<PAGE> 1
A Family of Mutual Funds
advised by First Hawaiian Bank
INVESTMENT ADVISER: BISHOP
First Hawaiian Bank STREET
FUNDS
DISTRIBUTOR:
SEI Financial Services Company
- --------------------------------------------------------------------------------
Annual Report
December 31, 1995
MONEY MARKET FUND
HAWAII MUNICIPAL BOND FUND
This information must be preceded or
accompanied by a current prospectus for
each Fund described.
BSF-F-006-01
<PAGE> 2
BISHOP STREET FUNDS
LETTER TO SHAREHOLDERS
Dear Shareholders:
We are pleased to report that the Bishop Street Funds' first year of operation
was one with many significant accomplishments. Following a successful launch --
which included the creation of a Money Market Fund and a Hawaii Tax-Free Fund
with both institutional and retail classes of shares -- the Bishop Street
Family of Funds grew to $324 million by December 31, 1995. With what we believe
to be a strong foundation built during the first year of operation, the Funds
are positioned to continue to grow and serve the investment needs of our
shareholders in 1996.
The first major initiative of the new year -- which was approved at a special
shareholders meeting at the end of January 1996 -- is the relaxation of certain
investment limitations of the Hawaii Tax-Free Fund. This change allows the Fund
to have increased flexibility in diversifying the portfolio with a greater
selection of Hawaii issues. To reflect this change, the Hawaii Tax-Free has
been renamed the Hawaii Municipal Bond Fund.
The Bishop Street Funds' commitment to expand the complex and to provide
additional investment opportunities to its shareholders is reflected in another
major initiative for 1996. By mid-year, we plan to launch a Treasury Money
Market Fund designed to provide a suitable investment option for shareholders
seeking a highly liquid investment vehicle primarily composed of U.S.
Government Treasuries. We believe that both the changes in the Hawaii Municipal
Bond Fund and the introduction of the new Treasury Money Market Fund are
indicative of Bishop Street's commitment to provide high quality investment
products and services to our shareholders.
We encourage you to read this entire report carefully. It includes a letter
from our Investment Adviser which recaps events in the national and local
financial markets for the past twelve months and provides an outlook for the
year ahead. In addition, you will find a discussion of and financial highlights
for each of The Bishop Street Funds during the twelve months ending December
31, 1995. If you have any questions about this report or the Bishop Street
Funds, we invite you to call our Investors' Service area at 1-800-262-9565.
We thank you for the trust you have placed in the Bishop Street Funds and look
forward to providing you with sound investment management and quality service.
Sincerely,
[SIG]
Robert A. Alm
Senior Vice President
First Hawaiian Bank
Investment Adviser
<PAGE> 3
BISHOP STREET FUNDS
MONEY MARKET FUND
INVESTMENT ADVISOR'S REPORT
For much of 1995, long-term interest rates fell sharply while short-term
rates remained flat. The Federal Reserve Board, which determines short-term
rates, was reluctant to ease the money supply too quickly and trigger inflation
expectations. It had just doubled short-term rates in a twelve-month period to
slow down an economy that was surging. As a result, money market fund yields
were extremely high during much of the year, and often provided higher yields
than intermediate bond funds.
Finally, in July of 1995, the Fed began to trim interest rates as the
economy showed clear signs of sluggishness. The cut in rates -- 0.25% -- was
not enough to stimulate a buoyant Christmas selling season. As a result, the
Fed cut interest rates in mid-December and early February 1996 in an attempt to
boost economic growth. Since last summer, the fed funds rate has been cut a
total of 0.75%. Although short-term interest rates have fallen in recent
months, money market funds continue to offer attractive yields in relation to
the rate of inflation.
Because the U.S. economy continues to be weak, we expect the Federal
Reserve Board to continue to lower interest rates in 1996. As a result, we
expect the yields on money market funds to come down gradually during this
year.
MANAGER'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
OBJECTIVE
The investment objective of the Money Market Fund is to preserve principal
and maintain a high degree of liquidity while providing current income. To
accomplish this objective, the Fund invests primarily in high quality
commercial paper, bank certificates of deposit and U.S. Treasury obligations.
STRATEGY
As interest rates tended downward in 1995, we attempted to extend the
average maturity of the fund to the 50-60 day range, up from the 30-40 day
range early in the year. By doing so, we were able to lock in the higher yields
that were available prior to the rate decline.
In addition, we purchased a higher percentage of commercial paper in order
to obtain anywhere from 0.10% to 0.30% more yield than U.S. Treasury bills. The
Fund's portfolio of commercial paper includes such blue-chip names as Chase
Manhattan, Ford Motor Credit and Sears Roebuck Acceptance. On December 31,
1995, 58.3% of the portfolio was invested in commercial paper.
ANALYSIS
The Money Market Fund commenced operations on January 30, 1995. On the
following day the Federal Reserve Board raised short-term rates for the last
time. For the eleven months ending December 31, 1995, the Money Market Fund
Institutional Class A provided a total return of 5.67% slightly less than the
Donoghue benchmark index of 5.80%. Aiding the Fund's performance was its
longer-than-average maturity, permitting it to maintain higher yields for a
longer period of time in a declining interest rate environment.
<PAGE> 4
HAWAII MUNICIPAL BOND FUND
INVESTMENT ADVISOR'S REPORT
Municipal bonds continue to provide significantly greater yields on an
after-tax basis when compared to U.S. Treasuries and other taxable securities.
During most of 1995, municipals were unusually attractive as investors
expressed concern over the ramifications of tax reform legislation. Normally,
tax-free bonds offer 75% to 80% of the U.S. Treasury yield. However, much of
last year, they yielded about 90% of Treasuries. Toward the end of 1995, market
analysts' fears of any dramatic tax reform legislation affecting municipals
abated, and the muni market outperformed the Treasury market.
The tax issue resurfaced in early 1996 during the presidential election
season. The "flat" tax received a tremendous amount of attention, appearing on
the covers of Time and Newsweek in mid-January. If enacted, a flat tax could
reduce or eliminate the tax paid on competing investments such as interest on
U.S. Treasuries. Thus, municipal bonds would no longer enjoy a relative tax
advantage over other investments. However, the political obstacles to enacting
such a tax system would be considerable.
Another factor affecting municipal bonds was the direction of interest
rates. Due to the downward trend in interest rates during 1995, the Hawaii
Municipal Bond Fund's unit share price appreciated. A modest inflation rate of
2.5% and a steady but non-explosive rate of economic growth allowed the Federal
Reserve Board to lower interest rates 0.75% since July. In general, falling
interest rates benefit fixed income securities.
The State of Hawaii's economy has been slow to emerge from recession, but
there are encouraging signs. Tourism, the state's major industry, is slowly
rebounding. In addition, the state has taken some steps to reduce expenditures
and address budget imbalances.
<PAGE> 5
BISHOP STREET FUNDS
HAWAII MUNICIPAL BOND FUND
MANAGER'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
OBJECTIVES
The Hawaii Municipal Bond Fund seeks to provide high current income that
is exempt from Federal and State of Hawaii income taxes. It does so by
investing primarily in bonds and notes issued by the State of Hawaii, its
agencies, instrumentalities and political sub-divisions. The Fund invests
primarily in bonds and notes rated at least BBB by Standard & Poor's
Corporation or Baa by Moody's Investor Service.
STRATEGY
The primary strategy of the Fund is to maintain a high quality portfolio
which will produce an attractive and dependable after-tax income stream. In
achieving this goal, we:
o Maintain a very high quality portfolio. On December 31, 1995, 79% of the
bond holdings were rated either AAA or AA.
o Maximize diversification. Our strategy is to remain broadly diversified
in such sectors as transportation, education, health care and utilities
-- as well as general obligations of the State. For a list of securities
in the Fund, please see the Statement of Net Assets for the Hawaii
Municipal Bond Fund.
o Use a combination of high coupon premium issues and discount
non-callable bonds. Premium issues are less volatile in a bear market
when interest rates are rising. In contrast, noncallable discount bonds
perform very well in a bond market rally.
ANALYSIS
The Hawaii Municipal Bond Fund, was launched on February 15, 1995, but
wasn't fully invested until October 1 due market conditions. For the first full
quarter in which the fund was fully invested, it produced a total return of
4.42%. In contrast, the Lehman Brothers Municipal Bond Fund Index produced a
total return of 3.41% for the fourth quarter. A survey of our peer group by
Lipper Analytical Services Inc. indicated that the Hawaiian Municipal Debt
Funds Average produced a total return of 4.52% for the same period.
<PAGE> 6
On December 31, 1995, the Hawaii Municipal Bond Fund was yielding 5.24%.
For an individual in the highest combined federal and state income tax bracket,
this yield translates into a taxable equivalent yield of 9.64%. This
information is based on a hypothetical illustration and is not representative
of any investment securities. Few taxable fixed income investments generate
such a high return today, particularly with the high credit quality of a
municipal bond portfolio.
The Fund was launched during an extremely challenging market environment.
Issuance of Hawaii municipal bonds was down dramatically from 1994. Prior to
the fourth quarter of 1995, the scarcity of issues made it challenging to stay
fully invested. Fortunately, there are several bond issues scheduled for the
first half of 1996, and we expect to have the opportunity to further diversify
the portfolio while maintaining its excellent credit quality.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE BISHOP STREET HAWAII MUNICIPAL
BOND FUND, INSTITUTIONAL CLASS A, VERSUS THE LEHMAN
BROTHERS MUNICIPAL BOND FUND, AND THE LIPPER
HAWAIIAN MUNICIPAL DEBT FUNDS AVERAGE.
__ Lehman Brothers Municipal Bond Fund
-- Lipper Hawaiian Municipal Debt Funds Average
== Bishop Street Hawaii Municipal Bond Fund, Institutional Class A
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
Initial Investment Date 2/28/95 Dec-95
- --------------------------------------------------------------- -------
<S> <C> <C>
Bishop Street Hawaii Municipal Bond Fund,
Institutional Class $10,000 $10,941
Lehman Brothers Municipal Bond Fund $10,000 $11,097
Lipper Hawaiian Municipal Debt Funds Average $10,000 $11,025
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------- ------
Annualized Inception to Date 10.91%
(Institutional Class A)
- ---------------------------------------------- ------
For the period ended December 31, 1995. Past performance
is not predictive of future performance.
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE BISHOP STREET HAWAII MUNICIPAL
BOND FUND, RETAIL CLASS B, VERSUS THE LEHMAN
BROTHERS MUNICIPAL BOND FUND, AND THE LIPPER
HAWAIIAN MUNICIPAL DEBT FUNDS AVERAGE.
__ Lehman Brothers Municipal Bond Fund
-- Lipper Hawaiian Municipal Debt Funds Average
== Bishop Street Hawaii Municipal Bond Fund, Retail Class B
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------
Initial Investment Date 2/28/95 Dec-95
- --------------------------------------------------------------- -------
Bishop Street Hawaii Municipal Bond Fund,
Investment Class $ 9,650 $10,556
Lehman Brothers Municipal Bond Fund $10,000 $11,097
Lipper Hawaiian Municipal Debt Funds Average $10,000 $11,025
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------------- ------
Annualized Inception to Date 6.46%
(Retail Class B)
- ---------------------------------------------- ------
For the period ended December 31, 1995. Past performance
is not predictive of future performance. The performance
of the Retail Class B Shares reflects the maximum sales
change of 3.5%.
<PAGE> 7
DECEMBER 31, 1995 BISHOP STREET FUNDS
STATEMENT OF NET ASSETS
MONEY MARKET FUND
<TABLE>
<CAPTION>
-----------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
-----------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER -- 58.3%
American Express Credit
5.800%, 03/15/96 $ 6,000 $ 5,931
5.870%, 03/08/96 4,000 3,958
American General Finance
5.840%, 02/09/96 5,000 4,969
5.880%, 01/30/96 3,000 2,986
American Home Products
5.850%, 03/07/96 7,000 6,927
Associates Corporation of
North America
5.870%, 02/12/96 7,000 6,954
Avco Financial Savings
5.910%, 01/25/96 7,000 6,973
Chase Manhattan
5.820%, 02/29/96 7,000 6,935
Ciesco
5.750%, 03/08/96 1,000 990
5.840%, 02/29/96 9,000 8,917
CIT Group Holdings
5.840%, 02/12/96 5,000 4,967
Clipper Receivable
6.000%, 01/31/96 3,580 3,562
Coca Cola Enterprises
5.870%, 02/12/96 7,000 6,953
CoreStates Bank
5.860%, 01/05/96 3,000 3,000
CoreStates Capital
5.860%, 02/20/96 4,500 4,465
Deere (John) Capital
5.720%, 04/25/96 10,000 9,824
Ford Motor Credit
5.870%, 02/09/96 3,000 2,982
General Electric Capital
5.680%, 02/13/96 4,000 3,973
5.870%, 02/09/96 6,000 5,963
General Motors Acceptance
5.920%, 01/23/96 5,000 4,982
5.960%, 02/16/96 3,500 3,474
Household Finance
5.870%, 01/31/96 7,000 6,967
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
-----------------------------------------------------------
<S> <C> <C>
IBM
5.720%, 04/24/96 $10,000 $ 9,826
International Lease Finance
5.830%, 02/26/96 4,000 3,965
McKenna Triangle
5.820%, 02/15/96 5,000 4,965
National Fuel Gas
5.940%, 01/22/96 5,000 4,983
Norwest Financial
5.690%, 02/28/96 2,000 1,982
PNC Funding
5.770%, 02/05/96 8,000 7,955
Prefco
5.710%, 04/16/96 10,000 9,837
Sears Roebuck Acceptance
5.880%, 02/13/96 7,000 6,952
5.890%, 02/13/96 3,000 2,980
Synthetic Money Market Trust
95-1 (A)
5.770%, 05/29/96 8,000 7,999
Synthetic Money Market Trust
95-B (A)
5.990%, 08/02/96 2,000 2,000
--------
TOTAL COMMERCIAL PAPER
(Cost $180,095,757) 180,096
--------
CORPORATE BOND -- 1.9%
NationsBank (A)
5.880%, 11/18/96 3,000 3,002
Society National Bank
6.000%, 04/25/96 2,810 2,811
--------
TOTAL CORPORATE BOND
(Cost $5,813,239) 5,813
--------
BANK NOTES -- 16.5%
BankAmerica, IL
5.740%, 02/16/96 10,000 10,000
Bank of New York
5.520%, 05/22/96 10,000 9,997
First American Bank
5.560%, 03/20/96 6,000 6,000
</TABLE>
<PAGE> 8
BISHOP STREET FUNDS
<TABLE>
<CAPTION>
---------------------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
---------------------------------------------------------------------
<S> <C> <C>
First Bank of South Dakota
5.910%, 05/06/96 $ 7,000 $ 6,999
First National Bank of
Maryland
5.740%, 02/05/96 3,000 3,000
5.750%, 05/01/96 5,000 5,001
NationsBank
5.500%, 06/10/96 7,000 7,000
South Trust, AL (A)
5.920%, 04/19/96 3,000 3,000
--------
TOTAL BANK NOTES
(Cost $50,996,739) 50,997
--------
CERTIFICATES OF DEPOSIT -- 4.2%
Chase Manhattan, DE
5.770%, 04/15/96 3,000 3,000
Wilmington Trust of Delaware
5.680%, 03/27/96 10,000 10,000
--------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $13,000,000) 13,000
--------
BANKERS ACCEPTANCE -- 0.6%
CoreStates Bank
5.560%, 03/04/96 2,000 1,980
--------
TOTAL BANKERS ACCEPTANCE
(Cost $1,980,540) 1,980
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.2%
Federal National Mortgage
Association
5.530%, 05/10/96 10,000 9,808
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $9,807,528) 9,808
--------
REPURCHASE AGREEMENTS -- 15.6%
Lehman Brothers
5.95%, dated 12/29/95,
matures 01/02/95,
repurchase price $48,231,866
(collateralized by U.S. Treasury
Note, par value $49,105,000,
5.25%, matures 12/31/97:
market value $49,166,363) 48,200 48,200
--------
TOTAL REPURCHASE AGREEMENTS
(Cost $48,200,000) 48,200
--------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
VALUE
DESCRIPTION (000)
---------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS -- 100.3%
(Cost $309,893,803) $309,894
--------
OTHER ASSETS AND LIABILITIES, NET -- (0.3%) (1,116)
--------
NET ASSETS:
Fund shares of Institutional Class A (unlimited
authorization -- no par value) based on
305,116,499 outstanding shares of beneficial
interest 305,116
Fund shares of Retail Class B (unlimited
authorization -- no par value) based on
3,657,974 outstanding shares of beneficial
interest 3,658
Accumulated Net Realized Gain on
Investments 4
--------
TOTAL NET ASSETS -- 100.0% $308,778
--------
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>
(A) FLOATING RATE SECURITY - THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON DECEMBER 31, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE> 9
DECEMBER 31, 1995 BISHOP STREET FUNDS
STATEMENT OF NET ASSETS
HAWAII MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
- ------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS -- 95.6%
HAWAII -- 76.5%
Hawaii County, GO, MBIA Insured
6.850%, 12/01/02 $ 250 $ 265
Hawaii County, GO Ser A,
FGIC Insured
5.600%, 05/01/12 200 208
5.300%, 05/01/05 120 126
5.600%, 05/01/13 190 198
Hawaii State, GO Ser BZ
6.000%, 10/01/12 100 110
Hawaii Department of Budget &
Finance, Ser CE
5.250%, 06/01/11 380 380
Hawaii State, GO Ser CH
6.000%, 11/01/10 100 111
Hawaii State, GO Ser CJ
6.250%, 01/01/15 100 107
Hawaii State Airport Systems,
Ser 2, RB, FGIC Insured
7.500%, 07/01/20 50 56
Hawaii State Airport Systems,
RB, FGIC Insured
7.000%, 07/01/20 380 424
Hawaii State Airport Systems,
Ser 2, RB
6.900%, 07/01/12 60 69
7.000%, 07/01/18 195 216
Hawaii State Airport Systems,
RB, MBIA Insured
6.250%, 07/01/06 1,000 1,099
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage Queens Medical Center
Project, RB, FGIC Insured
7.000%, 07/01/08 75 81
6.500%, 07/01/12 110 114
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage Hawaii Electric
Incorporated Project, RB
7.630%, 12/01/18 50 55
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
- ------------------------------------------------------------
<S> <C> <C>
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage Hawaii Electric
Incorporated Project Ser B, RB
7.600%, 07/01/20 $ 300 $ 330
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage Kaiser Permanente
Project Ser A, RB
6.500%, 03/01/11 300 319
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage St. Francis Medical
Center Project, RB, CGIC Insured
5.880%, 07/01/01 210 224
6.500%, 07/01/22 30 32
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage Kapiolani Health
Care System Project, RB
6.300%, 07/01/08 400 422
6.400%, 07/01/13 250 261
Hawaii State Department of Budget
& Finance Special Purpose
Mortgage Hawaii Electric
Incorporated Project Ser A, RB,
MBIA Insured
6.600%, 01/01/25 250 275
Hawaii State Harbor Capital
Improvement, RB, MBIA Insured
7.000%, 07/01/17 375 412
Hawaii State Harbor Capital
Improvement, RB, FGIC Insured
6.200%, 07/01/08 150 162
6.250%, 07/01/15 150 161
Hawaii State Housing, Finance &
Development Corporation
University of Hawaii Faculty
Housing Project, RB,
AMBAC Insured
5.650%, 10/01/16 675 690
</TABLE>
<PAGE> 10
BISHOP STREET FUNDS
<TABLE>
<CAPTION>
----------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
----------------------------------------------------------
<S> <C> <C>
Hawaii State Housing, Finance &
Development Corporation
Affordable Rental Housing
Program Ser 1995 A, RB
6.000%, 07/01/15 $ 350 $ 356
6.050%, 07/01/22 250 254
Hawaii State Housing, Finance &
Development Corporation Single
Family Mortgage Purchase Ser B,
RB, FNMA Collateral
5.700%, 07/01/13 545 550
5.850%, 07/01/17 1,000 1,015
Hawaii State Highway Project, RB
5.000%, 07/01/11 510 497
5.000%, 07/01/12 250 242
Honolulu City & County Ser A, GO
6.000%, 01/01/10 150 163
5.700%, 04/01/09 215 227
Honolulu City & County, GO,
Ser A, MBIA Insured
6.000%, 11/01/10 300 326
Honolulu City & County Mortgage
Smith Berentia Ser A, RB,
FHA & MBIA Insured
7.800%, 07/01/24 100 110
Honolulu City & County Waipahu
Towers Project Ser A,
GNMA Collateral
6.900%, 06/20/35 200 215
Kauai County, Refunding Ser A,
GO, MBIA Insured
5.400%, 02/01/04 50 53
Kauai County, Ser B, GO,
MBIA Insured
5.900%, 02/01/13 175 183
Maui County, Ser A, GO,
FGIC Insured
5.750%, 01/01/11 250 257
Maui County, GO, FGIC Insured
5.000%, 09/01/09 200 197
Maui County, Refunding GO,
FGIC Insured
5.130%, 12/15/10 100 100
Maui County, GO, FGIC Insured
5.130%, 12/15/12 100 99
Maui County, Board of Water
Supply Ser A, RB, FGIC Insured
6.000%, 12/01/01 $520 $ 569
-------
12,320
-------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
----------------------------------------------------------
<S> <C> <C>
GUAM -- 3.7%
Guam Power Authority, Ser A, RB,
AMBAC Insured
6.380%, 10/01/08 400 437
Guam, Government Limited
Obligation, Ser A, RB
7.100%, 11/15/09 150 161
-------
598
-------
PUERTO RICO -- 11.4%
Commonwealth of Puerto Rico, Go,
FSA Insured
6.000%, 07/01/22 150 154
Commonwealth of Puerto Rico, GO,
AMBAC Insured
5.750%, 07/01/24 375 382
Puerto Rico Electric Power Authority,
Ser O, RB, CGIC Insured
6.000%, 07/01/10 150 155
Puerto Rico Public Building
Authority, Government Facilities,
Ser A, RB, AMBAC Insured
5.750%, 07/01/22 250 257
Puerto Rico Industrial Tourist
Educational, Medical
Environmental Control Facilities
Hospital Auxilio Muto Oblig
Group, MBIA Insured
6.250%, 07/01/24 300 321
Puerto Rico Housing, Banking &
Finance Agency, Single Family
Mortgage, Affordable Housing
Mortgage Portfolio I, RB, GNMA/
FNMA/FHLMC Collateral
6.100%, 10/01/15 300 308
University of Puerto Rico, Ser M,
RB, MBIA Insured
5.500%, 06/01/15 250 254
-------
1,831
-------
</TABLE>
<PAGE> 11
DECEMBER 31, 1995 BISHOP STREET FUNDS
STATEMENT OF NET ASSETS
HAWAII MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
-------------------------------------------------------------------
FACE
AMOUNT VALUE
DESCRIPTION (000) (000)
-------------------------------------------------------------------
<S> <C> <C>
TEXAS -- 3.0%
Austin Utility Systems, RB,
MBIA Insured
5.250%, 05/15/18 $ 500 $ 491
-------
VIRGIN ISLANDS -- 1.0%
Virgin Islands Housing Finance
Authority Single Family, GNMA
Mortgage Backed Securities
Program, Ser A, RB
6.500%, 03/01/25 150 156
-------
TOTAL MUNICIPAL BONDS
(Cost $14,908,552) 15,396
-------
CASH EQUIVALENTS -- 1.2%
Dreyfus Tax Exempt Cash
Management Fund
4.430% 155 155
Nuveen Federal Tax Exempt
Money Market
4.620% 43 43
-------
TOTAL CASH EQUIVALENTS
(Cost $197,834) 198
-------
TOTAL INVESTMENTS -- 96.8%
(Cost $15,106,386) $15,594
-------
OTHER ASSETS AND LIABILITIES, NET -- 3.2% 519
-------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
VALUE
DESCRIPTION (000)
-------------------------------------------------------------------
<S> <C>
NET ASSETS:
Fund shares of Institutional Class A (unlimited
authorization -- no par value) based on
898,641 outstanding shares of beneficial
interest 9,113
Fund shares of Retail Class B (unlimited
authorization -- no par value) based on
639,856 outstanding shares of beneficial
interest 6,472
Accumulated Net Realized Gain on
Investments 41
Net Unrealized Appreciation on
Investments 487
-------
TOTAL NET ASSETS -- 100.0% $16,113
-------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE --
INSTITUTIONAL CLASS A $10.47
=======
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE --
RETAIL CLASS B $10.47
=======
MAXIMUM OFFERING PRICE PER SHARE
($10.47 + 96.5%) RETAIL CLASS B $10.85
=======
-------------------------------------------------------------------
AMBAC-AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
CGIC-CAPITAL GUARANTY INSURANCE CORPORATION
FGIC-FEDERAL GUARANTY INSURANCE CORPORATION
FSA-FINANCIAL SECURITY ASSURANCE
GNMA-GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO-GENERAL OBLIGATION
MBIA-MUNICIPAL BOND INSURANCE ASSOCIATION
RB-REVENUE BOND
SER-SERIES
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 12
FOR THE PERIOD ENDED DECEMBER 31,1995 BISHOP STREET FUNDS
STATEMENT OF OPERATIONS (000)
<TABLE>
<CAPTION>
MONEY MARKET HAWAII MUNICIPAL BOND
FUND(1) FUND(2)
------------ --------------------
<S> <C> <C>
INTEREST INCOME: $15,991 $422
------- ----
Expenses:
Investment Adviser Fee 800 27
Investment Adviser Fee Waiver (423) (27)
Reimbursement by Investment Adviser -- (23)
Management Fee 533 15
Management Fee Waiver -- (15)
Custody Fees 133 4
Transfer Agent Fees & Expenses 49 26
Professional Fees 55 2
Registration Fees 106 5
Distribution Fee (+) 1 --
Trustees Fees 45 1
Miscellaneous Expenses 30 3
Amortization of Deferred Organizational Costs 5 5
------- ----
Total Expenses 1,334 23
------- ----
Net Investment Income 14,657 399
------- ----
Net Realized Gain on Investments 4 41
Change in Unrealized Appreciation on Investments -- 487
------- ----
Net Realized and Unrealized Gain on Investments 4 528
------- ----
Increase in Net Assets Resulting from Operations $14,661 $927
======= ====
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
(+) All distribution fees are incurred in the Retail Class B.
(1) Commenced operations on January 30, 1995.
(2) Commenced operations on February 15, 1995.
The accompanying notes are an integral part of the financial statements.
<PAGE> 13
BISHOP STREET FUNDS
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
MONEY MARKET
FUND
------------
01/30/95 (1)
TO 12/31/95
------------
<S> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 14,657
Net Realized Gain on Investments 4
--------
Increase in Net Assets Resulting From
Operations 14,661
--------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class A (14,594)
Retail Class B (63)
--------
Total Distributions (14,657)
--------
Change in Net Assets 4
--------
CAPITAL SHARE TRANSACTIONS: (ALL AT $1.00 PER SHARE)
Institutional Class A Shares:
Shares Issued 752,769
Shares Issued in Lieu of Cash Distributions 6
Shares Redeemed (447,659)
--------
Total Institutional Capital Share Transactions 305,116
Retail Class B Shares:
Shares Issued 5,529
Shares Issued in Lieu of Cash Distributions 59
Shares Redeemed (1,930)
--------
Total Investment Capital Share Transactions 3,658
--------
Net Increase in Net Assets From Share Transactions 308,774
--------
Total Increase in Net Assets 308,778
NET ASSETS:
Beginning of Period
End of Period --
--------
$308,778
========
</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> 14
BISHOP STREET FUNDS
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
HAWAII MUNICIPAL BOND
FUND
---------------------
02/15/95 (1)
TO 12/31/95
------------
<S> <C>
INVESTMENT ACTIVITIES:
Net Investment Income $ 399
Net Realized Gain on Investments 41
Change in Unrealized Appreciation on Investments 487
-------
Increase in Net Assets Resulting From Operations 927
-------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class A Shares (221)
Retail Class B Shares (178)
-------
Total Distributions (399)
-------
Change in Net Assets 528
-------
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Shares Issued 9,397
Shares Issued in Lieu of Cash Distributions 97
Shares Redeemed (381)
-------
Total Institutional Capital Share Transactions 9,113
Retail Class B Shares:
Shares Issued 6,868
Shares Issued in Lieu of Cash Distributions 120
Shares Redeemed (516)
-------
Total Investment Capital Share Transactions 6,472
-------
Net Increase in Net Assets From Capital Share
Transactions 15,585
-------
Total Increase in Net Assets 16,113
NET ASSETS:
Beginning of Period --
-------
End of Period $16,113
=======
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Shares Issued 927
Shares Issued in Lieu of Cash Distributions 9
Shares Redeemed (37)
-------
Total Institutional Capital Share Transactions 899
-------
Retail Class B Shares:
Shares Issued 679
Shares Issued in Lieu of Cash Distributions 12
Shares Redeemed (51)
-------
Total Investment Capital Share Transactions 640
-------
Net Increase in Capital Shares 1,539
=======
</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> 15
BISHOP STREET FUNDS
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Investment Activities Distributions
-------------------------- -------------------
Net
Net Realized Net
Asset and Asset
Value, Net Unrealized Net Value,
Beginning Investment Gain (Loss) on Investment Capital End of
of Period Income Investments Income Gains Period
--------- ------ ----------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
INSTITUTIONAL CLASS A
FOR THE PERIOD ENDED DECEMBER 31, 1995(1): 1.00 0.051 -- (0.051) -- 1.00
RETAIL CLASS B
FOR THE PERIOD ENDED DECEMBER 31, 1995(2): 1.00 0.047 -- (0.047) -- 1.00
HAWAII MUNICIPAL BOND FUND
INSTITUTIONAL CLASS A
FOR THE PERIOD ENDED DECEMBER 31, 1995(3): 10.00 0.451 0.473 (0.452) -- 10.47
RETAIL CLASS B**
FOR THE PERIOD ENDED DECEMBER 31, 1995(4): 10.00 0.453 0.472 (0.451) -- 10.47
</TABLE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Ratio of Expenses to Ratio of Income to
Net Expenses Average Net Average
Assets, to Net Assets Investment Net Assets
End of Average Excluding Fee Income to Excluding Fee Portfolio
Total Period Net Waivers and Average Waivers and Turnover
Return (000) Assets Reimbursements Net Assets Reimbursements Rate
------ -------- ------ -------------- ---------- -------------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
INSTITUTIONAL CLASS A
FOR THE PERIOD ENDED DECEMBER 31, 1995(1): 5.67%* $305,120 0.50%* 0.66%* 5.50%* 5.34%* --
RETAIL CLASS B
FOR THE PERIOD ENDED DECEMBER 31, 1995(2): 5.55%* $ 3,658 0.60%* 0.76%* 5.26%* 5.10%* --
HAWAII MUNICIPAL BOND FUND
INSTITUTIONAL CLASS A
FOR THE PERIOD ENDED DECEMBER 31, 1995(3): 10.91%* $ 9,411 0.27%* 1.10%* 5.24%* 4.40%* 68%
RETAIL CLASS B**
FOR THE PERIOD ENDED DECEMBER 31, 1995(4): 10.85%* $ 6,702 0.33%* 1.45%* 5.14%* 4.02%* 68%
</TABLE>
Amounts Designated as "--" are either $0 or have been rounded to $0.
* Annualized
** Total return does not reflect the sales charge.
(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> 16
December 31, 1995 BISHOP STREET FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Bishop Street Funds (the "Trust") are registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Bishop Street Funds consists of a series of four funds (the "Funds") which
includes the High Grade Income Fund, Hawaii Municipal Bond Fund (formerly
Hawaii Tax-Free Fund), Equity Fund and the Money Market Fund. Effective
1/29/96, the Hawaii Tax Free Bond Fund officially changed its name to the
Hawaii Municipal Bond 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, has commenced
operations prior to December 31, 1995. This report pertains only to the Hawaii
Municipal Bond Fund and Money Market Fund.
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.
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 by the counterparty. If the counterparty defaults and the value
of the collateral declines or if the counterparty enters an insolvency
proceeding, realization of the collateral by the Fund may be delayed or limited.
<PAGE> 17
BISHOP STREET FUNDS
CLASSES -- Class specific expenses are borne by that class. Income, nonclass
specific expenses and realized/unrealized gains and losses are allocated to the
respective classes on the basis of the relative daily net assets.
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 assets.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income are
declared daily and paid on a monthly basis for the Hawaii Municipal Bond 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 qualify as a regulated
investment company for Federal income tax purposes and to distribute all of its
taxable income and net capital gains. Accordingly, no provision for Federal
income taxes is required.
ORGANIZATION COSTS -- Organization costs of approximately $121,000 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 organization
costs, the redemption proceeds payable to the holder thereof by the Fund will be
reduced by the unamortized organization 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.
MANAGEMENT -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVESTMENT ADVISORY AGREEMENT
Investment advisory services are provided to the Funds by First Hawaiian
Bank. (the "Adviser"). The Adviser is entitled to receive an annual fee of
0.30% of the average daily net assets of the Money Market Fund and 0.35% of the
average daily net assets of the Hawaii Municipal Bond Fund. The Adviser has
voluntarily agreed for an indefinite period of time to waive a portion of its
fee in the Money Market Fund in order to limit the operating expenses of the
Fund to .50%. In addition, for the period February 15, 1995 to June 29, 1995,
the Adviser had waived a portion of its fee in the Hawaii Municipal Bond Fund
in order to limit the operating expense of the Fund to .65%. Commencing June
30, 1995, the Adviser agreed to voluntarily waive its fee and reimburse the
Hawaii Municipal Bond Fund in order to limit operating expenses to .21% on an
annual basis.
<PAGE> 18
BISHOP STREET FUNDS
Wellington Management Company (The "Sub-Adviser") serves as the investment
sub-adviser for the Money Market Fund pursuant to a sub-adviser 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 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.
4. 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 Municipal Bond 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 services to the Trust.
SEI Financial Services Company ("SFS"), 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 Municipal Bond
Fund, respectively. SFS has voluntarily agreed to waive a portion of the
distribution charge for the Hawaii Municipal Bond 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.
<PAGE> 19
BISHOP STREET FUNDS
5. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of
securities, other than temporary cash investments for the period ended December
31, 1995 are presented below for the Hawaii Municipal Bond Fund.
FUND INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
HAWAII MUNICIPAL BOND
FUND
---------------------
<S> <C>
Purchases
U.S. Government Securities $ --
Other 20,601,444
Sales
U.S. Government Securities $ --
Other 5,722,438
</TABLE>
At December 31, 1995 the total cost of securities and the net realized
gains and losses on securities sold for federal income tax purposes were not
materially different from amounts reported for financial reporting purposes.
The aggregate unrealized appreciation/depreciation on securities at December
31, 1995 for the Hawaii Municipal Bond Fund is as follows:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 2,124,456
Gross Unrealized Depreciation (1,637,296)
-----------
Net Unrealized Appreciation $ 487,160
===========
</TABLE>
<PAGE> 20
BISHOP STREET FUNDS
6. CONCENTRATION OF CREDIT RISK (UNAUDITED)
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 December 31, 1995, the percentage of
the fund investments by each revenue source was as follows:
<TABLE>
<CAPTION>
HAWAII MUNICIPAL BOND
FUND
---------------------
<S> <C>
Cash Equivalents 1%
Education Bonds 6%
General Obligation Bonds 20%
Hospital Bonds 9%
Housing Bonds 18%
Mortgage Revenue Bond 2%
Public Facility Bonds 4%
Transportation Bonds 22%
Utility Bonds 15%
Other 3%
----
100%
====
</TABLE>
The ratings of long-term debt holdings as a percentage of total value of
investments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
HAWAII MUNICIPAL BOND
STANDARD & POOR'S RATING FUND
------------------------ ---------------------
<S> <C>
AAA 65%
AA 14%
A+ 1%
A 14%
A- 2%
BBB+ 3%
Not Rated 1%
----
100%
----
</TABLE>
<PAGE> 21
BISHOP STREET FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF BISHOP STREET FUNDS:
We have audited the accompanying statements of net assets of the Money
Market Fund and Hawaii Municipal Bond Fund as of December 31, 1995, and the
related statements of operations, the statements of changes in net assets, and
the financial highlights for the period from January 30, 1995 (commencement of
operations) through December 31, 1995 for the Money Market Fund, and for the
period from February 15, 1995 (commencement of operations) through December 31,
1995, for the Hawaii Municipal Bond Fund. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included physical inspection and confirmation of
investments held by the custodian as of December 31, 1995. An audit also
includes assessing the accounting principles used and significant estimates
used by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the Money Market Fund and the Hawaii Municipal Bond Fund, as of December 31,
1995, the results of their operations, the changes in their net assets, and the
financial highlights for the period from January 30, 1995 (commencement of
operations) through December 31, 1995 for the Money Market Fund, and for the
period from February 15, 1995 (commencement of operations) through December 31,
1995 for the Hawaii Municipal Bond Fund, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
February 16, 1996
<PAGE> 22
BISHOP STREET FUNDS
NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (UNAUDITED)
For shareholders that do not have a December 31, 1995 tax year end, this
notice is for informational purposes only. For shareholders with a December 31,
1995 tax year end, please consult your tax advisor as to the pertinence of this
notice.
For the fiscal year ended December 31, 1995, each fund has designated the
following items with regard to distributions paid during the year.
<TABLE>
<CAPTION>
(A) (B) (C)
LONG TERM ORDINARY (A+B)
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
------------------------------------------------------------------
<S> <C> <C> <C>
Money Market 0% 100% 100%
Hawaii Municipal Bond 0% 100% 100%
</TABLE>
<TABLE>
<CAPTION>
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
FUND DIVIDENDS INTEREST TAX CREDIT
------------------------------------------------------------------
<S> <C> <C> <C>
Money Market 0% 0% 0%
Hawaii Municipal Bond 0% 90% 0%
</TABLE>
(1) Qualifying dividends represents dividends which qualify for the
corporate dividends received deduction.
* Items (A) and (B) are based on a percentage of each fund's total
distributions.
** Items (D) and (E) are based on a percentage of ordinary income
distributions of each fund.
