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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c/o The CT Corporation System
2 Oliver Street
Boston, MA 02109
(Address of principal executive offices) (Zip code)
SEI Investments Company
Oaks, PA 19456
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-888-462-5386
DATE OF FISCAL YEAR END: DECEMBER 31, 2004
DATE OF REPORTING PERIOD: DECEMBER 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
[BACKGROUND COMPASS GRAPHIC OMITTED]
BISHOP STREET
FUNDS
ANNUAL REPORT
DECEMBER 31, 2004
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]
The Funds' Forms N-Q are available on the Commission's website at
http://www.sec.gov, and may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge, by calling 1-800-262-9565 or by visiting the Commission's website at
http://www.sec.gov. Information regarding how the Funds voted proxies relating
to portfolio securities during the most recent twelve-month period ended
December 31 is available without charge, by calling 1-800-262-9565 or by
visiting the Funds' website at http://www.bishopstreetfunds.com or the website
of the Securities and Exchange Commission.
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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 ........................................ 34
Statement of Net Assets ...................................... 36
MONEY MARKET & TREASURY MONEY MARKET FUNDS
Management Discussion ........................................ 46
Statements of Net Assets ..................................... 48
STATEMENTS OF OPERATIONS ........................................... 56
STATEMENTS OF CHANGES IN NET ASSETS ................................ 58
FINANCIAL HIGHLIGHTS ............................................... 62
NOTES TO FINANCIAL STATEMENTS ...................................... 66
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ............ 74
DISCLOSURE OF FUND EXPENSES ........................................ 75
NOTICE TO SHAREHOLDERS ............................................. 77
BOARD OF TRUSTEES AND OFFICERS ..................................... 78
1
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BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
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[Gregory E. Ratte Photo Omitted]
"SUCCESS IS THE ABILITY TO GO FROM ONE FAILURE TO ANOTHER WITH NO LOSS OF
ENTHUSIASM". - Sir Winston Churchill
As we look back at 2004, what lessons can we learn that will help us to better
navigate through 2005? First, we review what went right, what went wrong, and
where our crystal ball failed us. (Learning from setbacks greatly increases the
odds of success in the future.)
On the economic front, our predictions of 4-5% in Gross Domestic Product growth,
no Federal Reserve ("Fed") tightening until mid-year and a weaker dollar, in
hindsight, looked pretty good. With that said, at the beginning of the year, we
did not see oil spiking to over $50 a barrel. Even back in the low $40s where it
ended the year, oil remained a much more significant risk to the economy than
was anticipated. We also felt that the U.S. dollar would likely remain weak in
2004, but the magnitude of the decline was larger than expected. Given this
decline, and the impact of the strong Euro on European growth, currency
volatility will be one of the key stress points of the global system in 2005.
Regarding profits and the stock market, we were optimistic, but not nearly
enough so. Our forecast of low double-digit growth in earnings per share
compares with what will likely be an almost 20% growth rate, surpassing even
2003's impressive performance.
Finally, on interest rates, our call on the Fed was right, but our expectation
of the upward pressure that this would put on longer-term interest rates was, in
Wall Street parlance, "early" (Main Street for "wrong"). Despite clear language
by the Fed signaling its desire to see interest rates higher across the curve,
Bishop Street Funds 2
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[BISHOP STREET FUNDS LOGO OMITTED]
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investors chose to focus on both moderate growth and moderate inflation, and
10-year Treasury rates actually ended a fraction of a percent below where they
started the year.
So where does this review of our forecasts lead us? Back to Sir Winston's adage;
wiser but no less enthusiastic about the opportunity for future success.
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, 2004 3 www.bishopstreetfunds.com
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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INVESTMENT ADVISER'S REPORT
Among the top developments of 2004 was the precipitous rise in the price of oil,
driven by surging Asian (mainly Chinese) demand, supply disruptions, and secular
shrinkage in reserves. Although the price has moderated from its mid-$50s peak,
its "normalized" price looks to be significantly and persistently higher than
was ever envisioned at the beginning of the year. Rather unsurprisingly,
therefore, in the stock market, Energy was the best performing sector of 2004,
followed (rather surprisingly) by Utilities. What was true of oil was also true
of most basic materials in 2004, as industrial growth in China (and a rebounding
global economy) continued to stretch the world's reserves of steel, aluminum,
and copper.
For U.S. firms, this meant higher input costs at a time when global competition
limited the ability to pass through these increases. The year-long slide in the
dollar (a positive for international sales, but a negative for most domestic
companies) also raised producer costs. Profit margins, however, continued to be
robust-so much so that analysts actually under-estimated the earning power of
the S&P 500 Index in 2004 by the largest margin since 1988. For some context,
consider that positive surprises of this kind have happened only five times
since the mid-80's, twice in the last two years.
Continued productivity gains and low long-term interest rates neutralized the
effects on profit margins of higher commodity costs and a weaker dollar.
Earnings were higher than consensus estimates, boosting a market that, until the
fourth quarter, looked quite troubled. The market gained further momentum by an
end-of-year moderation in oil prices and, probably more importantly, the
resolution of the presidential election. Ultimately, American corporations ended
the year in good shape, with stronger corporate balance sheets. Higher corporate
liquidity and the rising stock market also prompted an increase in merger and
acquisition activities, share buybacks, and dividend payouts. Finally, IPO
activity was higher in 2004 than in 2003, though still a far cry from the go-go
1990s.
Bishop Street Funds 4
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[BISHOP STREET FUNDS LOGO OMITTED]
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Looking into 2005, the outlook for the stock market is still good, but
definitely not as good as last year. Earnings are likely to grow in line with
economic expansion. However, given current valuations, we are unlikely to see an
expansion in the price-earnings multiple investors are willing to pay for
stocks. This translates into a respectable single-digit return opportunity,
perhaps more modest than 2004, but still reflecting the performance of the
overall economy.
Interest rates in the major global economies remained surprisingly low in 2004.
This is especially puzzling in the U.S., given reasonably strong Gross Domestic
Product growth, steady productivity gains, a weak dollar, massive trade and
fiscal deficits, and burgeoning levels of consumer and government debt.
So why have bond yields remained so low? It appears that investors reassessed
how quickly the Federal Reserve (the "Fed") would need to tighten monetary
policy following the first Fed funds hike last June. As core inflation initially
moved higher last spring, it appeared that the Fed was "behind the curve" and
would need to raise its target rate sooner rather than later as a preventative
measure. However, the U.S. economy subsequently slowed, with core inflation
falling back to more tolerable levels. That reduced the need for aggressive Fed
action. In addition, both consumer prices and inflation expectations remained
constrained, despite the surprising increases in oil and commodity prices.
Low interest rates are also consistent with an abundance of global capital and
savings. Current account surpluses and savings rates in Asia and the Euro Zone
have been rising sharply and have been more than sufficient to finance existing
capital spending needs, as well as our rapidly growing U.S. current account
deficit. Thus, while there is a risk that U.S. Treasury yields could spike
sharply higher if foreign central banks ever tire of accumulating U.S. dollar
assets, we do not expect that to happen in the near term. We also think that the
market has recognized that the Fed has moved aggressively enough to stay ahead
of the inflation curve, rather than lagging behind, as was the case in past
cycles.
December 31, 2004 5 www.bishopstreetfunds.com
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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What might we expect in 2005? There is a lot to be concerned about. Financial
imbalances loom large as our twin deficits (trade and government spending)
expand to record levels. Geopolitical risks abound as we struggle to establish
peace in the Middle East and continue our fight against terrorism. And as we
witnessed over the holiday season, mother nature is certainly capable of dishing
out its share of despair.
We should expect the Fed to continue to raise interest rates at a measured pace,
slowly removing the stimulus that helped our economy recover from the recession
and shocks of 2001. With that said, abundant global savings and currency
intervention do not mean that bond yields cannot rise. The U.S. bond market will
eventually move with the business cycle, and longer-term yields are likely to
follow short-term yields higher even as the Fed continues to reduce the level of
monetary stimulus.
For the near term, the benchmark 10-year Treasury yield appears stuck in a
trading range between 4.00% and 4.75%. We expect that rates will remain in that
range as long as the Fed continues moving at a "measured pace" to return its
target rate back to neutral and there is no dramatic external shock to the
global financial system.
We expect corporate bonds to continue to do well even though yield spreads have
now tightened back to 1997 levels, as corporate balance sheets remain strong and
there is little evidence that credit quality is deteriorating. For bond
investors, the risk remains that activities such as share buybacks and merger
and acquisition activity will hurt bond holders since these activities favor
shareholders. Also, mortgages and callable-agencies (i.e., U.S. agency
securities that may be called by the issuer) should perform well as interest
volatility subsides. Finally, for taxable investors, the relative value of
municipal securities remains very high because of their superior after-tax
yield. All in all, it should be an interest--ing year indeed!
Bishop Street Funds 6
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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Equity Fund
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The Bishop Street Equity Fund's Institutional Class returned 3.72% for 2004.
These results reflect a bounce back in the equity market in the fourth quarter
after essentially flat performance through the first three quarters of the year.
Contributors to the market rally included continuing strong economic growth, an
easing in the price of oil after a period of very rapid appreciation, and an end
to the uncertainty of the election. Forecasts are for continued moderate-
to-strong economic growth, although some deceleration in profit growth appears
inevitable.
For the year, strong performance in the Energy sector positively impacted the
Bishop Street Equity Fund's (the "Fund") relative performance, although Energy
shares were slightly weak in the fourth quarter due to the fall in oil prices.
On the negative side, the Health Care and Information Technology sectors
adversely impacted performance. The pharmaceutical industry, which has been
mired in controversy, particularly contributed to lagging returns for the year.
Sector weightings had negligible impact on relative performance.
From a style standpoint, value stocks strongly outperformed growth stocks over
the past year, just as they have over the last several years. Once again, small-
capitalization stocks strongly outperformed large-capitalization stocks for the
year. Neither of these market trends has been helpful to the Fund's relative
performance.
December 31, 2004 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
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
12/97 12,031 11,339 12,553 10,137 11,927
12/98 16,007 15,087 16,141 10,300 13,711
12/99 19,908 18,739 19,537 10,575 17,363
12/00 16,683 15,649 17,759 10,931 17,644
12/01 12,411 10,612 15,647 11,101 15,970
12/02 9,300 8,689 12,189 11,367 12,698
12/03 11,776 10,975 15,687 11,581 16,732
12/04 12,214 11,345 17,393 11,958 18,718
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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3.72% -0.53% -9.31% 2.69% Institutional Class*
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3.37% -0.77% -9.55% -5.53% Class A**
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-2.61% -2.71% -10.62% -6.53% 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.
+ 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. General Electric 3.4%
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2. Exxon Mobil 3.3%
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3. Pfizer 3.3%
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4. Citigroup 3.0%
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5. American International Group 2.7%
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6. Johnson & Johnson 2.6%
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7. Microsoft 2.6%
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8. IAC/InterActiveCorp 2.6%
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9. Boston Scientific 2.4%
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10. Wal-Mart Stores 2.4%
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[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
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SECTOR WEIGHTINGS (UNAUDITED)+
16.6% Financials
14.8% Information Technology
14.1% Health Care
11.1% Industrials
10.1% Consumer Discretion
9.8% Energy
9.1% Consumer Staples
7.8% Short-Term Investments
4.6% Materials
2.0% Telecommunications
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+PERCENTAGES BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED WITH CASH
COLLATERAL RECEIVED FROM SECURITIES LENDING.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
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COMMON STOCK -- 98.5%
CONSUMER DISCRETION -- 10.8%
41,230 Carnival $ 2,376
56,990 Comcast, Cl A* 1,897
44,932 Home Depot 1,920
168,953 IAC/InterActiveCorp* (A) 4,666
21,707 Mohawk Industries* 1,981
35,253 Omnicom Group (A) 2,973
73,310 Viacom, Cl B 2,668
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18,481
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December 31, 2004 9 www.bishopstreetfunds.com
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
CONSUMER STAPLES -- 9.7%
47,813 CVS $ 2,155
73,540 PepsiCo 3,839
61,290 Procter & Gamble 3,376
75,300 Sysco 2,874
81,790 Wal-Mart Stores 4,320
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16,564
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ENERGY -- 10.5%
58,660 Devon Energy 2,283
118,750 Exxon Mobil 6,087
106,990 GlobalSantaFe (A) 3,543
54,290 Halliburton 2,130
58,668 Schlumberger Ltd. 3,928
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17,971
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FINANCIALS -- 17.7%
25,550 AMBAC Financial Group (A) 2,098
35,933 American Express 2,026
74,295 American International Group 4,879
112,173 Citigroup 5,404
32,400 Goldman Sachs Group 3,371
90,400 JPMorgan Chase 3,526
71,650 Morgan Stanley 3,978
43,504 St. Paul Travelers 1,613
56,280 Wells Fargo 3,498
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30,393
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HEALTH CARE -- 15.0%
42,050 Amgen* 2,698
123,707 Boston Scientific* 4,398
22,370 Eli Lilly 1,269
56,210 Forest Laboratories* (A) 2,522
17,661 Genzyme* 1,026
49,620 Gilead Sciences* 1,736
74,849 Johnson & Johnson 4,747
221,620 Pfizer 5,959
15,257 UnitedHealth Group 1,343
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25,698
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Bishop Street Funds 10
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
INDUSTRIALS -- 11.8%
19,482 3M $ 1,599
168,305 General Electric 6,143
75,922 Pentair 3,307
86,090 Tyco International Ltd. (A) 3,077
27,460 Union Pacific 1,846
30,420 United Parcel Service/Georgia, Cl B 2,600
16,690 United Technologies 1,725
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20,297
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INFORMATION TECHNOLOGY -- 15.8%
203,868 Applied Materials* (A) 3,486
101,020 Cisco Systems* 1,950
61,379 Dell* 2,587
188,990 Flextronics International Ltd.* 2,612
104,470 Intel 2,444
18,342 International Business Machines 1,808
23,732 Linear Technology 920
174,884 Microsoft 4,671
77,089 Paychex 2,627
23,120 Qualcomm 980
21,190 SAP ADR 937
81,808 Symantec* 2,107
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27,129
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MATERIALS -- 5.0%
100,756 Alcoa 3,166
32,540 Dow Chemical (A) 1,611
84,160 Praxair 3,715
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8,492
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TELECOMMUNICATIONS -- 2.2%
46,670 Verizon Communications 1,891
67,350 Vodafone Group ADR* (A) 1,844
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3,735
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TOTAL COMMON STOCK (Cost $150,059) 168,760
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December 31, 2004 11 www.bishopstreetfunds.com
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Amount Value
(000)/Shares (000)
------------ ------
CORPORATE OBLIGATIONS (B) -- 4.6%
FINANCIALS -- 4.6%
Bear Stearns
$ 1,594 2.463%, 01/05/05 $ 1,594
Bear Stearns MTN (C)
1,593 2.412%, 01/12/06 1,595
First Tennessee Bank MTN (C)
3,187 2.330%, 06/07/05 3,186
Lehman Brothers MTN (C)
1,593 2.403%, 05/16/05 1,593
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TOTAL CORPORATE OBLIGATIONS (Cost $7,968) 7,968
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COMMERCIAL PAPER (B)(C) -- 1.9%
Morgan Stanley
3,187 2.393%, 02/18/05 3,187
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TOTAL COMMERCIAL PAPER (Cost $3,187) 3,187
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CASH EQUIVALENTS -- 8.3%
7,110,423 Dreyfus Cash Management Fund 7,110
7,110,423 Fidelity Institutional Money Market Fund 7,110
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TOTAL CASH EQUIVALENTS (Cost $14,220) 14,220
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REPURCHASE AGREEMENT (B) -- 7.1%
Lehman Brothers 2.383%, dated 12/31/04,
to be repurchased on 01/03/05, repurchase price
$12,156,556, (collateralized by Asset-Backed and
CMO Securities, ranging in par value $1,000-
$94,780,051, 0.010%-7.000%, 05/25/05-07/10/37;
12,156 total market value $12,764,974) 12,156
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TOTAL REPURCHASE AGREEMENT (Cost $12,156) 12,156
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TOTAL INVESTMENTS (COST $187,590) -- 120.4% 206,291
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OTHER ASSETS AND LIABILITIES -- (20.4)%
Payable Upon Return of Securities Loaned (23,311)
Payable for Investment Securities Purchased (11,614)
Payable for Capital Shares Redeemed (114)
Investment Adviser Fees Payable (79)
Administrative Fees Payable (15)
Shareholder Servicing Fees Payable (13)
Other Assets and Liabilities, Net 151
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TOTAL OTHER ASSETS AND LIABILITIES (34,995)
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NET ASSETS -- 100% $171,296
========
Bishop Street Funds 12
Equity Fund
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STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $216,256
Accumulated Net Realized Loss on Investments (63,661)
Net Unrealized Appreciation on Investments 18,701
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NET ASSETS $171,296
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NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($169,685,003 / 17,359,079 SHARES) $ 9.78
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A
($1,611,379 / 165,819 SHARES) $ 9.72
========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($9.72 / 94.25%) $ 10.31
========
* NON-INCOME PRODUCING SECURITY
(A) THE SECURITY OR A PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2004
(SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2004 WAS $22,463,800.
(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, 2004 WAS $23,310,503.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2004. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
LTD. -- LIMITED
MTN -- MEDIUM TERM NOTE
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2004 13 www.bishopstreetfunds.com
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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Strategic Growth Fund
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The Strategic Growth Fund (the "Fund") returned 9.64% for the year as a strong
rally in the fourth quarter more than compensated for the weak market during the
first three quarters. In particular, strong stock selection in the Consumer
Discretion and Health Care sectors offset weakness in the Energy and Information
Technology sectors. Key macro drivers to the Fund's strong finish in 2004 were
the removal of uncertainties hanging over the market, including the end of a
rancorous election campaign and a weakening in energy prices. Because of the
positioning of the portfolio, these elements aided fourth quarter performance.
We continue to believe that the U.S. economy is on track for solid growth in
2005, and expect corporate earnings to reflect this more than currently
anticipated by investors. The weakness of European and Japanese trends and, to a
lesser extent, the very temporary impact of the tsunami catastrophe on Asia may,
however, moderate the benefits for the equity markets.
All in all, the outlook for the U.S. equity market is rather positive in the
first half of the year, which should work in favor of the Fund, given its
current positioning. Investors, however, remain relatively nervous, and we
expect continued volatility in the first half of 2005, as companies release
their 2004 results and refine their guidance for 2005. On the other hand, the
U.S. economy is on track for solid growth in 2005, and we expect corporate
earnings to reflect this more than currently expected by investors.
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 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 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 10,056 8,915
6/03 10,309 10,233 10,026 10,214 10,002
12/03 11,928 11,559 11,543 10,246 11,562
6/04 12,328 11,873 11,941 10,545 11,950
12/04 13,077 12,267 12,799 10,580 12,844
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
------------------------
9.64% 11.35% Institutional Class*
------------------------
* Commenced operations on 07/01/02.
+ Returns shown do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
December 31, 2004 15 www.bishopstreetfunds.com
Strategic Growth Fund
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TOP TEN EQUITY HOLDINGS+
- --------------------------------------------------------------------------------
Percentage of
Investments
---------------------------------------------------------------------
1. RenaissanceRe Holdings 2.1%
---------------------------------------------------------------------
2. Staples 2.1%
---------------------------------------------------------------------
3. International Game Technology 2.1%
---------------------------------------------------------------------
4. Apollo Group, Cl A 2.1%
---------------------------------------------------------------------
5. Bed Bath & Beyond 2.1%
---------------------------------------------------------------------
6. Cognos 2.1%
---------------------------------------------------------------------
7. JetBlue Airways 2.1%
---------------------------------------------------------------------
8. BJ Services 2.1%
---------------------------------------------------------------------
9. Lowe's 2.1%
---------------------------------------------------------------------
10. Nextel Communications, Cl A 2.1%
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[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
20.2% Consumer Discretion
19.9% Financials
19.5% Information Technology
16.1% Industrials
15.8% Health Care
4.0% Energy
2.1% Telecommunications
1.9% Materials
0.5% Short-Term Investments
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+PERCENTAGES BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
------ ------
COMMON STOCK -- 99.3%
CONSUMER DISCRETION -- 20.2%
41,500 Bed Bath & Beyond* $ 1,653
24,900 Best Buy 1,480
29,000 Coach* 1,636
27,000 Harley-Davidson 1,640
11,900 Harman International Industries 1,511
48,200 International Game Technology 1,657
28,600 Lowe's 1,647
44,700 PETsMART 1,588
49,400 Staples 1,665
31,800 Yum! Brands 1,500
-------
15,977
-------
Bishop Street Funds 16
Strategic Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
ENERGY -- 3.9%
35,400 BJ Services* $ 1,648
41,700 XTO Energy 1,475
-------
3,123
-------
FINANCIALS -- 19.9%
28,700 Allstate 1,484
34,900 Bank of America 1,640
18,100 Capital One Financial 1,524
31,600 Citigroup 1,523
17,500 Everest Re Group Ltd. 1,567
15,700 Goldman Sachs Group 1,634
25,700 MBIA 1,626
17,400 Moody's 1,511
27,900 Morgan Stanley 1,549
32,100 RenaissanceRe Holdings 1,672
-------
15,730
-------
HEALTH CARE -- 15.8%
22,500 Amgen* 1,443
40,600 Caremark Rx* 1,601
20,500 Express Scripts* 1,567
27,700 Genzyme* 1,609
46,300 Gilead Sciences* 1,620
99,000 IVAX* 1,566
17,900 UnitedHealth Group 1,576
13,000 WellPoint* 1,495
-------
12,477
-------
INDUSTRIALS -- 16.1%
20,500 Apollo Group, Cl A* 1,654
68,300 Cendant 1,597
15,000 FedEx 1,477
71,100 JetBlue Airways* 1,651
21,800 L-3 Communications Holdings 1,597
42,500 Norfolk Southern 1,538
45,400 Tyco International Ltd. 1,623
15,300 United Technologies 1,581
-------
12,718
-------
INFORMATION TECHNOLOGY -- 19.4%
56,500 Accenture Ltd., Cl A* 1,525
27,200 Affiliated Computer Services, Cl A* 1,637
24,700 Apple Computer* 1,591
38,700 Autodesk 1,469
90,100 Avaya* 1,550
37,500 Cognos* 1,652
34,400 Dell* 1,450
63,500 Intel 1,485
December 31, 2004 17 www.bishopstreetfunds.com
Strategic Growth Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
INFORMATION TECHNOLOGY -- (CONTINUED)
58,200 Jabil Circuit* $ 1,489
24,700 Microchip Technology 658
79,500 Western Digital* 862
-------
15,368
-------
MATERIALS -- 1.9%
30,000 United States Steel 1,537
-------
TELECOMMUNICATIONS -- 2.1%
54,700 Nextel Communications, Cl A* 1,641
-------
TOTAL COMMON STOCK (Cost $64,968) 78,571
-------
CASH EQUIVALENTS -- 0.4%
180,714 Dreyfus Cash Management Fund 181
180,714 Fidelity Institutional Money Market Fund 181
-------
TOTAL CASH EQUIVALENTS (Cost $362) 362
-------
TOTAL INVESTMENTS (COST $65,330) -- 99.7% 78,933
-------
OTHER ASSETS AND LIABILITIES -- 0.3%
Payable for Investment Securities Purchased (128)
Investment Adviser Fees Payable (45)
Administrative Fees Payable (6)
Shareholder Servicing Fees Payable (6)
Other Assets and Liabilities, Net 420
-------
TOTAL OTHER ASSETS AND LIABILITIES 235
-------
NET ASSETS -- 100.0% $79,168
=======
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $65,308
Accumulated Net Investment Loss (15)
Accumulated Net Realized Gain on Investments 272
Net Unrealized Appreciation on Investments 13,603
-------
NET ASSETS $79,168
=======
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($79,167,774 / 6,051,922 SHARES) $ 13.08
=======
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
LTD. -- LIMITED
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 18
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
The Bishop Street Tax Managed Equity Fund (the "Fund") returned 6.40% for 2004.
Overcoming the relative inertia of the prior three quarters in the final months
of the year, the Fund portfolio advanced strongly with the overall equity
market, propelled by a moderation in the price of oil and the resolution of the
presidential election. The fourth quarter was noteworthy in the number of
leading corporations that saw their market capitalizations shrink due to
regulatory scrutiny. Among these affected behemoths were Pfizer, Merck, and AIG
- -- all three Fund holdings, which negatively impacted both the overall quarterly
and annual performance of the Fund.
For the entire year of 2004, the Energy sector was the best performing group for
the Fund, and the full effect of that performance was heightened by the relative
sector overweight. Industrials also did well. On the other hand, lagging
performance came in the Financials (particularly AIG and brokerage stocks) and
Materials (specifically, aluminum) sectors. As in 2003, the Fund's tilt toward
large-capitalization, growth stocks was again not in favor in 2004. In a repeat,
albeit a muted one, the year saw small-capitalization stocks outperform large-
capitalization stocks, value trounce growth, and risk win out.
Looking forward, however, we expect that economic and profit growth will
moderate and that earnings growth will follow the rate of economic expansion in
2005. Our 2005 equity forecast calls for a valuation multiple close to current
levels. This, coupled with higher dividend payouts, will result in respectable
returns in high single-digits, more modest than in 2004 but keeping with
historical levels. In this type of moderate, steady growth environment,
high-quality large-capitalization stocks, like those in the Fund, do best.
December 31, 2004 19 www.bishopstreetfunds.com
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
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 9,976 9,905
6/03 10,713 11,138 10,133 10,946
12/03 12,171 12,825 10,164 12,452
6/04 12,478 13,266 10,461 12,701
12/04 12,949 14,220 10,495 13,417
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
------------------------
6.40% 12.90% 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. Citigroup 4.1%
---------------------------------------------------------------------
2. Exxon Mobil 3.8%
---------------------------------------------------------------------
3. General Electric 3.1%
---------------------------------------------------------------------
4. Amgen 2.8%
---------------------------------------------------------------------
5. Microsoft 2.6%
---------------------------------------------------------------------
6. Johnson & Johnson 2.4%
---------------------------------------------------------------------
7. Wells Fargo 2.1%
---------------------------------------------------------------------
8. Wal-Mart Stores 2.1%
---------------------------------------------------------------------
9. IAC/InterActiveCorp 2.1%
---------------------------------------------------------------------
10. JPMorgan Chase 2.0%
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
19.6% Financials
16.1% Information Technology
12.2% Industrials
12.1% Consumer Discretion
10.9% Health Care
9.9% Energy
8.9% Consumer Staples
4.4% Materials
4.1% Telecommunications
1.8% Short-Term Investments
- --------------------------------------------------------------------------------
+PERCENTAGES BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
------ ------
COMMON STOCK -- 98.0%
CONSUMER DISCRETION -- 12.1%
4,300 Carnival $ 248
8,600 Comcast, Cl A* 286
3,500 eBay* 407
8,930 Home Depot 382
26,710 IAC/InterActiveCorp* 738
4,700 Mohawk Industries* 429
6,660 Omnicom Group 561
8,600 Target 446
December 31, 2004 21 www.bishopstreetfunds.com
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
CONSUMER DISCRETION -- (CONTINUED)
14,750 Time Warner* $ 287
14,200 Viacom, Cl B 517
-------
4,301
-------
CONSUMER STAPLES -- 8.9%
11,380 Avon Products 440
11,170 CVS 504
10,180 PepsiCo 531
11,940 Procter & Gamble 658
7,200 Sysco 275
14,240 Wal-Mart Stores 752
-------
3,160
-------
ENERGY -- 9.9%
2,560 Anadarko Petroleum 166
6,820 ChevronTexaco 358
12,000 Devon Energy 467
26,100 Exxon Mobil 1,338
6,100 GlobalSantaFe 202
13,840 Halliburton 543
6,500 Schlumberger Ltd. 435
-------
3,509
-------
FINANCIALS -- 19.6%
10,500 Allstate 543
7,580 American Express 427
3,600 American International Group 236
30,210 Citigroup 1,456
3,000 Goldman Sachs Group 312
17,790 JPMorgan Chase 694
8,320 MBIA 527
5,760 Merrill Lynch 344
8,210 Morgan Stanley 456
9,382 St. Paul Travelers 348
10,970 Wachovia 577
6,500 Washington Mutual 275
12,230 Wells Fargo 760
-------
6,955
-------
HEALTH CARE -- 10.9%
15,400 Amgen* 988
13,800 Boston Scientific* 490
3,670 Genzyme* 213
5,000 Gilead Sciences* 175
13,360 Johnson & Johnson 847
Bishop Street Funds 22
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
HEALTH CARE -- (CONTINUED)
25,808 Pfizer $ 694
5,380 UnitedHealth Group 474
-------
3,881
-------
INDUSTRIALS -- 12.1%
5,690 3M 467
5,030 General Dynamics 526
30,000 General Electric 1,095
4,900 Illinois Tool Works 454
14,760 Pentair 643
9,850 Tyco International Ltd. 352
4,840 United Parcel Service/Georgia, Cl B 414
3,560 United Technologies 368
-------
4,319
-------
INFORMATION TECHNOLOGY -- 16.0%
23,500 Applied Materials* 402
25,480 Cisco Systems* 492
13,060 Dell* 550
25,200 Flextronics International Ltd.* 348
26,740 Intel 625
5,400 International Business Machines 532
5,070 Linear Technology 197
34,200 Microsoft 914
13,640 Paychex 465
10,520 Qualcomm 446
4,940 SAP ADR 218
20,000 Symantec* 515
-------
5,704
-------
MATERIALS -- 4.4%
15,960 Alcoa 502
9,100 Dow Chemical 451
8,100 EI Du Pont de Nemours 397
5,220 Praxair 230
-------
1,580
-------
TELECOMMUNICATIONS -- 4.1%
17,100 SBC Communications 440
13,030 Verizon Communications 528
18,000 Vodafone Group ADR* 493
-------
1,461
-------
TOTAL COMMON STOCK (Cost $28,041) 34,870
-------
December 31, 2004 23 www.bishopstreetfunds.com
Tax Managed Equity Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
------ ------
CASH EQUIVALENTS -- 1.8%
313,662 Dreyfus Cash Management Fund $ 314
313,662 Fidelity Institutional Money Market Fund 314
-------
TOTAL CASH EQUIVALENTS (Cost $628) 628
-------
TOTAL INVESTMENTS (COST $28,669) -- 99.8% 35,498
-------
OTHER ASSETS AND LIABILITIES -- 0.2%
Investment Adviser Fees Payable (15)
Administrative Fees Payable (3)
Shareholder Servicing Fees Payable (3)
Other Assets and Liabilities, Net 98
-------
TOTAL OTHER ASSETS AND LIABILITIES 77
-------
NET ASSETS -- 100.0% $35,575
=======
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $28,728
Accumulated Net Realized Gain on Investments 18
Net Unrealized Appreciation on Investments 6,829
-------
NET ASSETS $35,575
=======
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($35,574,830 / 2,888,380 SHARES) $ 12.32
=======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
LTD. -- LIMITED
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 24
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
High Grade Income Fund
- --------------------------------------------------------------------------------
The bond market performed well in 2004 in spite of the 125-basis-point increase
in the Federal funds rate for the year. Rising oil prices and solid economic
growth failed to result in the long-anticipated sell-off in fixed-income assets.
The 10-year and 30-year Treasuries ended the year below the closing levels of
2003 by 3 basis points and 25 basis points, respectively. Strong foreign central
bank demand for U.S. fixed-income assets kept interest rates low. Japan and
China were notable buyers of U.S. bonds, as they sought to stabilize currency
fluctuations.
The corporate bond sector, supported by improving company fundamentals,
outperformed treasury and agency debt for the year, following similar
performance in 2003. BBB rated credits outpaced AA rated credits by
approximately 235 basis points, posting a total return of 6.15%. Treasury
Inflation-Protected Securities ("TIPS") posted a solid 8.46% return as investors
sought protection from higher oil and commodity prices.
In the latter half of the year, our performance was helped by our overweight in
corporate bonds and modestly long duration. However, the High Grade Income Fund
Institutional Class's total return of 3.41% for the year 2004 was hindered by
its under-exposure to higher risk credits, such as BBB-rated bonds. With spreads
at their narrowest since 1998, the corporate bond sector may be poised for a
modest pull back in 2005. The Federal Reserve (the "Fed") will probably continue
to increase the Fed funds rate at a measured pace. The market expects moderately
higher interest rates in 2005, but there is a risk that the market could repeat
2004 and surprise to the downside in yields. The domestic economy and foreign
demand for U.S. bonds will be key components to bond performance in 2005.
December 31, 2004 25 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN
THE 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
12/97 10,795 10,282 10,962 10,137
12/98 11,776 11,217 12,000 10,300
12/99 11,265 10,651 11,742 10,575
12/00 12,419 11,700 13,133 10,931
12/01 13,309 12,522 14,250 11,101
12/02 14,845 13,923 15,821 11,367
12/03 15,336 14,360 16,561 11,581
12/04 15,859 14,814 17,258 11,958
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
- ----------------------------------------------------------
3.41% 6.02% 7.08% 6.00% Institutional Class*
- ----------------------------------------------------------
3.16% 5.76% 6.82% 6.12% Class A**
- ----------------------------------------------------------
-1.77% 4.05% 5.78% 5.20% Class A, with load***
- ----------------------------------------------------------
* Commenced operations on 01/30/97.
** Commenced operations on 06/14/99.
*** Reflects 4.75% sales charge.
+ Returns shown do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
Bishop Street Funds 26
High Grade Income Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS+
- --------------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
----------------------------------------------------------------------------
1. U.S. Treasury Bonds 7.250% 05/15/16 7.3%
----------------------------------------------------------------------------
2. U.S. Treasury Bonds 5.375% 02/15/31 4.2%
----------------------------------------------------------------------------
3. FNMA 3.750% 09/15/08 3.6%
----------------------------------------------------------------------------
4. U.S. Treasury Bonds 6.250% 08/15/23 3.2%
----------------------------------------------------------------------------
5. FNMA 7.250% 01/15/10 3.0%
----------------------------------------------------------------------------
6. U.S. Treasury Bonds 7.500% 11/15/16 2.6%
----------------------------------------------------------------------------
7. U.S. Treasury Bonds 6.375% 08/15/27 2.0%
----------------------------------------------------------------------------
8. FHLMC MTN 4.850% 12/01/09 2.0%
----------------------------------------------------------------------------
9. Morgan Stanley 6.600% 04/01/12 2.0%
----------------------------------------------------------------------------
10. FNMA 2.540% 01/12/07 1.9%
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
31.2% U.S. Treasury Obligations
22.7% U.S. Government Obligations
22.7% Industrials
15.4% Financials
3.4% Utilities
3.3% Telecommunications
1.3% Short-Term Investments
- --------------------------------------------------------------------------------
+PERCENTAGES BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED WITH CASH
COLLATERAL RECEIVED FROM SECURITIES LENDING.
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------ -------
CORPORATE OBLIGATIONS -- 55.1%
AEROSPACE & DEFENSE -- 4.7%
Boeing
$ 2,800 7.875%, 02/15/05 $ 2,816
General Dynamics
2,850 4.500%, 08/15/10 2,912
United Technologies (A)
1,500 6.350%, 03/01/11 1,671
--------
7,399
--------
BANKS -- 1.7%
Bank of America
2,600 4.875%, 01/15/13 2,645
--------
December 31, 2004 27 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
BIOTECHNOLOGY -- 1.6%
Boston Scientific
$ 1,500 4.250%, 01/12/11 $ 1,489
Pharmacia
1,000 5.750%, 12/01/05 1,024
--------
2,513
--------
BROADCASTING & CABLE -- 1.2%
TCI Communications
1,550 7.875%, 08/01/13 1,858
--------
COMPUTER HARDWARE -- 1.0%
Dell
1,475 6.550%, 04/15/08 1,600
--------
DIVERSE FINANCIAL SERVICES -- 13.5%
American General Finance MTN, Ser G
1,550 5.750%, 03/15/07 1,618
Citigroup
2,600 6.750%, 12/01/05 2,685
Countrywide Home Loan MTN, Ser H
1,500 6.250%, 04/15/09 1,617
Ford Motor Credit
700 7.375%, 10/28/09 755
Ford Motor Credit MTN
1,400 7.750%, 02/15/07 1,488
General Electric Capital MTN, Ser A
2,600 5.450%, 01/15/13 2,744
General Motors Acceptance
1,400 6.750%, 01/15/06 1,436
525 4.500%, 07/15/06 525
Goldman Sachs Group
2,600 6.600%, 01/15/12 2,902
JPMorgan Chase
1,500 3.500%, 03/15/09 1,470
Morgan Stanley
2,800 6.600%, 04/01/12 3,123
Unitrin
850 4.875%, 11/01/10 844
--------
21,207
--------
FINANCIALS (B) -- 10.8%
Bear Stearns
3,406 2.463%, 01/05/05 3,406
Bishop Street Funds 28
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------- ------
FINANCIALS (B) -- (CONTINUED)
Bear Stearns MTN (C)
$ 3,407 2.412%, 01/12/06 $ 3,410
First Tennessee Bank MTN (C)
6,813 2.330%, 06/07/05 6,812
Lehman Brothers MTN (C)
3,407 2.403%, 05/16/05 3,407
--------
17,035
--------
FOOD & BEVERAGE -- 1.1%
ConAgra Foods
1,475 7.875%, 09/15/10 1,733
--------
FORESTRY -- 1.0%
Weyerhaeuser (A)
1,420 6.750%, 03/15/12 1,600
--------
GENERAL MERCHANDISE -- 3.1%
Sears Roebuck Acceptance
600 7.000%, 02/01/11 640
Target
1,300 6.350%, 01/15/11 1,449
Wal-Mart Stores
2,625 8.000%, 09/15/06 2,822
--------
4,911
--------
HEALTH CARE -- 0.9%
UnitedHealth Group
1,400 5.200%, 01/17/07 1,450
--------
HOUSEHOLD PRODUCTS -- 0.5%
Rubbermaid
650 6.600%, 11/15/06 687
--------
MACHINERY - INDUSTRIAL -- 1.0%
Masco
1,500 5.875%, 07/15/12 1,608
--------
OIL & GAS - EQUIPMENT/SERVICES -- 1.4%
Baker Hughes
1,300 6.000%, 02/15/09 1,398
Kinder Morgan
750 6.800%, 03/01/08 810
--------
2,208
--------
December 31, 2004 29 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
OIL & GAS - EXPLORATION/PRODUCTION -- 2.0%
Anadarko Petroleum
$ 1,250 7.200%, 03/15/29 $ 1,466
Ocean Energy
1,450 7.250%, 10/01/11 1,652
--------
3,118
--------
PHARMACEUTICALS -- 1.8%
Abbott Laboratories
2,700 6.400%, 12/01/06 2,851
--------
RETAIL - FOOD -- 0.7%
McDonald's MTN, Ser E
1,000 5.950%, 01/15/08 1,060
--------
SEMI-CONDUCTORS -- 1.9%
Constellation Energy Group (A)
1,400 7.000%, 04/01/12 1,596
Duke Energy (A)
1,425 4.200%, 10/01/08 1,436
--------
3,032
--------
TELECOMMUNICATIONS -- 3.2%
AT&T Wireless Services
1,550 7.350%, 03/01/06 1,621
GTE South, Ser C
750 6.000%, 02/15/08 791
Verizon Virginia, Ser A
1,400 4.625%, 03/15/13 1,365
Vodafone Group PLC
1,300 3.950%, 01/30/08 1,309
--------
5,086
--------
TRANSPORTATION SERVICES -- 1.0%
FedEx
1,340 7.250%, 02/15/11 1,530
--------
UTILITIES -- 1.0%
Dominion Resources
1,500 4.125%, 02/15/08 1,510
--------
TOTAL CORPORATE OBLIGATIONS (Cost $85,683) 86,641
--------
Bishop Street Funds 30
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
U.S. TREASURY OBLIGATIONS -- 30.8%
U.S. Treasury Bonds
$ 3,250 7.500%, 11/15/16 (A) $ 4,153
9,000 7.250%, 05/15/16 (A) 11,265
3,300 6.375%, 08/15/27 (A) 3,963
4,240 6.250%, 08/15/23 (A) 4,964
1,000 6.250%, 05/15/30 (A) 1,196
1,150 6.000%, 02/15/26 (A) 1,317
6,050 5.375%, 02/15/31 (A) 6,542
1,500 5.250%, 11/15/28 1,572
U.S. Treasury Bonds TIPS
1,613 3.375%, 04/15/32 2,135
1,013 2.000%, 07/15/14 1,045
U.S. Treasury Notes (A)
2,500 4.375%, 05/15/07 2,569
1,500 4.375%, 08/15/12 1,536
1,200 4.000%, 02/15/14 1,183
2,500 2.375%, 08/15/06 2,476
2,600 1.500%, 07/31/05 2,584
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $45,215) 48,500
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 22.4%
FHLB
1,500 5.375%, 02/15/07 1,562
2,000 3.750%, 08/15/08 2,005
2,800 3.375%, 02/15/08 (A) 2,786
FHLMC
2,800 5.125%, 10/15/08 (A) 2,946
1,500 4.375%, 07/30/09 1,506
1,436 3.500%, 06/01/09 1,415
FHLMC MTN
3,100 4.850%, 12/01/09 3,125
FNMA
4,000 7.250%, 01/15/10 (A) 4,597
1,400 5.500%, 07/18/12 1,417
1,000 3.875%, 11/17/08 996
5,600 3.750%, 09/15/08 5,573
2,925 3.678%, 02/17/09 (C) 2,952
1,450 3.500%, 08/01/10 1,412
3,000 2.540%, 01/12/07 2,958
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $35,030) 35,250
--------
December 31, 2004 31 www.bishopstreetfunds.com
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Amount Value
(000)/Shares (000)
------------ ------
COMMERCIAL PAPER (B)(C) -- 4.3%
Morgan Stanley
$ 6,813 2.393%, 02/18/05 $ 6,813
--------
TOTAL COMMERCIAL PAPER (Cost $6,813) 6,813
--------
CASH EQUIVALENTS -- 1.3%
1,007,638 Dreyfus Cash Management Fund 1,008
1,007,638 Fidelity Institutional Money Market Fund 1,008
--------
TOTAL CASH EQUIVALENTS (Cost $2,016) 2,016
--------
REPURCHASE AGREEMENT (B) -- 16.5%
Lehman Brothers 2.383%, dated 12/31/04,
to be repurchased on 01/03/05, repurchase price
$25,989,828, (collateralized by Asset-Backed and
CMO Securities, ranging in par value $1,000-
$94,780,051, 0.010%-7.000%, 05/25/05-07/10/37;
25,988 total market value $27,290,582) 25,988
--------
TOTAL REPURCHASE AGREEMENT (Cost $25,988) 25,988
--------
TOTAL INVESTMENTS (COST $200,745) -- 130.4% 205,208
--------
OTHER ASSETS AND LIABILITIES -- (30.4)%
Payable Upon Return of Securities Loaned (49,836)
Income Distribution Payable (260)
Investment Adviser Fees Payable (47)
Administrative Fees Payable (14)
Shareholder Servicing Fees Payable (12)
Payable for Capital Shares Redeemed (10)
Other Assets and Liabilities, Net 2,366
--------
TOTAL OTHER ASSETS AND LIABILITIES (47,813)
--------
NET ASSETS -- 100.0% $157,395
========
Bishop Street Funds 32
High Grade Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $152,748
Undistributed Net Investment Income 9
Accumulated Net Realized Gain on Investments 175
Net Unrealized Appreciation on Investments 4,463
--------
NET ASSETS $157,395
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($157,170,136 / 15,214,160 SHARES) $ 10.33
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A
($224,938 / 21,870 SHARES) $ 10.29
========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($10.29 / 95.25%) $ 10.80
========
(A) THE SECURITY OR A PORTION OF THIS SECURITY IS ON LOAN AT DECEMBER 31, 2004
(SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2004 WAS $48,744,282.
(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, 2004 WAS $49,836,151.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2004. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
PLC -- PUBLIC LIMITED COMPANY
SER -- SERIES
TIPS -- TREASURY INFLATION-PROTECTED SECURITY
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2004 33 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
Tax-exempt municipal bonds performed solidly in 2004 and ended the year with
performance in excess of most comparable taxable fixed-income indices. Short
maturity municipal bonds ended the year very rich with municipal yields hovering
close to 70% of U.S. Treasury yields. Value remained in the long end of the
municipal bond curve, offering investors tax-free yields close to 93-95% of U.S.
Treasury yields.
Hawaii's improving economy showed no signs of slowing down in 2004. Visitor
arrivals to the islands from the Mainland U.S. increased by 7.6%, arrivals from
Japan grew 10.3%, and visitor days grew by 6.8% in 2004. Statewide, total wage
and salary jobs are expected to grow by 2.2% in 2004 with the real personal
income forecast to show a 2.5% increase for the same period.
Relative to other fixed-income asset classes, municipal bonds should remain an
attractive asset heading into 2005. The credit outlook for municipalities across
the nation is expected to improve in the coming year. State and local
governments reported an $8.6 billion surplus for the 3rd quarter of 2004,
continuing a two year trend of improving fiscal management. Moreover, supply of
municipal bonds remained relatively light throughout most of 2004 and is
expected to be flat to lower over the next year.
For the year ended December 31, 2004, the Bishop Street Hawaii Municipal Bond
Fund's Institutional Class returned 3.36%, outperforming the Lipper Hawaii
Municipal Debt Objective by 0.27%. The Bishop Street Hawaii Municipal Bond
Fund's (the "Fund") relatively longer duration contributed to its outperformance
of the Hawaii benchmark. Looking forward, the Fund is positioned to benefit from
a further flattening of the yield curve as well as continued strengthening of
municipal credit quality.
Bishop Street Funds 34
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE HAWAII MUNICIPAL BOND FUND, 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 10,176 10,956
12/96 11,402 10,917 11,589 10,510 11,377
12/97 12,373 11,847 12,656 10,692 12,291
12/98 13,096 12,539 13,476 10,864 12,974
12/99 12,749 12,174 13,197 11,154 12,445
12/00 14,356 13,677 14,740 11,530 13,840
12/01 14,965 14,241 15,496 11,709 14,397
12/02 16,464 15,630 16,983 11,990 15,633
12/03 17,332 16,413 17,887 12,215 16,410
12/04 17,914 16,922 18,686 12,613 16,917
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*
- ----------------------------------------------------------
3.36% 6.18% 7.04% 6.09% Institutional Class*
- ----------------------------------------------------------
3.10% 5.91% 6.81% 5.78% Class A**
- ----------------------------------------------------------
-1.30% 4.40% 5.89% 4.96% Class A, with load***
- ----------------------------------------------------------
* Commenced operations on 02/16/95.
** Commenced operations on 06/14/99.
*** Reflects 4.25% sales charge.
+ Returns shown do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
December 31, 2004 35 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS+
- -------------------------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
---------------------------------------------------------------------------------------
1. Hawaii State Department of Budget & Finance RB 5.650% 10/01/27 2.2%
---------------------------------------------------------------------------------------
2. Honolulu City & County GO 5.000% 07/01/19 2.1%
---------------------------------------------------------------------------------------
3. Hawaii State GO 4.750% 04/01/18 2.1%
---------------------------------------------------------------------------------------
4. Hawaii State Airport System RB 5.750% 07/01/17 2.0%
---------------------------------------------------------------------------------------
5. Hawaii State Highway RB 5.250% 07/01/15 2.0%
---------------------------------------------------------------------------------------
6. Hawaii State Airport System RB 6.500% 07/01/14 1.6%
---------------------------------------------------------------------------------------
7. Schaumburg, Illinois GO 5.000% 12/01/38 1.6%
---------------------------------------------------------------------------------------
8. Honolulu City & County RB 5.250% 07/01/18 1.5%
---------------------------------------------------------------------------------------
9. Hawaii State GO 5.250% 04/01/12 1.5%
---------------------------------------------------------------------------------------
10. Puerto Rico RB 5.000% 12/01/16 1.5%
- -------------------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
41.1% General Revenue
11.2% Transportation
7.1% Medical
6.8% Airport
6.4% Power
6.1% Facilities
4.2% Utilities
3.6% School District
3.2% Higher Education
2.3% Single Family Housing
2.1% Development
2.1% Housing
1.5% Water
0.9% Education
0.7% Multifamily Housing
0.7% Short-Term Investments
- --------------------------------------------------------------------------------
+PERCENTAGES BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
------ ------
MUNICIPAL BONDS -- 97.9%
ARKANSAS -- 3.2%
Alma, School District No. 30, Construction Project,
Ser D, GO
$1,015 4.800%, 01/01/33 $ 1,001
Alma, School District No. 30, Refunding & Construction
Project, Ser C, GO
2,000 4.875%, 01/01/33 1,995
1,500 4.750%, 01/01/29 1,479
Bishop Street Funds 36
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
ARKANSAS -- (CONTINUED)
Bentonville, School District No. 006, Construction
Project, Ser C, GO
$ 505 4.375%, 06/01/16 $ 512
Lincoln, School District No. 48, Construction
Project, GO
430 4.875%, 02/01/34 426
Osceola, School District No. 001, Construction
Project, GO
395 4.800%, 11/01/34 387
--------
5,800
--------
CALIFORNIA -- 1.0%
Highland, Redevelopment Agency, Project Area No. 1
Tax Allocation, RB, AMBAC Insured
1,440 5.650%, 12/01/24 1,690
--------
FLORIDA -- 0.3%
Leesburg, Utilities, RB, FGIC Insured
500 5.000%, 10/01/34 515
--------
HAWAII -- 79.9%
Hawaii County, Ser A, GO, FGIC Insured
450 5.600%, 05/01/12 515
430 5.600%, 05/01/13 493
400 5.550%, 05/01/09 446
630 5.500%, 07/15/12 712
Hawaii County, Ser A, GO, FSA Insured
1,000 5.625%, 05/15/19 1,110
500 5.400%, 05/15/15 550
1,000 5.250%, 05/15/11 1,101
1,000 5.000%, 07/15/23 1,055
Hawaii County, Ser A ,GO, MBIA Insured
1,055 5.250%, 07/15/18 1,178
1,205 5.000%, 07/15/15 1,327
1,470 5.000%, 07/15/24 1,549
Hawaii State, Airport System, RB, AMT, FGIC Insured
3,235 5.750%, 07/01/17 3,603
200 5.250%, 07/01/21 209
Hawaii State, Airport System, Second Ser, RB, AMT, ETM
60 6.900%, 07/01/12 70
Hawaii State, Airport System, Second Ser, RB, AMT, ETM,
MBIA Insured
1,100 6.900%, 07/01/12 1,290
December 31, 2004 37 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII -- (CONTINUED)
Hawaii State, Airport System, Ser B, RB, AMT,
FGIC Insured
$1,500 6.625%, 07/01/18 $ 1,724
2,500 6.500%, 07/01/14 2,869
100 6.000%, 07/01/19 111
Hawaii State, Department of Budget & Finance,
Electric & Subsidiary Project, Ser B, RB
1,000 5.000%, 12/01/22 1,037
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser A, RB, AMT, AMBAC Insured
460 5.100%, 09/01/32 472
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser A, RB, AMT, MBIA Insured
785 6.200%, 05/01/26 823
3,660 5.650%, 10/01/27 3,961
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser B, RB, AMT, AMBAC Insured
1,000 5.750%, 12/01/18 1,100
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser C, RB, AMT, AMBAC Insured
1,000 6.200%, 11/01/29 1,130
Hawaii State, Department of Budget & Finance,
Kapiolani Health, RB
100 6.250%, 07/01/21 106
Hawaii State, Department of Budget & Finance, Queens
Health Systems, Ser A, RB, Pre-Refunded @ 102 (A)
1,450 5.875%, 07/01/06 1,555
2,505 5.750%, 07/01/06 2,683
Hawaii State, Department of Budget & Finance, Queens
Health Systems, Ser B, RB, MBIA Insured
750 5.250%, 07/01/11 817
1,445 5.250%, 07/01/12 1,575
1,275 5.250%, 07/01/13 1,390
1,000 5.250%, 07/01/14 1,089
Hawaii State, Department of Budget & Finance,
Special Purpose Mortgage, Hawaiian Electric Project,
Ser A, RB, AMT, MBIA Insured
1,090 6.600%, 01/01/25 1,115
Hawaii State, Department of Budget & Finance,
Special Purpose Mortgage, Kapiolani Health Care
System Project, RB
1,460 6.300%, 07/01/08 1,494
Hawaii State, Department of Budget & Finance,
Special Purpose Mortgage, St. Francis Medical Center
Project, RB, FSA Insured
930 6.500%, 07/01/22 933
Bishop Street Funds 38
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII -- (CONTINUED)
Hawaii State, Harbor Capital Improvement, RB, AMT,
MBIA Insured
$2,000 5.500%, 07/01/27 $ 2,072
545 5.400%, 07/01/09 587
Hawaii State, Harbor System, Ser A, RB, AMT,
FSA Insured
2,025 5.750%, 07/01/17 2,225
670 5.750%, 07/01/29 717
1,210 5.700%, 07/01/16 1,328
1,000 5.600%, 07/01/15 1,097
Hawaii State, Harbor System, Ser B, RB, AMT,
AMBAC Insured
200 5.500%, 07/01/19 218
Hawaii State, Harbor System, Ser B, RB, AMT,
FSA Insured
1,000 5.000%, 01/01/13 1,089
Hawaii State, Highway, RB
1,000 6.000%, 07/01/08 1,117
2,000 6.000%, 07/01/09 2,271
375 5.250%, 07/01/10 397
500 5.250%, 07/01/12 529
2,000 5.250%, 07/01/16 2,118
Hawaii State, Highway, RB, FGIC Insured
3,280 5.250%, 07/01/15 3,572
405 5.000%, 07/01/16 435
Hawaii State, Housing, Finance & Development,
Affordable Rental Housing Program, Ser A, RB, AMT,
FNMA Collateral
1,275 5.750%, 07/01/30 1,308
27 5.550%, 07/01/07 27
1,140 5.400%, 07/01/30 1,158
215 5.250%, 07/01/13 224
Hawaii State, Housing, Finance & Development,
Affordable Rental Housing Program, Ser A, RB,
Pre-Refunded @ 102 (A)
750 6.050%, 07/01/05 779
315 6.000%, 07/01/05 327
Hawaii State, Housing, Finance & Development,
Single-Family Mortgage Purchase, Ser A, RB, AMT,
FNMA Collateral
150 4.900%, 07/01/28 152
Hawaii State, Housing, Finance & Development,
Single-Family Mortgage Purchase, Ser B, RB,
FNMA Collateral
1,000 5.450%, 07/01/17 1,038
Hawaii State, Housing, Finance & Development,
University of Hawaii, Faculty Housing Project, RB,
AMBAC Insured
700 5.650%, 10/01/16 724
415 5.000%, 10/01/06 428
395 4.850%, 10/01/05 403
December 31, 2004 39 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII -- (CONTINUED)
Hawaii State, Kapolei Office Building, Ser A, COP,
AMBAC Insured
$1,475 5.250%, 05/01/13 $ 1,617
1,000 5.000%, 05/01/08 1,081
1,000 5.000%, 05/01/14 1,080
1,100 5.000%, 05/01/15 1,186
1,500 5.000%, 05/01/16 1,611
1,000 5.000%, 05/01/17 1,072
500 5.000%, 05/01/18 536
Hawaii State, No. 1 Capitol District State Office,
COP, MBIA Insured
1,000 5.200%, 05/01/14 1,074
175 5.000%, 05/01/11 191
Hawaii State, Ser CL, GO
1,000 6.000%, 03/01/09 1,126
Hawaii State, Ser CL, GO, MBIA Insured
555 6.000%, 03/01/08 616
Hawaii State, Ser CM, GO, FGIC Insured
2,000 6.500%, 12/01/13 2,445
500 6.000%, 12/01/09 574
1,500 6.000%, 12/01/11 1,752
Hawaii State, Ser CN, GO, FGIC Insured
500 5.500%, 03/01/14 539
500 5.250%, 03/01/12 536
540 5.250%, 03/01/17 578
Hawaii State, Ser CO, GO, FGIC Insured
200 6.000%, 09/01/05 205
Hawaii State, Ser CP, GO, FGIC Insured
300 5.000%, 10/01/16 321
Hawaii State, Ser CR, GO, MBIA Insured
270 5.250%, 04/01/11 293
2,500 5.250%, 04/01/12 2,713
3,600 4.750%, 04/01/18 3,714
Hawaii State, Ser CU, GO, MBIA Insured
500 5.750%, 10/01/11 567
550 5.750%, 10/01/12 622
Hawaii State, Ser CV, GO, FGIC Insured
1,000 5.250%, 08/01/21 1,075
Hawaii State, Ser CX, GO, FSA Insured
1,000 5.500%, 02/01/21 1,105
2,000 5.000%, 02/01/19 2,120
Hawaiian Home Lands Department, RB
1,250 4.000%, 07/01/05 1,261
Bishop Street Funds 40
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII -- (CONTINUED)
Honolulu City & County, Board of Water Supply, RB,
Pre-Refunded @ 101 (A)
$ 250 5.250%, 07/01/06 $ 264
Honolulu City & County, Board of Water Supply, Ser A,
RB, FGIC Insured
2,350 5.000%, 07/01/33 2,423
Honolulu City & County, GO
1,320 5.400%, 09/27/07 1,421
200 1.850%, 09/11/08 200
Honolulu City & County, GO, ETM
230 6.000%, 12/01/09 265
Honolulu City & County, Ser A, GO
55 6.000%, 01/01/10 63
Honolulu City & County, Ser A, GO, ETM
500 6.000%, 01/01/09 566
95 6.000%, 01/01/10 109
245 5.700%, 04/01/09 277
Honolulu City & County, Ser A, GO, ETM, MBIA Insured
135 6.000%, 11/01/10 157
Honolulu City & County, Ser A, GO, FSA Insured,
Pre-Refunded @ 100 (A)
400 5.125%, 09/01/11 449
Honolulu City & County, Ser A, GO, MBIA Insured
365 6.000%, 11/01/10 422
1,000 5.250%, 03/01/27 1,062
500 5.250%, 03/01/28 529
Honolulu City & County, Ser B, GO, ETM, FGIC Insured
635 5.500%, 10/01/11 727
Honolulu City & County, Ser B, GO, FGIC Insured,
Pre-Refunded @ 101 (A)
2,000 5.125%, 07/01/09 2,232
Honolulu City & County, Ser C, GO, FGIC Insured
125 5.500%, 11/01/07 136
1,200 5.125%, 07/01/11 1,317
1,100 5.125%, 07/01/15 1,199
650 5.000%, 07/01/09 712
3,500 5.000%, 07/01/19 3,734
Honolulu City & County, Ser D, GO, AMT, FGIC Insured
245 4.850%, 02/01/10 264
Honolulu City & County, Smith-Beretania, Ser 8A,
RB, MBIA/FHA Insured
1,000 5.450%, 01/01/25 1,001
December 31, 2004 41 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII -- (CONTINUED)
Honolulu City & County, Waipahu Towers Project,
Ser A, RB, AMT, GNMA Collateral
$ 200 6.900%, 06/20/35 $ 205
Honolulu City & County, Waste Water, 2nd Board
Resolution, Junior Ser, RB, FGIC Insured
1,000 5.250%, 07/01/12 1,100
900 5.250%, 07/01/13 987
1,000 5.250%, 07/01/17 1,093
2,500 5.250%, 07/01/18 2,736
1,000 5.000%, 07/01/23 1,046
Kauai County, Public Improvement, Ser B, GO,
MBIA Insured
175 5.200%, 08/01/15 188
165 5.150%, 08/01/14 177
155 5.100%, 08/01/13 166
120 5.050%, 08/01/12 128
140 5.000%, 08/01/11 149
135 4.950%, 08/01/10 144
100 4.850%, 08/01/09 107
120 4.750%, 08/01/08 128
Kauai County, Ser A, GO, FGIC Insured,
Pre-Refunded @ 100 (A)
1,135 6.250%, 08/01/10 1,331
1,480 6.250%, 08/01/10 1,736
1,335 6.250%, 08/01/10 1,566
1,050 6.250%, 08/01/10 1,232
Kauai County, Ser A, GO, MBIA Insured
750 5.625%, 08/01/18 842
Maui County, Ser A, GO
485 5.375%, 03/01/12 539
Maui County, Ser A, GO, FGIC Insured,
Pre-Refunded @ 101 (A)
100 5.125%, 03/01/08 108
615 5.100%, 03/01/09 649
200 5.000%, 03/01/08 216
795 5.000%, 03/01/09 837
Maui County, Ser A, GO, FGIC Insured,
Pre-Refunded @ 101 (A)
500 5.200%, 03/01/08 542
Maui County, Ser A, GO, MBIA Insured
1,840 5.000%, 03/01/20 1,944
Maui County, Ser A, GO, MBIA Insured,
Pre-Refunded @ 101 (A)
250 5.750%, 06/01/06 265
Maui County, Ser B, GO, MBIA Insured
500 5.000%, 09/01/17 544
Maui County, Ser C, GO, FGIC Insured
500 5.200%, 03/01/16 542
Maui County, Ser C, GO, FGIC Insured,
Pre-Refunded @ 101 (A)
790 5.150%, 03/01/08 855
Bishop Street Funds 42
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ------
HAWAII -- (CONTINUED)
Pacific Health Special Purpose, Ser A, RB
$ 580 5.600%, 07/01/33 $ 595
University of Hawaii, Ser A, RB, FGIC Insured
500 5.500%, 07/15/21 555
University of Hawaii, Ser B, RB, FSA Insured
320 5.250%, 10/01/16 350
775 5.250%, 10/01/17 844
--------
143,117
--------
ILLINOIS -- 2.0%
Illinois State, Educational Facilities Authority,
Northwestern University, RB
670 5.000%, 12/01/38 681
Schaumburg, Ser B, GO, FGIC Insured
2,750 5.000%, 12/01/38 2,808
--------
3,489
--------
INDIANA -- 0.8%
Elkhart, Community School Building, First Meeting, RB
1,500 4.500%, 07/15/24 1,491
--------
KENTUCKY -- 0.6%
Kenton County, Airport, RB, AMT, MBIA Insured
1,000 5.000%, 03/01/10 1,074
--------
NEW JERSEY -- 1.2%
New Jersey State, Economic Development Authority,
Motor Vehicle, Ser A, RB, MBIA Insured
2,000 5.000%, 07/01/34 2,060
--------
NEW YORK -- 0.6%
New York State, Tobacco Settlement Financing,
Ser B-1, RB
1,100 4.000%, 06/01/12 1,119
--------
OREGON -- 0.6%
Portland, Airport & Marina Improvements, Ser 12C,
RB, AMT, FGIC Insured
1,000 4.750%, 07/01/10 1,058
--------
PUERTO RICO -- 7.4%
Puerto Rico Commonwealth, GO, MBIA Insured
1,500 6.500%, 07/01/10 1,765
500 6.500%, 07/01/14 619
Puerto Rico Commonwealth, Public Improvement, GO,
FSA Insured
435 5.000%, 07/01/21 464
December 31, 2004 43 www.bishopstreetfunds.com
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Face Amount Value
(000)/Shares (000)
------------ ------
PUERTO RICO -- (CONTINUED)
Puerto Rico Commonwealth, Public Improvement,
Ser A, GO
$ 865 5.000%, 07/01/10 $ 937
870 5.000%, 07/01/11 949
1,000 5.000%, 07/01/27 1,024
Puerto Rico Commonwealth, Ser A, GO
1,000 5.000%, 07/01/30 1,074
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%, 07/01/29 529
Puerto Rico, Housing, Banking & Finance Agency,
Single-Family Mortgage, Affordable Housing Mortgage,
Portfolio I, RB, AMT, GNMA/FNMA/FHLMC Collateral
180 6.100%, 10/01/15 184
Puerto Rico, Housing Financial Authority, Capital
Funding Program, RB
2,500 5.000%, 12/01/16 2,709
Puerto Rico, Industrial Tourist Educational Medical
Environmental Control Facilities, Hospital Auxilio
Mutuo Obligation Group, Ser A, RB, MBIA Insured
300 6.250%, 07/01/24 307
University of Puerto Rico, Ser O, RB, MBIA Insured
1,500 5.750%, 06/01/19 1,696
--------
13,285
--------
TEXAS -- 0.3%
Channelview, Independent School District, Ser B, GO
550 5.250%, 08/15/19 608
--------
TOTAL MUNICIPAL BONDS (Cost $165,742) 175,306
--------
CASH EQUIVALENTS -- 0.7%
597,688 Dreyfus Tax-Exempt Cash Management Fund 598
597,688 Fidelity Institutional Money Market Tax-Exempt Fund 598
--------
TOTAL CASH EQUIVALENTS (Cost $1,196) 1,196
--------
TOTAL INVESTMENTS (COST $166,938) -- 98.6% 176,502
--------
Bishop Street Funds 44
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
OTHER ASSETS AND LIABILITIES -- 1.4%
Income Distribution Payable $ (485)
Payable for Capital Shares Redeemed (160)
Investment Adviser Fees Payable (26)
Shareholder Servicing Fees Payable (15)
Administrative Fees Payable (10)
Distribution Fees Payable (6)
Other Assets and Liabilities, Net 3,259
--------
TOTAL OTHER ASSETS AND LIABILITIES 2,557
--------
NET ASSETS -- 100.0% $179,059
========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $169,425
Undistributed Net Investment Income 45
Accumulated Net Realized Gain on Investments 25
Net Unrealized Appreciation on Investments 9,564
--------
NET ASSETS $179,059
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($148,574,937 / 13,482,481 SHARES) $ 11.02
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A
($30,483,858 / 2,765,707 SHARES) $ 11.02
========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($11.02 / 95.75%) $ 11.51
========
(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
FHA -- FEDERAL HOUSING ADMINISTRATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA -- FINANCIAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
RB -- REVENUE BOND
SER -- SERIES
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2004 45 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Money Market & Treasury Money Market Funds
- --------------------------------------------------------------------------------
The U.S. economy continued to grow at a healthy rate during 2004, even though
the pace of growth began to moderate from a peak of nearly 5% in early 2004.
Consumer spending remained robust and capital spending improved as well. Output
grew at a moderate pace, despite the rise in energy prices that occurred earlier
in the year, and manufacturing activity accelerated, as the falling dollar
continued to help exporters while domestic demand strengthened. The employment
situation continued to show modest signs of improvement; total employment gains
for the year were nearly enough to offset jobs lost from 2001 to 2003. A
stronger labor market should help to sustain consumer spending, now that the
effects of tax cuts and lower mortgage interest payments have faded.
In light of the strong economic data, Federal Reserve ("Fed") policy makers
began a tightening campaign in June, bringing Fed funds to 2.25% by year-end.
Policy makers reiterated their plan to continue raising rates at a "measured"
pace, suggesting the Federal Open Market Committee ("FOMC") is confident that
low rates, combined with increased productivity, will continue to fuel growth.
Short-term bonds priced in further rate increases after it became evident that
rates would continue to rise in 2005. The money market curve shifted higher
during the year, forecasting 3% Fed funds by mid-2005. While yields on shorter
maturity bonds moved higher along with the Fed funds rate, longer-term interest
rates remained stable causing the yield curve to flatten. Inflation remained low
by historical standards, but did begin to edge up during the year.
Despite rising short-term yields, money market assets were at $1.9 trillion at
the end of 2004, down about 5% for the year, as investors sought higher yielding
alternatives and banks became much more competitive in offering higher deposit
rates.
Bishop Street Funds 46
- --------------------------------------------------------------------------------
[BISHOP STREET FUNDS LOGO OMITTED]
- --------------------------------------------------------------------------------
The Money Market and Treasury Money Market Funds (the "Funds") started the year
with longer maturity stances that enabled us to lock in higher yields. However,
we shortened the weighted average maturity of both of the Funds throughout the
remainder of 2004 in anticipation of higher interest rates and further FOMC
increases.
Despite this shortening, we continued to opportunistically purchase longer-term
instruments that priced in multiple Fed tightenings. Implementing this strategy
meant that the Funds were positioned to quickly take advantage of expected
further tightening in 2005. As a result, we were able to keep short-term returns
competitive late in the year while positioning the Funds well for the long-term.
As the economy continues to expand and the risk of rising prices increases in
2005, we believe the Fed will remain on a path of steady tightening. A weaker
dollar and higher oil prices will force the Fed to remain diligent in their
effort to ward off inflation. In this environment, we will keep a shorter
average maturity in order to take advantage of the Fed's tightening campaign
while looking for opportunities to invest in longer securities when future rate
increases price in excess steepness in the curve. We continue to utilize our
extensive credit research resources to emphasize high quality, liquid issues and
avoid buying lower credit quality or leveraged structures that offer higher
yields.
December 31, 2004 47 www.bishopstreetfunds.com
Money Market Fund
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
36.5% Commercial Paper
22.1% U.S. Government Obligations
15.1% Certificates of Deposit/Bank Notes
8.3% Insurance Funding Agreements
7.2% Corporate Obligations
6.8% Collateralized Mortgage Obligations
4.0% Repurchase Agreements
- --------------------------------------------------------------------------------
+PERCENTAGES BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
------ ------
COMMERCIAL PAPER (C) -- 36.5%
ASSET-BACKED (D) -- 15.4%
Apreco
$3,500 2.188%, 01/18/05 $ 3,496
Cafco
4,000 2.238%, 01/18/05 3,996
Clipper Receivables
3,000 2.383%, 03/03/05 2,988
Edison Asset Securitization
4,000 2.349%, 02/11/05 3,989
Eureka Securitization
3,800 2.208%, 01/18/05 3,796
Jupiter Securitization
2,379 2.347%, 01/28/05 2,375
Park Avenue Receivables
4,000 2.228%, 01/19/05 3,996
Yorktown Capital
4,000 2.021%, 01/18/05 3,996
--------
28,632
--------
BANKS -- 4.3%
Barclays Bank
3,000 2.264%, 02/22/05 2,991
Danske Bank
5,000 2.057%, 01/25/05 4,993
--------
7,984
--------
DIVERSE FINANCIAL SERVICES -- 14.6%
Ciesco
3,800 2.190%, 01/27/05 3,794
General Electric Capital
2,500 2.273%, 02/16/05 2,493
Bishop Street Funds 48
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
------ -----
DIVERSE FINANCIAL SERVICES -- (CONTINUED)
Goldman Sachs Group
$4,000 2.336%, 01/28/05 $ 3,993
JPMorgan Chase
3,000 2.200%, 01/26/05 2,995
Morgan Stanley
4,000 2.176%, 01/07/05 3,999
3,500 2.253%, 02/14/05 3,490
Nationwide Building
1,450 2.090%, 01/19/05 1,449
Shell Finance
5,000 2.363%, 03/03/05 4,980
--------
27,193
--------
SCHOOLS -- 2.2%
Yale University TECP
4,000 2.310%, 02/04/05 3,991
--------
TOTAL COMMERCIAL PAPER (Cost $67,800) 67,800
--------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 22.1%
FHLB
4,000 2.148%, 01/19/05 (C) 3,996
1,500 1.500%, 03/01/05 1,500
4,000 1.625%, 04/15/05 4,004
1,100 1.660%, 05/16/05 1,100
FHLMC (C)
5,250 1.980%, 01/11/05 5,247
3,500 2.287%, 02/01/05 3,493
FNMA
6,000 1.980%, 01/12/05 (C) 5,996
6,714 2.198%, 01/19/05 (C) 6,707
2,700 2.249%, 02/02/05 (C) 2,694
3,000 1.375%, 02/11/05 2,997
2,800 1.375%, 02/14/05 2,800
540 1.610%, 05/13/05 540
--------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $41,074) 41,074
--------
December 31, 2004 49 www.bishopstreetfunds.com
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
------ -----
CERTIFICATES OF DEPOSIT/BANK NOTES -- 15.1%
Bradford & Bingley (A)(D)
$4,000 2.025%, 01/07/05 $ 4,000
Credit Suisse First Boston
4,000 2.350%, 01/20/05 4,000
Svenska Handelsbank
5,000 2.130%, 01/13/05 5,000
Wells Fargo Bank
6,000 2.010%, 01/19/05 6,000
Westdeutsche Landesbank
5,000 1.320%, 01/27/05 5,000
Wilmington Trust
4,000 2.070%, 01/05/05 4,000
--------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $28,000) 28,000
--------
INSURANCE FUNDING AGREEMENTS (A)(B)(D) -- 8.3%
Allstate
3,000 2.580%, 03/15/05 3,000
Metropolitan Life Insurance
5,000 2.240%, 01/03/05 5,000
Monumental Life Insurance
5,500 2.230%, 01/03/05 5,500
Travelers Insurance
2,000 2.480%, 02/28/05 2,000
--------
TOTAL INSURANCE FUNDING AGREEMENTS (Cost $15,500) 15,500
--------
CORPORATE OBLIGATIONS (A) -- 7.2%
BANKS -- 2.3%
Barclays Bank
1,500 2.348%, 01/24/05 1,500
Chase Manhattan Bank
2,750 2.340%, 01/11/05 2,750
--------
4,250
--------
DIVERSE FINANCIAL SERVICES -- 4.9%
General Electric Capital
2,300 2.460%, 01/10/05 2,300
General Electric Capital MTN
2,000 2.510%, 01/17/05 2,000
Bishop Street Funds 50
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
------ -----
DIVERSE FINANCIAL SERVICES -- (CONTINUED)
Principal Life Global Funding MTN (D)
$4,800 2.630%, 03/18/05 $ 4,801
--------
9,101
--------
TOTAL CORPORATE OBLIGATIONS (Cost $13,351) 13,351
--------
COLLATERALIZED MORTGAGE OBLIGATION (A) -- 6.8%
Aire Valley Mortgages, Ser 2004-1A, Cl 1A (D)
1,800 2.140%, 01/20/05 1,800
GE Commercial Equipment Financing, Ser 2004-1, Cl A1
1,638 2.373%, 01/20/05 1,638
GE Commerical Equipment Financing, Ser 2004-A,
Cl A1 (D)
1,500 2.590%, 01/22/05 1,500
Holmes Financing, Ser 8, Cl 1A
2,500 2.353%, 01/18/05 2,500
Permanent Financing, Ser 4, Cl 1A
3,500 2.320%, 01/10/05 3,500
Permanent Financing, Ser 5, Cl 1A
1,650 2.350%, 01/10/05 1,650
--------
TOTAL COLLATERALIZED MORTGAGE OBLIGATION (Cost $12,588) 12,588
--------
REPURCHASE AGREEMENT -- 4.0%
Deutsche Bank 2.170%, dated 12/31/04,
to be repurchased on 01/03/05, repurchase price
$7,401,338 (collateralized by GNMA,
par value $83,673,688, 8.500%, 04/20/26; total market
7,400 value $7,548,000) 7,400
--------
TOTAL REPURCHASE AGREEMENT (Cost $7,400) 7,400
--------
TOTAL INVESTMENTS (COST $185,713) -- 100.0% 185,713
--------
OTHER ASSETS AND LIABILITIES -- 0.0%
Income Distribution Payable (232)
Investment Adviser Fees Payable (34)
Administrative Fees Payable (18)
Shareholder Servicing Fees Payable (16)
Distribution Fees Payable (4)
Other Assets and Liabilities, Net 325
--------
TOTAL OTHER ASSETS AND LIABILITIES 21
--------
NET ASSETS -- 100.0% $185,734
========
December 31, 2004 51 www.bishopstreetfunds.com
Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $185,758
Accumulated Net Realized Loss on Investments (24)
--------
NET ASSETS $185,734
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($167,910,230 / 167,934,800 SHARES) $ 1.00
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A
($17,823,780 / 17,823,833 SHARES) $ 1.00
========
(A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2004. 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) 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." ON DECEMBER 31, 2004, THE VALUE OF THESE SECURITIES
TOTALED APPROXIMATELY $56,233,000 OR 30.3% OF THE FUND'S TOTAL NET ASSETS.
CL -- CLASS
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SER -- SERIES
TECP -- TAX-EXEMPT COMMERCIAL PAPER
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 52
Treasury Money Market Fund
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
27.8% U.S. Treasury Obligations
72.2% Repurchase Agreements
- --------------------------------------------------------------------------------
+PERCENTAGES BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
------ ------
U.S. TREASURY OBLIGATIONS -- 34.5%
U.S. Treasury Bills (A)
$50,000 2.042%, 01/18/05 $ 49,957
20,000 2.291%, 05/12/05 19,835
U.S. Treasury Notes
2,000 1.625%, 04/30/05 2,003
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $71,795) 71,795
--------
REPURCHASE AGREEMENTS -- 89.7%
ABN - Amro 1.500%, dated 12/31/04, to be
repurchased on 01/03/05, repurchase price $45,005,625
(collateralized by U.S. Treasury Bonds,
par value $39,437,000, 6.000%, 02/15/26; total market
45,000 value $45,968,850) 45,000
Deutsche Bank 1.650%, dated 12/31/04, to be
repurchased on 01/03/05, repurchase price $31,704,359
(collateralized by U.S. Treasury Bills,
par value $32,653,000, 2.430%, 05/26/05; total market
31,700 value $32,334,307) 31,700
Goldman Sachs Group 1.500%, dated 12/31/04, to be
repurchased on 01/03/05, repurchase price $50,006,250
(collateralized by U.S. Treasury Bonds,
par value $42,725,000, 6.250%, 08/15/23; total market
50,000 value $51,003,000) 50,000
Lehman Brothers 1.600%, dated 12/31/04, to be
repurchased on 01/03/05, repurchase price $10,001,333
(collateralized by various U.S. Treasury Notes,
ranging in par value $10,000-$695,000, 1.250%-4.250%,
10,000 02/28/05-11/15/14; total market value $10,199,262) 10,000
UBS Securities 1.600%, dated 12/31/04, to be
repurchased on 01/03/05, repurchase price $50,006,667
(collateralized by U.S. Treasury Notes,
par value $49,790,000, 6.750%, 05/15/05; total market
50,000 value $51,002,751) 50,000
--------
TOTAL REPURCHASE AGREEMENTS (Cost $186,700) 186,700
--------
TOTAL INVESTMENTS (COST $258,495) -- 124.2% 258,495
--------
December 31, 2004 53 www.bishopstreetfunds.com
Treasury Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
-----
OTHER ASSETS AND LIABILITIES -- (24.2)%
Payable for Investment Securities Purchased $(49,958)
Income Distribution Payable (306)
Investment Adviser Fees Payable (21)
Service Plan Fees Payable (19)
Administrative Fees Payable (22)
Other Assets and Liabilities, Net (16)
--------
TOTAL OTHER ASSETS AND LIABILITIES (50,342)
--------
NET ASSETS -- 100.0% $208,153
========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $208,190
Undistributed Net Investment Income 10
Accumulated Net Realized Loss on Investments (47)
--------
NET ASSETS $208,153
========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($208,152,878 / 208,190,799 SHARES) $ 1.00
========
(A) REPRESENTS THE EFFECTIVE YIELD AT THE DATE OF PURCHASE.
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 54
This page intentionally left blank.
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN THOUSANDS)
Tax High
Strategic Managed Grade
Equity Growth Equity Income
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend Income $2,539 $ 378 $ 583 $ --
Interest Income 31 10 7 6,354
Securities Lending, Net 33 -- -- 47
Less: Foreign Taxes Withheld (5) -- -- --
- -----------------------------------------------------------------------------------------
Total Investment Income 2,598 388 590 6,401
- -----------------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 1,151 425 250 794
Shareholder Servicing Fees 389 144 84 360
Administrative Fees 311 115 68 289
Distribution Fees, Class A 4 -- -- 1
Transfer Agent Fees 67 26 29 64
Professional Fees 48 18 10 45
Custody Fees 15 5 3 14
Trustees' Fees 14 4 3 13
Printing Fees 12 3 3 11
Registration Fees 3 1 2 --
Miscellaneous Expenses 7 -- 1 14
- -----------------------------------------------------------------------------------------
Total Expenses 2,021 741 453 1,605
- -----------------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (94) -- (36) (166)
Shareholder Servicing Fees (233) (86) (51) (217)
Administrative Fees (135) (50) (29) (126)
- -----------------------------------------------------------------------------------------
Total Waivers (462) (136) (116) (509)
- -----------------------------------------------------------------------------------------
Total Net Expenses 1,559 605 337 1,096
- -----------------------------------------------------------------------------------------
Net Investment Income (Loss) 1,039 (217) 253 5,305
- -----------------------------------------------------------------------------------------
Net Realized Gain on Investments 2,061 1,549 1,216 837
Change in Unrealized Appreciation
(Depreciation) on Investments 2,789 5,453 706 (1,214)
- -----------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments 4,850 7,002 1,922 (377)
- -----------------------------------------------------------------------------------------
Increase in Net Assets
Resulting from Operations $5,889 $6,785 $2,175 $ 4,928
=========================================================================================
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 OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN THOUSANDS)
Hawaii Treasury
Municipal Money Money
Bond Market Market
Fund Fund Fund
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $8,068 $3,224 $3,227
- --------------------------------------------------------------------------------
Total Investment Income 8,068 3,224 3,227
- --------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 623 689 729
Shareholder Servicing Fees 445 574 608
Administrative Fees 356 460 486
Distribution Fees, Class A 76 45 --
Transfer Agent Fees 68 73 49
Professional Fees 55 63 70
Custody Fees 17 23 23
Trustees' Fees 16 21 21
Printing Fees 14 21 24
Registration Fees 3 -- 3
Miscellaneous Expenses 38 -- 28
- --------------------------------------------------------------------------------
Total Expenses 1,711 1,969 2,041
- --------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (159) (231) (395)
Shareholder Servicing Fees (267) (345) (365)
Administrative Fees (231) (200) (212)
- --------------------------------------------------------------------------------
Total Waivers (657) (776) (972)
- --------------------------------------------------------------------------------
Total Net Expenses 1,054 1,193 1,069
- --------------------------------------------------------------------------------
Net Investment Income 7,014 2,031 2,158
- --------------------------------------------------------------------------------
Net Realized Gain (Loss) on Investments 1,678 (2) (46)
Change in Unrealized Depreciation
on Investments (2,892) -- --
- --------------------------------------------------------------------------------
Net Realized and Unrealized Loss
on Investments (1,214) (2) (46)
- --------------------------------------------------------------------------------
Increase in Net Assets
Resulting from Operations $ 5,800 $2,029 $2,112
================================================================================
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, 2004 57 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
Equity Fund
- ----------------------------------------------------------------------------------------------
2004 2003
- ----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 1,039 $ 655
Net Realized Gain on Investments 2,061 1,685
Change in Unrealized Appreciation
on Investments 2,789 30,565
- ----------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 5,889 32,905
- ----------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (1,043) (650)
Class A Shares (6) (3)
- ----------------------------------------------------------------------------------------------
Total Dividends (1,049) (653)
- ----------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares Issued 38,484 11,293
Reinvestments of Cash Distributions 711 393
Cost of Shares Redeemed (30,690) (17,181)
- ----------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions 8,505 (5,495)
- ----------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 144 143
Reinvestments of Cash Distributions 3 2
Cost of Shares Redeemed (161) (521)
- ----------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions (14) (376)
- ----------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
From Capital Share Transactions 8,491 (5,871)
- ----------------------------------------------------------------------------------------------
Total Increase in Net Assets 13,331 26,381
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 157,965 131,584
- ----------------------------------------------------------------------------------------------
End of Year $171,296 $157,965
==============================================================================================
Undistributed Net Investment Income $ -- $ 9
==============================================================================================
SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued 4,055 1,341
Shares Issued in Lieu of Cash Distributions 74 46
Shares Redeemed (3,249) (2,169)
- ----------------------------------------------------------------------------------------------
Total Institutional Class Share Transactions 880 (782)
- ----------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued 15 17
Shares Issued in Lieu of Cash Distributions -- 1
Shares Redeemed (17) (64)
- ----------------------------------------------------------------------------------------------
Total Class A Share Transactions (2) (46)
- ----------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding from Share Transactions 878 (828)
==============================================================================================
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)
Strategic Tax Managed
Growth Fund Equity Fund
- ------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income (Loss) $ (217) $ (167) $ 253 $ 205
Net Realized Gain on Investments 1,549 758 1,216 19
Change in Unrealized Appreciation
on Investments 5,453 8,983 706 6,553
- ------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 6,785 9,574 2,175 6,777
- ------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares -- -- (254) (204)
Capital Gains:
Institutional Class Shares -- -- (1,183) (46)
- ------------------------------------------------------------------------------------------------------
Total Dividends and Distributions -- -- (1,437) (250)
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares Issued 34,231 20,073 3,777 8,008
Reinvestments of Cash Distributions -- -- 80 6
Cost of Shares Redeemed (8,693) (2,701) (3,828) (4,368)
- ------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
From Capital Share Transactions 25,538 17,372 29 3,646
- ------------------------------------------------------------------------------------------------------
Total Increase in Net Assets 32,323 26,946 767 10,173
- ------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 46,845 19,899 34,808 24,635
- ------------------------------------------------------------------------------------------------------
End of Year $79,168 $46,845 $35,575 $34,808
======================================================================================================
Accumulated Net Investment Loss $ (15) $ (22) $ -- $ (14)
======================================================================================================
SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued 2,842 1,873 311 802
Shares Issued in Lieu of Cash Distributions -- -- 7 1
Shares Redeemed (715) (251) (316) (422)
- ------------------------------------------------------------------------------------------------------
Total Institutional Class Share Transactions 2,127 1,622 2 381
- ------------------------------------------------------------------------------------------------------
Net Increase in Shares Outstanding from
Share Transactions 2,127 1,622 2 381
======================================================================================================
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, 2004 59 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
- -------------------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 5,305 $ 5,273 $ 7,014 $ 7,321
Net Realized Gain on Investments 837 4,600 1,678 1,911
Change in Unrealized Appreciation (Depreciation)
on Investments (1,214) (5,397) (2,892) 64
- -------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 4,928 4,476 5,800 9,296
- -------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (5,288) (5,260) (5,870) (6,122)
Class A Shares (10) (13) (1,133) (1,218)
Capital Gains:
Institutional Class Shares (546) (2,572) (1,540) (1,555)
Class A Shares (1) (5) (317) (317)
- -------------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (5,845) (7,850) (8,860) (9,212)
- -------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class Shares:
Proceeds from Shares Issued 40,169 15,737 14,569 18,535
Reinvestments of Cash Distributions 2,530 2,901 1,202 1,112
Cost of Shares Redeemed (19,460) (18,942) (15,048) (19,607)
- -------------------------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions 23,239 (304) 723 40
- -------------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 2 25 2,467 2,635
Reinvestments of Cash Distributions 7 15 680 726
Cost of Shares Redeemed (57) (182) (3,099) (5,880)
- -------------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions (48) (142) 48 (2,519)
- -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets From
Capital Share Transactions 23,191 (446) 771 (2,479)
- -------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 22,274 (3,820) (2,289) (2,395)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 135,121 138,941 181,348 183,743
- -------------------------------------------------------------------------------------------------------------------
End of Year $157,395 $135,121 $179,059 $181,348
===================================================================================================================
Undistributed Net Investment Income $ 9 $ 2 $ 45 $ 34
===================================================================================================================
SHARE TRANSACTIONS:
Institutional Class Shares:
Shares Issued 3,890 1,481 1,310 1,656
Shares Issued in Lieu of Cash Distributions 244 274 108 99
Shares Redeemed (1,881) (1,777) (1,356) (1,750)
- -------------------------------------------------------------------------------------------------------------------
Total Institutional Class Share Transactions 2,253 (22) 62 5
- -------------------------------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued -- 2 221 234
Shares Issued in Lieu of Cash Distributions 1 2 61 65
Shares Redeemed (6) (17) (280) (521)
- -------------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (5) (13) 2 (222)
- -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding
from Share Transactions 2,248 (35) 64 (217)
===================================================================================================================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
Bishop Street Funds 60
Bishop Street Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
Money Market Treasury Money Market
Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 2,031 $ 1,740 $ 2,158 $ 2,386
Net Realized Gain (Loss) on Investments (2) -- (46) 21
- ------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting From Operations 2,029 1,740 2,112 2,407
- ------------------------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Institutional Class Shares (1,908) (1,731) (2,173) (2,386)
Class A Shares (122) (9) -- --
- ------------------------------------------------------------------------------------------------------------------------
Total Dividends (2,030) (1,740) (2,173) (2,386)
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (ALL AT $1.00 PER SHARE):
Institutional Class Shares:
Proceeds from Shares Issued 443,764 408,493 501,131 678,219
Reinvestments of Cash Distributions 83 25 6 9
Cost of Shares Redeemed (458,078) (464,850) (563,288) (739,562)
- ------------------------------------------------------------------------------------------------------------------------
Total Institutional Class Capital Share Transactions (14,231) (56,332) (62,151) (61,334)
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 47,431 20,191 -- --
Reinvestments of Cash Distributions 99 9 -- --
Cost of Shares Redeemed (47,170) (2,948) -- --
- ------------------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 360 17,252 -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets
From Capital Share Transactions (13,871) (39,080) (62,151) (61,334)
- ------------------------------------------------------------------------------------------------------------------------
Total Decrease in Net Assets (13,872) (39,080) (62,212) (61,313)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 199,606 238,686 270,365 331,678
- ------------------------------------------------------------------------------------------------------------------------
End of Year $ 185,734 $ 199,606 $ 208,153 $ 270,365
========================================================================================================================
Undistributed Net Investment Income $ -- $ (1) $ 10 $ 16
========================================================================================================================
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, 2004 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 (LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS
--------- ------------- -------------- ---------- ---------- ------- ---------------
- -----------
EQUITY FUND
- -----------
INSTITUTIONAL CLASS SHARES:
2004(1) $ 9.49 $ 0.06 $ 0.29 $ 0.35 $(0.06) $ -- $(0.06)
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)
CLASS A SHARES:
2004(1) $ 9.44 $ 0.04 $ 0.28 $ 0.32 $(0.04) $ -- $(0.04)
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)
- ---------------------
STRATEGIC GROWTH FUND
- ---------------------
INSTITUTIONAL CLASS SHARES:
2004(1) $11.93 $(0.05) $ 1.20 $ 1.15 $ -- $ -- $ --
2003(1) 8.64 (0.06) 3.35 3.29 -- -- --
2002(2) 10.00 (0.03) (1.33) (1.36) -- -- --
- -----------------------
TAX MANAGED EQUITY FUND
- -----------------------
INSTITUTIONAL CLASS SHARES:
2004(1) $12.06 $ 0.09 $ 0.68 $ 0.77 $(0.09) $(0.42) $(0.51)
2003(1) 9.83 0.07 2.25 2.32 (0.07) (0.02) (0.09)
2002(3) 10.00 0.01 (0.17) (0.16) (0.01) -- (0.01)
- ----------------------
HIGH GRADE INCOME FUND
- ----------------------
INSTITUTIONAL CLASS SHARES:
2004(1) $10.40 $ 0.38 $(0.03) $ 0.35 $(0.38) $(0.04) $(0.42)
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)
CLASS A SHARES:
2004(1) $10.36 $ 0.35 $(0.03) $ 0.32 $(0.35) $(0.04) $(0.39)
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)
+ 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
(1) PER SHARE NET INVESTMENT INCOME AMOUNT CALCULATED USING AVERAGE SHARES.
(2) COMMENCED OPERATIONS ON JULY 1, 2002.
(3) COMMENCED OPERATIONS ON NOVEMBER 13, 2002.
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
--------- ------- ----------- ----------- ----------------- ------------- ---------
- -----------
EQUITY FUND
- -----------
INSTITUTIONAL CLASS SHARES:
2004(1) $ 9.78 3.72% $169,685 1.00% 1.30% 0.67% 42%
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
CLASS A SHARES:
2004(1) $ 9.72 3.37% $ 1,611 1.25% 1.55% 0.42% 42%
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
- ---------------------
STRATEGIC GROWTH FUND
- ---------------------
INSTITUTIONAL CLASS SHARES:
2004(1) $13.08 9.64% $ 79,168 1.05% 1.29% (0.38)% 59%
2003(1) 11.93 38.08 46,845 1.17 1.41 (0.57) 59
2002(2) 8.64 (13.60) 19,899 1.25* 1.67* (0.61)* 50
- -----------------------
TAX MANAGED EQUITY FUND
- -----------------------
INSTITUTIONAL CLASS SHARES:
2004(1) $12.32 6.40% $ 35,575 1.00% 1.34% 0.74% 36%
2003(1) 12.06 23.66 34,808 1.00 1.43 0.68 34
2002(3) 9.83 (1.57) 24,635 1.00* 1.50* 0.99* 1
- ----------------------
HIGH GRADE INCOME FUND
- ----------------------
INSTITUTIONAL CLASS SHARES:
2004(1) $10.33 3.41% $157,170 0.76% 1.11% 3.68% 45%
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
CLASS A SHARES:
2004(1) $10.29 3.16% $ 225 1.01% 1.36% 3.43% 45%
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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2004 63 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:
2004(2) $11.21 $ 0.44 $(0.07) $ 0.37 $(0.44) $(0.12) $(0.56)
2003(2) 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)
CLASS A SHARES:
2004(2) $11.21 $ 0.41 $(0.07) $ 0.34 $(0.41) $(0.12) $(0.53)
2003(2) 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)
- -----------------
MONEY MARKET FUND
- -----------------
INSTITUTIONAL CLASS SHARES:
2004(2) $ 1.00 $ 0.01 $ -- $ 0.01 $(0.01) $ -- $(0.01)
2003(2) 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)
CLASS A SHARES:
2004(2) $ 1.00 $ 0.01 $ -- $ 0.01 $(0.01) $ -- $(0.01)
2003(2) 1.00 0.01 -- 0.01 (0.01) -- (0.01)
2002 1.00 0.01 -- 0.01 (0.01) -- (0.01)
2001(1) 1.00 0.02 -- 0.02 (0.02) -- (0.02)
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
INSTITUTIONAL CLASS SHARES:
2004(2) $ 1.00 $ 0.01 $ -- $ 0.01 $(0.01) $ -- $(0.01)
2003(2) 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)
+ 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 MAY 1, 2001.
(2) 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 64
- --------------------------------------------------------------------------------
RATIO OF RATIO OF EXPENSES RATIO OF NET
NET ASSET NET ASSETS, EXPENSES TO TO AVERAGE INVESTMENT
VALUE, END OF AVERAGE NET ASSETS INCOME 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:
2004(2) $11.02 3.36% $148,575 0.55% 0.92% 3.97% 40%
2003(2) 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
CLASS A SHARES:
2004(2) $11.02 3.10% $ 30,484 0.80% 1.17% 3.72% 40%
2003(2) 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
- -----------------
MONEY MARKET FUND
- -----------------
INSTITUTIONAL CLASS SHARES:
2004(2) $ 1.00 0.92% $167,910 0.50% 0.84% 0.90% n/a
2003(2) 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
CLASS A SHARES:
2004(2) $ 1.00 0.67% $ 17,824 0.75% 1.09% 0.65% n/a
2003(2) 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(1) 1.00 1.96 500 0.75* 1.07* 2.66* n/a
- --------------------------
TREASURY MONEY MARKET FUND
- --------------------------
INSTITUTIONAL CLASS SHARES:
2004(2) $ 1.00 0.91% $208,153 0.44% 0.84% 0.89% n/a
2003(2) 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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2004 65 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Bishop Street Funds (the "Trust") are registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Bishop Street Funds consist of a series of seven funds (each a Fund,
collectively the "Funds") which includes the Equity Fund, Strategic Growth Fund,
Tax Managed Equity Fund, High Grade Income Fund, Hawaii Municipal Bond Fund,
Money Market Fund and the Treasury Money Market Fund. Class A Shares of the
Equity, High Grade Income and Hawaii Municipal Bond Funds are subject to a sales
load as disclosed in the prospectus. The assets of each Fund are segregated, and
a shareholder's interest is limited to the Fund in which shares are held. The
Funds' prospectus provides a description of each Fund's investment objectives,
policies and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
SECURITY VALUATION
The Funds' investments in equity securities listed on a securities exchange,
market or automated quotation system for which quotations are readily available
(except for securities traded on NASDAQ) are valued at the last quoted sale
price on the primary exchange or market (foreign or domestic) on which they are
traded, or, if there is no such reported sale, at the most recent quoted bid
price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will
be used. If available, debt securities are priced based upon valuations provided
by independent, third-party pricing agents. Such values generally reflect the
last reported sales price if the security is actively traded. The third-party
pricing agents may also value debt securities at an evaluated bid price by
employing methodologies that utilize actual market transactions, broker-supplied
valuations, or other methodologies designed to identify the market value for
such securities. Debt obligations with remaining maturities of sixty days or
less may be valued at their amortized cost, which approximates market value.
Prices for most securities held in the Funds are provided daily by recognized
independent pricing agents. If a security price cannot be obtained from an
independent, third-party pricing agent, the Funds seek to obtain a bid price
from at least one independent broker.
Bishop Street Funds 66
- --------------------------------------------------------------------------------
Securities for which market prices are not "readily available" are valued in
accordance with Fair Value Procedures established by the Funds' Board of
Trustees (the "Board"). The Funds' Fair Value Procedures are implemented through
a Fair Value Pricing Committee (the "Committee") designated by the Funds' Board.
Some of the more common reasons that may necessitate that a security be valued
using Fair Value Procedures include: the security's trading has been halted or
suspended; the security has been de-listed from a national exchange; the
security's primary trading market is temporarily closed at a time when under
normal conditions it would be open; or the security's primary pricing source is
not able or willing to provide a price. When a security is valued in accordance
with the Fair Value Procedures, the Committee will determine the value after
taking into consideration relevant information reasonably available to the
Committee.
Investment securities held by the Money Market and Treasury Money Market
Funds are stated at amortized cost, which approximates market value. Under this
valuation method, purchase discounts and premiums are accreted and amortized
ratably to maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on 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. The Equity, Strategic Growth, Tax
Managed Equity, High Grade Income and Hawaii Municipal Bond Funds use the
scientific interest method, which approximates the effective interest method.
The Money Market and Treasury Money Market Funds use the straight line method.
REPURCHASE AGREEMENTS
Securities pledged as collateral for repurchase agreements are held by the
custodian bank until the respective agreements are repurchased. 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.
December 31, 2004 67 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
CLASSES
Class-specific expenses are 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 Funds are prorated to the Funds on
the basis of relative net assets.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared daily and paid on a monthly
basis for the High Grade Income, Hawaii Municipal Bond, Money Market and
Treasury Money Market Funds. The Equity, Strategic Growth and Tax Managed Equity
Funds declare and pay dividends from any net investment income on a quarterly
basis. Any net realized capital gains will be distributed at least annually for
all Funds. Distributions to shareholders are recorded on the ex-dividend date.
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.
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. Such waivers are disclosed in the Statements of
Operations.
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
Bishop Street Funds 68
- --------------------------------------------------------------------------------
$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, as disclosed in the
Statements of Operations.
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.
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, the Parent Company of
Bishop Street Capital Management, for shareholder services performed for the
Funds. SIDCO has voluntarily agreed to waive a portion of its fee in order to
limit operating expenses, as disclosed in the Statements of Operations.
Certain ministerial officers of the Trust are also ministerial 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 Board. These loans may not exceed 331/3% of the
total asset value of the Fund (including the loan collateral).
December 31, 2004 69 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
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. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale and maturities
of securities, other than temporary cash investments for the period ended
December 31, 2004 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 $ -- $ -- $ -- $50,701 $ --
Other 72,160 58,925 11,848 41,159 69,340
Sales and Maturities
U.S.
Government
Securities $ -- $ -- $ -- $15,387 $ --
Other 64,703 33,989 13,573 44,426 72,639
7. 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.
Bishop Street Funds 70
- --------------------------------------------------------------------------------
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 Gain Capital
(000) (000) (000)
----------------- ----------- ---------
Equity Fund $ 1 $ -- $ (1)
Strategic Growth Fund 224 -- (224)
Tax Managed Equity Fund 15 (15) --
Treasury Money
Market Fund 9 (9) --
These reclassifications have no effect on net assets or net asset values per
share.
The tax character of dividends and distributions paid during the years ended
December 31, 2004 and December 31, 2003 were as follows:
Ordinary Tax Exempt Long-Term
Income Income Capital Gain Total
(000) (000) (000) (000)
-------- ---------- ------------ -------
Equity Fund
2004 $1,049 $ -- $ -- $1,049
2003 653 -- -- 653
Strategic Growth
Fund
2004 $ -- $ -- $ -- $ --
2003 -- -- -- --
Tax Managed Equity
Fund
2004 $ 311 $ -- $1,126 $1,437
2003 250 -- -- 250
High Grade Income
Fund
2004 $5,298 $ -- $ 547 $5,845
2003 5,273 -- 2,577 7,850
Hawaii Municipal
Bond Fund
2004 $ 71 $7,003 $1,786 $8,860
2003 14 7,326 1,872 9,212
Money Market Fund
2004 $2,030 $ -- $ -- $2,030
2003 1,740 -- -- 1,740
Treasury Money
Market Fund
2004 $2,173 $ -- $ -- $2,173
2003 2,386 -- -- 2,386
December 31, 2004 71 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
As of December 31, 2004, 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 $ -- $ -- $ 14 $ 654 $ -- $ -- $ 9
Undistributed
tax exempt
income -- -- -- -- 1 -- --
Undistributed
long-term
capital gain -- 368 49 108 25 -- --
Capital loss
carryforwards
expiring:
Dec. 2005 -- -- -- -- -- (2) --
Dec. 2008 -- -- -- -- -- (2) --
Dec. 2009 (36,271) -- -- -- -- (18) --
Dec. 2010 (25,686) -- -- -- -- -- --
Dec. 2011 (1,697) -- -- -- -- -- --
Dec. 2012 -- -- -- -- -- -- (27)
Post-October
Losses -- -- -- -- -- (2) (19)
Other Temporary
Differences -- (16) (15) (486) 44 -- --
Unrealized
appreciation 18,694 13,508 6,799 4,371 9,564 -- --
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, 2004 the Equity, Strategic Growth, and the Money Market Funds,
utilized capital loss carryforwards of $1,987,036, $1,048,930 and $442,
respectively, to offset realized capital gains.
Post-October losses represent losses realized on investment transactions from
November 1, 2003 through December 31, 2004 that, in accordance with Federal
income tax regulations the Funds have elected to defer and treat as having
arisen in the following fiscal year.
The aggregate gross unrealized appreciation and depreciation of securities
held by the Equity, Strategic Growth, Tax Managed Equity, High Grade Income, and
Hawaii Municipal Bond Funds for Federal income tax purposes at December 31, 2004
were as follows:
Bishop Street Funds 72
- --------------------------------------------------------------------------------
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 $187,597 $65,425 $28,699 $200,837 $166,938
-------- ------- ------- -------- --------
Gross
Unrealized
Appreciation 26,667 14,280 7,194 4,854 9,635
Gross
Unrealized
Depreciation (7,973) (772) (395) (483) (71)
-------- ------- ------- -------- --------
Net
Unrealized
Appreciation $ 18,694 $13,508 $ 6,799 $ 4,371 $ 9,564
======== ======= ======= ======== ========
8. 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.
9. OTHER
In the normal course of business, the Funds enter into contracts that provide
general indemnifications. The Funds' maximum exposure under these arrangements
is dependent on future claims that may be made against the Funds and, therefore,
cannot be established; however, based on experience, the risk of loss from such
claim is considered remote.
10. SUBSEQUENT EVENT
On or about April 29, 2005, the Class A Shares for the Equity Fund and High
Grade Income Fund will be reclassified as Institutional Class Shares of the
respective Funds. Those Class A Shares will then be liquidated. This
reclassification will result in reduced expenses for the former Class A
shareholders as the Institutional Class Shares are not subject to a 12b-1 fee.
Shareholders of the relevant Funds will continue to be invested in the same
Bishop Street Fund(s), whose management, fund objective and investment
strategies will not change as a result of the reclassification of Class A Shares
into Institutional Class Shares. The reclassification will not have any tax
implications for the affected Funds or their respective shareholders.
December 31, 2004 73 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004,
the results of each of their operations for the year then ended, the changes in
each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States 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 the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 17, 2005
Bishop Street Funds 74
Bishop Street Funds
- --------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
All mutual funds have operating expenses. As a shareholder of a mutual fund,
your investment is affected by these ongoing costs, which include (among others)
costs for portfolio management, administrative services, and shareholder reports
like this one. It is important for you to understand the impact of these costs
on your investment returns.
Operating expenses such as these are deducted from a mutual fund's gross income
and directly reduce your final investment return. These expenses are expressed
as a percentage of the mutual fund's average net assets; this percentage is
known as the mutual fund's expense ratio.
The following examples use the expense ratio and are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The table on the next page illustrates your Fund's costs in two ways:
o ACTUAL FUND RETURN. This section helps you to estimate the actual expenses
after fee waivers that your Fund incurred over the period. The "Expenses Paid
During Period" column shows the actual dollar expense cost incurred by a $1,000
investment in the Fund, and the "Ending Account Value" number is derived from
deducting that expense cost from the Fund's gross investment return.
You can use this information, together with the actual amount you invested in
the Fund, to estimate the expenses you paid over that period. Simply divide your
actual account value by $1,000 to arrive at a ratio (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply that ratio by the number
shown for your Fund under "Expenses Paid During Period".
o HYPOTHETICAL 5% FUND RETURN. This section helps you compare your Fund's costs
with those of other mutual funds. It assumes that the Fund had an annual 5%
return before expenses during the year, but that the expense ratio (Column 3)
for the period is unchanged. This example is useful in making comparisons
because the Securities and Exchange Commission requires all mutual funds to make
this 5% calculation. You can assess your Fund's comparative cost by comparing
the hypothetical result for your Fund in the "Expenses Paid During Period"
column with those that appear in the same charts in the shareholder reports for
other funds.
NOTE: Because the return is set at 5% for comparison purposes -- NOT your Fund's
actual return -- the account values shown may not apply to your specific
investment.
December 31, 2004 75 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
6/30/04 12/31/04 Ratios Period*
- -------------------------------------------------------------------------------------------
EQUITY FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,034.40 1.00% $5.11
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,020.11 1.00% 5.08
- -------------------------------------------------------------------------------------------
EQUITY FUND -- CLASS A
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,033.30 1.24% $6.34
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,018.90 1.24% 6.29
- -------------------------------------------------------------------------------------------
STRATEGIC GROWTH FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,060.80 1.08% $5.59
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,019.71 1.08% 5.48
- -------------------------------------------------------------------------------------------
TAX MANAGED EQUITY FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,037.80 1.00% $5.12
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,020.11 1.00% 5.08
- -------------------------------------------------------------------------------------------
HIGH GRADE INCOME FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,039.30 0.76% $3.90
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,021.32 0.76% 3.86
- -------------------------------------------------------------------------------------------
HIGH GRADE INCOME FUND -- CLASS A
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,039.10 1.01% $5.18
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,020.06 1.01% 5.13
- -------------------------------------------------------------------------------------------
HAWAII MUNICIPAL BOND FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,044.00 0.55% $2.83
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,022.37 0.55% 2.80
- -------------------------------------------------------------------------------------------
HAWAII MUNICIPAL BOND FUND -- CLASS A
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,042.70 0.80% $4.11
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,021.11 0.80% 4.06
- -------------------------------------------------------------------------------------------
MONEY MARKET FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,006.00 0.50% $2.52
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,022.62 0.50% 2.54
- -------------------------------------------------------------------------------------------
MONEY MARKET FUND -- CLASS A
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,004.70 0.75% $3.78
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,021.37 0.75% 3.81
- -------------------------------------------------------------------------------------------
TREASURY MONEY MARKET FUND -- INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,005.90 0.44% $2.22
HYPOTHETICAL 5% FUND RETURN 1,000.00 1,022.92 0.44% 2.24
- -------------------------------------------------------------------------------------------
<FN>
*Expenses are equal to the Fund's annualized expense ratio multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the one-half year
period).
</FN>
Bishop Street Funds 76
Bishop Street Funds
- --------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (UNAUDITED)
For shareholders that do not have a December 31, 2004 taxable year end, this
notice is for informational purposes only. For shareholders with a December 31,
2004 tax year end, please consult your tax advisor as to the pertinence of this
notice.
For the fiscal year ended December 31, 2004, each Fund has designated the
following items with regard to distributions paid during the year:
(A) (B) (C)
LONG TERM SHORT TERM ORDINARY
CAPITAL GAINS CAPITAL GAINS INCOME (D)
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS TAX EXEMPT
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) INTEREST
- ------ ------------- ------------- ------------- ----------
Equity 0% 0% 100% 0%
Strategic Growth 0% 0% 0% 0%
Tax Managed Equity 78% 4% 18% 0%
High Grade Income 9% 0% 91% 0%
Hawaii Municipal Bond 20% 1% 0% 79%
Money Market 0% 0% 100% 0%
Treasury Money Market 0% 1% 99% 0%
(F)
DIVIDENDS
(E) QUALIFYING FOR
(A+B+C+D) CORPORATE (G) (H)
TOTAL DIVIDENDS QUALIFYING U.S.
DISTRIBUTIONS RECEIVABLE DIVIDEND GOVERNMENT
FUND (TAX BASIS) DEDUCTION(1) INCOME(2) INTEREST (3)
- ------ ------------- ------------- ----------- ------------
Equity 100% 100% 100% 0%
Strategic Growth 0% 0% 0% 0%
Tax Managed Equity 100% 100% 100% 0%
High Grade Income 100% 0% 0% 7%
Hawaii Municipal Bond 100% 0% 0% 0%
Money Market 100% 0% 0% 5%
Treasury Money Market 100% 0% 0% 35%
(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"
(THE TOTAL OF SHORT TERM CAPITAL GAIN AND NET INVESTMENT INCOME
DISTRIBUTIONS). IT IS THE INTENTION OF THE FUND TO DESIGNATE THE MAXIMUM
AMOUNT PERMITTED BY THE LAW.
(3) "U.S. GOVERNMENT INTEREST" REPRESENTS THE AMOUNT OF INTEREST THAT WAS
DERIVED FROM DIRECT U.S. GOVERNMENT OBLIGATIONS AND DISTRIBUTED DURING THE
FISCAL YEAR. THIS AMOUNT IS REFLECTED AS A PERCENTAGE OF TOTAL ORDINARY
INCOME DISTRIBUTIONS (THE TOTAL OF SHORT TERM CAPITAL GAIN AND NET
INVESTMENT INCOME DISTRIBUTIONS). GENERALLY, INTEREST FROM DIRECT U.S.
GOVERNMENT OBLIGATIONS IS EXEMPT FROM STATE INCOME TAX. HOWEVER, FOR
RESIDENTS OF CALIFORNIA, CONNECTICUT AND NEW YORK, THE STATUTORY THRESHHOLD
REQUIREMENTS WERE NOT SATISFIED TO PERMIT EXEMPTION OF THESE AMOUNTS FROM
STATE INCOME.
* ITEMS (A), (B), (C) AND (D) ARE BASED ON THE PERCENTAGE OF EACH FUND'S
TOTAL DISTRIBUTION.
** ITEMS (F), (G) AND (H) ARE BASED ON A PERCENTAGE OF ORDINARY INCOME
DISTRIBUTIONS (THE TOTAL OF SHORT TERM CAPITAL GAIN AND NET INVESTMENT
INCOME) OF EACH FUND.
December 31, 2004 77 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
The following table lists the Trustees and Officers as of February 17, 2005.
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
81
[Photo Omitted]
MR. PETER F. SANSEVERO Trustee Since 1999
71
[Photo Omitted]
MR. MANUEL R. SYLVESTER Trustee Since 1994
74
[Photo Omitted]
DR. JOYCE S. TSUNODA Trustee Since 1994
66
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)
- --------------------------------------------- ------------- -------------
PARTNER -- Goodsill, Anderson, Quinn & Stifel 7 None
since 1951
REGIONAL DIRECTOR OF THE NORTHWESTERN REGION AND 7 None
FIRST VICE PRESIDENT -- Merrill Lynch
(1958-1997)
RETIRED SINCE 1992 7 None
EMERITUS CHANCELLOR FOR THE COMMUNITY COLLEGES -- 7 None
University of Hawaii since October 2003
DISTINGUISHED VISITING SCHOLAR -- East-West
Center since January 2004
VICE PRESIDENT FOR INTERNATIONAL EDUCATION --
University of Hawaii System (2003-2004)
CHANCELLOR FOR COMMUNITY COLLEGES --
University of Hawaii (1983-2003)
SENIOR VICE PRESIDENT -- University of Hawaii
(1989-2003)
December 31, 2004 79 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
73
President
[Photo Omitted] and
MR. ROBERT A. NESHER Chairman of Since 1998
58 the Board
of Trustees
[Photo Omitted]
MR. JOHN K. TSUI Trustee Since 2004
66
OFFICERS
Peter (Pedro) A. Rodriquez Treasurer Since February 2005
42 and Controller
Philip T. Masterson Vice President 1
40 and Secretary
Bishop Street Funds 80
(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 ADVISORS' INNER CIRCLE FUND II,
CURRENTLY PERFORMS VARIOUS SERVICES ON BEHALF OF 7 EXPEDITION FUNDS, SEI ASSET ALLOCATION
SEI INVESTMENTS FOR WHICH MR. NESHER IS COMPENSATED. TRUST, SEI DAILY INCOME TRUST, SEI
EXECUTIVE VICE PRESIDENT -- SEI Investments (1986-1994) INDEX FUNDS, SEI INSTITUTIONAL INVESTMENTS
DIRECTOR AND EXECUTIVE VICE PRESIDENT OF THE ADVISER, TRUST, SEI INSTITUTIONAL MANAGED TRUST,
THE ADMINISTRATOR AND THE DISTRIBUTOR (1981-1994) SEI INSTITUTIONAL INTERNATIONAL TRUST,
SEI LIQUID ASSET TRUST
AND SEI TAX EXEMPT TRUST.
PRESIDENT, CHIEF OPERATING OFFICER, DIRECTOR -- First 7 None
Hawaiian Bank (1994-2002) VICE CHAIRMAN,
CHIEF CREDIT OFFICER -- BancWest Corporation
(2000-2002) DIRECTOR -- Bank of the West (2000-2002)
Director, SEI Investments, Fund Accounting and N/A N/A
Administration (1997-present); Vice President,
Blackrock Financial Management, Fund
Administration (April 2002-September 2002).
Employed by SEI Investments since 2004. General N/A N/A
counsel, CITCO Mutual Fund Services (2003-
2004); Vice President and Associate Counsel,
Oppenheimer Funds (1998-2003).
December 31, 2004 81 www.bishopstreetfunds.com
Bishop Street Funds
- --------------------------------------------------------------------------------
TERM OF
POSITION(S) OFFICE AND
PERSONAL HELD WITH THE LENGTH OF
INFORMATION(1) COMPANY TIME SERVED(2)
- ------------------------------- ------------- ------------
James Ndiaye Vice President and Since February 2005
37 Assistant Secretary
Sofia A. Rosala Vice President and Since February 2005
31 Assistant Secretary
Timothy D. Barto Vice President and 4
36 Assistant Secretary
Michael T. Pang Vice President and Since February 2005
32 Assistant Secretary
Ryan S. Ushijima Chief 1
48 Compliance
Officer
Lori Foo Vice President and 3
47 Assistant Secretary
1 EACH TRUSTEE MAY BE CONTACTED BY WRITING TO THE TRUSTEE C/O BISHOP STREET
FUNDS, PO BOX 3708, HONOLULU, HI 96811. EACH OFFICER MAY BE CONTACTED BY
WRITING TO THE OFFICER C/O SEI INVESTMENTS, ONE FREEDOM VALLEY DRIVE, OAKS,
PA 19456.
2 EACH TRUSTEE SHALL HOLD OFFICE DURING THE LIFETIME OF THIS TRUST UNTIL THE
ELECTION AND QUALIFICATION OF HIS OR HER SUCCESSOR, OR UNTIL HE OR SHE SOONER
DIES, RESIGNS OR IS REMOVED IN ACCORDANCE WITH THE TRUST'S DECLARATION OF
TRUST.
3 THE "BISHOP STREET FUNDS COMPLEX" CONSISTS OF ALL REGISTERED INVESTMENT
COMPANIES FOR WHICH BISHOP STREET CAPITAL MANAGEMENT SERVES AS INVESTMENT
ADVISER. AS OF JUNE 30, 2004, THE BISHOP STREET FUNDS COMPLEX CONSISTED OF 7
FUNDS.
Bishop Street Funds 82
(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)
- --------------------------------------------- --------------- ---------------
Employed by SEI Investments since 2004. Vice N/A N/A
President, Deutsche Asset Management (2003-
2004); Associate, Morgan, Lewis & Bockius LLP
(2000-2003); Assistant Vice President, ING
Variable Annuities Group (1999-2000).
Compliance Officer of SEI Investments N/A N/A
since September 2001. Account and Product
Consultant, SEI Private Trust Company
(1998-2001).
Vice President and Assistant Secretary of SEI N/A N/A
Investments Global Funds Services since 1999;
Associate, Dechert (1997-1999).
Employed by SEI Investments since January 2005. N/A N/A
Counsel, Caledonian Bank and Trust's Mutual Funds
Group in 2004; Counsel, Permal Asset Management
(2001-2004); Associate, Schulte, Roth and Zabel's
Investment Management Group (2000-2001).
Chief Compliance Officer of Bishop Street Funds; N/A N/A
Commissioner of Securities, Department of
Commerce and Consumer Affairs, State of Hawaii
(1998-2004).
Assistant Vice President of First Hawaiian Bank since N/A N/A
2000; Employed by First Hawaiian Bank since 1994.
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 TSUI 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, 2004 83 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
NOTES
[Background 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 64121
CUSTODIAN
UNION BANK OF CALIFORNIA, N.A.
SAN FRANCISCO, CA 94101
LEGAL COUNSEL
MORGAN, LEWIS & BOCKIUS LLP
PHILADELPHIA, PA 19103
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
PHILADELPHIA, PA 19103
[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-006-1000
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, controller or
principal accounting officer, and any person who performs a similar function.
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 (PwC LLP) Related to the Trust
PwC LLP billed the Trust aggregate fees for services rendered to the Trust for
the last two fiscal years as follows:
- ------------------------------------------------------------------------------------------------------------------------------
2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
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 pre- did not require were pre- did not require
approved pre-approval approved pre-approval
- ------------------------------------------------------------------------------------------------------------------------------
(a) Audit $98,200 N/A N/A $90,500 N/A N/A
Fees(1)
- ------------------------------------------------------------------------------------------------------------------------------
(b) Audit- N/A N/A N/A N/A N/A N/A
Related
Fees
- ------------------------------------------------------------------------------------------------------------------------------
(c) Tax N/A N/A N/A N/A N/A N/A
Fees
- ------------------------------------------------------------------------------------------------------------------------------
(d) All N/A N/A N/A N/A N/A N/A
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:
---------------------------------------------------------------
2004 2003
---------------------------------------------------------------
Audit-Related Fees N/A N/A
---------------------------------------------------------------
Tax Fees N/A N/A
---------------------------------------------------------------
All Other Fees N/A N/A
---------------------------------------------------------------
(f) Not applicable.
(g) The aggregate non-audit fees and services billed by PwC LLP for the
last two fiscal years were $0 and $0 for 2004 and 2003, respectively.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end management investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end management investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable. Effective for closed-end management investment companies for
fiscal years ending on or after December 31, 2005.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable to open-end management investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEMS 12. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Bishop Street Funds
/s/ Robert A. Nesher
By (Signature and Title)* ------------------------------
Robert A. Nesher
President
Date: 02/28/05
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.
/s/ Robert A. Nesher
By (Signature and Title)* ------------------------------
Robert A. Nesher
President
Date: 02/28/05
/s/ Peter (Pedro) A. Rodriguez
By (Signature and Title)* ------------------------------
Peter (Pedro) A. Rodriguez
Treasurer and Controller
Date 02/28/05
* Print the name and title of each signing officer under his or her signature.