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 811-08572
BISHOP STREET FUNDS
(Exact name of registrant as specified in charter)
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2 Oliver Street
Boston, MA 02109
(Address of principal executive offices)
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-610-254-1000
DATE OF FISCAL YEAR END: DECEMBER 31, 2005
DATE OF REPORTING PERIOD: DECEMBER 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
BISHOP STREET
FUNDS
ANNUAL REPORT
DECEMBER 31, 2005
LARGE CAP GROWTH 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
[LOGO]
BISHOP
STREET
FUNDS
The Funds file their complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q within sixty days after the end of the period. The Funds' Forms N-Q are
available on the Commission's website at http://www.sec.gov, and may be reviewed
and copied at the Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
A description of the policies and procedures that the Funds use to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge, by calling 1-800-262-9565 or by visiting the Commission's website at
http://www.sec.gov. Information regarding how the Funds voted proxies relating
to portfolio securities during the most recent twelve-month period ended June 30
is available without charge, by calling 1-800-262-9565 or by visiting the Funds'
website at http://www.bishopstreetfunds.com or the website of the Securities and
Exchange Commission.
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BISHOP STREET
TABLE OF CONTENTS
FUNDS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS ............................................... 2
INVESTMENT ADVISER'S REPORT .......................................... 4
LARGE CAP GROWTH 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 ........................................... 20
Statement of Net Assets ......................................... 22
HIGH GRADE INCOME FUND
Management Discussion ........................................... 26
Statement of Net Assets ......................................... 28
HAWAII MUNICIPAL BOND FUND
Management Discussion ........................................... 36
Statement of Net Assets ......................................... 38
MONEY MARKET & TREASURY MONEY MARKET FUNDS
Management Discussion ........................................... 48
Statements of Net Assets ........................................ 50
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 .............. 75
DISCLOSURE OF FUND EXPENSES .......................................... 76
NOTICE TO SHAREHOLDERS ............................................... 78
BOARD OF TRUSTEES AND OFFICERS ....................................... 80
SHAREHOLDER VOTING RESULTS ........................................... 86
1
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BISHOP STREET
LETTER TO SHAREHOLDERS
FUNDS
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[PHOTO OF DALE KOBAYASHI OMITTED]
Looking solely at the low single digit returns generated by domestic equity and
fixed income markets during 2005, one could arrive at the mistaken conclusion
that the year was an uneventful one in the financial markets. On the contrary,
the low returns in the market could be more accurately characterized as a
surprising show of resiliency of the economy in the face of severe challenges as
well as the continuation of persistent, growing imbalances.
Indeed, the litany of challenges faced during the year was quite considerable.
While headline grabbing issues arising from the effects of Katrina/Rita and the
prolonged oil shock necessarily generated a great deal of angst in the financial
markets, it is the persistency of the financial imbalances which lend a cautious
tone to 2006 projections. In particular, the leveraging of the American consumer
on the steep increase in real estate prices nationwide constitutes the primary
challenge to an orderly continuation of a tenuous economic recovery.
2005 saw the fifth straight year where consumer spending represented the primary
growth engine for the economy. Notably, in 2005 the personal savings rate was
negative, with consumers borrowing more than they were saving, for the first
time since the depression era. The housing market bubble provided the means to
continue the high degree of leverage, current estimates show $880 billion of
home equity was converted to cash during the year. Clearly, the steep increase
in real estate prices which has made this all possible is unsustainable. The
question as we ponder the prospects for the current year becomes whether these
imbalances can be reversed at a gradual, orderly pace, or with the loud pop of
an asset bubble bursting as history has taught us to be justifiably fearful of.
Bishop Street Funds 2
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[LOGO]
BISHOP
STREET
FUNDS
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From where we sit, the prospects for a "soft landing" are invariably tied into
the probability of a sharp rise in interest rates, the most likely catalyst for
a collapse in housing prices and consumer spending. This against the backdrop of
transitions in the Federal Reserve (the "Fed") chairmanship. After January 31st,
Ben Bernanke will become the first new Fed chairman since Alan Greenspan was
appointed by President Reagan in 1987. For all the discussion of Mr. Bernanke
being better known as a deflation fighter than the inflation hawk Chairman
Greenspan was, we foresee more continuity than disruption at the Fed and the
reality of an end to the current tightening cycle in early 2006.
At the end of the day, despite inflation concerns generated by an easy money
policy, higher commodity prices, the jump in energy prices, and a tightening
domestic labor market, these factors pale in significance to one overriding
structural consideration: a globalized labor market where goods are easily
sourced from the lowest cost producer worldwide. Looking forward, we anticipate
the slowdown in consumer spending to begin revealing itself in the coming year,
but to come at a reasonable pace.
Sincerely,
/s/ Dale Kobayashi
Dale Kobayashi
President and Chief Investment Officer
Bishop Street Capital Management
December 31, 2005 3 www.bishopstreetfunds.com
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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INVESTMENT ADVISER'S REPORT
ECONOMIC BACKDROP
2005 was full of intrigue, but you would never know it looking at the financial
markets, for which the year ended pretty much as it had begun. Perhaps the most
surprising development was the strength of the economy in the face of severe
challenges, including Katrina/Rita and a prolonged oil shock. Yet persistent and
growing financial imbalances, led by the housing bubble, have not dissipated.
Will 2006 see a day of reckoning? Maybe, but probably not. The more likely
outcome, in our view, is a Fed-engineered "soft landing", that will prolong the
current economic boom for another year at least.
As many commentators have recognized, the economic recovery has been
built on a rickety foundation. Defying all expectations, consumer spending
fueled by rising real estate values has been the primary growth engine for the
economy for the past five years. (Consumer spending in fact never faltered: the
2001 recession was entirely related to a fall off in business investment).
Without question, at some point the consumer will no longer be able to shoulder
the load. Notably, in 2005 the personal saving rate went negative, meaning
American consumers were borrowing more than they were saving (the last time that
happened was during the Depression). And boy, are they ever borrowing. According
to a Federal Reserve (the "Fed") study, in 2004 homeowners converted $600
billion of home equity to cash (e.g., through home equity loans). Goldman Sachs
estimates a figure of over $880 billion for 2005, or roughly 7% of personal
income.
The second major area of risk for the economy in 2006 can be put under the
general heading of "Fed policy blunder", by which we mean a failure by the Fed
to correctly calibrate monetary policy. If the Fed tightens too aggressively,
economic growth may stagnate. If they don't tighten enough, excess liquidity
could provoke inflation. Imbedded here is the Fed reaction function to a variety
of unpredictable scenarios, such as a renewed spike in energy prices or an
overheating economy.
Bishop Street Funds 4
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[LOGO]
BISHOP
STREET
FUNDS
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Assuming that 2006 avoids a national housing market collapse or a Fed policy
blunder, the economic outlook is reasonably strong. THE WALL STREET JOURNAL
SEMIANNUAL ECONOMIC FORECASTING SURVEY of 56 economists provides a consensus
forecast of 3.2% GDP growth for 2006, a slowdown from the last two years but
still respectable in light of the tightening monetary policy and higher energy
prices which are weighing on the economy. Although consumption spending will
likely slow, business spending should remain robust, reflecting record levels of
cash on corporate balance sheets.
There is also wide agreement that interest rates will remain range bound, and
few expect long term treasury yields to top 5% (vs. about 4.4% today). The key
for this generally rosy consensus to happen is for inflation to remain under
control, which we believe is likely. Inflation hawks justifiably point to a long
period of very easy money, the jump in commodity prices (including a big run up
in gold), higher energy costs, and the tightening labor market as possible
precursors of resurgent inflation. These factors are tempered, however, by
structural disinflationary forces, including globalization of the labor market
such that goods are easily sourced from the lowest cost producers worldwide.
EQUITY MARKET REVIEW AND OUTLOOK
Last year, we projected "a respectable single-digit return opportunity" for U.S.
equities in 2005. In the event, the S&P 500 Index had a total return of 4.8%, in
line with our admittedly wide forecast range. We could hardly have envisioned
the path by which we got there, however. Our expectation was for earnings growth
to be in the single-digit range, with valuation multiples staying flat. Instead,
earnings growth will likely exceed 13%, and multiples have continued to
compress. Looking a little deeper, one can begin to see why the market was less
then enamored with 2005's earnings story--virtually all of the earnings upside
occurred in only one sector, Energy, while most other sectors disappointed. Not
surprisingly, Energy-related stocks also showed the best price performance by
wide margin, rising 29% for the year.
December 31, 2005 5 www.bishopstreetfunds.com
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BISHOP STREET
INVESTMENT ADVISER'S REPORT
FUNDS
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As has been the case for several years, small cap stocks outperformed large
caps, and value stocks outperformed growth. We have a growing conviction that
these trends are likely to reverse in 2006. We note that large cap valuations
appear very reasonable. After several years of underperformance, many of the
largest best known companies in America (e.g. Wal-mart, Microsoft, Pfizer) are
trading at steep discounts to historical averages, while conversely small caps
look expensive. Such a prolonged period of large cap underperformance has not
been seen since the 1970's, a time of structural change in the financial markets
that saw a large inflow of investment funds into the small cap market. Further,
periods of decelerating economic growth (as we expect in 2006) tend to favor
growth stocks--those companies which can achieve superior growth rates during
cyclical lulls.
Overall, we expect another positive but not spectacular year for the stock
market. The economic backdrop, while not as robust as a couple of years ago, is
generally favorable (with the caveats noted in the previous section). Earnings
growth will likely fall somewhere between 5% and 10% (the consensus estimate is
7%). It is hard to believe that earnings multiples (commonly expressed as the
trailing price/earnings ratio), already cut nearly in half over the past three
years, will compress much further. Some modest multiple expansion appears more
likely, particularly in light of the continued low interest rate environment. We
expect investment returns to also be boosted by a return of more corporate cash
to shareholders in the form of dividends and share buybacks. In 2005 the
companies in the S&P 500 Index returned about $500 billion directly to
shareholders, up 35% from 2004. All in all, we again anticipate single-digit
returns or better from the stock market in 2006.
Bishop Street Funds 6
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BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
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LARGE CAP GROWTH FUND
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The Bishop Street Large Cap Growth Fund (the "Fund") returned 0.94% in
the fourth quarter of 2005. For the full year 2005 the Fund returned 1.59%.
Early in the fourth quarter the economy faced challenges from tightening
monetary policy, higher energy prices and the aftermath of Katrina/Rita. Despite
these headwinds, the economy was surprisingly robust. For investors, clear signs
of a slowdown in the housing market (along with related consequences for
consumer spending) seem to be counterbalanced by muted core inflation and the
prospect of an end to the Federal Reserve (the "Fed") tightening.
Compared to the benchmark S&P 500 Index, during the quarter the portfolio had a
negative impact from stock selection, mostly due to a single healthcare stock,
Kinetic Concepts Inc. (KCI), which was down nearly 37% due to negative
reimbursement developments. To a lesser extent performance was hurt by stock
selection in the Information Technology sector. On the positive side, Energy
stocks positively affected portfolio performance. In the aggregate, sector
weightings had a negligible effect on relative performance.
Looking ahead, assuming that 2006 avoids a national housing market collapse or a
Fed policy blunder, the economic outlook is reasonably strong. The key to this
forecast is that inflation remains under control, which we believe is likely. In
summary, the tenuous economic recovery cannot last forever, but will likely
persist through 2006.
As has been the case for several years, small cap stocks outperformed large cap,
and value stocks outperformed growth during 2005. We have a growing conviction
that these trends are likely to reverse in 2006. In historical terms large cap
valuations appear very reasonable. Further, periods of decelerating economic
growth (as we expect in 2006) tend to favor growth stocks -- those companies
which can achieve superior growth rates during cyclical lulls.
December 31, 2005 7 www.bishopstreetfunds.com
LARGE CAP GROWTH FUND
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PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE
OF A $10,000 INVESTMENT IN THE
LARGE CAP GROWTH FUND, CLASS I,
VERSUS THE S&P 500 COMPOSITE INDEX,
THE CONSUMER PRICE INDEX AND THE
LIPPER DOMESTIC EQUITY AGGREGATE.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
S&P 500
Large Cap Growth Composite Consumer Lipper Domestic
Fund, Class I# Index Price Index Equity Aggregate
1/31/97 10,000 10,000 10,000 10,000
12/97 12,031 12,553 10,137 11,929
12/98 16,007 16,141 10,300 13,715
12/99 19,908 19,537 10,575 17,351
12/00 16,683 17,759 10,931 17,701
12/01 12,411 15,647 11,101 16,071
12/02 9,300 12,189 11,367 12,818
12/03 11,776 15,687 11,581 16,908
12/04 12,214 17,393 11,958 18,953
12/05 12,408 18,247 12,364 20,245
# 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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1.59% 10.09% -5.75% 2.56% Class I*
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* Commenced operations on 01/30/97.
+ 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
LARGE CAP GROWTH FUND
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TOP TEN EQUITY HOLDINGS+
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Percentage of
Investments
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1. General Electric 4.2%
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2. Procter & Gamble 3.5%
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3. Microsoft 3.5%
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4. PepsiCo 3.4%
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5. Citigroup 3.2%
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6. Amgen 3.1%
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7. JPMorgan Chase 3.0%
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8. Goldman Sachs Group 2.9%
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9. Johnson & Johnson 2.8%
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10. Halliburton 2.6%
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SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
Information Technology 17.6%
Financials 15.2%
Health Care 15.2%
Industrials 13.1%
Consumer Discretionary 10.5%
Consumer Staples 10.4%
Energy 9.1%
Materials 5.2%
Telecommunication Services 2.5%
Short-Term Investments 1.2%
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+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED
WITH CASH COLLATERAL RECEIVED FROM SECURITIES LENDING.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
--------- ---------
COMMON STOCK -- 99.0%
CONSUMER DISCRETIONARY -- 11.7%
16,610 Apollo Group, Cl A* (A) $ 1,004
38,930 Best Buy 1,693
37,030 Carnival 1,980
40,160 eBay* 1,737
14,480 EchoStar Communications, Cl A* 393
24,476 IAC/InterActiveCorp* 693
December 31, 2005 9 www.bishopstreetfunds.com
LARGE CAP GROWTH FUND
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
CONSUMER DISCRETIONARY -- (CONTINUED)
11,867 Mohawk Industries* $ 1,032
9,503 Omnicom Group 809
27,540 Viacom, Cl B* 898
---------
10,239
---------
CONSUMER STAPLES -- 10.4%
53,616 CVS 1,417
50,850 PepsiCo 3,004
52,820 Procter & Gamble 3,057
21,014 Whole Foods Market 1,626
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9,104
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ENERGY -- 9.1%
12,590 Apache 863
11,960 ConocoPhillips 696
27,659 GlobalSantaFe (A) 1,332
36,900 Halliburton (A) 2,286
17,800 Peabody Energy 1,467
13,743 Schlumberger Ltd. (A) 1,335
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7,979
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FINANCIALS -- 15.2%
14,020 AMBAC Financial Group 1,081
19,703 American Express (A) 1,014
4,048 Ameriprise Financial 166
58,583 Citigroup 2,843
20,170 Goldman Sachs Group 2,576
66,820 JPMorgan Chase 2,652
23,844 St. Paul Travelers 1,065
31,150 Wells Fargo 1,957
---------
13,354
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HEALTH CARE -- 15.2%
34,980 Amgen* 2,759
17,190 Caremark Rx* 890
12,500 Eli Lilly (A) 707
5,951 Genzyme* 421
9,190 Gilead Sciences* 484
41,029 Johnson & Johnson 2,466
8,866 Kinetic Concepts* 352
16,030 Medtronic 923
89,651 Pfizer 2,091
35,924 UnitedHealth Group 2,232
---------
13,325
---------
Bishop Street Funds 10
LARGE CAP GROWTH FUND
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STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
INDUSTRIALS -- 12.0%
40,080 Danaher (A) $ 2,236
104,805 General Electric 3,673
21,722 Pentair 750
8,460 Union Pacific 681
15,040 United Parcel Service, Cl B 1,130
36,550 United Technologies 2,044
---------
10,514
---------
INFORMATION TECHNOLOGY -- 17.6%
11,160 Analog Devices (A) 400
61,549 Applied Materials 1,104
55,360 Cisco Systems* 948
52,302 Dell* 1,569
35,680 EMC Corp/Massachusetts* 486
88,780 Intel 2,216
10,052 International Business Machines 826
12,992 Linear Technology 469
116,424 Microsoft 3,045
19,450 Motorola 439
33,370 Oracle* 407
22,150 Paychex 844
30,530 Qualcomm 1,315
24,946 Symantec* 437
16,610 Texas Instruments 533
11,380 Yahoo!* (A) 446
---------
15,484
---------
MATERIALS -- 5.2%
41,550 Dow Chemical 1,821
20,400 EI Du Pont de Nemours (A) 867
36,170 Praxair 1,915
---------
4,603
---------
TELECOMMUNICATION SERVICES -- 2.6%
22,631 Corning* 445
44,240 Sprint Nextel 1,033
25,580 Verizon Communications 771
---------
2,249
---------
TOTAL COMMON STOCK (Cost $80,211) 86,851
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December 31, 2005 11 www.bishopstreetfunds.com
LARGE CAP GROWTH FUND
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STATEMENT OF NET ASSETS
(CONTINUED)
Shares/Face Market
Amount Value
(000) (000)
------------- ---------
CORPORATE OBLIGATIONS (B) -- 4.0%
FINANCIALS -- 4.0%
Bank of America
$1,043 4.330%, 01/03/06 $ 1,043
Bear Stearns
522 4.400%, 01/04/06 522
Bear Stearns MTN (C)
1,043 4.348%, 01/12/06 1,044
General Electric Capital MTN (C)
417 4.301%, 03/29/06 417
Sigma Finance MTN (C)
521 4.330%, 07/07/06 521
---------
TOTAL CORPORATE OBLIGATIONS (Cost $3,547) 3,547
---------
CERTIFICATES OF DEPOSIT/BANK NOTES (B)(C) -- 2.4%
First Tennessee Bank
2,086 4.330%, 03/21/06 2,086
---------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $2,086) 2,086
---------
COMMERCIAL PAPER (B)(C) -- 2.4%
Morgan Stanley
2,086 4.330%, 02/15/06 2,086
---------
TOTAL COMMERCIAL PAPER (Cost $2,086) 2,086
---------
CASH EQUIVALENTS (D) -- 1.2%
511,239 Dreyfus Cash Management Fund, Institutional
Shares, 4.110% 511
511,211 Fidelity Money Market Fund, Institutional
Shares, 4.170% 511
---------
TOTAL CASH EQUIVALENTS (Cost $1,022) 1,022
---------
REPURCHASE AGREEMENTS (B) -- 2.8%
Bank of America 4.300%, dated 12/30/05, to be
repurchased on 01/03/06, repurchase price
$814,163 (collateralized by Morgan Stanley
Group, par value $699,644, 7.250%, 04/01/32;
814 with total market value $841,923) 814
Bishop Street Funds 12
LARGE CAP GROWTH FUND
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STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
REPURCHASE AGREEMENTS (B) -- (CONTINUED)
Lehman Brothers 4.320%, dated 12/30/05, to be
repurchased on 01/03/06, repurchase price
$1,700,134 (collateralized by Banc of America
Mortgage Securities, Ser 2005-1, Cl 1A19, GE
Capital Commercial Mortgage, Ser 2005-C3, Cl
A7B, Salomon Brothers Mortgage Securities, Ser
G97AP, Cl L, and Structured Asset Securities,
Ser 1995-2, Cl IIB1, ranging in par value
$169,439- $2,057,523, 0.000%-5.250%,
04/01/16-07/10/45; with total market
$1,699 value $1,779,052) $ 1,699
---------
TOTAL REPURCHASE AGREEMENTS (Cost $2,513) 2,513
---------
TOTAL INVESTMENTS (COST $91,465) -- 111.8% 98,105
---------
OTHER ASSETS AND LIABILITIES -- (11.8)%
Payable Upon Return of Securities Loaned (10,232)
Payable for Capital Shares Redeemed (182)
Investment Adviser Fees Payable (48)
Administrative Fees Payable (9)
Shareholder Servicing Fees Payable (8)
Trustees' Fees Payable (1)
Other Assets and Liabilities, Net 90
---------
TOTAL OTHER ASSETS AND LIABILITIES (10,390)
---------
NET ASSETS -- 100.0% $ 87,715
=========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $ 133,364
Accumulated net realized loss on investments (52,289)
Net unrealized appreciation on investments 6,640
---------
NET ASSETS $ 87,715
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS I
($87,715,359 / 8,869,192 SHARES) $ 9.89
=========
* NON-INCOME PRODUCING SECURITY
(A) THE SECURITY OR A PORTION OF THE SECURITY IS ON LOAN AT DECEMBER 31, 2005
(SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2005 WAS $9,943,102.
(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, 2005 WAS $10,232,107.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2005. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
(D) RATES SHOWN ARE THE 7-DAY YIELDS AS OF DECEMBER 31, 2005.
CL -- CLASS
LTD. -- LIMITED
MTN -- MEDIUM TERM NOTE
SER -- SERIES
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 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 11.52% for the year.
This good performance was driven by a strong stock picking in a wide range of
sectors, as illustrated by the diversity of companies among our top performers
of the year. These include Apple and Western Digital in technology (although
with a very different focus), Express Scripts or Gilead Sciences in healthcare,
XTO in energy, or Moody's in finance. Moreover, even if a few disappointments on
stocks such as Harmann or Petsmart penalized us, their number remained
reasonably limited, and their magnitude manageable. Our underexposure to energy
was detrimental in the first half of the year, but caused less impact as it
became clear that most of the good news was discounted.
In line with our anticipations, it became increasingly clear over the last few
months that the disruptions caused by the September and October hurricanes would
not durably impact the U.S. economy. The leading indicators, which have been
back to positive territory for two consecutive months, confirm this view.
With a solid optimism among company managers and a continuing rebound in
consumer confidence, the U.S. looks poised to remain one of the strongest
developed economies well into 2006, with a positive impact on corporate
earnings. A slowdown in interest rates hikes, or more favorable trends in energy
prices, could be the catalysts investors expect before they turn more positive.
We therefore maintain a relatively aggressive stance in our portfolio. Our high
exposure to companies that deliver, year after year, strong earnings growth
should be a significant advantage, specially when the momentum fades on Japanese
(and, to a lesser extent, European) companies' profits after the restructuring
wave.
In conclusion, 2006 seems to offer attractive opportunities for the U.S. market,
but investors' current focus on the oil and interest rates threats will probably
make it a difficult year for investment timing. We will therefore remain
extremely selective in our stock picking, and will continue to focus on the
medium and long term, without paying excessive attention to short term
volatilities. We trust this is the best way to approach the market, even if it
may cause some temporary bumps in our performance, especially after the very
good results achieved in 2005.
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,
CLASS I, VERSUS THE S&P 500/CITIGROUP
GROWTH INDEX, THE S&P 500/CITIGROUP
PURE GROWTH INDEX, THE S&P 500/BARRA
GROWTH INDEX, THE S&P 500 COMPOSITE
INDEX, THE CONSUMER PRICE INDEX AND
THE LIPPER MULTI CAP CORE
CLASSIFICATION.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
S&P 500 Lipper Multi
Strategic Growth S&P 500/Citigroup S&P 500/Citigroup S&P 500/BARRA Composite Consumer Cap Core
Fund, Class I# Growth Index Pure Growth Index Growth Index Index Price Index Classification
7/1/02 10,000 10,000 10,000 10,000 10,000 10,000 10,000
12/02 8,639 9,195 9,370 9,198 8,971 10,056 8,912
06/03 10,309 10,357 11,432 10,233 10,026 10,214 10,011
12/03 11,928 11,686 13,337 11,559 11,543 10,246 11,581
06/04 12,328 11,999 14,258 11,873 11,941 10,545 11,972
12/04 13,077 12,499 15,507 12,267 12,799 10,580 12,875
06/05 12,968 12,199 15,727 12,055 12,695 10,811 12,838
12/05 14,585 12,642 16,631 12,691 13,427 10,938 13,711
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS+
-----------------------------------------------
ONE ANNUALIZED ANNUALIZED
YEAR 3 YEAR INCEPTION
RETURN RETURN TO DATE
-----------------------------------------------
11.52% 19.07% 11.40% Class I*
-----------------------------------------------
* 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, 2005 15 www.bishopstreetfunds.com
STRATEGIC GROWTH FUND
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS+
- -----------------------------------------------------------------------------
Percentage of
Investments
- -----------------------------------------------------------------------------
1. Hilton Hotels 2.3%
- -----------------------------------------------------------------------------
2. Western Digital 2.1%
- -----------------------------------------------------------------------------
3. BJ Services 2.1%
- -----------------------------------------------------------------------------
4. Lowe's 2.1%
- -----------------------------------------------------------------------------
5. Cendant 2.1%
- -----------------------------------------------------------------------------
6. Capital One Financial 2.1%
- -----------------------------------------------------------------------------
7. United Technologies 2.1%
- -----------------------------------------------------------------------------
8. Abercrombie & Fitch 2.1%
- -----------------------------------------------------------------------------
9. Hewlett-Packard 2.1%
- -----------------------------------------------------------------------------
10. XTO Energy 2.1%
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
Information Technology 21.6%
Consumer Discretionary 21.5%
Financials 17.3%
Health Care 15.4%
Industrials 9.8%
Energy 6.1%
Materials 3.8%
Short-Term Investments 2.4%
Telecommunication Services 2.1%
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
--------- ---------
COMMON STOCK -- 99.2%
CONSUMER DISCRETIONARY -- 21.9%
39,600 Abercrombie & Fitch, Cl A $ 2,581
62,300 Bed Bath & Beyond* 2,252
71,400 Coach* 2,380
36,100 Federated Department Stores 2,395
117,107 Hilton Hotels 2,823
38,900 Lowe's 2,593
65,400 Nordstrom 2,446
110,250 Staples 2,504
42,000 Target 2,309
Bishop Street Funds 16
STRATEGIC GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
CONSUMER DISCRETIONARY -- (CONTINUED)
33,400 W.W. Grainger $ 2,375
49,000 Yum! Brands 2,297
---------
26,955
---------
ENERGY -- 6.2%
70,800 BJ Services 2,596
44,800 Exxon Mobil 2,516
58,500 XTO Energy 2,571
---------
7,683
---------
FINANCIALS -- 17.6%
42,900 Allstate 2,320
51,600 Bank of America 2,381
29,900 Capital One Financial 2,583
23,800 Everest Re Group Ltd. 2,388
18,200 Goldman Sachs Group 2,324
18,100 Lehman Brothers Holdings 2,320
36,700 Merrill Lynch 2,486
41,200 Moody's 2,530
60,900 Paychex 2,322
---------
21,654
---------
HEALTH CARE -- 15.6%
24,100 Aetna 2,273
29,700 Amgen* 2,342
45,300 Caremark Rx* 2,346
29,400 Express Scripts* 2,464
36,100 Genzyme* 2,555
44,600 Gilead Sciences* 2,347
42,400 Medtronic 2,441
40,000 UnitedHealth Group 2,486
---------
19,254
---------
INDUSTRIALS -- 10.0%
150,000 Cendant 2,588
152,550 JetBlue Airways* 2,346
33,300 L-3 Communications Holdings 2,476
52,000 Norfolk Southern 2,331
46,200 United Technologies 2,583
---------
12,324
---------
INFORMATION TECHNOLOGY -- 21.9%
88,400 Accenture Ltd., Cl A 2,552
34,000 Apple Computer* 2,444
December 31, 2005 17 www.bishopstreetfunds.com
STRATEGIC GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
INFORMATION TECHNOLOGY -- (CONTINUED)
55,700 Autodesk $ 2,392
149,100 Cisco Systems* 2,553
89,900 Hewlett-Packard 2,574
98,900 Intel 2,469
62,700 Jabil Circuit* 2,326
102,400 Motorola 2,313
66,300 Nvidia* 2,424
196,000 Oracle* 2,393
141,600 Western Digital* 2,635
---------
27,075
---------
MATERIALS -- 3.9%
66,700 Allegheny Technologies 2,407
55,100 Dow Chemical 2,414
---------
4,821
---------
TELECOMMUNICATIONS -- 2.1%
109,852 Sprint Nextel 2,566
---------
TOTAL COMMON STOCK (Cost $99,165) 122,332
---------
CASH EQUIVALENTS (A) -- 2.4%
1,506,718 Dreyfus Cash Management Fund, Institutional
Shares, 4.110% 1,507
1,506,718 Fidelity Money Market Fund, Institutional
Shares, 4.170% 1,507
---------
TOTAL CASH EQUIVALENTS (Cost $3,014) 3,014
---------
TOTAL INVESTMENTS (COST $102,179) -- 101.6% 125,346
---------
OTHER ASSETS AND LIABILITIES -- (1.6)%
Payable for Investment Securities Purchased (1,859)
Payable for Capital Shares Redeemed (180)
Investment Adviser Fees Payable (88)
Administrative Fees Payable (12)
Shareholder Servicing Fees Payable (11)
Trustees' Fees Payable (1)
Other Assets and Liabilities, Net 146
---------
TOTAL OTHER ASSETS AND LIABILITIES (2,005)
---------
NET ASSETS -- 100.0% $ 123,341
=========
Bishop Street Funds 18
STRATEGIC GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
---------
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $ 98,449
Accumulated net investment loss (8)
Accumulated net realized gain on investments 1,733
Net unrealized appreciation on investments 23,167
---------
NET ASSETS $ 123,341
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS I
($123,341,084 / 8,595,871 SHARES) $ 14.35
=========
* NON-INCOME PRODUCING SECURITY
(A) RATE SHOWN IS THE 7-DAY YIELD AS OF DECEMBER 31, 2005.
CL -- CLASS
LTD. -- LIMITED
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 19 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
The Bishop Street Tax-Managed Equity Fund (the "Fund") returned 0.5% for the
fourth quarter of 2005 versus 2.09% for the S&P 500 Index. Unlike prior years,
tax selling at the end of October and December offset capital gains liabilities
from 2005 transactions, although higher cash balances from those sales did
impact this period's returns.
Although highly anticipated, the holiday season rally never truly materialized
for the equity markets. November staged a strong advance off of October's
retreat, but December provided negligible follow through. Energy was the weakest
performing sector during the fourth quarter, partially reversing double digit
returns during the prior nine months, and both natural gas and oil prices ended
the year significantly higher, although measurably below their immediate
post-Katrina levels. Materials, particularly gold and copper stocks, were a
stern performer as well, posting the best quarterly returns for the S&P 500
Index. Financials were the second strongest performers, as investors read into
the moderate inflation measures a closer than previously expected end to the Fed
tightening cycle.
For the Fund, an overweight position in Energy hurt performance, although better
stock selection in the sector blunted the negative effects. Healthcare and
technology holdings were the weakest performing sectors for the quarter, with
sharp corrections in a few names held in the portfolio. An underweight position
in financials also hurt. Positive performance contribution came from stock
selection in consumer discretion, staples, energy and utilities.
Looking forward, the Fund will continue to emphasize attractively-priced stocks
with higher profitability and earnings growth, relative to the benchmark. It is
anticipated that we will expand the number of stocks held in the portfolio,
emphasizing less concentrated positions than in the past, in order to better
balance lower turnover (and hence, lower tax liability generation) with risk
control.
Bishop Street Funds 20
TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE
OF A $10,000 INVESTMENT IN THE TAX
MANAGED EQUITY FUND, CLASS I, VERSUS
THE S&P 500 COMPOSITE INDEX, THE
CONSUMER PRICE INDEX AND THE LIPPER
LARGE CAP CORE CLASSIFICATION.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Tax Managed S&P 500 Lipper Large
Equity Fund, Composite Consumer Cap Core
Class I# Index Price Index Classificiation
11/13/02 10,000 10,000 10,000 10,000
12/02 9,843 9,966 9,976 9,916
06/03 10,713 11,138 10,133 10,946
12/03 12,171 12,825 10,164 12,469
06/04 12,478 13,266 10,461 12,740
12/04 12,949 14,220 10,495 13,479
06/05 12,512 14,105 10,725 13,325
12/05 13,038 14,917 10,851 14,123
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS+
------------------------------------------
ONE ANNUALIZED ANNUALIZED
YEAR 3 YEAR INCEPTION
RETURN RETURN TO DATE
------------------------------------------
0.68% 9.83% 8.85% Class I*
------------------------------------------
* 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.
December 31, 2005 21 www.bishopstreetfunds.com
TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS+
- -----------------------------------------------------------------------------
Percentage of
Investments
- -----------------------------------------------------------------------------
1. Citigroup 4.6%
- -----------------------------------------------------------------------------
2. Amgen 3.6%
- -----------------------------------------------------------------------------
3. General Electric 3.5%
- -----------------------------------------------------------------------------
4. Halliburton 3.0%
- -----------------------------------------------------------------------------
5. Altria Group 2.9%
- -----------------------------------------------------------------------------
6. Exxon Mobil 2.7%
- -----------------------------------------------------------------------------
7. UnitedHealth Group 2.7%
- -----------------------------------------------------------------------------
8. Microsoft 2.6%
- -----------------------------------------------------------------------------
9. Johnson & Johnson 2.4%
- -----------------------------------------------------------------------------
10. GlobalSantaFe 2.3%
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
Information Technology 17.7%
Financials 17.1%
Industrials 14.4%
Energy 11.6%
Health Care 11.3%
Consumer Staples 10.9%
Consumer Discretionary 9.9%
Materials 3.6%
Telecommunication Services 1.9%
Short-Term Investments 1.6%
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Market
Value
Shares (000)
--------- ---------
COMMON STOCK -- 97.5%
CONSUMER DISCRETIONARY -- 9.9%
4,000 Best Buy $ 174
6,550 Carnival 350
8,300 eBay* 359
7,165 Expedia* 172
8,930 Home Depot 361
7,165 IAC/InterActiveCorp* 203
2,900 Michaels Stores 103
4,700 Mohawk Industries* 409
4,000 Omnicom Group 341
Bishop Street Funds 22
TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
CONSUMER DISCRETIONARY -- (CONTINUED)
2,280 Sears Holdings* $ 263
6,950 Target 382
14,750 Time Warner 257
---------
3,374
---------
CONSUMER STAPLES -- 10.8%
13,400 Altria Group 1,001
15,000 CVS 396
10,180 PepsiCo 601
11,940 Procter & Gamble 691
12,000 Sysco 373
9,200 Wal-Mart Stores 431
2,780 Whole Foods Market 215
---------
3,708
---------
ENERGY -- 11.5%
2,920 Devon Energy 182
16,500 Exxon Mobil 927
16,020 GlobalSantaFe 771
16,250 Halliburton 1,007
3,470 Peabody Energy 286
7,850 Schlumberger Ltd. 763
---------
3,936
---------
FINANCIALS -- 16.9%
4,200 Aflac 195
10,500 Allstate 568
7,580 American Express 390
3,130 American International Group 214
1,516 Ameriprise Financial 62
32,400 Citigroup 1,572
4,300 Goldman Sachs Group 549
12,790 JPMorgan Chase 508
5,760 Merrill Lynch 390
10,970 Wachovia 580
12,230 Wells Fargo 768
---------
5,796
---------
HEALTH CARE -- 11.2%
15,400 Amgen* 1,214
3,300 Caremark Rx* 171
3,670 Genzyme* 260
13,360 Johnson & Johnson 803
December 31, 2005 23 www.bishopstreetfunds.com
TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
HEALTH CARE -- (CONTINUED)
20,600 Pfizer $ 480
14,560 UnitedHealth Group 905
---------
3,833
---------
INDUSTRIALS -- 14.2%
5,690 3M 441
5,100 Boeing 358
11,600 Exelon 617
3,330 General Dynamics 380
34,100 General Electric 1,195
4,900 Illinois Tool Works 431
10,380 Pentair 358
7,470 Union Pacific 601
8,850 United Technologies 495
---------
4,876
---------
INFORMATION TECHNOLOGY -- 17.5%
23,500 Applied Materials 422
25,480 Cisco Systems* 436
13,060 Dell* 392
15,480 EMC Corp/Massachusetts* 211
26,740 Intel 667
5,400 International Business Machines 444
7,570 Linear Technology 273
34,200 Microsoft 894
8,200 Motorola 185
13,640 Paychex 520
12,920 Qualcomm 557
20,000 Symantec* 350
10,900 Texas Instruments 350
7,950 Yahoo!* 312
---------
6,013
---------
MATERIALS -- 3.6%
8,100 Dow Chemical 355
8,100 EI Du Pont de Nemours 344
10,220 Praxair 541
---------
1,240
---------
TELECOMMUNICATION SERVICES -- 1.9%
11,180 Sprint Nextel 261
18,000 Vodafone Group ADR 387
---------
648
---------
TOTAL COMMON STOCK (Cost $26,570) 33,424
---------
Bishop Street Funds 24
TAX MANAGED EQUITY FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
--------- ---------
CASH EQUIVALENTS (A) -- 1.6%
271,892 Dreyfus Cash Management Fund, Institutional
Shares, 4.110% $ 272
271,892 Fidelity Money Market Fund, Institutional
Shares, 4.170% 272
---------
TOTAL CASH EQUIVALENTS (Cost $544) 544
---------
TOTAL INVESTMENTS (COST $27,114) -- 99.1% 33,968
---------
OTHER ASSETS AND LIABILITIES -- 0.9%
Payable for Investment Securities Purchased (173)
Investment Adviser Fees Payable (16)
Payable for Capital Shares Redeemed (9)
Administrative Fees Payable (3)
Shareholder Servicing Fees Payable (3)
Other Assets and Liabilities, Net 507
---------
TOTAL OTHER ASSETS AND LIABILITIES 303
---------
NET ASSETS -- 100.0% $ 34,271
=========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $ 27,476
Distribution in excess of net investment income (1)
Accumulated net realized loss on investments (58)
Net unrealized appreciation on investments 6,854
---------
NET ASSETS $ 34,271
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS I
($34,271,367 / 2,791,680 SHARES) $ 12.28
=========
* NON-INCOME PRODUCING SECURITY
(A) RATE SHOWN IS THE 7-DAY YIELD AS OF DECEMBER 31, 2005.
ADR -- AMERICAN DEPOSITARY RECEIPT
LTD. -- LIMITED
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 25 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
The conundrum of higher short term interest rates and lower long term rates
continued in the second half of the year even as the Federal Reserve raised the
fed funds rate by 200 basis points to 4.25% for the year. The yield curve
flattened by 163 basis points during the year while the 2 year note closed up
134 basis points and the long bond closed down by 29 basis points. Treasuries
outperformed most asset classes, led by the 30 year treasury bond which
registered a 9.0% total return on the year.
The market focused on the destruction caused by and subsequent recovery from
Hurricane Katrina in the third quarter, while the Federal Open Market Committee
stayed on the course of tightening. At the same time, the rise in energy prices
and stronger than expected growth resulted in inflationary fears. The 10 year
treasury bond tested the high end of the trading range posting a yield of 4.66%
during the month of November. Corporate bonds struggled with the flattening of
the yield curve as lower quality credits underperformed, led by the auto sector,
which lagged significantly.
The Bishop Street High Grade Income Fund (the "Fund") modestly underperformed
the Lehman Brothers Government/Credit Index for the year. As a result of its
modestly short position on the long end of the curve and its overweight in the
corporate sector, the Fund gave up some performance in the last quarter of the
year.
Looking ahead, we believe that the Fund may perform well with its shorter
duration as we anticipate that interest rates may be biased to the upside during
the first quarter of 2006.
Bishop Street Funds 26
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE HIGH GRADE INCOME FUND, CLASS
I, VERSUS THE LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT
INDEX, THE CONSUMER PRICE INDEX AND THE
LIPPER CORPORATE DEBT A-RATED OBJECTIVE.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Lehman Brothers Lipper
U.S. Consumer Corporate
High Grade Income Government/Credit Price Debt A- Rated
Fund, Class I# Index Index Objective
1/31/97 10,000 10,000 10,000 10,000
12/97 10,795 10,962 10,137 10,949
12/98 11,776 12,000 10,300 11,779
12/99 11,265 11,742 10,575 11,469
12/00 12,419 13,133 10,931 12,619
12/01 13,309 14,250 11,101 13,591
12/02 14,845 15,821 11,367 14,757
12/03 15,336 16,559 11,581 15,551
12/04 15,859 17,253 11,958 16,202
12/05 16,176 17,662 12,364 16,510
# 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
---------------------------------------------------------------------
2.00% 2.91% 5.43% 5.54% Class I*
---------------------------------------------------------------------
* Commenced operations on 01/30/97.
+ 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, 2005 27 www.bishopstreetfunds.com
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS+
- --------------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
- --------------------------------------------------------------------------------
1. U.S. Treasury Bonds 7.250% 05/15/16 5.3%
- --------------------------------------------------------------------------------
2. U.S. Treasury Bonds 6.250% 08/15/23 3.3%
- --------------------------------------------------------------------------------
3. U.S. Treasury Bonds 6.375% 08/15/27 2.7%
- --------------------------------------------------------------------------------
4. U.S. Treasury Bonds 7.500% 11/15/16 2.5%
- --------------------------------------------------------------------------------
5. FNMA 7.250% 01/15/10 2.0%
- --------------------------------------------------------------------------------
6. FHLMC MTN 4.850% 12/01/09 2.0%
- --------------------------------------------------------------------------------
7. FNMA 2.540% 01/12/07 1.9%
- --------------------------------------------------------------------------------
8. Goldman Sachs Group 6.600% 01/15/12 1.8%
- --------------------------------------------------------------------------------
9. U.S. Treasury Notes 4.375% 05/15/07 1.8%
- --------------------------------------------------------------------------------
10. Wal-Mart Stores 8.000% 09/15/06 1.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
U.S. Government Agency Obligations 27.7%
U.S. Treasury Obligations 24.1%
Financials 11.5%
Consumer Discretionary 6.4%
Energy 6.2%
Telecommunication Services 5.7%
Health Care 4.8%
Industrials 2.7%
Municipal Bonds 2.1%
Consumer Staples 1.9%
Short-Term Investments 1.9%
Utilities 1.8%
U.S. Government Mortgage-Backed Obligations 1.6%
Information Technology 1.6%
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. EXCLUDES SECURITIES PURCHASED WITH
CASH COLLATERAL RECEIVED FROM SECURITIES LENDING. NARROW INDUSTRIES ARE
UTILIZED FOR COMPLIANCE PURPOSES, WHEREAS BROAD SECTORS ARE UTILIZED FOR
REPORTING.
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
-------- ---------
CORPORATE OBLIGATIONS -- 52.0%
AEROSPACE & DEFENSE -- 1.7%
General Dynamics
$1,000 4.500%, 08/15/10 $ 984
United Technologies
1,350 6.350%, 03/01/11 1,439
---------
2,423
---------
AUTOMOTIVE -- 0.5%
DaimlerChrysler NA Holding
700 8.000%, 06/15/10 765
---------
Bishop Street Funds 28
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
BANKS -- 1.6%
Bank of America
$2,350 4.875%, 01/15/13 $ 2,324
---------
BIOTECHNOLOGY -- 0.9%
Boston Scientific
1,350 4.250%, 01/12/11 1,282
---------
BROADCASTING & CABLE -- 1.9%
TCI Communications
1,400 7.875%, 08/01/13 1,582
Turner Broadcasting System
975 8.375%, 07/01/13 1,123
---------
2,705
---------
COMPUTER HARDWARE -- 1.0%
Dell
1,325 6.550%, 04/15/08 1,370
---------
FINANCIALS -- 18.8%
American General Finance MTN, Ser G
1,400 5.750%, 03/15/07 1,412
Bank of America (B)
3,957 4.330%, 01/03/06 3,957
Bear Stearns (B)
1,979 4.400%, 01/04/06 1,979
Bear Stearns MTN (B)(C)
3,957 4.348%, 01/12/06 3,961
Boeing Capital
1,400 6.500%, 02/15/12 1,511
CIT Group
1,350 5.000%, 11/24/08 1,349
Fannie Mae (D)
625 2.350%, 03/30/09 621
Ford Motor Credit
1,400 7.250%, 10/25/11 1,210
General Electric Capital MTN (B)(C)
1,583 4.301%, 03/29/06 1,584
General Electric Capital MTN, Ser A
2,350 5.450%, 01/15/13 2,407
Goldman Sachs Group
2,350 6.600%, 01/15/12 2,524
JPMorgan Chase
1,350 3.500%, 03/15/09 1,295
Sigma Finance MTN (B)(C)
1,979 4.330%, 07/07/06 1,978
Unitrin
850 4.875%, 11/01/10 834
---------
26,622
---------
December 31, 2005 29 www.bishopstreetfunds.com
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
FOOD & BEVERAGE -- 1.0%
ConAgra Foods
$1,325 7.875%, 09/15/10 $ 1,459
---------
GENERAL MERCHANDISE -- 2.6%
Target
1,150 6.350%, 01/15/11 1,226
Wal-Mart Stores
2,400 8.000%, 09/15/06 2,448
---------
3,674
---------
HEALTH CARE -- 2.1%
Johnson & Johnson
1,400 6.950%, 09/01/29 1,749
UnitedHealth Group
1,250 5.200%, 01/17/07 1,249
---------
2,998
---------
HOUSEHOLD PRODUCTS -- 0.9%
Proctor & Gamble
475 8.000%, 10/26/29 639
Rubbermaid
600 6.600%, 11/15/06 609
---------
1,248
---------
MACHINERY - INDUSTRIAL -- 1.1%
Lennar, Ser B
1,600 5.500%, 09/01/14 1,545
---------
MOVIES & ENTERTAINMENT -- 1.0%
Walt Disney MTN
1,400 6.200%, 06/20/14 1,473
---------
OIL & GAS - EQUIPMENT/SERVICES -- 1.4%
Baker Hughes
1,175 6.000%, 02/15/09 1,213
Kinder Morgan
675 6.800%, 03/01/08 698
---------
1,911
---------
OIL & GAS - EXPLORATION/PRODUCTION -- 2.4%
Anadarko Petroleum
1,250 7.200%, 03/15/29 1,466
Ocean Energy
1,700 7.250%, 10/01/11 1,877
---------
3,343
---------
Bishop Street Funds 30
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
OIL & GAS - INTEGRATED -- 2.4%
BP Amoco
$1,385 9.125%, 03/01/11 $ 1,645
Occidental Petroleum
1,600 6.750%, 01/15/12 1,756
---------
3,401
---------
PHARMACEUTICALS -- 1.7%
Abbott Laboratories
2,400 6.400%, 12/01/06 2,431
---------
REAL ESTATE -- 0.8%
Post Apartment Homes LP
1,050 7.700%, 12/20/10 1,160
---------
RETAIL - DRUGS -- 1.5%
CVS
2,200 4.875%, 09/15/14 2,123
---------
RETAIL - FOOD -- 0.7%
McDonald's MTN, Ser E
900 5.950%, 01/15/08 919
---------
SEMI-CONDUCTORS -- 1.5%
Applied Materials
800 6.750%, 10/15/07 821
Duke Energy
1,275 4.200%, 10/01/08 1,247
---------
2,068
---------
TELECOMMUNICATIONS -- 2.7%
GTE South, Ser C
675 6.000%, 02/15/08 679
New Cingular Wireless Services
1,350 7.350%, 03/01/06 1,356
Sprint Capital
1,475 7.625%, 01/30/11 1,626
Verizon Global Funding MTN
100 7.600%, 03/15/07 103
---------
3,764
---------
TRANSPORTATION SERVICES -- 0.9%
FedEx
1,200 7.250%, 02/15/11 1,312
---------
UTILITIES -- 0.9%
Dominion Resources
1,350 4.125%, 02/15/08 1,325
---------
TOTAL CORPORATE OBLIGATIONS (Cost $74,633) 73,645
---------
December 31, 2005 31 www.bishopstreetfunds.com
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 26.9%
FHLB
$ 200 6.875%, 08/13/10 $ 217
1,000 6.000%, 08/24/15 1,007
1,350 5.375%, 02/15/07 1,359
1,000 5.000%, 02/22/13 976
1,300 4.750%, 08/13/10 1,297
1,400 4.100%, 06/13/08 1,379
1,000 3.875%, 07/24/09 972
1,750 3.875%, 02/12/10 (A) 1,694
1,800 3.750%, 08/15/08 1,757
1,125 3.600%, 10/19/07 1,103
2,500 3.375%, 02/15/08 (A) 2,431
200 2.625%, 02/16/07 195
FHLMC
1,300 6.375%, 08/01/11 1,307
1,400 5.200%, 03/05/19 1,366
2,400 5.125%, 10/15/08 2,425
1,000 5.000%, 01/30/14 (A) 986
1,400 4.750%, 05/06/13 1,352
1,500 4.625%, 08/15/08 1,492
1,350 4.375%, 07/30/09 1,324
1,400 4.375%, 03/01/10 1,376
FHLMC MTN
2,800 4.850%, 12/01/09 2,783
1,000 3.650%, 05/07/08 976
450 2.500%, 12/04/06 (A) 441
FNMA
2,600 7.250%, 01/15/10 2,833
1,400 4.400%, 03/08/10 1,381
800 3.875%, 11/17/08 780
200 3.250%, 03/17/08 194
2,700 2.540%, 01/12/07 2,640
---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $38,555) 38,043
---------
Bishop Street Funds 32
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
---------- ---------
U.S. TREASURY OBLIGATIONS (A) -- 23.9%
U.S. Treasury Bonds
$2,750 7.500%, 11/15/16 $ 3,454
6,000 7.250%, 05/15/16 7,367
3,000 6.375%, 08/15/27 3,716
3,900 6.250%, 08/15/23 4,657
1,000 6.250%, 05/15/30 1,242
1,050 6.000%, 02/15/26 1,238
650 5.375%, 02/15/31 730
1,500 5.250%, 11/15/28 1,636
U.S. Treasury Notes
2,500 4.375%, 05/15/07 2,498
1,350 4.375%, 08/15/12 1,350
1,400 4.250%, 08/15/15 1,382
1,200 4.000%, 02/15/14 1,168
1,200 4.000%, 02/15/15 1,164
2,200 2.375%, 08/15/06 2,173
---------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $31,371) 33,775
---------
COMMERCIAL PAPER (B)(C) -- 5.6%
Morgan Stanley
7,914 4.330%, 02/15/06 7,914
---------
TOTAL COMMERCIAL PAPER (Cost $7,914) 7,914
---------
CERTIFICATES OF DEPOSIT/BANK NOTES (B)(C) -- 5.6%
FINANCIALS -- 5.6%
First Tennessee Bank
7,914 4.330%, 03/21/06 7,914
---------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $7,914) 7,914
---------
December 31, 2005 33 www.bishopstreetfunds.com
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Shares/Face Value
Amount (000) (000)
----------------- ---------
MUNICIPAL BONDS -- 2.1%
California State, GO
$ 500 4.750%, 06/01/35 $ 502
Honolulu City & County, Ser E, GO, FGIC Insured
500 5.250%, 07/01/20 545
Honolulu City & County, Waste Water, Senior Ser
A, RB, FGIC Insured
755 5.000%, 07/01/35 787
Kauai County, Ser A, GO, FGIC Insured
1,000 5.000%, 08/01/25 1,054
---------
TOTAL MUNICIPAL BONDS (Cost $2,864) 2,888
---------
CASH EQUIVALENTS (E) -- 1.8%
1,338,208 Dreyfus Cash Management Fund, Institutional
Shares, 4.110% 1,338
1,338,208 Fidelity Money Market Fund, Institutional
Shares, 4.170% 1,338
---------
TOTAL CASH EQUIVALENTS (Cost $2,676) 2,676
---------
U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS -- 1.6%
FHLMC
79 3.500%, 05/01/08 76
FHLMC, Ser 2764, Cl PH
1,080 4.000%, 09/15/19 1,071
FNMA
1,166 3.500%, 08/01/10 1,106
---------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (Cost $2,316) 2,253
---------
REPURCHASE AGREEMENTS (B) -- 6.8%
3,088 Bank of America 4.300%, dated 12/30/05, to be
repurchased on 01/03/06, repurchase price
$3,089,029 (collateralized by Morgan Stanley
Group, par value $2,654,528, 7.250%, 04/01/32;
with total market value $3,194,353) 3,088
6,447 Lehman Brothers 4.320%, dated 12/30/05, to be
repurchased on 01/03/06, repurchase price
$6,450,502 (collateralized by Banc of America
Mortgage Securities, Ser 2005-1, Cl 1A19, GE
Capital Commercial Mortgage, Ser 2005-C3, Cl A7B,
Salomon Brothers Mortgage Securities, Ser G97AP,
Cl L, and Structured Asset Securities, Ser 1995-2,
Cl IIB1, ranging in par value $642,873-$7,806,477,
0.000%-5.250%, 04/01/16-07/10/45; with total
market value $6,749,926) 6,447
---------
TOTAL REPURCHASE AGREEMENTS (Cost $9,535) 9,535
---------
TOTAL INVESTMENTS (COST $177,778) -- 126.3% 178,643
---------
Bishop Street Funds 34
HIGH GRADE INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
---------
OTHER ASSETS AND LIABILITIES -- (26.3)%
Payable Upon Return of Securities Loaned $ (38,822)
Payable for Capital Shares Redeemed (277)
Income Distribution Payable (207)
Investment Adviser Fees Payable (42)
Administrative Fees Payable (14)
Shareholder Servicing Fees Payable (12)
Trustees' Fees Payable (1)
Other Assets and Liabilities, Net 2,171
---------
TOTAL OTHER ASSETS AND LIABILITIES (37,204)
---------
NET ASSETS -- 100.0% $ 141,439
=========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $ 140,666
Undistributed net investment income 9
Accumulated net realized loss on investments (101)
Net unrealized appreciation on investments 865
---------
NET ASSETS $ 141,439
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS I
($141,438,703 / 14,065,728 SHARES) $ 10.06
=========
(A) THE SECURITY OR A PORTION OF THE SECURITY IS ON LOAN AT DECEMBER 31, 2005
(SEE NOTE 5 IN THE NOTES TO FINANCIAL STATEMENTS.) THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2005 WAS $38,279,432.
(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, 2005 WAS $38,821,788.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2005. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
(D) STEP BOND -- COUPON RATE INCREASES IN INCREMENTS TO MATURITY. RATE DISCLOSED
IS AS OF DECEMBER 31, 2005.
(E) RATE SHOWN IS THE 7-DAY YIELD AS OF DECEMBER 31, 2005.
CL -- CLASS
FGIC -- FINANCIAL GUARANTEE INSURANCE CORPORATION
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
LP -- LIMITED PARTNERSHIP
MTN -- MEDIUM TERM NOTE
NA -- NATIONAL ASSOCIATION
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, 2005 35 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
Hawaii Municipal Bond Fund
- --------------------------------------------------------------------------------
Returns on municipal securities were mixed in 2005. The municipal yield curve
flattened significantly over the year with short-end rates moving higher and
long duration securities dropping in yield. Tax-exempt assets with maturities of
1-3 years returned approximately 1 percent for the 12 month period; assets with
maturities of over 20 years returned on the average 7.1 percent, highlighting
the out-performance of the long end of the municipal curve despite, the Federal
Reserve raising interest rates 200 basis points.
Hawaii continued to enjoy solid, widespread economic growth throughout 2005. All
four of the state's counties participated in the positive growth, posting
significant improvements in visitor arrivals and job creation. In the third
quarter, the state saw a 4.4 percent increase in employment, the highest
quarterly rate of growth in 15 years. The state of Hawaii and the city and
county of Honolulu each hold Aa2 credit ratings from Moody's, only 2 levels
below the credit company's highest rating of Aaa.
As an asset class, municipal bonds should continue to perform well relative to
other taxable fixed income securities. Balance sheets of municipalities
throughout the nation continued to improve as revenues from income and property
taxes grew impressively in 2005. However, the risks to the municipal investors
include curve steepening with lower overall interest rates, which would allow
municipalities to refund outstanding debt, creating excess supply in the market
and overall wider spreads.
For the year ending December 31, 2005, the Bishop Street Hawaii Municipal Bond
Fund, Class I (the "Fund") returned 2.51%, outperforming the Lipper Hawaii
Municipal Debt Objective of 0.43%. The Fund's relatively longer duration
contributed to its out-performance of the Hawaii benchmark. Looking forward, we
believe that the fund is positioned to benefit from a further flattening of the
municipal yield curve as well lower overall interest rates.
Bishop Street Funds 36
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE HAWAII MUNICIPAL BOND FUND, CLASS I OR CLASS A, VERSUS
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX, THE CONSUMER PRICE INDEX
AND THE LIPPER HAWAII MUNICIPAL DEBT OBJECTIVE.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Hawaii Municipal Hawaii Municipal Lehman Brothers Lipper Hawaii
Bond Fund, Bond Fund, Municipal Bond Consumer Municipal Debt
Class I# Class A# Index Price Index Objective
12/1/95 10,000 9,575 10,000 10,000 10,000
12/96 10,421 9,978 10,444 10,328 10,384
12/97 11,309 10,828 11,405 10,507 11,218
12/98 11,969 11,461 12,144 10,676 11,842
12/99 11,652 11,127 11,893 10,961 11,358
12/00 13,121 12,500 13,283 11,330 12,632
12/01 13,678 13,016 13,964 11,506 13,141
12/02 15,048 14,286 15,305 11,782 14,268
12/03 15,841 15,001 16,119 12,004 14,977
12/04 16,374 15,466 16,839 12,395 15,449
12/05 16,785 15,814 17,430 12,815 15,770
# Account value if you reinvested income and capital gains.
AVERAGE ANNUAL TOTAL RETURNS+
-----------------------------------------------------------------------
ONE ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED
YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
RETURN RETURN RETURN RETURN TO DATE
-----------------------------------------------------------------------
2.51% 3.71% 5.05% 5.32% 5.75% Class I
2.25% 3.45% 4.81% 5.15%* 5.60%* Class A
-2.10% 1.95% 3.92% 4.70%* 5.18%* Class A with load**
-----------------------------------------------------------------------
* Class A Shares of the Fund were offered beginning June 14, 1999. The
performance information shown prior to that represents performance of Class I
Shares, which were offered beginning February 16, 1995. Class A Shares
performance reflects the maximum front-end sales charge and Rule 12b-1 fees
on Class A Shares, neither of which applies to Class I Shares.
** 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, 2005 37 www.bishopstreetfunds.com
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS+
- ------------------------------------------------------------------------------------------
Percentage
Coupon Maturity of
Rate Date Investments
- ------------------------------------------------------------------------------------------
1. Puerto Rico Housing Financing Authority RB 5.000% 12/01/16 2.7%
- ------------------------------------------------------------------------------------------
2. Honolulu City & County, Hawaii RB 5.000% 07/01/35 2.4%
- ------------------------------------------------------------------------------------------
3. Hawaii State Department of Budget & Finance RB 5.650% 10/01/27 2.4%
- ------------------------------------------------------------------------------------------
4. Honolulu City & County, Hawaii GO 5.125% 07/01/15 2.1%
- ------------------------------------------------------------------------------------------
5. Hawaii State Airport System RB 5.750% 07/01/17 2.0%
- ------------------------------------------------------------------------------------------
6. Puerto Rico Public Buildings Authority RB 5.250% 07/01/25 1.9%
- ------------------------------------------------------------------------------------------
7. Maui County, Hawaii GO 5.000% 03/01/14 1.9%
- ------------------------------------------------------------------------------------------
8. Kauai County, Hawaii GO 5.000% 08/01/26 1.8%
- ------------------------------------------------------------------------------------------
9. Hawaii State Airport System RB 6.500% 07/01/14 1.6%
- ------------------------------------------------------------------------------------------
10. Honolulu City & County, Hawaii RB 5.250% 07/01/18 1.5%
- ------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)+
General Obligation 46.8%
Transportation 10.3%
Facilities 7.6%
Higher Education 7.6%
Utilities 6.6%
Airport 6.1%
Power 5.2%
Medical 3.3%
Single-Family Housing 1.7%
Water 1.5%
Development 1.0%
Education 0.9%
General Revenue 0.9%
School District 0.3%
Multi-Family Housing 0.1%
Short-Term Investments 0.1%
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS. NARROW INDUSTRIES ARE UTILIZED FOR
COMPLIANCE PURPOSES, WHEREAS BROAD SECTORS ARE UTILIZED FOR REPORTING.
STATEMENT OF NET ASSETS
Face Market
Amount Value
(000) (000)
---------- ---------
MUNICIPAL BONDS -- 98.5%
CALIFORNIA -- 4.3%
California State, GO
$1,000 5.000%, 02/01/33 $ 1,031
1,275 5.000%, 08/01/33 1,323
1,500 4.750%, 06/01/35 1,508
Bishop Street Funds 38
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ---------
CALIFORNIA -- (CONTINUED)
Coast, Unified School District, School
Facilities District 1-B, GO, FSA Insured (C)
$1,610 5.050%, 08/01/40 $ 306
Highland, Redevelopment Agency, Project Area
No. 1 Tax Allocation, RB, AMBAC Insured
1,440 5.650%, 12/01/24 1,688
La Mesa-Spring Valley, School District,
Electric of 2002 Project, Ser B, GO, FGIC
Insured (C)
630 5.250%, 08/01/27 224
San Bernardino, Community College District,
GO, FSA Insured (C)
1,060 5.000%, 08/01/21 521
San Francisco, Bay Area Transit Financing
Authority, Ser A, RB, MBIA Insured
1,000 4.500%, 07/01/30 998
---------
7,599
---------
FLORIDA -- 0.3%
Leesburg, Utilities, RB, FGIC Insured
500 5.000%, 10/01/34 523
---------
HAWAII -- 80.6%
Hawaii County, Refunding & Improvement
Project, Ser A, GO,
FGIC Insured
450 5.600%, 05/01/12 499
430 5.600%, 05/01/13 481
400 5.550%, 05/01/09 427
Hawaii County, Ser A, GO, FGIC Insured
630 5.500%, 07/15/12 691
Hawaii County, Ser A, GO, FSA Insured
1,000 5.625%, 05/15/19 1,073
500 5.400%, 05/15/15 534
1,000 5.250%, 05/15/11 1,066
1,000 5.000%, 07/15/23 1,048
Hawaii County, Ser A, GO, MBIA Insured
1,055 5.250%, 07/15/18 1,154
1,205 5.000%, 07/15/15 1,304
1,470 5.000%, 07/15/24 1,543
Hawaii State, Airport System, RB, AMT, FGIC
Insured
3,235 5.750%, 07/01/17 3,514
280 5.250%, 07/01/21 292
Hawaii State, Airport System, Second Ser, RB,
AMT, ETM
60 6.900%, 07/01/12 67
December 31, 2005 39 www.bishopstreetfunds.com
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ --------
HAWAII -- (CONTINUED)
Hawaii State, Airport System, Second Ser, RB,
AMT, ETM, MBIA Insured
$1,505 6.900%, 07/01/12 $ 1,682
Hawaii State, Airport System, Ser B, RB, AMT,
FGIC Insured
1,500 6.625%, 07/01/18 1,678
2,500 6.500%, 07/01/14 2,797
500 6.000%, 07/01/19 544
Hawaii State, Department of Budget & Finance,
Electric Company & Subsidiary Project, Ser A,
RB, AMT, FGIC Insured
1,500 4.800%, 01/01/25 1,509
Hawaii State, Department of Budget & Finance,
Electric Company & Subsidiary Project, Ser B,
RB, AMT, XLCA Insured
1,000 5.000%, 12/01/22 1,032
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser A, RB, AMT, AMBAC Insured
460 5.100%, 09/01/32 471
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser A, RB, AMT, MBIA Insured
805 6.200%, 05/01/26 819
3,810 5.650%, 10/01/27 4,134
Hawaii State, Department of Budget & Finance,
Hawaiian Electric, Ser C, RB, AMT, AMBAC Insured
1,000 6.200%, 11/01/29 1,097
Hawaii State, Department of Budget & Finance,
Kapiolani Health Care System Project, RB,
Pre-Refunded @ 102 (A)
100 6.250%, 07/01/06 103
Hawaii State, Department of Budget & Finance,
Queens Health Systems, Ser B, RB, MBIA Insured
750 5.250%, 07/01/11 786
1,445 5.250%, 07/01/12 1,514
1,275 5.250%, 07/01/13 1,336
1,000 5.250%, 07/01/14 1,046
Hawaii State, Harbor Capital Improvement, RB,
AMT, MBIA Insured
2,000 5.500%, 07/01/27 2,050
545 5.400%, 07/01/09 570
Hawaii State, Harbor System, Ser A, RB, AMT,
FSA Insured
2,025 5.750%, 07/01/17 2,187
670 5.750%, 07/01/29 717
1,210 5.700%, 07/01/16 1,305
1,000 5.600%, 07/01/15 1,080
Hawaii State, Harbor System, Ser B, RB, AMT,
AMBAC Insured
200 5.500%, 07/01/19 215
Bishop Street Funds 40
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ---------
HAWAII -- (CONTINUED)
Hawaii State, Harbor System, Ser B, RB, AMT,
FSA Insured
$1,000 5.000%, 01/01/13 $ 1,067
Hawaii State, Highway, RB
1,000 6.000%, 07/01/08 1,062
2,000 6.000%, 07/01/09 2,172
Hawaii State, Highway, RB, FGIC Insured,
Pre-Refunded @ 101 (A)
405 5.000%, 07/01/08 425
Hawaii State, Highway, Ser A, RB, FSA Insured
1,805 5.000%, 07/01/23 1,909
Hawaii State, Highway, Ser B, RB, FSA Insured
2,000 5.000%, 07/01/16 2,167
Hawaii State, Housing, Finance & Development,
Single-Family Housing, Ser A, RB, AMT, FNMA
Collateral
710 5.750%, 07/01/30 710
905 5.400%, 07/01/30 934
165 5.250%, 07/01/13 170
Hawaii State, Housing, Finance & Development,
Single-Family Housing, Ser B, RB, FNMA
Collateral
1,000 5.450%, 07/01/17 1,030
Hawaii State, Housing, Finance & Development,
University of Hawaii Faculty Housing Project,
RB, AMBAC Insured
700 5.650%, 10/01/16 710
415 5.000%, 10/01/06 421
Hawaii State, Kapolei Office Building, Ser A,
COP, AMBAC Insured
1,475 5.250%, 05/01/13 1,559
1,000 5.000%, 05/01/08 1,036
1,000 5.000%, 05/01/14 1,050
1,100 5.000%, 05/01/15 1,154
1,500 5.000%, 05/01/16 1,571
1,000 5.000%, 05/01/17 1,047
500 5.000%, 05/01/18 523
Hawaii State, No. 1 Capitol District State
Office, COP, MBIA Insured
1,000 5.200%, 05/01/14 1,055
175 5.000%, 05/01/11 186
Hawaii State, Pacific Health Special Purpose,
Ser A, RB
615 5.600%, 07/01/33 642
Hawaii State, Ser CL, GO
1,000 6.000%, 03/01/09 1,076
Hawaii State, Ser CL, GO, MBIA Insured
555 6.000%, 03/01/08 585
Hawaii State, Ser CM, GO, FGIC Insured
2,000 6.500%, 12/01/13 2,376
500 6.000%, 12/01/09 548
1,500 6.000%, 12/01/11 1,694
December 31, 2005 41 www.bishopstreetfunds.com
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ---------
HAWAII -- (CONTINUED)
Hawaii State, Ser CP, GO, FGIC Insured
$ 90 5.000%, 10/01/16 $ 93
Hawaii State, Ser CR, GO, MBIA Insured,
Pre-Refunded @ 101 (A)
270 5.250%, 04/01/08 284
Hawaii State, Ser CU, GO, MBIA Insured
475 5.750%, 10/01/11 522
550 5.750%, 10/01/12 602
Hawaii State, Ser CU, GO, MBIA Insured,
Pre-Refunded @ 100 (A)
25 5.750%, 10/01/10 28
Hawaii State, Ser CV, GO, FGIC Insured
1,000 5.250%, 08/01/21 1,071
Hawaii State, Ser CX, GO, FSA Insured
1,000 5.500%, 02/01/21 1,087
Hawaii State, Ser DF, GO, AMBAC Insured
2,400 5.000%, 07/01/25 2,529
Hawaii State, Ser DG, GO, AMBAC Insured
2,000 5.000%, 07/01/17 2,158
Hawaii State, University of Hawaii, Ser A,
RB, FGIC Insured
500 5.500%, 07/15/21 546
500 5.125%, 07/15/32 523
Hawaii State, University of Hawaii, Ser B,
RB, FSA Insured
320 5.250%, 10/01/16 343
775 5.250%, 10/01/17 831
Honolulu City & County, Board of Water Supply,
Ser A, RB, FGIC Insured
2,000 5.000%, 07/01/33 2,085
Honolulu City & County, GO
1,320 5.400%, 09/27/07 1,365
Honolulu City & County, GO, ETM
230 6.000%, 12/01/09 252
Honolulu City & County, Ser A, GO
55 6.000%, 01/01/10 60
Honolulu City & County, Ser A, GO, ETM
500 6.000%, 01/01/09 538
95 6.000%, 01/01/10 104
Honolulu City & County, Ser A, GO, MBIA Insured
1,000 5.250%, 03/01/27 1,066
500 5.250%, 03/01/28 533
1,000 5.000%, 07/01/14 1,086
Honolulu City & County, Ser B, GO, ETM,
FGIC Insured
635 5.500%, 10/01/11 700
Honolulu City & County, Ser B, GO, FGIC Insured,
Pre-Refunded @ 101 (A)
2,000 5.125%, 07/01/09 2,134
Bishop Street Funds 42
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ---------
HAWAII -- (CONTINUED)
Honolulu City & County, Ser B, GO, MBIA Insured
$ 825 5.000%, 07/01/13 $ 893
Honolulu City & County, Ser C, GO, FGIC Insured
125 5.500%, 11/01/07 130
1,200 5.125%, 07/01/11 1,277
1,100 5.125%, 07/01/15 1,169
3,500 5.000%, 07/01/19 3,681
Honolulu City & County, Ser D, GO, AMT, FGIC
Insured
245 4.850%, 02/01/10 255
Honolulu City & County, Ser D, GO, MBIA Insured
885 5.000%, 07/01/19 948
2,000 5.000%, 07/01/23 2,115
Honolulu City & County, Ser E, GO, FGIC Insured
1,500 5.250%, 07/01/20 1,635
Honolulu City & County, Waipahu Towers Project,
Ser A, RB, AMT, GNMA Collateral
200 6.900%, 06/20/35 203
Honolulu City & County, Waste Water, 2nd Board
Resolution, Junior Ser, RB, FGIC Insured
1,000 5.250%, 07/01/12 1,066
900 5.250%, 07/01/13 960
1,000 5.250%, 07/01/17 1,063
2,500 5.250%, 07/01/18 2,659
1,000 5.000%, 07/01/23 1,048
Honolulu City & County, Waste Water, Senior Ser A,
RB, FGIC Insured
4,050 5.000%, 07/01/35 4,222
Kauai County, Public Improvement, Ser B, GO,
MBIA Insured, Pre-Refunded @ 101 (A)
175 5.200%, 08/01/07 182
165 5.150%, 08/01/07 171
155 5.100%, 08/01/07 161
120 5.050%, 08/01/07 124
140 5.000%, 08/01/07 145
135 4.950%, 08/01/07 140
100 4.850%, 08/01/07 103
120 4.750%, 08/01/07 124
Kauai County, Ser A, GO, FGIC Insured
1,610 5.000%, 08/01/21 1,713
2,000 5.000%, 08/01/22 2,123
2,440 5.000%, 08/01/23 2,583
1,555 5.000%, 08/01/24 1,641
500 5.000%, 08/01/25 527
2,900 5.000%, 08/01/26 3,052
December 31, 2005 43 www.bishopstreetfunds.com
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ---------
HAWAII -- (CONTINUED)
Kauai County, Ser A, GO, FGIC Insured,
Pre-Refunded @ 100 (A)
$5,000 6.250%, 08/01/10 $ 5,595
Kauai County, Ser A, GO, MBIA Insured
490 5.625%, 08/01/18 535
Kauai County, Ser A, GO, MBIA Insured,
Pre-Refunded @ 100 (A)
260 5.625%, 08/01/11 287
Maui County, GO, MBIA Insured
3,000 5.000%, 03/01/14 3,251
1,100 5.000%, 03/01/24 1,158
1,450 3.800%, 03/01/16 1,434
Maui County, Ser A, GO
485 5.375%, 03/01/12 525
Maui County, Ser A, GO, FGIC Insured
150 5.000%, 03/01/13 156
Maui County, Ser A, GO, FGIC Insured,
Pre-Refunded @ 101 (A)
100 5.125%, 03/01/08 105
50 5.000%, 03/01/08 52
Maui County, Ser A, GO, MBIA Insured
840 5.000%, 03/01/20 879
Maui County, Ser B, GO, MBIA Insured
500 5.000%, 09/01/17 537
---------
142,411
---------
ILLINOIS -- 1.0%
Illinois State, Educational Facilities
Authority, Northwestern University, RB
670 5.000%, 12/01/38 691
Schaumburg, Ser B, GO, FGIC Insured
1,000 5.000%, 12/01/38 1,031
---------
1,722
---------
INDIANA -- 0.8%
Elkhart, Community School Building Company,
First Meeting, RB, XLCA Insured
1,500 4.500%, 07/15/24 1,506
---------
MASSACHUSETTS -- 0.3%
Massachusetts State, Water Resources Authority,
Ser J, RB
500 5.000%, 08/01/42 514
---------
Bishop Street Funds 44
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face Market
Amount Value
(000) (000)
------ ---------
PUERTO RICO -- 8.7%
Commonwealth of Puerto Rico, GO, MBIA Insured
$1,500 6.500%, 07/01/10 $ 1,687
500 6.500%, 07/01/14 597
Commonwealth of Puerto Rico, Public Improvement,
GO, FSA Insured
435 5.000%, 07/01/21 460
Commonwealth of Puerto Rico, Public Improvement,
Ser A, GO
1,000 5.000%, 07/01/27 1,021
Puerto Rico, Electric Power Authority, Ser DD,
RB, FSA Insured
1,000 5.000%, 07/01/28 1,031
Puerto Rico, Electric Power Authority, Ser HH,
RB, FSA Insured
500 5.250%, 07/01/29 536
Puerto Rico, Housing Financing Authority,
Capital Funding Program, RB
4,360 5.000%, 12/01/16 4,627
Puerto Rico, Housing, Banking & Financing Agency,
Single-Family Mortgage, Affordable Housing Mortgage,
Portfolio I, RB, AMT, GNMA/FNMA/FHLMC Collateral
180 6.100%, 10/01/15 182
Puerto Rico, Industrial Tourist Educational
Medical Environmental Control Facilities,
Hospital Auxilio Mutuo Obligation Group,
Ser A, RB, MBIA Insured
300 6.250%, 07/01/24 303
Puerto Rico, Public Buildings Authority, Ser F, RB
3,000 5.250%, 07/01/25 3,360
Puerto Rico, University of Puerto Rico, Ser O, RB,
MBIA Insured
1,500 5.750%, 06/01/19 1,631
---------
15,435
---------
TEXAS -- 1.1%
Harris County, Houston Texas Sports Authority,
Ser A, Special RB, MBIA Insured (C)
5,000 5.400%, 11/15/40 737
Mckinney, GO, XLCA Insured
1,145 5.000%, 08/15/24 1,201
---------
1,938
---------
WASHINGTON -- 1.4%
Washington State, University of Washington,
RB, FSA Insured
2,315 5.000%, 06/01/23 2,439
---------
TOTAL MUNICIPAL BONDS (Cost $168,610) 174,087
---------
December 31, 2005 45 www.bishopstreetfunds.com
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Market
Value
Shares (000)
-------- ---------
CASH EQUIVALENTS (B) -- 0.1%
93,968 Dreyfus Tax-Exempt Cash Management Fund,
Institutional Shares, 3.200% $ 94
93,968 Fidelity Money Market Tax-Exempt Fund,
Institutional Shares, 3.190% 94
---------
TOTAL CASH EQUIVALENTS (Cost $188) 188
---------
TOTAL INVESTMENTS (COST $168,798) -- 98.6% 174,275
---------
OTHER ASSETS AND LIABILITIES -- 1.4%
Income Distribution Payable (466)
Payable for Fund Shares Redeemed (170)
Investment Adviser Fees Payable (29)
Shareholder Servicing Fees Payable (15)
Administrative Fees Payable (11)
Distribution Fees Payable (7)
Trustees' Fees Payable (2)
Other Assets and Liabilities, Net 3,153
---------
TOTAL OTHER ASSETS AND LIABILITIES 2,453
---------
NET ASSETS -- 100.0% $ 176,728
=========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $ 171,196
Undistributed net investment income 48
Accumulated net realized gain on investments 7
Net unrealized appreciation on investments 5,477
---------
NET ASSETS $ 176,728
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS I
($145,213,395 / 13,485,917 SHARES) $ 10.77
=========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A
($31,514,991 / 2,926,230 SHARES) $ 10.77
=========
MAXIMUM OFFERING PRICE PER SHARE --
CLASS A SHARES ($10.77 / 97.00%) $ 11.10
=========
Bishop Street Funds 46
HAWAII MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
(A) PREREFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
(B) RATE SHOWN IS THE 7-DAY YIELD AS OF DECEMBER 31, 2005.
(C) ZERO COUPON SECURITY -- THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME
OF PURCHASE.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT -- ALTERNATIVE MINIMUM TAX
COP -- CERTIFICATE OF PARTICIPATION
ETM -- ESCROWED TO MATURITY
FGIC -- FINANCIAL GUARANTEE INSURANCE CORPORATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
FSA -- FINANCIAL SECURITY ASSURANCE
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INVESTORS ASSURANCE
RB -- REVENUE BOND
SER -- SERIES
XLCA -- XL CAPITAL
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 47 www.bishopstreetfunds.com
- --------------------------------------------------------------------------------
BISHOP STREET
MANAGEMENT DISCUSSION
FUNDS
- --------------------------------------------------------------------------------
MONEY MARKET & TREASURY MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Economic growth in the U.S. continued at a steady pace during 2005 despite
increases in short term interest rates. Growth was led primarily by healthy
consumer spending while corporate capital expenditures were soft. Unemployment
declined throughout the year to levels last seen in 2001 and the labor sector
added in excess of 2 million jobs (Bureau of Labor Statistics: Non-farm
Payrolls), contributing to consumer strength. The manufacturing sector remained
robust despite the difficulties plaguing the U.S. automotive industry. A demand
driven rise in commodity and energy prices around the globe has led to increased
pricing pressure for intermediate goods. There is, however, scant evidence of
transmission to core consumer prices (ex. food and energy).
The yield curve flattened in 2005 as the Federal Reserve policy makers increased
the Federal Funds target rate at each meeting during the year. Thirteen
consecutive increases in monetary policy rates have reduced the term premium in
the U.S. Treasury yield curve. The alignment of short term and long term
interest rates has brought an end to the "carry" trade which had benefited from
the previously steep curve. At year end, the Federal Open Market Committee
indicated that the monetary policy tightening campaign was nearing an end and
that current policy rates may no longer be accommodative. Markets, however,
continue to price in 1-2 additional Federal Funds Rate increases in 2006.
Significant increases in short term interest rates have been followed by healthy
inflows into money market funds. Money market yields often increase more quickly
than bank deposit rates in rising yield environments and therefore offer more
attractive opportunities for investors. Taxable money funds increased 6% in 2005
to $1.659 trillion.
Bishop Street Funds 48
- --------------------------------------------------------------------------------
[LOGO]
BISHOP
STREET
FUNDS
- --------------------------------------------------------------------------------
The Money Market and Treasury Money Market Funds (the "Funds") were maintained
at a conservative maturity stance which enabled us to continually reinvest at
increasing yield levels throughout 2005. As monetary policy rates approach
neutral levels, however, we expect that opportunities to capture additional
yield premium by extending the maturity of the Funds will emerge in 2006.
While growth is strong and inflation is benign, we are conscious of the risks
posed by rising energy and commodity prices. The direction of future interest
rates in the U.S. has become "data dependent". We believe that the Federal Funds
rate will reach a level of 5.00% in 2006, after which the Fed will pause to
reassess the state of the economy. We expect that the future direction of
interest rates will become clearer with time. We continue to strive to improve
the yield of the Funds while maintaining a high level of credit quality.
December 31, 2005 49 www.bishopstreetfunds.com
MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
Commercial Paper 62.9%
Certificates of Deposit/Bank Notes 13.3%
U.S. Government Agency Obligations 10.5%
Asset Backed Securities 8.2%
Corporate Obligations 3.6%
Collateralized Mortgage Obligations 1.5%
- --------------------------------------------------------------------------------
+ PERCENTAGES ARE BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
------ ---------
COMMERCIAL PAPER (B) -- 62.4%
AUTO FINANCE -- 4.6%
BMW Vehicle Lease Trust
$9,500 4.182%, 01/03/06 $ 9,498
---------
BANKS -- 30.6%
ANZ
3,800 4.372%, 02/22/06 3,776
Danske Bank
9,000 4.296%, 01/30/06 8,969
Deutsche Ausgleichsbank
9,000 4.394%, 01/03/06 8,998
Lloyds TSB Bank
8,500 4.285%, 01/17/06 8,484
Royal Bank of Canada
8,000 4.018%, 01/11/06 7,991
Societe Generale
6,000 4.164%, 01/27/06 5,982
3,000 4.279%, 02/01/06 2,989
UBS Finance
9,500 4.192%, 01/03/06 9,498
Westpack Banking
6,400 4.382%, 02/28/06 6,355
---------
63,042
---------
FINANCIALS -- 27.2%
Abbey National Treasury Services
9,000 4.324%, 01/03/06 8,998
ABN-Amro North America Finance
7,500 4.262%, 01/19/06 7,484
Atlantic Asset Securitization
9,000 4.248%, 01/06/06 8,995
Bishop Street Funds 50
MONEY MARKET FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
------ ---------
FINANCIALS -- (CONTINUED)
CBA Finance
$2,000 4.152%, 01/03/06 $ 2,000
7,000 4.272%, 01/31/06 6,975
1,000 4.441%, 03/14/06 991
Chariot Funding
5,700 4.338%, 01/31/06 5,679
Charta
6,000 4.113%, 01/19/06 5,988
Svenska Handels New York
5,000 4.286%, 02/16/06 4,973
Svenska Handelsbank
4,000 4.098%, 01/20/06 3,991
---------
56,074
---------
TOTAL COMMERCIAL PAPER (Cost $128,614) 128,614
---------
CERTIFICATES OF DEPOSIT/BANK NOTES -- 18.0%
Barclays Capital New York
8,000 4.300%, 02/01/06 8,000
Citigroup
4,500 4.125%, 01/20/06 4,500
Dresdner Funding Trust I
8,500 4.100%, 01/17/06 8,500
Toronto Dominion New York
8,000 4.290%, 01/23/06 8,000
Wells Fargo Bank
8,000 4.310%, 01/26/06 8,000
---------
TOTAL CERTIFICATES OF DEPOSIT/BANK NOTES (Cost $37,000) 37,000
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 11.1%
FHLB (B)
5,000 4.161%, 01/25/06 4,986
FHLMC
6,000 3.990%, 01/24/06 5,985
4,000 2.180%, 01/30/06 3,987
FNMA (B)
8,000 4.208%, 01/26/06 7,977
---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $22,935) 22,935
---------
December 31, 2005 51 www.bishopstreetfunds.com
MONEY MARKET FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Face
Amount Value
(000) (000)
-------- ---------
ASSET BACKED SECURITIES -- 10.2%
AUTO FINANCE -- 7.5%
Americredit Automobile Receivables Trust,
Ser 2005-CF, Cl A1
$1,809 3.845%, 09/06/06 $ 1,809
Honda Auto Receivables Owner Trust, Ser
2005-4, Cl A1
1,452 3.827%, 08/21/06 1,452
Honda Auto Receivables Owner Trust,
Ser 2005-6, Cl A1
4,000 4.512%, 12/18/06 4,000
Nissan Auto Lease Trust, Ser 2005-A, Cl A1
3,813 4.271%, 11/15/06 3,813
Volkswagen Auto Loan Enhanced Trust,
Ser 2005-1, Cl A1
4,376 4.366%, 11/20/06 4,376
---------
15,450
---------
MORTGAGE RELATED -- 1.6%
Lothian Mortgages, Ser 4A, Cl A1 (C)
1,675 4.369%, 01/24/06 1,675
Permanent Financing, Ser 7, Cl 1A
1,540 4.320%, 03/10/06 1,540
---------
3,215
---------
OTHER (C)-- 1.1%
GE Commercial Equipment Financing,
Ser 2005-1A, Cl A1
2,281 3.994%, 09/22/06 2,281
---------
TOTAL ASSET BACKED SECURITIES (Cost $20,946) 20,946
---------
CORPORATE OBLIGATIONS (A) -- 3.8%
FINANCIALS -- 3.8%
American Express Centurion
3,500 4.339%, 02/28/06 3,500
General Electric Capital
2,300 4.440%, 10/06/06 2,300
General Electric Capital MTN
2,000 4.470%, 12/15/06 2,000
---------
TOTAL CORPORATE OBLIGATIONS (Cost $7,800) 7,800
---------
TOTAL INVESTMENTS (COST $217,295) -- 105.5% 217,295
---------
Bishop Street Funds 52
MONEY MARKET FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
---------
OTHER ASSETS AND LIABILITIES -- (5.5%)
Cash Overdraft $ (9,147)
Payable for Capital Shares Redeemed (1,734)
Income Distribution Payable (548)
Administrative Fees Payable (20)
Investment Adviser Fees Payable (19)
Shareholder Servicing Fees Payable (18)
Distribution Fees Payable (7)
Trustees' Fees Payable (2)
Other Assets and Liabilities, Net 185
---------
TOTAL OTHER ASSETS AND LIABILITIES (11,310)
---------
NET ASSETS -- 100.0% $ 205,985
=========
NET ASSETS:
Fund Shares (unlimited authorization -- no par value) $ 206,012
Distributions in Excess of Net Investment Income (4)
Accumulated Net Realized Loss on Investments (23)
---------
NET ASSETS $ 205,985
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS I
($170,454,783 / 170,482,899 SHARES) $ 1.00
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A
($35,530,615 / 35,531,815 SHARES) $ 1.00
=========
(A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON DECEMBER 31, 2005. THE MATURITY DATE SHOWN IS THE
NEXT SCHEDULED RESET DATE.
(B) REPRESENTS THE EFFECTIVE YIELD AT THE DATE OF PURCHASE.
(C) 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."
CL -- CLASS
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SER -- SERIES
COST FIGURES ARE SHOWN WITH "000S" OMITTED.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 53 www.bishopstreetfunds.com
TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECTOR WEIGHTINGS (UNAUDITED)+
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.]
U.S. Treasury Obligations 94.6%
Repurchase Agreement 5.4%
- --------------------------------------------------------------------------------
+ PERCENTAGES BASED ON TOTAL INVESTMENTS.
STATEMENT OF NET ASSETS
Face
Amount Value
(000) (000)
------ ---------
U.S. TREASURY OBLIGATIONS (A) -- 97.0%
U.S. Treasury Bills
$10,000 3.557%, 01/05/06 $ 9,996
15,000 4.026%, 01/17/06 14,977
40,000 3.589%, 01/19/06 39,924
15,000 3.684%, 01/26/06 14,962
10,000 3.858%, 02/02/06 9,966
20,000 3.871%, 02/09/06 19,917
15,000 3.902%, 02/16/06 14,926
8,000 3.869%, 03/09/06 7,943
10,000 4.008%, 03/16/06 9,919
45,000 3.913%, 03/23/06 44,607
15,000 3.956%, 04/06/06 14,845
15,000 3.995%, 04/13/06 14,832
---------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $216,814) 216,814
---------
REPURCHASE AGREEMENT -- 5.5%
12,400 Lehman Brothers 3.250%, dated 12/30/05,
to be repurchased on 01/03/06, repurchase
price $12,401,593 (collateralized by a
U.S. Treasury Note, par value $11,710,000,
5.750%, 08/15/10; total market value $12,652,260)
(Cost $12,400) 12,400
---------
TOTAL INVESTMENTS (COST $229,214) -- 102.5% 229,214
---------
Bishop Street Funds 54
TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
(CONTINUED)
Value
(000)
---------
OTHER ASSETS AND LIABILITIES -- (2.5)%
Payable for Investment Securities Purchased $ (14,977)
Income Distribution Payable (662)
Administrative Fees Payable (22)
Shareholder Servicing Fees Payable (19)
Investment Adviser Fee Payable (9)
Trustees' Fees Payable (2)
Other Assets and Liabilities, Net 10,091
---------
TOTAL OTHER ASSETS AND LIABILITIES (5,600)
---------
NET ASSETS -- 100.0% $ 223,614
=========
NET ASSETS:
Fund Shares of Institutional Shares (unlimited
authorization -- no par value) $ 223,668
Accumulated net realized loss on investments (54)
---------
TOTAL NET ASSETS $ 223,614
=========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- INSTITUTIONAL CLASS
($223,613,711 / 223,669,395 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.
December 31, 2005 55 www.bishopstreetfunds.com
BISHOP STREET FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
(IN THOUSANDS)
Tax High
Large Cap Strategic Managed Grade
Growth Growth Equity Income
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend Income $ 1,702 $ 724 $ 667 $ 72
Interest Income -- -- -- 6,449
Securities Lending, Net 22 -- -- 82
- ----------------------------------------------------------------------------------------------
Total Investment Income 1,724 724 667 6,603
- ----------------------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 893 744 264 793
Shareholder Servicing Fee 302 251 89 361
Administrative Fees 241 201 71 289
Distribution Fees, Class A 1 -- -- --
Transfer Agent Fees 52 38 30 53
Professional Fees 30 37 11 44
Trustees' Fees 17 13 5 20
Custody Fees 12 10 4 14
Printing Fees 12 12 4 15
Registration Fees 5 3 6 4
Miscellaneous Expenses 19 10 6 29
- ----------------------------------------------------------------------------------------------
Total Expenses 1,584 1,319 490 1,622
- ----------------------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (90) -- (48) (185)
Shareholder Servicing Fees (181) (151) (54) (216)
Administrative Fees (105) (88) (31) (125)
- ----------------------------------------------------------------------------------------------
Total Waivers (376) (239) (133) (526)
- ----------------------------------------------------------------------------------------------
Net Expenses 1,208 1,080 357 1,096
- ----------------------------------------------------------------------------------------------
Net Investment Income (Loss) 516 (356) 310 5,507
- ----------------------------------------------------------------------------------------------
Net Realized Gain (Loss) on Investments 11,372 3,839 (27) 880
Change in Unrealized Appreciation
(Depreciation) on Investments (12,061) 9,564 25 (3,598)
- ----------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments (689) 13,403 (2) (2,718)
- ----------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Resulting from Operations ($ 173) $13,047 $ 308 $ 2,789
==============================================================================================
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, 2005
(IN THOUSANDS)
Hawaii Treasury
Municipal Money Money
Bond Market Market
Fund Fund Fund
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend Income $ 35 $ -- $ --
Interest Income 8,027 6,691 7,208
- -------------------------------------------------------------------------------
Total Investment Income 8,062 6,691 7,208
- -------------------------------------------------------------------------------
EXPENSES:
Investment Adviser Fees 624 618 710
Shareholder Servicing Fee 446 515 591
Administrative Fees 356 412 473
Distribution Fees, Class A 78 64 --
Transfer Agent Fees 70 71 54
Professional Fees 56 64 69
Trustees' Fees 24 28 33
Printing Fees 19 28 25
Custody Fees 18 20 24
Registration Fees 5 5 5
Miscellaneous Expenses 47 32 64
- -------------------------------------------------------------------------------
Total Expenses 1,743 1,857 2,048
- -------------------------------------------------------------------------------
Less Waivers:
Investment Adviser Fees (185) (273) (447)
Shareholder Servicing Fees (267) (309) (355)
Administrative Fees (232) (179) (206)
- -------------------------------------------------------------------------------
Total Waivers (684) (761) (1,008)
- -------------------------------------------------------------------------------
Net Expenses 1,059 1,096 1,040
- -------------------------------------------------------------------------------
Net Investment Income 7,003 5,595 6,168
- -------------------------------------------------------------------------------
Net Realized Gain (Loss) on Investments 1,417 (1) (7)
- -------------------------------------------------------------------------------
Change in Unrealized Depreciation
on Investments (4,087) -- --
- -------------------------------------------------------------------------------
Net Realized and Unrealized Loss
on Investments (2,670) (1) (7)
- -------------------------------------------------------------------------------
Increase in Net Assets
Resulting from Operations $ 4,333 $5,594 $ 6,161
===============================================================================
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, 2005 57 www.bishopstreetfunds.com
BISHOP STREET FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)
Large Cap
Growth Fund
- ------------------------------------------------------------------------------------------------
2005 2004
- ------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 516 $ 1,039
Net Realized Gain on Investments 11,372 2,061
Change in Unrealized Appreciation (Depreciation)
on Investments (12,061) 2,789
- ------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets Resulting from Operations (173) 5,889
- ------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (523) (1,043)
Class A Shares (1) (6)
- ------------------------------------------------------------------------------------------------
Total Dividends (524) (1,049)
- ------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 8,226 38,484
Reinvestments of Cash Distributions 403 711
Proceeds from Shares Issued in Connection with Conversion
from Class A Shares(1) 1,428 --
Cost of Shares Redeemed (91,416) (30,690)
- ------------------------------------------------------------------------------------------------
Total Class I Capital Share Transactions (81,359) 8,505
- ------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 2 144
Reinvestments of Cash Distributions -- 3
Value of Shares Liquidated in Connection with Conversion
to Class I Shares(1) (1,428) --
Cost of Shares Redeemed (99) (161)
- ------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions (1,525) (14)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
From Capital Share Transactions (82,884) 8,491
- ------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (83,581) 13,331
- ------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 171,296 157,965
- ------------------------------------------------------------------------------------------------
End of Year $ 87,715 $ 171,296
================================================================================================
Undistributed Net Investment Income $ -- $ --
================================================================================================
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 858 4,055
Shares Issued in Lieu of Cash Distributions 42 74
Shares Issued in Connection with Conversion from Class A Shares(1) 155 --
Shares Redeemed (9,545) (3,249)
- ------------------------------------------------------------------------------------------------
Total Class I Share Transactions (8,490) 880
- ------------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued -- 15
Shares Issued in Lieu of Cash Distributions -- --
Value of Shares Liquidated in Connection with Conversion
to Class I Shares(1) (156) --
Shares Redeemed (10) (17)
- ------------------------------------------------------------------------------------------------
Total Class A Share Transactions (166) (2)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding from Share Transactions (8,656) 878
================================================================================================
(1) ON APRIL 29, 2005, CLASS A SHARES OF THE BISHOP STREET EQUITY FUND WERE
CONVERTED TO CLASS I SHARES. SEE NOTE 1 IN NOTES TO FINANCIAL STATEMENTS
FOR ADDITIONAL INFORMATION.
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
- ------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- ------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income (Loss) $ (356) $ (217) $ 310 $ 253
Net Realized Gain (Loss) on Investments 3,839 1,549 (27) 1,216
Change in Unrealized Appreciation on Investments 9,564 5,453 25 706
- ------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations 13,047 6,785 308 2,175
- ------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares -- -- (311) (254)
Capital Gains:
Class I Shares (2,019) -- (49) (1,183)
- ------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (2,019) -- (360) (1,437)
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 46,780 34,231 11,074 3,777
Reinvestments of Cash Distributions 1,500 -- 29 80
Cost of Shares Redeemed (15,135) (8,693) (12,355) (3,828)
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
From Capital Share Transactions 33,145 25,538 (1,252) 29
- ------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 44,173 32,323 (1,304) 767
- ------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 79,168 46,845 35,575 34,808
- ------------------------------------------------------------------------------------------------------
End of Year $ 123,341 $ 79,168 $ 34,271 $ 35,575
======================================================================================================
Accumulated Net Investment Loss/Distributions
in Excess of Net Investment Income $ (8) $ (15) $ (1) $ --
======================================================================================================
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 3,544 2,842 921 311
Shares Issued in Lieu of Cash Distributions 105 -- 2 7
Shares Redeemed (1,105) (715) (1,019) (316)
- ------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding from
Share Transactions 2,544 2,127 (96) 2
======================================================================================================
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, 2005 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
- -----------------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 5,507 $ 5,305 $ 7,003 $ 7,014
Net Realized Gain on Investments 880 837 1,417 1,678
Change in Unrealized Depreciation on Investments (3,598) (1,214) (4,087) (2,892)
- -----------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations 2,789 4,928 4,333 5,800
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (5,502) (5,288) (5,833) (5,870)
Class A Shares (3) (10) (1,167) (1,133)
Capital Gains:
Class I Shares (1,158) (546) (1,183) (1,540)
Class A Shares -- (1) (252) (317)
- -----------------------------------------------------------------------------------------------------------------
Total Dividends and Distributions (6,663) (5,845) (8,435) (8,860)
- -----------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Class I Shares:
Proceeds from Shares Issued 18,810 40,169 18,692 14,569
Reinvestments of Cash Distributions 3,659 2,530 1,160 1,202
Proceeds from Shares Issued in Connection with Conversion
from Class A Shares(1) 310 -- -- --
Cost of Shares Redeemed (34,634) (19,460) (19,845) (15,048)
- -----------------------------------------------------------------------------------------------------------------
Total Class I Capital Share Transactions (11,855) 23,239 7 723
- -----------------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 96 2 2,724 2,467
Reinvestments of Cash Distributions 1 7 652 680
Value of Shares Liquidated in Connection with Conversion
to Class I Shares(1) (310) -- -- --
Cost of Shares Redeemed (14) (57) (1,612) (3,099)
- -----------------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions (227) (48) 1,764 48
- -----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (12,082) 23,191 1,771 771
- -----------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (15,956) 22,274 (2,331) (2,289)
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 157,395 135,121 179,059 181,348
- -----------------------------------------------------------------------------------------------------------------
End of Year $ 141,439 $ 157,395 $ 176,728 $ 179,059
=================================================================================================================
Undistributed Net Investment Income $ 9 $ 9 $ 48 $ 45
=================================================================================================================
SHARE TRANSACTIONS:
Class I Shares:
Shares Issued 1,834 3,890 1,710 1,310
Shares Issued in Lieu of Cash Distributions 358 244 107 108
Shares Issued in Connection with Conversion
from Class A Shares(1) 30 -- -- --
Shares Redeemed (3,370) (1,881) (1,813) (1,356)
- -----------------------------------------------------------------------------------------------------------------
Total Class I Share Transactions (1,148) 2,253 4 62
- -----------------------------------------------------------------------------------------------------------------
Class A Shares:
Shares Issued 10 -- 249 221
Shares Issued in Lieu of Cash Distributions -- 1 60 61
Value of Shares Liquidated in Connection with Conversion
to Class I Shares(1) (30) -- -- --
Shares Redeemed (2) (6) (149) (280)
- -----------------------------------------------------------------------------------------------------------------
Total Class A Share Transactions (22) (5) 160 2
- -----------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Shares Outstanding
from Share Transactions (1,170) 2,248 164 64
=================================================================================================================
(1) ON APRIL 29, 2005, CLASS A SHARES OF THE BISHOP STREET HIGH GRADE INCOME
FUND WERE CONVERTED TO CLASS I SHARES.
SEE NOTE 1 IN NOTES TO FINANCIAL STATEMENTS FOR ADDITIONAL INFORMATION.
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
Fund Market Fund
- --------------------------------------------------------------------------------------------------------
2005 2004 2005 2004
- --------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES FROM OPERATIONS:
Net Investment Income $ 5,595 $ 2,031 $ 6,168 $ 2,158
Net Realized Loss on Investments (1) (2) (7) (46)
- --------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations 5,594 2,029 6,161 2,112
- --------------------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income:
Class I Shares (4,936) (1,908) (6,178) (2,173)
Class A Shares (663) (122) -- --
- --------------------------------------------------------------------------------------------------------
Total Dividends (5,599) (2,030) (6,178) (2,173)
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS: (ALL AT $1.00 PER SHARE):
Class I Shares:
Proceeds from Shares Issued 456,536 443,764 554,900 501,131
Reinvestments of Cash Distributions 192 83 13 6
Cost of Shares Redeemed (454,204) (458,078) (539,435) (563,288)
- --------------------------------------------------------------------------------------------------------
Total Class I Capital Share Transactions 2,524 (14,231) 15,478 (62,151)
- --------------------------------------------------------------------------------------------------------
Class A Shares:
Proceeds from Shares Issued 157,534 47,431 -- --
Reinvestments of Cash Distributions 646 99 -- --
Cost of Shares Redeemed (140,448) (47,170) -- --
- --------------------------------------------------------------------------------------------------------
Total Class A Capital Share Transactions 17,732 360 -- --
- --------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 20,256 (13,871) 15,478 (62,151)
- --------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 20,251 (13,872) 15,461 (62,212)
- --------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 185,734 199,606 208,153 270,365
- --------------------------------------------------------------------------------------------------------
End of Year $ 205,985 $ 185,734 $ 223,614 $ 208,153
========================================================================================================
Undistributed (Distributions in Excess of)
Net Investment Income $ (4) $ -- $ -- $ 10
========================================================================================================
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, 2005 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
--------- ------------- -------------- ---------- ---------- ------- -------------
- -----------------------
LARGE CAP GROWTH FUND
- -----------------------
CLASS I SHARES:
2005(1) $ 9.78 $ 0.04 $ 0.11 $ 0.15 $(0.04) $ -- $(0.04)
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) -- -- --
- -----------------------
STRATEGIC GROWTH FUND
- -----------------------
CLASS I SHARES:
2005(1) $13.08 $(0.05) $ 1.56 $ 1.51 $ -- $(0.24) $(0.24)
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
- -----------------------
CLASS I SHARES:
2005(1) $12.32 $ 0.10 $(0.01) $ 0.09 $(0.11) $(0.02) $(0.13)
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
- -----------------------
CLASS I SHARES:
2005(1) $10.33 $ 0.39 $(0.19) $ 0.20 $(0.39) $(0.08) $(0.47)
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)
+ 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) 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
--------- -------- ----------- ------------ ----------------- ------------- ---------
- -----------------------
LARGE CAP GROWTH FUND
- -----------------------
CLASS I SHARES:
2005(1) $ 9.89 1.59% $ 87,715 1.00% 1.31% 0.43% 40%
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
- -----------------------
STRATEGIC GROWTH FUND
- -----------------------
CLASS I SHARES:
2005(1) $14.35 11.52% $123,341 1.07% 1.31% (0.35)% 55%
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
- -----------------------
CLASS I SHARES:
2005(1) $12.28 0.68% $ 34,271 1.00% 1.37% 0.87% 29%
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
- -----------------------
CLASS I SHARES:
2005(1) $10.06 2.00% $141,439 0.76% 1.13% 3.82% 45%
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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 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
- ---------------------------
CLASS I SHARES:
2005(2) $11.02 $ 0.43 $(0.16) $ 0.27 $(0.43) $(0.09) $(0.52)
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)
CLASS A SHARES:
2005(2) $11.02 $ 0.41 $(0.16) $ 0.25 $(0.41) $(0.09) $(0.50)
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)
- ---------------------------
MONEY MARKET FUND
- ---------------------------
CLASS I SHARES:
2005(2) $ 1.00 $ 0.03 $ -- $ 0.03 $(0.03) $ -- $(0.03)
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)
CLASS A SHARES:
2005(2) $ 1.00 $ 0.03 $ -- $ 0.03 $(0.03) $ -- $(0.03)
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
- ---------------------------
CLASS I SHARES:
2005(2) $ 1.00 $ 0.03 $ -- $ 0.03 $(0.03) $ -- $(0.03)
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)
+ 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) 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
- --------------------------
CLASS I SHARES:
2005(2) $10.77 2.51% $145,213 0.55% 0.93% 3.97% 41%
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
CLASS A SHARES:
2005(2) $10.77 2.25% 31,515 0.80% 1.18% 3.72% 41%
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
- --------------------------
MONEY MARKET FUND
- --------------------------
CLASS I SHARES:
2005(2) $ 1.00 2.78% $170,455 0.50% 0.87% 2.73% n/a
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
CLASS A SHARES:
2005(2) $ 1.00 2.53% $ 35,531 0.75% 1.12% 2.60% n/a
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
- --------------------------
CLASS I SHARES:
2005(2) $ 1.00 2.62% $223,614 0.44% 0.87% 2.61% n/a
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
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
December 31, 2005 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 Large Cap Growth Fund (previously
known as 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 Hawaii Municipal Bond Fund 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.
Prior to April 29, 2005, the Large Cap Growth Fund and High Grade Income
Fund offered Class A Shares and Class I Shares. Effective April 29, 2005, Class
A Shares were fully liquidated and converted as Class I Shares.
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 increases and
decreases in net assets from operations 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
Bishop Street Funds 66
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independent pricing agents. If a security price cannot be obtained from an
independent, third-party pricing agent, the Funds seek to obtain a bid price
from at least one independent broker.
Securities for which market prices are not "readily available" are valued
in accordance with Fair Value Procedures established by the Funds' Board of
Trustees (the "Board"). The Funds' Fair Value Procedures are implemented through
a Fair Value Pricing Committee (the "Committee") designated by the Funds' Board.
Some of the more common reasons that may necessitate that a security be valued
using Fair Value Procedures include: the security's trading has been halted or
suspended; the security has been 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 specific identification. Interest income is recorded on the
accrual basis; dividend income is recorded on ex-dividend date.
Discounts and premiums are accreted or amortized over the life of each
security and are recorded as interest income. The Large Cap Growth, 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, 2005 67 www.bishopstreetfunds.com
BISHOP STREET FUNDS
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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 Large Cap Growth, 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. At December 31, 2005, there were no illiquid securities held by the
Funds.
CASH OVERDRAFT CHARGES
Per the terms of an informal agreement with Union Bank of California,
N.A., the custodian of the Funds, if a fund has a cash overdraft on a given day,
it will be assessed an overdraft charge of 110% of the current Fed Funds rate.
Cash overdraft charges are included in miscellaneous expenses on the Statement
of Operations.
3. INVESTMENT ADVISORY AND CUSTODIAN AGREEMENT
Investment advisory services are provided to the Funds by Bishop Street
Capital Management (the "Adviser"), a registered adviser and wholly-owned
subsidiary of First Hawaiian Bank. First Hawaiian Bank is a subsidiary of Banc
West Corporation, itself a subsidiary of BNP Paribas. The Adviser is entitled to
receive an annual fee of 0.74% of the average daily net assets of the Large Cap
Growth, 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 has voluntarily agreed to waive a portion of
its advisory fee to the extent necessary to keep operating expenses at or below
certain percentages of the respective average daily net assets. The voluntary
expense limitations are as follows: Large Cap Growth Fund (Class I) 1.00%,
Strategic Growth Fund (Class I) 1.25%, Tax Managed Equity Fund (Class I) 1.00%,
High Grade Income Fund (Class I) 0.76%, Hawaii Municipal Bond Fund (Class I)
0.55%, Hawaii Municipal Bond Fund (Class A) 0.80%,
Bishop Street Funds 68
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Money Market Fund (Class I) 0.50%, Money Market Fund (Class A) 0.75% and
Treasury Money Market Fund (Class I) 0.44%.
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.
Fischer, Francis, Trees & Watts ("FFTW") serves as the investment
sub-adviser for the Money Market Funds, pursuant to a sub-adviser agreement
dated July 1, 2005, as approved by shareholders on August 15, 2005. FFTW is
entitled to receive from the Adviser a fee, computed daily and paid monthly, at
the annual rate of 0.060% of the average daily net assets of the Money Market
Funds up to $500 million and 0.020% of the average daily net assets of the Money
Market Funds in excess of $500 million. Prior to July 1, 2005, Wellington
Management Company, LLP served as the investment sub-adviser for the Money
Market Funds. Wellington was entitled to receive from the Adviser a fee,
computed daily and paid monthly, at the annual rate of 0.075% of the average
daily net assets of the Money Market Funds up to $500 million and 0.020% of the
average daily net assets of the Money Market Funds in excess of $500 million.
Union Bank of California, N.A. acts as custodian (the "Custodian") for the
Funds. The Custodian plays no role in determining the investment policies of the
Funds or which securities are to be purchased or sold by the Funds.
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 administrative fee to the extent necessary to keep operating
expenses at or below certain percentages of the respective average daily net
assets.
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
December 31, 2005 69 www.bishopstreetfunds.com
BISHOP STREET FUNDS
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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 shareholder servicing fee to the extent necessary to keep
operating expenses at or below certain percentages of the respective average
daily net assets.
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 33 1/3% of the
total asset value of the Fund (including the loan collateral). No Fund will lend
portfolio securities to its investment adviser, sub-adviser or their affiliates
unless it has applied for and received specific authority to do so from the SEC.
Loans of portfolio securities will be fully collateralized by cash, letters of
credit or U.S. Government securities, and the collateral will be maintained in
an amount equal to at least 100% of the current market value of the loaned
securities by marking to market daily, although the borrower will be required to
deliver collateral of 102% of the market value of borrowed securities. 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. Securities lending on the Statement of Operations
is net of commissions to the security lending agent.
6. INVESTMENT TRANSACTIONS
The cost of security purchases and the proceeds from the sale and
maturities of securities, other than short-term investments for the year ended
December 31, 2005 are presented below for the Funds.
Large Cap Strategic Tax High Grade Hawaii
Growth Growth Managed Income Municipal
Fund Fund Equity Fund Fund Bond Fund
(000) (000) (000) (000) (000)
--------- --------- ----------- ---------- ---------
Purchases
U.S.
Government
Securities $ -- $ -- $ -- $ 31,584 $ --
Other 47,511 84,326 10,084 27,449 73,378
Sales and Maturities
U.S.
Government
Securities $ -- $ -- $ -- $ 42,379 $ --
Other 128,722 54,162 11,530 33,185 70,089
Bishop Street Funds 70
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 substantially all of its
taxable income and net capital gains. Accordingly, no provision for federal
income taxes is required. The timing and characterization of certain income and
capital gains distributions are determined annually in accordance with Federal
tax regulations which may differ from accounting principles generally accepted
in the United States of America. As a result, net investment income (loss) and
net realized gain (loss) on investment transactions for the reporting period may
differ from distributions during such period. These book/tax differences may be
temporary or permanent in nature. To the extent these differences are permanent,
they are charged or credited to paid-in-capital or accumulated net realized
gain, as appropriate, in the period that the differences arise.
Accordingly, the following permanent differences, primarily attributable
to net operating loss, paydown gains and losses, reclassification of
distributions, and expiration of capital loss carryforwards have been
reclassified:
Undistributed Accumulated Paid
Net Investment Realized in
Income Gain Capital
(000) (000) (000)
-------------- ----------- --------
Large Cap Growth Fund $ 8 $ -- $ (8)
Strategic Growth Fund 363 (359) (4)
High Grade Income Fund (2) 2 --
Money Market Fund -- 2 (2)
The tax character of dividends and distributions declared during the years
ended December 31, 2005 and December 31, 2004 were as follows:
Ordinary Tax Exempt Long-Term
Income Income Capital Gain Total
(000) (000) (000) (000)
-------- ---------- ------------ -------
Large Cap Growth
Fund
2005 $ 524 $ -- $ -- $ 524
2004 1,049 -- -- 1,049
Strategic Growth
Fund
2005 $ -- $ -- $ 2,019 $2,019
2004 -- -- -- --
Tax Managed
Equity Fund
2005 $ 311 $ -- $ 49 $ 360
2004 311 -- 1,126 1,437
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Ordinary Tax Exempt Long-Term
Income Income Capital Gain Total
(000) (000) (000) (000)
--------- --------- ------------ --------
High Grade
Income Fund
2005 $6,284 $ -- $ 379 $6,663
2004 5,298 -- 547 5,845
Hawaii Municipal
Bond Fund
2005 $ 24 $7,000 $1,411 $8,435
2004 71 7,003 1,786 8,860
Money Market Fund
2005 $5,599 $ -- $ -- $5,599
2004 2,030 -- -- 2,030
Treasury Money
Market Fund
2005 $6,178 $ -- $ -- $6,178
2004 2,173 -- -- 2,173
As of December 31, 2005, the components of Distributable Earnings
(Accumulated Losses) on a tax basis were as follows:
Treasury
Large Cap Strategic Tax High Grade Hawaii Money Money
Growth Growth Managed Income Municipal Market Market
Fund Fund Equity Fund Fund Bond Fund Fund Fund
(000) (000) (000) (000) (000) (000) (000)
--------- ---------- ----------- ---------- --------- -------- --------
Undistributed
(Distributions in
excess of) net
investment
income $ -- $ -- $ 7 $ 9 $ -- $ (4) $ --
Undistributed
tax exempt
income -- -- -- -- 2 -- --
Undistributed
long-term
capital gain -- 2,042 -- -- 7 -- --
Capital loss
carryforwards (52,057) -- (30) -- -- (23) (54)
Post-October
Losses -- -- -- (44) -- -- --
Other Temporary
Differences -- (8) (10) -- -- -- --
Unrealized
appreciation 6,408 22,858 6,828 808 5,523 -- --
-------- -------- -------- -------- -------- -------- --------
Total Distributable
Earnings
(Accumulated
Losses) $(45,649) $ 24,892 $ 6,795 $ 773 $ 5,532 $ (27) $ (54)
======== ======== ======== ======== ======== ======== ========
Bishop Street Funds 72
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For Federal income tax purposes, capital loss carryforwards represent
realized losses of the Funds that may be carried forward for a maximum period of
eight years and applied against future capital gains as follows:
Treasury
Large Cap Strategic Tax High Grade Hawaii Money Money
Growth Growth Managed Income Municipal Market Market
Fund Fund Equity Fund Fund Bond Fund Fund Fund
(000) (000) (000) (000) (000) (000) (000)
---------- --------- ----------- ---------- --------- -------- ---------
Dec. 2008 -- -- -- -- -- (2) --
Dec. 2009 (24,675) -- -- -- -- (18) --
Dec. 2010 (25,686) -- -- -- -- -- --
Dec. 2011 (1,696) -- -- -- -- -- --
Dec. 2012 -- -- -- -- -- -- (27)
Dec. 2013 -- -- (30) -- -- (3) (27)
During the year ended December 31, 2005 the Large Cap Growth Fund,
utilized capital loss carryforwards of $11,595,848, to offset realized capital
gains.
Post-October losses represent losses realized on investment transactions
from November 1, 2005 through December 31, 2005 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 Large Cap Growth, Strategic Growth, Tax Managed Equity, High Grade
Income, and Hawaii Municipal Bond Funds for Federal income tax purposes at
December 31, 2005 were as follows:
Large Cap Strategic Tax High Grade Hawaii
Growth Growth Managed Income Municipal
Fund Fund Equity Fund Fund Bond Fund
(000) (000) (000) (000) (000)
--------- --------- ----------- --------- ---------
Federal Tax Cost $ 91,697 $ 102,488 $ 27,140 $ 177,835 $ 168,752
--------- --------- --------- --------- ---------
Gross
Unrealized
Appreciation 10,967 25,100 7,203 2,944 5,918
Gross
Unrealized
Depreciation (4,559) (2,242) (375) (2,136) (395)
--------- --------- --------- --------- ---------
Net
Unrealized
Appreciation $ 6,408 $ 22,858 $ 6,828 $ 808 $ 5,523
========= ========= ========= ========= =========
December 31, 2005 73 www.bishopstreetfunds.com
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8. 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.
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.
9. OTHER
At December 31, 2005, the percentage of total shares outstanding held by
shareholders for each Fund, which comprised of an omnibus account that was held
on behalf of several individual shareholders, was as follows:
Number of % of Outstanding
Shareholders Shares
------------ ----------------
Equity Fund, Class I Shares 1 84.92%
Strategic Growth Fund, Class I Shares 1 92.55
Tax Managed Equity Fund, Class I Shares 1 90.79
High Grade Income Fund, Class I Shares 1 86.34
Hawaii Municipal Bond Fund, Class I Shares 1 90.45
Hawaii Municipal Bond Fund, Class A Shares 1 12.92
Money Market Fund, Class I Shares 1 95.24
Money Market Fund, Class A Shares 1 99.93
Treasury Money Market Fund, Class I Shares 1 99.82
Bishop Street Funds 74
BISHOP STREET FUNDS
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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
Large Cap Growth (formerly 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 "Funds")
at December 31, 2005, 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
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2005 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 17, 2006
December 31, 2005 75 www.bishopstreetfunds.com
BISHOP STREET FUNDS
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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 its final investment return. These expenses are expressed as
a percentage of the mutual fund's average net assets; this percentage is known
as the mutual fund's expense ratio.
The following examples use the expense ratio and are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
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% 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.
Bishop Street Funds 76
BISHOP STREET FUNDS
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- --------------------------------------------------------------------------------------------------
Beginning Ending Expenses
Account Account Annualized Paid
Value Value Expense During
7/1/05 12/31/05 Ratios Period*
- --------------------------------------------------------------------------------------------------
LARGE CAP GROWTH FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,052.00 1.00% $5.17
HYPOTHETICAL 5% RETURN $1,000.00 1,020.16 1.00% 5.09
- --------------------------------------------------------------------------------------------------
STRATEGIC GROWTH FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,124.70 1.09% $5.84
HYPOTHETICAL 5% RETURN 1,000.00 1,019.71 1.09% 5.55
- --------------------------------------------------------------------------------------------------
TAX MANAGED EQUITY FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,042.10 1.00% $5.15
HYPOTHETICAL 5% RETURN 1,000.00 1,020.16 1.00% 5.09
- --------------------------------------------------------------------------------------------------
HIGH GRADE INCOME FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $ 992.50 0.76% $3.82
HYPOTHETICAL 5% RETURN 1,000.00 1,021.37 0.76% 3.87
- --------------------------------------------------------------------------------------------------
HAWAII MUNICIPAL BOND FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,004.10 0.55% $2.78
HYPOTHETICAL 5% RETURN 1,000.00 1,022.43 0.55% 2.80
- --------------------------------------------------------------------------------------------------
HAWAII MUNICIPAL BOND FUND -- CLASS A
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,002.80 0.80% $4.04
HYPOTHETICAL 5% RETURN 1,000.00 1,021.17 0.80% 4.08
- --------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,016.50 0.50% $2.54
HYPOTHETICAL 5% RETURN 1,000.00 1,022.68 0.50% 2.55
- --------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- CLASS A
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,015.30 0.75% $3.81
HYPOTHETICAL 5% RETURN 1,000.00 1,021.42 0.75% 3.82
- --------------------------------------------------------------------------------------------------
TREASURY MONEY MARKET FUND -- CLASS I
- --------------------------------------------------------------------------------------------------
ACTUAL FUND RETURN $1,000.00 $1,015.30 0.44% $2.24
HYPOTHETICAL 5% RETURN 1,000.00 1,022.99 0.44% 2.24
- --------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period).
December 31, 2005 77 www.bishopstreetfunds.com
BISHOP STREET FUNDS
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NOTICE TO SHAREHOLDERS OF BISHOP STREET FUNDS (UNAUDITED)
For shareholders that do not have a December 31, 2005 taxable year end,
this notice is for informational purposes only. For shareholders with a December
31, 2005 tax year end, please consult your tax advisor as to the pertinence of
this notice.
(A) (B) (C)
LONG TERM SHORT TERM NET INVESTMENT (D)
CAPITAL GAINS CAPITAL GAINS INCOME TAX
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS EXEMPT
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) INTEREST
- ---- ------------- ------------- -------------- --------
Large Cap Growth 0% 0% 100% 0%
Strategic Growth 100% 0% 0% 0%
Tax Managed Equity 14% 0% 86% 0%
High Grade Income 6% 12% 82% 0%
Hawaii Municipal Bond 17% 0% 0% 83%
Money Market 0% 0% 100% 0%
Treasury Money Market 0% 0% 100% 0%
(1) QUALIFYING DIVIDENDS REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE
DIVIDENDS RECEIVED DEDUCTION. THIS AMOUNT IS REFLECTED AS A PERCENTAGE OF
TOTAL ORDINARY INCOME DISTRIBUTIONS (THE TOTAL OF SHORT-TERM CAPITAL GAIN
AND NET INVESTMENT INCOME DISTRIBUTIONS.
(2) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING
DIVIDEND INCOME" AS 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.
Bishop Street Funds 78
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For the fiscal year ended December 31, 2005, each Fund has designated the
following items with regard to distributions paid during the year:
(F)
DIVIDENDS
QUALIFYING
(E) FOR (J)
(A+B+C+D) CORPORATE (G) (H) (I) QUALIFIED
TOTAL DIVIDENDS QUALIFYING U.S. QUALIFIED SHORT-TERM
DISTRIBUTIONS RECEIVABLE DIVIDEND GOVERNMENT INTEREST CAPITAL
(TAX BASIS) DEDUCTION(1) INCOME(2) INTEREST (3) INCOME (4) GAIN (5)
- ---------------------------------------------------------------------------------------
100% 100% 100% 0% 3% 0%
100% 0% 0% 0% 0% 0%
100% 100% 100% 0% 4% 0%
100% 0% 0% 30% 91% 79%
100% 0% 0% 0% 95% 0%
100% 0% 0% 5% 95% 0%
100% 0% 0% 69% 95% 0%
(4) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING
INTEREST INCOME" AS CREATED BY THE AMERICAN JOBS CREATION ACT OF 2004 AND
IS A PERCENTAGE OF NET INVESTMENT INCOME THAT IS EXEMPT FROM U.S.
WITHHOLDING TAX WHEN PAID TO FOREIGN INVESTORS.
(5) THE PERCENTAGE IN THIS COLUMN REPRESENTS THE AMOUNT OF "QUALIFYING
SHORT-TERM CAPITAL GAIN" AS CREATED BY THE AMERICAN JOBS CREATION ACT OF
2004 AND IS REFLECTED AS A PERCENTAGE OF SHORT-TERM CAPITAL GAIN
DISTRIBUTIONS THAT IS EXEMPT FROM U.S. WITHHOLDING TAX WHEN PAID TO
FOREIGN INVESTORS.
* ITEMS (A), (B), (C) AND (D) ARE BASED ON THE PERCENTAGE OF EACH FUND'S
TOTAL DISTRIBUTION.
December 31, 2005 79 www.bishopstreetfunds.com
BISHOP STREET FUNDS
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
The following table lists the Trustees and Officers as of February 17, 2006.
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
82
[PHOTO OMITTED] MR. PETER F. SANSEVERO Trustee Since 1999
72
[PHOTO OMITTED] MR. MANUEL R. SYLVESTER Trustee Since 1994
75
[PHOTO OMITTED] DR. JOYCE S. TSUNODA Trustee Since 1994
67
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)
- ---------------------------------------------------------- --------------- ---------------------
PARTNER -- Goodsill, Anderson, Quinn & Stifel since 1951 7 None
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, 2005 81 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
74
President
and
[PHOTO OMITTED] MR. ROBERT A. NESHER Chairman of Since 1998
59 the Board
of Trustees
[PHOTO OMITTED] MR. JOHN K. TSUI Trustee Since 2004
67
OFFICERS
Michael Lawson Treasurer Since 2005
45 and Controller
Philip T. Masterson Vice President 1
41 and Secretary
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)
- ---------------------------------------------------------- --------------- -----------------------------------------
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 SEI ASSET ALLOCATION TRUST, SEI DAILY
SEI INVESTMENTS FOR WHICH MR. NESHER IS COMPENSATED. INCOME TRUST, SEI INDEX FUNDS,
EXECUTIVE VICE PRESIDENT -- SEI Investments (1986-1994) SEI INSTITUTIONAL INVESTMENTS TRUST,
DIRECTOR AND EXECUTIVE VICE PRESIDENT OF THE ADMINISTRATOR SEI INSTITUTIONAL MANAGED TRUST,
AND THE DISTRIBUTOR (1981-1994) SEI INSTITUTIONAL INTERNATIONAL TRUST,
SEI LIQUID ASSET TRUST
AND SEI TAX EXEMPT TRUST.
CHAIRMAN -- Towne Development of Hawaii since 7 None
2003. DIRECTOR -- First Hawaiian Bank since 1994.
DIRECTOR -- Bank of the West since 2000. DIRECTOR --
BancWest Corporation since 1998. PRESIDENT -- CHIEF
OPERATING OFFICER -- First Hawaiian Bank (1994-2002).
VICE CHAIRMAN -- CHIEF CREDIT OFFICER, BANKWEST
Corporation (1998-2002).
Director, SEI Investments, Fund Accounting N/A N/A
(2005-present); Manager, SEI Investments
AVP (1995-2005).
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, 2005 83 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
38 Assistant Secretary
Sofia A. Rosala Vice President and Since February 2005
32 Assistant Secretary
Timothy D. Barto Vice President and 4
37 Assistant Secretary
Michael T. Pang Vice President and Since February 2005
33 Assistant Secretary
Ryan S. Ushijima Chief 1
49 Compliance
Officer
Lori Foo Vice President and 3
48 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 DECEMBER 31, 2005, THE BISHOP STREET FUNDS COMPLEX
CONSISTED OF 7 FUNDS.
Bishop Street Funds 84
(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 N/A N/A
since 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, 2005 85 www.bishopstreetfunds.com
BISHOP STREET FUNDS
- --------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS (UNAUDITED)
At a special meeting held on August 15, 2005, the shareholders of the Bishop
Street Funds voted on the proposal listed below.
Proposal: To approve the new investment sub-advisory agreement between the
Trust, on behalf of the Funds, Bishop Street Capital Management, and Fischer
Francis Trees & Watts, Inc.
The results of the voting were as follows:
TREASURY MONEY MARKET FUND
% OF
NUMBER OUTSTANDING % OF SHARES
OF SHARES SHARES VOTED
--------------- ----------- -----------
Affirmative 140,753,432.000 55.037% 99.961%
Against 0.000 0.000% 0.000%
Abstain 54,966.000 0.021% 0.039%
TOTAL 140,808,398.000 55.058% 100.000%
Record Total 255,743,563.690
Voted Shares 140,808,398.000
Percent Voted 55.058%
MONEY MARKET FUND
% OF
NUMBER OUTSTANDING % OF SHARES
OF SHARES SHARES VOTED
--------------- ----------- -----------
Affirmative 120,280,730.000 64.348% 98.293%
Against 11,692.000 0.006% 0.010%
Abstain 2,077,034.000 1.111% 1.697%
TOTAL 122,369,456.000 65.465% 100.000%
Record Total 186,922,125.776
Voted Shares 122,369,456.000
Percent Voted 65.465%
Bishop Street Funds 86
NOTES
NOTES
- --------------------------------------------------------------------------------
[GRAPHIC OMMITED]
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
[LOGO]
BISHOP
STREET
FUNDS
FOR MORE INFORMATION ABOUT BISHOP STREET FUNDS, CALL 1-800-262-9565
OR YOUR INVESTMENT SPECIALIST
VISIT US ONLINE AT WWW.BISHOPSTREETFUNDS.COM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]
BISHOP BISHOP STREET FUNDS
STREET P.O. BOX 3708
FUNDS 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-006-1100
- --------------------------------------------------------------------------------
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:
- ------------------ ----------------------------------------------------- -----------------------------------------------------
2005 2004
- ------------------ ----------------------------------------------------- -----------------------------------------------------
All fees and All fees and All other fees All fees and All fees and All other fees
services to the services to and services to services to the services to and services to
Trust that were service service Trust that were service service
pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that
were did not require were did not require
pre-approved pre-approval pre-approved pre-approval
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(a) Audit $104,100 N/A N/A $98,200 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:
------------------------- ----------------- ----------------
2005 2004
------------------------- ----------------- ----------------
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 2005 and 2004, 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
registrants 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
By (Signature and Title)* /s/ Robert A. Nesher
------------------------
Robert A. Nesher
President
Date: March 6, 2006
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.
(Registrant) Bishop Street Funds
By (Signature and Title)* /s/ Robert A. Nesher
------------------------
Robert A. Nesher
President
Date: March 6, 2006
By (Signature and Title)* /s/ Michael Lawson
------------------------
Michael Lawson
Treasurer and Controller
Date: March 6, 2006
* Print the name and title of each signing officer under his or her signature.