[PHOTOGRAPH OF FIRST HAWAIIAN BANK]
A FAMILY OF MUTUAL FUNDS ADVISED BY FIRST HAWAIIAN BANK
BISHOP
--------
STREET
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FUNDS
SEMI-ANNUAL REPORT
JUNE 30, 1997
EQUITY FUND
HIGH GRADE INCOME FUND
HAWAII MUNICIPAL BOND FUND
MONEY MARKET FUND
TREASURY MONEY MARKET FUND
<PAGE>
BISHOP STREET
TABLE OF CONTENTS
FUNDS
LETTER TO SHAREHOLDERS ................................................ 2
EQUITY FUND
Investment Adviser's Report & Management Discussion ............. 4
Statement of Net Assets ......................................... 7
HIGH GRADE INCOME FUND
Investment Adviser's Report & Management Discussion .............12
Statement of Net Assets .........................................15
HAWAII MUNICIPAL BOND FUND
Investment Adviser's Report & Management Discussion .............18
Statement of Net Assets .........................................21
MONEY MARKET FUND & TREASURY MONEY MARKET FUND
Investment Adviser's Report & Management Discussion .............26
Statement of Net Assets .........................................27
Financial Statements ..................................................32
Financial Highlights ..................................................36
Notes to Financial Statements .........................................38
1
<PAGE>
[PHOTO OF ROBERT A. ALM]
DEAR FELLOW SHAREHOLDER:
We are pleased to present to you the Bishop Street Funds' Semi-Annual Report to
Shareholders.
Good news! We've converted Bishop Street Funds to a no-load structure. What this
means to you is no upfront or redemption sales charge which lowers your
investment costs and increases your net return.
During the past six months, the Bishop Street Funds experienced continued
deliberate and steady growth, expanding our fund family to meet your investment
needs. In January, we added two new funds to the Bishop Street line-up: the
Equity Fund and the High Grade Income Fund to provide you with additional
investment options for growth opportunities and maximum income.
The stock market continues to set records, as the economy's growth rate remains
moderate, corporate profits continue to advance, inflation is nil and interest
rates remain low. Meanwhile, Congress and the President signed an agreement to
balance the federal budget and cut capital gains taxes. A shrinking federal
budget deficit reduces the demand for borrowing and lowers interest rates.
Cutting the capital gains rate enhances the potential rate of return on stocks
and bonds.
Although there are no dark clouds on the horizon, the stock market's lofty level
does not allow much room for disappointment on the key variables of inflation,
interest rates or profits. As a result, we continue to be alert to adverse
changes in the environment.
2
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
The taxable and municipal bond markets produced moderate returns during the
first half of 1997, as interest rate volatility cut into total returns. However,
bonds continue to offer attractive income in relation to inflation.
You can be assured that the Bishop Street Funds will remain dedicated to
providing you with high quality service and prudent investment management.
This report contains important information for the six months ending June 30,
1997 including the Investment Adviser's Report, Management Discussion & Analysis
of Fund Performance, the Statement of Net Assets and other financial information
for each Fund. If you have any questions about this report or the Bishop Street
Funds, we invite you to call Bishop Street Investor Services at
1-800-262-9565 or your Investment Specialist.
Thank you for choosing the Bishop Street Funds.
Sincerely,
/S/ SIGNATURE
Robert A. Alm
Senior Vice President and Manager,
Financial Management Group
First Hawaiian Bank, Investment Adviser
3
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
EQUITY FUND
Investment Adviser's Report:
Early this year, the stock market appeared to be in for a rough ride. The
economy was growing at a rapid rate, rekindling fears of inflation. Corporate
earnings appeared soft, particularly in the technology sector. The Federal
Reserve Board hiked short-term interest rates from 5.25% to 5.50%, and investors
feared further Fed action later in the year. As a result, the S&P 500 Index fell
7.5% between March 11th and April 2nd. Other market segments, notably small
capitalization stocks, fell much further. Bond markets were similarly jittery as
the yield on the 30-year U.S. Treasury bond reached 7%. As the first quarter
ended, investor sentiment was clearly pessimistic.
A DRAMATIC SHIFT: However, within weeks, investor sentiment shifted dramatically
- -- and this relentless bull market resumed. As it became apparent that the
economy in the second quarter would grow more slowly, the Fed did not raise
interest rates at its May meeting. Long-term interest rates began to fall, as
inflation data remained benign. Meanwhile, first quarter corporate profits
surprised investors on the upside.
After a nearly 10% decline this spring, the stock market used the lows of April
as a launching pad for new highs in June. By June 30th, the S&P 500 Index
recorded a first-half gain of 144.4 points, or 19.49%, to close at 885.14. Small
capitalization stocks also made a comeback, and the NASDAQ index, heavily
dominated by the technology sector, rocketed to new highs.
A continuation of strong corporate profits will be necessary to sustain the
upward trend in the stock market. That may be difficult in the current
environment, in which economic growth is slowing. However, since interest rates
remain low, corporate productivity is impressive and there are no signs of
inflation, we remain optimistic but cautious about the market's near-term
future.
4
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
Management Discussion & Analysis of Fund Performance:
The investment objective of the new Equity Fund, launched January 31, 1997, is
to produce long-term growth of capital, with a secondary goal of current income.
We seek to do this by focusing on the large capitalization growth companies of
the S&P 500 Index, many of which are leaders in their markets and operate
globally. The companies also tend to have earnings momentum--that is, their
earnings are growing at an increasing rate.
As a way to reduce risk, the Fund holds a broadly diversified portfolio of 70 to
100 stocks, representing virtually every industry sector of the S&P 500. Since
we take a long-term view of investing, we tend to have relatively low turnover
in the portfolio.
During the five months ended June 30, 1997, the Fund produced a total return of
12.2%. In comparison, the average domestic growth fund as measured by Lipper
Analytical Services, Inc. was up 8.6% and the unmanaged S&P 500 Index was up
13.5%.
The pharmaceutical industry was one of several that contributed positively to
the Fund's strong performance during the period. Our largest positions in this
industry have extensive product lines and better than expected earnings. We
intend to maintain our strong weighting in this industry, due to its expected
earnings growth of 15%-20% per year over the next five years and reasonable
stock price valuations today.
Another industry that performed well for us was the oil sector. Although the
price of oil has been volatile, the major companies have made technological
advances in exploration--as well as reductions in overhead--which reduce the
price of oiL at which they can be profitable. The major international oil
companies that we own have strong free cash flows, good balance sheets and
excellent management. We also like the oil service companies which help the
major oil companies in their exploration efforts.
In technology, the big capitalization leaders continued to perform strongly. The
companies we tend to select are leaders in their fields, with strong management
and dynamic earnings potential. The U.S. is increasingly viewed as the world
leader in technology, and the stocks reflect that assessment.
In recent months, we have begun to overweight financial services companies
relative to the S&P 500 Index. The financial services industry continues to
consolidate. In addition, the banks that we own in the portfolio continue to
move toward fee income by focusing on businesses such as asset management and
away from traditional net interest margin businesses such as corporate lending
that are so sensitive to changes in interest rates.
5
<PAGE>
BISHOP STREET FUNDS
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
BISHOP STREET EQUITY FUND VERSUS THE S&P 500
COMPOSITE INDEX AND THE LIPPER DOMESTIC EQUITY AVERAGE
[LINE GRAPH]
<TABLE>
<CAPTION>
1/31/97 2/97 3/97 4/97 5/97 6/97
<S> <C> <C> <C> <C> <C> <C>
BISHOP STREET EQUITY FUND $10,000 $10,020 $9,593 $10,139 $10,655 $11,105
S&P 500 COMPOSITE INDEX $10,000 $10,078 $9,665 $10,241 $10,863 $11,350
LIPPER DOMESTIC EQUITY AVERAGE $10,000 $9,852 $9,410 $9,642 $10,424 $10,856
</TABLE>
ANNUALIZED CUMULATIVE
ONE MONTH 3 MONTH INCEPTION INCEPTION
RETURN RETURN TO DATE* TO DATE*
---------------------------------------------------
INSTITUTIONAL SHARES 4.22% 15.75% 31.96% 12.16%
*Commenced operations 1/31/97
TOP TEN HOLDINGS
Percentage of
Investments
- ----------------------------------------------------------------------
1. Intel Corporation 4.0%
2. General Electric Company 3.7%
3. Microsoft Corporation 2.9%
4. Exxon Corporation 2.5%
5. Boeing Company 2.0%
6. Citicorp 1.8%
7. Royal Dutch Petroleum Company 1.8%
8. Merck & Company Incorporated 1.7%
9. Nationsbank Corporation 1.7%
10. Philip Morris Companies Incorporated 1.6%
6
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
EQUITY FUND -- STATEMENT OF NET ASSETS
Market
Value
Shares (000)
------- -------
COMMON STOCK -- 95.2%
AIR TRANSPORTATION -- 0.5%
5,400 Federal Express Corp.* $ 312
--------
AIRCRAFT -- 4.1%
7,200 Allied Signal, Inc. 605
23,800 Boeing Co. 1,263
8,500 United Technologies Corp. 705
--------
2,573
--------
APPAREL/TEXTILES -- 0.5%
7,200 Liz Claiborne Inc. 336
--------
AUTOMOTIVE -- 0.8%
8,100 Chrysler Corp. 266
4,700 General Motors Corp. 262
--------
528
--------
BANKS -- 8.2%
9,300 Chase Manhattan Corp. 903
9,500 Citicorp 1,145
10,000 First Chicago NBD Corp. 605
9,100 First Union Corp. 842
16,400 NationsBank Corp. 1,058
11,300 Norwest Corp. 636
--------
5,189
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BEAUTY PRODUCTS -- 2.3%
7,600 Gillette Co. 720
5,300 Proctor & Gamble Co. 749
--------
1,469
--------
CHEMICALS -- 2.2%
5,500 Air Products & Chemicals, Inc. 447
22,100 Monsanto Co. 952
--------
1,399
--------
COMMUNICATIONS EQUIPMENT -- 2.1%
13,100 GTE Corp. 575
9,900 Motorola, Inc. 752
--------
1,327
--------
7
<PAGE>
BISHOP STREET FUNDS
EQUITY FUND -- STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------- -------
COMMON STOCK -- CONTINUED
COMPUTERS & SERVICES -- 3.8%
8,400 Cisco Systems, Inc.* $ 564
3,000 Compaq Computer Corp.* 298
10,700 Hewlett Packard Co. 599
10,200 International Business Machine Corp. 920
--------
2,381
--------
DRUGS -- 10.6%
7,900 Abbott Laboratories 527
7,400 American Home Products Corp. 566
4,000 Amgen Inc.* 232
10,600 Bristol-Myers Squibb Co. 859
7,100 Eli Lilly & Co. 776
11,600 Johnson & Johnson 747
10,600 Merck & Co., Inc. 1,097
5,700 Pfizer Inc. 681
10,000 Schering Plough Corp. 479
6,200 Warner Lambert Co. 770
--------
6,734
--------
ELECTRICAL UTILITIES -- 0.4%
5,900 FPL Group, Inc. 272
--------
ENTERTAINMENT -- 0.8%
6,100 Walt Disney Co. 490
--------
ENVIRONMENTAL SERVICES -- 0.5%
9,100 Waste Management, Inc. 292
--------
FINANCIAL SERVICES -- 3.3%
6,300 American Express Co. 469
9,800 Federal Home Loan Mortgage Corp. 337
16,500 Federal National Mortgage Association 720
9,800 Merrill Lynch & Co., Inc. 584
--------
2,110
--------
FOOD, BEVERAGE & TOBACCO -- 4.9%
13,800 Campbell Soup, Co. 690
14,600 Coca Cola, Co. 1,018
23,400 Philip Morris Companies Inc. 1,038
7,700 Sara Lee Corp. 321
--------
3,067
--------
GAS/NATURAL GAS -- 0.9%
13,600 Williams Companies Inc. 595
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8
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Market
Value
Shares (000)
------- -------
COMMON STOCK -- CONTINUED
HOTELS & LODGING -- 0.7%
17,500 Hilton Hotels Corp. $ 465
--------
INSURANCE -- 4.4%
4,900 American International Group, Inc. 732
5,200 Chubb Corp. 348
1,600 Cigna Corp. 284
1,600 General Re Corp. 291
4,100 Hartford Financial Services Group Inc. 339
12,000 Travelers Group Inc. 757
--------
2,751
--------
MACHINERY -- 5.5%
12,450 Baker Hughes, Inc. 482
7,100 Deere & Co. 390
5,000 Emerson Electric Co. 275
35,800 General Electric, Co. 2,340
--------
3,487
--------
MEDICAL PRODUCTS & SERVICES -- 0.7%
11,600 Columbia/HCA Healthcare Corp. 456
--------
METALS & MINING -- 0.5%
4,000 Phelps Dodge Corp. 341
--------
MISCELLANEOUS BUSINESS SERVICES -- 5.4%
12,900 First Data Corp. 567
14,300 Microsoft, Corp.* 1,807
13,400 Oracle Corp.* 675
9,100 Sun Microsystems, Inc.* 339
--------
3,388
--------
MISCELLANEOUS CONSUMER SERVICES -- 0.4%
8,300 Service Corp International 273
--------
OFFICE FURNITURE & FIXTURES -- 0.9%
14,000 Johnson Controls, Inc. 575
--------
PAPER & PAPER PRODUCTS -- 0.9%
6,200 Kimberly-Clark Corp. 308
4,600 Mead Corp. 286
--------
594
--------
PETROLEUM & FUEL PRODUCTS -- 1.1%
5,400 Schlumberger Ltd. 675
--------
9
<PAGE>
BISHOP STREET FUNDS
EQUITY FUND -- STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------- -------
COMMON STOCK -- CONCLUDED
PETROLEUM REFINING -- 9.7%
7,300 Amoco Corp. $ 635
7,800 British Petroleum, ADR 584
9,200 Chevron, Corp. 680
25,400 Exxon Corp. 1,562
8,800 Mobil Corp. 615
20,800 Royal Dutch Petroleum Co. New York Registry 1,131
8,700 Texaco, Inc. 946
--------
6,153
--------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 0.4%
3,200 Eastman Kodak Co. 246
--------
RAILROADS -- 0.9%
15,700 Illinois Central, Corp. 549
--------
RETAIL -- 5.6%
8,700 Albertson's Inc. 318
13,900 Dayton-Hudson Corp. 739
10,400 Home Depot, Inc. 717
9,200 McDonald's Corp. 444
18,800 Pepsico, Inc. 706
11,500 Sears Roebuck & Co. 618
--------
3,542
--------
RUBBER & PLASTIC -- 0.8%
8,200 Nike, Inc., Cl B 479
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 4.0%
17,850 Intel Corp. 2,531
--------
TELEPHONES & TELECOMMUNICATION -- 6.9%
15,600 AT & T Corp. 547
21,700 Airtouch Communications Inc.* 594
5,800 Bell Atlantic Corp. 440
12,000 Bellsouth Corp. 556
10,300 Lucent Technologies Inc. 742
3,700 NYNEX, Corp. 213
5,800 SBC Communications, Inc. 359
5,000 US West Communications Group 188
22,200 Worldcom Inc.* 710
--------
4,349
--------
WHOLESALE -- 0.5%
1,600 Unilever NV, ADR 342
--------
TOTAL COMMON STOCK (Cost $52,972) 60,270
--------
10
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Market
Value
Shares (000)
------- -------
CASH EQUIVALENT -- 4.7%
2,602 SEI Daily Income Trust Money Market Portfolio $ 2,603
384 SEI Daily Income Trust Prime Obligation Portfolio 385
--------
TOTAL CASH EQUIVALENT (Cost $2,988) 2,988
--------
TOTAL INVESTMENTS (COST $55,960)-- 99.9% 63,258
--------
OTHER ASSETS AND LIABILITIES, NET-- 0.1% 38
--------
NET ASSETS:
Fund shares of Institutional Class A (unlimited authorization -- no par
value) based on 5,668,039 outstanding shares of beneficial
interest 56,634
Accumulated net realized loss on investments (636)
Net unrealized appreciation on investments 7,298
--------
TOTAL NET ASSETS-- 100.0% $63,296
========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS A $11.17
--------
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
HIGH GRADE INCOME FUND
Investment Adviser's Report:
The bond market turned in mixed results in the first half of 1997. During the
first quarter, bonds were weak as investors anticipated action by the Federal
Reserve Board to raise interest rates in response to a fast-growing economy.
Although the Fed boosted short-term rates from 5.25% to 5.50% on March 25th, no
further action took place during the first half of the year. The reasons: the
economy showed signs of slowing and inflation did not reappear as feared. As a
result, bonds rebounded strongly in the second quarter.
A good way to assess the bond market at a given point in time is to look at the
U.S. Treasury bond yield. On January 31st, the ten year security was yielding
6.49%. On June 30th, the yield was 6.50%. From point to point, the market would
appear quiet, since bond prices move inversely to interest rates. However,
during the five months between the points, yields were very volatile as
investors struggled to interpret conflicting economic data.
SECOND FED ACTION EXPECTED: Historically, strong economic growth, as exhibited
in the first quarter of 1997, has been followed by higher inflation. That is not
happening now, even though the economy is in the seventh year of an expansion.
Another pattern is that the Fed typically raises interest rates more than once.
Many investors expected another Fed action in May, but it did not happen.
The second quarter was also a time of good news on the federal budget deficit,
which could be as low as $37 billion in fiscal 1997, or just half of one percent
of Gross Domestic Product. That is a remarkable improvement compared to a few
years ago, when the budget deficit was $300 billion. A shrinking budget deficit
means that the U.S. government has lower financing needs, which in turn exerts
downward pressure on interest rates.
The bond market's performance in the second half of the year got off to a great
start in July, as the yield on the ten year Treasury bond fell sharply to 6.01%
as of July 31st. However, we believe that inflation pressure will ultimately
cause the Federal Reserve Board to raise short-term rates one more time late in
the year. As a result, our fixed income strategy is one of caution over the next
several months.
12
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
Management Discussion & Analysis of Fund Performance:
The investment objective of the new High Grade Income Fund, launched January 31,
1997, is to provide high total return consistent with prudent investment risk.
We seek to do this by investing primarily in U.S. government bonds as well as
high quality corporate securities. As of June 30, 1997, the portfolio was
comprised of 30% in U.S. Treasuries, 30% in U.S. government agencies, 26% in
corporates and the balance in cash equivalents.
Of course, U.S. government bonds are backed by the full faith and credit of the
U.S. government and are rated AAA. The average corporate bond in the portfolio
carries an A rating by Standard & Poor's Corporation.
For the five months ended June 30, 1997, the Fund's total return was 2.17%. In
comparison, the average domestic fixed income fund as measured by Lipper
Analytical Services Inc. produced a total return of 2.76% and the unmanaged
Lehman Brothers Government/Corporate Bond Index was up 2.61%. As of June 30,
1997, the Fund's 30-day SEC yield -- an approximation of income -- was 5.60%.
The Fund slightly underperformed its benchmarks because we kept duration
(sensitivity to interest rates) slightly shorter than neutral. That means that
the bond prices in the portfolio were slightly less sensitive to falling
interest rates. Since bond prices move inversely to interest rates, a shorter
than average duration will underperform in a falling interest rate environment.
On the other hand, our strategy should have outperformed the averages had
interest rates risen. With the economy growing above average trend rates, and
with low unemployment, we anticipated that the Federal Reserve Board would raise
interest rates again in the second quarter.
As we look ahead to year end, we expect the economy to pick up steam. With
consumer confidence at record highs, unemployment at 25-year lows and real
disposable income growth at about 4%, consumers are in a strong position to
drive above-trend spending. As a result, we think inflation will accelerate
slightly, triggering Fed action in the fourth quarter. Our strategy is to remain
duration-neutral until then, and then we may extend duration if the Fed acts.
When you compare the income currently offered by the Fund to the current level
of inflation, the difference is about 4%, a relatively high figure by historical
standards. The High Grade Income Fund will continue to strive to offer
conservative management, preservation of capital, and income consistent with a
high quality portfolio.
13
<PAGE>
BISHOP STREET FUNDS
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
BISHOP STREET HIGH GRADE INCOME FUND VERSUS THE LEHMAN
GOVERNMENT/CORPORATEINDEX AND THE LIPPER DOMESTIC FIXED INCOME AVERAGE
[LINE GRAPH]
<TABLE>
<CAPTION>
1/31/97 2/97 3/97 4/97 5/97 6/97
BISHOP STREET HIGH GRADE
<S> <C> <C> <C> <C> <C> <C>
INCOME FUND $10,000 $10,015 $9,902 $10,030 $10,108 $10,216
LEHMAN GOVERNMENT/CORPORATE
INDEX $10,000 $10,021 $9,902 $10,046 $10,140 $10,261
LIPPER DOMESTIC FIXED
INCOME AVERAGE $10,000 $10,044 $9,936 $10,053 $10,160 $10,275
</TABLE>
ANNUALIZED CUMULATIVE
ONE MONTH 3 MONTH INCEPTION INCEPTION
RETURN RETURN TO DATE* TO DATE*
---------------------------------------------------
INSTITUTIONAL SHARES 1.07% 3.17% 5.32% 2.17%
*Commenced operations 1/31/97
<TABLE>
<CAPTION>
TOP TEN HOLDINGS Percentage
Coupon Maturity of
Rate Date Investments
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Federal National Mortgage Association 6.60% May 8, 2002 8.2%
2. United States Treasury Note 5.75% Dec. 31, 1998 6.1%
3. United States Treasury Note 5.88% Nov. 15, 1999 6.1%
4. Federal Home Loan Mortgage Corp. 5.69% Jan. 24, 2001 4.4%
5. United States Treasury Note 6.38% Jan. 15, 1999 4.1%
6. Federal National Mortgage Association 7.40% July 1, 2004 3.4%
7. Texas Instrument 8.75% Apr. 1, 2007 3.2%
8. United States Treasury Bond 7.50% Nov. 15, 2016 3.1%
9. United States Treasury Note 8.50% Nov. 15, 2000 3.0%
10. Federal Home Loan Bank 7.57% Aug. 19, 2004 3.0%
</TABLE>
14
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
HIGH GRADE INCOME FUND -- STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------- -------
CORPORATE OBLIGATIONS -- 28.1%
AIRCRAFT -- 2.3%
Boeing
$600 6.350%, 06/15/03 $ 586
--------
BANKS -- 1.2%
Bayerische Landesbank
300 6.375%, 10/15/05 289
--------
CHEMICALS -- 4.3%
Hercules
600 6.625%, 06/01/03 588
PPG Industries, Inc.
500 6.875%, 02/15/12 487
--------
1,075
--------
COMMUNICATIONS EQUIPMENT -- 1.2%
Rockwell International Corp.
300 6.625%, 06/01/05 295
--------
FOOD, BEVERAGE & TOBACCO -- 5.4%
Pet Inc.
700 6.500%, 07/01/03 678
Philip Morris Companies, Inc.
700 6.375%, 02/01/06 659
--------
1,337
--------
INSURANCE -- 2.7%
Aon Corp.
700 6.300%, 01/15/04 671
--------
MACHINERY -- 1.2%
Dresser Industries, Inc.
300 6.250%, 06/01/00 298
--------
PRINTING & PUBLISHING -- 2.8%
Tribune Co.
700 6.875%, 11/01/06 694
--------
RETAIL -- 1.1%
Lowes Companies Inc.
300 6.375%, 12/15/05 287
--------
15
<PAGE>
BISHOP STREET FUNDS
HIGH GRADE INCOME FUND -- STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------- -------
CORPORATE OBLIGATIONS -- CONCLUDED
SEMI-CONDUCTORS/INSTRUMENTS -- 3.1% Texas Instruments, Inc.
$ 700 8.750%, 04/01/07 $ 778
--------
TELEPHONES & TELECOMMUNICATION -- 2.8%
US West Communications Group, Inc.
700 6.625%, 09/15/05 686
--------
TOTAL CORPORATE OBLIGATIONS (Cost $7,020) 6,996
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 34.3%
FHLB
700 7.170%, 03/29/00 714
400 6.000%, 07/05/00 395
700 7.310%, 07/06/01 719
700 7.570%, 08/19/04 735
FHLMC
1,100 5.690%, 01/24/01 1,070
700 6.220%, 03/24/03 686
FNMA
2,000 6.605%, 05/08/02 2,004
700 6.590%, 05/21/02 704
300 6.350%, 06/10/05 292
400 6.440%, 06/21/05 392
800 7.400%, 07/01/04 833
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $8,555) 8,544
--------
16
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Face Market
Amount/Shares Value
(000) (000)
------------- -------
U.S. TREASURY OBLIGATIONS -- 32.6%
U.S. Treasury Bond
$ 700 7.500%, 11/15/16 $ 748
U.S. Treasury Notes
1,500 5.750%, 12/31/98 1,495
1,000 6.375%, 01/15/99 1,005
500 7.500%, 10/31/99 514
1,500 5.875%, 11/15/99 1,490
700 8.500%, 11/15/00 746
700 7.750%, 02/15/01 732
700 6.125%, 12/31/01 693
700 6.375%, 08/15/02 700
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $8,147) 8,123
--------
CASH EQUIVALENT -- 3.4%
622 SEI Daily Income Trust Money Market Portfolio 623
223 SEI Daily Income Trust Prime Obligation Portfolio 224
--------
TOTAL CASH EQUIVALENT (Cost $847) 847
--------
TOTAL INVESTMENTS (COST $24,569)-- 98.4% 24,510
--------
OTHER ASSETS AND LIABILITIES, NET-- 1.6% 399
--------
NET ASSETS:
Fund shares of Institutional Class A (unlimited authorization -- no par value)
based on 2,496,881 outstanding shares of beneficial interest 24,967
Accumulated net realized gain on investments 1
Net unrealized depreciation on investments (59)
--------
TOTAL NET ASSETS --100.0% $24,909
========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS A $9.98
--------
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
HAWAII MUNICIPAL BOND FUND
Investment Adviser's Report:
The municipal bond market tracked the fixed income markets as a whole during the
first half of 1997, producing total returns on a par with historical norms.
In the first quarter, the U.S. economy was growing rapidly, and the Federal
Reserve Board raised short-term interest rates by a quarter percentage point in
an attempt to slow the economy down and ward off inflation. As the second
quarter began, many municipal as well as taxable fixed income investors feared
that this move would be followed by a series of additional actions.
However, by late April, the economy was slowing and inflation was in check. With
the expectation that the Fed probably wouldn't have to tighten the money supply
further, the taxable and tax-exempt bond markets rallied, and yields ended the
first half of 1997 at about their same levels on January 1st.
The municipal bond market faced a shortage of supply during the period, as
approximately $40 billion of municipal bonds, or more than 20% of the entire
1997 new issue volume, were called and retired from the market.
HAWAII BONDS TRADE ACTIVELY: Despite the March downgrading of the State of
Hawaii by Standard & Poor's Corporation from AA to A+, Hawaii issues have traded
extremely well in the market, and have been in chronic short supply. The State
has taken some measures to improve its fiscal position, but will have to do more
to have a significant impact in correcting the budgetary imbalances. Tourism,
which is dependent upon healthy economies on the U.S. mainland and in Japan, has
recovered only slightly. While a $1 billion capital improvement program recently
authorized by the state legislature should improve tax revenue flow, we hope
that longer-term solutions will be forthcoming, such as an improvement in the
state's tax environment.
18
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
Management Discussion & Analysis of Fund Performance:
The primary goal of the Hawaii Municipal Bond Fund is to deliver a high level of
current income that is exempt from both state and federal income tax. At June
30, 1997, the Fund was yielding 5.01%. For an individual in the highest combined
federal and state income tax bracket, this translates into a taxable equivalent
yield of 9.13%.* Few taxable fixed income investments with the quality
comparable to a municipal bond portfolio generate such a high return today.
In generating this high yield, we seek to invest in the highest quality
securities. Indeed, 86% of the portfolio is rated AAA or AA. In addition, 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 and counties of Hawaii.
During the period, we added to our position in general obligation bonds issued
by Maui County, which has demonstrated conservative fiscal management. As
California's economy continues to strengthen, Maui's tourism industry stands to
benefit. We also added to our State of Hawaii general obligation bond position,
when the issue became insured -- and was rated AAA -- in May.
For the six months ending June 30, 1997, the Hawaii Municipal Bond Fund produced
a total return of 2.82%. In comparison, the Lipper Hawaii Municipal Debt Funds
Average was 2.78%. The Lehman Brothers Municipal Bond Index, an unmanaged
measure of municipal bond funds nationally, was up 3.20% for the period.
For the twelve months ending June 30, 1997, the Hawaii Municipal Bond Fund
produced a total return of 8.16%. In comparison, the Lipper Hawaii Municipal
Debt Funds Average produced a total return of 7.73%. The Lehman Brothers
Municipal Bond Index, was up 8.25% for the period.
In an attempt to help minimize interest rate risk, we continue to keep the
portfolio's average maturity under 15 years -- shorter than most municipal
funds. At this time, we don't believe the current market offers enough
additional yield on longer maturities to offset the additional volatility.
Our strategy for the remainder of the year and beyond is to attempt to generate
a high tax-exempt yield by investing in high-quality, highly-liquid securities
issued by Hawaii municipalities.
*This information is based on a hypothetical illustration and is not
representative of any investment securities.
19
<PAGE>
BISHOP STREET FUNDS
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
BISHOP STREET HAWAII MUNICIPAL BOND FUND VERSUS THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX AND THE HAWAIIAN MUNICIPAL DEBT FUNDS AVERAGE.
[LINE GRAPH]
<TABLE>
<CAPTION>
2/28/95 3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97
BISHOP STREET HAWAII
MUNICIPAL BOND FUND,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS $10,000 $10,082 $10,289 $10,478 $10,941 $10,757 $10,850 $11,106 $11,402 $11,340 $11,724
LEHMAN BROTHERS MUNICIPAL
BOND INDEX $10,000 $10,115 $10,359 $10,657 $11,096 $10,962 $11,046 $11,300 $11,589 $11,562 $11,921
LIPPER HAWAIIAN MUNICIPAL
DEBT FUNDS AVERAGE $10,000 $10,097 $10,310 $10,529 $11,005 $10,808 $10,879 $11,146 $11,403 $11,339 $11,721
</TABLE>
ANNUALIZED ANNUALIZED CUMULATIVE
ONE YEAR 2 YEAR INCEPTION INCEPTION
RETURN RETURN TO DATE* TO DATE*
---------------------------------------------------
INSTITUTIONAL SHARES 8.06% 6.74% 6.96% 17.26%
---------------------------------------------------
RETAIL SHARES 8.16% 6.79% 6.99% 17.36%
*Commenced operations 2/15/95
<TABLE>
<CAPTION>
TOP TEN HOLDINGS Percentage
Coupon Maturity of
Rate Date Investments
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Hawaii State 5.55% July 1, 2007 4.7%
2. Commonwealth of Puerto Rico 6.50% July 1, 2013 4.4%
3. Hawaii State 6.25% July 1, 2006 4.1%
4. Hawaii State Dept. Budget & Finance 6.00% July 1, 2020 3.9%
5. Hawaii State 6.50% July 1, 2022 3.8%
6. Hawaii State 7.00% July 1, 2020 3.1%
7. Hawaii State 6.30% July 1, 2008 3.1%
8. Hawaii State 6.20% May 1, 2026 3.0%
9. Hawaii State 5.80% July 1, 2016 2.9%
10. Hawaii State 5.65% Oct. 1, 2016 2.7%
</TABLE>
20
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
HAWAII MUNICIPAL BOND FUND -- STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------- -------
MUNICIPAL BONDS -- 95.7%
GUAM -- 2.2%
Guam Power Authority, Ser A, RB, AMBAC Insured
$ 400 6.375%, 10/01/08 $ 430
Guam, Government Limited Obligation, Ser A, RB
150 7.100%, 11/15/09 157
--------
587
--------
HAWAII -- 82.5%
Department of Budget & Finance, Hawaiian Electric, RB, MBIA Insured
750 6.200%, 05/01/26 778
Department of Budget & Finance, Special Purpose Mortgage,
Hawaii Electric Incorporated Project, Ser A, RB, MBIA Insured
350 6.600%, 01/01/25 378
Department of Budget & Finance, Queens Health Systems, Ser A, RB
1,000 6.000%, 07/01/20 1,028
Department of Budget & Finance, Queens Health Systems, Ser A, RB
250 5.875%, 07/01/11 258
Department of Budget & Finance, Special Purpose Mortgage,
Kaiser Permanente Project, Ser A, RB
300 6.500%, 03/01/11 315
Department of Budget & Finance, Special Purpose Mortgage,
Kapiolani Health Care System Project, RB
760 6.300%, 07/01/08 802
Department of Budget & Finance, Special Purpose Mortgage,
Kapiolani Health Care System Project, RB
250 6.000%, 07/01/11 257
Department of Budget & Finance, Special Purpose Mortgage,
Kapiolani Health Care System Project, RB
250 6.400%, 07/01/13 259
Department of Budget & Finance, Special Purpose Mortgage,
St. Francis Medical Center Project, RB, FSA Insured
210 5.875%, 07/01/01 220
Department of Budget & Finance, Special Purpose Mortgage,
St. Francis Medical Center Project, RB, FSA Insured
930 6.500%, 07/01/22 985
Harbor Capital Improvement, Ser 1992, RB, FGIC Insured
225 6.500%, 07/01/19 239
Harbor Capital Improvement, RB, MBIA Insured
500 5.400%, 07/01/09 501
Harbor Capital Improvement, RB, MBIA Insured
500 5.250%, 07/01/11 487
21
<PAGE>
BISHOP STREET FUNDS
HAWAII MUNICIPAL BOND FUND -- STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------- -------
MUNICIPAL BONDS -- CONTINUED
Harbor Capital Improvement, RB, MBIA Insured
$480 7.000%, 07/01/17 $ 517
Hawaii County, GO, MBIA Insured
250 6.850%, 12/01/02 255
Hawaii County, Hawaii Refunding and Improvement, GO,
Ser A, FGIC Insured
320 5.300%, 05/01/05 331
Hawaii County, Ser A, GO, FGIC Insured
450 5.600%, 05/01/12 465
Hawaii County, Ser A, GO, FGIC Insured
190 5.600%, 05/01/13 196
Honolulu City & County Board of Water Supply, RB
250 5.250%, 07/01/07 255
Honolulu City & County Board of Water Supply, RB
750 5.800%, 07/01/16 764
Honolulu City & County Mortgage, Smith Berentia, Ser A,
RB, FHA & MBIA Insured
100 7.800%, 07/01/24 108
Honolulu City & County Ser A, GO
245 5.700%, 04/01/09 257
Honolulu City & County Waipahu Towers Project, Ser A, RB,
GNMA Collateral
200 6.900%, 06/20/35 212
Honolulu City & County, Ser A, GO
150 6.000%, 01/01/10 161
Honolulu City & County, Ser A, GO, MBIA Insured
500 6.000%, 11/01/10 539
Honolulu City & County, Ser D, GO, Pre-Refunded 12/01/00 @ 101
500 6.900%, 12/01/08 545
Kauai County, Refunding Ser A, GO, MBIA Insured
50 5.400%, 02/01/04 52
Kauai County, Ser B, GO, AMBAC Insured
285 5.750%, 08/01/06 304
Kauai County, Ser B, GO, MBIA Insured
260 5.900%, 02/01/13 269
Maui County, Board of Water Supply, Ser A, RB, FGIC Insured
520 6.000%, 12/01/01 555
Maui County, GO, FGIC Insured
115 5.000%, 09/01/08 115
Maui County, GO, FGIC Insured
200 5.000%, 09/01/09 198
Maui County, GO, FGIC Insured
100 5.125%, 12/15/12 98
Maui County, GO, MBIA Insured
250 5.750%, 06/01/13 258
22
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Face Market
Amount Value
(000) (000)
------- -------
MUNICIPAL BONDS -- CONTINUED
Maui County, Refunding GO, FGIC Insured
$ 290 5.125%, 12/15/10 $ 287
Maui County, Ser A, GO, FGIC Insured
250 5.750%, 01/01/11 255
State Airport Systems, RB, FGIC Insured
755 7.000%, 07/01/20 822
State Airport Systems, RB, MBIA Insured
1,000 6.250%, 07/01/06 1,086
State Airport Systems, Ser 2, RB
60 6.900%, 07/01/12 69
State Airport Systems, RB, FGIC Insured
300 7.200%, 07/01/00 322
State GO, Ser CE
250 5.250%, 06/01/11 248
State GO, Ser CJ
250 6.250%, 01/01/15 273
State GO, Ser Cl
300 5.250%, 03/01/16 289
State GO, Ser CM, FGIC Insured
500 6.000%, 12/01/09 543
State GO, Ser CN, FGIC Insured
500 5.500%, 03/01/14 503
State Highway Project, RB
275 5.250%, 07/01/10 275
State Highway Project, RB
510 5.000%, 07/01/11 490
State Highway Project, RB
500 5.250%, 07/01/12 492
State Housing, Finance & Development Corporation,
Affordable Rental Housing Program, Ser 1995 A, RB
350 6.000%, 07/01/15 354
State Housing, Finance & Development Corporation,
Affordable Rental Housing Program, Ser 1995 A, RB
250 6.050%, 07/01/22 253
State Housing, Finance & Development Corporation,
Single Family Mortgage Purchase, RB
1,200 5.550%, 07/01/07 1,233
State Housing, Finance & Development Corporation,
Single Family Mortgage Purchase, Ser B, RB, FNMA Collateral
595 5.700%, 07/01/13 603
State Housing, Finance & Development Corporation,
University of Hawaii Faculty Housing Project, RB, AMBAC Insured
700 5.650%, 10/01/16 709
--------
22,067
--------
23
<PAGE>
BISHOP STREET FUNDS
HAWAII MUNICIPAL BOND FUND -- STATEMENT OF NET ASSETS
(CONCLUDED)
Face Market
Amount/Shares Value
(000) (000)
------- -------
MUNICIPAL BONDS -- CONCLUDED
PUERTO RICO -- 10.4%
Commonwealth of Puerto Rico, GO, MBIA Insured
$1,000 6.500%, 07/01/13 $ 1,143
Aqueduct & Sewer Revenue, RB, Callable 07/01/06 @101.50
AMBAC Insured
500 5.000%, 07/01/19 469
Commonwealth Highway & Transportation Authority, Ser Z, FSA Insured
500 6.000%, 07/01/18 544
Housing, Banking & Finance Agency, Single Family Mortgage,
Affordable Housing Mortgage Portfolio I, RB,
GNMA/FNMA/FHLMC Collateral
300 6.100%, 10/01/15 306
Industrial Tourist Educational Medical Environmental Control
Facilities Hospital Auxilio Muto Obligation Group, RB, MBIA Insured
300 6.250%, 07/01/24 319
--------
2,781
--------
VIRGIN ISLANDS -- 0.6%
Housing Finance Authority, Single Family, GNMA Mortgage
Backed Securities Program, Ser A, RB
150 6.500%, 03/01/25 155
--------
TOTAL MUNICIPAL BONDS (Cost $25,026) 25,590
--------
CASH EQUIVALENT -- 2.2%
227 Dreyfus Tax Exempt Cash Management Fund 227
122 Nuveen Federal Tax Exempt Money Market 122
240 SEI Institutional Tax Free Portfolio 241
--------
TOTAL CASH EQUIVALENT (Cost $590) 590
--------
TOTAL INVESTMENTS (COST $25,616)-- 97.9% 26,180
--------
OTHER ASSETS AND LIABILITIES, NET-- 2.1% 564
--------
24
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Market
Value
(000)
-------
NET ASSETS:
Fund shares of Institutional Class A (unlimited authorization -- no par value)
based on 1,729,185 outstanding shares of beneficial interest $17,653
Fund Shares of Retail Class B (unlimited authorization -- no par value) based on
851,714 outstanding shares of beneficial interest 8,653
Undistributed net investment income 28
Accumulated net realized loss on investments (152)
Net unrealized appreciation on investments 562
--------
TOTAL NET ASSETS-- 100.0% $26,744
========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS A $10.36
--------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE-- RETAIL CLASS B $10.37
--------
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
FGIC -- FEDERAL GUARANTY INSURANCE CORPORATION
FHA -- FEDERAL HOUSING AUTHORITY
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA -- FINANCIAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
RB -- REVENUE BOND
SER -- SERIES
25
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
MONEY MARKET FUND & TREASURY MONEY MARKET FUND
Investment Adviser's Report:
In a widely predicted move, the Federal Reserve raised the Fed Funds rate at the
end of the first quarter by 25 basis points to 5.50%. The fixed income markets
immediately began to anticipate the possibility of additional increases in the
months ahead. However, the Fed kept the rate unchanged in the second quarter,
based on a slowing of the economy. The economic fundamentals that we have been
focusing upon remain intact: slower economic growth, low inflation, favorable
fiscal policies, and non-disruptive monetary policies. The Treasury market has
been further supported by shrinking Government debt and increasing foreign
investment. The yield on the 90 day U.S. T-Bill, now at 5.17%, is lower than at
the beginning of the year, while other yields are approaching their lowest
levels for the year.
The short term markets got a taste of credit deterioration in early 1997 as
Mercury Finance, a lender in the higher risk "sub-prime" sector, faced a
liquidity crisis and was unable to repay $500 million to its commercial paper
investors. Once again, the mutual fund sponsors which distributed exposed funds
digested the problem securities and no shareholders lost money. The Bishop
Street Money Market Funds had no exposure to this issue and continue to
concentrate only on high quality corporate obligations.
Management Discussion & Analysis of Fund Performance:
The Money Market Fund's holdings are concentrated in commercial paper, floating
rate notes, and bank notes/CDs. We increased the portfolios average weighted
maturity in May to approximately 55 days after economic data suggested stable
monetary policy. Going into June, we shortened the portfolio to take advantage
of quarter-end interest rate pressures.
We allowed the Treasury Money Market Fund's average weighted maturity to roll
down as we approached the May Fed meeting. As the Fed kept rates unchanged, we
extended the portfolio in early June. As this portfolio consists primarily of
repurchase agreements, we were able to take advantage of the corporate tax
payment date, June 15th, and quarter end, June 30th, when there was pressure on
the Fed Fund's rate.
With the Federal Reserve unlikely to move short term interest rates soon, the
toughest issue facing the fixed income market now is deciding whether the
economic cycle has turned or temporarily slowed following an extremely robust
period. We are inclined to think of the slowdown as temporary given the high
levels of employment and confidence which should translate into renewed consumer
spending. This makes us cautious on the market following the recent sharp
declines in yields.
26
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
MONEY MARKET FUND -- STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------- -------
COMMERCIAL PAPER -- 61.7%
Aon
$6,500 5.841%, 08/18/97 $ 6,451
Associates
7,500 5.764%, 08/25/97 7,436
Avco Financial Services
7,500 5.570%, 09/15/97 7,412
Bank of New York
7,780 5.550%, 07/14/97 7,764
Bear Stearns
7,500 5.689%, 07/07/97 7,493
BT Securities
7,500 5.600%, 07/25/97 7,472
Centre Square Funding
8,200 5.600%, 07/15/97 8,182
Centric Funding
3,000 5.570%, 07/10/97 2,996
Centric Funding
3,025 5.580%, 07/21/97 3,016
CPC International
7,000 5.600%, 08/20/97 6,946
Delmarva Power & Light
8,000 5.580%, 07/15/97 7,983
Enterprise Funding
6,119 5.696%, 07/21/97 6,100
Falcon Asset Securitization
8,000 5.706%, 07/22/97 7,974
Fleet Funding
4,570 5.570%, 07/31/97 4,549
General Electric Credit
6,815 5.550%, 07/30/97 6,785
General Motors Acceptance
6,000 5.495%, 07/14/97 5,988
General Motors Acceptance
3,000 5.800%, 11/14/97 2,934
Island Finance Puerto Rico
8,000 5.600%, 08/22/97 7,935
Kitty Hawk Funding
7,500 5.660%, 09/02/97 7,426
Morgan Stanley Group
8,000 5.580%, 07/21/97 7,975
New Center Asset Trust
8,000 5.280%, 08/14/97 7,948
27
<PAGE>
BISHOP STREET FUNDS
MONEY MARKET FUND -- STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------- -------
COMMERCIAL PAPER -- CONTINUED
Private Export Funding
$8,000 5.550%, 08/15/97 $ 7,944
Ranger Funding
3,000 5.717%, 07/18/97 2,992
Ranger Funding
5,000 5.650%, 07/30/97 4,977
--------
TOTAL COMMERCIAL PAPER (Cost $154,678) 154,678
--------
FLOATING RATE NOTES -- 20.3%
Bank of America (A)
5,000 5.650%, 07/01/97 4,998
Bank One (A)
9,000 5.660%, 07/01/97 8,995
CoreStates Capital (A)
5,000 5.610%, 07/21/97 5,000
Key Bank (A)
10,000 5.600%, 07/01/97 9,998
Peoples Security Life (A)
10,000 5.960%, 07/01/97 10,000
SMM Trust 96-B (A)
2,000 5.738%, 07/07/97 2,000
Travelers Insurance (A)
8,000 5.687%, 07/01/97 8,000
Travelers Insurance (A)
2,000 5.687%, 07/01/97 2,000
--------
TOTAL FLOATING RATE NOTES (Cost $50,991) 50,991
--------
CERTIFICATES OF DEPOSIT/BANK NOTES -- 15.7%
BankAmerica
4,000 5.570%, 11/07/97 3,994
Chase Manhattan Bank
10,000 5.500%, 07/01/97 10,000
First National Bank of Boston
7,500 5.690%, 10/14/97 7,500
Morgan Guaranty NY
5,000 5.965%, 06/22/98 4,998
Regions Bank
5,000 5.650%, 10/31/97 5,000
Wilmington Trust
3,000 5.430%, 08/19/97 3,000
Wilmington Trust
5,000 5.900%, 11/19/97 5,000
--------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $39,492) 39,492
--------
28
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Face Market
Amount Value
(000) (000)
------- -------
BANKERS ACCEPTANCE -- 2.0%
Bank of Hawaii
$5,000 5.650%, 09/10/97 $ 4,944
--------
TOTAL BANKERS ACCEPTANCE (Cost $4,944) 4,944
--------
REPURCHASE AGREEMENTS -- 0.4%
Lehman Brothers
6.00%, dated 06/30/97, matures 07/01/97, repurchase
price $879,147 (collateralized by U.S. Treasury STRIPS,
par value $4,150,000, 0.00%, matures 05/15/19:
879 market value $911,631) 879
--------
TOTAL REPURCHASE AGREEMENTS (Cost $879) 879
--------
TOTAL INVESTMENTS (COST$250,984)-- 100.1% 250,984
--------
OTHER ASSETS AND LIABILITIES, NET (0.1%) (183)
--------
NET ASSETS:
Fund shares of Institutional Class A (unlimited authorization -- no par value)
based on 246,721,800 outstanding shares of beneficial interest 246,721
Fund Shares of Retail Class B (unlimited authorization -- no par value) based on
4,107,936 outstanding shares of beneficial interest 4,108
Undistributed net investment income 4
Accumulated net realized loss on investments (32)
--------
TOTAL NET ASSETS --100.0% $250,801
========
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
--------
(A) FLOATING RATE SECURITY--THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS IS
THE RATE IN EFFECT ON JUNE 30, 1997. THE DATE SHOWN IS THE NEXT SCHEDULED
RESET DATE.
STRIPS -- SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
29
<PAGE>
BISHOP STREET FUNDS
TREASURY MONEY MARKET FUND -- STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------- -------
U.S. TREASURY OBLIGATIONS -- 11.0%
U.S. Treasury Notes
$5,000 5.250%, 12/31/97 $ 4,990
4,000 5.125%, 02/28/98 3,983
5,000 5.125%, 03/31/98 4,979
6,000 6.125%, 03/31/98 6,017
4,000 5.875%, 04/30/98 4,000
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $23,969) 23,969
--------
REPURCHASE AGREEMENTS -- 89.3%
Chase Manhattan
5.95%, dated 06/30/97, matures 07/01/97, repurchase
price $45,007,438 (collateralized by various U.S. Treasury
Bills, total par value $44,289,000, 10/23/97-06/25/98, various
U.S. Treasury Notes, total par value $3,029,000, 6.25%-7.12%,
45,000 06/30/98-02/15/07: total market value $45,901,962) 45,000
Greenwich
6.03%, dated 06/30/97, matures 07/01/97, repurchase price
$40,006,700 (collateralized by various U.S. Treasury Notes, total
par value $40,465,000, 5.00%-5.875%, 02/15/99-03/31/99:
40,000 total market value $40,803,807) 40,000
JP Morgan
5.95%, dated 06/30/97, matures 07/01/97, repurchase price
$29,843,932 (collateralized by U.S. Treasury Note, par value
$28,820,000, 8.25%, matures 07/15/98: market
29,839 value $30,594,779) 29,839
Lehman Brothers
6.00%, dated 06/30/97, matures 07/01/97, repurchase price
$35,005,833 (collateralized by various U.S. Treasury STRIPS,
total par value $51,909,000, 0.00%, 08/15/01-05/15/14: total
35,000 market value $36,708,834) 35,000
UBS
5.95%, dated 06/30/97, matures 07/01/97, repurchase price
$45,007,438 (collateralized by various U.S. Treasury Bonds, total
par value $36,840,000, 8.125%-9.00%, 11/15/18-08/15/20:
45,000 total market value $45,904,730) 45,000
--------
TOTAL REPURCHASE AGREEMENTS (COST$194,839) 194,839
--------
TOTAL INVESTMENTS (COST $218,808)-- 100.3% 218,808
--------
30
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
Market
Value
(000)
-------
OTHER ASSETS AND LIABILITIES, NET (0.3%) $ (730)
--------
NET ASSETS:
Fund shares of Institutional Class A (unlimited authorization -- no par value)
based on 218,101,308 outstanding shares of beneficial interest 218,102
Distributions in excess of net investment income (2)
Accumulated net realized loss on investments (22)
--------
TOTAL NET ASSETS -- 100.0% $218,078
========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS A $1.00
--------
STRIPS -- SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL OF SECURITIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
31
<PAGE>
BISHOP STREET FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
High Hawaii Treasury
Grade Municipal Money Money
Equity Income Bond Market Market
Fund (2) Fund (2) Fund Fund Fund
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest Income $ 79 $650 $699 $6,892 $5,451
Dividend Income 408 -- -- -- --
- -----------------------------------------------------------------------------------------
Total Investment Income 487 650 699 6,892 5,451
- -----------------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fee 181 61 45 368 301
Investment Adviser Fee Waiver (46) (27) (43) (117) (187)
Management Fee 49 20 26 245 200
Management Fee Waiver (12) (5) (24) (110) (93)
Shareholder Servicing Fee 50 21 23 207 174
Shareholder Servicing Fee Waiver (30) (12) (20) (128) (104)
Custody Fees 8 2 2 27 10
Transfer Agent Fees 11 6 16 43 28
Registration Fees 10 4 -- 6 21
Distribution Fees (1) -- -- 9 2 --
Distribution Fee Waiver -- -- (9) -- --
Trustees Fees 4 1 2 15 10
Printing Fees 3 2 1 20 15
Professional Fees 6 2 2 35 34
Amortization of Deferred
Organizational Costs 1 1 -- 5 2
Miscellaneous Expenses 9 4 2 12 7
- -----------------------------------------------------------------------------------------
Total Expenses 244 80 32 630 418
- -----------------------------------------------------------------------------------------
Net Investment Income 243 570 667 6,262 5,033
- -----------------------------------------------------------------------------------------
Net Realized Gain (Loss) on Investments (636) 1 (7) (1) (36)
Change in Unrealized Appreciation
(Depreciation) on Investments 7,298 (59) 66 -- --
- -----------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments 6,662 (58) 59 (1) (36)
- -----------------------------------------------------------------------------------------
Increase in Net Assets
Resulting from Operations $6,905 $512 $726 $6,261 $4,997
=========================================================================================
<FN>
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 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
32
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Equity High Grade
Fund Income Fund
- -----------------------------------------------------------------------------------------
01/31/97 01/31/97
to 06/30/97 (1) to 06/30/97 (1)
- -----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Income $ 243 $ 570
Net Realized Gain (Loss) on Investments (636) 1
Change in Unrealized Appreciation (Depreciation)
on Investments 7,298 (59)
- -----------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 6,905 512
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class A Shares (243) (570)
Capital Gains:
Institutional Class A Shares -- --
- -----------------------------------------------------------------------------------------
Total Distributions (243) (570)
- -----------------------------------------------------------------------------------------
Change in Net Assets 6,662 (58)
- -----------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Proceeds from Shares Issued 57,491 24,397
Reinvestments of Cash Distributions 243 570
Cost of Shares Redeemed (1,100) --
- -----------------------------------------------------------------------------------------
Total Institutional Capital Share Transactions 56,634 24,967
- -----------------------------------------------------------------------------------------
Net Increase in Net Assets
From Share Transactions 56,634 24,967
- -----------------------------------------------------------------------------------------
Total Increase in Net Assets 63,296 24,909
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period -- --
- -----------------------------------------------------------------------------------------
End of Period $63,296 $24,909
=========================================================================================
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Shares Issued 5,748 2,439
Shares Issued in Lieu of Cash Distributions 23 58
Shares Redeemed (103) --
- -----------------------------------------------------------------------------------------
Total Institutional Capital Share Transactions 5,668 2,497
- -----------------------------------------------------------------------------------------
Net Increase (Decrease) in Capital Shares $ 5,668 $ 2,497
=========================================================================================
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) COMMENCED OPERATIONS ON JANUARY 31, 1997.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
33
<PAGE>
BISHOP STREET FUNDS
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Hawaii Municipal
Bond Fund
- --------------------------------------------------------------------------------------------
01/01/97 01/01/96
to 06/30/97 to 12/31/96
- --------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Income $ 667 $ 1,196
Net Realized Loss on Investments (7) (145)
Change in Unrealized Appreciation on Investments 66 9
- --------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 726 1,060
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class A Shares (438) (717)
Retail Class B Shares (229) (451)
Capital Gains:
Institutional Class A Shares -- (25)
Retail Class B Shares -- (16)
- --------------------------------------------------------------------------------------------
Total Distributions (667) (1,209)
- --------------------------------------------------------------------------------------------
Changes in Net Assets 59 (149)
- --------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Proceeds from Shares Issued 3,001 7,259
Reinvestments of Cash Distributions 166 275
Cost of Shares Redeemed (701) (1,460)
- --------------------------------------------------------------------------------------------
Total Institutional Capital Share Transactions 2,466 6,074
- --------------------------------------------------------------------------------------------
Retail Class B Shares:
Proceeds from Shares Issued 403 4,344
Reinvestments of Cash Distributions 135 310
Cost of Shares Redeemed (568) (2,443)
- --------------------------------------------------------------------------------------------
Total Retail Capital Share Transactions (30) 2,211
- --------------------------------------------------------------------------------------------
Net Increase in Net Assets From Capital Share Transactions 2,436 8,285
- --------------------------------------------------------------------------------------------
Total Increase in Net Assets 2,495 8,136
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 24,249 16,113
- --------------------------------------------------------------------------------------------
End of Period $26,744 $24,249
============================================================================================
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Shares Issued 291 709
Shares Issued in Lieu of Cash Distributions 16 27
Shares Redeemed (69) (144)
- --------------------------------------------------------------------------------------------
Total Institutional Capital Share Transactions 238 592
- --------------------------------------------------------------------------------------------
Retail Class B Shares:
Shares Issued 39 424
Shares Issued in Lieu of Cash Distributions 14 30
Shares Redeemed (55) (239)
- --------------------------------------------------------------------------------------------
Total Retail Capital Share Transactions (2) 215
- --------------------------------------------------------------------------------------------
Net Increase in Capital Shares 236 807
============================================================================================
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
34
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Treasury
Money Market Money Market
Fund Fund
- ----------------------------------------------------------------------------------------------
01/01/97 01/01/96 01/01/97 05/01/96 (1)
to 06/30/97 to 12/31/96 to 06/30/97 to 12/31/96
- ----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net Investment Income $ 6,262 $ 16,365 $ 5,033 $ 5,219
Net Realized Gain (Loss) on Investments (1) (35) (36) 14
- ----------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 6,261 16,330 4,997 5,233
- ----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class A Shares (6,152) (16,188) (5,035) (5,219)
Retail Class B Shares (107) (176) -- --
Capital Gains:
Institutional Class A Shares -- -- -- --
Retail Class B Shares -- -- -- --
- ----------------------------------------------------------------------------------------------
Total Distributions (6,259) (16,364) (5,035) (5,219)
- ----------------------------------------------------------------------------------------------
Changes in Net Assets 2 (34) (38) 14
- ----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class A Shares:
Proceeds from Shares Issued 267,341 541,728 800,036 1,011,211
Reinvestments of Cash Distributions 3 13 -- --
Cost of Shares Redeemed (294,777) (572,703) (762,121) (831,024)
- ----------------------------------------------------------------------------------------------
Total Institutional Capital Share
Transactions (27,433) (30,962) 37,915 180,187
- ----------------------------------------------------------------------------------------------
Retail Class B Shares:
Proceeds from Shares Issued 1,135 4,790 -- --
Reinvestments of Cash Distributions 103 148 -- --
Cost of Shares Redeemed (1,649) (4,077) -- --
- ----------------------------------------------------------------------------------------------
Total Retail Capital Share Transactions (411) 861 -- --
- ----------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
From Capital Share Transactions (27,844) (30,101) 37,915 180,187
- ----------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (27,842) (30,135) 37,877 180,201
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 278,643 308,778 180,201 --
- ----------------------------------------------------------------------------------------------
End of Period $250,801 $278,643 $218,078 $180,201
==============================================================================================
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) COMMENCED OPERATIONS ON MAY 1, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
N
35
<PAGE>
BISHOP STREET FUNDS SEMI-ANNUAL REPORT -- JUNE 30, 1997
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, 1997 (UNAUDITED)
AND THE PERIODS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT ACTIVITIES DISTRIBUTIONS FROM
----------------------------------- ------------------
NET RATIO OF
NET REALIZED NET NET EXPENSES
ASSET AND ASSET ASSETS, TO
VALUE, NET UNREALIZED NET VALUE, END OF AVERAGE
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT CAPITAL END OF TOTAL PERIOD NET
OF PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD RETURN (7) (000) ASSETS
--------- ---------- -------------- ---------- ------- ------ ---------- ------ -------
- ------------
EQUITY FUND
- ------------
INSTITUTIONAL CLASS A
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1997(1): $10.00 $0.04 $ 1.17 $(0.04) -- $11.17 12.16%+ $ 63,296 1.00%*
- ----------------------
HIGH GRADEINCOME FUND
- ----------------------
INSTITUTIONAL CLASS A
1997(1): $10.00 $0.23 $(0.02) $(0.23) -- $ 9.98 2.17%+ $ 24,909 0.80%*
- ---------------------------
HAWAII MUNICIPAL BOND FUND
- ---------------------------
INSTITUTIONAL CLASS A
1997: $10.34 $0.27 $ 0.02 $(0.27) -- $10.36 2.82%+ $ 17,913 0.25%*
1996: $10.47 $0.55 $(0.12) $(0.55) $(0.01) $10.34 4.21% $ 15,408 0.21%
1995(2): $10.00 $0.45 $ 0.47 $(0.45) -- $10.47 10.91%++ $ 9,411 0.27%*
RETAIL CLASS B
1997: $10.35 $0.27 $ 0.02 $(0.27) -- $10.37 2.82%+ $ 8,831 0.25%*
1996: $10.47 $0.55 $(0.11) $(0.55) $(0.01) $10.35 4.31% $ 8,841 0.21%
1995(3): $10.00 $0.45 $ 0.47 $(0.45) -- $10.47 10.85%++ $ 6,702 0.33%*
- ------------------
MONEY MARKET FUND
- ------------------
INSTITUTIONAL CLASS A
1997: $1.00 $0.03 -- $(0.03) -- $ 1.00 5.12%++ $246,695 0.50%*
1996: $1.00 $0.05 -- $(0.05) -- $ 1.00 5.12% $274,125 0.49%
1995(4): $1.00 $0.05 -- $(0.05) -- $ 1.00 5.67%++ $305,120 0.50%*
RETAIL CLASS B
1997: $1.00 $0.02 -- $(0.02) -- $ 1.00 5.04%++ $ 4,106 0.60%*
1996: $1.00 $0.05 -- $(0.05) -- $ 1.00 5.02% $ 4,518 0.59%
1995(5): $1.00 $0.05 -- $(0.05) -- $ 1.00 5.55%++ $ 3,658 0.60%*
- ---------------------------
TREASURY MONEY MARKET FUND
- ---------------------------
INSTITUTIONAL CLASS A
1997: $1.00 $0.02 -- $(0.02) -- $ 1.00 5.04%++ $218,078 0.42%*
1996(6): $1.00 $0.03 -- $(0.03) -- $ 1.00 5.08%++ $180,201 0.42%*
RATIO OF
NET INVESTMENT
EXPENSES TO RATIO OF INCOME TO
AVERAGE NET AVERAGE
NET ASSETS INVESTMENT NET ASSETS
EXCLUDING FEE INCOME TO EXCLUDING FEE PORTFOLIO AVERAGE
WAIVERS AND AVERAGE WAIVERS AND TURNOVER COMMISSION
REIMBURSEMENTS NET ASSETS REIMBURSEMENTS RATE RATE (8)
-------------- ---------- -------------- --------- ----------
- ------------
EQUITY FUND
- ------------
INSTITUTIONAL CLASS A
<C> <C> <C> <C> <C> <C>
1997(1): 1.23%* 0.99%* 0.76%* 13% $0.0705
- ----------------------
HIGH GRADEINCOME FUND
- ----------------------
INSTITUTIONAL CLASS A
1997(1): 1.12%* 5.67%* 5.35%* 11% n/a
- --------------------------
HAWAII MUNICIPAL BOND FUND
- --------------------------
INSTITUTIONAL CLASS A
1997: 0.77%* 5.22%* 4.70%* 17% n/a
1996: 0.85% 5.33% 4.68% 27% n/a
1995(2): 1.10%* 5.24%* 4.40%* 68% n/a
RETAIL CLASS B
1997: 0.98%* 5.22%* 4.49%* 17% n/a
1996: 1.05% 5.33% 4.48% 27% n/a
1995(3): 1.45%* 5.14%* 4.02%* 68% n/a
- ------------------
MONEY MARKET FUND
- ------------------
INSTITUTIONAL CLASS A
1997: 0.69%* 5.12%* 4.93%* -- n/a
1996: 0.60% 5.01% 4.90% -- n/a
1995(4): 0.66%* 5.50%* 5.34%* -- n/a
RETAIL CLASS B
1997: 0.79%* 5.02%* 4.83%* -- n/a
1996: 0.76% 4.91% 4.74% -- n/a
1995(5): 0.76%* 5.26%* 5.10%* -- n/a
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
INSTITUTIONAL CLASS A
1997: 0.70%* 5.03%* 4.75%* -- n/a
1996(6): 0.65%* 4.96%* 4.74%* -- n/a
<FN>
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
++ TOTAL RETURN HAS BEEN ANNUALIZED.
* ANNUALIZED.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) COMMENCED OPERATIONS ON JANUARY 31, 1997.
(2) COMMENCED OPERATIONS ON FEBRUARY 15, 1995.
(3) COMMENCED OPERATIONS ON FEBRUARY 16, 1995.
(4) COMMENCED OPERATIONS ON JANUARY 30, 1995.
(5) COMMENCED OPERATIONS ON FEBRUARY 17, 1995.
(6) COMMENCED OPERATIONS ON MAY 1, 1996.
(7) TOTAL RETURN DOES NOT REFLECT APPLICABLE SALES CHARGE FOR THE HAWAII
MUNICIPAL BOND FUND.
(8) AVERAGE COMMISSION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES
DURING THE PERIOD.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
36 & 37
<PAGE>
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 five funds (the "Funds") which
includes the Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund,
Money Market Fund and the Treasury 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.
The Funds' prospectus provides a description of each Fund's investment
objectives, policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust.
SECURITY VALUATION
Bishop Street Fund investments in equity securities which are traded on a
national securities exchange (or reported on the NASDAQ national market system)
are stated at the last quoted sales price if readily available for such equity
securities on each business day, other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt obligations
exceeding sixty days to maturity which are actively traded are valued by an
independent pricing service 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.
Investment securities held by the Money Market and Treasury Money Market
Funds 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.
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.
38
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
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.
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 High Grade Income Fund, Hawaii Municipal Bond Fund, the
Money Market Fund and the Treasury Money Market Fund. The Equity Fund declares
and pays such dividends on a quarterly basis. 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 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 prior to the end of the amortization period, the proceeds 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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
39
<PAGE>
BISHOP STREET FUNDS
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 0.74% of
the average daily net assets of the Equity Fund, 0.55% of the average daily net
assets of the High Grade Income Fund, 0.35% of the average daily net assets of
the Hawaii Municipal Bond Fund, and .30% of the Money Market and Treasury Money
Market Funds. The Adviser may from time to time waive a portion of its fee in
order to limit the operating expenses of a Fund.
Wellington Management Company (The "Sub-Adviser") serves as the investment
sub-adviser for the Money Market Fund and the Treasury 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 0.075%
of the average daily net assets of the Fund up to $500 million and 0.020% 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 Fund Resources ("SEI"), a wholly owned subsidiary of SEI
Investments, acts as the Trust's Administrator. Under the terms of the
Agreement, SEI is entitled to receive an annual fee of 0.20% of the average
daily net assets of each Fund. SEI has voluntarily agreed to waive a portion of
its fee 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 Investments Distribution Co. ("SEI Investments"), wholly owned subsidiary
of SEI Investments Company, 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 0.10%
and 0.25% of their average daily net assets for the Money Market Fund and Hawaii
Municipal Bond Fund, respectively. SEI Investments has voluntarily agreed to
waive the distribution charge for the Hawaii Municipal Bond Fund in order to
limit operating expenses for the Retail Class B shares. Effective May 15, 1997
The Board of Trustees terminated the Distribution Plan for Retail Class B shares
that had previously been approved pursuant to Rule 12b-1.
Certain officers of the Trust are also officers of the Administrator. Such
officers are paid no fees by the Trust.
40
<PAGE>
SEMI-ANNUAL REPORT -- JUNE 30, 1997
(UNAUDITED)
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 June 30,
1997 are presented below for the Funds.
FUND INVESTMENT TRANSACTIONS
<TABLE>
<CAPTION>
EQUITY HIGH GRADE HAWAII MUNICIPAL
FUND INCOME FUND BOND FUND
-------- ----------- ----------------
Purchases
<S> <C> <C> <C>
U.S. Government Securities $ -- $18,418,398 $ --
Other 60,788,932 7,698,976 6,682,950
Sales
U.S. Government Securities $ -- $1,701,531 $ --
Other 7,180,012 680,106 4,282,101
</TABLE>
At June 30, 1997 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 June 30, 1997
for the Funds is as follows:
<TABLE>
<CAPTION>
EQUITY HIGH GRADE HAWAII MUNICIPAL
FUND INCOME FUND BOND FUND
---------- ----------- ----------------
<S> <C> <C> <C>
Gross Unrealized Appreciation $7,830,920 $ 17,600 $580,916
Gross Unrealized Depreciation (533,258) (76,987) (18,299)
---------- -------- --------
Net Unrealized Appreciation
(Depreciation) $7,297,662 $(59,387) $562,617
========== ======== ========
</TABLE>
41
<PAGE>
NOTES
42
<PAGE>
NOTES
43
<PAGE>
NOTES
44
<PAGE>
[BISHOP STREET FUNDS LOGO]
THANK YOU FOR YOUR INVESTMENT IN
BISHOP STREET FUNDS.
- -----------------------------------------------------------------------------
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR
THE GENERAL INFORMATION OF BISHOP STREET FUNDS' SHAREHOLDERS. THIS REPORT IS
NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
SHARES OF BISHOP STREET FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY FIRST HAWAIIAN BANK OR ANY OF ITS SUBSIDIARIES. SUCH SHARES ARE
ALSO NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN SHARES OF MUTUAL
FUNDS INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SEI
INVESTMENTS DISTRIBUTION CO. SERVES AS DISTRIBUTOR FOR BISHOP STREET FUNDS
AND IS NOT AFFILIATED WITH FIRST HAWAIIAN BANK.
- -----------------------------------------------------------------------------
<PAGE>
[BISHOP STREET LOGO]
INVESTMENT ADVISER
FIRST HAWAIIAN BANK
HONOLULU, HI 96813
ADMINISTRATOR
SEI FUND RESOURCES
WAYNE, PA 19087
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
TRANSFER AGENT
DST SYSTEMS INC.
KANSAS CITY, MO 64141
CUSTODIAN
CHASE MANHATTAN BANK
NY, NY 10041
LEGAL COUNSEL
MORGAN,LEWIS & BOCKIUS LLP
PHILADELPHIA, PA 19103
AUDITORS
COOPERS & LYBRAND LLP
PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT
BISHOP STREET FUNDS,
CALL 1-800-262-9565
OR YOUR INVESTMENT SPECIALIST
BSF-F-004-03
