UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07583
HSBC ADVISOR FUNDS TRUST
(Exact name of registrant as specified in charter)
452 FIFTH AVENUE
NEW YORK, NY 10018
(Address of principal executive offices) (Zip code)
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OH 43219
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-782-8183
Date of fiscal year end: October 31, 2005
Date of reporting period: October 31, 2005
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. 'SS' 3507.
Item 1. Reports to Stockholders.
Include a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1).
<Page>
Annual Report
[GRAPHIC] HSBC Investor
Family of Funds
October 31, 2005
HSBC INVESTOR LIMITED MATURITY FUND
HSBC INVESTOR FIXED INCOME FUND
HSBC INVESTOR BOND FUND
HSBC INVESTOR NEW YORK
TAX-FREE BOND FUND
HSBC INVESTOR GROWTH FUND
HSBC INVESTOR VALUE FUND
HSBC INVESTOR GROWTH AND INCOME FUND
HSBC INVESTOR MID-CAP FUND
HSBC INVESTOR INTERNATIONAL EQUITY FUND
HSBC INVESTOR OVERSEAS EQUITY FUND
HSBC INVESTOR SMALL CAP EQUITY FUND
HSBC INVESTOR OPPORTUNITY FUND
[HSBC LOGO]
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Table of Contents
HSBC Investor Family of Funds
Annual Report - October 31, 2005
Glossary of Terms
Chairmans Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Commentary From the Investment Manager . . . . . . . . . . . . . . . . . . . 2
Portfolio Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Schedules of Portfolio Investments
HSBC Investor New York Tax-Free Bond Fund. . . . . . . . . . . . . . . . ..24
HSBC Investor Growth and Income Fund . . . . . . . . . . . . . . . . . . . 27
HSBC Investor Mid-Cap Fund . . . . . . . . . . . . . . . . . . . . . . . . 28
Statements of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . 30
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . .34
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .58
Report of Independent Registered Public Accounting Firm . . . . . . . . . . .70
Investment Adviser Contract Approval . . . . . . . . . . . . . . . . . . . . 71
Table of Shareholder Expenses . . . . . . . . . . . . . . . . . . . . . . . .72
HSBC Investor Portfolios
Schedules of Portfolio Investments
HSBC Investor Limited Maturity Portfolio . . . . . . . . . . . . . . . . . 74
HSBC Investor Fixed Income Portfolio . . . . . . . . . . . . . . . . . . . 76
HSBC Investor Growth Portfolio . . . . . . . . . . . . . . . . . . . . . . 79
HSBC Investor Value Portfolio. . . . . . . . . . . . . . . . . . . . . . . 80
HSBC Investor International Equity Portfolio . . . . . . . . . . . . . . . 81
HSBC Investor Small Cap Equity Portfolio . . . . . . . . . . . . . . . . . 84
Statements of Assets and Liabilities . . . . . . . . . . . . . . . . . . . . 85
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . 87
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 91
Report of Independent Registered Public Accounting Firm . . . . . . . . . . 98
Investment Adviser Contract Approval . . . . . . . . . . . . . . . . . . . . 99
Table of Shareholder Expenses . . . . . . . . . . . . . . . . . . . . . . . 100
Board of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Privacy Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
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Glossary of Terms
Consumer Price Index ("CPI") A measure of price changes in consumer goods and
services such as gasoline, food, and automobiles. Sometimes referred to as
headline inflation.
Gross Domestic Product (GDP) is the measure of the market value of the goods and
services produced by labor and property in the United States.
Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the investment-grade debt issues with at least one year to
final maturity.
Lehman Brothers Intermediate Aggregate Bond Index is an unmanaged index
generally representative of investment-grade issues with maturities between
three and ten years.
Lehman Brothers New York Tax Exempt Index is an unmanaged index composed of
investment grade New York tax-exempt securities, all having a $50 million
minimum maturity value.
Lipper General Bond Funds Average is comprised of managed funds that do not have
quality or maturity restrictions. The Funds primary goal is to keep the bulk of
the portfolios assets in corporate and government debt issues.
Lipper Intermediate Investment-Grade Debt Funds Average is an average of managed
funds that invest at least 65% of their assets in investment-grade debt issues
(rated in the top four grades) with dollar-weighted average maturities of five
to ten years.
Lipper International Large-Cap Core Average consists of funds that, by portfolio
practice, invest at least 75% of their equity assets in companies strictly
outside of the U.S. with market capitalizations (on a three-year weighted basis)
greater than the 250th largest company in the S&P/Citigroup World ex-U.S. Broad
Market Index.
Lipper Large-Cap Core Funds Average is comprised of managed funds that, by
portfolio practice, invest at least 75% of their equity assets in companies with
market capitalizations (on a three-year weighted basis) greater than 300% of the
dollar-weighted median market capitalization of the Standard & Poors Mid-Cap 400
Index.
Lipper Large-Cap Growth Funds Average Funds that, by portfolio practice, invest
at least 75% of their equity assets in companies with market capitalizations (on
a three-year weighted basis) greater than 300% of the dollar-weighted median
market capitalization of the middle 1,000 securities of the S&P SuperComposite
1500 Index. Large-cap growth funds typically have an above-average
price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share
growth value, compared to the S&P 500 Index.
Lipper Mid-Cap Growth Funds Average is comprised of managed funds that, by
portfolio practice, invest at least 75% of their equity assets in companies with
market capitalizations (on a three-year weighted basis) of less than 300% of the
dollar-weighted median market capitalization of the Standard & Poor's Mid-Cap
400 Index.
Lipper Multi-Cap Value Funds Average is comprised of managed funds that, by
portfolio practice, invest in a variety of market capitalization ranges, without
concentrating 75% of their equity assets in any one market capitalization range
over an extended period of time. Multi-Cap funds will generally have between 25%
to 75% of their assets invested in companies with market capitalizations (on a
three-year weighted basis) above 300% of the dollar-weighted median market
capitalization of the S&P MidCap 400 Index. Multi-Cap Value funds seek long-term
growth of capital by investing in companies that are considered to be
undervalued relative to a major unmanaged stock index based on price-to-current
earnings, book value, asset value, or other factors. These funds will normally
have a below-average price-to-earnings ratio, price-to-book ratio, and
three-year earnings growth figure, compared to the U S diversified multi-cap
funds universe average.
Lipper New York Municipal Debt Funds Average is an average of managed funds that
invest at least 65% of their assets in municipal debt issues that are exempt
from taxation in New York or a city in New York.
Morgan Stanley Capital International Europe, Australasia and Far East ("MSCI
EAFE") Index is an unmanaged index that measures performance of a diverse range
of developed countries in the indicated regions.
Producer Price Index ("PPI") A family of indexes that measures the average
change over time in selling prices received by domestic producers of goods and
services. PPIs measure price change from the perspective of the seller.
The Russell Universe - In 1984, Russell created the Russell family of stock
indices as part of a more accurate and comprehensive system for evaluating the
performance of investment managers. Russell now maintains 21 U.S. stock indices
and has launched similar broad-market and style indices in Canada and Japan.
Today, more than $214 billion is invested in funds modeling Russell's U.S.
indices, and more than $1 trillion in funds is benchmarked against the global
family of Russell indices.
Russell MidCap'r' Growth Index is an unmanaged index which measures the
performance of securities found in the Russell universe that fall in the
mid-range sector.
Russell 1000'r' Value Index is unmanaged index which measures the performance of
the 1,000 largest of the 3,000 largest U.S.-domiciled companies (based on total
market capitalization) with lower price-to-book ratios and lower forecasted
growth values.
Russell 2500'r' Growth Index is unmanaged index which represents the smallest
2500 securities found in the Russell universe with higher price-to-book and
higher forecasted growth values.
Standard & Poor's MidCap 400 Index ("S&P MidCap 400") is an unmanaged index
comprised of 400 domestic stocks chosen for market size (median market
capitalization of $676 million), liquidity and industry group representation.
Standard & Poor's 500 Index ("S&P 500") is an unmanaged index that measures the
performance of the stock market as a whole.
Lipper is an independent mutual fund performance monitor whose results are based
on total return and do not reflect a sales charge.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or expenses. Securities in
the Fund do not match those in the indexes and performance of the Fund will
differ. Investors cannot invest directly in an index, although they can invest
in the underlying funds or securities.
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Chairmans Message
Dear Fellow Shareholders:
You have probably read about a number of new and proposed rules that the
Securities and Exchange Commission has announced to enhance the corporate
governance structure of mutual funds. In my letter to you in the Funds most
recent Semi-Annual Report, I noted that the Board of Trustees was committed to
following the recommendations of the SEC and to work on its own to operate in a
manner that is most beneficial to you, the shareholders.
The HSBC Investor Funds instituted a number of sound governance practices even
before the SEC made them rules. For example, the SEC is currently considering a
requirement that the chairman of a mutual fund board be an independent person,
with no significant ties to fund management. Our funds were among the first in
the industry to create the position of independent chairman, and we are
determined to maintain much more than a majority of independent trustees.
The SEC requirement regarding the minimum number of independent trustees is 40%.
Current regulations stipulate that independent trustees must hold at least a
majority of board positions. Our board consists of five independent members
(84%) and one interested trustee, who is the CEO of HSBC Investments (USA) Inc.
The independent trustees also lead and work on various board committees,
including audit, nominating/governance and valuation.
The full board meets at least quarterly to receive reports from fund management
on topics such as investment performance, administrative activities and
government regulations. At these sessions, the board meets with the various
sub-advisers to the HSBC Investor Funds to review their investment operations
and results. We work closely with fund counsel and our own independent legal
counsel to ensure that the funds continue to comply with all regulatory
requirements, including any new rules promulgated by the SEC. Between board
meetings, ongoing communication among board members and with management helps us
fulfill our responsibilities to oversee the operations of the funds.
All of us who are involved in the management of the HSBC Investor Funds welcome
communication with you as well. We will keep you informed about industry trends
and our commitment to best practices. If you have any concerns, please contact
us at:
HSBC Investor Funds
PO Box 182845
Columbus, Ohio 43218-2845
On behalf of the Board of Trustees and fund management, I would like to thank
you for your continuing support.
Sincerely,
Larry M. Robbins
Larry M. Robbins, Chairman, HSBC Investor Funds
1 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Commentary From the Investment Manager
HSBC Investments (USA) Inc.
U.S. Economic Review
The U.S. economy generated healthy growth during the 12-month period ended
October 31, 2005, despite a number of negative influences. Strong business and
consumer spending helped the economy expand in the face of headwinds that
included rising interest rates, surging energy prices and the devastation
wrought by hurricanes on the Gulf Coast.
Energy prices climbed dramatically throughout much of the period, as production
capacity did not keep pace with demand from growing economies in China, India
and much of the rest of the world. Meanwhile, concerns about instability in the
Middle East and other oil-producing regions led commodities traders to bid up
oil prices. Hurricanes Katrina and Rita in late August and early September
decimated much of the United States oil refining capacity, resulting in a
spike in gasoline prices.
Higher energy prices appeared to have a mildly negative impact on consumer
spending. That development seemed to dampen the economy, decreasing the
threat of inflation for a timebut data in the fall of 2005 suggested that high
energy prices finally had begun to translate into rising consumer prices.
The Federal Reserve Board (the "Fed") throughout this period was concerned that
economic growth and rising commodity and energy prices might lead to higher
inflation. The Fed therefore increased its target short-term interest rate seven
times for a total increase of 1.75 percentage points. (The Fed increased the
federal funds rate by another quarter-point on November 1, just after the end of
the period under discussion.) That tighter monetary policy was designed to
increase borrowing costs, thereby restraining economic growth and keeping
inflation in check.
Long-term interest rates remained low throughout much of the period, however.
Investors showed little concern about the prospect of higher inflation and
foreign investors poured money into Treasury bonds, which supported their prices
and put a ceiling on yields. Low long-term rates helped keep mortgage rates at
very low levels throughout most of this 12-month period. Inexpensive mortgages
buttressed consumer spending by allowing consumers to refinance their home loans
and free up cash. Low mortgage rates also supported strong growth in the housing
sector.
Business spending remained strong throughout the period. Corporations entered
this fiscal year with historically high levels of cash and low debt. Many
companies had waited to make significant investments until the presidential
election provided a less cloudy outlook on taxes and regulations. The elections
resolution freed those firms to invest in hiring, equipment and other
initiatives during this 12-month period. Corporate profit growth exceeded
analysts' expectations throughout this fiscal year. Many companies sought to
generate continued strong growth through mergers and acquisitions.
Market Review
Stocks experienced an up-and-down year. The market generated strong gains early
in the period, fell sharply in the spring of 2005, rallied during summer and
then declined again in early autumn. The Standard & Poor's 500 index gained
8.72% for the period as a whole.
Energy stocks produced much of the markets gains. Shares in that sector
benefited from higher energy prices, which expanded profit margins in the
sector and increased demand for energy-related products and services. Other
traditionally defensive sectors such as utilities and basic materials also fared
well.
Financial-services stocks struggled. The combination of rising short-term
interest rates and consistently low long-term interest rates led to a flatter
yield curve. The smaller spread between short- and long-term interest rates
crimped profits for many lenders, which make money by borrowing cash at
short-term rates and lending it at long-term rates.
Consumer-related stocks declined during the second half of the period, as
investors grew concerned that stagnant wages and higher energy prices would take
a toll on consumer spending. The health-care sector surged early in the period,
but subsequently was dragged down by ongoing problems among large pharmaceutical
stocks. Drug companies continued to struggle with slow revenue growth, patent
expirations, weak drug pipelines and high-profile legal problems. Technology
shares struggled early in the period, but staged a comeback toward the end of
the fiscal year as demand for technology appeared to pick up and advertising
revenues strengthened at Internet media stocks.
Value indices outperformed growth benchmarks, due to the strength of
value-oriented sectors such as energy and utilities and the weakness of growth
sectors including health care, consumer discretionary and-for much of the
period-technology. Smalland mid-cap shares continued a long run of superior
performance to large caps.
Foreign stocks generally outperformed the U.S. market. Foreign shares performed
especially well for U.S. investors early in the period, as the dollar declined
versus foreign currencies. Emerging markets significantly outperformed developed
markets on the strength of faster-than-expected economic growth.
HSBC INVESTOR FAMILY OF FUNDS 2
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Portfolio Reviews
HSBC Investor Limited Maturity Fund
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor Limited Maturity Fund (the "Fund") seeks to realize
above-average total return, consistent with reasonable risk, by investing in a
diversified investment grade portfolio of U.S. government obligations, corporate
bonds and mortgagebacked securities. The Fund utilizes a two tier structure,
commonly known as "master-feeder," in which the Fund invests all of its
investable assets in the HSBC Investor Limited Maturity Portfolio (the
"Portfolio").
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
The Fund returned 0.31% (without sales charge) for the Class A (Investor) Shares
and 0.45% for the Class Y Shares during the 12-month period ended October 31,
2005. That compared to a total return of 0.87% for Lehman Brothers Intermediate
Aggregate Bond Index.(4)
Past performance is no guarantee of future results.
The economy continued to expand at a slightly above trend pace. For the annual
period ending September 2005 Gross Domestic Product4 growth was 3.7%. The Fed
maintained a measured approach to raising the target rate by 25 basis points
(0.25%) at each meeting since the Feds first increase of the current cycle,
which began on June 30, 2004.
Yields on short maturity U.S. Treasury securities increased with the fed funds
rate. Yields on 2-year notes rose by 183 basis points (1.83%) whereas 10-year
notes rose by only 53 basis points (0.53%). Further, yields on the 30-year
yields actually fell by 4 basis points (0.04%). Changing investor expectations
about inflationary pressures and the level of economic activity caused
intra-period volatility. This was due to uncertainty about the impact of
Hurricane Katrina and the effects of higher energy prices. However, core
inflation remained relatively tame. As a result, the yield curve flattened by
179 basis points (1.79%) as measured by the yield differential between 2-year
and 30-year yields.
Despite strong performance through February, corporate bonds ended the period
with poor relative performance as yields among most corporate bonds widened. A
confluence of factors including disappointing operating performance within the
automotive sector and a greater focus on shareholder value by many companies led
investors to demand higher yield premiums. General Motors and Ford provided the
biggest drag on the corporate market as both companies announced disappointing
results and sustained reduced market share. The rise in corporate yield premiums
filtered through to other market sectors as investors realigned valuations
across sectors. In contrast spreads on agencies, asset backed securities and
commercial mortgage backed securities performed well as investor demand for high
quality assets drove yield spreads tighter versus Treasuries. In contrast,
mortgage pass-throughs underperformed due to poor market technicals.
Specifically a reduction in agency demand and an increase in supply due to
convexity related hedging drove spreads wider.
A defense duration, a "barbelled" yield curve strategy and a higher than
benchmark position in asset backed securities benefited the Funds absolute and
relative to benchmark total return over the annual period. However, price
declines from rise in yields and the widening yield premiums in certain
corporate bonds held in the Fund detracted from relative performance resulting
in an underperformance of the Fund in comparison to its benchmark index.*
Going forward we will continue to position the portfolio defensively. We believe
we have positioned the portfolio with a lower sensitivity to a change in
interest rates than that of the Funds benchmark. We also remain concerned about
the level yield premiums on corporate bonds and securitized debt. During this
time we feel it is important to remind our investors of the benefits of active
management. Current valuations allow us to construct a portfolio where, we
believe, the investor has less exposure to some of the risks in the current
market.
* Portfolio composition is subject to change.
3 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
HSBC Investor Limited Maturity Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Limited Maturity Lehman Brothers Intermediate
Fund Class Y Aggregate Bond Index
1/23/01 10,000 10,000
12/31/01 10,767 10,695
12/31/02 11,581 11,712
12/31/03 11,969 12,157
12/31/04 12,355 12,613
10/31/05 12,412 12,718
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Limited Lehman Brothers Intermediate
Maturity Fund Class A Aggregate Bond Index
(Investor)(2)
2/7/01 9,526 10,000
12/31/01 10,159 10,695
12/31/02 10,900 11,712
12/31/03 11,238 12,157
12/31/04 11,573 12,613
10/31/05 11,602 12,718
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Funds benchmark and
represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 3 Since
AS of October 31, 2005 Date Year Year Inception
- --------------------------------------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class A (Investor)(1) 2/7/01 -4.44 1.06 3.19
- --------------------------------------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class B(2) 2/15/01 -4.29 1.34 3.48
- --------------------------------------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class C(3) 2/13/01 -1.40 1.94 3.43
- --------------------------------------------------------------------------------------------------------------------------
HSBC Investor Limited Maturity Fund Class Y 1/23/01 0.45 2.93 4.63
- --------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Intermediate Aggregate Bond Index(4) -- 0.87 3.32 --
- --------------------------------------------------------------------------------------------------------------------------
Lipper Intermediate Investment-Grade Debt Funds Average(4) -- 0.82 3.90 --
- --------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 investors shares, when redeemed may be
worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Fund is measured against the Lehman Brothers Intermediate Aggregate Bond
Index, an unmanaged index generally representative of investment-grade issues
with maturities between three and ten years. The performance of the index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Funds performance reflects
the deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities.
During the period shown, the Investment Manager waived and/or voluntarily
reimbursed fees for various expenses. Had these waivers and/or reimbursements
not been in effect, performance quoted would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 4
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Portfolio Reviews
HSBC Investor Fixed Income Fund
HSBC Investor Bond Fund (Class A (Investor) Shares, B Shares and C Shares)
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor Fixed Income Fund and the HSBC Investor Bond Fund (the
"Funds") seek to provide investors with above-average total return, consistent
with reasonable risk, through investments in a diversified portfolio of
fixed-income securities. The Funds utilize a two-tier structure, commonly
known as a master-feeder, in which the Funds invest all of their investable
assets in the HSBC Investor Fixed Income Portfolio (the Portfolio).
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
For the 12-month period ended October 31, 2005, the shares of the HSBC Investor
Fixed Income Fund produced a 1.55% total return, and the Class A (Investor)
Shares of the HSBC Investor Bond Fund returned 1.16%, (Class A) (without sales
charge). That compared to a total return of 1.13% and 1.57% for the Lehman
Brothers Aggregate Bond Index(4) and the Lipper General Bond Funds Average(4),
respectively.
Past performance is no guarantee of future results.
The economy continued to expand at a slightly above trend pace. For the annual
period ending September 2005 the Gross Domestic Product4 growth was 3.7%. The
Fed maintained a measured approach to raising the target rate by 25 basis points
(0.25%) at each meeting since the Feds first increase of the current cycle,
which began on June 30, 2004.
Yields on short maturity U.S. Treasury securities increased with the fed funds
rate. Yields on 2-year notes rose by 183 basis points (1.83%) whereas 10-year
notes rose by only 53 basis points (0.53%). Further, yields on the 30-year
yields actually fell by 4 basis points (0.04%). Changing investor expectations
about inflationary pressures and the level of economic activity caused
intra-period volatility. This was due to uncertainty about the impact of
Hurricane Katrina and the effects of higher energy prices. However core
inflation remained relatively tame. As a result, the yield curve flattened by
179 basis points (1.79%) as measured by the yield differential between 2-year
and 30-year yields.
Despite strong performance through February, corporate bonds ended the period
with poor relative performance. A confluence of factors including disappointing
operating performance within the automotive sector and a greater focus on
shareholder value by many companies led investors to demand higher yield
premiums. General Motors and Ford provided the biggest drag on the corporate
market as both companies announced disappointing results and sustained reduced
market share. The rise in corporate yield premiums filtered through to other
market sectors as investors realigned valuations across sectors. In contrast
spreads on agencies, asset backed securities and commercial mortgage backed
securities performed well as investor demand for high quality assets drove yield
spreads tighter versus Treasuries. In contrast, mortgage pass-throughs
underperformed due to poor market technicals. Specifically a reduction in agency
demand and an increase in supply due to convexity related hedging drove spreads
wider.
A defense duration, a "barbelled" yield curve strategy and a lower than
benchmark position in mortgage pass-throughs benefited the Fund's absolute
and relative to benchmark total return over the annual period. Price declines
from rise in yields and the widening yield premiums in certain corporate bonds
held in the portfolio detracted from relative performance.*
* Portfolio composition is subject to change.
5 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
HSBC Investor Fixed Income Fund
HSBC Investor Bond Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Fixed Lehman Brothers Aggregate
Income Fund Bond Index
10/31/95 10,000 10,000
12/31/95 10,260 10,292
12/31/96 10,865 10,666
12/31/97 11,764 11,696
12/31/98 12,570 12,712
12/31/99 12,434 12,607
12/31/00 13,831 14,073
12/31/01 15,089 15,261
12/31/02 16,382 16,826
12/31/03 17,124 17,517
12/31/04 17,853 18,277
10/31/05 18,069 18,463
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Bond Fund Lehman Brothers Aggregate
Class A (Investor)(1) Bond Index
8/26/96 9,524 10,000
12/31/96 9,996 10,479
12/31/97 10,846 11,491
12/31/98 11,540 12,489
12/31/99 11,392 12,387
12/31/00 12,600 13,827
12/31/01 13,659 14,994
12/31/02 14,758 16,532
12/31/03 15,344 17,211
12/31/04 15,939 17,957
10/31/05 16,078 18,140
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Funds benchmark and
represents the reinvestment of dividends and capital gains in the Funds.
Average Annual Total Return (%)
Inception 1 5 10 Since
As of October 31, 2005 Date Year Year Year Inception
- --------------------------------------------------------------------------------------------------------
HSBC Investor Fixed Income Fund 1/9/95 1.55 6.26 6.09 6.95
- --------------------------------------------------------------------------------------------------------
HSBC Investor Bond Fund Class A (Investor)(1) 8/26/96 -3.66 4.73 -- 5.31
- --------------------------------------------------------------------------------------------------------
HSBC Investor Bond Fund Class B(2) 1/6/98 -3.39 4.96 -- 4.42
- --------------------------------------------------------------------------------------------------------
HSBC Investor Bond Fund Class C(3) 11/4/98 -0.47 4.97 -- 4.38
- --------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index -- 1.13 6.31 6.32 --
- --------------------------------------------------------------------------------------------------------
Lipper General Bond Funds Average(4) 1.57 5.53 6.30 --
- --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 investors shares, when redeemed
may be worth more or less than the original cost. To obtain performance
information current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Funds are measured against the Lehman Brothers Aggregate Bond Index is an
unmanaged market value-weighted performance benchmark for investment-grade
fixed-rate debt issues, including government, corporate, asset-backed, and
mortgage-backed securities, with maturities of at least one year. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees. The
Funds performance reflects the deduction of fees for these value-added services.
Investors cannot invest directly in an index, although they can invest in its
underlying securities. During the period shown, the Investment Manager waived
and/or voluntarily reimbursed fees for various expenses. Had these waivers
and/or reimbursements not been in effect, performance quoted would have been
lower
HSBC INVESTOR FAMILY OF FUNDS 6
<Page>
Portfolio Reviews
HSBC Investor New York Tax-Free Bond Fund (Class A (Investor) Shares,
B Shares, C Shares and Y Shares)
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor New York Tax-Free Bond Fund (the "Fund") seeks to provide
shareholders with income exempt from regular, federal, New York state and
New York city personal income taxes.
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
The Funds income may be subject to certain state and local taxes and, depending
on your tax status, the federal alternative minimum tax. Regional funds may be
subject to additional risks, since the issues they invest in are located in one
geographical location.
Market Commentary
The Fund delivered a total return of 1.03% (without sales charge) for Class A
(Investor) Shares and 1.28% for Class Y Shares for the period ended October 31,
2005. That compared to 2.33% and 2.19% for the Funds benchmarks, the Lehman
Brothers New York Tax Exempt Index4 and the Lipper New York Municipal Debt Funds
Average4, respectively.
The Fund underperformed its benchmark index due to its higher quality profile
than the index as well as expenses to the Fund. Over the period lower quality
paper and sectors such as tobacco significantly outperformed higher quality
sectors. In addition, one of the standout performers in the New York market was
New York City General Obligation debt which makes up approximately 15% of the
benchmark index. By Fund diversification rules the Fund attempts to maintain a
limit of 5% per issuer and as such was significantly underweight New York City
bonds.
Past performance does not guarantee future results.
Hurricanes Katrina, Rita and Wilma wreaked havoc from late August through
October on the Gulf Coast region, taking many lives and causing billions in
economic losses. It is still too early to fully assess the impact of the storms
on the national economy, but the shutdown of oil and natural gas refinery
facilities in the region has exacerbated already high-energy prices. As
companies pass along their higher energy expenses to consumers, consumer
spending could possibly be curtailed and economic growth dampened in the near
term. Katrina alone is expected to reduce Gross Domestic Product ("GDP")(4)
by 0.5% to 1.0% through the end of the year. The first estimate of GDP after
the storm came in at a strong 3.8%, exceeding the 3.6% median. Including energy
and food, the September Consumer Price Index(4) and Producer Price Index(4)
posted at 1.2% versus 0.9% and 1.9% versus 1.2% respectively. Although energy
prices have fallen back some from the post hurricane highs as production came
back on line, increasing global demand and limited refinery capacity will
continue to keep prices elevated. Spending for clean up and rebuilding the
affected areas will have a stimulus effect and give economic growth a boost.
Contrary to many predictions that the Fed would temporarily pause its tightening
policy, the fed funds target rate was hiked another 25 basis points (0.25%) to
3.75% following the Feds September 20, 2005 meeting. In the Federal Open Market
Committee meeting minutes, the committee deemed the effects of Katrina on growth
as temporary and was more concerned that the effects were likely to add to
already considerable pressure on prices. The committee concluded that core
inflation has been relatively low, and longer-term inflation expectations remain
contained. In closing, the committee stated that policy accommodation can be
removed at a pace that is likely to be measured. With core inflation on the high
side of their 2% ceiling, the Fed is expected to be vigilant in keeping it from
going higher, especially with new incoming chairman Ben Bernanke looking to
demonstrate his inflation fighting credentials. We believe the Fed will continue
to hike interest rates at each subsequent meeting, and possibly conclude in the
first quarter of 2006.
The Fund maintained its strategy of keeping a short weighted average maturity.
With no incentive to extend maturities, the Funds allocation has been
concentrated in floating rate securities and two- to three-month tax exempt
commercial paper to benefit from a rising interest rate environment. At the end
of October 2005, the Funds weighted average maturity stood at 18 days, and
floating rate securities comprised approximately 80% of the Fund. Economic data
will be scrutinized over the next few months as the Fed winds down in its
campaign to raise interest rates. At that time, the Fund will look to extend
maturities and attempt to lock in higher yields*
* Portfolio composition is subject to change.
7 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
HSBC Investor New York Tax-Free Bond Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor N.Y. Tax-Free Lehman Brothers New York
Bond Fund Class Y Tax Exempt Index
7/1/96 10,000 10,000
12/31/96 10,411 10,520
12/31/97 11,385 11,555
12/31/98 12,118 12,350
12/31/99 11,744 12,099
12/31/00 13,016 13,552
12/31/01 13,546 14,208
12/31/02 14,798 15,581
12/31/03 15,492 16,407
12/31/04 16,003 17,112
10/31/05 16,181 17,454
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor N.Y. Tax-Free Lehman Brothers New York
Bond Fund Class A (Investor)(1) Tax Exempt Index
10/31/95 9,523 10,000
12/31/95 9,788 10,257
12/31/96 10,097 10,743
12/31/97 11,028 11,800
12/31/98 11,700 12,612
12/31/99 11,309 12,356
12/31/00 12,502 13,839
12/31/01 12,979 14,509
12/31/02 14,142 15,912
12/31/03 14,770 16,755
12/31/04 15,218 17,475
10/31/05 15,356 17,824
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Funds benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 5 10 Since
As of October 31, 2005 Date Year Year Year Inception
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class A (Investor)(1) 5/1/95 -3.73 3.86 4.38 4.79
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class B(2) 1/6/98 -3.63 4.10 -- 3.68
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class C(3) 11/4/98 -0.70 4.08 -- 3.31
- -----------------------------------------------------------------------------------------------------------------
HSBC Investor New York Tax-Free Bond Fund Class Y 7/1/96 1.28 5.14 -- 5.29
- -----------------------------------------------------------------------------------------------------------------
Lehman Brothers New York Tax Exempt Index(4) -- 2.33 5.90 5.82 --
- -----------------------------------------------------------------------------------------------------------------
Lipper New York Municipal Debt Funds Average(4) -- 2.19 5.28 5.02 --
- -----------------------------------------------------------------------------------------------------------------
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 investors shares, when redeemed may be
worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Fund is measured against the Lehman Brothers New York Tax Exempt Index, an
unmanaged index composed of investment grade New York tax-exempt securities, all
having a $50 million minimum maturity value. The performance of the index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Funds performance reflects
the deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities.
During the period shown, the Investment Manager waived and/or voluntarily
reimbursed fees for various expenses. Had these waivers and/or reimbursements
not been in effect, performance quoted would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 8
<Page>
Portfolio Reviews
HSBC Investor Growth Fund
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
by Philip J. Sanders, Senior Vice President/Portfolio Manager, CFA and
Dan P. Becker, Senior Vice President/Portfolio Manager, CFA
Waddell & Reed Investment Management Company
The HSBC Investor Growth Fund (the "Fund") seeks longterm 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 subadviser believes have the potential to generate superior levels of
long-term profitability and growth. The Fund utilizes a two tier structure,
commonly known as a master/feeder, and invests all of its assets in the HSBC
Investor Growth Portfolio (the Portfolio), which acts as the master fund. The
Portfolio employs Waddell & Reed Investment Management Company (Waddell & Reed)
as sub-adviser.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
The Fund returned 12.91% (without sales charge) for the Class A (Investor)
Shares and 13.17% for the Class Y Shares for the year ended October 31, 2005.
That compared to a 8.72% return for the S&P 500 Index and a 10.06% return for
the Lipper Large-Cap Growth Funds Average(4).
Past performance does not guarantee future results.
Large-cap growth stocks generated roughly flat returns during the first half of
this fiscal year, then produced solid gains during the periods second half. That
environment contributed to healthy absolute returns for the Fund.
Energy stocks led the market during this period, supported by large increases in
oil and gas prices. The Fund's sub-adviser held an overweight allocation to
energy, so the sectors surge boosted performance relative to the benchmark. The
sub-adviser also over-weighted financial-services stocks. That strategy helped
relative gains, as did strong stock selection in the financial sector. The
Fund's managers de-emphasized interest-rate sensitive bank stocks in favor of
shares in the capital-markets, student loan and asset management industries.*
Stock selection in the technology sector also boosted returns against the
benchmark. The Funds managers focused on shares of firms that they believed
could generate reliable earnings growth, and such stocks posted solid gains
during the second half of the period.*
The Funds holdings in the consumer discretionary sector weighed on relative
returns. The sub-adviser invested in shares of consumer-oriented firms with
strong franchises, but investor concerns about potential weakness in consumer
spending led to losses for many of those stocks. The Funds overweight position
in health care stocks also hurt returns against the index, despite good stock
selection in the sector.*
* Portfolio composition is subject to change.
9 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
HSBC Investor Growth Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Growth Fund Standard & Poor's
Class Y 500 Index
5/10/04 10,000 10,000
12/31/04 10,629 11,077
10/31/05 11,326 11,193
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Growth Fund Standard & Poor's
Class A (Investor)(1) 500 Index
5/10/04 9,500 10,000
12/31/04 10,085 11,077
10/31/05 10,727 11,193
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Funds benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 Since
As of October 31, 2005 Date Year Inception
- -----------------------------------------------------------------------------------
HSBC Investor Growth Fund Class A (Investor)(1) 5/10/04 7.27 4.87
- -----------------------------------------------------------------------------------
HSBC Investor Growth Fund Class B(2) 5/10/04 8.06 5.74
- -----------------------------------------------------------------------------------
HSBC Investor Growth Fund Class C(3) 5/10/04 11.08 7.73
- -----------------------------------------------------------------------------------
HSBC Investor Growth Fund Class Y 5/10/04 13.17 8.80
- -----------------------------------------------------------------------------------
Standard & Poor's 500 Index(4) -- 8.72 N/A
- -----------------------------------------------------------------------------------
Lipper Large-Cap Growth Funds Average(4) -- 10.06 N/A
- -----------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investors shares, when redeemed may be
worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Fund is measured against the Standard & Poors 500 Index, an unmanaged index
that is generally representative of the U.S. stock market as a whole. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees. The
Funds performance reflects the deduction of fees for these value-added services.
Investors cannot invest directly in an index, although they can invest in its
underlying securities. During the period shown, the Investment Manager waived
and/or voluntarily reimbursed fees for various expenses. Had these waivers
and/or reimbursements not been in effect, performance quoted would have been
lower.
HSBC INVESTOR FAMILY OF FUNDS 10
<Page>
Portfolio Reviews
HSBC Investor Value Fund
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
by Jon D. Bosse, CFA
Chief Investment Officer
NWQ Investment Management Co., LLC
The HSBC Investor Value Fund (the "Fund") seeks long-term growth of capital and
income by investing primarily in U.S. and foreign companies with large and
medium capitalizations that possess hidden opportunities underpriced by the
market. The Fund utilizes a two tier structure, commonly known as a master/
feeder and invests all of its assets in the HSBC Investor Value Portfolio (the
"Portfolio"), which acts as the master fund. The Portfolio employs NWQ
Investment Management Company, LLC ("NWQ") as sub-adviser.
Investment Concerns
Value-based investments are subject to the risk that the broad market may not
recognize their intrinsic value.
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the Portfolio changes.
Market Commentary
The Fund returned 14.69% (without sales charge) for the Class A (Investor)
Shares and 14.96% for the Class Y Shares for the year ended October 31, 2005.
That compared to a 11.86% return for the Russell 1000'r' Value Index(4) and a
11.02% return for the Lipper Multi-Cap Value Funds Average(4).
Past performance does not guarantee future results.
The stock market generated healthy returns during this period. Energy shares led
the equity market, as investors bid them up on the strength of rising oil and
gas prices. That environment and strong performance from several individual
holdings helped this Fund generate strong absolute and relative gains.
Security selection was the largest contributor to the Funds superior relative
performance. The strong performance of individual stocks in the insurance,
technology, retail and business services sectors contributed to the Funds
absolute and positive relative returns. The Funds sub-adviser held an
underweight stake in the market-leading energy sector, but the negative impact
of that positioning was more than offset by a relative overweighting in the
other energy sub-sector, which includes oil and gas exploration and production
companies. That part of the energy market significantly outperformed the energy
sector as a whole, and boosted the Funds relative gains.*
Overweighting the Funds allocation to media and publishing stocks weighed on
relative performance, as weak advertising revenues pressured this group. An
underweighted position in the financial sector helped relative returns.
Financial stocks generally were weak during the period, primarily due to the
flattening of the yield curve, which investors worried would reduce profit
margins for the sector. Financial stocks typically make up a substantial portion
of most value indices and benchmarks. Within financials, mortgage-related stocks
detracted from performance due to concerns of a potential slowdown in mortgage
refinancing activity.*
* Portfolio composition is subject to change.
11 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
- ------------------------------------------------------------------------------
HSBC Investor Value Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Value Fund Russell 1000'r'
Class Y Value Index
5/10/04 10,000 10,000
12/31/04 11,697 11,590
10/31/05 12,318 11,941
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Value Fund Russell 1000'r'
Class A (Investor)(1) Value Index
5/10/2004 9,501 10,000
12/31/2004 11,088 11,590
10/31/2005 11,646 11,941
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 Since
As of October 31, 2005 Date Year Inception
- ---------------------------------------------------------------------------------------
HSBC Investor Value Fund Class A (Investor)(1) 5/10/04 8.98 10.87
- ---------------------------------------------------------------------------------------
HSBC Investor Value Fund Class B(2) 5/10/04 9.78 12.04
- ---------------------------------------------------------------------------------------
HSBC Investor Value Fund Class C(3) 5/10/04 12.86 13.95
- ---------------------------------------------------------------------------------------
HSBC Investor Value Fund Class Y 5/10/04 14.96 15.16
- ---------------------------------------------------------------------------------------
Russell 1000'r' Value Index(4) -- 11.86 N/A
- ---------------------------------------------------------------------------------------
Lipper Multi-Cap Value Funds Average(4) -- 11.02 N/A
- ---------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Fund is measured against the Russell 1000'r' Value Index, an unmanaged
index comprised of the 1000 securities found in the Russell universe with a
less-than-average growth orientation. Companies in this index generally have
low price-to-book and price-to-earning ratios, higher dividend yields, and lower
forecasted growth values. The performance of the index does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance reflects the
deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities.
During the period shown, the Investment Manager waived and/or voluntarily
reimbursed fees for various expenses. Had these waivers and/or reimbursements
not been in effect, performance quoted would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 12
<Page>
Portfolio Reviews
- -------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund
(Class A (Investor) Shares, B Shares, C Shares and Y Shares)
by Gary U. Rolle, CFA, Principal/Chief Investment Officer and
Edward S. Han, Principal/Portfolio Manager and
Kirk J. Kim, Principal/Portfolio Manager and
Transamerica Investment Management, LLC
The HSBC Investor Growth and Income Fund ("the Fund") normally invests at least
65% of its total assets in common stocks, preferred stocks, and convertible
securities. The Fund may invest the balance of its assets in various types of
fixed income securities and in money market instruments. The Fund employs
Transamerica Investment Management, LLC ("TIM") as the sub-adviser to the Fund.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
The Fund returned 12.36% (without sales charge) for the Class A (Investor)
Shares and 12.61% for the Class Y Shares for the year ended October 31, 2005.
That compared to a 8.72% return for the Standard & Poor's 500 Index(4) and a
8.35% return for the Lipper Large-Cap Core Funds Average(4).
Past performance does not guarantee future results.
The stock market generated healthy gains, driven largely by a rally in energy
stocks. The Funds strong absolute gain also benefited from good performance
among shares in the consumer discretionary, health care and industrials
sectors.*
TIM employs a bottom-up investment approach to identify attractively valued
shares of firms that generate strong free cash flow and have high-quality
management, good business plans and sound execution.
Strong sector allocations and stock selection helped this Fund outperform its
benchmark during the period. The Fund's managers held significantly overweight
positions in consumer discretionary, energy and industrials stocks. Those
relatively large stakes boosted performance against the benchmark. Security
selection in those sectors also contributed to superior relative gains, as the
Fund's consumer discretionary, energy and industrials holdings outperformed the
corresponding sectors in the index.*
The Fund's technology holdings supported strong relative performance as well.
The managers maintained a technology allocation approximately neutral to that
of the benchmark, but the Fund benefited from large gains among particular
stocks in the storage, hardware, and networking industries. An underweight
position in financial services also helped improve relative returns, as
financial-services stocks trailed the benchmark.*
A handful of stock-specific problems prevented the Fund from generating greater
relative returns. For example, certain of the Funds holdings in the media,
medical devices, and computer hardware sectors generated weak results during
this period.
* Portfolio composition is subject to change.
13 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
- -------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Growth and Standard & Poor's 500
Income Fund Class Y Stock Index
4/2/01 10,000 10,000
12/31/01 9,598 9,997
12/31/02 7,180 7,788
12/31/03 9,091 10,021
12/31/04 9,784 11,111
10/31/05 10,219 11,228
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Growth and Standard & Poor's 500
Income Fund Class A Stock Index
(Investor)(1)
4/12/01 9,498 10,000
12/31/01 8,811 9,997
12/31/02 6,575 7,788
12/31/03 8,299 10,021
12/31/04 8,922 11,111
10/31/05 9,296 11,228
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 Since
As of October 31, 2005 Date Year Inception
- -------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class A (Investor)(1) 4/12/01 6.76 -1.59
- -------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class B(2) 4/5/01 7.61 -0.59
- -------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class C(3) 11/3/03 10.59 7.53
- -------------------------------------------------------------------------------------------------
HSBC Investor Growth and Income Fund Class Y 4/2/01 12.61 0.47
- -------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index(4) -- 8.72 N/A
- -------------------------------------------------------------------------------------------------
Lipper Large-Cap Core Funds Average(4) -- 8.35 N/A
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Fund is measured against the Standard & Poor's 500 Index, an unmanaged index
that is generally representative of the U.S. stock market as a whole. The
performance of the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees.
The Fund's performance reflects the deduction of fees for these value-added
services. Investors cannot invest directly in an index, although they can
invest in its underlying securities. During the period shown, the Investment
Manager waived and/or voluntarily reimbursed fees for various expenses. Had
these waivers and/or reimbursements not been in effect, performance quoted
would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 14
<Page>
Portfolio Reviews
- ------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund
(Class A Shares, B Shares, C Shares and Trust Shares)
by Tony V. Dong, CFA, Director, Mid-Cap Equity and Senior Portfolio Manager and
Brian S. Matuszak, CFA, Senior Equity Analyst and
Andy Mui, CPA, Senior Equity Analyst
Munder Capital Management
The HSBC Investor Mid-Cap Fund (the "Fund") seeks to achieve its objective by
investing in common or preferred stocks and convertible securities. The Fund
will normally invest at least 80% of its assets in equity securities of
mid-sized companies with market capitalizations falling within the range of the
S&P MidCap 400 Index (between $270 million and $8.6 billion as of March 31,
2005) at the time of acquisition. Investments are primarily in domestic common
stocks but also may include, to a limited degree, preferred stocks, and
convertible securities.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Mid capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
Market Commentary
The Fund's Class A Shares posted a return of 16.94% (without sales charge) and
17.14% for the Trust Shares for the 12-months ended October 31, 2005. That
compares to 17.65%, 15.91% and 14.07% for the Fund's benchmarks, the S&P MidCap
400 Index, the Russell MidCap'r' Growth Index(4), and the Lipper Mid-Cap Growth
Funds Average(4).
Past performance does not guarantee future results.
Medium-sized stocks performed well during this period, powered by a surge in
energy stocks. That environment helped this Fund post healthy gains.
Since assuming management of the Fund on April 18, 2005, Munder's portfolio
management team has restructured the portfolio to correspond with the firm's
investment style and philosophy. Munder employs a "bottom-up" stock-selection
strategy, seeking reasonably valued stocks of firms with high returns on
invested capital, superior earnings growth, and strong free cash flow.*
The manager's strategy produced strong stock selection during this period. The
Fund's holdings in eight of the ten economic sectors outperformed the
corresponding sectors in the benchmark during the period under Munders
management.*
Stock selection in the basic materials sector generated the largest positive
contribution to the Fund's relative returns during that period. The Fund's
materials holdings gained an average of 38.3% between August 15 and October 31,
fueled by strong performance among certain copper and aggregate producers. By
contrast, the basic material stocks in the benchmark returned 4.9%. The 20.9%
average gain of the Fund's utilities stocks during the same period also boosted
performance against the index, as the utility shares in the index returned
10.3%.*
The Fund's technology stake hurt relative performance. Losses sustained by one
Internet stock in the Fund's portfolio accounted for much of the performance
lag. The Fund also held relatively small exposures to strong-performing stocks
in the computer storage, peripherals and electronic manufacturing services
industries, because those stocks did not offer the earnings and cash-flow
growth that the managers seek.*
* Portfolio composition is subject to change.
15 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
- -------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Mid-Cap Fund HSBC Investor Mid-Cap Standard & Poor's MidCap Russell MidCap'r'
Class A(1) Fund Trust 400 Index Growth Index
10/31/95 9,500 10,000 10,000 10,000
12/31/95 9,921 10,448 10,453 10,411
12/31/96 11,553 12,213 12,279 12,410
12/31/97 15,105 15,994 15,047 16,412
12/31/98 16,500 17,507 17,735 19,549
12/31/99 22,789 24,230 26,832 22,427
12/31/00 25,270 26,927 23,680 26,353
12/31/01 22,893 24,424 18,908 26,194
12/31/02 16,669 17,828 13,726 22,393
12/31/03 21,958 23,543 19,589 30,369
12/31/04 25,030 26,898 22,621 35,375
10/31/05 26,366 28,377 23,792 37,701
The chart above represents a comparison of a hypothetical $10,000 investment in
the indicated share class versus a similar investment in the Fund's benchmark,
and represents the reinvestment of dividends and capital gains in the Fund.
Average Annual Total Return (%)
Inception 1 5 10 Since
As of October 31, 2005 Date'D' Year Year Year Inception
- -------------------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class A(1) 7/1/93 11.15 -1.12 10.18 10.51
- -------------------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class B(2) 7/1/93 12.18 -0.88 9.91 10.15
- -------------------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Class C(3) 7/1/93 15.06 -0.76 9.98 10.21
- -------------------------------------------------------------------------------------------------
HSBC Investor Mid-Cap Fund Trust 7/1/93 17.14 0.10 10.99 11.25
- -------------------------------------------------------------------------------------------------
Standard & Poor's MidCap 400 Index(4) -- 17.65 7.32 14.19 N/A
- -------------------------------------------------------------------------------------------------
Russell MidCap'r' Growth Index(4) -- 15.91 -3.71 9.05 N/A
- -------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth Funds Average(4) -- 14.07 -3.89 7.72 N/A
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
'D' For periods prior to July 1, 2000, the performance shown above includes the
total return (adjusted for Fund expenses) generate by HSBC Investments (USA)
Inc's management of a pooled investment vehicle called a collective investment
trust (CTF) with the same investment objective as the Fund. The assets from that
CTF were converted into the HSBC Investor Mid-Cap Fund on July 1, 2000. The CTF
was not registered with the Securities & Exchange Commission (SEC) and thus was
not subject to certain investment restrictions that are imposed on the Fund. If
the CTF had been registered with the SEC, its performance might have been
adversely affected. Performance assumes reinvestment of dividends and
distributions.
The Fund has changed its standardized benchmark from the Russell MidCap'r'
Growth Index to the Standard & Poor's MidCap 400 Index ("S&P MidCap 400") to
provide a more appropriate market comparison. The S&P MidCap 400 Index is
comprised of 400 domestic stocks chosen for market size (median market
capitalization of $676 million), liquidity and industry group representation.
The Russell MidCap'r' Growth Index tracks the performance of those Russell
securities in the Russell Universe(4) with higher price-to-book ratios and
higher forecasted growth values. The performance of the indices does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Funds performance reflects
the deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities.
During the period shown, the Investment Manager waived and/or voluntarily
reimbursed fees for various expenses. Had these waivers and/or reimbursements
not been in effect, performance quoted would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 16
<Page>
Portfolio Reviews
- -------------------------------------------------------------------------------
HSBC Investor International Equity Fund
HSBC Investor Overseas Equity Fund (Class A (Investor) Shares,
B Shares and C Shares)
by Kevin F. Simms
Co-CIO International Value Equities and Director of
Research Global and International Value Equities AllianceBernstein
Investment Research and Management
The HSBC Investor International Equity Fund and the HSBC Investor Overseas
Equity Fund (the "Funds") seek to provide their shareholders with long-term
growth of capital and future income by investing primarily in securities of
non-U.S. issuers and securities of issuers whose principal markets are outside
of the United States. The Funds employ a two-tier fund structure, known as
"master-feeder", in which the Funds invest all of their investable assets
in the HSBC Investor International Equity Portfolio (the "Portfolio").
The Portfolio employs 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
For the 12-months ended October 31, 2005, the shares of the HSBC Investor
International Equity Fund produced a 19.69% return and the Class A (Investor)
Shares of the HSBC Investor Overseas Equity Fund returned 18.64% (without sales
charge). That compared to a total return of 18.09% and 16.80% for the Funds'
benchmarks, the MSCI EAFE Index(4) and the Lipper International Large-Cap Core
Funds Average(4).
Past performance does not guarantee future results.
Stronger-than-expected economic and earnings growth helped foreign markets post
good returns during this period. That environment contributed to strong gains
for the Fund.
The Fund generated returns superior to its benchmark in part because of its
overweight position in shares of industrial commodities firms. Such stocks
benefited from the unexpected strength of the global economy, which investors
believed would contribute to greater demand for basic commodities such as steel
and coal. An overweight position in Japanese and Korean financial-services
stocks also boosted relative returns, as solid economic growth in Asia led
investors to expect higher profits for such firms.*
The Fund's returns against the benchmark also benefited from a relatively large
stake in emerging markets. Developing markets tend to perform well during
periods of strong economic growth, so better-than-expected economic data during
this period contributed to significant gains.*
The Fund's return advantage over the benchmark was diminished by relatively
large weightings in certain aluminum and paper stocks, which suffered from
unexpectedly strong capacity in those industries. Likewise, the Fund held
relatively large positions in certain consumer stocks that fared poorly due to
company-specific issues.*
* Portfolio composition is subject to change.
17 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
- -------------------------------------------------------------------------------
HSBC Investor International Equity Fund
HSBC Investor Overseas Equity Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor International MSCI EAFE Index
Equity Fund
10/31/95 10,000 10,000
12/31/95 10,390 10,692
12/31/96 11,956 11,339
12/31/97 13,117 11,541
12/31/98 14,748 13,848
12/31/99 25,222 17,582
12/31/00 20,267 15,091
12/31/01 16,725 11,855
12/31/02 13,653 9,966
12/31/03 17,662 13,811
12/31/04 21,851 16,607
10/31/05 23,484 17,587
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Overseas Equity MSCI EAFE Index
Fund Class A (Investor)(1)
8/26/96 9,497 10,000
12/31/96 10,132 10,429
12/31/97 10,932 10,614
12/31/98 12,087 12,737
12/31/99 20,392 16,171
12/31/00 16,276 13,880
12/31/01 13,339 10,904
12/31/02 11,013 9,166
12/31/03 14,138 12,703
12/31/04 17,375 15,274
10/31/05 18,541 16,175
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Average Annual Total Return
Inception 1 5 10 Since
As of October 31, 2005 Date Year Year Year Inception
- -----------------------------------------------------------------------------------------------------------
HSBC Investor International Equity Fund 1/9/95 19.69 2.37 8.91 9.02
HSBC Investor Overseas Equity Fund Class A (Investor)(1) 8/26/96 12.74 0.95 -- 6.96
HSBC Investor Overseas Equity Fund Class B(2) 1/6/98 13.72 1.21 -- 6.24
HSBC Investor Overseas Equity Fund Class C(3) 11/4/98 16.70 1.21 -- 6.35
MSCI EAFE Index(4) -- 18.09 3.04 5.81 N/A
Lipper International Large-Cap Core Average(4) -- 16.80 0.56 5.72 N/A
- -------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investors shares, when redeemed may be
worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Funds are measured against the Morgan Stanley Capital International (MSCI)
Europe, Australasia and Far East (EAFE) Index, which is an unmanaged index that
measures performance of a diverse range of developed countries in the indicated
regions. The performance of the index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund accounting
fees. The Funds' performance reflects the deduction of fees for these
value-added services. Investors cannot invest directly in an index, although
they can invest in its underlying securities. During the period shown, the
Investment Manager waived and/or voluntarily reimbursed fees for various
expenses. Had these waivers and/or reimbursements not been in effect,
performance quoted would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 18
<Page>
Portfolio Reviews
- -----------------------------------------------------------------------------
HSBC Investor Small Cap Equity Fund
HSBC Investor Opportunity Fund (Class A (Investor) Shares, B Shares
and C Shares)
by William A. Muggia
President-Chief Investment Officer
Westfield Capital Management
The HSBC Investor Small Cap Equity Fund and the HSBC Investor Opportunity Fund
("the Funds") seek to provide their shareholders with long-term growth of
capital by investing in equity securities of emerging small and medium-sized
companies expected to deliver earnings growth well above the growth rate of
the economy and the rate of inflation. The Funds employ a two-tier structure,
commonly referred to as "master-feeder". The Funds invest all of their
investable assets in the HSBC Investor Small Cap Equity Portfolio (the
"Portfolio"). The Portfolio employs Westfield Capital Management, LLC as
sub-investment adviser.
The Portfolio invests primarily in common stocks of small and medium-sized
companies that may have the potential to become major enterprises.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
Market Commentary
For the 12-months ended October 31, 2005, the shares of the HSBC Investor Small
Cap Equity Fund produced a 14.31% return and the Class A (Investor) Shares of
the HSBC Investor Opportunity Fund produced a 13.57% return (without sales
charge). The Funds' benchmarks, the Russell 2500'r' Growth Index(4) and the
Lipper Mid-Cap Growth Funds Average(4), returned 13.83% and 14.07%,
respectively.
Small-capitalization stocks produced solid gains, helping power this Funds
strong returns. Energy stocks led the small-cap market, while technology stocks
generated the benchmarks weakest returns.
This Fund's sub-adviser, Westfield Capital Management, generated positive
performance through a combination of successful sector allocation and strong
stock selection. The manager held an overweight position in energy stocks
throughout the period, which boosted relative returns as such stocks surged. The
manager trimmed the overweight position in recent months as many of the Fund's
energy stocks rose to levels in line with the managers price targets.
Selection among technology stocks had the second-largest positive impact on
relative gains. The technology stocks held by the Fund gained an average of more
than 15%, supported by strong performance among Internet, software and computer
services stocks. Meanwhile, the technology stocks represented in the benchmark
delivered average returns of 5.4%.*
Selection among consumer discretionary stocks weighed on relative returns.
Westfield Capital Management avoided richly valued shares of particular
retailers, so strong performance among those stocks hurt performance against the
benchmark. And disappointing performance by shares of some medical devices
manufacturers and specialty pharmaceutical firms caused the Fund's health care
allocation to lag that of the benchmark, despite strong gains by certain managed
care and biotechnology stocks.*
* Portfolio composition is subject to change.
19 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
- -------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Fund
HSBC Investor Opportunity Fund - As of October 31, 2005
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Small Cap Russell 2500'r'
Equity Fund Growth Index
9/3/96 10,000 10,000
12/31/96 10,864 10,629
12/31/97 13,336 12,197
12/31/98 15,127 12,575
12/31/99 22,418 19,552
12/31/00 23,547 16,406
12/31/01 23,240 14,629
12/31/02 15,539 10,373
12/31/03 21,618 15,177
12/31/04 24,196 17,391
10/31/05 25,511 17,716
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Opportunity Russell 2500'r'
Fund Class A (Investor)(1) Growth Index
9/23/96 9,497 10,000
12/31/96 9,501 10,093
12/31/97 11,578 11,583
12/31/98 13,080 11,942
12/31/99 19,238 18,567
12/31/00 20,062 15,579
12/31/01 19,670 13,892
12/31/02 13,108 9,850
12/31/03 18,068 14,412
12/31/04 20,130 16,515
10/31/05 21,119 16,823
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Average Annual Total Return (%)
Inception 1 5 Since
As of October 31, 2005 Date Year Year Inception
- ------------------------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Fund 9/3/96 14.31 0.33 10.77
- ------------------------------------------------------------------------------------------------
HSBC Investor Opportunity Fund Class A (Investor)(1) 9/23/96 7.93 -1.32 8.56
- ------------------------------------------------------------------------------------------------
HSBC Investor Opportunity Fund Class B(2) 1/6/98 8.73 -1.04 7.51
- ------------------------------------------------------------------------------------------------
HSBC Investor Opportunity Fund Class C(3) 11/4/98 11.70 -1.03 8.44
- ------------------------------------------------------------------------------------------------
Russell 2500'r' Growth Index(4) -- 13.83 -1.48 N/A
- ------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth Funds Average(4) -- 14.07 3.89 N/A
- ------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the contingent deferred sales charge maximum of 4.00%.
(3) Reflects the contingent deferred sales charge maximum of 1.00%.
(4) For additional information, please refer to the Glossary of Terms.
The Funds are measured against the Russell 2500'r' Growth Index, an unmanaged
index that tracks the performance of 2500 securities found in the Russell
Universe(4) with higher price-to-book and higher forecasted growth values. The
performance for the index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees.
The Funds' performance reflects the deduction of fees for these valueadded
services. Investors cannot invest directly in an index, although they can
invest in its underlying securities. During the period shown, the Investment
Manager waived and/or voluntarily reimbursed fees for various expenses. Had
these waivers and/or reimbursements not been in effect, performance quoted
would have been lower.
HSBC INVESTOR FAMILY OF FUNDS 20
<Page>
Portfolio Reviews
- ------------------------------------------------------------------------------
Portfolio Composition*
October 31, 2005
(Unaudited)
HSBC Investor Limited Maturity Portfolio
Investment Allocation Percentage of Investments at Value
==============================================================================
U.S. Government Agencies 34.1%
- ------------------------------------------------------------------------------
Corporate Bond 26.7%
- ------------------------------------------------------------------------------
U.S. Treasury Notes 14.6%
- ------------------------------------------------------------------------------
Asset Backed Securities 10.2%
- ------------------------------------------------------------------------------
Collateralized Mortgage Obligations 10.2%
- ------------------------------------------------------------------------------
Cash and Equivalents 2.3%
- ------------------------------------------------------------------------------
Repurchase Agreements 1.9%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
HSBC Investor Fixed Income Portfolio
Investment Allocation Percentage of Investments at Value
==============================================================================
U.S. Government Agencies 29.1%
- ------------------------------------------------------------------------------
Corporate Bond 28.8%
- ------------------------------------------------------------------------------
Collateralized Mortgage Obligations 14.8%
- ------------------------------------------------------------------------------
U.S. Treasury Securities 11.9%
- ------------------------------------------------------------------------------
Asset Backed Securities 8.2%
- ------------------------------------------------------------------------------
Repurchase Agreements 5.7%
- ------------------------------------------------------------------------------
Cash and Equivalents 0.8%
- ------------------------------------------------------------------------------
Municipal Bond 0.7%
- ------------------------------------------------------------------------------
Total 100.0%
===============================================================================
HSBC Investor New York Tax-Free Bond Fund
Investment Allocation Percentage of Investments at Value
==============================================================================
Municipal Bonds 90.3%
- ------------------------------------------------------------------------------
Variable Rate Notes 7.3%
- ------------------------------------------------------------------------------
Cash and Equivalents 2.4%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
HSBC Investor Growth Portfolio
Investment Allocation Percentage of Investments at Value
==============================================================================
Health Care 23.4%
- ------------------------------------------------------------------------------
Information Technology 22.4%
- ------------------------------------------------------------------------------
Financials 15.2%
- ------------------------------------------------------------------------------
Industrials 13.1%
- ------------------------------------------------------------------------------
Energy 8.6%
- ------------------------------------------------------------------------------
Consumer Discretionary 8.6%
- ------------------------------------------------------------------------------
Consumer Staples 6.5%
- ------------------------------------------------------------------------------
Cash and Equivalents 2.2%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
HSBC Investor Value Portfolio
Investment Allocation Percentage of Investments at Value
==============================================================================
Financials 28.4%
- ------------------------------------------------------------------------------
Information Technology 14.0%
- ------------------------------------------------------------------------------
Energy 12.8%
- ------------------------------------------------------------------------------
Industrials 12.7%
- ------------------------------------------------------------------------------
Materials 7.7%
- ------------------------------------------------------------------------------
Consumer Staples 7.4%
- ------------------------------------------------------------------------------
Consumer Discretionary 5.4%
- ------------------------------------------------------------------------------
Telecommunication Services 3.1%
- ------------------------------------------------------------------------------
Transportation 2.2%
- ------------------------------------------------------------------------------
Health Care 2.1%
- ------------------------------------------------------------------------------
Miscellaneous 2.0%
- ------------------------------------------------------------------------------
Utilities 1.6%
- ------------------------------------------------------------------------------
Cash and Equivalents 0.6%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
HSBC Investor Growth and Income Fund
Investment Allocation Percentage of Investments at Value
==============================================================================
Industrials 26.7%
- ------------------------------------------------------------------------------
Consumer Discretionary 16.0%
- ------------------------------------------------------------------------------
Information Technology 14.2%
- ------------------------------------------------------------------------------
Health Care 14.1%
- ------------------------------------------------------------------------------
Financials 12.9%
- ------------------------------------------------------------------------------
Energy 9.1%
- ------------------------------------------------------------------------------
Consumer Staples 3.6%
- ------------------------------------------------------------------------------
Repurchase Agreements 1.9%
- ------------------------------------------------------------------------------
Materials 1.5%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
* Portfolio composition is subject to change.
21 HSBC INVESTOR FAMILY OF FUNDS
<Page>
Portfolio Reviews
Portfolio Composition*
October 31, 2005
(Unaudited)
HSBC Investor Mid-Cap Fund
Investment Allocation Percentage of Investments at Value
==============================================================================
Consumer Discretionary 16.4%
- ------------------------------------------------------------------------------
Financials 16.3%
- ------------------------------------------------------------------------------
Information Technology 15.1%
- ------------------------------------------------------------------------------
Health Care 13.0%
- ------------------------------------------------------------------------------
Energy 10.9%
- ------------------------------------------------------------------------------
Industrials 10.7%
- ------------------------------------------------------------------------------
Materials 5.8%
- ------------------------------------------------------------------------------
Consumer Staples 4.5%
- ------------------------------------------------------------------------------
Utilities 4.5%
- ------------------------------------------------------------------------------
Telecommunication Services 1.8%
- ------------------------------------------------------------------------------
Cash and Equivalents 1.0%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
HSBC International Equity Portfolio
Investment Allocation Percentage of Investments at Value
==============================================================================
Europe 61.9%
- ------------------------------------------------------------------------------
Japan 24.7%
- ------------------------------------------------------------------------------
Australia and Far East 7.7%
- ------------------------------------------------------------------------------
Other 3.0%
- ------------------------------------------------------------------------------
Canada 2.3%
- ------------------------------------------------------------------------------
Cash and Equivalents 0.4%
- ------------------------------------------------------------------------------
Total 100.0%
==============================================================================
HSBC Investor Small Cap Equity Portfolio
Investment Allocation Percentage of Investments at Value
==============================================================================
Health Care 25.2%
Information Technology 17.8%
Repurchase Agreements 16.2%
Industrials 14.6%
Energy 12.9%
Financials 5.5%
Consumer Discretionary 5.1%
Transportation 1.4%
Cash and Equivalents 1.3%
Total 100.0%
==============================================================================
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 22
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23 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS -- 88.7%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK -- 82.2%
Brookhaven, New York GO (FGIC Insured),
5.50%, 10/1/12, Defeased to call,
10/1/06 @ 102......................... 500,000 520,935
Buffalo, New York Fiscal Stability
Authority (MBIA Insured), 5.25%,
8/15/13............................... 500,000 548,210
Corning City, New York School District
GO (FSA Insured), 4.00%, 6/15/08...... 930,000 947,233
Corning City, New York School District
GO (FSA Insured), 5.00%, 6/15/09...... 790,000 833,118
Erie County, New York GO (FGIC
Insured), 5.375%, 6/15/07............. 250,000 254,400
Grand Central New York District
Management, 4.00%, 1/1/07............. 400,000 403,440
Metropolitan Transportation Authority
of New York Revenue (FGIC Insured),
5.25%, 7/1/17, Prerefunded 7/1/08 @
100.5................................. 1,145,000 1,210,047
Metropolitan Transportation Authority
of New York Revenue (FGIC Insured),
5.50%, 11/15/19....................... 1,000,000 1,132,260
Metropolitan Transportation Authority
of New York Revenue (FSA Insured),
5.00%, 11/15/32, Callable 11/15/12 @
100................................... 1,625,000 1,666,615
Metropolitan Transportation Authority
of New York Revenue (MBIA Insured),
5.50%, 1/1/19, Callable 7/1/12 @
100................................... 480,000 525,562
Metropolitan Transportation Authority
of New York Revenue, Escrowed to
Maturity, 5.75%, 7/1/13............... 285,000 312,597
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.625%, 1/1/10........................ 1,240,000 1,322,931
Monroe County, New York, Airport
Authority Revenue, AMT (MBIA Insured),
5.75%, 1/1/14......................... 750,000 819,855
New York City GO, 5.00%, 8/1/08........ 990,000 1,033,580
New York City GO, 5.00%, 8/1/14........ 200,000 212,460
New York City GO, 6.00%, 8/1/14,
Callable 8/1/07 @ 101................. 980,000 1,030,960
New York City GO, 6.00%, 8/1/14,
Prerefunded 8/1/07 @ 101.............. 20,000 21,166
New York City Housing Development Corp.
Revenue, AMT, 5.60%, 11/1/19.......... 100,000 103,870
New York City Industrial Development
Agency (FSA Insured), 5.00%, 11/15/19,
Callable 5/1/13 @ 100................. 1,000,000 1,053,740
New York City Municipal Assistance
Corp. Revenue, 6.00%, 7/1/06,
(Defeased to Maturity)................ 735,000 749,509
New York City Municipal Water Authority
Revenue, 5.00%, 6/15/34, Callable
6/15/13 @ 100......................... 1,250,000 1,277,737
New York City Municipal Water Finance
Authority, 5.00%, 6/15/36, Callable
12/15/14 @ 100........................ 1,000,000 1,025,200
New York City Transitional Finance
Authority Revenue, 5.25%, 5/1/17,
Callable 5/1/11 @ 100................. 400,000 427,724
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK, CONTINUED
New York City Transitional Finance
Authority Revenue, 5.25%, 2/1/29,
Callable 2/1/11 @ 100................. 1,540,000 1,644,027
New York City Water & Sewer Systems
(FSA Insured), 5.00%, 6/15/29,
Callable 06/15/15 @ 100............... 1,000,000 1,037,070
New York N.Y., Series G (LOC UBS
Financial Services, Inc.), 5.00%,
12/1/13............................... 1,000,000 1,061,500
New York State Dormitory Authority
Revenue, City University, 5.00%,
7/1/06................................ 1,000,000 1,011,870
New York State Dormitory Authority
Revenue, Columbia University, 4.00%,
7/1/06................................ 1,000,000 1,007,050
New York State Dormitory Authority
Revenue, Columbia University, 5.00%,
7/1/29, Mandatory put 7/1/07 @ 100.... 1,000,000 1,029,680
New York State Dormitory Authority
Revenue, Cooper Union (MBIA Insured),
6.00%, 7/1/19, Callable 7/1/09 @
101................................... 350,000 383,943
New York State Dormitory Authority
Revenue, Department of Health, 5.25%,
7/1/16, Callable 7/1/14 @ 100......... 500,000 537,405
New York State Dormitory Authority
Revenue, Master PG (FSA Insured),
5.25%, 8/15/19, Callable 8/15/12 @
100................................... 1,000,000 1,073,170
New York State Dormitory Authority
Revenue, Mental Health, 6.50%,
8/15/11............................... 225,000 255,949
New York State Dormitory Authority
Revenue, Mental Health, 5.50%,
8/15/17, Partially Prerefunded 2/15/07
@ 102................................. 985,000 1,027,247
New York State Dormitory Authority
Revenue, Mental Health, 5.50%,
8/15/17, Prerefunded 2/15/07 @ 102.... 15,000 15,733
New York State Dormitory Authority
Revenue, New York Presbyterian
Hospital (AMBAC Insured), 5.50%,
8/1/10................................ 750,000 809,453
New York State Dormitory Authority
Revenue, New York University (AMBAC
Insured), 5.50%, 7/1/18............... 500,000 563,315
New York State Dormitory Authority
Revenue, NY State Rehabilitation
Association (CIFG Group Insured),
4.00%, 7/1/06......................... 1,120,000 1,126,339
New York State Dormitory Authority
Revenue, (FSA Insured), 2.00%,
7/1/06................................ 475,000 470,274
New York State Dormitory Authority
Revenue, (FSA Insured), 5.25%, 7/1/18,
Callable 7/1/12 @ 101................. 1,460,000 1,572,070
New York State Dormitory Authority
Revenue, Rockefeller University,
5.25%, 7/1/13, Callable 7/1/08 @
101................................... 500,000 528,595
New York State Dormitory Authority
Revenue, School District Board
Financing, 5.00%, 7/1/08.............. 595,000 621,055
New York State Dormitory Authority
Revenue, School District Rescue,
5.00%, 4/1/07......................... 500,000 511,585
New York State Dormitory Authority
Revenue, Sloan Kettering Institute
(MBIA Insured), 5.50%, 7/1/23......... 1,300,000 1,470,833
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 24
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK, CONTINUED
New York State Environmental
Facilities, 5.00%, 6/15/09............ 1,000,000 1,056,490
New York State Environmental Facscorp.,
5.70%, 1/15/14, Callable 7/15/09 @
101................................... 415,000 449,752
New York State Environmental Facscorp.,
5.70%, 1/15/14, Prerefunded 7/15/09 @
101................................... 570,000 622,577
New York State Environmental Facscorp.,
5.70%, 1/15/14, Prerefunded 7/15/09 @
101................................... 15,000 16,384
New York State Mortgage Agency Revenue,
AMT, 5.60%, 10/1/14, Callable 9/1/07 @
101.5................................. 1,000,000 1,032,190
New York State Municipal Bond Bank
Revenue (LOC State Aid Withholding),
5.50%, 12/1/12........................ 850,000 932,722
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.25%, 4/1/07............... 300,000 308,823
New York State Thruway Authority
Revenue, Highway & Bridge (FGIC
Insured), 5.50%, 4/1/17, Callable
4/1/11 @ 101.......................... 1,000,000 1,103,040
New York State Thruway Authority
Revenue, Highway & Bridge (MBIA
Insured), 5.00%, 4/1/22, Callable
4/1/14 @ 100.......................... 1,000,000 1,043,930
New York State Thruway Authority,
Personal Income Tax Revenue, 5.50%,
3/15/20, Callable 3/15/12 @ 100....... 500,000 550,535
New York State Thruway Authority,
Personal Income Tax Revenue (FSA
Insured), 5.00%, 3/15/13.............. 645,000 692,530
New York State Thruway Authority,
Personal Income Tax Revenue (MBIA
Insured), 5.00%, 3/15/19, Callable
3/15/13 @ 100......................... 1,400,000 1,475,460
New York State Thruway Authority,
Personal Income Tax Revenue (MBIA
Insured), 5.00%, 3/15/21, Callable
3/15/13 @ 100......................... 500,000 522,965
New York State Thruway Authority,
Service Contract Revenue, 5.50%,
4/1/11................................ 1,000,000 1,088,870
New York State Urban Development Corp.
(LOC GO of Corp.), 5.125%, 1/1/22,
Callable 7/1/14 @ 100................. 885,000 924,922
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12................ 500,000 552,495
New York State Urban Development Corp.
Revenue, 5.75%, 4/1/12, Prerefunded
4/1/07 @ 102.......................... 1,000,000 1,055,860
New York State Urban Development Corp.
Revenue, 5.125%, 1/1/25, Prerefunded
1/1/11 @ 100.......................... 175,000 187,983
New York State Urban Development Corp.
Revenue, Series A (MBIA Insured),
6.50%, 1/1/09......................... 500,000 545,660
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/14, Callable 9/15/10 @
101................................... 300,000 321,096
<Caption>
- ---------------------------------------------------------------
MUNICIPAL BONDS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
NEW YORK, CONTINUED
Onondaga County, New York Water
Authority Revenue (FSA Insured),
5.00%, 9/15/15, Callable 9/15/10 @
101................................... 665,000 707,600
Port Authority of New York & New Jersey
Revenue (LOC GO of Auth), 5.00%,
9/1/27, Callable 9/1/13 @ 100......... 795,000 821,784
Port Authority of New York & New Jersey
Revenue, 5.375%, 3/1/28............... 1,100,000 1,223,057
Port Authority of New York & New Jersey
Special Obligation Revenue, AMT (MBIA
Insured), 5.75%, 12/1/22, Callable
12/1/07 @ 102......................... 500,000 529,390
Suffolk County, New York (FSA Insured),
5.25%, 5/1/12......................... 100,000 109,609
Suffolk County, New York (FSA Insured),
5.25%, 5/1/15......................... 515,000 558,796
Tobacco Settlement Corp., 5.00%,
6/1/06................................ 1,000,000 1,009,950
Tobacco Settlement Corp., Series C-1,
5.50%, 6/1/21, Callable 6/1/13 @
100................................... 1,000,000 1,082,290
Webster, New York Central School
District GO (FSA Insured), 5.00%,
6/15/14............................... 500,000 538,860
Yonkers New York, Series E (MBIA
Insured), 5.00%, 12/1/14.............. 750,000 803,265
----------
PUERTO RICO (6.5%)
Puerto Rico Commonwealth, Highway and
Transportation (MBIA Insured), 5.00%,
9/15/17, Callable 3/15/14 @ 100....... 1,000,000 1,066,110
Puerto Rico Electric Power Authority
Revenue (MBIA Insured), 5.25%,
7/1/22................................ 1,000,000 1,109,620
Puerto Rico Public Buildings Authority
Revenue, 5.25%, 7/1/33, Callable
7/1/14 @ 100.......................... 700,000 723,072
Puerto Rico Public Finance Corp.
Revenue (MBIA Insured), 5.25%, 8/1/29,
Callable 2/1/12 @ 100................. 1,000,000 1,076,650
Puerto Rico Publishing Finance Corp.
Revenue (AMBAC Insured), 5.375%,
6/1/18................................ 500,000 557,990
----------
4,533,442
----------
TOTAL MUNICIPAL BONDS
(COST $59,748,384).................... 61,593,639
----------
- ---------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (7.2%)
NEW YORK (7.2%)
New York City Housing Development Corp.
Multifamily Revenue, East 165th
Street, AMT (LOC Citibank N.A.),
2.71%, 6/1/36......................... 2,100,000 2,100,000
New York State Housing Finance Agency
Revenue, AMT (Fleet National Bank
Insured), 2.72%, 11/1/36.............. 1,900,000 1,900,000
New York State Mortgage Agency Revenue,
AMT (Dexia Credit Local), 2.71%,
10/1/34............................... 1,000,000 1,000,000
----------
5,000,000
----------
TOTAL VARIABLE RATE DEMAND NOTES* (COST
$5,000,000)........................... 5,000,000
----------
</Table>
25 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ---------------------------------------------------------------
INVESTMENT COMPANIES -- 2.3%
SHARES VALUE($)
--------- ----------
Blackrock New York Tax-Free Money
Market Fund Institutional Shares...... 1,630,948 1,630,948
----------
TOTAL INVESTMENT COMPANIES
(COST $1,630,948)..................... 1,630,948
----------
TOTAL INVESTMENTS
(COST $66,379,332) -- 98.2%........... 68,224,587
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $69,461,879.
* Variable rate security. The interest rates on these securities are adjusted
periodically to reflect then-current short-term interest rates. The rates
presented in this report represent the rates that were in effect on
October 31, 2005. The maturity dates presented reflect the final maturity
dates. However, each of these securities contains put or demand features that
allow the fund to require the issuer to repurchase the security from the fund
within various time periods, including daily, weekly, monthly, or
semi-annually.
AMBAC -- American Municipal Bond Assurance Corp.
AMT -- Interest on security may be subject to Federal
Alternative Minimum Tax
CIFG -- CDC IXIS Financial Guaranty NA, Inc.
FGIC -- Federal Guaranty Insurance Corp.
FSA -- Financial Security Assurance
GO -- General Obligation
LOC -- Letter of Credit
MBIA -- Municipal Bond Insurance Association
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 26
HSBC INVESTOR GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS -- 106.1%
SHARES VALUE($)
------ ----------
AEROSPACE & DEFENSE - 1.5%
United Technologies Corp................... 15,000 769,200
----------
BIOTECHNOLOGY - 3.0%
Amgen, Inc. (a)............................ 20,600 1,560,656
----------
CHEMICALS - 3.4%
3M Co...................................... 12,000 911,760
Ecolab, Inc................................ 25,500 843,540
----------
1,755,300
----------
COMPUTER SOFTWARE - 7.1%
Microsoft Corp............................. 50,000 1,285,000
NAVTEQ Corp. (a)........................... 21,700 848,904
SanDisk Corp. (a).......................... 26,500 1,560,585
----------
3,694,489
----------
COMPUTERS - 2.9%
Apple Computer, Inc. (a)................... 26,500 1,526,135
----------
CONSUMER PRODUCTS - 6.2%
American Standard Cos., Inc................ 16,500 627,660
Harley-Davidson, Inc....................... 12,000 594,360
PepsiCo, Inc............................... 16,600 980,728
The Procter & Gamble Co.................... 19,000 1,063,810
----------
3,266,558
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 22.5%
Caterpillar, Inc........................... 41,500 2,182,485
Donaldson Co., Inc......................... 36,500 1,140,625
General Electric Co........................ 25,290 857,584
Graco, Inc................................. 27,500 942,425
Illinois Tool Works, Inc................... 14,000 1,186,640
Jacobs Engineering Group, Inc. (a)......... 29,500 1,880,625
Kennametal, Inc............................ 23,500 1,201,085
PACCAR, Inc................................ 15,600 1,092,312
W. W. Grainger, Inc........................ 20,000 1,339,600
----------
11,823,381
----------
FINANCIAL SERVICES - 9.4%
American Express Co........................ 34,000 1,692,180
Ameriprise Financial, Inc. (a)............. 18,780 698,992
J.P. Morgan Chase & Co..................... 26,000 952,120
The Chicago Mercantile Exchange Holdings,
Inc....................................... 4,300 1,570,145
----------
4,913,437
----------
FORESTRY - 2.7%
Plum Creek Timber Co., Inc................. 36,500 1,419,850
----------
HEALTH CARE - 5.1%
WellPoint, Inc. (a)........................ 19,800 1,478,664
Zimmer Holdings, Inc. (a).................. 19,000 1,211,630
----------
2,690,294
----------
HOTELS & LODGING - 3.9%
Marriott International, Inc., Class A...... 20,000 1,192,400
MGM Mirage (a)............................. 22,100 825,877
----------
2,018,277
----------
INSURANCE - 1.9%
Progressive Corp........................... 8,400 972,804
----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------ ----------
INTERNET RELATED - 2.5%
eBay, Inc. (a)............................. 33,600 1,330,560
----------
LEISURE - 0.9%
Carnival Corp.............................. 10,000 496,700
----------
MEDIA - 7.3%
McGraw-Hill Cos., Inc...................... 43,700 2,138,678
The Walt Disney Co......................... 27,000 657,990
XM Satellite Radio Holdings Inc.,
Class A (a)(b)............................ 36,500 1,052,295
----------
3,848,963
----------
MEDICAL & HEALTH PRODUCTS - 2.8%
Genentech, Inc. (a)........................ 16,000 1,449,600
----------
OIL & GAS - 9.9%
Anadarko Petroleum Corp.................... 8,000 725,680
Apache Corp................................ 19,800 1,263,834
Schlumberger Ltd........................... 20,000 1,815,400
Suncor Energy, Inc. ADR.................... 25,500 1,367,565
----------
5,172,479
----------
PHARMACEUTICALS - 4.3%
Affymetrix, Inc. (a)....................... 26,500 1,203,895
Johnson & Johnson.......................... 17,000 1,064,540
----------
2,268,435
----------
RESTAURANTS - 1.1%
Starbucks Corp. (a)........................ 20,000 565,600
----------
RETAIL - 2.4%
Staples, Inc............................... 55,000 1,250,150
----------
TELECOMMUNICATIONS - 3.4%
QUALCOMM, Inc.............................. 44,400 1,765,344
----------
TRANSPORTATION - 1.9%
FedEx Corp................................. 11,000 1,011,230
----------
TOTAL COMMON STOCKS
(COST $48,038,028)........................ 55,569,442
----------
<Caption>
- ----------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN -- 2.0%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
Pool of various securities for HSBC
Family of Funds -- Note 2 -- Security
Loans................................. 1,058,500 1,058,500
----------
TOTAL SECURITIES HELD AS
COLLATERAL FOR SECURITIES
ON LOAN (COST $1,058,500)............. 1,058,500
----------
TOTAL INVESTMENTS
(COST $49,096,528) - 108.1%.......... 56,627,942
----------
----------
</Table>
- --------------
Percentages indicated are based on net assets of $52,390,654.
(a) Represents non-income producing security.
(b) All or a portion of the security was on loan as of October 31, 2005.
ADR -- American Depositary Receipt
27 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR MID-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS -- 99.3%
SHARES VALUE($)
--------- -----------
ADVERTISING SERVICES - 2.9%
aQuantive, Inc. (a)................... 17,000 368,050
Getty Images, Inc. (a)................ 5,825 483,533
-----------
851,583
-----------
AEROSPACE & DEFENSE - 2.7%
L-3 Communications Holdings, Inc...... 10,225 795,710
-----------
BANKING - 2.0%
Euronet Worldwide, Inc. (a) (b)....... 9,675 271,868
UCBH Holdings, Inc.................... 18,825 327,555
-----------
599,423
-----------
BIOTECHNOLOGY - 2.1%
Gilead Sciences, Inc. (a)............. 12,925 610,706
-----------
BUILDING MATERIALS - 1.9%
Florida Rock Industries, Inc.......... 10,037 571,105
-----------
BUSINESS SERVICES - 3.2%
Digital River, Inc. (a) (b)........... 10,575 296,206
McDermott International, Inc. (a)..... 5,400 196,182
Wright Express Corp. (a).............. 21,300 459,654
-----------
952,042
-----------
CHEMICALS - 2.0%
Airgas, Inc........................... 11,025 311,677
Praxair, Inc.......................... 5,825 287,813
-----------
599,490
-----------
COMPUTER HARDWARE - 1.1%
Logitech International SA ADR (a)..... 8,200 314,552
-----------
COMPUTER SERVICES - 1.3%
Cognizant Technology Solutions Corp.
(a).................................. 8,775 385,925
-----------
COMPUTER SOFTWARE - 2.7%
Blackbaud, Inc........................ 22,000 316,800
SRA International, Inc., Class A
(a).................................. 14,150 464,403
-----------
781,203
-----------
CONSUMER PRODUCTS - 4.7%
Chattem, Inc. (a)..................... 9,800 323,400
Constellation Brands, Inc. (a)........ 16,650 391,941
The Toro Co........................... 11,225 409,825
Thor Industries, Inc.................. 7,300 238,199
-----------
1,363,365
-----------
CONSUMER SERVICES - 2.2%
VCA Antech, Inc. (a).................. 24,850 641,130
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 2.4%
FormFactor, Inc. (a).................. 10,875 267,743
Microchip Technology, Inc............. 9,900 298,683
ON Semiconductor Corp. (a)............ 27,100 125,744
-----------
692,170
-----------
ENVIRONMENTAL SERVICES - 1.9%
Stericycle, Inc. (a).................. 9,550 549,698
-----------
FINANCIAL SERVICES - 6.2%
Affiliated Managers Group, Inc. (a)
(b).................................. 5,975 458,581
Ameritrade Holding Corp. (a).......... 21,450 451,094
Asset Acceptance Capital Corp. (a).... 17,975 476,157
The Chicago Mercantile Exchange
Holdings, Inc........................ 1,200 438,180
-----------
1,824,012
-----------
FOOD & BEVERAGE - 2.1%
Flowers Foods, Inc.................... 20,975 614,568
-----------
<Caption>
- ---------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
HEALTH CARE - 8.8%
Coventry Health Care, Inc. (a)........ 11,050 596,589
CYTYC Corp. (a)....................... 18,500 468,975
Hologic, Inc. (a)..................... 5,500 305,030
Laboratory Corp. of America Holdings
(a).................................. 6,000 289,500
LifePoint Hospitals, Inc. (a)......... 7,525 294,228
ResMed, Inc. (a)...................... 16,050 611,986
-----------
2,566,308
-----------
INSURANCE - 2.6%
AmerUs Group Co....................... 8,300 490,696
Universal American Financial Corp.
(a).................................. 18,675 276,390
-----------
767,086
-----------
LEISURE - 1.9%
Penn National Gaming, Inc. (a)........ 19,075 563,666
-----------
METALS & MINING - 1.8%
Phelps Dodge Corp..................... 4,375 527,056
-----------
OIL & GAS - 10.9%
Chesapeake Energy Corp................ 12,000 385,200
Helmerich & Payne, Inc................ 8,900 493,060
National-Oilwell Varco, Inc. (a)...... 9,350 584,094
Patterson-UTI Energy, Inc............. 16,050 547,787
Precision Drilling Corp. (a).......... 13,800 634,799
XTO Energy, Inc....................... 13,058 567,501
-----------
3,212,441
-----------
REAL ESTATE - 6.4%
American Home Mortgage Investment
Corp................................. 12,600 340,578
KKR Financial Corp.................... 45,825 1,022,813
Ventas, Inc........................... 16,300 499,269
-----------
1,862,660
-----------
RESIDENTIAL BUILDING CONSTRUCTION - 4.2%
KB Home, Inc.......................... 6,400 418,240
Pulte Homes, Inc...................... 11,650 440,254
Standard Pacific Corp................. 9,350 360,723
-----------
1,219,217
-----------
RETAIL - 7.9%
Chico's FAS, Inc. (a)................. 9,250 365,745
Dick's Sporting Goods, Inc. (a) (b)... 10,375 310,524
GameStop Corp., Class A (a) (b)....... 12,800 454,144
Jos. A. Bank Clothiers, Inc. (a)
(b).................................. 12,000 489,719
Sears Holdings Corp. (a) (b).......... 2,675 321,669
Tractor Supply Co. (a)................ 7,650 371,025
-----------
2,312,826
-----------
TELECOMMUNICATIONS - 4.8%
Comverse Technology, Inc. (a)......... 11,900 298,690
j2 Global Communications, Inc. (a)
(b).................................. 12,700 561,467
Nextel Partners, Inc., Class A (a).... 21,250 534,438
-----------
1,394,595
-----------
TRANSPORTATION - 4.1%
Old Dominion Freight Line, Inc. (a)... 16,925 598,976
Oshkosh Truck Corp.................... 13,800 601,128
-----------
1,200,104
-----------
UTILITIES - 4.5%
Aqua America, Inc..................... 16,850 570,878
Equitable Resources, Inc.............. 10,950 423,218
New Jersey Resources Corp............. 7,650 330,174
-----------
1,324,270
-----------
TOTAL COMMON STOCKS
(COST $25,105,888)................... 29,096,911
-----------
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 28
HSBC INVESTOR MID-CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ---------------------------------------------------------------
INVESTMENT COMPANIES -- 0.3%
SHARES VALUE($)
--------- -----------
HSBC Investor Money Market Fund
Class Y Shares *..................... 82,259 82,259
-----------
TOTAL INVESTMENT COMPANIES
(COST $82,259)....................... 82,259
-----------
<Caption>
- ---------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN -- 10.6%
PRINCIPAL
AMOUNT($) VALUE($)
--------- -----------
Pool of various securities for HSBC
Family of Funds -- Note 2 -- Security
Loans................................ 3,114,600 3,114,600
-----------
TOTAL SECURITIES HELD AS COLLATERAL
FOR SECURITIES ON LOAN (COST
$3,114,600).......................... 3,114,600
-----------
TOTAL INVESTMENTS
(COST $28,302,747) - 110.2%......... 32,293,770
-----------
-----------
</Table>
- --------------
Percentages indicated are based on net assets of $29,294,434.
(a) Represents non-income producing security.
(b) All or a portion of the security was on loan as of October 31, 2005.
* Investment in affiliate.
ADR -- American Depositary Receipt
29 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
<Table>
<Caption>
LIMITED NEW YORK
MATURITY FIXED INCOME BOND TAX-FREE BOND
FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
ASSETS:
Investments in Portfolio $31,252,681 $89,948,397 $24,139,877 --
Investments, at value (non
affiliated) (see note 2) -- -- -- $68,224,587
Interest and dividends receivable -- -- -- 873,771
Receivable for capital shares issued 550 -- 17,908 533,917
Receivable from Investment Adviser 4,932 -- 9,332 --
Prepaid expenses and other assets 1,724 4,107 1,273 2,791
----------- ----------- ----------- -----------
TOTAL ASSETS 31,259,887 89,952,504 24,168,390 69,635,066
----------- ----------- ----------- -----------
LIABILITIES:
Dividends payable 50,905 175,477 40,512 83,443
Payable for capital shares redeemed 8,500 2,176 1,965 11,635
Accrued expenses and other
liabilities:
Investment management -- -- -- 14,747
Administration 1,601 4,874 942 5,526
Distribution 5,019 -- 7,296 11,786
Shareholder servicing 1,374 -- 5,142 11,152
Accounting -- -- -- 36
Compliance service 39 115 29 11,456
Transfer Agent 12,041 5,010 10,954 12,788
Trustee 106 339 78 440
Other 1,494 21,076 3,014 10,178
----------- ----------- ----------- -----------
TOTAL LIABILITIES 81,079 209,067 69,932 173,187
----------- ----------- ----------- -----------
NET ASSETS $31,178,808 $89,743,437 $24,098,458 $69,461,879
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
.............................................................................................................
COMPOSITION OF NET ASSETS:
Capital $31,857,304 $87,216,153 $24,923,786 $67,515,893
Accumulated net investment income
(loss) 14,682 1,400,871 108,687 --
Accumulated net realized gains
(losses) from investment
transactions (303,754) 2,284,271 (617,445) 100,731
Unrealized appreciation/depreciation
from investments (389,424) (1,157,858) (316,570) 1,845,255
----------- ----------- ----------- -----------
NET ASSETS $31,178,808 $89,743,437 $24,098,458 $69,461,879
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
.............................................................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 1,055,175 $ -- $17,646,062 $34,441,188
Shares Outstanding 109,132 -- 1,712,884 3,109,089
Net Asset Value and Redemption Price
per share $ 9.67 $ -- $ 10.30 $ 11.08
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Maximum sales charge 4.75% -- 4.75% 4.75%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 10.15 $ -- $ 10.81 $ 11.63
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
.............................................................................................................
CLASS B SHARES
Net Assets $ 4,851,793 $ -- $ 6,167,740 $16,257,885
Shares Outstanding 500,877 -- 598,021 1,469,104
Net Asset Value, Offering Price and
Redemption Price per share* $ 9.69 $ -- $ 10.31 $ 11.07
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
.............................................................................................................
CLASS C SHARES
Net Assets $ 527,381 $ -- $ 284,656 $ 1,782,281
Shares Outstanding 54,472 -- 27,647 160,433
Net Asset Value, Offering Price and
Redemption Price per share* $ 9.68 $ -- $ 10.30 $ 11.11
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
.............................................................................................................
CLASS Y SHARES
Net Assets $24,744,459 $ -- $ -- $16,980,525
Shares Outstanding 2,555,734 -- -- 1,532,666
Net Asset Value, Offering Price and
Redemption Price per share $ 9.68 $ -- $ -- $ 11.08
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
.............................................................................................................
ADVISOR SHARES
Net Assets $ -- $89,743,437 $ -- $ --
Shares Outstanding -- 8,509,159 -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ 10.55 $ -- $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Investments, at cost $66,379,332
-----------
-----------
<Caption>
GROWTH VALUE
FUND FUND
--------------- ---------------
ASSETS:
Investments in Portfolio $36,618,445 $40,525,735
Investments, at value (non
affiliated) (see note 2) -- --
Interest and dividends receivable -- --
Receivable for capital shares issued 39,774 10,228
Receivable from Investment Adviser 15,145 14,885
Prepaid expenses and other assets 2,771 2,813
----------- -----------
TOTAL ASSETS 36,676,135 40,553,661
----------- -----------
LIABILITIES:
Dividends payable -- --
Payable for capital shares redeemed 16,175 10,782
Accrued expenses and other
liabilities:
Investment management -- --
Administration 1,123 1,263
Distribution 1,019 1,384
Shareholder servicing 4,892 5,394
Accounting -- --
Compliance service 44 52
Transfer Agent 14,753 16,237
Trustee 134 158
Other 3,801 4,479
----------- -----------
TOTAL LIABILITIES 41,941 39,749
----------- -----------
NET ASSETS $36,634,194 $40,513,912
----------- -----------
----------- -----------
.......................................................................
COMPOSITION OF NET ASSETS:
Capital $31,676,033 $31,241,729
Accumulated net investment income
(loss) -- 294,913
Accumulated net realized gains
(losses) from investment
transactions 449,709 3,540,392
Unrealized appreciation/depreciation
from investments 4,508,452 5,436,878
----------- -----------
NET ASSETS $36,634,194 $40,513,912
----------- -----------
----------- -----------
.......................................................................
CLASS A (INVESTOR) SHARES
Net Assets $21,866,491 $23,314,776
Shares Outstanding 1,548,824 1,540,484
Net Asset Value and Redemption Price
per share $ 14.12 $ 15.13
----------- -----------
----------- -----------
Maximum sales charge 5.00% 5.00%
----------- -----------
----------- -----------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 14.86 $ 15.93
----------- -----------
----------- -----------
.......................................................................
CLASS B SHARES
Net Assets $ 1,316,753 $ 1,766,696
Shares Outstanding 97,053 120,993
Net Asset Value, Offering Price and
Redemption Price per share* $ 13.57 $ 14.60
----------- -----------
----------- -----------
.......................................................................
CLASS C SHARES
Net Assets $ 343,568 $ 387,998
Shares Outstanding 25,189 26,456
Net Asset Value, Offering Price and
Redemption Price per share* $ 13.64 $ 14.67
----------- -----------
----------- -----------
.......................................................................
CLASS Y SHARES
Net Assets $13,107,382 $15,044,442
Shares Outstanding 928,385 994,604
Net Asset Value, Offering Price and
Redemption Price per share $ 14.12 $ 15.13
----------- -----------
----------- -----------
.......................................................................
ADVISOR SHARES
Net Assets $ -- $ --
Shares Outstanding -- --
Net Asset Value, Offering Price and
Redemption Price per share $ -- $ --
----------- -----------
----------- -----------
Investments, at cost
------------ ------------
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 30
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
GROWTH AND MID-CAP INTERNATIONAL
INCOME FUND FUND EQUITY FUND
--------------- --------------- --------------
ASSETS:
Investments in
Portfolio -- -- $192,993,079
Investments at value
(non affiliated) (see
note 2)** $56,627,942 $32,211,511 --
Investment in
affiliates at value -- 82,259 --
Cash 1,765,160 -- --
Interest and dividends
receivable 33,334 1,238 --
Receivable for capital
shares issued 47,582 1,786 --
Receivable for
investments sold 95,143 302,358 --
Receivable from
Investment Adviser -- -- --
Tax reclaims receivable -- -- 184,482
Prepaid expenses and
other assets 8,007 4,534 6,830
----------- ----------- ------------
TOTAL ASSETS 58,577,168 32,603,686 193,184,391
----------- ----------- ------------
LIABILITIES:
Cash overdraft -- 78 --
Payable for investments
purchased -- 128,681 --
Payable for capital
shares redeemed 5,054,910 1,579 1,029
Payable for return of
collateral received 1,058,500 3,114,600 --
Accrued expenses and
other liabilities:
Investment management 31,894 17,449 --
Administration 11,593 4,827 8,430
Distribution 2,714 4,858 --
Shareholder servicing 1,150 2,046 --
Accounting 145 90 --
Compliance service 195 72 243
Custodian -- 12,000 --
Transfer Agent 12,385 16,315 5,816
Trustee 992 240 540
Other 12,036 6,417 24,210
----------- ----------- ------------
TOTAL LIABILITIES 6,186,514 3,309,252 40,268
----------- ----------- ------------
NET ASSETS $52,390,654 $29,294,434 $193,144,123
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
COMPOSITION OF NET
ASSETS:
Capital $58,593,240 $18,872,188 $155,252,639
Accumulated net
investment income
(loss) -- -- 3,030,485
Accumulated net
realized gains
(losses) from
investment, and
foreign currency
transactions (13,734,000) 6,431,223 6,442,702
Unrealized
appreciation/depreciation
from investments, and
foreign currencies 7,531,414 3,991,023 28,418,297
----------- ----------- ------------
NET ASSETS $52,390,654 $29,294,434 $193,144,123
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
CLASS A (INVESTOR) SHARES
Net Assets $ 1,260,114 $ 2,150,574 $ --
Shares Outstanding 129,189 217,827 --
Net Asset Value and
Redemption Price per
share $ 9.75 $ 9.87 $ --
----------- ----------- ------------
----------- ----------- ------------
Maximum sales charge 5.00% 5.00% --
----------- ----------- ------------
----------- ----------- ------------
Maximum Offering Price
per share (Net Asset
Value/(100% - maximum
sales charge)) $ 10.26 $ 10.39 $ --
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
CLASS B SHARES
Net Assets $ 4,193,592 $ 7,414,988 $ --
Shares Outstanding 436,237 781,982 --
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 9.61 $ 9.48 $ --
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
CLASS C SHARES
Net Assets $ 48,730 $ 110,529 $ --
Shares Outstanding 5,026 11,580 --
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 9.70 $ 9.54 $ --
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
CLASS Y SHARES
Net Assets $46,888,218 $ -- $ --
Shares Outstanding 4,806,814 -- --
Net Asset Value,
Offering Price and
Redemption Price per
share $ 9.75 $ -- $ --
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
ADVISOR SHARES
Net Assets $ -- $ -- $193,144,123
Shares Outstanding -- -- 11,014,439
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ -- $ 17.54
----------- ----------- ------------
----------- ----------- ------------
..............................................................................
TRUST SHARES
Net Assets $ -- $19,618,343 $ --
Shares Outstanding -- 1,965,695 --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ 9.98 $ --
----------- ----------- ------------
----------- ----------- ------------
Investments, at cost $49,096,528 $28,302,747
----------- -----------
----------- -----------
<Caption>
OVERSEAS SMALL CAP OPPORTUNITY
EQUITY FUND EQUITY FUND FUND
----------- -------------- ---------------
ASSETS:
Investments in
Portfolio $23,227,577 $177,586,048 $27,730,388
Investments at value
(non affiliated) (see
note 2)** -- -- --
Investment in
affiliates at value -- -- --
Cash -- -- --
Interest and dividends
receivable -- -- --
Receivable for capital
shares issued 10,755 -- 8,869
Receivable for
investments sold -- -- --
Receivable from
Investment Adviser -- -- 10,874
Tax reclaims receivable 32,220 -- --
Prepaid expenses and
other assets 4,432 6,091 2,386
----------- ------------ -----------
TOTAL ASSETS 23,274,984 177,592,139 27,752,517
----------- ------------ -----------
LIABILITIES:
Cash overdraft -- -- --
Payable for investments
purchased -- -- --
Payable for capital
shares redeemed 5,206 427 3,734
Payable for return of
collateral received -- -- --
Accrued expenses and
other liabilities:
Investment management -- -- --
Administration 866 8,566 1,103
Distribution 1,934 -- 2,273
Shareholder servicing 4,993 -- 5,992
Accounting -- -- --
Compliance service 30 236 36
Custodian -- -- --
Transfer Agent 11,298 6,455 15,119
Trustee 72 690 91
Other 2,846 57,087 3,506
----------- ------------ -----------
TOTAL LIABILITIES 27,245 73,461 31,854
----------- ------------ -----------
NET ASSETS $23,247,739 $177,518,678 $27,720,663
----------- ------------ -----------
----------- ------------ -----------
........................................................................
COMPOSITION OF NET
ASSETS:
Capital $17,560,946 $143,019,015 $23,730,916
Accumulated net
investment income
(loss) 247,876 -- --
Accumulated net
realized gains
(losses) from
investment, and
foreign currency
transactions 1,692,382 4,938,140 767,173
Unrealized
appreciation/depreciation
from investments, and
foreign currencies 3,746,535 29,561,523 3,222,574
----------- ------------ -----------
NET ASSETS $23,247,739 $177,518,678 $27,720,663
----------- ------------ -----------
----------- ------------ -----------
........................................................................
CLASS A (INVESTOR) SHARES
Net Assets $20,680,473 $ -- $22,875,290
Shares Outstanding 1,326,158 -- 1,846,098
Net Asset Value and
Redemption Price per
share $ 15.59 $ -- $ 12.39
----------- ------------ -----------
----------- ------------ -----------
Maximum sales charge 5.00% -- 5.00%
----------- ------------ -----------
----------- ------------ -----------
Maximum Offering Price
per share (Net Asset
Value/(100% - maximum
sales charge)) $ 16.41 $ -- $ 13.04
----------- ------------ -----------
----------- ------------ -----------
........................................................................
CLASS B SHARES
Net Assets $2,403,372 $ -- $ 4,538,926
Shares Outstanding 160,709 -- 391,172
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 14.95 $ -- $ 11.60
----------- ------------ -----------
----------- ------------ -----------
........................................................................
CLASS C SHARES
Net Assets $163,894 $ -- $ 306,447
Shares Outstanding 10,758 -- 26,172
Net Asset Value,
Offering Price and
Redemption Price per
share* $ 15.23 $ -- $ 11.71
----------- ------------ -----------
----------- ------------ -----------
........................................................................
CLASS Y SHARES
Net Assets $ -- $ -- $ --
Shares Outstanding -- -- --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ -- $ --
----------- ------------ -----------
----------- ------------ -----------
........................................................................
ADVISOR SHARES
Net Assets $ -- $177,518,678 $ --
Shares Outstanding -- 11,882,221 --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ 14.94 $ --
----------- ------------ -----------
----------- ------------ -----------
........................................................................
TRUST SHARES
Net Assets $ -- $ -- $ --
Shares Outstanding -- -- --
Net Asset Value,
Offering Price and
Redemption Price per
share $ -- $ -- $ --
----------- ------------ -----------
----------- ------------ -----------
Investments, at cost
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
** The Growth and Income Fund and Mid-Cap Fund include securities on loan of
$1,052,295, $3,086,215, respectively.
31 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
<Caption>
NEW YORK
LIMITED FIXED INCOME BOND TAX-FREE
MATURITY FUND FUND FUND BOND FUND GROWTH FUND VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ -- $ -- $ -- $ 2,736,016 $ -- $ --
Dividends -- -- -- 34,406 -- --
Investment income from
Portfolio 1,555,985 4,958,515 1,183,535 -- 569,534 890,346
Other income (see note 6) -- -- -- 382 -- --
Foreign tax withholding
from Portfolio -- -- -- -- (2,395) (2,389)
Expenses from Portfolio
(see note 6) (177,682) (440,524) (106,352) -- (254,443) (314,756)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME 1,378,303 4,517,991 1,077,183 2,770,804 312,696 573,201
----------- ----------- ----------- ----------- ----------- -----------
..............................................................................................................................
EXPENSES:
Investment management -- -- -- 177,804 -- --
Administration -- HSBC
(see note 3) 4,102 12,440 3,090 17,487 4,787 5,565
Administration -- BISYS
(see note 3) 9,237 27,264 6,391 35,757 10,377 12,948
Distribution:
Class B Shares 42,693 -- 49,820 125,835 10,293 14,572
Class C Shares 4,503 -- 2,822 15,445 2,437 3,197
Shareholder servicing:
Class A (Investor)
Shares 3,142 -- 45,795 84,934 51,592 59,152
Class B Shares 14,231 -- 16,607 41,945 3,431 4,857
Class C Shares 1,501 -- 941 5,148 812 1,066
Accounting 27,001 9,000 27,000 64,508 35,999 35,999
Compliance service 497 1,487 351 13,248 563 689
Custodian -- -- -- 24,658 -- --
Registration 4,616 10,923 5,247 4,005 8,569 8,681
Printing 9,734 4,688 10,065 21,424 21,251 23,195
Transfer agent 63,062 27,730 65,490 74,638 97,160 98,934
Trustee 1,089 3,110 731 4,057 1,162 1,416
Other 5,591 12,938 3,916 20,082 6,236 7,532
----------- ----------- ----------- ----------- ----------- -----------
Total expenses before
fee reductions 190,999 109,580 238,266 730,975 254,669 277,803
Fees reduced by
Investment Adviser
(see notes 3 and 6) (29,668) -- (77,641) (8,379) (74,292) (64,019)
Fees reduced by
Administrator -- BISYS
(see note 3) (678) (2,097) (489) (2,708) (797) (985)
----------- ----------- ----------- ----------- ----------- -----------
NET EXPENSES 160,653 107,483 160,136 719,888 179,580 212,799
----------- ----------- ----------- ----------- ----------- -----------
..............................................................................................................................
NET INVESTMENT INCOME 1,217,650 4,410,508 917,047 2,050,916 133,116 360,402
----------- ----------- ----------- ----------- ----------- -----------
..............................................................................................................................
NET REALIZED/UNREALIZED
GAINS (LOSSES) FROM
INVESTMENTS: (a)
Net realized gains (losses)
from investment
transactions (164,652) 5,419,977 357,536 100,731 1,569,705 3,260,840
Change in unrealized
appreciation/depreciation
from investments (909,347) (7,924,615) (1,010,611) (1,531,859) 3,355,369 3,423,080
----------- ----------- ----------- ----------- ----------- -----------
..............................................................................................................................
Net realized/unrealized
gains from investment
transactions (1,073,999) (2,504,638) (653,075) (1,431,128) 4,925,074 6,683,920
----------- ----------- ----------- ----------- ----------- -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 143,651 $ 1,905,870 $ 263,972 $ 619,788 $ 5,058,190 $ 7,044,322
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</Table>
- --------------
(a) With the exception of New York Tax-Free Bond Fund, represents amounts
allocated from the respective Master Portfolios.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 32
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
GROWTH AND INTERNATIONAL OVERSEAS
INCOME MID-CAP EQUITY EQUITY
FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
INVESTMENT INCOME:
Interest $ -- $ 2,358 $ -- $ --
Dividends 3,261,113 550,799 -- --
Dividends from affiliated investments 41,989 14,258 -- --
Income from securities lending 1,742 3,816 -- --
Investment income from Portfolio -- -- 5,414,808 726,432
Other income (see note 6) 2,059 12,798 -- --
Tax reclaims -- -- 269,189 17,197
Foreign tax withholding from Portfolio -- -- (597,404) (80,286)
Expenses from Portfolio (see note 6) -- -- (1,451,346) (193,401)
----------- ----------- ----------- ----------
TOTAL INVESTMENT INCOME (LOSS) 3,306,903 584,029 3,635,247 469,942
----------- ----------- ----------- ----------
...............................................................................................................
EXPENSES:
Investment management 949,771 508,508 -- --
Administration -- HSBC (see note 3) 26,621 8,152 24,130 2,987
Administration -- BISYS (see note 3) 97,865 54,178 40,837 5,647
Distribution:
Class B Shares 30,607 56,256 -- 17,303
Class C Shares 341 792 -- 1,151
Shareholder servicing:
Class A (Investor) Shares 3,415 5,134 -- 51,472
Class B Shares 10,202 18,760 -- 5,768
Class C Shares 114 264 -- 383
Accounting 54,852 53,510 8,851 27,000
Compliance service 4,693 2,323 2,177 319
Custodian 54,005 44,009 -- --
Interest 18,237 21,017 -- --
Registration 21,624 1,703 4,018 7,217
Printing 64,869 55,671 5,433 11,130
Transfer agent 76,181 92,716 33,128 74,015
Trustee 11,110 6,122 4,456 615
Other 46,421 25,623 21,595 3,554
----------- ----------- ----------- ----------
Total expenses before fee reductions 1,470,928 954,738 144,625 208,561
Fees reduced by Investment Adviser
(see notes 3 and 6) (81,688) (109,916) -- --
Fees reduced by Administrator --
BISYS (see note 3) (6,860) (2,756) (3,142) (429)
----------- ----------- ----------- ----------
NET EXPENSES 1,382,380 842,066 141,483 208,132
----------- ----------- ----------- ----------
...............................................................................................................
NET INVESTMENT INCOME (LOSS) 1,924,523 (258,037) 3,493,764 261,810
----------- ----------- ----------- ----------
...............................................................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS AND FOREIGN
CURRENCIES: (a)
Net realized gains (losses) from
investments and foreign currency
transactions (b) 42,217,628 30,598,634 12,653,084 1,709,313
Change in unrealized
appreciation/depreciation from
investments and foreign currencies (22,761,234) (13,661,163) 14,319,665 1,850,263
----------- ----------- ----------- ----------
...............................................................................................................
Net realized/unrealized gains from
investments and foreign currency
transactions 19,456,394 16,937,471 26,972,749 3,559,576
----------- ----------- ----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $21,380,917 $16,679,434 $30,466,513 $3,821,386
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
<Caption>
SMALL CAP
EQUITY OPPORTUNITY
FUND FUND
--------------- ---------------
INVESTMENT INCOME:
Interest $ -- $ --
Dividends -- --
Dividends from affiliated investments -- --
Income from securities lending -- --
Investment income from Portfolio 903,176 111,386
Other income (see note 6) -- --
Tax reclaims -- --
Foreign tax withholding from Portfolio -- --
Expenses from Portfolio (see note 6) (1,929,205) (239,150)
----------- ----------
TOTAL INVESTMENT INCOME (LOSS) (1,026,029) (127,764)
----------- ----------
.........................................................................
EXPENSES:
Investment management -- --
Administration -- HSBC (see note 3) 25,095 3,638
Administration -- BISYS (see note 3) 59,324 6,779
Distribution:
Class B Shares -- 35,395
Class C Shares -- 2,246
Shareholder servicing:
Class A (Investor) Shares -- 56,974
Class B Shares -- 11,798
Class C Shares -- 749
Accounting 9,000 27,000
Compliance service 3,242 387
Custodian -- --
Interest -- --
Registration 8,580 6,432
Printing 6,821 16,202
Transfer agent 35,681 95,948
Trustee 7,121 799
Other 30,711 4,201
----------- ----------
Total expenses before fee reductions 185,575 268,548
Fees reduced by Investment Adviser
(see notes 3 and 6) -- (48,974)
Fees reduced by Administrator --
BISYS (see note 3) (4,135) (510)
----------- ----------
NET EXPENSES 181,440 219,064
----------- ----------
.........................................................................
NET INVESTMENT INCOME (LOSS) (1,207,469) (346,828)
----------- ----------
.........................................................................
NET REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS AND FOREIGN
CURRENCIES: (a)
Net realized gains (losses) from
investments and foreign currency
transactions (b) 47,977,577 4,141,172
Change in unrealized
appreciation/depreciation from
investments and foreign currencies (11,295,639) (361,730)
----------- ----------
.........................................................................
Net realized/unrealized gains from
investments and foreign currency
transactions 36,681,938 3,779,442
----------- ----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $35,474,469 $3,432,614
----------- ----------
----------- ----------
</Table>
- --------------
(a) With the exception of Growth and Income Fund and Mid-Cap Fund, represents
amounts allocated from the respective Master Portfolios.
(b) Mid-Cap Fund includes $357,646 related to the reimbursement of losses from
the disposal of the investment in certain investment companies. (see note 6)
33 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 1,217,650 $ 1,249,682 $ 4,410,508 $ 4,468,204
Net realized gains (losses) from
investment transactions (164,652) 331,944 5,419,977 1,275,025
Change in unrealized
appreciation/depreciation from
investments (909,347) 32,330 (7,924,615) (86,587)
----------- ----------- ------------ ------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 143,651 1,613,956 1,905,870 5,656,642
----------- ----------- ------------ ------------
.............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (46,585) (79,559) -- --
Class B Shares (167,671) (161,712) -- --
Class C Shares (17,702) (37,490) -- --
Class Y Shares (1,107,840) (1,086,077) -- --
Advisor Shares -- -- (4,620,609) (4,500,718)
NET REALIZED GAINS:
Class A (Investor) Shares (8,294) (135,028) -- --
Class B Shares (34,076) (282,131) -- --
Class C Shares (3,623) (105,514) -- --
Class Y Shares (168,256) (1,415,704) -- --
----------- ----------- ------------ ------------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (1,554,047) (3,303,215) (4,620,609) (4,500,718)
----------- ----------- ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (7,184,938) (2,200,141) (17,060,133) (2,606,046)
----------- ----------- ------------ ------------
CHANGE IN NET ASSETS (8,595,334) (3,889,400) (19,774,872) (1,450,122)
..............................................................................................................................
NET ASSETS:
Beginning of period 39,774,142 43,663,542 109,518,309 110,968,431
----------- ----------- ------------ ------------
End of period $31,178,808 $39,774,142 $ 89,743,437 $109,518,309
=========== =========== ============ ============
Accumulated net investment
income (loss) $ 14,682 $ (2,273) $ 1,400,871 $ 61,426
=========== =========== ============ ============
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 34
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
LIMITED MATURITY FUND FIXED INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 34,242 $ 420,136 $ -- $ --
Dividends reinvested 50,200 200,881 -- --
Cost of shares redeemed (535,335) (2,229,725) -- --
----------- ------------ ------------ -----------
Class A (Investor) Shares capital
transactions (450,893) (1,608,708) -- --
----------- ------------ ------------ -----------
.............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 321,814 893,262 -- --
Dividends reinvested 167,106 397,930 -- --
Cost of shares redeemed (1,732,661) (1,163,686) -- --
----------- ------------ ------------ -----------
Class B Shares capital
transactions (1,243,741) 127,506 -- --
----------- ------------ ------------ -----------
.............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 73,800 83,393 -- --
Dividends reinvested 20,896 141,149 -- --
Cost of shares redeemed (222,961) (1,990,271) -- --
----------- ------------ ------------ -----------
Class C Shares capital
transactions (128,265) (1,765,729) -- --
----------- ------------ ------------ -----------
.............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 3,589,138 9,931,279 -- --
Dividends reinvested 949,314 1,913,383 -- --
Cost of shares redeemed (9,900,491) (10,797,872) -- --
----------- ------------ ------------ -----------
Class Y Shares capital
transactions (5,362,039) 1,046,790 -- --
----------- ------------ ------------ -----------
.............................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued -- -- 19,120,519 26,239,405
Dividends reinvested -- -- 2,839,680 2,670,922
Cost of shares redeemed -- -- (39,020,332) (31,516,373)
----------- ------------ ------------ -----------
Advisor Shares capital
transactions -- -- (17,060,133) (2,606,046)
----------- ------------ ------------ -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(7,184,938) $ (2,200,141) $(17,060,133) $(2,606,046)
=========== ============= ============ ===========
.............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 3,469 41,873 -- --
Reinvested 5,075 19,911 -- --
Redeemed (54,165) (223,097) -- --
----------- ------------ ------------ -----------
Change in Class A (Investor)
Shares (45,621) (161,313) -- --
----------- ------------ ------------ -----------
.............................................................................................................................
CLASS B SHARES:
Issued 32,423 88,212 -- --
Reinvested 16,867 39,414 -- --
Redeemed (175,199) (115,235) -- --
----------- ------------ ------------ -----------
Change in Class B Shares (125,909) 12,391 -- --
----------- ------------ ------------ -----------
.............................................................................................................................
CLASS C SHARES:
Issued 7,375 8,294 -- --
Reinvested 2,111 13,973 -- --
Redeemed (22,459) (197,361) -- --
----------- ------------ ------------ -----------
Change in Class C Shares (12,973) (175,094) -- --
----------- ------------ ------------ -----------
.............................................................................................................................
CLASS Y SHARES:
Issued 362,553 984,517 -- --
Reinvested 95,902 189,646 -- --
Redeemed (1,000,441) (1,068,607) -- --
----------- ------------ ------------ -----------
Change in Class Y Shares (541,986) 105,556 -- --
----------- ------------ ------------ -----------
.............................................................................................................................
ADVISOR SHARES:
Issued -- -- 1,776,405 2,434,997
Reinvested -- -- 264,105 247,974
Redeemed -- -- (3,627,137) (2,927,030)
----------- ------------ ------------ -----------
Change in Advisor Shares -- -- (1,586,627) (244,059)
----------- ------------ ------------ -----------
</Table>
35 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
BOND FUND NEW YORK TAX-FREE BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 917,047 $ 869,048 $ 2,050,916 $ 1,993,744
Net realized gains (losses) from
investment transactions 357,536 (157,901) 100,731 113,912
Change in unrealized
appreciation/depreciation from
investments (1,010,611) 377,523 (1,531,859) 817,257
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 263,972 1,088,670 619,788 2,924,913
----------- ----------- ----------- -----------
............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (736,448) (638,457) (1,025,066) (868,263)
Class B Shares (217,164) (223,750) (381,218) (419,400)
Class C Shares (12,298) (13,252) (46,591) (61,105)
Class Y Shares -- -- (598,043) (646,490)
NET REALIZED GAINS:
Class A (Investor) Shares -- -- (52,912) (120,953)
Class B Shares -- -- (26,947) (92,061)
Class C Shares -- -- (3,247) (15,865)
Class Y (Adviser) Shares -- -- (30,806) (96,127)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (965,910) (875,459) (2,164,830) (2,320,264)
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 158,293 2,250,029 (1,586,390) 7,769,011
----------- ----------- ----------- -----------
CHANGE IN NET ASSETS (543,645) 2,463,240 (3,131,432) 8,373,660
............................................................................................................................
NET ASSETS:
Beginning of period 24,642,103 22,178,863 72,593,311 64,219,651
----------- ----------- ----------- -----------
End of period $24,098,458 $24,642,103 $69,461,879 $72,593,311
=========== =========== =========== ===========
Accumulated net investment
income (loss) $ 108,687 $ 11,787 $ -- $ 3
=========== =========== =========== ===========
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 36
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
NEW YORK TAX-FREE
BOND FUND BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 5,377,389 $11,120,582 $11,178,427 $ 19,778,905
Dividends reinvested 686,992 592,247 997,193 907,234
Cost of shares redeemed (5,153,657) (8,748,191) (9,874,970) (10,395,878)
----------- ----------- ----------- ------------
Class A (Investor) Shares capital
transactions 910,724 2,964,638 2,300,650 10,290,261
----------- ----------- ----------- ------------
..............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 276,141 899,953 1,160,530 2,134,581
Dividends reinvested 182,474 191,588 300,525 389,604
Cost of shares redeemed (1,128,034) (1,572,057) (2,294,196) (3,543,472)
----------- ----------- ----------- ------------
Class B Shares capital transactions (669,419) (480,516) (833,141) (1,019,287)
----------- ----------- ----------- ------------
..............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 41,252 9,167 168,099 276,101
Dividends reinvested 12,108 12,757 31,499 54,385
Cost of shares redeemed (136,372) (256,017) (712,746) (1,262,303)
----------- ----------- ----------- ------------
Class C Shares capital transactions (83,012) (234,093) (513,148) (931,817)
----------- ----------- ----------- ------------
..............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued -- -- 3,878,812 3,969,688
Dividends reinvested -- -- 88,333 188,028
Cost of shares redeemed -- -- (6,507,896) (4,727,862)
----------- ----------- ----------- ------------
Class Y Shares capital transactions -- -- (2,540,751) (570,146)
----------- ----------- ----------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 158,293 $ 2,250,029 $(1,586,390) $ 7,769,011
=========== =========== =========== ============
..............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 510,841 1,055,569 994,246 1,759,416
Reinvested 65,729 56,325 88,791 80,838
Redeemed (491,249) (833,673) (879,250) (926,189)
----------- ----------- ----------- ------------
Change in Class A (Investor) Shares 85,321 278,221 203,787 914,065
----------- ----------- ----------- ------------
..............................................................................................................................
CLASS B SHARES:
Issued 26,263 85,059 103,036 189,522
Reinvested 17,068 18,245 26,746 34,705
Redeemed (107,440) (149,766) (204,345) (318,736)
----------- ----------- ----------- ------------
Change in Class B Shares (64,109) (46,462) (74,563) (94,509)
----------- ----------- ----------- ------------
...............................................................................................................................
CLASS C SHARES:
Issued 3,914 868 14,856 24,608
Reinvested 1,153 1,213 2,794 4,817
Redeemed (13,005) (24,313) (63,317) (112,449)
----------- ----------- ----------- ------------
Change in Class C Shares (7,938) (22,232) (45,667) (83,024)
----------- ----------- ----------- ------------
..............................................................................................................................
CLASS Y SHARES:
Issued -- -- 345,617 353,878
Reinvested -- -- 7,844 16,713
Redeemed -- -- (579,080) (421,929)
----------- ----------- ----------- ------------
Change in Class Y Shares -- -- (225,619) (51,338)
----------- ----------- ----------- ------------
</Table>
37 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
GROWTH FUND VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 (a) OCTOBER 31, 2005 OCTOBER 31, 2004 (a)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 133,116 $ (57,920) $ 360,402 $ 202,593
Net realized gains (losses) from
investment transactions 1,569,705 (1,428,444) 3,260,840 434,463
Change in unrealized
appreciation/depreciation from
investments 3,355,369 1,153,083 3,423,080 2,013,798
----------- ----------- ------------ -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 5,058,190 (333,281) 7,044,322 2,650,854
----------- ----------- ------------ -----------
.............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (71,973) -- (125,206) (68,463)
Class B Shares -- -- -- (1,749)
Class C Shares -- -- (294) (444)
Class Y Shares (120,143) -- (201,076) (105,185)
NET REALIZED GAINS:
Class A (Investor) Shares -- -- (208,943) --
Class B Shares -- -- (18,614) --
Class C Shares -- -- (3,904) --
Class Y (Adviser) Shares -- -- (241,526) --
----------- ----------- ------------ -----------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (192,116) -- (799,563) (175,841)
----------- ----------- ------------ -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (6,429,843) 38,531,244 (14,599,343) 46,393,483
----------- ----------- ------------ -----------
CHANGE IN NET ASSETS (1,563,769) 38,197,963 (8,354,584) 48,868,496
.............................................................................................................................
NET ASSETS:
Beginning of period 38,197,963 -- 48,868,496 --
----------- ----------- ------------ -----------
End of period $36,634,194 $38,197,963 $ 40,513,912 $48,868,496
=========== =========== ============ ===========
Accumulated net investment income (loss) $ -- $ -- $ 294,913 $ 30,849
=========== =========== ============ ===========
</Table>
- --------------
(a) The Growth Fund and Value Fund commenced operations on May 7, 2004.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 38
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
GROWTH FUND VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 (a) OCTOBER 31, 2005 OCTOBER 31, 2004 (a)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 7,190,005 $19,786,406 $ 6,244,508 $23,212,388
Dividends reinvested 71,637 -- 332,959 67,173
Cost of shares redeemed (5,124,260) (2,253,596) (6,994,075) (3,411,150)
------------ ----------- ------------ -----------
Class A (Investor) Shares capital
transactions 2,137,382 17,532,810 (416,608) 19,868,411
------------ ----------- ------------ -----------
............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 179,753 1,516,870 221,506 1,963,686
Dividends reinvested -- -- 18,074 1,711
Cost of shares redeemed (421,388) (93,968) (645,696) (124,729)
------------ ----------- ------------ -----------
Class B Shares capital transactions (241,635) 1,422,902 (406,116) 1,840,668
------------ ----------- ------------ -----------
............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 1,916 329,711 1,918 402,773
Dividends reinvested -- -- 4,190 440
Cost of shares redeemed (4,610) (17,780) (66,676) (23,948)
------------ ----------- ------------ -----------
Class C Shares capital transactions (2,694) 311,931 (60,568) 379,265
------------ ----------- ------------ -----------
............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 3,674,487 20,852,452 3,422,732 26,452,278
Dividends reinvested 95,917 -- 388,870 81,165
Cost of shares redeemed (12,093,300) (1,588,851) (17,527,653) (2,228,304)
------------ ----------- ------------ -----------
Class Y Shares capital transactions (8,322,896) 19,263,601 (13,716,051) 24,305,139
------------ ----------- ------------ -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (6,429,843) $38,531,244 $(14,599,343) $46,393,483
============ =========== ============ ===========
............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 543,733 1,564,821 432,340 1,818,480
Reinvested 5,380 -- 23,041 5,025
Redeemed (385,043) (180,067) (479,115) (259,287)
------------ ----------- ------------ -----------
Change in Class A (Investor) Shares 164,070 1,384,754 (23,734) 1,564,218
------------ ----------- ------------ -----------
............................................................................................................................
CLASS B SHARES:
Issued 13,881 123,574 15,903 159,465
Reinvested -- -- 1,182 133
Redeemed (32,632) (7,770) (45,745) (9,945)
------------ ----------- ------------ -----------
Change in Class B Shares (18,751) 115,804 (28,660) 149,653
------------ ----------- ------------ -----------
............................................................................................................................
CLASS C SHARES:
Issued 169 26,836 131 32,464
Reinvested -- -- 299 34
Redeemed (357) (1,459) (4,608) (1,864)
------------ ----------- ------------ -----------
Change in Class C Shares (188) 25,377 (4,178) 30,634
------------ ----------- ------------ -----------
............................................................................................................................
CLASS Y SHARES:
Issued 278,002 1,651,120 237,945 2,077,872
Reinvested 7,226 -- 26,943 6,073
Redeemed (880,050) (127,913) (1,184,279) (169,950)
------------ ----------- ------------ -----------
Change in Class Y Shares (594,822) 1,523,207 (919,391) 1,913,995
------------ ----------- ------------ -----------
</Table>
- --------------
(a) The Growth Fund and Value Fund commenced operations on May 7, 2004.
39 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 1,924,523 $ 1,573,190 $ (258,037) $ (448,035)
Net realized gains (losses) from
investment transactions 42,217,628 9,000,926 30,598,634 21,489,500
Change in unrealized
appreciation/depreciation from
investments (22,761,234) (23,421) (13,661,163) (11,346,234)
------------- ------------ ------------- ------------
..............................................................................................................................
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 21,380,917 10,550,695 16,679,434 9,695,231
------------- ------------ ------------- ------------
..............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares (13,734) (12,296) -- --
Class B Shares (14,001) (876) -- --
Class C Shares (a) (192) (24) -- --
Class Y Shares (2,477,542) (1,535,871) -- --
------------- ------------ ------------- ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (2,505,469) (1,549,067) -- --
------------- ------------ ------------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (168,065,613) (14,941,610) (113,747,380) (51,555,708)
------------- ------------ ------------- ------------
CHANGE IN NET ASSETS (149,190,165) (5,939,982) (97,067,946) (41,860,477)
...............................................................................................................................
NET ASSETS:
Beginning of period 201,580,819 207,520,801 126,362,380 168,222,857
------------- ------------ ------------- ------------
End of period $ 52,390,654 $201,580,819 $ 29,294,434 $126,362,380
============= ============ ============= ============
Accumulated net investment income (loss) $ -- $ 566,583 $ -- $ --
============= ============ ============= ============
</Table>
- --------------
(a) Growth and Income Fund Class C commenced operations on November 3, 2003.
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 40
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
GROWTH AND INCOME FUND MID-CAP FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ 137,722 $ 1,500,035 $ 364,447 $ 863,793
Dividends reinvested 13,438 12,137 -- --
Cost of shares redeemed (534,595) (1,915,097) (405,751) (614,831)
------------- ------------ ------------- ------------
Class A (Investor) Shares capital
transactions (383,435) (402,925) (41,304) 248,962
------------- ------------ ------------- ------------
..............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 527,760 1,837,750 496,846 1,257,527
Dividends reinvested 13,755 869 -- --
Cost of shares redeemed (592,341) (320,783) (1,227,997) (548,619)
------------- ------------ ------------- ------------
Class B Shares capital transactions (50,826) 1,517,836 (731,151) 708,908
------------- ------------ ------------- ------------
..............................................................................................................................
CLASS C SHARES: (a)
Proceeds from shares issued 2,599 45,962 1,800 38,477
Dividends reinvested 183 -- -- --
Cost of shares redeemed (20) (5,303) (25) (4,165)
------------- ------------ ------------- ------------
Class C Shares capital transactions 2,762 40,659 1,775 34,312
------------- ------------ ------------- ------------
...............................................................................................................................
CLASS Y SHARES:
Proceeds from shares issued 8,479,032 12,306,056 -- --
Dividends reinvested 622,998 348,375 -- --
Cost of shares redeemed (131,458,444) (28,751,611) -- --
Redemption In-Kind (45,277,700) -- -- --
------------- ------------ ------------- ------------
Class Y Shares capital transactions (167,634,114) (16,097,180) -- --
------------- ------------ ------------- ------------
...............................................................................................................................
TRUST SHARES:
Proceeds from shares issued -- -- 5,350,460 11,848,793
Cost of shares redeemed -- -- (69,769,880) (64,396,683)
Redemption In-Kind -- -- (48,557,280) --
------------- ------------ ------------- ------------
Trust Shares capital transactions -- -- (112,976,700) (52,547,890)
------------- ------------ ------------- ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(168,065,613) $(14,941,610) $(113,747,380) $(51,555,708)
============= ============ ============= ============
...............................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued 14,916 170,577 38,102 103,921
Reinvested 1,443 1,389 -- --
Redeemed (58,381) (218,685) (42,829) (74,968)
------------- ------------ ------------- ------------
Change in Class A (Investor) Shares (42,022) (46,719) (4,727) 28,953
------------- ------------ ------------- ------------
...............................................................................................................................
CLASS B SHARES:
Issued 57,646 209,864 55,019 155,872
Reinvested 1,492 101 -- --
Redeemed (64,860) (37,302) (134,933) (69,124)
------------- ------------ ------------- ------------
Change in Class B Shares (5,722) 172,663 (79,914) 86,748
------------- ------------ ------------- ------------
...............................................................................................................................
CLASS C SHARES: (a)
Issued 287 5,315 201 4,931
Reinvested 20 -- -- --
Redeemed (2) (595) (3) (506)
------------- ------------ ------------- ------------
Change in Class C Shares 305 4,720 198 4,425
------------- ------------ ------------- ------------
...............................................................................................................................
CLASS Y SHARES:
Issued 917,280 1,406,257 -- --
Reinvested 66,974 39,834 -- --
Redeemed (13,877,205) (3,307,085) -- --
Redemption In-Kind (4,672,621) -- -- --
------------- ------------ ------------- ------------
Change in Class Y Shares (17,565,572) (1,860,994) -- --
------------- ------------ ------------- ------------
...............................................................................................................................
TRUST SHARES:
Issued -- -- 561,225 1,427,284
Redeemed -- -- (7,160,908) (7,710,357)
Redemption In-Kind -- -- (5,215,605) --
------------- ------------ ------------- ------------
Change in Trust Shares -- -- (11,815,288) (6,283,073)
------------- ------------ ------------- ------------
</Table>
- --------------
(a) Growth and Income Fund Class C Shares commenced operations on
November 3, 2003.
41 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 3,493,764 $ 1,840,313 $ 261,810 $ 118,843
Net realized gains (losses) from
investment and foreign currency
transactions 12,653,084 19,965,089 1,709,313 2,009,405
Change in unrealized
appreciation/depreciation from
investments and foreign currencies 14,319,665 2,586,405 1,850,263 693,652
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 30,466,513 24,391,807 3,821,386 2,821,900
------------ ------------ ------------ ------------
...............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A (Investor) Shares -- -- (86,962) (75,763)
Advisor Shares (2,396,450) (3,737,768) -- --
NET REALIZED GAINS FROM INVESTMENT AND
FOREIGN
CURRENCY TRANSACTIONS:
Class A (Investor) Shares -- -- (1,064,452) --
Class B Shares -- -- (122,864) --
Class C Shares -- -- (7,702) --
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM SHAREHOLDER
DIVIDENDS (2,396,450) (3,737,768) (1,281,980) (75,763)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 16,757,285 4,005,057 789,114 5,879,349
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS 44,827,348 24,659,096 3,328,520 8,625,486
...............................................................................................................................
NET ASSETS:
Beginning of period 148,316,775 123,657,679 19,919,219 11,293,733
------------ ------------ ------------ ------------
End of period $193,144,123 $148,316,775 $ 23,247,739 $ 19,919,219
============ ============ ============ ============
Accumulated net investment income (loss) $ 3,030,485 $ 2,066,521 $ 247,876 $ 86,769
============ ============ ============ ============
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 42
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
INTERNATIONAL EQUITY FUND OVERSEAS EQUITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $ 5,532,757 $10,468,157
Dividends reinvested -- -- 1,138,107 74,544
Cost of shares redeemed -- -- (5,992,575) (5,380,471)
------------ ------------ ----------- -----------
Class A (Investor) Shares capital
transactions -- -- 678,289 5,162,230
------------ ------------ ----------- -----------
.................................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 342,387 836,302
Dividends reinvested -- -- 119,012 --
Cost of shares redeemed -- -- (360,874) (111,311)
------------ ------------ ----------- -----------
Class B Shares capital transactions -- -- 100,525 724,991
------------ ------------ ----------- -----------
.................................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 11,807 24,526
Dividends reinvested -- -- 7,641 --
Cost of shares redeemed -- -- (9,148) (32,398)
------------ ------------ ----------- -----------
Class C Shares capital transactions -- -- 10,300 (7,872)
------------ ------------ ----------- -----------
.................................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 58,275,702 26,978,110 -- --
Dividends reinvested 1,241,344 1,968,545 -- --
Cost of shares redeemed (42,759,761) (24,941,598) -- --
------------ ------------ ----------- -----------
Advisor Shares capital transactions 16,757,285 4,005,057 -- --
------------ ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 16,757,285 $ 4,005,057 $ 789,114 $ 5,879,349
============ ============ =========== ===========
.................................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 375,295 816,578
Reinvested -- -- 79,895 5,847
Redeemed -- -- (400,918) (411,221)
------------ ------------ ----------- -----------
Change in Class A (Investor) Shares -- -- 54,272 411,204
------------ ------------ ----------- -----------
.................................................................................................................................
CLASS B SHARES:
Issued -- -- 24,056 67,626
Reinvested -- -- 8,435 --
Redeemed -- -- (25,222) (9,063)
------------ ------------ ----------- -----------
Change in Class B Shares -- -- 7,269 58,563
------------ ------------ ----------- -----------
.................................................................................................................................
CLASS C SHARES:
Issued -- -- 831 1,956
Reinvested -- -- 544 --
Redeemed -- -- (609) (2,475)
------------ ------------ ----------- -----------
Change in Class C Shares -- -- 766 (519)
------------ ------------ ----------- -----------
.................................................................................................................................
ADVISOR SHARES:
Issued 3,503,991 1,962,577 -- --
Reinvested 77,827 151,249 -- --
Redeemed (2,539,074) (1,835,748) -- --
------------ ------------ ----------- -----------
Change in Advisor Shares 1,042,744 278,078 -- --
------------ ------------ ----------- -----------
</Table>
43 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ (1,207,469) $ (1,757,367) $ (346,828) $ (350,135)
Net realized gains (losses) from
investment transactions 47,977,577 30,929,551 4,141,172 1,634,222
Change in unrealized
appreciation/depreciation from
investments (11,295,639) (11,885,640) (361,730) (121,946)
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 35,474,469 17,286,544 3,432,614 1,162,141
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS (137,624,740) (63,689,406) (1,568,177) 3,652,913
------------- ------------ ----------- -----------
CHANGE IN NET ASSETS (102,150,271) (46,402,862) 1,864,437 4,815,054
..............................................................................................................................
NET ASSETS:
Beginning of period 279,668,949 326,071,811 25,856,226 21,041,172
------------- ------------ ----------- -----------
End of period $ 177,518,678 $279,668,949 $27,720,663 $25,856,226
------------- ------------ ----------- -----------
Accumulated net investment income (loss) $ -- $ -- $ -- $ --
============= ============= =========== ===========
</Table>
See notes to financial statements. HSBC INVESTOR FAMILY OF FUNDS 44
HSBC INVESTOR FAMILY OF FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
SMALL CAP EQUITY FUND OPPORTUNITY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2005 2004 2005 2004
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Proceeds from shares issued $ -- $ -- $ 4,837,326 $11,062,186
Cost of shares redeemed -- -- (5,698,960) (7,827,796)
------------- ------------- ----------- -----------
Class A (Investor) Shares capital
transactions -- -- (861,634) 3,234,390
------------- ------------- ----------- -----------
..................................................................................................................................
CLASS B SHARES:
Proceeds from shares issued -- -- 244,211 1,037,036
Cost of shares redeemed -- -- (877,468) (548,444)
------------- ------------- ----------- -----------
Class B Shares capital transactions -- -- (633,257) 488,592
------------- ------------- ----------- -----------
..................................................................................................................................
CLASS C SHARES:
Proceeds from shares issued -- -- 16,069 46,142
Cost of shares redeemed -- -- (89,355) (116,211)
------------- ------------- ----------- -----------
Class C Shares capital transactions -- -- (73,286) (70,069)
------------- ------------- ----------- -----------
..................................................................................................................................
ADVISOR SHARES:
Proceeds from shares issued 14,466,184 49,388,314 -- --
Cost of shares redeemed (90,280,738) (113,077,720) -- --
Redemption In-Kind (61,810,186) -- -- --
------------- ------------- ----------- -----------
Advisor Shares capital transactions (137,624,740) (63,689,406) -- --
------------- ------------- ----------- -----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $(137,624,740) $ (63,689,406) $(1,568,177) $ 3,652,913
============= ============= =========== ===========
..................................................................................................................................
SHARE TRANSACTIONS:
CLASS A (INVESTOR) SHARES:
Issued -- -- 411,566 1,041,089
Redeemed -- -- (481,625) (736,333)
------------- ------------- ----------- -----------
Change in Class A (Investor) Shares -- -- (70,059) 304,756
------------- ------------- ----------- -----------
..................................................................................................................................
CLASS B SHARES:
Issued -- -- 22,382 102,168
Redeemed -- -- (79,084) (55,286)
------------- ------------- ----------- -----------
Change in Class B Shares -- -- (56,702) 46,882
------------- ------------- ----------- -----------
..................................................................................................................................
CLASS C SHARES:
Issued -- -- 1,413 4,725
Redeemed -- -- (8,351) (11,371)
------------- ------------- ----------- -----------
Change in Class C Shares -- -- (6,938) (6,646)
------------- ------------- ----------- -----------
..................................................................................................................................
ADVISOR SHARES:
Issued 1,031,358 3,907,178 -- --
Redeemed (6,178,289) (8,901,381) -- --
Redemption In-Kind (4,362,046) -- -- --
------------- ------------- ----------- -----------
Change in Advisor Shares (9,508,977) (4,994,203) -- --
------------- ------------- ----------- -----------
</Table>
45 HSBC INVESTOR FAMILY OF FUNDS See notes to financial statements.
HSBC INVESTOR FUNDS -- LIMITED MATURITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ -------------------------------------
NET REALIZED AND NET
NET ASSET UNREALIZED GAINS TOTAL REALIZED
VALUE, NET (LOSSES) FROM FROM NET GAINS FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2001 (f) $10.04 0.33 0.54 0.87 (0.33) -- (0.33)
Year ended October 31, 2002 10.58 0.44 (0.10) 0.34 (0.44) (0.05) (0.49)
Year ended October 31, 2003 10.43 0.33 0.08 0.41 (0.37) -- (0.37)
Year ended October 31, 2004 10.47 0.32* 0.06 0.38 (0.33) (0.46) (0.79)
Year ended October 31, 2005 10.06 0.33 (0.29) 0.04 (0.37) (0.06) (0.43)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2001 (h) $10.07 0.25 0.52 0.77 (0.25) -- (0.25)
Year ended October 31, 2002 10.59 0.36 (0.09) 0.27 (0.36) (0.05) (0.41)
Year ended October 31, 2003 10.45 0.25 0.08 0.33 (0.29) -- (0.29)
Year ended October 31, 2004 10.49 0.23 0.08 0.31 (0.26) (0.46) (0.72)
Year ended October 31, 2005 10.08 0.25 (0.29) (0.04) (0.29) (0.06) (0.35)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2001 (i) $10.07 0.26 0.51 0.77 (0.26) -- (0.26)
Year ended October 31, 2002 10.58 0.36 (0.09) 0.27 (0.36) (0.05) (0.41)
Year ended October 31, 2003 10.44 0.25 0.09 0.34 (0.29) -- (0.29)
Year ended October 31, 2004 10.49 0.22* 0.08 0.30 (0.26) (0.46) (0.72)
Year ended October 31, 2005 10.07 0.25 (0.29) (0.04) (0.29) (0.06) (0.35)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2001 (j) $10.00 0.37 0.59 0.96 (0.37) -- (0.37)
Year ended October 31, 2002 10.59 0.46 (0.09) 0.37 (0.46) (0.05) (0.51)
Year ended October 31, 2003 10.45 0.33 0.10 0.43 (0.40) -- (0.40)
Year ended October 31, 2004 10.48 0.33 0.09 0.42 (0.36) (0.46) (0.82)
Year ended October 31, 2005 10.08 0.35 (0.30) 0.05 (0.39) (0.06) (0.45)
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------
RATIO OF
RATIO OF NET
NET ASSETS AT EXPENSES INVESTMENT RATIO OF
NET ASSET END OF TO AVERAGE INCOME TO EXPENSES TO
VALUE, END TOTAL PERIOD NET AVERAGE NET AVERAGE PORTFOLIO
OF PERIOD RETURN(b) (000'S) ASSETS(c) ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2001 (f) $10.58 8.78 % $ 977 1.10% 4.27% 1.49% 102.01%
Year ended October 31, 2002 10.43 3.34 % 1,608 0.96% 4.14% 0.96% 44.04%
Year ended October 31, 2003 10.47 3.97 % 3,309 1.01% 2.99% 1.01% 98.42%
Year ended October 31, 2004 10.06 3.90 % 1,558 1.10% 3.01% 1.21% 50.06%
Year ended October 31, 2005 9.67 0.31 %(g) 1,055 1.01%(g) 3.37%(g) 1.10%(g) 107.26%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2001 (h) $10.59 8.02 % $ 896 1.85% 3.52% 7.59% 102.01%
Year ended October 31, 2002 10.45 2.65 % 4,178 1.70% 3.30% 1.70% 44.04%
Year ended October 31, 2003 10.49 3.19 % 6,443 1.73% 2.30% 1.73% 98.42%
Year ended October 31, 2004 10.08 3.11 % 6,321 1.85% 2.28% 1.96% 50.06%
Year ended October 31, 2005 9.69 (0.44)%(g) 4,852 1.76%(g) 2.60%(g) 1.85%(g) 107.26%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2001 (i) $10.58 7.80 % $ 161 1.85% 3.60% 17.61% 102.01%
Year ended October 31, 2002 10.44 2.65 % 1,759 1.70% 3.26% 1.70% 44.04%
Year ended October 31, 2003 10.49 3.29 % 2,544 1.73% 2.31% 1.73% 98.42%
Year ended October 31, 2004 10.07 3.03 % 679 1.85% 2.25% 1.96% 50.06%
Year ended October 31, 2005 9.68 (0.44)%(g) 527 1.77%(g) 2.60%(g) 1.86%(g) 107.26%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2001 (j) $10.59 9.78 % $67,315 0.85% 4.59% 0.85% 102.01%
Year ended October 31, 2002 10.45 3.69 % 94,886 0.71% 4.42% 0.71% 44.04%
Year ended October 31, 2003 10.48 4.12 % 31,368 0.69% 3.62% 0.69% 98.42%
Year ended October 31, 2004 10.08 4.25 % 31,217 0.85% 3.28% 0.96% 50.06%
Year ended October 31, 2005 9.68 0.45 %(g) 24,744 0.76%(g) 3.60%(g) 0.85%(g) 107.26%
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Limited Maturity Portfolio.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(f) Class A (Investor) Shares commenced operations on February 7, 2001.
(g) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to
the net expense ratio, net income ratio, gross expense ratio and total
return were 0.09%, 0.09%, 0.09% and 0.08% for Class A Shares, Class B
Shares, Class C Shares and Class Y Shares, respectively.
(h) Class B Shares commenced operations on February 15, 2001.
(i) Class C Shares commenced operations on February 13, 2001.
(j) Class Y Shares commenced operations on January 23, 2001.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 46
HSBC ADVISOR FUNDS TRUST -- FIXED INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM
VALUE, NET INVESTMENT AND TOTAL FROM NET
BEGINNING OF INVESTMENT FUTURES INVESTMENT INVESTMENT TOTAL
PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2001 $ 9.99 0.67 0.80 1.47 (0.65) (0.65)
Year ended October 31, 2002 10.81 0.55 (0.14) 0.41 (0.59) (0.59)
Year ended October 31, 2003 10.63 0.41 0.19 0.60 (0.50) (0.50)
Year ended October 31, 2004 10.73 0.45 0.12 0.57 (0.45) (0.45)
Year ended October 31, 2005 10.85 0.44 (0.27) 0.17 (0.47) (0.47)
- ------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
NET ASSET AT END OF EXPENSES TO INCOME TO EXPENSES TO
VALUE, END TOTAL PERIOD AVERAGE AVERAGE AVERAGE NE PORTFOLIO
OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- -------------------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2001 $10.81 15.11% $150,580 0.63% 6.45% 0.63% 341.26%
Year ended October 31, 2002 10.63 3.94% 284,841 0.56% 5.06% 0.56% 77.82%
Year ended October 31, 2003 10.73 5.71% 110,968 0.56% 4.30% 0.56% 70.91%
Year ended October 31, 2004 10.85 5.46% 109,518 0.64% 4.20% 0.64% 34.88%
Year ended October 31, 2005 10.55 1.55%(f 89,743 0.52%(f) 4.15%(f) 0.52% 176.60%
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Fixed Income Portfolio.
(b) Not Annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its investable assets.
(f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to
the net expense ratio, net income ratio, gross expense ratio and total
return were 0.11% for the Advisor Shares.
See notes to financial statements.
47 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FUNDS -- BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET (LOSSES) FROM
VALUE, NET INVESTMENT AND TOTAL FROM NET
BEGINNING OF INVESTMENT FUTURES INVESTMENT INVESTMENT TOTAL
PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS
- -------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $ 9.76 0.60 0.77 1.37 (0.58) (0.58)
Year ended October 31, 2002 10.55 0.49 (0.14) 0.35 (0.52) (0.52)
Year ended October 31, 2003 10.38 0.40 0.13 0.53 (0.43) (0.43)
Year ended October 31, 2004 10.48 0.40 0.12 0.52 (0.40) (0.40)
Year ended October 31, 2005 10.60 0.39 (0.27) 0.12 (0.42) (0.42)
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $ 9.77 0.52 0.76 1.28 (0.50) (0.50)
Year ended October 31, 2002 10.55 0.41 (0.13) 0.28 (0.44) (0.44)
Year ended October 31, 2003 10.39 0.32 0.13 0.45 (0.35) (0.35)
Year ended October 31, 2004 10.49 0.32 0.11 0.43 (0.32) (0.32)
Year ended October 31, 2005 10.60 0.32 (0.27) 0.05 (0.34) (0.34)
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $ 9.76 0.51 0.77 1.28 (0.50) (0.50)
Year ended October 31, 2002 10.54 0.41 (0.13) 0.28 (0.44) (0.44)
Year ended October 31, 2003 10.38 0.32 0.13 0.45 (0.35) (0.35)
Year ended October 31, 2004 10.48 0.32 0.11 0.43 (0.32) (0.32)
Year ended October 31, 2005 10.59 0.32 (0.27) 0.05 (0.34) (0.34)
- -------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES TO INCOME TO EXPENSES TO
END OF TOTAL PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO
PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $10.55 14.41% $ 6,683 1.10% 5.92% 2.61% 341.26%
Year ended October 31, 2002 10.38 3.44% 12,053 1.10% 4.52% 1.47% 77.82%
Year ended October 31, 2003 10.48 5.17% 14,143 1.10% 3.76% 1.21% 70.91%
Year ended October 31, 2004 10.60 5.07% 17,248 1.04% 3.78% 1.26% 34.88%
Year ended October 31, 2005 10.30 1.16%(f) 17,646 0.84%(f) 3.82%(f) 1.15%(f) 176.60%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $10.55 13.43% $ 1,494 1.85% 5.04% 3.32% 341.26%
Year ended October 31, 2002 10.39 2.76% 6,124 1.85% 3.66% 2.18% 77.82%
Year ended October 31, 2003 10.49 4.38% 7,430 1.85% 3.01% 1.96% 70.91%
Year ended October 31, 2004 10.60 4.19% 7,017 1.79% 3.05% 2.01% 34.88%
Year ended October 31, 2005 10.31 0.50%(f) 6,168 1.59%(f) 3.08%(f) 1.90%(f) 176.60%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $10.54 13.44% $ 526 1.85% 5.11% 3.34% 341.26%
Year ended October 31, 2002 10.38 2.77% 983 1.85% 3.75% 2.21% 77.82%
Year ended October 31, 2003 10.48 4.39% 606 1.85% 3.06% 1.97% 70.91%
Year ended October 31, 2004 10.59 4.20% 377 1.80% 3.07% 2.02% 34.88%
Year ended October 31, 2005 10.30 0.51%(f) 285 1.58%(f) 3.14%(f) 1.89%(f) 176.60%
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Fixed Income Portfolio.
(b) Not Annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
(f) During the year ended Oa
ctober 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to the
net expense ratio, net income ratio, gross expense ratio and total return
were 0.11%, 0.11% and 0.12% for Class A Shares, Class B Shares and Class C
Shares, respectively.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 48
HSBC INVESTOR FUNDS -- NEW YORK TAX-FREE BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ -------------------------------------
NET REALIZED AND
UNREALIZED GAINS NET REALIZED
NET ASSET (LOSSES) FROM GAINS FROM
VALUE, NET INVESTMENT AND TOTAL FROM NET INVESTMENT
BEGINNING INVESTMENT FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $10.39 0.41 0.54 0.95 (0.41) -- (0.41)
Year ended October 31, 2002 10.93 0.38 0.16 0.54 (0.38) -- (0.38)
Year ended October 31, 2003 11.09 0.38 0.12 0.50 (0.38) -- (0.38)
Year ended October 31, 2004 11.21 0.34 0.17 0.51 (0.34) (0.06) (0.40)
Year ended October 31, 2005 11.32 0.34 (0.22) 0.12 (0.34) (0.02) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $10.38 0.33 0.54 0.87 (0.33) -- (0.33)
Year ended October 31, 2002 10.92 0.30 0.16 0.46 (0.30) -- (0.30)
Year ended October 31, 2003 11.08 0.30 0.12 0.42 (0.30) -- (0.30)
Year ended October 31, 2004 11.20 0.25 0.17 0.42 (0.25) (0.06) (0.31)
Year ended October 31, 2005 11.31 0.25 (0.22) 0.03 (0.25) (0.02) (0.27)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $10.42 0.33 0.54 0.87 (0.33) -- (0.33)
Year ended October 31, 2002 10.96 0.30 0.16 0.46 (0.30) -- (0.30)
Year ended October 31, 2003 11.12 0.30 0.13 0.43 (0.30) -- (0.30)
Year ended October 31, 2004 11.25 0.25 0.16 0.41 (0.25) (0.06) (0.31)
Year ended October 31, 2005 11.35 0.25 (0.22) 0.03 (0.25) (0.02) (0.27)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 2001 $10.39 0.44 0.54 0.98 (0.44) -- (0.44)
Year ended October 31, 2002 10.93 0.41 0.16 0.57 (0.41) -- (0.41)
Year ended October 31, 2003 11.09 0.41 0.12 0.53 (0.41) -- (0.41)
Year ended October 31, 2004 11.21 0.37 0.17 0.54 (0.37) (0.06) (0.43)
Year ended October 31, 2005 11.32 0.37 (0.22) 0.15 (0.37) (0.02) (0.39)
- ------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT RATIO OF
NET ASSET END OF EXPENSES INCOME TO EXPENSES TO
VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE PORTFOLIO
OF PERIOD RETURN(a) (000'S) NET ASSETS(b) NET ASSETS(b) NET ASSETS(b)(c) TURNOVER(d)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $10.93 9.26% $17,722 0.95% 3.91% 1.07% 0.00%
Year ended October 31, 2002 11.09 5.08% 16,341 0.95% 3.52% 0.95% 30.70%
Year ended October 31, 2003 11.21 4.57% 22,326 0.91% 3.39% 0.91% 29.79%
Year ended October 31, 2004 11.32 4.57% 32,889 0.87% 3.01% 0.87% 26.96%
Year ended October 31, 2005 11.08 1.03%(e) 34,441 0.88%(e) 3.02%(e) 0.89% 13.87%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $10.92 8.44% $ 5,619 1.70% 3.05% 1.82% 0.00%
Year ended October 31, 2002 11.08 4.30% 12,699 1.70% 2.74% 1.70% 30.70%
Year ended October 31, 2003 11.20 3.80% 18,352 1.66% 2.64% 1.66% 29.79%
Year ended October 31, 2004 11.31 3.80% 17,457 1.62% 2.27% 1.62% 26.96%
Year ended October 31, 2005 11.07 0.28%(e) 16,258 1.63%(e) 2.27%(e) 1.64% 13.87%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $10.96 8.40% $ 1,523 1.70% 3.04% 1.83% 0.00%
Year ended October 31, 2002 11.12 4.28% 2,608 1.70% 2.74% 1.70% 30.70%
Year ended October 31, 2003 11.25 3.87% 3,252 1.66% 2.64% 1.66% 29.79%
Year ended October 31, 2004 11.35 3.69% 2,340 1.62% 2.26% 1.62% 26.96%
Year ended October 31, 2005 11.11 0.28%(e) 1,782 1.63%(e) 2.26%(e) 1.64% 13.87%
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Year ended October 31, 2001 $10.93 9.53% $14,989 0.70% 4.19% 0.83% 0.00%
Year ended October 31, 2002 11.09 5.34% 19,753 0.70% 3.76% 0.70% 30.70%
Year ended October 31, 2003 11.21 4.84% 20,290 0.67% 3.67% 0.67% 29.79%
Year ended October 31, 2004 11.32 4.83% 19,908 0.62% 3.27% 0.62% 26.96%
Year ended October 31, 2005 11.08 1.28%(e) 16,981 0.63%(e) 3.27%(e) 0.64% 13.87%
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
(a) Not Annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(b) Annualized for periods less than one year.
(c) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole,
without the distinguishing between the classes of shares issued.
(e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the Fund related to violation of certain investment policies and
limitations. The corresponding impact to the net expense ratio, net income
ratio and total return were 0.01%, 0.01%, 0.01% and 0.01% for Class A
Shares, Class B Shares, Class C Shares and Class Y Shares, respectively.
See notes to financial statements.
49 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FUNDS -- GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------
NET REALIZED AND
UNREALIZED GAINS
NET ASSET NET (LOSSES) FROM
VALUE, INVESTMENT INVESTMENT AND TOTAL FROM NET
BEGINNING OF INCOME FUTURES INVESTMENT INVESTMENT TOTAL
PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS
- -------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2004 (f) $12.68 (0.02) (0.11) (0.13) -- --
Year ended October 31,
2005 12.55 0.03 1.59 1.62 (0.05) (0.05)
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2004 (f) $12.28 (0.07) (0.10) (0.17) -- --
Year ended October 31,
2005 12.11 (0.07) 1.53 1.46 -- --
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2004 (f) $12.35 (0.06) (0.12) (0.18) -- --
Year ended October 31,
2005 12.17 (0.07) 1.54 1.47 -- --
- -------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2004 (f) $12.67 (0.01) (0.11) (0.12) -- --
Year ended October 31,
2005 12.55 0.06 1.59 1.65 (0.08) (0.08)
- -------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
----------------------------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT RATIO OF
NET ASSET END OF EXPENSES TO INCOME (LOSS) EXPENSES TO
VALUE, END TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO
OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2004 (f) $12.55 (1.03)% $17,372 1.20% (0.42)% 1.31% 53.08%
Year ended October 31,
2005 14.12 12.91 %(g 21,866 1.15%(g) 0.19 %(g) 1.35%(g) 79.54%
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2004 (f) $12.11 (1.38)% $ 1,402 1.95% (1.17)% 2.06% 53.08%
Year ended October 31,
2005 13.57 12.06 %(g 1,317 1.90%(g) (0.48)%(g) 2.09%(g) 79.54%
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2004 (f) $12.17 (1.46)% $ 309 1.95% (1.18)% 2.06% 53.08%
Year ended October 31,
2005 13.64 12.08 %(g 344 1.90%(g) (0.51)%(g) 2.10%(g) 79.54%
- -------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2004 (f) $12.55 0.95 % $19,115 0.95% (0.17)% 1.06% 53.08%
Year ended October 31,
2005 14.12 13.17 %(g 13,107 0.90%(g) 0.56 %(g) 1.07%(g) 79.54%
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Growth Portfolio.
(b) Not Annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all its investable assets.
(f) Class A Shares, Class B Shares, Class C Shares and Class Y Shares commenced
operations on May 7, 2004.
(g) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to the
net expense ratio, net income ratio, gross expense ratio and total return
were 0.05%, 0.05%, 0.05% and 0.05% for Class A Shares, Class B Shares, Class
C Shares and Class Y Shares, respectively.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 50
HSBC INVESTOR FUNDS -- VALUE FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
--------------------------------------------- -------------------------------------
NET REALIZED AND
UNREALIZED GAINS NET REALIZED
NET ASSET NET (LOSSES) FROM GAINS FROM
VALUE, INVESTMENT INVESTMENT AND TOTAL FROM NET INVESTMENT
BEGINNING INCOME FUTURES INVESTMENT INVESTMENT AND FUTURES TOTAL
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2004 (f) $12.68 0.05 0.69 0.74 (0.04) -- (0.04)
Year ended October 31,
2005 13.38 0.10 1.86 1.96 (0.08) (0.13) (0.21)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2004 (f) $12.28 -- 0.68 0.68 (0.01) -- (0.01)
Year ended October 31,
2005 12.95 (0.02) 1.80 1.78 -- (0.13) (0.13)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2004 (f) $12.35 0.01 0.67 0.68 (0.02) -- (0.02)
Year ended October 31,
2005 13.01 (0.02) 1.82 1.80 (0.01) (0.13) (0.14)
- ----------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2004 (f) $12.67 0.07 0.70 0.77 (0.06) -- (0.06)
Year ended October 31,
2005 13.38 0.13 1.86 1.99 (0.11) (0.13) (0.24)
- ----------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
NET ASSET AT END OF EXPENSES INCOME (LOSS) EXPENSES TO
VALUE, END TOTAL PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2004 (f) $13.38 7.79% $20,933 1.20% 0.81% 1.25% 10.33%
Year ended October 31,
2005 15.13 14.69%(g) 23,315 1.15%(g) 0.64%(g) 1.30%(g) 16.45%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2004 (f) $12.95 9.06% $ 1,938 1.95% 0.05% 2.00% 10.33%
Year ended October 31,
2005 14.60 13.78%(g) 1,767 1.90%(g) (0.10)(g) 2.04%(g) 16.45%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2004 (f) $13.01 8.47% $ 399 1.95% 0.04% 2.00% 10.33%
Year ended October 31,
2005 14.67 13.86%(g) 388 1.90%(g) (0.12)(g) 2.05%(g) 16.45%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2004 (f) $13.38 6.05% $25,600 0.95% 1.05% 1.00% 10.33%
Year ended October 31,
2005 15.13 14.96%(g) 15,044 0.90%(g) 0.91%(g) 1.02%(g) 16.45%
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Value Portfolio.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all its investable assets.
(f) Class A Shares, Class B Shares, Class C Shares and Class Y Shares commenced
operations on May 7, 2004.
(g) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to
the net expense ratio, net income ratio, gross expense ratio and total
return were 0.05%, 0.05%, 0.05% and 0.05% for Class A Shares, Class B
Shares, Class C Shares and Class Y Shares, respectively.
See notes to financial statements.
51 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FUNDS -- GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET
BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS
- ----------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2001 (e) $10.06 0.01 (1.15) (1.14) (0.01) (0.01)
Year ended October 31,
2002 8.91 0.04 (1.73) (1.69) (0.01) (0.01)
Year ended October 31,
2003 7.21 0.06 1.18 1.24 (0.06) (0.06)
Year ended October 31,
2004 8.39 0.05 0.36 0.41 (0.04) (0.04)
Year ended October 31,
2005 8.76 0.07 1.01 1.08 (0.09) (0.09)
- ----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2001 (g) $ 9.54 (0.01) (0.64) (0.65) (0.01) (0.01)
Year ended October 31,
2002 8.88 (0.00)> (1.74) (1.74) -- --
Year ended October 31,
2003 7.14 (0.01) 1.18 1.17 (0.01) (0.01)
Year ended October 31,
2004 8.30 (0.02)* 0.36 0.34 (0.00)> (0.00)>
Year ended October 31,
2005 8.64 (0.01) 1.01 1.00 (0.03) (0.03)
- ----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2004 (h) $ 8.40 (0.02)* 0.38 0.36 (0.03) (0.03)
Year ended October 31,
2005 8.73 (0.01) 1.02 1.01 (0.04) (0.04)
- ----------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2001 (i) $10.00 0.02 (1.09) (1.07) (0.01) (0.01)
Year ended October 31,
2002 8.92 0.06 (1.73) (1.67) (0.03) (0.03)
Year ended
October 31, 2003 7.22 0.07 1.19 1.26 (0.08) (0.08)
Year ended October 31,
2004 8.40 0.07 0.36 0.43 (0.06) (0.06)
Year ended October 31,
2005 8.77 0.10 0.99 1.10 (0.12) (0.12)
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
NET ASSET AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO
VALUE, END TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(a) (000'S) NET ASSETS(b) NET ASSETS(b) ASSETS(b)(c) TURNOVER(d)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Period ended October 31,
2001 (e) $8.91 (12.65)% $ 1,927 1.11% 0.15 % 1.11% 43.13%
Year ended October 31,
2002 7.21 (18.97)% 1,306 1.01% 0.39 % 1.01% 59.85%
Year ended October 31,
2003 8.39 17.26 % 1,827 1.04% 0.70 % 1.04% 64.52%
Year ended October 31,
2004 8.76 4.94 % 1,500 1.02% 0.50 % 1.02% 73.68%
Year ended October 31,
2005 9.75 12.36 %(f) 1,260 1.11%(f) 0.73 %(f) 1.16% 106.49%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2001 (g) $8.88 (10.52)% $ 330 1.84% (0.64)% 1.84% 43.13%
Year ended October 31,
2002 7.14 (19.59)% 1,154 1.76% (0.30)% 1.76% 59.85%
Year ended October 31,
2003 8.30 16.40 % 2,235 1.79% (0.07)% 1.79% 64.52%
Year ended October 31,
2004 8.64 4.13 % 3,820 1.77% (0.25)% 1.77% 73.68%
Year ended October 31,
2005 9.61 11.61 %(f) 4,194 1.87%(f) (0.10)%(f) 1.93% 106.49%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2004 (h) $8.73 3.57 % $ 41 1.77% (0.28)% 1.77% 73.68%
Year ended October 31,
2005 9.70 11.59 %(f) 49 1.88%(f) (0.13)%(f) 1.93% 106.49%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Period ended October 31,
2001 (i) $8.92 (9.71)% $219,221 0.82% 0.38 % 0.82% 43.13%
Year ended October 31,
2002 7.22 (18.76)% 168,812 0.76% 0.66 % 0.76% 59.85%
Year ended
October 31, 2003 8.40 17.63 % 203,458 0.79% 0.96 % 0.79% 64.52%
Year ended October 31,
2004 8.77 5.18 % 196,219 0.77% 0.77 % 0.77% 73.68%
Year ended October 31,
2005 9.75 12.61 %(f) 46,888 0.80%(f) 1.20 %(f) 0.86% 106.49%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
> Less than $0.005 per share.
* Calculated based on average shares outstanding.
(a) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(b) Annualized for periods less than one year.
(c) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole,
without the distinguishing between the classes of shares issued.
(e) Class A (Investor) Shares commenced operations on April 12, 2001.
(f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the Fund related to violation of certain investment policies and
limitations. The corresponding impact to the net expense ratio, net income
ratio and total return were 0.02%, 0.02%, 0.02% and 0.03% for Class A
Shares, Class B Shares, Class C Shares and Class Y Shares, respectively.
(g) Class B Shares commenced operations on April 5, 2001.
(h) Class C Shares commenced operations on November 3, 2003.
(i) Class Y Shares commenced operations on April 2, 2001.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 52
HSBC INVESTOR FUNDS -- MID-CAP FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ------------------------
NET REALIZED AND
UNREALIZED GAINS NET REALIZED
NET ASSET (LOSSES) FROM GAINS FROM
VALUE, NET INVESTMENTS AND TOTAL FROM INVESTMENTS
BEGINNING INVESTMENT OPTION INVESTMENT AND OPTION TOTAL
OF PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- ------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $10.07 (0.03) (2.00) (2.03) (0.14) (0.14)
Year ended October 31, 2002 7.90 (0.03) (1.57) (1.60) -- --
Year ended October 31, 2003 6.30 (0.03)* 1.68 1.65 -- --
Year ended October 31, 2004 7.95 (0.04)* 0.53 0.49 -- --
Year ended October 31, 2005 8.44 (0.06)* 1.49 1.43 -- --
- ------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $10.06 (0.08) (2.02) (2.10) (0.14) (0.14)
Year ended October 31, 2002 7.82 (0.08) (1.55) (1.63) -- --
Year ended October 31, 2003 6.19 (0.08) 1.64 1.56 -- --
Year ended October 31, 2004 7.75 (0.10)* 0.51 0.41 -- --
Year ended October 31, 2005 8.16 (0.13)* 1.45 1.32 -- --
- ------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $10.06 (0.09) (2.01) (2.10) (0.14) (0.14)
Year ended October 31, 2002 7.82 (0.08) (1.54) (1.62) -- --
Year ended October 31, 2003 6.20 (0.08) 1.68 1.60 -- --
Year ended October 31, 2004 7.80 (0.10)* 0.52 0.42 -- --
Year ended October 31, 2005 8.22 (0.13)* 1.45 1.32 -- --
- ------------------------------------------------------------------------------------------------------------
TRUST SHARES
Year ended October 31, 2001 $10.08 (0.01) (2.02) (2.03) (0.14) (0.14)
Year ended October 31, 2002 7.91 (0.02) (1.56) (1.58) -- --
Year ended October 31, 2003 6.33 (0.01) 1.69 1.68 -- --
Year ended October 31, 2004 8.01 (0.02)* 0.53 0.51 -- --
Year ended October 31, 2005 8.52 (0.02)* 1.48 1.46 -- --
- ------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT RATIO OF
NET ASSET END OF EXPENSES LOSS TO EXPENSES TO
VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE NET AVERAGE NET PORTFOLIO
OF PERIOD RETURN(a) (000'S) NET ASSETS(b) ASSETS(b) ASSETS(b)(c) TURNOVER(d)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $7.90 (20.37)% $ 927 1.13% (0.40)% 1.13% 112.67%
Year ended October 31, 2002 6.30 (20.25)% 1,010 1.08% (0.46)% 1.08% 140.23%
Year ended October 31, 2003 7.95 26.19 % 1,539 1.10% (0.43)% 1.10% 100.86%
Year ended October 31, 2004 8.44 6.16 % 1,878 1.09% (0.54)% 1.09% 106.72%
Year ended October 31, 2005 9.87 16.94 %(e) 2,151 1.38%(e) (0.65)%(e) 1.53% 169.62%
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $7.82 (21.09)% $ 3,827 1.88% (1.16)% 1.88% 112.67%
Year ended October 31, 2002 6.19 (20.84)% 4,391 1.83% (1.21)% 1.83% 140.23%
Year ended October 31, 2003 7.75 25.20 % 6,009 1.85% (1.16)% 1.85% 100.86%
Year ended October 31, 2004 8.16 5.29 % 7,037 1.84% (1.29)% 1.84% 106.72%
Year ended October 31, 2005 9.48 16.18 %(e) 7,415 2.11%(e) (1.38)%(e) 2.27% 169.62%
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $7.82 (21.09)% $ 21 1.87% (1.13)% 1.87% 112.67%
Year ended October 31, 2002 6.20 (20.72)% 20 1.83% (1.20)% 1.83% 140.23%
Year ended October 31, 2003 7.80 25.81 % 54 1.85% (1.23)% 1.85% 100.86%
Year ended October 31, 2004 8.22 5.38 % 94 1.84% (1.29)% 1.84% 106.72%
Year ended October 31, 2005 9.54 16.06 %(e) 111 2.13%(e) (1.40)%(e) 2.28% 169.62%
- -----------------------------------------------------------------------------------------------------------------------------------
TRUST SHARES
Year ended October 31, 2001 $7.91 (20.34)% $129,390 0.87% (0.13)% 0.87% 112.67%
Year ended October 31, 2002 6.33 (19.97)% 98,059 0.82% (0.18)% 0.82% 140.23%
Year ended October 31, 2003 8.01 26.54 % 160,621 0.85% (0.17)% 0.85% 100.86%
Year ended October 31, 2004 8.52 6.37 % 117,354 0.84% (0.28)% 0.84% 106.72%
Year ended October 31, 2005 9.98 17.14 %(e) 19,618 0.89%(e) (0.19)%(e) 1.02% 169.62%
- -----------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(b) Annualized for periods less than one year.
(c) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been indicated.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole,
without the distinguishing between the classes of shares issued.
(e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the Fund related to violation of certain investment policies and
limitations. The corresponding impact to the net expense ratio and net
income ratio were 0.10%, 0.10%, 0.10% and 0.09% for Class A Shares, Class B
Shares, Class C Shares and Trust Shares, respectively. The corresponding
impact to the total return was 0.57%, 0.57%, 0.57% and 0.56% for Class A
Shares, Class B Shares, Class C Shares and Trust Shares, respectively.
See notes to financial statements.
53 HSBC INVESTOR FAMILY OF FUNDS
HSBC ADVISOR FUNDS TRUST -- INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ -------------------------------------
NET REALIZED AND NET REALIZED
UNREALIZED GAINS GAINS FROM
NET ASSET (LOSSES) FROM INVESTMENT
VALUE, NET INVESTMENT AND TOTAL FROM NET AND FOREIGN
BEGINNING INVESTMENT FOREIGN CURRENCY INVESTMENT INVESTMENT CURRENCY TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2001 $18.13 0.09 (4.38) (4.29) -- (1.28) (1.28)
Year ended October 31, 2002 12.56 0.09 (1.73) (1.64) (0.19) -- (0.19)
Year ended October 31, 2003 10.73 0.20 2.02 2.22 (0.19) -- (0.19)
Year ended October 31, 2004 12.76 0.18 2.32 2.50 (0.39) -- (0.39)
Year ended October 31, 2005 14.87 0.31 2.59 2.90 (0.23) -- (0.23)
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
NET ASSET AT END OF EXPENSES TO INCOME TO EXPENSES TO
VALUE, END TOTAL PERIOD AVERAGE AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2001 $12.56 (25.42)% $184,494 0.99% 0.51% 0.99% 26.90%
Year ended October 31, 2002 10.73 (13.32)% 194,704 0.99% 0.70% 0.99% 31.63%
Year ended October 31, 2003 12.76 21.03% 123,658 1.07% 1.16% 1.07% 68.51%
Year ended October 31, 2004 14.87 20.06% 148,317 1.05% 1.39% 1.05% 106.11%
Year ended October 31, 2005 17.54 19.69% 193,144 0.92% 2.01% 0.92% 31.32%
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
(a) The per share amounts and percentages reflect income and expense assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor International Portfolio.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio
in which the Fund invests all of its inevitable assets.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 54
- --------------------------------------------------------------------------------
HSBC INVESTOR FUNDS -- OVERSEAS EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ -----------------------------------------
NET REALIZED AND
UNREALIZED GAINS NET REALIZED
NET ASSET NET (LOSSES) FROM GAINS FROM
VALUE, INVESTMENT INVESTMENT AND TOTAL FROM NET INVESTMENT AND
BEGINNING OF INCOME FOREIGN CURRENCY INVESTMENT INVESTMENT FOREIGN CURRENCY TOTAL
PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $17.21 (0.04) (4.05) (4.09) -- (1.46) (1.46)
Year ended October 31, 2002 11.66 (0.04) (1.34) (1.38) (0.12) (0.29) (0.41)
Year ended October 31, 2003 9.87 0.01 1.95 1.96 (0.10) -- (0.10)
Year ended October 31, 2004 11.73 0.08 2.19 2.27 (0.07) -- (0.07)
Year ended October 31, 2005 13.93 0.18 2.33 2.51 (0.06) (0.79) (0.85)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $16.85 (0.14) (3.95) (4.09) -- (1.46) (1.46)
Year ended October 31, 2002 11.30 (0.08) (1.34) (1.42) (0.03) (0.29) (0.32)
Year ended October 31, 2003 9.56 (0.06) 1.89 1.83 (0.05) -- (0.05)
Year ended October 31, 2004 11.34 0.01 * 2.08 2.09 -- -- --
Year ended October 31, 2005 13.43 0.07 2.24 2.31 -- (0.79) (0.79)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $17.00 (0.18) (3.95) (4.13) -- (1.46) (1.46)
Year ended October 31, 2002 11.41 (0.08) (1.36) (1.44) -- (0.29) (0.29)
Year ended October 31, 2003 9.68 (0.06) 1.93 1.87 (0.01) -- (0.01)
Year ended October 31, 2004 11.54 (0.01) 2.14 2.13 -- -- --
Year ended October 31, 2005 13.67 0.06 2.29 2.35 -- (0.79) (0.79)
- --------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT RATIO OF
NET ASSET END OF EXPENSES TO INCOME (LOSS) EXPENSES TO
VALUE, END TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $11.66 (25.93)% $ 6,940 1.85% (0.35)% 2.44% 26.90%
Year ended October 31, 2002 9.87 (12.42)% 7,203 1.85% (0.18)% 2.28% 31.63%
Year ended October 31, 2003 11.73 20.09 % 10,096 1.85% 0.07 % 2.34% 68.51%
Year ended October 31, 2004 13.93 19.40 % 17,721 1.78% 0.79 % 1.88% 106.11%
Year ended October 31, 2005 15.59 18.64 % 20,680 1.66% 1.21 % 1.66% 31.32%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $11.30 (26.52)% $ 294 2.60% (1.09)% 3.18% 26.90%
Year ended October 31, 2002 9.56 (13.07)% 588 2.60% (0.87)% 3.04% 31.63%
Year ended October 31, 2003 11.34 19.26 % 1,076 2.60% (0.62)% 3.16% 68.51%
Year ended October 31, 2004 13.43 18.43 % 2,061 2.53% 0.05 % 2.63% 106.11%
Year ended October 31, 2005 14.95 17.72 % 2,403 2.41% 0.47 % 2.41% 31.32%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $11.41 (26.53)% $ 139 2.60% (1.10)% 3.16% 26.90%
Year ended October 31, 2002 9.68 (13.08)% 96 2.60% (1.00)% 3.04% 31.63%
Year ended October 31, 2003 11.54 19.28 % 121 2.60% (0.64)% 3.17% 68.51%
Year ended October 31, 2004 13.67 18.46 % 137 2.54% (0.10)% 2.66% 106.11%
Year ended October 31, 2005 15.23 17.70 % 164 2.41% 0.48 % 2.41% 31.32%
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) The per share amounts and percentages reflect income and expense assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor International Portfolio.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
See notes to financial statements.
55 HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
HSBC ADVISOR FUNDS TRUST -- SMALL CAP EQUITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS NET REALIZED
VALUE, NET (LOSSES) FROM TOTAL FROM GAINS FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL
OF PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- --------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2001 $17.81 (0.10) (3.65) (3.75) (2.74) (2.74)
Year ended October 31, 2002 11.32 (0.09) (1.96) (2.05) -- --
Year ended October 31, 2003 9.27 (0.06) 3.15 3.09 -- --
Year ended October 31, 2004 12.36 (0.08) 0.79 0.71 -- --
Year ended October 31, 2005 13.07 (0.10) 1.97 1.87 -- --
- --------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT RATIO OF
NET ASSET END OF EXPENSES TO LOSS TO EXPENSES TO
VALUE, END TOTAL PERIOD AVERAGE NET AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(b) (000'S) ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ----------------------------------------------------------------------------------------------------------------------------------
ADVISOR SHARES
Year ended October 31, 2001 $11.32 (22.98)% $180,265 1.07% (0.74)% 1.07% 52.47%
Year ended October 31, 2002 9.27 (18.11)% 190,686 1.07% (0.87)% 1.07% 103.90%
Year ended October 31, 2003 12.36 33.33 % 326,072 1.01% (0.72)% 1.01% 152.05%
Year ended October 31, 2004 13.07 5.74 % 279,669 0.98% (0.62)% 0.98% 81.75%
Year ended October 31, 2005 14.94 14.31 %(f) 177,519 0.94%(f) (0.54)%(f) 0.94%(f) 63.95%
- ------------------------------
</Table>
(a) The per share amounts and percentages reflect income and expense assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Small Cap Equity Portfolio.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
(f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to the
net expense ratio, net income ratio, gross expense ratio and total return
was 0.04% for the Advisor Shares.
See notes to financial statements.
HSBC INVESTOR FAMILY OF FUNDS 56
- --------------------------------------------------------------------------------
HSBC INVESTOR FUNDS -- OPPORTUNITY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------------
NET REALIZED AND
NET ASSET UNREALIZED GAINS NET REALIZED
VALUE, NET (LOSSES) FROM TOTAL FROM GAINS FROM
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL
OF PERIOD LOSS TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $18.75 (0.14) (3.58) (3.72) (5.43) (5.43)
Year ended October 31, 2002 9.60 (0.13) (1.64) (1.77) -- --
Year ended October 31, 2003 7.83 (0.10) 2.63 2.53 -- --
Year ended October 31, 2004 10.36 (0.13) 0.68 0.55 -- --
Year ended October 31, 2005 10.91 (0.14) 1.62 1.48 -- --
- -------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $18.40 (0.23)* (3.47) (3.70) (5.43) (5.43)
Year ended October 31, 2002 9.27 (0.20)* (1.56) (1.76) -- --
Year ended October 31, 2003 7.51 (0.18)* 2.52 2.34 -- --
Year ended October 31, 2004 9.85 (0.20) 0.64 0.44 -- --
Year ended October 31, 2005 10.29 (0.22) 1.53 1.31 -- --
- -------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $18.51 (0.24)* (3.49) (3.73) (5.43) (5.43)
Year ended October 31, 2002 9.35 (0.21)* (1.57) (1.78) -- --
Year ended October 31, 2003 7.57 (0.18) 2.55 2.37 -- --
Year ended October 31, 2004 9.94 (0.22) 0.67 0.45 -- --
Year ended October 31, 2005 10.39 (0.21) 1.53 1.32 -- --
- -------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------
RATIO OF NET
NET ASSETS AT RATIO OF INVESTMENT RATIO OF
NET ASSET END OF EXPENSES LOSS TO EXPENSES TO
VALUE, END TOTAL PERIOD TO AVERAGE AVERAGE AVERAGE NET PORTFOLIO
OF PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A (INVESTOR) SHARES
Year ended October 31, 2001 $ 9.60 (23.65)% $11,892 1.65% (1.32)% 1.97% 52.47%
Year ended October 31, 2002 7.83 (18.44)% 11,384 1.65% (1.45)% 2.08% 103.90%
Year ended October 31, 2003 10.36 32.31 % 16,695 1.65% (1.36)% 2.09% 152.05%
Year ended October 31, 2004 10.91 5.31 % 20,902 1.61% (1.24)% 1.72% 81.75%
Year ended October 31, 2005 12.39 13.57 %(f) 22,875 1.51%(f) (1.11)%(f) 1.69%(f) 63.95%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Year ended October 31, 2001 $ 9.27 (24.16)% $ 1,315 2.40% (2.08)% 2.73% 52.47%
Year ended October 31, 2002 7.51 (18.99)% 2,374 2.40% (2.18)% 2.86% 103.90%
Year ended October 31, 2003 9.85 31.16 % 3,952 2.40% (2.11)% 2.83% 152.05%
Year ended October 31, 2004 10.29 4.47 % 4,611 2.36% (2.00)% 2.47% 81.75%
Year ended October 31, 2005 11.60 12.73 %(f) 4,539 2.26%(f) (1.86)%(f) 2.44%(f) 63.95%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Year ended October 31, 2001 $ 9.35 (24.17)% $ 407 2.40% (2.06)% 2.71% 52.47%
Year ended October 31, 2002 7.57 (19.04)% 329 2.40% (2.20)% 2.83% 103.90%
Year ended October 31, 2003 9.94 31.31 % 395 2.40% (2.11)% 2.84% 152.05%
Year ended October 31, 2004 10.39 4.53 % 344 2.37% (2.00)% 2.48% 81.75%
Year ended October 31, 2005 11.71 12.70 %(f) 306 2.26%(f) (1.86)%(f) 2.44%(f) 63.95%
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated using average shares.
(a) The per share amounts and percentages reflect income and expense assuming
inclusion of the Fund's proportionate share of the income and expenses of
the HSBC Investor Small Cap Portfolio.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated on the basis of the respective Portfolio in
which the Fund invests all of its investable assets.
(f) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the respective Portfolio in which the Fund invests related to violation of
certain investment policies and limitations. The corresponding impact to the
net expense ratio, net income ratio, gross expense ratio and total return
were 0.04%, 0.04% and 0.04% for Class A Shares, Class B Shares and Class C
Shares, respectively.
See notes to financial statements.
57 HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005
1. ORGANIZATION:
The HSBC Investor Funds (the 'Trust'), a Massachusetts business trust
organized on April 22, 1987, and the HSBC Advisor Funds Trust (the 'Advisor
Trust'), a Massachusetts business trust organized on April 5, 1996, are
registered under the Investment Company Act of 1940, as amended (the 'Act'),
as open-end management investment companies. The Trust and Advisor Trust
(collectively the 'Trusts') contain the following funds (individually a
'Fund', collectively the 'Funds'):
<Table>
<Caption>
FUND SHORT NAME TRUST
- ---- ---------- -----
HSBC Investor Limited Maturity Fund Limited Maturity Trust
Fund
HSBC Investor Fixed Income Fund Fixed Income Fund Advisor Trust
HSBC Investor Bond Fund Bond Fund Trust
HSBC Investor New York Tax-Free Bond Fund New York Tax-Free Trust
Bond Fund
HSBC Investor Growth Fund Growth Fund Trust
HSBC Investor Value Fund Value Fund Trust
HSBC Investor Growth and Income Fund Growth and Income Trust
Fund
HSBC Investor Mid-Cap Fund Mid-Cap Fund Trust
HSBC Investor International Equity Fund International Advisor Trust
Equity Fund
HSBC Investor Overseas Equity Fund Overseas Equity Trust
Fund
HSBC Investor Small Cap Equity Fund Small Cap Equity Advisor Trust
Fund
HSBC Investor Opportunity Fund Opportunity Fund Trust
</Table>
The Funds are separate series of the Trusts and are part of the HSBC
Investor Family of Funds. Financial statements for all other series of HSBC
Investor Family of Funds are published separately.
The Limited Maturity Fund, Fixed Income Fund, Bond Fund, Growth Fund,
Value Fund, International Equity Fund, Overseas Equity Fund, Small Cap
Equity Fund, and the Opportunity Fund (individually a 'Feeder Fund',
collectively the 'Feeder Funds') utilize the Master Feeder Fund Structure
and seek to achieve their investment objectives by investing all of their
investable assets in their Respective Portfolios (as defined below).
During the fiscal year ended October 31, 2005, the Mid-Cap Fund, Growth
and Income Fund and Small Cap Equity Fund delivered securities of the Funds
in exchange for the redemption of Trust Shares or Advisor Shares (redemption
in-kind). Cash and securities were transferred for redemptions at a market
value of $48,557,280, $45,277,700 and $61,810,186 for the Mid-Cap Fund,
Growth and Income Fund and Small Cap Equity Fund, respectively. For
financial reporting purposes, the Mid-Cap Fund, Growth and Income Fund and
Small Cap Equity Fund recorded net realized gains of $10,491,006, $7,358,803
and $13,854,760, respectively, in connection with the transactions. However,
for tax purposes, the transactions received tax-free treatment. These
permanent book to tax differences were reclassified within the components of
net assets in accordance with the Funds' accounting policies, more fully
disclosed in note 2.
HSBC INVESTOR FAMILY OF FUNDS 58
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PROPORTIONATE
INTEREST ON
FUND RESPECTIVE PORTFOLIO OCTOBER 31, 2005
- ---- -------------------- ----------------
Limited Maturity Fund HSBC Investor Limited Maturity Portfolio 95.3%
Fixed Income Fund HSBC Investor Fixed Income Portfolio 73.4%
Bond Fund HSBC Investor Fixed Income Portfolio 19.7%
Growth Fund HSBC Investor Growth Portfolio 74.1%
Value Fund HSBC Investor Value Portfolio 74.8%
International Equity Fund HSBC Investor International Equity 83.8%
Portfolio
Overseas Equity Fund HSBC Investor International Equity 10.1%
Portfolio
Small Cap Equity Fund HSBC Investor Small Cap Equity Portfolio 81.2%
Opportunity Fund HSBC Investor Small Cap Equity Portfolio 12.7%
</Table>
The HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income
Portfolio, HSBC Investor Growth Portfolio, HSBC Investor Value Portfolio,
HSBC Investor International Equity Portfolio, and the HSBC Investor Small
Cap Equity Portfolio (individually a 'Portfolio', collectively the
'Portfolios'), are diversified series of the HSBC Investor Portfolios (the
'Portfolio Trust'), and like each Feeder Fund, are registered open-end
management investment companies. The financial statements of the Portfolios,
including the Schedules of Portfolio Investments, are included in this
report. The financial statements of the Portfolios should be read in
conjunction with the financial statements of the Feeder Funds.
The Funds are authorized to issue an unlimited number of shares of
beneficial interest with a par value of $0.001 per share. The Limited
Maturity Fund, New York Tax-Free Bond Fund, Growth Fund, Value Fund, and the
Growth and Income Fund each offers four classes of shares: Class A
(Investor) Shares, Class B Shares, Class C Shares and Class Y Shares. The
Mid-Cap Fund offers four classes of shares: Class A Shares, Class B Shares,
Class C Shares, and Trust Shares. The Fixed Income Fund, International
Equity Fund, and the Small Cap Equity Fund each offers one class of shares
(Advisor). The Bond Fund, Overseas Equity Fund, and the Opportunity Fund
each offers three classes of shares, Class A (Investor) Shares, Class B
Shares and Class C Shares. Each class of shares in the Funds has identical
rights and privileges except with respect to arrangements pertaining to
shareholder servicing or distribution, class-related expenses, voting rights
on matters affecting a single class of shares, and the exchange privilege of
each class of shares.
Under the Funds' organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, in the normal course of business,
the Funds enter into contracts with their vendors and others that provide
for general indemnifications. The Funds' maximum exposure under these
arrangements is unknown, as this would involve future claims that may be
made against the Funds. However, based on experience, the 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 Funds in the preparation of their financial statements. The
policies are in conformity with accounting principles generally accepted in
the United States of America ('GAAP'). The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results could
differ from those estimates.
SECURITIES VALUATION:
A. NEW YORK TAX-FREE BOND FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) are valued on the basis of
valuations furnished by a pricing service, the use of which has been
approved by the Funds' Board of Trustees. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and the use of
matrix techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities,
59 HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
yield, quality, coupon rate, maturity, type of issue, trading
characteristics other than market data and without exclusive reliance upon
quoted prices or exchanges or over-the-counter prices, since such valuations
are believed to reflect more accurately the fair value of such securities.
All debt portfolio securities with a remaining maturity of 60 days or less
are valued at amortized cost. Under the amortized cost method, premium or
discount, if any, is amortized or accreted, respectively, on a constant
(straight-line) basis to the maturity of the security.
The value of each equity security is based either on the last sale price
on a national securities exchange, or in the absence of recorded sales, at
the closing bid prices on such exchanges, or at the quoted bid price in the
over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued by or at the direction of
the Funds' Board of Trustees. In addition, specific securities may need to
be valued by or at the direction of the Funds' Board of Trustees due to
potentially significant events. Examples of potentially significant events
that could affect the value of an individual security include corporate
actions by the issuer, announcements by the issuer relating to its earnings
or products, regulatory news, natural disasters and litigation. Examples of
potentially significant events that could affect multiple securities held by
a Fund include governmental actions, natural disasters and armed conflicts.
B. FEEDER FUNDS
The Feeder Funds record their investments in their respective Portfolios
at fair value. Securities of the Portfolios are recorded at value as more
fully discussed in the notes to those financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
A. NEW YORK TAX-FREE BOND FUND, GROWTH AND INCOME FUND, AND MID-CAP FUND
Changes in holdings of portfolio securities are reflected no later than
the first business day following the trade date. However, for financial
statement purposes, portfolio securities are reflected as of trade date.
Securities gains and losses are calculated on the identified cost basis.
Interest income is recognized on the accrual basis and includes, where
applicable, the amortization or accretion of premium or discount. Dividend
income is recorded on the ex-dividend date.
B. FEEDER FUNDS
The Feeder Funds record daily their pro-rata share of their respective
Portfolio's income, expenses and realized and unrealized gains and losses.
In addition, the Feeder Funds accrue their own expenses daily as incurred.
Realized gains or losses and changes in unrealized appreciation or
depreciation represent the Feeder Fund's share of such elements allocated
from the Portfolio.
FUTURES CONTRACTS:
The New York Tax-Free Bond Fund, Growth and Income Fund and Mid-Cap Fund
may invest in futures contracts for the purpose of hedging existing
portfolio securities or securities it intends to purchase against
fluctuations in fair value caused by changes in prevailing market interest
rates. Upon entering into a futures contract, the New York Tax-Free Bond
Fund is required to pledge to the broker an amount of cash and/or other
assets equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as 'variation margin', are made each
day, depending on the daily fluctuations in the fair value of the underlying
security. A gain or loss equal to the daily variation margin is recognized
on a daily basis.
A 'sale' of futures contract means a contractual obligation to deliver
the securities or foreign currency called for by the contract at a fixed
price at a specified time in the future. A 'purchase' of a futures contract
means a contractual obligation to acquire the securities or foreign currency
at a fixed price at a specified time in the future.
Should market conditions move unexpectedly, the New York Tax-Free Bond
Fund, Growth and Income Fund and Mid-Cap Fund may not achieve the
anticipated benefits of the futures contracts and may realize a loss. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the
underlying hedged assets.
HSBC INVESTOR FAMILY OF FUNDS 60
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
OPTIONS:
The Growth and Income Fund and the Mid-Cap Fund may write covered call
options against some of the securities in their portfolios provided the
securities are listed on a national securities exchange. A call option is
'covered' if the Fund owns the underlying securities covered by the call.
The premium received is recorded as a liability and is subsequently adjusted
to the current fair value of the option written. Premiums received from
writing options that expire unexercised are treated on the expiration date
as realized gains from investments. The difference between the premium and
the amount paid on effecting a closing purchase transaction, including
brokerage commissions, is also treated as a realized gain or loss. If the
call option is exercised, the premium is added to the proceeds from the sale
of the underlying security in determining a realized gain or loss. For the
year ended October 31, 2005, the funds did not write any covered call
options.
SECURITIES LOANS:
To generate additional income, the Funds (except Feeder Funds) may lend
up to 33 1/3% of their respective assets pursuant to agreements requiring
that the loan be collateralized by cash, U.S. Government or U.S. Government
agency securities, equal at all times to at least 100% of the fair value.
The Funds receive payments from borrowers equivalent to the dividends and
interest that would have been earned on securities lent while simultaneously
seeking to earn income on the investment of collateral. Collateral is marked
to market daily to provide a level of collateral at least equal to the fair
value of securities lent. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of
the securities fail financially. However, loans will be made only to
borrowers, such as broker-dealers, banks or institutional borrowers of
securities, deemed by HSBC to be of good standing and creditworthy under
guidelines established by the Board of Trustees and when, in the judgement
of HSBC, the consideration which can be earned currently from such
securities loans justifies the attendant risks. Loans are subject to
termination by the Funds or the borrower at any time and are, therefore, not
considered to be illiquid investments. As of October 31, 2005, the following
Funds had collateral and loaned securities as follows:
<Table>
<Caption>
VALUE
VALUE OF OF LOANED
PORTFOLIO NAME COLLATERAL SECURITIES
-------------- ---------- ----------
Growth and Income Fund.............................. $1,058,500 $1,052,295
Mid-Cap Fund........................................ 3,114,600 3,086,215
</Table>
The cash collateral received by the Funds was invested in a pooled
account by HSBC Bank USA and at October 31, 2005, the pooled account
consisted of the following:
<Table>
<Caption>
FAIR MATURITY MATURITY
SECURITY TYPE SECURITY NAME VALUE RATE DATE
------------- ------------- ----- ---- ----
Repurchase Agreement Credit Suisse First Boston, Inc. $68,609,832 4.02% 11/01/2005
</Table>
LINE OF CREDIT
The New York Tax-Free Bond Fund, Growth and Income Fund and Mid-Cap Fund
participate in a short-term, demand note agreement with HSBC Bank USA, an
affiliate of the Investment Adviser (defined below). Under the agreement,
the funds may borrow up to $50 million. The purpose of the agreement is to
meet temporary or emergency cash needs, including redemption requests that
might otherwise require the untimely disposition of securities.
During the fiscal year ended October 31, 2005, the Growth and Income
Fund and the Mid-Cap Fund had borrowed against the Line of Credit. The
details of the borrowing were as follows (based on actual number of days in
which the respective Fund borrowed monies):
<Table>
<Caption>
AVERAGE AVERAGE
AMOUNT INTEREST
FUND OUTSTANDING RATE
---- ----------- ----
Growth and Income Fund.............................. $1,502,235 3.87%
Mid-Cap Fund........................................ 2,481,039 3.58%
</Table>
61 HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
ALLOCATIONS:
Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are allocated proportionately
among various or all Funds within the HSBC Investor Family of Funds in
relation to the net assets of each Fund or on another reasonable basis.
Expenses specific to a class are charged to that class. In addition, income,
expenses (other than class specific), and unrealized/realized gains and
losses are allocated to each class based on relative net assets on a daily
basis.
DIVIDENDS TO SHAREHOLDERS:
The Limited Maturity Fund, Fixed Income Fund, Bond Fund, and the New
York Tax-Free Bond Fund declare all net investment income daily as dividends
to their shareholders and distribute such dividends monthly. Dividends from
net investment income, if any, are declared and distributed quarterly in the
case of the Growth Fund and Value Fund, semi-annually in the case of the
Growth and Income Fund, Small Cap Equity Fund, and the Opportunity Fund and
annually in the case of the Mid-Cap Fund, International Equity Fund and
Overseas Equity Fund.
The Funds' net realized gains, if any, are distributed to shareholders
at least annually. Additional distributions are also made to the Funds'
shareholders to the extent necessary to avoid the federal excise tax on
certain undistributed income and net capital gains of regulated investment
companies.
The 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 distributions), such amounts are
reclassified within the components of net assets; temporary differences do
not require reclassification. The Funds may utilize equalization accounting
for tax purposes and designate earnings and profits, including net realized
gains distributed to shareholders on redemption of shares, as a part of the
dividends paid deduction for income tax purposes.
REDEMPTION FEE:
A redemption fee of 2.00% is charged and recorded as paid-in-capital for
any shares redeemed or exchanged after holding them for less than 30 days.
This fee does not apply to shares purchased through reinvested dividends or
capital gains or shares held in certain omnibus accounts or retirement plans
that cannot implement the fee. For the year ended October 31, 2005, the
following Funds collected redemption fees as follows:
<Table>
<Caption>
FUND FEES COLLECTED
---- --------------
Limited Maturity Fund............................ $11,663
Fixed Income Fund................................ $11,937
Bond Fund........................................ $ 398
New York Tax-Free Bond Fund...................... $16,064
Growth Fund...................................... $ 823
Value Fund....................................... $ 704
Growth and Income Fund........................... $ 464
Mid-Cap Fund..................................... $ 34
International Equity Fund........................ $ 144
Overseas Equity Fund............................. $ 643
Small Cap Equity Fund............................ $ 0
Opportunity Fund................................. $ 522
</Table>
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.
HSBC INVESTOR FAMILY OF FUNDS 62
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
3. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Investments (USA) Inc. ('HSBC' or the 'Investment Adviser'), a
wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank,
acts as Investment Adviser to the New York Tax-Free Bond Fund. As Investment
Adviser, HSBC manages the investments of the Funds and continuously reviews,
supervises and administers the Funds' investments. Effective April 18, 2005,
Transamerica Investment Management, LLC and Munder Capital Management began
serving as Sub-Investment Advisor for the Growth and Income Fund and Mid-Cap
Fund, respectively.
For its services as Investment Adviser, HSBC is entitled to receive a
fee, accrued daily and paid monthly, based on average daily net assets, at
an annual rate of:
<Table>
<Caption>
FUND FEE RATE
---- --------
New York Tax-Free Bond Fund......................... 0.25%
</Table>
For its services as Investment Adviser and Sub-Investment Advisor,
respectively, HSBC and Transamerica Investment Management, LLC receive in
aggregate, a fee, accrued daily and paid monthly, at an annual rate of 0.60%
of the Growth and Income Fund's average daily net assets.
For its services as Investment Adviser and Sub-Investment Advisor,
respectively, HSBC and Munder Capital Management receive in aggregate, a
fee, accrued accrued daily and paid monthly, at an annual rate of 0.75% of
the Mid-Cap Fund's average daily net assets.
Prior to April, 18, 2005, HSBC Investments (USA) Inc. served as
Investment Advisor for the Growth and Income Fund and Mid-Cap Fund and
received a fee, accrued daily and paid monthly, based on average daily net
assets, at an annual rate of:
<Table>
<Caption>
FUND FEE RATE
---- --------
Growth and Income Fund.............................. 0.55%
Mid-Cap Fund........................................ 0.55%
</Table>
Effective April 18, 2005, the Investment Adviser has agreed to
contractually waive 0.05%, for a net fee rate of 0.50%, based on average
daily net assets of the Growth and Income Fund and Mid-Cap Funds.
All contractual and any voluntary investment advisory fee waivers are
not subject to recoupment in subsequent fiscal periods.
ADMINISTRATION:
Effective July 1, 2005, HSBC serves the Funds as Administrator. Under
the terms of the administration agreement, HSBC receives from the Funds a
fee, accrued daily and paid monthly, at an annual rate of:
<Table>
<Caption>
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%
</Table>
The fee breakpoints are determined on the basis of the aggregate average
daily net assets of the HSBC Investor Family of Funds. The fee is allocated
to each of the HSBC Investor Family of Funds based upon its pro-rata share
of net assets for each class. For assets invested in the underlying
Portfolios by the Feeder Funds, the Portfolios pay half of the
administration fee and the Feeder Funds pay half, for a combination of the
total fee rate above. HSBC may directly or through an affiliate, use their
fee revenue, past profits, or other revenue sources to pay promotional,
administrative, shareholder support, and other expenses to third parties,
including broker dealers, in connection with the offer, sale and
administration of shares of the Funds.
Effective July 1, 2005, pursuant to a Sub-Administration Agreement with
HSBC, BISYS Fund Services Ohio, Inc. ('BISYS Ohio') a wholly-owned
subsidiary of The BISYS Group, Inc, serves as the Trusts sub-administrator
to each
63 HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
Fund subject to the general supervision of the Funds' Board of Trustees and
HSBC. For these services, BISYS is entitled to a fee, payable by HSBC. Prior
to July 1, 2005, BISYS Ohio received compensation for providing
administration services to the Funds under the same compensation structure
as those currently with HSBC.
Under a Compliance Services Agreement between the Funds' and BISYS Ohio
(the 'CCO Agreement'), BISYS Ohio makes an employee available to serve as
the Funds' Chief Compliance Officer (the 'CCO'). Under the CCO Agreement,
BISYS Ohio also provides infrastructure and support in implementing the
written policies and procedures comprising the Funds' compliance program,
including support services to the CCO. For the services provided under the
CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $200,000
for the fiscal year ended October 31, 2005, plus certain out of pocket
expenses. Expenses incurred are reflected on the Statements of Operations as
'Compliance service'. In addition, BISYS Ohio received a one-time
implementation fee of $50,000 which is included in Other Expenses on the
Statements of Operations. BISYS Ohio pays the salary and other compensation
earned by any such individuals as employees of BISYS.
All voluntary administration fee waivers are not subject to recoupment
in subsequent fiscal periods.
DISTRIBUTION PLAN:
BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned
subsidiary of BISYS Fund Services, Inc., serves the Funds as Distributor
(the 'Distributor'). The Trusts have adopted a non-compensatory Distribution
Plan and Agreement (the 'Plan') pursuant to Rule 12b-1 of the Act. The Plan
provides for a monthly payment of actual expenses by the Funds to the
Distributor at a rate not to exceed 0.25% of the average daily net assets of
Class A (Investor) Shares (currently not being charged) and 0.75% of the
average daily net assets of Class B Shares and Class C Shares of the Funds.
This payment represents expenses incurred by the Distributor for marketing
costs and services rendered in distributing the Funds' shares. BISYS, as the
Funds' distributor, received $930,944 in commissions from sales of the HSBC
Investor Family of Funds, of which $930,503 was reallowed to affiliated
brokers and dealers.
SHAREHOLDER SERVICING:
The Trusts have entered into a Shareholder Servicing Agreement with its
shareholder servicing agents (which currently consists of HSBC and its
affiliates) for providing various shareholder services. For performing these
services, the shareholder servicing agents receive a fee of 0.25%, 0.25%,
and 0.25% that is computed daily and paid monthly equal to a percentage of
average daily net assets of Class A (Investor) Shares, Class B Shares and
Class C Shares of the Fund, respectively. The aggregate fees paid to the
Distributor pursuant to the Distribution Plan and to shareholder servicing
agents pursuant to the Shareholder Servicing Agreement currently are not
intended to exceed 0.25% of the average daily net assets of Class A
(Investor) Shares, and 1.00% of the average daily net assets of Class B
Shares and Class C Shares.
FEE REDUCTIONS:
The Investment Adviser has agreed to limit the total expenses, exclusive
of interest, taxes, brokerage commissions and extraordinary expenses, of the
Bond Fund, Overseas Equity Fund and Opportunity Fund. Each Fund Class has
it's own expense limitations based on average daily net assets for any full
fiscal year as follows:
<Table>
<Caption>
EXPENSE
FUND CLASS LIMITATION
---- ----- ----------
Bond Fund................................................... A 1.10%
Bond Fund................................................... B 1.85%
Bond Fund................................................... C 1.85%
Overseas Equity Fund........................................ A 1.85%
Overseas Equity Fund........................................ B 2.60%
Overseas Equity Fund........................................ C 2.60%
Opportunity Fund............................................ A 1.65%
Opportunity Fund............................................ B 2.40%
Opportunity Fund............................................ C 2.40%
</Table>
HSBC INVESTOR FAMILY OF FUNDS 64
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HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
All contractual and any voluntary investment advisory fee waivers are
not subject to recoupment in subsequent fiscal periods. In addition, the
investment advisor may waive additional fees at their discretion.
FUND ACCOUNTING, TRANSFER AGENCY, CUSTODIAN AND TRUSTEE:
BISYS Ohio provides fund accounting and transfer agency services for all
classes of each Fund. In addition, HSBC serves as custodian for the New York
Tax-Free Bond Fund, Mid-Cap Fund and Growth and Income Fund. As transfer
agent for the Funds, BISYS receives a fee based on the number Funds and
shareholder accounts, subject to certain minimums and reimbursement of
certain expenses. As fund accountant for the Funds, BISYS receives an annual
fee per Fund and share class, subject to certain minimums and reimbursement
of certain expenses. As custodian for the Funds, HSBC receives a fees based
on average daily net assets, number of transactions and reimbursement of
certain expenses.
Each of the six non-interested Trustees are compensated a $24,000 annual
Board retainer, a $1,000 annual retainer for each Committee of the Board,
and a $4,000 and $2,000 meeting fee for each regular in-person Board meeting
and Committee meeting, respectively. In addition, Trustees may receive
compensation for special meetings and/or functioning as a Committee
Chairperson or Lead Trustee. Also, the Trustees are reimbursed for certain
expenses.
OTHER:
For its service as security lending agent, HSBC Bank USA (see note 2 --
Security Loans), receives a fee equal to 0.06% of the average dollar value
of the loans outstanding during a given month from the Funds. Income from
Securities lending, net of related expenses, is recorded as earned. The fees
collected by HSBC Bank USA for the year ended October 31, 2005 were:
<Table>
<Caption>
FUND FEE
---- ---
Growth and Income Fund...................................... $1,243
Mid-Cap Fund................................................ 593
</Table>
The HSBC Investor Family of Funds may use affiliated broker/dealers for
the execution of portfolio investment trades. For the fiscal year ended
October 31, 2005, affiliated broker/dealers did not receive any commissions
on the execution of trades related to the HSBC Investor Family of Funds.
4. INVESTMENT TRANSACTIONS:
Purchases of and proceeds from sales, excluding short-term securities,
for the Funds for the fiscal year ended October 31, 2005, totaled:
<Table>
<Caption>
FUND PURCHASES SALES
---- --------- -----
New York Tax-Free Bond Fund............................... $ 9,162,338 $ 13,346,646
Growth and Income Fund.................................... 170,364,667 335,584,493
Mid-Cap Fund.............................................. 140,045,871 253,445,448
</Table>
There were no long-term U.S. Government securities held during the
fiscal year ended October 31, 2005.
Contributions and withdrawals of the respective Portfolios for the
fiscal year ended October 31, 2005, totaled:
<Table>
<Caption>
FUND CONTRIBUTIONS WITHDRAWALS
---- ------------- -----------
Limited Maturity Fund...................................... $ 4,062,901 $ 12,945,903
Fixed Income Fund.......................................... 19,135,214 40,818,325
Bond Fund.................................................. 5,783,518 6,772,190
Growth Fund................................................ 11,094,831 17,923,548
Value Fund................................................. 9,963,316 25,654,245
International Equity Fund.................................. 58,120,281 43,806,574
Overseas Equity Fund....................................... 5,886,434 6,599,283
Small Cap Equity Fund...................................... 14,434,663 152,305,469
Opportunity Fund........................................... 5,151,729 6,946,160
</Table>
65 HSBC INVESTOR FAMILY OF FUNDS
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HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
5. CONCENTRATION OF CREDIT RISK:
The New York Tax-Free Bond Fund invests primarily in debt obligations
issued by the State of New York and its respective political subdivisions,
agencies and public authorities. The Fund is more susceptible to economic
and political factors adversely affecting issuers of New York specific
municipal securities than are municipal bond funds that are not concentrated
in these issuers to the same extent.
6. PAYMENTS FROM AFFILIATE:
During the year ended October 31, 2005, HSBC reimbursed certain advisory
fees and gross losses realized by some of the Funds related to violations of
certain investment policies and limitations. HSBC also reimbursed the Funds
for interest on these amounts. For the Feeder Funds, a pro-rata share of the
reimbursed advisory fees and interest related to the violations was
allocated from the respective Portfolio. The amounts for the year ended
October 31, 2005, are disclosed in the following table. The corresponding
impact to the gross/net expense ratio, net income ratio and total return for
the year ended October 31, 2005, are disclosed in the Funds' Financial
Highlights.
<Table>
<Caption>
ADVISORY REALIZED INTEREST
FUND FEES(1) LOSSES(2) (3) TOTAL
---- ------- --------- --- -----
Small Cap Equity Fund....................................... $ 87,516 $ -- $ 3,996 $ 91,512
Opportunity Fund Class A Shares............................. 8,719 -- 398 9,117
Opportunity Fund Class B Shares............................. 1,888 -- 86 1,974
Opportunity Fund Class C Shares............................. 115 -- 5 120
Limited Maturity Fund Class A Shares........................ 1,125 -- 51 1,176
Limited Maturity Fund Class B Shares........................ 4,927 -- 225 5,152
Limited Maturity Fund Class C Shares........................ 506 -- 23 529
Limited Maturity Fund Class Y Shares........................ 24,303 -- 1,110 25,413
Growth Fund Class A Shares.................................. 9,669 -- 441 10,110
Growth Fund Class B Shares.................................. 684 -- 31 715
Growth Fund Class C Shares.................................. 150 -- 7 157
Growth Fund Class Y Shares.................................. 9,192 -- 420 9,612
Value Fund Class A Shares................................... 11,559 -- 528 12,087
Value Fund Class B Shares................................... 1,019 -- 47 1,066
Value Fund Class C Shares................................... 210 -- 10 220
Value Fund Class Y Shares................................... 12,564 -- 574 13,138
Fixed Income Fund........................................... 118,164 -- 5,395 123,559
Bond Fund Class A Shares.................................... 19,302 -- 881 20,183
Bond Fund Class B Shares.................................... 7,219 -- 330 7,549
Bond Fund Class C Shares.................................... 436 -- 20 456
Growth and Income Fund Class A Shares....................... 334 -- 15 349
Growth and Income Fund Class B Shares....................... 976 -- 45 1,021
Growth and Income Fund Class C Shares....................... 11 -- -- 11
Growth and Income Fund Class Y Shares....................... 43,776 -- 1,999 45,775
New York Tax-Free Bond Fund Class A Shares.................. 4,037 -- 184 4,221
New York Tax-Free Bond Fund Class B Shares.................. 1,969 -- 90 2,059
New York Tax-Free Bond Fund Class C Shares.................. 243 -- 11 254
New York Tax-Free Bond Fund Class Y Shares.................. 2,130 -- 97 2,227
Mid-Cap Fund Class A Shares................................. 2,038 9,162 328 11,528
Mid-Cap Fund Class B Shares................................. 7,788 35,018 1,253 44,059
Mid-Cap Fund Class C Shares................................. 108 486 17 611
Mid-Cap Fund Class Y Shares................................. 69,607 312,980 11,200 393,787
-------- -------- -------- --------
Total....................................................... $452,284 $357,646 $ 29,817 $839,747
-------- -------- -------- --------
-------- -------- -------- --------
</Table>
(footnotes on next page)
HSBC INVESTOR FAMILY OF FUNDS 66
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HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
(footnotes from previous page)
(1) Amounts relate to the reimbursement of investment advisory fees on the
investment in certain investment companies and are included in 'Fees reduced
by the Investment Adviser' (except for the Feeder Funds which are included
in 'Expenses from Portfolio') on the Statements of Operations.
(2) Amount relate to the reimbursement of realized losses on the disposal of the
investment in certain investment companies and are included in 'Net realized
gains (losses) from investments and foreign currency transactions' on the
Statements of Operations.
(3) Amounts relate to the reimbursement of computed interest on the amounts
noted in (1) and (2) above and are included in 'Other Income' (except for
the Feeder Funds which are included in 'Investment income from Portfolio')
on the Statements of Operations.
In addition, during the year ended October 31, 2005, HSBC reimbursed
certain interest expense of the Growth and Income Fund and the Mid-Cap Fund
related to violations of certain compliance policies and limitations. The
amounts for the year ended October 31, 2005 are $690 and $17,640 for the
Growth and Income Fund and the Mid-Cap Fund, respectively, and did not have
a significant effect to the net expense ratio, net income ratio and total
return.
7. FEDERAL INCOME TAX INFORMATION:
At October 31, 2005, the cost, gross unrealized appreciation and gross
unrealized depreciation on securities, for federal income tax purposes, were
as follows:
<Table>
<Caption>
NET UNREALIZED
TAX UNREALIZED TAX UNREALIZED APPRECIATION
FUND TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---- -------- ------------ -------------- --------------
New York Tax-Free Bond Fund...... $66,379,332 $1,997,106 $(151,851) $1,845,255
Growth and Income Fund........... 49,173,161 8,202,372 (747,591) 7,454,781
Mid-Cap Fund..................... 28,320,088 4,568,013 (594,331) 3,973,682
</Table>
The tax characteristics of dividends paid by the Funds during the fiscal
year ended October 31, 2005 were as follows:
<Table>
<Caption>
DIVIDENDS PAID FROM
--------------------------------
NET LONG TERM TOTAL TAXABLE TAX EXEMPT TOTAL DIVIDENDS
FUND ORDINARY INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS PAID(1)
---- --------------- ------------- --------- ------------- -------
Limited Maturity Fund......... $1,354,679 $201,978 $1,556,657 $ -- $1,556,657
Fixed Income Fund............. 4,616,716 -- 4,616,716 -- 4,616,716
Bond Fund..................... 959,222 -- 959,222 -- 959,222
New York Tax-Free Bond Fund... 3,990 113,912 117,902 2,040,705 2,158,607
Growth Fund................... 133,116 59,000 192,116 -- 192,116
Value Fund.................... 542,918 256,645 799,563 -- 799,563
Growth and Income Fund........ 2,505,469 -- 2,505,469 -- 2,505,469
International Equity Fund..... 2,396,450 -- 2,396,450 -- 2,396,450
Overseas Equity Fund.......... 1,082,546 199,434 1,281,980 -- 1,281,980
</Table>
In addition to the above, the Mid-Cap Fund designated $3,527,339 in net
long-term capital gains distributed for federal income tax purposes due to the
utilization of earnings and profits distributed to shareholders upon the
redemption of shares.
The New York Tax-Free Bond Fund designated 95.5% of its income dividends as
exempt-interest dividends for the year ended October 31, 2005.
67 HSBC INVESTOR FAMILY OF FUNDS
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HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
The tax characteristics of dividends paid by the Funds during the fiscal
year ended October 31, 2004 were as follows:
<Table>
<Caption>
DIVIDENDS PAID FROM
-------------------------------- NET LONG TOTAL
ORDINARY TERM TAXABLE TAX EXEMPT
FUND INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS
---- ------ ------------- --------- -------------
Limited Maturity Fund......... $1,573,548 $1,736,087 $3,309,635 $ -- $3,309,635
Fixed Income Fund............. 4,544,831 -- 4,544,831 -- 4,544,831
Bond Fund..................... 876,878 -- 876,878 -- 876,878
New York Tax-Free Bond Fund... 4,914 325,008 329,922 1,995,085 2,325,007
Growth Fund................... -- -- -- -- --
Value Fund.................... 175,840 -- 175,840 -- 175,840
Growth and Income Fund........ 1,549,067 -- 1,549,067 -- 1,549,067
International Equity Fund..... 3,737,768 -- 3,737,768 -- 3,737,768
Overseas Equity Fund.......... 75,763 -- 75,763 -- 75,763
</Table>
The New York Tax-Free Bond Fund designated 85.8% of its income dividends
as exempt-interest dividends for the year ended October 31, 2004.
As of October 31, 2005, the components of accumulated earnings/(deficit)
on a tax basis for the Funds were as follows:
<Table>
<Caption>
ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED CAPITAL AND
ORDINARY UNDISTRIBUTED TAX LONG TERM ACCUMULATED DIVIDENDS OTHER
FUND INCOME EXEMPT INCOME CAPITAL GAINS EARNINGS PAYABLE LOSSES
---- ------ ------------- ------------- -------- ------- ------
Limited Maturity Fund............. $ 65,588 $ -- $ -- $ 65,588 $(50,905) $ (288,779)
Fixed Income Fund................. 1,576,348 -- 2,329,061 3,905,409 (175,477) --
Bond Fund......................... 149,199 -- -- 149,199 (40,512) (604,563)
New York Tax-Free Bond Fund....... -- 83,443 100,731 184,174 (83,443) --
Growth Fund....................... -- -- 604,764 604,764 -- --
Value Fund........................ 294,913 -- 3,327,270 3,622,183 -- --
Growth and Income Fund............ -- -- -- -- -- (13,657,367)
Mid-Cap Fund...................... -- -- 6,448,564 6,448,564 -- --
International Equity Fund......... 3,895,580 -- 6,656,884 10,552,464 -- --
Overseas Equity Fund.............. 754,848 -- 1,303,263 2,058,111 -- --
Small Cap Equity Fund............. -- -- 5,803,618 5,803,618 -- --
Opportunity Fund.................. -- -- 872,331 872,331 -- --
<Caption>
TOTAL
UNREALIZED ACCUMULATED
APPRECIATION/ EARNINGS/
FUND (DEPRECIATION)(2) (DEFICIT)
---- ----------------- ---------
Limited Maturity Fund............. $ (404,400) $ (678,496)
Fixed Income Fund................. (1,202,648) 2,527,284
Bond Fund......................... (329,452) (825,328)
New York Tax-Free Bond Fund....... 1,845,255 1,945,986
Growth Fund....................... 4,353,397 4,958,161
Value Fund........................ 5,650,000 9,272,183
Growth and Income Fund............ 7,454,781 (6,202,586)
Mid-Cap Fund...................... 3,973,682 10,422,246
International Equity Fund......... 27,339,020 37,891,484
Overseas Equity Fund.............. 3,628,682 5,686,793
Small Cap Equity Fund............. 28,696,045 34,499,663
Opportunity Fund.................. 3,117,416 3,989,747
</Table>
- ---------
(1) Total dividends paid may differ from the amount reported in the Statement of
Changes in Net Assets because for tax purposes dividends are recognized when
actually paid.
(2) The differences between book-basis and tax-basis unrealized
appreciation/deprecation are attributable primarily to: tax deferral of
losses on wash sales, the realization for tax purposes of unrealized
gains/losses on certain derivative instruments, the difference between book
and tax amortization methods for premium and market discount, the
realization for tax purposes of unrealized gains/losses on investments in
passive foreign investment companies, and the return of capital adjustments
from real estate investment trusts.
As of October 31, 2005, the following Funds have net capital loss
carryforwards, which are available to offset future realized gains.
<Table>
<Caption>
FUND AMOUNT EXPIRES
---- ------ -------
Limited Maturity Fund............................... $ 288,779 2013
Bond Fund........................................... 28,334 2008
185,518 2010
182,320 2011
208,391 2012
Growth and Income Fund.............................. 4,060,346 2010
9,597,021 2011
</Table>
HSBC INVESTOR FAMILY OF FUNDS 68
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
8. OTHER FEDERAL INCOME INFORMATION (UNAUDITED):
For the fiscal year ended October 31, 2005, the following percentage of
the total ordinary income dividends paid by the Funds qualify for the
corporate dividends received deduction available to corporate shareholders.
<Table>
<Caption>
DIVIDENDS
RECEIVED
FUND DEDUCTION
---- ---------
Growth Fund........................................ 100%
Value Fund......................................... 68%
Growth and Income Fund............................. 100%
</Table>
The Funds intend to elect to pass through to shareholders the income tax
credit for taxes paid to foreign countries. Foreign source income and
foreign tax expense per outstanding share on October 31, 2005 are as
follows:
<Table>
<Caption>
FOREIGN FOREIGN
SOURCE TAX
FUND INCOME EXPENSE
---- ------ -------
International Equity Fund.... ...................... $0.44 $0.05
Overseas Equity Fund................................ 0.43 0.05
</Table>
The pass-through of the foreign tax credit will only affect those
persons who are shareholders on the dividend record date in December 2005.
These shareholders will receive more detailed information along with their
2005 Form 1099-DIV.
For the year ended October 31, 2005, dividends paid by the Funds may be
subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth
Growth Tax Relief Reconciliation Act of 2003. The Funds intend to designate
the maximum amount allowable as taxed at a maximum rate of 15%. Complete
information will be reported in conjunction with your 2005 Form 1099-DIV.
<Table>
<Caption>
QUALIFIED
FUND DIVIDEND INCOME
---- ---------------
Growth Fund........... ............................. 100%
Value Fund.......................................... 67%
Growth and Income Fund.............................. 100%
International Equity Fund........................... 100%
Overseas Equity Fund................................ 37%
</Table>
69 HSBC INVESTOR FAMILY OF FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
HSBC Investor Funds
HSBC Investor Advisor Funds Trust:
We have audited the the accompanying statements of assets and liabilities of
HSBC Investor Fixed Income Fund, New York Tax-Free Bond Fund, HSBC Investor
Growth and Income Fund, HSBC Investor Mid-Cap Fund, HSBC Investor Limited
Maturity Fund, HSBC Investor Bond Fund, HSBC Investor Growth Fund, HSBC Investor
Value Fund, HSBC Investor International Equity Fund, HSBC Investor Overseas
Equity Fund, HSBC Investor Small Cap Equity Fund and HSBC Investor Opportunity
Fund (collectively, the Funds), including the schedules of portfolio investments
of HSBC Investor New York Tax-Free Bond Fund, HSBC Investor Growth and Income
Fund and HSBC Investor Mid-Cap Fund, as of October 31, 2005, and the related
statements of operations for the year then ended, the statements of changes in
net assets for each period in the two-year period then ended, and the financial
highlights for each period in the five-year period then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned by HSBC Investor New York Tax-Free Bond Fund, HSBC Investor
Growth and Income Fund and HSBC Investor Mid-Cap Fund as of October 31, 2005, by
correspondence with the custodian and brokers; or other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of October 31, 2005, the results of their operations for the year then
ended, the changes in their net assets for each period in the two-year period
then ended, and the financial highlights for each period in the five-year period
then ended, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
December 27, 2005
HSBC INVESTOR FAMILY OF FUNDS 70
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CONTRACT APPROVAL (UNAUDITED)
The Boards of Trustees (the 'Board of Trustees') of HSBC Investor Funds
and HSBC Investor Portfolios approved a new sub-advisory agreement (the 'New
Agreement') between the Investment Adviser and NWQ Investment Management
Co., LLC ('NWQ'), with respect to the Value Fund, at a meeting of the Board
of Trustees held on June 13-14, 2005. The New Agreement was approved by the
Board of Trustees in order for NWQ to continue to provide investment
sub-advisory services to the Value Fund after a change in control
transaction terminated the old sub-advisory agreement dated January 30, 2004
(the 'Old Agreement'). The approval of the New Agreement did not result in
any changes to the way in which the Value Fund is managed and did not cause
any changes to the Value Fund's investment objectives and policies.
Furthermore, the terms of the New Agreement, including the sub-advisory fee
paid to NWQ, are the same in all respect as the Old Agreement. Additionally,
there were no changes to the portfolio management team at NWQ that services
the Value Fund. In determining whether it was appropriate to approve the New
Agreement, the Board of Trustees requested and received extensive materials
and information from the Investment Adviser to assist them in considering
the approval of the New Agreement. Based on its review of the information
requested and provided, and the discussions with management of the
Investment Adviser, the Board of Trustees determined that approval of the
New Agreement was consistent with the best interests of the Value Fund and
its shareholders, and would enable the Value Fund to receive high quality
services at a cost that is appropriate, reasonable, and in the best
interests of the Value Fund and its shareholders. The Board of Trustees made
these determinations on the basis of the following factors, among others:
-- Nature, Extent, and Quality of Services Provided by the Investment
Adviser and NWQ. The Board of Trustees considered the nature, quality and
extent of the investment advisory services provided by NWQ, and NWQ's
historic performance managing accounts having similar investment objectives
as the Value Fund. The Board of Trustees concluded that the services to be
provided by the Investment Adviser and NWQ are extensive and that the
Investment Adviser and NWQ would deliver a high level of service to the
Value Fund.
-- Investment Performance of the Value Fund, Investment Adviser and
NWQ. The Board of Trustees considered short- and long-term investment
performance of the Value Fund over various periods of time as compared to a
peer group of comparable funds, as well as NWQ's historic performance
managing accounts having similar investment objectives as the Value Fund.
Additionally, the Board of Trustees considered fee and expense information
regarding the Value Fund's peer groups.
-- Costs of Services and Profits Realized by the Investment Adviser.
The Board of Trustees considered that the proposal had no material effect
upon the analysis of the Investment Adviser's overall profitability and
costs that had been prepared in connection with the last renewal of the
advisory contract, and would not change any factors bearing upon the
profitability to NWQ and Investment Adviser from their relationships with
the Value Fund.
-- Other Relevant Considerations. The Board of Trustees considered
NWQ's representations regarding staffing and capabilities to manage assets
of the Value Portfolio. The Board of Trustees also considered the overall
high quality of the personnel, operations, financial condition, investment
management capabilities, methodologies, and performance of the Investment
Adviser and NWQ.
Accordingly, in light of the above considerations and such other factors
and information it considered relevant, the Board of Trustees by a unanimous
vote of those present in person at the meeting (including a separate vote of
the Independent Trustees present in person at the meeting) approved the New
Agreement with respect to the Value Fund.
71 HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005
As a shareholder of the HSBC Investor Funds, you incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchases;
redemption fees; and exchange fees; (2) ongoing costs, including management
fees; distribution and 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 May 1, 2005
through October 31, 2005.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
5/1/05 10/31/05 5/1/05 - 10/31/05 5/1/05 - 10/31/05
------ -------- ----------------- -----------------
Limited Maturity Fund Class A $1,000.00 $1,000.60 $5.55 1.10%
Class Y 1,000.00 1,001.90 4.29 0.85%
Class B 1,000.00 997.90 9.32 1.85%
Class C 1,000.00 996.90 9.31 1.85%
Fixed Income Fund Advisor Shares 1,000.00 1,002.60 3.18 0.63%
Bond Fund Class A 1,000.00 1,000.50 4.79 0.95%
Class B 1,000.00 997.70 8.56 1.70%
Class C 1,000.00 996.80 8.56 1.70%
New York Tax-Free Bond
Fund Class A 1,000.00 1,000.90 4.54 0.90%
Class Y 1,000.00 1,002.20 3.28 0.65%
Class B 1,000.00 997.20 8.31 1.65%
Class C 1,000.00 997.20 8.31 1.65%
Growth Fund Class A 1,000.00 1,123.70 6.42 1.20%
Class Y 1,000.00 1,124.90 5.09 0.95%
Class B 1,000.00 1,119.60 10.42 1.95%
Class C 1,000.00 1,119.00 10.42 1.95%
Value Fund Class A 1,000.00 1,082.60 6.30 1.20%
Class Y 1,000.00 1,083.80 4.99 0.95%
Class B 1,000.00 1,078.30 10.21 1.95%
Class C 1,000.00 1,078.60 10.22 1.95%
Growth & Income Fund Class A 1,000.00 1,096.80 6.66 1.26%
Class Y 1,000.00 1,098.30 4.81 0.91%
Class B 1,000.00 1,092.30 10.60 2.01%
Class C 1,000.00 1,094.00 10.66 2.02%
Mid-Cap Fund Class A 1,000.00 1,110.20 9.57 1.80%
Class Y 1,000.00 1,111.40 7.29 1.37%
Class B 1,000.00 1,106.20 13.48 2.54%
Class C 1,000.00 1,106.70 13.54 2.55%
International Equity
Fund Advisor Shares 1,000.00 1,101.10 3.55 0.67%
Overseas Fund Class A 1,000.00 1,095.60 8.13 1.54%
Class B 1,000.00 1,092.00 12.08 2.29%
Class C 1,000.00 1,091.80 12.07 2.29%
Small Cap Equity Fund Advisor Shares 1,000.00 1,136.10 5.28 0.98%
Opportunity Fund Class A 1,000.00 1,132.50 8.33 1.55%
Class B 1,000.00 1,128.40 12.34 2.30%
Class C 1,000.00 1,128.10 12.34 2.30%
</Table>
- --------------
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
HSBC INVESTOR FAMILY OF FUNDS 72
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor Funds's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
5/1/05 10/31/05 5/1/05 - 10/31/05 5/1/05 - 10/31/05
------ -------- ----------------- -----------------
Limited Maturity Fund Class A $1,000.00 $1,019.66 $5.60 1.10%
Class Y 1,000.00 1,020.92 4.33 0.85%
Class B 1,000.00 1,015.88 9.40 1.85%
Class C 1,000.00 1,015.88 9.40 1.85%
Fixed Income Fund Advisor Shares 1,000.00 1,022.03 3.21 0.63%
Bond Fund Class A 1,000.00 1,020.42 4.84 0.95%
Class B 1,000.00 1,016.64 8.64 1.70%
Class C 1,000.00 1,016.64 8.64 1.70%
New York Tax-Free Bond
Fund Class A 1,000.00 1,020.67 4.58 0.90%
Class Y 1,000.00 1,021.93 3.31 0.65%
Class B 1,000.00 1,016.89 8.39 1.65%
Class C 1,000.00 1,016.89 8.39 1.65%
Growth Fund Class A 1,000.00 1,019.16 6.11 1.20%
Class Y 1,000.00 1,020.42 4.84 0.95%
Class B 1,000.00 1,015.38 9.91 1.95%
Class C 1,000.00 1,015.38 9.91 1.95%
Value Fund Class A 1,000.00 1,019.16 6.11 1.20%
Class Y 1,000.00 1,020.42 4.84 0.95%
Class B 1,000.00 1,015.38 9.91 1.95%
Class C 1,000.00 1,015.38 9.91 1.95%
Growth & Income Fund Class A 1,000.00 1,018.85 6.41 1.26%
Class Y 1,000.00 1,020.62 4.63 0.91%
Class B 1,000.00 1,015.07 10.21 2.01%
Class C 1,000.00 1,015.02 10.26 2.02%
Mid-Cap Fund Class A 1,000.00 1,016.13 9.15 1.80%
Class Y 1,000.00 1,018.30 6.97 1.37%
Class B 1,000.00 1,012.40 12.88 2.54%
Class C 1,000.00 1,012.35 12.93 2.55%
International Equity
Fund Advisor Shares 1,000.00 1,021.83 3.41 0.67%
Overseas Fund Class A 1,000.00 1,017.44 7.83 1.54%
Class B 1,000.00 1,016.66 11.62 2.29%
Class C 1,000.00 1,013.66 11.62 2.29%
Small Cap Equity Fund Advisor Shares 1,000.00 1,020.27 4.99 0.98%
Opportunity Fund Class A 1,000.00 1,017.39 7.88 1.55%
Class B 1,000.00 1,013.61 11.67 2.30%
Class C 1,000.00 1,013.61 11.67 2.30%
</Table>
- --------------
* 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.
73 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ---------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 48.8%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
FEDERAL HOME LOAN MORTGAGE CORP. -
13.5%
5.00%, 7/15/14......................... 400,000 401,788
Pool #C01188, 7.00%, 6/1/31............ 256,793 268,094
Pool #C75371, 6.00%, 1/1/33............ 602,424 609,014
Pool #G01740, 5.50%, 12/1/34........... 3,209,052 3,170,163
----------
4,449,059
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 20.6%
Pool #535063, 6.50%, 12/1/14........... 269,740 278,726
Pool #535933, 6.50%, 5/1/31............ 188,728 194,095
Pool #555427, 6.00%, 2/1/18............ 1,612,877 1,650,312
Pool #593187, 7.00%, 11/1/31........... 536,388 561,129
Pool #704439, 5.00%, 5/1/18............ 1,525,037 1,505,448
Pool #735224, 5.50%, 2/1/35............ 1,396,020 1,379,427
Pool #740686, 6.50%, 10/1/33........... 674,816 694,105
Pool #781560, 4.49%, 10/1/34........... 502,330 495,173
----------
6,758,415
----------
U.S. TREASURY NOTES - 14.7%
4.00%, 9/30/07......................... 750,000 744,668
4.125%, 8/15/08........................ 400,000 397,031
3.875%, 9/15/10........................ 1,975,000 1,923,311
4.25%, 8/15/15 (c)..................... 1,790,000 1,746,648
----------
4,811,658
----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS
(COST $16,218,579).................... 16,019,132
----------
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS - 26.8%
AUTO MANUFACTURERS - 1.0%
DaimlerChrysler North American
Holdings, 4.05%, 6/4/08............... 350,000 339,798
----------
BANKS - 0.9%
Sovereign Bank, 5.125%, 3/15/13........ 300,000 294,146
----------
FINANCE - 9.3%
American General Finance, 4.875%,
5/15/10............................... 500,000 494,441
Ford Motor Credit Corp., 5.80%,
1/12/09............................... 475,000 435,029
General Motors Acceptance Corp., 4.50%,
7/15/06 (c)........................... 250,000 247,100
General Motors Acceptance Corp.,
4.375%, 12/10/07...................... 500,000 472,045
J.P. Morgan Chase & Co., 5.15%,
10/1/15............................... 350,000 341,004
MBNA Europe Funding PLC, 3.88%, 9/7/07,
(a) (b)............................... 600,000 599,881
Met Life Global Funding, 4.50%, 5/5/10,
(b)................................... 450,000 440,921
----------
3,030,421
----------
MEDIA - 2.7%
AOL Time Warner, Inc., 6.875%,
5/1/12................................ 500,000 535,179
Tribune Co., 4.875%, 8/15/10........... 350,000 341,597
----------
876,776
----------
PHARMACEUTICALS - 1.0%
American Home Products, 6.95%,
3/15/11............................... 300,000 323,345
----------
<Caption>
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
REAL ESTATE - 1.2%
Erp Operating LP, 5.125%, 3/15/16...... 400,000 387,950
----------
RETAIL - 3.7%
Fred Meyer, Inc., 7.45%, 3/1/08........ 400,000 418,470
May Department Stores Co., 5.75%,
7/15/14............................... 800,000 799,380
----------
1,217,850
----------
TELECOMMUNICATIONS - 3.6%
Comcast Corp., 4.95%, 6/15/16.......... 400,000 371,531
SBC Communications, Inc., 6.25%,
3/15/11............................... 400,000 416,439
Verizon Pennsylvania, Inc., 5.65%,
11/15/11.............................. 400,000 397,192
----------
1,185,162
----------
TRANSPORTATION - 3.4%
Burlington Northern Santa Fe Railway
Co., 4.83%, 1/15/23................... 600,000 590,646
Union Pacific Railroad, 5.08%,
1/2/29................................ 550,000 537,240
----------
1,127,886
----------
TOTAL CORPORATE OBLIGATIONS (COST
$8,950,792)........................... 8,783,334
----------
- ---------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 10.3%
Citigroup Mortgage Loan Trust, Inc.
2005-WF2 AF2, 4.92%, 8/25/35.......... 426,686 424,549
Countrywide Alternative Loan Trust
2004-30CB 3A1, 5.00%, 2/25/20......... 708,898 700,954
Countrywide Home Loans 2005-HYB8 2A1,
5.41%, 12/31/49, (a).................. 490,000 490,306
FHLB Series 00-0582, Class H, 4.75%,
10/25/10.............................. 488,484 485,739
Freddie Mac 2962 CJ, 5.50%, 11/15/23... 900,421 906,392
Greenwich Capital Commercial Funding
Corp., 5.12%, 4/10/37................. 360,000 359,775
----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $3,391,164)......... 3,367,715
----------
- ---------------------------------------------------------------
ASSET BACKED SECURITIES - 10.2%
Asset Backed Funding Certificates 2003-
AHL1 A1, 3.68%, 3/25/33............... 502,170 487,738
Capital Auto Receivables Asset Trust
2003-2 CL A4A, 1.96%, 1/15/09......... 400,000 392,198
Carmax Auto Owner Trust, 3.00%,
9/15/08............................... 1,250,000 1,230,631
Chase Issuance Trust 2005-A8, 4.01%,
10/15/12, (a)......................... 500,000 500,000
DaimlerChrysler Auto Trust 2005-B A3,
4.04%, 9/8/09......................... 750,000 741,975
----------
TOTAL ASSET BACKED SECURITIES (COST
$3,383,627)........................... 3,352,542
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 2.3%
HSBC Investor Money Market Fund
Class Y Shares*....................... 746,417 746,417
----------
TOTAL INVESTMENT COMPANIES
(COST $746,417)....................... 746,417
----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 74
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ---------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 1.9%
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
Pool of various securities for HSBC
Family of Funds -- Note 2 -- Security
Loans................................. 629,969 629,969
----------
TOTAL SECURITIES HELD AS COLLATERAL FOR
SECURITIES ON LOAN (COST $629,969).... 629,969
----------
TOTAL INVESTMENTS (COST $33,320,548) -
100.3%................................ 32,899,109
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $32,809,686.
(a) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report represent the rates that were in
effect on October 31, 2005. The maturity dates presented
reflect the final maturity date. However, each of these
securities contains put or demand features that allow the
fund to require the issuer to repurchase the security
from the fund within various time periods, including
daily, weekly, monthly, or semi-annually.
(b) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
(c) All or a portion of the security was on loan as of
October 31, 2005.
* Investment in affiliate.
75 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 43.4%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
FEDERAL HOME LOAN MORTGAGE CORP. - 14.8%
Pool #C00368, 8.50%, 10/1/24.......... 44,602 48,493
Pool #C00922, 8.00%, 2/1/30........... 298,755 318,325
Pool #C54447, 7.00%, 7/1/31........... 52,857 55,183
Pool #C60712, 6.50%, 11/1/31.......... 702,412 721,502
Pool #C80387, 6.50%, 4/1/26........... 44,442 45,761
Pool #D62926, 6.50%, 8/1/25........... 32,379 33,338
Pool #G00951, 6.00%, 7/1/28........... 399,138 404,268
Pool #G01317, 7.00%, 10/1/31.......... 250,566 261,593
Pool #G01740, 5.50%, 12/1/34.......... 11,519,674 11,380,074
Pool #G01857, 5.00%, 10/1/33.......... 2,284,386 2,206,619
Pool #G01858, 5.00%, 7/1/34........... 2,802,521 2,702,448
-----------
18,177,604
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.5%
Pool #253438, 8.50%, 9/1/30........... 81,673 88,610
Pool #329530, 7.00%, 12/1/25.......... 121,647 127,560
Pool #329655, 7.00%, 11/1/25.......... 65,106 68,271
Pool #356905, 5.36%, 10/1/36, (a)..... 360,425 368,441
Pool #398958, 6.50%, 10/1/12.......... 97,522 100,739
Pool #535332, 8.50%, 4/1/30........... 69,829 75,773
Pool #535440, 8.50%, 8/1/30........... 79,129 85,850
Pool #535608, 9.50%, 4/1/30........... 150,783 166,243
Pool #548965, 8.50%, 7/1/30........... 72,134 78,260
Pool #568486, 7.00%, 1/1/31........... 40,526 42,396
Pool #573752, 8.50%, 2/1/31........... 66,235 71,861
Pool #575328, 6.50%, 4/1/31........... 95,961 98,690
Pool #623129, 6.50%, 1/1/32........... 1,168,229 1,201,451
Pool #725232, 5.00%, 3/1/34........... 1,895,784 1,830,989
Pool #735224, 5.50%, 2/1/35........... 5,122,852 5,061,959
Pool #781560, 4.49%, 10/1/34.......... 1,914,184 1,886,911
Pool #817347, 6.00%, 7/1/35........... 2,628,707 2,652,000
Pool #827171, 6.00%, 6/1/35........... 4,831,097 4,873,904
-----------
18,879,908
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.5%
Pool #346406, 7.50%, 2/15/23.......... 79,445 84,693
Pool #412530, 7.50%, 12/15/25......... 127,161 135,132
Pool #780804, 10.00%, 12/15/20........ 99,860 110,987
Pool #780826, 9.50%, 5/15/18.......... 58,324 64,144
Pool #781300, 7.00%, 6/15/31.......... 222,684 234,140
-----------
629,096
-----------
U.S. TREASURY BONDS - 2.8%
5.375%, 2/15/31....................... 3,150,000 3,435,469
-----------
U.S. TREASURY NOTES - 9.8%
4.00%, 9/30/07........................ 1,650,000 1,638,270
4.125%, 8/15/08....................... 1,300,000 1,290,351
3.875%, 9/15/10....................... 760,000 740,109
4.25%, 8/15/15 (e).................... 8,510,000 8,303,897
-----------
11,972,627
-----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (COST
$53,757,787)......................... 53,094,704
-----------
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS - 30.6%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
AUTO MANUFACTURERS - 1.0%
DaimlerChrysler North American
Holdings, 4.05%, 6/4/08.............. 1,275,000 1,237,835
-----------
BANKS - 0.9%
Sovereign Bank, 5.125%, 3/15/13....... 1,075,000 1,054,025
-----------
BUSINESS SERVICES - 0.9%
Xerox Corp., 9.75%, 1/15/09........... 1,000,000 1,105,000
-----------
CHEMICALS - 1.7%
Nova Chemicals Corp., 7.00%,
5/15/06.............................. 1,200,000 1,209,000
Nova Chemicals Corp., 7.40%, 4/1/09... 900,000 913,500
-----------
2,122,500
-----------
FINANCE - 8.8%
American General Finance, 4.875%,
5/15/10.............................. 2,100,000 2,076,650
Ford Motor Credit Corp., 5.80%,
1/12/09 (e).......................... 1,600,000 1,465,362
General Motors Acceptance Corp.,
4.375%, 12/10/07..................... 1,900,000 1,793,771
J.P. Morgan Chase & Co., 5.15%,
10/1/15.............................. 1,350,000 1,315,300
J.P. Morgan Chase XVII, 5.85%,
8/1/35............................... 500,000 472,110
MBNA Europe Funding PLC, 3.88%,
9/7/07, (a) (b)...................... 2,200,000 2,199,561
Met Life Global Funding, 4.50%,
5/5/10, (b).......................... 1,500,000 1,469,738
-----------
10,792,492
-----------
MEDIA - 1.1%
Tribune Co., 4.875%, 8/15/10.......... 1,350,000 1,317,589
-----------
MEDICAL - 0.8%
HCA, Inc., 6.95%, 5/1/12.............. 1,000,000 1,018,820
-----------
PHARMACEUTICALS - 1.1%
American Home Products, 6.95%,
3/15/11.............................. 1,250,000 1,347,270
-----------
REAL ESTATE - 1.0%
Erp Operating LP, 5.125%, 3/15/16..... 1,250,000 1,212,345
-----------
RETAIL - 3.9%
Fred Meyer, Inc., 7.45%, 3/1/08....... 1,500,000 1,569,263
May Department Stores Co., 6.65%,
7/15/14.............................. 3,200,000 3,233,804
-----------
4,803,067
-----------
TELECOMMUNICATIONS - 7.0%
AOL Time Warner, Inc., 7.70%,
5/1/32............................... 1,500,000 1,708,339
AT&T Wireless Services, Inc., 8.75%,
3/1/31............................... 650,000 847,633
Comcast Corp., 4.95%, 6/15/16......... 1,400,000 1,300,359
SBC Communications, Inc., 6.25%,
3/15/11.............................. 1,450,000 1,509,589
Time Warner Entertainment Co., 8.375%,
3/15/23.............................. 675,000 793,400
Verizon Global Funding Corp., 7.75%,
12/1/30.............................. 850,000 985,794
Verizon Pennsylvania, Inc., 5.65%,
11/15/11............................. 1,400,000 1,390,173
-----------
8,535,287
-----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 76
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
TRANSPORTATION - 2.4%
Burlington Northern Santa Fe Railway
Co., 7.57%, 1/2/21................... 327,035 373,261
Burlington Northern Santa Fe Railway
Co., 4.83%, 1/15/23.................. 1,100,000 1,082,851
Union Pacific Corp., 6.85%, 1/2/19.... 451,336 489,510
Union Pacific Railroad, 5.08%,
1/2/29............................... 1,050,000 1,025,640
-----------
2,971,262
-----------
TOTAL CORPORATE OBLIGATIONS (COST
$38,335,343)......................... 37,517,492
-----------
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 15.6%
Banc of America Commercial Mortgage,
Inc. 00 2 A2, 7.20%, 5/15/10......... 675,000 726,153
Chase Commercial Mortgage Securities
Corp. 99 2 A2, 7.20%, 1/15/32........ 700,000 751,717
Citigroup Mortgage Loan Trust, Inc.
2005-WF2 AF2, 4.92%, 8/25/35......... 1,351,171 1,344,405
Countrywide Alternative Loan Trust
2004-30CB 3A1, 5.00%, 2/25/20........ 2,543,172 2,514,673
Countrywide Home Loans 2005-HYB8 2A1,
5.41%, 12/31/49, (a)................. 1,840,000 1,841,150
DLJ Mortgage Acceptance Corp. IO 97
CF1 S, 0.91%, 5/15/30, (b) (c)....... 497,419 4,900
Fannie Mae IO 00 16 PS, 4.56%,
10/25/29, (c)........................ 101,337 6,206
Fannie Mae IO 01 4 SA, 3.58%,
2/17/31, (c)......................... 350,150 20,855
Fannie Mae IO 200 32 SV, 4.62%,
3/18/30, (c)......................... 48,440 2,172
Fannie Mae IO 270 2, 8.50%, 9/1/23,
(c).................................. 74,943 18,391
Fannie Mae IO 296 2, 8.00%, 4/1/24,
(c).................................. 83,848 19,538
Fannie Mae IO 306 2, 8.00%, 5/1/30,
(c).................................. 110,914 26,099
FHA Weyerhauser, 7.43%, 1/1/24, (d)
(f).................................. 78,037 78,037
First Union-Chase Commercial Mortgage
99 C2 A2, 6.645%, 6/15/31............ 582,622 607,740
Freddie Mac 2894 QA, 5.50%,
12/15/24............................. 4,047,957 4,089,291
Freddie Mac 2962 CJ, 5.50%,
11/15/23............................. 3,317,340 3,339,340
Freddie Mac IO 1534 K, 3.40%,
6/15/23, (c)......................... 231,789 12,583
Freddie Mac IO 2141 SD, 4.18%,
4/15/29, (c)......................... 165,707 16,224
Freddie Mac IO 2247 SC, 3.53%,
8/15/30, (c)......................... 112,472 4,330
GE Capital Commercial Mortgage Corp.
01 1 A1, 6.08%, 5/15/33.............. 215,244 219,552
GMAC Commercial Mortgage Securities,
Inc. 98 C2 A2, 6.42%, 5/15/35........ 571,792 590,172
GMAC Commercial Mortgage Securities,
Inc. IO 96 C1 X2, 2.08%,
10/15/28, (c)........................ 188,706 1,882
Government National Mortgage
Association IO 99 29 SD, 4.03%,
3/16/26, (c)......................... 5,511 11
Government National Mortgage
Association IO 99 30 S, 4.63%,
8/16/29, (c)......................... 112,397 8,825
Government National Mortgage
Association IO 99 30 SA, 4.03%,
4/16/29, (c)......................... 145,516 9,532
Government National Mortgage
Association IO 99 32 SB, 4.03%,
7/16/27, (c)......................... 52,862 1,294
<Caption>
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Greenwich Capital Commercial Funding
Corp., 5.12%, 4/10/37................ 1,350,000 1,349,156
GS Mortgage Securities Corp. IO 97 GL
X2, 0.90%, 7/13/30, (c).............. 367,626 4,695
LB-UBS Commercial Mortgage Trust 00 C3
A1, 7.95%, 7/15/09................... 212,057 218,483
PNC Mortgage Acceptance Corp. 00 C2
A2, 7.30%, 10/12/33.................. 600,000 648,731
Salomon Brothers Mortgage Securities
VII 00 C3 A2, 6.59%, 12/18/33........ 650,000 686,135
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $19,172,949)....... 19,162,272
-----------
- ----------------------------------------------------------------
ASSET BACKED SECURITIES - 8.7%
Asset Backed Funding Certificates
2003-AHL1 A1, 3.68%, 3/25/33......... 1,763,872 1,713,178
Capital Auto Receivables Asset Trust
2003-2 CL A4A, 1.96%, 1/15/09........ 1,450,000 1,421,719
DaimlerChrysler Auto Trust 2004-C A4,
3.28%, 12/8/09....................... 1,500,000 1,455,253
DaimlerChrysler Auto Trust 2005-B A3,
4.04%, 9/8/09........................ 950,000 939,835
Peco Energy Transition Trust 00 A A3,
7.625%, 3/1/10....................... 600,000 648,023
Union Acceptance Corp. 01 C B, 4.73%,
11/9/09.............................. 2,500,000 2,501,344
WFS Financial Owner Trust 2004-3 A3,
3.30%, 4/17/09....................... 2,000,000 1,974,292
-----------
TOTAL ASSET BACKED SECURITIES (COST
$10,696,796)......................... 10,653,644
-----------
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 0.8%
HSBC Investor Money Market Fund
Class Y Shares *..................... 1,011,001 1,011,001
-----------
TOTAL INVESTMENT COMPANIES (COST
$1,011,001).......................... 1,011,001
-----------
- ----------------------------------------------------------------
MUNICIPAL BONDS - 0.7%
URBAN AND COMMUNITY DEVELOPMENT - 0.7%
Louisiana Local Government
Environmental Facilities & Community
Development (LOC AMBAC), 6.30%,
7/1/30............................... 850,000 882,521
-----------
TOTAL MUNICIPAL BONDS
(COST $931,100)...................... 882,521
-----------
- ----------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 6.0%
Pool of various securities for HSBC
Family of Funds -- Note 2 --
Security Loans....................... 7,362,043 7,362,043
-----------
TOTAL SECURITIES HELD AS COLLATERAL
FOR SECURITIES ON LOAN (COST
$7,362,043).......................... 7,362,043
-----------
TOTAL INVESTMENTS
(COST $131,267,019) - 105.8%........ 129,683,677
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $122,529,780.
77 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
(a) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report represents the rates that were
in final on October 31, 2005. The maturity dates
presented reflect the stated maturity dates. However,
each of these securities contains put or demand features
that allow the fund to require the issuer to repurchase
the security from the fund within various time periods,
including daily, weekly, monthly, or semi-annually.
(b) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
(c) Interest-only represents securities that entitle holders
to receive only interest payments on the underlying
mortgages. The yield to maturity of an Interest-Only is
extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of
principal repayments may have an adverse (positive)
effect on yield to maturity. The interest rate presented
represents the rates that were in effect on October 31,
2005. The principal amount shown is the notional amount
of the underlying mortgages.
(d) Rule 144a, section 4(2) or other security which is
restricted as to resale to institutional investors. The
Investment Advisor, using Board approved procedures, has
deemed these securities to be illiquid. Represents 0.06%
of net assets.
(e) All or a portion of the security was on loan as of
October 31, 2005.
(f) Security was fair valued (See note 2) as of October 31,
2005.
* Investment in affiliate.
AMBAC - American Municipal Bank Assurance Corp.
LOC - Letter of Credit
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 78
HSBC INVESTOR GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 97.8%
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 3.2%
General Dynamics Corp.................... 10,650 1,238,595
The Boeing Co............................ 5,600 361,984
----------
1,600,579
----------
BIOTECHNOLOGY - 4.4%
Amgen, Inc. (a).......................... 19,050 1,443,228
Gilead Sciences, Inc. (a)................ 15,500 732,375
----------
2,175,603
----------
BUSINESS SERVICES - 3.0%
Paychex, Inc............................. 37,800 1,465,128
----------
CHEMICALS - 2.3%
Monsanto Co.............................. 18,150 1,143,632
----------
COMPUTER SOFTWARE - 9.2%
Adobe Systems, Inc....................... 18,600 599,850
Automatic Data Processing, Inc........... 25,250 1,178,165
EMC Corp. (a)............................ 33,550 468,358
Microsoft Corp........................... 71,850 1,846,544
SAP AG................................... 10,700 459,458
----------
4,552,375
----------
COMPUTERS - 1.2%
Apple Computer, Inc. (a)................. 10,650 613,334
----------
CONSUMER PRODUCTS - 3.0%
Harman International Industries, Inc..... 4,950 494,307
The Procter & Gamble Co.................. 17,950 1,005,021
----------
1,499,328
----------
DIVERSIFIED MANUFACTURING OPERATIONS - 3.4%
General Electric Co...................... 50,062 1,697,602
----------
ELECTRONIC COMPONENTS &
SEMICONDUCTORS - 3.3%
Broadcom Corp. (a)....................... 11,000 467,060
Maxim Integrated Products, Inc........... 11,400 395,352
Microchip Technology, Inc................ 25,150 758,776
----------
1,621,188
----------
FINANCIAL SERVICES - 17.0%
American Express Co...................... 8,900 442,953
Franklin Resources, Inc.................. 16,100 1,422,757
Goldman Sachs Group, Inc................. 4,150 524,436
Legg Mason, Inc.......................... 15,000 1,609,649
Moody's Corp............................. 11,000 585,860
Robert Half International, Inc........... 22,650 835,332
SLM Corp................................. 39,400 2,187,881
The Chicago Mercantile Exchange Holdings,
Inc..................................... 2,050 748,558
----------
8,357,426
----------
HEALTH CARE - 8.4%
DENTSPLY International, Inc.............. 7,100 391,494
Medtronic, Inc........................... 20,700 1,172,862
Stryker Corp............................. 11,850 486,680
UnitedHealth Group, Inc.................. 36,500 2,112,985
----------
4,164,021
----------
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- ----------
HOTELS & LODGING - 1.5%
Las Vegas Sands Corp. (a)................ 6,700 229,810
Starwood Hotels & Resorts Worldwide,
Inc..................................... 8,700 508,341
----------
738,151
----------
INTERNET RELATED - 6.5%
eBay, Inc. (a)........................... 11,800 467,280
Google, Inc., Class A (a)................ 6,050 2,251,447
Yahoo!, Inc. (a)......................... 13,850 512,035
----------
3,230,762
----------
MEDICAL & HEALTH PRODUCTS - 3.8%
Genentech, Inc. (a)...................... 20,929 1,896,167
----------
OIL & GAS - 8.6%
Baker Hughes, Inc........................ 16,150 887,604
Schlumberger Ltd......................... 19,750 1,792,708
Smith International, Inc................. 48,200 1,561,680
----------
4,241,992
----------
PHARMACEUTICALS - 6.7%
Alcon, Inc............................... 8,400 1,116,360
Allergan, Inc............................ 4,350 388,455
Johnson & Johnson........................ 28,550 1,787,801
----------
3,292,616
----------
RETAIL - 9.7%
Advance Auto Parts (a)................... 10,025 375,938
Best Buy Co., Inc........................ 9,875 437,068
CVS Corp................................. 16,750 408,868
Home Depot, Inc.......................... 20,750 851,579
Staples, Inc............................. 22,775 517,676
Walgreen Co.............................. 40,017 1,817,971
Weight Watchers International, Inc.
(a)..................................... 6,600 346,962
----------
4,756,062
----------
TELECOMMUNICATIONS - 1.1%
QUALCOMM, Inc............................ 13,200 524,832
----------
TRANSPORTATION - 1.5%
Expeditors International of Washington,
Inc..................................... 12,300 746,241
----------
TOTAL COMMON STOCKS
(COST $42,329,616)...................... 48,317,039
----------
<Caption>
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 2.2%
SHARES VALUE($)
--------- ----------
HSBC Investor Money Market Fund Class Y
Shares*................................. 1,106,735 1,106,735
----------
TOTAL INVESTMENT COMPANIES (COST
$1,106,735)............................. 1,106,735
----------
TOTAL INVESTMENTS
(COST $43,436,351) - 100.0%............ 49,423,774
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $49,414,699.
(a) Represents non-income producing security.
* Investment in affiliate.
79 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR VALUE PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 97.5%
SHARES VALUE($)
------- ----------
AEROSPACE & DEFENSE - 7.9%
Lockheed Martin Corp...................... 24,600 1,489,776
Northrop Grumman Corp..................... 32,600 1,748,990
Raytheon Co............................... 28,300 1,045,685
----------
4,284,451
----------
BANKING - 4.8%
Bank of America Corp...................... 23,600 1,032,264
Wells Fargo & Co.......................... 25,800 1,553,160
----------
2,585,424
----------
BUSINESS SERVICES - 2.5%
Pitney Bowes, Inc......................... 32,100 1,350,768
----------
COMPUTER SOFTWARE - 7.1%
Computer Associates International, Inc.... 87,100 2,436,187
Microsoft Corp............................ 54,300 1,395,510
----------
3,831,697
----------
CONGLOMERATES - 1.9%
Loews Corp................................ 11,200 1,041,376
----------
CONSUMER PRODUCTS - 7.3%
Altria Group, Inc......................... 29,200 2,191,460
Kimberly-Clark Corp....................... 31,000 1,762,040
----------
3,953,500
----------
DIVERSIFIED MANUFACTURING OPERATIONS -
2.1%
Ingersoll-Rand Co......................... 29,800 1,126,142
----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS -
3.7%
Agilent Technologies, Inc. (a)............ 62,900 2,013,429
----------
FINANCIAL SERVICES - 17.0%
Citigroup, Inc............................ 36,707 1,680,446
Countrywide Financial Corp................ 76,600 2,433,582
Fannie Mae................................ 44,000 2,090,880
Genworth Financial, Inc., Class A......... 28,000 887,320
J.P. Morgan Chase & Co.................... 39,150 1,433,673
MGIC Investment Corp...................... 11,800 699,032
----------
9,224,933
----------
GAS & ELECTRIC UTILITY - 1.5%
Dominion Resources, Inc................... 11,000 836,880
----------
INSURANCE - 8.1%
Aetna, Inc................................ 12,400 1,098,144
AON Corp.................................. 26,900 910,565
Radian Group, Inc......................... 21,400 1,114,940
The Hartford Financial Services Group,
Inc...................................... 15,700 1,252,075
----------
4,375,724
----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
------- ----------
MEDIA - 5.3%
Liberty Media Corp., Class A (a).......... 100,350 799,790
Viacom, Inc., Class B..................... 66,100 2,047,117
----------
2,846,907
----------
METALS & MINING - 6.2%
Barrick Gold Corp......................... 62,700 1,583,175
POSCO ADR................................. 11,800 605,222
Rio Tinto PLC ADR......................... 7,500 1,144,650
----------
3,333,047
----------
OIL & GAS - 12.6%
Burlington Resources, Inc................. 9,500 686,090
ConocoPhillips............................ 14,082 920,681
Kerr-McGee Corp........................... 33,589 2,856,409
Noble Energy, Inc......................... 59,000 2,362,950
----------
6,826,130
----------
PAPER PRODUCTS - 1.4%
International Paper Co.................... 26,800 782,024
----------
TELECOMMUNICATIONS - 6.0%
BellSouth Corp............................ 36,050 938,021
Motorola, Inc............................. 72,000 1,595,520
Sprint Nextel Corp........................ 30,600 713,286
----------
3,246,827
----------
TRANSPORTATION - 2.1%
Union Pacific Corp........................ 16,700 1,155,306
----------
TOTAL COMMON STOCKS
(COST $45,949,150)....................... 52,814,565
----------
<Caption>
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 0.6%
SHARES VALUE($)
------- ----------
HSBC Investor Money Market Fund
Class Y Shares*.......................... 312,264 312,264
----------
TOTAL INVESTMENT COMPANIES
(COST $312,264).......................... 312,264
----------
TOTAL INVESTMENTS
(COST $46,261,414) - 98.1%.............. 53,126,829
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $54,150,448.
* Investment in Affiliate
(a) Represents non-income producing security.
ADR - American Depositary Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 80
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 98.5%
SHARES VALUE($)
--------- -----------
AUSTRALIA - 1.1%
BlueScope Steel Ltd.................... 96,800 616,221
Macquarie Airports..................... 699,400 1,574,606
Macquarie Infrastructure Group......... 154,500 397,394
-----------
2,588,221
-----------
AUSTRIA - 0.5%
Omv AG................................. 20,500 1,105,950
-----------
BELGIUM - 1.7%
Delhaize Group......................... 51,900 3,008,743
KBC Bankverzekeringsholding............ 11,300 920,875
-----------
3,929,618
-----------
BRAZIL - 2.1%
Braskem SA-Pref (b).................... 40,000 344,843
CIA de Saneamento Basico do Estado de
Sao Paulo............................. 7,710,000 493,032
Gerdau SA ADR.......................... 50,100 679,857
Petroleo Brasileiro SA ADR............. 27,700 1,589,149
Unibanco GDR........................... 13,000 679,900
Usinas Siderurgicas de Minas Gerais
SA.................................... 30,200 610,495
Votorantim Celulos Papel SA ADR........ 34,250 409,973
-----------
4,807,249
-----------
CANADA - 2.3%
Canadian Natural Resources............. 43,400 1,774,886
EnCana Corp............................ 30,000 1,371,951
Nexen, Inc............................. 20,000 823,171
Teck Cominco Ltd., B shares............ 32,300 1,361,152
-----------
5,331,160
-----------
CHINA - 0.1%
China Petroleum & Chemical Corp........ 592,000 239,076
-----------
FINLAND - 0.5%
Sampo OYJ, Class A..................... 77,000 1,181,124
-----------
FRANCE - 10.9%
Assurances Generales de France......... 36,800 3,504,532
BNP Paribas SA......................... 15,800 1,198,226
Credit Agricole SA..................... 75,900 2,225,300
France Telecom SA...................... 32,800 852,631
Renault SA............................. 55,300 4,788,787
Sanofi-Aventis......................... 57,800 4,630,180
Societe Generale....................... 33,700 3,848,704
Thomson SA............................. 58,900 1,110,378
Total SA, B Shares..................... 11,700 2,944,053
-----------
25,102,791
-----------
GERMANY - 6.7%
Continental AG......................... 51,400 3,928,072
E.ON AG................................ 41,000 3,714,684
Fresenius Medical Care AG.............. 22,800 2,058,314
MAN AG................................. 66,000 3,060,449
Muenchener Rueckversicherungs-
Gesellschaft AG....................... 22,400 2,629,530
-----------
15,391,049
-----------
HUNGARY - 0.4%
MOL Magyar Olaj -- es Gazipari Rt.
GDR................................... 9,600 904,800
-----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
IRELAND - 0.7%
Depfa Bank plc......................... 96,470 1,504,564
-----------
ISRAEL - 0.5%
Bank Hapoalim BM....................... 286,600 1,098,642
-----------
ITALY - 1.9%
ENI SpA................................ 166,500 4,456,335
-----------
JAPAN - 24.4%
Canon, Inc............................. 89,300 4,727,388
East Japan Railway Co.................. 102 606,134
Hitachi, Ltd........................... 144,000 886,868
Honda Motor Co., Ltd................... 96,600 5,373,359
ITOCHU Corp............................ 317,000 2,173,147
Japan Tobacco, Inc..................... 240 3,794,856
JFE Holdings, Inc...................... 121,400 3,771,805
Kobe Steel, Ltd........................ 958,000 2,830,925
Kyocera Corp........................... 11,400 739,491
Mitsubishi UFJ Financial Group, Inc.... 133 1,671,891
Mitsui Chemicals, Inc.................. 310,000 1,857,499
Nippon Mining Holdings, Inc............ 360,000 2,673,254
Nissan Motor Co., Ltd.................. 225,100 2,360,275
ORIX Corp.............................. 27,800 5,213,614
Sanyo Shinpan Finance Co., Ltd......... 26,900 1,957,695
Sega Sammy Holdings, Inc............... 9,800 352,698
Sega Sammy Holdings, Inc. (b).......... 9,800 352,797
Sony Corp.............................. 12,510 408,770
Sumitomo Metal Industries, Ltd......... 294,000 1,018,033
Sumitomo Mitsui Financial Group,
Inc................................... 598 5,523,745
The Tokyo Electric Power Co., Inc...... 90,600 2,253,088
Tokyo Gas Co., Ltd..................... 529,000 2,080,678
Toyota Motor Corp...................... 51,600 2,393,128
UNY Co., Ltd........................... 90,000 1,121,975
-----------
56,143,113
-----------
LUXEMBOURG - 2.2%
Arcelor................................ 211,180 5,014,193
-----------
NETHERLANDS - 4.5%
ABN AMRO Holding NV.................... 44,453 1,051,350
European Aeronautic Defence and Space
Co.................................... 79,660 2,759,807
ING Groep NV........................... 190,468 5,492,775
Royal Dutch Shell plc, A Shares........ 33,600 1,035,958
-----------
10,339,890
-----------
PHILIPPINES - 0.3%
Philippine Long Distance Telephone
Co.................................... 21,000 641,110
-----------
SINGAPORE - 1.9%
Flextronics International Ltd. (b)..... 162,400 1,508,696
Singapore Telecommunications Ltd....... 2,104,630 2,900,304
-----------
4,409,000
-----------
SOUTH AFRICA - 0.8%
ABSA Group Ltd......................... 27,540 365,668
Sanlam Ltd............................. 554,040 1,021,108
Telkom South Africa Ltd................ 28,000 529,052
-----------
1,915,828
-----------
</Table>
81 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
SOUTH KOREA - 2.5%
Hyundai Motor Co....................... 11,600 857,749
Industrial Bank of Korea GDR........... 88,300 1,081,675
Kookmin Bank ADR....................... 14,600 852,932
POSCO ADR.............................. 34,200 1,754,118
Shinhan Financial Group Co., Ltd.
ADR................................... 19,450 1,312,681
-----------
5,859,155
-----------
SPAIN - 3.7%
Endesa SA.............................. 155,800 3,867,995
Repsol YPF SA.......................... 155,000 4,616,429
-----------
8,484,424
-----------
SWITZERLAND - 1.8%
Credit Suisse Group.................... 81,100 3,588,142
Micronas Semiconductor Holding AG
(b)................................... 14,300 484,846
-----------
4,072,988
-----------
TAIWAN - 1.4%
China Steel Corp. GDR.................. 43,470 697,694
Compal Electronics, Inc. GDR........... 222,840 1,065,175
Far Eastone Telecommunications Co.,
Ltd. GDR.............................. 21,400 373,128
Gigabyte Technology Co., Ltd........... 270,112 224,669
Taiwan Semiconductor Manufacturing Co.,
Ltd................................... 491,141 763,122
-----------
3,123,788
-----------
THAILAND - 0.3%
PTT Public Company Ltd. plc............ 121,400 726,732
-----------
TURKEY - 0.1%
Ford Otomotiv Sanayi AS................ 47,640 342,464
-----------
UNITED KINGDOM - 25.2%
Aviva plc.............................. 346,270 4,088,803
Barclays plc........................... 410,200 4,064,675
BP Amoco plc........................... 410,200 4,543,590
British Aerospace plc.................. 485,500 2,840,581
British American Tobacco plc........... 28,000 616,085
Friends Provident plc.................. 782,500 2,441,216
George Wimpey plc...................... 244,600 1,772,262
Glaxosmithkline plc.................... 133,600 3,474,475
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
--------- -----------
UNITED KINGDOM, CONTINUED
HBOS plc............................... 260,121 3,842,156
Intercontinental Hotels Group plc...... 120,214 1,502,351
International Power plc................ 300,000 1,231,847
Mitchells & Butlers plc................ 119,800 769,498
Punch Taverns plc...................... 185,000 2,394,991
Royal & Sun Alliance Insurance Group
plc................................... 736,000 1,252,824
Royal Bank of Scotland Group plc....... 169,100 4,682,159
Royal Dutch Shell plc, B Shares........ 45,973 1,499,509
Sainsbury plc.......................... 410,062 2,025,468
Tate & Lyle plc........................ 235,000 1,928,271
Taylor Woodrow plc..................... 361,600 2,004,519
Trinity Mirror plc..................... 145,600 1,534,559
Vodafone Group plc..................... 1,461,053 3,835,556
Whitbread plc.......................... 145,200 2,416,537
Xstrata plc............................ 146,000 3,344,512
-----------
58,106,444
-----------
TOTAL COMMON STOCKS
(COST $187,403,528)................... 226,819,708
-----------
- ----------------------------------------------------------------
CASH RESERVE - 0.4%
Investors Bank Trust Cash Reserve...... 937,632 937,632
-----------
TOTAL CASH RESERVE
(COST $937,632)....................... 937,632
-----------
- ----------------------------------------------------------------
RIGHTS & WARRANTS - 0.0%
UNITED KINGDOM - 0.0%
TI Automotive Ltd., Class A (b) (c).... 190,000 0
-----------
TOTAL RIGHTS & WARRANTS
(COST $0)............................. 0
-----------
TOTAL INVESTMENTS
(COST $188,341,160) - 98.9%.......... 227,757,340
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $230,229,852.
(a) Not used.
(b) Represents non-income producing security.
(c) Represents illiquid security.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 82
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Aerospace & Defense......................................... 2.4%
Automotive.................................................. 8.7%
Banking & Financial Services................................ 22.7%
Building & Construction..................................... 1.6%
Chemicals................................................... 1.0%
Computer Related............................................ 0.6%
Drugs -- Medical............................................ 4.4%
Electrical.................................................. 2.8%
Electronic Components & Semiconductors...................... 2.1%
Energy...................................................... 0.5%
Food & Beverage............................................. 0.9%
Insurance................................................... 7.0%
Leisure..................................................... 1.9%
Manufacturing............................................... 5.3%
Metals & Mining............................................. 9.4%
Multimedia.................................................. 1.1%
Oil & Gas................................................... 15.7%
Paper Products.............................................. 0.2%
Cash........................................................ 0.4%
Retail...................................................... 3.2%
Telecommunications.......................................... 4.0%
Tobacco..................................................... 1.9%
Transportation Services..................................... 1.1%
------
Total Investments........................................... 98.9%
------
Other assets in excess of liabilities....................... 1.1%
------
Net Assets.................................................. 100.0%
------
------
</Table>
83 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
- --------------------------------------------------------------------------------
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 98.7%
SHARES VALUE($)
---------- -----------
ADVERTISING - 2.3%
Monster Worldwide, Inc. (a) (b)....... 154,700 5,075,707
-----------
BANKING - 4.3%
East West Bancorporation, Inc......... 112,000 4,288,480
Wintrust Financial Corp............... 95,200 5,110,336
-----------
9,398,816
-----------
BIOTECHNOLOGY - 4.0%
Celgene Corp. (a)..................... 154,100 8,645,010
-----------
COMMERCIAL SERVICES - 4.2%
Alliance Data Systems Corp. (a)....... 123,000 4,373,880
ValueClick, Inc. (a).................. 275,300 4,817,750
-----------
9,191,630
-----------
COMPUTER SOFTWARE - 7.0%
CheckFree Corp. (a)................... 60,300 2,562,750
Satyam Computer Services Ltd. ADR..... 86,200 2,946,316
SRA International, Inc., Class A (a)
(b).................................. 157,500 5,169,150
Transaction Systems Architects, Inc.,
Class A (a).......................... 173,500 4,686,235
-----------
15,364,451
-----------
CONSULTING SERVICES - 1.4%
LECG Corp. (a)........................ 138,600 3,061,674
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 8.6%
Actuant Corp., Class A................ 98,300 4,787,210
AMETEK, Inc........................... 166,300 6,773,399
AptarGroup, Inc....................... 13,000 665,470
IDEX Corp............................. 140,100 5,606,802
Roper Industries, Inc................. 26,400 995,280
-----------
18,828,161
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 9.1%
Advanced Analogic Technologies, Inc.
(a).................................. 92,000 1,002,800
Amphenol Corp., Class A............... 54,800 2,190,356
ATMI, Inc. (a)........................ 108,800 2,971,328
Cognos, Inc. (a)...................... 60,200 2,259,306
Power Integrations, Inc. (a).......... 133,700 2,822,407
Thermo Electron Corp. (a)............. 188,300 5,684,777
Varian Semiconductor Equipment
Associates, Inc. (a) (b)............. 80,100 3,029,382
-----------
19,960,356
-----------
ENVIRONMENTAL SERVICES - 5.5%
Pioneer Natural Resources Co.......... 57,600 2,882,880
Republic Services, Inc., Class A...... 153,900 5,440,365
Waste Connections, Inc. (a)........... 109,200 3,644,004
-----------
11,967,249
-----------
FINANCIAL SERVICES - 2.2%
Affiliated Managers
Group, Inc. (a) (b).................. 62,800 4,819,900
-----------
HEALTH CARE - 16.9%
Advanced Medical Optics, Inc. (a)..... 111,900 3,992,592
Amylin Pharmaceuticals Inc. (a)....... 32,500 1,092,000
Charles River Laboratories (a)........ 46,100 2,017,336
CYTYC Corp. (a)....................... 151,000 3,827,850
Inamed Corp. (a)...................... 97,900 6,960,690
Kinetic Concepts, Inc. (a)............ 72,000 2,584,800
Manor Care, Inc. (b).................. 161,000 5,997,250
Omnicare, Inc. (b).................... 154,700 8,369,270
PacifiCare Health Systems, Inc. (a)... 27,700 2,281,372
-----------
37,123,160
-----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
SHARES VALUE($)
---------- -----------
HOSPITALS - 2.0%
Triad Hospitals, Inc. (a)............. 103,800 4,269,294
-----------
INTERNET RELATED - 1.6%
Concur Technologies, Inc. (a)......... 226,300 3,057,313
RSA Security, Inc. (a)................ 32,400 369,360
-----------
3,426,673
-----------
OIL & GAS - 14.1%
Chesapeake Energy Corp................ 149,000 4,782,900
Consol Energy, Inc.................... 76,200 4,640,580
Denbury Resources, Inc. (a)........... 100,400 4,380,452
Massey Energy Co...................... 186,900 7,489,083
Peabody Energy Corp................... 68,800 5,377,408
Smith International, Inc.............. 130,500 4,228,200
-----------
30,898,623
-----------
PHARMACEUTICALS - 4.7%
Elan Corp. plc ADR (a) (b)............ 555,800 4,585,350
OSI Pharmaceuticals, Inc. (a) (b)..... 160,100 3,730,330
Santarus, Inc. (a) (b)................ 333,100 2,048,565
-----------
10,364,245
-----------
RETAIL - 6.1%
Dick's Sporting Goods, Inc. (a) (b)... 75,300 2,253,729
P.F. Chang's China Bistro, Inc. (a)
(b).................................. 41,700 1,907,358
Talbots, Inc.......................... 137,300 3,582,157
Weight Watchers
International, Inc. (a).............. 40,100 2,108,057
Williams-Sonoma, Inc. (a)............. 86,600 3,386,926
-----------
13,238,227
-----------
TELECOMMUNICATIONS - 3.0%
Polycom, Inc. (a)..................... 279,600 4,277,880
Scientific-Atlanta, Inc............... 67,200 2,381,568
-----------
6,659,448
-----------
TRANSPORTATION - 1.7%
J.B. Hunt Transport Services, Inc..... 186,400 3,618,024
-----------
TOTAL COMMON STOCKS
(COST $178,714,602).................. 215,910,648
-----------
<Caption>
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 1.6%
SHARES VALUE($)
---------- -----------
HSBC Investor Money Market Fund
Class Y Shares *..................... 3,433,854 3,433,854
-----------
TOTAL INVESTMENT COMPANIES (COST
$3,433,854).......................... 3,433,854
-----------
<Caption>
- ----------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 19.4%
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Pool of various securities for HSBC
Family of Funds -- Note 2 --
Security Loans....................... 42,518,000 42,518,000
-----------
TOTAL SECURITIES HELD AS COLLATERAL
FOR SECURITIES ON LOAN
(COST $42,518,000)................... 42,518,000
-----------
TOTAL INVESTMENTS
(COST $224,666,456) - 119.7%........ 261,862,502
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $218,778,225.
<Table>
(a) Represents non-income producing security.
(b) All or portion of security was on loan as of October 31,
2005.
* Investment in affiliate
ADR -- American Depositary Receipt
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 84
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
<Table>
<Caption>
LIMITED INTERNATIONAL SMALL CAP
MATURITY FIXED INCOME GROWTH VALUE EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in
non-affiliates, at
value * $32,152,692 $128,672,676 $48,317,039 $52,814,565 $227,757,340 $258,428,648
Investments in affiliates,
at value 746,417 1,011,001 1,106,735 312,264 -- 3,433,854
Foreign currency -- -- -- -- 2,286,293 --
Interest and dividends
receivable 236,392 1,071,200 22,243 32,035 414,521 20,549
Receivable for investments
sold 1,687,524 7,792,581 -- 1,019,072 -- 2,452,491
Prepaid expenses 361 1,409 565 674 1,898 1,715
----------- ------------ ----------- ----------- ------------ ------------
TOTAL ASSETS 34,823,386 138,548,867 49,446,582 54,178,610 230,460,052 264,337,257
----------- ------------ ----------- ----------- ------------ ------------
................................................................................................................................
LIABILITIES:
Payable for investments
purchased 1,365,675 8,597,581 -- -- -- 2,854,119
Payable for collateral
received on loaned
securities 629,969 7,362,043 -- -- -- 42,518,000
Accrued expenses and other
liabilities:
Investment management 11,326 46,531 20,507 24,041 190,249 152,511
Administration 2,246 7,177 1,571 1,756 10,904 11,338
Accounting 218 543 384 223 121 134
Compliance service 44 158 59 69 292 291
Custodian 2,722 -- 7,500 -- 18,887 12,692
Trustee 127 459 173 201 666 840
Other 1,373 4,595 1,689 1,872 9,081 9,107
----------- ------------ ----------- ----------- ------------ ------------
TOTAL LIABILITIES 2,013,700 16,019,087 31,883 28,162 230,200 45,559,032
----------- ------------ ----------- ----------- ------------ ------------
................................................................................................................................
NET ASSETS:
Applicable to investors'
beneficial interest $32,809,686 $122,529,780 $49,414,699 $54,150,448 $230,229,852 $218,778,225
----------- ------------ ----------- ----------- ------------ ------------
----------- ------------ ----------- ----------- ------------ ------------
Investments, at cost $33,320,548 $131,267,019 $43,436,351 $42,261,414 $188,341,160 $224,666,456
----------- ------------ ----------- ----------- ------------ ------------
----------- ------------ ----------- ----------- ------------ ------------
Foreign currency, at cost $ 2,296,002
------------
------------
</Table>
- ---------
* The Limited Maturity Portfolio, Fixed Income Portfolio, and Small Cap Equity
Portfolio include securities on loan of $617,119, $7,216,681, $41,194,226,
respectively.
85 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF OPERATIONS -- FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
<Caption>
LIMITED FIXED INTERNATIONAL SMALL CAP
MATURITY INCOME GROWTH VALUE EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 2,105,378 $ 6,989,667 $ 0 $ 0 $ 22,432 $ 0
Dividends 217 1,242 688,580 1,061,066 7,050,398 990,070
Dividend income from affiliated
investments 25,523 110,154 42,243 55,096 -- 138,034
Foreign tax withholding -- -- -- -- (778,471) --
Income from securities lending 6,154 12,904 366 2,358 -- 12,148
Other income (see note 5) 2,093 7,821 1,126 1,423 -- 5,169
----------- ------------ ---------- ---------- ----------- ------------
TOTAL INVESTMENT INCOME 2,139,365 7,121,788 732,315 1,119,943 6,294,359 1,145,421
----------- ------------ ---------- ---------- ----------- ------------
.................................................................................................................................
EXPENSES:
Investment management 197,360 620,549 259,397 328,104 1,568,100 2,284,219
Administration -- HSBC (see
note 3) 4,684 17,001 6,370 7,303 29,205 30,836
Administration -- BISYS (see
note 3) 13,745 40,031 13,209 16,106 56,179 76,108
Accounting 48,094 57,945 41,057 39,454 78,906 40,138
Compliance service 687 2,110 716 858 3,125 4,038
Custodian 16,066 42,418 26,567 30,165 145,360 76,725
Interest -- 93 -- -- -- 104
Trustee 1,587 4,619 452 853 6,197 8,600
Other 6,005 18,231 7,005 7,885 30,270 37,046
----------- ------------ ---------- ---------- ----------- ------------
Total expenses before voluntary
fee reductions 288,228 802,997 354,773 430,728 1,917,342 2,557,814
Fees reduced by Investment
Adviser (see note 3 and 5) (45,832) (171,285) (24,678) (31,167) -- (113,213)
Fees reduced by Administrator --
BISYS (see note 3) (902) (2,934) (1,018) (1,231) (4,020) (5,102)
----------- ------------ ---------- ---------- ----------- ------------
NET EXPENSES 241,494 628,778 329,077 398,330 1,913,322 2,439,499
----------- ------------ ---------- ---------- ----------- ------------
.................................................................................................................................
NET INVESTMENT INCOME (LOSS) 1,897,871 6,493,010 403,238 721,613 4,381,037 (1,294,078)
----------- ------------ ---------- ---------- ----------- ------------
.................................................................................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains (losses) from
investments and foreign
currency transactions (162,231) 7,083,274 2,375,542 4,124,126 18,977,305 62,035,547
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies (1,247,772) (10,643,468) 3,995,556 4,254,259 17,737,274 (17,237,446)
----------- ------------ ---------- ---------- ----------- ------------
.................................................................................................................................
Net realized/unrealized gains
(losses) from investments and
foreign currency transactions (1,410,003) (3,560,194) 6,371,098 8,378,385 36,714,579 44,798,101
----------- ------------ ---------- ---------- ----------- ------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 487,868 $ 2,932,816 $6,774,336 $9,099,998 $41,095,616 $ 43,504,023
----------- ------------ ---------- ---------- ----------- ------------
----------- ------------ ---------- ---------- ----------- ------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 86
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
LIMITED MATURITY FIXED INCOME
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,897,871 $ 2,685,767 $ 6,493,010 $ 8,004,774
Net realized gains (losses) from
investment transactions (162,231) 350,688 7,083,274 1,234,753
Change in unrealized
appreciation/depreciation from
investments (1,247,772) 195,249 (10,643,468) 533,676
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 487,868 3,231,704 2,932,816 9,773,203
------------ ------------ ------------ ------------
Proceeds from contributions 6,926,443 19,537,952 31,409,368 47,385,442
Value of withdrawals (38,301,414) (43,561,156) (81,271,788) (91,249,818)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (31,374,971) (24,023,204) (49,862,420) (43,864,376)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS (30,887,103) (20,791,500) (46,929,604) (34,091,173)
...............................................................................................................................
NET ASSETS:
Beginning of period 63,696,789 84,488,289 169,459,384 203,550,557
------------ ------------ ------------ ------------
End of period $ 32,809,686 $ 63,696,789 $122,529,780 $169,459,384
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
87 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
GROWTH VALUE
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004(a) OCTOBER 31, 2005 OCTOBER 31, 2004(a)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 403,238 $ 11,209 $ 721,613 $ 325,186
Net realized gains (losses)
from investment
transactions 2,375,542 (1,576,336) 4,124,126 506,578
Change in unrealized
appreciation/depreciation
from investments 3,995,556 1,991,868 4,254,259 2,611,156
------------ ----------- ------------ -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 6,774,336 426,741 9,099,998 3,442,920
------------ ----------- ------------ -----------
Proceeds from contributions 15,081,868 53,535,759 14,013,050 64,069,267
Value of withdrawals (22,121,709) (4,282,296) (30,376,597) (6,098,190)
------------ ----------- ------------ -----------
CHANGE IN NET ASSETS FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST (7,039,841) 49,253,463 (16,363,547) 57,971,077
------------ ----------- ------------ -----------
CHANGE IN NET ASSETS (265,505) 49,680,204 (7,263,549) 61,413,997
.............................................................................................................................
NET ASSETS:
Beginning of period 49,680,204 -- 61,413,997 --
------------ ----------- ------------ -----------
End of period $ 49,414,699 $49,680,204 $ 54,150,448 $61,413,997
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</Table>
- ---------
(a) Growth Portfolio commenced operations on May 7, 2004. Value Portfolio
commenced operations on May 7, 2004.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 88
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
INTERNATIONAL EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 2005 OCTOBER 31, 2004 OCTOBER 31, 2005 OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 4,381,037 $ 3,284,091 $ (1,294,078) $ (1,984,985)
Net realized gains (losses) from
investment and foreign currency
transactions 18,977,305 32,731,371 62,035,547 41,945,235
Change in unrealized
appreciation/depreciation from
investments and foreign currencies 17,737,274 3,338,622 (17,237,446) (17,175,725)
------------ ---------------- ------------- -------------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS 41,095,616 39,354,084 43,504,023 22,784,525
------------ ---------------- ------------- -------------
Proceeds from contributions 68,931,727 44,516,479 24,917,377 67,718,326
Value of withdrawals (a) (99,822,646) (65,649,972) (208,976,448) (157,351,034)
------------ ---------------- ------------- -------------
CHANGE IN NET ASSETS FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTEREST (30,890,919) (21,133,493) (184,059,071) (89,632,708)
------------ ---------------- ------------- -------------
CHANGE IN NET ASSETS 10,204,697 18,220,591 (140,555,048) (66,848,183)
...............................................................................................................................
NET ASSETS:
Beginning of period 220,025,155 201,804,564 359,333,273 426,181,456
------------ ---------------- ------------- -------------
End of period $230,229,852 $ 220,025,155 $ 218,778,225 $ 359,333,273
------------ ---------------- ------------- -------------
------------ ---------------- ------------- -------------
</Table>
- ---------
(a) During the year ended October 31, 2005, the Small Cap Equity Portfolio
delivered cash and securities with a market value of $61,810,186 in
connection with a redemption in-kind of the HSBC Investor Small Cap Equity
Fund.
89 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------
RATIO OF RATIO OF NET
NET ASSETS AT EXPENSES INVESTMENT
END OF TO AVERAGE INCOME (LOSS)
TOTAL PERIOD NET TO AVERAGE
RETURN(a) (000'S) ASSETS(b) NET ASSETS(b)
- --------------------------------------------------------------------------------------------------------------------------
LIMITED MATURITY PORTFOLIO
Period ended October 31, 2001 (d) $115,180 0.55% 4.97%
Year ended October 31, 2002 149,815 0.51% 4.60%
Year ended October 31, 2003 4.42% 84,488 0.53% 3.70%
Year ended October 31, 2004 4.48% 63,697 0.57% 3.54%
Year ended October 31, 2005 0.76 %(e) 32,810 0.49%(e) 3.85 % (e)
- --------------------------------------------------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
Year ended October 31, 2001 $242,914 0.53% 6.53%
Year ended October 31, 2002 385,802 0.48% 5.14%
Year ended October 31, 2003 5.80% 203,551 0.48% 4.38%
Year ended October 31, 2004 5.56% 169,459 0.52% 4.31%
Year ended October 31, 2005 1.64%(e) 122,530 0.40%(e) 4.25 % (e)
- --------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
Period ended October 31, 2004 (d) (0.86%) $ 49,680 0.72% 0.06%
Year ended October 31, 2005 13.59 %(e) 49,415 0.63%(e) 0.77 % (e)
- --------------------------------------------------------------------------------------------------------------------------
VALUE PORTFOLIO
Period ended October 31, 2004 (d) 6.12% $ 61,414 0.71% 1.28%
Year ended October 31, 2005 15.23 %(e) 54,150 0.64%(e) 1.15 % (e)
- --------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Year ended October 31, 2001 $275,848 0.90% 0.54%
Year ended October 31, 2002 256,616 0.91% 0.63%
Year ended October 31, 2003 23.70% 201,805 0.96% 1.00%
Year ended October 31, 2004 20.29% 220,025 0.94% 1.53%
Year ended October 31, 2005 19.54% 230,230 0.84% 1.92%
- --------------------------------------------------------------------------------------------------------------------------
SMALL CAP EQUITY PORTFOLIO
Year ended October 31, 2001 $265,573 0.98% (0.65%)
Year ended October 31, 2002 266,217 0.99% (0.78%)
Year ended October 31, 2003 33.30% 426,181 0.91% (0.62%)
Year ended October 31, 2004 5.93% 359,333 0.88% (0.52%)
Year ended October 31, 2005 14.35 %(e) 218,778 0.85%(e) (0.45%)(e)
- --------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
----------------------------
RATIO OF
EXPENSES
TO AVERAGE PORTFOLIO
NET ASSETS(b)(c) TURNOVER
- ------------------------------------------------------------------------------
LIMITED MATURITY PORTFOLIO
Period ended October 31, 2001 (d) 0.55% 102.01%
Year ended October 31, 2002 0.51% 44.04%
Year ended October 31, 2003 0.53% 98.42%
Year ended October 31, 2004 0.57% 50.06%
Year ended October 31, 2005 0.58% 107.26%
- ------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO
Year ended October 31, 2001 0.53% 341.26%
Year ended October 31, 2002 0.48% 77.82%
Year ended October 31, 2003 0.48% 70.91%
Year ended October 31, 2004 0.52% 34.88%
Year ended October 31, 2005 0.53% 176.60%
- ------------------------------------------------------------------------------
GROWTH PORTFOLIO
Period ended October 31, 2004 (d) 0.72% 53.08%
Year ended October 31, 2005 0.68% 79.54%
- ------------------------------------------------------------------------------
VALUE PORTFOLIO
Period ended October 31, 2004 (d) 0.71% 10.33%
Year ended October 31, 2005 0.69% 16.45%
- ------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Year ended October 31, 2001 0.90% 26.90%
Year ended October 31, 2002 0.91% 31.63%
Year ended October 31, 2003 0.96% 68.51%
Year ended October 31, 2004 0.94% 106.11%
Year ended October 31, 2005 0.84% 31.32%
- ------------------------------------------------------------------------------
SMALL CAP EQUITY PORTFOLIO
Year ended October 31, 2001 0.98% 52.47%
Year ended October 31, 2002 0.99% 103.90%
Year ended October 31, 2003 0.91% 152.05%
Year ended October 31, 2004 0.88% 81.75%
Year ended October 31, 2005 0.90% 63.95%
- ------------------------------------------------------------------------------
</Table>
(a) Not annualized for periods less than one year.
(b) Annualized for periods less than one year.
(c) During the period, certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(d) Limited Maturity Portfolio commenced operations on January 24, 2001.
Value Portfolio commenced operations on May 7, 2004.
Growth Portfolio commenced operations on May 7, 2004.
(e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the Portfolios related to violations of certain investment policies and
limitations. The corresponding impact to the net expense ratio, net income
ratio and total return were 0.09%, 0.12%, 0.05%, 0.05% and 0.04% for Limited
Maturity Portfolio, Fixed Income Portfolio, Growth Portfolio, Value
Portfolio and Small Cap Equity Portfolio, respectively.
See notes to financial statements.
HSBC INVESTOR PORTFOLIOS 90
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005
1. ORGANIZATION:
The HSBC Investor Portfolios (the 'Portfolio Trust'), is a registered
open-end management investment company organized as a master trust fund
under the laws of the State of New York on November 1, 1994. The Portfolios
operate as master funds in master-feeder arrangements. The Declaration of
Trust permits the Board of Trustees to issue an unlimited number of
beneficial interests in the Portfolios. The Portfolio Trust contains the
following (individually a 'Portfolio,' collectively the 'Portfolios'):
<Table>
<Caption>
PORTFOLIO SHORT NAME
- --------- ----------
HSBC Investor Limited Maturity Portfolio Limited Maturity Portfolio
HSBC Investor Fixed Income Portfolio Fixed Income Portfolio
HSBC Investor Growth Portfolio Growth Portfolio
HSBC Investor Value Portfolio Value Portfolio
HSBC Investor International Equity Portfolio International Equity Portfolio
HSBC Investor Small Cap Equity Portfolio Small Cap Equity Portfolio
</Table>
The Portfolios are diversified series of the Portfolio Trust and are
part of the HSBC Investor Family of Funds. Financial Statements for all
other series of the HSBC Investor Family of Funds are published separately.
Under the Portfolios' organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the Portfolios. In addition, in the normal
course of business, the Portfolios enter into contracts with their vendors
and others that provide for general indemnifications. The Portfolios'
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Portfolios. However, based on
experience, the Portfolios expect that risk of loss to be remote.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the Portfolios in the preparation of their financial statements.
The policies are in conformity with accounting principles generally accepted
in the United States of America ('GAAP'). The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results could
differ from those estimates.
SECURITIES VALUATION:
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) are valued on the basis of
valuations furnished by a pricing service, the use of which has been
approved by the Portfolios' Board of Trustees. In making such valuations,
the pricing service utilizes both dealer-supplied valuations and the use of
matrix techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics other than
market data and without exclusive reliance upon quoted prices or exchanges
or over-the-counter prices, since such valuations are believed to reflect
more accurately the fair value of such securities. All debt portfolio
securities with a remaining maturity of 60 days or less are valued at
amortized cost. Under the amortized cost method, premium or discount, if
any, is amortized or accreted, respectively, on a constant (straight-line)
basis to the maturity of the security.
The value of each equity security is based either on the last sale price
on a national securities exchange, or in the absence of recorded sales, at
the closing bid prices on such exchanges, or at the quoted bid price in the
over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued by or at the direction of
the Portfolios' Board of Trustees. Examples of potentially significant
events that could affect the value of an individual security include
corporate actions by the issuer, announcements by the issuer relating to its
earnings or products, regulatory news, natural disasters and litigation.
Examples of potentially significant events that could affect multiple
securities held by a Portfolio include governmental actions, natural
disasters and armed conflicts. In addition, if events materially affecting
the value of foreign securities occur between the time when the exchange on
which they are traded closes and the time when the Portfolios' net assets
are calculated, such securities may be valued using fair
91 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
value pricing in accordance with procedures adopted by the Board of
Trustees. Management identifies possible fluctuations in foreign securities
by monitoring the rise or fall in the value of a designated benchmark index.
In the event of a rise or fall greater than predetermined levels, the
International Equity Portfolio may use a systematic valuation model provided
by an independent third party to value its foreign securities. When the
International Equity Portfolio uses fair value pricing, the value assigned
to the International Equity Portfolio's foreign securities may not be the
quoted or published prices of the investment on their primary markets or
exchanges.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Changes in holdings of portfolio securities are reflected no later than
on the first business day following trade date. However, for financial
reporting purposes, portfolio securities are reflected as of trade date.
Securities gains and losses are calculated on the identified cost basis.
Interest income is recognized on the accrual basis and includes, where
applicable, the amortization or accretion of premium or discount. Dividend
income is recorded on the ex-dividend date.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Portfolios are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars at the current
rate of exchange to determine the value of investments, assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of
such transactions. The Portfolios do not isolate the portion of the results
of operations resulting from changes in foreign exchange rates on
investments from fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments and foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Portfolios may enter into forward foreign currency exchange
contracts in connection with planned purchases or sales of securities or to
hedge the U.S. dollar value of portfolio securities denominated in a
particular currency. The Portfolios could be exposed to risks if the
counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purposes as
unrealized gains or losses until the contract settlement date.
FUTURES CONTRACTS:
Each Portfolio may invest in futures contracts for the purpose of
hedging their existing portfolio securities or securities it intends to
purchase against fluctuations in fair value caused by changes in prevailing
market interest rates. Upon entering into a futures contract, the Portfolio
is required to pledge to the broker an amount of cash and/or other assets
equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as 'variation margin,' are made or
received by the Portfolio each day, depending on the daily fluctuations in
the fair value of the underlying security. The Portfolio recognizes a gain
or loss equal to the daily variation margin. Should market conditions move
unexpectedly, the Portfolio may not achieve the anticipated benefits of the
futures contracts and may realize a loss. The use of futures transactions
involves the risk of imperfect correlation in movements in the price of
futures contracts, interest rates and the underlying hedged assets.
MORTGAGE DOLLAR ROLL TRANSACTIONS:
The Fixed Income Portfolio may engage in dollar roll transactions with
respect to mortgage securities issued by the Government National Mortgage
Association, the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation. In a dollar roll transaction, the Portfolio sells
a mortgage-backed security and simultaneously agrees to repurchase a similar
security on a specified future date at an agreed upon price. During the roll
period, the Portfolio will not be entitled to receive any interest or
principal paid on the securities sold. The Portfolio is compensated for the
lost interest on the securities sold by the difference between the sales
price and the lower price for the future repurchase as well as by the
interest earned on the reinvestment of the sales proceeds. The
HSBC INVESTOR PORTFOLIOS 92
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in
an amount sufficient to pay for the future repurchase are segregated with
the custodian.
RESTRICTED AND ILLIQUID SECURITIES:
A restricted security is a security which has been purchased through a
private offering and cannot be resold to the general public without prior
registration under the Securities Act of 1933 (the '1933 Act') or pursuant
to the resale limitations provided by Rule 144 under the 1933 Act, or an
exemption from the registration requirements of the 1933 Act. Certain
restricted securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers, and may be deemed
liquid by the investment manager based on procedures established by the
Board of Trustees. Not all restricted securities are considered illiquid.
At October 31, 2005, the HSBC Fixed Income Portfolio held illiquid
securities, representing 0.06% of net assets, as follows:
<Table>
<Caption>
ACQUISITION ACQUISITION PRINCIPAL
SECURITY NAME DATE COST($) AMOUNT($) VALUE($)
- ------------- ---- ------- --------- --------
FHA Weyerhauser, 7.43%, 1/1/24.............................. 3/28/2002 $411,213 $78,037 $78,037
</Table>
SECURITIES LOANS:
To generate additional income, the Portfolios may lend up to 33 1/3%,
except for Small Cap Equity Portfolio which may lend up to 30%, of their
respective assets pursuant to agreements requiring that the loan be
collateralized by cash, U.S. Government or U.S. Government agency
securities, equal at all times to at least 100% of the fair value. The
Portfolios receive payments from borrowers equivalent to the dividends and
interest that would have been earned on securities lent while simultaneously
seeking to earn income on the investment of collateral. Collateral is marked
to market daily to provide the required level of collateral. There may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans will be made only to borrowers, such as broker-dealers, banks or
institutional borrowers of securities, deemed by HSBC to be of good standing
and creditworthy under guidelines established by the Board of Trustees and
when, in the judgement of HSBC, the consideration which can be earned
currently from such securities loans justifies the attendant risks. Loans
are subject to termination by the Portfolios or the borrower at any time and
are, therefore, not considered to be illiquid investments. As of October 31,
2005, the following Portfolios had collateral and loaned securities as
follows:
<Table>
<Caption>
VALUE
VALUE OF LOANED
PORTFOLIO NAME OF COLLATERAL SECURITIES
- -------------- ------------- ----------
Limited Maturity Portfolio.................................. $ 629,969 $ 617,119
Fixed Income Portfolio...................................... 7,362,043 7,216,681
Small Cap Equity Portfolio.................................. 42,518,000 41,194,226
</Table>
The cash collateral received by the Portfolios was invested in a pooled
account by HSBC Bank USA and at October 31, 2005, the pooled account
consisted of the following:
<Table>
<Caption>
FAIR MATURITY MATURITY
SECURITY TYPE SECURITY NAME VALUE RATE DATE
- ------------- ------------- ----- ---- ----
Repurchase Agreement...................... Credit Suisse First Boston, Inc. $68,609,832 4.02% 11/01/2005
</Table>
LINE OF CREDIT:
The Portfolios participate in a short-term, demand note agreement with
HSBC Bank USA, an affiliate of the Investment Adviser (defined below). Under
the agreement, the Funds may borrow up to $50 million. The purpose of the
agreement is to meet temporary or emergency cash needs, including redemption
requests that might otherwise require the untimely disposition of
securities.
93 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
During the fiscal year ended October 31, 2005, the Fixed Income
Portfolio, Limited Maturity Portfolio and Small Cap Equity Portfolio had
borrowed against the Line of Credit. The details of the borrowing were as
follows (based on actual number of days in which the respective Fund
borrowed monies):
<Table>
<Caption>
AVERAGE AMOUNT AVERAGE
FUND OUTSTANDING INTEREST RATE
- ---- ----------- -------------
Fixed Income Portfolio..................................... $ 389,711 2.87%
Small Cap Equity Portfolio................................. 1,038,000 3.59%
</Table>
EXPENSE ALLOCATIONS:
Expenses incurred by the HSBC Investor Family of Funds with respect to
any two or more funds within the HSBC Investor Family of Funds are allocated
in proportion to the net assets of each fund within the HSBC Investor Family
of Funds, or another appropriate basis. Expenses directly attributable to a
Portfolio are charged to that Portfolio.
FEDERAL INCOME TAXES:
Each Portfolio will be treated as a partnership for U.S. Federal income
tax purposes. Accordingly, each Portfolio passes through all of its net
investment income and gains and losses to its Feeders, and is therefore not
subject to U.S. Federal income tax. As such, an investor in the Portfolios
will be taxed on their share of the Portfolios' ordinary income and realized
gains. It is intended that the Portfolios will be managed in such a way that
an investor will be able to satisfy the requirements of the Internal Revenue
Code applicable to regulated investment companies.
3. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Investments (USA) Inc. ('HSBC' or the 'Investment Adviser'), a
wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank,
acts as the Investment Adviser to the Portfolios pursuant to an investment
management contract with the Portfolio Trust. As Investment Adviser, HSBC
manages the investments of the Portfolios and continuously reviews,
supervises and administers the Portfolios' investments. Waddell & Reed
Investment Management Company, NWQ Investment Management Co., LLC,
AllianceBernstein Investment Research and Management, and Westfield Capital
Management, LLC serve as Sub-Investment Advisers for the Growth Portfolio,
Value Portfolio, International Equity Portfolio and the Small Cap Equity
Portfolio, respectively.
For its services as Investment Adviser, HSBC receives a fee, accrued
daily and paid monthly, at an annual rate of 0.40% of the Limited Maturity
Portfolio's average daily net assets.
For its services as Investment Adviser, HSBC receives, from the Fixed
Income Portfolio, a fee accrued daily and paid monthly at an annual rate of:
<Table>
<Caption>
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%
</Table>
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:
<Table>
<Caption>
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%
</Table>
HSBC INVESTOR PORTFOLIOS 94
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and NWQ Investment Management Co., LLC receive in
aggregate, from the Value Portfolio, a fee, accrued daily and paid monthly,
at an annual rate of:
<Table>
<Caption>
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%
</Table>
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:
<Table>
<Caption>
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%
</Table>
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and Westfield Capital Management LLC receive in
aggregate, a fee, accrued daily and paid monthly, at an annual rate of 0.80%
of the Small Cap Equity Portfolio's average daily net assets.
ADMINISTRATION:
Effective July 1, 2005, HSBC serves the Funds as Administrator. Under
the terms of the administration agreement, HSBC receives from the Funds a
fee, accrued daily and paid monthly, at an annual rate of:
<Table>
<Caption>
BASED ON AVERAGE DAILY NET ASSETS OF FEE RATE
- ------------------------------------ --------
Up to $8 billion............................................ 0.075%
In excess of $8 billion but not exceeding $9.25 billion..... 0.070%
In excess of $9.25 billion but not exceeding $12 billion.... 0.050%
In excess of $12 billion.................................... 0.030%
</Table>
The fee rate and breakpoints are determined on the basis of the
aggregate average daily net assets of the HSBC Investor Family of Funds, but
the assets of the Portfolios and Feeder Funds that invest in the Portfolios
are not double-counted. The total administration fee to be paid to BISYS is
allocated to each of the funds in the HSBC Investor Family of Funds based
upon its proportionate share of the aggregate net assets of the Family of
Funds. For assets invested in the Portfolios by Feeder Funds, the Portfolios
pay half of the administration fee and the Feeder Funds pay half of the
administration fee, for a combination of the total fee rate set forth above.
Effective July 1, 2005, pursuant to a Sub-Administration Agreement with
HSBC, BISYS Fund Services Ohio, Inc. ('BISYS Ohio') a wholly-owned
subsidiary of The BISYS Group, Inc, serves as the Trust's sub-administrator
subject to the general supervision of the Portfolios' Board of Trustees and
HSBC. For these services, BISYS is entitled to a fee, payable by HSBC. Prior
to July 1, 2005, BISYS Ohio received compensation for providing
administration services to the Portfolios under the same compensation
structure as those currently with HSBC.
All voluntary administration fee waivers are not subject to recoupment
in subsequent fiscal periods.
Under a Compliance Services Agreement between the Portfolios' and BISYS
Ohio (the 'CCO Agreement'), BISYS Ohio makes an employee available to serve
as the Portfolios' Chief Compliance Officer (the 'CCO'). Under the CCO
Agreement, BISYS Ohio also provides infrastructure and support in
implementing the written policies and procedures comprising the Portfolios'
compliance program, including support services to the CCO. For the services
provided under the CCO Agreement, the HSBC Investor Family of Funds paid
BISYS Ohio $200,000 for the fiscal year ended October 31, 2005, plus certain
out of pocket expenses. Expenses incurred are reflected on the Statements of
Operations as 'Compliance Service'. In addition, BISYS Ohio received a
one-time implementation fee of $50,000
95 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
which is included in Other Expenses on the Statements of Operations. BISYS
Ohio pays the salary and other compensation earned by any such individuals
as employees of BISYS Ohio.
FUND ACCOUNTING, CUSTODIAN AND TRUSTEE:
BISYS provides fund accounting services for the Portfolios. For its
services to the Portfolios, BISYS receives an annual fee per Portfolio,
including reimbursement of certain expenses, from each Portfolio accrued
daily and paid monthly. HSBC serves as custodian to the Limited Maturity
Portfolio, Fixed Income Portfolio, Growth Portfolio, Value Portfolio and
Small Cap Equity Portfolio. Investor's Bank & Trust Company serves as
custodian to the International Equity Portfolio. Compensation HSBC receives
for services to the Portfolios as custodian is presented in the Statements
of Operations as custodian fees.
Each of the six non-interested Trustees are compensated a $24,000 annual
Board retainer, a $1,000 annual retainer for each Committee of the Board,
and a $4,000 and $2,000 meeting fee for each regular in-person Board meeting
and Committee meeting, respectively. In addition, Trustees may receive
compensation for special meetings and/or functioning as a Committee
Chairperson or Lead Trustee. Also, the Trustees are reimbursed for certain
expenses.
OTHER:
For its service as security lending agent, HSBC Bank USA (see note
2 -- Security Loans), receives a fee equal to 0.06% of the average dollar
value of the loans outstanding during a given month from the Portfolios.
Income from securities lending net of related expenses, is recorded as
earned. The fees collected by HSBC Bank USA for the fiscal year ended
October 31, 2005 were:
<Table>
<Caption>
PORTFOLIO FEE
- --------- ---
Limited Maturity Portfolio.................................. $ 568
Fixed Income Portfolio...................................... 1,205
Growth Portfolio............................................ 254
Value Portfolio............................................. 653
Small Cap Equity Portfolio.................................. 8,970
</Table>
The HSBC Investor Family of Funds may use affiliated broker/dealers for
the execution of portfolio investment trades. For the year ended
October 31, 2005, affiliated broker/dealers did not receive any commissions
on the execution of trades related to the HSBC Investor Family of Funds.
4. INVESTMENT TRANSACTIONS:
For the year ended October 31, 2005, each Portfolio purchased and sold
securities, excluding short-term securities, in the following amounts:
<Table>
<Caption>
PURCHASES SALES PURCHASES SALES
(EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S.
PORTFOLIO NAME GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT
- -------------- ----------- ----------- ---------- ----------
Limited Maturity Portfolio........ $ 32,546,569 $ 57,480,601 $17,111,529 $20,592,365
Fixed Income Portfolio............ 186,894,699 198,575,702 53,683,995 55,827,445
Growth Portfolio.................. 39,850,716 43,292,812 -- --
Value Portfolio................... 9,779,806 20,931,182 -- --
International Portfolio........... 70,579,054 98,846,092 -- --
Small Cap Equity Portfolio........ 180,474,013 359,258,559 -- --
</Table>
5. PAYMENTS FROM AFFILIATE:
During the year ended October 31, 2005, HSBC reimbursed certain advisory
fees by some of the Portfolios related to violations of certain investment
policies and limitations. HSBC also reimbursed the Portfolios for interest
on these amounts. The amounts for the year ended October 31, 2005, are
disclosed in the following table. The corresponding
HSBC INVESTOR PORTFOLIOS 96
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
impact to the net expense ratio, net income ratio and total return for the
year ended October 31, 2005, are disclosed in the Fund's Financial
Highlights.
<Table>
<Caption>
ADVISORY
FUND FEES(1) INTEREST(2) TOTAL
- ---- ------- ----------- -----
Limited Maturity Portfolio.............................. $ 45,832 $ 2,093 $ 47,925
Fixed Income Portfolio.................................. 171,285 7,821 179,106
Growth Portfolio........................................ 24,678 1,126 25,804
Value Portfolio......................................... 31,167 1,423 32,590
Small Cap Equity Portfolio.............................. 113,213 5,169 118,382
-------- ------- --------
Total............................................... $386,175 $17,632 $403,807
-------- ------- --------
-------- ------- --------
</Table>
-------------
(1) Amounts relate to the reimbursement of investment advisory fees on the
investment in certain investment companies and are included in 'Fees
reduced by Investment Adviser' on the Statements of Operations.
(2) Amounts relate to the reimbursement of computed interest on the amounts
noted in (1) above and are included in 'Other income' on the Statements
of Operations.
6. FEDERAL INCOME TAX INFORMATION:
At October 31, 2005, the cost, gross unrealized appreciation and gross
unrealized depreciation on securities, for federal income tax purposes, were
as follows:
<Table>
<Caption>
NET UNREALIZED
TAX UNREALIZED TAX UNREALIZED APPRECIATION
PORTFOLIO NAME TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
- -------------- -------- ------------ -------------- --------------
Limited Maturity Portfolio...... $ 33,339,365 $ 32,642 $ (472,898) $ (440,256)
Fixed Income Portfolio.......... 131,332,427 289,246 (1,937,996) (1,648,750)
Growth Portfolio................ 43,812,578 6,427,977 (816,781) 5,611,196
Value Portfolio................. 46,061,864 8,982,656 (1,917,691) 7,064,965
International Equity
Portfolio..................... 189,689,427 42,503,870 (4,435,957) 38,067,913
Small Cap Equity Portfolio...... 225,744,877 43,684,514 (7,596,890) 36,087,624
</Table>
97 HSBC INVESTOR PORTFOLIOS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
HSBC Investor Portfolios:
We have audited the accompanying statements of assets and liabilities of
HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income
Portfolio, HSBC Investor Small Cap Equity Portfolio, HSBC Investor
International Equity Portfolio, HSBC Investor Growth Portfolio and HSBC
Investor Value Portfolio (collectively, the Funds), including the schedules
of portfolio investments, as of October 31, 2005, and the related statements
of operations for the year then ended, the changes in net assets for each
period in the two-year period then ended and the financial highlights for
each period in the five-year period then ended. These financial statements
and financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of October 31,
2005, by correspondence with the custodian and brokers; or other appropriate
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Funds as of October 31, 2005, the results of their
operations the year then ended, the changes in their net assets for each
period in the two-year period then ended and the financial highlights for
each period in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
December 27, 2005
HSBC INVESTOR PORTFOLIOS 98
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CONTRACT APPROVAL (UNAUDITED) -- OCTOBER 31, 2005
The Boards of Trustees (the 'Board of Trustees') of HSBC Investor Funds
and HSBC Investor Portfolios approved a new sub-advisory agreement (the 'New
Agreement') between the Investment Adviser and NWQ Investment Management
Co., LLC ('NWQ'), with respect to the Value Fund, at a meeting of the Board
of Trustees held on June 13-14, 2005. The New Agreement was approved by the
Board of Trustees in order for NWQ to continue to provide investment
sub-advisory services to the Value Fund after a change in control
transaction terminated the old sub-advisory agreement dated January 30, 2004
(the 'Old Agreement'). The approval of the New Agreement did not result in
any changes to the way in which the Value Fund is managed and did not cause
any changes to the Value Fund's investment objectives and policies.
Furthermore, the terms of the New Agreement, including the sub-advisory fee
paid to NWQ, are the same in all respect as the Old Agreement. Additionally,
there were no changes to the portfolio management team at NWQ that services
the Value Fund. In determining whether it was appropriate to approve the New
Agreement, the Board of Trustees requested and received extensive materials
and information from the Investment Adviser to assist them in considering
the approval of the New Agreement. Based on its review of the information
requested and provided, and the discussions with management of the
Investment Adviser, the Board of Trustees determined that approval of the
New Agreement was consistent with the best interests of the Value Fund and
its shareholders, and would enable the Value Fund to receive high quality
services at a cost that is appropriate, reasonable, and in the best
interests of the Value Fund and its shareholders. The Board of Trustees made
these determinations on the basis of the following factors, among others:
- Nature, Extent, and Quality of Services Provided by the Investment
Adviser and NWQ. The Board of Trustees considered the nature, quality
and extent of the investment advisory services provided by NWQ, and
NWQ's historic performance managing accounts having similar
investment objectives as the Value Fund. The Board of Trustees
concluded that the services to be provided by the Investment Adviser
and NWQ are extensive and that the Investment Adviser and NWQ would
deliver a high level of service to the Value Fund.
- Investment Performance of the Value Fund, Investment Adviser and NWQ.
The Board of Trustees considered short- and long-term investment
performance of the Value Fund over various periods of time as
compared to a peer group of comparable funds, as well as NWQ's
historic performance managing accounts having similar investment
objectives as the Value Fund. Additionally, the Board of Trustees
considered fee and expense information regarding the Value Fund's
peer groups.
- Costs of Services and Profits Realized by the Investment Adviser. The
Board of Trustees considered that the proposal had no material effect
upon the analysis of the Investment Adviser's overall profitability
and costs that had been prepared in connection with the last renewal
of the advisory contract, and would not change any factors bearing
upon the profitability to NWQ and Investment Adviser from their
relationships with the Value Fund.
- Other Relevant Considerations. The Board of Trustees considered NWQ's
representations regarding staffing and capabilities to manage assets
of the Value Portfolio. The Board of Trustees also considered the
overall high quality of the personnel, operations, financial
condition, investment management capabilities, methodologies, and
performance of the Investment Adviser and NWQ.
Accordingly, in light of the above considerations and such other factors
and information it considered relevant, the Board of Trustees by a unanimous
vote of those present in person at the meeting (including a separate vote of
the Independent Trustees present in person at the meeting) approved the New
Agreement with respect to the Value Fund.
99 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005
As a shareholder of the HSBC Investor Funds, you incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchases;
redemption fees; and exchange fees; (2) ongoing costs, including management
fees; distribution and/or service fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars)
of investing in the HSBC Investor Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from May 1, 2005
through October 31, 2005.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSE PAID
BEGINNING ENDING DURING EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD
5/1/05 10/31/05 5/1/05-10/31/05 5/1/05-10/31/05
------ -------- --------------- ---------------
Limited Maturity Portfolio $1,000.00 $1,003.40 $ 2.93 0.58%
Fixed Income Portfolio 1,000.00 1,002.70 2.68 0.53%
Growth Portfolio 1,000.00 1,127.20 3.54 0.66%
Value Portfolio 1,000.00 1,085.00 3.57 0.68%
International Equity Portfolio 1,000.00 1,100.30 4.29 0.81%
Small Cap Equity Portfolio 1,000.00 1,136.70 4.90 0.91%
</Table>
- ---------
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.
HSBC INVESTOR FAMILY OF FUNDS 100
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor Funds's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
EXPENSE PAID
BEGINNING ENDING DURING EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD
5/1/05 10/31/05 5/1/05-10/31/05 5/1/05-10/31/05
------ -------- --------------- ---------------
Limited Maturity Portfolio $1,000.00 $1,022.28 $ 2.96 0.58%
Fixed Income Portfolio 1,000.00 1,022.53 2.70 0.53%
Growth Portfolio 1,000.00 1,021.88 3.36 0.66%
Value Portfolio 1,000.00 1,021.78 3.47 0.68%
International Equity Portfolio 1,000.00 1,021.12 4.13 0.81%
Small Cap Equity Portfolio 1,000.00 1,020.62 4.63 0.91%
</Table>
- ---------
* 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.
101 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED)
The following table contains information regarding HSBC Investor Family of Funds
Board of Trustees. Asterisks indicate those Trustees who are 'interested
persons,' as defined in the Investment Company Act of 1940, as amended, of the
Funds. The Funds' Statement of Additional Information includes additional
information about the Trustees and is available by calling (888) 525-5757.
<Table>
<Caption>
NUMBER OF PORTFOLIOS
TERM OF OFFICE AND IN THE FUND
NAME, ADDRESS POSITION LENGTH OF TIME PRINCIPAL OCCUPATIONS(S) COMPLEX OVERSEEN
AND AGE HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS BY TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------
Frederick C. Chen Emeritus Trustee Indefinite; Trustee Management Consultant, since 1988 35
P.O. Box 182845 from 1990 to June
Columbus, Ohio 43218 2005; 15 years
Age: 78
- -----------------------------------------------------------------------------------------------------------------------------
Larry M. Robbins Trustee Indefinite; 18 years Director, Center for Teaching and 35
P.O. Box 182845 Learning, University of
Columbus, Ohio 43218 Pennsylvania
Age: 67
- -----------------------------------------------------------------------------------------------------------------------------
Alan S. Parsow Trustee Indefinite; 18 years General Partner of Elkhorn 35
P.O. Box 182845 Partners, L.P., since 1989
Columbus, Ohio 43218
Age: 55
- -----------------------------------------------------------------------------------------------------------------------------
Michael Seely Trustee Indefinite; 18 years Private Investor; Finance Chair of 35
P.O. Box 182845 the Vermont Republican Party;
Columbus, Ohio 43218 President of Investor Access
Age: 60 Corporation, 1981-2004
- -----------------------------------------------------------------------------------------------------------------------------
Thomas Robards Trustee Indefinite; 1 year Private Investor; Chief Financial 35
P.O. Box 182845 Officer, American Museum of Natural
Columbus, Ohio 43218 History (2003 to 2004); Chief
Age: 59 Financial Officer, Datek Online
Holding Corp. (2000 to 2002);
Executive member of Board of
Directors, Executive Vice President
and Chief Financial Officer,
Republic New York Corporation (1976
to 1999)
- -----------------------------------------------------------------------------------------------------------------------------
Richard Brealey Trustee Indefinite; 1 year Emeritus Professor, London School 35
P.O. Box 182845 of Business (2002 to present);
Columbus, Ohio 43218 Deputy Chairman, Balancing and
Age: 69 Settlement Code Panel (September
2000 to present)
- -----------------------------------------------------------------------------------------------------------------------------
Stephen J. Baker* Trustee Indefinite; 2 years Chief Executive Officer, HSBC 35
P.O. Box 182845 Investments (USA), Inc. (2003 to
Columbus, Ohio 43218 present); Chief Executive Officer,
Age: 49 HSBC Asset Management (Canada)
Limited (1998 to 2003)
- -----------------------------------------------------------------------------------------------------------------------------
<Caption>
NAME, ADDRESS OTHER DIRECTORSHIPS
AND AGE HELD BY TRUSTEE
- ---------------------------------------------------------------
Frederick C. Chen None
P.O. Box 182845
Columbus, Ohio 43218
Age: 78
- ---------------------------------------------------------------
Larry M. Robbins None
P.O. Box 182845
Columbus, Ohio 43218
Age: 67
- ---------------------------------------------------------------
Alan S. Parsow None
P.O. Box 182845
Columbus, Ohio 43218
Age: 55
- ---------------------------------------------------------------
Michael Seely None
P.O. Box 182845
Columbus, Ohio 43218
Age: 60
- ---------------------------------------------------------------
Thomas Robards Financial Federal
P.O. Box 182845 Corporation and
Columbus, Ohio 43218 Overseas
Age: 59 Shipholding Group
- ---------------------------------------------------------------
Richard Brealey None
P.O. Box 182845
Columbus, Ohio 43218
Age: 69
- ---------------------------------------------------------------
Stephen J. Baker* None
P.O. Box 182845
Columbus, Ohio 43218
Age: 49
- ---------------------------------------------------------------
</Table>
HSBC INVESTOR FAMILY OF FUNDS 102
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED) (CONTINUED)
The names of the Officers, their addresses, ages, position(s) held with each
Trust, and principal occupation(s) during the past five years are described in
the table below. Unless otherwise indicated, the address for each Officer is
3435 Stelzer Road, Columbus, Ohio 43219-3035.
<Table>
<Caption>
TERM OF OFFICE AND
NAME, ADDRESS POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S)
AND AGE HELD WITH THE FUNDS SERVED WITH THE FUNDS DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------------------------
Richard A. Fabietti President Indefinite; March Senior Vice President, Head of Product Management, HSBC
3435 Stelzer Road 2004- Present Investments (USA) Inc, 1998-Present
Columbus, Ohio 43219
Age: 47
- --------------------------------------------------------------------------------------------------------------------------------
Mark L. Suter* Senior Vice Indefinite; Employee of BISYS Fund Services, Inc., 2000-Present
90 Park Avenue President 2000-Present
10th Floor
New York, NY 10018
Age: 43
- --------------------------------------------------------------------------------------------------------------------------------
Marc Schuman Secretary Indefinite; Senior Counsel of BISYS Fund Services, Inc., 2005-Present;
90 Park Avenue 2005-Present Senior Corporate Counsel of The BISYS Group, Inc. 2001-2005;
10th Floor Of Counsel to Morgan, Lewis & Bockius LLP (law firm)
New York, NY 10016 2000-2001.
Age: 45
- --------------------------------------------------------------------------------------------------------------------------------
Michael Lawlor Assistant Secretary Indefinite; March Assistant Counsel of BISYS Fund Services, Inc. 2005-Present;
100 Summer Street 2005- Present Associate Counsel of IXIS Advisors Group 2003-2005; Staff
Suite 1500 Counsel Loomis, Sayles & Company, L.P. 2000-2003; Legal
Boston, MA 02110 Product Manager, Scudder Kemper Investments 1999-2000.
Age: 36
- --------------------------------------------------------------------------------------------------------------------------------
Troy Sheets* Treasurer Indefinite; Employee of BISYS Fund Services, Inc., 2002-Present; Senior
3435 Stelzer Road 2004-Present Manager, KPMG LLP, 1993-2002
Columbus, Ohio 43219
Age: 34
- --------------------------------------------------------------------------------------------------------------------------------
Alaina Metz* Assistant Treasurer Indefinite; Employee of BISYS Fund Services, Inc., 1995-Present
3435 Stelzer Road 1996-Present
Columbus, Ohio 43219
Age: 38
- --------------------------------------------------------------------------------------------------------------------------------
Frederick J. Schmidt* Chief Compliance Expires 2006; 2004- Senior Vice President and Chief Compliance Officer, CCO
90 Park Avenue Officer Present Services of BISYS Fund Services, 2004-Present; President,
10th Floor FJS Associates, 2002-2004; Vice President, Credit Agricole
New York, NY 10016 Asset Mangement, U.S., 1987-2002
Age: 46
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
- ---------
* Messrs. Suter, Sheets and Schmidt and Ms. Metz also are officers of certain
other investment companies of which BISYS or an affiliate is the
administrator.
103 HSBC INVESTOR FAMILY OF FUNDS
PRIVACY POLICY FOR
HSBC INVESTOR FUNDS AND
HSBC ADVISOR FUNDS TRUST
- --------------------------------------------------------------------------------
THIS PRIVACY POLICY NOTICE SUMMARIZES THE COLLECTION AND DISCLOSURE OF NONPUBLIC
PERSONAL INFORMATION ('INFORMATION') OF CUSTOMERS ('YOU') OF THE HSBC INVESTOR
FAMILY OF FUNDS ('WE' OR 'US'). IF YOU ARE AN INDIVIDUAL SHAREHOLDER OF RECORD
OF ANY SERIES OF THE FUNDS, WE CONSIDER YOU TO BE A CUSTOMER OF THE HSBC
INVESTOR FAMILY OF FUNDS. SHAREHOLDERS PURCHASING OR OWNING SHARES OF ANY OF THE
HSBC INVESTOR FAMILY OF FUNDS THROUGH THEIR BANK, BROKER, OR OTHER FINANCIAL
INSTITUTION SHOULD CONSULT THAT FINANCIAL INSTITUTION'S PRIVACY POLICIES.
WE COLLECT THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
- --------------------------------------------------------------------------------
We collect Information about you from the following sources: information we
receive from you on applications or other forms; information about your
transactions with us, our affiliates, or others; and information we receive from
a consumer reporting agency.
WE DISCLOSE THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
- --------------------------------------------------------------------------------
We do not disclose any Information about you or any former customer to anyone,
except as permitted by law, including to our affiliates and third party service
providers.
WE DISCLOSE INFORMATION ABOUT YOU TO THE FOLLOWING TYPES OF THIRD PARTIES
- --------------------------------------------------------------------------------
We may disclose Information about you and any former customer to our affiliates,
which we consider to include HSBC Bank USA N.A., HSBC Investments (USA) Inc. and
their affiliates, and to nonaffiliated third parties, as permitted by law.
We may disclose all of the Information we collect to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing agreements.
PROTECTING THE SECURITY AND CONFIDENTIALITY OF YOUR INFORMATION
- --------------------------------------------------------------------------------
We restrict access to Information about you to those employees who need to know
that information to provide products or services to you. We maintain physical,
electronic, and procedural safeguards that comply with federal standards to
guard your Information.
HSBC INVESTOR FAMILY OF FUNDS 104
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to the portfolio securities is available without
charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC
Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on
the Fund's website at www.investorfunds.us.hsbc.com and the Securities and
Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting
record for the 12 month period ending June 30, 2005 is available at the Security
and Exchange Commission's website at http://www.sec.gov.
Schedules of Portfolio Investments for fiscal quarters ending January 31 and
July 31 will be available no later than 60 days after period end, without
charge, on the Fund's website at www.investorfunds.us.hsbc.com and on the
Securities and Exchange Commission's website at http://www.sec.gov.
<Page>
HSBC Investor Family of Funds:
INVESTMENT ADVISER AND ADMINISTRATOR
HSBC Investments (USA) Inc.
452 Fifth Avenue
New York, NY 10018
SUB-ADVISERS
HSBC Growth and Income Fund
TransAmerica Investment Management, LLC
1150 S. Olive Street, Suite 2700
Los Angeles, CA 90015
HSBC Investor Mid-Cap Fund
Munder Capital Management
Munder Capital Center
480 Pierce Street
Birmingham, MI 48009-6063
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, 4th Floor
Los Angeles, CA 90067
HSBC Investor International Equity Portfolio
AllianceBernstein Investment Research and Management
1345 Avenue of the Americas, 39th Floor
New York, NY 10105
HSBC Investor Small Cap Equity Portfolio
Westfield Capital Management Company
One Financial Center
Boston, MA 02111
SHAREHOLDER SERVICING AGENTS
For HSBC Bank USA, N.A. and
HSBC Brokerage (USA) Inc. Clients
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
1-888-525-5757
For All Other Shareholders
HSBC Investor Funds
P.O. Box 182845
Columbus, OH 43218-2845
1-800-782-8183
TRANSFER AGENT,
DISTRIBUTOR AND SPONSOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
CUSTODIANS
HSBC Investor Limited Maturity Portfolio
HSBC Investor Fixed Income Portfolio
HSBC Investor New York Tax-Free Bond Fund
HSBC Investor Growth Portfolio
HSBC Investor Value Portfolio
HSBC Investor Growth and Income Fund
HSBC Investor Mid-Cap Fund
HSBC Investor Small Cap Equity Portfolio
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
HSBC Investor International Equity Portfolio
Investors Bank & Trust Company
200 Clarendon Street -- 16th Floor
Boston, MA 02116
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
KPMG LLP
191 West Nationwide Blvd., Suite 500
Columbus, OH 43215
LEGAL COUNSEL
Dechert LLP
1775 Eye Street, N.W.
Washington, D.C. 20006
The HSBC Investor Family of Funds are distributed by BISYS Fund Services. This
document must be preceded or accompanied by a current prospectus for the HSBC
Investor Funds, which you should read carefully before you invest or send money.
HSB-0008 12/05
Item 2. Code of Ethics.
Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. If the registrant has not adopted such a code of ethics,
explain why it has not done so.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. This code of ethics is included as Exhibit 12(a)(i).
The registrant must briefly describe the nature of any amendment, during
the period covered by the report, to a provision of its code of ethics that
applies to the registrant's principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these individuals are
employed by the registrant or a third party, and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of
this Item. The registrant must file a copy of any such amendment as an
exhibit pursuant to Item 12(a)(1), unless the registrant has elected to
satisfy paragraph (f) of this Item by posting its code of ethics on its
website pursuant to paragraph (f)(2) of this Item, or by undertaking to
provide its code of ethics to any person without charge, upon request,
pursuant to paragraph (f)(3) of this Item.
If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of
ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, that relates
to one or more items set forth in paragraph (b) of this Item, the
registrant must briefly describe the nature of the waiver, the name of the
person to whom the waiver was granted, and the date of the waiver.
During the period covered by the report, with respect to the registrant's
code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions; there have been no amendments to, nor any
waivers granted from, a provision that relates to any element of the code
of ethics definition enumerated in paragraph (b) of this Item 2.
Item 3. Audit Committee Financial Expert.
(a) (1) Disclose that the registrant's board of directors has
determined that the registrant either:
(i) Has at least one audit committee financial expert serving
on its audit committee; or
(ii) Does not have an audit committee financial expert serving
on its audit committee.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is
"independent." In order to be considered "independent" for purposes
of this Item, a member of an audit committee may not, other than in
his or her capacity as a member of the audit committee, the board
of directors, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-
2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an
audit committee financial expert.
3(a)(1) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on its audit
committee.
3(a)(2) The audit committee financial expert is Thomas Robards, who
is "independent" for purposes of this Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed
for each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
2004 $200,230
2005 $255,000
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
2004 $36,130
2005 $40,000
2004 - Fees of $4,150 relate to the consent of N1A filing and $31,980
relate to the performance of the Funds' 17f-2 examinations.
2005 - Fees of $5,000 relate to the consent of N1A filing and $35,000
relate to the performance and review of the Funds' 17f-2 examinations.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in
each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
2004 $108,115
2005 $139,200
Fees for both 2004 and 2005 relate to the preparation of federal income
and excise tax returns and the review of excise tax distributions.
(d) Disclose, under the caption All Other Fees, the aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
2004 $0
2005 $0
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust's
Audit Committee must preapprove all audit and non-audit services by the
independent accountants relating to the operations or financial reporting of the
Funds. Prior to the commencement of any audit or non-audit services to a fund,
the Audit Committee reviews the services to determine whether they are
appropriate and permissible under applicable law.
(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
None of the services summarized in (b) - (d), above, were approved by the audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours
expended on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees.
Not applicable.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
2004 $1,952,245
2005 $ 228,200
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
The audit committee considered the nonaudit services rendered to the
registrant's investment adviser and any entity controlling, controlled by, or
under common control with the investment adviser, and believes the services are
compatible with the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17CFR 240.10A-3), state whether or not
the registrant has a separately-designated standing audit
committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as
the registrant's audit committee as specified in Section
3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so
state.
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17CFR 240.10A-3(d)) regarding an
exemption from the listing standards for all audit committees.
Not applicable.
Item 6. Schedule of Investments.
File Schedule I - Investments in securities of unaffiliated issuers as of the
close of the reporting period as set forth in 'SS' 210.12-12 of Regulation S-X,
unless the schedule is included as part of the report to shareholders filed
under Item 1 of this Form.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
A closed-end management investment company that is filing an annual
report on this Form N-CSR must, unless it invests exclusively in non-voting
securities, describe the policies and procedures that it uses to determine how
to vote proxies relating to portfolio securities, including the procedures that
the company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
If the registrant is a closed-end management investment company that is filing
an annual report on this Form N-CSR, provide the information specified in
paragraphs (a) and (b) of this Item with respect to portfolio managers.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company. If the registrant is a closed-end management investment company,
provide the information specified in paragraph (b) of this Item with respect
to any purchase made by or on behalf of the registrant or any "affiliated
purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR
240.10b-18(a)(3)), of shares or other units of any class of the registrant's
equity securities that is registered by the registrant pursuant to Section 12
of the Exchange Act (15 U.S.C. 781).
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
Not applicable.
Item 11. Controls and Procedures.
(a) Disclose the conclusions of the registrant's principal executive
and principal financial officers, or persons performing similar functions,
regarding the effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as
of a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
The registrant's principal executive officer and principal financial officer
have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant on Form N-CSR is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that
occurred during the second fiscal quarter of the period covered by this report
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that have materially affected or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
The code of ethics that is the subject of the disclosure required by Item 2 is
attached hereto.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2(a)
under the Act (17 CFR 270.30a-2). Certifications pursuant to Rule 30a-2(a) are
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1
under the Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange
Act, provide the certifications required by rule 30a-2(b) under the Act as an
exhibit. A certification furnished pursuant to this paragraph will not be deemed
"filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to
the liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the registrant incorporates it by
reference. Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) HSBC ADVISOR FUNDS TRUST
___________________________________________________________________
By (Signature and Title)* /s/ Richard A. Fabietti
_______________________________________________________
Richard A. Fabietti
President
Date__January 6, 2006__________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Richard A. Fabietti
______________________________________________________
Richard A. Fabietti
President
Date___January 6, 2006_________________________________
By (Signature and Title)* /s/ Troy A. Sheets
_______________________________________________________
Troy A. Sheets
Treasurer
Date___January 6, 2006_________________________________
STATEMENT OF DIFFERENCES
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