a cost that is appropriate and reasonable. The Board of Trustees made these determinations on the basis of the following considerations, among others: - Nature, Extent, and Quality of Services Provided by Adviser and Sub-Advisers. The Board of Trustees considered the nature, quality and extent of the investment advisory services to be provided by the Adviser (and, as applicable to the Equity Funds, the sub-advisers), in light of the high quality services provided to the Funds, and each Fund's historic performance. In the case of the High Yield Funds, the Board of Trustees considered the historical performance and experience of the management team in managing other mutual funds having similar investment objectives. For the High Yield Funds and other Fixed Income Funds, the Board also considered the historical performance and experience of the management team in managing other accounts, and the reasonable expectation of achieving competitive performance for these Funds. The Board of Trustees also considered the general and administrative and marketing services provided to the Funds by the Adviser. With respect to the Equity Funds, the Board considered the capabilities and performance of the Adviser's Multimanager unit. The Board of Trustees also considered the sufficiency of the Adviser's capabilities and oversight for both internally managed Funds as well as the sub-advised Equity Funds. The Board of Trustees further considered the Adviser's and Sub-Advisers' ability to obtain best execution on portfolio transactions. - Investment Performance of the Funds, Adviser and Sub-Advisers. The Board of Trustees considered short-term and long-term investment performance of each Fund over various periods of time as compared to a peer group of comparable funds. The Board of Trustees also considered the Equity Funds' sub-adviser's historic performance managing accounts having similar investment objectives as the Fund. With respect to the High Yield Funds, the Trustees considered the various measurements of investment performance provided with respect to the high yield team, and the significant achievements by the team in its management of high-yield products. - Costs of Services and Profits Realized by the Adviser. The Board of Trustees considered the Adviser's overall profitability and costs and an analysis of the estimated profitability to the Adviser from its relationship with the Funds. The Board of Trustees considered that the advisory fees under the Agreements were within the range of those of similar funds, noting the high level of resource, expertise and experience that was provided to the Funds by the Adviser and Sub-Advisers. For the Equity Funds, the Board of Trustees concluded that the combined advisory fees payable to the Adviser and each of the Equity Fund's Sub-Advisers are fair and reasonable in light of the services to be provided, the anticipated costs of these services, the profitability of the Adviser's relationship with the Fund, and the comparability of the advisory fee to similar fees paid by comparable mutual funds. - Other Relevant Considerations. The Board of Trustees considered the Adviser's and Sub-Adviser's representations regarding staffing and capabilities to manage the Funds. The Board of Trustees also considered the overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of the Adviser and Sub-Advisers. 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 meetings (including a separate vote of the Independent Trustees present in person at the meeting) approved the Agreements. HSBC INVESTOR PORTFOLIOS 72 - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- APRIL 30, 2006 As a shareholder of the HSBC Investor Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases; redemption fees; and exchange fees; (2) ongoing costs, including management fees; distribution and/or shareholder servicing fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the HSBC Investor Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from November 1, 2005 through April 30, 2006. ACTUAL EXPENSES The table below provides information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled 'Expenses Paid During Period' to estimate the expenses you paid on your account during this period.
EXPENSE PAID BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 11/1/05 4/30/06 11/1/05-4/30/06 11/1/05-4/30/06 ------- ------- --------------- --------------- Intermediate Duration Fixed Income Portfolio $1,000.00 $1,008.80 $ 3.84 0.77% Core Plus Fixed Income Portfolio 1,000.00 1,008.80 3.14 0.63% High Yield Fixed Income Portfolio** 1,000.00 1,046.80 8.51 1.84% Growth Portfolio 1,000.00 1,083.20 3.56 0.69% Value Portfolio 1,000.00 1,135.80 3.81 0.72% International Equity Portfolio 1,000.00 1,281.20 4.86 0.86% Small Cap Equity Portfolio 1,000.00 1,210.60 4.99 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. ** Information shown reflects values using the expense ratios and rates of return for the period from November 18, 2005 to April 30, 2006. 73 HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- HSBC INVESTOR FAMILY OF FUNDS - -------------------------------------------------------------------------------- TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- APRIL 30, 2006 (CONTINUED) HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below provides information about hypothetical account values and hypothetical expenses based on each HSBC Investor Funds's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
EXPENSE PAID BEGINNING ENDING DURING EXPENSE RATIO ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD 11/1/05 4/30/06 11/1/05-4/30/06 11/1/05-4/30/06 ------- ------- --------------- --------------- Intermediate Duration Fixed Income Portfolio $1,000.00 $1,020.98 $ 3.86 0.77% Core Plus Fixed Income Portfolio 1,000.00 1,021.67 3.16 0.63% High Yield Fixed Income Portfolio** 1,000.00 1,015.62 9.25 1.84% Growth Portfolio 1,000.00 1,021.37 3.46 0.69% Value Portfolio 1,000.00 1,021.22 3.61 0.72% International Equity Portfolio 1,000.00 1,020.53 4.31 0.86% Small Cap Equity Portfolio 1,000.00 1,020.28 4.56 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. ** Information shown reflects values using the expense ratios for the period from November 18, 2005 to April 30, 2006 and has been annualized to reflect values for the period November 1, 2005 to April 30, 2006. HSBC INVESTOR FAMILY OF FUNDS 74 A description of the policies and procedures that the Funds use to determine how to vote proxies relating to the portfolio securities is available without charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on the Fund's website at www.investorfunds.us.hsbc.com and the Securities and Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting record for the most recent 12 month period ending June 30 is available at the Security and Exchange Commission's website at http://www.sec.gov. Schedules of Portfolio Investments for fiscal quarters ending January 31 and July 31 will be available no later than 60 days after each period end, without charge, on the Fund's website at www.investorfunds.us.hsbc.com and on the Securities and Exchange Commission's website at http://www.sec.gov. 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, LLC 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 Intermediate Duration Fixed Income Portfolio HSBC Investor Core Plus Fixed Income Portfolio HSBC Investor Growth Portfolio HSBC Investor Value Portfolio HSBC Investor Small Cap Equity Portfolio HSBC Bank USA, N.A. 452 Fifth Avenue New York, NY 10018 HSBC Investor High Yield Fixed Income Fund HSBC Investor International Equity Portfolio Investors Bank & Trust Company 200 Clarendon Street -D 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-001 6/06 Item 2. Code of Ethics. Not applicable - only for annual reports. Item 3. Audit Committee Financial Expert. Not applicable - only for annual reports. Item 4. Principal Accountant Fees and Services. Not applicable - only for annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. Controls and Procedures. (a)The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b)There were no changes in the registrant's internal control over financial reporting (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 have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable - Only effective for annual reports. (a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) are furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) HSBC INVESTOR PORTFOLIOS -------------------------------------------------------------------- By (Signature and Title)* /s/ Richard A. Fabietti ------------------------------------------------------ Richard A. Fabietti President Date__July 7, 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___July 7, 2006_________________________________ By (Signature and Title)* /s/ Troy A. Sheets ------------------------------------------------------ Troy A. Sheets Treasurer Date___July 7, 2006_________________________________ * Print the name and title of each signing officer under his or her signature. STATEMENT OF DIFFERENCES The trademark symbol shall be expressed as.............................. 'TM' The registered trademark symbol shall be expressed as................... 'r' The dagger symbol shall be expressed as................................. 'D' The section symbol shall be expressed as................................ 'SS' EX-99.CERT 2 ex99-cert.txt EXHIBIT 12(A)(2) CERTIFICATIONS - -------------- I, Richard A. Fabietti, certify that: 1. I have reviewed this report on Form N-CSR of HSBC Investor Portfolios (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. July 7, 2006 /s/ Richard A. Fabietti - -------------- ------------------------------------------- Date Richard A. Fabietti President CERTIFICATIONS - -------------- I, Troy A. Sheets, certify that: 1. I have reviewed this report on Form N-CSR of HSBC Investor Portfolios (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. July 7, 2006 /s/ Troy A. Sheets - ------------- ------------------- Date Troy A. Sheets Treasurer EX-99.906CERT 3 ex99-906.txt EXHIBIT 12(B) This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 'SS' 1350, and accompanies the report on Form N-CSR for the period ended April 30, 2006 of HSBC Investor Portfolios (the "Registrant"). Each of the undersigned, being the Principal Executive Officer and Principal Financial Officer of the Registrant, hereby certifies that, to such officer's knowledge,: 1. the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and 2. the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. July 7, 2006 - ------------- Date /s/ Richard A. Fabietti -------------------------------------------- Richard A. Fabietti President /s/ Troy A. Sheets -------------------------------------------- Troy A. Sheets Treasurer This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----