BISHOP STREET
FUNDS
[COVER PICTURE OMITTED]
ANNUAL REPORT
DECEMBER 31, 1999
EQUITY FUND
HIGH GRADE INCOME FUND
HAWAII MUNICIPAL BOND FUND
MONEY MARKET FUND
TREASURY MONEY MARKET FUND
INVESTMENT ADVISER
FIRST HAWAIIAN BANK
A SUBSIDIARY OF
BANCWEST CORPORATION
[BISHOP LOGO OMITTED]
<PAGE>
[INSIDE COVER PICTURE OMITTED]
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF BISHOP STREET FUNDS' SHAREHOLDERS. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
SHARES OF BISHOP STREET FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY FIRST HAWAIIAN BANK OR ANY OF ITS AFFILIATES. SUCH SHARES ARE ALSO NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN SHARES OF MUTUAL FUNDS
INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SEI INVESTMENTS
DISTRIBUTION CO. SERVES AS DISTRIBUTOR FOR BISHOP STREET FUNDS AND IS NOT
AFFILIATED WITH FIRST HAWAIIAN BANK.
<PAGE>
BISHOP STREET
TABLE OF CONTENTS
FUNDS
LETTER TO SHAREHOLDERS ............................................... 2
EQUITY FUND
Investment Adviser's Report & Management Discussion ............ 4
Statement of Net Assets ........................................ 7
HIGH GRADE INCOME FUND
Investment Adviser's Report & Management Discussion ............ 12
Statement of Net Assets ........................................ 15
HAWAII MUNICIPAL BOND FUND
Investment Adviser's Report & Management Discussion ............ 20
Statement of Net Assets ........................................ 23
MONEY MARKET & TREASURY MONEY MARKET FUNDS
Investment Adviser's Report & Management Discussion ............ 32
Statements of Net Assets ....................................... 34
Statements of Operations ............................................. 40
Statements of Changes in Net Assets .................................. 41
Financial Highlights ................................................. 44
Notes to Financial Statements ........................................ 46
Report of Independent Accountants .................................... 52
Notice to Shareholders ............................................... 53
1
<PAGE>
BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
[ROBERT A. ALM PHOTO OMITTED]
DEAR FELLOW SHAREHOLDER:
We are pleased to present Bishop Street Funds' Annual Report for 1999.
The stock market posted another year of strong gains, as the U.S. economy
marched toward the longest period of prosperity in history. Leading the charge
were technology companies that helped make American business more productive. In
addition, the Internet continued to revolutionize commerce, and companies
involved in the Internet's development produced remarkable returns for
investors.
Because of its emphasis on technology, the Bishop Street Equity Fund
outperformed its benchmark, the S&P 500 Composite Index. The Fund (Institutional
Class) produced a total return of 24.37% while the unmanaged S&P 500 Composite
Index rose 21.04%.* Additionally, for the two years ended December 31, 1999, the
Fund was ranked in the top 20% of its Lipper peer group.**
Although 1999 was a very good year for stocks, it was a more difficult
environment for bonds. In a rising interest rate environment, bond prices fall.
As a result, the Bishop Street High Grade Income Fund and the Bishop Street
Hawaii Municipal Bond Fund produced slightly negative returns. If the economy
slows and interest rates fall in 2000, then bond prices and total returns may
rise.
Despite this challenging environment, the Bishop Street Hawaii Municipal Bond
Fund has been a top performer within its peer group over time. The Fund
maintained its four star rating which places it in the top 33% of 1,623
Municipal Bond Funds tracked by Morningstar.*** Additionally, The Fund was
ranked the number one Hawaii Municipal Bond Fund for the four years ended
12/31/99 according to Lipper Analytical Services.****
Overall, through asset conversions and the addition of new distribution
channels, the Bishop Street Funds saw strong growth in 1999. Assets under
management increased 76% from roughly $700 million at the end of 1998 to over
$1.28 billion as of December 1999.
There were also a number of exciting developments at Bishop Street Funds during
the past year:
[bullet] In an effort to expand distribution for the Funds, we added a new share
shares for retail investors.
[bullet] In recognizing that mutual fund prospectuses can often be intimidating
with the amount of information they are required to cover, we have
converted the
2
Bishop Street Funds
<PAGE>
Bishop Street Funds prospectus to "Plain English" style. This new
format provides shareholders with easier to understand explanations and
about the Funds.
[bullet] We have added a check writing feature to our Treasury Money Market Fund
in order to provide flexibility and convenience for our Institutional
Shareholders.
[bullet] Finally, in order to better service our shareholders,
we have extended our Investor Services hours of operations from
8:00 p.m. to 9:00 p.m. Eastern Standard Time to provide convenient
access to Fund and account information.
Please take some time to read the following pages. They include a summary of the
economic environment affecting each fund, a discussion of performance,
statements of net assets and other financial information. If you have any
questions about this report or the Bishop Street Funds, please call your
investment professional or Bishop Street Funds Investor Services at
1-800-262-9565.
Thank you for choosing the Bishop Street Funds.
Sincerely,
/s/signature omitted
Robert A. Alm
Executive Vice President and Manager
Financial Management Group
First Hawaiian Bank, Investment Adviser
*The performance data quoted represents past performance for the
Institutional shares and does not guarantee future results. The investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
**For the one-year and two-year periods ended 12/31/99, Lipper Analytical
Services ranked the Bishop Street Equity Fund 131st out of 375 funds and
51st out of 290 funds, respectively, in the Large-Cap Core Funds
classification.
***The ratings are subject to change every month. Past performance is no
guarantee of future results. Morningstar ratings are calculated from a
fund's three-, five-, and ten-year average annual returns (if available)
in excess of 90-day Treasury bill returns. The Hawaii Municipal Bond Fund
received 4 stars for the three year period ending 12/31/99. The top 10% of
funds within a rating category receive 5 stars, the next 22.5% receive 4
stars. The Fund was rated among 1,623 funds for the three-year period within
the Municipal Bond Fund category.
****For the one-year and four-year periods ended 12/31/99, Lipper Analytical
Services ranked the Bishop Street Hawaii Municipal Bond Fund 4th out
of 12 funds and 1st out of 9 funds, respectively, in the Hawaii Municipal
Debt Average.
3
Annual Report -- December 31, 1999
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
Equity Fund
- --------------------------------------------------------------------------------
INVESTMENT ADVISER'S REPORT:
For the fifth year in a row, the U.S. stock market produced a return in excess
of 20%, as the U.S. economy approached the longest expansion in history.
Remarkably, the stock market continued to post solid gains even though interest
rates were sharply higher in 1999.
Typically, a rising interest rate environment causes investors to shift assets
towards bonds. Instead, investors shifted money from interest-sensitive stocks
such as financial services and put the money to work in high-growth areas such
as technology and telecommunications. Indeed, the NASDAQ, an index dominated by
technology stocks, returned 86% in 1999, its best performance ever.
Unlike the previous few years, investors did not favor large capitalization
stocks over small cap companies. Indeed, while the S&P 500 Composite Index rose
21.04% in 1999, the Russell 2000 Index of small cap companies returned 21.26%.
While technology was extremely strong in 1999, other growth areas of the market
were not. For example, pharmaceutical stocks declined as Congress began serious
discussions about expanding Medicare to cover prescription drugs. Typically,
government programs in health care reduce corporate profits. Other growth stocks
that disappointed include multinational beverages and personal care products
companies.
The disparity in valuations between technology and other areas of the market
continues to grow. However, technology growth may just be beginning as the
economies of Europe and Asia, two major markets for technology products,
continue to rebound.
4
Bishop Street Funds
<PAGE>
[Bishop Logo Omitted]
MANAGEMENT DISCUSSION & ANALYSIS OF FUND PERFORMANCE:
During the year ended December 31, 1999, the Equity Fund Institutional Class
produced a total return of 24.37%.* In comparison, the Lipper Domestic Equity
Funds Aggregate was up 27.18%, while the unmanaged S&P 500 Composite Index was
up 21.04%.
Our strategy is to seek excess return relative to the S&P 500 Composite Index by
overweighting sectors where we believe growth is likely to occur and
underweighting areas where we believe there is average or below-average growth.
After determining the appropriate sector weightings, we focus on individual
stock selection, choosing companies that we believe are market leaders relative
to their peers. Finally, we thoroughly analyze the risk of each individual stock
as well as the portfolio as a whole.
The Fund benefited from an overweighting in technology and telecommunications
stocks. During the first three quarters of the year, an overweight in energy
shares also aided performance, although energy stocks gave back some of that
performance in the fourth quarter. Another benefit to the portfolio was a lack
of emphasis in the financial services sector, which generally performed poorly
due to the rising interest rate environment. In particular, banks saw their
profit margins squeezed as their cost of funds increased.
The Fund's performance was hurt somewhat by a market weighting in pharmaceutical
stocks, which declined due to Congressional debate over the expanded role of
Medicare. While our long-term view of this sector is positive, we believe
presidential politics may create uncertainty for most of 2000.
Although stocks are expensive based on historical valuation measures, our
outlook remains positive. We believe the U.S. economy, which has been the engine
of global growth over the past several years, may slow down in 2000, easing
interest rate and inflation pressures later in the year. Meanwhile, projections
for economic growth in Europe and Asia are trending upwards, which should
benefit the multinational companies in our portfolios.
* The Bishop Street Equity Fund (Class A shares), launched on 6/14/99, produced
a total cumulative return of 20.52%. Including the maximum sales charge of
5.75%, the total cumulative return for the Fund's Class A shares was 13.59%.
5
Annual Report -- December 31, 1999
<PAGE>
Equity Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE BISHOP STREET EQUITY FUND, INSTITUTIONAL CLASS OR SYNTHETIC
CLASS A, VERSUS THE S&P 500 COMPOSITE INDEX, THE CONSUMER PRICE
INDEX, AND THE LIPPER DOMESTIC EQUITY FUNDS AGGREGATE
[EQUITY GRAPH OMITTED]
PLOT POINTS FOLLOWS:
<TABLE>
<CAPTION>
BISHOP STREET BISHOP STREET S&P 500 CONSUMER LIPPER DOMESTIC
EQUITY FUND, SYNTHETIC COMPOSITE PRICE EQUITY FUNDS,
INSTITUTIONAL CLASS CLASS A+ INDEX INDEX AGGREGATE
<S> <C> <C> <C> <C> <C>
1/31/97 10,000 9,425 10,000 10,000 10,000
3/97 9,593 9,042 9,665 9,427 10,040
6/97 11,104 10,466 11,351 10,832 10,070
9/97 11,844 11,163 12,202 12,112 10,131
12/97 12,031 11,339 12,552 11,937 10,171
3/98 13,699 12,912 14,301 13,324 10,181
6/98 14,164 13,349 14,773 13,252 10,242
9/98 12,873 12,133 13,306 11,339 10,283
12/98 16,007 15,086 16,141 13,544 10,335
3/99 17,052 16,072 16,944 13,716 10,376
6/99 17,808 16,784 18,139 15,105 10,449
9/99 16,905 15,931 17,005 14,361 10,553
12/99 19,907 18,740 19,536 17,119 10,606
</TABLE>
+Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS
ONE ANNUALIZED
YEAR INCEPTION
RETURN TO DATE
-----------------------------
24.37%+ 27.05%+ Institutional Class*
-----------------------------
24.21%** 26.99%** Synthetic Class A**
-----------------------------
17.08%** 24.44%** Synthetic Class A, with load
* Commenced operations on 01/31/97.
** Class A was offered beginning 06/14/99. Prior performance information
represents performance of the Institutional Class, which was offered
01/31/97. Institutional Class performance has been adjusted to reflect the
Class A sales charge, but has not been adjusted to reflect Class A Rule
12b-1 fees and expenses. Had that adjustment been made, performance would
be lower than that shown.
6
Bishop Street Funds
<PAGE>
Equity Fund
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS
- --------------------------------------------------------------------------------
Percentage of
Investments
- --------------------------------------------------------------------------------
1. Cisco Systems 5.4%
- --------------------------------------------------------------------------------
2. Microsoft 4.6%
- --------------------------------------------------------------------------------
3. General Electric 3.6%
- --------------------------------------------------------------------------------
4. Lucent Technologies 2.8%
- --------------------------------------------------------------------------------
5. MCI WorldCom 2.7%
- --------------------------------------------------------------------------------
6. Sun Microsystems 2.6%
- --------------------------------------------------------------------------------
7. AT&T 2.5%
- --------------------------------------------------------------------------------
8. AES 2.0%
- --------------------------------------------------------------------------------
9. Home Depot 1.9%
- --------------------------------------------------------------------------------
10. Eli Lilly 1.9%
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
--------- ---------
COMMON STOCK -- 96.8%
AIR TRANSPORTATION -- 0.7%
69,800 FDX* $ 2,857
-------
AUTOMOTIVE -- 1.1%
47,250 General Motors, CI H 4,536
-------
BANKS -- 3.7%
70,250 Bank of America 3,526
132,300 Bank of New York 5,292
73,654 Chase Manhattan 5,722
-------
14,540
-------
BEAUTY PRODUCTS -- 1.1%
40,450 Proctor & Gamble 4,432
-------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 8.4%
80,600 Clear Channel Communications* 7,194
94,300 Comcast, Cl A 4,515
90,700 Mediaone Group * 6,967
53,400 Omnicom Group 5,340
57,100 Time Warner 4,136
47,600 Univision Communications* 4,864
-------
33,016
-------
7
Annual Report -- December 31, 1999
<PAGE>
Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
CHEMICALS -- 1.6%
54,250 E.I. DuPont de Nemours $ 3,574
71,900 Monsanto 2,561
-------
6,135
-------
COMPUTERS & SERVICES -- 16.8%
53,400 America Online* 4,028
196,350 Cisco Systems* 21,034
53,600 Hewlett Packard 6,107
58,400 International Business Machine 6,307
155,100 Microsoft* 18,108
132,000 Sun Microsystems* 10,222
-------
65,806
-------
DRUGS -- 10.7%
82,300 Amgen* 4,943
53,300 Biogen* 4,504
45,750 Bristol-Myers Squibb 2,937
141,100 Elan, ADR* 4,162
110,000 Eli Lilly 7,315
47,900 Johnson & Johnson 4,461
123,050 Pfizer 3,991
143,100 Schering Plough 6,037
44,800 Warner Lambert 3,671
-------
42,021
-------
ELECTRICAL UTILITIES -- 2.0%
102,750 AES* 7,681
-------
FINANCIAL SERVICES -- 4.1%
31,150 American Express 5,179
124,200 Charles Schwab 4,766
107,400 Citigroup 5,967
-------
15,912
-------
FOOD, BEVERAGE & TOBACCO -- 0.9%
57,750 Coca-Cola 3,364
-------
GAS/NATURAL GAS -- 0.5%
71,250 Williams Companies 2,178
-------
HOUSEHOLD PRODUCTS -- 1.8%
69,500 Clorox 3,501
52,200 Illinois Tool Works 3,527
-------
7,028
-------
8
Bishop Street Funds
<PAGE>
Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
INDUSTRIAL -- 1.2%
80,600 Honeywell International $ 4,650
-------
INSURANCE -- 2.8%
58,550 American General 4,443
59,987 American International Group 6,486
-------
10,929
-------
MACHINERY -- 3.6%
90,300 General Electric 13,974
-------
MARINE TRANSPORTATION -- 1.3%
107,850 Carnival, Cl A 5,157
-------
MISCELLANEOUS BUSINESS SERVICES -- 0.8%
74,800 At Home, Ser A* 3,207
-------
MISCELLANEOUS MANUFACTURING -- 1.6%
161,824 Tyco International Ltd 6,291
-------
PAPER & PAPER PRODUCTS -- 1.3%
80,450 Kimberly-Clark 5,249
-------
PETROLEUM & FUEL PRODUCTS -- 3.2%
51,400 Enron 2,281
120,450 Halliburton 4,848
82,350 Schlumberger Ltd 4,632
30,300 USX Marathon Group 748
-------
12,509
-------
PETROLEUM REFINING -- 4.1%
3,750 Chevron 325
64,750 Royal Dutch Petroleum, ADR, New York Registry 3,913
54,100 Texaco 2,938
123,500 Tosco 3,358
71,800 Total Fina SA, ADR 4,972
15,942 Transocean Sedco Forex 537
-------
16,043
-------
RETAIL -- 7.6%
38,750 Costco Wholesale* 3,536
84,900 CVS 3,391
68,700 Dayton-Hudson 5,045
94,400 Gap 4,342
110,400 Home Depot 7,569
84,300 Wal-Mart Stores 5,827
-------
29,710
-------
9
Annual Report -- December 31, 1999
<PAGE>
Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
SEMI-CONDUCTORS/INSTRUMENTS -- 3.5%
34,000 Applied Materials* $ 4,307
60,300 Intel 4,963
44,500 Texas Instruments 4,311
--------
13,581
--------
TELEPHONES & TELECOMMUNICATION -- 12.4%
190,300 AT&T 9,658
145,900 Lucent Technologies 10,915
200,475 MCI WorldCom* 10,638
27,900 Nokia ADR, CI A 5,301
105,700 Qwest Communications International* 4,545
56,600 SBC Communications 2,759
96,000 Vodafone Airtouch PLC ADR 4,752
--------
48,568
--------
TOTAL COMMON STOCK (Cost $243,705) 379,374
--------
CASH EQUIVALENTS -- 3.2%
12,232 SEI Daily Income Trust Money Market Portfolio 12,232
228 SEI Daily Income Trust Prime Obligation Portfolio 228
--------
TOTAL CASH EQUIVALENTS (Cost $12,460) 12,460
--------
TOTAL INVESTMENTS (Cost $256,165) -- 100.0% 391,834
--------
OTHER ASSETS AND LIABILITIES, NET -- 0.0% (24)
--------
10
Bishop Street Funds
<PAGE>
Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONCLUDED)
Market
Value
(000)
---------
NET ASSETS:
Fund Shares of Institutional Class (unlimited
authorization -- no par value) based on 21,877,935
outstanding shares of beneficial interest $246,975
Fund Shares of Class A (unlimited authorization -- no par value)
based on 32,616 outstanding shares of beneficial interest 554
Accumulated net realized gain on investments 8,612
Net unrealized appreciation on investments 135,669
--------
TOTAL NET ASSETS -- 100.0% $391,810
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $17.88
--------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE -- CLASS A $17.87
--------
MAXIMUM OFFERING PRICE PER SHARE -- CLASS A ($17.87 / 94.25%) $18.96
--------
* NON-INCOME PRODUCING SECURITIES
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
PLC -- PUBLIC LIMITED COMPANY
SER -- SERIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
Annual Report -- December 31, 1999
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER'S REPORT:
During the decade of the 1990s, bonds generally performed very well, with two
notable exceptions: 1994 and 1999. In those two years, the Federal Reserve Board
raised interest rates to slow the economy, causing bond prices to decline.
In 1999, the economy continued to boom despite Fed action raising short-term
interest rates from 4.75% to 5.50%. Investors in longer-term bonds also demanded
significantly higher yields to compensate them for potential inflation.
Of all the fixed-income asset classes, U.S. Treasury bonds weakened the most.
While 1998 could be characterized as a year in which global investors sought
quality in the midst of the Asian economic downturn, 1999 was the opposite. With
a global recovery solidly in place, investors took profits in U.S. Treasury
bonds and sought higher yields elsewhere. Corporate bonds benefited from this
trend, as investors became less concerned about credit risk.
The Y2K anxiety impacted the corporate bond market to some degree. Despite
rising interest rates, issuance was predicted to be heavier than normal during
the summer as corporations sought to get their financing needs for the year out
of the way. Investors became cautious, and corporate bond prices slumped.
However, expectations for a year-end additional surge in supply never truly
materialized, and corporate bond performance improved by the fourth quarter.
MANAGEMENT DISCUSSION & ANALYSIS OF FUND PERFORMANCE:
Coming into 1999, the portfolio was positioned for falling interest rates. The
Fed had just lowered short-term interest rates from 5.50% to 4.75% to prevent
the U.S. economy from falling into a recession. Central banks around the world
followed suit in an effort to stimulate economies in Asia, Latin America and
Europe.
12
Bishop Street Funds
<PAGE>
[Bishop Logo Omitted]
In this climate of lower interest rates, the Fund's duration (which describes
the portfolio's sensitivity to interest rates) was greater than the benchmark.
If interest rates continued to fall, then the portfolio would benefit
accordingly.
Instead, interest rates began to rise as economic activity throughout the world
increased. Within months, fears of global deflation were replaced by inflation
worries. The portfolio's longer duration became a negative factor in its
performance. Although duration was shortened later in the year, the impact on
the Fund's total return could not be erased. For the year ended December 31,
1999, the Institutional Class of the Fund produced a total return of -4.34%*
while the unmanaged Lehman Brothers Government/Corporate Bond Index returned
- -2.15%.
It should be emphasized that a bond fund's total return is not the same as its
effective yield. Total return is the sum of the income a fund generates plus or
minus changes in its net asset value (NAV). Like the price of an individual
bond, a fund's NAV falls when interest rates rise, and vice versa. As of
December 31, 1999, the High Grade Income Fund's effective yield -- a measure of
income to shareholders -- was 5.40%. Additionally, we strive to maintain
extremely high credit quality. At year-end, 77% of the portfolio was invested in
bonds rated AA or higher.
The Fund's strategy regarding corporate bonds produced a positive effect. The
portfolio was underweighted in corporates during mid-year when Y2K fears caused
corporates to perform poorly. The portfolio's focus on corporate bonds rated A
or better was an advantage at certain times of the year and a disadvantage at
other times.
Our outlook for the bond market is cautious. Because the economy continues to
boom, the Federal Reserve Board is likely to raise interest rates again. As a
result, we will continue to shorten the portfolio's duration, at least until
mid-year when we believe that the economy may finally slow down. In the
meantime, we believe that bonds currently offer attractive yields for investors.
* The Bishop Street High Grade Income Fund (Class A shares), launched on
06/14/99, produced a total cumulative return of -0.05%. Including the maximum
sales charge of 4.75%, the total cumulative return for the Fund's Class A
shares was -4.77%.
13
Annual Report -- December 31, 1999
<PAGE>
High Grade Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
BISHOP STREET HIGH GRADE INCOME FUND, INSTITUTIONAL CLASS OR SYNTHETIC CLASS A,
VERSUS THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX,
THE CONSUMER PRICE INDEX, AND THE LIPPER DOMESTIC TAXABLE FIXED INCOME AGGREGATE
[HIGH GRADE INCOME GRAPH OMITTED]
PLOT POINTS FOLLOWS:
<TABLE>
<CAPTION>
BISHOP STREET BISHOP STREET LIPPER
HIGH GRADE HIGH GRADE LEHMAN BROTHERS CONSUMER DOMESTIC
INCOME FUND, INCOME FUND, GOVT/CORPORATE PRICE TAXABLE FIXED,
INSTITUTIONAL CLASS+ SYNTHETIC CLASS A+ BOND INDEX INDEX INCOME AGGREGATE
<S> <C> <C> <C> <C> <C>
1/31/97 10,000 9,425 10,000 10,000 10,000
3/97 9,902 9,431 9,902 9,937 10,040
6/97 10,216 9,730 10,261 10,279 10,070
9/97 10,514 10,015 10,621 10,611 10,131
12/97 10,793 10,280 10,962 10,828 10,171
3/98 10,937 10,418 11,129 11,031 10,181
6/98 11,191 10,659 11,419 11,203 10,242
9/98 11,798 11,237 11,985 11,359 10,283
12/98 11,774 11,215 12,000 11,441 10,335
3/99 11,495 10,949 11,856 11,506 10,376
6/99 11,316 10,755 11,727 11,474 10,499
9/99 11,359 10,752 11,790 11,492 10,553
12/99 11,263 10,650 11,742 11,618 10,606
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF
FUTURE PERFORMANCE.
+Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS
ONE ANNUALIZED
YEAR INCEPTION
RETURN TO DATE
-----------------------------
-4.34%+ 4.17%+ Institutional Class*
-----------------------------
-5.04%** 3.90%** Synthetic Class A**
-----------------------------
-9.55%** 2.18%** Synthetic Class A, with load
* Commenced operations on 01/31/97.
** Class A was offered beginning 06/14/99. Prior performance information
represents performance of the Institutional Class, which was offered
01/31/97. Institutional Class performance has been adjusted to
reflect the Class A sales charge, but has not been adjusted to reflect
Class A Rule 12b-1 fees and expenses. Had that adjustment been made,
performance would be lower than that shown.
14
Bishop Street Funds
<PAGE>
High Grade Income Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
Percentage
Coupon Maturity of
Rate Date Investments
- --------------------------------------------------------------------------------
1. United States Treasury Bond 7.25% May 15, 2016 6.0%
- --------------------------------------------------------------------------------
2. United States Treasury Bond 7.50% Nov. 15, 2016 4.7%
- --------------------------------------------------------------------------------
3. United States Treasury Bond 7.13% Feb. 15, 2023 4.1%
- --------------------------------------------------------------------------------
4. United States Treasury Note 6.13% Sept. 30, 2000 3.3%
- --------------------------------------------------------------------------------
5. Shell Oil 6.70% Aug. 15, 2002 3.2%
- --------------------------------------------------------------------------------
6. Lucent Technologies 7.25% Jul. 15, 2006 3.0%
- --------------------------------------------------------------------------------
7. United States Treasury Bond 6.00% Feb. 15, 2026 2.7%
- --------------------------------------------------------------------------------
8. United States Treasury Bond 7.25% Aug. 15, 2022 2.7%
- --------------------------------------------------------------------------------
9. Federal National Mortgage Association 5.13% Feb. 13, 2004 2.6%
- --------------------------------------------------------------------------------
10. United States Treasury Bond 6.75% Aug. 15, 2026 2.4%
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
--------- ---------
U.S. TREASURY OBLIGATIONS -- 57.8%
U.S. Treasury Bonds
$7,300 7.250%, 05/15/16 $ 7,631
5,500 7.500%, 11/15/16 5,884
3,175 7.250%, 08/15/22 3,348
5,000 7.125%, 02/15/23 5,202
3,550 6.250%, 08/15/23 3,347
3,725 6.000%, 02/15/26 3,407
3,025 6.750%, 08/15/26 3,038
2,500 6.500%, 11/15/26 2,436
100 6.125%, 11/15/27 93
U.S. Treasury Notes
900 6.375%, 05/15/00 902
400 6.250%, 05/31/00 401
1,000 6.000%, 08/15/00 1,001
4,177 6.125%, 09/30/00 4,179
350 5.750%, 11/15/00 349
450 8.500%, 11/15/00 459
1,400 5.625%, 11/30/00 1,394
15
Annual Report -- December 31, 1999
<PAGE>
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
$ 950 7.750%, 02/15/01 $ 966
1,500 6.250%, 04/30/01 1,501
725 6.500%, 05/31/01 728
500 6.625%, 06/30/01 503
2,625 6.625%, 07/31/01 2,641
2,500 6.375%, 09/30/01 2,505
1,200 6.125%, 12/31/01 1,197
1,950 6.250%, 01/31/02 1,949
1,000 7.500%, 05/15/02 1,026
700 6.375%, 08/15/02 701
625 5.750%, 10/31/02 616
2,625 5.500%, 01/31/03 2,564
2,825 6.250%, 02/15/03 2,816
625 5.500%, 05/31/03 609
1,700 5.750%, 08/15/03 1,665
500 5.875%, 02/15/04 491
250 7.250%, 05/15/04 257
2,000 7.250%, 08/15/04 2,062
1,625 7.875%, 11/15/04 1,718
250 6.500%, 08/15/05 250
500 7.000%, 07/15/06 512
1,625 6.500%, 10/15/06 1,620
2,000 6.625%, 05/15/07 2,007
-------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $79,768) 73,975
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 6.4%
FHLB
700 7.170%, 03/29/00 702
200 6.055%, 10/24/00 199
700 7.310%, 07/06/01 708
700 7.570%, 08/19/04 720
FNMA
1,000 6.610%, 05/08/02, MTN 1,000
3,500 5.125%, 02/13/04 3,291
1,625 5.750%, 06/15/05 1,545
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $8,420) 8,165
-------
16
Bishop Street Funds
<PAGE>
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
CORPORATE OBLIGATIONS -- 28.8%
BEAUTY PRODUCTS -- 1.8%
Procter and Gamble
$2,425 5.250%, 09/15/03 $ 2,298
-------
COMMUNICATIONS EQUIPMENT -- 3.9%
Motorola
2,550 5.800%, 10/15/08 2,295
Rockwell International
300 6.625%, 06/01/05 290
Sony
2,425 6.125%, 03/04/03 2,349
-------
4,934
-------
FOOD, BEVERAGE & TOBACCO -- 1.5%
Philip Morris
2,000 7.125%, 08/15/02 1,963
-------
INDUSTRIAL -- 1.9%
Honeywell
2,525 7.000%, 03/15/07 2,449
-------
MACHINERY -- 1.8%
Emerson Electric
2,625 5.000%, 10/15/08 2,241
-------
PETROLEUM REFINING -- 4.9%
Halliburton
2,550 5.625%, 12/01/08 2,254
Shell Oil
4,000 6.700%, 08/15/02 3,985
-------
6,239
-------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 2.6%
Xerox
1,000 6.625%, 04/16/01 996
2,525 5.250%, 12/15/03, MTN 2,339
-------
3,335
-------
17
Annual Report -- December 31, 1999
<PAGE>
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Value
Amount(000)/Shares (000)
- ------------------------- -------
RETAIL -- 5.8%
Gap
$2,625 6.900%, 09/15/07 $ 2,543
Lowes Companies
2,300 6.375%, 12/15/05 2,199
Wal-Mart Stores
2,625 8.000%, 09/15/06 2,717
---------
7,459
---------
TELEPHONES & TELECOMMUNICATION -- 3.0%
Lucent Technologies
3,800 7.250%, 07/15/06 3,795
---------
TOYS -- 1.6%
Hasbro
2,325 6.150%, 07/15/08 2,110
---------
TOTAL CORPORATE OBLIGATIONS (Cost $38,559) 36,823
---------
CASH EQUIVALENTS -- 5.7%
3,696 SEI Daily Income Trust Money Market Portfolio 3,696
3,588 SEI Daily Income Trust Prime Obligation Portfolio 3,588
---------
TOTAL CASH EQUIVALENTS (Cost $7,284) 7,284
---------
Total Investments (Cost $134,031)-- 98.7% 126,247
---------
Other Assets and Liabilities, Net -- 1.3% 1,635
---------
18
Bishop Street Funds
<PAGE>
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONCLUDED)
Market
Value
(000)
---------
NET ASSETS:
Fund Shares of Institutional Class (unlimited
authorization -- no par value) based on 13,618,699
outstanding shares of beneficial interest $135,736
Fund Shares of Class A (unlimited authorization -- no par value)
based on 109 outstanding shares of beneficial interest 1
Distribution in excess of net investment income (1)
Accumulated net realized loss on investments (70)
Net unrealized depreciation on investments (7,784)
--------
TOTAL NET ASSETS -- 100.0% $127,882
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- INSTITUTIONAL CLASS $9.39
--------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE -- CLASS A $9.35
--------
Maximum Offering Price Per Share -- Class A ($9.35 / 95.25%) $9.82
--------
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
19
Annual Report -- December 31, 1999
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
INVESTMENT ADVISER'S REPORT:
Fixed income markets came under continuous pressure throughout 1999. Although
the inflation rate stayed moderate, the combination of a continuously robust
economy, rising labor costs and a euphoric equity market induced the Federal
Reserve to raise short-term interest rates from 4.75% to 5.50%.
The municipal bond market performed slightly better than the Treasury bond
market, primarily because of a 21% reduction in overall municipal bond issuance.
The reduced supply put some upward pressure on prices, but two major demand
factors offset this and resulted in a softer municipal bond market. The first
factor was the reduction in demand from bond funds and casualty insurance
companies -- two of the largest institutional buyers of municipals. The second
was an extremely strong equity market that diverted some cash flow from
municipal bonds and other fixed income funds products.
As 2000 begins, there are few indications that the U.S. economy is downshifting
and that the Fed may be finished with its tightening moves. As a result, we
believe the Fed may act early in the first quarter with additional increases in
short-term interest rates. By mid-year, we believe economic growth to moderate
and we could possibly see stable and improving market conditions during the
second half of 2000.
MANAGEMENT DISCUSSION & ANALYSIS OF FUND PERFORMANCE:
The Fund's SEC 30-Day yield as of 12/31/99 was 5.07%, which equates to a 9.20%*
taxable equivalent for individuals in the maximum combined state and federal
income tax brackets. Our major objective continues to be the delivery of a high
level of current income exempt from Hawaii and federal income taxes. We feel we
have met this objective while maintaining a portfolio of extremely high credit
quality. At the year-end, 91% of our long-term debt holdings were in the AAA/AA
category.
When it became evident in the second half of 1999 that the Federal Reserve would
be in a tightening mode, our strategy was to shorten our average weighted
20
Bishop Street Funds
<PAGE>
[Bishop Logo Omitted]
maturity and duration -- which buffered us somewhat against the deteriorating
market conditions. At year-end 1999, our average weighted maturity was 10 years
vs. 12 years at the end of 1998, and duration stood at 7.3 vs. 8.1 at the end
of 1998.
Also, because of the relative flatness of the yield curve -- which describes the
relationship between interest rates and maturity -- we were able to implement
this strategy without any significant reduction in current income to our
shareholders. A relatively flat yield curve suggests that investors do not
receive much extra income by buying longer-maturity bonds. However, an investor
in a longer-maturity bond faces more risk of principal loss should interest
rates rise.
Our strategy is to continue to stay short of the maximum maturity range until
the yield curve presents opportunities to increase income significantly to
offset the volatility inherent in extending our maturities.
For the year ending December 31, 1999, the Hawaii Municipal Bond Fund produced a
total return of -2.65%.** In comparison, the return of the Lipper Hawaii
Municipal Debt Average was -4.04%. The Lehman Brothers Municipal Bond Index,
measuring an unmanaged portfolio of national issues mostly non-exempt from
Hawaii income taxes, reflected a -2.07% return of the same period. A negative
return reflects the impact of raising interest rates on the market value of
bonds.
During 1999, there were positive signs that tourism, Hawaii's prime economic
engine, was beginning to increase, primarily a result of the Asian component,
which accounts for 33% of tourist revenues. During 1999, Japan as well as the
rest of Asia emerged from a deep recession. Indications are that in 2000,
Hawaii's economy will also continue its long-awaited recovery and this should
gradually improve state and county budgetary and fiscal conditions.
* This information is based on a hypothetical illustration and is not
representative of any investment securities.
** The Bishop Street Hawaii Municipal Bond Fund (Class A shares), launched on
06/14/99, produced a total cumulative return of -1.76%. Including the maximum
sales charge of 4.25%, the total cumulative return for the Fund's Class A
shares was -5.91%.
21
Annual Report -- December 31, 1999
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE BISHOP STREET HAWAII MUNICIPAL BOND FUND, INSTITUTIONAL CLASS OR
SYNTHETIC CLASS A, VERSUS THE LEHMAN BROTHERS MUNICIPAL BOND INDEX, THE
CONSUMER PRICE INDEX, AND THE LIPPER HAWAII MUNICIPAL DEBT AVERAGE
[HAWAII MUNICIPAL BOND GRAPH OMITTED]
PLOT POINTS FOLLOWS:
<TABLE>
<CAPTION>
BISHOP STREET BISHOP STREET LIPPER
HAWAII MUNICIPAL HAWAII MUNICIPAL LEHMAN BROTHERS HAWAII CONSUMER
BOND FUND, BOND FUND, MUNICIPAL MUNICIPAL PRICE
INSTITUTIONAL CLASS+ SYNTHETIC RETAIL+ BOND INDEX DEBT AVERAGE INDEX
<S> <C> <C> <C> <C> <C>
2/28/95 10,000 9,575 10,000 10,000 10,000
6/95 10,288 9,851 10,304 10,359 10,100
12/95 10,941 10,476 11,005 11,097 10,191
6/96 10,849 10,388 10,893 11,047 10,376
12/96 11,401 10,916 11,420 11,589 10,522
6/97 11,722 11,224 11,727 11,961 10,606
12/97 12,373 11,847 12,362 12,656 10,712
6/98 12,661 12,123 12,647 12,997 10,787
12/98 13,097 12,540 13,070 13,478 10,884
6/99 12,921 12,362 12,865 13,356 11,004
12/99 12,750 12,176 13,199 12,513 11,170
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
+Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS
ONE ANNUALIZED ANNUALIZED
YEAR 3 YEAR INCEPTION
RETURN RETURN TO DATE
-----------------------------------
-2.65% 3.79% 5.12% Institutional Class*
-----------------------------------
-2.91%** 3.70%** 5.06%** Synthetic Class A**
-----------------------------------
-7.05%** 2.21%** 4.13%** Synthetic Class A, with
load
* Commenced operations on 02/15/95.
** Class A was offered beginning 06/14/99. Prior performance information
represents performance of the Institutional Class, which was offered
02/15/95. Institutional Class performance has been adjusted to reflect the
Class A sales charge, but has not been adjusted to reflect Class A Rule
12b-1 fees and expenses. Had that adjustment been made, performance would
be lower than that shown.
22
Bishop Street Funds
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Percentage
Coupon Maturity of
Rate Date Investments
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Hawaii State GO 5.25% Apr. 01, 2013 3.1%
2. Honolulu Waste Water Revenue Bond 5.25% Jul. 01, 2023 2.8%
3. Hawaii State GO 6.50% Dec. 01, 2013 2.6%
4. Honolulu Waste Water Revenue Bond 5.25% Jul. 01, 2015 2.2%
5. Hawaii State Highway Revenue Bond 6.00% Jul. 01, 2009 2.2%
6. Hawaii State Highway Revenue Bond 5.25% Jul. 01, 2015 2.1%
7. Honolulu, Hawaii City & County GO 5.00% Jul. 01, 2019 2.1%
8. Honolulu Waste Water Revenue Bond 5.25% Jul. 01, 2016 1.9%
9. Honolulu, Hawaii City & County GO 5.13% Jul. 01, 2017 1.9%
10. Maui County, Hawaii GO 6.00% Dec. 15, 2008 1.8%
</TABLE>
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
--------- -------
MUNICIPAL BONDS -- 94.3%
HAWAII -- 82.4%
Department of Budget & Finance, Hawaiian
Electric, RB, MBIA Insured
$760 6.200%, 05/01/26 $ 759
Department of Budget & Finance, Queens
Health Systems, Ser A, RB
1,450 5.875%, 07/01/11 1,459
1,000 6.000%, 07/01/20 964
Department of Budget & Finance, Queens
Health Systems, Ser B, RB,
MBIA Insured
750 5.250%, 07/01/11 734
1,445 5.250%, 07/01/12 1,403
1,275 5.250%, 07/01/13 1,227
1,000 5.250%, 07/01/14 950
Department of Budget & Finance, Special
Purpose Mortgage, Hawaii Electric Incorporated
Project, Ser A, RB, MBIA Insured
590 6.600%, 01/01/25 609
Department of Budget & Finance, Special
Purpose Mortgage, Hawaiian Electric Company,
Ser A, RB, MBIA Insured
1,620 4.950%, 04/01/12 1,523
23
Annual Report -- December 31, 1999
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
Department of Budget & Finance, Special
Purpose Mortgage, Hawaiian Electric, Ser A, RB,
AMBAC Insured
$2,000 5.500%, 12/01/14 $1,938
Department of Budget & Finance, Special
Purpose Mortgage, Hawaiian Electric, Ser B, RB,
AMT, AMBAC Insured
2,000 5.750%, 12/01/18 1,935
Department of Budget & Finance, Special
Purpose Mortgage, Kaiser Permanente Project,
Ser A, RB
2,500 6.500%, 03/01/11 2,566
Department of Budget & Finance, Special
Purpose Mortgage, Kapiolani Health Care
System Project, RB
1,260 6.300%, 07/01/08 1,293
250 6.000%, 07/01/11 249
250 6.400%, 07/01/13 253
Department of Budget & Finance, Special
Purpose Mortgage, St. Francis Medical Center
Project, RB, FSA Insured
930 6.500%, 07/01/22 965
Department of Budget & Finance, Special
Purpose Mortgage, Wilcox Memorial Hospital
Projects, RB
500 5.500%, 07/01/09 477
Harbor Capital Improvement, RB, MBIA Insured
500 5.400%, 07/01/09 498
480 7.000%, 07/01/17 495
Harbor Capital Improvement, RB, Ser 1992,
FGIC Insured
225 6.500%, 07/01/19 234
Hawaii County, GO, MBIA Insured
250 6.850%, 12/01/02 252
Hawaii County, Ser A, GO, FGIC Insured
400 5.550%, 05/01/09 407
450 5.600%, 05/01/12 453
190 5.600%, 05/01/13 190
Hawaii County, Ser A, GO, FSA Insured
1,000 5.250%, 05/15/11 975
1,000 5.250%, 05/15/12 975
1,000 5.375%, 05/15/13 970
1,000 5.375%, 05/15/14 964
500 5.400%, 05/15/15 477
1,000 5.625%, 05/15/19 946
24
Bishop Street Funds
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
Home Lands Department, RB
$1,250 4.000%, 07/01/05 $1,180
Honolulu City & County Board of Water Supply, RB
250 5.250%, 07/01/07 252
1,000 5.800%, 07/01/16 1,002
Honolulu City & County Mortgage, Smith Berentia,
Ser A, RB, FHA & MBIA Insured
95 7.800%, 07/01/24 98
Honolulu City & County Waipahu Towers Project,
Ser A, RB, GNMA Collateral
200 6.900%, 06/20/35 205
Honolulu City & County, GO
230 6.000%, 12/01/09 241
Honolulu City & County, GO, FGIC Insured
125 5.500%, 11/01/07 128
1,200 5.125%, 07/01/11 1,155
3,500 5.000%, 07/01/19 3,045
Honolulu City & County, GO, Ser A
250 5.800%, 03/01/01 254
245 5.700%, 04/01/09 254
150 6.000%, 01/01/10 158
Honolulu City & County, GO, Ser A, MBIA Insured
500 6.000%, 11/01/10 527
Honolulu City & County, GO, Ser B
1,500 5.600%, 06/01/05 1,546
3,000 5.125%, 07/01/17 2,704
Honolulu City & County, GO, Ser B, FGIC Insured
2,000 5.500%, 10/01/11 2,013
Honolulu City & County, GO, Ser C, FGIC Insured
2,000 5.125%, 07/01/13 1,895
1,000 5.125%, 07/01/15 924
Honolulu City & County, Halawa Business Park,
Special Assessment
370 6.400%, 10/15/01 378
25
Annual Report -- December 31, 1999
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
Honolulu City & County, Waste Water, RB,
Junior Ser, FGIC Insured
$1,000 5.250%, 07/01/12 $ 971
1,900 5.250%, 07/01/13 1,829
3,365 5.250%, 07/01/15 3,172
3,000 5.250%, 07/01/16 2,801
2,000 5.250%, 07/01/17 1,847
4,500 5.250%, 07/01/18 4,112
1,525 5.000%, 07/01/23 1,294
Kapolei, Ser A, COP, AMBAC Insured
1,000 5.000%, 05/01/14 914
500 5.000%, 05/01/18 437
Kauai County, Ser B, GO, AMBAC Insured
285 5.750%, 08/01/06 296
Kauai County, Ser B, GO, MBIA Insured
120 4.750%, 08/01/08 116
100 4.850%, 08/01/09 97
135 4.950%, 08/01/10 130
140 5.000%, 08/01/11 133
120 5.050%, 08/01/12 114
260 5.900%, 02/01/13 264
155 5.100%, 08/01/13 146
165 5.150%, 08/01/14 155
175 5.200%, 08/01/15 163
Maui County, Board of Water Supply,
Ser A, RB, FGIC Insured
520 6.000%, 12/01/01 534
Maui County, GO, FGIC Insured
1,000 5.100%, 09/01/04 1,011
2,465 6.000%, 12/15/08 2,601
Maui County, GO, Refunding, FGIC Insured
290 5.125%, 12/15/10 283
Maui County, GO, Ser A, AMBAC Insured
200 6.800%, 12/01/00 205
Maui County, GO, Ser A, FGIC Insured
200 5.000%, 03/01/03 202
500 5.200%, 09/01/12 483
500 4.800%, 03/01/13 454
200 5.000%, 03/01/13 186
500 4.900%, 03/01/14 453
100 5.125%, 03/01/14 94
795 5.000%, 03/01/18 700
26
Bishop Street Funds
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
$ 615 5.100%, 03/01/19 $ 546
Maui County, GO, Ser A, MBIA Insured
250 5.750%, 06/01/13 254
Maui County, GO, Ser C, FGIC Insured
555 5.150%, 03/01/14 523
790 5.150%, 03/01/15 735
500 5.200%, 03/01/16 463
State Airport Systems, RB, FGIC Insured
1,470 7.000%, 07/01/20 1,545
State Airport Systems, Ser 2, RB
60 6.900%, 07/01/12 66
State Airport Systems, Ser 2, RB, AMT,
MBIA Insured
1,100 6.900%, 07/01/12 1,220
State Airport Systems, Ser 2, RB, FGIC Insured
300 7.200%, 07/01/00 304
State Airport Systems, Ser 3, RB, AMBAC Insured
1,000 5.750%, 07/01/09 1,026
State Harbor Capital Improvement, RB,
FGIC Insured
305 6.200%, 07/01/08 321
State Harbor Capital Improvement, RB,
MBIA Insured, AMT
1,000 5.500%, 07/01/27 904
State Highway, RB
3,000 6.000%, 07/01/09 3,158
375 5.250%, 07/01/10 371
510 5.000%, 07/01/11 486
500 5.250%, 07/01/12 484
1,175 5.000%, 07/01/13 1,091
1,000 5.250%, 07/01/16 944
State Highway RB, FGIC Insured
3,280 5.250%, 07/01/15 3,091
405 5.000%, 07/01/16 360
State Housing, Finance & Development
Corporation, Affordable Rental Housing Program,
Ser 1995 A, RB
350 6.000%, 07/01/15 351
750 6.050%, 07/01/22 743
State Housing, Finance & Development Corporation,
Single Family Mortgage Purchase, RB
1,005 5.550%, 07/01/07 1,010
27
Annual Report -- December 31, 1999
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
State Housing, Finance & Development
Corporation, Single Family Mortgage Purchase,
RB, Ser A, AMT,
FNMA Collateral
$ 250 5.250%, 07/01/13 $ 235
1,375 5.400%, 07/01/30 1,213
1,575 5.750%, 07/01/30 1,459
State Housing, Finance & Development
Corporation, Single Family Mortgage Purchase,
RB, Ser B, FNMA Collateral
1,000 5.450%, 07/01/17 946
State Housing, Finance & Development
Corporation, University of Hawaii Faculty
Housing Project, RB, AMBAC Insured
360 4.650%, 10/01/03 360
380 4.750%, 10/01/04 380
395 4.850%, 10/01/05 395
415 5.000%, 10/01/06 417
700 5.650%, 10/01/16 690
State, COP, Ser A, AMBAC Insured
1,725 5.250%, 05/01/13 1,645
2,000 5.000%, 05/01/15 1,813
1,500 5.000%, 05/01/16 1,343
1,000 5.000%, 05/01/17 888
State, GO, FGIC Insured
500 5.250%, 03/01/17 458
State, GO, MBIA Insured
4,675 5.250%, 04/01/13 4,482
State, GO, Ser BR, Pre-refunded
350 6.900%, 06/01/02 354
State, GO, Ser CM, FGIC Insured
500 6.000%, 12/01/09 526
1,500 6.000%, 12/01/11 1,568
3,500 6.500%, 12/01/13 3,793
State, GO, Ser CN, FGIC Insured
1,000 5.250%, 03/01/13 959
500 5.500%, 03/01/14 490
State, GO, Ser CO, FGIC Insured
200 6.000%, 09/01/05 210
State, GO, Ser CQ, FGIC Insured
175 5.000%, 10/01/00 176
28
Bishop Street Funds
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
--------- ---------
State, GO, Ser CR, MBIA Insured
$2,500 5.250%, 04/01/12 $ 2,425
State, GO, Ser CT, FSA Insured
2,000 5.875%, 09/01/16 1,983
State, GO, Ser LL
1,000 6.000%, 03/01/09 1,048
--------
121,548
--------
PUERTO RICO -- 11.6%
Commonwealth Highway & Transportation Authority,
Ser Z, RB, FSA Insured
500 6.000%, 07/01/18 516
Commonwealth of Puerto Rico, GO, MBIA Insured
1,500 6.500%, 07/01/10 1,661
1,000 6.500%, 07/01/13 1,110
1,260 5.850%, 07/01/15 1,318
Commonwealth of Puerto Rico, GO, MBIA Insured
1,000 6.500%, 07/01/14 1,104
Commonwealth of Puerto Rico,
Industrial Development General Purpose,
Ser B, RB, MBIA Insured
2,000 5.375%, 07/01/16 1,923
Commonwealth of Puerto Rico,
Public Improvements, GO, AMBAC Insured
500 5.900%, 07/01/00 505
Commonwealth of Puerto Rico,
Public Improvements, GO, FSA Insured
900 5.500%, 07/01/12 919
Commonwealth of Puerto Rico,
Public Improvements, GO, MBIA Insured
350 4.875%, 07/01/23 300
Electric Power Authority, Ser FF, RB,
MBIA Insured
1,000 5.250%, 07/01/14 965
Housing, Banking & Finance Agency,
Single Family Mortgage,
Affordable Housing Mortgage Portfolio I, RB,
GNMA/FNMA/FHLMC Collateral
195 6.100%, 10/01/15 196
Industrial Tourist Educational Medical
Environmental Control Facilities Hospital
Auxilio Muto Obligation Group,
RB, MBIA Insured
300 6.250%, 07/01/24 310
Industrial Tourist Educational Medical
Environmental Control Facilities Inter American
University, Ser A, MBIA Insured
250 5.000%, 10/01/22 219
29
Annual Report -- December 31, 1999
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Value
Amount (000)/Shares (000)
- ------------------- ---------
Municipal Finance Agency Unlimited General
Obligation, Ser A, FSA Insured
$1,000 5.500%, 08/01/19 $ 958
Public Building Authority Government Facilities,
Ser B, RB, MBIA Insured
1,000 4.800%, 07/01/08 984
1,000 5.000%, 07/01/09 988
2,195 5.100%, 07/01/10 2,170
1,000 5.000%, 07/01/15 919
--------
17,065
--------
GUAM -- 0.3%
Guam Power Authority, Ser A, RB, AMBAC Insured
400 6.375%, 10/01/08 427
--------
TOTAL MUNICIPAL BONDS (Cost $145,316) 139,040
--------
CASH EQUIVALENTS -- 4.1%
1,482 Dreyfus Tax Exempt Cash Management Fund 1,482
4,596 SEI Institutional Tax Free Portfolio 4,596
--------
TOTAL CASH EQUIVALENTS (Cost $6,078) 6,078
--------
TOTAL INVESTMENTS (Cost $151,394)-- 98.4% 145,118
--------
OTHER ASSETS AND LIABILITIES, NET -- 1.6% 2,354
--------
30
Bishop Street Funds
<PAGE>
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONCLUDED)
Market
Value
(000)
---------
NET ASSETS:
Fund Shares of Institutional Class (unlimited
authorization -- no par value) based on 14,161,298
outstanding shares of beneficial interest $147,397
Fund Shares of Class A (unlimited authorization -- no
par value) based on 614,765 outstanding shares of
beneficial interest 6,285
Accumulated net realized gain on investments 66
Net unrealized depreciation on investments (6,276)
--------
TOTAL NET ASSETS -- 100.0% $147,472
========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE -- INSTITUTIONAL CLASS $ 9.98
--------
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE -- CLASS A $ 9.97
--------
MAXIMUM OFFERING PRICE PER SHARE -- CLASS A ($9.97 / 95.75%) $10.41
--------
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT -- ALTERNATIVE MINIMUM TAX
COP -- CERTIFICATE OF PARTICIPATION
FGIC -- FINANCIAL GUARANTY INSURANCE CORPORATION
FHA -- FEDERAL HOUSING ADMINISTRATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA -- FINANCIAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
RB -- REVENUE BOND
SER -- SERIES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
31
Annual Report -- December 31, 1999
<PAGE>
BISHOP STREET
INVESTMENT ADVISER'S REPORT & MANAGEMENT DISCUSSION
FUNDS
Money Market & Treasury Money Market Funds
- --------------------------------------------------------------------------------
INVESTMENT ADVISER'S REPORT:
The twelve month period ended December 31, 1999 was a continuation of one of the
longest periods of economic expansion in U.S. history, characterized by low
inflation, strong consumer confidence, solid wage gains and continued positive
equity returns. Tight labor markets and increasing wealth pushed consumer
confidence to its highest level in over 30 years, spurring heavy spending on
homes, autos and the latest technology. Economic growth for the year measured
near 4%, while other than a correction in oil prices, inflation pressures
remained contained. Despite the low levels of unemployment, increasing gains in
productivity helped offset any increasing labor costs. In addition, the most
powerful force containing inflation has been the proliferation in Internet
related activity, empowering both businesses and consumers to search for more
competitive pricing.
In response to the brisk pace of economic activity, the Federal Reserve raised
interest rates by 25 basis points three times over the course of the year,
effectively erasing the 75 basis point reduction that was implemented in 1998.
The major credit problem for short term investors during the year was in August,
when General American Life Insurance Company failed to meet liquidity demands of
shareholders after it was downgraded by the rating agencies. The issue was
ultimately resolved when Metropolitan Life purchased the smaller insurer,
assuming all obligations. Neither the Bishop Street Treasury Money Market Fund
nor the Bishop Street Money Market Fund had any exposure to this issuer.
As mid-year passed, investors began focusing on funding pressures related to
year-end, particularly the potential impact on market liquidity due to Y2K
related fears. In order to ease concerns, the Federal Reserve took an active
role by implementing innovative financing programs for banks and dealers, and
the Treasury provided further liquidity by issuing bills maturing in early
January. The combination of these measures combined with large cash balances
held by investors did force overnight yields to dip slightly for a couple of
days at year-end, but the overall impact on the Bishop Street Funds was minimal
when measured over a longer time frame.
32
Bishop Street Funds
<PAGE>
[Bishop Logo Omitted]
MANAGEMENT DISCUSSION & ANALYSIS OF FUND PERFORMANCE:
Our strategy during 1999 in the Bishop Street Treasury Money Market Fund was to
maintain a high exposure to overnight repurchase agreements, allowing us to
respond quickly in the rising interest rate environment. We also made
opportunistic purchases of Treasury securities when the yield-curve priced in
additional Fed rate hikes. As of December 31, the weighted average maturity of
the Treasury Fund was 51 days.
In the Money Market Fund we also extended into the new year when it was
attractive to do so, typically using commercial paper or bank notes to take
advantage of the premium issuers had to pay the market in order to finance into
2000. We also increased our exposure to LIBOR based floating rate notes. This
market determined index performed well as it incorporated both the market's
anticipation of future Fed rate hikes, as well as the increasing nervousness
amongst fixed-income investors as we approached Y2K. As of December 31, the
weighted average maturity of the Money Market Fund was 49 days.
OUTLOOK & STRATEGY
Now that any threats of a Y2K meltdown are behind us, the market will focus on
the Fed's willingness to temper the brisk pace of economic activity. The tight
labor market and a resumption of business spending on capital investments,
namely technological advancements, are likely to keep economic growth higher
than the Fed desires. Even if activity were to slow in the U.S., continued
improving global activity would act as a buffer to the domestic decline. In the
absence of significant signs of inflation, the Fed is likely to continue to
tighten monetary policy on a gradual basis. In this environment we will continue
to favor shorter-term securities which will "turn-over" faster in this rising
rate scenario.
33
Annual Report -- December 31, 1999
<PAGE>
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
--------- ---------
COMMERCIAL PAPER -- 58.8%
ASSET BACKED -- 19.1%
Aesop Funding
$5,000 6.080%, 03/07/00 $ 4,944
Apreco
5,000 5.870%, 02/03/00 4,973
Corporate Asset Funding (A)
4,000 6.174%, 04/07/00 4,000
Corporate Receivables
8,000 6.541%, 02/16/00 8,000
Delaware Funding
8,000 5.930%, 02/08/00 7,950
Park Avenue Receivables
8,000 6.000%, 02/14/00 7,941
Riverwoods Funding
7,500 6.000%, 02/15/00 7,444
Variable Funding Capital
9,000 5.900%, 01/28/00 8,960
-------
54,212
-------
BROKERAGE -- 11.9%
Bear Stearns
5,000 5.970%, 02/09/00 4,968
JP Morgan
5,000 5.870%, 04/17/00 4,913
Goldman Sachs Group
8,000 6.070%, 02/23/00 7,929
Merrill Lynch
8,000 5.600%, 01/20/00 7,976
Morgan Stanley Dean Witter
8,000 6.000%, 01/28/00 7,964
-------
33,750
-------
DRUGS -- 5.6%
American Home Products
7,500 5.730%, 02/23/00 7,437
Glaxo Wellcome
8,500 5.920%, 02/04/00 8,453
-------
15,890
-------
FINANCE COMPANY -- 2.8%
Island Finance Puerto Rico
8,000 5.950%, 03/02/00 7,919
-------
34
Bishop Street Funds
<PAGE>
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
--------- ---------
FINANCIAL SERVICES -- 5.2%
Sears Roebuck Acceptance
$8,000 6.150%, 02/10/00 $ 7,945
Unifunding
7,000 5.580%, 02/08/00 6,957
--------
14,902
--------
GAS/NATURAL GAS -- 2.8%
National Fuel Gas
8,000 6.050%, 02/01/00 7,958
--------
INDUSTRIAL -- 3.0%
Harvard University
8,500 5.200%, 01/27/00 8,468
--------
RETAIL -- 2.8%
Albertson's (A)
8,000 6.441%, 07/14/00 7,998
--------
STEEL & STEEL WORKS -- 2.8%
Alcoa
8,000 5.870%, 02/17/00 7,939
--------
TELEPHONES & TELECOMMUNICATION -- 2.8%
GTE
8,000 5.950%, 02/10/00 7,947
--------
TOTAL COMMERCIAL PAPER (Cost $166,983) 166,983
--------
FLOATING RATE NOTES -- 18.6%
AT&T (A) (B)
8,000 6.163%, 08/07/00 8,000
All-State Corporation GISA (A)
3,000 6.211%, 03/15/00 3,000
American Express Centurion Bank (A)
8,000 6.090%, 02/15/00 8,000
General Electric Capital (A) MTN
6,000 6.111%, 05/03/00 6,000
Key Bank North America (A)
8,000 6.220%, 08/31/00 8,000
Monumental Life Insurance (A)
10,000 6.310%, 05/02/00 10,000
35
Annual Report -- December 31, 1999
<PAGE>
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONCLUDED)
Face
Amount Value
(000) (000)
--------- ---------
FLOATING RATE NOTES (CONTINUED)
National Rural (A)
$4,000 6.141%, 06/26/00 $ 3,999
Travelers Insurance (A)
6,000 6.163%, 05/31/00 6,000
--------
TOTAL FLOATING RATE NOTES (Cost $52,999) 52,999
--------
CERTIFICATES OF DEPOSIT/BANK NOTES -- 10.4%
Bank of Scotland
5,500 5.725%, 07/03/00 5,499
First Tennessee Bank
8,000 5.600%, 01/31/00 8,000
Royal Bank of Canada
4,000 5.700%, 07/03/00 3,999
Societe Generale
8,000 4.980%, 02/01/00 8,000
Westpac Banking
4,000 5.030%, 02/07/00 4,000
--------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES
(Cost $29,498) 29,498
--------
CORPORATE OBLIGATIONS -- 8.4%
Ford Motor Credit
8,000 6.038%, 08/18/00 7,996
GMAC
8,000 5.960%, 02/07/00 7,951
Unum Corporation, MTN (A)
8,000 6.120%, 06/19/00 7,997
--------
TOTAL CORPORATE OBLIGATIONS (Cost $23,944) 23,944
--------
36
Bishop Street Funds
<PAGE>
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
--------- ---------
REPURCHASE AGREEMENT -- 4.2%
Paribas Capital Market, 2.800%, dated 12/31/99,
matures 01/03/00, repurchase price $11,881,772
(collateralized by U.S. Treasury Note, total
par value $12,033,000, 5.50%, matures 08/31/01:
$11,879 total market value $12,120,671) $ 11,879
--------
TOTAL REPURCHASE AGREEMENT (Cost $11,879) 11,879
--------
TOTAL INVESTMENTS (Cost $285,303) -- 100.4% 285,303
--------
OTHER ASSETS AND LIABILITIES, NET -- (0.4%) (1,012)
--------
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) based on
284,289,183 outstanding shares of beneficial interest 284,289
Undistributed net investment income 4
Accumulated net realized loss on investments (2)
--------
TOTAL NET ASSETS -- 100.0% $284,291
========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $1.00
--------
(A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF
NET ASSETS IS THE RATE IN EFFECT ON 12/31/99. THE MATURITY DATE
SHOWN IS THE NEXT SCHEDULED RESET DATE.
(B) SECURITIES SOLD WITHIN THE TERMS OF A PRIVATE PLACEMENT MEMORANDUM,
EXCEPT FROM REGISTRATION UNDER SECTION 3A-4, 4(2) OR 144A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE SOLD ONLY TO
DEALERS IN THAT PROGARM OR OTHER "ACCREDITED INVESTORS."
THIS SECURITY HAS BEEN DETERMINED TO BE LIQUID UNDER
GUIDELINES ESTABLISHED BY THE BOARD OF TRUSTEES.
MTN -- MEDIUM TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
37
Annual Report -- December 31, 1999
<PAGE>
Treasury Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
--------- ---------
U.S. TREASURY OBLIGATIONS -- 36.1%
U.S. Treasury Bills (A)
$48,000 5.305%, 01/13/00 $ 47,913
9,000 5.055%, 03/09/00 8,914
U.S. Treasury Notes
12,000 5.875%, 02/15/00 12,016
7,000 6.875%, 03/31/00 7,032
11,000 4.000%, 10/31/00 10,858
12,000 5.750%, 11/15/00 11,998
16,000 4.625%, 11/30/00 15,809
5,000 5.625%, 11/30/00 4,984
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $119,524) 119,524
--------
REPURCHASE AGREEMENTS -- 64.1%
Abn Amro, 3.000%, dated 12/31/99, matures
01/03/00, repurchase price $40,010,000
(collateralized by various U.S. Treasury Notes
and Bond, total par value $42,323,000,
5.625%-7.500%, 09/30/01-02/15/26:
40,000 total market value $40,800,470) 40,000
Barclays Capital, 2.750%, dated 12/31/99,
matures 01/03/00, repurchase price $70,016,042
(collateralized by U.S. Treasury Bills,
total par value $74,632,000, 0.00%,
01/06/00-10/12/00:
70,000 total market value $71,400,179) 70,000
J.P. Morgan, 2.500%, dated 12/31/99,
matures 01/03/00, repurchase price $40,008,333
(collateralized by U.S. Treasury Notes,
total par value $40,813,000, 4.875%-7.875%,
03/31/01-08/15/01: total market value
40,000 $40,800,839) 40,000
Paribas Capital Markets, 2.850%, dated
12/31/99, matures 01/03/00, repurchase price
$15,003,563 (collateralized by U.S. Treasury
Note and Bill, total par value $16,000,000,
0.000%-7.000%, 10/12/00-07/15/06:
15,000 total market value $15,392,817) 15,000
Paribas Capital Markets, 2.800%, dated
12/31/99, matures 01/03/00, repurchase price
$7,344,713 (collateralized by U.S.
Treasury Note, total par value $7,412,000, 6.50%,
7,343 matures 10/15/06: total market value $7,508,726) 7,343
38
Bishop Street Funds
<PAGE>
Treasury Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONCLUDED)
Face
Amount Value
(000) (000)
--------- ---------
Warburg Dillon, 2.500%, dated 12/31/99,
matures 01/03/00, repurchase price $40,008,333
(collateralized by U.S. Treasury Note and Bond,
total par value $37,341,000, 4.75%-9.25%,
11/15/08-02/15/16: total market value
$40,000 $40,804,845) $ 40,000
--------
Total Repurchase Agreements (Cost $212,343) 212,343
--------
TOTAL INVESTMENTS (Cost $331,867) -- 100.2% 331,867
--------
OTHER ASSETS AND LIABILITIES, NET -- (0.2%) (803)
--------
NET ASSETS:
Fund Shares (unlimited authorization -- no par value)
based on 331,073,578 outstanding shares of
beneficial interest 331,074
Undistributed net investment income 14
Accumulated net realized loss on investments (24)
--------
TOTAL NET ASSETS -- 100.0% $331,064
========
Net Asset Value, Offering and Redemption Price Per Share $1.00
--------
(A) REPRESENTS THE YIELD TO MATURITY.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
39
Annual Report -- December 31, 1999
<PAGE>
<TABLE>
<CAPTION>
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED 12/31/99
(IN THOUSANDS)
High Hawaii Treasury
Grade Municipal Money Money
Equity Income Bond Market Market
Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest Income $ 383 $ 3,262 $ 3,638 $14,864 $16,246
Dividend Income
(Net of withholding taxes of $12) 1,442 -- -- -- --
- ---------------------------------------------------------------------------------------------------------
Total Investment Income 1,825 3,262 3,638 14,864 16,246
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fee 1,355 302 244 845 975
Investment Adviser Fee Waiver (46) (72) (197) (126) (437)
Management Fee 366 110 139 563 650
Management Fee Waiver (184) (60) (107) (412) (406)
Shareholder Servicing Fee 458 137 174 704 812
Shareholder Servicing Fee Waiver (275) (82) (104) (422) (487)
Distribution Fees Class A -- -- 5 -- --
Custody Fees 34 31 34 38 32
Transfer Agent Fees 32 27 33 34 40
Registration Fees 31 5 18 14 25
Trustees Fees 7 6 7 37 39
Printing Fees 17 11 11 53 58
Professional Fees 29 18 26 78 97
Amortization of Deferred
Organizational Costs 6 6 6 -- 7
Miscellaneous Expenses 1 1 2 6 24
- ---------------------------------------------------------------------------------------------------------
Total Expenses 1,831 440 291 1,412 1,429
- ---------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (6) 2,822 3,347 13,452 14,817
- ---------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) on Investments 30,951 7 143 7 11
Change in Unrealized Appreciation
(Depreciation) on Investments 26,018 (4,605) (5,313) -- --
- ---------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments 56,969 (4,598) (5,170) 7 11
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Resulting from Operations $56,963 ($1,776) ($1,823) $13,459 $14,828
=========================================================================================================
</TABLE>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
40
Bishop Street Funds
<PAGE>
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Equity Fund High Grade Income Fund
- -------------------------------------------------------------------------------------------------------
01/01/99 to 01/01/98 to 01/01/99 to 01/01/98 to
12/31/99 12/31/98 12/31/99 12/31/98
- -------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (6) $ 304 $ 2,822 $ 1,342
Net Realized Gain (Loss) on Investments 30,951 4,270 7 655
Change in Unrealized Appreciation
(Depreciation) on Investments 26,018 18,838 (4,605) 252
- -------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Resulting
From Operations 56,963 23,412 (1,776) 2,249
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Institutional Class Shares -- (304) (2,822) (1,342)
Class A Shares (1) -- -- -- --
Capital Gains:
Institutional Class Shares (22,427) (3,962) (376) (391)
Class A Shares (1) (30) -- -- --
- -------------------------------------------------------------------------------------------------------
Total Distributions (22,457) (4,266) (3,198) (1,733)
- -------------------------------------------------------------------------------------------------------
Changes in Net Assets 34,506 19,146 (4,974) 516
- -------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds in Connection with the Acquisition of
Common Trust Fund Assets 224,391 -- 97,163 --
Proceeds from Shares Issued 30,327 8,970 18,415 1,225
Reinvestments of Cash Distributions 8,559 4,234 1,731 1,615
Cost of Shares Redeemed (8,344) (500) (9,355) (4,697)
- -------------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share
Transactions 254,933 12,704 107,954 (1,857)
- -------------------------------------------------------------------------------------------------------
Class A Shares: (1)
Proceeds from Shares Issued 680 -- 1 --
Reinvestments of Cash Distributions 30 -- -- --
Cost of Shares Redeemed (156) -- -- --
- -------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 554 -- 1 --
- -------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
From Capital Share Transactions 255,487 12,704 107,955 (1,857)
- -------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 289,993 31,850 102,981 (1,341)
- -------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 101,817 69,967 24,901 26,242
- -------------------------------------------------------------------------------------------------------
End of Period $391,810 $101,817 $127,882 $24,901
=======================================================================================================
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued in Connection with the
Acquisition of Common Trust Fund Assets 13,437 -- 10,121 --
Shares Issued 1,772 605 1,898 118
Shares Issued in Lieu of Cash Distributions 497 296 177 155
Shares Redeemed (492) (38) (964) (452)
- -------------------------------------------------------------------------------------------------------
Total Institutional Class Capital
Share Transactions 15,214 863 11,232 (179)
- -------------------------------------------------------------------------------------------------------
Class A Shares: (1)
Shares Issued 40 -- -- --
Shares Issued in Lieu of Cash Distributions 2 -- -- --
Shares Redeemed (9) -- -- --
- -------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 33 -- -- --
- -------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Capital Shares 15,247 863 11,232 (179)
=======================================================================================================
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
(1) COMMENCED OPERATIONS ON 06/14/99.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
41
Annual Report -- December 31, 1999
<PAGE>
<TABLE>
<CAPTION>
Bishop Street Funds
- ---------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
(IN THOUSANDS)
Hawaii Municipal
Bond Fund
- --------------------------------------------------------------------------------------------------
01/01/99 01/01/98
to 12/31/99 to 12/31/98
- --------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Income $ 3,347 $ 1,503
Net Realized Gain on Investments 143 78
Change in Unrealized Appreciation
(Depreciation) on Investments (5,313) 206
- -------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Resulting From Operations (1,823) 1,787
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (3,279) (1,503)
Class A Shares (1) (96) --
Capital Gains:
Institutional Class Shares (88) --
Class A Shares (1) (6) --
- -------------------------------------------------------------------------------------------------
Total Distributions (3,469) (1,503)
- -------------------------------------------------------------------------------------------------
Change in Net Assets (5,292) 284
- -------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds in Connection with the Acquisition of
Common Trust Fund Assets 102,397 --
Proceeds from Shares Issued 17,832 10,520
Reinvestments of Cash Distributions 907 705
Cost of Shares Redeemed (10,408) (4,763)
- -------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions 110,728 6,462
- -------------------------------------------------------------------------------------------------
Class A Shares: (1)
Proceeds from Shares Issued 6,374 --
Reinvestments of Cash Distributions 101 --
Cost of Shares Redeemed (190) --
- -------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 6,285 --
- -------------------------------------------------------------------------------------------------
Net Increase in Net Assets From Capital Share Transactions 117,013 6,462
- -------------------------------------------------------------------------------------------------
Total Increase in Net Assets 111,721 6,746
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 35,751 29,005
- -------------------------------------------------------------------------------------------------
End of Period $147,472 $35,751
=================================================================================================
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued in Connection with the
Acquisition of Common Trust Fund Assets 10,049
Shares Issued 1,716 984
Shares Issued in Lieu of Cash Distributions 87 63
Shares Redeemed (1,011) (445)
- -------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions 10,841 602
- -------------------------------------------------------------------------------------------------
Class A Shares: (1)
Shares Issued 624 --
Shares Issued in Lieu of Cash Distributions 10 --
Shares Redeemed (19) --
- -------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 615 --
- -------------------------------------------------------------------------------------------------
Net Increase in Capital Shares 11,456 602
=================================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
<FN>
(1) COMMENCED OPERATIONS ON 06/14/99.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
42
Bishop Street Funds
<PAGE>
<TABLE>
<CAPTION>
Bishop Street Funds
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Treasury
Money Market Money Market
Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
01/01/99 01/01/98 01/01/99 01/01/98
to 12/31/99 to 12/31/98 to 12/31/99 to 12/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net Investment Income $ 13,452 $ 13,120 $ 14,817 $ 16,063
Net Realized Gain on Investments 7 25 11 2
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From
Operations 13,459 13,145 14,828 16,065
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (13,452) (13,120) (14,817) (16,061)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (13,452) (13,120) (14,817) (16,061)
- ------------------------------------------------------------------------------------------------------------------------------------
Changes in Net Assets 7 25 11 4
- ------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Institutional Class Shares:
Proceeds from Shares Issued 695,788 709,477 1,290,349 1,801,697
Reinvestments of Cash Distributions 373 214 8 --
Cost of Shares Redeemed (680,195) (688,069) (1,259,148) (1,775,776)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
From Capital Share Transactions 15,966 21,622 31,209 25,921
- ------------------------------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 15,973 21,647 31,220 25,925
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 268,318 246,671 299,844 273,919
- ------------------------------------------------------------------------------------------------------------------------------------
End of Period $284,291 $ 268,318 $331,064 $ 299,844
====================================================================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
43
Annual Report -- December 31, 1999
<PAGE>
<TABLE>
<CAPTION>
Bishop Street Funds
- ---------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS ENDED DECEMBER 31,
INVESTMENT ACTIVITIES DISTRIBUTIONS FROM
---------------------------------------- --------------------------
NET
NET REALIZED NET
ASSET AND ASSET
VALUE, NET UNREALIZED NET VALUE,
BEGINNING INVESTMENT GAIN (LOSS) ON INVESTMENT CAPITAL END OF
OF PERIOD INCOME INVESTMENTS INCOME GAINS PERIOD
--------- ---------- ----------- --------- ------ ------
- --------------
EQUITY FUND
- --------------
INSTITUTIONAL CLASS SHARES:
<S> <C> <C> <C> <C> <C> <C>
1999(6): $15.28 $-- $ 3.68 $ -- $(1.08) $17.88
1998: $12.06 $0.05 $ 3.88 $(0.05) $(0.66) $15.28
1997(1): $10.00 $0.08 $ 2.06 $(0.08) -- $12.06
CLASS A SHARES:
1999(2): $15.74 $-- $ 3.19 $ -- $(1.06) $17.87
- -----------------------
HIGH GRADE INCOME FUND
- -----------------------
INSTITUTIONAL CLASS SHARES:
1999: $10.43 $0.48 $(0.92) $(0.50) $(0.10) $ 9.39
1998: $10.23 $0.54 $ 0.37 $(0.54) $(0.17) $10.43
1997(1): $10.00 $0.51 $ 0.26 $(0.51) $(0.03) $10.23
CLASS A SHARES:
1999(2): $ 9.69 $0.19 $(0.19) $(0.24) $(0.10) $ 9.35
- --------------------------
HAWAII MUNICIPAL BOND FUND
- --------------------------
INSTITUTIONAL CLASS SHARES:
1999: $10.77 $0.48 $(0.75) $(0.50) $(0.02) $ 9.98
1998: $10.67 $0.51 $ 0.10 $(0.51) -- $10.77
1997: $10.34 $0.53 $ 0.33 $(0.53) -- $10.67
1996: $10.47 $0.55 $(0.12) $(0.55) $(0.01) $10.34
1995(3): $10.00 $0.45 $ 0.47 $(0.45) -- $10.47
CLASS A SHARES:
1999(2): $10.42 $0.26 $(0.44) $(0.25) $(0.02) $ 9.97
- -----------------
MONEY MARKET FUND
- -----------------
1999: $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00
1998: $ 1.00 $0.05 -- $(0.05) -- $ 1.00
1997: $ 1.00 $0.05 -- $(0.05) -- $ 1.00
1996: $ 1.00 $0.05 -- $(0.05) -- $ 1.00
1995(4): $ 1.00 $0.05 -- $(0.05) -- $ 1.00
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
1999: $ 1.00 $0.05 $ -- $(0.05) $ -- $ 1.00
1998: $ 1.00 $0.05 -- $(0.05) -- $ 1.00
1997: $ 1.00 $0.05 -- $(0.05) -- $ 1.00
1996(5): $ 1.00 $0.03 -- $(0.03) -- $ 1.00
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
++ TOTAL RETURN HAS BEEN ANNUALIZED.
* ANNUALIZED.
** TOTAL RETURN DOES NOT REFLECT THE SALES CHARGE ON CLASS A SHARES.
(1) COMMENCED OPERATIONS ON JANUARY 31, 1997.
(2) COMMENCED OPERATIONS ON JUNE 14, 1999.
(3) COMMENCED OPERATIONS ON FEBRUARY 15, 1995.
(4) COMMENCED OPERATIONS ON JANUARY 30, 1995.
(5) COMMENCED OPERATIONS ON MAY 1, 1996.
(6) PER SHARE NET INVESTMENT INCOME AMOUNT CALCULATED USING AVERAGE SHARES.
</FN>
</TABLE>
44
Bishop Street Funds
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
RATIO OF RATIO OF RATIO OF NET INVESTMENT
NET EXPENSES EXPENSES TO NET INCOME TO
ASSETS, TO AVERAGE INVESTMENT AVERAGE
END OF AVERAGE NET ASSETS INCOME TO NET ASSETS PORTFOLIO
TOTAL PERIOD NET EXCLUDING FEE AVERAGE EXCLUDING FEE TURNOVER
RETURN** (000) ASSETS WAIVERS NET ASSETS WAIVERS RATE
- -------- ------ -------- ------------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
24.37% $391,227 1.00% 1.27% (0.01)% (0.28)% 58%
33.05% $101,817 1.00% 1.32% 0.38% 0.06% 41%
21.52%+ $ 69,967 0.99%* 1.39%* 0.83%* 0.43%* 30%
20.52%+ $ 583 1.25%* 1.61%* (0.33)%* (0.69)%* 58%
(4.34)% $127,881 0.80% 1.19% 5.12% 4.73% 56%
9.09% $ 24,901 0.80% 1.21% 5.21% 4.80% 98%
7.94%+ $ 26,242 0.80%* 1.30%* 5.58%* 5.08%* 32%
(0.05)%+ $ 1 1.05%* 1.87%* 4.89%* 4.07%* 56%
(2.65)% $141,341 0.41% 0.99% 4.79% 4.21% 14%
5.84% $ 35,751 0.41% 1.01% 4.74% 4.14% 21%
8.52% $ 29,005 0.34% 0.99% 5.05% 4.40% 29%
4.21% $ 15,408 0.21% 0.85% 5.33% 4.68% 27%
10.91%++ $ 9,411 0.27%* 1.10%* 5.24%* 4.40%* 68%
(1.76)%+ $ 6,131 0.66%* 1.24%* 4.89%* 4.31%* 14%
4.88% $284,291 0.50% 0.84% 4.78% 4.44% n/a
5.26% $268,318 0.50% 0.81% 5.12% 4.81% n/a
5.29% $246,671 0.51% 0.85% 5.18% 4.84% n/a
5.12% $274,125 0.49% 0.60% 5.01% 4.90% n/a
5.67%++ $305,120 0.50%* 0.66%* 5.50%* 5.34%* n/a
4.65% $331,064 0.44% 0.85% 4.56% 4.15% n/a
5.10% $299,844 0.44% 0.84% 4.98% 4.58% n/a
5.22% $273,919 0.43% 0.86% 5.11% 4.68% n/a
5.08%++ $180,201 0.42%* 0.65%* 4.96%* 4.74%* n/a
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
45
Annual Report -- December 31, 1999
<PAGE>
Bishop Street Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Bishop Street Funds (the "Trust") are registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Bishop Street Funds consist of a series of five funds (the "Funds") which
includes the Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund,
Money Market Fund and the Treasury Money Market Fund. On June 14, 1999, Class A
Shares commenced operations. Class A Shares are subject to a sales load as
disclosed in the prospectus. The assets of each Fund are segregated, and a
shareholder's interest is limited to the Fund in which shares are held. The
Funds' prospectus provides a description of each Fund's investment objectives,
policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust.
SECURITY VALUATION
Bishop Street Fund investments in equity securities which are traded on a
national securities exchange (or reported on the NASDAQ national market system)
are stated at the last quoted sale price on the principal exchange on which they
are traded on valuation date, other equity securities traded in the
over-the-counter market and listed equity securities for which no sale was
reported on that date are stated at the last quoted bid price. Debt obligations
exceeding sixty days to maturity which are actively traded are valued by an
independent pricing service at the most recently quoted bid price. Debt
obligations with sixty days or less remaining until maturity may be valued at
their amortized cost. Restricted securities for which quotations are not readily
available are valued at fair value using methods determined in good faith under
general Trustee supervision.
Investment securities held by the Money Market and Treasury Money Market
Funds are stated at amortized cost, which approximates market value. Under this
valuation method, purchase discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Costs used in determining net realized capital
gains and losses on the sale of securities are those of the specific securities
sold adjusted for the accretion and amortization of the purchase discounts and
premiums during the respective holding periods. Interest income is recorded on
the accrual basis; dividend income is recorded on ex-dividend date.
DISCOUNTS AND PREMIUMS
Discounts and premiums are accreted or amortized over the life of each
security and are recorded as interest income for each of the Funds using the
scientific interest method, which approximates the effective interest method.
46
Bishop Street Funds
<PAGE>
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Securities pledged as collateral for Repurchase Agreements are held by the
custodian bank until the respective agreements mature. The Funds may also invest
in tri-party repurchase agreements. Securities held as collateral for tri-party
repurchase agreements are maintained in a segregated account by the broker's
custodian bank until the maturity of the repurchase agreement. Provisions of
repurchase agreements and procedures adopted by the Adviser ensure that the
market value of the collateral is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
EXPENSES
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Class specific expenses, such as the distribution fees, are borne
by that class. Other operating expenses of the Trust are prorated to the Funds
on the basis of relative net assets. Income, other expenses and realized and
unrealized gains and losses of a fund are allocated to the respective classes on
the basis of relative net assets each day.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are declared daily and paid on a
monthly basis for the High Grade Income Fund, Hawaii Municipal Bond Fund, the
Money Market Fund and the Treasury Money Market Fund. The Equity Fund declares
and pays such dividends on a quarterly basis. Any net realized capital gains
will be distributed at least annually for all Funds.
FEDERAL INCOME TAXES
It is each Fund's intention to qualify as a regulated investment company
for Federal income tax purposes and to distribute a majority of its taxable
income and net capital gains. Accordingly, no provision for Federal income taxes
is required. the timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
that may differ from generally accepted accounting principles. These differences
relate primarily to paydowns on asset-backed securities and certain securities
sold at a loss. As a result, net investment income (loss) and net realized gain
(loss) on investment transactions for a reporting period may differ from
distributions during such period. Accordingly, the Funds may periodically make
reclassifications among certain capital accounts without impacting the net asset
value of the Funds. The following permanent differences as of December 31, 1999
have been reclassified from net investment income to the accumulated net
realized gains: Equity Fund $(5,988), High Grade Income Fund $1,320.
ORGANIZATION COSTS
Organization costs have been capitalized by the Funds and are being amortized
over sixty months commencing with operations. In the event any of the
initial shares are redeemed by
47
Annual Report -- December 31, 1999
<PAGE>
Bishop Street Funds
- --------------------------------------------------------------------------------
any holder thereof during the period that the fund is amortizing its
organization costs, the redemption proceeds payable to the holder thereof prior
to the end of the amortization period, the proceeds will be reduced by the
unamortized organization costs in the same ratio as the number of initial shares
being redeemed bears to the number of initial shares outstanding at the time of
the redemption.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
3. INVESTMENT ADVISORY AGREEMENT
Investment advisory services are provided to the Funds by First Hawaiian
Bank (the "Adviser"). The Adviser is entitled to receive an annual fee of 0.74%
of the average daily net assets of the Equity Fund, 0.55% of the average daily
net assets of the High Grade Income Fund, 0.35% of the average daily net assets
of the Hawaii Municipal Bond Fund, and 0.30% of the Money Market and Treasury
Money Market Funds. The Adviser may from time to time waive a portion of its fee
in order to limit the operating expenses of a Fund.
Wellington Management Company, LLP (the "Sub-Adviser") serves as the
investment sub-adviser for the Money Market Fund and the Treasury Money Market
Fund (collectively, the "Money Market Funds"), pursuant to a sub-adviser
agreement. The Sub-Adviser is entitled to receive from the Adviser a fee,
computed daily and paid monthly, at the annual rate of 0.075% of the average
daily net assets of the Money Market Funds up to $500 million and 0.020% of the
average daily net assets of the Money Market Funds in excess of $500 million.
4. ADMINISTRATIVE, TRANSFER AGENT AND DISTRIBUTION SERVICES
Pursuant to an administration agreement dated January 27, 1995, (the
"Agreement") SEI Investments Mutual Funds Services ("SEI"), a wholly owned
subsidiary of SEI Investments Company, acts as the Trust's Administrator. Under
the terms of the Agreement, SEI is entitled to receive an annual fee of 0.20% of
the average daily net assets of each Fund. SEI has voluntarily agreed to waive a
portion of its fee in order to limit operating expenses.
Pursuant to an agreement dated January 30, 1995, DST Systems, Inc. ("DST")
acts as the Transfer Agent of the Trust. As such, DST provides transfer agency,
dividend disbursing and shareholder services to the Trust.
48
Bishop Street Funds
<PAGE>
- --------------------------------------------------------------------------------
SEI Investments Distribution Co. ("SEI Investments"), a wholly owned
subsidiary of SEI Investments Company, acts as the Trust's Distributor pursuant
to a distribution agreement dated June 10, 1999. The Funds have adopted a
Distribution Plan on behalf of Class A Shares pursuant to rule 12b-1 under the
Investment Company Act of 1940. The Plan provides that Class A Shares will bear
the cost of their distribution expenses. The Distributor, as compensation for
its services under the Plan, receives a distribution fee, computed daily and
payable monthly, of 0.25% of the average daily net assets attributable to each
Fund's Class A Shares.
The Trust has adopted and entered into a shareholder service plan and
agreement with SEI Investments. Each Fund pays to SEI Investments a shareholder
servicing fee at an annual rate of 0.25% of the average daily net asset value of
all shares of each fund, which is computed daily and paid monthly. SEI
Investments has voluntarily agreed to waive a portion of its fee in order to
limit operating expenses.
Certain officers of the Trust are also officers of the Administrator. Such
officers are paid no fees by the Trust.
5. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale of
securities, other than temporary cash investments for the period ended December
31, 1999 are presented below for the Funds.
FUND INVESTMENT TRANSACTIONS (000)
EQUITY HIGH GRADE HAWAII MUNICIPAL
FUND INCOME FUND BOND FUND
-------- ----------- ----------------
Purchases
U.S. Government Securities $ -- $ 22,351 --
Other 120,297 13,129 25,866
Sales
U.S. Government Securities -- 22,656 --
Other 105,765 8,308 9,482
At December 31, 1999 the following Funds have capital loss carryforwards
for federal income tax purposes. For tax purposes, the losses in the Funds can
be carried forward for a maximum of eight years to offset any net realized
capital gains.
EXPIRATION
AMOUNT (000) DATE
------------ ------------
Money Market Fund $ 2 2005
Treasury Money Market Fund 24 2005
-------- ---------
49
Annual Report -- December 31, 1999
<PAGE>
Bishop Street Funds
- --------------------------------------------------------------------------------
At December 31, 1999, the High Grade Income Fund had post October losses of
approximately $68,000.
The aggregate gross unrealized appreciation and depreciation of securities
held by the Equity Fund, High Grade Income Fund, and Hawaii Municipal Bond Fund
for federal income tax purposes at December 31, 1999 were as follows:
EQUITY HIGH GRADE HAWAII MUNICIPAL
FUND INCOME FUND BOND FUND
-------- ----------- ----------------
Gross Unrealized Appreciation $142,904 $ 45 $ 350
Gross Unrealized Depreciation (7,235) (7,829) (6,626)
-------- ------- -------
Net Unrealized Appreciation
(Depreciation) $135,669 $(7,784) $(6,276)
======== ======= =======
The total cost of securities and the net realized gains or losses on
securities sold for federal income tax purposes at December 31, 1999 was not
materially different from amounts reported for financial reporting purposes.
6. CONCENTRATION OF CREDIT RISK (Unaudited)
The Hawaii Municipal Bond Fund invests primarily in debt instruments in the
state of Hawaii. The issuers' ability to meet their obligations may be affected
by economic developments in that state. At December 31, 1999, the percentage of
the Fund investments by each revenue source was as follows:
HAWAII MUNICIPAL
BOND FUND
----------------
Cash Equivalents 4
Education Bonds 2
General Obligation Bonds 40
Hospital Bonds 9
Housing Bonds 5
Transportation Bonds 12
Utility Bonds 18
Public Facility Bonds 8
Other Revenue Bonds 2
-----
100%
=====
50
Bishop Street Funds
<PAGE>
- --------------------------------------------------------------------------------
The ratings of long-term debt holdings as a percentage of total value of
long-term debt investments at December 31, 1999 are as follows:
STANDARD & HAWAII MUNICIPAL
POOR'S RATING BOND FUND
------------- ----------------
AAA 81
AA 10
A+ 3
A 3
Not Rated 3
----
100%
====
7. COMMON TRUST FUND CONVERSIONS
On September 17, 1999, certain common trust funds of First Hawaiian Bank
were converted into the Bishop Street Funds pursuant to a plan of reorganization
approved by First Hawaiian Bank shareholders on June 16, 1999. The Funds
involved in the conversion were as follows:
COMMON TRUST BISHOP
FUND STREET FUND
---------------------- --------------------------
FHB Equity Fund Equity Fund
FHB Equity Income Fund Equity Fund
FHB Fixed Income Fund High Grade Income Fund
FHB Tax Exempt Fund Hawaii Municipal Bond Fund
The assets, which consisted of securities and related receivables less
liabilities, were converted on a tax-free basis. The number of shares issued by
each Fund and the net assets (including unrealized appreciation (depreciation))
of each Common Trust Fund immediately before the conversion were as follows:
COMMON NET UNREALIZED COMMON TRUST
TRUST ASSETS APPRECIATION FUND SHARES PRIOR BISHOP STREET
FUND VALUE (DEPRECIATION) TO CONVERSION SHARES ISSUED
-------- ------ ------------- ----------------- -------------
FHB Equity $194,483,008 $62,405,848 2,225,655 11,645,689
FHB Equity Income 29,908,418 16,464,775 767,254 1,790,923
FHB Fixed Income 97,162,807 (3,971,262) 10,680,571 10,121,126
FHB Tax Exempt 102,397,433 (2,463,733) 10,695,238 10,048,816
51
Annual Report -- December 31, 1999
<PAGE>
Bishop Street Funds
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of Bishop Street Funds:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund, Money Market
Fund and Treasury Money Market Fund (constituting the Bishop Street Funds,
hereafter referred to as the "Trust") at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 15, 2000
52
Bishop Street Funds
<PAGE>
- --------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (UNAUDITED)
For shareholders that do not have a December 31, 1999 taxable year end,
this notice is for informational purposes only. For shareholders with a December
31, 1999 tax year end, please consult your tax advisor as to the pertinence of
this notice.
For the fiscal year ended December 31, 1999, each fund has designated the
following items with regard to distributions paid during the year :
(A) (B) (C)
LONG TERM ORDINARY (A+B)
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
- ------ ------------- ------------- -------------
Equity 92% 8% 100%
High Grade Income 12% 88% 100%
Hawaii Municipal Bond 4% 96% 100%
Money Market 0% 100% 100%
Treasury Money Market 0% 100% 100%
(D) (E)
QUALIFYING TAX EXEMPT
FUND DIVIDENDS(1) INTEREST
- ------ ------------- ------------
Equity 100% 0%
High Grade Income 0% 0%
Hawaii Municipal Bond 0% 100%
Money Market 0% 0%
Treasury Money Market 0% 0%
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.
* ITEMS (A) AND (B) ARE BASED ON THE PERCENTAGE OF EACH FUND'S TOTAL
DISTRIBUTION.
** ITEMS (D) AND (E) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS
OF EACH FUND.
53
Annual Report -- December 31, 1999
<PAGE>
INVESTMENT TEAM
[Bishop Street Investment Team Photo Omitted]
BISHOP STREET FUNDS' INVESTMENT TEAM (LEFT TO RIGHT):
MICHAEL MASUDA, VICE-PRESIDENT; JENNY CARIAS, ASSISTANT VICE-PRESIDENT;
LORI FOO, COMPLIANCE OFFICER; LOU LEVITAS, PORTFOLIO MANAGER; TONY GOO,
SENIOR VICE-PRESIDENT.
54
Bishop Street Funds
<PAGE>
Bishop Street Funds
- -------------------------------------------------------------------------------
BOARD OF TRUSTEES
[MARTIN ANDERSON PHOTO OMITTED]
MR. MARTIN ANDERSON
PARTNER--Goodsill, Anderson, Quinn & Stifel
[CHARLES E. CARLBORN PHOTO OMITTED]
MR. CHARLES E. CARLBOM
CHAIRMAN--B.P.I.
PRESIDENT AND CEO--United Grocers, Inc.
(1997-1999)
PRESIDENT AND CEO--Western Family Food, Inc.
Western Family Holdings Inc.
(1982-1997)
[PHILIP H. CHING PHOTO OMITTED]
MR. PHILIP H. CHING
VICE CHAIRMAN--First Hawaiian Bank
(through January 1996)
[JAMES L. HUFFMAN PHOTO OMITTED]
MR. JAMES L. HUFFMAN
DEAN & PROFESSOR--Lewis & Clark Law School
[SHUNICHI KIMURA PHOTO OMITTED]
HONORABLE SHUNICHI KIMURA
REGENT--University of Hawaii (1995-1996)
JUDGE--State of Hawaii Judiciary (1974-1994)
MAYOR--County of Hawaii (1968-1974)
CHAIRMAN & CHIEF EXECUTIVE--County of Hawaii
(1964-1968)
55
Annual Report -- December 31, 1999
<PAGE>
- --------------------------------------------------------------------------------
[ROBERT A. NESHER PHOTO OMITTED]
MR. ROBERT A. NESHER
CHAIRMAN--SEI Mutual Funds
[WILLIAM S. RICHARDSON PHOTO OMITTED]
HONORABLE WILLIAM S. RICHARDSON
TRUSTEE--Kamehameha Schools Bishop Estate
(through 1992)
CHIEF JUSTICE--Supreme Court of Hawaii
(through 1983)
LIEUTENANT GOVERNOR--State of Hawaii (1962-1966)
[PETER F. SANSEVERO PHOTO OMITTED]
MR. PETER F. SANSEVERO
REGIONAL DIRECTOR OF THE NORTHWESTERN REGION AND
FIRST VICE PRESIDENT--Merrill Lynch
(through 1997)
[MANUEL R. SYLVESTER PHOTO OMITTED]
MR. MANUEL R. SYLVESTER
MANAGING & EXECUTIVE PARTNER--Coopers & Lybrand
(through 1992)
[JOYCE S. TSUNODA PHOTO OMITTED]
DR. JOYCE S. TSUNODA
SENIOR VICE PRESIDENT & CHANCELLOR FOR COMMUNITY
COLLEGES--University of Hawaii
56
Bishop Street Funds
<PAGE>
INVESTMENT ADVISER
FIRST HAWAIIAN BANK
A SUBSIDIARY OF BANCWEST CORP.
HONOLULU, HI 96813
ADMINISTRATOR
SEI INVESTMENTS MUTUAL FUNDS SERVICES
OAKS, PA 19456
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
OAKS, PA 19456
TRANSFER AGENT
DST SYSTEMS, INC.
KANSAS CITY, MO 64141
CUSTODIAN
CHASE MANHATTAN BANK
NEW YORK, NY 10041
LEGAL COUNSEL
MORGAN, LEWIS & BOCKIUS LLP
PHILADELPHIA, PA 19103
AUDITORS
PRICEWATERHOUSECOOPERS LLP
PHILADELPHIA, PA 19103
[Bishop Street Funds Logo Omitted]
FOR MORE INFORMATION ABOUT BISHOP STREET FUNDS, CALL 1-800-262-9565
OR YOUR INVESTMENT SPECIALIST
<PAGE>
[Bishop Street Funds Logo Omitted]
BISHOP STREET FUNDS
P.O. BOX 3708
HONOLULU, HI 96811
THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE
GENERAL INFORMATION OF BISHOP STREET FUNDS' SHAREHOLDERS. THIS REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
SHARES OF BISHOP STREET FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY FIRST HAWAIIAN BANK OR ANY OF ITS AFFILIATES. SUCH SHARES ARE ALSO NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN SHARES OF MUTUAL FUNDS
INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SEI INVESTMENTS
DISTRIBUTION CO. SERVES AS DISTRIBUTOR FOR THE BISHOP STREET FUNDS AND IS NOT
AFFILIATED WITH FIRST HAWAIIAN BANK.
BSF-F-006-05
