UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act File Number 811-08572
Bishop Street Funds
(Exact name of registrant as specified in charter)
c/o CT Corporation
101 Federal Street
Boston, MA 02110
(Address of principal executive offices)
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
Registrant’s telephone number, including area code: 1-800-262-9565
Date of fiscal year end: December 31, 2016
Date of reporting period: December 31, 2016
Item 1. | Reports to Stockholders. |
The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov, and may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how to vote proxies (if any) relating to portfolio securities is available without charge, by calling 1-800-262-9565 or by visiting the Commission’s website at http://www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 is available without charge, by calling 1-800-262-9565 or by visiting the Funds’ website at http://www.bishopstreetfunds.com or the website of the Securities and Exchange Commission.
BISHOP STREET
FUNDS
2 | ||||
Definitions of Comparative Indices | 4 | |||
Strategic Growth Fund | ||||
6 | ||||
11 | ||||
Dividend Value Fund | ||||
14 | ||||
18 | ||||
High Grade Income Fund | ||||
23 | ||||
25 | ||||
Hawaii Municipal Bond Fund | ||||
34 | ||||
37 | ||||
Short Duration Bond Fund | ||||
46 | ||||
48 | ||||
51 | ||||
53 | ||||
55 | ||||
58 | ||||
62 | ||||
76 | ||||
77 | ||||
80 | ||||
82 |
1
BISHOP STREET
FUNDS
Dear Shareholder:
U.S. stock markets produced strong returns in 2016, driven by solid economic reports and an end-of-the-year rally related to the much anticipated policies of President-Elect Donald Trump. The S&P 500 Index rose 11.95% over the year, while the Nasdaq 100 Stock Index experienced a return of just over 7%. Developed international markets, as measured by the MSCI EAFE Index, gained just over 1% during the year.
While impressive, the nominal returns above do not accurately reflect the severe market volatility that occurred during the year. In the first two months of 2016, the market (S&P 500 Index) declined sharply by -15% on worries of slowing growth in China. Over the next four months, the equity markets clawed their way back to levels near where they started the year but just when things began to feel normal again, the market declined sharply by over -5% in June, due to a surprising vote by the U.K. to leave the European Union. The markets declined modestly again heading into the U.S. Presidential election but since then, have rallied sharply with over 80% of the return attributable to gains earned in the last two months of the year.
Interest rates were equally volatile with the yield on the 10-Year U.S. Treasury note declining 91 basis points to a low of 1.36% in July, and finishing the year at 2.45%. U.S. bond markets experienced small positive returns in 2016, with the Bloomberg Barclays U.S. Aggregate Bond Index increasing 2.65%. Credit was the sector of choice reflecting investor’s penchant to take on risk. Looking ahead, market indicators imply that the trajectory of interest rates will continue higher, a message that has been well communicated by U.S. Federal Reserve.
As the economy continues to mature, economic indicators will continue to be mixed. Positive data points currently include the U.S. labor market, as the unemployment rate holds steady at its lowest level in nearly ten years. Also, earnings projections are forecasted to remain strong despite the muted economic growth experienced last year. A strong U.S. dollar will likely be a headwind for sales abroad so an interesting picture lies ahead.
One new development that we are proud to announce is the recent launch of the Short Duration Bond Fund. This Fund invests in high quality U.S. treasury and government-
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2
issued securities and does not assume the credit risk that is associated with corporate securities. In the uncertain times which lie ahead, we believe that this Fund will deliver attractive risk-adjusted fixed income returns to our shareholders.
The Road Ahead
President-Elect Donald Trump’s policies and strategic initiatives appear to be good for growth but might be offset by the negative side effects of higher wages, rising inflation and interest rates and like any other political platform, questions still remain regarding implementation and execution. While we do expect the U.S. economy to move steadily forward, it will not be without starts and stops and episodes of sharp volatility tied to geopolitical risks abroad and uncertainty related to Trump’s economic, fiscal and foreign policy initiatives.
Under these circumstances, we believe that portfolio diversification is a prudent way to help weather these shocks and remain confident that the Bishop Street Family of Funds will provide you with the strategies needed to create a value-added investment portfolio.
As always, thank you for your continued trust and confidence.
Sincerely,
Michael K. Hirai, CFA, CPA
President and Chief Investment Officer
Bishop Street Capital Management
February 7, 2017
The performance data quoted represents past performance. Past performance does not guarantee future results. Index returns are for illustrative purposes only and do not represent actual Fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
Investing involves risk including possible loss of principal. Diversification does not protect against market loss.
December 31, 2016 | www.bishopstreetfunds.com |
3
BISHOP STREET
DEFINITIONS OF COMPARATIVE INDICES
FUNDS
Definitions of Comparative Indices
Bloomberg Barclays U.S. Aggregate Bond Index is made up of the Barclays U.S. Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million.
Bloomberg Barclays U.S. Government/Credit Index is a widely-recognized, market value weighted index of U.S. Treasury securities, U.S. government agency obligations, corporate debt backed by the U.S. government and fixed-rate non-convertible corporate debt securities issued or guaranteed by foreign governments and agencies. All securities in the Index are rated investment grade (BBB) or higher, with maturities of at least one year.
Bloomberg Barclays Municipal Bond Index is a widely-recognized index of municipal bonds with maturities of at least one year.
Lipper Corporate A – Rated Debt Funds Objective – Funds that invest primarily in corporate debt issues rated “A” or better or government issues.
Lipper Large-Cap Core Funds Classification – Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s USDE large-cap floor. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index.
Lipper Large-Cap Growth Funds Classification – Funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper’s USDE large-cap floor. Large-cap growth funds typically have above-average characteristics compared to the S&P 500 Index.
Lipper Other States Municipal Debt Funds Objective – Funds that invest in municipal debt issues with dollar-weighted average maturities of five to ten years and are exempt from taxation on a specified city or state basis.
The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the large cap growth segment. The Russell 1000 Growth Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect growth characteristics.
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The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. The Russell 1000 Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics.
The Standard & Poor’s 500 Index (S&P 500 Index) is an unmanaged list of common stocks which includes 500 large companies.
The NASDAQ 100 Index is a market capitalization weighted index that includes 100 of the largest non-financial companies, domestic and foreign, in the NASDAQ National Market. In addition to meeting the qualification standards for inclusion in the NASDAQ National Market, these have strong earnings and assets.
The Russell 1000® Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the Russell 3000 Index. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected.
MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 8% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.
December 31, 2016 | www.bishopstreetfunds.com |
5
BISHOP STREET
FUNDS
2016 will be remembered as a very challenging year for growth investors, as it proved to be a mirror image opposite of 2015. Market sentiment shifted decisively away from our secular high-growth portfolio, as investors faced a host of headlines ranging from the continued earnings recession, lackluster global growth along with political uncertainty resulting from the BREXIT vote and the highly contentious U.S. presidential election. This volatile environment in conjunction with adverse political rhetoric, overshadowed positive underlying fundamentals for many of our holdings and resulted in material underperformance vs. our benchmark the Russell 1000 Growth Index and the S&P 500 broader equity market.
Looking back over the course of the year, the U.S. equity market struggled right out of the gate with one of its worst starts to a calendar year on record. Investors grappled with the continued sluggishness of the global economy, plummeting oil and commodity prices, and uncertainty regarding the Federal Reserve’s interest rate hike path.
All these factors culminated in an increasingly risk-averse environment, where investors gravitated to perceived areas of safety such as U.S. Treasuries and low growth, yield-oriented defensive sectors. In this environment, pessimism and a focus on the near term clearly won out, as investors were more focused on today and tomorrow vs. long-term secular growth fundamentals. This shift in sentiment led to indiscriminate selling across high-growth equities (information technology and health care in particular), resulting in multiple compression for many of our holdings.
As the year progressed, the market showed signs of settling down and our portfolio rebounded off the February lows — posting strong absolute and relative returns during the second and third quarters. We began to see investors return to the underlying fundamentals, which sent some of the most beaten up names in the information technology and consumer discretionary sectors higher. Generally speaking, the health care sector continued to lag as political uncertainty remained elevated.
After making considerable progress in recapturing the ground lost from earlier in the year, the strategy’s positive momentum stalled out in the final quarter of 2016, ending the year on a disappointing note and capping off our most challenging year from a relative performance standpoint in over 13 years of running the strategy.
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Going into the U.S. presidential election, investors were sitting on the sidelines eagerly anticipating the results as the S&P 500 Index posted nine consecutive down days — a feat not seen since 1980. While Hillary Clinton was the prohibitive favorite to become the 45th president of the United States, with many pollsters pegging her odds of winning at 70-90%, the 2016 election took the world by surprise. In the end, Donald Trump won the majority of battleground states to win the Electoral College vote and the election.
Republicans also gained control of both the U.S. House of Representatives and the Senate. This is widely expected to help Trump push his agenda through, which among other things, has called for increased infrastructure spending and corporate tax reform. Unlike what many market participants had forecasted, a Trump victory was not met with an uncertainty selloff. In fact the opposite occurred, unleashing a powerful rally that drove financial and cyclical sectors materially higher at the expense of the information technology sector to close the year.
In the end, most equity indexes were positive for the year, with the S&P 500 Index advancing 11.96%. Value oriented stocks had the clear upper hand over their growth peers, as the 17.34% return of the Russell 1000 Value Index far outpaced the 7.08% showing for the Russell 1000 Growth Index. A large gap also occurred along the market capitalization spectrum, as the small-cap Russell 2000 Index surged 21.31% and finished well ahead of the large-cap indices.
The strategy materially underperformed the Russell 1000 Growth Index benchmark, which managed to post a 7.08% return for the year. In an atypical environment, which we have seen three times before in the 13 years of running the strategy, the market gravitated to companies with the lowest projected growth rates over companies with the highest by over 1000 basis points (bps) within the Russell 1000 Growth Index. (A basis point is 1/100 of a percent.) Yield was also a key determinant of performance, particularly in the first half of the year, as investors migrated to bond-proxy type stocks as fixed-income yields declined. These factors proved to be substantial headwinds for our high-growth strategy, as we tend to have little to no exposure to the most mature, yield oriented names, as companies with little to no projected growth do not meet our investment criteria.
December 31, 2016 | www.bishopstreetfunds.com |
7
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
Outlook
If ‘Trumponomics’ is about recharging the economy and creating a new leg of growth, almost like a 2009 recovery, we should fare well from improved investor confidence. The outperformance of financials/industrials and commodities of late suggests 2017 and beyond should experience higher domestic GDP growth, an end to the manufacturing recession following the oil bust and thereby unleashing increased spending and profits in key sectors of our focused strategy.
Most health care firms pay high tax rates and have vast reserves of cash abroad that can be repatriated back to the U.S. for buybacks or mergers, as many of our companies have little need to pay down debt with already low levels. A friendlier regulatory environment should reaccelerate consolidation among pharma and biotech at a point in time when shares are at historically low valuations. Plus, the majority of their end market source of profits are U.S. consumers, who should also feel better with tax cuts and fiscal growth and thereby increase consumption of products and services.
Industrials have been the second best performing area in the market this year, only behind energy. Because information technology end demand is a function of corporate profits and capital spending, their customers will have more wherewithal to spend. Our holding of Acuity Brands is one of the purest plays on improving infrastructure and capital spending.
Information technology companies are like industrials on steroids, so better infrastructure spending should be really good for them. Plus financials are the biggest end-market customer for information technology, which has thus far been hurt by poor profits/margins and regulations. A more profitable and less constrained regulatory atmosphere for the financial service industry should lead to accelerating spending for information technology products. Information technology (also heath care) should benefit from tax cuts and repatriation and should profit from greater interest income on cash balances.
If the outcome of the new administration is a faster-growing economy, then we believe consumers will be more apt to spend freely in areas that we focus/invest in, namely shopping (Amazon), travel/leisure (Priceline), eating outside the house (Starbucks) and beauty/selfies (Ulta). Over one-third of Costco customers are small- and medium-sized companies who should have an improved outlook from greater domestic growth and therefore likely increase sales.
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We continue to be overweight financials. The more vertical yield curve and growing wealth for individuals and institutional investors should accelerate top- and bottom-line growth for our holdings in Charles Schwab and Intercontinental Exchange. Schwab is also a pure play on the U.S. economy, so it stands to benefit from ‘Trumponomics,’ both from domestic GDP growth and also a cut to their full tax rate of 40%. Intercontinental Exchange should benefit from falling correlations between asset classes, increased volatility, higher demand for financial products, stronger commodities and increased trading.
The performance data quoted represents past performance. Past performance 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 and current performance may be higher or lower than the performance quoted. For performance data current to the most recent month end, please visit www.bishopstreetfunds.com or call 1-800-262-9565.
Index returns are for illustrative purposes only and do not represent actual Fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
Investing involves risk including possible loss of principal. Diversification does not protect against market loss.
December 31, 2016 | www.bishopstreetfunds.com |
9
Strategic Growth Fund |
Performance Comparison
Comparison of Change in the Value of a $10,000 Investment in the Strategic Growth Fund, Class I, versus the Russell 1000 Growth Index and the Lipper Large-Cap Growth Funds Classification.
# Account value if you reinvested income and capital gains.
(1) See page 4 for definitions of comparative indices.
Average Annual Total Returns† | ||||||||||||||||
One Year Return | Annualized 3 Year Return | Annualized 5 Year Return | Annualized 10 Year Return | |||||||||||||
-9.13 | % | 1.87 | % | 9.65 | % | 4.46 | % | Strategic Growth Fund, Class I | ||||||||
7.08 | % | 8.55 | % | 14.50 | % | 8.33 | % | Russell 1000 Growth Index | ||||||||
1.79 | % | 5.95 | % | 13.03 | % | 7.10 | % | Lipper Large-Cap Growth Funds Classification |
† | Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
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Strategic Growth Fund |
Top Ten Equity Holdings (Unaudited)†
Percentage of Investments | ||||||||
| ||||||||
1. | Amazon.com | 4.6% | ||||||
| ||||||||
2. | Bristol-Myers Squibb | 4.5% | ||||||
| ||||||||
3. | Celgene | 4.2% | ||||||
| ||||||||
4. | Nike Cl B | 4.2% | ||||||
| ||||||||
5. | Starbucks | 4.1% | ||||||
| ||||||||
6. | priceline.com | 3.7% | ||||||
| ||||||||
7. | Facebook Cl A | 3.7% | ||||||
| ||||||||
8. | Alibaba Group Holding ADR | 3.6% | ||||||
| ||||||||
9. | Mobileye NV | 3.6% | ||||||
| ||||||||
10. | Vertex Pharmaceuticals | 3.4% |
† | Percentages based on total investments. Top ten holdings do not include short-term investments. |
Shares | Value (000) | |||||||
COMMON STOCK† — 99.7% | ||||||||
Consumer Discretionary — 17.8% | ||||||||
1,609 | Amazon.com* | $ | 1,207 | |||||
21,580 | Nike Cl B | 1,097 | ||||||
659 | priceline.com* | 966 | ||||||
19,300 | Starbucks | 1,071 | ||||||
1,259 | Ulta Salon Cosmetics & Fragrance* | 321 | ||||||
|
| |||||||
4,662 | ||||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
11
Strategic Growth Fund |
Schedule of Investments
(continued)
Shares | Value (000) | |||||||
Consumer Staples — 5.7% | ||||||||
3,933 | Costco Wholesale | $ | 629 | |||||
19,437 | Monster Beverage* | 862 | ||||||
|
| |||||||
1,491 | ||||||||
|
| |||||||
Financials — 5.7% | ||||||||
20,913 | Charles Schwab | 826 | ||||||
12,073 | Intercontinental Exchange | 681 | ||||||
|
| |||||||
1,507 | ||||||||
|
| |||||||
Health Care — 30.2% | ||||||||
7,046 | Alexion Pharmaceuticals* | 862 | ||||||
2,680 | Biogen* | 760 | ||||||
20,150 | Bristol-Myers Squibb | 1,178 | ||||||
9,540 | Celgene* | 1,104 | ||||||
8,145 | DexCom* | 486 | ||||||
6,775 | Edwards Lifesciences* | 635 | ||||||
5,784 | Illumina* | 740 | ||||||
6,136 | Intercept Pharmaceuticals* | 667 | ||||||
3,438 | Shire PLC | 586 | ||||||
12,196 | Vertex Pharmaceuticals* | 898 | ||||||
|
| |||||||
7,916 | ||||||||
|
| |||||||
Industrials — 1.9% | ||||||||
2,160 | Acuity Brands | 499 | ||||||
|
| |||||||
Information Technology — 35.3% | ||||||||
24,557 | Activision Blizzard | 887 | ||||||
7,445 | Adobe Systems* | 766 | ||||||
10,793 | Alibaba Group Holding ADR* | 948 | ||||||
8,388 | Facebook Cl A* | 965 | ||||||
4,096 | MercadoLibre | 640 | ||||||
24,515 | Mobileye NV* | 934 | ||||||
3,437 | NVIDIA | 367 | ||||||
4,765 | Palo Alto Networks* | 596 | ||||||
12,526 | salesforce.com inc* | 857 | ||||||
9,951 | ServiceNow* | 740 | ||||||
13,990 | Splunk* | 716 | ||||||
10,843 | Visa Cl A | 846 | ||||||
|
| |||||||
9,262 | ||||||||
|
|
Bishop Street Funds |
12
Strategic Growth Fund |
Schedule of Investments
(concluded)
Shares | Value (000) | |||||||
Materials — 3.1% | ||||||||
3,008 | Sherwin-Williams | $ | 808 | |||||
|
| |||||||
TOTAL COMMON STOCK (Cost $25,225) | 26,145 | |||||||
|
| |||||||
TOTAL INVESTMENTS (Cost $25,225) — 99.7% | $ | 26,145 | ||||||
|
|
Percentages are based on Net Assets of $26,211 (000).
* | Non-income producing security. |
† | More narrow industries are utilized for compliance purposes, whereas broad sectors are utilized for reporting purposes. |
Cl — Class
PLC — Public Limited Company
ADR — American Depositary Receipt
Cost figures are shown in thousands.
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
13
BISHOP STREET
FUNDS
Two thousand sixteen was a year full of surprises and changes in attitudes. The first half of the year was marked by investor cautiousness and uncertainty over economic growth and political outcomes. During the first six weeks of the year, the stock market reflected concerns over declining oil prices and economic growth in China. Pessimism peaked as the market hit a low in February and yet equities, as measured by the S&P 500, produced a positive rate of return in the first quarter of the year and every quarter thereafter. The second half of the year reflected resilience in the face of unexpected political outcomes and market optimism driven by a recovery in commodity prices, improving economic outlook and a recovery in earnings. The economy as measured by real GDP grew by 1.6% in 2016 after increasing by 2.6% in 2015 accompanied by domestic job growth and growth in disposable income. The biggest change in 2016 was investor outlook shifting from concern to optimism.
The S&P 500 Index rose by 11.96% for calendar 2016 with broad based participation. The S&P 500 has produced a positive annual return over the past eight consecutive years. For 2016, value stocks led growth stocks and small cap stocks outperformed large cap stocks.
For the year ended December 31, 2016, the Dividend Value Fund returned 13.16%. The fund produced strong real returns but underperformed its benchmark, the Russell 1000 Value Index, which returned 17.34% for the year. The leading sector contributors to the Russell 1000 Value Index were Financials, Energy and Industrials, accounting for more than half of the Index’s return. All sectors in the Russell 1000 Value Index produced positive returns for the year.
Positive sector contribution for the fund was driven by health care and consumer discretionary sectors. Equity selection was strong in these sectors. In health care, management’s decision to sell Amgen early in the first quarter of the year helped performance. The overweight in Merck also benefited return. Merck’s performance was driven by the Keynote-24 trial data released this summer showing that Keytruda beat chemotherapy in first-line lung cancer treatment. In October, Merck received FDA approval for treatment of first line lung cancer patients with high PD-L1 expression. UnitedHealth Group’s strong performance (up over 40%) also aided the sector’s performance. Within
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14
the consumer discretionary sector, Comcast and Time Warner performed well. Time Warner received a takeover proposal from AT&T.
Although the fund relatively underperformed the financial sector, the equity selection within this sector was good. Standout individual performance came from CME Group, Bank of America, Marsh & McLennan and J.P. Morgan.
Three sectors (Energy, Consumer Staples and Industrials) accounted for a majority of the fund’s underperformance relative to the Russell 1000 Value Index. Within Energy, the worst performing stocks in the beginning of the year due to the pressures from low oil prices and balance sheet issues became the best performers as oil prices recovered. Given our focus on dividend sustainability, investment grade balance sheets and free cash flow generation, the fund has substantial exposure to names like Exxon and Chevron versus the Exploration & Production companies. Within Industrials, General Dynamics, Park-Hannifin, Waste Management and United Parcel Services provided strong performance. The fund would have needed greater exposure to Industrial cyclicals such as Caterpillar and transportation issues in airlines and railroads to outperform. Within the Consumer Staples sector, the performance of CVS accounted for the relative performance of the sector. In November, CVS reduced their 2017 earnings guidance due to the loss of a contract resulting in a decline in CVS shares during a period of strong market gains.
Outlook
The Russell 1000 Value Index delivered strong performance in 2016 with a good portion of the return coming in the 4th quarter of 2016. With the election of Mr. Trump combined with the control of the House and Senate in Republican hands, the market is discounting a favorable business environment driven by a favorable regulatory actions and potential tax reform. Currently, the market discounts many of these anticipated positives. Instead of focusing on uncertain outcomes, we will concentrate on continuing to execute on our investment process of focusing on operating free cash flows, balance sheets and capital allocation decisions of corporations. We believe that dividend actions provide a window into the Board of Directors outlook for the company’s future cash flows. Although times change, the fund’s philosophy and process will remain consistent.
December 31, 2016 | www.bishopstreetfunds.com |
15
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
The performance data quoted represents past performance. Past performance 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 and current performance may be higher or lower than the performance quoted. For performance data current to the most recent month end, please visit www.bishopstreetfunds.com or call 1-800-262-9565.
Index returns are for illustrative purposes only and do not represent actual Fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
Investing involves risk including possible loss of principal. Diversification does not protect against market loss.
Bishop Street Funds |
16
Dividend Value Fund |
Performance Comparison
Comparison of Change in the Value of a $10,000 Investment in the Dividend Value Fund, Class I, versus the Russell 1000 Value Index and the Lipper Large-Cap Core Funds Classification.
# Account value if you reinvested income and capital gains.
‡ Performance begins on April 30, 2006.
(1) See page 4 for definitions of comparative indices.
Average Annual Total Returns† | ||||||||||||||||
One Year Return | Annualized 3 Year Return | Annualized 5 Year Return | Annualized 10 Year Return | |||||||||||||
13.16 | % | 8.40 | % | 12.76 | % | 5.81 | % | Dividend Value Fund, Class I* | ||||||||
17.34 | % | 8.59 | % | 14.80 | % | 5.72 | % | Russell 1000 Value Index | ||||||||
10.04 | % | 6.84 | % | 13.14 | % | 6.14 | % | Lipper Large-Cap Core Funds Classification |
* | Commenced operations on 05/03/06. |
† | Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
December 31, 2016 | www.bishopstreetfunds.com |
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Dividend Value Fund |
Top Ten Equity Holdings (Unaudited)†
Percentage of Investments | ||||||||
| ||||||||
1. | Microsoft | 4.3% | ||||||
| ||||||||
2. | JPMorgan Chase | 3.6% | ||||||
| ||||||||
3. | Exxon Mobil | 3.3% | ||||||
| ||||||||
4. | Johnson & Johnson | 3.2% | ||||||
| ||||||||
5. | Apple | 2.9% | ||||||
| ||||||||
6. | Comcast Cl A | 2.4% | ||||||
| ||||||||
7. | Home Depot | 2.3% | ||||||
| ||||||||
8. | Merck | 2.3% | ||||||
| ||||||||
9. | Verizon Communications | 2.3% | ||||||
| ||||||||
10. | Philip Morris International | 2.1% |
† | Percentages based on total investments. Top ten holdings do not include short-term investments. |
Shares | Value (000) | |||||||
COMMON STOCK — 98.6% | ||||||||
Consumer Discretionary — 9.5% | ||||||||
13,735 | Comcast Cl A | $ | 948 | |||||
2,405 | Genuine Parts | 230 | ||||||
6,905 | Home Depot | 926 | ||||||
8,405 | Interpublic Group of Companies | 197 | ||||||
2,790 | McDonald’s | 340 | ||||||
5,480 | Time Warner | 529 | ||||||
3,060 | TJX | 230 |
Bishop Street Funds |
18
Dividend Value Fund |
Schedule of Investments
(continued)
Shares | Value (000) | |||||||
Consumer Discretionary — (continued) | ||||||||
2,635 | VF | $ | 140 | |||||
2,025 | Walt Disney | 211 | ||||||
|
| |||||||
3,751 | ||||||||
|
| |||||||
Consumer Staples — 11.0% | ||||||||
11,985 | Altria Group | 810 | ||||||
5,055 | Coca-Cola Enterprises | 159 | ||||||
5,170 | CVS Health | 408 | ||||||
6,480 | General Mills | 400 | ||||||
2,520 | Kimberly-Clark | 288 | ||||||
6,300 | PepsiCo | 659 | ||||||
9,230 | Philip Morris International | 845 | ||||||
5,220 | Procter & Gamble | 439 | ||||||
5,095 | Wal-Mart Stores | 352 | ||||||
|
| |||||||
4,360 | ||||||||
|
| |||||||
Energy — 8.8% | ||||||||
5,060 | Chevron | 596 | ||||||
14,475 | Exxon Mobil | 1,306 | ||||||
4,200 | Occidental Petroleum | 299 | ||||||
9,110 | Schlumberger | 765 | ||||||
7,010 | Suncor Energy | 229 | ||||||
4,265 | Valero Energy | 291 | ||||||
|
| |||||||
3,486 | ||||||||
|
| |||||||
Financials — 17.4% | ||||||||
19,100 | Bank of America | 422 | ||||||
7,025 | BB&T | 330 | ||||||
1,320 | BlackRock | 502 | ||||||
5,270 | Chubb | 696 | ||||||
4,915 | CME Group | 567 | ||||||
16,610 | JPMorgan Chase | 1,433 | ||||||
9,095 | Marsh & McLennan | 615 | ||||||
4,275 | Northern Trust | 381 | ||||||
5,420 | PNC Financial Services Group | 634 | ||||||
3,890 | T Rowe Price Group | 293 | ||||||
8,925 | US Bancorp | 458 | ||||||
10,390 | Wells Fargo | 573 | ||||||
|
| |||||||
6,904 | ||||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
19
Dividend Value Fund |
Schedule of Investments
(continued)
Shares | Value (000) | |||||||
Health Care — 10.9% | ||||||||
6,645 | AbbVie | $ | 416 | |||||
765 | Aetna | 95 | ||||||
3,160 | Bristol-Myers Squibb | 185 | ||||||
2,380 | Eli Lilly | 175 | ||||||
11,085 | Johnson & Johnson | 1,277 | ||||||
3,385 | Medtronic PLC | 241 | ||||||
15,655 | Merck | 922 | ||||||
24,460 | Pfizer | 794 | ||||||
1,395 | UnitedHealth Group | 223 | ||||||
|
| |||||||
4,328 | ||||||||
|
| |||||||
Industrials — 13.2% | ||||||||
2,890 | 3M | 516 | ||||||
1,435 | Boeing | 223 | ||||||
4,490 | General Dynamics | 775 | ||||||
6,785 | Honeywell International | 786 | ||||||
3,265 | Ingersoll-Rand PLC | 245 | ||||||
3,015 | Lockheed Martin | 754 | ||||||
2,150 | Parker Hannifin | 301 | ||||||
2,430 | Stanley Black & Decker | 279 | ||||||
6,290 | United Parcel Service Cl B | 721 | ||||||
2,045 | United Technologies | 224 | ||||||
5,620 | Waste Management | 399 | ||||||
|
| |||||||
5,223 | ||||||||
|
| |||||||
Information Technology — 15.2% | ||||||||
9,900 | Apple | 1,147 | ||||||
5,045 | Automatic Data Processing | 518 | ||||||
1,115 | Broadcom | 197 | ||||||
24,045 | Cisco Systems | 727 | ||||||
11,785 | Intel | 427 | ||||||
3,505 | Lam Research | 371 | ||||||
27,640 | Microsoft | 1,718 | ||||||
6,600 | Qualcomm | 430 | ||||||
6,775 | Texas Instruments | 494 | ||||||
|
| |||||||
6,029 | ||||||||
|
|
Bishop Street Funds |
20
Dividend Value Fund |
Schedule of Investments
(continued)
Shares | Value (000) | |||||||
Materials — 1.8% | ||||||||
5,260 | Dow Chemical | $ | 301 | |||||
1,985 | LyondellBasell Industries NV Cl A | 170 | ||||||
4,695 | Sonoco Products | 248 | ||||||
|
| |||||||
719 | ||||||||
|
| |||||||
Real Estate — 3.9% | ||||||||
995 | American Tower‡ | 105 | ||||||
445 | AvalonBay Communities‡ | 79 | ||||||
1,580 | Crown Castle International‡ | 137 | ||||||
2,140 | Digital Realty Trust‡ | 210 | ||||||
5,060 | Duke Realty‡ | 134 | ||||||
1,380 | Equity LifeStyle Properties‡ | 99 | ||||||
605 | Essex Property Trust‡ | 141 | ||||||
1,820 | Public Storage‡ | 407 | ||||||
1,215 | Simon Property Group ‡ | 216 | ||||||
|
| |||||||
1,528 | ||||||||
|
| |||||||
Telecommunication Services — 2.2% | ||||||||
16,740 | Verizon Communications | 894 | ||||||
|
| |||||||
Utilities — 4.7% | ||||||||
3,700 | American Electric Power | 233 | ||||||
6,625 | CMS Energy | 276 | ||||||
2,905 | Dominion Resources | 223 | ||||||
4,300 | Eversource Energy | 238 | ||||||
2,155 | NextEra Energy | 257 | ||||||
3,510 | PG&E | 213 | ||||||
1,800 | Sempra Energy | 181 | ||||||
4,285 | WEC Energy Group | 251 | ||||||
|
| |||||||
1,872 | ||||||||
|
| |||||||
TOTAL COMMON STOCK (Cost $27,890) | 39,094 | |||||||
|
| |||||||
PREFERRED STOCK — 0.2% | ||||||||
Energy — 0.2% | ||||||||
1,200 | Hess, 8.00% (Cost $67) | 88 | ||||||
|
| |||||||
CASH EQUIVALENT — 1.1% | ||||||||
426,652 | BlackRock FedFund, Institutional Shares, 0.415% (A) (Cost $426) | 427 | ||||||
|
| |||||||
TOTAL INVESTMENTS (Cost $28,383) — 99.9% | $ | 39,609 | ||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
21
Dividend Value Fund |
Schedule of Investments
(concluded)
Percentages are based on Net Assets of $39,642 (000).
‡ | Real Estate Investment Trust |
(A) | The rate reported is the 7-day effective yield as of December 31, 2016. |
Cl — Class
PLC — Public Limited Company
Cost figures are shown in thousands.
The accompanying notes are an integral part of the financial statements.
Bishop Street Funds |
22
BISHOP STREET
FUNDS
After a solid start in the first half of the year, U.S. fixed income markets sold off sharply at year-end as interest rates and inflation expectations spiked sharply in reaction to President-Elect Donald Trump’s pro-growth initiatives. President Trump’s unexpected victory drove investor expectations sharply higher after the elections with U.S. stocks gaining 11.95% when measured to the S&P 500 Index and ten-year U.S. Treasury yields increasing 18 basis points to 2.45% by year-end. Investors rewarded risk taking as high yield bonds and lower-rated investment grade credits outperformed government issued securities. Many issues drove investors into and out of the markets beginning with uncertainty about China’s future growth and the U.K.’s decision to leave the European Union. With an improving U.S. economy and employment and inflation near its targets, the Federal Reserve raised its key rate in December, indicating further hikes down the road. For the year, the Bishop Street High Grade Income Fund returned 1.47% reflecting its conservative posture in credit and yield curve positioning versus the Bloomberg Barclays U.S. Government/Credit Index which finished the year up 3.05%.
The performance data quoted represents past performance. Past performance 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 and current performance may be higher or lower than the performance quoted. For performance data current to the most recent month end, please visit www.bishopstreetfunds.com or call 1-800-262-9565.
Index returns are for illustrative purposes only and do not represent actual Fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
Investing involves risk including possible loss of principal. Diversification does not protect against market loss.
December 31, 2016 | www.bishopstreetfunds.com |
23
High Grade Income Fund |
Performance Comparison
Comparison of Change in the Value of a $10,000 Investment in the High Grade Income Fund, Class I, versus
the Barclays Capital U.S. Government/Credit Index and the Lipper Corporate A-Rated Debt Funds Objective.
# Account value if you reinvested income and capital gains.
(1) See page 4 for definitions of comparative indices.
Average Annual Total Returns† | ||||||||||||||||
One Year Return | Annualized 3 Year Return | Annualized 5 Year Return | Annualized 10 Year Return | |||||||||||||
1.47 | % | 2.51 | % | 1.95 | % | 4.55 | % | High Grade Income Fund, Class I | ||||||||
3.05 | % | 3.04 | % | 2.29 | % | 4.40 | % | Barclays Capital U.S. Government/Credit Index | ||||||||
4.48 | % | 3.67 | % | 3.19 | % | 4.54 | % | Lipper Corporate A-Rated Debt Funds Objective |
† | Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
December 31, 2016 | www.bishopstreetfunds.com |
24
High Grade Income Fund |
Top Ten Equity Holdings (Unaudited)†
Coupon Rate | Maturity Date | Percentage of Investments | ||||||||||||||
| ||||||||||||||||
1. | FHLMC, Ser 2011-3970, Cl KC | 3.500% | 03/15/33 | 2.5% | ||||||||||||
| ||||||||||||||||
2. | U.S. Treasury Bond | 4.500% | 08/15/39 | 2.1% | ||||||||||||
| ||||||||||||||||
3. | U.S. Treasury Bond | 3.625% | 08/15/43 | 1.8% | ||||||||||||
| ||||||||||||||||
4. | MetLife | 6.817% | 08/15/18 | 1.8% | ||||||||||||
| ||||||||||||||||
5. | FHLB | 4.125% | 03/13/20 | 1.8% | ||||||||||||
| ||||||||||||||||
6. | U.S. Treasury Bond | 6.000% | 02/15/26 | 1.7% | ||||||||||||
| ||||||||||||||||
7. | Home Depot | 5.875% | 12/16/36 | 1.5% | ||||||||||||
| ||||||||||||||||
8. | U.S. Treasury Bond | 2.250% | 08/15/46 | 1.4% | ||||||||||||
| ||||||||||||||||
9. | International Business Machines | 8.375% | 11/01/19 | 1.4% | ||||||||||||
| ||||||||||||||||
10. | GNMA, Ser 2012-101, Cl KL | 2.000% | 09/20/41 | 1.4% |
† | Percentages based on total investments. Top ten holdings do not include short-term investments. |
Face | Value (000) | |||||||
CORPORATE OBLIGATIONS — 57.8% | ||||||||
Consumer Discretionary — 11.7% | ||||||||
Amazon.com | ||||||||
$ | 650 | 4.800%, 12/05/34 | $ | 715 | ||||
Anheuser-Busch InBev Finance | ||||||||
425 | 1.250%, 01/17/18 | 425 | ||||||
Anheuser-Busch InBev Worldwide | ||||||||
350 | 7.750%, 01/15/19 | 390 |
December 31, 2016 | www.bishopstreetfunds.com |
25
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Consumer Discretionary — (continued) | ||||||||
AutoZone | ||||||||
$ | 250 | 4.000%, 11/15/20 | $ | 263 | ||||
Comcast | ||||||||
500 | 3.600%, 03/01/24 | 516 | ||||||
350 | 3.150%, 03/01/26 | 345 | ||||||
DIRECTV Holdings LLC | ||||||||
275 | 3.800%, 03/15/22 | 282 | ||||||
Dollar General | ||||||||
350 | 1.875%, 04/15/18 | 350 | ||||||
Ford Motor Credit LLC | ||||||||
500 | 2.375%, 03/12/19 | 500 | ||||||
George Washington University | ||||||||
225 | 4.363%, 09/15/43 | 222 | ||||||
Home Depot | ||||||||
700 | 5.875%, 12/16/36 | 884 | ||||||
McDonald’s MTN | ||||||||
500 | 4.600%, 05/26/45 | 516 | ||||||
475 | 2.200%, 05/26/20 | 475 | ||||||
Starbucks | ||||||||
350 | 2.450%, 06/15/26 | 334 | ||||||
Target | ||||||||
525 | 2.300%, 06/26/19 | 534 | ||||||
Walt Disney MTN | ||||||||
425 | 1.850%, 07/30/26 | 383 | ||||||
|
| |||||||
7,134 | ||||||||
|
| |||||||
Consumer Staples — 4.9% | ||||||||
Campbell Soup | ||||||||
500 | 4.250%, 04/15/21 | 533 | ||||||
Coca-Cola | ||||||||
250 | 2.875%, 10/27/25 | 247 | ||||||
200 | 2.450%, 11/01/20 | 202 | ||||||
Colgate-Palmolive MTN | ||||||||
500 | 1.950%, 02/01/23 | 481 | ||||||
CVS Health | ||||||||
300 | 2.875%, 06/01/26 | 286 | ||||||
Hershey | ||||||||
250 | 2.625%, 05/01/23 | 246 | ||||||
Kellogg | ||||||||
250 | 3.250%, 04/01/26 | 244 | ||||||
Unilever Capital | ||||||||
375 | 2.100%, 07/30/20 | 374 |
Bishop Street Funds |
26
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Consumer Staples — (continued) | ||||||||
Walgreens Boots Alliance | ||||||||
$ | 400 | 3.300%, 11/18/21 | $ | 407 | ||||
|
| |||||||
3,020 | ||||||||
|
| |||||||
Energy — 3.0% | ||||||||
BP Capital Markets PLC | ||||||||
265 | 3.814%, 02/10/24 | 275 | ||||||
Halliburton | ||||||||
350 | 6.150%, 09/15/19 | 386 | ||||||
Occidental Petroleum | ||||||||
300 | 2.700%, 02/15/23 | 297 | ||||||
Schlumberger Investment SA | ||||||||
400 | 3.650%, 12/01/23 | 419 | ||||||
Shell International Finance BV | ||||||||
500 | 1.875%, 05/10/21 | 489 | ||||||
|
| |||||||
1,866 | ||||||||
|
| |||||||
Financials — 15.4% | ||||||||
American International Group | ||||||||
350 | 2.300%, 07/16/19 | 352 | ||||||
Aon PLC | ||||||||
440 | 4.450%, 05/24/43 | 424 | ||||||
Bank of America MTN | ||||||||
300 | 2.600%, 01/15/19 | 302 | ||||||
Bank of New York Mellon MTN | ||||||||
500 | 4.150%, 02/01/21 | 530 | ||||||
Goldman Sachs Group MTN | ||||||||
500 | 7.500%, 02/15/19 | 554 | ||||||
800 | 2.220%, 11/23/24 (A) | 796 | ||||||
JPMorgan Chase | ||||||||
600 | 2.250%, 01/23/20 | 599 | ||||||
Lincoln National | ||||||||
500 | 8.750%, 07/01/19 | 575 | ||||||
MetLife | ||||||||
1,000 | 6.817%, 08/15/18 | 1,078 | ||||||
Morgan Stanley MTN | ||||||||
250 | 3.435%, 08/31/17 (A) | 251 | ||||||
500 | 3.100%, 11/09/18 (A) | 503 | ||||||
MUFG Americas Holdings | ||||||||
250 | 2.250%, 02/10/20 | 247 | ||||||
Prudential Financial MTN | ||||||||
320 | 7.375%, 06/15/19 | 360 |
December 31, 2016 | www.bishopstreetfunds.com |
27
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Financials — (continued) | ||||||||
Royal Bank of Canada MTN | ||||||||
$ | 650 | 2.150%, 03/06/20 | $ | 648 | ||||
300 | 1.500%, 07/29/19 | 296 | ||||||
State Street | ||||||||
425 | 4.956%, 03/15/18 | 439 | ||||||
Toyota Motor Credit MTN | ||||||||
630 | 1.375%, 01/10/18 | 629 | ||||||
US Bancorp MTN | ||||||||
500 | 3.000%, 03/15/22 | 510 | ||||||
Wells Fargo | ||||||||
300 | 2.150%, 01/15/19 | 302 | ||||||
|
| |||||||
9,395 | ||||||||
|
| |||||||
Health Care — 5.4% | ||||||||
AbbVie | ||||||||
500 | 2.900%, 11/06/22 | 494 | ||||||
Amgen | ||||||||
350 | 5.700%, 02/01/19 | 376 | ||||||
150 | 4.950%, 10/01/41 | 156 | ||||||
Becton Dickinson and Co | ||||||||
300 | 3.125%, 11/08/21 | 308 | ||||||
Celgene | ||||||||
450 | 3.875%, 08/15/25 | 456 | ||||||
Gilead Sciences | ||||||||
650 | 4.500%, 04/01/21 | 700 | ||||||
Merck Sharp & Dohme | ||||||||
750 | 5.000%, 06/30/19 | 812 | ||||||
|
| |||||||
3,302 | ||||||||
|
| |||||||
Industrials — 6.3% | ||||||||
Caterpillar | ||||||||
500 | 7.900%, 12/15/18 | 558 | ||||||
FedEx | ||||||||
330 | 2.625%, 08/01/22 | 329 | ||||||
General Electric MTN | ||||||||
500 | 1.963%, 03/15/23 (A) | 507 | ||||||
Johnson Controls International PLC | ||||||||
500 | 4.250%, 03/01/21 | 528 | ||||||
Norfolk Southern | ||||||||
450 | 2.900%, 06/15/26 | 433 | ||||||
Northrop Grumman | ||||||||
500 | 4.750%, 06/01/43 | 545 |
Bishop Street Funds |
28
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Industrials — (continued) | ||||||||
Raytheon | ||||||||
$ | 475 | 2.500%, 12/15/22 | $ | 472 | ||||
United Technologies | ||||||||
500 | 3.100%, 06/01/22 | 514 | ||||||
|
| |||||||
3,886 | ||||||||
|
| |||||||
Information Technology — 6.0% | ||||||||
Apple | ||||||||
725 | 2.850%, 05/06/21 | 740 | ||||||
Intel | ||||||||
500 | 3.300%, 10/01/21 | 519 | ||||||
International Business Machines | ||||||||
700 | 8.375%, 11/01/19 | 824 | ||||||
Microsoft | ||||||||
500 | 3.625%, 12/15/23 | 527 | ||||||
NetApp | ||||||||
550 | 3.375%, 06/15/21 | 558 | ||||||
Texas Instruments | ||||||||
500 | 1.000%, 05/01/18 | 498 | ||||||
|
| |||||||
3,666 | ||||||||
|
| |||||||
Materials — 2.6% | ||||||||
Dow Chemical | ||||||||
500 | 8.550%, 05/15/19 | 573 | ||||||
Mosaic | ||||||||
400 | 5.625%, 11/15/43 | 385 | ||||||
Praxair | ||||||||
500 | 2.200%, 08/15/22 | 489 | ||||||
Rio Tinto Finance USA PLC | ||||||||
139 | 9.000%, 05/01/19 | 160 | ||||||
|
| |||||||
1,607 | ||||||||
|
| |||||||
Real Estate — 0.2% | ||||||||
Ventas Realty | ||||||||
100 | 2.700%, 04/01/20 | 101 | ||||||
|
| |||||||
Telecommunication Services — 1.4% | ||||||||
Ameritech Capital Funding | ||||||||
425 | 6.875%, 10/15/27 | 492 | ||||||
Verizon Communications | ||||||||
375 | 2.625%, 02/21/20 | 379 | ||||||
|
| |||||||
871 | ||||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
29
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Transportation — 0.9% | ||||||||
Burlington Northern Santa Fe LLC | ||||||||
$ | 500 | 4.450%, 03/15/43 | $ | 524 | ||||
|
| |||||||
TOTAL CORPORATE OBLIGATIONS (Cost $34,828) | 35,372 | |||||||
|
| |||||||
U.S. TREASURY OBLIGATIONS — 11.8% | ||||||||
U.S. Treasury Bond | ||||||||
800 | 6.000%, 02/15/26 | 1,034 | ||||||
500 | 5.375%, 02/15/31 | 666 | ||||||
350 | 4.750%, 02/15/37 | 456 | ||||||
1,000 | 4.500%, 08/15/39 | 1,256 | ||||||
500 | 4.375%, 05/15/41 | 618 | ||||||
1,000 | 3.625%, 08/15/43 | 1,109 | ||||||
300 | 3.000%, 11/15/45 | 296 | ||||||
1,000 | 2.250%, 08/15/46 | 841 | ||||||
U.S. Treasury Note | ||||||||
350 | 3.625%, 02/15/21 | 376 | ||||||
400 | 2.875%, 03/31/18 | 409 | ||||||
180 | 2.375%, 08/15/24 | 181 | ||||||
|
| |||||||
TOTAL U.S. TREASURY OBLIGATIONS (Cost $7,032) | 7,242 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS — 10.0% | ||||||||
FFCB | ||||||||
600 | 2.000%, 06/01/21 | 598 | ||||||
675 | 1.750%, 08/01/22 | 653 | ||||||
500 | 1.420%, 12/28/18 | 500 | ||||||
500 | 1.240%, 11/29/19 | 492 | ||||||
FHLB | ||||||||
475 | 4.750%, 03/10/23 | 539 | ||||||
1,000 | 4.125%, 03/13/20 | 1,078 | ||||||
500 | 3.750%, 12/14/18 | 524 | ||||||
400 | 0.572%, 03/31/17 (D) | 400 | ||||||
FHLMC MTN | ||||||||
650 | 1.600%, 09/30/21 | 639 | ||||||
675 | 1.500%, 08/25/21 (B) | 664 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $6,087) | 6,087 | |||||||
|
|
Bishop Street Funds |
30
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
MUNICIPAL BONDS — 9.8% | ||||||||
Babylon New York, GO | ||||||||
$ | 375 | 4.600%, 07/01/37 | $ | 375 | ||||
California State, GO | ||||||||
560 | 6.509%, 04/01/39 | 652 | ||||||
City & County, Honolulu Hawaii Wastewater System Revenue, Ser B, RB | ||||||||
190 | 5.000%, 07/01/36 | 218 | ||||||
Hawaii State, Department of Budget & Finance, Pacific Health Project, Ser A, RB | ||||||||
500 | 5.500%, 07/01/43 | 558 | ||||||
Houston, Independent School District, GO | ||||||||
250 | 6.125%, 02/15/28 | 269 | ||||||
Hudson County, Improvement Authority, RB, AGM Insured | ||||||||
575 | 7.400%, 12/01/25 | 669 | ||||||
Indiana Bond Bank, Ser A, RB | ||||||||
350 | 3.276%, 01/15/25 | 352 | ||||||
Maryland State, Transportation Authority, RB | ||||||||
500 | 5.788%, 07/01/29 | 601 | ||||||
Massachusetts Housing Finance Agency, Ser A, RB | ||||||||
415 | 5.086%, 12/01/41 | 417 | ||||||
Napa Valley Unified School District, GO | ||||||||
225 | 6.507%, 08/01/43 | 297 | ||||||
Oklahoma Development Finance Authority, RB | ||||||||
100 | 3.200%, 06/01/27 | 96 | ||||||
San Antonio Texas Water System Revenue, RB | ||||||||
250 | 5.502%, 05/15/29 | 293 | ||||||
Stockton Public Financing Authority, RB | ||||||||
500 | 7.942%, 10/01/38 | 563 | ||||||
University of Texas System, Ser C, RB | ||||||||
550 | 4.794%, 08/15/46 | 631 | ||||||
|
| |||||||
TOTAL MUNICIPAL BONDS (Cost $5,894) | 5,991 | |||||||
|
| |||||||
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS — 7.7% | ||||||||
FHLMC, Ser 2011-3970, Cl KC | ||||||||
1,500 | 3.500%, 03/15/33 | 1,548 | ||||||
FHLMC, Ser 2015-4425, Cl BY | ||||||||
597 | 2.000%, 01/15/45 | 507 | ||||||
FHLMC, Ser E01488 | ||||||||
47 | 5.000%, 10/01/18 | 48 | ||||||
FHLMC, Ser G12710 | ||||||||
92 | 5.500%, 07/01/22 | 94 |
December 31, 2016 | www.bishopstreetfunds.com |
31
High Grade Income Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (continued) | ||||||||
FNMA, Ser 2003-33, Cl AB | ||||||||
$ | 11 | 3.750%, 03/25/33 | $ | 11 | ||||
FNMA, Ser 2003-58, Cl D | ||||||||
55 | 3.500%, 07/25/33 | 56 | ||||||
FNMA, Ser 2012-84, Cl JB | ||||||||
400 | 3.000%, 05/25/42 | 376 | ||||||
FNMA, Ser 2013-92, Cl MT | ||||||||
66 | 4.000%, 07/25/41 | 70 | ||||||
FNMA, Ser 889958 | ||||||||
41 | 5.000%, 10/01/23 | 44 | ||||||
GNMA, Ser 2011-112, Cl JP | ||||||||
223 | 2.000%, 02/20/40 | 223 | ||||||
GNMA, Ser 2012-101, Cl KL | ||||||||
885 | 2.000%, 09/20/41 | 823 | ||||||
GNMA, Ser 2012-91, Cl QL | ||||||||
765 | 2.000%, 09/20/41 | 667 | ||||||
GNMA, Ser 2013-4, Cl CN | ||||||||
220 | 2.000%, 10/16/42 | 213 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (Cost $4,724) | 4,680 | |||||||
|
| |||||||
NON-AGENCY MORTGAGE-BACKED OBLIGATION — 0.8% | ||||||||
GSR Mortgage Loan Trust, Ser 2004-4, Cl 3A2 | ||||||||
552 | 2.390%, 04/25/32 (A) (Cost $506) | 517 | ||||||
|
| |||||||
Shares | Value (000) | |||||||
CASH EQUIVALENT — 1.4% | ||||||||
876,701 | BlackRock FedFund, Institutional Shares, 0.415% (C) (Cost $877) | $ | 877 | |||||
|
| |||||||
TOTAL INVESTMENTS (Cost $59,948) —99.3% | $ | 60,766 | ||||||
|
|
Percentages are based on Net Assets of $61,204 (000).
(A) | Floating Rate Security — The rate reflected on the Schedule of Investments is the rate in effect on December 31, 2016. The maturity date shown is the final maturity date. |
(B) | Step Bond — The rate reflected on the Schedule of Investments is the effective yield on December 31, 2016. The coupon on a step bond changes on a specified date. |
(C) | The rate reported is the 7-day effective yield as of December 31, 2016. |
(D) | Zero coupon security. The rate reported on the Schedule of Investments is the effective yield at time of purchase. |
Bishop Street Funds |
32
High Grade Income Fund |
Schedule of Investments
(concluded)
AGM — Assured Guaranty Municipal Corp.
Cl — Class
FFCB — Federal Farm Credit Bank
FHLB — Federal Home Loan Bank
FHLMC — Federal Home Loan Mortgage Corporation
FNMA — Federal National Mortgage Corporation
GNMA — Government National Mortgage Corporation
GO — General Obligation
LLC — Limited Liability Corporation
MTN — Medium Term Note
PLC — Public Limited Company
RB — Revenue Bond
Ser — Series
Cost figures are shown in thousands.
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
33
BISHOP STREET
FUNDS
After a solid start in the first half of the year, fixed income markets sold off sharply at year-end as interest rates and inflation expectations spiked sharply in reaction to President-Elect Donald Trump’s pro-growth initiatives. While volatile during the year, U.S. stocks gained 11.95% when measured to the S&P 500 Index and ten-year U.S. Treasury yields increased 18 basis points to 2.45% by year-end. During the year, investors were rewarded for risk taking as high yield bonds and lower-rated municipal credits outperformed government issued securities.
Municipal bond specific headwinds included lower than expected demand for new issuance and uncertainty regarding tax reform, which could affect the benefits of tax-free securities. Investor funds flowed into Municipal Bond funds in the first three quarters of the year, while significant outflows occurred during the fourth quarter.
For the year, the Bishop Street Hawaii Municipal Bond Fund returned -0.32% reflecting Hawaii’s high credit quality rating and conservative yield curve positioning versus the Bloomberg Barclays Municipal Bond Index return of +0.25%.
The performance data quoted represents past performance. Past performance 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 and current performance may be higher or lower than the performance quoted. For performance data current to the most recent month end, please visit www.bishopstreetfunds.com or call 1-800-262-9565.
Index returns are for illustrative purposes only and do not represent actual Fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
Investing involves risk including possible loss of principal. Diversification does not protect against market loss.
Bishop Street Funds |
34
Hawaii Municipal Bond Fund |
Performance Comparison
Comparison of Change in the Value of a $10,000 Investment in the Hawaii Municipal Bond Fund, Class I or Class A, versus the Barclays Capital Municipal Bond Index and the Lipper Other States Municipal Debt Funds Objective.
# Account value if you reinvested income and capital gains.
(1) See page 4 for definitions of comparative indices.
Average Annual Total Returns† | ||||||||||||||||
One Year Return | Annualized 3 Year Return | Annualized 5 Year Return | Annualized 10 Year Return | |||||||||||||
(0.32 | )% | 2.85 | % | 2.19 | % | 3.20 | % | Hawaii Municipal Bond Fund, Class I | ||||||||
(0.57 | )% | 2.59 | % | 1.94 | % | 2.94 | % | Hawaii Municipal Bond Fund, Class A | ||||||||
(3.52 | )% | 1.54 | % | 1.32 | % | 2.63 | % | Hawaii Municipal Bond Fund, Class A, with load** | ||||||||
0.25 | % | 4.14 | % | 3.28 | % | 4.25 | % | Barclays Capital Municipal Bond Index | ||||||||
0.26 | % | 4.09 | % | 2.76 | % | 3.27 | % | Lipper Other States Municipal Debt Funds Objective |
** | Reflects 3.00% sales charge. |
† | Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
December 31, 2016 | www.bishopstreetfunds.com |
35
Hawaii Municipal Bond Fund |
Top Ten Holdings (Unaudited)†
Coupon Rate | Maturity Date | Percentage of Investments | ||||||||||||||
| ||||||||||||||||
1. | Hawaii State, Department of Budget & Finance, Ser 2009 | 6.500% | 07/01/39 | 3.2% | ||||||||||||
| ||||||||||||||||
2. | Hawaii State, Department of Transportation, Airports Division Lease Revenue, AMT | 5.000% | 08/01/27 | 2.9% | ||||||||||||
| ||||||||||||||||
3. | Hawaii State, Department of Budget & Finance, Ser A | 5.000% | 07/01/35 | 2.8% | ||||||||||||
| ||||||||||||||||
4. | Hawaii State, Airport System Authority, Ser A | 5.250% | 07/01/27 | 2.0% | ||||||||||||
| ||||||||||||||||
5. | Hawaii State, Ser EY | 5.000% | 10/01/27 | 1.7% | ||||||||||||
| ||||||||||||||||
6. | Hawaii State, Airport System Authority, AMT | 5.000% | 07/01/24 | 1.5% | ||||||||||||
| ||||||||||||||||
7. | Hawaii State, Ser FB | 4.000% | 04/01/31 | 1.5% | ||||||||||||
| ||||||||||||||||
8. | Hawaii State, Housing Finance & Development, Rental Housing System, Ser B, AGM Insured | 6.500% | 07/01/33 | 1.5% | ||||||||||||
| ||||||||||||||||
9. | Hawaii State, Department of Budget & Finance, Ser A | 5.000% | 07/01/27 | 1.5% | ||||||||||||
| ||||||||||||||||
10. | Hawaii State, Department of Hawaiian Home Lands, Kapolei Office Facilities, Ser A, AGM Insured | 5.000% | 11/01/31 | 1.4% |
† | Percentages based on total investments. Top ten holdings do not include short-term investments. |
Bishop Street Funds |
36
Hawaii Municipal Bond Fund |
Face | Value (000) | |||||||
MUNICIPAL BONDS — 98.4% | ||||||||
Alabama — 0.2% | ||||||||
Huntsville, Electric System Revenue, RB | ||||||||
$ | 225 | 5.250%, 12/01/29 | $ | 257 | ||||
|
| |||||||
Alaska — 1.2% | ||||||||
Alaska Municipal Bond Bank Authority, Ser 3, RB, Bond Bank Moral Obligation Insured | ||||||||
1,000 | 5.000%, 09/01/22 | 1,124 | ||||||
Alaska State, Ser A, GO | ||||||||
525 | 5.000%, 08/01/34 | 586 | ||||||
|
| |||||||
1,710 | ||||||||
|
| |||||||
Arkansas — 0.4% | ||||||||
Little Rock, Sewer Revenue, RB | ||||||||
500 | 5.000%, 08/01/20 | 554 | ||||||
|
| |||||||
California — 3.9% | ||||||||
California State, GO | ||||||||
1,000 | 5.000%, 09/01/23 | 1,173 | ||||||
235 | 4.500%, 03/01/21 | 255 | ||||||
150 | 4.500%, 08/01/30 | 150 | ||||||
Orange County, Water District, Ser A, RB | ||||||||
1,000 | 5.000%, 08/15/31 | 1,165 | ||||||
Sacramento City Unified School District, GO | ||||||||
500 | 5.000%, 07/01/23 | 586 | ||||||
Sonoma County, Junior College District, GO | ||||||||
1,000 | 5.000%, 08/01/27 | 1,159 | ||||||
University of California, Ser AF, RB | ||||||||
1,000 | 5.000%, 05/15/36 | 1,117 | ||||||
|
| |||||||
5,605 | ||||||||
|
| |||||||
Florida — 0.9% | ||||||||
Jacksonville, Sales Tax Revenue, Ser A, RB | ||||||||
1,000 | 5.000%, 10/01/29 | 1,135 | ||||||
Miami-Dade County School Board, Ser D, COP | ||||||||
150 | 5.000%, 02/01/27 | 172 | ||||||
|
| |||||||
1,307 | ||||||||
|
| |||||||
Georgia — 0.4% | ||||||||
Atlanta, Water & Wastewater Revenue, Ser A, RB, NATL Insured | ||||||||
450 | 5.500%, 11/01/27 | 548 | ||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
37
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Hawaii — 82.9% | ||||||||
Hawaii County, Ser A, GO | ||||||||
$ | 1,000 | 5.000%, 07/15/18, Pre-Refunded @ 100 (A) | $ | 1,057 | ||||
500 | 5.000%, 09/01/20 | 557 | ||||||
250 | 5.000%, 09/01/22 | 289 | ||||||
1,000 | 5.000%, 09/01/31 | 1,176 | ||||||
500 | 4.000%, 03/01/20, Pre-Refunded @ 100 (A) | 537 | ||||||
1,850 | 4.000%, 09/01/35 | 1,953 | ||||||
Hawaii County, Ser B, GO | ||||||||
200 | 5.000%, 09/01/22 | 231 | ||||||
Hawaii County, Ser D, GO | ||||||||
450 | 5.000%, 09/01/25 | 542 | ||||||
Hawaii State, Airport System Authority, RB, AGM Insured | ||||||||
1,000 | 5.250%, 07/01/27 | 1,114 | ||||||
Hawaii State, Airport System Authority, Ser A, RB | ||||||||
250 | 5.250%, 07/01/23 | 279 | ||||||
2,500 | 5.250%, 07/01/27 | 2,779 | ||||||
1,000 | 5.250%, 07/01/28 | 1,111 | ||||||
900 | 5.250%, 07/01/30 | 995 | ||||||
1,500 | 5.000%, 07/01/45 | 1,615 | ||||||
Hawaii State, Airport System Authority, RB, AMT | ||||||||
2,000 | 5.000%, 07/01/24 | 2,190 | ||||||
1,000 | 4.125%, 07/01/24 | 1,061 | ||||||
500 | 3.000%, 07/01/17 | 505 | ||||||
Hawaii State, Department of Budget & Finance, Mid Pacific Institute, RB, AGC Insured | ||||||||
1,000 | 5.000%, 01/01/26 | 1,002 | ||||||
Hawaii State, Department of Budget & Finance, Pacific Health Project, Ser A, RB | ||||||||
425 | 6.000%, 07/01/33 | 496 | ||||||
500 | 4.625%, 07/01/21 | 543 | ||||||
Hawaii State, Department of Budget & Finance, Pacific Health Project, Ser B, RB | ||||||||
225 | 5.000%, 07/01/18 | 237 | ||||||
55 | 3.000%, 07/01/19 | 57 | ||||||
Hawaii State, Department of Budget & Finance, RB | ||||||||
325 | 5.125%, 07/01/31 | 362 | ||||||
350 | 3.250%, 01/01/25 | 349 | ||||||
Hawaii State, Department of Budget & Finance, Ser 2009, RB | ||||||||
4,100 | 6.500%, 07/01/39 | 4,465 | ||||||
Hawaii State, Department of Budget & Finance, Ser A, RB | ||||||||
100 | 5.000%, 07/01/22 | 114 | ||||||
575 | 5.000%, 07/01/26 | 650 |
Bishop Street Funds |
38
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Hawaii — (continued) | ||||||||
$ | 1,800 | 5.000%, 07/01/27 | $ | 2,118 | ||||
3,500 | 5.000%, 07/01/35 | 3,932 | ||||||
850 | 4.000%, 07/01/18 | 883 | ||||||
Hawaii State, Department of Budget & Finance, Ser B, RB | ||||||||
775 | 5.000%, 07/01/28 | 869 | ||||||
Hawaii State, Department of Hawaiian Home Lands, Kapolei Office Facilities, Ser A, COP, AGM Insured | ||||||||
2,000 | 5.000%, 11/01/31 | 2,005 | ||||||
110 | 4.250%, 11/01/26 | 110 | ||||||
Hawaii State, Department of Transportation, Airports Division Lease Revenue, COP, AMT | ||||||||
1,525 | 5.000%, 08/01/21 | 1,694 | ||||||
3,675 | 5.000%, 08/01/27 | 4,094 | ||||||
1,000 | 5.000%, 08/01/28 | 1,108 | ||||||
Hawaii State, Department of Transportation, COP, AMT | ||||||||
1,000 | 5.250%, 08/01/25 | 1,142 | ||||||
Hawaii State, Harbor System Revenue, Ser A, RB | ||||||||
100 | 5.000%, 07/01/25 | 110 | ||||||
1,125 | 4.250%, 07/01/21 | 1,205 | ||||||
Hawaii State, Harbor System Revenue, Ser B, RB, AMT, AGM Insured | ||||||||
500 | 5.000%, 01/01/23 | 500 | ||||||
Hawaii State, Highway Authority, RB | ||||||||
605 | 5.500%, 07/01/18 | 645 | ||||||
1,000 | 5.500%, 01/01/19, Pre-Refunded @ 100 (A) | 1,082 | ||||||
Hawaii State, Highway Authority, Ser A, RB | ||||||||
700 | 5.000%, 01/01/23 | 814 | ||||||
1,600 | 5.000%, 01/01/30 | 1,866 | ||||||
1,700 | 5.000%, 01/01/31 | 1,949 | ||||||
1,000 | 5.000%, 01/01/33 | 1,156 | ||||||
Hawaii State, Highway Authority, Ser B, RB, AGM Insured | ||||||||
1,250 | 5.250%, 07/01/18 | 1,329 | ||||||
1,600 | 5.250%, 07/01/19 | 1,749 | ||||||
Hawaii State, Highway Revenue, Ser A, RB | ||||||||
1,000 | 4.000%, 01/01/36 | 1,044 | ||||||
Hawaii State, Housing Finance & Development, Kuhio Park Terrace Multi-Family Housing, Ser A, RB, FHLMC Insured | ||||||||
200 | 3.900%, 04/01/22 | 211 | ||||||
115 | 3.750%, 04/01/21 | 121 | ||||||
180 | 3.500%, 04/01/20 | 187 | ||||||
115 | 3.000%, 04/01/18 | 117 | ||||||
Hawaii State, Housing Finance & Development, Rental Housing System, Ser B, RB, AGM Insured | ||||||||
2,000 | 6.500%, 07/01/33 | 2,151 |
December 31, 2016 | www.bishopstreetfunds.com |
39
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Hawaii — (continued) | ||||||||
Hawaii State, Housing Finance & Development, Single-Family Housing, Ser B, RB, GNMA/FNMA/FHLMC Insured | ||||||||
$ | 490 | 3.450%, 01/01/22 | $ | 511 | ||||
Hawaii State, Housing Finance & Development, Wilikina Apartments Project, Ser A, RB | ||||||||
1,000 | 5.000%, 05/01/34 | 1,002 | ||||||
Hawaii State, Ser DK, GO (A) | ||||||||
195 | 5.000%, 05/01/18 | 205 | ||||||
25 | 5.000%, 05/01/18, Pre-Refunded @ 100 (A) | 27 | ||||||
Hawaii State, Ser DN, GO (A) | ||||||||
200 | 5.250%, 08/01/18, Pre-Refunded @ 100 (A) | 212 | ||||||
Hawaii State, Ser DQ, GO (A) | ||||||||
35 | 5.000%, 06/01/19, Pre-Refunded @ 100 (A) | 38 | ||||||
Hawaii State, Ser DR, GO | ||||||||
1,000 | 5.000%, 06/01/19 | 1,083 | ||||||
735 | 4.250%, 06/01/19 | 783 | ||||||
Hawaii State, Ser DT, GO | ||||||||
270 | 5.000%, 11/01/19 | 296 | ||||||
Hawaii State, Ser DY, GO | ||||||||
825 | 5.000%, 02/01/19 | 886 | ||||||
Hawaii State, Ser DZ, GO | ||||||||
70 | 5.000%, 12/01/17 (D) | 72 | ||||||
100 | 5.000%, 12/01/20 (D) | 112 | ||||||
1,045 | 5.000%, 12/01/21, Pre-Refunded @ 100 (A) | 1,196 | ||||||
45 | 5.000%, 12/01/23 | 51 | ||||||
50 | 5.000%, 12/01/26 | 57 | ||||||
25 | 5.000%, 12/01/26, Pre-Refunded @ 100 (A) | 29 | ||||||
65 | 5.000%, 12/01/28, Pre-Refunded @ 100 (A) | 74 | ||||||
100 | 5.000%, 12/01/28 | 113 | ||||||
450 | 5.000%, 12/01/29 | 505 | ||||||
95 | 5.000%, 12/01/30 | 106 | ||||||
155 | 5.000%, 12/01/30, Pre-Refunded @ 100 (A) | 177 | ||||||
380 | 5.000%, 12/01/31 | 425 | ||||||
620 | 5.000%, 12/01/31, Pre-Refunded @ 100 (A) | 710 | ||||||
Hawaii State, Ser EA, GO | ||||||||
935 | 5.000%, 12/01/21 | 1,069 | ||||||
1,700 | 5.000%, 12/01/22 | 1,923 | ||||||
Hawaii State, Ser EF, GO | ||||||||
500 | 5.000%, 11/01/22 | 581 | ||||||
300 | 5.000%, 11/01/23 | 346 | ||||||
Hawaii State, Ser EH, GO | ||||||||
1,000 | 5.000%, 08/01/18 | 1,059 | ||||||
340 | 5.000%, 08/01/23 | 400 |
Bishop Street Funds |
40
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Hawaii — (continued) | ||||||||
$ | 335 | 5.000%, 08/01/23, Pre-Refunded @ 100 (A) | $ | 396 | ||||
365 | 5.000%, 08/01/24 | 426 | ||||||
855 | 5.000%, 08/01/30 | 983 | ||||||
280 | 5.000%, 08/01/30, Pre-Refunded @ 100 (A) | 331 | ||||||
195 | 5.000%, 08/01/32 | 223 | ||||||
5 | 5.000%, 08/01/32, Pre-Refunded @ 100 (A) | 6 | ||||||
Hawaii State, Ser EO, GO | ||||||||
150 | 5.000%, 08/01/24 | 178 | ||||||
1,000 | 5.000%, 08/01/33 | 1,145 | ||||||
Hawaii State, Ser EP, GO | ||||||||
1,000 | 5.000%, 08/01/22 | 1,156 | ||||||
Hawaii State, Ser EY, GO | ||||||||
2,000 | 5.000%, 10/01/27 | 2,389 | ||||||
Hawaii State, Ser FB, GO | ||||||||
2,000 | 4.000%, 04/01/31 | 2,154 | ||||||
Hawaii State, Ser FE, GO | ||||||||
245 | 5.000%, 10/01/27 | 296 | ||||||
Hawaii State, Ser FG, GO | ||||||||
1,075 | 3.000%, 10/01/19 | 1,117 | ||||||
Honolulu City & County, Board of Water Supply, Ser A, RB | ||||||||
400 | 5.000%, 07/01/24 | 476 | ||||||
600 | 5.000%, 07/01/27 | 709 | ||||||
Honolulu Hawaii City & County, Board of Water Supply, Ser A, RB | ||||||||
1,050 | 5.000%, 07/01/19 | 1,142 | ||||||
875 | 5.000%, 07/01/23 | 998 | ||||||
130 | 4.000%, 07/01/18 | 135 | ||||||
300 | 3.000%, 07/01/17 | 303 | ||||||
Honolulu Hawaii City & County, Ser A, GO | ||||||||
275 | 5.250%, 08/01/21, Pre-Refunded @ 100 (A) | 316 | ||||||
1,000 | 5.000%, 04/01/19, Pre-Refunded @ 100 (A) | 1,079 | ||||||
700 | 5.000%, 10/01/19 | 765 | ||||||
680 | 5.000%, 11/01/21 | 777 | ||||||
500 | 5.000%, 11/01/22 | 580 | ||||||
1,000 | 5.000%, 10/01/27 | 1,187 | ||||||
325 | 5.000%, 10/01/29 | 383 | ||||||
700 | 4.000%, 11/01/19 | 748 | ||||||
325 | 4.000%, 08/01/21, Pre-Refunded @ 100 (A) | 356 | ||||||
275 | 3.750%, 04/01/18 | 284 | ||||||
Honolulu Hawaii City & County, Ser A, GO, AGM Insured | ||||||||
60 | 5.000%, 07/01/17, Pre-Refunded @ 100 (A) | 61 | ||||||
Honolulu Hawaii City & County, Ser B, GO | ||||||||
250 | 5.000%, 12/01/18 | 267 | ||||||
375 | 5.000%, 08/01/21 | 426 | ||||||
350 | 5.000%, 08/01/22 | 396 |
December 31, 2016 | www.bishopstreetfunds.com |
41
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Hawaii — (continued) | ||||||||
$ | 400 | 5.000%, 11/01/24 | $ | 459 | ||||
300 | 5.000%, 08/01/26 | 339 | ||||||
525 | 5.000%, 10/01/26 | 627 | ||||||
500 | 4.000%, 10/01/19 | 533 | ||||||
1,400 | 4.000%, 10/01/20 | 1,511 | ||||||
Honolulu Hawaii City & County, Ser B, GO, AGM Insured | ||||||||
100 | 5.250%, 07/01/19 | 109 | ||||||
Honolulu Hawaii City & County, Ser C, GO | ||||||||
750 | 5.000%, 10/01/23 | 882 | ||||||
200 | 4.750%, 09/01/18 | 211 | ||||||
Honolulu Hawaii City & County, Ser D, GO | ||||||||
1,400 | 5.250%, 09/01/19, Pre-Refunded @ 100 (A) | 1,536 | ||||||
Honolulu Hawaii City & County, Wastewater System Authority, Ser A, RB | ||||||||
400 | 5.000%, 07/01/20 | 433 | ||||||
250 | 5.000%, 07/01/21, Pre-Refunded @ 100 (A) | 284 | ||||||
100 | 5.000%, 07/01/22, Pre-Refunded @ 100 (A) | 116 | ||||||
1,000 | 5.000%, 07/01/24 | 1,177 | ||||||
1,000 | 5.000%, 07/01/38 | 1,113 | ||||||
Honolulu Hawaii City & County, Wastewater System Authority, Ser B, GO | ||||||||
1,575 | 5.000%, 07/01/23 | 1,842 | ||||||
Honolulu Hawaii City & County, Wastewater System Authority, Ser B, RB | ||||||||
200 | 4.000%, 07/01/21 | 218 | ||||||
Honolulu Hawaii City & County, Wastewater System Authority, Ser S, RB | ||||||||
650 | 5.000%, 07/01/22 | 748 | ||||||
Honolulu Hawaii City & County, Wastewater System Authority, Waipahu Towers Project, Ser A, RB, AMT, GNMA Insured | ||||||||
165 | 6.900%, 06/20/35 | 166 | ||||||
Honolulu Hawaii City & County, Wastewater System Revenue, Ser B, RB | ||||||||
125 | 5.000%, 07/01/20 | 139 | ||||||
Kauai County, Ser A, GO | ||||||||
250 | 5.000%, 08/01/21 | 283 | ||||||
150 | 5.000%, 08/01/23 | 173 | ||||||
250 | 4.000%, 08/01/24 | 273 | ||||||
250 | 3.250%, 08/01/23 | 259 | ||||||
Kauai County, Ser A, GO, NATL FGIC Insured | ||||||||
415 | 5.000%, 08/01/21 | 416 | ||||||
Maui County, GO | ||||||||
250 | 5.000%, 06/01/20 | 278 | ||||||
150 | 5.000%, 06/01/21 | 171 |
Bishop Street Funds |
42
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Hawaii — (continued) | ||||||||
Maui County, Ser B, GO | ||||||||
$ | 500 | 4.000%, 06/01/21 | $ | 538 | ||||
University of Hawaii, RB | ||||||||
1,400 | 5.000%, 10/01/25 | 1,660 | ||||||
1,200 | 5.000%, 10/01/32 | 1,397 | ||||||
University of Hawaii, Ser A, RB, NATL Insured | ||||||||
350 | 3.500%, 07/15/28 | 350 | ||||||
University of Hawaii, Ser A, RB | ||||||||
100 | 6.000%, 10/01/38 | 111 | ||||||
University of Hawaii, Ser A-2, RB | ||||||||
1,030 | 4.000%, 10/01/18 | 1,078 | ||||||
University of Hawaii, Ser B, RB | ||||||||
1,500 | 5.000%, 10/01/34 | 1,718 | ||||||
1,000 | 4.000%, 10/01/23 | 1,106 | ||||||
|
| |||||||
118,947 | ||||||||
|
| |||||||
Indiana — 0.0% | ||||||||
Indiana State, Housing & Community Development Authority, Ser C, RB, GNMA/FNMA/FHLMC Insured | ||||||||
70 | 4.100%, 06/01/27 | 72 | ||||||
|
| |||||||
Maine — 0.6% | ||||||||
Maine State, Health & Higher Educational Facilities Authority, Ser A, RB | ||||||||
750 | 5.250%, 07/01/31 | 828 | ||||||
|
| |||||||
Maryland — 0.4% | ||||||||
Maryland State, GO | ||||||||
575 | 5.000%, 03/01/22 | 635 | ||||||
|
| |||||||
New York — 2.0% | ||||||||
Metropolitan Transportation Authority, Ser A, RB | ||||||||
1,000 | 4.000%, 11/15/20 | 1,077 | ||||||
New York City, Trust for Cultural Resources, Ser S, RB | ||||||||
1,000 | 5.000%, 07/01/41 | 1,125 | ||||||
New York, New York, Ser H, GO | ||||||||
500 | 5.000%, 08/01/20 | 555 | ||||||
|
| |||||||
2,757 | ||||||||
|
| |||||||
Ohio — 1.0% | ||||||||
Akron, Income Tax Revenue, RB | ||||||||
1,000 | 5.000%, 12/01/33 | 1,128 | ||||||
Ohio State, Ser 2011-B, GO | ||||||||
300 | 5.000%, 08/01/22 | 347 | ||||||
|
| |||||||
1,475 | ||||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
43
Hawaii Municipal Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
Oklahoma — 0.1% | ||||||||
Oklahoma City, Water Utilities Trust, RB | ||||||||
$ | 125 | 5.000%, 07/01/40 | $ | 139 | ||||
|
| |||||||
Oregon — 0.2% | ||||||||
Oregon State, Facilities Authority, Providence Health Services, RB | ||||||||
225 | 5.000%, 10/01/19 | 245 | ||||||
|
| |||||||
Tennessee — 0.4% | ||||||||
Memphis, Ser A, GO | ||||||||
500 | 5.000%, 04/01/26 | 594 | ||||||
|
| |||||||
Texas — 3.0% | ||||||||
Arlington, Higher Education Finance, Ser 2014-A, RB, PSF-GTD Insured | ||||||||
750 | 5.000%, 08/15/27 | 863 | ||||||
City of Mesquite, GO | ||||||||
1,000 | 5.000%, 02/15/27 | 1,160 | ||||||
Clifton, Higher Education Finance, Ser 2014, RB, PSF-GTD Insured | ||||||||
700 | 5.000%, 08/15/26 | 805 | ||||||
Harris County, Metropolitan Transit Authority, Ser A, RB | ||||||||
425 | 5.000%, 11/01/21, Pre-Refunded @ 100 (A) | 486 | ||||||
Midland County, Fresh Water Supply District No. 1, Ser A, RB | ||||||||
1,000 | 4.789%, 09/15/37 (B) | 397 | ||||||
Richardson, Independent School District, GO | ||||||||
500 | 4.000%, 02/15/33 | 524 | ||||||
|
| |||||||
4,235 | ||||||||
|
| |||||||
Utah — 0.2% | ||||||||
Central Utah, Water Conservancy District, Ser B, GO | ||||||||
200 | 5.250%, 04/01/23 | 227 | ||||||
|
| |||||||
Washington — 0.6% | ||||||||
Port of Seattle Washington, Ser A, RB | ||||||||
750 | 5.000%, 08/01/26 | 852 | ||||||
|
| |||||||
TOTAL MUNICIPAL BONDS (Cost $141,069) | 140,987 | |||||||
|
| |||||||
CASH EQUIVALENT — 0.2% | ||||||||
322,752 | BlackRock FedFund, Institutional Shares, 0.415% (C) (Cost $323) | 323 | ||||||
|
| |||||||
TOTAL INVESTMENTS (Cost $141,392) — 98.6% | $ | 141,310 | ||||||
|
|
Percentages are based on Net Assets of $143,268 (000).
(A) | Pre-Refunded Security —The maturity date shown is the pre-refunded date. |
(B) | Zero coupon security. The rate reported on the Schedule of Investments is the effective yield at time of purchase. |
Bishop Street Funds |
44
Hawaii Municipal Bond Fund |
Schedule of Investments
(concluded)
(C) | The rate reported is the 7-day effective yield as of December 31, 2016. |
(D) | Security is escrowed to maturity. |
AGC — American Guarantee Corporation
AGM — Assured Guaranty Municipal Corp.
AMT — Alternative Minimum Tax
COP — Certificate of Participation
FGIC — Financial Guarantee Insurance Corporation
FHLMC — Federal Home Loan Mortgage Corporation
FNMA — Federal National Mortgage Corporation
GNMA — Government National Mortgage Corporation
GO — General Obligation
NATL — National Public Finance Guarantee Corporation
PSF-GTD — Guaranteed by Permanent School Fund
RB — Revenue Bond
Ser — Series
Cost figures are shown in thousands.
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
45
BISHOP STREET
FUNDS
After a solid start in the first half of the year, U.S. fixed income markets sold off sharply at year-end as interest rates and inflation expectations spiked sharply in reaction to President-Elect Donald Trump’s pro-growth initiatives. President Trump’s unexpected victory drove investor expectations sharply higher after the elections with U.S. stocks gaining +11.95% when measured to the S&P 500 Index and ten-year U.S. Treasury yields increasing 18 basis points to 2.45% by year-end. Investors rewarded risk taking as high yield bonds and lower-rated investment grade credits outperformed government issued securities. Many issues drove investors into and out of the markets beginning with uncertainty about China’s future growth and the U.K.’s decision to leave the European Union. With an improving U.S. economy and employment and inflation near its targets, the Federal Reserve raised its key rate in December, indicating further hikes down the road. Since its launch May31st, the Bishop Street Short Duration Bond Fund returned -0.32% but we believe is poised to take advantage of opportunities and benefits resulting from fiscal and monetary policy changes that lie ahead.
The performance data quoted represents past performance. Past performance 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 and current performance may be higher or lower than the performance quoted. For performance data current to the most recent month end, please call 1-800-262-9565.
Index returns are for illustrative purposes only and do not represent actual Fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
Investing involves risk including possible loss of principal. Diversification does not protect against market loss.
December 31, 2016 | www.bishopstreetfunds.com |
46
Short Duration Bond Fund |
Performance Comparison
Comparison of Change in the Value of a $10,000 Investment in
the Short Duration Bond Fund, Class I versus the Bloomberg Barclays 1-3 Year
U.S. Government Index and the Lipper Core Bond Funds Objective.
# Account value if you reinvested income and capital gains.
(1) See page 4 for definitions of comparative indices.
Average Annual Total Returns† | ||||
Cumulative Inception to Date Return* | ||||
(0.32 | )% | Short Duration Bond Fund, Class I | ||
0.04 | % | Bloomberg Barclays 1-3 Year U.S. Government Index | ||
(0.28 | )% | Lipper Core Bond Funds Classification Objective |
† | Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
* | Short Duration Bond Fund commenced operations on May 31, 2016. |
December 31, 2016 | www.bishopstreetfunds.com |
47
Short Duration Bond Fund |
Top Ten Holdings (Unaudited)†
Coupon Rate | Maturity Date | Percentage of Investments | ||||||||||||||
| ||||||||||||||||
1. | FHLMC | 1.250% | 08/01/19 | 10.1% | ||||||||||||
| ||||||||||||||||
2. | FHLMC | 0.750% | 04/09/18 | 8.9% | ||||||||||||
| ||||||||||||||||
3. | U.S. Treasury Note | 0.875% | 05/15/19 | 5.7% | ||||||||||||
| ||||||||||||||||
4. | U.S. Treasury Note | 0.625% | 05/31/17 | 5.4% | ||||||||||||
| ||||||||||||||||
5. | U.S. Treasury Note | 0.875% | 05/31/18 | 5.1% | ||||||||||||
| ||||||||||||||||
6. | U.S. Treasury Note | 1.375% | 12/15/19 | 4.6% | ||||||||||||
| ||||||||||||||||
7. | FHLB | 1.375% | 11/15/19 | 4.6% | ||||||||||||
| ||||||||||||||||
8. | FNMA | 4.000% | 07/01/29 | 2.6% | ||||||||||||
| ||||||||||||||||
9. | FNMA | 5.000% | 11/01/21 | 2.6% | ||||||||||||
| ||||||||||||||||
10. | FNMA | 2.000% | 03/01/23 | 2.4% |
† | Percentages based on total investments. Top ten holdings do not include short-term investments. |
Face | Value (000) | |||||||
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS — 46.5% | ||||||||
FHLMC | ||||||||
$ | 30 | 5.500%, 10/01/19 | $ | 31 | ||||
162 | 5.500%, 05/01/20 | 170 | ||||||
111 | 5.500%, 07/01/20 | 115 | ||||||
120 | 5.500%, 11/01/21 | 127 | ||||||
123 | 5.500%, 01/01/24 | 133 | ||||||
102 | 4.500%, 12/01/24 | 108 | ||||||
101 | 4.500%, 02/01/25 | 107 | ||||||
71 | 4.500%, 06/01/26 | 75 | ||||||
198 | 4.000%, 05/01/27 | 213 | ||||||
FNMA | ||||||||
55 | 6.000%, 08/01/21 | 59 | ||||||
90 | 6.000%, 10/01/39 | 103 | ||||||
39 | 5.500%, 10/01/18 | 40 | ||||||
92 | 5.500%, 02/01/20 | 95 |
Bishop Street Funds |
48
Short Duration Bond Fund |
Schedule of Investments
(continued)
Face | Value (000) | |||||||
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (continued) | ||||||||
$ | 81 | 5.500%, 07/01/20 | $ | 85 | ||||
27 | 5.500%, 10/01/21 | 29 | ||||||
174 | 5.500%, 09/01/23 | 186 | ||||||
160 | 5.000%, 05/01/19 | 164 | ||||||
247 | 5.000%, 11/01/21 | 255 | ||||||
61 | 4.500%, 01/01/27 | 65 | ||||||
100 | 4.000%, 06/01/25 | 106 | ||||||
55 | 4.000%, 10/01/26 | 56 | ||||||
168 | 4.000%, 11/01/26 | 177 | ||||||
85 | 4.000%, 02/01/29 | 90 | ||||||
250 | 4.000%, 07/01/29 | 264 | ||||||
225 | 3.500%, 05/01/27 | 235 | ||||||
104 | 3.500%, 07/01/27 | 108 | ||||||
176 | 3.500%, 08/01/28 | 184 | ||||||
185 | 3.120%, 06/01/35 (A) | 195 | ||||||
114 | 2.643%, 10/01/38 (A) | 120 | ||||||
221 | 2.593%, 12/01/36 (A) | 235 | ||||||
240 | 2.000%, 03/01/23 | 242 | ||||||
103 | 2.000%, 08/01/23 | 104 | ||||||
38 | 2.000%, 09/01/23 | 39 | ||||||
GNMA | ||||||||
139 | 4.000%, 05/15/25 | 145 | ||||||
185 | 4.000%, 05/15/26 | 191 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (Cost $4,694) | 4,651 | |||||||
|
| |||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS — 26.0% | ||||||||
FHLB | ||||||||
455 | 1.375%, 11/15/19 | 453 | ||||||
FHLMC | ||||||||
46 | 4.500%, 09/01/20 | 48 | ||||||
97 | 4.500%, 05/01/25 | 104 | ||||||
94 | 2.500%, 06/01/24 | 95 | ||||||
1,010 | 1.250%, 08/01/19 | 1,006 | ||||||
FHLMC MTN | ||||||||
895 | 0.750%, 04/09/18 | 892 | ||||||
|
| |||||||
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $2,611) | 2,598 | |||||||
|
|
December 31, 2016 | www.bishopstreetfunds.com |
49
Short Duration Bond Fund |
Schedule of Investments
(concluded)
Face | Value (000) | |||||||
U.S. TREASURY OBLIGATIONS — 23.6% | ||||||||
U.S. Treasury Bill | ||||||||
$ | 100 | 0.656%, 05/25/17 (B) | $ | 100 | ||||
U.S. Treasury Note | ||||||||
455 | 1.375%, 12/15/19 | 454 | ||||||
505 | 0.875%, 05/31/18 | 504 | ||||||
575 | 0.875%, 05/15/19 | 569 | ||||||
40 | 0.750%, 08/31/18 | 40 | ||||||
125 | 0.750%, 08/15/19 | 123 | ||||||
535 | 0.625%, 05/31/17 | 535 | ||||||
30 | 0.625%, 08/31/17 | 30 | ||||||
|
| |||||||
TOTAL U.S. TREASURY OBLIGATIONS (Cost $2,364) | 2,355 | |||||||
|
| |||||||
CASH EQUIVALENT — 3.6% | ||||||||
363,192 | BlackRock FedFund, Institutional Shares, 0.415% (C) (Cost $363) | 363 | ||||||
|
| |||||||
TOTAL INVESTMENTS (Cost $10,032) — 99.7% | $ | 9,967 | ||||||
|
|
Percentages are based on Net Assets of $9,993(000).
(A) | Floating Rate Security — The rate reflected on the Schedule of Investments is the rate in effect on December 31, 2016. The maturity date shown is the final maturity date. |
(B) | Zero coupon security. The rate reported on the Schedule of Investments is the effective yield at time of purchase. |
(C) | The rate reported is the 7-day effective yield as of December 31, 2016. |
FHLB — Federal Home Loan Bank
FHLMC — Federal Home Loan Mortgage Corporation
FNMA — Federal National Mortgage Corporation
GNMA — Government National Mortgage Corporation
MTN — Medium Term Note
Cost figures are shown in thousands.
The accompanying notes are an integral part of the financial statements.
Bishop Street Funds |
50
Bishop Street Funds |
Statements of Assets and Liabilities (000)
December 31, 2016
Strategic Growth Fund | Dividend Value Fund | High Grade Income Fund | ||||||||||
Assets: | ||||||||||||
Investments, at Cost | $ | 25,225 | $ | 28,383 | $ | 59,948 | ||||||
| ||||||||||||
Investments, at Value | $ | 26,145 | $ | 39,609 | $ | 60,766 | ||||||
Receivable for Investment Securities Sold | 269 | — | — | |||||||||
Dividends and Interest Receivable | 5 | 89 | 525 | |||||||||
Reclaim Receivable | 3 | 1 | 2 | |||||||||
Receivable for Fund Shares Sold | — | — | 6 | |||||||||
Prepaid Expenses | 3 | 2 | 12 | |||||||||
| ||||||||||||
Total Assets | 26,425 | 39,701 | 61,311 | |||||||||
| ||||||||||||
Liabilities: | ||||||||||||
Payable to Custodian | 164 | — | — | |||||||||
Advisory Fees Payable | 17 | 17 | 9 | |||||||||
Administrative Fees Payable | 3 | 5 | 8 | |||||||||
Shareholder Servicing Fees Payable | 2 | 3 | 5 | |||||||||
Payable for Fund Shares Redeemed | 1 | 3 | 2 | |||||||||
Income Distribution Payable | — | — | 36 | |||||||||
Chief Compliance Officer Fees Payable | — | — | 1 | |||||||||
Other Accrued Expenses Payable | 27 | 31 | 46 | |||||||||
| ||||||||||||
Total Liabilities | 214 | 59 | 107 | |||||||||
| ||||||||||||
Net Assets | $ | 26,211 | $ | 39,642 | $ | 61,204 | ||||||
| ||||||||||||
Paid-in Capital | $ | 25,195 | $ | 27,007 | $ | 60,262 | ||||||
Undistributed Net Investment Income | — | 1 | 1 | |||||||||
Accumulated Net Realized Gain on Investments | 96 | 1,408 | 123 | |||||||||
Net Unrealized Appreciation on Investments | 920 | 11,226 | 818 | |||||||||
| ||||||||||||
Net Assets | $ | 26,211 | $ | 39,642 | $ | 61,204 | ||||||
| ||||||||||||
Class I Shares: | ||||||||||||
Net Assets | $ | 26,211 | $ | 39,642 | $ | 61,204 | ||||||
Outstanding Shares of Beneficial Interest | 2,222 | 2,697 | 6,341 | |||||||||
Net Asset Value, Offering and Redemption Price Per Share — Class I (Net Assets / Shares Outstanding) | $ | 11.80 | $ | 14.70 | $ | 9.65 | ||||||
|
Amounts designated as “—” are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
51
Bishop Street Funds |
Statements of Assets and Liabilities (000)
December 31, 2016
Hawaii Municipal Bond Fund | Short Duration Bond Fund | |||||||
Assets: | ||||||||
Investments, at Cost | $ | 141,392 | $ | 10,032 | ||||
| ||||||||
Investments, at Value | $ | 141,310 | $ | 9,967 | ||||
Dividends and Interest Receivable | 2,317 | 26 | ||||||
Receivable for Fund Shares Sold | 10 | — | ||||||
Due from Advisor | — | 9 | ||||||
Prepaid Expenses | 9 | 7 | ||||||
| ||||||||
Total Assets | 143,646 | 10,009 | ||||||
| ||||||||
Liabilities: | ||||||||
Income Distribution Payable | 225 | — | ||||||
Administrative Fees Payable | 13 | 1 | ||||||
Shareholder Servicing Fees Payable | 12 | 1 | ||||||
Advisory Fees Payable | 9 | 2 | ||||||
Payable for Fund Shares Redeemed | 9 | — | ||||||
Chief Compliance Officer Fees Payable | 2 | — | ||||||
Other Accrued Expenses Payable | 108 | 12 | ||||||
| ||||||||
Total Liabilities | 378 | 16 | ||||||
| ||||||||
Net Assets | $ | 143,268 | $ | 9,993 | ||||
| ||||||||
Paid-in Capital | $ | 143,343 | $ | 10,097 | ||||
Undistributed Net Investment Income | 49 | — | ||||||
Accumulated Net Realized Loss on Investments | (42 | ) | (39 | ) | ||||
Net Unrealized Depreciation on Investments | (82 | ) | (65 | ) | ||||
| ||||||||
Net Assets | $ | 143,268 | $ | 9,993 | ||||
| ||||||||
Class I Shares: | ||||||||
Net Assets | $ | 120,894 | $ | 9,993 | ||||
Outstanding Shares of Beneficial Interest | 11,567 | 1,009 | ||||||
Net Asset Value, Offering and Redemption Price Per Share — Class I (Net Assets / Shares Outstanding) | $ | 10.45 | $ | 9.90 | ||||
| ||||||||
Class A Shares: | ||||||||
Net Assets | $ | 22,374 | N/A | |||||
Outstanding Shares of Beneficial Interest | 2,141 | N/A | ||||||
Net Asset Value, Offering and Redemption Price Per Share — Class A | $ | 10.45 | N/A | |||||
| ||||||||
Maximum Offering Price Per Shares — Class A ($10.45/ 97.00%) | $ | 10.77 | N/A | |||||
|
N/A — Not Applicable. Share class currently not offered.
Amounts designated as “—” are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
Bishop Street Funds |
52
Bishop Street Funds |
Statements of Operations (000)
For the year ended December 31, 2016
Strategic Growth Fund | Dividend Value Fund | High Grade Income Fund | ||||||||||
Investment Income: | ||||||||||||
Dividend Income | $ | 134 | $ | 1,200 | $ | — | ||||||
Interest Income | — | — | 2,022 | |||||||||
Less: Foreign Taxes Withheld | (7 | ) | (1 | ) | — | |||||||
| ||||||||||||
Total Investment Income | 127 | 1,199 | 2,022 | |||||||||
| ||||||||||||
Expenses: | ||||||||||||
Investment Adviser Fees | 240 | 323 | 376 | |||||||||
Shareholder Servicing Fees | 81 | 109 | 171 | |||||||||
Administrative Fees | 65 | 87 | 137 | |||||||||
Chief Compliance Officer Fees | 2 | 2 | 3 | |||||||||
Transfer Agent Fees | 38 | 41 | 48 | |||||||||
Audit Fees | 10 | 17 | 28 | |||||||||
Printing Fees | 9 | 13 | 21 | |||||||||
Legal Fees | 7 | 9 | 14 | |||||||||
Trustees’ Fees | 5 | 7 | 10 | |||||||||
Registration Fees | 5 | 2 | 19 | |||||||||
Custody Fees | 5 | 5 | 5 | |||||||||
Pricing Fees | 1 | 3 | 14 | |||||||||
Miscellaneous Expenses | 4 | 5 | 8 | |||||||||
| ||||||||||||
Total Expenses | 472 | 623 | 854 | |||||||||
| ||||||||||||
Less Waivers: | ||||||||||||
Shareholder Servicing Fees | (49 | ) | (66 | ) | (103 | ) | ||||||
Administrative Fees | (19 | ) | (26 | ) | (41 | ) | ||||||
Investment Adviser Fees | — | (73 | ) | (192 | ) | |||||||
| ||||||||||||
Total Waivers | (68 | ) | (165 | ) | (336 | ) | ||||||
| ||||||||||||
Total Net Expenses | 404 | 458 | 518 | |||||||||
| ||||||||||||
Net Investment Income (Loss) | (277 | ) | 741 | 1,504 | ||||||||
| ||||||||||||
Net Realized Gain on Investments | 1,339 | 5,496 | 600 | |||||||||
Net Change in Unrealized (Depreciation) on Investments | (4,393 | ) | (860 | ) | (692 | ) | ||||||
| ||||||||||||
Net Realized and Unrealized Gain (Loss) on Investments | (3,054 | ) | 4,636 | (92 | ) | |||||||
| ||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations | $ | (3,331 | ) | $ | 5,377 | $ | 1,412 | |||||
|
Amounts designated as “—” are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
53
Bishop Street Funds |
Statements of Operations (000)
For the year ended December 31, 2016
Hawaii Municipal Bond Fund | Short Duration Bond Fund(1) | |||||||
Investment Income: | ||||||||
Interest Income | $ | 4,504 | $ | 49 | ||||
Dividend from Investment Companies | — | — | ||||||
| ||||||||
Total Investment Income | 4,504 | 49 | ||||||
| ||||||||
Expenses: | ||||||||
Investment Adviser Fees | 525 | 11 | ||||||
Shareholder Servicing Fees | 375 | 11 | ||||||
Administrative Fees | 300 | 9 | ||||||
Distribution Fees, Class A | 58 | — | ||||||
Chief Compliance Officer Fees | 7 | — | ||||||
Transfer Agent Fees | 97 | 18 | ||||||
Audit Fees | 65 | 4 | ||||||
Printing Fees | 46 | 3 | ||||||
Legal Fees | 31 | 1 | ||||||
Pricing Fees | 30 | 1 | ||||||
Trustees’ Fees | 22 | 1 | ||||||
Registration Fees | 11 | — | ||||||
Custody Fees | 7 | 3 | ||||||
Offering Fees | — | 22 | ||||||
Miscellaneous Expenses | 17 | 1 | ||||||
| ||||||||
Total Expenses | 1,591 | 85 | ||||||
| ||||||||
Less Waivers: | ||||||||
Investment Adviser Fees | (319 | ) | (11 | ) | ||||
Shareholder Servicing Fees | (225 | ) | (7 | ) | ||||
Administrative Fees | (164 | ) | (2 | ) | ||||
Expense Reimbursement by Advisor | — | (40 | ) | |||||
| ||||||||
Total Waivers | (708 | ) | (60 | ) | ||||
| ||||||||
Total Net Expenses | 883 | 25 | ||||||
| ||||||||
Net Investment Income | 3,621 | 24 | ||||||
| ||||||||
Net Realized Gain on Investments | 578 | — | ||||||
Net Change in Unrealized (Depreciation) on Investments | (4,551 | ) | (65 | ) | ||||
| ||||||||
Net Realized and Unrealized Loss on Investments | (3,973 | ) | (65 | ) | ||||
| ||||||||
Decrease in Net Assets Resulting from Operations | $ | (352 | ) | $ | (41 | ) | ||
|
(1) | Fund commenced operations May 31, 2016. |
Amounts designated as “—” are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
Bishop Street Funds |
54
Bishop Street Funds |
Statements of Changes in Net Assets (000)
For the years or period ended December 31,
Strategic Growth Fund | Dividend Value Fund | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Investment Activities from Operations: | ||||||||||||||||
Net Investment Income (Loss) | $ | (277 | ) | $ | (377 | ) | $ | 741 | $ | 840 | ||||||
Net Realized Gain on Investments | 1,339 | 4,567 | 5,496 | 4,322 | ||||||||||||
Net Change in Unrealized Depreciation on Investments | (4,393 | ) | (836 | ) | (860 | ) | (4,932 | ) | ||||||||
| ||||||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations | (3,331 | ) | 3,354 | 5,377 | 230 | |||||||||||
| ||||||||||||||||
Dividends and Distributions to Shareholders: | ||||||||||||||||
Net Investment Income: | ||||||||||||||||
Class I Shares | — | — | (746 | ) | (847 | ) | ||||||||||
Capital Gains: | ||||||||||||||||
Class I Shares | (2,035 | ) | (3,780 | ) | (694 | ) | — | |||||||||
| ||||||||||||||||
Total Dividends and Distributions to Shareholders | (2,035 | ) | (3,780 | ) | (1,440 | ) | (847 | ) | ||||||||
| ||||||||||||||||
Capital Share Transactions: | ||||||||||||||||
Proceeds from Shares Issued | 340 | 417 | 102 | 232 | ||||||||||||
Reinvestments of Cash Distributions | 1,374 | 2,675 | 873 | 560 | ||||||||||||
Cost of Shares Redeemed | (9,565 | ) | (13,479 | ) | (11,516 | ) | (9,594 | ) | ||||||||
| ||||||||||||||||
Net Decrease in Net Assets from Capital Share Transactions | (7,851 | ) | (10,387 | ) | (10,541 | ) | (8,802 | ) | ||||||||
| ||||||||||||||||
Total Decrease in Net Assets | (13,217 | ) | (10,813 | ) | (6,604 | ) | (9,419 | ) | ||||||||
| ||||||||||||||||
Net Assets: | ||||||||||||||||
Beginning of Year | 39,428 | 50,241 | 46,246 | 55,665 | ||||||||||||
| ||||||||||||||||
End of Year | $ | 26,211 | $ | 39,428 | $ | 39,642 | $ | 46,246 | ||||||||
| ||||||||||||||||
Undistributed Net Investment Income | $ | — | $ | — | $ | 1 | $ | — | ||||||||
| ||||||||||||||||
Share Transactions: | ||||||||||||||||
Shares Issued | 27 | 29 | 7 | 18 | ||||||||||||
Shares Issued in Lieu of Cash Distributions | 111 | 193 | 60 | 42 | ||||||||||||
Shares Redeemed | (743 | ) | (913 | ) | (808 | ) | (711 | ) | ||||||||
| ||||||||||||||||
Net Decrease in Shares Outstanding from Share Transactions | (605 | ) | (691 | ) | (741 | ) | (651 | ) | ||||||||
|
Amounts designated as “—” are either $0, or have been rounded to $0.
The accompanying notes are an integral part of the financial statements
December 31, 2016 | www.bishopstreetfunds.com |
55
Bishop Street Funds |
Statements of Changes in Net Assets (000)
For the years or period ended December 31,
High Income | Hawaii Bond | Short Duration Bond Fund(1) | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | ||||||||||||||||
Investment Activities from Operations: | ||||||||||||||||||||
Net Investment Income | $ | 1,504 | $ | 1,712 | $ | 3,621 | $ | 3,994 | $ | 24 | ||||||||||
Net Realized Gain on Investments | 600 | 343 | 578 | 1,127 | — | |||||||||||||||
Net Change in Unrealized Depreciation on Investments | (692 | ) | (1,733 | ) | (4,551 | ) | (1,252 | ) | (65 | ) | ||||||||||
| ||||||||||||||||||||
Increase (Decrease) in Net Assets Resulting from Operations | 1,412 | 322 | (352 | ) | 3,869 | (41 | ) | |||||||||||||
| ||||||||||||||||||||
Dividends and Distributions to Shareholders: | ||||||||||||||||||||
Net Investment Income: | ||||||||||||||||||||
Class I Shares | (1,478 | ) | (1,709 | ) | (3,091 | ) | (3,440 | ) | (63 | ) | ||||||||||
Class A Shares | N/A | N/A | (508 | ) | (538 | ) | N/A | |||||||||||||
Capital Gains: | ||||||||||||||||||||
Class I Shares | (514 | ) | (423 | ) | (658 | ) | (882 | ) | — | |||||||||||
Class A Shares | N/A | N/A | (121 | ) | (158 | ) | N/A | |||||||||||||
| ||||||||||||||||||||
Total Dividends and Distributions to Shareholders | (1,992 | ) | (2,132 | ) | (4,378 | ) | (5,018 | ) | (63 | ) | ||||||||||
| ||||||||||||||||||||
Capital Share Transactions: | ||||||||||||||||||||
Class I Shares: | ||||||||||||||||||||
Proceeds from Shares Issued | 3,317 | 4,201 | 9,032 | 10,103 | 10,087 | |||||||||||||||
Reinvestments of Cash Distributions | 1,374 | 1,451 | 572 | 689 | 10 | |||||||||||||||
Cost of Shares Redeemed | (15,158 | ) | (6,233 | ) | (12,434 | ) | (14,637 | ) | — | |||||||||||
| ||||||||||||||||||||
Total Class I Capital Share Transactions | (10,467 | ) | (581 | ) | (2,830 | ) | (3,845 | ) | 10,097 | |||||||||||
| ||||||||||||||||||||
Class A Shares: | ||||||||||||||||||||
Proceeds from Shares Issued | N/A | N/A | 1,745 | 1,877 | N/A | |||||||||||||||
Reinvestments of Cash Distributions | N/A | N/A | 483 | 549 | N/A | |||||||||||||||
Cost of Shares Redeemed | N/A | N/A | (2,071 | ) | (1,625 | ) | N/A | |||||||||||||
| ||||||||||||||||||||
Total Class A Capital Share Transactions | N/A | N/A | 157 | 801 | N/A | |||||||||||||||
| ||||||||||||||||||||
Net Increase (Decrease) in Net Assets from Capital Share Transactions | (10,467 | ) | (581 | ) | (2,673 | ) | (3,044 | ) | 10,097 | |||||||||||
| ||||||||||||||||||||
Total Increase (Decrease) in Net Assets | (11,047 | ) | (2,391 | ) | (7,403 | ) | (4,193 | ) | 9,993 | |||||||||||
| ||||||||||||||||||||
Net Assets: | ||||||||||||||||||||
Beginning of Year/Period | 72,251 | 74,642 | 150,671 | 154,864 | — | |||||||||||||||
| ||||||||||||||||||||
End of Year/Period | $ | 61,204 | $ | 72,251 | $ | 143,268 | $ | 150,671 | $ | 9,993 | ||||||||||
| ||||||||||||||||||||
Undistributed Net Investment Income | $ | 1 | $ | 2 | $ | 49 | $ | 28 | $ | — | ||||||||||
| ||||||||||||||||||||
Share Transactions: | ||||||||||||||||||||
Class I Shares: | ||||||||||||||||||||
Shares Issued | 330 | 420 | 825 | 932 | 1,008 | |||||||||||||||
Shares Issued in Lieu of Cash Distributions | 139 | 145 | 53 | 64 | 1 | |||||||||||||||
Shares Redeemed | (1,499 | ) | (624 | ) | (1,139 | ) | (1,352 | ) | — | |||||||||||
| ||||||||||||||||||||
Total Class I Transactions | (1,030 | ) | (59 | ) | (261 | ) | (356 | ) | 1,009 | |||||||||||
| ||||||||||||||||||||
Class A Shares: | ||||||||||||||||||||
Shares Issued | N/A | N/A | 160 | 174 | N/A | |||||||||||||||
Shares Issued in Lieu of Cash Distributions | N/A | N/A | 45 | 50 | N/A | |||||||||||||||
Shares Redeemed | N/A | N/A | (191 | ) | (150 | ) | N/A | |||||||||||||
| ||||||||||||||||||||
Total Class A Transactions | N/A | N/A | 14 | 74 | N/A | |||||||||||||||
| ||||||||||||||||||||
Net Increase (Decrease) in Shares Outstanding from Share Transactions | (1,030 | ) | (59 | ) | (247 | ) | (282 | ) | 1,009 | |||||||||||
|
(1) | Fund commenced operations May 31, 2016. |
N/A — Not Applicable. Share class currently not offered.
Amounts designated as “—” are either $0, or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
Bishop Street Funds |
56
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Bishop Street Funds |
For a share outstanding throughout the period ended December 31,
Investment Activities | Total Investment Activities from Operations | Dividends and Distributions from | |||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Year | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain(Loss) on Investments | Net Investment Income | Capital Gains | Total Dividends and Distributions | ||||||||||||||||||||||||||||||
STRATEGIC GROWTH FUND | |||||||||||||||||||||||||||||||||||
Class I Shares: |
| ||||||||||||||||||||||||||||||||||
2016 | $ | 13.95 | $ | (0.11 | ) | $ | (1.14 | ) | $ | (1.25 | ) | $ | — | $ | (0.90 | ) | $ | (0.90 | ) | ||||||||||||||||
2015 | 14.28 | (0.13 | ) | 1.21 | 1.08 | — | (1.41 | ) | (1.41 | ) | |||||||||||||||||||||||||
2014 | 14.56 | (0.12 | ) | 1.30 | 1.18 | — | (1.46 | ) | (1.46 | ) | |||||||||||||||||||||||||
2013 | 13.56 | (0.04 | ) | 4.59 | 4.55 | — | (3.55 | ) | (3.55 | ) | |||||||||||||||||||||||||
2012 | 12.24 | 0.03 | 1.32 | †† | 1.35 | (0.03 | ) | — | (0.03 | ) | |||||||||||||||||||||||||
DIVIDEND VALUE FUND | |||||||||||||||||||||||||||||||||||
Class I Shares: |
| ||||||||||||||||||||||||||||||||||
2016 | $ | 13.45 | $ | 0.24 | $ | 1.52 | $ | 1.76 | $ | (0.25 | ) | $ | (0.26 | ) | $ | (0.51 | ) | ||||||||||||||||||
2015 | 13.62 | 0.22 | (0.17 | ) | 0.05 | (0.22 | ) | — | (0.22 | ) | |||||||||||||||||||||||||
2014 | 12.43 | 0.29 | 1.20 | 1.49 | (0.30 | ) | — | (0.30 | ) | ||||||||||||||||||||||||||
2013 | 9.83 | 0.21 | 2.61 | 2.82 | (0.22 | ) | — | (0.22 | ) | ||||||||||||||||||||||||||
2012 | 9.05 | 0.21 | 0.79 | 1.00 | (0.22 | ) | — | (0.22 | ) | ||||||||||||||||||||||||||
HIGH GRADE INCOME FUND | |||||||||||||||||||||||||||||||||||
Class I Shares: |
| ||||||||||||||||||||||||||||||||||
2016 | $ | 9.80 | $ | 0.22 | $ | (0.07 | ) | $ | 0.15 | $ | (0.22 | ) | $ | (0.08 | ) | $ | (0.30 | ) | |||||||||||||||||
2015 | 10.05 | 0.23 | (0.19 | ) | 0.04 | (0.23 | ) | (0.06 | ) | (0.29 | ) | ||||||||||||||||||||||||
2014 | 9.78 | 0.23 | 0.33 | 0.56 | (0.23 | ) | (0.06 | ) | (0.29 | ) | |||||||||||||||||||||||||
2013 | 10.51 | 0.22 | (0.50 | ) | (0.28 | ) | (0.22 | ) | (0.23 | ) | (0.45 | ) | |||||||||||||||||||||||
2012 | 10.44 | 0.26 | 0.26 | 0.52 | (0.26 | ) | (0.19 | ) | (0.45 | ) |
(1) | Per share net investment income calculated using average shares. |
† | Total return is for the period indicated and has not been annualized. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
†† | Includes payment by affiliate of $0.03 per share. If payments by affiliates were not made, total return would have been decreased by 0.27%. |
Amounts designated as “—” are either $0 or have been rounded to $0
Bishop Street Funds |
58
Net Asset Value, End of Year | Total Return† | Net Assets End of Year (000) | Ratio of Expenses to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investments Income (Loss) to Average Net Assets | Portfolio Turnover Rate | ||||||||||||||||||||||||||||
$ | 11.80 | (9.13 | )% | $ | 26,211 | 1.25 | % | 1.46 | % | (0.86 | )% | 33 | % | |||||||||||||||||||||
13.95 | 7.77 | 39,428 | 1.17 | 1.40 | (0.86 | ) | 55 | |||||||||||||||||||||||||||
14.28 | 7.94 | 50,241 | 1.15 | 1.38 | (0.83 | ) | 44 | |||||||||||||||||||||||||||
14.56 | 35.03 | 56,998 | 1.17 | 1.40 | (0.26 | ) | 130 | |||||||||||||||||||||||||||
13.56 | 11.05 | †† | 46,644 | 1.17 | 1.40 | 0.21 | 68 | |||||||||||||||||||||||||||
$ | 14.70 | 13.16 | % | $ | 39,642 | 1.05 | % | 1.43 | % | 1.70 | % | 17 | % | |||||||||||||||||||||
13.45 | 0.44 | 46,246 | 1.05 | 1.38 | 1.62 | 24 | ||||||||||||||||||||||||||||
13.62 | 12.08 | 55,665 | 1.05 | 1.37 | 2.27 | 21 | ||||||||||||||||||||||||||||
12.43 | 28.84 | 61,460 | 1.05 | 1.38 | 1.87 | 13 | ||||||||||||||||||||||||||||
9.83 | 11.07 | 57,137 | 1.05 | 1.38 | 2.19 | 17 | ||||||||||||||||||||||||||||
$ | 9.65 | 1.47 | % | $ | 61,204 | 0.76 | % | 1.25 | % | 2.20 | % | 27 | % | |||||||||||||||||||||
9.80 | 0.37 | 72,251 | 0.76 | 1.21 | 2.31 | 24 | ||||||||||||||||||||||||||||
10.05 | 5.77 | 74,642 | 0.76 | 1.20 | 2.32 | 28 | ||||||||||||||||||||||||||||
9.78 | (2.69 | ) | 74,007 | 0.76 | 1.21 | 2.18 | 35 | |||||||||||||||||||||||||||
10.51 | 5.05 | 85,771 | 0.76 | 1.20 | 2.47 | 39 |
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
59
Bishop Street Funds |
Financial Highlights
For a share outstanding throughout the period ended December 31,
Investment Activities | Total Investment Activities from Operations | Dividends and Distributions from | |||||||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain(Loss) on Investments | Net Investment Income | Capital Gains | Total Dividends and Distributions | ||||||||||||||||||||||||||||||
HAWAII MUNICIPAL BOND FUND | |||||||||||||||||||||||||||||||||||
Class I Shares: | |||||||||||||||||||||||||||||||||||
2016 | $ | 10.80 | $ | 0.27 | $ | (0.30 | ) | $ | (0.03 | ) | $ | (0.26 | ) | $ | (0.06 | ) | $ | (0.32 | ) | ||||||||||||||||
2015 | 10.88 | 0.29 | (0.01 | ) | 0.28 | (0.29 | ) | (0.07 | ) | (0.36 | ) | ||||||||||||||||||||||||
2014 | 10.52 | 0.29 | 0.38 | 0.67 | (0.29 | ) | (0.02 | ) | (0.31 | ) | |||||||||||||||||||||||||
2013 | 11.13 | 0.29 | (0.57 | ) | (0.28 | ) | (0.29 | ) | (0.04 | ) | (0.33 | ) | |||||||||||||||||||||||
2012 | 10.94 | 0.32 | 0.23 | 0.55 | (0.32 | ) | (0.04 | ) | (0.36 | ) | |||||||||||||||||||||||||
Class A Shares: | |||||||||||||||||||||||||||||||||||
2016 | $ | 10.80 | $ | 0.24 | $ | (0.29 | ) | $ | (0.05 | ) | $ | (0.24 | ) | $ | (0.06 | ) | $ | (0.30 | ) | ||||||||||||||||
2015 | 10.88 | 0.26 | (0.01 | ) | 0.25 | (0.26 | ) | (0.07 | ) | (0.33 | ) | ||||||||||||||||||||||||
2014 | 10.52 | 0.26 | 0.38 | 0.64 | (0.26 | ) | (0.02 | ) | (0.28 | ) | |||||||||||||||||||||||||
2013 | 11.13 | 0.27 | (0.57 | ) | (0.30 | ) | (0.27 | ) | (0.04 | ) | (0.31 | ) | |||||||||||||||||||||||
2012 | 10.94 | 0.29 | 0.23 | 0.52 | (0.29 | ) | (0.04 | ) | (0.33 | ) | |||||||||||||||||||||||||
SHORT DURATION BOND FUND** | |||||||||||||||||||||||||||||||||||
Class I Shares: | |||||||||||||||||||||||||||||||||||
2016 | $ | 10.00 | $ | 0.03 | $ | (0.06 | ) | $ | (0.03 | ) | $ | (0.07 | ) | $ | — | $ | (0.07 | ) |
(1) | Per share net investment income calculated using average shares. |
* | Annualized. |
** | Fund commenced operations on May 31, 2016. |
† | Total return is for the period indicated and has not been annualized. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Fee waivers are in effect; if they had not been in effect, performance would have been lower. |
Amounts designated as “—” are either $0 or have been rounded to $0
Bishop Street Funds |
60
Net Asset Value, End of Period | Total Return† | Net Assets End of Period (000) | Ratio of Expenses to Average Net Assets | Ratio of Expenses to Average Net Assets (Excluding Waivers) | Ratio of Net Investments Income (Loss) to Average Net Assets | Portfolio Turnover Rate | |||||||||||||||||||||||||||
$ | 10.45 | (0.32 | )% | $ | 120,894 | 0.55 | % | 1.02 | % | 2.45 | % | 26 | % | ||||||||||||||||||||
10.80 | 2.61 | 127,712 | 0.55 | 0.98 | 2.64 | 28 | |||||||||||||||||||||||||||
10.88 | 6.36 | 132,540 | 0.55 | 0.99 | 2.66 | 27 | |||||||||||||||||||||||||||
10.52 | (2.47 | ) | 126,289 | 0.55 | 1.01 | 2.72 | 29 | ||||||||||||||||||||||||||
11.13 | 5.06 | 134,179 | 0.55 | 0.99 | 2.86 | 23 | |||||||||||||||||||||||||||
$ | 10.45 | (0.57 | )% | $ | 22,374 | 0.80 | % | 1.27 | % | 2.20 | % | 26 | % | ||||||||||||||||||||
10.80 | 2.36 | 22,959 | 0.80 | 1.23 | 2.39 | 28 | |||||||||||||||||||||||||||
10.88 | 6.10 | 22,324 | 0.80 | 1.24 | 2.41 | 27 | |||||||||||||||||||||||||||
10.52 | (2.72 | ) | 24,359 | 0.80 | 1.26 | 2.47 | 29 | ||||||||||||||||||||||||||
11.13 | 4.80 | 25,660 | 0.80 | 1.24 | 2.61 | 23 | |||||||||||||||||||||||||||
$ | 9.90 | (0.32 | )% | $ | 9,993 | 0.55 | %* | 1.88 | %* | 0.53 | %* | 9 | % |
The accompanying notes are an integral part of the financial statements.
December 31, 2016 | www.bishopstreetfunds.com |
61
Bishop Street Funds |
December 31, 2016
The amounts included in the Notes to Financial Statements are in thousands unless otherwise noted.
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 (each a Fund, collectively the “Funds”) which includes the Strategic Growth Fund, Dividend Value Fund, High Grade Income Fund, Hawaii Municipal Bond Fund and the Short Duration Bond Fund. Each Fund is diversified, with the exception of Hawaii Municipal Bond Fund, which is non-diversified. Class A Shares of the Hawaii Municipal Bond Fund are subject to a sales load as disclosed in the prospectus. The Short Duration Bond Fund commenced operations on May 31, 2016. 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. The Funds are investment companies in conformity with U.S. generally accepted accounting principles (U.S. GAAP). Therefore, the Funds follow the accounting and reporting guidelines for investment companies.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of assets, 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.
Security Valuation
The Funds’ investments in equity securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ) including securities traded over the counter, are valued at the last quoted sale price on an exchange or market (foreign or domestic) on which they are traded on valuation date (or at approximately 4:00 pm ET if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. Debt securities are priced based upon valuations provided by independent, third-party pricing agents, if available.
Such values generally reflect the last reported sales price in the most advantageous market, if the security is actively traded. The third-party pricing agents may also value
Bishop Street Funds |
62
debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the fair value for such securities. Such methodologies typically include matrix systems which reflect such factors as security prices, yields, maturities and ratings. Debt obligations with remaining maturities of sixty days or less may be valued at their amortized cost, which approximates market value provided that it is determined the amortized cost continues to approximate fair value. Should existing credit, liquidity or interest rate conditions in the relevant markets and issuer specific circumstances suggest that amortized cost does not approximate fair value, then the amortized cost method may not be used. Prices for most securities held in the Funds are provided daily by recognized independent pricing agents.
If a security price cannot be obtained from an independent, third-party pricing agent, the Funds seek to obtain a bid price from at least one independent broker.
Securities for which market prices are not “readily available” are valued in accordance with Fair Value Procedures established by the Funds’ Board of Trustees (the “Board”). The Funds’ Fair Value Procedures are implemented through a Fair Value Pricing Committee (the “Committee”) designated by the Funds’ Board. Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security’s trading has been halted or suspended; the security has been delisted from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; or the security’s primary pricing source is not able or willing to provide a price. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee.
In accordance with the authoritative guidance on fair value measurement under U.S. GAAP, the Funds disclose fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
• | Level 1 — Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date; |
December 31, 2016 | www.bishopstreetfunds.com |
63
Bishop Street Funds |
• | Level 2 — Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, referenced indices, quoted prices in inactive markets, adjusted quoted prices in active markets, etc.); and |
• | Level 3 — Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement.
As of December 31, 2016, all investments in the Strategic Growth Fund and the Dividend Value Fund were considered Level 1.
The following is a summary of the levels of inputs used in valuing the following Fund’s investments carried at value:
High Grade Income Fund | ||||||||||||||||
Investments in Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Corporate Obligations | $ | — | $ | 35,372 | $ | — | $ | 35,372 | ||||||||
U.S. Treasury Obligations | — | 7,242 | — | 7,242 | ||||||||||||
U.S. Government Agency Obligations | — | 6,087 | — | 6,087 | ||||||||||||
Municipal Bonds | — | 5,991 | — | 5,991 | ||||||||||||
U.S. Government Mortgage-Backed Obligations | — | 4,680 | — | 4,680 | ||||||||||||
Cash Equivalent | 877 | — | — | 877 | ||||||||||||
Non-Agency Mortgage-Backed Obligation | — | 517 | — | 517 | ||||||||||||
|
| |||||||||||||||
Total Investments in Securities | $ | 877 | $ | 59,889 | $ | — | $ | 60,766 | ||||||||
|
| |||||||||||||||
Hawaii Municipal Bond Fund | ||||||||||||||||
Investments in Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Municipal Bonds | $ | — | $ | 140,987 | $ | — | $ | 140,987 | ||||||||
Cash Equivalent | 323 | — | — | 323 | ||||||||||||
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Total Investments in Securities | $ | 323 | $ | 140,987 | $ | — | $ | 141,310 | ||||||||
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Short Duration Bond Fund | ||||||||||||||||
Investments in Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
U.S. Government Mortgage-Backed Obligations | $ | — | $ | 4,651 | $ | — | $ | 4,651 | ||||||||
U.S. Government Agency Obligations | — | 2,598 | — | 2,598 | ||||||||||||
U.S. Treasury Obligations | — | 2,355 | — | 2,355 | ||||||||||||
Cash Equivalent | 363 | — | — | 363 | ||||||||||||
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Total Investments in Securities | $ | 363 | $ | 9,604 | $ | — | $ | 9,967 | ||||||||
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For the year ended December 31, 2016, there were no transfers between Level 1 and Level 2 assets and liabilities. For the year ended December 31, 2016, there were no transfers between Level 2 and Level 3 assets and liabilities. There were no Level 3 investments during the year ended December 31, 2016. For the year ended December 31, 2016, there have been no changes to the Funds’ fair value methodologies.
Federal Income Taxes
It is each Fund’s intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, and to distribute substantially all of its income to shareholders. Accordingly, no provision for Federal income taxes has been made in the financial statements.
The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more-likely-than- not” (i.e., greater than 50-percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Funds did not record any tax provision in the current period. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., the last 3 open tax year ends, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.
Security Transactions and Investment Income
Security transactions are accounted for on trade date. Costs used in determining net realized capital gains and losses on the sale of securities are on the basis of specific identification. Interest income is recorded on the accrual basis from settlement date and dividend income is recorded on ex-dividend date.
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Bishop Street Funds |
Discounts and premiums are accreted or amortized using the effective interest method over the life of each security and are recorded as interest income. Realized gains (losses) on paydowns of mortgage-backed and asset-backed securities are recorded as an adjustment to interest income.
Classes
Class-specific expenses are borne by the applicable class of shares. Income, realized and unrealized gains/losses and non-class-specific expenses are allocated to the respective class on the basis of relative daily net assets. Distribution fees are the only class-specific expense.
Expenses
Expenses that are directly related to one of the Funds are charged directly to that Fund. Other operating expenses of the Trust are prorated to each of the Funds on the basis of relative net assets.
Dividends and Distributions to Shareholders
The Strategic Growth, Dividend Value Funds and Short-Duration Bond declare and pay dividends from net investment income, if available, on a quarterly basis. Dividends from net investment income are declared daily and paid on a monthly basis for the High Grade Income and Hawaii Municipal Bond. Any net realized capital gains will be distributed at least annually for all Funds. Distributions to shareholders are recorded on the ex-dividend date.
Front-End Sales Commission
Front-end sales commissions (the “sales charges”) are not recorded as expenses of the Hawaii Municipal Bond Fund. Sales charges are deducted from proceeds from the sales of Hawaii Municipal Bond Fund shares prior to investment in Class A shares.
Cash Overdraft Charges
Per the terms of the agreement with MUFG Union Bank, N.A., the custodian of the Funds (the “Custodian”), if a Fund has a cash overdraft on a given day, it will be assessed an overdraft charge of the Prime Rate plus 4.00%. Cash overdraft charges are included in miscellaneous expenses on the Statements of Operations. For the year ended December 31, 2016, there were no cash overdraft charges.
3. | INVESTMENT ADVISORY AGREEMENT |
Investment advisory services are provided to the Funds by Bishop Street Capital Management (the “Adviser”), a registered adviser and wholly owned subsidiary of First Hawaiian Bank. First Hawaiian Bank is a subsidiary of BancWest Corporation, itself a subsidiary of BNP Paribas. The Adviser is entitled to receive an annual fee of 0.74% of
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the average daily net assets of the Strategic Growth and the Dividend Value Funds, 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 0.25% of the daily average net assets of the Short-Duration Bond Fund. The Adviser has contractually agreed, through April 30, 2017, to waive a portion of its advisory fee (excluding interest, taxes, brokerage commissions, acquired fund fees and expenses, and extraordinary expenses (collectively, excluded expenses)) to the extent necessary to keep operating expenses at or below certain percentages of the respective average daily net assets.
The contractual expense limitations are as follows:
Strategic Growth Fund, Class I Shares | 1.25% | |||
Dividend Value Fund, Class I Shares | 1.05% | |||
High Grade Income Fund, Class I Shares | 0.76% | |||
Hawaii Municipal Bond Fund, Class I Shares | 0.55% | |||
Hawaii Municipal Bond Fund, Class A Shares | 0.80% |
The Adviser has voluntarily agreed to waive a portion of its advisory fees and to assume expenses, if necessary, in order to keep the Short Duration Bond Fund’s total annual operating expenses, after the effect of expense-offset arrangements, from exceeding 0.55% of average daily net assets excluding expenses. These fees and waivers are labeled on the Statement of Operations as “Investment Adviser Fees/Waivers and Reimbursement from Adviser.” The Adviser intends to continue these fee reductions and expense reimbursements until further notice, but may discontinue them at any time.
If at any point it becomes unnecessary for the Adviser to reduce fees and make expense reimbursements, the Board may permit the Adviser to retain the difference between the Total Annual Fund Operating Expenses and contractual expense limitations to recapture all or a portion of its prior expense reductions or reimbursements made during the preceding three year period during which this agreement was in place. During the year ended December 31, 2016, the Adviser did not recapture any previously waived fees.
As of December 31, 2016, fees which were previously waived by the Investment Manager which may be subject to possible future reimbursement to the Adviser were as follows:
Dividend | High Grade Income Fund | Hawaii Municipal Bond Fund | Short Duration Bond Fund | Total | Expires | |||||||||||||||||
$ | 53 | $ | 160 | $ | 237 | $ | 0 | $ | 450 | 12/31/2017 | ||||||||||||
52 | 160 | 236 | 0 | 448 | 12/31/2018 | |||||||||||||||||
73 | 192 | 319 | 51 | 635 | 12/31/2019 |
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Bishop Street Funds |
Columbia Management Investment Advisers, LLC (“Columbia”) serves as the investment sub-adviser for the Strategic Growth Fund and the Dividend Value Fund, pursuant to a sub-adviser agreement. Columbia is entitled to receive from the Adviser a fee, computed daily and paid monthly, at the annual rate based on the average daily net assets of the Strategic Growth Fund and the Dividend Value Fund, under the following fee schedule: 0.360% on the first $75 million; 0.350% on the next $75 million; 0.325% on the next $100 million; 0.300% on the next $250 million; and 0.250% on assets over $500 million.
4. | ADMINISTRATIVE, CUSTODIAN, TRANSFER AGENT, DISTRIBUTION AND SHAREHOLDER SERVICES |
The Funds and the Administrator are parties to an Administration Agreement under which the Administrator provides administrative services to the Funds. For these services, the Administrator is paid an asset based fee which will vary depending the number of share classes and the on the average daily net assets of the Funds. The Administrator has voluntarily agreed to waive 0.08% of its administrative fee on each of the Funds’ average daily net assets excluding the Hawaii Municipal Bond Fund for which the Administrator is waiving 0.13% of its fee. These fee waivers are voluntary and may be discontinued at any time. For the year ended December 31, 2016, the Funds were charged as follows for these services: $65 in the Strategic Growth Fund, $87 in the Dividend Value Fund, $137 in the High Grade Income Fund, $300 in the Hawaii Municipal Bond Fund and $9 in the Short Duration Fund. For the year ended December 31, 2016, the Funds waived as follows for these services: $19 in the Strategic Growth Fund, $26 in the Dividend Value Fund, $41 in the High Grade Income Fund, and $165 in the Hawaii Municipal Bond Fund, and $2 in the Short Duration Fund. These fees and waivers are labeled as “Administrative Fees/Waivers” on the Statement of Operations.
MUFG Union Bank, N.A. acts as custodian for the Funds. The Custodian plays no role in determining the investment policies of the Funds or which securities are to be purchased or sold by the Funds. These fees are labeled on the Statement of Operations as “Custody Fees.”
DST Systems, Inc. (“DST”) acts as the Transfer Agent of the Funds. As such, DST provides transfer agency, dividend disbursing and shareholder services to the Funds. These fees are disclosed on the Statement of Operations as “Transfer Agent Fees.”
SEI Investments Distribution Co. (“SIDCO”), the “Distributer” a wholly owned subsidiary of SEI Investments Company, acts as the Trust’s Distributor pursuant to the distribution agreement. The Funds have adopted a Distribution Plan (the “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
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expenses. SIDCO, 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. This fee is disclosed as “Distribution Fees, Class A” on the Statement of Operations.
The Trust has adopted and entered into a shareholder service plan and agreement with SIDCO. Each Fund pays to SIDCO a shareholder servicing fee not to exceed 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. Under the shareholder service plan, SIDCO may perform, or may compensate other service providers for performing various shareholder and administrative services. SIDCO may also retain as profit any difference between the fee it receives and amount it pays to third parties. For the year, SIDCO paid the entire amount of fees received under the shareholder service plan to First Hawaiian Bank, the Parent Company of Bishop Street Capital Management, for shareholder services performed by First Hawaiian Bank on behalf of SIDCO for the benefit of certain shareholders to the Funds. SIDCO has voluntarily agreed to waive 0.15% of its shareholder servicing fee to the extent necessary to keep operating expenses at or below certain percentages of the respective average daily net assets. These fees and waivers are represented as “Shareholder Servicing Fees/Waivers” on the Statement of Operations.
5. | TRANSACTIONS WITH AFFILIATES |
Certain officers of the Trust are also officers of SEI Investments Global Funds Services (the “Administrator”), a wholly owned subsidiary of SEI Investments Company, and/or SIDCO. Such officers are paid no fees by the Trust other than the Chief Compliance Officer (“CCO”) as described below, for serving as officers of the Trust.
A portion of the services provided by the CCO and his staff, who are employees of the Administrator, are paid for by the Trust as incurred. The services include regulatory oversight of the Trust’s Advisers and service providers as required by SEC regulations. The CCO’s services and expenses have been approved by and are reviewed by the Board. These fees are disclosed on the Statement of Operations as “Chief Compliance Officer Fees.”
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Bishop Street Funds |
6. | INVESTMENT TRANSACTIONS |
The cost of security purchases and the proceeds from the sale and maturities of securities, other than short-term investments, for the year ended December 31, 2016 are presented below for the Funds.
Strategic Growth Fund | Dividend Value Fund | High Grade Income Fund | Hawaii Municipal Bond Fund | Short Duration Bond Fund | ||||||||||||||||
Purchases | ||||||||||||||||||||
U.S. Government Securities | $ | — | $ | — | $ | 6,659 | $ | — | $ | 9,703 | ||||||||||
Other | 10,829 | 7,388 | 10,510 | 38,069 | — | |||||||||||||||
Sales and Maturities | ||||||||||||||||||||
U.S. Government Securities | $ | — | $ | — | $ | 14,353 | $ | — | $ | 685 | ||||||||||
Other | 20,932 | 17,941 | 13,605 | 39,384 | — |
7. | FEDERAL TAX INFORMATION |
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with Federal tax regulations which may differ from U.S. GAAP.
As a result, net investment income (loss) and net realized gain (loss) on investment transactions for the reporting period may differ from distributions during such period. These book/tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to undistributed net investment income/(loss), paid-in capital or accumulated net realized gain/(loss), as appropriate, in the period that the differences arise.
Accordingly, the following permanent differences, primarily attributable to investments in paydown gains and losses, market discount, REIT adjustments, distribution reclassification and net operating losses have been reclassified:
Paid in Capital | Undistributed Net Investment Income | Accumulated Net Realized Loss | ||||||||||
Strategic Growth Fund | (277 | ) | 277 | — | ||||||||
Dividend Value Fund | — | 6 | (6 | ) | ||||||||
High Grade Income Fund | — | (27 | ) | 27 | ||||||||
Hawaii Municipal Bond Fund | — | (1 | ) | 1 | ||||||||
Short Duration Bond Fund | — | 39 | (39 | ) |
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The tax character of dividends and distributions declared during the years ended December 31, 2016 and 2015 were as follows:
Ordinary Income | Tax Exempt Income | Long Term Capital Gain | Total | |||||||||||||
Strategic Growth Fund | ||||||||||||||||
2016 | $ | 112 | $ | — | $ | 1,923 | $ | 2,035 | ||||||||
2015 | 72 | — | 3,708 | 3,780 | ||||||||||||
Dividend Value Fund | ||||||||||||||||
2016 | $ | 746 | $ | — | $ | 694 | $ | 1,440 | ||||||||
2015 | 847 | — | — | 847 | ||||||||||||
High Grade Income Fund | ||||||||||||||||
2016 | $ | 1,647 | $ | — | $ | 345 | $ | 1,992 | ||||||||
2015 | 1,709 | — | 423 | 2,132 | ||||||||||||
Hawaii Municipal Bond Fund | ||||||||||||||||
2016 | $ | 163 | $ | 3,599 | $ | 616 | $ | 4,378 | ||||||||
2015 | 3 | 3,978 | 1,037 | 5,018 | ||||||||||||
Short Duration Bond Fund | ||||||||||||||||
2016 | $ | 63 | $ | — | $ | — | $ | 63 |
As of December 31, 2016, the components of Distributable Earnings (Accumulated Losses) on a tax basis were as follows:
Strategic Growth Fund | Dividend Value Fund | High Grade Income Fund | Hawaii Municipal Bond Fund | Short Duration Bond Fund | ||||||||||||||||
Undistributed Tax-Exempt Income | $ | — | $ | — | $ | — | $ | 4 | $ | — | ||||||||||
Undistributed Ordinary Income | — | — | — | — | — | |||||||||||||||
Undistributed Long-Term Capital Gain Income | 182 | 1,433 | 123 | — | — | |||||||||||||||
Capital Loss Carryforwards | — | — | — | — | (39 | ) | ||||||||||||||
Post October Losses | — | — | — | (40 | ) | — | ||||||||||||||
Unrealized Appreciation (Depreciation) | 833 | 11,202 | 817 | (39 | ) | (65 | ) | |||||||||||||
Other Temporary Differences | 1 | — | 2 | — | — | |||||||||||||||
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Total Distributable Earnings | $ | 1,016 | $ | 12,635 | $ | 942 | $ | (75 | ) | $ | (104 | ) | ||||||||
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Post-October losses represent losses realized on investment transactions from November 1, 2016 through December 31, 2016 that, in accordance with Federal income tax regulations, the Funds have elected to defer and treat as having arisen in the following fiscal year.
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Bishop Street Funds |
For Federal income tax purposes, capital losses incurred may be carried forward and applied against future capital gains. Under the Regulated Investment Company Modernization Act of 2010, Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Additionally, post enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Losses carried forward under these new provisions are as follows:
Short-Term Loss | ||||
Short Duration Bond Fund | $ | 39 |
During the year ended December 31, 2016, the Dividend Value Fund utilized capital loss carryforwards of $3,387.
For Federal income tax purposes, the cost of securities owned at December 31, 2016, and the net realized gains or losses on securities sold for the period were not materially different from amounts reported for financial reporting purposes. These differences are primarily due to wash sales which cannot be used for Federal income tax purposes in the current year and have been deferred for use in future years. The aggregate gross unrealized appreciation and depreciation of securities held by the Strategic Growth, Dividend Value, High Grade Income, Hawaii Municipal Bond and Short Duration Bond Funds for Federal income tax purposes at December 31, 2016 were as follows:
Strategic Growth Fund | Dividend Value Fund | High Grade Income Fund | Hawaii Municipal Bond Fund | |||||||||||||
Federal Tax Cost | $ | 25,312 | $ | 28,407 | $ | 59,949 | $ | 141,349 | ||||||||
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Gross Unrealized Appreciation | 2,976 | 11,488 | 1,598 | 2,065 | ||||||||||||
Gross Unrealized Depreciation | (2,143 | ) | (286 | ) | (781 | ) | (2,104 | ) | ||||||||
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Net Unrealized Appreciation (Depreciation) | $ | 833 | $ | 11,202 | $ | 817 | $ | (39 | ) | |||||||
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Short Duration Bond Fund | ||||
Federal Tax Cost | $ | 10,032 | ||
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Gross Unrealized Appreciation | 2 | |||
Gross Unrealized Depreciation | (67 | ) | ||
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Net Unrealized Depreciation | $ | (65 | ) | |
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8. | RISKS |
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. In addition, each Fund’s investments in debt securities are subject to “credit risk,” which is the risk that an issuer will be unable, or will be perceived to be unable, to repay its obligations at maturity and “interest rate risk” which is the potential for fluctuations in bond prices due to changing interest rates. Funds that invest primarily in high quality debt securities generally are subject to less credit risk than funds that invest in lower quality debt securities.
Certain debt securities are backed by credit enhancements from various financial institutions and financial guarantee assurance agencies. These credit enhancements reinforce the credit quality of the individual securities; however, if any of the financial institutions or financial guarantee assurance agencies’ credit quality should deteriorate, it could cause the individual security’s credit quality to change. Additionally, if any of the Funds concentrate their credit enhancements in any one financial institution, the risk of credit quality deterioration increases. The following table provides detail on the approximate percentage of each fund’s investments in securities with these types of enhancements, as well as the name of the entity providing the largest proportion of enhancements in the Fund.
Hawaii Municipal Bond Fund | ||
% of investments in securities with credit enhancements or liquidity enhancements | 11.91% | |
Largest % of investments in securities with credit enhancements or liquidity enhancements from a single institution | 6.46% (Assured Guaranty |
The value of asset-backed securities may be affected by the credit risk of the servicing agent for the pool, the originator of the loans or receivables, or the financial institution(s) providing the credit support. In addition to credit risk, asset-backed securities and other securities with early redemption features are subject to pre-payment risk. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate or an issuer may retire an outstanding bond early to reduce interest costs. A Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to the general prevailing interest rates at that time.
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Bishop Street Funds |
The market value of the Funds’ investments in fixed income securities may change in response to interest rate changes and other factors. During periods of falling interest rates, the values of fixed income securities generally rise. Conversely, during periods of rising interest rates, the values of such securities generally decline. Changes by recognized rating agencies in the ratings of any fixed income security and in the ability of an issuer to make payments of interest and principal may also affect the value of these investments.
In the normal course of business, the Funds enter into contracts that provide general indemnifications. The Funds’ maximum exposure under these arrangements is dependent on future claims that may be made against the Funds and, therefore, cannot be established; however, based on experience, the risk of loss from such claims is considered remote.
Strategic Growth Fund and Dividend Value Fund invest solely in equity securities. Purchases of equity securities are subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund’s equity securities may fluctuate drastically from day to day. Individual companies may report poor results or be negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility, which is the principal risk of investing in the Fund’s
9. | OTHER |
At December 31, 2016, the percentage of total shares outstanding held by shareholders owning 10% or greater of total shares outstanding of each Fund, which comprised omnibus accounts that were held on behalf of several individual shareholders, was as follows:
Number of Shareholders | % of Outstanding Shares | |||||||
Strategic Growth Fund, Class I Shares | 2 | 97.36 | % | |||||
Dividend Value Fund, Class I Shares | 2 | 97.86 | ||||||
High Grade Income Fund, Class I Shares* | 3 | 84.23 | ||||||
Hawaii Municipal Bond Fund, Class I Shares | 1 | 64.19 | ||||||
Hawaii Municipal Bond Fund, Class A Shares | — | — | ||||||
Short Duration Bond Fund, Class I Shares | 1 | 100.00 |
* | Includes one unaffiliated shareholder, all other shareholders in the above table are affiliated. |
10. | REGULATORY MATTERS |
In October 2016, the Securities and Exchange Commission (the “SEC”) released its Final Rule on Investment Company Reporting Modernization (the “Rule”). The Rule
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which introduces two new regulatory reporting forms for investment companies — Form N-PORT and Form N-CEN — also contains amendments to Regulation S-X which impact financial statement presentation, particularly the presentation of derivative investments. Although still evaluating the impact of the Rule, management believes that many of the Regulation S-X amendments are consistent with the Portfolios’ current financial statement presentation and expects that the Portfolios will be able to comply with the Rule’s Regulation S-X amendments by the August 1, 2017 compliance date.
11. | SUBSEQUENT EVENTS |
The Funds have evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no additional disclosures and/or adjustments were required to the financial statements.
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Bishop Street Funds |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Bishop Street Funds and the Shareholders of the Funds, as defined:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, 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 Strategic Growth Fund, Dividend Value Fund, High Grade Income Fund, Hawaii Municipal Bond Fund and Short Duration Bond Fund (constituting Bishop Street Funds, hereafter referred to as the “Funds”) as of December 31, 2016, the results of each of their operations for the year then ended, and with respect to the Short Duration Bond Fund from May 31, 2016 (commencement of operations) through December 31, 2016, the changes in each of their net assets for each of the periods indicated and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 as of December 31, 2016 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 28, 2017
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Bishop Street Funds | (unaudited) |
All mutual funds have operating expenses. As a shareholder of a mutual fund you incur two types of costs: (1) transaction costs, including applicable sales charges (loads); and (2) ongoing costs, which include (among others) costs for portfolio management, administrative services, distribution and service (12b-1), shareholder service fees, and shareholder reports like this one. It is important for you to understand the impact of these costs on your investment returns.
Operating expenses such as these are deducted from a mutual fund’s gross income and directly reduce its final investment return. These expenses are expressed as a percentage of the mutual fund’s average net assets; this percentage is known as the mutual fund’s expense ratio.
The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period from July 1, 2016 to December 31, 2016.
The table on the next page illustrates your Fund’s costs in two ways:
• | Actual Fund Return. This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The “Expenses Paid During Period” column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense cost from the Fund’s gross investment return. |
You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your actual account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the number shown for your Fund under “Expenses Paid During Period.”
• | Hypothetical 5% Return. This section helps you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had an annual 5% return before expenses during the year, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to make this 5% calculation. You can assess your Fund’s comparative cost by comparing the hypothetical result for your Fund in the “Expenses Paid During Period” column with those that appear in the same charts in the shareholder reports for other funds. |
Note: Because the return is set at 5% for comparison purposes — NOT your Fund’s actual return — the account values shown may not apply to your specific investment.
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(unaudited) |
Beginning Account Value 7/1/16 | Ending Account Value 12/31/16 | Annualized Expense Ratios | Expenses Paid During Period* | |||||||||||||
Strategic Growth Fund — Class I |
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Actual Fund Return | $ | 1,000.00 | $ | 983.50 | 1.25 | % | $ | 6.23 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,018.85 | 1.25 | 6.34 | ||||||||||||
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Dividend Value Fund — Class I |
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Actual Fund Return | $ | 1,000.00 | $ | 1,055.20 | 1.05 | % | $ | 5.42 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,019.79 | 1.05 | 5.33 | ||||||||||||
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High Grade Income Fund — Class I |
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Actual Fund Return | $ | 1,000.00 | $ | 961.60 | 0.76 | % | $ | 3.75 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,021.25 | 0.76 | 3.86 | ||||||||||||
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Hawaii Municipal Bond Fund — Class I |
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Actual Fund Return | $ | 1,000.00 | $ | 964.00 | 0.55 | % | $ | 2.72 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,022.30 | 0.55 | 2.80 | ||||||||||||
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Hawaii Municipal Bond Fund — Class A |
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Actual Fund Return | $ | 1,000.00 | 962.80 | 0.80 | % | 3.95 | ||||||||||
Hypothetical 5% Return | 1,000.00 | 1,021.05 | 0.80 | 4.07 | ||||||||||||
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Short Duration Bond Fund — Class I‡ | ||||||||||||||||
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Actual Fund Return | $ | 1,000.00 | $ | 993.40 | 0.55 | % | $ | 2.74 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,022.32 | 0.55 | 2.78 | ||||||||||||
|
‡ | Fund commenced operations on May 31, 2016. |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
Bishop Street Funds |
78
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Bishop Street Funds | (unaudited) |
Notice to Shareholders of Bishop Street Funds
For shareholders that do not have a December 31, 2016 taxable year end, this notice is for informational purposes only. For shareholders with a December 31, 2016 tax year end, please consult your tax adviser as to the pertinence of this notice.
Fund | (A)* Long Term Capital Gains Distributions (Tax Basis) | (B)* Ordinary Income Distributions (Tax Basis) | (C)* Tax Exempt Interest | (A+B+C) (D) Total Distributions (Tax Basis) | ||||||||||||
Strategic Growth Fund | 94.51 | % | 5.49 | % | 0.00 | % | 100.00 | % | ||||||||
Dividend Value Fund | 48.21 | % | 51.79 | % | 0.00 | % | 100.00 | % | ||||||||
High Grade Income Fund | 17.31 | % | 82.69 | % | 0.00 | % | 100.00 | % | ||||||||
Hawaii Municipal Bond Fund(6) | 14.06 | % | 3.71 | % | 82.23 | % | 100.00 | % | ||||||||
Short Duration Bond Fund | 0.00 | % | 100.00 | % | 0.00 | % | 100.00 | % |
* | Items (A), (B) and (C) are based on the percentage of each fund’s total distribution. |
(1) | Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of ordinary income distributions (the total of short-term capital gain and net investment income distributions). |
(2) | The percentage in this column represents the amount of “Qualifying Dividend Income” as created by the Jobs and Growth Tax Relief Reconciliation Act of 2003 and is reflected as a percentage of “Ordinary Income Distributions” (the total of short term capital gain and net investment income distributions). It is the intention of the Fund to designate the maximum amount permitted by the law. |
(3) | “U.S. Government Interest” represents the amount of interest that was derived from direct U.S. Government Obligations and distributed during the fiscal year. This amount is reflected as a percentage of total ordinary income distributions (the total of short term capital gain and net investment income distributions). Generally, interest from direct U.S. Government Obligations is exempt from state income tax. However, for residents of California, Connecticut and New York, the statutory threshold requirements were not satisfied to permit exemption of these amounts from state income. |
Bishop Street Funds |
80
For the fiscal year ended December 31, 2016, each fund has designated the following items with regard to distributions paid during the year.
Qualifying | Qualifying Dividend Income(2) | U.S. Government Interest(3) | Interest Related Dividends(4) | Short-Term Capital Gain Dividends(5) | ||||||||||||||
100.00 | % | 100.00 | % | 0.00 | % | 0.00 | % | 100.00 | % | |||||||||
100.00 | % | 100.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||
0.00 | % | 0.00 | % | 19.58 | % | 91.59 | % | 100.00 | % | |||||||||
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 100.00 | % | |||||||||
0.00 | % | 0.00 | % | 8.45 | % | 98.86 | % | 0.00 | % |
(4) | The percentage in this column represents the amount of “Interest Related Dividends” as created by the American Jobs Creation Act of 2004 and is reflected as a percentage of net investment income distributions that is exempt from U.S. withholding tax when paid to foreign investors. |
(5) | The percentage in this column represents the amount of “Short-Term Capital Gain Dividends” as created by the American Jobs Creation Act of 2004 and is reflected as a percentage of short-term capital gain distributions that is exempt from U.S. withholding tax when paid to foreign investors. |
(6) | For California income tax purposes, for the fiscal year ended December 31, 2016, the Hawaii Municipal Bond Fund designated 3.74% of their distributions paid from net investment income as exempt interest dividends under Section 17145 of the California Revenue and Taxation Code. |
December 31, 2016 | www.bishopstreetfunds.com |
81
Bishop Street Funds |
Board of Trustees and Officers
Set forth below are the names, age, position with the Trust, length of term of office, and the principal occupations for the last five years of each of the persons currently serving as Trustees and Officers of the Trust. Trustees who are deemed not to be “interested persons” of the Trust are referred to as “Independent Board Members.” Messrs. Nesher and Doran are Trustees who
Name, Address, Age1 | Position(s) Held with the Trust and Length of Time Served2 | Principal Occupation(s) During the Past 5 Years | ||
INTERESTED BOARD MEMBERS 3,4 | ||||
ROBERT NESHER 70 yrs. old | Chairman of the Board of Trustees (Since 1991) | SEI employee 1974 to present; currently performs various services on behalf of SEI Investments for which Mr. Nesher is compensated. | ||
WILLIAM M. DORAN 1701 Market Street Philadelphia, PA 19103 76 yrs. old | Trustee (Since 1991) | Self-Employed Consultant since 2003. Partner at Morgan, Lewis & Bockius LLP (law firm) from 1976 to 2003, counsel to the Trust, SEI Investments, SIMC, the Administrator and the Distributor. | ||
INDEPENDENT BOARD MEMBERS 4 | ||||
JOHN K. DARR 72 yrs. old | Trustee (Since 2008) | Retired. Chief Executive Officer, Office of Finance, Federal Home Loan Bank, from 1992 to 2007. | ||
JOSEPH T. GRAUSE, JR. 64 yrs. old | Trustee (Since 2011) | Self-Employed Consultant since January 2012. Director of Endowments and Foundations, Morningstar Investment Management, Morningstar, Inc., 2010 to 2011. Director of International Consulting and Chief Executive Officer of Morningstar Associates Europe Limited, Morningstar, Inc., 2007 to 2010. Country Manager — Morningstar UK Limited, Morningstar, Inc., 2005 to 2007. |
1 | Unless otherwise noted, the business address of each trustee is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. |
2 | Each Trustee shall hold office during the lifetime of this trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust |
3 | Denotes Trustees who may be deemed to be “interested” persons of the Fund as that term is defined in the 1940 Act by virtue of their affiliation with the Distributor and/or its affiliates. |
4 | Board Members oversee 5 funds in the Bishop Street Funds. |
Bishop Street Funds |
82
(unaudited) |
may be deemed to be “interested” persons of the Trust as that term is defined in the 1940 Act by virtue of their affiliation with the Trust’s Distributor. The Trust’s Statement of Additional Information (“SAI”) includes additional information about the Trustees and Officers. The SAI may be obtained without charge by calling 1-800-262-9565. The following chart lists Trustees and Officers as of December 31, 2016.
|
Other Directorships Held by Board Member5 |
Current Directorships: Trustee of The Advisor’s Inner Circle Fund II, Bishop Street Funds, The KP Funds, SEI Daily Income Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Director of SEI Structured Credit Fund, L.P., SEI Global Master Fund PLC, SEI Global Assets Fund PLC, SEI Global Investments Fund PLC, SEI Investments — Global Funds Services, Limited, SEI Investments Global, Limited, SEI Investments (Europe) Ltd., SEI Investments — Unit Trust Management (UK) Limited, SEI Multi-Strategy Funds PLC and SEI Global Nominee Ltd.
Former Directorships: Director of SEI Opportunity Fund, L.P. to 2010, Director of SEI Alpha Strategy Portfolios, LP to 2013. Trustee of SEI Liquid Asset Trust to 2016. |
Current Directorships: Trustee of The Advisors’ Inner Circle Fund II, Advisors’ Inner Circle Fund III, Bishop Street Funds, Winton Series Trust, Winton Diversified Opportunities Fund, Gallery Trust, SEI Daily Income Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust, SEI Catholic Values Trust and The KP Funds. Director of SEI Investments (Europe), Limited, SEI Investments — Global Funds Services, Limited, SEI Investments Global, Limited, SEI Investments (Asia), Limited, SEI Global Nominee Ltd. and SEI Investments — Unit Trust Management (UK) Limited. Director of the Distributor since 2003.
Former Directorships: Director of SEI Alpha Strategy Portfolios, LP to 2013. Trustee of O’Connor EQUUS (closed-end investment company) to 2016. Trustee of SEI Liquid Asset Trust to 2016. |
Current Directorships: Trustee of The Advisors’ Inner Circle Fund II, Bishop Street Funds and The KP Funds. Director of Federal Home Loan Bank of Pittsburgh, Meals on Wheels, Lewes/Rehoboth Beach and West Rehoboth Land Trust. |
Current Directorships: Trustee of The Advisors’ Inner Circle Fund II, Bishop Street Funds and The KP Funds. Director of The Korea Fund, Inc. |
5 | Directorships of Companies required to report to the securities and Exchange Commission under the Securities Exchange act of 1934 (i.e., “public companies”) or other investment companies under the 1940 act. |
December 31, 2016 | www.bishopstreetfunds.com |
83
Bishop Street Funds |
Name, Address, Age1 | Position(s) Held and Length of Time Served2 | Principal Occupation(s) During the Past 5 Years | ||
INDEPENDENT BOARD MEMBERS3 (continued) | ||||
MITCHELL A. JOHNSON 74 yrs. old | Trustee (Since 2005) | Retired. Private investor since 1994. | ||
BETTY L. KRIKORIAN 73 yrs. old | Trustee (Since 2005) | Vice President, Compliance, AARP Financial Inc. from 2008 – 2010. Self-Employed Legal and Financial Services Consultant since 2003. Counsel (in-house) for State Street Bank from 1995 to 2003. | ||
BRUCE R. SPECA 60 yrs. old | Trustee (Since 2011) | Global Head of Asset Allocation, Manulife Asset Management (subsidiary of Manulife Financial), 2010 to 2011. Executive Vice President — Investment Management Services, John Hancock Financial Services (subsidiary of Manulife Financial), 2003 to 2010. | ||
GEORGE J. 74 yrs. old | Trustee Lead Independent Trustee (Since 1999) | Retired since 2012. Self-employed Consultant, Newfound Consultants Inc., 1997 to 2011. | ||
OFFICERS | ||||
MICHAEL BEATTIE 51 yrs. old | President (Since 2011) | Director of Client Service, SEI Investments Company, since 2004. | ||
STEPHEN CONNORS 32 yrs. old | Treasurer, Controller and Chief Financial Officer (Since 2015) | Director, SEI Investments, Fund Accounting since December 2014. Audit Manager, Deloitte & Touche LLP, from 2011 to 2014. Audit Supervisor, BBD, LLP (formerly Briggs, Bunting & Dougherty, LLP), from 2007 to 2011. |
1 | Unless otherwise noted, the business address of each trustee is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. |
2 | Each Trustee shall hold office during the lifetime of this trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust |
3 | Board Members oversee 5 funds in the Bishop Street Funds. |
Bishop Street Funds |
84
(unaudited) |
Other Directorships Held by Board Member/Trustee4 |
Current Directorships: Trustee of The Advisors’ Inner Circle Fund II, The KP Funds, Bishop Street Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Institutional International Trust, SEI Institutional Managed Trust, SEI Institutional Investments Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Director of Federal Agricultural Mortgage Corporation (Farmer Mac) since 1997.
Former Directorships: Director of the SEI Alpha Strategy Portfolios, LP to 2013. SEI Liquid Asset Trust to 2016. |
Current Directorships: Trustee of The Advisors’ Inner Circle Fund II, Bishop Street Funds and The KP Funds. |
Current Directorships: Trustee of The Advisors’ Inner Circle Fund II, Bishop Street Funds and The KP Funds. |
Current Directorships: Trustee/ Director of State Street Navigator Securities Lending Trust, The Advisors’ Inner Circle Fund II, Bishop Street Funds, The KP Funds, SEI Structured Credit Fund, LP, SEI Daily Income Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Member of the independent review committee for SEI’s Canadian-registered mutual funds.
Former Directorships: Director of SEI Opportunity Fund, L.P. to 2010, Director of SEI Alpha Strategy Portfolios, LP to 2013. Trustee of SEI Liquid Asset Trust to 2016. |
None. |
None. |
4 | Directorships of Companies required to report to the securities and Exchange Commission under the Securities Exchange act of 1934 (i.e., “public companies”) or other investment companies under the 1940 act. |
December 31, 2016 | www.bishopstreetfunds.com |
85
Bishop Street Funds |
Name, Address, Age1 | Position(s) Held with the Trust and Length of Time Served2 | Principal Occupation(s) During the Past 5 Years | ||
OFFICERS (continued) | ||||
RUSSELL EMERY 54 yrs. old | Chief Compliance Officer (Since 2006) | Chief Compliance Officer of SEI Structured Credit Fund, LP since June 2007. Chief Compliance Officer of SEI Alpha Strategy Portfolios, LP from June 2007 to September 2013. Chief Compliance Officer of The Advisors’ Inner Circle Fund II, Bishop Street Funds, The KP Funds, The Advisors’ Inner Circle Fund III, Winton Series Trust, Winton Diversified Opportunities Fund (closed-end investment company), Gallery Trust, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Chief Compliance Officer of SEI Opportunity Fund, L.P. until 2010. Chief Compliance Officer of O’Connor EQUUS (closed-end investment company) to 2016. Chief Compliance Officer of SEI Liquid Asset Trust to 2016. | ||
DIANNE M. DESCOTEAUX 39 yrs. old | Vice President and Secretary (Since 2011) | Counsel at SEI Investments since 2010. Associate at Morgan, Lewis & Bockius LLP from 2006 to 2010. | ||
LISA WHITTAKER 38 yrs. old | Vice President and Assistant Secretary (Since 2013) | Attorney, SEI Investments Company (2012-present). Associate Counsel, The Glenmede Trust Company (2011-2012). Associate, Drinker Biddle & Reath LLP (2006-2011). | ||
JOHN Y. KIM 35 yrs. old | Vice President and Secretary (Since 2014) | Attorney, SEI Investments Company (2014-present). Associate Stradley Ronan Stevens & Young (2009-2014). | ||
BRIDGET E. SUDALL 36 yrs. old | Anti-Money Laundering Compliance Officer and Privacy Officer (Since 2015) | Senior Associate and AML Officer, Morgan Stanley Alternative Investment Partners, April 2011 to March 2015. Investor Services Team Lead, Morgan Stanley Alternative Investment Partners, 2007 to 2011. |
1 | Unless otherwise noted, the business address of each trustee is SEI Investments Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. |
2 | Each Trustee shall hold office during the lifetime of this trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust |
Bishop Street Funds |
86
(unaudited) |
Other Directorships Held by Trustee |
None. |
None. |
None. |
None. |
None. |
December 31, 2016 | www.bishopstreetfunds.com |
87
INVESTMENT ADVISER
BISHOP STREET CAPITAL MANAGEMENT
HONOLULU, HI 96813
ADMINISTRATOR
SEI INVESTMENTS GLOBAL FUNDS SERVICES
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
DISTRIBUTOR
SEI INVESTMENTS DISTRIBUTION CO.
ONE FREEDOM VALLEY DRIVE
OAKS, PA 19456
TRANSFER AGENT
DST SYSTEMS, INC.
KANSAS CITY, MO 64121
CUSTODIAN
MUFG UNION BANK, N.A.
SAN FRANCISCO, CA 94101
LEGAL COUNSEL
MORGAN, LEWIS & BOCKIUS LLP
PHILADELPHIA, PA 19103
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
PHILADELPHIA, PA 19103
FORMOREINFORMATIONABOUT BISHOP STREET FUNDS,CALL 1-800-262-9565ORYOUR INVESTMENT SPECIALISTVISITUSONLINEATWWW.BISHOPSTREETFUNDS.COM
![]() | BISHOP STREET FUNDS P.O. BOX 219721 KANSAS CITY, MO 64121-9721 |
THISREPORTANDTHEFINANCIALSTATEMENTSCONTAINEDHEREINARESUBMITTEDFORTHEGENERALINFORMATIONOF BISHOP STREET FUNDS’SHAREHOLDERS. THISREPORTISNOTAUTHORIZEDFORDISTRIBUTIONTOPROSPECTIVEINVESTORSUNLESSPRECEDEDORACCOMPANIEDBYANEFFECTIVEPROSPECTUS.
SHARESOF BISHOP STREET FUNDSARE NOTDEPOSITSOROBLIGATIONSOF,ORGUARANTEEDBY FIRST HAWAIIAN BANKORANYOFITSAFFILIATES. SUCHSHARESAREALSO NOTFEDERALLYINSUREDBYTHE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,ORANYOTHERAGENCY. INVESTMENTINSHARESOFMUTUALFUNDSINVOLVESRISK,INCLUDINGTHEPOSSIBLELOSSOFPRINCIPAL. THE BISHOP STREET FUNDSAREDISTRIBUTEDBY SEI INVESTMENTS DISTRIBUTION CO.,WHICHIS NOTAFFILIATEDWITH FIRST HAWAIIAN BANK, BANKOFTHE WESTOR BANCWEST CORPORATION. BANCWEST CORPORATIONISAWHOLLY-OWNEDSUBSIDIARYOF BNP PARIBAS.
BSF-AR-006-2200
Item 2. | Code of Ethics. |
The Registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, controller or principal accounting officer, and any person who performs a similar function. There have been no amendments to or waivers granted to this code of ethics during the past fiscal year.
Item 3. | Audit Committee Financial Expert. |
(a)(1) The registrant’s board of trustees has determined that the registrant has at least one audit committee financial expert serving on the audit committee.
(a) (2) The audit committee financial experts are George Sullivan and John Darr, and are independent as defined in Form N-CSR Item 3 (a) (2).
Item 4. | Principal Accountant Fees and Services. |
Fees billed by PricewaterhouseCoopers (PwC LLP) Related to the Trust
PwC LLP billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows:
2016
| 2015
| |||||||||||||
All fees and services to the Trust that were pre- approved | All fees and services to service affiliates that were pre- approved | All other fees and services to service affiliates that did not require pre- approval | All fees and services to the Trust that were pre- approved | All fees and services to service affiliates that were pre- approved | All other fees and services to service affiliates that did not require pre- approval | |||||||||
(a)
| Audit Fees(1)
| 124,900 | N/A | N/A | $95,400 | N/A | N/A | |||||||
(b)
| Audit-Related Fees
| N/A | N/A | N/A | N/A | N/A | N/A | |||||||
(c)
| Tax Fees
| N/A | N/A | N/A | N/A | N/A | N/A | |||||||
(d)
| All Other Fees
| N/A | N/A | N/A | N/A | N/A | N/A |
Notes:
(1) | Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. |
(e)(1)
(e)(1) The Trust’s Audit Committee has adopted and the Board of Trustees has ratified an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”), which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor of the Funds may be pre-approved.
The Policy provides that all requests or applications for proposed services to be provided by the independent auditor must be submitted to the Registrant’s Chief Financial Officer (“CFO”) and must include a detailed description of the services proposed to be rendered. The CFO will determine whether such services:
(1) require specific pre-approval; (2) are included within the list of services that have received the general pre-approval of the Audit Committee pursuant to the Policy; or (3) have been previously pre-approved in connection with the independent auditor’s annual engagement letter for the applicable year or otherwise. In any instance where services require pre-approval, the Audit Committee will consider whether such services are consistent with SEC’s rules and whether the provision of such services would impair the auditor’s independence.
Requests or applications to provide services that require specific pre-approval by the Audit Committee will be submitted to the Audit Committee by the CFO. The Audit Committee will be informed by the CFO on a quarterly basis of all services rendered by the independent auditor. The Audit Committee has delegated specific pre-approval authority to either the Audit Committee Chair or financial expert, provided that the estimated fee for any such proposed pre-approved service does not exceed $100,000 and any pre-approval decisions are reported to the Audit Committee at its next regularly scheduled meeting.
Services that have received the general pre-approval of the Audit Committee are identified and described in the Policy. In addition, the Policy sets forth a maximum fee per engagement with respect to each identified service that has received general pre-approval.
All services to be provided by the independent auditor shall be provided pursuant to a signed written engagement letter with the Registrant, the investment advisor or applicable control affiliate (except that matters as to which an engagement letter would be impractical because of timing issues or because the matter is small may not be the subject of an engagement letter) that sets forth both the services to be provided by the independent auditor and the total fees to be paid to the independent auditor for those services.
In addition, the Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the independent auditor and to assure the auditor’s independence from the Registrant, such as reviewing a formal written statement from the independent auditor delineating all relationships between the independent auditor and the Registrant, and discussing with the independent auditor its methods and procedures for ensuring independence.
(e)(2) Percentage of fees billed applicable to non-audit services approved pursuant to the “de minimis” exception of Rule 2-01(c)(7)(i)(C) were as follows:
2016 | 2015 | |||
Audit-Related Fees
| N/A
| N/A
| ||
Tax Fees
| N/A
| N/A
| ||
All Other Fees
| N/A
| N/A
|
(f) Not applicable.
(g) The aggregate non-audit fees and services billed by PwC for services rendered to the Registrant, and rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for the last two fiscal years were $0 and $0 for 2016 and 2015, respectively.
(h) During the past fiscal year, all non-audit services provided by Registrant’s principal accountant to either Registrant’s investment adviser or to any entity controlling, controlled by, or under common control with Registrant’s investment adviser that provides ongoing services to Registrant were pre-approved by the audit committee of Registrant’s Board of Trustees. Included in the audit committee’s pre-approval was the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant’s independence.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to open-end management investment companies.
Item 6. | Schedule of Investments |
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to open-end management investment companies.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies |
Not applicable. Effective for closed-end management investment companies for fiscal years ending on or after December 31, 2005
Item 9. | Purchases of Equity Securities by Closed-End Management Company and Affiliated Purchasers. |
Not applicable to open-end management investment companies.
Item 10. | Submission of Matters to a Vote of Security Holders. |
Not applicable.
Item 11. | Controls and Procedures. |
((a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions have concluded that the Registrant’s disclosure controls and procedures, as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c)) as of a date within 90 days of the
filing date of the report, are effective based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 270.30a-15(b)) or 240.15d-15(b)).
(b) There has been no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17CFR 270.3a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Items 12. | Exhibits. |
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), is filed herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing as an exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Bishop Street Funds | |||||
By (Signature and Title)* | /s/ Michael Beattie | |||||
Michael Beattie, President | ||||||
Dated: March 9, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Michael Beattie | |||||
Michael Beattie, President | ||||||
Dated: March 9, 2017 | ||||||
By (Signature and Title)* | /s/ Stephen Connors | |||||
Stephen Connors, | ||||||
Treasurer, Controller & CFO | ||||||
Dated: March 9, 2017 |
* | Print the name and title of each signing officer under his or her signature. |