UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08928
HSBC INVESTOR PORTFOLIOS
(Exact name of registrant as specified in charter)
452 FIFTH AVENUE
NEW YORK, NY 10018
(Address of principal executive offices) (Zip code)
BISYS FUND SERVICES
3435 STELZER ROAD
COLUMBUS, OH 43219
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-782-8183
Date of fiscal year end: October 31, 2006
Date of reporting period: April 30, 2006
Item 1. Reports to Stockholders.
Semi-Annual Report
HSBC Investor LifeLine Funds'TM'
April 30, 2006
HSBC Investor Aggressive
Growth Strategy Fund
LifeLine
HSBC Investor Growth
Strategy Fund
It's simple.
HSBC Investor Moderate
Growth Strategy Fund
It's easy.
HSBC Investor Conservative
Growth Strategy Fund
It's affordable.
HSBC Investor Conservative
Income Strategy Fund
HSBC Investor LifeLine Funds
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[HSBC LOGO]
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Table of Contents
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HSBC Investor Lifeline Funds
Semi Annual Report - April 30, 2006
Chairman's Message ..................................................... 1
Commentary From the Investment Manager ................................. 2
Portfolio Reviews ...................................................... 3
Statements of Assets and Liabilities ...................................20
Statements of Operations ...............................................21
Statements of Changes in Net Assets ....................................22
Financial Highlights ...................................................28
Notes to Financial Statements ..........................................33
Table of Shareholder Expenses ..........................................38
HSBC Investor Portfolios
Schedules of Portfolio Investments
HSBC Investor Intermediate Duration Fixed Income Portfolio .....40
HSBC Investor Core Plus Fixed Income Portfolio .................43
HSBC Investor High Yield Fixed Income Portfolio ................47
HSBC Investor Growth Portfolio .................................49
HSBC Investor Value Portfolio ..................................50
HSBC Investor International Equity Portfolio ...................51
HSBC Investor Small Cap Equity Portfolio .......................55
Statements of Assets and Liabilities ...................................56
Statements of Operations ...............................................58
Statements of Changes in Net Assets ....................................60
Financial Highlights ...................................................64
Notes to Financial Statements ..........................................65
Investment Adviser Contract Approval ...................................72
Table of Shareholder Expenses ..........................................73
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Chairman's Message
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Dear Fellow Shareholders:
The phrase, "disinterested trustees" is an important one in the mutual fund
industry, although it could easily conjure up the image of a bunch of board
people sitting around rubber stamping management decisions. The term actually
means "independent of management" and denotes not a lack of interest but loyalty
to the shareholders in supporting their vested interest in the funds.
To help the trustees monitor all fund activities, the advisors, sub-advisors and
administrators must provide timely and accurate information. The independent
trustees then interpret all the data they receive, giving special attention to
expenses, performance and compliance.
To perform the tasks of monitoring and decision-making, the board has created
various committees:
o Audit
The Audit Committee is composed entirely of independent trustees. The
Chair is designated as the Audit Committee Financial Expert and has
the required professional qualifications and experience. The Committee
meets quarterly to receive reports from management on financial
matters of the Funds, as well as those relating to internal controls
and compliance with established policies and procedures of the Funds
and with pertinent laws and regulations. At each meeting the Committee
holds separate executive sessions with the Funds' Treasurer, Chief
Compliance Officer and Independent Auditors.
o Nominating and Governance
The Nominating and Governance Committee meets when it is necessary to
select new trustees. At this time, the committee establishes what can
be called the "job description" for an independent trustee and then
solicits nominations. This committee also deals with such issues as
ongoing trustee education, board responsibilities, compensation and
leadership development.
o Valuation
The Valuation Committee is responsible for overseeing established
procedures in determining the appropriate value of the securities held
by the individual HSBC Investor Funds and the net asset value per
share of each of the funds in the HSBC complex. Working with
management, auditors and, especially, the Funds' Chief Compliance
Officer, this committee is a watchdog against any aberration in
pricing or breach of regulations. The committee's job is not to
establish price but to determine and oversee implementation of best
practice.
The committee structure allows board members to focus on specific issues so that
when the full board meets it has the information it needs to make decisions on
behalf of the shareholders, creating efficiency in governance.
The independent trustees and all of the members of fund management wish to take
this opportunity to thank you for your continued confidence in the HSBC Investor
Funds. As always, should you have any questions or comments, please feel free to
contact me.
Yours truly,
LARRY M. ROBBINS
Larry M. Robbins, Chairman, HSBC Investor Funds
1 HSBC INVESTOR FAMILY OF FUNDS
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Commentary From the Investment Manager
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HSBC Investments (USA) Inc.
U.S. Economic Review
The U.S. economy expanded at a solid pace during the six-month period between
November 1, 2005 and April 30, 2006. Gross domestic product grew at a relatively
slow rate during the final two months of 2005, as the economy absorbed the
effects of the summer's Gulf Coast hurricanes, but expanded quickly during the
first four months of 2006. Strong business spending helped the economy shrug off
the negative effects of rising interest rates and high prices on energy and
commodities.
Powerful global economic growth contributed to high oil prices, as demand for
fuel outstripped supply. A mild winter in the eastern U.S. allowed inventories
of heating oil and natural gas to increase. But burgeoning demand from China and
concerns that militant activity in Nigeria and nuclear tensions with Iran could
disrupt global oil supplies more than offset the effect of higher inventories.
Strong global growth also pushed up prices of other commodities. Gold prices
approached $600 an ounce, copper and aluminum traded near their all-time highs,
and silver hit its highest level in many decades. Agricultural products also
rose in price. In particular, a new push toward crops that could be used to make
ethanol raised the prices of sugar and corn.
That environment caused concerns about the potential for higher inflation,
despite the fact that strong productivity gains to that point had allowed the
economy to absorb higher energy and commodity prices without a significant
increase in inflation. The Federal Reserve Board attempted to forestall higher
prices by raising interest rates continually during this period, bringing its
target short-term rate to 4.75% as of April 30. The Federal Reserve Board (the
"Fed") installed a new chairman during this period, as Ben Bernanke succeeded
long-time chairman Alan Greenspan.
The Feds interest-rate increases caused yields on short-term bonds to rise.
Meanwhile, yields on long-term bonds generally were stable. The bond market
briefly experienced an inverted yield curve--an environment in which short-term
bonds offer higher yields than long-term bonds--which historically has been a
harbinger of recession. The yield curve quickly flattened, however, easing
concerns about future economic weakness.
Some observers worried that higher interest rates would lead to a significant
decline in the housing market, potentially imperiling consumer spending. Healthy
employment reports and increased wage growth helped relieve those fears,
however.
Market Review
Stocks generated strong returns for the six-month period. The S&P 500 gained
9.64%, while the Russell 2000 Index of small-cap stocks climbed 18.91%.
Strong corporate earnings and healthy corporate balance sheets helped fuel the
stock-market rally. U.S. corporations used their large cash holdings to add
value for shareholders in the form of stock buybacks and higher dividend
payouts. Merger and acquisition activity also picked up considerably and
contributed to stock gains.
Strong global economic growth boosted the returns of stocks in a number of
sectors. Shares of industrial firms benefited as the powerful worldwide
expansion increased demand for heavy equipment, airplanes and other items;
meanwhile, a number of industrial stocks also got a boost from strong defense
spending. Materials firms saw their profits increase dramatically as commodity
prices climbed, and stocks in that sector posted strong gains. Likewise, shares
of energy firms benefited from the high prices of oil and gas. Financial stocks
posted good returns despite rising interest rates.
Consumer-oriented stocks generally lagged the broad market, as investors worried
about the effects higher interest rates and energy prices would have on consumer
spending. Health-care shares were held back by troubles at several large
pharmaceuticals firms, while technology stocks produced mixed results.
Strong returns from value-oriented sectors such as energy and commodities,
coupled with relatively weak returns from growth sectors such as health care and
technology, helped value indices continue a long run of market leadership.
Small- and mid-cap stocks significantly outperformed larger shares, also
continuing a long-standing trend. Foreign stocks out-gained the U.S. market by a
wide margin, with emerging-markets stocks leading the way on the strength of
burgeoning emerging economies and surging demand for natural resources.
HSBC INVESTOR FAMILY OF FUNDS 2
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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 Core Plus Fixed Income
Portfolio ("Core Plus Fixed Income Portfolio"); HSBC Investor High Yield Fixed
Income Portfolio (High Yield Fixed Income Fund) HSBC Investor Intermediate
Duration Fixed Income Portfolio ("Intermediate Duration Fixed Income
Portfolio"), and the HSBC Investor Money Market Fund ("Money Market Fund").
3 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
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Effective April 28, 2006 the Lifeline Funds began investing in the HSBC Investor
High Yield Fixed Income Portfolio, however due to the short performance period,
that investment did not significantly contribute to the LifeLine Funds overall
total return for the period ended April 30, 2006. During the last fiscal year,
each LifeLine Fund invested in a different combination of the underlying
Portfolios according to the various target percentage weightings selected by the
Adviser, approximately as set forth in the charts below.
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HSBC Investor HSBC Investor HSBC Investor HSBC Investor HSBC Investor
April 28, 2006 Aggressive Growth Growth Moderate Growth Conservative Growth Conservative Income
Reallocation Strategy Strategy Strategy Strategy Strategy
Underlying Portfolio Fund Fund Fund Fund Fund
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Growth Portfolio 21% 21% 19% 15% 8%
Value Portfolio 21% 21% 18% 15% 8%
Small Cap Equity Portfolio 34% 20% 11% 5% None
International Equity Portfolio 23% 20% 15% 10% 4%
Core Plus Fixed Income Portfolio None 17% 31% 20% 25%
High Yield Fixed Income Portfolio None None None 15% 25%
Intermediate Duration Fixed
Income Portfolio 1% 1% 6% 20% 30%
Money Market Fund 1% 1% 6% 21% 30%
Total: 100% 100% 100% 100% 100%
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HSBC Investor HSBC Investor HSBC Investor HSBC Investor HSBC Investor
Pre April 28, 2006 Aggressive Growth Growth Moderate Growth Conservative Growth Conservative Income
Reallocation Strategy Strategy Strategy Strategy Strategy
Underlying Portfolio Fund Fund Fund Fund Fund
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Growth Portfolio 21% 21% 19% 15% 8%
Value Portfolio 21% 21% 18% 15% 8%
Small Cap Equity Portfolio 34% 20% 11% 5% None
International Equity Portfolio 23% 20% 15% 10% 4%
Core Plus Fixed Income Portfolio None 17% 31% 20% 25%
Intermediate Duration Fixed
Income Portfolio None None None 15% 25%
Money Market Fund 1% 1% 6% 20% 30%
Total: 100% 100% 100% 100% 100%
HSBC INVESTOR FAMILY OF FUNDS 4
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Portfolio Reviews
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HSBC Investor Aggressive Growth Strategy Fund
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Fund Performance Average Annual Total Return (%)
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Inception Six 1 Since
As of April 30, 2006 Date Month'D' Year Inception
HSBC Investor Aggressive Growth Strategy Fund Class A(1) 2/14/05 11.55 23.62 14.90
HSBC Investor Aggressive Growth Strategy Fund Class B(2) 2/9/05 13.02 25.25 16.68
HSBC Investor Aggressive Growth Strategy Fund Class C(3) 6/9/05 15.96 -- 22.39
Aggressive Growth Blended Portfolio Index(4) 15.30 25.13 --
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
'D' Aggregate total return.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) The Aggressive Growth Blended Portfolio Index consists of a blend by
percentage of the following indices. The 90-Day T-Bill (1%); Russell
1000'r' Growth Index (21%); Russell 1000'r' Value Index (21%); Russell
2500'r' Growth Index (34%) and the MSCI EAFE Index (23%). The 90-Day T-Bill
is government guaranteed and offers a fixed rate of return. Return and
principal of stocks and bonds will vary with market conditions. Treasury
bills are less volatile than longer-term fixed-income securities and are
guaranteed as to timely payment of principal and interest by the U.S.
Government. The Russell 1000 Growth Index measures the performance of those
Russell companies with higher price-to-book ratios and higherforecasted
growth values. The Russell 1000 Value Index measures the performance of
those Russell companies with a less-than-average growth orientation.
Companies in this index generally have low price-to-book and
price-to-earning ratios, higher dividend yields, and lower forecasted
growth values. The Russell Mid Cap Growth Index measures the performance
of those Russell Midcap companies with higher price-to-book ratios
and higher forecasted growth values. The MSCI EAFE Index is a market
capitalization-weighted equity index comprising 20 of the 48 countries in
the MSCI universe and representing the developed world outside of North
America. The above indices are unmanaged and do not reflect the fees
associated with a mutual fund, and investors cannot directly invest in an
index.
5 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
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HSBC Investor Growth Strategy Fund
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Fund Performance Average Annual Total Return (%)
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Inception Six 1 Since
As of April 30, 2006 Date Month'D' Year Inception
HSBC Investor Growth Strategy Fund Class A(1) 2/8/05 8.23 17.50 12.86
HSBC Investor Growth Strategy Fund Class B(2) 2/1/05 9.43 18.89 15.26
HSBC Investor Growth Strategy Fund Class C(3) 4/27/05 12.48 21.90 22.58
Growth Blended Portfolio Index(4) 12.20 19.70 --
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
'D' Aggregate total return.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) The Growth Blended Portfolio Index consists of a blend by percentage of the
following indices. The 90-Day T-Bill (1%); Merrill Lynch High Yield Master
II Index (2.0%); Lehman Brothers U.S. Aggregate Bond Fund Index (15%);
Russell 1000'r' Growth Index (21%); Russell 1000'r' Value Index (21%);
Russell 2500'r' Growth Index (20%), and the MSCI EAFE Index (20%). The
90-Day T-Bill is government guaranteed and offers a fixed rate of return.
Return and principal of stocks and bonds will vary with market conditions.
Treasury bills are less volatile than longer-term fixed-income securities
and are guaranteed as to timely payment of principal and interest by the
U.S. Government. The Merrill Lynch High Yield Master II Index consists of
U.S. dollar denominated bonds that are issued in countries having a BBB3 or
higher debt rating with at least one year remaining till maturity. All
bonds must have a credit rating below investment grade but not in default.
The Lehman Brothers U.S. Aggregate Bond Fund Index is a market
value-weighted performance benchmark for investment-grade fixed-rate debt
issues, including government, corporate, asset-backed, and mortgage-backed
securities, with maturities of at least one year. The Russell 1000 Growth
Index measures the performance of those Russell companies with higher
price-to-book ratios and higher forecasted growth values. The Russell 1000
Value Index measures the performance of those Russell companies with a
less-than-average growth orientation. Companies in this index generally
have low price-to-book and price-to-earning ratios, higher dividend yields,
and lower forecasted growth values. The Russell Mid Cap Growth Index
measures the performance of those Russell Midcap companies with higher
price-to-book ratios and higher forecasted growth values. The MSCI EAFE
Index is a market capitalization-weighted equity index comprising 20 of the
48 countries in the MSCI universe and representing the developed world
outside of North America. The above indices are unmanaged and do not
reflect the fees associated with a mutual fund, and investors cannot
directly invest in an index.
HSBC INVESTOR FAMILY OF FUNDS 6
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Portfolio Reviews
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HSBC Investor Moderate Growth Strategy Fund
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Fund Performance Average Annual Total Return (%)
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Inception Six 1 Since
As of April 30, 2006 Date Month'D' Year Inception
HSBC Investor Moderate Growth Strategy Fund Class A(1) 2/3/05 4.82 11.48 7.97
HSBC Investor Moderate Growth Strategy Fund Class B(2) 2/1/05 5.89 12.43 9.89
HSBC Investor Moderate Growth Strategy Fund Class C(3) 6/10/05 8.97 -- 12.05
Moderate Growth Blended Portfolio Index(4) 9.11 14.60 --
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
'D' Aggregate total return.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) The Moderate Growth Blended Portfolio Index consists of a blend by
percentage of the following indices. The 90-Day T-Bill (6%); Lehman
Brothers U.S. Aggregate Bond Fund Index (26%); Merrill Lynch High Yield
Master II Index (5.0%); Russell 1000'r' Growth Index (19%); Russell 1000'r'
Value Index (18%); Russell 2500'r' Growth Index (11%) and the MSCI EAFE
Index (15%). The 90-Day T-Bill is government guaranteed and offers a fixed
rate of return. Return and principal of stocks and bonds will vary with
market conditions. Treasury bills are less volatile than longer-term
fixed-income securities and are guaranteed as to timely payment of
principal and interest by the U.S. Government. The Merrill Lynch High Yield
Master II Index consists of U.S. dollar denominated bonds that are issued
in countries having a BBB3 or higher debt rating with at least one year
remaining till maturity. All bonds must have a credit rating below
investment grade but not in default. The Lehman Brothers U.S. Aggregate
Bond Fund Index is a market value-weighted performance benchmark for
investment-grade fixed-rate debt issues, including government, corporate,
asset-backed, and mortgage-backed securities, with maturities of at least
one year. The Russell 1000 Growth Index measures the performance of those
Russell companies with higher price-to-book ratios and higher forecasted
growth values. The Russell 1000 Value Index measures the performance of
those Russell companies with a less-than-average growth orientation.
Companies in this index generally have low price-to-book and
price-to-earning ratios, higher dividend yields, and lower forecasted
growth values. The Russell Mid Cap Growth Index measures the performance
of those Russell Midcap companies with higher price-to-book ratios
and higher forecasted growth values. The MSCI EAFE Index is a market
capitalization-weighted equity index comprising 20 of the 48 countries in
the MSCI universe and representing the developed world outside of North
America. The above indices are unmanaged and do not reflect the fees
associated with a mutual fund, and investors cannot directly invest in an
index.
7 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
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HSBC Investor Conservative Growth Strategy Fund
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Fund Performance Average Annual Total Return (%)
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Inception Six 1 Since
As of April 30, 2006 Date Month'D' Year Inception
HSBC Investor Conservative Growth Strategy Fund Class A(1) 2/23/05 2.10 6.65 4.28
HSBC Investor Conservative Growth Strategy Fund Class B(2) 2/17/05 3.13 7.51 5.15
HSBC Investor Conservative Growth Strategy Fund Class C(3) 4/19/05 6.06 11.01 11.10
Conservative Growth Blended Portfolio Index(4) 6.65 10.59 --
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
'D' Aggregate total return.
(1) Reflects the maximum sales charge of 5.00%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) The Conservative Growth Blended Portfolio Index consists of a blend by
percentage of the following indices. The 90-Day T-Bill (21%); Merrill Lynch
High Yield Master II Index (8.0%); Lehman Brothers U.S. Aggregate Bond Fund
Index (25%); Lehman Brothers U.S. Interm. Aggregate Bond Index (3%);
Russell 1000'r' Growth Index (15%); Russell 1000'r' Value Index (14%);
Russell 2500'r' Growth Index (4%) and the MSCI EAFE Index (10%). The 90-Day
T-Bill is gov't. guaranteed and offers a fixed rate of return. Return and
principal of stocks and bonds will vary with market conditions. Treasury
bills are less volatile than longer-term fixed-income securities and are
guaranteed as to timely payment of principal and interest by the U.S.
Government. The Merrill Lynch High Yield Master II Index consists of U.S.
dollar denominated bonds that are issued in countries having a BBB3 or
higher debt rating with at least one year remaining till maturity. All
bonds must have a credit rating below investment grade but not in default.
The Lehman Bros. Aggregate Bond Fund Index is a market value-weighted
performance benchmark for investment-grade fixed-rate debt issues,
including gov't, corporate, asset-backed, and mortgage-backed securities,
with maturities of at least one year. The Lehman Bros. Intermediate
Aggregate Index is an unmanaged index generally representative of
investment-grade debt issues with maturities between three and ten years.
The Russell 1000 Growth Index measures the performance of those Russell
companies with higher price-to-book ratios and higher forecasted growth
values. The Russell 1000 Value Index measures the performance of those
Russell companies with a less-than-average growth orientation. Companies in
this index generally have low price-to-book and price-to-earning ratios,
higher dividend yields, and lower forecasted growth values. The Russell Mid
Cap Growth Index measures the performance of those Russell Midcap companies
with higher price-to-book ratios and higher forecasted growth values. The
MSCI EAFE Index is a market capitalization-weighted equity index comprising
20 of the 48 countries in the MSCI universe and representing the developed
world outside of North America. The above indices are unmanaged and do not
reflect the fees associated with a mutual fund, and investors cannot
directly invest in an index.
HSBC INVESTOR FAMILY OF FUNDS 8
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Portfolio Reviews
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HSBC Investor Conservative Income Strategy Fund
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Fund Performance Average Annual Total Return (%)
- --------------------------------------------------------------------------------
Inception Six 1 Since
As of April 30, 2006 Date Month'D' Year Inception
HSBC Investor Conservative Income Strategy Fund Class A(1) 2/8/05 -1.88 0.13 -0.60
HSBC Investor Conservative Income Strategy Fund Class B(2) 2/14/05 -1.07 0.63 0.52
HSBC Investor Conservative Income Strategy Fund Class C(3) 5/4/05 1.91 -- 3.36
Conservative Income Blended Portfolio Index(4) 3.42 5.41 --
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect the taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
'D' Aggregate total return.
(1) Reflects the maximum sales charge of 4.75%.
(2) Reflects the applicable contingent deferred sales charge, maximum of 4.00%.
(3) Reflects the applicable contingent deferred sales charge, maximum of 1.00%.
(4) The Conservative Income Blended Portfolio Index consists of a blend by
percentage of the following indices. The 90-Day T-Bill (30%); Lehman Bros.
U.S. Aggregate Bond Fund Index (15%); Merrill Lynch High Yield Master II
Index (10%); Lehman Bros. U.S. Interm. Aggregate Bond Index (25%); Russell
1000'r' Growth Index (8%); Russell 1000'r' Value Index (8%) and the MSCI
EAFE Index (4%). The 90-Day T-Bill is gov't. guaranteed and offers a fixed
rate of return. Return and principal of stocks and bonds will vary with
market conditions. Treasury bills are less volatile than longer-term
fixed-income securities and are guaranteed as to timely payment of
principal and interest by the U.S. Government. The Merrill Lynch High Yield
Master II Index consists of U.S. dollar denominated bonds that are issued
in countries having a BBB3 or higher debt rating with at least one year
remaining till maturity. All bonds must have a credit rating below
investment grade but not in default. The Lehman Bros. Aggregate Bond Fund
Index is a market value-weighted performance benchmark for investment-grade
fixed-rate debt issues, including gov't., corporate, asset-backed, and
mortgage-backed securities, with maturities of at least one year. The
Lehman Bros. Interm. Aggregate Index is an unmanaged index generally
representative of investment-grade debt issues with maturities between
three and ten years. The Russell 1000 Growth Index measures the performance
of those Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values. The Russell 1000 Value Index measures the
performance of those Russell 1000 companies with a less-than-average growth
orientation. Companies in this index generally have low price-to-book and
price-to-earning ratios, higher dividend yields, and lower forecasted
growth values. The MSCI EAFE Index is a market capitalization-weighted
equity index comprising 20 of the 48 countries in the MSCI universe and
representing the developed world outside of North America. The above
indices are unmanaged and do not reflect the fees associated with a mutual
fund, and investors cannot directly invest in an index.
9 HSBC INVESTOR FAMILY OF FUNDS
<Page>
- --------------------------------------------------------------------------------
Portfolio Reviews
- --------------------------------------------------------------------------------
The following graphs are illustrations of the HSBC Investor LifeLine Funds'
Asset Allocations as represented by the underlying investments standardized
indices:
Aggressive Growth Blended Portfolio Index
[Pie chart]
34.0% Russell 2500'r' Growth Index
23.0% MSCI EAFE Index
21.0% Russell 1000'r' Growth Index
21.0% Russell 1000'r' Value Index
1.0% Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index
Growth Blended Portfolio Index
[Pie chart]
21.0% Russell 1000'r' Growth Index
21.0% Russell 1000'r' Value Index
20.0% Russell 2500'r' Growth Index
20.0% MSCI EAFE Index
15.0% Lehman Brothers U.S.
Aggregate Bond Index
2.0% Merrill Lynch High
Yield Master II Index
1.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
Moderate Growth Blended Portfolio Index
[Pie chart]
26.0% Lehman Brothers U.S.
Aggregate Bond Index
19.0% Russell 1000'r' Growth Index
18.0% Russell 1000 'r'Value Index
15.0% MSCI EAFE Index
11.0% Russell 2500'r' Growth Index
6.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
5.0% Merrill Lynch High
Yield Master II Index
Conservative Growth Blended Portfolio Index
[Pie chart]
25.0% Lehman Brothers U.S.
Aggregate Bond Index
21.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
15.0% Russell 1000'r' Growth Index
14.0% Russell 1000'r' Value Index
10.0% MSCI EAFE Index
8.0% Merrill Lynch High
Yield Master II Index
4.0% Russell 2500'r' Growth Index
3.0% Lehman Brothers Intermediate
Aggregate Bond Index
Conservative Income
Blended Portfolio Index
[Pie chart]
30.0% Citigroup U.S. Domestic 3-Month
U.S. Treasury Bill Index
25.0% Lehman Brothers Intermediate
Aggregate Bond Index
15.0% Lehman Brothers U.S.
Aggregate Bond Index
10.0% Merrill Lynch High Yield
Master II Index
8.0% Russell 1000'r' Growth Index
8.0% Russell 1000'r' Value Index
4.0% MSCI EAFE Index
- --------------------------------------------------------------------------------
Avearge Annual Total Return (%)
- --------------------------------------------------------------------------------
1 3 5 10
Year Year Year Year
Citigroup U.S. Domestic
3 Month Treasury Bill Index 3.63 2.11 2.14 3.69
Lehman Brothers U.S.
Aggregate Bond Index 0.71 2.58 5.16 6.33
Lehman Brothers Intermediate
Aggregate Bond Index 1.20 2.46 4.84 6.06
MSCI EAFE Index 34.00 29.60 9.59 7.03
Russell 1000'r' Growth Index 15.18 12.05 -0.76 6.21
Russell 1000'r' Value Index 18.31 19.39 7.30 11.21
Russell 2500'r' Growth Index 30.35 25.72 11.68 11.61
Citigroup U.S. Domestic 3-Month U.S. Treasury Bill Index reflects monthly return
equivalents of yield averages that are not marked to the market. The Index is an
average of the last three-month Treasury Bill issues. The three-month Treasury
Bills are the short-term debt obligations of the U.S. government.
Lehman Brothers U.S. Aggregate Bond Index is a market value-weighted performance
benchmark for investment-grade fixed-rate debt issues, including government,
corporate, asset-backed, and mortgage-backed securities, with maturities of at
least one year.
Lehman Brothers Intermediate Aggregate Bond Index is generally representative of
investment-grade debt issues with maturities between three and ten years.
Merrill Lynch High Yield Master II Index consists of U.S. dollar denominated
bonds that are issued in countries having a BBB3 or higher debt rating with at
least one year remaining till maturity. All bonds must have a credit rating
below investment grade but not in default.
Morgan Stanley Capital International Europe, Australasia and Far East Index
(MSCI EAFE) is a market capitalization-weighted equity index comprising 20 of
the 48 countries in the MSCI universe and representing the developed world
outside of North America. Each MSCI country index is created separately, then
aggregated, without change, into regional MSCI indices. EAFE performance data is
calculated in U.S. dollars and in local currency.
Russell 1000'r' Growth Index measures the performance of 1000 securities in the
Russell Universe with higher price-to-book ratios and higher forecasted growth
values.
Russell 1000'r' Value Index measures the performance of 1000 securities in the
Russell Universe with a less-than-average growth orientation. Companies in this
index generally have low price-to-book and price-to-earning ratios, higher
dividend yields, and lower forecasted growth values. Investors cannot invest
directly in an index.
Russell Midcap'r' Growth Index measures the performance of those Russell Midcap
companies with higher price-to-book ratios and higher forecasted growth values.
The stocks are also members of the Russell 1000'r' Growth index.
Investors cannot invest directly in an index, although they can invest in the
underlying securities.
HSBC INVESTOR FAMILY OF FUNDS 10
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Portfolio Reviews
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HSBC Investor Money Market Fund
by Thomas Riordan
Senior Fixed Income Portfolio Manager
Moody's has assigned an "Aaa" rating to the HSBC Investor Money Market Fund.(1)
Investment Concerns
An investment in the fund is not insured or guaranteed by the FDIC or any other
government agency. Although the fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
fund.
The first quarter of 2006 came to a close with another increase in the target
federal funds rate to 4.75%. It was the fifteenth consecutive 25 basis point
(0.25%) increase in the federal funds rate since the tightening cycle began in
June 2004. Despite 375 basis points (3.75%) of tightening, the economy continues
to expand at a healthy rate. Fourth quarter Gross Domestic Product(2) ("GDP")
was initially estimated to have grown at a disappointing 1.1% annual rate.
This was later revised upwards to a 1.7% rate. First quarter GDP rebounded and
was estimated to have grown at a 4.8% annual rate, offsetting the prior
quarter's sluggish growth. This was the fastest growth rate in two years.
The Consumer Price Index(2) ("CPI") and the Producer Price Index(2) ("PPI") data
released during the past 6 months suggested an emerging inflationary threat.
Measured on a year over year basis, PPI was approximately 1.7% while CPI
increased in excess of 2%. With the new Federal Reserve chairman, Ben Bernanke
explicitly targeting an inflation comfort zone of between 1% and 2%, market
participant's expectations have shifted to the likelihood of more rate
increases. The rise in commodity prices has also added to the specter of an
increase in the rate of inflation. Global growth creating increased demand for
various metals and turmoil in several oil producing countries are two the
reasons for the increase. Gold has traded above $700 an ounce and oil has traded
over $70 per barrel. The question remains as to whether oil prices act as more
of a tax on economic growth or whether it is a harbinger of future inflation.
That will depend on producer's ability to pass along price increases of their
goods.
The housing market, which had been a source of strength in the economy for the
past few years, has become an area of concern. Significant evidence of a
slowdown in both new and existing home sales has raised concerns about the carry
over effect on the wider economy. Low interest rates, which helped drive the
housing boom, have largely run its course. Consumers who were able to draw
significant spending power from mortgage refinancing and equity extraction from
their home's value may lose the ability to drive the economy through spending.
Trading activity the past 6 months continues to be centered primarily in the
purchase of A1+/P1 or A1/P1 commercial paper in the 30 to 90 day range.
Additionally, we bought Variable Rate Notes ("VRN") that are indexed to either
Prime or Libor(3) and offer incremental yield pick-up over shorter dated paper.
We believe it is likely that the Fed will continue to raise the target federal
funds rate; we look to add to both our VRN and short dated securities position.
As we progress through 2006, the short-term market is awakening to the
possibility that long dormant inflationary pressures are likely to increase.
This increases the odds of future hikes in the target federal funds rate. While
many market participants expect economic growth to slow in 2006, this may not be
enough to prevent an increase in inflation, and may in turn force the Federal
Open Market Committee to raise federal funds more than previously expected. We
will therefore maintain a short weighted average maturity in anticipation of
higher rates. Of course, this strategy is subject to the change should there be
a change in economic conditions.*
*Portfolio composition is subject to change.
Past performance does not guarantee future results. The performance data quoted
represents past performance and current returns may be lower or higher. Total
return figures include change in share price, reinvestment of dividends and
capital gains and do not reflect taxes that a shareholder would pay on fund
distributions or on the redemption of fund shares. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed may
be worth more or less than the original cost. To obtain performance information
current to the most recent month end, please call 1-800-782-8183.
(1) The "Aaa" money market fund rating is historical and reflects the superior
quality of the Fund's investments, sound liquidity management, and strong
operations and trading support. Periodic reviews are conducted to ensure a
secure operations environment. Moody's rating represents an opinion only, not a
recommendation to buy or sell.
(2) The Consumer Price Index ("CPI") is a measure of price changes in consumer
goods and services such as gasoline, food, and automobiles. Sometimes referred
to as "headline inflation." Producer Price Index ("PPI") is a family of indexes
that measures the average change over time in selling prices received by
domestic producers of goods and services. PPIs measure price change from the
perspective of the seller. The Gross Domestic Product ("GDP") is the measure of
the market value of the goods and services produced by labor and property in the
United States.
(3) The London Inter-Bank Offer Rate ("LIBOR") is the interest rate that the
largest international banks charge each other for loans.
11 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
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HSBC Investor Intermediate Duration Fixed Income Portfolio
(formerly HSBC Investor Limited Maturity Portfolio)
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor Intermediate Duration Fixed Income Portfolio (the "Portfolio")
seeks to realize above-average total return, consistent with reasonable risk, by
investing in a diversified investment grade portfolio of U.S. government
obligations, corporate bonds and mortgage-backed securities.
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
GDP(1) growth in the U.S. fell off significantly in the fourth quarter of 2005,
slowing to a relative crawl of 1.7% in the wake of late summer gulf storms, but
recovered dramatically in the first quarter of 2006, when GDP growth rebounded
to 4.8%. Energy prices rose steadily over the course of the semi-annual period,
reaching a high of almost $74 a barrel in late April. This, along with the rise
in a host of other commodity prices, gold and copper in particular, generated
concerns about inflation among central bankers and consumers alike. Robust
growth in non-farm payrolls helped buoy consumer confidence even as the
realization dawned that the housing market had begun to cool off. In the face of
continued strong output growth and incipient pricing pressures, the Fed
maintained its measured pace of policy tightening, raising the target federal
funds rate by 25 basis points (0.25%) at each of the four Federal Open Market
Committee meetings during the period under review, to end at 4.75%.
During the period ended April 30, 2006, the yield on the three-month U.S.
Treasury Bill rose 88 basis points (0.88%), climbing more or less in sync with
the step-wise increase in the fed funds rate. Meanwhile, the yield on the
two-year Treasury note rose 48 basis points (0.48%) to end at 4.86% and the
ten-year rose 50 basis points (0.50%), ending the quarter at 5.05%. The rise in
rates caused a bearish flattening in the yield curve during the period, and
created a somewhat difficult environment for performance. Spreads continued to
tighten and spread sectors generally had significant excess returns versus
Treasury securities of similar duration with securitized debt (Asset Backed
Securities in particular) and corporates leading the way and lower quality paper
showing the strongest performance.
The Fund underperformed its benchmark index for the period under review. The key
component of that was select, off-benchmark holdings in high yield and emerging
market debt. An overweight in spread sectors generally relative to the
benchmark, particularly asset backed securities and collateralized mortgage
backed securities and individual security selection in corporate credit also had
a negative impact on performance. Our short, defensive duration positioning
relative to the benchmark helped performance, as did our yield curve positioning
over the course of the six month period.*
Going forward, we will opportunistically add duration as higher yields reflect
fair value. We continue to analyze the yield curve for pricing anomalies and,
subject to portfolio restrictions, we will attempt to add high quality
securitized debt issues that offer attractive yields without the issuer specific
risk of corporate bonds. Within corporates we will continue our focus on
security selection, including select off-benchmark names that we think, in a
relatively homogenized credit environment, may offer greater opportunities for
value.*
* Portfolio composition is subject to change.
(1) The Gross Domestic Product ("GDP") is the measure of the market value of the
goods and services produced by labor and property in the United States.
HSBC INVESTOR FAMILY OF FUNDS 12
<Page>
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Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Core Plus Fixed Income Portfolio
(formerly HSBC Investor Fixed Income Portfolio)
by HSBC Investments (USA) Inc. U.S. Core Fixed Income Team
The HSBC Investor Core Plus Fixed Income Portfolio (the "Portfolio") seeks to
provide investors with above-average total return, consistent with reasonable
risk, through investments in a diversified portfolio of fixed-income securities.
Investment Concerns
Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.
Market Commentary
GDP(1) growth in the U.S. fell off significantly in the fourth quarter of 2005,
slowing to a relative crawl of 1.7% in the wake of late summer gulf storms, but
recovered dramatically in the first quarter of 2006, when GDP growth rebounded
to 4.8%. Energy prices rose steadily over the course of the semi-annual period,
reaching a high of almost $74 a barrel in late April. This, along with the rise
in a host of other commodity prices, gold and copper in particular, generated
concerns about inflation among central bankers and consumers alike. Robust
growth in non-farm payrolls helped buoy consumer confidence even as the
realization dawned that the housing market had begun to cool off. In the face of
continued strong output growth and incipient pricing pressures, the Federal
Reserve maintained its measured pace of policy tightening, raising the target
federal funds rate by 25 basis points (0.25%) at each of the four Federal Open
Market Committee meetings during the period under review, to end at 4.75%.
During this period, the yield on the three-month U.S. Treasury Bill rose 88
basis points (0.88%), climbing more or less in sync with the step-wise increase
in the fed funds rate. Meanwhile, the yield on the two-year Treasury note rose
48 basis points (0.48%) to end at 4.86% and the ten-year rose 50 basis points
(0.50%), ending the quarter at 5.05%. The rise in rates caused a bearish
flattening in the yield curve during the period under review, and created a
somewhat difficult environment for performance. Spreads continued to tighten and
spread sectors generally had significant excess returns versus Treasury
securities of similar duration with securitized debt (Asset Backed Securities in
particular) and corporates leading the way and lower quality paper showing the
strongest performance.*
The Fund outperformed its benchmark index for the period under review. The key
component of that outperformance was select, off-benchmark holdings in high
yield and emerging market debt. An overweight in spread sectors generally
relative to the benchmark, particularly asset backed securities and
collateralized mortgage backed securities and individual security selection in
corporate credit also had a positive impact on performance. Our short, defensive
duration positioning relative to the benchmark helped performance, as did our
yield curve positioning over the course of the semiannual period.*
Going forward, we will opportunistically add duration as higher yields reflect
fair value. We continue to analyze the yield curve for pricing anomalies and,
subject to portfolio restrictions, we will attempt to add high quality
securitized debt issues that offer attractive yields without the issuer specific
risk of corporate bonds. Within corporates we will continue our focus on
security selection, including select off-benchmark names that we think, in a
relatively homogenized credit environment, may offer greater opportunities for
value.*
* Portfolio composition is subject to change.
(1) The Gross Domestic Product ("GDP") is the measure of the market value of the
goods and services produced by labor and property in the United States.
13 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
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HSBC Investor Growth Portfolio
by Philip J. Sanders, Senior Vice President/Portfolio Manager, CFA and
Daniel P. Becker, Senior Vice President/Portfolio Manager, CFA
Waddell & Reed Investment Management Company
The HSBC Investor Growth Portfolio (the "Portfolio") seeks long-term growth of
capital by investing primarily in U.S. and foreign equity securities of high
quality companies with market capitalization generally in excess of $2 billion,
which the sub-adviser believes have the potential to generate superior levels of
long-term profitability and growth. The Portfolio employs Waddell & Reed
Investment Management Company (Waddell & Reed) as the sub-adviser.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
Large-capitalization growth stocks generated solid returns during the period,
although they trailed smaller shares and value-oriented large caps. That
environment helped the Fund post good absolute performance.
The Fund outperformed its large-cap growth benchmark for the six-month period.
That superior relative performance came primarily on the strength of stock
selection within the energy sector. An overweight stake in energy stocks also
contributed positively to the Fund's relative returns. The portfolio managers'
stock selection within the information technology sector boosted the Fund's
relative gains as well, as did selection among consumer discretionary stocks.*
The Fund's investments in health-care stocks were the largest detractor from
performance relative to the Russell 1000'r' Growth benchmark index. Selection
among health-care stocks weighed on relative performance, as did a slightly
overweight position in shares of health-care firms that was slightly larger than
that of the benchmark. Several of the individual stocks that weighed the most on
relative returns were in the health-care sector.
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 14
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Portfolio Reviews
- --------------------------------------------------------------------------------
HSBC Investor Value Portfolio
by Jon D. Bosse, CFA
Chief Investment Officer
NWQ Investment Management Co., LLC
The HSBC Investor Value Portfolio (the "Portfolio") seeks long-term growth of
capital and income by investing primarily in U.S. and foreign companies with
large and medium capitalizations that possess hidden opportunities underpriced
by the market. The Portfolio employs NWQ Investment Management Company, LLC
("NWQ") as the sub-adviser.
Investment Concerns
Value-based investments are subject to the risk that the broad market may not
recognize their intrinsic value.
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
The Fund's absolute return benefited from strong stock-market performance.
Investor sentiment improved late in the period, as investors showed confidence
in market fundamentals and the Fed's ability to restrain inflation without
endangering economic growth. Corporate consolidation, supported by strong
corporate balance sheets, inexpensive financing, good organic growth and
shareholder activism, also helped push the market higher. Financial stocks
provided the largest contribution to the Fund's absolute gains, followed by
shares of miners, producer durables firms and industrial companies. Technology
stocks reduced the Fund's absolute return.*
Stock selection in the financials sector provided the largest boost to the
Fund's relative returns. Mortgage stocks in particular lifted relative
performance, as those stocks posted gains after lagging for much of 2005. An
overweight stake in the materials and processing sector also helped performance
against the benchmark, as did stock selection within that sector. Mining stocks
were especially strong, as the prices of gold and other metals climbed due to
bullish market fundamentals, as well as concerns about inflation and potential
stockpiling by certain governments. Overweight stakes in producer durables and
industrial stocks also boosted relative gains.*
The Fund held an overweight position in technology stocks, due to the portfolio
manager's belief that higher corporate spending would benefit such shares. That
allocation weighed on relative performance, as certain of the Fund's technology
holdings issued disappointing earnings results. Selection among consumer
discretionary stocks also hindered returns against the benchmark, as a
relatively large stake in attractively valued media shares underperformed the
market for this period. Selection in the consumer staples sector likewise
dragged on relative returns, due largely to weakness among food producers.*
* Portfolio composition is subject to change.
15 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
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HSBC Investor International Equity Portfolio
by Kevin F. Simms
Co-CIO International Value Equities and Director of Research - Global and
International Value Equities
AllianceBernstein Investment Research and Management
The HSBC Investor International Equity Portfolio (the "Portfolio") seeks to
provide their shareholders with long-term growth of capital and future income by
investing primarily in securities of non-U.S. issuers and securities of issuers
whose principal markets are outside of the United States. The Portfolio employs
Bernstein Investment Research and Management ("AllianceBernstein"), a unit of
AllianceBernstein Investment Research and Management as sub-investment adviser.
The Portfolio invests primarily in equity securities of companies organized and
domiciled in developed nations outside the U.S., or for which the principal
trading market is outside the U.S., including Europe, Canada, Australia and the
Far East.
Investment Concerns
There are risks associated with investing in foreign companies, such as erratic
market conditions, economic and political instability and fluctuations in
currency and exchange rates.
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Market Commentary
Global economic growth and corporate profits consistently exceeded expectations
during this six-month period. Those developments generated optimism among global
investors, supporting strong gains in international stock markets and boosting
this Fund's returns.*
The Fund generated benchmark-beating returns largely on the strength of good
stock picking. The Fund's holdings in every economic sector except
transportation outperformed the corresponding sectors in the EAFE index, while
the Fund's transportation holdings lagged only slightly. Selection among
financials and industrial commodities stocks was especially strong.*
The Fund's sector weightings also contributed modestly to relative gains. An
underweight position in the underperforming telecommunications sector boosted
returns against the benchmark, as did overweight stakes in surging capital
equipment and industrial commodities shares. Investments in emerging markets
also helped the Fund outperform its index--which does not include
emerging-markets stocks--as emerging markets led the global equity markets
during the six-month period.*
An overweight position in global energy stocks weighed on relative returns.
The energy sector led the international markets during recent years, but
trailed the markets during the recent six-month period.*
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 16
<Page>
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Portfolio Reviews
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HSBC Investor Small Cap Equity Portfolio
by William A. Muggia
President-Chief Investment Officer
Westfield Capital Management
The HSBC Investor Small Cap Equity Portfolio (the "Portfolio") invests primarily
in common stocks of small and medium-sized companies that may have the potential
to become major enterprises.
Investment Concerns
Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes.
Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
Market Commentary
Stronger-than-expected profit growth propelled small- and mid-cap growth stocks
to sizable gains during this six-month period, helping this Fund generate strong
returns. Health care stocks provided the largest contribution to the Fund's
absolute return, followed by technology, industrials, energy and consumer
stocks. Financials and materials stocks contributed the least to the Fund's
gains, although every sector posted positive returns during this period.
Selection among health care stocks was a principal reason the Fund outperformed
its benchmark. The Fund's investments in the biotechnology and health care
industries performed especially well. The Fund's manager attempt to maximize the
risk-to-return profile of their investments in those volatile industries by
focusing on shares of firms that have high-quality management teams, proven
drugs in late-stage clinical trials and a focus on developing therapies for
which there are immediate, unmet medical needs.*
The Fund's stake in energy stocks also boosted relative returns, largely on the
strength of investments in coal companies. Selection in the technology sector
lifted relative performance as well, as healthy gains among data processing,
communications equipment and application software firms more than offset
weakness in shares of IT consulting, semiconductors and semiconductor capital
equipment companies. An underweight position in the lagging consumer
discretionary sector also helped performance against the benchmark.*
An underweight position in surging materials stocks detracted from relative
gains. Stock selection among financials also reduced the Fund's advantage over
the benchmark, as the growth-oriented regional bank stocks held by the Fund
slid due to investor concerns about competition and a flat yield curve.
Finally, the Fund's small cash stake, which averaged 2.2% of assets, reduced
relative performance due to the strong market environment.*
* Portfolio composition is subject to change.
17 HSBC INVESTOR FAMILY OF FUNDS
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Portfolio Reviews
- --------------------------------------------------------------------------------
Portfolio Composition of Underlying Portfolios*
April 30, 2006
(Unaudited)
- --------------------------------------------------------------------------------
HSBC Investor Intermediate Duration
Fixed Income Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
Corporate Bonds 29.5%
- ---------------------------------------------------------------------------------------------------
Mortgage Backed Securities 29.1%
- ---------------------------------------------------------------------------------------------------
Asset Backed Securities 12.9%
- ---------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 12.4%
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Securities 8.0%
- ---------------------------------------------------------------------------------------------------
Commercial Mortgage Backed
Securities 7.0%
- ---------------------------------------------------------------------------------------------------
Foreign Sovereign Bonds 0.5%
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents 0.3%
- ---------------------------------------------------------------------------------------------------
Foreign Corporate Bonds 0.3%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HSBC Investor Core Plus Fixed Income Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
Corporate Bonds 28.7%
- ---------------------------------------------------------------------------------------------------
Mortgage Backed Securities 25.2%
- ---------------------------------------------------------------------------------------------------
Asset Backed Securities 11.6%
- ---------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations 11.2%
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Securities 10.4%
- ---------------------------------------------------------------------------------------------------
Commercial Mortgage Backed Securities 7.1%
- ---------------------------------------------------------------------------------------------------
U.S. Government Agencies 3.8%
- ---------------------------------------------------------------------------------------------------
Municipal Bonds 0.8%
- ---------------------------------------------------------------------------------------------------
Foreign Sovereign Bonds 0.5%
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents 0.4%
- ---------------------------------------------------------------------------------------------------
Foreign Corporate Bonds 0.3%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HSBC Investor Growth Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
Information Technology 24.3%
- ---------------------------------------------------------------------------------------------------
Industrials 18.9%
- ---------------------------------------------------------------------------------------------------
Financials 13.7%
- ---------------------------------------------------------------------------------------------------
Consumer Discretionary 12.1%
- ---------------------------------------------------------------------------------------------------
Health Care 11.0%
- ---------------------------------------------------------------------------------------------------
Consumer Staples 8.1%
- ---------------------------------------------------------------------------------------------------
Energy 7.3%
- ---------------------------------------------------------------------------------------------------
Repurchase Agreements 4.6%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
* Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
HSBC Investor High Yield Fixed Income Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
Corporate Bonds 84.0%
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents 16.0%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HSBC International Equity Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
Europe 58.8%
- ---------------------------------------------------------------------------------------------------
Japan 27.6%
- ---------------------------------------------------------------------------------------------------
Australia & Far East 5.9%
- ---------------------------------------------------------------------------------------------------
Canada 3.4%
- ---------------------------------------------------------------------------------------------------
Other 2.8%
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents 1.5%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HSBC Investor Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
HealthCare 26.5%
- ---------------------------------------------------------------------------------------------------
Information Technology 22.0%
- ---------------------------------------------------------------------------------------------------
Industrials 17.5%
- ---------------------------------------------------------------------------------------------------
Energy 12.2%
- ---------------------------------------------------------------------------------------------------
Consumer Discretionary 11.0%
- ---------------------------------------------------------------------------------------------------
Financial 6.5%
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents 3.4%
- ---------------------------------------------------------------------------------------------------
Materials 0.9%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HSBC Investor Value Portfolio
- --------------------------------------------------------------------------------
Investment Allocation Percentage of Investments at Value
- ---------------------------------------------------------------------------------------------------
Financials 28.8%
- ---------------------------------------------------------------------------------------------------
Industrials 11.8%
- ---------------------------------------------------------------------------------------------------
Energy 11.0%
- ---------------------------------------------------------------------------------------------------
Consumer Discretionary 9.0%
- ---------------------------------------------------------------------------------------------------
Information Technology 8.9%
- ---------------------------------------------------------------------------------------------------
Materials 7.9%
- ---------------------------------------------------------------------------------------------------
Consumer Staples 6.6%
- ---------------------------------------------------------------------------------------------------
Cash and Equivalents 4.7%
- ---------------------------------------------------------------------------------------------------
Telecommunication Services 4.3%
- ---------------------------------------------------------------------------------------------------
Utilities 2.1%
- ---------------------------------------------------------------------------------------------------
Transportation 2.0%
- ---------------------------------------------------------------------------------------------------
Miscellaneous 1.9%
- ---------------------------------------------------------------------------------------------------
Health Care 1.0%
- ---------------------------------------------------------------------------------------------------
Total 100.0%
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
* Portfolio composition is subject to change.
HSBC INVESTOR FAMILY OF FUNDS 18
<Page>
This page is intentionally left blank.
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
<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 $3,921,612 $13,486,892 $15,450,050 $3,603,816 $1,412,810
Investment in affiliates, at
value (a) 39,596 136,196 985,739 958,419 604,794
Receivable for capital shares
issued 49,888 321,208 53,660 475 21,136
Prepaid expenses and other
assets 8,817 13,440 17,648 6,260 4,454
---------- ----------- ----------- ---------- ----------
TOTAL ASSETS 4,019,913 13,957,736 16,507,097 4,568,970 2,043,194
---------- ----------- ----------- ---------- ----------
LIABILITIES:
Dividends payable -- -- -- -- 4,589
Payable for capital shares
redeemed -- 7,548 2,843 -- --
Accrued related party expenses
and other liabilities:
Investment Management 841 1,851 632 181 287
Administration 112 385 487 139 69
Transfer Agent -- -- -- -- 265
Distribution 1,227 3,860 5,059 1,472 520
Shareholder Servicing 754 2,559 3,215 920 417
Chief Compliance Officer -- -- -- -- 3
Other 1,825 6,773 8,044 2,991 1,552
---------- ----------- ----------- ---------- ----------
TOTAL LIABILITIES 4,759 22,976 20,280 5,703 7,702
---------- ----------- ----------- ---------- ----------
NET ASSETS $4,015,154 $13,934,760 $16,486,817 $4,563,267 $2,035,492
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
...............................................................................................................................
COMPOSITION OF NET ASSETS:
Capital $3,598,876 $12,733,336 $15,387,932 $4,320,882 $2,011,689
Accumulated net investment
income (loss) (8,380) 5,685 12,594 6,222 311
Accumulated net realized gains
(losses) from investment
transactions 56,588 147,122 113,850 23,149 (5,669)
Unrealized
appreciation/depreciation from
investments 368,070 1,048,617 972,441 213,014 29,161
---------- ----------- ----------- ---------- ----------
NET ASSETS $4,015,154 $13,934,760 $16,486,817 $4,563,267 $2,035,492
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
...............................................................................................................................
NET ASSETS
Class A Shares: $1,888,954 $ 7,095,007 $ 7,949,262 $2,159,134 $1,230,198
Class B Shares: $1,997,173 $ 6,250,579 $ 7,757,526 $2,058,815 $ 553,225
Class C Shares: $ 129,027 $ 589,174 $ 780,029 $ 345,318 $ 252,069
---------- ----------- ----------- ---------- ----------
$4,015,154 $13,934,760 $16,486,817 $4,563,267 $2,035,492
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
...............................................................................................................................
SHARES OUTSTANDING
Class A Shares: 152,471 582,692 691,839 197,335 120,869
Class B Shares: 162,280 512,412 674,237 189,802 54,239
Class C Shares: 10,507 48,081 69,305 31,210 24,595
...............................................................................................................................
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
Class A Shares: $ 12.39 $ 12.18 $ 11.49 $ 10.94 $ 10.18
Class B Shares:* $ 12.31 $ 12.20 $ 11.51 $ 10.85 $ 10.20
Class C Shares:* $ 12.28 $ 12.25 $ 11.26 $ 11.06 $ 10.25
Maximum Sales Charge -- Class A
Shares 5.00% 5.00% 5.00% 5.00% 4.75%
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
Maximum Offering Price per share
(Net Asset Value/100%-maximum
sales charge)) $ 13.04 $ 12.82 $ 12.09 $ 11.52 $ 10.69
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
Investments in affiliates, at
cost (a) $ 39,596 $ 136,196 $ 985,739 $ 958,419 $ 604,794
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
</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 20
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE
GROWTH STRATEGY GROWTH GROWTH INCOME
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Investment income from
Portfolios $ 15,586 $ 87,260 $142,857 $ 44,301 $ 23,723
Investment income from
affiliates 471 1,694 13,472 14,319 9,933
Foreign tax withholding from
Portfolios (544) (1,656) (1,604) (323) (59)
Expenses from Portfolios (9,293) (31,462) (37,573) (10,262) (4,002)
-------- ---------- -------- -------- --------
TOTAL INVESTMENT INCOME 6,220 55,836 117,152 48,035 29,595
-------- ---------- -------- -------- --------
...............................................................................................................................
EXPENSES:
Investment Management 586 2,094 2,748 873 397
Administration 439 1,570 2,061 654 298
Distribution:
Class B Shares 4,448 15,092 18,854 6,239 1,893
Class C Shares 258 1,147 2,322 858 931
Shareholder Servicing:
Class A Shares 1,359 5,055 6,682 1,997 1,046
Class B Shares 1,483 5,031 6,285 2,080 631
Class C Shares 86 382 774 286 310
Fund Accounting 15,620 15,620 15,620 15,620 15,620
Chief Compliance Officer 10 41 53 17 7
Printing 3,210 12,435 15,680 5,343 2,510
Transfer Agent 21,350 21,391 21,403 21,346 21,333
Trustee 17 64 79 27 13
Other 911 1,777 2,427 677 604
-------- ---------- -------- -------- --------
Total expenses before fee
reductions 49,777 81,699 94,988 56,017 45,593
Fees reduced by Fund
Accounting and Transfer
Agent (36,566) (36,566) (36,566) (36,566) (36,566)
Fees reduced and expenses
reimbursed by Investment
Adviser (97) -- -- -- --
-------- ---------- -------- -------- --------
NET EXPENSES 13,114 45,133 58,422 19,451 9,027
-------- ---------- -------- -------- --------
...............................................................................................................................
NET INVESTMENT INCOME (LOSS) (6,894) 10,703 58,730 28,584 20,568
-------- ---------- -------- -------- --------
...............................................................................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS: (A)
Net realized gains (losses) from
investments 57,359 149,829 116,823 24,825 (2,228)
Change in unrealized
appreciation/depreciation from
investments 303,281 853,521 795,015 175,129 24,415
-------- ---------- -------- -------- --------
...............................................................................................................................
Net realized/unrealized gains from
investment transactions 360,640 1,003,350 911,838 199,954 22,187
-------- ---------- -------- -------- --------
CHANGE IN NET ASSETS RESULTING FROM
OPERATIONS $353,746 $1,014,053 $970,568 $228,538 $ 42,755
-------- ---------- -------- -------- --------
-------- ---------- -------- -------- --------
</Table>
- --------------
(a) Represents amounts allocated from the Respective Portfolios.
21 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
AGGRESSIVE GROWTH STRATEGY FUND GROWTH STRATEGY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ (6,894) $ (3,032) $ 10,703 $ 886
Net realized gains (losses)
from investment transactions 57,359 4,441 149,829 (1,238)
Change in unrealized
appreciation/depreciation from
investments 303,281 64,789 853,521 195,096
---------- ---------- ----------- ----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 353,746 66,198 1,014,053 194,744
---------- ---------- ----------- ----------
...............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A Shares -- -- (22) --
Class B Shares -- -- -- --
Class C Shares -- -- -- --
NET REALIZED GAINS:
Class A Shares (4,248) -- (7,479) --
Class B Shares (4,512) -- (8,003) --
Class C Shares (298) -- (626) --
---------- ---------- ----------- ----------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (9,058) -- (16,130) --
---------- ---------- ----------- ----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 2,223,270 1,380,998 7,346,115 5,395,978
---------- ---------- ----------- ----------
CHANGE IN NET ASSETS 2,567,958 1,447,196 8,344,038 5,590,722
...............................................................................................................................
NET ASSETS:
Beginning of period 1,447,196 -- 5,590,722 --
---------- ---------- ----------- ----------
End of period $4,015,154 $1,447,196 $13,934,760 $5,590,722
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Accumulated net investment
income (loss) $ (8,380) $ (1,486) $ 5,685 $ (4,996)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</Table>
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 22
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
AGGRESSIVE GROWTH STRATEGY FUND GROWTH STRATEGY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued $1,004,490 $ 693,884 $4,006,211 $2,731,568
Dividends reinvested 4,248 -- 7,500 --
Cost of shares redeemed (9,331) (9,512) (228,172) (26,214)
---------- ---------- ---------- ----------
Class A Shares capital
transactions 999,407 684,372 3,785,539 2,705,354
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 1,144,612 690,126 3,144,997 2,623,574
Dividends reinvested 4,512 -- 8,003 --
Cost of shares redeemed (23,827) (13,505) (42,770) (35,907)
---------- ---------- ---------- ----------
Class B Shares capital
transactions 1,125,297 676,621 3,110,230 2,587,667
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 98,268 20,005 449,735 102,957
Dividends reinvested 298 -- 626 --
Cost of shares redeemed -- -- (15) --
---------- ---------- ---------- ----------
Class C Shares capital
transactions 98,566 20,005 450,346 102,957
---------- ---------- ---------- ----------
...............................................................................................................................
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $2,223,270 $1,380,998 $7,346,115 $5,395,978
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
...............................................................................................................................
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued 84,441 69,359 339,369 265,018
Reinvested 378 -- 664 --
Redeemed (800) (907) (19,884) (2,475)
---------- ---------- ---------- ----------
Change in Class A Shares 84,019 68,452 320,149 262,543
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS B SHARES:
Issued 97,561 67,597 267,493 251,135
Reinvested 402 -- 705 --
Redeemed (1,947) (1,333) (3,575) (3,346)
---------- ---------- ---------- ----------
Change in Class B Shares 96,016 66,264 264,623 247,789
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS C SHARES:
Issued 8,480 2,000 38,217 9,809
Reinvested 27 -- 55 --
---------- ---------- ---------- ----------
Change in Class C Shares 8,507 2,000 38,272 9,809
---------- ---------- ---------- ----------
</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.
23 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
MODERATE GROWTH STRATEGY FUND CONSERVATIVE GROWTH STRATEGY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b)
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 58,730 $ 14,049 $ 28,584 $ 7,510
Net realized gains (losses)
from investment transactions 116,823 (11,530) 24,825 (4,777)
Change in unrealized
appreciation/
depreciation from investments 795,015 177,426 175,129 37,885
----------- ---------- ---------- ----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 970,568 179,945 228,538 40,618
----------- ---------- ---------- ----------
...............................................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A Shares (35,853) (116) (17,299) (203)
Class B Shares (9,816) (73) (10,529) (5)
Class C Shares (2,095) -- (1,849) --
...............................................................................................................................
NET REALIZED GAINS:
Class A Shares (3,616) -- -- --
Class B Shares (3,427) -- -- --
Class C Shares (500) -- -- --
----------- ---------- ---------- ----------
CHANGE IN NET ASSETS FROM
SHAREHOLDER DIVIDENDS (55,307) (189) (29,677) (208)
----------- ---------- ---------- ----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS 8,448,638 6,943,162 1,921,894 2,402,102
----------- ---------- ---------- ----------
CHANGE IN NET ASSETS 9,363,899 7,122,918 2,120,755 2,442,512
----------- ---------- ---------- ----------
...............................................................................................................................
NET ASSETS:
Beginning of period 7,122,918 -- 2,442,512 --
----------- ---------- ---------- ----------
End of period $16,486,817 $7,122,918 $4,563,267 $2,442,512
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
Accumulated net investment
income (loss) $ 12,594 $ 3,256 $ 6,222 $ 14,630
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</Table>
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 24
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
MODERATE GROWTH STRATEGY FUND CONSERVATIVE GROWTH STRATEGY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 2005 (a) (UNAUDITED) OCTOBER 31, 2005 (b)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued $4,461,131 $3,264,968 $1,140,810 $1,046,895
Dividends reinvested 38,859 117 17,299 203
Cost of shares redeemed (229,214) (110,833) (141,993) (11,388)
---------- ---------- ---------- ----------
Class A Shares capital
transactions 4,270,776 3,154,252 1,016,116 1,035,710
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS B SHARES:
Proceeds from shares issued 3,963,846 3,640,156 727,474 1,298,439
Dividends reinvested 13,186 63 10,396 4
Cost of shares redeemed (252,633) (125,948) (83,974) (13,275)
---------- ---------- ---------- ----------
Class B Shares capital
transactions 3,724,399 3,514,271 653,896 1,285,168
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS C SHARES:
Proceeds from shares issued 450,968 275,464 255,080 81,224
Dividends reinvested 2,594 -- 1,849 --
Cost of shares redeemed (99) (825) (5,047) --
---------- ---------- ---------- ----------
Class C Shares capital
transactions 453,463 274,639 251,882 81,224
---------- ---------- ---------- ----------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $8,448,638 $6,943,162 $1,921,894 $2,402,102
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
...............................................................................................................................
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued 399,075 319,580 106,448 103,636
Reinvested 3,492 12 1,615 20
Redeemed (19,705) (10,615) (13,244) (1,140)
---------- ---------- ---------- ----------
Change in Class A Shares 382,862 308,977 94,819 102,516
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS B SHARES:
Issued 352,404 355,469 68,615 129,472
Reinvested 1,177 6 979 -- (c)
Redeemed (22,562) (12,257) (7,962) (1,302)
---------- ---------- ---------- ----------
Change in Class B Shares 331,019 343,218 61,632 128,170
---------- ---------- ---------- ----------
...............................................................................................................................
CLASS C SHARES:
Issued 42,072 27,076 23,590 7,918
Reinvested 239 -- 171 --
Redeemed -- (82) (469) --
---------- ---------- ---------- ----------
Change in Class C Shares 42,311 26,994 23,292 7,918
---------- ---------- ---------- ----------
</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.
25 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
CONSERVATIVE INCOME STRATEGY FUND
- -----------------------------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 2005 (a)
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 20,568 $ 7,227
Net realized gains (losses) from investment transactions (2,228) (4,123)
Change in unrealized appreciation/depreciation from
investments 24,415 4,746
---------- ----------
CHANGE IN NET ASSETS FROM OPERATIONS 42,755 7,850
---------- ----------
..............................................................................................................
DIVIDENDS:
NET INVESTMENT INCOME:
Class A Shares (14,299) (3,758)
Class B Shares (6,218) (1,409)
Class C Shares (2,993) (1,093)
---------- ----------
CHANGE IN NET ASSETS FROM SHAREHOLDER DIVIDENDS (23,510) (6,260)
---------- ----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS 874,526 1,140,131
---------- ----------
CHANGE IN NET ASSETS 893,771 1,141,721
..............................................................................................................
NET ASSETS:
Beginning of period 1,141,721 --
---------- ----------
End of period $2,035,492 $1,141,721
---------- ----------
---------- ----------
Accumulated net investment income (loss) $ 311 $ 6,506
---------- ----------
---------- ----------
</Table>
See notes to financial statements. HSBC INVESTOR LIFELINE FUNDS 26
<Page>
HSBC INVESTOR LIFELINE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
CONSERVATIVE INCOME STRATEGY FUND
- -----------------------------------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED
(UNAUDITED) OCTOBER 31, 2005 (a)
- -----------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued $862,906 $ 420,293
Dividends reinvested 12,898 2,097
Cost of shares redeemed (71,871) (3,999)
-------- ----------
Class A Shares capital transactions 803,933 418,391
-------- ----------
..........................................................................................................
CLASS B SHARES:
Proceeds from shares issued 146,298 516,383
Dividends reinvested 5,270 695
Cost of shares redeemed (83,987) (40,981)
-------- ----------
Class B Shares capital transactions 67,581 476,097
-------- ----------
..........................................................................................................
CLASS C SHARES:
Proceeds from shares issued 27 245,019
Dividends reinvested 2,985 624
-------- ----------
Class C Shares capital transactions 3,012 245,643
-------- ----------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $874,526 $1,140,131
-------- ----------
-------- ----------
..........................................................................................................
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued 84,814 42,045
Reinvested 1,272 208
Redeemed (7,072) (398)
-------- ----------
Change in Class A Shares 79,014 41,855
-------- ----------
..........................................................................................................
CLASS B SHARES:
Issued 14,336 51,661
Reinvested 519 69
Redeemed (8,248) (4,098)
-------- ----------
Change in Class B Shares 6,607 47,632
-------- ----------
..........................................................................................................
CLASS C SHARES:
Issued -- 24,240
Reinvested 293 62
-------- ----------
Change in Class C Shares 293 24,302
-------- ----------
</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.
27 HSBC INVESTOR LIFELINE FUNDS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR AGGRESSIVE GROWTH STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
---------------------------------------- ------------------------
NET REALIZED
NET ASSET NET AND UNREALIZED TOTAL NET REALIZED NET ASSET
VALUE, INVESTMENT GAINS FROM FROM GAINS FROM VALUE,
BEGINNING INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL END OF
OF PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 (0.01) 0.61 0.60 -- -- $10.60
Six months ended April 30, 2006
(unaudited) 10.60 -- 1.84 1.84 (0.05) (0.05) 12.39
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.00 (0.04) 0.61 0.57 -- -- $10.57
Six months ended April 30, 2006
(unaudited) 10.57 (0.03) 1.82 1.79 (0.05) (0.05) 12.31
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.00 (0.05) 0.60 0.55 -- -- $10.55
Six months ended April 30, 2006
(unaudited) 10.55 (0.02) 1.80 1.78 (0.05) (0.05) 12.28
- -----------------------------------------------------------------------------------------------------------------------------------
<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 NET PORTFOLIO
RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) 6.00% $ 726 1.50% (0.20)% 11.72% 49.10%
Six months ended April 30, 2006
(unaudited) 17.44% 1,889 1.50% (0.19)% 4.63% 23.47%
- ------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) 5.70% $ 700 2.25% (1.01)% 11.63% 49.10%
Six months ended April 30, 2006
(unaudited) 17.02% 1,997 2.25% (0.93)% 5.35% 23.47%
- ------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) 5.50% $ 21 2.25% (1.15)% 9.79% 49.10%
Six months ended April 30, 2006
(unaudited) 16.96% 129 2.25% (0.94)% 5.28% 23.47%
- ------------------------------------------------------------------------------------------------------------------------
</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 2006 portfolio turnover rate. Portfolio
turnover rate is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 14, 2005.
(g) Class B Shares commenced operations on February 9, 2005.
(h) Class C Shares commenced operations on June 10, 2005.
See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS 28
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR 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
NET ASSET NET UNREALIZED GAINS TOTAL REALIZED
VALUE, INVESTMENT FROM FROM GAINS FROM
BEGINNING OF INCOME INVESTMENT INVESTMENT INVESTMENT TOTAL
PERIOD (LOSS) TRANSACTIONS ACTIVITIES TRANSACTIONS DIVIDENDS
- -------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 0.02 0.70 0.72 -- --
Six months ended April 30, 2006
(unaudited) 10.72 0.04* 1.45 1.49 (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.00 (0.01) 0.79 0.78 -- --
Six months ended April 30, 2006
(unaudited) 10.78 (0.01)* 1.46 1.45 (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.00 (0.02) 0.84 0.82 -- --
Six months ended April 30, 2006
(unaudited) 10.82 (0.01)* 1.47 1.46 (0.03) (0.03)
- -------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
-----------------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES INCOME (LOSS) EXPENSES TO
END OF TOTAL PERIOD TO AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
PERIOD RETURN(B) (000'S) NET ASSETS(C) NET ASSETS(C) ASSETS(C)(D) TURNOVER(E)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.72 7.20% $2,814 1.50% 0.42% 5.19% 69.23%
Six months ended April 30, 2006
(unaudited) 12.18 13.88% 7,095 1.43% 0.65% 2.30% 40.92%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (g) $10.78 7.80% $2,670 2.25% (0.38)% 5.74% 69.23%
Six months ended April 30, 2006
(unaudited) 12.20 13.43% 6,251 2.18% (0.12)% 3.06% 40.92%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (h) $10.82 8.20% $ 106 2.25% (0.55)% 5.24% 69.23%
Six months ended April 30, 2006
(unaudited) 12.25 13.48% 589 2.17% (0.09)% 3.02% 40.92%
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
* Calculated based on average shares outstanding.
(a) The per share amounts and percentages reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the applicable HSBC Investor Portfolios.
(b) Not annualized for periods less than one year. Total Return calculations do
not include any sales or redemption charges.
(c) Annualized for periods less than one year.
(d) During the period certain fees were reduced. If such fee reductions had not
occurred, the ratio would have been as indicated.
(e) Portfolio turnover is calculated by aggregating the results of multiplying
the Funds investment percentage in the respective Portfolios by the
corresponding Portfolio's entire 2006 portfolio turnover rate. Portfolio
turnover rate is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 8, 2005.
(g) Class B Shares commenced operations on February 1, 2005.
(h) Class C Shares commenced operations on April 27, 2005.
See notes to financial statements.
29 HSBC INVESTOR LIFELINE FUNDS
<Page>
- --------------------------------------------------------------------------------
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 NET REALIZED
NET ASSET AND UNREALIZED TOTAL GAINS FROM
VALUE, NET GAINS FROM FROM NET INVESTMENT
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT AND TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME TRANSACTIONS DIVIDENDS
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.00 0.04 0.45 0.49 -- (g) -- -- (g)
Six months ended April 30, 2006
(unaudited) 10.49 0.08 1.00 1.08 (0.07) (0.01) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (h) $10.00 0.01 0.49 0.50 -- (g) -- -- (g)
Six months ended April 30, 2006
(unaudited) 10.50 0.03 1.01 1.04 (0.02) (0.01) (0.03)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) $10.00 --(g) 0.28 0.28 -- -- --
Six months ended April 30, 2006
(unaudited) 10.28 0.03 0.99 1.02 (0.03) (0.01) (0.04)
- ---------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------------------
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT RATIO OF
VALUE, AT END OF EXPENSES TO INCOME TO EXPENSES TO
END OF TOTAL PERIOD AVERAGE AVERAGE AVERAGE NET PORTFOLIO
PERIOD RETURN(b) (000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31, 2005 (f) $10.49 4.94% $3,241 1.50% 0.95% 4.30% 84.55%
Six months ended April 30, 2006
(unaudited) 11.49 10.31% 7,949 1.35% 1.45% 2.01% 52.81%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31, 2005 (h) $10.50 5.03% $3,604 2.25% 0.18% 5.01% 84.55%
Six months ended April 30, 2006
(unaudited) 11.51 9.89% 7,758 2.10% 0.70% 2.77% 52.81%
- ------------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31, 2005 (i) $10.28 2.80% $ 278 2.25% 0.05% 4.69% 84.55%
Six months ended April 30, 2006
(unaudited) 11.26 9.97% 780 2.10% 0.68% 2.77% 52.81%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 2006 portfolio turnover rate. Portfolio turnover rate
is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 3, 2005.
(g) Rounds to less than $0.01.
(h) Class B Shares commenced operations on February 1, 2005.
(i) Class C Shares commenced operations on June 10, 2005.
See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS 30
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR CONSERVATIVE GROWTH STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS
INDICATED. (a)
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
---------------------------------------- ----------------------
NET REALIZED
NET ASSET AND UNREALIZED NET ASSET
VALUE, NET GAINS FROM TOTAL FROM NET VALUE,
BEGINNING INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL END OF TOTAL
OF PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD RETURN(b)
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31,
2005 (f) $10.00 0.04 0.26 0.30 (0.01) (0.01) $10.29 2.96%
Six months ended
April 30, 2006
(unaudited) 10.29 0.09 0.67 0.76 (0.11) (0.11) 10.94 7.46%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2005 (g) $10.00 0.03 0.16 0.19 -- (h) -- (h) $10.19 1.92%
Six months ended
April 30, 2006
(unaudited) 10.19 0.06 0.67 0.73 (0.07) (0.07) 10.85 7.13%
- --------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2005 (i) $10.00 0.03 0.38 0.41 --(h) --(h) $10.41 4.10%
Six months ended
April 30, 2006
(unaudited) 10.41 0.05 0.68 0.73 (0.08) (0.08) 11.06 7.06%
- --------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME TO EXPENSES TO
PERIOD AVERAGE AVERAGE AVERAGE PORTFOLIO
(000'S) NET ASSETS(c) NET ASSETS(c) NET ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31,
2005 (f) $1,054 1.50% 1.28% 8.01% 72.14%
Six months ended
April 30, 2006
(unaudited) 2,159 1.29% 2.05% 3.36% 50.54%
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2005 (g) $1,306 2.25% 0.53% 9.21% 72.14%
Six months ended
April 30, 2006
(unaudited) 2,059 2.04% 1.27% 4.15% 50.54%
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2005 (i) $ 82 2.25% 0.66% 7.94% 72.14%
Six months ended
April 30, 2006
(unaudited) 345 2.03% 1.32% 4.06% 50.54%
- ------------------------------------------------------------------------------------------------------
</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 2006 portfolio turnover rate.
Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 23, 2005.
(g) Class B Shares commenced operations on February 17, 2005.
(h) Rounds to less than $0.01.
(i) Class C Shares commenced operations on April 19, 2005.
See notes to financial statements.
31 HSBC INVESTOR LIFELINE FUNDS
<Page>
- --------------------------------------------------------------------------------
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
NET ASSET AND UNREALIZED TOTAL NET ASSET
VALUE, NET GAINS FROM FROM NET VALUE,
BEGINNING OF INVESTMENT INVESTMENT INVESTMENT INVESTMENT TOTAL END OF TOTAL
PERIOD INCOME TRANSACTIONS ACTIVITIES INCOME DIVIDENDS PERIOD RETURN(b)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31,
2005 (f) $10.00 0.11 0.01 0.12 (0.11) (0.11) $10.01 1.18%
Six months ended April
30, 2006 (unaudited) 10.01 0.12 0.21 0.33 (0.16) (0.16) 10.18 3.32%
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2005 (g) $10.00 0.06 0.01 0.07 (0.04) (0.04) 10.03 0.68%
Six months ended April
30, 2006 (unaudited) 10.03 0.10 0.19 0.29 (0.12) (0.12) 10.20 2.93%
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2005 (h) $10.00 0.06 0.08 0.14 (0.06) (0.06) $10.08 1.41%
Six months ended April
30, 2006 (unaudited) 10.08 0.10 0.19 0.29 (0.12) (0.12) 10.25 2.91%
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS/SUPPLEMENTARY DATA
---------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF INVESTMENT RATIO OF
AT END OF EXPENSES TO INCOME EXPENSES TO
PERIOD AVERAGE TO AVERAGE AVERAGE NET PORTFOLIO
(000'S) NET ASSETS(c) NET ASSETS(c) ASSETS(c)(d) TURNOVER(e)
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Period ended October 31,
2005 (f) $ 419 1.50% 1.79% 14.10% 79.90%
Six months ended April
30, 2006 (unaudited) 1,230 1.27% 2.97% 5.70% 58.07%
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Period ended October 31,
2005 (g) $ 478 2.25% 1.21% 12.16% 79.90%
Six months ended April
30, 2006 (unaudited) 553 2.04% 2.15% 6.78% 58.07%
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Period ended October 31,
2005 (h) $ 245 2.25% 1.24% 9.60% 79.90%
Six months ended April
30, 2006 (unaudited) 252 2.05% 2.14% 6.83% 58.07%
- ------------------------------------------------------------------------------------------------------
</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 2006 portfolio turnover rate. Portfolio
turnover rate is calculated on the basis of the Fund as a whole without
distinguishing between classes of shares issued.
(f) Class A Shares commenced operations on February 8, 2005.
(g) Class B Shares commenced operations on February 14, 2005.
(h) Class C Shares commenced operations on May 4, 2005.
See notes to financial statements.
HSBC INVESTOR LIFELINE FUNDS 32
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
1. ORGANIZATION:
The HSBC Investor Funds (the 'Trust'), a Massachusetts business trust
organized on April 22, 1987, is registered under the Investment Company Act
of 1940, as amended (the 'Act'), as an open-end management investment
company. As of April 30, 2006, the Trust is comprised of 24 separate funds,
each a diversified series of the HSBC Investor Family of Funds. The
accompanying financial statements are presented for the following 5 funds
(individually a 'Fund', collectively the 'LifeLine Funds'):
<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>
Financial statements for all other series of the HSBC Investor Family of
Funds are published separately. The HSBC Investor Growth Portfolio, HSBC
Investor Value Portfolio, HSBC Investor Small Cap Equity Portfolio, HSBC
Investor International Equity Portfolio, HSBC Investor Core Plus Fixed
Income Portfolio (formerly the HSBC Investor Fixed Income Portfolio), HSBC
Investor High Yield Fixed Income Portfolio, and the HSBC Investor
Intermediate Duration Fixed Income Portfolio (formerly the HSBC Investor
Limited Maturity Portfolio) (individually a 'Portfolio,' collectively the
'Portfolios') are diversified series of the HSBC Investor Portfolios (the
'Portfolio Trust'). The Portfolio Trust is an open-end management investment
company organized under the laws of the State of New York on November 1,
1994. The Portfolios operate as master funds in master-feeder arrangements.
The Board of Trustees may authorize issuance of an unlimited number of
shares of beneficial interest in the Portfolios under the Declaration of
Trust of the Portfolio Trust.
The HSBC Investor Money Market Fund (the 'Money Market Fund') is an
open-end management investment company and, like each LifeLine Fund, is a
diversified series of the Trust.
The LifeLine Funds utilize a master feeder fund (collectively the
'Underlying Portfolios') structure and seek to achieve their investment
objectives by investing all of their investable assets in the Portfolios and
the Money Market Fund per the following schedule for the period ended
April 30, 2006:
LIFELINE FUNDS PORTFOLIO WEIGHTINGS
<Table>
<Caption>
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE
GROWTH STRATEGY GROWTH GROWTH INCOME
UNDERLYING PORTFOLIOS FUND FUND FUND FUND FUND
--------------------- ---- ---- ---- ---- ----
Growth Portfolio................................ 21% 21% 19% 15% 8%
Value Portfolio................................. 21% 21% 18% 14% 8%
Small Cap Equity Portfolio...................... 34% 20% 11% 4% None
International Equity Portfolio.................. 23% 20% 15% 10% 4%
Core Plus Fixed Income Portfolio................ None 15% 26% 25% 15%
High Yield Fixed Income Portfolio............... None 2% 5% 8% 10%
Intermediate Duration Fixed Income Portfolio.... None None None 3% 25%
Money Market Fund............................... 1% 1% 6% 21% 30%
---- ---- ---- ---- ----
Total........................................... 100% 100% 100% 100% 100%
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</Table>
33 HSBC INVESTOR LIFELINE FUNDS
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
Prior to April 28, 2006, the Lifeline Funds utilized the following
schedule:
<Table>
<Caption>
AGGRESSIVE GROWTH MODERATE CONSERVATIVE CONSERVATIVE
GROWTH STRATEGY GROWTH GROWTH INCOME
UNDERLYING PORTFOLIOS FUND FUND FUND FUND FUND
--------------------- ---- ---- ---- ---- ----
Growth Portfolio................................ 21% 21% 19% 15% 8%
Value Portfolio................................. 21% 21% 18% 15% 8%
Small Cap Equity Portfolio...................... 34% 20% 11% 5% None
International Equity Portfolio.................. 23% 20% 15% 10% 4%
Core Plus Fixed Income Portfolio................ None 17% 31% 20% 25%
Intermediate Duration Fixed Income Portfolio.... None None None 15% 25%
Money Market Fund............................... 1% 1% 6% 20% 30%
---- ---- ---- ---- ----
Total........................................... 100% 100% 100% 100% 100%
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</Table>
The financial statements of the Underlying Portfolios, including the
Schedules of Portfolio Investments, are included elsewhere in this report.
The financial statements of the Portfolios should be read in conjunction
with the financial statements of the LifeLine Funds.
The LifeLine Funds are authorized to issue an unlimited number of shares
of beneficial interest with a par value of $0.001 per share. Each Fund
offers four classes of shares: Class A Shares, Class B Shares, Class C
Shares, and Class R Shares (currently not operational with assets). Each
class of shares in the LifeLine Funds has identical rights and privileges
except with respect to arrangements pertaining to shareholder servicing or
distribution, class-related expenses, voting rights on matters affecting a
single class of shares, and the exchange privileges of each class of shares.
Under the Trust's organizational documents, the LifeLine Funds' officers
and trustees are indemnified against certain liabilities arising out of the
performance of their duties to the LifeLine Funds. In addition, in the
normal course of business, the LifeLine Funds enter into contracts with
service providers, which also provide for indemnifications by the Funds. The
LifeLine Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the LifeLine Funds.
However, based on experience, the LifeLine Funds expect that risk of loss to
be remote.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the LifeLine Funds in the preparation of their financial
statements. The policies are in conformity with accounting principles
generally accepted in the United States of America ('GAAP'). The preparation
of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses for the period.
Actual results could differ from those estimates.
SECURITIES VALUATION:
The LifeLine Funds record their investments in the Underlying Portfolios
at fair value. Securities of the Portfolios' and the Money Market Fund are
recorded at value and at amortized cost, respectively, as more fully
discussed in the notes to those financial statements.
SECURITIES TRANSACTIONS AND RELATED INCOME:
The LifeLine Funds record daily their pro-rata Portfolios' income,
expenses, changes in unrealized appreciation and depreciation, and realized
and unrealized gains and losses. Changes in holdings of the Money Market
Fund for each LifeLine Fund are reflected no later than the first business
day following trade date. However, for financial reporting purposes, changes
in holdings of the Money Market Fund are reflected as of trade date. In
addition, the LifeLine Funds accrue their own expenses daily as incurred.
ALLOCATIONS:
Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are allocated proportionately
among various or all Funds within the HSBC Investor Family of Funds in
relation to the net
HSBC INVESTOR LIFELINE FUNDS 34
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
assets of each Fund or on another reasonable basis. Expenses specific to a
class are charged to that class. In addition, income, expenses (other than
class specific expenses), and unrealized/realized gains and losses are
allocated to each class based on relative net assets on a daily basis.
DIVIDENDS TO SHAREHOLDERS:
The Conservative Income Fund declares and distributes all net investment
income as dividends to its shareholders monthly. Dividends from net
investment income, if any, are declared and distributed quarterly in the
case of the Moderate Growth Fund and Conservative Growth Fund, and annually
in the case of the Aggressive Growth Fund and Growth Strategy Fund.
The LifeLine Funds' net realized gains, if any, are distributed to
shareholders at least annually. Additional distributions are also made to
the LifeLine Funds' shareholders to the extent necessary to avoid the
federal excise tax on certain undistributed income and net capital gains of
regulated investment companies.
The amount and character of net investment income and net realized gains
distributions are determined in accordance with federal income tax
regulations which may differ from GAAP. These 'book/tax' differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature (i.e. reclassification of market
discounts, gain/loss, paydowns, and certain distributions), such amounts are
reclassified within the components of net assets; temporary differences do
not require reclassification. The LifeLine Funds may utilize equalization
accounting for tax purposes and designate earnings and profits, including
net realized gains distributed to shareholders on redemption of shares, as a
part of the dividends paid deduction for income tax purposes.
REDEMPTION FEE:
A redemption fee of 2.00% will be charged and recorded as
paid-in-capital for any shares redeemed or exchanged after holding them for
less than 30 days. This fee does not apply to shares purchased through
reinvested dividends or capital gains or shares held in certain omnibus
accounts or retirement plans that cannot implement the fee. For the period
ended April 30, 2006, the following LifeLine Funds collected redemption fees
as follows:
<Table>
<Caption>
FUND FEES COLLECTED
- ---- --------------
Aggressive Growth Fund...................................... $ 4
Growth Strategy Fund........................................ 32
Moderate Growth Fund........................................ 305
Conservative Growth Fund.................................... 30
Conservative Income Fund.................................... 70
</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 LifeLine Funds and continuously reviews,
supervises and administers the LifeLine Funds' investments. For its services
as Investment Adviser, HSBC is entitled to receive a fee, computed daily and
paid monthly, based on average daily net assets, at an annual rate of 0.05%
for each Fund.
35 HSBC INVESTOR LIFELINE FUNDS
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
ADMINISTRATION:
HSBC serves the Funds as Administrator. Under the terms of the
administration agreement, HSBC receives from the LifeLine Funds a fee
accrued daily and paid monthly at an annual rate of:
<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 series of the HSBC Investor Family of Funds based upon its pro-rata
share of net assets. For assets invested in Underlying Portfolios by
LifeLine Funds, the Portfolios pay half of the administration fee, and the
LifeLine Funds pay the other half, for a combination of the total fee rate
above. HSBC may directly or through an affiliate, use their fee revenue,
past profits, or other revenue sources to pay promotional, administrative,
shareholder support, and other expenses to third parties, including broker
dealers, in connection with the offer, sale and administration of shares of
the Funds.
Pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund
Services Ohio, Inc. ('BISYS Ohio') a wholly-owned subsidiary of The BISYS
Group, Inc, serves as the Trust's sub-administrator to each LifeLine Fund
subject to the general supervision of the Trust's Board of Trustees and
HSBC. For these services, BISYS Ohio is entitled to a fee, payable by HSBC,
at an annual rate equivalent to the fee rates set forth above, minus 0.02%
(2 basis points), which is retained by HSBC.
Under a Compliance Services Agreement between the Trust's and BISYS Ohio
(the 'CCO Agreement'), BISYS Ohio makes an employee available to serve as
the Trust's Chief Compliance Officer (the 'CCO'). Under the CCO Agreement,
BISYS Ohio also provides infrastructure and support in implementing the
written policies and procedures comprising the Trust's compliance program,
including support services to the CCO. For the services provided under the
CCO Agreement, the HSBC Investor Family of Funds paid BISYS Ohio $117,433
for the period ended April 30, 2006, plus certain out of pocket expenses.
Expenses incurred are reflected on the Statements of Operations as
'Compliance service.' BISYS Ohio pays the salary and other compensation
earned by any such individuals as employees of BISYS Ohio.
All administration fee waivers are voluntary and not subject to
recoupment in subsequent fiscal periods.
DISTRIBUTION PLAN:
BISYS Fund Services Limited Partnership ('BISYS'), a wholly-owned
subsidiary of BISYS Fund Services, Inc., serves the LifeLine Funds as
Distributor (the 'Distributor'). The Trust has adopted a non-compensatory
Distribution Plan and Agreement (the 'Plan') pursuant to Rule 12b-1 of the
Act. The Plan provides for a monthly payment of actual expenses by the
LifeLine Funds to the Distributor at a rate not to exceed 0.25% of the
average daily net assets of Class A Shares (currently not being charged) and
0.75% of the average daily net assets of Class B Shares and Class C Shares
of the LifeLine Funds. This payment represents expenses incurred by the
Distributor for marketing costs and services rendered in distributing the
LifeLine Funds' shares. BISYS, as the LifeLine Funds' distributor, received
$1,125,165 in commissions from sales of the HSBC Family of Funds, of which
$1,124,903 was reallowed to affiliated brokers and dealers.
SHAREHOLDER SERVICING:
The Trust has entered into a Shareholder Servicing Agreement with its
shareholder servicing agents (which currently consists of HSBC and its
affiliates) for providing various shareholder services. For performing these
services, the shareholder servicing agents receive a fee of 0.25%, 0.25%,
0.25%, and 0.75% that is computed daily and paid monthly equal to a
percentage of average daily net assets of Class A Shares, Class B Shares,
Class C Shares and Class R Shares of the Fund, respectively. The fees paid
to the Distributor pursuant to the Distribution Plan and to shareholder
servicing agents pursuant to the Shareholder Servicing Agreement currently
are not intended to exceed, on
HSBC INVESTOR LIFELINE FUNDS 36
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
the aggregate, 0.25% of the average daily net assets of Class A Shares,
1.00% of the average daily net assets of Class B Shares and Class C Shares,
and 0.75% of the average daily net assets of Class R Shares.
FUND ACCOUNTING, TRANSFER AGENCY, CUSTODIAN AND TRUSTEE:
BISYS Ohio provides fund accounting and transfer agency services for all
classes of each Fund. As transfer agent for the LifeLine Funds, BISYS
receives a fee based on the number of LifeLine Funds and shareholder
accounts, subject to certain minimums and reimbursement of certain expenses.
As fund accountant for the LifeLine Funds, BISYS receives an annual fee per
Fund and share class, subject to certain minimums and reimbursement of
certain expenses. HSBC Bank is the named Custodian for the LifeLine Funds,
however, the LifeLine Funds maintained no securities for which such services
were rendered during the period.
Each of the six non-interested Trustees are compensated with a $24,000
annual Board retainer, as well as a $1,000 annual retainer for each
Committee of the Board. Each non-interested Trustee also receives a $4,000
and $2,000 meeting fee for each regular in-person Board meeting and
Committee meeting, respectively. Furthermore, each non-interested Trustee
receives compensation for attending special meetings and/or functioning as a
Committee Chairperson or Lead Trustee. In addition, the non-interested
Trustees are reimbursed for certain expenses incurred in connection with
their Board membership.
FEE REDUCTIONS:
The Investment Adviser has agreed to limit the total expenses, exclusive
of interest, taxes, brokerage commissions and extraordinary expenses, of the
LifeLine Funds. Each Fund Class has its own expense limitations based on
average daily net assets for any full fiscal year as follows: Class A 1.50%,
Class B 2.25%, Class C 2.25% and Class R 2.00%.
In addition, the Investment Adviser may waive additional fees at their
discretion. All contractual and any voluntary investment advisory fee
waivers are not subject to recoupment in subsequent fiscal periods.
4. INVESTMENT TRANSACTIONS:
Aggregate contributions and withdrawals of the Underlying Portfolios for
the period ended April 30, 2006, totaled:
<Table>
<Caption>
CONTRIBUTIONS WITHDRAWALS
------------- -----------
Aggressive Growth Fund...................................... $2,217,478 $ 91,207
Growth Strategy Fund........................................ 7,267,863 333,410
Moderate Growth Fund........................................ 8,356,010 540,104
Conservative Growth Fund.................................... 1,708,763 227,215
Conservative Income Fund.................................... 714,610 141,587
</Table>
37 HSBC INVESTOR LIFELINE FUNDS
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDERS EXPENSES -- APRIL 30, 2006 (UNAUDITED)
As a shareholder of the HSBC Investor LifeLine Funds, you incur two
types of costs: (1) transaction costs, including sales charges (loads) on
purchases, reinvested dividends, or other distributions; redemption fees;
and exchange fees; (2) ongoing costs, including management fees;
distribution and shareholder servicing fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars)
of investing in the HSBC Investor LifeLine Funds and to compare these costs
with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from November 1, 2005
through April 30, 2006.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
11/1/05 4/30/06 11/1/05 - 4/30/06 11/1/05 - 4/30/06
------- ------- ----------------- -----------------
Aggressive Growth Strategy Fund.... Class A $1,000.00 $1,174.40 $ 8.09 1.50%
Class B 1,000.00 1,170.20 12.11 2.25%
Class C 1,000.00 1,169.60 12.10 2.25%
Growth Strategy Fund............... Class A 1,000.00 1,138.80 7.58 1.43%
Class B 1,000.00 1,134.30 11.54 2.18%
Class C 1,000.00 1,134.80 11.49 2.17%
Moderate Growth Strategy Fund...... Class A 1,000.00 1,103.10 7.04 1.35%
Class B 1,000.00 1,098.90 10.93 2.10%
Class C 1,000.00 1,099.70 10.93 2.10%
Conservative Growth Strategy
Fund............................. Class A 1,000.00 1,074.60 6.64 1.29%
Class B 1,000.00 1,071.30 10.48 2.04%
Class C 1,000.00 1,070.60 10.42 2.03%
Conservative Income Strategy
Fund............................. Class A 1,000.00 1,033.20 6.40 1.27%
Class B 1,000.00 1,029.30 10.26 2.04%
Class C 1,000.00 1,029.10 10.31 2.05%
</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 LIFELINE FUNDS 38
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR LIFELINE FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDERS EXPENSES -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor LifeLine Funds's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSE PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
11/1/05 4/30/06 11/1/05 - 4/30/06 11/1/05 - 4/30/06
------- ------- ----------------- -----------------
Aggressive Growth Strategy Fund.... Class A $1,000.00 $1,017.36 $ 7.50 1.50%
Class B 1,000.00 1,013.64 11.23 2.25%
Class C 1,000.00 1,013.64 11.23 2.25%
Growth Strategy Fund............... Class A 1,000.00 1,017.70 7.15 1.43%
Class B 1,000.00 1,013.98 10.89 2.18%
Class C 1,000.00 1,014.03 10.84 2.17%
Moderate Growth Strategy Fund...... Class A 1,000.00 1,018.10 6.76 1.35%
Class B 1,000.00 1,014.38 10.49 2.10%
Class C 1,000.00 1,014.38 10.49 2.10%
Conservative Growth Strategy
Fund............................. Class A 1,000.00 1,018.40 6.46 1.29%
Class B 1,000.00 1,014.68 10.19 2.04%
Class C 1,000.00 1,014.73 10.14 2.03%
Conservative Income Strategy
Fund............................. Class A 1,000.00 1,018.50 6.36 1.27%
Class B 1,000.00 1,014.68 10.19 2.04%
Class C 1,000.00 1,014.63 10.24 2.05%
</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.
39 HSBC INVESTOR LIFELINE FUNDS
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- ---------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 39.9%
- ---------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
FEDERAL HOME LOAN MORTGAGE CORP. - 8.0%
Pool #1B2655, 4.14%, 12/1/34, (a)...... 343,145 338,219
Pool #C01188, 7.00%, 6/1/31............ 218,072 224,345
Pool #C90893, 5.50%, 4/1/25............ 626,629 613,236
Pool #G01884, 5.00%, 9/1/35............ 578,579 547,201
----------
1,723,001
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 23.3%
Pool #254693, 5.50%, 4/1/33............ 959,400 934,334
Pool #535063, 6.50%, 12/1/14........... 232,417 237,840
Pool #593187, 7.00%, 11/1/31........... 481,176 495,321
Pool #740686, 6.50%, 10/1/33........... 607,938 620,504
Pool #781560, 4.49%, 10/1/34, (a)...... 450,728 441,795
Pool #825278, 5.00%, 7/1/35............ 575,260 544,265
TBA May, 5.50%, 5/1/35................. 1,200,000 1,165,126
TBA May, 6.00%, 5/15/36................ 600,000 597,187
----------
5,036,372
----------
U.S. TREASURY NOTES - 8.6%
4.00%, 9/30/07......................... 95,000 93,835
4.50%, 2/15/09......................... 860,000 851,533
4.50%, 2/28/11......................... 265,000 260,156
4.75%, 3/31/11......................... 285,000 282,751
4.00%, 2/15/15......................... 405,000 375,258
----------
1,863,533
----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS
(COST $8,672,143)..................... 8,622,906
----------
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS - 31.4%
- ---------------------------------------------------------------
AUTO MANUFACTURERS - 1.8%
DaimlerChrysler North American
Holdings, 4.05%, 6/4/08............... 400,000 388,256
----------
BANKS - 1.8%
Sovereign Bank, 5.125%, 3/15/13........ 300,000 285,883
Turanalem Finance BV, 7.75%, 4/25/13,
(b)................................... 100,000 98,625
----------
384,508
----------
CABLE - 1.6%
Comcast Corp., 6.50%, 1/15/15.......... 350,000 356,490
----------
CHEMICALS - 1.1%
Nova Chemicals Corp., 6.50%, 1/15/12... 250,000 233,750
----------
COLLEGES & UNIVERSITIES - 1.9%
Tulane University of Louisiana, 5.55%,
11/15/12, (a)......................... 400,000 402,500
----------
ELECTRIC - 1.2%
Progress Energy, Inc., 5.14%, 11/14/08,
(a)................................... 250,000 250,141
----------
FINANCE - 7.8%
American General Finance Corp., 4.875%,
5/15/10............................... 500,000 485,467
Ford Motor Credit Corp., 5.80%,
1/12/09............................... 475,000 429,946
General Motors Acceptance Corp., 4.50%,
7/15/06............................... 250,000 248,177
General Motors Acceptance Corp.,
4.375%, 12/10/07...................... 500,000 470,319
- ---------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
- ---------------------------------------------------------------
<Caption>
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
General Motors Corp., 8.25%, 7/15/23... 100,000 72,500
----------
1,706,409
----------
MEDIA - 2.9%
Time Warner Entertainment, 8.875%,
10/1/12............................... 550,000 622,808
----------
OIL & GAS - 1.4%
Pioneer Natural Resources, 6.875%,
5/1/18................................ 300,000 300,630
----------
RETAIL - 3.8%
Fred Meyer, Inc., 7.45%, 3/1/08........ 350,000 361,065
May Department Stores Co., 5.75%,
7/15/14............................... 500,000 491,312
----------
852,377
----------
TELECOMMUNICATIONS - 3.6%
AT&T, Inc., 5.10%, 9/15/14............. 400,000 376,584
Verizon Pennsylvania, Inc., 5.65%,
11/15/11.............................. 400,000 393,811
----------
770,395
----------
TRANSPORTATION - 2.5%
Burlington Northern Santa Fe Railway
Co., 4.83%, 1/15/23................... 279,656 265,897
Union Pacific Railroad, 5.08%,
1/2/29................................ 299,958 279,513
----------
545,410
----------
TOTAL CORPORATE OBLIGATIONS (COST
$6,987,670)........................... 6,813,674
----------
- ---------------------------------------------------------------
ASSET BACKED SECURITIES - 13.9%
- ---------------------------------------------------------------
Asset Backed Funding Certificates
Series 2003-AHL1, Class A1, 3.68%,
3/25/33............................... 210,318 202,621
Capital Auto Receivables Asset Trust
Series 2003-2, Class A4A, 1.96%,
1/15/09............................... 339,159 335,860
Carmax Auto Owner Trust Series 2004-2,
Class A3, 3.00%, 9/15/08.............. 491,354 486,651
Chase Issuance Trust 2005, Class A8,
4.94%, 10/15/12, (a).................. 300,000 300,212
Citibank Credit Card Issuance Trust
Series 2005-A6, Class A6, 4.56%,
10/7/11, (a).......................... 450,000 449,986
MBNA Credit Card Master Note Trust
Series 2002-A5, Class A5, 5.08%,
10/17/11, (a)......................... 450,000 452,282
SLM Student Loan Trust Series 2003-12,
Class A3, 5.03%, 12/15/15, (a)........ 450,000 451,143
Volkswagen Auto Lease Trust Series
2004-A, Class A3, 2.84%, 7/20/07...... 333,359 331,462
----------
TOTAL ASSET BACKED SECURITIES (COST
$3,019,597)........................... 3,010,217
----------
- ---------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 13.2%
- ---------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
Series 2005-WF2, Class AF2, 4.92%,
8/25/35............................... 324,477 320,735
Countrywide Home Loans Series 2005-
HYB8, Class 2A1, 5.385%, 12/20/35,
(a)................................... 439,800 436,223
Freddie Mac Reference Remic Series
R004, Class AL, 5.125%, 12/15/13...... 556,319 549,630
Freddie Mac Series 2962, Class CJ,
5.50%, 11/15/23....................... 566,117 566,917
J.P. Morgan Alternative Loan Trust
Series 2005-S1, Class 2A9, 6.00%,
12/25/35.............................. 507,249 499,640
Morgan Stanley Mortgage Loan Trust
Series 2006-3AR, Class 2A3, 5.92%,
3/25/36............................... 348,329 349,323
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 40
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
- ---------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED
- ---------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
Nomura Asset Acceptance Corp. Series
2006-AP1, Class A2, 5.515%, 2/25/36... 150,000 147,946
----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (COST $2,906,325)......... 2,870,414
----------
- ---------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 7.5%
- ---------------------------------------------------------------
Banc of America Commercial Mortgage,
Inc. Series 2005-6, Class AM, 5.18%,
9/10/47............................... 227,000 218,539
Commercial Mortgage Pass-Through
Certificate Series 2005-FL11,
Class A1, 5.05%, 11/15/17, (a) (b).... 299,842 299,821
Global Signal Trust Series 2006-1,
Class A2, 5.45%, 2/15/36, (a) (b)..... 200,000 197,612
JP Morgan Chase Commercial Mortgage
Securities Corp. Series 2005-LDP5,
Class AM, 5.22%, 12/15/44............. 325,000 314,025
LB-UBS Commercial Mortgage Trust Series
2006-C1, Class A4, 5.16%, 2/15/31..... 300,000 287,565
Morgan Stanley Capital I Series
2006-T21, Class A4, 5.16%, 10/12/52... 330,000 316,183
----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(COST $1,686,732)..................... 1,633,745
----------
- ---------------------------------------------------------------
FOREIGN BONDS** - 0.9%
- ---------------------------------------------------------------
ICELAND
SOVEREIGN - 0.2%
Housing Finance Fund, 3.75%, 2/15/24... 3,877,344 53,548
----------
MEXICO
FINANCE - 0.3%
General Electric Capital Corp., 9.50%,
8/4/10................................ 800,000 73,471
----------
<Caption>
- ---------------------------------------------------------------
FOREIGN BONDS**, CONTINUED
- ---------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
--------- ----------
SOVEREIGN - 0.4%
Mexican Bonos, 9.00%, 12/22/11......... 750,000 69,679
----------
TOTAL FOREIGN BONDS**
(COST $197,280)....................... 196,698
----------
- ---------------------------------------------------------------
INVESTMENT COMPANIES - 0.3%
- ---------------------------------------------------------------
HSBC Investor Money Market Fund Class I
Shares*............................... 60,896 60,896
----------
TOTAL INVESTMENT COMPANIES
(COST $60,896)........................ 60,896
----------
TOTAL INVESTMENTS (COST $23,530,643) --
107.1%................................ 23,208,550
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $21,671,765.
(a) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report represent the rates that were in
effect on April 30, 2006. The maturity dates presented
reflect the final maturity date. However, each of these
securities contains put or demand features that allow the
fund to require the issuer to repurchase the security
from the fund within various time periods, including
daily, weekly, monthly, or semi-annually.
(b) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
* Investment in affiliate.
** The principal amount of each security is denominated in
the local currency of each respective country.
TBA -- Security was traded on a 'to be announced' basis.
41 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERMEDIATE DURATION FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
At April 30, 2006, the portfolio's open forward currency contracts were as
follows:
<Table>
<Caption>
CURRENCY CONTRACT UNREALIZED
DELIVERY AMOUNT VALUE APPRECIATION/
CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION)
- -------- ---- ---------------- ------------- ----- --------------
LONG CONTRACTS
Icelandic Krona...................................... 5/4/2006 3,704,582 $ 50,088 $ 49,981 $(107)
Mexican Neuvo Peso................................... 5/2/2006 794,575 71,442 71,810 368
-------- -------- -----
TOTAL LONG CONTRACTS............................................................... $121,530 $121,791 $ 261
-------- -------- -----
-------- -------- -----
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 42
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- ----------------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT AGENCY OBLIGATIONS - 42.8%
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
FEDERAL HOME LOAN MORTGAGE CORP. - 7.7%
Pool #1B2655, 4.14%, 12/1/34, (a)..... 1,681,409 1,657,271
Pool #C00368, 8.50%, 10/1/24.......... 37,780 40,634
Pool #C00922, 8.00%, 2/1/30........... 243,455 259,195
Pool #C54447, 7.00%, 7/1/31........... 39,732 40,875
Pool #C60712, 6.50%, 11/1/31.......... 631,015 643,843
Pool #C80387, 6.50%, 4/1/26........... 37,840 38,681
Pool #C90893, 5.50%, 4/1/25........... 2,351,702 2,301,440
Pool #D62926, 6.50%, 8/1/25........... 29,221 29,868
Pool #G01317, 7.00%, 10/1/31.......... 207,877 213,857
Pool #G01884, 5.00%, 9/1/35........... 3,278,612 3,100,805
-----------
8,326,469
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 23.4%
5.50%, 3/15/11........................ 4,500,000 4,541,216
Pool #253438, 8.50%, 9/1/30........... 66,073 71,237
Pool #254693, 5.50%, 4/1/33........... 4,653,089 4,531,522
Pool #329530, 7.00%, 12/1/25.......... 118,083 121,702
Pool #329655, 7.00%, 11/1/25.......... 50,764 52,320
Pool #356905, 5.89%, 10/1/36, (a)..... 283,558 287,232
Pool #398958, 6.50%, 10/1/12.......... 88,373 90,149
Pool #535332, 8.50%, 4/1/30........... 58,519 63,066
Pool #535440, 8.50%, 8/1/30........... 68,680 74,049
Pool #535608, 9.50%, 4/1/30........... 131,706 144,376
Pool #548965, 8.50%, 7/1/30........... 59,661 64,324
Pool #568486, 7.00%, 1/1/31........... 40,222 41,426
Pool #573752, 8.50%, 2/1/31........... 54,755 59,036
Pool #575328, 6.50%, 4/1/31........... 72,360 73,862
Pool #781560, 4.49%, 10/1/34, (a)..... 1,717,545 1,683,507
Pool #825278, 5.00%, 7/1/35........... 3,259,805 3,084,167
TBA May, 5.50%, 5/1/35................ 5,950,000 5,777,081
TBA May, 6.50%, 5/1/35................ 1,910,000 1,942,231
TBA May, 6.00%, 5/15/36............... 2,900,000 2,886,405
-----------
25,588,908
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.4%
Pool #346406, 7.50%, 2/15/23.......... 75,085 78,809
Pool #412530, 7.50%, 12/15/25......... 102,512 107,712
Pool #781300, 7.00%, 6/15/31.......... 188,677 195,912
-----------
382,433
-----------
U.S. TREASURY BONDS - 2.0%
5.375%, 2/15/31....................... 2,180,000 2,212,700
-----------
U.S. TREASURY NOTES - 9.3%
4.50%, 2/15/09........................ 2,810,000 2,782,338
4.50%, 2/28/11........................ 2,915,000 2,861,712
4.75%, 3/31/11........................ 1,220,000 1,210,373
4.00%, 2/15/15........................ 2,175,000 2,015,272
5.50%, 8/15/28........................ 1,205,000 1,235,313
-----------
10,105,008
-----------
TOTAL U.S. GOVERNMENT AND GOVERNMENT
AGENCY OBLIGATIONS (COST
46,919,627).......................... $46,615,518
-----------
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS - 31.2%
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
AUTO MANUFACTURERS - 1.4%
DaimlerChrysler North American
Holdings, 4.05%, 6/4/08.............. 1,575,000 1,528,760
-----------
BANKS - 1.4%
Sovereign Bank, 5.125%, 3/15/13....... 1,075,000 1,024,415
Turanalem Finance BV, 7.75%, 4/25/13,
(b).................................. 475,000 468,469
-----------
1,492,884
-----------
CABLE - 1.5%
Comcast Corp., 6.50%, 1/15/15......... 1,600,000 1,629,670
-----------
CHEMICALS - 2.1%
Nova Chemicals Corp., 7.00%,
5/15/06.............................. 1,200,000 1,200,000
Nova Chemicals Corp., 6.50%,
1/15/12.............................. 1,190,000 1,112,650
-----------
2,312,650
-----------
COLLEGES & UNIVERSITIES - 1.6%
Tulane University of Louisiana, 5.55%,
11/15/12, (a)........................ 1,700,000 1,710,625
-----------
ELECTRIC - 0.9%
Progress Energy, Inc., 5.14%,
11/14/08, (a)........................ 1,000,000 1,000,564
-----------
FINANCE - 5.9%
American General Finance Corp.,
4.875%, 5/15/10...................... 2,100,000 2,038,955
Ford Motor Credit Corp., 5.80%,
1/12/09.............................. 1,600,000 1,448,240
General Motors Acceptance Corp.,
4.50%, 7/15/06....................... 1,250,000 1,240,886
General Motors Acceptance Corp.,
4.375%, 12/10/07..................... 1,400,000 1,316,892
General Motors Corp., 8.25%,
7/15/23.............................. 500,000 362,500
-----------
6,407,473
-----------
MEDICAL - 1.5%
HCA, Inc., 6.95%, 5/1/12.............. 1,650,000 1,655,666
-----------
MULTIMEDIA - 0.5%
Viacom, Inc., 6.25%, 4/30/16, (b)..... 600,000 594,652
-----------
OIL & GAS - 1.5%
Pioneer Natural Resources, 6.875%,
5/1/18............................... 1,575,000 1,578,308
-----------
RETAIL - 3.4%
Fred Meyer, Inc., 7.45%, 3/1/08....... 1,500,000 1,547,423
May Department Stores Co., 6.65%,
7/15/24.............................. 2,200,000 2,172,319
-----------
3,719,742
-----------
TELECOMMUNICATIONS - 7.7%
AOL Time Warner, Inc., 7.70%,
5/1/32............................... 1,000,000 1,092,837
AT&T, Inc., 5.10%, 9/15/14............ 1,750,000 1,647,554
Bell Telephone Co. Pennsylvania,
8.75%, 8/15/31....................... 850,000 978,585
Sprint Capital Corp., 8.75%,
3/15/32.............................. 1,300,000 1,613,023
Time Warner Entertainment Co., 8.375%,
3/15/23.............................. 1,300,000 1,457,862
Verizon Communications, Inc., 5.55%,
2/15/16.............................. 1,650,000 1,574,475
-----------
8,364,336
-----------
</Table>
43 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
TRANSPORTATION - 1.8%
BNSF Funding Trust I, 6.61%, 12/15/55,
Callable 01/15/26 @ 100.............. 1,200,000 1,153,183
Burlington Northern Santa Fe Railway
Co., 7.57%, 1/2/21................... 312,308 343,926
Union Pacific Corp., 6.85%, 1/2/19.... 432,401 457,632
-----------
1,954,741
-----------
TOTAL CORPORATE OBLIGATIONS (COST
$34,798,525)......................... 33,950,071
-----------
- ----------------------------------------------------------------
ASSET BACKED SECURITIES - 12.7%
- ----------------------------------------------------------------
Asset Backed Funding Certificates
Series 2003-AHL1, Class A1, 3.68%,
3/25/33.............................. 738,743 711,708
Capital Auto Receivables Asset Trust
Series 2003-2, Class A4A, 1.96%,
1/15/09.............................. 1,229,453 1,217,494
Capital Auto Receivables Asset Trust
Series 2006-1, Class A2A, 5.03%,
9/15/08.............................. 2,040,000 2,037,347
Chase Issuance Trust 2005, Class A8,
4.94%, 10/15/12, (a)................. 1,000,000 1,000,707
Citibank Credit Card Issuance Trust
Series 2005-A6, Class A6, 4.56%,
10/7/11, (a)......................... 2,150,000 2,149,933
MBNA Credit Card Master Note Trust
Series 2002-A5, Class A5, 5.08%,
10/17/11, (a)........................ 2,250,000 2,261,410
Peco Energy Transition Trust Series
2000-A, Class A3, 7.625%, 3/1/10..... 600,000 634,253
SLM Student Loan Trust Series 2003-12,
Class A3, 5.03%, 12/15/15, (a)....... 2,250,000 2,255,714
Volkswagen Auto Lease Trust Series
2004-A, Class A3, 2.84%, 7/20/07..... 1,514,300 1,505,683
-----------
TOTAL ASSET BACKED SECURITIES (COST
$13,758,121)......................... 13,774,249
-----------
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 12.3%
- ----------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
Series 2005-WF2, Class AF2, 4.92%,
8/25/35.............................. 1,017,148 1,005,419
Countrywide Home Loans Series 2005-
HYB8, Class 2A1, 5.385%, 12/20/35,
(a).................................. 1,651,495 1,638,063
Fannie Mae IO Series 2000-16, Class
PS, 3.64%, 10/25/29, (a) (c)......... 84,607 5,256
Fannie Mae IO Series 2000-32, Class
SV, 3.69%, 3/18/30, (a) (c).......... 29,046 1,219
Fannie Mae IO Series 2001-4, Class SA,
2.64%, 2/17/31, (a) (c).............. 307,243 13,051
Fannie Mae IO Series 270, Class 2,
8.50%, 9/1/23, (c)................... 64,603 16,162
Fannie Mae IO Series 296, Class 2,
8.00%, 4/1/24, (c)................... 73,651 17,431
Fannie Mae IO Series 306, Class IO,
8.00%, 5/1/30, (c)................... 93,060 23,098
FHA Weyerhauser, 7.43%, 1/1/24, (d)
(e).................................. 34,389 34,389
Freddie Mac IO Series 1534, Class K,
2.46%, 6/15/23, (a) (c).............. 202,076 8,347
Freddie Mac IO Series 2141, Class SD,
3.24%, 4/15/29, (a) (c).............. 148,106 13,562
Freddie Mac IO Series 2247, Class SC,
2.59%, 8/15/30, (a) (c).............. 97,524 3,511
<Caption>
- ----------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS, CONTINUED
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Freddie Mac Series 2894, Class QA,
5.50%, 12/15/24...................... 3,655,912 3,669,015
Freddie Mac Series 2962, Class CJ,
5.50%, 11/15/23...................... 2,177,372 2,180,447
Government National Mortgage
Association IO Series 1999-30, Class
S, 3.69%, 8/16/29, (a) (c)........... 89,114 5,741
Government National Mortgage
Association IO Series 1999-30, Class
SA, 3.09%, 4/16/29, (a) (c).......... 117,716 5,979
Government National Mortgage
Association IO Series 1999-32, Class
SB, 3.09%, 7/16/27, (a) (c).......... 32,152 678
J.P. Morgan Alternative Loan Trust
Series 2005-S1, Class 2A9, 6.00%,
12/25/35............................. 2,351,793 2,316,514
Morgan Stanley Mortgage Loan Trust
Series 2006-3AR, Class 2A3, 5.92%,
3/25/36.............................. 1,625,537 1,630,175
Nomura Asset Acceptance Corp. Series
2006-AP1, Class A2, 5.515%,
2/25/36.............................. 750,000 739,732
-----------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(COST $13,572,216)................... 13,327,789
-----------
- ----------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES - 7.7%
- ----------------------------------------------------------------
Banc of America Commercial Mortgage,
Inc. Series 2000-2, Class A2, 7.20%,
5/15/10.............................. 675,000 713,514
Banc of America Commercial Mortgage,
Inc. Series 2005-6, Class AM, 5.18%,
9/10/47.............................. 900,000 866,454
Commercial Mortgage Pass-Through
Certificate Series 2005-FL11, Class
A1, 5.05%, 11/15/17, (a) (b)......... 1,219,356 1,219,271
DLJ Mortgage Acceptance Corp. IO
Series 1997-CF1, Class S, 0.92%,
5/15/30, (a) (b) (c)................. 416,997 2,749
Global Signal Trust Series 2006-1,
Class A2, 5.45%, 2/15/36, (a) (b).... 850,000 839,850
GMAC Commercial Mortgage Securities,
Inc. IO Series 1996-C1, Class X2,
2.22%, 10/15/28, (a) (c)............. 115,437 2,319
GS Mortgage Securities Corp. IO Series
1997-GL, Class X2, 0.90%, 7/13/30,
(a) (c).............................. 364,321 3,407
JP Morgan Chase Commercial Mortgage
Securities Corp. Series 2005-LDP5,
Class AM, 5.22%, 12/15/44............ 1,280,000 1,236,777
LB-UBS Commercial Mortgage Trust
Series 2000-C3, Class A1, 7.95%,
7/15/09.............................. 204,401 207,331
LB-UBS Commercial Mortgage Trust
Series 2006-C1, Class A4, 5.16%,
2/15/31.............................. 1,300,000 1,246,118
Morgan Stanley Capital I Series
2006-T21, Class A4, 5.16%,
10/12/52............................. 1,480,000 1,418,033
PNC Mortgage Acceptance Corp. Series
2000-C2, Class A2, 7.30%, 10/12/33... 600,000 637,610
-----------
TOTAL COMMERCIAL MORTGAGE BACKED
SECURITIES
(COST $8,576,866).................... 8,393,433
-----------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 44
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
FOREIGN BONDS** - 0.9%
- ---------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
ICELAND - 0.2%
SOVEREIGN - 0.2%
Housing Finance Fund, 3.75%,
2/15/24.............................. 19,537,785 269,825
-----------
MEXICO - 0.7%
FINANCE - 0.3%
General Electric Capital Corp., 9.50%,
8/4/10............................... 3,800,000 348,989
-----------
SOVEREIGN - 0.4%
Mexican Bonos, 9.00%, 12/22/11........ 3,600,000 334,459
-----------
TOTAL FOREIGN BONDS**
(COST $956,057)...................... 953,273
-----------
- ----------------------------------------------------------------
MUNICIPAL BONDS - 0.9%
- ----------------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.9%
Louisiana Local Government
Environmental Facilities & Community
Development, 6.30%, 7/1/30, (LOC
AMBAC)............................... 850,000 923,559
-----------
TOTAL MUNICIPAL BONDS
(COST $930,321)...................... 923,559
-----------
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 0.5%
- ----------------------------------------------------------------
HSBC Investor Money Market Fund Class
I Shares *........................... 510,201 510,201
-----------
TOTAL INVESTMENT COMPANIES (COST
$510,201)............................ 510,201
-----------
TOTAL INVESTMENTS
(COST $120,021,934) -- 109.0%....... 118,448,093
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $108,659,148.
(a) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report, represents the rates that were
in effect on April 30, 2006. The maturity dates presented
reflect the final maturity date. However, each of these
securities contains put or demand features that allow the
fund to require the issuer to repurchase the security
from the fund within various time periods, including
daily, weekly, monthly, or semi-annually.
(b) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
(c) Interest-only represents securities that entitle holders
to receive only interest payments on the underlying
mortgages. The yield to maturity of an Interest-only is
extremely sensitive to the rate of principal payments on
the underlying mortgage assets. A rapid (slow) rate of
principal repayments may have an adverse (positive)
effect on yield to maturity. The interest rate presented
represents the rates that were in effect on April 30,
2006. The principal amount shown is the notional amount
of the underlying mortgages.
(d) Rule 144a, section 4(2) or other security which is
restricted as to resale to institutional investors. The
investment manager, using Board approved procedures, has
deemed these securities to be illiquid. Represents 0.03%
of net assets.
(e) Security was fair valued (See note 2) as of April 30,
2006.
* Investment in affiliate.
** The principal amount of each security is denominated in
the local currency of each respective country.
AMBAC - American Municipal Bank Assurance Corp.
LOC - Letter of Credit
TBA - Security was traded on a 'to be announced' basis.
45 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR CORE PLUS FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
At April 30, 2006, the portfolio's open forward currency contracts were as
follows:
<Table>
<Caption>
CONTRACT CONTRACT UNREALIZED
DELIVERY AMOUNT VALUE APPRECIATION/
CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION)
- -------- ---- ---------------- ------------- ----- --------------
LONG CONTRACTS
Icelandic Krona......................................... 5/4/2006 18,667,246 $252,392 $251,852 $ (540)
Mexican Neuvo Peso...................................... 5/2/2006 3,813,960 342,920 344,687 1,767
-------- -------- ------
TOTAL LONG CONTRACTS................................................................. $595,312 $596,539 $1,227
-------- -------- ------
-------- -------- ------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 46
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS - 83.9%
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
ADVERTISING SERVICES - 4.0%
Iron Mountain, Inc., 8.625%, 4/1/13,
Callable 4/1/06 @ 104.313............ 250,000 260,313
R.H. Donnelley Corp., 6.875%, 1/15/13,
Callable 1/15/09 @ 103.438 (a)....... 90,000 83,700
R.H. Donnelley Corp., 6.875%, 1/15/13,
Callable 1/15/09 @ 103.438........... 100,000 93,000
-----------
437,013
-----------
AEROSPACE/DEFENSE -- EQUIPMENT - 0.9%
DRS Technologies, Inc., 7.625%,
2/1/18, Callable 2/1/11 @ 103.813.... 100,000 102,625
-----------
APPAREL MANUFACTURERS - 0.5%
Levi Strauss & Co., 8.875%, 4/1/16,
Callable 4/1/11 @ 104.438 (a)........ 50,000 50,125
-----------
BUILDING & CONSTRUCTION PRODUCTS - 1.3%
Ply Gem Industries, Inc., 9.00%,
2/15/12, Callable 2/18/08 @ 104.50... 150,000 144,375
-----------
CABLE TELEVISION - 4.5%
Cablevision Systems Corp., 8.00%,
4/15/12.............................. 250,000 249,375
Mediacom LLC, 7.875%, 2/15/11,
Callable 2/15/06 @ 103.938........... 250,000 242,500
-----------
491,875
-----------
CHEMICALS - 3.0%
JohnsonDiversey, Inc., 9.625%,
5/15/12, Callable 5/15/07 @
104.813.............................. 250,000 255,313
Millennium America, Inc., 9.25%,
6/15/08.............................. 25,000 26,125
PQ Corp., 7.75%, 2/15/13, Callable
2/15/09 @ 103.75 (a)................. 50,000 47,500
-----------
328,938
-----------
COMPUTER SOFTWARE - 0.5%
Activant Solutions Holdings, Inc.,
9.50%, 5/1/16, Callable 5/1/11 @
104.75 (a)........................... 50,000 50,875
-----------
CONTAINERS -- PAPER/PLASTIC - 2.4%
Solo Cup Co., 8.50%, 2/15/14, Callable
2/15/2009 @ 104.25................... 250,000 237,500
Stone Container Finance Co. of Canada,
7.375%, 7/15/14, Callable 7/15/09
@ 103.688............................ 25,000 23,000
-----------
260,500
-----------
DIVERSIFIED OPERATIONS - 1.0%
Stripes Acquisition LLC/Susser Finance
Corp., 10.625%, 12/15/13, Callable
12/15/2009 @ 105.313 (a)............. 100,000 106,250
-----------
ELECTRIC - 1.5%
AES Corp., 7.75%, 3/1/14,............. 60,000 62,550
CMS Energy Corp., 6.875%, 12/15/15.... 100,000 99,500
-----------
162,050
-----------
ENERGY - 4.3%
Copano Energy LLC, 8.125%, 3/1/16,
Callable 3/1/11 @ 104.0625 (a)....... 80,000 82,200
Massey Energy Co., 6.875%, 12/15/13,
Callable 12/15/09 @ 103.44 (a)....... 100,000 96,250
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Mirant North America LLC, 7.375%,
12/31/13, Callable 12/31/09
@ 103.688 (a)........................ 50,000 50,188
Williams Cos., 6.375%, 10/1/10, (a)... 250,000 249,375
-----------
478,013
-----------
FINANCE - 8.3%
Basell AF SCA, 8.375%, 8/15/15,
Callable 8/15/10 @ 104.188 (a)....... 250,000 247,812
CCM Merger, Inc., 8.00%, 8/1/13,
Callable 8/1/09 @ 104 (a)............ 250,000 242,500
Ford Motor Credit Co., 7.375%,
10/28/09............................. 100,000 92,398
General Motors Accept Corp., 6.875%,
8/28/12.............................. 300,000 279,542
Nalco Finance Holdings, Inc., 0.00%,
2/1/14, Callable 2/1/09 @ 104.5
(b).................................. 75,000 57,375
-----------
919,627
-----------
GAMBLING - 6.4%
Greektown Holdings, Inc., 10.75%,
12/1/13, Callable 12/1/10 @ 105.375
(a).................................. 100,000 105,000
Isle of Capri Casinos, Inc., 7.00%,
3/1/14, Callable 3/1/09 @ 103.50..... 250,000 245,625
Kerzner International Ltd., 6.75%,
10/1/15, Callable 10/1/10 @
103.375.............................. 250,000 259,375
MGM MIRAGE, Inc., 6.75%, 4/1/13,
(a).................................. 100,000 98,500
-----------
708,500
-----------
LEISURE - 3.3%
AMC Entertainment, Inc., 11.00%,
2/1/16, Callable 2/1/11 @ 105.50
(a).................................. 100,000 108,500
K2, Inc., 7.375%, 7/1/14, Callable
7/1/09 @ 103.688..................... 258,000 258,000
-----------
366,500
-----------
MACHINERY -- FARM - 0.4%
Case New Holland, Inc., 7.125%,
3/1/14, Callable 3/1/10 @ 103.563
(a).................................. 50,000 49,125
-----------
MANUFACTURING - 0.2%
Nutro Products, Inc., 10.75%, 4/15/14,
Callable 4/15/09 @ 108.063 (a)....... 25,000 25,875
-----------
MEDICAL - 0.9%
MultiPlan, Inc., 10.375%, 4/15/16,
Callable 4/15/11 @ 105.188 (a)....... 100,000 101,625
-----------
METAL PROCESSORS AND FABRICATION - 0.9%
TriMas Corp., 9.875%, 6/15/12,
Callable 6/15/07 @ 104.938........... 100,000 93,750
-----------
OIL & GAS - 10.0%
Chaparral Energy, Inc., 8.50%,
12/1/15, Callable 12/1/10 @ 104.25
(a).................................. 100,000 103,000
Chesapeake Energy Corp., 6.875%,
1/15/16, Callable 1/15/09 @
103.438.............................. 250,000 246,250
Clayton Williams Energy, Inc., 7.75%,
8/1/13, Callable 8/1/2009 @ 103.875
(a).................................. 100,000 94,250
Colorado Interstate Gas, 6.80%,
11/15/15, (a)........................ 150,000 150,109
</Table>
47 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR HIGH YIELD FIXED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
Compton Petroleum Finance Corp.,
7.625%, 12/1/13, Callable 12/1/09
@ 103.813............................ 250,000 247,499
El Paso Production Holdings, 7.75%,
6/1/13, Callable 6/1/08 @ 103.875.... 150,000 154,688
Inergy LP/Inergy Finance, 8.25%,
3/1/16, Callable 3/1/11 @ 104.125
(a).................................. 100,000 102,750
-----------
1,098,546
-----------
PAPER & RELATED PRODUCTS - 5.0%
Abitibi-Consolidated Co. of Canada,
8.375%, 4/1/15....................... 250,000 252,500
Exopac Holding Corp., 11.25%, 2/1/14,
Callable 2/1/10 @ 105.625 (a)........ 50,000 50,625
Georgia-Pacific Corp., 7.70%,
6/15/15.............................. 250,000 250,000
-----------
553,125
-----------
PHARMACY SERVICES - 0.9%
Omnicare, Inc., 6.75%, 12/15/13,
Callable 12/15/09 @ 103.375.......... 100,000 98,875
-----------
PUBLISHING - 2.6%
Block Communications, Inc., 8.25%,
12/15/15, Callable 12/15/10
@ 104.125 (a)........................ 50,000 48,875
Morris Publishing, 7.00%, 8/1/13,
Callable 8/1/08 @ 103.50............. 250,000 235,625
-----------
284,500
-----------
RENTAL -- AUTO AND EQUIPMENT - 1.9%
Avis Budget Car Rental, Inc., 7.625%,
5/15/14, Callable 5/15/10 @ 103.81
(a).................................. 100,000 101,750
Hertz Corp., 8.875%, 1/1/14, Callable
1/1/10 @ 104.44 (a).................. 100,000 106,250
-----------
208,000
-----------
RESEARCH AND TESTING SERVICES - 0.5%
Cie Gen Geophysique, 7.50%, 5/15/15,
Callable 5/15/10 @ 103.75 (a)........ 50,000 51,625
-----------
RESTAURANTS - 2.7%
Dave & Busters. Inc., 11.25%, 3/15/14,
Callable 3/15/10 @ 105.625 (a)....... 50,000 50,500
Landry's Restaurants, Inc., 7.50%,
12/15/14, Callable 12/15/09 @
103.75............................... 200,000 192,000
NPC International, Inc., 9.50%,
5/1/14, Callable 5/1/10 @ 104.75
(a).................................. 50,000 50,500
-----------
293,000
-----------
RETAIL - 2.6%
Linens 'n Things, Inc., 10.70%,
1/15/14, Callable 1/15/08 @ 102 (a)
(c).................................. 50,000 50,625
The Jean Coutu Group PJC, Inc., 8.50%,
8/1/14, Callable 8/1/09 @ 104.25..... 250,000 234,375
-----------
285,000
-----------
<Caption>
- ----------------------------------------------------------------
CORPORATE OBLIGATIONS, CONTINUED
- ----------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT($) VALUE($)
---------- -----------
SEMICONDUCTOR EQUIPMENT - 0.5%
Sensata Technologies BV, 8.00%,
5/1/14, Callable 5/1/10 @ 104 (a).... 50,000 50,250
-----------
STEEL - 3.2%
AK Steel Corp., 7.75%, 6/15/12,
Callable 6/15/07 @ 103.875........... 200,000 202,500
Gibraltar Industries, Inc., 8.00%,
12/1/15, Callable 12/1/10 @ 104
(a).................................. 150,000 152,625
-----------
355,125
-----------
TELECOMMUNICATIONS - 7.5%
Centennial Communications Corp.,
10.00%, 1/1/13, Callable 1/1/09 @
107.50............................... 100,000 104,000
Cincinnati Bell, Inc., 8.375%,
1/15/14, Callable 1/15/09 @
104.1885............................. 250,000 255,625
Insight Midwest L.P., 9.75%, 10/1/09,
Callable 10/1/06 @ 101.625........... 250,000 257,500
Nordic Telephone Co. Holdings, 8.875%,
5/1/16, Callable 5/1/11 @ 104.438
(a).................................. 50,000 51,750
Rural Cellular Corp., 9.75%, 1/15/10,
Callable 1/15/07 @ 103.25............ 50,000 51,563
Wind Acquisition Financial SA, 10.75%,
12/1/15, Callable 12/1/10 @
105.375.............................. 100,000 110,500
-----------
830,938
-----------
WASTE DISPOSAL - 2.2%
Allied Waste North America, Inc.,
7.375%, 4/15/14, Callable 4/15/09 @
103.688.............................. 250,000 246,250
-----------
TOTAL CORPORATE OBLIGATIONS (COST
$9,076,618).......................... 9,232,875
-----------
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 15.9%
- ----------------------------------------------------------------
Investors Bank Trust Cash Reserve..... 1,754,963 1,754,963
-----------
TOTAL INVESTMENT COMPANIES (COST
$1,754,963).......................... 1,754,963
-----------
TOTAL INVESTMENTS
(COST $10,831,581) - 99.8%.......... 10,987,838
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $11,015,360.
(a) Security exempt from registration under Rule 144a of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to
qualified institutional buyers. These securities have
been deemed liquid by the investment manager based on
procedures approved by the Board of Trustees.
(b) Step Coupon. Rate set to step up to 9.0% on 2/2/09.
(c) Variable rate security. The interest rates on these
securities are adjusted periodically to reflect
then-current short-term interest rates. The rates
presented in this report, represents the rates that were
in effect on April 30, 2006. The maturity dates presented
reflect the final maturity date. However, each of these
securities contains put or demand features that allow the
fund to require the issuer to repurchase the security
from the fund within various time periods, including
daily, weekly, monthly, or semi-annually.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 48
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 95.3%
- -----------------------------------------------------------------
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 3.8%
General Dynamics Corp.................... 20,300 1,332,086
The Boeing Co............................ 10,600 884,570
----------
2,216,656
----------
BUSINESS SERVICES - 2.9%
Paychex, Inc............................. 41,650 1,682,244
----------
CHEMICALS - 3.0%
Monsanto Co.............................. 20,700 1,726,380
----------
COMPUTER SOFTWARE - 10.5%
Adobe Systems, Inc. (a).................. 30,550 1,197,560
Automatic Data Processing, Inc........... 12,100 533,368
CheckFree Corp. (a)...................... 26,850 1,446,409
Electronic Arts, Inc. (a)................ 10,150 576,520
Microsoft Corp........................... 42,650 1,029,998
SAP AG ADR............................... 23,700 1,294,730
----------
6,078,585
----------
COMPUTERS - 1.5%
Apple Computer, Inc. (a)................. 12,250 862,278
----------
CONSUMER PRODUCTS - 7.5%
Colgate-Palmolive Co..................... 26,450 1,563,724
Harman International Industries, Inc..... 5,700 501,543
PepsiCo, Inc............................. 20,000 1,164,800
The Procter & Gamble Co.................. 18,650 1,085,617
----------
4,315,684
----------
DIVERSIFIED MANUFACTURING OPERATIONS -
6.0%
Caterpillar, Inc......................... 26,900 2,037,406
General Electric Co...................... 41,412 1,432,441
----------
3,469,847
----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 4.3%
Broadcom Corp. (a)....................... 13,200 542,652
Maxim Integrated Products, Inc........... 11,850 417,831
Microchip Technology, Inc................ 41,750 1,555,605
----------
2,516,088
----------
FINANCIAL SERVICES - 14.2%
Franklin Resources, Inc.................. 5,950 554,064
Goldman Sachs Group, Inc................. 8,600 1,378,494
Legg Mason, Inc.......................... 17,900 2,120,792
Robert Half International, Inc........... 23,500 993,345
SLM Corp................................. 45,000 2,379,599
The Chicago Mercantile Exchange
Holdings, Inc........................... 1,700 778,600
----------
8,204,894
----------
HEALTH CARE - 3.5%
DENTSPLY International, Inc.............. 9,650 575,816
Medtronic, Inc........................... 11,150 558,838
UnitedHealth Group, Inc.................. 17,400 865,476
----------
2,000,130
----------
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
- -----------------------------------------------------------------
SHARES VALUE($)
--------- ----------
HOTELS & LODGING - 3.5%
Las Vegas Sands Corp. (a)................ 31,200 2,022,072
----------
INSURANCE - 1.2%
AFLAC, Inc............................... 15,200 722,608
----------
INTERNET RELATED - 4.1%
eBay, Inc. (a)........................... 12,450 428,405
Google, Inc., Class A (a)................ 4,700 1,964,318
----------
2,392,723
----------
OIL & GAS - 7.3%
Schlumberger Ltd......................... 29,850 2,063,829
Smith International, Inc................. 50,950 2,151,619
----------
4,215,448
----------
PHARMACEUTICALS - 7.5%
Alcon, Inc............................... 5,650 574,662
Allergan, Inc............................ 6,150 631,728
Genentech, Inc. (a)...................... 15,979 1,273,686
Gilead Sciences, Inc. (a)................ 22,600 1,299,499
Johnson & Johnson........................ 9,650 565,587
----------
4,345,162
----------
RESTAURANTS - 1.0%
Starbucks Corp. (a)...................... 15,300 570,231
----------
RETAIL - 7.5%
Abercrombie & Fitch Co., Class A......... 10,100 613,373
Best Buy Co., Inc........................ 10,225 579,349
Home Depot, Inc.......................... 23,750 948,337
Staples, Inc............................. 13,025 343,990
Walgreen Co.............................. 44,417 1,862,404
----------
4,347,453
----------
TELECOMMUNICATIONS - 4.2%
Cisco Systems, Inc. (a).................. 73,550 1,540,873
QUALCOMM, Inc............................ 17,400 893,316
----------
2,434,189
----------
TRANSPORTATION - 1.8%
Expeditors International of Washington,
Inc..................................... 12,250 1,048,723
----------
TOTAL COMMON STOCKS
(COST $47,890,794)...................... 55,171,395
----------
<Caption>
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 4.6%
- -----------------------------------------------------------------
SHARES VALUE($)
--------- ----------
HSBC Investor Money
Market Fund Class I Shares *............ 2,644,023 2,644,023
----------
TOTAL INVESTMENT COMPANIES (COST
$2,644,023)............................. 2,644,023
----------
TOTAL INVESTMENTS
(COST $50,534,817) - 99.9%............. 57,815,418
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $57,888,505.
(a) Represents non-income producing security.
* Investment in affiliate.
ADR -- American Depositary Receipt
49 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR VALUE PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS - 95.3%
- -----------------------------------------------------------------
SHARES VALUE($)
--------- ----------
AEROSPACE & DEFENSE - 7.5%
Lockheed Martin Corp..................... 19,400 1,472,460
Northrop Grumman Corp.................... 28,600 1,913,340
Raytheon Co.............................. 28,300 1,252,841
----------
4,638,641
----------
BANKING - 4.8%
Bank of America Corp..................... 23,600 1,178,112
Wells Fargo & Co......................... 25,800 1,772,202
----------
2,950,314
----------
BUSINESS SERVICES - 2.2%
Pitney Bowes, Inc........................ 32,100 1,343,385
----------
COMPUTER SOFTWARE - 5.7%
CA, Inc.................................. 87,100 2,208,856
Microsoft Corp........................... 54,300 1,311,345
----------
3,520,201
----------
CONGLOMERATES - 1.9%
Loews Corp............................... 11,200 1,188,880
----------
CONSUMER PRODUCTS - 6.6%
Altria Group, Inc........................ 29,200 2,136,272
Kimberly-Clark Corp...................... 24,500 1,433,985
Tyson Foods, Inc. -- Class A............. 34,200 499,320
----------
4,069,577
----------
DIVERSIFIED MANUFACTURING
OPERATIONS - 2.1%
Ingersoll-Rand Co., Class A.............. 29,800 1,303,750
----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 1.5%
Agilent Technologies, Inc. (a)........... 24,564 943,749
----------
FINANCIAL SERVICES - 18.0%
Citigroup, Inc........................... 36,707 1,833,515
Countrywide Financial Corp............... 76,600 3,114,556
Fannie Mae............................... 41,500 2,099,900
Genworth Financial, Inc., Class A........ 50,900 1,689,880
J.P. Morgan Chase & Co................... 34,150 1,549,727
MGIC Investment Corp..................... 11,800 834,260
----------
11,121,838
----------
GAS & ELECTRIC UTILITY - 2.1%
Dominion Resources, Inc.................. 17,000 1,272,790
----------
INSURANCE - 7.0%
Aetna, Inc............................... 16,600 639,100
AON Corp................................. 26,900 1,127,379
Radian Group, Inc........................ 17,400 1,091,328
The Hartford Financial Services Group,
Inc..................................... 15,700 1,443,301
----------
4,301,108
----------
<Caption>
- -----------------------------------------------------------------
COMMON STOCKS, CONTINUED
- -----------------------------------------------------------------
SHARES VALUE($)
--------- ----------
MEDIA - 6.8%
CBS Corp., Class B....................... 33,050 841,784
Liberty Media Corp., Class A (a)......... 100,350 837,923
Viacom, Inc., Class B (a)................ 63,800 2,541,153
----------
4,220,860
----------
METALS & MINING - 6.4%
Barrick Gold Corp........................ 62,700 1,911,096
POSCO ADR................................ 11,800 831,546
Rio Tinto PLC ADR........................ 5,300 1,180,310
----------
3,922,952
----------
OIL & GAS - 11.0%
ConocoPhillips........................... 16,271 1,088,530
Kerr-McGee Corp.......................... 30,589 3,054,617
Noble Energy, Inc........................ 59,000 2,653,820
----------
6,796,967
----------
PAPER PRODUCTS - 1.6%
International Paper Co................... 26,800 974,180
----------
TELECOMMUNICATIONS - 8.1%
AT&T, Inc................................ 44,900 1,176,829
BellSouth Corp........................... 21,050 711,069
Comcast Corp. Special Class A (a)........ 42,300 1,304,109
Motorola, Inc............................ 47,900 1,022,665
Sprint Nextel Corp....................... 30,600 758,880
----------
4,973,552
----------
TRANSPORTATION - 2.0%
Union Pacific Corp....................... 13,200 1,203,972
----------
TOTAL COMMON STOCKS
(COST $46,902,116)...................... 58,746,716
----------
<Caption>
- -----------------------------------------------------------------
INVESTMENT COMPANIES - 4.7%
- -----------------------------------------------------------------
SHARES VALUE($)
--------- ----------
HSBC Investor Money Market Fund
Class I Shares*......................... 2,922,921 2,922,921
----------
TOTAL INVESTMENT COMPANIES
(COST $2,922,921)....................... 2,922,921
----------
TOTAL INVESTMENTS
(COST $49,825,037) - 100.0%............ 61,669,637
----------
----------
</Table>
- ---------
Percentages indicated are based on net assets of $61,678,884.
(a) Represents non-income producing security.
* Investment in Affiliate
ADR - American Depository Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 50
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 97.4%
- ----------------------------------------------------------------
SHARES VALUE($)
--------- -----------
AUSTRALIA - 0.6%
Macquarie Airports..................... 699,400 1,742,312
-----------
AUSTRIA - 0.5%
Omv AG................................. 20,500 1,425,073
-----------
BELGIUM - 1.1%
Delhaize Group......................... 29,300 2,110,360
KBC Bankverzekeringsholding............ 11,300 1,310,639
-----------
3,420,999
-----------
BRAZIL - 1.9%
Braskem SA-Pref........................ 40,000 275,234
Gerdau SA ADR.......................... 75,150 1,300,095
Petroleo Brasileiro SA ADR............. 27,700 2,462,253
Unibanco ADR........................... 8,100 642,735
Usinas Siderurgicas de Minas Gerais
SA.................................... 30,200 1,146,890
-----------
5,827,207
-----------
CANADA - 3.3%
Canadian Natural Resources............. 43,400 2,609,126
EnCana Corp............................ 30,000 1,499,732
ING Canada, Inc........................ 32,800 1,766,176
IPSCO, Inc............................. 8,900 918,663
Nexen, Inc............................. 20,000 1,168,903
Teck Cominco Ltd., B shares............ 32,300 2,227,307
-----------
10,189,907
-----------
CHINA - 0.1%
China Petroleum & Chemical Corp........ 592,000 376,061
-----------
FINLAND - 0.5%
Sampo OYJ, Class A..................... 77,000 1,589,011
-----------
FRANCE - 11.3%
Assurances Generales de France......... 36,800 4,651,236
BNP Paribas New (a).................... 1,580 144,194
BNP Paribas SA......................... 15,800 1,492,766
Credit Agricole SA..................... 89,990 3,625,617
Renault SA............................. 55,300 6,417,498
Sanofi-Aventis......................... 57,800 5,449,941
Societe Generale....................... 33,700 5,147,861
Thomson SA............................. 58,900 1,218,462
Total SA, B Shares..................... 24,700 6,829,522
-----------
34,977,097
-----------
GERMANY - 9.1%
Allianz AG............................. 9,300 1,554,360
Continental AG......................... 51,400 6,117,921
E.ON AG (a)............................ 41,000 5,024,345
Fresenius Medical Care AG.............. 11,800 1,415,518
MAN AG................................. 66,000 5,001,804
Muenchener Rueckversicherungs-
Gesellschaft AG....................... 28,600 4,047,010
RWE AG................................. 44,500 3,856,850
TUI AG................................. 41,500 884,159
-----------
27,901,967
-----------
HONG KONG - 0.1%
Sino Land Co., Ltd..................... 142,200 236,603
-----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
- ----------------------------------------------------------------
SHARES VALUE($)
--------- -----------
HUNGARY - 0.4%
MOL Magyar Olaj -- es Gazipari Rt.
GDR................................... 9,600 1,128,000
-----------
ISRAEL - 0.5%
Bank Hapoalim BM....................... 286,600 1,445,806
-----------
ITALY - 1.9%
Buzzi Unicem SpA....................... 27,300 698,366
ENI SpA................................ 166,500 5,082,559
-----------
5,780,925
-----------
JAPAN - 27.3%
Alps Electric Co., Ltd................. 55,000 965,700
Canon, Inc............................. 89,300 6,831,822
East Japan Railway Co.................. 102 796,469
EDION Corp............................. 67,800 1,640,659
Hitachi, Ltd........................... 144,000 1,071,304
Honda Motor Co., Ltd................... 23,500 1,669,873
ITOCHU Corp............................ 317,000 2,879,034
Japan Tobacco, Inc..................... 1,200 4,827,404
JFE Holdings, Inc...................... 140,100 5,439,104
Kobe Steel, Ltd........................ 958,000 3,256,443
Kyocera Corp........................... 11,400 1,064,401
Mitsubishi Corp........................ 129,000 3,121,607
Mitsubishi UFJ Financial Group, Inc.... 172 2,704,260
Mitsui & Co., Ltd...................... 171,000 2,584,901
Mitsui Chemicals, Inc.................. 396,000 2,866,087
Mitsui O.S.K. Lines, Ltd............... 451,000 3,228,502
Nippon Mining Holdings, Inc............ 360,000 3,329,644
Nippon Telegraph & Telephone Corp...... 344 1,540,975
Nissan Motor Co., Ltd.................. 225,100 2,959,813
ORIX Corp.............................. 19,300 5,797,628
Sanyo Shinpan Finance Co., Ltd......... 23,750 1,403,931
Sega Sammy Holdings, Inc............... 17,400 693,860
Sony Corp.............................. 12,510 628,522
Sumitomo Heavy Industries, Ltd......... 128,000 1,349,144
Sumitomo Metal Industries, Ltd......... 294,000 1,239,526
Sumitomo Mitsui Financial Group,
Inc................................... 598 6,565,657
The Tokyo Electric Power Co., Inc...... 90,600 2,327,668
Tokyo Gas Co., Ltd..................... 529,000 2,560,202
Toyota Motor Corp...................... 123,900 7,247,904
UNY Co., Ltd........................... 90,000 1,608,696
-----------
84,200,740
-----------
LUXEMBOURG - 0.9%
Arcelor................................ 63,680 2,618,626
-----------
NETHERLANDS - 5.2%
ABN AMRO Holding NV.................... 92,253 2,756,756
European Aeronautic Defence and Space
Co.................................... 79,660 3,143,112
ING Groep NV........................... 190,468 7,750,669
Koninklijke Philips Electronics NV..... 35,000 1,207,475
Royal Dutch Shell plc, A Shares........ 33,600 1,151,971
-----------
16,009,983
-----------
PHILLIPINES - 0.3%
Philippine Long Distance Telephone
Co.................................... 21,000 830,658
-----------
</Table>
51 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
- ----------------------------------------------------------------
SHARES VALUE($)
--------- -----------
SINGAPORE - 1.8%
Flextronics International, Ltd. (a).... 162,400 1,844,864
Singapore Telecommunications, Ltd...... 2,104,630 3,648,416
-----------
5,493,280
-----------
SOUTH AFRICA - 0.9%
Sanlam, Ltd............................ 554,040 1,433,443
Telkom South Africa, Ltd............... 28,000 667,988
Tiger Brands, Ltd...................... 20,800 580,425
-----------
2,681,856
-----------
SOUTH KOREA - 1.7%
Industrial Bank of Korea GDR........... 88,300 1,910,812
Kookmin Bank ADR....................... 14,600 1,300,130
POSCO ADR.............................. 29,000 2,043,630
-----------
5,254,572
-----------
SPAIN - 3.1%
Endesa SA.............................. 143,600 4,767,527
Repsol YPF SA.......................... 155,000 4,629,842
-----------
9,397,369
-----------
SWITZERLAND - 1.9%
Credit Suisse Group.................... 81,100 5,095,734
Novartis AG............................ 13,460 772,446
-----------
5,868,180
-----------
TAIWAN - 1.0%
China Steel Corp. GDR.................. 36,470 708,612
Compal Electronics, Inc. GDR........... 222,840 1,236,762
Gigabyte Technology Co., Ltd........... 270,112 213,635
Taiwan Semiconductor Manufacturing Co.,
Ltd................................... 491,141 1,049,736
-----------
3,208,745
-----------
THAILAND - 0.3%
PTT Public Company Ltd. plc............ 121,400 795,959
-----------
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
- ----------------------------------------------------------------
SHARES VALUE($)
--------- -----------
UNITED KINGDOM - 21.7%
AstraZeneca plc........................ 61,200 3,381,031
Aviva plc.............................. 346,270 5,057,110
Barclays plc........................... 410,200 5,123,200
BHP Billiton plc....................... 47,100 969,549
BP Amoco plc........................... 255,100 3,146,540
British Aerospace plc.................. 485,500 3,695,734
British American Tobacco plc........... 110,300 2,819,542
Friends Provident plc.................. 782,500 2,807,076
George Wimpey plc...................... 244,600 2,334,684
HBOS plc............................... 260,121 4,564,899
Mitchells & Butlers plc................ 119,800 1,075,221
Punch Taverns plc...................... 185,000 2,954,819
Royal & Sun Alliance Insurance Group
plc................................... 736,000 1,851,876
Royal Bank of Scotland Group plc....... 169,100 5,521,972
Royal Dutch Shell plc, B Shares........ 45,973 1,643,749
Sainsbury plc.......................... 410,062 2,499,056
Tate & Lyle plc........................ 191,100 1,933,787
Taylor Woodrow plc..................... 361,600 2,525,121
Vodafone Group plc..................... 2,871,953 6,781,132
Whitbread plc.......................... 145,200 2,965,102
Xstrata plc............................ 96,000 3,472,705
-----------
67,123,905
-----------
TOTAL COMMON STOCKS
(COST $208,441,583)................... 299,524,841
-----------
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS - 1.4%
- ----------------------------------------------------------------
Investors Bank & Trust, 3.21%,
purchased on 4/28/06, due 5/01/06 with
maturity
value of $4,429,637 (Collateralized
fully by various U.S. Government
Obligations).......................... 4,428,452 4,428,452
-----------
TOTAL REPURCHASE AGREEMENTS
(COST $4,428,452)..................... 4,428,452
-----------
- ----------------------------------------------------------------
RIGHTS & WARRANTS - 0.0%
- ----------------------------------------------------------------
UNITED KINGDOM - 0.0%
TI Automotive Ltd., Class A (a) (b).... 190,000 0
-----------
TOTAL RIGHTS & WARRANTS
(COST $0)............................. 0
-----------
TOTAL INVESTMENTS
(COST $212,870,035) - 98.8%.......... 303,953,293
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $307,492,484.
(a) Represents non-income producing security.
(b) Represents illiquid security.
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 52
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
PERCENT OF
INDUSTRY NET ASSETS
- -------- ----------
Aerospace & Defense......................................... 2.2%
Automotive.................................................. 7.9%
Banking & Financial Services................................ 20.9%
Building & Construction..................................... 1.8%
Cash........................................................ 1.4%
Chemicals................................................... 1.0%
Computer Related............................................ 0.5%
Drugs -- Medical............................................ 3.6%
Electrical.................................................. 3.6%
Electronic Components & Semiconductors...................... 2.5%
Food & Beverage............................................. 1.0%
Insurance................................................... 8.1%
Leisure..................................................... 1.0%
Manufacturing............................................... 7.1%
Metals & Mining............................................. 8.2%
Multimedia.................................................. 0.4%
Oil & Gas................................................... 15.3%
Real Estate................................................. 0.1%
Retail...................................................... 3.1%
Telecommunications.......................................... 4.4%
Tobacco..................................................... 2.5%
Tourism..................................................... 0.3%
Transportation Services..................................... 1.9%
------
Total Investments........................................... 98.8%
------
Other assets in excess of liabilities....................... 1.2%
------
Net Assets.................................................. 100.0%
------
------
</Table>
53 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
At April 30, 2006, the portfolio's open forward currency contracts were as
follows:
<Table>
<Caption>
CONTRACT CONTRACT UNREALIZED
DELIVERY AMOUNT VALUE APPRECIATION/
CURRENCY DATE (LOCAL CURRENCY) (U.S. DOLLAR) VALUE (DEPRECIATION)
- -------- ---- ---------------- ------------- ----- --------------
LONG CONTRACTS
Japanese Yen......................................... 5/1/2006 105,000,000 $ 921,295 $ 922,266 $ 971
SHORT CONTRACTS
Swiss Franc.......................................... 6/15/2006 6,520,000 $5,158,432 $5,285,637 $(127,205)
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 54
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR SMALL CAP EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS - 95.7%
- ----------------------------------------------------------------
SHARES VALUE($)
---------- -----------
ADVERTISING - 2.6%
Monster Worldwide, Inc. (a)........... 112,800 6,474,720
-----------
AEROSPACE & DEFENSE - 1.0%
Hexcel Corp. (a)...................... 107,000 2,363,630
-----------
BANKING - 3.0%
East West Bancorp, Inc................ 101,200 4,014,604
Wintrust Financial Corp............... 65,500 3,389,625
-----------
7,404,229
-----------
BIOTECHNOLOGY - 2.9%
Celgene Corp. (a)..................... 168,700 7,112,392
-----------
COMMERCIAL SERVICES - 4.2%
Alliance Data Systems Corp. (a)....... 90,900 4,999,500
Schawk, Inc., Class A................. 67,400 1,707,916
Sotheby's Holdings, Inc. (a).......... 125,400 3,760,746
-----------
10,468,162
-----------
COMPUTER SOFTWARE - 9.6%
Activision, Inc. (a).................. 58,400 828,696
CheckFree Corp. (a)................... 55,100 2,968,237
Mercury Interactive Corp. (a)......... 78,400 2,822,400
Satyam Computer Services Ltd. ADR..... 96,500 3,472,070
Sina Corp. (a)........................ 103,100 2,726,995
SRA International, Inc., Class A
(a).................................. 142,700 4,569,254
Transaction Systems Architects, Inc.,
Class A (a).......................... 157,000 6,270,580
-----------
23,658,232
-----------
CONSULTING SERVICES - 1.1%
LECG Corp. (a)........................ 19,400 358,706
Resources Connection, Inc. (a)........ 84,900 2,283,810
-----------
2,642,516
-----------
DIVERSIFIED MANUFACTURING OPERATIONS - 8.6%
Actuant Corp., Class A................ 40,100 2,564,395
AMETEK, Inc........................... 150,500 7,415,135
AptarGroup, Inc....................... 40,900 2,143,569
IDEX Corp............................. 130,300 6,619,240
The Stanley Works..................... 48,000 2,508,000
-----------
21,250,339
-----------
ELECTRONIC COMPONENTS & SEMICONDUCTORS - 10.3%
Atmel Corp. (a)....................... 470,300 2,464,372
ATMI, Inc. (a)........................ 98,600 2,800,240
Cognos, Inc. (a)...................... 128,600 4,792,922
Integrated Device Technology, Inc.
(a).................................. 157,600 2,398,672
Power Integrations, Inc. (a).......... 90,200 1,909,534
Thermo Electron Corp. (a)............. 174,500 6,725,230
Varian Semiconductor Equipment
Associates, Inc. (a)................. 132,850 4,350,838
-----------
25,441,808
-----------
ENVIRONMENTAL SERVICES - 4.0%
Republic Services, Inc., Class A...... 139,500 6,139,395
Waste Connections, Inc. (a)........... 98,900 3,807,650
-----------
9,947,045
-----------
FINANCIAL SERVICES - 2.4%
Affiliated Managers Group, Inc. (a)... 57,600 5,834,880
-----------
HEALTH CARE - 12.7%
Advanced Medical Optics, Inc. (a)..... 51,200 2,385,920
Charles River Laboratories
International,
Inc. (a)............................. 42,800 2,022,300
<Caption>
- ----------------------------------------------------------------
COMMON STOCKS, CONTINUED
- ----------------------------------------------------------------
SHARES VALUE($)
---------- -----------
CYTYC Corp. (a)....................... 117,400 3,034,790
Manor Care, Inc....................... 145,900 6,397,715
Omnicare, Inc......................... 140,100 7,945,070
Respironics, Inc. (a)................. 180,900 6,624,558
Ventana Medical Systems (a)........... 61,600 2,999,920
-----------
31,410,273
-----------
HOSPITALS - 1.4%
Triad Hospitals, Inc. (a)............. 86,900 3,580,280
-----------
MEDIA - 1.7%
Meredith Corp......................... 85,600 4,245,760
-----------
OIL & GAS - 12.1%
Chesapeake Energy Corp................ 140,700 4,457,376
Consol Energy, Inc.................... 65,500 5,577,980
Denbury Resources, Inc. (a)........... 157,000 5,118,200
Massey Energy Co...................... 142,700 5,515,355
Peabody Energy Corp................... 66,600 4,253,076
Smith International, Inc.............. 118,000 4,983,140
-----------
29,905,127
-----------
PHARMACEUTICALS - 6.6%
Elan Corp. PLC ADR (a)................ 505,400 7,434,434
MGI Pharma, Inc. (a).................. 33,000 616,440
OSI Pharmaceuticals, Inc. (a)......... 208,900 5,550,473
Santarus, Inc. (a).................... 369,700 2,854,084
-----------
16,455,431
-----------
REAL ESTATE - 1.0%
Northstar Realty Finance Corp......... 59,700 669,237
The Mills Corp........................ 60,000 1,914,600
-----------
2,583,837
-----------
RETAIL - 6.6%
Advance Auto Parts, Inc............... 116,800 4,697,696
Dick's Sporting Goods, Inc. (a)....... 70,700 2,980,005
P.F. Chang's China Bistro, Inc. (a)... 37,600 1,602,136
PETsMART, Inc......................... 138,700 3,836,442
Williams-Sonoma, Inc.................. 78,400 3,282,608
-----------
16,398,887
-----------
TELECOMMUNICATIONS - 2.0%
Polycom, Inc. (a)..................... 227,700 5,009,400
-----------
TRANSPORTATION - 1.9%
J.B. Hunt Transport Services, Inc..... 202,300 4,820,809
-----------
TOTAL COMMON STOCKS (COST $177,833,854) 237,007,757
-----------
<Caption>
- ----------------------------------------------------------------
INVESTMENT COMPANIES - 3.3%
- ----------------------------------------------------------------
SHARES VALUE($)
---------- -----------
HSBC Investor Money Market Fund Class
I Shares*............................ 8,247,705 8,247,705
-----------
TOTAL INVESTMENT COMPANIES
(COST $8,247,705) 8,247,705
-----------
TOTAL INVESTMENTS
(COST $186,081,559) -- 99.0% 245,255,462
-----------
-----------
</Table>
- ---------
Percentages indicated are based on net assets of $247,708,167.
(a) Represents non-income producing security.
* Investment in Affiliate
ADR -- American Depository Receipt
55 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
INTERMEDIATE
DURATION CORE PLUS HIGH YIELD
FIXED INCOME FIXED INCOME FIXED INCOME GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO (A) PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments in non-affiliates,
at value $23,147,654 $117,937,892 $10,987,838 $55,171,395 $ 58,746,716
Investments in affiliates, at
value 60,896 510,201 -- 2,644,023 2,922,921
Interest and dividends
receivable 168,622 1,011,426 180,023 42,353 81,836
Receivable for investments sold 1,978,010 14,102,691 -- 1,338,859 --
Unrealized appreciation on
forward foreign currency
contracts 368 1,767 -- -- --
Prepaid expenses and other
assets 520 7,177 7,058 976 1,137
----------- ------------ ----------- ----------- ------------
TOTAL ASSETS 25,356,070 133,571,154 11,174,919 59,197,606 61,752,610
----------- ------------ ----------- ----------- ------------
...................................................................................................................................
LIABILITIES:
Cash overdraft -- -- -- -- 27,625
Payable for investments
purchased 3,664,746 24,850,475 150,000 1,259,823 --
Unrealized depreciation on
forward foreign currency
contracts 107 540 -- -- --
Accrued expenses and other
liabilities:
Investment management 7,375 42,688 4,560 23,112 26,068
Administration 1,876 6,606 285 1,799 1,899
Accounting 3,595 6,278 4,114 5,335 4,213
Compliance service 61 160 55 20 39
Custodian 5,809 2,679 -- 18,212 13,092
Trustee -- -- 74 -- --
Other 736 2,580 471 800 790
----------- ------------ ----------- ----------- ------------
TOTAL LIABILITIES 3,684,305 24,912,006 159,559 1,309,101 73,726
----------- ------------ ----------- ----------- ------------
...................................................................................................................................
NET ASSETS:
Applicable to investors'
beneficial interest $21,671,765 $108,659,148 $11,015,360 $57,888,505 $ 61,678,884
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
Investments, at cost $23,530,643 $120,021,934 $10,831,581 $50,534,817 $ 49,825,037
----------- ------------ ----------- ----------- ------------
----------- ------------ ----------- ----------- ------------
Foreign currency, at cost
--------------- ------------ ------------ ------------ ------------
</Table>
(a) The High Yield Fixed Income Portfolio commenced operation on November 18,
2005.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 56
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
<Table>
<Caption>
INTERNATIONAL SMALL CAP
EQUITY EQUITY
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------
ASSETS:
Investments in non-affiliates,
at value $303,953,293 $237,007,757
Investments in affiliates, at
value -- 8,247,705
Cash -- 27,625
Foreign currency 3,480,827 --
Interest and dividends
receivable 1,411,755 70,436
Receivable for investments sold 365,663 3,280,115
Unrealized appreciation on
forward foreign currency
contracts 971 --
Prepaid expenses and other
assets 12,048 20,627
------------ ------------
TOTAL ASSETS 309,224,557 248,654,265
------------ ------------
..........................................................................
LIABILITIES:
Payable for investments
purchased 1,351,991 765,721
Unrealized depreciation on
forward foreign currency
contracts 127,205 --
Accrued expenses and other
liabilities:
Investment management 217,625 160,167
Administration 12,611 11,691
Accounting 3,504 3,610
Compliance service 130 188
Custodian 15,276 --
Trustee -- --
Other 3,731 4,721
------------ ------------
TOTAL LIABILITIES 1,732,073 946,098
------------ ------------
NET ASSETS:
Applicable to investors'
beneficial interest $307,492,484 $247,708,167
------------ ------------
------------ ------------
Investments, at cost $212,870,035 $186,081,559
------------ ------------
------------ ------------
Foreign currency, at cost $ 3,317,581
------------
------------
</Table>
57 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
INTERMEDIATE
DURATION CORE PLUS HIGH YIELD
FIXED INCOME FIXED INCOME FIXED INCOME GROWTH VALUE
PORTFOLIO PORTFOLIO PORTFOLIO (A) PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 651,070 $ 2,995,063 $ 270,687 $ -- $ --
Dividends -- -- 6,930 225,785 531,470
Dividend income from affiliated
investments 5,869 49,468 -- 34,315 31,292
Income from securities lending 3,075 17,878 -- 19 113
----------- ------------ ---------- ---------- -----------
TOTAL INVESTMENT INCOME 660,014 3,062,409 277,617 260,119 562,875
----------- ------------ ---------- ---------- -----------
.................................................................................................................................
EXPENSES:
Investment management 51,488 261,162 21,182 132,919 149,916
Administration 4,827 21,074 1,324 10,088 10,708
Accounting 29,688 35,520 27,432 28,429 27,296
Compliance service 230 870 98 352 388
Custodian 10,633 25,069 15,049 10,712 13,092
Trustee 365 1,371 150 548 606
Other 2,127 8,100 645 3,284 3,535
----------- ------------ ---------- ---------- -----------
TOTAL EXPENSES 99,358 353,166 65,880 186,332 205,541
----------- ------------ ---------- ---------- -----------
.................................................................................................................................
NET INVESTMENT INCOME (LOSS) 560,656 2,709,243 211,737 73,787 357,334
----------- ------------ ---------- ---------- -----------
.................................................................................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains (losses) from
investments and foreign
currency transactions (402,173) (1,657,869) 12,241 2,754,704 1,945,744
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies 99,229 8,919 156,257 1,293,178 4,979,185
----------- ------------ ---------- ---------- -----------
.................................................................................................................................
Net realized/unrealized gains
(losses) from investments and
foreign currency transactions (302,944) (1,648,950) 168,498 4,047,882 6,924,929
----------- ------------ ---------- ---------- -----------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 257,712 $ 1,060,293 $ 380,235 $4,121,669 $ 7,282,263
----------- ------------ ---------- ---------- -----------
----------- ------------ ---------- ---------- -----------
</Table>
(a) The High Yield Fixed Income Portfolio commenced operations on November 18,
2005.
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 58
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF OPERATIONS -- FOR THE SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
(CONTINUED)
<Table>
<Caption>
INTERNATIONAL SMALL CAP
EQUITY EQUITY
PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 33,150 $ --
Dividends 2,749,453 518,945
Dividend income from affiliated
investments -- 97,727
Foreign tax withholding (215,505) --
Income from securities lending -- 7,230
------------ ------------
TOTAL INVESTMENT INCOME 2,567,098 623,902
------------ ------------
..........................................................................
EXPENSES:
Investment management 882,918 931,724
Administration 48,859 43,675
Accounting 46,366 27,328
Compliance service 1,681 1,611
Custodian 119,047 34,367
Trustee 2,633 2,526
Other 14,758 14,224
------------ ------------
TOTAL EXPENSES 1,116,262 1,055,455
------------ ------------
..........................................................................
NET INVESTMENT INCOME (LOSS) 1,450,836 (431,553)
------------ ------------
..........................................................................
NET REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gains (losses) from
investments and foreign
currency transactions 11,980,778 22,894,387
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies 51,766,202 21,977,857
------------ ------------
..........................................................................
Net realized/unrealized gains
(losses) from investments and
foreign currency transactions 63,746,980 44,872,244
------------ ------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 65,197,816 $ 44,440,691
------------ ------------
------------ ------------
</Table>
59 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
INTERMEDIATE DURATION CORE PLUS
FIXED INCOME FIXED INCOME
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 YEAR ENDED APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005 (UNAUDITED) OCTOBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 560,656 $ 1,897,871 $ 2,709,243 $ 6,493,010
Net realized gains (losses)
from investment and foreign
currency transactions (402,173) (162,231) (1,657,869) 7,083,274
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies 99,229 (1,247,772) 8,919 (10,643,468)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 257,712 487,868 1,060,293 2,932,816
------------ ------------ ------------ ------------
Proceeds from contributions 803,700 6,926,443 18,592,258 31,409,368
Value of withdrawals (12,199,333) (38,301,414) (33,523,183) (81,271,788)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST (11,395,633) (31,374,971) (14,930,925) (49,862,420)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS (11,137,921) (30,887,103) (13,870,632) (46,929,604)
................................................................................................................................
NET ASSETS:
Beginning of period 32,809,686 63,696,789 122,529,780 169,459,384
------------ ------------ ------------ ------------
End of period $ 21,671,765 $ 32,809,686 $108,659,148 $122,529,780
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 60
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
HIGH YIELD
FIXED INCOME
- ---------------------------------------------------------------------------------
FOR THE
PERIOD ENDED
APRIL 30, 2006 (a)
(UNAUDITED)
- ------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 211,737
Net realized gains (losses)
from investment transactions 12,241
Change in unrealized
appreciation/depreciation from
investments 156,257
------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 380,235
------------
Proceeds from contributions 11,582,416
Value of withdrawals (947,291)
------------
CHANGE IN NET ASSETS FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST 10,635,125
------------
CHANGE IN NET ASSETS 11,015,360
...........................................................
NET ASSETS:
Beginning of period --
------------
End of period $ 11,015,360
------------
------------
</Table>
- ---------
(a) The High Yield Fixed Income Portfolio commenced operations on November 18,
2005.
61 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
GROWTH VALUE
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 PERIOD ENDED APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005 (UNAUDITED) OCTOBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 73,787 $ 403,238 $ 357,334 $ 721,613
Net realized gains (losses)
from investment transactions 2,754,704 2,375,542 1,945,744 4,124,126
Change in unrealized
appreciation/depreciation from
investments 1,293,178 3,995,556 4,979,185 4,254,259
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 4,121,669 6,774,336 7,282,263 9,099,998
------------ ------------ ------------ ------------
Proceeds from contributions 11,019,790 15,081,868 8,492,544 14,013,050
Value of withdrawals (6,667,653) (22,121,709) (8,246,371) (30,376,597)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST 4,352,137 (7,039,841) 246,173 (16,363,547)
------------ ------------ ------------ ------------
CHANGE IN NET ASSETS 8,473,806 (265,505) 7,528,436 (7,263,549)
................................................................................................................................
NET ASSETS:
Beginning of period 49,414,699 49,680,204 54,150,448 61,413,997
------------ ------------ ------------ ------------
End of period $ 57,888,505 $ 49,414,699 $ 61,678,884 $ 54,150,448
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</Table>
See notes to financial statements. HSBC INVESTOR PORTFOLIOS 62
<Page>
HSBC INVESTOR PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
INTERNATIONAL EQUITY SMALL CAP EQUITY
PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 2006 YEAR ENDED APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005 (UNAUDITED) OCTOBER 31, 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) $ 1,450,836 $ 4,381,037 $ (431,553) $ (1,294,078)
Net realized gains (losses)
from investment and foreign
currency transactions 11,980,778 18,977,305 22,894,387 62,035,547
Change in unrealized
appreciation/depreciation from
investments and foreign
currencies 51,766,202 17,737,274 21,977,857 (17,237,446)
------------ ---------------- ------------- -------------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS 65,197,816 41,095,616 44,440,691 43,504,023
------------ ---------------- ------------- -------------
Proceeds from contributions 38,879,905 68,931,727 15,966,433 24,917,377
Value of withdrawals (26,815,089) (99,822,646) (31,477,182) (208,976,448)
------------ ---------------- ------------- -------------
CHANGE IN NET ASSETS FROM
TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST 12,064,816 (30,890,919) (15,510,749) (184,059,071)
------------ ---------------- ------------- -------------
CHANGE IN NET ASSETS 77,262,632 10,204,697 28,929,942 (140,555,048)
................................................................................................................................
NET ASSETS:
Beginning of period 230,229,852 220,025,155 218,778,225 359,333,273
------------ ---------------- ------------- -------------
End of period $307,492,484 $ 230,229,852 $ 247,708,167 $ 218,778,225
------------ ---------------- ------------- -------------
------------ ---------------- ------------- -------------
</Table>
63 HSBC INVESTOR PORTFOLIOS See notes to financial statements.
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------------
RATIO OF RATIO OF NET
NET ASSETS AT EXPENSES INVESTMENT RATIO OF
END OF TO AVERAGE INCOME (LOSS) EXPENSES
TOTAL PERIOD NET TO AVERAGE TO AVERAGE PORTFOLIO
RETURN(a) (000'S) ASSETS(b) NET ASSETS(b) NET ASSETS(b)(c) TURNOVER
- ---------------------------------------------------------------------------------------------------------------------------------
INTERMEDIATE DURATION FIXED
INCOME PORTFOLIO
Period ended October 31, 2001 (d) $115,180 0.55% 4.97% 0.55% 102.01%
Year ended October 31, 2002 149,815 0.51% 4.60% 0.51% 44.04%
Year ended October 31, 2003 4.42% 84,488 0.53% 3.70% 0.53% 98.42%
Year ended October 31, 2004 4.48% 63,697 0.57% 3.54% 0.57% 50.06%
Year ended October 31, 2005 0.76%(e) 32,810 0.49%(e) 3.85%(e) 0.58% 107.26%
Six months ended April 30, 2006
(unaudited) 0.88% 21,672 0.77% 4.37% 0.77% 124.22%
- ---------------------------------------------------------------------------------------------------------------------------------
CORE PLUS FIXED INCOME PORTFOLIO
Year ended October 31, 2001 $242,914 0.53% 6.53% 0.53% 341.26%
Year ended October 31, 2002 385,802 0.48% 5.14% 0.48% 77.82%
Year ended October 31, 2003 5.80% 203,551 0.48% 4.38% 0.48% 70.91%
Year ended October 31, 2004 5.56% 169,459 0.52% 4.31% 0.52% 34.88%
Year ended October 31, 2005 1.64%(e) 122,530 0.40%(e) 4.25%(e) 0.53% 176.60%
Six months ended April 30, 2006
(unaudited) 0.88% 108,659 0.63% 4.82% 0.63% 147.29%
- ---------------------------------------------------------------------------------------------------------------------------------
HIGH YIELD FIXED INCOME
PORTFOLIO
Period ended April 30, 2006
(unaudited) (d) 4.68% 11,015 1.84% 5.91% 1.84% 6.94%
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO
Period ended October 31, 2004
(d) (0.86%) $ 49,680 0.72% 0.06% 0.72% 53.08%
Year ended October 31, 2005 13.59%(e) 49,415 0.63%(e) 0.77%(e) 0.68% 79.54%
Six months ended April 30, 2006
(unaudited) 8.32% 57,889 0.69% 0.27% 0.69% 36.21%
- ---------------------------------------------------------------------------------------------------------------------------------
VALUE PORTFOLIO
Period ended October 31, 2004
(d) 6.12% $ 61,414 0.71% 1.28% 0.71% 10.33%
Year ended October 31, 2005 15.23%(e) 54,150 0.64%(e) 1.15%(e) 0.69% 16.45%
Six months ended April 30, 2006
(unaudited) 13.58% 61,679 0.72% 1.25% 0.72% 9.31%
- ---------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
Year ended October 31, 2001 $275,848 0.90% 0.54% 0.90% 26.90%
Year ended October 31, 2002 256,616 0.91% 0.63% 0.91% 31.63%
Year ended October 31, 2003 23.70% 201,805 0.96% 1.00% 0.96% 68.51%
Year ended October 31, 2004 20.29% 220,025 0.94% 1.53% 0.94% 106.11%
Year ended October 31, 2005 19.54% 230,230 0.84% 1.92% 0.84% 31.32%
Six months ended April 30, 2006
(unaudited) 28.12% 307,492 0.86% 1.11% 0.86% 14.64%
- ---------------------------------------------------------------------------------------------------------------------------------
SMALL CAP EQUITY PORTFOLIO
Year ended October 31, 2001 $265,573 0.98% (0.65%) 0.98% 52.47%
Year ended October 31, 2002 266,217 0.99% (0.78%) 0.99% 103.90%
Year ended October 31, 2003 33.30% 426,181 0.91% (0.62%) 0.91% 152.05%
Year ended October 31, 2004 5.93% 359,333 0.88% (0.52%) 0.88% 81.75%
Year ended October 31, 2005 14.35%(e) 218,778 0.85%(e) (0.45%)(e) 0.90% 63.95%
Six months ended April 30, 2006
(unaudited) 21.06% 247,708 0.91% (0.37%) 0.91% 31.02%
- ---------------------------------------------------------------------------------------------------------------------------------
</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) Intermediate Duration Fixed Income Portfolio commenced operations on
January 24, 2001.
High Yield Fixed Income Portfolio commenced operations on November 18, 2005.
Value Portfolio commenced operations on May 7, 2004.
Growth Portfolio commenced operations on May 7, 2004.
(e) During the year ended October 31, 2005, HSBC reimbursed certain amounts to
the Portfolios related to violations of certain investment policies and
limitations. The corresponding impact to the net expense ratio, net income
ratio and total return were 0.09%, 0.12%, 0.05%, 0.05% and 0.04% for
Intermediate Duration Fixed Income Portfolio, Core Plus Fixed Income
Portfolio, Growth Portfolio, Value Portfolio and Small Cap Equity Portfolio,
respectively.
See notes to financial statements.
HSBC INVESTOR PORTFOLIOS 64
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
1. ORGANIZATION:
The HSBC Investor Portfolios (the 'Portfolio Trust'), is an open-end
management investment company organized as a New York trust under the laws
of the State of New York on November 1, 1994. The Portfolios operate as
master funds in master-feeder arrangements. The Declaration of Trust permits
the Board of Trustees to issue an unlimited number of beneficial interests
in the Portfolios. The Portfolio Trust contains the following master funds
(individually a 'Portfolio,' collectively the 'Portfolios'):
<Table>
<Caption>
PORTFOLIO SHORT NAME
--------- ----------
HSBC Investor Intermediate Duration Fixed Intermediate Duration Fixed Income
Income Portfolio (formerly the HSBC Investor Portfolio
Limited Maturity Portfolio)
HSBC Investor Core Plus Fixed Income Portfolio Core Plus Fixed Income Portfolio
(formerly the HSBC Investor Fixed Income
Portfolio)
HSBC Investor High Yield Fixed Income Portfolio High Yield Fixed Income Portfolio
HSBC Investor Growth Portfolio Growth Portfolio
HSBC Investor Value Portfolio Value Portfolio
HSBC Investor International Equity Portfolio International Equity Portfolio
HSBC Investor Small Cap Equity Portfolio Small Cap Equity Portfolio
</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 Portfolio Trust's organizational documents, the Portfolios'
officers and trustees are indemnified against certain liabilities arising
out of the performance of their duties to the Portfolios. In addition, in
the normal course of business, the Portfolios enter into contracts with
their service providers, which also provide for indemnifications by the
Portfolios. The Portfolios' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the
Portfolios. However, based on experience, the Portfolios expect that risk of
loss to be remote.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies
followed by the Portfolios in the preparation of their financial statements.
The policies are in conformity with accounting principles generally accepted
in the United States of America ('GAAP'). The preparation of financial
statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results could
differ from those estimates.
SECURITIES VALUATION:
Bonds and other fixed income securities (other than short-term
obligations but including listed issues) are valued on the basis of
valuations furnished by a pricing service, the use of which has been
approved by the Portfolios' Board of Trustees. In making such valuations,
the pricing service utilizes both dealer-supplied valuations and the use of
matrix techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics other than
market data and without exclusive reliance upon quoted prices or exchanges
or over-the-counter prices, since such valuations are believed to reflect
more accurately the fair value of such securities. All debt portfolio
securities with a remaining maturity of 60 days or less are valued at
amortized cost. Under the amortized cost method, premium or discount, if
any, is amortized or accreted, respectively, on a constant (straight-line)
basis to the maturity of the security.
The value of each equity security is based either on the last sale price
on a national securities exchange, or in the absence of recorded sales, at
the closing bid prices on such exchanges, or at the quoted bid price in the
over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued by or at the direction of
the Portfolios' Board of Trustees. Examples of potentially significant
events that could affect the value of an
65 HSBC INVESTOR PORTFOLIOS
<Page>
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HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
individual security include corporate actions by the issuer, announcements
by the issuer relating to its earnings or products, regulatory news, natural
disasters and litigation. Examples of potentially significant events that
could affect multiple securities held by a Portfolio include governmental
actions, natural disasters and armed conflicts. In addition, if events
materially affecting the value of foreign securities occur between the time
when the exchange on which they are traded closes and the time when the
Portfolios' net assets are calculated, such securities may be valued using
fair value pricing in accordance with procedures adopted by the Board of
Trustees. Management identifies possible fluctuations in foreign securities
by monitoring the rise or fall in the value of a designated benchmark index.
In the event of a rise or fall greater than predetermined levels, the
International Equity Portfolio may use a systematic valuation model provided
by an independent third party to value its foreign securities. When the
International Equity Portfolio uses fair value pricing, the value assigned
to the International Equity Portfolio's foreign securities may not be the
quoted or published prices of the investment on their primary markets or
exchanges.
SECURITIES TRANSACTIONS AND RELATED INCOME:
During the period, security transactions are accounted for no later than
one business day following trade date. For financial reporting purposes,
however, changes in holdings are accounted for on trade date on the last
business day of the reporting period. Securities gains and losses are
calculated on the identified cost basis. Interest income is recognized on
the accrual basis and includes, where applicable, the amortization or
accretion of premium or discount. Dividend income is recorded on the
ex-dividend date.
FOREIGN CURRENCY TRANSLATION:
The accounting records of the Portfolios are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars at the current
rate of exchange to determine the value of investments, assets and
liabilities. Purchases and sales of securities, and income and expenses are
translated at the prevailing rate of exchange on the respective dates of
such transactions. The Portfolios do not isolate the portion of the results
of operations resulting from changes in foreign exchange rates on
investments from fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments and foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The Portfolios may enter into forward foreign currency exchange
contracts in connection with planned purchases or sales of securities or to
hedge the U.S. dollar value of portfolio securities denominated in a
particular currency. The Portfolios could be exposed to risks if the
counter-parties to the contracts are unable to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purposes as
unrealized gains or losses until the contract settlement date.
FUTURES CONTRACTS:
Each Portfolio may invest in futures contracts for the purpose of
hedging their existing portfolio securities or securities it intends to
purchase against fluctuations in fair value caused by changes in prevailing
market interest rates. Upon entering into a futures contract, the Portfolio
is required to pledge to the broker an amount of cash and/or other assets
equal to a certain percentage of the contract amount (initial margin
deposit). Subsequent payments, known as 'variation margin,' are made or
received by the Portfolio each day, depending on the daily fluctuations in
the fair value of the underlying security. The Portfolio recognizes a gain
or loss equal to the daily variation margin. Should market conditions move
unexpectedly, the Portfolio may not achieve the anticipated benefits of the
futures contracts and may realize a loss. The use of futures transactions
involves the risk of imperfect correlation in movements in the price of
futures contracts, interest rates and the underlying hedged assets.
HSBC INVESTOR PORTFOLIOS 66
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
MORTGAGE DOLLAR ROLL TRANSACTIONS:
The Core Plus Fixed Income Portfolio may engage in dollar roll
transactions with respect to mortgage securities issued by the Government
National Mortgage Association, the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation. In a dollar roll transaction,
the Portfolio sells a mortgage-backed security and simultaneously agrees to
repurchase a similar security on a specified future date at an agreed upon
price. During the roll period, the Portfolio will not be entitled to receive
any interest or principal paid on the securities sold. The Portfolio is
compensated for the lost interest on the securities sold by the difference
between the sales price and the lower price for the future repurchase as
well as by the interest earned on the reinvestment of the sales proceeds.
The Portfolio may also be compensated by receipt of a commitment fee. When
the Portfolio enters into a mortgage dollar roll transaction, liquid assets
in an amount sufficient to pay for the future repurchase are segregated with
the custodian.
RESTRICTED AND ILLIQUID SECURITIES:
A restricted security is a security which has been purchased through a
private offering and cannot be resold to the general public without prior
registration under the Securities Act of 1933 (the '1933 Act') or pursuant
to the resale limitations provided by Rule 144 under the 1933 Act, or an
exemption from the registration requirements of the 1933 Act. Certain
restricted securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers, and may be deemed
liquid by the investment manager based on procedures established by the
Board of Trustees. Therefore, not all restricted securities are considered
illiquid. At April 30, 2006, the HSBC Core Plus Fixed Income Portfolio held
restricted securities that were illiquid, representing 0.03% of net assets,
as follows:
<Table>
<Caption>
ACQUISITION ACQUISITION PRINCIPAL
SECURITY NAME DATE COST($) AMOUNT($) VALUE($)
------------- ---- ------- --------- --------
FHA Weyerhauser, 7.43%, 1/1/24................ 3/28/2002 32,498 34,389 34,389
</Table>
SECURITY LOANS:
To generate additional income, the Portfolios may lend portfolio
securities in amounts up to 33 1/3%, except for Small Cap Equity Portfolio,
which may lend up to 30%, of its respective assets pursuant to agreements
requiring that the loan be collateralized by cash, U.S. Government or U.S.
Government agency securities, equal at all times to at least 100% of the
fair value of the loaned securities. HSBC Bank USA ('HSBC Bank'), an
affiliate of the Investment Adviser (defined below), acts as the securities
lending agent for this activity. The Portfolios receive payments from
borrowers equivalent to the dividends and interest that would have been
earned on securities loaned while simultaneously seeking to earn income on
the investment of collateral. Collateral is marked to market daily to
provide the required level of collateral. There may be risks of delay in
recovery of the securities or even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans will be made
only to borrowers, such as broker-dealers, banks or institutional borrowers
of securities, deemed by HSBC Bank to be of good standing and creditworthy
under guidelines approved by the Board of Trustees and when, in the
judgement of HSBC Bank, the amounts that can be earned currently from such
securities loans justifies the attendant risks. Loans are subject to
termination by the Portfolios or the borrower at any time and are,
therefore, not considered to be illiquid investments. As of April 30, 2006,
the Portfolios did not have any securities on loan.
LINE OF CREDIT:
The Portfolios may borrow up to $50 million under the terms of a
short-term, demand note agreement with HSBC Bank. The purpose of the
agreement is to meet temporary or emergency cash needs, including redemption
requests that might otherwise require the untimely disposition of
securities.
During the period ended April 30, 2006, the details of the borrowings
were as follows (based on actual number of days on which the respective
Portfolios borrowed monies):
<Table>
<Caption>
AVERAGE AMOUNT AVERAGE
FUND OUTSTANDING INTEREST RATE
---- ----------- -------------
Core Plus Fixed Income Portfolio........................... $7,732,592 4.60%
</Table>
67 HSBC INVESTOR PORTFOLIOS
<Page>
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HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
EXPENSE ALLOCATIONS:
Expenses directly attributable to a Portfolio are charged to that
Portfolio. Expenses not directly attributable to a Portfolio are allocated
proportionally among various or all series within the HSBC Investor Family
of Funds in relation to net assets or on another reasonable basis.
FEDERAL INCOME TAXES:
Each Portfolio will be treated as a partnership for U.S. Federal income
tax purposes. Accordingly, each Portfolio passes through all of its net
investment income and gains and losses to its Feeders, and is therefore not
subject to U.S. Federal income tax. As such, an investor in the Portfolios
will be taxed on their share of the Portfolios' ordinary income and realized
gains. It is intended that the Portfolios will be managed in such a way that
an investor will be able to satisfy the requirements of the Internal Revenue
Code applicable to regulated investment companies.
3. RELATED PARTY TRANSACTIONS:
INVESTMENT MANAGEMENT:
HSBC Investments (USA) Inc. ('HSBC' or the 'Investment Adviser'), a
wholly owned subsidiary of HSBC Bank USA, a New York State chartered bank,
acts as the Investment Adviser to the Portfolios pursuant to an investment
management contract with the Portfolio Trust. As Investment Adviser, HSBC
manages the investments of the Portfolios and continuously reviews,
supervises and administers the Portfolios' investments. Waddell & Reed
Investment Management Company, NWQ Investment Management Co., LLC,
AllianceBernstein Investment Research and Management, and Westfield Capital
Management, LLC serve as Sub-Investment Advisers for the Growth Portfolio,
Value Portfolio, International Equity Portfolio and the Small Cap Equity
Portfolio, respectively, and are paid for their services directly by HSBC.
For its services as Investment Adviser, HSBC receives a fee, accrued
daily and paid monthly, at an annual rate of 0.40% of the Intermediate
Duration Fixed Income Portfolio's average daily net assets and 0.60% of the
High Yield Fixed Income Portfolio's average daily net assets.
For its services as Investment Adviser, HSBC receives, from the Core
Plus Fixed Income Portfolio, a fee accrued daily and paid monthly at an
annual rate of:
<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 68
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
For their services as Investment Adviser and Sub-Investment Adviser,
respectively, HSBC and NWQ Investment Management Co., LLC receive in
aggregate, from the Value Portfolio, a fee, accrued daily and paid monthly,
at an annual rate of:
<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:
HSBC serves the Portfolios as Administrator. Under the terms of the
administration agreement, HSBC receives from the Portfolios fee, accrued
daily and paid monthly, at an annual rate of:
<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 rates and breakpoints are determined on the basis of the
aggregate average daily net assets of the HSBC Investor Family of Funds;
however the assets of the Portfolios and Feeder Funds that invest in the
Portfolios are not double-counted. The total administration fee paid to
BISYS is allocated to each series in the HSBC Investor Family of Funds based
upon its proportionate share of the aggregate net assets of the Family of
Funds. For assets invested in the Portfolios by Feeder Funds, the Portfolios
pay half of the administration fee and the Feeder Funds pay half of the
administration fee, for a combination of the total fee rate set forth above.
Pursuant to a Sub-Administration Agreement with HSBC, BISYS Fund
Services Ohio, Inc. ('BISYS Ohio') a wholly-owned subsidiary of The BISYS
Group, Inc., serves as the Portfolio Trust's sub-administrator subject to
the general supervision of the Portfolio Trust's Board of Trustees and HSBC.
For these services, BISYS Ohio is entitled to a fee, payable by HSBC, at an
annual rate equivalent to the fee rates set forth above, minus 0.02% (2
basis points), which is retained by HSBC.
All voluntary administration fee waivers are not subject to recoupment
in subsequent fiscal periods.
Under a Compliance Services Agreement between the Portfolios' and BISYS
Ohio (the 'CCO Agreement'), BISYS Ohio makes an employee available to serve
as the Portfolios' Chief Compliance Officer (the 'CCO'). Under the CCO
Agreement, BISYS Ohio also provides infrastructure and support in
implementing the written policies and procedures comprising the Portfolios'
compliance program, including support services to the CCO. For the services
provided under the CCO Agreement, the HSBC Investor Family of Funds paid
BISYS Ohio $117,433 for the period ended April 30, 2006, plus certain out of
pocket expenses. Expenses incurred are reflected on the Statement of
Operations as 'Compliance Service'. BISYS Ohio pays the salary and other
compensation earned by any such individuals as employees of BISYS Ohio.
69 HSBC INVESTOR PORTFOLIOS
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
FUND ACCOUNTING, CUSTODIAN AND TRUSTEE:
BISYS Ohio provides fund accounting services for the Portfolios. For its
services to the Portfolios, BISYS Ohio receives an annual fee per Portfolio,
including reimbursement of certain expenses, from each Portfolio accrued
daily and paid monthly.
HSBC Bank serves as custodian to the Portfolios. Investor's Bank & Trust
Company ('IBT') serves as custodian for the High Yield Fixed Income
Portfolio and for the foreign assets of all Portfolios. Compensation paid to
HSBC Bank and IBT for services to the Portfolios as custodian is presented
in the Statements of Operations as custodian fees.
Each of the six non-interested Trustees are compensated with a $24,000
annual Board retainer, as well as a $1,000 annual retainer for each
Committee of the Board. Each non-interested Trustee also receives a $4,000
and $2,000 meeting fee for each regular in-person Board meeting and
Committee meeting, respectively. Furthermore, each non-interested Trustee
receives compensation for attending special meetings and/or functioning as a
Committee Chairperson or Lead Trustee. In addition, the non-interested
Trustees are reimbursed for certain expenses incurred in connection with
their Board membership.
OTHER:
For its services as securities lending agent, HSBC Bank (see note
2 -- Security Loans) receives a fee equal to 0.06% of the average dollar
value of the loans outstanding during a given month from the Portfolios.
Income from securities lending, net of related expenses, is recorded as
earned by the Portfolios. The fees collected by HSBC Bank for the period
ended April 30, 2006 were:
<Table>
<Caption>
PORTFOLIO FEE
--------- ---
Intermediate Duration Fixed Income Portfolio................ $ 161
Core Plus Fixed Income Portfolio............................ 940
Growth Portfolio............................................ 38
Value Fund Portfolio........................................ 188
Small Cap Equity Portfolio.................................. 7,966
</Table>
The HSBC Investor Family of Funds may use affiliated broker/dealers for
the execution of portfolio investment trades. For the period ended April 30,
2006, affiliated broker/dealers did not receive any commissions on the
execution of trades related to the HSBC Investor Family of Funds.
4. INVESTMENT TRANSACTIONS:
For the period ended April 30, 2006, each Portfolio purchased and sold
securities, excluding short-term securities, in the following amounts:
<Table>
<Caption>
PURCHASES SALES PURCHASES SALES
(EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S.
PORTFOLIO NAME GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT
-------------- ----------- ----------- ---------- ----------
Intermediate Duration Fixed Income
Portfolio....................... $18,980,122 $ 26,046,165 $10,635,614 $13,580,774
Core Plus Fixed Income
Portfolio....................... 96,558,425 108,148,784 53,046,523 55,825,407
High Yield Fixed Income
Portfolio....................... 8,661,436 460,125 -- --
Growth Portfolio.................. 21,737,014 18,902,135 -- --
Value Portfolio................... 5,195,941 6,171,912 -- --
International Equity Portfolio.... 46,727,645 37,687,328 -- --
Small Cap Equity Portfolio........ 71,494,223 95,269,342 -- --
</Table>
HSBC INVESTOR PORTFOLIOS 70
<Page>
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HSBC INVESTOR PORTFOLIOS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED) (CONTINUED)
5. FEDERAL INCOME TAX INFORMATION:
As of April 30, 2006, the cost, gross unrealized appreciation and gross
unrealized depreciation on securities, for federal income tax purposes, were
as follows:
<Table>
<Caption>
NET UNREALIZED
TAX UNREALIZED TAX UNREALIZED APPRECIATION
PORTFOLIO NAME TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------------- -------- ------------ ------------ --------------
Intermediate Duration Fixed
Income Portfolio.............. $ 23,555,072 $ 17,465 $ (363,987) $ (346,522)
Core Plus Fixed Income
Portfolio..................... 120,194,657 165,198 (1,911,762) (1,746,564)
High Yield Fixed Income
Portfolio..................... 10,831,581 191,438 (35,181) 156,257
Growth Portfolio................ 50,665,009 8,014,230 (863,821) 7,150,409
Value Portfolio................. 49,869,239 13,159,409 (1,359,011) 11,800,398
International Equity
Portfolio..................... 213,186,293 92,595,218 (1,828,218) 90,767,000
Small Cap Equity Portfolio...... 187,367,893 60,814,195 (2,926,626) 57,887,569
</Table>
71 HSBC INVESTOR PORTFOLIOS
<Page>
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HSBC INVESTOR PORTFOLIOS
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INVESTMENT ADVISER CONTRACT APPROVAL -- APRIL 30, 2006 (UNAUDITED)
The Board of Trustees (the 'Board of Trustees') of the HSBC Investor
Trust, HSBC Advisor Trust and HSBC Portfolio Trust (collectively, the
'Trusts'), and the non-interested Trustees, voting separately, approved the
renewal of the Investment Advisory Contracts and, where applicable
Sub-Advisory Contracts, with respect to the respective series of the Trusts
then existing (collectively, the 'Existing Funds') at an in-person meeting
held on December 12, 2005. For the HSBC Investor High Yield Fixed Income
Fund and HSBC Investor High Yield Fixed Income Portfolio (the 'High Yield
Funds') the Board of Trustees reviewed and approved the initial investment
advisory agreement on June 13, 2005 (the Existing Funds and High Yield Funds
are collectively referred to as the 'Funds' and the Investment Advisory
Contracts and Sub-Advisory Contracts are collectively referred to as the
'Agreements').
In determining whether it was appropriate to approve the Agreements for
the Funds, the Board of Trustees requested information from the Adviser and
the various Sub-Advisers that it believed to be reasonably necessary to
reach its conclusion. The Board of Trustees carefully evaluated this
information, and was advised by independent legal counsel with respect to
its deliberations. Based on its review of the information requested and
provided for each Fund, the Board of Trustees determined that the relevant
Agreement is consistent with the best interests of the Funds and their
shareholders, and enables the Funds to receive high quality services at a
cost that is appropriate and reasonable. The Board of Trustees made these
determinations on the basis of the following considerations, among others:
- Nature, Extent, and Quality of Services Provided by Adviser and
Sub-Advisers. The Board of Trustees considered the nature, quality
and extent of the investment advisory services to be provided by the
Adviser (and, as applicable to the Equity Funds, the sub-advisers),
in light of the high quality services provided to the Funds, and each
Fund's historic performance. In the case of the High Yield Funds, the
Board of Trustees considered the historical performance and
experience of the management team in managing other mutual funds
having similar investment objectives. For the High Yield Funds and
other Fixed Income Funds, the Board also considered the historical
performance and experience of the management team in managing other
accounts, and the reasonable expectation of achieving competitive
performance for these Funds. The Board of Trustees also considered
the general and administrative and marketing services provided to the
Funds by the Adviser. With respect to the Equity Funds, the Board
considered the capabilities and performance of the Adviser's
Multimanager unit. The Board of Trustees also considered the
sufficiency of the Adviser's capabilities and oversight for both
internally managed Funds as well as the sub-advised Equity Funds. The
Board of Trustees further considered the Adviser's and Sub-Advisers'
ability to obtain best execution on portfolio transactions.
- Investment Performance of the Funds, Adviser and Sub-Advisers. The
Board of Trustees considered short-term and long-term investment
performance of each Fund over various periods of time as compared to
a peer group of comparable funds. The Board of Trustees also
considered the Equity Funds' sub-adviser's historic performance
managing accounts having similar investment objectives as the Fund.
With respect to the High Yield Funds, the Trustees considered the
various measurements of investment performance provided with respect
to the high yield team, and the significant achievements by the team
in its management of high-yield products.
- Costs of Services and Profits Realized by the Adviser. The Board of
Trustees considered the Adviser's overall profitability and costs and
an analysis of the estimated profitability to the Adviser from its
relationship with the Funds. The Board of Trustees considered that
the advisory fees under the Agreements were within the range of those
of similar funds, noting the high level of resource, expertise and
experience that was provided to the Funds by the Adviser and
Sub-Advisers. For the Equity Funds, the Board of Trustees concluded
that the combined advisory fees payable to the Adviser and each of
the Equity Fund's Sub-Advisers are fair and reasonable in light of
the services to be provided, the anticipated costs of these services,
the profitability of the Adviser's relationship with the Fund, and
the comparability of the advisory fee to similar fees paid by
comparable mutual funds.
- Other Relevant Considerations. The Board of Trustees considered the
Adviser's and Sub-Adviser's representations regarding staffing and
capabilities to manage the Funds. The Board of Trustees also
considered the overall high quality of the personnel, operations,
financial condition, investment management capabilities,
methodologies, and performance of the Adviser and Sub-Advisers.
Accordingly, in light of the above considerations and such other factors
and information it considered relevant, the Board of Trustees by a unanimous
vote of those present in person at the meetings (including a separate vote
of the Independent Trustees present in person at the meeting) approved the
Agreements.
HSBC INVESTOR PORTFOLIOS 72
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- APRIL 30, 2006
As a shareholder of the HSBC Investor Funds, you incur two types of
costs: (1) transaction costs, including sales charges (loads) on purchases;
redemption fees; and exchange fees; (2) ongoing costs, including management
fees; distribution and/or shareholder servicing fees; and other Fund
expenses. This example is intended to help you understand your ongoing costs
(in dollars) of investing in the HSBC Investor Funds and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from November 1, 2005
through April 30, 2006.
ACTUAL EXPENSES
The table below provides information about actual account values and
actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
table under the heading entitled 'Expenses Paid During Period' to estimate
the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSE PAID
BEGINNING ENDING DURING EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD
11/1/05 4/30/06 11/1/05-4/30/06 11/1/05-4/30/06
------- ------- --------------- ---------------
Intermediate Duration Fixed Income
Portfolio $1,000.00 $1,008.80 $ 3.84 0.77%
Core Plus Fixed Income Portfolio 1,000.00 1,008.80 3.14 0.63%
High Yield Fixed Income
Portfolio** 1,000.00 1,046.80 8.51 1.84%
Growth Portfolio 1,000.00 1,083.20 3.56 0.69%
Value Portfolio 1,000.00 1,135.80 3.81 0.72%
International Equity Portfolio 1,000.00 1,281.20 4.86 0.86%
Small Cap Equity Portfolio 1,000.00 1,210.60 4.99 0.91%
</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 November 18, 2005 to April 30, 2006.
73 HSBC INVESTOR FAMILY OF FUNDS
<Page>
- --------------------------------------------------------------------------------
HSBC INVESTOR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
TABLE OF SHAREHOLDER EXPENSES (UNAUDITED) -- APRIL 30, 2006 (CONTINUED)
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table below provides information about hypothetical account values
and hypothetical expenses based on each HSBC Investor Funds's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund's actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses
you paid for the period. You may use this information to compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
sales charges (loads), redemption fees, or exchange fees. Therefore, the
table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been
higher.
<Table>
<Caption>
EXPENSE PAID
BEGINNING ENDING DURING EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE PERIOD* DURING PERIOD
11/1/05 4/30/06 11/1/05-4/30/06 11/1/05-4/30/06
------- ------- --------------- ---------------
Intermediate Duration Fixed Income
Portfolio $1,000.00 $1,020.98 $ 3.86 0.77%
Core Plus Fixed Income Portfolio 1,000.00 1,021.67 3.16 0.63%
High Yield Fixed Income
Portfolio** 1,000.00 1,015.62 9.25 1.84%
Growth Portfolio 1,000.00 1,021.37 3.46 0.69%
Value Portfolio 1,000.00 1,021.22 3.61 0.72%
International Equity Portfolio 1,000.00 1,020.53 4.31 0.86%
Small Cap Equity Portfolio 1,000.00 1,020.28 4.56 0.91%
</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 November 18, 2005 to April 30, 2006 and has been annualized to reflect
values for the period November 1, 2005 to April 30, 2006.
HSBC INVESTOR FAMILY OF FUNDS 74
<Page>
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to the portfolio securities is available without
charge, upon request, by calling 1-800-525-5757 for HSBC Bank USA and HSBC
Brokerage (USA) Inc. clients and 1-800-782-8183 for all other shareholders or on
the Fund's website at www.investorfunds.us.hsbc.com and the Securities and
Exchange Commission's website at http://www.sec.gov. A copy of the Fund's voting
record for the most recent 12 month period ending June 30 is available at the
Security and Exchange Commission's website at http://www.sec.gov.
Schedules of Portfolio Investments for fiscal quarters ending January 31 and
July 31 will be available no later than 60 days after each period end, without
charge, on the Fund's website at www.investorfunds.us.hsbc.com and on the
Securities and Exchange Commission's website at http://www.sec.gov.
<Page>
HSBC Investor LifeLine Funds:
INVESTMENT ADVISER AND ADMINISTRATOR
HSBC Investments (USA) Inc.
452 Fifth Avenue
New York, NY 10018
SUB-ADVISERS
HSBC Investor Growth Portfolio
Waddell & Reed Investment Management Company
6300 Lamar Avenue
Overland Park, KS 66202
HSBC Investor Value Portfolio
NWQ Investment Management Co., LLC
2049 Century Park East, 16th Floor
Los Angeles, CA 90067
HSBC Investor International Equity Portfolio
AllianceBernstein Investment Research and Management
1345 Avenue of the Americas, 39th Floor
New York, NY 10105
HSBC Investor Small Cap Equity Portfolio
Westfield Capital Management, LLC
One Financial Center
Boston, MA 02111
SHAREHOLDER SERVICING AGENTS
For HSBC Bank USA, N.A. and
HSBC Securities (USA) Inc. Clients
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
1-888-525-5757
For All Other Shareholders
HSBC Investor Funds
P.O. Box 182845 Columbus, OH 43218-2845
1-800-782-8183
TRANSFER AGENT,
DISTRIBUTOR AND SPONSOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
CUSTODIANS
HSBC Investor Intermediate Duration Fixed Income Portfolio
HSBC Investor Core Plus Fixed Income Portfolio
HSBC Investor Growth Portfolio
HSBC Investor Value Portfolio
HSBC Investor Small Cap Equity Portfolio
HSBC Bank USA, N.A.
452 Fifth Avenue
New York, NY 10018
HSBC Investor High Yield Fixed Income Fund
HSBC Investor International Equity Portfolio
Investors Bank & Trust Company
200 Clarendon Street -D 16th Floor
Boston, MA 02116
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP
191 West Nationwide Blvd., Suite 500
Columbus, OH 43215
LEGAL COUNSEL
Dechert LLP
1775 Eye Street, N.W.
Washington, D.C. 20006
The HSBC LifeLine Funds are distributed by BISYS Fund Services. This
document must be preceded or accompanied by a current prospectus for the
HSBC Investor Funds, which you should read carefully before you invest
or send money.
HSB-001 6/06
Item 2. Code of Ethics.
Not applicable - only for annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable - only for annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable - only for annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a)The registrant's principal executive officer and principal financial officer
have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant on Form N-CSR is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b)There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that
occurred during the second fiscal quarter of the period covered by this report
that have materially affected or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
Not applicable - Only effective for annual reports.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) HSBC INVESTOR PORTFOLIOS
--------------------------------------------------------------------
By (Signature and Title)* /s/ Richard A. Fabietti
------------------------------------------------------
Richard A. Fabietti
President
Date__July 7, 2006__________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Richard A. Fabietti
------------------------------------------------------
Richard A. Fabietti
President
Date___July 7, 2006_________________________________
By (Signature and Title)* /s/ Troy A. Sheets
------------------------------------------------------
Troy A. Sheets
Treasurer
Date___July 7, 2006_________________________________
* Print the name and title of each signing officer under his or her signature.
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as.............................. 'TM'
The registered trademark symbol shall be expressed as................... 'r'
The dagger symbol shall be expressed as................................. 'D'
The section symbol shall be expressed as................................ 'SS'