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 811-8572 BISHOP STREET FUNDS (Exact name of registrant as specified in charter) -------- 2 Oliver Street Boston, MA 02109 (Address of principal executive offices) (Zip code) DST Systems Inc. Kansas City, MO 64141 (Name and address of agent for service) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610-254-1000 DATE OF FISCAL YEAR END: DECEMBER 31, 2003 DATE OF REPORTING PERIOD: JUNE 30, 2003 ITEM 1. REPORTS TO STOCKHOLDERS. [Background Compass Graphic Omitted] BISHOP STREET FUNDS SEMI-ANNUAL REPORT JUNE 30, 2003 EQUITY FUND STRATEGIC GROWTH FUND TAX MANAGED EQUITY FUND HIGH GRADE INCOME FUND HAWAII MUNICIPAL BOND FUND MONEY MARKET FUND TREASURY MONEY MARKET FUND INVESTMENT ADVISER BISHOP STREET CAPITAL MANAGEMENT [BISHOP STREET FUNDS Logo Omitted] YOUR AVENUE TO SOUND INVESTMENT <page> [Inside Cover Graphic Omitted] <page> BISHOP STREET TABLE OF CONTENTS FUNDS LETTER TO SHAREHOLDERS............................................. 2 INVESTMENT ADVISER'S REPORT........................................ 4 EQUITY FUND Management Discussion........................................ 6 Statement of Net Assets...................................... 8 STRATEGIC GROWTH FUND Management Discussion........................................ 14 Statement of Net Assets...................................... 16 TAX MANAGED EQUITY FUND Management Discussion........................................ 20 Statement of Net Assets...................................... 22 HIGH GRADE INCOME FUND Management Discussion........................................ 28 Statement of Net Assets...................................... 30 HAWAII MUNICIPAL BOND FUND Management Discussion........................................ 36 Statement of Net Assets...................................... 38 MONEY MARKET & Treasury Money Market Funds Management Discussion........................................ 48 Statements of Net Assets..................................... 49 Statements of Operations........................................... 56 Statements of Changes in Net Assets................................ 58 Financial Highlights............................................... 62 Notes to Financial Statements...................................... 66 Board of Trustees and Officers..................................... 72 1 BISHOP STREET LETTER TO SHAREHOLDERS FUNDS [Photo Omitted] Gregory Ratte DEAR SHAREHOLDER: Risk paid off in financial markets in the second quarter. In the U.S. equity market, the top performing popular benchmark was the technology-heavy NASDAQ composite, up a whopping 21.1% versus a still very respectable 15.4% for the broad S&P 500 Composite Index. At the same time, small- and mid-cap stocks handily beat their more mature large-cap cousins, while on average the much beleaguered international markets -- led by the riskiest emerging markets -- substantially outpaced the U.S. Finally, in the fixed-income markets, junk bonds, or "high-yield credits" in polite society, outperformed all other more conservative fixed-income securities. On the economic front, the story was much more mixed. While the Federal Reserve Bank's (Fed) May deflation alert sent interest rates to fresh multi-decade lows, and the President's tax plan promised immense fiscal stimulus, the economy itself has remained stubbornly weak. The expected post-war capital spending recovery has still not materialized and unemployment continues to rise. Meanwhile, mildly deflationary recessions in both Japan and Germany have added to U.S. softness despite the near-term salutary effects of a weaker U.S. dollar. The only bright spot remains the American consumer, who continued to refinance and spend with abandon, despite declining employment and stagnating incomes. Given the unprecedented government stimulus, the still vibrant consumer and a projected recovery in business spending, the second half of the year should show an economy expanding at more than twice the rate in the first half. This Bishop Street Funds 2 [BISHOP STREET FUNDS Logo Omitted] would still be below the normal surge in an economy rebounding from a recession, but that is to be expected given the mild nature of the recession. Although the weak international economy and the lingering excesses of the 1990's investment bubble should cap the economy over the near term, a stronger end to this year should provide momentum for an even stronger 2004. On the fixed-income front, we believe that the great bull market in bonds that began in 1982 is probably over. During that period, the yield on the ten-year Treasury note dropped from 15% to under 3 1/4% in June as inflation was wrung out of the system. Given the Fed's promise to aggressively counter any whiff of deflation, along with a very easy monetary policy, significant fiscal stimulus and a weak currency, yields on Treasury bonds have likely bottomed. In the near term, the Fed's stated intention to hold short rates steady will anchor the yield curve and keep intermediate- and long-term rates from rising too much. That said, the "salad days" of high-coupons and capital gains on bonds due to falling interest rates are behind us. As in the stock market, investors should expect lower nominal bond returns in the years ahead. All in all the outlook is for steady economic healing, but probably modest financial market returns once the equity market has stabilized. Thank you for your continued support and confidence. Sincerely, /s/ Gregory Ratte Gregory Ratte Chief Investment Officer Bishop Street Capital Management June 30, 2003 3 www.bishopstreetfunds.com BISHOP STREET INVESTMENT ADVISER'S REPORT FUNDS Since the beginning of the year, government authorities have been doing everything possible to set a recovery in motion. At the June 25th Federal Open Market Committee (FOMC) meeting, the Fed cut their policy lending rate another 25 basis points to 1%. Mortgage refinancing is back at record levels, which will result in additional cash in consumer's pockets. The Bush Administration pushed through another tax cut, which could add $210 billion to the economy over the next fifteen months. This combined monetary and fiscal stimulus has injected tremendous additional liquidity into the financial system. In addition, consumers and corporations alike have been repairing their balance sheets, which will support economic growth once demand returns. A decisive military victory in Iraq early in the period helped to reduce geopolitical uncertainties and kick-start a 4-month climb in U.S. equities. All major indices surged: the S&P 500 Composite Index advanced 12% for the 6-month period, and small caps were standouts with the Russell 2000 Index up 18%. Although early in the year the negative war sentiment influenced money market yields, in the second quarter yields have been heading higher. Prior to the last Fed meeting, 2-year Treasury yields reached 1.07%. With the Fed rate decrease only 1/4 of a point, bond yields rose sharply as investors concluded that interest rates had bottomed. The money market yield curve, which remained flat since mid-March, steepened slightly at the end of the period as well. Through much of the first half of the year, the money market world focused on potential rate cuts at the FOMC meetings in March and June. Although the Fed left short-term rates unchanged in March, with the Fed 1/4 point rate cut at the end of June the Federal funds rate reached the lowest rate in 45 years. Heightened industry attention to the pending rate cuts was a result of the Bishop Street Funds 4 [BISHOP STREET FUNDS Logo Omitted] increasingly small spread between money market yields and expense ratios. With 13 rate reductions since 2001, the industry has been struggling to cut fees and keep yields positive. Additional pressure has been added by the increased competition from bank deposits seeking to attract money market fund customers. Although some industry experts believe that the 1/4 point cut left room for the Fed to cut rates further should the economic recovery stall, it is likely that short-term interest rates will remain low for the foreseeable future in order to protect against potential deflation and allow the economy to gain traction. June 30, 2003 5 www.bishopstreetfunds.com BISHOP STREET MANAGEMENT DISCUSSION FUNDS Equity Fund - -------------------------------------------------------------------------------- In the second quarter of 2003, U.S. equity markets sustained the rally which began in mid-March, as investors turned their attention away from Iraq towards an improving economic picture. Despite some downward pressure in its closing days, the quarter saw the S&P 500 Composite Index jump 15.4%, the strongest quarterly performance since 1998 and one of the three best quarters in the past 15 years. For the six months ended June 30, 2003, the Index is up 11.8%. All sectors of the stock market showed absolute gains for the quarter, led by economically sensitive sectors (financials, consumer discretion, information technology) and previously beaten-down sectors (telecom and utilities). More defensive healthcare, consumer staples, and energy stocks lagged the Index. Stock prices appear to be discounting significant economic recovery in the second half of the year, despite scant confirmation that the widely expected post-war bounce has yet materialized. Investors evidently are betting that the positive effects of tax cuts, low interest rates, and a weaker dollar will begin to be seen shortly. We are generally in agreement with that view, but note that the economic recovery remains fragile. For the second quarter, the Bishop Street Equity Fund Institutional Class Shares* returned 14.1%, slightly lagging the S&P 500 Composite Index's total return of 15.4%. This moderate underperformance was driven primarily by the Fund's large-cap orientation, as mid-cap and small-cap stocks strongly led the market during the quarter. Year to date, the Fund is up 11.2%. We remain confident that our focus on financially strong companies in growing markets will provide superior return relative to risk, and reward investors with longer-term time horizons. * During the second quarter ended June 30, 2003, the Bishop Street Equity Fund (Class A Shares) produced a total return of 13.9%. Including the maximum sales charge of 5.75%, total return was 7.5%. Past performance is no guarantee of future results. Bishop Street Funds 6 Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE BISHOP STREET EQUITY FUND, INSTITUTIONAL CLASS OR CLASS A, VERSUS THE S&P 500 COMPOSITE INDEX AND THE CONSUMER PRICE INDEX. [Line Graph Omitted] Plot Points as Follows: Bishop Street Bishop Street Equity Fund, Equity Fund, S&P 500 Consumer Institutional Class# Class A#+ Composite Index Price Index 1/31/97 $10,000 $ 9,425 $10,000 $10,000 6/97 11,105 10,466 11,351 10,060 12/97 12,032 11,340 12,551 10,151 6/98 14,165 13,351 14,773 10,201 12/98 16,008 15,088 16,141 10,293 6/99 17,807 16,784 18,139 10,386 12/99 19,909 18,739 19,535 10,553 6/00 19,698 18,497 19,453 10,765 12/00 16,684 15,649 17,757 10,906 6/01 13,901 12,281 16,567 11,115 12/01 12,411 10,947 15,646 11,070 6/02 10,269 9,045 13,587 11,226 12/02 9,301 8,192 12,188 11,338 6/03 10,342 9,091 13,621 11,463 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. #Account value if you reinvested income and capital gains. AVERAGE ANNUAL TOTAL RETURNS++ - ---------------------------------------------------------- SIX ONE ANNUALIZED ANNUALIZED ANNUALIZED MONTH YEAR 3 YEAR 5 YEAR INCEPTION RETURN+++ RETURN RETURN RETURN TO DATE - ---------------------------------------------------------- 11.19% 0.71% -19.33% -6.10% 0.68% Institutional Class* - ---------------------------------------------------------- 10.98% 0.51% -19.52% -6.30%+ -11.14% Class A** - ---------------------------------------------------------- 4.56% -5.22% -21.10% -7.40%+ -12.43% Class A, with load*** - ---------------------------------------------------------- * Commenced operations on 01/30/97. ** Commenced operations on 06/14/99. *** Reflects 5.75% sales charge. + Prior performance information represents performance of the Institutional Class, which was offered on 01/30/97. Institutional Class performance has been adjusted to reflect the Class A sales charge, but has not been adjusted to reflect Class A Rule 12b-1 fees and expenses. Had that adjustment been made, performance would be lower than that shown. ++ Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. +++ The six month return has not been annualized. June 30, 2003 7 www.bishopstreetfunds.com Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS* -------------------------------------------------------------------------- Percentage of Investments* ------------------------------------------------------------------------ 1. Pfizer 4.9% ------------------------------------------------------------------------ 2. General Electric 3.6% ------------------------------------------------------------------------ 3. Amgen 3.3% ------------------------------------------------------------------------ 4. American International Group 3.0% ------------------------------------------------------------------------ 5. Bank of America 3.0% ------------------------------------------------------------------------ 6. Wal-Mart Stores 2.9% ------------------------------------------------------------------------ 7. Microsoft 2.8% ------------------------------------------------------------------------ 8. Johnson & Johnson 2.7% ------------------------------------------------------------------------ 9. Symantec 2.7% ------------------------------------------------------------------------ 10. Citigroup 2.7% -------------------------------------------------------------------------- *EXCLUDES SECURITIES PURCHASED WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING. STATEMENT OF NET ASSETS Market Value Shares (000) ---------- --------- COMMON STOCK -- 96.7% ADVERTISING -- 1.7% 32,630 Omnicom Group (A) $ 2,340 -------- AEROSPACE & DEFENSE -- 1.7% 32,810 General Dynamics 2,379 -------- AIR FREIGHT & COURIERS -- 1.4% 30,890 United Parcel Service, Cl B (A) 1,968 -------- BANKS -- 8.3% 51,140 Bank of America 4,042 55,720 Mellon Financial 1,546 54,150 Washington Mutual 2,236 71,040 Wells Fargo 3,581 -------- 11,405 -------- BIOTECHNOLOGY -- 4.8% 67,130 Amgen* 4,460 80,960 Baxter International 2,105 -------- 6,565 -------- Bishop Street Funds 8 Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) ---------- --------- BROADCASTING & CABLE -- 2.7% 53,020 Clear Channel Communications* $ 2,248 45,894 Univision Communications, Cl A* (A) 1,395 -------- 3,643 -------- CHEMICALS - DIVERSE -- 0.8% 45,680 Ecolab (A) 1,169 -------- COMPUTER HARDWARE -- 0.8% 35,000 Dell Computer* 1,119 -------- DIVERSE FINANCIAL SERVICES -- 4.6% 85,193 Citigroup 3,646 15,411 Fannie Mae 1,039 18,740 Goldman Sachs Group 1,570 -------- 6,255 -------- ELECTRICAL SERVICES -- 0.4% 28,480 Duke Energy 568 -------- FOOD DISTRIBUTORS -- 1.5% 67,940 Sysco 2,041 -------- GENERAL MERCHANDISE -- 5.0% 36,690 Michaels Stores* (A) 1,396 40,660 Target 1,539 73,760 Wal-Mart Stores 3,959 -------- 6,894 -------- HEALTHCARE - DISTRIBUTION/SERVICES -- 1.7% 47,700 UnitedHealth Group 2,397 -------- HOTELS -- 1.1% 47,310 Carnival (A) 1,538 -------- HOUSEHOLD PRODUCTS -- 1.8% 27,710 Procter & Gamble 2,471 -------- INDUSTRIAL CONGLOMERATES -- 5.1% 16,540 3M 2,134 170,405 General Electric 4,887 -------- 7,021 -------- INDUSTRIAL GASES -- 1.7% 38,100 Praxair 2,290 -------- June 30, 2003 9 www.bishopstreetfunds.com Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) ---------- --------- INSURANCE - MULTI-LINE -- 6.5% 35,090 Allstate $ 1,251 22,980 AMBAC Financial Group 1,522 73,245 American International Group 4,042 131,107 Travelers Property Casualty, Cl B 2,068 -------- 8,883 -------- INTEGRATED TELECOMMUNICATION SERVICES -- 2.8% 43,200 SBC Communications 1,104 67,450 Verizon Communications 2,661 -------- 3,765 -------- MACHINERY - INDUSTRIAL -- 3.2% 33,410 Illinois Tool Works (A) 2,200 50,750 SPX* (A) 2,236 -------- 4,436 -------- MOVIES & ENTERTAINMENT -- 0.7% 50,660 Walt Disney 1,000 -------- OIL & GAS - DRILLING -- 1.6% 94,350 GlobalSantaFe 2,202 -------- OIL & GAS - EQUIPMENT/SERVICES -- 1.2% 35,420 Schlumberger 1,685 -------- OIL & GAS - EXPLORATION/PRODUCTION -- 1.0% 25,870 Devon Energy 1,381 -------- OIL & GAS - INTEGRATED -- 2.3% 87,240 Exxon Mobil 3,133 -------- PHARMACEUTICALS -- 11.2% 41,810 Abbott Laboratories 1,829 12,690 Forest Laboratories* 695 71,338 Johnson & Johnson 3,688 195,042 Pfizer 6,661 53,891 Wyeth 2,455 -------- 15,328 -------- PRINTING & PUBLISHING -- 0.7% 22,490 Viacom, Cl B* 982 -------- RETAIL - BEVERAGES -- 0.9% 25,410 Anheuser-Busch 1,297 -------- Bishop Street Funds 10 Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Shares/Face Value Amount (000) (000) ------------ --------- RETAIL - HOME IMPROVEMENT -- 0.9% 38,760 Home Depot $ 1,284 -------- RETAIL - TOBACCO -- 1.1% 32,800 Altria Group 1,490 -------- SEMI-CONDUCTORS -- 2.4% 71,630 Intel 1,489 57,852 Linear Technology (A) 1,863 -------- 3,352 -------- SEMI-CONDUCTORS EQUIPMENT -- 1.4% 125,150 Applied Materials* 1,985 -------- SOFT DRINKS -- 1.8% 55,090 PepsiCo 2,451 -------- SYSTEMS SOFTWARE -- 8.2% 129,710 BEA Systems* (A) 1,409 58,716 Mercury Interactive* (A) 2,267 151,434 Microsoft 3,878 83,412 Symantec* 3,658 -------- 11,212 -------- TELECOMMUNICATION EQUIPMENT -- 2.1% 171,770 Nokia ADR 2,822 -------- WIRELESS TELECOMMUNICATION SERVICES -- 1.6% 109,300 Vodafone Group ADR (A) 2,148 -------- TOTAL COMMON STOCK (Cost $133,289) 132,899 -------- CORPORATE OBLIGATIONS (B) -- 4.8% BANKS -- 4.7% AMEX Centurion Bank, MTN $1,629 1.054%, 09/24/03 1,629 Bear Stearns, MTN 3,257 1.505%, 02/03/04 3,257 Washington Mutual Bank 1,629 1.180%, 11/26/03 1,629 -------- TOTAL CORPORATE OBLIGATIONS (Cost $6,515) 6,515 -------- June 30, 2003 11 www.bishopstreetfunds.com Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Face Amount Value (000)/Shares (000) ------------ --------- COMMERCIAL PAPER (B) -- 4.5% Countrywide Home Loans $2,932 1.500%, 07/01/03 $ 2,932 Four Winds Funding 3,257 1.550%,07/01/03 3,257 -------- TOTAL COMMERCIAL PAPER (Cost $6,189) 6,189 -------- CASH EQUIVALENTS -- 2.5% 1,725,471 Dreyfus Cash Management Fund 1,725 1,725,472 Fidelity Institutional Money Market Fund 1,725 -------- TOTAL CASH EQUIVALENTS (Cost $3,450) 3,450 -------- REPURCHASE AGREEMENTS (B) -- 4.1% Bank of America, 1.440%, dated 06/30/03, due 07/01/03, repurchase price $3,782,239 (collateralized by a mortgage obligation total par value $5,314,317, 6.000%, $3,782 05/20/33: total market value $3,971,193) 3,782 Lehman Brothers, 1.455%, dated 06/30/03, due 07/01/03, repurchase price $1,845,721 (collateralized by a mortgage obligation total par value $1,882,947, 4.000%, 1,846 05/25/33: total market value $1,938,281) 1,846 -------- TOTAL REPURCHASE AGREEMENTS (Cost $5,628) 5,628 -------- TOTAL INVESTMENTS (Cost $155,071) -- 112.6% 154,681 -------- OTHER ASSETS AND LIABILITIES -- (12.6)% Payable Upon Return of Securities Loaned (18,332) Investment Adviser Fees Payable (82) Administrative Fees Payable (13) Other Assets and Liabilities, Net 1,150 -------- TOTAL OTHER ASSETS AND LIABILITIES (17,277) -------- Bishop Street Funds 12 Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value (000) --------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 16,279,553 Outstanding Shares of Beneficial Interest $199,350 Fund Shares of Class A (unlimited authorization -- no par value) Based on 183,251 Outstanding Shares of Beneficial Interest 6,763 Distributions in Excess of Net Investment Income (9) Accumulated Net Realized Loss on Investments (68,310) Net Unrealized Depreciation on Investments (390) -------- TOTAL NET ASSETS -- 100.0% $137,404 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS ($135,883,293 / 16,279,553 SHARES) $ 8.35 ======== NET ASSET VALUE, REDEMPTION PRICE PER SHARE -- CLASS A ($1,520,980 / 183,251 SHARES) $ 8.30 ======== MAXIMUM OFFERING PRICE PER SHARE -- CLASS A SHARES ($8.30 / 94.25%) $ 8.81 ======== * NON-INCOME PRODUCING SECURITY (A) THE SECURITY OR A PORTION OF THIS SECURITY IS ON LOAN AT JUNE 30, 2003 (SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF SECURITIES ON LOAN AT JUNE 30, 2003 WAS $17,661,011. (B) THESE SECURITIES WERE PURCHASED WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING (SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF SUCH SECURITIES AS OF JUNE 30, 2003 WAS $18,332,313. ADR -- AMERICAN DEPOSITORY RECEIPT CL -- CLASS MTN -- MEDIUM TERM NOTE THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 13 www.bishopstreetfunds.com BISHOP STREET MANAGEMENT DISCUSSION FUNDS Strategic Growth Fund - -------------------------------------------------------------------------------- The U.S. market performed strongly this quarter, with the S&P 500 Composite and Nasdaq 100 Indices rising some 15.4% and 18.0%, respectively. Hopes of a stabilizing economy after the end of the war and a growing number of positive earnings revisions backed by more confident feedback from corporations fueled this rally. The Strategic Growth Fund portfolio strongly outperformed the S&P 500 Composite Index benchmark for the second quarter, returning 18.9% as compared to 15.4% for the quarter. Five holdings were replaced in the portfolio during the quarter, with a globally neutral impact on sector exposures. The portfolio's strong performance was driven by companies across a wide range of industries: the top 10 performers belonging to 9 different industry groups, ranging from credit cards to hardware and healthcare services. While the economic rebound is less strong than we had hoped to see after the war, we continue to believe that the recovery is on track. Better corporate earnings will also help market confidence build up gradually for the medium-term, regardless of any short-term correction following the recent rise. This makes us confident that the current situation is sustainable, although a short-term correction would not be abnormal after the strong performance of the last few months. Both second quarter earnings and the outlook for the rest of the year should reflect the beneficial effects of exchange rates and interest rates, and help current valuations look acceptable. Because we don't know when demand will start picking up, however, we expect our quantitative model to keep the current global sector exposures unchanged for the moment, rather than shift further to economically-sensitive holdings. Therefore, it is likely that portfolio turnover in the near term will be driven primarily by company-specific factors rather than macroeconomics. Bishop Street Funds 14 Strategic Growth Fund (UNAUDITED) - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE BISHOP STREET STRATEGIC GROWTH FUND INSTITUTIONAL CLASS VERSUS THE S&P 500/BARRA GROWTH INDEX, THE S&P 500 COMPOSITE INDEX, THE CONSUMER PRICE INDEX AND THE LIPPER LARGE CAP GROWTH CLASSIFICATION. [Line Graph Omitted] Plot Points as Follows: Bishop Street S&P 500 S&P 500 Consumer Lipper Large Strategic Growth Fund, /BARRA Composite Price Cap Growth Institutional Class# Growth Index Index Index Classificiation 7/1/02 $10,000 $10,000 $10,000 $10,000 $10,000 7/02 9,060 9,520 9,220 10,020 9,255 8/02 9,160 9,580 9,281 10,040 9,279 9/02 8,289 8,588 8,272 10,060 8,445 10/02 8,769 9,383 9,000 10,080 9,119 11/02 9,199 9,838 9,530 10,090 9,512 12/02 8,639 9,198 8,970 10,100 8,843 1/03 8,599 8,969 8,735 10,131 8,666 2/03 8,489 8,942 8,604 10,191 8,594 3/03 8,669 9,123 8,687 10,222 8,756 4/03 9,469 9,734 9,403 10,191 9,376 5/03 9,960 10,052 9,898 10,191 9,831 6/03 10,309 10,235 10,025 10,212 9,922 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. #Account value if you reinvested income and capital gains. AVERAGE ANNUAL TOTAL RETURNS+ ------------------------- SIX CUMULATIVE MONTH INCEPTION RETURN++ TO DATE ------------------------- 19.33% 3.10% Institutional Class* ------------------------- * Commenced operations on 07/01/02. + Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. ++ The six month return has not been annualized. June 30, 2003 15 www.bishopstreetfunds.com Strategic Growth Fund (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS -------------------------------------------------------------------------- Percentage of Investments ------------------------------------------------------------------------ 1. International Game Technology 2.2% ------------------------------------------------------------------------ 2. Gilead Sciences 2.2% ------------------------------------------------------------------------ 3. Capital One Financial 2.2% ------------------------------------------------------------------------ 4. Apollo Group, Cl A 2.2% ------------------------------------------------------------------------ 5. Oxford Health Plans 2.1% ------------------------------------------------------------------------ 6. UnitedHealth Group 2.1% ------------------------------------------------------------------------ 7. eBay 2.1% ------------------------------------------------------------------------ 8. Amgen 2.1% ------------------------------------------------------------------------ 9. Hewlett-Packard 2.1% ------------------------------------------------------------------------ 10. Barr Laboratories 2.1% -------------------------------------------------------------------------- STATEMENT OF NET ASSETS - -------------------------------------------------------------------------------- Market Value Shares (000) --------- --------- COMMON STOCK -- 99.9% AEROSPACE & DEFENSE -- 1.9% 7,200 United Technologies $ 510 -------- BANKS -- 4.0% 18,500 SouthTrust 503 13,100 Washington Mutual 541 -------- 1,044 -------- BIOTECHNOLOGY -- 2.1% 8,400 Amgen* 558 -------- CASINOS -- 2.2% 5,600 International Game Technology* 573 -------- COMPUTER HARDWARE -- 4.0% 15,200 Dell Computer* 486 26,200 Hewlett-Packard 558 -------- 1,044 -------- Bishop Street Funds 16 Strategic Growth Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) -------- --------- COMPUTER SYSTEMS & SERVICES -- 5.7% 10,400 Affiliated Computer Services, Cl A* $ 476 29,700 Cendant* 544 11,400 First Data 472 -------- 1,492 -------- DIVERSE FINANCIAL SERVICES -- 6.1% 11,600 Capital One Financial 571 7,100 Fannie Mae 479 16,100 JP Morgan Chase 550 -------- 1,600 -------- E-COMMERCE -- 2.1% 5,400 eBay* 563 -------- EDUCATIONAL SERVICES -- 2.1% 9,200 Apollo Group, Cl A* 568 -------- ELECTRONIC EQUIPMENT/INSTRUMENTS -- 2.0% 12,300 L-3 Communications Holdings* 535 -------- GENERAL MERCHANDISE -- 11.7% 13,000 Bed Bath & Beyond* 505 12,200 Best Buy* 536 12,400 Lowe's 533 16,200 Sears Roebuck 545 25,800 Staples* 473 17,000 Yum! Brands* 502 -------- 3,094 -------- HEALTHCARE - DISTRIBUTION/SERVICES -- 12.4% 20,200 Caremark Rx* 519 8,000 Express Scripts* 546 13,400 Oxford Health Plans* 563 9,500 St. Jude Medical* 546 11,200 UnitedHealth Group 563 6,200 WellPoint Health Networks* 523 -------- 3,260 -------- INDUSTRIAL CONGLOMERATES -- 2.0% 27,700 Tyco International 526 -------- INSURANCE - MULTI-LINE -- 5.8% 6,500 Everest Re Group 497 11,400 MGIC Investment 532 10,800 RenaissanceRe Holdings 492 -------- 1,521 -------- June 30, 2003 17 www.bishopstreetfunds.com Strategic Growth Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) -------- --------- MISCELLANEOUS CONSUMER SERVICES -- 2.1% 12,700 H&R Block $ 549 -------- MOTORCYCLE MANUFACTURERS -- 1.8% 11,800 Harley-Davidson 470 -------- NETWORKING EQUIPMENT -- 1.8% 28,600 Cisco Systems* 477 -------- PHARMACEUTICALS -- 10.3% 8,450 Barr Laboratories* 553 11,000 Biovail* 518 8,500 Cardinal Health 547 9,700 Forest Laboratories* 531 10,300 Gilead Sciences* 572 -------- 2,721 -------- RETAIL - AUTOMOTIVE -- 2.0% 7,000 Autozone* 532 -------- SEMI-CONDUCTORS -- 8.0% 21,700 Broadcom, Cl A* 540 24,700 Intel 513 22,000 Microchip Technology 542 10,400 QLogic* 503 -------- 2,098 -------- SYSTEMS SOFTWARE -- 3.9% 7,000 Electronic Arts* 518 11,400 Intuit* 508 -------- 1,026 -------- TELECOMMUNICATION EQUIPMENT -- 3.8% 27,600 Nextel Communications, Cl A* 499 13,800 Qualcomm 493 -------- 992 -------- WHOLESALE - FOOD -- 2.1% 17,550 Dean Foods* 553 -------- TOTAL COMMON STOCK (Cost $21,624) 26,306 -------- TOTAL INVESTMENTS (COST $21,624) -- 99.9% 26,306 -------- Bishop Street Funds 18 Strategic Growth Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value (000) --------- OTHER ASSETS AND LIABILITIES -- 0.1% Investment Adviser Fees Payable $ (15) Administrative Fees Payable (2) Other Assets and Liabilities, Net 33 -------- TOTAL OTHER ASSETS AND LIABILITIES 16 -------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 2,552,756 Outstanding Shares of Beneficial Interest 24,940 Accumulated Net Investment Loss (94) Accumulated Net Realized Loss on Investments (3,206) Net Unrealized Appreciation on Investments 4,682 -------- TOTAL NET ASSETS -- 100.0% $ 26,322 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS $ 10.31 ======== * NON-INCOME PRODUCING SECURITY CL -- CLASS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 19 www.bishopstreetfunds.com BISHOP STREET MANAGEMENT DISCUSSION FUNDS Tax Managed Equity Fund - -------------------------------------------------------------------------------- For the second quarter, the Bishop Street Tax-Managed Fund returned 12.8%, moderately underperforming the S&P 500 Composite Index total return of 15.4%. The Fund's conservative structure (favoring less volatile, larger-capitalization stocks), may have contributed to lagging performance during periods of very strong rising markets, as was seen in the second quarter. In addition, profits were actively harvested in the quarter, offset by losses taken earlier in the year, helping to mitigate ordinary capital gains treatment within the Fund. Despite the weak U.S. economic results and stagnant corporate earnings, we continue to believe that our conservative positioning and active tax management will reward investors over the long-term. Bishop Street Funds 20 Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE BISHOP STREET TAX MANAGED EQUITY FUND INSTITUTIONAL CLASS VERSUS THE S&P 500 COMPOSITE INDEX, THE CONSUMER PRICE INDEX AND THE LIPPER LARGE CAP CORE CLASSIFICATION. [Line Graph Omitted] Plot Points as Follows: Bishop Street Tax Managed S&P 500 Lipper Large Equity Fund, Composite Consumer Cap Core Institutional Class# Index Price Index Classification 11/13/02 $10,000 $10,000 $10,000 $10,000 11/02 10,480 10,589 10,010 10,507 12/02 9,843 9,966 10,020 9,891 1/03 9,543 9,705 10,050 9,630 2/03 9,402 9,560 10,110 9,486 3/03 9,501 9,652 10,141 9,573 4/03 10,254 10,448 10,110 10,302 5/03 10,665 10,998 10,110 10,812 6/03 10,713 11,139 10,131 10,918 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. #Account value if you reinvested income and capital gains. AVERAGE ANNUAL TOTAL RETURNS+ ------------------------- SIX CUMULATIVE MONTH INCEPTION RETURN++ TO DATE ------------------------- 8.84% 7.13% Institutional Class* ------------------------- * Commenced operations on 11/13/02. + Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. ++ The six month return has not been annualized. June 30, 2003 21 www.bishopstreetfunds.com Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN EQUITY HOLDINGS -------------------------------------------------------------------------- Percentage of Investments ------------------------------------------------------------------------ 1. Pfizer 4.1% ------------------------------------------------------------------------ 2. General Electric 3.8% ------------------------------------------------------------------------ 3. Microsoft 3.0% ------------------------------------------------------------------------ 4. Exxon Mobil 3.0% ------------------------------------------------------------------------ 5. Wal-Mart Stores 2.8% ------------------------------------------------------------------------ 6. Symantec 2.4% ------------------------------------------------------------------------ 7. Citigroup 2.3% ------------------------------------------------------------------------ 8. Bank of America 2.2% ------------------------------------------------------------------------ 9. Merck 2.1% ------------------------------------------------------------------------ 10. Johnson & Johnson 2.1% -------------------------------------------------------------------------- STATEMENT OF NET ASSETS Market Value Shares (000) -------- --------- COMMON STOCK -- 97.3% ADVERTISING -- 1.1% 4,960 Omnicom Group $ 356 -------- AEROSPACE & DEFENSE -- 1.2% 5,030 General Dynamics 365 -------- AIR FREIGHT & COURIERS -- 1.0% 4,840 United Parcel Service, Cl B 308 -------- ALUMINUM -- 1.1% 12,960 Alcoa 330 -------- BANKS -- 8.4% 8,590 Bank of America 679 18,010 US Bancorp 441 10,970 Wachovia 438 10,540 Washington Mutual 435 12,230 Wells Fargo 617 -------- 2,610 -------- Bishop Street Funds 22 Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) -------- --------- BIOTECHNOLOGY -- 1.3% 4,980 Amgen* $ 331 1,910 Biogen* 72 -------- 403 -------- BROADCASTING & CABLE -- 1.8% 3,995 Clear Channel Communications* 169 6,630 EchoStar Communications, Cl A* 229 4,920 Univision Communications, Cl A* 150 -------- 548 -------- CHEMICALS - DIVERSE -- 0.8% 3,530 Du Pont EI de Nemours 147 3,460 Ecolab 89 -------- 236 -------- COMPUTER HARDWARE -- 2.8% 13,060 Dell Computer* 417 5,400 International Business Machines 446 -------- 863 -------- DIVERSE FINANCIAL SERVICES -- 6.6% 7,580 American Express 317 16,560 Citigroup 709 3,600 Fannie Mae 243 2,600 Freddie Mac 132 2,000 Goldman Sachs Group 167 5,760 Merrill Lynch 269 5,210 Morgan Stanley 223 -------- 2,060 -------- ELECTRICAL SERVICES -- 1.0% 15,800 Duke Energy 315 -------- FOOTWEAR -- 0.6% 3,640 Nike, Cl B 195 -------- GENERAL MERCHANDISE -- 4.5% 4,765 Bed Bath & Beyond* 185 8,600 Target 326 16,440 Wal-Mart Stores 882 -------- 1,393 -------- HEALTHCARE - DISTRIBUTION/SERVICES -- 1.2% 7,380 UnitedHealth Group 371 -------- June 30, 2003 23 www.bishopstreetfunds.com Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) -------- --------- HOTELS -- 0.4% 4,300 Carnival $ 140 -------- HOUSEHOLD PRODUCTS -- 1.7% 5,970 Procter & Gamble 532 -------- INDUSTRIAL CONGLOMERATES -- 5.4% 3,980 3M 513 40,720 General Electric 1,168 -------- 1,681 -------- INDUSTRIAL GASES -- 0.5% 2,610 Praxair 157 -------- INSURANCE - MULTI-LINE -- 4.9% 5,420 AFLAC 167 5,500 Allstate 196 1,620 AMBAC Financial Group 107 10,700 American International Group 590 5,820 MBIA 284 12,650 Travelers Property Casualty, Cl B 200 -------- 1,544 -------- INTEGRATED TELECOMMUNICATION SERVICES -- 3.0% 3,070 BellSouth 82 11,760 SBC Communications 300 13,830 Verizon Communications 546 -------- 928 -------- MACHINERY - INDUSTRIAL -- 1.7% 4,900 Illinois Tool Works 323 4,900 SPX* 216 -------- 539 -------- MOTORCYCLE MANUFACTURERS -- 0.7% 5,755 Harley-Davidson 229 -------- MOVIES & ENTERTAINMENT -- 1.2% 14,750 AOL Time Warner* 237 7,580 Walt Disney 150 -------- 387 -------- NETWORKING EQUIPMENT -- 1.9% 36,100 Cisco Systems* 602 -------- Bishop Street Funds 24 Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) -------- --------- OIL & GAS - EQUIPMENT/SERVICES -- 1.3% 11,640 Halliburton $ 268 2,810 Schlumberger 133 -------- 401 -------- OIL & GAS - EXPLORATION/PRODUCTION -- 1.5% 6,560 Anadarko Petroleum 292 3,320 Devon Energy 177 -------- 469 -------- OIL & GAS - INTEGRATED -- 3.5% 2,160 ChevronTexaco 156 25,720 Exxon Mobil 923 -------- 1,079 -------- PERSONAL PRODUCTS -- 1.1% 5,690 Avon Products 354 -------- PHARMACEUTICALS -- 13.5% 8,370 Abbott Laboratories 366 13,470 Bristol-Myers Squibb 366 5,360 Forest Laboratories* 294 12,580 Johnson & Johnson 650 5,400 Medtronic 259 11,010 Merck 667 37,388 Pfizer 1,277 7,320 Wyeth 333 -------- 4,212 -------- PRINTING & PUBLISHING -- 1.1% 7,810 Viacom, Cl B* 341 -------- RAILROADS -- 1.1% 6,140 Union Pacific 356 -------- RETAIL - BEVERAGES -- 2.7% 7,470 Anheuser-Busch 382 9,940 Coca-Cola 461 -------- 843 -------- RETAIL - DRUGS -- 1.0% 11,170 CVS 313 -------- RETAIL - FOOD -- 0.4% 3,800 Kraft Foods, Cl A 124 -------- June 30, 2003 25 www.bishopstreetfunds.com Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value Shares (000) -------- --------- RETAIL - HOME IMPROVEMENT -- 1.5% 13,790 Home Depot $ 457 -------- RETAIL - TOBACCO -- 1.5% 10,000 Altria Group 454 -------- SEMI-CONDUCTORS -- 2.0% 21,740 Intel 452 5,070 Linear Technology 163 -------- 615 -------- SOFT DRINKS -- 1.0% 6,880 PepsiCo 306 -------- SPECIALTY STORES -- 0.7% 6,730 Tiffany 220 -------- SYSTEMS SOFTWARE -- 6.9% 3,770 Mercury Interactive* 145 36,250 Microsoft 928 28,360 Oracle* 341 17,000 Symantec* 746 -------- 2,160 -------- TELECOMMUNICATION EQUIPMENT -- 0.6% 11,000 Nokia ADR 181 -------- WIRELESS TELECOMMUNICATION SERVICES -- 1.1% 18,000 Vodafone Group ADR 354 -------- TOTAL COMMON STOCK (Cost $28,347) 30,331 -------- CASH EQUIVALENTS -- 2.5% 383,722 Dreyfus Cash Management Fund 384 383,722 Fidelity Institutional Money Market Fund 384 -------- TOTAL CASH EQUIVALENTS (Cost $768) 768 -------- TOTAL INVESTMENTS (COST $29,115) -- 99.8% 31,099 -------- Bishop Street Funds 26 Tax Managed Equity Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value (000) --------- OTHER ASSETS AND LIABILITIES -- 0.2% Investment Adviser Fees Payable $ (13) Administrative Fees Payable (3) Other Assets and Liabilities, Net 75 -------- TOTAL OTHER ASSETS AND LIABILITIES 59 -------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 2,922,540 Outstanding Shares of Beneficial Interest 29,126 Distributions in Excess of Net Investment Income (4) Accumulated Net Realized Gain on Investments 52 Net Unrealized Appreciation on Investments 1,984 -------- TOTAL NET ASSETS -- 100.0% $ 31,158 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS $ 10.66 ======== * NON-INCOME PRODUCING SECURITY ADR -- AMERICAN DEPOSITORY RECEIPT CL -- CLASS THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 27 www.bishopstreetfunds.com BISHOP STREET MANAGEMENT DISCUSSION FUNDS High Grade Income Fund - -------------------------------------------------------------------------------- With the war in Iraq and any heightened terrorist threat seemingly behind us, the financial markets focused on the slow pace of the economic recovery during the second quarter. The fixed-income markets in particular were preoccupied with the Federal Reserve's possible deflation scenario and interest rates fell to multi-decade lows. By the end of the quarter, the Fed had eased interest rates by 25 basis points but also disappointed the bond market by changing their assessment of the risk of weakness in the economy from negative to neutral. As a result, the quarter ended with yields significantly off of their all-time lows, though interest rates were still approximately 20 to 30 basis points lower than the first quarter 2003. Corporate bonds outperformed all other sectors as investors reached for higher yields than historical low-yielding treasuries. The lower investment grade sector was the place to be as credit risk paid an additional 200+ basis points of excess return. During the quarter, bonds with lower credit ratings appreciated more in price than those with higher credit ratings, leading to higher returns for the quarter. The performance of the Fund was therefore hindered by its preference for higher rated credits, and underperformed against the index, which contains a greater percentage of lower rated credits. Our slightly short positioning on the curve also worked against us as the longer maturities had better returns. We remain slightly short duration, however, and we look to add positive performance going into the second half of the year and into 2004. Bishop Street Funds 28 High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE BISHOP STREET HIGH GRADE INCOME FUND, INSTITUTIONAL CLASS OR CLASS A, VERSUS THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX AND THE CONSUMER PRICE INDEX. [Line Graph Omitted] Plot Points as Follows: Bishop Street Bishop Street High Grade High Grade Lehman Brothers Income Fund, Income Fund, U.S. Government/ Consumer Institutional Class# Class A#+ Credit Index Price Index 1/31/97 $10,000 $ 9,525 $10,000 $10,000 6/97 10,216 9,731 10,261 10,060 12/97 10,793 10,280 10,962 10,151 6/98 11,191 10,660 11,419 10,201 12/98 11,774 11,215 12,000 10,293 6/99 11,316 10,755 11,727 10,386 12/99 11,264 10,651 11,741 10,553 6/00 11,778 11,110 12,230 10,765 12/00 12,419 11,701 13,131 10,906 6/01 12,690 11,942 13,592 11,115 12/01 13,307 12,523 14,247 11,070 6/02 13,834 12,990 14,711 11,226 12/02 14,843 13,922 15,818 11,338 6/03 15,521 14,543 16,645 11,463 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. #Account value if you reinvested income and capital gains. AVERAGE ANNUAL TOTAL RETURNS++ - ----------------------------------------------------------- SIX ONE ANNUALIZED ANNUALIZED ANNUALIZED MONTH YEAR 3 YEAR 5 YEAR INCEPTION RETURN+++ RETURN RETURN RETURN TO DATE - ----------------------------------------------------------- 4.57% 12.20% 9.64% 6.76% 7.09% Institutional Class* - ----------------------------------------------------------- 4.46% 11.96% 9.39% 6.41%+ 7.99% Class A** - ----------------------------------------------------------- -0.51% 6.68% 7.65% 5.37%+ 6.71% Class A, with load*** - ----------------------------------------------------------- * Commenced operations on 01/30/97. ** Commenced operations on 06/14/99. *** Reflects 4.75% sales charge. + Prior performance information represents performance of the Institutional Class, which was offered on 01/30/97. Institutional Class performance has been adjusted to reflect the Class A sales charge, but has not been adjusted to reflect Class A Rule 12b-1 fees and expenses. Had that adjustment been made, performance would be lower than that shown. ++ Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. +++ The six month return has not been annualized. June 30, 2003 29 www.bishopstreetfunds.com High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS* - -------------------------------------------------------------------------------- Percentage Coupon Maturity of Rate Date Investments* ------------------------------------------------------------------------------ 1. U.S. Treasury Bond 7.250% 05/15/16 9.3% ------------------------------------------------------------------------------ 2. U.S. Treasury Bond 6.250% 08/15/23 3.8% ------------------------------------------------------------------------------ 3. FNMA 7.250% 01/15/10 3.6% ------------------------------------------------------------------------------ 4. U.S. Treasury Bond 7.500% 11/15/16 3.2% ------------------------------------------------------------------------------ 5. Pharmacia 5.750% 12/01/05 2.6% ------------------------------------------------------------------------------ 6. Pitney Bowes 5.750% 08/15/08 2.5% ------------------------------------------------------------------------------ 7. U.S. Treasury Bond 6.375% 08/15/27 2.4% ------------------------------------------------------------------------------ 8. Wal-Mart Stores 8.000% 09/15/06 2.3% ------------------------------------------------------------------------------ 9. Abbott Laboratories 6.400% 12/01/06 2.3% ------------------------------------------------------------------------------ 10. Avon Products 7.150% 11/15/09 2.2% - -------------------------------------------------------------------------------- *EXCLUDES SECURITIES PURCHASED WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING. STATEMENT OF NET ASSETS Face Market Amount Value (000) (000) ------- --------- CORPORATE OBLIGATIONS -- 67.9% AEROSPACE & DEFENSE -- 5.0% Boeing $2,700 7.875%, 02/15/05 $ 2,916 Loral 1,650 7.000%, 09/15/23 1,852 United Technologies 1,800 6.350%, 03/01/11 2,087 -------- 6,855 -------- ALUMINUM -- 1.9% Alcoa, Ser B 2,450 6.125%, 06/15/05 2,661 -------- BANKS -- 13.7% AMEX Centurion Bank, MTN(B) 3,371 1.054%, 09/24/03 3,371 Bank of America (A) 2,600 4.875%, 01/15/13 2,743 Bear Stearns, MTN (B) 6,742 1.505%, 02/03/04 6,742 Bishop Street Funds 30 High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- Washington Mutual Bank (B) $3,371 1.180%, 11/26/03 $ 3,371 Wells Fargo 2,650 3.500%, 04/04/08 2,733 -------- 18,960 -------- BIOTECHNOLOGY -- 2.6% Pharmacia 3,275 5.750%, 12/01/05 3,581 -------- BROADCASTING & CABLE -- 2.4% Cox Communications 1,400 6.750%, 03/15/11 1,633 TCI Communications 1,400 7.875%, 08/01/13 1,696 -------- 3,329 -------- BUILDING & CONSTRUCTION -- 1.1% Centex 1,400 5.800%, 09/15/09 1,538 -------- DIVERSE FINANCIAL SERVICES -- 8.9% Citigroup 2,600 6.750%, 12/01/05 2,899 Countrywide Home Loan, MTN, Ser K 1,400 5.500%, 02/01/07 1,533 General Electric Capital, MTN, Ser A (A) 2,600 5.450%, 01/15/13 2,816 General Motors Acceptance 1,400 6.750%, 01/15/06 1,486 525 4.500%, 07/15/06 535 Goldman Sachs Group 2,600 6.600%, 01/15/12 3,021 -------- 12,290 -------- FORESTRY -- 1.2% Weyerhaeuser 1,420 6.750%, 03/15/12 1,612 -------- GENERAL MERCHANDISE -- 5.4% Costco 2,600 5.500%, 03/15/07 2,870 Target (A) 1,300 6.350%, 01/15/11 1,500 Wal-Mart Stores 2,625 8.000%, 09/15/06 3,091 -------- 7,461 -------- June 30, 2003 31 www.bishopstreetfunds.com High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HOUSEHOLD PRODUCTS -- 2.7% Avon Products $2,500 7.150%, 11/15/09 $ 3,028 Newell Rubbermaid 650 6.600%, 11/15/06 734 -------- 3,762 -------- INTEGRATED TELECOMMUNICATION SERVICES -- 4.2% AT&T 1,400 7.000%, 11/15/06 1,557 Dominion Resources (A) 1,400 4.125%, 02/15/08 1,465 Verizon Global (A) 2,700 4.000%, 01/15/08 2,819 -------- 5,841 -------- MOVIES & ENTERTAINMENT -- 1.1% Walt Disney, MTN 1,400 5.500%, 12/29/06 1,526 -------- OIL & GAS - EQUIPMENT/SERVICES -- 2.3% Baker Hughes 1,300 6.000%, 02/15/09 1,481 Global Marine 1,550 7.000%, 06/01/28 1,756 -------- 3,237 -------- OIL & GAS - EXPLORATION/PRODUCTION -- 2.3% Anadarko Petroleum 1,250 7.200%, 03/15/29 1,488 1,400 6.750%, 05/15/08 1,624 -------- 3,112 -------- PHARMACEUTICALS -- 4.5% Abbott Laboratories 2,700 6.400%, 12/01/06 3,082 Wyeth 1,030 5.875%, 03/15/04 1,062 2,000 5.250%, 03/15/13 2,114 -------- 6,258 -------- Bishop Street Funds 32 High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- RAILROADS -- 1.2% CSX $1,400 6.750%, 03/15/11 $ 1,630 -------- RETAIL - DRUGS -- 0.9% CVS 1,100 5.625%, 03/15/06 1,205 -------- SEMI-CONDUCTORS -- 2.2% Applied Materials 350 7.125%, 10/15/17 424 Texas Instruments 2,500 7.000%, 08/15/04 2,645 -------- 3,069 -------- SERVICES - OFFICE EQUIPMENT -- 2.4% Pitney Bowes 3,000 5.750%, 08/15/08 3,386 -------- SOFT DRINKS -- 1.9% PepsiCo 2,500 4.500%, 09/15/04 2,598 -------- TOTAL CORPORATE OBLIGATIONS (Cost $89,214) 93,911 -------- U.S. TREASURY OBLIGATIONS -- 25.1% U.S. Treasury Bonds 3,250 7.500%, 11/15/16 (A) 4,412 9,500 7.250%, 05/15/16 (A) 12,634 2,600 6.375%, 08/15/27 3,257 4,200 6.250%, 08/15/23 (A) 5,144 1,350 6.000%, 02/15/26 1,614 U.S. Treasury Notes 2,200 7.500%, 02/15/05 2,423 1,000 7.250%, 08/15/04 (A) 1,069 1,000 7.000%, 07/15/06 (A) 1,156 1,000 5.000%, 08/15/11 (A) 1,122 1,735 4.375%, 08/15/12 (A) 1,860 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $29,565) 34,691 -------- June 30, 2003 33 www.bishopstreetfunds.com High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000)/Shares (000) -------- --------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 15.1% FFCB $ 250 3.950%, 10/22/07 $ 252 FHLB 700 7.570%, 08/19/04 750 2,500 6.250%, 08/13/04 2,641 FHLMC 2,650 3.670%, 02/12/08 2,687 FHLMC MTN, Ser 1 625 6.250%, 08/15/16 655 FNMA 4,000 7.250%, 01/15/10 (A) 4,961 700 5.000%, 08/21/09 703 1,250 4.520%, 10/05/06 1,299 1,500 3.875%, 11/21/05 1,517 2,650 2.750%, 12/16/05 2,671 2,650 2.650%, 02/13/06 2,671 -------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $20,012) 20,807 -------- COMMERCIAL PAPER (B) -- 9.3% Countrywide Home Loans 6,068 1.500%, 07/01/03 6,068 Four Winds Funding 6,742 1.550%, 07/01/03 6,742 -------- TOTAL COMMERCIAL PAPER (Cost $12,810) 12,810 -------- REPURCHASE AGREEMENTS (B) -- 8.4% Bank of America, 1.440%, dated 06/30/03, due 07/01/03, repurchase price $7,827,937 (collateralized by a mortgage obligation total par value $10,998,812, 6.000%, 7,828 05/20/33: total market value $8,219,006) 7,828 Lehman Brothers, 1.455%, dated 06/30/03, due 07/01/03, repurchase price $3,820,008 (collateralized by a mortgage obligation total par value $3,897,053, 4.000%, 3,820 05/25/33: total market value $4,011,577) 3,820 -------- TOTAL REPURCHASE AGREEMENTS (Cost $11,648) 11,648 -------- CASH EQUIVALENTS -- 0.3% 211,611 Dreyfus Cash Management Fund 212 211,611 Fidelity Institutional Money Market Fund 212 -------- TOTAL CASH EQUIVALENTS (Cost $424) 424 -------- TOTAL INVESTMENTS (COST $163,673) -- 126.1% 174,291 -------- Bishop Street Funds 34 High Grade Income Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Value (000) --------- OTHER ASSETS AND LIABILITIES -- (26.1)% Payable Upon Return of Securities Loaned $(37,942) Investment Adviser Fees Payable (53) Administrative Fees Payable (13) Other Assets and Liabilities, Net 1,955 -------- TOTAL OTHER ASSETS AND LIABILITIES (36,053) -------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 12,603,091 Outstanding Shares of Beneficial Interest 125,576 Fund Shares of Class A (unlimited authorization -- no par value) Based on 35,650 Outstanding Shares of Beneficial Interest 348 Accumulated Net Realized Gain on Investments 1,696 Net Unrealized Appreciation on Investments 10,618 -------- TOTAL NET ASSETS -- 100.0% $138,238 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS ($137,850,052 / 12,603,091 SHARES) $ 10.94 ======== NET ASSET VALUE, REDEMPTION PRICE PER SHARE -- CLASS A ($388,210 / 35,650 SHARES) $ 10.89 ======== MAXIMUM OFFERING PRICE PER SHARE -- CLASS A SHARES ($10.89 / 95.25%) $ 11.43 ======== (A) THE SECURITY OR A PORTION OF THIS SECURITY IS ON LOAN AT JUNE 30, 2003 (SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF SECURITIES ON LOAN AT JUNE 30, 2003 WAS $37,134,255. (B) THESE SECURITIES WERE PURCHASED WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING (SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF SUCH SECURITIES AS OF JUNE 30, 2003 WAS $37,941,594. FFCB -- FEDERAL FARM CREDIT BANK FHLB -- FEDERAL HOME LOAN BANK FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION MTN -- MEDIUM TERM NOTE SER -- SERIES THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 35 www.bishopstreetfunds.com BISHOP STREET MANAGEMENT DISCUSSION FUNDS Hawaii Municipal Bond Fund - -------------------------------------------------------------------------------- State budget deficits continued to take center stage in the municipal arena in the second quarter of 2003. Overly optimistic state revenue projections and actual state revenues, which fell well below projections, forced many state legislatures to take severe actions over the past year including massive spending cuts, tax increases and a pick-up in short-term bond issuance to ease budget strains. The projected unresolved collective budget gap for the 50 states is currently greater than $50 billion; California's budget gap makes up roughly two-thirds of that figure at $38 billion. Due to its relative fiscal conservatism, the State of Hawaii has not suffered from the significant budget deficits that are affecting numerous states and cities throughout the United States. In fact, yields on Hawaii paper are currently at relative historic lows versus generic national municipal yields, a reflection of the State's stable fiscal condition. The Hawaii municipal bond market continues to suffer from a lack of supply as new issuance remains limited and secondary offerings are scarce due to Hawaii's relatively decent credit outlook and negligible budget concerns. Hawaii bond issuance is projected to increase over the second half of the year as local issuers take advantage of low interest rates. Over the past six months, we have worked diligently to reduce the portfolio's duration in anticipation of a modestly higher interest rate environment in 2004 and beyond. To counter the drop in yield due to duration reduction, we have increased our holdings of hospital and housing related municipal bonds -- issues that typically pay a higher yield to investors versus state and city general obligation bonds. For the quarter ending June 30, 2003, the Bishop Street Hawaii Municipal Bond Fund Institutional Class Shares* returned 2.6%, outperforming the Lehman Brothers Municipal Bond Index by 0.1% and the Lipper Hawaii Municipal Debt Objective by 0.3%. * During the second quarter ended June 30, 2003, the Bishop Street Hawaii Municipal Bond Fund (Class A Shares) produced a total return of 2.7%. Including the maximum sales charge of 4.25%, total return was (1.7)%. Past performance is no guarantee of future results. Bishop Street Funds 36 Hawaii Municipal Bond Fund - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE BISHOP STREET HAWAII MUNICIPAL BOND FUND, INSTITUTIONAL CLASS OR CLASS A, VERSUS THE LEHMAN BROTHERS MUNICIPAL BOND INDEX, THE CONSUMER PRICE INDEX AND THE LIPPER HAWAII MUNICIPAL DEBT OBJECTIVE. [Line Graph Omitted] Plot Points as Follows: Bishop Street Bishop Street Hawaii Municipal Hawaii Municipal Lehman Brothers Lipper Hawaii Bond Fund, Bond Fund, Muncipal Bond Consumer Municipal Debt Institutional Class# Class A#+ Index Price Index Objective 2/28/95 $10,000 $ 9,575 $10,000 $10,000 $10,000 12/95 10,941 10,476 11,097 10,192 10,958 12/96 11,402 10,917 11,589 10,533 11,378 12/97 12,373 11,847 12,656 10,713 12,308 12/98 13,096 12,539 13,476 10,884 12,999 12/99 12,749 12,174 13,197 11,139 12,448 12/00 14,356 13,677 14,740 11,512 13,859 12/01 14,965 14,241 15,496 11,686 14,430 12/02 16,464 15,630 16,983 11,970 15,683 6/03 17,100 16,229 17,630 12,102 16,196 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. #Account value if you reinvested income and capital gains. AVERAGE ANNUAL TOTAL RETURNS++ - ----------------------------------------------------------- SIX ONE ANNUALIZED ANNUALIZED ANNUALIZED MONTH YEAR 3 YEAR 5 YEAR INCEPTION RETURN+++ RETURN RETURN RETURN TO DATE - ----------------------------------------------------------- 3.86% 8.71% 8.62% 6.20% 6.62% Institutional Class* - ----------------------------------------------------------- 3.83% 8.54% 8.41% 6.01%+ 6.89% Class A** - ----------------------------------------------------------- -0.61% 3.90% 6.86% 5.10%+ 5.76% Class A, with load*** - ----------------------------------------------------------- * Commenced operations on 02/16/95. ** Commenced operations on 06/14/99. *** Reflects 4.25% sales charge. + Prior performance information represents performance of the Institutional Class, which was offered on 02/16/95. Institutional Class performance has been adjusted to reflect the Class A sales charge, but has not been adjusted to reflect Class A Rule 12b-1 fees and expenses. Had that adjustment been made, performance would be lower than that shown. ++ Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. +++ The six month return has not been annualized. June 30, 2003 37 www.bishopstreetfunds.com Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS - -------------------------------------------------------------------------------- Percentage Coupon Maturity of Rate Date Investments ------------------------------------------------------------------------------ 1. Honolulu City & County RB 5.250% 07/01/18 2.6% ------------------------------------------------------------------------------ 2. Honolulu City & County GO 5.000% 07/01/19 2.0% ------------------------------------------------------------------------------ 3. Hawaii State Highway RB 5.250% 07/01/15 1.9% ------------------------------------------------------------------------------ 4. Hawaii State Highway RB 6.000% 07/01/09 1.9% ------------------------------------------------------------------------------ 5. Honolulu City & CountyGO 5.125% 07/01/17 1.7% ------------------------------------------------------------------------------ 6. Department of Budget &Finance RB 5.750% 07/01/26 1.7% ------------------------------------------------------------------------------ 7. Hawaii State Airport System RB 6.500% 07/01/14 1.6% ------------------------------------------------------------------------------ 8. Hawaii State GO 5.250% 04/01/12 1.5% ------------------------------------------------------------------------------ 9. Honolulu City & County RB 5.250% 07/01/15 1.4% ------------------------------------------------------------------------------ 10. Hawaii State GO 6.500% 12/01/13 1.4% - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS Face Market Amount Value (000) (000) -------- --------- MUNICIPAL BONDS -- 98.2% ARKANSAS -- 0.5% Alma, Refunding & Construction, School District #30, Ser B, GO $1,000 4.700%, 01/01/28 $ 981 -------- CALIFORNIA -- 3.0% California State, GO 2,000 5.000%, 02/01/12 2,182 2,000 5.000%, 02/01/13 2,178 1,180 5.000%, 10/01/13 1,267 -------- 5,627 -------- HAWAII -- 88.0% Department of Budget & Finance, Electric & Subsidiary Project, Ser B, RB 2,000 5.000%, 12/01/22 2,035 Department of Budget & Finance, Hawaiian Electric, Ser A, RB, AMBAC Insured 2,000 5.500%, 12/01/14 2,275 Bishop Street Funds 38 Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) Department of Budget & Finance, Hawaiian Electric, Ser A, RB, AMT, AMBAC Insured $1,000 5.100%, 09/01/32 $ 1,026 Department of Budget & Finance, Hawaiian Electric, Ser A, RB, AMT, MBIA Insured 785 6.200%, 05/01/26 874 290 5.650%, 10/01/27 317 Department of Budget & Finance, Hawaiian Electric, Ser B, RB, AMT, AMBAC Insured 1,000 5.750%, 12/01/18 1,108 Department of Budget & Finance, Hawaiian Electric, Ser C, RB, AMT, AMBAC Insured 1,000 6.200%, 11/01/29 1,145 Department of Budget & Finance, Queens Health Systems, Ser A, RB 1,450 5.875%, 07/01/11 1,564 3,000 5.750%, 07/01/26 3,105 Department of Budget & Finance, Queens Health Systems, Ser B, RB, MBIA Insured 750 5.250%, 07/01/11 828 1,445 5.250%, 07/01/12 1,589 1,275 5.250%, 07/01/13 1,402 1,000 5.250%, 07/01/14 1,094 Department of Budget & Finance, Special Purpose Mortgage, Hawaiian Electric Project, Ser A, RB, AMT, MBIA Insured 1,090 6.600%, 01/01/25 1,169 Department of Budget & Finance, Special Purpose Mortgage, Kapiolani Health Care System Project, RB 1,260 6.300%, 07/01/08 1,303 Department of Budget & Finance, Special Purpose Mortgage, St. Francis Medical Center Project, RB, FSA Insured 930 6.500%, 07/01/22 942 Harbor Capital Improvement, RB, AMT, FGIC Insured 305 6.200%, 07/01/08 324 Harbor Capital Improvement, RB, AMT, MBIA Insured 2,000 5.500%, 07/01/27 2,097 545 5.400%, 07/01/09 619 Harbor System, Ser A, RB, AMT, FSA Insured 2,025 5.750%, 07/01/17 2,276 1,210 5.700%, 07/01/16 1,367 1,000 5.600%, 07/01/15 1,132 Harbor System, Ser B, RB, AMT, AMBAC Insured 200 5.500%, 07/01/19 217 June 30, 2003 39 www.bishopstreetfunds.com Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) Hawaii County, Ser A, GO, FGIC Insured $ 450 5.600%, 05/01/12 $ 531 430 5.600%, 05/01/13 510 400 5.550%, 05/01/09 464 630 5.500%, 07/15/12 737 Hawaii County, Ser A, GO, FSA Insured 1,000 5.625%, 05/15/19 1,129 500 5.400%, 05/15/15 562 1,000 5.250%, 05/15/11 1,122 1,000 5.000%, 07/15/21 1,062 1,000 5.000%, 07/15/22 1,055 1,000 5.000%, 07/15/23 1,046 Hawaii State, Airport System, First Ser, RB, MBIA Insured 775 5.600%, 07/01/04 810 Hawaii State, Airport System, Second Ser, RB, AMT, ETM 60 6.900%, 07/01/12 74 Hawaii State, Airport System, Second Ser, RB, AMT, ETM, MBIA Insured 1,100 6.900%, 07/01/12 1,357 Hawaii State, Airport System, Ser B, RB, AMT, FGIC Insured 1,500 6.625%, 07/01/18 1,770 2,500 6.500%, 07/01/14 2,947 100 6.000%, 07/01/19 114 Hawaii State, Highway, RB 1,000 6.000%, 07/01/08 1,170 3,000 6.000%, 07/01/09 3,570 375 5.250%, 07/01/10 420 500 5.250%, 07/01/12 556 2,000 5.250%, 07/01/16 2,187 Hawaii State, Highway, RB, FGIC Insured 3,280 5.250%, 07/01/15 3,645 405 5.000%, 07/01/16 442 Hawaii State, Highway, RB, FSA Insured 2,000 5.375%, 07/01/20 2,195 1,000 5.250%, 07/01/13 1,136 1,000 4.500%, 07/01/07 1,092 Hawaii State, Highway, RB, Prerefunded @ 102 (A) 510 5.000%, 07/01/03 520 Hawaii State, Housing & Community Development, Ser A, RB, AMT, FNMA Collateral 1,900 6.300%, 07/01/20 2,045 470 6.150%, 07/01/12 509 480 6.100%, 07/01/11 519 Bishop Street Funds 40 Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) Hawaii State, Housing, Finance & Development, Affordable Rental Housing Program, Ser A, RB $ 750 6.050%, 07/01/22 $ 782 340 6.000%, 07/01/15 357 Hawaii State, Housing, Finance & Development, Affordable Rental Housing Program, Ser A, RB, AMT, FNMA Collateral 2,030 5.750%, 07/01/30 2,109 247 5.550%, 07/01/07 257 1,355 5.400%, 07/01/30 1,392 250 5.250%, 07/01/13 266 Hawaii State, Housing, Finance & Development, Single-Family Mortgage Purchase, Ser B, RB, FNMA Collateral 1,000 5.450%, 07/01/17 1,052 Hawaii State, Housing, Finance & Development, University of Hawaii, Faculty Housing Project, RB, AMBAC Insured 700 5.650%, 10/01/16 762 415 5.000%, 10/01/06 452 395 4.850%, 10/01/05 425 380 4.750%, 10/01/04 397 Hawaii State, Kapolei Office Building, Ser A, COP, AMBAC Insured 1,475 5.250%, 05/01/13 1,654 1,000 5.000%, 05/01/08 1,121 1,000 5.000%, 05/01/14 1,094 1,100 5.000%, 05/01/15 1,191 1,500 5.000%, 05/01/16 1,644 1,000 5.000%, 05/01/17 1,084 500 5.000%, 05/01/18 535 Hawaii State, No. 1 Capitol District State Office, COP, MBIA Insured 1,000 5.200%, 05/01/14 1,106 175 5.000%, 05/01/11 195 Hawaii State, Ser CC, GO 400 5.125%, 02/01/08 449 Hawaii State, Ser CH, GO, MBIA Insured 1,000 6.000%, 11/01/06 1,138 Hawaii State, Ser CL, GO 1,000 6.000%, 03/01/09 1,180 Hawaii State, Ser CL, GO, MBIA Insured 555 6.000%, 03/01/08 644 Hawaii State, Ser CM, GO, FGIC Insured 2,000 6.500%, 12/01/13 2,548 500 6.000%, 12/01/09 601 1,500 6.000%, 12/01/11 1,821 June 30, 2003 41 www.bishopstreetfunds.com Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) Hawaii State, Ser CN, GO, FGIC Insured $ 500 5.500%, 03/01/14 $ 563 500 5.250%, 03/01/12 554 535 5.250%, 03/01/17 587 Hawaii State, Ser CO, GO, FGIC Insured 200 6.000%, 09/01/05 220 Hawaii State, Ser CP, GO, FGIC Insured 300 5.000%, 10/01/16 326 Hawaii State, Ser CR, GO, MBIA Insured 1,500 5.750%, 04/01/09 1,753 270 5.250%, 04/01/11 298 2,500 5.250%, 04/01/12 2,781 Hawaii State, Ser CS, GO, MBIA Insured 255 5.000%, 04/01/09 288 Hawaii State, Ser CT, GO, FSA Insured 400 5.500%, 09/01/06 446 Hawaii State, Ser CU, GO, MBIA Insured 500 5.750%, 10/01/07 574 500 5.750%, 10/01/11 586 550 5.750%, 10/01/12 639 Hawaii State, Ser CU, GO, MBIA Insured, Prerefunded @ 100 (A) 250 5.300%, 10/01/10 292 Hawaii State, Ser CV, GO, FGIC Insured 1,000 5.250%, 08/01/21 1,079 Hawaii State, Ser CX, GO, FSA Insured 1,000 5.500%, 02/01/21 1,115 200 4.250%, 02/01/11 216 Hawaii State, Ser CY, GO, FSA Insured 1,000 5.500%, 02/01/11 1,161 1,000 5.250%, 02/01/07 1,110 Hawaii State, Ser CZ, GO, FSA Insured 1,860 5.250%, 07/01/19 2,046 Hawaiian Home Lands Department, RB 1,250 4.000%, 07/01/05 1,308 Honolulu City & County, Board of Water Supply, RB, FSA Insured 620 5.500%, 07/01/15 712 340 5.000%, 07/01/08 382 Honolulu City & County, Board of Water Supply, RB, Prerefunded @ 101 (A) 1,000 5.800%, 07/01/06 1,136 250 5.250%, 07/01/06 280 Honolulu City & County, FHA-Smith-Beretania-8A, RB, MBIA Insured 1,000 5.450%, 01/01/25 1,017 Bishop Street Funds 42 Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) Honolulu City & County, GO $ 820 5.400%, 09/27/07 $ 930 200 1.250%, 09/11/08 200 Honolulu City & County, GO, ETM 230 6.000%, 12/01/09 278 Honolulu City & County, Ser A, GO 55 6.000%, 01/01/10 65 Honolulu City & County, Ser A, GO, ETM 500 6.000%, 01/01/09 592 95 6.000%, 01/01/10 113 800 5.750%, 04/01/10 947 245 5.700%, 04/01/09 288 Honolulu City & County, Ser A, GO, ETM, MBIA Insured 135 6.000%, 11/01/10 164 Honolulu City & County, Ser A, GO, FGIC Insured 250 5.000%, 07/01/03 250 Honolulu City & County, Ser A, GO, FSA Insured 300 5.125%, 09/01/21 318 Honolulu City & County, Ser A, GO, MBIA Insured 365 6.000%, 11/01/10 440 Honolulu City & County, Ser B, GO, ETM, FGIC Insured 635 5.500%, 10/01/11 752 Honolulu City & County, Ser B, GO, FGIC Insured 2,000 5.125%, 07/01/16 2,188 3,000 5.125%, 07/01/17 3,263 Honolulu City & County, Ser C, GO, FGIC Insured 125 5.500%, 11/01/07 143 1,200 5.125%, 07/01/11 1,343 2,100 5.125%, 07/01/15 2,318 650 5.000%, 07/01/09 738 3,500 5.000%, 07/01/19 3,728 Honolulu City & County, Waipahu Towers Project, Ser A, RB, AMT, GNMA Collateral 200 6.900%, 06/20/35 210 Honolulu City & County, Waste Water, 2nd Board Resolution, Junior Ser, RB, FGIC Insured 1,000 5.250%, 07/01/12 1,116 1,900 5.250%, 07/01/13 2,121 2,365 5.250%, 07/01/15 2,631 1,000 5.250%, 07/01/17 1,099 4,500 5.250%, 07/01/18 4,916 Honolulu City & County, Waste Water, 2nd Board Resolution, Ser B1, RB, MBIA Insured 1,600 1.000%, 07/01/32 1,600 June 30, 2003 43 www.bishopstreetfunds.com Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) Kauai County, Public Improvement, Ser B, GO, MBIA Insured $ 175 5.200%, 08/01/15 $ 193 165 5.150%, 08/01/14 182 155 5.100%, 08/01/13 170 120 5.050%, 08/01/12 132 140 5.000%, 08/01/11 154 135 4.950%, 08/01/10 147 100 4.850%, 08/01/09 110 120 4.750%, 08/01/08 132 Kauai County, Ser A, GO, FGIC Insured, Prerefunded @ 100 (A) 1,135 6.250%, 08/01/10 1,390 1,480 6.250%, 08/01/10 1,813 1,335 6.250%, 08/01/10 1,635 1,050 6.250%, 08/01/10 1,286 Kauai County, Ser A, GO, MBIA Insured 750 5.625%, 08/01/18 855 Kauai County, Ser B, GO, AMBAC Insured 285 5.750%, 08/01/06 319 Kauai County, Ser B, GO, MBIA Insured, Prerefunded @ 102 (A) 260 5.900%, 02/01/04 273 Maui County, GO, FGIC Insured, Prerefunded @ 101 (A) 290 5.125%, 12/15/03 298 Maui County, Ser A, GO 485 5.375%, 03/01/12 555 Maui County, Ser A, GO, FGIC Insured 500 5.200%, 09/01/12 553 100 5.125%, 03/01/14 110 615 5.100%, 03/01/19 657 200 5.000%, 03/01/13 221 795 5.000%, 03/01/18 850 Maui County, Ser A, GO, FGIC Insured, Prerefunded @ 101 (A) 450 5.800%, 03/01/10 537 Maui County, Ser A, GO, MBIA Insured, Prerefunded @ 101 (A) 250 5.750%, 06/01/06 283 Maui County, Ser C, GO, FGIC Insured 1,000 5.250%, 03/01/17 1,103 500 5.200%, 03/01/16 548 555 5.150%, 03/01/14 608 790 5.150%, 03/01/15 870 University of Hawaii, Ser A, RB, FGIC Insured 500 5.500%, 07/15/19 567 500 5.500%, 07/15/21 560 Bishop Street Funds 44 Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- HAWAII (CONTINUED) University of Hawaii, Ser B, RB, FSA Insured $ 320 5.250%, 10/01/16 $ 357 775 5.250%, 10/01/17 860 -------- 163,908 -------- IDAHO -- 0.1% Minidoka, Jerome County Project, GO 95 3.000%, 08/01/03 95 -------- NEW YORK -- 0.6% New York, Ser J, GO, 1,000 5.500%, 06/01/20 1,068 -------- PUERTO RICO -- 5.2% Puerto Rico Commonwealth, GO, MBIA Insured 1,500 6.500%, 07/01/10 1,851 500 6.500%, 07/01/14 640 Puerto Rico Commonwealth, Public Improvements, GO, FSA Insured 1,000 5.250%, 07/01/17 1,164 Puerto Rico Commonwealth, Public Improvements, Ser A, GO 570 5.500%, 07/01/17 675 Puerto Rico, Electric Power Authority, Ser DD, RB, FSA Insured 1,000 5.000%, 07/01/28 1,051 Puerto Rico, Electric Power Authority, Ser HH, RB, FSA Insured 500 5.250%, 07/01/29 542 Puerto Rico, Highway & Transportation Authority Revenue, Ser D, RB, FSA Insured 500 5.000%, 07/01/32 524 Puerto Rico, Housing, Banking & Finance Agency, Single-Family Mortgage, Affordable Housing Mortgage, Portfolio I, RB, AMT, GNMA/FNMA/FHLMC Collateral 180 6.100%, 10/01/15 188 Puerto Rico, Industrial Tourist Educational Medical Environmental Control Facilities, Hospital Auxilio Mutuo Obligation Group, Ser A, RB, MBIA Insured 300 6.250%, 07/01/24 325 Puerto Rico, Public Building Authority, Government Facilities, Ser B, RB, MBIA Insured 1,000 5.000%, 07/01/15 1,084 University of Puerto Rico, Ser O, RB, MBIA Insured 1,500 5.750%, 06/01/19 1,736 -------- 9,780 -------- June 30, 2003 45 www.bishopstreetfunds.com Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Market Face Value Amount (000)/Shares (000) -------- --------- TEXAS -- 0.3% San Antonio, Independent School District, Ser A, GO $ 500 5.000%, 08/15/31 $ 518 -------- UTAH -- 0.5% Washington County, St. George School District, Ser A, GO 1,000 4.100%, 03/01/18 1,011 -------- TOTAL MUNICIPAL BONDS (Cost $168,858) 182,988 -------- CASH EQUIVALENTS -- 2.6% 2,449,598 Dreyfus Tax-Exempt Cash Management Fund 2,450 2,449,597 Fidelity Institutional Money Market Tax-Exempt Fund 2,450 -------- TOTAL CASH EQUIVALENTS (Cost $4,900) 4,900 -------- TOTAL INVESTMENTS (COST $173,758)-- 100.8% 187,888 -------- OTHER ASSETS AND LIABILITIES -- (0.8)% Investment Adviser Fees Payable (31) Administrative Fees Payable (11) Other Assets and Liabilities, Net (1,551) -------- TOTAL OTHER ASSETS AND LIABILITIES (1,593) -------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 13,510,186 Outstanding Shares of Beneficial Interest 140,697 Fund Shares of Class A (unlimited authorization -- no par value) Based on 2,824,930 Outstanding Shares of Beneficial Interest 29,619 Undistributed Net Investment Income 51 Accumulated Net Realized Gain on Investments 1,798 Net Unrealized Appreciation on Investments 14,130 -------- TOTAL NET ASSETS -- 100.0% $186,295 ======== Bishop Street Funds 46 Hawaii Municipal Bond Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Value -------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS ($154,074,637 / 13,510,186 SHARES) $ 11.40 ======== NET ASSET VALUE, REDEMPTION PRICE PER SHARE -- CLASS A ($32,220,715 / 2,824,930 SHARES) $ 11.41 ======== MAXIMUM OFFERING PRICE PER SHARE -- CLASS A SHARES ($11.41 / 95.75%) $ 11.92 ======== (A) PREREFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PREREFUNDED DATE. AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY AMT -- ALTERNATIVE MINIMUM TAX COP -- CERTIFICATE OF PARTICIPATION ETM -- ESCROWED TO MATURITY FGIC -- FINANCIAL GUARANTEE INSURANCE CORPORATION FHA -- FEDERAL HOUSING ADMINISTRATION FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION FSA -- FINANCIAL SECURITY ASSURANCE GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION GO -- GENERAL OBLIGATION MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE RB -- REVENUE BOND SER -- SERIES THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 47 www.bishopstreetfunds.com - -------------------------------------------------------------------------------- BISHOP STREET MANAGEMENT DISCUSSION FUNDS - -------------------------------------------------------------------------------- Money Market & Treasury Money Market Funds - -------------------------------------------------------------------------------- In the Money Market Fund, our emphasis continues to be on high quality, liquid issues. We continue to invest conservatively and avoid reaching for yield by buying lower credit quality or leveraged structures that offer higher yields. In anticipation of lower interest rates, we lengthened the weighted average maturity of both the Treasury and Money Market Funds during the period. By extending the maturity of the Funds' positions, we were able to lock in yields prior to the 1/4 point rate cut in June. With much of the yield curve inverted during part of this period, this strategy sacrificed a modest level of short-term returns in order to position the Funds for the longer term. This strategy is now paying off with strong relative returns for both Funds as the yield curve shifted down late in the period. In this low rate environment, some money market funds have searched for different ways to increase yield. However, we continue to invest conservatively and avoid reaching for yield by buying lower credit quality or leveraged structures that offer higher yields. The Funds' consistent strategy during the first half of the year has been to continue to buy high quality securities maturing in the nine to twelve month area in order to maintain longer weighted maturities without sacrificing safety or liquidity. We continue to utilize our extensive credit research resources to ensure that these longer maturity instruments are of the highest quality and liquidity. OUTLOOK AND STRATEGY The outlook for the second half of 2003 depends greatly on the strength and pace of business investment. The economy, which will receive a boost from the $350 billion tax cut and additional monetary stimulus, is aligned for stronger growth, and signs of growth are starting to emerge. Operating profits have been improving and the consumer will benefit from the latest round of mortgage financing. The Fed will delay any tightening until the economy has gained significant momentum and concerns over deflation have subsided. In this environment we will continue to purchase longer securities in order to take advantage of any steepness in the money market curve when the market prices in future Fed tightenings. Bishop Street Funds 48 Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS Face Market Amount Value (000) (000) -------- --------- COMMERCIAL PAPER (D) -- 46.0% ASSET-BACKED -- 20.9% Apreco $ 2,000 0.970%, 08/15/03 $ 1,997 Clipper Receivable 4,000 1.240%, 07/07/03 3,999 Corporate Asset Funding 3,600 1.200%, 07/28/03 3,597 Corporate Receivable 5,000 1.230%, 07/09/03 4,999 Edison Asset 4,300 1.240%, 07/09/03 4,299 Eureka Securitization 4,000 1.210%, 08/06/03 3,995 Falcon Asset Securitization 3,500 0.960%, 07/30/03 3,497 Fleet Funding 4,000 1.120%, 08/11/03 3,995 Galaxy Funding 4,072 0.930%, 08/25/03 4,066 Greyhawk Funding 4,000 1.240%, 07/11/03 3,999 Mont Blanc Capital 4,000 1.070%, 07/28/03 3,997 Preferred Receivable Funding 2,500 1.000%, 07/21/03 2,499 -------- 44,939 -------- DIVERSE FINANCIAL SERVICES -- 7.9% General Electric Capital 3,000 1.240%, 07/16/03 2,999 HBOS Treasury Services 3,000 1.250%, 08/01/03 2,997 New York Life Capital 6,000 1.200%, 07/09/03 5,998 Toyota Motor Credit 5,000 1.090%, 08/01/03 4,995 -------- 16,989 -------- June 30, 2003 49 www.bishopstreetfunds.com Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- INDUSTRIAL -- 5.5% Du Pont EI De Nemours $ 6,000 1.180%, 08/14/03 $ 5,991 TotalFinaElf 6,000 1.220%, 07/15/03 5,997 -------- 11,988 -------- PHARMACEUTICALS -- 2.8% GlaxoSmithKline 6,000 1.170%, 08/19/03 5,990 -------- RETAIL - FOOD -- 3.8% Coca-Cola Enterprises 2,500 0.930%, 08/07/03 2,498 Nestle Capital 5,700 1.165%, 09/15/03 5,686 -------- 8,184 -------- SPECIAL PURPOSE ENTITY -- 5.1% Societe Generale NA 6,000 1.240%, 07/17/03 5,997 Yale University 5,000 1.060%, 08/15/03 4,993 -------- 10,990 -------- TOTAL COMMERCIAL PAPER (Cost $99,080) 99,080 -------- U.S. GOVERNMENT AGENCY OBLIGATIONS -- 24.3% FHLB 1,400 5.375%, 01/05/04 1,428 2,000 5.715%, 05/12/04 2,075 FHLMC 3,000 1.559%, 12/04/03 (C) 2,980 2,000 1.399%, 12/31/03 (C) 1,986 3,000 3.250%, 01/15/04 3,027 3,000 1.348%, 01/29/04 (C) 2,977 2,750 1.203%, 02/26/04 (C) 2,728 3,500 1.094%, 03/12/04 (C) 3,473 3,000 0.949%, 06/17/04 (C) 2,972 Bishop Street Funds 50 Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Market Amount Value (000) (000) -------- --------- FNMA $ 4,000 0.902%, 09/24/03 (C) $ 3,992 6,500 4.750%, 11/14/03 6,581 4,000 1.403%, 12/12/03 (C) 3,975 10,000 1.207%, 02/06/04 (C) 9,927 4,000 5.125%, 02/13/04 4,093 -------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $52,214) 52,214 -------- CERTIFICATES OF DEPOSIT/BANK NOTES (C) -- 10.0% Den Danske 4,000 1.570%, 11/06/03 4,000 Dexia Bank of New York 6,000 1.250%, 10/15/03 6,000 State Street Bank & Trust 5,500 1.190%, 08/13/03 5,500 Westdeutsche Landesbank 6,000 1.350%, 01/27/04 6,000 -------- TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $21,500) 21,500 -------- INSURANCE FUNDING AGREEMENTS (A)(B)(E) -- 8.2% Allstate 3,000 1.209%, 09/16/03 3,000 Metropolitan Life Insurance 5,000 1.390%, 08/01/03 5,000 Monumental Life Insurance 5,500 1.400%, 08/01/03 5,500 Travelers Insurance 4,000 1.350%, 08/31/03 4,000 -------- TOTAL INSURANCE FUNDING AGREEMENTS (Cost $17,500) 17,500 -------- CORPORATE OBLIGATIONS -- 7.1% DIVERSE FINANCIAL SERVICES -- 5.2% Abbey National Treasury Services (A) 5,000 1.040%, 03/10/04 5,000 General Electric Capital (A) 2,300 1.191%, 07/08/04 2,300 General Electric Capital, MTN (A) 2,000 1.170%, 07/16/04 2,000 Permanent Financing 2,000 1.070%, 03/10/04 2,000 -------- 11,300 -------- June 30, 2003 51 www.bishopstreetfunds.com Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Face Amount Value (000) (000) -------- --------- INDUSTRIAL GASES -- 1.9% BP Capital Markets $ 4,000 1.045%, 03/08/04 $ 4,000 -------- TOTAL CORPORATE OBLIGATIONS (Cost $15,300) 15,300 -------- COLLATERALIZED MORTGAGE OBLIGATION -- 2.3% Holmes Financing 5,000 1.180%, 10/15/03 5,000 -------- TOTAL COLLATERALIZED MORTGAGE OBLIGATION (Cost $5,000) 5,000 -------- REPURCHASE AGREEMENT -- 2.1% Goldman Sachs, 1.210%, dated 06/30/03, due 07/01/03, repurchase price $4,600,155 (collateralized by a U.S. Government Obligation, total par value 4,600 $4,589,923, 6.000%, 04/01/33: total market value $4,692,001 4,600 -------- TOTAL REPURCHASE AGREEMENT (Cost $4,600) 4,600 -------- TOTAL INVESTMENTS (COST $215,194) -- 100.0% 215,194 -------- OTHER ASSETS AND LIABILITIES -- 0.0% Investment Adviser Fees Payable (38) Administrative Fees Payable (20) Other Assets and Liabilities, Net 150 -------- TOTAL OTHER ASSETS AND LIABILITIES 92 -------- Bishop Street Funds 52 Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Value (000) ------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 215,185,762 Outstanding Shares of Beneficial Interest $215,186 Fund Shares of Class A (unlimited authorization -- no par value) Based on 123,663 Outstanding Shares of Beneficial Interest 123 Accumulated Net Investment Loss (1) Accumulated Net Realized Loss on Investments (22) -------- TOTAL NET ASSETS -- 100.0% $215,286 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS ($215,162,395 / 215,185,762 SHARES) $ 1.00 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- CLASS A ($123,535 / 123,663 SHARES) $ 1.00 ======== (A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS IS THE RATE IN EFFECT ON JUNE 30, 2003. THE MATURITY DATE SHOWN IS THE NEXT SCHEDULED RESET DATE. (B) SECURITIES SOLD WITHIN THE TERMS OF A PRIVATE PLACEMENT MEMORANDUM, EXCEPT FROM REGISTRATION UNDER SECTION 3A-4, 4(2) OR 144A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER "ACCREDITED INVESTORS". (C) REPRESENTS THE EFFECTIVE YIELD AT THE DATE OF PURCHASE. (D) REPRESENTS THE DISCOUNT YIELD AT THE DATE OF PURCHASE. (E) SECURITY CONSIDERED ILLIQUID. FHLB -- FEDERAL HOME LOAN BANK FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION MTN -- MEDIUM TERM NOTE NA -- NATIONAL ASSOCIATION THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 53 www.bishopstreetfunds.com Treasury Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS Face Market Amount Value (000) (000) -------- --------- U.S. TREASURY OBLIGATIONS -- 51.7% U.S. Treasury Bills (A) $10,000 0.840%, 07/10/03 $ 9,998 5,000 1.223%, 07/17/03 4,997 15,000 0.800%, 07/24/03 14,992 22,000 1.005%, 08/21/03 21,969 7,500 1.109%, 09/11/03 7,484 17,000 0.843%, 09/18/03 16,969 2,000 1.009%, 09/25/03 1,995 5,000 1.059%, 10/02/03 4,986 3,000 0.988%, 10/16/03 2,991 5,000 1.042%, 11/13/03 4,981 U.S. Treasury Notes 17,000 5.250%, 08/15/03 17,072 20,000 3.000%, 11/30/03 20,126 13,000 3.250%, 12/31/03 13,126 5,000 3.000%, 01/31/04 5,051 4,000 3.625%, 03/31/04 4,070 17,000 3.375%, 04/30/04 17,295 -------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $168,102) 168,102 -------- REPURCHASE AGREEMENTS -- 48.2% ABN AMRO, 1.100%, dated 06/30/03, due 07/01/03, repurchase price $13,000,397 (collateralized by U.S. Government Obligations, total par value $13,051,000 1.043%-1.140%, 06/30/04-11/30/04: total market value $13,359,400) 13,000 Goldman Sachs, 1.100%, dated 06/30/03, 13,000 due 07/01/03, repurchase price $68,702,099 (collateralized by U.S. Government Obligations, total par value $52,442,000, 6.250%-8.125%, 68,700 08/15/19-08/15/23: total market value $70,075,291) 68,700 UBS Warburg Dillion, 1.000%, dated 06/30/03, due 07/01/03, repurchase price $75,002,083 (collateralized by a U.S. Government Obligation, total par value $76,835,000, 0%, 12/11/03: 75,000 total market value $76,503,840) 75,000 -------- TOTAL REPURCHASE AGREEMENTS (Cost $156,700) 156,700 -------- TOTAL INVESTMENTS (COST $324,802) -- 99.9% 324,802 -------- Bishop Street Funds 54 Treasury Money Market Fund (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENT OF NET ASSETS (CONTINUED) Value (000) ------- OTHER ASSETS AND LIABILITIES -- 0.1% Investment Adviser Fees Payable $ (41) Administrative Fees Payable (31) Other Assets and Liabilities, Net 275 -------- TOTAL OTHER ASSETS AND LIABILITIES 203 -------- NET ASSETS: Fund Shares of Institutional Shares (unlimited authorization -- no par value) Based on 324,981,943 Outstanding Shares of Beneficial Interest 324,981 Undistributed Net Investment Income 16 Accumulated Net Realized Gain on Investments 8 -------- TOTAL NET ASSETS -- 100.0% $325,005 ======== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE -- INSTITUTIONAL CLASS $ 1.00 ======== (A) REPRESENTS THE EFFECTIVE YIELD AT THE DATE OF PURCHASE. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 55 www.bishopstreetfunds.com Bishop Street Funds (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 (IN THOUSANDS) Tax High Strategic Managed Grade Equity Growth Equity Income Fund Fund Fund Fund - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME: Dividend Income $ 959 $ 59 $ 233 $ -- Interest Income 24 1 10 3,199 Securities Lending 14 -- -- 24 Less: Foreign Taxes Withheld (10) -- (1) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total Investment Income 987 60 242 3,223 - ------------------------------------------------------------------------------------------------------------------------------------ EXPENSES: Investment Adviser Fees 478 84 103 373 Shareholder Servicing Fees 161 28 35 169 Administrative Fees 129 23 28 136 Distribution Fees, Class A 2 -- -- 1 Transfer Agent Fees 24 15 14 25 Professional Fees 10 5 4 15 Trustees Fees 6 2 1 8 Custody Fees 5 2 1 7 Printing Fees 2 1 1 2 Registration Fees 1 1 -- 2 Organizational Costs -- 16 14 -- Miscellaneous Expenses 4 2 2 2 - ------------------------------------------------------------------------------------------------------------------------------------ Total Expenses 822 179 203 740 - ------------------------------------------------------------------------------------------------------------------------------------ Less Waivers: Investment Adviser Fees (19) (11) (31) (62) Administrative Fees (57) (10) (12) (60) Shareholder Servicing Fees (97) (17) (21) (102) - ------------------------------------------------------------------------------------------------------------------------------------ Total Waivers (173) (38) (64) (224) - ------------------------------------------------------------------------------------------------------------------------------------ Total Net Expenses 649 141 139 516 - ------------------------------------------------------------------------------------------------------------------------------------ Net Investment Income (Loss) 338 (81) 103 2,707 - ------------------------------------------------------------------------------------------------------------------------------------ Net Realized Gain (Loss) on Investments (903) (1,171) 40 3,834 Change in Unrealized Appreciation (Depreciation) on Investments 14,263 5,515 2,414 (456) - ------------------------------------------------------------------------------------------------------------------------------------ Net Realized and Unrealized Gain on Investments 13,360 4,344 2,454 3,378 - ------------------------------------------------------------------------------------------------------------------------------------ Increase in Net Assets Resulting from Operations $13,698 $ 4,263 $2,557 $6,085 ==================================================================================================================================== 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 <page> Bishop Street Funds (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 (IN THOUSANDS) Hawaii Treasury Municipal Money Money Bond Market Market Fund Fund Fund - ------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME: Interest Income $4,204 $1,570 $2,247 - ------------------------------------------------------------------------------------------------------------- Total Investment Income 4,204 1,570 2,247 - ------------------------------------------------------------------------------------------------------------- EXPENSES: Investment Adviser Fees 325 348 525 Shareholder Servicing Fees 232 290 437 Administrative Fees 186 232 350 Distribution Fees, Class A 42 -- -- Transfer Agent Fees 29 30 25 Professional Fees 19 24 46 Trustees Fees 11 15 24 Custody Fees 8 7 14 Printing Fees 4 7 9 Registration Fees 1 2 2 Miscellaneous Expenses 4 5 17 - ------------------------------------------------------------------------------------------------------------- Total Expenses 861 960 1,449 - ------------------------------------------------------------------------------------------------------------- Less Waivers: Investment Adviser Fees (142) (102) (262) Administrative Fees (121) (102) (154) Shareholder Servicing Fees (139) (174) (262) - ------------------------------------------------------------------------------------------------------------- Total Waivers (402) (378) (678) - ------------------------------------------------------------------------------------------------------------- Total Net Expenses 459 582 771 - ------------------------------------------------------------------------------------------------------------- Net Investment Income 3,745 988 1,476 - ------------------------------------------------------------------------------------------------------------- Net Realized Gain on Investments 1,633 -- 21 Change in Unrealized Appreciation on Investments 1,738 -- -- - ------------------------------------------------------------------------------------------------------------- Net Realized and Unrealized Gain on Investments 3,371 -- 21 - ------------------------------------------------------------------------------------------------------------- Increase in Net Assets Resulting from Operations $7,116 $ 988 $1,497 ============================================================================================================= AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 57 www.bishopstreetfunds.com <page> Bishop Street Funds - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) Equity Fund - ------------------------------------------------------------------------------------------------------------------------------ 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES FROM OPERATIONS: Net Investment Income $ 338 $ 428 Net Realized Loss on Investments (903) (21,478) Change in Unrealized Appreciation (Depreciation) on Investments 14,263 (31,683) - ------------------------------------------------------------------------------------------------------------------------------ Increase (Decrease) in Net Assets Resulting From Operations 13,698 (52,733) - ------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS: Net Investment Income: Institutional Class Shares (352) (420) Class A Shares (2) -- - ------------------------------------------------------------------------------------------------------------------------------ Total Distributions (354) (420) - ------------------------------------------------------------------------------------------------------------------------------ Changes in Net Assets 13,344 (53,153) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS: Institutional Class Shares: Proceeds from Shares Issued 4,075 19,672 Reinvestments of Cash Distributions 210 246 Cost of Shares Redeemed (11,571) (53,829) - ------------------------------------------------------------------------------------------------------------------------------ Total Institutional Class Capital Share Transactions (7,286) (33,911) - ------------------------------------------------------------------------------------------------------------------------------ Class A Shares: Proceeds from Shares Issued 47 459 Reinvestments of Cash Distributions 1 -- Cost of Shares Redeemed (286) (1,036) - ------------------------------------------------------------------------------------------------------------------------------ Total Class A Capital Share Transactions (238) (577) - ------------------------------------------------------------------------------------------------------------------------------ Net Decrease in Net Assets From Capital Share Transactions (7,524) (34,488) - ------------------------------------------------------------------------------------------------------------------------------ Total Increase (Decrease) in Net Assets 5,820 (87,641) - ------------------------------------------------------------------------------------------------------------------------------ NET ASSETS: Beginning of Period 131,584 219,225 - ------------------------------------------------------------------------------------------------------------------------------ End of Period $137,404 $131,584 ============================================================================================================================== SHARE TRANSACTIONS: Institutional Class Shares: Issued 525 2,383 Issued in Lieu of Cash Distributions 26 33 Redeemed (1,532) (6,627) - ------------------------------------------------------------------------------------------------------------------------------ Total Institutional Class Share Transactions (981) (4,211) - ------------------------------------------------------------------------------------------------------------------------------ Class A Shares: Shares Issued 6 49 Shares Redeemed (37) (116) - ------------------------------------------------------------------------------------------------------------------------------ Total Class A Share Transactions (31) (67) - ------------------------------------------------------------------------------------------------------------------------------ Net Decrease in Shares Outstanding from Share Transactions (1,012) (4,278) ============================================================================================================================== 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 58 <page> Bishop Street Funds - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) Strategic Tax Managed Growth Fund(1) Equity Fund(2) - --------------------------------------------------------------------------------------------------------------------------- 2003 2002 2003 2002 - --------------------------------------------------------------------------------------------------------------------------- INVESTMENT ACTIVITIES FROM OPERATIONS: Net Investment Income (Loss) $ (81) $ (58) $ 103 $ 33 Net Realized Gain (Loss) on Investments (1,171) (2,035) 40 12 Change in Unrealized Appreciation (Depreciation) on Investments 5,515 (833) 2,414 (430) - --------------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Net Assets Resulting From Operations 4,263 (2,926) 2,557 (385) - --------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: Net Investment Income: Institutional Class Shares -- -- (107) (33) - --------------------------------------------------------------------------------------------------------------------------- Total Distributions -- -- (107) (33) - --------------------------------------------------------------------------------------------------------------------------- Changes in Net Assets 4,263 (2,926) 2,450 (418) - --------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: Institutional Class Shares: Proceeds from Shares Issued 3,029 22,869 6,857 25,278 Reinvestments of Cash Distributions -- -- 2 -- Cost of Shares Redeemed (869) (44) (2,786) (225) - --------------------------------------------------------------------------------------------------------------------------- Total Institutional Class Capital Share Transactions 2,160 22,825 4,073 25,053 - --------------------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets From Capital Share Transactions 2,160 22,825 4,073 25,053 - --------------------------------------------------------------------------------------------------------------------------- Total Increase in Net Assets 6,423 19,899 6,523 24,635 - --------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of Period 19,899 -- 24,635 -- - --------------------------------------------------------------------------------------------------------------------------- End of Period $26,322 $19,899 $31,158 $24,635 =========================================================================================================================== SHARE TRANSACTIONS: Institutional Class Shares: Shares Issued 339 2,308 700 2,527 Shares Issued in Lieu of Cash Distributions -- -- -- -- Shares Redeemed (89) (5) (282) (22) - --------------------------------------------------------------------------------------------------------------------------- Total Institutional Class Share Transactions 250 2,303 418 2,505 - --------------------------------------------------------------------------------------------------------------------------- Net Increase in Shares Outstanding from Share Transactions 250 2,303 418 2,505 =========================================================================================================================== (1) COMMENCED OPERATIONS ON JULY 1, 2002. (2) COMMENCED OPERATIONS ON NOVEMBER 13, 2002. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 59 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) High Grade Hawaii Municipal Income Fund Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES FROM OPERATIONS: Net Investment Income $ 2,707 $ 5,851 $ 3,745 $ 7,597 Net Realized Gain on Investments 3,834 576 1,633 1,253 Change in Unrealized Appreciation (Depreciation) on Investments (456) 8,053 1,738 8,384 - ------------------------------------------------------------------------------------------------------------------------------------ Increase in Net Assets Resulting From Operations 6,085 14,480 7,116 17,234 - ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS: Net Investment Income: Institutional Class Shares (2,702) (5,833) (3,106) (6,293) Class A Shares (7) (17) (641) (1,289) Capital Gains: Institutional Class Shares -- -- -- (600) Class A Shares -- -- -- (133) - ------------------------------------------------------------------------------------------------------------------------------------ Total Distributions (2,709) (5,850) (3,747) (8,315) - ------------------------------------------------------------------------------------------------------------------------------------ Changes in Net Assets 3,376 8,630 3,369 8,919 - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS: Institutional Class Shares: Proceeds from Shares Issued 5,486 23,640 10,109 22,766 Reinvestments of Cash Distributions 968 1,748 423 945 Cost of Shares Redeemed (10,488) (19,891) (9,494) (17,946) - ------------------------------------------------------------------------------------------------------------------------------------ Total Institutional Class Capital Share Transactions (4,034) 5,497 1,038 5,765 - ------------------------------------------------------------------------------------------------------------------------------------ Class A Shares: Proceeds from Shares Issued 26 169 1,962 4,677 Reinvestments of Cash Distributions 7 14 263 613 Cost of Shares Redeemed (78) (110) (4,080) (3,936) - ------------------------------------------------------------------------------------------------------------------------------------ Total Class A Capital Share Transactions (45) 73 (1,855) 1,354 - ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Net Assets From Capital Share Transactions (4,079) 5,570 (817) 7,119 - ------------------------------------------------------------------------------------------------------------------------------------ Total Increase (Decrease) in Net Assets (703) 14,200 2,552 16,038 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS: Beginning of Period 138,941 124,741 183,743 167,705 - ------------------------------------------------------------------------------------------------------------------------------------ End of Period $138,238 $138,941 $186,295 $183,743 ==================================================================================================================================== SHARE TRANSACTIONS: Institutional Class Shares: Shares Issued 510 2,310 901 2,089 Shares Issued in Lieu of Cash Distributions 89 170 37 86 Shares Redeemed (979) (1,934) (843) (1,629) - ------------------------------------------------------------------------------------------------------------------------------------ Total Institutional Class Share Transactions (380) 546 95 546 - ------------------------------------------------------------------------------------------------------------------------------------ Class A Shares: Shares Issued 2 17 174 429 Shares Issued in Lieu of Cash Distributions 1 1 23 56 Shares Redeemed (7) (11) (358) (359) - ------------------------------------------------------------------------------------------------------------------------------------ Total Class A Share Transactions (4) 7 (161) 126 - ------------------------------------------------------------------------------------------------------------------------------------ Net Increase (Decrease) in Shares Outstanding from Share Transactions (384) 553 (66) 672 ==================================================================================================================================== 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 60 Bishop Street Funds - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) Money Market Treasury Money Market Fund Fund - ------------------------------------------------------------------------------------------------------------------------------------ 2003 2002 2003 2002 - ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENT ACTIVITIES FROM OPERATIONS: Net Investment Income $ 988 $ 3,690 $ 1,476 $ 4,508 Net Realized Gain (Loss) on Investments -- 1 21 (9) - ------------------------------------------------------------------------------------------------------------------------------------ Increase in Net Assets Resulting From Operations 988 3,691 1,497 4,499 - ------------------------------------------------------------------------------------------------------------------------------------ DIVIDENDS TO SHAREHOLDERS: Net Investment Income: Institutional Class Shares (988) (3,687) (1,476) (4,508) Class A Shares -- (3) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total Dividends (988) (3,690) (1,476) (4,508) - ------------------------------------------------------------------------------------------------------------------------------------ Changes in Net Assets -- 1 21 (9) - ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS: (ALL AT $1.00 PER SHARE): Institutional Class Shares: Proceeds from Shares Issued 185,542 498,190 415,340 879,834 Reinvestments of Cash Distributions 15 60 7 25 Cost of Shares Redeemed (208,893) (569,687) (422,041) (920,594) - ------------------------------------------------------------------------------------------------------------------------------------ Total Institutional Class Capital Share Transactions (23,336) (71,437) (6,694) (40,735) - ------------------------------------------------------------------------------------------------------------------------------------ Class A Shares: Proceeds from Shares Issued -- 9 -- -- Reinvestments of Cash Distributions 1 3 -- -- Cost of Shares Redeemed (65) (325) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total Class A Capital Share Transactions (64) (313) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net Decrease in Net Assets From Capital Share Transactions (23,400) (71,750) (6,694) (40,735) - ------------------------------------------------------------------------------------------------------------------------------------ Total Decrease in Net Assets (23,400) (71,749) (6,673) (40,744) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS: Beginning of Period 238,686 310,435 331,678 372,422 - ------------------------------------------------------------------------------------------------------------------------------------ End of Period $215,286 $238,686 $325,005 $331,678 ==================================================================================================================================== AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 61 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND THE PERIODS ENDED DECEMBER 31, DIVIDENDS AND INVESTMENT ACTIVITIES DISTRIBUTIONS FROM -------------------------- ------------------------------ TOTAL NET ASSET NET REALIZED INVESTMENT TOTAL VALUE, NET AND UNREALIZED ACTIVITIES NET DIVIDENDS BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT CAPITAL AND OF PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS -------- ------------- ------------- ----------- ---------- ------- ---------- - ----------- EQUITY FUND - ----------- INSTITUTIONAL CLASS SHARES: 2003(1) $ 7.53 $ 0.02 $ 0.82 $ 0.84 $(0.02) $ -- $(0.02) 2002(1) 10.08 0.02 (2.55) (2.53) (0.02) -- (0.02) 2001 13.55 -- (3.47) (3.47) -- -- -- 2000 17.88 -- (2.77) (2.77) -- (1.56) (1.56) 1999(1) 15.28 -- 3.68 3.68 -- (1.08) (1.08) 1998 12.06 0.05 3.88 3.93 (0.05) (0.66) (0.71) CLASS A SHARES: 2003(1) $ 7.49 $ 0.01 $ 0.81 $ 0.82 $(0.01) $ -- $(0.01) 2002(1) 10.01 -- (2.52) (2.52) -- -- -- 2001 13.49 (0.07) (3.41) (3.48) -- -- -- 2000 17.87 -- (2.82) (2.82) -- (1.56) (1.56) 1999(2) 15.74 -- 3.19 3.19 -- (1.06) (1.06) - --------------------- STRATEGIC GROWTH FUND - --------------------- INSTITUTIONAL CLASS SHARES: 2003 $ 8.64 $(0.03) $ 1.70 $ 1.67 $ -- $ -- $ -- 2002(3) 10.00 (0.03) (1.33) (1.36) -- -- -- - ----------------------- TAX MANAGED EQUITY FUND - ----------------------- INSTITUTIONAL CLASS SHARES: 2003 $ 9.83 $ 0.04 $ 0.83 $ 0.87 $(0.04) $ -- $(0.04) 2002(4) 10.00 0.01 (0.17) (0.16) (0.01) -- (0.01) - --------------------- HIGH GRADEINCOME FUND - --------------------- INSTITUTIONAL CLASS SHARES: 2003 $10.67 $ 0.21 $ 0.27 $ 0.48 $(0.21) $ -- $(0.21) 2002 10.00 0.46 0.67 1.13 (0.46) -- (0.46) 2001 9.81 0.50 0.19 0.69 (0.50) -- (0.50) 2000 9.39 0.52 0.42 0.94 (0.52) -- (0.52) 1999 10.43 0.48 (0.92) (0.44) (0.50) (0.10) (0.60) 1998 10.23 0.54 0.37 0.91 (0.54) (0.17) (0.71) CLASS A SHARES: 2003 $10.62 $ 0.20 $ 0.27 $ 0.47 $(0.20) $ -- $(0.20) 2002 9.96 0.43 0.66 1.09 (0.43) -- (0.43) 2001 9.76 0.48 0.19 0.67 (0.47) -- (0.47) 2000 9.35 0.52 0.38 0.90 (0.49) -- (0.49) 1999(2) 9.69 0.19 (0.19) -- (0.24) (0.10) (0.34) <FN> + TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED. TOTAL RETURN DOES NOT REFLECT THE SALES CHARGE ON CLASS A SHARES. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. * ANNUALIZED. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. </FN> Bishop Street Funds 62 <page> RATIO OF NET INVESTMENT RATIO OF INCOME RATIO OF EXPENSES RATIO OF NET (LOSS) TO NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT AVERAGE VALUE, END OF AVERAGE NET ASSETS INCOME (LOSS) NET ASSETS PORTFOLIO END OF TOTAL PERIOD NET EXCLUDING FEE TO AVERAGE EXCLUDING TURNOVER PERIOD RETURN+ (000) ASSETS WAIVERS NET ASSETS FEE WAIVERS RATE ------ ------- -------- ------ ------- ---------- ----------- -------- - ----------- EQUITY FUND - ----------- INSTITUTIONAL CLASS SHARES: 2003(1) $ 8.35 11.19% $135,883 1.00%* 1.27%* 0.53%* 0.26%* 18% 2002(1) 7.53 (25.06) 129,981 1.00 1.27 0.24 (0.03) 60 2001 10.08 (25.61) 216,412 1.00 1.27 -- (0.27) 86 2000 13.55 (16.20) 300,565 1.00 1.28 (0.23) (0.51) 52 1999(1) 17.88 24.37 391,227 1.00 1.27 (0.01) (0.28) 58 1998 15.28 33.05 101,817 1.00 1.32 0.38 0.06 41 Class A Shares: 2003(1) $ 8.30 10.98% $ 1,521 1.25%* 1.52%* 0.29%* 0.02%* 18% 2002(1) 7.49 (25.17) 1,603 1.25 1.52 (0.02) (0.29) 60 2001 10.01 (25.80) 2,813 1.25 1.52 (0.29) (0.56) 86 2000 13.49 (16.49) 10,631 1.25 1.53 (0.51) (0.79) 52 1999(2) 17.87 20.52 583 1.25* 1.61* (0.33)* (0.69)* 58 - --------------------- STRATEGIC GROWTH FUND - --------------------- INSTITUTIONAL CLASS SHARES: 2003 $10.31 19.33% $ 26,322 1.25%* 1.58%* (0.72)%* (1.05)%* 35% 2002(3) 8.64 (13.60) 19,899 1.25* 1.67* (0.61)* (1.03)* 50 - ----------------------- TAX MANAGED EQUITY FUND - ----------------------- INSTITUTIONAL CLASS SHARES: 2003 $10.66 8.84% $ 31,158 1.00%* 1.46%* 0.74%* 0.28%* 15% 2002(4) 9.83 (1.57) 24,635 1.00* 1.50* 0.99* 0.49* 1 - --------------------- HIGH GRADEINCOME FUND - --------------------- INSTITUTIONAL CLASS SHARES: 2003 $10.94 4.57% $137,850 0.76%* 1.09%* 3.99%* 3.66%* 33% 2002 10.67 11.54 138,516 0.76 1.09 4.45 4.12 19 2001 10.00 7.16 124,416 0.76 1.09 5.02 4.69 89 2000 9.81 10.25 127,888 0.77 1.14 5.41 5.04 88 1999 9.39 (4.34) 127,881 0.80 1.19 5.12 4.73 56 1998 10.43 9.09 24,901 0.80 1.21 5.21 4.80 98 CLASS A SHARES: 2003 $10.89 4.46% $ 388 1.01%* 1.34%* 3.77%* 3.44%* 33% 2002 10.62 11.19 425 1.01 1.34 4.21 3.88 19 2001 9.96 7.02 325 1.01 1.34 4.72 4.39 89 2000 9.76 9.85 26 1.02 1.39 5.24 4.87 88 1999(2) 9.35 (0.05) 1 1.05* 1.87* 4.89* 4.07* 56 <FN> (1) PER SHARE NET INVESTMENT INCOME AMOUNT CALCULATED USING AVERAGE SHARES. (2) COMMENCED OPERATIONS ON JUNE 14, 1999. (3) COMMENCED OPERATIONS ON JULY 1, 2002. (4) COMMENCED OPERATIONS ON NOVEMBER 13, 2002. </FN> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. June 30, 2003 63 www.bishopstreetfunds.com <page> Bishop Street Funds - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED JUNE 30, 2003 (UNAUDITED) AND THE PERIODS ENDED DECEMBER 31, DIVIDENDS AND INVESTMENT ACTIVITIES DISTRIBUTIONS FROM -------------------------- ----------------------- TOTAL NET ASSET NET REALIZED INVESTMENT TOTAL VALUE, NET AND UNREALIZED ACTIVITIES NET DIVIDENDS BEGINNING INVESTMENT GAIN (LOSS) ON FROM INVESTMENT CAPITAL AND OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTION ---------- ------ ----------- ---------- ------- ------- ------------ - -------------------------- HAWAII MUNICIPAL BOND FUND - -------------------------- INSTITUTIONAL CLASS SHARES: 2003 $11.20 $ 0.23 $ 0.20 $ 0.43 $(0.23) $ -- (0.23) 2002 10.66 0.47 0.57 1.04 (0.46) (0.04) (0.50) 2001 10.70 0.49 (0.04) 0.45 (0.49) -- (0.49) 2000 9.98 0.50 0.72 1.22 (0.50) -- (0.50) 1999 10.77 0.48 (0.75) (0.27) (0.50) (0.02) (0.52) 1998 10.67 0.51 0.10 0.61 (0.51) -- (0.51) CLASS A SHARES: 2003 $11.20 $ 0.21 $ 0.21 $ 0.42 $(0.21) $ -- $(0.21) 2002 10.66 0.44 0.58 1.02 (0.44) (0.04) (0.48) 2001 10.69 0.46 (0.02) 0.44 (0.47) -- (0.47) 2000 9.97 0.46 0.73 1.19 (0.47) -- (0.47) 1999(1) 10.42 0.26 (0.44) (0.18) (0.25) (0.02) (0.27) - ----------------- MONEY MARKET FUND - ----------------- INSTITUTIONAL CLASS SHARES: 2003 $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- 2002 1.00 0.01 -- 0.01 (0.01) -- (0.01) 2001 1.00 0.04 -- 0.04 (0.04) -- (0.04) 2000 1.00 0.06 -- 0.06 (0.06) -- (0.06) 1999 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1998 1.00 0.05 -- 0.05 (0.05) -- (0.05) CLASS A SHARES: 2003 $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- 2002 1.00 0.01 -- 0.01 (0.01) -- (0.01) 2001(2) 1.00 0.02 -- 0.02 (0.02) -- (0.02) - -------------------------- TREASURY MONEY MARKET FUND - -------------------------- INSTITUTIONAL CLASS SHARES: 2003 $ 1.00 $ -- $ -- $ -- $ -- $ -- $ -- 2002 1.00 0.01 -- 0.01 (0.01) -- (0.01) 2001 1.00 0.04 -- 0.04 (0.04) -- (0.04) 2000 1.00 0.06 -- 0.06 (0.06) -- (0.06) 1999 1.00 0.05 -- 0.05 (0.05) -- (0.05) 1998 1.00 0.05 -- 0.05 (0.05) -- (0.05) <FN> + 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 IDISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. * ANNUALIZED. (1) COMMENCED OPERATIONS ON JUNE 14, 1999. (2) COMMENCED OPERATIONS ON MAY 1, 2001. </FN> 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 64 - -------------------------------------------------------------------------------- RATIO OF NET RATIO OF RATIO OF INVESTMENT RATIO EXPENSES NET INCOME NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT TO AVERAGE PORT- VALUE, END OF AVERAGE NET ASSETS INCOME NET ASSETS FOLIO END OF TOTAL PERIOD NET EXCLUDING FEE TO AVERAGE EXCLUDING TURNOVER PERIOD RETURN+ (000) ASSETS WAIVERS NET ASSETS FEE WAIVERS RATE ------ ------- -------- ------- ------- ---------- ----------- ------ - -------------------------- HAWAII MUNICIPAL BOND FUND - -------------------------- INSTITUTIONAL CLASS SHARES: 2003 $11.40 3.86% $154,074 0.45%* 0.88%* 4.08%* 3.65%* 12% 2002 11.20 10.02 150,287 0.45 0.89 4.23 3.79 26 2001 10.66 4.24 137,206 0.45 0.88 4.54 4.11 4 2000 10.70 12.61 134,901 0.44 0.92 4.89 4.41 19 1999 9.98 (2.65) 141,341 0.41 0.99 4.79 4.21 14 1998 10.77 5.84 35,751 0.41 1.01 4.74 4.14 21 CLASS A SHARES: 2003 $11.41 3.83% $ 32,221 0.70%* 1.13%* 3.83%* 3.40%* 12% 2002 11.20 9.75 33,456 0.70 1.14 3.98 3.54 26 2001 10.66 4.13 30,499 0.70 1.13 4.29 3.86 4 2000 10.69 12.34 19,951 0.69 1.17 4.63 4.15 19 1999(1) 9.97 (1.76) 6,131 0.66* 1.24* 4.89* 4.31* 14 - ----------------- MONEY MARKET FUND - ----------------- INSTITUTIONAL CLASS SHARES: 2003 $ 1.00 0.42% $215,162 0.50%* 0.83%* 0.85%* 0.52%* n/a 2002 1.00 1.34 238,498 0.50 0.81 1.33 1.02 n/a 2001 1.00 3.86 309,935 0.50 0.82 3.71 3.39 n/a 2000 1.00 6.13 305,678 0.50 0.83 5.95 5.62 n/a 1999 1.00 4.88 284,291 0.50 0.84 4.78 4.44 n/a 1998 1.00 5.26 268,318 0.50 0.81 5.12 4.81 n/a CLASS A SHARES: 2003 $ 1.00 0.30% $ 124 0.75%* 1.08%* 0.61%* 0.28%* n/a 2002 1.00 1.08 188 0.75 1.06 1.10 0.79 n/a 2001(2) 1.00 1.96 500 0.75* 1.07* 2.66* 2.34* n/a - -------------------------- TREASURY MONEY MARKET FUND - -------------------------- INSTITUTIONAL CLASS SHARES: 2003 $ 1.00 0.42% $325,005 0.44%* 0.83%* 0.84%* 0.45%* n/a 2002 1.00 1.29 331,678 0.44 0.83 1.28 0.89 n/a 2001 1.00 3.68 372,422 0.44 0.85 3.68 3.27 n/a 2000 1.00 5.89 455,612 0.44 0.82 5.73 5.35 n/a 1999 1.00 4.65 331,064 0.44 0.85 4.56 4.15 n/a 1998 1.00 5.10 299,844 0.44 0.84 4.98 4.58 n/a June 30, 2003 65 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION The Bishop Street Funds (the "Trust") are registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Bishop Street Funds consist of a series of seven funds (each a Fund, collectively the "Funds") which includes the Equity Fund, Strategic Growth Fund, Tax Managed Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund, Money Market Fund and the Treasury Money Market Fund. Class A Shares of the Equity, High Grade Income and Hawaii Municipal Bond Funds are subject to a sales load as disclosed in the prospectus. The assets of each Fund are segregated, and a shareholder's interest is limited to the Fund in which shares are held. The Funds' prospectus provides a description of each Fund's investment objectives, policies and strategies. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Trust. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. SECURITY VALUATION Bishop Street Funds' investments in equity securities which are traded on a national securities exchange are stated at the last official closing price on the principal exchange on which they are traded on valuation date or, if there is none, at the last sales price. Equity securities which are reported on the NASDAQ national market system are stated at the official closing price. Other equity securities traded in the over-the-counter market and listed equity securities for which no sale was reported on that date are stated at the last quoted bid price. Debt obligations exceeding sixty days to maturity which are actively traded are valued by an independent pricing service at the most recently quoted bid price. Debt obligations with sixty days or less remaining until maturity may be valued at their amortized cost. Restricted securities for which quotations are not readily available are valued at fair value using methods determined in good faith under general Trustee supervision. Investment securities held by the Money Market and Treasury Money Market Funds are stated at amortized cost, which approximates market value. Under this valuation method, purchase discounts and premiums are accreted and amortized ratably to maturity and are included in interest income. Bishop Street Funds 66 <page> (UNAUDITED) - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for on the date the security is purchased or sold (trade date). Costs used in determining net realized capital gains and losses on the sale of securities are those of the specific securities sold adjusted for the accretion and amortization of the purchase discounts and premiums during the respective holding periods. Interest income is recorded on the accrual basis; dividend income is recorded on ex-dividend date. DISCOUNTS AND PREMIUMS Discounts and premiums are accreted or amortized over the life of each security and are recorded as interest income for each of the Funds using the scientific interest method, which approximates the effective interest method. REPURCHASE AGREEMENTS Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. The Funds may also invest in tri-party repurchase agreements. Securities held as collateral for tri-party repurchase agreements are maintained in a segregated account by the broker's custodian bank. Provisions of repurchase agreements and procedures adopted by the Adviser (see Note 3) ensure that the market value of the collateral is sufficient in the event of default by the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. CLASSES Class-specific expenses were borne by that 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. EXPENSES Expenses that are directly related to one of the Funds are charged directly to that Fund. Other operating expenses of the Trust are prorated to the Funds on the basis of relative net assets. DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income are declared daily and paid on a monthly basis for the High Grade Income Fund, Hawaii Municipal Bond Fund, Money Market Fund and Treasury Money Market Fund. The Equity Fund, Strategic Income Fund and Tax Managed Equity Fund declare and pay distributions from net investment income on a quarterly basis. Any net realized capital gains will be distributed at least annually for all Funds. ILLIQUID SECURITIES Valuations of illiquid securities may differ significantly from the values that would have been used had an active market value for these securities existed. June 30, 2003 67 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- 3. INVESTMENT ADVISORY AGREEMENT Investment advisory services are provided to the Funds by Bishop Street Capital Management (the "Adviser"). The Adviser is entitled to receive an annual fee of 0.74% of the average daily net assets of the Equity, Strategic Growth and the Tax Managed Equity 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 0.30% of the average daily net assets of the Money Market and Treasury Money Market Funds (collectively, the "Money Market Funds"). The Adviser may from time to time waive a portion of its fee in order to limit the operating expenses of a Fund. BNP Paribas Asset Management, Inc. ("BNP PAM") serves as the investment sub-adviser for the Strategic Growth Fund, pursuant to a sub-adviser agreement. BNP PAM is entitled to receive from the Adviser a fee, computed daily and paid monthly, at the annual rate of 0.37% of the average daily net assets of the Strategic Growth Fund. Wellington Management Company, LLP ("Wellington") serves as the investment sub-adviser for the Money Market Funds, pursuant to a sub-adviser agreement. Wellington is entitled to receive from the Adviser a fee, computed daily and paid monthly, at the annual rate of 0.075% of the average daily net assets of the Money Market Funds up to $500 million and 0.020% of the average daily net assets of the Money Market Funds in excess of $500 million. 4. ADMINISTRATIVE, TRANSFER AGENT AND DISTRIBUTION SERVICES Pursuant to an administration agreement dated January 27, 1995, (the "Agreement") SEI Investments Global Funds Services ("GFS"), a wholly owned subsidiary of SEI Investments Company, acts as the Trust's Administrator. Under the terms of the Agreement, GFS is entitled to receive an annual fee of 0.20% of the average daily net assets of the Funds. GFS has voluntarily agreed to waive a portion of its fee in order to limit operating expenses. Pursuant to an agreement dated January 30, 1995, DST Systems, Inc. ("DST") acts as the Transfer Agent of the Trust. As such, DST provides transfer agency, dividend disbursing and shareholder services to the Trust. SEI Investments Distribution Co. ("SIDCO"), a wholly owned subsidiary of SEI Investments Company, acts as the Trust's Distributor pursuant to a distribution agreement dated June 10, 1999. The Funds have adopted a Distribution Plan (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 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. Bishop Street Funds 68 (UNAUDITED) - -------------------------------------------------------------------------------- The Trust has adopted and entered into a shareholder service plan and agreement with SIDCO. Each Fund pays to SIDCO a shareholder servicing fee at an annual rate of 0.25% of the average daily net asset value of all shares of each fund, which is computed daily and paid monthly. 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 period, SIDCO paid the entire amount of fees received under the shareholder service plan to First Hawaiian Bank for shareholder services performed for the Funds. SIDCO has voluntarily agreed to waive a portion of its fee in order to limit operating expenses. Certain officers of the Trust are also officers of the Administrator. Such officers are paid no fees by the Trust. 5. SECURITIES LENDING Each Fund may lend portfolio securities to brokers, dealers and other financial organizations that meet capital and other credit requirements or other criteria established by the Trust's Board of Trustees. These loans may not exceed 331/3% of the total asset value of the Fund (including the loan collateral). No Fund will lend portfolio securities to its investment adviser, sub-adviser or their affiliates unless it has applied for and received specific authority to do so from the SEC. Loans of portfolio securities will be fully collateralized by cash, letters of credit or U.S. Government securities, and the collateral will be maintained in an amount equal to at least 100% of the current market value of the loaned securities by marking to market daily, although the borrower will be required to deliver collateral of 102% of the market value of borrowed securities for domestic and foreign securities, respectively. Although the risk of lending is mitigated by the collateral, the Fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return them. 6. ORGANIZATION COSTS Certain costs associated with the organization of the Strategic Growth and Tax Managed Equity Funds have been paid by the Funds' Investment Adviser. The Funds will not be required to reimburse the Adviser for such organization costs. These costs, including initial registration costs, were deferred and were charged to expenses during the Funds' first twelve months of operation. June 30, 2003 69 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- 7. INVESTMENT TRANSACTIONS The cost of security purchases and the proceeds from the sale of securities, other than temporary cash investments for the period ended June 30, 2003 are presented below for the Funds. Strategic Tax High Grade Hawaii Equity Growth Managed Income Municipal Fund Fund Equity Fund Fund Bond Fund (000) (000) (000) (000) (000) ------- -------- ------ ------- ------- Purchases U.S. Government Securities $ -- $ -- $ -- $ -- $ -- Other 22,835 10,154 8,690 41,957 20,964 Sales U.S. Government Securities $ -- $ -- $ -- $ 16,484 $ -- Other 28,283 7,947 3,939 36,408 24,567 8. FEDERAL TAX INFORMATION It is each Fund's intention to continue to qualify as a regulated investment company for Federal income tax purposes and to distribute a majority of its taxable income and net capital gains. Accordingly, no provision for Federal income taxes is required. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with Federal tax regulations which may differ from accounting principles generally accepted in the United States of America. 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 paid-in-capital or accumulated net realized gain, as appropriate, in the period that the differences arise. For Federal income tax purposes, capital loss carryforwards represent realized losses of the Funds that may be carried forward for a maximum period of eight years and applied against future capital gains. As of December 31, 2002 the Funds had the following capital loss carryforwards. Bishop Street Funds 70 (UNAUDITED) - -------------------------------------------------------------------------------- Treasury Strategic High Grade Money Money Equity Growth Income Market Market Fund Fund Fund Fund Fund (000) (000) (000) (000) (000) --------- -------- ------- ---- ----- Capital loss carryforwards expiring: Dec. 2005 $ -- $ -- $ -- $(2) $ -- Dec. 2008 -- -- (2,069) (2) -- Dec. 2009 (38,258) -- -- (19) -- Dec. 2010 (25,686) (1,359) -- -- (12) Post-October losses (3,363) (227) -- -- -- Post-October losses represent losses realized on investment transactions from November 1, 2002 through December 31, 2002 that, in accordance with Federal income tax regulations the Funds have elected to defer and treat as having arisen in the following fiscal year. The aggregate gross unrealized appreciation and depreciation of securities held by the Equity Fund, Strategic Growth Fund, Tax Managed Equity Fund, High Grade Income Fund, and Hawaii Municipal Bond Fund for Federal income tax purposes at June 30, 2003 were as follows: Strategic Tax High Grade Hawaii Equity Growth Managed Income Municipal Fund Fund Equity Fund Fund Bond Fund (000) (000) (000) (000) (000) -------- ------- ------- -------- -------- Federal Tax Cost $155,152 $21,805 $29,115 $163,680 $173,609 -------- ------- ------- -------- -------- Gross Unrealized Appreciation 13,223 5,005 2,490 10,671 14,445 Gross Unrealized Depreciation (13,694) (504) (506) (60) (166) -------- ------- ------- -------- -------- Net Unrealized Appreciation (Depreciation) $ (471) $ 4,501 $ 1,984 $ 10,611 $ 14,279 ======== ======= ======= ======== ======== 9. CONCENTRATION OF CREDIT RISK 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. June 30, 2003 71 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS TERM OF POSITION OFFICE AND PERSONAL HELD WITH THE LENGTH OF INFORMATION(1) COMPANY TIME SERVED(2) - ----------------------------------------- -------------- ---------- INDEPENDENT BOARD MEMBERS [PHOTO OMITTED] MR. MARTIN ANDERSON Trustee Since 1994 79 [PHOTO OMITTED] MR. CHARLES E. CARLBOM Trustee Since 1999 68 [PHOTO OMITTED] MR. JAMES L. HUFFMAN Trustee Since 1999 58 [PHOTO OMITTED] MR. PETER F. SANSEVERO Trustee Since 1999 70 [PHOTO OMITTED] MR. MANUEL R. SYLVESTER Trustee Since 1994 73 [PHOTO OMITTED] DR. JOYCE S. TSUNODA Trustee Since 1994 65 Bishop Street Funds 72 (UNAUDITED) - -------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN BISHOP STREET OTHER FUNDS COMPLEX DIRECTORSHIPS PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY DURING PAST 5 YEARS BOARD MEMBER(3) BOARD MEMBER(4) - ----------------------------------------- -------------------- ------------------ PARTNER -- Goodsill, Anderson, Quinn & Stifel since 1951 7 None CHAIRMAN -- B.P.I., Inc. since 1999 7 None PRESIDENT AND CEO -- United Grocers, Inc. (1997-1999) Western Family Food, Inc. Western Family Holdings, Inc. (1982-1997) DEAN & PROFESSOR -- Lewis & Clark Law School since 1973 7 None REGIONAL DIRECTOR OF THE NORTHWESTERN REGION AND 7 None FIRST VICE PRESIDENT -- Merrill Lynch (1958-1997) RETIRED SINCE 1992 7 None VICE PRESIDENT FOR INTERNATIONAL EDUCATION-- University of Hawaii System 7 None since January 2003 CHANCELLOR FOR COMMUNITY COLLEGES-- University of Hawaii since 1983 SENIOR VICE PRESIDENT-- University of Hawaii 1989-2003 VICE PRESIDENT, INTERNATIONAL EDUCATION, University of Hawaii, 2003-present June 30, 2003 73 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS TERM OF POSITION(S) OFFICE AND PERSONAL HELD WITH THE LENGTH OF INFORMATION(1) COMPANY TIME SERVED(2) - ----------------------------------------- -------------- ------------- INTERESTED BOARD MEMBERS(5) [PHOTO OMITTED] MR. PHILLIP H. CHING Trustee Since 1994 72 Trustee, Chairman and [PHOTO OMITTED] MR. ROBERT A. NESHER President of Since 1998 56 the Board of Trustees [PHOTO OMITTED] HONORABLE WILLIAM S. RICHARDSON Trustee Since 1994 83 OFFICERS Peter J. Golden Treasurer 1 38 and Controller John Munch Vice President 1 32 and Secretary Bishop Street Funds 74 (UNAUDITED) - -------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN BISHOP STREET OTHER FUNDS COMPLEX DIRECTORSHIPS PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY DURING PAST 5 YEARS BOARD MEMBER(3) BOARD MEMBER(4) - -------------------------------------------------------- ------------- ----------------------- RETIRED SINCE 1996 7 None VICE CHAIRMAN -- First Hawaiian Bank (1968-1996) TRUSTEE OF: THE ADVISORS' INNER CIRCLE FUND, THE ARBOR FUND, EXPEDITION CURRENTLY PERFORMS VARIOUS SERVICES ON BEHALF OF 7 FUNDS, SEI ASSET ALLOCATION TRUST, SEI SEI INVESTMENTS FOR WHICH MR. NESHER IS COMPENSATED. DAILY INCOME TRUST, SEI INDEX FUNDS, EXECUTIVE VICE PRESIDENT-- SEI Investments (1986-1994) SEI INSTITUTIONAL INVESTMENTS TRUST, DIRECTOR AND EXECUTIVE VICE PRESIDENT OF THE ADVISER, SEI INSTITUTIONAL MANAGED TRUST, THE ADMINISTRATOR AND THE DISTRIBUTOR (1981-1994) SEI INSTITUTIONAL INTERNATIONAL TRUST, SEI INSURANCE PRODUCTS TRUST, SEI LIQUID ASSET TRUST AND SEI TAX EXEMPT TRUST. RETIRED SINCE 1992 7 None Fund Accounting Director of the Administrator N/A N/A since 2001; Vice President, Fund Administration, J.P. Morgan Chase & Co., 2000-2001; Vice President, Fund & Pension Accounting, Chase Manhattan Bank, 1997-2000. Vice President and Assistant Secretary of the N/A N/A Administrator and Distributor since November 2001; Associate at Howard Rice Nemorovoski Canady Falk & Rabin, 1998-2001; Associate at Seward & Kissel, 1996-1998. June 30, 2003 75 www.bishopstreetfunds.com Bishop Street Funds - -------------------------------------------------------------------------------- TERM OF POSITION(S) OFFICE AND PERSONAL HELD WITH THE LENGTH OF INFORMATION(1) COMPANY TIME SERVED(2) - ----------------------------------------- -------------- ------------ Sherry K. Vetterlein Vice President and 2 41 Assistant Secretary Todd B. Cipperman Vice President and 6 37 Assistant Secretary Lydia A. Gavalis Vice President and 4 39 Assistant Secretary Timothy D. Barto Vice President and 2 35 Assistant Secretary William E. Zitelli Vice President and 2 35 Assistant Secretary Christine M. McCullough Vice President and 2 42 Assistant Secretary Lori Foo Vice President and 1 45 Assistant Secretary <FN> 1 EACH TRUSTEE MAY BE CONTACTED BY WRITING TO THE TRUSTEE C/O BISHOP STREET FUNDS, PO BOX 3708, HONOLULU, HI 96811. EACH OFFICER MAY BE CONTACTED BY WRITING TO THE OFFICER C/O SEI INVESTMENTS, ONE FREEDOM VALLEY DRIVE, OAKS, PA 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 THE "BISHOP STREET FUNDS COMPLEX" CONSISTS OF ALL REGISTERED INVESTMENT COMPANIES FOR WHICH BISHOP STREET CAPITAL MANAGEMENT SERVES AS INVESTMENT ADVISER. AS OF JUNE 30, 2003, THE BISHOP STREET FUNDS COMPLEX CONSISTED OF 7 FUNDS. </FN> BISHOP STREET FUNDS 76 (UNAUDITED) - -------------------------------------------------------------------------------- NUMBER OF PORTFOLIOS IN BISHOP STREET OTHER FUNDS COMPLEX DIRECTORSHIPS PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY DURING PAST 5 YEARS BOARD MEMBER(3) BOARD MEMBER(4) - --------------------------------------------------------- --------------- ------------------------- Vice President and Assistant Secretary of SEI N/A N/A Investments Global Funds Services and SEI Investments Distribution Co. since January 2001; Shareholder/Partner, Buchanan Ingersoll Professional Corporation from 1992-2000. Senior Vice President and General Counsel of SEI N/A N/A Investments; Senior Vice President, General Counsel and Secretary of SEI Investments Global Funds Services and SEI Investments Distribution Co. since 2000; Vice President and Assistant Secretary of SEI Investments, SEI Global Funds Services and SEI Investments Distribution Co. from 1999-2000. Vice President and Assistant Secretary of SEI N/A N/A Investments, SEI Investments Global Funds Services and SEI Investments Distribution Co. since 1998; Assistant General Counsel and Director of Arbitration, Philadelphia Stock Exchange from 1989-1998. Vice President and Assistant Secretary of SEI N/A N/A Investments Global Funds Services and SEI Investments Distribution Co. since 1999; Associate, Dechert (law firm) from 1997-1999. Vice President and Assistant Secretary of SEI N/A N/A Investments Global Funds Services and SEI Investments Distribution Co. since 2000; Vice President, Merrill Lynch & Co. Asset Management Group from 1998 - 2000; Associate at Pepper Hamilton LLP from 1997-1998. Vice President and Assistant Secretary of SEI N/A N/A Investments Global Funds Services and SEI Investments Distribution Co. since 1999; Associate at White and Williams LLP from 1991-1999. Assistant Vice President of First Hawaiian Bank since N/A N/A 2000; Employed by First Hawaiian Bank since 1994. <FN> 4 DIRECTORSHIPS OF COMPANIES ARE REQUIRED TO REPORT TO THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES EXCHANGE ACT OF 1934 (I.E., "PUBLIC COMPANIES") OR OTHER INVESTMENT COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED. 5 MESSRS. CHING, NESHER AND RICHARDSON ARE TRUSTEES WHO MAY BE DEEMED TO BE AN "INTERESTED PERSON" OF THE TRUST, AS THAT TERM IS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED. </FN> FOR MORE INFORMATION REGARDING THE TRUSTEES AND OFFICERS, PLEASE REFER TO THE STATEMENT OF ADDITIONAL INFORMATION, WHICH ISAVAILABLE UPON REQUEST BY CALLING 1-800-262-9565. June 30, 2003 77 www.bishopstreetfunds.com - -------------------------------------------------------------------------------- NOTES - -------------------------------------------------------------------------------- NOTES - -------------------------------------------------------------------------------- NOTES [BACKGROUND COMPASS GRAPHIC OMITTED] INVESTMENT ADVISER BISHOP STREET CAPITAL MANAGEMENT HONOLULU, HI 96813 ADMINISTRATOR SEI INVESTMENTS GLOBAL FUNDS SERVICES OAKS, PA 19456 DISTRIBUTOR SEI INVESTMENTS DISTRIBUTION CO. OAKS, PA 19456 TRANSFER AGENT DST SYSTEMS, INC. KANSAS CITY, MO 64141 CUSTODIAN UNION BANK OF CALIFORNIA, N.A. SAN FRANCISCO, CA 94101 LEGAL COUNSEL MORGAN, LEWIS & Bockius LLP Philadelphia, PA 19103 AUDITORS PricewaterhouseCoopers LLP Philadelphia, PA 19103 [BISHOP STREET FUNDS LOGO OMITTED] YOUR AVENUE TO SOUND INVESTMENT FOR MORE INFORMATION ABOUT BISHOP STREET FUNDS, CALL 1-800-262-9565 OR YOUR INVESTMENT SPECIALIST VISIT US ONLINE AT WWW.BISHOPSTREETFUNDS.COM [BISHOP STREET FUNDS LOGO OMITTED] BISHOP STREET FUNDS P.O. BOX 3708 HONOLULU, HI 96811 THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF BISHOP STREET FUNDS' SHAREHOLDERS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. SHARES OF BISHOP STREET FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY FIRST HAWAIIAN BANK OR ANY OF ITS AFFILIATES. SUCH SHARES ARE ALSO NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN SHARES OF MUTUAL FUNDS INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE BISHOP STREET FUNDS ARE DISTRIBUTED BY SEIINVESTMENTS DISTRIBUTION CO., WHICH IS NOT AFFILIATED WITH FIRST HAWAIIAN BANK, BANK OF THE WEST OR BANCWEST CORPORATION. BANCWEST CORPORATION IS A WHOLLY-OWNED SUBSIDIARY OF BNP PARIBAS. BSF-SA-004-0900 ITEM 2. CODE OF ETHICS. Not applicable - only effective for annual reports for periods ending on or after July 15, 2003. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable - only effective for annual reports for periods ending on or after July 15, 2003. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable - only effective for annual reports for periods ending on or after December 15, 2003. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. (RESERVED) ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. (RESERVED) ITEM 9. CONTROLS AND PROCEDURES. (a) The certifying officers, whose certifications are included herewith, have evaluated the registrant's disclosure controls and procedures within 90 days of the filing date of this report. In their opinion, based on their evaluation, the registrant's disclosure controls and procedures are adequately designed, and are operating effectively to ensure, that information required to be disclosed by the registrant in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEMS 10. EXHIBITS. (a)(1) Not applicable. (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)), are 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/ Robert A. Nesher -------------------- Robert A. Nesher, Trustee, Chairman and President of the Board of Trustees Date 08/22/03 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/ Robert A. Nesher -------------------- Robert A. Nesher, Trustee, Chairman and President of the Board of Trustees Date 08/22/03 By (Signature and Title)* /s/ Peter J. Golden ------------------- Peter J. Golden, Treasurer and Controller Date 08/22/03 * Print the name and title of each signing officer under his or her signature.