UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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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)
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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: DECEMBER 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
[Background Compass Graphic Omitted]
BISHOP STREET
FUNDS
ANNUAL REPORT
DECEMBER 31, 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
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[Background Graphic Omitted]
The Bishop Street
Hawaii Municipal Bond Fund
Taxes can take a bite out of your income.
The Hawaii Municipal Bond Fund may
help reduce that tax burden.
If you are:
o Seeking high current income substantially
exempt from federal and Hawaii state income
taxes.
o Willing to accept the risk of investing in a
portfolio of municipal securities.
Then you should consider adding the Hawaii
Municipal Bond Fund to your portfolio.
o Invests primarily in Hawaii Municipal Bonds.
o Active portfolio management.
o High-quality investment portfolio.
Visit us at
www.bishopstreetfunds.com
or call 1-800-262-9565
today to discover how the
Bishop Street Funds Hawaii
Municipal Bond Fund can
help diversify your portfolio.
THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE
BISHOP STREET FUNDS. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING
OR SENDING MONEY. INVESTMENT IN MUTUAL FUNDS INVOLVES RISK, INCLUDING
POSSIBLE LOSS OF PRINCIPAL. CERTAIN SHAREHOLDERS MAY BE SUBJECT TO THE
ALTERNATIVE MINIMUM TAX (AMT). FEDERAL INCOME TAX RULES WILL APPLY TO ANY
CAPITAL GAINS DISTRIBUTIONS. IN ADDITION TO THE NORMAL RISKS ASSOCIATED WITH
INVESTING, NARROWLY FOCUSED INVESTMENTS TYPICALLY EXHIBIT HIGHER VOLATILITY.
THE BISHOP STREET FUNDS ARE DISTRIBUTED BY SEI INVESTMENTS 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 PARABAS.
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Not FDIC Insured No Bank Guarantee May Lose Value
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BISHOP STREET
TABLE OF CONTENTS
FUNDS
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LETTER TO SHAREHOLDERS ............................................. 2
INVESTMENT ADVISER'S REPORT ........................................ 4
EQUITY FUND
Management Discussion ........................................ 7
Statement of Net Assets ...................................... 9
STRATEGIC GROWTH FUND
Management Discussion ........................................ 14
Statement of Net Assets ...................................... 16
TAX MANAGED EQUITY FUND
Management Discussion ........................................ 19
Statement of Net Assets ...................................... 21
HIGH GRADE INCOME FUND
Management Discussion ........................................ 25
Statement of Net Assets ...................................... 27
HAWAII MUNICIPAL BOND FUND
Management Discussion ........................................ 33
Statement of Net Assets ...................................... 35
MONEY MARKET & Treasury Money Market Funds
Management Discussion ........................................ 45
Statements of Net Assets ..................................... 47
STATEMENTS OF OPERATIONS ........................................... 54
STATEMENTS OF CHANGES IN NET ASSETS ................................ 56
FINANCIAL HIGHLIGHTS ............................................... 60
NOTES TO FINANCIAL STATEMENTS ...................................... 64
REPORT OF INDEPENDENT AUDITORS ..................................... 72
NOTICE TO SHAREHOLDERS ............................................. 73
BOARD OF TRUSTEES AND OFFICERS ..................................... 74
1
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BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
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[Gregory E. Ratte Photo Omitted]
The litany of investor woes by the end of 2002 was considerable. It was the
third down year for the equity markets, the S&P 500 Composite Index had produced
its worst year since 1974, profit growth had been disappointing, corporate
scandals had rocked market confidence, the world continued to be demonstrably
unsafe, and the U.S. was close to declaring war on Iraq. On the economic front,
U.S. employment continued to erode, business confidence was terrible, the dollar
was weak, and Mideast tensions were sending the price of oil to more than $30
per barrel.
There were grounds for some cautious optimism, including the very easy monetary
and fiscal policies of the Fed and Bush Administration, the enduring resilience
of the U.S. consumer, and a budding recovery in corporate profits. Yet even
those of us in the optimistic camp looked forward to a year of gradual recovery,
not a "V" shaped rebound.
So what did 2003 actually look like? In a word, SPECTACULAR. The Dow Jones Index
returned 28.3%, the S&P 500 Composite Index 28.7%, and the NASDAQ Composite
Index recorded a blistering 50.7% return, reaching an almost two-year high
(although still some 50% plus below its bubble peak). Overseas, international
markets also rallied, outpacing even the strong U.S. market.
Importantly, the underlying fundamentals in many ways justified the market's
move in 2003, and were in their own way just as spectacular. Once uncertainty
over Iraq dissipated, the economic underpinning of the market firmed
dramatically. At the same time, the Bush Administration's highly stimulative tax
plan sailed through Congress and the Fed continued to aggressively pursue its
very easy monetary policy, reducing short-term interest rates to a 40-year low
of 1%. As a result, Gross Domestic Product growth accelerated throughout the
year;
Bishop Street Funds 2
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by the third-quarter, the economy was expanding at an 8.2% annualized rate--a
20-year high!
Perhaps most important to the market, however, was the impact of the improving
economy on corporate profits. Having reduced expenses and cut back spending
during the slowdown, companies found themselves with considerable leverage to
the better economic environment, and corporate profit growth accelerated
dramatically. In fact, both demand and productivity were so strong in 2003 that
profits for U.S. corporations expanded at the fastest rate since 1999 and were
ahead of Wall Street's forecasts for the first time since 1995. Analyst
estimates are actually being revised upward after years of consistent downside
disappointments.
Overall, while we expect 2004 to be another positive year for equity investors
(acknowledging the terrorism risk caveat), chances are returns will be lower
than in 2003. We also expect that unlike 2003, when 460 of 500 stocks in the S&P
500 Composite Index were up for the year, it will be easier to lose money if
investors are not careful. The key in this environment will be to focus on
companies with strong cash flows and disciplined management in expanding areas
of the economy with reasonable valuations.
Thank you for your continued support and confidence.
Sincerely,
/s/ Gregory E. Ratte
Gregory E. Ratte
President and Chief Investment Officer
Bishop Street Capital Management
December 31, 2003 3 www.bishopstreetfunds.com
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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INVESTMENT ADVISER'S REPORT
2004 -- CAN THE CONSENSUS EVER BE RIGHT?
Unlike 2003 when there was sharp disagreement between the bulls and the bears on
the U.S. economy, there is a broad consensus on the outlook for 2004.
Specifically:
[] U.S. GDP growth of 4-5%
[] No Fed tightening until mid-year at the earliest
[] 10-12% growth in S&P 500 profits
[] A weaker U.S. dollar relative to our trading partners
In fact, we find ourselves generally in agreement with these consensus
forecasts. The trouble is the consensus expectations have an odd way of being
confounded, so it's worth looking at where each of these forecasts might prove
either too sanguine or too cautious.
THE ECONOMY
There are just too many positives not to be optimistic. Fiscal and monetary
policy is still as accommodative as ever. Furthermore, with the upcoming
election, the chances of higher taxes or an aggressive Fed tightening before
November are pretty remote. Even more importantly for the economy, increasing
business investment, as corporations gain confidence in the sustainability of
the recovery and begin to expand capacity and build inventories, should spur the
"virtuous circle" of confidence leading to spending, spending to investment, and
investment to employment. Indeed, while concern about the exportation of U.S.
jobs to China and India garnered a fair share of 2003's national discussion,
recent data shows declining unemployment claims and higher household employment
and the intimation of job growth down the pike. FOR ALL THESE REASONS, IF THE
CONSENSUS IS WRONG ABOUT GDP GROWTH, IT'S LIKELY TO BE TOO LOW, NOT TOO HIGH.
Bishop Street Funds 4
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THE FED
There is more controversy here. Despite efforts to be more open in its
intentions, the Fed whip-sawed the markets in 2003 with confusing messages; we
foresee more of the same for 2004. To start, the current Fed stance, citing
scant inflationary pressures in the system, calls for the maintenance of current
policy for a "considerable" time. The trouble is, no one knows how long
"considerable" will end up being. GIVEN THE STRENGTH IN THE ECONOMY, THE
WEAKNESS IN THE DOLLAR, AND THE RECOVERY IN THE STOCK MARKET, IF THE CONSENSUS
IS WRONG, FED HIKES WILL PROBABLY COME SOONER THAN LATER. At the very least,
even a change in the language of the Fed's policy pronouncements will lead the
bond market to tighten on its own accord by pushing longer-term interest rates
higher before the Fed acts on the short-end.
CORPORATE PROFITS
We believe that after being burned by their own overheated predications during
the bubble period, analysts are, if anything, underestimating the earnings
potential of the companies that comprise the S&P 500 Composite Index. For three
consecutive quarters (the 2nd, 3rd and 4th quarters of 2003), they have had to
raise their profit estimates, with actual operating profits even exceeding those
higher expectations in every quarter. With the economy on firmer footing, the
weak dollar improving corporate competitiveness, repaired balance sheets and
bare-bones cost structures, U.S. companies should still be able to deliver
upside surprises. At some point, rising interest rates and the need to expand
investment and employment to stay competitive will begin to pressure
profitability; at that point, earnings growth will slow. BUT IN THE NEAR-TERM,
IF THE CONSENSUS OPINION ON PROFITS IS WRONG, IT'S LIKELY BECAUSE OF BEING TOO
LOW.
December 31, 2003 5 www.bishopstreetfunds.com
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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THE DOLLAR
This is the trickiest call of all. Essentially, we see the level of the dollar
as the canary in the coal mine for both the global economy and global capital
markets. The voracious U.S. appetite for imports and the ballooning federal
budget deficit, along with the still dominant role of the dollar as a global
reserve currency, all mean that a significant move in the dollar up or down has
repercussions everywhere. Since its peak in 2002, the decline in the dollar,
though dramatic against the Euro, has been steady enough that the real economy
and the markets have been able to adapt. A lower dollar improved U.S.
competitiveness and moderated the recession, while an avoidance of a dollar
panic enabled the U.S to continue financing its current account deficit while
not forcing up either interest rates or inflation. However, if the currency
decline should turn into a rout or, less likely, should the dollar rally
dramatically, the imbalances that would be created would undermine all of the
other three forecasts. IN OUR OPINION, THE RISK IS THAT IF THE CONSENSUS OF A
MODERATELY WEAKER DOLLAR IS WRONG, IT WILL BE BECAUSE OF STRENGTH, NOT WEAKNESS.
THE BOTTOM LINE
We believe 2004 will be another good year for the stock market, but tougher for
fixed-income investors. There appears to be enough traction in the economy to
sustain the recovery and fuel continued profit growth. On the other hand,
inflationary pressures should be building by year-end, providing a head wind for
the bond market.
Bishop Street Funds 6
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Equity Fund
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For the year ended December 31, 2003, the total return for the Bishop Street
Equity Fund Institutional Class Shares was 26.6%, a welcome return to strong
positive gains after a very difficult three years. In general, the Fund
benefited most from good stock picking in biopharmaceuticals, industrial
machinery, software, semiconductors, and telecommunications. Relative to the
market, the strong quality bias in the portfolio proved to be a drag as smaller,
riskier companies strongly outperformed higher-quality and large companies last
year.
Looking ahead, unlike 2003 when 460 of 500 stocks in the S&P 500 Composite Index
were up for the year, it will be easier to lose money in 2004 if investors are
not careful. Our strategy in this environment will be to focus on companies with
strong cash flows and disciplined management, operating in expanding areas of
the economy with reasonable valuations. We have also emphasized companies and
sectors, which have traditionally benefited during periods of strong economic
growth and favorable financial market environments.
December 31, 2003 7 www.bishopstreetfunds.com
Equity Fund
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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, THE CONSUMER PRICE INDEX AND THE LIPPER DOMESTIC
EQUITY AGGREGATE.
[Line Graphic Omitted] Plot points are as follows:
Bishop Street Bishop Street S&P 500 Consumer Lipper
Equity Fund, Equity Fund, Composite Price Domestic
Institutional Class# Class A#+ Index Index Equity Aggregate
1/31/97 10,000 9,425 10,000 10,000 10,000
6/97 11,105 10,466 11,351 10,060 10,844
12/97 12,032 11,340 12,552 10,151 11,919
6/98 14,165 13,351 14,775 10,201 13,257
12/98 16,008 15,088 16,139 10,293 13,645
6/99 17,807 16,784 18,137 10,386 15,144
12/99 19,909 18,739 19,535 10,553 17,140
6/00 19,698 18,497 19,453 10,765 17,910
12/00 16,684 15,649 17,757 10,906 17,277
6/01 13,901 12,281 16,567 11,115 16,389
12/01 12,411 10,947 15,646 11,070 15,524
6/02 10,269 9,045 13,587 11,226 13,838
12/02 9,301 8,192 12,187 11,338 12,316
6/03 10,342 9,091 13,621 11,463 13,912
12/03 11,778 10,348 15,683 11,543 16,167
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS++
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ONE ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR INCEPTION
RETURN RETURN RETURN TO DATE
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26.62% -10.96% -5.95% 2.54% Institutional Class*
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26.31% -11.15% -6.17%+ -7.38% Class A**
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19.00% -12.88% -7.27%+ -8.58% Class A, with load***
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* 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.
Bishop Street Funds 8
Equity Fund
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TOP TEN EQUITY HOLDINGS*
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Percentage of
Investments*
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1. Pfizer 4.6%
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2. American International Group 3.1%
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3. General Electric 3.0%
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4. Johnson & Johnson 3.0%
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5. Wells Fargo 2.6%
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6. Microsoft 2.6%
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7. Citigroup 2.6%
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8. Wal-Mart Stores 2.5%
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9. Morgan Stanley 2.4%
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10. Exxon Mobil 2.3%
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*EXCLUDES SECURITIES PURCHASED WITH CASH COLLATERAL RECEIVED FROM SECURITIES
LENDING.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
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COMMON STOCK -- 99.0%
CONSUMER DISCRETION -- 12.8%
77,105 Brinker International* (A) $ 2,557
47,310 Carnival (A) 1,880
53,020 Clear Channel Communications* (A) 2,483
51,492 Home Depot 1,827
66,383 InterActiveCorp* (A) 2,252
26,710 Michaels Stores 1,181
32,630 Omnicom Group (A) 2,850
20,634 Target 792
36,414 Univision Communications, Cl A* (A) 1,445
67,155 Viacom, Cl B* 2,980
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20,247
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CONSUMER STAPLES -- 8.3%
25,410 Anheuser-Busch 1,339
55,090 PepsiCo 2,568
27,710 Procter & Gamble 2,768
67,940 Sysco 2,529
December 31, 2003 9 www.bishopstreetfunds.com
Equity Fund
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Statement of Net Assets
(CONTINUED)
Market
Value
Shares (000)
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CONSUMER STAPLES (CONTINUED)
73,760 Wal-Mart Stores $ 3,913
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13,117
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ENERGY -- 6.5%
25,870 Devon Energy 1,481
87,240 Exxon Mobil 3,577
94,350 GlobalSantaFe (A) 2,342
53,138 Schlumberger Ltd. (A) 2,908
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10,308
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FINANCIALS -- 20.9%
35,090 Allstate 1,510
22,980 AMBAC Financial Group 1,595
31,683 American Express (A) 1,528
73,245 American International Group 4,855
38,302 Bank of America 3,081
85,193 Citigroup 4,135
28,580 Goldman Sachs Group 2,822
55,720 Mellon Financial 1,789
65,960 Morgan Stanley 3,817
90,917 Travelers Property Casualty, Cl B 1,543
54,150 Washington Mutual 2,172
71,040 Wells Fargo 4,183
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33,030
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HEALTH CARE -- 15.8%
26,676 Accredo Health* 843
57,330 Amgen* 3,543
44,580 Baxter International 1,361
32,125 Boston Scientific* 1,181
37,561 Forest Laboratories* 2,321
15,581 Genzyme* (A) 769
21,272 Gilead Sciences* 1,237
90,919 Johnson & Johnson 4,697
205,860 Pfizer 7,273
29,017 UnitedHealth Group 1,688
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24,913
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INDUSTRIALS -- 11.0%
22,632 3M 1,924
25,560 General Dynamics 2,310
151,865 General Electric 4,705
33,410 Illinois Tool Works (A) 2,803
Bishop Street Funds 10
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Shares/Face Value
Amount (000) (000)
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INDUSTRIALS (CONTINUED)
34,161 Pentair $ 1,561
56,130 SPX* (A) 3,301
11,650 Union Pacific 810
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17,414
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INFORMATION TECHNOLOGY -- 16.7%
53,285 Agilent Technologies* 1,558
102,788 Applied Materials* 2,308
129,710 BEA Systems* 1,595
65,579 Dell* 2,227
71,430 Hewlett-Packard 1,641
71,630 Intel 2,307
57,852 Linear Technology 2,434
29,836 Mercury Interactive* (A) 1,451
151,434 Microsoft 4,171
171,770 Nokia OYJ ADR (A) 2,920
37,990 Paychex (A) 1,413
69,564 Symantec* (A) 2,410
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26,435
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MATERIALS -- 4.5%
45,230 Alcoa 1,719
27,133 EI Du Pont de Nemours 1,245
45,680 Ecolab (A) 1,250
76,200 Praxair 2,911
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7,125
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TELECOMMUNICATIONS -- 2.5%
43,200 SBC Communications 1,126
109,300 Vodafone Group ADR (A) 2,737
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3,863
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TOTAL COMMON STOCK (Cost $140,540) 156,452
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CORPORATE OBLIGATION -- 3.8%
BANKS -- 3.8%
Bear Stearns MTN (B)(C)
$6,041 1.130%, 02/03/04 6,041
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TOTAL CORPORATE OBLIGATION (Cost $6,041) 6,041
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December 31, 2003 11 www.bishopstreetfunds.com
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Amount Value
(000)/Shares (000)
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COMMERCIAL PAPER (B) -- 4.8%
Autobahn Funding 144A
$3,020 1.120%, 01/06/04 $ 3,020
Countrywide Home Loans
3,018 1.121%, 01/30/04 3,018
Goldman Sachs Group
1,507 1.102%, 01/29/04 1,507
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TOTAL COMMERCIAL PAPER (Cost $7,545) 7,545
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CASH EQUIVALENTS -- 1.0%
745,750 Dreyfus Cash Management Fund 746
745,750 Fidelity Institutional Money Market Fund 746
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TOTAL CASH EQUIVALENTS (Cost $1,492) 1,492
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REPURCHASE AGREEMENTS (B) -- 12.4%
Bank of America 1.050%, dated 12/31/03,
to be repurchased on 01/02/04, repurchase price
$15,004,180 (collateralized by a mortgage obligation,
$15,004 total market value $15,753,929) 15,004
Lehman Brothers 1.080%, dated 12/31/03,
to be repurchased on 01/02/04, repurchase price
$4,590,398 (collateralized by various mortgage
4,590 obligations, total market value $4,821,880) 4,590
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TOTAL REPURCHASE AGREEMENTS (Cost $19,594) 19,594
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TOTAL INVESTMENTS (Cost $175,212)-- 121.0% 191,124
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OTHER ASSETS AND LIABILITIES -- (21.0)%
Payable Upon Return of Securities Loaned (33,180)
Investment Adviser Fees Payable (93)
Administrative Fees Payable (10)
Other Assets and Liabilities, Net 124
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TOTAL OTHER ASSETS AND LIABILITIES (33,159)
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Bishop Street Funds 12
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization
-- no par value) Based on 16,479,301 Outstanding Shares of
Beneficial Interest $201,141
Fund Shares of Class A (unlimited authorization -- no par
value) Based on 167,828 Outstanding Shares of Beneficial
Interest 6,625
Undistributed net investment income 9
Accumulated net realized loss on investments (65,722)
Net unrealized appreciation on investments 15,912
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TOTAL NET ASSETS -- 100.0% $157,965
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($156,380,816 / 16,479,301 SHARES) $ 9.49
========
NET ASSET VALUE, REDEMPTION
PRICE PER SHARE -- CLASS A
($1,583,733 / 167,828 SHARES) $ 9.44
========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($9.44 / 94.25%) $ 10.02
========
* NON-INCOME PRODUCING SECURITY
(A) THE SECURITY OR A PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2003
(SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $32,074,463.
(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 DECEMBER 31, 2003 WAS $33,179,912.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2003. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
LTD. -- LIMITED
MTN -- MEDIUM TERM NOTE
144A -- SECURITIES SOLD WITHIN THE TERMS OF 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."
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2003 13 www.bishopstreetfunds.com
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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Strategic Growth Fund
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For the year ended December 31, 2003 returns for the Bishop Street Strategic
Growth Fund were very strong. The total return for the Fund was 38.1%,
substantially ahead of the S&P 500 Composite Index. Good stock selection was the
primary contributor to performance during the year, though sector weightings
also contributed to returns. As we came to the end of the year in an environment
of rapid economic growth, we have gradually shifted exposure in the portfolio
away from "stable growth stocks" to more economically-sensitive companies.
Looking into 2004, earnings are likely to remain the driving factor for U.S.
equities' performance. Many analysts have raised their expectations dramatically
in the second half of 2003, thus exceeding companies' guidance in many cases.
There is a risk that disappointments will come in the next few quarters, unless
economic growth is surprisingly stronger than current consensus.
This concern is not sufficient to make us change our stance in the portfolio,
because we remain convinced that the medium- and long-term outlooks (which
represent our focus) are good. This will, however, make stock selection even
more important to try and avoid any major accidents.
Bishop Street Funds 14
Strategic Growth Fund
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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
MULTI CAP CORE CLASSIFICATION.
[Line Graphic Omitted] Plot points are as follows:
Bishop Street S&P 500/ S&P 500 Consumer Lipper
Strategic Growth Fund, BARRA Composite Price Multi Cap
Institutional Class# Growth Index Index Index Growth Classification
7/1/02 10,000 10,000 10,000 10,000 10,000
12/02 8,639 9,198 8,971 10,100 8,919
6/02 10,309 10,233 10,026 10,212 10,017
12/03 11,928 11,559 11,543 10,283 11,587
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS+
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ONE ANNUALIZED
YEAR INCEPTION
RETURN TO DATE
--------------------------
38.08% 12.51% Institutional Class*
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* 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.
December 31, 2003 15 www.bishopstreetfunds.com
Strategic Growth Fund
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS
----------------------------------------------------------------------------
Percentage of
Investments
----------------------------------------------------------------------------
1. Tyco International Ltd. 2.3%
----------------------------------------------------------------------------
2. UnitedHealth Group 2.2%
----------------------------------------------------------------------------
3. United Technologies 2.1%
----------------------------------------------------------------------------
4. Amgen 2.1%
----------------------------------------------------------------------------
5. Capital One Financial 2.1%
----------------------------------------------------------------------------
6. Affiliated Computer Services, Cl A 2.1%
----------------------------------------------------------------------------
7. Intuit 2.1%
----------------------------------------------------------------------------
8. Barr Laboratories 2.1%
----------------------------------------------------------------------------
9. Omnicare 2.1%
----------------------------------------------------------------------------
10. Autozone 2.1%
----------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
------ ------
COMMON STOCK -- 99.5%
CONSUMER DISCRETION -- 17.9%
11,400 Autozone* $ 971
21,800 Bed Bath & Beyond* 945
16,700 Best Buy* 873
23,700 Coach* 895
18,800 Harley-Davidson 894
26,200 International Game Technology 935
16,900 Lowe's 936
35,200 Staples* 961
28,200 Yum! Brands* 970
-------
8,380
-------
FINANCIALS -- 25.7%
25,500 AFLAC 923
16,200 Capital One Financial 993
19,700 Citigroup 956
11,000 Everest Re Group Ltd. 931
12,900 Fannie Mae 968
8,600 Goldman Sachs Group 849
Bishop Street Funds 16
Strategic Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
FINANCIALS -- (CONTINUED)
25,800 JP Morgan Chase $ 948
15,800 MBIA 936
14,700 Merrill Lynch 862
19,400 RenaissanceRe Holdings 951
27,000 SouthTrust 884
17,900 State Street 932
22,800 Washington Mutual 915
-------
12,048
-------
HEALTH CARE -- 18.1%
16,100 Amgen* 995
12,750 Barr Laboratories* 981
34,700 Caremark Rx* 879
13,400 Express Scripts* 890
18,200 Genzyme* 898
16,100 Gilead Sciences* 936
24,100 Omnicare 973
17,900 UnitedHealth Group 1,042
9,300 WellPoint Health Networks* 902
-------
8,496
-------
INDUSTRIALS -- 14.0%
13,500 Apollo Group, Cl A* 918
39,100 Cendant* 871
15,900 H&R Block 880
34,100 JetBlue Airways* 904
17,700 L-3 Communications Holdings* 909
40,700 Tyco International Ltd. 1,079
10,600 United Technologies 1,005
-------
6,566
-------
INFORMATION TECHNOLOGY -- 21.7%
18,100 Affiliated Computer Services, Cl A* 986
26,200 Broadcom, Cl A* 893
26,100 Dell* 886
20,200 Electronic Arts* 965
23,000 First Data 945
28,500 Intel 918
18,600 Intuit* 984
11,600 Lexmark International* 912
28,700 Microchip Technology 958
21,900 National Semiconductor* 863
16,900 QLogic* 872
-------
10,182
-------
December 31, 2003 17 www.bishopstreetfunds.com
Strategic Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
TELECOMMUNICATIONS -- 2.1%
34,100 Nextel Communications, Cl A* $ 957
-------
TOTAL COMMON STOCK (Cost $38,479) 46,629
-------
CASH EQUIVALENTS -- 0.6%
128,334 Dreyfus Cash Management Fund 128
128,334 Fidelity Institutional Money Market Fund 128
-------
TOTAL CASH EQUIVALENTS (Cost $256) 256
-------
TOTAL INVESTMENTS (Cost $38,735) -- 100.1% 46,885
-------
OTHER ASSETS AND LIABILITIES -- (0.1)%
Investment Adviser Fees Payable (29)
Administrative Fees Payable (4)
Other Assets and Liabilities, Net (7)
-------
TOTAL OTHER ASSETS AND LIABILITIES (40)
-------
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization
-- no par value) Based on 3,925,059 Outstanding Shares of
Beneficial Interest 39,994
Accumulated net investment loss (22)
Accumulated net realized loss on investments (1,277)
Net unrealized appreciation on investments 8,150
-------
TOTAL NET ASSETS -- 100.0% $46,845
=======
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 11.93
=======
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
LTD. -- LIMITED
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 18
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
For the year ended December 31, 2003, the Bishop Street Tax Managed Equity Fund
returned 23.7%, both before and after taxes. During the year, our emphasis on
large-capitalization, dividend-paying companies and remaining sector neutral to
the market dampened the volatility of the Fund. On the other hand, and contrary
to expectations given the favorable change in the tax treatment of dividends,
dividend-paying companies in the S&P 500 Composite Index underperformed those
paying no dividends at all. In fact, for the full year, riskier smaller
companies outperformed higher-quality and large companies by a considerable
margin.
Although the most distressed companies and sectors historically benefit the most
in the early stages of a rebound - both in the stock market and in the economy -
our sense is that, during 2004, fundamentals will re-exert themselves. If this
transition unfolds as we expect, higher-quality companies will show stronger
relative performance, while a more discerning market will be less forgiving to
weaker companies.
We continue to believe that our conservative positioning and active tax
management may reward our investors with longer time horizons.
December 31, 2003 19 www.bishopstreetfunds.com
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
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 Graphic Omitted] Plot points are as follows:
Bishop Street Tax S&P 500 Consumer Lipper
Managed Equity Fund, Composite Price Large Cap
Institutional Class# Index Index Core Classification
11/13/02 10,000 10,000 10,000 10,000
12/02 9,843 9,966 10,020 9,885
6/03 10,713 11,138 10,130 10,909
12/03 12,171 12,825 10,201 12,409
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS+
----------------------
ONE ANNUALIZED
YEAR INCEPTION
RETURN TO DATE
----------------------
23.66% 18.99% 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.
Bishop Street Funds 20
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS
----------------------------------------------------------------------------
Percentage of
Investments
----------------------------------------------------------------------------
1. General Electric 3.1%
----------------------------------------------------------------------------
2. Citigroup 2.7%
----------------------------------------------------------------------------
3. Symantec 2.6%
----------------------------------------------------------------------------
4. Pfizer 2.6%
----------------------------------------------------------------------------
5. Exxon Mobil 2.6%
----------------------------------------------------------------------------
6. Cisco 2.5%
----------------------------------------------------------------------------
7. Intel 2.5%
----------------------------------------------------------------------------
8. Microsoft 2.4%
----------------------------------------------------------------------------
9. Wal-Mart Stores 2.2%
----------------------------------------------------------------------------
10. Wells Fargo 2.1%
----------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
------ ------
COMMON STOCK -- 99.6%
CONSUMER DISCRETION -- 10.1%
4,765 Bed Bath & Beyond* $ 207
6,727 Brinker International* 223
4,300 Carnival 171
6,045 Clear Channel Communications* 283
7,855 Harley-Davidson 373
11,930 Home Depot 424
1,820 Nike, Cl B 125
4,960 Omnicom Group 433
8,600 Target 330
6,730 Tiffany 304
14,750 Time Warner* 265
4,920 Univision Communications, Cl A* 195
7,580 Walt Disney 177
-------
3,510
-------
December 31, 2003 21 www.bishopstreetfunds.com
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
CONSUMER STAPLES -- 11.6%
5,680 Altria Group $ 309
7,470 Anheuser-Busch 394
5,690 Avon Products 384
9,940 Coca-Cola 504
11,170 CVS 404
11,310 Kraft Foods, Cl A 364
6,880 PepsiCo 321
5,970 Procter & Gamble 596
14,240 Wal-Mart Stores 755
-------
4,031
-------
ENERGY -- 5.5%
6,560 Anadarko Petroleum 335
2,160 ChevronTexaco 186
22,100 Exxon Mobil 906
11,640 Halliburton 303
3,600 Royal Dutch Petroleum 189
-------
1,919
-------
FINANCIALS -- 21.3%
5,420 AFLAC 196
10,500 Allstate 452
1,620 AMBAC Financial Group 112
7,580 American Express 366
10,700 American International Group 709
6,630 Bank of America 533
19,010 Citigroup 923
7,600 Freddie Mac 443
3,000 Goldman Sachs Group 296
5,820 MBIA 345
5,760 Merrill Lynch 338
5,210 Morgan Stanley 302
12,650 Travelers Property Casualty, Cl B 215
18,010 US Bancorp 536
10,970 Wachovia 511
10,540 Washington Mutual 423
12,230 Wells Fargo 720
-------
7,420
-------
HEALTH CARE -- 14.0%
7,000 Accredo Health* 221
9,200 Amgen* 569
6,100 Baxter International 186
7,521 Biogen Idec* 277
Bishop Street Funds 22
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
HEALTH CARE (CONTINUED)
7,570 Bristol-Myers Squibb $ 216
10,000 Forest Laboratories* 618
3,670 Genzyme* 181
3,200 Gilead Sciences* 186
9,060 Johnson & Johnson 468
5,680 Medtronic 276
3,630 Merck 168
25,808 Pfizer 912
10,380 UnitedHealth Group 604
-------
4,882
-------
INDUSTRIALS -- 12.6%
7,960 3M 677
5,030 General Dynamics 455
34,960 General Electric 1,083
4,900 Illinois Tool Works 411
12,300 Pentair 562
6,900 SPX* 406
6,140 Union Pacific 426
4,840 United Parcel Service, Cl B 361
-------
4,381
-------
INFORMATION TECHNOLOGY -- 17.8%
4,700 Analog Devices 215
12,000 BEA Systems* 148
36,100 Cisco Systems* 877
13,060 Dell* 443
26,740 Intel 861
5,400 International Business Machines 500
8,770 Linear Technology 369
7,270 Mercury Interactive* 354
29,700 Microsoft 818
19,000 Nokia ADR 323
28,360 Oracle* 374
26,400 Symantec* 915
-------
6,197
-------
MATERIALS -- 3.3%
15,960 Alcoa 607
3,530 EI Du Pont de Nemours 162
6,460 Ecolab 177
5,220 Praxair 199
-------
1,145
-------
December 31, 2003 23 www.bishopstreetfunds.com
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
TELECOMMUNICATIONS -- 3.4%
3,070 BellSouth $ 87
11,760 SBC Communications 306
9,830 Verizon Communications 345
18,000 Vodafone Group ADR 451
-------
1,189
-------
TOTAL COMMON STOCK (Cost $28,551) 34,674
-------
CASH EQUIVALENTS -- 0.4%
63,454 Dreyfus Cash Management Fund 63
63,454 Fidelity Institutional Money Market Fund 63
-------
TOTAL CASH EQUIVALENTS (Cost $126) 126
-------
TOTAL INVESTMENTS (Cost $28,677) -- 100.0% 34,800
-------
OTHER ASSETS AND LIABILITIES -- 0.0%
Investment Adviser Fees Payable (18)
Administrative Fees Payable (3)
Other Assets and Liabilities, Net 29
-------
TOTAL OTHER ASSETS AND LIABILITIES 8
-------
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization
-- no par value) Based on 2,885,789 Outstanding Shares of
Beneficial Interest 28,699
Distributions in excess of net investment income (14)
Net unrealized appreciation on investments 6,123
-------
TOTAL NET ASSETS -- 100.0% $34,808
=======
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS $ 12.06
=======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
CL -- CLASS
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 24
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
High Grade Income Fund
- --------------------------------------------------------------------------------
Mid-year marked a psychological, if not an actual economic, turning point for
bonds. The economy grew at a much higher than expected rate with third-quarter
Gross Domestic Product growth at 8.2%. New and existing home sales maintained
their torrid pace despite an uptick in interest rates. Solid gains on the equity
indices bolstered consumer balance sheets and provided further gains in consumer
confidence fueling aggregate demand. The Fed continued to maintain its
accommodative monetary policy and held the Fed Funds rate at 1% for the duration
of the year.
Bonds sold off during the second half of the year as the deflation scenario
unwound and a more upbeat outlook on the economy developed. By year-end, the Fed
had reversed their "balanced disinflation" risk assessment to "balanced". The
10-year bond hit a high yield of 4.60% in September but disappointing payroll
reports supported its 4.25% year-end close. With corporate profits expanding at
its fastest rate since 1999 and interest rates still relatively low, investors
continued to reach for more yield. Risk continued to pay off as 2003 was the
best year on record for the Credit asset class with BBB credits outperforming
single A credits by 545 basis points.
With a high-quality bias, the Fund's performance was hindered by the
outperformance of lower risk credits. Its shorter duration contributed to
performance as the 5-year sector outperformed for the year. Looking ahead, we
feel that the Fund is positioned well for a continued economic rebound in 2004
with its overweight in the corporate sector and its shorter duration.
December 31, 2003 25 www.bishopstreetfunds.com
S
High Grade Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN
THE BISHOP STREET HIGH GRADE INCOME FUND, INSTITUTIONAL CLASS OR CLASS A,
VERSUS THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX AND THE CONSUMER
PRICE INDEX.
[Line Graphic Omitted] Plot points are as follows:
Bishop Street High Bishop Street High Lehman Brothers Consumer
Grade Income Fund, Grade Income Fund, U.S. Government/ Price
Institutional Class# Class A#+ Credit Index 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
12/03 15,334 14,360 16,558 11,543
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS++
- ----------------------------------------------------------
ONE ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR INCEPTION
RETURN RETURN RETURN TO DATE
- ----------------------------------------------------------
3.31% 7.28% 5.43% 6.38% Institutional Class*
- ----------------------------------------------------------
3.14% 7.07% 5.07%+ 6.78% Class A**
- ----------------------------------------------------------
-1.76% 5.33% 4.05%+ 5.65% 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.
Bishop Street Funds 26
High Grade Income Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS*
----------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments*
----------------------------------------------------------------------------
1. U.S. Treasury Bond 7.250% 05/15/16 8.4%
----------------------------------------------------------------------------
2. U.S. Treasury Bond 6.250% 08/15/23 3.6%
----------------------------------------------------------------------------
3. FNMA 7.250% 01/15/10 3.5%
----------------------------------------------------------------------------
4. U.S. Treasury Bond 7.500% 11/15/16 3.1%
----------------------------------------------------------------------------
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 2.3%
----------------------------------------------------------------------------
8. Abbott Laboratories 6.400% 12/01/06 2.2%
----------------------------------------------------------------------------
9. Wal-Mart Stores 8.000% 09/15/06 2.2%
----------------------------------------------------------------------------
10. FNMA 2.540% 01/12/07 2.2%
----------------------------------------------------------------------------
*EXCLUDES SECURITIES PURCHASED WITH CASH COLLATERAL RECEIVED FROM SECURITIES
LENDING.
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------ ------
CORPORATE OBLIGATIONS -- 59.1%
AEROSPACE & DEFENSE -- 3.4%
Boeing
$2,700 7.875%, 02/15/05 $ 2,873
United Technologies (A)
1,500 6.350%, 03/01/11 1,676
--------
4,549
--------
ALUMINUM -- 2.0%
Alcoa, Ser B
2,600 6.125%, 06/15/05 2,762
--------
BANKS -- 6.8%
Bank of America (A)
2,600 4.875%, 01/15/13 2,596
Bear Stearns MTN (B)(C)
3,959 1.130%, 02/03/04 3,959
Wells Fargo (A)
2,650 3.500%, 04/04/08 2,658
--------
9,213
--------
December 31, 2003 27 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
BIOTECHNOLOGY -- 2.6%
Pharmacia
$3,275 5.750%, 12/01/05 $ 3,507
--------
BROADCASTING & CABLE -- 2.5%
Cox Communications (A)
1,400 6.750%, 03/15/11 1,586
TCI Communications
1,550 7.875%, 08/01/13 1,835
--------
3,421
--------
BUILDING & CONSTRUCTION -- 1.1%
Centex
1,400 5.800%, 09/15/09 1,500
--------
DIVERSE FINANCIAL SERVICES -- 10.5%
Citigroup
2,600 6.750%, 12/01/05 2,824
Countrywide Home Loan MTN, Ser K
1,400 5.500%, 02/01/07 1,500
General Electric Capital MTN, Ser A
2,600 5.450%, 01/15/13 2,705
General Motors Acceptance
2,100 7.000%, 02/01/12 2,258
1,400 6.750%, 01/15/06 1,503
525 4.500%, 07/15/06 540
Goldman Sachs Group
2,600 6.600%, 01/15/12 2,906
--------
14,236
--------
FORESTRY -- 1.2%
Weyerhaeuser (A)
1,420 6.750%, 03/15/12 1,549
--------
GENERAL MERCHANDISE -- 3.3%
Target
1,300 6.350%, 01/15/11 1,451
Wal-Mart Stores
2,625 8.000%, 09/15/06 2,992
--------
4,443
--------
HOUSEHOLD PRODUCTS -- 2.7%
Avon Products
2,500 7.150%, 11/15/09 2,915
Newell Rubbermaid
650 6.600%, 11/15/06 717
--------
3,632
--------
Bishop Street Funds 28
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
INFORMATION TECHNOLOGY -- 4.2%
AT&T (A)
$1,400 7.250%, 11/15/06 $ 1,548
Dominion Resources
1,400 4.125%, 02/15/08 1,427
Vodafone Group
2,700 3.950%, 01/30/08 2,743
--------
5,718
--------
MACHINERY - INDUSTRIAL -- 1.1%
Masco
1,400 5.875%, 07/15/12 1,489
--------
MOVIES & ENTERTAINMENT -- 2.2%
Viacom
1,400 5.625%, 08/15/12 1,490
Walt Disney MTN
1,400 5.500%, 12/29/06 1,501
--------
2,991
--------
OIL & GAS - EQUIPMENT/SERVICES -- 2.3%
Baker Hughes
1,300 6.000%, 02/15/09 1,432
Global Marine
1,550 7.000%, 06/01/28 1,720
--------
3,152
--------
OIL & GAS - EXPLORATION/PRODUCTION -- 3.0%
Anadarko Petroleum
1,250 7.200%, 03/15/29 1,409
1,400 6.750%, 05/15/08 1,560
Ocean Energy
925 7.250%, 10/01/11 1,065
--------
4,034
--------
PHARMACEUTICALS -- 2.2%
Abbott Laboratories
2,700 6.400%, 12/01/06 2,997
--------
RAILROADS -- 1.2%
CSX
1,400 6.750%, 03/15/11 1,576
--------
December 31, 2003 29 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
RETAIL - DRUGS -- 0.9%
CVS
$1,100 5.625%, 03/15/06 $ 1,176
--------
SEMI-CONDUCTORS -- 3.5%
Applied Materials
440 7.125%, 10/15/17 512
Constellation Energy Group
1,400 7.000%, 04/01/12 1,584
Texas Instruments
2,500 7.000%, 08/15/04 2,586
--------
4,682
--------
SERVICES - OFFICE EQUIPMENT -- 2.4%
Pitney Bowes
3,000 5.750%, 08/15/08 3,278
--------
TOTAL CORPORATE OBLIGATIONS (Cost $77,469) 79,905
--------
U.S. TREASURY OBLIGATIONS -- 21.4%
U.S. Treasury Bonds
3,250 7.500%, 11/15/16 (A) 4,137
9,000 7.250%, 05/15/16 (A) 11,227
2,600 6.375%, 08/15/27 (A) 3,020
4,200 6.250%, 08/15/23 (A) 4,787
1,350 6.000%, 02/15/26 1,497
950 5.375%, 02/15/31 (A) 991
U.S. Treasury Notes (A)
1,800 7.500%, 02/15/05 1,924
1,300 4.375%, 08/15/12 1,326
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $26,190) 28,909
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 18.4%
FHLB
1,000 6.250%, 08/13/04 1,031
2,600 4.000%, 08/25/08 2,630
FHLMC
1,100 5.375%, 08/16/06 1,128
2,600 4.500%, 07/23/07 (A) 2,641
2,650 3.670%, 02/12/08 2,657
2,600 3.125%, 08/25/06 (A) 2,629
Bishop Street Funds 30
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Amount Value
(000)/Shares (000)
------------ ------
U.S. GOVERNMENT AGENCY OBLIGATIONS (CONTINUED)
FHLMC MTN
$ 500 2.325%, 08/26/05 $ 504
FHLMC MTN, Ser 1
625 6.250%, 08/15/16 641
FNMA
4,000 7.250%, 01/15/10 4,716
1,250 4.520%, 10/05/06 1,281
2,000 2.650%, 02/13/06 2,002
3,000 2.540%, 01/12/07 2,991
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $24,329) 24,851
--------
COMMERCIAL PAPER (B) -- 3.7%
Autobahn Funding 144A
1,979 1.120%, 01/06/04 1,979
Countrywide Home Loans
1,977 1.121%, 01/30/04 1,977
Goldman Sachs Group
988 1.102%, 01/29/04 988
--------
TOTAL COMMERCIAL PAPER (Cost $4,944) 4,944
--------
CASH EQUIVALENTS -- 2.6%
1,764,501 Dreyfus Cash Management Fund 1,765
1,764,501 Fidelity Institutional Money Market Fund 1,765
--------
TOTAL CASH EQUIVALENTS (Cost $3,530) 3,530
--------
REPURCHASE AGREEMENTS (B) -- 9.5%
Bank of America 1.050%, dated 12/31/03,
to be repurchased on 01/02/04, repurchase price
$9,832,727 (collateralized by a mortgage obligation,
$9,832 total market value $10,324,062) 9,832
Lehman Brothers 1.080%, dated 12/31/03,
to be repurchased on 01/02/04, repurchase price
$3,008,237 (collateralized by various mortgage
obligations,
3,008 total market value $3,159,935) 3,008
--------
TOTAL REPURCHASE AGREEMENTS (Cost $12,840) 12,840
--------
TOTAL INVESTMENTS (Cost $149,302) -- 114.7% 154,979
--------
December 31, 2003 31 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
OTHER ASSETS AND LIABILITIES -- (14.7)%
Payable Upon Return of Securities Loaned $(21,744)
Investment Adviser Fees Payable (50)
Administrative Fees Payable (13)
Other Assets and Liabilities, Net 1,949
--------
TOTAL OTHER ASSETS AND LIABILITIES (19,858)
--------
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization
-- no par value) Based on 12,961,057 Outstanding Shares of
Beneficial Interest 129,306
Fund Shares of Class A (unlimited authorization-- no par value)
Based on 26,653 Outstanding Shares of Beneficial Interest 251
Undistributed net investment income 2
Accumulated net realized loss on investments (115)
Net unrealized appreciation on investments 5,677
--------
TOTAL NET ASSETS -- 100.0% $135,121
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($134,845,301 / 12,961,057 SHARES) $ 10.40
========
NET ASSET VALUE, REDEMPTION
PRICE PER SHARE -- CLASS A
($276,064 / 26,653 SHARES) $ 10.36
========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($10.36 / 95.25%) $ 10.88
========
(A) THE SECURITY OR A PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2003
(SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $21,247,120.
(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 DECEMBER 31, 2003 WAS $21,743,876.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2003. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SER -- SERIES
144A -- SECURITIES SOLD WITHIN THE TERMS OF 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."
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 32
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
Tax-exempt municipal bonds outperformed most other taxable fixed-income
instruments for the 4th quarter of 2003, as the after-tax difference between
municipal yields and Treasury yields declined from historically very high levels
at the beginning of the year. Longer-dated municipal bonds performed the best
due to a decline in investors' resistance to low yields and a reduction in new
issuance of 30-year municipal bonds.
In general, the credit outlook for states and municipalities improved over the
last half of 2003. According to Moody's Investors Service, the 4th quarter of
2003 has shown a meaningful increase in revenues for the first time since fiscal
2001. The improvement is attributed to increased personal income taxes and sales
taxes, both of which had shown weak results in recent years. Moreover, the
ratings agency predicts that the majority of state downgrades due to the
recession have already occurred, but budget problems will persist if further
measures are not taken to improve municipal balance sheets.
The State of Hawaii and its municipalities faired well fiscally in 2003 and
managed to avoid the significant budget woes that troubled the rest of the
nation. The high-grade nature of Hawaii's municipal bonds, coupled with the
dearth of new issuance, contributed to the historically narrow spreads afforded
by our state's bonds.
For the year ended December 31, 2003, the Bishop Street Hawaii Municipal Bond
Fund Institutional Class Shares returned 5.27%, outperforming the Lipper Hawaii
Municipal Debt Objective by 0.29% and marginally underperformed the Lehman
Brothers Municipal Bond Index by 0.05%. Successful trading strategies
contributed to the Funds' outperformance of the Lipper Hawaii Index and allowed
the Fund to perform in line with the Lehman Brothers Municipal Bond Index
despite having a shorter duration. In anticipation of a higher interest rate
environment in 2004, the Fund will remain short duration while seeking to add
value through opportunistic trading.
December 31, 2003 33 www.bishopstreetfunds.com
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 Graphic Omitted] Plot points are as follows:
Bishop Street Hawaii Bishop Street Hawaii Lehman Brothers Consumer Lipper Hawaii
Municipal Bond Fund, Municipal Bond Fund, Municipal Bond Price Municipal Debt
Institutional Class# Class A#+ Index 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 10,864 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
12/03 17,332 16,413 17,887 12,187 16,464
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS++
- -----------------------------------------------------------
ONE ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR INCEPTION
RETURN RETURN RETURN TO DATE*
- -----------------------------------------------------------
5.27% 6.48% 5.77% 6.40% Institutional Class*
- -----------------------------------------------------------
5.01% 6.26% 5.53%+ 6.38% Class A**
- -----------------------------------------------------------
0.52% 4.75% 4.61%+ 5.37% 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.
Bishop Street Funds 34
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
----------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
----------------------------------------------------------------------------
1. Department of Budget & Finance RB 5.750% 07/01/26 2.8%
----------------------------------------------------------------------------
2. Honolulu City & County GO 5.000% 07/01/19 2.0%
----------------------------------------------------------------------------
3. Hawaii State Highway RB 5.250% 07/01/15 2.0%
----------------------------------------------------------------------------
4. Hawaii State Highway RB 6.000% 07/01/09 1.9%
----------------------------------------------------------------------------
5. Honolulu City & CountyGO 5.125% 07/01/17 1.8%
----------------------------------------------------------------------------
6. Hawaii State Airport System RM 6.500% 07/01/14 1.6%
----------------------------------------------------------------------------
7. Hawaii State GO 5.250% 04/01/12 1.5%
----------------------------------------------------------------------------
8. Honolulu City & County RB 5.250% 07/01/18 1.5%
----------------------------------------------------------------------------
9. Hawaii State GO 3.000% 09/01/05 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 -- 99.3%
ARKANSAS -- 0.3%
Little Rock Capital Improvement, GO, FSA Insured
$ 500 3.950%, 04/01/19 $ 497
--------
CALIFORNIA -- 0.9%
East Bay Regional District, Ser D, GO
500 5.000%, 09/01/23 512
Los Angeles Community College, Ser A, GO, MBIA Insured
1,000 5.500%, 08/01/12 1,142
--------
1,654
--------
HAWAII -- 83.1%
Department of Budget & Finance, Electric & Subsidiary Project,
Ser B, RB
1,000 5.000%, 12/01/22 1,017
Department of Budget & Finance, Hawaiian Electric,
Ser A, RB, AMBAC Insured
2,000 5.500%, 12/01/14 2,270
December 31, 2003 35 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII (CONTINUED)
Department of Budget & Finance, Hawaiian Electric,
Ser A, RB, AMT, MBIA Insured
$ 785 6.200%, 05/01/26 $ 858
290 5.650%, 10/01/27 312
Department of Budget & Finance, Hawaiian Electric,
Ser B, RB, AMT, AMBAC Insured
1,000 5.750%, 12/01/18 1,113
Department of Budget & Finance, Hawaiian Electric,
Ser C, RB, AMT, AMBAC Insured
1,000 6.200%, 11/01/29 1,131
Department of Budget & Finance, Kapiolani Heath, RB
100 6.250%, 07/01/21 105
Department of Budget & Finance, Queens Health Systems,
Ser A, RB, Pre-Refunded @ 102 (A)
1,450 5.875%, 07/01/11 1,629
4,505 5.750%, 07/01/26 5,051
Department of Budget & Finance, Queens Health Systems,
Ser B, RB, MBIA Insured
750 5.250%, 07/01/11 826
1,445 5.250%, 07/01/12 1,580
1,275 5.250%, 07/01/13 1,414
1,000 5.250%, 07/01/14 1,103
Department of Budget & Finance, Special Purpose Mortgage,
Hawaiian Electric Project, Ser A, RB, AMT, MBIA Insured
1,090 6.600%, 01/01/25 1,149
Department of Budget & Finance, Special Purpose Mortgage,
Kapiolani Health Care System Project, RB
1,510 6.300%, 07/01/08 1,547
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%, 07/01/08 317
Harbor Capital Improvement, RB, AMT, MBIA Insured
2,000 5.500%, 07/01/27 2,120
545 5.400%, 07/01/09 612
Harbor System, Ser A, RB, AMT, FSA Insured
2,025 5.750%, 07/01/17 2,215
1,210 5.700%, 07/01/16 1,336
1,000 5.600%, 07/01/15 1,109
Harbor System, Ser B, RB, AMT, AMBAC Insured
200 5.500%, 07/01/19 216
Bishop Street Funds 36
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
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 $ 524
430 5.600%, 05/01/13 501
400 5.550%, 05/01/09 457
630 5.500%, 07/15/12 725
Hawaii County, Ser A, GO, FSA Insured
1,000 5.625%, 05/15/19 1,119
500 5.400%, 05/15/15 555
1,000 5.250%, 05/15/11 1,124
1,000 5.000%, 07/15/23 1,036
Hawaii State, Airport System, Second Ser, RB, AMT, ETM
60 6.900%, 07/01/12 72
Hawaii State, Airport System, Second Ser, RB, AMT, ETM,
MBIA Insured
1,100 6.900%, 07/01/12 1,332
Hawaii State, Airport System, Ser B, RB, AMT,
FGIC Insured
1,500 6.625%, 07/01/18 1,755
2,500 6.500%, 07/01/14 2,949
100 6.000%, 07/01/19 113
Hawaii State, Highway, RB
1,000 6.000%, 07/01/08 1,149
3,000 6.000%, 07/01/09 3,503
375 5.250%, 07/01/10 418
500 5.250%, 07/01/12 553
2,000 5.250%, 07/01/16 2,159
Hawaii State, Highway, RB, FGIC Insured
3,280 5.250%, 07/01/15 3,634
405 5.000%, 07/01/16 435
Hawaii State, Highway, RB, FSA Insured
1,000 4.500%, 07/01/07 1,080
Hawaii State, Housing, Finance & Development,
Affordable Rental Housing Program, Ser A, RB
750 6.050%, 07/01/22 777
330 6.000%, 07/01/15 344
Hawaii State, Housing, Finance & Development, Affordable
Rental Housing Program, Ser A, RB, AMT, FNMA
Collateral
1,780 5.750%, 07/01/30 1,836
227 5.550%, 07/01/07 234
1,355 5.400%, 07/01/30 1,385
250 5.250%, 07/01/13 264
Hawaii State, Housing, Finance & Development, Single-Family
Mortgage Purchase, Ser B, RB, FNMA Collateral
1,000 5.450%, 07/01/17 1,041
December 31, 2003 37 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII (CONTINUED)
Hawaii State, Housing, Finance & Development, University
of Hawaii, Faculty Housing Project, RB, AMBAC Insured
$ 700 5.650%, 10/01/16 $ 752
415 5.000%, 10/01/06 444
395 4.850%, 10/01/05 418
Hawaii State, Kapolei Office Building, Ser A, COP,
AMBAC Insured
1,475 5.250%, 05/01/13 1,652
1,000 5.000%, 05/01/08 1,107
1,000 5.000%, 05/01/14 1,091
1,100 5.000%, 05/01/15 1,193
1,500 5.000%, 05/01/16 1,618
1,000 5.000%, 05/01/17 1,074
500 5.000%, 05/01/18 532
Hawaii State, No. 1 Capitol District State Office, COP,
MBIA Insured
1,000 5.200%, 05/01/14 1,087
175 5.000%, 05/01/11 194
Hawaii State, Ser CL, GO
1,000 6.000%, 03/01/09 1,163
Hawaii State, Ser CL, GO, MBIA Insured
555 6.000%, 03/01/08 636
Hawaii State, Ser CM, GO, FGIC Insured
2,000 6.500%, 12/01/13 2,500
500 6.000%, 12/01/09 590
1,500 6.000%, 12/01/11 1,799
Hawaii State, Ser CN, GO, FGIC Insured
500 5.500%, 03/01/14 555
500 5.250%, 03/01/12 550
535 5.250%, 03/01/17 577
Hawaii State, Ser CO, GO, FGIC Insured
200 6.000%, 09/01/05 215
Hawaii State, Ser CP, GO, FGIC Insured
300 5.000%, 10/01/16 319
Hawaii State, Ser CR, GO, MBIA Insured
1,500 5.750%, 04/01/09 1,726
270 5.250%, 04/01/11 297
2,500 5.250%, 04/01/12 2,761
1,000 4.750%, 04/01/18 1,033
Hawaii State, Ser CS, GO, MBIA Insured
255 5.000%, 04/01/09 284
Hawaii State, Ser CU, GO, MBIA Insured
500 5.750%, 10/01/07 565
500 5.750%, 10/01/11 579
550 5.750%, 10/01/12 628
Bishop Street Funds 38
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII (CONTINUED)
Hawaii State, Ser CU, GO, MBIA Insured, Pre-Refunded
@ 100 (A)
$ 250 5.300%, 10/01/15 $ 287
Hawaii State, Ser CV, GO, FGIC Insured
1,000 5.250%, 08/01/21 1,062
Hawaii State, Ser CX, GO, FSA Insured
1,000 5.500%, 02/01/21 1,090
2,000 5.000%, 02/01/19 2,130
Hawaii State, Ser CY, GO, FSA Insured
1,000 5.500%, 02/01/11 1,156
1,000 5.250%, 02/01/07 1,099
Hawaii State, Ser CZ, GO, FSA Insured, Pre-Refunded
@ 100 (A)
1,860 5.250%, 07/01/19 2,140
Hawaii State, Ser DB, GO, MBIA Insured
1,000 5.000%, 09/01/09 1,120
Hawaii State, Ser DC, GO
2,560 3.000%, 09/01/05 2,624
Hawaiian Home Lands Department, RB
1,250 4.000%, 07/01/05 1,294
Honolulu City & County, Board of Water Supply, RB,
FSA Insured
620 5.500%, 07/01/15 701
Honolulu City & County, Board of Water Supply, RB,
Pre-Refunded @ 101 (A)
1,000 5.800%, 07/01/16 1,114
250 5.250%, 07/01/07 275
Honolulu City & County, FHA-Smith-Beretania-8A, RB,
MBIA Insured
1,000 5.450%, 01/01/25 1,000
Honolulu City & County, GO
820 5.400%, 09/27/07 916
200 1.100%, 09/11/08 200
Honolulu City & County, GO, ETM
230 6.000%, 12/01/09 273
Honolulu City & County, Ser A, GO
55 6.000%, 01/01/10 65
Honolulu City & County, Ser A, GO, ETM
500 6.000%, 01/01/09 582
95 6.000%, 01/01/10 112
800 5.750%, 04/01/10 937
245 5.700%, 04/01/09 283
Honolulu City & County, Ser A, GO, ETM, MBIA Insured
135 6.000%, 11/01/10 161
Honolulu City & County, Ser A, GO, FSA Insured
400 5.125%, 09/01/21 419
December 31, 2003 39 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII (CONTINUED)
Honolulu City & County, Ser A, GO, MBIA Insured
$ 365 6.000%, 11/01/10 $ 435
1,000 5.250%, 03/01/27 1,045
Honolulu City & County, Ser B, GO, ETM, FGIC Insured
635 5.500%, 10/01/11 741
Honolulu City & County, Ser B, GO, FGIC Insured
2,000 5.125%, 07/01/16 2,156
3,000 5.125%, 07/01/17 3,217
Honolulu City & County, Ser C, GO, FGIC Insured
125 5.500%, 11/01/07 141
1,200 5.125%, 07/01/11 1,341
2,100 5.125%, 07/01/15 2,278
650 5.000%, 07/01/09 726
3,500 5.000%, 07/01/19 3,698
Honolulu City & County, Waipahu Towers Project,
Ser A, RB, AMT, GNMA Collateral
200 6.900%, 06/20/35 209
Honolulu City & County, Waste Water, 2nd Board Resolution,
Junior Ser, RB, FGIC Insured
1,000 5.250%, 07/01/12 1,112
1,900 5.250%, 07/01/13 2,104
1,000 5.250%, 07/01/17 1,089
2,500 5.250%, 07/01/18 2,711
Kauai County, Public Improvement, Ser B, GO, MBIA Insured
175 5.200%, 08/01/15 192
165 5.150%, 08/01/14 181
155 5.100%, 08/01/13 171
120 5.050%, 08/01/12 131
140 5.000%, 08/01/11 153
135 4.950%, 08/01/10 146
100 4.850%, 08/01/09 109
120 4.750%, 08/01/08 130
Kauai County, Ser A, GO, FGIC Insured, Pre-Refunded @ 100 (A)
1,135 6.250%, 08/01/18 1,373
1,480 6.250%, 08/01/20 1,790
1,335 6.250%, 08/01/21 1,615
1,050 6.250%, 08/01/22 1,270
Kauai County, Ser A, GO, MBIA Insured
750 5.625%, 08/01/18 843
Kauai County, Ser B, GO, MBIA Insured, Pre-Refunded
@ 102 (A)
260 5.900%, 02/01/13 266
Maui County, GO, FGIC Insured, Pre-Refunded
@ 101 (A)
355 5.125%, 12/15/10 360
Bishop Street Funds 40
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII (CONTINUED)
Maui County, Ser A, GO
$ 485 5.375%, 03/01/12 $ 548
Maui County, Ser A, GO, FGIC Insured
500 5.200%, 09/01/12 549
100 5.125%, 03/01/14 109
615 5.100%, 03/01/19 645
200 5.000%, 03/01/13 217
795 5.000%, 03/01/18 833
Maui County, Ser A, GO, FGIC Insured, Pre-Refunded
@ 101 (A)
450 5.800%, 03/01/15 531
Maui County, Ser A, GO, MBIA Insured, Pre-Refunded
@ 101 (A)
250 5.750%, 06/01/13 277
Maui County, Ser C, GO, FGIC Insured
1,000 5.250%, 03/01/17 1,086
500 5.200%, 03/01/16 543
790 5.150%, 03/01/15 860
Pacific Health Special Purpose, Ser A, RB
500 5.600%, 07/01/33 496
University of Hawaii, Ser A, RB, FGIC Insured
500 5.500%, 07/15/19 554
500 5.500%, 07/15/21 547
University of Hawaii, Ser B, RB, FSA Insured
320 5.250%, 10/01/16 352
775 5.250%, 10/01/17 847
--------
150,752
--------
ILLINOIS -- 0.3%
Illinois, Educational Facilities, Augustana College, RB
550 5.250%, 10/01/18 619
--------
KENTUCKY -- 0.6%
Kenton County, Airport, RB, AMT, MBIA Insured
1,000 5.000%, 03/01/10 1,090
--------
MASSACHUSETTS -- 0.7%
Massachusetts State, Port Authority, Ser B, RB, AMT,
FSA Insured
1,265 5.500%, 07/01/14 1,379
--------
NEW YORK -- 1.5%
New York State, Tobacco Settlement Financing Corp,
Ser B-1, RB
1,500 4.000%, 06/01/07 1,567
1,100 4.000%, 06/01/12 1,103
--------
2,670
--------
December 31, 2003 41 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
OREGON -- 0.6%
Portland, Airport & Marina Improvements, Ser 12C RB, AMT,
FGIC Insured
$1,000 4.750%, 07/01/10 $ 1,072
--------
PUERTO RICO -- 9.1%
Puerto Rico Commonwealth, GO, FGIC Insured
1,000 5.500%, 07/01/12 1,168
Puerto Rico Commonwealth, GO, MBIA Insured
1,500 6.500%, 07/01/10 1,832
500 6.500%, 07/01/14 630
Puerto Rico Commonwealth, Public Improvement, Ser A, GO
1,000 5.000%, 07/01/10 1,107
1,000 5.000%, 07/01/11 1,108
1,000 5.000%, 07/01/27 1,018
Puerto Rico, Electric Power Authority, Ser DD, RB,
FSA Insured
1,000 5.000%, 07/01/28 1,028
Puerto Rico, Electric Power Authority, Ser HH, RB,
FSA Insured
500 5.250%, 07/01/29 528
Puerto Rico, Highway & Transportation Authority Revenue,
Ser D, RB, FSA Insured
500 5.000%, 07/01/32 516
Puerto Rico, Housing Financial Authority, Capital
Funding Program, RB
1,000 5.000%, 12/01/16 1,080
1,000 4.500%, 12/01/09 1,090
1,000 2.500%, 12/01/07 1,015
Puerto Rico, Housing, Banking & Finance Agency, Single-
Family Mortgage, Affordable Housing Mortgage, Portfolio
I, RB, AMT, GNMA/FNMA/FHLMC Collateral
180 6.100%, 10/01/15 186
Puerto Rico, Industrial Tourist Educational Medical
Environmental Control Facilities, Hospital Auxilio
Mutuo Obligation Group, Ser A, RB, MBIA Insured
300 6.250%, 07/01/24 319
Puerto Rico, Public Building Authority, Government
Facilities, Ser B, RB, MBIA Insured
1,000 5.000%, 07/01/15 1,080
Puetro Rico Commonwealth, Public Improvement, GO,
FSA Insured
1,000 5.000%, 07/01/21 1,055
University of Puerto Rico, Ser O, RB, MBIA Insured
1,500 5.750%, 06/01/19 1,725
--------
16,485
--------
Bishop Street Funds 42
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000)/Shares (000)
------------ ------
TEXAS -- 0.3%
Dallas, Waterworks & Sewer Systems, Refunding &
Improvement, Ser A, RB, FSA Insured
$ 500 4.125%, 10/01/16 $ 507
--------
UTAH -- 1.9%
Davis County, Sales Tax Revenue, Ser B, RB,
AMBAC Insured
1,000 5.250%, 10/01/23 1,063
Utah, Transit Sales Tax Revenue, Ser A, RB,
FSA Insured
860 5.000%, 06/15/32 879
Webber County, Sales Tax Revenue, Ser B, RB,
AMBAC Insured
1,385 5.000%, 07/01/23 1,435
--------
3,377
--------
TOTAL MUNICIPAL BONDS (Cost $167,646) 180,102
--------
CASH EQUIVALENTS -- 0.9%
835,573 Dreyfus Tax-Exempt Cash Management Fund 836
835,572 Fidelity Institutional Money Market Tax-Exempt Fund 836
--------
TOTAL CASH EQUIVALENTS (Cost $1,672) 1,672
--------
TOTAL INVESTMENTS (Cost $169,318)-- 100.2% 181,774
--------
OTHER ASSETS AND LIABILITIES -- (0.2)%
Investment Adviser Fees Payable (18)
Administrative Fees Payable (11)
Other Assets and Liabilities, Net (397)
--------
TOTAL OTHER ASSETS AND LIABILITIES (426)
--------
December 31, 2003 43 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization
-- no par value) Based on 13,419,815 Outstanding Shares of
Beneficial Interest $139,699
Fund Shares of Class A (unlimited authorization -- no par value)
Based on 2,763,888 Outstanding Shares of Beneficial Interest 28,955
Undistributed net investment income 34
Accumulated net realized gain on investments 204
Net unrealized appreciation on investments 12,456
--------
TOTAL NET ASSETS -- 100.0% $181,348
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($150,373,234 / 13,419,815 SHARES) $ 11.21
========
NET ASSET VALUE, REDEMPTION
PRICE PER SHARE -- CLASS A
($30,974,300 / 2,763,888 SHARES) $ 11.21
========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($11.21 / 95.75%) $ 11.71
========
(A) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT -- ALTERNATIVE MINIMUM TAX
COP -- CERTIFICATE OF PARTICIPATION
ETM -- ESCROWED TO MATURITY
FGIC -- FINANCIAL GUARANTEE INSURANCE CORPORATION
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.
Bishop Street Funds 44
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Money Market & Treasury Money Market Funds
- --------------------------------------------------------------------------------
The U.S. economy ended 2003 on a strong note, signaling a strengthening,
broad-based recovery that, for the first time, began to reflect increasing
contributions to growth from the business sector. Gross Domestic Product numbers
released during the fourth quarter showed that the economy expanded at an
impressive rate of 8.2% during the prior quarter. Consumer spending remained
robust and capital spending, led by business equipment and software needs,
improved as well. In addition, with the recent decline in jobless claims, the
labor market now appears to be improving modestly. This economic backdrop
favored equities and other riskier assets in the final period, while subdued
inflation reports eased the market's fear of significantly higher interest
rates.
In light of the improving economic backdrop, Federal Reserve (Fed) policymakers
upgraded their assessment of the U.S. economy at their meeting on December 10th
while also signaling that an interest-rate hike may not occur for some time.
With favorable inflationary indicators surprising on the downside, markets
reassessed interest rate levels accounting for continued easy monetary policy.
While bond yields had moved higher earlier in the quarter with the strength in
economic data, they retraced some of that increase following benign inflationary
signs. The money market curve remained relatively unchanged on the quarter,
pricing in a 30% chance of a Fed tightening in mid 2004. The Fed Funds rate
capped the year at a 41-year low of 1%.
December 31, 2003 45 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
The U.S. economy showed signs that aggressive monetary and fiscal stimulus has
contributed to solid growth in 2003, and we expect this to continue in 2004.
While the consumer has been a key contributor to the economy, thanks in part to
record mortgage refinancing at low interest rates, capital spending and exports
will accelerate, resulting in a more balanced growth rate. Despite the recent
growth, there are only scant signs of higher prices on the horizon - the U.S.
dollar's value has been declining versus other currencies, while oil, gold and
other commodity prices have been rising. We believe the Fed will not raise
short-term rates until it has observed months of solid job growth and signs that
inflation is increasing, which would be well into 2004. By assuring the market
that that it will hold rates steady for a "considerable period," the Fed should
have a continued positive influence on both the U.S. economy and financial
markets. Finally, we do not believe that this year's U.S. Presidential election
will be an important factor - one way or the other - for the makers of U.S.
interest rate policy.
Bishop Street Funds 46
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
------ -----
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 34.4%
FHLB
$1,400 5.375%, 01/05/04 $ 1,401
2,000 5.715%, 05/12/04 2,031
FHLMC
3,000 3.250%, 01/15/04 3,002
3,000 1.348%, 01/29/04 (C) 2,997
4,000 1.075%, 02/18/04 (C) 3,994
2,750 1.223%, 02/26/04 (C) 2,745
3,500 1.094%, 03/12/04 (C) 3,492
4,000 1.136%, 04/22/04 (C) 3,986
3,000 0.949%, 06/17/04 (C) 2,987
6,000 1.360%, 08/06/04 6,003
4,000 1.190%, 08/19/04 (C) 3,970
FNMA
10,000 1.207%, 02/06/04 (C) 9,988
4,000 5.125%, 02/13/04 4,018
2,000 3.625%, 04/15/04 2,014
4,000 4.125%, 04/23/04 4,035
5,000 1.071%, 06/25/04 (C) 4,974
7,000 1.219%, 07/01/04 (C) 6,957
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $68,594) 68,594
--------
COMMERCIAL PAPER (D) -- 33.1%
ASSET-BACKED -- 16.8%
Apreco
3,000 1.110%, 02/17/04 2,996
Clipper Receivables
4,500 1.080%, 01/28/04 4,496
CRC Funding
4,500 1.090%, 02/06/04 4,495
Delaware Funding
4,500 1.090%, 01/12/04 4,499
Greyhawk Funding
4,000 1.100%, 01/09/04 3,999
Park Avenue Receivables
4,500 1.090%, 01/14/04 4,498
Variable Funding Capital
4,000 1.080%, 01/09/04 3,999
Windmill Funding
4,500 1.090%, 01/09/04 4,499
--------
33,481
--------
December 31, 2003 47 www.bishopstreetfunds.com
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
-------- -----
BANKS -- 4.0%
Svenska Handelsbank
$5,000 1.080%, 02/04/04 $ 4,995
UBS Finance
3,000 1.100%, 01/21/04 2,998
--------
7,993
--------
DIVERSE FINANCIAL SERVICES -- 5.5%
International Lease Finance
3,000 1.060%, 01/12/04 2,999
Morgan Stanley
2,000 1.080%, 02/19/04 1,997
Nationwide Building
1,000 1.116%, 01/20/04 999
Toyota Motor Credit
5,000 1.070%, 02/17/04 4,993
--------
10,988
--------
FOREIGN GOVERNMENTS -- 1.6%
Quebec Province
3,200 1.110%, 03/26/04 3,192
--------
RETAIL - BEVERAGES -- 1.7%
Diageo Capital
3,500 1.070%, 02/10/04 3,496
--------
RETAIL - FOOD -- 1.5%
Archer Daniels Midland
3,000 1.140%, 04/06/04 2,991
--------
SPECIAL PURPOSE ENTITY -- 2.0%
Westpac Capital
4,000 1.150%, 05/05/04 3,984
--------
TOTAL COMMERCIAL PAPER (Cost $66,125) 66,125
--------
CERTIFICATES OF DEPOSIT/BANK NOTES (C) -- 10.5%
American Express Centurion (A)
5,000 1.090%, 09/27/04 5,000
Bradford & Bingley 144A
4,000 1.150%, 01/07/05 4,000
Wells Fargo Bank
3,000 1.070%, 01/15/04 3,000
Bishop Street Funds 48
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
------- -----
CERTIFICATES OF DEPOSIT/BANK NOTES (CONTINUED)
Westdeutsche Landesbank
$6,000 1.350%, 01/27/04 $ 6,000
Wilmington Trust
3,000 1.100%, 01/22/04 3,000
--------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $21,000) 21,000
--------
CORPORATE OBLIGATIONS (A) -- 9.1%
DIVERSE FINANCIAL SERVICES -- 7.1%
Abbey National Treasury Services
5,000 1.040%, 03/10/04 5,000
General Electric Capital
2,300 1.250%, 01/07/05 2,300
General Electric Capital MTN
2,000 1.230%, 01/14/05 2,000
Nationwide Building 144A
900 1.140%, 07/23/04 900
Permanent Financing
2,000 1.130%, 03/10/04 2,000
2,055 1.130%, 12/10/04 2,055
--------
14,255
--------
INDUSTRIALS -- 2.0%
BP Capital Markets
4,000 1.045%, 03/08/04 4,000
--------
TOTAL CORPORATE OBLIGATIONS (Cost $18,255) 18,255
--------
INSURANCE FUNDING AGREEMENTS (A)(B) -- 8.8%
Allstate 144A
3,000 1.260%, 03/15/04 3,000
Metropolitan Life Insurance 144A
5,000 1.243%, 02/02/04 5,000
Monumental Life Insurance 144A
5,500 1.260%, 01/02/04 5,500
Travelers Insurance 144A
4,000 1.242%, 02/28/04 4,000
--------
TOTAL INSURANCE FUNDING AGREEMENTS (Cost $17,500) 17,500
--------
December 31, 2003 49 www.bishopstreetfunds.com
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
------- -----
MUNICIPAL BOND -- 2.0%
CONNECTICUT -- 2.0%
Yale University TECP (C)
$4,000 1.072%, 02/12/04 $ 3,995
--------
TOTAL MUNICIPAL BOND (Cost $3,995) 3,995
--------
REPURCHASE AGREEMENT -- 2.1%
UBS Warburg Dillion 1.000%, dated 12/31/03,
to be repurchased on 01/02/04, repurchase price $4,100,228,
(collateralized by Government Obligations, total market
4,100 value $4,182,757) 4,100
--------
TOTAL REPURCHASE AGREEMENT (Cost $4,100) 4,100
--------
TOTAL INVESTMENTS (COST $199,569) -- 100.0% 199,569
--------
OTHER ASSETS AND LIABILITIES -- 0.0%
Investment Adviser Fees Payable (37)
Administrative Fees Payable (21)
Other Assets and Liabilities, Net 95
--------
TOTAL OTHER ASSETS AND LIABILITIES 37
--------
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization --
no par value) Based on 182,189,368 Outstanding Shares of
Beneficial Interest 182,190
Fund Shares of Class A (unlimited authorization -- no par value)
Based on 17,440,456 Outstanding Shares of Beneficial Interest 17,439
Distributions in excess of net investment income (1)
Accumulated net realized loss on investments (22)
--------
TOTAL NET ASSETS -- 100.0% $199,606
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($182,165,949 / 182,189,368 SHARES) $ 1.00
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A
($17,440,331 / 17,440,456 SHARES) $ 1.00
========
Bishop Street Funds 50
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
(A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2003. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
(B) SECURITY CONSIDERED ILLIQUID.
(C) REPRESENTS THE EFFECTIVE YIELD AT THE DATE OF PURCHASE.
(D) REPRESENTS THE DISCOUNT YIELD AT THE DATE OF PURCHASE.
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
TECP -- TAX-EXEMPT COMMERCIAL PAPER
144A -- SECURITIES SOLD WITHIN THE TERMS OF 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."
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2003 51 www.bishopstreetfunds.com
Treasury Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
------- -----
U.S. TREASURY OBLIGATIONS -- 50.7%
U.S. Treasury Bills (A)
$35,000 0.846%, 01/02/04 $ 34,999
3,000 1.015%, 01/29/04 2,998
8,000 0.801%, 02/12/04 7,993
6,000 1.035%, 02/26/04 5,990
U.S. Treasury Notes
10,000 3.000%, 01/31/04 10,015
6,000 4.750%, 02/15/04 6,027
4,000 3.625%, 03/31/04 4,023
30,500 3.375%, 04/30/04 30,720
5,000 7.250%, 05/15/04 5,111
4,000 5.250%, 05/15/04 4,061
5,500 2.875%, 06/30/04 5,549
5,000 7.250%, 08/15/04 5,187
5,000 6.000%, 08/15/04 5,148
9,000 2.125%, 08/31/04 9,053
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $136,874) 136,874
--------
REPURCHASE AGREEMENTS -- 49.1%
ABN Amro 0.820%, dated 12/31/03, to be
repurchased on 01/02/04, repurchase price $10,000,456
(collateralized by U.S. Treasury Note,
10,000 total market value $10,106,354) 10,000
JP Morgan Chase 0.830%, dated 12/31/03, to be
repurchased on 01/02/04, repurchase price $62,002,922
(collateralized by U.S. Government Obligations,
62,000 total market value $63,242,984) 62,000
UBS Warburg Dillion 0.850%, dated 12/31/03, to be
repurchased on 01/02/04, repurchase price $60,902,876
(collateralized by U.S. Government Obligation,
60,900 total market value $62,118,581) 60,900
--------
TOTAL REPURCHASE AGREEMENTS (Cost $132,900) 132,900
--------
TOTAL INVESTMENTS (COST $269,774) -- 99.8% 269,774
--------
Bishop Street Funds 52
Treasury Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-------
OTHER ASSETS AND LIABILITIES -- 0.2%
Investment Adviser Fees Payable $ (36)
Administrative Fees Payable (26)
Other Assets and Liabilities, Net 653
--------
TOTAL OTHER ASSETS AND LIABILITIES 591
--------
NET ASSETS:
Fund Shares of Institutional Shares (unlimited authorization --
no par value) based on 270,341,173 outstanding shares of
beneficial interest 270,341
Undistributed net investment income 16
Accumulated net realized gain on investments 8
--------
TOTAL NET ASSETS -- 100.0% $270,365
========
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.
December 31, 2003 53 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN THOUSANDS)
Tax High
Strategic Managed Grade
Equity Growth Equity Income
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend Income $ 1,969 $ 172 $ 497 $ --
Interest Income 47 4 14 6,257
Securities Lending, Net 32 -- -- 42
Less: Foreign Taxes Withheld (9) -- (2) --
- -----------------------------------------------------------------------------------------
Total Investment Income 2,039 176 509 6,299
- -----------------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 1,021 218 224 741
Shareholder Servicing Fees 345 73 76 337
Administrative Fees 276 59 61 270
Distribution Fees, Class A 4 -- -- 1
Transfer Agent Fees 53 24 27 52
Professional Fees 25 7 8 28
Trustees Fees 18 4 4 16
Custody Fees 12 4 3 12
Printing Fees 10 3 3 10
Registration Fees 2 1 1 2
Offering Costs -- 16 24 --
Miscellaneous Expenses 3 4 3 11
- -----------------------------------------------------------------------------------------
Total Expenses 1,769 413 434 1,480
- -----------------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (52) -- (58) (134)
Shareholder Servicing Fees (207) (44) (46) (202)
Administrative Fees (126) (26) (26) (118)
- -----------------------------------------------------------------------------------------
Total Waivers (385) (70) (130) (454)
- -----------------------------------------------------------------------------------------
Total Net Expenses 1,384 343 304 1,026
- -----------------------------------------------------------------------------------------
Net Investment Income (Loss) 655 (167) 205 5,273
- -----------------------------------------------------------------------------------------
Net Realized Gain on Investments 1,685 758 19 4,600
Change in Unrealized Appreciation
(Depreciation) on Investments 30,565 8,983 6,553 (5,397)
- -----------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments 32,250 9,741 6,572 (797)
- -----------------------------------------------------------------------------------------
Increase in Net Assets
Resulting from Operations $32,905 $9,574 $6,777 $ 4,476
=========================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 54
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN THOUSANDS)
Hawaii Treasury
Municipal Money Money
Bond Market Market
Fund Fund Fund
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $8,232 $2,899 $ 3,781
- --------------------------------------------------------------------------------
Total Investment Income 8,232 2,899 3,781
- --------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 646 691 950
Shareholder Servicing Fees 461 576 792
Administrative Fees 369 461 633
Distribution Fees, Class A 81 6 --
Transfer Agent Fees 59 58 44
Professional Fees 42 47 73
Trustees Fees 22 27 38
Printing Fees 18 14 26
Custody Fees 17 19 26
Registration Fees 3 3 4
Miscellaneous Expenses 36 13 36
- --------------------------------------------------------------------------------
Total Expenses 1,754 1,915 2,622
- --------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (326) (209) (475)
Shareholder Servicing Fees (277) (346) (475)
Administrative Fees (240) (201) (277)
- --------------------------------------------------------------------------------
Total Waivers (843) (756) (1,227)
- --------------------------------------------------------------------------------
Total Net Expenses 911 1,159 1,395
- --------------------------------------------------------------------------------
Net Investment Income 7,321 1,740 2,386
- --------------------------------------------------------------------------------
Net Realized Gain on Investments 1,911 -- 21
Change in Unrealized Appreciation
on Investments 64 -- --
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain
on Investments 1,975 -- 21
- --------------------------------------------------------------------------------
Increase in Net Assets
Resulting from Operations $9,296 $1,740 $ 2,407
================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2003 55 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
Equity Fund
- ----------------------------------------------------------------------------------------------
2003 2002
- ----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 655 $ 428
Net Realized Gain (Loss) on Investments 1,685 (21,478)
Change in Unrealized Appreciation (Depreciation)
on Investments 30,565 (31,683)
- ----------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Resulting From Operations 32,905 (52,733)
- ----------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (650) (420)
Class A Shares (3) --
- ----------------------------------------------------------------------------------------------
Total Dividends (653) (420)
- ----------------------------------------------------------------------------------------------
Changes in Net Assets 32,252 (53,153)
- ----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares Issued 11,293 19,672
Reinvestments of Cash Distributions 393 246
Cost of Shares Redeemed (17,181) (53,829)
- ----------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions (5,495) (33,911)
- ----------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 143 459
Reinvestments of Cash Distributions 2 --
Cost of Shares Redeemed (521) (1,036)
- ----------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions (376) (577)
- ----------------------------------------------------------------------------------------------
Net Decrease in Net Assets
From Capital Share Transactions (5,871) (34,488)
- ----------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 26,381 (87,641)
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 131,584 219,225
- ----------------------------------------------------------------------------------------------
End of Year $157,965 $131,584
==============================================================================================
SHARE TRANSACTIONS:
Institutional Class Shares:
Issued 1,341 2,383
Issued in Lieu of Cash Distributions 46 33
Redeemed (2,169) (6,627)
- ----------------------------------------------------------------------------------------------
Total Institutional Class Share Transactions (782) (4,211)
- ----------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued 17 49
Shares Issued in Lieu of Cash Distributions 1 --
Shares Redeemed (64) (116)
- ----------------------------------------------------------------------------------------------
Total Class A Share Transactions (46) (67)
- ----------------------------------------------------------------------------------------------
Net Decrease in Shares Outstanding from Share Transactions (828) (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 56
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED DECEMBER 31,
(IN THOUSANDS)
Strategic Tax Managed
Growth Fund(1) Equity Fund(2)
- -----------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income (Loss) $ (167) $ (58) $ 205 $ 33
Net Realized Gain (Loss) on Investments 758 (2,035) 19 12
Change in Unrealized Appreciation (Depreciation)
on Investments 8,983 (833) 6,553 (430)
- -----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Resulting From Operations 9,574 (2,926) 6,777 (385)
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares -- -- (204) (33)
Capital Gains:
Institutional Class Shares -- -- (46) --
- -----------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions -- -- (250) (33)
- -----------------------------------------------------------------------------------------------------------------
Changes in Net Assets 9,574 (2,926) 6,527 (418)
- -----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares Issued 20,073 22,869 8,008 25,278
Reinvestments of Cash Distributions -- -- 6 --
Cost of Shares Redeemed (2,701) (44) (4,368) (225)
- -----------------------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions 17,372 22,825 3,646 25,053
- -----------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
From Capital Share Transactions 17,372 22,825 3,646 25,053
- -----------------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 26,946 19,899 10,173 24,635
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 19,899 -- 24,635 --
- -----------------------------------------------------------------------------------------------------------------
End of Period $46,845 $19,899 $34,808 $24,635
=================================================================================================================
SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued 1,873 2,308 802 2,527
Shares Issued in Lieu of Cash Distributions -- -- 1 --
Shares Redeemed (251) (5) (422) (22)
- -----------------------------------------------------------------------------------------------------------------
Total Institutional Class Share Transactions 1,622 2,303 381 2,505
- -----------------------------------------------------------------------------------------------------------------
Net Increase in Shares Outstanding from Share Transactions 1,622 2,303 381 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.
December 31, 2003 57 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
High Grade Hawaii Municipal
Income Fund Bond Fund
- --------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 5,273 $ 5,851 $ 7,321 $ 7,597
Net Realized Gain on Investments 4,600 576 1,911 1,253
Change in Unrealized Appreciation (Depreciation)
on Investments (5,397) 8,053 64 8,384
- --------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 4,476 14,480 9,296 17,234
- --------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (5,260) (5,833) (6,122) (6,293)
Class A Shares (13) (17) (1,218) (1,289)
Capital Gains:
Institutional Class Shares (2,572) -- (1,555) (600)
Class A Shares (5) -- (317) (133)
- --------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (7,850) (5,850) (9,212) (8,315)
- --------------------------------------------------------------------------------------------------------------------
Changes in Net Assets (3,374) 8,630 84 8,919
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares Issued 15,737 23,640 18,535 22,766
Reinvestments of Cash Distributions 2,901 1,748 1,112 945
Cost of Shares Redeemed (18,942) (19,891) (19,607) (17,946)
- --------------------------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions (304) 5,497 40 5,765
- --------------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 25 169 2,635 4,677
Reinvestments of Cash Distributions 15 14 726 613
Cost of Shares Redeemed (182) (110) (5,880) (3,936)
- --------------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions (142) 73 (2,519) 1,354
- --------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets From
Capital Share Transactions (446) 5,570 (2,479) 7,119
- --------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (3,820) 14,200 (2,395) 16,038
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 138,941 124,741 183,743 167,705
- --------------------------------------------------------------------------------------------------------------------
End of Year $135,121 $138,941 $181,348 $183,743
====================================================================================================================
SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued 1,481 2,310 1,656 2,089
Shares Issued in Lieu of Cash Distributions 274 170 99 86
Shares Redeemed (1,777) (1,934) (1,750) (1,629)
- --------------------------------------------------------------------------------------------------------------------
Total Institutional Class Share Transactions (22) 546 5 546
- --------------------------------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued 2 17 234 429
Shares Issued in Lieu of Cash Distributions 2 1 65 56
Shares Redeemed (17) (11) (521) (359)
- --------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (13) 7 (222) 126
- --------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding
from Share Transactions (35) 553 (217) 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 58
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
Money Market Treasury Money Market
Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 1,740 $ 3,690 $ 2,386 $ 4,508
Net Realized Gain (Loss) on Investments -- 1 21 (9)
- ------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 1,740 3,691 2,407 4,499
- ------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (1,731) (3,687) (2,386) (4,508)
Class A Shares (9) (3) -- --
- ------------------------------------------------------------------------------------------------------------------------
Total Dividends (1,740) (3,690) (2,386) (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 408,493 498,190 678,219 879,834
Reinvestments of Cash Distributions 25 60 9 25
Cost of Shares Redeemed (464,850) (569,687) (739,562) (920,594)
- ------------------------------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions (56,332) (71,437) (61,334) (40,735)
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 20,191 9 -- --
Reinvestments of Cash Distributions 9 3 -- --
Cost of Shares Redeemed (2,948) (325) -- --
- ------------------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 17,252 (313) -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets
From Capital Share Transactions (39,080) (71,750) (61,334) (40,735)
- ------------------------------------------------------------------------------------------------------------------------
Total Decrease in Net Assets (39,080) (71,749) (61,313) (40,744)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 238,686 310,435 331,678 372,422
- ------------------------------------------------------------------------------------------------------------------------
End of Year $ 199,606 $ 238,686 $ 270,365 $ 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.
December 31, 2003 59 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT 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 $ 0.04 $ 1.96 $ 2.00 $(0.04) $ -- $(0.04)
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)
CLASS A SHARES:
2003(1) $ 7.49 $ 0.02 $ 1.95 $ 1.97 $(0.02) $ -- $(0.02)
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(1) $ 8.64 $(0.06) $ 3.35 $ 3.29 $ -- $ -- $ --
2002(3) 10.00 (0.03) (1.33) (1.36) -- -- --
- -----------------------
TAX MANAGED EQUITY FUND
- -----------------------
INSTITUTIONAL CLASS SHARES:
2003(1) $ 9.83 $ 0.07 $ 2.25 $ 2.32 $(0.07) $(0.02) $(0.09)
2002(4) 10.00 0.01 (0.17) (0.16) (0.01) -- (0.01)
- ----------------------
HIGH GRADE INCOME FUND
- ----------------------
INSTITUTIONAL CLASS SHARES:
2003(1) $10.67 $ 0.42 $(0.07) $ 0.35 $(0.42) $(0.20) $(0.62)
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)
CLASS A SHARES:
2003(1) $10.62 $ 0.39 $(0.06) $ 0.33 $(0.39) $(0.20) $(0.59)
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)
+ 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.
Bishop Street Funds 60
- --------------------------------------------------------------------------------
RATIO OF RATIO OF EXPENSES RATIO OF NET
NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT
VALUE, END OF AVERAGE NET ASSETS INCOME (LOSS) PORTFOLIO
END OF TOTAL PERIOD NET EXCLUDING FEE TO AVERAGE TURNOVER
PERIOD RETURN+ (000) ASSETS WAIVERS NET ASSETS RATE
--------- ------- ----------- ----------- ----------------- ------------- ---------
- -----------
EQUITY FUND
- -----------
INSTITUTIONAL CLASS SHARES:
2003(1) $ 9.49 26.62% $156,381 1.00% 1.28% 0.48% 43%
2002(1) 7.53 (25.06) 129,981 1.00 1.27 0.24 60
2001 10.08 (25.61) 216,412 1.00 1.27 -- 86
2000 13.55 (16.20) 300,565 1.00 1.28 (0.23) 52
1999(1) 17.88 24.37 391,227 1.00 1.27 (0.01) 58
CLASS A SHARES:
2003(1) $ 9.44 26.31% $ 1,584 1.25% 1.53% 0.23% 43%
2002(1) 7.49 (25.17) 1,603 1.25 1.52 (0.02) 60
2001 10.01 (25.80) 2,813 1.25 1.52 (0.29) 86
2000 13.49 (16.49) 10,631 1.25 1.53 (0.51) 52
1999(2) 17.87 20.52 583 1.25* 1.61* (0.33)* 58
- ---------------------
STRATEGIC GROWTH FUND
- ---------------------
INSTITUTIONAL CLASS SHARES:
2003(1) $11.93 38.08% $ 46,845 1.17% 1.41% (0.57)% 59%
2002(3) 8.64 (13.60) 19,899 1.25* 1.67* (0.61)* 50
- -----------------------
TAX MANAGED EQUITY FUND
- -----------------------
INSTITUTIONAL CLASS SHARES:
2003(1) $12.06 23.66% $ 34,808 1.00% 1.43% 0.68% 34%
2002(4) 9.83 (1.57) 24,635 1.00* 1.50* 0.99* 1
- ----------------------
HIGH GRADE INCOME FUND
- ----------------------
INSTITUTIONAL CLASS SHARES:
2003(1) $10.40 3.31% $134,845 0.76% 1.10% 3.91% 48%
2002 10.67 11.54 138,516 0.76 1.09 4.45 19
2001 10.00 7.16 124,416 0.76 1.09 5.02 89
2000 9.81 10.25 127,888 0.77 1.14 5.41 88
1999 9.39 (4.34) 127,881 0.80 1.19 5.12 56
CLASS A SHARES:
2003(1) $10.36 3.14% $ 276 1.01% 1.35% 3.69% 48%
2002 10.62 11.19 425 1.01 1.34 4.21 19
2001 9.96 7.02 325 1.01 1.34 4.72 89
2000 9.76 9.85 26 1.02 1.39 5.24 88
1999(2) 9.35 (0.05) 1 1.05* 1.87* 4.89* 56
(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.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2003 61 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT 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 DISTRIBUTIONS
--------- ------------- -------------- ---------- ---------- ------- ---------------
- --------------------------
HAWAII MUNICIPAL BOND FUND
- --------------------------
INSTITUTIONAL CLASS SHARES:
2003(3) $11.20 $0.45 $ 0.13 $ 0.58 $(0.45) $(0.12) $(0.57)
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)
CLASS A SHARES:
2003(3) $11.20 $0.42 $0.13 $ 0.55 $(0.42) $(0.12) $(0.54)
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(3) $ 1.00 $0.01 $ -- $ 0.01 $(0.01) $ -- $(0.01)
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)
CLASS A SHARES:
2003(3) $ 1.00 $0.01 $ -- $ 0.01 $(0.01) $ -- $(0.01)
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(3) $ 1.00 $0.01 $ -- $ 0.01 $(0.01) $ -- $(0.01)
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)
+ TOTAL RETURN IS FOR THE PERIOD INDICATED AND HAS NOT BEEN ANNUALIZED.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD
PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
* ANNUALIZED
(1) COMMENCED OPERATIONS ON JUNE 14, 1999.
(2) COMMENCED OPERATIONS ON MAY 1, 2001.
(3) PER SHARE NET INVESTMENT INCOME AMOUNT CALCULATED USING AVERAGE SHARES.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
Bishop Street Funds 62
- --------------------------------------------------------------------------------
RATIO OF RATIO OF EXPENSES RATIO OF NET
NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT
VALUE, END OF AVERAGE NET ASSETS INCOME (LOSS) PORTFOLIO
END OF TOTAL PERIOD NET EXCLUDING FEE TO AVERAGE TURNOVER
PERIOD RETURN+ (000) ASSETS WAIVERS NET ASSETS RATE
--------- ------- ----------- ----------- ----------------- ------------- ---------
- --------------------------
HAWAII MUNICIPAL BOND FUND
- --------------------------
INSTITUTIONAL CLASS SHARES:
2003(3) $11.21 5.27% $150,373 0.45% 0.91% 4.01% 38%
2002 11.20 10.02 150,287 0.45 0.89 4.23 26
2001 10.66 4.24 137,206 0.45 0.88 4.54 4
2000 10.70 12.61 134,901 0.44 0.92 4.89 19
1999 9.98 (2.65) 141,341 0.41 0.99 4.79 14
CLASS A SHARES:
2003(3) $11.21 5.01% $ 30,975 0.70% 1.16% 3.76% 38%
2002 11.20 9.75 33,456 0.70 1.14 3.98 26
2001 10.66 4.13 30,499 0.70 1.13 4.29 4
2000 10.69 12.34 19,951 0.69 1.17 4.63 19
1999(1) 9.97 (1.76) 6,131 0.66* 1.24* 4.89* 14
- -----------------
MONEY MARKET FUND
- -----------------
INSTITUTIONAL CLASS SHARES:
2003(3) $ 1.00 0.76% $182,166 0.50% 0.83% 0.76% n/a
2002 1.00 1.34 238,498 0.50 0.81 1.33 n/a
2001 1.00 3.86 309,935 0.50 0.82 3.71 n/a
2000 1.00 6.13 305,678 0.50 0.83 5.95 n/a
1999 1.00 4.88 284,291 0.50 0.84 4.78 n/a
CLASS A SHARES:
2003(3) $ 1.00 0.50% $ 17,440 0.75% 1.08% 0.41% n/a
2002 1.00 1.08 188 0.75 1.06 1.10 n/a
2001(2) 1.00 1.96 500 0.75* 1.07* 2.66* n/a
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
INSTITUTIONAL CLASS SHARES:
2003(3) $ 1.00 0.74% $270,365 0.44% 0.83% 0.75% n/a
2002 1.00 1.29 331,678 0.44 0.83 1.28 n/a
2001 1.00 3.68 372,422 0.44 0.85 3.68 n/a
2000 1.00 5.89 455,612 0.44 0.82 5.73 n/a
1999 1.00 4.65 331,064 0.44 0.85 4.56 n/a
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2003 63 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 64
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. Costs used in
determining net realized capital gains and losses on the sale of securities are
on the basis of the specific identification method. 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) monitor 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.
DIVIDENDS AND 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.
December 31, 2003 65 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 66
- --------------------------------------------------------------------------------
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. OFFERING COSTS
Offering costs, which include registration fees, typesetting and prospectus
printing, and preparation of the initial registration statement, were
capitalized and amortized to expense over a twelve-month period. As of December
31, 2003, these fees have been fully amortized.
December 31, 2003 67 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 December 31, 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 $ -- $ -- $ -- $ 5,241 $ --
Other 57,398 34,625 14,711 53,499 68,089
Sales
U.S.
Government
Securities $ -- $ -- $ -- $26,243 $ --
Other 58,180 17,493 9,736 50,232 71,110
8. FEDERAL TAX INFORMATION
It is each Fund's intention to continue to qualify as a regulated investment
company for federal income tax purposes under Subchapter M of the Internal
Revenue Code as amended 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. Accordingly, the
following permanent differences, primarily attributable to net operating losses
and reclass of distributions for tax purposes have been reclassified:
Undistributed Net Accumulated Paid
Investment Realized in
Income (Loss) Gain Capital
(000) (000) (000)
----------------- ----------- -------
Strategic Growth Fund $158 $-- $(158)
Tax Managed Equity Fund (15) 15 --
These reclassifications have no effect on net assets or net asset values per
share.
Bishop Street Funds 68
- --------------------------------------------------------------------------------
The tax character of dividends and distributions paid during the years ended
December 31, 2003 and December 31, 2002 were as follows:
Ordinary Tax Exempt Long-Term
Income Income Capital Gain Total
(000) (000) (000) (000)
-------- ---------- ------------ -------
Equity Fund
2003 $ 653 $ -- $ -- $ 653
2002 420 -- -- 420
Strategic Growth
Fund
2003 $ -- $ -- $ -- $ --
2002 -- -- -- --
Tax Managed Equity
Fund
2003 $ 250 $ -- $ -- $ 250
2002 33 -- -- 33
High Grade Income
Fund
2003 $5,273 $ -- $2,577 $7,850
2002 5,850 -- -- 5,850
Hawaii Municipal
Bond Fund
2003 $ 14 $7,326 $1,872 $9,212
2002 -- 7,582 733 8,315
Money Market Fund
2003 $1,740 $ -- $ -- $1,740
2002 3,690 -- -- 3,690
Treasury Money
Market Fund
2003 $2,386 $ -- $ -- $2,386
2002 4,508 -- -- 4,508
December 31, 2003 69 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
As of December 31, 2003, the components of Distributable Earnings
(Accumulated Losses) on a tax basis were as follows:
Treasury
Strategic Tax High Grade Hawaii Money Money
Equity Growth Managed Income Municipal Market Market
Fund Fund Equity Fund Fund Bond Fund Fund Fund
(000) (000) (000) (000) (000) (000) (000)
-------- --------- ----------- ---------- --------- ------ --------
Undistributed
ordinary
income $ 9 $ -- $ 7 $ 425 $ 72 $ 117 $ 172
Undistributed
tax exempt
income -- -- -- -- 5 -- --
Undistributed
long-term
capital gain -- -- -- 11 130 -- --
Capital loss
carryforwards
expiring:
Dec. 2005 -- -- -- -- -- (2) --
Dec. 2008 -- -- -- -- -- (2) --
Dec. 2009 (38,258) -- -- -- -- (18) --
Dec. 2010 (25,686) (1,049) -- -- -- -- --
Dec. 2011 (1,697) -- -- -- -- -- --
Post-October
Losses -- -- -- (57) -- -- --
Other Temporary
Differences -- (22) (21) (423) 31 (118) (148)
Unrealized
appreciation 15,831 7,922 6,123 5,608 12,456 -- --
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. During the year ended
December 31, 2003, the Strategic Growth Fund, the High Grade Income Fund and the
Treasury Money Market Fund, utilized capital loss carryforwards of $310,043,
$2,068,477 and $11,795, respectively, to offset realized capital gains.
Post-October losses represent losses realized on investment transactions from
November 1, 2003 through December 31, 2003 that, in accordance with Federal
income tax regulations the Funds have elected to defer and treat as having
arisen in the following fiscal year.
Bishop Street Funds 70
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 December 31, 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 $175,293 $38,963 $28,677 $149,371 $169,318
-------- ------- ------- -------- --------
Gross
Unrealized
Appreciation 23,605 8,267 6,301 5,913 12,518
Gross
Unrealized
Depreciation (7,774) (345) (178) (305) (62)
-------- ------- ------- -------- --------
Net
Unrealized
Appreciation $ 15,831 $ 7,922 $ 6,123 $ 5,608 $ 12,456
======== ======= ======= ======== ========
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.
10. OTHER
In the normal course of business, the Funds enters into contracts that
provide general indemnifications. The Funds' maximum exposure under these
arrangements is dependent on future claims that may be made against the Funds
and, therefore, cannot be established; however, based on experience, the risk of
loss from such claim is considered remote.
11. SUBSEQUENT EVENT
The Bishop Street Funds Board of Trustees approved to change the voluntary
expense cap for the Hawaii Municipal Bond Fund from 45 basis points to 55 basis
points effective January 1, 2004.
December 31, 2003 71 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of Bishop Street Funds:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Equity, Strategic Growth, Tax Managed Equity, High Grade Income, Hawaii
Municipal Bond, Money Market and Treasury Money Market Funds (constituting
Bishop Street Funds, hereafter referred to as the "Fund") at December 31, 2003,
the results of each of their operations for the year then ended and the changes
in each of their net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 13, 2004
Bishop Street Funds 72
- --------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (Unaudited)
For shareholders that do not have a December 31, 2003 taxable year end, this
notice is for informational purposes only. For shareholders with a December 31,
2003 tax year end, please consult your tax advisor as to the pertinence of this
notice.
For the fiscal year ended December 31, 2003, each fund has designated the
following items with regard to distributions paid during the year:
(A) (B) (D)
LONG TERM ORDINARY (A+B+C)
CAPITAL GAINS INCOME (C) TOTAL
DISTRIBUTIONS DISTRIBUTIONS TAX EXEMPT DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) INTEREST (TAX BASIS)
- ------ ------------- ------------- ---------- -------------
Equity 0% 100% 0% 100%
Strategic Growth 0% 0% 0% 0%
Tax Managed Equity 0% 100% 0% 100%
High Grade Income 35% 65% 0% 100%
Hawaii Municipal Bond 18% 2% 80% 100%
Money Market 0% 100% 0% 100%
Treasury Money Market 0% 100% 0% 100%
(E)
DIVIDENDS
QUALIFYING FOR
CORPORATE (F)
DIVIDENDS QUALIFYING
RECEIVABLE DIVIDEND
FUND DEDUCTION(1) INCOME(2)
- ------ -------------- ----------
Equity 100% 100%
Strategic Growth 0% 0%
Tax Managed Equity 100% 100%
High Grade Income 0% 0%
Hawaii Municipal Bond 0% 0%
Money Market 0% 0%
Treasury Money Market 0% 0%
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION.
(2) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING DIVIDEND
INCOME" AS REQUIRED BY THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF
2003 AND IS REFLECTED AS A PERCENTAGE OF "ORDINARY INCOME DISTRIBUTIONS." IT
IS THE INTENTION OF THE FUND TO DESIGNATE THE MAXIMUM AMOUNT PERMITTED BY
THE LAW.
* ITEMS (A) AND (B) ARE BASED ON THE PERCENTAGE OF EACH FUND'S TOTAL
DISTRIBUTION.
** ITEMS (D) AND (E) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME DISTRIBUTIONS
OF EACH FUND.
December 31, 2003 73 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
80
[Photo Omitted]
MR. CHARLES E. CARLBOM* Trustee Since 1999
69
[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 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)
- --------------------------------------------- ------------- -------------
PARTNER -- Goodsill, Anderson, Quinn & Stifel 7 None
since 1951
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)
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 -- 7 None
University of Hawaii System 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
December 31, 2003 75 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
President
[Photo Omitted]
MR. ROBERT A. NESHER Chairman of Since 1998
57 the Board
of Trustees
[Photo Omitted]
HONORABLE WILLIAM S.
RICHARDSON** Trustee Since 1994
84
OFFICERS
Peter J. Golden Treasurer 2
39 & Controller
John Munch Vice President 2
32 and Secretary
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)
- ----------------------------------------- ------------- -------------
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 LIQUID ASSET TRUST
AND SEI TAX EXEMPT TRUST.
RETIRED SINCE 1992 7 None
Director, SEI Investments, Fund Accounting and N/A N/A
Administration since June 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.
December 31, 2003 77 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
TERM OF
POSITION(S) OFFICE AND
PERSONAL HELD WITH THE LENGTH OF
INFORMATION(1) COMPANY TIME SERVED(2)
- -------------------------------------- ------------- ------------
Lydia A. Gavalis Vice President and 5
39 Assistant Secretary
Timothy D. Barto Vice President and 3
35 Assistant Secretary
William E. Zitelli Vice President and 3
35 Assistant Secretary
Christine M. McCullough Vice President and 3
43 Assistant Secretary
Lori Foo Vice President and 2
46 Assistant Secretary
John Munera Vice President and 1
40 Assistant Secretary
* AS OF JANUARY 30, 2004, MR. CARLBOM TENDERED HIS RESIGNATION AS A TRUSTEE OF
THE BISHOP STREET FUNDS.
** AS OF JANUARY 30, 2004, HONORABLE RICHARDSON TENDERED HIS RESIGNATION AS A
TRUSTEE OF THE BISHOP STREET FUNDS.
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 DECEMBER 31, 2003, THE BISHOP STREET FUNDS COMPLEX CONSISTED
OF 7 FUNDS.
Bishop Street Funds 78
(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, 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.
Middle Office Compliance Officer of the Administrator N/A N/A
and Distributor since 2000; Supervising Examiner at the
Federal Reserve Bank of Philadelphia from 1998-2000.
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.
FOR MORE INFORMATION REGARDING THE TRUSTEES AND OFFICERS, PLEASE REFER TO THE
STATEMENT OF ADDITIONAL INFORMATION, WHICH IS AVAILABLE UPON REQUEST BY CALLING
1-800-262-9565.
December 31, 2003 79 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
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]
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
SEI INVESTMENTS 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-AR-006-0900
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, comptroller or
principal accounting officer, and any person who performs a similar function.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a)(1) The registrant's Board of Trustees has determined that the registrant has
at least one audit committee financial expert serving on the audit committee.
(a)(2) The audit committee financial expert is Manuel R. Sylvester and is
independent as defined in Form N-CSR Item 3 (a) (2).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fees billed by PriceWaterhouseCoopers LLP Related to the Funds
PriceWaterhouseCoopers LLP billed the Funds aggregate fees for services rendered
to the Funds for the last two fiscal years as follows:
- ------------------ ----------------------------------------------------- -----------------------------------------------------
2003 2002
- ------------------ ----------------------------------------------------- -----------------------------------------------------
All fees and All fees and All other fees All fees and All fees and All other fees
services to the services to and services to services to the services to and services to
Trust that were service service Trust that were service service
pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that
were did not require were did not require
pre-approved pre-approval pre-approved pre-approval
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(a) Audit $ 90,500 N/A $ 0 $ 85,000 N/A $ 0
Fees(1)
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(b) Audit- $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Related
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(c) Tax $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(d) All $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Notes:
(1) Audit fees include amounts related to the audit of the registrant's annual financial statements and services
normally provided by the accountant in connection with statutory and regulatory filings.
(e)(1) Not applicable.
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
---------------------------- ----------------- ----------------
2003 2002
---------------------------- ----------------- ----------------
Audit-Related Fees 0 % 0 %
---------------------------- ----------------- ----------------
Tax Fees 0 % 0 %
---------------------------- ----------------- ----------------
All Other Fees 0 % 0 %
---------------------------- ----------------- ----------------
(f) Not applicable
(g) The aggregate non-audit fees and services billed by
PriceWaterhouseCoopers LLP for the last two fiscal years were $0 for
2003 and $0 for 2002.
(h) Not applicable
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. PURCHASERS OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
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
registrants internal control over financial reporting.
ITEMS 10. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), 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 Steet Funds
By (Signature and Title)* /s/Robert A. Nesher
-----------------------------------------
Robert A. Nesher, Trustee, Chairman and
President of the Board of Trustees
Date 02/24/04
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
---------------------------------------
Date 02/24/04 Robert A. Nesher, Trustee, Chairman and
President of the Board of Trustees
By (Signature and Title)* /s/Peter J. Golden
-----------------------------------------
Peter J. Golden, Treasurer and Controller
Date 02/24/04
o Print the name and title of each signing officer under his or her signature.