<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
FILE NO. 33-80514
FILE NO. 811-8572
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 5 /X/
AND
REGISTRATION STATEMENT UNDER
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 6 /X/
------------------------
BISHOP STREET FUNDS
(Exact Name of Registrant as Specified in Charter)
C/O THE CT CORPORATION SYSTEM
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 254-1000
DAVID G. LEE
c/o SEI Investments Company
Oaks, Pennsylvania 19456
(Name and Address of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
Richard W. Grant, Esq. John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius Morgan, Lewis & Bockius
LLP LLP
2000 One Logan Square 1800 M Street, N.W.
Philadelphia, Pennsylvania Washington, D.C. 20036
19103
</TABLE>
------------------------
It is proposed that this filing will become effective (check appropriate box)
<TABLE>
<C> <S>
/X/ immediately upon filing pursuant to paragraph (b)
/ / on [date] pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on [date] pursuant to paragraph (a) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)
</TABLE>
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of units of beneficial interest have been registered
by this Registration Statement. Registrant's Rule 24f-2 notice for fiscal year
ended December 31, 1996 was filed on February 28, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BISHOP STREET FUNDS
CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 5
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------------------------------------------------------- --------------------------------------------------
<S> <C> <C>
PART A--
Item 1. Cover Page........................................ Cover Page
Item 2. Synopsis.......................................... Summary; Expense Summary
Item 3. Condensed Financial Information................... *
Item 4. General Description of Registrant................. The Trust; Investment Objectives and Policies;
General Investment Policies; Risk Factors;
Description of Permitted Investments and Risk
Factors; Investment Limitations; General
Information--The Trust
Item 5. Management of the Trust........................... General Information--Trustees of the Trust; The
Adviser; The Sub-Adviser(s); The Administrator;
The Transfer Agent; The Distributor
Item 6. Capital Stock and Other Securities................ General Information--Voting Rights; General
Information--Shareholder Inquiries; Performance;
General Information--Dividends; Taxes
Item 7. Purchase of Securities Being Offered.............. How to Purchase Retail Class B Shares; How to
Purchase Institutional Class A Shares; Sales
Charges; Exchanges; Redemption of Shares
Item 8. Redemption or Repurchase.......................... How to Purchase Retail Class B Shares; How to
Purchase Institutional Class A Shares; Sales
Charges; Exchanges; Redemption of Shares
Item 9. Pending Legal Proceedings......................... *
PART B--
Item 10. Cover Page........................................ Cover Page
Item 11. Table of Contents................................. Table of Contents
Item 12. General Information and History................... The Corporation
Item 13. Investment Objectives and Policies................ Description of Permitted Investments; Investment
Limitations; Description of Shares
Item 14. Management of the Registrant...................... Directors and Officers of the Corporation; The
Administrator
Item 15. Control Persons and Principal Holders of
Securities....................................... Directors and Officers of the Fund; 5%
Shareholders
Item 16. Investment Advisory and Other Services............ The Adviser; The Sub-Adviser(s); The
Administrator; The Distributor; Experts
Item 17. Brokerage Allocation.............................. Portfolio Transactions
Item 18. Capital Stock and Other Securities................ Description of Shares
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------------------------------------------------------- --------------------------------------------------
<S> <C> <C>
Item 19. Purchase, Redemption, and Pricing of Securities
Being Offered.................................... Purchase and Redemption of Shares; Determination
of Net Asset Value
Item 20. Tax Status........................................ Taxes
Item 21. Underwriters...................................... The Distributor
Item 22. Calculation of Yield Quotations................... Performance
Item 23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
- ------------------------
* Not Applicable
ii
<PAGE>
PROSPECTUS
BISHOP STREET FUNDS
INVESTMENT ADVISER:
FIRST HAWAIIAN BANK
BISHOP STREET FUNDS (the "Trust") is a mutual fund that seeks to provide a
convenient means of investing in one or more professionally managed portfolios
of securities. The prospectus relates to the following Funds (each a "Fund"):
BISHOP STREET HIGH GRADE INCOME FUND
BISHOP STREET HAWAII MUNICIPAL BOND FUND
BISHOP STREET EQUITY FUND
BISHOP STREET MONEY MARKET FUND
BISHOP STREET TREASURY MONEY MARKET FUND
An investor may purchase either Retail Class B or Institutional Class A shares
of each Fund. Excluding the Money Market and Treasury Money Market Funds, Retail
Class B shares are sold with a front-end sales load of up to 3.5% that will be
reduced or waived in certain circumstances. Retail Class B shares of the Money
Market and Treasury Money Market Funds and Institutional Class A shares of each
Fund are sold without a front-end sales load. First Hawaiian Bank, the Funds'
investment adviser, is an affiliate of First Hawaiian, Inc.
INSTITUTIONAL CLASS A SHARES OF THE FUNDS ARE OFFERED PRIMARILY TO AGENCY,
FIDUCIARY, CUSTODIAL AND ADVISORY CLIENTS OF FIRST HAWAIIAN BANK. RETAIL CLASS B
SHARES OF THE BISHOP STREET HIGH GRADE INCOME, HAWAII MUNICIPAL BOND AND EQUITY
FUNDS ARE OFFERED PRIMARILY TO INDIVIDUALS. RETAIL CLASS B SHARES OF THE BISHOP
STREET MONEY MARKET FUND AND THE BISHOP STREET TREASURY MONEY MARKET FUND ARE
OFFERED PRIMARILY TO INDIVIDUALS AND CASH SWEEP CUSTOMERS OF FIRST HAWAIIAN
BANK.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING FIRST HAWAIIAN BANK OR ITS AFFILIATES. THE
TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth concisely the basic information about the Funds and
the Trust that a prospective investor should know before investing. Investors
are advised to read this Prospectus and retain it for future reference. A
Statement of Additional Information dated April , 1997 has been filed with the
Securities and Exchange Commission and is available without charge by calling
1-800-262-9565. The Statement of Additional Information is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
APRIL 30, 1997
<PAGE>
2
SUMMARY
BISHOP STREET FUNDS (the "Trust") is an open-end management investment company
which provides a convenient way to invest in professionally managed portfolios
of securities. This Summary provides basic information about the Retail Class B
and Institutional Class A shares of the Funds.
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF EACH FUND? The High Grade
Income Fund seeks high total return consistent with prudent investment risk by
investing primarily in high grade U.S. dollar-denominated bonds and debentures
issued by U.S. and foreign corporations. The Hawaii Municipal Bond Fund seeks to
provide high current income that is exempt from Federal and State of Hawaii
income taxes by investing primarily in bonds and notes issued by the State of
Hawaii, its agencies, instrumentalities and political sub-divisions ("Hawaii
Municipal Securities"). The Equity Fund seeks long-term growth of capital with a
secondary goal of current income by investing primarily in common stocks of
domestic issuers and U.S. dollar denominated equity securities of foreign
issuers. The Money Market Fund seeks to preserve principal value and maintain a
high degree of liquidity while providing current income by investing in U.S.
dollar-denominated, high quality short-term debt securities. The Treasury Money
Market Fund seeks to preserve principal value and maintain a high degree of
liquidity while providing current income. There is no assurance that any Fund
will meet its investment objective. See "Investment Objectives and Policies" and
"Description of Permitted Investments and Risk Factors."
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE FUNDS? The High Grade
Income Fund, Hawaii Municipal Bond Fund and Equity Fund shares will fluctuate in
value with changes in the prices of their underlying portfolio securities.
Values of fixed income securities and, correspondingly, share prices of Funds
invested in such securities tend to vary inversely with interest rates and may
be affected by other market and economic factors as well. Common stocks in which
the Equity Fund invests may be more volatile and may fluctuate in value more
than other types of investments. The Hawaii Municipal Bond Fund is a
non-diversified portfolio that invests primarily in Hawaii Municipal Securities.
Therefore, the value of its shares may be especially affected by factors
pertaining to the Hawaiian economy and other factors specially affecting the
ability of issuers of Hawaii Municipal Securities to meet their obligations.
There are other risks involved in the ownership of a mutual fund. The Money
Market and Treasury Money Market Funds seek to maintain a net asset value of
$1.00 per share, but there can be no assurance that each Fund will be able to do
so on a continuous basis. There are other risks involved in the ownership of
money market mutual funds. See "Description of Permitted Investments and Risk
Factors."
WHO IS THE ADVISER? First Hawaiian Bank serves as the Adviser of the Funds.
Wellington Management Company, LLP serves as the Sub-Adviser of the Money Market
and Treasury Money Market Funds. See "Expense Summary" and "The Adviser."
WHO IS THE ADMINISTRATOR? SEI Fund Resources serves as the Administrator and
shareholder servicing agent of the Trust. See "Expense Summary" and "The
Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Trust. See "The Transfer Agent."
WHO IS THE DISTRIBUTOR? SEI Financial Services Company serves as distributor of
the Trust's shares. See "The Distributor."
HOW DO I PURCHASE, EXCHANGE OR REDEEM SHARES? Purchases, exchanges or
redemptions of shares may be made on any day on which both the New York Stock
Exchange and Federal Reserve wire system are open for business ("Business Days")
except for Hawaii state banking holidays. A purchase, exchange or redemption
order will be executed at a per share price equal to the net asset value per
share next determined after the receipt of the purchase, exchange or redemption
order, plus any applicable sales charges. Orders must be placed prior to
<PAGE>
3
4:00 p.m., Eastern Time, on any Business Day for the order to be effective that
day for the High Grade Income, Hawaii Municipal Bond and Equity Funds. Orders
for the Money Market and Treasury Money Market Funds must be placed prior to
1:00 p.m., Eastern Time, on any Business Day for the order to be effective that
day. The minimum initial investment is $1,000 ($500 for IRAs and $500 for
officers, directors, or employees of First Hawaiian Bank and its affiliates).
Subsequent purchases of shares must be at least $100. Net asset value is
determined as of 4:00 p.m., Eastern Time, on each Business Day for the High
Grade Income, Hawaii Municipal Bond and Equity Funds. Net asset value for the
Money Market and Treasury Money Market Funds is determined as of 1:00 p.m.,
Eastern Time, on each Business Day. See "Purchase of Shares," "Exchange of
Shares," and "Redemption of Shares."
HOW ARE DIVIDENDS PAID? Substantially all of the net investment income
(exclusive of capital gains) of the High Grade Income Fund, Hawaii Municipal
Bond Fund and the Equity Fund is distributed in the form of periodic dividends.
Substantially all of the net investment income (exclusive of capital gains) of
the Money Market and Treasury Money Market Funds is declared daily and
distributed in the form of monthly dividends. Any capital gain is distributed at
least annually. Distributions are paid in additional shares unless the
Shareholder elects to take the payment in cash. See "Dividends."
<PAGE>
4
EXPENSE SUMMARY
<TABLE>
<CAPTION>
RETAIL CLASS B SHARES
----------------------------------
HAWAII
MUNICIPAL HIGH GRADE
BOND INCOME EQUITY
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................. 3.50% 3.50% 3.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................. None None None
Maximum Contingent Deferred Sales Charge.............................. None None None
Exchange Fee.......................................................... None None None
Wire Redemption Fee................................................... $15 $15 $15
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
- ----------------------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1).................................. .00% .33% .53%
Rule 12b-1 Fee(2)..................................................... .00% .00% .00%
Other Expenses (after expense reimbursements)(3)...................... .21% .47% .47%
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers and expense reimbursements)(4)................... .21% .80% 1.00%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) These amounts for the Hawaii Municipal Bond Fund have been restated to
reflect reductions in fee waiver and expense reimbursement arrangements
effective in the current fiscal year. As discussed below, the Adviser and
the Administrator have agreed to waive a portion of their fee, and reserve
the right to terminate their waivers at any time in their sole discretion.
Absent such fee waivers, advisory fees would be .55% for the High Grade
Income Fund, .35% for the Hawaii Municipal Bond Fund, and .74% for the
Equity Fund.
(2) The Distributor has agreed to waive its right to receive fees under the Rule
12b-1 Distribution Plan. Absent this waiver, the maximum Rule 12b-1 Fee
would be .25%.
(3) These amounts represent estimates for the current fiscal year for the High
Grade Income and Equity Funds. The Adviser has agreed on a voluntary basis
to reimburse expenses so that the total operating expenses of the Hawaii
Municipal Bond Fund will be maintained at .21%. Amounts reimbursed by the
Adviser may result in taxable income for shareholders of that Fund. Other
Expenses for the Hawaii Municipal Bond Fund have been restated to reflect
fees for the current fiscal year and, absent expense reimbursements, Other
Expenses for Hawaii Municipal Bond Fund would be .41%.
(4) These amounts for the Hawaii Municipal Bond Fund have been restated to
reflect reductions in fee waiver and expense reimbursement arrangements
effective in the current fiscal year. Absent the Adviser's and the
Administrator's fee waivers and expense reimbursements, total operating
expenses would be 1.26% for the Hawaii Municipal Bond Fund, 1.50% for the
High Grade Income Fund and 1.69% for the Equity Fund.
<TABLE>
<CAPTION>
EXAMPLE
- -------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in the Retail Class B shares of a fund would pay the following
expenses on a $1,000 investment assuming (1) 5% annual return (2)
assessment of maximum sales charge, and (3) redemption at the end of each
time period:
Hawaii Municipal Bond Fund............................................... $ 37 $ 42 $ 46 $ 61
High Grade Income Fund................................................... 43 60 N/A N/A
Equity Fund.............................................................. 45 66 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Retail Class B shares of the Funds. A person who purchases shares through
a financial institution may be charged separate fees by that institution. See
"Purchase of Shares."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase of Shares."
<PAGE>
5
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS A SHARES
----------------------------------
HAWAII
MUNICIPAL HIGH GRADE
BOND INCOME EQUITY
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................. None None None
Maximum Contingent Deferred Sales Charge.............................. None None None
Exchange Fee.......................................................... None None None
Wire Redemption Fee................................................... $15 $15 $15
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
- ----------------------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1).................................. .00% .33% .53%
Other Expenses (after expense reimbursements)(2)...................... .21% .47% .47%
- ----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers and reimbursements)(3).... .21% .80% 1.00%
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) These amounts for the Hawaii Municipal Bond Fund have been restated to
reflect reductions in fee waiver and expense reimbursement arrangements
effective in the current fiscal year. As discussed below, the Adviser and
the Administrator have agreed to waive a portion of their fee, and reserve
the right to terminate their waivers at any time in their sole discretion.
Absent such fee waivers, advisory fees would be .55% for the High Grade
Income Fund, .35% for the Hawaii Municipal Bond Fund, and .74% for the
Equity Fund.
(2) These amounts represent estimates for the current fiscal year for the High
Grade Income and Equity Funds. The Adviser has agreed on a voluntary basis
to reimburse expenses so that the total operating expenses of the Hawaii
Municipal Bond Fund will be maintained at .21%. Amounts reimbursed by the
Adviser may result in taxable income for shareholders of that Fund. Other
Expenses for the Hawaii Municipal Bond Fund have been restated to reflect
fees for the current fiscal year and, absent expense reimbursements, Other
Expenses for Hawaii Municipal Bond Fund would be .41%.
(3) These amounts for the Hawaii Municipal Bond Fund have been restated to
reflect reductions in fee waiver and expense reimbursement arrangements
effective in the current fiscal year. Absent the Adviser's and the
Administrator's fee waivers and expense reimbursements, total operating
expenses would be 1.01% for the Hawaii Municipal Bond Fund, 1.25% for the
High Grade Income Fund and 1.44% for the Equity Fund.
<TABLE>
<CAPTION>
EXAMPLE
- -------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in the Institutional Class A shares of a fund would pay the
following expenses on a $1,000 investment assuming (1) 5% annual return
(2) assessment of maximum sales charge, and (3) redemption at the end of
each time period:
Hawaii Municipal Bond Fund............................................... $ 2 $ 7 $ 12 $ 27
High Grade Income Fund................................................... 8 26 N/A N/A
Equity Fund.............................................................. 10 32 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Institutional Class A shares of the Funds. A person who purchases shares
through a First Hawaiian Bank agency, custodial, fiduciary or advisory account
will pay a separate fee for those services. See "Purchase of Shares."
<PAGE>
6
EXPENSE SUMMARY
<TABLE>
<CAPTION>
RETAIL CLASS B SHARES
--------------------------
TREASURY
MONEY MONEY
SHAREHOLDER TRANSACTION EXPENSES MARKET FUND MARKET FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................................... None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................................... None None
Maximum Contingent Deferred Sales Charge....................................... None None
Exchange Fee................................................................... None None
Wire Redemption Fee............................................................ $15 $15
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
- -----------------------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1)........................................... .16% .08%
Rule 12b-1 Fee(2).............................................................. .00% .00%
Other Expenses (after fee waivers)............................................. .34% .36%(3)
- -----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers and expense reimbursements)(4)..... .50% .44%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) These numbers have been restated to reflect reductions in fee waiver
arrangements effective in the current fiscal year. The Adviser and the
Administrator have agreed to waive a portion of their fees. Absent fee
waivers, advisory fees would be .30% for each Fund. The Adviser and the
Administrator reserve the right to terminate the waiver at any time in their
sole discretion.
(2) The Distributor has agreed to waive its right to receive fees under the Rule
12b-1 Distribution Plan. Absent this waiver, the maximum Rule 12b-1 fee
would be .25%.
(3) Absent the Adviser's voluntary fee waivers, shareholder servicing fees would
be .25% for each Fund. This amount represents an estimate (after fee
waivers) for the current fiscal year.
(4) These numbers have been restated to reflect reductions in fee waiver
arrangements effective in the current fiscal year. Absent the Adviser's and
the Adminstrator's fee waivers, total operating expenses would be 1.12% for
the Money Market Fund and 1.14% for the Treasury Money Market Fund.
<TABLE>
<CAPTION>
EXAMPLE
- -------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in the Retail Class B shares of a fund would pay the following
expenses on a $1,000 investment assuming (1) 5% annual return and (2)
redemption at the end of each time period:...............................
Money Market Fund........................................................ $ 5 $ 16 $ 28 $ 63
Treasury Money Market Fund............................................... 5 14 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Retail Class B shares of the Fund. A person who purchases shares through
a financial institution may be charged separate fees by that institution. See
"Purchase of Shares."
<PAGE>
7
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS A
SHARES
--------------------------
TREASURY
MONEY MONEY
SHAREHOLDER TRANSACTION EXPENSES MARKET FUND MARKET FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Exchange Fee................................................................... None None
Wire Redemption Fee............................................................ None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
- -----------------------------------------------------------------------------------------------------------
Advisory Fees (after fee waivers)(1)........................................... .16% .08%
Other Expenses................................................................. .34% .36%(2)
- -----------------------------------------------------------------------------------------------------------
Total Operating Expenses (after fee waivers)(3)................................ .50% .44%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) These numbers have been restated to reflect reductions in fee waiver
arrangements effective in the current fiscal year. The Adviser and the
Administrator have agreed to waive a portion of their fees. Absent fee
waivers, advisory fees would be .30% for the Fund. The Adviser and the
Administrator reserve the right to terminate the waiver at any time in their
sole discretion.
(2) These amounts represent estimates (after fee waivers) for the current fiscal
year.
(3) These numbers have been restated to reflect reductions in fee waiver
arrangements effective in the current fiscal year for the Money Market Fund.
Absent the Adviser's and the Adminstrator's fee waivers, total operating
expenses would be .87% for the Money Market Fund and .89% for the Treasury
Money Market Fund.
<TABLE>
<CAPTION>
EXAMPLE
- -------------------------------------------------------------------------------------------------------------------------------
1 YR. 3 YRS. 5 YRS. 10 YRS.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
An investor in the Institutional Class A shares of a fund would pay the
following expenses on a $1,000 investment assuming (1) 5% annual return
and (2) redemption at the end of each time period:
Money Market Fund........................................................ $ 5 $ 16 $ 28 $ 63
Treasury Money Market Fund............................................... 5 14 N/A N/A
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Institutional Class A shares of the Fund. A person who purchases shares
through First Hawaiian Bank agency, fiduciary, custodial or advisory account
will pay a separate fee for those services. See "Purchase of Shares."
<PAGE>
8
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Trust's independent accountants, as indicated in their report dated February 18,
1997 on the Trust's financial statements as of December 31, 1996 incorporated by
reference in the Trust's Statement of Additional Information under "Financial
Information." This table should be read in conjunction with the Trust's
financial statements and notes thereto. Additional information is set forth in
the 1996 Annual Report to Shareholders and is available without charge by
calling 1-800-262-9565. As of January 31, 1997, the Equity and High Grade Income
Funds had commenced operations and made Institutional Class A shares available
for purchase.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
INVESTMENT ACTIVITIES
------------------------
NET
REALIZED
AND DISTRIBUTIONS NET
NET ASSET UNREALIZED ---------------------- ASSET
VALUE, NET GAIN (LOSS) NET VALUE,
BEGINNING INVESTMENT ON INVESTMENT CAPITAL END OF
OF PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD TOTAL RETURN
--------- ---------- ----------- ----------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
HAWAII MUNICIPAL BOND FUND
INSTITUTIONAL CLASS A
1996 10.47 0.55 (0.12 ) (0.55) (0.01) 10.34 4.21%
1995(1) 10.00 0.45 0.47 (0.45) -- 10.47 10.91%*
RETAIL CLASS B**
1996 10.47 0.55 (0.11 ) (0.55) (0.01) 10.35 4.31%(3)
1995(2) 10.00 0.45 0.47 (0.45) -- 10.47 10.85%*(3)
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET AVERAGE NET
NET ASSETS RATIO OF NET ASSETS
ASSETS, RATIO OF EXCLUDING INVESTMENT EXCLUDING FEE
END OF EXPENSES TO FEE WAIVERS INCOME TO WAIVERS AND PORTFOLIO
PERIOD AVERAGE NET AND REIM- AVERAGE NET REIM- TURNOVER
(000) ASSETS BURSEMENTS ASSETS BURSEMENTS RATE
------- ----------- ------------ ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
HAWAII MUNICIPAL BOND FUND
INSTITUTIONAL CLASS A
1996 $15,408 0.21% 0.85% 5.33% 4.68% 27%
1995(1) $ 9,411 0.27%* 1.10%* 5.24%* 4.40%* 68%
RETAIL CLASS B**
1996 $ 8,841 0.21% 1.05% 5.33% 4.48% 27%
1995(2) $ 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 February 15, 1995.
(2) Commenced operations on February 16, 1995.
(3) Total Return does not reflect applicable sales charges for the Hawaii
Municipal Bond Fund.
<PAGE>
9
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Trust's independent accountants, as indicated in their report dated February 18,
1997 on the Trust's financial statements as of December 31, 1996 incorporated by
reference in the Trust's Statement of Additional Information under "Financial
Information." This table should be read in conjunction with the Trust's
financial statements and notes thereto. Additional information is set forth in
the 1996 Annual Report to Shareholders and is available without charge by
calling 1-800-262-9565.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
INVESTMENT ACTIVITIES
-------------------------
NET REALIZED
AND DISTRIBUTIONS
NET ASSET UNREALIZED ------------------------
VALUE, NET GAIN (LOSS) NET NET ASSET
BEGINNING INVESTMENT ON INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD RETURN
----------- ----------- ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
INSTITUTIONAL CLASS A
1996 1.00 0.05 -- (0.05) -- 1.00 5.12%
1995(1) 1.00 0.05 -- (0.05) -- 1.00 5.67%*
RETAIL CLASS B
1996 1.00 0.05 -- (0.05) -- 1.00 5.02%
1995(2) 1.00 0.05 -- (0.05) -- 1.00 5.55%*
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET RATIO OF AVERAGE NET
NET ASSETS NET ASSETS
ASSETS, RATIO OF EXCLUDING INVESTMENT EXCLUDING
END OF EXPENSES FEE WAIVERS INCOME TO FEE WAIVERS PORTFOLIO
PERIOD TO AVERAGE AND REIM- AVERAGE NET AND REIM- TURNOVER
(000) NET ASSETS BURSEMENTS ASSETS BURSEMENTS RATE
---------- ---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
INSTITUTIONAL CLASS A
1996 $ 274,125 0.49% 0.60% 5.01% 4.90% --
1995(1) $ 305,120 0.50%* 0.66%* 5.50%* 5.34%* --
RETAIL CLASS B
1996 $ 4,518 0.59% 0.76% 4.91% 4.74% --
1995(2) $ 3,658 0.60%* 0.76%* 5.26%* 5.10%* --
</TABLE>
Amounts Designated as "--" are either $0 or have been rounded to $0.
* Annualized
(1) Commenced operations on January 30, 1995.
(2) Commenced operations on February 17, 1995.
<PAGE>
10
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Trust's independent accountants, as indicated in their report dated February 18,
1997 on the Trust's financial statements as of December 31, 1996 incorporated by
reference in the Trust's Statement of Additional Information under "Financial
Information." This table should be read in conjunction with the Trust's
financial statements and notes thereto. Additional information is set forth in
the 1996 Annual Report to Shareholders and is available without charge by
calling 1-800-262-9565.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
INVESTMENT ACTIVITIES
-------------------------
NET REALIZED
AND DISTRIBUTIONS
NET ASSET UNREALIZED ------------------------
VALUE, NET GAIN (LOSS) NET NET ASSET
BEGINNING INVESTMENT ON INVESTMENT CAPITAL VALUE, END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME GAINS OF PERIOD RETURN
----------- ----------- ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BISHOP STREET TREASURY MONEY
MARKET FUND
INSTITUTIONAL CLASS A (1)
1996 1.00 0.03 -- (0.03) -- 1.00 5.08%*
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES TO INCOME TO
AVERAGE NET RATIO OF AVERAGE NET
NET ASSETS NET ASSETS
ASSETS, RATIO OF EXCLUDING INVESTMENT EXCLUDING
END OF EXPENSES FEE WAIVERS INCOME TO FEE WAIVERS PORTFOLIO
PERIOD TO AVERAGE AND REIM- AVERAGE NET AND REIM- TURNOVER
(000) NET ASSETS BURSEMENTS ASSETS BURSEMENTS RATE
---------- ---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BISHOP STREET TREASURY MONEY
MARKET FUND
INSTITUTIONAL CLASS A (1)
1996 $ 180,201 0.42% 0.65% 4.96% 4.74% --
</TABLE>
Amounts Designated as "--" are either $0 or have been rounded to $0.
* Annualized
(1) The Fund commenced operations on May 1, 1996.
<PAGE>
11
THE TRUST
BISHOP STREET FUNDS (the "Trust") is an open-end management investment company
that offers units of beneficial interest ("shares") in the Funds through
separate Classes (Retail Class B and Institutional Class A), which provide for
variations in sales charges, voting rights and dividends. Except for these
differences, each share of each Fund represents an undivided, proportionate
interest in the Fund. This Prospectus offers shares of the Trust's High Grade
Income Fund, Hawaii Municipal Bond Fund, Equity Fund, Money Market Fund and
Treasury Money Market Fund (the "Funds").
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objective and policies. There can be no
assurance that the investment objective of a Fund will be met.
HIGH GRADE INCOME FUND
The investment objective of this Fund is to provide high total return consistent
with prudent investment risk.
The Fund invests primarily (at least 65% of its assets under normal conditions)
in high grade U.S. dollar-denominated bonds and debentures issued by U.S. and
foreign corporations and governments (i.e. those that are rated at the time of
purchase AA or better by Standard & Poor's Corporation ("S&P") or Aa by Moody's
Investors Service ("Moody's")). (Each of S&P and Moody's and certain other
ratings agencies are hereinafter referred to as a Nationally Recognized
Statistical Rating Organizations, or "NRSROs"). The Fund will maintain an
average weighted remaining maturity of between five and twelve years under
normal circumstances.
Any remaining assets may consist of: (i) obligations of the U.S. Treasury; (ii)
obligations issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. Government; (iii) mortgage pass-through securities
issued by the Government National Mortgage Association ("GNMA"), mortgage-backed
securities issued by other government agencies and privately issued
mortgage-backed securities rated at least A by an NRSRO, including CMOs, REMICs
and ARMs; (iv) repurchase agreements involving any of the foregoing obligations;
(v) obligations issued by supranational entities; (vi) asset-backed securities
rated at least A by an NRSRO; (vii) commercial paper rated at least P-2 or A-2
by an NRSRO; (viii) certificates of deposit, time deposits, notes, bankers'
acceptances and loan participations of U.S. and foreign banks that are rated in
the top two short-term rating categories by two or more NRSROs or that are of
comparable quality; (ix) receipts; and (x) shares of money market investment
companies investing in any of the foregoing obligations.
The Fund may invest up to 5% of its total assets in fixed income securities
rated as low as Baa by Moody's or BBB by S&P. Such securities possess some
speculative characteristics. The Fund intends to dispose of a security if its
rating after purchase declines below Baa or BBB.
The Fund may also invest in floating or variable rate obligations and zero
coupon securities, and may purchase securities on a "when-issued" basis.
HAWAII MUNICIPAL BOND FUND
The investment objective of this Fund is to provide high current income that is
exempt from regular Federal and State of Hawaii income taxes.
The Fund invests at least 80% of its assets in bonds and notes issued by states,
territories, and possessions of the U.S. and their agencies, authorities,
instrumentalities and political subdivisions, that are rated AAA, AA, A or BBB
by S&P, Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by Fitch Investors
Service ("Fitch"), and which pay interest that is not subject to regular Federal
income tax ("Municipal Securities"). This is a fundamental policy of the Fund.
Under normal circumstances, the Fund invests at least 65% of its assets in
Municipal Securities issued by the State of Hawaii, its agencies,
instrumentalities, and political sub-divisions, the income on which is exempt
from State of Hawaii personal income taxes ("Hawaii Municipal Securities").
There is no restriction on the percentage of the Fund's assets that may be
invested
<PAGE>
12
in obligations the interest income from which is treated as a preference item
for individuals for purposes of the federal alternative minimum tax.
The Fund may invest up to 20% of its assets in taxable securities, and may
purchase unrated securities that at the time of purchase are of comparable
quality to rated securities that the Fund may purchase as determined by the
Adviser. The Fund may purchase shares of other investment companies and may
purchase securities on a "when-issued" basis.
The Fund has no restrictions on the maturity of securities in which it may
invest. Accordingly, the Fund will invest in Municipal Securities of which the
maturities, in the judgment of the Adviser, will provide a high level of current
income consistent with prudent investment, with consideration given to market
conditions.
EQUITY FUND
The investment objective of this Fund is to produce long-term growth of capital,
with a secondary goal of current income.
Under normal circumstances, the Fund invests primarily (at least 65% of its
total assets) in common stocks of domestic issuers that are traded on a national
securities exchange or on NASDAQ, and U.S. dollar-denominated equity securities
of foreign issuers (including ADRs). The Fund may also purchase warrants and
rights to purchase common stocks, debt securities convertible into common stocks
and preferred stocks convertible into common stocks, and may acquire ADRs and
shares of open-end and closed-end investment companies. The Fund may enter into
repurchase agreements.
The Fund will invest in a diversified portfolio of common stocks and securities
convertible into common stocks of U.S. companies that have the potential for
capital appreciation. Market capitalizations of issues selected will be
primarily in excess of $500 million. Selections of issues for inclusion in the
portfolio will be based on top down/ bottom up evaluation, including fundamental
factors affecting growth such as industry position, management qualifications
and historical earnings. Industry sector rotation will occur based on an
assessment of the economic cycle.
MONEY MARKET FUND
The investment objective of this Fund is to preserve principal and maintain a
high degree of liquidity while providing current income.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds. These regulations impose
certain quality, maturity and diversification restraints on investments by the
Fund. The Fund intends to use its best efforts to maintain a constant net asset
value of $1.00 per share, but there can be no assurance that the Fund will be
able to do so on a continuing basis.
The Fund invests in the following U.S. dollar-denominated, high quality debt
obligations with remaining maturities of 397 days or less: (i) commercial paper
rated in the highest short-term ratings categories of a nationally recognized
statistical rating organization ("NRSRO"), or, if not rated, determined by the
Sub-Adviser to be of comparable quality; (ii) obligations (certificates of
deposit, time deposits, notes and bankers' acceptances) of U.S. savings and loan
and thrift institutions and U.S. commercial banks, provided that such
institutions (or, in the case of a branch, the parent institution) have total
assets of $500 million or
more as shown on their last published financial statements at the time of
investment; (iii) short-term corporate obligations with a remaining term of not
more than one year of issuers with commercial paper of comparable priority and
security meeting the above ratings; (iv) U.S. Treasury obligations and
obligations issued or guaranteed as to principal and interest by the agencies or
instrumentalities of the U.S. Government, including STRIPS; (v) short-term
obligations issued by state and local governmental issuers, which are rated, at
the time of investment by at least two NRSROs in one of the two highest
municipal bond rating categories, or, if not rated, determined to be of
comparable quality by the Sub-
<PAGE>
13
Adviser; (vi) receipts; and (vii) repurchase agreements involving any of the
foregoing obligations.
The Fund may invest in floating or variable rate obligations, and may purchase
securities on a "when-issued" basis.
TREASURY MONEY MARKET FUND
The investment objective of this Fund is to preserve principal value and
maintain a high degree of liquidity while providing current income.
Under normal conditions the Fund invests exclusively in U.S. Treasury
obligations and repurchase agreements involving such obligations.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds. These regulations impose
certain quality, maturity and diversification restraints on investments by the
Fund. The Fund intends to use its best efforts to maintain a constant net asset
value of $1.00 per share, but there can be no assurance that the Fund will be
able to do so on a continuing basis.
GENERAL INVESTMENT POLICIES
The High Grade Income Fund and Equity Fund are diversified funds. The Hawaii
Municipal Bond Fund is a non-diversified fund. It will comply, however, with the
diversification requirements of Sub-Chapter M of the Internal Revenue Code (See
"Taxes").
For temporary defensive purposes during periods when the Adviser determines that
market conditions warrant, the High Grade Income Fund, Hawaii Municipal Bond
Fund and Equity Fund may invest up to 100% of its assets in taxable money market
instruments consisting of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, repurchase agreements, and
commercial paper rated at least A-1 by S&P, P-1 by Moody's, or Fitch-1 by Fitch.
Each Fund also may hold a portion of its assets in cash. Each Fund will not be
pursuing its investment objective to the extent that a substantial portion of
its assets is invested in cash or money market securities.
The High Grade Income, Hawaii Municipal Bond and Equity Funds may lend up to
33 1/3% of its total assets to investors for the purpose of realizing additional
income. Each such Fund may also borrow money in amounts up to 33 1/3% of its net
assets. No Fund will purchase securities while its borrowings exceed 5% of its
total assets.
A Fund's purchase of investment company securities will result in the layering
of expenses. Generally, a Fund is prohibited from acquiring the securities of
other investment companies if, as a result of such acquisition, the Fund owns in
the aggregate (1) more than 3% of the total outstanding voting stock of the
acquired company, (2) securities issued by the acquired company having an
aggregate value of 5% of the value of the total assets of the Fund, or (3)
securities issued by the acquired company and all other investment companies
having an aggregate value in excess of 10% of the value of the total assets of
the Fund.
RISK FACTORS
The market value of a Fund's fixed income investments (I.E. bonds) will change
in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods with rising interest rates, the
values of such securities generally decline. Securities with longer maturities
are subject to greater fluctuations in value than securities with shorter
maturities.
Under normal market conditions, the Hawaii Municipal Bond Fund will be
predominantly invested in Hawaii Municipal Securities and, therefore, the value
of its shares may be especially affected by factors pertaining to the Hawaiian
economy and other factors specifically affecting the ability of issuers of
Hawaii Municipal Securities to meet their obligations. As a result, the value of
the Fund's shares may fluctuate more widely than the value of the shares of a
portfolio investing in securities relating to a number
<PAGE>
14
of different states. The ability of state, county and local governments to meet
their obligations will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions generally. The
amount of tax and other revenues available to governmental issuers of Hawaii
Municipal Securities may be affected from time to time by economic, political
and demographic conditions within the state. In addition, constitutional or
statutory restrictions may limit a government's power to raise revenues or
increase taxes. Further, payments of principal and interest on limited
obligation securities will depend on the economic condition of the facility or
specific revenue source from whose revenues the payments will be made, which in
turn could be affected by economic, political and demographic conditions in the
state. Moreover, the Fund is classified as "non-diversified" because it may
invest in obligations of a relatively limited number of issuers.
Under normal market conditions, it is estimated that the annual portfolio
turnover rate for the High Grade Income Fund will not exceed 200%, and the
turnover rate for the Equity Fund will not exceed 150%. Such turnover rates, if
achieved, will lead to higher transaction costs and possible tax consequences.
INVESTMENT LIMITATIONS
The High Grade Income Fund and Equity Fund may not purchase securities of any
issuer (except securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and repurchase agreements involving such
securities) if, with respect to 75% of each Fund's assets, more than 5% of total
assets of the Fund would be invested in the securities of such issuer. The Money
Market and Treasury Money Market Funds may not purchase securities of any issuer
(except securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, and repurchase agreements involving such securities) if,
as a result more than 5% of total assets of the Fund would be invested in the
securities of such issuer; provided, however, that the Treasury Money Market
Fund may invest up to 25% of its total assets without regard to this restriction
as permitted by Rule 2a-7.
No Fund may purchase any securities which would cause more than 25% of the total
assets of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that this limitation does not apply to investments in obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities,
repurchase agreements involving such securities and with respect to the Treasury
Money Market and Money Market Funds, domestic banks. The Hawaii Municipal Bond
Fund may not invest more than 25% of its assets in securities issued or backed
by non-governmental users that are members of the same industry.
The foregoing percentage limitations will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
Each Fund's investment objective and the foregoing investment limitations are
fundamental policies. Fundamental policies cannot be changed with respect to a
Fund without the consent of the holders of a majority of that Fund's outstanding
shares.
THE ADVISER
First Hawaiian Bank, 999 Bishop Street, 3rd floor, Honolulu, HI 96813, (the
"Adviser") acts as the investment adviser for the Funds. The Adviser makes
investment decisions for the assets of each Fund, and continuously reviews,
supervises and administers each Fund's investment program. The Adviser
discharges its responsibilities subject to the supervision of, and policies set
by, the Trustees of the Trust.
The Adviser is a wholly-owned subsidiary of First Hawaiian, Inc. Prior to
January, 1995, the Adviser had not previously served as an investment adviser to
mutual funds. The Adviser and its corporate predecessors have provided trust and
asset management services in Hawaii for over 70 years. As
<PAGE>
15
of December 31, 1996, the Trust and Investment divisions of the Adviser had
assets under management of approximately $7.9 billion.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .55% of the High Grade Income Fund's average daily net assets,
.35% of the Hawaii Municipal Bond Fund's average daily net assets, .74% of the
Equity Fund's average daily net assets, .30% of the Money Market Fund's average
daily net assets, and .30% of the Treasury Money Market Fund's average daily net
assets. The Adviser may from time to time waive all or a portion of its fee in
order to limit the operating expenses of a Fund. Any such waiver is voluntary
and may be terminated at any time in the Adviser's sole discretion.
For the fiscal year ended December 31, 1996, the Hawaiian Municipal Bond Fund
paid no advisory fees. For the fiscal year ended December 31, 1996, the Money
Market Fund and the Treasury Money Market Fund paid advisory fees of 27%, and
18%, respectively, of its average daily net assets. As of the fiscal year ended
December 31, 1996, the High Grade Income and Equity Funds had not commenced
operations. The Treasury Money Market Fund has not been in operation for a full
fiscal year.
Louis M. Levitas, an employee of Pacific One Dealer Center ("Dealer Center"),
serves as portfolio manager to the Hawaii Municipal Bond Fund pursuant to a
Leasing Agreement between the Dealer Center, a subsidiary of First Hawaiian,
Inc., and the Adviser. Mr. Levitas has been a municipal bond specialist since
1970. His extensive experience includes working in municipal trading and sales
capacities with Bank of America, Salomon Brothers and Lehman Brothers. In 1991,
he co-founded and served as consultant to Hawaiian Capital Securities through
1994. In 1992, he established an Investment Management Group for Stone &
Youngberg, a municipal specialist firm in San Francisco. In 1995, he joined the
Adviser to launch the Hawaii Municipal Bond Fund and manage tax-exempt
portfolios.
The day-to-day management of the High Grade Income and Equity Funds' investments
is the responsibility of a team of investment professionals. Decisions are made
by committee and no person has primary responsibility for making recommendations
to the committee.
THE SUB-ADVISER FOR THE MONEY MARKET AND TREASURY MONEY MARKET FUNDS
Wellington Management Company, LLP (the "Sub-Adviser") serves as the investment
sub-adviser for the Money Market and Treasury Money Market Funds pursuant to a
sub-advisory agreement (the "Sub-Advisory Agreement") with the Trust and the
Adviser. Under the Sub-Advisory Agreement, the Sub-Adviser manages the
investments of the Funds, selects investments, and places all orders for
purchases and sales of the Funds' securities, subject to the general supervision
of the Trustees of the Trust and the Adviser.
For the services provided and expenses incurred pursuant to the Sub-Advisory
Agreement, the Sub-Adviser is entitled to receive from the Adviser a fee,
computed daily and paid monthly, at the annual rate of .075% of the aggregate
average daily net assets of the Treasury Money Market Fund and the Money Market
Fund up to $500 million, and .020% of the aggregate average daily net assets of
the Funds in excess of $500 million.
The Sub-Adviser is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. As of December 31, 1996
Wellington had discretionary management authority with respect to approximately
$133.2 billion of assets. The Sub-Adviser and its predecessor organizations have
provided investment advisory services to investment companies since 1933 and to
investment counseling clients since 1960. Wellington Management Company, LLP, 75
State Street, Boston, MA 02109, is a Massachusetts limited liability
partnership, of which the following persons are managing partners: Robert W.
Doran, Duncan M. McFarland and John R. Ryan.
<PAGE>
16
THE ADMINISTRATOR
SEI Fund Resources (the "Administrator"), a wholly-owned subsidiary of SEI
Investments ("SEI"), provides the Trust with administrative services, including
fund accounting, regulatory reporting, necessary office space, equipment,
personnel, and facilities. The Administrator also acts as shareholder servicing
agent of the Funds.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .20% of the average daily net assets of the Funds.
The Administrator may waive its fee in its discretion.
THE TRANSFER AGENT
DST Systems, Inc. ("Transfer Agent"), 1004 Baltimore Street, Kansas City,
Missouri 64105, serves as the Transfer Agent and dividend disbursing agent for
the Trust.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. The Retail Class B shares of the Trust have a Rule
12b-1 Distribution Plan (the "Retail Class B Plan"), however, the Distributor
has agreed to waive its right to receive fees under the Retail Class B Plan.
Financial institutions that are the record owner of shares for the account of
their customers may impose separate fees for account services to their
customers.
Each Fund has adopted a shareholder servicing plan for its Institutional Class A
and Retail Class B shares (the "Service Plan") under which a shareholder
servicing fee of up to .25% of average daily net assets attributable to the
shares of each class will be paid to the Distributor. Under the Service Plan,
the Distributor may perform, or may compensate other service providers for
performing, the following shareholder and administrative services: maintaining
client accounts; arranging for bank wires; responding to client inquiries
concerning services provided on investments; assisting clients in changing
dividend options, account designations and addresses; sub-accounting; providing
information on share positions to clients; forwarding shareholder communications
to clients; processing purchase, exchange and redemption orders; and processing
dividend payments. Under the Service Plan, the Distributor may retain as a
profit any difference between the fee it receives and the amount it pays to
third parties.
The Funds may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
HOW TO PURCHASE SHARES
GENERAL INFORMATION
You may purchase shares of the Funds on any day on which both the New York Stock
Exchange and Federal Reserve wire system are open for business ("Business Days")
except for Hawaii state banking holidays. However, shares of the Funds cannot be
purchased by Federal Reserve wire on Federal holidays restricting wire
transfers. The minimum initial investment in any Fund is $1,000 ($500 for IRAs
and $500 for officers, directors, or employees of First Hawaiian Bank or its
affiliates). The Distributor may waive the minimum investment at its discretion.
Subsequent purchases of shares must be at least $100.
A purchase order for shares will be effective as of the Business Day received by
the Transfer Agent if the Transfer Agent receives the order and payment before
4:00 p.m., Eastern time for the High Grade Income, Hawaii Municipal Bond and
Equity Funds and before 1:00 p.m., Eastern time for the Money Market and
Treasury Money Market Funds. The purchase price (the "Offering Price") of Retail
Class B shares for the High Grade Income, Hawaii Municipal Bond and Equity Funds
is the net asset value next determined after the purchase order is effective
plus any applicable sales charge. The purchase price of Institutional Class A
shares for the High Grade Income, Hawaii Municipal Bond and Equity Funds is the
net asset value next determined after the purchase order is effective. The
purchase price of shares of the Money Market and Treasury Money Market Funds is
the net asset value determined after the purchase order is effective. Purchases
will be made in full and fractional shares calculated to three decimal places.
<PAGE>
17
The net asset value per share is determined as of 4:00 p.m. for the High Grade
Income, Hawaii Municipal Bond and Equity Funds and 1:00 p.m., Eastern time on
each Business Day for the Money Market and Treasury Money Market Funds, by
dividing the total market value of that Fund's investments and other assets,
less any liabilities, by the total outstanding shares of the Fund. The Money
Market and Treasury Money Market Funds value their portfolio securities using
the amortized cost method of valuation, approximating market value. Pursuant to
guidelines adopted and monitored by the Trustees of the Trust, each Fund may use
a pricing service to provide market quotations or valuations. A pricing service
may derive such valuations through the use of a matrix system to value fixed
income securities which considers factors such as securities prices, yield
features, ratings, and developments related to a specific security.
The Trust reserves the right to reject a purchase order for shares when the
Distributor determines that it is not in the best interest of the Trust and/or
its Shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should contact the Transfer Agent at 1-800-262-9565
for further instructions.
HOW TO PURCHASE INSTITUTIONAL CLASS A SHARES
Institutional Class A shares may only be purchased by First Hawaiian Bank in its
capacity as Agent, Fiduciary, Custodian or Adviser.
HOW TO PURCHASE RETAIL CLASS B SHARES
Retail Class B shares of the Funds (except the Treasury Money Market Fund) may
be purchased directly from the Transfer Agent by mail, by wire or through an
automatic investment plan ("AIP"). Shares may also be purchased through
broker-dealers that have established a dealer agreement with the Distributor.
Retail Class B shares of the Treasury Money Market Fund are not yet available
for purchase by investors.
HOW TO PURCHASE BY MAIL
You may purchase shares of a Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Bishop Street (Fund Name)," to the
Transfer Agent at PO Box 419721, Kansas City, Missouri 64141-6721. All purchases
made by check should be in U.S. dollars and made payable to the "Bishop Street
(Fund Name)." Third party checks, credit card checks and cash will not be
accepted. You may purchase more shares at any time by mailing payment also to
the Transfer Agent at the above address. Orders placed by mail will be executed
on receipt of your payment. If your check does not clear, your purchase will be
canceled and you could be liable for any losses or fees incurred.
You may obtain Account Application Forms by calling the Distributor at
1-800-262-9565.
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to the Transfer
Agent and the wire instructions must include your account number. You must call
the Transfer Agent at 1-800-262-9565 before wiring any funds. An order to
purchase shares by Federal funds wire will be deemed to have been received by
the Fund on the Business Day of the wire; provided that the shareholder wires
funds to the Transfer Agent prior to 4:00 p.m., Eastern time for the High Grade
Income, Hawaii Municipal Bond and Equity Funds and 1:00 p.m., Eastern time for
the Money Market and Treasury Money Market Funds. If the Transfer Agent does not
receive the wire by 4:00 p.m., Eastern time, for the High Grade Income, Hawaii
Municipal Bond and Equity Funds and 1:00 p.m., Eastern time for the Money Market
and Treasury Money Market Funds, the order will be executed on the next Business
Day.
HOW TO PURCHASE THROUGH AN AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by
<PAGE>
18
Automated Clearing House ("ACH") from a checking account by completing an AIP
Application Form. The minimum pre-authorized investment amount is $50 per month.
An AIP Application Form may be obtained by contacting the Distributor at
1-800-262-9565. The AIP is available only for additional investments to an
existing account.
HOW TO PURCHASE THROUGH FINANCIAL INSTITUTIONS
Shares may be purchased through financial institutions, including the Adviser,
that provide distribution assistance or shareholder services. Shares purchased
by persons ("Customers") through financial institutions may be held of record by
the financial institution. Financial institutions may impose an earlier cut-off
time for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Transfer Agent for
effectiveness the same day. Customers should contact their financial institution
for information as to that institution's procedures for transmitting purchase,
exchange or redemption orders to the Trust.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
SALES CHARGES
The following table shows the regular sales charge on Retail Class B shares of
the High Grade Income, Hawaii Municipal Bond and Equity Funds to a "single
purchaser" (defined below) together with the sales charge that is reallowed to
certain financial intermediaries (the "reallowance").
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE REALLOWANCE
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF OFFERING OF NET OF OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
- -------------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Less than $25,000... 3.50% 3.63% 3.15%
$25,000 but less
than $50,000...... 3.25% 3.36% 2.93%
$50,000 but less
than $100,000..... 3.00% 3.09% 2.70%
$100,000 but less
than $250,000..... 2.50% 2.56% 2.25%
$250,000 but less
than $500,000..... 1.75% 1.78% 1.58%
$500,000 but less
than $1,000,000... 1.00% 1.01% 0.90%
over $1,000,000..... none none none
</TABLE>
Under certain circumstances, the Distributor may use its own funds to compensate
financial institutions and intermediaries in amounts additional to the
commissions shown above. In addition, the Distributor may, from time to time in
its sole discretion, institute one or more promotional incentive programs, which
will be paid by the Distributor from the sales charges it receives or from any
other source available to it. Under any such program, the Distributor will
provide promotional incentives in the form of cash or other compensation,
including merchandise, airline vouchers, trips and vacation packages, to all
dealers selling shares of the Funds. Under certain circumstances, reallowances
of up to the amount of the entire sales charge may be paid to certain financial
institutions, who might then be deemed to be "underwriters" under the Securities
Act of 1933.
There are no sales charges applicable to shares of the Treasury Money Market and
Money Market Funds.
REDUCED SALES CHARGE:
RIGHTS OF ACCUMULATION
In calculating the sales charge rates applicable to current purchases of Retail
Class B shares of the High Grade Income, Hawaii Municipal Bond and Equity Funds,
a "single purchaser" is entitled to cumulate current purchases with the current
market value of previously purchased Retail Class B shares of the Funds sold
subject to a sales charge.
<PAGE>
19
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own combined individual and
joint accounts or for trust or custodial accounts for their minor children, and
(iii) a fiduciary purchasing for any one trust, estate or fiduciary account,
including employee benefit plans created under Sections 401 or 457 of the
Internal Revenue Code of 1986, as amended (the "Code") including related plans
of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Transfer Agent for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
REDUCED SALES CHARGE: LETTER OF INTENT
By submitting a Letter of Intent (the "Letter") to the Transfer Agent, a "single
purchaser" may purchase shares of the High Grade Income, Hawaii Municipal Bond
and Equity Funds during a 13-month period at the reduced sales charge rates
applying to the aggregate amount of the intended purchases stated in the Letter.
The Letter may apply to purchases made up to 90 days before the date of the
Letter. To receive credit for such prior purchases and later purchases
benefitting from the Letter, you must notify the Transfer Agent at the time the
Letter is submitted that there are prior purchases that may apply, and notify
the Transfer Agent again at the time of later purchases that such purchases are
applicable under the Letter.
WAIVER OF SALES LOAD
No sales charge is imposed on shares of the High Grade Income, Hawaii Municipal
Bond and Equity Funds: (i) issued as dividends and capital gain distributions;
(ii) acquired through the exercise of exchange privileges described below; (iii)
sold to officers, directors or trustees, employees and retirees (and their
spouses and immediate family members) of the Trust, First Hawaiian Bank and its
affiliates; (iv) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Trust is a party; (v) purchased
with the proceeds of distributions from employee benefit plans for which the
Adviser or its affiliates act in a fiduciary capacity or (vi) purchased within
thirty days of a redemption of Retail Class B shares of such Funds (only to the
amount of such redemption). You must notify the Distributor at the time of your
purchase if you are eligible for a waiver of the sales load. An investor relying
upon any of the categories of waivers of the sales charge must qualify such
waiver in advance of the purchase with the Distributor of the financial
institution or intermediary through which the shares are purchased by the
investor.
In addition, purchases of Retail Class B shares of the High Grade Income, Hawaii
Municipal Bond and Equity Funds that are funded by the proceeds from the
redemption (within 60 days of the purchase of Fund shares) of shares of any
unrelated open-end investment company that charges either a front end or back
end sales load may be made at net asset value. To make such a purchase at net
asset value, the investor or the investor's broker must, at the time of
purchase, submit a written request to the Transfer Agent that the purchase be
processed at net asset value pursuant to this privilege, accompanied by a
photocopy of the confirmation (or similar evidence) showing the redemption from
the unrelated fund. The redemption of the shares of the non-related fund is, for
federal income tax purposes, a sale upon which a gain or loss may be realized.
EXCHANGES OF SHARES
You may exchange Retail Class B or Institutional Class A shares of any Fund for
Retail Class B or Institutional Class A shares, respectively, of any other Fund
without paying any additional sales charge. Exchanges are generally made at net
asset value.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. In order to effect an
exchange of shares by telephone, you must elect the telephone exchange option on
your Account Application Form. With respect to High Grade Income,
<PAGE>
20
Hawaii Municipal Bond and Equity Fund shareholders, if an Exchange Request in
good order is received by the Transfer Agent by 4:00 p.m. Eastern time, on any
Business Day, the exchange will occur on that day. With respect to Money Market
and Treasury Money Market Fund shareholders, if an Exchange Request in good
order is received by the Transfer Agent on any Business Day, the exchange will
occur that day. The exchange privilege may be exercised only into a class of
shares that are currently offered for purchase to investors.
Customers who beneficially own shares held by a financial institution should
contact that institution if they wish to exchange shares. The institution will
contact the Transfer Agent and effect the exchange on behalf of the Customer.
The Trust reserves the right to change the terms or conditions of the exchange
privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $15 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail, by telephone or through a
pre-arranged systematic withdrawal plan. Investors who own shares held by a
financial institution should contact that institution for information on how to
redeem shares.
BY MAIL
A written request for redemption must be received by the Transfer Agent, PO Box
419721, Kansas City, Missouri 64141-6721 in order to constitute a valid
redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent or wired to an address different from that of record, the Transfer
Agent may require that the signature on the written redemption request be
guaranteed. You should be able to obtain a signature guarantee from a bank,
broker, dealer, credit union, securities exchange or association, clearing
agency or savings association. Notaries public cannot guarantee signatures. The
signature guarantee requirement will be waived if all of the following
conditions apply: (1) the redemption is for not more than $5,000 worth of
shares, (2) the redemption check is payable to the shareholder(s) of record, and
(3) the redemption check is mailed to the shareholder(s) at his or her address
of record.
BY TELEPHONE
You may redeem your shares by calling the Transfer Agent at 1-800-262-9565.
Under most circumstances, payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. You may have the proceeds
mailed to your address or wired to a commercial bank account previously
designated on your Account Application. There is no charge for having redemption
proceeds mailed to you, but there is a $15 charge for wiring redemption
proceeds.
You may request a wire redemption for redemptions in excess of $500 by calling
the Transfer Agent at 1-800-262-9565, who will deduct a wire charge of $15 from
the amount of the wire redemption. Shares cannot be redeemed by Federal Reserve
wire on Federal holidays restricting wire transfers.
Neither the Transfer Agent nor the Trust will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Trust and Transfer Agent will each
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. Such procedures may include taping of telephone conversations.
If market conditions are extraordinarily active or other extraordinary
circumstance exist, and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular
<PAGE>
21
distributions from your account. Upon commencement of the SWP, your account must
have a current value of $10,000 or more for the High Grade Income Fund, Hawaii
Municipal Bond Fund, and Equity Fund; and $20,000 or more for the Money Market
Fund and the Treasury Money Market Fund. You may elect to receive automatic
payments via check or ACH of $50 or more on a monthly, quarterly, semi-annual or
annual basis. You may obtain an SWP Application Form by contacting the
Distributor at 1-800-262-9565.
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could be
exhausted entirely. You may change or cancel the SWP at any time on written
notice to the Transfer Agent. The Transfer Agent may require that the signature
on the written notice be guaranteed.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of 4:00 p.m., Eastern time, on each Business Day for the
High Grade Income, Hawaii Municipal Bond and Equity Funds and 1:00 p.m., Eastern
time, on each Business Day for the Money Market and Treasury Money Market Funds.
Payment of redemption proceeds will be made as promptly as possible and, in any
event, within seven days after the redemption order is received, provided,
however, that redemption proceeds for shares purchased by check (including
certified or cashier's checks) will be forwarded only upon collection of payment
for such shares; collection of payment may take up to 15 days.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, if, your account in
any Fund has a value of less than the minimum initial purchase amount.
Accordingly, if you purchase shares of any Fund in only the minimum investment
amount, you may be subject to involuntary redemption if you redeem any shares.
Before any Fund exercises its right to redeem such shares, you will be given
notice that the value of the shares in your account is less than the minimum
amount and will be allowed 60 days to make an additional investment in such Fund
in an amount which will increase the value of the account to at least the
minimum amount.
PERFORMANCE
From time to time, the High Grade Income, Hawaii Municipal Bond and Equity Funds
may advertise yield and total return. The Money Market and Treasury Money Market
Funds may, from time to time, advertise their current yield and effective yield.
The Hawaii Municipal Bond Fund may also advertise a tax-equivalent yield. These
figures are based on historical earnings and are not intended to indicate future
performance. No representation can be made concerning actual future yields or
returns.
The "yield" of a Fund refers to the income generated by a hypothetical
investment, net of any sales charge imposed in such Fund over a thirty day
period. This income is then "annualized," i.e., the income over thirty days is
assumed to be generated over one year and is shown as a percentage of the
investment.
"Tax-equivalent yield" is calculated by determining the rate of return that
would have to be achieved on a fully taxable investment to produce the after-tax
equivalent of a Fund's yield, assuming certain tax brackets for the shareholder.
The "total return" of a Fund refers to the average compounded rate of return on
a hypothetical investment for designated time periods, net of any sales charge
imposed on Retail Class B shares and assuming that dividend and capital gain
distributions have been reinvested.
<PAGE>
22
The "current yield" of a Fund refers to the income generated by an investment in
the Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" (also called "effective compound yield") is calculated
similarly but, when annualized, the income earned by an investment in the Fund
is assumed to be reinvested. The effective yield will be slightly higher than
the current yield because of the compounding effect of this assumed
reinvestment.
For any Fund, the performance of Institutional Class A shares will be higher
than that of Retail Class B shares because of the sales load (when applicable)
charged to Retail Class B shares.
The Funds may periodically compare their performance to that of other mutual
funds tracked by mutual funds rating services (such as Lipper Analytical),
financial and business publications and periodicals, broad groups of comparable
mutual funds or unmanaged indices which may assume investment of dividends but
generally do not reflect deductions for administrative and management costs. The
Funds may quote Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance. The Funds may use long-term performance of
these capital market indices to demonstrate general long-term risk versus reward
scenarios and could include the value of a hypothetical investment in any of the
capital markets. The Funds may also quote financial and business publications
and periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of income tax consequences is based on current tax laws
and regulations, which may be changed by legislative, judicial or administrative
action. No attempt has been made to present a detailed explanation of the
Federal, state, or local income tax treatment of the Funds or their
Shareholders. In addition, state and local tax consequences of an investment in
a Fund may differ from the Federal income tax consequences described below.
Accordingly, Shareholders are urged to consult their tax advisers regarding
specific questions as to Federal, state and local income taxes. Additional
information concerning taxes is set forth in the Statement of Additional
Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other portfolios. Each Fund intends to continue to
qualify for the special tax treatment afforded regulated investment companies
("RICs") under Subchapter M of the Internal Revenue Code of 1986, as amended, so
as to be relieved of Federal income tax on net investment company taxable income
and net capital gains (the excess of net long-term capital gains over net
short-term capital losses) distributed to Shareholders. Subchapter M also
provides that a Fund will not invest more than 5% of its total assets in any one
issuer. This limitation applies to 50% of a Fund's total assets.
TAX STATUS OF DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income (including
net short-term capital gains) and net capital gains to Shareholders. Dividends
from the High Grade Income and Equity Funds' net investment company taxable
income are taxable to its Shareholders as ordinary income (whether received in
cash or in additional shares) to the extent of the Fund's earnings and profits.
Dividends paid by a Fund to corporate Shareholders will qualify for the
deduction for dividends received by corporations to the extent attributable to
dividends received by the Fund from domestic corporations. A portion of such
dividends
<PAGE>
23
received may be subject to the alternative minimum tax. Distributions of net
capital gains do not qualify for the dividends received deduction and are
taxable to Shareholders as long-term capital gains, regardless of how long
Shareholders have held their shares and regardless of whether the distributions
are received in cash or in additional shares.
If, at the close of each quarter of its taxable year, at least 50% of the value
of the Hawaii Municipal Bond Fund's assets consist of obligations the interest
on which is excludable from gross income, the Fund may pay "exempt-interest
dividends" to its Shareholders. Those dividends constitute the portion of the
aggregate dividends as designated by the Fund, equal to the excess of the
excludable interest over certain amounts disallowed as deductions. Exempt-
interest dividends are excludable from a Shareholder's gross income for Federal
income tax purposes, but may have certain collateral Federal income tax
consequences, including alternative minimum tax consequences. Current Federal
income tax law limits the types and volumes of bonds qualifying for the Federal
income tax exemption of interest, which may have an effect on the ability of the
Fund to purchase sufficient amounts of tax-exempt securities to satisfy the
Code's requirements for the payment of "exempt interest" dividends.
Because the Treasury Money Market Fund will normally invest exclusively in
United States Treasury obligations, its dividends are free from state and local
income taxes in the vast majority of states. Potential investors in this Fund
should consult their tax advisers with specific reference to their own tax
situations.
The Funds will provide annual reports to Shareholders of the Federal income tax
status of all distributions.
Distributions of net investment income paid by the Hawaii Municipal Bond Fund
are not taxable for purposes of the Hawaii state income tax to the extent that
this income is derived from obligations the interest income from which is exempt
from taxation in Hawaii. While the Hawaii Municipal Bond Fund intends to invest
primarily in obligations which produce interest exempt from regular Federal and
Hawaii state income taxes, if the Fund invests in obligations that are not
exempt for Hawaii purposes, a portion of the Fund's distributions will be
subject to Hawaii income tax.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for Federal excise tax applicable to regulated
investment companies.
With respect to investments which are sold at original issue discount and thus
do not make periodic cash interest payments, each Fund will be required to
include as part of its current income the imputed interest on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because each Fund distributes all of its net investment
income to its Shareholders, a Fund may have to sell portfolio securities to
distribute such imputed income which may occur at a time when the Adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
Sale, exchange or redemption of Fund Shares is a taxable transaction to the
Shareholder.
ADDITIONAL CONSIDERATIONS
The Hawaii Municipal Bond Fund may not be an appropriate investment for persons
(including corporations and other business entities) who are "substantial users"
(or persons related to "substantial users") of facilities financed by industrial
development private activity bonds. Such persons should consult their tax
advisers before purchasing shares. A "substantial user" is defined generally to
include "certain persons" who regularly use in their trade or business a part of
a facility financed from the proceeds of such bonds.
<PAGE>
24
GENERAL INFORMATION
THE TRUST
The Trust was organized as a Massachusetts business trust under Declaration of
Trust dated May 25, 1994. The Declaration of Trust permits the Trust to offer
separate portfolios of shares and different classes of each portfolio. All
consideration received by the Trust for shares of any Fund and all assets of
such Fund belong to that Fund and would be subject to the liabilities related
thereto.
The Trust pays its expenses, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation materials
and reports to Shareholders, costs of custodial services and registering the
shares under Federal and state securities laws, pricing, insurance expenses,
litigation and other extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses.
TRUSTEES OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Trust.
The Trustees of the Trust are as follows:
<TABLE>
<CAPTION>
NAME BUSINESS HISTORY
- ------------------------- ----------------------------------------
<S> <C>
Mr. Martin Anderson Attorney--Goodsill, Anderson, Quinn &
Stifel
Mr. Philip H. Ching Vice Chairman--First Hawaiian Bank
(through January, 1996)
Honorable Shunichi Kimura Regent--Universtiy of Hawaii (1995-1996)
Judge--State of Hawaii Judiciary
(1974-1994)
Mayor--County of Hawaii (1968-1974)
Chairman and Chief Executive of the
County of Hawaii (1964-1968)
<CAPTION>
NAME BUSINESS HISTORY
- ------------------------- ----------------------------------------
<S> <C>
Honorable William S. Trustee--Kamehameha Schools Bishop
Richardson Estate (through 1992); Chief
Justice--Supreme Court of Hawaii,
(through 1983) Lieutenant
Governor--State of Hawaii (1962-1966)
Mr. Manuel R. Sylvester Managing and Executive Partner--Coopers
& Lybrand (through 1992)
Dr. Joyce S. Tsunoda Senior Vice President University of
Hawaii and Chancellor for Community
Colleges
Mr. David G. Lee Senior Vice President--SEI Fund
Resources
</TABLE>
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote for each dollar
invested. In other words, each shareholder of record is entitled to one vote for
each dollar of net asset value of the shares held on the record date for the
meeting. The Shareholders of each Fund will vote separately on matters
pertaining solely to that Fund. The Shareholders of each class of each Fund will
vote separately on matters pertaining to its distribution plan. As a
Massachusetts business trust, the Trust is not required to hold annual meetings
of Shareholders but approval will be sought for certain changes in the operation
of the Trust and for the election of Trustees under certain circumstances.
In addition, a Trustee may be removed by the remaining Trustees or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested the Trust will provide appropriate assistance and
information to the Shareholders requesting the meeting.
<PAGE>
25
REPORTING
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to Bishop Street Funds at P.O. Box 419721,
Kansas City, MO 64141-6721 or by calling 1-800-262-9565.
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) of
the High Grade Income, Hawaii Municipal, Money Market, and Treasury Money Market
Funds is declared daily and distributed in the form of monthly dividends. The
Equity Fund declares and pays such dividends on a quarterly basis. Shareholders
of record for the Money Market and Treasury Money Market Funds on the last
Business day of each month will be entitled to receive the dividend.
Shareholders of record for the High Grade Income, Hawaii Municipal and Equity
Funds on the date each dividend is declared will be entitled to receive the
dividend. If any net capital gains are realized, they will be distributed by
each Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in the form of additional shares at the net asset value next
determined following the record date, unless the Shareholder has elected to take
such payment in cash. Shareholders may change their election by providing
written notice to the Bishop Street Funds at P.O. Box 419721, Kansas City, MO
64141-6721, at least 15 days prior to the distribution. Shareholders may receive
payments for cash distributions in the form of a check, by Federal Reserve wire
transfer or ACH.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Coopers & Lybrand
L.L.P. serves as the independent accountant of the Trust.
CUSTODIAN
Chase Manhattan Bank, (the "Custodian"), acts as custodian of the Trust's
assets. The Custodian holds cash, securities and other assets of the Trust as
required by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments for the various
Funds and the various risk factors associated therewith:
AMERICAN DEPOSITARY RECEIPTS ("ADRs")--ADRs are typically issued by a U.S.
financial institution that evidence ownership of underlying securities issued by
a foreign issuer. While the Funds expect to invest primarily in sponsored ADRs,
a joint arrangement between the foreign issuer and the depositary, some ADRs may
be unsponsored. Unlike sponsored ADRs the holders of unsponsored ADRs bear all
expenses and the depositary may not be obligated to distribute Shareholder
communications or to pass-through the voting rights on the deposited securities.
ADRS are typically listed and traded in the U.S. in the form of American
Depositary Shares (ADSs).
ASSET-BACKED SECURITIES--Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
obligations and are generally issued as the debt of a special purpose
<PAGE>
26
entity, such as a trust, organized solely for the purpose of owning such assets
and issuing such debt.
BANKERS' ACCEPTANCES--Bills of exchange or time drafts drawn on and accepted by
a commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT--Interest bearing instruments with a specific maturity.
Certificates of deposit are issued by banks and savings and loan institutions in
exchange for the deposit of funds and normally can be traded in the secondary
market prior to maturity. Certificates of deposit have penalties for early
withdrawal.
COMMERCIAL PAPER--The term used to designate unsecured short-term promissory
notes issued by municipalities, corporations and other entities. Maturities on
these issues vary, generally from a few days to nine months.
CONVERTIBLE SECURITIES--Convertible securities have characteristics similar to
both fixed income and equity securities. Because of the conversion feature, the
market value of convertible securities tends to move together with the market
value of the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provisions.
EQUITY SECURITIES--Investments in common stocks are subject to market risks
which may cause their prices to fluctuate over time. Changes in the value of
portfolio securities will not necessarily affect cash income derived from these
securities but will affect a Fund's net asset value.
FIXED INCOME SECURITIES--The market value of fixed income investments (e.g.
bonds, notes, debentures) will change in response to interest rate changes and
other factors. During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities generally decline.
Moreover, while securities with longer maturities tend to produce higher yields,
the prices of longer maturity securities are also subject to greater market
fluctuations as a result of changes in interest rates. Changes by recognized
agencies in the rating of any fixed income security and in the ability of an
issuer to make payments of interest and principal will also affect the value of
these investments. Changes in the value of portfolio securities will not affect
cash income derived from these securities but will affect a Fund's net asset
value.
GNMA PASS-THROUGH SECURITIES--GNMA securities represent participations in
mortgage pools. Although GNMA guarantees the timely payment of principal and
interest, the market value and yield of these instruments can vary due to
interest rate fluctuations and prepayments of underlying mortgages. In addition,
any premiums paid to purchase these instruments are not subject to GNMA
guarantees. Moreover, although GNMA certificates may offer higher yields than
those available from other types of U.S. Government securities, they may not be
as effective in "locking in" attractive long-interest rates because of
prepayments of the mortgage pools when interest rates decline. Due to this
prepayment feature, GNMA certificates tend not to increase in value as much as
most other debt securities when interest rates decline.
MORTGAGE-BACKED SECURITIES--Securities representing an interest in a pool of
mortgage loans that are issued or guaranteed by a U.S. Government agency. The
primary issuers or guarantors of these mortgage-backed securities are GNMA,
Fannie Mae and the Federal Home Loan Mortgage Corporation. Mortgage-backed
securities are also issued by non-governmental entities which consist of
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated by S&P or Moody's. The mortgages backing
these securities include conventional thirty-year fixed rate mortgages,
graduated payment mortgages and adjustable rate mortgages ("ARMs").
<PAGE>
27
Mortgage-backed securities are in most cases "pass-through" instruments, through
which the holder receives a share of all interest and principal payments from
the mortgages underlying the certificate.
CMOs are debt obligation or multiclass pass-through certificates issued by
agencies or instrumentalities of the U.S. Government or by private originators
or investors in mortgage loans. In a CMO, series of bonds or certificates are
usually issued in multiple classes. Principal and interest paid on the
underlying mortgage assets may be allocated among the several classes of a
series of a CMO in a variety of ways. Each class of a CMO, often referred to as
a "tranche," is issued with a specific fixed or floating coupon rate and has a
stated maturity or final distribution date. Principal payments on the underlying
mortgage assets may cause CMOs to be retired substantially earlier than their
stated maturities or final distribution dates, resulting in a loss of all or
part of any premium paid.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code and invests in certain mortgages principally secured by interests
in real property. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests, or "residual" interests. Guaranteed REMIC
pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC
represent beneficial ownership interests in a REMIC trust consisting principally
of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed mortgage pass-through
certificates. For FHLMC REMIC Certificates, FHLMC guarantees the timely payment
of interest, and also guarantees the payment of principal as payments are
required to be made on the underlying mortgage participation certificates.
Fannie Mae REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by Fannie Mae.
Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the average life or realized yield of a
particular issue of pass-through certificates. In the absence of a known
maturity, market participants generally refer to an estimated average life as
the most appropriate measure of the maturity of a mortgage-backed security. An
average life estimate is a function of an assumption regarding anticipated
prepayment patterns. The assumption is based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants
could produce somewhat different average life estimates with regard to the same
security. There can be no assurance that the estimated average life will be the
actual average life.
MUNICIPAL SECURITIES--Municipal securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
Certain municipal securities are municipal lease revenue obligations (or
certificates of participation ("COPs")), which typically provide that the
municipality has no obligation to make lease or installment payments in future
years unless such amounts are appropriated for such purpose. While
<PAGE>
28
the risk of appropriation is inherent to COP financing, this risk is mitigated
by the Fund's policy, to invest in COPs that are rated in one of the four
highest rating categories used by Moody's, S&P or Fitch, or of equivalent
quality, as determined by the Adviser, under guidelines adopted by the Board of
Trustees.
Municipal securities may be insured by third parties and may be subject to puts
and other enhancements.
OBLIGATIONS OF SUPRANATIONAL ENTITIES-- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, Inter-American Development Bank, International Bank
for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
PARTICIPATION INTERESTS--Participation interests are interests in loans from
financial institutions such as commercial and investment banks, savings and loan
associations and insurance companies. These interests may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership.
RECEIPTS--Separately traded interest and principal component parts of U.S.
Treasury obligations that are issued by banks or brokerage firms and are created
by depositing U.S. Treasury obligations into a special account at a custodian
bank. The custodian holds the interest and principal payments for the benefit of
the registered owners of the receipts. The custodian arranges for the issuance
of the receipts evidencing ownership and maintains the register. Receipts
include "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts"
("TIGRs"), "Liquid Yield Option Notes" ("LYONs"), and "Certificates of Accrual
on Treasury Securities" ("CATS"). TIGRs, LYONs and CATS are interests in private
proprietary accounts while TRs are interests in accounts sponsored by the U.S.
Treasury. Securities denominated as TRs, TIGRs, LYONs and CATS are sold as zero
coupon securities which means that they are sold at a substantial discount and
redeemed at face value at their maturity date without interim cash payments of
interest or principal.
REPURCHASE AGREEMENTS--Agreements by which a financial institution agrees to
sell a security to a Fund and commits to repurchase the security at an agreed
upon price (including principal and interest) on an agreed upon date within a
number of days from the date of purchase. The Fund will have actual or
constructive possession of the securities as collateral for the repurchase
agreement. The Trust bears a risk of loss in the event the other party defaults
on its obligations and the Trust is delayed or prevented from exercising its
right to dispose of the collateral securities or if the Trust realizes a loss on
the sale of the collateral. The Adviser will enter into repurchase agreements on
behalf of the Trust only with financial institutions deemed to present minimal
risk of bankruptcy during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees. Repurchase agreements are
considered loans under the 1940 Act.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by money market
funds are subject to limitations imposed under regulations adopted by the SEC.
These regulations generally require money market funds to acquire only U.S.
dollar obligations maturing in 397 days or less and to maintain a
dollar-weighted average portfolio maturity of 90 days or less. In addition, such
funds may acquire only obligations that present minimal credit risks and that
are "eligible securities" which means they are (i) rated, at the time of
investment, by at least two nationally recognized security rating organizations
(one if it is the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term-rating. A taxable money
market fund may also hold more than 5% of its assets in first tier securities of
a single issuer for three "business days" (that is, any day other than a
Saturday, Sunday or customary business holiday).
<PAGE>
29
RESTRICTED AND ILLIQUID SECURITIES--Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended or an exemption from registration. Illiquid securities
are securities which cannot be disposed of in 7 days or less at approximately
their carrying value (which is the value given the security by the Fund on its
books). The High Grade Income, Hawaii Municipal Bond, and Equity Funds may
invest up to 15% of its net assets in illiquid securities. The Money Market and
Treasury Money Market Funds may invest up to 10% of their respective net assets
in illiquid securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper. Rule 144A Securities are securities that have not been
registered under the Securities Act of 1933 but which may be traded between
certain qualified institutional investors, including investment companies. Such
instruments, while technically restricted, may be deemed by the Adviser to
nonetheless be liquid pursuant to guidelines adopted by the Board of Trustees.
RIGHTS--Rights are instruments giving existing shareholders the right to
purchase shares of newly issued common stock below the public offering price
before they are offered to the public.
SECURITIES LENDING--A Fund may lend the securities in which it is invested, in
order to generate additional income, pursuant to agreements requiring that the
loan be continuously secured by cash, securities of the U.S. Government or its
agencies or any combination of cash and such securities as collateral equal to
102% of the market value at all times of the securities lent. The Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of cash collateral in U.S. Government securities.
Collateral is marked to market daily to provide a level of collateral at least
equal to the value of the securities lent. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially.
SECURITIES OF FOREIGN ISSUERS--Investment in securities of foreign issuers, may
subject the Trust to different risks than those attendant to investments in
securities of U.S. issuers. These risks include differences in accounting,
auditing and financial reporting standards, the possibility of expropriation or
confiscatory taxation, and political instability. There may also be less
publicly available information with regard to foreign issuers than domestic
issuers. Foreign markets may be characterized by less liquidity, greater price
volatility, less regulation and higher transaction costs than U.S. markets.
TIME DEPOSITS--Time deposits are non-negotiable deposits in a banking
institution earning a specified interest rate over a given period of time. Time
deposits with a maturity of seven business days or more are considered illiquid.
U.S. GOVERNMENT AGENCY OBLIGATIONS--Certain Federal agencies such as the
Government National Mortgage Association ("GNMA") have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the United States Government, are either backed by the full faith
and credit of the United States (e.g., GNMA) or supported by the issuing
agencies' right to borrow from the Treasury. The issues of other agencies are
supported by the credit of the instrumentality (e.g., Federal National Mortgage
Association).
U.S. TREASURY OBLIGATIONS--Bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS").
VARIABLE/FLOATING RATE INSTRUMENTS--Certain obligations may carry variable or
floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices.
<PAGE>
30
The interest rates on these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
WARRANTS--Warrants are instruments giving holders the right, but not the
obligation, to buy equity or fixed income securities of a company at a given
price during a specified period.
WHEN-ISSUED SECURITIES--Securities purchased on a when-issued basis are subject
to settlement within 45 days of the purchase date. The price and yield on these
securities is fixed as of the purchase date and no interest accrues to the Fund
before settlement. These securities are therefore subject to market fluctuation
due to changes in market interest rates, and, although the purchase of
securities on a when-issued basis is not considered leveraging, it has the
effect of leveraging the Fund's assets. A Fund will maintain with the Custodian
a separate account with liquid high grade securities or cash in an amount at
least equal to these commitments.
ZERO-COUPON SECURITIES--STRIPS and Receipts are sold as zero coupon securities,
that is, fixed income securities that have been stripped of their unmatured
interest coupons. Zero coupon securities are sold at a (usually substantial)
discount and redeemed at face value at their maturity date without interim cash
payments of interest or principal. The amount of this discount is accreted over
the life of the security, and the accretion constitutes the income earned on the
security for both accounting and tax purposes. Because of these features, the
market prices of zero coupon securities are generally more volatile than the
market prices of securities that have similar maturity but that pay interest
periodically. Zero coupon securities are likely to respond to a greater degree
to interest rate changes than are non-zero coupon securities with similar
maturity and credit qualities.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Summary....................................... 2
Expense Summary............................... 4
Financial Highlights.......................... 8
The Trust..................................... 11
Investment Objectives and Policies............ 11
General Investment Policies................... 13
Risk Factors.................................. 13
Investment Limitations........................ 14
Fundamental Policies.......................... 14
The Adviser................................... 14
The Sub-Adviser for the Money Market
and Treasury Money Market Funds............. 15
The Administrator............................. 16
The Transfer Agent............................ 16
The Distributor............................... 16
How to Purchase Shares........................ 16
Sales Charges................................. 18
Exchange of Shares............................ 19
Redemption of Shares.......................... 20
Performance................................... 21
Taxes......................................... 22
General Information........................... 24
Description of Permitted Investments and Risk
Factors..................................... 25
</TABLE>
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
A FAMILY OF MUTUAL FUNDS
INVESTMENT ADVISER: ADVISED BY FIRST HAWAIIAN BANK
FIRST HAWAIIAN BANK
BISHOP
DISTRIBUTOR: STREET
SEI FINANCIAL SERVICES COMPANY FUNDS
- --------------------------------------------------------------------------
HIGH GRADE INCOME FUND
HAWAII MUNICIPAL BOND FUND
EQUITY FUND
MONEY MARKET FUND
TREASURY MONEY MARKET FUND
ADVISED BY
[LOGO] [LOGO]
BSF-002-02
<PAGE>
BISHOP STREET FUNDS
A FAMILY OF MUTUAL FUNDS
Investment Adviser:
First Hawaiian Bank
This STATEMENT OF ADDITIONAL INFORMATION is not a prospectus. It is intended
to provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's prospectuses dated
April 30, 1997. Prospectuses may be obtained through the Distributor, SEI
Financial Services Company, Oaks, Pennsylvania 19456.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
The Trust................................................................................................. S-2
Description of Permitted Investments...................................................................... S-2
Investment Limitations.................................................................................... S-7
The Adviser............................................................................................... S-8
The Sub-Adviser........................................................................................... S-8
The Administrator......................................................................................... S-9
The Distributor........................................................................................... S-10
Trustees and Officers of the Trust........................................................................ S-11
Reporting................................................................................................. S-12
Performance............................................................................................... S-12
Purchase and Redemption of Shares......................................................................... S-14
Determination of Net Asset Value.......................................................................... S-15
Taxes..................................................................................................... S-16
Fund Transactions......................................................................................... S-18
Description of Shares..................................................................................... S-19
Limitation of Trustees' Liability......................................................................... S-19
Shareholder Liability..................................................................................... S-20
5% Shareholders........................................................................................... S-20
Financial Information..................................................................................... S-21
Appendix.................................................................................................. S-22
</TABLE>
<PAGE>
THE TRUST
Bishop Street Funds (the "Trust") is an open-end management investment
company organized under Massachusetts law as a "Massachusetts business trust"
under an Agreement and Declaration of Trust dated May 25, 1994. The Agreement
and Declaration of Trust permits the Trust to offer separate series of units of
beneficial interest ("shares") and different classes of shares of each Fund.
Shareholders may purchase shares through two separate classes (Institutional
Class A and Retail Class B) which provide for variations in dividends and sales
loads. Except for these differences between Institutional Class A and Retail
Class B shares, each share of each Fund represents an equal proportionate
interest in that Fund. See "Description of Shares." This Statement of Additional
Information relates to the Institutional Class A and Retail Class B shares of
the Trust's High Grade Income Fund, Hawaii Municipal Bond Fund, Equity Fund,
Money Market Fund and Treasury Money Market Fund (the "Funds").
DESCRIPTION OF PERMITTED INVESTMENTS
The following information supplements the information about permitted
investments set forth in the Prospectus for the relevant Fund.
VARIABLE AMOUNT MASTER DEMAND NOTES--Certain of the Funds may purchase
VARIABLE AMOUNT MASTER DEMAND NOTES which may or may not be backed by bank
letters of credit. These notes permit the investment of fluctuating amounts at
varying market rates of interest pursuant to direct arrangements between the
Trust, as lender, and the borrower. Such notes provide that the interest rate on
the amount outstanding varies on a daily, weekly or monthly basis depending upon
a stated short-term interest rate index. Both the lender and the borrower have
the right to reduce the amount of outstanding indebtedness at any time. There is
no secondary market for the notes. It is not generally contemplated that such
instruments will be traded.
GNMA SECURITIES--The High Grade Income Fund and Money Market Fund may invest
in SECURITIES ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA"), a
wholly-owned U.S. Government corporation which guarantees the timely payment of
principal and interest. The market value and interest yield of these instruments
can vary due to market interest rate fluctuations and early prepayments of
underlying mortgages. These securities represent ownership in a pool of
federally insured mortgage loans. GNMA certificates consist of underlying
mortgages with a maximum maturity of 30 years. However, due to scheduled and
unscheduled principal payments, GNMA certificates have a shorter average
maturity and, therefore, less principal volatility than a comparable 30-year
bond. Since prepayment rates vary widely, it is not possible to predict
accurately the average maturity of a particular GNMA pool. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. The scheduled monthly
interest and principal payments relating to mortgages in the pool are "passed
through" to investors. In addition, there may be unscheduled principal payments
representing prepayments on the underlying mortgages. Although GNMA certificates
may offer yields higher than those available from other types of U.S. Government
securities, GNMA certificates may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of a
GNMA certificate likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price of
a GNMA certificate originally purchased at a premium to decline in price to its
par value, which may result in a loss.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES--The High Grade Income Fund may
invest in MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES. Two principal
types of mortgage-backed securities are collateralized mortgage obligations
("CMOs") and real estate mortgage investment conduits ("REMICS"). CMOs are
securities collateralized by mortgages, mortgage pass-through certificates,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool is
dedicated to bond repayment), and mortgage-backed bonds
S-2
<PAGE>
(general obligations of issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family properties).
Many CMOs are issued with a number of classes or series which have different
maturities and are retired in sequence. Investors purchasing CMOs in the
shortest maturities receive or are credited with their PRO RATA portion of the
scheduled payments of interest and principal on the underlying mortgages plus
all unscheduled prepayments of principal up to a predetermined portion of the
total CMO obligation. Until that portion of such CMO obligation is repaid,
investors in the longer maturities receive interest only. Accordingly, CMOs in
longer maturity series are less likely than other mortgage pass-throughs to be
prepaid prior to their stated maturity. Although some of the mortgages
underlying CMOs may be supported by various types of insurance, and while some
CMOs may be backed by GNMA certificates or other mortgage pass-throughs issued
or guaranteed by U.S. Government agencies or instrumentalities, CMOs themselves
are not generally guaranteed by the U.S. Government or any other entity.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
In addition to mortgage-backed securities, the High Grade Income Fund may
invest in ASSET-BACKED SECURITIES, which are securities that represent an
interest in a pool of non-mortgage assets, including company receivables, truck
and auto loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-to-intermediate maturity structure
depending on the paydown characteristics of the underlying financial assets.
REPURCHASE AGREEMENTS--REPURCHASE AGREEMENTS are agreements by which a
person (E.G., a Fund) obtains a security and simultaneously commits to return
the security to the seller (a financial institution deemed to present minimal
risk of bankruptcy during the term of the agreement based on guidelines
established and periodically reviewed by the Trustees) at an agreed upon price
(including principal and interest) on an agreed upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity date of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.
Repurchase agreements are considered to be loans by the participating Fund
for purposes of its investment limitations. Repurchase agreements entered into
by the Funds will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement. Under
all repurchase agreements entered into by the Funds, the Fund takes actual or
constructive possession of the underlying collateral. However, if the seller
defaults, the Fund could realize a loss on the sale of the underlying security
to the extent that the proceeds of sale including accrued interest are less than
the resale price provided in the agreement including interest. In addition, even
though the Bankruptcy Code provides protection for most repurchase agreements,
if the seller should be involved in bankruptcy or insolvency proceedings, the
Fund may incur delay and costs in selling the underlying security or may suffer
a loss of principal and interest if the Fund is treated as an unsecured creditor
and required to return the underlying security to the seller's estate.
MUNICIPAL SECURITIES--MUNICIPAL NOTES in which the Hawaii Municipal Bond
Fund may invest include, but are not limited to, general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. The Hawaii Municipal Bond Fund's
investments in any of the notes described above will be limited to those
obligations which are rated BBB or Baa or better at the time of investment by
Standard and Poor's
S-3
<PAGE>
Corporation ("S&P") or Moody's Investor Service, Inc. ("Moody's"), respectively
or which, if not rated, are of equivalent quality in the Adviser's judgment.
MUNICIPAL BONDS in which the Hawaii Municipal Bond Fund may invest must be
rated BBB or better by S&P or Baa or better by Moody's at the time of investment
or, if unrated, must be deemed by the Adviser to have essentially the same
characteristics and quality as bonds having such ratings. The Adviser may
purchase private activity bonds. Private activity bonds are issued by or on
behalf of States or political subdivisions thereof to finance privately owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking and low income housing.
The payment of the principal and interest on private activity bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and may be secured by a pledge of real and personal property so financed.
Municipal securities which are payable only from the revenues derived from a
particular facility may be adversely affected by Hawaii laws or regulations
which make it more difficult for the particular facility to generate revenues
sufficient to pay such interest and principal, including, among others, laws and
regulations which limit the amount of fees, rates or other charges which may be
imposed for use of the facility or which increase competition among facilities
of that type or which limit or otherwise have the effect of reducing the use of
such facilities generally, thereby reducing the revenues generated by the
particular facility. Municipal securities, the payment of interest and principal
on which is insured in whole or in part by a Hawaii governmentally created fund,
may be adversely affected by Hawaii laws or regulations which restrict the
aggregate proceeds available for payment of principal and interest in the event
of a default on such municipal securities. Similarly, municipal securities, the
payment of interest and principal on which is secured, in whole or in part, by
an interest in real property may be adversely affected by Hawaii laws which
limit the availability of remedies or the scope of remedies available in the
event of a default on such municipal securities. Because of the diverse nature
of such laws and regulations and the impossibility of either predicting in which
specific municipal securities the Fund will invest from time to time or
predicting the nature or extent of future changes in existing laws or
regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws
and regulations on the securities in which the Fund may invest and, therefore,
on the shares of the Fund.
Other types of TAX-EXEMPT INSTRUMENTS which are permissible investments for
the Hawaii Municipal Bond Fund include floating rate notes. Investments in such
floating rate instruments will normally involve industrial development or
revenue bonds which provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate) at a major
commercial bank, and that a Fund can demand payment of the obligation at all
times or at stipulated dates on short notice (not to exceed 30 days) at par plus
accrued interest. Such obligations are frequently secured by letters of credit
or other credit support arrangements provided by banks. The quality of the
underlying credit or of the bank, as the case may be, must, in the Adviser's
opinion be equivalent to the long-term bond or commercial paper ratings stated
above. The Adviser will monitor the earning power, cash flow and liquidity
ratios of the issuers of such instruments and the ability of an issuer of a
demand instrument to pay principal and interest on demand. The Adviser may
purchase other types of tax-exempt instruments as long as they are of a quality
equivalent to the bond or commercial paper ratings stated above.
The Adviser has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the High Grade Income, Money Market and Hawaii Municipal
Bond Funds to meet redemptions and remain as fully invested as possible in
municipal
S-4
<PAGE>
securities. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. The Funds will limit
their put transactions to those with institutions which the Adviser believes
present minimum credit risks, and the Adviser will use its best efforts to
initially determine and thereafter monitor the financial strength of the put
providers by evaluating their financial statements and such other information as
is available in the marketplace. It may, however, be difficult to monitor the
financial strength of the writers where adequate current financial information
is not available. In the event that any writer is unable to honor a put for
financial reasons, the affected Fund would be a general creditor (I.E., on a
parity with all other unsecured creditors) of the writer. Furthermore,
particular provisions of the contract between a Fund and the writer may excuse
the writer from repurchasing the securities in certain circumstances (for
example, a change in the published rating of the underlying municipal securities
or any similar event that has an adverse effect on the issuer's credit); or a
provision in the contract may provide that the put will not be exercised except
in certain special cases, for example, to maintain portfolio liquidity. A Fund
could, however, sell the underlying portfolio security in the open market or
wait until the portfolio security matures, at which time it should realize the
full par value of the security.
Municipal securities purchased subject to a put may be sold to third persons
at any time, even though the put is outstanding, but the put itself, unless it
is an integral part of the security as originally issued, may not be marketable
or otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to a Fund, such Fund could, of course, sell the portfolio security.
The maturity of the underlying security will generally be different from that of
the put. There will be no limit to the percentage of portfolio securities that
the Funds may purchase subject to a put. For the purpose of determining the
"maturity" of securities purchased subject to an option to put, and for the
purpose of determining the dollar-weighted average maturity of the Funds
including such securities, the Trust will consider "maturity" to be the first
date on which it has the right to demand payment from the writer of the put
although the final maturity of the security is later than such date.
SPECIAL CONSIDERATIONS RELATING TO HAWAII MUNICIPAL SECURITIES
The ability of issuers to pay interest on, and repay principal of, Hawaii
Municipal Securities may be affected by (1) the general financial condition of
the State of Hawaii, (2) amendments to the Hawaii Constitution and related
statutes that limit the taxing and spending authority of Hawaii government
entities, (3) voter initiatives, (4) civil actions and (5) a wide variety of
Hawaii laws and regulations.
FOREIGN SECURITIES--The High Grade Income and Equity Funds may invest in
U.S. DOLLAR DENOMINATED OBLIGATIONS OF FOREIGN ISSUERS. Permissible investments
may consist of obligations of foreign branches of U.S. banks and of foreign
banks, including European Certificates of Deposit, European Time Deposits,
Canadian Time Deposits and Yankee Certificates of Deposits, and investments in
Canadian Commercial Paper, foreign securities and Europaper. In addition, the
Equity Fund may invest in American Depositary Receipts. These instruments may
subject the Fund to investment risks that differ in some respects from those
related to investments in obligations of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
S-5
<PAGE>
WHEN-ISSUED SECURITIES--The High Grade Income, Hawaii Municipal Bond, Money
Market and Treasury Money Market Funds may invest in WHEN-ISSUED SECURITIES.
These securities involve the purchase of debt obligations on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of commitment to purchase. The Funds will only make commitments
to purchase obligations on a when-issued basis with the intention of actually
acquiring the securities, but may sell them before the settlement date. The
when-issued securities are subject to market fluctuation, and no interest
accrues on the security to the purchaser during this period. The payment
obligation and the interest rate that will be received on the securities are
each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case
there could be an unrealized loss at the time of delivery.
Segregated accounts will be established with the custodian, and the Funds
will maintain liquid assets in an amount at least equal in value to the Funds'
commitments to purchase when-issued securities. If the value of these assets
declines, the Funds will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
LENDING OF PORTFOLIO SECURITIES--Each of the Funds may LEND SECURITIES
pursuant to agreements requiring that the loans be continuously secured by cash,
securities of the U.S. government or its agencies, or any combination of cash
and such securities, as collateral equal to 100% of the market value at all
times of the securities lent. Such loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans for a Fund exceed one-third
of the value of its total assets taken at fair market value. A Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of the cash collateral in U.S. government securities.
However, a Fund will normally pay lending fees to broker-dealers and related
expenses from the interest earned on invested collateral. There may be risks of
delay in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans are made only to borrowers deemed by
the Adviser to be of good standing and when, in the judgment of the Adviser, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. Any loan may be terminated by either party upon reasonable
notice to the other party.
OTHER INVESTMENTS
The Funds are not prohibited from investing in obligations of banks which
are clients of SEI Investments Company ("SEI"). However, the purchase of shares
of the Trust by them or by their customers will not be a consideration in
determining which bank obligations the Funds will purchase. The Funds will not
purchase obligations of the Adviser or the Sub-Adviser.
The High Grade Income, Hawaii Municipal Bond Fund and Equity Funds may
purchase securities of other investment companies as permitted by the Investment
Company Act of 1940. Under these rules and regulations, a Fund is prohibited
from acquiring the securities of other investment companies if, as a result of
such acquisition, the Fund would own more than 3% of the total voting stock of
the company; securities issued by any one investment company represented more
than 5% of the Fund's assets; or securities (other than treasury stock) issued
by all investment companies would represent more than 10% of the total assets of
the Fund. These investment companies typically incur fees that are separate from
those fees incurred directly by the Fund. A Fund's purchase of such investment
company securities results in the layering of expenses, such that shareholders
of the Funds would indirectly bear a proportionate share of the operating
expenses of such investment companies, including advisory fees.
S-6
<PAGE>
INVESTMENT LIMITATIONS
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer, provided
that this limitation shall apply only as to 75% of the Fund's net assets
except that this restriction does not apply to the Hawaii Municipal Bond
Fund.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. To the extent
that such borrowing exceeds 5% of the value of the borrowing Fund's assets,
asset coverage of at least 300% is required. No Fund will purchase
securities while its borrowings exceed 5% of its total assets.
4. Make loans, except that (a) each Fund may purchase or hold debt instruments
in accordance with its investment objective and policies; (b) each Fund may
enter into repurchase agreements, and (c) the Money Market, Treasury Money
Market, High Grade Income, Hawaii Municipal Bond and Equity Funds may engage
in securities lending.
5. Pledge, mortgage or hypothecate assets except to secure borrowings permitted
by (3) above in aggregate amounts not to exceed 33% of total assets taken at
current value at the time of the incurrence of such loan.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts. However, each of the Funds (other than
the Money Market and Treasury Money Market Funds) may invest in companies
which invest in real estate, and in commodities contracts.
7. Make short sales of securities or purchase securities on margin, except that
each Fund may obtain short-term credits as necessary for the clearance of
security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
9. Purchase securities of other investment companies, except as permitted by
the Investment Company Act of 1940 and the rules and regulations thereunder.
10. Issue senior securities (as defined in the Investment Company Act of 1940)
except in connection with permitted borrowings as described above or as
permitted by rule, regulation or order of the Securities and Exchange
Commission (the "SEC").
11. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
NON-FUNDAMENTAL POLICIES
No Fund may invest in warrants, except that the Equity Fund may invest in
warrants in an amount not exceeding 5% of the Fund's net assets as valued at the
lower of cost or market value. Included in that amount, but not to exceed 2% of
the Fund's net assets, may be warrants not listed on the New York Stock Exchange
or American Stock Exchange.
The Money Market and Treasury Money Market Funds will comply with the
requirements of Rule 2a-7 under the Investment Company Act of 1940.
The foregoing percentages will apply at the time of the purchase of a
security.
S-7
<PAGE>
THE ADVISER
The Trust and First Hawaiian Bank (the "Adviser") have entered into an
advisory agreement (the "Advisory Agreement") dated January 27, 1995. The
Advisory Agreement provides that the Adviser shall not be protected against any
liability to the Trust or its Shareholders by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state, the Adviser will bear the amount
of such excess. The Adviser will not be required to bear expenses of the Trust
to an extent which would result in a Fund's inability to qualify as a regulated
investment company under provisions of the Internal Revenue Code.
The continuance of the Advisory Agreement, after the first two years, must
be specifically approved at least annually (i) by the vote of a majority of the
Trustees who are not parties to the Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the vote of the Trustees or a majority of outstanding
shares of the Funds, as defined in the 1940 Act. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees of the Trust or, with respect to the Funds
by a majority of the outstanding shares of the Funds, on not less than 30 days'
nor more than 60 days' written notice to the Adviser, or by the Adviser on 90
days' written notice to the Trust.
The Adviser is entitled to a fee which is calculated daily and paid monthly
at an annual rate of .30% of the daily average net assets of the Money Market
Fund, .55% of the daily average net assets of the High Grade Income Fund, .35%
of the daily average net assets of the Hawaii Municipal Bond Fund, .74% of the
daily average net assets of the Equity Fund and .30% of the daily average net
assets of the Treasury Money Market Fund.
For the fiscal years ended December 31, 1995 and 1996, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
ADVISORY FEES PAID ADVISORY FEES WAIVED
------------------------- -------------------------
1995 1996 1995 1996
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Hawaii Municipal Bond Fund................................. $ 0 $ 0 $ 49,931.76 $ 78,455
High Grade Income Fund..................................... * * * *
Equity Fund................................................ * * * *
Treasury Money Market Fund................................. * $ 189,543 * $ 126,363
Money Market Fund.......................................... $ 377,090.24 $ 931,000 $ 422,799.05 $ 0
</TABLE>
- ------------------------
* Not in operation during such period.
THE SUB-ADVISER
The Adviser has entered into a sub-advisory agreement with Wellington
Management Company, LLP ("Sub-Adviser") relating to the Money Market and
Treasury Money Market Funds. Under the agreement, the Sub-Adviser is entitled to
fees which are calculated daily and paid monthly at an annual rate of .075% of
the aggregate average daily net assets of the Money Market and Treasury Money
Market Funds, respectively, up to $500 million and .020% of the aggregate
average daily net assets of the Money Market and Treasury Money Market Funds,
respectively, in excess of $500 million. Such fees are paid by the Adviser and
the Sub-Adviser receives no fees directly from these Funds.
S-8
<PAGE>
For the fiscal years ended December 31, 1995 and 1996, the Money Market and
Treasury Money Market Funds paid the following sub-advisory fees:
<TABLE>
<CAPTION>
SUB-ADVISORY FEES PAID SUB-ADVISORY FEES WAIVED
------------------------- ------------------------------------
1995 1996 1995 1996
------------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C>
Money Market Fund.......................................... $ 199,972.32 $ 245,175 $ 0 $ 0
Treasury Money Market Fund................................. * $ 78,977 * $ 0
</TABLE>
- ------------------------
* Not in operation during such period.
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") have entered into an
administration agreement (the "Administration Agreement") dated January 27,
1995.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith or
negligence on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder.
For the fiscal years ended December 31, 1995 and 1996, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
ADMINISTRATIVE FEES PAID ADMINISTRATIVE FEES WAIVED
------------------------- --------------------------
1995 1996 1995 1996
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Hawaii Municipal Bond Fund................................ $ 0 $ 0 $ 15,374.15 $ 44,816
High Grade Income Fund.................................... * * * *
Equity Fund............................................... * * * *
Treasury Money Market Fund................................ * $ 105,303 * $ 105,000
Money Market Fund......................................... $ 533,244.01 $ 326,909 $ 0 $ 326,909
</TABLE>
- ------------------------
* Not in operation during such period.
The Administrator, a Delaware business trust, has its principal business
offices at Oaks, Pennsylvania 19456. SEI Financial Mangaement Corporation
("SFM"), a wholly-owned subsidiary of SEI Investments Company ("SEI"), is the
owner of all beneficial interests in the Administrator. SEI and its affiliates,
including the Administrator, are leading providers of funds evaluation services,
trust accounting systems, and brokerage and information services to financial
institutions, institutional investors and money managers. The Administrator and
its affiliates also serve as administrator to the following other mutual funds:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND, FMB Funds, First American
Funds, Inc., First American Investment Funds, Inc., First American Strategy
Funds, Inc., Marquis Funds-Registered Trademark-, Monitor Funds, Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., The Pillar Funds, Profit Funds
Investment Trust, Rembrandt Funds-Registered Trademark-, Santa Barbara Group of
Mutual Funds, Inc., 1784 Funds-Registered Trademark-, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI International Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, Stepstone Funds, STI Classic Funds STI
Classic Variable Trust and Turner Funds.
The Administrator is entitled to a fee, calculated daily and paid monthly,
at an annual rate of .20% of average daily net assets of each of the Funds.
S-9
<PAGE>
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI, serves as a distributor. The Retail Class B shares of the
Trust have a Rule 12b-1 Distribution Plan (the "Retail Class B Plan"), however,
the Distributor has agreed to waive its right to receive fees under the Retail
Class B Plan. Financial institutions that are the record owner of shares for the
account of their customers may impose separate fees for account services to
their customers.
Each Fund has adopted a shareholder servicing plan for its Institutional
Class A and Retail Class B shares (the "Service Plan") under which a shareholder
servicing fee of up to .25% of average daily net assets attributable to shares
of each class will be paid to the Distributor. Under the Service Plan, the
Distributor may perform, or may compensate other service providers for
performing, the following shareholder and administrative services: maintaining
client accounts; arranging for bank wires; responding to client inquiries
concerning services provided on investments; assisting clients in changing
dividend options, account designations and addresses; sub-accounting; providing
information on share positions to clients; forwarding shareholder communications
to clients; processing purchase, exchange and redemption orders; and processing
dividend payments. Under the Service Plan, the Distributor may retain as profit
any difference between the fee it receives and the amount it pays to third
parties.
For the fiscal year ended December 31, 1995, the Hawaii Municipal Bond Fund
incurred no distribution fees and the Money Market Fund incurred $1,185 in
distribution fees.
As of the fiscal year ended December 31, 1995, the High Grade Income, Equity
and Treasury Money Market Funds had not commenced operations.
For the fiscal year ended December 31, 1996, the Funds incurred the
following distribution expenses:
<TABLE>
<CAPTION>
AMOUNT PAID
TO 3RD PROSPECTUS
PARTIES PRINTING & COSTS
BY SFS FOR MAILING COSTS ASSOCIATED
DISTRIBUTOR (NEW WITH
RELATED SALES SHAREHOLDERS REGISTRATION
TOTAL SERVICES EXPENSES ADVERTISING ONLY) FEES
PORTFOLIO/CLASS ($ AMOUNT) ($ AMOUNT) ($ AMOUNT) ($ AMOUNT) ($ AMOUNT) ($ AMOUNT)
- ----------------------------------- ----------- ------------- --------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS A
Money Market Fund.................. $ 99,283 $ 0 $ 0 $ 0 $ 28,101 $ 71,182
Treasury Money Market Fund......... $ 76,065 $ 0 $ 0 $ 0 $ 13,672 $ 62,393
High Grade Income Fund............. * * * * * *
Hawaii Municipal Bond Fund......... $ 7,785 $ 0 $ 0 $ 0 $ 1,192 $ 6,593
Equity Fund........................ * * * * * *
RETAIL CLASS B
Money Market Fund.................. $ 4,620 $ 3,584 $ 0 $ 0 $ 312 $ 723
Treasury Money Market Fund......... * * * * * *
High Grade Income Fund............. * * * * * *
Hawaii Municipal Bond Fund......... $ 5,036 $ 0 $ 0 $ 0 $ 756 $ 4,280
Equity Fund........................ * * * * * *
</TABLE>
- ------------------------
* Not in operation during such period.
S-10
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under
the laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their principal occupations for
the last five years are set forth below.
*MARTIN ANDERSON (DOB 11/16/23)--Trustee--P.O. Box 3196, Honolulu, HI,
Attorney, Goodsill, Anderson, Quinn & Stifel since 1951.
*PHILIP H. CHING (DOB 01/11/31)--Trustee--1700 Palaau St., Honolulu, HI.
Vice Chairman First Hawaiian Bank (banking) since 1958 to 1996.
SHUNICHI KIMURA (DOB 03/15/30)--Trustee--34 Lilinoe St., Hilo, HI. Judge --
State of Hawaii Judiciary from May, 1974 to April, 1994. Regent--University of
Hawaii (1995-1996); Mayor--County of Hawaii (1968 to 1974); Chairman and Chief
Executive of the County of Hawaii (1964-1968).
MANUAL R. SYLVESTER (DOB 06/20/30)--Trustee--1487 Hiikala Place #35,
Honolulu, HI. Retired since 1992. Executive Partner (April, 1992 to September,
1992) and Managing Partner (July, 1978 to March, 1992) Coopers and Lybrand,
Certified Public Accounting.
JOYCE S. TSUNODA (DOB 01/01/38)--Trustee--1814 Hoollehua Street, Pearl City,
HI 96782. Administrator University of Hawaii since 1974. Senior Vice
President--University of Hawaii and Chancellor for Community Colleges.
*WILLIAM S. RICHARDSON (DOB 12/22/19)--Trustee--3335 Loulu Street, Honolulu,
HI. Trustee, Kamehameha Schools Bishop Estate (charitable educational trust)
from 1982 to 1992.
*DAVID G. LEE (DOB 04/16/52)--Trustee, President and Chief Executive
Officer--Senior Vice President of the Administrator and the Distributor since
1993. Vice President of the Administrator and the Distributor since 1991.
President, G.W. Sierra Trust Funds prior to 1991.
SANDRA K. ORLOW (DOB 10/18/53)--Vice President and Assistant Secretary--Vice
President and Assistant Secretary of the Administrator and Distributor since
1988.
KEVIN P. ROBINS (DOB 04/15/61)--Vice President and Assistant
Secretary--Senior Vice President, General Counsel and Assistant Secretary of
SEI, the Administrator and Distributor since 1994. Vice President of SEI, the
Administrator and Distributor 1992-1994. Associate, Morgan, Lewis & Bockius LLP
(law firm), 1988-1992.
JOHN H. GRADY, JR. (DOB 06/01/61)--Secretary--1800 M. Street, N.W.,
Washington, D.C. 20036, Partner since 1995, Morgan, Lewis & Bockius LLP (law
firm), counsel to the Trust, Administrator and Distributor.
KATHRYN L. STANTON (DOB 11/19/58)--Vice President and Assistant Secretary,
Deputy General Counsel--Vice President, Assistant Secretary of SEI, the
Administrator and Distributor, since 1994. Associate, Morgan, Lewis & Bockius
LLP (law firm) 1989-1994.
TODD CIPPERMAN (DOB 02/14/66)--Vice President, Assistant Secretary--Vice
President, Assistant Secretary of SEI, the Administrator and Distributor since
May, 1995, Associate, Dewey Ballantine (law firm) 1994-1995, Associate, Winston
& Strawn (law firm) 1991-1995.
JOSEPH LYDON (DOB 09/27/59)--Vice President, Assistant Secretary--Director
of Business Administration, SEI Corporation since April, 1995; Vice President of
Fund Group, Vice President of the Advisor--Dreman Value Management, LP,
President of Dreman Financial Services, Inc. 1989-1995.
STEPHEN G. MEYER (DOB 07/12/65)--Controller, Chief Financial Officer--Vice
President and Controller of SEI Funds Resources since 1995. Director, Internal
Audit and Risk Management, SEI Corporation, 1992-1995. Senior Associate, Coopers
& Lybrand, 1990-1992.
S-11
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE PENSION OR ESTIMATED TOTAL COMPENSATION FROM
COMPENSATION RETIREMENT BENEFITS ANNUAL REGISTRANT AND FUND COMPLEX
FROM REGISTRANT ACCRUED AS PART BENEFITS UPON PAID TO DIRECTORS FOR FYE
NAME OF PERSON AND POSITION FOR FYE 12/31/96 OF FUND EXPENSES RETIREMENT 12/31/96
- ----------------------------------- ----------------- ----------------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Martin Anderson, Trustee*.......... $ 10,000 $ 0 $0 $10,000 for services on 1
board
Philip H. Ching, Trustee*.......... N/A $ 0 $0 $10,000 for services on 1
board
Shunichi Kimura, Trustee........... $ 10,000 $ 0 $0 $10,000 for services on 1
board
Manuel R. Sylvester, Trustee....... $ 10,000 $ 0 $0 $10,000 for services on 1
board
Joyce S. Tsunoda, Trustee.......... $ 10,000 $ 0 $0 $10,000 for services on 1
board
William S. Richardson, Trustee*.... $ 10,000 $ 0 $0 $10,000 for services on 1
board
David G. Lee, Trustee*............. N/A $ 0 $0 $0 for services on 1 board
</TABLE>
- ------------------------------
* Messrs. Lee, Ching, Anderson and Richardson are Trustees who may be deemed
to be "interested" persons of the Trust as the term is defined in the
Investment Company Act of 1940.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust.
REPORTING
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
Shareholder reports to Shareholders of record.
PERFORMANCE
YIELDS. Yields are one basis upon which investors may compare the Funds
with other funds; however, yields of other funds and other investment vehicles
may not be comparable because of the factors set forth below and differences in
the methods used in valuing portfolio instruments.
The yield of a money market fund fluctuates, and the annualization of a
week's dividend is not a representation by the Trust as to what an investment in
a money market fund will actually yield in the future. Actual yields will depend
on such variables as asset quality, average asset maturity, the type of
instruments the Fund invests in, changes in interest rates on money market
instruments, changes in the expenses of the Fund and other factors.
MONEY MARKET FUND YIELDS. From time to time the Money Market and Treasury
Money Market Funds advertise their "current yield" and "effective compound
yield." Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "current yield" of these Funds refers to the
income generated by an investment in the Funds over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Funds is assumed to
be reinvested. The "effective yield" will be slightly higher than the "current
yield" because of the compounding effect of this assumed reinvestment.
The current yield of the Money Market and Treasury Money Market Funds will
be calculated daily based upon the seven days ending on the date of calculation
("base period"). The yield is computed by determining the net change (exclusive
of capital changes) in the value of a hypothetical pre-existing shareholder
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing such net change by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7). Realized and unrealized gains and losses are not included
in the calculation of the yield. The effective compound yield of these Funds is
determined by computing the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to
S-12
<PAGE>
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula: Effective Yield = (Base
Period Return + 1) 365/7)-1. The current and the effective yields reflect the
reinvestment of net income earned daily on portfolio assets.
For the seven-day period ended December 31, 1996, the seven-day yield and
seven-day effective yield for the Money Market Fund were 5.02% and 5.15%,
respectively, for the Institutional Class A shares, and 4.92% and 5.04%,
respectively, for the Retail Class B shares.
For the seven-day period ended December 31, 1996, the seven-day yield and
seven-day effective yield for the Treasury Money Market Fund were 5.03% and
5.15%, respectively, for the Institutional Class A shares. As of the fiscal year
ended December 31, 1996, the Retail Class B shares of the Treasury Money Market
Fund were not available for purchase by investors.
OTHER YIELDS. The Hawaii Municipal Bond Fund and the High Grade Income Fund
may advertise a 30-day yield. The Hawaii Municipal Bond Fund also may advertise
30-day tax-equivalent yield. Tax equivalent yields are computed by dividing that
portion of the Fund's yield which is tax-exempt by one minus a stated federal
and state income tax rate and adding the product to that portion, if any, of the
Fund's yield that is not tax-exempt. (Tax equivalent yields assume the payment
of Federal income taxes at a rate of 31% and Hawaii income taxes at a rate of
10%.) These figures will be based on historical earnings and are not intended to
indicate future performance. The 30-day yield of these Funds refers to the
annualized income generated by an investment in the Funds over a specified
30-day period. The yield is calculated by assuming that the income generated by
the investment during that period generated each period over one year and is
shown as a percentage of the investment. In particular, yield will be calculated
according to the following formula:
Yield = (2 (a-b/cd + 1)6-1) where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
Tax equivalent yields are computed by dividing that portion of a Fund's
yield which is tax-exempt by one minus a stated federal and state income tax
rate and adding the product to that portion, if any, of the Fund's yield that is
not tax-exempt.
For the 30-day period ended December 31, 1996, the 30-day yield and 30-day
tax equivalent yield for the Hawaii Municipal Bond Fund were 5.31% and 7.70%,
respectively, for the Institutional Class A shares and 5.13% and 7.43%,
respectively, for the Retail Class B shares. As of the fiscal year ended
December 31, 1996, the High Grade Income and Equity Funds had not commenced
operations.
TOTAL RETURN. From time to time, certain of the Funds may advertise total
return on an "average annual total return" basis and on an "aggregate total
return" basis for various periods. Average annual total return reflects the
average annual percentage change in the value of an investment in a Fund over a
particular measuring period. Aggregate total return reflects the cumulative
percentage change in value over the measuring period. Aggregate total return is
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows: P (1 + T)n = ERV, where P = a hypothetical initial payment
of $1,000; T = average annual total return; n = number of years; and ERV =
ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the designated time period as of the end of such period or the life of the
fund. The formula for calculating aggregate total return can be expressed as
(ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends and
capital gain distribution on the reinvestment dates during the period and that
the entire investment is redeemed at the end of the
S-13
<PAGE>
period. In addition the maximum sales charge for each Fund is deducted from the
initial $1,000 payment. Total return may also be shown without giving effect to
any sales charges.
<TABLE>
<CAPTION>
CLASS/WITHOUT LOAD AVERAGE ANNUAL TOTAL
FUND WITH LOAD RETURN SINCE INCEPTION
- ------------------------------------ ------------------------------------ ---------------------------------------
<S> <C> <C>
Money Market Fund Institutional 5.38%
Money Market Fund Retail 5.27%
Treasury Money Market Fund Institutional 5.08%
Treasury Money Market Fund Retail N/A
Hawaii Municipal Bond Fund Institutional/without load 7.28%
Hawaii Municipal Bond Fund Retail/with load 7.31%
Hawaii Municipal Bond Fund Retail/without load 5.31%
</TABLE>
The Funds' performance may from time to time be compared to other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical
Services), financial and business publications and periodicals, to broad groups
of comparable mutual funds or to unmanaged indices which may assume investment
of dividends but generally do not reflect deductions for administrative and
management costs. The Funds may quote Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance. The Funds may quote
Ibbotson Associates of Chicago, Illinois, which provides historical returns of
the capitals markets in the U.S. The Funds may use long term performance of
these capital markets to demonstrate general long-term risk vs. reward scenarios
and could include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation
in advertising and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the
New York Stock Exchange and the Federal Reserve wire system are open for
business except for Hawaii state banking holidays. Currently, the weekdays on
which the Trust is closed for business are: New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, Martin Luther King Day, Columbus Day, Veteran's Day, Kuhio Day,
Kamehameha Day, Admission Day and Election Day.
It is the Trust's policy to pay for redemptions in cash. The Trust retains
the right, however, to provide for redemptions in whole or in part by a
distribution in-kind of securities held by the Funds in lieu of cash.
Shareholders may incur brokerage charges on the sale of any such securities so
received in payment of redemptions. A Shareholder will at all times be entitled
to aggregate cash redemptions from all Funds of the Trust during any 90-day
period of up to the lesser of $250,000 or 1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of disposal or valuation of the Fund's securities is not
reasonably practicable, or for such other periods as the Securities and Exchange
Commission has by order permitted. The Trust also reserves the right to suspend
sales of shares of the Funds for any period during which the New York Stock
Exchange, the Adviser, the Administrator and/or the Custodian are not open for
business.
S-14
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Money Market and Treasury Money Market
Funds is calculated by adding the value of securities and other assets,
subtracting liabilities and dividing by the number of outstanding shares.
Securities will be valued by the amortized cost method which involves valuing a
security at its cost on the date of purchase and thereafter (absent unusual
circumstances) assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in general market rates of
interest on the value of the instrument. While this method provides certainty in
valuation, it may result in periods during which a security's value, as
determined by this method, is higher or lower than the price these Funds would
receive if they sold the instrument. During periods of declining interest rates,
the daily yield of these Funds may tend to be higher than a like computation
made by a company with identical investments utilizing a method of valuation
based upon market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized cost by these Funds resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
these Funds would be able to obtain a somewhat higher yield than would result
from investment in a company utilizing solely market values, and existing
investors in these Funds would experience a lower yield. The converse would
apply in a period of rising interest rates.
The Money Market and Treasury Money Market Funds' use of amortized cost and
the maintenance of these Funds' net asset value at $1.00 are permitted by
regulations promulgated by Rule 2a-7 under the Investment Company Act of 1940,
provided that certain conditions are met. These conditions currently require
that the Funds maintain a dollar-weighted average maturity of 90 days or less,
not purchase any instrument having a remaining maturity of more than 397 days,
and will limit their investments to those U.S. dollar-denominated instruments
which the Trustees determine to present minimal credit risks and which are of
"eligible" quality. The regulations also require the Trustees to establish
procedures which are reasonably designed to stabilize the net asset value per
share at $1.00 for these Funds. Such procedures include the determination of the
extent of deviation, if any, of the Funds' current net asset value per share
calculated using available market quotations from the Funds' amortized cost
price per share at such intervals as the Trustees deem appropriate and
reasonable in light of market conditions and periodic reviews of the amount of
the deviation and the methods used to calculate such deviation. In the event
that such deviation exceeds 1/2 of 1%, the Trustees are required to consider
promptly what action, if any, should be initiated, and, if the Trustees believe
that the extent of any deviation may result in material dilution or other unfair
results to Shareholders, the Trustees are required to take such corrective
action as they deem appropriate to eliminate or reduce such dilution or unfair
results to the extent reasonably practicable. Such actions may include the sale
of portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity; withholding dividends; redeeming shares
in kind; or establishing a net asset value per share by using available market
quotations. In addition, if these Funds incur a significant loss or liability,
the Trustees have the authority to reduce pro rata the number of shares of these
Funds in each Shareholder's account and to offset each Shareholder's PRO RATA
portion of such loss or liability from the Shareholder's accrued but unpaid
dividends or from future dividends.
The securities of the Equity, Hawaii Municipal Bond and High Grade Income
Funds are valued pursuant to prices and valuations provided by an independent
pricing service. The pricing service relies primarily on prices of actual market
transactions as well as trader quotations. However, the service may also use a
matrix system to determine valuations, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
S-15
<PAGE>
TAXES
The following is only a summary of certain income tax considerations
generally affecting a Fund and its Shareholders and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their tax
advisers with specific reference to their own tax situations, including their
state and local income tax liabilities.
FEDERAL INCOME TAX
ALL FUNDS
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) (the "Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income; (ii) the Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of stocks, securities or certain other investments held for
less than three months; (iii) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of the Fund's assets and that
does not represent more than 10% of the outstanding voting securities of such
issuer; and (iv) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RICs) of any one
issuer or of two or more issuers which are engaged in the same, similar or
related trades or businesses if the Fund owns at least 20% of the voting power
of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it fails to
distribute by the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts.
A dividends received deduction is available to corporations that receive
dividends from domestic corporations. Dividends paid by an equity fund will be
eligible for the dividends received deduction for corporate shareholders to the
extent they are derived from dividends from domestic corporations and to the
extent that the respective security has been held for at least five days. Equity
Fund Shareholders will be advised each year of the portion of ordinary income
dividends eligible for the deduction.
Dividends received from other funds, e.g., money market or fixed income
funds, will not be eligible for the dividends received deduction. Individual
shareholders are not entitled to the dividends received deduction regardless of
which fund paid the dividend.
Any gain or loss recognized on a sale or redemption of shares of any Fund by
a Shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise will be generally treated as a short-term capital gain or
loss. Any loss recognized by a Shareholder upon the sale or redemption of shares
of any Fund held for six months or less, however, will be disallowed to the
extent of any exempt-interest dividends received by the Shareholder with respect
to such shares. If shares on which a net capital gain distribution has been
received are subsequently sold or redeemed and such shares have been held for
six months or less, any loss
S-16
<PAGE>
recognized will be treated as a long-term capital loss to the extent of the
long-term capital gain distribution.
Interest on indebtedness incurred by Shareholders to purchase or carry
shares of the fund will not be deductible for federal income tax purposes to the
extent the Fund distributes exempt-interest dividends during the taxable year.
The deduction otherwise allowable to property and casualty insurance companies
for "losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during any taxable year. Foreign
corporations engaged in a trade or business in the United States may be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income,"
which could include exempt-interest dividends. Up to 85 percent of the Social
Security benefits or railroad retirement benefits received by an individual
during any taxable year will be included in the gross income of such individual
if the individual's "modified adjusted gross income" (which includes
exempt-interest dividends) plus one-half of the Social Security benefits or
railroad retirement benefits received by such individual during that taxable
year exceeds the base amount described in Section 86 of the Code.
ADDITIONAL CONSIDERATION FOR HAWAII MUNICIPAL BOND FUND
As noted in the Prospectus, exempt interest dividends are generally
excludable from a Shareholder's gross income for regular federal income tax
purposes. Exempt-interest dividends may nevertheless be subject to the
alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55 of
the Code or the environmental tax (the "Environmental Tax") imposed by Section
59A of the Code. The Alternative Minimum Tax is imposed at the rate of 26-28% in
the case of non-corporate taxpayers and at the rate of 20% in the case of
corporate taxpayers, to the extent it exceeds the taxpayer's regular tax
liability. The Environmental Tax is imposed at the rate of 0.12% and applies
only to corporate taxpayers. The Alternative Minimum Tax and the Environmental
Tax may be imposed in two circumstances. First, exempt-interest dividends
derived from certain "private activity bonds" issued after August 7, 1986, will
generally be an item of tax preference (and therefore potentially subject to the
Alternative Minimum Tax for both corporate and non-corporate taxpayers and the
Environmental Tax for corporate taxpayers only). Second, in the case of
exempt-interest dividends received by corporate Shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined in
Section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax and the
Environmental Tax.
If a Fund should fail to qualify as a regulated investment company for any
taxable year, the Fund would pay tax on its taxable investment income and
capital gains at regular corporate rates without any deductions for amounts
distributed to Shareholders. In addition, all of the Fund's distributions to
Shareholders would be taxable as ordinary income and would qualify for the
corporate dividends received deduction in the case of corporate shareholders.
The Fund may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
bonds or private activity bonds. A "substantial user" is defined generally to
include certain persons who regularly use a facility financed by the proceeds of
such bonds in their trade or business. Such entities or persons should consult
their tax advisors before purchasing shares of either Fund.
Issuers of bonds purchased by the Fund (or the beneficiary of such bonds)
may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date of such issuance of the bonds
to which such dividends are attributable if such
S-17
<PAGE>
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with such covenants.
STATE TAXES
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Depending upon state and
local law, distributions by the Funds to Shareholders and the ownership of
shares may be subject to state and local taxes.
Many states allow income received from certain United States Government
obligations that is tax exempt when received directly to be tax exempt when
received as income dividends from an investment company. Not all states permit
such income dividends to be tax exempt and some require that a certain minimum
percentage of an investment company's income dividend be derived from state
tax-exempt interest before any portion of the income dividends may be exempt.
The Funds will inform Shareholders annually of the percentage of income that is
derived from direct United States Government obligations. Shareholders should
consult their tax advisors to determine whether any portion of the income
dividends received from a Fund is considered tax exempt in their particular
states.
HAWAII TAXATION
The State of Hawaii has specifically adopted Sections 852 through 855 of the
Internal Revenue Code of 1986, as amended (the "Code"), which provisions provide
for pass-through treatment of exempt interest dividends and capital gains, i.e.,
distributions by the Hawaii Municipal Bond Fund of dividends representing exempt
interest and capital gains retain their original character in the hands of
shareholders. As the State of Hawaii's Department of Taxation has confirmed in
response to a request by special counsel for the Trust, distributions from the
Hawaii Municipal Bond Fund to its shareholders which are attributable to
interest on obligations exempt from income tax in the State of Hawaii will not
be subject to Hawaii income tax in the hands of shareholders so long as at least
fifty percent (50%) of the Hawaii Municipal Bond Fund's assets are invested in
securities the interest from which is exempt from Hawaii state taxation. In
addition, the Department of Taxation has confirmed that interest income on
obligations issued by the U.S. government and its territories is exempt from
State of Hawaii income taxation.
FUND TRANSACTIONS
Subject to policies established by the Trustees, the Adviser (and, where
applicable, the Sub-Adviser) are responsible for placing the orders to execute
transactions for the Funds. In placing orders, it is the policy of the Adviser
to seek to obtain the best net results taking into account such factors as price
(including the applicable dealer spread), the size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Adviser
generally seeks reasonably competitive spreads or commissions, the Funds will
not necessarily be paying the lowest spread or commission available. The Funds
will not purchase portfolio securities from any affiliated person acting as
principal except in conformity with the regulations of the SEC.
The money market securities in which the Funds invest are traded primarily
in the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Adviser
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
The Trust does not expect to use one particular dealer, but subject to the
Trust's policy of seeking the best net results, dealers who provide supplemental
investment research to the Adviser may receive orders
S-18
<PAGE>
for transactions by the Funds. Information so received will be in addition to
and not in lieu of the services required to be performed by the Adviser under
its Advisory Agreement, and the expenses of the Adviser will not necessarily be
reduced as a result of the receipt of such supplemental information.
The Funds may execute brokerage or other agency transactions through the
Distributor, which is a registered broker-dealer in conformity with the 1940
Act, the Securities Exchange Act of 1934 and rules promulgated by the SEC. Under
these provisions, the Distributor is permitted to receive and retain
compensation for effecting portfolio transactions for the Funds on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor to receive and retain such compensation.
These rules further require that commissions paid to the Distributor by the
Trust for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time." In addition, the
Funds may direct commission business to one or more designated broker/dealers,
including the Distributor, in connection with such broker/dealer's payment of
certain of the Funds' expenses. The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
Since the Trust does not market its shares through intermediary
broker-dealers, it is not the Trust's practice to allocate brokerage business on
the basis of sales of its shares which may be made through such firms. However,
the Adviser may place Fund orders with qualified broker-dealers who recommend
the Trust to clients, and may, when a number of brokers and dealers can provide
best price and execution on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.
For the fiscal year ended December 31, 1996, the portfolio turnover rate for
the Hawaii Municipal Bond Fund was 27.41%. As of December 31, 1996, the High
Grade Income and Equity Funds had not commenced operations.
For the Trust's fiscal year ended December 31, 1996, no brokerage fees were
paid.
DESCRIPTION OF SHARES
The Agreement and Declaration of Trust authorizes the issuance of an
unlimited number of shares of each series and of each class of shares thereof.
Each Institutional Class A and Retail Class B share of that Fund represents an
equal proportionate interest in that Fund with each other Institutional Class A
and Retail Class B share of that Fund. Shares are entitled upon liquidation to a
PRO RATA share in the net assets of the Funds, Shareholders have no preemptive
rights. The Agreement and Declaration of Trust provide that the Trustees of the
Trust may create additional series of shares. All consideration received by the
Trust for shares of any additional series and all assets in which such
consideration is invested would belong to that series and would be subject to
the liabilities related thereto. Share certificates representing shares will not
be issued.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for
his own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Trust will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their offices
with the Trust
S-19
<PAGE>
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust could,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. Even if, however, the Trust were held to be a
partnership, the possibility of the shareholders' incurring financial loss for
that reason appears remote because the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any shareholder held personally liable for the
obligations of the Trust.
5% SHAREHOLDERS
As of April 4, 1997, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or
more of the shares of the Funds.
BISHOP STREET MONEY MARKET FUND
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF FUND
- --------------------------------------- ------------------- -----------------
<S> <C> <C>
First Hawaiian Bank 251,491,543.13 98.41%
Asset Management Div.
Attn: Bishop Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
</TABLE>
BISHOP STREET HIGH GRADE INCOME FUND
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF FUND
- --------------------------------------- ----------------- ---------------
<S> <C> <C>
First Hawaiian Bank 2,449,818.67 100.00%
Asset Management Div.
Attn: Bishop Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
</TABLE>
S-20
<PAGE>
BISHOP STREET HAWAII MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF FUND
- --------------------------------------- ----------------- -----------------
<S> <C> <C>
First Hawaiian Bank 1,017,493.445 39.80%
Asset Management Div.
Attn: Biship Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
First Hawaiian Bank 671,421.934 26.26%
Asset Management Div.
Attn: Biship Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
</TABLE>
BISHOP STREET TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF FUND
- --------------------------------------- ----------------- ---------------
<S> <C> <C>
First Hawaiian Bank 201,452,581.75 100.00%
Trust and Investments Div.
Attn: Bishop Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
</TABLE>
BISHOP STREET EQUITY FUND
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF FUND
- --------------------------------------- ----------------- ---------------
<S> <C> <C>
First Hawaiian Bank 5,744,093.679 100.00%
Asset Management Div.
Attn: Bishop Street Funds Dept.
P.O. Box 3708
Honolulu, HI 96811-3708
</TABLE>
FINANCIAL INFORMATION
The Trust's financial statements for the fiscal year ended December 31,
1996, including notes thereto and the report of Coopers & Lybrand L.L.P.
thereon, are herein incorporated by reference. A copy of the 1996 Annual Report
must accompany the delivery of this Statement of Additional Information.
S-21
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published
by Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality respectively on the
basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned
by Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the second
highest commercial paper rating assigned by Fitch which reflects an assurance of
timely payment only slightly less in degree than the strongest issues.
Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Ratings of Duff-1 are further
refined by the gradations of "1+" and "1-." Issues rated Duff-1+ have the
highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1- have high certainty of timely payment, strong liquidity factors
supported by good fundamental protection factors, and small risk factors. Paper
rated Duff-2 is regarded as having good certainty of timely payment, good access
to capital markets and sound liquidity factors and company fundamentals. Risk
factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of corporate bond ratings have been published by
S&P, Moody's, Fitch, Duff and IBCA.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation.
Such a rating indicates an extremely strong capacity to pay principal and
interest. Bonds rated AA by S&P also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree. Debt rated A by S&P
has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
Bonds which are rated BBB by S&P are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are
S-22
<PAGE>
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future. Debt rated Baa by Moody's is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions liable to but slight market fluctuation other than through changes
in the money rate. The prime feature of an AAA bond is a showing of earnings
several times or many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable question whatever changes
occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured but influenced
as to rating by the lesser financial power of the enterprise and more local type
market. Bonds rated A by Fitch are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB by Fitch are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit
quality, with negligible risk factors being only slightly more than for
risk-free U.S. Treasury debt. Bonds rated AA by Duff are judged by Duff to be of
high credit quality with strong protection factors and risk that is modest but
that may vary slightly from time to time because of economic conditions. Bonds
rated A by Duff are judged by Duff to have average but adequate protection
factors. However, risk factors are more variable and greater in periods of
economic stress. Bonds rated BBB by Duff are judged by Duff as having below
average protection factors but still considered sufficient for prudent
investment, with considerable variability in risk during economic cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly. Obligations for which there is a low expectation on
investment risk are rated A by IBCA. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk. Obligations for
which there is currently a low expectation of investment risk are rated BBB by
IBCA. Capacity for timely repayment of principal and interest is adequate,
although adverse changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for obligations in higher
categories.
S-23
<PAGE>
BISHOP STREET FUNDS
PART C: OTHER INFORMATION
POST-EFFECTIVE AMENDMENT NO. 5
Item 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements
Part A: Financial Highlights
Part B: The following audited financial statements for Bishop Street
Funds as of December 31, 1996 and the report of the independent
auditors, Coopers & Lybrand, LLP dated February 18, 1997 are
incorporated by reference to the Statement of Additional Information
from Form N-30D filed on February 27, 1997 with Accession Number
0000935069-97-000015.
Schedule of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Additional Exhibits
1 Agreement and Declaration of Trust of the Registrant as originally
filed with the Registrant's Registration Statement on June 20, 1994,
incorporated herein by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement on Form N-1A (File No.
33-80514), as filed February 29, 1996.
1(a) Amended and Restated Agreement and Declaration of Trust as
originally filed with the Registrant's Pre-Effective Amendment No. 1
on September 7, 1994, incorporated herein by reference to
Post-Effective Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-80514), as filed February 29,
1996.
2 By-Laws of the Registrant as originally filed with the Registrant's
Registration Statement on June 20, 1994, incorporated herein by
reference to Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A (File No. 33-80514), as filed
February 29, 1996.
2(a) Amended By-Laws of the Registrant as originally filed with the
Registrant's Pre-Effective Amendment No. 1 on September 7, 1994,
incorporated herein by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement on Form N-1A (File No.
33-80514), as filed February 29, 1996.
5(a) Investment Advisory Agreement between the Registrant and First
Hawaiian Bank, incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration Statement on Form
N-1A (File No. 33-80514), as filed February 29, 1996.
5(b) Investment Sub-Advisory Agreement by and among the Registrant, First
Hawaiian Bank and Wellington Management Company, LLP, incorporated
herein by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A (File No. 33-80514),
as filed February 29, 1996.
5(c) Amended and Restated Investment Sub-Advisory Agreement by and among
the Registrant, First Hawaiian Bank and Wellington Management
Company, LLP, filed herewith.
5(d) Schedule B dated April 30, 1996, to the Investment Advisory
Agreement dated January 27, 1995, between the Registrant and First
Hawaiian Bank, is filed herewith.
C-1
<PAGE>
6 Distribution Agreement between the Registrant and SEI Financial
Services Company, incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration Statement on Form
N-1A (File No. 33-80514), as filed February 29, 1996.
8 Custodian Agreement between the Registrant and Chemical Bank, N.A.,
incorporated herein by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement on Form N-1A (File No.
33-80514), as filed February 29, 1996.
9(a) Administration Agreement between the Registrant and SEI Financial
Management Corporation, incorporated herein by reference to
Post-Effective Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-80514), as filed February 29,
1996.
9(b) Transfer Agent Agreement between the Registrant and Supervised
Service Company, incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration Statement on Form
N-1A (File No. 33-80514), as filed February 29, 1996.
9(c) Consent to Assignment and Assumption of the Administration Agreement
between the Trust and SEI Financial Management Corporation to SEI
Fund Resources, is filed herewith.
10 Opinion and Consent of Counsel as originally filed with the
Registrant's Pre-Effective Amendment No.1 on September 7, 1994,
incorporated herein by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement on Form N-1A (File No.
33-80514), as filed February 29, 1996.
11 Consent of Independent Public Accountants, filed herewith
15 12b-1 Plan as originally filed with the Registrant's Pre-Effective
Amendment No.1 on September 7, 1994, incorporated herein by reference
to Post-Effective Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-80514), as filed February 29,
1996.
16 Performance Calculations as originally filed with the Registrant's
Pre-Effective Amendment No.1 on September 7, 1994, incorporated
herein by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A (File No. 33-80514),
as filed February 29, 1996.
18 Rule 18f-3 Plan as originally filed with the Registrant's
Post-Effective Amendment No.1 on July 31, 1995, incorporated herein
by reference to Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A (File No. 33-80514), as filed
February 29, 1996.
27 Financial Data Schedules, filed herewith
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
See the Prospectuses and the Statement of Additional Information regarding
the Registrant's control relationships. The Administrator is a subsidiary of SEI
Investments Company, which also controls the distributor of the Registrant, SEI
Financial Services Company, other corporations engaged in providing various
financial and record keeping services, primarily to bank trust departments,
pension plan sponsors, and investment managers.
C-2
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders of each class as of , 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- ------------------------------------------------------------------------------ -----------------
<S> <C>
INSTITUTIONAL CLASS A
Bishop Street High Grade Income Fund.......................................... 5
Bishop Street Hawaii Municipal Bond Fund...................................... 7
Bishop Street Equity Fund..................................................... 5
Bishop Street Money Market Fund............................................... 6
Bishop Street Treasury Money Market Fund...................................... 5
RETAIL CLASS B
Bishop Street High Grade Income Fund.......................................... 0
Bishop Street Hawaii Municipal Bond Fund...................................... 288
Bishop Street Equity Fund..................................................... 0
Bishop Street Money Market Fund............................................... 96
Bishop Street Treasury Money Market Fund...................................... 0
</TABLE>
Item 27. INDEMNIFICATION:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification liabilities arising under the Securities Act of 1933, as
amended, may be permitted to trustees, directors, officers and controlling
persons of the Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND INVESTMENT
SUB-ADVISER:
Other business, profession, vocation, or employment of a substantial nature
in which each director or principal executive officer of the Adviser is or has
been, at any time during the last two fiscal years, engaged for his own account
or in the capacity of director, officer, employee, partner or trustee are as
follows:
FIRST HAWAIIAN BANK
<TABLE>
<CAPTION>
NAME AND POSITION NAME OF CONNECTION WITH
WITH INVESTMENT ADVISER OTHER COMPANY OTHER COMPANY
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
John W.A. Buyers C. Brewer & Co., Ltd. Chairman and Chief Executive Officer
Director
Albert C.K. Chun-Hoon -- Orthopedic Surgeon
Director
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION NAME OF CONNECTION WITH
WITH INVESTMENT ADVISER OTHER COMPANY OTHER COMPANY
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
John C. Couch Alexander & Baldwin, Inc. President and Chief Executive Officer
Director
Walter A. Dods, Jr. First Hawaiian, Inc. Chairman and Chief Executive Officer
Director, Chairman and Chief
Executive Officer
Dr. Julia Ann Frohlich Blood Bank of Hawaii President
Director
Paul Mullin Ganley Estate of S.M. Damon Carlsmith, Ball, Trustee
Director Wichman, Murray, Case & Ichiki Partner
David M. Haig Estate of S.M. Damon Trustee
Director
Warren H. Haruki GTE Hawaiian Tel President
Director
Howard K. Hiroki Coopers & Lybrand Partner (retired)
Director
John A. Hoag First Hawaiian, Inc. President
Director, President
Glenn A. Kaya Gem of Hawaii, Inc. President
Director
Dr. Richard R. Kelley Outrigger Hotels Hawaii Chairman and Chief Executive Officer
Director
Bert T. Kobayashi, Jr. Kobayashi, Sugita & Goda Principal
Director
Dr. Richard T. Mamiya Richard Mamiya, M.D., Inc. Heart Surgeon
Director
Dr. Fujio Matsuda The Research Corp. of the University Executive Director
Director of Hawaii
Dr. Roderick F. McPhee Punahou School President
Director
Robert J. Pfeiffer Alexander & Baldwin, Inc. Chairman of the Board
Director
Hugh R. Pingree -- Retired
Director
David W. Pratt Grove Farm Company, Inc. President and Chief Executive Officer
Director
Robert G. Reed, III Pacific Resources, Inc. Chairman, President and Chief
Director Executive Officer (retired)
George P. Shea, Jr. First Insurance Company of Hawaii, Chairman, President and Chief
Director Ltd. Executive Officer
R. Dwayne Steele Grace Pacific Corporation Chairman
Director
Laurence Vogel -- Royal Danish Consul
Director
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION NAME OF CONNECTION WITH
WITH INVESTMENT ADVISER OTHER COMPANY OTHER COMPANY
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Gen. Fred C. Weyand Estate of S.M. Damon Trustee
Director
James C. Wo Bojim Investments Chairman and Chief Executive Officer
Director
BJ Management Corp. Vice President and Treasurer
Robert C. Wo BJ Management Corp. President and Secretary
Director
C.S. Wo & Sons, Ltd. Chairman
Lily K. Yao Pioneer Federal Savings Bank President and Chief Executive Officer
Director
Howard H. Karr -- --
Vice Chairman and Chief Financial
Officer
Philip H. Ching -- --
Vice Chairman
Donald G. Horner -- --
Executive Vice President
Kenneth J. Bentley -- --
Executive Vice President
Anthony R. Guerrero, Jr. -- --
Executive Vice President
Norwood W. Pope -- --
Executive Vice President
Harriet M. Aoki -- --
Senior Vice President
Thomas P. Huber -- --
Senior Vice President and General
Counsel
Gary K. Kai -- --
Senior Vice President
</TABLE>
WELLINGTON MANAGEMENT COMPANY
The list required by this Item 28 of officers and directors of Wellington
Management Company, LLP, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV, filed by Wellington Management Company, LLP,
pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-15908).
Item 29. PRINCIPAL UNDERWRITER:
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or investment
adviser.
C-5
<PAGE>
Registrant's distributor, SEI Financial Services Company ("SFS"), acts as
distributor for:
<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds-Registered Trademark- June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds-Registered Trademark- August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
Turner Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
</TABLE>
SFS provides numerous financial services to investment managers, pension
plan sponsors, and bank trust departments. These services include portfolio
evaluation, performance measurement and consulting services ("Funds
Evaluation") and automated execution, clearing and settlement of securities
transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the business address of
each director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
POSITION AND OFFICE POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ------------------------- ------------------------------------------------------ ------------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer --
Henry H. Greer Director, President & Chief Operating Officer --
Carmen V. Romeo Director, Executive Vice President & Treasurer --
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, President--Investment --
Services Division
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICE POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ------------------------- ------------------------------------------------------ ------------------------------
<S> <C> <C>
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jerome Hickey Senior Vice President --
Larry Hutchison Senior Vice President --
Steven Kramer Senior Vice President --
David G. Lee Senior Vice President President and Chief Executive
Officer
William Madden Senior Vice President --
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore Senior Vice President --
James V. Morris Senior Vice President --
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & Secretary Vice President and Assistant
Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Kenneth Zimmer Senior Vice President --
Robert Aller Vice President --
Marc H. Cahn Vice President & Assistant Secretary Vice President and Assistant
Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President and Assistant
Secretary
Robert Crudup Vice President & Managing Director --
Ed Daly Vice President --
Jeff Drennen Vice President --
Mick Duncan Vice President and Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski Vice President & Managing Director --
Robert S. Ludwig Vice President and Team Leader --
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICE POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- ------------------------- ------------------------------------------------------ ------------------------------
<S> <C> <C>
Vicki Malloy Vice President and Team Leader --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President and Assistant
Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President and Assistant
Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary Vice President and Assistant
Secretary
Wayne M. Withrow Vice President & Managing Director --
William Zawaski Vice President --
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be
maintained at the offices of Registrant's Custodian:
Chemical Bank
4 New York Plaza
New York, New York 10004
(b)/(c)With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D);
(4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and
records are maintained at the offices of Registrant's Administrator:
SEI Fund Resources
Oaks, Pennsylvania 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f),
the required books and records are maintained at the principal offices of
the Registrant's Adviser and Sub-Adviser:
<TABLE>
<S> <C>
First Hawaiian Bank Wellington Management Company, LLP
1132 Bishop Street 75 State Street
17th Floor Boston, Massachusetts 02109
Honolulu, Hawaii 96813
</TABLE>
C-8
<PAGE>
Item 31. MANAGEMENT SERVICES:
None.
Item 32. UNDERTAKINGS:
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Trustees of their desire to communicate with Shareholders of the Trust,
the Trustees will inform such Shareholders as to the approximate number of
Shareholders of record and the approximate costs of mailing or afford said
Shareholders access to a list of Shareholders.
Registrant hereby undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Trustee(s) when requested in
writing to do so by the holders of at least 10% of Registrant's outstanding
shares and in connection with such meetings to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to Shareholder
communications.
Registrant undertakes to furnish each person to whom a prospectus for any
series of the Registrant is delivered with a copy of the Registrant's latest
annual report to shareholders for such series, when such annual report is issued
containing information called for by Item 5A of Form N-1A, upon request and
without charge.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Amendment No. 5 to Registration Statement No. 33-80514 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Oaks,
Commonwealth of Pennsylvania on the 28th day of April, 1997.
By: /s/ DAVID G. LEE
-----------------------------------------
David G. Lee
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacity on the dates indicated.
/s/ MARTIN ANDERSON
- ------------------------------ Trustee April 28, 1997
Martin Anderson
- ------------------------------ Trustee April 28, 1997
Philip H. Ching
- ------------------------------ Trustee April 28, 1997
Shunichi Kimura
- ------------------------------ Trustee April 28, 1997
William S. Richardson
/s/ MANUEL R. SYLVESTER
- ------------------------------ Trustee April 28, 1997
Manuel R. Sylvester
/s/ JOYCE S. TSUNODA
- ------------------------------ Trustee April 28, 1997
Joyce S. Tsunoda
/s/ DAVID G. LEE
- ------------------------------ Trustee, President and April 28, 1997
David G. Lee Chief Executive Officer
/s/ STEPHEN G. MEYER
- ------------------------------ Controller and Chief April 28, 1997
Stephen G. Meyer Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NAME EXHIBIT
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Agreement and Declaration of Trust of the Registrant dated May 25, 1994, as originally filed EX-99.B1
with the Registrant's Registration Statement on June 20, 1994, incorporated herein by
reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement on
Form N-1A (File No. 33-80514), as filed February 29, 1996.
Amended and Restated Agreement and Declaration of Trust as originally filed with the EX-99.B1(a)
Registrant's Pre-Effective Amendment No. 1 on September 7, 1994, incorporated herein by
reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement on
Form N-1A (File No. 33-80514), as filed February 29, 1996.
By-Laws of the Registrant as originally filed with the Registrant's Registration Statement on EX-99.B2
June 20, 1994, incorporated herein by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed February 29,
1996.
Amended By-Laws of the Registrant as originally filed with the Registrant's Pre-Effective EX-99.B2(a)
Amendment No. 1 on September 7, 1994, incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration Statement on Form N-1A (File No. 33-80514),
as filed February 29, 1996.
Investment Advisory Agreement between the Registrant and First Hawaiian Bank, incorporated EX-99.B5(a)
herein by reference to Post-Effective Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-80514), as filed February 29, 1996.
Investment Sub-Advisory Agreement by and among the Registrant, First Hawaiian Bank and EX-99.B5(b)
Wellington Management Company, LLP, incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration Statement on Form N-1A (File No. 33-80514),
as filed February 29, 1996.
Form of Amended and Restated Investment Sub-Advisory Agreement by and among the Registrant, EX-99.B5(c)
First Hawaiian Bank and Wellington Management Company, LLP, filed herewith.
Schedule B dated April 30, 1996, to the Investment Advisory Agreement dated January 27, 1995, EX-99.B5(d)
between the Registrant and First Hawaiian Bank, is filed herewith.
Distribution Agreement between the Registrant and SEI Financial Services Company, incorporated EX-99.B6
herein by reference to Post-Effective Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-80514), as filed February 29, 1996.
Custodian Agreement between the Registrant and Chemical Bank, N.A., incorporated herein by EX-99.B8
reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement on
Form N-1A (File No. 33-80514), as filed February 29, 1996.
Administration Agreement between the Registrant and SEI Financial Management Corporation, EX-99.B9(a)
incorporated herein by reference to Post-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A (File No. 33-80514), as filed February 29, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME EXHIBIT
- ----------------------------------------------------------------------------------------------- -----------------
<S> <C>
Transfer Agent Agreement between the Registrant and Supervised Service Company, incorporated EX-99.B9(b)
herein by reference to Post-Effective Amendment No. 3 to the Registrant's Registration
Statement on Form N-1A (File No. 33-80514), as filed February 29, 1996.
Consent to Assignment and Assumption of the Administration Agreement between the Trust and SEI EX-99.B9(c)
Financial Management Corporation to SEI Fund Resources, is filed herewith.
Opinion and Consent of Counsel as originally filed with the Registrant's Pre-Effective EX-99.B10
Amendment No. 1 on September 7, 1994, incorporated herein by reference to Post-Effective
Amendment No. 3 to the Registrant's Registration Statement on Form N-1A (File No. 33-80514),
as filed February 29, 1996.
Consent of Independent Public Accountants, filed herewith. EX-99.B11
12b-1 Plan as originally filed with the Registrant's Pre-Effective Amendment No. 1 on September EX-99.B15
7, 1994, incorporated herein by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed February 29,
1996.
Performance Calculations as originally filed with the Registrant's Pre-Effective Amendment No. EX-99.B16
1 on September 7, 1994, incorporated herein by reference to Post-Effective Amendment No. 3 to
the Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed February
29, 1996.
Rule 18f-3 Plan as originally filed with the Registrant's Post-Effective Amendment No. 1 on EX-99.B18
July 31, 1995, incorporated herein by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A (File No. 33-80514), as filed February 29,
1996.
Financial Data Schedules, filed herewith.
Bishop Street Money Market Fund (Institutional Class A) EX-27.1A
Bishop Street Money Market Fund (Retail Class B) EX-27.1B
Bishop Street Hawaii Municipal Bond Fund (Institutional Class A) EX-27.2A
Bishop Street Hawaii Municipal Bond Fund (Retail Class B) EX-27.2B
Bishop Street Treasury Money Market Fund (Institutional Class A) EX-27.3A
</TABLE>
<PAGE>
AMENDED AND RESTATED
INVESTMENT SUB-ADVISORY AGREEMENT
BISHOP STREET FUNDS
AMENDED AND RESTATED AGREEMENT made this 30th day of April, 1996, by and
among First Hawaiian Bank, a state-chartered bank incorporated under the laws of
the State of Hawaii (the "Adviser"), Wellington Management Company, a
Massachusetts general partnership (the "Sub-Adviser") and Bishop Street Funds, a
Massachusetts business trust (the "Trust").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated January 27, 1995, as amended effective April 30, 1996, (the "Advisory
Agreement") with the Trust, pursuant to which the Adviser serves as investment
adviser to the Bishop Street Money Market Fund and the Bishop Street Treasury
Market Fund (the "Funds"); and
WHEREAS, the Sub-Adviser has entered into an Investment Sub-Advisory
Agreement dated January 27, 1995 (the "Sub-Advisory Agreement") with the Adviser
and the Trust pursuant to which the Sub-Adviser provides investment management
services to the Bishop Street Money Market Fund;
WHEREAS, the Adviser and the Trust each desire to continue the Sub-Advisory
Agreement and to now retain the Sub-Adviser to provide investment management
services to the Bishop Street Treasury Money Market Fund in connection with the
management of the Funds, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Trust's Board of
Trustees, the Sub-Adviser shall manager the investment operations of
the Funds and the composition of the Funds' portfolio, including the
purchase, retention and disposition thereof, in accordance with the
Funds' investment objectives, policies and restrictions as stated in
the Funds' Prospectuses (such Prospectuses and the Statement of
Additional Information, as currently in effect and as amended or
supplemented from time to time, being herein called the
"Prospectuses"), and subject to the following:
(1) The Sub-Adviser shall provide supervision of the Funds'
investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Funds, and
what portion of the costs will be invested or held uninvested in
cash.
(2) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Trust's Agreement and Declaration of Trust and the Prospectuses
and with the instructions and directions
<PAGE>
of the Adviser and of the Board of Trustees of the Trust and will
conform to and comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, as amended, and all other
applicable federal and state laws and regulations, as each is
amended from time to time.
(3) The Sub-Adviser shall determine the securities to be purchased or
sold by the Funds and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect
to brokerage set forth in the Funds' Registration Statement (as
defined herein) and Prospectuses or as the Board of Trustees or
the Adviser may direct from time to time, in conformity with
federal securities laws. In providing the Funds with investment
supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution.
Within the framework of this policy, the Sub-Adviser may consider
the financial responsibility, research and investment information
and other services provided by brokers or dealers who may effect
or be a party to any such transaction or other transactions to
which the Sub-Adviser's other clients may be a party. It is
understood that it is desirable for the Funds that the
Sub-Adviser have access to supplemental investment and market
research and security and economic analysis provided by brokers
who may execute brokerage transactions at higher cost to the
Funds than may result when allocating brokerage to other brokers
on the basis of seeking the most favorable price and efficient
execution. Therefore, the Sub-Adviser is authorized to place
orders for the purchase and sale of securities for the Funds with
such brokers, subject to review by the Trust's Board of Trustees
from time to time with respect to the extent and continuation of
this practice. It is understood that the services provided by
such brokers may be useful to the Sub-Adviser in connection with
the Sub-Adviser's services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Funds as well as other
clients of the Sub-Adviser, the Sub-Adviser, to the extent
permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be so
purchased or sold in order to obtain the most favorable price or
lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well
as the expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable
and consistent with its fiduciary obligation to the Fund and to
such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect
to the Funds' portfolio transactions required by
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act and shall
2
<PAGE>
render to the Trust's Board of Trustees such periodic and special
reports as the Trust's Board of Trustees may reasonably request.
(5) The Sub-Adviser shall provide the Funds' Custodian on each
business day with information relating to all transactions
concerning the Fund's assets and shall provide the Adviser with
such information upon request of the Adviser.
(6) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to others,
as long as such services do not impair the services rendered to
the Adviser or the Trust.
(b) Services to be furnished by the Sub-Adviser under this Agreement may
be furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
(c) The Sub-Adviser shall keep the Funds' books and records required to be
maintained by the Sub-Adviser pursuant to paragraph 1(a) of this
Agreement and shall timely furnish to the Adviser all information
relating to the Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the Funds required
by Rule 31a-1 under the 1940 Act. The Sub-Adviser agrees that all
records that it maintains on behalf of the Funds are property of the
Funds and the Sub-Adviser will surrender promptly to the Funds any of
such records upon the Funds' request; provided, however, that the
Sub-Adviser may retain a copy of such records. The Sub-Adviser
further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained
by it pursuant to paragraph 1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Funds pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this
Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the Commonwealth of Massachusetts (such
Agreement and Declaration of Trust, as in effect on the date of this
Agreement and as amended from time to time, herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
3
<PAGE>
(c) Certified resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and the Sub-Adviser with respect to the
Fund, and approving the form of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement"), as
filed with the Securities and Exchange Commission (the "Commission")
relating to the Funds and shares of the Funds' beneficial shares, and
all amendments thereto;
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission, and all amendments thereto;
and
(f) Prospectuses of the Funds.
4. For the services to be provided by the Sub-Adviser pursuant to this
Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser agrees
to accept as full compensation therefore a sub-advisory fee at an annual
rate of 0.075% on the first $500 million of the Funds' aggregate average
daily net assets and 0.020% on such Funds' aggregate average daily net
assets in excess of $500 million. These fees will be computed daily and
paid to the Sub-Adviser monthly.
5. The Sub-Adviser shall not be liable for any error of judgment or for any
loss suffered by the Funds or the Adviser in connection with performance of
its obligations under this Agreement, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services
(in which case any award of damages shall be limited to the period and the
amount set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting
from willful misfeasance, bad faith or gross negligence on the
Sub-Adviser's part in the performance of its duties or from reckless
disregard of its obligations and duties under this Agreement, except as may
otherwise be provided under provisions of applicable state law which cannot
be waived or modified hereby.
6. This Agreement shall continue in effect for a period of more than two years
from January 27, 1995 only so long as continuance is specifically approved
at least annually in conformance with the 1940 Act; provided, however, that
this Agreement may be terminated (a) by the Funds at any time, without the
payment of any penalty, by the vote of a majority of Trustees of the Trust
or by the vote of a majority of the outstanding voting securities of such
Fund, (b) by the Adviser at any time, without the payment of any penalty,
on not more than 60 days' nor less than 30 days' written notice to the
other parties, or (c) by the Sub-Adviser at any time, without the payment
of any penalty, on 90 days' written notice to the other parties. This
Agreement shall terminate automatically and immediately in the event of its
assignment. As used in this Section 6, the terms "assignment" and "vote of
a majority of the outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules
4
<PAGE>
and regulations thereunder, subject to such exceptions as may be granted
by the Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's partners, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or
dissimilar nature, nor limit or restrict the Sub-Adviser's right to engage
in any other business or to render services of any kind to any other
corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements,
reports to stockholders, sales literature or other materials prepared for
distribution to stockholders of the Funds, the Trust or the public that
refer to the Sub-Adviser or its clients in any way prior to use thereof and
not to use material if the Sub-Adviser reasonably objects in writing within
five business days (or such other period as may be mutually agreed) after
receipt thereof. The Sub-Adviser's right to object to such materials is
limited to the portions of such materials that expressly relate to the
Sub-Adviser, its services and its clients. The Adviser agrees to use its
reasonable best efforts to ensure that materials prepared by its employees
or agents or its affiliates that refer to the Sub-Adviser or its clients in
any way are consistent with those materials previously approved by the
Sub-Adviser as referenced in the first sentence of this paragraph. Sales
literature may be furnished to the Sub-Adviser by first class or overnight
mail, facsimile transmission equipment or hand delivery.
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the charge, waiver, discharge or termination
is sought, and no amendment of this Agreement shall be effective until
approved by the vote of the majority of the outstanding voting securities
of the Funds.
10. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts; provided, however, that nothing herein shall be construed as
being inconsistent with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings
relating to this Agreement's subject matter. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be
an original, but such counterparts shall, together, constitute only one
instrument.
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
5
<PAGE>
13. Any notice, advice or report to be given pursuant to this Agreement shall
be delivered or mailed:
To the Adviser at:
First Hawaiian Bank
1132 Bishop Street
Honolulu, HI 96813
Attention: Legal Department
To the Sub-Adviser at:
Wellington Management Company
75 State Street
Boston, MA 02109
Attention: Legal Department
To the Trust or the Fund at:
Bishop Street Funds
680 East Swedesford Road
Wayne, PA 19087
Attention: General Counsel
14. Whether the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of
the Commission, whether of special or general application, such provision
shall be deemed to incorporate the effect of such rule, regulation or
order.
15. A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of
the Trust as Trustees, and that the obligations of this instrument are not
binding upon any of the Trustees, officers, or shareholders of the Trust
individually but binding only upon the assets and property of the Trust.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their officers designated below as of the day and year first written above.
FIRST HAWAIIAN BANK WELLINGTON MANAGEMENT COMPANY
By: /s/ Robbie Alm By: /s/ Duncan M. McFarland
----------------------------- ----------------------------
Title: Senior Vice President Title: President
-------------------------- --------------------
BISHOP STREET FUNDS
By: /s/ Kathryn L. Stanton
-----------------------------
Title: Vice President
--------------------------
7
<PAGE>
SCHEDULE B DATED APRIL 30, 1996
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED JANUARY 27, 1995
BETWEEN
BISHOP STREET FUNDS
AND
FIRST HAWAIIAN BANK
Pursuant to Article 3, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Bishop Street Treasury Money Market Fund .30%
<PAGE>
CONSENT TO ASSIGNMENT AND ASSUMPTION
1. SEI Financial Management Corporation ("Assignor") hereby notifies Bishop
Street Funds ("Trust") that it intends to assign all of its rights and
delegate its obligations under the Administration Agreement between the
Trust and SEI Financial Management Corporation, dated August 30, 1988, as
amended (the "Assignment and Assumption Agreement") to SEI Fund Resources,
("Assignee"), no later than June 1, 1996, in connection with the transition
of Assignor's fund administration and distribution business to Assignee;
2. Trust releases Assignor from its rights and obligations under the Agreement
on or after the date the Assignment and Assumption Agreement is executed
and any liability or responsibility for (i) breach of the Agreement by
Assignee or (ii) demands and claims made against the Trust or damages,
losses or expenses incurred by Trust on or after the date of the Assignment
and Assumption Agreement, unless such demands, claims, losses, damages or
expenses arose out of or resulted from an act or omission of Assignor prior
to the date of the Assignment and Assumption Agreement.
3. This consent is not a waiver or estoppel with respect to any rights the
Trust may have by reason of the past performance or failure to perform by
Assignor.
4. This consent is conditioned upon the execution of an Assignment and
Assumption Agreement between Assignor and Assignee that require(s) Assignee
(i) to assume all rights and obligations of Assignor under the Agreement
and (ii) to be liable to the Trust for any default or breach of the
Agreement to the extent the default or breach occurs on or after the date
of execution of the Assignment and Assumption Agreement
5. Except as provided herein, neither this consent nor the Assignment and
Assumption Agreement shall alter or modify the terms or conditions of the
Agremeent.
Trust: Assignor:
Bishop Street Funds SEI Financial Management Corporation
By: /s/ Sandy Orlow By: /s/ Marc Cahn
------------------------------- -------------------------------
Title: Vice President & Assistant Title: Vice President & Assistant
Secretary Secretary
----------------------------- -----------------------------
Date: May 31, 1996 Date: May 31, 1996
----------------------------- -----------------------------
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post Effective Amendment
No. 5 to the Registration Statement under the Securities Act of 1933 on Form
N-1A (File No. 33-80514) of our report dated February 18, 1997 on our audit of
the financial statements and financial highlights of Bishop Street Funds in the
Statement of Additional Information. We also consent to the reference to our
Firm under the captions "Financial Highlights" and "Counsel and Independent
Accountants" in the Prospectus and under the caption "Financial Information" in
the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 28, 1997
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<CIK> 0000925737
<NAME> BISHOP STREET FUNDS
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<NAME> TREASURY MONEY MARKET FUND CLASS A
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