<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON December 4, 1995
File No. 33-80514
File No. 811-8572
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [_]
POST-EFFECTIVE AMENDMENT NO. 2 [X]
and
REGISTRATION STATEMENT UNDER
INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 3 [X]
BISHOP STREET FUNDS
(Exact Name of Registrant as Specified in Charter)
c/o The CT Corporation System
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 254-1000
DAVID G. LEE
C/O SEI CORPORATION
680 E. SWEDESFORD ROAD
WAYNE, PENNSYLVANIA 19087
(Name and Address of Agent for Service)
Copies to:
RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
2000 ONE LOGAN SQUARE 1800 M STREET, N.W.
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
____ immediately upon filing pursuant to paragraph (b)
____ on [date] pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on [date] pursuant to paragraph (a) of Rule 485
X 75 days after filing pursuant to paragraph (a)
----
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of units of beneficial interest is being registered
by this Registration Statement.
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<PAGE>
BISHOP STREET FUNDS
CROSS REFERENCE SHEET
Post-Effective Amendment No. 2
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
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<C> <S> <C>
PART A -
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary; Expense Summary
Item 3. Condensed Financial Information *
Item 4. General Description of Registrant The Trust; Investment Objectives and Policies;
General Investment Policies; Risk Factors;
Description of Permitted Investments and Risk
Factors; Investment Limitations; General
Information -- The Trust
Item 5. Management of the Trust General Information -- Trustees of the Trust;
The Sub-Adviser(s); The Administrator;
The Transfer Agent; The Distributor
Item 6. Capital Stock and Other Securities General Information -- Voting Rights; General
Information -- Shareholder Inquiries;
Performance; General Information -- Dividends;
Taxes
Item 7. Purchase of Securities Being Offered How to Purchase Retail Class B Shares; How to
Purchase Institutional Class A Shares; Sales
Charges; Exchanges; Redemption of Shares
Item 8. Redemption or Repurchase How to Purchase Retail Class B Shares; How to
Purchase Institutional Class A Shares; Sales
Charges; Exchanges; Redemption of Shares
Item 9. Pending Legal Proceedings *
PART B -
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Corporation
Item 13. Investment Objectives and Policies Description of Permitted Investments; Investment
Limitations; Description of Shares
Item 14. Management of the Registrant Directors and Officers of the Corporation; The
Administrator
Item 15. Control Persons and Principal Holders Directors and Officers of the Fund; 5%
of Securities Shareholders
Item 16. Investment Advisory and Other Services The Adviser; The Sub-Adviser(s); The
Administrator; The Distributor; Experts
Item 17. Brokerage Allocation Portfolio Transactions
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing Purchase and Redemption of Shares;
of Securities Being Offered Determination of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Yield Quotations Performance
Item 23. Financial Statements Financial Statements
</TABLE>
i
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
* Not Applicable
ii
<PAGE>
The Prospectuses for the Retail Class B and Institutional Class A Shares of the
Bishop Street Money Market Fund, Bishop Street High Grade Income Fund, Bishop
Street Hawaii Tax-Free Fund and Bishop Street Equity Fund included as part of
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on Form
N-1A (File No. 33-80514) filed with the Securities and Exchange Commission on
September 7, 1994 are hereby incorporated by reference as if set forth in full
herein.
iii
<PAGE>
PROSPECTUS
BISHOP STREET FUNDS
INVESTMENT ADVISER:
FIRST HAWAIIAN BANK
BISHOP STREET FUNDS (the "Trust") is a mutual fund that seeks to provide a
convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Fund:
BISHOP STREET TREASURY MONEY MARKET FUND
The Bishop Street Treasury Money Market Fund (the "Fund") is composed of
Retail Class B and Institutional Class A shares. Retail Class B shares are
sold with distribution fees. Institutional Class A shares are sold without
distribution fees. First Hawaiian Bank, the Fund's investment adviser, is an
affiliate of First Hawaiian, Inc.
Institutional Class A shares are offered primarily to agency, fiduciary,
custodial and advisory clients of FIRST HAWAIIAN BANK. Retail Class B shares
are offered primarily to individuals and to cash sweep customers of FIRST
HAWAIIAN BANK.
- --------------------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST HAWAIIAN BANK OR ITS AFFILIATES.
THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
- --------------------------------------------------------------------------------
AS WITH ANY MUTUAL FUND, AN INVESTMENT IN THE BISHOP STREET TREASURY MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE
CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the basic information about the Fund and
the Trust that a prospective investor should know before investing. Investors
are advised to read this Prospectus and retain it for future reference. A
Statement of Additional Information dated January 30, 1995 has been filed with
the Securities and Exchange Commission and is available without charge by
calling 1-800-262-9565. The Statement of Additional Information is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
FEBRUARY 17, 1996
<PAGE>
2
SUMMARY
BISHOP STREET FUNDS (the "Trust") is an open-end management investment company
which provides a convenient way to invest in professionally managed portfolios
of securities. This Summary provides basic information about the Retail Class B
and Institutional Class A shares of the Trust's Treasury Money Market Fund (the
"Fund").
WHAT ARE THE INVESTMENT OBJECTIVE AND POLICIES OF THE FUND? The Fund seeks to
preserve principal value and maintain a high degree of liquidity while
providing current income. See "Investment Objectives and Policies" and
"Description of Permitted Investments and Risk Factors."
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUND? The Fund seeks to
maintain a net asset value of $1.00 per share, but there can be no assurance
that the Fund will be able to do so on a continuous basis. There are other
risks involved in the ownership of money market mutual funds. See "Description
of Permitted Investments and Risk Factors."
WHO IS THE ADVISER? First Hawaiian Bank serves as the Adviser of the Fund.
Wellington Management Company serves as the Sub-Adviser of the Fund. See
"Expense Summary" and "The Adviser" and "The Sub-Adviser."
WHO IS THE ADMINISTRATOR? SEI Financial Management Corporation serves as the
Administrator and shareholder servicing agent of the Trust. See "Expense
Summary" and "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Trust. See "The Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor of
the Trust's shares. See "The Distributor."
HOW DO I PURCHASE, EXCHANGE OR REDEEM SHARES? Purchases, exchanges or
redemptions of shares may be made on any day on which both the New York Stock
Exchange and Federal Reserve wire system are open for business ("Business
Days") except for Hawaii state banking holidays. A purchase, exchange or
redemption order will be executed at a per share price equal to the net asset
value per share next determined after the receipt of the purchase, exchange or
redemption order. Orders must be placed prior to 1:00 p.m., New York Time, on
any Business Day for the order to be effective that day. The minimum initial
investment is $1,000 ($500 for IRAs and $500 for officers, directors, or
employees of First Hawaiian Bank and its affiliates). Subsequent purchases of
shares must be at least $100. Net asset value is determined as of 1:00 p.m.,
New York Time, on each Business Day. See "Purchase of Shares," "Exchange of
Shares," and "Redemption of Shares."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is declared daily and distributed in
the form of monthly dividends. Any capital gain is distributed at least
annually. Distributions are paid in additional shares unless the Shareholder
elects to take the payment in cash. See "Dividends."
<PAGE>
3
EXPENSE SUMMARY
<TABLE>
<CAPTION>
RETAIL CLASS B
SHAREHOLDER TRANSACTION EXPENSES SHARES
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<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of of-
fering price).................................................. None
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price).................................. None
Maximum Contingent Deferred Sales Charge........................ None
Exchange Fee.................................................... None
Wire Redemption Fee............................................. $15
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
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Advisory Fees (after fee waivers)(1)............................ .18%
Rule 12b-1 Fees................................................. .10%
Other Expenses(2)............................................... .26%
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Total Operating Expenses (after fee waivers)(3)................. .54%
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</TABLE>
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(1) The Adviser has agreed to waive a portion of its fees. The Adviser reserves
the right to terminate the waiver at any time in its sole discretion.
Absent such fee waivers, advisory fees would be .30% for the Fund.
(2) These amounts represent estimates for the current fiscal year.
(3) Absent the Adviser's and the Administrator's voluntary fee waivers, total
operating expenses would be .73% for the Fund.
EXAMPLE
<TABLE>
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<CAPTION>
1 YR. 3 YRS.
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<S> <C> <C>
An investor in the Retail Class B shares of the Fund would pay
the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time peri-
od............................................................. $6 $17
=============================================================================
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in the Fund. A person who purchases shares through a financial
institution may be charged separate fees by that institution. See "Purchase of
Shares."
<PAGE>
4
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS A
SHAREHOLDER TRANSACTION EXPENSES SHARES
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<S> <C>
Exchange Fee.............................................. None
Wire Redemption Fee....................................... None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
- --------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1)...................... .18%
Other Expenses(2)......................................... .26%
- --------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(3)........... .44%
================================================================================
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser reserves
the right to terminate the waiver at any time in its sole discretion.
Absent such fee waivers, advisory fees would be .30% for the Fund.
(2) These amounts represent estimates for the current fiscal year.
(3) Absent the Adviser's and the Administrator's voluntary fee waivers, total
operating expenses would be .63% for the Fund.
EXAMPLE
<TABLE>
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<CAPTION>
1 YR. 3 YRS.
- --------------------------------------------------------------------------------
<S> <C> <C>
An investor in the Institutional Class A shares of the Fund would
pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.. $5 $14
================================================================================
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by
investors in the Fund. A person who purchases Institutional Class A shares
through a First Hawaiian Bank agency, fiduciary, custodial or advisory account
will pay a separate fee for those services. See "Purchase of Shares."
<PAGE>
5
THE TRUST
BISHOP STREET FUNDS (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in the Fund through
separate Classes (Retail Class B and Institutional Class A), which provide for
variations in sales charges, distribution costs, voting rights and dividends.
Except for these differences, each share of each Fund represents an undivided,
proportionate interest in the Fund. This Prospectus offers shares of the
Trust's Treasury Money Market Fund. Information regarding the Trust's High
Grade Income Fund, Hawaii Tax-Free Fund, Equity Fund and Money Market Fund is
contained in separate prospectuses that may be obtained by calling 1-800-262-
9565.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Treasury Money Market Fund is to preserve
principal value and maintain a high degree of liquidity while providing current
income. There can be no assurance that the investment objective of the Fund
will be met.
Under normal conditions the Fund invests exclusively in U.S. Treasury
obligations and repurchase agreements involving such obligations.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds. These regulations impose
certain quality, maturity and diversification restraints on investments by the
Fund. The Fund intends to use its best efforts to maintain a constant net asset
value of $1.00 per share, but there can be no assurance that the Fund will be
able to do so on a continuing basis.
INVESTMENT LIMITATIONS
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities, and repurchase
agreements involving such securities) if, as a result more than 5% of total
assets of the Fund would be invested in the securities of such issuer;
provided, however, that the Fund may invest up to 25% of its total assets
without regard to this restriction as permitted by Rule 2a-7.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in (a) domestic banks and (b)
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, and repurchase agreements involving such securities.
The foregoing percentage limitations will apply at the time of the purchase of
a security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
The Fund's investment objective and the foregoing investment limitations are
fundamental policies. Fundamental policies cannot be changed with respect to
the Fund without the consent of the holders of a majority of the Fund's
outstanding shares.
THE ADVISER
First Hawaiian Bank (the "Adviser") acts as the investment adviser for the
Fund. The Adviser makes investment decisions for the assets of the Fund, and
continuously reviews, supervises and administers the Fund's investment program.
The Adviser discharges its responsibilities subject to the supervision of, and
policies set by, the Trustees of the Trust.
The Adviser is a wholly-owned subsidiary of First Hawaiian, Inc. Prior to
January, 1995, the Adviser had not previously served as an investment adviser
to a mutual fund. The Adviser and its corporate predecessors have provided
trust and asset management services in Hawaii for over 70 years. As of ,
1995, the Adviser had assets under management of approximately $-- billion for
trust and agency clients.
<PAGE>
6
The Adviser is entitled to a fee, which is calculated daily and paid monthly,
at an annual rate of .30% of the Fund's average daily net assets. The Adviser
may from time to time waive all or a portion of its fee in order to limit the
operating expenses of a Fund. Any such waiver is voluntary and may be
terminated at any time in the Adviser's sole discretion.
THE SUB-ADVISER
Wellington Management Company (the "Sub- Adviser") serves as the investment
sub-adviser for the Fund pursuant to a sub-advisory agreement (the "Sub-
Advisory Agreement") with the Trust and the Adviser. Under the Sub-Advisory
Agreement, the Sub-Adviser manages the investments of the Fund, selects
investments, and places all orders for purchases and sales of the Fund's
securities, subject to the general supervision of the Trustees of the Trust and
the Adviser.
For the services provided and expenses incurred pursuant to the Sub-Advisory
Agreement, the Sub-Adviser is entitled to receive from the Adviser a fee,
computed daily and paid monthly, at the annual rate of .075% of the aggregate
average daily net assets of the Fund and the Trust's Money Market Fund up to
$500 million, and .020% of the aggregate average daily net assets of the Funds
in excess of $500 million.
The Sub-Adviser is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans,
endowments, foundations, and other institutions and individuals. As of
September 30, 1995 Wellington had discretionary management authority with
respect to approximately $102.4 billion of assets. The Sub-Adviser and its
predecessor organizations have provided investment advisory services to
investment companies since 1933 and to investment counseling clients since
1960. Wellington Management Company, 75 State Street, Boston, MA 02109, is a
Massachusetts general partnership, of which the following persons are managing
partners: Robert W. Doran, Duncan M. McFarland and John B. Neff.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), provides the Trust with administrative
services, including fund accounting, regulatory reporting, necessary office
space, equipment, personnel, and facilities. The Administrator also acts as
shareholder servicing agent of the Fund.
The Administrator is entitled to a fee, calculated daily and paid monthly, at
an annual rate of .20% of the average daily net assets of the Fund.
THE TRANSFER AGENT
DST Systems, Inc. (the "Transfer Agent"), P.O. Box 419721, Kansas City,
Missouri 64141-6721, serves as the Transfer Agent and dividend disbursing agent
for the Trust.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI, serves as distributor. The Retail Class B shares of the Trust have a
Rule 12b-1 Distribution Plan (the "Retail Class B Plan"), under which such
shares of the Fund bear distribution expenses and related service fees at the
annual rate of up to .10% of their average daily net assets. Financial
institutions that are the record owner of shares for the account of their
customers may impose separate fees for account services to their customers.
The Fund may execute repurchase agreements through the Distributor, for which
the Distributor receives compensation.
HOW TO PURCHASE SHARES
GENERAL INFORMATION
Shares of the Fund are available for sale in the State of Hawaii and Guam.
You may purchase shares of the Fund on any day on which both the New York Stock
Exchange and
<PAGE>
7
Federal Reserve wire system are open for business ("Business Days") except for
Hawaii state banking holidays. However, shares of the Fund cannot be purchased
by Federal Reserve wire on Federal holidays restricting wire transfers. The
minimum initial investment in the Fund is $1,000 ($500 for IRAs and $500 for
officers, directors, or employees of First Hawaiian Bank or its affiliates).
The Distributor may waive the minimum investment at its discretion. Subsequent
purchases of shares must be at least $100.
A purchase order for shares will be effective as of the Business Day received
by the Transfer Agent if the Transfer Agent receives the order and payment
before 1:00 p.m., New York time. The purchase price (the "Offering Price") is
the net asset value next determined after the purchase order is effective.
The net asset value per share of the Fund is determined as of 1:00 p.m., New
York time on each Business Day by dividing the total market value of the Fund's
investments and other assets, less any liabilities, by the total outstanding
shares of the Fund. The Fund values its portfolio securities using the
amortized cost method of valuation, approximating market value. Purchases will
be made in full and fractional shares calculated to three decimal places.
Pursuant to guidelines adopted and monitored by the Trustees of the Trust, the
Fund may use a pricing service to provide market quotations or fair market
valuations. A pricing service may derive such valuations through the use of a
matrix system to value fixed income securities which considers factors such as
securities prices, yield features, ratings, and developments related to a
specific security.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its Shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should contact the Transfer Agent at 1-800-262-
9565 for further instructions.
HOW TO PURCHASE INSTITUTIONAL CLASS A SHARES
Institutional Class A shares may only be purchased by First Hawaiian Bank in
its capacity as Agent, Fiduciary, Custodian or Adviser.
HOW TO PURCHASE RETAIL CLASS B SHARES
Retail Class B shares of the Fund may be purchased directly from the Transfer
Agent by mail, by wire or through an automatic investment plan ("AIP"). Shares
may also be purchased through broker-dealers that have established a dealer
agreement with the Distributor.
HOW TO PURCHASE BY MAIL
You may purchase shares of the Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Bishop Street Treasury Money Market
Fund," to the Transfer Agent at P.O. Box 419721, Kansas City, Missouri 64141-
6721. You may purchase more shares at any time by mailing payment to the
Transfer Agent at the above address. Orders placed by mail will be executed on
receipt of your payment. If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees incurred.
You may obtain Account Application Forms by calling the Distributor at 1-800-
262-9565.
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to the Transfer
Agent and the wire instructions must include your account number. You must call
the Transfer Agent at 1-800-262-9565 before wiring any funds. An order to
purchase shares by Federal funds wire will be deemed to have been received by
the Fund on the Business Day of the wire; provided that the shareholder wires
funds to the Transfer Agent prior to 1:00 p.m., New York time. If the Transfer
Agent does not receive the wire by 1:00 p.m., New York time, the order will be
executed on the next Business Day.
<PAGE>
8
HOW TO PURCHASE THROUGH AN AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Fund through
automatic deductions by Automated Clearing House ("ACH") from a checking
account by completing an AIP Application Form. The minimum pre-authorized
investment amount is $50 per month. An AIP Application Form may be obtained by
contacting the Distributor at 1-800-262-9565. The AIP is available only for
additional investments to an existing account.
HOW TO PURCHASE THROUGH FINANCIAL INSTITUTIONS
Shares may be purchased through financial institutions, including the Adviser,
that provide distribution assistance or shareholder services. Shares purchased
by persons ("Customers") through financial institutions may be held of record
by the financial institution. Financial institutions may impose an earlier cut-
off time for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer Agent for
effectiveness the same day. Customers should contact their financial
institution for information as to that institution's procedures for
transmitting purchase, exchange or redemption orders to the Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
EXCHANGE OF SHARES
You may exchange Retail Class B or Institutional Class A shares of the Treasury
Money Market Fund for Retail Class B or Institutional Class A shares,
respectively, of the High Grade Income, Hawaii Tax-Free, Equity or Money Market
Funds of the Trust at net asset value plus any applicable sales charge.
Exchanges of Retail Class B or Institutional Class A shares of any other Fund
of the Trust for Retail Class B shares or Institutional Class A shares of the
Treasury Money Market Fund will be made at net asset value.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. In order to effect an
exchange of shares by telephone, you must elect the telephone exchange option
on your Account Application Form. If an Exchange Request in good order is
received by the Transfer Agent on any Business Day, the exchange will occur on
that day. The exchange privilege may be exercised only in those states where
the class of shares of the "new" Fund may legally be sold.
Customers who beneficially own shares held by a financial institution should
contact that institution if they wish to exchange shares. The institution will
contact the Transfer Agent and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $15 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail, by telephone or through a
pre-arranged systematic withdrawal plan. Investors who own shares held by a
financial institution should contact that institution for information on how to
redeem shares.
BY MAIL
A written request for redemption must be received by the Transfer Agent, P.O.
Box 419721, Kansas City, Missouri 64141-6721 in order to constitute a valid
redemption request.
<PAGE>
9
If the redemption request exceeds $5,000, or if the request directs the
proceeds to be sent or wired to an address different from that of record, the
Transfer Agent may require that the signature on the written redemption request
be guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the shareholder(s) of record,
and (3) the redemption check is mailed to the shareholder(s) at his or her
address of record.
BY TELEPHONE
You may redeem your shares by calling the Transfer Agent at 1-800-262-9565.
Under most circumstances, payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. You may have the proceeds
mailed to your address or wired to a commercial bank account previously
designated on your Account Application. There is no charge for having
redemption proceeds mailed to you, but there is a $15 charge for wiring
redemption proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
the Transfer Agent at 1-800-262-9565, who will deduct a wire charge of $15 from
the amount of the wire redemption. Shares cannot be redeemed by Federal Reserve
wire on Federal holidays restricting wire transfers.
Neither the Transfer Agent nor the Trust will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Trust and Transfer Agent will each
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. Such procedures may include taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstance exist, and you experience difficulties placing redemption orders
by telephone, you may consider placing your order by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Fund offers a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $20,000 or more. You may elect to
receive automatic payments via check or ACH of $50 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by contacting the Distributor at 1-800-262-9565.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could
be exhausted entirely. You may change or cancel the SWP at any time on written
notice to the Transfer Agent. The Transfer Agent may require that the signature
on the written notice be guaranteed.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of 1:00 p.m., New York time, on each Business Day.
Payment to shareholders for shares redeemed will be made within seven days
after the Transfer Agent receives the valid redemption request. At various
times, however, the Fund may be requested to redeem shares for which it has not
yet received good payment; collection of payment may take ten or more days. In
such circumstances, the redemption request will be rejected by the Fund. Once
the Fund has received good payment for the shares a shareholder may submit
another request for redemption.
<PAGE>
10
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem your shares at net asset value, if, your account
in any Fund has a value of less than the minimum initial purchase amount.
Accordingly, if you purchase shares of the Fund in only the minimum investment
amount, you may be subject to involuntary redemption if you redeem any shares.
Before the Fund exercises its right to redeem such shares, you will be given
notice that the value of the shares in your account is less than the minimum
amount and will be allowed 60 days to make an additional investment in the Fund
in an amount which will increase the value of the account to at least the
minimum amount.
PERFORMANCE
From time to time, the Fund may advertise its current yield and effective
yield. These figures are based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns.
The "current yield" of the Fund refers to the income generated by an investment
in the Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" (also called "effective compound yield") is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective yield will be slightly higher than
the current yield because of the compounding effect of this assumed
reinvestment.
For the Fund, the performance of Institutional Class A shares will be higher
than that of Retail Class B shares because of the distribution expenses charged
to Retail Class B shares.
The Fund may periodically compare its performance to that of other mutual funds
tracked by mutual funds rating services (such as Lipper Analytical), financial
and business publications and periodicals, broad groups of comparable mutual
funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs.
The Fund may quote Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. The Fund may use long-term performance of
these capital market indices to demonstrate general long-term risk versus
reward scenarios and could include the value of a hypothetical investment in
any of the capital markets. The Fund may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques.
The Fund may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of Federal income tax consequences is based on current
tax laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the Federal, state, or local income tax treatment of the Fund or
its Shareholders. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to Federal, state and local income
taxes. State and local tax consequences of an investment in the Fund may differ
from the Federal income tax consequences described below. Additional
information concerning taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF THE FUND
The Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the
<PAGE>
11
Trust's other portfolios. The Fund intends to continue to qualify for the
special tax treatment afforded regulated investment companies ("RICs") under
Subchapter M of the Internal Revenue Code of 1986, as amended, so as to be
relieved of Federal income tax on net investment company taxable income and net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
The Fund distributes substantially all of its net investment income (including
net short-term capital gains) and net capital gains to Shareholders. Dividends
from the Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Dividends paid by the
Fund to corporate Shareholders will qualify for the deduction for dividends
received by corporations to the extent attributable to dividends received by
the Fund by domestic corporations. Distributions of net capital gains do not
qualify for that deduction and are taxable to Shareholders as long-term capital
gains, regardless of how long Shareholders have held their shares and
regardless of whether the distributions are received in cash or in additional
shares. The Fund provides annual reports to Shareholders of the Federal income
tax status of all distributions.
Because this Fund will invest exclusively in United States Treasury
obligations, its dividends are free from state and local income taxes in the
vast majority of states. Potential investors in this Fund should consult their
tax advisers with specific reference to their own tax situations.
Dividends declared by the Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
The Fund intends to make sufficient distributions to avoid liability for the
Federal excise tax.
With respect to investments which are sold at original issue discount and thus
do not make periodic cash interest payments, the Fund will be required to
include as part of its current income the imputed interest on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because the Fund distributes all of its net investment
income to its Shareholders, the Fund may have to sell portfolio securities to
distribute such imputed income which may occur at a time when the Adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
Sale, exchange or redemption of Fund Shares is a taxable transaction to the
Shareholder.
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under Declaration of
Trust dated May 25, 1994. The Declaration of Trust permits the Trust to offer
separate portfolios of shares and different classes of each portfolio. In
addition to the Fund, the Trust consists of the following portfolios: Bishop
Street High Grade Income, Hawaii Tax-Free, Equity and Money Market Funds. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund and would be subject to the liabilities related
thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation
materials and reports to Shareholders, costs of custodial services and
registering the shares under Federal and state securities laws, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
<PAGE>
12
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws of the Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies provide essential
management services to the Trust.
The Trustees of the Trust are as follows:
<TABLE>
<CAPTION>
NAME BUSINESS HISTORY
- ---- ----------------
<S> <C>
Mr. Martin Anderson Attorney--Goodsill,
Anderson, Quinn &
Stifel
Mr. Philip H. Ching Vice Chairman--First
Hawaiian Bank
Honorable Shunichi Kimura Judge--State of
Hawaii Judiciary
1974-1994
Honorable William S. Trustee--Kamehameha
Richardson Schools Bishop Estate
(through 1992); Chief
Justice--Supreme
Court of Hawaii,
(through 1983)
Lieutenant Governor--
State of Hawaii
(1962-1966)
Mr. Manuel R. Sylvester Managing and
Executive Partner--
Coopers & Lybrand
(through 1992)
Dr. Joyce S. Tsunoda Educator and
Administrator--
University of Hawaii
Mr. David G. Lee Senior Vice
President--SEI
Financial Management
Corporation
</TABLE>
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote for each dollar
invested. In other words, each Shareholder of record is entitled to one vote
for each dollar of net asset value of the shares held on the record date for
the meeting. The Shareholders of each Fund will vote separately on matters
pertaining solely to that Fund. The Shareholders of each class of each Fund
will vote separately on matters pertaining to its distribution plan. As a
Massachusetts business trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the
operation of the Trust and for the election of Trustees under certain
circumstances.
In addition, a Trustee may be removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
REPORTING
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to Bishop Street Funds at P.O. Box 419721,
Kansas City, MO 64141-6721 or by calling 1-800-262-9565.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the Fund is declared daily and distributed in the form of monthly dividends.
Shareholders of record on the last Business Day of each month will be entitled
to receive the dividend. If any net capital gains are realized, they will be
distributed by the Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined
following the record date, unless the Shareholder has elected to take such
payment in the form of cash. Shareholders may change their election by
providing written notice to the Bishop Street Funds at P.O. Box 419721, Kansas
City, MO 64141-6721 at least 15 days prior to the distribution. Shareholders
may receive payments for cash distributions in the form of a check, by Federal
Reserve wire transfer or ACH.
<PAGE>
13
Dividends and distributions of the Fund are paid on a per-share basis. The
value of each share will be reduced by the amount of any such payment. If
shares are purchased shortly before the record date for a dividend or the
distribution of capital gains, a Shareholder will pay the full price for the
shares and receive some portion of the price back as a taxable dividend or
distribution.
The dividends on Retail Class B Shares of the Fund will be lower than those on
Institutional Class A Shares because of the distribution expenses charged to
Retail Class B Shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Coopers & Lybrand
L.L.P. serves as the independent accountant of the Trust.
CUSTODIAN
Chemical Bank, (the "Custodian"), acts as custodian of the Trust's assets. The
Custodian holds cash, securities and other assets of the Trust as required by
the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments for the Fund and
the various risk factors associated therewith:
REPURCHASE AGREEMENTS--Agreements by which a financial institution agrees to
sell a security to the Fund and commits to repurchase the security at an agreed
upon price (including principal and interest) on an agreed upon date within a
number of days from the date of purchase. The securities purchased by the Fund
will be held as collateral in the actual or constructive possession of the Fund
and will be equal to at least 102% of the repurchase price. Repurchase
agreements are considered to be loans by the Fund. The Trust bears a risk of
loss in the event the other party defaults on its obligations and the Trust is
delayed or prevented from its right to dispose of the collateral securities or
if the Trust realizes a loss on the sale of the collateral securities. The
Adviser will enter into repurchase agreements on behalf of the Trust only with
financial institutions deemed to present minimal risk of bankruptcy during the
term of the agreement based on guidelines established and periodically reviewed
by the Trustees. Repurchase agreements are considered loans under the
Investment Company Act of 1940, as amended.
U.S. TREASURY OBLIGATIONS--Bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such
obligations that are transferable through the Federal book-entry system known
as Separately Traded Registered Interest and Principal Securities ("STRIPS").
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by money market
funds are subject to limitations imposed under regulations adopted by the SEC.
These regulations generally require money market funds to acquire only U.S.
dollar obligations maturing in 397 days or less and to maintain a dollar-
weighted average portfolio maturity of 90 days or less. In addition, such funds
may acquire only obligations that present minimal credit risks and that are
"eligible securities" which means they are (i) rated, at the time of
investment, by at least two nationally recognized security rating organizations
(one if it is the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term-rating. A taxable money
market fund may also hold more than 5% of its assets in first tier securities
of a single issuer for three "business days" (that is, any day other than a
Saturday, Sunday or customary business holiday).
<PAGE>
14
WHEN-ISSUED SECURITIES--Securities purchased on a when-issued basis are subject
to settlement within 45 days of the purchase date. The price and yield on these
securities is fixed as of the purchase date and no interest accrues to the Fund
before settlement. These securities are therefore subject to market fluctuation
due to changes in market interest rates, and, although the purchase of
securities on a when-issued basis is not considered leveraging, it has the
effect of leveraging the Fund's assets. The Fund will maintain with the
Custodian a separate account with liquid high grade securities or cash in an
amount at least equal to these commitments.
<PAGE>
TABLE OF CONTENTS
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 3
The Trust................................................................... 5
Investment Objective and Policies........................................... 5
Investment Limitations...................................................... 5
Fundamental Policies........................................................ 5
The Adviser................................................................. 5
The Sub-Adviser............................................................. 6
The Administrator........................................................... 6
</TABLE>
<TABLE>
<S> <C>
The Transfer Agent.......................................................... 6
The Distributor............................................................. 6
How to Purchase Shares...................................................... 6
Exchange of Shares.......................................................... 8
Redemption of Shares........................................................ 8
Performance................................................................. 10
Taxes....................................................................... 10
General Information......................................................... 11
Description of Permitted Investments and Risk Factors....................... 13
</TABLE>
<PAGE>
BISHOP STREET FUNDS
A Family of Mutual Funds
Investment Adviser:
First Hawaiian Bank
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's prospectuses dated
January 30, 1995 as supplemented and February 17, 1996. Prospectuses may be
obtained through the Distributor, SEI Financial Services Company, 680 E.
Swedesford Road, Wayne, Pennsylvania 19087-1658.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE TRUST........................................................... S-2
DESCRIPTION OF PERMITTED INVESTMENTS................................ S-2
INVESTMENT LIMITATIONS.............................................. S-9
THE ADVISER......................................................... S-10
THE SUB-ADVISER..................................................... S-11
THE ADMINISTRATOR................................................... S-11
THE DISTRIBUTOR..................................................... S-12
TRUSTEES AND OFFICERS OF THE TRUST.................................. S-13
REPORTING........................................................... S-15
PERFORMANCE......................................................... S-15
PURCHASE AND REDEMPTION OF SHARES................................... S-18
DETERMINATION OF NET ASSET VALUE................................... S-18
TAXES............................................................... S-20
FUND TRANSACTIONS................................................... S-23
DESCRIPTION OF SHARES............................................... S-24
SHAREHOLDER LIABILITY............................................... S-25
5% SHAREHOLDERS..................................................... S-25
LIMITATION OF TRUSTEES' LIABILITY.................................. S-26
APPENDIX............................................................ S-28
FINANCIALS.......................................................... S-32
</TABLE>
BSF-F-03-02
<PAGE>
THE TRUST
Bishop Street Funds (the "Trust") is an open-end management investment company
organized under Massachusetts law as a "Massachusetts business trust" under an
Agreement and Declaration of Trust dated May 25, 1994. The Agreement and
Declaration of Trust permits the Trust to offer separate series of units of
beneficial interest ("shares") and different classes of shares of each Fund.
Shareholders may purchase shares through two separate classes (Institutional
Class A and Retail Class B) which provide for variations in distribution costs
and dividends. Except for these differences between Institutional Class A and
Retail Class B shares, each share of each Fund represents an equal proportionate
interest in that Fund. See "Description of Shares." This Statement of
Additional Information relates to the Institutional Class A and Retail Class B
shares of the Trust's High Grade Income Fund, Hawaii Tax-Free Fund, Equity Fund,
Money Market Fund and Treasury Money Market Fund (the "Funds").
DESCRIPTION OF PERMITTED INVESTMENTS
The following information supplements the information about permitted
investments set forth in the Prospectus for the relevant Fund.
Variable amount master demand notes. Certain of the Funds may purchase variable
amount master demand notes which may or may not be backed by bank letters of
credit. These notes permit the investment of fluctuating amounts at varying
market rates of interest pursuant to direct arrangements between the Trust, as
lender, and the borrower. Such notes provide that the interest rate on the
amount outstanding varies on a daily, weekly or monthly basis depending upon a
stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There
is no secondary market for the notes. It is not generally contemplated that
such instruments will be traded.
GNMA securities. The High Grade Income Fund and Money Market Fund may invest in
securities issued by the Government National Mortgage Association ("GNMA"), a
wholly-owned U.S. Government corporation which guarantees the timely payment of
principal and interest. The market value and interest yield of these
instruments can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable 30-
year bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. The
S-2
<PAGE>
scheduled monthly interest and principal payments relating to mortgages in the
pool are "passed through" to investors. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available from
other types of U.S. Government securities, GNMA certificates may be less
effective than other types of securities as a means of "locking in" attractive
long-term rates because of the prepayment feature. For instance, when interest
rates decline, the value of a GNMA certificate likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition, these
prepayments can cause the price of a GNMA certificate originally purchased at a
premium to decline in price to its par value, which may result in a loss.
Mortgage-backed and asset-backed securities. The High Grade Income Fund may
invest in mortgage-backed securities and asset-backed securities. Two principal
types of mortgage-backed securities are collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICS"). CMOs are
securities collateralized by mortgages, mortgage pass-through certificates,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool is
dedicated to bond repayment), and mortgage-backed bonds (general obligations of
issuers payable out of the issuers' general funds and additionally secured by a
first lien on a pool of single family properties).
Many CMOs are issued with a number of classes or series which have different
maturities and are retired in sequence. Investors purchasing CMOs in the
shortest maturities receive or are credited with their pro rata portion of the
scheduled payments of interest and principal on the underlying mortgages plus
all unscheduled prepayments of principal up to a predetermined portion of the
total CMO obligation. Until that portion of such CMO obligation is repaid,
investors in the longer maturities receive interest only. Accordingly, CMOs in
longer maturity series are less likely than other mortgage pass-throughs to be
prepaid prior to their stated maturity. Although some of the mortgages
underlying CMOs may be supported by various types of insurance, and while some
CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued
or guaranteed by U.S. Government agencies or instrumentalities, CMOs themselves
are not generally guaranteed by the U.S. Government or any other entity.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
In addition to mortgage-backed securities, the High Grade Income Fund may invest
in asset-backed securities, which are securities that represent an interest in a
pool of
S-3
<PAGE>
non-mortgage assets, including company receivables, truck and auto loans,
leases, and credit card receivables. These issues may be traded over-the-
counter and typically have a short-to-intermediate maturity structure depending
on the paydown characteristics of the underlying financial assets.
Repurchase Agreements. Repurchase agreements are agreements by which a person
(e.g., a Fund) obtains a security and simultaneously commits to return the
security to the seller (a financial institution deemed to present minimal risk
of bankruptcy based on guidelines established and periodically reviewed by the
Trustees) at an agreed upon price (including principal and interest) on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon market rate of interest which is unrelated to the coupon rate or maturity
date of the underlying security. A repurchase agreement involves the obligation
of the seller to pay the agreed upon price, which obligation is in effect
secured by the value of the underlying security.
Repurchase agreements are considered to be loans by the participating Fund for
purposes of its investment limitations. Repurchase agreements entered into by
the Funds will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement. Under
all repurchase agreements entered into by the Funds, the Fund will have actual
or constructive possession of the underlying collateral. However, if the seller
defaults, the Fund could realize a loss on the sale of the underlying security
to the extent that the proceeds of sale including accrued interest are less than
the resale price provided in the agreement including interest. In addition,
even though the Bankruptcy Code provides protection for most repurchase
agreements, if the seller should be involved in bankruptcy or insolvency
proceedings, the Fund may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if the Fund is treated
as an unsecured creditor and required to return the underlying security to the
seller's estate.
Municipal Securities. Municipal notes in which the Hawaii Tax-Free Fund may
invest include, but are not limited to, general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. The Hawaii Tax-Free Fund's
investments in any of the notes described above will be limited to those
obligations which are rated BBB or Baa or better at the time of investment by
Standard and Poor's Corporation ("S&P") or Moody's Investor Service, Inc.
("Moody's"), respectively or which, if not rated, are of equivalent quality in
the Adviser's judgment.
S-4
<PAGE>
Municipal bonds in which the Hawaii Tax-Free Fund may invest must be rated BBB
or better by S&P or Baa or better by Moody's at the time of investment for the
Hawaii Tax-Free Fund or, if unrated must be deemed by the Adviser to have
essentially the same characteristics and quality as bonds having the above
ratings. The Adviser may purchase private activity bonds. Private activity
bonds are issued by or on behalf of States or political subdivisions thereof to
finance privately owned or operated facilities for business and manufacturing,
housing, sports, and pollution control and to finance activities of and
facilities for charitable institutions. Private activity bonds are also used to
finance public facilities such as airports, mass transit systems, ports, parking
and low income housing. The payment of the principal and interest on private
activity bonds is dependent solely on the ability of the facility's user to meet
its financial obligations and may be secured by a pledge of real and personal
property so financed.
Municipal Securities which are payable only from the revenues derived from a
particular facility may be adversely affected by Hawaii laws or regulations
which make it more difficult for the particular facility to generate revenues
sufficient to pay such interest and principal, including, among others, laws and
regulations which limit the amount of fees, rates or other charges which may be
imposed for use of the facility or which increase competition among facilities
of that type or which limit or otherwise have the effect of reducing the use of
such facilities generally, thereby reducing the revenues generated by the
particular facility. Municipal Securities, the payment of interest and
principal on which is insured in whole or in part by a Hawaii governmentally
created fund, may be adversely affected by Hawaii laws or regulations which
restrict the aggregate proceeds available for payment of principal and interest
in the event of a default on such municipal securities. Similarly, Municipal
Securities, the payment of interest and principal on which is secured, in whole
or in part, by an interest in real property may be adversely affected by Hawaii
laws which limit the availability of remedies or the scope of remedies available
in the event of a default on such municipal securities. Because of the diverse
nature of such laws and regulations and the impossibility of either predicting
in which specific Municipal Securities the Fund will invest from time to time or
predicting the nature or extent of future changes in existing laws or
regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws
and regulations on the securities in which the Fund may invest and, therefore,
on the shares of the Fund.
Other types of tax-exempt instruments which are permissible investments for the
Hawaii Tax-Free Fund include floating rate notes. Investments in such floating
rate instruments will normally involve industrial development or revenue bonds
which provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate) at a major commercial bank, and
that a Fund can demand payment of the obligation at all times or at stipulated
dates on short notice (not to exceed 30 days) at par plus accrued interest.
Such obligations are frequently
S-5
<PAGE>
secured by letters of credit or other credit support arrangements provided by
banks. The quality of the underlying credit or of the bank, as the case may be,
must, in the Adviser's opinion be equivalent to the long-term bond or commercial
paper ratings stated above. The Adviser will monitor the earning power, cash
flow and liquidity ratios of the issuers of such instruments and the ability of
an issuer of a demand instrument to pay principal and interest on demand. The
Adviser may purchase other types of tax-exempt instruments as long as they are
of a quality equivalent to the bond or commercial paper ratings stated above.
The Adviser has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the High Grade Income, Money Market and Hawaii Tax-Free
Funds to meet redemptions and remain as fully invested as possible in municipal
securities. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. The Funds will limit
their put transactions to those with institutions which the Adviser believes
present minimum credit risks, and the Adviser will use its best efforts to
initially determine and thereafter monitor the financial strength of the put
providers by evaluating their financial statements and such other information as
is available in the marketplace. It may, however, be difficult to monitor the
financial strength of the writers where adequate current financial information
is not available. In the event that any writer is unable to honor a put for
financial reasons, the affected Fund would be a general creditor (i.e., on a
parity with all other unsecured creditors) of the writer. Furthermore,
particular provisions of the contract between a Fund and the writer may excuse
the writer from repurchasing the securities in certain circumstances (for
example, a change in the published rating of the underlying municipal securities
or any similar event that has an adverse effect on the issuer's credit); or a
provision in the contract may provide that the put will not be exercised except
in certain special cases, for example, to maintain portfolio liquidity. A Fund
could, however, sell the underlying portfolio security in the open market or
wait until the portfolio security matures, at which time it should realize the
full par value of the security.
Municipal Securities purchased subject to a put may be sold to third persons at
any time, even though the put is outstanding, but the put itself, unless it is
an integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to a Fund, such Fund could, of course, sell the portfolio security.
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The maturity of the underlying security will generally be different from that of
the put. There will be no limit to the percentage of portfolio securities that
the Funds may purchase subject to a put. For the purpose of determining the
"maturity" of securities purchased subject to an option to put, and for the
purpose of determining the dollar-weighted average maturity of the Funds
including such securities, the Trust will consider "maturity" to be the first
date on which it has the right to demand payment from the writer of the put
although the final maturity of the security is later than such date.
Special Considerations Relating to Hawaii Municipal Securities
The ability of issuers to pay interest on, and repay principal of, Hawaii
Municipal Securities may be affected by (1) the general financial condition of
the State of Hawaii, (2) amendments to the Hawaii Constitution and related
statutes that limit the taxing and spending authority of Hawaii government
entities, (3) voter initiatives, (4) civil actions and (5) a wide variety of
Hawaii laws and regulations.
Foreign securities. The High Grade Income and Equity Funds may invest in U.S.
dollar denominated obligations or securities of foreign issuers. Permissible
investments may consist of obligations of foreign branches of U.S. banks and of
foreign banks, including European Certificates of Deposit, European Time
Deposits, Canadian Time Deposits and Yankee Certificates of Deposits, and
investments in Canadian Commercial Paper, foreign securities and Europaper. In
addition, the Equity Fund may invest in American Depositary Receipts. These
instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements than
those applicable to domestic branches of U.S. banks.
When-issued securities. The High Grade Income, Hawaii Tax-Free, Money Market
and Treasury Money Market Funds may invest in when-issued securities. These
securities involve the purchase of debt obligations on a when-issued basis, in
which case delivery and payment normally take place within 45 days after the
date of commitment to purchase. The Funds will only make commitments to
purchase
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obligations on a when-issued basis with the intention of actually acquiring the
securities, but may sell them before the settlement date. The when-issued
securities are subject to market fluctuation, and no interest accrues on the
security to the purchaser during this period. The payment obligation and the
interest rate that will be received on the securities are each fixed at the time
the purchaser enters into the commitment. Purchasing obligations on a when-
issued basis is a form of leveraging and can involve a risk that the yields
available in the market when the delivery takes place may actually be higher
than those obtained in the transaction itself. In that case there could be an
unrealized loss at the time of delivery.
Segregated accounts will be established with the Custodian, and the Funds will
maintain liquid assets in an amount at least equal in value to the Funds'
commitments to purchase when-issued securities. If the value of these assets
declines, the Funds will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
Lending of Portfolio Securities. Each of the Funds may lend securities pursuant
to agreements requiring that the loans be continuously secured by cash,
securities of the U.S. government or its agencies, or any combination of cash
and such securities, as collateral equal to 100% of the market value at all
times of the securities lent. Such loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans for a Fund exceed one-third
of the value of its total assets taken at fair market value. A Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of the cash collateral in U.S. government securities.
However, a Fund will normally pay lending fees to broker-dealers and related
expenses from the interest earned on invested collateral. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans are made only to borrowers deemed
by the Adviser to be of good standing and when, in the judgment of the Adviser,
the consideration which can be earned currently from such securities loans
justifies the attendant risk. Any loan may be terminated by either party upon
reasonable notice to the other party.
Other Investments
The Funds are not prohibited from investing in obligations of banks which are
clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Trust by them or by their customers will not be a consideration in determining
which bank obligations the Funds will purchase. The Funds will not purchase
obligations of the Adviser or the Sub-Adviser.
The High Grade Income, Hawaii Tax-Free Fund and Equity Funds may purchase
securities of other investment companies as permitted by the Investment Company
Act
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of 1940. Under these rules and regulations, a Fund is prohibited from acquiring
the securities of other investment companies if, as a result of such
acquisition, the Fund would own more than 3% of the total voting stock of the
company; securities issued by any one investment company represented more than
5% of the Fund's assets; or securities (other than treasury stock) issued by all
investment companies would represent more than 10% of the total assets of the
Fund. These investment companies typically incur fees that are separate from
those fees incurred directly by the Fund. A Fund's purchase of such investment
company securities results in the layering of expenses, such that Shareholders
would indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
INVESTMENT LIMITATIONS
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer, provided
that this limitation shall apply only as to 75% of the Fund's net assets
except that this restriction does not apply to the Hawaii Tax Free Fund.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. To the extent
that such borrowing exceeds 5% of the value of the borrowing Fund's assets,
asset coverage of at least 300% is required. No Fund will purchase
securities while its borrowings exceed 5% of its total assets.
4. Make loans, except that (a) each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies; (b) each Fund may
enter into repurchase agreements, and (c) the Money Market, Treasury Money
Market, High Grade Income, Hawaii Tax-Free and Equity Funds may engage in
securities lending.
5. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by (3) above in aggregate amounts not to exceed 33 1/3% of total
assets taken at current value at the time of the incurrence of such loan.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts. However, each of the Funds (other
than the Money Market and Treasury Money Market Funds) may invest in
companies which invest in real estate, and in commodities contracts.
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7. Make short sales of securities or purchase securities on margin, except
that each Fund may obtain short-term credits as necessary for the clearance
of security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
9. Purchase securities of other investment companies, except as permitted by
the Investment Company Act of 1940 and the rules and regulations
thereunder.
10. Issue senior securities (as defined in the Investment Company Act of 1940)
except in connection with permitted borrowings as described above or as
permitted by rule, regulation or order of the Securities and Exchange
Commission.
11. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
Non-Fundamental Policies
No Fund may invest in warrants, except that the Equity Fund may invest in
warrants in an amount not exceeding 5% of the Fund's net assets as valued at the
lower of cost or market value. Included in that amount, but not to exceed 2% of
the Fund's net assets, may be warrants not listed on the New York Stock Exchange
or American Stock Exchange.
The Money Market and Treasury Money Market Funds will comply with the
diversification requirements of Rule 2a-7 under the Investment Company Act of
1940.
The foregoing percentages will apply at the time of the purchase of a security.
THE ADVISER
The Trust and First Hawaiian Bank (the "Adviser") have entered into an advisory
agreement (the "Advisory Agreement") dated January 27, 1995. The Advisory
Agreement provides that the Adviser shall not be protected against any liability
to the Trust or its Shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state, the Adviser will bear the amount
of such excess. The Adviser will not be
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required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of a majority of the
Trustees who are not parties to the Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the vote of the Trustees or a majority of outstanding
shares of the Funds, as defined in the 1940 Act. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to the Funds
by a majority of the outstanding shares of the Funds, on not less than 30 days'
nor more than 60 days' written notice to the Adviser, or by the Adviser on 90
days' written notice to the Trust.
The Adviser is entitled to a fee which is calculated daily and paid monthly at
an annual rate of .30% of the daily average net assets of the Money Market Fund,
.55% of the daily average net assets of the High Grade Income Fund, .35% of the
daily average net assets of the Hawaii Tax-Free Fund, .74% of the daily average
net assets of the Equity Fund and .30% of the daily average net assets of the
Treasury Money Market Fund.
THE SUB-ADVISER
The Adviser has entered into a sub-advisory agreement with Wellington Management
Company ("Sub-Adviser") relating to the Money Market and Treasury Money Market
Funds. Under the agreement, the Sub-Adviser is entitled to fees which are
calculated daily and paid monthly at an annual rate of .075% of the aggregate
average daily net assets of the Money Market and Treasury Money Market Funds,
respectively, up to $500 million and .020% of the aggregate average daily net
assets of the Money Market and Treasury Money Market Funds, respectively, in
excess of $500 million. Such fees are paid by the Adviser and the Sub-Adviser
receives no fees directly from these Funds.
THE ADMINISTRATOR
The Trust and SEI Corporation (the "Administrator") have entered into an
administration agreement (the "Administration Agreement") dated January 27,
1995.
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith or
negligence on the part of the
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Administrator in the performance of its duties or from reckless disregard by it
of its duties and obligations thereunder.
The Administrator, a wholly-owned subsidiary of SEI Corporation ("SEI"), was
organized as a Delaware corporation in 1969 and has its principal business
offices at 680 East Swedesford Road, Wayne, Pennsylvania 19087. Alfred P. West,
Jr. and Henry H. Greer, constitute the Board of Directors of the Administrator
and the Distributor. Mr. West is the Chairman of the Board and Chief Executive
Officer of SEI, the Administrator and the Distributor. Mr. Greer serves as the
President and Chief Operating Officer of SEI, the Administrator and the
Distributor. SEI and its subsidiaries are leading providers of funds evaluation
services, trust accounting systems, and brokerage and information services to
financial institutions, institutional investors and money managers. The
Administrator also serves as administrator to the following other mutual funds:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
The Compass Capital Group, Conestoga Family of Funds, CoreFunds, Inc.,
CrestFunds, Inc.(C), CUFUND, First American Funds, Inc., First American
Investment Funds, Inc., FFB Lexicon Funds, Insurance Investment Products Trust,
Inventor Funds, Inc., Marquis/sm/ Funds, Morgan Grenfell Investment Trust, The
PBHG Funds, Inc., The Pillar Funds, Rembrandt Funds(R), 1784 Funds, SEI Daily
Income Trust, SEI Index Funds, SEI Institutional Managed Trust, SEI
International Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, Stepstone
Funds, STI Classic Funds and STI Classic Variable Trust.
The Administrator is entitled to a fee, calculated daily and paid monthly, at an
annual rate of .20% of average daily net assets of each of the Funds.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, and the Trust are parties to a distribution agreement ("Distribution
Agreement") dated January 27, 1995 which applies to both Institutional Class A
and Retail Class B shares of the Funds. The Distribution Agreement shall be
reviewed and ratified at least annually (i) by the Trust's Trustees or by the
vote of a majority of the outstanding shares of the Trust, and (ii) by the vote
of a majority of the Trustees of the Trust who are not parties to the
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
party to the Distribution Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement will terminate
in the event of any assignment, as defined in the 1940 Act, and is terminable
with respect to a particular Fund on not less than sixty days' notice by the
Trust' Trustees, by vote of a majority of the outstanding shares of such Fund or
by the Distributor. The Distributor will receive no compensation for
distribution of Institutional Class A shares. Retail Class B shares have a
distribution plan ("Retail Class B Distribution Plan").
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Retail Class B Distribution Plan
The Distribution Agreement and the Retail Class B Distribution Plan adopted by
the Retail Class B Shareholders provides that the Retail Class B shares will pay
the Distributor a fee of .25% of the average daily net assets of the High Grade
Income Fund, Hawaii Tax-Free Fund and Equity Fund, .10% of the average daily net
assets of the Money Market Fund and the Treasury Money Market Fund, which the
Distributor can use to compensate broker/dealers and service providers,
including the Adviser and its affiliates which provide administrative and/or
distribution services to the Retail Class B Shareholders or their customers who
beneficially own Retail Class B Shares.
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees, or by a majority vote of the outstanding
securities of the Trust upon not more than 60 days written notice by either
party.
The Trust has adopted the Retail Class B Distribution Plan in accordance with
the provisions of Rule 12b-1 under the 1940 Act which regulates circumstances
under which an investment company may directly or indirectly bear expenses
relating to the distribution of its shares. Continuance of the Retail Class B
distribution Plan must be approved annually by a majority of the Trustees of the
Trust and by a majority of the Qualified Trustees. The Retail Class B
Distribution Plan requires that quarterly written reports of amounts spent under
the Retail Class B Distribution Plan and the purposes of such expenditures be
furnished to and reviewed by the Trustees. The Retail Class B Distribution Plan
may not be amended to increase materially the amount which may be spent
thereunder without approval by a majority of the outstanding shares of the
Trust. All material amendments of the Plan will require approval by a majority
of the Trustees of the Trust and of the Qualified Trustees.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their principal occupations for
the last five years are set forth below.
*MARTIN ANDERSON - Trustee - P.O. Box 3196, Honolulu, HI, Attorney, Goodsill,
Anderson, Quinn & Stifel since 1951.
*PHILIP H. CHING - Trustee - 1700 Palaau St., Honolulu, HI. Vice Chairman First
Hawaiian Bank (banking) since 1958.
SHUNICHI KIMURA - Trustee - 34 Lilinoe St., Honolulu, HI. Judge - State of
Hawaii Judiciary from May, 1974 to April, 1994.
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MANUAL R. SYLVESTER - Trustee - 1487 Hiikala Place #35, Honolulu, HI. Retired
since 1992. Executive Partner (April, 1992 to September, 1992) and Managing
Partner (July, 1978 to March, 1992) Coopers and Lybrand, Certified Public
Accounting.
JOYCE S. TSUNODA - Trustee - 1814 Hollehua Street, Pearl City, HI 96782.
Administrator University of Hawaii since 1974.
*WILLIAM S. RICHARDSON - Trustee - 3335 Loulu Street, Honolulu, HI. Trustee,
Kamehameha Schools Bishop Estate (charitable educational trust) from 1982 to
1992.
*DAVID G. LEE - Trustee, President and Chief Executive Officer - Senior Vice
President of the Administrator and the Distributor since 1993. Vice President
of the Administrator and the Distributor since 1991. President of Sierra Trust
Funds prior to 1991.
SANDRA K. ORLOW - Vice President and Assistant Secretary - Vice President and
Assistant Secretary of the Administrator and Distributor since 1983.
KEVIN P. ROBINS - Vice President and Assistant Secretary - Senior Vice
President, General Counsel and Secretary of SEI, the Administrator and
Distributor since 1994. Vice President of SEI, the Administrator and
Distributor 1992-1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1988-
1992.
JOHN H. GRADY, JR. - Secretary - 1800 M. Street, N.W., Washington, D.C. 20036,
Partner since 1995, Morgan, Lewis & Bockius LLP (law firm), counsel to the
Trust, Administrator and Distributor.
ROBERT B. CARROLL - Vice President and Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor, since 1994.
United States Securities and Exchange Commission, Division of Investment
Management, 1990-1994. Associate, McGuire, Woods, Battle and Boothe (law firm)
before 1990.
KATHRYN L. STANTON - Vice President and Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor, since 1994.
Associate, Morgan, Lewis & Bockius LLP (law firm) 1989-1994.
TODD CIPPERMAN - Vice President, Assistant Secretary - Vice President, Assistant
Secretary of SEI, the Administrator and Distributor since May, 1995, Associate,
Dewey Ballantine (law firm) 1994-1995, Associate, Winston & Strawn (law firm)
1991-1995.
JOSEPH LYDON - Vice President, Assistant Secretary - Director of Business
Administration, SEI Corporation since April, 1995; Vice President of Fund Group,
Vice President of the Advisor - Dreman Value Management, LP, President of Dreman
Financial Services, Inc. 1989-1995.
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JEFFREY A. COHEN - Controller and Chief Financial Officer - CPA, Director,
International and Domestic Funds Accounting - SEI Corporation from 1991 to
Present; Price Waterhouse, Audit Manager - before 1991.
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*Messrs. Lee, Ching, Anderson and Richardson are Trustees who may be deemed to
be "interested" persons of the Trust as the term is defined in the Investment
Company Act of 1940.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust.
REPORTING
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
Shareholder reports to Shareholders of record.
PERFORMANCE
Yields. Yields are one basis upon which investors may compare the Funds with
other funds; however, yields of other funds and other investment vehicles may
not be comparable because of the factors set forth below and differences in the
methods used in valuing portfolio instruments.
The yield of a money market fund fluctuates, and the annualization of a week's
dividend is not a representation by the Trust as to what an investment in a
money market fund will actually yield in the future. Actual yields will depend
on such variables as asset quality, average asset maturity, the type of
instruments the Fund invests in, changes in interest rates on money market
instruments, changes in the expenses of the Fund and other factors.
Money Market Fund Yields. From time to time the Money Market and Treasury Money
Market Funds advertise their "current yield" and "effective compound yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The "current yield" of these Funds refers to the
income generated by an investment in the Funds over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Funds is assumed
to be reinvested. The "effective yield" will be slightly higher than the
"current yield" because of the compounding effect of this assumed reinvestment.
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The current yield of the Money Market and Treasury Money Market Funds will be
calculated daily based upon the seven days ending on the date of calculation
("base period"). The yield is computed by determining the net change (exclusive
of capital changes) in the value of a hypothetical pre-existing shareholder
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing such net change by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7). Realized and unrealized gains and losses are not
included in the calculation of the yield. The effective compound yield of these
Funds is determined by computing the net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula: Effective Yield = (Base Period Return + 1)
365/7) - 1. The current and the effective yields reflect the reinvestment of
net income earned daily on portfolio assets.
Other Yields. The Hawaii Tax-Free Fund and the High Grade Income Fund may
advertise a 30-day yield. The Hawaii Tax-Free Fund also may advertise 30-day
tax-equivalent yield. Tax equivalent yields are computed by dividing that
portion of the Fund's yield which is tax-exempt by one minus a stated federal
and state income tax rate and adding the product to that portion, if any, of the
Fund's yield that is not tax-exempt. (Tax equivalent yields assume the payment
of Federal income taxes at a rate of 31% and Hawaii income taxes at a rate of
10%.) These figures will be based on historical earnings and are not intended
to indicate future performance. The 30-day yield of these Funds refers to the
annualized income generated by an investment in the Funds over a specified 30-
day period. The yield is calculated by assuming that the income generated by
the investment during that period generated each period over one year and is
shown as a percentage of the investment. In particular, yield will be
calculated according to the following formula:
Yield = (2 (a-b/cd + 1)/6/ - 1) where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
Tax equivalent yields are computed by dividing that portion of a Fund's yield
which is tax-exempt by one minus a stated federal and state income tax rate and
adding the product to that portion, if any, of the Fund's yield that is not tax-
exempt.
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Total Return. From time to time, the non-Money Market Funds may advertise total
return on an "average annual total return" basis and on an "aggregate total
return" basis for various periods. Average annual total return reflects the
average annual percentage change in the value of an investment in a Fund over a
particular measuring period. Aggregate total return reflects the cumulative
percentage change in value over the measuring period. Aggregate total return is
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows: P (1 + T)/n/ = ERV, where P = a hypothetical initial
payment of $1,000; T = average annual total return; n = number of years; and ERV
= ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the designated time period as of the end of such period or the life of the
fund. The formula for calculating aggregate total return can be expressed as
(ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends and
capital gain distribution on the reinvestment dates during the period and that
the entire investment is redeemed at the end of the period. In addition the
maximum sales charge for each Fund is deducted from the initial $1,000 payment.
Total return may also be shown without giving effect to any sales charges.
The Funds' performance may from time to time be compared to other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services),
financial and business publications and periodicals, to broad groups of
comparable mutual funds or to unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs. The Funds may quote Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance. The Funds may quote
Ibbotson Associates of Chicago, Illinois, which provides historical returns of
the capitals markets in the U.S. The Funds may use long term performance of
these capital markets to demonstrate general long-term risk vs. reward scenarios
and could include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
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PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange and the Federal Reserve wire system are open for business
except for Hawaii state banking holidays.
It is the Trust's policy to pay for redemptions in cash. The Trust retains the
right, however, to provide for redemptions in whole or in part by a distribution
in-kind of securities held by the Funds in lieu of cash. Shareholders may incur
brokerage charges on the sale of any such securities so received in payment of
redemptions. A Shareholder will at all times be entitled to aggregate cash
redemptions from all Funds of the Trust during any 90-day period of up to the
lesser of $250,000 or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of disposal or valuation of the Fund's securities is not
reasonably practicable, or for such other periods as the Securities and Exchange
Commission has by order permitted. The Trust also reserves the right to suspend
sales of shares of the Funds for any period during which the New York Stock
Exchange, the Adviser, the Administrator and/or the Custodian are not open for
business.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Money Market and Treasury Money Market
Funds is calculated by adding the value of securities and other assets,
subtracting liabilities and dividing by the number of outstanding shares.
Securities will be valued by the amortized cost method which involves valuing a
security at its cost on the date of purchase and thereafter (absent unusual
circumstances) assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in general market rates of
interest on the value of the instrument. While this method provides certainty
in valuation, it may result in periods during which a security's value, as
determined by this method, is higher or lower than the price these Funds would
receive if they sold the instrument. During periods of declining interest
rates, the daily yield of these Funds may tend to be higher than a like
computation made by a company with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all of its
portfolio securities. Thus, if the use of amortized cost by these Funds
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in these Funds would be able to obtain a somewhat higher yield than
would result from investment in a company utilizing solely market values, and
existing investors in
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these Funds would experience a lower yield. The converse would apply in a period
of rising interest rates.
The Money Market and Treasury Money Market Funds' use of amortized cost and the
maintenance of these Funds' net asset value at $1.00 are permitted by
regulations promulgated by Rule 2a-7 under the Investment Company Act of 1940,
provided that certain conditions are met. These conditions currently require
that the Funds maintain a dollar-weighted average maturity of 90 days or less,
not purchase any instrument having a remaining maturity of more than 397 days,
and will limit their investments to those U.S. dollar-denominated instruments
which the Trustees determine to present minimal credit risks and which are of
"eligible" quality. The regulations also require the Trustees to establish
procedures which are reasonably designed to stabilize the net asset value per
share at $1.00 for these Funds. Such procedures include the determination of
the extent of deviation, if any, of the Funds' current net asset value per share
calculated using available market quotations from the Funds' amortized cost
price per share at such intervals as the Trustees deem appropriate and
reasonable in light of market conditions and periodic reviews of the amount of
the deviation and the methods used to calculate such deviation. In the event
that such deviation exceeds 1/2 of 1%, the Trustees are required to consider
promptly what action, if any, should be initiated, and, if the Trustees believe
that the extent of any deviation may result in material dilution or other unfair
results to Shareholders, the Trustees are required to take such corrective
action as they deem appropriate to eliminate or reduce such dilution or unfair
results to the extent reasonably practicable. Such actions may include the sale
of portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity; withholding dividends; redeeming shares
in kind; or establishing a net asset value per share by using available market
quotations. In addition, if these Funds incur a significant loss or liability,
the Trustees have the authority to reduce pro rata the number of shares of these
Funds in each Shareholder's account and to offset each Shareholder's pro rata
portion of such loss or liability from the Shareholder's accrued but unpaid
dividends or from future dividends.
The securities of the non-Money Market Funds are valued pursuant to prices and
valuations provided by an independent pricing service. The pricing service
relies primarily on prices of actual market transactions as well as trader
quotations. However, the service may also use a matrix system to determine
valuations, which system considers such factors as security prices, yields,
maturities, call features, ratings and developments relating to specific
securities in arriving at valuations. The procedures of the pricing service and
its valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees. Although the methodology and procedures are
identical, the net asset value per share of Institutional Class A and Retail
Class B shares of Funds other than the Money Market and Treasury Money Market
Funds may differ because of the distribution expenses charged to Retail Class B
shares.
S-19
<PAGE>
TAXES
Federal Income Tax
All Funds
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) and also must meet several additional requirements. Among these
requirements are the following: (i) at least 90% of the Fund's gross income
each taxable year must be derived from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
stock or securities, or certain other income; (ii) the Fund must derive less
than 30% of its gross income each taxable year from the sale or other
disposition of stocks or securities held for less than three months; (iii) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iv) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer.
Notwithstanding the distribution requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it fails to
distribute by the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts.
Additional Consideration for Hawaii Tax-Free Fund
As noted in the Prospectus, exempt interest dividends are excludable from a
Shareholder's gross income for regular federal income tax purposes. Exempt-
interest dividends may nevertheless be subject to the alternative minimum tax
(the "Alternative Minimum Tax") imposed by Section 55 of the Code or the
environmental tax (the "Environmental Tax") imposed by Section 59A of the Code.
The Alternative Minimum Tax is imposed at the rate of 24% in the case of non-
corporate taxpayers and at the rate of 20% in the case of corporate taxpayers,
to the extent it exceeds the taxpayer's
S-20
<PAGE>
regular tax liability. The Environmental Tax is imposed at the rate of 0.12%
and applies only to corporate taxpayers. The Alternative Minimum Tax and the
Environmental Tax may be imposed in two circumstances. First, exempt-interest
dividends derived from certain "private activity bonds" issued after August 7,
1986, will generally be an item of tax preference (and therefore potentially
subject to the Alternative Minimum Tax and the Environmental Tax) for both
corporate and non-corporate taxpayers. Second, in the case of exempt-interest
dividends received by corporate Shareholders, all exempt-interest dividends,
regardless of when the bonds from which they are derived were issued or whether
they are derived from private activity bonds, will be included in the
corporation's "adjusted current earnings," as defined in Section 56(g) of the
Code, in calculating the corporation's alternative minimum taxable income for
purposes of determining the Alternative Minimum Tax and the Environmental Tax.
Any gain or loss recognized on a sale or redemption of shares of any Fund by a
Shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise will be generally treated as a short-term capital gain or
loss. Any loss recognized by a Shareholder upon the sale or redemption of
shares of any Fund held for six months or less, however, will be disallowed to
the extent of any exempt-interest dividends received by the Shareholder with
respect to such shares. If shares on which a net capital gain distribution has
been received are subsequently sold or redeemed and such shares have been held
for six months or less, any loss recognized will be treated as a long-term
capital loss to the extent of the long-term capital gain distribution.
Interest on indebtedness incurred by Shareholders to purchase or carry shares of
the fund will not be deductible for federal income tax purposes. The deduction
otherwise allowable to property and casualty insurance companies for "losses
incurred" will be reduced by an amount equal to a portion of exempt-interest
dividends received or accrued during any taxable year. Foreign corporations
engaged in a trade or business in the United States will be subject to a "branch
profits tax" on their "dividend equivalent amount" for the taxable year, which
will include exempt-interest dividends. Certain Subchapter S corporations may
also be subject to taxes on their "passive investment income," which could
include exempt-interest dividends. Up to 50 percent of the Social Security
benefits or railroad retirement benefits received by an individual during any
taxable year will be included in the gross income of such individual if the
individual's "modified adjusted gross income" (which includes exempt-interest
dividends) plus 50 percent of the Social Security benefits or railroad
retirement benefits received by such individual during that taxable year exceeds
the base amount described in Section 86 of the Code.
The Funds may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such
S-21
<PAGE>
users) of facilities financed by industrial development or private activity
bonds. A "substantial user" is defined generally to include certain persons who
regularly use a facility in their trade or business. Such entities or persons
should consult their tax advisors before purchasing shares of either Fund.
Issuers of bonds purchased by the Funds (or the beneficiary of such bonds) may
have made certain representations or covenants in connection with the issuance
of such bonds to satisfy certain requirements of the Code that must be satisfied
subsequent to the issuance of such bonds. Investors should be aware that
exempt-interest dividends derived from such bonds may become subject to federal
income taxation retroactively to the date thereof if such representations are
determined to have been inaccurate or if the issuer of such bonds (or the
beneficiary of such bonds) fails to comply with such covenants.
If a Fund should fail to qualify as a regulated investment company for any
taxable year, the Fund would pay tax on its taxable investment income and
capital gains at regular corporate rates without any deductions for amounts
distributed to Shareholders. In addition, all of the Fund's distributions to
Shareholders would be taxable as ordinary income and would qualify for the
corporate dividends-received deduction.
State Taxes
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to Shareholders and the ownership of shares may be subject to state and local
taxes.
Many states allow income received from certain United States Government
obligations that is tax exempt when received directly to be tax exempt when
received as income dividends from an investment company. Not all states permit
such income dividends to be tax exempt and some require that a certain minimum
percentage of an investment company's income dividend be derived from state tax-
exempt interest before any portion of the income dividends may be exempt. The
Funds will inform Shareholders annually of the percentage of income that is
derived from direct United States Government obligations. Shareholders should
consult their tax advisors to determine whether any portion of the income
dividends received from a Fund is considered tax exempt in their particular
states.
Hawaii Taxation
The State of Hawaii has specifically adopted Sections 852 through 855 of the
Internal Revenue Code of 1986, as amended (the "Code"), which provisions provide
for pass-through treatment of exempt interest dividends and capital gains, i.e.,
distributions by the Hawaii Tax-Free Fund of dividends representing exempt
interest and capital gains
S-22
<PAGE>
retain their original character in the hands of shareholders. As the State of
Hawaii's Department of Taxation has confirmed in response to a request by
special counsel for the Trust, distributions from the Hawaii Tax-Free Fund to
its shareholders which are attributable to interest on obligations exempt from
income tax in the State of Hawaii will not be subject to Hawaii income tax in
the hands of shareholders so long as at least fifty percent (50%) of the Hawaii
Tax-Free Fund's assets are invested in securities the interest from which is
exempt from Hawaii state taxation. In addition, the Department of Taxation has
confirmed that interest income on obligations issued by the U.S. government and
its territories is exempt from State of Hawaii income taxation.
FUND TRANSACTIONS
Subject to policies established by the Trustees, the Adviser (and, where
applicable, the Sub-Adviser) are responsible for placing the orders to execute
transactions for the Funds. In placing orders, it is the policy of the Adviser
to seek to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), the size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Adviser
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available. The Funds
will not purchase portfolio securities from any affiliated person acting as
principal except in conformity with the regulations of the Securities and
Exchange Commission (the "SEC").
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. Where possible, the Adviser will
deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
The Trust does not expect to use one particular dealer, but subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to the Adviser may receive orders for transactions by the
Funds. Information so received will be in addition to and not in lieu of the
services required to be performed by the Adviser under its Advisory Agreement,
and the expenses of the Adviser will not necessarily be reduced as a result of
the receipt of such supplemental information.
S-23
<PAGE>
The Funds may execute brokerage or other agency transactions through the
Distributor, which is a registered broker-dealer in conformity with the 1940
Act, the Securities Exchange Act of 1934 and rules promulgated by the SEC.
Under these provisions, the Distributor is permitted to receive and retain
compensation for effecting portfolio transactions for the Funds on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor to receive and retain such compensation.
These rules further require that commissions paid to the Distributor by the
Trust for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
renumeration received or to be received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time." In addition, the
Funds may direct commission business to one or more designated broker/dealers,
including the Distributor, in connection with such broker/dealer's payment of
certain of the Funds' expenses. The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
Since the Trust does not market its shares through intermediary broker-dealers,
it is not the Trust's practice to allocate brokerage business on the basis of
sales of its shares which may be made through such firms. However, the Adviser
may place Fund orders with qualified broker-dealers who recommend the Trust to
clients, and may, when a number of brokers and dealers can provide best price
and execution on a particular transaction, consider such recommendations by a
broker or dealer in selecting among broker-dealers.
DESCRIPTION OF SHARES
The Agreement and Declaration of Trust authorizes the issuance of an unlimited
number of shares of each series and of each class of shares thereof. Each
Institutional Class A and Retail Class B share of that Fund represents an equal
proportionate interest in that Fund with each other Institutional Class A and
Retail Class B share of that Fund. Shares are entitled upon liquidation to a
pro rata share in the net assets of the Funds, Shareholders have no preemptive
rights. The Agreement and Declaration of Trust provide that the Trustees of the
Trust may create additional series of shares. All consideration received by the
Trust for shares of any additional series and all assets in which such
consideration is invested would belong to that series and would be subject to
the liabilities related thereto. Share certificates representing shares will
not be issued.
S-24
<PAGE>
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.
5% SHAREHOLDERS
As of November 24, 1995, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Funds.
<TABLE>
<CAPTION>
Bishop Street Money Market Fund Class A
---------------------------------------
Name and Address Number of Shares Percent of Fund
---------------- ---------------- ----------------
<S> <C> <C>
First Hawaiian Bank 314,984,544.8200 99.89%
Assistant Management Division
Attn: Bishop Street Funds Dep.
P.O. Box 3708
Honolulu, HI 96811-3708
<CAPTION>
Bishop Street Money Market Fund Class B
---------------------------------------
Name and Address Number of Shares Percent of Fund
---------------- ---------------- ---------------
<S> <C> <C>
The Bay Villas Inc./GRY-AMT 253,135.5700 7.53%
500 Bay Drive
Kapalua, HI 96761-9034
The Bay Villas Inc./GRN-RES 268,474.2300 7.99%
500 Bay Drive
Kapalua, HI 96761-9034
</TABLE>
S-25
<PAGE>
<TABLE>
<S> <C> <C>
Marilynn R. Cutter TTEE FBO 506,755.1100 15.08%
4999 Kahala Ave., Apt. 407
Honolulu, HI 96186-5421
Drywall Tapers 850,000.0000 25.30%
Workers Local Union
1287 Kalani St., Ste. 204
Honolulu, HI 96817
<CAPTION>
Bishop Street Hawaii Tax-Free Fund Class A
------------------------------------------
Name and Address Number of Shares Percent of Fund
---------------- ---------------- ---------------
<S> <C> <C>
First Hawaiian Bank 350,337.5630 42.26%
Asset Management Division
Attn: Bishop Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
First Hawaiian Bank 478,673.1100 57.74%
Asset Management Division
Attn: Bishop Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
<CAPTION>
Bishop Street Hawaii Tax-Free Fund Class B
------------------------------------------
Name and Address Number of Shares Percent of Fund
- ---------------- ---------------- ---------------
<S> <C> <C>
Mariko C. Hayashi 29,211.2950 5.01%
1525 Wilder Ave., #607
Honolulu, HI 96822-4685
</TABLE>
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of
S-26
<PAGE>
any such person. The Declaration of Trust also provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with actual or threatened litigation in which they may be involved
because of their offices with the Trust unless it is determined in the manner
provided in the Declaration of Trust that they have not acted in good faith in
the reasonable belief that their actions were in the best interests of the
Trust. However, nothing in the Declaration of Trust shall protect or indemnify a
Trustee against any liability for his willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties.
S-27
<PAGE>
APPENDIX
Description of Commercial Paper Ratings
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated A-
1+ are those with an "overwhelming degree" of credit protection. Those rated A-
1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality respectively on the
basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the
second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Ratings of Duff-1 are further
refined by the gradations of "1+" and "1-." Issues rated Duff-1+ have the
highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1- have high certainty of timely payment, strong liquidity factors
supported by good fundamental protection factors, and small risk factors. Paper
rated Duff-2 is regarded as having good certainty of timely payment, good access
to capital markets and sound liquidity factors and company fundamentals. Risk
factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
S-28
<PAGE>
Description of Corporate Bond Ratings
The following descriptions of corporate bond ratings have been published by S&P,
Moody's, Fitch, Duff and IBCA.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such
a rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Bonds which are rated BBB by S&P are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa by Moody's is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
S-29
<PAGE>
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times
or many times interest requirements, with such stability of applicable earnings
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond
question and are readily salable, whose merits are not unlike those of the AAA
class, but whose margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but influenced as to rating
by the lesser financial power of the enterprise and more local type market.
Bonds rated A by Fitch are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB by Fitch are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by
Duff are judged by Duff to have average but adequate protection factors.
However, risk factors are more variable and greater in periods of economic
stress. Bonds rated BBB by Duff are judged by Duff as having below average
protection factors but still considered sufficient for prudent investment, with
considerable variability in risk during economic cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a
very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly. Obligations for which there is a low expectation on
investment risk are rated A by IBCA. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk. Obligations for
which there is currently a low expectation of investment risk are rated BBB by
IBCA. Capacity for timely repayment of principal and interest is adequate,
although
S-30
<PAGE>
adverse changes in business, economic or financial conditions are more likely to
lead to increased investment risk than for obligations in higher categories.
S-31
<PAGE>
[LETTERHEAD OF COOPERS & LYBRAND L.L.P. APPEARS HERE]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Bishop Street Funds
We have audited the accompanying statement of assets and liabilities of Bishop
Street Funds (comprising the Money Market Fund, Equity Fund, High Grade Income
Fund and Hawaii Tax-Free Fund) as August 31, 1994. This financial statement is
the responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the statement of assets and liabilities. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the Bishop
Street Funds as of August 31, 1994, in conformity with generally accepted
accounting principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
September 2, 1994
<PAGE>
Bishop Street Funds
Statement of Assets and Liabilities
August 31, 1994
<TABLE>
<CAPTION>
Money
Market
Fund
- -------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Cash............................................................................... $98,500
Deferred Organization Costs........................................................ 13,000
- -------------------------------------------------------------------------------------------------
Total Assets..................................................................... $111,500
- -------------------------------------------------------------------------------------------------
Liabilities:
Due to Administrator............................................................... $13,000
- -------------------------------------------------------------------------------------------------
Net Assets:
Institutional Class shares (unlimited authorization-no par value) based on
98,250 shares of beneficial interest.............................................. $98,250
Retail Class shares (unlimited authorization-no par value) based on
250 shares of beneficial interest................................................. $250
- -------------------------------------------------------------------------------------------------
Net Assets Value, Offering Price and Redemption Price Per Share-Institutional Class... $1.00
Net Assets Value and Redemption Price Per Share-Retail Class.......................... $1.00
Maximum Public Offering Price Per Share-Retail Class.................................. $1.00
- -------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Bishop Street Funds
Statement of Assets and Liabilities
August 31, 1994
<TABLE>
<CAPTION>
High Grade
Income
Fund
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Cash............................................................... $500
Deferred Organization Costs........................................ 13,000
- --------------------------------------------------------------------------------
Total Assets..................................................... $13,500
- --------------------------------------------------------------------------------
Liabilities:
Due to Administrator............................................... $13,000
- --------------------------------------------------------------------------------
Net Assets:
Institutional Class shares (unlimited authorization-no par value)
based on 25 shares of beneficial interest........................ $250
Retail Class shares (unlimited authorization-no par value)
based on 25 shares of beneficial interest........................ $250
- --------------------------------------------------------------------------------
Net Assets Value, Offering Price and Redemption Price Per
Share-Institutional Class........................................ $10.00
Net Assets Value and Redemption Price Per Share-Retail Class......... $10.00
Maximum Public Offering Price Per Share-Retail Class ($10.00/96.5%).. $10.36
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Bishop Street Funds
Statement of Assets and Liabilities
August 31, 1994
<TABLE>
<CAPTION>
Hawaii
Tax-Free
Fund
- -------------------------------------------------------------------------------
<S> <C>
Assets:
Cash................................................................ $500
Deferred Organization Costs......................................... 13,000
- -------------------------------------------------------------------------------
Total Assets...................................................... $13,500
- -------------------------------------------------------------------------------
Liabilities:
Due to Administrator................................................ $13,000
- -------------------------------------------------------------------------------
Net Assets:
Institutional Class shares (unlimited authorization-no par
value) based on 25 shares of beneficial interest................... $250
Retail Class shares (unlimited authorization-no par value)
based on 25 shares of beneficial interest.......................... $250
- -------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Price Per
Share-Institutional Class........................................... $10.00
Net Asset Value and Redemption Price Per Share-Retail Class........... $10.00
Maximum Public Offering Price Per Share-Retail Class ($10.00/96.5%)... $10.36
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Bishop Street Funds
Statement of Assets and Liabilities
August 31, 1994
<TABLE>
<CAPTION>
Equity
Fund
- --------------------------------------------------------------------------------
<S> <C>
Assets:
Cash............................................................... $500
Deferred Organization Costs........................................ 13,000
- --------------------------------------------------------------------------------
Total Assets..................................................... $13,500
- --------------------------------------------------------------------------------
Liabilities:
Due to Administrator............................................... $13,000
- --------------------------------------------------------------------------------
Net Assets:
Institutional Class shares (unlimited authorization-no par value)
based on 25 shares of beneficial interest........................ $250
Retail Class shares (unlimited authorization-no par value)
based on 25 shares of beneficial interest........................ $250
- --------------------------------------------------------------------------------
Net Assets Value, Offering Price and Redemption Price Per
Share-Institutional Class........................................ $10.00
Net Assets Value and Redemption Price Per Share-Retail Class......... $10.00
Maximum Public Offering Price Per Share-Retail Class ($10.00/96.5%).. $10.36
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
BISHOP STREET FUNDS
Notes to Financial Statements
August 31, 1994
1. Organization:
Bishop Street Funds (the "Trust") was organized under Massachusetts law as a
Massachusetts business trust under an Agreement and Declaration of Trust dated
May 25, 1994. The Trust is registered under the Investment Company Act of 1940
as amended, as a management investment company which offers both diversified and
non-diversified funds. The Trust is currently offering shares in four funds:
Money Market Fund, High Grade Income Fund, Hawaii Tax-Free Fund and Equity Fund
(the "Funds"). The assets of each Fund are segregated, and a shareholder's
interest is limited to the Fund in which shares are held. The Funds have not
commenced operations except those related to organizational matters and the sale
of initial shares of beneficial interest to SEI Financial Management Corporation
(the "Administrator") on August 31, 1994.
2. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Trust and are being amortized
over sixty months commencing with the operations of each Fund. In the event any
of the initial shares of the Trust are redeemed by any holder thereof during the
period that the Trust is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Trust will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption. These costs include legal fees of approximately $20,000 for
organizational work performed by a law firm of which an officer of the Trust is
a partner.
Certain officers and Trustees of the Trust are also officers of the
Administrator and/or Distributor. Such officers are paid no fees by the Trust
for serving as officers of the Trust.
3. Administration and Distribution Agreements:
The Trust and SEI Financial Management Corporation intend to enter into an
Administration agreement. Under the terms of the proposed Administration
agreement, the Administrator will provide administrative services for an annual
fee of .20% on the average daily net assets of each of the Funds.
The Trust and SEI Financial Services Company (the "Distributor") intend to enter
into a Distribution agreement under which the Distributor will receive no fees
for its distribution services under this proposed agreement for the
Institutional Class of any Fund. The Distributor will receive .10% of the Retail
Class average daily net assets in the Money Market Fund and .25% of the Retail
Class average daily net assets in each of the High Grade Income Fund, the Hawaii
Tax-Free Fund and the Equity Fund.
4. Investment Advisory Agreement:
The Trust intends to enter into an Investment Advisory Agreement with First
Hawaiian Bank under which the Adviser will receive an annual fee equal to .10%
of the average daily net assets of the Money Market Fund, .55% of the average
daily net assets of the High Grade Income Fund, .35% of the average daily net
assets of the Hawaii Tax-Free Fund and .74% of the average daily net assets of
the Equity Fund. The Adviser has voluntarily agreed for an indefinite period of
time to waive all or a portion of its fees in order to limit operating expenses
in each of the Funds.
----------
<PAGE>
UNAUDITED FINANCIALS FOR THE MONEY MARKET AND HAWAII TAX-FREE
-------------------------------------------------------------
FUNDS DATED MAY 31, 1995
------------------------
<PAGE>
Statement of Net Assets Bishop Street Funds
May 31, 1995 Unaudited
<TABLE>
<CAPTION>
Face Market
Amount Value
Money Market Fund (000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Certificates of Deposit (5.9%)
- ------------------------------------------------------------------------------
First Alabama Bank
6.120%, 07/21/95................................. $ 6,000 $ 6,000
West One Bank
6.100%, 06/13/95................................. 4,000 4,000
6.050%, 07/10/95................................. 5,000 5,000
- ------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost $15,000,000)........................................... 15,000
- ------------------------------------------------------------------------------
Commercial Paper (82.6%)
- ------------------------------------------------------------------------------
American Express Credit
5.900%, 10/19/95................................. 7,000 6,839
American Home Products
6.050%, 06/12/95................................. 5,000 4,991
6.020%, 06/26/95................................. 2,635 2,624
Associates NA
5.950%, 08/07/95................................. 3,000 2,967
Bear Stearns
5.980%, 07/11/95................................. 9,000 8,941
Beneficial
6.000%, 07/06/95................................. 5,000 4,971
5.900%, 09/21/95................................. 3,000 2,945
Chevron Oil Finance
6.000%, 06/07/95................................. 8,000 7,992
Cipsco
5.930%, 08/11/95................................. 9,000 8,895
CIT Group Holdings
6.100%, 07/05/95................................. 5,000 4,971
Coca-Cola Enterprises
6.010%, 06/13/95................................. 4,000 3,992
Corestates Bank FRN
6.050%, 01/05/96 (A)............................. 3,000 3,000
Corporate Asset Funding
6.000%, 06/07/95................................. 8,000 7,992
Corporate Receivables
6.000%, 06/08/95................................. 4,425 4,420
CSM Credit
6.000%, 06/14/95................................. 7,700 7,683
Dean Witter Discover
6.020%, 06/01/95................................. 5,000 5,000
6.000%, 07/26/95................................. 5,000 4,954
Delaware Funding
5.950%, 08/08/95................................. 4,000 3,955
Ford Motor Credit
6.000%, 07/20/95................................. 8,000 7,935
</TABLE>
<PAGE>
Statement of Net Assets Bishop Street Funds
May 31, 1995 Unaudited
[CAPTION]
<TABLE>
Face Market
Amount Value
Money Market Fund (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
General Electric Capital
6.120%, 06/08/95........................ $ 8,000 $ 7,990
Household Finance
6.050%, 06/12/95........................ 8,000 7,985
IBM Credit
6.000%, 07/26/95........................ 8,000 7,927
International Lease Finance
6.000%, 07/12/95........................ 5,000 4,966
John Deere Capital
6.000%, 06/06/95........................ 8,000 7,993
McKenna Triangle
6.030%, 07/13/95........................ 5,000 4,965
Norwest
6.090%, 06/13/95........................ 8,000 7,984
Philip Morris
6.020%, 6/06/95......................... 2,600 2,598
5.960%, 08/03/95........................ 3,000 2,969
Prefcor
6.020%, 06/06/95........................ 3,000 2,997
6.020%, 06/13/95........................ 3,000 2,994
5.980%, 07/05/95........................ 3,000 2,983
Prudential Funding
5.970%, 07/13/95........................ 4,000 3,972
Puerto Rico Development Bank
6.020%, 07/19/95........................ 5,000 4,960
Sears Roebuck Acceptance....................
6.100%, 07/11/95........................ 5,000 4,966
6.030%, 07/24/95........................ 4,000 3,964
Synthetic Money Market 95-1 Frn
6.082%, 05/29/96........................ 8,000 7,998
Transamerica Finance
6.050%, 06/15/95........................ 5,000 4,988
6.100%, 07/10/95........................ 3,000 2,980
Whirlpool
6.050%, 06/08/95........................ 5,000 4,994
- --------------------------------------------------------------------------------
Total Commercial Paper
(Cost $208,239,833)............................... 208,240
- --------------------------------------------------------------------------------
U.S. Government Agency Obligations (11.7%)
- --------------------------------------------------------------------------------
FHLB
6.253%, 07/13/95........................ 690 685
FHLMC
6.094%, 08/03/95........................ 10,000 9,896
FNMA
6.252%, 07/31/95........................ 4,000 3,960
</TABLE>
<PAGE>
Statement of Net Assets Bishop Street Funds
May 31, 1995 Unaudited
<TABLE>
<CAPTION>
Face Market
Amount Value
Money Market Fund (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
6.098%, 08/02/95 ................................ $ 5,000 $ 4,949
6.095%, 08/04/95 ................................ 10,000 9,895
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $29,385,434) ......................................... 29,385
- --------------------------------------------------------------------------------
Repurchase Agreements (0.3%)
- --------------------------------------------------------------------------------
Aubrey Lanston
6.125% dated 05/31/93, matures 06/01/95, repurchase
price $665,113 (collateralized by U.S. Treasury
Note, total par value $675,000, 7.875%, matures
01/15/98; market value $706,000) ................................ 665
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $665,000) ............................................ 665
- --------------------------------------------------------------------------------
Total Investments (100.5%)
(Cost $253,290,267) 253,290
- --------------------------------------------------------------------------------
Other Assets and Liabilities (-0.5%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities ................................ ( 1,342)
- --------------------------------------------------------------------------------
Net Assets:
Fund share of Institutional Class A (unlimited
authorization--no par value) based on 251,296,547
outstanding shares of beneficial interest ....................... 251,297
Fund share of Retail Class B (unlimited
authorization--no par value) based on 613,413
outstanding shares of beneficial interest........................ 613
Undistributed Net Investment Income................................ 35
Accumulated Net Realized Gain on Investments....................... 3
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%).........................................$ 251,948
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share--Institutional Class A...........................$ 1.00
Net Asset Value, Offering Price and Redemption
Price Per Share--Retail Class B..................................$ 1.00
- --------------------------------------------------------------------------------
</TABLE>
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
(A) Interest bearing commercial paper
<PAGE>
Statement of Net Assets Bishop Street Funds
May 31, 1995 Unaudited
<TABLE>
<CAPTION>
Face Market
Amount Value
Hawaii Tax-Free Fund (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash Equivalents (11.5%)
- --------------------------------------------------------------------------------
Dreyfus Tax Exempt Cash Management Fund
3.920%, 06/01/95 ....................... $ 312 $ 312
Nuveen Federal Tax Exempt Money Market Fund
3.632%, 06/01/95 ....................... 311 311
- --------------------------------------------------------------------------------
Total Cash Equivalents
(Cost $623,459) .................................. 623
- --------------------------------------------------------------------------------
Municipal Bonds (86.7%)
- --------------------------------------------------------------------------------
Guam (3.0%)
Guam, Government Limited Obligation, Series
A, RB
7.100%, 11/15/09 ....................... 150 159
Total Guam .......................................... 159
Hawaii (70.6%)
Hawaii County, Ser A, RB
5.600%, 05/01/13 ....................... 190 190
Hawaii Department of Budget & Finance, Queens
Medical Center Project, RB, FGIC Insured
7.000%, 07/01/08 ....................... 75 80
Hawaii State Airport System, Second Series,RB
7.000%, 07/01/18 ....................... 55 58
Hawaii State Airport Systems, Project, RB
7.000%, 07/01/20 ....................... 300 327
Hawaii State Department of Budget & Finance,
Hawaiian Electric Project, Special Purpose
Mortgage, Ser A, RB
6.600%, 01/01/25 ....................... 250 264
Hawaii State Department of Budget & Finance,
Kapiolani Health Care Special Purpose
Mortgage, RB
6.400%, 07/01/13 ....................... 250 258
Hawaii State Department of Budget & Finance,
Special Purpose Mortgage, Queens Medical
Center Project, RB
6.500%, 07/01/12 ....................... 65 67
Hawaii State Harbor Capital Improvement, RB
6.250%, 07/01/15 ....................... 150 155
Hawaii State Highway Project, RB
5.000%, 07/01/12 ....................... 100 92
Hawaii State Highway, RB
5.000%, 07/01/11 ....................... 175 161
Hawaii State Housing Finance & Development,
Single Family Mortgage Purchase, Ser A, RB
6.000%, 07/01/26 ....................... 150 145
</TABLE>
<PAGE>
Statement of Net Assets BISHOP STREET FUNDS
May 31, 1995 Unaudited
<TABLE>
<CAPTION>
Face Market
Amount Value
Hawaii Tax-Free Fund (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Hawaii State Housing Finance & Development,
Single Family Mortgage Purchase, Ser B, RB
5.850%, 07/01/17........................... $ 630 $ 618
Hawaii State Housing, Finance & Development,
Rental Housing System, Ser A, RB
5.700%, 07/01/18........................... 100 95
Hawaii State, Ser BZ, GO
6.000%, 10/01/12........................... 100 105
Hawaii State, Ser CJ, GO
6.250%, 01/01/15........................... 100 104
Honolulu City & County Mortgage, Smith Berentia
Project, Ser A, RB, FHA Insured
7.800%, 07/01/24........................... 100 109
Honolulu City & County, Ser A, GO
6.000%, 01/01/10........................... 150 158
Honolulu City & County, Ser A, Prerefunded @ 101,
GO
6.700%, 08/01/08........................... 270 302
Honolulu City & County, Waipahu Towers Project,
Ser A, RB
6.900%, 06/20/35........................... 200 204
Kauai County, Hawaii, Ser B, RB
5.900%, 02/01/13........................... 125 128
Maui County, Hawaii, GO
5.125%, 12/15/10........................... 100 96
Maui County, Hawaii, RB
2.125%, 12/15/12........................... 100 94
Total Hawaii.............................................. 3,810
Puerto Rico (10.3%)
Commonwealth of Puerto Rico, GO
5.750%, 07/01/24........................... 50 50
Commonwealth of Puerto Rico, RB, FSA Insured
6.000%, 07/01/22........................... 150 151
Puerto Rico Telephone Authority, GO, CGIC Insured
5.400%, 01/01/08........................... 100 101
Puerto Rico, Electric Power Authority, Ser N, RB
6.000%, 07/01/10........................... 150 152
Puerto Rico, Public Building Authority, Public
Education & Health Facilities, Ser R, RB
5.750%, 07/01/15........................... 100 100
Total Puerto Rico......................................... 554
Virgin Islands (2.8%)
Virgin Islands, Housing Finance Authority, Single
Family Project, GNMA Mortgage Backed Program, Ser
A, RB
6.500%, 03/01/05........................... 150 152
Total Virgin Islands...................................... 152
</TABLE>
<PAGE>
Statement of Net Assets Bishop Street Funds
May 31, 1995 Unaudited
<TABLE>
<CAPTION>
Face Market
Amount Value
Hawaii Tax-Free Fund (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Total Municipal Bonds
(Cost $4,573,972) .................................... $ 4,675
- --------------------------------------------------------------------------------
Total Investments (98.2%)
(Cost $5,197,431) $ 5,298
- --------------------------------------------------------------------------------
Other Assets and Liabilities (1.8%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities .......................... $ 99
- --------------------------------------------------------------------------------
Net Assets:
Fund share of Institutional Class A (unlimited
authorization--no par value) based on 220,094
outstanding shares of beneficial interest ................. $ 2,214
Fund share of Retail Class B (unlimited
authorization--no par value) based on 306,365
outstanding shares of beneficial interest ................. 3,072
Overdistributed Net Investment Income .......................
Accumulated Net Realized Gain on Investments ................ 11
Net Unrealized Appreciation of Investments .................. 100
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%) ................................. $ 5,397
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption
Price Per Share--Institutional Class A .................... $ 10.25
Net Asset Value, Redemption Price Per
Share--Retail Class B ..................................... $ 10.25
Maximum Offering Price Per Share--Retail Class B
(10.25/96.5%) ............................................. $ 10.62
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statement of Operations Bishop Street Funds
For the Period Ended May 31, 1995
<TABLE>
<CAPTION>
(in Thousands)
-----------------------------------
Money Market Hawaii Tax-Free
Fund(2) Fund(3)
- --------------------------------------------------------------------------------
<S> <C> <C>
Interest Income............................. $ 5,471 $ 55
- --------------------------------------------------------------------------------
Total investment income................. 5,471 55
- --------------------------------------------------------------------------------
Expenses:
Investment Advisor Fee.................... 177 4
Investment Advisor Fee Waiver............. (56) (4)
Management Fee............................ 177 2
Management Fee Waiver..................... -- (2)
Reimbursement by Investment Advisor....... -- 8
Custody Fees.............................. 44 --
Transfer Agent Fees....................... 10 9
Registration Fees......................... 29 2
Distribution Fee (1)...................... -- 2
Distribution Fee Waiver................... -- (1)
Pricing Fees.............................. 1 1
Insurance Fees............................ 3 --
Trustees Fees............................. 16 --
Printing Fees............................. 16 --
Legal Fees................................ 10 --
Audit Fees................................ 7 --
Miscellaneous Fees........................ -- --
Amortization of Deferred Organizational
Costs.................................... 9 2
- --------------------------------------------------------------------------------
Total Expenses.......................... 443 7
- --------------------------------------------------------------------------------
Net Investment Income....................... 5,028 48
- --------------------------------------------------------------------------------
Net Realized Gain on Investments............ 3 11
- --------------------------------------------------------------------------------
Change in Unrealized Appreciation on
Investments............................... -- 100
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on
Investments............................... 3 111
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting from
Operations................................ $ 5,031 $ 159
================================================================================
</TABLE>
Amounts designated as "__" are either $0 or have been rounded to $0.
(1) All distribution fees are incurred in the Retail class B
(2) Commenced operations on January 30, 1995
(3) Commenced operations on February 15, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets Bishop Street Funds
<TABLE>
<CAPTION>
(In Thousands)
------------------
Money Market
Fund
------------------
01/30/95(1)
to 05/31/95
- --------------------------------------------------------------------------------
<S> <C>
Investment Activities:
Net Investment Income................................. $ 5,028
Net Realized Gain on Investments...................... 3
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations........ 5,031
- --------------------------------------------------------------------------------
Distributions to Shareholders:
Net Investment Income:
Institutional Class A Shares........................ (4,990)
Retail Class B Shares............................... (3)
Capital Gains:
Institutional Class A Shares........................ ----
Retail Class B Shares............................... ----
- --------------------------------------------------------------------------------
Total Distributions............................... (4,993)
- --------------------------------------------------------------------------------
Change in Net Assets.................................... 38
- --------------------------------------------------------------------------------
Share Transactions:
Institutional Class A Shares:
Shares Issued....................................... 373,570
Shares Issued in Lieu of Cash Distributions......... 1
Shares Redeemed..................................... (122,274)
---------
Total Institutional Share Transactions............ 251,297
Retail Class B Shares:
Shares Issued....................................... 669
Shares Issued in Lieu of Cash Distributions......... 2
Shares Redeemed..................................... (58)
----
Total Investment Share Transactions............... 613
- --------------------------------------------------------------------------------
Net Increase in Net Assets From Share Transactions...... 251,910
- --------------------------------------------------------------------------------
Total Increase in Net Assets........................ 251,948
- --------------------------------------------------------------------------------
Net Assets:
Beginning of Period................................... ----
- --------------------------------------------------------------------------------
End of Period......................................... $ 251,948
- --------------------------------------------------------------------------------
</TABLE>
Amounts designated as "----" are either $0 or have been rounded to $0.
(1) Commenced operations on January 30, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of Changes in Net Assets Bishop Street Funds
<TABLE>
<CAPTION>
(In Thousands)
----------------
Hawaii Tax-Free
Fund
----------------
02/15/95(1)
to 05/31/95
- --------------------------------------------------------------------------------
<S> <C>
Investment Activities
Net Investment Income..................................... $ 48
Net Realized Gain on Investments.......................... 11
change in Unrealized Appreciation on Investments.......... 100
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations............ 159
- --------------------------------------------------------------------------------
Distributions to Shareholders
Net Investment Income
Institutional Class A Shares............................ (17)
Retail Class B Shares................................... (31)
Capital Gains:
Institutional Class A Shares............................ --
Retail Class B Shares................................... --
- --------------------------------------------------------------------------------
Total Distributions................................... (48)
- --------------------------------------------------------------------------------
Change in Net Assets........................................ 111
- --------------------------------------------------------------------------------
Share Transactions:
Institutional Class A Shares:
Shares issued........................................... 2,336
Shares issued in Lieu of Cash Distributions............. 3
Shares Redeemed......................................... (125)
------
Total Institutional Share Transactions................ 2,214
Retail Class B Shares:
Shares issued........................................... 3,196
Shares issued in Lieu of Cash Distributions............. 13
Shares Redeemed......................................... (137)
------
Total Investment Share Transactions................... 3,072
- --------------------------------------------------------------------------------
Net Increase in Net Assets From Share Transactions.......... 5,286
- --------------------------------------------------------------------------------
Total Increase in Net Assets............................ 5,397
- --------------------------------------------------------------------------------
Net Assets:
Beginning of Period....................................... --
- --------------------------------------------------------------------------------
End of Period............................................. $ 5,397
- --------------------------------------------------------------------------------
Shares issued and Redeemed:
Institutional Class A Shares:
issued.................................................. 232
issued in Lieu of Cash Distributions.................... --
Redeemed................................................ (12)
-----
Total Institutional Share Transactions................ 220
Retail Class B Shares:
issued.................................................. 319
issued in Lieu of Cash Distributions.................... 1
Redeemed................................................ (14)
-----
Total Investment Share Transactions................... 306
- --------------------------------------------------------------------------------
Net Increase in Share Transactions 526
================================================================================
</TABLE>
Amounts designated as "__" are either $0 or have been rounded to $0.
(1) Commenced operations on February 15, 1995
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Agencies Distributions
Net -------------------------- --------------------
Asset Net Realized Net Net
Value Net and Unrealized Net Asset Value Assets End
Beginning Investment Gain (Loss) Investment Capital End Total of Period
of Period Income on Investments Income Gains of Period Return [000]
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class
For the period ended May 31,
1995(1) 1.00 0.019 -- (0.019) -- 1.00 5.84% 251,335
Investment Class
For the period ended May 31,
1985(2) 1.00 0.016 -- (0.016) -- 1.00 5.73% 613
- ------------------------------------------------------------------------------------------------------------------------------------
Hawaii Tax-Free Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Class
for the period ended May 31,
1995(3) 10.00 0.138 0.251 (0.139) -- 10.25 14.45% 2,256
Investment Class
for the period ended May 31,
1985(4) 10.00 0.138 0.250 (0.138) -- 10.25 14.25% 3,141
<CAPTION>
Ratio of Ratio of
Expenses Net Investment
Ratio to Average Ratio of Income
of Expenses Net Assets Net Investment to Average
to Average Excluding Income Net Assets Portfolio
Net Fee Waivers and to Average Excluding Turnover
Assets Reimbursements Net Assets Fee Waivers Rate
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Money Market Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional Class
For the period ended May 31,
1995(1) 0.50% 0.66% 5.64% 5.48% --
Investment Class
For the period ended May 31,
1985(2) 0.60% 0.76% 5.57% 5.41% --
- ---------------------------------------------------------------------------------------------------------------
Hawaii Tax-Free Fund
- ---------------------------------------------------------------------------------------------------------------
Institutional Class
for the period ended May 31,
1995(3) 0.65% 1.20% 4.87% 4.32% 54.68%
Investment Class
for the period ended May 31,
1985(4) 0.69% 1.24% 4.69% 4.14% 54.68%
</TABLE>
Annualized
(1) Commenced operations on January 30, 1995
(2) Commenced operations on February 17, 1995
(3) Commenced operations on February 16, 1995
(4) Commenced operations on February 15, 1995
<PAGE>
Notes to Financial Statements Bishop Street Funds
May 31, 1995
1. Organization
The Bishop Street Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Bishop Street Funds presently consists of a series or four funds ( the "Funds")
which includes the High Grade Income Fund, Hawaii Tax-Free Fund, Equity Fund and
the Money Market Fund. The Bishop Street Funds Declaration of Trust permits the
Trust to offer separate portfolios of shares and different classes of each
portfolio. The assets of each Fund are segregated, and a shareholder's interest
is limited to the Fund in which shares are held. Each Fund with the exception of
the High Grade Income Fund and Equity Fund have commenced operation prior to May
31, 1995. This report pertains only to those in operation as of May 31, 1995.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Trust.
Security Valuation - Investment securities held by the Money Market Fund are
stated at amortized cost which approximates market value. Under this valuation
method purchase discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
Debt obligations exceeding sixty days to maturity for which market quotations
are readily available are valued at the most recently quoted bid price. Debt
obligations with sixty days or less remaining until maturity may be valued at
their amortized cost. Restricted securities for which quotations are not readily
available are valued at fair value using methods determined in good faith under
general Trustee supervision.
Security Transactions and Investment Income - Security transactions are
accounted for on the date the security is purchased or sold (trade date). Costs
used in determining net realized capital gains and losses on the sale of
securities are those of the specific securities sold adjusted for the accretion
and amortization of the purchase discounts and premiums during the respective
holding periods. Interest income is recorded on the accrual basis.
Discounts and Premiums - Discounts and premiums are accreted or amortized over
the life of each security and are recorded as interest income for each of the
Funds using a method which approximates the effective interest method.
Net Assets Value Per Share - The net asset value per share is calculated on each
business day for each Fund. In general, it is computed by dividing the assets of
each Fund, less its liabilities by the number of outstanding shares for each
Fund.
Repurchase Agreements - Securities pledged as collateral for Repurchase
Agreements are held by the custodian bank until the respective agreements
mature. Provisions of repurchase agreements and procedures adopted by the
Adviser ensure that the market value of the collateral is sufficient in the
event of default and by the counterparty. If the counterparty defaults and the
value for the collateral declines or if the counterparty enters an insolvency
proceeding realization of the collateral by the Fund may be delayed or limited.
Classes - Class specific expenses are borne by that class. Income, non class
specific expenses and realized/unrealized gains and losses are allocated to the
respective classes on the basis of the relative daily net assets.
----------
<PAGE>
Notes to Financial Statements Bishop Street Funds
May 31, 1995
Expenses - Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses of the Trust are prorated to
the Funds on the basis of relative net asset value.
Distributions to Shareholders - Distributions from net investment income are
declared daily and paid on a monthly basis for the Hawaii Tax-Free Fund and the
Money market Fund. Any net realized capital gains will be distributed at least
annually for all Funds.
Federal Income Taxes - It is each Fund's intention to continue to qualify as a
regulated investment company for Federal income tax purposes and distribute all
of its taxable income and net capital gains. Accordingly, no provision for
Federal income taxes is required.
3. Organizational Costs and Transactions with Affiliates
Organizational costs of approximately $121,239 have been capitalized by the
Funds and are being amortized over sixty months commencing with operations. In
the event any of the initial shares are redeemed by any holder thereof during
the period that the fund is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Fund will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of the redemption.
4. Investment Advisory Agreement
Pursuant to an investment advisory agreement dated January 27, 1995. Investment
advisory services are provided to the Funds by First Hawaiian Bank (the
"Adviser"). The Adviser is entitled to receive an annual fee of 0.35% of the
average daily net assets of the Hawaii Tax-Free Fund and 0.30% of the average
daily net assets of the Money Market Fund. The Advisor has voluntarily agreed,
for an indefinite period of time to waive all or a portion of its fee in the
Hawaii Tax-Free and Money Market Fund in order to limit the operating expenses
of the Funds to .65% and .50% respectively.
Wellington Management Company (The "Sub-Advisor") serve as the investment sub-
advisor for the Money Market Fund pursuant to a sub-advisory agreement. The Sub-
Advisor is entitled to receive from the Advisor a fee, computed daily and paid
monthly, at the annual rate of .075% of the average daily net assets of the Fund
up to $500 million and .020% of the average daily net assets of the Fund in
excess of $500 million.
5. Administrative, Transfer Agent and Distribution Services
Pursuant to an administration agreement dated January 27, 1995, (the
"Agreement") SEI Financial Management Corporation ("SFM"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), acts as the Trust's Administrator. Under
the terms of the Agreement, SFM is entitled to receive an annual fee of 0.20% of
the average daily net assets of each Fund. SFM has voluntarily agreed to waive a
portion of its fee for the Hawaii Tax-Free Fund in order to limit operating
expenses.
Pursuant to an agreement dated January 30, 1995, DST Systems, Inc. ("DST") acts
as the Transfer Agent of the Trust. As such, DST provides transfer agency,
dividend disbursing and shareholder servicing for the Trust.
<PAGE>
Notes to Financial Statements Bishop Street Funds
May 31, 1995
SEI Financial Services Company ("SFS"), a wholly owned subsidiary of SEI acts as
the Trust's Distributor pursuant to a distribution agreement dated January 27,
1995. The Retail Class B shares of the Trust have a Rule 12b-1 Distribution Plan
under which such shares of the Funds bear distribution expenses and related
service fees at the annual rate of 10% and .25% of their average daily net
assets for the Money Market Fund and Hawaii Tax-Free Fund respectively. SFS has
voluntarily agreed to waive a portion of the distribution charge for the Hawaii
Tax-Free Fund in order to limit operating expenses for the Retail Class B
shares.
Certain officers of the Trust are also officers of the Administrator. Such
officers are paid no fees by the Trust.
6. Investment Transactions
The cost of security purchases and the proceeds from the sale of securities
other than temporary cash investments for the period ended May 31, 1995, are
presented below for the Funds. On May 31, 1995 the total cost of securities and
the net realized gains and losses on securities sold for federal Income tax
purposes was not materially different from amounts reported for financial
reporting purposes.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fund Investment Transactions (000)
Hawaii Tax-Free Fund
--------------------
<S> <C>
Purchaser
U.S. Government Securities - 0 -
Other 6,275,330
Sales
U.S. Government Securities - 0 -
Other 1,711,751
</TABLE>
The aggregate unrealized appreciation/depreciation on securities at May 31, 1995
for the Hawaii Tax-Free Fund is as follows:
<TABLE>
<S> <C>
Gross Unrealized Appreciation 176,009
Gross Unrealized Depreciation (75,537)
Net Unrealized Appreciation 100,472
</TABLE>
7. Concentration of Credit Risk
The Hawaii Tax-Free Fund invests primarily in debt instruments in the state of
Hawaii. The issuers ability to meet their obligations may be affected by
economic developments in that state. At May 31, 1995, the percentage of the Fund
investments by each revenue source was as follows:
<TABLE>
<CAPTION>
Hawaii Tax-Free Fund
--------------------
<S> <C>
Cash Equivalents 12%
General Obligation Bonds 26%
Hospital Bonds 8%
Housing Bonds 22%
Public Facility Bonds 5%
Transportation Bonds 12%
Utility Bonds 10%
Other Revenue Bonds 5%
----
100%
----
</TABLE>
The ratings of long-term debt holdings as a percentage of total value of
investments at May 31, 1995 are as follows:
<PAGE>
Notes to Financial Statements Bishop Street Funds
May 31, 1995
<TABLE>
<CAPTION>
Standard & Poor's Rating Hawaii Tax-Free Fund
- ------------------------ --------------------
<S> <C>
AAA 43%
AA+ -
AA 4%
AA- 3%
A+ 2%
A 20%
A- 2%
BBB+ -
BBB -
BBB- -
Not Rated 5%
--
100%
----
</TABLE>
----------
<PAGE>
BISHOP STREET FUNDS
PART C: OTHER INFORMATION
Post-Effective Amendment No. 2
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Unaudited Financial Statements for the period ending May 31, 1995 for the
Money Market Portfolio and Hawaii Tax Free Portfolio
Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Additional Exhibits
1 Agreement and Declaration of Trust of the Registrant (incorporated by
reference to Registration Statement filed on June 20, 1994)
1(a) Form of Amended and Restated Agreement and Declaration of Trust
(incorporated by reference to Pre-Effective Amendment No. 1 filed on
September 7, 1994)
2 By-Laws of the Registrant (incorporated by reference to Registration
Statement filed on June 20, 1994)
2(a) Amended By-Laws of the Registrant (incorporated by reference to Pre-
Effective Amendment No. 1 filed on September 7, 1994)
5(a) Form of Investment Advisory Agreement between the Registrant and
First Hawaiian Bank (incorporated by reference to Pre-Effective
Amendment No. 1 filed on September 7, 1994)
5(b) Form of Investment Sub-Advisory Agreement between Registrant, First
Hawaiian Bank and Wellington Management Company (incorporated by
reference to Pre-Effective Amendment No. 1 filed on September 7,
1994)
6 Form of Distribution Agreement between the Registrant and SEI
Financial Services Company (incorporated by reference to Pre-
Effective Amendment No. 1 filed on September 7, 1994)
8 Form of Custodian Agreement between the Registrant and Chemical Bank,
N.A. (incorporated by reference to Pre-Effective Amendment No. 1
filed on September 7, 1994)
9(a) Form of Administration Agreement between the Registrant and SEI
Financial Management Corporation (incorporated by reference to Pre-
Effective Amendment No. 1 filed on September 7, 1994)
9(b) Form of Transfer Agent Agreement between the Registrant and
Supervised Service Company (incorporated by reference to Pre-
Effective Amendment No. 1 filed on September 7, 1994)
C-1
<PAGE>
10 Opinion and Consent of Counsel (incorporated by reference to Pre-
Effective Amendment No. 1 filed on September 7, 1994)
11 Consent of Independent Public Accountants filed herewith
15 Form of 12b-1 Plan (incorporated by reference to Pre-Effective
Amendment No. 1 filed on September 7, 1994)
16 Performance Calculations (incorporated by reference to Pre-Effective
Amendment No. 1 filed on September 7, 1994)
18 Rule 18f-3 Plan (incorporated by reference to Post-Effective
Amendment No. 1 filed July 31, 1995)
Item 25. Persons Controlled by or under Common Control with Registrant
See the Prospectuses and the Statement of Additional Information regarding
the Registrant's control relationships. The Administrator is a subsidiary of
SEI Corporation, which also controls the distributor of the Registrant, SEI
Financial Services Company, other corporations engaged in providing various
financial and record keeping services, primarily to bank trust departments,
pension plan sponsors, and investment managers.
Item 26. Number of Holders of Securities
The number of record holders of each class as of November 24, 1995:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
INSTITUTIONAL CLASS A
<S> <C>
Bishop Street High Grade Income Fund 0
Bishop Street Hawaii Tax-Free Fund 7
Bishop Street Equity Fund 0
Bishop Street Money Market Fund 8
Bishop Street Treasury Money Market Fund 0
RETAIL CLASS B
Bishop Street High Grade Income Fund 0
Bishop Street Hawaii Tax-Free Fund 261
Bishop Street Equity Fund 0
Bishop Street Money Market Fund 58
Bishop Street Treasury Money Market Fund 0
</TABLE>
C-2
<PAGE>
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification liabilities arising under the Securities Act of 1933, as
amended, may be permitted to trustees, directors, officers and controlling
persons of the Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 28. Business and Other Connections of Investment Adviser and Investment
Sub-Adviser:
Other business, profession, vocation, or employment of a substantial
nature in which each director or principal executive officer of the Adviser is
or has been, at any time during the last two fiscal years, engaged for his own
account or in the capacity of director, officer, employee, partner or trustee
are as follows:
<TABLE>
<CAPTION>
FIRST HAWAIIAN BANK
<S> <C> <C>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
- --------------------------- ------------------------ -----------------------
John W.A. Buyers C. Brewer & Co., Ltd. Chairman and Chief
Director Executive Officer
Albert C.K. Chun-Hoon -- Orthopedic Surgeon
Director
John C. Couch Alexander & Baldwin, President and Chief
Director Inc. Executive Officer
Walter A. Dods, Jr. First Hawaiian, Inc. Chairman and Chief
Director, Chairman and Executive Officer
Chief Executive Officer
</TABLE>
C-3
<PAGE>
<TABLE>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
- --------------------------- ------------------------ -----------------------
<S> <C> <C>
Dr. Julia Ann Frohlich Blood Bank of Hawaii President
Director
Paul Mullin Ganley Estate of S.M. Damon Trustee
Director Carlsmith, Ball, Partner
Wichman,
Murray, Case & Ichiki
David M. Haig Estate of S.M. Damon Trustee
Director
Warren H. Haruki GTE Hawaiian Tel President
Director
Howard K. Hiroki Coopers & Lybrand Partner (retired)
Director
John A. Hoag First Hawaiian, Inc. President
Director, President
Glenn A. Kaya Gem of Hawaii, Inc. President
Director
Dr. Richard R. Kelley Outrigger Hotels Hawaii Chairman and Chief
Director Executive Officer
Bert T. Kobayashi, Jr. Kobayashi, Sugita & Goda Principal
Director
Dr. Richard T. Mamiya Richard Mamiya, M.D., Heart Surgeon
Director Inc.
Dr. Fujio Matsuda The Research Corp. of Executive Director
Director the University of Hawaii
Dr. Roderick F. McPhee Punahou School President
Director
Robert J. Pfeiffer Alexander & Baldwin, Chairman of the Board
Director Inc.
Hugh R. Pingree -- Retired
Director
</TABLE>
C-4
<PAGE>
<TABLE>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
- --------------------------- ------------------------ -----------------------
<S> <C> <C>
David W. Pratt Grove Farm Company, Inc. President and Chief
Director Executive Officer
Robert G. Reed, III Pacific Resources, Inc. Chairman, President
Director and Chief Executive
Officer (retired)
George P. Shea, Jr. First Insurance Company Chairman, President
Director of Hawaii, Ltd. and Chief Executive
Officer
R. Dwayne Steele Grace Pacific Chairman
Director Corporation
Laurence Vogel -- Royal Danish Consul
Director
Gen. Fred C. Weyand Estate of S.M. Damon Trustee
Director
James C. Wo Bojim Investments Chairman and Chief
Director Executive Officer
BJ Management Corp. Vice President and
Treasurer
Robert C. Wo BJ Management Corp. President and Secretary
Director C.S. Wo & Sons, Ltd. Chairman
Lily K. Yao Pioneer Federal Savings President and Chief
Director Bank Executive Officer
Howard H. Karr -- --
Vice Chairman and Chief
Financial Officer
Philip H. Ching -- --
Vice Chairman
Donald G. Horner -- --
Executive Vice President
Kenneth J. Bentley -- --
Executive Vice President
</TABLE>
C-5
<PAGE>
<TABLE>
Name and Position Name of Connection with
with Investment Adviser Other Company Other Company
- --------------------------- ------------------------ -----------------------
<S> <C> <C>
Anthony R. Guerrero, Jr. -- --
Executive Vice President
Norwood W. Pope -- --
Executive Vice President
Harriet M. Aoki -- --
Senior Vice President
Thomas P. Huber -- --
Senior Vice President and
General Counsel
Gary K. Kai -- --
Senior Vice President
</TABLE>
WELLINGTON MANAGEMENT COMPANY
The list required by this Item 28 of officers and directors of Wellington
Management, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV, filed by Wellington Management pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-15908).
Item 29. Principal Underwriter:
- -------------------------------
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing securities of the
Registrant also acts as a principal underwriter, distributor or investment
adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"), acts as
distributor for:
<TABLE>
<CAPTION>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Compass Capital Group March 8, 1991
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C>
FFB Lexicon Funds October 18, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis/SM/ Funds August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
Inventor Funds, Inc. August 1, 1994
The Achievement Funds Trust December 27, 1994
Insurance Investment Products Trust December 30, 1994
CrestFunds, Inc. March 1, 1995
Conestoga Family of Funds May 1, 1995
STI Classic Variable Trust August 18, 1995
</TABLE>
SFS provides numerous financial services to investment managers, pension
plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in
the answer to Item 21 of Part B. Unless otherwise noted, the business
address of each director or officer is 680 East Swedesford Road, Wayne,
Pennsylvania 19087.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief --
Executive Officer
Henry H. Greer Director, President & Chief --
Operating Officer
Carmen V. Romeo Director, Executive Vice Treasurer
President & Treasurer
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President --
Charles A. Marsh Executive Vice --
President-Capital Resources
Division
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
David G. Lee Senior Vice President President & Chief
Executive Officer
William Madden Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ---------------- ---------------
<S> <C> <C>
Hartland J. McKeown Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, Vice President &
General Counsel & Assistant
Secretary Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Crudup Managing Director --
Vic Galef Managing Director --
Kim Kirk Managing Director --
John Krzeminski Managing Director --
Carolyn McLaurin Managing Director --
Barbara Moore Managing Director --
Donald Pepin Managing Director --
Mark Samuels Managing Director --
Wayne M. Withrow Managing Director --
Mick Duncan Team Leader --
Robert Ludwig Team Leader --
Vicki Malloy Team Leader --
Robert Aller Vice President --
C. Tony Baker Vice President --
Steve Bendinelli Vice President --
Cris Brookmyer Vice President & Controller --
Gordon W. Carpenter Vice President --
Robert B. Carroll Vice President & Assistant Vice President &
Secretary Assistant Secretary
Todd Cipperman Vice President & Assistant
Secretary --
Ed Daly Vice President --
Jeff Drennen Vice President --
Lucinda Duncalfe Vice President --
Kathy Heilig Vice President --
Larry Hutchison Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Donald H. Korytowski Vice President --
Jack May Vice President --
Sandra K. Orlow Vice President & Assistant Vice President &
Secretary Assistant Secretary
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Vice President &
Secretary Assistant Secretary
William Zawaski Vice President --
James Dougherty Director of Brokerage --
Services
</TABLE>
C-8
<PAGE>
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records will be maintained
at the offices of Registrant's Custodian:
Chemical Bank
4 New York Plaza
New York, New York 10004
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D);
(4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and
records are maintained at the offices of Registrant's Administrator:
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, Pennsylvania 19087
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Adviser and Sub-Adviser:
First Hawaiian Bank Wellington Management Company
1132 Bishop Street 75 State Street
17th Floor Boston, Massachusetts 02109
Honolulu, Hawaii 96813
Item 31. Management Services: None.
Item 32. Undertakings:
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Trustees of their desire to communicate with Shareholders of the Trust,
the Trustees will inform such Shareholders as to the approximate number of
Shareholders of record and the approximate costs of mailing or afford said
Shareholders access to a list of Shareholders.
Registrant hereby undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Trustee(s) when requested in
writing to do
C-9
<PAGE>
so by the holders of at least 10% of Registrant's outstanding shares and in
connection with such meetings to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to Shareholder communications.
Registrant hereby undertakes to file a post-effective amendment, including
financial statements which need not be audited, within 4-6 months from the
effective date of this Post-Effective Amendment No. 2.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment No. 2 to
Registration Statement No. 33-80514 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wayne, Commonwealth of
Pennsylvania on the 30th day of November, 1995.
By: /s/ David G. Lee
---------------------------------
David G. Lee,
President and Chief
Executive Officer
ATTEST:
/s/ Jeffrey A. Cohen
- ------------------------
Jeffrey A. Cohen,
Controller and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacity on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------- Trustee November 30, 1995
Martin Anderson
- ------------------------- Trustee November 30, 1995
Philip H. Ching
- ------------------------- Trustee November 30, 1995
Shunichi Kimura
- ------------------------- Trustee November 30, 1995
William S. Richardson
- ------------------------- Trustee November 30, 1995
Manuel R. Sylvester
- ------------------------- Trustee November 30, 1995
Joyce S. Tsunoda
/s/ David G. Lee President and November 30, 1995
- ------------------------- Chief Executive Officer
David G. Lee
/s/ Jeffrey A. Cohen Controller and Chief November 30, 1995
- ------------------------- Financial Officer
Jeffrey A. Cohen
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
No. 2 to Registration Statement No. 33-80514 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Honolulu, State of Hawaii
on the 30th day of November, 1995.
By:
-----------------------------
David G. Lee,
President and Chief
Executive Officer
ATTEST:
- ------------------------
Jeffrey A. Cohen,
Controller and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacity on the
dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Martin Anderson Trustee November 30, 1995
- ---------------------------
Martin Anderson
/s/ Philip H. Ching Trustee November 30, 1995
- ---------------------------
Philip H. Ching
Trustee November 30, 1995
- ---------------------------
Shunichi Kimura
/s/ William S. Richardson Trustee November 30, 1995
- ---------------------------
William S. Richardson
/s/ Manuel R. Sylvester Trustee November 30, 1995
- ---------------------------
Manuel R. Sylvester
/s/ Joyce S. Tsunoda Trustee November 30, 1995
- ---------------------------
Joyce S. Tsunoda
- --------------------------- President and November 30, 1995
David G. Lee Chief Executive Officer
- --------------------------- Controller and Chief November 30, 1995
Jeffrey A. Cohen Financial Officer
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
Name Exhibit
- ---- -------
<S> <C>
Agreement and Declaration of Trust of the EX-99.B1
Registrant, dated May 25, 1994 (incorporated by reference
to Registration Statement as filed on June 20, 1994).
Form of Amended and Restated Agreement and Declaration of EX-99.B1(a)
Trust (incorporated by reference to Pre-Effective Amendment
No. 1, filed on September 7, 1994).
By-Laws of the Registrant (incorporated by reference EX-99.B2
to Registration Statement as filed on June 20, 1994).
Amended By-Laws of the Registrant (incorporated by reference EX-99.B2(a)
to Pre-Effective Amendment No. 1, filed on September 7, 1994).
Form of Investment Advisory Agreement between the EX-99.B5(a)
Registrant and First Hawaiian Bank (incorporated by
reference to Pre-Effective Amendment No. 1, filed on September
7, 1994).
Form of Investment Sub-Advisory Agreement between EX-99.B5(b)
Registrant, First Hawaiian Bank and Wellington
Management Company (incorporated by reference to
Pre-Effective Amendment No. 1, filed on September
7, 1994).
Form of Distribution Agreement between the EX-99.B6
Registrant and SEI Financial Services Company
(incorporated by reference to Pre-Effective Amendment
No. 1, filed on September 7, 1994).
Form of Custodian Agreement between the Registrant EX-99.B8
and Chemical Bank, N.A. (incorporated by reference to
Pre-Effective Amendment No. 1, filed on September 7, 1994).
Form of Administration Agreement between the EX-99.B9(a)
Registrant and SEI Financial Management Corporation
(incorporated by reference to Pre-Effective Amendment
No. 1, filed on September 7, 1994).
Form of Transfer Agent Agreement between the EX-99.B9(b)
Registrant and Supervised Service Company (incorporated
by reference to Pre-Effective Amendment No. 1, filed
on September 7, 1994).
Form of Opinion and Consent of Counsel (incorporated EX-99.B10
by reference to Pre-Effective Amendment No. 1, filed
on September 7, 1994).
Consent of Independent Public Accountants filed herewith. EX-99.B11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Form of 12b-1 Plan (incorporated by reference to EX-99.B15
Pre-Effective Amendment No. 1, filed on September 7, 1994).
Performance Calculations (incorporated by reference EX-99.B16
to Pre-Effective Amendment No. 1, filed on September 7,
1994).
Rule 18f-3 Plan (incorporated by reference to Post Effective EX-99.B18
Amendment No. 1, filed July 31, 1995.
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to the Registration Statement under the Securities Act of 1933 on Form
N-1A (33-80514) of our report dated September 2, 1994 on our audit of the
statement of assets and liabilities at August 31, 1994 of the Bishop Street
Funds. We also consent to the reference to our firm under the caption "Counsel
and Independent Accountants."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 4, 1995
