<PAGE>
PROSPECTUS
-------------------------------
AS SUPPLEMENTED THROUGH
NOVEMBER 14, 2000
HSBC INVESTOR
NEW YORK TAX-FREE
BOND FUND
HSBC INVESTOR EQUITY FUND
HSBC INVESTOR
FIXED INCOME FUND
HSBC INVESTOR
INTERNATIONAL EQUITY
FUND
HSBC INVESTOR
SMALL CAP EQUITY FUND
HSBC INVESTOR FAMILY OF FUNDS
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
--------------------------------------------------------------------------------
HSBC INVESTOR FUNDS TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
----------------------------------------------------------------------------------------
Carefully review this 3 HSBC Investor New York Tax-Free Bond Fund
important section, which 10 HSBC Investor Equity Fund
summarizes each Fund's 17 HSBC Investor Fixed Income Fund
investments, risks, past 24 HSBC Investor International Equity Fund
performance, and fees. 31 HSBC Investor Small Cap Equity Fund
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
----------------------------------------------------------------------------------------
Review this section 38 HSBC Investor New York Tax-Free Bond Fund
for information on 39 HSBC Investor Equity Fund
investment strategies 41 HSBC Investor Fixed Income Fund
and risks. 42 HSBC Investor International Equity Fund
44 HSBC Investor Small Cap Equity Fund
46 General Risk Factors: All Funds
48 Specific Risk Factors
FUND MANAGEMENT
----------------------------------------------------------------------------------------
Review this section 51 The Investment Adviser
for details on 53 Portfolio Managers
the people and 55 The Distributor and Administrator
organizations who provide 56 The Two-Tier Fund Structure
services to the Funds.
SHAREHOLDER INFORMATION
----------------------------------------------------------------------------------------
Review this section for 57 Pricing of Fund Shares
details on how 58 Purchasing and Adding to Your Shares
shares are valued, 61 Selling Your Shares
and how to purchase, 65 Exchanging Your Shares
sell and exchange shares. 66 Dividends, Distributions and Taxes
This section also describes
related charges and
payments of dividends
and distributions.
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------
Review this section for 69 HSBC Investor New York Tax-Free Bond Fund
details on selected 70 HSBC Investor Equity Fund
financial statements 71 HSBC Investor Fixed Income Fund
of the Funds. 72 HSBC Investor International Equity Fund
73 HSBC Investor Small Cap Equity Fund
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS
----------------------------------------------------------------------------------------
TAXABLE EQUIVALENT YIELD TABLES
----------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The following is a summary of key information about the Funds, each of which
offers Adviser (Class Y) Shares in this Prospectus. You will find additional
information about the Funds, including a detailed description of the Funds'
investment objectives, strategies and risks, after this Summary.
<TABLE>
<S> <C>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
INVESTMENT OBJECTIVE The investment objective of the New York
Tax-Free Bond Fund is to provide
shareholders of the Fund with income
exempt from regular federal, New York
State and New York City personal income
taxes.
PRINCIPAL The Fund seeks to achieve its investment
INVESTMENT STRATEGIES objective by investing its assets
primarily in a non-diversified portfolio
of municipal bonds, notes, commercial
paper, U.S. Government securities, and
other debt instruments the interest on
which is exempt from regular federal
(except for U.S. Government securities),
New York State and New York City personal
income taxes.
</TABLE>
3
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
PRINCIPAL Market Conditions: The Fund's performance
INVESTMENT RISKS per share will change daily based on many
factors, including the quality of the
instruments in the Fund's investment
portfolio, national and international
economic conditions and general market
conditions. You could lose money on your
investment in the Fund or the Fund could
underperform other investments.
Credit Risk: The Fund could lose money if
the issuer of a fixed income security
owned by the Portfolio defaults on its
financial obligation.
Interest Rate Risk: Changes in interest
rates will affect the yield and value of
the Fund's investments in debt securities.
Derivatives Risk: The Fund may invest in
derivative instruments (e.g., option and
futures contracts) to help achieve its
investment objective. The Fund may do so
only for hedging purposes and not for
speculation. These investments could
increase the Fund's price volatility or
reduce the return on your investment.
Concentration Risk: Because the Fund will
concentrate its investments in New York
obligations and may invest a significant
portion of its assets in the securities of
a single issuer or sector, the value of
the Fund's assets could lose significant
value due to the poor performance of a
single issuer or sector. Historically,
New York State and other issuers of
New York Municipal Obligations have
experienced periods of financial
difficulty. Because a significant share of
New York State's economy depends on
financial and business services, any
change in market conditions that adversely
affects these industries could affect the
ability of New York and its localities to
meet its financial obligations. If such
difficulties arise in the future, you
could lose money on your investment.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT
OF HSBC BANK USA ('HSBC') AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
</TABLE>
4
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
Looking to add a monthly tax-exempt
income component to your investment
portfolio
Seeking higher potential returns than
provided by money market funds
Willing to accept the risks of price and
income fluctuations
Investing short-term reserves
This Fund will not be appropriate for
anyone:
Investing emergency reserves
Seeking safety of principal
Who does not live in New York
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of the Fund
shareholders. If there is a change in the
investment objective or strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment
in light of their then current financial
position and needs. There can be no
assurance that the investment objective of
the Fund will be achieved.
</TABLE>
5
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
PERFORMANCE BAR
CHART AND TABLE
The chart and table on this page show how the HSBC Investor New York Tax-Free
Bond Fund has performed and how its performance has varied from year to year.
The bar chart assumes reinvestment of dividends and distributions.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR ADVISER (CLASS Y)
SHARES*
<S> <C>
1997.................................... 8.50%
1998.................................... 6.41%
1999.................................... -3.08%
</TABLE>
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 2Q 1997 +3.65%
Worst quarter: 2Q 1999 -2.20%
</TABLE>
* The Fund only offers Adviser (Class Y) Shares pursuant
to this prospectus. The Fund offers three additional
classes of shares pursuant to a separate prospectus. The
Adviser (Class Y) Shares of the Fund are offered only to
clients of HSBC and its affiliates for whom HSBC or its
affiliates exercises investment discretion.
6
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The table below compares the Fund's performance over time to that of the Lehman
NY Exempt Index, an index composed of investment grade New York tax-exempt
securities, all having a $50 million minimum maturity value, and the Lipper NY
Municipal Bond Fund Index, an unmanaged, equally weighted index composed of the
30 largest mutual funds with a similar investment objective. The table assumes
reinvestment of dividends and distributions.
-----------------
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
-----------------
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
ADVISER (CLASS Y) SHARES* July 1, 1996 - 3.08% 8.32%
LEHMAN NY EXEMPT INDEX - 1.99% 6.81%**
LIPPER NY MUNICIPAL BOND FUND - 4.96% 4.04%**
</TABLE>
* The New York Tax-Free Bond Fund offers three other classes of shares (Class
A, Class B and Class C Shares) pursuant to another prospectus. Only Adviser
(Class Y) Shares are offered by this prospectus.
** Since September 1, 1996
7
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
FEES AND EXPENSES
As an investor in the HSBC Investor New York Tax-Free Bond Fund, you may pay the
following fees and expenses if you buy and hold Adviser (Class Y) Shares of the
Fund. Shareholder transaction fees are paid from your account. Annual Fund
operating expenses are paid out of Fund assets, and are reflected in the share
price.
<TABLE>
<CAPTION>
SHAREHOLDER
TRANSACTION EXPENSES ADVISER
(FEES PAID DIRECTLY (CLASS Y)
FROM YOUR INVESTMENT) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
----------------------------------------------
Maximum deferred sales charge
(load) None
ANNUAL FUND
OPERATING EXPENSES ADVISER
(EXPENSES THAT ARE DEDUCTED (CLASS Y)
FROM FUND ASSETS) SHARES
Management fee 0.25%
----------------------------------------------
Distribution (12b-1) fee None
----------------------------------------------
Other expenses 0.70%
----------------------------------------------
Total Fund
operating expenses 0.95%
----------------------------------------------
Fee waiver and
expense reimbursement'D' 0.25%
----------------------------------------------
Net operating expenses 0.70%
</TABLE>
'D' Pursuant to an expense limitation agreement.
8
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
EXAMPLE
This Example is intended to help you compare the cost of investing in Adviser
(Class Y) Shares of the Fund with the cost of investing in other mutual funds.
It illustrates the amount of fees and expenses you would pay, assuming the
following:
$10,000 investment
5% annual return
redemption at the end of each period
no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
HSBC INVESTOR NEW
YORK 1 3 5 10
TAX-FREE BOND FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
ADVISER (CLASS Y)
SHARES $72 $278 $501 $1,144
</TABLE>
9
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
HSBC INVESTOR EQUITY FUND
INVESTMENT OBJECTIVE The investment objective of the Equity
Fund is long-term growth of capital and
income without excessive fluctuations in
market value.
PRINCIPAL The Fund seeks to achieve its objective by
INVESTMENT STRATEGIES investing at least 65% of its assets in
equity securities of seasoned medium and
large-sized companies that are expected to
show above average price appreciation. To
achieve its investment objective, the Fund
will pursue two styles of investing.
The 'GROWTH' STYLE of investing focuses on
investing in financially secure firms with
established operating histories that are
proven leaders in their industry or market
sector. Such companies may demonstrate
characteristics such as participation in
expanding markets, increasing unit sales
volume, growth in revenues and earnings
per share, and increasing return on
investments.
The 'VALUE' STYLE of investing focuses on
investing in the equity securities of U.S.
companies believed to be undervalued based
upon internal research and proprietary
valuation systems. Investment decisions
are based on fundamental research,
internally developed valuations systems
and seasoned judgment.
</TABLE>
10
<PAGE>
HSBC INVESTOR EAUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
PRINCIPAL Market Risk: The Fund's performance per
INVESTMENT RISKS share will change daily based on many
factors, including national and
international economic conditions and
general market conditions. You could lose
money on your investment in the Fund or
the Fund could underperform other
investments.
Equity securities have greater price
volatility than fixed income instruments.
The value of the Fund will fluctuate as
the market price of its investments
increases or decreases.
Issuer Risk: The value of a security may
fluctuate for a variety of reasons that
relate to the issuer, including, but not
limited to, management performance and
reduced demand for the issuer's products
and services.
Derivative Risk: The Fund may invest in
derivative instruments (e.g., option and
futures contracts) to help achieve its
investment objective. The Fund intends to
do so primarily for hedging purposes.
These investments could increase the
Fund's price volatility or reduce the
return on your investment.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT
OF HSBC AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
</TABLE>
11
<PAGE>
HSBC INVESTOR EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
Seeking a long-term goal such as
retirement
Looking to add a growth component to your
investment portfolio
Willing to accept higher risks of
investing in the stock market in exchange
for potentially higher long-term returns
This Fund will not be appropriate for
anyone:
Seeking monthly income
Pursuing a short-term goal or investing
emergency reserves
Seeking safety of principal
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of the Fund
shareholders. If there is a change in the
investment objective or strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment
in light of their then current financial
position and needs. There can be no
assurance that the investment objective of
the Fund will be achieved.
</TABLE>
12
<PAGE>
HSBC INVESTOR EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor Equity Fund's annual returns
and how its performance has varied from year to year. The bar chart assumes
reinvestment of dividends and distributions.
[PERFORMANCE GRAPH]
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR ADVISER (CLASS Y)
SHARES*
1997......................28.57%
1998......................29.59%
1999......................10.05%
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1998 +23.38%
Worst quarter: 3Q 1998 -11.52%
</TABLE>
* The Fund only offers Adviser (Class Y) Shares pursuant
to this prospectus. The Fund offers three additional
classes of shares pursuant to a separate prospectus.
Adviser (Class Y) Shares of the Fund are offered only to
clients of HSBC and its affiliates for whom HSBC or its
affiliates exercises investment discretion.
13
<PAGE>
HSBC INVESTOR EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The table below compares the Fund's performance over time to that of the Russell
1000 Index, an unmanaged index of the 1000 largest U.S. companies (representing
approximately 90% of the total market capitalization) in the Russell 3000 Index
(representing approximately 98% of the U.S. equity market by capitalization),
the Lipper Growth Fund Index, an unmanaged, equally weighted index composed of
30 of the largest mutual funds with a similar investment objective, and the
Lipper Large Cap Core Index, an index composed of mutual funds that have an
investment objective similiar to that of the Fund. The table assumes
reinvestment of dividends and distributions.
-----------------
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
ADVISER (CLASS Y) SHARES* July 1, 1996 10.05% 21.36%
RUSSELL 1000 INDEX 20.91% 28.84%**
LIPPER GROWTH FUND INDEX 27.96% 28.39%**
LIPPER LARGE CAP CORE INDEX 19.35% 24.50%***
</TABLE>
* The Equity Fund offers three other classes of shares (Class A, Class B and
Class C Shares) pursuant to another prospectus. Only Adviser (Class Y)
Shares are offered in this prospectus.
** Since September 1, 1996.
*** Since July 1, 1996.
14
<PAGE>
HSBC INVESTOR EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
FEES AND EXPENSES
As an investor in the HSBC Investor Equity Fund, you may pay the following fees
and expenses if you buy and hold Adviser (Class Y) Shares of the Fund.
Shareholder transaction fees are paid from your account. Annual Fund operating
expenses are paid out of Fund assets, and are reflected in the share price.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES ADVISER
(FEES PAID DIRECTLY FROM YOUR (CLASS Y)
INVESTMENT) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
---------------------------------------------
Maximum deferred sales charge
(load) None
ANNUAL FUND OPERATING EXPENSES ADVISER
(EXPENSES THAT ARE DEDUCTED FROM (CLASS Y)
FUND ASSETS) SHARES
Management fee 0.45%
---------------------------------------------
Distribution (12b-1) None
---------------------------------------------
Other expenses 0.24%
---------------------------------------------
Total Fund operating expenses 0.69%
</TABLE>
15
<PAGE>
HSBC INVESTOR EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
EXAMPLE
This Example is intended to help you compare the cost of investing in Adviser
(Class Y) Shares of the Fund with the costs of investing in other mutual funds.
It illustrates the amount of fees and expenses you would pay, assuming the
following:
$10,000 investment
5% annual return
redemption at the end of each period
no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
-------------------
HSBC INVESTOR EQUITY 1 3 5 10
FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
ADVISER (CLASS Y)
SHARES $70 $221 $384 $859
</TABLE>
16
<PAGE>
HSBC INVESTOR FIXED INCOME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
HSBC INVESTOR FIXED INCOME FUND
INVESTMENT OBJECTIVE The investment objective of the Fixed Income
Fund is to realize above-average total
return, consistent with reasonable risk,
through investment primarily in a diversified
portfolio of fixed income securities.
PRINCIPAL The Fund seeks to achieve its investment
INVESTMENT STRATEGIES objective by investing all of its assets in
the HSBC Investor Fixed Income Portfolio (the
'Portfolio'), which has the same investment
objective as the Fund. This two-tier fund
structure is commonly referred to as a
'master/feeder' structure because one fund
(the Fixed Income Fund or 'feeder fund') is
investing all its assets in a second fund
(the Portfolio or 'master fund').
The Portfolio invests primarily in fixed
income securities, such as U.S. Government
securities, corporate debt securities and
commercial paper, mortgage-backed and
asset-backed securities, and similar
securities issued by foreign governments and
corporations.
</TABLE>
17
<PAGE>
HSBC INVESTOR FIXED INCOME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
PRINCIPAL Market Risk: The Fund's performance per share
INVESTMENT RISKS will change daily based on many factors,
including the quality of the instruments in
the Portfolio's investment portfolio,
national and international economic
conditions and general market conditions. You
could lose money on your investment in the
Fund or the Fund could underperform other
investments.
Credit Risk: The Fund could lose money if the
issuer of a fixed income security owned by
the Portfolio defaults on its financial
obligation.
Interest Rate Risk: Changes in interest rates
will affect the yield and value of the Fund's
investments in debt securities.
Derivatives Risk: The Fund may invest in
derivative instruments (e.g., options and
futures contracts) to help achieve its
investment objective. The Fund may do so
primarily for hedging purposes. These
investments could increase the Fund's price
volatility or reduce the return on your
investment.
High Yield Securities ('Junk Bonds'): The
Fund may invest in high-yield securities,
which are subject to higher credit risks and
are less liquid than other fixed-income
securities. The Fund could lose money if it
is unable to dispose of these investments at
an appropriate time.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF
HSBC AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
</TABLE>
18
<PAGE>
HSBC INVESTOR FIXED INC0ME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
Looking to add a monthly income component to
your investment portfolio
Seeking higher potential returns than
provided by money market funds
Willing to accept the risks of price and
income fluctuations
Investing short-term reserves
This Fund will not be appropriate for anyone:
Investing emergency reserves
Seeking safety of principal
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of the Fund
shareholders. If there is a change in the
investment objective or strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment in
light of their then current financial
position and needs. There can be no assurance
that the investment objective of the Fund or
the Portfolio will be achieved.
</TABLE>
19
<PAGE>
HSBC INVESTOR FIXED INCOME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor Fixed Income Fund's annual
returns and how its performance has varied from year to year. The bar chart
assumes reinvestment of dividends and distributions.
[PERFORMANCE GRAPH]
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR ADVISER (CLASS A)
SHARES
1996.................................... 5.01%
1997.................................... 9.17%
1998.................................... 6.83%
1999.................................... -1.08%
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C> <C>
Best quarter: 2Q 1995 +5.96%
Worst quarter: 2Q 1999 -1.46%
</TABLE>
20
<PAGE>
HSBC INVESTOR FIXED INCOME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The table compares the Fund's performance over time to that of the Salomon Broad
Investment-Grade Bond Index, a market-capitalization-based total return index
containing U.S. fixed rate issues of greater than one year and at least
$50 million outstanding, and the Lipper A Rated Bond Fund Index, an unmanaged,
equally weighted index composed of the 30 largest mutual funds with a similar
investment objective. The table assumes reinvestment of dividends and
distributions.
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
ADVISER (CLASS Y) SHARES Jan. 9, 1995 - 1.08% 7.35%
SALOMON BIG BOND INDEX - 0.83% 7.74%*
LIPPER A RATED BOND FUND INDEX - 2.04% 7.25%*
</TABLE>
* Since January 1, 1995.
21
<PAGE>
HSBC INVESTOR FIXED INCOME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
FEES AND EXPENSES*
As an investor in the HSBC Investor Fixed Income Fund, you may pay the following
fees and expenses if you buy and hold Adviser (Class Y) Shares of the Fund.
Shareholder transaction fees are paid from your account. Annual Fund operating
expenses are paid out of Fund assets, and are reflected in the share price.
<TABLE>
<Capton>
SHAREHOLDER TRANSACTION EXPENSES ADVISER
(FEES PAID DIRECTLY FROM YOUR (CLASS Y)
INVESTMENT) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
Maximum deferred sales charge (load) None
ANNUAL FUND
OPERATING EXPENSES ADVISER
(EXPENSES THAT ARE DEDUCTED (CLASS Y)
FROM FUND ASSETS) SHARES
Management fee 0.40%
Distribution (12b-1) fee None
Other expenses 0.25%
Total Fund operating expenses 0.65%
</TABLE>
* The table reflects the combined fees of both the Fixed Income Fund and the
Fixed Income Portfolio.
22
<PAGE>
HSBC INVESTOR FIXED INCOME FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
EXAMPLE*
This Example is intended to help you compare the cost of investing in the
Adviser (Class Y) Shares of the Fund with the cost of investing in other mutual
funds. It illustrates the amount of fees and expenses you would pay, assuming
the following:
$10,000 investment
5% annual return
redemption at the end of each period
no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
HSBC INVESTOR FIXED 1 3 5 10
INCOME FUND YEARS YEARS YEARS YEARS
<S> <C> <C> <C> <C>
ADVISER (CLASS Y)
SHARES $66 $208 $362 $ 810
</TABLE>
* The example reflects the combined fees of both the Fund and the Fixed Income
Portfolio.
23
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE The investment objective of the International
Equity Fund is to seek long-term growth of
capital and future income through investment
primarily in securities of non-U.S. issuers and
securities of issuers whose principal markets
are outside of the United States.
PRINCIPAL The Fund seeks to achieve its investment
INVESTMENT STRATEGIES objective by investing all of its assets in the
HSBC Investor International Equity Portfolio
(the 'Portfolio'), which has the same investment
objective as the Fund. This two-tier fund
structure is commonly referred to as a
'master/feeder' structure because one fund (the
International Equity Fund or 'feeder fund') is
investing all its assets in a second fund (the
Portfolio or 'master fund').
The International Equity Portfolio will invest
primarily in equity securities of companies
organized and domiciled in developed nations
outside the United States or for which the
principal trading market is outside the United
States, including Europe, Canada, Australia and
the Far East.
</TABLE>
24
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
PRINCIPAL Market Risk: The Fund's performance per share
INVESTMENT RISKS will change daily based on many factors,
including national and international economic
conditions and general market conditions. You
could lose money on your investment in the Fund
or the Fund could underperform other
investments.
Equity securities have greater price volatility
than fixed income instruments. The value of the
Fund will fluctuate as the market price of its
investments increases or decreases.
Foreign Investment Risk: The Fund's investments
in foreign securities are riskier than
investments in U.S. securities. Investments in
foreign securities may lose value due to
unstable international political and economic
conditions, fluctuations in currency exchange
rates, lack of adequate company information, as
well as other factors. The Fund may invest up to
20% of its total assets in emerging market
securities of issuers in countries with
developing economies. Emerging market securities
are subject to even greater price volatility
than investments in foreign securities because
there is a greater risk of political or social
upheaval in emerging markets. In addition, these
investments are often illiquid and difficult to
value accurately.
Issuer Risk: The value of a security may
fluctuate for a variety of reasons that relate
to the issuer, including, but not limited to,
management performance and reduced demand for
the issuer's products and services.
Derivatives Risk: The Fund may invest in
derivative instruments (e.g., option and futures
contracts) to help achieve its investment
objective. The Fund may do so only for hedging
purposes. These investments could increase the
Fund's price volatility or reduce the return on
your investment.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF
HSBC AND IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
</TABLE>
25
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
Seeking a long-term goal such as retirement
Looking to add a foreign growth component to
your investment portfolio
Willing to accept higher risks of investing in
the stock market in exchange for potentially
higher long-term returns
This Fund will not be appropriate for anyone:
Seeking monthly income
Pursuing a short-term goal or investing
emergency reserves
Seeking safety of principal
The investment objective and strategies of the
Fund are not fundamental and may be changed
without approval of the Fund shareholders. If
there is a change in the investment objective or
strategies of the Fund, shareholders should
consider whether the Fund remains an appropriate
investment in light of their then current
financial position and needs. There can be no
assurance that the investment objective of the
Fund or the Portfolio will be achieved.
</TABLE>
26
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The bar chart on this page shows the HSBC Investor International Equity Fund's
annual returns and how its performance has varied from year to year. The bar
chart assumes reinvestment of dividends and distributions.
PERFORMANCE BAR
CHART AND TABLE
[PERFORMANCE GRAPH]
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR ADVISER (CLASS Y)
SHARES
1996.................................... 15.08%
1997.................................... 9.71%
1998.................................... 12.43%
1999.................................... 71.01%
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C> <C>
Best quarter: 4Q 1999 +30.85%
Worst quarter: 3Q 1998 -15.81%
</TABLE>
27
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The table below compares the Fund's performance to that of the MSCI EAFE Index,
which includes 1,600 companies in 22 countries representing the stock markets of
Europe, Australia, New Zealand and the Far East, and the Lipper International
Equity Fund Index, an unmanaged, equally weighted index composed of the 30
largest mutual funds with a similar investment objective. The table assumes
reinvestment of dividends and distributions.
-----------------
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
ADVISER (CLASS Y) SHARES Jan. 9, 1995 71.01% 22.38%
MSCI EAFE INDEX 27.30% 13.15%*
LIPPER INTERNATIONAL EQUITY FUND INDEX 37.83% 15.96%*
</TABLE>
* Since January 1, 1995.
28
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
FEES AND EXPENSES*
As an investor in the HSBC Investor International Equity Fund, you may pay the
following fees and expenses if you buy and hold Adviser (Class Y) Shares of the
Fund. Shareholder transaction fees are paid from your account. Annual Fund
operating expenses are paid out of Fund assets, and are reflected in the share
price.
<TABLE>
<CAPTION>
SHAREHOLDER
TRANSACTION EXPENSES ADVISER
(FEES PAID DIRECTLY FROM YOUR CLASS Y
INVESTMENT) SHARES
<S> <C>
Maximum sales charge (load) on
purchases None
---------------------------------------------
Maximum deferred sales charge
(load) None
-----------------------------------
ANNUAL FUND
OPERATING EXPENSES ADVISER
(EXPENSES THAT ARE DEDUCTED FROM CLASS Y
FUND ASSETS) SHARES
Management fee 0.69%
---------------------------------------------
Distribution (12b-1) fee None
---------------------------------------------
Other expenses 0.28%
---------------------------------------------
Total Fund
operating expenses 0.97%
</TABLE>
* The table reflects the combined fees of both the International Equity Fund
and the International Equity Portfolio.
29
<PAGE>
HSBC INVESTOR INTERNATIONAL EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
EXAMPLE*
This Example is intended to help you compare the cost of investing in Adviser
(Class Y) Shares with the cost of investing in other mutual funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
$10,000 investment
5% annual return
redemption at the end of each period
no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
HSBC INVESTOR 1 3 5 10
INTERNATIONAL EQUITY FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
ADVISER (CLASS Y) SHARES $99 $309 $536 $1,190
</TABLE>
* The example reflects the combined fees of both the International Equity Fund
and the International Equity Portfolio.
30
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
HSBC INVESTOR SMALL CAP EQUITY FUND
INVESTMENT OBJECTIVE The investment objective of the Small Cap
Equity Fund is to seek long-term growth of
capital by investing in equity securities of
emerging small- and medium-sized companies
that are expected to show earnings growth
over time that is well above the growth rate
of the overall economy and the rate of
inflation.
PRINCIPAL The Fund seeks to achieve its investment
INVESTMENT STRATEGIES objective by investing all of its assets in
the HSBC Investor Small Cap Equity Portfolio
(the 'Portfolio'), which has the same
investment objective as the Fund. This
two-tier fund structure is commonly referred
to as a 'master/feeder' structure because
one fund (the Small Cap Equity Fund or
'feeder fund') is investing all its assets
in a second fund (the Portfolio or 'master
fund').
The Portfolio will invest primarily in
common stocks of small- and medium-sized
companies, but may also invest in bonds,
notes, commercial paper, U.S. Government
securities, and foreign securities. The Fund
may also invest in common stocks of larger,
more established companies if they are
expected to show increased earnings.
</TABLE>
31
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
PRINCIPAL Market Risk: The Fund's performance per
INVESTMENT RISKS share will change daily based on many
factors, including national and
international economic conditions and
general market conditions. You could lose
money on your investment in the Fund or the
Fund could underperform other investments.
Equity securities have greater price
volatility than fixed income instruments.
The value of the Fund will fluctuate as the
market price of its investments increases or
decreases.
Small Company Risk: Because emerging small-
and medium-sized companies have fewer
financial resources than larger,
well-established companies, investments in
the Fund are subject to greater price
volatility than investments in other equity
funds that invest in larger,
well-established companies, particularly
during periods of economic uncertainty or
downturns.
Foreign Investment Risk: The Fund's
investments in foreign securities are
riskier than its investments in U.S.
securities. Investments in foreign
securities may lose value due to unstable
international political and economic
conditions, fluctuations in currency
exchange rates, lack of adequate company
information, as well as other factors.
Issuer Risk: The value of a security may
fluctuate for a variety of reasons that
relate to the issuer, including, but not
limited to, management performance and
reduced demand for the issuer's products and
services.
Derivatives Risk: The Fund may invest in
derivative instruments (e.g., option and
futures contracts) to help achieve its
investment objective. The Fund intends to do
so primarily for hedging purposes. These
investments could increase the Fund's price
volatility or reduce the return on your
investment.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT
OF HSBC AND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.
</TABLE>
32
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
<TABLE>
<S> <C>
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
Seeking a long-term investment
Looking to add a growth component to your
investment portfolio
Willing to accept higher risks of investing
in emerging companies in exchange for
potentially higher long-term returns.
This Fund will not be appropriate for
anyone:
Seeking monthly income
Pursuing a short-term goal or investing
emergency reserves
The investment objective and strategies of
the Fund are not fundamental and may be
changed without approval of the Fund
shareholders. If there is a change in the
investment objective or strategies of the
Fund, shareholders should consider whether
the Fund remains an appropriate investment
in light of their then current financial
position and needs. There can be no
assurance that the investment objective of
the Fund or the Portfolio will be achieved.
</TABLE>
33
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor Small Cap Equity Fund's
annual returns and how its performance has varied from year to year. The bar
chart assumes reinvestment of dividends and distributions.
[PEFORMANCE GRAPH]
YEAR-BY-YEAR
TOTAL RETURNS
AS OF 12/31
FOR ADVISER (CLASS Y)
SHARES
1997.................................... 22.76%
1998.................................... 13.43%
1999.................................... 48.20%
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1999 + 46.70%
Worst quarter: 3Q 1998 - 20.10%
</TABLE>
34
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
The table below compares the Fund's performance over time with the Russell 2000
Index, an unmanaged index of the 2000 smallest companies (representing
approximately 10% of the total market capitalization) in the Russell 3000 Index
(representing 98% of the U.S. equity market by capitalization), and the Lipper
Small Company Fund Index, an unmanaged, equally weighted index composed of the
30 largest mutual funds with a similar investment objective. The table assumes
reinvestment of dividends and distributions.
-----------------
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
ADVISER (CLASS Y) SHARES Sept. 3, 1996 48.20% 27.47%
RUSSELL 2000 INDEX 21.26% 14.72%*
LIPPER SMALL COMPANY FUND
INDEX 41.54% 17.06%*
</TABLE>
* Since September 1, 1996.
35
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
FEES AND EXPENSES*
As an investor in the HSBC Investor Small Cap Equity Fund, you may pay the
following fees and expenses if you buy and hold Adviser (Class Y) Shares of the
Fund. Shareholder transaction fees are paid from your account. Annual Fund
operating expenses are paid out of Fund assets, and are reflected in the share
price.
<TABLE>
<CAPTION>
ADVISER
SHAREHOLDER TRANSACTION EXPENSES (CLASS Y)
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) SHARES
<S> <C>
Maximum sales charge (load) on purchases None
Maximum deferred sales charge (load) None
ANNUAL FUND OPERATING EXPENSES ADVISER
(EXPENSES THAT ARE DEDUCTED FROM FUND (CLASS Y)
ASSETS) SHARES
Management fee 0.86%
Distribution (12b-1) fee None
Other expenses 0.27%
Total Fund operating expenses 1.13%
</TABLE>
* The table reflects the combined fees of both the Small Cap Equity Fund and
the Small Cap Equity Portfolio.
36
<PAGE>
HSBC INVESTOR SMALL CAP EQUITY FUND
RISK/RETURN SUMMARY AND FUND EXPENSES [LOGO]
EXAMPLE*
This Example is intended to help you compare the cost of investing in Adviser
(Class Y) Shares of the Fund with the cost of investing in other mutual funds.
It illustrates the amount of fees and expenses you would pay, assuming the
following:
$10,000 investment
5% annual return
redemption at the end of each period
no changes in the Fund's operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
HSBC INVESTOR SMALL CAP 1 3 5 10
EQUITY FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
ADVISER (CLASS Y) SHARES $115 $359 $622 $1,375
</TABLE>
* The example reflects the combined fees of both the Small Cap Equity Fund and
the Small Cap Equity Portfolio.
37
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
TICKER SYMBOL: RYYXX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the New York Tax-Free Bond Fund is to provide
shareholders of the Fund with income exempt from regular federal, New York State
and New York City personal income taxes. The Fund seeks to achieve its
investment objective by investing its assets primarily in a non-diversified
portfolio of municipal bonds, municipal notes, and other debt instruments, the
interest on which is exempt from regular federal, New York State and New York
City personal income taxes.
Consistent with its investment objective, the New York Tax-Free Bond Fund:
will invest at least 80% of its assets in tax exempt obligations, and at
least 65%, if not all, of its assets in New York Municipal Obligations. To
the extent that New York Municipal Obligations do not have acceptable risk-
and tax-adjusted returns, the Fund may purchase Municipal Obligations issued
by other states and political subdivisions, the interest income on which is
exempt from regular federal income tax but is subject to New York State and
New York City personal income taxes.
may invest, as a temporary defensive measure, in short-term obligations or
hold some of its assets in cash. If so, shareholders may have to pay federal
and New York State and New York City personal income taxes on the interest
received on these investments.
may invest in derivative instruments, including, but not limited to, options
and futures contracts on fixed income securities and indices of municipal
securities.
may invest in fixed income securities, which may include bonds, debentures,
mortgage securities, notes, bills, commercial paper, and U.S. Government
securities.
may engage in repurchase transactions, where the Portfolio or Fund purchases
a security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date.
may purchase and sell securities on a when-issued basis, in which a
security's price and yield are fixed on the date of the commitment but
payment and delivery are scheduled for a future date.
The investment adviser selects securities for the Portfolio based on various
factors, including the credit quality of the securities, the outlook for the
economy, and anticipated changes in interest rates and inflation. The investment
adviser may sell securities when it believes that expected risk-adjusted return
is low compared to other investment opportunities.
38
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
HSBC INVESTOR EQUITY FUND
TICKER SYMBOL: REQYX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the Equity Fund is long-term growth of capital and
income without excessive fluctuations in market value. The Fund seeks to achieve
its objective by investing at least 65% of its assets in equity securities of
seasoned medium and large-sized companies in sound financial condition that are
expected to show above average price appreciation.
To achieve its investment objective, the Fund employs two investment sub-
advisers, each of whom pursues a different investment strategy. As investment
manager of the Fund, HSBC Bank USA ('HSBC') is responsible for allocating the
assets between the investment sub-advisers. Although HSBC usually divides the
assets in half, it may allocate a greater portion of the assets to one of the
investment sub-advisers if HSBC believes it is in the best interests of the
Fund.
The first investment sub-adviser invests its portion of the Fund's assets using
a 'growth' style of investing. The second investment sub-adviser invests the
remaining assets using a 'value' style of investing. Each approach relies on a
careful analysis of each company considered for investment, using internal
fundamental research analysis, to determine its source of earnings, competitive
edge, management strength, and level of industry dominance as measured by market
share.
'GROWTH' STRATEGY: This strategy focuses on investing in financially secure
firms with established operating histories that are proven leaders in their
industry or market sector. Such companies may demonstrate characteristics such
as participation in expanding markets, increasing unit sales volume, growth in
revenues and earnings per share, and increasing return on investments. The
Fund's assets may be invested in companies that do not demonstrate such
characteristics if such companies are expected to undergo an acceleration in
growth of earnings because of special factors such as new management, new
products, changes in consumer demand or basic changes in the economic
environment.
'VALUE' STRATEGY: This approach seeks to attain the Fund's investment objective
by investing in equity securities of U.S. companies believed to be undervalued
based upon internal research and proprietary valuation systems. Investment
decisions are based on fundamental research, internally developed valuation
systems and seasoned judgment. The research focuses on two levels of analysis:
first, on understanding wealth shifts that occur within the equity market; and
second, on individual company research.
39
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
Consistent with its investment objective, the HSBC Investor Equity Fund:
may invest in a broad range of equity securities of U.S. and foreign
companies, including debt securities, warrants or rights that can be
converted into common stock.
may invest in derivative instruments, including, but not limited to, futures
contracts options on securities, securities indices, futures contracts, and
foreign currencies.
may invest up to 35% in bonds and other debt securities, including lower
rated, high-yield bonds, commonly referred to as 'junk bonds.'
may invest without limit in short-term debt and other high-quality, fixed
income securities, including U.S. and foreign government securities,
certificates of deposit and bankers' acceptances of U.S. and foreign banks,
and commercial paper of U.S. or foreign issuers.
may engage in repurchase transactions, where the Fund purchases a security
and simultaneously commits to resell that security to the seller at an agreed
upon price on an agreed upon date.
may lend securities to qualified brokers, dealers, banks and other financial
institutions for the purpose of realizing additional income.
40
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
HSBC INVESTOR FIXED INCOME FUND
TICKER SYMBOL: RFXIX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the Fixed Income Fund is to realize above-average
total return, consistent with reasonable risk, through investment primarily in a
diversified portfolio of U.S. Government securities, corporate bonds, mortgage-
backed securities and other fixed income securities. The Fund seeks to achieve
its investment objective by investing all of its assets in the HSBC Investor
Fixed Income Portfolio, which has the same investment objective as the Fund.
Consistent with the investment objective of the Fund, the Fixed Income
Portfolio:
will normally invest at least 65% of its total assets in fixed income
securities, which may include U.S. Government securities, corporate debt
securities and commercial paper, mortgage-backed and asset-backed securities,
obligations of foreign governments or international entities, and foreign
currency exchange-related securities.
may invest more than 50% of its assets in mortgage-backed securities
including mortgage pass-through securities, mortgage-backed bonds and CMOs,
that carry a guarantee of timely payment.
may lend its securities to brokers, dealers, and other financial institutions
for the purpose of realizing additional income. The Fund or Portfolio may
also borrow money for temporary or emergency purposes.
may invest in derivative instruments, including, but not limited to,
financial futures, foreign currency futures, foreign currency contracts,
options on futures contracts, options on securities, and swaps.
may invest in high yield/high risk securities ('junk bonds') as well as
floating and variable rate instruments and obligations.
may engage in repurchase transactions, where the Portfolio purchases a
security and simultaneously commits to resell that security to the seller at
an agreed upon price on an agreed upon date.
may invest in debt obligations by commercial banks and savings and loan
associations. These instruments would include certificates of deposit, time
deposits, and bankers' acceptances.
may purchase and sell securities on a when-issued basis, in which a
security's price and yield are fixed on the date of the commitment but
payment and delivery are scheduled for a future date.
The investment sub-adviser selects securities for the Portfolio based on various
factors, including the outlook for the economy and anticipated changes in
interest rates and inflation. The investment sub-adviser may sell securities
when it believes that expected risk-adjusted return is low compared to other
investment opportunities.
41
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
HSBC INVESTOR INTERNATIONAL EQUITY FUND
TICKER SYMBOL: RINEX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the International Equity Fund is to seek long-term
growth of capital and future income through investment primarily in securities
of non-U.S. issuers and securities whose principal markets are outside of the
United States. The Fund seeks to achieve its investment objective by investing
all of its assets in the International Equity Portfolio, which has the same
investment objective as the Fund. The principal investments of the International
Equity Portfolio will be in equity securities of companies organized and
domiciled in developed nations outside the United States or for which the
principal trading market is outside the United States, including Europe, Canada,
Australia and the Far East.
Consistent with the investment objective of the Fund, the International Equity
Portfolio:
will normally invest at least 80% of its total assets in equity securities of
foreign corporations, consisting of common stocks, and other securities with
equity characteristics, including preferred stock, warrants, rights,
securities convertible into common stock, trust certificates, limited
partnership interests and equity participations.
may invest up to 20% of its assets in equity securities of companies in
emerging markets.
intends to have at least three different countries represented in its
portfolio and intends to invest primarily in companies with large market
capitalizations.
may, under exceptional circumstances, temporarily invest part or all of its
assets in fixed income securities denominated in foreign currencies, domestic
or foreign government securities, and nonconvertible preferred stock, or hold
its assets in cash or cash equivalents.
42
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
may invest in derivative instruments, including, but not limited to, foreign
currency futures contracts and options on foreign currencies and foreign
currency futures.
may engage in repurchase transactions, where the Portfolio or Fund purchases
a security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date.
may lend securities to qualified brokers, dealers, banks and other financial
institutions for the purpose of realizing additional income.
may purchase and sell securities on a 'when-issued' basis, in which a
security's price and yield are fixed on the date of the commitment but
payment and delivery are scheduled for a future date.
The investment sub-adviser's approach to investing relies on extensive field
research and direct company contact. It is a fundamental value-oriented approach
that attempts to identify the difference between the underlying value of a
company and the price of its security in the market.
43
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
HSBC INVESTOR SMALL CAP EQUITY FUND
TICKER SYMBOL: RESCX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the Small Cap Equity Fund is to seek long-term
growth of capital by investing in equity securities of small- and medium-sized
companies that are early in their life cycle, but which may have potential to
become major enterprises. These companies would be expected to show earnings
growth over time that is well above the growth rate of the overall economy and
the rate of inflation, and would have the products, management and market
opportunities that are usually necessary to become more widely recognized. The
Fund seeks to achieve its investment objective by investing all of its assets in
the HSBC Investor Small Cap Equity Portfolio, which has the same investment
objective as the Fund.
Consistent with the investment objective of the Fund, the Small Cap Equity
Portfolio:
will invest at least 80% of its assets in equity securities, of which at
least 65% will be equity securities issued by small cap companies. Small cap
companies generally are those companies which have small (under $1 billion)
market capitalizations and have gross revenues ranging from $10 million to $1
billion.
may invest in more established companies whose rates of earnings growth are
expected to accelerate because of special factors, such as rejuvenated
management, new products, changes in consumer demand or basic changes in the
economic environment.
may invest up to 20% of its assets in foreign securities.
will invest primarily in common stocks, but may, to a limited extent, seek
appreciation in other types of securities when relative values and market
conditions make such purchases appear attractive.
may invest part or all of its assets in cash (including foreign currency) or
short-term obligations during times of international, political or economic
uncertainty or turmoil, or in order to meet anticipated redemption requests.
These investments may include certificates of deposit, commercial paper,
short-term notes and U.S. Government securities.
44
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
may invest in derivative instruments, including, but not limited to,
financial and foreign currency futures contracts as well as options on
securities, foreign currencies, and foreign currency futures.
may invest in fixed income securities, which may include bonds, debentures,
mortgage securities, notes, bills, commercial paper, and U.S. Government
securities.
may engage in repurchase transactions, where the Portfolio or Fund purchases
a security and simultaneously commits to resell that security to the seller
at an agreed upon price on an agreed upon date.
may lend securities to qualified brokers, dealers, banks and other financial
institutions for the purpose of realizing additional income.
The investment sub-adviser uses a bottom-up, as opposed to a top-down,
investment style in managing the Fund. Securities are selected based upon
fundamental analysis of a company's cash flow, industry position, potential for
high profit margins, and strength of management, as well as other factors.
45
<PAGE>
INVESTMENT RISKS [LOGO]
GENERAL RISK FACTORS: ALL FUNDS
An investment in the Funds is subject to investment risks, including the
possible loss of the principal amount invested. The Funds' performance per share
will change daily based on many factors, including fluctuation in interest
rates, the quality of the instruments in each Fund's investment portfolio,
national and international economic conditions and general market conditions.
Generally, the New York Tax-Free Bond Fund, the Equity Fund, the Fixed Income
Fund, the International Equity Fund, and the Small Cap Equity Fund and their
corresponding portfolios, will be subject to the following risks:
Fixed Income Securities: The value of investments in fixed income securities
will fluctuate as interest rates decrease or increase. In addition, these
securities may accrue income that is distributable to shareholders even though
the income may not yet have been paid to a Fund or Portfolio. If so, a Fund or
Portfolio may need to liquidate some of its holdings and forego the purchase
of additional income-producing assets.
Credit Risks: The Funds could lose money if the issuer of a fixed income
security owned by a Fund or Portfolio is unable to meet its financial
obligations.
Derivatives: The Funds may invest in various types of derivative securities.
Generally, a derivative is a financial arrangement the value of which is based
on (or 'derived' from) a traditional security, asset, or market index.
Derivative securities include, but are not limited to, options and futures
transactions, forward foreign currency exchange contracts, swaps, mortgage-
and asset-backed securities, and 'when-issued' securities. There are, in fact,
many different types of derivative securities and many different ways to use
them.
The use of derivative securities is a highly specialized activity and there
can be no guarantee that their use will increase the return of the Funds or
protect their assets from declining in value. In fact, investments in
derivative securities may actually lower a Fund's return if such investments
are timed incorrectly or are executed under adverse market conditions. In
addition, the lack of a liquid market for derivative securities may prevent
the Fund from selling unfavorable positions, which could result in adverse
consequences.
Each Fund may invest in different kinds of derivative securities. The
Statement of Additional Information contains a detailed description of the
derivative securities in which the Fund may invest and a discussion of the
risks associated with each security. To request a Statement of Additional
Information, please refer to the back cover of this Prospectus.
46
<PAGE>
INVESTMENT RISKS [LOGO]
Repurchase Agreements: The use of repurchase agreements involves certain
risks. For example, if the seller of the agreements defaults on its obligation
to repurchase the underlying securities at a time when the value of these
securities has declined, the Portfolio or Fund may incur a loss upon
disposition of the securities. There is also the risk that the seller of the
agreement may become insolvent and subject to liquidation.
Illiquid Securities: The Funds may, at times, hold illiquid securities, by
virtue of the absence of a readily available market for certain of its
investments, or because of legal or contractual restrictions on sale. A Fund
could lose money if it is unable to dispose of an investment at a time that is
most beneficial to the Fund.
Returns Are Not Guaranteed: An investment in the Funds is neither insured nor
guaranteed by the U.S. Government. Shares of the Funds are not deposits or
obligations of, or guaranteed or endorsed by HSBC or any other bank, and the
shares are not federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other agency.
YEAR 2000 RISK:
Like other funds and business organizations around the world, each Fund and its
service providers rely heavily on computer systems that use date fields. The
Funds could be adversely affected if the computer systems used by the Funds and
their service providers do not properly process and calculate date-related
information for the year 2000 and beyond (the 'Year 2000 Issue'). As of the date
of this Prospectus, the Year 2000 Issue has not had any adverse consequences to
the Funds, but there is no assurance that the Year 2000 Issue will not cause
problems in the future.
The Funds and their service providers have taken steps to minimize risks to
services critical to the Funds' operations associated with the Year 2000 Issue.
47
<PAGE>
INVESTMENT RISKS [LOGO]
The Funds currently have no reason to believe that the Year 2000 will have a
material adverse effect on their business or operations, but complications as
yet unidentified may arise. The Funds will continue to closely monitor
developments relating to the Year 2000 Issue.
SPECIFIC RISK FACTORS: FOREIGN AND HIGH YIELD/HIGH RISK SECURITIES
<TABLE>
<S> <C>
EQUITY FUND FIXED INCOME FUND
SMALL CAP EQUITY FUND INTERNATIONAL EQUITY FUND
</TABLE>
Foreign securities involve investment risks different from those associated with
domestic securities. Foreign investments may be riskier than U.S. investments
because of unstable international political and economic conditions, foreign
controls on investment and currency exchange rates, withholding taxes, and a
lack of adequate company information, liquidity, and government regulation.
Investments in foreign emerging markets present greater risk than investing in
foreign issuers in general. The risk of political or social upheaval is greater
in emerging markets. In addition, a number of emerging markets restrict foreign
investment in stocks. Inflation and rapid fluctuations in inflation rates have
had and may continue to have negative effects on the economies and securities
markets of certain emerging market countries. Moreover, many of the emerging
securities markets are relatively small, have low trading volumes, suffer
periods of relative illiquidity, and are characterized by significant price
volatility.
48
<PAGE>
INVESTMENT RISKS [LOGO]
High yield/high risk securities ('junk bonds') may be more susceptible to real
or perceived adverse economic and competitive industry conditions than higher
grade securities. If the issuer of high yield/high risk securities defaults, the
Fund or Portfolio may incur additional expenses to seek recovery. High
yield/high risk securities may be less liquid than the market for higher grade
securities. Less liquidity in the secondary trading markets could adversely
effect and cause large fluctuations in the daily net asset value of the Funds.
SPECIFIC RISK FACTORS: 'WHEN-ISSUED' SECURITIES
NEW YORK TAX-FREE BOND FUND
FIXED INCOME FUND
INTERNATIONAL EQUITY FUND
The price and yield of securities purchased on a 'when-issued' basis is fixed on
the date of the commitment but payment and delivery are scheduled for a future
date. Consequently, these securities present a risk of loss if the other party
to a 'when-issued' transaction fails to deliver or pay for the security. In
addition, purchasing securities on a 'when-issued' basis can involve a risk that
the yields available in the market on the settlement date may actually be higher
(or lower) than those obtained in the transaction itself and, as a result, the
'when-issued' security may have a lesser (or greater) value at the time of
settlement than the Fund's payment obligation with respect to that security.
SPECIFIC RISK FACTORS: MORTGAGE-BACKED SECURITIES AND SWAPS
FIXED INCOME FUND
Mortgage- and asset-backed securities are debt instruments that are secured by
interests in pools of mortgage loans or other financial assets. Mortgage- and
asset-backed securities are subject to prepayment, extension, market, and credit
risks. Prepayment risk reflects the risk that borrowers may prepay their
mortgages faster than expected, thereby affecting the investment's average life
and perhaps its yield. Conversely, an extension risk is present during periods
of rising interest rates, when a reduction in the rate of prepayments may
significantly lengthen the effective durations of such securities. Market risk
reflects the risk that the price of the security may fluctuate over time as a
result of changing interest rates or the lack of liquidity. Credit risk reflects
the risk that the Fund or Portfolio may not receive all or part of its principal
because the issuer has defaulted on its obligations.
A swap is an agreement to change the return generated by one instrument for the
return generated by another instrument. The use of swaps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If the other party
to the swap defaults, the Fund or Portfolio may lose interest payments that it
is contractually entitled to receive and may, in some cases, lose the entire
principal value of the investment security.
49
<PAGE>
INVESTMENT RISKS [LOGO]
SPECIFIC RISK FACTORS: CONCENTRATION
NEW YORK TAX-FREE BOND FUND
Because the Fund will concentrate its investments in New York and may
concentrate a significant portion of its assets in the securities of a single
issuer or sector, investment in this Fund may pose investment risks greater than
those posed by a more broadly diversified portfolio. Consequently, unlike a more
diversified portfolio, the value of the Fund's assets could lose significant
value due to the poor performance of a single issuer or sector.
The Fund may also be subject to credit risks. Historically, New York State and
other issuers of New York Municipal Obligations have experienced periods of
financial difficulty. Because a significant share of New York State's economy
depends on financial and business services, any change in market conditions that
adversely affect these industries could affect the ability of New York and its
localities to meet its financial obligations. The financial stability of New
York State is closely related to the financial stability of its localities,
particularly New York City, which has required and continues to require
significant financial assistance from New York. To the extent that New York City
and other New York localities require the State's assistance, the ability of the
State to meet its own obligations as they come due or to obtain additional
financing could be adversely affected. If this occurs, you could lose money on
your investment.
50
<PAGE>
FUND MANAGEMENT [LOGO]
THE INVESTMENT ADVISER
HSBC Bank USA ('HSBC'), 452 Fifth Avenue, New York, New York 10018, is the
investment adviser for the New York Tax-Free Bond Fund. HSBC is also the
investment manager for the Equity Fund, the Fixed Income Portfolio, the
International Portfolio, and the Small Cap Equity Portfolio. As investment
manager of the Equity Fund and the Portfolios, HSBC provides general supervision
over the investment management functions performed by the investment advisers.
HSBC is a wholly owned subsidiary of HSBC USA, Inc., a registered bank holding
company. HSBC currently provides investment advisory services for individuals,
trusts, estates and institutions. HSBC manages more than $80 billion in assets
including $3.2 billion in the HSBC Investor Family of Funds.
The following companies serve as investment sub-advisers of their respective
Fund and Portfolios. The investment sub-advisers make the day-to-day investment
decisions and continuously review, supervise and administer investment programs.
The Fixed Income Fund (Fixed Income Portfolio): Miller Anderson & Sherrard
('MAS'), One Tower Bridge, West Conshohocken, Pennsylvania 19428, is a
Pennsylvania limited partnership founded in 1969. MAS is wholly-owned by
indirect subsidiaries of Morgan Stanley Dean Witter & Co., and is a division of
Morgan Stanley Dean Witter Investment Management. MAS provides investment
services to employee benefit plans, endowment funds, foundations and other
institutional investors. As of December 31, 1999, MAS had approximately
$66.6 billion in assets under management.
The Equity Fund: Alliance Capital Management L.P. ('Alliance'), 1345 Avenue of
the Americas, New York, New York 10105, and Brinson Partners, Inc. ('Brinson'),
209 South LaSalle Street, Chicago, IL 60604, both serve as investment advisers
to the Equity Fund. Alliance pursues a 'growth' style of investing, while
Brinson pursues a 'value' style of investing. As investment manager, HSBC is
responsible for allocating the Fund's assets between Alliance and Brinson for
purposes of investment.
Alliance is a leading global investment adviser supervising client accounts with
assets totaling $368 billion as of December 31, 1999. Alliance's clients are
primarily major corporate employee benefit funds, public employee retirement
systems, investment companies, foundations and endowment funds.
51
<PAGE>
FUND MANAGEMENT [LOGO]
THE INVESTMENT ADVISER
CONTINUED
Brinson is an investment management firm managing, as of December 31, 1999,
approximately $390 billion, primarily for pension and profit sharing
institutional accounts. Brinson and its predecessor entities have managed
domestic and international investment assets since 1974 and global investment
assets since 1982. Brinson also serves as the investment adviser to seven other
investment companies.
The International Equity Fund (International Equity Portfolio): Capital Guardian
Trust Company ('CGTC'), which was founded in 1968, is a wholly owned subsidiary
of The Capital Group Companies, Inc., both of which are located at 333 South
Hope Street, Los Angeles, California. As of December 31, 1999, CGTC managed $154
billion of assets primarily for large institutional clients.
The Small Cap Equity Fund (Small Cap Equity Portfolio): MFS Institutional
Advisers, Inc. ('MFSI'), together with its parent company Massachusetts
Financial Services Company ('MFS'), is America's oldest mutual fund
organization. MFSI has its principal office at 500 Boylston Street, Boston, MA
02116. As of December 31, 1999, the MFS organization had approximately $137
billion in assets under management on behalf of over two million investor
accounts. As of that date, the MFS organization managed approximately $106
billion of assets invested in equity securities and approximately $21 billion of
assets invested in fixed income securities.
For these advisory and management services, the Funds paid a management fee as
follows:
-------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 10/31/99*
<S> <C>
Fixed Income Fund 0.39%
New York Tax-Free Bond Fund 0.25%
Equity Fund 0.45%
International Equity Fund 0.72%
Small Cap Equity Fund 0.88%
</TABLE>
* HSBC waived a portion of its contractual fees with the New York Tax-Free Bond
Fund, International Equity Fund and Small Cap Equity Fund for the most recent
fiscal year. Actual fees paid on behalf of the Funds and Portfolios during the
previous fiscal year may be higher than the current contractual fees due to
breakpoints in the investment adviser's fee, which are based on the value of the
assets in a Fund or Portfolio.
52
<PAGE>
FUND MANAGEMENT [LOGO]
PORTFOLIO MANAGERS
THE NEW YORK TAX-FREE BOND FUND:
Peter J. Loftus, Senior Portfolio Manager with HSBC since 1997, is
primarily responsible for the day-to-day management of the New York
Tax-Free Bond Fund's portfolio. Prior to joining HSBC, Mr. Loftus was a
Senior Vice President at Dillon, Read & Co. from August, 1992 through
August, 1997, where he managed tax-exempt trading and hedging for the firm.
He also spent seven years (1984-1991) at Paine Webber as a Vice President
involved in the trading and distribution of tax-exempt securities.
THE EQUITY FUND:
John L. Blundin, Executive Vice President and Portfolio Manager and
Disciplined Growth Team Leader, and Christopher Toub, a Senior Vice
President, Equity Portfolio Manager and Director of Global Equity Research,
have primary portfolio management responsibility for the Equity Fund's
assets allocated to Alliance. In all, Mr. Blundin has 35 years of
investment experience. For 27 years, including the last five years, Mr.
Blundin has served as a portfolio manager at Alliance. Mr. Toub has 18
years of investment experience, including the last five years of experience
as a portfolio manager at Alliance.
Jeffrey J. Diermeier, Managing Partner-U.S. Equities at Brinson, has
primary portfolio management responsibility for the Fund's assets allocated
to Brinson. Including the last five years, Mr. Diermeier has 22 years of
investment experience at Brinson.
THE FIXED INCOME FUND (FIXED INCOME PORTFOLIO):
The Portfolio Manager for the Fixed Income Portfolio is Kenneth B. Dunn.
Mr. Dunn has been a Partner at MAS since prior to 1991. He has served as
the Portfolio Manager of the MAS Fixed Income and MAS Domestic Fixed Income
Portfolios since 1987; the MAS Fixed Income II Portfolio since 1990; the
MAS Mortgage-Backed Securities and Special Purpose Fixed Income Portfolios,
since 1992; and the MAS Municipal and PA Municipal Portfolios, since 1994.
53
<PAGE>
FUND MANAGEMENT [LOGO]
PORTFOLIO MANAGERS
CONTINUED
THE INTERNATIONAL EQUITY FUND (INTERNATIONAL EQUITY PORTFOLIO):
The following persons are primarily responsible for portfolio management of the
International Equity Portfolio:
David Fisher, Chairman of CGTC, has had 33 years experience as an
investment professional (29 years with CGTC or its affiliates, including
the last five years).
Harmut Giesecke, Senior Vice President and Director of Capital
International, Inc., has had 27 years experience as an investment
professional (25 years with CGTC or its affiliates, including the last five
years).
Nancy Kyle, Senior Vice President of CGTC, has had 25 years experience as
an investment professional (8 years with CGTC or its affiliates, including
the last five years). From 1980 to 1990, Ms. Kyle was managing director of
J. P. Morgan Investment Management, Inc.
John McIlwraith, Senior Vice President of CGTC, has had 29 years experience
as an investment professional (15 years with CGTC or its affiliates,
including the last five years).
Robert Ronus, President of CGTC, has had 30 years experience as an
investment professional (24 years with CGTC or its affiliates, including
the last five years).
Nilly Sikorsky, Director of The Capital Group Companies, Inc., has had 36
years experience as an investment professional, all of which was with CGTC
or its affiliates.
54
<PAGE>
FUND MANAGEMENT [LOGO]
PORTFOLIO MANAGERS
CONTINUED
SMALL CAP EQUITY FUND (SMALL CAP EQUITY PORTFOLIO):
The portfolio manager of the Small Cap Equity Portfolio is Brian Stack,
Senior Vice President of MFSI. Mr. Stack has been employed by MFSI since
1993.
THE DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services ('BISYS'), whose address is 3435 Stelzer Road, Columbus,
Ohio 43219-3035, serves as the Funds' administrator (the 'Administrator').
Management and administrative services of BISYS include providing office space,
equipment and clerical personnel to the Funds and supervising custodial,
auditing, valuation, bookkeeping, legal and dividend dispersing services.
BISYS also serves as the distributor (the 'Distributor') of the Funds' shares.
BISYS may provide financial assistance in connection with pre-approved seminars,
conferences and advertising to the extent permitted by applicable state or
self-regulatory agencies, such as the National Association of Securities
Dealers.
The Statement of Additional Information has more detailed information about the
Investment Adviser, Distributor and Administrator, and other service providers.
55
<PAGE>
FUND MANAGEMENT [LOGO]
THE TWO-TIER FUND STRUCTURE
The Fixed Income Fund, the International Equity Fund, and the Small Cap Equity
Fund seek to achieve their investment objectives by investing all of each Fund's
assets in the HSBC Investor Fixed Income Portfolio, HSBC Investor International
Equity Portfolio, and the HSBC Investor Small Cap Equity Portfolio,
respectively, series of a separate open-end investment company each having the
same investment objectives as their respective Funds. This is referred to as a
'master/feeder' arrangement because one fund (the 'feeder' fund) 'feeds' its
assets into another fund (the 'master fund'). The two-tier investment fund
structure has been developed relatively recently, so shareholders should
carefully consider this investment approach. For example, other mutual funds and
institutional investors may invest in the Portfolios on the same terms and
conditions as the Funds (although they may have different sales commissions and
other operating expenses that may generate different returns). As with
traditionally structured funds which have large investors, the actions of these
mutual funds and institutional investors (or other large investors) may have a
material effect on smaller investors in the Fund. For example, if a large
investor withdraws from a portfolio (a 'master fund'), operating expenses may
increase, thereby producing lower returns for investors in the Funds ('feeder
funds'). Additionally, the portfolio may become less diverse, resulting in
increased portfolio operating expenses.
Except as permitted, whenever a Fund is requested to vote on a matter pertaining
to its corresponding Portfolio, the Fund will hold a meeting of its
shareholders. At the meeting of investors in the Portfolio, the Fund will cast
all of its votes in the same proportion as the votes of the Fund's shareholders.
The investment objectives of the Funds and the Portfolios may be changed without
approval of the shareholders. A Fund may withdraw its investment in its
corresponding Portfolio as a result of certain changes in the Portfolio's
investment objective, policies or restrictions or if it is in the best interests
of the Fund to do so.
56
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by dividing the total value of a Fund's investments and
other assets attributable to a class of shares, less any liabilities, by the
number of outstanding shares of that class:
NAV =
Total Assets -- Liabilities
------------------------
Number of Shares
Outstanding
Values of assets in a Fund's portfolio or held by a Portfolio are determined on
the basis of their market or other fair value.
THE INCOME AND EQUITY FUNDS
The net asset value per share (NAV) of the Fixed Income Fund and the New York
Tax-Free Bond Fund (collectively, the 'Income Funds'), and the Equity Fund, the
International Equity Fund, and the Small Cap Equity Fund (collectively, the
'Equity Funds'), is determined once each day at the close of regular trading on
the New York Stock Exchange, normally at 4 p.m. Eastern time on days the
Exchange is open. The New York Stock Exchange is open every weekday except for
the days on which national holidays are observed.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund.
------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES
You may purchase Funds through the Distributor or through banks, brokers and
other investment representatives, which may charge additional fees and may
require higher minimum investments or impose other limitations on buying and
selling shares. If you purchase shares through an investment representative,
that party is responsible for transmitting orders by close of business and may
have an earlier cut-off time for purchase and sale requests. Consult your
investment representative or institution for specific information.
-------------------------------------------------------------------------
57
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
PURCHASING AND ADDING TO YOUR SHARES
All purchases must be in
U.S. dollars. A fee will be
charged for any checks that
do not clear. Third-party
checks are not accepted.
A Fund may waive its
minimum purchase
requirement and the
Distributor may reject a
purchase order if it
considers it in the best
interest of the Fund and its
shareholders.
<TABLE>
<CAPTION>
MINIMUM
INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
ADVISER (CLASS Y) SHARES*
Regular
(non-retirement) $1,000,000 $ N/A
* HSBC clients that
maintain an investement
management account are
not subject to the
minimun initial
investment requirements.
</TABLE>
-----------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
The Funds are required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Funds with their certified taxpayer identification number in compliance with
IRS rules, or if you have been notified by the IRS that you are subject to
backup withholding. Backup withholding is not an additional tax; rather it is a
way in which the IRS ensures that it will collect taxes otherwise due. Any
amounts withheld may be credited against your U.S. federal income tax
liability. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
-----------------------------------------------------------------------
58
<PAGE>
SHAREHOLDER INVORMATION [LOGO]
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY REGULAR MAIL OR BY OVERNIGHT SERVICE
Initial Investment:
If purchasing through your financial adviser or brokerage account, simply tell
your adviser or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. For all other purchases,
follow the instructions below.
1. Carefully read, complete, and sign the account application. Establishing your
account privileges now saves you the inconvenience of having to add them
later.
2. Make check, bank draft or money order payable to 'HSBC Investor Funds' and
include the name of the appropriate Fund(s) on the check.
Mail to: HSBC Investor Funds, PO Box 182845, Columbus, Ohio 43218-2845.
Subsequent:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information in writing:
Fund name
Share class
Amount invested
Account name
Account number
Include your account number on your check.
----------------------------
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial
institutions to send funds to
each other, almost
instantaneously. With an
electronic purchase or sale, the
transaction is made through the
Automated Clearing House (ACH)
and may take up to eight days to
clear. There is generally no fee
for ACH transactions.
Mail investment slip and check to: HSBC Investor Funds, PO Box 182845, Columbus,
Ohio 43218-2845.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be a
United States Bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
1-800-782-8183. Your account can generally be set up for electronic purchases
within 15 days.
Call 1-800-782-8183 to arrange a transfer from your bank account.
59
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
For information on how to request a wire transfer, call 1-800-782-8183.
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in the Funds from your bank account, through
payroll deduction or from your federal employment, Social Security or other
regular government checks. Automatic investments can be as little as $25, once
you've invested the $250 minimum required to open the account.
To invest regularly from your bank account:
Complete the Automatic Investment Plan portion on your Account Application.
Make sure you note:
Your bank name, address and account number
The amount you wish to invest automatically (minimum $25)
How often you want to invest (every month, 4 times a year, twice a year or
once a year)
Attach a voided personal check.
To invest regularly from your paycheck or government check:
Call 1-800-782-8183 for an enrollment form.
-----------------------------
DIRECTED DIVIDEND OPTION
By selecting the appropriate box in
the Account Application, you can
elect to receive your distributions
in cash (check) or have
distributions (capital gains and
dividends) reinvested in another
HSBC Investor Fund without a sales
charge. You must maintain the
minimum balance in each Fund into
which you plan to reinvest dividends
or the reinvestment will be
suspended and your dividends paid to
you. The Fund may modify or
terminate this reinvestment option
without notice. You can change or
terminate your participation in the
reinvestment option at any time.
----------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Capital gains are distributed at least annually.
Distributions are made on a per share basis regardless of how long you've owned
your shares. Therefore, if you invest shortly before the distribution date, some
of your investment will be returned to you in the form of a distribution, which
may be taxable.
----------------------------------------------------------------------
60
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
SELLING YOUR SHARES
<TABLE>
<S> <C>
--------------------------------------
WITHDRAWING MONEY FROM YOUR FUND
INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you
request a withdrawal in cash. This is
also known as redeeming shares or a
redemption of shares.
--------------------------------------
You may sell your shares at any
time. Your sales price will be
the next NAV after your sell
order is received by the Fund,
its transfer agent, or your
investment representative.
Normally you will receive your
proceeds within a week after
your request is received. See
section on 'General Policies on
Selling Shares' below.
</TABLE>
INSTRUCTIONS FOR SELLING SHARES
If selling your shares through you financial adviser or broker, ask him or her
for redemption procedures. Your adviser and/or broker may have transaction
minimums and/or transaction times that will affect your redemption.
For all other sales transactions, follow the instructions below.
BY TELEPHONE
(unless you have declined telephone sales privileges)
1. Call 1-800-782-8183 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer). (See 'General Policies on
Selling Shares -- Verifying Telephone Redemptions' below)
BY MAIL OR OVERNIGHT SERVICE
(See 'General Policies on Selling Shares -- Redemptions in Writing Required'
below)
1. Call 1-800-782-8183 to request redemption forms or write a letter of
instruction indicating:
your Fund and account number
amount you wish to redeem
address where your check should be sent
account owner signature
2. Mail to: HSBC Investor Funds, PO Box 182845, Columbus, Ohio
43218-2845.
61
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
SELLING YOUR SHARES
CONTINUED
WIRE TRANSFER
You must indicate this option on your account application.
Call 1-800-782-8183 to request a wire transfer.
If you call by 4 p.m. Eastern time, your payment will normally be wired to your
bank on the same business day. Otherwise, it will normally be wired on the
second business day after your call.
The Fund may charge a wire transfer fee.
Note: Your financial institution may also charge a separate fee.
ELECTRONIC REDEMPTIONS
Call 1-800-782-8183 to request an electronic redemption.
Your bank must participate in the Automated Clearing House (ACH) and must be a
U.S. bank. If you call by 4 p.m. Eastern time, the NAV of your shares will
normally be determined on the same day and the proceeds credited within 7 days.
Your bank may charge for this service.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $50. To activate this
feature:
Make sure you have checked the appropriate box on the Account Application,
or call 1-800-782-8183.
Include a voided personal check.
Your account must have a value of $10,000 or more to start withdrawals.
If the value of your account falls below $1,000, you may be asked to add
sufficient funds to bring the account back to $1,000, or the Fund may
close your account and mail the proceeds to you.
62
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
SELLING YOUR SHARES
CONTINUED
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ('IRAs').
2. Redemption requests requiring a signature guarantee, which include any of the
following:
Redemptions over $10,000;
Your account registration or the name(s) in your account has changed
within the last 15 days;
The check is not being mailed to the address on your account;
The check is not being made payable to the owner of the account; or
The redemption proceeds are being transferred to another Fund account with
a different registration.
You must obtain a signature guarantee from members of the STAMP (Securities
Transfer Agents Medallion Program), MSP (New York Stock Exchange Signature
Program) or SEMP (Stock Exchanges Medallion Program). Members are subject to
dollar limitations which must be considered when requesting their guarantee. The
Transfer Agent may reject any signature guarantee if it believes the transaction
would otherwise be improper.
63
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
SELLING YOUR SHARES
CONTINUED
VERIFYING TELEPHONE REDEMPTIONS
The Funds make every effort to insure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
Transfer Agent may be liable for losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 15 business days). You can avoid this delay by
purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account falls below $50 due to redemptions, the Fund may ask you to
increase your balance. If it is still below $50 after 30 days, the Fund may
close your account and send you the proceeds at the current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash, if
distribution checks (1) are returned and marked as 'undeliverable' or (2) remain
uncashed for six months, your account will be changed automatically so that all
future distributions are reinvested in your account. Checks that remain uncashed
for six months will be canceled and the money reinvested in the Fund.
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
There is no sales charge on purchases of Adviser (Class Y) Shares. In addition,
there are no 12b-1 distribution fees paid from the Funds for Adviser (Class Y)
Class Shares.
64
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
EXCHANGING YOUR SHARES
You can exchange your shares in one Fund for shares of the same class of another
HSBC Investor Fund, usually without paying additional sales charges (see 'Notes
on Exchanges' below). No transaction fees are charged for exchanges.
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to HSBC Investor Funds,
PO Box 182845, Columbus, Ohio 43218-2845 or by calling 1-800-782-8183. Please
provide the following information:
Your name and telephone number
The exact name on your account and account number
Taxpayer identification number (usually your social security number)
Dollar value or number of shares to be exchanged
The name of the Fund from which the exchange is to be made
The name of the Fund into which the exchange is being made.
See 'Selling your Shares' for important information about telephone
transactions.
To prevent disruption in the management of the Funds, due to market timing
strategies, excessive exchange activity may be limited.
NOTES ON EXCHANGES
When exchanging from a Fund that has no sales charge or a lower sales charge to
a Fund with a higher sales charge, you will pay the difference.
The registration and tax identification numbers of the two accounts must be
identical.
The Exchange Privilege (including automatic exchanges) may be changed or
eliminated at any time upon a 60-day notice to shareholders.
Be sure to read the Prospectus carefully of any Fund into which you wish to
exchange shares.
65
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Please see the Fund's Statement of Additional Information for more
information. Because everyone's tax situation is unique, you should rely on
your own tax advisor for advice about the particular federal, state and local
tax consequences to you of investing in a Fund.
A Fund generally will not have to pay income tax on amounts it distributes to
shareholders, although shareholders will be taxed on distributions they
receive.
Any income a Fund receives in the form of interest and dividends is paid out,
less expenses, to its shareholders. Shares begin accruing interest and
dividends on the day they are purchased.
Dividends on all Income Funds are paid monthly. Dividends for the Equity
Fund, the International Equity Fund, and the Small Cap Equity Fund are paid
quarterly, annually and semi-annually, respectively. Capital gains for all
Funds are distributed at least annually. Unless a shareholder elects to
receive dividends in cash, dividends will be automatically invested in
additional shares of the Fund.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
Dividends are generally taxable as ordinary income; however, distributions of
tax-exempt interest income by the New York Tax-Free Bond Fund are expected to
be exempt from the regular federal income tax.
If a Fund designates a dividend as a capital gain distribution (e.g., when
the Fund has a gain from the sale of an asset the Fund held for more than 12
months), you will pay tax on that dividend at the long-term capital gains tax
rate, no matter how long you have held your Fund shares.
Dividends are taxable in the year in which they are paid, even if they appear
on your account statement the following year. If a Fund declares a dividend
in October, November or December of a year and distributes the dividend in
January of the next year, you may be taxed as if you received it in the year
declared rather than the year received.
There may be tax consequences to you if you dispose of your shares in a Fund,
for example, through redemption, exchange or sale. The amount of any gain or
loss and the rate of tax will depend mainly upon how much you pay for the
shares, how much you sell them for, and how long you held them.
You will be notified in January each year about the federal tax status of
distributions made by the Funds. The notice will tell you which dividends and
redemptions must be treated as taxable ordinary income and which (if any) are
short-term or long-term capital gain. Depending on your residence for tax
purposes, distributions also may be subject to state and local taxes,
including withholding taxes.
66
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to you if
you fail to provide the Fund with your correct taxpayer identification number
or to make required certifications, or if you have been notified by the IRS
that you are subject to backup withholding. Backup withholding is not an
additional tax, but is a method in which the IRS ensures that it will collect
taxes otherwise due. Any amounts withheld may be credited against your U.S.
federal income tax liability.
Foreign shareholders may be subject to special withholding requirements.
If you invest through a tax-deferred retirement account, such as an IRA, you
generally will not have to pay tax on dividends or capital gains until they
are distributed from the account. These accounts are subject to complex tax
rules, and you should consult your tax adviser about investment through a
tax-deferred account.
There is a penalty on certain pre-retirement distributions from retirement
accounts.
67
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past five years, or, if shorter, the period of the
Fund's operations. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned or lost on an investment in the Fund (assuming reinvestment of
all dividends and distributions for the indicated periods). This information has
been derived from information audited by KPMG LLP, whose report, along with the
Fund's financial statements, are included in the annual report, which is
available upon request.
68
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
ADVISER (CLASS Y) SHARES
<TABLE>
<Captions>
FOR THE YEARS FOR THE PERIOD
ENDED OCTOBER 31, JULY 1, 1996
------------------------------ TO OCTOBER 31,
1999 1998 1997 1996(e)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.93 $10.64 $10.30 $10.18
----------------------------------------------------------------------------------
Investment activities:
Net investment income 0.48 0.49 0.46 0.16
Net realized and unrealized
gains/(losses) from
investment transactions (0.84) 0.33 0.36 0.12
----------------------------------------------------------------------------------
Total from investment
activities (0.36) 0.82 0.82 0.28
----------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.48) (0.49) (0.46) (0.16)
In excess of net investment
income (0.00)* -- -- --
Net realized gains from
investment transactions (0.02) (0.04) (0.02) --
----------------------------------------------------------------------------------
Total dividends (0.50) (0.53) (0.48) (0.16)
----------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $10.07 $10.93 $10.64 $10.30
----------------------------------------------------------------------------------
Total return (3.45%) 7.87% 8.38% 3.52%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000's) $8,619 $8,641 $8,901 $8,233
Ratio of expenses to average
net assets 0.71% 0.70% 0.78% 0.60%(b)
Ratio of net investment income
to average net assets 4.49% 4.53% 4.66% 4.78%(b)
Ratio of expenses to average
net assets (a) 0.96% 0.95% 1.27% 2.26%(b)
Portfolio turnover (d) 46.56% 100.35% 163.46% 178.11%
----------------------------------------------------------------------------------
</TABLE>
* Less than $0.01 per share.
(a) During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole,
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
See notes to financial statements.
69
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR EQUITY FUND
ADVISER (CLASS Y) SHARES
<TABLE>
<Captions>
FOR THE YEARS ENDED FOR THE PERIOD
OCTOBER 31, JULY 1, 1996
----------------------------- TO OCTOBER 31,
1999 1998 1997 1996(e)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 16.95 $ 15.01 $ 11.93 $ 11.49
------------------------------------------------------------------------------
Investment activities:
Net investment income 0.10 0.08 0.10 0.08
Net realized and unrealized
gains from investment
transactions 3.32 2.79 3.33 0.42
------------------------------------------------------------------------------
Total from investment
activities 3.42 2.87 3.43 0.50
------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.09) (0.08) (0.13) (0.06)
Net realized gains from
investment
transactions (0.39) (0.85) (0.22) --
------------------------------------------------------------------------------
Total dividends (0.48) (0.93) (0.35) (0.06)
------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 19.89 $ 16.95 $ 15.01 $ 11.93
------------------------------------------------------------------------------
Total return 20.59% 20.16% 29.28% 4.72%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000's) $245,342 $210,498 $63,060 $33,155
Ratio of expenses to average
net assets 0.69% 0.78% 0.96% 0.66%(b)
Ratio of net investment
income to average net assets 0.51% 0.55% 0.77% 1.93%(b)
Ratio of expenses to average
net assets 0.69% 0.78% 1.03%(a) 0.97%(a),(b)
Portfolio turnover (d) 70.85% 176.34% 99.02% 86.18%
------------------------------------------------------------------------------
</TABLE>
(a) During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(b) Annualized.
(c) Not annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole,
without distinguishing between the classes of shares issued.
(e) Period from commencement of operations.
See notes to financial statements.
70
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR FIXED INCOME FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED OCTOBER 31, JANUARY 9, 1995
-------------------------------------- TO OCTOBER 31,
1999 1998 1997 1996 1995(d)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.81 $ 10.92 $ 10.67 $ 10.96 $ 10.00
--------------------------------------------------------------------------------
Investment activities:
Net investment income 0.62 0.65 0.59 0.59 0.46
Net realized and
unrealized
gains/(losses) from
investments and
futures transactions (0.51) 0.02 0.31 0.08 0.96
--------------------------------------------------------------------------------
Total from
investment
activities 0.11 0.67 0.90 0.67 1.42
--------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.62) (0.65) (0.64) (0.59) (0.46)
Net realized gains from
investments and
futures transactions (0.28) (0.13) (0.01) (0.37) --
In excess of net
realized gains from
investments and
futures transactions (0.01) -- -- -- --
--------------------------------------------------------------------------------
Total dividends (0.91) (0.78) (0.65) (0.96) (0.46)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.01 $ 10.81 $ 10.92 $ 10.67 $ 10.96
--------------------------------------------------------------------------------
Total return 1.01% 6.26% 9.14% 6.51% 14.37%(c)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000's) $114,405 $97,728 $71,686 $42,424 $26,128
Ratio of expenses to
average net assets 0.69% 0.78% 0.83% 0.83% 0.91%(b)
Ratio of net investment
income to average net
assets 6.31% 5.87% 5.92% 5.51% 5.63%(b)
Ratio of expenses to
average net assets 0.69% 0.78% 0.85%(a) 1.06%(a) 1.72%(a),(b)
Portfolio turnover(e) 433.26% 126.40% 349.00% 152.00% 100.00%
--------------------------------------------------------------------------------
</TABLE>
(a) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(b) Annualized.
(c) Not annualized.
(d) Period from commencement of operations.
(e) Portfolio turnover is calculated on the basis of the Portfolio.
See notes to financial statements.
71
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED OCTOBER 31, JANUARY 9, 1995
---------------------------------------- TO OCTOBER 31,
1999 1998 1997 1996 1995(d)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 13.24 $ 13.76 $ 12.05 $ 10.80 $ 10.00
------------------------------------------------------------------------------------
Investment activities:
Net investment income 0.09 0.11 0.12 0.11 0.08
Net realized and unrealized
gains from investments
and foreign currency
transactions 5.87 0.32 1.85 1.31 0.75
-------------------------------------------------------------------------------------
Total from investment
activities 5.96 0.43 1.97 1.42 0.83
-------------------------------------------------------------------------------------
Dividends:
Net investment income (0.15) (0.27) (0.11) (0.16) (0.03)
Net realized gains from
investments and foreign
currency transactions (0.47) (0.68) (0.15) (0.01) --
------------------------------------------------------------------------------------
Total dividends (0.62) (0.95) (0.26) (0.17) (0.03)
------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 18.58 $ 13.24 $ 13.76 $ 12.05 $ 10.80
------------------------------------------------------------------------------------
Total return 46.92% 3.49% 16.62% 13.22% 8.31%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of
period (000's) $172,004 $120,250 $132,924 $96,977 $34,244
Ratio of expenses to
average net assets 1.05% 1.09% 0.91% 1.11% 1.14%(b)
Ratio of net investment
income to average net
assets 0.54% 0.75% 0.91% 0.99% 1.26%(b)
Ratio of expenses to
average net assets 1.05% 1.09% 0.91% 1.13%(a) 2.12%(a),(b)
Portfolio turnover(e) 34.26% 40.47% 30.00% 23.30% 3.07%
------------------------------------------------------------------------------------
</TABLE>
(a) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(b) Annualized.
(c) Not annualized.
(d) Period from commencement of operations.
(e) Portfolio turnover is calculated on the basis of the Portfolio.
See notes to financial statements.
72
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED OCTOBER 31, SEPTEMBER 3, 1996
------------------------------- TO OCTOBER 31,
1999 1998 1997 1996(d)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 11.48 $ 13.44 $ 10.63 $ 10.00
------------------------------------------------------------------------------------
Investment activities:
Net investment loss (0.09) (0.09) (0.06) --
Net realized and unrealized
gains/(losses) from
investments 2.65 (0.49) 2.93 0.63
------------------------------------------------------------------------------------
Total from investment
activities 2.56 (0.58) 2.87 0.63
------------------------------------------------------------------------------------
DIVIDENDS:
In excess of net investment
income (0.03) -- -- --
Net realized gains from
investments (1.45) (1.38) (0.06) --
------------------------------------------------------------------------------------
Total dividends (1.48) (1.38) (0.06) --
------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 12.56 $ 11.48 $ 13.44 $ 10.63
------------------------------------------------------------------------------------
Total return 24.63% (4.27%) 27.18% 6.30%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000's) $148,538 $112,935 $137,996 $92,842
Ratio of expenses to average
net assets 1.18% 1.14% 1.02% 0.91%(b)
Ratio of net investment loss
to average net assets (0.81%) (0.68%) (0.50%) (0.28%)(b)
Ratio of expenses to average
net assets 1.18% 1.16%(a) 1.03%(a) 1.17%(a),(b)
Portfolio turnover(e) 77.74% 154.69% 92.18% 50.55%
------------------------------------------------------------------------------------
</TABLE>
(a) During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(b) Annualized.
(c) Not annualized.
(d) Period from commencement of operations.
(e) Portfolio turnover is calculated on the basis of the Portfolio.
See notes to financial statements.
73
<PAGE>
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS [LOGO]
The following tables set forth information for the Fixed Income Fund, Equity
Fund, International Equity Fund and the Small Cap Equity Fund, and information
on the prior performance of the investment advisers (the 'Sub-Advisers') for
those Funds and, where applicable, the corresponding portfolios.
The Sub-Adviser prior performance information is a composite of the average
annual total returns of all institutional separate accounts managed by the Sub-
Advisers that have investment objectives, policies and restrictions
substantially similar to the Funds (and corresponding Portfolios), and which
have been managed as the Funds (and corresponding Portfolios) have been managed.
The composite data is provided to illustrate the past performance of the
Sub-Advisers in managing substantially similar accounts with substantially
similar investment objectives, strategies and policies as measured against the
specified market index and does not represent the performance of the Fixed
Income Fund, Equity Fund, International Equity Fund or Small Cap Equity Fund or
the Fixed Income Portfolio, International Equity Portfolio or Small Cap Equity
Portfolio.
<TABLE>
<CAPTION>
FIXED INCOME SUB-ADVISER
ANNUALIZED RETURNS
FUND SUB-ADVISER SALOMON BIG
PERFORMANCE COMPOSITE'D' INDEX(2)
<S> <C> <C> <C>
1 Year(1) - 1.08% - 2.57% - 0.84%
Since Portfolio Inception (1/9/95) 7.35% N/A 7.77%*
5 Years(1) N/A 6.27% 7.75%
10 Years(1) N/A 6.64% 7.76%
</TABLE>
------------
(1) Through December 31, 1999.
(2) The Salomon Broad Investment Grade Bond Index is a market-capitalization-
based total return index containing U.S. fixed rate issues having a
maturity of greater than one year and at least $50 million outstanding.
The Salomon BIG Index includes Treasury, Government-sponsored,
mortgage-backed, and investment grade corporate issues.
'D' If the expense ratio of the Fund after expense reimbursements was used as
the basis for adjustment, the Sub-Adviser composite average annual returns
would be - 1.67% for one year, 7.24% for 5 years, 7.61% for 10 years, and
N/A since inception.
* Since December 31, 1994.
74
<PAGE>
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS [LOGO]
<TABLE>
<CAPTION>
EQUITY SUB-ADVISERS
ANNUALIZED RETURNS
FUND ALLIANCE RUSSELL BRINSON RUSSELL RUSSELL
PERFORMANCE COMPOSITE GROWTH(2) COMPOSITE VALUE(3) 1000(4)
<S> <C> <C> <C> <C> <C> <C>
1 Year(1) 10.05% 26.21% 33.16% - 6.40% 7.35% 20.91%
Since Inception'D' 21.36% 30.33% 30.58% 16.47% 20.60% 25.41%
5 Years(1) N/A 32.15% 32.42% 19.56% 23.07% 28.04%
Since 12/31/87 N/A 20.20% 20.32% 14.67% 15.60% 18.13%
</TABLE>
------------
(1) Through December 31, 1999.
(2) The Russell 1000 Growth Index is an unmanaged index of those companies in
the Russell 1000 Index with higher price-to-book ratios and higher
forecasted growth values.
(3) The Russell 1000 Value Index is an unmanaged index of those companies in
the Russell 1000 Index with lower price-to-book ratios and lower forecasted
growth values.
(4) The Russell 1000 Index is an unmanaged index of the 1000 largest U.S.
companies (representing approximately 90% of the total market
capitalization) in the Russell 3000 Index, which represents approximately
98% of the U.S. equity market by capitalization.
'D' Since Fund inception (8/1/95).
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY SUB-ADVISER
ANNUALIZED RETURNS
FUND SUB-ADVISER EAFE
PERFORMANCE COMPOSITE'D' INDEX(2)
<S> <C> <C> <C>
1 Year(1) 71.01% 67.56% 27.30%
Since Portfolio Inception (1/9/95) 22.38% N/A 13.67%
5 Years(1) N/A 21.51% 13.14%
10 Years(1) N/A 12.94% 7.33%
</TABLE>
------------
(1) Through December 31, 1999.
(2) The EAFE Index includes 1,600 companies in 22 countries representing the
stock markets of Europe, Australia, New Zealand and the Far East. The
combined market capitalization of these companies represents approximately
60% of the combined market value of the stock exchanges. The EAFE Index is
capitalization weighted in U.S. dollars and includes dividends.
'D' If the expense ratio of the Fund after expense reimbursements was used as
the basis for adjustment, the Sub-Adviser composite average annual returns
would be 67.93% for one year, 26.80% for 5 years, 13.22% for 10 years and
N/A since inception.
75
<PAGE>
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS [LOGO]
<TABLE>
<CAPTION>
SMALL CAP EQUITY SUB-ADVISER
ANNUALIZED RETURNS
FUND SUB-ADVISER RUSSELL 2000
PERFORMANCE COMPOSITE'D' INDEX(2)
<S> <C> <C> <C>
1 Year(1) 48.20% 50.68% 21.26%
Since Portfolio Inception
(9/3/96) 27.47% N/A 14.81%
3 Years(1) N/A 27.70% 13.08%
5 Years(1) N/A 28.57% 16.69%
</TABLE>
------------
(1) Through December 31, 1999.
(2) The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest companies (representing approximately 10% of the total market
capitalization) in the Russell 3000 Index, which represents approximately
98% of the U.S. equity market by capitalization.
'D' If the expense ratio of the Fund after expense reimbursements was used as
the basis for adjustment, the Sub-Adviser composite average annual returns
would be 51.12% for one year, 28.62% for 3 years, 29.01% for five years,
and N/A since inception.
* Since August 31, 1996.
76
<PAGE>
TAXABLE EQUIVALENT YIELD TABLES [LOGO]
TAXABLE EQUIVALENT YIELD TABLES
The tables below show the approximate taxable yields which are equivalent to
tax-exempt yields, for the ranges indicated, under (i) federal and New York
State personal income tax laws, and (ii) federal, New York State and New York
City personal income tax laws, in each case based upon the applicable 2000
rates. Such yields may differ under the laws applicable to subsequent years if
the effect of any such law is to change any tax bracket or the amount of taxable
income which is applicable to a tax bracket. Separate calculations, showing the
applicable taxable income brackets, are provided for investors who file single
returns and for those investors who file joint returns. For cases in which two
or more state (or city) brackets fall within a federal bracket, the highest
state (or city) bracket is combined with the federal bracket. The combined
income tax brackets shown reflect the fact that state and city income taxes are
currently deductible as an itemized deduction for federal tax purposes (however,
a taxpayer's itemized deductions may be subject to an overall limitation, the
effect of which has not been taken into account in preparing these tables).
FEDERAL AND NEW YORK STATE TABLE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
TAXABLE INCOME* TAX-EXEMPT YIELD
------------------------------------ INCOME --------------------------------------------------------------
SINGLE JOINT TAX 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
RETURN RETURN BRACKET**
EQUIVALENT TAXABLE YIELD
----------------- ----------------- --------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 26,250 $ 0-$ 43,850 20.80% 3.16% 3.79% 4.42% 5.05% 5.68% 6.31% 6.95% 7.58%
$ 26,251-$ 63,550 $ 43,851-$105,950 32.90% 3.73% 4.47% 5.22% 5.95% 6.71% 7.46% 8.20% 8.95%
$ 63,551-$132,600 $105,951-$161,450 35.70% 3.89% 4.67% 5.44% 6.22% 7.00% 7.78% 8.56% 9.34%
$132,601-$288,350 $161,451-$288,150 40.40% 4.19% 5.03% 5.87% 6.71% 7.55% 8.39% 9.23% 10.06%
>=$288,350 >=$288,150 43.70% 4.44% 5.33% 6.22% 7.11% 8.00% 8.89% 9.78% 10.66%
</TABLE>
------------
* Net amount subject to federal and New York State personal income tax after
deductions and exemptions.
** Effective combined federal and state tax bracket.
This table does not take into account: (i) any taxes other than the regular
federal income tax and the regular New York State personal income tax; or (ii)
the New York State tax table benefit recapture tax. Also, it is assumed that:
(i) there are no federal or New York State minimum taxes applicable; (ii) a
shareholder has no net capital gain; and (iii) a shareholder's taxable income
for federal income tax purposes is the same as his or her taxable income for New
York State income tax purposes. Also, this table does not reflect the fact that,
due to factors including the federal phase-out of personal exemptions and
reduction of certain itemized deductions for taxpayers whose adjusted gross
income exceed specified thresholds, a shareholder's effective marginal tax rate
may differ from his or her tax bracket rate.
77
<PAGE>
TAXABLE EQUIVALENT YIELD TABLES [LOGO]
FEDERAL, NEW YORK STATE AND NEW YORK CITY TABLE
<TABLE>
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
------------------------------------ ---------------------------------------------------------------
INCOME 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
SINGLE JOINT TAX ----- ----- ----- ----- ----- ----- ------ ------
RETURN RETURN BRACKET** EQUIVALENT TAXABLE YIELD
----------------- ----------------- --------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 26,250 $ 0-$ 43,850 23.60% 3.27% 3.93% 4.58% 5.24% 5.89% 6.54% 7.20% 7.85%
$ 26,251-$ 63,550 $ 43,851-$105,950 35.32% 3.87% 4.64% 5.41% 6.18% 6.96% 7.73% 8.50% 9.28%
$ 63,551-$132,600 $105,951-$161,450 38.01% 4.03% 4.84% 5.65% 6.45% 7.26% 8.07% 8.87% 9.68%
$132,601-$288,350 $161,451-$288,350 42.51% 4.35% 5.22% 6.09% 6.96% 7.83% 8.70% 9.56% 10.44%
>=$288,350 >=$288,350 45.79% 4.61% 5.53% 6.45% 7.37% 8.29% 9.21% 10.14% 11.06%
</TABLE>
------------
* Net amount subject to federal, New York State and New York City personal
income tax after deductions and exemptions.
** Effective combined federal, state and city tax bracket.
This table does not take into account: (i) any taxes other than the regular
federal income tax, the regular New York State personal income tax, and the
regular New York City personal income tax (including the temporary tax surcharge
and the additional tax); or (ii) the New York State tax table benefit recapture
tax. Also, it is assumed that: (i) there are no federal, state or city minimum
taxes applicable; (ii) a shareholder has no net capital gain; and (iii) a
shareholder's taxable income for federal income tax purposes is the same as his
or her income for state and city tax purposes. Also, this table does not reflect
the fact that, due to factors including the federal phase-out of personal
exemptions and reduction of certain itemized deductions for taxpayers whose
adjusted gross income exceed specified thresholds, a shareholder's effective
marginal tax rate may differ from his or her tax bracket rate.
While it is expected that most of the dividends paid to the shareholders of the
New York Tax-Free Bond Fund will be exempt from federal, New York State and New
York City personal income taxes, portions of such dividends from time to time
may be subject to such taxes.
78
<PAGE>
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENTS OF ADDITIONAL INFORMATION (SAIS):
The SAIs provide more detailed information about the Funds, including their
operations and investment policies. They are incorporated by reference and
legally considered a part of this prospectus.
YOU CAN GET FREE COPIES OF REPORTS AND THE SAIS, PROSPECTUSES OF
OTHER MEMBERS OF THE HSBC INVESTOR FAMILY OF FUNDS, OR REQUEST
OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT THE FUNDS, BY
CONTACTING A BROKER OR HSBC BROKERAGE (USA) INC. FINANCIAL SERVICES AT
1-888-525-5757. OR CONTACT THE FUNDS AT:
HSBC INVESTOR FUNDS
P.O. BOX 182845
COLUMBUS, OHIO 43218-2845
TELEPHONE: 1-800-782-8183
You can review the Funds' reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
For a duplicating fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-0102, or by electronic request at
[email protected]. Information on the operation of the Public Reference Room
may be obtained by calling the Commission at 1-202-942-8090.
Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-4782.
RFFRC (3/00)
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as.................................... 'D'
The greater-than-or-equal-to sign shall be expressed as.................... >=
