UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08928
HSBC INVESTOR PORTFOLIOS
(Exact name of registrant as specified in charter)
452 FIFTH AVENUE
NEW YORK, NY 10018
(Address of principal executive offices) (Zip code)
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OH 43219
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-782-8183
Date of fiscal year end: October 31, 2005
Date of reporting period: October 31, 2005
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. 'SS' 3507.
Item 1. Reports to Stockholders.
Include a copy of the report transmitted to stockholders pursuant to Rule
30e-1 under the Act (17 CFR 270.30e-1).
Annual Report
HSBC Investor LifeLine Funds'TM'
LifeLine
It's simple.
It's easy.
It's affordable.
October 31, 2005
HSBC Investor Aggressive
Growth Strategy Fund
HSBC Investor Growth
Strategy Fund
HSBC Investor Moderate
Growth Strategy Fund
HSBC Investor Conservative
Growth Strategy Fund
HSBC Investor Conservative
Income Strategy Fund
HSBC Investor LifeLine Funds
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[HSBC LOGO]
Table of Contents
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HSBC Investor Lifeline Funds
Annual Report - October 31, 2005
Chairman's Message ............. ............................................ 1
Commentary From the Investment Manager ...................................... 2
Portfolio Reviews ........................................................... 3
Statements of Assets and Liabilities ........................................ 18
Statements of Operations .................................................... 19
Statements of Changes in Net Assets ......................................... 20
Financial Highlights ........................................................ 26
Notes to Financial Statements ............................................... 31
Report of Independent Registered Public Accounting Firm ..................... 37
Table of Shareholder Expenses ............................................... 38
HSBC Investor Portfolios
Schedules of Portfolio Investments
HSBC Investor Limited Maturity Portfolio ............................ 40
HSBC Investor Fixed Income Portfolio ................................ 42
HSBC Investor Growth Portfolio ...................................... 45
HSBC Investor Value Portfolio ....................................... 46
HSBC Investor International Equity Portfolio ........................ 47
HSBC Investor Small Cap Equity Portfolio ............................ 50
Statements of Assets and Liabilities ........................................ 51
Statements of Operations .................................................... 52
Statements of Changes in Net Assets ......................................... 53
Financial Highlights ........................................................ 56
Notes to Financial Statements ............................................... 57
Report of Independent Registered Public Accounting Firm ..................... 64
Investment Adviser Contract Approval ........................................ 65
Table of Shareholder Expenses ............................................... 66
Board of Trustees ........................................................... 68
Privacy Policy .............................................................. 70
Chairman's Message
Dear Fellow Shareholders:
You have probably read about a number of new and proposed rules that the
Securities and Exchange Commission has announced to enhance the corporate
governance structure of mutual funds. In my letter to you in the Funds' most
recent Semi-Annual Report, I noted that the Board of Trustees was committed to
following the recommendations of the SEC and to work on its own to operate in a
manner that is most beneficial to you, the shareholders.
The HSBC Investor Funds instituted a number of sound governance practices even
before the SEC made them rules. For example, the SEC is currently considering a
requirement that the chairman of a mutual fund board be an independent person,
with no significant ties to fund management. Our funds were among the first in
the industry to create the position of independent chairman, and we are
determined to maintain much more than a majority of independent trustees.
The SEC requirement regarding the minimum number of independent trustees is 40%.
Current regulations stipulate that independent trustees must hold at least a
majority of board positions. Our board consists of five independent members
(84%) and one interested trustee, who is the CEO of HSBC Investments (USA) Inc.
The independent trustees also lead and work on various board committees,
including audit, nominating/governance and valuation.
The full board meets at least quarterly to receive reports from fund management
on topics such as investment performance, administrative activities and
government regulations. At these sessions, the board meets with the various
sub-advisers to the HSBC Investor Funds to review their investment operations
and results. We work closely with fund counsel and our own independent legal
counsel to ensure that the funds continue to comply with all regulatory
requirements, including any new rules promulgated by the SEC. Between board
meetings, ongoing communication among board members and with management helps us
fulfill our responsibilities to oversee the operations of the funds.
All of us who are involved in the management of the HSBC Investor Funds welcome
communication with you as well. We will keep you informed about industry trends
and our commitment to 'best practices.' If you have any concerns, please contact
us at:
HSBC Investor Funds
PO Box 182845
Columbus, Ohio 43218-2845
On behalf of the Board of Trustees and fund management, I would like to thank
you for your continuing support.
Sincerely,
Larry M. Robbins
Larry M. Robbins, Chairman, HSBC Investor Funds
1 HSBC INVESTOR FAMILY OF FUNDS
Commentary From the Investment Manager
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HSBC Investments (USA) Inc.
U.S. Economic Review
The U.S. economy generated healthy growth during the 12-month period ended
October 31, 2005, despite a number of negative influences. Strong business and
consumer spending helped the economy expand in the face of headwinds that
included rising interest rates, surging energy prices and the devastation
wrought by hurricanes on the Gulf Coast.
Energy prices climbed dramatically throughout much of the period, as production
capacity did not keep pace with demand from growing economies in China, India
and much of the rest of the world. Meanwhile, concerns about instability in the
Middle East and other oil-producing regions led commodities traders to bid up
oil prices. Hurricanes Katrina and Rita in late August and early September
decimated much of the United States' oil refining capacity, resulting in a spike
in gasoline prices.
Higher energy prices appeared to have a mildly negative impact on consumer
spending. That development seemed to dampen the economy, decreasing the threat
of inflation for a time -- but data in the fall of 2005 suggested that high
energy prices finally had begun to translate into rising consumer prices.
The Federal Reserve Board (the 'Fed') throughout this period was concerned that
economic growth and rising commodity and energy prices might lead to higher
inflation. The Fed therefore increased its target short-term interest rate seven
times for a total increase of 1.75 percentage points. (The Fed increased the
federal funds rate by another quarter-point on November 1, just after the end of
the period under discussion.) That tighter monetary policy was designed to
increase borrowing costs, thereby restraining economic growth and keeping
inflation in check.
Long-term interest rates remained low throughout much of the period, however.
Investors showed little concern about the prospect of higher inflation and
foreign investors poured money into Treasury bonds, which supported their prices
and put a ceiling on yields. Low long-term rates helped keep mortgage rates at
very low levels throughout most of this 12-month period. Inexpensive mortgages
buttressed consumer spending by allowing consumers to refinance their home loans
and free up cash. Low mortgage rates also supported strong growth in the housing
sector.
Business spending remained strong throughout the period. Corporations entered
this fiscal year with historically high levels of cash and low debt. Many
companies had waited to make significant investments until the presidential
election provided a less cloudy outlook on taxes and regulations. The election's
resolution freed those firms to invest in hiring, equipment and other
initiatives during this 12-month period. Corporate profit growth exceeded
analysts' expectations throughout this fiscal year. Many companies sought to
generate continued strong growth through mergers and acquisitions.
Market Review
Stocks experienced an up-and-down year. The market generated strong gains early
in the period, fell sharply in the spring of 2005, rallied during summer and
then declined again in early autumn. The Standard & Poor's 500 index gained
8.72% for the period as a whole.
Energy stocks produced much of the market's gains. Shares in that sector
benefited from higher energy prices, which expanded profit margins in the sector
and increased demand for energy-related products and services. Other
traditionally defensive sectors such as utilities and basic materials also fared
well.
Financial-services stocks struggled. The combination of rising short-term
interest rates and consistently low long-term interest rates led to a flatter
yield curve. The smaller spread between short- and long-term interest rates
crimped profits for many lenders, which make money by borrowing cash at
short-term rates and lending it at long-term rates.
Consumer-related stocks declined during the second half of the period, as
investors grew concerned that stagnant wages and higher energy prices would take
a toll on consumer spending. The health-care sector surged early in the period,
but subsequently was dragged down by ongoing problems among large pharmaceutical
stocks. Drug companies continued to struggle with slow revenue growth, patent
expirations, weak drug pipelines and high-profile legal problems. Technology
shares struggled early in the period, but staged a comeback toward the end of
the fiscal year as demand for technology appeared to pick up and advertising
revenues strengthened at Internet media stocks.
Value indices outperformed growth benchmarks, due to the strength of
value-oriented sectors such as energy and utilities and the weakness of growth
sectors including health care, consumer discretionary and -- for much of the
period -- technology. Small- and mid-cap shares continued a long run of superior
performance to large caps.
Foreign stocks generally outperformed the U.S. market. Foreign shares performed
especially well for U.S. investors early in the period, as the dollar declined
versus foreign currencies. Emerging markets significantly outperformed developed
markets on the strength of faster-than-expected economic growth.
HSBC INVESTOR FAMILY OF FUNDS 2
Portfolio Reviews
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HSBC Investor Aggressive Growth Strategy Fund
HSBC Investor Growth Strategy Fund
HSBC Investor Moderate Growth Strategy Fund
HSBC Investor Conservative Growth Strategy Fund
HSBC Investor Conservative Income Strategy Fund
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk, than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of the Fund will fluctuate as the
value of the securities in the portfolio changes.
Common stocks, and funds investing in common stocks, generally provide greater
return potential when compared with other types of investments.
Value-based investments are subject to the risk that the broad market may not
recognize their intrinsic value.
Small capitalization funds typically carry additional risks, since smaller
companies generally have a higher risk of failure and historically have
experienced a greater degree of market volatility than average. There are risks
associated with investing in a fund that invests in securities of foreign
countries, such as erratic market conditions, economic and political
instabilities and fluctuations in currency exchanges.
An investment in money market funds is not insured or guaranteed by the FDIC or
any other government agency. Although the funds seek to preserve the value of
your investment at $1.00.
The HSBC Investor Funds feature a number of funds that are structured as
'master/feeder' funds. Under this two-tier structure, one fund (the 'feeder
fund') invests all of its assets in a second fund (the 'master fund'). The
LifeLine Funds, through this master/feeder structure, provide an asset
allocation option to investors who seek to diversify their investment across a
variety of asset classes. Each LifeLine Fund provides an asset allocation option
corresponding to different investment objectives and risk tolerances. Each
LifeLine Fund is a feeder fund. However, unlike most feeder funds, a LifeLine
Fund will not direct all of its assets to a single master fund. Instead, the
LifeLine Fund will allocate its assets to different master funds in accordance
with its asset allocation model. HSBC Investments (USA) Inc. (the 'Adviser'),
according to specific target allocations, invested each LifeLine Fund's assets
in some or all of the following master funds ('underlying Portfolios'):
HSBC Investor Growth Portfolio ('Growth Portfolio'); HSBC Investor Value
Portfolio ('Value Portfolio'); HSBC Investor Small Cap Equity Portfolio ('Small
Cap Equity Portfolio'); HSBC Investor International Equity Portfolio
('International Equity Portfolio'); HSBC Investor Fixed Income Portfolio ('Fixed
Income Portfolio'); HSBC Investor Limited Maturity Portfolio ('Limited Maturity
Portfolio'), and the HSBC Investor Money Market Fund ('Money Market Fund').
During the last fiscal year, each LifeLine Fund invested in a different
combination of the underlying Portfolios according to the various target
percentage weightings selected by the Adviser, approximately as set forth in the
chart below.
HSBC Investor HSBC Investor HSBC Investor HSBC Investor HSBC Investor
Aggressive Growth Growth Moderate Growth Conservative Growth Conservative Income
Strategy Strategy Strategy Strategy Strategy
Underlying Portfolio Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------
Money Market Fund 1% 1% 6% 20% 30%
----------------------------------------------------------------------------------------
Fixed Income Portfolio None 17% 31% 20% 25%
----------------------------------------------------------------------------------------
Limited Maturity Portfolio None None None 15% 25%
----------------------------------------------------------------------------------------
Growth Portfolio 21% 21% 19% 15% 8%
----------------------------------------------------------------------------------------
Value Portfolio 21% 21% 18% 15% 8%
----------------------------------------------------------------------------------------
Small Cap Equity Portfolio 34% 20% 11% 5% None
----------------------------------------------------------------------------------------
International Equity Portfolio 23% 20% 15% 10% 4%
----------------------------------------------------------------------------------------
Total: 100% 100% 100% 100% 100%
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3 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Aggressive Growth Strategy Fund
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Aggressive Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI EAFE Index Citigroup U.S.
Growth Strategy Growth Index Value Index Growth Index Domestic Three Month
Fund (B Shares)(2) Treasury Bill Index
2/9/05 10,000 10,000 10,000 10,000 10,000 10,000
2/28/05 10,050 10,331 10,106 10,253 10,434 10,018
3/31/05 9,850 10,190 9,922 10,103 10,176 10,039
4/30/05 9,570 10,007 9,733 9,704 9,949 10,060
5/31/05 9,910 10,248 10,204 10,259 9,964 10,084
6/30/05 10,110 10,360 10,167 10,450 10,100 10,108
7/31/05 10,530 10,660 10,664 11,060 10,410 10,134
8/31/05 10,660 10,614 10,526 10,992 10,676 10,161
9/30/05 10,900 10,763 10,575 11,135 11,154 10,188
10/31/05 10,170 10,489 10,472 10,807 10,829 10,218
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Aggressive Aggressive Growth Blended
Growth Strategy Fund Portfolio Index(4)
(B Shares)(2)
2/9/05 10,000 10,000
2/28/05 10,050 10,278
3/31/05 9,850 10,100
4/30/05 9,570 9,834
5/31/05 9,910 10,179
6/30/05 10,110 10,291
7/31/05 10,530 10,736
8/31/05 10,660 10,738
9/30/05 10,900 10,938
10/31/05 10,170 10,675
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%)
- ------------------------------------------------------------------------------------
Inception Since
As of October 31, 2005 Date Inception
- ------------------------------------------------------------------------------------
HSBC Investor Aggressive Growth Strategy Fund Class A(1) 2/14/05 0.66
- ------------------------------------------------------------------------------------
HSBC Investor Aggressive Growth Strategy Fund Class B(2) 2/9/05 1.70
- ------------------------------------------------------------------------------------
HSBC Investor Aggressive Growth Strategy Fund Class C(3) 6/9/05 4.50
- ------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) For additional information, please refer to page 9.
The Fund is measured against the Russell 1000'r' Growth Index, the Russell
1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index and
the Citigroup U.S. Domestic Three Month Treasury Bill Index. The performance for
the indices do not reflect the deduction of expenses associated with a mutual
fund, such as investment management and fund accounting fees. The Funds'
performance reflects the deduction of fees for these value-added services.
Investors cannot invest directly in an index, although they can invest in its
underlying securities. For a complete definition of each index please refer to
page 9.
HSBC INVESTOR FAMILY OF FUNDS 4
Portfolio Reviews
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HSBC Investor Growth Strategy Fund
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Growth Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI EAFE Citigroup U.S. Lehman Brothers
Strategy Fund Growth Index Value Index Growth Index Index Domestic Three Month Aggregate Bond
(B Shares)(2) Treasury Bill Index Index
2/1/05 10,000 10,000 10,000 10,000 10,000 10,000 10,000
2/28/05 10,250 10,331 10,106 10,253 10,434 10,018 9,941
3/31/05 10,150 10,190 9,922 10,103 10,176 10,039 9,890
4/30/05 9,950 10,007 9,733 9,704 9,949 10,060 10,024
5/31/05 10,250 10,248 10,204 10,259 9,964 10,084 10,132
6/30/05 10,410 10,360 10,167 10,450 10,100 10,108 10,188
7/31/05 10,730 10,660 10,664 11,060 10,410 10,134 10,095
8/31/05 10,860 10,614 10,526 10,992 10,676 10,161 10,224
9/30/05 11,040 10,763 10,575 11,135 11,154 10,188 10,119
10/31/05 10,380 10,489 10,472 10,807 10,829 10,218 10,039
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Growth Growth Blended
Strategy Fund Portfolio Index(4)
(B Shares)(2)
2/1/05 10,000 10,000
2/28/05 10,250 10,220
3/31/05 10,150 10,062
4/30/05 9,950 9,883
5/31/05 10,250 10,168
6/30/05 10,410 10,258
7/31/05 10,730 10,593
8/31/05 10,860 10,619
9/30/05 11,040 10,765
10/31/05 10,380 10,546
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%)
- ------------------------------------------------------------------------------------
Inception Since
As of October 31, 2005 Date Inception
- ------------------------------------------------------------------------------------
HSBC Investor Growth Strategy Fund Class A(1) 2/8/05 1.80
- ------------------------------------------------------------------------------------
HSBC Investor Growth Strategy Fund Class B(2) 2/1/05 3.80
- ------------------------------------------------------------------------------------
HSBC Investor Growth Strategy Fund Class C(3) 4/27/05 7.20
- ------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) For additional information, please refer to page 9.
The Fund is measured against the Russell 1000'r' Growth Index, the Russell
1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index,
the Citigroup U.S. Domestic Three Month Treasury Bill Index and the Lehman
Brothers Aggregate Bond Index. The performance for the indices do not reflect
the deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Funds' performance reflects the
deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities. For
a complete definition of each index please refer to page 9.
5 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
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HSBC Investor Moderate Growth Strategy Fund
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Moderate Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI EAFE Citigroup U.S. Lehman Brothers
Growth Strategy Fund Growth Index Value Index Growth Index Index Domestic Three Aggregate Bond
(B Shares)(2) Month Treasury Index
Bill Index
2/1/05 10,000 10,000 10,000 10,000 10,000 10,000 10,000
2/28/05 10,160 10,331 10,106 10,253 10,434 10,018 9,941
3/31/05 10,032 10,190 9,922 10,103 10,176 10,039 9,890
4/30/05 9,912 10,007 9,733 9,704 9,949 10,060 10,024
5/31/05 10,133 10,248 10,204 10,259 9,964 10,084 10,132
6/30/05 10,263 10,360 10,167 10,450 10,100 10,108 10,188
7/31/05 10,483 10,660 10,664 11,060 10,410 10,134 10,095
8/31/05 10,583 10,614 10,526 10,992 10,676 10,161 10,224
9/30/05 10,693 10,763 10,575 11,135 11,154 10,188 10,119
10/31/05 10,103 10,489 10,472 10,807 10,829 10,218 10,039
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Moderate Moderate Growth Blended
Growth Strategy Fund Portfolio Index(4)
(B Shares)(2)
2/1/05 10,000 10,000
2/28/05 10,160 10,156
3/31/05 10,032 10,027
4/30/05 9,912 9,924
5/31/05 10,133 10,158
6/30/05 10,263 10,231
7/31/05 10,483 10,465
8/31/05 10,583 10,507
9/30/05 10,693 10,597
10/31/05 10,103 10,424
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%)
- ------------------------------------------------------------------------------------
Inception Since
As of October 31, 2005 Date Inception
- ------------------------------------------------------------------------------------
HSBC Investor Moderate Growth Strategy Fund Class A(1) 2/3/05 -0.34
- ------------------------------------------------------------------------------------
HSBC Investor Moderate Growth Strategy Fund Class B(2) 2/1/05 1.03
- ------------------------------------------------------------------------------------
HSBC Investor Moderate Growth Strategy Fund Class C(3) 6/10/05 1.80
- ------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) For additional information, please refer to page 9.
The Fund is measured against the Russell 1000'r' Growth Index, the Russell
1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index,
the Citigroup U.S. Domestic Three Month Treasury Bill Index and the Lehman
Brothers Aggregatge Bond Index. The performance for the indices do not reflect
the deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The Funds' performance reflects the
deduction of fees for these value-added services. Investors cannot invest
directly in an index, although they can invest in its underlying securities. For
a complete definition of each index please refer to page 9.
HSBC INVESTOR FAMILY OF FUNDS 6
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Conservative Growth Strategy Fund
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Russell 1000'r' Russell 1000'r' Russell MidCap'r' MSCI Citigroup U.S. Lehman Brothers Lehman Brothers
Conservative Growth Index Value Index Growth Index EAFE Domestic Three Aggregate Bond Intermediate
Growth Strategy Index Month Treasury Index Aggregate Bond
Fund (B Shares)(2) Bill Index Index
2/17/05 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
2/28/05 9,970 10,331 10,106 10,253 10,434 10,018 9,941 9,948
3/31/05 9,872 10,190 9,922 10,103 10,176 10,039 9,890 9,910
4/30/05 9,792 10,007 9,733 9,704 9,949 10,060 10,024 10,023
5/31/05 9,952 10,248 10,204 10,259 9,964 10,084 10,132 10,109
6/30/05 10,032 10,360 10,167 10,450 10,100 10,108 10,188 10,150
7/31/05 10,172 10,660 10,664 11,060 10,410 10,134 10,095 10,078
8/31/05 10,252 10,614 10,526 10,992 10,676 10,161 10,224 10,186
9/30/05 10,312 10,763 10,575 11,135 11,154 10,188 10,119 10,110
10/31/05 9,792 10,489 10,472 10,807 10,829 10,218 10,039 10,049
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Conservative Growth
Conservative Blended Portfolio
Growth Strategy Index(4)
Fund (B Shares)(2)
2/17/05 10,000 10,000
2/28/05 9,970 10,106
3/31/05 9,872 10,013
4/30/05 9,792 9,964
5/31/05 9,952 10,141
6/30/05 10,032 10,198
7/31/05 10,172 10,353
8/31/05 10,252 10,399
9/30/05 10,312 10,454
10/31/05 9,792 10,333
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%)
- ---------------------------------------------------------------------------------------
Inception Since
As of October 31, 2005 Date Inception
- ---------------------------------------------------------------------------------------
HSBC Investor Conservative Growth Strategy Fund Class A(1) 2/23/05 -2.22
- ---------------------------------------------------------------------------------------
HSBC Investor Conservative Growth Strategy Fund Class B(2) 2/17/05 -2.08
- ---------------------------------------------------------------------------------------
HSBC Investor Conservative Growth Strategy Fund Class C(3) 4/19/05 3.10
- ---------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data
quoted represents past performance and current returns may be lower or higher.
Total return figures include change in share price, reinvestment of dividends
and capital gains and do not reflect the taxes that a shareholder would pay on
fund distributions or on the redemption of fund shares. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed
may be worth more or less than the original cost. To obtain performance
information current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) For additional information, please refer to page 9.
The Fund is measured against the Russell 1000'r' Growth Index, the Russell
1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index,
the Citigroup U.S. Domestic Three Month Treasury Bill Index, the Lehman Brothers
Aggregate Bond Index and the Lehman Brothers Intermediate Aggregate Bond Index.
The performance for the indices do not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund accounting
fees. The Funds' performance reflects the deduction of fees for these
value-added services. Investors cannot invest directly in an index, although
they can invest in its underlying securities. For a complete definition of each
index please refer to page 9.
7 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Conservative Income Strategy Fund
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Russell 1000'r' Russell 1000'r' MSCI EAFE Citigroup U.S. Lehman Brothers Lehman Brothers
Conservative Growth Index Value Index Index Domestic Three Aggregate Bond Intermediate
Income Strategy Fund Month Treasury Index Aggregate Bond
(A Shares)(1) Bill Index Index
2/8/05 9,497 10,000 10,000 10,000 10,000 10,000 10,000
2/28/05 9,484 10,331 10,106 10,434 10,018 9,941 9,948
3/31/05 9,417 10,190 9,922 10,176 10,039 9,890 9,910
4/30/05 9,420 10,007 9,733 9,949 10,060 10,024 10,023
5/31/05 9,517 10,248 10,204 9,964 10,084 10,132 10,109
6/30/05 9,560 10,360 10,167 10,100 10,108 10,188 10,150
7/31/05 9,607 10,660 10,664 10,410 10,134 10,095 10,078
8/31/05 9,669 10,614 10,526 10,676 10,161 10,224 10,186
9/30/05 9,666 10,763 10,575 11,154 10,188 10,119 10,110
10/31/05 9,608 10,489 10,472 10,829 10,218 10,039 10,049
Value of a $10,000 Investment
[PERFORMANCE GRAPH]
HSBC Investor Conservative Income
Conservative Blended Portfolio
Income Strategy Fund Index(4)
(A Shares)(1)
2/8/05 9,497 10,000
2/28/05 9,484 10,030
3/31/05 9,417 9,978
4/30/05 9,420 10,009
5/31/05 9,517 10,123
6/30/05 9,560 10,165
7/31/05 9,607 10,208
8/31/05 9,669 10,272
9/30/05 9,666 10,269
10/31/05 9,608 10,201
The charts above represent a comparison of a hypothetical $10,000 investment in
the indicated share classes versus a similar investment in the Funds' benchmark
and represents the reinvestment of dividends and capital gains in the Funds.
Fund Performance Aggregate Total Return (%)
- ---------------------------------------------------------------------------------------
Inception Since
As of October 31, 2005 Date Inception
- ---------------------------------------------------------------------------------------
HSBC Investor Conservative Income Strategy Fund Class A(1) 2/8/05 -3.92
- ---------------------------------------------------------------------------------------
HSBC Investor Conservative Income Strategy Fund Class B(2) 2/14/05 -3.32
- ---------------------------------------------------------------------------------------
HSBC Investor Conservative Income Strategy Fund Class C(3) 5/4/05 0.41
- ---------------------------------------------------------------------------------------
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) For additional information, please refer to page 9.
The Fund is measured against the Russell 1000'r' Growth Index, the Russell
1000'r' Value Index, the Russell MidCap'r' Growth Index, the MSCI EAFE Index,
the Citigroup U.S. Domestic Three Month Treasury Bill Index, the Lehman Brothers
Aggregate Bond Index and the Lehman Brothers Intermediate Aggregate Bond Index.
The performance for the indices do not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund accounting
fees. The Funds' performance reflects the deduction of fees for these
value-added services. Investors cannot invest directly in an index, although
they can invest in its underlying securities. For a complete definition of each
index please refer to page 9.
HSBC INVESTOR FAMILY OF FUNDS 8
Portfolio Reviews
- --------------------------------------------------------------------------------
Aggressive Growth
Blended Portfolio
Index
[PIE CHART]
34.0% Russell MidCap'r' Growth Index
23.0% MSCI EAFE Index
21.0% Russell 1000'r' Value Index
21.0% Russell 1000'r' Growth Index
1.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
Growth Blended
Portfolio Index
[PIE CHART]
21.0% Russell 1000'r' Value Index
21.0% Russell 1000'r' Growth Index
20.0% Russell MidCap'r' Growth Index
20.0% MSCI EAFE Index
17.0% Lehman Brothers Aggregate Bond Index
1.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
Moderate Growth
Blended Portfolio
Index
[PIE CHART]
31.0% Lehman Brothers Aggregate Bond Index
19.0% Russell 1000'r' Growth Index
18.0% Russell 1000'r' Value Index
11.0% Russell MidCap'r' Growth Index
15.0% MSCI EAFE Index
6.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
Conservative Growth
Blended Portfolio
Index
[PIE CHART]
20.0% Lehman Brothers Aggregate Bond Index
20.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
15.0% Lehman Brothers Intermediate Aggregate Bond Index
15.0% Russell 1000'r' Growth Index
15.0% Russell 1000'r' Value Index
10.0% MSCI EAFE Index
5.0% Russell MidCap'r' Growth Index
Conservative Income
Blended Portfolio
Index
[PIE CHART]
30.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
25.0% Lehman Brothers Aggregate Bond Index
25.0% Lehman Brothers Intermediate Aggregate Bond Index
8.0% Russell 1000'r' Growth Index
8.0% Russell 1000'r' Value Index
4.0% MSCI EAFE Index
Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index reflects monthly return
equivalents of yield averages that are not marked to the market. The Index is an
average of the last three-month Treasury Bill issues. The three-month Treasury
Bills are the short-term debt obligations of the U.S. government.
Lehman Brothers Aggregate Bond Index is a market value-weighted performance
benchmark for investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities, with maturities of at
least one year.
Lehman Brothers Intermediate Aggregate Bond Index is generally representative of
investment-grade debt issues with maturities between three and ten years.
Morgan Stanley Capital International Europe, Australasia and Far East Index
(MSCI EAFE) is a market capitalization-weighted equity index comprising 20 of
the 48 countries in the MSCI universe and representing the developed world
outside of North America. Each MSCI country index is created separately, then
aggregated, without change, into regional MSCI indices. EAFE performance data is
calculated in U.S. dollars and in local currency.
Russell 1000'r' Growth Index measures the performance of 1000 securities in the
Russell Universe with higher price-to-book ratios and higher forecasted growth
values.
Russell 1000'r' Value Index measures the performance of 1000 securities in the
Russell Universe with a less-than-average growth orientation. Companies in this
index generally have low price-to-book and price-to-earning ratios, higher
dividend yields, and lower forecasted growth values. Investors cannot invest
directly in an index.
Russell Midcap'r' Growth Index measures the performance of those Russell Midcap
companies with higher price-to-book ratios and higher forecasted growth values.
The stocks are also members of the Russell 1000'r' Growth index.
Investors cannot invest directly in an index, although they can invest in the
underlying securities.
9 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Money Market Fund
by Thomas Riordan
Senior Fixed Income Portfolio Manager
Investment Concerns
An investment in the fund is not insured or guaranteed by the FDIC or any other
government agency. Although the fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
fund.
The third quarter of 2005 closed with the Fed's eleventh consecutive 25 basis
point (0.25%) increase in the target federal funds rate. This tightening cycle
began in June 2004 with the federal funds rate at 1.0%. The federal funds rate
reached 3.75% following the Federal Open Market Committee's September 20
meeting. For much of the period the economy has grown in excess of a 3.5% annual
rate. The economy has produced more than 175,000 non-farm payroll jobs for most
of the year. Core inflation also remains under control, with both Consumer and
Producer Price indexes(2) posting annual gains of less than 2.0%. Oil prices
have risen steadily over the period, and are currently at approximately $60 per
barrel. There are a number of reasons for the rising prices such as increased
worldwide demand, unrest in oil producing countries, and insufficient domestic
refining capacity. Despite this, rising energy prices have not yet been able to
derail the economic expansion.
There have also been several shocks to the economy. Hurricanes Katrina and Rita
wrecked havoc on the Gulf Coast region. In addition to the human costs, much of
the nations' oil refining capacity was damaged. The impact on the regional and
national economies is not yet clear, but the federal government has committed
itself to spending whatever necessary to rebuild the battered region. The
effects of this commitment are twofold. First, it appears to have restored a
degree of confidence in the region and second, due to the dramatic increase in
federal spending, it has given inflation hawks something to worry about.
Among the uncertainties faced by the U.S. economy is the pending retirement of
Federal Reserve Chairman Alan Greenspan. Chairman Greenspan has been a
reassuring presence on the economic scene since his appointment in 1987 and it
will take the market some time to adjust to the economic stewardship of his
announced successor, Ben Bernanke.
Trading activity the past year continues to be centered primarily in the
purchase of A1+/P1 or A1/P1(3) commercial paper in the 30 to 90 day range.
Additionally, we bought Variable Rate Notes ('VRN') that are indexed to either
Prime or Libor(1) and offer incremental yield pick-up over shorter dated paper.
As it is likely that the Fed will continue to raise the target federal funds
rate, we look to add to both our VRN and short dated securities position.*
As we approach the end of 2005, the short-term market is adjusting to the
possibility of additional federal funds rate increases than previously
anticipated. Because we believe the Fed still considers the federal funds rate
to be at an accommodative level, we look for rate increases to continue as long
as the economic data remains as strong as it has been for much of 2005. Of
course, this strategy is subject to change should economic conditions
necessitate a change.
*Portfolio composition is subject to change.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) The 'Aaa' money market fund rating is historical and reflects the superior
quality of the Fund's investments, sound liquidity management, and strong
operations and trading support. Periodic reviews are conducted to ensure a
secure operations environment. Moody's rating represents an opinion only,
not a recommendation to buy or sell.
(2) Consumer Price Index ('CPI') a measure of price changes in consumer goods
and services such as gasoline, food, and automobiles. Sometimes referred to
as 'headline inflation.' Producer Price Index ('PPI') a family of indexes
that measures the average change over time in selling prices received by
domestic producers of goods and services. PPIs measure price change from
the perspective of the seller.
(3) The London Inter-Bank Offer Rate (LIBOR) is the interest rate that the
largest international banks charge each other for loans.
HSBC INVESTOR FAMILY OF FUNDS 10
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Limited Maturity Portfolio
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor Limited Maturity Portfolio (the 'Portfolio') seeks to realize
above-average total return, consistent with reasonable risk, by investing in a
diversified investment grade portfolio of U.S. government obligations, corporate
bonds and mortgage-backed securities.
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
The economy continued to expand at a slightly above trend pace. For the annual
period ending September 2005 Gross Domestic Product(1) growth was 3.7%. The
Federal Reserve Board (the 'Fed') maintained a measured approach to raising the
target rate by 25 basis points (0.25%) at each meeting since the Fed's first
increase of the current cycle, which began on June 30, 2004.
Yields on short maturity U.S. Treasury securities increased with the fed funds
rate. Yields on 2-year notes rose by 183 basis points (1.83%) whereas 10-year
notes rose by only 53 basis points (0.53%). Further, yields on the 30-year
yields actually fell by 4 basis points (0.04%). Changing investor expectations
about inflationary pressures and the level of economic activity caused
intra-period volatility. This was due to uncertainty about the impact of
Hurricane Katrina and the effects of higher energy prices. However, core
inflation remained relatively tame. As a result, the yield curve flattened by
179 basis points (1.79%) as measured by the yield differential between 2-year
and 30-year yields.
Despite strong performance through February, corporate bonds ended the period
with poor relative performance as yields among most corporate bonds widened. A
confluence of factors including disappointing operating performance within the
automotive sector and a greater focus on shareholder value by many companies led
investors to demand higher yield premiums. General Motors and Ford provided the
biggest drag on the corporate market as both companies announced disappointing
results and sustained reduced market share. The rise in corporate yield premiums
filtered through to other market sectors as investors realigned valuations
across sectors.
In contrast spreads on agencies, asset backed securities and commercial mortgage
backed securities performed well as investor demand for high quality assets
drove yield spreads tighter versus Treasuries. In contrast, mortgage
pass-throughs underperformed due to poor market technicals. Specifically a
reduction in agency demand and an increase in supply due to convexity related
hedging drove spreads wider.
A defense duration, a 'barbelled' yield curve strategy and a higher than
benchmark position in asset backed securities benefited the Fund's absolute and
relative to benchmark total return over the annual period. However, price
declines from rise in yields and the widening yield premiums in certain
corporate bonds held in the Fund detracted from relative performance resulting
in an underperformance of the Fund in comparison to its benchmark index.*
Going forward we will continue to position the portfolio defensively. We believe
we have positioned the portfolio with a lower sensitivity to a change in
interest rates than that of the Fund's benchmark. We also remain concerned about
the level yield premiums on corporate bonds and securitized debt. During this
time we feel it is important to remind our investors of the benefits of active
management. Current valuations allow us to construct a portfolio where, we
believe, the investor has less exposure to some of the risks in the current
market.
(1) Gross Domestic Product (GDP) is the measure of the market value of the
goods and services produced by labor and property in the United States.
* Portfolio composition is subject to change.
11 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Fixed Income Portfolio
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor Fixed Income Portfolio (the 'Portfolio') seeks to provide
investors with above-average total return, consistent with reasonable risk,
through investments in a diversified portfolio of fixed-income securities.
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
The economy continued to expand at a slightly above trend pace. For the annual
period ending September 2005 Gross Domestic Product(1) growth was 3.7%. The
Federal Reserve Board (the 'Fed') maintained a measured approach to raising the
target rate by 25 basis points (0.25%) at each meeting since the Fed's first
increase of the current cycle, which began on June 30, 2004.
Yields on short maturity U.S. Treasury securities increased with the fed funds
rate. Yields on 2-year notes rose by 183 basis points (1.83%) whereas 10-year
notes rose by only 53 basis points (0.53%). Further, yields on the 30-year
yields actually fell by 4 basis points (0.04%). Changing investor expectations
about inflationary pressures and the level of economic activity caused
intra-period volatility. This was due to uncertainty about the impact of
Hurricane Katrina and the effects of higher energy prices. However core
inflation remained relatively tame. As a result, the yield curve flattened by
179 basis points (1.79%) as measured by the yield differential between 2-year
and 30-year yields.
Despite strong performance through February, corporate bonds ended the period
with poor relative performance. A confluence of factors including disappointing
operating performance within the automotive sector and a greater focus on
shareholder value by many companies led investors to demand higher yield
premiums. General Motors and Ford provided the biggest drag on the corporate
market as both companies announced disappointing results and sustained reduced
market share. The rise in corporate yield premiums filtered through to other
market sectors as investors realigned valuations across sectors. In contrast
spreads on agencies, asset backed securities and commercial mortgage backed
securities performed well as investor demand for high quality assets drove yield
spreads tighter versus Treasuries. In contrast, mortgage pass-throughs
underperformed due to poor market technicals. Specifically a reduction in agency
demand and an increase in supply due to convexity related hedging drove spreads
wider.
A defense duration, a 'barbelled' yield curve strategy and a lower than
benchmark position in mortgage pass-throughs benefited the Fund's absolute and
relative to benchmark total return over the annual period. Price declines from
rise in yields and the widening yield premiums in certain corporate bonds held
in the portfolio detracted from relative performance.*
(1) Gross Domestic Product (GDP) is the measure of the market value of the
goods and services produced by labor and property in the United States.
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 12
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Growth Portfolio
by Philip J. Sanders, Senior Vice President/Portfolio Manager, CFA and
Daniel P. Becker, Senior Vice President/Portfolio Manager, CFA
Waddell & Reed Investment Management Company
The HSBC Investor Growth Portfolio (the 'Portfolio') seeks long-term growth of
capital by investing primarily in U.S. and foreign equity securities of high
quality companies with market capitalization generally in excess of $2 billion,
which the sub-adviser believes have the potential to generate superior levels of
long-term profitability and growth. The Portfolio employs Waddell & Reed
Investment Management Company (Waddell & Reed) as the sub-adviser.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
Large-cap growth stocks generated roughly flat returns during the first half of
this fiscal year, then produced solid gains during the period's second half.
That environment contributed to healthy absolute returns for the Fund.
Energy stocks led the market during this period, supported by large increases in
oil and gas prices. The Fund's sub-adviser held an overweight allocation to
energy, so the sector's surge boosted performance relative to the benchmark. The
sub-adviser also over-weighted financial-services stocks. That strategy helped
relative gains, as did strong stock selection in the financial sector. The
Fund's managers de-emphasized interest-rate sensitive bank stocks in favor of
shares in the capital-markets, student loan and asset management industries.*
Stock selection in the technology sector also boosted returns against the
benchmark. The Fund's managers focused on shares of firms that they believed
could generate reliable earnings growth, and such stocks posted solid gains
during the second half of the period.*
The Fund's holdings in the consumer discretionary sector weighed on relative
returns. The sub-adviser invested in shares of consumer-oriented firms with
strong franchises, but investor concerns about potential weakness in consumer
spending led to losses for many of those stocks. The Fund's overweight position
in health care stocks also hurt returns against the index, despite good stock
selection in the sector.*
* Portfolio composition is subject to change.
13 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Value Portfolio
by Jon D. Bosse, CFA
Chief Investment Officer
NWQ Investment Management Co., LLC
The HSBC Investor Value Portfolio (the 'Portfolio') seeks long-term growth of
capital and income by investing primarily in U.S. and foreign companies with
large and medium capitalizations that possess hidden opportunities underpriced
by the market. The Portfolio employs NWQ Investment Management Company, LLC
('NWQ') as the sub-adviser.
Investment Concerns
Value-based investments are subject to the risk that the broad market may not
recognize their intrinsic value.
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
The stock market generated healthy returns during this period. Energy shares led
the equity market, as investors bid them up on the strength of rising oil and
gas prices. That environment and strong performance from several individual
holdings helped this Fund generate strong absolute and relative gains.
Security selection was the largest contributor to the Fund's superior relative
performance. The strong performance of individual stocks in the insurance,
technology, retail and business services sectors contributed to the Fund's
absolute and positive relative returns. The Fund's sub-adviser held an
underweight stake in the market-leading energy sector, but the negative impact
of that positioning was more than offset by a relative overweighting in the
'other energy' sub-sector, which includes oil and gas exploration and production
companies. That part of the energy market significantly outperformed the energy
sector as a whole, and boosted the Fund's relative gains.*
Overweighting the Fund's allocation to media and publishing stocks weighed on
relative performance, as weak advertising revenues pressured this group. An
underweighted position in the financial sector helped relative returns.
Financial stocks generally were weak during the period, primarily due to the
flattening of the yield curve, which investors worried would reduce profit
margins for the sector. Financial stocks typically make up a substantial portion
of most value indices and benchmarks. Within financials, mortgage-related stocks
detracted from performance due to concerns of a potential slowdown in mortgage
refinancing activity.*
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 14
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor International Equity Portfolio
by Kevin F. Simms
Co-CIO International Value Equities and Director of Research - Global and
International Value Equities
AllianceBernstein Investment Research and Management
The HSBC Investor International Equity Portfolio (the 'Portfolio') seeks to
provide their shareholders with long-term growth of capital and future income by
investing primarily in securities of non-U.S. issuers and securities of issuers
whose principal markets are outside of the United States. The Portfolio employs
Bernstein Investment Research and Management ('AllianceBernstein'), a unit of
AllianceBernstein Investment Research and Management as sub-investment adviser.
The Portfolio invests primarily in equity securities of companies organized and
domiciled in developed nations outside the U.S., or for which the principal
trading market is outside the U.S., including Europe, Canada, Australia and the
Far East.
Investment Concerns
There are risks associated with investing in foreign companies, such as erratic
market conditions, economic and political instability and fluctuations in
currency and exchange rates.
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
Stronger-than-expected economic and earnings growth helped foreign markets post
good returns during this period. That environment contributed to strong gains
for the Fund.
The Fund generated returns superior to its benchmark in part because of its
overweight position in shares of industrial commodities firms. Such stocks
benefited from the unexpected strength of the global economy, which investors
believed would contribute to greater demand for basic commodities such as steel
and coal. An overweight position in Japanese and Korean financial-services
stocks also boosted relative returns, as solid economic growth in Asia led
investors to expect higher profits for such firms.*
The Fund's returns against the benchmark also benefited from a relatively large
stake in emerging markets. Developing markets tend to perform well during
periods of strong economic growth, so better-than-expected economic data during
this period contributed to significant gains.*
The Fund's return advantage over the benchmark was diminished by relatively
large weightings in certain aluminum and paper stocks, which suffered from
unexpectedly strong capacity in those industries. Likewise, the Fund held
relatively large positions in certain consumer stocks that fared poorly due to
company-specific issues.*
* Portfolio composition is subject to change.
15 HSBC INVESTOR FAMILY OF FUNDS
Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Portfolio
by William A. Muggia
President-Chief Investment Officer
Westfield Capital Management
The HSBC Investor Small Cap Equity Fund and the HSBC Investor Opportunity Fund
('the Funds') seek to provide their shareholders with long-term growth of
capital by investing in equity securities of emerging small and medium-sized
companies expected to deliver earnings growth well above the growth rate of the
economy and the rate of inflation. The Funds employ a two-tier structure,
commonly referred to as 'master-feeder.' The Funds invest all of their
investable assets in the HSBC Investor Small Cap Equity Portfolio (the
'Portfolio'). The Portfolio employs Westfield Capital Management, LLC as
sub-investment adviser.
The Portfolio invests primarily in common stocks of small and medium-sized
companies that may have the potential to become major enterprises.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
Market Commentary
Small-capitalization stocks produced solid gains, helping power this Fund's
strong returns. Energy stocks led the small-cap market, while technology stocks
generated the benchmark's weakest returns.
This Fund's sub-adviser, Westfield Capital Management, generated positive
performance through a combination of successful sector allocation and strong
stock selection. The manager held an overweight position in energy stocks
throughout the period, which boosted relative returns as such stocks surged. The
manager trimmed the overweight position in recent months as many of the Fund's
energy stocks rose to levels in line with the managers' price targets.
Selection among technology stocks had the second-largest positive impact on
relative gains. The technology stocks held by the Fund gained an average of more
than 15%, supported by strong performance among Internet, software and computer
services stocks. Meanwhile, the technology stocks represented in the benchmark
delivered average returns of 5.4%.*
Selection among consumer discretionary stocks weighed on relative returns.
Westfield Capital Management avoided richly valued shares of particular
retailers, so strong performance among those stocks hurt performance against the
benchmark. And disappointing performance by shares of some medical devices
manufacturers and specialty pharmaceutical firms caused the Fund's health care
allocation to lag that of the benchmark, despite strong gains by certain managed
care and biotechnology stocks.*
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 16
Portfolio Reviews
- --------------------------------------------------------------------------------
Portfolio Composition*
October 31, 2005
(Unaudited)
HSBC Investor Limited Maturity Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- --------------------------------------------------------------------------------
U.S. Government Agencies 34.1%
- --------------------------------------------------------------------------------
Corporate Bond 26.7%
- --------------------------------------------------------------------------------
U.S. Treasury Notes 14.6%
- --------------------------------------------------------------------------------
Asset Backed Securities 10.2%
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations 10.2%
- --------------------------------------------------------------------------------
Cash and Equivalents 2.3%
- --------------------------------------------------------------------------------
Repurchase Agreements 1.9%
- --------------------------------------------------------------------------------
Total 100.0%
- --------------------------------------------------------------------------------
HSBC Investor Fixed Income Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- --------------------------------------------------------------------------------
U.S. Government Agencies 29.1%
- --------------------------------------------------------------------------------
Corporate Bond 28.8%
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations 14.8%
- --------------------------------------------------------------------------------
U.S. Treasury Securities 11.9%
- --------------------------------------------------------------------------------
Asset Backed Securities 8.2%
- --------------------------------------------------------------------------------
Repurchase Agreements 5.7%
- --------------------------------------------------------------------------------
Cash and Equivalents 0.8%
- --------------------------------------------------------------------------------
Municipal Bond 0.7%
- --------------------------------------------------------------------------------
Total 100.0%
- --------------------------------------------------------------------------------
HSBC Investor Growth Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- --------------------------------------------------------------------------------
Health Care 23.4%
- --------------------------------------------------------------------------------
Information Technology 22.4%
- --------------------------------------------------------------------------------
Financials 15.2%
- --------------------------------------------------------------------------------
Industrials 13.1%
- --------------------------------------------------------------------------------
Energy 8.6%
- --------------------------------------------------------------------------------
Consumer Discretionary 8.6%
- --------------------------------------------------------------------------------
Consumer Staples 6.5%
- --------------------------------------------------------------------------------
Cash and Equivalents 2.2%
- --------------------------------------------------------------------------------
Total 100.0%
- --------------------------------------------------------------------------------
HSBC International Equity Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- --------------------------------------------------------------------------------
Europe 61.9%
- --------------------------------------------------------------------------------
Japan 24.7%
- --------------------------------------------------------------------------------
Australia and Far East 7.7%
- --------------------------------------------------------------------------------
Other 3.0%
- --------------------------------------------------------------------------------
Canada 2.3%
- --------------------------------------------------------------------------------
Cash and Equivalents 0.4%
- --------------------------------------------------------------------------------
Total 100.0%
- --------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- --------------------------------------------------------------------------------
Health Care 25.2%
- --------------------------------------------------------------------------------
Information Technology 17.8%
- --------------------------------------------------------------------------------
Repurchase Agreements 16.2%
- --------------------------------------------------------------------------------
Industrials 14.6%
- --------------------------------------------------------------------------------
Energy 12.9%
- --------------------------------------------------------------------------------
Financials 5.5%
- --------------------------------------------------------------------------------
Consumer Discretionary 5.1%
- --------------------------------------------------------------------------------
Transportation 1.4%
- --------------------------------------------------------------------------------
Cash and Equivalents 1.3%
- --------------------------------------------------------------------------------
Total 100.0%
- --------------------------------------------------------------------------------
HSBC Investor Value Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- --------------------------------------------------------------------------------
Financials 28.4%
- --------------------------------------------------------------------------------
Information Technology 14.0%
- --------------------------------------------------------------------------------
Energy 12.8%
- --------------------------------------------------------------------------------
Industrials 12.7%
- --------------------------------------------------------------------------------
Materials 7.7%
- --------------------------------------------------------------------------------
Consumer Staples 7.4%
- --------------------------------------------------------------------------------
Consumer Discretionary 5.4%
- --------------------------------------------------------------------------------
Telecommunication Services 3.1%
- --------------------------------------------------------------------------------
Transportation 2.2%
- --------------------------------------------------------------------------------
Health Care 2.1%
- --------------------------------------------------------------------------------
Miscellaneous 2.0%
- --------------------------------------------------------------------------------
Utilities 1.6%
- --------------------------------------------------------------------------------
Cash and Equivalents 0.6%
- --------------------------------------------------------------------------------
Total 100.0%
- --------------------------------------------------------------------------------
* Portfolio composition is subject to change.
17 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
<Table>
<Caption>
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE
GROWTH STRATEGY GROWTH GROWTH INCOME
STRATEGY FUND FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND
--------------- --------------- --------------- --------------- ---------------
ASSETS:
Investments in Portfolios $1,425,345 $5,511,039 $6,668,909 $1,953,247 $ 803,891
Investment in affiliates, at
value (a) 14,310 55,309 423,097 485,625 343,330
Receivable for capital shares
issued 10,802 16,093 24,139 2,770 15
Receivable from Investment
Adviser 2,700 20,314 21,724 6,378 --
Prepaid expenses 1,047 2,008 2,306 647 647
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS 1,454,204 5,604,763 7,140,175 2,448,667 1,147,883
---------- ---------- ---------- ---------- ----------
LIABILITIES:
Dividends payable -- -- -- -- 2,761
Payable for capital shares
redeemed 3,319 -- -- -- --
Accrued expenses and other
liabilities:
Investment Management -- -- -- -- 205
Administration 44 177 226 76 42
Distribution 458 1,839 2,496 867 484
Shareholder Servicing 302 1,182 1,492 502 238
Compliance service 2 3 2 5 6
Transfer Agent 20 20 20 20 20
Trustee 3 11 15 6 3
Other 2,860 10,809 13,006 4,679 2,403
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES 7,008 14,041 17,257 6,155 6,162
---------- ---------- ---------- ---------- ----------
NET ASSETS $1,447,196 $5,590,722 $7,122,918 $2,442,512 $1,141,721
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
...............................................................................................................................
COMPOSITION OF NET ASSETS:
Capital $1,375,606 $5,387,221 $6,939,294 $2,398,988 $1,137,163
Accumulated net investment income
(loss) (1,486) (4,996) 1,628 7,315 3,253
Accumulated net realized gains
(losses) from investment
transactions 8,287 13,401 4,570 (1,676) (3,441)
Unrealized
appreciation/depreciation from
investments 64,789 195,096 177,426 37,885 4,746
---------- ---------- ---------- ---------- ----------
NET ASSETS $1,447,196 $5,590,722 $7,122,918 $2,442,512 $1,141,721
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
...............................................................................................................................
CLASS A SHARES
Net Assets $ 725,720 $2,814,159 $3,241,228 $1,054,405 $ 419,120
Shares Outstanding 68,452 262,543 308,977 102,516 41,855
Net Asset Value and Redemption
Price per share $ 10.60 $ 10.72 $ 10.49 $ 10.29 $ 10.01
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Maximum sales charge 5.00% 5.00% 5.00% 5.00% 4.75%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Maximum Offering Price per share
(Net Asset Value/(100%-maximum
sales charge)) $ 11.16 $ 11.28 $ 11.04 $ 10.83 $ 10.51
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
...............................................................................................................................
CLASS B SHARES
Net Assets $ 700,381 2,670,396 $3,604,156 $1,305,707 $ 477,743
Shares Outstanding 66,264 247,789 343,218 128,170 47,632
Net Asset Value, Offering Price
and Redemption Price per share* $ 10.57 $ 10.78 $ 10.50 $ 10.19 $ 10.03
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
...............................................................................................................................
CLASS C SHARES
Net Assets $ 21,095 106,167 $ 277,534 $ 82,400 $ 244,858
Shares Outstanding 2,000 9,809 26,994 7,918 24,302
Net Asset Value, Offering Price
and Redemption Price per share* $ 10.55 $ 10.82 $ 10.28 $ 10.41 $ 10.08
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Investments in affiliates, at
cost (a) $ 14,310 $ 55,309 $ 423,097 $ 485,625 $ 343,330
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</Table>
- --------------
* Redemption Price per share varies by length of time shares are held.
(a) The investment in affiliates are holdings of the HSBC Investor Money Market
Fund Class Y Shares (see Note 1). The shares held in the Fund are identical
to value since it is at $1.00 net asset value per share. In addition, value
and cost for financial reporting and federal income tax purpose are the
same.
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 18
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF OPERATIONS -- FOR THE PERIOD ENDED OCTOBER 31, 2005
<Table>
<Caption>
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE
GROWTH STRATEGY GROWTH GROWTH INCOME
FUND (a) FUND (b) FUND (b) FUND (c) FUND (d)
---------------- ---------------- ---------------- ---------------- ----------------
INVESTMENT INCOME:
Investment income from Portfolios $ 6,996 $ 40,156 $ 60,534 $ 19,147 $ 12,493
Investment income from Money
Market Fund 163 634 4,828 5,352 4,214
Foreign tax withholding from
Portfolios (411) (1,409) (1,373) (288) (71)
Expenses from Portfolios (4,026) (14,585) (16,335) (4,436) (2,028)
-------- -------- -------- -------- --------
TOTAL INVESTMENT INCOME 2,722 24,796 47,654 19,775 14,608
-------- -------- -------- -------- --------
................................................................................................................................
EXPENSES:
Investment Management 260 1,033 1,305 432 243
Administration -- HSBC (see note 3) 150 570 712 245 127
Administration -- BISYS (see note 3) 45 195 256 76 54
Distribution:
Class B Shares 1,746 6,924 9,878 3,417 1,417
Class C Shares 62 288 561 198 612
Shareholder Servicing:
Class A Shares 714 2,762 3,044 955 543
Class B Shares 582 2,308 3,293 1,139 472
Class C Shares 20 96 187 66 204
Fund Accounting 17,250 18,750 17,250 18,750 17,250
Chief Compliance Officer 7 24 30 15 12
Printing 6,024 34,026 37,207 14,824 8,375
Transfer Agent 28,182 28,416 28,658 28,160 28,063
Trustee 5 21 28 10 6
Other 2,721 3,179 3,996 2,471 2,415
-------- -------- -------- -------- --------
Total expenses before fee
reductions 57,768 98,592 106,405 70,758 59,793
Fees reduced by Fund Accounting
and Transfer Agent (45,172) (46,588) (45,139) (46,689) (45,226)
Fees reduced by Administrator --
BISYS (see note 3) (12) (48) (63) (19) (11)
Fees reduced and expenses
reimbursed by Investment
Adviser (6,830) (28,046) (27,598) (11,785) (7,175)
-------- -------- -------- -------- --------
NET EXPENSES 5,754 23,910 33,605 12,265 7,381
-------- -------- -------- -------- --------
................................................................................................................................
NET INVESTMENT INCOME (LOSS) (3,032) 886 14,049 7,510 7,227
-------- -------- -------- -------- --------
................................................................................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS: (E)
Net realized gains (losses) from
investment transactions 4,441 (1,238) (11,530) (4,777) (4,123)
Change in unrealized
appreciation/depreciation from
investments 64,789 195,096 177,426 37,885 4,746
-------- -------- -------- -------- --------
................................................................................................................................
Net realized/unrealized gains
(losses) from investment
transactions and foreign
currencies 69,230 193,858 165,896 33,108 623
-------- -------- -------- -------- --------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $ 66,198 $194,744 $179,945 $ 40,618 $ 7,850
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</Table>
- --------------
(a) The Aggressive Growth Strategy Fund commenced operations on February 9,
2005.
(b) The Growth Strategy Fund and Moderate Growth Strategy Fund commenced
operations on February 1, 2005.
(c) The Conservative Growth Strategy Fund commenced operations on February 17,
2005.
(d) The Conservative Income Strategy Fund commenced operations on February 8,
2005.
(e) Represents amounts allocated from the Respective Portfolios.
19 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
AGGRESSIVE
GROWTH GROWTH
STRATEGY FUND STRATEGY FUND
- -----------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b)
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ (3,032) $ 886
Net realized gains (losses) from investment transactions 4,441 (1,238)
Change in unrealized appreciation/depreciation from
investments 64,789 195,096
---------- ----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 66,198 194,744
---------- ----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 1,380,998 5,395,978
---------- ----------
CHANGE IN NET ASSETS 1,447,196 5,590,722
................................................................................................................................
NET ASSETS:
Beginning of period -- --
---------- ----------
End of period $1,447,196 $5,590,722
---------- ----------
---------- ----------
Accumulated net investment income (loss) $ (1,486) $ (4,996)
---------- ----------
---------- ----------
</Table>
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 20
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
AGGRESSIVE
GROWTH GROWTH
STRATEGY FUND STRATEGY FUND
- ------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b)
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued $ 693,884 $2,731,568
Cost of shares redeemed (9,512) (26,214)
---------- ----------
Class A Shares capital transactions 684,372 2,705,354
---------- ----------
................................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 690,126 2,623,574
Cost of shares redeemed (13,505) (35,907)
---------- ----------
Class B Shares capital transactions 676,621 2,587,667
---------- ----------
................................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 20,005 102,957
---------- ----------
Class C Shares capital transactions 20,005 102,957
---------- ----------
................................................................................................................................
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $1,380,998 $5,395,978
---------- ----------
---------- ----------
................................................................................................................................
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued 69,359 265,018
Redeemed (907) (2,475)
---------- ----------
Change in Class A Shares 68,452 262,543
---------- ----------
................................................................................................................................
CLASS B SHARES:
Issued 67,597 251,135
Redeemed (1,333) (3,346)
---------- ----------
Change in Class B Shares 66,264 247,789
---------- ----------
................................................................................................................................
CLASS C SHARES:
Issued 2,000 9,809
---------- ----------
Change in Class C Shares 2,000 9,809
---------- ----------
</Table>
- --------------
(a) Aggressive Growth Strategy Fund Class A Shares commenced operations on
February 14, 2005, Class B Shares commenced operations on February 9, 2005,
and Class C Shares commenced operations on June 10, 2005.
(b) Growth Strategy Fund Class A Shares commenced operations on February 8,
2005, Class B Shares commenced operations on February 1, 2005, and Class C
Shares commenced operations on April 27, 2005.
21 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
MODERATE CONSERVATIVE
GROWTH GROWTH
STRATEGY FUND STRATEGY FUND
- ------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b)
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 14,049 $ 7,510
Net realized gains (losses) from investment transactions (11,530) (4,777)
Change in unrealized appreciation/depreciation
from investments 177,426 37,885
---------- ----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 179,945 40,618
---------- ----------
................................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A Shares (116) (203)
Class B Shares (73) (5)
---------- ----------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (189) (208)
---------- ----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 6,943,162 2,402,102
---------- ----------
CHANGE IN NET ASSETS 7,122,918 2,442,512
................................................................................................................................
NET ASSETS:
Beginning of period -- --
---------- ----------
End of period $7,122,918 $2,442,512
---------- ----------
---------- ----------
Accumulated net investment income (loss) $ 1,628 $ 7,315
---------- ----------
---------- ----------
</Table>
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 22
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
MODERATE CONSERVATIVE
GROWTH GROWTH
STRATEGY FUND STRATEGY FUND
- --------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 2005 (a) OCTOBER 31, 2005 (b)
- --------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued $3,264,968 $1,046,895
Dividends reinvested 117 203
Cost of shares redeemed (110,833) (11,388)
---------- ----------
Class A Shares capital transactions 3,154,252 1,035,710
---------- ----------
................................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 3,640,156 1,298,439
Dividends reinvested 63 4
Cost of shares redeemed (125,948) (13,275)
---------- ----------
Class B Shares capital transactions 3,514,271 1,285,168
---------- ----------
................................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 275,464 81,224
Cost of shares redeemed (825) --
---------- ----------
Class C Shares capital transactions 274,639 81,224
---------- ----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $6,943,162 $2,402,102
---------- ----------
---------- ----------
................................................................................................................................
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued 319,580 103,636
Reinvested 12 20
Redeemed (10,615) (1,140)
---------- ----------
Change in Class A Shares 308,977 102,516
---------- ----------
................................................................................................................................
CLASS B SHARES:
Issued 355,469 129,472
Reinvested 6 --(c)
Redeemed (12,257) (1,302)
---------- ----------
Change in Class B Shares 343,218 128,170
---------- ----------
................................................................................................................................
CLASS C SHARES:
Issued 27,076 7,918
Redeemed (82) --
---------- ----------
Change in Class C Shares 26,994 7,918
---------- ----------
</Table>
- --------------
(a) Moderate Growth Strategy Fund Class A Shares commenced operations on
February 3, 2005, Class B Shares commenced operations on February 1, 2005,
and Class C Shares commenced operations on June 10, 2005.
(b) Conservative Growth Strategy Fund Class A Shares commenced operations on
February 23, 2005, Class B Shares commenced operations on February 17, 2005,
and Class C Shares commenced operations on April 19, 2005.
(c) Rounds to less than 1.0 shares.
23 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
CONSERVATIVE
INCOME
STRATEGY FUND
- -------------------------------------------------------------------------------------
FOR THE
PERIOD ENDED
OCTOBER 31, 2005 (a)
- -------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 7,227
Net realized gains (losses) from investment transactions (4,123)
Change in unrealized appreciation/depreciation from
investments 4,746
----------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 7,850
----------
....................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A Shares (3,758)
Class B Shares (1,409)
Class C Shares (1,093)
----------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (6,260)
----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 1,140,131
----------
CHANGE IN NET ASSETS 1,141,721
....................................................................................
NET ASSETS:
Beginning of period --
----------
End of period $1,141,721
----------
----------
Accumulated net investment income (loss) $ 3,253
----------
----------
</Table>
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 24
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
CONSERVATIVE
INCOME STRATEGY
FUND
- --------------------------------------------------------------------------------------
FOR THE
PERIOD ENDED
OCTOBER 31, 2005 (a)
- --------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued $ 420,293
Dividends reinvested 2,097
Cost of shares redeemed (3,999)
----------
Class A Shares capital transactions 418,391
----------
.....................................................................................
CLASS B SHARES:
Proceeds from shares issued 516,383
Dividends reinvested 695
Cost of shares redeemed (40,981)
----------
Class B Shares capital transactions 476,097
----------
.....................................................................................
CLASS C SHARES:
Proceeds from shares issued 245,019
Dividends reinvested 624
----------
Class C Shares capital transactions 245,643
----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $1,140,131
----------
----------
.....................................................................................
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued 42,045
Reinvested 208
Redeemed (398)
----------
Change in Class A Shares 41,855
----------
.....................................................................................
CLASS B SHARES:
Issued 51,661
Reinvested 69
Redeemed (4,098)
----------
Change in Class B Shares 47,632
----------
.....................................................................................
CLASS C SHARES:
Issued 24,240
Reinvested 62
----------
Change in Class C Shares 24,302
----------
</Table>
- --------------
(a) The Conservative Income Strategy Fund Class A Shares commenced operations on
February 8, 2005, Class B Shares commenced operations on February 14, 2005,
and Class C Shares commenced operations on May 4, 2005.
25 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS TOTAL NET ASSET
VALUE, INVESTMENT (LOSSES) FROM FROM VALUE,
BEGINNING OF INCOME INVESTMENT INVESTMENT END OF TOTAL
PERIOD (LOSS) TRANSACTIONS ACTIVITIES PERIOD RETURN(b)
- -----------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 (0.01) 0.61 0.60 $10.60 6.00%
- -----------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.00 (0.04) 0.61 0.57 $10.57 5.70%
- -----------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.00 (0.05) 0.60 0.55 $10.55 5.50%
- -----------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES INCOME (LOSS) EXPENSES TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
(000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $726 1.50% (0.20)% 11.72% 49.10%
- -------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $700 2.25% (1.01)% 11.63% 49.10%
- -------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $ 21 2.25% (1.15)% 9.79% 49.10%
- -------------------------------------------------------------------------------------------------------
</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 applicable HSBC Investor Portfolios.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated by aggregating the results of multiplying
the Fund's investment percentage in the respective Portfolios by the
corresponding Portfolio's entire fiscal 2005 portfolio turnover rate.
Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 14, 2005.
(g) Class B Shares commenced operations on February 9, 2005.
(h) Class C Shares commenced operations on June 10, 2005.
See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS 26
HSBC INVESTOR GROWTH STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
<Table>
<Caption>
INVESTMENT ACTIVITIES
------------------------------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS TOTAL
VALUE, INVESTMENT (LOSSES) FROM FROM
BEGINNING OF INCOME INVESTMENT INVESTMENT
PERIOD (LOSS) TRANSACTIONS ACTIVITIES
- ----------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 0.02 0.70 0.72
- ----------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.00 (0.01) 0.79 0.78
- ----------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.00 (0.02) 0.84 0.82
- ----------------------------------------------------------------------------------------------
<Caption>
NET ASSET
VALUE,
END OF TOTAL
PERIOD RETURN(b)
- --------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.72 7.20%
- --------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.78 7.80%
- --------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.82 8.20%
- --------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
----------------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES INCOME (LOSS) EXPENSES TO
PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
(000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- -----------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $2,814 1.50% 0.42 % 5.19% 69.23%
- -----------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $2,670 2.25% (0.38)% 5.74% 69.23%
- -----------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $ 106 2.25% (0.55)% 5.24% 69.23%
- -----------------------------------------------------------------------------------------------------------------------
</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 applicable HSBC Investor Portfolios.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated by aggregating the results of multiplying
the Funds investment percentage in the respective Portfolios by the
corresponding Portfolio's entire fiscal 2005 portfolio turnover rate.
Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 8, 2005.
(g) Class B Shares commenced operations on February 1, 2005.
(h) Class C Shares commenced operations on April 27, 2005.
See notes to financial statements.
27 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR MODERATE GROWTH STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS NET ASSET
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET VALUE,
BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 0.04 0.45 0.49 --(g) --(g) $10.49
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (h) $10.00 0.01 0.49 0.50 --(g) --(g) $10.50
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) $10.00 --(g) 0.28 0.28 -- -- $10.28
- ---------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO
TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO
RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) 4.94% $3,241 1.50% 0.95% 4.30% 84.55%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (h) 5.03% $3,604 2.25% 0.18% 5.01% 84.55%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) 2.80% $ 278 2.25% 0.05% 4.69% 84.55%
- ---------------------------------------------------------------------------------------------------------------------------------
</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 applicable HSBC Investor Portfolios.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated by aggregating the results of multiplying
the Funds investment percentage in the respective Portfolios by the
corresponding Portfolio's entire fiscal 2005 portfolio turnover rate.
Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 3, 2005.
(g) Rounds to less than $0.01.
(h) Class B Shares commenced operations on February 1, 2005.
(i) Class C Shares commenced operations on June 10, 2005.
See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS 28
HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
<Table>
<Caption>
INVESTMENT ACTIVITIES
-------------------------------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM
BEGINNING INCOME INVESTMENT INVESTMENT
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES
- --------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 0.04 0.26 0.30
- --------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.00 0.03 0.16 0.19
- --------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) $10.00 0.03 0.38 0.41
- --------------------------------------------------------------------------------------------
<Caption>
DIVIDENDS
----------------------
NET ASSET
NET VALUE,
INVESTMENT TOTAL END OF TOTAL
INCOME DIVIDENDS PERIOD RETURN(b)
- ----------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) (0.01) (0.01) $10.29 2.96%
- ----------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) --(h) --(h) $10.19 1.92%
- ----------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) -- -- $10.41 4.10%
- ----------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO
PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO
(000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- --------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $1,054 1.50% 1.28% 8.01% 72.14%
- --------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $1,306 2.25% 0.53% 9.21% 72.14%
- --------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) $ 82 2.25% 0.66% 7.94% 72.14%
- --------------------------------------------------------------------------------------------------------------------------
</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 applicable HSBC Investor Portfolios.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated by aggregating the results of multiplying
the Funds investment percentage in the respective Portfolios by the
corresponding Portfolio's entire fiscal 2005 portfolio turnover rate.
Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 23, 2005.
(g) Class B Shares commenced operations on February 17, 2005.
(h) Rounds to less than $0.01.
(i) Class C Shares commenced operations on April 19, 2005.
See notes to financial statements.
29 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR CONSERVATIVE INCOME STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED(a).
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
------------------------------------------ ----------------------
NET REALIZED AND
NET ASSET NET UNREALIZED GAINS NET ASSET
VALUE, INVESTMENT (LOSSES) FROM TOTAL FROM NET VALUE,
BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 0.11 0.01 0.12 (0.11) (0.11) $10.01
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.00 0.06 0.01 0.07 (0.04) (0.04) $10.03
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.00 0.06 0.08 0.14 (0.06) (0.06) $10.08
- ---------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME (LOSS) EXPENSES TO
TOTAL PERIOD AVERAGE TO AVERAGE AVERAGE PORTFOLIO
RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) 1.18% $419 1.50% 1.79% 14.10% 79.90%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) 0.68% $478 2.25% 1.21% 12.16% 79.90%
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) 1.41% $245 2.25% 1.24% 9.60% 79.90%
- ---------------------------------------------------------------------------------------------------------------------------------
</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 applicable HSBC Investor Portfolios.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated by aggregating the results of multiplying
the Funds investment percentage in the respective Portfolios by the
corresponding Portfolio's entire fiscal 2005 portfolio turnover rate.
Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 8, 2005.
(g) Class B Shares commenced operations on February 14, 2005.
(h) Class C Shares commenced operations on May 4, 2005.
See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS 30
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005
1. ORGANIZATION:
The HSBC Investor Funds (the 'Trust'), a Massachusetts business trust
organized on April 22, 1987, is registered under the Investment Company Act
of 1940, as amended (the 'Act'), as an open-end management investment
company. The Trust contains the following funds (individually a 'Fund,'
collectively the 'LifeLine Funds'):
<Table>
<Caption>
FUND SHORT NAME
- ---- ----------
HSBC Investor Aggressive Growth Strategy Fund Aggressive Growth Fund
HSBC Investor Growth Strategy Fund Growth Strategy Fund
HSBC Investor Moderate Growth Strategy Fund Moderate Growth Fund
HSBC Investor Conservative Growth Strategy Fund Conservative Growth Fund
HSBC Investor Conservative Income Strategy Fund Conservative Income Fund
</Table>
The LifeLine Funds are separate series of the Trust and are part of the
HSBC Investor Family of Funds. Financial statements for all other series of
HSBC Investor Family of Funds are published separately.
The LifeLine Funds (individually a 'Feeder Fund,' collectively the
'Feeder Funds') utilize the Master Feeder Fund Structure and seek to achieve
their investment objectives by investing all of their investable assets in
their Respective Portfolios (as defined below) and the HSBC Investor Money
Market Fund (the 'Money Market Fund'), per the following schedule through
the fiscal year ended October 31, 2005:
HSBC INVESTOR LIFELINE FUNDS PORTFOLIO WEIGHTINGS
<Table>
<Caption>
AGGRESSIVE MODERATE CONSERVATIVE CONSERVATIVE
GROWTH GROWTH GROWTH GROWTH INCOME
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
UNDERLYING PORTFOLIO OR FUND FUND FUND FUND FUND FUND
- ---------------------------- ---- ---- ---- ---- ----
Money Market Fund................................... 1% 1% 6% 20% 30%
Fixed Income Portfolio.............................. None 17% 31% 20% 25%
Limited Maturity Portfolio.......................... None None None 15% 25%
Growth Portfolio.................................... 21% 21% 19% 15% 8%
Value Portfolio..................................... 21% 21% 18% 15% 8%
Small Cap Equity Portfolio.......................... 34% 20% 11% 5% None
International Equity Portfolio...................... 23% 20% 15% 10% 4%
---- ---- ---- ---- ----
Total............................................... 100% 100% 100% 100% 100%
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</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 HSBC Investor Money Market Fund is a diversified series of the
Trust, and like each Feeder Fund is an open-end management investment
company.
The LifeLine Funds are authorized to issue an unlimited number of shares
of beneficial interest with a par value of $0.001 per share. Each Fund
offers four classes of shares: Class A Shares, Class B Shares, Class C
Shares and Class R Shares (currently not operational). Each class of shares
in the LifeLine Funds has identical rights and privileges except with
respect to arrangements pertaining to shareholder servicing or distribution,
class-related expenses, voting rights on matters affecting a single class of
shares, and the exchange privilege of each class of shares.
Under the LifeLine Funds' organizational documents, its officers and
trustees are indemnified against certain liabilities arising out of the
performance of their duties to the LifeLine Funds. In addition, in the
normal course of business, the LifeLine Funds enter into contracts with
their vendors and others that provide for general indemnifications. The
LifeLine Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the LifeLine Funds.
However, based on experience, the LifeLine Funds expect that risk of loss to
be remote.
31 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with accounting principles generally accepted in
the United States of America ('GAAP'). The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results could
differ from those estimates.
SECURITIES VALUATION:
Feeder Funds record their investments in the Portfolios at fair value.
Securities of the Portfolios' are recorded at value as more fully discussed
in the notes to those financial statements. Investments in the Money Market
Fund are recorded at net asset value as reported by the Fund.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Feeder Funds record daily their pro-rata share of their underlying
Portfolios' income, expenses and realized and unrealized gains and losses.
Changes in holdings of the Money Market Fund for each LifeLine Fund are
reflected no later than the first business day following trade date.
However, for financial reporting purposes, changes in holdings of the Money
Market Fund are reflected as of trade date. In addition, the Feeder Funds
accrue their own expenses daily as incurred. Realized gains or losses and
changes in unrealized appreciation or depreciation represent each Feeder
Fund's share of such elements allocated from the Portfolios.
ALLOCATIONS:
Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are allocated proportionately
among various or all Funds within the HSBC Investor Family of Funds in
relation to the net assets of each Fund or on another reasonable basis.
Expenses specific to a class are charged to that class. In addition, income,
expenses (other than class specific), and unrealized/realized gains and
losses are allocated to each class based on relative net assets on a daily
basis.
DIVIDENDS TO SHAREHOLDERS:
The Conservative Income Fund declares and distributes all net investment
income as dividends to their shareholders monthly. Dividends from net
investment income, if any, are declared and distributed quarterly in the
case of the Moderate Growth Fund and Conservative Growth Fund, and annually
in the case of the Aggressive Growth Fund and Growth Strategy Fund.
The LifeLine Funds' net realized gains, if any, are distributed to
shareholders at least annually. Additional distributions are also made to
the LifeLine Funds' shareholders to the extent necessary to avoid the
federal excise tax on certain undistributed income and net capital gains of
regulated investment companies.
The amount character of net investment income and net realized gains
distributions are determined in accordance with federal income tax
regulations which may differ from GAAP. These 'book/tax' differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature (i.e. reclassification of market
discounts, gain/loss, paydowns, and certain distributions), such amounts are
reclassified within the components of net assets; temporary differences do
not require reclassification. The Funds may utilize equalization accounting
for tax purposes and designate earnings and profits, including net realized
gains distributed to shareholders on redemption of shares, as a part of the
dividends paid deduction for income tax purposes.
REDEMPTION FEE:
A redemption fee of 2.00% will be charged and recorded as
paid-in-capital for any shares redeemed or exchanged after holding them for
less than 30 days. This fee does not apply to shares purchased through
reinvested dividends or capital gains or shares held in certain omnibus
accounts or retirement plans that cannot implement the fee. For the year
ended October 31, 2005, the following LifeLine Funds collected redemption
fees as follows:
HSBC INVESTOR LIFELINE FUNDS 32
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
FUND FEES COLLECTED
- ---- --------------
Growth Strategy Fund........................................ $ 78
Moderate Growth Strategy Fund............................... 3,411
Conservative Growth Strategy Fund........................... 162
Conservative Income Strategy Fund........................... 252
</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.
3. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Investments (USA) Inc. ('HSBC' or the 'Investment Adviser'), a
wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank,
acts as Investment Adviser to the LifeLine Funds. As Investment Adviser,
HSBC manages the investments of the Funds and continuously reviews,
supervises and administers the Funds' investments. For its services as
Investment Adviser, HSBC is entitled to receive a fee, computed daily and
paid monthly, based on average daily net assets, at an annual rate of 0.05%
for each Fund.
ADMINISTRATION:
Effective July 1, 2005, HSBC serves the Funds as Administrator. Under
the terms of the administration agreement, HSBC receives from the Funds a
fee accrued daily and paid monthly at an annual rate of:
<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 assets invested in the underlying Portfolios by Feeder
Funds, the Portfolios pay half of the administration fee and the Feeder
Funds pay half, for a combination of the total fee rate above. HSBC may
directly or through an affiliate, use their fee revenue, past profits, or
other revenue sources to pay promotional, administrative, shareholder
support, and other expenses to third parties, including broker dealers, in
connection with the offer, sale and administration of shares of the Funds.
Effective July 1, 2005, pursuant to a Sub-Administration Agreement with
HSBC, BISYS Fund Services Ohio, Inc. ('BISYS Ohio') a wholly-owned
subsidiary of The BISYS Group, Inc, serves as the Trusts sub-administrator
to each Fund subject to the general supervision of the Funds' Board of
Trustees and HSBC. For these services, BISYS is entitled to a fee, payable
by HSBC. Prior to July 1, 2005, BISYS Ohio received compensation for
providing administration services to the Funds under the same compensation
structure as those currently with HSBC.
Under a Compliance Services Agreement between the Funds' and BISYS Ohio
(the 'CCO Agreement'), BISYS Ohio makes an employee available to serve as
the Funds' Chief Compliance Officer (the 'CCO'). Under the CCO Agreement,
BISYS Ohio also provides infrastructure and support in implementing the
written policies and procedures comprising the Funds' compliance program,
including support services to the CCO. For the services provided under the
CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $200,000
for the fiscal year ended October 31, 2005, plus certain out of pocket
expenses. Expenses incurred are reflected on the Statements of Operations as
'Compliance Service'. In addition, BISYS Ohio received a one-time
implementation fee of $50,000 which is included
33 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
in Other Expenses on the Statements of Operations. BISYS Ohio pays the
salary and other compensation earned by any such individuals as employees of
BISYS Ohio.
All voluntary administration fee waivers are not subject to recoupment
in subsequent fiscal periods.
DISTRIBUTION PLAN:
BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned
subsidiary of The BISYS Fund Services, Inc., serves the Funds as Distributor
(the 'Distributor'). The Trust has adopted a non-compensatory Distribution
Plan and Agreement (the 'Plan') pursuant to Rule 12b-1 of the Act. The Plan
provides for a monthly payment of actual expenses by the LifeLine Funds to
the Distributor at a rate not to exceed 0.25% of the average daily net
assets of Class A Shares (currently not being charged) and 0.75% of the
average daily net assets of Class B Shares and Class C Shares of the
LifeLine Funds. This payment represents expenses incurred by the Distributor
for marketing costs and services rendered in distributing the LifeLine
Funds' shares. BISYS, as the LifeLine Funds' distributor, received $930,944
in commissions from sales of the HSBC Investor Family of Funds of which
$930,503 was reallowed to affiliated brokers and dealers.
SHAREHOLDER SERVICING:
The Trust has entered into a Shareholder Servicing Agreement with its
shareholder servicing agents (which currently consists of HSBC and its
affiliates) for providing various shareholder services. For performing these
services, the shareholder servicing agents receive a fee of 0.25%, 0.25%,
0.25%, and 0.75% that is computed daily and paid monthly equal to a
percentage of average daily net assets of Class A Shares, Class B Shares,
Class C Shares and Class R Shares of the Fund, respectively. The aggregate
fees paid to the Distributor pursuant to the Distribution Plan and to
shareholder servicing agents pursuant to the Shareholder Servicing Agreement
currently are not intended to exceed 0.25% of the average daily net assets
of Class A Shares, 1.00% of the average daily net assets of Class B Shares
and Class C Shares, and 0.75% of the average daily net assets of Class R
Shares.
FUND ACCOUNTING, TRANSFER AGENCY, CUSTODIAN AND TRUSTEE:
BISYS Ohio provides fund accounting and transfer agency services for all
classes of each Fund. As transfer agent for the Funds, BISYS receives a fee
based on the number of Funds and shareholder accounts, subject to certain
minimums and reimbursement of certain expenses. As fund accountant for the
Funds, BISYS receives an annual fee per Fund and share class, subject to
certain minimums and reimbursement of certain expenses. HSBC is the named
Custodian for the LifeLine Funds, however, there was no security maintained
for which services were rendered during the period.
Each of the six non-interested Trustees are compensated a $24,000 annual
Board retainer, a $1,000 annual retainer for each Committee of the Board,
and a $4,000 and $2,000 meeting fee for each regular in-person Board meeting
and Committee meeting, respectively. In addition, Trustees may receive
compensation for special meetings and/or functioning as a Committee
Chairperson or Lead Trustee. Also, the Trustees are reimbursed for certain
expenses.
FEE REDUCTIONS:
The Investment Adviser has agreed to limit the total expenses, exclusive
of interest, taxes, brokerage commissions and extraordinary expenses, of the
LifeLine Funds. Each Fund Class has its own expense limitations based on
average daily net assets for any full fiscal year as follows, Class A 1.50%,
Class B 2.25%, Class C 2.25% and Class R 2.00%.
In addition, the investment adviser may waive additional fees at their
discretion. All contractual and any voluntary investment advisory fee
waivers are not subject to recoupment in subsequent fiscal periods.
HSBC INVESTOR LIFELINE FUNDS 34
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
4. INVESTMENT TRANSACTIONS:
Aggregate contributions and withdrawals of the underlying Portfolios for
the fiscal year ended October 31, 2005, totaled:
<Table>
<Caption>
CONTRIBUTIONS WITHDRAWALS
------------- -----------
Aggressive Growth Fund...................................... $1,427,065 $ 73,039
Growth Fund................................................. 5,439,422 145,205
Moderate Growth Fund........................................ 6,772,906 307,156
Conservative Growth Fund.................................... 1,980,205 71,413
Conservative Income Fund.................................... 863,411 71,019
</Table>
5. FEDERAL INCOME TAX INFORMATION:
The tax characteristics of dividends paid by the Funds during the fiscal
year ended October 31, 2005 were as follows:
<Table>
<Caption>
DIVIDENDS PAID FROM
--------------------------------
NET LONG
TERM TOTAL TAXABLE TAX EXEMPT TOTAL DIVIDENDS
ORDINARY INCOME CAPITAL GAINS DIVIDENDS DISTRIBUTIONS PAID(1)
--------------- ------------- --------- ------------- -------
Moderate Growth Strategy Fund........ $ 189 $ -- $ 189 $ -- $ 189
Conservative Growth Strategy Fund.... 208 -- 208 -- 208
Conservative Income Strategy Fund.... 3,499 -- 3,499 -- 3,499
</Table>
As of October 31, 2005, the components of accumulated earnings/(deficit)
on a tax basis for the Funds were as follows:
<Table>
<Caption>
UNDISTRIBUTED
LONG TERM ACCUMULATED
UNDISTRIBUTED UNDISTRIBUTED TAX CAPITAL ACCUMULATED DIVIDENDS CAPITAL AND OTHER
ORDINARY INCOME EXEMPT INCOME GAINS EARNINGS PAYABLE LOSSES
--------------- ------------- ----- -------- ------- ------
Aggressive Growth
Fund................ $ -- $ -- $ 9,058 $ 9,058 $ -- --
Growth Strategy
Fund................ -- -- 16,108 16,108 -- --
Moderate Growth
Fund................ 6,406 -- 7,543 13,949 -- --
Conservative Growth
Fund................ 8,411 -- -- 8,411 -- (996)
Conservative Income
Fund................ 6,221 -- -- 6,221 (2,761) (3,111)
<Caption>
UNREALIZED TOTAL
APPRECIATION/ ACCUMULATED
(DEPRECIATION)(2) EARNINGS/(DEFICIT)
----------------- ------------------
Aggressive Growth
Fund................ $ 62,532 $ 71,590
Growth Strategy
Fund................ 187,393 203,501
Moderate Growth
Fund................ 169,675 183,624
Conservative Growth
Fund................ 36,109 43,524
Conservative Income
Fund................ 4,209 4,558
</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>
AMOUNT EXPIRES
------ -------
Conservative Growth Fund.................................... $ 996 2013
Conservative Income Fund.................................... 3,111 2013
</Table>
6. OTHER FEDERAL INCOME INFORMATION (UNAUDITED):
For the fiscal year ended October 31, 2005, the following percentage of
the total ordinary income dividends paid by the Funds qualify for the
corporate dividends received deduction available to corporate shareholders.
35 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
DIVIDENDS
RECEIVED
DEDUCTION
---------
Moderate Growth Strategy Fund............................... 100%
Conservative Growth Strategy Fund........................... 36%
Conservative Income Strategy Fund........................... 9%
</Table>
For the fiscal year ended October 31, 2005, dividends paid by the
Funds may be subject to a maximum tax rate of 15%, as provided for by
the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Funds
intend to designate the maximum amount allowable as taxed at a
maximum rate of 15%. Complete information will be reported in
conjunction with your 2005 Form 1099-DIV.
<Table>
<Caption>
AMOUNT
------
Moderate Growth Fund........................................ 100%
Conservative Growth Fund.................................... 62%
Conservative Income Fund.................................... 15%
</Table>
HSBC INVESTOR LIFELINE FUNDS 36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
HSBC Investor LifeLine Funds:
We have audited the accompanying statements of assets and liabilities of HSBC
Investor Aggressive Growth Strategy Fund, HSBC Investor Growth Strategy Fund,
HSBC Investor Moderate Growth Strategy Fund, HSBC Investor Conservative Growth
Strategy Fund and HSBC Investor Conservative Income Strategy Fund (collectively,
the Funds), as of October 31, 2005, including the related statements of
operations, changes in net assets and financial highlights for the period then
ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of October 31, 2005, and the results of their operations, the changes
in their net assets and the financial highlights for the period then ended, in
conformity with U.S. generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
December 27, 2005
37 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005
As a shareholder of the HSBC Investor LifeLine Funds, you incur two
types of costs: (1) transaction costs, including sales charges (loads) on
purchases; redemption fees; and exchange fees; (2) ongoing costs, including
management fees; distribution and shareholder servicing fees; and other Fund
expenses. This example is intended to help you understand your ongoing costs
(in dollars) of investing in the HSBC Investor LifeLine Funds and to compare
these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from May 1, 2005
through October 31, 2005.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<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
------ -------- ----------------- -----------------
Aggressive Growth Strategy Fund... Class A $1,000.00 $1,107.60 $ 7.97 1.50%
Class B 1,000.00 1,104.50 11.94 2.25%
Class C** 1,000.00 1,055.00 9.12 2.25%
Conservative Growth Strategy
Fund............................ Class A 1,000.00 1,044.80 7.73 1.50%
Class B 1,000.00 1,040.90 11.57 2.25%
Class C 1,000.00 1,046.20 11.60 2.25%
Conservative Income Strategy
Fund............................ Class A 1,000.00 1,020.00 7.64 1.50%
Class B 1,000.00 1,016.50 11.54 2.27%
Class C*** 1,000.00 1,014.10 11.24 2.25%
Growth Strategy Fund.............. Class A 1,000.00 1,086.10 7.89 1.50%
Class B 1,000.00 1,083.40 11.82 2.25%
Class C 1,000.00 1,083.10 11.81 2.25%
Moderate Growth Strategy Fund..... Class A 1,000.00 1,063.90 7.80 1.50%
Class B 1,000.00 1,059.50 11.68 2.25%
Class C**** 1,000.00 1,028.00 9.00 2.25%
</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.
** Information shown reflects values using the expense ratios and rates of
return for the period from June 10, 2005 to October 31, 2005.
*** Information shown reflects values using the expense ratios and rates of
return for the period from May 4, 2005 to October 31, 2005.
**** Information shown reflects values using the expense ratios and rates of
return from the period from June 10, 2005 to October 31, 2005.
HSBC INVESTOR LIFELINE FUNDS 38
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor LifeLine Funds's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<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
------ -------- ----------------- -----------------
Aggressive Growth Strategy Fund... Class A $1,000.00 $1,017.64 $ 7.63 1.50%
Class B 1,000.00 1,013.86 11.42 2.25%
Class C** 1,000.00 1,013.86 11.42 2.25%
Conservative Growth Strategy
Fund............................ Class A 1,000.00 1,017.64 7.63 1.50%
Class B 1,000.00 1,013.86 11.42 2.25%
Class C 1,000.00 1,013.86 11.42 2.25%
Conservative Income Strategy
Fund............................ Class A 1,000.00 1,017.64 7.63 1.50%
Class B 1,000.00 1,013.76 11.52 2.27%
Class C*** 1,000.00 1,013.86 11.42 2.25%
Growth Strategy Fund.............. Class A 1,000.00 1,017.64 7.63 1.50%
Class B 1,000.00 1,013.86 11.42 2.25%
Class C 1,000.00 1,013.86 11.42 2.25%
Moderate Growth Strategy Fund..... Class A 1,000.00 1,017.64 7.63 1.50%
Class B 1,000.00 1,013.86 11.42 2.25%
Class C**** 1,000.00 1,013.86 11.42 2.25%
</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.
** Information shown reflects values using the expense ratios for the
period from June 10, 2005 to October 31, 2005 and has been annualized
to reflect values for the period May 1, 2005 to October 31, 2005.
*** Information shown reflects values using the expense ratios for the
period from May 4, 2005 to October 31, 2005 and has been annualized to
reflect values for the period May 1, 2005 to October 31, 2005.
**** Information shown reflects values using the expense ratios for the
period from June 10, 2005 to October 31, 2005 and has been annualized
to reflect values for the period May 1, 2005 to October 31, 2005.
39 HSBC INVESTOR LIFELINE FUNDS
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<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 $746,417)....................... 746,417
----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 40
HSBC INVESTOR LIMITED MATURITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
<Table>
<Caption>
- ---------------------------------------------------------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN - 1.9%
PRINCIPAL
AMOUNT($) 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 $32,809,686.
(a) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report represent the rates that were in
effect on October 31, 2005. The maturity dates presented
reflect the final maturity date. However, each of these
securities contains put or demand features that allow the
fund to require the issuer to repurchase the security
from the fund within various time periods, including
daily, weekly, monthly, or semi-annually.
(b) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
(c) All or a portion of the security was on loan as of
October 31, 2005.
* Investment in affiliate.
41 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 43.4%
PRINCIPAL
AMOUNT($) 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 42
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.
43 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005 (CONTINUED)
(a) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report represents the rates that were
in final on October 31, 2005. The maturity dates
presented reflect the stated maturity dates. However,
each of these securities contains put or demand features
that allow the fund to require the issuer to repurchase
the security from the fund within various time periods,
including daily, weekly, monthly, or semi-annually.
(b) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
(c) Interest-only represents securities that entitle holders
to receive only interest payments on the underlying
mortgages. The yield to maturity of an Interest-Only is
extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of
principal repayments may have an adverse (positive)
effect on yield to maturity. The interest rate presented
represents the rates that were in effect on October 31,
2005. The principal amount shown is the notional amount
of the underlying mortgages.
(d) Rule 144a, section 4(2) or other security which is
restricted as to resale to institutional investors. The
Investment Advisor, using Board approved procedures, has
deemed these securities to be illiquid. Represents 0.06%
of net assets.
(e) All or a portion of the security was on loan as of
October 31, 2005.
(f) Security was fair valued (See note 2) as of October 31,
2005.
* Investment in affiliate.
AMBAC - American Municipal Bank Assurance Corp.
LOC - Letter of Credit
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 44
HSBC INVESTOR GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<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 $49,414,699.
(a) Represents non-income producing security.
* Investment in affiliate.
45 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR VALUE PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 97.5%
SHARES VALUE($)
------- ----------
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 $54,150,448.
* Investment in Affiliate
(a) Represents non-income producing security.
ADR - American Depositary Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 46
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 98.5%
SHARES VALUE($)
--------- -----------
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>
47 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 48
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>
49 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- OCTOBER 31, 2005
<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.
(a) Represents non-income producing security.
(b) All or portion of security was on loan as of October 31,
2005.
* Investment in affiliate
ADR -- American Depositary Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 50
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
<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.
51 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
MATURITY INCOME GROWTH VALUE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- -------------- --------------- --------------- ---------------
INVESTMENT INCOME:
Interest $ 2,105,378 $ 6,989,667 $ 0 $ 0 $ 22,432
Dividends 217 1,242 688,580 1,061,066 7,050,398
Dividend income from affiliated
investments 25,523 110,154 42,243 55,096 --
Foreign tax withholding -- -- -- -- (778,471)
Income from securities lending 6,154 12,904 366 2,358 --
Other income (see note 5) 2,093 7,821 1,126 1,423 --
----------- ------------ ---------- ---------- -----------
TOTAL INVESTMENT INCOME 2,139,365 7,121,788 732,315 1,119,943 6,294,359
----------- ------------ ---------- ---------- -----------
...............................................................................................................................
EXPENSES:
Investment management 197,360 620,549 259,397 328,104 1,568,100
Administration -- HSBC (see
note 3) 4,684 17,001 6,370 7,303 29,205
Administration -- BISYS (see
note 3) 13,745 40,031 13,209 16,106 56,179
Accounting 48,094 57,945 41,057 39,454 78,906
Compliance service 687 2,110 716 858 3,125
Custodian 16,066 42,418 26,567 30,165 145,360
Interest -- 93 -- -- --
Trustee 1,587 4,619 452 853 6,197
Other 6,005 18,231 7,005 7,885 30,270
----------- ------------ ---------- ---------- -----------
Total expenses before voluntary
fee reductions 288,228 802,997 354,773 430,728 1,917,342
Fees reduced by Investment
Adviser (see note 3 and 5) (45,832) (171,285) (24,678) (31,167) --
Fees reduced by Administrator --
BISYS (see note 3) (902) (2,934) (1,018) (1,231) (4,020)
----------- ------------ ---------- ---------- -----------
NET EXPENSES 241,494 628,778 329,077 398,330 1,913,322
----------- ------------ ---------- ---------- -----------
...............................................................................................................................
NET INVESTMENT INCOME (LOSS) 1,897,871 6,493,010 403,238 721,613 4,381,037
----------- ------------ ---------- ---------- -----------
...............................................................................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains (losses) from
investments and foreign
currency transactions (162,231) 7,083,274 2,375,542 4,124,126 18,977,305
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies (1,247,772) (10,643,468) 3,995,556 4,254,259 17,737,274
----------- ------------ ---------- ---------- -----------
...............................................................................................................................
Net realized/unrealized gains
(losses) from investments and
foreign currency transactions (1,410,003) (3,560,194) 6,371,098 8,378,385 36,714,579
----------- ------------ ---------- ---------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 487,868 $ 2,932,816 $6,774,336 $9,099,998 $41,095,616
----------- ------------ ---------- ---------- -----------
----------- ------------ ---------- ---------- -----------
<Caption>
SMALL CAP
EQUITY
PORTFOLIO
--------------
Interest $ 0
Dividends 990,070
Dividend income from affiliated
investments 138,034
Foreign tax withholding --
Income from securities lending 12,148
Other income (see note 5) 5,169
------------
TOTAL INVESTMENT INCOME 1,145,421
------------
................. ..................................
EXPENSES:
Investment management 2,284,219
Administration -- HSBC (see
note 3) 30,836
Administration -- BISYS (see
note 3) 76,108
Accounting 40,138
Compliance service 4,038
Custodian 76,725
Interest 104
Trustee 8,600
Other 37,046
------------
Total expenses before voluntary
fee reductions 2,557,814
Fees reduced by Investment
Adviser (see note 3 and 5) (113,213)
Fees reduced by Administrator --
BISYS (see note 3) (5,102)
------------
NET EXPENSES 2,439,499
------------
..................................................
NET INVESTMENT INCOME (LOSS) (1,294,078)
------------
..................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains (losses) from
investments and foreign
currency transactions 62,035,547
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies (17,237,446)
------------
..................................................
Net realized/unrealized gains
(losses) from investments and
foreign currency transactions 44,798,101
------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 43,504,023
------------
------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 52
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>
53 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 54
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 (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>
55 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 56
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005
1. ORGANIZATION:
The HSBC Investor Portfolios (the 'Portfolio Trust'), is a registered
open-end management investment company organized as a master trust fund
under the laws of the State of New York on November 1, 1994. The Portfolios
operate as master funds in master-feeder arrangements. The Declaration of
Trust permits the Board of Trustees to issue an unlimited number of
beneficial interests in the Portfolios. The Portfolio Trust contains the
following (individually a 'Portfolio,' collectively the 'Portfolios'):
<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
57 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
value pricing in accordance with procedures adopted by the Board of
Trustees. Management identifies possible fluctuations in foreign securities
by monitoring the rise or fall in the value of a designated benchmark index.
In the event of a rise or fall greater than predetermined levels, the
International Equity Portfolio may use a systematic valuation model provided
by an independent third party to value its foreign securities. When the
International Equity Portfolio uses fair value pricing, the value assigned
to the International Equity Portfolio's foreign securities may not be the
quoted or published prices of the investment on their primary markets or
exchanges.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Changes in holdings of portfolio securities are reflected no later than
on the first business day following trade date. However, for financial
reporting purposes, portfolio securities are reflected as of trade date.
Securities gains and losses are calculated on the identified cost basis.
Interest income is recognized on the accrual basis and includes, where
applicable, the amortization or accretion of premium or discount. Dividend
income is recorded on the ex-dividend date.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Portfolios are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars at the current
rate of exchange to determine the value of investments, assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of
such transactions. The Portfolios do not isolate the portion of the results
of operations resulting from changes in foreign exchange rates on
investments from fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments and foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Portfolios may enter into forward foreign currency exchange
contracts in connection with planned purchases or sales of securities or to
hedge the U.S. dollar value of portfolio securities denominated in a
particular currency. The Portfolios could be exposed to risks if the
counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purposes as
unrealized gains or losses until the contract settlement date.
FUTURES CONTRACTS:
Each Portfolio may invest in futures contracts for the purpose of
hedging their existing portfolio securities or securities it intends to
purchase against fluctuations in fair value caused by changes in prevailing
market interest rates. Upon entering into a futures contract, the Portfolio
is required to pledge to the broker an amount of cash and/or other assets
equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as 'variation margin,' are made or
received by the Portfolio each day, depending on the daily fluctuations in
the fair value of the underlying security. The Portfolio recognizes a gain
or loss equal to the daily variation margin. Should market conditions move
unexpectedly, the Portfolio may not achieve the anticipated benefits of the
futures contracts and may realize a loss. The use of futures transactions
involves the risk of imperfect correlation in movements in the price of
futures contracts, interest rates and the underlying hedged assets.
MORTGAGE DOLLAR ROLL TRANSACTIONS:
The Fixed Income Portfolio may engage in dollar roll transactions with
respect to mortgage securities issued by the Government National Mortgage
Association, the Federal National Mortgage Association and the Federal Home
Loan Mortgage Corporation. In a dollar roll transaction, the Portfolio sells
a mortgage-backed security and simultaneously agrees to repurchase a similar
security on a specified future date at an agreed upon price. During the roll
period, the Portfolio will not be entitled to receive any interest or
principal paid on the securities sold. The Portfolio is compensated for the
lost interest on the securities sold by the difference between the sales
price and the lower price for the future repurchase as well as by the
interest earned on the reinvestment of the sales proceeds. The
HSBC INVESTOR PORTFOLIOS 58
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
Portfolio may also be compensated by receipt of a commitment fee. When the
Portfolio enters into a mortgage dollar roll transaction, liquid assets in
an amount sufficient to pay for the future repurchase are segregated with
the custodian.
RESTRICTED AND ILLIQUID SECURITIES:
A restricted security is a security which has been purchased through a
private offering and cannot be resold to the general public without prior
registration under the Securities Act of 1933 (the '1933 Act') or pursuant
to the resale limitations provided by Rule 144 under the 1933 Act, or an
exemption from the registration requirements of the 1933 Act. Certain
restricted securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers, and may be deemed
liquid by the investment manager based on procedures established by the
Board of Trustees. Not all restricted securities are considered illiquid.
At October 31, 2005, the HSBC Fixed Income Portfolio held illiquid
securities, representing 0.06% of net assets, as follows:
<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.
59 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
During the fiscal year ended October 31, 2005, the Fixed Income
Portfolio, Limited Maturity Portfolio and Small Cap Equity Portfolio had
borrowed against the Line of Credit. The details of the borrowing were as
follows (based on actual number of days in which the respective Fund
borrowed monies):
<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 60
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and NWQ Investment Management Co., LLC receive in
aggregate, from the Value Portfolio, a fee, accrued daily and paid monthly,
at an annual rate of:
<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. In addition, BISYS Ohio received a one-time
implementation of $50,000 which is included in Other Expenses on the
Statements of Operations. Expenses incurred
61 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
are reflected on the Statements of Operations as 'Compliance Service'. BISYS
Ohio pays the salary and other compensation earned by any such individuals
as employees of BISYS Ohio.
FUND ACCOUNTING, CUSTODIAN AND TRUSTEE:
BISYS provides fund accounting services for the Portfolios. For its
services to the Portfolios, BISYS receives an annual fee per Portfolio,
including reimbursement of certain expenses, from each Portfolio accrued
daily and paid monthly. HSBC serves as custodian to the Limited Maturity
Portfolio, Fixed Income Portfolio, Growth Portfolio, Value Portfolio and
Small Cap Equity Portfolio. Investor's Bank & Trust Company serves as
custodian to the International Equity Portfolio. Compensation HSBC receives
for services to the Portfolios as custodian is presented in the Statements
of Operations as custodian fees.
Each of the six non-interested Trustees are compensated a $24,000 annual
Board retainer, a $1,000 annual retainer for each Committee of the Board,
and a $4,000 and $2,000 meeting fee for each regular in-person Board meeting
and Committee meeting, respectively. In addition, Trustees may receive
compensation for special meetings and/or functioning as a Committee
Chairperson or Lead Trustee. Also, the Trustees are reimbursed for certain
expenses.
OTHER:
For its service as security lending agent, HSBC Bank USA (see note
2 -- Security Loans), receives a fee equal to 0.06% of the average dollar
value of the loans outstanding during a given month from the Portfolios.
Income from securities lending net of related expenses, is recorded as
earned. The fees collected by HSBC Bank USA for the fiscal year ended
October 31, 2005 were:
<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 62
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 (CONTINUED)
impact to the net expense ratio, net income ratio and total return for the
year ended October 31, 2005, are disclosed in the Fund's Financial
Highlights.
<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>
63 HSBC INVESTOR PORTFOLIOS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Trustees of
HSBC Investor Portfolios:
We have audited the accompanying statements of assets and liabilities of
HSBC Investor Limited Maturity Portfolio, HSBC Investor Fixed Income
Portfolio, HSBC Investor Small Cap Equity Portfolio, HSBC Investor
International Equity Portfolio, HSBC Investor Growth Portfolio and HSBC
Investor Value Portfolio (collectively, the Funds), including the schedules
of portfolio investments, as of October 31, 2005, and the related statements
of operations for the year then ended, the changes in net assets for each
period in the two-year period then ended and the financial highlights for
each period in the five-year period then ended. These financial statements
and financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of October 31,
2005, by correspondence with the custodian and brokers; or other appropriate
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Funds as of October 31, 2005, the results of their
operations the year then ended, the changes in their net assets for each
period in the two-year period then ended and the financial highlights for
each period in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
December 27, 2005
HSBC INVESTOR PORTFOLIOS 64
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER CONTRACT APPROVAL (UNAUDITED) -- OCTOBER 31, 2005
The Boards of Trustees (the 'Board of Trustees') of HSBC Investor Funds
and HSBC Investor Portfolios approved a new sub-advisory agreement (the 'New
Agreement') between the Investment Adviser and NWQ Investment Management
Co., LLC ('NWQ'), with respect to the Value Fund, at a meeting of the Board
of Trustees held on June 13-14, 2005. The New Agreement was approved by the
Board of Trustees in order for NWQ to continue to provide investment
sub-advisory services to the Value Fund after a change in control
transaction terminated the old sub-advisory agreement dated January 30, 2004
(the 'Old Agreement'). The approval of the New Agreement did not result in
any changes to the way in which the Value Fund is managed and did not cause
any changes to the Value Fund's investment objectives and policies.
Furthermore, the terms of the New Agreement, including the sub-advisory fee
paid to NWQ, are the same in all respect as the Old Agreement. Additionally,
there were no changes to the portfolio management team at NWQ that services
the Value Fund. In determining whether it was appropriate to approve the New
Agreement, the Board of Trustees requested and received extensive materials
and information from the Investment Adviser to assist them in considering
the approval of the New Agreement. Based on its review of the information
requested and provided, and the discussions with management of the
Investment Adviser, the Board of Trustees determined that approval of the
New Agreement was consistent with the best interests of the Value Fund and
its shareholders, and would enable the Value Fund to receive high quality
services at a cost that is appropriate, reasonable, and in the best
interests of the Value Fund and its shareholders. The Board of Trustees made
these determinations on the basis of the following factors, among others:
- Nature, Extent, and Quality of Services Provided by the Investment
Adviser and NWQ. The Board of Trustees considered the nature, quality
and extent of the investment advisory services provided by NWQ, and
NWQ's historic performance managing accounts having similar
investment objectives as the Value Fund. The Board of Trustees
concluded that the services to be provided by the Investment Adviser
and NWQ are extensive and that the Investment Adviser and NWQ would
deliver a high level of service to the Value Fund.
- Investment Performance of the Value Fund, Investment Adviser and NWQ.
The Board of Trustees considered short- and long-term investment
performance of the Value Fund over various periods of time as
compared to a peer group of comparable funds, as well as NWQ's
historic performance managing accounts having similar investment
objectives as the Value Fund. Additionally, the Board of Trustees
considered fee and expense information regarding the Value Fund's
peer groups.
- Costs of Services and Profits Realized by the Investment Adviser. The
Board of Trustees considered that the proposal had no material effect
upon the analysis of the Investment Adviser's overall profitability
and costs that had been prepared in connection with the last renewal
of the advisory contract, and would not change any factors bearing
upon the profitability to NWQ and Investment Adviser from their
relationships with the Value Fund.
- Other Relevant Considerations. The Board of Trustees considered NWQ's
representations regarding staffing and capabilities to manage assets
of the Value Portfolio. The Board of Trustees also considered the
overall high quality of the personnel, operations, financial
condition, investment management capabilities, methodologies, and
performance of the Investment Adviser and NWQ.
Accordingly, in light of the above considerations and such other factors
and information it considered relevant, the Board of Trustees by a unanimous
vote of those present in person at the meeting (including a separate vote of
the Independent Trustees present in person at the meeting) approved the New
Agreement with respect to the Value Fund.
65 HSBC INVESTOR PORTFOLIOS
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005
As a shareholder of the HSBC Investor Funds, you incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchases;
redemption fees; and exchange fees; (2) ongoing costs, including management
fees; distribution and/or service fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars)
of investing in the HSBC Investor Funds and to compare these costs with the
ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from May 1, 2005
through October 31, 2005.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<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 66
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- OCTOBER 31, 2005 (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor Funds's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<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.
67 HSBC INVESTOR FAMILY OF FUNDS
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED)
The following table contains information regarding HSBC Investor Family of Funds
Board of Trustees. Asterisks indicate those Trustees who are 'interested
persons,' as defined in the Investment Company Act of 1940, as amended, of the
Funds. The Funds' Statement of Additional Information includes additional
information about the Trustees and is available by calling (888) 525-5757.
<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 68
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES (UNAUDITED) (CONTINUED)
The names of the Officers, their addresses, ages, position(s) held with each
Trust, and principal occupation(s) during the past five years are described in
the table below. Unless otherwise indicated, the address for each Officer is
3435 Stelzer Road, Columbus, Ohio 43219-3035.
<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.
69 HSBC INVESTOR FAMILY OF FUNDS
PRIVACY POLICY FOR
HSBC INVESTOR FUNDS AND
HSBC ADVISOR FUNDS TRUST
- --------------------------------------------------------------------------------
THIS PRIVACY POLICY NOTICE SUMMARIZES THE COLLECTION AND DISCLOSURE OF NONPUBLIC
PERSONAL INFORMATION ('INFORMATION') OF CUSTOMERS ('YOU') OF THE HSBC INVESTOR
FAMILY OF FUNDS ('WE' OR 'US'). IF YOU ARE AN INDIVIDUAL SHAREHOLDER OF RECORD
OF ANY SERIES OF THE FUNDS, WE CONSIDER YOU TO BE A CUSTOMER OF THE HSBC
INVESTOR FAMILY OF FUNDS. SHAREHOLDERS PURCHASING OR OWNING SHARES OF ANY OF THE
HSBC INVESTOR FAMILY OF FUNDS THROUGH THEIR BANK, BROKER, OR OTHER FINANCIAL
INSTITUTION SHOULD CONSULT THAT FINANCIAL INSTITUTION'S PRIVACY POLICIES.
WE COLLECT THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
- --------------------------------------------------------------------------------
We collect Information about you from the following sources: information we
receive from you on applications or other forms; information about your
transactions with us, our affiliates, or others; and information we receive from
a consumer reporting agency.
WE DISCLOSE THE FOLLOWING CATEGORIES OF INFORMATION ABOUT YOU
- --------------------------------------------------------------------------------
We do not disclose any Information about you or any former customer to anyone,
except as permitted by law, including to our affiliates and third party service
providers.
WE DISCLOSE INFORMATION ABOUT YOU TO THE FOLLOWING TYPES OF THIRD PARTIES
- --------------------------------------------------------------------------------
We may disclose Information about you and any former customer to our affiliates,
which we consider to include HSBC Bank USA N.A., HSBC Investments (USA) Inc. and
their affiliates, and to nonaffiliated third parties, as permitted by law.
We may disclose all of the Information we collect to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing agreements.
PROTECTING THE SECURITY AND CONFIDENTIALITY OF YOUR INFORMATION
- --------------------------------------------------------------------------------
We restrict access to Information about you to those employees who need to know
that information to provide products or services to you. We maintain physical,
electronic, and procedural safeguards that comply with federal standards to
guard your Information.
HSBC INVESTOR FAMILY OF FUNDS 70
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to the portfolio securities is available without
charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC
Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on
the Fund's website at www.investorfunds.us.hsbc.com and the Securities and
Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting
record for the 12 month period ending June 30, 2005 is available at the Security
and Exchange Commission's website at http://www.sec.gov.
Schedules of Portfolio Investments for fiscal quarters ending January 31 and
July 31 will be available no later than 60 days after period end, without
charge, on the Fund's website at www.investorfunds.us.hsbc.com and on the
Securities and Exchange Commission's website at http://www.sec.gov.
HSBC Investor LifeLine Funds:
INVESTMENT ADVISER AND ADMINISTRATOR
HSBC Investments (USA) Inc.
452 Fifth Avenue
New York, NY 10018
SUB-ADVISERS
HSBC Investor Growth Portfolio
Waddell & Reed Investment Management Company
6300 Lamar Avenue
Overland Park, KS 66202
HSBC Investor Value Portfolio
NWQ Investment Management Co., LLC
2049 Century Park East, 16th Floor
Los Angeles, CA 90067
HSBC Investor International Equity Portfolio
AllianceBernstein Investment Research and Management
1345 Avenue of the Americas, 39th Floor
New York, NY 10105
HSBC Investor Small Cap Equity Portfolio
Westfield Capital Management Company
One Financial Center
Boston, MA 02111
SHAREHOLDER SERVICING AGENTS
For HSBC Bank USA, N.A. and
HSBC Securities (USA) Inc. Clients
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
1-888-525-5757
For All Other Shareholders
HSBC Investor Funds
P.O. Box 182845
Columbus, OH 43218-2845
1-800-782-8183
TRANSFER AGENT,
DISTRIBUTOR AND SPONSOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
CUSTODIANS
HSBC Investor Limited Maturity Portfolio
HSBC Investor Fixed Income Portfolio
HSBC Investor New York Tax-Free Bond Fund
HSBC Investor Growth Portfolio
HSBC Investor Value Portfolio
HSBC Investor Growth and Income Fund
HSBC Investor Small Cap Equity Portfolio
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
HSBC Investor International Equity Portfolio
Investors Bank & Trust Company
200 Clarendon Street -- 16th Floor
Boston, MA 02116
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
KPMG LLP
191 West Nationwide Blvd., Suite 500
Columbus, OH 43215
LEGAL COUNSEL
Dechert LLP
1775 Eye Street, N.W.
Washington, D.C. 20006
The HSBC LifeLine Funds are distributed by BISYS Fund Services. This document
must be preceded or accompanied by a current prospectus for the HSBC Investor
Funds, which you should read carefully before you invest or send money.
HSB-0008 12/05
Item 2. Code of Ethics.
Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. If the registrant has not adopted such a code of ethics,
explain why it has not done so.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. This code of ethics is included as Exhibit 12(a)(i).
The registrant must briefly describe the nature of any amendment, during
the period covered by the report, to a provision of its code of ethics that
applies to the registrant's principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions, regardless of whether these individuals are
employed by the registrant or a third party, and that relates to any
element of the code of ethics definition enumerated in paragraph (b) of
this Item. The registrant must file a copy of any such amendment as an
exhibit pursuant to Item 12(a)(1), unless the registrant has elected to
satisfy paragraph (f) of this Item by posting its code of ethics on its
website pursuant to paragraph (f)(2) of this Item, or by undertaking to
provide its code of ethics to any person without charge, upon request,
pursuant to paragraph (f)(3) of this Item.
If the registrant has, during the period covered by the report, granted a
waiver, including an implicit waiver, from a provision of the code of
ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third party, that relates
to one or more items set forth in paragraph (b) of this Item, the
registrant must briefly describe the nature of the waiver, the name of the
person to whom the waiver was granted, and the date of the waiver.
During the period covered by the report, with respect to the registrant's
code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions; there have been no amendments to, nor any
waivers granted from, a provision that relates to any element of the code
of ethics definition enumerated in paragraph (b) of this Item 2.
Item 3. Audit Committee Financial Expert.
(a) (1) Disclose that the registrant's board of directors has determined
that the registrant either:
(i) Has at least one audit committee financial expert serving
on its audit committee; or
(ii) Does not have an audit committee financial expert
serving on its audit committee.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is "independent."
In order to be considered "independent" for purposes of this Item, a
member of an audit committee may not, other than in his or her
capacity as a member of the audit committee, the board of directors,
or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an audit
committee financial expert.
3(a)(1) The registrant's board of directors has determined that the registrant
has at least one audit committee financial expert serving on its audit
committee.
3(a)(2) The audit committee financial expert is Thomas Robards, who is
"independent" for purposes of this Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed
for each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
2004 $200,230
2005 $255,000
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
2004 $36,130
2005 $40,000
2004 - Fees of $4,150 relate to the consent of N1A filing and $31,980
relate to the performance of the Funds' 17f-2 examinations.
2005 - Fees of $5,000 relate to the consent of N1A filing and $35,000
relate to the performance of the Funds' 17f-2 examinations.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in
each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
2004 $108,115
2005 $139,200
Fees for both 2004 and 2005 relate to the preparation of federal
income and excise tax returns and the review of excise tax distributions.
(d) Disclose, under the caption All Other Fees, the aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
2004 $0
2005 $0
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Except as permitted by Rule 2-01(c)(7)(i)(C) of Regulation S-X, the Trust's
Audit Committee must preapprove all audit and non-audit services by the
independent accountants relating to the operations or financial reporting of the
Funds. Prior to the commencement of any audit or non-audit services to a fund,
the Audit Committee reviews the services to determine whether they are
appropriate and permissible under applicable law.
(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
None of the services summarized in (b) - (d), above, were approved by the audit
Committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours
expended on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees.
Not applicable.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
2004 $1,952,245
2005 $228,200
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
The audit committee considered the nonaudit services rendered to the
registrant's investment adviser and any entity controlling, controlled by, or
under common control with the investment adviser, and believes the services are
compatible with the principal accountant's independence.
Item 5. Audit Committee of Listed Registrants.
(a) If the registrant is a listed issuer as defined in Rule 10A-3
under the Exchange Act (17CFR 240.10A-3), state whether or not
the registrant has a separately-designated standing audit
committee established in accordance with Section
3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the
registrant has such a committee, however designated, identify
each committee member. If the entire board of directors is acting
as the registrant's audit committee as specified in Section
3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so
state.
(b) If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act (17CFR 240.10A-3(d)) regarding an
exemption from the listing standards for all audit committees.
Not applicable.
Item 6. Schedule of Investments.
File Schedule I - Investments in securities of unaffiliated issuers as of the
close of the reporting period as set forth in 'SS' 210.12-12 of Regulation S-X,
unless the schedule is included as part of the report to shareholders filed
under Item 1 of this Form.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
A closed-end management investment company that is filing an annual
report on this Form N-CSR must, unless it invests exclusively in non-voting
securities, describe the policies and procedures that it uses to determine how
to vote proxies relating to portfolio securities, including the procedures that
the company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
If the registrant is a closed-end management investment company that is filing
an annual report on this Form N-CSR, provide the information specified in
paragraphs (a) and (b) of this Item with respect to portfolio managers.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company.
If the registrant is a closed-end management investment company, provide
the information specified in paragraph (b) of this Item with respect to
any purchase made by or on behalf of the registrant or any "affiliated
purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR
240.10b-18(a)(3)), of shares or other units of any class of the registrant's
equity securities that is registered by the registrant pursuant to Section 12 of
the Exchange Act (15 U.S.C. 781).
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Describe any material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or
this Item.
Not applicable.
Item 11. Controls and Procedures.
(a) Disclose the conclusions of the registrant's principal executive
and principal financial officers, or persons performing similar functions,
regarding the effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as
of a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
The registrant's principal executive officer and principal financial officer
have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant on Form N-CSR is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that
occurred during the second fiscal quarter of the period covered by this report
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that have materially affected or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
The code of ethics that is the subject of the disclosure required by Item 2 is
attached hereto.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2(a)
under the Act (17 CFR 270.30a-2). Certifications pursuant to Rule 30a-2(a) are
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1
under the Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange
Act, provide the certifications required by rule 30a-2(b) under the Act as an
exhibit. A certification furnished pursuant to this paragraph will not be deemed
"filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to
the liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or
the Exchange Act, except to the extent that the registrant incorporates it by
reference. Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) HSBC INVESTOR PORTFOLIOS
By (Signature and Title)* /s/ Richard A. Fabietti
-----------------------------------------------------
Richard A. Fabietti
President
Date____January 6, 2006______________________________
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Richard A. Fabietti
-----------------------------------------------------
Richard A. Fabietti
President
Date____January 6, 2006______________________________
By (Signature and Title)* /s/ Troy A. Sheets
-----------------------------------------------------
Troy A. Sheets
Treasurer
Date____January 6, 2006______________________________
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as.......................... 'TM'
The registered trademark symbol shall be expressed as............... 'r'