<PAGE>
[GRAPHIC OMITTED]
PROSPECTUS
----------
AS SUPPLEMENTED THROUGH
NOVEMBER 14, 2000
HSBC INVESTOR
NEW YORK TAX-FREE
BOND FUND
HSBC INVESTOR EQUITY FUND
HSBC INVESTOR BOND FUND
HSBC INVESTOR
OVERSEAS EQUITY FUND
HSBC INVESTOR
OPPORTUNITY 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>
[LOGO] 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 Bond Fund
investments, risks, past 24 HSBC Investor Overseas Equity Fund
performance, and fees. 31 HSBC Investor Opportunity Fund
[LOGO] 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 Bond Fund
and risks. 42 HSBC Investor Overseas Equity Fund
44 HSBC Investor Opportunity Fund
45 General Risk Factors: All Funds
46 Specific Risk Factors
[LOGO] FUND MANAGEMENT
----------------------------------------------------------------------------------------
Review this section 49 The Investment Adviser
for details on 51 Portfolio Managers
the people and 53 The Distributor and Administrator
organizations who provide 54 The Two-Tier Fund Structure
services to the Funds.
[LOGO] SHAREHOLDER INFORMATION
----------------------------------------------------------------------------------------
Review this section for 55 Pricing of Fund Shares
details on how 56 Purchasing and Adding to Your Shares
shares are valued, 59 Selling Your Shares
and how to purchase, 63 Distribution Arrangements/Sales Charge
sell and exchange shares. 69 Exchanging Your Shares
This section also describes 70 Dividends, Distributions and Taxes
related charges, and
payments of dividends
and distributions.
[LOGO] FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------
Review this section 73 HSBC Investor New York Tax-Free Bond Fund
for details on 76 HSBC Investor Equity Fund
selected financial 79 HSBC Investor Bond Fund
statements of the Funds. 82 HSBC Investor Overseas Equity Fund
85 HSBC Investor Opportunity Fund
[LOGO] PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS
----------------------------------------------------------------------------------------
[LOGO] TAXABLE EQUIVALENT YIELD TABLES
----------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
The following is a summary of key information about the Funds. 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 [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
PRINCIPAL Market Risk: The Fund's performance per
INVESTMENT RISKS 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 Fund 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
affect 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 ('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 [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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 tax-exempt 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 activities 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 [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor New York Tax-Free Bond Fund's
annual returns and how its performance has varied from year to year. The bar
chart assumes reinvestment of dividends and distributions, but does not reflect
sales charges. If sales charges were reflected, returns would be less than those
shown.
The returns for Class B and Class C Shares will differ from the returns for
Class A Shares shown in the bar chart because of differences in expenses of each
class.
Year-by-Year
Total Returns
as of 12/31
for Class A
Shares*
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C>
1996..................... 3.16%
1997..................... 9.20%
1998..................... 6.12%
1999..................... -3.34%
</TABLE>
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1995 4.27%
Worst quarter: 2Q 1999 -2.27%
</TABLE>
* The Fund offers three different classes of shares
through this prospectus: Class A Shares, Class B Shares,
and Class C Shares. The Fund offers another class of
shares pursuant to a separate prospectus. Each class of
shares has different characteristics and are subject to
different fees and expenses. The following pages of this
Prospectus will highlight these differences. The Fund's
Statement of Additional Information contains a more
detailed discussion of the different classes of shares.
6
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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, and includes
applicable sales charges.
<TABLE>
<S> <C>
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
</TABLE>
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
--------------------------------------------------------------------------
CLASS A May 1, 1995 - 6.01% 4.52%
----------------------------------------
CLASS B Jan. 6, 1998 - 6.72% - 0.58%
----------------------------------------
CLASS C Nov. 4, 1998 - 4.93% - 2.78%
----------------------------------------
LEHMAN NY EXEMPT INDEX - 1.99% 6.18%*
----------------------------------------
LIPPER NY MUNICIPAL BOND FUND - 4.96% 4.66%**
--------------------------------------------------------------------------
</TABLE>
* Since May 1, 1995.
** Since June 30, 1995.
7
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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 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
(FEES PAID DIRECTLY FROM A B C
YOUR INVESTMENT) SHARES SHARES SHARES
<S> <C> <C> <C>
Maximum sales charge
(load) on purchases 4.75% None None
--------------------------------------------------
Maximum deferred sales
charge (load) None 4.00% 1.00%
------------------------
ANNUAL FUND
OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM A B C
FUND ASSETS) SHARES SHARES SHARES
<S> <C> <C> <C>
Management fee 0.25% 0.25% 0.25%
--------------------------------------------------
Distribution (12b-1) fee 0.00%* 0.75% 0.75%
--------------------------------------------------
Shareholder servicing
fee 0.25% 0.25% 0.25%
Other operating
expenses 0.70% 0.70% 0.70%
Total other expenses: 0.95% 0.95% 0.95%
--------------------------------------------------
Total Fund
operating expenses 1.20% 1.95% 1.95%
--------------------------------------------------
Fee waiver and
expense reimbursement'D' 0.25% 0.25% 0.25%
--------------------------------------------------
Net operating
expenses 0.95% 1.70% 1.70%
</TABLE>
* There is a 12b-1 plan for Class A Shares, which authorizes payments up to .25%
of the Fund's assets. To date, no payments under the 12b-1 plan have been made.
'D' Pursuant to an expense limitation agreement.
8
<PAGE>
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
EXAMPLE
This Example is intended to help you compare the cost of investing in 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
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 YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $567 $814 $1,080 $1,839
-------------------------------------------------------
CLASS B SHARES
Assuming Redemption $573 $788 $1,029 $1,881
Assuming no
Redemption $173 $588 $1,029 $1,881
-------------------------------------------------------
CLASS C SHARES
Assuming Redemption $273 $588 $1,029 $2,255
Assuming no
Redemption $173 $588 $1,029 $2,255
</TABLE>
9
<PAGE>
HSBC INVESTOR EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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 EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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.
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>
11
<PAGE>
HSBC INVESTOR EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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 [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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, but does not reflect sales charges.
If sales charges were reflected, returns would be less than those shown.
The returns for Class B and Class C Shares will differ from the returns for
Class A Shares shown in the bar chart because of differences in expenses of each
class.
Year-by-Year
Total Returns
as of 12/31
for Class A
Shares*
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C>
1996..................... 15.49%
1997..................... 28.37%
1998..................... 29.20%
1999..................... 9.79%
</TABLE>
Of course, past performance does not indicate how
the Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1998 +23.30%
Worst quarter: 3Q 1998 -11.58%
</TABLE>
* The Fund offers three different classes of shares
through this prospectus: Class A Shares, Class B Shares,
and Class C Shares. The Fund offers another class of
shares pursuant to a separate prospectus. Each class of
shares has different characteristics and are subject to
different fees and expenses. The following pages of this
Prospectus will highlight these differences. The Fund's
Statement of Additional Information contains a more
detailed discussion of the different classes of shares.
13
<PAGE>
HSBC INVESTOR EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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 similar to that of the Fund.
The table assumes reinvestment of dividends and distributions, and includes
applicable sales charges.
<TABLE>
<S> <C>
-------------------
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
</TABLE>
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
---------------------------------------------------------------
CLASS A Aug. 1, 1995 5.94% 20.16%
--------------------------------
CLASS B Jan. 6, 1998 5.01% 17.18%
(with applicable CDSC)
--------------------------------
CLASS C Nov. 4, 1998 8.43% 19.21%
(with applicable CDSC)
--------------------------------
RUSSELL 1000 INDEX 20.91% 25.91%*
--------------------------------
LIPPER GROWTH FUND INDEX 27.96% 23.93%*
--------------------------------
LIPPER LARGE CAP CORE INDEX 19.35% 23.71%*
---------------------------------------------------------------
</TABLE>
* Since August 1, 1995.
14
<PAGE>
HSBC INVESTOR EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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 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
(FEES PAID DIRECTLY A B C
FROM YOUR INVESTMENT) SHARES SHARES SHARES
<S> <C> <C> <C>
Maximum sales charge
(load) on purchases 5.00% None None
----------------------------------------------
Maximum deferred
sales
charge (load) None 4.00% 1.00%
ANNUAL FUND
OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM A B C
FUND ASSETS) SHARES SHARES SHARES
Management fee 0.45% 0.45% 0.45%
----------------------------------------------
Distribution (12b-1)
fee 0.00%* 0.75% 0.75%
----------------------------------------------
Shareholder servicing
fee: 0.25% 0.25% 0.25%
Other operating
expenses: 0.24% 0.24% 0.24%
Total other expenses: 0.49% 0.49% 0.49%
----------------------------------------------
Total Fund operating
expenses 0.94% 1.69% 1.69%
----------------------------------------------
</TABLE>
* There is a 12b-1 plan for Class A Shares, which authorizes payments up to .25%
of the Fund's assets. To date, no payments under the 12b-1 plan have been made.
15
<PAGE>
HSBC INVESTOR EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
EXAMPLE
This Example is intended to help you compare the cost of investing in 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
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>
HSBC INVESTOR EQUITY 1 3 5 10
FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $591 $785 $994 $1,597
-----------------------------------------------------
CLASS B SHARES
Assuming
Redemption $572 $733 $918 $1,616
Assuming no
Redemption $172 $533 $918 $1,616
-----------------------------------------------------
CLASS C SHARES
Assuming
Redemption $272 $533 $918 $1,998
Assuming no
Redemption $172 $533 $918 $1,998
-----------------------------------------------------
</TABLE>
16
<PAGE>
HSBC INVESTOR BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
HSBC INVESTOR BOND FUND
INVESTMENT OBJECTIVE The investment objective of the Bond 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 Bond 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.
PRINCIPAL INVESTMENT RISKS Market Risk: The Fund's performance per share
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.
</TABLE>
17
<PAGE>
HSBC INVESTOR BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
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 intends to do
so primarily for hedging purposes. These
investments could increase the Fund's price
volatility or reduce the return on your
investment.
High Yield ('Junk Bonds') Risk: 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 BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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 BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor Bond Fund's annual returns
and how its performance has varied from year to year. The bar chart assumes
reinvestment of dividends and distributions, but does not reflect sales charges.
If sales charges were reflected, returns would be less than those shown.
The returns for Class B and Class C Shares will differ from the returns for
Class A Shares shown in the bar chart because of differences in expenses of each
class.
Year-by-Year
Total Returns
as of 12/31
for Class A
Shares*
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C>
1997..................... 8.50%
1998..................... 6.41%
1999..................... -1.28%
</TABLE>
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1996 +3.61%
Worst quarter: 2Q 1999 -1.55%
</TABLE>
* The Fund offers three different classes of shares: Class
A Shares, Class B Shares, and Class C Shares. Each class
of shares has different characteristics and are subject to
different fees and expenses. The following pages of this
Prospectus will highlight these differences. The Fund's
Statement of Additional Information contains a more
detailed discussion of the different classes of shares.
20
<PAGE>
HSBC INVESTOR BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
The table below 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, and includes
applicable sales charges.
<TABLE>
<S> <C>
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
</TABLE>
----------------------------
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
----------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A Aug. 26, 1996 - 3.97% 4.63%
----------------------------------------
CLASS B Jan. 6, 1998 - 4.88% 0.29%
----------------------------------------
CLASS C Nov. 4, 1998 - 3.02% - 0.25%
----------------------------------------
SALOMON BIG BOND INDEX - 0.83% 6.64%*
----------------------------------------
LIPPER A RATED BOND FUND INDEX - 2.04% 5.98%*
----------------------------------------------------------------------------
</TABLE>
* Since August 31, 1996.
21
<PAGE>
HSBC INVESTOR BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES*
As an investor in the HSBC Investor Bond Fund, you may pay the following fees
and expenses if you buy and hold 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>
---------------------
SHAREHOLDER
TRANSACTION EXPENSES
(FEES PAID DIRECTLY
FROM A B C
YOUR INVESTMENT) SHARES SHARES SHARES
<S> <C> <C> <C>
Maximum sales
charge (load) on
purchases 4.75% None None
-------------------------------------------------
Maximum
deferred sales
charge (load) None 4.00% 1.00%
---------------------
ANNUAL FUND
OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM A B C
FUND ASSETS) SHARES SHARES SHARES
<S> <C> <C> <C>
Management fee 0.40% 0.40% 0.40%
-------------------------------------------------
Distribution
(12b-1) fee 0.00%** 0.75% 0.75%
-------------------------------------------------
Shareholder servicing
fees 0.25% 0.25% 0.25%
Other operating
expenses 2.01% 2.01% 2.01%
Total other expenses 2.26% 2.26% 2.26%
-------------------------------------------------
Total fund
operating
expenses 2.66% 3.41% 3.41%
-------------------------------------------------
Fee waiver and expense
reimbursement'D' 1.56% 1.56% 1.56%
-------------------------------------------------
Net operating expenses 1.10% 1.85% 1.85%
</TABLE>
* The table reflects the combined fees of both the Bond Fund and the Fixed
Income Portfolio.
** There is a 12b-1 plan for Class A Shares, which authorizes payments up to
.25% of the Fund's assets. To date, no payments under the 12b-1 plan have been
made.
'D' Pursuant to an expense limitation agreement.
22
<PAGE>
HSBC INVESTOR BOND FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
EXAMPLE*
The Example is intended to help you compare the cost of investing in 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
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>
------------------
HSBC INVESTOR 1 3 5 10
BOND FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $582 $1,121 $1,685 $3,216
-------------------------------------------------------
CLASS B SHARES
Assuming
Redemption $588 $1,103 $1,640 $3,262
Assuming no
Redemption $188 $ 903 $1,640 $3,262
-------------------------------------------------------
CLASS C SHARES
Assuming
Redemption $288 $ 903 $1,640 $3,589
Assuming no
Redemption $188 $ 903 $1,640 $3,589
</TABLE>
* The example reflects the combined fees of both the Bond Fund and the Fixed
Income Portfolio.
23
<PAGE>
HSBC INVESTOR OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
HSBC INVESTOR OVERSEAS EQUITY FUND
INVESTMENT OBJECTIVE The investment objective of the Overseas
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 Overseas 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
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 OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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 prices of its investments increase or
decrease.
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 OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
WHO MAY WANT TO Consider investing in the Fund if you are:
INVEST?
Seeking a long-term goal such as
retirement
Looking to add a foreign 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 OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor Overseas Equity Fund's annual
returns and how its performance has varied from year to year. The bar chart
assumes reinvestment of dividends and distributions, but does not reflect sales
charges. If sales charges were reflected, returns would be less than those
shown.
The returns for Class B and Class C Shares will differ from the returns for
Class A Shares shown in the bar chart because of differences in expenses of each
class.
Year-by-Year
Total Returns
as of 12/31
for Class A
Shares*
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C>
1997..................... 7.90%
1998..................... 10.56%
1999..................... 68.71%
</TABLE>
Of course, past performance does not indicate how
the Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1999 +30.25%
Worst quarter: 3Q 1998 -16.10%
</TABLE>
* The Fund offers three different classes of shares:
Class A Shares, Class B Shares, and Class C Shares. Each
class of shares has different characteristics and are
subject to different fees and expenses. The following
pages of this Prospectus will highlight these differences.
The Fund's Statement of Additional Information contains a
more detailed discussion of the different classes of
shares.
27
<PAGE>
HSBC INVESTOR OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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, and includes
applicable sales charges.
------------------
<TABLE>
<S> <C>
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
</TABLE>
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
<S> <C> <C> <C>
---------------------------------------------------------------
CLASS A Aug. 26, 1996 62.86% 24.32
---------------------------------
CLASS B
(with applicable CDSC) Jan. 6, 1998 63.46% 34.15%
---------------------------------
CLASS C
(with applicable CDSC) Nov. 4, 1998 66.99% 63.82%
---------------------------------
MSCI EAFE INDEX
---------------------------------
INDEX 27.30% 15.83%*
---------------------------------
LIPPER INTERNATIONAL
---------------------------------
EQUITY FUND INDEX 37.83% 19.11%*
---------------------------------------------------------------
</TABLE>
* Since August 31, 1996.
28
<PAGE>
HSBC INVESTOR OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES*
As an investor in the HSBC Investor Overseas Equity Fund, you may pay the
following fees and expenses if you buy and hold 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
(FEES PAID DIRECTLY FROM A B C
YOUR INVESTMENT) SHARES SHARES SHARES
<S> <C> <C> <C>
Maximum sales charge (load)
on purchases 5.00% None None
-----------------------------------------------------
Maximum deferred sales
charge (load) None 4.00% 1.00%
ANNUAL FUND
OPERATING EXPENSES
(EXPENSES THAT ARE A B C
DEDUCTED FROM FUND ASSETS) SHARES SHARES SHARES
Management fee 0.69% 0.69% 0.69%
-----------------------------------------------------
Distribution (12b-1)
and Service fee 0.00%** 0.75% 0.75%
-----------------------------------------------------
Shareholder servicing
fees: 0.25% 0.25% 0.25%
Other operating expenses: 0.95% 0.95% 0.95%
Total other expenses: 1.20% 1.20% 1.20%
-----------------------------------------------------
Total Fund operating
expenses 1.89% 2.64% 2.64%
-----------------------------------------------------
</TABLE>
* The table reflects the combined fees of both the Overseas Equity Fund and the
International Equity Portfolio.
** There is a 12b-1 plan for Class A Shares, which authorizes payments up to
.25% of the Fund's assets. To date, no payments under the 12b-1 plan have been
made.
29
<PAGE>
HSBC INVESTOR OVERSEAS EQUITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
EXAMPLE*
This Example is intended to help you compare the cost of investing in 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
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
OVERSEAS EQUITY FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $682 $1,064 $1,470 $2,601
---------------------------------------------------------
CLASS B SHARES
Assuming Redemption $667 $1,020 $1,400 $2,625
Assuming no Redemption $267 $ 820 $1,400 $2,625
---------------------------------------------------------
CLASS C SHARES
Assuming Redemption $367 $ 820 $1,400 $2,973
Assuming no Redemption $267 $ 820 $1,400 $2,973
---------------------------------------------------------
</TABLE>
* The example reflects the combined fees of both the Overseas Equity Fund and
the International Equity Portfolio.
30
<PAGE>
HSBC INVESTOR OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<TABLE>
<S> <C>
HSBC INVESTOR OPPORTUNITY FUND
INVESTMENT OBJECTIVE The investment objective of the Opportunity
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 Opportunity 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 OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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 prices of its investments increase or
decrease.
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 OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
<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
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 OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
PERFORMANCE BAR
CHART AND TABLE
The bar chart on this page shows the HSBC Investor Opportunity Fund's annual
returns and how its performance has varied from year to year. The bar chart
assumes reinvestment of dividends and distributions, but does not reflect sales
charges. If sales charges were reflected, returns would be less than those
shown.
The returns for Class B and Class C Shares will differ from the returns for
Class A Shares shown in the bar chart because of differences in expenses of each
class.
Year-by-Year
Total Returns
as of 12/31
for Class A
Shares*
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C>
1997..................... 21.86%
1998..................... 12.95%
1999..................... 47.07%
</TABLE>
Of course, past performance does not indicate how the
Fund will perform in the future.
<TABLE>
<S> <C>
Best quarter: 4Q 1999 +46.37%
Worst quarter: 3Q 1998 -20.18%
</TABLE>
* The Fund offers three different classes of shares:
Class A Shares, Class B Shares, and Class C Shares. Each
class of shares has different characteristics and are
subject to different fees and expenses. The following
pages of this Prospectus will highlight these differences.
The Fund's Statement of Additional Information contains a
more detailed discussion of the different classes of
shares.
34
<PAGE>
HSBC INVESTOR OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
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 approximately 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, and includes
applicable sales charges.
<TABLE>
<S> <C>
AVERAGE ANNUAL
TOTAL RETURNS (for
the periods ended
December 31, 1999)
</TABLE>
<TABLE>
<CAPTION>
INCEPTION PAST SINCE
DATE YEAR INCEPTION
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A Sept. 23, 1996 41.94% 22.75%
-------------------------------------------
CLASS B Jan. 6, 1998 42.05% 27.68%
(with applicable CDSC)
-------------------------------------------
CLASS C Nov. 4, 1998 45.26% 56.21%
(with applicable CDSC)
-------------------------------------------
RUSSELL 2000 INDEX 21.26% 13.78%*
-------------------------------------------
LIPPER SMALL COMPANY 41.54% 15.53%*
-------------------------------------------
FUND INDEX
-------------------------------------------------------------------------------------
</TABLE>
* Since September 30, 1996.
35
<PAGE>
HSBC INVESTOR OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
FEES AND EXPENSES*
As an investor in the HSBC Investor Opportunity Fund, you may pay the following
fees and expenses if you buy and hold 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
(FEES PAID DIRECTLY FROM A B C
YOUR INVESTMENT) SHARES SHARES SHARES
<S> <C> <C> <C>
Maximum sales charge (load)
on purchases 5.00% None None
-----------------------------------------------------
Maximum deferred sales
charge (load) None 4.00% 1.00%
ANNUAL FUND
OPERATING EXPENSES
(EXPENSES THAT ARE A B C
DEDUCTED FROM FUND ASSETS) SHARES SHARES SHARES
Management fee 0.86% 0.86% 0.86%
-----------------------------------------------------
Distribution (12b-1) fee 0.00%** 0.75% 0.75%
-----------------------------------------------------
Shareholder servicing fee 0.25% 0.25% 0.25%
Other operating expenses 0.54% 0.54% 0.54%
Total other expenses: 0.79% 0.79% 0.79%
-----------------------------------------------------
Total Fund operating
expenses 1.65% 2.40% 2.40%
-----------------------------------------------------
</TABLE>
* The table reflects the combined fees of both the Opportunity Fund and the
Small Cap Equity Portfolio.
** There is a 12b-1 plan for Class A Shares, which authorizes payments up to
0.25% of the funds assets to date, no payments under the 12b-1 plan have been
made.
36
<PAGE>
HSBC INVESTOR OPPORTUNITY FUND [LOGO]
RISK/RETURN SUMMARY AND FUND EXPENSES
EXAMPLE*
This Example is intended to help you compare the cost of investing in 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
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
OPPORTUNITY FUND YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
CLASS A SHARES $659 $994 $1,352 $2,357
-------------------------------------------------------
CLASS B SHARES
Assuming Redemption $643 $948 $1,280 $2,380
Assuming no Redemption $243 $748 $1,280 $2,380
-------------------------------------------------------
CLASS C SHARES
Assuming Redemption $343 $748 $1,280 $2,736
Assuming no Redemption $243 $748 $1,280 $2,736
-------------------------------------------------------
</TABLE>
* The example reflects the combined fees of both the Opportunity Fund and the
Small Cap Equity Portfolio.
37
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
TICKER SYMBOL: CLASS A: RNYCX CLASS B: RNYBX CLASS C: RNYTX
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 objectives, 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: CLASS A: REPEX CLASS B: REQBX CLASS C: REFCX
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 goal, 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: The 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 obtain 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 BOND FUND
TICKER SYMBOL: CLASS A: RBDDX CLASS B: REBBX CLASS C: RBFCX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the Bond 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 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 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 OVERSEAS EQUITY FUND
TICKER SYMBOL: CLASS A: ROVEX CLASS B: ROEBX CLASS C: ROECX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the Overseas 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.
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.
42
<PAGE>
INVESTMENT OBJECTIVES AND STRATEGIES [LOGO]
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 OPPORTUNITY FUND
TICKER SYMBOL: CLASS A: RPOPX CLASS B: RBOPX CLASS C: ROFCX
INVESTMENT OBJECTIVE, POLICIES AND STRATEGY
The investment objective of the Opportunity 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 Fund's investment objective, 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.
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.
44
<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 Bond Fund, the
Opportunity Fund, the Overseas 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, mortgage- and
asset-backed securities, 'when-issued' securities, and swaps. 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.
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.
45
<PAGE>
INVESTMENT RISKS [LOGO]
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 resulted in 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 Year 2000 Issues.
The Funds currently have no reason to believe that the Year 2000 will have an
material adverse effect on their business or operations, but complications as
yet unidentified might 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 BOND FUND
OPPORTUNITY FUND OVERSEAS 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, or a lack
of adequate company information, liquidity, and government regulation.
46
<PAGE>
INVESTMENT RISKS [LOGO]
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 foreign 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.
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
BOND FUND
OVERSEAS 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.
47
<PAGE>
INVESTMENT RISKS [LOGO]
SPECIFIC RISK FACTORS: MORTGAGE-BACKED SECURITIES AND SWAPS
BOND FUND
Mortage- 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 Fixed Income 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.
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.
48
<PAGE>
FUND MANAGEMENT [LOGO]
THE INVESTMENT ADVISER
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 Bond 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.
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
49
<PAGE>
FUND MANAGEMENT [LOGO]
THE INVESTMENT ADVISER
CONTINUED
assets since 1982. Brinson also serves as the investment adviser to seven other
investment companies.
The Overseas 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 Opportunity 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. Net assets under the
management of the MFS organization were approximately $137 billion on behalf of
over two million investor accounts as of December 31, 1999. 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>
Bond Fund 0.39%
------------------------------
New York Tax-Free Bond Fund 0.25%
------------------------------
Equity Fund 0.45%
------------------------------
Overseas Equity Fund 0.72%
------------------------------
Opportunity Fund 0.88%
----------------------------------------------------------------------
</TABLE>
* HSBC waived a portion of its contractual fees with the New York Tax-Free Bond
Fund, Overseas Equity Fund, and Opportunity 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 fee due to break points
in the investment adviser's fee, which are based on the value of the assets in
the Fund or Portfolio.
50
<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 - 1992) at Paine Webber as a Vice President
involved in the trading and distribution of tax-exempt securities.
THE EQUITY FUND:
John L. Blundin, an 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 BOND 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.
51
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FUND MANAGEMENT [LOGO]
PORTFOLIO MANAGERS
CONTINUED
THE OVERSEAS 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.
52
<PAGE>
FUND MANAGEMENT [LOGO]
PORTFOLIO MANAGERS
CONTINUED
OPPORTUNITY 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.
53
<PAGE>
FUND MANAGEMENT [LOGO]
THE TWO-TIER FUND STRUCTURE
The Bond Fund, Overseas Equity Fund, and Opportunity 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.
54
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
PRICING OF FUND SHARES
------------------------
HOW NAV IS CALCULATED
The NAV for each class of shares is calculated by dividing the total value of a
Fund's investments and other assets attributable to a class less any
liabilities, by the total 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 Bond Fund and the New York Tax-Free
Bond Fund (collectively, the 'Income Funds'), and the Equity Fund, the Overseas
Equity Fund, and the Opportunity 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 plus any applicable sales
charge. If you sell Class B Shares or Class C Shares, a contingent deferred
sales load may apply, which would reduce the amount of money paid to you by the
Fund. For more information about sales charges, see the section on 'Distribution
Arrangements/Sales Charges.'
--------------------------------------------------------------------------------
PURCHASING AND ADDING TO YOUR SHARES
You may purchase Funds through the HSBC Investor Funds 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.
-------------------------------------------------------------------------
55
<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>
MINIMUM
INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Class A Regular
(non-retirement) $1,000 $ 100
----------------------------------------------
Retirement (IRA) $ 250 $ 100
----------------------------------------------
Automatic
Investment Plan $ 250 $ 25
</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.
--------------------------------------------------------------------------------
56
<PAGE>
SHAREHOLDER INFORMATION [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.
3. 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.
<TABLE>
<S> <C>
----------------------------
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.
</TABLE>
3. 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.
BY WIRE TRANSFER
For information on how to request a wire transfer, call 1-800-782-8183.
57
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
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.
<TABLE>
<S> <C>
----------------------------
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.
</TABLE>
------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Class A shares than for Class B and C shares, because
Class A shares have lower operating expenses. 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.
----------------------------------------------------------------------
58
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
<TABLE>
<S> <C>
SELLING YOUR SHARES
--------------------------------------
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.
------------------------------------
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B or C shares,
you will be charged a fee for any
shares that have not been held for a
sufficient length of time. These fees
will be deducted from the money paid
to you. See the section on
'Distribution Arrangements/Sales
Charges' below for details.
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 your 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.
59
<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.
60
<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.
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.
61
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
SELLING YOUR SHARES
CONTINUED
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.
62
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
This section describes the sales charges and fees you will pay as an investor in
different share classes offered by the New York Tax-Free Bond Fund and Bond Fund
(collectively, the 'Income Funds') and the Equity Fund, the Overseas Equity
Fund, and the Opportunity Fund (collectively, the 'Equity Funds').
THE INCOME FUNDS
<TABLE>
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-----------------------------------------------------------------------------
------------------- PERCENTAGE No front-end No front-end
Sales Charge (Load) OF PERCENTAGE sales charge. A sales charge. A
OFFERING OF contingent contingent
PRICE INVESTMENT deferred sales deferred sales
Less than $50,000 4.75% 4.99% charge (CDSC) charge (CDSC)
$50,000 but less may be imposed may be imposed
than $100,000 4.25% 4.44% on shares on shares
$100,000 but less redeemed within redeemed within
than $250,000 3.50% 3.63% four years after one year after
$250,000 but less purchase. Shares purchase.
than $500,000 2.50% 2.56% automatically
$500,000 but less convert to
than $1,000,000 2.00% 2.04% Class A Shares
$1,000,000 and over 1.00% 1.01% after 6 years.
----------------------------------------------------------------------------------------------------
Distribution (12b-1) Subject to Subject to Subject to
and Service Fees combined annual combined annual combined annual
distribution and distribution and distribution and
shareholder shareholder shareholder
servicing fees of servicing fees of servicing fees of
up to .25% up to 1.00% annually up to 1.00%
annually of the of the Fund's annually of the
Fund's total average Fund's average
average daily net daily net assets. daily net assets.
assets.
----------------------------------------------------------------------------------------------------
Fund Expenses Lower annual Higher annual Higher annual
expenses than expenses than expenses than
Class B or C Class A Shares. Class A Shares.
shares
----------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
THE EQUITY FUNDS
<TABLE>
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
---------------------------------------------------------------------------------
------------------- PERCENTAGE No front-end No front-end sales
Sales Charge (Load) OF PERCENTAGE sales charge. A charge. A
OFFERING OF contingent contingent
PRICE INVESTMENT deferred sales deferred sales
Less than $50,000 5.00% 5.26% charge (CDSC) charge (CDSC)
$50,000 but less may be imposed may be imposed
than $100,000 4.50% 4.71% on shares on shares
$100,000 but less redeemed within redeemed within
than $250,000 3.75% 3.90% four years after one year after
$250,000 but less purchase. Shares purchase.
than $500,000 2.50% 2.56% automatically
$500,000 but less convert to
than $1,000,000 2.00% 2.04% Class A Shares
$1,000,000 and over 1.00% 1.01% after 6 years.
--------------------------------------------------------------------------------------------------------
Distribution (12b-1) Subject to Subject to Subject to
and Service Fees combined annual combined annual combined annual
distribution and distribution and distribution and
shareholder shareholder shareholder
servicing fees of servicing fees of servicing fees of
up to .25% annually of up to 1.00% annually up to 1.00% annually
the of the of the
Fund's total Fund's average Fund's average
average daily net daily net assets. daily net assets.
assets.
--------------------------------------------------------------------------------------------------------
Fund Expenses Lower annual Higher annual Higher annual
expenses than expenses than expenses than
Class B or C Class A Shares. Class A Shares.
Shares.
--------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
DISTRIBUTION (12b-1) AND SHAREHOLDER SERVICE FEES
The Funds have adopted Distribution ('12b-1') plans for Class A, Class B and
Class C Shares. 12b-1 fees compensate the Distributor and other dealers and
investment representatives for services and expenses relating to the sale and
distribution of the Funds' shares and/or for providing shareholder services.
12b-1 fees are paid from Fund assets on an ongoing basis, and will decrease the
return on your investment.
The 12b-1 fees vary by share class as follows:
Class A Shares may pay a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class A Shares of the Fund.
Class B and Class C Shares pay a 12b-1 fee of up to 0.75% of the average
daily net assets of the respective classes of the Fund. This will cause
expenses for Class B and Class C Shares to be higher and dividends to be
lower than for Class A Shares.
The higher 12b-1 fee on Class B and Class C Shares, together with the
contingent deferred sales load help the Distributor sell Class B and Class C
Shares without an 'up-front' sales charge. In particular, these fees help to
defray the Distributor's costs of advancing brokerage commissions to
investment representatives.
In addition to the 12b-1 fees, Class A, Class B and Class C Shares are
subject to a shareholder servicing fee of up to 0.25% of the average daily
net assets of the respective classes of the Funds.
The combination of the 12b-1 fees and shareholder servicing fees will not
exceed 1.00% of the average daily net assets of the respective classes of the
Funds for the Class B and Class C Shares.
Long-term Class B and Class C shareholders may pay indirectly more than the
equivalent of the maximum permitted front-end sales charge due to the recurring
nature of 12b-1 distribution and service fees.
65
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS A SHARES
WAIVER OF SALES CHARGES FOR CLASS A SHARES
The following qualify for waivers of sales charges:
Shares purchased by investment representatives through fee-based investment
products or accounts.
Proceeds from redemptions from another mutual fund complex within 60 days
after redemption, if you paid a front-end sales charge for those shares.
Reinvestment of distributions from a deferred compensation plan, agency,
trust, or custody account that was maintained by the investment advisers or
their affiliates or invested in any of the Funds.
Shares purchased for trust or other advisory accounts established with the
investment advisers or their affiliates.
Shares purchased by directors, trustees, employees, and family members of the
investment advisers and their affiliates and any organization that provides
services to the Funds; retired Fund trustees; dealers who have an agreement
with the Distributor; and any trade organization to which the investment
advisers or the Administrator belongs.
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to shareholders with
investments of $50,000 or more. In addition, you may qualify for reduced sales
charges under the following circumstances.
Letter of Intent. You inform the Fund in writing that you intend to purchase
enough shares over a 13-month period to qualify for a reduced sales charge.
You must include a minimum of 5% of the total amount you intend to purchase
with your letter of intent.
Rights of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for reduced
sales charges, your added investment will qualify for the reduced sales
charge.
Combination Privilege. You can combine accounts of multiple Funds (excluding
the Money Market Funds) or accounts of immediate family household members
(spouse and children under 21) to achieve reduced sales charges.
66
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CLASS B SHARES
Class B Shares of the Funds may be purchased for individual accounts only in
amounts of less than $500,000. There is no sales charge imposed upon purchases
of Class B Shares, but investors may be subject to a contingent deferred sales
charge ('CDSC').
THE INCOME FUNDS
The Income Funds' Class B Shares will be subject to a declining CDSC if they are
redeemed less than four years after purchase. In such cases, the CDSC will be as
illustrated in the chart to the right.
<TABLE>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 4.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
more than 4 None
</TABLE>
THE EQUITY FUNDS
The Equity Funds' Class B Shares will be subject to a declining CDSC if they are
redeemed within four years after purchase. In such cases, the CDSC will be as
illustrated in the chart to the right.
For Income and Equity Funds, the CDSC will be based upon the lower of the NAV at
the time of purchase or the NAV at the time of redemption. There is no CDSC on
reinvested dividends or distributions.
<TABLE>
YEARS CDSC AS A % OF
SINCE DOLLAR AMOUNT
PURCHASE SUBJECT TO CHARGE
<S> <C>
0-1 4.00%
1-2 3.00%
2-3 2.00%
3-4 1.00%
more than 4 None
</TABLE>
If you sell some but not all of your Class B Shares, shares not subject to the
CDSC (i.e., shares purchased with reinvested dividends) will be redeemed first,
followed by shares subject to the lowest CDSC (typically shares held for the
longest time).
67
<PAGE>
SHAREHOLDER INFORMATION [LOGO]
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
CONTINUED
CONVERSION FEATURE -- CLASS B SHARES
Class B Shares of the Funds will convert automatically to Class A Shares of
the same Fund after six years from the beginning of the calendar month in
which the Class B Shares were originally purchased.
After conversion, your shares will be subject to the lower distribution and
shareholder servicing fees charged on Class A Shares which will increase your
investment return compared to the Class B Shares.
You will not pay any sales charge or fees when your shares convert, nor will
the transaction be subject to any tax.
If you purchased Class B Shares of one Fund which you exchanged for Class B
Shares of another Fund, your holding period will be calculated from the time
of your original purchase of Class B Shares. The dollar value of Class A
Shares you receive will equal the dollar value of the Class B Shares
converted.
CLASS C SHARES
Class C Shares of the Funds may be purchased for individual accounts normally in
amounts of less than $500,000. There is no sales charge imposed upon purchases
of Class C Shares, but investors may be subject to a CDSC. Specifically, if you
redeem Class C Shares of the Funds, your redemption may be subject to a 1.00%
CDSC if the shares are redeemed less than one year after the original purchase
of the Class C Shares. The CDSC will be assessed on an amount equal to the
lesser of the current market value or the cost of the shares being redeemed.
Unlike Class B Shares, Class C Shares have no conversion feature.
WAIVER OF SALES CHARGES -- CLASS B SHARES AND CLASS C SHARES
The following qualify for waivers of sales charges:
Distributions following the death or disability of shareholder.
Redemptions representing the minimum distribution from an IRA or a Custodial
Account to a shareholder who has reached age 70 1/2.
Redemptions representing the minimum distribution from 401(k) retirement
plans where such redemptions are necessary to make distributions to plan
participants.
68
<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 carefully the Prospectus of any Fund into which you wish to
exchange shares.
Class B Shares of the HSBC Investor Income Funds (currently, the HSBC Investor
Bond Fund and HSBC Investor New York Tax Free Bond Fund) or HSBC Investor Equity
Funds (currently, the HSBC Investor Equity Fund, HSBC Investor Overseas Equity
Fund and HSBC Investor Opportunity Fund) may be exchanged for Class D Shares of
the HSBC Investor Money Market Funds only if you are otherwise eligible to
receive them. In all other cases, you will receive Class A Shares of the HSBC
Investor Money Market Funds in exchange for your Class B Shares of the HSBC
Investor Income or HSBC Investor Equity Funds.
69
<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 on the Equity Fund,
Overseas Equity Fund, and Opportunity Fund are paid quarterly, annually and
semiannually, 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 or deemed 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.
70
<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.
71
<PAGE>
FINANCIAL HIGHLIGHTS [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.
72
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
CLASS A SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED OCTOBER 31, MAY 1, 1995
------------------------------------- TO OCTOBER 31,
1999 1998 1997 1996 1995(e)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.93 $ 10.64 $ 10.30 $ 10.38 $10.00
----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.46 0.47 0.45 0.54 0.25
Net realized and
unrealized
gains/(losses) from
investment
transactions (0.83) 0.33 0.36 (0.01) 0.38
----------------------------------------------------------------------------------
Total from investment
activities (0.37) 0.80 0.81 0.53 0.63
----------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.46) (0.47) (0.45) (0.54) (0.25)
In excess of net
investment income (0.00)* -- -- -- --
Net realized gains from
investment
transactions (0.02) (0.04) (0.02) (0.07) --
----------------------------------------------------------------------------------
Total dividends (0.48) (0.51) (0.47) (0.61) (0.25)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 10.08 $ 10.93 $ 10.64 $ 10.30 $10.38
----------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES
SALES CHARGE) (3.62%) 7.65% 8.22% 4.75% 6.39%(c)
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000's) $17,568 $23,153 $20,794 $6,353 $6,908
Ratio of expenses to
average net assets 0.96% 0.95% 0.92% 0.58% 0.50%(b)
Ratio of net investment
income to average net
assets 4.22% 4.28% 4.46% 4.78% 4.91%(b)
Ratio of expenses to
average net
assets (a) 1.21% 1.20% 1.55% 2.21% 2.40%(b)
Portfolio turnover (d) 46.56% 100.35% 163.46% 178.11% 130.00%
----------------------------------------------------------------------------------
</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.
73
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR ENDED JANUARY 6, 1998
OCTOBER 31, TO OCTOBER 31,
1999 1998(e)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.92 $10.81
----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.38 0.37
Net realized and unrealized gains/(losses) from
investment transactions (0.83) 0.11
----------------------------------------------------------------------------------
Total from investment activities (0.45) 0.48
----------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.38) (0.37)
In excess of net investment income (0.00)* --
Net realized gains from investment transactions (0.02) --
----------------------------------------------------------------------------------
Total dividends (0.40) (0.37)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.07 $10.92
----------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) (4.30%) 4.50%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 564 $ 618
Ratio of expenses to average net assets 1.71% 1.70%(b)
Ratio of net investment income to average net
assets 3.48% 3.53%(b)
Ratio of expenses to average net assets (a) 1.96% 1.95%(b)
Portfolio turnover (d) 46.56% 100.35%
----------------------------------------------------------------------------------
</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.
74
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR NEW YORK TAX-FREE BOND FUND
CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 4, 1998
TO OCTOBER 31,
1998(e)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.90
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.34
Net realized and unrealized losses from investment
transactions (0.77)
------------------------------------------------------------------------------
Total from investment activities (0.43)
------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.34)
Net realized gains from investment transactions (0.02)
------------------------------------------------------------------------------
Total dividends (0.36)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.11
------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) (4.10%)(c)
------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 256
Ratio of expenses to average net assets 1.70%(b)
Ratio of net investment income to average net assets 3.46%(b)
Ratio of expenses to average net assets (a) 2.02%(b)
Portfolio turnover (d) 46.56%
------------------------------------------------------------------------------
</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.
75
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR EQUITY FUND
CLASS A SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED OCTOBER 31, AUGUST 1, 1995
------------------------------------- TO OCTOBER 31,
1999 1998 1997 1996 1995(e)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 16.95 $ 15.00 $ 11.93 $ 10.24 $ 10.00
-------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.05 0.05 0.07 0.19 0.04
Net realized and
unrealized gains
from investment
transactions 3.32 2.80 3.32 1.67 0.24
-------------------------------------------------------------------------------
Total from
investment
activities 3.37 2.85 3.39 1.86 0.28
-------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.04) (0.05) (0.10) (0.17) (0.04)
Net realized gains
from investment
transactions (0.39) (0.85) (0.22) -- --
-------------------------------------------------------------------------------
Total dividends (0.43) (0.90) (0.32) (0.17) (0.04)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 19.89 $ 16.95 $ 15.00 $ 11.93 $ 10.24
-------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES
SALES CHARGE) 20.23% 19.98% 28.92% 18.30% 2.75%(c)
-------------------------------------------------------------------------------
RATIOS/SUPPLEMENTARY
DATA:
Net assets at end of
period (000's) $27,942 $23,559 $12,363 $3,918 $22,092
Ratio of expenses to
average net assets 0.94% 1.03% 1.21% 1.28% 1.47%(b)
Ratio of net
investment income to
average net assets 0.26% 0.30% 0.48% 1.83% 1.59%(b)
Ratio of expenses to
average net
assets 0.94% 1.03% 1.28%(a) 1.59%(a) 2.44%(a)(b)
Portfolio
turnover (d) 70.85% 176.34% 99.02% 86.18% 2.00%(b)
-------------------------------------------------------------------------------
</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.
76
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR EQUITY FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE JANUARY 6, 1998
YEAR ENDED TO OCTOBER 31,
OCTOBER 31, 1999 1998(e)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $.16.92 $14.88
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.08) (0.01)
Net realized and unrealized gains from
investment transactions 3.30 2.07
------------------------------------------------------------------------------
Total from investment activities 3.22 2.06
------------------------------------------------------------------------------
DIVIDENDS:
Net investment income -- (0.02)
In excess of net investment income (0.01) --
Net realized gains from investment
transactions (0.39) --
------------------------------------------------------------------------------
Total dividends (0.40) (0.02)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.74 $16.92
------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 19.32% 13.84%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $1,775 $956
Ratio of expenses to average net assets 1.69% 1.78%(b)
Ratio of net investment loss to average
net assets (0.50%) (0.45%)(b)
Ratio of expenses to average net
assets 1.69% 1.78%(b)
Portfolio turnover (d) 70.85% 176.34%
------------------------------------------------------------------------------
</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.
77
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR EQUITY FUND
CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 4, 1998
TO OCTOBER 31,
1999(e)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $.17.08
-------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income --
Net realized and unrealized gains from investment
transactions 3.19
-------------------------------------------------------------------------------
Total from investment activities 3.19
-------------------------------------------------------------------------------
DIVIDENDS:
Net investment income --
In excess of net investment income (0.05)
Net realized gains from investment transactions (0.39)
-------------------------------------------------------------------------------
Total dividends (0.44)
-------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $19.83
-------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 19.05%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $1,626
Ratio of expenses to average net assets 1.33%(b)
Ratio of net investment loss to average net assets (0.16%)(b)
Ratio of expenses to average net assets 1.33%(b)
Portfolio turnover (d) 70.85%
-------------------------------------------------------------------------------
</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.
78
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR BOND FUND
CLASS A (INVESTOR) SHARES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE PERIOD
OCTOBER 31, AUGUST 26, 1996
------------------------ TO OCTOBER 31,
1999 1998 1997 1996(d)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.51 $10.50 $10.26 $10.00
---------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.57 0.59 0.57 0.10
Net realized and unrealized
gains/(losses) from investments
and futures transactions (0.49) 0.01 0.30 0.26
---------------------------------------------------------------------------------
Total from investment
activities 0.08 0.60 0.87 0.36
---------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.57) (0.59) (0.57) --
Net realized gains from investments
and futures transactions (0.22) -- (0.06) (0.10)
In excess of net realized gains
from investments and futures
transactions (0.02) -- -- --
---------------------------------------------------------------------------------
Total dividends (0.81) (0.59) (0.63) (0.10)
---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.78 $10.51 $10.50 $10.26
---------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES SALES CHARGE) 0.68% 5.83% 8.71% 3.61%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $4,331 $4,826 $2,439 $ 21
Ratio of expenses to average net
assets 1.07% 1.10% 1.10% 1.04%(b)
Ratio of net investment income to
average net assets 5.84% 5.51% 5.40% 5.23%(b)
Ratio of expenses to average net
assets (a) 2.62% 1.61% 5.24% 280.50%(b)
Portfolio turnover (e) 433.26% 126.40% 349.00% 152.00%
---------------------------------------------------------------------------------
</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.
79
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR BOND FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JANUARY 6, 1998
OCTOBER 31, TO OCTOBER 31,
1999 1998(e)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.51 $10.63
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.49 0.41
Net realized and unrealized losses from
investments and futures transactions (0.49) (0.12)
--------------------------------------------------------------------------------
Total from investment activities 0.00 0.29
--------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.49) (0.41)
Net realized gains from investments and
futures transactions (0.22) --
In excess of net realized gains from
investments and futures transactions (0.02) --
--------------------------------------------------------------------------------
Total dividends (0.73) (0.41)
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.78 $10.51
--------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) (0.01%) 2.84%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $345 $364
Ratio of expenses to average net assets 1.79% 1.85%(b)
Ratio of net investment income to average
net assets 5.13% 4.76%(b)
Ratio of expenses to average net assets (a) 3.37% 2.36%(b)
Portfolio turnover (e) 433.26% 126.40%
--------------------------------------------------------------------------------
</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.
80
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR BOND FUND
CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 4, 1998
TO OCTOBER 31,
1999(d)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.46
------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment income 0.47
Net realized and unrealized losses from investments and
futures transactions (0.45)
------------------------------------------------------------------------------
Total from investment activities 0.02
------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.47)
Net realized gains from investments and futures
transactions (0.24)
------------------------------------------------------------------------------
Total dividends (0.71)
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.77
------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 0.11%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 152
Ratio of expenses to average net assets 1.95%(b)
Ratio of net investment income to average net assets 4.96%(b)
Ratio of expenses to average net assets (a) 3.50%(b)
Portfolio turnover (e) 433.26%
------------------------------------------------------------------------------
</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.
81
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR OVERSEAS EQUITY FUND
CLASS A (INVESTOR) SHARES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31, FOR THE PERIOD
------------------------ AUGUST 26, 1996 TO
1999 1998 1997 OCTOBER 31, 1996(d)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.64 $11.57 $10.15 $10.00
------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.04) (0.01) (0.00)* --
Net realized and unrealized gains
from investments and foreign
currency transactions 5.32 0.23 1.43 0.15
------------------------------------------------------------------------------------
Total from investment
operations 5.28 0.22 1.43 0.15
------------------------------------------------------------------------------------
DIVIDENDS:
Net investment income (0.02) (0.08) (0.01) --
Net realized gains from investments
and foreign currency transactions -- (0.07) (0.00)* --
------------------------------------------------------------------------------------
Total dividends (0.02) (0.15) (0.01) --
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.90 $11.64 $11.57 $10.15
------------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES SALES CHARGE) 45.41% 1.96% 14.08% 1.50%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets, at end of period
(000's) $8,138 $6,070 $3,660 $ 142
Ratio of expenses to average
net assets 1.86% 1.77% 1.71% 1.69%(b)
Ratio of net investment
income/(loss) to average
net assets (0.30%) (0.08%) (0.16%) 0.05%(b)
Ratio of expenses to average
net assets (a) 2.44% 1.86% 4.10% 33.34%(b)
Portfolio turnover (e) 34.26% 40.47% 30.00% 23.30%
------------------------------------------------------------------------------------
</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 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.
82
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR OVERSEAS EQUITY FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR ENDED JANUARY 6, 1998 TO
OCTOBER 31, 1999 OCTOBER 31, 1998(d)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.57 $11.45
---------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.12) (0.07)
Net realized and unrealized gains
from investments and foreign
currency transactions 5.24 0.19
---------------------------------------------------------------------------------
Total from investment
actitivities 5.12 0.12
---------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.69 $11.57
---------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION
CHARGE) 44.25% 1.05%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 90 $ 42
Ratio of expenses to average net
assets 2.59% 2.52%(b)
Ratio of net investment income/(loss)
to average net assets (a) (1.04%) (0.83%)(b)
Ratio of expenses to average net
assets (a) 3.24% 2.61%(b)
Portfolio turnover (e) 34.26% 40.47%
---------------------------------------------------------------------------------
</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.
83
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR OVERSEAS EQUITY FUND
CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 4, 1998 TO
OCTOBER 31, 1998(d)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.88
--------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.08)
Net realized and unrealized gains from investments and
foreign currency transactions 5.04
--------------------------------------------------------------------------------
Total from investment actitivities 4.96
--------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.84
--------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 41.84%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 98
Ratio of expenses to average net assets 2.57%(b)
Ratio of net investment loss to average net assets (1.01%)(b)
Ratio of expenses to average net assets (a) 3.15%(b)
Portfolio turnover (e) 34.26%
--------------------------------------------------------------------------------
</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.
84
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR OPPORTUNITY FUND
CLASS A (INVESTOR) SHARES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
OCTOBER 31, FOR THE PERIOD
-------------------------- SEPTEMBER 23, 1996
1999 1998 1997 TO OCTOBER 31, 1996(d)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 11.33 $ 12.37 $ 9.80 $10.00
-----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.19) (0.13) (0.07) --
Net realized and unrealized
gains/(losses) from
investment transactions 2.78 (0.46) 2.64 (0.20)
-----------------------------------------------------------------------------------
Total from investment
activities 2.59 (0.59) 2.57 (0.20)
-----------------------------------------------------------------------------------
DIVIDENDS:
In excess of net investment
income (0.04) -- -- --
Net realized gains from
investment transactions (0.69) (0.45) (0.00)* --
-----------------------------------------------------------------------------------
Total dividends (0.73) (0.45) (0.00)* --
-----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.19 $ 11.33 $12.37 $ 9.80
-----------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES SALES
CHARGE) 23.80% (4.68%) 26.28% (2.00%)(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period
(000's) $13,015 $13,137 $9,983 $3,184
Ratio of expenses to average
net assets 1.75% 1.63% 1.55% 1.22%(b)
Ratio of net investment loss
to average net assets (1.38%) (1.17%) (1.05%) (0.28%)(b)
Ratio of expenses to average
net assets (a) 2.14% 1.64% 2.01% 2.90%(b)
Portfolio turnover (e) 77.74% 154.69% 92.18% 50.55%
-----------------------------------------------------------------------------------
</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 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.
85
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR OPPORTUNITY FUND
CLASS B SHARES
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JANUARY 6, 1998
OCTOBER 31, 1999 TO OCTOBER 31, 1998(d)
------ -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.31 $ 11.65
------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.23) (0.09)
Net realized and unrealized
gains/(losses) from investment
transactions 2.71 (0.25)
------------------------------------------------------------------------------------
Total from investment activities 2.48 (0.34)
------------------------------------------------------------------------------------
DIVIDENDS:
In excess of net investment income (0.04) --
Net realized gains from investment
transactions (0.69) --
------------------------------------------------------------------------------------
Total dividends (0.73) --
------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.06 $ 11.31
------------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 22.93% (2.92%)(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 536 $ 349
Ratio of expenses to average net assets 2.48% 2.38%(b)
Ratio of net investment loss to average
net assets (2.12%) (1.92%)(b)
Ratio of expenses to average net
assets (a) 2.92% 2.39%(b)
Portfolio turnover (e) 77.74% 154.69%
------------------------------------------------------------------------------------
</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.
86
<PAGE>
FINANCIAL HIGHLIGHTS [LOGO]
HSBC INVESTOR OPPORTUNITY FUND
CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 4, 1998
TO OCTOBER 31, 1999(d)
------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.55
----------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Net investment loss (0.10)
Net realized and unrealized gains from investment
transactions 2.41
----------------------------------------------------------------------------------
Total from investment activities 2.31
----------------------------------------------------------------------------------
DIVIDENDS:
In excess of net investment income (0.04)
Net realized gains from investment transactions (0.69)
----------------------------------------------------------------------------------
Total dividends (0.73)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.13
----------------------------------------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 21.00%(c)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000's) $ 289
Ratio of expenses to average net assets 2.38%(b)
Ratio of net investment loss to average net assets (2.02%)(b)
Ratio of expenses to average net assets (a) 2.77%(b)
Portfolio turnover (e) 77.74%
----------------------------------------------------------------------------------
</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.
87
<PAGE>
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS [LOGO]
The following tables set forth information for the Bond Fund, Equity Fund,
Overseas Equity Fund and the Opportunity 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 Bond Fund,
Equity Fund, Overseas Equity Fund or Opportunity Fund or the Fixed Income
Portfolio, International Equity Portfolio or Small Cap Equity Portfolio.
<TABLE>
<CAPTION>
FIXED INCOME SUB-ADVISER
ANNUALIZED RETURNS
BOND FUND SUB-ADVISER SALOMON BIG
PERFORMANCE COMPOSITE'D' INDEX(2)
<S> <C> <C> <C>
1 Year(1) - 1.28% - 2.57% - 0.8%
Since Portfolio Inception
(1/9/95) 6.98% 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.
88
<PAGE>
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS [LOGO]
<TABLE>
<CAPTION>
EQUITY SUB-ADVISERS
EQUITY 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) 9.79% 26.21% 33.16% - 6.40% 7.35% 20.91%
Since Inception'D' 21.13% 30.33% 30.58% 16.47% 20.60% 25.91%
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
OVERSEAS EQUITY FUND SUB-ADVISER EAFE
PERFORMANCE COMPOSITE'D' INDEX(2)
<S> <C> <C> <C>
1 Year(1) 68.71% 67.56% 27.30%
Since Portfolio Inception
(1/9/95) 20.99% 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, 21.80% for 5 years, 13.25% for 10 years, and
n/a since inception.
* Since December 31, 1994.
89
<PAGE>
PRIOR PERFORMANCE OF INVESTMENT SUB-ADVISERS [LOGO]
<TABLE>
<CAPTION>
SMALL CAP EQUITY SUB-ADVISER
ANNUALIZED RETURNS
OPPORTUNITY FUND SUB-ADVISER RUSSELL 2000
PERFORMANCE COMPOSITE INDEX(2)
<S> <C> <C> <C>
1 Year(1) 47.07% 50.68% 21.26%
Portfolio Inception (1/3/96) 26.09% 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 three years, 29.61% for five
years, and n/a since inception.
* Since August 31, 1996.
90
<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*
------------------------------------ INCOME TAX-EXEMPT YIELD
SINGLE JOINT TAX --------------------------------------------------------------
RETURN RETURN BRACKET** 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
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-$288,350 40.40% 4.19% 5.03% 5.87% 6.71% 7.55% 8.39% 9.23% 10.06%
$288,350 > $288,350 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.
91
<PAGE>
TAXABLE EQUIVALENT YIELD TABLES [LOGO]
FEDERAL, NEW YORK STATE AND NEW YORK CITY TABLE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME*
------------------------------------ INCOME TAX-EXEMPT YIELD
SINGLE JOINT TAX ---------------------------------------------------------------
RETURN RETURN BRACKET** 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00%
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 45.74% 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.
92
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
For more information about the Funds, the following documents are available free
upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' 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. AT 1-888-525-5757. OR CONTACT THE FUNDS AT:
HSBC INVESTOR FUNDS
PO 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'
